Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Bear Hill Nursing Center, Inc.,
d/b/a Bear Hill Nursing Center of Wakefield
(CCN: 22-5272)

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-1658
Decision No. CR3564

Date: January 9, 2015

DECISION

I grant summary judgment in favor of the Centers for Medicare & Medicaid Services
(CMS) and against Petitioner, Bear Hill Nursing Center, a skilled nursing facility in the
Commonwealth of Massachusetts, sustaining CMS’s determination to impose a per-
instance civil money penalty of $2500 against Petitioner.

I. Background

Petitioner requested a hearing to challenge CMS’s determination to impose the remedy
that I cite in this decision’s opening paragraph. CMS moved for summary judgment and
Petitioner opposed the motion. In support of its motion CMS offered exhibits that are
identified as CMS Ex. 1 - CMS Ex. 3. Petitioner offered two exhibits each identified as
P. Ex. 1. I remark the October 22, 2014 letter regarding the informal dispute resolution
(IDR) conclusions as P. Ex. 2. I receive these exhibits into the record for purposes of this
decision.
II. Issues, Findings of Fact and Conclusions of Law
A. Issues

The issues are: whether Petitioner failed to comply substantially with Medicare
participation requirements; and whether CMS’s remedy determination is reasonab

e.
B. Findings of Fact and Conclusions of Law

There are no disputed issues of fact. All of CMS’s allegations of noncompliance focus
on the care that Petitioner’s staff provided to a resident who is identified as Resident # 1.
The resident was physically dependent on Petitioner’s staff for transfers and mobility.
The resident had a care plan that provided that the resident would be transferred from one
location to the next (for example, from bed to a wheelchair) with the assistance of two
staff members and by means of a mechanical lift. CMS Ex. | at 2.

Certified nursing assistants (CNAs) were responsible for delivering much of the care
received by Resident # 1. These caregivers included a nursing assistant identified as
CNA #1. CNA # | regularly provided care to the resident and was aware of the
requirements of the resident’s care plan. CMS Ex. | at 2.

On March 2, 2014, CNA # | attempted to reposition Resident # | without the assistance
of another CNA. The CNA raised the resident from a prone position in bed to a sitting
position at the edge of the bed. The CNA diverted her attention momentarily while the
resident was sitting and the resident fell to the floor. CMS Ex. | at 2. The CNA then
picked up the resident without assistance or the use of a mechanical lift (both of which
were required) and placed the resident in a shower chair. Id.

CNA # | attempted to cover up her failure to provide appropriate care to Resident # 1.
Facility policy requires any resident who sustains a fall to be assessed by a nurse. It
requires additionally that an injury report be completed that states the results of the
assessment. CMS Ex. | at 6. However, CNA # | did not report Resident # 1’s fall
immediately to a nurse. Instead, CNA # 1 told another CNA, CNA # 2, about the
accident. CNA # 2 did not relay to a nurse the information that was communicated by
CNA # 1. Eventually, CNA # | told a nurse and a nurse supervisor that the resident had
fallen when CNAs #s | and 2 attempted to transfer the resident via a mechanical lift. Id.
at 2-3, 5.

One of Resident # 1’s family members observed a bump on the resident’s head about
eight hours after the resident had fallen and reported it to Petitioner’s nursing staff. A
nursing supervisor questioned CNA # | about the injury and only then did the CNA
admit the facts surrounding the resident’s fall. The supervisor contacted Resident #1’s
physician who ordered x-rays, the results of which revealed the resident sustained a
fractured right clavicle. Resident # 1’s physician determined that the fractured right
clavicle was caused by the fall. CMS Ex. | at 3, 6-7, 10.

CMS alleges that Petitioner contravened three Medicare participation requirements.
These are:

e 42C FR. § 483.20(k)(3)(ii), which requires that the services provided to each
resident by a facility must be provided by qualified persons in accordance with
that resident’s plan of care. CMS alleges that Petitioner failed to comply with this
regulation because Resident # 1’s plan of care explicitly required that the resident
be transferred with the assistance of two persons and a mechanical lift and staff
violated this directive.

e 42C FR. § 483.25, which requires that a facility must provide each of its
residents with the necessary care and services to attain or maintain the highest
practicable physical, mental, and psychosocial well-being, in accordance with that
resident’s comprehensive assessment and plan of care. CMS contends that
Petitioner failed to comply with this requirement in that its staff failed to provide
Resident # 1 with services and care explicitly called for by the resident’s care plan,
those being transfers with the aid of two individuals and the assistance of a
mechanical lift.’

e 42CFR. § 483.25(h), which requires, among other things, that each resident of a
facility receives adequate supervision and assistance devices in order to prevent
accidents. CMS asserts that Petitioner’s staff knew that Resident # 1 needed the
assistance of two persons and a mechanical lift device in order to be transferred
from one location to another and that Petitioner’s staff failed to provide this
assistance to the resident.

The undisputed material facts plainly support CMS’s allegations of noncompliance.
There were explicit directions in Resident # 1’s plan of care that called for transfers of the
resident only with the assistance of two persons and a mechanical lift. Petitioner’s staff
violated those directions and then, attempted to cover up that violation. The resident’s
injuries were the proximate consequence of the failure to comply with the care plan.

' Petitioner argues that this alleged deficiency was deleted at an IDR process and that
CMS subsequently concurred. See P. Ex. 2. However, it is evident that CMS does not
now concur with the IDR finding because it is arguing this deficiency as part of its case.
Moreover, even if the deficiency were rescinded by agreement of CMS, the remaining
two deficiencies are more than sufficient to support the remedy in this case.
Petitioner asserts that the events leading to Resident # 1’s accident and injuries were a
one-time occurrence. It argues that it and its staff had an unblemished history of caring
for Resident # 1 prior to the resident’s fall and injuries and that it cannot be held liable for
this isolated event, which it characterizes as aberrance. To do so, argues Petitioner,
would be to impose an unreasonable strict liability standard against it.

I disagree. The accident sustained by Resident # 1 was not some unforeseeable
occurrence or act of God that was beyond Petitioner’s ability to control. I do not hold
Petitioner liable simply because an accident occurred. Rather, I hold it liable because it
was responsible for the conduct that caused that accident.

The accident sustained by Resident # 1 was the direct consequence of an employee’s
willful disregard of an explicit order. Petitioner’s employees are Petitioner’s agents and
Petitioner bears full responsibility for their conduct. When a member of Petitioner’s staff
provides care to a resident that staff member is doing so on behalf of Petitioner and
Petitioner is liable for the employee’s misfeasance or malfeasance in providing care.
Thus, Petitioner is liable for its employee’s actions when an employee such as CNA # 1
willfully violates the directions in a resident’s plan of care.

CMS imposed a per-instance civil money penalty of $2500 against Petitioner as a remedy
for its noncompliance. That amount is one-fourth of the maximum allowable amount for
a per-instance penalty and is, therefore, a modest penalty. 42 C.F.R. § 488.438(a)(2). I
find it to be entirely reasonable based on the undisputed material facts. It is amply
justified by the serious noncompliance established by those facts, a willful disregard of a
resident’s plan of care resulting in a serious injury to that resident. 42 C.F.R.

§§ 488 .438(f)(3); 488.404 (incorporated by reference into 42 C.F.R. § 488.438(f)(3)).

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Quest of Olanta, Inc.
d/b/a HD’s Quick Stop,

Respondent.

Docket No. C-15-521
FDA Docket No. FDA-2014-H-2043

Decision No. CR3561

Date: January 9, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Quest of Olanta, Inc. d/b/a HD’s Quick Stop, that alleges facts and
legal authority sufficient to justify the imposition of a $500 civil money penalty.
Respondent did not answer the Complaint, nor did Respondent request an extension of
time within which to file an answer. Therefore, I enter a default judgment against
Respondent and assess a $500 civil money penalty.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent impermissibly sold tobacco
products to minors and failed to verify that a tobacco purchaser was 18 years of age or
older, thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301
et seq., and its implementing regulations, Cigarettes and Smokeless Tobacco, 21 C.F.R.
pt. 1140 (2013). CTP seeks a civil money penalty of $500.

On December 3, 2014, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days, Respondent should pay the proposed
penalty, file an answer, or request an extension of time within which to file an answer.
CTP warned Respondent that if it failed to take one of these actions within 30 days, an
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering Respondent to pay the full amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Pursuant to 21 C.F.R. § 17.11(a), 1 am required to “assume the
facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the
Act, issue a default judgment and impose a civil money penalty. Accordingly, I must
determine whether the allegations in the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns HD’s Quick Stop, an establishment that sells tobacco products
and is located at 519 East Hampton Street, Olanta, South Carolina 29114.
Complaint § 3.

e During an inspection of Respondent’s establishment on December 3, 2013, at
approximately 5:36 PM, an FDA-commissioned inspector observed that “a person
younger than 18 years of age was able to purchase a package of Grizzly Long Cut
Premium Wintergreen smokeless tobacco... .” Complaint § 10.

¢ On February 20, 2014, CTP issued a Warning Letter to Respondent regarding the
inspector’s observation from December 3, 2013. The letter explained that the
observation constituted a violation of regulations found at 21 C.F.R. § 1140.14(a),
and that the named violation was not necessarily intended to be an exhaustive list
of all violations at the establishment. The Warning Letter went on to state that if
Respondent failed to correct the violation, regulatory action by the FDA or a civil
money penalty action could occur and that Respondent is responsible for
complying with the law. Complaint § 10.

e Although UPS records indicate that an individual named “Frye” received the
Warning Letter, CTP did not receive a response to the Warning Letter. Complaint

ql.

e During a subsequent inspection of Respondent’s establishment on June 24, 2014,
at approximately 5:12 PM, FDA-commissioned inspectors documented that “‘a
person younger than 18 years of age was able to purchase a package of Newport
Box cigarettes . . . [.]” The inspectors also documented that “the minor’s
identification was not verified before the sale... .” Complaint § 1.
These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of tobacco products to any person younger than 18 years of age. 21 C.F.R.

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

Taking the above alleged facts as true, Respondent violated the prohibition against selling
tobacco products to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a), on
December 3, 2013, and June 24, 2014. On June 24, 2014, Respondent also violated the
requirement that retailers verify, by means of photo identification containing a
purchaser’s date of birth, that no purchasers of tobacco products are younger than

18 years of age. 21 C.F.R. § 1140.14(b)(1). Therefore, Respondent’s actions constitute
violations of law that merit a civil money penalty.

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

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Kawana Latrice Hickman,
(OI File No. H-13-43191-9),

Petitioner,
v.
The Inspector General.
Docket No. C-14-1447
Decision No. CR3558

Date: January 7, 2015

DECISION

Petitioner, Kawana Latrice Hickman, appeals the determination of the Inspector General
for the U.S. Department of Health and Human Services (I.G.) to exclude her from
participating in Medicare, Medicaid, and other federal health care programs pursuant to
section 1128(a)(1) of the Social Security Act (Act) (42 U.S.C. § 1320a-7(a)(1)) for five
years. For the reasons discussed below, I find the I.G. was authorized to exclude
Petitioner for the five-year minimum mandatory exclusionary period.

Background

The I.G. notified Petitioner, by letter dated April 30, 2014, that she was being excluded,
pursuant to section 1128(a)(1) of the Act, from participating in Medicare, Medicaid, and
other federal health care programs for the minimum mandatory period of five years. The
1G. advised Petitioner that the exclusion was based on her conviction in the State of
Wisconsin, Dane County, of a criminal offense related to the delivery of an item or
service under Medicare or a state health care program.
Petitioner timely filed a request for hearing stating that the I.G. erroneously excluded her
under the mandatory section of the exclusion statute (section 1128(a)(1) of the Act).
Petitioner asserted, based on her misdemeanor conviction, that the I.G. should have
excluded her instead under the permissive sections of the statute at either sections
1128(b)(7) or 1128(b)(16).

I convened a prehearing conference with the parties, which I summarized in my August
7, 2014 Order and Schedule for Filing Briefs and Documentary Evidence (Scheduling
Order). Pursuant to that Scheduling Order, I asked the parties to answer the questions on
the short-form briefs sent to them, together with any additional arguments and supporting
documents they wished to present. The I.G. filed his short-form brief (I.G. Br.) together
with three exhibits (1.G. Exs. 1-3). Petitioner filed a short-form brief (P. Br.) together
with four exhibits (P. Exs. 1-4). I.G. counsel notified me on November 19, 2014 that the
1G. would not be filing a reply. Neither party requested an in-person hearing or objected
to the exhibits filed by the opposing party. I admit I.G. Exs. 1-3 and P. Exs. 1-4 into the
record. The record is now closed, and I decide the case based on the written record.

Discussion
A. Issue

The only issue before me is whether the I.G. had a legitimate basis to exclude Petitioner
from participating in Medicare, Medicaid, and other federal health care programs
pursuant to section 1128(a)(1) of the Act. If I find that the I.G. was authorized to exclude
Petitioner, then I must uphold the I.G.’s exclusion because it is for the minimum
mandatory period of five years. 42 C.F.R. § 1001.2007(a)(2).

B. Findings of Fact and Conclusions of Law

1. The I.G. had a legitimate basis to exclude Petitioner under section
1128(a)(1) of the Act.

The I.G. must exclude an individual where: 1) the individual has been convicted of a
criminal offense which occurred after August 21, 1996; and 2) the criminal offense is
related to the delivery of an item or service under Medicare or a state health care
program. Act § 1128(a)(1); see also 42 C.F.R. § 1001.101(c).

a. Petitioner was convicted of a criminal offense on May 1, 2013.

For exclusionary purposes, a conviction occurs when: 1) when a judgment of conviction
has been entered against an individual by a federal, state, or local court, regardless of
whether there is an appeal pending or whether the judgment of conviction or other record
relating to the criminal conduct has been expunged; 2) when there has been a finding of
guilt against an individual by a federal, state or local court; 3) when a plea of guilty or
nolo contendere by an individual has been accepted by a federal, state, or local court; or
4) when an individual has entered into participation in a first offender, deferred
adjudication, or other arrangement or program where judgment of conviction has been
withheld. Act § 1128(i).

I find that Petitioner was convicted of a criminal offense pursuant to sections 1128(i)(1)
and 1128(i)(3) of the Act. Specifically, on February 28, 2013, the Assistant Attorney
General of the Wisconsin Department of Justice filed a three-count information against
Petitioner. 1.G. Ex. 3. The information charged that, during 2007 and 2008, Petitioner
made false representations to the Wisconsin Medicaid program indicating that she had
provided health services to a Medicare beneficiary when, in fact, she did not provide
those services. I.G. Ex. 3. On May 1, 2013, in the Wisconsin Circuit Court for Dane
County, the court entered a judgment of conviction accepting Petitioner’s guilty plea to
three counts of theft in violation of Wis. Stat. § 943.20(1)(d). I.G. Exs. 1,2,3. Petitioner
was sentenced to two years of probation, paid restitution in advance of her conviction,
and the court withheld her sentence.' I.G. Exs. 1,2 at2.

Petitioner disagrees with the I.G.’s characterization of her criminal offense as a felony
(see I.G. Br. at 2) and explains that she was actually convicted of three misdemeanor
counts of theft-false representation. P. Br. 4. I agree that Petitioner was not convicted of
a felony offense here. Although I.G. counsel characterized Petitioner’s conviction as a
felony, the mandatory provision of section 1128(a)(1) applies to all criminal offenses and
does not differentiate between felony and misdemeanor convictions. When an individual
is convicted of a program-related misdemeanor involving the delivery of an item or
service, the mandatory exclusion statute still applies, and the minimum period of
exclusion is five years. See Act § 1128(c)(3)(B); Gregory J. Salko, M.D., DAB No.
2437, at 4-5 (2012). Therefore, the I.G.’s mischaracterization is a harmless error that
does not ultimately affect Petitioner’s exclusion and exclusionary period. See 42 C.F.R.
§1005.23.

b. Petitioner’s criminal offense is related to the delivery of an item
or service under Medicaid.

A conviction is related to the delivery of an item or service under Medicare or Medicaid
if there is a common sense connection or nexus between the offense and the delivery of
an item or service under Medicare or Medicaid. Berton Siegel, D.O., DAB No. 1467
(1994). The facts behind Petitioner’s conviction are undisputed and are set forth in the
February 28, 2013 information. P. Br. at 2; 1.G. Ex. 3. Petitioner pled guilty to three
counts of theft as described in that information. I.G. Exs. 2,3. The information describes
how Petitioner, during 2007 and 2008, intentionally deceived the Wisconsin Medicaid

' Petitioner asserts that restitution to the state of Wisconsin was $5,829 but that she
actually paid $5,830. P. Br. at 4; P. Ex. 3. The IG. asserts that Petitioner paid restitution
in the amount of $4,283.51. I.G. Br. at 2.
program when falsely representing that she provided services to a program beneficiary.
1G. Ex. 3. Such conduct is directly-related to providing a state Medicaid service.

2. The I.G. does not have the authority to exclude Petitioner under
section 1128(b)(7) or section 1128(b)(16) of the Act in lieu of section
1128(a)(1).

Although admitting she was convicted of a criminal offense, Petitioner disputes that the
1G. is authorized to exclude her under section 1128(a)(1). Petitioner argues instead that
her exclusion should be pursuant to the permissive exclusion authority of either section
1128(b)(7) (42 U.S.C. § 1320a-7(b)(7)) or 1128(b)(16) (42 U.S.C. § 1320a-7(b)(16)) of
the Act. RFH; P. Br. at 2. Section 1128(b)(7) permits exclusion where the I.G. has
determined that fraud, kickbacks and other prohibited activities have occurred. Section
1128(b)(16) permits exclusion in cases involving the making of false statements or
misrepresentations of material facts.

Petitioner states:

I was convicted of 3 counts of theft-false representation/misdemeanor during
2007/2008 during a period when I was self-employed and paid a third-party
financial intermediary for my self-employment business to receive and process my
hours and reimburse me for my self-employment. Pet. Ex. 1,2. During this time
frame, I misrepresented my business by giving the third party a list of dates that I
said I worked but didn’t which made it theft, I also misrepresented my business by
not giving the third party a list of dates I worked because I had reached my limit of
hours and assumed I could make up those hours. The result of doing this lead [sic]
to my business making false statements or misrepresentations of material fact
under section 1128(b)(16) . . . [or] fraud, kickback and other prohibited activities
under 1128(b)(7) .. . of the Act. I believe the length of the exclusion is
unreasonable.

P. Br. at 2.

The Department Appeals Board has reviewed the legislative history behind section
1128(a)(1) and determined, however, that the Congressional intent is clear. Congress
intended section 1128(a)(1) to minimally require a five-year exclusion for criminal
offenses relating to the Medicare and Medicaid programs, strengthening the law then
existing which, while mandating exclusion, did not set a minimum length of exclusion for
program-related criminal offenses. See Jack W. Greene, DAB No. 1078, at 8 (1989),
aff'd sub nom Greene v. Sullivan, 731 F. Supp. 835, 838 (E.D. Tenn. 1990). “[W]here a
conviction falls within the terms of section 1128(a)(1), it is governed by that section. The
fact that the conviction also meets the more inclusive elements of section 1128(b) ...
does not remove it from the ambit of section 1128(a)(1), and the I.G. must impose a
mandatory exclusion.” Boris Lipovsky, DAB No. 1363, at 6 (1992). Here, where
Petitioner’s conviction, which directly involved state Medicaid beneficiaries, falls within
the ambit of section 1128(a)(1), the I.G. has no discretion to instead consider a
permissive exclusion.

Conclusion

I find the I.G. was authorized to exclude Petitioner under section 1128(a)(1) because
Petitioner was convicted of a misdemeanor offense related to the delivery of a service
under a state Medicaid program. The five-year exclusion that the I.G. imposed is
mandatory as a matter of law and is effective 20 days from the I.G.’s exclusion notice
dated April 30,2014. 42 U.S.C. § 1320a-7(a); 42 C.F.R. § 1001.101(a).

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1825)

Complainant
v.
Anna’s Market and Deli LLC,
Respondent.
Docket No. C-15-298
Decision No. CR3556

Date: January 6, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Anna’s Market and Deli LLC, at 2900 East Mill Plain
Boulevard, Vancouver, Washington 98661, and by filing a copy of the complaint with the
Food and Drug Administration’s (FDA) Division of Dockets Management. The
complaint alleges that Anna’s Market and Deli impermissibly sold cigarettes to minors,
thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et
seq., and its implementing regulations, 21 C.F.R. pt. 1140. CTP seeks to impose a $250
civil money penalty against Respondent Anna’s Market and Deli.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on November 11, 2014, CTP served the
complaint on Respondent Anna’s Market and Deli by United Parcel Service. In the
complaint and accompanying cover letter, CTP explained that, within 30 days,
Respondent should pay the penalty, file an answer, or request an extension of time in
which to file an answer.
CTP warned Respondent that, if it failed to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

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

e At approximately 12:55 p.m. on November 3, 2013, at Respondent’s business
establishment, 2900 East Mill Plain Boulevard, Vancouver, Washington 98661, an
FDA-commissioned inspector observed Respondent’s staff selling a package of
Camel Filters 99’s cigarettes to a person younger than 18 years of age;

e Ina warning letter dated January 16, 2014, CTP informed Respondent of the
inspector’s November 3, 2013 observation, and that such an action violates federal
law, 21 C.F.R. § 1140.14(a). The letter further warned that Respondent’s failure
to correct its violation could result in a civil money penalty or other regulatory
action;

e At approximately 12:28 p.m. on May 23, 2014, at Respondent’s business
establishment, 2900 East Mill Plain Boulevard, Vancouver, Washington 98661,
FDA-commissioned inspectors documented Respondent’s staff selling a package
of Newport Box 100s cigarettes to a person younger than 18 years of age.

These facts establish Respondent Anna’s Market and Deli’s liability under the Act. The
Act prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product
is misbranded if sold or distributed in violation of regulations issued under section 906(d)
of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).
The Secretary of the U.S. Department of Health and Human Services issued the
regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1;
see 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21
C.F.R. § 1140.14(a), no retailer may sell cigarettes to any person younger than 18 years
of age.

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

For these reasons, I enter default judgment in the amount of $250 against Respondent
Anna’s Market and Deli LLC. Pursuant to 21 C.F.R. § 17.11(b), this order becomes final
and binding upon both parties after 30 days of the date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant,
v.

Gratiot Gas and Mini Mart, Inc. / Abed Berry
d/b/a Sunoco,

Respondent.

Docket No. C-15-216
FDA Docket No. FDA-2014-H-1734

Decision No. CR3554

Date: January 5, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Gratiot Gas and Mini Mart, Inc. / Abed Berry d/b/a Sunoco that
alleges facts and legal authority sufficient to justify the imposition of a civil money
penalty of $500. Respondent did not answer the Complaint, nor did Respondent request
an extension of time within which to file an answer. Therefore, I enter a default
judgment against Respondent and assess a civil money penalty of $500.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent impermissibly sold cigarettes to
minors and failed to verify that a cigarette purchaser was 18 years of age or older, thereby
violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and
its implementing regulations, Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140
(2013). CTP seeks a civil money penalty of $500.
On November 4, 2014, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days, Respondent should pay the proposed
penalty, file an answer, or request an extension of time within which to file an answer.
CTP warned Respondent that if it failed to take one of these actions within 30 days, an
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering Respondent to pay the full amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Pursuant to 21 C.F.R. § 17.11(a), Iam required to “assume the
facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the
Act, issue a default judgment and impose a civil money penalty. Accordingly, I must
determine whether the allegations in the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Sunoco, an establishment that sells tobacco products and is
located at 2153 Gratiot Avenue, Detroit, Michigan 48207. Complaint { 3.

e During an inspection of Respondent’s establishment on October 27, 2013, at
approximately 10:22 AM, an FDA-commissioned inspector observed that “a
person younger than 18 years of age was able to purchase a package of Newport
Box 100s cigarettes.” The inspector also observed that “the minor’s identification
was not verified before the sale... .” Complaint § 10.

e On January 9, 2014, CTP issued a Warning Letter to Respondent regarding the
inspector’s observations from October 27, 2013. The letter explained that the
observations constituted violations of regulations found at 21 C.F.R. § 1140.14(a)
and that the named violations were not necessarily intended to be an exhaustive
list of all violations at the establishment. The Warning Letter went on to state that
if Respondent failed to correct the violations, regulatory action by the FDA ora
civil money penalty action could occur and that Respondent is responsible for
complying with the law. Complaint 10.

e Although FDA did not receive a response to the Warning Letter, United Parcel
Service records indicate the Warning Letter was received on January 10, 2014 by
“Mohammed.” Complaint § 11.

e During a subsequent inspection of Respondent’s establishment on May 3, 2014, at
approximately 1:15 PM, FDA-commissioned inspectors documented that “a
person younger than 18 years of age was able to purchase a package of Newport
Box 100s cigarettes ... [.]’” The inspector also observed that “the minor’s
identification was not verified before the sale....” Complaint 1.
These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of cigarettes to any person younger than 18 years of age. 21 C.F.R. § 1140.14(a).
The regulations also require retailers to verify, by means of photo identification
containing a purchaser’s date of birth, that no cigarette purchasers are younger than

18 years of age. 21 C.F.R. § 1140.14(b)(1).

Taking the above alleged facts as true, on October 27, 2013 and May 3, 2014, the
Respondent violated the prohibition against selling tobacco products to persons younger
than 18 years of age, 21 C.F.R. § 1140.14(a). The Respondent also violated the
requirement that retailers verify, by means of photo identification containing a
purchaser’s date of birth, that no cigarette purchasers are younger than 18 years of age.
21 C.F.R. § 1140.14(b)(1). Therefore, Respondent’s actions constitute violations of law
that merit a civil money penalty.

CTP has requested a fine of $500, which is a permissible fine under the regulations.

21 C.F.R. § 17.2. Therefore, I find that a civil money penalty of $500 is warranted and so
order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1600)

Complainant,
v.

S.R.Y. Fuel, Inc. / Karmjit Singh
d/b/a US Gas,

Respondent.
Docket No. C-15-100
Decision No. CR3553

Date: January 5, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, S.R.Y. Fuel, Inc. / Karmjit Singh d/b/a US Gas, 44 Greenwood
Avenue Wayne, New Jersey 07470, and by filing a copy of the complaint with the Food
and Drug Administration’s (FDA) Division of Dockets Management. The complaint
alleges that US Gas unlawfully sold cigarettes to minors and failed to verify that the
cigarette purchasers were 18 years of age or older, thereby violating the Federal Food,
Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations,
Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140. CTP seeks to impose a $500
civil money penalty against Respondent US Gas.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on November 4, 2014, CTP served the
complaint on Respondent US Gas by United Parcel Service. In the complaint and
accompanying cover letter, CTP explained that, within 30 days, Respondent should pay
the penalty, file an answer, or request an extension of time in which to file an answer.
CTP warned Respondent that, if it failed to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

Respondent US Gas has neither filed an answer within the time prescribed, nor requested
an extension of time within which to file an answer. Pursuant to 21 C.F.R. § 17.11, 1
assume that the facts alleged in the complaint (but not its conclusory statements) are true.
Specifically:

e At approximately 6:58 p.m. on November 21, 2013, at Respondent’s business
establishment, 44 Greenwood Avenue Wayne, New Jersey 07470, an FDA-
commissioned inspector observed that a person younger than 18 years of age was
able to purchase a package of Newport Box cigarettes. The inspector also
documented that staff failed to verify, by means of photographic identification
containing a date of birth, that the purchaser was 18 years of age or older;

e Ina warning letter dated February 6, 2014, CTP informed Respondent of the
inspector’s November 21, 2013 observations, and that such actions violate federal
law, 21 C.F.R. § 1140.14(a) and (b)(1). The letter further warned that
Respondent’s failure to correct its violations could result in a civil money penalty
or other regulatory action;

e At approximately 12:36 p.m. on April 11, 2014, at Respondent’s business
establishment, 44 Greenwood Avenue Wayne, New Jersey 07470,
FDA-commissioned inspectors observed that a person younger than 18 years of
age was able to purchase a package of Newport Box cigarettes. The inspectors
also documented that staff failed to verify, by means of photographic identification
containing a date of birth, that the purchaser was 18 years of age or older.

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

21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.
§ 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of cigarettes to any person younger than 18 years of age. 21 C.F.R. § 1140.14(a).
The regulations also require retailers to verify, by means of photo identification
containing a purchaser’s date of birth, that no cigarette purchasers are younger than

18 years of age. 21 C.F.R. § 1140.14(b)(1).

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

For these reasons, I enter default judgment in the amount of $500 against Respondent
S.R.Y. Fuel, Inc. / Karmjit Singh d/b/a US Gas. Pursuant to 21 C.F.R. § 17.11(b), this
order becomes final and binding upon both parties after 30 days of the date of its
issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Dan Weldon d/b/a Well-Done Medical Supply,
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-908
Decision No. CR3552

Date: January 6, 2015

DECISION

Palmetto GBA National Supplier Clearinghouse (NSC), an administrative contractor
acting on behalf of the Centers for Medicare & Medicaid Services (CMS), revoked the
Medicare enrollment and billing privileges of Petitioner, Dan Weldon d/b/a Well-Done
Medical Supply, a supplier of durable medical equipment, prosthetics, orthotics, and
supplies (DMEPOS). Petitioner appealed, and CMS now argues the revocation was
proper and moves for summary judgment. Because Petitioner was not open for inspection
during his posted hours, I must sustain CMS’s determination to revoke his Medicare
enrollment and billing privileges.

I. Background and Procedural History

Petitioner participated in the Medicare program as a supplier of DMEPOS. See 42 C.F.R.
§ 424.57. Ina letter dated February 21, 2014, NSC notified Petitioner that NSC was
retroactively revoking Petitioner’s Medicare supplier number, pursuant to 42 C.F.R.

§§ 405.800, 424.57(e), 424.535(a)(1), 424.535(a)(5)(ii), and 424.535(g). The letter
explained that one of the contractor’s representatives attempted to visit Petitioner on
January 21 and 23, 2014. The business was closed on both occasions, so the
representative could not complete an inspection. CMS Exhibit (Ex.) 3. NSC also
imposed a two-year bar on Petitioner’s re-enrollment in the Medicare program. CMS Ex.
3, at 3.

Petitioner sought reconsideration. On March 25, 2014, NSC issued a reconsidered
determination affirming the revocation. CMS Ex. 1. The hearing officer stated that NSC
was authorized to perform revalidation site inspections in order to verify the information
that NSC had on file for suppliers and to confirm compliance with all supplier standards.
CMS Ex. 1, at 2. The hearing officer concluded that Petitioner was not open during his
posted hours of operation on two separate occasions when a NSC inspector attempted to
complete an unannounced on-site visit, and the NSC inspector was unable to verify
compliance with the supplier standards. CMS Ex. 1, at 2-3. The hearing officer thus
affirmed the revocation of Petitioner’s supplier number, citing 42 C.F.R.

§ 424.57, and stated that Petitioner “has not shown compliance with supplier standard 7”
and because Petitioner “has not provided evidence to show they have complied with the
standard for which they were non-compliant, they cannot be granted access to the
Medicare Trust Fund by way of a Medicare supplier number.” CMS Ex. 1, at 4. The
hearing officer did not address the effective date of Petitioner’s revocation.

Petitioner filed a request for a hearing with the Departmental Appeals Board, Civil
Remedies Division, on April 4, 2014. The case was assigned to me, and I issued an
Acknowledgment and Pre-hearing Order (Pre-hearing Order). In accordance with that
order, CMS timely filed its pre-hearing exchange, consisting of a motion for summary
judgment and brief (CMS Br.) along with seven proposed exhibits, CMS Exs. 1-7.
Petitioner then filed his pre-hearing exchange, which included an affidavit in opposition
to CMS’s motion for summary judgment (P. Br.). Petitioner did not object to CMS’s
proposed exhibits, and I admit them into the record.

The Pre-hearing Order also advised the parties that they must submit written direct
testimony for each proposed witness and that an in-person hearing would only be
necessary if the opposing party requested an opportunity to cross-examine a witness.
Pre-hearing Order ff 8, 9, and 10; Vandalia Park, DAB No. 1940 (2004); Pacific
Regency Arvin, DAB No. 1823, at 8 (2002) (concluding that the use of written direct
testimony for witnesses is permissible as long as the opposing party has the opportunity
to cross-examine those witnesses). CMS listed one witness, the NSC site inspector, and
submitted an affidavit of written direct testimony for him. CMS Ex. 6. Petitioner did not
request to cross-examine him. Petitioner submitted his affidavit of written direct
testimony, and CMS did not request to cross-examine him. My Pre-hearing Order
required the parties to brief all arguments in advance, regardless of whether a party chose
to also file a motion for summary judgment. I find, therefore, that an in-person hearing
for cross-examination purposes is unnecessary, and this matter may be decided on the
written record, without resolving whether the standards for summary judgment are
satisfied.

II. Analysis
A. Issue

The issue in this case is whether the evidence establishes CMS had a legitimate basis to
revoke Petitioner’s Medicare enrollment and billing privileges.

B. Finding of Fact and Conclusion of Law

I. CMS had a legitimate basis to revoke Petitioner’s Medicare supplier
number because a NSC inspector was not able to access Petitioner’s
location, on January 21 and 23, 2014, during Petitioner’s posted hours of
operation.

To receive Medicare payments for items furnished to a Medicare-eligible beneficiary, the
Secretary of Health and Human Services must issue a supplier billing number to a
DMEPOS supplier. Social Security Act (Act) § 1834(j)(1)(A); 42 U.S.C.

§ 1395m(j)(1)(A). Among other requirements, a DMEPOS supplier must be in a location
accessible to the public, and CMS and must be accessible and staffed during posted hours
of operation. 42 C.F.R. § 424.57(c)(7)()(B),(C).

CMS will revoke a currently-enrolled Medicare supplier’s billing privileges if CMS or its
agent determines that the supplier is not in compliance with any supplier enrollment
standard. See 18661CPayday.com, DAB No. 2289, at 13 (2009) (“[F]ailure to comply
with even one supplier standard is a sufficient basis for revoking a supplier’s billing
privileges.””). Where, as here, a contractor’s representative finds the facility closed during
its posted hours, the supplier does not meet the regulatory requirements, and CMS may
appropriately revoke its billing privileges. [ta Udeobong, d/b/a Midland Care Med.
Supply and Equip., DAB No. 2324 (2010). Suppliers who have had their billing
privileges revoked “are barred from participating in the Medicare program from the
effective date of the revocation until the end of the re-enrollment bar,” which is “a
minimum of | year, but not greater than 3 years depending on the severity of the basis for
revocation.” 42 C.F.R. § 424.535(c).

CMS argues the site inspector reasonably concluded, based upon available evidence, that
Petitioner was not open to the public and accessible during posted hours of operation.
Thus, CMS argues that NSC properly revoked Petitioner’s Medicare billing privileges.
Petitioner argues the revocation was not authorized and contends the office was properly
staffed, even though no staff members were present at the facility at the time of the
January 21 and January 23 attempted on-site inspections.
According to the site inspector’s report, he visited the facility at 11:20 a.m. on Tuesday,
January 21, 2014 and returned at 10:15 a.m. on Thursday, January 23, 2014. CMS Ex. 4,
at 2. The facility’s hours of operation were posted: 9:00 a.m. to 4:00 p.m. Monday
through Friday. CMS Ex. 4, at 3; CMS Ex. 6 (Browning Decl.). On both occasions, the
business was closed; the door was locked, and no one answered the inspector’s knocks on
the door. CMS Ex. 4, at 7; CMS Ex. 6. The inspector took photographs on both days,
and the photographs indicate the dates and times cited in the report. CMS Ex. 4, at 8;
CMS Ex. 6.

Petitioner concedes that the facility was closed on the dates and times in question. Ina
letter included with Petitioner’s request for hearing, Petitioner contends that “[o]n the two
days that [the inspector] visited our office . . . the only office staff employee, was away
assisting at . . . senior centers for a two hour period. She had her office phone with her,
but failed to receive [the inspector’s] call on the morning of January 21, 2014.”
Petitioner states that he is aware of the requirement that the office be operational during
posted hours “but felt that since we had no walk-in business . . . a two hour visit to assist
at the center (for the promotion of our company) was considered appropriate hours of
operation. We have reviewed this compliance issue and corrective measures are already
in place.” Moreover, in Petitioner’s affidavit in opposition to CMS’s motion for
summary judgment, Petitioner states, “I readily admit that on the two occasions that the
inspector came to the physical site my staff was not present and were at the Senior
Citizen Home informing the beneficiaries of the services of [Petitioner’s] business and a
display of the shoes available to the beneficiaries.” P. Br. at 1. Petitioner further
represents that staff was present at the office “on most all occasions” but most of
Petitioner’s services “were provided to the beneficiaries on site at nursing homes,
residences, and Senior Citizen Centers... .” P. Br. at 1-2. Petitioner contends the
facility was thus operational during Petitioner’s posted hours of operation. P. Br. at 2.

A supplier must be in a location accessible to the public, Medicare beneficiaries, CMS,
NSC, and its agents, and the supplier must be accessible and staffed during posted hours
of operation. 42 C.F.R. § 424.57(c)(7)(i)(B),(C). Petitioner has not offered any evidence
or argument in Petitioner’s reconsideration request, hearing request, or briefing in this
proceeding suggesting that Petitioner was open, accessible, and staffed at the time of the
attempted on-site inspections on January 21 and January 23, 2014. Instead, Petitioner
admits the facility was closed and no staff members were present at the time of both
attempted on-site inspections.

I find that Petitioner was not in compliance with all of the regulatory standards for
suppliers. The facility’s posted hours of operation were 9:00 a.m. to 4:00 p.m. Monday
through Friday. Yet, as Petitioner admits, no person was present at Petitioner’s facility at
the time of the attempted site inspections during Petitioner’s posted hours. The
regulatory standard would have no meaning if suppliers were not always required to
adhere to their posted hours of operation. Moreover, even if Petitioner had left a note on

the facility’s door indicating staff were out promoting Petitioner’s products at a
retirement community and would return within a couple hours (which Petitioner did not),
posting a “‘will-return” sign whenever the office is closed is not sufficient to satisfy the
requirement that the facility actually be open and accessible during its posted hours of
operation. Udeobong, DAB No. 2324, at 6-7. A supplier may not close, even for a few
hours, during posted hours of operation and must be available to meet the needs of
beneficiaries. Complete Home Care, Inc., DAB No. 2525, at 5 (2013). Petitioner is
responsible for making the necessary arrangements to keep his business open and allow
beneficiaries to access the business during posted hours of operation while allowing for
patient consultations, promotional activities, and breaks for staff members. As explained
in a similar case:

A Medicare supplier differs from a strictly private business in that it is
an integral part of a publicly run program. The requirement that a
supplier be open at all times during normal business hours reflects
CMS’s determination that a supplier be available to beneficiaries to meet
their needs and to alleviate their medical conditions.

A to Z DME, LLC, DAB CR1995, at 6 (2009), aff'd, DAB No. 2303 (2010). Also, the
regulatory drafters contemplated allowing facilities to temporarily close during posted
hours to account for circumstances including short-term closures but instead chose to
emphasize that a supplier’s place of business must always remain publicly accessible.
Complete Home Care, Inc., DAB No. 2525, at 6. The drafters explained in the preamble
to the final rule that they believed a supplier “should be available during posted business
hours” and “should do its best to plan and staff for temporary absences.” 75 Fed. Reg.
52,629, 52,636 (2010).

Additionally, CMS is authorized to revoke a supplier’s Medicare billing privileges based
upon the failure to be open when an inspector visits the supplier’s address, regardless of
whether the facility may have been open and accessible at some earlier or later time. See,
e.g., Mission Home Health et al., DAB No. 2310 (2010). CMS and its contractors have
limited resources and cannot be compelled to attempt multiple on-site inspections to
determine if the facility complies with all Medicare requirements.

NSC originally relied on several bases for revocation, but NSC specifically relied upon
the revocation basis of section 424.57(c)(7) in its reconsidered determination. In his
request for hearing, Petitioner did not challenge CMS’s determination of the effective
date of Petitioner’s revocation, and neither party presented arguments regarding the
effective date of revocation. Moreover, the reconsidered determination did not address
the effective date of revocation. Therefore, I do not modify the effective date of
Petitioner’s revocation here.
Petitioner’s noncompliance with one supplier standard is a sufficient basis for revoking
Petitioner’s Medicare enrollment, and I need not address other possible grounds for
revocation. See 1866ICPayday.com, DAB No. 22839, at 13. I find Petitioner did not
comply with all the Medicare application certification standards set forth in 42 C.F.R. §
424.57(c) because Petitioner was not accessible to the public, Medicare beneficiaries, and
NSC, and was not staffed during posted hours of operation on two separate occasions. I
find, therefore, CMS was authorized to revoke Petitioner’s Medicare enrollment and
billing privileges.

/s/
Joseph Grow
Administrative Law Judge