Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Pearsall Nursing and Rehabilitation Center — North
(CCN: 45-5797),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-1333
Decision No. CR4197
Date: September 10, 2015
DECISION

Following an investigation survey that ended on February 27, 2014, the Texas
Department of Aging and Disability Services (state agency) found that Petitioner,
Pearsall Nursing and Rehabilitation Center — North, was not in substantial compliance
with requirements for a Medicare-participating long-term care facility. The state agency
determined that Petitioner’s care of a resident did not comply substantially with several
requirements including the general quality of care requirement in 42 C.F.R. § 483.25,
cited under Tag F-309. The state agency also determined that Petitioner’s noncompliance
posed immediate jeopardy to resident health and safety. The Centers for Medicare

& Medicaid Services (CMS) accepted the state agency’s findings and, with regard to
Petitioner’s noncompliance with 42 C.F.R. § 483.25, imposed an $8,750 per-instance
civil money penalty (CMP) against Petitioner. CMS did not impose an enforcement
remedy with regard to the other deficiencies that the state agency cited. Petitioner
appealed, and CMS now moves for summary judgment.

For the reasons set forth below, I find that the undisputed material facts establish that
Petitioner was not in substantial compliance with 42 C.F.R. § 483.25 during the cited
period and that the enforcement remedy imposed is reasonable. I therefore affirm the
noncompliance determination as well as the $8,750 per-instance CMP.
I. Background and Procedural History

Petitioner is a long-term care facility in Pearsall, Texas, that participates in the Medicare
and Medicaid programs. The state agency conducted a complaint investigation survey of
Petitioner’s facility, which concluded on February 27, 2014. The state agency found that
a resident of Petitioner’s facility, referred to in survey documents and throughout this
proceeding as “Resident 1,” suffered an acute intertrochanteric facture of the proximal
left femur’ that Petitioner’s staff discovered in a pelvic X-ray on January 11,2014. CMS
Exhibit (Ex.) 3 at 53-70. According to the state agency, Resident 1’s physician
subsequently ordered that she be referred to an orthopedic specialist “the sooner, the
better ....” CMS Ex. 3 at 55. The state agency found that Petitioner’s staff did not carry
out the physician’s order to refer Resident | to an orthopedic surgeon for nearly four
weeks. Following Resident 1’s complaints of hip pain during a dialysis treatment on
February 7, 2014, the dialysis nursing staff consulted with an orthopedic surgeon’s office,
which ordered another pelvic X-ray. CMS Ex. 3 at 56. That second X-ray showed
Resident 1’s fracture had not changed. On February 10, 2014, 30 days after the initial
X-ray revealed Resident 1’s femur fracture and three days after her second X-ray again
showed the fracture, and after Resident | again complained of hip pain during her
dialysis treatment, the orthopedic surgeon with whom the dialysis nursing staff consulted,
ordered that she be transferred for “direct admit” to the hospital. CMS Ex. 3 at 56.

Based on these findings, the state agency found that Petitioner was not in substantial
compliance with the Medicare participation requirement set forth in 42 C.F.R. § 483.25
(Tag F-309), which requires a facility to provide the care and services necessary to attain
or maintain a resident’s well-being in accordance with that resident’s comprehensive plan
of care.

' An “intertrochanteric fracture” is a type of hip fracture. The intertrochanteric line is
where the body or shaft of the femur ends and the neck of the femur begins. The femur
neck leads to the femur head, which, in turn, is the “ball” portion of the ball-and-socket
hip joint. An intertrochanteric fracture is a partial or full break of the femur along the
intertrochanteric line, which can separate the femur body from the femur neck and head.
See Gray’s Anatomy, Articulations of the Lower Extremity: Coxal Articulation or Hip-
Joint, Fig. 339 (20th ed.), available at http://www.bartleby.com/107/92.html.

> The state agency also determined that Petitioner was not in substantial compliance with
four other Medicare participation requirements. However, CMS did not impose an
enforcement remedy against Petitioner as a result of those four deficiencies, and they are
not at issue in this appeal. See 42 C-F.R. §§ 488.408(g)(1), 498.3(b)(13).
By letter dated April 8, 2014, CMS notified Petitioner that it was imposing two per-
instance CMPs, one for $4,250 based on the deficiency cited under Tag F-309, and
another one for $4,250 based on a separate deficiency. However, in a subsequent letter
dated April 24, 2014,CMS modified the per-instance CMP for the deficiency cited under
Tag F-309 from $4,250 to $8,750, and it rescinded the CMP for the other deficiency.

Petitioner filed its request for hearing on June 18, 2014. CMS filed a motion for
summary judgment with a supporting brief (CMS Br.) as well as 10 proposed exhibits
(CMS Exs. 1-10). Petitioner filed its opposition to summary judgment and supporting
brief (P. Br.) as well as two proposed exhibits (P. Exs. 1-2). Neither party filed any
objections to the admission of the proposed exhibits, although Petitioner disputed some
of the legal conclusions that CMS’s witnesses included in their written direct testimony,
which I discuss below. In the absence of any objections, I admit CMS Exs. 1-10 and P.
Exs. 1-2 into the record for consideration.

II. Issues
This case presents the following issues:
1. Whether summary judgment is appropriate;

2. Whether Petitioner was in substantial compliance with the Medicare participation
requirement in 42 C.F.R. § 483.25 during the period cited; and

3. If Petitioner was not in substantial compliance, whether the penalty imposed is
reasonable.

The immediate jeopardy determination is not reviewable in this case. An administrative
law judge may review CMS’s scope and severity findings (which include a finding of
immediate jeopardy) only if a successful challenge would affect the range of the CMP or
if CMS has made a finding of substandard quality of care that results in the loss of
approval of a facility’s nurse aide training program. 42 C.FR. §§ 498.3(b)(14),

498 .3(d)(10); Cedar Lake Nursing Home, DAB No. 2344, at 9-10 (2010); Aase Haugen
Homes, DAB No. 2013, at 17-19 (2006). For a per-instance penalty, the regulations
provide only one range of possible penalty ($1,000 to $10,000), so the scope and severity
of any noncompliance does not affect the range of the possible CMP. See 42 C.F.R.

§ 488 .438(a)(2).

There is no evidence before me that the facility operated a nurse aide training program.
Even if it did, CMS’s scope and severity finding would not affect approval of such a
program. By statute and regulation, if, as here, CMS properly imposes a penalty of
$5,000 or more, the state agency cannot approve the nurse aide training program, so the
facility would lose approval of it without regard to the immediate jeopardy finding.

42 USC. § 1395i-3(f)(2)(B); 42 C.F.R. § 483.151(b)(2)(iv); see also White Sulphur
Springs Ctr., DAB No. 2520, at 17 (2013) (“[T]he imposition of a CMP of $5,000 or
more automatically results in the loss of [a facility’s nurse aide training program]; thus,
the fact that there was a finding of substandard quality of care in this case would not
provide a basis for appealing the immediate jeopardy determination.”)

Accordingly, because the immediate jeopardy finding here does not affect the range of
the CMP or result in the facility losing any approval of its nurse aide training program,
the immediate jeopardy determination is not reviewable.

III. Statutory and Regulatory Framework

The Social Security Act (Act) establishes the minimum standards of resident care that a
long-term care facility must meet to participate in the Medicare and Medicaid programs
and authorizes the Secretary of Health and Human Services (Secretary) to promulgate
regulations implementing those statutory requirements. 42 U.S.C. §§ 1395i-3, 1396r.
Specific Medicare participation requirements for long-term care facilities are in 42 C.F.R.
Part 483. A long-term care facility must remain in substantial compliance with program
requirements to participate in Medicare. 42 C.F.R. § 483.1(b). “Substantial compliance”
means “‘a level of compliance with the requirements of participation such that any
identified deficiencies pose no greater risk to resident health or safety than the potential
for minimal harm. Id. § 488.301. “Noncompliance” means “any deficiency that causes a
facility not to be in substantial compliance.” Id.

The Act authorizes the Secretary to impose enforcement remedies against a long-term
care facility for failure to comply substantially with the federal participation
requirements. The Secretary has delegated to CMS and the states the authority to impose
remedies against a long-term care facility not in substantial compliance with participation
requirements. State agencies survey facilities on behalf of CMS to determine whether the
facilities comply with federal participation requirements. 42 C.F.R. §§ 488.10-.28,

488 .300-.335. Standard surveys must occur at least every 15 months, and complaints of
abuse or neglect of residents in a long-term care facility may trigger a survey sooner than
a standard survey. See 42 U.S.C. § 1395i-3(g)(1)(C), (g)(2)(A)(ili).. The regulations
specify the enforcement remedies that CMS may impose if a facility is not in substantial
compliance with Medicare requirements. 42 C.F.R. § 488.406. These remedies include:
termination of a facility’s participation in the Medicare program, closure of the facility,
temporary management, denial of certain Medicare payments, transfer of residents, state
monitoring, directed plans of correction, and various CMPs. Id. § 488.408.

CMS may impose a per-day CMP for the number of days a facility is not in substantial
compliance or a per-instance CMP for each instance of the facility’s noncompliance. Id.
§ 488.430(a). A per-instance CMP, which CMS imposed in this case, may range from
$1,000 to $10,000. Id. § 488.438(a)(2). When establishing the amount of a per-instance
CMP, CMS must consider, among other things, the seriousness of the deficiencies which
includes whether the deficiencies posed no actual harm with the potential for more than
minimal harm that is not immediate jeopardy, actual harm that is not immediate jeopardy,
or immediate jeopardy to resident health and safety. Id. §§ 488.438(f), 488.404(b).
“Immediate jeopardy” exists when “the provider’s noncompliance with one or more
requirements of participation has caused, or is likely to cause, serious injury, harm,
impairment, or death to a resident.” Id. § 488.301.

If CMS imposes an enforcement remedy against a long-term care facility based on a
noncompliance determination, the facility may request a hearing before an administrative
law judge to challenge the noncompliance finding and enforcement remedies. 42 U.S.C.
§§ 1320a-7a(c)(2), 1395cc(h); 42 C.F.R. §§ 488.408(g), 498.3(b)(13).

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

Summary judgment is appropriate if there is “no genuine issue as to any material fact,
and the moving party is entitled to judgment as a matter of law.” Mission Hosp. Reg’!
Med. Ctr., DAB No. 2459, at 5 (2012) (citations omitted). The moving party must show
that there is no genuine dispute of material fact requiring an evidentiary hearing and that
it is entitled to judgment as a matter of law. Id. If the moving party meets its initial
burden, the non-moving party must “come forward with ‘specific facts showing that there
is a genuine issue for trial... .”” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 587 (1986). “To defeat an adequately supported summary judgment motion,
the non-moving party may not rely on the denials in its pleadings or briefs, but must
furnish evidence of a dispute concerning a material fact — a fact that, if proven, would
affect the outcome of the case under governing law.” Senior Rehab. & Skilled Nursing
Ctr., DAB No. 2300, at 3 (2010). A party “must do more than show that there is ‘some
metaphysical doubt as to the material facts . .. . Where the record taken as a whole could
not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue
for trial.” Mission Hosp., DAB No. 2459, at 5 (quoting Matsushita, 475 U.S. at 586).

In examining the evidence to determine the appropriateness of summary judgment, I must
draw all reasonable inferences in the light most favorable to the non-moving party. See
Brightview Care Ctr., DAB No. 2132, at 2,9 (2007); but see Cedar Lake, DAB No.
2344, at 7 (2010); Brightview, DAB No. 2132, at 10 (noting entry of summary judgment
upheld where inferences and views of non-moving party are not reasonable). However,
drawing factual inferences in the light most favorable to the non-moving party does not
require that I accept the non-moving party’s legal conclusions. Cedar Lake, DAB No.
2344, at 7.
There is no genuine dispute of any material fact in this case. The documentary evidence
provides the material facts here and consists of, among other things, Petitioner’s facility
records, partial medical records for Resident 1, Petitioner’s investigation documents, and
survey documents. Petitioner points to medication administration records, facility job
descriptions, and certain facility policies that CMS offered as evidence, which allegedly
show that Petitioner “reasonably assessed the necessary care and services” for Resident 1.
P. Br. at 6. But the facts Petitioner cites in reaching its legal conclusion are not in
dispute, and whether Petitioner “reasonably assessed the necessary care and services” for
Resident 1 is ultimately a legal question I am able to decide based on undisputed facts.

Petitioner references statements from facility employees who reported during the
facility’s investigation that Resident | did not complain of hip pain during their contact
with her, which, according to Petitioner, contradicts CMS’s witnesses’ claims that
Resident 1 complained of pain while her hip fracture remained untreated. P. Br. at 7-8.
For purposes of summary judgment, I infer that Resident | did not complain of hip pain
to those facility employees. CMS does not, however, dispute or challenge the
employees’ statements about Resident 1 not complaining of pain to those specific staff
members. The evidence is not contradictory, either. The surveyor’s finding that Resident
1 complained of hip pain is supported by documented instances of those complaints that
Petitioner does not address in its opposition to summary judgment. See, e.g., CMS Ex. 7
at 93 (Physician Patient Notes for Resident 1, noting that Resident 1 was complaining of
pain to left groin/hip area and was “losing mobility/function/unable to bear [weight]”).
Moreover, the surveyor did not allege that Resident 1 continuously complained of pain to
all of Petitioner’s staff members, so Petitioner’s citing instances where Resident 1 did not
complain of pain does not necessarily contradict the surveyor’s findings based on other
undisputed facts.

Petitioner also argues that summary judgment is not appropriate because the testimonial
evidence that CMS submitted (CMS Exs. 9-10) raises factual disputes about the conduct
of Petitioner’s staff. P. Br. at 3. To the extent CMS’s witness testimony offers a legal
opinion about Petitioner’s noncompliance, I disregard those conclusions. Moreover, it is
difficult to see how the testimonial evidence of the surveyor (CMS Ex. 9) raises a factual
dispute when the surveyor primarily relied on the documents that are now in the record
and which Petitioner does not dispute. While the statement of deficiencies contains
interview summaries that the surveyor obtained during the survey, those interviews
simply confirm what is already in the documentary evidence and do not add or detract
from the material facts necessary to decide this case. Accordingly, summary judgment
cannot be defeated simply because the surveyor included interview summaries that
provide evidence that neither confirms nor supplements the material facts of the case or
because the CMS witnesses’ offered legal conclusions that I must disregard as part of my
de novo review.
Overall, in its attempt to raise a genuine dispute of material fact, all Petitioner has
actually done is cite to more facts that remain undisputed. I find there are no issues of
material fact to decide, and I do not need to weigh any of the evidence. My decision in
this case is based on the undisputed documentary evidence and the reasonable inferences
Ihave drawn in favor of Petitioner. Accordingly, I conclude this case turns on a matter
of law where summary judgment is appropriate.

2. Petitioner was not in substantial compliance with 42 C.F.R. § 483.25 because
the undisputed evidence establishes that staff did not take reasonable steps to
provide Resident | timely treatment and care after an X-ray showed that she
had an acute intertrochanteric fracture in her left femur.

Resident 1 was a 47-year-old female, admitted to Petitioner’s facility on May 17, 2013,
with diagnoses of Alzheimer’s-type dementia, insulin-dependent diabetes mellitus (also
referred to as Type I diabetes), end-stage renal disease, hypertension, and hypokalemia
(low potassium levels), among other ailments. CMS Ex. 7 at 12-16. She was wheelchair
bound and required staff assistance for nearly all of her activities of daily living. CMS
Ex. 7 at 48-49. Resident 1’s care plan noted that she was “at risk for misunderstanding”
and “usually understands/comprehends most of conversation but may miss part or intent
of message.” CMS Ex. 7 at 52. Her care plan also documented that Resident 1 was “at
risk for unrelieved pain,” and stated that she should receive acetaminophen (acetyl para-
aminophenol or ““APAP”) as needed for pain and fever. CMS Ex. 7 at 63. One of the
approaches listed for staff to address Resident 1’s pain included “monitor for [complaints
of] pain or increased [signs and symptoms] of pain: increased tearfulness, agitation,
facial grimacing/moaning.” CMS Ex. 7 at 63.

Resident 1 complained of hip pain in early January 2014, prompting her physician to
order an X-ray. See CMS Ex. 7 at 20, 30. A pelvic X-ray taken on January 11, 2014,
revealed that Resident 1 was suffering from an acute intertrochanteric fracture of her left
proximal femur. CMS Ex. 7 at 20; CMS Ex. 8 at 3. That evening, staff documented in
the facility’s “24 Hour Report” that Resident 1 needed an appointment to address her
fractured femur. CMS Ex. 7 at 85. The next day, staff documented that Resident 1
“needs appt [with orthopedic surgeon] the sooner the better.” CMS Ex. 7 at 86.

The following day, the same notation appeared for Resident 1, with an added note to the
side: “NEEDS PRIOR.” CMS Ex. 7 at 87 (capitalization in original). As Petitioner
argues, and later staff notations confirm, the “NEEDS PRIOR” notation refers to prior
insurance authorization for Resident 1 to see the orthopedic surgeon. See P. Br. at 7;
CMS Ex. 7 at 88. On January 14, 2014, staff noted that Resident | “Needs prior
auth[orization] to be seen by [orthopedic surgeon] . . ..” CMS Ex. 7 at 88. The same or
very similar notation appears in the 24 Hour Report for the following eight days, through
January 22, 2014. CMS Ex. 7 at 89-92, 100-03. Petitioner does not allege, nor is there
any documentation in the record that staff took any steps from January 11 to January 22,
2014, to follow up about the status of the prior authorization or consult with Resident 1’s
physician about different treatment options to address her fracture.

On January 21, 2014, Resident 1’s nephrologist evaluated her at a dialysis center. He
noted that her potassium levels improved and addressed Resident 1’s hip pain and femur
fracture. The nephrologist ordered a referral to an orthopedic surgeon. CMS Ex. 7 at 93.
A dialysis nursing staff member noted that Resident 1 complained of “pain to [left]
groin/hip.” CMS Ex. 7 at 93. She also noted that Resident 1 complained of “losing
mobility/function/unable to bear [weight]. CMS Ex. 7 at 93. On January 22, 2014, staff
apparently consulted with Resident 1’s physician about the status of Resident 1’s prior
authorization to see the orthopedic surgeon. There is a notation in the record on that date
saying that Resident 1’s physician was “aware” that prior authorization was needed.
CMS Ex. 7 at 103. The following day, on January 23, 2014, Petitioner’s staff noted that
Resident 1’s physician was expected “to send referral to see [orthopedic surgeon].” CMS
Ex. 7 at 104. That referral did not come, because on January 24 and January 25, 2014,
the same notation appeared, saying that Petitioner’s staff was expecting the physician to
send a referral for Resident | to see the orthopedic surgeon. CMS Ex. 7 at 105-06.

On January 28, 2014, Resident 1’s nephrologist again evaluated her in the dialysis center
and noted that she was “pending” a follow-up with an orthopedic surgeon for her femur
fracture. The dialysis nurse called an orthopedic surgeon’s office, which responded that
an appointment could not be scheduled for Resident 1 because “office does not accept
[Resident 1’s] insurance.”* CMS Ex. 7 at 93.

On February 7, 2014, Resident | presented to the dialysis center complaining of hip pain.
CMS Ex. 7 at 10. A dialysis center nursing note stated that an appointment had been
scheduled — apparently by the dialysis center staff — for Resident | to see an orthopedic
surgeon. The orthopedic surgeon that the nursing note refers to is one who was not
previously referred to in the medical documentation and apparently had not been
consulted before. The orthopedic surgeon’s office requested the report from Resident 1’s
January 11,2014 pelvic X-ray, which the dialysis center’s staff faxed to the surgeon’s
office. CMS Ex. 7 at 94. The surgeon’s office then requested a more recent X-ray and
ordered a “STAT” X-ray for Resident 1. CMS Ex. 7 at 94. The dialysis center nursing
staff then “[c]alled [Petitioner]- spoke with nurse[.] Made aware of app[ointment] and

> It is not clear whether the dialysis center nurse contacted the same orthopedic surgeon’s
office that Petitioner’s staff contacted. The dialysis nursing notes refer to a different
physician’s name than the orthopedic surgeon listed in the 24 Hour Report. Compare
CMS Ex. 7 at 93 with CMS Ex. 7 at 86. The record does not indicate whether the two
surgeons were part of the same practice or had separate practices. Ultimately, an entirely
different orthopedic surgeon treated Resident | and, after seeing her X-rays, ordered that
she be directly admitted to the hospital for treatment. See CMS Ex. 7 at 94.
need for STAT Xrays.” CMS Ex. 7 at 94. The dialysis center staff notation confirms that
the dialysis staff — and not Petitioner’s staff — was responsible for setting up an
appointment with an orthopedic surgeon and ensuring she receive a second X-ray. The
X-ray taken on February 7, 2014, again showed a left femoral neck intertrochanteric
fracture. CMS Ex. 7 at 21. However, as noted in a later incident report, after Petitioner’s
staff received the February 7 X-ray results, “[n]o follow up was done.” CMS Ex. 7 at 10.

On February 10, 2014, Petitioner’s charge nurse “followed up” and faxed the X-ray
report from February 7, 2014 to the orthopedic surgeon’s office. In response, the surgeon
immediately ordered that Resident | be directly admitted to the hospital for treatment.
CMS Ex. 7 at 10, 94.

The state agency and CMS determined that Petitioner was not in substantial compliance
with 42 C.F.R. § 483.25 with regard to how its staff handled Resident 1’s femur fracture.
CMS Ex. 3 at 53-70. The lead-in language of 42 C.F.R. § 483.25 states:

Each resident must receive and the facility must provide the necessary care
and services to attain or maintain the highest practicable physical, mental,
and psychosocial well-being, in accordance with the comprehensive
assessment and plan of care.

The Board has explained that this regulation “imposes on facilities an affirmative duty
designed to achieve favorable outcomes to the highest practicable degree.” Windsor
Health Care Ctr., DAB No. 1902, at 16-17 (2003), aff’d, 127 F. App’x. 843 (6th Cir.
2005). “The facility must take ‘reasonable steps’ and ‘practicable measures to achieve
that regulatory end.’” Golden Living Ctr. - Foley, DAB No. 2510, at 23 (2013) (quoting
Clermont Nursing & Convalescent Ctr., DAB No. 1923, at 21 (2004)). The regulation
implicitly imposes on a facility the duty to provide care and services that, “at a minimum,
meet accepted professional standards of quality ‘since the regulations elsewhere require
that the services provided or arranged by the facility must meet such standards.’” Id.
(quoting Spring Meadows Health Care Ctr., DAB No. 1966, at 17 (2005)). The Board
has also determined that the regulation requires facilities to furnish the care and services
set forth in the resident’s care plan, to implement physicians’ orders, to monitor and
document the resident’s conditions, and to follow its own policies. See Life Care Ctr. of
Bardstown, DAB No. 2479, at 22 (2012), aff'd, No. 12-4420 (6th Cir. 2013).

It is undisputed that for 30 days Petitioner’s staff did not arrange for or provide any care
or services to address Resident 1’s acute intertrochanteric fracture. Petitioner’s staff was
certainly aware of Resident 1’s fracture. See CMS Ex. 7 at 85-92, 100-04 (documenting
Resident 1’s diagnosis as a femur fracture). But Petitioner’s nursing staff appeared to
stop all active attempts at arranging the appropriate services for Resident | once they
determined that preauthorization was needed to refer the resident to a specific orthopedic
surgeon. Rather than search for a different surgeon or consult with Resident 1’s
10

physician about her treatment options, Petitioner comes forward with no evidence to
suggest its staff took meaningful and reasonable steps to ensure Resident | received the
care and services necessary to treat her femur fracture. Instead, they waited. There are
no documented assessments of Resident 1’s hip or her pain levels during this time, nor
does there appear to be any attempt to secure even temporary care for her fracture. Even
more distressing, after Resident 1’s physician learned of the delay in referring her to an
orthopedic surgeon, he did not follow through in providing a referral as nursing staff
indicated he would. Indeed, it ultimately was Resident 1’s nephrologist and the dialysis
center nursing staff, not Petitioner, who located an orthopedic surgeon willing to treat
Resident 1 and scheduled an appointment for Resident | to see that surgeon. The dialysis
center’s efforts prompted a second X-ray of Resident 1’s hip and eventual admission to
the hospital for treatment. Even after Petitioner received the results of the second X-ray
and Petitioner’s staff was aware that the dialysis center had arranged for an orthopedic
surgeon to see Resident 1, Petitioner’s staff took no follow up actions. CMS Ex. 7 at 10.
Only three days later did a charge nurse fax the X-ray results to the orthopedic surgeon
who immediately ordered that Resident | to go to the hospital. See CMS Ex. 7 at 10, 94.

Petitioner’s lack of any reasonable efforts to secure or attempt to provide appropriate
services for Resident 1’s femur fracture represents a shocking disregard of Resident 1’s
health and overall well-being. It is equally shocking and remarkable that Petitioner’s
staff undertook no assessments of Resident 1’s pain, mobility, or ability to bear weight
despite being fully aware that she was suffering from a fractured hip. Her care plan
required staff to assess Resident | for pain (CMS Ex. 7 at 63), yet there is no indication in
the medical records that Petitioner’s staff ever did so between January 11 and February
10, 2014. See CMS Ex. 7 at 17 (providing a blank pain management flow sheet for
Resident 1 during January 2014). Waiting for preauthorization to occur, which appears
to be all that Petitioner’s staff did with Resident | in this case, is never a “reasonable
step” to provide the necessary care and services to maintain resident well-being.
Resident 1’s highest practicable well-being could not possibly have been met while she
had a diagnosed, yet untreated fracture for 30 days. Petitioner’s passive approach and
failure to obtain the necessary care and services to treat Resident 1’s acute femur fracture
is a clear violation of the regulatory requirement.

* It is possible that the absence of any notations in Resident 1’s pain management flow
sheet means that she did not complain of pain to Resident 1’s staff. See CMS Ex. 7 at 17
(showing column labeled “Origin of Pain,” implying that the resident must complain of
pain before the flow chart would be used). However, I am not required to make
unreasonable inferences in favor of Petitioner, and there is no other documentation that
staff assessed Resident | for pain, considering she was suffering from an acute femur
fracture at the time, and no negative reports that she denied such pain. Instead, there are
times during January 2014 when Resident | complained of pain. CMS Ex. 7 at 93.
11

Petitioner claims that Resident 1 did not complain of any pain during the month she had a
fractured hip. P. Br. at 7-8. Petitioner cites three statements that staff members provided
during the internal investigation, all of which state that Resident 1 did not complain of
pain while those staff members interacted with her. CMS Ex. 8 at 16-18. For purposes
of summary judgment, I will accept these facts as true, but I do not find them material. It
is undisputed that Petitioner’s staff knew that Resident | had a fractured hip, and her
complaints of pain (or lack thereof) should have made no difference in whether Petitioner
sought to obtain further treatment for her fracture. Even if she were not in pain (or could
not verbalize her pain), staff could not ignore or unreasonably delay treatment for a
known acute fracture and still maintain the resident’s highest overall well-being. Simply
because Resident | did not state to those staff members that she was in pain does not
mean that she was not actually in pain or that staff carried out its responsibility to assess
Resident | for pain. See CMS Ex. 7 at 63. None of the three staff members’ statements
say that they assessed Resident 1’s hip for pain. It is further undisputed that the
individuals who actually assessed Resident | for hip pain found that she was in pain. See
CMS Ex. 7 at 93.

Petitioner claims without any evidentiary support, that its staff “took reasonable measures
to assess Resident 1 by conducting assessments, care planning and monitoring to
determine whether Resident | was comfortable and to ensure care plan goals were being
achieved.” P. Br. at 8. The undisputed evidence before me does not support this
argument at all. There are no documented assessments of Resident 1’s hip or pain levels
by Petitioner’s nursing staff, there were no changes to Resident 1’s care plan between the
time her hip fracture was first shown on an X-ray and the time she was finally admitted to
the hospital, and there are no documented occasions where staff determined Resident 1’s
comfort level.

The record shows that the orthopedic surgeon’s preauthorization requirement seemed to
paralyze Petitioner’s staff, resulting in no follow up or treatment, even within Petitioner’s
facility, for Resident 1’s fracture for a significant amount of time. CMS Ex. 7 at 85-92.
Petitioner does argue that its staff initially attempted to set up an appointment for
Resident | with an orthopedic surgeon, but that surgeon “refused to see Resident 1
because he did not accept her insurance.” P. Br. at 13. For purposes of summary
judgment I will infer that as true, however, it is unreasonable to claim that Petitioner did
not have to follow up or arrange for any further care for Resident 1’s acute hip fracture
simply because one surgeon refused to operate based on Resident 1’s insurance.”
Petitioner had an obligation to provide the necessary care and services to Resident 1 so
that she could maintain her highest practicable well-being, which most certainly included
not suffering from a known hip fracture for 30 days without treatment. Indeed, the

> Resident 1 had Medicaid coverage. CMS Ex. 8 at 6.
12

dialysis facility that treated Resident 1 did not have the same difficulty consulting with
and arranging for treatment from an orthopedic surgeon. See CMS Ex. 7 at 93-94. By
not ensuring that Resident | received the care and services necessary to treat her hip
fracture, Petitioner did not substantially comply with 42 C.F.R. § 483.25.

3. The $8,750 per-instance CMP is reasonable.

Based on Petitioner’s noncompliance, CMS imposed an $8,750 per-instance CMP against
Petitioner. CMS Ex. 2 at 4. The factors listed in 42 C.F.R. § 488.438(f) guide whether
the CMP imposed here is reasonable. Those factors include: (1) the facility’s history of
noncompliance; (2) the facility’s financial condition; (3) factors specified in 42 C.F.R.

§ 488.404; and (4) the facility’s degree of culpability, including neglect, indifference, or
disregard for resident care, comfort or safety. Among the factors specified in section
488.404 are the scope and severity of noncompliance, the relationship of one deficiency
to another deficiency resulting in noncompliance, and the facility’s history of
noncompliance generally as well as with reference to the cited deficiencies. 42 C.F.R.

§ 488.404(b)-(c). In addition, the “absence of culpability is not a mitigating circumstance
in reducing the amount of the penalty.” 42 C.F.R. § 488.438(£)(4).

Unless a facility shows that a particular regulatory factor does not support the CMP
amount, the ALJ must sustain it. Coquina Ctr., DAB No. 1860 at 32 (2002). Here,
Petitioner has not alleged or offered evidence that its financial condition affects its ability
to pay the CMP.

Despite prior findings of noncompliance, there has been no recent enforcement remedies
imposed against Petitioner. See P. Ex. 2. Nevertheless, this case involves a serious
instance where the facility did not meet Medicare participation standards. Once
Petitioner’s staff knew of Resident 1’s acute femur fracture and the refusal of one
orthopedic surgeon to see Resident | based on her insurance, Petitioner did not take any
other steps to provide the necessary care and services to Resident 1, which left her with
an untreated fracture for nearly one month. It is impermissible for Petitioner to shift
blame to the orthopedic surgeon’s office or Medicaid, or to downplay its culpability in
this case. Petitioner’s staff allowed Resident 1’s fracture to go untreated for a month and
did not ensure she received care during that time. In fact, but for the dialysis center’s
nursing staff — not Petitioner — making arrangements for Resident | to see a surgeon, it
may have been even longer while the fracture went untreated.
13

Compared to the level of CMP that CMS could have imposed based on the nearly month-
long period that Petitioner’s staff failed to maintain Resident 1’s overall well-being, the
per-instance CMP imposed in this case is very modest. See Plum City Care Ctr., DAB
No. 2272 at 18-19 (2009) (observing that even a $10,000 per-instance CMP can be “a
modest penalty when compared to what CMS might have imposed”). In light of all of
these circumstances, I find that the $8,750 per-instance CMP imposed here is well-
supported by the record before me.

V. Conclusion

For all of the reasons stated above, I conclude that the undisputed facts show Petitioner
was not in substantial compliance with Medicare participation requirements and the CMP
imposed is reasonable. CMS, therefore, is entitled to summary judgment affirming the
noncompliance determination and enforcement remedy.

/s/
Joseph Grow
Administrative Law Judge


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

Guardian Care Services, Inc.,
(CCN: 10-7633),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-15-2684
Decision No. CR4195
Date: September 9, 2015
DECISION

I grant summary judgment in favor of the Centers for Medicare & Medicaid
Services (CMS), sustaining the determination of one of its contractors to revoke
the Medicare billing privileges of Petitioner, Guardian Care Services, Inc., a home
health agency, effective November 3, 2014. Revocation is justified because
Petitioner was not operational within the meaning of 42 C.F.R. §§ 424.535(a)(5)
and 424.502.

I. Background

Petitioner requested a hearing to challenge a reconsidered determination that
affirmed the contractor’s determination that it was not operational. CMS Ex. 8.
CMS moved for summary judgment and Petitioner opposed the motion. CMS
offered exhibits along with its motion that are identified as CMS Ex. 1 —- CMS Ex.
11. Ireceive these exhibits into the record. Petitioner filed 22 exhibits with its
request for hearing. These exhibits consist of documents that Petitioner also
offered with its request for reconsideration. I am identifying these as P. Ex. 1 —P.
Ex. 22 and I receive them into the record.
Petitioner offered 13 additional exhibits with its opposition to CMS’s motion for
summary judgment. Confusingly, Petitioner identified these exhibits as P. Ex. 1 —
P. Ex. 13. 1am renumbering these exhibits as P. Ex. 23 — P. Ex. 35. [receive P.
Ex. 25 — P. Ex. 35 into the record. CMS objected to my receiving P. Ex. 23 — P.
Ex. 24. I sustain CMS’s objections to P. Ex. 23 and P. Ex. 24. These two exhibits
are documents that relate directly to Petitioner’s argument that it maintained an
operational business. Petitioner did not offer these exhibits at reconsideration and
has not established good cause for its failure to present these exhibits at
reconsideration. I exclude these exhibits because Petitioner failed to satisfy the
requirements of 42 C.F.R. § 498.56(e).

CMS also objected to my receiving P. Exs. 26-29 and 31-34 on the grounds that
they are irrelevant and cumulative. These exhibits consist of declarations from
some of Petitioner’s employees. I agree with CMS that these exhibits are of
questionable relevance. They certainly do not establish a dispute as to material
facts. However, I see no harm in receiving them at this juncture of the case.

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

The issue is whether CMS is authorized to revoke Petitioner’s billing privileges on
the ground that Petitioner was not operational.

B. Findings of Fact and Conclusions of Law

CMS may revoke a provider or a supplier’s Medicare billing privileges if it
determines:

[u]pon on-site review or other reliable evidence, . . . that the provider
or supplier is either of the following: (i) No longer operational to
furnish Medicare-covered items or services. (ii) Otherwise fails to
satisfy any Medicare enrollment requirement.

42 C.F.R. § 424.535(a)(5). “Operational” is defined to mean:

[T]he provider or supplier has a qualified physical practice location,
is open to the public for the purpose of providing health care related
services, is prepared to submit valid Medicare claims, and is
properly staffed, equipped, and stocked (as applicable, based on the
type of facility or organization, provider or supplier specialty, or the
services or items being rendered), to furnish these items or services.
42 C.F.R. § 424.502 (emphasis added).

CMS offers the following facts. Petitioner holds itself out as being open to the
public during the following hours of operation: Monday through Friday, from 8:30
a.m. to 5:00 p.m. CMS Ex. | at 1,6; CMS Ex. 9 at 2; CMS Ex. 10 at 1. However,
on three occasions in November 2014 inspectors working for a Medicare
contractor appeared at Petitioner’s facility during Petitioner’s advertised business
hours and found it to be closed to the public.

On November 3, 2014, inspectors arrived at Petitioner’s facility. They found signs
on the front door of the facility announcing that the facility was closed because it
was being fumigated. CMS Ex | at 5-6; CMS Ex. 9 at 2; CMS Ex. 10 at 1. The
inspectors returned the next day, November 4, 2014, during Petitioner’s
announced business hours. CMS Ex. 2. The sign announcing that the facility was
closed due to fumigation was no longer present. However, the office door was
locked. CMS Ex. 2; CMS Ex. 9 at 2. On November 12, 2014, an inspector made
a third attempt to inspect Petitioner’s facility during business hours. CMS Ex. 3.
Once again, the facility was locked, and there were signs announcing that the
facility was closed because it was being fumigated. Id. at 2,4, 6-8; CMS Ex. 11 at
1-2.

Petitioner does not deny any of these facts. It does not deny that its facilities were
locked when the inspectors arrived on November 3, 4, and 12. Nor does it deny
that it had posted signs announcing that its facility was closed due to it being
fumigated.

The undisputed facts establish that Petitioner was not operational within the
meaning of 42 C.F.R. §§ 424.535(a)(5) and 424.502. Therefore, CMS is
authorized to revoke Petitioner’s billing privileges. As is stressed by the
emphasized language in 42 C.F.R. § 424.502, in order to be operational, a
participating provider or supplier must be open to the public for the purpose of
providing health care related services. Petitioner was not open to the public on the
three dates in question. Its facility was not only inaccessible to the public but
Petitioner posted signs on two of the three days telling the public that its facility
was closed.

Petitioner contends that it was operational on the dates in question even if its
office was closed to the public. Petitioner’s opposition to CMS’s motion at 2 — 3.
In support of that assertion Petitioner contends that home health administrative
services were occurring within Petitioner’s facility and that its staff nurses and
home health aides were in the field and actively providing care to patients. Id. at
3. It supports this assertion by reciting a variety of business records that include
various payment records, employee timesheets, evidence of payment of telephone
and utility bills, and payroll checks to several of its employees. Id.

For purposes of deciding CMS’s motion, I am accepting as true all of Petitioner’s
representations that it was actively doing business as a home health agency on the
three dates in question. But those representations do not address the reason why
the contractor and CMS found Petitioner not to be operational on those dates. The
regulation requires a participating supplier or provider to be open to the public
during its normal business hours. That means it must be accessible to the public,
and not just doing business in other ways. Petitioner plainly was not open to the
public on the dates in question. Therefore, it was not operational consistent with
Medicare participation requirements even if it was actively doing business on
those dates.

Petitioner seems to argue that its business activities as a home health agency do
not require its office staff to come into face-to-face contact with members of the
public since home health services are provided to Medicare beneficiaries at their
residences. Petitioner’s opposition to CMS’s motion at 5. It appears to contend
that the requirement that it be open to the public shouldn’t apply to its operations.
Idisagree. The regulatory language is explicit and does not suggest that there are
exceptions to the rule that a provider or a supplier has an office that is accessible
to the public. Moreover, Petitioner has offered no facts to show that members of
the public would have no reason to visit its office. To the contrary, there are
reasons why members of the public would want to visit Petitioner’s office directly.
The fact that a home health agency delivers care at locations other than its office
premises does not mean that there wouldn’t be times when either beneficiaries or
members of their families would have need to talk to Petitioner’s office staff in
person. They might wish to visit in person to ask questions about what home
health care consists of and their eligibility for such care. They might do so to seek
instructions about care to be given to relatives or to ask questions about that care.

Petitioner contends that a water main break on November 2, 2014, forced it to
relocate its business activities to the rear of its facility on that date. Petitioner’s
opposition to CMS’s motion at 4. But, assuming that to be true, this does not
excuse Petitioner from its obligation to be open to the public during business
hours. Petitioner does not explain why, for example, it could not have directed the
public to that part of its facility that remained staffed after the water main break.
Obviously, its employees were able to move to that location. Nor does it explain
why it would tell potential visitors on two dates occurring after November 2 that
its facility was closed because it was being fumigated.

Petitioner asserts also that there are factual errors in a CMS exhibit that
summarizes a meeting between Petitioner’s president and a representative of the
CMS contractor. See CMS Ex. 4; Petitioner’s opposition to CMS’s motion at 4-5.
However, even if that exhibit contains some inaccuracies, Petitioner has not
explained how those inaccuracies impact on the material facts offered by CMS.
Those facts, as I have explained, are undisputed. Consequently, inaccuracies in
CMS’s exhibit, if they exist, are irrelevant.

Finally, Petitioner avers that there are disputed issues of material fact in this case
that preclude the entry of summary judgment. However, Petitioner hasn’t
identified a single fact that contradicts the material facts offered by CMS and
shows that Petitioner was not operational.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

The Inspector General of the Social Security Administration,
Petitioner,
v.
Evelyn Oquendo,
Respondent.
Docket No. C-13-1352
Decision No. CR4187

Date: September 4, 2015

DECISION

The Inspector General (IG) of the Social Security Administration (SSA) charges that
Respondent, Evelyn Oquendo, violated section 1129 of the Social Security Act (Act)
because she deliberately misled SSA about her living arrangements and household
income in order to maintain her Supplemental Security Income (SSI) benefits. The IG
proposes imposing against Respondent Oquendo a civil money penalty (CMP) totaling
$126,167.31.

For the reasons discussed below, I agree that Respondent Oquendo deliberately withheld
material facts and falsely reported her living arrangements and household income so that
her SSI benefits would not be reduced or cancelled. In light of her deliberate, long-
standing deception, I consider $126,167.31 a reasonable CMP.

Background

SSI Rules. The SSI program (Title XVI of the Act) pays benefits to individuals who are
aged, blind, or disabled and have limited income and resources. 20 C.F.R. §§ 416.202;
416.1100. In determining whether an individual is eligible for benefits, SSA considers
her entire household’s income and resources. If an otherwise eligible individual lives in
the same household with an ineligible spouse, SSA “deems” some of the spouse’s income
to the eligible individual, i.e., treats it as if it were the individual’s own income.

20 C.F.R. § 416.1160.

Generally, state law determines whether two individuals are husband and wife for
purposes of determining SSI eligibility. However, if the individuals “hold themselves
out” to their community as husband and wife, SSA will consider them as such. Act

§ 1614(d)(2); 20 CFR. § 416.1806(a)(3).

Section 1129 Sanctions. Section 1129(a)(1) of the Act subjects to penalty any person
(including an organization, agency, or other entity) who: 1) knowingly misrepresents a
material fact for SSA’s use in determining a right to SSI benefits or the amount of those
benefits; 2) makes such a statement with “knowing disregard of the truth”; or 3)
knowingly omits or otherwise withholds a fact that she knows or should know is material
to SSA’s determining eligibility for benefits or benefit amounts.

Similarly, Social Security regulations authorize the IG to impose a penalty against any
person who “[h]as made . . . a statement or representation of a material fact” that is used
to determine the person’s eligibility for SSI benefits or the amount of those benefits or
payments, where the person “knew, or should have known, that the statement or
representation was false or misleading,” or who has made the statement “with knowing
disregard of the truth,” or where the person omitted, “or otherwise withheld disclosure of
the material fact.” 20 C.F.R. § 498.102(a).

Procedural Background. In this case, the IG contends that Respondent Oquendo
deliberately misled SSA about her living arrangements. She repeatedly told the agency
that she lived alone or with her children, when, in fact, she was living with her putative
husband, William Candelario. By letter dated July 8, 2013, the IG advised Respondent
Oquendo that, because she withheld material information from SSA, he proposed
imposing against her a penalty of $60,000 plus an assessment in lieu of damages of
$66,167.31, for a total CMP of $126,167.31 ($60,000 + $66,167.31 = $126,167.31). SSA
Ex. 8.

Respondent Oquendo requested a hearing.

On January 20, 2015, I convened a hearing, via video teleconference, from the offices of
the Departmental Appeals Board in Washington, D.C. Ms. Penny Collender and Ms.
Joscelyn Funnié, representing the SSA IG, appeared from New York City. Transcript
(Tr.) 4. Mr. Mark Alves represented Respondent Oquendo and appeared from Boston,
Massachusetts. Tr. 5. IG witness Elena Torres testified from Puerto Rico; IG witnesses
Jason Donnelly and William Candelario, and Respondent Oquendo testified from Boston.
The parties filed pre-hearing briefs (IG Br.; Resp. Br), and post-hearing briefs (IG Post-

hrg. Br.; Resp. Post-hrg. Br.). I admitted into evidence SSA Exhibits 1-10 (SSA Exs. 1-
10) and Respondent Exhibits (Resp. Exs.) 1- 6. Summary of Prehearing Conference at 2
(July 3, 2014); Tr. 6.

Issues
The issues before me are:

1. Did Respondent Oquendo omit, or otherwise knowingly withhold from SSA,
disclosure of a fact or facts that she knew or should have known were material to
determining her eligibility for SSI benefits and/or the amount of those benefits;
and

2. If so, is the proposed penalty — $126,167.31 — reasonable.
Summary of Prehearing Conference at 1-2 (July 3, 2014); Tr. 5-6.
Discussion

1. Respondent Oquendo violated section 1129 of the Act,
because she deliberately withheld material facts and made
false statements to SSA for its use in determining her
eligibility for SSI benefits.'

The early representations. In her efforts to obtain and continue receiving SSI benefits,
Respondent Oquendo represented to SSA the following:

e On May 31, 1994, Respondent Oquendo applied for SSI disability benefits. On
her application, she acknowledged that she was in a “holding out relationship,”
i.e., living in the same household and holding themselves out as a married couple,
with William Candelario. SSA denied her application based on a lack of medical
evidence. SSA Ex. | at 2; SSA Ex. 9 at 2 (Torres Decl. § 4).

e She reapplied for benefits on November 25, 1997, but this time she claimed that
she was the sole member of her household. Again, SSA denied the application,
finding that she did not meet the medical criteria for benefits. SSA Ex. | at 2.

' My findings of fact/conclusions of law are set forth, in italics and bold, in the
discussion captions of this decision.
¢ On December 7, 1998, she applied for SSI benefits a third time. She reported that
she lived in an apartment on Gaylord Street in Dorchester, Massachusetts, with her
three children, Enrique Candelario, Lillian Candelario, and Ismael Oquendo. This
time, SSA awarded her benefits. SSA Ex. 1 at 2; SSA Ex. 9 at 2 (Torres Decl.
94).

e After SSA has approved a claimant’s application for SSI disability benefits, the
claimant must undergo a “‘pre-effectuation review conference” before SSA will
pay any benefits. The purpose of the conference is to assure that the claimant is
still financially eligible for SSI and to update other relevant information. Here,
Respondent Oquendo completed her pre-effectuation review conference on April
6, 1999, at which she reported no changes to her living situation. SSA Ex. | at 2.

e¢ On December 29, 2000, Respondent Oquendo called SSA to report that her
daughter had a baby, who was a new addition to the household. SSA Ex. | at 2.

e¢ On September 9, 2002, she reported that she lived at a new address with her
grandson only. SSA Ex. | at 2-3.

e On February 7, 2011, when SSA redetermined Respondent Oquendo’s eligibility
for SSI benefits, she reported that she lived alone in an apartment on Magnolia
Street in Dorchester, with no additional household income and no marriage or
“holding out relationship.” SSA Ex. 1 at 3; SSA Ex. 9 at 2 (Torres Decl. § 4).

Thus, for many years after she was awarded benefits, Respondent Oquendo consistently
maintained that she lived alone or with her children/grandchild and that she had no family
income beyond her SSI benefits, the children’s welfare benefits, and a state housing
allowance. She reported no marriage or “holding out relationship” with William
Candelario or anyone else. SSA Ex. | at 2.

The investigation. An anonymous individual contacted SSA’s Boston Field Office and
alleged that Respondent Oquendo lived with her “husband,” William Candelario, and
concealed from SSA that living arrangement and her household income. In response, on
February 21, 2012, the IG began an investigation. SSA Ex. | at 2; SSA Ex. 9 at 1-2
(Torres Decl. § 3); Tr. 51.

On December 10, 2012, Respondent Oquendo met with IG Special Agents Elena Torres
and Jason Donnelly at the SSA District Office in Dorchester, Massachusetts. SSA Ex. 1
at 10; SSA Ex. 9 at 2 (Torres Decl. § 5); SSA Ex. 10 at 2 (Donnelly Decl. § 4). Both
agents are fluent in English and Spanish, and Special Agent Torres is certified as a
bilingual criminal investigator. SSA Ex. 9 (Torres Decl. § 1); SSA Ex. 10 at 1 (Donnelly
Decl. § 1); Tr. 30. According to the agents, Respondent Oquendo understood and spoke
English. In fact, they began the interview in English, and Respondent Oquendo
responded in English. She subsequently asked that they speak Spanish, so the agents
continued the interview in Spanish. SSA Ex. 9 at 2 (Torres Decl. § 5); SSA Ex. 10 at 2
(Donnelly Decl. § 4); Tr. 31.

Although the parties vehemently disagree about what transpired during that meeting,
compelling evidence establishes the following:

Early in the interview, Respondent Oquendo blatantly misrepresented her relationship
with William Candelario. She admitted that William Candelario Sr. was the father of her
children but claimed that she had not seen him in a long time. Then she changed her
story and said that she had seen him the night before. In fact, he had driven her to the
district office and was outside, in his car, waiting for her, which she eventually admitted.
SSA Ex. 9 at 2 (Torres Decl. § 5); SSA Ex. 10 at 2 (Donnelly Decl. § 4); Tr. 127; see Tr.
98, 130 (conceding that, when William Candelario had a car, he gave her rides).
Respondent Oquendo’s efforts to deceive the special agents significantly undermine her
credibility.

According to both Special Agent Torres and Special Agent Donnelly, whom I found
completely credible, Respondent Oquendo agreed to provide a voluntary, written
statement but asked Special Agent Torres to assist her in preparing it. Agent Torres
wrote the statement based on the information the respondent provided. She read the
statement to Respondent Oquendo in English and in Spanish. SSA Ex. 9 at 2 (Torres
Decl. § 6). After reviewing the statement, Respondent Oquendo said that no changes
needed to be made. She signed it and initialed each page. The special agents signed as
witnesses. SSA Ex. 9 at 3 (Torres Decl. § 6); SSA Ex. 10 at 2-3 (Donnelly Decl. § 5); Tr.
37-39.

In the statement, Respondent Oquendo acknowledged that, in March 2004, her husband,
William Candelario Sr., was released from jail and came to live with her. In 2005, they
moved to the Magnolia Street apartment with their grandchild and have been living there
ever since. She acknowledged that she and William Candelario never officially married
but said that they had been holding themselves out to others as husband and wife since
1978. She admitted that they had lived together for many years, except from 1998 to
2004, when William Candelario was in jail. She knew that having him in her household
would affect her SSI benefits but claimed that she did not know that she had to report his
living with her. SSA Ex. 3 at 1-2; SSA Ex. 9 at 2-3 (Torres Decl. § 6); SSA Ex. 10 at 2-3
(Donnelly Decl. § 5). At the hearing, however, she admitted knowing that she had to
report such a living arrangement. Tr. 126-27.

Respondent Oquendo also explained that they resided in Section 8 housing, which was
under her name. William Candelario could not be listed on the Section 8 award because
of his felony conviction. SSA Ex. 3 at 3; SSA Ex. 10 at 3 (Donnelly Decl. § 5). She said
that she paid $136 per month in rent.’ With respect to their other household expenses,
she said that they divided the cable bill evenly; William paid either the electric bill or the
gas bill, depending on which arrived first, and she paid the bill that arrived second. She
and her grandchildren received food stamps, with which she bought food, and he bought
more food with cash. SSA Ex. 3 at 3.

On February 4, 2013, Special Agents Torres and Jamie Mazzone, from the Department of
Housing and Urban Development, interviewed the owner of Respondent Oquendo’s
apartment building. The owner told the agents that Respondent Oquendo lived there with
her grandson. Section 8 authorizes only two people to live in the apartment, but the
owner, who did not live in the building, nevertheless acknowledged that she had seen
William Candelario there. SSA Ex. 9 at 3 (Torres Decl. § 8); Tr. 51.

Post-investigation representations. Respondent Oquendo soon began to backtrack on the
representations she made in her written statement. On January 22, 2013, responding to
another redetermination of eligibility, she told SSA that she continued to live in an
apartment on Magnolia Street with her grandson only and that, except for food stamps,
she received no help or money to pay for food, rent, or utilities from any person not
living with her or from any agency. SSA Ex. 4 at 3. She admitted that William
Candelario “stays with me a couple of days a week, but I do not consider him my spouse
and we do not hold ourselves out to the community as man and wife.” She said that
Willaim Candelario lived on Puritan Road in Somerville and that she did not know his
phone number. SSA Ex. 4 at 1.

In these proceedings, Respondent Oquendo has denied virtually every prior admission.
In her written declaration, she admitted that William Candelario was the father of her
children but said that they were never married and never held themselves out as husband
and wife. Resp. Ex. | at 1 (Oquendo Decl. §§ 2,3, 4). But we know that this cannot be
accurate because, when she applied for benefits in 1994, she acknowledged her “holding
out” relationship with William Candelario. SSA Ex. | at 2; SSA Ex. 9 at 2 (Torres Decl.
94).

In her written declaration, she also denies that she and William have lived together since
he was released from jail in 2004 and that he has ever provided any financial support.
Resp. Ex. 1 at 1 (Oquendo Decl. 99 5, 6).

With respect to her meeting with Special Agents Torres and Donnelly, she states that she
received a letter instructing her to go to SSA on December 10, 2012, and, when she

arrived, “a woman” told her that she was under criminal investigation and questioned her
in English only, never in Spanish. In fact, to support her claim that she didn’t understand

Respondent’s landlord confirmed that Respondent Oquendo is responsible for $136 per
month, and the Section 8 program pays the balance of the rent. SSA Ex. | at 17.
what she was signing, Respondent Oquendo claims that she is essentially illiterate in both
English and Spanish and that she did not even know that Special Agent Torres spoke
Spanish. Tr. 116-17. She also claims that “the woman” told her to write something, but
she responded that she could not read or write. So “the woman” wrote something and
told Respondent Oquendo to sign and initial “in many places,” which she did, even
though she did not know what was written. Resp. Ex. 1 at 1 (Oquendo Decl. § 8); Tr.
118-19.

I do not find any of this credible. To accept Respondent’s assertions, I would have to
believe that neither Agent Torres nor Agent Donnelly speak Spanish, as they claim, or
that they deliberately refused to communicate with the person they were supposed to be
interviewing. I reject both propositions. The agents are plainly fluent in Spanish, and
had no discernible reason to refuse to communicate with Respondent in a language she
could understand.

Moreover, Respondent’s claims of ignorance are inconsistent with her written
declaration, in which she describes in some detail the conversation she had with Special
Agent Torres and, thus, inadvertently admits that she well understood what transpired.
According to her declaration, “the woman” asked several times about the father of her
children and told her that:

they had videos and pictures of him living at my home and
using his own keys. I said that was not possible because I
would not let him live there. I told her she come to my house
(sic) anytime and check but she said no.

Resp. Ex. 1 at 1 (Oquendo Decl. § 8); but see Tr. 115 (denying that Agent Torres told her
she had videos). Moreover, Respondent Oquendo concedes that she answered the
questions posed by Agent Torres. She does not say whether she responded in English or
Spanish. If she speaks little to no English, she would have responded in Spanish. But
she also claims that she didn’t even know that Special Agent Torres spoke Spanish.
How, then, did they communicate?

Other evidence undermines Respondent Oquendo’s claims that she does not speak or
understand English. She has lived in the Boston area since 1992 and eventually conceded
that she speaks “a little English.” Tr. 109, 111. During the hearing, it appeared that she
well understood the proceedings. During cross-examination, for example, while I was
giving instructions to the translator, Respondent’s attorney, who does not speak Spanish,
gave her some instructions that were not audible on the record and was admonished not
to engage in conversation with her while she was testifying. Tr. 123-24; see Tr. 112. At
another point, Respondent Oquendo corrected the interpreter in his translation of her
testimony. Tr. 132-33. These lapses suggest more than a passing knowledge of English.
Respondent Oquendo may not have understood their potential implications, but she well
understood the facts she admitted.

Respondent also attacks those portions of her written statement regarding who pays the
utility bills. She produces letters from her grandson’s healthcare providers declaring that,
because the grandson has a chronic illness, utilities should not be shut off. Resp. Ex. 6.
But, contrary to Respondent’s suggestion, these letters do not negate her written
statement regarding who paid the utility bills. The letters prevent shut-off; they do not
mean that she didn’t have to pay those bills. Presumably, the utility company could
collect any arrearage by other means.’

William Candelario’s testimony. I found the testimony of William Candelario even less
credible than Respondent’s. His testimony ran the gamut from unconvincingly vague to
incredible. Initially, he was unable or unwilling to provide any details as to where he has
lived since his release from prison in 2004: “in one place for a time, and then one place —
in another place for another time.” Tr. 66. Then he claimed that, as an ex-convict, he
“couldn’t have any fixed address.” Tr. 68, 69.4

After much equivocation, he claimed that, when released from prison in April 2004, he
lived with his son Enrique in Walpole, Massachusetts. Tr. 72. According to Enrique, his
father began to live with him in 2005. Resp. Ex. 5. But William Candelario testified that
in 2005 he lived in Charlestown with a friend named “Roberto.” He said that he did not
know Roberto’s last name, but met him at a dance club. He said that he moved in with
Roberto because Respondent Oquendo “didn’t want me in the house anymore.” Tr.72,
76-77. I found this testimony especially hard to credit.

When asked if he spent nights at Respondent Oquendo’s house, he first replied that “[i]t
was just now and again” to see his grandson. Tr. 88. Then he said “[I]t could be that I
went by there and I might spend the day and I might spend the night, but I didn’t live
there. I had other obligations.” Tr. 89.

He also denied ever contributing any rent or other housing expenses to Respondent
Oquendo or anyone else, although he allowed that he might occasionally have given
some money to a family member with whom he was living. Tr. 88,90. He conceded that

> The letters dated June 8, 2011 and later raise some additional questions. Resp. Ex. 6 at
12-16. According to her February 7, 2011 redetermination, Respondent Oquendo lived
alone at that time. SSA Ex. 1 at 3; SSA Ex. 9 at 2 (Torres Decl. § 4).

* The IG suggests that William Candelario meant that he was prohibited from living in
Section 8 housing, which, in the IG’s view, explains why he has claimed other addresses.
IG Post-hrg. Br. at 4-5. Although not dispositive, I find this scenario more likely than
any Respondent has offered.
he might even have given Respondent Oquendo a small amount of money so that she
could buy their grandchild a toy. Tr. 105, 106. Thus, according to Mr. Candelario, he
has lived in a variety of places since his release from prison but has never paid any rent or
other household expense. I find this unlikely.

Nor was I persuaded by the declarations from various family members. Daughter Lillian
Candelario claims that she has “never seen” her father stay overnight at her mother’s
residence. Resp. Ex. 2 (Lillian Candelario Decl. § 7). Even her parents don’t make that
claim. Each admitted that William Candelario spent the night there, although they were
vague as to how often. SSA Ex. 4 at 1; Tr. 128-29.

William Candelario’s income. On January 31, 2013, Special Agents Torres and Mazzone
visited the Pearl Meat Packing Company and spoke to the company president and to the
comptroller. They confirmed that William Candelario had worked continuously for the
company since 2003, when he started there as part of a prison pre-release program. This
is consistent with his earnings record, which shows that he worked for Pearl from 2003
through 2011, with annual earnings that ranged from $4,127.20 to $26,858.27. In 2011,
he earned $24,782.52. SSA Ex. 1 at 3. The company executives told the agents that they
understood that William Candelario lived with his wife and son, William Candelario, Jr.,
who also worked for the company. SSA Ex. 9 at 3 (Torres Decl. § 7); Tr. 44-45. They
mentioned that a woman who identified herself as his “wife” would call the company,
when, for example, he was unable to report for work due to illness. Tr. 45.

In his testimony, William Candelario confirmed that he worked full-time for the Pearl
Company and had worked there for 12 years. Tr. 65. He said that he earned about $498
per week or $24,000 per year. Tr. 66.

Thus, by her own admission, Respondent Oquendo has lived with William Candelario
since 2004, and they held themselves out as husband and wife. William Candelario
worked full-time and contributed to the household expenses. Although she well
understood her obligation to report honestly her living arrangements and household
income, Respondent Oquendo deliberately misled SSA so that her SSI benefits would not
be reduced or cancelled. The IG may therefore impose a CMP.

2. The I.G. proposes a reasonable CMP against
Respondent Oquendo.

Penalty. The statute allows SSA to impose a penalty of not more than $5,000 for each
false statement or misrepresentation and $5,000 for each receipt of benefits or payments
while withholding disclosure of material facts. Each month an individual withholds a
material fact counts as a separate instance of making a false statement and/or
misrepresentation of a material fact. Act §1129(a)(1); 20 C.F.R. §§ 498.103(a),

498 .103(b); see SSA Ex. 8.
10

Citing the six-year statute of limitations, the IG seeks no penalties for the
misrepresentations Respondent Oquendo made prior to July 2007. Act § 1129(b)(1). He
proposes a CMP covering the period from July 2007 through April 2013. IG Br. at 12.
During this time, Respondent Oquendo collected at least 70 benefits checks to which she
was not entitled. This alone could subject her to a penalty of $350,000 ($5,000 X 70
months).

In addition, this record includes two instances, since July 2007, in which Respondent
Oquendo affirmatively made false statements regarding her living arrangements. On
February 7, 2011, she reported that she lived alone with no additional household income
and no marriage or “holding out” relationship. SSA Ex. | at 3; SSA Ex. 9 at 2 (Torres
Decl. § 4). On January 22, 2013, she told SSA that she lived with her grandson only and
received no help or money to pay for food, rent, or utilities from any person not living
with her. SSA Ex. 4 at 1. These statements could add an additional $10,000 to her
penalty.

The amount of the proposed penalty — $60,000 — is thus significantly lower than the
maximum authorized by the statute and regulations.

Assessment in lieu of damages. SSA may also impose an assessment in lieu of damages
of not more than twice the amount of benefits or payments paid as a result of the false
statements or misrepresentations or the withholding of disclosure. Act § 1129(a)(1);

20 CFR. § 498.104.

As a result of her deception, the IG determined that SSA paid her $66,167.31 more in
benefits than what she should have received. SSA Ex. 5. After deducting the
overpayment amount incurred prior to July 2007, that amount is lowered to $44,132.15.
SSA Ex. 7. The IG’s proposed assessment in lieu of damages — $66,167.31 — is
significantly lower than twice the amount of the benefits paid as a result of Respondent’s
misrepresentations and withholding of disclosure ($88,264.30). The proposed assessment
in lieu of damages is therefore within statutory and regulatory limits.

Regulatory criteria. I now apply regulatory criteria to assess the appropriateness of the
penalty. I am specifically authorized to affirm, deny, increase, or reduce the penalties
proposed by the IG. 20 C.F.R. § 498.220. In determining the appropriateness of the
penalty, I must consider: 1) the nature of the statements and representations and the
circumstances under which they occurred; 2) the degree of culpability of the person
committing the offense; 3) the history of prior offenses of the person committing the
offense; 4) the financial condition of the person committing the offense; and 5) such other
matters as justice may require. 20 C.F.R. § 498.106.
11

SSA does not contend that Respondent Oquendo has a history of prior offenses, although
he points out that her deception continued for a substantial period of time. IG Br. at 19.

With respect to her financial condition, the IG is correct that the respondent bears the
burden of establishing that her financial condition prevents her from paying the penalty.
SSA v. Clara Sloan, DAB CR1081 (2003); Recommended Decision to Decline Review,
App. Div. Dkt. No. A-04-03 at 2 (Feb. 9, 2004) (finding “no basis to disturb the ALJ’s
... legal conclusions.”). Although given the opportunity, Respondent Oquendo did not
submit to the IG a financial disclosure form, nor has she provided any financial
documents as part of these proceedings. Even her written declaration is silent on the
issue. She has made no effort to establish that her financial condition prevents her from
paying the penalty.

Nevertheless, I have considered that she is an SSI recipient and, as such, has limited
resources and income. For this reason, it is fitting to keep the CMP well below the
maximum amount authorized, even though she has been guilty of deception and fraud
lasting for many years and continuing through the time of the hearing in this matter.

And her dissembling has been substantial, which leads to the other factors I must
consider. As this record establishes, Respondent Oquendo engaged in years-long
deception, much longer than the period of time for which she is being held accountable.
During that time, she knowingly withheld material information from SSA, and, when
directly questioned about her living arrangements and household income, she lied. She
attempted to mislead federal investigators and this tribunal. Her degree of culpability is
substantial and would justify a CMP greater than that imposed here.

Finally, I note that the integrity of the SSI program depends on each beneficiary
accurately reporting household income and assets so that SSA can determine whether she
qualifies and, if she does, the accurate amount of her benefits. Where, as here, the
beneficiary deliberately misrepresents the make-up and income of her household, she
undermines the integrity of that system.

Conclusion

Respondent Oquendo violated section 1129 of the Act because she deliberately withheld
material facts and made false statements to SSA for its use in determining her continuing
eligibility for SSI benefits and the amount of those benefits. I consider the $126,167.31
CMP reasonable.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
AnSah, Inc. d/b/a AnSah Health Care
(NPI: 1124207618),

Petitioner,

v.

Centers for Medicare & Medicaid Services.
Docket No. C-15-1680
Decision No. CR4182

Date: August 31, 2015

DECISION

The Centers for Medicare & Medicaid Services (CMS) revoked the Medicare billing
privileges of AnSah, Inc. (AnSah), doing business as AnSah Health Care, because CMS
concluded that AnSah was not operational at the practice location on file with CMS and
its administrative contractor. After the CMS contractor upheld the revocation in a
reconsidered determination, AnSah requested a hearing to dispute the revocation. Based
on the evidence in the record, I affirm CMS’s revocation of AnSah’s Medicare billing
privileges.

I. Background

AnSah is a home health agency that was enrolled as a provider of services in the
Medicare program. See 42 U.S.C. § 1395x(u). On October 27, 2014, a CMS
administrator contractor, Palmetto GBA, informed AnSah that its Medicare billing
privileges were revoked retroactively to July 23, 2014. CMS Exhibit (Ex.) 2. Palmetto
stated:
CMS has determined, upon on-site review, that Ansah Inc. is
no longer operational to furnish Medicare covered items or
services and is not meeting Medicare enrollment requirements
under statute or regulation to supervise treatment of or to
provide Medicare covered items or services for Medicare
patients. On July 23, 2014 a site visit was conducted at 5054
Navajo Drive Frisco, TX 75034-1273. It was found that
Ansah Inc. is no longer operating from this location.

CMS Ex. 2 at 1.

On December 15, 2014, AnSah requested reconsideration of the revocation. CMS Ex. 4.
AnSah’s reconsideration request included an affidavit from its administrator, who stated
that AnSah moved from the 5054 Navajo Drive location on December 2, 2013, to 9555
Lebanon Road, Suite 1001, Frisco, Texas 75034. CMS Ex. 4 at 7. AnSah’s
administrator asserted that AnSah notified the Texas Department of Aging and Disability
Services on November 1, 2013, of its upcoming change in location and later notified
Palmetto of the location change on a “cost report” filed in May 2014. CMS Ex. 4 at 8,
23. AnSabh also filed with Palmetto a CMS-855A enrollment application on November
12, 2014, through the Provider Enrollment, Chain, and Ownership System (PECOS).
CMS Ex. 4 at 27-87.

On February 2, 2015, CMS’s Center for Program Integrity issued a reconsidered
determination that stated, in relevant part:

All of the documentation in the file for this case has been
reviewed and the decision has been made in accordance with
Medicare guidelines. Specifically, the provider shows
evidence of changing its address with the Texas Department
of Aging [and Disability Services]. However, PECOS still
reflects the old practice location that failed the site inspection.
The copy of the submitted 855A does not show evidence of
being submitted to Palmetto in 2013 which is required within
90 days as outlined in 42 CFR§ 424.516(e). Therefore, the
proposed reconsideration is denied.

CMS Ex. 3 at 2.

On March 17, 2015, AnSah requested a hearing to dispute the revocation of its Medicare
billing privileges. In response to my Acknowledgement and Pre-hearing Order (Order),
CMS filed a brief and five exhibits, and AnSah filed a brief.
II. Decision on the Record

AnSah did not object to CMS’s proposed exhibits. Therefore, I admit CMS Exhibits
1 through 5 into the record.

Neither party submitted written direct testimony for any witnesses. See Order § 8; Civil
Remedies Division Procedures (CRDP) § 19(b). Accordingly, there is no need for an in-
person hearing to cross-examine witnesses. Order J 9; CRDP § 16(b). I issue this
decision based on the written record. Order JJ 10-11; CRDP § 16(b), (d).

III. Issue

Whether CMS has a legitimate basis to revoke AnSah’s Medicare billing privileges
because AnSah was not operational at the practice location on file with CMS when an
inspector attempted to conduct a site visit.

IV. Jurisdiction

Ihave jurisdiction to decide this case. 42 C.F.R. §§ 405.803(a), 424.545(a)(1),
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’

To participate in the Medicare program as a provider, a provider must complete a CMS-
855A enrollment application, which requires disclosure of the provider’s address. See
42 CFR. § 424.510(a). Once enrolled, a provider must report, within 90 days, any
changes in its enrollment information, including its address. 42 C.F.R. § 424.516(e)(2).
CMS may perform periodic revalidations and site visits to verify the provider’s
enrollment information, the provider’s compliance with Medicare enrollment
requirements, and that the provider is operational. 42 C.F.R. §§ 424.510(d)(8),
424.515(c), 424.517(a). If CMS determines that a provider is not operational, then CMS
may revoke the provider’s Medicare billing privileges retroactive to the date that CMS
determined that the provider was not operational. 42 C.F.R. §§ 405.800(b)(2);

424 .535(a)(5)(i), (g).

1. A Palmetto inspector attempted to conduct a site visit on July 23, 2014, at the
address on file for AnSah (5054 Navajo Drive, Frisco, Texas); however, that
location was not open to the public or staffed to allow the inspector to enter the
office.

' My numbered findings of fact and conclusions of law appear in bold and italics.
It is undisputed that until December 2, 2013, AnSah was enrolled in the Medicare
program with its address listed as 5054 Navajo Drive, Frisco, Texas. CMS Ex. 4 at 7; see
also CMS Ex. 5 at 51. It is also now undisputed that AnSah moved its office on or
around December 2, 2013, to 9555 Lebanon Road, Suite 1001, Frisco, Texas. CMS Ex. 3
at 2; CMS Ex. 4 at 7,48. AnSah sent notice of its change in location to the Texas
Department of Aging and Disability Services, but there is no evidence that it actually sent
notice of the location change to Palmetto prior to the site inspection. CMS Ex. 4 at 8,
11-23.

On July 23, 2014, at approximately 1:50 p.m., an inspector with Palmetto attempted to
conduct an unannounced site inspection of AnSah’s office at the 5054 Navajo Drive
location. CMS Ex. | at 1. The inspector wrote in his inspection report that when he
arrived at that location, an occupant told him that AnSah had moved locations to the 9555
Lebanon Road address. CMS Ex. | at 1. The inspector noted in his report that AnSah:
was not open for business; did not have staff present; did not have customer activity; did
not have inventory present; and did not appear to be operational. CMS Ex. | at 1.

2. CMS had a basis to revoke AnSah’s Medicare billing privileges pursuant to
42 C.F.R. § 424.535(a)(5) because the July 23, 2014 on-site visit showed that
AnSah was not operational at the location on file with CMS.

AnSah acknowledges that it left the 5054 Navajo Drive location by December 2, 2013,
over six months before Palmetto’s attempted on-site visit. CMS Ex. 4 at 7-8, 48. AnSah
argues that on July 23, 2014, it was operational at the 9555 Lebanon Road address and
that it had provided Palmetto (and CMS) with notice of its change of address. AnSah
points out that it completed a change of location form for the Texas Department of Aging
and Disability Services, and also claims that it filed a “cost report” with Palmetto in May
2014 that included AnSah’s new location. CMS Ex. 4 at 8. AnSah further argues that the
inspector learned of AnSah’s new location at the time of the on-site visit, when an
occupant of AnSah’s old location told him the new address. See CMS Ex. | at 1.

A provider is “operational” when it:

has a qualified physical practice location, is open to the public
for the purpose of providing health care related services, is
prepared to submit valid Medicare claims, and is properly
staffed, equipped, and stocked (as applicable based on the
type of facility or organization, provider or supplier specialty,
or the services or items being rendered) to furnish these items
or services.

42 CFR. § 424.502. CMS may revoke a currently enrolled provider’s Medicare billing
privileges in the following circumstance.
Upon on-site review, CMS determines that-

(i) A Medicare Part A provider is no longer operational
to furnish Medicare covered items or services, or the
provider fails to satisfy any of the Medicare enrollment
requirements.

42 CFR. § 424.535(a)(5)(i).

Even if AnSah was open and staffed at the 9555 Lebanon Road location on July 23, 2014,
the regulatory definition of the term “operational” refers to the “qualified physical
practice location” of a provider. 42 C.F.R. § 424.502. The Medicare enrollment
application requires a provider to list its practice location (see CMS Ex. 4 at 48) and a
provider must provide documentation of its “practice location” with its enrollment
application. 42 C.F.R. § 424.510(d)(2)(ii). CMS may perform on-site inspections to
verify that the enrollment information submitted by a supplier is accurate and to
determine compliance with Medicare requirements. 42 C.F.R. § 424.517(a). This means
that CMS will inspect the “qualified physical practice location” that has been provided by
the supplier and is currently on file with CMS. See, e.g., JIB Enterprises, LLC, DAB
CR3010, at 9 (2013). As the regulatory drafters explained,

when CMS or our contractor determines that a provider . . . is
no longer operating at the practice location provided to
Medicare on a paper or electronic Medicare enrollment
application that the revocation should be effective with the
date that CMS or our contractor determines that the provider
or supplier is no longer operating at the practice location.

73 Fed. Reg. 69,725, 69,865 (Nov. 18, 2008) (emphasis added).

In the present matter, CMS provided undisputed evidence that AnSah was not open to the
public or properly staffed and thus not operational at the 5054 Navajo Road location,
which was the address AnSah had on file with CMS at the time of the July 23, 2014
attempted on-site visit. I conclude that CMS had a legal basis to revoke AnSah’s billing
privileges pursuant to 42 C.F.R. § 424.535(a)(5)(i).

3. AnSah did not notify CMS or the CMS contractor of its change of address
within 90 days of December 2, 2013, the date AnSah changed locations.

AnSah argued at the reconsideration level that its notification to the Texas Department of
Aging and Disability Services in November 2013, a May 2014 “cost report” to Palmetto,
the notice given by a third party to the inspector on July 23, 2014, and a CMS-855A
enrollment application filed on November 12, 2014, were sufficient to provide Palmetto
with notice of AnSah’s new location. AnSah implies that the inspection (or a separately
attempted inspection) should have occurred at the 9555 Lebanon Road location based on
these notifications. CMS Ex. 4 at 7-9.

AnSah has not provided evidence to support that it effectively or timely notified Palmetto
of its change in location within the 90 days required by regulation. 42 C.F.R.

§ 424.516(e)(2). Of the arguments AnSah puts forward, the only possible notice that
could be considered timely is the one provided to the Texas Department of Aging and
Disability Services. However, it is unreasonable — and unsupported — for AnSah to
presume that notifying the Texas Department of Aging and Disability Services
automatically notified Palmetto, an entirely separate entity serving a different level of
government.

AnSah’s other arguments involving alleged notice through a May 2014 “cost report” filed
with Palmetto, by a third party to the Palmetto inspector on July 23, 2014, and through
the filing of a CMS-855A enrollment application on November 12, 2014, all occurred
more than 90 days following AnSah’s change of location. Even if I could consider the
cost report to be notice provided before the July 2014 attempted inspection, AnSah did
not submit a copy of that report for me to review. AnSah’s mere allegation of submitting
a cost report as notice is insufficient for me to conclude Palmetto had notice of the
change of address. Further, only the latest notice, through a CMS-855A, was proper
notice; however, it occurred nearly a year after AnSah changed locations and many
months after the attempted inspection. Therefore, I conclude that AnSah did not timely
notify Palmetto of its change of address. The July 23, 2014 attempted on-site inspection
occurred at the location on file with Palmetto.

VI. Conclusion

I affirm the revocation of AnSah’s Medicare billing privileges effective July 23, 2014.

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Duffy and Associates, Inc. and Lee Duffy
d/b/a Discount Tobacco,

Respondent.

Docket No. C-15-1487
FDA Docket No. FDA-2015-H-0670

Decision No. CR4180

Date: August 28, 2015

INITIAL DECISION

I sustain the determination of the Center for Tobacco Products of the United States
Food and Drug Administration (CTP) to impose a civil money penalty of $500
against Respondent Duffy and Associates, Inc. and Lee Duffy d/b/a Discount
Tobacco. The preponderance of the evidence establishes that Respondent
distributed free samples of cigarettes, unlawfully sold tobacco products

(cigarettes) to a minor, and failed to verify that the cigarette purchaser was 18
years of age or older during a twenty-four month period in violation of 21 C.F.R.
§§ 1140.16(d)(1), 1140.14(a), and 1140.14(b)(1). These actions were violations of
the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 387c(a)(7)(B).

I. Procedural History

Complainant began this matter by serving an administrative complaint on
Respondent, Discount Tobacco, at 1726 East Sangamon Avenue, Springfield,
Illinois 62702, and by filing a copy of the complaint with the Food and Drug
Administration’s (FDA) Division of Dockets Management. Respondent timely
answered the Complaint. In its Answer, Respondent provided a picture of the
individual that it believes was the alleged minor. Respondent denied selling
tobacco products to a minor, and further stated that the verification of
photographic identification was not required for persons over the age of 26, and
Respondent believed that the alleged minor was over 26.

On March 27, 2015, I issued an Acknowledgement and Prehearing Order (APHO)
that set deadlines for the parties to file their pre-hearing exchanges. The
Complainant filed its pre-hearing exchange on June 19, 2015. Complainant’s
filing included an informal brief, a witness and exhibit list and the submission of
28 Exhibits that are identified as CTP Ex. 1 - CTP Ex. 28. Complainant alleged in
its brief that Respondent distributed free samples of cigarettes, unlawfully sold
cigarettes to a minor, and failed to verify that the cigarette purchaser was 18 years
of age or older. Complainant also asserts that the assessment of a $500 civil
money penalty is appropriate.

Respondent subsequently filed its pre-hearing exchange July 9, 2015.
Respondent’s filing included an informal brief, a witness and exhibit list, and the
submission of 8 Exhibits that are identified as R. Ex. 1 — R. Ex. 8. In its informal
brief, Respondent admitted to the distribution of free samples of tobacco products
on March 31, 2014. Respondent asserted that it did not have the evidence to
confirm or deny whether it sold cigarettes to a minor. Respondent submitted a
photograph of the individual that it believes was the alleged minor and stated that
“Tilf the photo confirms the identity of the alleged minor, and said person is
confirmed to be a minor, then we accept the allegation as true.” Then, assuming
the submitted photograph was of the alleged minor, the individual who sold the
cigarettes “solemnly [swears] before the courts that said person did not appear to
be under the age of 27.” Respondent also takes issue with the amount of the civil
money penalty because it does not believe that it failed to verify the identification
of the cigarette purchaser.

I held a pre-hearing conference on August 3, 2015, following which both parties
informed me that they did not intend to cross-examine the other party’s
witness(es). I am issuing a decision on the record in this case. I admit into
evidence the Complainant’s exhibits identified as CTP Ex. 1 — CTP Ex. 28, and
the Respondent’s exhibits identified as R. Ex. 1 — R. Ex. 8.
II. Issues, Findings of Fact and Conclusions of Law
A. Issues

The issues are whether: Respondent distributed free samples of cigarettes,
unlawfully sold tobacco products (cigarettes) to a minor, and failed to verify that
the cigarette purchaser was 18 years of age or older; and whether the law
authorizes the remedy imposed by CTP.

B. Findings of Fact and Conclusions of Law

The following facts are either undisputed or are established by the preponderance
of the evidence. Respondent does business as Discount Tobacco, located at 1726
East Sangamon Avenue, Springfield, Illinois 62702. Respondent’s business
includes the sale of tobacco products, including cigarettes. CTP Informal Brief, at
3-5; Respondent Informal Brief, at 1-2.

i. Distribution of Free Samples of Cigarettes

Complainant alleges that Respondent distributed free samples of cigarettes on
March 31, 2014. Complaint § 10. Respondent admits that Complainant’s
allegation is true. Respondent Informal Brief, at 3.

ii. Unlawful Sale of Tobacco Products to a Minor

On October 17, 2014, two inspectors working on behalf of CTP conducted an
undercover buy inspection at Respondent’s business. CTP Ex. 1; CTP Ex. 2. One
of the inspectors entered Respondent’s business and the other inspector waited in
the vehicle during the undercover buy inspection. The inspectors brought with
them a minor. The minor purchased Marlboro cigarettes from an employee of
Respondent’s business.

Respondent states that it does not have evidence to confirm or deny whether this
allegation is true. Respondent provides a photograph of a customer and states that
if that photograph is of the alleged minor than it accepts that the Complainant’s
allegation is true. I find it unnecessary to determine whether Respondent’s
photograph is of the alleged minor. Respondent provides no evidence that it did
not sell cigarettes to a minor, and Complainant has provided declarations that
support its assertion that the sale occurred. Governing regulations prohibit the sale
of tobacco products to any person who is under the age of 18. 21 C.F.R.

§ 1140.14(a). The evidence proves that Respondent violated that regulation on
October 17, 2014, when its employee sold cigarettes to a minor. This violation is
in turn a violation of the Act, 21 U.S.C. §§ 331k and 387c(a)(7)(B).

iii. Failure to Verify that Cigarette Purchaser Was 18 Years
of Age Or Older

Complainant also alleges that Respondent failed to verify that the cigarette
purchaser was 18 years of age or older. On October 17, 2014, the minor carried
with her identification establishing her actual date of birth. CTP Ex. 1; CTP Ex. 2.
On the occasion of the purchase, the employee of Respondent did not ask the
minor for identification, and the minor did not provide identification. CTP Ex. 1.

Respondent states that, assuming the minor is the person in the photograph, the
minor does not appear to be under the age of 27, and that Food and Drug
Administration guidance states that the photographic identification of those who
appear to be under the age of 27, who attempt to purchase tobacco products,
should be checked. Respondent Informal Brief.

The governing regulation states that “each retailer shall verify by means of
photographic identification containing the bearer’s date of birth that no person
purchasing the product is younger than 18 years of age.” 21 C.F.R.

§ 1140.14(b)(1). The regulation further states that “[n]o such verification is
required for any person over the age of 26.” 21 C.F.R. § 1140.14(b)(2). The
regulation requires Respondent to verify the date of birth of the purchaser if they
are 26 years of age or younger. This was an objective requirement, and was not
intended to allow retailers to forego age verification based on an employee’s
subjective determination of the purchaser’s age. See 61 Fed. Reg. 44396, at 44439
(August 28, 1996) (“By requiring age verification if a purchaser is 26 years old or
younger, regardless of his or her appearance, the retailer foregoes age verification
at its own risk.”). The evidence proves that Respondent violated that regulation on
October 17, 2014, when its employee failed to verify that the minor cigarette
purchaser was 18 years of age or older. This violation is in turn a violation of the
Act, 21 U.S.C. §§ 331k and 387c(a)(7)(B).

iv. Appropriateness of the Penalty

Complainant is authorized to impose civil money penalties on individuals or
entities that violate the Act and its implementing regulations. Penalties of up to
$500 are authorized for three violations that occur within a 24-month period.

21 C.F.R. § 17.2. I find that the penalty that Complainant seeks to impose for
Respondent’s noncompliance is reasonable pursuant to 21 U.S.C. § 333(£)(5)(B).
The amount of the penalty is minimal. Respondent’s noncompliance, however, is
egregious. The evidence in this case establishes that Respondent distributed free
samples of cigarettes, sold cigarettes to a minor, and failed to verify that the
cigarette purchaser was 18 years of age or older. I note, furthermore, that
Respondent presented no evidence to establish that it would suffer any hardship as
a result of being subject to the minimal penalty that CTP requests. For these
reasons, I sustain the penalty amount.

Order

For these reasons, I enter judgment in the amount of $500 against Respondent
Duffy and Associates, Inc. and Lee Duffy d/b/a Discount Tobacco.

/s/

Steven T. Kessel
Administrative Law Judge