Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Freedom Pain Hospital
(CCN: 03-0135),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-15-2279
Decision No. CR4530
Date: February 10, 2016
DECISION

The Centers for Medicare & Medicaid Services (CMS) terminated the Medicare provider
agreement of Freedom Pain Hospital (Petitioner) effective April 30, 2015, after CMS
determined Petitioner did not meet the requirements to participate in the Medicare
program as a hospital. CMS relied on a validation survey by the Arizona Department of
Health Services (state agency) that ended January 15, 2015, which found Petitioner did
not have any inpatients during the survey, and that over a one-year period ending January
3, 2015, only approximately 2% of Petitioner’s overall patients were inpatients. CMS
concluded that Petitioner no longer met the statutory definition of a hospital because it
was not “primarily engaged” in the treatment of inpatients. Petitioner requested a hearing
before an administrative law judge to challenge the termination of its provider agreement.
The parties have now crossed-moved for summary judgment.

I find that the undisputed material facts, when considering all inferences drawn in favor
of Petitioner, demonstrate that Petitioner was not “primarily engaged” in the treatment of
inpatients and therefore did not comply with the definition of a “hospital.” See 42 U.S.C.
§ 1395x(e)(1). As a result, Petitioner did not meet all of the requirements necessary to
participate in the Medicare program as a hospital. Accordingly, I grant summary
judgment in favor of CMS affirming the termination of Petitioner’s Medicare provider
agreement.

I. Statutory and Regulatory Background

Title XVIII of the Social Security Act (Act) establishes the health insurance program for
the aged and disabled, known as the Medicare program. Part A of the Medicare program
covers certain expenses that beneficiaries may incur for services provided by hospitals,
home health agencies, and hospices, among other facilities. See 42 U.S.C. § 1395c.
Payment for services furnished to a beneficiary will only be made to a provider of
services that has a provider agreement with the Medicare program. Jd. §§ 1395f(a),
1395cc. The Secretary of Health and Human Services (Secretary) has defined a
“provider agreement” as an “agreement between CMS and one of the providers specified
in § 489.2(b) [of title 42 of the Code of Federal Regulations] to provide services to
Medicare beneficiaries and to comply with the requirements in [42 U.S.C. § 1395cc].”
42 CFR. § 489.3.

The Act defines the types of services that Part A covers as well as the requirements each
provider type must meet in order to participate in Medicare and receive payment for
covered services furnished to beneficiaries. 42 U.S.C. § 1395x; 42 C.F.R. § 489.1(a)(1).
A “hospital” must meet nine specific statutory requirements. 42 U.S.C. § 1395x(e)(1)-
(9). Relevant here, a “hospital” is an institution that “is primarily engaged in providing

. .. to inpatients (A) diagnostic services and therapeutic services for medical diagnosis,
treatment, and care of injured, disabled, or sick persons, or (B) rehabilitation services for
the rehabilitation of injured, disabled, or sick persons.” Jd. § 1395x(e)(1) (emphases
added).

In addition, the Act authorizes the Secretary to implement by regulation additional
Medicare enrollment requirements for each type of provider as well as the general
enrollment process for providers. 42 U.S.C. § 1395ce(j); see also id. § 1395x(e)(9). The
Secretary has established conditions of participation (CoPs) for hospitals in 42 C.F.R.
part 482. A hospital, like any provider, must meet all applicable CoPs to participate in
the Medicare program. 42 C.F.R. § 488.3(a). The Secretary permits certain national
accreditation programs to accredit hospitals, and if a hospital is accredited under such a
program, then CMS may deem that hospital as meeting all CoPs. Jd. §§ 488.5(a), 488.6.
CMS may also require a validation survey to ensure that the hospital continues to meet all
CoPs. Id. § 488.7. A state survey agency performs the validation survey on behalf of
CMS, and CMS may then use the results of that survey to determine whether the hospital
meets or continues to meet all CoPs. Id. §§ 488.7(a), 488.5(c).

The Act provides circumstances where the Secretary may refuse to enter into a provider
agreement or may terminate an existing provider agreement. Jd. § 1395cc(b)(2). The
Secretary may terminate a provider agreement if, among other reasons, the Secretary “has
determined that the provider fails substantially to meet the applicable provisions of

[42 U.S.C. § 1395x],” which sets forth the statutory requirements for each provider type.
Id. § 1395cc(b)(2)(B). In addition, the Secretary may terminate a provider agreement if
the provider does not meet applicable regulatory requirements specific to its provider
type or the provisions of its provider agreement. 42 C.F.R. § 489.53(a)(1). A provider
whose Medicare provider agreement has been terminated may request a hearing before an
administrative law judge to challenge that termination. 42 C.F.R. § 489.53(e).

II. Case Background and Procedural History

The following facts are undisputed unless otherwise noted. Petitioner is located in
Arizona and has described itself in these proceedings as a “one of a kind specialty
hospital for pain.” Petitioner Brief (P. Br.) at 12. In early 2014, Noridian Healthcare
Solutions (Noridian), a CMS administrative contractor, received an application from
Petitioner to enroll in the Medicare program as a hospital. See CMS Exhibit (Ex.) 5 at 1.
Noridian then forwarded Petitioner’s enrollment application to the state agency and
notified Petitioner that the next step in its process to enroll as a hospital would be a
survey or site visit from the state agency or “a CMS approved deemed accrediting
organization to ensure compliance with the required Conditions of Participation.” CMS
Ex. 5 at 1. Soon after, Det Norske Veritas Healthcare, Inc. (DNV Healthcare), an
approved accrediting organization, determined that Petitioner was in compliance with all
CoPs for a hospital in 42 C.F.R. part 482, and accredited Petitioner for three years. CMS
Ex. 7.

The CMS Western Division of Survey and Certification later notified Petitioner that CMS
accepted Petitioner’s Medicare provider agreement effective retroactively to the day
DNV Healthcare accredited Petitioner. CMS Ex. 8 at 1. CMS clarified that the
agreement was “restricted,” and was only issued pending final approval from the U.S.
Department of Health and Human Services’ Office for Civil Rights (OCR). If OCR did
not grant approval to Petitioner, then CMS would recoup any Medicare payments made
for services provided after the provider agreement took effect. CMS Ex. 8 at 1. Several
months later, OCR advised Petitioner that it was in compliance with the necessary
regulations and had “civil rights clearance” to participate in the Medicare program. CMS
Ex. 9. On the same day as OCR’s letter advising Petitioner of its civil rights compliance,
the state agency began its survey of Petitioner’s facility, which would soon lead to the
termination of Petitioner’s Medicare provider agreement.

The state agency conducted a four-day validation survey from January 12, 2015 through
January 15, 2015. CMS Ex. 1. Surveyors determined that Petitioner did not treat any
inpatients for the duration of the survey, which Petitioner’s Chief Nursing Officer and
Patient Access Coordinator confirmed. CMS Ex. 1 at 1. Surveyors also found that for
the 12 months from January 1, 2014, through January 3, 2015, only 2% of Petitioner’s
overall patients were inpatients. CMS Ex. | at 1. Finally, surveyors found that Petitioner
discharged its last inpatient on January 4, 2015, and did not have any other inpatients
“scheduled for the remainder of January 2015.” CMS Ex. 1 at 2. Based on these
findings, the surveyors concluded that Petitioner “does not primarily provide inpatient
services.” CMS Ex. | at 2.

Soon after, CMS advised Petitioner, based on the findings from the state agency’s survey,
Petitioner was not in compliance with the CoPs for a hospital in the Medicare program,
and its Medicare provider agreement would be terminated effective April 30, 2015. CMS
Ex. 10 at 1. CMS concluded that Petitioner did not meet the definition of a “hospital” in
42 U.S.C. § 1395x(e) because it was “not primarily engaged in providing care to
inpatients.” CMS Ex. 10 at 2.

Petitioner subsequently requested a hearing before an administrative law judge. The case
was assigned to me to decide, and on May 7, 2015, I issued an Acknowledgment and
Prehearing Order (Prehearing Order) to establish procedures for record development. In
my Prehearing Order, I permitted the parties to file for summary judgment, if appropriate.
See Prehearing Order § 4; see also Civil Remedies Division Procedures (CRDP) § 19(a).
CMS timely filed a motion for summary judgment with a supporting brief (CMS Br.)
with 13 supporting exhibits (CMS Exs. 1-13) including the written direct testimony of the
state agency’s surveyor. See CMS Ex. 11; CRDP §§ 16(b), 19(b). Soon after, Petitioner
filed a motion for the issuance of a subpoena, which CMS opposed. On July 16, 2015,
Petitioner timely filed an opposition to CMS’s motion for summary judgment and a
cross-motion for summary judgment with a supporting brief (P. Br.) and nine supporting
exhibits (P. Exs. 1-9') including the written direct testimony of Petitioner’s Chief
Executive Officer. See P. Ex. 4. On August 17, 2015, CMS filed a response (CMS
Resp.) in opposition to Petitioner’s cross-motion for summary judgment as well as notice
of its intention to cross-examine Petitioner’s witness if the case went to hearing. Four
days later, on August 21, 2015, Petitioner moved to strike CMS’s notice of intent to
cross-examine Petitioner’s witness, arguing that CMS had untimely filed that notice.

I need not resolve whether CMS’s August 17 notice preserved its right to cross-examine
Petitioner’s witness because I decide this case on summary judgment in favor of CMS,
without the need for an in-person hearing. See CRDP § 19(a).

III. Issues
This case presents the following issues:

1. Whether summary judgment is appropriate; and

' Petitioner labeled its exhibits as “FPH Ex.” However, to be consistent with other
decisions in the Civil Remedies Division as well as the CRDP, I will refer to Petitioner’s
exhibits as “P. Ex.” See CRDP § 14(c)(ii).
2. Whether CMS was authorized to terminate Petitioner’s Medicare provider
agreement because it did not continue to meet the statutory requirements of a
hospital.

IV. Ruling on Pending Subpoena Request

On June 30, 2015, Petitioner filed a motion (P. Motion) pursuant to 42 C.F.R. § 498.58
requesting the issuance of a subpoena that would require CMS to produce documents.
Petitioner seeks the following documents:

(1) A list of all hospitals terminated from the Medicare program based on low
inpatient volumes, along with records sufficient to show inpatient and
outpatient volumes at each such hospital during the year prior to termination.

(2) A list of all hospitals terminated from the Medicare program because of the
time in between inpatient admissions and discharges at each such hospital
during the year prior to termination.

(3) A list of all cases in which CMS has compared inpatient and outpatient
hospital census numbers for the purposes of evaluating the hospital’s initial
or continued participating in the Medicare program, along with records
sufficient to show the inpatient and outpatient census numbers evaluated at
each such hospital and the outcome of each case.

(4) A list of hospitals that have been evaluated for termination from the
Medicare program within one year of their Medicare certification, together
with records sufficient to show the reason for their termination or non-
termination from the program.

(5) A list of all pain management hospitals that CMS has evaluated for
termination from the Medicare program, together with records sufficient to
show the reason for their termination or non-termination from the program.

P. Motion at 2. Petitioner claims that the requested documents are directly relevant to
CMS’s basis for terminating Petitioner’s Medicare provider agreement and to Petitioner’s
claim that CMS’s decision to terminate Petitioner was arbitrary, capricious, and
unprecedented. P. Motion at 3. Petitioner states that the requested documents may be
available through a public records request, however, “government response times to
FOIA [Freedom of Information Act] requests often exceed two months and there is no
guarantee that the documents can be obtained through the FOIA process within the time
needed to prepare for the hearing in this matter.” P. Motion at 3. On July 13, 2015, CMS
filed its objections to the motion.
I may issue a subpoena for the production of documents or testimony at the request of a
party, or sua sponte, but only if I conclude that a subpoena is “reasonably necessary for
the full presentation of a case.” 42 C.F.R. § 498.58(a). I must determine in this case
whether the termination of Petitioner’s provider agreement was proper based upon the
unique circumstances of Petitioner’s facility, not by comparing the actions CMS took or
did not take for other hospitals. The requested documents, assuming they exist, would
not be necessary to Petitioner’s presentation of its case. Petitioner has obtained the
relevant documents on which CMS based its decision to terminate Petitioner in CMS’s
prehearing exchange; that basis did not rely on the actions CMS took against other
hospitals or by comparing Petitioner’s performance to that of other hospitals. Moreover,
Petitioner is not entitled to an administrative hearing on whether CMS’s actions were
arbitrary and capricious. See NMS Healthcare of Hagerstown, DAB No. 2603, at 5-6
(2014). Therefore, I deny Petitioner’s subpoena request.

V. Findings of Fact and Conclusions of Law
I. Summary judgment is appropriate.

Summary judgment is appropriate if there are “no genuine issues as to any material fact,
and the moving party is entitled to judgment as a matter of law.” Mission Hosp. Reg’!
Med. Ctr., DAB No. 2459, at 5 (2012) (citations omitted); see also Crestview Parke Care
Ctr. v. Thompson, 373 F.3d 743, 749-50 (6th Cir. 2004) (recognizing summary judgment
procedures in cases governed by 42 C.F.R. part 498 as a valid interpretive rule). The
moving party must show that there is no genuine dispute of material fact requiring an
evidentiary hearing and that it is entitled to judgment as a matter of law. 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 Corp., 475 U.S. 574, 587 (1986). “To defeat an adequately
supported summary judgment motion, the non-moving party may not rely on the denials
in its pleadings or briefs, but must furnish evidence of a dispute concerning a material
fact — a fact that, if proven, would affect the outcome of the case under governing law.”
Senior Rehab. & Skilled Nursing Ctr., DAB No. 2300, at 3 (2010). A party “must do
more than show that there is ‘some metaphysical doubt as to the material facts... .
Where the record taken as a whole could not lead a rational trier of fact to find for the
nonmoving party, there is no genuine issue for trial.’”” Mission Hosp., DAB No. 2459,

at 5 (quoting Matsushita, 475 U.S. at 586).

In examining the evidence to determine the appropriateness of summary judgment, I must
draw all reasonable inferences in the light most favorable to the non-moving party. See
Brightview Care Ctr., DAB No. 2132, at 2, 9 (2007); but see Cedar Lake, DAB No.
2344, at 7 (2010) (upholding summary judgment where inferences and views of non-
moving party were not reasonable). However, drawing factual inferences in the light
most favorable to the non-moving party does not require that I accept the non-moving
party’s legal conclusions. Cedar Lake, DAB No. 2344, at 7.

The parties dispute the total number of inpatients and outpatients that Petitioner treated
during 2014, but as I discuss below, those disputes are not material to the outcome of the
case and do not preclude summary judgment. The parties also dispute the amount of time
that lapsed between the discharge of one inpatient and the admission of another inpatient.
See CMS Br. at 2-3; P. Br. at 10. In the absence of other undisputed evidence, this
factual dispute may indeed be material to preclude summary judgment. The length of
time between inpatient admissions has been used in prior decisions to help determine
whether a facility was “primarily engaged” in treating inpatients. See, e.g., Ariz. Surgical
Hosp., DAB No. 1890, at 6 (2003). However, I need not resolve that factual dispute to
decide this case on summary judgment because the record contains other undisputed facts
related to Petitioner’s treatment of inpatients that allow me to conclude whether
Petitioner was “primarily engaged” in such treatment.

CMS asserts that Petitioner’s facility was only open and staffed for 12 hours a day, from
7:00 a.m. to 7:00 p.m., instead of 24 hours a day as required.” CMS Br. at 2, 6 (citing
42 U.S.C. § 1395x(e)(5)). Petitioner’s witness testified that Petitioner used military time
when listing its hours, so “07 to 07,” as it is written in the state license renewal
application, actually meant 24 hours a day, or 7:00 a.m. to 7:00 a.m. the following day.
P. Ex.4 96. For purposes of summary judgment I will infer that Petitioner was open 24
hours daily. My decision in favor of CMS is based only on the undisputed evidence
before me and the reasonable inferences I have drawn in favor of Petitioner.

a. It is undisputed that between January 1, 2014, and January 3, 2015,
less than 3% of patients that Petitioner treated were inpatients.

The state agency found that for a period of just over 12 months, between January 1, 2014,
and January 3, 2015, Petitioner had a total of 2,188 patients, only 45 of which, or 2.05%
overall, were inpatients. CMS Ex. | at 1. CMS bases those figures on two documents
that Petitioner’s Chief Nursing Officer provided to surveyors and that CMS has offered in

> Neither the surveyor nor CMS in its initial determination considered Petitioner’s hours
of operation as a basis for terminating its Medicare provider agreement. See CMS Ex. |
at 2; CMS Ex. 10 at 2. Accordingly, this is a new issue that CMS has raised in this
forum, although there was no clear notice that CMS was adding a new factual basis for
the underlying determination. 42 C.F.R. § 498.56(a). While I do not resolve this issue
because I am affirming the original basis for terminating Petitioner’s provider agreement,
I note that Petitioner has had a full opportunity to address — and, in fact, adequately
addressed — this new issue in its opposition to CMS’s motion for summary judgment.
See P. Br. at 10; P. Ex. 4.4 4.
support of its motion for summary judgment. The first document is a roster of all patients
during the relevant time period and includes a brief description of the services Petitioner
provided to a specific patient and what appears to be the Current Procedural Terminology
(CPT) code used for those services. See CMS Ex. 3. The second document is a chart
titled “Inpatient and Observation Tracker 2014-2015.” CMS Ex. 4. It includes the
patient’s admission date and time, discharge date and time, demographic information, the
type of inpatient service provided (for example, “In-Patient” or “Surgery-Spine”), and the
patient’s general diagnosis. See CMS Ex. 4. There are a total of 54 patients listed on this
chart. However, there is a handwritten notation at the top of the chart that says
“highlighted = inpatient,” and there are 45 patients that are highlighted on the chart.

CMS Ex. 4 at 1.

Petitioner generally disputes the accuracy of the charts originally provided to surveyors
and offers slightly different figures than those in CMS’s exhibits. One chart that
Petitioner offered with its cross-motion for summary judgment provides columns labeled
“Line Item,” which consists of consecutive numbers to track the total number of entries,
“DOS,” which includes dates, and “IP/OP,” which says “OP” for every line entry. See

P. Ex. 7. Under the circumstances “DOS” reasonably means “Date of Service,” and
“TP/OP” means “Inpatient/Outpatient.” I will draw the inference in favor of Petitioner
that the data presented in the chart lists a total number of outpatients that Petitioner
treated between January 1, 2014 and December 31, 2014.° A second spreadsheet appears
to be an annual billing summary, and includes, among other data, columns labeled “Total
Patient Days” and “Total Patient Discharges.” P. Ex. 6. Petitioner represents, and I
accept for summary judgment, that the values in these fields are the total number of
inpatients that Petitioner treated throughout all of 2014. According to Petitioner’s
figures, for the same 12 month period that surveyors referenced, it had 1,884 outpatients
(P. Ex. 7) and 56 inpatients (P. Ex. 6), for a total of 1,940 patients. Based on these
numbers, a total of 2.88% of the patients that Petitioner treated in 2014 were inpatients.

The parties genuinely dispute the exact number of total inpatients and overall patients
that Petitioner treated during 2014. However, I find that the disputes the parties have
about the exact number of patients and the percentage of inpatients in this case are
inconsequential, and thus immaterial to preclude summary judgment. See Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect
the outcome of the suit under the governing law will properly preclude the entry of
summary judgment.”). The parties both agree that the chief legal question in this case

> Petitioner has offered no authentication of this chart. There is no information in the
record about who created the chart, what specific information it summarizes, or where
that information was obtained. See Fed. R. Evid. 901(a), 1006; CRDP § 15. However,
for the limited purpose of summary judgment and in order to draw all factual inferences
in favor of Petitioner, I will consider the chart as showing the total number of outpatients
that Petitioner treated during 2014.

turns on whether Petitioner was “primarily engaged” in treating inpatients. See CMS Br.
at 4; P. Br. at 2; see also CMS Ex. | at 2; CMS Ex. 10 at 2. The evidence from both
parties undisputedly shows that less than 3% of patients that Petitioner treated in 2014
were inpatients. That undisputed fact is enough to reach a legal conclusion in this case.
If, as I conclude below, the measure of being “primarily engaged” in treating inpatients
is, at least in part, the overall percentage of inpatients treated, then the difference between
2.05% and 2.88% is too insignificant to affect the ultimate outcome when I make the
inference in the light most favorable to Petitioner.

b. It is undisputed that Petitioner’s facility has 12 beds, all of which are
designated as “inpatient” beds.

The surveyors described Petitioner’s facility as “Medicare certified for twelve (12)
inpatient beds.” CMS Ex. | at 1; see also CMS Ex. 11 94. Petitioner has also offered
the sworn affidavit of Petitioner’s Chief Executive Officer, who confirms that the facility
has 12 inpatient beds and “no outpatient beds.” P. Ex. 494. Petitioner’s state license
also documents that the facility licensed for 12 “medical/surgical” beds, which supports
the CEO’s assertion that there are no designated outpatient beds. See P. Ex. 5 at 2. CMS
does not dispute the number of inpatient beds in Petitioner’s facility and in fact uses 12
beds as a multiplier in its calculation of Petitioner’s overall inpatient availability. See
CMS Resp. at 7. Therefore, I accept as undisputed that Petitioner has 12 beds, all of
which are designated as “inpatient” beds.

c. It is undisputed that between January 1, 2014, and January 3, 2015,
Petitioner utilized approximately 3% of available inpatient beds.

Petitioner offered evidence with its cross-motion for summary judgment that shows the
total number of “patient days” during 2014. P. Ex. 6. Petitioner uses the same document
as evidence of the total number of inpatients during 2014. P. Br. at 9. Based on
Petitioner’s use of this document in its argument, the only reasonable inference I can
draw is that a “patient day” refers to a day that a patient was admitted to Petitioner’s
facility as an inpatient. The total number of “patient days,” therefore, represents the total
number of days that patients were admitted to Petitioner’s facility as inpatients. During
2014, Petitioner had a total of 131 patient days. P. Ex. 6.

Each day, Petitioner’s facility has 12 available “patient days” because, as noted above,
Petitioner has 12 inpatient beds. See P. Ex. 494; CMS Ex. | at 1. Thus, for all of 2014,
Petitioner had 4,380 available patient days (12 inpatient beds for 365 days). Petitioner
had 131 patient days out of a total of 4,380 patient days available, meaning that Petitioner
used 2.99% of available patient days during 2014. See CMS Resp. at 7; P. Ex. 6. This
figure is undisputed.

10

d. It is undisputed that Petitioner did not have any inpatients during the
validation survey from January 12 through January 15, 2015.

Surveyors did not observe any inpatients in Petitioner’s facility during the four-day
survey from January 12 through January 15, 2015. CMS Ex. 1. Petitioner points out that
it had an inpatient in early January 2015 as well as an inpatient later in the month but
does not dispute that there were no inpatients in its facility at the time of the survey. See
P. Br. at 9.

2. Petitioner did not meet the statutory definition of a hospital because it was
not “primarily engaged” in providing treatment to inpatients.

The Act defines a “hospital” in part as an institution that “is primarily engaged in
providing . . . to inpatients (A) diagnostic services and therapeutic services for medical
diagnosis, treatment, and care of injured, disabled, or sick persons, or (B) rehabilitation
services for the rehabilitation of injured, disabled, or sick persons.” 42 U.S.C.

§ 1395x(e)(1) (emphases added). Neither the Act nor the Secretary’s regulations define
what it means to be “primarily engaged” in providing treatment to inpatients, and the
parties strongly disagree over what factors I should consider in determining whether
Petitioner is “primarily engaged” in treating inpatients.

In 2006, the Secretary submitted a Final Report to Congress, which referred to an earlier
Interim Report that stated there had not been “a feasible way to define by regulation the
statutory requirement in [42 U.S.C. § 1395x(e)] that a hospital is an entity that is
‘primarily engaged’ in furnishing services to hospital inpatients. Instead... CMS will
continue to interpret ‘primarily engaged’ on a case-by-case basis as it continues to
explore other options for addressing this issue.” United States Department of Health and
Human Services, Final Report to the Congress and Strategic and Implementing Plan
Required under Section 5006 of the Deficit Reduction Act of 2005 at 79 (2006) (Final
Report)‘ (emphasis added). The Final Report concluded that the Department of Health
and Human Services was “in no better position now than we were at the time of the
Interim Report was issued to define ‘primarily engaged’ by regulation and, thus, are not
committing at this time to engage in rulemaking.” Jd. The Final Report also noted that
two major hospital organizations had differing views on whether “primarily engaged”
should be clearly defined by regulation. /d. at 23,79. Thus, the Secretary determined
that, as of 2006, there would be no established definition of “primarily engaged” or a
single set of criteria to determine whether a facility was “primarily engaged” in providing
treatment to inpatients.

* The Final Report is available on CMS’s website addressing “Specialty Hospital
Issues,” at https://www.cms.gov/Medicare/Fraud-and-A buse/PhysicianSelfReferral/
specialty hospital _issues.html.

11

In 2008, the Director of CMS’s Center for Medicaid and State Operations, Survey and
Certification Group, issued a memorandum addressing as its subject, “Requirements for
Provider-based Off-campus Emergency Departments and Hospitals that Specialize in the
Provision of Emergency Services.” Survey & Cert. Memo. 08-08, at 1 (Jan. 11, 2008).°
In a section titled “Hospitals Specializing in Emergency Services,” the Director wrote
that “CMS has occasionally encountered interest from providers who seek participation
in Medicare as a hospital that specializes in emergency services.” Jd. at 5. The
Memorandum reminded providers that an applicant seeking to enroll as a hospital “must
demonstrate that it satisfies the definition of a hospital in [42 U.S.C. § 1395x(e)],
including the requirement that the provider is primarily engaged in the provision of
services to inpatients.” Jd. The Memorandum continued:

In the case of an applicant specializing in emergency services, CMS would
pay particular attention to the size of the applicant’s ED [Emergency
Department] compared to its inpatient capacity. A detailed analysis of the
facts and the applicant's operations would be required.

We interpret the statutory requirement that a hospital be primarily engaged
in the provision of inpatient services to mean that the provider devotes 51%
or more of its beds to inpatient care. In the absence of other clearly
persuasive data, CMS renders a determination regarding hospital status
based on the proportion of inpatient beds to all other beds.

Id. (emphases added). The Memorandum thus provided state survey agencies with a
clear numerical standard to determine whether a facility that specialized in emergency
services was “primarily engaged” in providing treatment to inpatients.

The Departmental Appeals Board has interpreted “primarily engaged” to refer to a
facility’s actual provision of services, not its capability to provide those services. See
Kearney Reg’! Med. Ctr., DAB No. 2639, at 9 (2015); Ariz. Surgical Hosp., DAB No.
1890, at 6-7 (2003); see also United Med. Home Care, Inc., DAB No. 2194, at 11 (2008)
(concluding that the facility did not provide any skilled nursing services, and thus was not
“primarily engaged” in providing skilled nursing and other therapeutic services). In
Arizona Surgical, the Board rejected an argument that a facility’s intent to provide
inpatient services was somehow relevant to whether it was “primarily engaged” in
provider services to inpatients. DAB No. 1890, at 5-6. The Board wrote that it “fail[ed]

5 Petitioner offered this memorandum as an exhibit. See P. Ex. 3. However, because it
is a published and publicly-available document on CMS’s website, I will cite it according
to its public reference number “08-08.” It is available at https://www.cms.gov/Medicare/
Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Policy-and-Memos-
to-States-and-Regions. html.

12

to see how [the petitioner] could have been ‘primarily engaged’ in providing services to
inpatients when it was not ‘engaged’ in providing those services in the first place.” Jd. at
6. The Board more recently noted that it considers various types of evidence in
evaluating whether a facility meets the definition of a hospital and has not established a
“bright-line rule.” Kearney, DAB No. 2639, at 8. The Board cautioned, however, that it
has never considered “the main defining characteristic of a hospital, i.e., being ‘primarily
engaged’ in treating inpatients, as somehow synonymous with ‘for the most part’ or
‘having embarked on’ the provision of services to inpatients ....” Jd. at 8-9. Rather, the
Board “has consistently read the statutory language requiring that a hospital be ‘primarily
engaged’ to plainly mean that the bulk of its present activity consists of providing the
required services to treat inpatients.” Jd. at 9 (emphasis added). Accordingly, a facility’s
ability to or mere intent to engage in the treatment of inpatients is not sufficient to meet
the statutory definition of a hospital. As the Board noted, the statute “does not make the
definition turn on what activities the facility previously engaged in, or plans to engage in,
or is equipped to engage in, but on what its central activity currently is.” Jd. (emphasis in
original).

Petitioner argues that the 2008 Survey and Certification Memorandum should control the
analysis of whether it was “primarily engaged” in providing services to inpatients. P. Br.
at 3-4. Petitioner notes that the 2006 Final Report struggled with whether CMS should
apply a uniform definition and argues that the 2008 Memorandum, the “only written
guidance on the issue,” finally established a clear measure of whether a facility was
“primarily engaged” in providing treatment to inpatients. P. Br. at 3. The Memorandum,
as noted above, states in part that “[iJn the absence of other clearly persuasive data, CMS
renders a determination regarding hospital status based on the proportion of inpatient
beds to all other beds.” Survey & Cert. Memo. 08-08, at 5. Petitioner’s facility has 12
beds, all of which are inpatients beds. CMS Ex. | at 1; P. Ex. 4 at 94. Thus, according
to Petitioner, because 100% of its beds are inpatient beds, it satisfies CMS’s “only
articulated test” for being “primarily engaged” in providing treatment to inpatients.

P. Br. at 4-6. Petitioner also argues that any other interpretation of the statute “would
necessarily exclude many community and specialty hospitals in the country based on
recent data, which shows that these hospitals’ provision of inpatients is limited.” P. Br.
at 6. Petitioner attempts to distinguish its case from that of Arizona Surgical by noting
that the Board decided that case before CMS established its “bright line bed count
definition” in the 2008 Memorandum. Petitioner also points out that the facility in
Arizona Surgical, unlike Petitioner, was prohibited from admitting patients for an
extended period, which meant it did not have any inpatients at all and could not engage in
any inpatient treatment. P. Br. at 6-7. Petitioner also attempts to distinguish Kearney,
arguing that it involved an initial Medicare enrollment, which resulted in a lack of
inpatient care, while Petitioner was already enrolled in Medicare as a hospital and had a
history of treating inpatients at the time CMS terminated its provider agreement. See

P. Br. at 7, 9-10, 12.

13

CMS argues that prior Board decisions correctly interpret the statutory provision that
defines a hospital. CMS Br. at 8-9; CMS Resp. at 2. According to CMS’s reading of
prior Board decisions, “two fact issues are consistently evaluated: the periods of time
when a facility was not providing the required services and what portion of a facility’s
operations were devoted to the required services.” CMS Resp. at 4. Relying on this
interpretation, CMS argues that Petitioner’s overall percentage of inpatients being less
than 3% of its total patients and the periods when Petitioner did not have any inpatients in
its facility demonstrate that it was not primarily engaged in the treatment of inpatients.
CMS Br. at 6-8. CMS also argues that Petitioner relies on an “improper characterization
of a passage taken out of context” from the 2008 Survey and Certification Memorandum.
CMS Resp. at 2. CMS notes that Petitioner’s interpretation of the 2008 Memorandum is
inconsistent with the 2006 Final Report’s assertion to Congress that a “case-by-case”
approach to determining whether a facility is primarily engaged in providing treatment to
inpatients would continue to be used going forward. CMS Resp. at 4.

l agree with CMS that Petitioner’s reliance on the 2008 Survey and Certification
Memorandum is misplaced in this case. First, the Memorandum is limited in scope. It
must be read consistently with the 2006 Final Report, which stated that CMS would
continue to use a “case-by-case” approach in determining whether a facility was
“primarily engaged” in providing treatment to inpatients. See Final Report at 76. It is
unreasonable that the Director of the Survey and Certification Group, within the Center
for Medicaid and State Operations, within CMS, intended to or even had the authority to
offer the only interpretation of the relevant statutory provision on behalf of the Secretary.
Further it does not appear that the Memorandum went through the necessary notice and
comment procedures to be a binding agency rule. See 5 U.S.C. § 553(b)-(d). Rather, the
Memorandum offers an interpretation of a specific type of case that has become more
frequent, namely the construction of free-standing facilities specializing in emergency
services. See Survey & Cert. Memo. 08-08, at 1. Even more telling, the Memorandum
Summary notes that in “rare cases, new providers are seeking certification as a hospital
specializing in the provision of emergency services.” Jd. Accordingly, the Memorandum
provides an approach only in the “rare cases” it describes rather than to any facility
enrolling as a hospital. It does not apply to Petitioner, who is neither newly-enrolling nor
specializing in emergency services.

Second, the Memorandum states that newly-enrolling facilities that specialize in
emergency services must nevertheless meet the statutory definition of a “hospital,”
because there is no special designation in the Medicare program as an “emergency
services hospital.” Jd. at 5. But, as CMS points out, a newly-enrolling facility that plans
to specialize in emergency services is unlikely to have any record of treating inpatients.
See CMS Resp. at 2. The Memorandum goes on to state that in such a case CMS would
consider whether 51% or more of the facility’s beds were inpatient beds. Survey & Cert.
Memo 08-08, at 5. That measure was certainly not intended to be a “bright line rule” as
Petitioner argues, because the Memorandum’s own language qualifies that the ratio of
14

inpatient beds would be used only “[i]n the absence of other clearly persuasive data... .
Id. A facility’s record of treating inpatients may certainly be “other clearly persuasive
data,” and the Memorandum seems to confirm this. It states in the same section that a
“detailed analysis of the facts of the applicant’s operations would be required.” Id.
(emphasis added). The “applicant’s operations” would reasonably include inpatient data
if the facility was already operating as a hospital. Also, the Memorandum does not call
for an analysis of the applicant’s future operations or intended operations but rather its
actual operations. Accordingly, the Memorandum’s use of 51% of inpatient beds as a
measure of being “primarily engaged” in treating inpatients does not apply to Petitioner’s
case, which involves an enrolled hospital with a record of treating inpatients from time to
time, and that does not provide or specialize in providing emergency services.

Nevertheless, the Memorandum is relevant in one way. It offers a numerical value of
51% to explain what it means to be “primarily engaged” in something. It is also
consistent with the Board’s interpretation that a “bulk” of activity is devoted to inpatient
care. See Kearney, DAB No. 2639, at 9. In addition, other agencies have defined
“primarily engaged” using greater than 50% as the appropriate threshold. Cf: 29 C.F.R.

§ 779.372(d) (defining “primarily engaged” in Department of Labor regulations as “over
50 percent” of the time). Therefore, in order to be “primarily engaged” in providing
treatment to inpatients, a plain-language reading of the statute requires that more than
half of a facility’s treatment must be provided to inpatients. See 42 U.S.C. § 1395x(e)(1).

For a facility with an existing record of treating patients, a mere bed count, as the 2008
Memorandum suggests and for which Petitioner argues, is not consistent with the
statutory language and is impractical when determining what factors determine whether
more than half of a facility’s treatments are provided to inpatients. As the Board first
pointed out in Arizona Surgical, a facility must first “engage” in providing treatment to
inpatients before it can even be considered “primarily engaged” in providing such
treatment. DAB No. 1890, at 6. Thus, having “inpatient beds” without any actual
inpatients cannot reasonably qualify as being “engaged” in providing treatment to
inpatients. It is irrational to think that Medicare would enroll a facility as a hospital just
to have the very beds used to qualify as a hospital go unused in providing any actual
services. That is why the Board more recently noted that Congress drafted the statute in
the present tense, meaning that the statutory definition of a hospital does not consider
“what activities the facility previously engaged in, or plans to engage in, or is equipped to
engage in, but on what the central activity currently is.” Kearney, DAB No. 2639, at 9.
A bed count alone shows what activities the facility is equipped to engage in but cannot
demonstrate that the facility is actually engaged — let alone “primarily engaged” — in
providing treatment to inpatients. Therefore, even though it is undisputed that all of
Petitioner’s 12 beds are designated as “inpatient beds,” that fact does not demonstrate that
Petitioner was actually engaged in using those beds to provide treatment to inpatients.
15

A strict present-tense reading of the statute, however, would preclude consideration of
any factors other than the observations that surveyors make during a validation survey or
during an accreditation visit. See id. (“The statute does not make the definition turn on
what activities the facility previously engaged in... .”). Thus, under this interpretation,
only the activities the facility is engaging in at the time of the survey would be relevant.
In this case, it is undisputed that Petitioner did not have any inpatients during the
validation survey from January 12 through January 15, 2015. CMS Ex. | at 2; P. Br. at 9.
But that is likely too narrow of an approach to the statutory requirement, and more to
Petitioner’s point, could unintentionally and detrimentally impact small community or
tural hospitals. See P. Br. at 6. There are factors beyond a hospital’s control, such as
location, population served, types of services provided, and so on, that could result in that
hospital not having any inpatients for a brief time, yet still be “primarily engaged” overall
in providing treatment to inpatients. Therefore, a review of past records, including
whether any outpatients were treated during that time, is important to clarify whether the
survey findings correctly depict the hospital’s actual activities. The Board seems to have
recognized this possibility. See, e.g., Kearney, DAB No. 2639, at 10. It has considered a
facility’s previous treatment records in assessing whether the facilities were “primarily
engaged” in providing treatment to inpatients. See Ariz. Surgical, DAB No. 1890, at 7;
Kearney, DAB No. 2639, at 11.

Here, it is undisputed that for all of 2014 less than 3% of Petitioner’s overall patients
were inpatients. CMS Ex. | at 2; P. Ex. 6; P. Ex. 7. The overall percentage of inpatients
that Petitioner treated during an entire year was extremely low and certainly not close to
being half of the patients to whom it provided treatment. This fact alone shows that
nearly all of Petitioner’s patients were outpatients and does not support that Petitioner
was “primarily engaged” in providing treatment to inpatients. But the ratio of inpatients
to overall patients may not on its own always be a clear measure of whether a facility is
primarily engaged in providing treatment to inpatients in all cases. For example, if each
inpatient was typically admitted for several days or weeks at a time, then the total number
of inpatients that the facility treated may be less than half of its patients overall, but the
facility would have nevertheless been consistently providing treatment to inpatients.° In
such a situation, it would be expected that the number of inpatient beds occupied at any
given time would be a substantial percentage of the facility’s overall inpatient capacity.

But in this case, according to Petitioner’s data, which I accept as true for summary
judgment purposes, Petitioner had only 56 inpatients during 2014. See P. Ex. 6. Those

® Using Petitioner’s facility as an example, if inpatients in Petitioner’s facility averaged
7-day (week-long) admissions, and Petitioner was using all of its 12 available inpatient
beds, it would average 12 inpatients per week and 624 inpatients for the entire 52-week
year. That amount of inpatients is still substantially less than the number of outpatients
Petitioner had in 2014 (see P. Ex. 7), yet Petitioner would have always been engaged in
providing treatment to inpatients during that time.

16

56 inpatients accounted for a total of 131 patient days out of a possible 4,380 patient days
available in Petitioner’s facility. P. Ex. 6. Thus, Petitioner used only about 3% of its
inpatient capacity, meaning that nearly all of its 12 inpatient beds were unused for most,
if not all, of the year. Thus, with only 131 patient days, all 12 of Petitioner’s inpatient
beds must have been empty and unused for well over half of the 365 days in the year.

See P. Ex. 6. The undisputed evidence shows that Petitioner undoubtedly focused its
primary activities on the treatment of outpatients.

There can be little doubt that Petitioner’s facility was established, and likely intended, to
handle inpatients at any given time, but its treatment history confirms what the surveyor
found, i.e., that it was not providing treatment to inpatients as its primary activity. All of
the undisputed evidence, when taken together, shows that Petitioner was not “primarily
engaged” in providing treatment to inpatients, and it therefore did not meet the statutory
definition of a “hospital” in any reasonable construction of that requirement.

3. CMS, acting on behalf of the Secretary, has the authority to terminate
Petitioner’s Medicare provider agreement.

The Act authorizes the termination of a provider that substantially fails to meet the
requirements of 42 U.S.C. § 1395x. See 42 U.S.C. § 1395cc(b)(2)(B). The Secretary’s
regulations setting forth the general participation requirements for providers state that to
be approved for participation in, or coverage under, the Medicare program, a prospective
provider must meet the statutory definitions applicable to its provider type in (among
others) 42 U.S.C. § 1395x. 42 C.F.R. § 488.3(a); see Ariz. Surgical, DAB No. 1890, at 9.
The Secretary may terminate a provider agreement if the provider does not meet all
applicable regulatory requirements specific to its provider type or the provisions of its
provider agreement. 42 C.F.R. § 489.53(a)(1). By regulation, CMS is authorized to
carry out the termination of a Medicare provider agreement on behalf of the Secretary.
See generally 42 C.F.R. § 489.53 (providing for termination “by CMS”).

Here, Petitioner did not meet the statutory requirements of a hospital because it was not
“primarily engaged” in providing treatment to inpatients. See 42 U.S.C. § 1395x(e)(1).
As a result, Petitioner did not meet the regulatory requirement that a provider must meet
the applicable statutory definition for its provider type. See 42 C.F.R. § 488.3(a). CMS,
therefore, acting on behalf of the Secretary, was authorized to terminate Petitioner’s
Medicare provider agreement because it no longer met the applicable regulatory
requirements for a hospital that, in turn, required Petitioner to continue to meet the
statutory definition of a hospital. 42 C.F.R. § 489.53(a).

4. Petitioner’s equal protection arguments are not appropriate in this forum.

Petitioner argues that CMS violated Petitioner’s equal protection rights by terminating its
Medicare provider agreement despite Petitioner’s inpatient treatment data being similar to
17

other hospitals that CMS did not terminate. P. Br. at 13. But whether or not CMS has
treated similarly-situated hospitals consistently in its termination of provider agreements
is not a sufficient equal protection argument. See Sylvia Dev. Corp. v. Calvert Cnty.,

48 F.3d 810, 819 (4th Cir. 1995) (citing Snowden v. Hughes, 321 U.S. 1 (1944)). When
Petitioner asked that I issue a subpoena to make it possible obtain documents related to
administrative actions that CMS has taken against other hospitals, that information would
not further its equal protection claim. There must be some evidence that shows an actual
intent to discriminate for a specific reason. Jd. (citing Washington v. Davis, 426 U.S.
229, 239 (1976)). There is no evidence or allegation of such intent to discriminate on the
part of CMS. Petitioner has argued that it is unique in being a facility that specializes in
pain management. P. Br. at 12. CMS’s action in this case, however, is not based on the
nature of Petitioner’s specialty but rather on the number of inpatients it has treated over
the course of an entire year. See CMS Ex. 1; CMS Ex. 10. Thus, there is a neutral basis
for CMS’s actions that the Act and implementing regulations authorize. That CMS’s
action impacted a specialized facility is no basis to conclude that there was an equal
protection violation.

In any event, I do not have the authority to reverse a termination action that the Act and
Secretary’s regulations clearly authorize. I am limited to reviewing whether there is a
legally sufficient factual basis for the federal agency’s decision. United Med. Ctr., DAB
No. 2194, at 15. In this case, I have determined that there is a legally sufficient factual
basis for the termination of Petitioner’s Medicare provider agreement, and my review
must end there.

VI. Conclusion

The undisputed material facts of this case show that Petitioner was not “primarily
engaged” in the treatment of inpatients and therefore did not comply with the definition
of a “hospital.” See 42 U.S.C. § 1395x(e)(1). Petitioner did not meet all requirements
necessary to continue its participation in the Medicare program as a hospital. Therefore,
I grant summary judgment in favor of CMS affirming the termination of Petitioner’s
Medicare provider agreement effective April 30, 2015.

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Foot Specialists of Northridge,
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-15-3864
Decision No. CR4529
Date: February 9, 2016
DECISION

The Centers for Medicare & Medicaid Services (CMS), through its administrative
contractor, Palmetto GBA National Supplier Clearinghouse (NSC), revoked the
enrollment and Medicare billing privileges of Foot Specialists of Northridge (Northridge
or Petitioner) as a Medicare supplier of durable medical equipment, prosthetics, orthotics,
and supplies (DMEPOS) because Northridge was not operational at the practice location
on file with CMS. Northridge requested a hearing to dispute the revocation, arguing that
it was operational at a new address and that Northridge had attempted to timely inform
CMS of its change of address through CMS’s online Provider Enrollment, Chain, and
Ownership System (PECOS), but that both PECOS and an NSC employee indicated that
Northridge could not update its address until NSC completed processing Northridge’s
previously filed revalidation enrollment application.

CMS moves for summary judgment because it is undisputed that Northridge was not
operational at the last address Northridge provided to CMS. Northridge opposes
summary judgment arguing that PECOS and an NSC employee are to blame for
Northridge’s inability to timely update its address with CMS. Based on the undisputed
facts in this case, I grant CMS’s motion for summary judgment.
I. Background

Northridge was enrolled in the Medicare program as a DMEPOS supplier. Drs. Stefan
Feldman and Charles Kelman own Northridge. CMS Exhibit (Ex.) 3 at 6; Petitioner (P.)
Ex. 2 § 2. Northridge’s address was: 9335 Reseda Boulevard, Suite 500, Northridge,
California 91324.

On or about December 10, 2014, Northridge received notice that it had to vacate its 9335
Reseda Boulevard location within 30 days. P. Ex. 1 43; P. Ex. 3. Northridge ultimately
secured an extension of time before it had to leave that address. P. Ex. 2 3.

In a January 7, 2015 notice, NSC informed Northridge that it had 60 days to submit a
revalidation Medicare enrollment application. P. Ex. 4; see also P. Ex. 1 § 4. On January
23, 2015, Northridge filed its revalidation enrollment application through PECOS and, on
January 27, 2015, Northridge mailed paper documents to NSC related to its revalidation
enrollment application. P. Ex. 1 5-6; P. Ex. 5; P. Ex. 6. Because Northridge did not
yet have new offices, Northridge indicated on the revalidation enrollment application that
9335 Reseda Boulevard was its address. CMS Ex. 1 § 4; P. Ex. 1 99] 5-6; P. Ex. 5.

Shortly after submitting the revalidation enrollment application and supporting
documentation, Northridge found a new location for its offices: 10515 Balboa
Boulevard, Suite 140, Granada Hills, California 91344. P. Ex. 1 7; P. Ex. 7. On
February 3, 2015, Northridge filed an enrollment application (CMS-8551) through
PECOS to change Dr. Feldman’s practice address with CMS. P. Ex. 1 § 7; P. Ex. 9.
CMS approved this application. P. Ex. 7 at 3. At about that time, Northridge also
successfully changed its address with the IRS. P. Ex. 1 § 10; P. Ex. 10. However, when
Northridge attempted, on or about February 3, 2015, to file an enrollment application
(CMS-855S) to change its address with CMS through PECOS, Northridge could not do
so because Northridge’s revalidation enrollment application was still pending. P. Ex. 1
48. A Northridge employee spoke with an NSC employee, who stated that a change of
address (CMS-855S) could not be completed while a revalidation enrollment application
was pending. P. Ex. 1 4 8; P. Ex. 7 at 1.

On February 19, 2015, the same NSC employee who spoke to the Northridge employee
sent a letter to Northridge in which she listed six deficiencies in Northridge’s revalidation
enrollment application. One of the listed items was the omission of a physical address in
the business location portion of the CMS-855S. NSC gave Northridge 30 days to provide
the missing information. P. Ex. 1 § 11; P. Ex. 11; P. Ex. 12. Northwood responded that
its business location was 9335 Reseda Boulevard. P. Ex. 1 4 11.

On March 1, 2015, Northridge moved to its new offices at 10515 Balboa Boulevard.
P. Ex. 294. Northridge posted notices on the front and rear doors of the Reseda

Boulevard office stating that it moved to the 10515 Balboa Boulevard location. P. Ex. 1
4 12; P. Ex. 8.

On April 14, 2015, an NSC inspector attempted to visit Northridge’s offices. NSC
informed the inspector that 9335 Reseda Boulevard was Northridge’s address on file with
CMS. CMS Ex. 194. Although the inspector found 9335 Reseda Boulevard and a sign
with Northridge’s name on it, the inspector concluded that Northridge was not
operational at that address. CMS Ex. | § 5; CMS Ex. 4 at 1. The inspector’s report
stated the following:

Supplier is not operational at location. Building is under
demolition/construction. Per construction worker on site
during visit, they started the demolition 2 weeks prior and that
tenants of building were no longer at the building when they
started demo. He does not know who the tenants were and if
they moved.

CMS Ex. 4 at 1. The inspector took photographs of the 9335 Reseda Boulevard location.
CMS Ex. 4 at 2.

Ina May 20, 2015 initial determination, NSC revoked Northridge’s Medicare enrollment
and billing privileges. CMS Ex. 5. NSC provided the following reason for its decision:

Recently, a representative of the NSC attempted to conduct a
visit of your facility on April 14, 2015; however, the visit was
unsuccessful because the facility was found to be in the
process of demolition/construction. Because we could not
complete an inspection of your facility, we could not verify
your compliance with the supplier standards. Based upon a
review of the facts, we have determined that your facility is
not operational to furnish Medicare covered items and
services. Thus, you are considered to be in violation of
42 CFR §§ 424.535(a)(5) and all supplier standards as
defined in 42 CFR 424.57(c).

CMS Ex. 5 at 2. NSC made the effective date for revocation retroactive to April 14,
2015, the date of the attempted site visit, and barred Northridge from reenrolling in the
Medicare program for two years. CMS Ex. 5 at 1.

Ina May 20, 2015 letter, Northridge requested reconsideration of the initial
determination. Northridge stated that its office moved on March 1, 2015, and that in
February 2015, Northridge had been told that it only needed to inform
“Medicare/Noridian” of the change and that they would in turn notify NSC. Northridge

indicated that it had now learned how to change its address with NSC and was
submitting, with the reconsideration request, a CMS-855S enrollment application. CMS
Ex. 1 § 13; CMS Ex. 6; CMS Ex. 7.

On June 25, 2015, an NSC hearing officer issued a reconsidered determination (CMS Ex.
9) and then an amended reconsidered determination. CMS Ex. 8. After summarizing the
initial determination, the reconsideration request, and the facts and law related to this
case, the hearing officer concluded:

The fact remains that the site inspector could not access Foot
Specialists of Northridge facility to verify compliance with
the supplier standards because the facility location on file
with the NSC was not operational or accessible to the site
inspector.

CMS Ex. 8 at 3.

On August 13, 2015, Northridge requested a hearing before an administrative law judge
(ALJ) to dispute the revocation. I issued an Acknowledgement and Pre-hearing Order
(Order) on September 3, 2015. In response to my Order, CMS filed a brief and motion
for summary judgment, as well as nine exhibits, one of which was the written direct
testimony of an NSC employee (CMS Ex. 1). Petitioner, through counsel, filed a brief
and opposition to summary judgment (P. Br.), as well as 12 exhibits, two of which were
written direct testimony for two witnesses (P. Exs. 1, 2).

CMS and Petitioner requested to cross-examine the witnesses for which written direct
testimony had been submitted. Petitioner also requested that I issue subpoenas for the
testimony of the NSC employee who spoke on the phone with a Northridge employee
regarding the submission of a change of address in PECOS, the NSC site inspector who
attempted the April 14, 2015 site visit to 9335 Reseda Boulevard, and an unnamed CMS
expert on the PECOS system. Further Petitioner sought a subpoena to compel CMS to
produce all documents related to Northridge’s efforts to notify NSC of the change in its
address. P. Br. 12-14; P. Witness & Ex. List at 3-5.

CMS objected to Petitioner’s subpoena requests and to Petitioner Exhibits 5, and 8
through 12, primarily because Petitioner failed to submit these documents with its
reconsideration request. CMS Objections to Exs. & Witnesses. Petitioner objected to
copies of photographs in CMS Exhibit 4 because they are allegedly blurry. P. Br. at 3.

For reasons indicated below, I grant CMS’s motion for summary judgment. Therefore, it
is unnecessary for me to rule on the parties’ evidentiary objections and Petitioner’s
subpoena requests.
IL. Issues
This case presents two issues:
1. Whether CMS is entitled to summary judgment; and

2. Whether CMS had a legitimate basis for revoking Petitioner’s Medicare billing
privileges for failing to be operational (42 C.F.R. § 424.535(a)(5)(ii)).

Ill. Jurisdiction

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

IV. Findings of Fact, Conclusions of Law, and Analysis

The Secretary of Health and Human Services (Secretary) has the authority to create
regulations that establish enrollment standards for providers and suppliers, and to create
supplier requirements for DMEPOS suppliers. 42 U.S.C. §§ 1395m(j)(1)(B)(ii),
1395cc(j). The Secretary promulgated a regulation that requires providers and suppliers
to be operational. 42 C.F.R. § 424.535(a)(5)(ii). CMS or its contractors may conduct
inspections of a supplier’s premises at any time to determine if a supplier is in
compliance with Medicare enrollment requirements or the DMEPOS supplier standards.
See 42 C.F.R. §§ 424.57(c)(8), 424.510(d)(8), 424.515(c), 424.517(a), (a)(8).

I. Summary judgment is appropriate in this case.

When appropriate, an ALJ may decide a case arising under 42 C.F.R. part 498 by
summary judgment. 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. Thomson, 373 F.3d
743 (6th Cir. 2004)). “Matters presented to the ALJ for summary judgment will follow
Rule 56 of the Federal Rules of Civil Procedure and federal case law... .” Civil
Remedies Division Procedures § 19(a).

As stated by the United States Supreme Court:

Rule 56(c) of the Federal Rules of Civil Procedure provides
that summary judgment ‘shall be rendered forthwith if the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.’
By its very terms, this standard provides that the mere
existence of some alleged factual dispute between the parties
will not defeat an otherwise properly supported motion for
summary judgment; the requirement is that there be no
genuine issue of material fact.

Anderson vy. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).

To determine whether there are genuine issues of material fact for an in-person hearing,
the ALJ must view the evidence in the light most favorable to the non-moving party,
drawing all reasonable inferences in that party’s favor. Senior Rehab. & Skilled Nursing
Ctr., DAB No. 2300, at 3 (2010) (citations omitted).

There is no genuine dispute of any material fact in this case. It is undisputed that
Northridge no longer occupied its former offices at 9335 Reseda Boulevard by March 1,
2015. P. Ex. 1 § 12; P. Ex.2 44. It is undisputed that an NSC inspector attempted to
visit the 9335 Reseda Boulevard location on April 14, 2015, but that the location was
vacant. CMS Ex. 4; P. Br. at 3. It is also undisputed that in January 2015 Northridge
indicated that its business address was 9335 Reseda Boulevard in its Medicare
revalidation enrollment application and again in February 2015 in response to a request
for additional information related to the revalidation enrollment application. P. Ex. 1
495, 11. In addition, there is no dispute that Northridge attempted to file a CMS-855S
through PECOS to change its address, but was unsuccessful, and that the first time
Northridge successfully filed with NSC a CMS-855S to change its address with CMS
was on May 20, 2015. P. Br. at 3-4, 6; CMS Ex. 6; CMS Ex. 7; P. Ex. 1 9] 8, 13; P. Ex.
295; see also CMS Ex. 1 § 6. Therefore, there is no material fact in dispute that, on
April 14, 2015, the NSC site inspector went to Northridge’s address that was on file with
CMS. See P. Br. at 3.

I accept as true for purposes of summary judgment that Northridge attempted to submit a
CMS-855S on or about February 3, 2015, through PECOS in order to notify CMS of its
impending change of address. I also accept as true that PECOS would not accept the
change of address because Northridge’s revalidation enrollment application was still
pending with NSC and that an NSC employee told a Northridge employee that a CMS-
855S could not be submitted to change an address while a revalidation application was
still being processed. P. Ex. 1 § 8; P. Ex. 7 at 1.

For purposes of summary judgment, I draw all reasonable inferences in favor of
Northridge. As explained below, CMS is entitled to judgment as a matter of law and
Petitioner’s defenses are insufficient to justify reversal of the revocation CMS imposed
on Petitioner.
2. CMS had a legitimate basis to revoke Petitioner’s Medicare billing
privileges because Petitioner was not operational at its qualified
practice location (9335 Reseda Boulevard) on file with CMS on April
14, 2015, when an NSC inspector attempted to visit that practice
location.

Northridge does not dispute that it indicated its address was 9335 Reseda Boulevard
when it filed its Medicare revalidation enrollment application with NSC in January 2015,
and again stated that same address to NSC in response to NSC’s February 2015 request
for additional information concerning its business location. CMS Ex. | § 4; P. Ex. 1 996,
11; P. Ex. 5 at 1. Further, there is no dispute that until May 2015, Northridge did not
provide notice to CMS on a CMS-855S form of the change in Northridge’s address to
10515 Balboa Boulevard, either electronically through PECOS or with a paper form sent
through the mail, although Northridge unsuccessfully attempted to file that form
electronically through PECOS in February 2015. CMS Ex. 1 § 6; P. Br. at 4, 6; P. Ex. 1
49 8, 13; P. Ex. 295. Finally, there is no dispute that an NSC inspector attempted a site
visit to Northridge’s 9335 Reseda Boulevard location on April 14, 2015, and that
Northridge was no longer operating from that location on that date. CMS Ex. | § 5; CMS
Ex. 4; P. Br. at 3; P. Ex. 1 § 12; P. Ex.2 4 4.

A supplier is “operational” when it:

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

42 C.F.R. § 424.502. CMS may revoke a currently enrolled supplier’s Medicare billing
privileges in the following circumstance.

Upon on-site review, CMS determines that-

(i) A Medicare Part B supplier is no longer operational
to furnish Medicare covered items or services, or the
supplier has failed to satisfy any or all of the Medicare
enrollment requirements, or has failed to furnish
Medicare covered items or services as required by
statute or regulations.

42 CFR. § 424.535(a)(5)(ii).
Although Northridge asserts that it was operational on April 14, 2015, at its new 10515
Balboa Boulevard location (P. Br. at 3), the regulatory definition of the term
“operational” refers to the “qualified physical practice location” of a supplier. 42 C.F.R.
§ 424.502. This practice location is the address provided by a supplier on an enrollment
application. Cf 42 C.F.R. § 424.510(d)(2)(ii). CMS may perform on-site inspections to
verify that the enrollment information submitted by a supplier is accurate and to
determine compliance with Medicare requirements. 42 C.F.R. § 424.517(a). This means
that CMS will inspect the “qualified physical practice location” that has been provided by
the supplier and is currently on file with CMS. See, e.g., JIB Enterprises, LLC, DAB
CR3010, at 9 (2013). Therefore,

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

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

In the present matter, NSC’s inspector went to Northridge’s practice location that was on
file with CMS on April 14, 2015, and it is undisputed that Northridge was no longer
present at that location. Therefore, Northridge was not operational at its “qualified
practice location.”!

3. The allegedly inaccurate information that an NSC employee provided
to Northridge is not legally sufficient to require reversal of the
revocation in this case.

Although Northridge does not dispute that its location at 9335 Reseda Boulevard was
vacant on April 14, 2015, when the site inspector attempted a visit, Northridge asserts
that it unsuccessfully attempted to report its change of address through PECOS on or
about February 3, 2015, and was the victim of an NSC employee who falsely told
Northridge that it could not report a change of its address until NSC processed
Northridge’s previously filed revalidation enrollment application. Northridge believes
that the NSC employee’s conduct is grounds for equitable relief. P. Br. at 10-12.

' Because I conclude that Northridge was not operational under 42 C.F.R.
§ 424.535(a)(5), I do not need to decide whether Northridge violated any of the
DMEPOS supplier standards in 42 C.F.R. § 424.57.
DMEPOS suppliers like Northridge “must report to CMS any changes in the information
supplied on the [enrollment] application within 30 days of the change.” 42 C.F.R.

§§ 424.57(c)(2), 416.516(c). As indicated above, a supplier provides its practice location
on the enrollment application. Therefore, Northridge had 30 days from March 1, 2015, to
report its change of address to CMS, but did not do so until May 20, 2015.

A Northridge employee testified by declaration that on or about February 3, 2015, she
attempted to use PECOS to file a CMS-855S to report the up-coming change in
Northridge’s address. However, PECOS indicated that it could not accept the CMS-855S
because Northridge’s revalidation enrollment application was still being processed. A
Northridge employee spoke with an NSC employee and the NSC employee allegedly said
that “while the revalidation was pending, changes to Northridge’s address and filing of
Form 855S could not be processed.” P. Ex. 1 8. It is this testimony that is the basis for
Northridge’s allegation that CMS should be estopped on equitable grounds from revoking
Northridge. For purposes of summary judgment, I accept as true that the NSC employee
told Northridge that it could not file a CMS-855S form while a reenrollment application
was pending.

In its most basic form, “[e]stoppel is an equitable doctrine invoked to avoid injustice in
particular cases,” in which:

the party claiming the estoppel must have relied on its
adversary’s conduct “in such a manner as to change his
position for the worse.” and that reliance must have been
reasonable in that the party claiming the estoppel did not
know nor should it have known that its adversary’s conduct
was misleading.

Heckler v. Community Health Services of Crawford County, Inc., 467 U.S. 51, 59 (1984).
However, estoppel is not easily applied against the government. Office of Personnel
Management v. Richmond, 496 U.S. 414, 419 (1990) (“From our earliest cases, we have
recognized that equitable estoppel will not lie against the Government as it lies against
private litigants.”). The United States Supreme Court, however, has indicated “that some
type of ‘affirmative misconduct’ might give rise to estoppel against the Government.” Jd.
at 421. It is under this specific theory that Petitioner seeks relief in this case.

Although I have accepted for purposes of summary judgment that the NSC incorrectly
stated that Northridge could not submit a CMS-855S while a revalidation enrollment
application was pending, I cannot conclude that the testimony of the Northridge
employee on which this supposition is based supports the conclusion that the NSC
employee engaged in “affirmative misconduct.” See US Ultrasound, DAB No. 2302, at 8
(2010); 1866/CPayday.com, L.L.C., DAB No. 2289, at 14 (2009). At worst, I can only
reasonably infer that the NSC employee provided incorrect information.
Everyone is charged with knowledge of duly promulgated regulations, and individuals
cannot prevail if a government agent provides incorrect information “regardless of actual
knowledge of what is in the Regulations or of the hardship resulting from innocent
ignorance.” Federal Crop Insurance Corp. v. Merril, 332 U.S. 380, 385 (1947). In the
present case, Northridge was under a clear regulatory obligation to report the change in
its address within 30 days of the change. 42 C.F.R. §§ 424.57(c)(2); 424.516(c).
Regardless of the statements made by the NSC representative, Northridge needed to
comply with the regulations. Its failure to comply provides CMS with sufficient legal
basis to revoke Northridge.

Related to its estoppel argument, Northridge submitted documents that show that the
same NSC employee who allegedly engaged in affirmative misconduct wrote to
Northridge on February 19, 2015, and stated that the “[p]hysical address as listed in
business location section of CMS 8558S” was either “missing or incomplete.” P. Ex. 12 at
1. The NSC employee gave Northridge 30 days to provide the information requested. P.
Exs. 11, 12. Northridge asserts that this letter, taken in conjunction with the previous
telephone conversation earlier in February, required Northridge to provide the 9335
Reseda Boulevard address in response to this query, even though Northridge would move
to the 10515 Balboa Boulevard before the 30-day period to provide its business address
to NSC expired. See P. Ex. 19 11.

Although I must make reasonable inferences in Petitioner’s favor when considering
summary judgment, I do not agree that Petitioner’s interpretation of the February 19 letter
is reasonable. The letter clearly asked for missing or incomplete information from the
revalidation enrollment application and indicates Petitioner’s business address is one of
the items that is missing or incomplete. This was an opportunity for Petitioner to timely
provide its new address, which Petitioner failed to do.

V. Conclusion

For the reasons stated above, I grant CMS’s motion for summary judgment and affirm
CMS’s revocation of Northridge’s Medicare enrollment and billing privileges.

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Amber Mullins, NP,
(PTAN: 403844Y PPS, 403844YPPZ, 403844 YP9B)
Petitioner,
v.
Centers for Medicare & Medicaid Services
Docket No. C-16-77
Decision No. CR4528

Date: February 9, 2016

DECISION

I sustain the determination of a Medicare contractor to assign an effective Medicare
participation date of March 31, 2015, to Petitioner, Amber Mullins, NP.

I. Background

Petitioner filed a hearing request challenging her effective Medicare participation date.
She seeks an effective participation date of either September 1, 2014 or December 1,
2014. CMS moved for summary judgment. With its motion it filed proposed exhibits
that are identified as CMS Ex. 1 - CMS Ex. 17. Petitioner opposed the motion. She filed
two unidentified exhibits consisting of a record of payroll checks and a list of patients
that Petitioner asserts that she treated. I identify these exhibits as P. Ex. 1 and P. Ex. 2,
respectively. I receive both parties’ exhibits into the record.

Although CMS styled its brief as a motion for summary judgment it is unnecessary that I
treat it as such. Neither CMS nor Petitioner has offered the testimony of any witnesses.
Therefore, I decide the case based on the parties’ written exchanges.
IL. Issue, Findings of Fact, and Conclusions of Law
A. Issue

The issue is whether the Medicare contractor appropriately assigned an effective
participation date to Petitioner of March 31, 2015.

B. Findings of Fact and Conclusions of Law

The effective participation date of a Medicare supplier such as Petitioner is governed by
regulation. 42 C.F.R. § 424.520(d). The regulation provides that the effective
participation date shall be the later of the following: the date when the supplier submits a
participation application that is subsequently approved, or the date when the supplier
begins practicing at a new practice location.

In this case Petitioner submitted three applications to participate in Medicare: an
application that is dated September 1, 2014; a second application that is dated December
1, 2014; and a third application that was received by the contractor on March 31, 2015.
The contractor did not receive the first two applications until January 7, 2015. CMS Ex.
7; CMS Ex. 8; CMS Ex. 13 at 2.

The contractor rejected Petitioner’s first two applications because they were incomplete
and Petitioner did not provide requested supplemental information. CMS Ex. 7; CMS
Ex. 8; CMS Ex. 13 at 2; CMS Ex. 16; CMS Ex. 17. Petitioner does not challenge the
contractor’s rejection of either of these applications. She offers neither evidence nor
argument to suggest that the contractor rejected them incorrectly. The contractor
eventually accepted the third application and assigned Petitioner an effective participation
date of March 31, 2015, because it had “subsequently approved” the application that it
had received on that date.’

The foregoing facts establish the contractor’s determination to be correct. The earliest
effective participation date that the contractor could have assigned to Petitioner was
March 31, 2015, based on the contractor’s acceptance of the application that it received
on that date. The contractor could not assign Petitioner an effective date based on either
of Petitioner’s previously filed applications because those applications undisputedly were
incomplete and were ultimately rejected by the contractor when Petitioner failed to
provide requested supplemental information.

Petitioner essentially makes equitable arguments in support of her contention that she
should be assigned an earlier effective participation date than March 31, 2015. She

' As a consequence, Petitioner was entitled to claim reimbursement for Medicare items
or services that she provided beginning on March 1, 2015. 42 C.F.R. § 424.521.
argues that: she provided appropriate medical care to patients, including beneficiaries
prior to March 1, 2015; that her employer has a history of complying with CMS
requirements and that it did not receive a “timely notice” of a missing form; and that
Petitioner had intended all along to be “credentialed” for participation in Medicare as of
September 2014. Essentially, Petitioner asserts that she acted in good faith, that any
errors that were made in filing the applications were unintentional, and that it would be
inequitable to deny her reimbursement for legitimate services that she provided to
beneficiaries.

As a general rule I do not have the authority to consider equitable arguments. More
important, however, is that Petitioner has provided me with no evidence or argument that
suggests that the contractor incorrectly applied the requirements of 42 C.F.R.

§ 424.520(d) to the facts. To reiterate: Petitioner did not file an application until March
31, 2015 with the contractor that the contractor was able to accept. In light of that and
the regulation’s requirements, the contractor was required to assign a March 31, 2015
effective participation date to Petitioner.

/s/
Steve T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Jason Lee Frazier,
(O.L. File No. H-15-40960-9),

Petitioner,
v.
The Inspector General.
Docket No. C-15-3557
Decision No. CR4527

Date: February 9, 2016

DECISION

Petitioner, Jason Lee Frazier, was a licensed professional counselor in the State of
Oklahoma. He pled guilty to felony counts of Medicaid fraud and identity theft. Based
on this, the Inspector General (I.G.) has excluded him for five years from participating in
Medicare, Medicaid, and all federal health care programs, as authorized by section
1128(a)(1) of the Social Security Act (Act). Petitioner appeals the exclusion. For the
reasons discussed below, I find that the I.G. properly excluded Petitioner Frazier and that
the statute mandates a minimum five-year exclusion.

Background

Ina letter dated May 29, 2015, the LG. notified Petitioner that he was excluded from
participating in Medicare, Medicaid, and all federal health care programs for a period of
five years because he had been convicted of a criminal offense related to the delivery of
an item or service under the Medicare or state health care program. The letter explained
that section 1128(a)(1) of the Act authorizes the exclusion. I.G. Ex. 1. Petitioner
requested review.
Each party submitted a written argument (I.G. Br.; P. Br.). The IG. submitted six
exhibits (I.G. Exs. 1-6). In the absence of any objection, I admit into evidence I.G. Exs.
1-6.

The parties agree that an in-person hearing is not necessary. LG. Br. at 10; P. Br. at 2.
Discussion

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

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

Here Petitioner Frazier was a professional counselor, working under contract with the
Oklahoma Medicaid agency. He provided psychotherapy services to children who were
Medicaid beneficiaries. The state Medicaid agency required him to meet face-to-face
with the children and their families. IG. Ex. 3. He moved to Hawaii and continued
billing the Oklahoma Medicaid program for counseling services. According to Petitioner
Frazier, he communicated with his clients by means of telephone, text-messaging, and
Skype. I.G. Ex. 3. He admitted that he also fraudulently used the identities of others in
submitting claims. LG. Ex. 5 at 6.

On April 11, 2014, Petitioner Frazier was charged with state felony counts of Medicaid
fraud and identity theft. I.G. Ex. 4. He pled guilty to both charges, and, on January 12,
2015, the state court accepted his plea. I.G. Exs. 5, 6. The court granted him a deferred
sentence, placed him on three years unsupervised probation, and ordered him to pay
$23,145.66 in restitution and $16,854.34 in fines and investigative fees. I.G. Ex. 6. The
court also ordered that he not submit any claims to the Oklahoma Medicaid program
during his probationary period. LG. Ex. 6.

Petitioner admits that he was convicted of a crime for which exclusion is required, but
complains about the length of his exclusion. He maintains that he paid all the ordered
restitution and has not practiced therapy for almost two years. P. Br. at 3. But the statute
mandates exclusion for a minimum period of five years and provides me no discretion to
alter that period. Act ยง 1128(c)(3)(B); 42 C.F.R. ยง 1001.102(a).

' T make this one finding of fact/conclusion of law.
Conclusion

Because he was convicted of a criminal offense related to the delivery of an item or
service under a state health care program (Medicaid), Petitioner Frazier must be excluded
from participation in Medicare, Medicaid, and all federal health care programs for a
minimum period of five years.

/s/
Carolyn Cozad Hughes
Administrative Law Judge