Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Shelby Memorial Hospital,
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-1914
Decision No. CR3647

Date: February 11, 2015

DECISION

The Centers for Medicare & Medicaid Services (CMS) denied the request of Petitioner,
Shelby Memorial Hospital, to participate in the Medicare program as a critical access
hospital (CAH). Petitioner requested a hearing to dispute CMS’s determination. CMS
moved for summary disposition, which Petitioner opposed. For the reasons set forth
below, I grant summary judgment to CMS and affirm CMS’s determination.

I. Background and Procedural History

Petitioner is a hospital located in Shelbyville, Illinois. On October 22, 2013, Petitioner
filed a CMS-855A enrollment application to change its status from a Prospective
Payment Provider to a CAH. See Petitioner Exhibit (P. Ex.) 14. Following a survey, Det
Norske Veritas Healthcare, Inc. (DNV) deemed Petitioner to be in compliance with the
Medicare CAH conditions of participation and recommended that CMS approve
Petitioner for deemed status as a CAH in the Medicare program; however, DNV noted
that “CMS makes the final determination regarding your Medicare certification

woe.” PLEX. 15.
On May 19, 2014, CMS denied Petitioner’s request to participate as a CAH in the
Medicare program because Petitioner did not satisfy the condition of participation found
in 42 C.F.R. § 485.610(c). P. Ex. 2. CMS’s determination stated:

Based upon our review of the information provided to CMS
by DNV and the Illinois Department of Public Health
(IDPH), your hospital is located 16.2 miles from the nearest
hospital or CAH. However, of the total distance of 16.2
miles, 2.7 of those miles are traversed via primary roadways,
in this case, US Highway 51. For purposes of determining
compliance with the distance requirements found at 42 CFR
§ 485.610(c), CMS’s guidance issued at State Operations
Manual (SOM) Section 2256A requires that any facility
seeking certification as a CAH that cannot meet the 35 mile
distance requirement, may participate if the facility is greater
than 15 miles from the nearest hospital or CAH if only
secondary roads are available. Our review of your
information revealed that there is only 13.5 miles of
secondary roadway between your hospital and the nearest
hospital or CAH. Therefore, CMS cannot approve your
facility to participate as a CAH in the Medicare program.

P. Ex. 2 at 1.

Petitioner timely requested reconsideration. P. Ex. 16. On July 18, 2014, CMS issued an
unfavorable reconsidered determination. P. Ex. 17.

Petitioner timely requested a hearing before an administrative law judge (ALJ). With its
request for hearing (RFH), Petitioner submitted 13 exhibits, labeled “A” through “M.”
CMS moved for summary disposition and filed a supporting brief (CMS Br.) with three
exhibits (CMS Exs. 1-3). Petitioner filed a brief opposing summary disposition with 20
exhibits (P. Exs. 1-20).

IL. Issue

The general issue in this case is whether the undisputed facts establish that Petitioner fails
to satisfy the regulatory criteria to be designated as a CAH in the Medicare program. The
specific issue is whether Petitioner’s hospital is located more than a 15-mile drive on
secondary roads from another hospital or CAH.
III. Findings of Fact, Conclusions of Law, and Analysis’

The Social Security Act (Act) permits states to establish a Medicare Rural Hospital
Flexibility Program. 42 U.S.C. § 13951-4. States establishing such a program must
develop at least one rural health network and have at least one facility in the state
designated as a CAH. Id. § 1395i-4(c)(1). A facility enrolled in Medicare as a CAH
generally receives higher payments from Medicare than it would if enrolled as a hospital.
Id. §§ 1395f, 1395m, 1395x; see also 72 Fed. Reg. 42,628, 42,806 (2007) (stating that the
“intent of the CAH program is to maintain hospital-level services in rural communities
while ensuring access to care”).

In order for CMS to designate a facility as a CAH, the facility must be:

located more than a 35-mile drive (or, in the case of
mountainous terrain or in areas with only secondary roads
available, a 15-mile drive) from a hospital, or another facility
[CAH]....

42 U.S.C. § 1395i-4(c)(2)(B)(i)(D. This standard also appears in the regulations as a
condition of participation for CAHs. 42 C.F.R. § 485.610(c).

I. Summary judgment is appropriate.

When appropriate, ALJs may decide a case arising under 42 C.F.R. part 498 by summary
judgment. See Civil Remedies Division Procedures § 19(a); Livingston Care Ctr. v. U.S.
Dep’t of Health & Human Servs., 388 F.3d 168, 172 (6th Cir. 2004) (citing Crestview
Parke Care Ctr. v. Thompson, 373 F.3d 743 (6th Cir. 2004). Summary judgment is
appropriate if “the record shows that there is no genuine issue as to

any material fact, and the moving party is entitled to judgment as a matter of law.”
Senior Rehab. & Skilled Nursing Ctr., DAB No. 2300, at 3 (2010) (citations omitted).
The moving party must show that there are no genuine issues of material fact requiring an
evidentiary hearing and that it is entitled to judgment as a matter of law. Jd. If the
moving party meets its initial burden, the non-moving party must “come forward with
“specific facts showing that there is a genuine issue for trial... .”” Matsushita Elec.
Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986). “To defeat an adequately
supported summary judgment motion, the non-moving party may not rely on the denials
in its pleadings or briefs, but must furnish evidence of a dispute concerning a material
fact — a fact that, if proven, would affect the outcome of the case under governing law.”
Senior Rehab., DAB No. 2300, at 3. To determine whether there are genuine issues of
material fact for hearing, an ALJ must view the evidence in the light most favorable to
the nonmoving party, drawing all reasonable inferences in that party’s favor. Jd. When

' My findings of fact and conclusions of laws are set forth in italics and bold.
ruling on a motion for summary judgment, an ALJ may not assess credibility or evaluate
the weight of conflicting evidence. Holy Cross Vill. at Notre Dame, Inc., DAB No. 2291,
at 5 (2009).

Here, CMS has moved for summary disposition. The parties do not dispute the facts
material to this case and there is no genuine dispute as to any material fact that requires
an evidentiary hearing. The only issue to be resolved in this case is a matter of law,
which, as discussed below, must be decided in CMS’s favor. Accordingly, summary
judgment is appropriate.

2. CMS is entitled to summary judgment because the undisputed facts
establish that Petitioner is located less than a 15-mile drive via secondary
roads from the nearest hospital and, therefore, does not satisfy the
distance requirement for designation as a CAH in the Medicare program.
42 U.S.C. § 1395i-4(c)(2)(B) (i) (D); 42 C.F-R. § 485.610(c).

CMS denied Petitioner CAH status on the grounds that Petitioner did not satisfy the
distance requirement established by the statute and regulations because Petitioner was
located less than a 15-mile drive via secondary roads from the nearest hospital.
Specifically, CMS found that Petitioner was located 16.2 miles from the nearest hospital
or CAH. CMS determined that of this total distance of 16.2 miles, the distance traveled
via a primary road, in this case, U.S. Highway 51 (U.S. 51), was 2.7 miles, and the
distance traveled via a secondary road was only 13.5 miles. P. Exs. 2, 17.

The following facts are not disputed. The closest hospital to Petitioner is Pana
Community Hospital (PCH) in Pana, Illinois. Although the parties differ slightly as to
the total distance, they are in agreement that the distance between Petitioner and PCH is a
little more than 16 miles. P. Br. at 4; CMS Br. at 1.? The route between the two hospitals
runs primarily along Illinois State Highway 16 (IL 16). RFH at 1. Fora portion of the
route, which is at least 2.1 miles, the stretch of highway is co-designated as IL 16 and
U.S. 51. The entire route between Petitioner and PCH is a two lane road (one lane in
each direction with the exception of short turn lanes at certain intersections). P. Br. at 9.

> According to CMS, the distance between Petitioner and PCH is between 16.2 and 16.4
miles. CMS Br. at 1. Petitioner claims that the distance between it and PCH is 16.33
miles. RFH; P. Br. at 4.

> CMS states that the stretch of highway co-designated as IL 16 and U.S. 51 is 2.7 miles.
CMS Br. at 3, 6; P. Exs. 2, 17. Petitioner gives the distance as 2.1 miles. RFH at 2; P.
Br. at 5.
In denying Petitioner’s request for CAH status, CMS relied on the interpretive guidance
published in the State Operations Manual (SOM), § 2256A, which sets out criteria to
differentiate between primary and secondary roads. In pertinent part, the SOM states:

Application of the more than 15-mile drive standard,
based on secondary roads

To be eligible for the lesser distance standard due to the
secondary road criteria under § 485.610(c) the CAH must
document that there are more than 15 miles between the CAH
and any hospital or other CAH where there are no primary
roads. A primary road is:

e A numbered federal highway, including interstates,
intrastates, expressways or any other numbered federal
highway; or

e A numbered State highway with 2 or more lanes each
way; or

e Aroad shown on a map prepared in accordance with
the U.S. Geological Survey’s Federal Geographic Data
Committee (FGDC) Digital Cartographic Standard for
Geologic Map Symbolization as a “primary highway,
divided by a median strip.”

A CAH may qualify for application of the “secondary roads”
criterion if there is a combination of primary and secondary
roads between it and any hospital or other CAH, so long as
more than 15 of the total miles from the hospital or other
CAH consists of areas in which only secondary roads are
available. To apply the secondary roads criterion, measure
the total driving distance between the CAH and each hospital
or CAH located within a 35 mile drive and subtract the
portion of that drive in which primary roads are available. If
the result is more than 15 miles for each drive to a hospital or
CAH facility, the 15-mile criterion is met... .

SOM Ch. 2, § 2256A (emphasis in original); P. Ex. 3 at 4-5. According to the SOM, a
road that does not meet the definition of a “primary road” would constitute a secondary
road. Therefore, a secondary road is a road that is not a numbered federal highway or a
numbered State highway with two or more lanes each way.
Petitioner argues that I should disregard the SOM criteria regarding what constitutes
“primary” and “secondary” roads. Petitioner argues that the SOM provisions are
“arbitrary and capricious” and fail to take into account a road’s physical characteristics.
Petitioner contends that CMS is “woodenly” applying the SOM definitions to label the
stretch of road co-designated as IL 16 and U.S. 51 a “primary road” despite the fact it is
an undivided two lane road. In Petitioner’s view, CMS’s position leads to an illogical
result in this case and thwarts the congressional objective behind the creation of the CAH
provisions, which was to ensure that Medicare beneficiaries located in rural communities
ave reasonable access to hospital care.* P. Br. at 6-9.

Petitioner is located a little over 16 miles from the nearest hospital, PCH. Thus,
Petitioner clearly does not qualify for CAH status based on the 35-mile distance
requirement, but would be able to qualify as a CAH if more than 15 miles of the road
between it and PCH are considered a secondary road. In denying Petitioner status as a
CAH, CMS applied the SOM criteria and determined that, out of the total distance
between Petitioner and PCH, the distance on secondary roads was less than 15 miles due
to the fact that a 2.7-mile portion of the route constituted a primary road based on its co-
designation as a numbered federal highway (US 51).

Neither the Act nor the regulation defines the term “secondary road.” However, CMS
‘as provided guidance as to the meaning of the term in the SOM. It is well-settled that
the SOM, as CMS’s interpretative guidance, is instructive, but is not controlling
authority. Baylor Cnty. Hosp. Dist. d/b/a Seymour Hosp., DAB No. 2617, at 4 (2015);
Green Oaks Health & Rehab. Ctr., DAB No. 2567, at 11 (2014); Agape Rehab. of Rock

* In examining the legislative history pertaining to the creation of the CAH program,
Petitioner notes that the mileage standard contained in the statute was a “compromise.”
P. Br. at 3 n.4. Petitioner cites to the House of Representative Report which stated that
such facilities had to be:

located a distance that corresponds to a travel time of greater
than 30 minutes (using the guidelines specified [in the] .. .
Code of Federal Regulations . . .), from [another] hospital

H.R. Rep. No. 105-149, at 392 (1997); P. Ex. 5, at 12. The Senate, in the Conference
Report, offered an alternative provision based on mileage, stating that a facility would
receive CAH status if it is “located more than a 35-mile drive from another hospital or
other health care facility.” H.R. Rep. No. 105-217, at 706 (1997); P. Ex. 6 at 5. The
Conference agreement adopted the Senate’s mileage standard, but with a modification
which stated “[t]he distance requirement for facilities includes a 15-mile drive in the case
of mountainous terrain or in areas with only secondary roads available.” Jd.
Hill, DAB No. 2411, at 19 (2011). An agency’s interpretation of ambiguous statutory or
regulatory language is entitled to deference so long as the interpretation is reasonable and
the party against whom the agency interpretation is applied had adequate notice. Baylor
Cnty. Hosp., DAB No. 2617; Cibola Gen. Hosp., DAB No. 2387, at 7-8 (2011). Here,
Petitioner does not dispute that it had adequate notice of CMS’s interpretation of what
constitutes a primary road and secondary road. Instead, Petitioner argues that CMS’s
interpretation is arbitrary and leads to an illogical result when applied to the facts of this
case.

Subsequent to the filings in this case, an appellate panel of the Departmental Appeals
Board (DAB) issued its decision in the Baylor County Hospital District case, DAB No.
2617.° In its decision, the DAB upheld the ALJ decision, concluding that CMS’s
interpretation in the SOM of what constitutes a “secondary road” was entitled to
deference and that, based on the SOM criteria, the petitioner did not meet the distance
requirements of the Act and 42 C.F.R. § 485.610(c), and thus did not qualify as a CAH.

Like Petitioner in this case, the petitioner in the Baylor County Hospital District case
argued that the SOM criteria regarding what constitutes “primary” and “secondary” roads
should not be given deference since they do not take a road’s actual physical
characteristics into account. In Baylor County Hospital District, at issue was an
approximately 28-mile stretch of road between the petitioner and the nearest hospital that
was designated as U.S. Highway 183/U.S. Highway 283. According to the petitioner,
this road had one lane in each direction, did not have a median strip, and would be
considered a secondary road but for its federal highway designation. The ALJ, in his
decision, concluded that although the SOM did not have the force of regulation, it did not
conflict with either the regulatory or statutory language and was entitled to deference.
Applying the SOM criteria, the ALJ concluded that the entire route at issue was a
“primary road” because it was a “numbered federal highway,” and, thus, the petitioner
did not satisfy the statutory distance requirements to qualify as a CAH. Baylor Cnty.
Hosp., DAB CR3301, at 3 (2014). The ALJ commented further that, in the absence of
any defining language in the Act, and given the lack of resources to make case-by-case
judgments about every highway in the United States, the SOM provisions constituted
reasonable policy determinations. Id. at 4.

The DAB was not persuaded by the petitioner’s argument on appeal that CMS’s
interpretation was unreasonable because it failed to take into consideration the specific
characteristics of individual roads and concluded that ““CMS’s interpretation is not
unreasonable or inconsistent with the intent of the CAH statute.” Baylor Cnty. Hosp.,
DAB No. 2617, at 4. Significantly, the DAB held:

5 On January 26, 2015, CMS filed a Statement of Additional Authority, to which it
attached the DAB’s Baylor County Hospital District decision.
We are not persuaded by Seymour’s argument that CMS
should have adopted a bright-line rule that treated only those
parts of federal highways with two or more lanes in each
direction or median strips as primary. Pet. R. Br. at 8. The
fact that CMS could have constructed other bright-line rules,
using different approaches, does not mean that the rule it
chose to adopt is unreasonable.

Id. at 5. The DAB thus concluded that it was appropriate to defer to CMS’s interpretation
of the term “secondary road.” Id. at 6.

Although I understand and am sympathetic to Petitioner’s arguments in this case, based
on Baylor County Hospital District, 1 will apply the SOM criteria to determine whether
Petitioner satisfies the statutory distance requirements required for CAH status. In this
case, Petitioner asserts the disputed section of road between Petitioner and PCH is 2.1
miles and is co-designated as IL 16 and U.S. 51. RFH at 2; P. Br. at 5. Under the SOM
criteria, the disputed section is a “primary” road and not a “secondary” road because the
section is co-designated as a numbered federal highway. The statute requires that the
“secondary roads” distance from a prospective CAH to another hospital be more than 15
miles. Here, when one subtracts the 2.1-mile primary road portion of the route from the
total distance between Petitioner and PCH, which is between 16.2 and 16.4 miles, the
minimum total amount of secondary road between Petitioner and PCH is 14.3 miles.
Accordingly, under the SOM, Petitioner is located less than a 15-mile drive via secondary
roads from the nearest hospital and, therefore, is too close to another hospital to be
designated as a CAH under 42 U.S.C. § 1395i-4(c)(2)(B)G)(D.

Petitioner makes the additional argument that a U.S. 51 bypass will be constructed in the
future and, when this occurs, there will no longer be a portion of IL 16 that is co-
designated as U.S. 51, which means that the segment in dispute will no longer be
considered a primary road. RFH; P. Br. at 10. Unfortunately, the possible removal of the
U.S. 51 designation from the disputed section of road in this case is not relevant.

IV. Conclusion

This case presents no genuine dispute of material fact and CMS is entitled to judgment as
a matter of law. Therefore, I grant CMS’s motion for summary disposition.

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-2150)

Complainant,
v.

Arabo Enterprises, Inc.
d/b/a Graham's Party Shoppe,

Respondent.
Docket No. C-15-626
Decision No. CR3646

Date: February 11, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Arabo Enterprises, Inc. d/b/a Graham's Party Shoppe, at 15801
Plymouth Road, Detroit, Michigan 48227, and by filing a copy of the complaint with the
Food and Drug Administration’s (FDA) Division of Dockets Management. The
complaint alleges that Graham's Party Shoppe impermissibly sold cigarettes to minors
and failed to verify, by means of photo identification containing a date of birth, that a
tobacco purchaser was 18 years of age or older, thereby violating the Federal Food, Drug,
and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations,
Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140 (2013). CTP seeks to impose a
$250 civil money penalty against Graham’s Party Shoppe.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on December 15, 2014, CTP served the
complaint on Respondent Graham's Party Shoppe 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 Graham's Party Shoppe 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:

¢ On December 14, 2013, at 4:53 p.m., at Respondent’s business establishment,
15801 Plymouth Road, Detroit, Michigan 48227, 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 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 March 6, 2014, CTP informed Respondent of the
inspector’s December 14, 2013 observations, and that such actions violate federal
laws, 21 C.F.R. §§ 1140.14(a) and 1140.14(b)(1). The letter further warned that
Respondent’s failure to correct the violations could result in a civil money penalty
or other regulatory action;

e At approximately 1:35 p.m. on June 14, 2014, at Respondent’s business
establishment, 15801 Plymouth Road, Detroit, Michigan 48227,
FDA-commissioned inspectors observed that a person younger than 18 years of
age was able to purchase a package of Newport Box 100s cigarettes.

These facts establish Respondent Graham's Party Shoppe’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). 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 $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
Arabo Enterprises, Inc. d/b/a Graham's Party Shoppe. 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.

Springmart, Inc.
d/b/a Spring Mart / BP,

Respondent.

Docket No. C-15-687
FDA Docket No. FDA-2014-H-2209

Decision No: CR3645

Date: February 11, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Springmart, Inc. d/b/a Spring Mart / BP, 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 sold cigarettes to minors, and
failed to verify, by means of photo identification containing a date of birth,
that tobacco purchasers were 18 years of age or older, thereby violating the Federal Food,
Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seg., 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 18, 2014, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days, Respondent should pay the 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 Spring Mart / BP, an establishment that sells tobacco products
and is located at 2221 Main Street, Springfield, Massachusetts 01104. Complaint

q3.

e During an inspection of Respondent’s establishment on November 7, 2012, at
approximately 4:51 PM, an FDA-commissioned inspector observed that “a person
younger than 18 years of age was able to purchase a package of Marlboro
cigarettes .. . [.]” The inspectors also documented that “the minor’s identification
was not verified before the sale... .” Complaint § 10.

e¢ On January 10, 2013, CTP issued a Warning Letter to Respondent regarding the
inspector’s observations from November 7, 2012. The letter explained that the
observations constituted violations of regulations found at 21 C.F.R. § 1140.14(a)
and (b)(1), and that the named violations were not necessarily intended to be an
exhaustive list of all violations at the establishment. The Warning Letter went on
to state that if Respondent failed to correct the violations, regulatory action by the
FDA or a civil money penalty action could occur and that Respondent is
responsible for complying with the law. Complaint § 10.

e By letter on March 1, 2013, Respondent’s site manager, Mr. Budhwani, responded
to the Warning Letter. “The response stated that all employees were trained to
verify identification, signs were posted to remind employees to verify the age of
tobacco purchasers, and employees were rewarded for passing inspections.”
Complaint § 11.

e During a subsequent inspection of Respondent’s establishment, conducted on June
17, 2014, at approximately 11:28 AM, FDA-commissioned inspectors documented
that “a person younger than 18 years of age was able to purchase a package of
Marlboro 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 cigarette purchasers are
younger than 18 years of age. 21 C.F.R. § 1140.14(b)(1).

Respondent violated the prohibition against selling tobacco products to persons younger
than 18 years of age, 21 C.F.R. § 1140.14(a), on November 7, 2012 and June 17, 2014.
On those same dates, 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. 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

Center for Tobacco Products,
(FDA No. FDA-2014-H-2230)

Complainant
v.

M and F Petroleum LLC / Mohammad Al Omari
d/b/a Valero,

Respondent.
Docket No. C-15-702
Decision No. CR3643

Date: February 11, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, M and F Petroleum LLC / Mohammad Al Omari d/b/a Valero,
at 14620 Tireman Street, Detroit, Michigan 48228, and by filing a copy of the complaint
with the Food and Drug Administration’s (FDA) Division of Dockets Management. The
complaint alleges that Valero impermissibly sold cigarettes to minors and failed to verify,
by means of photo identification containing a date of birth, that the purchasers were 18
years of age or older, thereby violating the Federal Food, Drug, and Cosmetic Act (Act),
21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R. pt. 1140. CTP seeks
to impose a $500 civil money penalty against Respondent Valero.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on December 22, 2014, CTP served the
complaint on Respondent Valero 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 Valero 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 12:07 p.m. on January 11, 2014, at Respondent’s business
establishment, 14620 Tireman Street, Detroit, Michigan 48228, an
FDA-commissioned inspector observed Respondent’s staff selling a package of
Newport Box 100s cigarettes to a person younger than 18 years of age. The
inspector also observed 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 April 3, 2014, CTP informed Respondent of the
inspector’s January 11, 2014 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 10:20 a.m. on July 19, 2014, at Respondent’s business
establishment, 14620 Tireman Street, Detroit, Michigan 48228,
FDA-commissioned inspectors documented Respondent’s staff selling a package
of Newport Box 100s cigarettes to a person younger than 18 years of age. 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 Valero’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 US.C. § 387f(d); see 21 U.S.C. § 387¢(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.
Under 21 C.F.R. § 1140.14(b)(1), retailers must verify, by means of photographic
identification containing a purchaser’s date of birth, that no cigarette purchasers are
younger than 18 years of age.
A $500 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $500 against Respondent M
and F Petroleum LLC / Mohammad Al Omari d/b/a Valero. 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

Corpus Christi Nursing and Rehabilitation Center,
(CCN: 67-6107),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-1842
Decision No. CR3640
Date: February 11, 2015
DECISION REMANDING AND DISMISSING

The request for hearing filed by Petitioner, Corpus Christi Nursing and Rehabilitation
Center, on August 31, 2014, is dismissed pursuant to 42 C.F.R. § 498.70(b). This case is
remanded to the Centers for Medicare & Medicaid Services (CMS) pursuant to 42 C.F.R.
§ 498.56(d). Pursuant to 42 C.F.R. § 498.72, I may vacate the dismissal of a request for
hearing if a party files a written request within 60 days of receipt of this decision and
shows good cause. The dismissal of this case is without prejudice to Petitioner’s right to
request review pursuant to 42 C.F.R. pt. 498 in the event any CMS action on remand
triggers such right.

I. Background

Petitioner is located in Corpus Christi, Texas, and participates in Medicare as a skilled
nursing facility (SNF). On October 24, 2013, the Texas state agency (state agency)
conducted a survey of Petitioner’s facility on behalf of CMS. The survey found that
Petitioner was not in substantial compliance with program participation requirements.
CMS Exhibit (Ex.) 1.
CMS sent Petitioner a notice letter dated November 25, 2013, by facsimile. The notice
advised Petitioner that CMS was imposing the following enforcement remedies: a per
instance civil money penalty (PICMP) of $5,000 for noncompliance with 42 C.F.R.

§ 483.13(c) and a $5,000 PICMP for noncompliance with 42 C.F.R. § 483.25; a denial of
payment for new admissions (DPNA) if Petitioner did not return to substantial
compliance before November 21, 2013; directed in-service training; and termination of
Petitioner’s provider agreement if Petitioner did not return to substantial compliance
before March 24, 2014. CMS Ex. 1.

Petitioner requested a hearing before an administrative law judge (ALJ) through counsel
by letter dated August 31, 2014. The case was assigned to me for hearing and decision
and an Acknowledgement and Prehearing Order was issued on September 25, 2014.

On October 15, 2014, CMS moved to dismiss the case on grounds that the request for
earing was not timely filed and no good cause exists to extend the period for filing.
CMS filed CMS Exhibits (CMS Exs.) | through 6 with its motion. Petitioner filed a
response in opposition on November 4, 2014, with Petitioner’s Exhibits (P. Exs.) 1 and 2.
On November 10, 2014, I ordered the filing of additional evidence and briefing. On
November 25, 2014, Petitioner filed the declaration of counsel and P. Ex. 3. Petitioner
filed a supplemental response in opposition on December 29, 2014. No objections have
been made to my consideration of CMS Exs. | through 6 and P. Exs. | through 3, and all
are admitted and considered.

On December 10, 2014, I stayed further proceedings pending my ruling on the motion to
dismiss.

IL. Discussion
A. Applicable Law

The statutory and regulatory requirements for participation of a SNF in Medicare are
found at section 1819 of the Social Security Act (Act) and at 42 C.F.R. pt. 483. Section
1819(h)(2) of the Act authorizes the Secretary of Health and Human Services (Secretary)
to impose enforcement remedies against a SNF for failure to comply substantially with
the federal participation requirements established by sections 1819(b), (c), and (d) of the
Act. The Act requires that the Secretary terminate the Medicare participation of any SNF
that does not return to substantial compliance with participation requirements within six
months of being found not to be in substantial compliance. Act § 1819(h)(2)(C). The
Act also requires that the Secretary deny payment of Medicare benefits for any
beneficiary admitted to a SNF, if the SNF fails to return to substantial compliance with
program participation requirements within three months of being found not to be in
substantial compliance — commonly referred to as the mandatory or statutory DPNA. Act
§ 1819(h)(2)(D). The Act grants the Secretary discretionary authority to terminate a

noncompliant SNF’s participation in Medicare, even if there has been less than 180 days
of noncompliance. The Act also grants the Secretary authority to impose other
enforcement remedies, including a discretionary DPNA, civil money penalties (CMP),
appointment of temporary management, and other remedies such as a directed plan of
correction. Act § 1819(h)(2)(B).

The Secretary has delegated to CMS and the states the authority to impose remedies
against a long-term care facility that is not complying substantially with federal
participation requirements. “Substantial compliance means a level of compliance with
the requirements of participation such that any identified deficiencies pose no greater risk
to resident health or safety than the potential for causing minimal harm.” 42 C.F.R.

§ 488.301 (emphasis in original). A deficiency is a violation of a participation
requirement established by sections 1819(b), (c), and (d) of the Act or the Secretary’s
regulations at 42 C.F.R. pt. 483, subpt. B. Noncompliance refers to any deficiency that
causes a facility not to be in substantial compliance. 42 C.F.R. § 488.301. State survey
agencies survey facilities that participate in Medicare on behalf of CMS to determine
whether the facilities are complying with federal participation requirements. 42 C.F.R.
§§ 488.10-.28, 488.300-.335. The regulations specify the enforcement remedies that
CMS may impose if a facility is not in substantial compliance with Medicare
requirements. 42 C.F.R. § 488.406.

The Act and regulations make a hearing before an ALJ available to a long-term care
facility against which CMS has determined to impose an enforcement remedy. Act

§§ 1128A(c)(2), 1866(h); 42 C.F.R. §§ 488.408(g), 498.3(b)(13). A facility has a right to
appeal a “certification of noncompliance leading to an enforcement remedy.” 42 C.F.R.
§§ 488.408(g)(1); 488.330(e), 498.3. The hearing before an ALJ is a de novo proceeding,
ie., “a fresh look by a neutral decision-maker at the legal and factual basis for the
deficiency findings underlying the remedies.” Life Care Ctr. of Bardstown, DAB No.
2479 at 32 (2012) (citation omitted); The Residence at Salem Woods, DAB No. 2052
(2006); Cal Turner Extended Care, DAB No. 2030 (2006); Beechwood Sanitarium, DAB
No. 1906 (2004); Emerald Oaks, DAB No. 1800 at 11 (2001); Anesthesiologists
Affiliated, DAB CR65 (1990), aff'd, 941 F.2d 678 (8th Cir. 1991). The procedures
applicable are established by 42 C.F.R. pt. 498.

B. Issue
Whether Petitioner’s request for hearing should be dismissed.
C. Findings of Fact, Conclusions of Law, and Analysis

My conclusions of law are set forth in bold followed by the pertinent facts and analysis.
1. Petitioner was never notified of the CMS initial determination by
mail as required by 42 C.F.R. § 498.20(a)(1).

2. Remand is appropriate to permit CMS to provide Petitioner proper
notice of its initial determination by mail as required by 42 C.F.R.
§ 498.20(a)(1), or to take other action CMS deems appropriate.

3. The request for hearing is dismissed without prejudice to
Petitioner’s right to request a hearing in the event the CMS action on
remand triggers such right.

a. Facts

The state agency surveyed Petitioner’s facility on October 24, 2013, and concluded that
Petitioner was not in substantial compliance with program participation requirements.
CMS sent Petitioner a notice letter dated November 25, 2013, by facsimile. Printed on
the letter is the following:

THIS SERVES AS OFFICIAL NOTICE SENT VIA
FACSIMILE PURSUANT TO 42 CFR 488- NO HARD
COPY TO FOLLOW.

The letter was notice of the CMS initial determination imposing enforcement remedies
based on the findings and conclusions of the survey completed on October 24, 2013. The
notice advised Petitioner of its right to request informal dispute resolution within ten days
of the date on the notice letter. The notice advised Petitioner of its right to request review
by an ALJ within 60 days of the date the notice was transmitted. CMS Ex. 1. There is no
dispute that CMS sent the notice to Petitioner by facsimile at about 6:28 p.m. on
November 25, 2013. CMS Ex. 2. Petitioner alleges that Petitioner’s management did not
receive the facsimile. There is no dispute that CMS did not send the notice to Petitioner
by mail.

CMS sent Petitioner another notice dated February 5, 2014. The notice contains the
following:

THIS SERVES AS OFFICIAL NOTICE SENT VIA
FACSIMILE PURSUANT TO 42 CFR 488- NO HARD
COPY TO FOLLOW.

The February 5, 2014 notice advised Petitioner that the state agency determined that
Petitioner returned to substantial compliance with program participation requirements on
November 20, 2013. Therefore, the proposed enforcement remedies of termination and
a DPNA were rescinded. The PICMP of $10,000 remained. The notice stated that
January 24, 2014, was the last day for Petitioner to request a hearing or waive its right to
a hearing in exchange for a reduction of the PICMP, but there was no record that
Petitioner had requested a hearing. Petitioner was advised that the PICMP was, therefore,
due and payable as of February 20, 2014. CMS Ex. 3. There is no dispute that on
February 5, 2014, at about 5:16 p.m. the letter was sent to Petitioner by facsimile and
receipt was acknowledged by reply facsimile at about 5:28 p.m. by Antonio Villanueva,
Petitioner’s Administrator or authorized representative. CMS Ex. 4. There is no dispute
that the February 5, 2014 notice was not sent to Petitioner by mail.

On April 16, 2014, CMS sent Petitioner’s attorney in this case an email with copies of the
November 25, 2013 and February 5, 2014 notices attached. Petitioner’s attorney
acknowledged receipt by reply email on April 16, 2014. CMS Ex. 6. Petitioner’s
counsel acknowledged that he was retained in November 2013 to assist Petitioner with
the October 24, 2013 survey. However, he states that he first received a copy of the CMS
notice letters as email attachments on April 16, 2014. Declaration of Michael D. Seale,
dated November 24, 2014.

Jimmy Carter stated in his declaration dated November 4, 2014, that he was Petitioner’s
administrator from April 1, 2013, through April 1, 2014. He stated that the state agency
provided a copy of the survey report related to the October 24, 2013 survey attached to a
letter dated November 7, 2013. However, he testified that he first saw the November 25,
2013 CMS letter in August 2014, after he was no longer employed by Petitioner. He
stated that he was not aware of Petitioner receiving the November 25, 2013 CMS letter
by facsimile. P. Ex. 1. Brian Gregory stated in his declaration dated November 4, 2014,
that he was director of nursing for Petitioner from September 24, 2013, until April 15,
2014. He also stated that the state agency provided a copy of the survey report on
November 7, 2013. He stated that he first saw the November 25, 2013 CMS notice in
August 2014, after he was no longer employed by Petitioner. He also stated that he was
unaware of Petitioner receiving the November 25, 2013 CMS notice by facsimile. P. Ex.
3. [have no reason to doubt the credibility of either Jimmy Carter or Brian Gregory.

b. Analysis

The CMS letter dated November 25, 2013, was the CMS notice of its initial
determination to impose enforcement remedies based on the findings and conclusions of
the survey completed on October 24, 2013. CMS Ex. 1. There is no evidence that the
November 25, 2013 CMS letter was sent to Petitioner by mail. There is also no evidence
that the February 5, 2014 CMS letter was sent to Petitioner by mail. In fact, the notices
clearly state that no “hard copy” of the letters was sent by CMS to Petitioner. The
declaration of Petitioner’s counsel is consistent with the other evidence that no copy of
either letter was ever sent to Petitioner by mail and counsel received copies as email
attachments and not by mail.
Pursuant to 42 C.F.R. § 488.402(f) CMS must give notice that it intends to impose an
enforcement remedy. The notice must state the nature of the noncompliance that is the
basis for imposing the enforcement remedy; which enforcement remedy is imposed; the
effective date of the remedy; and the right to appeal the determination to impose the
remedy. For a CMP, the notice must comply with 42 C.F.R. §§ 488.434 and 488.440. 42
C.F.R. § 488.402(f)(6). Pursuant to 42 C.F.R. § 488.434, when a CMP is being imposed,
CMS must send a written notice to the facility. The notice must state the noncompliance
that is the basis for imposing the CMP; the statutory basis for imposing the CMP; the
amount of the CMP per day or per instance; the factors considered when determining the
amount of the CMP; the date of the instance of noncompliance or the date on which the
CMP began to accrue; the date the CMP stops accruing if applicable; when the penalty is
to be collected; and instructions for responding to the notice, including the right to a
hearing or to waive a hearing and receive a discount in the CMP amount. Additional
notice requirements are established by 42 C.F.R. § 488.440(d) and (e).

A facility may appeal a certification of noncompliance that is the basis for imposition of
an enforcement remedy. The procedures for ALJ review and appeals to the Departmental
Appeals Board are established by 42 C.F.R. pt. 498. 42 C.F.R. §§ 488.24;

488.330(e)(3); 488.408(g); 488.43 1(d).

CMS must give notice of its initial determination to impose an enforcement remedy
based on noncompliance in accordance with 42 C.F.R. § 498.20(a)(1), which provides:

(a) Notice of initial determination—

(1) General rule. CMS .. . mails notice of an_ initial
determination to the affected party, setting 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.

(emphasis added). The regulation requires that the notice of initial determination be
mailed to the affected party. No provision of 42 C.F.R. pt. 498 permits notice of an
initial determination by facsimile, email, or other alternative means. The State
Operations Manual (SOM), CMS Pub. 100-07, chap. 7, § 7305.4 (Sep. 2010)
(http://www.cms.hhs.gov/Manuals/IOM/list.asp), suggests that facsimile transmission
may be an acceptable alternative to sending a notice of initial determination by mail.
However, the SOM does not have the force and effect of law, and may only be applied
consistent with the requirements of the Act and regulations. Ind. Dep't. of Pub. Welfare
v. Sullivan, 934 F.2d 853 (7th Cir. 1991); Nw. Tissue Ctr. v. Shalala, | F.3d 522 (7th Cir.
1993). Further, even if I were to apply the SOM, section 7305.4 requires the sender to
“maintain a record of transmission to assure proof of transmission if receipt is denied.”
CMS has offered proof that it transmitted a seven page document to Petitioner on

November 25, 2013, but CMS’s evidence does not establish that it sent the five page
November 25, 2013 notice of initial determination to Petitioner. Compare CMS Ex. 2,
with CMS Ex. 1. Further, CMS has not offered proof that Petitioner actually received the
documents it did send on November 25, 2013. Tellingly, CMS does not offer an
acknowledgment signed by the facility’s Administrator or an authorized representative,
similar to that which CMS retained after transmitting the February 5, 2014 notice.

In this case, CMS failed to properly serve the November 25, 2013 notice of initial
determination upon Petitioner by mail as required by 42 C.F.R. § 498.20(a)(1).
Accordingly, CMS never accomplished proper service, and the running of the 60-day
period for Petitioner to request ALJ review was not triggered. Petitioner has not waived
the defective service.

Because CMS failed to properly serve the notice of initial determination to impose an
enforcement remedy, Petitioner’s right to a hearing was not triggered. Accordingly,
dismissal is appropriate and this case is dismissed. 42 C.F.R. § 498.70(b). Either party
may request that I vacate this dismissal for good cause within 60 days from receipt. 42
C.F.R. § 498.72. This case is remanded to CMS pursuant to 42 C.F.R. § 487.56(d), to
address the defective notice of initial determination or such other action as CMS may
deem appropriate. The dismissal of this case is without prejudice to Petitioner’s right to
request review pursuant to 42 C.F.R. pt. 498 in the event any CMS action on remand
triggers such right.

II. Conclusion

For the foregoing reasons, this case is remanded to CMS and the case is dismissed.

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

John N. Jordan, M.D.,
(PTAN: SC22178753)
(NPI: 120824042),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-933
Decision No. CR3637

Date: February 10, 2015

DECISION

Petitioner, John N. Jordan, M.D., appealed the effective date determination that he was
not eligible for enrollment in the Medicare program as a supplier earlier than October 11,
2013, and he could not submit retrospective claims for payment earlier than September
11, 2013. I find that Palmetto GBA (Palmetto), an administrative contractor for the
Centers for Medicare & Medicaid Services (CMS), properly determined that the earliest
approvable enrollment application that it received was on October 11, 2013, which
necessarily determines Petitioner’s effective date of enrollment as October 11, 2013, with
a retrospective billing period starting September 11, 2013.

I. Background

The following facts are undisputed unless otherwise noted. Petitioner is a physician
practicing in South Carolina. Petitioner desired to reassign his Medicare billing
privileges with a new group practice, Agape Senior Primary Care (Agape). Agape
represented Petitioner in these transactions with Palmetto. Agape claims it submitted
reassignment enrollment applications, CMS Form 855R and CMS Form 855], on behalf
of Petitioner to Palmetto on January 18, 2013. The following is a summary of the
timeline of events:

e Petitioner was associated with Dunes Medical Center for Medicare billing
purposes and wished to reassign his Medicare billing privileges to Agape.

e Agape’s Provider Relations Coordinator (Coordinator) states that she mailed
Petitioner’s reassignment application forms 8551 and 855R on January 18, 2013.
P. Ex. 2 at | 3.

e Petitioner began providing medical services at Agape on February 1, 2013.

e On March 8, 2013, Palmetto notified Petitioner that he needed to revalidate his
Provider Transaction Access Number (PTAN) associated with Dunes Medical
Center using an enrollment application. CMS Ex. 1.

e The Coordinator’s first telephone contact with Palmetto was on August 14, 2013,
approximately eight months after she claims she mailed Petitioner’s reassignment
applications. The Coordinator states that Palmetto’s agent informed her that
Palmetto received Petitioner’s applications on March 13, 2013, and it was
reviewing them. P. Ex. 2 at 4. CMS does not deny that this interaction occurred
but asserts that the telephone call took place on August 19, 2013, and explains
now that Palmetto’s agent was referencing Petitioner’s revalidation transaction
with Dunes Medical Center and not the reassignment to Agape. CMS Ex. 15 at
qf) 11-17.

e The Coordinator’s second telephone call to Palmetto was on August 26, 2013.
During that call, Palmetto’s agent advised her that Palmetto was researching
Petitioner’s applications. P. Ex. 2 at 9/5. Again, CMS explains now that the
Palmetto agent was referencing Petitioner’s revalidation transaction with Dunes
Medical Center and not the reassignment transaction to Agape. CMS Ex. 15 at
4 18-19.

e The Coordinator’s third telephone call to Palmetto was on September 11, 2013.
Palmetto’s agent advised her that Palmetto was still processing Petitioner’s
applications. Palmetto’s agent gave the Coordinator reference number
9013254365000. P. Ex. 2 at 97. Again, CMS explains now that Palmetto’s agent
was referencing Petitioner’s revalidation transaction regarding Dunes Medical
Center and not the reassignment to Agape. CMS Ex. 15 at § 28.

e The Coordinator’s fourth telephone call to Palmetto was on September 25, 2013.
Palmetto’s agent told her that Palmetto never received Petitioner’s reassignment
applications and that she needed to resubmit the information. P. Ex. 2 at J 8.

e The Coordinator submitted new applications for Petitioner’s reassignment to
Agape on October 9, 2013. P. Ex. 2 at 49.

e Palmetto received Petitioner’s reassignment applications for Agape on October 11,
2013. CMS Ex. 6; CMS Ex. 7.

e By emails dated October 30, 2013, and December 16, 2013, Palmetto requested
additional information, revisions, and supporting documentation regarding
Petitioner’s applications. CMS Exs. 8, 10.

¢ On January 14, 2014, Palmetto approved the reassignment applications to allow
Agape to directly bill Medicare on Petitioner’s behalf starting September 11, 2013.
CMS Ex. 11.

e Petitioner requested reconsideration of Palmetto’s effective date determination.
Palmetto issued a reconsideration decision on February 10, 2014, concluding it
had correctly determined that Petitioner could begin billing Medicare starting
September 11, 2013, because Palmetto received Petitioner’s approvable
applications on October 11, 2013. CMS Ex. 13.

Petitioner filed a request for hearing (RFH) on April 10, 2014, and I was assigned this
case. Following the issuance of my Acknowledgement and Pre-hearing Order (Order),
CMS moved for summary judgment and filed a supporting brief (CMS Br.) with 16
proposed exhibits (CMS Exs. 1-16). My Order required the parties to provide prehearing
exchanges, including a brief addressing all issues of law and fact and any motion for
summary judgment the party might make. In accordance with my Order, I construe
CMS’s motion for summary judgment as its pre-hearing brief. CMS proposed two
witnesses and provided written direct testimony for them. CMS Exs. 15, 16. Petitioner
submitted a pre-hearing brief and opposition to CMS’s motion for summary judgment (P.
Br.) with three proposed exhibits (P. Exs. 1-3). Petitioner proposes the Coordinator as a
witness and provided her written direct testimony as P. Ex. 2.

In the absence of any objection, I admit CMS Exs. 1-16 and P. Exs. 1-3 into the record.
Neither party requested the opportunity to cross-examine any opposing witness;
therefore, in accordance with my Order, a hearing in this matter is not necessary. Order
at 10. I issue this decision on the full merits of the written record.

IL. Discussion

A. Issue

Whether CMS or its contractor correctly established the effective date for Petitioner’s
enrollment in the Medicare program.
B. Findings of Fact and Conclusions of Law

1. Palmetto received an approvable Medicare enrollment application
from Petitioner on October 11, 2013, which necessarily determined
Petitioner’s effective date.

The effective date for enrollment for physicians is “the later of the date of filing of a
Medicare enrollment application that was subsequently approved by a Medicare
contractor or the date an enrolled physician or nonphysician practitioner first began
furnishing services at a new practice location.” 42 C.F.R. § 424.520. The “date of filing’
is the date that the Medicare contractor “receives” a signed enrollment application that
the Medicare contractor is “able to process to approval.” 73 Fed. Reg. 69,725, 69,769
(Nov. 19, 2008).

Palmetto’s records show that Palmetto received Petitioner’s reassignment applications on
October 11, 2013, and CMS provides the applications’ envelope displaying a postmark of
October 9, 2013.' CMS Ex. 6 at 1. CMS provides an iFlow tracking document from its
tracking system that shows Palmetto received no earlier application. CMS Ex. 2.
Palmetto acknowledged receipt of the October 11, 2013 applications in an electronic
transmission dated October 30, 2013. CMS Ex. 7. CMS explains that a comprehensive
search of the national provider database confirms that Palmetto did not receive
applications from Agape on behalf of Petitioner any earlier than October 11, 2013. See
CMS Ex. 16 at §§ 4, 8; see also CMS Ex. 15 at § 35.

CMS provided me with two comprehensive and credible affidavits from Palmetto agents.
The first affidavit is from a manager in the Provider Enrollment department at Palmetto
(the Manager). CMS Ex. 16. The Manager states that all documents received are date
stamped and scanned into the iFlow tracking system (CMS Exs. 2, 3) and that Palmetto
conducted an exhaustive search for Petitioner’s enrollment applications using Petitioner’s
name, social security number, National Provider Identifier (NPI), and the group identifier
for Agape. Palmetto’s search of its national database files reportedly could not find an
enrollment application from Agape on behalf of the Petitioner before October 2013.

CMS Ex. 16 at §§ 4, 7, 8.

The Manager also explained that Palmetto sent Dune Medical Center, the group practice
with which Petitioner was previously associated, a March 8, 2013 revalidation request
regarding Petitioner. The Manager further explained that Palmetto generates Call Control

we

' The enrollment application packet that Palmetto received on October 11, 20
included: the envelope postmarked October 9, 2013; a cover letter from Agape dated
January 18, 2013; a CMS Form 855! dated January 14, 2013; a CMS Form 855R dated
January 18, 2013; a letter from Agape to Palmetto dated October 1, 2013; a CMS Form
855I dated October 1, 2013; and a CMS Form 855R dated October 1, 2013. CMS Ex. 6.
Numbers (CCNs) for every telephone call it received and that those numbers are not
helpful to ascertain the receipt date of any provider enrollment application. CMS Ex. 16
at J 11, 12. He also explained that Palmetto sends an email confirmation to a provider
within 20 days of receiving an enrollment application, and Palmetto sent its only
confirmation email to Agape on October 30, 2013. CMS Exs. 7; 16 at § 13.

CMS proffered a second affidavit, from a supervisor in Palmetto’s Provider Contact
Center (the Supervisor). CMS Ex. 15. In her affidavit, the Supervisor explains that the
Multi-Carrier System Desktop Tool (MCSDT) logs and tracks every telephone call. The
Supervisor stated she conducted a thorough search of Palmetto’s MCSDT for all calls
received regarding Petitioner using Petitioner’s five different PTANs, his NPI, and the
group number for Agape. CMS Ex. 5; CMS Ex. 15 at §§ 4, 8, 35. She explained that a
CCN is generated each time a telephone call is logged, and that Costumer Service
Advocates (CSAs) answer call inquiries. A CCN does not document the receipt of any
provider enrollment application. The only “item pending for” Petitioner in Palmetto’s
database prior to October 11, 2013, was a revalidation request for Petitioner’s previous
practice group, not a new enrollment for Agape. CMS Ex. 15 at § 13. She also explained
the iFlow system tracks every document that a Palmetto employee views. CMS Ex. 15 at
q 15.

The Supervisor specifically addressed Agape’s telephone inquiries. CMS Ex. 15. She
explained that there is no record of a telephone call from Agape on August 14, 2013, as
Agape’s Coordinator claims, but there is a record of a telephone call on August 19, 2013.
The CSA who responded to that call commented that “Provider checking status of
application that has been pending since 3/8/13” in the log. CMS Ex. 15 at 9.11. The
Supervisor explained that the iFlow system showed that the CSA who answered the
telephone call on August 19, 2013, viewed only the revalidation letter Palmetto sent to
Petitioner on March 8, 2013 (associated with the Dune Medical revalidation process).
CMS Ex. 15 at ¥ 15.

The Supervisor explained that the iFlow system shows that the CSA viewed the March 8,
2013 Dune revalidation letter during the course of the August 26, 2013 call. CMS Ex.
15,4 19. Similarly, the Supervisor explained that the iFlow system showed that the CSA
who answered a September 3, 2013 telephone call from Agape viewed the March 8, 2013
Dune revalidation letter. CMS Ex. 15 at § 22.

The Supervisor further explained that Palmetto received two telephone calls from Agape
on September 11, 2013. The CCN for the first call was 9013254365000. CMS Ex. 15 at
26. During the second telephone call on September 11, 2013, the CSA directed Agape
to fax information concerning Petitioner’s Dune revalidation request. CMS Ex. 15 at
428. The Supervisor reported that according to the iFlow system, Palmetto did not
receive a provider enrollment application for Petitioner until October 11, 2013. CMS Ex.
15 at ff] 14, 35.

The Supervisor stated that the CSA who responded to a September 25, 2013 telephone
call reportedly told Agape that Palmetto had not received Petitioner’s enrollment
application. The CSA did view the March 8, 2013 revalidation request (pertaining to
Dune Medical) on the iFlow system. CMS Ex. 15 at §§ 29, 30. That CSA reportedly also
informed Agape that Palmetto had received a different application for a different
physician associated with Agape in March 2013. See CMS Ex. 14.

In sum, CMS concedes that Agape contacted Palmetto several times regarding the status
of enrollment applications. However, the evidence specifically and persuasively suggests
there were several misunderstandings and that the discussions Agape and Palmetto
employees had related to Petitioner’s revalidation with another group practice (Dune
Medical) and not to Petitioner’s reassignment to Agape.

2. Petitioner is eligible for retrospective billing privileges starting
September 11, 2013.

I find the evidence demonstrates that Palmetto first received Petitioner’s enrollment
application on October 11, 2013. Palmetto ultimately approved that application and
notified Petitioner of its October 11, 2013 effective date decision. CMS Ex. 11. A CMS
contractor may permit retrospective billing for up to thirty days prior to the effective date
of enrollment. 42 C.F.R. § 424.521(a).

Here, thirty days prior to the effective date of October 11, 2013, is September 11, 2013.
Accordingly, Agape may bill Medicare retrospectively for reimbursement of covered
services performed by Petitioner starting no earlier than September 11, 2013. Palmetto
erroneously characterized September 11, 2013, as Petitioner’s “effective date,” rather
than Petitioner’s retrospective billing date. CMS Ex. 11. I treat Palmetto’s action as if it
intended to set September 11, 2013, as the earliest date for which Petitioner may submit
retrospective claims, with the effective date of Petitioner’s enrollment as October 11,
2013.

3. Petitioner does not persuade me that Palmetto received earlier approvable
reassignment applications from Agape before October 11, 2013.

Petitioner argues his effective date should be February 1, 2013, the date Petitioner began
to provide medical services for Agape because Agape actually filed applications on
Petitioner’s behalf on January 18, 2013. P. Br. at 3. Alternatively, Agape argues
Petitioner’s effective date should be February 11, 2013, because he claims Palmetto
verbally acknowledged that it received Petitioner’s enrollment applications on March 13,
2013. P. Br. at 3.
In support, Petitioner submits as exhibits Petitioner’s enrollment application and cover
letter dated January 18, 2013 (P. Ex. 1) and an enrollment application and cover letter
dated October 1, 2013 (P. Ex. 3) in which the Agape Coordinator asserts that she mailed
an earlier application on January 18, 2013. Petitioner also submits the Coordinator’s
affidavit (P. Ex. 2) explaining how the Coordinator mailed Petitioner’s application on
January 18, 2013. The Coordinator also references a CCN, 9013254365000, that
Palmetto provided her.

I find the CCN number helps show that Agape did inquire about Petitioner’s
reassignment applications, but it does not refute CMS’s explanation that Palmetto was
referencing Petitioner’s separate revalidation process regarding a different group practice
during several of Agape’s telephone inquiries. Therefore, the CCN does not show that
Palmetto received Petitioner’s applications before October 11, 2013.

In her affidavit, the Agape Coordinator explains very generally that she mailed
Petitioner’s completed enrollment applications on January 18, 2013. She does not state
where or how she mailed the applications. She does not state whether she paid for
certified mail delivery or whether she obtained any record of mailing it. She does not
explain how, absent a receipt or other documentation, she remembers mailing specific
forms on a specific date nearly 10 months prior to her making that recollection. See P.
Exs. 2, 3. Ultimately, there is not sufficient evidence in the record to persuade me that
Agape actually mailed enrollment applications for Petitioner on or around January 18,
2013. And even if Petitioner could prove that Agape mailed its applications on January
18, 2013, he has not come forward with sufficient evidence to prove the date on which
Palmetto received the approvable applications, which would be instrumental in
determining the filing date for effective date determinations.

Alternatively, Petitioner relies on the Coordinator’s claim that she received verbal
acknowledgment of receipt of Petitioner’s applications on March 13, 2013, during her
August 19, 2013 telephone inquiry to Palmetto. However, the MCSDT and iFlow
records suggest that the CSA who answered the August 19, 2013 telephone call was
referring to the March 8, 2013 revalidation request for one of Petitioner’s already existing
PTANs, the one associated with Dune Medical Center, an entirely separate transaction.
Unfortunately, Agape did not realize during its first phone inquiry, on August 19, 2013,
that Palmetto never received Petitioner’s applications that Petitioner asserts it mailed in
January 2013. What followed was a lot of ongoing confusion during the telephone
communications between Agape and Palmetto regarding two separate and distinct
transactions.
4. Iam not authorized to grant Petitioner's requests for
equitable relief.

Petitioner claims he received inaccurate information from Palmetto, which amounts to a
claim of equitable estoppel. I am unable to grant the relief that Petitioner requests. It is
well-established that: (1) estoppel cannot be the basis to require payment of funds from
the federal fisc; (2) estoppel cannot lie against the government, if at all, absent a showing
of affirmative misconduct, such as fraud; and (3) I am not authorized to order payment
contrary to law based on equitable grounds. See, e.g., Office of Personnel Mgmt. v.
Richmond, 496 U.S. 414 (1990); Heckler v. Cmty. Health Servs. of Crawford County,
Inc., 467 U.S. 51 (1984); Oklahoma Heart Hosp., DAB No. 2183, at 16 (2008); Wade
Pediatrics, DAB No. 2153, at 22 n.9 (2008), aff'd, 567 F.3d 1202 (10th Cir. 2009). Here,
Petitioner does not allege any affirmative misconduct. Any misinformation was
attributable to confusion regarding two distinct enrollment transactions, and I am unable
to grant the earlier effective date that Petitioner requests.

II. Conclusion

Petitioner’s earliest enrollment application, which Palmetto was able to subsequently
approve, was received by Palmetto on October 11, 2013. Although Palmetto made
references to earlier filed applications during the process, I find those references relating
to a separate enrollment revalidation transaction concerning a different group practice. I
affirm the CMS contractor’s determination that Petitioner’s enrollment in the Medicare
program is effective October 11, 2013, with retrospective billing privileges starting
September 11, 2013.

/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-2114)
Complainant,

v.

Rite Aid of Maryland, Inc.
d/b/a Rite Aid 4983,

Respondent.
Docket No. C-15-587
Decision No. CR3636

Date: February 9, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative

complaint on Respon
Baltimore Avenue, Ri

lent, Rite Aid of Maryland, Inc. d/b/a Rite Aid 4983, at 6130
verdale, Maryland 20737, and by filing a copy of the complaint

with the Food and Drug Administration’s (FDA) Division of Dockets Management. The

complaint alleges that

Rite Aid 4983 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 regu

ations, Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140

(2013).CTP seeks to impose a $250 civil money penalty against Rite Aid 4983.

As provided for in 21
complaint on Respon
accompanying cover |

C.F.R. §§ 17.5 and 17.7, on December 9, 2014, CTP served the
lent Rite Aid 4983 by United Parcel Service. In the complaint and
etter, 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 Rite Aid 4983 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, Lassume that the facts alleged in the complaint (but not its conclusory
statements) are true. Specifically:

e On January 17, 2014, at 10:39 a.m., at Respondent’s business establishment, 6130
Baltimore Avenue, Riverdale, Maryland 20737, an FDA-commissioned inspector
observed that a person younger than 18 years of age was able to purchase a
package of Newport Menthol Gold Box cigarettes;

e Ina warning letter dated April 10, 2014, CTP informed Respondent of the
inspector’s January 17, 2014 observation, and that such action violates federal law,
21 C.F.R. § 1140.14(a). The letter further warned that Respondent’s failure to
correct the violation could result in a civil money penalty or other regulatory
action;

e At approximately 1:15 p.m. on June 17, 2014, at Respondent’s business
establishment, 6130 Baltimore Avenue, Riverdale, Maryland 20737,
FDA-commissioned inspectors observed that a person younger than 18 years of
age was able to purchase a package of Newport Box cigarettes.

These facts establish Respondent Rite Aid 4983’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). The
regulations prohibit the sale of cigarettes to any person younger than 18 years of age.
21 C.F.R. § 1140.14(a).

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
Rite Aid of Maryland, Inc. d/b/a Rite Aid 4983. 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,
(FDA No. FDA-2014-H-2130)

Complainant,
v.

Stop N Go II, Inc. / Kashmir Gill
d/b/a Stop N Go II / Mobil Mart,

Respondent.
Docket No. C-15-603
Decision No. CR3634

Date: February 9, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Stop N Go II, Inc. / Kashmir Gill d/b/a Stop N Go II / Mobil
Mart, at 2512 Steffens Court, Green Bay, Wisconsin 54311, and by filing a copy of the
complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The complaint alleges that Stop N Go II / Mobil Mart unlawfully utilized a
self-service display of smokeless tobacco in a non-exempt facility, and impermissibly
sold cigarettes to a minor, 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 to impose a $250 civil money
penalty against Stop N Go II / Mobil Mart.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on December 10, 2014, CTP served the
complaint on Respondent Stop N Go II / Mobil Mart by United Parcel Service. In the
complaint and accompanying cover letter, CTP explained that, within 30 days,
Respondent should pay the penalty, file an answer, or request an extension of time in
which to file an answer. CTP warned Respondent that, if it failed to take one of these
actions within 30 days, the Administrative Law Judge could, pursuant to 21 C.F.R.

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

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

¢ On April 30, 2013, at an unspecified time, at Respondent’s business establishment,
2512 Steffens Court, Green Bay, Wisconsin 54311, a FDA-commissioned
inspector observed “customer-accessible shelves containing a variety of cigarette
and smokeless tobacco in the establishment.” The inspector also observed that the
establishment is open to the general public during normal business hours;

e Ina warning letter dated May 23, 2013, CTP informed Respondent of the
inspector’s April 30, 2013 observations, and that such actions violate federal law,
21 C.F.R. § 1140.16(c). The letter further warned that Respondent’s failure to
correct the violation could result in a civil money penalty or other regulatory
action;

e At approximately 1:11 p.m. on April 15, 2014, at Respondent’s business
establishment, 2512 Steffens Court, Green Bay, Wisconsin 54311,
FDA-commissioned inspectors observed that a person younger than 18 years of
age was able to purchase a package of Camel Crush Regular Fresh cigarettes.

These facts establish Respondent Stop N Go II / Mobil Mart’s liability under the Act.
The Act prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco
product is misbranded if sold or distributed in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R.
§ 1140.1(b). The Secretary 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 require a retailer to sell tobacco products only in a direct, face-to-face
exchange. 21 C.F.R. § 1140.16(c). The regulations also prohibit the sale of cigarettes to
any person younger than 18 years of age. 21 C.F.R. § 1140.14(a).

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
Stop N Go I, Inc. / Kashmir Gill d/b/a Stop N Go II / Mobil Mart. Pursuant to 21 C.F.R.
§ 17.11(b), this order becomes final and binding upon both parties after 30 days of the
date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Georgina A. Molina, a/k/a Julia Ann Marie Mejia
(OI File No. H-14-40951-9),

Petitioner,
v.
The Inspector General.
Docket No. C-14-1671
Decision No. CR3632

Date: February 6, 2015

DECISION

Petitioner, Georgina A. Molina, a/k/a Julia Ann Marie Mejia, was a licensed practical
nurse, employed by an Arizona nursing home.' She has a significant history of felony
convictions. In 2005, the Arizona State Board of Nursing learned of her felonious past
and revoked her nursing license. Because her license was revoked for reasons bearing on
her professional competence, performance, or financial integrity, the Inspector General
(1.G.) subsequently excluded her from participation in Medicare, Medicaid, and all other
federal health care programs pursuant to section 1128(b)(4) of the Social Security Act
(Act). That exclusion became effective on June 8, 2009, and continues.

In 2014, the L.G. learned that, in 2011, Petitioner Molina had been convicted of yet
another felony. While working as a “caregiver,” she was convicted of fraud in
connection with access devices. Based on this conviction and her earlier exclusion, the
1.G. has now excluded her from program participation for 20 years, pursuant to section
1128(a)(3) of the Act, concurrent with her section 1128(b)(4) exclusion. Petitioner

' Petitioner Molina has used the names: Georgina Ann Molina, Georgina Ann Mullins,
and Julia Ann Marie Mejia. See LG. Ex. 12.
concedes that she must be excluded for ten years, but challenges the length of the
exclusion beyond that.

I find that the I.G. properly excluded Petitioner Molina and that the 20-year exclusion
falls within a reasonable range.

Background

In November 2004, the Pima County Superior Court charged Petitioner Molina with
felony forgery and felony theft because she stole and misused her colleague’s wallet,
credit card, and checkbook. LG. Ex. 20 at 2, 49/5, 6, 7. When the Arizona State Board of
Nursing learned of the charges, it launched an investigation and discovered that Petitioner
Molina had at least three previous felony convictions:

¢ On December 30, 2003, she was convicted in Maricopa County Superior Court of
felony theft. She had stolen a credit card. The court sentenced her to one-year
supervised probation and 50 hours of community service, and ordered her to pay
$308.54 in restitution.

¢ On the same day, the court convicted her of felony attempted theft of a credit
card/obtaining a credit card by fraud. She had taken a second individual’s credit
card. The court sentenced her to one-year probation, concurrent with her other
sentence.

e¢ On March 11, 2004, the court convicted her of felony forgery because she had
purchased a $900 gift card using a check written on someone else’s account. *

1G. Ex. 20 at 3, J 8; see LG. Exs. 14, 15.

Based on these convictions, the Nursing Board issued an order, dated November 16,
2005, revoking Petitioner Molina’s nursing license for a minimum period of five years.
LG. Ex. 20 at 4-5.

By letter dated May 29, 2009, the I.G. advised Petitioner Molina that, because the
Arizona State Board of Nursing revoked her license to provide health care as a practical
nurse for reasons bearing on her professional competence, performance, or financial
integrity, she was excluded from program participation. The letter explained that section
1128(b)(4) of the Act authorized the exclusion and that she would not be eligible for
reinstatement until she regained her license. I.G. Ex. 11 at 1.

> In these cases, Petitioner Molina was convicted under the name, Georgina Ann
Mullins.
This case stems from a later conviction. In June 2011, Petitioner Molina pled guilty to
felony fraud in connection with access devices. I.G. Ex. 3. By letter dated July 31, 2014,
the I.G. notified Petitioner Molina that, pursuant to section 1128(a)(3) of the Act, she was
excluded from program participation for a period of 20 years because she had been
convicted of a criminal offense related to fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct in connection with the delivery of a health
care item or service. I.G. Ex. 1. Petitioner now appeals.

The L.G. submitted a written brief (I.G. Br.) and Petitioner submitted a letter in response
(P. Ltr.). With its brief, the I.G. submitted 20 exhibits (I.G. Exs. 1-20). Petitioner
submitted three exhibits (P. Exs. 1-3). The I.G. filed a reply. In the absence of any
objections, I admit into evidence I.G. Exs. 1-20 and P. Exs. 1-3.

I directed the parties to indicate in their briefs whether an in-person hearing would be
necessary, and, if so, to “describe the testimony it wishes to present, the names of the
witnesses it would call, and a summary of each witnesses’ proposed testimony.” I
specifically directed the parties to explain why the testimony would be relevant. Order
and Schedule at 2, 2, Attachment | (Informal Brief of Petitioner § III), Attachment 2
(Informal Brief of I.G. § IIL) (September 17, 2014). The LG. indicates that an in-person
hearing is not necessary. Although Petitioner does not directly respond to the question,
she does not contend that an in-person hearing is necessary and lists no potential
witnesses. I therefore conclude that an in-person hearing is not required.

Issue

Petitioner concedes that the I.G. has a basis for excluding her under section 1128(a)(3)
and that she is subject to a minimum exclusion of ten years. The sole issue before me is
whether the length of the exclusion beyond the ten-year mandatory minimum is
reasonable.

Discussion

Section 1128(a)(3) of the Act mandates that an individual or entity convicted of felony
fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial
misconduct in connection with the delivery of a health care item or service be excluded
from participation in federal health care programs. See also 42 C.F.R. § 1001.101(c).

From June through May 2010, Petitioner — who then called herself Julia Ann Marie Mejia
— was employed as a caregiver for a man who was terminally ill. Her job gave her access
to his credit card, so that she could make purchases for him. Without his knowledge or
consent, she used the card to buy herself more than $1,000 worth of merchandise. I.G.
Ex. 3 at 6. She was charged in federal district court with fraud in connection with access
devices, in violation of 18 U.S.C. § 1029(a)(2). I.G. Ex. 2. In June 2011, she pled guilty.
1.G. Ex. 3. In December 2011, the court accepted her plea agreement and entered
judgment against her. The court sentenced her to 23 months in prison, followed by three
years of supervised release, and ordered her to pay $27,497.32 in restitution plus a $100
special assessment. I.G. Ex. 4 at 6; I.G. Ex. 5 at 1. Based on this conviction, the I.G. has
excluded her from program participation.

Based on the aggravating factors and the absence of any
mitigating factors, the 20-year exclusion falls within a
reasonable range.’

Individuals excluded under section 1128(a)(3) generally must be excluded for at least five
years. Act § 1128(c)(3)(B); 42 C.F.R. § 1001.102(a). However, if the individual has
previously been convicted of an offense for which an exclusion could be imposed, she
must be excluded for at least ten years. Act § 1128(c)(3)(G)(i); 42 C.F.R.

§ 1001.102(d)(1).4

The regulations set forth criteria for lengthening exclusions beyond the ten-year
minimum. 42 C.F.R. § 1001.102(b), 1001.102(d)(1). Evidence that does not pertain to
one of the aggravating or mitigating factors listed in the regulations may not be used to
decide whether an exclusion of a particular length is reasonable.

Among the factors that may serve as bases for lengthening the period of exclusion are the
four that the L.G. cites to justify the period of exclusion in this case: 1) the acts resulting
in the conviction, or similar acts, had a significant adverse physical, mental, or financial
impact on one or more individuals; 2) the sentence imposed by the court included
incarceration; 3) the convicted individual has a prior criminal, civil, or administrative
sanction record; and 4) the individual has previously been convicted of a criminal offense
involving the same or similar circumstances. 42 C.F.R. § 1001.102(b)(3), (5), (6), (8).
The presence of an aggravating factor or factors not offset by any mitigating factor or
factors justifies lengthening the mandatory period of exclusion.

Adverse impact. Petitioner was the caregiver for a man with a terminal illness. She
betrayed his trust and misused his credit card, incurring significant unauthorized
expenses. The court ordered her to pay $27,497.32 in restitution. Although the
restitution order was directed primarily to the bank, the credit card company, and other
entities, the principal victim here was an individual, who had apparently been

> | make this one finding of fact/conclusion of law.

4 If, on two or more previous occasions, the individual has been convicted of an offense
for which she could be excluded, the exclusion must be permanent. Act
§ 1128(c)(3)(G)(ii); 42 C.F.R. § 1001.102(d)(2) (emphasis added).
indemnified by these institutions. I.G. Ex. 3 at 6 (referring to the individual as “the
victim”); I.G. Ex. 6 at 1. Iam therefore satisfied that Petitioner’s crimes had a significant
adverse impact on individuals, as anyone who has been the victim of such theft would
understand. *

Moreover, the record is replete with examples of “similar acts” that had an adverse
impact, including financial impact, on individuals: as noted above, in June 2003, she
stole and used credit cards from two individuals; in March 2004, she forged a check on
an individual’s account and bought herself a $900 gift card. I.G. Ex. 20 at 3. In
November 2004, she stole a co-worker’s wallet, credit cards, and checkbook, writing

8 checks on that account, for a total of $761.86. I.G. Ex. 20. See discussion below of
previous criminal convictions.

Incarceration. Petitioner was sentenced to 23 months incarceration for her crime. Any
period of incarceration justifies increasing the period of exclusion. See Jeremy Robinson,
DAB No. 1905 at 12 (2004) (characterizing a nine-month incarceration as “relatively
substantial.”); Stacy Ann Battle, DDS, DAB No. 1843 (2002) (finding that four months in
a halfway house, followed by four months home confinement justifies lengthening the
period of exclusion).

Prior criminal, civil, or administrative sanction record. As discussed above, Petitioner’s
nursing license was revoked in 2005 and she was excluded from program participation in
2009. As discussed below, she also has an impressive record of criminal convictions
involving the same or similar circumstances.

Previous criminal convictions. The record includes a dizzying and confusing list of the
Petitioner’s felony convictions. She has been a brazen thief, stealing from her vulnerable
patient, her colleagues, and others. Repeated convictions, loss of her nursing license,
even incarceration, have not deterred her from continuing her criminal behavior. More
than any other factor, Petitioner’s criminal record establishes that she poses a significant
threat to program beneficiaries and program integrity.

Among her convictions:
¢ Two 2003 felony convictions for theft and attempted theft of a credit card/
obtaining a credit card by fraudulent means (discussed above). I.G. Exs. 14, 15,

20;

e A 2004 felony conviction for forgery (also discussed above). I.G. Ex. 20;

5 That the criminal acts caused losses of $5,000 or more to one or more entities is also
considered an aggravating factor. 42 C.F.R. § 1001.102(b)(1).
e She was convicted of felony theft in 2004 (under the name Georgina Ann Mullins)
and placed on probation for six months, although the record here does not include
the particulars of that conviction. I.G. Exs. 16, 17 (indicating Case # CR2004-
37218-001);

e In 2007, under the name Julia Ann Marie Mejia aka Georgina Ann Molina, Gina
Molina, Georgina Ann Mullins, she was charged with bank fraud and identity theft
and pled guilty to bank fraud. LG. Exs. 6, 8. Using someone else’s credit card,
obtained through fraud, she withdrew funds from an ATM. LG. Ex. 8 at 6. The
court sentenced her to fifteen months in prison followed by three years of
supervised release, and ordered her to pay $9,449.97 in restitution plus a $100
special assessment. I.G. Ex. 10 at 1;

e In October 2010, under the name Julia Ann Marie Mejia, she was convicted of
attempted theft of a credit card. LG. Ex. 18.

Petitioner complains that some of these convictions should not count because they were
reduced to misdemeanors and eventually dismissed. 1.G. Ex. 19 at 1. It appears that,
when she was discharged from probation for the 2003 felonies, the court reduced the
offenses to misdemeanors. I.G. Ex. 19 at 4, 5.° Another order, dated January 31, 2005,
discharged her from probation and reduced to a misdemeanor her 2004 conviction for
felony theft (Case # CR2004-37218-001). IG. Ex. 19 at 6. In an order dated November
13, 2013, the court expunged this theft conviction. 1.G. Ex. 19 at 7. Thus, according to
the documents before me, of her seven felony convictions (including the one that forms
the basis for this exclusion), two have been reduced to misdemeanors and one has been
expunged. Of course, that still leaves her with a significant criminal record of four
felonies and two misdemeanors.

In any event, for exclusion purposes, these later court actions are irrelevant. The
regulations provide that “convicted” means that a judgment of conviction has been
entered regardless of whether the judgment was ultimately expunged or otherwise
removed. 42 C.F.R. § 1001.2; see Henry L. Gupton, DAB No. 2058 at 7-8 (2007), aff'd
sub nom. Gupton v. Leavitt, 575 F. Supp. 2d 874 (E.D. Tenn. 2008) (explaining that, for
exclusion purposes, Congress deliberately defined “conviction” broadly to ensure that
exclusions would not hinge on state criminal justice practices).

Without regard to the other aggravating factors in this case, Petitioner’s criminal record
justifies an exclusion of at least 20 years.

® One of the court orders (relating to her conviction on the attempted theft of a credit
card/obtaining a credit card by fraud) is confusing because it indicates a probation start
date of October 30, 2003, which is before the date she was convicted or sentenced. I.G.
Ex. 19 at 4.
No mitigating factors. The regulations consider mitigating just three factors: 1) a
petitioner was convicted of three or fewer misdemeanor offenses and the resulting
financial loss to the program was less than $1,500; 2) the record in the criminal
proceedings demonstrates that a petitioner had a mental, physical, or emotional condition
that reduced her culpability; and 3) a petitioner’s cooperation with federal or state
officials resulted in others being convicted or excluded, or additional cases being
investigated, or a civil money penalty being imposed. 42 C.F.R. § 1001.102(c).

Obviously, because Petitioner’s felony conviction involved financial losses greater than
$5,000, the first factor does not apply here. Nor does Petitioner claim to have cooperated
with law enforcement.

Petitioner cites “mandatory counseling for severe depression” as a mitigating factor.

P. Ltr. at 2. It seems that, as a condition of her supervised release, the sentencing court
ordered her to participate in a mental health program as directed by her probation officer.
P. Ex. 2; 1.G. Ex. 5 at 3. According to a written statement from her counselling service,
she has been receiving individual monthly counselling since September 2013. I.G. Ex.
19 at 2. But nothing in her criminal record suggests that Petitioner’s mental, physical, or
emotional condition reduced her culpability.

Petitioner also claims that her 2011 conviction was “taken out of context.” She alleges
that her patient was not terminally ill, that she and he “were in a close relationship,” and
that she was in the process of moving into his home until his estranged wife intervened.
P. Ltr. at 1. She submits a disturbing note, dated December 9, 2009, from the victim,
asking her to move in and telling her that “however long I’m granted to live, I’d like to
spend with you.” P. Ex. 3. If anything, this evidence seems to bolster the notion that she
took advantage of a vulnerable patient who trusted her. In any event, her criminal
conviction precludes her from arguing that her conduct was anything but criminal. The
relevant facts were adjudicated during the criminal proceedings and are not reviewable
here. 42 C.F.R. § 1001.2007(d); Joanne Fletcher Cash, DAB No. 1725 (2000); Chander
Kachoria, R.Ph., DAB No. 1380 at 8 (1993) (citing Olufemi Okonuren, M.D., DAB No.
1319 (1992) (“There is no reason to ‘unnecessarily encumber the exclusion process’ with
efforts to reexamine the fairness of state convictions.”).

So long as the period of exclusion is within a reasonable range, based on demonstrated
criteria, I have no authority to change it. Jeremy Robinson, DAB No. 1905 at 5; Joann
Fletcher Cash, DAB No. 1725 at 7, citing 57 Fed. Reg. 3298, 3321 (1992). Here,
Petitioner has persistently engaged in felonious conduct. She lost her nursing license and
served two significant prison sentences. Yet, she refuses to admit responsibility for her
actions, claiming, “I have been in the medical field since 1997 without ANY misconduct
of any sort.” (emphasis in original). P. Ltr. at 1. She presents as grave a risk to the
integrity of health care programs and to program beneficiaries as anyone I have
encountered. I therefore sustain the 20-year exclusion.

Conclusion

The I.G. properly excluded Petitioner from participation in Medicare, Medicaid, and all
federal health care programs, and I sustain as reasonable the 20-year period of exclusion.

/s/
Carolyn Cozad Hughes
Administrative Law Judge