Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Wills Eye Hospital,
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-846
Decision No. CR4532

Date: February 18, 2016

DECISION

The issue in this case is limited and straight-forward: in order to meet Medicare’s
statutory definition of “hospital,” must an institution provide the bulk of its services to
actual “inpatients.”

Petitioner, Wills Eye Hospital, was previously enrolled in the Medicare program as an
ambulatory surgical center (ASC) but wants to enroll in the program as a hospital instead.
The Centers for Medicare & Medicaid Services (CMS) denied its enrollment application,
finding that it did not meet the statutory definition of a hospital. Petitioner appeals, and
the parties have filed cross-motions for summary judgment.

For the reasons discussed below, I find that, to enroll in the Medicare program as a
hospital, an institution must primarily engage in providing services to inpatients. The
undisputed evidence in this case establishes that Petitioner Wills Eye does not do so, and
CMS properly denied its hospital enrollment application. I therefore grant CMS’s motion
and deny Petitioner’s.
Background

To participate in the Medicare program as a hospital, the institution must apply, and
establish that it meets the statutory definition of a hospital and complies with all
regulatory requirements. Social Security Act (Act) § 1866(b)(2)(B); 42 C.F.R.

§§ 482.1(a)(1), 488.3(a), 489.12(a)(4).

Here, Petitioner Wills Eye participated in the Medicare program as an ASC from about
2002 until 2013, when it relinquished its state license as an ASC, asked to terminate its
Medicare participation as an ASC, and applied for Medicare enrollment as a hospital.
CMS Exhibits (Exs.) 6, 7. CMS denied the application initially and following
reconsideration, finding that the facility did not meet the statutory definition of a hospital
because the institution “primarily engaged” in providing services to outpatients, rather
than inpatients; the statute requires that hospitals provide the bulk of their services to
inpatients. CMS Exs. 1, 4.

Petitioner timely requested a hearing, and the parties have filed cross-motions for
summary judgment.

Issues
As a threshold matter, I consider whether summary judgment is appropriate.

On the merits, the issue is whether Petitioner Wills Eye meets the statutory definition of
“hospital” and thus qualifies to participate in the Medicare program as a hospital.

Discussion

1. CMS is entitled to summary judgment because the undisputed evidence
establishes that Petitioner does not meet the statutory definition of a hospital
(Act § 1861 (e)), which requires that hospitals primarily engage in providing
services to inpatients.

Statutory definition. The Medicare statute defines a hospital as an institution that, among
other requirements, “is primarily engaged in providing . . . to inpatients” certain
diagnostic, therapeutic, or rehabilitation services. Act § 1861(e)(1); see Social Security
Amendments of 1965, P.L. 89-97, 79 Stat. 1432 (CMS Ex. 8). To participate in the
Medicare program as a hospital, an institution must meet the statutory definition and
comply with regulatory requirements. Act §§ 1861(e), 1866(b)(2); 42 C.F.R. Part 482;
42 CFR. §§ 488.3, 489.10, 489.12; Kearney Reg’l Med. Ctr., DAB No. 2639 at 12
(2015); Ariz. Surgical Hosp., LLC, DAB No. 1890 at 12 (2003). An “inpatient” is an
individual who has been formally admitted to the institution pursuant to the order of a
physician or other qualified practitioner who is permitted by the state to admit patients to
hospitals. 42 C.F.R. § 482.12(c); see 42 C.F.R. § 412.3(a).

An ASC is a distinct entity that operates exclusively for the purpose of providing surgical
services to patients not requiring hospitalizations and in which the expected duration of
services would not exceed 24 hours following an admission. 42 C.F.R. § 416.2; see Act
§ 1832(a)(2)(F).

Facts. Here, the relevant facts are not disputed. After operating for many years as a
Medicare-certified ASC, Wills Eye renovated its physical plant and added four inpatient
beds. It surrendered its ASC license, terminated its Medicare participation as an ASC,
and applied for enrollment as a hospital. CMS Ex. 5 at 6; CMS Exs. 6 and 7. Although
Petitioner is vague as to the exact proportions, it concedes that the vast majority of its
services do not require inpatient hospitalization. CMS Ex. 2 at 4 (“[B]ecause of the
evolution of ophthalmology itself toward treatments that allow patients to go home the
same day, the number of ophthalmology inpatients at any one time is limited.”); CMS Ex.
4 at 2 (estimating that Wills Eye performs 8,400 outpatient surgeries per year at this
location; Petitioner has not challenged this estimate); P. Ex. 4 at 1 (showing that from
July 2011 to June 2012, Petitioner performed 8,030 outpatient procedures and 370
inpatient procedures; thus, 95.6% of its procedures were outpatient). Further, CMS
determined, and Petitioner does not challenge, that Petitioner’s staffing levels were
inconsistent with a facility that primarily provides services to inpatients. CMS Exs. 5 at
6; 10 at 2.

Summary judgment. Because this case turns on a statutory interpretation and does not
present any disputes of material fact, summary judgment is appropriate. See Ariz.
Surgical Hosp., DAB No. 1890 at 7 (“Given Petitioner’s inability to comply with the
statutory definition, the [Administrative Law Judge] was not required to take additional
evidence.”).

According to CMS, the plain language of section 1861(e)(1) mandates that a hospital
primarily engage in providing designated services to inpatients, and the undisputed
evidence establishes that Petitioner Wills Eye does not meet the statutory definition.
Petitioner, however, challenges CMS’s reading of the statute and argues that, “given the
statutory structure and syntax” of section 1861(e)(1), I should deny summary judgment in
order to consider expert opinion as to the proper definition of “hospital.” Petitioner’s
Brief in Opposition to Summary Judgment (P. Br.) at 2. Pointing to the legal analysis
provided by an attorney it describes as a “legislative drafting expert,” Petitioner argues
that an institution is a hospital if it primarily provides the services described in section
1861(e)(1) to whatever inpatients it has, no matter how few, and without regard to where
it provides the bulk of its services. Petitioner identifies a single dispute of material fact
with respect to this issue, which is: “what ‘primarily engaged in’ modifies within
[section] 1861(e)(1), the resolution of which is properly informed by consideration of
extrinsic evidence... .” P. Br. at 11.

Notwithstanding its “structure” or “syntax,” interpreting the meaning of a statute is a
legal question. | am aware of no support — and Petitioner cites none — for the proposition
that a purely legal question requires the taking of evidence. In fact, the opposite is true;
the federal rule governing summary judgment and the decisions deriving from that rule,
including a long line of Departmental Appeals Board decisions, are explicit: if no
material facts are in dispute and “the movant is entitled to judgment as a matter of law,”
the adjudicator “shall grant summary judgment.” Fed. R. Civ. P. 56 (emphasis added);
Celotex Corp. v. Catrett, 477 U.S. 317, 322-25 (1986); Bartley Healthcare Nursing &
Rehab., DAB No. 2539 at 3 (2013); Ill. Knights Templar Home, DAB No. 2274 at 3-4
(2009), and cases cited therein; Guardian Health Care Ctr., DAB No. 1943 at 11 (2004)
(“A dispute over the conclusion to be drawn from applying relevant legal criteria to
undisputed facts does not preclude summary judgment if the record is sufficiently
developed and there is only one reasonable conclusion that can be drawn from those
facts.”). Extrinsic evidence of the kind Petitioner urges me to consider cannot be used to
create ambiguity where none exists; where a statute’s meaning is plain, a court’s role is to
enforce it. Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 568 (2005)
(“Extrinsic materials have a role in statutory interpretation only to the extent they shed a
reliable light on the enacting Legislature’s understanding of otherwise ambiguous
terms.”).

The significance of adverbs. Inasmuch as the agency and courts have determined its
meaning (see below), I do not consider dispositive a strict grammatical analysis of the
statute. Even if I did, I would reject Petitioner’s analysis, which ultimately misconstrues
the function of an adverb and largely ignores the critical prepositional phrase “to
inpatients.”

As legislation goes, I see nothing particularly unusual about the structure or syntax of
section 1861(e)(1). Petitioner correctly points out that “primarily” is an adverb that
modifies the verb phrase “engaged in providing.”! But Petitioner then claims that,
because the sentence includes a direct object (“services”), “primarily” applies to the types
of services that must be provided. P. Br. at 9; P. Ex. | at 6 (Clark Decl. § 14). This is not
a conventional use of an adverb. Adverbs do not modify nouns, whether those nouns are

' For the purists: I recognize that this verb phrase is, in fact, a verb (“engaged”)
followed by a prepositional phrase (“in providing”), made up of a preposition (“in’”’)
followed by a gerund (“providing”) as the object of the preposition. The phrase acts as
an adverb that modifies the verb. John E. Warriner, English Grammar and Composition:
Complete Course 32, 34-35, 40-41 (1963). I treat the entire phrase as a verb in an effort
to simplify this discussion. Refer to the Addendum to this decision for a more technically
accurate diagram of the clause.

subjects or objects; adverbs modify verbs, adjectives, or maybe other adverbs.”
Adjectives modify nouns. Warriner, supra, at 7, 11-12, 151.3

Petitioner is correct that “services” is a direct object. Direct objects show the result of the
action, answering the question “what?” after the action verb. Jd. at 26. Here, it shows
what the institution engages in providing. “To inpatients” is a prepositional phrase, used
as an adverb modifying the verb, telling us to whom the action of the verb applies. Id. at
32, 34-35. It shows to whom the services are provided. If the drafters had used an
indirect object instead of a prepositional phrase, as Petitioner suggests (e.g., “engaged in
providing inpatients with services”), the meaning would be the same. P. Ex. 1 at 5 (Clark
Decl. § 12). The indirect object “inpatients” tells us to whom the institution primarily
provides the listed services. Warriner, supra, at 27.4

Thus, a strict grammatical reading of the statute supports CMS’s position: a hospital is
an institution that primarily provides to inpatients the services listed.

Consistent interpretations of the statutory language. Petitioner cites no decision by a
court or administrative tribunal to support its interpretation of section 1861(e)(1). In fact,
the adjudicators who have addressed the issue have ruled that section 1861(e)(1) requires
that an institution care for inpatients as its primary activity before Medicare will
recognize and reimburse it as a hospital. Kearney Reg’] Med. Ctr., DAB No. 2639 at 14.

In its seminal decision, Arizona Surgical Hospital, LLC, the Departmental Appeals Board
characterized as “fundamental and plainly stated” the statutory requirement for inpatient
services. DAB No. 1890 at 10. The Board there sustained termination of the hospital’s
Medicare provider agreement, finding that the hospital could not meet the statutory
definition because it had voluntarily suspended inpatient admissions, had no inpatients,
and was not providing inpatient hospital services. But the Board did not stop there.
Considering the hospital’s argument that it had suspended admissions temporarily, the
Board specifically addressed the institution’s earlier situation where, as here, it admitted a
limited number of patients but provided a wide range of services to outpatients. The
Board concluded that such an institution did not operate as a hospital but functioned
“almost entirely as an outpatient surgical facility.” Jd. at 7. In short, where the
institution’s inpatient stays were “not [its] ‘primary’ service,” it was not a hospital. Id. at
8.

> CMS argues, incorrectly, that the adverb “primarily” and the verb “engaged” modify
the nouns “inpatients” and “services.” CMS Prehearing Exchange, Motion for Summary
Judgment and Supporting Brief (CMS Br.) at 8. Again, only adjectives modify nouns.

> Although this standard grammar text is very old, it was current in 1965, when Congress
enacted section 1861(e)(1).

47 include, as an addendum to this decision, a diagram of the clause.
In Kearney Regional Medical Center., the Medicare applicant was a new facility with a
limited history of serving inpatients. DAB No. 2639 at 10. It did not admit patients for
42 days, although it had admitted a handful of patients before deciding to suspend
admissions. In a decision that leaves no doubt as to the meaning of section 1861(e)(1),
the Board reaffirmed the position it laid out in Arizona Surgical Hospital:

e The statute and regulations “require a facility to be presently engaged in serving
inpatients as its primary activity.” Kearney Regional Medical Ctr., DAB No.
2639 at 1 (emphasis added);

e “[B]eing ‘primarily engaged’ in treating inpatients” is the “main defining
characteristic of a hospital.” Id. at 8;

e “The Board has consistently read the statutory language requiring that a hospital
be ‘primarily engaged’ to plainly mean that the bulk of its present activity consists
of providing the required services to treat inpatients.” Jd. at 9;

e “A hospital is a facility that is mainly serving inpatients.” (emphasis in original)
Id. at 9; “we consider this element the core definition of hospital ....” Jd. at 9
n.5.

e “[T]he Act does require that a facility be currently caring for inpatients as its
primary activity before Medicare will recognize and reimburse the facility as a
hospital.” Jd. at 14.

See also Puget Sound Behavioral Health, DAB No. 1944 (2004) (defining a hospital as
“a facility where injured, disabled, or sick persons receive . . . services on an inpatient
basis”).

In related contexts, federal courts’ interpretations of section 1861(e)(1) have been
consistent with the Board’s.° For example, in deciding whether a medical institution
providing emergency services was liable under the Emergency Medical Treatment and
Active Labor Act (EMTALA), the First Circuit noted that EMTALA applies to
Medicare-participating hospitals only. Looking to section 1861(e)(1), the court
determined that the institution was not a hospital because it was “not primarily engaged
in providing . . . services to inpatients, as required by subsection (e)(1)”; rather, it
provided outpatient, ambulatory care. Rodriguez, et al. v. Am. Int’l Ins. Co. of P.R., 402
F.3d 45, 48 (1st Cir. 2005) (emphasis in original); see also P.I.A. Michigan City, Inc. v.
Thompson, 292 F. 3d 820, 821-22, 31 (D.C. Cir. 2002) (noting that the Medicare program

> Neither party cited any court cases involving a direct challenge to CMS’s reading of
section 1861(e)(1). Nor did I find any such case.
“can make direct payment to providers of inpatient hospital services” and that the
institution had not been “primarily providing acute care inpatient services”); Downing v.
Dep't of Health & Human Servs., No. 1:12-CV-22, 2013 WL 1281795 at *6 (N.D. Ind.
Mar. 6, 2013), report and recommendation adopted, No. 1:12-CV-22-TLS, 2013 WL
1281834 (N.D. Ind., Mar. 26, 2013) (finding that an institution that holds itself out as
housing physician offices and provides services to outpatients rather than primarily
inpatients “does not appear to be a hospital under the Act.”); U.S. ex rel. Thompson v.
Columbia/HCA Healthcare Corp., 20 F. Supp. 2d 1017, 1022 (S.D. Tex. 1998)
(“Medicare regulations label a provider of outpatient surgical facilities as an ambulatory
surgical center. ... In contrast, a hospital is ‘an institution which is primarily engaged in
providing [services] to inpatients.’”).

Even if the statute were ambiguous (which it is not), I would then defer to the agency
interpretation. Chevron U.S.A. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-843
(holding that an agency’s interpretation of its own governing statute is entitled to
deference). And, as the discussion below shows, CMS has consistently

interpreted section 1861(e)(1) to require that hospitals furnish the bulk of their services to
inpatients. See, e.g., 70 Fed. Reg. 47,278, 47,462 (August 12, 2005) (affirming that a
Medicare-participating hospital “must” primarily engage in furnishing services to
inpatients); United States Department of Health and Human Services, Final Report to the
Congress and Strategic and Implementing Plan Required under Section 5006 of the
Deficit Reduction Act of 2005 at 17 (2006) (CMS Ex. 9 at 19) (“Section 1861(e) of the
Act provides that, in order to be a ‘hospital,’ an institution must be primarily engaged in
providing care to inpatients.”); United States Department of Health and Human Services,
Strategic Plan Regarding Physician Investment in Specialty Hospitals Section 5006 of the
Deficit Reduction Act: Interim Report to Congress at 4 (2006) (P. Ex. 6 at 6); Physician-
Owned Specialty Hospitals: Hearing Before the S. Comm. on Finance, 109th Cong. 11
(2006) (Statement of Mark B. McClellan, Administrator, Centers for Medicare &
Medicaid Servs.), 2006 WLNR 8541246 (“Under existing law, a hospital, for Medicare
purposes, must be, among other requirements, primarily engaged in furnishing services to
inpatients.”); Survey & Cert. Memo. 08-08, at 5 (January 11, 2008) (advising that a
hospital applicant specializing in emergency services must primarily engage in providing
services to inpatients).

2. Petitioner is not entitled to judgment as a matter of law on its claims that CMS
has unlawfully changed its standards and has certified as hospitals many
institutions that primarily provide services to outpatients.

In 1965, when the Medicare statute was drafted, virtually all of the types of services
described in section 1861(e)(1) would have been provided in hospitals. Since then, an
increasing number of those services are provided to outpatients, and, in 1982, Medicare
began to cover outpatient surgical services provided in ASCs, albeit at rates of
reimbursement that were generally lower than those paid to hospitals. See Omnibus
Reconciliation Act of 1980, P.L. 96-499, 94 Stat. 2599; Act § 1832(a)(2)(F); 42 C.F.R.
§ 416.2.°

Distinguishing between a hospital and an ASC is not always easy. CMS has declined to
set strict numerical standards for determining exactly when an institution establishes that
its inpatient services constitute its primary business. Rather, it assesses, case-by-case,
whether the statutory definition is met. Kearney Reg’l Med. Ctr., DAB No. 2639 at 14;
CMS Ex. 9 at 21.’ Where, as here, an institution provides the vast majority of its services
to outpatients, it unquestionably does not meet the statutory definition, and I need not
consider the methods CMS uses to decide closer cases.

Petitioner, nevertheless, argues that CMS violated section 1871(a)(2) of the Act (as well
as the Administrative Procedures Act and the Constitution) because it purportedly
changed the standards for hospital certification without promulgating regulations, in
violation of section 1871. P. Br. at 12. Section 1871(a)(2) precludes any “rule,
requirement, or other statement of policy” that “establishes or changes a substantive legal
standard governing” an entity’s eligibility to furnish services under Medicare, unless the
new standard is promulgated by regulation. Act §§ 1871(a) and (b) (emphasis added).
Petitioner’s argument fails because CMS neither “established” nor “changed” the
requirement for inpatient services. That definition is set forth in the statute and has
remained unchanged for 50 years. Petitioner points to no regulation, policy issuance, or
other reliable evidence suggesting that the agency has deviated from this position.

Petitioner also asserts that CMS has certified as hospitals institutions whose inpatient
services represent an even smaller share of their overall services than Petitioner Wills
Eye’s and that CMS’s treatment of Petitioner has been arbitrary and capricious.

° Medical practices may have outpaced the statute. Petitioner and others note that
surgical centers provide to outpatients increasingly sophisticated services, services that,
in the past, required hospitalization. Yet the centers are reimbursed at significantly lower
rates because they cannot be certified as hospitals. A legislative or policy change could
provide Petitioner and others the relief they seek but this is not the appropriate forum for
effecting such changes.

7 CMS considers whether to approve a new hospital that has a significant non-inpatient
mission based on “a detailed analysis of the facts of the applicant’s operations ....” In
the absence of “other clearly persuasive data,” CMS bases its determination on the
proportion of inpatient beds to all other beds. To meet the statutory requirement the
provider generally must devote 51% or more of its beds to inpatient care. Interpreting
“primarily engaged” to mean that an institution engages in that activity more than other
activities seems eminently reasonable. However, at the request of the applicant, CMS
may consider other factors and the “51% test” may not be dispositive in all cases. Survey
& Cert. Memo. 08-08, at 5 (January 11, 2008).
According to Petitioner, CMS has certified “hundreds of hospitals with small
complements of inpatient beds and exponentially greater volumes of outpatient than
inpatient services, including specialized hospitals.” P. Br. at 17. For purposes of
summary judgment, I accept that some institutions participating in the Medicare program
as hospitals may not qualify. In some cases, a hospital’s services may have changed over
time but CMS is not yet aware of that fact; in other cases, CMS personnel may have erred
when they certified the institution in the first place. But this does not change the
statutory definition, and I may not compound CMS’s purported errors by compelling
CMS to allow yet another unqualified institution to be certified. See Beverly Health &
Rehab.-- Springhill, DAB No. 1696 (1999) (holding that selective enforcement does not
bar future enforcement actions), aff'd, Beverly Health & Rehab Servs. v. Thompson, 223
F. Supp. 2d 73 (D.D.C. 2002). The remedy for these purported errors is set forth in the
statute and regulations: CMS may refuse to renew or may terminate the noncompliant
institution’s provider agreement. Act § 1866(b)(2)(B); 42 C.F.R. § 489.53(a)(1).°

Iam bound by the terms of the statute and cannot ignore the fact that Petitioner does not
meet the definition of a hospital, without regard to whether CMS has previously admitted
other hospitals that also do not meet the definition. Ariz. Surgical Hosp., DAB No. 1890
at 10 (“CMS’s actions or lack thereof regarding other facilities would provide no basis
for the ALJ to ignore or decline to enforce the statute’s clear requirements.”); see also
Pepper Hill Nursing & Rehab. Ctr., LLC, DAB No. 2395 at 10-11 (2011) (stating that an
ALJ and the Departmental Appeals Board are bound by the applicable statute and
regulations). Moreover, “CMS’s treatment of other facilities cannot undercut
[Petitioner’s] responsibility to show that it was in compliance with the applicable legal
requirements or remove CMS’s authority to take actions which it is authorized by statute
... to take.” Jewish Home of Eastern Pa., DAB No. 2254 at 15 (2009), aff'd, Jewish
Home of Eastern Pa. v. Centers for Medicare & Medicaid Servs., 693 F.3d 359 (2012).

® Tn fact, the Kearney Regional Medical Center decision alludes to CMS’s taking such
actions. Referring to an article published by the American Bar Association, Petitioner
Kearney complained about its own termination and speculated that CMS was widely
enforcing the “primarily engaged” definition because hospitals with low inpatient
volume, which should be considered ASCs, had managed to enroll as inpatient hospitals
“in order to obtain greater reimbursement under the hospital outpatient prospective
payment system.” Kearney Reg’! Med. Ctr., DAB No. 2639 at 15 (citing Mark Faccenda,
CMS Enforcement against Hospitals for Failure to be Primarily Engaged in Inpatient
Care, ABA Health eSource, Vol. 10 No.8 (April 2014)); see Freedom Pain Hosp., DAB
CR4530 (2016).
10

3. CMS is not bound by recommendations from the state agencies.

The Pennsylvania state agency surveyed Petitioner Wills Eye, concluded that it satisfied
the Medicare Conditions of Participation for hospitals, and recommended that it be
certified. Petitioner complains that CMS should have deferred to the state’s
recommendation.

Petitioner misconstrues the relationship between the state agency and CMS. Section
1864(a) says that CMS contracts with state agencies to determine the institutions’
compliance with regulatory requirements (referred to as conditions of participation).
CMS may accept the state agency’s certification “to the extent that [it] finds it
appropriate. Act § 1864(a). Moreover, section 1866(b)(2) of the Act gives CMS the
ultimate authority to determine whether an institution meets the provisions of section
1861. See also 42 C.F.R. § 488.12 (providing that the state agency recommends but CMS
determines whether a provider is eligible to participate in the Medicare program.); Big
Bend Hosp. Corp., DAB No. 1814 at 6 (2002), aff'd, Big Bend Hosp. Corp. v. Thompson,
88 F. App’x 4 (5th Cir. 2003) (holding that section 1864(a) authorizes CMS “to proceed
as it deems appropriate to make a determination about how to treat a certification”).”

4. Petitioner has not satisfied the requirements for issuance of subpoenas.

Finally, Petitioner asked me to subpoena unspecified agency records that, it claims, are
calculated to lead to admissible evidence through which it can demonstrate that CMS
discriminated in denying it hospital status. It also asked that I compel the testimony of
two CMS officials, Dale Van Wieren and Timothy J. Hock, and one state official, Charles
Schlegel. The regulations governing these proceedings do not allow such broad requests
for discovery or for the issuance of subpoenas that are not necessary to allow Petitioner to
present its case.

e First, the requesting party must identify the documents to be produced and
describe their locations with sufficient particularity to permit them to be found. 42
C.F.R. § 498.58(c)(1)-(2). Here, Petitioner identifies broad categories of records
and asks that CMS be compelled to identify and locate particular documents that
fit within those categories.

e Second, the regulation requires that the requesting party “specify the pertinent
facts the party expects to establish by the . . . witnesses or documents, and indicate
why those facts could not be established without use of a subpoena.” 42 C.F.R.

° For this reason, the opinions of a state agency employee, whom Petitioner asks me to
subpoena, are irrelevant. See 42 C.F.R. § 498.58(a) and (c) and discussion below.
11

§ 498.58(c)(3). But no material facts are in dispute, so additional documents
would not be relevant.

e Finally, the requesting party must establish that the documents or witnesses’
testimony sought are “reasonably necessary for the full presentation of a case.” 42
C.F.R. § 498.58(a). This case turns on a purely legal issue: whether, under the
statute, hospitals must provide services primarily to inpatients. I find that

ospitals must do so and that, without regard to the standard CMS applies,
Petitioner Wills Eye does not meet the statutory definition. Even if I were to grant
Petitioner the subpoenas it seeks, the principal purposes of which are to establish
that it has been treated disparately (P. Br. at 18), I cannot ignore the plain meaning
of the statute. The documents sought are therefore not necessary for a full
presentation of Petitioner’s case.

Thus, Petitioner’s request does not satisfy the requirements of section 498.58, and
Petitioner is not entitled to a subpoena for the documents it seeks or any of the three
officials whose testimony it seeks to compel.

Conclusion

The sine qua non of a hospital is that it provides the bulk of its services to inpatients.
Here, the undisputed evidence establishes that Petitioner Wills Eye does not primarily
provide services to inpatients; rather its inpatient services make up a very small
proportion of the services it provides. CMS properly denied its Medicare hospital
enrollment application. I therefore grant CMS’s motion for summary judgment and deny
Petitioner’s.

/s/
Carolyn Cozad Hughes
Administrative Law Judge

Subject
(“institution”)

12

ADDENDUM
Verb Direct object
(“engaged”) (“services”

Object of preposition
(“inpatients”)


Depart

ment of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Professional Management Services, LLC
(NPI: 1699731810; PTAN: 4384040001)

Petitioner,

Vv.

Centers for Medicare & Medicaid Services.

Docket No. C-15-3829
Decision No. CR4531
Date: February 17, 2016

DECISION

The Medicare enrollment and billing privileges of Petitioner, Professional Management
Services, LLC, are revoked pursuant to 42 C.F.R. § 424.57(e)! effective April 25, 2015,

based on noncompliance wit!
7).

I. Procedural History and

Palmetto, GBA (Palmetto), t
Supplier Clearinghouse for t

Petitioner’s facility on Marc!

42 C.F.R. § 424.57(c)(7)(i)(C) and (D) (Supplier Standard

Jurisdiction

ie Medicare administrative contractor operating the National
e Centers for Medicare & Medicaid Services (CMS),

notified Petitioner by letter dated April 10, 2015, that its Medicare supplier number was
revoked. Palmetto cited as authority for the revocation 42 C.F.R. §§ 405.800, 424.57(e),
424.535(a)(5), and 424.535(g). Palmetto imposed a two-year bar to re-enrollment
pursuant to 42 C.F.R. § 424.535(c). Palmetto alleged that an inspector attempted to visit

19 and 23, 2015, but could not gain access on either visit

' The 2014 revision of the Code of Federal Regulations (C.F.R.) is cited, unless

otherwise indicated.
because Petitioner’s business was closed and there was no business sign or hours of
operation posted. Because Petitioner was not open on either occasion that the inspector
visited and there were no posted business sign or hours, Palmetto concluded that
Petitioner was not operational. CMS Exhibit (Ex.) | at 11-13.

On April 23, 2015, Petitioner requested that Palmetto reconsider its initial determination
to revoke Petitioner’s Medicare enrollment and billing privileges. Petitioner explained in
its request for reconsideration that the services and supplies that Petitioner provides are
such that Petitioner falls within the exception to the requirement to maintain a facility
open to the public. Petitioner noted that since first enrolled in Medicare as a durable
medical equipment, prosthetics, and orthotic supplies (DMEPOS) supplier it has always
provided its supplies (shoes and inserts) and services (fittings and delivery) in the
facilities where its clients resided such as nursing homes and assisted living facilities
because its clients are unable to travel to a business location. CMS Ex. | at 9-10.

On May 24, 2015, a Palmetto hearing officer upheld the revocation. CMS Ex. | at 1-5.
At the beginning of the section of the reconsidered determination titled “Rationale,” the
hearing officer cited 42 C.F.R. § 424.57(c)(7) (Supplier Standard 7) as the legal basis for
revocation and the inspector’s inability to access Petitioner’s facility and the absence of a
business sign and posted hours of operation as the factual basis. CMS Ex. | at 1-2.
Subsequently, and still in her “Rationale,” the hearing officer stated that Petitioner’s
facility was not accessible to the inspector as required by 42 C.F.R. § 424.515. CMS Ex.
1 at 3-4. In the last paragraph of her “Rationale,” the hearing officer cited 42 C.F.R.

§§ 405.800, 424.57(e), 424.535(a)(5)(ii), and 424.535(g) and declared that Petitioner’s
supplier number was revoked. The hearing officer stated that the additional information
provided by Petitioner does not verify compliance with Supplier Standard 7. CMS Ex. 1
at 4. The hearing officer did not specifically address whether or not Petitioner met the
exception to the Supplier Standard 7 requirement for having a business facility and
posted hours of operation, or whether there is such an exception. In a section of the
reconsidered determination titled “Decision,” the hearing officer stated that Petitioner has
not shown compliance with Supplier Standard 7. The hearing officer also stated that
Petitioner has not provided evidence to show compliance with the standard for which
Petitioner was found noncompliant. CMS Ex. | at 4.

Petitioner filed a request for hearing (RFH) before an administrative law judge (ALJ) on
July 16, 2015. Petitioner filed with its request for hearing a collection of documents
which I treat as Petitioner’s exhibit (P. Ex.) 1. Departmental Appeals Board Electronic
Filing System (DAB E-File) Item # 1, la, and 1b. Many of the documents in P. Ex. 1,
but not all, are also included in CMS Ex. 1. On August 24, 2015, the case was assigned
to me and an Acknowledgement and Prehearing Order (Prehearing Order) was issued.
CMS filed its prehearing exchange and a motion for summary judgment on September
23, 2015, with CMS Exs. | and 2. Petitioner failed to timely file its exchange and on
November 19, 2015, I ordered Petitioner to show cause for why the case should not be
dismissed for abandonment or as a sanction. Petitioner responded to the order to show
cause by letter dated November 25, 2015, which I treat as P. Ex. 2. On December 3,
2015, CMS waived filing a reply brief. Petitioner submitted another letter dated
December 8, 2015, which I treat as P. Ex. 3. Neither party has objected to my
consideration of the documents offered and CMS Exs. | and 2 and P. Exs. 1 through 3 are
admitted as evidence.

IL. Discussion
A. Applicable Law

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

The Act requires the Secretary to issue regulations that establish a process for the
enrollment of providers and suppliers, including the right to a hearing and judicial review
in the event of denial or non-renewal. Act § 1866(j) (42 U.S.C. § 1395cc(j)). Pursuant to
42 C.F.R. § 424.505, a supplier must be enrolled in the Medicare program and be issued a
billing number to have billing privileges and to be eligible to receive payment for services
rendered to a Medicare eligible beneficiary. To receive direct-billing privileges, a
DMEPOS supplier must meet and maintain the Medicare application certification
standards set forth in 42 C.F.R. § 424.57(c). Among other requirements, a DMEPOS
supplier must maintain a physical facility on an appropriate site. 42 C.F.R.

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

§ 424.57(c)(7). An appropriate site for the physical facility must meet certain criteria,
including that the practice location is in a location accessible to the public, Medicare
beneficiaries, and CMS and its agents, and that the practice location is accessible and
staffed during posted hours of operation. 42 C.F.R. § 424.57(c)(7)(i)(B), (C). A
DMEPOS supplier must provide complete and accurate information in response to
questions on its application for Medicare billing privileges and must report to CMS any
changes in information supplied on the application within 30 days of the change.

42 C.F.R. § 424.57(c)(2). A DMEPOS supplier must permit CMS or its agent to conduct
on-site inspections to ascertain supplier compliance with the Medicare enrollment
standards. 42 C.F.R. § 424.57(c)(8). Finally, a DMEPOS supplier must at all times be
“operational,” which means 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 or services.” 42 C.F.R. § 424.502.

The Secretary has delegated the authority to revoke enrollment and billing privileges to
CMS. 42 C.F.R. § 424.535. CMS or its Medicare contractor may revoke an enrolled
supplier’s Medicare enrollment, billing privileges, and supplier agreement for any of the
reasons listed in 42 C.F.R. § 424.535. Specifically, CMS may revoke a supplier’s
enrollment and billing privileges if the supplier is found not to be in compliance with the
enrollment requirements. 42 C.F.R. § 424.535(a)(1). CMS may also revoke a currently
enrolled supplier’s Medicare enrollment and billing privileges if CMS determines, upon
on-site review, that the supplier is no longer operational to furnish Medicare covered
items or services, or the supplier fails 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 C.F.R. § 424.535(a)(5)(ii). Revocation of Medicare
enrollment and billing privileges fora DMEPOS supplier is required under 42 C.F.R.

§ 424.57(e) ifa DMEPOS supplier fails to meet the special requirements for such
suppliers established by 42 C.F.R. § 424.57(b) and (c). After a supplier’s Medicare
enrollment and billing privileges are revoked, the supplier is barred from reenrolling in
the Medicare program for one to three years. 42 C.F.R. § 424.535(c).

A supplier whose enrollment and billing privileges have been revoked may request
reconsideration and review as provided by 42 C.F.R. pt. 498. A supplier submits a
written request for reconsideration to CMS or its contractor. 42 C.F.R. § 498.22(a).

CMS or its contractor must give notice of its reconsidered determination to the supplier,
giving the reasons for its determination and specifying the conditions or requirements the
supplier failed to meet, and the right to an ALJ hearing. 42 C.F.R. § 498.25. Ifthe
decision on reconsideration is unfavorable to the supplier, the supplier has the right to
request a hearing by an ALJ and further review by the Departmental Appeals Board (the
Board). Act § 1866(j)(8) (42 U.S.C. § 1395ce(j)(8)); 42 C.F.R. §§ 424.545, 498.3(b)(17),
498.5. A hearing on the record, also known as an oral hearing, is required under the Act.
Crestview Parke Care Ctr. v. Thompson, 373 F.3d 743, 748-751 (6th Cir. 2004). The
supplier bears the burden to demonstrate that it meets enrollment requirements with
documents and records. 42 C.F.R. § 424.545(c).

B. Issues
Whether summary judgment is appropriate; and

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

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

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

1. Summary judgment is appropriate.

2. There was a basis to revoke Petitioner’s Medicare enrollment and
billing privileges pursuant to 42 C.F.R. § 57(e) for violation of
42 C.F.R. § 424.57(c)(7)(i)(C) and (D) (Supplier Standard 7).

3. The effective date of revocation is April 25, 2015, pursuant to
42 C.F.R. § 424.57(e).

A provider or supplier denied enrollment in Medicare or whose enrollment had been
revoked has a right to a hearing and judicial review pursuant to section 1866(h)(1) and (j)
of the Act and 42 C.F.R. §§ 424.454(a), 498.3(b)(1), (5), (6), (8), (15), (17), 498.5. The
Act requires a hearing on the record, also known as an oral hearing. Act §§ 205(b), 1866
(h)(1) and (j); Crestview Parke Care Ctr. v. Thompson, 373 F.3d 743, 748-51. A party
may waive appearance at an oral hearing, but must do so affirmatively in writing.

42 C.F.R. § 498.66. In this case, Petitioner has not waived the right to oral hearing or
otherwise consented to decision based only upon the documentary evidence or pleadings.
Accordingly, disposition on the written record alone is not permissible, unless CMS’
motion for summary judgment has merit.

Summary judgment is not automatic upon request. Rather, it is limited to certain specific
conditions. The procedures established by 42 C.F.R. pt. 498 related to ALJ hearings
applicable in this case do not include a summary judgment procedure. However,
appellate panels of the Board have long recognized the availability of summary judgment
in cases subject to 42 C.F.R. pt. 498, and the federal courts have recognized the Board’s
interpretative rule. See, e.g., Crestview, 373 F.3d at 749-750. Furthermore, I adopted a
summary judgment procedure as a matter of judicial economy within my authority to
regulate the course of proceedings and made it available to the parties in the litigation of
this case by my Prehearing Order. Prehearing Order §§ ILD, ILG.

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

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

a. Undisputed Facts
Petitioner does not dispute the facts necessary to conclude that there is a basis for

revocation based on violation of 42 C.F.R. § 424.57(c)(7)(C) and (D) (Supplier Standard
7).
On December 18, 2014, Palmetto notified Petitioner that Petitioner was required to
revalidate its enrollment as a DMEPOS supplier. CMS Ex. | at 47-49. Petitioner
completed, signed, and dated the enrollment application (CMS Form 855S) required for
revalidation on January 13, 2015. CMS Ex. | at 38, 45. The application reflects that
Petitioner supplies diabetic shoes/inserts and custom diabetic shoes/inserts. CMS Ex. | at
23. The application listed Petitioner’s business location as 707 Old Crossing Drive,
Baltimore, Maryland. The application stated Petitioner’s hours of operation at its
business location were 9 a.m. to 5 p.m., Monday through Friday. Petitioner did not check
the block to indicate that its facility was opened by appointment only. CMS Ex. | at 20.
The application Petitioner signed states that a “supplier must maintain a physical facility
on an appropriate site and must maintain a visible sign with posted hours of operation.”
CMS Ex. | at 15. The application stated that the supplier must permit CMS or its agent
to conduct an on-site inspection. The application also stated that a supplier must remain
open to the public for a minimum of 30 hours per week, except for physicians, physical
and occupational therapists, or suppliers working with custom orthotics and prosthetics.
CMS Ex. | at 15.

Petitioner does not dispute that on March 19, 2015, at about 2:00 p.m. and March 23,
2015, at about 11:54 a.m., Beverly Ailiff, an inspector contracted to act on behalf of
Palmetto, attempted to conduct on-site inspections of Petitioner’s facility at 707 Old
Crossing Drive, Pikesville, Maryland.’ Petitioner does not dispute that Inspector Ailiff
was at its business location. Petitioner does not dispute that the visits occurred during the
hours of operation that Petitioner listed in its revalidation application. Petitioner does not
dispute that it had no business sign with its name or posted hours of operation at the
address visited by Inspector Ailiff. Petitioner does not dispute that there were no
employees present or business activity at its facility at the time of the on-site visits.
Petitioner does not dispute the accuracy of Inspector Ailiff’s declaration. CMS Ex. 2.
Petitioner does not dispute that Inspector Ailiff could not gain access to its facility to
conduct a site inspection.

> In its revalidation application, Petitioner lists its business address as 707 Old Crossing
Drive, Baltimore, Maryland 21208. CMS Ex. | at 20. Investigator Aillif states in her
declaration that she attempted site visits at 707 Old Crossing Drive, Pikesville, Maryland
21208. CMS Ex. 2 at 1,42. Investigator Aillif also listed the city as Pikesville in her
report dated March 23, 2015. CMS Ex. 2 at 4. There is no dispute that Investigator Aillif
attempted site visits at Petitioner’s business location, despite the inconsistency in the
addresses.
b. Analysis

A single violation of a single supplier standard is an adequate basis for revocation of
billing privileges and enrollment. 1866/CPayday.com, DAB No. 2289 at 13 (2009). In
this case CMS cites multiple bases for revocation that depend upon different facts. I
conclude that the undisputed facts establish one of the bases cited by CMS, specifically
Petitioner’s failure to comply with 42 C.F.R. § 424.57(c)(7)(i)(C) and (D) (Supplier
Standard 7).

The facts also establish a violation of 42 C.F.R. § 424.57(c)(8) (Supplier Standard 8),
which requires that a DMEPOS supplier permit CMS or its agents to conduct on-site
inspections. However, neither the initial determination nor the reconsidered
determination cite 42 C.F.R. § 424.57(c)(8) as a basis for revocation. Arguably the
factual assertions in the initial and reconsidered determination may have been sufficient
notice that revocation was based on denial of access. However, I need not resolve
whether or not notice to Petitioner was legally sufficient under 42 C.F.R.

§§ 424.500(b)(1) and 498.20(a)(1), because there was adequate notice of a violation of
42 C.F.R. § 424.57(c)(7) (Supplier Standard 7) and sufficient facts to establish that
violation.

CMS also argues that revocation is appropriate under 42 C.F.R. § 424.535(a)(5)(ii) on the
theory that Petitioner was not operational at the times of the site visits. However, I
conclude that there are genuine disputes related to whether or not Petitioner was
operational and summary judgment is not appropriate as to revocation under 42 C.F.R.

§ 424.535(a)(5)(ii). Operational is defined by 42 C.F.R. § 424.502 to mean that a
“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 . . . to furnish” the items
or services for the type of provider or supplier. Thus, the definition of operational at

42 C.F.R. § 424.502, requires consideration of more than simply whether the door is
unlocked, the lights are on, and staff is present when the inspector shows up. CMS Ex. 1
at 8-10; P. Ex. 3. Revocation under 42 C.F.R. § 424.535(a)(5)(ii) would permit
revocation earlier than revocation under 42 C.F.R. §§ 424.57(c)(7). In this case,
revocation under 42 C.F.R. § 424.535(a)(5)(ii) would be effective March 23, 2015,
pursuant to 42 C.F.R. § 424.535(g), rather than April 25, 2015, based on a revocation
pursuant to 42 C.F.R. § 424.57(e). If CMS wishes to pursue the earlier revocation date
based on revocation under 42 C.F.R. § 424.535(a)(5)(i), CMS may file a motion within
60 days of the date of this decision requesting that I reopen this decision to permit an oral
hearing for purposes of determining whether or not Petitioner was operational on March
23, 2015, when the inspector last visited Petitioner’s business. 42 C.F.R. § 498.100.
The undisputed facts in this case clearly show that Petitioner violated 42 C.F.R.

§ 424.57(c)(7)(i)(C) and (D) (Supplier Standard 7). There is no question that Petitioner
had a physical facility at 707 Old Crossing Drive, Baltimore, Maryland as required by
42 C.F.R. § 424.57(c)(7). The violation of 42 C.F.R. § 424.57(c)(7)(i)(C) occurred in
this case because it is undisputed that Inspector Ailiff visited Petitioner’s facility during
the hours of operation listed in Petitioner’s revalidation application, but Petitioner’s
facility was not accessible and staffed. The violation of 42 C.F.R. § 424.57(c)(7)(i)(D)
occurred because it is undisputed that Petitioner had no visible sign at its facility with its
name and no posted hours of operation.

Petitioner asserts that it falls within the exception to requirements for a physical facility
with a sign, and posted hours of operation. RFH at 1; P. Ex. 1 at 1,3; CMS Ex. | at 8-9.
I accept for purposes of summary judgment that Petitioner is a supplier of custom
orthotics. However, Petitioner’s arguments about the applicability of the requirements of
Supplier Standard 7 for a physical facility and posted hours of operation must be resolved
against Petitioner as a matter of law.

The regulation requires that a DMEPOS supplier meet and certify in its application for
billing privileges that it meets and will continue to meet the 30 supplier standards
established by 42 C.F.R. § 424.57(c), including Supplier Standard 7 which requires that a
DMEPOS supplier:

(7) Maintains a physical facility on an appropriate site. An
appropriate site must meet all of the following:

(i) Must meet the following criteria:

(A)(1) Except for orthotic and prosthetic personnel
described in paragraph (c)(7)(i)(A)(2) of this section,
maintains a practice location that is at least 200 square
feet beginning—

(i) September 27, 2010 for a prospective DMEPOS
supplier;

(ii) The first day after termination of an expiring
lease for an existing DMEPOS supplier with a
lease that expires on or after September 27, 2010
and before September 27, 2013; or

(iii) September 27, 2013, for an existing DMEPOS
supplier with a lease that expires on or after
September 27, 2013.
10

(2) Orthotic and prosthetic personnel providing custom
fabricated orthotics or prosthetics in private practice do
not have to meet the practice location requirements in
paragraph (c)(7)(i)(A)(1) of this section if the orthotic
and prosthetic personnel are—

(i) State-licensed; or

(ii) Practicing in a State that does not offer State
licensure for orthotic and prosthetic personnel.

(B) Is in a location that is accessible to the public,
Medicare beneficiaries, CMS, NSC, and its agents. (The
location must not be in a gated community or other area
where access is restricted.)

(C) Is accessible and staffed during posted hours of
operation.

(D) Maintains a permanent visible sign in plain view and
posts hours of operation. If the supplier’s place of
business is located within a building complex, the sign
must be visible at the main entrance of the building or the
hours can be posted at the entrance of the supplier.

(E) Except for business records that are stored in
centralized location as described in paragraph (c)(7)(ii) of
this section, is in a location that contains space for storing
business records (including the supplier’s delivery,
maintenance, and beneficiary communication records).

(F) Is in a location that contains space for retaining the
necessary ordering and referring documentation specified
in § 424.516(f).

(ii) May be the centralized location for all of the business
records and the ordering and referring documentation of a
multisite supplier.

(iii) May be a “closed door” business, such as a pharmacy or
supplier providing services only to beneficiaries residing in a
nursing home, that complies with all applicable Federal,
11

State, and local laws and regulations. “Closed door”
businesses must comply with all the requirements in this
paragraph.

Petitioner clearly misread the requirements of 42 C.F.R. § 424.57(c)(7)(i)(A). _L accept
for purposes of summary judgment that Petitioner is a supplier of custom orthotics that
meets the requirements of 42 C.F.R. § 424.57(c)(7)(i)(A)(2). However, as a supplier of
custom orthotics, Petitioner is only relieved of the requirement of 42 C.F.R.

§ 424.57(c)(7)(i)(A)(1), which is the requirement to have a facility of 200 square feet.
Contrary to what Petitioner seems to believe, there is no exception for the requirements to
have a location accessible to the public and CMS or its agents; staffed and accessible
during posted hours of operation; with signage identifying the location as Petitioner’s and
posted hours of operation; and with space for retaining required records. 42 C.F.R.

§ 424.57(c)(7)(i)(B) — (F). Even if Petitioner is a “closed door” business within the
meaning of 42 C.F.R. § 424.57(c)(7)(iii), which I also accept for purposes of summary
judgment, the regulation specifically provides that ““‘[c]losed door’ businesses must
comply with all the requirements of” 42 C.F.R. § 424.57(c)(7). Thus, Petitioner’s
argument that it fit within an exception to the requirement to be open and accessible with
signage and posted hours of operation must be resolved against Petitioner as a matter of
law, because there simply is no such exception under 42 C.F.R. § 424.57(c)(7)(i).

Petitioner complains that it was given no opportunity to correct the problem that caused
the revocation. P. Ex. 2. However, 42 C.F.R. § 424.57(d) provides that CMS will revoke
billing privileges if it is found that a DMEPOS supplier fails to meet a supplier standard.
Unlike a revocation pursuant to 42 C.F.R. § 424.535(a)(1), there is no requirement to
accord a DMEPOS supplier an opportunity to correct its deficient compliance with
supplier standards.

Petitioner also refers in its request for hearing to a shared office arrangement and that
business signage and hours of operation can be posted at that office. P. Ex. 2; RFH. Iam
uncertain as to Petitioner’s intent in raising this issue. I have no authority to authorize a
corrective action plan proposed by Petitioner. I also note that Supplier Standard 29, with
limited exceptions, prohibits a DMEPOS supplier from sharing office space with any
other Medicare supplier or provider. 42 C.F.R. § 424.57(c)(29).

Pursuant to 42 C.F.R. § 424.57(e), revocation of Medicare enrollment and billing
privileges for violation of 42 C.F.R. § 424.57(b) or (c), is effective 15 days after the
notice of revocation.
12

III. Conclusion

I conclude, after viewing the evidence before me in the light most favorable to Petitioner
and drawing all inferences in Petitioner’s favor, that summary judgment is appropriate.
The undisputed evidence shows that there is a basis for the revocation of Petitioner’s
Medicare billing privileges effective April 25, 2015.

/s/
Keith W. Sickendick
Administrative Law Judge