Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division

Breton L. Morgan, M.D., Inc.
(NPI: 1376984435 / PTAN: C721),

and

Breton L. Morgan, M.D.
(NPI: 1508897919 / PTAN: WV3187C721)

Petitioners,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-17-867
Decision No. CR5014
Date: January 30, 2018
DECISION
The Medicare enrollment and billing privileges of Petitioners, Breton L. Morgan, M.D.,
Inc. and Breton L. Morgan, M.D., are revoked pursuant to 42 C.F.R. § 424.535(a)(4).!
The effective date of revocation as to Breton L. Morgan, M.D. is December 7, 2016, 30
days after the November 7, 2016 notice of the reopened and revised initial revocation
determination. The effective date of revocation as to Breton L. Morgan, M.D.., Inc. is

January 29, 2017, 30 days after the December 30, 2016 notice of the reopened and
revised initial determination to revoke. 42 C.F.R. § 424.535(g).

' Citations are to the 2016 revision of the Code of Federal Regulation (C.F.R.), unless
otherwise stated.
I. Procedural History and Jurisdiction

On November 7, 2016, Palmetto GBA, a Medicare administrative contractor (MAC),
notified Petitioner Breton Morgan, M_D. of its reopened and revised initial determination
to revoke his Medicare enrollment and billing privileges effective December 7, 2016, and
to impose a three-year re-enrollment bar. The MAC cited 42 C.F.R. § 424.535(a)(4) as
authority for the revocation. Centers for Medicare & Medicaid Services (CMS) Exhibit
(Ex.) 1 at 13-14. On December 30, 2016, the MAC notified Petitioner Breton L. Morgan,
MLD., Inc. of its reopened and revised determination to revoke its Medicare enrollment
and billing privileges effective January 29, 2017, and to impose a three-year
re-enrollment bar. The MAC cited 42 C.F.R. § 424.535(a)(4) as the authority for
revocation. CMS Ex. 2 at 14-15.

Petitioners requested reconsideration on behalf of Petitioner Breton Morgan, M.D. by
letter dated January 5, 2017. CMS Ex. | at 7-11. Petitioners requested reconsideration
on behalf of Breton Morgan, M.D., Inc. by letter dated February 13,2017. CMS Ex. 2 at
8-12. On March 30, 2017 and May 12, 2017, a CMS hearing officer issued
reconsideration determinations upholding revocation pursuant to 42 C.F.R.

§ 424.535(a)(4) as to each Petitioner. CMS Exs. | at 1-6; 2 at 1-7.

Petitioners filed a request for hearing for Breton L. Morgan, M.D. on May 28, 2017. The
case was docketed as C-17-731. On July 6, 2017, Petitioners requested a hearing on
behalf of Breton L. Morgan, M.D., Inc. and requested consolidation of both cases. The
second request for hearing was docketed as C-17-867. Both cases were assigned to me.
On July 19, 2017, an Acknowledgment and Prehearing Order (Prehearing Order) was
issued in C-17-867 that consolidated C-17-731 and C-17-867 and dismissed C-17-731.
There is no dispute that Petitioners’ requests for hearing were timely, and I have
jurisdiction.

CMS filed a motion for summary judgment and prehearing brief on August 18, 2017
(CMS Br.) with CMS Exs. | through 4. On September 16, 2017, Petitioners filed a
response in opposition to the CMS motion and a cross-motion for summary judgment
(P. Br.) and Petitioners’ exhibits (P. Exs.) A through N. On October 2, 2017, CMS filed
a combined reply brief in opposition to Petitioners’ motion for summary judgment; a
motion to exclude P. Exs. B, M, and N; and a motion to deny Petitioners’ request for
subpoenas (CMS Reply). Petitioners did not respond to the CMS objections to my
consideration of P. Exs. B, M, and N or the CMS motion to deny Petitioners’ request for
subpoenas within 20 days as permitted by 42 C.F.R. § 498.17(b) and Petitioners thereby
waived the right to reply. Petitioners did not object to my consideration of CMS Exs. |
through 4 and they are admitted as evidence. CMS did not object to my consideration of
P. Exs. A and C through L and they are admitted as evidence. Pursuant to 42 C.F.R.

§ 498 .60(b)(1), I am to receive in evidence any documents that are relevant and material.
Federal Rule of Evidence 401 describes relevant evidence as evidence that has any

tendency to a make a fact of consequence to determining the action more or less
probable. The narrow issue before me is whether CMS has a basis to revoke Petitioners’
Medicare enrollment and billing privileges. Dinesh Patel, M.D., DAB No. 2551 at 11
(2013); Fady Fayad, M.D., DAB No. 2266 at 16 (2009), aff'd, Fayad v. Sebelius, 803

F. Supp. 2d 699 (E.D. Mich. 2011); Abdul Razzaque Ahmed, M.D., DAB No. 2261 at 16-
7, 19 (2009), aff’d, Ahmed v. Sebelius, 710 F. Supp. 2d 167 (D. Mass. 2010). P. Ex. B is
the Affidavit of Lori McCoy, Petitioners’ office assistant. Ms. McCoy indicates that she
participated in the enrollment application that provides the factual basis for revocation
cited by CMS. Accordingly, Ms. McCoy’s affidavit is clearly relevant, the CMS
objection is overruled, and P. Ex. B is admitted. P. Ex. M is an October 8, 2015 letter
from the State of West Virginia Department of Health and Human Services (DHHS)
advising Petitioners that a Medicaid audit found no irregularity. P. Ex. N is a letter from
the West Virginia DHHS dated January 11, 2016, advising Petitioners that the clinic did
not need to be licensed as a Chronic Pain Management Clinic at that time. Neither of
these documents has any tendency to make a fact of consequence to whether or not CMS
ad a basis to revoke Petitioners’ enrollment and billing privileges more or less probable.
Accordingly, I conclude that P. Exs. M and N are not relevant, and they are not admitted
as evidence. CMS also objects to my consideration of any evidence offered related to a
prior case before me involving Petitioners, which was dismissed as moot and closed. I
consider only evidence properly offered by the parties as evidence in this proceeding.

Petitioners’ requested that I issue subpoenas duces tecum to AdvanceMed (a contractor to
the MAC), the MAC, and CMS requiring the production of:

Any and all documentation, correspondence, memoranda, and
other written and electronic materials, including emails,
relating to Breton L. Morgan M.D. and/or Breton L. Morgan
M.D. Inc., including but not limited to Dr. Morgan’s CMS
revocation in 2008, his application for reinstatement in 2013,
CMS’s attempt to revoke his Medicare privileges in March,
2016, and the revocation of his Medicare privileges, effective
December 7, 2016.

Petitioners’ List of Exhibits, Witnesses, and Requested Subpoenas filed September 17,
2017 at 3. I am authorized to issue subpoenas in the name of the Secretary by 42 C.F.R.
§ 498.58. A party requesting the issuance of a subpoena must “[s]pecify the pertinent
facts the party expects to establish by the witnesses or documents [that are the target of
the subpoena], and indicate why those facts could not be established without use of a
subpoena.” 42 C.F.R. § 498.58(c)(3). Petitioners’ subpoena requests do not specify the
pertinent facts Petitioners expect to establish by the documents they want to subpoena or
why those facts could not be established without the need for subpoenas. Accordingly,
Petitioners’ subpoena requests must be denied. Because no subpoenas will issue for the

production of records and because I determine summary judgment is appropriate,
Petitioners’ requests for subpoenas ad testificandum are moot.

II. Discussion
A. Applicable Law

Section 1831 of the Social Security Act (the Act) (42 U.S.C. § 1395j) establishes the
supplementary medical insurance benefits program for the aged and disabled known as
Medicare Part B. Administration of the Part B program is through the MACs. Act

§ 1842(a) (42 U.S.C. § 1395u(a)). Payment under the program for services rendered to
Medicare-eligible beneficiaries may only be made to eligible providers of services and
suppliers.? Act §§ 1835(a) (42 U.S.C. § 1395n(a)), 1842(h)(1) (42 U.S.C. § 1395u(h)(1)).
Petitioners, a physician and his practice, are suppliers.

The Act requires that the Secretary issue regulations to establish a process for enrolling
providers and suppliers in Medicare, including the requirement to provide the right to a
hearing and judicial review of certain enrollment determinations, such as revocation of
enrollment and billing privileges. Act § 1866(j) (42 U.S.C. § 1395cc(j)). Pursuant to
42 CFR. § 424.505, suppliers such as Petitioners must be enrolled in the Medicare
program and be issued a billing number to have billing privileges and to be eligible to
receive payment for services rendered to a Medicare-eligible beneficiary.

The Secretary has delegated the authority to revoke enrollment and billing privileges to
CMS. 42 C.F.R. § 424.535. CMS or its Medicare contractor may revoke an enrolled
supplier’s Medicare enrollment and billing privileges and supplier agreement for any of
the reasons listed in 42 C.F.R. § 424.535. Pursuant to 42 C.F.R. § 424.535(a)(4), CMS
may revoke a supplier’s enrollment and billing privileges if CMS determines the
“supplier certified as ‘true’ misleading or false information on the enrollment application
to be enrolled or maintain enrollment in the Medicare program.” Generally, when CMS

2 A “supplier” furnishes services under Medicare and includes physicians or other
practitioners and facilities that are not included within the definition of the phrase
“provider of services.” Act § 1861(d) (42 U.S.C. § 1395x(d)). A “provider of services,”
commonly shortened to “provider,” includes hospitals, critical access hospitals, skilled
nursing facilities, comprehensive outpatient rehabilitation facilities, home health
agencies, hospice programs, and a fund as described in sections 1814(g) (42 U.S.C.

§ 1395f(g)) and 1835(e) (42 U.S.C. § 1395n(e)) of the Act. Act § 1861(u) (42 U.S.C.

§ 1395x(u)). The distinction between providers and suppliers is important because they
are treated differently under the Act for some purposes.
revokes a supplier’s Medicare billing privileges for not complying with enrollment
requirements, the revocation is effective 30 days after CMS or its contractor mails notice
of its determination to the supplier. 42 C.F.R. § 424.535(g). After a supplier’s Medicare
enrollment and billing privileges are revoked, the supplier is barred from re-enrolling in
the Medicare program for one to three years. 42 C.F.R. § 424.535(c).

A supplier whose enrollment and billing privileges have been revoked may request
reconsideration and review as provided by 42 C.F R. pt. 498. A supplier submits a
written request for reconsideration to CMS or its contractor. 42 C.F.R. § 498.22(a).
CMS or its contractor must give notice of its reconsidered determination to the supplier,
giving the reasons for its determination and specifying the conditions or requirements the
supplier failed to meet, and advising the supplier of its right to an ALJ hearing. 42 C.F.R.
§ 498.25. If the decision on reconsideration is unfavorable to the supplier, the supplier
has the right to request a hearing by an ALJ and further review by the Departmental
Appeals Board (the Board). Act § 1866(j)(8) (42 U.S.C. § 1395cc(j)(8)); 42 C.F.R.

§§ 424.545, 498 .3(b)(17), 498.5(1)(2). CMS is also granted the right to request ALJ
review of a reconsidered determination with which it is dissatisfied. 42 C.F.R.

§ 498.5(1)(2). A hearing on the record, also known as an oral hearing, is required under
the Act. Crestview Parke Care Ctr. v. Thompson, 373 F.3d 743, 748-51 (6th Cir. 2004).
The supplier bears the burden to demonstrate that it meets enrollment requirements with
documents and records. 42 C.F.R. § 424.545(c).

B. Issues
Whether summary judgment is appropriate; and

Whether there was a basis for the revocation of Petitioners’ billing
privileges and Medicare enrollment.

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

My conclusions of law are set forth in bold followed by the pertinent findings of fact and
analysis.

1. Summary judgment is appropriate.

Both parties assert that summary judgment is appropriate in their favor. A provider or
supplier denied enrollment in Medicare or whose enrollment has been revoked has a right
to a hearing and judicial review pursuant to section 1866(h)(1) and (j) of the Act

(42 U.S.C. § 1395cc(h)(1) and (j)) and 42 C.F.R. §§ 498.3(b)(1), (5), (6), (8), (15), (17);
498.5(1). A hearing on the record, also known as an oral hearing, is required under the
Act. Act §§ 205(b), 1866(h)(1) and (j)(8) (42 U.S.C. §§ 405(b), 1395cc(h)(1) and (j)(8));
Crestview, 373 F.3d at 748-51. A party may waive appearance at an oral hearing, but
must do so affirmatively in writing. 42 C.F.R. § 498.66. Petitioners have not filed a
written waiver of the right to appear and present evidence. Because Petitioners have not
waived the right to oral hearing, disposition on the written record alone is not permissible
unless summary judgment is appropriate.

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

Summary judgment is appropriate when there is no genuine dispute as to any material
fact for adjudication and/or the moving party is entitled to judgment as a matter of law.
In determining whether there are genuine issues of material fact for trial, the reviewer
must view the evidence in the light most favorable to the non-moving party, drawing all
reasonable inferences in that party’s favor. The party requesting summary judgment
bears the burden of showing that there are no genuine issues of material fact for trial
and/or that it is entitled to judgment as a matter of law. Generally, the non-movant may
not defeat an adequately supported summary judgment motion by relying upon the
denials in its pleadings or briefs but must furnish evidence of a dispute concerning a
material fact, i.e., a fact that would affect the outcome of the case if proven. Mission
Hosp. Reg’! Med. Ctr., DAB No. 2459 at 5 (2012) (and cases cited therein); Experts Are
Us, Inc., DAB No. 2452 at 5 (2012) (and cases cited therein); Senior Rehab. & Skilled
Nursing Ctr., DAB No. 2300 at 3 (2010) (and cases cited therein); see also Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

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

There is no genuine dispute as to any material fact in this case. Petitioner Dr. Morgan
was convicted of a felony in 2007, and he did not list that conviction on his enrollment
application submitted within ten years of the date of that conviction. P. Br. at 4-6; P. Exs.
A and | at 13-14. The issues in this case that require resolution are issues of law related
to the interpretation and application of the regulations that govern enrollment and billing
privileges in the Medicare program and application of the law to the undisputed facts of
this case. Summary judgment is appropriate as to both the bases for revocation and the
effective date of revocation.

2. Certifying as true information on an enrollment application or

application to maintain enrollment that is misleading or false, is a basis
for revocation of Medicare enrollment and billing privileges. 42 C.F R.
§ 424.535(a)(4).

3. There is a basis to revoke Petitioners’ Medicare enrollment and
billing privileges pursuant to 42 C.F.R. § 424.535(a)(4) because
Petitioners failed to list as a final adverse action a 2007 felony
conviction on the enrollment application signed July 17,2013, while
certifying that the information in the application was true, correct, and
complete.

4. Revocation of the Medicare enrollment and billing privileges of
Petitioner Breton L. Morgan, M_D. is effective December 7, 2016, 30
days from the date of the November 7, 2016 notice of initial
determination to revoke. 42 C.F.R. § 424.535(g).

5. Revocation of the Medicare enrollment and billing privileges of
Petitioner Breton L. Morgan, M_.D., Inc. is effective January 29, 2017,
30 days from the date of the December 30, 2016 notice of initial
determination to revoke. 42 C.F.R. § 424.535(g).
a. Facts
The material facts are not disputed.

Petitioner Breton L. Morgan M.D. was convicted of a felony in 2007. On May 30, 2008,
the Inspector General (I.G.), U.S. Department of Health and Human Services, excluded
Petitioner Dr. Morgan from participation in Medicare for five years from about June 19,
2008 to June 19, 2013, based on his felony conviction pursuant to section 1128(a)(3) of
the Act. P. Ex. A§§ 2,8, IT at 15, 17; CMS Ex. | at 19-20, 35.

CMS revoked Petitioner Dr. Morgan’s Medicare enrollment and billing privileges on
September 3, 2008, effective April 4, 2006, based on the surrender of his medical license
in Ohio. CMS Exs. | at 22-23, 2 at 23-24; P. Ex. F.

Following Petitioner Breton L. Morgan, M.D.’s reinstatement by the LG. on June 19,
2013, he filed a CMS-855I to enroll himself and his practice in Medicare. CMS Exs. | at
36-69, 2 at 37-70; P. Ex. I. Dr. Morgan signed the certification statement on the
application on July 17, 2013, certifying that the information contained in the application
was “true, correct, and complete.” CMS Ex. 1 at 64-65, P. Ex. I at 29-30. Under Section
3 of the application titled “Final Adverse Legal Actions/Convictions” Petitioners listed
Dr. Morgan’s “Medicare Exclusion” date May 30, 2008, and his release or reinstatement
by the I.G. on June 18, 2013. CMS Ex. | at 49; P. Ex. Lat 14. Petitioners attached
multiple copies of the I.G. letter dated June 19, 2013, granting Dr. Morgan’s
reinstatement of his eligibility to participate in Medicare. CMS Ex. 1 at 50,52, 59, 76;
P. Ex. Lat 15, 17,24. There is no dispute that the instructions for Section 3 of the CMS-
8551 specifically state that “‘[a]ll applicable final adverse actions must be reported,
regardless of whether any records were expunged or any appeals are pending.” CMS
Ex. | at 48; P. Ex. | at 13. Section 3 specifically describes the types of convictions that
must be listed if they occurred within the ten years preceding the filing of an enrollment
or revalidation application. Any felony conviction that would result in mandatory
exclusion by the I.G. pursuant to section 1128(a) of the Act that occurred within the ten
years preceding the date of filing an enrollment or revalidation application is specifically
listed as an adverse action that must be reported under Section 3 of the CMS-855I that
Petitioners filed.

Petitioners were enrolled in Medicare and granted billing privileges on October 8, 2013,
effective July 17,2013. CMS Exs. | at 79-83, 2 at 80-85; P. Ex. J.

It is undisputed that Petitioner Dr. Morgan filed the enrollment application within ten
years of his felony conviction and that the I.G. excluded him pursuant to section
1128(a)(3) of the Act based on that conviction. There is no dispute that Dr. Morgan did
not list the felony conviction on the CMS-855] that he certified “true, correct, and
complete.” CMS Ex. | at 48-49, 64-65; P. Ex. I at 13-14, 29-30.
b. Analysis

After the I.G. reinstated Dr. Morgan’s eligibility to enroll in Medicare, it was necessary
for him to file an enrollment application to enroll in Medicare and receive billing
privileges. 42 C.F.R. §§ 424.505, 424.510 (2012). The regulations required that an
application submitted must be complete, accurate, and truthful in response to all
information requested. 42 C.F.R. § 424.510(d)(2)(i) (2012).

Pursuant to the 2012 revision of 42 C.F.R. § 424.502 in effect on July 17,2013, when Dr.
Morgan signed the enrollment application:

Final adverse action means one or more of the following
actions:

(1) A Medicare-imposed revocation of any Medicare billing
privileges;

(2) Suspension or revocation of a license to provide health
care by any State licensing authority;

(3) Revocation or suspension by an accreditation
organization;

(4) A conviction of a Federal or State felony offense (as
defined in § 424.535(a)(3)(i)) within the last 10 years
preceding enrollment, revalidation, or re-enrollment; or

(5) An exclusion or debarment from participation in a
Federal or State health care program.

(Emphasis in original). The elements of the fourth definition of a final adverse action
are: (1) the provider or supplier was convicted; (2) the conviction was of a federal or
state offense; (3) the offense was a felony; and (4) the felony conviction was during the
period ten years preceding the date of enrollment, revalidation, or re-enrollment.
Petitioner Dr. Morgan does not dispute that he was convicted of a felony in 2007 within
the meaning of 42 C.F.R. § 424.502(a)(4) (2012). Petitioner Dr. Morgan also does not
dispute that he was subject to mandatory exclusion by the I.G. based on that felony
pursuant to section 1128(a)(3) of the Act.

Section 3 of the CMS-855I that Petitioner Dr. Morgan signed on July 17, 2013,
specifically informed him that a conviction such as his is a final adverse legal action and
specified that reporting of such a conviction is required. Further, 42 C.F.R.

10

§ 424.516(d)(1)(ii) also requires the reporting of adverse legal action. There is no dispute
that Dr. Morgan’s 2007 felony conviction was not listed on the CMS-855] signed on July
17,2013. CMS Ex. | at 49; P. Ex. Lat 14.

CMS and the MAC are authorized to revoke Medicare enrollment and billing privileges
pursuant to 42 C.F.R. § 424.535(a)(4) when the “provider or supplier certified as ‘true’
misleading or false information on the enrollment application.” Petitioner Dr. Morgan
failed to list his 2007 felony conviction and, as a result, the application he certified by his
signature on July 17, 2013, was not true, correct, and complete, but rather was false and
misleading because it did not list all adverse actions required to be listed. See, e.g.,
Sandra E. Johnson, CRNA, DAB No. 2708 at 7, 15-16 (2016) (no intent to provide false
information required; fact occurred sufficient); Mark Koch, D.O., DAB No. 2610 at 4
(2014) (unintentional or inadvertent omission is not a defense).

Petitioners did not list Dr. Morgan’s 2007 felony conviction on the enrollment
application signed and certified by Dr. Morgan as true, correct, and complete on July 17,
2013 and filed within ten years of the date of Dr. Morgan’s conviction. I conclude that
CMS has a basis to revoke Petitioners’ Medicare enrollment and billing privileges
pursuant to 42 C.F.R. § 424.535(a)(4).

Petitioners’ arguments in their defense are without merit.

Petitioners argue they did not submit false or misleading information. P. Br. at 1. The
fact that Petitioners did not list Dr. Morgan’s 2007 felony conviction as a final adverse
legal action in the July 2013 CMS-855] is not disputed. Whether the failure to list the
conviction amounts to false or misleading information and is a basis for revocation
pursuant to 42 C.F.R. § 424.535(a)(4) is an issue of law that must be resolved against
Petitioners. Both the regulations and the CMS-855] clearly required that Petitioners
report Dr. Morgan’s conviction because that 2007 felony conviction occurred within ten
years of Petitioners’ 2013 application to enroll in Medicare and it was a conviction for
which Petitioner Dr. Morgan was excluded pursuant to section 1128(a) of the Act. CMS
Ex. | at 48; P. Ex. I at 13; 42 CFR. §§ 424.502, 424.510(d)(2)(i), 424.5 16(d)(1)(ii)
(2012). I conclude that because Petitioners did not list Dr. Morgan’s conviction as a final
adverse legal action, the CMS-855I that was certified by Dr. Morgan’s signature on July
17, 2013, and filed by Petitioners in 2013 was not true, correct, and complete but rather
was incomplete, false, and misleading.

Petitioners argue that in 2008, CMS revoked Dr. Morgan’s Medicare enrollment and
billing privileges, and CMS was clearly aware of Petitioner Dr. Morgan’s conviction.
P. Br. at 2,5, 7-9. Whether or not CMS had records and was aware of Dr. Morgan’s
felony conviction in 2007 is not the issue. Petitioners had an affirmative duty under the
regulations, of which they were advised by the CMS-855I, to submit a true, complete,

11

and accurate application. Petitioners violated that affirmative duty. Petitioners offer no
explanation for the failure.

Petitioners argue that because the I.G. excluded Dr. Morgan for five years and Dr.
Morgan’s Medicare enrollment and billing privileges were already revoked for three
years, it is improper for CMS to revoke Petitioners privileges again, and would
effectively impose a ten-year exclusion which is not authorized. P. Br. at 6-7. The IG.
exclusion and the prior CMS revocation were based on Dr. Morgan’s 2007 conviction.
The current revocation is based upon Petitioners’ failure to file a true, correct, and
complete application in 2013, because Petitioners failed to list Dr. Morgan’s 2007 felony
conviction as a final adverse legal action. I conclude that the prior I.G. exclusion and the
prior revocation of Dr. Morgan’s enrollment is no bar to the revocation before me as
there are separate factual and legal bases for the current revocation.

Petitioners assert that revocation is barred by the affirmative defenses of waiver, estoppel,
laches, res judicata, collateral estoppel, and double jeopardy. P. Br. at 9. It is not
disputed that the revocation of Petitioners’ Medicare enrollment is pursuant to 42 C.F.R.
§ 424.535(a)(4) based on Petitioners’ failure to submit a true, correct, and complete
application that listed Dr. Morgan’s 2007 felony conviction. The prior CMS revocation
of Medicare enrollment and billing privileges on September 3, 2008, was based on
Petitioner Dr. Morgan’s surrender of his medical license in Ohio. CMS Exs. | at 22-23,2
at 23-24; P. Ex. F. The I.G. exclusion of Petitioner Dr. Morgan pursuant to section
1128(a)(3) was based on his 2007 felony conviction. P. Ex. A J§ 2, 8,1 at 15, 17; CMS
Ex. | at 19-20, 35. The revocation of Petitioner Dr. Morgan’s enrollment and billing
privileges on September 3, 2008, and his May 30, 2008 I.G. exclusion had different
factual and legal bases from the current revocation of Petitioners’ Medicare enrollment
and billing privileges. Petitioners cite no authority that recognizes the application of
waiver, estoppel, laches, res judicata, collateral, estoppel, or double jeopardy on facts
such as those presented by this case.

Accordingly, I conclude that there is a basis for revocation of Petitioners’ Medicare
enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(4) and Petitioners
have failed to either rebut the prima facie showing or establish an affirmative defense.

Having found that there is a basis for revocation, I have no authority to review the
exercise of discretion by CMS to revoke Petitioners’ Medicare enrollment and billing
privileges. Dinesh Patel, M.D., DAB No. 2551 at 10 (2013); Fady Fayad, M.D., DAB
No. 2266, at 16 (2009), aff’d, 803 F. Supp. 2d 699 (E.D. Mich. 2011); Abdul Razzaque
Ahmed, M.D., DAB No. 2261 at 16-17, 19 (2009), aff’d, 710 F. Supp. 2d 167 (D. Mass.
2010).

Summary judgment is also appropriate as to the effective date of revocation. Pursuant to
42 CFR. § 424.535(g), revocation becomes effective 30 days after CMS or the CMS
12

contractor mails notice of its determination to the provider or supplier, except under
certain facts not present in this case. The notices of the initial determinations to revoke
were dated November 7, 2016 and December 30, 2016. CMS Exs. | at 13-16; 2 at 14-17.
It is not subject to dispute that the thirtieth day after November 7, 2016, was December 7,
2016, and the thirtieth day after December 30, 2016, was January 29, 2017. Accordingly,
I conclude that December 7, 2016 and January 29, 2017 are the correct revocation dates.

The MAC imposed a three-year bar to reenrollment. CMS Exs. | at 13-16; 2 at 14-17.
When a supplier’s Medicare enrollment and billing privileges are revoked, the supplier is
barred from re-enrolling in the Medicare program for one to three years. 42 C.F.R.

§ 424.535(c). Petitioners argue that a one-year bar to re-enrollment is the longest
appropriate pursuant to Medicare Program Integrity Manual, CMS Pub. 100-08 (MPIM),
chap. 15, § 15.27.2(E) — the subsection in effect at the time of the reconsidered
determination was section 15.27.2(D). P. Br. at 9. Under MPIM, §15.27.2(D)(2) (rev.
688, eff. Jul. 26, 2016), the recommended length of the bar to re-enrollment for exclusion
pursuant to 42 C.F.R. § 424.535(a)(4) is three years. The section also states that every
case must be judged on its own merits and indicates that CMS retains discretion to
impose an appropriate bar to re-enrollment of one to three years.

There is no statutory or regulatory language establishing a right to review of the duration
of the re-enrollment bar CMS imposes. Act § 1866(j)(8) (42 U.S.C. § 1395cc(j)(8));

42 CFR. §§ 424.535(c), 424.545; 498.3(b), 498.5. The Board has held that the duration
of a revoked supplier’s re-enrollment bar is not an appealable initial determination listed
in 42 C.F.R. § 498.3(b) and not subject to ALJ review. Vijendra Dave, M.D., DAB

No. 2672 at 10-11 (2016).

To the extent that Petitioners’ arguments may be construed as a request for equitable
relief, I have no authority to grant such relief. US Ultrasound, DAB No. 2302 at 8
(2010). Iam also required to follow the Act and regulations and have no authority to
declare statutes or regulations invalid. 1866ICPayday.com, L.L.C., DAB No. 2289 at 14.

III. Conclusion

For the foregoing reasons, Petitioners’ Medicare enrollment and billing privileges are
revoked pursuant to 42 C.F.R. § 424.535(a)(4). The effective date of revocation for
Petitioner Dr. Morgan is December 7, 2016, and for his practice is January 29, 2017.

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Summit Shah, M.D.
(NPI: 1871702613 / PTAN: 4312952),

and

Premier Allergy, LLC
(NPI: 1710289293 / PTAN: 939491),

Petitioners,
v.
Centers for Medicare & Medicaid Services.

Docket No. C-17-895

Decision No. CR5013

Date: January 25, 2018

DECISION

The Medicare enrollment and billing privileges of Petitioners, Summit Shah, M.D. and
his practice Premier Allergy, LLC are revoked pursuant to 42 C.F.R. § 424.535(a)(3) and
(9), effective August 25, 2016.
I. Background

CGS, a Medicare Administrative Contractor (MAC) for the Centers for Medicare &
Medicaid Services (CMS), notified Petitioners by letter dated December 21, 2016, that

' References are to the 2016 revision of the Code of Federal Regulations (C.F.R.), the
revision in effect at the time of the initial determination in this case, unless otherwise
stated.
their Medicare enrollment and billing privileges were revoked effective August 25, 2016.
The MAC stated that revocation was pursuant to 42 C.F.R. § 424.535(a)(3) and (9).

CMS Exhibits (Exs.) 1 at 32-33; 2 at 32-33. The MAC advised Petitioners that they were
subject to a three-year bar to re-enrollment beginning 30 days from the postmark on
MAC’s notice letter. CMS Exs. | at 33, 2 at 33.

On February 15, 2017, Petitioners submitted a consolidated request for reconsideration.
CMS Exs. | at 9-10, 2 at 9-10. On May 15, 2017, a Medicare Hearing Office upheld
revocation of the Medicare enrollment and billing privileges of Petitioner Summit Shah,
M.D. effective August 25, 2016, pursuant to 42 C.F.R. § 424.535(a)(3) and (9). CMS Ex.
1 at 1-7. On May 12, 2017, the Medicare Hearing Officer upheld revocation of Petitioner
Premier Allergy’s Medicare enrollment and billing privileges effective August 25, 2016,
pursuant to 42 C.F.R. § 424.535(a)(3) and (9). CMS Ex. 2 at 1-7.

On July 12, 2017, Petitioners timely filed a consolidated request for hearing before an
administrative law judge (ALJ). On July 21, 2017, the case was assigned to me for
hearing and decision, and an Acknowledgement and Prehearing Order (Prehearing Order)
was issued at my direction.

On August 21, 2017, CMS filed a combined prehearing brief and motion for summary
judgment (CMS Br.) with CMS Exs. 1 through 14. On September 19, 2017, Petitioners
filed a combined prehearing brief, cross-motion for summary judgment, and opposition to
CMS’s motion for summary judgment (P. Br.), with no exhibits. CMS filed its response
to Petitioners’ cross-motion for summary judgment on October 4, 2017. Petitioners did
not object to my consideration of CMS Exs. | through 14 and they are admitted.

II. Discussion
A. Applicable Law

Section 1831 of the Social Security Act (the Act) (42 U.S.C. § 1395j) establishes the
supplementary medical insurance benefits program for the aged and disabled known as
Medicare Part B. Administration of the Part B program is through the MACs. Act §
1842(a) (42 U.S.C. § 1395u(a)). Payment under the program for services rendered to
Medicare-eligible beneficiaries may only be made to eligible providers of services and
suppliers.” Act §§ 1835(a) (42 U.S.C. § 1395n(a)), 1842(h)(1) (42 U.S.C. § 1395u(h)(1)).
Petitioners are a physician and his practice and they are suppliers.

> A “supplier” furnishes services under Medicare and includes physicians or other
practitioners and facilities that are not included within the definition of the phrase
“provider of services.” Act § 1861(d) (42 U.S.C. § 1395x(d)). A “provider of services,”

(Continued next page.)
The Act requires the Secretary of Health and Human Services (Secretary) to issue
regulations that establish a process for the enrollment in Medicare of providers and
suppliers, including the right to a hearing and judicial review of certain enrollment
determinations, such as revocation of enrollment and billing privileges. Act § 1866(j)
(42 U.S.C. § 1395cc(j)). Pursuant to 42 C.F.R. § 424.505, a supplier such as Petitioner
must be enrolled in the Medicare program and be issued a billing number to have billing
privileges and to be eligible to receive payment for services rendered to a Medicare-
eligible beneficiary.

The Secretary has delegated the authority to revoke enrollment and billing privileges to
CMS. 42 C.F.R. § 424.535. CMS or its Medicare contractor may revoke an enrolled
supplier’s Medicare enrollment and billing privileges and supplier agreement for any of
the reasons listed in 42 C.F.R. § 424.535. The effective date of the revocation is
controlled by 42 C.F.R. § 424.535(g).

A supplier whose enrollment and billing privileges have been revoked may request
reconsideration and review as provided by 42 C.F.R. pt. 498. 42 C.F.R. § 424.545(a). A
supplier submits a written request for reconsideration to CMS or its contractor. 42 C.F.R.
§ 498.22(a). CMS or its contractor must give notice of its reconsidered determination to
the supplier, giving the reasons for its determination, specifying the conditions or
requirements the supplier failed to meet, and advising of the right to an ALJ hearing.

42 C.F.R. § 498.25. If the decision on reconsideration is unfavorable to the supplier, the
supplier has the right to request a hearing by an ALJ and further review by the
Departmental Appeals Board (the Board). Act § 1866(j)(8) (42 U.S.C. § 1395cec(j)(8));
42 C.F.R. §§ 424.545, 498.3(b)(17), 498.5. A hearing on the record, also known as an
oral hearing, is required under the Act. Crestview Parke Care Ctr. v. Thompson, 373
F.3d 743, 748-51 (6th Cir. 2004). The supplier bears the burden to demonstrate that it
meets enrollment requirements with documents and records. 42 C.F.R. § 424.545(c).

(Continued from preceding page.)

commonly shortened to “provider,” includes hospitals, critical access hospitals, skilled
nursing facilities, comprehensive outpatient rehabilitation facilities, home health
agencies, hospice programs, and a fund as described in sections 1814(g) (42 U.S.C.

§ 1395f(g)) and 1835(e) (42 U.S.C. § 1395n(e)) of the Act. Act § 1861(u) (42 U.S.C.

§ 1395x(u)). The distinction between providers and suppliers is important because they
are treated differently under the Act for some purposes.
B. Issues
Whether summary judgment is appropriate; and

Whether there was a basis for the revocation of Petitioners billing
privileges and enrollment in Medicare.

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

My conclusions of law are set forth in bold text followed by my findings of fact and
analysis.

1. Summary judgment is appropriate.

Both parties request summary judgment. A supplier whose enrollment has been revoked
has a right to a hearing and judicial review. A hearing on the record is required under the
Act. Act §§ 205(b), 1866 (h)(1), (j) (42 U.S.C. § 1395cc(h)(1), (j)); 42 C.F.R.

§§ 498.3(b)(1), (5), (6), (8), (15), (17), 498.5; Crestview, 373 F.3d at 748-51. A party
may waive appearance at an oral hearing but must do so affirmatively in writing.

42 C.F.R. § 498.66. In this case, Petitioners have not waived the right to oral hearing or
otherwise consented to a decision based only upon the documentary evidence or
pleadings. Accordingly, disposition on the written record alone is not permissible, unless
summary judgment is appropriate.

Summary judgment is not automatic upon request but is limited to certain specific
conditions. The Secretary’s regulations at 42 C.F.R. pt. 498 that establish the procedure
to be followed in adjudicating Petitioners’ case do not establish a summary judgment
procedure or recognize such a procedure. However, the Board has long accepted that
summary judgment is an acceptable procedural device in cases adjudicated pursuant to 42
C.F.R. pt. 498. See, e.g., Ill. Knights Templar Home, DAB No. 2274 at 3-4 (2009);
Garden City Med. Clinic, DAB No. 1763 (2001); Everett Rehab. & Med. Ctr., DAB No.
1628 at 3 (1997). The Board also has recognized that the Federal Rules of Civil
Procedure do not apply in administrative adjudications such as this, but the Board has
accepted that Fed. R. Civ. Pro. 56 and related cases provide useful guidance for
determining whether summary judgment is appropriate. Furthermore, a summary
judgment procedure was adopted as a matter of judicial economy within my authority to
regulate the course of proceedings and made available to the parties in the litigation of
this case by my Prehearing Order, para. I1.D and G. The parties were given notice by the
Prehearing Order that summary judgment is an available procedural device and that the
law as it has developed related to Fed. R. Civ. Pro. 56 will be applied.

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

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

Viewing the evidence before me in a light most favorable to Petitioners and drawing all
inferences in Petitioners’ favor, I conclude that there are no genuine disputes as to any
material facts pertinent to revocation under 42 C.F.R. § 424.535(a)(3) or (9) that require a
hearing in this case. The issues in this case raised by Petitioners related to revocation
under 42 C.F.R. § 424.535(a)(3) and (9) must be resolved against them as a matter of
law. Accordingly, summary judgment is appropriate.

2. The issue for hearing and decision is whether there is a basis for
revocation of Petitioners’ Medicare enrollment and billing privileges
and, if there is a basis for revocation, my jurisdiction does not extend
to review of whether CMS properly exercised its discretion to revoke
Petitioners Medicare enrollment and billing privileges.
3. The Secretary has determined and provided by regulation that any
felony for which mandatory exclusion from Medicare is required by
section 1128(a) of the Act (42 U.S.C. §1320a-7(a)), is detrimental to the
Medicare program or its beneficiaries. 42 C.F.R. § 424.535(a)(3)(ii)(D).

4. Petitioner Shah was convicted of felony offenses for which
mandatory exclusion from Medicare was required by section 1128(a) of
the Act.

5. There is a basis for revocation of Petitioners’ enrollment in
Medicare and their billing privileges pursuant to 42 C.F.R.
§ 424.535(a)(3).

6. There is no dispute that neither Petitioners nor anyone on their
behalf notified CMS or the MAC of Petitioner Shah’s conviction within
30 days of the date of conviction as required by 42 C.F.R.

§ 424.516(d)(1)(ii).

7. There is a basis for revocation of Petitioners’ enrollment in
Medicare and their billing privileges pursuant to 42 C.F.R.
§ 424.535(a)(9) for violation of 42 C.F.R. § 424.516(d)(1)(ii).

8. Petitioners’ Medicare enrollment and billing privileges are revoked
effective August 25, 2016. 42 C.F.R. § 424.535(g).

9. Ihave no authority to review CMS’s determination to impose a
three-year bar on Petitioners’ Medicare re-enrollment.

10. Pursuant to 42 C.F.R. § 424.535(c)(1), the three-year bar to
reenrollment began to run 30 days from the date CMS or the MAC
mailed the notice of revocation, but the Secretary and CMS have
discretion not to enroll one convicted of a felony determined
detrimental to the best interests of Medicare or its beneficiaries for up
to ten years from the date of conviction. Act § 1866(b)(2)(42 U.S.C.

§ 1395ce(b)(2)); 42 C.F.R. § 424.530(a)(3).

a. Facts
The following material facts are undisputed.

Petitioners were enrolled in Medicare effective November 8, 2010. CMS Ex. 8, 9.
On August 25, 2016, in the Court of Common Pleas, Franklin County, Ohio, Case No. 16
CR 4628, Petitioner Shah pleaded guilty to two felony counts of selling, purchasing,
distributing, or delivering dangerous or investigational drugs in violation of Ohio Revised
Code § 4729.51. CMS Ex. 4. In the same court, in Case No. 16 CR 4629, Petitioner
Shah pleaded guilty to two felony counts of selling, purchasing, distributing, or
delivering dangerous drugs in violation of Ohio Revised Code § 4729.51(C)(1). CMS
Ex. 5. Petitioner was convicted on August 25, 2016 pursuant to his pleas. CMS Exs. 4,
5; P. Br. at 2-3.

There is no dispute that Petitioners did not report Petitioner Shah’s conviction to CMS or
the MAC.

Petitioner Shah was excluded by the Inspector General (I.G.), U.S. Department of Health
and Human Services from participation in Medicare, Medicaid, and all federal health care
programs pursuant to 1128(a)(1) of the Act based on his August 25, 2016 conviction.
CMS Ex. 14.

b. Analysis

The MAC revoked Petitioners’ Medicare enrollment and billing privileges under 42
C.F.R. § 424.535(a)(3) and (9). Sections 424.535(a)(3) and (9) provide in pertinent part:

(a) Reasons for revocation. CMS may revoke a currently
enrolled provider or supplier’s Medicare billing privileges
and any corresponding provider agreement or supplier
agreement for the following reasons:

oe Rk

(3) Felonies. (i) The provider, supplier, or any owner or
managing employee of the provider or supplier was, within
the preceding 10 years, convicted (as that term is defined in
42 CFR 1001.2) of a Federal or State felony offense that
CMS determines is detrimental to the best interests of the
Medicare program and its beneficiaries.

(ii) Offenses include, but are not limited in scope or severity
to—

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(D) Any felonies that would result in mandatory exclusion
under section 1128(a) of the Act.
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(9) Failure to report. The provider or supplier did not
comply with the reporting requirements specified in
§ 424.516(d)(1)(ii) and (iii) of this subpart.

42 C.F.R. § 424.535(a)(3)(ii)(D) and (9). The Act specifically grants the Secretary
authority not to enroll or to revoke the enrollment of a provider or supplier convicted
under federal or state law of a felony offense that the Secretary determines is detrimental
to the program or its beneficiaries. Act § 1866(b)(2)(D). Section 424.516(d)(1) of 42
C.F.R. requires that a physician report any adverse legal action within 30 days of the
event. The elements for revocation under both 42 C.F.R. § 424.535(a)(3)(ii)(D) and (9)
are satisfied by the undisputed facts in this case.

Petitioner Shah does not dispute that he was convicted but argues that his conviction was
not one that required mandatory exclusion by the I.G. under 1128(a) of the Act or that
had to be reported under 42 C.F.R. § 424.516(d)(1)(ii) and (iti). P. Br. at 1, 4-8.

On December 30, 2016, the I.G. notified Petitioner Shah that he was being excluded
pursuant to section 1128(a)(1) of the Act based on his felony convictions, as summarized
above, because they were criminal offenses related to the delivery of an item or service
under Medicare or a state health care program. Petitioner Shah challenged the exclusion
before an ALJ on grounds that his offense was not related to the delivery of an item or
service under Medicare or a state health care program. Petitioner Shah did not prevail
and his exclusion pursuant to section 1128(a) of the Act was upheld. Summit S. Shah,
M._D., DAB No. CR4927 (2017) aff'd DAB No. 2836 (2017); CMS Ex. 14.

Accordingly, I conclude that there is a basis for revocation of Petitioners’ Medicare
enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3)(ii)(D).

I further conclude that the failure to report the conviction within 30 days as required by
42 C.F.R. § 424.516(d)(1)(ii) is an independent basis for revocation of Petitioners’
enrollment pursuant to 42 C.F.R. § 424.535(a)(9). Failure of a physician or a physician
organization to comply with reporting requirements established by 42 C.F.R.

§ 424.516(d)(1)(ii) is an authorized basis for revocation of Medicare enrollment and
billing privileges. Pursuant to 42 C.F.R. § 424.516(d)(1)(1i) a physician and his practice
are required to report any adverse legal action within 30 days of the action. The
regulations specify that a final adverse legal action includes a conviction in state or
federal court of a felony offense, as defined by 42 C.F.R. § 424.535(a)(3)(i), that
occurred within the last ten years preceding enrollment, revalidation of enrollment, or
re-enrollment. 42 C.F.R. § 424.502. Any felony conviction that triggers mandatory
exclusion under section 1128(a) of the Act is included among the felonies within the
scope of 42 C.F.R. § 424.535(a)(3)(i). Petitioners do not deny Petitioner Shah’s
conviction was not reported based on their mistaken belief that his conviction was not
one that needed to be reported.

Accordingly, I conclude that there is a basis for revocation of Petitioners’ Medicare
enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(9).

Summary judgment is also appropriate as to the effective date of revocation of
Petitioners’ Medicare enrollment and billing privileges.

The Act specifies that one is convicted of a criminal offense when a judgment of
conviction has been entered against an individual by a federal, state, or local court; when
there has been a finding of guilt by a federal, state, or local court; when a guilty plea or
no contest plea is accepted by a federal state, or local court; or when an individual has
entered an arrangement where a judgment of conviction has been withheld. Act § 1128(i)
(42 U.S.C. § 1320a-7(i)). The undisputed evidence shows that Petitioner pleaded guilty
and the guilty plea was accepted on August 25, 2016. Accordingly, I conclude that, as a
matter of law, Petitioner was convicted on August 25, 2016, within the meaning of
section 1128(i) of the Act.

The effective date of the revocation is controlled by 42 C.F.R. § 424.535(g). The
regulation provides that when revocation is based on a felony conviction, the effective
date of revocation is the date of the conviction. 42 C.F.R. § 424.535(g).

(g) Effective date of revocation. Revocation becomes
effective 30 days after CMS or the CMS contractor mails
notice of its determination to the provider or supplier, except
if the revocation is based on Federal exclusion or debarment,
felony conviction, license suspension or revocation, or the
practice location is determined by CMS or its contractor not
to be operational. When a revocation is based on a Federal
exclusion or debarment, felony conviction, license
suspension or revocation, or the practice location is
determined by CMS or its contractor not to be operational,
the revocation is effective with the date of exclusion or
debarment, felony conviction, license suspension or
revocation or the date that CMS or its contractor determined
that the provider or supplier was no longer operational.

42 C.F.R. § 424.535(g) (emphasis added). This regulation grants CMS and its contractor
no discretion to choose an effective date of revocation other than the date of the
conviction. Accordingly, the effective date of Petitioners’ exclusion pursuant to

42 C.F.R. § 424.535(a)(3) was August 25, 2016. Although failure to report the
conviction is an independent basis for revocation under 42 C.F.R. § 424.535(a)(9) that
would normally be effective 30 days after notice of the initial determination, the
10

regulation does not grant CMS or its contractor discretion to choose the later effective
date.

When a supplier’s Medicare enrollment and billing privileges are revoked, the supplier is
barred from re-enrolling in the Medicare program for one to three years. 42 C.F.R.

§ 424.535(c). In this case, CMS determined that a three-year bar was appropriate. There
is no statutory or regulatory language establishing a right to review of the duration of the
re-enrollment bar CMS imposes. Act § 1866(j)(8) (42 U.S.C. § 1395cc(j)(8)) ; 42 C.F.R.
§§ 424.535(c), 424.545, 498.3(b), and 498.5. The Board has held that the duration of a
revoked supplier’s re-enrollment bar is not an appealable initial determination listed in
42 C.F.R. § 498.3(b) and, thus, is not subject to ALJ review. Vijendra Dave, DAB No.
2672 at 11 (2016).

I have no authority to review the exercise of discretion by CMS or its contractor to
revoke where there is a basis for revocation. Abdul Razzaque Ahmed, M.D., DAB No.
2261 at 19 (2009), aff'd, Ahmed v. Sebelius, 710 F.Supp.2d 167 (D. Mass. 2010). The
scope of my authority is limited to determining whether there is a legal basis for
revocation of Petitioners Medicare enrollment and billing privileges. Id. I have
concluded that there is a basis for CMS to revoke Petitioners Medicare enrollment and
billing privileges pursuant to 42 C.F.R. § 424.535(a)(3).

III. Conclusion

For the foregoing reasons, I conclude that Petitioners’ Medicare enrollment and billing
privileges are properly revoked pursuant to 42 C.F.R. § 424.535(a)(3) and (9), effective
August 25, 2016.

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Sunsites Pearce Fire District,
(PTAN: Z860372114/ NPI: 1215921812),
Petitioner,

v.

Centers for Medicare & Medicaid Services.
Docket No. C-17-1191
Decision No. CR5012

Date: January 25, 2018

DECISION

I grant summary judgment sustaining the determinations of a Medicare contractor, as
affirmed on reconsideration, to revoke the Medicare participation and to decline to renew
participation of Petitioner, Sunsites Pearce Fire District.

I. Background

The Centers for Medicare & Medicaid Services (CMS) moved for summary judgment,
filing supporting exhibits identified as CMS Ex. 1-CMS Ex. 13. Petitioner opposed the
motion and filed supporting exhibits identified as P. Ex. 1-15. These exhibits included
the sworn declarations of three witnesses. CMS objected to portions of Petitioner’s
exhibits and requested that it be permitted to cross-examine Petitioner’s witnesses in the
event that I denied the motion for summary judgment.

It is unnecessary that I rule on CMS’s objections inasmuch as I grant its motion for
summary judgment. Nor do I receive either party’s exhibits as evidence because I decide
this case based on the undisputed material facts. However, I refer to some of the parties’
exhibits, only for purposes of illustrating facts that are not in dispute.
IL. Issue, Findings of Fact and Conclusions of Law
A. Issue

The issue in this case is whether a Medicare contractor appropriately revoked Petitioner’s
Medicare participation and declined to renew its participation.

B. Findings of Fact and Conclusions of Law

There is no dispute concerning the material facts. Petitioner, a rural fire district in
Arizona, operates an ambulance service. In 2013, Petitioner made Joshua Steinberg its
managing employee. Mr. Steinberg was the district’s interim fire chief.

On March 13, 2011, Mr. Steinberg was charged with a felony in Cochise County,
Arizona. Specifically he was charged with disorderly conduct consisting of recklessly
discharging a 9mm pistol in the presence of his former girlfriend. CMS Ex. 12 at 1. Mr.
Steinberg elected to participate in the county’s adult diversion program. Id. at 2-4. A
court ordered that the charges against him be suspended for two years while he
participated in the program. Jd. at 10. The court dismissed the charges upon Mr.
Steinberg’s completion of the program. Jd. at 13.

Petitioner did not inform CMS or its contractor of the legal actions taken against Mr.
Steinberg. On May 30, 2013, it submitted an application to the contractor (CMS Form
855B) seeking to add Mr. Steinberg as its managing director. CMS Ex. 4 at 7. Petitioner
did not include with this application the information required at Section 6B of the
application form. This section requires applicants to certify whether managing
employees and other key personnel have been subject to any “final adverse legal actions.”
CMS Ex. 9 at 27.

Upon reviewing the application the contractor asked Petitioner to supply the information
required at Section 6B. CMS Ex. 5. On August 8, 2013, Petitioner resubmitted the Form
885B but again failed to include Section 6B with its submission. CMS Ex. 6.

The contractor again requested Petitioner to complete its application. CMS Ex. 7. On
November 21, 2013, Petitioner submitted another Form 855B. On this occasion it
completed Section 6B as it pertained to Mr. Steinberg. Petitioner affirmatively asserted
that Mr. Steinberg had not been subjected to any adverse legal action. CMS Ex. 8 at 7.

Provider and supplier enrollment in Medicare is governed by regulations at 42 C.F.R.
Part 424. A provider or supplier must be enrolled in Medicare in order to claim
reimbursement for items or services that it provides to beneficiaries. In order to qualify
for enrollment a provider or supplier must file an enrollment application. Every provider
or supplier is obligated to submit accurate and truthful responses to all information
requests made on behalf of the Medicare program and to attest to the accuracy of any
information submitted. 42 C.F.R. §§ 424.510(d)(2), (d)(3).

CMS or its delegated contractor may revoke a provider or a supplier’s Medicare
participation in the circumstance where a provider or a supplier certifies on its enrollment
application as being true information that is misleading or is false. 42 C.F.R.

§ 424.535(a)(4). CMS or a contractor may also revoke participation in the circumstance
where any owner or managing employee of a provider or supplier was “convicted” of a
felony within the previous ten years, that CMS determines is detrimental to the best
interests of Medicare and its beneficiaries. 42 C.F.R. § 424.535(a)(3). The regulation
that was in effect when Petitioner retained Mr. Steinberg as its manager and when it
submitted the Forms 855B that I have discussed defines felonies for which revocation
may be imposed to include:

Felony crimes against persons, such as murder, rape, assault and other
similar crimes for which the individual was convicted, including guilty
pleas and adjudicated pretrial diversions.

42 CFR. § 424.535(a)(3)(ii)(A) (2013).!

The undisputed material facts establish grounds to revoke Petitioner’s participation,
pursuant to the then-extant 42 C.F.R. § 424.535(a)(3)(ii)(A) and under 42 C.F.R.

§ 424.535(a)(4). Grounds for revocation exist because Petitioner’s manager, Mr.
Steinberg was convicted of a felony within the ten years prior to his assuming the duties
of manager and because Petitioner misled the contractor about Mr. Steinberg’s status in
failing to file Section 6B and then stating falsely that Mr. Steinberg had not been subject
to an adverse legal action.

Petitioner argues that Mr. Steinberg was not convicted of a felony and therefore, it was
not required to report that he was subject to an adverse legal action. Petitioner’s Brief
(P.Br.) at 6-7. As support for this argument Petitioner points to the modifications to 42
C.F.R. § 424.535(a)(3) adopted by the Secretary in 2015. Jd. at 7. In 2015, the
regulation added a clarification that states that a “felony offense” is “as that term is
defined in 42 C.F.R. 1001.2”. That latter section includes a subpart (d) that defines
“convicted” of a felony offense as including the circumstance where:

an individual or an entity has entered into participation in a first offender,
deferred adjudication or other program or arrangement where judgment of
conviction has been withheld.

* The Secretary modified this regulation in 2015. I discuss the modified language below.
42 C.F.R. § 1001.2(d). Petitioner reasons that Mr. Steinberg was not “convicted” of a
felony inasmuch as this clarifying language was not part of the regulation in 2011 when
he entered into a deferred adjudication program or in 2013 when Petitioner filed its
application for participation. P. Br. at 7-8. Petitioner asserts that the absence of the
clarifying language can only mean that deferred adjudications such as the one that Mr.
Steinberg entered were not subject to the regulation’s reach prior to 2015.” Jd.

I disagree. The regulation in effect as of Mr. Steinberg’s conviction and when Petitioner
filed the Form 855Bs that are at issue here encompassed “adjudicated pretrial
diversions.” That is precisely what Mr. Steinberg entered into in 2011. He entered into a
program — subject to the consent and subsequent review of a court — pursuant to which he
was obligated to complete enumerated requirements in return for subsequent dismissal of
the felony charge that had been made against him. That is exactly what a deferred
adjudication consists of. I do not find that the addition of clarifying language to the
regulation in 2015 meant that Mr. Steinberg’s deferred adjudication was excluded from
the regulation’s purview prior to that date. It clarified the regulation’s reach but it did not
expand it. Kimberly Shipper, P.A., DAB No. 2804 at 10 (2017).

Petitioner argues also that the arrangement that Mr. Steinberg entered into was not an
“adjudicated” pretrial diversion. It contends that his arrangement was not “adjudicated”
because he neither pled guilty to a felony nor was found to be guilty of one. P. Br. at 10-
11. According to Petitioner, an “adjudicated” pretrial diversion occurs only after a court
finds an individual to be guilty and then offers diversion in lieu of punishment. Jd.

I reject that argument. Here, the court adjudicated Mr. Steinberg’s case because it
accepted a formalized arrangement in lieu of a plea and also because it retained
jurisdiction over the case while Mr. Steinberg complied with the requirements of his
diversion. “Adjudication” in this context is synonymous with “disposition.”

Moreover, in making its argument Petitioner ignores the presence of the word “pretrial”
in the relevant phrase. The regulation in effect when Mr. Steinberg entered into his
arrangement clearly encompassed arrangements made prior to trial in which individuals
agreed to be subject to court supervision and other requirements in lieu of entering a
guilty plea or facing a jury.

Petitioner also argues that the contractor wrongly determined that the charge against Mr.
Steinberg was for a felony that is detrimental to the Medicare program. P. Br. at 12. But,
CMS plainly has the discretion to determine what may be or may not be detrimental.
Certain felony convictions are per se grounds for revocation but CMS is not limited to

> Petitioner argues also that CMS improperly seeks to apply the 2015 clarified regulation
here. That is incorrect. CMS relies on the pre-2015 language to support its motion
although it argues that the 2015 clarification does not expand the reach of the regulation
but merely clarifies it.
revoking solely on the basis of those convictions. The regulation governing revocation
based on felony convictions states that CMS has the authority to revoke based on what it
determines to be detrimental. 42 C.F.R. § 424.535(a)(3). That delegates the authority to
CMS to determine in individual cases what is or is not detrimental. That is a non-
reviewable discretionary authority vested in CMS by the Secretary. Letantia Bussell,
DAB No. 2196 (2008).

Petitioner also argues that its 2017 termination of Mr. Steinberg’s Medicare supervisory
authority effectively wiped the slate clean, requiring the contractor to reinstate Petitioner
as of that date. P. Br. at 13-14. As support for this contention Petitioner cites an April
26, 2017 resolution by the fire district board that purports to separate Mr. Steinberg from
all Medicare issues. P. Ex. 7 at 8. However, neither this resolution nor the supporting
testimony offered by Petitioner explains precisely how this arrangement is supposed to
work. See P. Ex. 1; P. Ex. 2: P. Ex. 12. Mr. Steinberg retains his duties as fire chief.
The ambulance service is part of the district’s fire department. Petitioner has provided no
mechanism that separates the operation of the ambulance service and associated
emergency medical services from the fire department. I find that the contractor had
discretion to decline to renew given the vagueness of the resolution and the absence of an
explanation as to how Mr. Steinberg would serve as fire chief but not manager of the fire
department’s ambulance service.

As Ihave stated there are two bases for revocation of Petitioner’s Medicare enrollment:
its misleading and false statements concerning Mr. Steinberg’s status; and, its failure to
inform the contractor or CMS that Mr. Steinberg had an adverse legal action against him.
The former basis allows for revocation 30 days after CMS or the contractor sends notice
to the provider or supplier. 42 C.F.R. § 535(g). The latter basis allows for revocation
retroactive to the date of a manager’s conviction. Jd.

In this case the contractor and CMS opted to revoke Petitioner’s participation retroactive
to March 4, 2013. This date evidently relates to the date when the contractor first asked
Petitioner to complete an application that Petitioner had filed in 2012. The contractor did
not impose an earlier revocation date (for example, back to the date of Mr. Steinberg’s
conviction) because Mr. Steinberg wasn’t associated with Petitioner at that time.

This determination to revoke retroactively is well within the contractor’s and CMS’s
regulatory authority. Given that grounds exist, | am without authority to modify or
change the revocation date. I note that in its exhibits Petitioner alleges that the
retroactive revocation will cause it to experience economic harm (CMS is seeking to
recoup as an overpayment payments made to Petitioner for ambulance services that it
provided between the revocation date and the date when the contractor notified Petitioner
of the revocation, March 31, 2017). That is an equitable argument, which I have no
authority to hear or decide. Amber Mullins, N.P., DAB No. 2729 at 5-6, (2016).

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Caren Battaglia,
(OI File No. 6-12-40428-9),

Petitioner,
v.
The Inspector General.
Docket No. C-18-68
Decision No. CR5011

Date: January 24, 2018

DECISION

Petitioner, Caren Battaglia, was a licensed practical nurse (LPN) who worked for a home
health agency in the State of Louisiana. She pled guilty to one felony count of misprision
of a felony. Based on this conviction, the Inspector General (IG) has excluded her for
five years from participating in Medicare, Medicaid, and all federal health care programs,
as authorized by section 1128(a)(1) of the Social Security Act (Act). Petitioner appeals
the exclusion. For the reasons discussed below, I find that the IG properly excluded
Petitioner Battaglia and that the statute mandates a minimum five-year exclusion.

Background

Ina letter dated September 29, 2017, the IG notified Petitioner that she was excluded
from participating in Medicare, Medicaid, and all federal health care programs for a
period of five years because she had been convicted of a criminal offense related to the
delivery of an item or service under Medicare or a state health care program. The letter
explained that section 1128(a)(1) of the Act authorizes the exclusion. IG Exhibit (Ex.) 1.

Petitioner timely requested review.
The IG submitted a written argument (IG Br.) and five exhibits (IG Exs. 1-5). Petitioner
responded to the IG’s brief (P. Br.), and the IG submitted a reply (IG Reply).

In the absence of any objections, I admit into evidence IG Exs. 1-5.
The parties agree that an in-person hearing is not necessary. IG Br. at 5; P. Br. at 4.
Discussion

Petitioner must be excluded from program participation for
a minimum of five years because she was convicted of a
criminal offense related to the delivery of an item or service
under Medicare. Act § 1128(a)(1). '

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

On September 7, 2016, Petitioner Battaglia signed a plea agreement with the U.S.
Attorney for the Eastern District of Louisiana. Under its terms, she agreed to plead guilty
to one count of misprision of a felony. IG Ex. 2. On the same day, the U.S. Attorney
presented a bill of information charging her with that crime. Specifically, the information
charged that:

e Petitioner’s employer, Abide Home Care Services, participated in the Medicare
program as a home health agency;

e Medicare rules required Petitioner Battaglia, as the home health nurse, to
document the hands-on personal care she provided to Medicare beneficiaries;

e Between January 1, 2013, and June 25, 2014, Petitioner knew, but willfully
concealed, that her employer was committing health care fraud by creating false
documentation in order to bill the Medicare program fraudulently;

e Between September 16, 2013, and November 14, 2013, Petitioner Battaglia
documented that she made skilled nursing visits to a patient referred to as JeJo;

e Petitioner knew that her employer had fraudulently classified JeJo as
“homebound” and had assigned him a false diagnosis (arthropathy); yet she

' T make this one finding of fact/conclusion of law.
concealed the fraud by documenting that she had taught “on the disease process”
(for a disease that he did not have) and noting that his “homebound status [was]
evident,” even though she knew that he left home each day for a day program and
for other reasons.

IG Ex. 4; see IG Ex. 5.

On August 23, 2017, Petitioner Battaglia pled guilty to the felony charge. IG Ex. 3. The
court accepted the plea, imposed a $2,000 fine plus $100 assessment, and ordered her to
pay $1,427.04 in restitution to the Medicare program. IG Ex. 3 at 2.

Here, Petitioner concedes that she helped conceal her employer’s fraud by documenting
that she taught JeJo ‘on the disease process” and falsely reporting that he was
homebound. Nevertheless, she argues that the offense of misprision “is not sufficiently
related to the delivery of a service to support a mandatory exclusion under [s]ection
1128(a)(1).” P. Br. at 2-3. While she acknowledges that failing to report healthcare
fraud may be related to the delivery of an item or service under Medicare, she argues that
such a connection is not automatic; it depends on the circumstances of the offender’s
involvement. Her crime, she maintains, was not against the healthcare system, but
against the justice system, so was not related to the delivery of services under Medicare.

I cannot think of any circumstance in which a conviction for misprision of Medicare

fraud would not be “related to” the delivery of an item or service under that program. See
Lyle Kai, R. Ph., DAB No. 1979 at 5 (2005), aff'd, Kai v. Leavitt, No. 05-00514 BMK
(D. Haw. July 17, 2006) (holding that an offense is “related to” the delivery of a
ealthcare item or service, if there is ‘““a nexus or common-sense connection” between the
conduct giving rise to the offense and the delivery of a healthcare item or service); Berton
Siegel, D.O., DAB No 1467 at 5 (1994); Carolyn Westin, DAB No. 1381 (1993), aff'd
sub nom. Westin v. Shalala, 845 F. Supp. 1446 (D. Kan. 1994). But I need not reach that
issue here. Based on the plain language of her conviction, Petitioner Battaglia not only
failed to report her employer’s Medicare fraud, she actively facilitated it by documenting
misleading and false information.

Further, the court ordered Petitioner to pay restitution to the Medicare program. This, by
itself, confirms the direct connection between her crime and Medicare. Thus, Petitioner

Battaglia was “convicted” within the meaning of section 1128(a)(1) and she is subject to
exclusion.

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

For these reasons, I conclude that the IG properly excluded Petitioner from participation
in Medicare, Medicaid and all federal health care programs, and I sustain the five-year
exclusion.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division

Center for Tobacco Products,
Complainant

Vv.

Moulana Petroleum, Inc.
d/b/a Cape Coral Marathon,
Respondent

FDA Docket No. FDA-2017-H-3275
CRD Docket No. T-17-4422

Decision No. TB2394

Date: January 23, 2018

INITIAL DECISION AND DEFAULT JUDGMENT

Found:
1) Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§§ 1140.14(a)(1) and 1140.14(a)(2)(i) as charged in the complaint; and
2) Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R
§§ 1140.14(a)(1) and 1140.14(a)(2)(i) as charged in the prior complaint;
and
3) Respondent committed five violations in a 36-month period as set forth
hereinabove.
4) Respondent is hereby assessed a civil penalty in the amount of $5,591.
Glossary:

ALJ Administrative Law Judge!

CMP civil money penalty

CTP/Complainant Center for Tobacco Products

DJ Default Judgment

FDCA Federal Food, Drug, and Cosmetic Act (21 U.S.C.A.
Chap. 9)

DN UPS Delivery Notification

' See 5 CFR. § 930.204.
FDA Food and Drug Administration

HHS Dept. of Health and Human Services

OSC Order to Show Cause

POS UPS Proof of Service

SOP Service of Process

Respondent Moulana Petroleum, Inc. d/b/a Cape Coral Marathon
TCA The Family Smoking Prevention and Tobacco Control

Act, Pub. L. No. 111-31, 123 Stat. 1776 (2009)(TCA)

I. JURISDICTION

Ihave jurisdiction to hear this case pursuant to my appointment by the Secretary
of Health and Human Services and my authority under the Administrative Procedure Act
(5 U.S.C. §§ 554-556), 5 U.S.C.A. § 3106, 21 U.S.C. § 333(f)(5), 5 C.F.R. §§ 930.201 et
seq. and 21 C.F.R. Part 172
Il. PROCEDURAL BACKGROUND

The Center for Tobacco Products (CTP/Complainant) filed a Complaint dated
May 30, 2017, alleging that FDA documented five violations within a 36- month period.

Moulana Petroleum, Inc. d/b/a Cape Coral Marathon (Respondent or Cape Coral
Marathon) was served with process on June 9, 2017 by United Parcel Service.
Respondent filed an Answer dated July 7, 2017. On August 15, 2017, I issued an
Acknowledgement and Pre-Hearing Order (APHO) setting a schedule for filings and
procedures. Pursuant to my APHO, CTP served Respondent’s counsel with a Request for

Production of Documents on September 14,2017. The parties jointly requested an

2 See also Butz v. Economou, 438 U.S. 478 at 513, 98 S.Ct. 2894, 57 L.Ed.2d 895
(1978); Marshall v. Jerrico, Inc., 446 U.S. 238 (1980); Federal Maritime Com’n v. South
Carolina State Ports Authority, 535 U.S. 743, 744 (2002).

2
Extension of deadlines on September 19, 2017. On September 21, 2017, I issued an
Order extended all deadlines in this case including the deadline to request documents.

On November 29, 2017, CTP filed Motions to Compel Discovery and Extend
Deadlines averring Respondent failed to comply with its request for production of
documents. On November 30, 2017, I issued an Order granting CTP’s Motion to Compel
Discovery and Motion to Extend Deadlines, and ordered Respondent to comply with
CTP’s Request for Production of Documents by December 11, 2017. I further warned
Respondent “[fJailure 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 December 28, 2017, CTP filed a Motion to Impose Sanctions against
Respondent asserting that Respondent failed to respond to CTP’s request for production
of documents or comply with my November 30, 2017 Order. In its motion, CTP asked
that I strike Respondent’s Answer and issue a Default Judgment against Respondent as a
sanction for failure to comply with my orders. On January 5, 2018, I issued an Order to
Show Cause (OSC) to Respondent, in which I ordered Respondent to show cause on or
before January 12, 2018, why I should not enter default judgment against Respondent, in
the full amount requested by CTP, as an appropriate sanction pursuant to 21 C.F.R.

§ 17.35(b)-(f).

3 The Order to Show Cause was issued on January 5, 2018. Through inadvertent,
typographical error the OSC states the deadline for Respondent to show cause as January
12,2017. However, based on the date the OSC was issued, the deadline was clearly
January 12, 2018.
To date, Respondent has failed to respond.
Pursuant to 21 C.F.R. § 17.35(a), I may sanction a person, including any party or
counsel for:
(1) Failing to comply with an order, subpoena, rule, or procedure
governing the proceeding;
(2) Failing to prosecute or defend an action; or
(3) Engaging in other misconduct that interferes with the speedy,
orderly, or fair conduct of the hearing.
In this case, Respondent failed to comply with my orders and procedures
governing this proceeding.
Il. STRIKING RESPONDENT’S ANSWER
Respondent failed to comply with my August 15,2017 APHO, failed to comply
with my November 30, 2017 Order, failed to respond to CTP’s December 28, 2017
Motion to Impose Sanctions, and failed to respond to my January 5, 2018 OSC. In fact,
Respondent has not made any contact with this Court since Respondent’s July 7, 2017
Answer.
Due to Respondent’s noncompliance, I am striking Respondent’s Answer, issuing
this default decision, and assuming the facts alleged in CTP’s complaint to be true. 21
CFR. §§ 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. See
21 CFR. § 17.35(b). Respondent failed to comply with my August 15, 2017 APHO, my

November 30, 2017 Order, and my January 5, 2018 OSC.

4
I find and conclude Respondent’s repeated failure to comply with my orders is
sufficiently egregious to warrant striking the answer and issuing a decision without
further proceedings. 21 C.F.R. §§ 17.35(c)(3), 17.11 (a).

IV. BURDEN OF PROOF

CTP as the petitioning party has the burden of proof. 21 C.F.R. § 17.33.
Vv. LAW

21 U.S.C. § 331, specifically 21 C.F.R. §§ 1140.14(a)(1) and 1140.14(a)(2)(i).
VI. ISSUE

Did Respondent violate 21 U.S.C. § 331, specifically 21 C.F.R. §§ 1140.14(a)(1)
and 1140.14(a)(2)(i) as alleged in the complaint?

VII. DEFAULT

I find Respondent was served and is subject to the jurisdiction of this forum, as
established by the UPS Delivery Notification filed by CTP.

Striking Respondent’s Answer leaves the Complaint unanswered.

My January 5, 2018 OSC is incorporated herein by reference. My OSC instructed
Respondent to show cause on or before close of business on January 12, 2018, why
Judgment of Default (DJ) should not be entered in favor of the Complainant pursuant to
21 CFR. § 17.11. Respondent failed to file any pleading in response to my January 5,
2018 OSC.

Pursuant to 21 C.F.R. § 17.35(c)(3), I struck Respondent’s Answer as a sanction.

It is Respondent’s right to participate in the legal process.

It is Respondent’s right to request a hearing or to waive a hearing.

5
By failing to file a response pleading, I find Respondent waived its right to a
hearing pursuant to 21 C.F.R. § 17.11(b).
VII. ALLEGATIONS

A. Agency’s recitation of facts

CTP alleged that Respondent owned an establishment, doing business under the
name Cape Coral Marathon, located at 1541 Del Prado Boulevard North, Cape Coral,
Florida 33909. Respondent's establishment received tobacco products in interstate
commerce and held them for sale after shipment in interstate commerce.
During an inspection of Cape Coral Marathon conducted on March 15, 2017, an
FDA-commissioned inspector documented the following violations:
a. Selling tobacco products to a minor, in violation of 21 C.F.R. § 1140.14(a)(1).
Specifically, a person younger than 18 years of age was able to purchase a
package of Maverick Box cigarettes on March 15, 2017, at approximately 3:49
PM; and

b. Failing to verify the age of a person purchasing tobacco products by means of
photographic identification containing the bearer's date of birth, as required by
21 CFR. § 1140.14(a)(2)(i). Specifically, the minor's identification was not
verified before the sale, as detailed above, on March 15, 2017, at
approximately 3:49 PM.

B. Respondent’s recitation of facts

I struck Respondent’s Answer dated July 7, 2017.

Accordingly, Respondent filed no responsive pleadings that I may consider.

6
IX. PRIOR VIOLATIONS

On July 28, 2016, CTP initiated a previous civil money penalty action, CRD
Docket Number T-16-1269, FDA Docket Number FDA-2016-H-2016, against
Respondent for three* violations of 21 C.F.R. pt. 1140 within a 24- month period. CTP
alleged those violations to have occurred at Respondent’s business establishment, 1541
Del Prado Boulevard North, Cape Coral, Florida 33909, on September 30, 2014, and
January 11,2016.

The previous action concluded when Respondent admitted the allegations
contained in the Complaint issued by CTP, and agreed to pay a monetary penalty in
settlement of that claim. Further, “Respondent expressly waived its right to contest such
violations in subsequent actions.”

I find and conclude Respondent committed five violations of 21 U.S.C. § 331,
specifically 21 C.F.R. §§ 1140.14(a)(1) and 1140.14(a)(2)(i) within a 36-month period
as set forth in the Complaint.

X. FAMILY SMOKING PREVENTION AND TOBACCO CONTROL ACT

The “relevant statute” in this case is actually a combination of statutes and

regulations: The Family Smoking Prevention and Tobacco Control Act, Pub. L. No.

4 An FDA-commissioned inspector documented two violations on September 30, 2014
for the sale of tobacco products to a minor (21 C.F.R. § 1140.14(a)(1)) and failure to
verify the age of the person purchasing tobacco products (21 C.F.R. § 1140.14(a)(2)(i))
and two violations on January 11, 2016, for the sale of tobacco products to a minor (21
C.F.R. § 1140.14(a)(1)) and failure to verify the age of the person purchasing tobacco
products (21 C.F.R. § 1140.14(a)(2)(i))._ In accordance with customary practice, CTP
counted the violations at the initial inspection as a single violation, and all subsequent
violations as separate individual violations.

7
111-31, 123 Stat. 1776 (2009) (TCA), amended the Food, Drug, and Cosmetic Act (21
U.S.C.A. Chap. 9) (FDCA) and created a new subchapter of that Act that dealt
exclusively with tobacco products, (21 U.S.C. §§ 387-387u), and it also modified other
parts of the FDCA explicitly to include tobacco products among the regulated products
whose misbranding can give rise to civil, and in some cases criminal, liability. The 2009
amendments to the FDCA contained within the TCA also charged the Secretary of Health
and Human Services with, among other things, creating regulations to govern tobacco
sales. The Secretary’s regulations on tobacco products appear in Part 1140 of

Title 21, Code of Federal Regulations.

Under the FDCA, “[a] tobacco product shall be deemed to be misbranded if, in the
case of any tobacco product sold or offered for sale in any State, it is sold or distributed
in violation of regulations prescribed under section 387f(d).” 21 U.S.C. § 387c(a)(7)(B)
(2012). Section 387 a-1 directed FDA to re-issue, with some modifications, regulations
previously passed in 1996. 21 U.S.C. § 387 a-1(a)(2012). These regulations were passed
pursuant to section 387f(d), which authorizes FDA to promulgate regulations on the sale
and distribution of tobacco products; 75 Fed. Reg. 13,225 (March 19, 2010), codified at
21 CFR. Part 1140 (2015); 21 U.S.C. § 387f(d)(1) (2012). Accordingly, 21 C.F.R.

§ 1140.1(b) provides that “failure to comply with any applicable provision in this part in
the sale, distribution, and use of cigarettes and smokeless tobacco renders the product
misbranded under the act.”

Under 21 U.S.C. § 331(k), “[t]he alteration, mutilation, destruction, obliteration, or

removal of the whole or any part of the labeling of, or the doing of any other act with

8
respect to, a food, drug, device, tobacco product, or cosmetic, if such act is done while
such article is held for sale (whether or not the first sale) after shipment in interstate
commerce and results in such article being adulterated or misbranded” is a prohibited act
under 21 U.S.C. § 331. Thus, when a Retailer such as Respondent misbrands a tobacco
product by violating a requirement of 21 C.F.R. Part 1140, that misbranding in turn
violates the FDCA, specifically 21 U.S.C. § 331(k). FDA may seek a civil money
penalty from “any person who violates a requirement of this chapter which relates to
tobacco products.” 21 U.S.C. § 333(f)(9)(A) (2012). Penalties are set by 21 U.S.C.

§ 333 note and 21 C.F.R. § 17.2. Under current FDA policy, the first time FDA finds
violations of 21 C.F.R. Part 1140 at an establishment, FDA only counts one violation
regardless of the number of specific regulatory requirements that were actually violated,
but if FDA finds violations on subsequent occasions, it will count violations of specific
regulatory requirements individually in computing any civil money penalty sought. This
policy is set forth in detail, with examples to illustrate, at U.S. Food & Drug Admin.,
Guidance for Industry and FDA Staff, Civil Money Penalties and No-Tobacco-Sale
Orders for Tobacco Retailers, Responses to Frequently Asked Questions (Revised)
(2015), available at

http: //www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/U

CM447310.pdf [hereinafter Guidance for Industry], at 13-15. So, for instance, if a
retailer sells a tobacco product on a particular occasion to a minor without checking for
photographic identification, in violation of 21 C.F.R. §§ 1140.14(a))1) and (a)(2)(i), this

will count as two separate violations for purposes of computing the civil money penalty,

9
unless it is the first time violations were observed at that particular establishment. This
policy of counting violations has been determined by the HHS Departmental Appeals
Board to be consistent with the language of the FDCA and its implementing regulations,
see CTP v. Orton Motor Company, Departmental Appeals Board Decision number 2717
of June 30, 2016.

XI. LIABILITY

When a retailer such as Respondent is found to have “misbranded” a tobacco
product in interstate commerce, it can be liable to pay a CMP. 21 U.S.C. §§ 331, 333.

A retailer facing such a penalty has the right, set out in statute, to a hearing under the
Administrative Procedure Act (21 U.S.C. § 333(f)(5)(A)). A retailer can forfeit its
rights under the statute and regulations by failing to participate in the process, a failure
known as a “default” (21 C.F.R. § 17.11).

As set forth above, it is Respondent’s right to decide whether to participate in the
legal process. It is Respondent’s right to decide to request a hearing and it is
Respondent’s right to waive a hearing.

I find Respondent, by failing to respond, waived its right to a hearing.

XII. IMPACT OF RESPONDENT’S DEFAULT

When a Respondent defaults by failing to answer the complaint, or respond to a
OSC, an ALJ must assume as true all factual allegations in the complaint and issue an
initial decision within thirty (30) days of the answer’s due date, imposing “the maximum
amount of penalties provided for by law for the violations alleged” or “the amount asked

for in the complaint, whichever is smaller” if “liability under the relevant statute” is

10
established (21 C.F.R. § 17.11(a)(1) and (2)). But see 21 C.F.R. § 17.45 (initial decision
must state the “appropriate penalty” and take into account aggravating and mitigating
circumstances).

Two aspects of Rule 17.11 are important in default cases.

First, the Complainant benefits from a regulatory presumption (the ALJ shall
assume that the facts alleged in the complaint are true) that relieves it from having to put
on evidence:

The presumption affords a party, for whose benefit the presumption runs, the
luxury of not having to produce specific evidence to establish the point at issue. When
the predicate evidence is established that triggers the presumption, the further evidentiary
gap is filled by the presumption. See 1 Weinstein's Federal Evidence § 301.02[1], at
301-7 (2d ed.1997); 2 McCormick on Evidence § 342, at 450 (John W. Strong ed., 4th ed.
1992). Routen v. West, 142 F.3d 1434, 1440 (Fed. Cir. 1998).5

Second, as far as the penalty is concerned, my discretion is limited by the language

of the regulation. I may not tailor the penalty to address any extenuation or mitigation,

5 However, when the opposing party puts in proof to the contrary of that provided by the
presumption, and that proof meets the requisite level, the presumption disappears. See
Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248, 254-55, 101 S.Ct. 1089,
1094-95, 67 L.Ed.2d 207 (1981); A.C. Aukerman, 960 F.2d at 1037 (“[A] presumption ...
completely vanishes upon the introduction of evidence sufficient to support a finding of
the nonexistence of the presumed fact.”); see also Weinstein’s Federal Evidence

§ 301App.100, at 301 App—13 (explaining that in the “bursting bubble” theory once the
presumption is overcome, then it disappears from the case); 9 Wigmore on Evidence

§ 2487, at 295-96 (Chadbourn rev.1981). See generally Charles V. Laughlin, In Support
of the Thayer Theory of Presumptions, 52 Mich. L.Rev. 195 (1953). Routen v. West, 142
F.3d 1434 (1998) at 1440.

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for example, nor, because of notice concerns, may I increase the penalty beyond the
smaller of (a) the Complainant's request or (b) the maximum penalty authorized by law.
XIII. LIABILITY UNDER THE RELEVANT STATUTE

Taking the CTP’s allegations as set forth in the complaint as true, the next step is
whether the allegations make out “liability under the relevant statute” (21 C.F.R.

§ 17.11(a)).

Based on Respondent’s failure to answer I assume all the allegations in the
complaint to be true.

I find and conclude that the evidentiary facts, by a preponderance of the evidence
standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(a)(1) in that a person younger than 18 years of age was able to purchase
tobacco products on September 30, 2014, January 11,2016, and March 15, 2017.

I find and conclude that the evidentiary facts, by a preponderance of the evidence
standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(a)(2)(i) on the same dates in that Respondent also violated the requirement that
retailers verify, by means of photo identification containing a purchaser’s date of birth,
that no tobacco product purchasers are younger than 18 years of age.

The conduct set forth above on September 30, 2014, January 11,2016, and March
15,2017, counts as five (5) violations under FDA policy for purposes of computing the
civil money penalty. See Guidance for Industry, at 13-15.

XIV. PENALTY

There being liability under the relevant statute, I must now determine the amount

12
of penalty to impose. My discretion regarding a penalty is constrained by regulation. I

must impose either the maximum amount permitted by law or the amount requested by

the Center, whichever is lower. 21 C.F.R. § 17.11(a)(1), (a)(2).

In terms of specific punishments available, the legislation that provides the basis

for assessing civil monetary penalties divides retailers into two categories: those that

have “an approved training program” and those that do not. Retailer:

's with an approved

program face no more than a warning letter for their first violation; retailers without

such a program begin paying monetary penalties with their first. TC.

§ 103(q)(2), 123 Stat. 1839, codified at 21 U.S.C. § 333 note. See 2

A

CFR. § 17.2.

The FDA has informed the regulated public that “at this time, and until FDA issues

regulations setting the standards for an approved training program, al

will proceed under the reduced penalty schedule.” FDA Regulatory

1 applicable CMPs

Enforcement

Manual, Aug 2015, § 5-8-1. Because of this reasonable exercise of discretion, the

starting point for punishments and the rate at which they mount are clear — the lower and

slower schedules.
XV. MITIGATION
Because Respondent is found to be in default I am required to
maximum amount of penalties provided for by law for the violations
Therefore, no mitigation is considered.

XVI. CONCLUSION

impose the

alleged.

Respondent committed five violations in a 36-month period and so, Respondent

is liable for a civil money penalty of $5,591. See 21 C.F.R. § 17.2.

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WHEREFORE, evidence having read and considered it be and is hereby
ORDERED as follows:

a. I find Respondent has been served with process herein and is subject to
this forum.

b. I find Respondent failed to respond to my January 5, 2018 order to show
cause.

c. I strike Respondent’s Answer dated July 7, 2017 as a sanction pursuant to
21 C.F.R. §§ 17.35(c)(3).

d. I find Respondent is in default.

e. [assume the facts alleged in the complaint to be true.

f. I find the facts set forth in the complaint establish liability under the
relevant statute.

g. Lassess a monetary penalty in the amount of $5,591.

/s/
Richard C. Goodwin
U.S. Administrative Law Judge

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