Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
Virginia Planas, D.C., ) Date: August 15, 2008

)
Petitioner, )
)

-Vv.- ) Docket No. C-08-305

) Decision No. CR1831
The Inspector General. )
)

DECISION

This matter is before me on the Inspector General’s (1.G.’s) Motion for Summary
Affirmance of his determination to exclude Petitioner pro se Virginia Planas, D.C., from
participation in Medicare, Medicaid, and all other federal health care programs for a
period of five years, based on the terms of section 1128(a)(3) of the Social Security Act
(Act), 42 U.S.C. § 1320a-7(a)(3). I grant the I.G.’s Motion.

I. Procedural Background

Virginia Planas, D.C., was a Florida chiropractor when, in 2004 and 2005, she became
professionally associated with Plantation Medical Recovery Center, Inc. (Plantation), and
Dial Medical Rehab, Inc. (Dial Medical). On July 14, 2005, the Federal Grand Jury
sitting for the United States District Court for the Southern District of Florida returned an
Indictment naming Petitioner and 21 others, including the business entities Plantation and
Dial Medical, as defendants in an elaborate conspiracy to defraud a number of private
health-insurance and auto-insurance carriers and, through another conspiracy, to conceal
the proceeds of that illegal activity.

The Grand Jury handed up a Superseding Indictment on September 26, 2006. That
document charged the same 22 defendants with a total of 40 felony violations of federal
law and recited a forfeiture claim based on 18 U.S.C. § 982. Petitioner was charged in a
single count of the Superseding Indictment: Count 22 charged her and co-defendant

2

Dmitry Rakovsky with having falsely stated that she was “one hundred percent owner of
1* Florida Medical Group, Inc., formerly known as Dial Medical,” a violation of 18
U.S.C. § 1035, False Statements Relating to Health Care Matters.

Assisted by counsel, Petitioner in late December 2006 negotiated a plea agreement with
the United States and agreed to plead guilty as charged in the Superseding Indictment.
The date of her guilty plea does not appear in this record, but on March 28, 2007
Petitioner appeared with counsel in United States District Court and was sentenced to a
three-year term of probation, fined $1000, and assessed a special fee of $100.

Acting on the authority of section 1128(a)(3) of the Act, the I.G. began the process of
excluding Petitioner from participation in Medicare, Medicaid, and all other federal
health care programs. On December 31, 2007, the I.G. notified Petitioner that she was to
be excluded for a period of five years, the mandatory minimum period of exclusion
established by section 1128(c)(3)(B) of the Act, 42 U.S.C. § 1320a-7(c)(3)(B).

Petitioner timely sought review of the I.G.’s action by her pro se letter of February 14,
2008. On the authority of 42 C.F.R. § 1005.6, I convened a prehearing conference by
telephone on April 8, 2008, to discuss the issues presented by the case and the procedures
best suited for addressing those issues. The parties agreed that the case could be decided
on written submissions, and I established a schedule for the submission of documents and
briefs. The results of that conference appear in the Order of April 8, 2008. Briefing is
now complete; the record in this case closed on July 15, 2008. Throughout these
proceedings Petitioner has appeared pro se.

The evidentiary record on which I decide this case comprises the 10 exhibits proffered by
Petitioner (P. Exs. 1-10) and the six exhibits proffered by the I.G. (I.G. Exs. 1-6). In
admitting all proffered exhibits, I overrule Petitioner’s objection to I.G. Ex. 4.

II. Issues

The factual and legal issues before me are set out at 42 C.F.R. § 1001.2007(a)(1). In the
specific context of this record, they are:

1. Whether the LG. has a basis for excluding Petitioner from participating
in Medicare, Medicaid, and all other federal health care programs pursuant

to section 1128(a)(3) of the Act; and

2. Whether the five-year term of the exclusion is unreasonable.
3

I resolve both issues in favor of the I.G.’s position. I find a basis for Petitioner’s
exclusion pursuant to section 1128(a)(3) of the Act, and I conclude that the five-year term
of exclusion, the minimum established by section 1128(c)(3)(B) of the Act, 42 U.S.C.

§ 1320a-7(c)(3)(B), is reasonable as a matter of law.

Ii. Controlling Statutes and Regulations

Section 1128(a)(3) of the Act, 42 U.S.C. § 1320a-7(a)(3), requires the mandatory
exclusion from participation in Medicare, Medicaid, and all other federal health care
programs of “[a]ny individual or entity that has been convicted for an offense which
occurred after [August 21, 1996,] under Federal or State law, in connection with the
delivery of a health care item or service or with respect to any act or omission in a health
care program (other than those specifically described in [section 1128(a)](1)) operated by
or financed in whole or in part by any Federal, State, or local government agency, of a
criminal offense consisting of a felony related to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct.”

The regulation implementing section 1128(a)(3) appears at 42 C.F.R. § 1001.101(c)(1). It
states, in relevant part, that the I.G. must exclude any individual who:

[h]as been convicted, under Federal or State law, of a felony . . . relating to
fraud, theft, embezzlement, breach of fiduciary responsibility, or other
financial misconduct . . . [i]n connection with the delivery of a health care
item or service, including the performance of management or administrative
services relating to the delivery of such items or services[.]

The Act defines “convicted” as including those circumstances, among others:
(1) when a judgment of conviction has been entered against the individual .
.. by a Federal . . . court, regardless of whether .. . the judgment of

conviction or other record relating to criminal conduct has been expunged;

(2) when there has been a finding of guilt against the individual .. . by a Federal
... court; (or)

(3) when a plea of guilty or nolo contendere by the individual . . . has been
accepted by a Federal . . . court[.]

Act, section 1128(i)(1)-(3); 42 U.S.C. §§ 1320a-7(i)(1)-(3). These definitions are
repeated at 42 C.F.R. § 1001.2.
4

An exclusion based on section 1128(a)(3) is mandatory, and the I.G. must impose it for a
minimum period of five years. Act, section 1128(c)(3)(B); 42 U.S.C. § 1320a-7(c)(3)(B).
The regulatory language of 42 C.F.R. § 1001.102(a) affirms the statutory provision. The
1G. has not sought to enhance the five-year mandatory minimum period in this case, and
so I may not consider any of the specific aggravating or mitigating factors set out at 42
C.F.R. §§ 1001.102(b) and (c).

IV. Findings and Conclusions
I find and conclude:

1. On March 28, 2007, in the United States District Court for the Southern District of
Florida, Petitioner Virginia Planas, D.C., was adjudicated guilty and convicted on her
plea of guilty to False Statements Relating to Health Care Matters, in violation of 18
U.S.C. § 1035, a felony, and was sentenced. I.G. Ex. 2; P. Ex. 2.

2. The plea, conviction, and sentence as described above in Finding | constitute a felony
“conviction” within the terms of sections 1128(a)(3) and 1128(i)(1), (2) and (3) of the
Act, and 42 C.F.R. § 1001.2.

3. The conduct that resulted in Petitioner’s conviction as described above in Findings 1
and 2 related to fraud in connection with the delivery of a health care item or service.
1G. Exs. 2, 4, 5.

4. The conduct that resulted in Petitioner’s conviction as described above in Findings 1
and 2 occurred on or about January 3, 2005, and thus after August 21, 1996. LG. Ex. 4, at
25.

5. By reason of her conviction of a felony offense related to fraud in connection with the
delivery of a health care item or service that occurred after August 21, 1996, Petitioner
was subject to, and the I.G. was required to impose, a period of exclusion from
participation in Medicare, Medicaid, and all other federal health care programs. Act,
section 1128(a)(3).

6. On December 31, 2007, the I.G. notified Petitioner that she was to be excluded from
participation in Medicare, Medicaid, and all other federal health care programs for a
period of five years, based on the authority set out in section 1128(a)(3) of the Act.
1G. Ex. 1.
5

7. Acting pro se, Petitioner perfected her appeal from the I.G.’s action by filing a timely
hearing request on July 29, 2005.

8. The I.G. reasonably set the period of Petitioner’s exclusion at five years, the
mandatory minimum term provided by law. Act, section 1128(c)(3)(B); 42 C.F.R.
§§ 1001.102(a), 1001.2007(a)(2).

9. There are no disputed issues of material fact before me and summary disposition on
the written submissions is appropriate in this matter. Thelma Walley, DAB No. 1367
(1992).

V. Discussion

The essential elements necessary to support an exclusion based on section 1128(a)(3) of
the Act are: (1) the individual to be excluded must have been convicted of a felony
offense; (2) the felony offense must have been based on conduct relating to fraud, theft,
embezzlement, breach of fiduciary responsibility, or other financial misconduct; (3) the
felony offense must have been for conduct in connection with the delivery ofa health
care item or service, or the felony offense must have been with respect to any act or
omission in a health care program operated by or financed in whole or in part by any
federal, state, or local government agency; and (4) the felonious conduct must have
occurred after August 21, 1996. Andrew D. Goddard, DAB No. 2032 (2006); Erik D.
DeSimone, R.Ph., DAB No. 1932 (2004); Jeremy Robinson, DAB No. 1905 (2004);
Michael Patrick Fryman, DAB CR1261 (2004); Golden G. Higgwe, D.P.M., DAB
CR1229 (2004); Thomas A. Oswald, R.Ph., DAB CR1216 (2004); Katherine Marie
Nielsen, DAB CR1181 (2004).

Petitioner concedes that she pleaded guilty to and was convicted ofa felony, a violation
of 18 U.S.C. § 1035. She concedes that her misconduct occurred after August 21, 1996.
The first and fourth essential elements are thus established without the need for further
discussion. The second and third elements are what Petitioner contests.

Petitioner’s contention with respect to the second essential element takes two forms. Her
argument’s first form amounts to a denial of any real wrongdoing at all. In support of this
effort she emphasizes her comparative inexperience in health-care administration and her
assertion that she derived no personal gain from her part in the indicted scheme. But the
fact remains that she negotiated and tendered a guilty plea to a violation of 18 U.S.C.

§ 1035, that she did so with the advice and assistance of counsel, and that she was
adjudicated guilty on that plea, convicted, and sentenced accordingly. Her argument
could, of course, have been offered as a defense to the criminal charge, but she has
admitted her guilt by her guilty plea in United States District Court and she may not make
6

that argument here. Collateral attack on predicate convictions in exclusion proceedings is
precluded by regulation at 42 C.F.R. § 1001.2007(d), and that preclusion has been
affirmed repeatedly by appellate panels of the Departmental Appeals Board (Board).
Susan Malady, R.N., DAB No. 1816 (2002); Dr. Frank R. Pennington, M.D., DAB No.
1786 (2001); Joann Fletcher Cash, DAB No. 1725 (2000); Paul R. Scollo, D.P.M., DAB
No. 1498 (1994); Chander Kachoria, R.Ph., DAB No. 1380 (1993).

Her argument takes its second form in her staunch denial that the crime she admitted and
of which she was convicted involved conduct related to fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial misconduct. An answer to her
argument begins and ends with a review of the statute itself. 18 U.S.C. § 1035 purports to
forbid, by its very title, False Statements Relating to Health Care Matters. The goal and
effect of its language are just as clear:

(a) Whoever, in any matter involving a health care benefit program,
knowingly and willfully—

(1) falsifies, conceals, or covers up by any trick, scheme, or
device a material fact; or

(2) makes any materially false, fictitious, or fraudulent statements or
representations, or makes or uses any materially false writing or
document knowing the same to contain any materially false,
fictitious, or fraudulent statement or entry, in connection with the
delivery of or payment for health care benefits, items, or services,
shall be fined under this title or imprisoned not more than 5 years, or
both.

(b) As used in this section, the term “health care benefit program” has the
meaning given such term in section 24(b) of this title.

The definition of “health care benefit system” set out at 18 U.S.C. § 24(b) reads:

(b) As used in this title, the term “health care benefit program” means any
public or private plan or contract, affecting commerce, under which any
medical benefit, item, or service is provided to any individual, and includes
any individual or entity who is providing a medical benefit, item, or service
for which payment may be made under the plan or contract.
7

It is simply impossible to imagine a clearer statutory definition of a crime
committed by fraud and committed in the context of the delivery ofa health care
item or service. For that reason I believe it unnecessary here to perform the factual
analysis of Petitioner’s conduct described in Berton Siegel, D.O., DAB No. 1467
(1994), in order to detect the “nexus”and “common sense connection” of her
conduct to the delivery ofa health care item or service. The requisite nexus and
connection are patent in the plain language of the statute she admitted violating. I
conclude, therefore, that Petitioner’s conviction, based on her violation of 18
U.S.C. § 1035, satisfies the second essential element as a matter of law.

Petitioner’s contention regarding the third essential element is based on her
mistaken reading of section 1128(a)(3) of the Act. Petitioner apparently believes
that the statutory language demands that the .G. prove not only that the predicate
conviction occurred in connection with the delivery ofa health care item or
service, but that the I.G. also prove that the crime took place in the context of a
health care program operated or funded by a government agency. Petitioner’s
Answer Brief at 6-7. Her argument has been made in this forum before, but those
arguments did not prevail, nor can the one at hand prevail now, over settled
precedent in this forum and before the Board. The I.G. must prove either that the
predicate conviction was based on conduct in connection with the delivery of a
health care item or service, or must prove that the predicate conviction was based
on conduct that occurred in the context of a government health care program. The
1G. is not obliged to prove both.

The disjunctive and separate classification of predicate convictions identified by
section 1128(a)(3) of the Act was settled by the Board in Erik D. DeSimone, R.Ph.,
DAB No. 1932. The Board’s ruling in DeSimone has been applied by the
Administrative Law Judges (ALJs) of this forum in a series of cases arising from
conduct and convictions similar to those in this case, and based on a theory similar
to that urged here. Morganna Elizabeth Allen, DAB CR1479 (2006); Robert F.
Tschinkel, R.Ph., DAB CR1323 (2005); Michael Patrick Fryman, DAB CR1261;
Golden G. Higgwe, D.P.M., DAB CR1229; Thomas A. Oswald, R.Ph., DAB
CR1216.

The Board’s DeSimone analysis, as reflected in the ALJ’s decision in Fryman, has
won explicit approval in the Article III federal courts. The Board affirmed the
ALJ’s decision in Fryman by memorandum Order in Michael Patrick Fryman,
DAB No. 1965 (2005); no separate decision was issued. Fryman pursued his
appeal in United States District Court. That court affirmed the ALJ and the Board,
and specifically wrote that with respect to the exclusion remedy established by
section 1128(a)(3): “The court affirms the conclusion of the ALJ that no nexus to
8

a government-funded health care program is required with respect to a conviction
in connection with the delivery of a health care item or service.” Fryman v.
Leavitt, No. 3-CV-256-S, at 7 (W.D. Ky., June 29, 2006). The third essential
element has been established.

Petitioner describes the five-year term of exclusion as “abusive” and presumably
regards it as unreasonable.” The five-year period of exclusion proposed in this
case is the absolute minimum required by section 1128(c)(3)(B) of the Act. Asa
matter of law it is not unreasonable, and neither the Board nor I can reduce it.
Mark K. Mileski, DAB No. 1945 (2004); Salvacion Lee, M.D., DAB No. 1850
(2002); 42 C.F.R. § 1001.2007(a)(2).

Resolution of a case by summary disposition is particularly fitting when settled
law can be applied to undisputed material facts. Michael J. Rosen, D.C., DAB No.
2096 (2007); Thelma Walley, DAB No. 1367. Summary disposition is authorized
by the terms of 42 C.F.R. § 1005.4(b)(12). This forum looks to FED. R. CIv. P. 56
for guidance in applying that regulation. Robert C. Greenwood, DAB No. 1423
(1993). The material facts in this case are undisputed and unambiguous. They
support summary disposition as a matter of settled law. This Decision issues
accordingly.

VI. Conclusion

For the reasons set out above, the I.G.’s Motion for Summary Affirmance should
be, and it is, GRANTED. The I.G.’s exclusion of Petitioner Virginia Planas, D.C.,
from participation in Medicare, Medicaid, and all other federal health care
programs for a term of five years, pursuant to the terms of section 1128(a)(3) of
the Act, is sustained.

/s/
Richard J. Smith
Administrative Law Judge

At least twice in her pleadings Petitioner has asserted that these exclusion
proceedings are “personal and discriminatory for my origin as a Latin woman.” See
Petitioner’s Summary of the Respon[se] Brief at 1; Petitioner’s Respon[se] Brief at 5.
That is an unjustified and fundamentally gratuitous allegation: there is no evidence
whatsoever at any place in the record before me to warrant or excuse it. That record gives
the lie to Petitioner’s assertion, and I would so find without hesitation if such a finding
were necessary to resolution of the issues before me.


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
Van Allen Nursing Home, )
(CCN: 33-5586), ) Date: August 12, 2008
)
Petitioner, )
)
-Vv.- ) Docket No. C-08-224
) Decision No. CR1829
Centers for Medicare & )
Medicaid Services. )
)

DECISION DISMISSING REQUEST FOR HEARING

I dismiss the hearing request filed on behalf of Petitioner, Van Allen Nursing Home.
Consequently, the Centers for Medicare & Medicaid Services (CMS) may impose
remedies against Petitioner consisting of:

* civil money penalties of $5500 per day for each day of a period beginning on
October 30, 2007 and running through November 12, 2007;

* civil money penalties of $50 per day for each day of a period beginning on
November 13, 2007 and running through February 8, 2008; and

+ denial of payment for new Medicare admissions for each day of a period
beginning on November 7, 2007 and running through February 8, 2008.

I. Background

Petitioner is a skilled nursing facility doing business in the State of New York. It
participates in the Medicare program. Its participation in Medicare is governed by
sections 1819 and 1866 of the Social Security Act (Act) and by implementing regulations
at 42 C.F.R. Parts 483 and 488. Its right to a hearing in this case is governed by section
1128A of the Act and by regulations at 42 C.F.R. Part 498.
2

Petitioner was inspected for compliance with Medicare participation requirements in a
survey that ended on October 31, 2007. The surveyors found that Petitioner manifested
deficiencies and these deficiencies included noncompliance that was so egregious as to
pose immediate jeopardy for Petitioner’s residents. An “immediate jeopardy” level
deficiency is one that is so severe as to cause, or which is likely to cause, serious injury,
arm, impairment, or death to a facility’s residents. 42 C.F.R. § 488.301. CMS
concurred with the surveyors’ findings and determined to impose the remedies that I
describe in the opening paragraph of this decision.

Petitioner, through its counsel, requested a hearing and the case was assigned to me fora
earing and a decision. On January 15, 2008 I issued an initial pre-hearing order in the
case. I directed the parties, as a mandatory element of the pre-hearing process, to
exchange proposed exhibits including the written direct testimony of all proposed
witnesses and pre-hearing briefs. Acknowledgment and Initial Pre-Hearing Order (initial
pre-hearing order), at 2, paragraphs 1-2. I gave CMS an exchange deadline of May 22,
2008. Jd. Petitioner’s deadline was June 23, 2008. Jd. The initial pre-hearing order
explicitly warned the parties that I could sanction them for their noncompliance with its
requirements. /d., at 5, paragraph 11.

CMS complied with the pre-hearing order. Petitioner did not make a filing on June 23.
On July 7, I sent an order to show cause to Petitioner’s counsel directing him to either
make a satisfactory filing or to explain why Petitioner had not filed its pre-hearing
exchange. I gave counsel 10 days within which to reply. On July 11, 2008 I received a
reply from Petitioner’s counsel advising me that he had withdrawn from the case and that
he no longer represented Petitioner. He made no substantive filing. On July 17, 2008 I
issued a second order to show cause which I directed to Petitioner and to its owner and
administrator. I recited that Petitioner’s counsel had withdrawn from the case and I gave
Petitioner an additional 10 days either to file a pre-hearing exchange or to give me a
satisfactory explanation for its failure to file an exchange. I gave Petitioner the name and
telephone number of an attorney on the Civil Remedies Division staff to whom Petitioner
could direct any inquiries. I warned Petitioner that failure to file a response could result
in my dismissing its hearing request.

Petitioner failed to file any response to the second order to show cause or to call the
contact person whose name and phone number I had supplied to Petitioner.
3

II. Issue, findings of fact and conclusions of law
A. Issue

The issue in this case is whether grounds exist for me to dismiss Petitioner’s hearing
request.

B. Findings of fact and conclusions of law

I make findings of fact and conclusions of law (Findings) to support my decision in this
case. I set forth each Finding below as a separate heading.

1. I may dismiss a party’s hearing request where that party has not
complied with my initial pre-hearing order and has failed to explain its
failure to do so.

a. I may sanction a party to a civil money penalty case by
dismissing its hearing request in the circumstance where that party
has not complied with my pre-hearing order.

Section 1819(h) of the Act gives the Secretary the authority to impose remedies against
skilled nursing facilities that fail to comply with Medicare participation requirements.
These remedies include civil money penalties. This section provides specifically that the
provisions of section 1128A of the Act shall apply to any civil money penalty that is
imposed by the Secretary against a skilled nursing facility. Act, section 1819(h)(2)(B)(ii).

Section 1128A creates a general framework governing the imposition of civil money
penalties by the Secretary. This section gives hearing rights to a party against whom
penalties are imposed. Act, section 1128A(c). That section provides that the official
conducting a hearing may sanction an individual or entity for failing to comply with an
order or procedure, failing to defend an action, or other misconduct as would interfere
with the speedy, orderly, or fair conduct of the hearing. /d., section 1128A(c)(4).
Sanctions may include dismissal of the action. /d., section 1128A(c)(4)(E).

Dismissal is obviously a remedy which should not be imposed lightly. But, it is
appropriate in those circumstances where a party fails to comply with a pre-hearing order
and fails to explain its noncompliance after having been given more than one opportunity
to do so.
b. I may dismiss a hearing request where a party has abandoned it.

As I discuss above this case is governed by procedural hearing regulations at 42 C.F.R.
Part 498. These regulations provide that an administrative law judge may dismiss a
hearing request if it is abandoned by the party that requested it. 42 C.F.R. § 498.69(a).
The regulation states that an administrative law judge may consider a hearing request to
be abandoned if the party or its representative:

(1) Fails to appear at the pre-hearing conference or hearing without having
previously shown good cause for not appearing; and

(2) Fails to respond, within 10 days after the . . . [administrative law judge]
sends a “show cause” notice, with a showing of good cause.

Failure to comply with the requirements of a pre-hearing order directing exchanges of
proposed evidence and briefs is, effectively, failure by a party to appear at and participate
ina hearing. A purpose of requiring pre-hearing exchanges is to assure that each party
files its affirmative evidence in advance of taking cross-examination or redirect testimony
of witnesses. That is as much an element of the actual hearing of the case as is an
appearance to conduct cross-examination. Thus, I may dismiss a hearing request for
abandonment where a party fails to file its pre-hearing exchange and fails also to respond
with a showing of good cause, within 10 days of its receipt of an order to show cause.

2. Grounds exist for me to dismiss Petitioner’s hearing request.

There are two grounds for dismissing Petitioner’s hearing request. First, Petitioner has
willfully not complied with my initial pre-hearing order. Second, Petitioner has
abandoned its request for a hearing.

Dismissal of Petitioner’s hearing request is an appropriate sanction. I gave Petitioner two
extensions of time within which to comply with my initial pre-hearing order, either by
filing a satisfactory pre-hearing exchange or by explaining its failure to do so. It has
provided me with nothing substantive in response and has not even replied to the second
order to show cause that I sent to it. Petitioner’s failure to provide me even with an
explanation for its noncompliance with my pre-hearing order amounts to a deliberate
obstruction of the hearing process that I established.
5

Dismissal is also appropriate because Petitioner has abandoned its request for a hearing.
Petitioner has failed to participate in any meaningful sense in the hearing and decision
process that I established and has not provided good cause (or, in fact, any explanation)
for its failure to do so.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:

KGV Easy Leasing, d/b/a Privilege
Diagnostics,
(PIN: TD052),

Date: August 6, 2008

)

)

)

)

)

) Docket No. C-08-93 (On Remand)

) Decision No. CR1828

Petitioner, )
)
)
)
)

Centers for Medicare & Medicaid Services.

DECISION

The Medicare billing privileges of Petitioner, KGV Easy Leasing, d/b/a Privilege
Diagnostics, are revoked effective January 3, 2008.

I. Background

The National Heritage Insurance Company (NHIC)' notified Petitioner by letter dated
April 6, 2006, that Petitioner’s Medicare Provider Identification Number (PIN) was being
revoked effective April 21, 2006. NHIC advised Petitioner that the revocation was based
upon NHIC’s “possession of information which establishes that [Petitioner] submitted
false or fraudulent claims to Medicare.” CMS Exhibit (CMS Ex.) 2, at 1. The NHIC
notice listed the allegedly false and fraudulent claims. NHIC further alleged in its notice

' NHIC was the regional Medicare Part B Carrier at the time of the notice.
SafeGuard Services subsequently became the Medicare Part B Carrier for the region.
Pursuant to sections 1834(a)(12) and 1842(a) of the Social Security Act (Act) (42 U.S.C.
§ 1395m(a)(12) and 1395u), the administration of Medicare Part B is through Medicare
administrative contractors, and the Secretary of Health and Human Services (Secretary)
may designate one carrier for one or more regions to process claims for items covered by
Medicare Part B. CMS administers the contracting program, which includes both
intermediaries and carriers, pursuant to 42 C.F.R. Part 421.
2

that Petitioner “violated the terms of [Petitioner’s] participation in Medicare” and
Petitioner no longer met the requirements for Medicare billing privileges and those
privileges were being revoked effective April 21, 2006. The notice advised Petitioner of
the right to request a hearing before a carrier hearing officer or, in the alternative, to
submit a corrective action plan. CMS Ex. 2, at 3.

Petitioner requested hearing by a carrier hearing officer. A hearing was held on July 28,
2006, and a decision was issued that day. The hearing officer found that Petitioner signed
an application to participate in Medicare on May 15, 2001, and thereby agreed not to
“knowingly” present false or fraudulent claims to Medicare for payment. The hearing
officer concluded that Petitioner’s evidence did not overcome the allegations of the NHIC
notice dated April 6, 2006. The hearing officer mentions no evidence submitted by NHIC
or CMS to show why NHIC or CMS believed that the claims listed in the NHIC notice
dated April 6, 2006, were either false or fraudulent. The hearing officer apparently
concluded that Petitioner submitted false or fraudulent claims in violation of the covenant
not to in its May 15, 2001 application. The hearing officer advised Petitioner of the right
to review by an administrative law judge (ALJ). Request for Hearing (RFH) Ex. A; CMS
Ex. 5.

On September 25, 2006, Petitioner requested a hearing before an ALJ. This case was
docketed as C-06-686 and assigned to me for hearing and decision on September 28,
2006. On November 15, 2006, I convened a telephonic prehearing conference, the
substance of which is memorialized in my Order dated November 20, 2006. Counsel for
CMS agreed that the hearing procedures of 42 C.F.R. Part 498 are applicable to this case.
CMS asserted during the conference that the basis for revocation of Petitioner’s PIN was
42 C.F.R. § 424.535(a)(4), which permits revocation based upon false or misleading
information in connection with application or reapplication for enrollment in Medicare.
However, counsel for CMS requested the opportunity to move for dismissal on grounds
that the request for hearing was moot on the theory that Petitioner had voluntarily ended
its participation in Medicare before revocation of the PIN by NHIC. Because the issue
raised by CMS was potentially jurisdictional, I issued a briefing schedule in my Order of
November 20, 2006, rather than ordering development of the case for hearing.

CMS filed its motion to dismiss on November 29, 2006, with CMS Exs. 1 through 3.
Petitioner filed its opposition to the motion on December 15, 2006, with Petitioner’s
exhibits (P. Exs.) | through 5.27, CMS requested leave to file a reply with CMS Ex. 4, and

> The parties did not comply with the Civil Remedies Procedures in marking and

submitting documentary evidence for my consideration, and documents appropriate for
consideration were not marked or were incorrectly numbered. To facilitate any review on
(continued...)
3

Petitioner requested leave to file a sur-reply and for oral argument. The CMS reply and
Petitioner’s sur-reply were accepted, but the request for oral argument was denied.

On March 6, 2007, I issued a ruling granting the CMS motion to dismiss the request for
earing in this case. On May 3, 2007, Petitioner moved that I vacate and reconsider my
March 6, 2007 ruling, with P. Ex. 6 attached. CMS opposed the motion on May 23, 2007.
Petitioner replied to the CMS opposition on June 5, 2007, with P. Exs. 7 through 9
attached. On June 25, 2007, I issued a ruling denying Petitioner’s request that I
reconsider my March 6, 2007 ruling. On November 6, 2007, an appellate panel of the
Departmental Appeals Board (the Board) issued a decision vacating my ruling dismissing
the request for hearing and remanding the case to me for further action specified in the
decision. KGV Easy Leasing, dba Privilege Diagnostics, DAB No. 2130 (2007) (Board
Decision). The case was received on remand and assigned docket number C-08-93.

Counsel for CMS advised me by letter dated November 21, 2007, that CMS had received
the remand order from the Board and that CMS intended to renew the motion to dismiss.
On December 3, 2007, I ordered that CMS address specified issues raised by the remand
decision and produce specified documents, if such documents existed. I also permitted
Petitioner an opportunity to respond. CMS filed its response to my December 3 Order on
December 11, 2007. Petitioner filed its response to the December 3 Order on December
20, 2007, with P. Exs. 10 and 11 attached. On January 29, 2008, the parties filed a joint
status report in which they set forth their respective positions, and Petitioner requested a
“special evidentiary hearing” for me inquire into alleged misrepresentations by CMS and
sanctions.’

On February 5, 2008, I issued a ruling denying CMS’s motion to dismiss Petitioner’s
request for hearing and a scheduling order to guide and direct the parties in preparing this
case for a hearing. Ina letter dated March 5, 2008, counsel for CMS acknowledged
receipt of my February 5, 2008 Ruling Denying Respondent’s Motion to Dismiss and
Scheduling Order. CMS asserted in its letter that the action to revoke Petitioner’s billing
privileges was rescinded. CMS also asserted that due to the recision there is “no longer a
live case or controversy before” me and that “CMS does not intend to make any further
filings in this matter.” Petitioner responded by letter dated March 7, 2008, and requested
that judgment be entered in its favor. On March 17, 2008, I issued an order for CMS to
produce certain documents and a ruling denying Petitioner’s motion for judgment. On

*(...continued)
appeal, I have remarked the exhibits that I believe the parties intended for me to consider
on the merits and compiled an exhibit list for each party that is at the end of this decision.

> T have reviewed the many pleadings and items of correspondence in this case and
find no grounds to inquire further or to consider sanctioning either party.
4

April 10, 2008, CMS responded to my order to produce, filing CMS Exs. 5 through 10.
CMS also asserted in its cover letter that, pursuant to the remand order, it is entitled to file
a dispositive motion and receive a ruling. On April 15, 2008, CMS filed CMS Ex. 11,
pursuant to my order to produce. On April 17, 2008, Petitioner moved to strike CMS Ex.
11 (originally marked CMS Ex. 10). On April 18, 2008, CMS filed CMS Ex. 12,
pursuant to my order to produce.

On April 28, 2008, I issued a ruling denying the CMS request in its April 10, 2008 cover
letter that CMS be permitted to file a dispositive motion. I treated the CMS request as a
request that I reconsider my February 5, 2008 ruling denying the CMS motion to dismiss.
The CMS motion to dismiss filed November 29, 2006 was pending before me after the
remand due to the Board having vacated my prior ruling granting the motion. Thus, after
remand it was not necessary for CMS to file another dispositive motion arguing the same
grounds. In my April 28 ruling, I also modified the prehearing schedule and notified the
parties of the issues for hearing.

Petitioner waived an oral hearing by letter dated May 1, 2008, presented its arguments
and requested a judgment on the existing record. CMS filed a brief on May 27, 2008.
Petitioner responded to the CMS brief by letter dated June 1, 2008. Pursuant to the CMS
request, I issued a ruling on June 4, 2008, establishing the date by which CMS could file a
reply brief. By letter dated June 23, 2008, CMS advised that “all relevant matters having
been exhaustively briefed by the parties, this matter is now ripe for decision.

Accordingly, respondent respectfully requests that the hearing request be dismissed
forthwith.”

CMS has filed no objection to any of the documents offered as evidence by Petitioner,
and Petitioner’s Exs. | through 11, as marked and described in the attached table, are
admitted. Petitioner objected to the admission of CMS Ex. 11 (originally marked CMS
Ex. 10) on grounds that it was produced late, is not relevant, and is of no probative value.
Petitioner’s Letter dated April 17, 2008. I agree with Petitioner that CMS Ex. 11 is not
relevant to the specific issue of whether Petitioner ceased doing business as alleged by
CMS. However, CMS Ex. 11 does provide information related to additional actions by
CMS and its contractors concerning Petitioner for the period in issue and I find it is at
least minimally relevant for that reason. Petitioner’s objections to CMS Ex. 11 are
overruled, and CMS Exs. | through 12, as marked and described on the attached table, are
admitted.*

* Prior to my ruling granting the CMS motion to dismiss, Petitioner filed affidavits
or declarations allegedly related to the original NHIC allegations of false or fraudulent
claims. However, those affidavits or declarations are not relevant because CMS has

(continued...)
5

Upon consideration of the responses of CMS, I find that it is not necessary to receive
supplemental briefing upon the CMS motion to dismiss. The motion must be denied and
this matter developed for hearing.

II. Discussion

A. Findings of Fact

The following findings of fact are based upon the parties’ joint stipulation, the undisputed
allegations of fact from their pleadings, and the exhibits admitted. Citations to evidence
may be found in the analysis section of this decision if not indicated here.

1.

NHIC notified Petitioner by letter dated April 6, 2006, that Petitioner’s Medicare
billing privileges were being revoked effective April 21, 2006, based on
information Petitioner had submitted false or fraudulent claims.

Petitioner ceased operations as an Independent Diagnostic Testing Facility (IDTF)
on April 6, 2006.

On November 29, 2006, CMS, by its counsel, nullified or rescinded the NHIC
action to revoke Petitioner’s billing privileges based upon the alleged submission
of false or fraudulent claims by Petitioner and withdrew its assertion of such basis
in the case before me.

Between November 29, 2006 and December 4, 2007, there was no evidence of any
action by CMS to revoke Petitioner’s billing privileges or Petitioner’s participation
in Medicare.

CMS rescinded the April 6, 2006 NHIC notice of revocation by letter December 4,
2007. CMS Ex. 6.

The CMS notice of December 4, 2007, was a notice of revocation of Petitioner’s
billing privileges based on Petitioner’s cessation of operations as an IDTF. CMS

Ex. 6.

Petitioner’s Medicare billing privileges were revoked effective January 3, 2008.

4(...continued)

abandoned all allegations of false or fraudulent claims as a basis for revocation of
Petitioner’s billing privileges in this proceeding. Thus, I have not marked the affidavits
or declarations as Petitioner’s exhibits, or considered them as evidence in this case.
B. Conclusions of Law

Petitioner has a right to a hearing before an ALJ based upon the revocation of his
billing privileges.

I have jurisdiction to hear and decide this case.

CMS rescinded the April 6, 2006 action of its contractor NHIC to revoke
Petitioner’s billing privileges based upon allegations of false or fraudulent claims
and CMS, through counsel, withdrew from any allegations of false or fraudulent
claims by Petitioner in the case before me.

The April 6, 2006 action of NHIC to revoke Petitioner’s Medicare billing
privileges was rescinded and nullified by CMS, and was of no force or effect.

Among the requirements for enrollment in Medicare is the requirement that the
supplier must be operational to furnish Medicare covered items or services before
being granted billing privileges. 42 C.F.R. § 424.510(d)(6).

Following enrollment, a supplier must report to CMS any changes to the
information furnished on its enrollment application (42 C.F.R. § 424.520(b)),
including any change in its operational status and ability to deliver Medicare items
or services.

CMS may revoke a supplier’s Medicare billing privileges, after an opportunity to
correct, because the supplier is not in compliance with enrollment requirements,
which include the requirement to be operational. 42 C.F.R. § 424.535(a)(1).

CMS may revoke billing privileges without an opportunity for the supplier to
correct when CMS determines, based on an on-site review, that the supplier is no
longer operational to furnish Medicare items or services or does not meet the
enrollment requirement to provide Medicare-covered items or services. 42 C.F.R.
§ 424.535(a)(5).

Petitioner was subject to revocation for no longer being operational after April 6,
2006, under either 42 C.F.R. § 424.535(a)(1) or (5), with or without an opportunity
to correct.

Petitioner was not prejudiced in this case because CMS failed to conduct an on-site
review as Petitioner admitted it was no longer operational after April 6, 2006.
7

1. The December 4, 2007 CMS notice was deficient under the regulations because it
did not advise Petitioner of a right to appeal or provide an address where any
appeal should be sent.

2. Petitioner was not prejudiced by the defective CMS notice dated December 4,
2007, as Petitioner’s appeal was already pending before me.

3. Pursuant to 42 C.F.R. § 424.535(f), a revocation becomes effective within 30 days
of the initial revocation notification. See also 73 Fed. Reg. 36,448, 36,461 (June
27, 2008) to be codified as 42 C.F.R. § 405.874(b)(2), effective August 26, 2008.

4. The revocation of Petitioner’s billing privileges was effective January 3, 2008, 30
days after the December 4, 2007 CMS notice of revocation.

C. Applicable Law

The hearing officer decision reflects that on May 15, 2001, Petitioner completed an
application to participate in the Medicare Part B program. After the application was
approved, Petitioner could deliver services to Medicare-eligible beneficiaries and file
claims with Medicare for reimbursement for covered services. RFH, Ex. A; CMS Ex. 5.
Petitioner is an IDTF and provides mobile diagnostic services to Medicare-eligible
beneficiaries pursuant to physician orders. P. Ex. 5.

Section 1831 of the Act (42 U.S.C. § 1395j) establishes the supplementary medical
insurance benefits program for the aged and disabled known as Medicare Part B.
Payment under the program for services rendered to Medicare eligible beneficiaries may
only be made to eligible providers of services and suppliers.’ Act, §§ 1835(a) (42 U.S.C.
§ 1395n(a)); 1842(h)(1) (42 U.S.C. § 1395u(h)(1)). Administration of the Part B program
is through contractors. Act, § 1842(a) (42 U.S.C. § 1395u(a)). The Act requires that the
Secretary issue regulations that establish a process for the enrollment of providers and

° A “supplier” furnishes services under Medicare and includes physicians or other
practitioners and facilities that are not a “provider of services.” Act, § 1861(d) (42 U.S.C.
§ 1395x(d)). A “provider of services,” commonly shortened to “provider,” includes
hospitals, critical access hospitals, skilled nursing facilities, comprehensive outpatient
rehabilitation facilities, home health agencies, hospice programs, or are subject to section
1814(g) and section 1835(e) of the Act. Act, § 1861(u) (42 U.S.C. § 1395x(u)). The
distinction between providers and suppliers is important because they are treated
differently under the Act for some purposes.
8

suppliers, including the right to a hearing and judicial review in the event of denial or
non-renewal. Act, § 1866(j) (42 U.S.C. § 139S5cc(j)). Pursuant to 42 C.F.R. § 424.505, a
provider or supplier must be enrolled in the Medicare program and be issued a billing
number to have billing privileges and to be eligible to receive payment for services
rendered to a Medicare-eligible beneficiary.°

CMS may deny a supplier’s enrollment application if a supplier is not in compliance with
Medicare enrollment requirements. 42 C.F.R. § 424.530(a)(1). A supplier enrollment is
considered denied when a supplier is determined to be “ineligible to receive Medicare
billing privileges for Medicare covered items or services provided to Medicare
beneficiaries” for one or more of the reasons listed in 42 C.F.R. § 424.530. 42 C.F.R.

§ 424.502. CMS’s contractor notifies a supplier in writing when it denies enrollment and
explains the reasons for the determination and information regarding the supplier’s right
to appeal. 42 C.F.R. § 498.20(a); MPIM Ch. 10, §§ 6.2, 13.2. The supplier may submit a
written request for reconsideration to CMS. 42 C.F.R. § 498.22(a). CMS must give
notice of its reconsidered determination to the supplier, giving the reasons for its
determination and specifying the conditions or requirements the supplier failed to meet.
42 C.F.R. § 498.25. If the CMS decision on reconsideration is unfavorable to the
supplier, the Act provides for a hearing by an ALJ and judicial review. Act § 1866(j); see
also 73 Fed. Reg. 36,448, 36,461.

If a provider or supplier is accepted for enrollment and granted billing privileges, the
enrollee is subject to revalidation every five years. Every five years, the enrollee is
required to resubmit and recertify the accuracy of its enrollment information, and the
information is reverified by the CMS contractor. CMS is also permitted to conduct “off-
cycle” revalidations, which may be conducted at any time and which may be triggered by
random checks, adverse information, national initiatives, complaints, or other reasons that
cause CMS to question whether the provider or supplier continues to meet enrollment
requirements. 42 C.F.R. § 424.515.

® Currently, if enrollment is approved, a supplier is issued a National Provider
Identifier (NPI) to use for billing Medicare and a Provider Transaction Access Number
(PTAN), an identifier for the supplier for inquiries. Medicare Program Integrity Manual
(MPIM), Chapter 10 — Healthcare Provider/Supplier Enrollment, § 6.1.1. In this case it is
sufficient to understand that Petitioner’s billing number and related billing privileges
were revoked.
9

CMS may revoke an enrolled provider’s or supplier’s Medicare billing privileges and any
provider or supplier agreement for any of the reasons listed in 42 C.F.R. § 424.535.
Section 1866(j)(2) of the Act does not specify that a supplier has a right to a hearing or
judicial review if its billing privileges are revoked, but mentions only that such rights
exist for denial of an application or nonrenewal of enrollment. However, the Secretary
recently amended 42 C.F.R. § 424.545(a) to provide a supplier a hearing if its enrollment
is revoked. 73 Fed. Reg. 36,448, 36,461 (June 27, 2008), amending 42 C.F.R. §§
424.545(a) and 498.1(g) (section 1866(j) of the Act provides for hearing and judicial
review for provider or supplier whose billing privileges are revoked). Although the
revision of the regulations is not effective until August 26, 2008, CMS agreed during the
first prehearing conference that a supplier may request an ALJ hearing when its billing
privileges are revoked. Nevertheless, CMS has consistently argued in this case since the
first prehearing conference, that this Petitioner has no right to a hearing because it
voluntarily ceased participation in Medicare rather than having its billing privileges
revoked.

D. Issues

Whether there is a basis for revocation of Petitioner’s billing
privileges.

Whether, if there is a basis for revocation of Petitioner’s
billing privileges, a revocation occurred in this case and the
effective date of the revocation.

E. Analysis

The evidence presented provides insight into Petitioner’s rocky relationship with CMS
and its contractors.

Petitioner was notified by letter dated March 27, 2006 from Medicare contractor
Electronic Data Systems Corporation (EDS) that its claims for services were selected for
prepayment review. The notice explains that under prepayment review Petitioner needed
to submit documents with its claims showing that the services provided were medically
necessary and reasonable; and that the claims and supporting documents would be
reviewed by a medical advisor before they would be paid. The notice advised Petitioner
that prepayment review would continue from three months to a year. P. Ex. 2. Petitioner
was previously on prepayment review that ended on May 24, 2004. P. Ex. 1.
10

Petitioner was notified by letter dated April 6, 2006 from the Medicare contractor EDS,
that its Medicare payments were suspended based upon a decision of the CMS Regional
Office in San Francisco. EDS advised Petitioner that the CMS decision was based on
reliable information that an overpayment existed, that fraud or willful misrepresentation
existed, and that payments made to Petitioner may not be correct, based upon a post
payment review or audit by EDS. EDS included a list of patients for which Petitioner
filed claims but allegedly could not have provided the services for which compensation
was claimed. EDS advised Petitioner that a suspension is generally limited to 180 days,
but the suspension could be extended upon CMS approval. EDS also advised Petitioner
that suspension is not punitive and Petitioner could continue to provide services and
submit claims for payment to Medicare, the claims would be reviewed, Petitioner could
appeal denied claims, but payment would be withheld during the period of the
suspension. CMS Ex. 7.

On July 14, 2006, Petitioner filed a complaint for damages and injunctive relief
(compliant) against the Secretary, NHIC, and EDS in the United States District Court for
the Central District of California. Petitioner stated in its complaint that due to repeated
denial of its claims it was unable to financially sustain operations and it stopped providing
services and went out of business in or about February 2006. CMS Ex. 1, at 17.

Petitioner alleged that NHIC and EDS forced Petitioner to stop providing services and to
go out of business. CMS Ex. 1, at 24. Petitioner sought: judicial review of claims denied
y the Secretary through the Medicare Appeals Council; that the court declare Petitioner
entitled to be reimbursed for certain claims; a writ directing the Secretary to reopen and
review certain of Petitioner’s claims; and damages. CMS Ex. 1, at 18-29. On September
5, 2006, the complaint was dismissed without prejudice. CMS Ex. 3.

Petitioner was notified by letter dated October 23, 2006, from the Medicare contractor
EDS, that the period of suspension of payment was being extended for an additional 180
days with approval by CMS. CMS Ex. 8.

On November 7, 2006, the Medicare contractor EDS requested by letter that Petitioner
provide specified records for a list of patients and dates of services. EDS required that
Petitioner respond in 15 days, but no list of patients was attached to the EDS letter. P. Ex.
3. The list of 65 patients was attached to a letter from EDS to Petitioner dated November
3, 2006. EDS extended the time for Petitioner to respond with the specified records to
December 4, 2006. P. Ex. 4.

11

Petitioner was notified by letter dated March 27, 2007, that CMS approved a further
extension of the payment suspension, but no period for the extension was specified. EDS
indicates that the reason for the extension was Petitioner’s failure to provide requested
documentation so that EDS could complete its review. CMS Ex. 9.

CMS Medicare contractor SafeGuard Services (SafeGuard) advised Petitioner by letter
dated April 9, 2008, that the post payment audit or review for the period January 1, 2005
to February 28, 2006 was completed. CMS Ex. 11. The contractor stated that it reviewed
2,037 claims totaling $1,715,100.00; $1,284,895.89 in claims were allowed; and
$1,023,855.65 in claims were previously paid. The notice indicates that Petitioner was
placed on prepayment review on March 27, 2006. The notice clarifies that the suspension
of payments was effective March 22, 2006, although I note that the effective date of the
suspension is not mentioned in the EDS letter of April 6, 2006 (CMS Ex. 7). The notice
indicates that Petitioner was sent a preliminary overpayment letter dated January 30,
2007, that alleged that Petitioner had been overpaid in the amount of $953,535.94. The
contractor reveals that its medical consultant completed review of records submitted by
Petitioner on April 19, 2007. CMS Ex. 11, at 1-3. The contractor discussed in its letter
the results of its review, concluded that Petitioner was overpaid in the amount of
$953,535.94, and advised Petitioner that it would receive a demand for overpayment from
another Medicare contractor, NHIC, and that the demand would explain Petitioner’s
appeal rights. CMS Ex. 11, at 12-13.

Petitioner received a second letter from SafeGuard dated April 9, 2008. SafeGuard
advised Petitioner that CMS had directed termination of payment suspension. The
contractor advised that payment suspension would end when NHIC issued the demand for
overpayment referenced in SafeGuard’s April 10, 2008 letter. CMS Ex. 11. I note that
the reference to an April 10 letter is in error, as the letter described is actually the letter
discussed above dated April 9, 2008.

In addition to being placed on prepayment review on March 27, 2006 (P. Ex. 2) and
suspension of payments on April 6, 2006 (CMS Ex. 7), Petitioner was notified on April 6,
2006, that its Medicare Billing Privileges were being revoked on April 21, 2006. CMS
Ex. 2. The April 6, 2006 notice-letter was issued by NHIC. The letter advised Petitioner
that NHIC possessed information “which establishes that [Petitioner] . . . submitted false
or fraudulent claims to Medicare” for services Petitioner did not provide. CMS Ex. 2, at
1.

1. Issues within my jurisdiction or authority.

Of all the actions by CMS and its contractors described above, only the last, the April 6,
2006 notice of revocation, is subject to my jurisdiction. CMS agreed during the initial
prehearing conference that I have authority to review and decide whether there was a
basis for revocation as upheld by the hearing officer’s unfavorable decision on July 28,
12

2006 (CMS Ex. 5). The CMS consent to my jurisdiction is consistent with recent
revisions to the Secretary’s regulations. As part of such review, it is necessary for me to
determine whether there is a basis for the CMS revocation action. In its April 6, 2006
notice of revocation, the CMS contractor alleged that it had evidence that Petitioner had
submitted false or fraudulent claims as the basis for revocation. In the context of such
allegations, it would be necessary for me to review individual claims that were allegedly
false or fraudulent. However, as discussed in detail hereafter, CMS has now withdrawn
from the allegations that the revocation was based upon individual claims and no such
allegations are before me for review.

am aware of no statutory or regulatory provision, and Petitioner points to no authority,
that accords Petitioner a right to challenge or have reviewed the CMS decisions to impose
prepayment review or to suspend payments to Petitioner.

have no authority to review Petitioner’s individual claims for reimbursement for
services allegedly provided to Medicare eligible beneficiaries. Authority to review such
claims has been delegated by the Secretary to ALJs assigned to the Office of Medicare
Hearings and Appeals (OMHA). See Act, § 1869(a), (b), (d); 42 C.F.R. § 405.855. I also
ave no authority to review or decide any claims by CMS to recoup overpayments. See
Act, §§ 1870(a), 1879; 42 C.F.R. Part 405, Subpart C.

2. The March 6, 2007 Ruling granting the CMS motion to dismiss.

Petitioner requested a hearing on September 25, 2006, after receiving the July 28, 2006
unfavorable hearing officer decision. On November 29, 2006, CMS moved to dismiss the
request for hearing. On March 6, 2007, I issued a ruling granting the CMS motion to
dismiss the request for hearing in this case. I made one finding of fact,’ i.e., that CMS

ad declared the April 6, 2006 revocation of Petitioner’s billing privileges by NHIC a
nullity. I did not inquire into or address the basis for the judicial declaration and
admission of the Office of General Counsel, which represents CMS in this matter, that the
revocation action was a nullity,* i.e., the argument that Petitioner had previously
voluntarily terminated its participation in the program. The initial determination for

7 The Board correctly noted in its remand decision that I failed to specifically
denominate my finding of fact and conclusion of law as such. The regulations require
that a decision contain separately numbered findings of fact and conclusions of law ( 42
C.F.R. § 498.74(a), although I note that that requirement is often not observed, at least as
to findings of fact.

8 “Nullify” means to make void or to render invalid. “Nullification” is the act of
making something void or may mean the state or condition of being void. “Nullity”
means legally void. Black’s Law Dictionary 1098 (8" ed. 2004).
13

which a hearing was requested was the “involuntary” termination of Petitioner’s PIN by
the CMS contractor NHIC based upon allegedly false or fraudulent claims. After CMS
withdrew from those allegations as a basis for revocation and declared the revocation a
nullity, I had no evidence of any adverse action by CMS within my jurisdiction affecting
Petitioner’s billing privileges. I have no authority to issue advisory opinions on matters
not before me. I made one conclusion of law, i.e., because there was no revocation of
Petitioner’s PIN or billing privileges, Petitioner had no right to a hearing and dismissal
was appropriate.

On June 25, 2007, I issued a ruling denying Petitioner’s request that I reconsider my
March 6, 2007 ruling. I denied the request because the parties presented no new facts that
would cause me to reopen and revise my earlier ruling, i.e., the parties had presented no
evidence that there was an involuntary termination by a CMS contractor, CMS, or the
Secretary.” I did not provide an advisory opinion regarding the CMS argument that there
may have been a voluntary termination by Petitioner or the issue of my jurisdiction to
review such a termination. I also avoided suggesting a possible course of action by CMS.

While my finding, based upon the concession of counsel for the Secretary and CMS, that
no revocation of Petitioner’s PIN occurred seemed to be wholly favorable to Petitioner,
Petitioner nevertheless requested review by the Board.

3. The November 6, 2007 Board remand decision.

On November 6, 2007, the Board issued a decision vacating my ruling dismissing the
request for hearing and remanding the case to me for further action specified in the
decision. KGV Easy Leasing, dba Privilege Diagnostics, DAB No. 2130 (2007).

Despite my failure to specifically denominate my finding of fact and conclusion of law,
the Board correctly identified my factual finding that a revocation did not occur on April
6, 2006, and my conclusion of law that because there was no revocation, there was no
right to a hearing. Board Decision at 4. In the remaining four pages of its discussion the
Board appears to have fallen victim to the parties’ speculations and convoluted arguments
about the basis for my ruling dismissing the request for hearing, rather than accepting the
simple answer provided by the ruling itself. See, e.g., Board Decision at 5-6, n.5. The
Board recognized that

° In its remand decision the Board suggests that I may have failed to consider the
evidence submitted by Petitioner in connection with the request for reconsideration.
Board Decision at 4. To the contrary, I specifically mentioned that the parties had not
presented new facts that would cause me to reopen and revise. Ruling Denying Request
for Reconsideration at 1 (June 25, 2007). There is no requirement that I actually
summarize or specifically discuss evidence to demonstrate that it was considered.
14

[T]he appealability [sic] of a voluntary termination finding is not at issue
here because there is no evidence that a CMS official with proper authority
actually made such a finding. Moreover, nowhere in its motion to dismiss
did CMS assert that it had made a finding of voluntary termination.

Board Decision at 6. Nevertheless, the Board directed that on remand, if CMS renews its
motion to dismiss, I am to determine:

[W]hether KGV voluntarily terminated its Medicare enrollment and billing
privileges prior to April 2006.

Board Decision at 8. Depending upon the results of that inquiry, the Board directed that I
reconsider the motion to dismiss. If, on the other hand, CMS does not renew the motion
to dismiss, the Board specified that I am to promptly conduct a hearing on the merits, of
what, is not specified by the Board.

The Board in its remand decision expressed concern that there was no evidence that one
with proper authority at CMS declared the involuntary revocation of Petitioner’s PIN,
evidenced by the April 6, 2006 notice, a nullity. Indeed, the Board rejected with virtually
no discussion the notion that counsel from the Office of General Counsel (OGC) assigned
to represent CMS in this case had authority to declare the April 6, 2006 revocation a
nullity and withdraw the allegation that revocation of Petitioner’s billing number was
based upon false or fraudulent claims. The CMS responses to my December 3, 2007
Order clearly demonstrate that counsel from OGC who represent CMS before me had full
authority to act for and bind CMS and the Secretary.’ CMS Response to December 3,
2007 Order, dated December 11, 2007. It is not necessary in this case to determine with
more certainty the scope of the authority of counsel for CMS to declare the April 6, 2006
notice of NHIC rescinded as on December 4, 2007, a CMS official took action and
rescinded the NHIC notice. CMS Ex. 6. I note, however, that I have no doubt that
counsel for CMS acted within his authority when advising Petitioner and me that the
government would no longer proceed on the theory that Petitioner’s billing privileges
were revoked due to evidence of false or fraudulent claims.

'° CMS cites to Part A, Chapter AG (Office of the General Counsel), Section
AG20(3), Statement of Organization, Functions and Delegations of Authority, U.S.
Department of Health and Human Services (OGC attorneys authorized to represent the
Department in litigation before the Board); M. Graham, Federal Practice and Procedure:
Evidence §§ 7023 (Interim Ed. 2007) (discussing Rule 801(d)(2)(D) and application to
attorneys representing clients in proceedings); and U.S. v. Kattar, 840 F.2d 118, 130-31
(1* Cir. 1988) (government attorney in proceeding establishes the position of the United
States by his or her assertions). See also United States v. Bisset-Berman Corp., 481 F.2d
764, 768-69 (9" Cir. 1973); Fed.R.Civ.Pro. 11(b).
15

The Board was also concerned that there was no evidence that one with proper authority
at CMS made a finding that Petitioner had voluntarily terminated its participation in
Medicare. This concern was well founded and validates my conclusion that when the
April 6, 2006 revocation was nullified, there was no adverse CMS action pending against
Petitioner’s billing privileges. CMS also recognized a vacuum had been created. CMS
thus produced the December 4, 2007 letter from CMS to Petitioner, which declared that
Petitioner’s participation in Medicare was terminated on February 28, 2006, on grounds
that Petitioner allegedly ceased providing services and went out of business as an IDTF
on that date. CMS Ex. 6. Therefore, there is now evidence that CMS declared
Petitioner’s participation in Medicare terminated, whether voluntarily or involuntarily,
based upon Petitioner’s cessation of business and providing services."

4. The renewed CMS motion to dismiss following remand.

CMS advised me of its intent to renew its motion to dismiss on November 21, 2007.
CMS reminded me at the end of its filing in response to my December 3, 2007 Order, that
it renewed the motion to dismiss and requested an opportunity to submit further
supporting argument and evidence should I determine that the record was insufficient to
sustain the motion. I concluded that further argument or supplementation of the record
was unnecessary. The positions of both parties on the motion to dismiss were well-
documented in their numerous pleadings. CMS did not elaborate upon what other
evidence it might offer in support of its motion, and I found the promise of additional
unspecified evidence an insufficient reason to further delay ruling, particularly as the
evidence before me made the ruling clear.

The evidence shows that CMS rescinded the action to revoke Petitioner’s PIN based upon
allegations of fraud and false claims. The evidence shows one with authority acting on
behalf of CMS rescinded the revocation action based on false claims or fraud. The
evidence shows that CMS on December 4, 2007, declared Petitioner’s enrollment and
PIN revoked effective February 28, 2006, based upon Petitioner’s cessation of operation
as an IDTF on or about that date.

'"' The Board directs me to address on remand whether claims listed in the NHIC
notice on April 6, 2006 are or were subject to review, I presume by OMHA and the
Medicare Appeals Council who have jurisdiction to review individual claims. Board
Decision at 8. However, whether those claims are pending review or not is not relevant to
the issues before me, as CMS has withdrawn its allegation that revocation was based
upon those allegedly false or fraudulent claims.
16

CMS requested dismissal of the request for hearing pursuant to 42 C.F.R. § 498.70(b).
The cited regulation provides that an ALJ may dismiss a request for a hearing either
entirely or as to any issue if the petitioner has no right to a hearing or is not a proper
party. The CMS theory is that the Petitioner in this case has no right to a hearing because
Petitioner “voluntarily terminated” its participation in Medicare pursuant to 42 C.F.R.

§ 489.52, despite Petitioner’s protestations to the contrary. CMS argues that voluntary
termination is not one of the initial determinations listed in 42 C.F.R. § 498.3(b) over
which ALJs may exercise jurisdiction under 42 C.F.R. Part 498. CMS Motion to Dismiss
at 3-7. CMS pursues a similar argument in its brief on the merits. Respondent’s
Prehearing Brief (CMS Brief) at 4-8. However, the Board correctly noted in the remand
decision that 42 C.F.R. § 489.52, the regulatory provision that is the lynch-pin for the
CMS argument, has no application in this case as 42 C.F.R. §§ 489.52, 489.53, 489.54,
489.55, and 489.57 govern termination of “provider agreements” by the provider, CMS,
or OIG, and reinstatement of a “provider agreement” after termination.'? The Board
correctly found that Petitioner is a supplier and not a provider, and suppliers do not have
provider agreements that they can voluntarily terminate. Board Decision at 7; see Act,

§ 1861(d) (supplier is a physician or other practitioner, a facility, or other entity (other
than a provider of services), that furnishes items or services under the Act).

Revocation of a supplier’s enrollment in Medicare and the revocation of the supplier’s
billing privileges is governed by 42 C.F.R. § 424.535, which lists specific grounds for the
revocation of a supplier’s enrollment and billing privileges. Part 424 of 42 C.F.R. does
not appear to include specific provisions similar to 42 C.F.R. § 489.52, nor language
making that regulatory provision applicable to suppliers.

Section 1866(j)(2) of the Act provides that a provider of services or supplier whose
application to enroll is denied or not renewed is entitled to a hearing and judicial review.
Provider and supplier appeal rights are set forth in the Secretary’s regulations at 42 C.F.R.
§ 424.545. Counsel for CMS agreed during the prehearing conference on November 15,
2006 (Order dated November 20, 2006), that the current version of the regulation was
undergoing revision and that pending such revision, CMS agrees that the hearing and
appeal procedures established by 42 C.F.R. Part 498 should be applied in this case. The
regulations provide that “(a)ny supplier dissatisfied with an initial determination that the
services subject to the determination no longer meet the conditions for coverage, is
entitled to a hearing before an ALJ.” 42 C.F.R. § 498.5(e) (emphasis added). Initial
determinations by CMS listed at 42 C.F.R. § 498.3(b) include “[w]hether the services of a
supplier continue to meet the conditions for coverage ....” 42 C.F.R. § 498.3(b)(6).
CMS determined in this case, evidenced by the December 4, 2007 letter (CMS Ex. 6),

” Contrary to what the title to 42 C.F.R. Part 489 indicates, its application is
limited to providers and provider agreements. See 42 C.F.R. § 489.2. IDTFs, such as
Petitioner, are not listed as subject to the provisions of the part. 42 C.F.R. § 489.2(b).
17

that Petitioner no longer met conditions for coverage, an initial determination.
Accordingly, I concluded that Petitioner was entitled to a hearing by an ALJ and the CMS
motion to dismiss was denied. Ruling Denying CMS Motion to Dismiss and Scheduling
Order dated February 5, 2008.

On April 10, 2008, CMS submitted a letter that I treated as a motion to reconsider my
February 5, 2008 ruling denying its motion to dismiss. Because CMS had filed additional
evidence in response to my order to produce, I reconsidered my February 5, 2008 ruling
and again denied the CMS motion to dismiss. Additional rationale to that stated in my
ruling of February 5, 2008, was my observation that the evidence submitted by CMS
confirmed the presence of a case and controversy for me to adjudicate. Contrary to the
suggestion of CMS in its April 10, 2008 letter, it did file a dispositive motion in the form
of its motion to dismiss. I granted that motion and dismissed the request for hearing. The
Board vacated the dismissal and remanded the case for me for further proceedings.
Vacation of my Ruling dismissing the case resulted in the CMS motion being unresolved
and pending before me. By letter dated November 21, 2007, CMS renewed its motion to
dismiss. On December 11, 2007, CMS responded to my Order of December 3, 2007.
CMS responded to the issues specified in my December 3, 2007 Order, and included two
and one-half pages arguing in support of its motion to dismiss. On January 29, 2008,
CMS filed the parties’ status report, which included an approximate three-page statement
of CMS, again arguing in support of its motion to dismiss. The arguments advanced by
CMS in both pleadings were similar to that advanced in its original briefing on the
motion. In my ruling dated February 5, 2008, I noted at page 4 that after reviewing the
CMS response to my order dated December 3, 2007, I found it unnecessary to receive
supplemental briefing upon the CMS motion to dismiss.'"> Thus, the CMS arguments that
this case should have been dismissed have been fully considered on more than one
occasion and found to be meritless.

Even if I accepted the CMS argument that “voluntary termination” pursuant to 42 C.F.R.
§ 489.52 or similar provision was applicable to suppliers'’, I would nevertheless find it
appropriate to deny the motion to dismiss. Considering the pleadings of the parties, I

'S On June 3, 2008, CMS requested by email that a date be set for CMS to file a
reply brief on the merits of the case. On June 4, 2008, I issued an Order granting CMS
until June 23, 2008, to file a reply. The CMS one-page reply consisted of the assertion
that the matter was fully briefed and that the request for hearing should be dismissed.

'* CMS argues that the SOM extends the application of 42 C.F.R. § 489.52 to
suppliers. CMS Brief at 7-8. The SOM does not have the force and effect of law. State
of Indiana by the Indiana Department of Public Welfare v. Sullivan, 934 F.2d 853 (7" Cir.
1991); Northwest Tissue Center v. Shalala, | F.3d 522 (7" Cir. 1993). CMS is the
proponent of 42 C.F.R. Part 489 and has the option to modify the regulations which are
legally enforceable against Petitioner.
18

conclude that CMS has mischaracterized the nature of the termination in this case as a
“voluntary termination” and that CMS has, in fact, involuntarily terminated Petitioner’s
enrollment and billing privileges. CMS has cited no authority for the proposition that I
am bound by its characterization of the termination action as voluntary even though the
facts show that the termination was involuntary. Key to my conclusion that Petitioner did
not voluntarily terminate is the fact that Petitioner did not give the notice of termination
to CMS and the public as would be required by 42 C.F.R. § 489.52(a) and (c). Cresent
Healthcare, DAB No. 1888, 2003 WL 21801701 (HHS) (July 11, 2003). Another
important fact is that it was CMS who issued the notice of termination on December 4,
2007 (CMS Ex. 6) in this case rather than Petitioner. Finally, it is significant that
Petitioner presented some argument and evidence to support its argument that it had, in
fact, continued in business and to provide services after February 28, 2006.

Accordingly, I concluded that Petitioner was entitled to a hearing and decision on the
issue of whether CMS had a basis to revoke Petitioner’s billing privileges. Petitioner
waived an oral hearing by letter dated May 1, 2008, presented its arguments, and
requested a judgment on the existing record.

5. Petitioner ceased providing services on or about April 6, 2006.

In its July 2006 complaint in the U.S. District Court, Central District of California,
Petitioner clearly stated that due to repeated denial of its claims it was unable to
financially sustain operations and it stopped providing services and went out of business
in or about February 2006. CMS Ex. 1, at 17. In his December 15, 2006 declaration,
Petitioner’s principal'® and representative in this proceeding, Gregory Davidov, stated
that:

In March of 2006, . . . [EDS] of which NHIC is a wholly-owned subsiderary
again placed KGV on a prepayment review. Unable to operate without
being paid for its services, in February of 2006, KGV stopped providing
further services but continued to proceed with the administrative review of
its 2002-2003 claims as well as its 2005-2006 claims.

P. Ex. 5, at 2-3. I construe the claims to which Petitioner refers, to be claims for
Medicare reimbursement. In a declaration dated May 3, 2007, Mr. Davidov declared that
Petitioner never intended to surrender its billing privileges, that he hoped to resume
operations after receiving payment on his claims, and that Petitioner was effectively

'S Gregory Davidov was the President and owner of KGV Easy Leasing
Incorporated, doing business as Privilege Diagnostics, the Petitioner. P. Exs. 5, 6, 7.
19

driven out-of-business and ceased providing services on April 6, 2006, when NHIC
notified Petitioner that its billing privileges were revoked. He further declares that
Petitioner continued to provide services to patients between February 2006 and April
2006, although Petitioner’s operations were greatly reduced. P. Ex. 6.

In response to my order to produce, CMS filed CMS Ex. 10, a listing of Fully Denied
Claims submitted by Petitioner. The list shows claims with dates of service (column title
“FDOS”) in January, February, and March 2006. The latest date of service listed is
March 29, 2006 on four claims. Petitioner also filed 12 claims with date of service of
March 28, 2006. CMS Ex. 10. Petitioner also submitted for my consideration, copies of
test results for tests done on April 6, 2006. P. Ex. 9. CMS argues that its records show
that no claims for services were filed by Petitioner after March 28, 2006 (CMS Brief at
0), however CMS Ex. 10 shows claims filed on March 29, 2006. CMS argues that Mr.
Davidov’s attestation is self-serving and not entitled to credence. CMS Ex. 9-10. CMS
does not address P. Ex. 9, but, no doubt, CMS does not believe that evidence credible
either. CMS argues that it does not matter if Petitioner ceased providing services in
February 2006, March 2006, or April 6, 2006. Rather, CMS asserts that the key
consideration is whether Petitioner ceased providing services prior to April 21, 2006, the
effective date of the rescinded revocation by NHIC. CMS Brief at 10-11.

For purposes of this decision, out of an abundance of caution, I accept as credible Mr.
Davidov’s representation that Petitioner ceased providing services as an IDTF on April 6,
2006. Although CMS questions Mr. Davidov’s credibility, the date is supported by CMS
records showing that claims for dates of service of March 29, 2006 were denied by the
CMS contractor and by records of testing submitted by Mr. Davidov. Further, CMS now
takes the position that the precise date is of no consequence so long as it was before April
21, 2006.

Accordingly, I conclude that Petitioner ceased providing services as an IDTF on April 6,
2006. Whether Petitioner voluntarily ceased providing service as CMS asserts or
Petitioner was forced out of business by CMS contractors is a matter of opinion and
perspective. Whether voluntary or involuntary, I concluded that Petitioner was entitled to
a hearing and decision and he has received same.

6. Petitioner’s billing privileges are revoked effective January 3, 2008.

Because I have concluded that Petitioner ceased providing services as an IDTF on April
6, 2006, it is necessary to examine the regulatory scheme for supplier eligibility to
participate in Medicare and whether cessation of operation has any effect on Petitioner’s
continuing eligibility for continued participation thereafter.
20

A supplier must be enrolled in Medicare to receive payment for Medicare items or
services from either Medicare or a Medicare beneficiary. An enrolled supplier is granted
billing privileges evidenced by a valid billing number. 42 C.F.R. § 424.505. Among the
requirements for enrollment in Medicare is the requirement that the supplier must be
operational to furnish Medicare covered items or services before being granted billing
privileges. 42 C.F.R. § 424.510(d)(6). Pursuant to 42 C.F.R. § 424.510(d)(8)(ii), CMS
reserves the right to review that Medicare Part B suppliers continue to be operational
including the right to do an on-site review. Following enrollment, a supplier must report
to CMS any changes to the information furnished on its enrollment application (42 C.F.R.
§ 424.520(b)), which I construe to include any change in its operational status and ability
to deliver Medicare items or services. CMS may revoke a supplier’s Medicare billing
privileges, after an opportunity to correct, because the supplier is not complying with
enrollment requirements, which include the requirement to be operational. 42 C.F.R.

§ 424.535(a)(1). CMS may also revoke billing privileges without an opportunity for the
supplier to correct when CMS determines, based on an on-site review, that the supplier is
no longer operational to furnish Medicare items or services or does not meet the
enrollment requirement to provide Medicare covered items or services. 42 C.F.R. §
424.535(a)(5). Pursuant to 42 C.F.R. § 424.502,

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

In this case, Petitioner does not deny that it stopped providing services on April 6, 2006.
Thus, after April 6, 2006, Petitioner was not operational and no longer met the enrollment
requirements. Petitioner was subject to revocation for no longer being operational after
April 6, 2006, under either 42 C.F.R. § 424.535(a)(1) or (5), with or without an
opportunity to correct. CMS did not conduct an on-site review in this case. However,
given Petitioner’s July 2006 admission in the U.S. District Court that it stopped providing
services, an on-site review would have been a needless and unnecessary act.

CMS, or its contractor, did not give Petitioner any notice that revocation of its billing
privileges was based upon Petitioner’s failure to continue to meet enrollment
requirements because it ceased to be operational, until the CMS letter dated December 4,
2007 (CMS Ex. 6). The requirement for notice is not provided for in 42 C.F.R. Part 424.
Pursuant to 42 C.F.R. § 424.545(a), a supplier was granted the right to appeal a
revocation pursuant to 42 C.F.R. Part 405, subpart H. The notice of revocation must be
sent by certified mail, and inform the supplier of the reason for revocation, the date by
which an appeal must be filed, and the address to where an appeal should be sent in
writing. 42 C.F.R. § 405.874(b). In this case, CMS agreed that the provisions of 42
21

C.F.R. Part 498 should be applied to this appeal. Pursuant to 42 C.F.R. § 498.20(a)(1), a
notice of initial determination must be mailed by CMS, and set forth the basis or reasons
for the determination, the effect of the determination, and the party’s right to
reconsideration, if applicable, or to a hearing. The notice requirements for a reconsidered
determination are similar to those for an initial determination. 42 C.F.R. § 498.25(a).
Under the revision to the regulations, effective August 26, 2008, the notice provisions are
in a revised 42 C.F.R. § 405.874(b), and include that notice of revocation must be sent to
the supplier by certified mail, state the reason for the revocation in sufficient detail for the
supplier to understand the nature of the deficiencies, the right to appeal in accordance
with 42 C.F.R. Part 498, and the address to which the appeal must be mailed. 73 Fed.
Reg. 36,448, 36,460. My review of the December 4, 2007 CMS notice reveals that it
states that Petitioner ceased providing services and went out of business as the basis for
the termination of Petitioner’s participation in the Medicare program, and that no
payments would be made after the termination. The notice reflects it was sent by an
express delivery service. The notice did not advise Petitioner of a right to appeal or an
address to where the appeal should be sent. Though the notice was defective for not
providing notice as to a right to appeal, which is required under the existing and future
regulations, I conclude that error was not prejudicial as Petitioner already had this appeal
pending.

The December 4, 2007 notice (CMS Ex. 6) advised Petitioner that the revocation was
effective February 28, 2006, prior to the date of the notice. This was clearly in error.
Pursuant to 42 C.F.R. § 424.535(f), a revocation becomes effective within 30 days of the
initial revocation notification. The revision to the regulations provides that a revocation
is effective 30 days after the date the notice is mailed. 42 C.F.R. § 405.874(b)(2); 73 Fed.
Reg. 36,448, 36,460. I conclude, based upon the regulatory requirements, that the CMS
revocation of which Petitioner was notified by the letter dated December 4, 2007, was not
effective for 30 days or January 3, 2008. If the documents produced by CMS are correct,
Petitioner’s last claim was for services provided on March 31, 2006. Accordingly, the
delayed effective date causes no prejudice to the Medicare program.

Petitioner’s representative argues throughout his many correspondences that CMS forced
im to cease providing services and to go out of business. Neither CMS nor its
contractors have authority to require a supplier to cease operations or its business. CMS
and its contractors approve a supplier for participation upon finding the supplier eligible.
CMS and its contractors are tasked by the Act and the Secretary with reviewing and
approving claims for services or supplies furnished by eligible suppliers to eligible
eneficiaries. I have received and reviewed evidence and arguments that show Petitioner,
when an eligible supplier, had much difficulty receiving payment from CMS and its
contractors. I have no jurisdiction to review Petitioner’s problem with obtaining payment
for its claims. I note, however, that Petitioner’s decision to participate in Medicare was a
usiness decision. Apparently, Petitioner’s business became so dependent upon Medicare
claims that Petitioner could not continue to maintain operations after April 6, 2006, in the

22

face of its difficulty obtaining payment on its Medicare claims. Any decision by
Petitioner to rely upon Medicare claims as its primary business was a business decision.
Finally, Petitioner’s decision that it could no longer continue operations after April 6,
2006, was a business decision. | find Petitioner’s arguments to be without merit.

To the extent that Petitioner’s arguments might be construed to be an argument that CMS
should be estopped from revoking Petitioner’s billing privileges, I find such argument to
e without merit. I recognize that my jurisdiction in cases involving CMS is limited to
earing and deciding those issues which the Secretary has delegated authority for me to
ear and decide in his regulations. The regulations authorize me only to hear and decide
cases involving specified initial determinations by CMS. I have no authority to determine
that CMS’s actions would violate public policy and no authority to award damages or
fashion extraordinary relief. I also have no authority to hear and decide claims of
equitable estoppel against the Secretary. I note, however, that while the Supreme Court
as not ruled that estoppel will never lie against the government, the decisions of the
Court make clear that equitable estoppel will not lie against the government in cases
involving benefits to be paid from the Treasury, particularly in the complicated area of
Medicare. See Office of Personnel Management v. Richmond, 496 U.S. 414 (1990);
Heckler v. Community Health Services of Crawford County, Inc., 467 U.S. 51 (1984). If
had authority to rule upon an estoppel defense, I see no evidence that CMS made any
representations or statements to Petitioner upon which Petitioner detrimentally relied.

conclude that there was a basis for the revocation of Petitioner’s billing privileges, i.e.,
Petitioner was no longer operational and no longer met enrollment requirements after
April 6, 2006. The revocation of Petitioner’s billing privileges was effective January 3,
2008, 30 days after the December 4, 2007 CMS notice of revocation.’

‘© Pursuant to 42 C.F.R. § 424.535(c) of the current regulation, a supplier may seek
to re-enroll in Medicare by completing a new application for validation by CMS. Under
the revision to 42 C.F.R. § 424.535(c) effective August 26, 2008, a provider or supplier is
barred from re-enrollment for a minimum of one year but not more than three years. 73
Fed. Reg. 36,448, 36,461.
23

Ill. Conclusion

For the foregoing reasons, Petitioner’s billing privileges are revoked effective January 3,
2008.

/s/
Keith W. Sickendick
Administrative Law Judge
24

08-093 KGV Easy Leasing —- Exhibit Lists

CMS Exhibits

Ex. No. Description Offered Attached To Comment
4 Complaint for Damages & 11/29/2006 CMS Memo. in
Injunctive Relief, Filed 7/14/2006, Support of Motion to
U.S. Dist. Ct., Central Dist. Calif. Dismiss (MTD)
2 CMS/NHIC Ltr. Dtd. 4/6/2006, Re: | 11/29/2006 CMS Memo. in
Notice of Revocation of Billing Support of MTD
Privileges
3 Judgment of Dismissal, Filed 11/29/2006 CMS Memo. in
9/15/2007, U.S. Dist. Ct., Central Support of MTD
Dist. Calif.
4 Notice of Final Action and Order of | 12/29/2006 CMS Reply to P. Opp.
Remand of Medicare Appeals to MTD
Council
5 CMSI/NHIC Ltr. Dtd. 7/28/2006 4/10/2008 CMS Production Marked by CMS as
Ex.4
6 CMS Ltr. Dtd. 12/4/2007 4/10/2008 CMS Production Marked by CMS as
Ho to P. Ex.5
7 CMS/EDS Ltr. Dtd. 4/6/2006 4/10/2008 CMS Production Marked by CMS as
Ex.6
8 CMS/EDS Ltr. Dtd. 10/23/2006 4/10/2008 CMS Production Marked by CMS as
Ex.7
9 CMS/EDS Ltr. Dtd. 3/27/2007 4/10/2008 CMS Production Marked by CMS as
Ex.8
10 Medicare Part B Billing Provider 4/10/2008 CMS Production Marked by CMS as
Detail - Fully Denied Claims, Ex.9
3/1/2006 -- 2/29/2008
11 CMS/SafeGuard Services, Ltr. 4/15/2008 Ltr. Submitting Exhibit | Marked by CMS as
Dtd. 4/9/2008, Final Notice of Post Ex. 10
Payment Audit
12 CMS/SafeGuard Services, Ltr. 4/18/2008 Ltr. Submitting Exhibit | Marked by CMS as

Dtd. 4/9/2008, Termination of
Payment Suspension

Ex. 11

25

Petitioner’s Exhibits

Ex. No. Description (Based on first Date Offered Attached To Comment
page)
1 CMSINHIC Ltr. Dtd. 5/24/2004 12/15/2006 Petitioner's Opp. To
CMS MTD (P. Opp.)
2 CMS/EDS Ltr. Dtd. 3/27/2006 12/15/2006 P. Opp.
3 CMS/EDS Ltr. Dtd. 11/7/2006 12/15/2006 P. Opp.
4 CMS/EDS Ltr. Dtd. 11/13/2006 12/15/2006 P. Opp.
5 Declaration, Gregory Davidov, 12/15/2006 P. Opp. Not marked by
Dtd. 12/15/2006 Petitioner
6 Declaration, Gregory Davidov, 5/3/2007 P. Motion to Vacate Not marked by
Dtd. 5/2/2007 with Exhibit A and Reconsideration Petitioner
Declaration, Gregory Davidov, P. Reply to CMS Opp. | Marked by P. as Ex. 1
7 Dtd. 6/6/2007 6/5/2007 to Reconsideration to pleading
8 Declaration, Gary Berkovich, P. Reply to CMS Opp. | Marked by P. as Ex. 2
Esq 6/5/2007 to Reconsideration to pleading
9 Neuro-Electro Diagnostic Tests, 6/5/2007 P. Reply to CMS Opp. | Marked by P. as Ex.3
Physician Order Form, Dtd. to Reconsideration to pleading
4/6/2006
CMS Ltr. Dtd 12/4/2007, Ho to P. | 12/20/2007 P. Response to Marked by P. as Ex. 1
10 12/3/2007 Order to pleading
11 Misc. Communication between 12/20/2007 P. Response to Marked by P. as Ex. 2
CMS counsel and Davidov 12/3/2007 Order to pleading