Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Psychiatric Behavioral Services/Edward McCullough NP,
(PTAN: G8585B/G8597Y),
(NPI: 193245 1507/1962754531),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-333
Decision Number: CR3511

Date: December 12, 2014

DECISION

Petitioner Psychiatric Behavioral Services/Edward McCullough NP, a Medicare
supplier,’ filed a hearing request to challenge the effective date of Petitioner’s Medicare
enrollment and billing privileges. I find that First Coast Service Options, Inc. (FCSO)
received an enrollment application from Petitioner on June 12, 2013 that FCSO was able
to process to approval, and I affirm the Centers for Medicare & Medicaid’s (CMS’s)
determination that the effective date of Petitioner’s Medicare enrollment is June 12, 2013,
with a retrospective billing date of May 12, 2013.

I. Background

The following facts are undisputed unless otherwise noted. To enroll in the Medicare
program and obtain billing privileges for service reimbursement, Petitioner submitted an
application (a form CMS-855I) to FCSO, a CMS administrative contractor. On

' A “supplier” is a physician or other practitioner, or an entity other than a provider, that
furnishes health care services under Medicare.” 42 C.F.R. § 400.202.
November 27, 2012, FCSO informed Petitioner that FCSO received the enrollment
application; however, FCSO’s review of Petitioner’s “CMS-855] identified missing,
incomplete, or inaccurate information needed to complete the process of [Petitioner’s]
application.” CMS Exhibit (Ex.) 6. FCSO listed several sections of Petitioner’s
application where additional information was necessary including the sections identifying
personal information, medical specialties, practice location information, and the
certification statement. CMS Ex. 6. FCSO directed Petitioner to provide the requested
information within 30 days. CMS Ex. 6. FCSO also informed Petitioner that FCSO
would reject Petitioner’s application if Petitioner did not furnish complete information
within 30 days, and if FCSO rejected the application, Petitioner would need to resubmit a
new application, which might affect Petitioner’s effective date of enrollment in the
Medicare program. CMS Ex. 6.

On February 1, 2013, FCSO notified Petitioner that FCSO was closing and rejecting
Petitioner’s enrollment application due to Petitioner’s failure to furnish complete
information in a timely manner. CMS Ex. 4. On June 12, 2013, FCSO received another
enrollment application from Petitioner. CMS Ex. 1. By letter dated July 15, 2013, FCSO
approved that enrollment application with an “effective date” of May 12, 2013. CMS
Ex. 2.

Petitioner requested a reconsideration determination by letter dated July 18, 2013.
Petitioner argued for an effective enrollment date of February 1, 2013, based on the
enrollment application Petitioner submitted in November of 2012. On August 8, 2013,
FCSO issued a reconsideration determination, upholding the effective enrollment date of
June 12, 2013, and explaining that Petitioner’s application received in November of 2012
was rejected on February 1, 2013, for failure to respond to FCSO’s November 27, 2012
request for further information. CMS Ex. 3, at 3-5. FCSO further explained it did not,
therefore, base Petitioner’s effective date on the November 2012 application. CMS Ex.
3, at 4. The reconsideration determination notified Petitioner of the 60-day deadline to
file an appeal with an Administrative Law Judge (ALJ). CMS Ex. 3, at 5.

> FCSO states in its July 15, 2013 letter that May 12, 2013 is the effective date of
Petitioner’s enrollment and billing privileges. However, the effective date of a supplier’s
enrollment and billing privileges is generally the date that the Medicare contractor
received an enrollment application that it could subsequently approve. See 42 C.F.R.

§ 424.520(d). CMS and its contractors are authorized to permit suppliers to
“retrospectively bill” for their services for up to 30 days prior to their effective date,
which FCSO did here when it cited the effective date as May 12, 2013 (the retrospective
billing date) not June 12, 2013 (the enrollment effective date). 42 C.F.R.

§ 424.521(a)(1). For clarity in this case, I hereafter refer to the effective date of
enrollment as the date established by regulation, June 12, 2013, and not the date on which
Petitioner’s retrospective billing privileges began, May 12, 2013.
Petitioner and CMS disagree about the date Petitioner received the reconsideration
determination. Petitioner’s representative contends that Petitioner received the August 8,
2013 reconsideration determination for the first time by fax transmission on September
27,2013. Petitioner’s Request for Hearing (RFH). CMS believes that Petitioner received
the reconsideration determination shortly after it issued and contends that on August 13,
2013, Petitioner’s representative called FCSO and stated that Petitioner did not agree
with the outcome of the reconsideration determination. CMS Ex. 3, at 7.

On September 5, 2013, Petitioner decided to file a second request for reconsideration for
reasons that are not clear to me. CMS Ex.5. By letter dated September 27, 2013, FCSO
dismissed Petitioner’s second request for reconsideration explaining FCSO previously
issued a reconsideration determination. CMS Ex. 5, at 3.

Petitioner requested a hearing before an ALJ on November 23, 2013. Petitioner stated
that Petitioner intended to “appeal the decision made August 8, 2013 and received via fax
to us on September 27, 2013. The date faxed to us is shown on the top of the pages
showing we did not receive the letter until September 27, 2013 and we have submitted
the appeal in the proper time frame based on the date the letter was received by us.” RFH
at 1. Petitioner also argues that the June 12, 2013 effective date is erroneous and that
Petitioner is entitled to an earlier effective date for Medicare enrollment and billing
privileges.

The case was assigned to me for hearing and decision. I issued an Acknowledgment and
Pre-Hearing Order on December 6, 2013 (Pre-Hearing Order). My Pre-Hearing Order
advised the parties that their prehearing exchanges must include all arguments, proposed
exhibits, proposed witnesses, and written direct testimony for each proposed witness.
Pre-Hearing Order §§ 4,8. My Pre-Hearing Order also stated that an in-person hearing
will only be necessary if the opposing party affirmatively requests an opportunity to
cross-examine a witness. Pre-Hearing Order J§ 9, 10; see, e.g., Vandalia Park, DAB No.
1940 (2004); Pacific Regency Arvin, DAB No. 1823, at 8 (2002) (determining that the
use of written direct testimony for witnesses is permissible so long as the opposing party
has the opportunity to cross-examine those witnesses).

Pursuant to my Pre-Hearing Order, CMS filed a Motion for Dismissal and, in the
Alternative, Motion for Summary Judgment (CMS Br.) and six exhibits (CMS Exs. | —
6). Petitioner filed a Motion for Summary Judgment (P. Br.) and three exhibits (P. Exs. 1
— 3). In its Motion for Dismissal, CMS argues that Petitioner’s request for a hearing is
untimely and this matter should be dismissed. CMS Br. at 4-5. However, Petitioner
contends that the request for hearing is timely because Petitioner received the August 8,
2013 reconsideration determination by fax on September 27, 2013 along with the letter
from FCSO dismissing Petitioner’s second request for reconsideration. RFH; P. Br. The
4

September 27, 2013 dismissal letter contains multiple errors > which may be indicative of
prior miscommunication. Thus, I deny CMS’s Motion for Dismissal and find good cause
to accept Petitioner’s request for ALJ review. Neither CMS nor Petitioner listed any
witnesses or filed any written direct testimony. I find, therefore, that an in-person
hearing in this case is unnecessary, and I issue this decision on the merits of the case
based on the written record. See Pre-Hearing Order §§ 10, 11.

II. Discussion
A. Issue

Whether FCSO, acting on behalf of CMS, properly established June 12, 2013, as
Petitioner’s effective date for enrollment in Medicare, with Petitioner’s retrospective
billing privileges starting on May 12, 2013.

B. Findings of Fact and Conclusions of Law

1. FCSO rejected Petitioner’s November 2012 application because
Petitioner did not provide requested information within 30 days.

A CMS contractor may reject and close an enrollment application if a supplier “fails to
furnish complete information on the provider/supplier enrollment application within
30 calendar days from the date of the contractor request for the missing information.”
42 CFR. § 424.525(a)(1); see also 42 C.F.R. § 424.502 (definition of
Reject/Rejected). A supplier does not have the right to appeal a rejected application.
42 CFR. § 424.525(d). Rather, the supplier must resubmit a new enrollment
application. 42 C.F.R. § 424.525(c). CMS may extend the 30-day period before
rejecting an application if CMS determines that the supplier is actively working with
CMS to resolve any outstanding issues. 42 C.F.R. § 424.525(b). However, that
determination is a discretionary matter, and it is also not subject to appeal. See 42
CFR. § 424.525(d)

Petitioner requests an effective date based on the first enrollment application Petitioner
filed and believes that application should have been processed and approved. However,
on November 27, 2012, FCSO notified Petitioner that FCSO would reject Petitioner’s
enrollment application if Petitioner did not submit certain documentation within 30 days.

> CMS admits that the dismissal letter contains a typographical error in reference to
August 9, 2013 date of the reconsideration determination, when it should refer to the
reconsideration determination dated August 8, 2013. CMS Br. at 3. The letter appears to
contain an additional error because it references the name of a Medicare supplier other
than Petitioner. CMS Ex. 5, at 3.
CMS Ex. 6. FCSO then, in fact, did issue a notice rejecting and closing this application
on February 1, 2013, stating Petitioner failed to provide the necessary supporting
documentation. CMS Ex. 4.

After review of all of the documents submitted, it appears that Petitioner believes FCSO
erred in refusing to process Petitioner’s application submitted in November of 2012 and
thus “the original application date should apply.” P. Br. at 2. Petitioner states that
Petitioner’s representative could not complete Petitioner’s Medicare application in
November 2012, because Petitioner did not yet know the locations Petitioner would be
working. P. Ex. 2, at 2. Petitioner contends that around this time, Petitioner told a FCSO
representative that Petitioner did not know the requested practice locations. P. Ex. 2, at 2.
Petitioner argues that the FCSO representative told Petitioner to “fax section 4C in with
the CCN assigned to the application and that was all that was necessary.” P. Ex. 2, at 2.
Petitioner argues that the first application “had been processed and approved as
[Petitioner’s representatives] were in continual contact submitting each item as
requested.” RFH at 1. Petitioner states that Petitioner learned the November 2012
application was rejected when “[a]fter two months of calling customer service
[Petitioner] was informed [FCSO] actually noted that an entire new application was
necessary and that [Petitioner’s] faxed sections 4C were never looked at ....” P. Ex. 2,
at 2.

However, Petitioner has not provided any sworn testimony or documentation, either in
Petitioner’s RFH or Petitioner’s Motion for Summary Judgment, showing that Petitioner
submitted to FCSO all of the specific documentation FCSO requested in the November
27, 2012 letter or that FCSO later amended its request. Instead, Petitioner states that
Petitioner sent all requested information to FCSO and generally describes some phone
calls to FCSO contacts that occurred on April 4, 2013 and thereafter. See RFH. FCSO
rejected and closed the November 2012 enrollment application on February 1, 2013.
CMS Ex. 4. Once FCSO rejected the November 2012 application for a failure to submit
required information within 30 days, Petitioner needed to resubmit a new application, and
I have no jurisdiction to consider Petitioner’s original application with regard to the
effective date determination.

2. Based upon the receipt of Petitioner’s subsequent application that
FCSO was able to process to approval, Petitioner’s effective date of
enrollment in Medicare is June 12, 2013, with retrospective billing
privileges starting on May 12, 2013.

The effective date of Medicare enrollment for physicians, nonphysician practitioners, and
physician and nonphysician practitioner organizations is “the later of the date of filing of
a Medicare enrollment application that was subsequently approved by a Medicare
contractor or the date an enrolled physician or nonphysician practitioner first began
furnishing services at a new practice location.” 42 C.F.R. § 424.520(d) (emphasis
added). The “date of filing” is the date that the Medicare contractor “receives” a signed
provider enrollment application that the Medicare contractor is able to process to
approval. 73 Fed. Reg. 69,726, at 69,769 (Nov. 19, 2008). Physicians may
retrospectively bill for their services when they have “met all program requirements” and
“services were provided at the enrolled practice location for up to . . . 30 days prior to
their effective date if circumstances precluded enrollment in advance of providing
services to Medicare beneficiaries.” 42 C.F.R. § 424.521 (a)(1).

Here, FCSO received two enrollment applications from Petitioner, one submitted before
Petitioner began furnishing services, and one submitted after Petitioner began working at
a new practice location. RFH. However, as previously discussed, FCSO rejected
Petitioner’s first enrollment application.

It is undisputed that Petitioner electronically submitted a second enrollment application
on June 12, 2013, and FCSO subsequently processed that submission to approval. CMS
Exs. 1-2. Therefore, the effective date of Petitioner’s enrollment must be June 12, 2013,
the date FCSO received the enrollment application it subsequently could process to
approval. FCSO properly established an effective enrollment date of June 12, 2013, and
permitted Petitioner to bill retrospectively for services 30 days prior this effective date.

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1521)

Complainant,
v.

Westminster Liquor, Inc.
d/b/a Westminster Liquors,

Respondent.
Docket No. C-15-28
Decision No. CR3509

Date: December 10, 2014

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Westminster Liquor, Inc. d/b/a Westminster Liquors at 6030
West 92nd Avenue, Westminster, Colorado 80031, and by filing a copy of the complaint
with the Food and Drug Administration’s (FDA) Division of Dockets Management. The
complaint alleges that Westminster Liquor unlawfully utilized a self-service display of
cigarette tobacco in a non-exempt facility, impermissibly sold cigarettes to a minor, and
failed to verify, by means of photo identification containing a date of birth, that a tobacco
purchaser was 18 years of age or older, thereby violating the Federal Food, Drug, and
Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R.
pt. 1140. CTP seeks to impose a $500 civil money penalty against Respondent
Westminster Liquor.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on October 15, 2014, CTP served the
complaint on Respondent Westminster Liquor 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 Westminster Liquor 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 Respondent’s business establishment, 6030 West 92nd Avenue, Westminster,
Colorado 80031, on April 18, 2012, at an unspecified time, an FDA-commissioned
inspector observed the presence of a self-service display of cigarette tobacco. The
inspector also observed that the establishment allows minors to enter during
regular business hours;

e Ina warning letter issued on July 19, 2012, CTP informed Respondent of the
inspector’s observations from April 18, 2012, and that such an action violates
federal law, 21 C.F.R. § 1140.16(c). The letter further warned that if Respondent
failed to correct its violation, the FDA could impose a civil money penalty or take
other regulatory action;

e At Respondent’s business establishment, 6030 West 92nd Avenue, Westminster,
Colorado 80031, on February 23, 2014, at approximately 12:08 p.m.,
FDA-commissioned inspectors documented Respondent’s staff selling a package
of Marlboro cigarettes to a person younger than 18 years of age. The inspectors
also documented that Respondent’s staff failed to verify, by means of photo
identification containing the bearer’s date of birth, that the purchaser of a tobacco
product was 18 years of age or older.

These facts establish Respondent Westminster Liquor’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 § 906(d) of the
Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387¢(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under § 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21 C.F.R.

§ 1140.14(a), no retailer may sell cigarettes to any person younger than 18 years of age.
Under 21 C.F.R. § 1140.14(b)(1), retailers must verify, by means of photographic
identification containing a purchaser’s date of birth, that no cigarette purchasers are
younger than 18 years of age.
The regulations also require a retailer to sell cigarettes only in a direct, face-to-face
exchange. 21 C.F.R. § 1140.16(c).

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
Westminster Liquor, Inc. d/b/a Westminster Liquors. 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

MedChoice Medical Center
(NPI: 1093716318; PTAN: 447370)

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-1358
Decision No. CR3506
Date: December 8, 2014
DECISION

The Medicare enrollment and billing privileges of Petitioner, MedChoice Medical Center,
are revoked pursuant to 42 C.F.R. § 424.535(a)(1), ' effective December 5, 2013.
Pursuant to Centers for Medicare & Medicaid Services (CMS) policy and 42 C.F.R.
§ 424.535(c), Petitioner is subject to a two-year bar to re-enrolling in Medicare that
expires December 4, 2015.
I. Background
On November 4, 2013, National Government Services, Inc., a Medicare administrative
contractor (MAC), notified Petitioner that its billing privileges and Medicare enrollment
were revoked effective December 5, 2013 pursuant to 42 C.F.R. § 424.545(a)(1). The
MAC alleged in its notice that revocation was based on Petitioner’s refusal to allow

investigators of Cahaba Safeguard Administrators, LLC (Cahaba), the Zone Program
Integrity Contractor (ZPIC), access to medical records during an attempted onsite audit of

' Citations are to the 2013 revision of the Code of Federal Regulations (C.F.R.), unless
otherwise stated.
Petitioner on September 4, 2013. The MAC alleged that access to medical records was
authorized by sections 1833(e) and 1893(a) of the Social Security Act (the Act)

(42 U.S.C. §§ 1395l(e), 1395ddd(a)). The notice advised Petitioner that it could submit a
corrective action plan (CAP) within 30 days; and request reconsideration by a contractor
hearing officer within 60 days. The MAC notice also advised Petitioner that it was
subject to a three-year reenrollment bar pursuant to 42 C.F.R. § 424.535(c). CMS
Exhibit (Ex.) 1 at 35-36.

Petitioner sent the MAC a CAP dated December 2, 2013. CMS Ex. 1 at 40-41.
Petitioner requested reconsideration by letter dated January 2, 2014. CMS Ex. 1 at 4-12.
Reconsidered determinations were issued by CMS on March 27, 2014 and April 24,
2014. The hearing officer upheld revocation of Petitioner’s billing privileges and
termination of Petitioner’s provider agreement citing 42 C.F.R. § 424.535(a)(1). The
earing officer found that Petitioner admitted that it denied Cahaba investigators access
to medical documents. The hearing officer commented that Petitioner’s CAP was denied
because there was “no evidence provided of future compliance.” CMS Ex. | at 1-2.

On June 23, 2014, Petitioner filed a request for hearing (RFH) before an administrative
law judge (ALJ). The case was assigned to me and an Acknowledgement and Prehearing
Order (Prehearing Order) was issued on June 27, 2014.

On July 28, 2014, CMS filed its prehearing brief and alternative motion for summary
judgment (CMS Br.) with CMS Exs. | through 5. Petitioner filed its prehearing brief and
opposition to the CMS motion for summary judgment on August 27, 2014, with
Petitioner’s exhibits (P. Exs.) 1 and 2. CMS filed a reply brief on September 10, 2014
(CMS Reply). On September 22, 2014, Petitioner filed a motion for leave to file a sur-
reply but Petitioner failed to attach a copy of its sur-reply as required by the Prehearing
Order § IL.G. Petitioner’s motion contains a detailed statement of points and authorities
and I accept the motion as setting forth Petitioner’s sur-reply, even though Petitioner
failed to comply with the Prehearing Order.

Petitioner did not object to my consideration of CMS Exs. | through 5 and they are
admitted as evidence. CMS objected to P. Exs. 1 and 2 on grounds they are not relevant.
CMS Reply at 2. P. Ex. 1 is Petitioner’s supplier agreement, which reflects Petitioner’s
name; Provider Transaction Access Number (PTAN); and Petitioner’s effective date of
Medicare participation of January 1, 1999. P. Ex. | also reflects that Petitioner agreed to
accept the assignment of Medicare Part B payments from Medicare beneficiaries as full
payment for covered Medicare Part B services plus the applicable deductible and
coinsurance amounts. The agreement is clearly relevant to show that Petitioner was
properly enrolled and entitled to receive assigned Medicare payments for covered
services delivered to Medicare beneficiaries. P. Ex. 2 is a letter from CMS to Petitioner
dated March 27, 2014, with the subject-line “MedChoice Medical Center Reconsideration
Decision.” Petitioner offers P. Ex. 2 because it shows that Petitioner’s CAP was denied
March 27, 2014, and because it states the reconsidered determination in Petitioner’s case.
P. Br. at 8 n.8. CMS argues that P. Ex. 2 was superseded by the April 24, 2014 CMS
letter announcing its reconsidered determination. CMS Reply at 2. The CMS letter dated
April 24, 2014, also with the subject line “MedChoice Medical Center Reconsideration
Decision,” does not refer to the March 27, 2014 CMS notice and does not state whether it
superseded the earlier notice or was a reopened and revised reconsideration
determination. Given the lack of clarity in the CMS notices, Petitioner is entitled to
ensure that I have the complete administrative record to consider. Although the Federal
Rules of Evidence (Fed. R. Evid.) do not control in this case, CMS is referred to Fed. R.
Evid. 106 as a current example of an expression of the rule of completeness. P. Exs. 1
and 2 are admitted and considered as evidence.

II. Discussion
A. Statutory and Regulatory Program Requirements

Section 1831 of the Act (42 U.S.C. § 1395j) establishes the supplementary medical
insurance benefits program for the aged and disabled known as Medicare Part B.
Administration of the Part B program is through contractors such as National
Government Services, Inc. Act § 1842(a) (42 U.S.C. § 1395u(a)). Payment under the
program for services rendered to Medicare-eligible beneficiaries may only be made to
eligible providers of services and suppliers.” Act §§ 1835(a) (42 U.S.C. § 1395n(a)),
1842(h)(1) (42 U.S.C. § 1395(u)(h)(1)). Petitioner, a practice group, is a supplier.

The Act requires the Secretary of Health and Human Services (Secretary) to issue
regulations that establish a process for the enrollment in Medicare of providers and
suppliers, including the right to a hearing and judicial review of certain enrollment
determinations, including revocation of enrollment and billing privileges. Act § 1866(j)
(42 U.S.C. § 1395cc(j)). Pursuant to 42 C.F.R. § 424.505, a supplier such as Petitioner

> A “supplier” furnishes items or services under Medicare and includes physicians or
other practitioners and facilities that are not included within the definition of the phrase
“provider of services.” Act § 1861(d) (42 U.S.C. § 1395x(d)). A “provider of services,”
commonly shortened to “provider,” includes hospitals, critical access hospitals, skilled
nursing facilities, comprehensive outpatient rehabilitation facilities, home health
agencies, hospice programs, and a fund as described in sections 1814(g) and 1835(e) of
the Act. Act § 1861(u) (42 U.S.C. § 1395x(u)). The distinction between providers and
suppliers is important because they are treated differently under the Act for some
purposes.
must be enrolled in the Medicare program to accept an assignment of Medicare benefits
and be reimbursed for services provided to Medicare beneficiaries.

Participation in Medicare imposes obligations upon a supplier. Suppliers must submit
complete, accurate and truthful responses to all information requested in the enrollment
application. 42 C.F.R. § 424.510(d)(2). Pursuant to 42 C.F.R. §§ 424.502 and
424.510(d)(3), a supplier’s application to enroll in Medicare must be signed by an
authorized official, ie., one with authority to bind the provider or supplier both legally
and financially. The regulation provides that the signature attests to the accuracy of
information provided in the application. The signature also attests to the fact that the
provider or supplier is aware of and agrees to abide by all applicable statutes, regulations,
and program instructions. 42 C.F.R. § 424.510(d)(3). Suppliers must meet basic
requirements depending on their type of service. 42 C.F.R. §§ 424.505, .516, .517.
Suppliers may also be subject to additional screening requirements depending upon the
type of service they provide. 42 C.F.R. § 424.518.

Once enrolled, the supplier receives billing privileges and is issued a billing number that
is required to receive payment for services rendered to a Medicare beneficiary. 42 C.F.R.
§ 424.505. The supplier is subject to a five-year revalidation of enrollment cycle and
CMS is authorized to perform off-cycle revalidations for a number of reasons. CMS has
the right to perform on-site inspections to verify that the information CMS receives is
correct. CMS contacts the supplier directly when it is time to revalidate enrollment
information. A supplier must submit the applicable enrollment information, with
complete and accurate information and supporting documentation, within 60 calendar
days of CMS’s notification. 42 C.F.R. § 424.515. There is no issue in this case that
Petitioner was enrolled in Medicare as a supplier.

The Secretary has delegated authority to CMS to revoke an enrolled supplier’s Medicare
enrollment and billing privileges and any supplier agreement for any of the reasons listed
in 42 C.F.R. § 424.535. Pursuant to 42 C.F.R. § 424.535(a)(1), CMS may revoke a
supplier’s enrollment and billing privileges if the supplier is determined not to be in
compliance with enrollment requirements. If CMS revokes a supplier’s Medicare billing
privileges, the revocation becomes effective 30 days after CMS or one of its contractors
mails the revocation notice to the supplier, subject to some exceptions not applicable in
this case. After a supplier’s Medicare enrollment and billing privileges are revoked, the
supplier is barred from reenrolling in the Medicare program for one to three years.

42 C.F.R. § 424.535(c).

A supplier whose enrollment and billing privileges have been revoked may request
reconsideration and review as provided by 42 C.F.R. pt. 498. 42 C.F.R. §§ 405.800-.803,
424.545(a). A supplier submits a written request for reconsideration to CMS or its
contractor. 42 C.F.R. § 498.22(a). CMS or its contractor must give notice of its
reconsidered determination to the supplier, giving the reasons for its determination and
specifying the conditions or requirements the supplier failed to meet, and the right to an
ALJ hearing. 42 C.F.R. § 498.25. Ifthe decision on reconsideration is unfavorable to the
supplier, the supplier has the right to request a hearing by an ALJ and further review by
the Departmental Appeals Board (the Board). Act § 1866(j)(8) (42 U.S.C.

§ 1395cc(j)(8)); 42 C.F.R. §§ 405.803, 424.545, 498.3(b)(17), 498.5. A hearing on the
record, also known as an oral hearing, is required under the Act. Crestview Parke Care
Ctr. v. Thompson, 373 F.3d 743, 748-51 (6th Cir. 2004). The supplier bears the burden to
demonstrate that it meets enrollment requirements with documents and records.

42 CFR. § 424.545(c).

B. Issues
Whether summary judgment is appropriate; and

Whether there was a basis for revocation of Petitioner’s billing privileges
and enrollment in Medicare.

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

My conclusions of law are set forth in bold text followed by my findings of fact and
analysis.
1. Summary judgment is appropriate.

CMS has requested summary judgment. A provider or supplier denied enrollment in
Medicare or whose enrollment has been revoked has a right to a hearing and judicial
review pursuant to section 1866(h)(1) and (j) of the Act and 42 C.F.R. §§ 498.3(b)(1),
(5), (6), (8), (15), (17), and 498.5. A hearing on the record, also known as an oral
hearing, is required under the Act. Act §§ 205(b), 1866 (h)(1), (j)(8); Crestview, 373
F.3d at 748-51. A party may waive appearance at an oral hearing, but must do so
affirmatively in writing. 42 C.F.R. § 498.66. In this case, Petitioner has not waived the
right to oral hearing or otherwise consented to decision based only upon the documentary
evidence or pleadings. P. Br. at 1. Accordingly, disposition on the written record alone
is not permissible, unless the CMS motion for summary judgment has merit.

Summary judgment is not automatic upon request but is limited to certain specific
conditions. The Secretary’s regulations that establish the procedure to be followed in
adjudicating Petitioner’s case are at 42 C.F.R. pt. 498. 42 C.F.R. §§ 424.545(a),
498.3(b)(5), (6), (15), (17). The regulations do not establish a summary judgment
procedure or recognize such a procedure. However, the Board has long accepted that
summary judgment is an acceptable procedural device in cases adjudicated pursuant to
42 CFR. pt. 498. See, e.g., Ill. Knights Templar Home, DAB No. 2274, at 3-4 (2009);
Garden City Med. Clinic, DAB No. 1763 (2001); Everett Rehab. & Med. Ctr., DAB No.
1628, at 3 (1997). The Board also has recognized that the Federal Rules of Civil
Procedure (Fed. Civ. Pro.) do not apply in administrative adjudications such as this, but
the Board has accepted that Fed. R. Civ. Pro. 56 and related cases provide useful
guidance for determining whether summary judgment is appropriate. Furthermore, a
summary judgment procedure was adopted as a matter of judicial economy within my
authority to regulate the course of proceedings and made available to the parties in the
litigation of this case by my Prehearing Order. The parties were given notice by the
Prehearing Order that summary judgment is an available procedural device and that the
law as it has developed related to Fed. R. Civ. Pro. 56 will be applied.

Summary judgment is appropriate when there is no genuine dispute as to any issue of
material fact for adjudication and/or the moving party is entitled to judgment as a matter
of law. In determining whether there are genuine issues of material fact for trial, the
reviewer must view the evidence in the light most favorable to the non-moving party,
drawing all reasonable inferences in that party’s favor. The party requesting summary
judgment bears the burden of showing that there are no genuine issues of material fact for
trial and/or that it is entitled to judgment as a matter of law. Generally, the non-movant
may not defeat an adequately supported summary judgment motion by relying upon the
denials in its pleadings or briefs but must furnish evidence of a dispute concerning a
material fact, i.e., a fact that would affect the outcome of the case if proven. Mission
Hosp. Reg’! Med. Ctr., DAB No. 2459, at 4 (2012) (and cases cited therein); Experts Are
Us, Inc., DAB No. 2452, at 4 (2012) (and cases cited therein); Senior Rehab. & Skilled
Nursing Ctr., DAB No. 2300, at 3 (2010) (and cases cited therein); see also Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

The standard for deciding a case on summary judgment and an ALJ’s decision-making in
deciding a summary judgment motion differs from that used in resolving a case after a
hearing. On summary judgment, the ALJ does not make credibility determinations,
weigh the evidence, or decide which inferences to draw from the evidence, as would be
done when finding facts after a hearing on the record. Rather, on summary judgment, the
ALJ construes the evidence in a light most favorable to the non-movant and avoids
deciding which version of the facts is more likely true. Holy Cross Vill. at Notre Dame,
Inc., DAB No. 2291, at 5 (2009). The Board also has recognized that on summary
judgment it is appropriate for the ALJ to consider whether a rational trier of fact could
find that the party’s evidence would be sufficient to meet that party’s evidentiary burden.
Dumas Nursing & Rehab., L.P., DAB No. 2347, at 5 (2010). The Secretary has not
provided in 42 C.F.R. pt. 498, for the allocation of the burden of persuasion or the
quantum of evidence required to satisfy the burden. However, the Board has provided
some persuasive analysis regarding the allocation of the burden of persuasion in cases
subject to 42 C.F.R. pt. 498. Batavia Nursing & Conv. Ctr., DAB No. 1904 (2004), aff'd,
Batavia Nursing & Conv. Ctr. v. Thompson, 129 Fed. App’x 181 (6th Cir. 2005).

There is no genuine dispute as to any material fact pertinent to revocation under
42 C.F.R. § 424.535(a)(1) that requires a trial. The issues in this case raised by Petitioner
related to revocation under 42 C.F.R. § 424.535(a)(1), are issues of law. The issues in
this case must be resolved against Petitioner as a matter of law. The undisputed evidence
shows that there is a basis for revocation of Petitioner’s Medicare enrollment and billing
privileges. Accordingly, summary judgment is appropriate.

2. There is a basis for revocation of Petitioner’s Medicare enrollment
and billing privileges pursuant to 42 C.F.R. § 424.535(a)(1).

3. Petitioner’s enrollment in Medicare and its billing privileges are
revoked effective December 5, 2013.

a. Facts

The facts that are relevant to the revocation are not disputed. Any inferences are drawn
in favor of Petitioner.

On September 2, 2013, which was the federal Labor Day holiday, Cahaba sent an email
with an attached letter to Joseph Kimble, DC, Petitioner’s President. The letter advised
Dr. Kimble that Cahaba would conduct an on-site audit of two of Petitioner’s
practitioners on September 4, 2013, beginning at 8:30 a.m. A hard-copy of the letter was
not received by Petitioner until September 6, 2013. The letter advised Petitioner that
Cahaba wanted to review the records of 82 Medicare beneficiaries treated by a nurse
practitioner and physician who were part of Petitioner’s group. The letter did not list the
82 beneficiaries and suggested that other beneficiary records may also be reviewed. The
letter stated that the auditors would tour the office; Petitioner was to provide a room for
the auditors to work with access to a copy machine; and entrance and exit conferences
would be conducted. The letter also specified that Petitioner would provide the auditors
with staff schedules for 2012 and 2013; copies of employment contracts; daily patient
appointment schedules; credentialing documents; training schedules and minutes for
2012 and 2013; and policy and procedure manuals. The September 2 letter stated that the
purpose of the audit was post-payment review to determine if documentation in the
beneficiaries’ medical records supported the services claimed and substantiated the
payment for the services. The letter stated that a medical record request would be
provided during the entrance conference. The letter cited 42 C.F.R. § 424.5, which
establishes the basic conditions for payment of Medicare claims. RFH at 1-2; CMS Ex. 1
at 4-12 (Petitioner’s reconsideration request), 13-14 (Sep. 2, 2013 Announced On-site
Letter), 18-19 (President Kimble’s affidavit).

Petitioner’s attorney sent Cahaba a letter dated September 3, 2013, advising Cahaba that
a one-day notice was unrealistic and unfair and that Petitioner could not comply with the
Cahaba requests by the deadline. RFH at 3; CMS Ex. 1 at 15.

Cahaba auditors arrived at Petitioner’s office on September 4, 2013, at about 11:30 a.m.
Patient care was on-going and Petitioner asked the Cahaba auditors not to disrupt patient
care. Dr. Kimble advised the Cahaba auditors that they could not conduct the audit at
that time. RFH at 3; P. Br. at 2.

President Kimble states in his affidavit dated January 2, 2014, that because Cahaba gave
Petitioner such short notice of the audit: Petitioner did not have time to reschedule its
patients for September 4, 2013; Petitioner’s staff did not have time to meet Cahaba’s
requests and no space was available for the auditors due to scheduled patient visits; he
could not attend either the entrance or exit conference due to scheduled patients; and it
was not possible with only one-day notice to collect the requested documents and make
necessary redactions. CMS Ex. | at 18-19.

Nadine Hukarevic, Medicare Investigator for Cahaba, states in her declaration that
Cahaba operates under contract with CMS as a ZPIC. This fact is not disputed by
Petitioner. Ms. Hukarevic states that she and two additional auditors, Jessica Drobick
and Kathleen Heuertz, attempted to conduct an on-site audit of Petitioner on September

4, 2013. She states that when they arrived at Petitioner, Joseph Kimble, DC, the owner of
Petitioner, refused to let them do the audit and he told the auditors to leave or he would
call the police. She states that Dr. Kimble did not say the audit could not be done due to
lack of space, he did not request time to assemble documents, and he did not ask to
reschedule. CMS Ex. 4. Petitioner has not disputed the facts asserted by Ms. Hukarevic
regarding the actions of Dr. Kimball.

Cahaba notified Petitioner on October 1, 2013, that Petitioner’s Medicare payments were
suspended citing reliable information of an overpayment and Petitioner’s refusal to
provide medical records. On November 4, 2013, the MAC notified Petitioner that its
Medicare enrollment and billing privileges were revoked and that Petitioner was subject
to a three-year re-enrollment ban. RFH at 3-4; P. Br. at 2.

Cahaba recommended to CMS on October 10, 2013, that CMS revoke Petitioner’s
enrollment in Medicare because Petitioner denied Cahaba auditors access to records and
review the facility on September 4, 2013. According to the Cahaba recommendation,
when auditors arrived at Petitioner’s office on September 4, 2013, they properly
identified themselves and their purpose, but Dr. Kimble informed the Cahaba auditors
that they were not allowed on site; no information would be given to them; and if they
stayed police would be summoned. CMS Ex. | at 37-39.

I advised the parties in the Prehearing Order that in considering a motion for summary
judgment a fact alleged and not specifically denied may be accepted as true. Prehearing
Order § II.G. Dr. Kimble does not mention in his affidavit that he denied access to
Petitioner’s facility or that he threatened to call police. Petitioner does not deny in its
RFH or pleadings that on September 4, 2013, Dr. Kimble told Cahaba auditors that they
had to leave Petitioner’s facility and that he would call police if they did not leave.
Therefore, I accept as true the alleged facts that on September 4, 2013, Dr. Kimble told
Cahaba auditors that they had to leave Petitioner’s facility and, if they did not, he would
call the police.

In its enrollment application dated June 16, 2010, Petitioner identified itself as physical
and/or occupational therapy group in private practice in Rockford, Illinois. Joseph L.
Kimble is listed as an owner, managing employee, and an officer or director. The
enrollment application included the standard certification statement, including the
applicant’s agreement to abide by the Medicare laws, regulations, and program
instructions applicable and the statement that the applicant understood that payment of
claims by Medicare is conditioned upon the claim being compliant with the law,
regulations, and program instructions and the applicant’s compliance with the applicable
conditions for participation in Medicare. CMS Ex. 2.

CMS offered as CMS Ex. 3, Electronic Data Interchange (EDI) enrollment forms signed
by Peter Park, MD and Antonio R. Baluga, MD, on September 25, 2003. The forms list
MedChoice Medical Center, Ltd. as the physicians’ practice group. The forms indicate
that the listed “provider” agrees to listed conditions for submitting Medicare claims
electronically to CMS or its contractor. Included as conditions are requirements to
maintain source documents that can be readily associated with electronic claims that
reflect the beneficiary name and insurance number, dates of service, diagnosis or nature
of illness, and procedure or services performed; and to maintain original source
documents and medical records pertaining to Medicare claims for no fewer than six years
and three months after the claim is paid. Also included is the statement that the
Secretary, his or her designee, or a contractor has the right to audit and confirm
information submitted and has the right to access all original source documents and
medical records related to Medicare claims. The EDI forms state that federal law
governs their interpretation and for any appeal of a decision made by CMS under the
document. The EDI forms do not cite the applicable provisions of the Act, regulations, or
program instructions. CMS Ex. 3.

b. Analysis

Cahaba recommended to CMS that Petitioner’s Medicare enrollment and billing
privileges be revoked pursuant to 42 C.F.R. § 424.535(a)(1) because Petitioner denied
access to its facility and medical records related to Medicare claims. CMS Ex. | at 37-
39. The MAC notified Petitioner on November 4, 2013, that its Medicare billing
privileges and enrollment were revoked effective December 5, 2013, pursuant to

42 C.F.R. § 424.545(a)(1) for noncompliance with enrollment requirements, specifically
by denying Cahaba auditors access to medical records on September 4, 2013. CMS Ex. 1
at 35-36. On April 24, 2014, the reconsideration hearing officer upheld revocation of
Petitioner’s enrollment and billing privileges pursuant to 42 C.F.R. § 424.545(a)(1) on

10

grounds that Petitioner denied Cahaba auditors access to medical documentation when
they attempted an on-site visit of Petitioner on September 4, 2014. CMS Ex. | at 1-3.
Thus, CMS and its contractors have been consistent in their position that Petitioner’s
enrollment in Medicare and billing privileges should be revoked based on Petitioner’s
refusal to permit Cahaba auditors access to medical records on September 4, 2013.

CMS has clearly reserved the right for it or its contractors to conduct on-site inspections
of any entity enrolled in Medicare as a provider of services or a supplier. The regulations
provide that the purposes for such inspections are to verify enrollment information and to
determine compliance with Medicare enrollment requirements. 42 C.F.R.

§§ 424.510(d)(8), 424.515(c), 424.517. Petitioner erroneously attempts to distinguish
between on-site inspections for prepayment or post-payment audits and on-site
inspections to determine compliance with Medicare enrollment requirements. P. Br. at 9.
Petitioner correctly notes that the Medicare Program Integrity Manual CMS Pub. 100-08
(MPIM) establishes policy related to prepayment and post-payment reviews and
inspections in two different chapters, chapters 3 and 15. MPIM § 15.20 (eff. Jun. 9,
2012) and sets forth CMS policy regarding on-site inspections and site verifications.
Section 15.20.1A2, specifies that a contractor will conduct a site verification in a manner
which limits the disruption for the provider or supplier. Section 15.20.1B specifies that
verifications are to be done Monday through Friday, except holidays, during posted
business hours or between 9 a.m. and 5 p.m. if no hours are posted. My reading of
MPIM chap. 15 convinces me that the CMS policies stated apply to all site visits by CMS
or its contractors, whatever the specific reason for the visit. MPIM § 3.2 (eff. Jun. 28,
2011) establishes procedures for prepayment and post-payment reviews or audits. MPIM
§ 3.2.3 establishes the procedures for requesting additional documentation during
prepayment review and post-payment review. The provisions of MPIM chap. 3 primarily
involve the collection of records and auditing and do not appear to supersede the policy
in MIPM chap. 15. Therefore, contrary to Petitioner’s argument, I conclude that both
MPIM §§ 3.2 and 15.20 apply in this case. There was a request for documents that was
to be delivered during the entrance briefing. There was also a site visit which clearly had
the purpose to collect and audit documents and determine whether or not Petitioner was
compliant with Medicare enrollment requirements related to the claims that were the
subject of the post-payment review.

Petitioner agreed to comply with the law, regulations, and policies related to Medicare
when it enrolled in the Medicare program, including submitting to inspections and audits
by CMS or its contractors. Petitioner has not disputed that its most recent enrollment or
re-enrollment application was dated June 16, 2010 and signed by Joseph L. Kimble.
Petitioner has not disputed that by filing the application dated June 16, 2010, it agreed to
abide by the Medicare laws, regulations, and program instructions applicable to
Petitioner. Petitioner has not disputed that by filing the application dated June 16, 2010,
Petitioner acknowledged that it understood that payment of claims by Medicare is
conditioned upon the claim being compliant with the law, regulations, and program

11

instructions and the Petitioner’s compliance with the applicable conditions for
participation in Medicare. CMS Ex. 2.

Petitioner has not disputed that Petitioner and its practitioners are obligated to maintain
records, including medical records and other documentation, related to claims for
payment submitted to Medicare. The obligation to maintain records is found in both the
regulations and CMS policy.’ The regulations specifically provide that failure to permit
CMS access to documentation required to be maintained by 42 C.F.R. § 424.516(f) is a
basis for revocation. 42 C.F.R. § 424.535(a)(10). Pursuant to 42 C.F.R. § 424.516(f)(1)
providers or suppliers that furnish covered items of durable medical equipment,
prosthetics, orthotics and supplies (DMEPOS), clinical laboratory services, imaging
services, or home health services are required to maintain documents for seven years
from the date of service and to give CMS or a Medicare contractor access to that
documentation upon request. The evidence before me does not show that Petitioner
furnished any items or services of the type specified by 42 C.F.R. § 424.516(f)(1).
However, pursuant to 42 C.F.R. § 424.516(f)(2), a physician who orders and/or certifies
home health services or a physician or other eligible provider who orders DMEPOS,
clinical laboratory, or imaging services is required to maintain documentation for seven
years from the date of service and, upon request, give CMS or a Medicare contractor
access to that documentation. The documentation that must be maintained includes
written and electronic documents relating to written orders, certifications, or requests for
payments for items of DMEPOS, clinical laboratory services, imaging, and home health
services. 42 C.F.R. § 424.516(f)(2)(ii). Petitioner does not deny that its physicians and
other practitioners are subject to the requirement of 42 C.F.R. § 424.516(f)(2).

Petitioner does not deny that it uses the Medicare EDI system for submission of
electronic claims or that its practitioners executed EDI enrollment forms that require that
they agree to maintain records and to give CMS or its contractors access to those records
on request. Medicare EDI policies are found in the Medicare Claims Processing Manual,
CMS Pub. 100-04 (MCPM), chap. 24. MCPM chap. 24, § 30.2 (eff. Sep. 17, 2013)
addresses new enrollments and maintenance of existing enrollments in EDI. MCPM
chap. 24, § 30.2.A provides that when a provider or supplier submits Medicare claims
electronically the provider or supplier agrees to 15 conditions. Included among the
conditions that must be agreed to:

> The obligation for physicians and other licensed practitioners to maintain medical
records reflecting their care and treatment for their patients may be found in state law and
other sources. The parties have not addressed state law or other sources and I consider
only the Secretary’s regulations and CMS policy statements.
12

e The Secretary, his or her designee, or a contractor designated by CMS has the
right to audit and confirm information submitted by the provider or supplier and
have access to all original source documents and medical records related to
provider or supplier claims; and

e Retention of all original source documents and medical records pertaining to any
Medicare claim for 6 years and three months after the claim is paid.

MCPM chap. 24, § 30.2A. Medicare Learning Network (MLN) Matters, No. SE1022
discusses medical record retention and media formats for medical records. Petitioner
does not dispute that it was required to maintain original source documents and medical
records related to Medicare claims. Petitioner does not deny that it had custody and/or
control of such records, whether or not at the facility visited by the Cahaba auditors.
Petitioner does not dispute that to have access to original source documents, Cahaba
auditors had to have access to Petitioner’s facility.

Petitioner does not deny before me that Cahaba is a Medicare contractor within the
meaning of section 1893 of the Act and authorized to access records on behalf of CMS.

I find as undisputed fact and conclude as a matter of law, that Petitioner was obligated to
maintain medical records and other documents related to claims for payment filed with
Medicare by Petitioner and its practitioners. I further find and conclude that CMS or its
contractors, the MAC and Cahaba, have the right to access original medical records and
other original source documents related to claims for payment filed with Medicare by
Petitioner and its practitioners. Petitioner was on notice based on 42 C.F.R. § 424.535,
the CMS policies discussed above, its Medicare enrollment application, and the EDI
enrollment forms of its obligations to maintain original source records and to give CMS
or its contractors access to those records. Petitioner was also on notice that failure to give
access is a basis for revocation of its Medicare enrollment and billing privileges under 42
C.F.R. § 424.535(a).

The undisputed facts are that on September 4, 2013, Dr. Kimble, an owner and officer of
Petitioner, refused to permit Cahaba auditors access to medical and other records of two
practitioners’ related to Medicare claims they filed or that were filed on their behalf. Dr.
Kimble threatened to call law enforcement to forcibly remove the Cahaba auditors, if
necessary. I conclude that denying the Cahaba auditors access to original medical
records on September 4, 2014, is a basis for revocation of Petitioner’s enrollment in
Medicare and its billing privileges.

CMS or its contractor is required to give notice of an initial determination to revoke
enrollment and billing privileges. The pertinent regulation provides:
13

(b) Revocation of Medicare billing privileges—(1) Notice of
revocation. If CMS or a CMS contractor revokes a provider’s
or supplier’s Medicare billing privileges, CMS or a CMS
contractor notifies the supplier by certified mail. The notice
must include the following:

(i) The reason for the revocation in sufficient detail for
the provider or supplier to understand the nature of its
deficiencies.

(ii) The right to appeal in accordance with part 498 of
this chapter [42 C.F.R. pt. 498].

(iii) The address to which the written appeal must be
mailed.

42 C.F.R. § 405.800(b). The notice of revocation was sufficient in this case. Pursuant to
42 C.F.R. § 424.535(g), the effective date of revocation is 30 days after the date CMS or
its contractor mails the notice of revocation. 42 C.F.R. § 424.535(g). In this case, the
MAC notice of the initial determination to revoke was dated November 4, 2013.
December 4, 2013 is the thirtieth day after the date of the notice of initial determination.
However, the notice of initial determination specified that the effective date of the
revocation was December 5, 2013, not December 4, 2013. The MAC notice did not
explain how the December 5, 2013 effective date was determined, but I do not disturb
that determination.

Petitioner requested review of the reconsidered determination upholding the revocation.
RFH at 4. Petitioner argues that it never refused to comply with the Cahaba request for
records but merely informed Cahaba that it was unable to comply in the short-time
permitted. RFH at 1, 4, 6-7; P. Br. at 1-2. Petitioner argued in its reconsideration request
that it never refused requested material or denied Cahaba personnel access to Petitioner’s
premises. CMS Ex. | at 7-8. Petitioner’s arguments are inconsistent with the undisputed
facts. Petitioner has not specifically disputed the allegations of CMS that when Cahaba
auditors arrived at Petitioner’s facility on September 4, 2013, Dr. Kimble not only
declined to provide access to any records at that time, he also forced the Cahaba auditors
to leave Petitioner’s facility, threatening to call law enforcement if necessary.

Petitioner cites MPIM § 8.4.6.1.1 as stating “where written notice is given of an
impending audit, thirty (30) days’ notice should be given to the provider to comply.”
RFH at 6 (footnote omitted); P. Br at 8-9. The section cited states:

When advance notification is given, providers and suppliers
have 30 calendar days to submit (for PSC or ZPIC BI unit or
contractor MR unit site reviews) or make available (for

provider/supplier site reviews) the requested documentation.
14

MPIM § 8.4.6.1.1. The section requires the Medicare contractor to advise the provider or
supplier that claims for which documentation is not provided in 30 calendar days will be
denied. The section also gives the contractor discretion to extend the time limit. The
contractor is also given discretion to request documentation upon arrival at the provider’s
or supplier’s site and to give no notification prior to arrival at the site. MPIM § 8.4.6.1.
MPIM § 3.2.3.2(A) and (B), which are also cited by Petitioner (RFH at 6), also establish
30 to 45 day calendar periods for a provider or supplier to submit documents in response
to prepayment and post-payment reviews. Petitioner’s reliance upon the cited provisions
of the MPIM as a defense to denying Cahaba auditors access is misplaced. The sections
of the MPIM cited do not require that a contractor give Petitioner notice 30 days prior to
a site visit, whether or not there is written notice. The MPIM sections simply provide
that the contractor will give Petitioner 30 calendar days to produce records whether
requested in advance of the site visit or during the site visit. In this case, Cahaba did not
provide the list of records sought in advance and informed Petitioner that the list would
be provided during the entrance conference (CMS Ex. | at 13, 27), which was within the
discretion of Cahaba under the MPIM. However, Petitioner denied Cahaba access to its
site so that the entrance conference was not conducted and the list of records sought was
not delivered. Petitioner cannot excuse its denial of access to Cahaba based on the cited
provisions of the MPIM.

Petitioner argues that CMS had no basis for the suspension of payments to Petitioner.
RFH at 5-8. The suspension of Medicare payments is not an initial determination that is
subject to appeal or my review. 42 C.F.R. § 405.375(c).

Petitioner argues in its request for hearing that it timely submitted a CAP and CMS erred
by not giving time to respond or correct the alleged violation. Petitioner argues that
“(t]he statutory scheme governing Medicare suspension and revocation — and basic
principles of due process — entitles a provider to both notice of the specific findings made
against it and an opportunity to respond to and correct those findings.” Petitioner asserts
that the cursory denial of its CAP failed to permit Petitioner a reasonable opportunity to
comply with the Cahaba request for access to records. RFH at 8-9. Petitioner argues in
its brief that CMS did not give Petitioner an opportunity to correct the alleged violation
as required by 42 C.F.R. § 423.535(a)(1). P. Br. at 6-8. I note that Petitioner was
notified of its right to submit a CAP (CMS Ex.1 at 35); Petitioner did submit a CAP
(CMS Ex. | at 39-41); and the CAP was denied (CMS Ex. | at 2). Denial of a CAP and
refusal to reinstate billing privileges is not an initial determination subject to review by an
ALJ under 42 C.F.R. pt. 498.

Petitioner argues that summary judgment should not be granted in this case because its
provider agreement (P. Ex. 1) entitles it to notice and opportunity for a hearing before
termination. P. Br. at 2. Petitioner was given notice of both the initial determination and
the reconsidered determination. Petitioner has not argued that the notices did not satisfy
15

the statutory or regulatory requirements applicable to those notices. There is no question
that because the reconsidered determination was unfavorable to Petitioner, Petitioner has
the right to request a hearing by an ALJ and further review by the Board. Act

§ 1866(j)(8) (42 U.S.C. § 1395cc(j)(8)); 42 C.F.R. §§ 405.803, 424.545, 498.3(b)(17),
498.5. A hearing on the record, also known as an oral hearing, is required under the Act.
Crestview, 373 F.3d at 748-51. Summary judgment is a procedural process that deprives
Petitioner of an oral hearing. Petitioner filed no objection to the Prehearing Order or its
provisions making summary judgment available to the parties. Summary judgment is
appropriate and no oral hearing is necessary when there is no genuine dispute as to the
material facts and the case must be resolved by application of the law to the undisputed
facts. The material facts are not disputed in this case and the only issues that require
resolution are issues of law and the application of the law to the undisputed facts.
Neither Petitioner’s provider agreement nor the law prevents disposition of this case by
summary judgment. I conclude that Petitioner received the notice and opportunity for a
hearing required by its provider agreement (P. Ex. 1); the Act; and the regulations.

4. Petitioner is subject to a two-year bar to re-enrollment pursuant to
CMS policy and CMS has articulated no reason to depart from its
policy.

Petitioner argues that pursuant to 42 C.F.R. § 424.535(c), the re-enrollment bar does not
apply to a revocation under 42 C.F.R. § 424.535(a)(1) when the revocation is based on a
provider’s or supplier’s failure to timely respond to a revalidation request or other request
for information. RFH at 9; P. Br. at 10. The regulation provides:

(c) Reapplying after revocation. After a provider, supplier,
delegated official, or authorizing official has had their billing
privileges revoked, they are barred from participating in the
Medicare program from the effective date of the revocation
until the end of the re-enrollment bar. The re-enrollment bar
is a minimum of | year, but not greater than 3 years,
depending on the severity of the basis for revocation. The re-
enrollment bar does not apply in the event a revocation of
Medicare billing privileges is imposed under paragraph
(a)(1) of this section based upon a provider or supplier's
failure to respond timely to a revalidation request or other
request for information.

42 C.F.R. § 424.535(c) (emphasis added). In this case, Petitioner enrollment and billing
privileges are revoked pursuant to 42 C.F.R. § 424.535(a)(1), but not because Petitioner
failed to respond timely to a revalidation request or request for information. In this case,
the revocation is based upon Petitioner’s denial of access to its records and facility on
16

September 4, 2013. Accordingly, Petitioner legal argument fails and Petitioner is subject
to a one to three year bar to re-enrollment.

Section 1866 of the Act, and the Secretary’s regulations at 42 C.F.R. §§ 405.803,
424.545, 498.3(b)(17), and 498.5, establish the right to appeal the denial of a Medicare
enrollment application or the revocation of a current Medicare enrollment and billing
privileges. The regulations do not mention a right to review of the reasonableness of the
period of the bar to re-enrollment. The Board previously questioned the right to review
as to the reasonableness of the duration of bar in John Hartman, D.O., DAB No. 2564 at
5 (2014). The Board chose not to resolve the issue in Hartman, commenting that it
would find the bar in that case reasonable if it did consider the issue reviewable.

I conclude that I have no authority to review the reasonableness of the period of the bar in
the absence of an express delegation of authority in the regulations. Accordingly, I do
not consider the reasonableness of imposing the maximum authorized bar of three years
in this case.*

Nevertheless, CMS policy set forth in MPIM § 15.20.1E provides that for revocations
based on regulatory noncompliance, the contractor will cite 42 C.F.R. § 424.535(a)(1)
and establish a two-year enrollment bar. I am not bound to follow CMS policy as if it
were the law, however I will give CMS policy effect to the extent consistent with the law.
The MAC deviated from CMS policy by imposing a three-year ban in this case, which
involves noncompliance with regulatory and policy provisions rather than noncompliance
with the Act. CMS has offered no explanation for why it deviated from its policy in this
case. Accordingly, I give the CMS policy effect and conclude that Petitioner is only
subject to a two-year re-enrollment bar under that policy.’

* If I concluded that I have authority to review the reasonableness of the duration of the
bar, I would conclude that the maximum bar of three years is appropriate in this case.
Petitioner’s conduct in this case was egregious. The maximum bar of three years is
reasonable to impress upon Petitioner the importance of its obligations under the
Medicare program and the need for Petitioner to work cooperatively with CMS and its
contractors to minimize program losses, whether through fraud, neglect, or innocent
error.

> If CMS wishes to further litigate regarding its policy, it may do so by filing a proper
motion reopening and revision. 42 C.F.R. §§ 498.100-.103.
17

III. Conclusion

For the foregoing reasons, Petitioner’s Medicare enrollment and billing privileges are
revoked pursuant to 42 C.F.R. § 424.535(a)(1), effective December 5, 2013. Pursuant to
CMS policy and 42 C.F.R. § 424.535(c), Petitioner is subject to a two-year bar to re-
enrolling in Medicare that expires December 4, 2015.

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Eugene Goldman, M.D.,
(OI File No.: 3-06-40317-9),

Petitioner,
v.
The Inspector General
Docket No. C-14-1223
Decision No. CR3504

Date: December 9, 2014

DECISION

Petitioner, Eugene Goldman, M.D., was a physician, licensed to practice in the State of
Pennsylvania. He was convicted on one felony count of conspiracy to receive kickbacks
for Medicare referrals and four felony counts of receiving kickbacks for Medicare
referrals. Based on his conviction, the Inspector General (1.G.) has excluded him for
fifteen years from participating in Medicare, Medicaid, and all federal health care
programs, as authorized by section 1128(a)(1) of the Social Security Act (Act).
Petitioner concedes that he is subject to exclusion but challenges its length. For the
reasons discussed below, I find that the I.G. properly excluded Petitioner Goldman and
that the fifteen-year exclusion falls within a reasonable range.

I. Background

Section 1128(a)(1) of the Act mandates that the Secretary of Health and Human Services
exclude an individual who has been convicted under federal or state law of a criminal
offense related to the delivery of an item or service under Medicare or a state health care
program (which includes Medicaid). 42 C.F.R. § 1001.101(a).
In a letter dated March 31, 2014, the I.G. notified Petitioner that he was excluded from
participation in Medicare, Medicaid, and all federal health care programs for a period of
fifteen years because he had been convicted of a criminal offense related to the delivery
of an item or service under the Medicare or state health care program. The letter
explained that section 1128(a)(1) of the Act authorizes the exclusion. I.G. Ex. 1.
Petitioner requested review, and the matter is before me for resolution.

Neither party lists any witnesses or claims that this case requires an in-person hearing.
1G. Br. at 7; see Order and Schedule for Filing Briefs and Documentary Evidence at 2
(June 26, 2014) (Order). Each party submitted an initial brief (I.G. Br.; P. Br.). The I.G.
submitted three exhibits (1.G. Exs. 1-3) and a reply brief (I.G. Reply). In the absence of
an objection, I admit into evidence I.G. Exs. 1-3.

II. Issue

Petitioner concedes that he was convicted and is subject to exclusion under section
1128(a)(1). P. Br. at 2; see Order at 1. Because the parties agree that the I.G. has a b:
upon which to exclude Petitioner from program participation, the sole issue before me is
whether the length of the exclusion (fifteen years) is reasonable.

III. Discussion

Petitioner Goldman had a medical practice in Philadelphia and served as the medical
director for Home Care Hospice, Inc., a for-profit hospice provider that participated in the
Medicare and Medicaid programs. For almost eight years, he referred Medicare and
Medicaid patients to the hospice in return for kickbacks and bribes. I.G. Ex. 3.

Petitioner was charged in a six-count criminal indictment, and, following a trial, was
convicted on five of the six counts: one felony count of conspiracy to receive kickbacks
for Medicare referrals and four felony counts of receiving kickbacks for Medicare
referrals. I.G. Exs. 2,3. On October 23, 2013, the Federal District Court for the Eastern
District of Pennsylvania entered judgment against him. I.G. Ex. 2. The court sentenced
him to 51 months in prison, and ordered him to pay an assessment of $500 and a fine of
$300,000.00. I.G. Ex. 2 at 2,5.

Based on the aggravating factors in this case and the
absence of any mitigating factor, the fifteen-year exclusion
falls within a reasonable range.'

An exclusion under section 1128(a)(1) must be for a minimum period of five years. Act
§ 1128(c)(3)(B); 42 C.F.R. §§ 1001.102(a), 1001.2007(a)(2). Federal regulations set

' T make this one finding of fact/conclusion of law.
forth criteria for lengthening exclusions beyond the five-year minimum. 42 C.F.R.
§ 1001.102(b).

Among the factors that may serve as bases for lengthening the period of exclusion are the
two that the IG. cites to justify the period of exclusion in this case: 1) the acts that
resulted in the conviction, or similar acts, were committed over a period of one year or
more; and 2) the sentence imposed by the court included incarceration. 42 C.F.R.

§ 1001.102(b)(2), and(5). The presence of an aggravating factor or factors not offset by
any mitigating factor or factors justifies lengthening the mandatory period of exclusion.
Evidence that does not pertain to one of the aggravating or mitigating factors listed in the
regulations may not be used to decide whether an exclusion of a particular length is
reasonable.

Duration of the crime (42 C.F.R. § 1001.102(b)(2)). Petitioner was part of a conspiracy
that lasted over ten years, “from December 2000 until approximately July 2011.” LG.
Ex. 3 at 3,5. His personal involvement lasted from December 2000 until October 2008,
significantly longer than the one-year threshold for aggravation. I.G. Ex. 3 at 6
(Indictment JJ 17, 18).

Petitioner argues that I may consider only the judgment of conviction in assessing the
duration of his crimes. Because the judgment refers only to one date, October 2008, he
reasons that the duration of his crimes is not an aggravating factor. P. Br. at 7.
Petitioner’s argument fails for two reasons. First, the regulation directs me to consider
“the acts that resulted in the conviction or similar acts,” so I may look beyond the
judgment in assessing this factor. Second, Petitioner misreads the judgment. It indicates
that the offenses ended in October 2008. The counts on which he was convicted are set
out in the indictment and describe conduct beginning in December 2000 and ending in
October 2008.

Incarceration (42 C.F.R. § 1001.102(b)(5)). The criminal court sentenced Petitioner to a
substantial period of incarceration — 51 months — which underscores the seriousness of
his crimes. I.G. Ex. 2 at 2.

Any period of incarceration, no matter how short, justifies increasing the period of
exclusion. Fifty-one months is a substantial period of incarceration, which reflects the
sentencing court’s assessment of Petitioner’s trustworthiness (or lack thereof). See
Raymond Lamont Shoemaker, DAB No. 2560 at 8 (2014) ( “In light of the high degree of
untrustworthiness reflected in the length of Petitioner’s term of incarceration, a five-year
extension of the mandatory minimum five-year exclusion based on this factor alone
would not be unreasonable.”); Jeremy Robinson, DAB No. 1905 at 12 (2004)
(characterizing a nine-month incarceration as “relatively substantial.”); Jason Hollady,
M.D., DAB No. 1855 at 12 (2002); Stacy Ann Battle, DDS., DAB No. 1843 (2002)
(finding that four months in a halfway house, followed by four months home confinement
justifies lengthening the period of exclusion); Brenda Mills, M.D., DAB CR1461, aff'd
DAB No. 2061 (2007) (finding that six months home confinement justifies increasing the
length of exclusion).

No mitigating factors. The regulations consider mitigating just three factors: 1) a
petitioner was convicted of three or fewer misdemeanor offenses and the resulting
financial loss to the program was less than $1,500; 2) the record in the criminal
proceedings demonstrates that a petitioner had a mental, physical, or emotional condition
that reduced his culpability; and 3) a petitioner’s cooperation with federal or state
officials resulted in others being convicted or excluded, or additional cases being
investigated, or a civil money penalty being imposed. 42 C.F.R. § 1001.102(c).

Obviously, because he was convicted of felonies, the first factor does not apply here. Nor
does Petitioner claim any mental, physical, or emotional condition that reduced his
culpability. He does not claim to have cooperated with federal or state officials. Thus,
no mitigating factor offsets the aggravating factors here.

Petitioner suggests that he was not nearly as culpable as his co-conspirators, whose
criminal conduct caused the Medicare and Medicaid programs significant financial
losses. This is not a mitigating factor and does not justify any decrease in his period of
exclusion.

So long as the period of exclusion is within a reasonable range, based on demonstrated
criteria, I have no authority to change it. Jeremy Robinson, DAB No. 1905 at 5; Joann
Fletcher Cash, DAB No. 1725 at 7, citing 57 Fed. Reg. 3298, 3321 (1992). In this case,
Petitioner’s crimes demonstrate that he presents significant risks to the integrity of health
care programs. He engaged in illegal conduct that lasted a very long time. He has been
sentenced to a lengthy period of time in prison. No mitigating factors offset these
aggravating factors.

IV. 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 as reasonable
the fifteen-year period of exclusion.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant,
v.

Stogie’s, Inc.
d/b/a Stogie’s Discount Tobacco and Beer,

Respondent.

Docket No. C-14-733
FDA Docket No. FDA-2014-H-0236

Decision No. CR3503

Date: December 5, 2014

INITIAL DECISION AND DEFAULT JUDGMENT

Lissue this default judgment against Respondent, Stogie’s, Inc. d/b/a Stogie’s Discount
Tobacco and Beer, as a sanction for its failure to comply with the Center for Tobacco
Products' (CTP's) discovery request. On November 13, 2014, I issued an order directing
Respondent to comply with the request. Respondent failed to produce any documents by
the deadline that I had set for compliance. I warned Respondent in my order that failure
to comply with CTP's discovery request would be a basis for me to impose a default
judgment against it.

CTP began this case by serving a Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent’s staff unlawfully utilized a self-
service display of tobacco products in a non-exempt facility, sold tobacco products to a
minor, and failed to verify, by means of photo identification containing a date of birth,
that a tobacco purchaser was 18 years of age or older, thereby violating the Federal Food,
Drug, and Cosmetic Act (Act) and its implementing regulations, found at 21 C.F.R.
pt. 1140. CTP seeks a civil money penalty of $2,000.

On March 10, 2014, CTP served the Complaint on Respondent by United Parcel Service,
pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying cover letter,
CTP explained that within 30 days Respondent should pay the penalty, file an answer, or
request an extension of time within which to file an answer. CTP warned Respondent
that if it failed to take one of these actions within 30 days an Administrative Law Judge
could issue an initial decision by default ordering Respondent to pay the full amount of
the proposed penalty. 21 C.F.R.§ 17.11.

Lissued an Initial Decision and Default Judgment in this case on May 2, 2014.
Respondent timely answered the Complaint, however, the Civil Remedies Division
(CRD) received Respondent’s answer well after the filing deadline. On May 30, 2014,
I vacated the decision and issued an Acknowledgment and Prehearing Order that set
deadlines for the parties’ submissions, including the September 7, 2014 deadline to
request that the opposing party provide copies of documents relevant to this case.

For purposes of this decision, I assume the facts alleged in the Complaint are true.
21 CFR. § 17.11(a). Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Stogie’s Discount Tobacco and Beer, an establishment that sells
tobacco products and is located at 3477 US Route 60, Huntington, West Virginia
25705. Complaint § 3.

e During an inspection of Respondent’s establishment on February 6, 2013, at an
undisclosed time, an FDA-commissioned inspector observed the presence of “a
self-service display . . . of cigarette tobacco and smokeless tobacco... .”
Specifically, “an employee on duty told the inspector that minors were allowed to
enter with an adult.” Complaint J 10.

e¢ On March 18, 2013, Shawn Stewart responded in writing to the Warning Letter on
Respondent’s behalf. “Mr. Stewart stated that the store posted a sign outside that
stated that minors are not allowed inside and that the establishment’s employees
have been made aware of FDA policy.” Complaint § 11.

e During a subsequent two-part inspection on June 6, 2013 and June 11, 2013, FDA-
commissioned inspectors documented additional violations of 21 C.F.R. Part 1140
at Respondent’s establishment. Specifically, “a person younger than 18 years of
age was able to purchase a package of Marlboro Gold Pack 72’s cigarettes on June
6, 2013, at approximately 5:15 PM[.]” The inspectors also documented that “the
minor’s identification was not verified before the sale . . . on June 6, 2013, at
approximately 5:15 PM[.]” Additionally, “the establishment ha[d] a self-service
display of smokeless tobacco in a customer-accessible aisle of the establishment
[,][and] . . . minors [we]re able to enter the establishment at any time.” Complaint

gi.

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

21 U.S.C. § 387c(a)(7)(B); 21 C.F.R § 1140.1(b). The regulations prohibit the sale of
tobacco products to any person younger than 18 years of age. 21 C.F.R. § 1140.14(a).
The regulations also require the verification, by means of photo identification containing
a purchaser’s date of birth, that no tobacco product purchasers are younger than 18 years
of age. 21 C.F.R. § 1140.14(b)(1). Pursuant to 21 C.F.R. § 1140.16(c)(1), a retailer may
sell cigarettes and smokeless tobacco only in a direct, face-to-face exchange between the
retailer and the consumer. Self-service displays are a method of sale that is not permitted
under the regulations, 21 C.F.R. § 1140.16(c)(1), except when located in facilities where
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).

Taking the above alleged facts as true, Respondent committed four violations of the
regulations contained in 21 C.F.R. Part 1140 within a 24-month period. Specifically, on
February 6, 2013, Respondent utilized a self-service display of regulated tobacco
products, in violation of 21 C.F.R. § 1140.16(c). During a two-part inspection on June 6,
2013 and June 11, 2013, Respondent unlawfully sold a regulated tobacco product to a
minor, failed to verify the purchaser’s age by means of photographic identification
containing the purchaser’s date of birth, and utilized a self-service display of regulated
tobacco products in violation of 21 C.F.R. § 1140.16(c). 21 C.F.R. § 1140.14(a) and
(b)(1); 21 C.F.R. § 1140.16(c). Therefore, Respondent’s actions constitute violations of
law that merit a civil money penalty.

CTP has requested a fine of $2,000, which is a permissible fine under the regulations.
21 C.F.R. § 17.2. Therefore, I find that a civil money penalty of $2,000 is warranted and
so order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1498)

Complainant,
v.

Benedict A. Schepis, Inc. / Matt
Genua, d/b/a Brand Bar and Beverage,

Respondent.
Docket No. C-15-8
Decision No. CR3501

Date: December 5, 2014

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Benedict A. Schepis, Inc. / Matt Genua, d/b/a Brand Bar and
Beverage, 73 Park Avenue, Park Ridge, New Jersey 07656, and by filing a copy of the
complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The complaint alleges that Brand Bar and Beverage unlawfully sold
cigarettes to minors and failed to verify that the cigarette purchasers were 18 years of age
or older, thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C.

§ 301 et seq., and its implementing regulations, Cigarettes and Smokeless Tobacco,

21 C.F.R. pt. 1140. CTP seeks to impose a $500 civil money penalty against Respondent
Brand Bar and Beverage.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on October 8, 2014, CTP served the
complaint on Respondent Brand Bar and Beverage 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 Brand Bar and Beverage has neither filed an answer within the time
prescribed, nor requested an extension of time within which to file an answer. Pursuant
to 21 C.F.R. § 17.11, L assume that the facts alleged in the complaint (but not its
conclusory statements) are true. Specifically:

e At approximately 12:28 p.m. on June 16, 2013, at Respondent’s business
establishment, at 73 Park Avenue, Suite 1, Park Ridge, New Jersey 07656, an
FDA-commissioned inspector observed that a person younger than 18 years of age
was able to purchase a package of Newport Box 100s cigarettes. The inspector
also documented that staff failed to verify, by means of photographic identification
containing a date of birth, that the purchaser was 18 years of age or older;

e Ina warning letter dated August 1, 2013, CTP informed Respondent of the
inspector’s June 16, 2013 observations, and that such actions violate federal law,
21 CFR. § 1140.14(a) and (b)(1). The letter further warned that Respondent’s
failure to correct its violations could result in a civil money penalty or other
regulatory action;

e At approximately 6:04 p.m. on March 26, 2014, at Respondent’s business
establishment, at 73 Park Avenue, Suite 1, Park Ridge, New Jersey 07656, FDA-
commissioned inspectors documented that a person younger than 18 years of age
was able to purchase a package of Marlboro cigarettes. The inspectors also
documented that 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 Brand Bar and Beverage’s liability under the Act. The
Act prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product
is misbranded if sold or distributed in violation of regulations issued under section 906(d)
of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).
The Secretary of the U.S. Department of Health and Human Services issued the
regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1;
see 21 U.S.C. § 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The
regulations prohibit the sale of cigarettes to any person younger than 18 years of age.

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

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

Order

For these reasons, I enter default judgment in the amount of $500 against Respondent
Benedict A. Schepis, Inc. / Matt Genua, d/b/a Brand Bar and Beverage. 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-1561)

Complainant
v.

Jeffrey Lynn Warren
d/b/a One Stop Bait and Tackle,

Respondent.
Docket No. C-15-70
Decision No. CR3500

Date: December 5, 2014

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Jeffrey Lynn Warren d/b/a One Stop Bait and Tackle, at 805
Roland Avenue, Surf City, North Carolina 28445, and by filing a copy of the complaint
with the Food and Drug Administration’s (FDA) Division of Dockets Management. The
complaint alleges that One Stop Bait and Tackle unlawfully utilized a self-service display
of cigarette tobacco in a non-exempt facility, thereby violating the Federal Food, Drug,
and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations,

21 CFR. pt. 1140. CTP seeks to impose a $250 civil money penalty against Respondent
One Stop Bait and Tackle.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on October 16, 2014, CTP served the
complaint on Respondent One Stop Bait and Tackle 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 One Stop Bait and Tackle has neither filed an answer within the time
prescribed, nor requested an extension of time within which to file an answer. Pursuant
to 21 C.F.R. § 17.11, L assume that the facts alleged in the complaint (but not its
conclusory statements) are true. Specifically:

e At Respondent’s business establishment, 805 Roland Avenue, Surf City, North
Carolina 28445, on August 24, 2013, at an unspecified time, a FDA-commissioned
inspector observed the presence of a self-service display of cigarette tobacco. The
inspector also observed that the establishment allows minors to enter during
regular business hours;

e Ina warning letter dated October 31, 2013, CTP informed Respondent of the
inspector’s August 24, 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 violations could result in a civil money penalty or other regulatory
action;

e At Respondent’s business establishment, 805 Roland Avenue, Surf City, North
Carolina 28445, on April 19, 2014, at an unspecified time, FDA-commissioned
inspectors documented the presence of a self-service display of cigarette tobacco.
The inspector also observed that the establishment allows minors to enter during
regular business hours.

These facts establish Respondent One Stop Bait and Tackle’s liability under the Act. The
Act prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product
is misbranded if sold or distributed in violation of regulations issued under section 906(d)
of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).
The Secretary of the U.S. Department of Health and Human Services issued the
regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1;
see 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The
regulations also require a retailer to sell cigarettes only in a direct, face-to-face exchange.
21 CFR. § 1140.16(c).

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
Jeffrey Lynn Warren d/b/a One Stop Bait and Tackle. 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
Earl Braunlin, M.D.,

(PTAN: 0646100001),

Petitioner,

v.

Centers for Medicare & Medicaid Services
Docket No. C-14-1324
Decision No. CR3499

Date: December 5, 2014

DECISION

Petitioner, Earl Braunlin, M.D., is an ophthalmologist, optometrist, and optician who
applied to participate in the Medicare program as a supplier of durable medical
equipment (eye glasses and contact lenses for cataract patients). He has asked the
Centers for Medicare and Medicaid Services (CMS) to waive his $542 Medicare
enrollment fee. Acting on behalf of CMS, the Medicare contractor denied the waiver,
and Petitioner appeals.

I agree that Petitioner is not entitled to the waiver, and, for the reasons discussed below, I
affirm the denial.

Background

Petitioner was apparently enrolled in the Medicare program as a supplier of durable
medical equipment, but, rather than revalidate his enrollment, he voluntarily terminated
his program participation in 2013. He subsequently submitted a new application, Form
CMS-855S, dated April 2,2014. CMS Ex. | at 4-36. At the same time, he asked for a
hardship exception so that he would not have to pay the $542 application fee and
included an “income statement” for calendar year 2013, which showed income of
$107,646.36, but an “office income loss” of $3,718.40. CMS Ex. 1 at 1-3.

In a letter dated April 16, 2014, the Medicare contractor, Palmetto GBA, denied
Petitioner’s request for a hardship exception, finding that he had not submitted “strong
enough evidence” to support the exception to the application fee. CMS Ex. 2. Petitioner
sought reconsideration. CMS Ex. 3. In a reconsidered determination, dated May 27,
2014, a Medicare hearing officer agreed that Petitioner did not satisfy the requirements
for a hardship exception. CMS Ex. 9. Petitioner appeals the reconsidered determination.
See 42 CFR. §§ 424.514(h)(2); 405.874(c) (2011).'

CMS has submitted a brief, a motion for summary judgment, and 11 exhibits (CMS Exs.
1-11). In the absence of any objections, I admit into evidence CMS Exs. 1-11. In
addition to his hearing request, Petitioner submitted written arguments dated June 18,
2014, July 14, 2014, and August 2, 2014, with a letter from his accountant, dated August
25,2014.

Neither party proposes any specific witnesses, provides any written declarations of
witnesses, nor asks to cross-examine an appropriate witness.” See Acknowledgment and
Prehearing Order at 3 (J 4(c)(iv)); 5 (J 8). Because a hearing would serve no purpose, I
issue this decision without considering CMS’s motion for summary judgment.

Discussion

CMS properly exercised its discretion to deny Petitioner
Braunlin’s request for a hardship exception 3

An applicant for Medicare enrollment must pay an application fee or request a hardship
exception. Social Security Act (Act) § 1866(j)(2)(C)(); 42 C.F.R. § 514(a). If he
requests an exception from the fee, he must include, with his application, a letter that

' Section 424.514(h)(2) makes a hardship exception appealable “using § 405.874 of this
chapter.” In 2012, CMS recodified section 405.874(c) as 42 C.F.R. § 405.803. 77 Fed.
Reg. 29001, 29016-17 (May 16, 2012). CMS has not updated section 424.514(h)(2) to
reflect that change, but concedes that Petitioner’s appeal rights remain intact. 77 Fed.
Reg. at 29017; see CMS Br. at 5, fn 6.

> Although Petitioner asks to cross-examine government counsel (July 14 letter), these
individuals presented CMS’s legal arguments (to which Petitioner has responded), not

evidence, and are not subject to cross-examination.

> T make this one finding of fact/conclusion of law.
describes the hardship and explains why the hardship justifies an exception. 42 C.F.R.

§ 424.514(f). By statute and regulation, “on a case-by-case basis,” CMS has the
discretion to exempt an applicant from paying the fee if it “determines that the imposition
of the application fee would result in a hardship.” Act § 1866(j)(2)(C)(ii); 42 C.F.R. §§
424.514(a)(2) and (b)(2).

I agree with CMS that section 424.514(f) describes threshold requirements that must be
met before CMS will even consider granting an exception (i.e., the applicant must file a
request with his application). Nothing in that regulation prohibits CMS from requiring
that the applicant support his claims of hardship. In exercising its discretion to grant an
exception, CMS may — indeed, CMS should — require applicants to support their claims
with credible underlying documentation. See, e.g., Maximum Comfort, Inc. v. Sec’y. of
Health and Human Servs., 512 F.3d 1081, 1087 9" Cir. 2007) (where the statute
required only a certificate of medical necessity, nothing prevented CMS from imposing
additional documentation requirements on suppliers of durable medical equipment).
CMS is obligated to protect program integrity, and it would be irresponsible to grant a
waiver based solely on an applicant’s unsupported allegation.

The application fee here is modest — $542 for calendar year 2014 — and “should not
represent a significant burden for an adequately capitalized . . . supplier.” PIM, Chap. 15,
§ 15.19.1(C)(2); see Act § 1866(j)(2)(C); 42 CFR. § 424.514(d)(2). Indeed, Petitioner
has not claimed that he is unable to pay the fee.

Instead, he complains that the regulations “appear to have been written in a manner that
makes it difficult if not impossible to qualify for an exception.” (June 18 letter). He is
correct. In drafting the regulations, CMS declared that it would grant exceptions
“infrequently.” 76 Fed. Reg. 5862, 5955 (Feb. 2, 2011). In the Medicare Program
Integrity Manual, which I consider a reasonable exercise of CMS’s authority to interpret
its own regulations, CMS explains that the supplier “must... make a strong argument to
support its request, including providing comprehensive documentation (which may
include, without limitation, historical cost reports, recent financial reports such as balance
sheets and income statements, cash flow statements, tax returns, etc.).””, PIM, Chap 15,

§ 15.19.1(C)(2). The applicant must submit such documentation before the contractor
issues its initial determination and is “precluded from introducing new evidence at higher
levels of the appeals process.” 42 C.F.R. § 405.874(c)(5)(2011); see 42 CFR.

§§ 405.803(e); 498 .56(e).

The Program Integrity Manual lists factors that may suggest hardship: a) considerable
bad debt expenses; b) significant amount of charity care/financial assistance furnished to
patients; c) presence of substantive partnerships (whereby clinical, financial integration
are present) with those who furnish medical care to a disproportionately low-income
population; d) “considerable amounts” of an institution’s funding is from
disproportionate share hospital payments; and e) the supplier is located in a
presidentially-declared disaster area. The applicant must provide its supporting evidence
at the time it submits its hardship request. PIM, Chap. 15, § 15.19.1(C)(2). Plainly, CMS
anticipated granting exceptions in ways that would benefit disadvantaged program
beneficiaries.

To support his claim for an exception, Petitioner cites only one of these factors: charity
care/financial assistance. He claims to practice in an “inner city” location and to provide
“a significant amount of charity care/financial assistance to patients.” (June 18 letter).
But he provides no evidence establishing that his patients are disproportionately low-
income or that he furnishes significant charity care. Indeed, as CMS points out, his
financial statements do not mention bad debt or reflect any significant problems
collecting fees. See, e.g., CMS Ex. 3 at 3-4 (reflecting professional receipts equaling
96.7% and 102.8% of charges in 2011 and 2012).

Petitioner here submitted his accountant’s statements only — no tax returns or other
underlying documentation explaining how he reached the cited figures. He submitted no

information about his savings, investments, or net worth. He submitted no data at all for

2014. Nevertheless, the figures he submitted suggest that he owns significant assets — the
building in which the business operates, for which he claims no mortgage expenses.
CMS may legitimately consider assets as well as income in assessing whether a hardship
exception is appropriate.

Except for one year, Petitioner’s business has consistently made at least a small profit. In
2013 he had a gross income of $107,646.36. After deducting labor costs (he apparently
has two employees), property expenses (including taxes, repairs and maintenance),
automobile expenses (gasoline, repairs and insurance), and “miscellaneous expenses”
(including travel and lodging, meals and entertainment), he claimed a loss of $3 718.40.4
His accountant explains that Petitioner’s revenues have declined “over the past severa
years” because of Petitioner’s age and because he no longer performs surgical
procedures. (August 25 letter). CMS may legitimately determine that an otherwise
solvent applicant is not entitled to a hardship exemption based on his voluntarily
curtailing his practice. If, as Petitioner argues (June 18 and July 14 letters), this
ultimately means that the application fee exceeds the income he derives from the
Medicare program (for glasses he provides to post-cataract-surgery patients), it may not
make good business sense for him to continue his program participation, but that does not
create a basis for a hardship exception.

* To arrive at this figure, he deducted $5,143.90 as depreciation for the building he
owned, which obviously did not involve an out of pocket expense.

> The accountant’s statement would not be admissible as new evidence. 42 C.F.R.
§ 405.874(c)(5)(2011). However, I accept it as argument.
Conclusion

The statute and regulation give CMS broad discretion to determine whether to exempt a
Medicare applicant from paying the application fee. Here, in determining to deny
Petitioner that exception, CMS has not abused its discretion. I therefore affirm the
reconsidered determination.

/s/
Carolyn Cozad Hughes
Administrative Law Judge