Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

AL Peoria LLC dba AlignLife of Peoria
(PTAN: F100280759)
and
Andrea Forget-Schnowske, DC
(PTAN: F400281216),

Petitioners,
Vv.
Centers for Medicare & Medicaid Services.
Docket No. C-16-615
Decision No. CR4725

Date: October 24, 2016

DECISION

This case involves the consolidated requests for hearing of two petitioners-- AL Peoria
LLC doing business as AlignLife of Peoria (“Petitioner AlignLife” or “the practice”) and
Andrea Forget-Schnowske, DC (“Petitioner Forget-Schnowske”). Petitioners’ Medicare
billing privileges were deactivated as a result of the practice’s failure to timely respond to
a request that it revalidate its enrollment information. Petitioners’ billing privileges were
subsequently reactivated effective January 13, 2016, which is 30 days prior to the receipt
of Petitioner AlignLife’s enrollment application to reactivate its billing privileges by
National Government Services (NGS), a Medicare administrative contractor. Petitioners
have both appealed NGS’s assignment of a January 13, 2016 effective date for the
reactivation of their billing privileges. For the reasons discussed below, I conclude that
the effective date of Petitioners’ reactivated billing privileges remains January 13, 2016.
I. Background

Petitioner AlignLife is a chiropractic practice that is owned by Petitioner Forget-
Schnowske, a chiropractic doctor. Centers for Medicare & Medicaid Services Exhibit
(CMS Ex.) 4 at 2 (letter from Petitioner Forget-Schnowske to NGS stating that she
“purchased this business on January 1, 2015”). Petitioner Forget-Schnowske reported in
a Form CMS-855B that, prior to purchasing the practice on January 1, 2015, she took
over managing control of the practice on December 1, 2014. CMS Ex. | at 30. In
connection with this appeal, Petitioner currently contends that, despite the
aforementioned statements, she did not purchase the practice until May 18, 2015. P. Ex.
3 (letter stating that Petitioner Forget-Schnowske “entered into a sale agreement for the
practice AL Peoria LLC on 1/1/2015 and documents were signed showing a sale date of
1/1/2015 at the request of the accountant for the business” but “the actual sale and
transfer of ownership of the practice with closing documents did not occur until May 18,
2015.”)

On March 23, 2015, NGS sent Petitioner AlignLife a request for revalidation of its
Medicare enrollment. CMS Ex. 2. NGS mailed the correspondence to 4812 N. Sheridan
Rd. in Peoria, Illinois. CMS Ex. 2 at 1. NGS’s letter cautioned the practice that its
Medicare billing privileges may be deactivated if it did not return a completed
revalidation application within 60 days. CMS Ex. 2 at 1. The letter further informed the
practice that it was required to report enrollment changes, such as changes in ownership,
control, or practice location, within specified time limits. CMS Ex. 2 at 3. Petitioner
AlignLife did not return the revalidation application within the prescribed time period.!

Ina letter dated October 9. 2015, well after its sale was completed, NGS informed
Petitioner AlignLife that it had deactivated Petitioner AlignLife’s billing privileges,
effective September 19, 2015. CMS Ex. 3 at 1. NGS likewise deactivated Petitioner
Forget-Schnowske’s Provider Transaction Access Number (PTAN) because her billing
privileges were based on her relationship with Petitioner AlignLife. CMS Ex. 13 at 1;
see CMS Ex. 4 at 2.

Petitioner AlignLife submitted a revalidation application (Form CMS-855B) that was
received on February 12, 2016, at which time it reported that Petitioner Forget-
Schnowske assumed managing control on December 1, 2014 and purchased the practice

' Despite the notice provided in the March 23, 2015 letter, Petitioner did not inform NGS
of its changes in managing control and ownership until February 12, 2016.
on January 1, 2015.7 CMS Ex. | at 2, 30. Petitioner AlignLife also reported that it had
relocated to a new office location at 4700 N. University Street in Peoria, IL, and had seen
its first Medicare patient at that location on December 21, 2015. CMS Ex. 1 at 20. Ina
letter dated March 11, 2016, NGS approved Petitioner AlignLife’s revalidation
application and assigned a new PTAN with an effective date of January 13, 2016. CMS
Ex. 7. Ina separate letter issued that same date, March 11, 2016, NGS informed
Petitioner Forget-Schnowske that her revalidation application had been approved and
assigned a new PTAN. CMS Ex. 12 at 1.

Both petitioners sought reconsideration of the effective dates assigned for their
reactivated Medicare billing privileges. CMS Ex. 4. NGS issued a single reconsidered
determination that explained that both petitioners would maintain the newly assigned
PTANSs and that the effective date of billing privileges would continue to be January 13,
2016. CMS Ex. 9 at 1-2.

Both petitioners filed a request for hearing on May 31, 2016 that was received at the Civil
Remedies Division on June 7, 2016.° CMS filed an amended pre-hearing brief and
motion for summary disposition (CMS Br.), along with 13 exhibits (CMS Exs. | to 13).
Petitioner filed a response (P. Br.) with four exhibits (P. Exs. 1 to 4).* In the absence of
any objections, I admit CMS Exs. | to 13 and P. Exs. 1 to 4 into the record.

Neither party has offered the testimony of any witnesses, and therefore, a hearing for the
purpose of cross-examination of witnesses is not necessary. See Acknowledgment and
Prehearing Order §§ 8, 9, and 10. I consider the record in this case to be closed, and the
matter is ready for a decision on the merits.”

> Petitioner Forget-Schnowske previously submitted her own enrollment application,
Form CMS-855L, on January 13, 2016, presumably to update her practice location and
related information. CMS Ex. 10.

> Petitioner Forget-Schnowske was added as a named party to this appeal after CMS
conceded that she is a proper party in an amended brief filed on August 12, 2016.

+ While Petitioners’ exhibits do not comply with the identification and marking
requirements set forth in the Acknowledgement and Pre-Hearing Order, Petitioners’
exhibit list identifies each of the four exhibits by number.

> CMS has argued that summary disposition is appropriate. It is unnecessary in this
instance to address the issue of summary disposition, as neither party has requested an in-
person hearing.
IL. Issues

Whether CMS had a legitimate basis for establishing January 13, 2016, as the effective
date of the reactivated billing privileges for Petitioner AlignLife and Petitioner Forget-
Schnowske.

Il. Jurisdiction
I have jurisdiction to decide this case. 42 C.F.R. §§ 498.3(b)(15), 498.5(/)(2).
IV. Findings of Fact, Conclusions of Law, and Analysis®

I. On March 23, 2015, NGS sent a revalidation request to Petitioner
AlignLife.

2. NGS received Petitioner AlignLife’s enrollment application seeking
reactivation of its billing privileges on February 12, 2016.

3. An effective date earlier than January 13, 2016 is not warranted for
the reactivation of billing privileges for Petitioner AlignLife and
Petitioner Forget-Schnowske.

Both petitioners are considered to be “suppliers” for purposes of the Social Security Act
(Act) and the regulations. See 42 U.S.C. §§ 1395x(d), 1395x(u); see also 42 C.F.R.

§ 498.2. A “supplier” furnishes services under Medicare and the term applies to
physicians or other practitioners that are not included within the definition of the phrase
“provider of services.” 42 U.S.C. § 1395x(d). A supplier must enroll in the Medicare
program to receive payment for covered Medicare items or services. 42 C.F.R.

§ 424.505. The regulations at 42 C.F.R. Part 424, subpart P, establish the requirements
for a supplier to enroll in the Medicare program. 42 C.F.R. §§ 424.510 - 424.516; see
also Act § 1866(j)(1)(A) (authorizing the Secretary of the U.S. Department of Health and
Human Services to establish regulations addressing the enrollment of providers and
suppliers in the Medicare program). A supplier that seeks billing privileges under
Medicare must “submit enrollment information on the applicable enrollment application.”
42 C.F.R. § 424.510(a). “Once the provider or supplier successfully completes the
enrollment process . .. CMS enrolls the provider or supplier into the Medicare program.”
42 C.F.R. § 424.510(a), (d).

To maintain Medicare billing privileges, a supplier must revalidate its enrollment
information at least every five years. 42 C.F.R. § 424.515. CMS (or its contractor)
reserves the right to perform off-cycle revalidations in addition to the regular five-year

® My findings of fact and conclusions of law are set forth in italics and bold font.
revalidations and may request that a provider or supplier recertify the accuracy of the
enrollment information when warranted to assess and confirm the validity of the
enrollment information maintained by CMS. 42 C.F.R. § 424.515. Off-cycle
revalidations may be triggered as a result of random checks, information indicating local
health care fraud problems, national initiatives, complaints, or other reasons that cause
CMS to question the compliance of the provider or supplier with Medicare enrollment
requirements. 42 C.F.R. § 424.515(d). When CMS notifies a supplier that it is time to
revalidate, the supplier must provide the requested information and documentation
within 60 calendar days of CMS’s notification. 42 C.F.R. § 424.515(a)(2).

CMS is authorized to deactivate an enrolled supplier’s Medicare billing privileges if the
enrollee fails to comply with revalidation requirements within 90 days of CMS’s notice
to revalidate. 42 C.F.R. § 424.540(a)(3). If CMS deactivates a supplier’s Medicare
billing privileges, “[n]o payment may be made for otherwise Medicare covered items or
services furnished to a Medicare beneficiary.” 42 C.F.R. § 424.555(b). The regulation
authorizing deactivation explains that “[d]eactivation of Medicare billing privileges is
considered an action to protect the provider or supplier from misuse of its billing number
and to protect the Medicare Trust Funds from unnecessary overpayments.” 42 C.F.R.

§ 424.540(c).

The reactivation of an enrolled provider or supplier’s billing privileges is governed by
42 C.F.R. § 424.540(b), and the process for reactivation is contingent on the reason for
deactivation. If CMS deactivates a provider or supplier’s billing privileges due to an
untimely response to a revalidation request, such as in this case, the enrolled provider or
supplier may apply for CMS to reactivate its Medicare billing privileges by completing
the appropriate enrollment application or recertifying its enrollment information, if
deemed appropriate. 42 C.F.R. § 424.540(a)(3), (b)(1). NGS informed Petitioner
AlignLife, at the time of its deactivation, that it could revalidate using an internet-based
system or it could submit a hard copy Form CMS-855 application. CMS Ex. 3 at 1-2.

NGS deactivated Petitioner AlignLife’s billing privileges approximately six months after
NGS requested that it revalidate its enrollment information and Petitioner AlignLife did
not provide a response.’ CMS Exs. 3. More than 10 months after NGS initially
requested that Petitioner complete the revalidation process (CMS Ex. 2), Petitioner
AlignLife submitted an application for revalidation that NGS received on February 12,
2016. CMS Ex. 1. NGS accepted Petitioner AlignLife’s application and reactivated both
petitioners’ billing privileges and assigned new PTANs. CMS Exs. 7, 12. NGS
reactivated the billing privileges of Petitioner AlignLife and Petitioner Forget-Schnowske
effective January 13, 2016, which is 30 days prior to NGS’s receipt of Petitioner
AlignLife’s signed enrollment application. CMS Exs. 7, 12; see CMS Ex. 1.

7 The deactivation of Petitioner Forget-Schnowske’s billing privileges resulted from the
deactivation her practice’s billing privileges.
The pertinent regulation with respect to the effective date of reactivation, as cited by
NGS in its reconsidered decision, is 42 C.F.R. § 424.520(d). CMS Ex. 9 at 1; Arkady B.
Stern, M_.D., DAB No. 2329 at 4 (2010). Section 424.520(d) states that “[t]he effective
date for billing privileges . . . is the later of — (1) [t]he date of filing of a Medicare
enrollment application that was subsequently approved by a Medicare contractor; or (2)
[t]he date that the supplier first began furnishing services at a new practice location.”
NGS’s letter referenced a corresponding CMS policy (“Revalidation Received After a
Deactivation Occurs”), which at that time had been in effect since May 15, 2015.° That
policy was consistent with section 424.520(d) and instructed that “[t]he PTAN and
effective date shall remain the same if the revalidation application was received prior to
120 days after the date of deactivation” and “[i]f the revalidation is received more than
120 days after deactivation, a new PTAN and effective date shall be issued to the
provider or supplier... .”. Medicare Program Integrity Manual (MPIM), ch. 15

§ 15.29.4.3 (rev. 578, issued February 25, 2015, effective May 15, 2015). The
Departmental Appeals Board has explained that the “date of filing” is the date “that an
application, however sent to a contractor, is actually received.” Alexander C. Gatzimos,
MD, JD, LLC, DAB No. 2730 at 5 (2016) (emphasis omitted). Accordingly, based on the
date of filing of Petitioner AlignLife’s enrollment application, which was more than 120
days after deactivation, NGS reactivated Petitioners’ billing privileges effective January
13, 2016. NGS favorably assigned a January 13, 2016 effective date of billing privileges
based on its interpretation that 42 C.F.R. § 424.521(a) allowed for an earlier effective
date of billing privileges based on the 30-day retrospective billing provision contained in
that regulation. See CMS Ex. 9 at 1, citing 42 C.F.R. § 424.521(a).

Petitioners are seeking an effective date of billing privileges dating back to the date of
deactivation on September 19, 2015. However, Petitioners do not identify any authority
supporting this retroactive effective date for the reactivation of billing privileges.

While Petitioner AlignLife’s failure to respond to the revalidation request for a period of
more than 10 months resulted in an approximately 5-month lapse in its billing privileges,
only a few years ago such a failure to respond to a revalidation request could have

resulted in a revocation of billing privileges and an enrollment bar for a minimum of one
year.” 42 C.F.R. § 424.535(b), (c) (2010) (stating that “[w]hen a provider’s or supplier’s

® The Secretary recently revised portions of section 15.29.4.3 and related sections of the
MPIM, but those revisions do not substantively impact the discussion herein. (Revision
666, issued August 5, 2016, and effective September 6, 2016).

° As I previously referenced, the available evidence indicates that Petitioner AlignLife
failed to timely report changes in managing control, ownership, and practice location.
While not addressed by NGS, I recognize that such delayed notification of changes in
Petitioner’s managing control, ownership, and practice location, if supported by the
billing privilege is revoked any provider agreement in effect at the time of revocation is
terminated effective with the date of revocation” and “[a]fter a... supplier . . . 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,”
which is a minimum of one year and no more than three years.) The Secretary’s former
authority to revoke billing privileges and establish a re-enrollment bar was implemented
through a final rule published on June 27, 2008, and the regulatory amendment had a
stated purpose “to prevent providers and suppliers from being able to immediately re-
enroll in Medicare after their billing privileges were revoked.” 76 Fed. Reg. 65909,
65912 (October 24, 2011), citing 73 Fed. Reg. 36448. When the Secretary later
determined, in subsequent rulemaking, that this basis for revocation and a re-enrollment
bar should be eliminated through removing the pertinent language in 42 C.F.R.

§ 424.535(c), the Secretary’s final rule explained:

In our October 24, 2011, proposed rule, we proposed to revise § 424.535(c)
to eliminate the re-enrollment bar in instances where providers and
suppliers have had their billing privileges revoked under § 424.535(a)
solely for failing to respond timely to a CMS revalidation request or other
request for information. As we explained in the proposed rule, we believe
that this change is appropriate because the re-enrollment bar in such
circumstances often results in unnecessarily harsh consequences for the
provider or supplier and causes beneficiary access issues in some cases... .
Moreover, there is another, less restrictive regulatory remedy available for
addressing a failure to respond timely to a revalidation request. This
remedy was identified in proposed § 424.540(a)(3).

77 Fed. Reg. at 29009 (emphasis added). The final rule further stated:

evidence, could have resulted in the revocation of its billing privileges based on a failure
to comply with enrollment requirements. See 42 C.F.R. §§ 424.516(d), 424.535(a)(9). In
addition to revocation of billing privileges, such a failure to meet enrollment
requirements could have resulted in one-year re-enrollment bar, at a minimum, whereas
the total duration of Petitioner’s deactivated billing privileges was for approximately 5
months. 42 C.F.R. § 424.535(c). Thus, it is fortuitous for Petitioner that NGS
deactivated its billing privileges rather than revoking its Medicare supplier agreement and
establishing a re-enrollment bar. While Petitioner Forget-Schnowske attributes the
failure to timely revalidate on the practice’s previous owner and billing employee, she
was the practice’s owner at the time it both changed ownership and relocated to a new
practice location. Petitioner Forget-Schnowske was also the owner of the practice at the
time NGS provided notice that its Medicare billing privileges had been deactivated due to
its failure to respond to a revalidation request. CMS Ex. 3.
We do not believe that the finalization of our proposed revision to
§ 424.535(c) will impact our ability to prevent or combat fraudulent activity
in our programs. Providers and suppliers that fail to respond once or
repeatedly to a revalidation or other informational request will still be
subject to adverse consequences, including—as explained below—the
deactivation of their Medicare billing privileges.

77 Fed. Reg. at 29010 (emphasis added). Finally, in amending section 424.540(a)(3), as
referenced above, the final rule stated:

We proposed to add a new § 424.540(a)(3) that would allow us to
deactivate, rather than revoke, the Medicare billing privileges of a provider
or supplier that fails to furnish complete and accurate information and all
supporting documentation within 90 calendar days of receiving notification
to submit an enrollment application and supporting documentation, or
resubmit and certify to the accuracy of its enrollment information. While
the deactivated provider or supplier would still need to submit a complete
enrollment application to reactivate its billing privileges, it would not be
subject to other, ancillary consequences that a revocation entails; for
instance, a prior revocation must be reported in section 3 of the Form CMS-
855I application, whereas a prior deactivation need not.

77 Fed. Reg. at 29013 (emphasis added). Thus, while the rulemaking explained that the
regulatory amendment was intended to mitigate the “unnecessarily harsh consequences”
of revocation and a mandatory enrollment bar for a supplier’s failure to respond to a
revalidation request, the final rule recognized that there was a “less restrictive regulatory
remedy available for addressing a failure to respond timely to a revalidation request” and
that a supplier “will still be subject to adverse consequences” that included “the
deactivation of their Medicare billing privileges.” The final rule implemented section
424.540(a)(3), which specified that deactivation of billing privileges, rather than
revocation, was appropriate, and stated that deactivation “does not have any effect ona
provider or supplier’s participation agreement or any conditions of participation.” '°

42 CFR. § 424.540(a)(3), (c).

' A physician or supplier participation agreement can be made through a Form CMS-
460. When a physician or supplier enters into such an agreement, it “enters into an
agreement with the Medicare program to accept assignment of the Medicare Part B
payment for all services for which the participant is eligible to accept assignment under
the Medicare law and regulations.” Form CMS-460. A supplier such as Petitioner is not
subject to conditions of participation. See 42 C.F.R. Parts 482 and 485.
While section 424.540(a)(3) indicates that the deactivation does not have any effect on
the supplier’s participation agreement or conditions of participation, deactivation
nonetheless may cause “adverse consequences,” most significantly, the loss of billing
privileges. The effective date of reactivation of billing privileges is governed by

42 C.F.R. § 424.520, “Effective date of Medicare billing privileges,” which states, in
pertinent part, that the effective date for billing privileges, as applicable to this case, is
“(t]he date of filing of a Medicare enrollment application that was subsequently approved
by a Medicare contractor.” 42 C.F.R. § 424.520(d)(1). The May 9, 2016 reconsidered
determination explicitly relied on 42 C.F.R. § 424.520(d) in determining that the effective
date of Petitioner’s reactivated billing privileges was correctly determined to be January
13, 2016. CMS Ex. 9 at 2. The reconsidered determination additionally relied on section
15.29.4.3 of the version of the MPIM that was in effect, which contained the
aforementioned policy guidance that is consistent with section 424.520(d) and indicates
that the effective date of a reactivation based on a revalidation application that was
received more than 120 days after deactivation is the date the enrollment application was
submitted. But see Viora Home Health, Inc., DAB No. 2690 at 8 (2016) (“the MPIM
provision . . . is sub-regulatory guidance, and as the introduction to chapter 15 of MPIM .
. . suggests, chapter 15 provisions are primarily intended as guidance or instructions for
CMS fee-for-service contractors”). While the regulation does not require CMS to wait as
long as 120 days to deactivate billing privileges and assign a new PTAN and effective
date, NGS followed the more permissive directive of the MPIM that required assignment
of anew PTAN and effective date after more than 120 days following deactivation."
NGS correctly applied section 424.520(d), and its reliance on the MPIM was to the
benefit of Petitioners. An effective date earlier than January 13, 2016 is not warranted.

Petitioners have argued that they were unaware of the revalidation request and allege that
the former owner and an internal billing employee were responsible for the failure to
timely revalidate the practice’s Medicare enrollment. P. Br. at 1. Prior to the instant
appeal, Petitioner Forget-Schnowske asserted, on more than one occasion, that she has
owned the practice since January 1, 2015. CMS Ex. | at 3; 4 at 2. In fact, Petitioner

'! Pursuant to 42 C.F.R. § 424.540(a)(3), CMS may deactivate the Medicare billing
privileges when a provider or supplier “does not furnish complete and accurate
information and all supporting documentation within 90 calendar days of receipt of
notification from CMS to submit an enrollment application and supporting
documentation, or resubmit and certify to the accuracy of its enrollment application.”
Thus, Section 15.29.4.3 of the MPIM in effect at the time of Petitioners’ deactivation,
while not inconsistent with the regulation, instructed Medicare contractors to allow an
additional 30 days, until 120 days, to receive a response to a request for revalidation
before deactivating Medicare billing privileges. See also MPIM, ch. 15 § 15.29.3.3 (rev.
578, issued February 25, 2015, effective May 15, 2015) (addressing revalidation
applications not received within 120 to 125 days of the date the revalidation notice is
sent).
10

Forget-Schnowske reported that she has had “managing control” of the practice since
December 1, 2014. CMS Ex. 1 at 30. Only now, in furtherance of her arguments, does
Petitioner Forget-Schnowske, for the first time, contend that she was not the owner of the
practice prior to May 18, 2015. Furthermore, while the effective date of both petitioners’
billing privileges is the only issue for consideration in the instant case, I observe that the
failure to timely revalidate is one of several instances evidencing a pattern of failure to
comply with Medicare requirements, to include reporting changes in managing control,
ownership, and practice location. Regardless of whether Petitioner Forget-Schnowske
owned the practice at the time of the revalidation request, the unrefuted evidence shows
that Petitioner Forget-Schnowske had managing control of the practice at that time.
Further, Petitioner Forget-Schnowske was unquestionably the owner of Petitioner
AlignLife on October 9, 2015, when the notice of deactivation was mailed to the practice.
Yet, neither Petitioner AlignLife nor Petitioner Forget-Schnowske submitted a
revalidation application soon after receiving notice of the practice’s deactivation.
Petitioner’s failure to timely respond to the revalidation request and notice of deactivation
is not due to any fault of CMS or NGS, but rather, its own failure to provide a response.

To the extent that the petitioners are requesting equitable relief in the form of an earlier
effective date of reactivated billing privileges, I am unable to grant equitable relief. See
US Ultrasound, DAB No. 2302 at 8 (2010) (“[nJeither the ALJ nor the Board is
authorized to provide equitable relief by reimbursing or enrolling a supplier who does not
meet statutory or regulatory requirements”). Therefore, the effective date of January 13,
2016 must stand.

V. Conclusion

I uphold the January 13, 2016 effective date of the reactivation of Medicare billing
privileges for Petitioner AlignLife and Petitioner Forget-Schnowske.

/s/
Leslie C. Rogall
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Lindsay Zamis, M.D., & Lindsay Zamis, M.D., a Professional Corporation,
(PTANs: CB231787 & CB231788)

(NPI: 1457751968)
Petitioners,

Vv.

Centers for Medicare & Medicaid Services.

Docket No. C-15-4134

Decision No. CR4723

Date: October 21, 2016

Petitioners, Lindsay Zamis, M.D.,

DECISION

and Lindsay Zamis, M.D., a Professional Corporation,

appealed the determination establishing the effective date of their enrollment and billing

privileges as Medicare suppliers.

For the reasons explained below, I find that Noridian

Healthcare Solutions (Noridian), an administrative contractor for the Centers for
Medicare & Medicaid Services (CMS), properly determined that the effective date of

Petitioners’ enrollment was April

, 2015, with retrospective billing permitted as of

March 2, 2015.' See CMS Exhibit (Ex.) 3. I therefore affirm the effective date set by

CMS.

' Noridian identified March 2, 20

5, as the “effective date” of Petitioners’ enrollment.

CMS Ex. 3. However, by regulation, the “effective date” of enrollment is the date
Noridian received enrollment applications from Petitioners that it eventually approved.
See 42 C.F.R. § 424.520(d). In this case, Noridian received Petitioners’ enrollment

application on April 1, 2015. See,
“retrospectively bill” for services

e.g., CMS Ex. 5 at 2. CMS may permit a supplier to
or up to 30 days prior to that effective date. 42 C.F.R.

§ 424.521(a). Because March 2, 2015 is 30 days prior to the date Noridian received
I. Background and Procedural History

On September 1, 2014, Petitioners’ credentialing specialist sent applications for Medicare
enrollment and billing privileges to Noridian using Forms CMS-855B, CMS-855I, and
CMS-855R. Petitioners’ (P.) Ex. 8 § 2 (Shanahan Declaration).” Noridian received the
applications on September 17, 2014. See, e.g., CMS Ex. | at 1. Noridian sent
Petitioners’ credentialing specialist e-mails requesting additional information regarding
the applications on October 2, 2014, November 11, 2014, and December 20, 2014. P. Ex.
8 99 3,5, 6.

Each of the e-mails requesting additional information stated that Noridian may reject
Petitioners’ applications if Petitioners failed to provide complete information “within 30
calendar days of the initial request.” P. Ex. 1; CMS Exs. 7, 8.

By letter dated December 30, 2014, Noridian notified Petitioners that it had rejected
Petitioners’ applications because the applications were incomplete and because
Petitioners had not submitted complete applications in response to the requests for
additional information. CMS Ex. 1. The December 30 letter further explained that in
order to reapply for Medicare enrollment, Petitioners must submit new applications. Jd.

Petitioners submitted a new application for enrollment (Form CMS-855]) that Noridian
received on April 1, 2015. CMS Ex. 2 at 28. Noridian approved the application. CMS
Ex. 3. Noridian approved retrospective billing effective March 2, 2015. Petitioners
requested reconsideration of the effective date. CMS Ex. 4. Noridian issued an
unfavorable reconsidered determination in which it reaffirmed the effective date of
Petitioners’ enrollment. CMS Ex. 5. Petitioners filed a timely request for a hearing
before an administrative law judge. The case was originally assigned to Judge Joseph
Grow and was briefly re-assigned to Judge Carolyn Cozad Hughes before being re-
assigned to me effective September 16, 2016.

Pursuant to the Acknowledgement and Pre-Hearing Order (Order) issued by Judge Grow,
the parties filed cross-motions for summary judgment and CMS filed a reply brief
opposing Petitioners’ motion for summary judgment (CMS Br., P. Br., CMS Reply).

Petitioners’ application, it appears that Noridian used the term “effective date” to refer to
the date from which Petitioners are authorized to retrospectively bill for Medicare
services. For clarity, I use the term “effective date” in this decision to refer to the
effective date of enrollment that is established by regulation (April 1, 2015), not the date
from which retrospective billing is authorized (March 2, 2015).

> Petitioners submitted the written declaration of their credentialing specialist, Madison
Shanahan, but did not mark the declaration as an exhibit. For purposes of this decision, I
designate Ms. Shanahan’s declaration as P. Ex. 8.
CMS offered nine exhibits. (CMS Exs. 1-9). Petitioners offered seven exhibits. (P. Exs.
1-7). As noted previously, Petitioners submitted the written declaration of Madison
Shanahan; but, Petitioners did not mark the declaration as an exhibit, as was required
under Judge Grow’s pre-hearing order. Order §f 4.c.iv, 8. Therefore, consistent with the
terms of the pre-hearing order, I designate Ms. Shanahan’s declaration as P. Ex. 8. In the
absence of objection, I admit CMS Exs. 1-6 and P. Exs. 1-8 into the record.

Petitioners objected to the admission of CMS Exs. 7-9 as untimely under the terms of
Judge Grow’s pre-hearing order. I overrule the objection. Petitioners do not deny that
they received the three e-mail communications that are the subject of CMS Exs. 7-9. To
the contrary, Ms. Shanahan’s declaration describes each of the e-mail communications at
issue. P. Ex. 8. Thus, there can be no issue of unfair surprise regarding the e-mails.
Moreover, while Ms. Shanahan’s declaration refers to the e-mails, Petitioners did not
offer printouts of the content of these e-mails in support of the declaration. Therefore, in
the interest of creating a complete record of the communications between Petitioners and
Noridian, I find good cause to admit CMS Exs. 7-9 into the record.

CMS did not propose to call any witnesses. Petitioners offered the written declaration of
Ms. Shanahan. However, CMS did not request to cross-examine Ms. Shanahan. As
Judge Grow’s pre-hearing order informed the parties, a hearing is necessary only if a
party requests to cross-examine a witness for whom the party opponent offered written
direct testimony. Order ff 9, 10. Therefore, I deny the motions for summary judgment
and proceed to issue this decision based on the written record.*

II. Issue

The issue in this case is whether Noridian, acting on behalf of CMS, properly established
April 1, 2015, as Petitioners’ effective date for enrollment in Medicare, with retrospective
billing privileges authorized from March 2, 2015.

Il. = Jurisdiction

I have jurisdiction to hear and decide this case. 42 C.F.R. §§ 498.3(b)(17), 498.5())(2);
see also Social Security Act (Act) § 1866(j)(8) (codified at 42 U.S.C. § 1395cc(j)(8)).

> Further, it appears Petitioners waived their right to appear at a hearing, as they
indicated that the case was ready for a decision on the merits without further proceedings.
See April 7, 2016 Notice of Case Status.
IV. Findings of Fact, Conclusions of Law, and Analysis*

A provider or supplier that seeks billing privileges under Medicare must “submit
enrollment information on the applicable enrollment application.” 42 C.F.R.

§ 424.510(a). A “provider or supplier must submit a complete enrollment application and
supporting documentation to the designated Medicare fee-for-service contractor,” and the
application must include “complete, accurate, and truthful responses to all information
requested within each section as applicable to the provider or supplier type.” 42 C.F.R.

§ 424.510(d)(1)-(2). “Once the provider or supplier successfully completes the
enrollment process . .. CMS enrolls the provider or supplier into the Medicare program.”
42 CFR. § 424.510(a).

CMS “may reject” 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 C.F.R.

§ 424.525(a)(1); see also 42 C.F.R. § 424.502 (definition of Reject/Rejected). 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, CMS’s (or the contractor’s) decision to either
reject the application or extend the period for submitting information is a matter of
discretion that is not subject to appeal. 42 C.F.R. § 424.525(d).

If CMS or its contractor rejects an enrollment application, the supplier must submit a new
enrollment application. 42 C.F.R. § 424.525(c). For suppliers that are physicians or non-
physician practitioners, or physician or non-physician practitioner organizations, the
effective date for Medicare enrollment and billing privileges is the date on which the
supplier files an enrollment application that is subsequently approved or the date on
which the supplier first began providing services at a new location, whichever is later.

42 CFR. § 424.520(d).

I. Ihave no authority to review Noridian’s rejection of Petitioners’ September
2014 enrollment application.

CMS argues that its contractor’s determination to reject a Medicare enrollment
application is not subject to review by an administrative law judge. CMS Br. at 4. In
response, Petitioners argue that they do not challenge Noridian’s rejection of their
applications. P. Br. at 6-8. For the reasons explained below, I find Petitioners’
arguments unconvincing.

+ My numbered findings of fact and conclusions of law appear in bold and italics.
Petitioners cite to 42 C.F.R. § 498.3(b)(15) as establishing their right to administrative
review of the determination establishing the effective date of their Medicare enrollment.
P. Br. at 6. Petitioners are correct. There is no doubt Petitioners have a right to review of
the effective date of enrollment, but my authority to review the effective date of
enrollment cannot be expanded to permit review of Noridian’s determination to reject
Petitioners’ applications.

Petitioners acknowledge that CMS may reject an incomplete enrollment application. P.
Br. at 7. Nevertheless, their arguments focus solely on how and why Noridian (on behalf
of CMS) erred by rejecting their September 1 enrollment applications. Petitioners detail
the communications that their credentialing specialist had with Noridian representatives
regarding Noridian’s requests for additional information. P. Br. at 8-10. Petitioners
suggest that Noridian’s requests for information were unclear or that Noridian
mishandled the application process.* Jd. Petitioners also contend that they were
“actively working with CMS to resolve any outstanding issues” within the meaning of
42 C.F.R. § 424.525(b). P. Br. at 7. Finally, Petitioners argue that the information
Noridian requested was at all times apparent from their applications. P. Br. at 2. I have
considered these contentions but, even accepting them as true, I am unable to grant
Petitioners the relief they seek.

I cannot grant a September 1, 2014 effective date for Petitioners’ Medicare enrollment
unless I set aside Noridian’s rejection of Petitioners’ September 2014 enrollment
applications. As summarized above, the governing regulations provide that, once an
enrollment application is rejected, a supplier must submit a new enrollment application.
See 42 C.F.R. § 424.525(c). Thus, a rejected enrollment application cannot be the basis
for an enrollment effective date. This is because submission of a new enrollment
application triggers a new effective date calculation based on the date the contractor
receives the new application. See 42 C.F.R. § 424.520(d). No matter how Petitioners

> For example, Petitioners emphasize the fact that Noridian rejected the applications
before 30 days had elapsed from its final request for information. P. Br. at 9-10.
However, Noridian’s e-mail of November 11, 2014, informed Petitioners that their
applications may be rejected if they failed to submit complete responses “within 30
calendar days of the initial request.” CMS Ex. 8 (emphasis added). As CMS points out
in its Reply, this instruction is consistent with the provisions of the Medicare Program
Integrity Manual, Chapter 15 § 15.8.2, which states that “[i]f the contractor makes a
follow-up request for information, the 30-day clock does not start anew; rather it keeps
running for the date the pre-screening letter was sent.” CMS Reply at 4. Noridian
rejected Petitioners’ applications on December 30, 2014, which is beyond 30 days
following the information request on November 11, 2014. Thus, Petitioners’ criticisms
of Noridian’s process do not even establish that Noridian acted contrary to CMS policy.
may couch their arguments, I cannot grant Petitioners relief without exercising authority
over Noridian’s rejection of Petitioners’ September 2014 enrollment applications. The
regulations do not permit me to exercise such authority. See 42 C.F.R. § 424.525(d).

2. By regulation, the effective date of Petitioners’ Medicare enrollment cannot
be earlier than April 1, 2015, the date they submitted an application that
Noridian accepted.

Because Noridian, on behalf of CMS, rejected Petitioners’ September 2014 applications,
Petitioners were required to submit a new enrollment application. The date of filing an
enrollment application directly impacts the effective date for Medicare billing privileges. As
stated in the regulations:

The effective date for billing privileges 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).

The “date of filing” is the date that the Medicare contractor “receives” a signed enrollment
application that the Medicare contractor is able to process to approval. Tri-Valley Family
Medicine, Inc., DAB No. 2358 at 6-7 (2010) (citing 73 Fed. Reg. 69,725, 69,769 (Nov. 19,
2008)); see also Alexander C. Gatzimos, MD, JD, LLC, DAB No. 2730 at 5-15 (2016)
(explaining that CMS did not change the definition of the date of filing when it stated that
“(t]he ‘date of filing’ is the date on which the provider or supplier submitted its CMS-855
application via mail or Internet-based PECOS [Provider Enrollment, Chain and Ownership
System].”) (citing 79 Fed. Reg. 72,500, 72,521 (Dec. 5, 2014)).

Petitioners do not contend that Noridian received their new enrollment application at any
time prior to April 1, 2015. Accordingly, as required by regulation, the effective date of
Petitioners’ Medicare enrollment is April 1, 2015. Pursuant to 42 C.F.R. § 424.521(a)(1),
Petitioners are permitted to retrospectively bill for services for up to 30 days prior to the
effective date of enrollment.
V. Conclusion

I affirm CMS’s decision that the effective date of Petitioners’ Medicare enrollment and
billing privileges is April 1, 2015, with retrospective billing permitted as of March 2,
2015.

/s/
Leslie A. Weyn
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

J.A.C. Fine Wine and Spirits, Inc.
d/b/a Friendly Liquors,

Respondent.

Docket No. T-16-170
FDA No. FDA-2016-H-0454

Decision No. TB393

Date: October 19, 2016

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) initiated a $500 civil money penalty (CMP)
action against Respondent for unlawfully selling cigarettes to minors, on two separate
occasions, and failing to verify, by means of photo identification containing a date of
birth, that the purchasers were 18 years of age or older, on two separate occasions, in
violation of the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seg., and
its implementing regulations, 21 C.F.R. pt. 1140. During the hearing process,
Respondent failed to comply with a judicial direction regarding CTP’s discovery request.
I therefore strike Respondent’s answer and issue this decision of default judgment.

I. Procedural History
Respondent timely answered CTP’s complaint. I issued an Acknowledgement and

Prehearing Order (APHO) that set deadlines for parties’ submissions, including the June
3, 2016 deadline to request that the opposing party provide copies of documents relevant
to this case. Additionally, the APHO stated that a party receiving such a request must
provide the requested documents no later than 30 days after the request.

CTP served Respondent with its request for documents on June 3, 2016. On July 13,
2016, CTP filed a motion to compel discovery indicating that CTP had not received a
response to its request for production of documents. See 21 C.F.R. § 17.23(a). On July
13, 2016, CTP also filed a motion to extend the deadlines. Pursuant to my direction, a
July 15, 2016 letter allowed Respondent until July 29, 2016 to file a response to CTP’s
motion to compel discovery. On July 15, 2016, I also issued an Order that extended the
parties’ pre-hearing exchange deadlines.

On August 10, 2016, I issued an Order that granted CTP’s motion to compel discovery. I
noted that Respondent had not filed a response to CTP’s motion to compel discovery. In
that Order, I stated that Respondent shall comply with CTP’s request for production of
documents by September 2, 2016. I further stated that:

Failure to do so may result in sanctions, including the issuance of an Initial
Decision and Default Judgment finding Respondent liable for the violations
listed in the Complaint and imposing a civil money penalty.

On September 14, 2016, CTP filed a motion to impose sanctions advising me that
Respondent had not complied with my August 10, 2016 Order and asked me to strike the
Respondent’s answer and issue a default judgment in this case. On September 14, 2016,
CTP also filed a motion to extend deadlines that asked me to extend any deadlines for
either 30 days or a period of time sufficient for me to rule on CTP’s motion to impose
sanctions. On September 22, 2016, I issued an Order that allowed Respondent until
October 5, 2016 to file a response to CTP’s motion to impose sanctions. In the
September 22, 2016 Order I also extended the parties’ pre-hearing exchange deadlines.

Il. Striking Respondent’s Answer

Respondent failed to file a response to CTP’s motion to compel discovery, failed to
comply with the August 10, 2016 Order compelling discovery responses to be provided
by September 2, 2016, and failed to file a response to CTP’s motion to impose sanctions.
Respondent did not comply with CTP’s discovery requests. Respondent has not made
any contact with this Court since May 2, 2016, the date Respondent timely filed its
answer. Respondent’s failure to effectively prosecute and defend actions taken over the
course of the proceedings have interfered with the orderly and speedy processing of this
case, further warranting imposition of sanctions. See 21 C.F.R. § 17.35(a) (1)(2) and (3).

Due to Respondent’s noncompliance with the August 10, 2016 Order, I am striking
Respondent’s Answer, issuing this default decision, and assuming the facts alleged in
CTP’s complaint to be true. See 21 C.F.R. § 17.35(c) (3), 17.11(a). The harshness of the
sanctions I impose upon either party must relate to the nature and severity of the
misconduct or failure to comply, and I find the failure to comply here sufficiently
egregious to warrant striking the answer and issuing a decision without further
proceedings. See 21 C.F.R. § 17.35(b). Respondent failed to comply with the August 10,
2016 Order, nor did it provide any adequate justification for not doing so.

Ill. Default Decision

Striking Respondent’s answer leaves the Complaint unanswered. Therefore, I am
required to issue an initial decision by default if the complaint is sufficient to justify a
penalty. 21 C.F.R. § 17.11(a). Accordingly, I must determine whether the allegations in
the Complaint establish violations of the Act.

For purposes of this decision, I assume the facts alleged in the Complaint are true and
conclude that default judgment is merited based on the allegations of the Complaint and
the sanctions imposed on Respondent for failure to comply with my order. 21 C.F.R.
§ 17.11. Specifically:

e Respondent owns Friendly Liquors, an establishment that sells tobacco products
and is located at 1567 Acushnet Avenue, New Bedford, Massachusetts 02746.
Complaint § 6-7.

e During an inspection of Respondent’s establishment on August 1, 2015, at
approximately 11:47 AM, an FDA-commissioned inspector observed that “a
person younger than 18 years of age was able to purchase a package of Marlboro
cigarettes .. . [.]” The inspector also observed that “the minor’s identification was
not verified before the sale... .” Complaint § 10.

¢ On August 13, 2015, CTP issued a Warning Letter to Respondent regarding the
inspector’s observations from August 1, 2015. The letter explained that the
observations constituted violations of regulations, and that the named violations
were not necessarily intended to be an exhaustive list of all violations at the
establishment. The Warning Letter went on to state that if Respondent failed to
correct the violations, regulatory action by the FDA or a civil money penalty

action could occur and that Respondent is responsible for complying with the law.
Complaint § 10-11.

e During a subsequent inspection of Respondent’s establishment on November 22,
2015, at approximately 2:37 PM, an FDA-commissioned inspector documented
that “‘a person younger than 18 years of age was able to purchase a package of
Newport Box cigarettes . . . [.]” The inspector also documented that “the minor’s
identification was not verified before the sale... .” Complaint § 8.
These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under

section 906(d) of the Act. 21 U.S.C. § 387c(a)

(7)(B); 21 C.F.R. § 1140.1(b). The

Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of cigarettes to any person younger than 18 years of age. 21 C.F.R. § 1140.14(a).

The regulations also require retailers to verify,

by means of photo identification

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

years of age. 21 C.F.R. § 1140.14(b)(1).

Taking the above alleged facts as true, Respon

lent violated the prohibition against selling

tobacco to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a), on August 1,

2015, and November 22, 2015. On those same

dates, Respondent also violated the

requirement that retailers verify, by means of photo identification containing a
purchaser’s date of birth, that no tobacco purchasers are younger than 18 years of age.
21 C.F.R. § 1140.14(b)(1). Therefore, Respondent’s actions constitute violations of law

that merit a civil money penalty.

CTP has requested a fine of $500, which is a permissible fine under the regulations.
21 C.F.R. § 17.2. Therefore, I find that a civil money penalty of $500 is warranted and so

order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Santa Rosa Orthopaedic Medical Group Inc.,
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-16-719
Decision No. CR4722

Date: October 18, 2016

DECISION

I sustain the determination of a Medicare contractor, as subsequently ratified by the
Centers for Medicare & Medicaid Services (CMS), to revoke the Medicare participation
of Petitioner, Santa Rosa Orthopaedic Medical Group, Inc. I modify the effective
revocation date from February 18, 2016 to April 20, 2016.

I. Background

Petitioner is a supplier of durable medical equipment, prosthetics, orthotics, and supplies
(DMEPOS). A Medicare contractor notified Petitioner that it had revoked Petitioner’s
participation in Medicare. A reconsideration determination affirmed the initial
determination and Petitioner requested a hearing. CMS moved for summary judgment
and filed a brief plus 13 proposed exhibits, identified as CMS Ex. 1-CMS Ex. 13.
Petitioner opposed the motion and cross-moved for summary judgment. CMS filed a
reply brief. I receive CMS Ex. 1-CMS Ex. 13 into the record.

Although both parties moved for summary judgment, I find it unnecessary that I decide
whether the criteria for summary judgment are met here. Neither side offered witness
testimony. Consequently, there is no need for an in-person hearing. I decide the case
based on the parties’ written submissions.

IL. Issue, Findings of Fact and Conclusions of Law
A. Issue

The issue is whether CMS may revoke Petitioner’s Medicare participation.
B. Findings of Fact and Conclusions of Law

The facts of this case are uncomplicated and undisputed. Raymond Severt, M.D. owned
a partnership interest in Petitioner until July 23, 2013, when Petitioner purchased that
interest and terminated its relationship with him. CMS Ex. 8. Previously, Petitioner filed
a form with the contractor advising it that Dr. Severt owned a partnership interest. CMS
Ex. 2 at 32.

Petitioner ended its relationship with Dr. Severt after several events occurred affecting
his professional credentials. On March 4, 2013, the State of California suspended his
license to practice medicine. CMS Ex. 4. On that same date, CMS revoked his Medicare
billing privileges. CMS Ex. 5.

On May 14, 2013, Petitioner notified the contractor that Petitioner would terminate the
reassignment of Dr. Severt’s Medicare billing privileges. CMS Ex. 6. Effectively, that
meant that Petitioner would no longer claim reimbursement for any Medicare items or

services provided by Dr. Severt.

The State of California revoked Dr. Severt’s medical license on August 21, 2015. CMS
Ex. 9. The Inspector General excluded Dr. Severt from participating in Medicare on
February 18, 2016. CMS Ex. 10.

Petitioner did not inform the contractor that it had terminated its relationship with Dr.
Severt in July 2013 until April 7, 2016, when it sought reconsideration of the contractor’s
initial determination and filed a notice (CMS-855S) removing his name from the list of
Petitioner’s partners and managing employees. CMS Ex. 12.

CMS asserts that these facts establish two grounds for revoking Petitioner’s Medicare
participation. First, CMS contends that Petitioner’s failure — until April 7, 2016 — to
notify the contractor of the end of its relationship with Dr. Severt is basis to conclude
that, as of February 18, 2016, Petitioner maintained a partnership relationship with Dr.
Severt. That, asserts CMS, establishes that Petitioner violated the requirements of 42
§ 424.535(a)(2). In relevant part, the regulation allows for revocation of Medicare
participation if a provider, supplier, or its owner, managing employee or certain other
individuals are excluded from participating in Medicare or debarred, suspended or
otherwise excluded from participating in certain programs.

Second, CMS contends that it may revoke Petitioner’s participation because Petitioner
allegedly failed to comply with the requirements of 42 C.F.R. § 424.57(c)(2). This
regulation allows a DMEPOS supplier 30 days to notify CMS or its contractor of a
material change in the supplier’s status. CMS may revoke a supplier’s participation for
failure to comply with this regulation. 42 C.F.R. § 424.57(d). CMS asserts that
Petitioner failed, until April 7, 2016, to notify the contractor of Dr. Severt’s termination
as a partner in July 2013. This, according to CMS, is a clear violation of the regulation.

I do not agree with CMS that Petitioner’s participation may be revoked pursuant to 42
C.F.R. § 424.535(a)(2). That regulation allows for revocation of a provider or supplier’s
participation if it currently has a manager or owner who is excluded. The regulation
predicates revocation on the involvement in the affairs of a provider or supplier by an
excluded individual. However, in this case, Petitioner terminated its relationship with Dr.
Severt more than two years prior to the date of his exclusion. He was not an owner or
manager of Petitioner on February 18, 2016 and therefore, there is no basis to revoke
Petitioner’s participation pursuant to the regulation.

CMS conflates Petitioner’s failure to notify the contractor of its termination of its
relationship with Dr. Severt with its status as of February 18, 2016. CMS seems to argue
that, if a provider or supplier fails to notify a contractor of its termination of a
relationship with an owner or manager that relationship remains alive for purposes of
establishing a basis to revoke pursuant to 42 C.F.R. § 424.535(a)(2). I find nothing in the
regulation that supports this theory. The regulation addresses the status of a provider or a
supplier — i.e., who owns or manages it as of a particular point in time. It does not
address failure to notify of a change of status.

Moreover, as Petitioner argued, pursuant to 42 C.F.R § 424.535(e), CMS may reverse a
revocation, if the revocation was due to adverse activity (sanction, exclusion or felony)
against an owner, managing employee or delegated official if the provider or supplier
terminates and submits proof within 30 days of the revocation notification that it has
terminated its business relationship with that individual. See also CMS Ex. 11 at 2
(Revocation Notice Letter). If I were to accept CMS’s contention with respect to 42
C.F.R. § 424.535(a)(2), that would render 42 C.F.R. § 424.535(e) meaningless.

Although I find no basis for revocation pursuant to 42 C.F.R. § 424.535(a)(2), I conclude
that CMS may exercise discretion to revoke Petitioner’s participation for failure to
comply with the requirements of 42 C.F.R. § 424.57(c)(2). That regulation plainly
requires a DMEPOS supplier such as Petitioner to notify a contractor of a material
change in its status. Dr. Severt’s departure in July 2013 was such a change and Petitioner
was obligated to notify the contractor of it. The regulation gave Petitioner 30 days to do
so. Petitioner failed to comply with that requirement by not formally notifying the
contractor and CMS of Dr. Severt’s departure until April 7, 2016. That failure by
Petitioner authorizes CMS to revoke its participation. 42 C.F.R. § 424.57(d).

Petitioner argues that revoking its participation pursuant to 42 C.F.R. §§ 424.57(c)(2) and
(d) denies it due process. It asserts that the initial rationale for revoking its participation
failed to refer to the notification requirement. The reconsideration determination cited
Petitioner’s failure to comply with the notification requirement but, according to
Petitioner, the contractor could not rely on that failure as a rationale for its
reconsideration determination inasmuch as it had not been cited previously.

I find no denial of due process. On reconsideration a contractor may, among other things
“affirm or modify” the rationale for the initial determination. 42 C.F.R. § 498.24.
Adding a ground for revocation at reconsideration is a permissible modification of the
initial rationale. There is no due process denial if a provider or supplier receives notice
of the modified rationale — as was the case here — and has the opportunity to address that
modified rationale with argument and evidence at an administrative hearing.

Petitioner argues also that it effectively gave notice of Dr. Severt’s departure in May
2013 when it advised the contractor that it would no longer accept reassignment of his
billing privileges. But, that notification is not the same as a notification of the departure
of a partner in an entity. An individual may retain an equitable stake or a managing
position in an entity even if that individual is no longer providing billable services on the
entity’s behalf. The contractor is not obligated to draw inferences from a DMEPOS
supplier’s notification. The duty to notify requires the supplier to be specific about the
change in status.

Finally, Petitioner argues that its failure to notify CMS was inadvertent and that it should
not be penalized for that failure. The failure in this case may be inadvertent, but the
authority to revoke extends to inadvertent errors. There is nothing in the regulation that
distinguishes willful from mistaken failure to notify the contractor of a material change in
a supplier’s status. The duty is absolute.

CMS could have determined to exercise its discretion and not revoke Petitioner’s
enrollment pursuant to 42 C.F.R. § 424.57(c)(2) when Petitioner submitted timely proof
that it had terminated its business relationship with Dr. Severt. Obviously, it chose not to
do so.

CMS determined to revoke Petitioner’s participation retroactively to February 18, 2016,
based on its alleged failure to comply with the requirements of 42 C.F.R. § 424.535(a)(2).
It argues that 42 C.F.R. § 424.535(g) allows it to revoke retroactively. However, that
section allows for retroactive revocation only in instances where revocation occurs
pursuant to 42 C.F.R. § 424.535. In other cases, such as this one, where other authority

allows for revocation, the governing regulation is 42 C.F.R. § 424.57(e)(1). That
regulation provides for revocation effective 30 days from the date of notice of revocation.
CMS sent its notice to Petitioner on March 21, 2016. Consequently, the effective
revocation date is April 20, 2016.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Mountain Vista Health Center,
(CCN: 06-5015),

Petitioner,

v.

Centers for Medicare & Medicaid Services.
Docket No. C-16-554
Decision No. CR4719

Date: October 7, 2016

DECISION

I grant summary judgment in favor of the Centers for Medicare & Medicaid
Services (CMS) sustaining its determination to deny payment to Petitioner,
Mountain Vista Health Center, a skilled nursing facility, for a period that began on
April 6, 2016 and that ran through May 8, 2016.

I. Background

Petitioner requested a hearing in order to challenge CMS’s determination to
impose a denial of payment for new admissions. CMS moved for summary
judgment, filing a brief plus 18 proposed exhibits that it identified as CMS Ex. 1-
CMS Ex. 18. Petitioner filed a brief in opposition to CMS’s motion (Response)
plus five proposed exhibits that it identified as P. Ex. 1-P. Ex. 5. I receive these
exhibits into the record for purposes of deciding CMS’s motion.
II. Issue, Findings of Fact and Conclusions of Law
A. Issue

The sole issue is whether CMS is authorized to impose a denial of payment for
new Medicare admissions against Petitioner for the period that ran from April 6
through May 8, 2016.

CMS predicates its remedy determination on findings that were made at two
surveys of Petitioner’s facility: a complaint survey completed on March 7, 2016;
and, a revisit survey completed on May 9, 2016. At the complaint survey, the
surveyor found that Petitioner failed to comply with Medicare participation
requirements, most pertinently, 42 C.F.R. § 483.25(c). This regulation requires a
facility to: ensure that residents do not develop avoidable pressure sores; and, to
provide all residents who have sores with the necessary treatment and services to
promote healing.’ At the revisit survey, the surveyor concluded that Petitioner had
not completely corrected its deficiencies prior to midnight on May 8, 2016, despite
its assertions that it had corrected all deficiencies as of March 22, 2016.

Petitioner does not challenge the findings of noncompliance that were made at the
May 9 survey.” It argues only that it corrected all of its deficiencies by March 22,
2016 and that no remedy should be imposed against it.

' In its brief in support of summary judgment, CMS discusses in some detail the
findings of errors and omissions of Petitioner’s staff that undergird CMS’s
noncompliance findings. CMS’ pre-hearing brief and motion for summary
judgment at 4-8. It is unnecessary to discuss these findings here inasmuch as
Petitioner does not contest them.

? In its hearing request, Petitioner did not challenge the surveyor’s findings of
noncompliance. However, in their Response, counsel for Petitioner now argues
that the surveyor’s finding that seat cushions were not correctly inflated is at least
erroneous in part by challenging the surveyor’s methodology for testing the
cushions and also by arguing that the cushions were inflated pursuant to the
manufacturer’s recommendations. | find this new argument to be irrelevant. As I
discuss in detail in this decision, the issue is not whether particular cushions were
properly inflated but whether Petitioner had in place a system for insuring that
they were. Petitioner offered no facts that address this issue.
B. Findings of Fact and Conclusions of Law

The undisputed facts establish that Petitioner did not correct its noncompliance
with 42 C.F.R. § 483.25(c) before May 9, 2016. Consequently, CMS is authorized
to impose the remedy of denial of payment for new Medicare admissions for each
day of a period beginning on April 6 and running through May 8, 2016.

Petitioner submitted a plan of correction in response to the noncompliance
findings that were made at the March 7 survey. State agency authorities initially
rejected the plan but ultimately accepted a second, amended plan that Petitioner
filed on March 24, 2016. CMS Exs. 13-15. In that plan, Petitioner set forth a
number of corrective actions and avowed that it would attain compliance with all
participation requirements by March 22, 2016. CMS Ex. 15.

However, and as CMS points out, Petitioner could not have completed some of the
corrective actions by March 22 (two days prior to the date when Petitioner filed its
amended plan). For example, one of the corrective actions proposed by Petitioner
was to have its nursing leadership team conduct weekly audits to assure that all
corrective actions dealing with wound care were being implemented. CMS Ex. 15
at 2. Those audits would, in turn, be discussed on a monthly basis at Petitioner’s
quality assurance meeting and action plans were to be developed as needed. Jd.
Petitioner could not possibly implement this corrective action before some time in
the latter part of April 2016 inasmuch as it filed its amended plan on March 24.

CMS also contends — and the undisputed facts support its assertion — that
Petitioner did not have in place prior to May 9, 2016 a system for consistently
monitoring pressure-relieving cushions that were designed to protect residents
from developing pressure sores or from exacerbating existing sores. CMS Ex. 17;
CMS Ex. 18. The surveyor who conducted the May 9 revisit found that some of
these cushions were not properly inflated. CMS Ex. 18. But, more important,
Petitioner’s staff was not able to confirm when these cushions had most recently
been checked for proper inflation and Petitioner’s administrator acknowledged
that there was no system in place for checking and documenting the functionality
of the cushions. Jd.

Petitioner also argues that there is a disputed fact issue as to whether the surveyor
“totally ignored evidence of Petitioner’s system for monitoring . . . .” seat
cushions. Response at 9. Notwithstanding this assertion, Petitioner offered no
facts showing there was any system in place for regularly checking and monitoring
seat cushions. Petitioner asserts that its manager instructed its nursing director to
pinch a cushion and, based on her determination that the cushion was leaking,
Petitioner ordered a new one. It cites this as evidence of “our process for
monitoring these devices for defects or malfunctioning and reporting the need for
areplacement.” P. Ex. 5 at 3. But, that is not evidence of a system for checking
cushions, but rather only proof that on one occasion, the staff determined that a
cushion was leaking. I cannot reasonably infer from such facts that Petitioner
actually had a system in place for checking its cushions for proper inflation prior
to May 9.

A skilled nursing facility that is not complying with Medicare participation
requirements is presumed to remain out of compliance until it proves that it has
corrected its deficiencies. Taos Living Ctr., DAB No. 2293, at 20 (2009). The
facility must establish that it has completely corrected all of its deficiencies. The
burden of persuasion rests entirely on the facility to show that it has attained
compliance. Owensboro Place & Rehab. Ctr., DAB No. 2397, at 12-13 (2011).
Mere representation of compliance is insufficient to prove that compliance has
been attained. The allegations of compliance in a plan of correction, standing
alone, do not prove compliance. A facility must produce actual evidence of
compliance in order to prove that it corrected its deficiencies. Florence Park Care
Ctr., DAB No. 1931, at 30 (2004).

The undisputed facts establish that Petitioner did not satisfy this burden prior to
May 9, 2016. As I have discussed, Petitioner could not possibly have
implemented all of its corrective actions by March 22, 2016, as it contends to have
done. But, more significantly, Petitioner plainly failed to ensure that its residents
were protected from developing avoidable pressure sores by May 9. It did not
have in place by that date a system that would assure that protective seat cushions
were functional.

Petitioner offers several arguments in opposition to CMS’s motion and I find them
to be without merit. First, Petitioner contends that CMS’s entire case is predicated
on a surveyor’s allegedly incorrect finding that one or more of the seat cushions
that she examined on May 9 were underinflated. Petitioner’s Response in
Opposition to CMS’s Motion for Summary Judgment (Response) at 4; see
Petitioner’s request for hearing. That assertion is incorrect. The surveyor actually
found that several cushions were not inflated properly. CMS Ex. 17; CMS Ex. 18.
But, Petitioner would not have attained compliance by May 9 even if all of the
cushions examined by the surveyor on that date were inflated properly. The issue
is not whether a cushion or cushions were improperly inflated on a particular date
but whether Petitioner had in place a system for assuring that the cushions were
inflated correctly.

Second, Petitioner asserts that CMS’s entire case rests on the surveyor’s allegedly
ad hoc procedures for testing whether cushions were inflated properly. Response
at 4. That assertion also is incorrect. It is true that the surveyor reached
conclusions on May 9 that some of the cushions were not properly inflated. She
didn’t base those judgments solely on her own testing of the cushions. Petitioner’s
staff admitted to the surveyor that some of the cushions were not properly inflated.
CMS Ex. 17; CMS Ex. 18. But, even if that were not so, CMS’s case does not
hinge at all on whether cushions were properly inflated on May 9 but, rather, on
whether Petitioner had a system in place for checking these cushions.

Petitioner complains that the surveyor who conducted the May 9 survey failed to
interview nurse aides on Petitioner’s staff to determine how they were using seat
cushions to protect residents. Response at 6. Even if that were so, that does not
relieve Petitioner of the burden of producing evidence that it complied with
participation requirements. The burden of coming forward with such evidence and
proving compliance rests on Petitioner and not on CMS. If Petitioner has
evidence — consisting of nurse aide testimony — showing that it was compliant as
of May 9 then it should have produced it.

Petitioner also contends that, with respect to the specific residents using seat
cushions, the surveyor ignored resident care plans that list interventions to be
employed in order to protect residents. Response at 6. Again, it is Petitioner’s
burden to produce care plans, not CMS’s burden. If in fact, resident care plans
establish compliance, then Petitioner ought to have offered them as evidence. It
does not attain compliance by asserting that CMS should have considered these
plans.

When Petitioner’s arguments are considered, either individually or collectively,
they fail to address CMS’s central point. Petitioner needed to have some system
in place to assure that seat cushions designed to protect its residents from
developing or exacerbating pressure sores were being utilized properly and that
they were correctly inflated. It offered no evidence prior to May 9, 2016, that it
had such a system in place. Consequently, and notwithstanding Petitioner’s
arguments and assertions, Petitioner has failed to adduce facts showing that it
attained full compliance with participation requirements prior to May 9.

CMS is authorized to impose the remedy of denial of payment for new Medicare
admissions in the case where a facility manifests any failure to comply
substantially with participation requirements. 42 C.F.R. § 488.417. Petitioner’s
failure to prove that it attained compliance prior to May 9, 2016, justifies CMS’s
determination to implement that remedy here.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Sue Ann Spece
(O.1. File No. H-16-4-0751-9),

Petitioner,
v.
The Inspector General.
Docket No. C-16-560
Decision No. CR4718

Date: October 4, 2016

DECISION

The Inspector General (IG) of the United States Department of Health and Human
Services notified Petitioner, Sue Ann Spece, that she was being excluded from
participation in Medicare, Medicaid, and all other federal health care programs for a
minimum period of five years under 42 U.S.C. § 1320a-7(a)(1). Petitioner requested a
hearing before an administrative law judge (ALJ) to dispute the exclusion. I conclude
that the IG has a basis for excluding Petitioner from program participation for five-years.

I. Background

In an April 29, 2016 letter, the IG notified Petitioner that she was being excluded from
participation in Medicare, Medicaid, and all federal health care programs for a minimum
period of five years under 42 U.S.C. § 1320a-7(a)(1). The exclusion was based on
Petitioner’s felony conviction “in the Iowa District Court for Buchanan County, of a
criminal offense related to the delivery of an item or service under the Medicare or a
State health care program, including the performance of management or administrative
services relating to the delivery of items or services, under any such program.” IG
Exhibit (Ex.) 1.
Petitioner timely requested a hearing to dispute the exclusion. I was assigned to hear and
decide this case. On June 8, 2016, I convened a prehearing conference by telephone, the
substance of which is summarized in my Order and Schedule for Filing Briefs and
Documentary Evidence (Order), dated June 9, 2016. Pursuant to the Order, the IG filed a
brief (IG Br.) and eight exhibits (IG Exs. 1-8). Petitioner filed a response brief (P. Br.)
with seven exhibits (P. Exs. 1-7). The IG filed a reply brief (IG Reply).

II. Decision on the Record

Neither party objected to any of the proposed exhibits. Therefore, I admit them all into
the record. See Order § 4; 42 C.F.R. §§ 1005.4(b)(10), 1005.8(c).

Because both parties indicated that a hearing is not necessary in this case and that they
did not have any witnesses to offer, I decide this case on the basis of the written record.
IG Br. at 7-8; P. Br. at 11.

III. Issue

Whether the IG has a basis for excluding Petitioner from participating in Medicare,
Medicaid, and all other federal health care programs for five years pursuant to 42 U.S.C.
§ 1320a-7(a)(1). See 42 C.F.R. § 1001.2007(a)(1)-(2).

IV. Jurisdiction

I have jurisdiction to adjudicate this case. 42 U.S.C. § 1320a-7(f)(1); 42 C.F.R.
§§ 1001.2007, 1005.2.

V. Findings of Fact, Conclusions of Law, and Analysis’

The IG must exclude an individual from participation in Medicare, Medicaid, and all
other federally-funded health care programs if that individual “has been convicted of a
criminal offense related to the delivery of an item or service under title XVIII or under
any State health care program.” 42 U.S.C. § 1320a-7(a)(1); 42 C.F.R. § 1001.101(a).

A, Petitioner entered an Alford plea of guilty to one count of Tampering with
Records in violation of Iowa Code § 715A.5, and the Iowa District Court for
Buchanan County (District Court) accepted that plea and ordered a deferred
judgment, which included two years of probation and restitution to the Iowa
Medicaid program.

' My findings of fact and conclusions of law are set forth in italics and bold font.
Petitioner is the mother of three adult children who suffer from spinal muscular atrophy,
which is a genetic condition resulting in severe muscle weakness and physical disability
that worsens slowly over time. The muscle weakness impacts breathing, swallowing, and
the gastrointestinal system, and all three of Petitioner’s children need powered
wheelchairs for mobility. Petitioner’s children require assistance 24 hours a day.
Although the needs of each child vary, one of Petitioner’s children is “totally dependent
upon caretakers to perform activities of daily living.” P. Ex. 2 at 1. Petitioner provided
assistance to all three children and received compensation from the lowa Medicaid
program as Consumer Directed Attendant Care (CDAC). P. Ex. 1 at 1.

CDAC is a program that assists disabled individuals to remain in their homes by hiring
individuals to provide skilled medical care and unskilled services. Unskilled services
include assistance with normal daily life activities, such as housekeeping, fixing meals,
shopping, getting dressed, taking a bath, and going to the doctor. IG Ex. 5 at 2. With
certain exceptions, a family member can provide services for the disabled individual. IG
Ex. 5 at 3. Each provider of services must sign a CDAC provider agreement. IG Ex. 5 at
5; see also P. Ex. 5. Further, the provider must keep accurate records indicating the date,
time, and specific type of services performed. IG Ex. 6; see also P. Ex. 5 at 11; P. Ex. 7
(examples of CDAC daily service records). The provider must maintain these records for
at least five years. IG Ex. 5 at 6; see also P. Ex. 5 at 11.

On February 10, 2015, lowa’s Medicaid Fraud Control Unit initiated an investigation into
Petitioner out of concern that Petitioner could not provide all of the services for three
adult children that she claimed under the CDAC program. IG Ex. 4 at 3. The
investigator assigned to this matter demanded that Petitioner produce all records of the
services she provided daily to her children for the last five years; however, it took over a
month for Petitioner to provide them. IG Ex. 4 at 8-9. The investigator noted
discrepancies in the records Petitioner provided and concluded that Petitioner had “mass-
produced a significant amount of CDAC services logs after [the investigator’s]
preliminary request in order to avoid reimbursement of previous claims.” IG Ex. 4 at 3;
see also P. Ex. 6 at 8 (investigator testifying that “if a provider is not able to provide
records that have been requested of them that they’re required to keep, then they may be
liable to pay the money back to Medicaid for which they don’t have any documentation
of services.”).

On September 28, 2015, the investigator signed a Complaint and Affidavit alleging that:

Evidence indicates that [Petitioner] retroactively mass-
produced CDAC daily records, which are required to be
maintained on a contemporaneous basis, after they were
requested of her as part of this investigation. Consequently,
services documented from 6/14/13-6/15/13, on 3/5/14, from
6/26/14 to 6/28/14, and from 7/9/14 to 7/10/14, do not
accurately represent services that may or may not have been
provided by [Petitioner] on these days. This resulted in
$705.77 in CDAC services to be misrepresented and billed
for by [Petitioner].

IG Ex. 2 at 1. On October 13, 2015, the Buchanan County Attorney filed a Trial
Information with the District Court charging Petitioner with Fraudulent Practice in the
Third Degree (Count I) and Tampering with Records (Count II). IG Ex. 3 at 1.

On March 16, 2016, Petitioner entered an A/ford guilty plea to violating Count II of the
Trial Information and requested that the District Court enter a deferred judgment against
her. IG Ex. 6. On March 18, 2016, the District Court accepted Petitioner’s guilty plea,
entered a deferred judgment, and sentenced Petitioner to two years of probation.
Petitioner was ordered to pay $705.77 in financial damages to the lowa Medicaid
program and $3,983.75 for the cost of the Medicaid Fraud Control Unit’s investigation.
IG Ex. 4 at 12-13; IG Ex. 8; see also IG Ex. 7 at 1-2.

B. Petitioner was convicted of a criminal offense for the purposes of 42 U.S.C.
§ 1320a-7(a)(1).

Under 42 U.S.C. § 1320a-7(a)(1), Petitioner must be “convicted of a criminal offense”
before she can be excluded. An individual is considered “convicted” when a federal,
state, or local court accepts a plea of guilty or no contest, or when an individual enters
into participation in a first offender, deferred adjudication or other program where
judgment of conviction has been withheld. 42 U.S.C. § 1320a-7(i)(3), (4).

In the present matter, Petitioner entered an Alford guilty plea to Tampering with Records
under Iowa Code § 715A.5, and the District Court accepted that plea. IG Ex. 6; IG Ex. 7
at 1. An Alford guilty plea is the same as a guilty plea for exclusion purposes. Rudman
v. Leavitt, 578 F. Supp. 2d 812, 815 (D. Md. 2008).

Further, the District Court entered a deferred judgment against Petitioner. IG Ex. 7 at 1.
A deferred judgment in Iowa permits a court to place a defendant on probation with
conditions, the successful completion of which will result in discharge of the case without
a judgment of conviction; however, if the defendant violates the conditions, the court
may impose a sentence. Iowa Code § 907.3(1). This deferral of judgment is a conviction
for exclusion purposes. See Travers v. Shalala, 20 F.3d 993, 996-98 (9th Cir. 1994).

C. Petitioner’s criminal conviction related to the delivery of items or services
under the Medicaid program.

An individual must be excluded from participation in any federal health care program if
the individual was convicted under federal or state law of a criminal offense related to the
delivery of an item or service under Medicare or a state health care program. 42 U.S.C.
§ 1320a-7(a)(1); 42 C.F.R § 1001.101(a). A state health care program includes a state’s
Medicaid program. 42 U.S.C. § 1320a-7(h)(1); 42 C.F.R. § 1001.2 (definition of State
health care program).

The statute’s requirement that the conviction be “related to” the delivery of health care
items or services means that there only needs to be a nexus or common sense connection
between the offense and the delivery of an item or service under a relevant program. See
Friedman vy. Sebelius, 686 F.3d 813, 820 (D.C. Cir. 2012) (describing the phrase “relating
to” as “deliberately expansive words,” “the ordinary meaning of [which] is a broad one,”
and one that is not subject to “crabbed and formalistic interpretation”) (internal quotes
omitted); Quayum v. U.S. Dep’t of Health & Human Servs., 34 F. Supp. 2d 141, 143
(E.D.N.Y. 1998).

In the present case, Petitioner was a provider in lowa’s CDAC Medicaid program. As a
provider, Petitioner billed Medicaid for the assistance she rendered to her adult children.
However, Petitioner was obligated to document the services she provided and retain that
information for at least five years. Petitioner failed to always document the services she
provided and, when called upon by a criminal investigator to produce the documentation
of her services, Petitioner generated documents and submitted them as if they had been
created contemporaneously with the services she provided. As a result, she was
convicted of Tampering with Records, which provides that:

A person commits an aggravated misdemeanor if, knowing
that the person has no privilege to do so, the person falsifies,
destroys, removes, or conceals a writing or record, with the
intent to deceive or injure anyone or to conceal any
wrongdoing.

Towa Code § 715A.5.

Petitioner asserts that her crime does not relate to the delivery of items or services under
the Medicaid program, but rather to obstructing an investigation under 42 U.S.C.

§ 1320a-7(b)(2). P. Br. at 11. Petitioner may be correct that she was convicted of a
crime related to concealing a wrongdoing that could have been criminal conduct
excludable under 42 U.S.C. § 1320a-7(a) or (b)(1). However, simply because a
permissive exclusion could be applied to a person, it does not follow that a mandatory
exclusion could not be imposed on that same individual. Timothy Wayne Hensley, DAB
No. 2044 (2006).

The District Court ordered Petitioner to pay restitution in the amount of $705.77 as
financial damages to the Medicaid program. See IG Ex. 7 at 1-2; IG Ex. 8. It is possible
that the District Court ordered this restitution based on the dismissed Count I, as
Petitioner asserts. P. Br. at 10. However, it is certain that the District Court ordered this
pursuant to the plea agreement that Petitioner entered into with the County Attorney. IG
Ex. 6 at 4; IG Ex. 7 at 3.

It is well settled that payment of restitution is evidence of program loss. E.g., Craig
Richard Wilder, DAB No. 2416 at 9 (2011). Where an individual is convicted of a crime,
“proof that any sentence based on that conviction included the payment of restitution to a
protected program creates a rebuttable presumption of a nexus or common-sense
connection between the conviction and the delivery of an item or service under [that]
program.” Johnnelle Johnson Bing, DAB CR1938 at 6 (2009) (citing Alexander
Nepomuceno Jamias, DAB CR1480 (2006)). Petitioner asserts that this presumption has
been rebutted since restitution was paid based on the dismissed Count I. However,
because Petitioner agreed to pay restitution to the Medicaid program in an amount based
on the improper CDAC documentation she provided the investigator (IG Ex. 2 at 1), I
disagree with Petitioner and conclude that it is sufficient evidence of a nexus between
Petitioner’s conviction and the delivery of items or services under the Medicaid program.

D. Petitioner must be excluded for the statutory minimum of five years under
42 U.S.C. § 1320a-7(c)(3)(B).

Because I have concluded that a basis exists to exclude Petitioner pursuant to 42 U.S.C.
§ 1320a-7(a)(1), Petitioner must be excluded for a minimum period of five years.
42 US.C. § 1320a-7(c)(3)(B); 42 C.F.R. §§ 1001.102(a), 1001.2007(a)(2).

I note that exclusion in this matter does not serve a useful purpose. The investigator who
brought the criminal charges against Petitioner admitted that Petitioner “probably puts in
more time [serving her adult children] beyond what she is able to bill.” P. Ex. 6 at 12.
Indeed, the record shows that Petitioner’s care for her children is constant, extensive, and
effective. P. Ex. 1 at 2-3; P. Ex. 2 at 4; P. Ex. 2 at 5 (‘‘[Petitioner’s] diligence as a care-
giver is evident from the fact that [Petitioner’s three adult children] have largely avoided
pressure sores or other complications.”) Petitioner’s exclusion places her adult children
in the position of potentially having to reside at a long term care facility, which will not
only cost the Medicaid program significantly more money, but will result in a lower
quality of life for the children. P. Ex. 1 at 1; P. Ex. 3. However, Congress mandated
exclusion broadly for crimes related to the delivery of items or services under Medicaid,
and the IG was required to impose at least a five-year exclusion and I am required to
uphold that exclusion. Travers, 20 F.3d at 998.

Nevertheless, it is baffling as to why the lowa Medicaid Fraud Control Unit thought it
necessary to criminally prosecute Petitioner for misdemeanors based on a mere supposed
loss of about $700 to the Medicaid program knowing that exclusion would follow. See
IG Ex. 4 at 11 (lowa Medicaid Fraud Control Unit investigator noting that “HHS-OIG
Exclusion documentation” was submitted on March 21, 2016). Petitioner has dedicated
her adult life to caring for her disabled children. It is easy to understand that, day after
day, Petitioner provides essentially the same services for her children, which Petitioner
did not always document, probably owing to unremitting efforts to care for them. No
doubt, Petitioner reacted incorrectly when she realized she did not have all of the
documentation requested of her by the investigator; however, there is no evidence that
she failed to perform all services expected of her under the CDAC program. Exclusion of
Petitioner for five years for the mistake she made related to documentation is harsh and
ultimately irrational.

VI. Conclusion

For the foregoing reasons, I affirm the IG’s determination to exclude Petitioner from
participating in Medicare, Medicaid, and all other federal health care programs for the
statutory five-year minimum period pursuant to 42 U.S.C. § 1320a-7(a)(1), (c)(3)(B).

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Sharon Brown,
(O.1. File No. H-16-40332-9),
Petitioner,
v.
The Inspector General.
Docket No. C-16-486
Decision No. CR4717

Date: September 30, 2016

DECISION

I sustain the determination of the Inspector General (I.G.) to exclude Petitioner, Sharon
Brown, from participating in Medicare, State Medicaid, and other federally funded health
care programs for a period of at least five years.

I. Background

The I.G. excluded Petitioner because he concluded that she had been convicted of a
criminal offense as described at section 1128(a)(2) of the Social Security Act (Act).
Petitioner requested a hearing in order to challenge the I.G.’s determination. The I.G.
filed a brief and a reply brief in support of his determination. Petitioner filed a brief in
opposition. The I.G. submitted eight proposed exhibits that are identified as I.G. Ex. 1-
1.G. Ex. 8. Petitioner submitted seven proposed exhibits that are identified as P. Ex. 1-
P. Ex. 7. I receive the parties’ exhibits into the record.

Prior to filing her brief Petitioner moved that she be allowed to take the depositions of
two individuals as discovery. I deny that motion. Discovery in cases involving the I.G.
is governed by 42 C.F.R. § 1005.7. The regulation allows only for limited inspection and
copying of documents. Depositions are not permitted pursuant to that regulation and,
consequently, I have no authority to order that they be conducted.

Petitioner also asserts that there is a need for an in-person hearing in this case. She
contends, essentially, that there are numerous errors and omissions in a State report that
underlies the criminal charges that were filed against her and that testimony is necessary
to elicit and explain those alleged errors and omissions. As I discuss in more detail,
below, Petitioner is essentially attacking the process that led to her conviction of an
excludable offense. She also seems to be arguing that she is in fact innocent of the
charges to which she entered a guilty plea. These collateral attacks on her conviction
comprise no legally sufficient defense to the I.G.’s determination to exclude Petitioner.
42 C.F.R. § 1001.2007(d). I find no basis to convene an in-person hearing for that
reason.

II. Issue, Findings of Fact and Conclusions of Law
A. Issue

The issue is whether the I.G. is required by law to exclude Petitioner for a period of at
least five years.

B. Findings of Fact and Conclusions of Law

Section 1128(a)(2) of the Act mandates the exclusion of any individual who is convicted
of a criminal offense relating to the neglect or abuse of patients in connection with the
delivery of a health care item or service. Any exclusion imposed pursuant to this section
must be for a period of at least five years. Act § 1128(c)(3)(B).

The Act does not permit exceptions. Section 1128(a)(2) does not distinguish between
convictions for felonies or for lesser offenses. Nor does the Act state that actual harm or
injury to a patient is a necessary element of an excludable offense. An individual who is
convicted of criminal neglect of a patient must be excluded without regard to whether or
not harm resulted from the neglect.

The I.G.’s duty to exclude pursuant to section 1128(a)(2) derives from a conviction of the
crime of patient neglect or abuse. If an individual is convicted of such an offense he or
she must be excluded. The actual conduct leading to the conviction is not a determinative
element of the I.G.’s duty to exclude. The I.G. must exclude based on the conviction
without re-adjudicating the conduct leading to the conviction. For that reason, an
excluded individual may not collaterally attack his or her conviction on the grounds that
the conviction is invalid due to reversible errors in the process leading to the conviction
or that he or she is not really guilty of the crime of which he or she was convicted. The
governing principle is stated explicitly at 42 C.F.R. § 1001.2007(d).

The evidence in this case establishes unequivocally that Petitioner was convicted of a
criminal offense as is defined by section 1128(a)(2). That is sufficient to prove that the
1.G. must exclude Petitioner for at least five years.

The evidence shows that Petitioner pled guilty to specific charges of neglect of patients
who had been placed under her care as a nursing supervisor. On February 27, 2015, a
Florida State court filed a revised order of disposition that recited that Petitioner pled
guilty to ten counts of “culpable negligence,” a criminal offense under Florida law. I.G.
Ex. 8. This disposition of Petitioner’s case was the ultimate result of allegations that
Petitioner, while working as a director of nursing at a skilled nursing facility, along with
others, had willfully or by culpable negligence neglected the care of patients by failing to
provide them with the care, supervision, and services necessary to maintain their physical
and mental health. I.G. Ex. 3; I.G. Ex. 4.

Petitioner raises several arguments in opposition to the I.G.’s determination. I find these
to be without merit.

Principally, Petitioner attacks the process that led to her conviction. She argues that the
report that underlies her conviction is rife with errors. She contends that if she pled
guilty to anything, it was to a crime that “did not exist.” Petitioner’s informal brief at 1.
She asserts that she is innocent of any crime and that she entered into a plea agreement
only because she feared that her status as a lawful immigrant to the United States would
be jeopardized if she did not. /d. at 2. She asserts, additionally, that there is no evidence
in this case that any act or omission that she committed caused any patient to suffer any
harm. Jd.

As I have discussed, an excluded individual may not in this forum collaterally attack the
conviction that is the basis for his or her exclusion. Petitioner seems to be arguing either
that she was wrongfully convicted or that the conviction is illusory because she is not
really guilty of a crime. Both of those assertions are irrelevant for the reasons that I have
stated. All that matters for purposes of evaluating Petitioner’s exclusion is whether she
was convicted of a section 1128(a)(2) offense. That clearly is the case.

Petitioner also seems to contend that the offenses to which she entered her guilty plea
have no relationship to the original charges that were filed against her. Petitioner
originally was charged with felonies. These charges were dismissed, evidently as part of
a plea agreement, and Petitioner subsequently pled guilty to lesser offenses. Some
clerical errors were made in the process of dismissing the original charges against
Petitioner and accepting her plea to lesser charges. But, none of that derogates from the

fact that Petitioner ultimately pled guilty to criminal charges of culpable negligence that
derived from allegations that she had neglected the care of patients in the course of
performing her duties as a supervising nurse. I.G. Ex. 5.

Moreover, and for the reasons that I have discussed previously, whether or not
Petitioner’s crimes caused patients to suffer actual harm is not relevant. The conviction
in this case was for “culpable negligence” of patients in the course of the delivery of
health care services to those patients. These are precisely the crimes for which section
1128(a)(2) mandates exclusion regardless of whether the crimes caused actual harm.

/s/
Steven T. Kessel
Administrative Law Judge