Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Hatem M. Dajani, M.D.,
Petitioner,
v.
Centers for Medicare & Medicaid Services.

Docket No. C-14-90
Decision No. CR3612

Date: January 30, 2015

DECISION

The Centers for Medicare & Medicaid Services (CMS), through its administrative
contractor Wisconsin Physicians Service Insurance Corporation (WPS), determined to
revoke Petitioner Hatem M. Dajani, M.D.’s Medicare enrollment and billing privileges
pursuant to 42 C.F.R. § 424.535(a)(3). WPS took this action based on Petitioner’s July
16, 2009 guilty plea to a wire fraud offense, which WPS determined was detrimental to
the best interests of the Medicare program and its beneficiaries. WPS imposed a three-
year re-enrollment bar commencing on the date of Petitioner’s conviction.

For the reasons set forth below, I sustain the revocation of Petitioner’s enrollment and
billing privileges as of July 16, 2009. I have no authority to consider whether a three-
year re-enrollment bar is appropriate because the imposition and duration of a re-
enrollment bar is not an appealable initial determination.

I. Procedural Background

WPS revoked Petitioner’s Medicare enrollment and billing privileges on June 20, 2013,
effective July 16, 2009. WPS cited 42 C.F.R. § 424.535(a)(3) as the basis for the
revocation. WPS stated that it took this action because on July 16, 2009 Petitioner pled
guilty to wire fraud. CMS Ex. 1. WPS imposed a three-year re-enrollment bar
commencing on July 16, 2009, the date of Petitioner’s conviction. CMS Ex. 1; 42 C.F.R.
§ 424.535(c).

On June 27, 2013, Petitioner requested reconsideration. CMS Ex. 2. On August 12,
2013, a WPS hearing officer upheld the revocation. In evaluating the evidence, the
hearing officer explained that:

According to our records on July 16, 2009, you pleaded guilty to wire
fraud. This offense has been determined to be detrimental to the best
interest of the program and its beneficiaries. The reconsideration request
indicated that you were granted unrestricted Medicare privileges to practice
medicine when you joined Riverview Hospital in Wisconsin Rapids. WPS
Medicare only received a CMS-855R application for you to join this group.
We did not receive a CMS-855] application reporting the adverse legal
action.

The hearing officer then determined that Petitioner “has not provided evidence to show
that you have fully compliance [sic] with the standards for which you were denied.
Therefore we cannot grant you access to the Medicare Trust Fund (by way or issuance) of
a Medicare number.” CMS Ex. 3.

Petitioner filed a timely request for hearing on October 10, 2013. Petitioner does not
dispute that he was convicted, but he raises equitable and other defenses discussed below.
The case was assigned to me for hearing and decision on October 28, 2013, and I issued
an Acknowledgment and Pre-hearing Order (Order) on that date. In the Order, I set dates
for the parties to exchange arguments and evidence. I informed the parties that I would
only schedule a hearing if a party filed written direct testimony, and the opposing party
then requested cross-examination. Order § 10.

On December 2, 2013, CMS filed a motion for summary judgment and pre-hearing brief
(CMS Br.), accompanied by 41 exhibits (CMS Exs. 1-41). CMS did not list any
witnesses or file written direct testimony. Petitioner did not object to CMS’s exhibits,
and I admit CMS Exs. 1-41.

On January 6, 2014, Petitioner filed a cross-motion for summary judgment and pre-
hearing brief (P. Br.), accompanied by four exhibits (P. Exs. 1-4), including Petitioner’s
written direct testimony.' CMS did not object to Petitioner’s exhibits, and I admit P. Exs.
1-4.

' Petitioner also filed a motion to strike CMS’s motion for summary judgment and pre-
hearing brief, arguing that CMS’s pre-hearing exchange was untimely filed on December
2, 2013, because my Order stated it must be filed on or before December 1, 2013. I deny
On January 15, 2014, CMS responded to Petitioner’s motion to strike CMS’s pre-hearing
brief and motion for summary judgment. On January 27, 2014, CMS responded to
Petitioner’s cross-motion for summary judgment and pre-hearing brief (CMS Response).
CMS did not request to cross-examine Petitioner.

While reviewing the briefs and exhibits, I discovered a discrepancy between WPS’s
initial determination to revoke Petitioner’s enrollment and billing privileges and the WPS
hearing officer’s reconsidered determination. The hearing officer’s determination did not
refer to “revocation” of Petitioner’s enrollment and billing privileges but rather to a
“denial” of enrollment under 42 C.F.R. § 424.530(a)(3). To address this inconsistency, I
gave the parties the opportunity to file supplemental briefs. November 7, 2014 Order for
Supplemental Briefing (Supplemental Order).

Based on the joint stipulations the parties then filed, I decide this case based on a June 20,
2013 revocation of Petitioner’s enrollment and billing privileges under 42 C.F.R.

§ 424.535. My Order states that I will only hold a hearing if a party files admissible
written direct testimony and the opposing party asks to cross-examine the witness. Order
4] 10. I do not find it necessary to convene an in-person hearing here because CMS did
not file admissible written direct testimony, and CMS has not asked to cross-examine
Petitioner, the only witness for whom Petitioner filed written direct testimony.
Accordingly, the record is closed. Having considered all of the documentary evidence, I
issue this decision based on the full merits of the written record and find it unnecessary to
rule on summary judgment. Order {fj 10, 11.

IL. Discussion
A. Issues

1. Whether CMS is authorized to revoke Petitioner’s Medicare enrollment
and billing privileges; and, if so,

2. Whether I have the authority to consider Petitioner’s three-year re-
enrollment bar.

Petitioner’s motion. December 1, 2013 was a Sunday. The Civil Remedies Division
Procedures reflect that a document is filed timely if it is filed on the next business day
after a Saturday, Sunday, or legal holiday.
B. Substantive Background

The facts that follow are not disputed unless otherwise noted. Petitioner is both a
pharmacist (receiving his pharmacy degree in 1998) and a medical doctor (receiving his
medical degree in 2005). CMS Ex. 13, at 26, 33. Petitioner is licensed to practice
medicine in Indiana, Ohio, and Wisconsin. CMS Ex. 40, at 1-5. This case concerns
Petitioner’s felony conviction for wire fraud and its impact on his Medicare enrollment
and billing privileges.

On December 3, 2014, the parties filed joint stipulations, agreeing that:

1. WPS issued two separate determinations based upon the same felony
conviction, which CMS found . . . to be a detrimental felony offense:

(i) a June 5, 2013 denial of Dr. Dajani’s enrollment application under

42 C.F.R. § 424.530(a)(3)(i)(B); and (ii) a June 20, 2013 revocation under
42 CFR. § 424.535(a)(3)(i)(B). CMS Exs. 1 & 39.

2. Dr. Dajani requested reconsideration of the June 20 revocation.

3. The August 12, 2013 decision states that the WPS Hearing Officer
interpreted the reconsideration request as seeking reconsideration of the
prior June 5 denial.

4. In her August 12, 2013 decision, the Hearing Officer found that
Dr. Dajani’s felony offense “has been determined to be detrimental to the
best interest of the program and its beneficiaries.” CMS Ex. 3, at 1.

5. By January 2014, the parties had fully briefed cross-motions for
summary judgment as to whether this Tribunal should uphold the June 20
revocation.

6. As reflected in this Tribunal’s order of November 7, 2014, there have
been subsequent developments in the Board’s guidance regarding appeals
from reconsideration determinations under 42 C.F.R. § 498.5(/)(2).

7. The parties believe that ruling on the pending cross-motions regarding
the June 20 revocation would preserve their resources and the resources of
this Tribunal, rather than remanding or dismissing the matter until such
time as the hearing officer issues a reconsideration decision that expressly
addresses the June 20 revocation decision.

8. Thus, the parties agree that the ALJ’s review of the June 20 revocation
decision, without reference to any errors and omissions in the hearing
officer’s August 12 reconsideration decision, would not constitute
prejudicial error to either party under the specific circumstances of this
case.

9. As for the reenrollment bar imposed in the June 20 revocation
determination (and not the June 5 denial determination), the parties
disagree as to whether this Tribunal could or should review or revise the
reenrollment bar.

10. However, the parties agree that the ALJ may address their respective
jurisdictional and other arguments regarding the reenrollment bar without
reference to the hearing officer’s decision, or any statements or omissions
therein.

For the foregoing reasons, the Parties ask that this Tribunal proceed with
addressing the Parties’ pending cross-motions for summary judgment.

While an internal medicine resident in Wisconsin, Petitioner also worked part-time as a
staff pharmacist for Walgreens, a drug store chain, at various locations in Wisconsin.
CMS Ex. 20, at 47-48. After his residency, Petitioner moved to Ohio for a cardiology
fellowship, but he continued to bill Walgreens for hours that he did not work. Walgreens
discovered the fraud, and on March 26, 2009, the U.S. Attorneys’ office for the Northern
District of Ohio filed a criminal information against Petitioner alleging one count of wire
fraud (18 U.S.C. § 1343). CMS Ex. 5. The information specifically alleges that:

From on or about May 12, 2008, through on or about October 6, 2008, in the
Northern District of Ohio . . . and elsewhere . . . [Petitioner] devised and executed
a fraudulent scheme whereby he would call his Walgreen’s home store in
Oconomowoc, Wisconsin, and report hours he had purportedly worked along with
the store location. In fact, as the defendant well knew and believed, he had not
worked any hours for Walgreen’s during that period of time.

CMS Ex. 5, at 1-2. Walgreens paid Petitioner $86,517.61 in gross wages to which he
was not entitled based on Petitioner’s false reports. CMS Ex. 5, at 2.

On April 16, 2009, Petitioner pled guilty to felony wire fraud, a Class C felony offense,
punishable by a maximum sentence of up to 20 years imprisonment (or longer, in certain
circumstances) (18 U.S.C. §§ 1343, 3559(a)(3)). CMS Ex. 4, at 2; CMS Ex. 6, at 8. On
July 16, 2009, the presiding judge entered a judgment of conviction, sentencing Petitioner
to two years of probation. CMS Ex. 7, at 2-3. On July 30, 2010, Petitioner moved to
terminate the remainder of his probation, and on August 4, 2010, the judge granted the
motion. CMS Ex. 8, at 1; CMS Ex. 9, at 1.
Petitioner continued to work as a cardiology fellow in Ohio through March 2010 but had
to resign because of his conviction. CMS Ex. 13, at 26, 35; CMS Ex. 20, at 39, 47. From
November 2008 through November 2009, in addition to his work as a cardiology fellow,
Petitioner also worked as a /ocum tenens at various Ohio hospitals. CMS Ex. 13, at 26;
CMS Ex. 20, at 47.

Petitioner did not lose his medical licenses based on his conviction. Wisconsin took no
action on his license (CMS Ex. 13, at 36); Ohio imposed a 30-day stayed suspension
(CMS Ex. 16, at 3-6) and required him to provide a copy of the stayed suspension order
to current and future employers and “third party payors” (Medicare is a third party
payor); and Indiana put him on “indefinite probation” and required him to comply with
Ohio’s order. On September 21, 2012, Indiana ended Petitioner’s probation. CMS Ex.
38, at 13-14; Hearing Request at 24-29.

Following his guilty plea, Petitioner filed several Medicare enrollment applications (the
CMS Form 8551 individual enrollment application and CMS Form 855R reassignment
application) with Medicare contractors serving Indiana, Ohio, and Wisconsin. The CMS
Form 855] application specifically asks, in Section 3, if an applicant has had any final
adverse legal actions (such as convictions, exclusions, revocations and suspensions) taken
against them. Specifically with regard to a conviction for a felony financial crime,
Section 3 cites as financial crimes “extortion, embezzlement, income tax evasion,
insurance fraud and other similar crimes for which the individual was convicted,
including guilty pleas and adjudicated pre-trial diversions ....” E.g., CMS Ex. 13, at 9.
If an applicant answers “yes” to this question, the applicant is instructed to report on the
form “each final adverse action, when it occurred, the Federal or State agency or the
court/administrative body that imposed the action, and the resolution, if any.” Jd. at 10.
The applicant must also “[a]ttach a copy of the final adverse action documentation and
resolution.” Jd. In contrast, the 855R, which pertains to the reassignment of benefits,

does not ask about adverse legal actions or contain a requirement equivalent to Section 3
of the 8551.

Petitioner did not specifically list his guilty plea or felony conviction in Section 3 on any
of the 855Is he submitted to Medicare contractors after his guilty plea, nor did he attach a
copy of the court’s July 16, 2009 judgment of conviction. Instead, he enclosed
documents generally referencing his criminal proceedings. Specifically:

e Approval of Petitioner’s April 2009 Ohio enrollment application:
Petitioner signed certification statements in an 8551 and 855R as of April 10,
2009, and submitted them to Palmetto GBA, a Medicare contractor, six days
before he pled guilty. CMS Exs. 10, at 19; 11, at 2-3. Petitioner indicated in
Section 3 of the 855] that he had no adverse legal actions to report. CMS Ex.
10, at 9. Petitioner submitted the applications to the Medicare contractor,
Palmetto GBA, on April 24 and the contractor received them on April 27.
CMS Exs. 11, at 9; 12, at 9. Petitioner’s conviction occurred on July 16,
2009. Medicare regulations require physicians to report adverse legal actions
within 30 days. 42 C.F.R. § 424.516(d)(1)(ii). Petitioner did not amend
Section 3 of the 855] to reflect his guilty plea. According to CMS, CGS
Administrators, Palmetto GBA’s successor in Ohio, found no evidence that
Petitioner ever reported the felony conviction to Ohio Medicare. CMS Br.

at 6. Petitioner does not assert that he reported his conviction to Palmetto
GBA within 30 days of the conviction. Instead, Petitioner argues that he did
not report the conviction within 30 days because he was no longer practicing
in Ohio at that time. P. Br. at 5. However, evidence of record suggests that he
was practicing medicine in Ohio until at least March 2010. CMS Ex. 8, at 2;
CMS Ex. 13, at 26, 35; CMS Ex. 20, at 39, 47; P. Ex. 2, at 1; Hearing Request
at 4n.6; 5 n.9.

¢ Denial of Petitioner’s July 15, 2010 Wisconsin enrollment application:
Petitioner signed and submitted an 855I and 855R to WPS.” CMS Exs. 13;
14. Petitioner marked a box on the 855] that he had a final adverse action
taken against him, but he did not specifically list his July 16, 2009 conviction
and wrote “See Attached” in Section 3. CMS Ex. 13, at 10. In the attachment
he included a statement discussing his conviction and letters supporting him
which apparently were sent to the Ohio Board in response to potential
disciplinary action the Ohio Board might take against him as a result of his
conviction. CMS Ex. 13, at 35-40. The Ohio Board’s order itself, however,
was not sent to WPS until July 28, 2010. CMS Ex. 15; see CMS Ex. 16 (Ohio
Board letter of July 14, 2010 forwarding certified copies of Ohio Board
documents, including the Board’s order, to Petitioner). Based on these
documents, by letter dated September 24, 2010, WPS denied Petitioner’s
application based on his 2009 felony conviction. CMS Ex. 17, at 1; CMS Ex.
18, at 1.

e Approval of Petitioner’s September 28, 2010 Indiana enrollment
application: Petitioner signed and submitted an 8551 and 855R to National
Government Services (NGS), a Medicare contractor. CMS Exs. 19, 20.

In Section 3 of the 855] he did not list his July 16, 2009 conviction but did list

> Petitioner states that he did not disclose the Ohio Board’s July 14, 2010 order
(imposing a 30-day suspension and requiring him to provide a copy of the stayed
suspension order to current and future employers and third party payors) to WPS because
Section 3 only requires disclosure of “Final Adverse Actions” regarding exclusions,
revocations or suspensions, and the Ohio Board did not suspend his medical license.

P. Br. at 6-7. In this decision I need only focus on whether CMS was authorized to
revoke Petitioner’s enrollment and billing privileges based on his conviction.
the July 14, 2010 Ohio Board’s stayed suspension of his medical license.
CMS Ex. 20, at 14. He also enclosed a copy of the Ohio Board’s order
referencing his wire fraud conviction and other documents referencing the
conviction but did not attach a copy of the court’s judgment itself. NGS
received the applications on October 1, 2010. CMS Exs. 19, 20. In reviewing
Section 3, an NGS agent apparently questioned Petitioner’s reported “stayed
suspension” adverse action, and when consulted, another NGS agent
apparently decided that Petitioner was “ok, as long as his IN license is ok and
not on the GSA or OIG List. He has several active OH ptans, so he should be
ok.”? CMS Ex. 21, at 8. NGS then approved his Medicare enrollment in
Indiana. CMS Ex. 22. Petitioner later submitted an 855R to reassign his
benefits and NGS approved the application. CMS Exs. 23, 24.

¢ Denial of Petitioner’s June 6, 2012 Indiana revalidation application: NGS
received Petitioner’s revalidation 855I on June 11, 2012. CMS Ex. 26.
Petitioner did not explicitly disclose his July 16, 2009 conviction in Section 3.
CMS Ex. 26, at 15. The application lists only his “stayed suspension” of July
14, 2010. CMS Ex. 26, at 15. Section 17 of the application instructed that he
must submit a copy of any final adverse action document. While he enclosed
a copy of the July 14, 2010 Ohio Board’s order and other documents
referencing the criminal proceedings, he did not submit a copy of the criminal
judgment. CMS Ex. 26, at 35-42. After reviewing the submission, on June
14, 2012, NGS requested additional information, including a specific request
regarding Section 3 of the 855I to “complete the section as necessary.” CMS
Ex. 28. On June 26, 2012, NGS sent a letter to Petitioner’s employer that it
had processed Petitioner’s original revalidation application. CMS Ex. 29.
However, in November 2012, Petitioner’s employer submitted a revised
revalidation 8551 to NGS’s successor, WPS. Petitioner signed this document
as of October 31, 2012. CMS Ex. 38. In Section 3 he listed only the July 14,
2010 stayed Ohio Board suspension, not his felony conviction. Again, he did
not include a copy of the court’s judgment. CMS Ex. 38, at 6, 13-29. On
June 5, 2013, WPS informed Petitioner that his application was denied. WPS
denied the November 2012 revalidation application pursuant to 42 C.F.R.
§ 424.530(a)(3). WPS noted specifically that “On July 16, 2009 you plead
[sic] guilty to wire fraud. You are still within 10 years of the felony. It is for

> Petitioner argues that I should not consider these communications because they are
hearsay and do not prove anything. P. Br. at 8. 1am not precluded from considering
hearsay in this administrative proceeding. In determining its weight, I consider “the
degree of [its] reliability, based on relevant indicia of reliability and whether the hearsay
is corroborated by other evidence in the record as a whole.” Gateway Nursing Ctr., DAB
No. 2283, at 6 (2009), citing Omni Manor Nursing Home, DAB No. 1920, at 17 (2004).
this reason your application is denied and revalidation cannot occur.” CMS
Ex. 39, at 1.

Approval, and then Denial, of Petitioner’s 2012 Wisconsin Applications:
On August 24, 2012, WPS received an 855R to reassign Petitioner’s Medicare
benefits to Riverview Hospital Association (Riverview). WPS found a
problem with the application because Petitioner was not enrolled in Wisconsin
and had not included an 8551. CMS Ex. 31. On September 4, 2012, WPS
requested an 855] for the Riverview location. CMS Ex. 32. However, on
August 29, 2012, Petitioner signed and submitted an 8551 and 855R for
another Wisconsin location, the Mayo Clinic Health System — Franciscan
Medical Center (Franciscan). CMS Exs. 33, 34. Petitioner did not list his
felony conviction in Section 3 of the 8551. In fact, he did not list any adverse
legal action against him, checking “No” when asked whether he had a final
adverse legal action taken against him. CMS Ex. 33, at 6. After receiving the
855I for Franciscan, WPS decided to forego its earlier request for an 8551 for
Riverview. On September 19, 2012, WPS approved the Franciscan
application, and on September 20, 2012, the Riverview application. CMS Ex.
31, at 4; CMS Ex. 33, at 5, 9; CMS Ex. 35; CMS Ex. 36; CMS Ex. 37.
Petitioner asserts that he does not know why the information regarding his
conviction was not included in the Franciscan 8551 application. He explains
that his employer prepared the 855], and he asserts that he was only provided
“the last page to sign by the hospital administrative staff at the Mayo Clinic at
the time the packet was submitted to WPS.” P. Ex. 1, at 2. In the 8551,
Petitioner certified by his signature that, among other things, he “read the
contents of [the] application, and the information contained herein is true,
correct, and complete.” Petitioner also certified that he read and understood
the penalties for falsifying information and that the “deliberate omission,
misrepresentation, or falsification of any information contained . . . [in the
application] . .. may be punished by criminal, civil, or administrative
penalties ....” CMS Ex. 33, at 8-9. Although he acknowledges it was his
responsibility to ensure the accuracy of the information contained in his
enrollment application, he asserts that he believed the hospital, which had
knowledge of his conviction, would submit the appropriate documentation to
WPS. He explains he was surprised to learn his supplemental information had
not been submitted. However, he asserts that WPS already had information
regarding his conviction, as it denied his July 2010 application based on that
application. P. Br. at 11-13; P. Ex. 1, at 2.

10

C. Findings of Fact and Conclusions of Law

An Administrative Law Judge’s proper role under section 424.535(a)(3) is to determine
whether CMS has sufficient legal grounds for a revocation determination. Abdul
Razzaque Ahmed, M.D., DAB No. 2261, at 17 (2009), aff'd, Ahmed v. Sebelius, 710 F.
Supp. 2d 167 (D. Mass. 2010). To uphold revocation under 42 C.F.R. § 424.535(a)(3), I
must find that Petitioner was: 1) convicted of a felony offense; 2) that CMS has
determined to be detrimental to the best interests of the Medicare program and its
beneficiaries; and 3) that occurred within 10 years of his Medicare enrollment or the
revalidation of his enrollment. See Abdul Razzaque Ahmed, M.D., 710 F. Supp. 2d 167,
173; Fady Fayad, M.D., Docket No. 2266 (2009). If CMS proves this, and “the
supplier’s conviction was the basis for the challenged revocation,” then I must “sustain
the revocation, regardless of other factors, such as the scope or seriousness of the
supplier’s criminal conduct and the potential impact on Medicare beneficiaries,
[considerations] that CMS might reasonably have weighed in exercising its discretion.”
Fayad, DAB No. 2266, at 16, citing Ahmed, DAB No. 2261, at 16-17, 19. I “may not
substitute [my] discretion for that of CMS in determining whether revocation is
appropriate under all the circumstances.” Ahmed, DAB No. 2261, at 19. The crime need
not be based on the specific crimes enumerated in 42 C.F.R. § 424.535(a)(3)(i)(A)-(D),
and CMS is not precluded “from making a case-specific, or adjudicative, determination
that a crime or category of crime not specified in the regulation is detrimental to the best
interests of Medicare.” Fayad, DAB No. 2266, at 8.

Revocation based on a felony conviction is effective on the date of the conviction. 42
C.F.R. § 424.535(g). Petitioner, a physician, is considered a supplier to Medicare. 42
C.F.R. § 400.202. After CMS revokes a supplier’s enrollment and billing privileges, the
supplier cannot participate in Medicare from the effective date of the revocation until the
end of the re-enrollment bar. The re-enrollment bar must last for a minimum of one year
but cannot exceed three years. 42 C.F.R. § 424.535(c). When a supplier’s billing
privileges are revoked, any “agreement in effect at the time of revocation is terminated
effective with the date of revocation.” 42 C.F.R. § 424.535(b).

1. Petitioner was convicted of a federal felony offense.

The record shows, and Petitioner does not dispute, that on April 16, 2009, Petitioner pled
guilty to a committing wire fraud, a Class C felony offense. CMS Ex. 4, at 2; CMS Ex.
6, at 8. On July 16, 2009, the presiding Judge entered a judgment of conviction and
sentenced Petitioner to two years of probation. CMS Ex. 7, at 1-3; P. Hearing Request;
P. Br.
11

2. Petitioner’s conviction occurred within 10 years preceding Petitioner’s
enrollment or revalidation of enrollment.

Petitioner’s July 16, 2009 conviction occurred within 10 years preceding WPS’s June 20,
2013 revocation of Petitioner’s Medicare enrollment and billing privileges.

3. Petitioner’s felony offense is a financial crime under 42 C.F.R.
§ 424.535(a)(3)(i)(B).

CMS determined, and I agree, that Petitioner’s conviction for wire fraud is for a financial
crime, and I “must treat a revocation based on that crime as a reasonable and permissible
exercise of the discretion granted to [CMS] under section 424.535(a)(3)[.]” Ahmed, DAB
No. 2261, at 11-12 citing Letantia Bussell, M.D., DAB No. 2196, at 9-10, 12-13 (2008).
Further, Petitioner does not dispute in either his hearing request or his brief that his
conviction is for a financial crime pursuant to 42 C.F.R. § 424.535(a)(3)(i)(B).

4. CMS’s determination to revoke Petitioner, because Petitioner’s felony
offense is detrimental to the best interests of the Medicare program
and its beneficiaries, was within CMS’s discretion, and I may not
review its decision to exercise that authority.

Petitioner disputes that his felony offense is detrimental to the best interests of Medicare.
He asserts that that his felony offense was an aberration and that he is trustworthy enough
to be enrolled in Medicare. Petitioner stresses that the judge who presided over his
criminal case placed Petitioner on probation and “recognized that [Petitioner’s] actions
were an unfortunate departure from an otherwise exemplary life, and . . . [the judge]
believed that [Petitioner] deserved the opportunity to practice medicine.” P. Br. at 19.
Petitioner asserts that his inability to participate in Medicare will severely limit his ability
to practice medicine and thus frustrate the judge’s goals for him. Moreover, the Indiana,
Ohio, and Wisconsin medical licensing Boards all supported his continued practice of
medicine because they did not suspend or revoke his licenses. He argues further that
private insurance companies still approved his applications notwithstanding his felony
conviction. P. Br. at 1, 19-20.

Petitioner further asserts that his felony offense did not impact the Medicare program or
its beneficiaries, and his revocation will deny his Medicare patients access to his quality
medical care. Petitioner stresses that CMS should have considered the “forthright and
honest manner in which he accepted responsibility for his actions and how he went the
“extra mile’ to report his convictions.” P. Br. at 1-2. Petitioner disputes CMS’s
suggestion that by submitting multiple enrollment applications Petitioner is trying to trick
Medicare or slip through a crack in the system. Petitioner argues that instead he is
“desperate[ly]” attempting “to gain employment, put his past behind him and try[ing] to
become a contributing member of society.” P. Br. at 13.

12

CMS has decided to revoke Petitioner because Petitioner’s felony fraud offense is
detrimental to the Medicare program, and I have no authority to question its exercise of
discretion here. Petitioner, while employed as a pharmacist and thus a health care
professional, fraudulently obtained money from his employer by claiming remuneration
for hours he did not work. It is reasonable for CMS to question whether it should allow
him the privilege of direct billing for Medicare beneficiaries. Even assuming Petitioner’s
conduct did not directly harm the Medicare program or its beneficiaries, CMS’s decision
to revoke his enrollment and billing privileges need not be based solely on a specific act
or acts directly harming the program. See Lorrie Laurel, PT, DAB No. 2524, at 4-5
(2013).

Petitioner’s argument that his enrollment and billing privileges should not be revoked
because other entities such as state licensing boards and insurers chose not to sanction
him, because others support his continued practice of medicine, and because his patients
will lose his services, does not compel Medicare to enroll him. While Petitioner asserts
that he has been “forthright” and “honest” and went the “extra mile” in reporting his
conviction to Medicare, Petitioner’s assertions are not persuasive. In none of the 855Is
he filed following his conviction did he specifically cite his conviction. Further, in none
of the attachments to his 855Is did he attach a copy of the judgment of conviction.
Petitioner argues that hospital employers who completed his enrollment applications
failed to accurately respond to Section 3 of his enrollment applications, without
Petitioner’s knowledge and contrary to his instructions. P. Br. at 15 n.4. However, an
applicant for Medicare enrollment must not be able to shirk responsibility for application
responses by blaming a third-party assistant or employer. Petitioner specifically certified to
the truthfulness of those statements in his applications.

5. CMS is not estopped from revoking Petitioner’s enrollment and billing
privileges.

Petitioner argues that revocation of his enrollment and billing privileges is inappropriate
because NGS approved his Indiana participation in Medicare on October 1, 2010,
approved his reassignment on February 11, 2011, and revalidated his enrollment on June
26, 2012. He states all of these enrollment actions took place following his felony
conviction and with the contractor’s full knowledge of the conviction.’ Petitioner
stresses that WPS enrolled him in Wisconsin with knowledge of his felony offense
because it had once denied him enrollment based on the felony offense. By approving his

4 Petitioner also clarifies that, contrary to the June 20, 2013 notice of revocation,
Petitioner did not continue to bill Medicare for services he provided after the date of a
loss of licensure because his licenses to provide health care in Indiana, Ohio, and
Wisconsin were never suspended or revoked in those states. P. Br. at 16.

13

participation, Petitioner argues that the contractors and CMS waived the ability to later
revoke his enrollment and billing privileges. P. Br, at 10-15.

Petitioner also explains how he relied on the approval of his enrollment application,
submitted Medicare claims, and now may be subject to an overpayment and may have to
re-pay the claims. This is particularly unfair in Petitioner’s view as the Medicare
contractors involved had the discretion not to revoke or deny his applications. See P. Br.
at 11-12, 15, 17. These arguments amount to a claim of equitable estoppel.

To establish a claim of equitable estoppel:

[T]he party seeking relief must, at minimum, show that the traditional
requirements for estoppel are present (i.e., a factual misrepresentation by the
government, reasonable reliance on the misrepresentation by the party seeking
estoppel, and harm or detriment to that party as a result of the reliance) and that
the government’s employees or agents engaged in “affirmative misconduct.” See
Schweiker v. Hansen, 450 U.S. 785, 788 (1981); Heckler v. Community Health
Servs., 467 U.S. 51, 59 (1984); Estate of James v. U.S. Dept. of Agriculture, 404
F.3d 989, 995 (on Cir. 2005); Tennessee Dept. of Health and Environment, DAB
No. 1082 (1989).

Rosewood Living Ctr., DAB No. 2019, at 13 (2006). Petitioner has not met any of the
elements for equitable estoppel here. He does not allege CMS, or its contractors, made a
factual misrepresentation and does not assert that he relied on such misrepresentation.
There is no evidence that any government employee or agent engaged in affirmative
misconduct and no ground to find that CMS or its contractors made a knowing waiver.
Petitioner offers no precedent for CMS or the contractor having waived the ability to
revoke his enrollment and billing privileges. Rather, Petitioner’s own conduct in not
ensuring complete and accurate responses to Section 3 of the 2012 Indiana 855] and the
2012 Wisconsin 855] suggests that Petitioner understood that he was subject to denial or
revocation due to his conviction. I also do not have the authority to consider retroactive
payment consequences that CMS takes into consideration when exercising its discretion.
Laurel, DAB No. 2524, at 7-8.

6. Ihave no authority to reduce Petitioner’s three-year re-enrollment bar.

The re-enrollment bar after a revocation is a minimum of one year and a maximum of
three years. 42 C.F.R. § 424.535(c). Petitioner argues that the three-year re-enrollment
bar is not appropriate in his case because Petitioner did not wrongfully bill Medicare after
the date of his conviction. Petitioner asserts that, even assuming the revocation of his
enrollment and billing privileges is appropriate, a three-year bar as opposed to a one-year
bar is not.
14

The imposition and duration of the re-enrollment bar are not appealable initial
determinations, and thus I do not have the authority to consider them. My authority is
limited to determining whether CMS had a basis to revoke Petitioner’s enrollment and
billing privileges. See 42 C.F.R. §§ 424.535(c), 498.3(b)(17); David Tolliver, M.D.,
DAB CR2281, at 12-13 (2010).

III. Conclusion

CMS, through its contractor WPS, had a legitimate basis to revoke Petitioner’s Medicare
enrollment and billing privileges because of his July 16, 2009 conviction for wire fraud.
Accordingly, I sustain CMS’s revocation and the three-year re-enrollment bar.
Petitioner’s revocation is retroactive to his date of conviction.

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Alfredo Gonzalez Texas State Veterans Home,
(CCN: 67-6063),
Petitioner,
v.
Centers for Medicare & Medicaid Services
Docket No. C-13-35
Decision No. CR3610

Date: January 30, 2015

DECISION

This case explores (among other issues) a long-term-care facility’s obligation to respect
the rights of its residents.

Petitioner, Alfredo Gonzalez Texas State Veterans Home, is a long-term-care facility
located in McAllen, Texas, that participates in the Medicare program. Based on surveys
completed March 7, May 17, and June 7, 2012, the Centers for Medicare & Medicaid
Services (CMS) determined that the facility was not in substantial compliance with
multiple Medicare program requirements. CMS imposed no penalties for the deficiencies
cited during the March survey. However, following the May survey, it imposed five per-
instance civil money penalties (CMPs) of $2,000 apiece, and, following the June survey,
it imposed an additional $2,000 per-instance CMP, for a total of $12,000 in penalties.
Petitioner appealed.

For the reasons set forth below, I find that the facility was not in substantial compliance
with the cited program requirements and that the penalties imposed are reasonable.
I. Background

The Social Security Act (Act) sets forth requirements for nursing facility participation in
the Medicare program and authorizes the Secretary of Health and Human Services to
promulgate regulations implementing those statutory provisions. Act § 1819. The
Secretary’s regulations are found at 42 C.F.R. Part 483. To participate in the Medicare
program, a nursing facility must maintain substantial compliance with program
requirements. To be in substantial compliance, a facility’s deficiencies may pose no
greater risk to resident health and safety than “the potential for causing minimal harm.”
42 CFR. § 488.301.

The Secretary contracts with state survey agencies to conduct periodic surveys to
determine whether skilled nursing facilities are in substantial compliance. Act § 1864(a);
42 C.F.R. § 488.20. The regulations require that each facility be surveyed once every
twelve months, and more often, if necessary, to ensure that identified deficiencies are
corrected. Act § 1819(g)(2)(A); 42 C.F.R. §§ 488.20(a), 488.308.

Here, the state agency surveyed the facility in March, May, and June 2012. CMS has
imposed per-instance penalties of $2,000 for deficiencies cited under each of the
following regulations:

© 42 C.F.R. § 483.10(b)(4) (Tag F155 — rights and services) at scope and severity
level H (pattern of noncompliance that causes actual harm);

© 42C.F.R. § 483.15(a) (Tag F241 — quality of life — dignity) at scope and severity
level H;

© 42 C.F.R. § 483.15(b) (Tag F242 — quality of life — self-determination and
participation) at scope and severity level H;

© 42 C.F.R. § 483.15(g)(1) (Tag F250 — quality of life — social services) at scope and
severity level H;

© 42C.F.R. § 483.75 (Tag F490 — administration) at scope and severity level H; and

© 42 C.F.R. § 483.25(c) (Tag F314 — quality of care — pressure sores) at scope and
severity level G (isolated instance of noncompliance that causes actual harm).

Petitioner timely requested a hearing to challenge all of the deficiency findings for which
CMS imposed a remedy. The case was initially assigned to Judge Richard Smith, and,
following his departure from the Departmental Appeals Board, it was reassigned to me.
On November 6, 2013, I convened a video hearing from the offices of the Departmental
Appeals Board in Washington, D.C. Counsel and witnesses appeared in Edinburgh,
Texas. Transcript (Tr.) 4. Ms. Jennifer Mendola appeared on behalf of CMS, and Ms.
Nancy A. Shellhorse appeared on behalf of Petitioner. I have admitted into evidence
CMS exhibits (CMS Exs.) 1-3, 5-45, 48-52, 54, and 56-60 and Petitioner’s exhibits (P.
Exs.) 1-17. Tr. 6.

The parties have filed pre-hearing briefs (CMS Pre-hrg. Br.; P. Pre-hrg. Br.) and post-
hearing briefs (CMS Post-hrg. Br.; P. Post-hrg. Br.).

II. Issues
The issues before me are:

1. Was the facility in substantial compliance with the following program
requirements:

© 42CFR. § 483.10(b)(4) (Tag F155);
© 42CFR. § 483.15(a) (Tag F241);
© 42CFR. § 483.15(b) (Tag F242);
© 42CFR. § 483.15(g)(1) (Tag F250);

¢ 42.CF.R. § 483.75 (Tag F490); and

© 42CF.R. § 483.25(c) (Tag F314)

2. If the facility was not in substantial compliance with the cited regulations, are
the penalties imposed — $2,000 per-instance for each deficiency — reasonable?!

' In its closing brief, CMS argues, for the first time, that the facility’s deficiencies posed
immediate jeopardy to resident health and safety. CMS Post-hrg. Br. at 11. But the
deficiencies were cited at lower levels of scope and severity. CMS has not explained its
apparent change in position nor provided adequate notice that it would argue a new issue,
so the question of scope and severity is not properly before me. Even if it were, my
authority to review CMS’s scope and severity findings (which include a finding of
immediate jeopardy) is strictly limited, and the issue would likely not be reviewable here,
where the scope and severity finding does not affect the range of the CMP or the
facility’s nurse aide training program (assuming that it even has one, which is not
(continues on next page)
II. Discussion

A, The facility was not in substantial compliance with
42 CF.R. §§ 483.10(b)(4), 483.15(a),(b), and (g)(1), and
483.75 because facility staff deceived a competent
resident about the nature of his admission, did not allow
him to formulate his own advance directive, confined
him in a locked ward without his consent, and failed to
provide him with much-needed social services.”

Program requirements: 42 C.F.R. § 483.10(b)(4) (Tag F155). Each resident has the right
to formulate an advance directive, and the facility must inform him, in writing, of his
right to accept or refuse medical treatment. If, because of an incapacitating condition or
mental disorder, an adult resident is unable to receive necessary information, the facility
may instead give the information to a family member or appropriate surrogate.

42 C.F.R. § 483.15 (Tags F241, F242, and F250). Under the quality-of-life regulation,
the facility must care for its residents “in a manner and in an environment that maintains
or enhances each resident’s dignity and respect in full recognition of his or her
individuality.” 42 C.F.R. § 483.15(a). The resident has a right to “[m]Jake choices about
aspects of his . . . life in the facility that are significant” to him (42 C.F.R. § 483.15(b));
and the facility must provide medically-related social services so that the resident may
“attain or maintain the highest practicable physical, mental, and psychosocial well-
being... .” 42 C.F.R. § 483.15(g)(1).

42 C.F.R. § 483.75 (Tag F490). The facility must be governed in a manner that enables it
to use its resources effectively and efficiently to attain or maintain the highest practicable
physical, mental, and psychosocial well-being of each resident.

Resident 1 (R1). R1 was a ninety-two-year-old man, living with his children until
November 2011, when he fractured his hip. He was treated at the Veteran’s
Administration (VA) hospital and then transferred to the facility for rehabilitation in
January 2012. The VA hospital described him as “always alert,” and never confused, not
even occasionally. CMS Ex. 8. Besides the hip fracture, his diagnoses at the time of his

apparent from the record before me). See 42 C.F.R. § 498.3(b)(14); 42 C.F.R.

§§ 498.3(b)(14), 498.3(d)(10); Cedar Lake Nursing Home, DAB No. 2344 at 9 (2010);
Evergreen Commons, DAB No. 2175 (2008); Aase Haugen Homes, DAB No. 2013
(2006).

> My findings of fact/conclusions of law are set forth, in italics and bold, in the
discussion captions of this decision.
admission to the facility included: hypertension, gastroesophageal reflux disease,
osteoporosis, coronary artery disease, depression, and history of prostate cancer. CMS
Ex. 10 at 1; P. Ex. 14 at 2 (Smith Decl. 4 6).

The facility’s admission documents described R1 as “alert.” His long and short-term
memories were “ok.” His cognitive and decision-making skills were “independent.” He
could make himself understood and understood others. CMS Ex. 7 at 3. Similarly,
nurse’s notes described him as “alert and oriented [to place, time, and person].” CMS
Ex. 27 at 1. The facility’s social worker described him as “alert and able to communicate
needs,” as well as “helpful and compliant.” CMS Ex. 16 at 3. In contrast to the
assessment included in the hospital discharge summary, she wrote in progress notes that
he had “episodes of forgetfulness/confusion.” CMS Ex. 16 at 3; CMS Ex. 25 at 1. The
file includes no explanation as to how she reached that conclusion, although her notes
indicate that R1’s daughters said that R1 had a history “of verbal abuse and sometimes is
not patient with others.” CMS Ex. 25, at 1

The daughter also said that R1 had a history of wandering. CMS Ex. 25 at 1; P. Ex. 15 at
2 (Cavazos Decl. §5). No documentation supports the assertion. An April 2011
physician assessment determined that R1 was not at risk for wandering. Among other
factors, he had no legal guardian, was not considered dangerous, was not gravely disabled
by a mental disorder, did not lack the cognitive ability to make relevant decisions, and
had no physical or mental impairments (such as dementia) that increased his risk. P. Ex.
1 at 1. He had no mood or behavioral issues, although he was on medication for
depression. CMS Ex. 16 at 4. According to the facility’s own January 18, 2012 “wander
data collection tool,” R1 had not wandered previously and was not at risk. CMS Ex. 22
at 3. His MDS (minimum data set) said the same. CMS Ex. 17 at 11; see also CMS Ex.
7 at 7 (indicating no history of wandering, no medication causing confusion or
disorientation, and no indications of dementia).

R1’s initial psychosocial assessment, dated January 12, 2012, concluded that he was
competent and able to make medical decisions for himself. He had no guardian, durable
power of attorney, or surrogate. CMS Ex. 16 at 1. The facility social worker reported
that he was free of any adjustment, mood, or behavior problem, although he was

> Petitioner claims that R1 suffered from “stage IV metastatic prostate cancer,” citing an
April 15, 2011 physician note. P. Post-hrg. Br. at 5; P. Ex. 1 at 1-2. Although that note
lists prostate cancer as a diagnosis (apparently first diagnosed in 2001), it says nothing
about stages of metastases. An October 28, 2011 dermatology note quotes R1’s daughter
as saying that R1 had “stage IV metastatic prostate cancer,” but the assertion is in
quotation marks and “stage IV metastatic” is not added to the prostate cancer diagnosis.
P. Ex. 1 at 5-6.
diagnosed with depression. The social worker indicated that R1 had no history of mental
health treatment and was not being followed by a psychiatrist, psychologist, or counselor.
CMS Ex. 16 at 1.

In assessing his cognitive abilities at the time of his admission, the facility’s (then) MDS
coordinator reported that R1 was able to complete the interview and that a mental status
assessment was not necessary. CMS Ex. 17 at 7; P. Ex. 3 at 7. He had no hallucinations
or delusions and no behavioral symptoms. Again, he presented no risk of wandering.
CMS Ex. 17 at 10-11; P. Ex. 3 at 10-11. He knew the day of the week, but not the month
or year (or did not answer when asked) and was able to repeat two of three words and to
recall them later, with cueing. CMS Ex. 17 at 6; P. Ex. 3 at 6. The MDS does not list
any neurological diagnoses, which would have included dementia had the MDS
coordinator determined that he suffered from it. CMS Ex. 17 at 17-18; P. Ex. 3 at 17-18.
R1’s later assessments yielded similar results. P. Ex. 5 at 6, 7, 10, 14-15;

The initial deception. No one seriously disputes that, at the time of his admission, R1 had
the right to know that his placement was permanent. Tr. 72 (MDS Coordinator/now
DON agrees); Tr. 88 (social worker agrees).

Yet, facility staff colluded with R1’s daughters to deceive him as to the nature of his
admission. He thought that he was there short-term for rehabilitation following his hip
and foot injuries. Tr. 86. But his daughters told the facility social worker that he was in
for the long-term because they could no longer care for him. They acknowledged to the
social worker that the resident did not know about the nature of his placement. In
progress notes dated January 12, 2012, the social worker documented their conversation,
and, from all appearances, she acquiesced in the deception. At any rate, she did not
discuss the issue with R1 at that time. CMS Ex. 25 at 1; P. Ex. 2 at 1; Tr. 77 (agreeing
that R1 did not know that his admission was long-term and admitting that she did not
discuss the issue with him); see CMS Ex. 16 at 1 (indicating that R1 would be staying in
the facility “for more than 20 days” and did not need any community referral
information).

Nor was the social worker alone in withholding from R1 this information to which he
was entitled. Although his MDS indicates that both R1 and his family participated in the
assessment, the family alone dictated that discharge was not feasible and that he would
remain in the facility. CMS Ex. 17 at 31; P. Ex. 3 at 31. Thus, according to the MDS
assessment, the MDS coordinator knew that R1’s admission was long-term. She
testified, however, that she was not aware that this was a long-term admission, and, had
she known, she’d “definitely” have told him. Tr. 72. But, as her own documentation
shows, she was aware, and she did not tell him.

Because her testimony was not consistent with her contemporaneous documentation, I
find her testimony less credible. Compare P. Ex. 3 at 31 with Tr. 72.
Until March 14, 2012 — more than two months after his initial placement and a month
after he began to complain — the facility did not add to R1’s care plan any interventions
aimed at helping him adjust to the long-term placement. P. Ex. 9 at 41.

Wanderguard and confinement. I see no evidence that R1 had any problems during his
first month in the facility. He cooperated with the rehabilitation staff and made
reasonable improvements. Progress notes dated February 16, 2012, however, describe
R1 as “upset” and wanting to go home. CMS Ex. 25 at 2; CMS Ex. 27 at 12. The social
worker spoke to his daughters, suggesting a care planning meeting at which they would
finally explain to R1 that they planned a long-term stay. The daughters declined,
claiming that they had already discussed the issue with their father and that he could
either stay at the facility or go to the VA in San Antonio. CMS Ex. 25 at 2. San Antonio
is hours away from R1’s family and everyone understood that R1 would not voluntarily
have agreed to go there. Tr. 78.

Nevertheless, the social worker and the MDS coordinator — who was also apparently a
nurse supervisor, and is identified as such in the notes — met with R1 on February 16. R1
told them that he wanted to go home but knew his daughters would not allow it. The
social worker asked if anyone else would take him, and he said that he did not think he
needed to be cared for. The social worker told him that it was dangerous to ask strangers
to take him home because he needed a doctor’s order for discharge, and his daughters
would not agree to care for him. He left the meeting, telling the social worker that he did
not plan to leave the building. CMS Ex. 25 at 3.

Aside from what she reflected in her notes, the social worker did not discuss with R1 his
adjustment to the facility, did not counsel him on services that would be available, and
did not research alternative placements. See Tr. 80. Inadequate as the February 16
discussion was, it seems to have been the first time anyone at the facility even considered
the possibility of finding an alternative placement or helping R1 adjust to his having to
remain in the facility against his will.

Immediately after the February 16 meeting, facility staff took two actions, neither of
which was compatible with regulatory requirements: 1) the social worker advised staff
that R1’s family wanted him to be “redirected” by threatening to send him to the VA
hospital in San Antonio, a move plainly designed to frighten the resident into accepting
his placement (CMS Ex. 25 at 3; Tr. 77-78); and 2) the MDS coordinator/nurse
supervisor instructed a nurse to place a Wanderguard’ on the resident. CMS Ex. 25 at 3.

* A Wanderguard system attaches sensors to exit doors and/or windows, causing them
either to lock or sound an alarm when approached by a resident wearing a corresponding
bracelet/anklet.
These actions seem to have been arrived at ad hoc. I see no evidence that the facility
considered other options. It seems that the nurse supervisor unilaterally decided to attach
the Wanderguard, and the social worker unquestioningly accepted the daughters’
suggestion that R1 be controlled by threatening to send him far away. No one even
consulted the resident, much less asked for his consent.

Facility staff added to R1’s care plan the application of the Wanderguard and dated that
entry February 16. CMS Ex. 58 at 3 (Cortez Decl.); P. Ex. 9 at 23. I see no evidence that
the issue was discussed by an interdisciplinary team, the last team conference having
been held on January 23, more than three weeks prior to this intervention. P. Ex. 9. at 1-
25. The form authorizing use of the Wanderguard is unsigned, with a note at the bottom
saying “verbal received by [a facility nurse] given by daughter... .” CMS Ex. 23.

The facility’s written policy instructed staff to discuss with the resident the need for a
Wanderguard and to obtain his written approval as well as a physician order. CMS Ex.
33 at 2. Staff did not discuss the issue with R1 and did not obtain his written approval.°

R1 met his goals and was discharged from physical therapy on February 24, 2012, able to
transfer and ambulate with a rolling walker or pushing a wheelchair. CMS Ex. 28. A

few days later, on February 27, he apparently told the receptionist that he was leaving the
facility; he no longer needed to be there because his foot had healed. The social worker
then called R1’s daughter, recommending that he be placed in the facility’s locked unit
because he was threatening to leave. Initially, his daughter balked; she did not think that
R1 would benefit from being in a locked area. According to the social worker’s note, she
told R1’s daughter that, if her father continued threatening to leave or attempted to leave,
“memory support unit placement would be determined by [the facility] for his safety.”
They scheduled a meeting for March 1. CMS Ex. 25 at 4-5.

But that meeting did not take place. Instead, on February 28, R1 told the social worker
that he was going to walk home. The social worker called his daughter, who agreed to
place her father in a locked ward. No one discussed the placement with R1, even though
he was responsible for his own medical decisions. CMS Ex. 25 at 6. The decision was
made without an additional assessment, team meeting, or consideration of less restrictive
alternatives. See CMS Ex. 58 at 2 (Cortez Decl.). The decision was made without regard
to the facility’s written policy, which required a “[p]rimary medical diagnosis of

> Although nurse’s notes document staff discussions with R1’s daughter, the record
contains no written authorization from her or anyone else. Of course, because R1 was the
only one authorized to make decisions for himself, his daughter’s written consent would
not have been sufficient.
9

Alzheimer’s Disease or related disorder.” CMS Ex. 35 at 2.° Although the facility

eventually added the intervention to R1’s care plan, t!

at hand-written entry is not dated

and was most likely written after February 28 because other entries dated February 28 are

typed. Again, the plan refers to a January 23 team co
intervention of placing the unwilling resident in a loc

nference date, so the drastic
‘ed ward was imposed without

benefit of an interdisciplinary team conference. P. Ex. 9 at 25.
The record includes a physician order authorizing the confinement “per family request,”
but it is not signed by a physician. CMS Ex. 12 at 2. Petitioner points to no
documentation of an actual conversation with R1’s physician, so I cannot tell whether
staff spoke to the physician or merely accepted the daughter’s representation that the
physician approved (which would, of course, have been inappropriate). See CMS Ex. 25
at 6; P. Ex. 14 at 3 (Smith Decl. § 12) (indicating that the social worker spoke to the
daughter who said that the physician approved, but does not claim that a nurse or anyone
else from the facility spoke to the physician); P. Ex. 15 at 3 (Cavazos Decl. J 14); CMS
Ex. 27 at 35 (nurse’s notes for February 28 that do not mention contact with the
physician).

On the same day, a state nursing home ombudsman was in the facility for a meeting. R1
complained to her about his situation. The ombudsman questioned the facility’s holding
R1 against his will and warned the social worker that the facility could not justify locking
im up in the memory support unit. CMS Ex. 25 at 6-7. When informed of the
ombudsman’s concerns by Petitioner’s Administrator, the daughter’s reluctant consent
changed to insistence that R1 be held in a locked ward. After some initial resistance (see
below), the facility complied, again without regard to the resident’s wishes.

Do Not Resuscitate (DNR) instructions
R1 was “full code.” CMS Ex. 14 at 1.
indicates “full code.” CMS Ex. 8. Ap!
code.” CMS Ex. 10 at 1; but see CMS
directive, also dated January 10, 2012,

. According to R1’s January 11, 2012 care plan,
The patient transfer form, dated January 11,
ysician order, dated January 10, 2012, says “full
Ex. 11 at 1 (indicating a “DNR” advance

but attributed to a different physician).”

® When questioned about the facility’s policy for placing people in the locked ward, the
MDS coordinator/now DON’s response was evasive, confusing, inconsistent, and not
credible. Tr. 62-68.

7 The physician order sheet identifying R1’s advanced directive as “full code” was
attributed to Dr. Hines, who was identified as R1’s “primary” physician at the time.
CMS Ex. 7 at 1. The “DNR” was attributed to Dr. Gutierrez, who was listed as his
“alternate physician.” CMS Ex. 7 at 1. Such inconsistent directives, purportedly entered
on the same day, demonstrate serious problems with the facility’s practices in

formulating advance directives in accordance with 42 C.F.R. § 483.10(b)(4).
10

The record includes a DNR order, dated January 13, 2012, which is signed by R1’s
daughter. CMS Ex. 21. Neither R1 nor any physician signed it.

In her January 12, 2012 progress note, the social worker wrote that the resident’s
daughters had selected “DNR status” for Rl. CMS Ex. 25 at 1; see CMS Ex. 21. InR1’s
initial psychosocial assessment, the social worker noted, falsely, that R1 was satisfied
with the DNR. CMS Ex. 16 at 1. In fact, no one asked or told R1 about his DNR status
until much later. But the DNR (to which he had not agreed) was incorporated into R1’s
January 23 care plan: “[R1] desires no resuscitation in the event of cardiopulmonary
arrest,” so he would receive none. P. Ex. 9 at 20.

On March 12, 2012, staff met with the daughter, and they agreed that R1 would not be
discharged and that he would continue with DNR status. CMS Ex. 25 at 11.8 More than
a week later, on March 21, 2012, social services staff finally spoke to the resident about
his code status, telling him that his daughters had signed the DNR form. He then also
signed an out-of-hospital DNR form, according to the social service progress notes.

CMS Ex. 25 at 11. But on May 7, 2012, according to the notes, R1 refused to sign
another advance directive. CMS Ex. 25 at 12. On May 9, 2012, after staff explained
advance directive code status to him, he said that he “doesn’t want his chest compressed”
and agreed to sign the DNR. CMS Ex. 25 at 13.

Substantial noncompliance. Petitioner mischaracterizes the nature of the deficiencies
cited under sections 483.10 and 483.15, suggesting that CMS is penalizing the facility
because it protected R1 by not allowing him to leave the facility unsupervised. To the
contrary, CMS faults the facility because: 1) it admitted R1 under false pretenses,
withholding from him the true nature of his admission; 2) it offered him virtually no
counselling, placement, or other social services, which he plainly needed; 3) when R1
learned of the deception, expressed his dismay and threatened to leave, facility staff
attached a Wanderguard and — worse — locked him up against his will, without consulting
him or considering less restrictive alternatives; and 4) the facility instituted a DNR order
without consulting him.

Citing a January 10, 2012 physician order, Petitioner argues that, because R1 required
skilled care, no other placement was possible, so the facility justifiably declined to
address his desire to leave. CMS Ex. 10 at 4. No one disputes that, at the time of his

® This meeting was apparently memorialized in an unusual care plan entry, dated March
14. The entry reflects the daughter’s statements and directions rather than the resident’s
needs and choices. It says that the daughter declared that she was the decision-maker and
that she wanted her father to stay in the facility. She wanted staff to tell him that he had
to remain and to limit his use of the phone so that he could not call her. P. Ex. 9 at 44.
11

admission to the facility, R1 required skilled care — rehabilitation for his broken hip. R1
himself willingly entered the facility for this purpose. But he met his rehabilitation goals
and was discharged from physical therapy on February 24. CMS Ex. 28.

Petitioner also justifies its disregard of R1’s rights by claiming that he was demented and
incapable of making his own decisions. The main problem with this position is that the
facility’s own admission records say otherwise. Had facility staff legitimately questioned
R1’s competence, they should have made and documented that assessment at the time of
his admission. But Petitioner has not shown that R1 was demented at the time of his
admission. Indeed, no reliable evidence suggests that anyone at the facility seriously
questioned R1’s competence. In fact, as late as February 28 and March 1, 2012 — when
R1’s daughter pressed to confine him in a locked unit — the facility administrator
reminded her that R1 had not been diagnosed with dementia. CMS Ex. 25 at 8. His
March 5, 2012 VA medical certification, which was signed by his primary care physician
(Dr. Hines) and the facility social worker, describe his mental and behavioral status as
alert and agreeable, not confused or disoriented. The form indicates that dementia is not
a primary diagnosis; the resident does not suffer from mental illness; and has not received
mental services within the past two years. CMS Ex. 9.

The facility did not send R1 out for a psychiatric assessment until after the March survey.
That March assessment, which was performed by a physician assistant, is somewhat
suspect; it describes R1’s functional ability as “total dependent care.” CMS Ex. 30 at 4.
Nothing in his treatment record or any other assessment supports this extreme conclusion.
But accepting the validity of this assessment would only establish that R1’s faculties
deteriorated dramatically between January and March so that he was no longer
competent; it would not justify staff’s ignoring his rights back in January when, by all
accounts, he was competent. Nor does it justify the facility’s ongoing failure to provide
social services.

Petitioner also cites a “letter to acknowledge a resident incompetent,” signed by Dr.

Alberto Gutierrez, and argues that R1’s attending physician determined that he could not
make medical decisions on his own behalf. P. Ex. 11 at 1. But, again, this letter was not
generated until months after R1’s admission, and does not reflect his abilities at the time
12

of admission. Nor does the letter explain how R1’s cognition could have taken such a
dramatic turn — from high cognitive functioning upon admission to mentally incompetent
within months.”

To justify consulting R1’s daughter rather than R1 on issues related to his medical care
and quality of life, Petitioner points out that a dermatologist previously discussed R1’s
medical treatment and condition with R1’s daughter. P. Br. at 4, citing P. Ex. 1 at 5.
Significantly, each time the dermatologist discussed R1’s care, he carefully documented
that the patient had given permission. P. Ex. | at 5 (indicating on October 28, 2011 that
“pt gave verbal permission to discuss his medical conditions and care with his
daughters”; on November 7, 2011, “pt. gave permission to me to discuss his medical
treatment and conditions with [his daughter]”). Facility staff here did not even tell R1
that they were consulting his daughter instead of him. Moreover, at the time of the
dermatology consults, October and November 2011, R1 was living with his daughter and,
from all appearances, they were in agreement on his treatment. By the time R1 was
admitted to the facility, their positions on basic issues affecting his life were diametrically
opposed (as facility staff well knew), which makes it far less likely that he would have
consented to her speaking for him.

Finally, I see no evidence that the facility provided on-going psychosocial services to
assist R1 in adjusting to the facility. Nor does the record show that, prior to the May

survey, the facility’s social services department seriously explored the possibility of a
new placement. CMS Ex. 25 at 12-17.

By not advising him that his admission was permanent, by administering a Wanderguard
bracelet and then confining him in a locked ward without his consent, and by imposing a
DNR on him without his knowledge or consent, the facility plainly violated R1’s rights.

In doing so, the facility violated the regulations requiring that he be allowed to formulate
an advance directive, to accept or refuse treatment, and to make choices about his life in

° Moreover, the letter itself raises a lot of questions. It is typed but undated, although
someone handwrote “5-3-12” next to what may be the physician signature. The signature
itself is not legible. A physician progress note is attached to the letter. It refers to itself
as an assessment and is dated May 6, 2012, three days after the handwritten date on the
letter. Assuming the letter was signed on May 3, it could not have been based on the
attached assessment. The progress note appears to have been signed by someone other
than the individual who signed the letter. Again, the signature is not legible and the name
of the physician who prepared the progress note is not indicated. These faults might have
been corrected had Petitioner explained the exhibit. However, no physician testified or
subjected himself to cross-examination. No one else explained the assessment or
explained the letter.
13

the facility. The facility did not provide the social services he needed so that he could
attain the highest practicable physical, mental, and psychosocial well-being. It was

therefore not in substantial compliance with 42 C.F.R. §§ 483.10(b)(4) and 483.15(a),
(b), and (g)(1).

Administration. A deficiency citation alleging noncompliance with section 483.75
(administration) may be derived from findings of noncompliance with other participation
requirements. Stone County Nursing & Rehab. Ctr., DAB No. 2276 at 15-16 (2009); see
Asbury Ctr. at Johnson City, DAB No. 1815 at 11 (2002); Odd Fellow & Rebekah Health
Care Facility, DAB No. 1839 at 7 (2002). As the above discussion establishes, as least
two critical members of the facility staff — the social worker and the MDS coordinator,
who was also a nurse supervisor — violated the regulations and disregarded the facility’s
own policies when they deceived R1 about his admission, allowed his daughter to
determine his advance directive without his consent, administered the Wanderguard
without his consent, and placed him in a locked ward without his consent. The facility
provided him virtually none of the social services he so desperately required.

Because facility staff violated its resident’s rights, did not allow him to make choices
about significant aspects of his life, and failed to provide him necessary social services,
the facility was not governed in a manner that enabled it to use its resources effectively so
that he could attain or maintain the highest practicable physical, mental and psychosocial
well-being and was not in substantial compliance with 42 C.F.R. § 483.75.

B. The facility was not in substantial compliance with
42 C.F.R. § 483.25(c) because it failed to take all
necessary precautions to prevent pressure sores from
developing.

Program requirements. Under the statute and the “quality of care” regulation, each
resident must receive, and the facility must provide, the necessary care and services to
allow a resident to attain or maintain the highest practicable physical, mental, and
psychosocial well-being, in accordance with the resident’s comprehensive assessment
and plan of care. Act § 1819(b); 42 C.F.R. § 483.25. To this end, the facility must
(among other requirements) ensure that a resident who enters the facility without pressure
sores does not develop them, unless his clinical condition shows that they were
unavoidable, based on the resident’s comprehensive assessment. 42 C.F.R.

§ 483.25(c)(1). If the resident has pressure sores, the facility must ensure that he receives
the treatment and services necessary to promote healing, prevent infection, and prevent
new sores from developing. 42 C.F.R. § 483.25(c)(2). In assessing the facility’s
compliance with this requirement, the relevant question is: did the facility “take all
necessary precautions” to prevent new sores from developing. If it did, and the resident
developed sores anyway, I could find no deficiency. But if the evidence establishes that
the facility fell short of taking all necessary precautions, then the regulation is violated.
14

Senior Rehab. & Skilled Nursing Ctr., DAB No. 2300 at 13 (2010), aff'd, Senior Rehab.
& Skilled Nursing Ctr. v. HHS, No. 10-60241 (December 20, 2010); Koester Pavilion,
DAB No. 1750 at 32 (2000).

Resident 7 (R7). R7 was an 81-year-old man, confined to a wheelchair, who was
admitted to the facility in September 2010 and readmitted on March 2, 2012. CMS Ex.
42 at 18-19, 27, 53. He suffered from a variety of ailments, including angina pectoris,
Type 2 diabetes, paralysis agitans (Parkinson’s Disease), peripheral vascular disease, and
multicystic kidney disease. CMS Ex. 42 at 49.

R7 had no pressure sores at the time of his readmission. His March 9, 2012 skin
assessment indicated that he was at less than a mild risk for developing them, measuring
20 on the Braden scale, with scores of 15 to 18 denoting mild risk. CMS Ex. 42 at 6; P.
Ex. 12 at 1. But the assessment is puzzling, because it disregards R7’s well-documented
risk factors and is inconsistent with his other medical records in significant ways. For
example:

e The assessment indicated that R7 had no sensory deficit that would limit his
ability to feel pain or discomfort. CMS Ex. 42 at 6; P. Ex. 12 at 1. In fact, since at
least September 2010, he suffered from peripheral neuropathy, which, according
to his care plan, put him at risk for skin breakdown. P. Ex. 12 at 2.

e The assessment said that he was capable of making “‘major and frequent changes
in position without assistance.” CMS Ex. 42 at 6; P. Ex. 12 at 1. On the other
hand, he scored a “2” in “friction and shear,” which means that he “moves feebly
or requires minimum assistance.” Moreover, according to his MDS, he required
extensive assistance to move to and from a lying position, turn from side to side,
and position himself in bed. He did not walk, but used a wheelchair. CMS Ex. 42
at 26-27.

e The assessment also said that he was usually dry. CMS Ex. 42 at 6; P. Ex. 12 at 1.
But, according to his records, he was incontinent and wore adult diapers/briefs and
eventually had an indwelling catheter. P. Ex. 12 at 11, 12.

Moreover, R7’s physician plainly considered him at risk because, since September 2010,
he had ordered a weekly skin assessment to prevent skin breakdown. CMS Ex. 42 at 52.
R7’s care plan called for a weekly “systematic skin inspection” by a nurse and daily
inspections by a nurse aide. P. Ex. 12 at 2. Staff were to apply a moisture barrier to his
perineal area and to encourage physical activity, mobility, and range of motion. P. Ex. 12
at 3.
15

In stark contrast to R7’s March 9 skin assessment, his March 5, 2012 MDS indicated that
he was at risk of developing pressure sores. CMS Ex. 42 at 35. Moreover, in May, when
a pressure sore developed, staff attributed the skin breakdown to R7’s decreased sensory
perception, moisture/incontinence, decreased activity, and impaired mobility, all factors
that were characterized as “no impairment” on the skin assessment. CMS Ex. 42 at 1; P.
Ex. 12 at 1.

By May 25, 2012, R7 had developed a stage II pressure sore (1 cm X 1 cm) on his right
buttock. CMS Ex. 42 at 7, 15; P. Ex. 12 at 5. He subsequently developed a second
pressure sore on his buttock, which was first documented on June 5. CMS Ex. 42 at 8,
12; P. Ex. 12 at 6.

The facility did not take all necessary precautions to prevent those sores. R7’s care plan
did not include any interventions designed to relieve pressure areas. According to his
March 5 MDS, he had a pressure-reducing device for his chair, a pressure-reducing
device for his bed, and was on a turning/repositioning program. CMS Ex. 42 at 37. A
physician’s order, dated March 26, 2012, authorizes the use of a low alternating air
pressure mattress at all times to relieve pressure areas, and the mattress was apparently
provided. P. Ex. 12 at 11; CMS Ex. 42 at 52.

But R7 spent the bulk of his day sitting up in his wheelchair or in his recliner. His care
plan does not address that practice. P. Ex. 12; CMS Ex. 59 at 4 (Harwell Decl.). No
physician order calls for a pressure-relieving device suitable for a chair or recliner.
Instead, the facility provided a “cushion” for R7’s use with his wheelchair. Petitioner
does not claim that this cushion was a pressure-relieving device. P. Ex. 14 at 4 (Smith
Decl. § 16); see CMS Ex. 42 at 15 (wound report indicating that R7 had no gel cushion or
similar pressure-relieving device). Surveyor Michael Harwell examined that cushion. It
was square, approximately two inches thick, with a section cut out. The idea was that
R7’s coccyx and inner buttocks would hover over the cut-out, thus avoiding contact with
the seat itself. The problem was, as R7 explained to Surveyor Harwell, that the cushion
was too soft, allowing R7’s buttocks to hit the seat of the wheelchair when he sat, causing
him pain. CMS Ex. 59 at 2 (Harwell Decl.). Even though the facility policy for
preventing pressure sores required staff to “monitor fit of immobilizing devices/adaptive
equipment,” it seems that no one checked to see whether the cushion adequately
protected the resident. CMS Ex. 59 at 4 (Harwell Decl.).

Because the facility did not provide R7 with a pressure-relieving device to protect him
when he was sitting, it did not take “all necessary precautions” to prevent new sores from
developing. At a minimum, when the cushion proved ineffective and he developed the
first pressure sore, the facility should have known that its intervention was inadequate.
16

Petitioner suggests that its alternative would have been to force R7 to remain in bed,
where he had a pressure-relieving mattress. No, the alternative was to protect him from
developing pressure sores while sitting up by providing an appropriate pressure-relieving
device. Because it failed to do so, the facility was not taking all necessary precautions
and was not in substantial compliance with 42 C.F.R. § 483.25(c).

C. The penalties imposed are reasonable.

To determine whether a CMP is reasonable, I apply the factors listed in 42 C.F.R.

§ 488.438(f): 1) the facility’s history of noncompliance; 2) the facility’s financial
condition; 3) factors specified in 42 C.F.R. § 488.404; and 4) the facility’s degree of
culpability, which includes neglect, indifference, or disregard for resident care, comfort
or safety. The absence of culpability is not a mitigating factor. The factors in 42 C.F.R.
§ 488.404 include: 1) the scope and severity of the deficiency; 2) the relationship of the
deficiency to other deficiencies resulting in noncompliance; and 3) the facility’s prior
history of noncompliance in general and specifically with reference to the cited
deficiencies.

I consider whether the evidence supports a finding that the amount of the CMP is at a
level reasonably related to an effort to produce corrective action by a provider with the
kind of deficiencies found, and in light of the section 488.438(f) factors. I am neither
bound to defer to CMS’s factual assertions, nor free to make a wholly independent choice
of remedies without regard for CMS’s discretion. Barn Hill Care Ctr., DAB No. 1848 at
21 (2002); Community Nursing Home, DAB No. 1807 at 22 et seg. (2002); Emerald
Oaks, DAB No. 1800 at 9 (2001); CarePlex of Silver Spring, DAB No. 1638 at 8 (1999).

CMS imposes a very modest penalty of $2,000 per-instance for each of the deficiencies
cited. $2,000 is at the low end of the per-instance penalty range ($1,000 to $10,000).

42 CFR. §§ 488.408(d), 488.438(a)(2). See Plum City Care Ctr., DAB No. 2272 at 18-
19 (2009) (observing that even a $10,000 per-instance CMP can be “a modest penalty
when compared to what CMS might have imposed.”).

CMS does not contend that the facility’s history justifies a higher CMP. Petitioner has
not argued that its financial condition affects its ability to pay the relatively small penalty.

With respect to the other factors, I find that the scope and severity of the deficiencies
cited more than justify the modest penalties. Both R1 and R7 suffered actual harm. R1’s
profound unhappiness with his situation is well-documented. CMS Ex. 25 at 3 (“he
wanted to go home and . . . he was going to ask someone to take him.”); CMS Ex. 27 at
12 (“I want to go home.”). On March 6, he complained to the visiting ombudsman; he
complained to Surveyor Elma Garza during the March survey (“I was told that my stay
was going to be short visit in the secured unit.”; “I don’t know why I am here.”; “[My
doctor] told me I was just coming for rehab and that I would be released.”). CMS Ex. 5

17

at 6; CMS Ex. 57 at 2 (Garza Decl.). He was depressed, complaining that he “did not like
it here” and “had never been locked up before.” He asked for alternative living
arrangements. CMS Ex. 30 at 2.

In May, he told Surveyor Asencio Cortez that he “felt like crying.” He complained that
staff put the Wanderguard on his ankle and then moved him to a locked unit. They would
not allow him to leave the facility. He said that he could live with his three sons and had
a provider who would care for him. Surveyor Cortez described the resident as “alert and
oriented,” and easily able to express his feelings about his family, facility staff, and his
stay at the facility. CMS Ex. 58 at 3 (Cortez Decl.). Knowing that his situation left him
frustrated and depressed, facility staff nevertheless disregarded his rights and failed to
provide services that he sorely needed. This suggests indifference to or disregard for his
care, comfort and safety, and the facility is culpable.

Similarly, R7’s risks for developing pressure sores were well-documented, and facility
staff knew or should have recognized the importance of providing him with pressure-
relieving devices. Yet, they gave him with a wholly-inadequate seat cushion and did not
ensure that it functioned properly. Even after he developed the first sore, staff did not
investigate and did not provide him an adequate pressure-relieving device so that he
could sit safely. The facility is also culpable for these failures.

For these reasons, I find the penalties imposed reasonable.
IV. Conclusion

CMS properly determined that the facility was not in substantial compliance with
42 C.F.R. §§ 483.10(b)(4), 483.15(a), (b), and (g)(1), 483.75, and 483.25(c). I affirm, as
reasonable, the penalties imposed.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-2041)

Complainant
v.

Kiran Mart LLC,
Respondent.
Docket No. C-15-546
Decision No. CR3609

Date: January 30, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Kiran Mart LLC, at 1450 Southford Road, Southbury,
Connecticut 06488, and by filing a copy of the complaint with the Food and Drug
Administration’s (FDA) Division of Dockets Management. The complaint alleges that
Kiran Mart used a self-service display in a non-exempt facility, sold cigarettes to a minor,
and failed to verify, by means of photo identification containing a date of birth, that a
cigarette purchaser was 18 years of age or older, thereby violating the Federal Food,
Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seg., and its implementing regulations,
21 C.F.R. pt. 1140. CTP seeks to impose a $500 civil money penalty against Respondent
Kiran Mart.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on December 4, 2014, CTP served the
complaint on Respondent Kiran 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 Kiran 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, Lassume that the facts alleged in the complaint (but not its conclusory
statements) are true. Specifically:

¢ On April 19, 2013, at Respondent’s business establishment, 1450 Southford Road,
Southbury, Connecticut 06488, an FDA-commissioned inspector observed
cigarettes for sale from both the main sales floor and a customer-accessible
humidor. The inspector further observed that the establishment was open to the
public during regular business hours;

e Ina warning letter dated August 1, 2013, CTP informed Respondent of the
inspector’s April 19, 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 its violation could result in a civil money penalty or other regulatory
action;

e At approximately 11:23 a.m. on May 30, 2014, at Respondent’s business
establishment, 1450 Southford Road, Southbury, Connecticut 06488,
FDA-commissioned inspectors documented Respondent’s staff selling a package
of Pall Mall Menthol 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 Kiran 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. § 387£(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 tobacco products 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 purchasers of tobacco
products are younger than 18 years of age.
A self-service display is a method of sale expressly prohibited by the regulations unless
the self-service display is located in a facility in which the retailer ensures that no person
younger than 18 years of age is present, or permitted to enter, at any time. 21 C.F.R.

§ 1140.16(c)(2)(ii).

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

Kiran Mart LLC. Pursuant to 21 C.F.R. § 17.11(b), this order becomes final and binding
upon both parties after 30 days of the date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1958)

Complainant
v.

The Village Market Management Co., LLC
d/b/a The Village Market,

Respondent.
Docket No. C-15-427
Decision No. CR3608

Date: January 30, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, The Village Market Management Co., LLC d/b/a The Village
Market, at 35 Brookhaven CT, Sunrise Beach, Missouri 65079, and by filing a copy of
the complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The complaint alleges that The Village Market impermissibly sold
cigarettes to minors and failed to verify, by means of photo identification containing a
date of birth, that a cigarette purchaser was 18 years of age or older, thereby violating the
Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its
implementing regulations, 21 C.F.R. pt. 1140. CTP seeks to impose a $250 civil money
penalty against Respondent The Village Market.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on December 4, 2014, CTP served the
complaint on Respondent The Village Market 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 The Village Market 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 At approximately 1:09 p.m. on June 17, 2013, at Respondent’s business
establishment, 2599 State Road MM, Sunrise Beach, Missouri 65079, an
FDA-commissioned inspector observed Respondent’s staff selling a package of
L&M 100’s 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 July 11, 2013, CTP informed Respondent of the
inspector’s June 17, 2013 observations, and that such actions violate federal law,
21 C.F.R. § 1140.14(a) and (b)(1). The letter further warned that Respondent’s

failure to correct its vio

regulatory action;

ations could result in a civil money penalty or other

e At approximately 3:37 p.m. on May 28, 2014, at Respondent’s business
establishment, 2599 State Road MM, Sunrise Beach, Missouri 65079,
FDA-commissioned inspectors documented Respondent’s staff selling a package
of Pall Mall Red cigarettes to a person younger than 18 years of age.

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

' CTP served the Complaint on Respondent at 35 Brookhaven CT, Sunrise Beach,
Missouri 65079, and not at its retail address. Nonetheless, an individual bearing the
name “Galloway” signed for the complaint. In addition, my office sent an Initial Order
Establishing Procedures to the 35 Brookhaven CT address, and that order was not
returned undelivered. Therefore, in the absence of any evidence to the contrary, I will
infer that Respondent had proper notice in this matter.

identification containing a purchaser’s date of birth, that no cigarette purchasers are
younger than 18 years of age.

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

For these reasons, I enter default judgment in the amount of $250 against Respondent
The Village Market Management Co., LLC d/b/a The Village Market. 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
Jonna Sue Castaneda,
(OI File No. H-13-42526-9),
Petitioner,

v.

The Inspector General
Docket No. C-14-1160
Decision No. CR3607

Date: January 29, 2015

DECISION

Petitioner, Jonna Sue Castaneda, asks review of the Inspector General’s (1.G.’s)
determination to exclude her for five years from participation in the Medicare, Medicaid,
and all federal health care programs under section 1128(a)(3) of the Social Security Act.
For the reasons discussed below, I find that the I.G. is authorized to exclude Petitioner,
and that the statute mandates a minimum five-year exclusion.

Discussion

The sole issue before me is whether the I.G. has a basis for excluding Petitioner from
program participation. Because an exclusion under section 1128(a)(3) of the Act must be
for a minimum period of five years, the reasonableness of the length of the exclusion is
not an issue. Act § 1128(c)(3)(B); 42 C.F.R. § 1001.2007(a)(2).

The parties have submitted their written arguments (I.G. Br.; P. Br.), and the L.G. filed a
reply. With his brief, the I.G. submitted five exhibits (IG. Exs. 1-5); Petitioner submitted
six exhibits (P. Exs. 1-6). In the absence of any objections, I admit into evidence I.G.
Exs. 1-5 and P. Exs 1-6.

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. Ruling
and Order at 2 § 3, Attachment 1 (Informal Brief of Petitioner § III) and Attachment 2
(Informal Brief of I.G. § IIL) (September 29, 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.

Petitioner must be excluded for five years because she was
convicted of felony fraud in connection with the delivery of
a healthcare item or service.

The underlying facts here are not in dispute. Petitioner was a licensed vocational nurse
who worked in a Texas nursing home. She kept for herself tablets of the narcotic drug
Hydrocodone while claiming to have administered them to the nursing home residents for
whom they were ordered. I.G. Ex. 2 at 2-3; 1.G. Ex. 3. On September 9, 2013, she pled
guilty to two felony counts of knowingly possessing and obtaining a controlled substance
by fraud, forgery, or deception, in violation of Texas Health and Safety Code § 481.129.
LG. Exs. 4, 5.

The Texas court accepted Petitioner’s plea and entered two separate Orders of Deferred
Adjudication against her. LG. Exs. 4, 5.

In a letter dated February 28, 2014, the I.G. advised Petitioner that, because she had been
convicted of a felony 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, the I.G. was excluding her from participation in Medicare, Medicaid,
and all federal health care programs for a period of five years. I.G. Ex. 1.

Section 1128(a)(3) provides 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 must be excluded from
participation in federal health care programs for a minimum of five years. See 42 C.F.R.
§ 1001.101(c). Because Petitioner was convicted of felony fraud in connection with the
delivery of health care items (prescription drugs), she is subject to exclusion.

' [make this one finding of fact/conclusion of law.
Petitioner does not deny any of the above facts, but points out that she self-reported her
misconduct prior to any charges being filed and has since demonstrated that she is a
trustworthy nurse. That she has shown herself to be trustworthy is not a basis for
overturning a mandatory exclusion.

Petitioner also argues that, because her sentence was “deferred,” the charges against her
were eventually dismissed, so she was not “convicted.” The Departmental Appeals
Board (Board) has consistently rejected this and similar arguments and characterizes as
“well established” the principle that the term “conviction” includes “diverted, deferred
and expunged convictions regardless of whether state law treats such actions as a
conviction.” Henry L. Gupton, DAB No. 2058 at 8 (2007), aff'd sub nom. Gupton v.
Leavitt, 575 F. Supp. 2d 874 (E.D. Tenn. 2008).

In Gupton, the Board explained why, in these I.G. proceedings, the federal definition of
“conviction” must apply. That definition differs from many state criminal law
definitions. For exclusion purposes, Congress deliberately defined “conviction” broadly
to ensure that exclusions would not hinge on the state criminal justice policies. Quoting
the legislative history, the Board explained:

The rationale for the different meanings of “conviction” for
state criminal law versus federal exclusion law purposes
follows from the distinct goals involved. The goals of
criminal law generally involve punishment and rehabilitation
of the offender, possibly deterrence of future misconduct by
the same or other persons, and various public policy goals.
[footnote omitted] Exclusions imposed by the I.G., by
contrast, are civil sanctions, designed to protect the
beneficiaries of health care programs and the federal fisc, and
are thus remedial in nature rather than primarily punitive or
deterrent .... In the effort to protect both beneficiaries and
funds, Congress could logically conclude that it was better to
exclude providers whose involvement in the criminal system
raised serious concerns about their integrity and
trustworthiness, even if they were not subjected to criminal
sanctions for reasons of state policy.

Gupton, at 7-8. | agree with the Board’s analysis and conclude that Petitioner was
convicted within the meaning of the Act.
Conclusion
For these reasons, I conclude that the I.G. properly excluded Petitioner from participation

in Medicare, Medicaid, and all federal health care programs, and I sustain the five-year
exclusion.

/s/

Carolyn Cozad Hughes
Administrative Law Judge