Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Arizona Medical Boutique, LLC,
Petitioner,
v.
Centers for Medicare and Medicaid Services.
Docket No. C-12-939
Date: November 30, 2012

DECISION NO. CR2674

Arizona Medical Boutique, LLC (Petitioner), appeals an April 13, 2012 reconsideration
decision. I sustain the Centers for Medicare and Medicaid Services (CMS) determination
to deny Petitioner’s enrollment as a supplier in the Medicare program. I find that there is
a legal basis for CMS to deny enrollment effective July 1, 2007 because Petitioner was
not in compliance with Medicare enrollment requirements. Specifically, Petitioner does
not dispute that its Medicare enrollment application did not have the required authorizing
signatures.

I. Background and Procedural History

Petitioner submitted a Medicare Enrollment Application for Clinics/Group Practices and
Certain Other Suppliers (CMS-855B), for a single specialty clinic providing family
practice services, on or about September 5, 2007. The application listed Shuree
Oldehoeft, a physician’s assistant, as Petitioner’s owner and manager. CMS Exhibits
(Exs.) 1,4. The application also showed Petitioner employed Wanda Juarros, M.D., as a
supervising physician.' Both Ms. Oldehoeft and Dr. Juarros apparently signed the CMS-
855B as Petitioner’s authorized officials.

' For Medicare reimbursement purposes, a physician’s assistant needs to have his or her
work generally supervised by a physician. See 42 C.F.R. §§ 410.74; 410.150(b)(15).
Petitioner also employed Donna Tomich as a billing consultant, and Ms. Tomich appears
on the enrollment application as Petitioner’s point of contact person for CMS. CMS Ex.
4, at 6. CMS approved Petitioner’s enrollment in Medicare effective September 1, 2007,
with retrospective billing effective as of July 1, 2007. CMS Exs. 7, 8; CMS Br. at 4.

By letter dated August 22, 2011, CMS’s contractor, Noridian Administrative Services
LLC (Noridian), informed Petitioner that it was revoking Petitioner’s Medicare
enrollment because Petitioner had certified as “true” misleading information on its
Medicare enrollment application. Noridian also informed Petitioner that it was barred
from participating in the Medicare program for a three-year period, commencing on the
effective date of the revocation, July 1, 2007. The letter noted that Petitioner could both
submit a corrective action plan and appeal Noridian’s decision. CMS Ex. 7. On
September 8, 2011, Petitioner timely requested a reconsideration decision and also
submitted a corrective action plan. P. Ex. 4. On October 24, 2011, Noridian issued a
decision unfavorable to Petitioner. CMS Ex. 8; Petitioner Supplemental Exhibit (P.
Supp. Ex.) 1. Petitioner timely requested a hearing, and the case was assigned to an
Administrative Law Judge (ALJ). On February 6, 2012, CMS filed a motion to remand
or stay the proceedings to assess the impact of new evidence and to issue a revised
reconsideration decision. The ALJ granted CMS’s motion on March 1, 2012 and
dismissed the case. CMS Ex. 8.

On April 13, 2012, CMS notified Petitioner of its reconsidered determination to uphold
the revocation of Petitioner’s enrollment and billing privileges. CMS noted that the
revocation was effective July 1, 2007 and that Petitioner was barred for three years from
enrolling in Medicare. CMS also noted that pursuant to 42 C.F.R. § 424.535(c),
Petitioner was eligible to reapply to Medicare on or after July 1, 2010. CMS specifically
determined that Petitioner’s CMS-855B application, submitted on or near September 5,
2007, contained the forged signature of Dr. Juarros, whose identification was,
unbeknownst to her, used during the application process. Dr. Juarros also denied the
application’s representation that she had an ownership interest in Petitioner. CMS also
determined that Petitioner submitted a Medicare Enrollment Application for
Reassignment of Medical Benefits (CMS-855R) containing the forged signature of Dr.
Juarros. CMS Ex. 8.

In addition, CMS determined that an Electronic Funds Transfer Authorization Agreement
(CMS 588) that Petitioner submitted during the enrollment application process contained
false and misleading bank account information by listing Dr. Juarros as the provider.
Specifically, CMS found that Dr. Juarros was neither a signatory on, nor had access to,
nor control over, the account and that only Ms. Oldehoeft had such access. CMS
explained that during an investigative interview, Ms. Tomich admitted forging Dr.
Juarros’s signature. Finally, CMS determined that after receiving approval to become a
Medicare provider, Petitioner submitted claims between July 2007 and May 2010 under
Dr. Juarros’s National Provider Identifier (NPI) and was paid approximately $473,000.
CMS Ex. 8.

On June 3, 2012, Petitioner filed a new hearing request with the Civil Remedies Division
of the Departmental Appeals Board, and the case was assigned to me for hearing and
decision. In accordance with my July 2, 2012 Acknowledgment and Pre-hearing Order,
CMS filed a prehearing brief/motion for summary judgment and supporting
memorandum (CMS Br.), accompanied by 14 exhibits (CMS Exs. 1-14). Petitioner filed
its response in opposition (P. Br.), accompanied by eight exhibits (P. Exs. 1-8). In
response to my Order of October 17, 2012, requesting that the parties address how
CMS’s revocation effective date reconciles with the effective date authority set out at 42
C.F.R. § 424.535(g), both parties filed supplemental briefs (CMS Supp. Br. and P. Supp.
Br.), and each party filed one supplemental exhibit (CMS Supp. Ex. | and P. Supp. Ex.
1). Ladmit CMS Exs. 1-14 and CMS Supp. Ex. 1 and P. Exs. 1-8 and P. Supp. Ex. 1 into
the record.

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. Payment under the program for services rendered to Medicare
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)). The Act
requires the Secretary of Health and Human Services to issue regulations that establish a
process for the enrollment of providers and suppliers, including the right to a hearing and
judicial review of certain enrollment determinations. Act § 1866(j) (42 U.S.C.

§ 1395cc(j)).

II. Issue

The issue in this case is whether CMS had a legitimate basis to deny Petitioner’s
enrollment in the Medicare program as of July 1, 2007.

III. Discussion
A, Summary judgment is appropriate.

CMS argues that it is entitled to summary judgment. Members of the Departmental
Appeals Board (Board) explained the standard for summary judgment:

> Petitioner is a “supplier” for purposes of the Act. A “supplier” can furnish services
under Medicare and refers to facilities that are not included within the definition of the
phrase “provider of services.” Act § 1861(d) (42 U.S.C. § 1395x(d)).
Summary judgment is appropriate when the record shows that there is no genuine
issue as to any material fact, and the moving party is entitled to judgment as a
matter of law. ... The party moving for summary judgment bears the initial
burden of showing that there are no genuine issues of material fact for trial and
that it is entitled to judgment as a matter of law. .. . To defeat an adequately
supported summary judgment motion, the non-moving party may not rely on the
denials in its pleadings or briefs, but must furnish evidence of a dispute concerning
a material fact — a fact that, if proven, would affect the outcome of the case under
governing law. . . . 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.

Senior Rehab. & Skilled Nursing Ctr., DAB No. 2300, at 3 (2010) (citations omitted).

An ALJ’s role in deciding a summary judgment motion differs from his or her role in
resolving a case after a hearing. The ALJ should not assess credibility or evaluate the
weight of conflicting evidence. Holy Cross Vill. at Notre Dame, Inc., DAB No. 2291, at
5 (2009). The Board has further stated, “[iJn addition, it is appropriate for the tribunal to
consider whether a rational trier of fact could regard the parties’ presentation as sufficient
to meet the evidentiary burden under the relevant substantive law.” Dumas Nursing and
Rehab., L.P., DAB No. 2347, at 5 (2010).

Petitioner objects to CMS’s motion for summary judgment, asserting there are material
facts in dispute. Below, I accept all the contested material facts Petitioner asserts to be
true. P. Br. at 2, 8-9. In addition, I draw all reasonable inferences in Petitioner’s favor.
However, no dispute exists that Dr. Juarros’s signature was forged on the documents in
question, and Petitioner, the non-moving party, asserts that Ms. Oldehoeft’s signature
was also forged, and it did not ratify any forged signatures. Accepting these facts as true,
the forged signatures alone, as discussed below, support denial of Petitioner’s enrollment
application.

B. Petitioner’s enrollment application and supporting documents were
not legitimately signed.

Section 424.510(d) of 42 C.F.R. sets forth application requirements for supplier
enrollment in the Medicare program including:

(3) Signature(s) required on the enrollment application. The certification
statement found on the enrollment application must be signed by an individual
who has the authority to bind the provider or supplier, both legally and financially,
to the requirements set forth in this chapter. This person must also have an
ownership or control interest in the provider or supplier, as that term is defined in
section 1124(a)(3) of the Act, such as, the general partner, chairman of the board,
chief financial officer, chief executive officer, president, or hold a position of
similar status and authority within the provider or supplier organization. The
signature attests that the information submitted is accurate and that the provider or
supplier is aware of, and abides by, all applicable statutes, regulations, and
program instructions.

The specific enrollment application language on the CMS-855B required the signatures
of authorized officials to certify:

I have read the contents of this application. My signature legally and financially
binds this supplier to the laws, regulations, and program instructions of the
Medicare program. By my signature, | certify that the information contained
herein is true, correct, and complete and I authorize the Medicare fee-for-service
contractor to verify this information. If 1 become aware that any information in
this application is not true, correct, or complete, I agree to notify the Medicare fee-
for-service contractor of this fact immediately.

CMS Ex. 4, at 7; CMS Ex. 9.

Petitioner’s enrollment application only lists the names of Shuree K. Oldehoeft and
Wanda D. Juarros as Petitioner’s authorized officials. Jd. Both individuals appeared to
have signed the application on September 5, 2007. Jd. However, both parties agree that
Ms. Tomich, Petitioner’s third party billing consultant, forged Dr. Juarros’s signature on
the enrollment application (CMS 855B), the EFT authorization agreement (CMS 588),
and the reassignment of Medicare benefits form (CMS 855R) without Dr. Juarros’s
knowledge.

CMS alleges, however, that Ms. Oldehoeft signed the enrollment application and other
documents as an authorized official certifying that the documents were true, correct and
complete. Petitioner asserts that Ms. Oldehoeft did not sign these documents and that
Ms. Tomich also forged Ms. Oldehoeft’s signature. Petitioner asserts that Ms. Oldehoeft
relied on Ms. Tomich’s expertise and believed that because Ms. Tomich was presenting
documents for her signature, Ms. Oldhoeft had no reason to believe Ms. Tomich was
forging hers or anyone else’s signatures.

CMS argues that because Petitioner has not disavowed the enrollment application it
submitted on September 5, 2007, it is responsible for the truth and accuracy of the
information in it. CMS Br. at 7-9. CMS notes Petitioner’s argument that it bears no
responsibility for Ms. Tomich’s forgeries. However, CMS asserts that because Ms.
Tomich was Petitioner’s agent, and listed as such on Petitioner’s enrollment application,
Petitioner is responsible for Ms. Tomich’s actions, as a principle is responsible for the
acts of its agent in the course of employment. However, even if Ms. Tomich had not
been Petitioner’s agent, CMS asserts that Ms. Oldehoeft certified the application was true
and correct, thereby ratifying the forgery. CMS Br. at 9.
In response to my October 17 Order, CMS notified Petitioner that, in the alternative,
considering Petitioner claims forged signatures on its enrollment application, Petitioner’s
Medicare enrollment must be denied ab initio pursuant to 42 C.F.R. § 424.530(a)(1).
CMS Supp. Br. at 4-8.

For purposes of summary judgment, I will accept as true Petitioner’s assertions that Ms.
Oldehoeft’s signature was forged, without her knowledge, and that she did not ratify the
forged application. Therefore, the effect of this forged application is that no authorized
official agreed to be bound by Medicare’s laws, regulations, and program instructions.
Further no authorized official certified to the accuracy of the information in Petitioner’s
application, and no authorized official agreed to be bound to notify the Medicare
contractor of inaccurate information.

C. CMS had a legitimate basis to deny Petitioner’s enrollment
application.

Although CMS initially stated in this proceeding that it was revoking Petitioner’s
enrollment application, CMS is not precluded from later establishing that it is denying
Petitioner’s enrollment application. The Board has consistently held that a federal
agency may assert or rely on new or alternative grounds for a challenged action after an
administrative appeal has commenced, so long as the non-federal party has notice of, and
a reasonable opportunity to respond to, the asserted new grounds during the
administrative proceeding. See Green Hills Enterprises, LLC, DAB No. 2199, at 8
(2008); see also Abercrombie v. Clarke, 920 F.2d 1351, 1360 (7" Cir. 1990), cert.
denied, 502 U.S. 809 (1991). I find that Petitioner received proper notice of the facts
CMS was alleging, and, during the supplemental briefing period, Petitioner had an
opportunity to respond to CMS’s basis for the denial of Petitioner’s enrollment
application.

“Denial” of a Medicare enrollment application means an enrolling provider or supplier
has been determined to be ineligible to receive Medicare billing privileges for Medicare
covered items or services provided to Medicare beneficiaries. 42 C.F.R. § 424.502.
CMS may deny a provider’s or supplier’s enrollment in the Medicare program for the
following reasons, among others:

(1) Compliance. The provider or supplier at any time is found not to be in
compliance with the Medicare enrollment requirements described in this section or
on the applicable enrollment application to the type of provider or supplier
enrolling, and has not submitted a plan of corrective action ....
(4) False or misleading information. The provider or supplier has submitted false
or misleading information on the enrollment application to gain enrollment in the
Medicare program.

42 CFR. § 424.530(a)(1), (4).

Petitioner acknowledges in its supplemental brief that it tried to rectify the problem by
submitting a corrective action plan with a properly executed enrollment application. P.
Ex. 4, at 44-150. CMS did not approve Petitioner’s plan, and I do not have the authority
to review a corrective action plan. See DMS Imaging, Inc., DAB No. 2313, at 5-8 (2010).

D. CMS may deny Petitioner’s enrollment and billing privileges
retrospectively to July 1, 2007.

CMS may deny a supplier’s enrollment in the Medicare program at any time if it is found
not to be in compliance with the Medicare enrollment requirements or on the applicable
enrollment application. 42 C.F.R. § 424.530(a)(1); see US Ultrasound, DAB No. 2302,
at 6-7 (2010) (sustaining a denial of an application previously approved in error where
CMS discovered the supplier did not meet enrollment requirements for its type at the time
of enrollment).

Noridian, through no fault of its own, approved Medicare enrollment for Petitioner based
on the application without the required authorized signatures. Without a legitimately
signed application, Petitioner clearly was not eligible for enrollment.

Petitioner argues it believed for four years that it was properly enrolled in the Medicare
program, and it provided services in reliance on that belief. Petitioner argues that it
should not be penalized for Ms. Tomich’s illegal actions with the loss of all its Medicare
reimbursement for services rendered to Medicare beneficiaries beginning July 1, 2007.
Instead, Petitioner argues that it should be permitted to amend its Medicare enrollment
application and retain its Medicare certification. P. Br. at 1-4, 7-8; P. Supp. Br. at 4-6.

Even assuming everything that Petitioner asserts is true, Petitioner’s equitable arguments
give me no grounds to reinstate Petitioner’s Medicare enrollment. See US Ultrasound,
DAB No. 2302, at 8 (“[n]Jeither the ALJ nor the board is authorized to provide equitable
relief by reimbursing or enrolling a supplier who does not meet statutory or regulatory
requirements.”). Moreover, I have no authority to declare statutes or regulations invalid
or ultra vires. 18661Payday.com, L.L.C., DAB No. 2289, at 14 (2009) (“[a]n ALJ is
bound by applicable laws and regulations and may not invalidate either a law or
regulation on any ground.”).

Although any suspected fraudulent billing scheme involving Petitioner may continue to
be investigated (P. Br. at n. 1; CMS Ex. 14), it is clear without full resolution of that
matter that CMS had a legal basis to deny Petitioner’s enrollment application based on a
lack of required signatures of authorized officials. Therefore, I grant CMS summary
judgment and sustain a denial of Petitioner’s Medicare billing privileges effective July 1,
2007.

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Social Security Administration,
Inspector General,

Petitioner,
v.

Bruce Patton,
Respondent.
Docket No. C-12-246
Decision No. CR2673

Date November 30, 2012

DECISION

The Social Security Administration Inspector General (SSA I.G.) has failed to establish
that there is a basis for the imposition of a civil money penalty (CMP) or assessment
pursuant to section 1129(a)(1) of the Social Security Act (the Act) (42 U.S.C. § 1320a-
8(a)(1)) against Respondent, Bruce Patton.

I. Background

Respondent timely requested a hearing by an administrative law judge (ALJ), pursuant to
20 C.F.R. § 498.202.' Respondent requested review of the proposal of the SSA L.G., of
which Respondent was notified by letter dated November 28, 2011, to impose against
Respondent a CMP of $25,000 and an assessment in lieu of damages of $20,000,
pursuant to section 1129 of the Act. SSA I.G. Exhibit (SSA Ex.) 13. The request for

' References are to the version of the Code of Federal Regulations (C.F.R.) in effect at
the time of the SSA LG. action, unless otherwise indicated.
hearing was received at the Civil Remedies Division (CRD) of the Departmental Appeals
Board (DAB) and assigned to me for hearing and decision on January 6, 2012. On
February 6, 2012, I convened a telephonic prehearing conference to discuss and establish
the schedule to hearing in this case. The substance of the prehearing conference is set
forth in my Scheduling Order and Notice of Hearing dated February 6, 2012. An
additional prehearing conference was convened by telephone on June 20, 2012, to discuss
final procedural details and the issuance of subpoenas. Transcript (Tr.) 7.

On June 27, 2012, a hearing was convened by video teleconference with the SSA LG.
appearing at a site in Baltimore, Maryland; Respondent appearing at a site in Oakbrook,
Illinois; witnesses testifying at a site in Chicago, Illinois; and me sitting in Kansas City,
Missouri. Tr. 4. Joscelyn Funnié, Esquire, represented the SSA I.G. Respondent
appeared represented by Ellen C. Hanson, Esquire. The I.G. offered and I admitted SSA
Exs. | through 20. Tr. 19-20. Respondent offered and I admitted Respondent’s exhibits
(R. Exs.) 1 through 8. Tr. 20-21. The SSA LG. called the following witnesses: Bruce
Patton; Special Agent Rodney Haymon; Jeri DeGroot; Mary Forness; and Chad Bungard,
Counsel to the I.G. Respondent called the following witnesses: Mark Patton and Bruce
Patton. A 369-page transcript of the hearing was prepared and provided to the parties.
SSA filed its post-hearing brief (SSA Br.) on August 31, 2012, and its post-hearing
reply brief (SSA Reply) on October 1, 2012.” Respondent filed his post-hearing

> The SSA LG. attached a photocopy of a check marked SSA Ex. 21, which reflects on
its face that: it was dated January 1, 2008; “Jeri Degrot” was the payee; the check is for
the amount of $365; the memo-line indicates it is for “Mark;” and the check bears a
signature “Bruce Patton.” The SSA I.G. states in its reply brief that this document is
offered as rebuttal evidence. The SSA LG. failed to comply with 20 C.F.R. § 498.213,
which requires that an application to the ALJ for an order or ruling will be by motion.
The SSA LG. did not file a motion to reopen the taking of evidence and for leave to file
rebuttal evidence. I explained to the parties at hearing that it would be necessary to
explain why I should allow the presentation of rebuttal evidence. Tr. 9. The SSA LG.
failed to offer an explanation for why rebuttal was necessary. Because the SSA LG.
failed to file a motion, Respondent had no opportunity to challenge this evidence or
request reopening of the hearing to offer testimony regarding the evidence or to present
additional evidence in surrebuttal. SSA Ex. 21 is not admitted and considered as
evidence. I conclude that exclusion of this evidence causes no prejudice to SSA because,
if it was admitted, it would not impact my decision in this case.

brief (R. Br.) on August 31, 2012, and his post-hearing reply brief (R. Reply) on October
1, 2012.

IL. Discussion
A. Applicable Law

Title II of the Act provides for old-age and survivor benefits and disability insurance

benefits for those who meet eligibility requirements. 42 U.S.C. §§ 402, 423;4 20 C.F.R.
pt. 404, subpt. D. Title II also provides that every child of an individual entitled to old-
age and survivor benefits or disability insurance benefits, is entitled to child’s insurance
benefits if:

1. An application for child’s benefits is filed;

2. At the time of application the child was unmarried and was not 18, or was a
full-time elementary or secondary school student under 19, or disabled and under
22; and,

3. The child was dependent upon the individual entitled to old-age or disability
insurance benefits, at the time the application for child’s benefits was filed or at
the time of death of the Title II beneficiary.

42 U.S.C. § 402(d); 20 C.F.R. § 404.350-.368. A child is deemed dependent upon his or
her father, adopting father, mother, or adopting mother at the pertinent time (application
or death), unless the child was not living with the Title II beneficiary or the Title II
beneficiary was not contributing to the support of the child and, either the child is not the
legitimate or adopted child of the Title II beneficiary or the child has been adopted by
another. 42 U.S.C. § 402(d)(3); 20 C.F.R. § 404.361-.362.

> Respondent attached two documents to his post-hearing brief marked as Resp. Ex. 1
and 2. Respondent also failed to comply with 20 C.F.R. § 498.213, which requires that
an application to the ALJ for an order or ruling will be by motion. Respondent did not
file a motion to reopen the taking of evidence and for leave to file additional evidence.
Resp. Ex. 1 and 2 attached to Respondent’s post-hearing brief are not admitted and
considered as evidence. Petitioner suffers no prejudice by this ruling given my decision
in this case.

* Sections 202 and 223 of the Act.
Section 1129(a)(1) of the Act (42 U.S.C. § 1320a-8(a)(1)) authorizes the imposition of a
CMP or an assessment against:

(a)(1) Any person... who —

(A) makes, or causes to be made, a statement or
representation of a material fact, for use in determining any
initial or continuing right to or the amount of monthly
insurance benefits under [Title II] or benefits or payments
under subchapter VIII or XVI. . ., that the person knows or
should know is false or misleading,

(B) makes such a statement or representation for such use
with knowing disregard for the truth, or

(C) omits from a statement or representation for such use, or
otherwise withholds disclosure of, a fact which the person
knows or should know is material to the determination of any
initial or continuing right to or the amount of monthly
insurance benefits under [Title II] or benefits or payments
under subchapter VIII or XVI. . ., if the person knows, or
should know, that the statement or representation with such
omission is false or misleading or that the withholding of
such disclosure is misleading... .

A material fact is a fact that the Commissioner of the Social Security Administration (the
Commissioner) may consider in evaluating whether an applicant is entitled to benefits or
payments under Titles II, VII, or XVI of the Act. Act § 1129(a)(2) (42 U.S.C. § 1320a-
8(a)(2)); 20 C-F.R. § 498.101.

Individuals who violate section 1129 are subject to a CMP of not more than $5,000 for
each such false or misleading statement or representation, or for each receipt of benefits
or payments while failing to disclose a material fact. Violators are also subject to an
assessment in lieu of damages of not more than twice the amount of the benefits or
payments made as a result of the statements, representations, or failures to disclose. Act
§ 1129(a)(1); 20 C.F.R. § 498.100(b)(1).

The Commissioner has delegated enforcement authority to the SSA I.G. as authorized by
section 1129(i)(2) of the Act. 20 C.F.R. §§ 498.102-.104. In determining the amount of
a CMP, the I.G. must consider: (1) the nature of the subject statements, representations,
actions, or failure to disclose, and circumstances under which they occurred; (2) the
degree of culpability of the person committing the offense; (3) the person’s history of
prior offenses; (4) the person’s financial condition; and (5) such other matters as justice
requires. Act § 1129(c); 20 C.F.R. § 498.106.

Section 1129(b)(2) specifies that the Commissioner shall not decide to impose a CMP or
assessment against a person until that person is given written notice and an opportunity
for the determination to be made on the record after a hearing at which the person is
allowed to participate. The Commissioner has provided by regulations at 20 C.F.R. pt.
498 that a person against whom a CMP is proposed by the I.G. may request a hearing
before an ALJ. 20 C.F.R. § 498.202. The ALJ has jurisdiction to determine whether the
person should be found liable for a CMP and/or an assessment. 20 C.F.R. § 498.215(a).
The person requesting the hearing, that is, the Respondent, has the burden of going
forward and the burden of persuasion with respect to any affirmative defenses and any
mitigating circumstances. 20 C.F.R. § 498.215(b)(1). The LG. has the burden of going
forward as well as the burden of persuasion with respect to all other issues. The burden
of persuasion is to be judged by a preponderance of the evidence. 20 C.F.R. §
498.215(c). The ALJ has the authority to affirm, deny, increase, or reduce the penalties
or assessments proposed by the SSA L.G. 20 C.F.R. § 498.220(b).

The ALJ decision becomes final and binding on the parties 30 days after the decision is
served. Either party may appeal the ALJ decision by filing with the DAB a notice of
appeal within 30 days of the date of service of the initial decision. 20 C.F.R. §§ 498.220-
.221. The procedures for appealing to the DAB are set forth at
http://www.hhs.gov/dab/divisions/appellate/guidelines/ssa.html.

B. Issues

Whether there is a basis for the imposition of a CMP and an assessment
pursuant to section 1129(a)(1) of the Social Security Act.

Whether the CMP and assessment proposed are reasonable considering the
factors specified by section 1129(c) of the Act.

C. Analysis

My conclusions of law are set forth in bold followed by the statement of pertinent facts
and my analysis.

1. The residence address of the child’s insurance benefits (CIB)
beneficiary is not material to a determination of initial or continuing
entitlement or to the amount of CIB in this case.
2. Whether or not the CIB beneficiary lived with Respondent is not
material to a determination of the CIB beneficiary’s initial or
continuing entitlement or to the amount of benefits in this case.

3. Respondent made no false statement of material fact.

4. Respondent did not fail to report a material fact.

5. There is no basis for the imposition of a CMP or an assessment in
this case and no CMP or assessment is reasonable.

a. Facts

The following statement of pertinent facts is based upon the documents admitted as
evidence and the testimony received during the hearing in this case.

The Counsel to the SSA L.G., B. Chad Bungard, notified Respondent by letter dated
November 28, 2011, that the I.G. proposed to impose a CMP of $45,000 against

Respondent.

The L.G. cited as the bases for the CMP that:

(1) On about March 11, 2005, Respondent falsely claimed in the
application for CIB for his son Mark, that Mark lived with him, but, Mark
ad not lived with him since October 2004;

(2) Respondent failed, on an unspecified date, to notify SSA that
Respondent’s son, Mark, was not in Respondent’s custody for the period
November 2005 through February 2008;

(3) Respondent received his son’s CIB benefits during the period
November 2005 through February 2008 and wrongfully converted those
funds to his own use;

(4) On about April 16, 2007, Respondent completed a Representative Payee
Report in which he falsely stated that his son, Mark, lived with him from
May 1, 2006 through April 30, 2007.

(5) On about April 16, 2007, Respondent falsely stated that $9,022 was
spent for the care and support of his son, Mark; and,
(6) Respondents’ false statements, misrepresentations, and omissions of
material facts to SSA related to Mark resulted in Respondent receiving
$10,977 in CIB to which Respondent was not entitled.

SSA Ex. 13 at 1.

Mr. Bungard testified that he made the determination to impose the CMP in this case.
Mr. Bungard testified that Respondent was notified by the SSA L.G. brief filed on June
11, 2012,° that the bases for the CMP were changed or modified to allege that
Respondent withheld material information from SSA regarding Mark’s living
arrangements from December 2006 through March 2008 and made a false statement
regarding Mark’s living arrangement in the representative payee report in April 2007. Tr.
278-82. Mr. Bungard testified that the SSA brief filed June 11, 2012 reflected his
decision that Petitioner only improperly received $6,493 of CIB, during the period
December 2006 through March 2008. Mr. Bungard’s testimony and the SSA brief filed
on June 11, 2012, reflect Mr. Bungard’s revised determination to impose a CMP of
$2,000 for each of 16 months from December 2006 through March 2008 when
Respondent allegedly failed to disclose Mark’s “true living arrangements,” $2,000 for the
false statement on the representative payee form dated April 16, 2007, a total CMP of
$34,000, plus an assessment in lieu of damages of $6,493. Tr. 281-83; SSA Br. at 1-2.

[he SSA I.G.’s evidence shows that on February 11, 2005, Respondent was notified by
SSA that he was found to be disabled as of October 29, 2004, and entitled to benefits
under Title II of the Act. SSA Ex. 1. On about March 11, 2005, Respondent applied for
CIB for his children, David W. Patton and Mark J. Patton. SSA Ex. 2. On April 2, 2005,
SSA notified Respondent that Mark was entitled to CIB beginning in April 2005, and that
Respondent was chosen to be Mark’s representative payee. SSA Ex. 3. The SSA LG.
introduced as evidence a Representative Payee Report, which Respondent does not
dispute he signed and dated on April 16, 2007. Respondent also does not dispute that he
checked the yes block for item 2, which questions whether or not Mark lived with
Respondent from May 1, 2006 through April 30, 2007. Respondent also completed the

> The SSA L.G.’s brief is titled “Petitioner’s Brief In Support of the Inspector General’s
Decision To Impose A Civil Monetary Penalty.” The brief was filed and served on June
11, 2012. The notice requirements of 20 C.F.R. § 498.109 are very specific and do not
appear to be fully satisfied by the SSA I.G. Brief dated June 11, 2012. However,
Respondent has made no specific objection and I find no prejudice if the notice is
adequate given the facts that Respondent exercised his right to request a hearing,
Petitioner was advised of the revised bases prior to hearing, and the Respondent had an
opportunity to challenge the revised bases in the proceedings before me.
form to indicate that he used $9,022 of benefits received by him during the period May 1,
2006 to April 30, 2007 on Mark’s behalf for the care and support of Mark. SSA Ex. 4.

The SSA I.G.’s evidence shows that Mark’s mother, Jeri Patton (DeGroot at the time of
hearing), reported to SSA on March 6, 2008, that Mark never lived with Respondent
during the period April 2005 through March 2008 and that Mark lived with her during
that period. She reported that she never received benefits for Mark until March 2008.
SSA Ex. 5. SSA notified Respondent by letter dated March 17, 2008, that Mark’s CIB
would be sent to a different representative payee and that Respondent should refund to
SSA any benefits he retained from payments he received on behalf of Mark. SSA Ex. 6.
The L.G. presented two reports of investigation that concluded that Respondent received
benefits from April 2005 to September 2008, apparently Mark’s CIB, that he was not
entitled to receive. SSA Exs. 7 and 8. The I.G. submitted the report of Mary Ann
Forness, a Title II Claims Representative (Tr. 216) that reflects her conclusion that
Respondent received CIB benefits for Mark during the period November 2005 through
February 2008, and that he appropriated $10,977 to his own use. SSA Ex. 9. SSA
notified Respondent by letter dated May 4, 2011, that he had to return $10,977 that he
received on behalf of Mark. SSA Ex. 10. SSA also offered as evidence a “Joint
Parenting Agreement” executed on February 7, 2006, which provides that the Respondent
and his wife, Jerri Patton, were to have joint legal and physical custody of Mark, that
Mark was to reside with her on a daily basis, and that Respondent was to have reasonable
and liberal visitation as Respondent and Jerri Patton agreed. SSA Ex. 20 at 1, 5; R. Ex. 8
at 7. A marital settlement agreement, also dated February 7, 2006, provided that
Respondent was to pay Jerri Patton $365 per month, and stated that was the entire amount
of Social Security benefits Respondent received on behalf of Mark. SSA Ex. 20 at 12; R.
Ex. 8 at 7. Respondent and Jeri R. Patton were divorced on February 7, 2006. R. Ex. 8 at
1-3.

SSA sent Respondent a notice dated November 14, 2011, that SSA would withhold $305
per month from Respondent’s monthly benefits through November 2014, to recover the
alleged $10,977 overpayment of Mark’s CIB benefits to Respondent. R. Ex. 2 at 10;
SSA Exs. 10, 15; Tr. 135-36, 233.

The SSA LG. called Respondent to testify. Respondent testified that when he applied for
CIB for Mark, he told SSA that Mark lived with him. Tr. 48. Respondent testified that
between April 2005 and March 2008, he would pick-up Mark after school, Mark lived at
his house during the weekend, and he took Mark to his mother’s house Sunday night or
he delivered him to school Monday morning. He testified that Mark stayed at his house
during summer vacations and school holidays. Tr. 69. Respondent testified that he did
not notify SSA that Marked lived with his mother during the week and with Respondent
on weekends and holidays. He testified that he did not know he should report. Tr. 71-72.
Respondent testified that he bought Mark some clothing; and he gave him spending
money. Tr. 76, Respondent testified that while he was Mark’s representative payee,
Mark’s $721 CIB payment was made by direct deposit to Respondent’s account, and
$365 was automatically transferred to Mark’s mother pursuant to the divorce settlement
agreement. Tr. 80-81. Respondent testified that he used the remainder of the CIB
payment for Mark’s benefit. Tr. 83-84.

Agent Haymon testified that he understood based upon his interview with Jeri DeGroot
that she received $365 of child support from Respondent each month and that Mark
stayed with Respondent on weekends, but he did not recall discussing with her where
Mark stayed during vacations, school holidays or when he was sick and stayed out of
school. Tr. 129-31. Agent Haymon testified that he did not investigate the amount of
money that Respondent spent on Mark and he did not investigate the number of days that
Mark lived with Respondent. Agent Haymon testified that Respondent told him that
Mark had a room in Respondent’s house and that Mark told him that he kept clothes at
Respondent’s house. Tr. 166-67.

Jeri DeGroot testified that she and Respondent were divorced in February 2006 but they
separated in 2004. She testified that when they separated, Mark lived with her weekdays
during school, on Friday after school he went to Respondent’s, and Mark returned to her
house on Sunday evening for school on Monday. Mark went to Respondent’s house on
holidays if she was working and sometimes when she was not working. She testified that
during the summer Mark stayed with his dad as she worked and Mark was too young to
be home alone. Tr. 176-79. She testified that she regularly received the $365 from
Respondent. Tr. 211. She testified that Respondent did not pay her more than the $365
per month child support established by the court with jurisdiction over the divorce. Tr.
186. She testified that she paid for Mark’s school activities and lunch, and purchased his
food and clothing. Tr. 186-87. She testified that she and Respondent agreed to claim
Mark as dependent for income tax purposes alternating years. Tr. 187-88. She testified
that she provided Mark transportation when he needed to go places. Tr. 189. She
testified that she paid the $40 monthly premium for health insurance for Mark. Tr. 192-
93. She testified in response to my questioning that Mark’s school break was June | to
September 1 each year, a period of 92 days. She agreed with me that there are 52 weeks
in the year with two weekend days, totaling 104 days. Tr. 189-90. She testified that she
never sent Respondent money for caring for Mark. Tr. 193. She testified that several
weeks Mark took enough food for a couple meals for himself to Respondent’s house but
she put a stop to that as she believed Respondent should be providing Mark food when
Mark stayed with Respondent. Tr. 194. She testified that Respondent took Mark on
hunting trips, at least until she objected. Tr. 195.

Mary Ann Forness, a Title Il Claims Representative, with the Elgin, Illinois Social
Security Field Office was called as a witness by the SSA IG. Tr. 215. She testified that
she reviewed Respondent’s Title II claims record. Tr. 217. She testified that Respondent
was removed as the representative payee and Jeri DeGroot was designated the
representative payee in March 2008, based on Ms. DeGroot’s claim that she was the

10

custodial parent of Mark. She testified that there was nothing in the file that showed that
Ms. DeGroot’s claim was investigated at the time. Tr. 220-22. Ms. Forness testified that
she made the determination that Respondent misused $10,977 of CIB benefits he
received for Mark, which Ms. Forness testified was the amount of CIB received by
Respondent in excess of the $365 per month he sent to Ms. DeGroot. Tr. 227-28. Ms.
Forness testified that her determination that Respondent misused funds was based upon
her interview of Respondent and his statements that he spent the money on taking Mark
to dinner and for activities. She admitted that spending the money on dinner and
activities including hunting, is not misuse of the funds so long as Mark’s basic needs
were being met. She testified that she did not recall specifically asking Respondent how
many days each year Mark lived with Respondent. Ms. Forness did not recall asking
Respondent if Mark had a room in Respondent’s house. Ms. Forness did not determine
iow much of the CIB benefits that Respondent received as Mark’s representative payee
were spent for Mark’s benefit. Tr. 230-32, 270. Ms. Forness agreed that there was never
an issue regarding Mark’s eligibility and that the only issue was a question of who was
the correct representative payee for Mark. Tr. 236. She also agreed that where the child
ives has no impact on the child’s eligibility for CIB, but may impact the determination of
the appropriate representative payee. Tr. 238-39. Ms. Forness testified that a natural
child is deemed dependent upon the natural parent and no determination of actual
dependence is required. Tr. 242. She testified that the determination of which parent
would be the preferred representative payee could turn on the issue of whether the child
ived over half the time with one parent. She agreed that the determination of who should
be representative payee has no impact on the child’s entitlement to benefits. Tr. 244-45.
On cross-examination, Ms. Forness testified that she never located a form completed by
Respondent requesting to be representative payee. Tr. 252.

Mark Patton testified that he went to Respondent’s house on weekends and anytime he
was not in school because his friends were in that area, his dogs were at Respondent’s
house, and he had more to do there. He testified he felt his home was with his dad
because he lived there longer. He testified it was more common for him to see friends at
his dad’s house than at his mom’s house. He testified that during the school year on
Monday, Tuesday, Wednesday, and Thursday night he ate his meals and slept at his
mom’s house, and used her telephone and bathroom. He testified that he did not drive his
mom’s car. He testified that he had his own room at his dad’s house, he had possessions
at his dad’s, and he slept and ate at his dad’s house. He testified that his mom took him
to the doctor, but when he was out of school due to illness he usually stayed with his dad.
He stayed with his dad on holidays, except that he spent time at both his dad’s and mom’s
at Christmas. He had two vacations with his mother but otherwise was with his Dad.
When he stayed with his dad he ate food his dad bought unless they went to a restaurant.
His dad gave him money for a movie. His dad bought him pants once, but his mom
bought most of his clothing. He testified that he took food to his dad’s a couple of times
but his mother told him she did not appreciate that. His mother did not give him money
to take to his dad and he did not give his dad money. He testified that Respondent bought

11

him a gun and an off-road motorcycle prior to 2008. Tr. 315-31; R. Ex. 7 at 1. On cross-
examination he explained he went to Respondent’s when he was sick because his dad was
home and he would have supervision. Tr. 332. He testified that he believed his mom
paid for school activities and that his dad did tell him to ask his mom for shoes and
clothes. Tr. 334. Mark Patton stated in his affidavit that he spent all summer with his
dad, except that he would probably see his mom once a week. He stated that at Easter he
went to church with his dad and had lunch with his mom, but then went back to
Respondent’s. He stated that Respondent usually picked him up after school on Friday
and returned him to his mom’s before school the next school day. R. Ex. 7 at 1.

Respondent testified that he answered correctly when he stated on the SSA form that
Mark lived with him. Tr. 342. Respondent testified that Mark stayed with him on the
weekends and during the summer, and that some holidays were shared. He testified that
sometimes Mark spent Sunday night with him but other times he took him home on
Sunday night. Tr. 345. He testified that he did not notify SSA of a change of address for
Mark as he believed that Mark continued to live with him. Tr. 346.

b. Analysis

The SSA LG. has failed to establish any bases for the imposition of a CMP and
assessment in this case because the facts the SSA LG. alleges were material and false, are
neither material nor false.

Pursuant to section 1129(a)(1) of the Act and 20 C.F.R. § 498.102(a), the SSA LG. is
authorized to impose a CMP and an assessment against a person when the I.G.
determines the following elements are met. The I.G. may impose a CMP or assessment
against a person who:

(1) (a) made or caused to be made;

(b) a statement or representation of a material fact;

(c) the statement or representation of material fact was for use in determining
any initial or continuing right to monthly insurance benefits or the amount of
monthly insurance benefits under Title II (Federal Old-Age, Survivors, and
Disability Insurance Benefits), or benefits or payments under Title VIII
(Special Benefits for Certain World War II Veterans) or Title XVI
(Supplemental Security Income for Aged, Blind, and Disabled); and

(d) the person knows or should know the statement or representation of
material fact is false or misleading; or
12

(e) made such a statement or representation with knowing disregard for the
truth; or

(2) (a) omits from a statement or representation or otherwise withholds disclosure
of;

(b) a fact which the person knows or should know is material to the
determination of any initial or continuing right to or the amount of monthly
insurance benefits under Title II or benefits or payments under Titles VIII or
XVI; and

(c) if the person knows, or should know, that the statement or representation
with such omission is false or misleading or that the withholding of such
disclosure is misleading ....

A material fact is a fact that the Commissioner may consider in evaluating whether an
applicant is entitled to benefits or payments under Titles II, VII, or XVI of the Act. Act
§ 1129(a)(2); 20 C.F.R. § 498.101. I interpret this provision broadly to include facts the
Commissioner may consider in evaluating initial eligibility and continuing eligibility and
the amount to which an applicant or beneficiary may be entitled based upon the language
of section 1129(a)(1) of the Act and 20 C.F.R. § 498.102(a), which specifically refer to
determinations of initial or continuing entitlement or the amount of monthly insurance
benefits.

Thus, in order for a CMP and assessment to be approved, the evidence must show that the
allegedly false or misleading fact or facts were material and that the fact or facts were
false or misleading as reported or by virtue of their omission or withholding.

(i) The residence address of Mark Patton and where
Mark Patton lived are not material facts that affect his
initial or continuing entitlement to CIB or the amount of
such benefits.

The SSA L.G.’s proposal to impose a CMP and assessment against Respondent must fail
because Mark Patton’s residence address and where Mark lived are not material to his
entitlement to CIB or the amount of such benefits.°

® Obvious examples of residence address and the address where one lives being different
include individuals away from home more than half the year to attend elementary and
secondary boarding school, college, and military service.
13

Every child of an individual entitled to old-age and survivor benefits or disability
insurance benefits is entitled to CIB if: (1) an application for CIB for the child is filed;
(2) at the time the application is filed the child is unmarried and was not 18, or was an
elementary or secondary school student under 19, or was disabled and under 22; and (3)
the child was dependent upon the individual entitled to Title II benefits when the
application for CIB was filed. 42 U.S.C. § 402(d); 20 C.F.R. § 404.350-.368. A child is
deemed dependent upon his or her father, adopting father, mother, or adopting mother
when the application is filed, unless the child was not living with the Title II beneficiary
or the Title II beneficiary was not contributing to the support of the child and, either the
child is not the legitimate or adopted child of the Title II beneficiary or the child has been
adopted by another. 42 U.S.C. § 402(d)(3); 20 C.F.R. §§ 404.361-.362. The monthly
CIB amount is equal to one-half of the amount of the Title II beneficiary’s primary
insurance amount if that person is living. 42 C.F.R. § 404.353(a).

There is no dispute in this case that Respondent has been entitled to Title II disability
benefits throughout the period March 11, 2005, when the application for CIB was filed
for Mark, through March 2008, the last month when the SSA I.G. alleges Respondent
failed to report where Mark lived. The material facts are not disputed. There is no
dispute that Mark is the natural child of Respondent or that Mark has not been adopted by
another. The SSA LG. has not alleged that Mark was not entitled to CIB throughout the
period March 11, 2005 through March 2008, and there is no dispute that he was entitled.

The Act and implementing regulations do not require that Mark, as the natural child of
Respondent who has not been adopted by another, live with Respondent or receive more
than one-half of his support from Respondent. Rather, Mark is deemed to be dependent
for purposes of initial and continuing entitlement. 42 U.S.C. § 402(d); 20 C.F.R. §§
404.360-.361; Tr. 238-39, 242; SSA Br. at 4. Mark’s residential address and who he
lived with are not material facts affecting his initial and continuing entitlement to CIB.’

7 Ms. Forness agreed that where the child lives does not matter, unless the child is
incarcerated which might result in a suspension of benefits. There is no allegation that
Mark was in prison in this case. She testified that Mark’s eligibility was not affected at
all in this case. Tr. 235-36. Mr. Bungard was not certain as to the materiality of where
Mark lived or his residence address or whether the agency actually made a determination
in that regard. Tr. 286-87. In response to my question, Mr. Bungard did not explain how
Respondent’s alleged failure to report Mark’s “true living arrangements” was material to
a determination of Mark’s entitlement to benefits. Tr. 287. Mr. Bungard testified that his
determination would have been different if he discovered that Mark spent the majority of

the time living with Respondent, but he testified he would not change his determination
(Footnote continues next page)

14

Furthermore, the amount of the CIB benefit to which Mark was entitled was not affected
by the address of his residence or where he lived. 20 C.F.R. §§ 404.304-.305;
404.353(a).*

The SSA LG. argues that there are events that may result in the suspension or termination
of CIB benefits, such as incarceration for more than 30 days or marriage. The SSA I.G.
argues that “living arrangements,” such as incarceration and marriage, may be material
facts that the Commissioner may consider in determining initial and continuing
entitlement to CIB or the amount of CIB benefits. SSA Br. at 2-3. The SSA LG.’s
reasoning is faulty. Even if the SSA LG. is correct that incarceration and marriage are
events that could affect initial or continuing entitlement to CIB or the amount of the CIB,
the incarceration and the marriage are the material facts not the address of the prison or
the address of the marital residence. The SSA I.G.’s position in this case is, in effect, that
a fact is material if it could lead to discovery of a fact that may affect initial or continuing
eligibility for CIB or the amount of CIB benefits. The definition of “material fact” under
the Act and regulation is not as broad as the SSA I.G. construes it. Act § 1129(a)(2); 20
C.F.R. § 498.101. Furthermore, the SSA I.G. concedes that Mark was not married and he
was not incarcerated in this case, so incarceration and marriage are not material facts in
this case. SSA Br. at 2-3.

The SSA LG. also argues that the definition of the phrase “living with” found in 20
C.F.R. § 404.366, is not pertinent to this case because SSA does not use this regulatory
provision to determine eligibility of a natural child.” SSA Br. at 4. The Act provides that
a child is deemed dependent upon a natural father or mother, unless the child was not
“living with” the natural father or mother or the father or mother was not contributing to
the child’s support and the child is neither the legitimate or adopted child of the father or
mother or the child has been adopted by some other. 42 U.S.C. § 402(d)(3). Thus, the

(Footnote continued.)

in this case because he continued to believe, based on SSA Ex. 20, that Mark’s primary
residence was with his mother. Tr. 291-93.

® The true focus of the SSA LG. in this case is whether or not Respondent made false
statements or omissions of material fact related to his selection and continuation as a
representative payee for Mark. Section 1129(a)(1) of the Act and 20 C.F.R. § 498.102(a)
do not grant the SSA I.G. authority to impose a CMP or assessment based on false
statements or omissions of material fact in connection with the application to be
designated a representative payee or for continuation of representative payee status.

° The SSA L.G.’s interpretation appears to be in error based upon the plain language of
the regulation, but this is not an issue before me that I need to resolve.
15

Act requires consideration of whether a child is “living with” the natural parent after
adoption by another for purposes of entitlement. The regulation implementing 42 U.S.C.
§ 402(d)(3) also requires consideration of whether a natural child is “living with” a
natural parent after adoption by another. 20 C.F.R. § 404.361(b). Therefore, whether or
not a natural child is living with a natural parent may be a material fact related to
entitlement for CIB in limited circumstances. However, the SSA LG. concedes by its
argument that whether or not Mark lived with Respondent is not a material fact related to
Mark’s initial or continuing entitlement or benefit amount in this case. SSA Br. at 4.

Whether or not Mark was “living with” Respondent is not a material fact in this case.
But, one of the bases for the CMP cited by the SSA LG. is that Respondent falsely
reported that Mark lived with him. The only definition of the phrase “living with”
possibly applicable to CIB entitlement is that found in 20 C.F.R. § 404.366. I conclude
that the definition in 20 C.F.R. § 404.366, is applicable and controlling in this case and it
is pertinent to the discussion that follows regarding whether or not it was true that Mark
“lived with” Respondent.

(ii) Respondent made no false or misleading statement of
material fact and no omissions or withholding of fact that
was misleading.

The SSA LG. alleges that Respondent made a false statement of material fact on a
“Representative Payee Report” that he completed on April 16, 2007, by responding yes to
the question “[d]id all the children named below live with you from 05/01/2006 to
04/30/2007?” SSA Ex. 4. The SSA LG. also alleges that for each of 16 months from
December 2006 through March 2008, Respondent failed to report Mark’s true living
arrangements and that the omission or failure to report was false or misleading. SSA Br.
at 1, 5-7. Even if one concluded that where Mark Patton lived or the address of his
residence is material to his entitlement, the SSA I.G.’s proposal to impose a CMP and
assessment against Respondent cannot be upheld because Respondent made no false
statement and did not knowingly fail to report any material fact.

In order to impose a CMP and an assessment against Respondent, section 1129(a)(1) of
the Act and 20 C.F.R. § 498.102(a) require that the SSA LG. show that Respondent knew
or should have known that his statement that Mark lived with him from May 1, 2006 to
April 30, 2007 was false or misleading or that he made such statements with knowing
disregard for the truth. In order to impose a CMP or assessment on grounds that
Respondent omitted to report the true facts related to Mark’s living arrangements from

16

December 2006 through March 2008,'° the SSA I.G. must show that Respondent knew or
should have known that the omission or withholding, in this case while receiving monthly
benefits, was false or misleading. The act and regulation do not provide a definition of
residence or establish residence as a material fact related to the initial or continuing
entitlement to CIB or the amount of such benefits. The regulation does define the phrase
“living with” and makes it a material fact related to entitlement to CIB benefits. 20
C.F.R. § 404.366. Respondent may be presumed to know and be subject to a substantive
tule of general applicability adopted as authorized by law that is properly published and
those rules of which he has actual and timely notice. 5 U.S.C. § 552. The evidence in
this case does not suggest, and the SSA I.G. does not argue, that the evidence shows that
Respondent had actual and timely notice that Mark’s residential address was a material
fact, for which he could be subject to sanction for failure to report. Thus, it is the phrase
“living with” that is pertinent in this case. In fact, the question on the SSA
“Representative Payee Report” form that Respondent completed on April 16, 2007, was
whether or not Mark lived with him from May 1, 2006 through April 30, 2007.

“Living with” is defined by 20 C.F.R. § 404.366(c) as follows:

(c) “Living with” the insured. You are living with the
insured if you ordinarily live in the same home with the
insured and he or she is exercising, or has the right to
exercise, parental control and authority over your activities.
You are living with the insured during temporary separations
if you and the insured expect to live together in the same
place after the separation. Temporary separations may
include the insured’s absence because of active military
service or imprisonment if he or she still exercises parental
control and authority. However, you are not considered to be
living with the insured if you are in active military service or
in prison. If living with is used to establish dependency for
your eligibility to child’s benefits and the date your
application is filed is used for establishing the point for
determining dependency, you must have been living with the

‘© The Act and regulation authorize the imposition of a CMP or assessment for the
omission or failure to report a fact that the person knows or should know is material to
the determination of any initial or continuing right to benefits or the amount of benefits.
Act §1129(a)(1); 20 C.F.R. § 498.102(a). For reasons already discussed, Mark’s
residence address and where he lived were not material facts and, therefore, Respondent
is not subject to a CMP or assessment for failure to report those facts on grounds that
they were material.
17

insured throughout the month your application is filed in
order to be entitled to benefits for that month.

Evaluating the facts of this case using the regulatory definition of “living with,” it is clear
that Mark was living with Respondent throughout the period May 1, 2006 through March
2008. Mark had a room in Respondent’s home. He kept personal property at
Respondent’s home. Mark spent weekends, most weeks of the school summer break,
days when he was too sick to attend school, and part or all of holidays at Respondent’s
home. The evidence shows that Mark clearly had the intention to return to Respondent’s
home after spending time at his mothers. Ms. DeGroot’s testimony shows that Mark
lived with Respondent as many as 196 days each year. Tr. 189-90. The evidence shows
that Mark lived with Respondent at least half the days of the year or more, which
supports a conclusion that he ordinarily resided with Respondent. The joint parenting
agreement supports a finding that Respondent had the right to joint legal and physical
custody of Mark and expresses the intent of the parties to that agreement that Respondent
was to have “frequent and continuing contact” and “input into the decisions affecting the
upbringing and raising of’ Mark. SSA Ex. 20 at 1. The fact that the joint parenting
agreement provided that Jeri DeGroot would be the “residential parent with whom
[Mark] shall reside on a daily basis” (SSA Ex. 20 at 1) is not controlling and is
insufficient to support an inference that Mark did not “live with” Respondent in this case.
Even if one construed the joint parenting agreement as establishing a presumption that
Mark “lived with” Jeri DeGroot, that presumption is rebutted by the evidence in this case.
Furthermore, considering all the facts in this case, it is not reasonable to conclude that
Respondent knew or should have known that Mark was not living with him during the
period May 1, 2006 through March 2008, or that Respondent acted with knowing
disregard for the truth with regard to Mark’s living arrangements.

I conclude that the elements necessary to impose a CMP or assessment against
Respondent are not satisfied in this case. Accordingly, I conclude that there is no basis
for the imposition of a CMP or assessment and none is reasonable.

II. Conclusion

For the foregoing reasons, I conclude that there is no basis for the imposition of a CMP or
assessment and no CMP or assessment is reasonable.

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Bryan James Krajicek, M.D.,
(NPI: 1689654303),

Petitioner,
v.
Centers for Medicare and Medicaid Services.
Docket No. C-12-918
Decision No. CR2672

Date: November 27, 2012

DECISION

Wisconsin Physicians Service (WPS), an administrative contractor acting on behalf of the
Centers for Medicare and Medicaid Services (CMS), determined that Petitioner’s
effective date of enrollment in the Medicare program is February 21, 2012, with a
retrospective billing period starting on January 22, 2012. Petitioner appealed. For the
reasons stated below, I affirm WPS’s determination.

I. Background and Procedural History

On January 20, 2012, WPS received a Medicare supplier enrollment application (Form
CMS-855R) from Petitioner in which Petitioner sought to reassign his Medicare billing
privileges to Pulmonary Medicine Specialists, P.C., with an effective date of January 1,
2012. CMS Ex. 3, at 4-11. Petitioner indicated a group provider transaction access
number (PTAN) of 095774 in the application, which is the PTAN for Pulmonary
Medicine Specialists’ Nebraska location. CMS Exs. 1, at 4; 3, at 4-11. On March 2,
2012, WPS approved Petitioner’s enrollment application and set January 1, 2012, as the
“Effective Billing Date.” Petitioner did not request reconsideration of this determination.
On February 21, 2012, WPS received a second Medicare supplier enrollment application
(Form CMS-855R) from Petitioner in which Petitioner sought to reassign his Medicare
billing privileges to Pulmonary Medicine Specialists with an effective date of January 1,
2012. CMS Ex. 2, at 4-14. This application is the subject of this appeal. Petitioner
indicated a group PTAN of 52187 in the application, which is the PTAN for Pulmonary
Medicine Specialists’ Iowa location. CMS Exs. 1, at 4; 2, at 4, 11. On March 3, 2012,
WPS approved Petitioner’s enrollment application and set January 22, 2012, as the
“Effective Billing Date” for Pulmonary Medicine Specialists’ Iowa location. CMS Ex. 2,
at 1-3.

On March 14, 2012, Petitioner filed a timely request for reconsideration of WPS’s March
3, 2012 determination. Specifically, Petitioner requested an effective date of January 1,
2012, for Pulmonary Medicine Specialists’ Iowa location so that this date would match
the effective date approved for Pulmonary Medicine Specialists’ Nebraska location.
CMS Ex. 1, at 4. Ina May 7, 2012 reconsidered determination, WPS decided that “the
effective billing date will remain January 22, 2012.” CMS Ex. 1, at 1-3.

On June 12, 2012, Petitioner timely filed a request for hearing (RFH) by an
administrative law judge. In response to my June 29, 2012 Acknowledgment and Pre-
hearing Order (Order), CMS filed a brief (CMS Br.) and three exhibits (CMS Exs. 1-3).
Petitioner filed a response brief, but did not file any exhibits or object to CMS’s exhibits.
In the absence of an objection, I admit CMS Exs. | through 3 into the record.’

The Order stated that the parties must submit written direct testimony for each proposed
witness and that an in-person hearing would only be necessary if the opposing party
requested an opportunity to cross-examine a witness. Order §§ 8 -11; Vandalia Park,
DAB No. 1940 (2004); Pacific Regency Arvin, DAB No. 1823, at 8 (2002) (holding that
the use of written direct testimony for witnesses is permissible so long as the opposing
party has the opportunity to cross-examine those witnesses). Neither party provided a list
of proposed witnesses or written direct testimony. Consequently, I will not hold an in-
person hearing in this matter. See Kate E. Paylo, D.O., DAB CR2232, at 9 (2010). The
record is closed and I will decide this matter based on the written record. Order § 12.

' Although Petitioner did not submit any marked exhibits, Petitioner attached to his
request for hearing copies of his request for reconsideration and the reconsidered
determination. These documents have been admitted into the record as part of CMS
Ex. 1.
IL. Discussion
A. Issue

Whether CMS had a legitimate basis for finding that February 21, 2012, is the effective
date of Petitioner’s Medicare enrollment and that Petitioner could retrospectively bill for
services rendered to Medicare beneficiaries on or after January 22, 2012.

B. Findings of Fact, Conclusions of Law, and Analysis”

The Social Security Act (Act) authorizes the Secretary of Health and Human Services
(Secretary) to promulgate regulations governing the enrollment process for providers and
suppliers.’ 42 U.S.C. §§ 1302, 1395cc(j). Under the Secretary’s regulations, a provider
or supplier that seeks billing privileges under Medicare must “submit enrollment
information on the applicable enrollment application. Once the provider or supplier
successfully completes the enrollment process . .. CMS enrolls the provider or supplier
into the Medicare program.” 42 C.F.R. § 424.510(a).

I. WPS received Petitioner’s completed and signed Form CMS-855R
(Medicare enrollment application for reassignment of Medicare
benefits) on February 21, 2012.

Petitioner and a representative of Pulmonary Medicine Specialists signed a Form CMS-
855R on February 20, 2012, related to the reassignment of Medicare billing privileges at
Pulmonary Medicine Specialists’ Iowa location. CMS Ex. 2, 10-14. Petitioner submitted
the Form CMS-855R to WPS by Federal Express on February 20, 2012. CMS Ex. 2, at
15. WPS received the Form CMS-855R on February 21, 2012. CMS Ex. 2, at 1, 4.
Petitioner does not dispute this date of receipt. See CMS Ex. 1, at 4. Therefore, all the
evidence of record supports the conclusion that on February 21, 2012, WPS received
Petitioner’s Form CMS-855R that Petitioner signed on February 20, 2012.

2. WPS properly concluded that Petitioner’s reassignment of Medicare
benefits was effective on February 21, 2012, with a retrospective
billing period commencing on January 22, 2012.

2 My findings of fact and conclusions of law are set forth in italics and bold font.

> Petitioner is considered a “supplier” for purposes of the Act and the regulations. See
42 U.S.C. §§ 1395x(d), 1395x(u); see also 42 C.F.R. § 498.2. A “supplier” furnishes
services under Medicare and the term applies to physicians or other practitioners that are
not included within the definition of the phrase “provider of services.” 42 U.S.C.

§ 1395x(d)).
By letter dated March 3, 2012, WPS notified Petitioner that his Medicare supplier
enrollment application, which had been received on February 21, 2012, was approved.
CMS Ex. 2, at 1-3. WPS set January 22, 2012, as Petitioner’s effective billing date.
CMS Ex. 2, at 1. On reconsideration, WPS upheld the January 22, 2012 effective billing
date, noting that this date was 30 days prior to the receipt of the application. CMS Ex. 1.

The relevant regulation concerning the effective date of Medicare enrollment states:

The effective date for billing privileges for physicians,
nonphysician practitioners, and physician and nonphysician
practitioner organizations is the later of the date of filing of a
Medicare enrollment application that was subsequently
approved by a Medicare contractor or the date an enrolled
physician or nonphysician practitioner first began furnishing
services at a new practice location.

42 C.F.R. § 424.520(d) (emphasis added). The “date of filing” is the date that the
Medicare contractor “receives” a signed provider enrollment application that the
Medicare contractor is able to process to approval. 73 Fed. Reg. 69,726, 69,769 (Nov.
19, 2008); see also Caroline Lott Douglas, PA, DAB CR2406, 5-7 (2011); Rizwan Sadiq,
M.D., DAB CR2401, at 5 (2011). Because WPS received a complete, approvable
application from Petitioner on February 21, 2012, WPS properly considered this date the
effective date for billing privileges.

Further, under the regulations set forth below, CMS may permit limited retrospective
billing if a practitioner meets all program requirements.

Physicians, nonphysician practitioners and physician and
nonphysician practitioner organizations may retrospectively
bill for services when a physician or nonphysician
practitioner or a physician or a nonphysician practitioner
organization have met all program requirements, including
State licensure requirements, and services were provided at
the enrolled practice location for up to—

(1) 30 days prior to their effective date if circumstances precluded enrollment in
advance of providing services to Medicare beneficiaries, or

(2) 90 days [in certain emergencies not applicable to this case.]

42 CFR. § 424.521 (a).
In the present matter, the earliest effective date for retrospective billing privileges that
Petitioner could be granted was 30 days prior to February 21, 2012. Thirty days prior to
February 21, 2012, is January 22, 2012. Thus, WPS correctly determined January 22,
2012, as Petitioner’s retrospective billing date.

3. WPS’s reference to an “Effective Billing Date” means the date on
which Petitioner’s retrospective billing period begins.

Petitioner, noting that January 22, 2012, was the effective date granted by WPS in its
determinations, argues that Petitioner should be allowed under 42 C.F.R. § 424.21, to
retroactively bill for services 30 days before January 22, 2012. P. Br. at 4. This
argument fails when one considers WPS’s determinations in context.

In both of its determinations in this case, WPS erroneously characterized the beginning of
the retrospective billing period to be the effective date. However, the initial
determination expressly states that “[t]his effective date is based on 30 days prior to the
filing date” and the reconsidered determination quotes from 42 C.F.R. § 424.52 1(a).
CMS Exs. 1, at 2; 2, at 1. The regulations, as explained above, do not authorize WPS to
grant more than a 30-day retrospective billing period (except in circumstances not
relevant to this case), and reviewing WPS’s determinations in context, they are meant to
be read consistently with the regulations. See Jorge M. Ballesteros, DAB CR2067, at 2
(2010) (“CMS apparently sets enrollment effective dates 30 days prior to the date of
application, which is what the Medicare contractor did here.”). Therefore, I interpret
WP%S’s determinations to mean that the “Effective Billing Date” is the beginning of the
retrospective billing period. Sadig, DAB CR2401, at 5-6.

4, Equitable estoppel cannot be applied against the CMS.

In his brief, Petitioner argues that he is entitled to an earlier effective date of January 1,
2012, because WPS representatives gave him incorrect advice as to the number of CMS-
855R forms that he needed to complete and file. P. Br. at 3. According to Petitioner, he
was told one application could be submitted for both of Pulmonary Medicine Specialists’
locations in Nebraska and Iowa, and then discovered this was not the case. RFH at 1; P.
Br. at 2. Petitioner argues that had it not been for the inaccurate information he received
from WPS staff, he would have submitted two applications at the same time and they
would have been processed together, resulting in January 1, 2012, as the date on which
Petitioner could bill from either the Nebraska or Iowa locations. P. Br. at 3. Petitioner’s
argument, in essence, seeks that I equitably estop CMS.

Because Petitioner did not allege any affirmative misconduct by WPS personnel,
Petitioner’s arguments amount to a claim of equitable estoppel for which I am unable to
grant any relief. It is well-established that: (1) estoppel cannot be the basis to require
payment of funds from the federal fisc; (2) estoppel cannot lie against the government, if
at all, absent a showing of affirmative misconduct, such as fraud; and (3) I am not
authorized to order payment contrary to law based on equitable grounds. It is well settled
that those who deal with the government are expected to know the law and may not rely
on the conduct of government agents contrary to law. See, e.g., Office of Personnel
Mgmt. v. Richmond, 496 U.S. 414 (1990); Heckler v. Cmty. Health Servs. of Crawford
County, Inc., 467 U.S. 51 (1984); Oklahoma Heart Hosp., DAB No. 2183, at 16 (2008);
Wade Pediatrics, DAB No. 2153, at 22 n.9 (2008), aff’d, 567 F.3d 1202 (10th Cir. 2009);
U.S. Ultrasound, DAB No. 2303, at 8 (2010). Therefore, Petitioner’s equitable estoppel
argument must be rejected.

5. The only issue in this case is the effective date for Petitioner’s
reassignment of Medicare benefits and I do not have jurisdiction to
decide whether Petitioner or Pulmonary Medicine Specialists are
entitled to bill Medicare based on previously approved enrollment
applications.

Petitioner asserts that the application in this matter is only one of “reassignment” of
benefits, thus implying that there already was an existing benefit to reassign. P. Br. at 3-
4. Petitioner argues that both he and Pulmonary Medicine Specialists were previously
enrolled in Medicare and that WPS’s established effective date “is arbitrary and denies
both parties the right to bill for services furnished to Medicare beneficiaries.” P. Br. at 4.

My jurisdiction in this matter is based on WPS’s unfavorable May 7, 2012 reconsidered
determination. 42 C.F.R. § 498.5(1); Better Health Ambulance, DAB No. 2475, at 4
(2012). The sole substantive issue before me is whether WPS and CMS properly
determined Petitioner’s effective date of enrollment (i.e., reassignment of benefits) based
on Petitioner’s February 21, 2012 application. Whether Petitioner or Pulmonary
Medicine Specialists has any other means to bill Medicare for the services Petitioner
provided prior to January 22, 2012, from Pulmonary Medicine Specialists’ lowa location
is not an issue I have the authority to decide.

II. Conclusion

For the reasons explained above, I affirm CMS’s determination that Petitioner’s effective
date of enrollment is February 21, 2012, with a retrospective billing period starting on
January 22, 2012.

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Wolverine State Inpatient Services,
Petitioner,
v.
Centers for Medicare and Medicaid Services.
Docket No. C-12-819
Decision No. CR2671

Date: November 26, 2012

DECISION

This matter is before me on the Motion for Summary Disposition filed by the Centers for
Medicare and Medicaid Services (CMS) on July 27, 2012. For the reason set out below, I
GRANT the CMS Motion and AFFIRM the denial of Petitioner Wolverine State
Inpatient Services’ (WSIS) Medicare application.

I. Background and Procedural History

Petitioner sought to enroll in the Medicare program as a multi-specialty group clinic.
CMS Exhibit (Ex.) 4 at 6. To that end, Petitioner submitted enrollment applications to
enroll itself as a “supplier” and to enroll a number of individual physicians who would
practice with Petitioner’s group clinic and reassign their Medicare payments to Petitioner.
CMS Exs. 4, 6-8. Wisconsin Physicians Service Insurance Corporation (WPS), a
Medicare contractor, denied Petitioner’s applications stating that Petitioner did not
qualify as a supplier in the Medicare program and was not operational to furnish
Medicare covered items or services. CMS Ex. 2 at 3. Petitioner requested contractor
reconsideration and on April 5, 2012, WPS found that Petitioner did not meet the
requirements to enroll in the Medicare program on the same bases. CMS Ex. 1.
On June 4, 2012, Petitioner filed a hearing request challenging the WPS redetermination.
CMS submitted a Motion for Summary Disposition and a brief in support of its motion
(CMS Br.), along with eight exhibits identified as CMS Exs. 1-8. Petitioner filed its
Memorandum of Law in Opposition to the CMS Motion (P. Br.), along with three
exhibits marked as P. Exs. 1-3. In the absence of objection, I admit CMS Exs. 1-8 and P.
Exs. 1-3 into the record.

Il. 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. Payment under the program for services rendered to Medicare
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). The Act
authorizes the Secretary of Health and Human Services (Secretary) to promulgate
regulations governing the enrollment process for providers and suppliers, including the
right to a hearing and judicial review of certain enrollment determinations. Act §§ 1102,
866(j), 42 U.S.C. §§ 1302, 1395cc(j).

The Act and regulations establish that a supplier is an individual or entity that furnishes
ealth care services under Medicare. Act § 1861(d); 42 C.F.R. § 400.202. Medicare Part
B pays for physicians’ services, including diagnosis, therapy, surgery, consultations, and
ome, office, and institutional calls. See 42 C.F.R. § 410.20. A supplier must be enrolled
in the Medicare program and be issued a billing number to be eligible to receive direct
payment from Medicare. 42 C.F.R. § 424.505.

Medicare pays a supplier directly for covered services if a beneficiary assigns a claim to
the supplier and the supplier accepts assignment. 42 C.F.R. § 424.55(a). Medicare may
pay a supplier’s employer if the supplier is required, as a condition of employment, to
turn over the fees from the supplier’s services. 42 C.F.R. § 424.80(b). Medicare will
also pay an entity billing for a supplier’s services if the entity is enrolled in Medicare and
there is a contractual arrangement between the entity and the supplier. 42 C.F.R.

§ 424.80(b)(2).

A supplier “must be operational to furnish Medicare covered items or services before
being granted Medicare billing privileges.” 42 C.F.R. § 424.510(d)(6). A supplier is
“operational” when it has a “qualified physical practice location, is open to the public for
the purpose of providing health care related services, is prepared to submit valid
Medicare claims, and is properly staffed, equipped, and stocked . . . to furnish these items
and services.” 42 C.F.R. § 424.502. Prospective suppliers must provide all
documentation required by CMS to ascertain whether the provider or supplier is eligible
to furnish Medicare-covered items or services. See 42 C.F.R. § 424.510. Federal
regulations define the circumstances in which CMS may deny the application of a
supplier to participate in the Medicare program. See generally 42 C.F.R. § 424.530.
CMS may deny a supplier’s enrollment in Medicare if “[t]he provider or supplier at any
time is found not to be in compliance with the Medicare enrollment requirements
described in this section or on the applicable enrollment application to the type of
provider or supplier enrolling, and has not submitted a plan of corrective action as
outlined in part 488 of this chapter.” 42 C.F.R. § 424.530(a)(1). CMS may also deny a
supplier’s enrollment if, upon on-site review, CMS determines that a “supplier is no
longer operational to furnish Medicare covered items or services, or the supplier has
failed to satisfy any or all of the Medicare enrollment requirements, or has failed to
furnish Medicare covered items or services as required by the statute or regulations.”
42 CFR. § 424.530(a)(5)(ii).

When CMS denies the enrollment of a supplier in the Medicare program, CMS will also
review other related enrollment files associated with the denied supplier to determine if
the denial warrants an adverse action on the associated suppliers. 42 C.F.R.

§ 424.530(d).

Ill. Issue

The issue in this case is whether CMS, or its contractor, was authorized to deny
Petitioner’s request to enroll in the Medicare program.

IV. Analysis

My findings of fact and conclusions of law are set forth in italics and bold in the
discussion captions of this decision.

A. This case is appropriate for summary judgment

CMS argues that it is entitled to summary judgment. The Departmental Appeals Board
(Board) stated the standard for summary judgment:

Summary judgment is appropriate when the record shows that there is no
genuine issue as to any material fact, and the moving party is entitled to
judgment as a matter of law. ... The party moving for summary judgment
bears the initial burden of showing that there are no genuine issues of
material fact for trial and that it is entitled to judgment as a matter of

law. ... To defeat an adequately supported summary judgment motion, the
non-moving party may not rely on the denials in its pleadings or briefs, but
must furnish evidence of a dispute concerning a material fact — a fact that,
if proven, would affect the outcome of the case under governing law. . . .
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.

Senior Rehabilitation & Skilled Nursing Center, DAB No. 2300, at 3 (2010) (citations
omitted).

The Board has further explained that the role of an Administrative Law Judge (ALJ) in
deciding a summary judgment motion differs from its role in resolving a case after a
hearing. The ALJ should not assess credibility or evaluate the weight of conflicting
evidence. Holy Cross Village at Notre Dame, Inc., DAB No. 2291, at 5 (2009). I find
that Petitioner has not disputed any fact material to my resolution of the case.
Accordingly, I conclude that summary judgment is appropriate in this case. Here, the
material facts are not disputed, and I draw all reasonable inferences in favor of Petitioner.

B. CMS was authorized to deny Petitioner’s request to enroll in the
Medicare program because Petitioner did not meet the definition of a
supplier and is not operational to furnish Medicare covered items or
services.

WSIS is a wholly-owned subsidiary of the partnership between Inpatient Services of
Michigan, P.C. (ISM) and its wholly-owned subsidiary, Michigan EM-II, Inc. (EM-II).
Douglas Webster, D.O. is the owner and authorized official of ISM, the owner of EM-II,
and is licensed to practice osteopathy in Michigan. EmCare, Inc. (EmCare) provides
various management and administrative services to ISM, its affiliated entities, and
employees under a management agreement. Reimbursement Technologies, Inc. (RTD), is
the billing entity for ISM. ISM contracts with physicians to supply services to hospitals
with which it also contracts. ISM has created a separate billing entity for each of the
hospitals with which it contracts. WSIS is one of those created billing entities. P. Br. at
1-3; P. Ex. 1 at 1-2 (Hufstetler Decl. at 4] 1, 5-7); CMS Ex. 2 at 6; CMS Ex. 5 at 2.

WSIS defines itself through the ISM and EM-II partnership agreement which states:
“The sole purpose of the Partnership is to provide a ‘pay to’ address when billing third
party payors to facilitate the bookkeeping of the payments received from such payors.”
CMS Ex. 5 at 1. The agreement also shows that Petitioner itself does not employ any of
the physicians for which Petitioner is acting as the billing entity. CMS Ex. 5 at 2. The
partnership agreement does not purport to assert that Petitioner would furnish health care
services under Medicare, but instead plainly asserts that Petitioner is an entity formed
solely to act as a billing entity. CMS Ex. 5.

WSIS does not qualify for enrollment in the Medicare program because it does not meet
the definition of a “supplier” under Medicare, and also because it is not operational to
furnish Medicare covered items or services. For Medicare purposes, “[s]upplier means a
physician or other practitioner, or an entity other than a provider, that furnishes health
care services under Medicare.” 42 C.F.R. § 400.202. A supplier must be operational to

‘urnish Medicare covered items or services before being granted Medicare billing
privileges. See 42 C.F.R. § 424.510(d)(6). “Operational means the provider or supplier
has a qualified physical practice location, is open to the public for the purpose of
providing health care related services, is prepared to submit valid Medicare claims, and is
properly staffed, equipped, and stocked (as applicable, based on the type of facility or
organization, provider or supplier specialty, or the services or items being rendered), to
‘urnish these items or services.” 42 C.F.R. § 424.502. In order to enroll in the Medicare
program, a supplier must demonstrate that it has the ability to furnish health care items or
services. If CMS determines upon reliable evidence that an entity is not operational or is
not meeting Medicare enrollment requirements, CMS may deny enrollment. See 42
CFR. § 424.530(a)(5).

Petitioner does not argue that WSIS furnishes health care services or that it has a
qualified physical practice location open to the public, providing health care related
services. Instead, Petitioner concedes that a separate legal entity (ISM) employs
physicians. Rather, Petitioner admits WSIS was created to be a separate general
partnership simply to serve as a billing entity to facilitate the bookkeeping of payments
received from third party payers.

Petitioner argues that “‘[n]either the definition of a supplier in 42 C.F.R. § 400.202, nor
the definition of operational in 42 C.F.R. § 424.502, expressly excludes arrangements
under which an entity under the ownership and direct control of the physician(s)
furnishing covered services enrolls at the direction of the physician group.” P. Br. at 9.
Although the definitions may not specifically exclude Petitioner’s business structure, it
does not change the fact that WSIS does not qualify as a supplier that is operational under
the regulations. 42 C.F.R. §§ 400.202, 424.502. Certainly, Petitioner is free to contract
and make billing arrangements with any range of entities it desires; however, enrollment
in Medicare and entities Medicare will pay for covered health care services are not based
on those arrangements, but on the regulatory definitions and requirements that Petitioner
overlooks.

Petitioner asserts that:

WSIS is under the complete ownership and control of ISM, and cannot act
independently of ISM. Under this model, EmCare contracts with a hospital
to arrange for hospitalist services. EmCare contracts with ISM to provide
the necessary physicians to support the contractual requirements regarding
this hospitalist coverage at the Hospital. ISM employs physicians to support
EmCare’s obligations to all of its client hospitals in Missouri [sic], and ISM
forms a general partnership - in which it is one of two general partners -
through which ISM’s employed physicians will bill for services provided at
the specific hospital. Under this structure, although the billing function is
performed by a separate legal entity from the entity that employs the
hospitalist physicians who render services, as a practical matter they are
linked.

P. Br. at 9.

I will assume for purposes of this summary disposition analysis that Petitioner is “linked”
to a separate legal entity that does in fact provide health care services and that would
qualify as a supplier under Medicare requirements. Petitioner argues that although it does
not provide health care services, it is linked as a practical matter to a legal entity that
does.

However, the regulations prohibit the reassignment of Medicare payments to affiliates of
a supplier’s employer. 42 C.F.R. § 424.80(a). In other words, unless an exception
applies, Medicare does not directly pay a supplier’s benefits to a reassigned entity if the
supplier has already assigned the benefits to the supplier’s employer. Thus, absent an
exception, ISM cannot reassign to Petitioner the suppliers’ benefits that those suppliers
assigned to ISM. Clearly, none of the exceptions apply to Petitioner’s case. 42 U.S.C.

§ 1395u(b)(6); 42 C.F.R. § 424.80(b)(1). The contractual exception under 42 C.F.R.

§ 424.80(b)(2) does not apply to this case because it only provides for Medicare to pay an
entity pursuant to a contractual arrangement if the entity is enrolled in Medicare, and
there is a contractual arrangement between the entity and the supplier. However, WSIS
does not contract with physicians, only ISM contracts with physicians. Simply having a
billing or reassignment arrangement with a supplier does not meet the legal requirements
for enrolling in the Medicare program as a supplier. Without the assignee having
previously enrolled in Medicare, CMS or its contractor will not directly pay the assignee
of the arrangement with a supplier. The exception allowing Medicare to pay an agent
“who furnishes billing and collection services” to the supplier or the supplier’s employer
if certain conditions are met, including that the agent receives payment under an agency
agreement with the supplier also does not apply. 42 C.F.R. § 424.80(b)(5); 42 C.F.R.

§ 424.73(b)(3). In this case, Petitioner insists that RTI is its billing agent. CMS Ex. 4 at
32; CMS Ex. 2. WSIS is not able to receive reassigned benefits from physicians in
accordance with the Medicare reassignment provisions.

Although Petitioner would distinguish the case, I believe that the enrollment denial here
is similar to that in US Ultrasound, DAB No. 2302 (2010). US Ultrasound sought to
enroll as an independent diagnostic testing facility; however, a contract submitted with
the enrollment application indicated that US Ultrasound did not own any ultrasound
equipment and was not responsible for any technical or professional services. US
Ultrasound, DAB No. 2302 at 6. The agreement between US Ultrasound and another
entity that actually furnished services provided that US Ultrasound pay that entity a
professional services fee for billing, scheduling, and patient records. US Ultrasound,
DAB No. 2302 at 4. The Board found that CMS had the legal authority to deny US
Ultrasound’s enrollment application because it failed to comply with Medicare
enrollment requirements in that it did not furnish services and thus failed to meet the
definition of a Medicare “supplier.” Jd. at 5-6. Similarly, in Briarwood Community
Mental Health Center, DAB No. 2414 (2011), the Board stated that “[t]he word
‘operational’ is a term of art specific to Medicare, and it means that a provider or supplier
must have a qualified physical practice location and actually be furnishing the types of
covered Medicare services that it holds itself out as furnishing.” There is no argument
that Petitioner does not meet those qualifications.

Arguing against summary disposition, Petitioner asserts that the “history of EmCare’s
meetings with CMS plainly establish that there are material facts in dispute.” P. Br. at 6-
8. Whether CMS or its agents at some point gave some sort of tacit or expressed
approval to Petitioner’s business structure does not create a material fact at issue.
Similarly, although Petitioner asks for equitable relief based on the actions of other
Medicare contractors, “[n]either the ALJ nor the Board is authorized to provide equitable
relief by reimbursing or enrolling a supplier who does not meet statutory or regulatory
requirements.” US Ultrasound, DAB No. 2302 (2010); see also Peter McCambridge,
C.F.A. v. CMS, Ruling No. 2010-1 on Request to Reopen Decision No. 2290, 2010 WL
744489 (February 2, 2010) (“The Board does not have the legal authority to require CMS
to take an action (i.e., enrolling Petitioner in Medicare as a surgical first assistant) that
would be inconsistent with the Medicare statute and regulations.”).

As a matter of law, Petitioner does not meet the definition of a Medicare supplier and
cannot be enrolled in the Medicare program.' Petitioner is a general partnership
established solely to receive payments for the services of a physician group. Petitioner
does not employ physicians, have a contractual arrangement with physicians, and does
not furnish health care services in any capacity. Whatever motivated or guided the
establishment of the business structure discussed above, its result included — and for all
present purposes dictated — the result I announce here.

' I note that because WSIS is not enrolled in the Medicare program, there is no basis to
approve any Medicare enrollment reassignments to Petitioner. See 42 C.F.R. §
424.80(b).
V. Conclusion

The undisputed evidence establishes that CMS was authorized to deny Petitioner’s
Medicare enrollment as a supplier because it was not operational and did not otherwise
meet the requirements of an eligible supplier. Accordingly, 1GRANT summary
judgment in favor of CMS. The denial of Petitioner Wolverine State Inpatient Services’
Medicare application must be, and it is, AFFIRMED.

/s/
Richard J. Smith
Administrative Law Judge