Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

SME Medical Equipment, Inc.,
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-180
Decision No. CR3605

Date: January 29, 2015

DECISION

Palmetto GBA National Supplier Clearinghouse (NSC), an administrative contractor
acting on behalf of the Centers for Medicare & Medicaid Services (CMS), revoked the
Medicare enrollment and billing privileges of Petitioner, SME Medical Equipment, a
supplier of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).
I find Petitioner was not open and accessible during its posted hours, and CMS properly
revoked its Medicare enrollment and billing privileges.

I. Background

In a letter dated July 10, 2013, NSC revoked Petitioner’s Medicare supplier number,
pursuant to 42 C.F.R. §§ 405.800; 424.57(e); 424.535(a)(1); 424.535(a)(5)(ii); and
424.535(g). The letter notes that an NSC inspector attempted to visit Petitioner’s
business location on April 15, April 19, and April 22, 2013. The NSC inspector could
not access the premises on any of these occasions, and the inspector could not complete
an on-site visit. CMS Exhibit (Ex.) 1, at 8-23. NSC also imposed a two-year bar on
Petitioner’s re-enrollment in the Medicare program. CMS Ex. I, at 23.
Petitioner sought reconsideration. On September 24, 2013, NSC issued a reconsideration
decision affirming the revocation. Petitioner’s Request for Hearing (RFH), Ex. C. The
hearing officer stated that NSC is authorized to perform revalidation site inspections in
order to verify the information that NSC has on file for suppliers and to confirm
compliance with all supplier standards. RFH, Ex. C. The hearing officer concluded that
Petitioner was not open during its posted hours of operation on three separate occasions
when a NSC inspector attempted to complete an unannounced on-site visit, and the NSC
inspector could not verify compliance with the supplier standards. RFH, Ex.C. The
hearing officer affirmed the revocation of Petitioner’s supplier number, citing 42 C.F.R.
§ 424.57, and concluded that Petitioner “thas not shown compliance with supplier
standard 7” and “has not provided evidence to show they have complied with the
standard for which they were non-compliant, they cannot be granted access to the
Medicare Trust Fund by way of a Medicare supplier number.” RFH, Ex. C. The hearing
officer did not address the effective date of Petitioner’s revocation.

Petitioner filed a request for a hearing with the Departmental Appeals Board, Civil
Remedies Division, on October 28, 2013. The case was assigned to me, and I issued an
Acknowledgment and Pre-hearing Order (Pre-hearing Order). In accordance with my
Pre-hearing Order, CMS timely filed its pre-hearing exchange, consisting of a motion for
summary judgment and brief (CMS Br.) along with CMS Ex. |. Petitioner then filed its
pre-hearing exchange, including a prehearing brief and response to the CMS motion for
summary judgment (P. Br.) and Petitioner’s exhibits (P. Exs.) 1-2. CMS also filed a
response to Petitioner’s prehearing brief, an updated exhibit list, and CMS Ex. 2.

I denied CMS’s motion for summary judgment on February 28, 2014, and I scheduled a
prehearing conference. At the prehearing conference, the parties did not object to any of
the proposed exhibits, and I admitted them to the record. I also scheduled a video-
teleconference (VTC) hearing, for the purpose of cross-examination of the NSC
inspector, CMS’s proposed witness, and Basma Arain, Petitioner’s proposed witness.
March 20, 2014 Order Following Prehearing Conference.

I convened the VTC hearing on May 21, 2014. I participated from the Civil Remedies
Division office in Washington, and counsel for CMS, counsel for Petitioner, and both
witnesses participated from a VTC site in Chicago, Illinois. At the hearing the witnesses
authenticated their direct testimony, and counsel cross-examined them. After the hearing,
both parties filed post-hearing briefs and post-hearing reply briefs.
II. Analysis
A. Issue

Whether CMS had a legitimate basis to revoke Petitioner’s Medicare enrollment and
billing privileges.

B. Findings of Fact and Conclusions of Law

1. CMS properly revoked Petitioner’s Medicare supplier number because an
NSC inspector could not access Petitioner’s facility during Petitioner’s
posted hours of operation.

A DMEPOS supplier’ must meet and maintain the Medicare application certification
standards set forth in 42 C.F.R. § 424.57(c) in order to receive Medicare billing
privileges. One of the standards requires that all suppliers must be in a location
accessible to the public and CMS, and they must be accessible and staffed during posted
hours of operation. 42 C.F.R. § 424.57(c)(7)(i)(B) (C).

According to the site investigation report, the NSC inspector attempted to perform an
inspection of Petitioner’s facility at 2:20 p.m. on Monday, April 15, 2013, at 10:35 a.m.,
on Friday, April 19, 2013, and at 10:45 a.m. on Monday, April 22,2013. CMS Ex. 1, at
10. On all three days, the NSC inspector noted that the business was closed, the door was
locked, and no one answered his knocks on the door. CMS Ex. 2 (NSC inspector Decl.).
When the NSC inspector attempted to visit the facility for the second time, he noted that
the facility posted hours of operation. CMS Ex. 2. The posted hours were: 9:00 a.m. to
5:00 p.m. Monday through Friday. CMS Ex. 1, at 9; CMS Ex. 2. The NSC inspector
took photographs on each visit, and the photographs indicate the dates and times cited in
the report. CMS Ex. 1, at 15-18; CMS Ex. 2.

The NSC inspector testified that he will typically make an unannounced site visit attempt,
note the attempt, and come back another time. Transcript (Tr.) at 36. When the NSC
inspector attempted onsite inspections of Petitioner’s facility, each time he found the
entrance door locked, and no one answered when he knocked. Tr. at 31, 37-39. The
NSC inspector visited Petitioner’s facility for approximately two minutes on each
occasion, and each time he would “walk to the door and knock on the door, look around,
take some pictures, and leave.” Tr. at 31. When the NSC inspector returned to attempt to
visit the facility on April 22", he tried to open the door, but it was again locked, and he
also knocked on the door. Tr. at 37. He did not recall a doorbell at the facility but stated
he “would have pushed it if there would have been one.” Tr. at 37. The NSC inspector

' Petitioner, as a supplier of DMEPOS, is considered a “supplier” for Medicare purposes.
See 42 C.F.R. § 498.2 (definition of “Supplier”).
waited 10-15 seconds after knocking, and he stated that “[iJn the meantime you’re kind of
looking inside to see if there’s any movement or there’s any light. You kind of try to
make a judgment, okay, is anybody here. You knock again after waiting, you know, a
minute, 90 seconds, two minutes, depending.” Tr. at 37. The NSC inspector took
photographs of the posted hours and also took a photograph of mail in front of
Petitioner’s door “because it indicated to me that . . . there was nobody there because the
mail had not been picked up.” Tr. at 38. The NSC inspector testified that he could not
get inside the business, could not see any light or movement within the business, and
determined the business was closed on each of the three site inspection attempts. See Tr.
at 38-40; CMS Ex. 2.

Petitioner contends it was not in violation of the relevant regulatory requirements because
someone was present during the attempted on-site visits. Petitioner’s Chief Operating
Officer, Basma Arain, testified she worked at Petitioner’s facility on April 15, 19, and 22,
2013. Tr. at 11,20. Ms. Arain testified that when Petitioner moved locations in
December of 2012 and in April of 2013, several employees left. Tr. at 15,21. Ms. Arain
hired another person in May of 2013, and there are currently five employees working for
Petitioner. Tr. at 14,21. However, at the time of the attempted site inspections in April
of 2013, Petitioner was “short-staffed,” and Ms. Arain was the only employee working in
the facility during posted business hours. Tr. at 15, 20-21. During this time period, Ms.
Arain would stock inventory, answer phone calls, and conduct all of the day-to-day
operations of the business. Tr. at 21. Ms. Arain testified that Petitioner’s facility is about
2,500 square feet and is “a long and deep office.” Tr. at 14. Ms. Arain typically sits in
an office near the entrance to the facility, but during April of 2013, she was “juggling...
multiple office duties at that time and [she worked] in the middle of the office towards
the back answering phones or doing other office stuff in the back.” Tr. at 15.

Ms. Arain testified that hours of operation were not posted at the time of the NSC
inspector’s April 15, 2013 visit because she was “in the process of changing the old
posted hours . . . to make it look more presentable.” Tr. at 16. Ms. Arain also indicated
that mail is sometimes left by the front door of the facility. Tr. at 17. Ms. Arain testified
she worked alone during Petitioner’s posted hours all day on April 15, 19 and 22, 2013,
and she ate her lunch at the office. Tr. at 20,27. She worked near the back of the office
some of the day and stated that she might have locked the front door for a short period of
time “to keep the office secure since I was the only one there. I might have been in the
back or doing something and I wasn’t able to tend to the front office... .” Tr. at 21-22.
When questioned, Ms. Arain stated that if she were in the back of the office, she did not
think she would be able to hear a knock at the front door of the facility. Tr. at 22. She
also testified that Petitioner’s doorbell did not work. Tr. at 22. Ms. Arain agreed that it is
possible that the NSC inspector visited Petitioner on April 15, 19, and 22, 2013 and
attempted to make staff aware of his visits, but Ms. Arain was unable to hear his knocks
on those days because she was not near the front door. Tr. at 23.
The regulation at 42 C.F.R. § 424.57(c)(7)(i)(B),(C) mandates that a supplier be ina
location accessible to the public, Medicare beneficiaries, CMS, NSC, and its agents.
Further, it must be accessible and staffed during posted hours of operation. I find the
NSC inspector’s testimony regarding his attempts to visit Petitioner’s business location to
be very credible. The NSC inspector testified in detail regarding his recollections of his
visits to Petitioner on three separate occasions. The NSC inspector’s testimony is
supported by other evidence in the record, including his site inspection report and
photographs taken contemporaneously with the site inspection attempts. Moreover, Ms.
Arain did not generally dispute the NSC inspector’s account of the events and agreed that
on the dates and times in question the door to Petitioner’s facility may have been locked,
and she might not have heard the NSC inspector’s knocks at the door. Tr. at 21-23.

Based on these facts, I agree that Petitioner was not in compliance with all of the
standards set forth in section 424.57(c). The facility posted hours of operation from 9:00
a.m. to 5:00 p.m. Monday through Friday. Yet, because Petitioner employed only one
office staff member in April of 2013, Petitioner’s facility could not be accessed at the
time of the attempted site inspections during Petitioner’s posted hours. During the three
attempted site visits, any member of the public, Medicare beneficiary, or CMS inspector
could not access Petitioner’s facility because its door was locked, the doorbell was not
working, and knocks could not be heard by the one staff member working in the back of
the facility. Petitioner therefore did not comply with 42 C.F.R. § 424.57(c)(7).

The regulatory standard would have no meaning if suppliers were not always required to
adhere to their posted hours of operation and keep their facilities accessible to the public.
A supplier may not be inaccessible, even for a short period of time, during its posted
hours of operation and must be available to meet the needs of beneficiaries. Complete
Home Care, Inc., DAB No. 2525, at 5 (2013). Petitioner is responsible for making the
necessary arrangements to keep its business open and allow beneficiaries to access the
facility during posted hours of operation while allowing for stocking of inventory, phone
calls, breaks for staff members, and any other business activities. As explained ina
similar case:

A Medicare supplier differs from a strictly private business in that it is
an integral part of a publicly run program. The requirement that a
supplier be open at all times during normal business hours reflects
CMS’s determination that a supplier be available to beneficiaries to meet
their needs and to alleviate their medical conditions.

Ato Z DME, LLC, DAB CR1995, at 6 (2009), aff’d DAB No. 2303 (2010). Also,
regulatory drafters contemplated allowing facilities to temporarily close during posted
hours to account for circumstances including short-term closures but instead chose to
emphasize that a supplier’s place of business must always remain publicly accessible.
See Complete Home Care, Inc., DAB No. 2525, at 6. The drafters explained in the
preamble to the final rule that they believed a supplier “should be available during posted
business hours” and “should do its best to plan and staff for temporary absences.”
75 Fed. Reg. 52,629, 52,636 (2010).

2. Iam unable to reverse NSC’s revocation of Petitioner even though it was
compliant with Medicare supplier standards during prior inspections.

Petitioner also argues it should not have its Medicare billing privileges revoked because
Petitioner is a legitimate DMEPOS supplier and has always maintained compliance with
Medicare enrollment requirements. At the hearing, the NSC inspector agreed that he
inspected Petitioner on several previous occasions when Petitioner was located at another
location, and he found Petitioner to be open, accessible, and operating. Tr. at 32. The
NSC inspector also agreed that Petitioner’s business operated for a number of years and
Petitioner had “passed our inspections . . . has inventory . . . has the records that are
required [and] the licenses that are needed... .” Tr. at 35. There is no dispute that prior
to the spring of 2013, Petitioner was a legitimate DMEPOS supplier at its previous
location, operating in compliance with Medicare enrollment requirements.

However, showing that Petitioner was in compliance with all Medicare requirements for
several years and previous inspections does not provide a basis for reversing Petitioner’s
revocation. The revocation of Petitioner’s Medicare enrollment is based on three
attempted site visits conducted in April of 2013, during which the inspector found
Petitioner’s business not accessible on all occasions. CMS is authorized to revoke a
supplier’s Medicare billing privileges based upon the failure to be accessible when an
inspector visits its address, regardless of whether it may have been open and accessible at
some earlier or later time. See Mission Home Health et al., DAB No. 2310, at 6 (2010).

Petitioner’s noncompliance with even one supplier standard is a sufficient basis for
revoking Petitioner’s Medicare enrollment, and I need not address other possible grounds
for revocation. See 1866I1CPayday.com, DAB No. 2289, at 13. I find Petitioner did not
maintain all the Medicare application certification standards set forth in 42 C.F.R.

§ 424.57(c) because Petitioner was not accessible to the public, Medicare beneficiaries,
and NSC, and it was not properly staffed during its posted hours of operation. Thus, I
find CMS was authorized to revoke Petitioner’s Medicare enrollment and billing
privileges.

/s/
Joseph Grow
Administrative Law Judge


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

Center for Tobacco Products,
(FDA No. FDA-2014-H-2028)
Complainant
v.

M and MJ Inc. / Norman Jonna
d/b/a 7 Craft Shopper,

Respondent.
Docket No. C-15-512
Decision No. CR3602

Date: January 29, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative

complaint on Respon

lent, M and MJ Inc. / Norman Jonna d/b/a 7 Craft Shopper, at

20040 Schoolcraft, Detroit, Michigan 48223, and by filing a copy of the complaint with

the Food and Drug A

ministration’s (FDA) Division of Dockets Management. The

complaint alleges that 7 Craft Shopper impermissibly sold cigarettes to a minor and failed
to verify, by means of photo identification containing a date of birth, that the purchaser
was 18 years of age or older, thereby violating the Federal Food, Drug, and Cosmetic Act

(Act), 21 U.S.C. § 30
seeks to impose a $25

As provided for in 21
complaint on Respon

et seq., and its implementing regulations, 21 C.F.R. pt. 1140. CTP
0 civil money penalty against Respondent 7 Craft Shopper.

C.F.R. §§ 17.5 and 17.7, on December 3, 2014, CTP served the
lent 7 Craft Shopper by United Parcel Service. In the complaint

and accompanying cover letter, CTP explained that, within 30 days, Respondent should
pay the penalty, file an answer, or request an extension of time in which to file an answer.

CTP warned Respond

ent that, if it failed to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

Respondent 7 Craft Shopper has neither filed an answer within the time prescribed, nor
requested an extension of time within which to file an answer. Pursuant to 21 C.F.R.

§ 17.11, Lassume that the facts alleged in the complaint (but not its conclusory
statements) are true. Specifically:

e At approximately 6:38 p.m. on November 22, 2013, at Respondent’s business
establishment, 20040 Schoolcraft, Detroit, Michigan 48223, an FDA-
commissioned inspector observed Respondent’s staff selling a package of
Newport Box 100 cigarettes to a person younger than 18 years of age. The
inspector also observed that staff failed to verify, by means of photographic
identification containing a date of birth, that the purchaser was 18 years of age or
older;

e Ina warning letter dated February 6, 2014, CTP informed Respondent of the
inspector’s November 22, 2013 observations, and that such actions violate federal
law, 21 C.F.R. § 1140.14(a) and (b)(1). The letter further warned that
Respondent’s failure to correct its violations could result in a civil money penalty
or other regulatory action;

e At approximately 4:31 p.m. on May 10, 2014, at Respondent’s business
establishment, 20040 Schoolcraft, Detroit, Michigan 48223, FDA-commissioned
inspectors documented Respondent’s staff selling a package of Newport Box 100s
cigarettes to a person younger than 18 years of age.

These facts establish Respondent 7 Craft Shopper’s liability under the Act. The Act
prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section 906(d)
of the Act. 21 U.S.C. § 387£(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).
The Secretary of the U.S. Department of Health and Human Services issued the
regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1;
see 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21
C.F.R. § 1140.14(a), no retailer may sell cigarettes to any person younger than 18 years
of age. Under 21 C.F.R. § 1140.14(b)(1), retailers must verify, by means of photographic
identification containing a purchaser’s date of birth, that no cigarette purchasers are
younger than 18 years of age.

A $250 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $250 against Respondent

M and MJ Inc. / Norman Jonna d/b/a 7 Craft Shopper. Pursuant to 21 C.F.R. § 17.11(b),
this order becomes final and binding upon both parties after 30 days of the date of its
issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Elmwood Care Center,
(CCN: 55-5819),
Petitioner,
v.
Centers for Medicare & Medicaid Services

Docket No. C-14-1694

ALJ Ruling No. 2015-7

Date: January 28, 2015

DISMISSAL
For the reasons set forth below, I conclude that Petitioner, Elmwood Care Center, is not
entitled to Administrative Law Judge (ALJ) review of a determination made by the
Centers for Medicare & Medicaid Services (CMS) following a May 30, 2014 survey. I
therefore dismiss its hearing request pursuant to 42 C.F.R. § 498.70(b).
Discussion
Petitioner has no right to a hearing because CMS did not impose a remedy.’

Petitioner is a skilled nursing facility located in Berkeley, California, that participates in
the Medicare program as a provider of services. On May 30, 2014, the California
Department of Public Health (State Agency) completed a survey of the facility and found
that it was not in substantial compliance with federal requirements. By letter dated June
6, 2014, the State Agency (as authorized by CMS) advised Petitioner that, based on the

survey findings, a penalty (denial of payment for new admissions) would be effectuated
unless the facility achieved substantial compliance prior to August 30, 2014. CMS Ex. 2.

' [make this one finding of fact/conclusion of law.
The facility submitted an acceptable plan of correction, and, following a revisit survey,
the State Agency (and CMS) determined that it had corrected its deficiencies as of
July 14, 2014. No penalties were imposed. CMS Ex. 3.

By letter dated August 5, 2014, Petitioner requested a hearing to challenge the May 30
survey findings.

CMS now moves to dismiss Petitioner’s hearing request. Petitioner has not responded to
CMS’s motion.

The hearing rights of a long-term care facility are established by federal regulations at 42
C.F.R. Part 498. A provider dissatisfied with an initial determination is entitled to further
review, but administrative actions that are not initial determinations are not subject to
appeal. 42 C.F.R. § 498.3(a). The regulations specify which actions are “initial
determinations” and set forth examples of actions that are not. A finding of
noncompliance that results in the imposition of a remedy specified in 42 C.F.R.

§ 488.406 (with a very limited exception, not applicable here) is an initial determination
for which a facility may request an ALJ hearing. 42 C.F.R. § 498.3(b)(13). But a facility
has no right to a hearing unless CMS imposes one of the specified remedies. Lutheran
Home -- Caledonia, DAB No. 1753 (2000); Schowalter Villa, DAB No. 1688 (1999);
Arcadia Acres, Inc., DAB No. 1607 (1997). The remedy, not the citation of a deficiency,
triggers the right to a hearing. Schowalter Villa; Arcadia Acres, Inc. Where CMS
withdraws the remedies or otherwise declines to impose one, Petitioner has no hearing
right. See Fountain Lake Health & Rehabilitation, Inc., DAB No. 1985 (2005).

Because CMS has imposed no remedies, Petitioner has no right to an ALJ hearing, and
this matter must be dismissed. 42 C.F.R. § 498.70(b). I therefore grant CMS’s motion.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Caribe Market, LLC / Joseph Shehada
d/b/a Caribe Market,

Respondent.

Docket No. C-15-466
FDA Docket No. FDA-2014-H-1994

Decision No. CR3600

Date: January 28, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Caribe Market, LLC / Joseph Shehada d/b/a Caribe Market that
alleges facts and legal authority sufficient to justify the imposition of a $500 civil money
penalty. Respondent did not answer the Complaint, nor did Respondent request an
extension of time within which to file an answer. Therefore, I enter a default judgment
against Respondent and assess a $500 civil money penalty.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent sold cigarettes to minors, failed to
verify that cigarette purchasers were 18 years of age or older, and sold individual
cigarettes, thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C.
§ 301 et seq., and its implementing regulations, Cigarettes and Smokeless Tobacco,

21 C.F.R. pt. 1140 (2013). CTP seeks a civil money penalty of $500.
On December 10, 2014, CTP served the Complaint on Respondent by United Parcel

Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days, Respondent should pay the proposed
penalty, file an answer, or request an extension of time within which to file an answer.
CTP warned Respondent that if it failed to take one of these actions within 30 days, an

Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision

ordering Respondent to pay the full amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor has it

requested an extension. Pursuant to 21 C.F.R. § 17.11(a), 1 am required to “assume the
facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the

Act, issue a default judgment and impose a civil money penalty. Accordingly, I must
determine whether the allegations in the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Caribe Market, an establishment that sells tobacco products and
is located at 560 Noble Avenue, Bridgeport, Connecticut 06608. Complaint { 3.

e During an inspection of Respondent’s establishment on October 8, 2013, at

approximately 2:30 PM, an FDA-commissioned inspector observed that “a person

younger than 18 years of age was able to purchase two individual Newport

cigarettes .. . [.]” The inspector also observed that “the minor’s identification was

not verified before the sale . . . [.]” Complaint § 10.

¢ On November 21, 2013, CTP issued a Warning Letter to Respondent regarding the

inspector’s observations from October 8, 2013. The letter explained that the

observations constituted violations of regulations found at 21 C.F.R. § 1140.14(a),
(b)(1), and (d) and that the named violations were not necessarily intended to be
an exhaustive list of all violations at the establishment. The Warning Letter went
on to state that if Respondent failed to correct the violations, regulatory action by

the FDA or a civil money penalty action could occur and that Respondent is
responsible for complying with the law. Complaint ¥ 10.

e Joseph Shehada responded to the Warning Letter in a November 30, 2013 letter.

Mr. Shehada admitted that the store sold individual cigarettes to a minor, but

explained that “it was because a friend was covering the cash register at the time,”
and that the friend would no longer be working at the store. He further stated that

it was the store’s practice “not to sell loose cigarettes to any customer” and that
Respondent had “posted signs ‘telling [its] customers that [it] will not sell loose
cigarettes’ and that it checks identification.” Complaint § 11.
e During a subsequent inspection of Respondent’s establishment on July 28, 2014,
at approximately 10:24 AM, FDA-commissioned inspectors documented that “a
person younger than 18 years of age was able to purchase a package of Newport
Box cigarettes . . . [.]” The inspectors also documented that “the minor’s
identification was not verified before the sale... .” Complaint § 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of cigarettes to any person younger than 18 years of age. 21 C.F.R. § 1140.14(a).
The regulations also require retailers to verify, by means of photo identification
containing a purchaser’s date of birth, that no cigarette purchasers are younger than

18 years of age. 21 C.F.R. § 1140.14(b)(1). Moreover, under 21 C.F.R. § 1140.14(d),
“(n]o retailer may break or otherwise open any cigarette or smokeless tobacco package to
sell or distribute individual cigarettes.” 21 C.F.R. § 1140.14(d).

Taking the above alleged facts as true, Respondent violated the prohibition against selling
cigarettes to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a), on October 8,
2013, and July 28, 2014. On those same dates, Respondent also violated the requirement
that retailers verify, by means of photo identification containing a purchaser’s date of
birth, that no cigarette purchasers are younger than 18 years of age. 21 C.F.R.

§ 1140.14(b)(1). Finally, on October 8, 2013, Respondent violated 21 C.F.R.

§ 1140.14(d) by selling individual cigarettes. Therefore, Respondent’s actions constitute
violations of law that merit a civil money penalty.

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

/s/
Steven T. Kessel
Administrative Law Judge


Department of He

alth and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Re

medies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1964)

Complainant,

J B Express Greens
d/b/a

Vv.

boro LLC / Yong A Bryant
JB Express,

Respondent.

Docket No. C-15-435

Decision No. CR3599

Date: January 27, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP)

began this matter by serving an administrative

complaint on Respondent, J B Express Greensboro LLC / Yong A Bryant d/b/a J B
Express, at 2400 Randleman Road, Greensboro, North Carolina 27406, and by filing a

copy of the complaint with the Food and
Dockets Management. The complaint al
cigarettes and sold cigarettes to minors, t
Cosmetic Act (Act), 21 U.S.C. § 301 et s
and Smokeless Tobacco, 21 C.F.R. pt. 1
penalty against Respondent J B Express.

Drug Administration’s (FDA) Division of

eges that J B Express unlawfully sold individual
hereby violating the Federal Food, Drug, and
eq., and its implementing regulations, Cigarettes
40. CTP seeks to impose a $250 civil money

As provided for in 21 C.F.R. §§ 17.5 and

17.7, on November 25, 2014, CTP served the

complaint on Respondent J B Express by United Parcel Service. In the complaint and
accompanying cover letter, CTP explained that, within 30 days, Respondent should pay

the penalty, file an answer, or request an
CTP warned Respondent that, if it failed

extension of time in which to file an answer.
to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

Respondent J B Express has neither filed an answer within the time prescribed, nor
requested an extension of time within which to file an answer. Pursuant to 21 C.F.R.
§ 17.11, Lassume that the facts alleged in the complaint (but not its conclusory
statements) are true. Specifically:

e Atan unspecified time on October 11, 2013, at Respondent’s business
establishment, 2400 Randleman Road, Greensboro, North Carolina 27406, an
FDA-commissioned inspector observed the clerk on duty sell two individual
Newport cigarettes to a customer;

e Ina warning letter dated December 12, 2013, CTP informed Respondent of the
inspector’s October 11, 2013 observations, and that such actions violate federal
law, 21 C.F.R. § 1140.14(d). The letter further warned that Respondent’s failure
to correct its violations could result in a civil money penalty or other regulatory
action;

e At approximately 10:15 a.m. on July 3, 2014, at Respondent’s business
establishment, 2400 Randleman Road, Greensboro, North Carolina 27406,
FDA-commissioned inspectors observed that a person younger than 18 years of
age was able to purchase a package of Newport Box cigarettes.

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

21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

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

A $250 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $250 against Respondent J B
Express Greensboro LLC / Yong A Bryant d/b/a J B Express. Pursuant to 21 C.F.R.

§ 17.11(b), this order becomes final and binding upon both parties after 30 days of the
date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Reverence Home Health and Hospice
(NPI: 1649524331)
(PTAN: 1235530002),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-1746
Decision No. CR3597

Date: January 23, 2015

DECISION

Petitioner, Reverence Home Health and Hospice, challenges the original denial of its
enrollment in the Medicare program as a Durable Medical Equipment, Orthotics,
Prosthetics and Supplies (DMEPOS) supplier and, following the acceptance of its
Corrective Action Plan (CAP), the assigned effective date of enrollment. For the reasons
stated below, I affirm the original determination to deny Petitioner’s enrollment
application and conclude that the subsequently assigned effective date of October 9,
2013, is permissible.

I. Background and Procedural History

Petitioner acquired an infusion pharmacy from Genesys Health Enterprises on January 1,
2013. CMS Exhibit (Ex.) 7 at 1. Petitioner believed that Genesys Health Enterprises
previously obtained a provider transaction access number (PTAN) for the infusion
pharmacy location that Petitioner purchased, however, that location was not separately
enrolled as a Medicare supplier. CMS Ex. 7 at 1-2. Due to the change in ownership of
the infusion pharmacy, Petitioner submitted a Form CMS-855S enrollment application to
Palmetto GBA National Supplier Clearinghouse (Palmetto NSC or NSC), an

administrative contractor acting on behalf of the Centers for Medicare & Medicaid
Services (CMS), seeking an effective enrollment date of January 1,2013. CMS Ex. 1.
The enrollment application was signed on February 4, 2013. CMS Ex. | at 39.

On April 30, 2013, Palmetto NSC requested additional information from Petitioner in
order to process the enrollment application. CMS Ex. | at 89. Petitioner responded and
Palmetto NSC received the requested information on May 7, 2013. CMS Ex. | at 79-91.
On April 30, 2013, NSC arranged for an inspector to conduct a site inspection of
Petitioner’s location. CMS Ex. | at 92; CMS Ex. 2 at 1. NSC specifically requested that
the inspector “take pictures of the sign... .” CMS Ex. | at 92.

The site inspection took place on May 29, 2013. CMS Ex. 2 at 1,2. The inspection
report included comments by the inspector that “[Petitioner] does not have a sign on the
building and supplier states . . . a sign will probably not be put up. There is a sign in the
building on the door.” CMS Ex. 2 at 6,7. The inspector also noted that Petitioner shared
a building entrance with another supplier of durable medical equipment. CMS Ex. 2 at 3.
The inspector commented that “[Petitioner] is located in the Materials Management
Building on the Genesys Hospital Campus. It shares an entrance with Genesys Health
Enterprises.” CMS Ex. 2 at 7.

The inspector requested additional information and on June 6, 2013, Petitioner faxed the
information to Palmetto NSC. CMS Ex. 2 at 32-35.

NSC issued an initial determination on September 4, 2013, denying billing privileges to
Petitioner based on noncompliance with Supplier Standards 7, 14, and 29. Palmetto NSC
offered Petitioner an opportunity to file a CAP or a reconsideration request.’ CMS Ex. 3.

Petitioner filed a CAP and reconsideration request, separately. Both were dated
September 26, 2013. Petitioner’s CAP and reconsideration request filings are very
similar and at times include identical text. They also have the same attachments. Both
filings were timely. CMS Ex. 4; CMS Ex. 5.

' Although page | of the initial determination indicated that Petitioner may file a CAP or
reconsideration request, on page 3 it also stated that Petitioner has the “right to request
reconsideration under 42 CFR 498.22, which will be conducted by an independent fair
hearing officer.” CMS Ex. 3 at 1,3. I do not construe NSC’s use of the disjunctive in the
initial determination to mean that NSC intended to force Petitioner to choose between
filing a CAP and a reconsideration request. I know of no legal basis for requiring such a
choice and CMS has not taken the position that Petitioner’s filing of a CAP precluded
Petitioner from filing a reconsideration request. Petitioner apparently did not believe it
was precluded from filing both a CAP and reconsideration request because it filed both
on the same day. See CMS Ex. 4; CMS Ex. 5.
On October 10, 2013, Palmetto NSC issued a decision in which it found that Petitioner
was in compliance with all the DMEPOS supplier standards based on the CAP Petitioner
submitted. CMS Ex. 6 at 3. On October 11, 2013, Palmetto sent a determination to
Petitioner that set October 9, 2013 as the effective date for billing privileges; however,
this determination did not provide any notice of appeal rights. CMS Ex. 6 at 1.

After Palmetto NSC set the October 9, 2013 effective date, Petitioner continued to press
its reconsideration request, disputing the basis for the initial denial of its enrollment
application and seeking to obtain additional relief in the form of an earlier effective date.
CMS Ex. 7; CMS Ex. 8. In response, Palmetto NSC sent an email indicating that it was
upholding the October 9, 2013 effective date determination. CMS Ex. 8 at 2. Petitioner
filed a request for hearing with the Civil Remedies Division on December 11, 2013.
CMS Ex. 9.

In its hearing request, Petitioner continued to dispute, among other things, that it had
been out of compliance with the supplier standards during the May 2013 site inspection,
and specifically disputed the October 9, 2013 effective date. CMS Ex. 9. The Director of
the Civil Remedies Division docketed the request as C-14-449, and administratively
assigned the case to me for a hearing and decision. In response to my December 24,
2013 Acknowledgment and Prehearing Order, CMS filed a motion to dismiss or in the
alternative a motion for summary judgment arguing that Petitioner had never filed a
reconsideration request; CMS later withdrew the motion after Petitioner submitted a copy
of the reconsideration request. CMS Ex. 10 at 2. CMS conceded that it never issued a
formal reconsidered determination but urged me to adjudicate the case because it was
clear that if I remanded the case, Palmetto NSC would uphold the initial determination to
deny. CMS Ex. 10 at 2. CMS also stated that if Petitioner requested remand, CMS
would consent. CMS Ex. 10 at 2. I remanded the case for Palmetto NSC to assign a
contract hearing officer to consider Petitioner’s request for reconsideration because,
under the regulations, a hearing officer needed to render the reconsidered determination.
I also stated that NSC’s email was probably not intended as a reconsidered determination
because it did not meet the regulatory requirements of a reconsidered determination.
Specifically, the email did not provide a basis for denying the reconsideration request and
a notice of appeal rights. The remand order stated that when the contract hearing officer
rendered the reconsidered determination, notice would be provided to Petitioner that it
had the right to request a hearing. CMS Ex. 10 at 3.

Following remand, a Palmetto NSC hearing officer issued a reconsidered determination
on June 18, 2014, in which it upheld Palmetto NSC’s previous action. The hearing
officer noted that on reconsideration, its scope of review was limited to the circumstances
as presented during the initial determination to deny enrollment. The hearing officer
reiterated that at the time of the May 2013 inspection, Petitioner did not meet the
compliance standards. However, the hearing officer explained that the Palmetto NSC
reviewed Petitioner’s CAP and determined that subsequent to the May 2013 inspection,
Petitioner met the compliance standards. The hearing officer stated that the Palmetto
NSC correctly determined Petitioner’s enrollment effective October 9, 2013 based on
42 CFR. § 405.812. CMS Ex. 11.

Petitioner filed another request for hearing on August 15, 2014, in which it again disputed
NSC’s determination that Petitioner had been out of compliance with the supplier
standards during the May 2013 site inspection and that the October 9, 2013 effective date
was correct. Petitioner requested an effective date of enrollment of January 1, 2013 or, in
the alternative, May 17,2013. This request was docketed as C-14-1746, and the Director
of the Civil Remedies Division administratively assigned this case to me for a hearing
and decision. In response to my September 2, 2014 Acknowledgment and Prehearing
Order (Order), CMS filed a motion for summary disposition and supporting brief (CMS
Br.) with eleven proposed exhibits marked as CMS Exs. 1-11. Petitioner filed an
opposition to the CMS motion (P. Br.) and one proposed exhibit marked as P. Ex. 1.
CMS then filed a reply brief (CMS Reply).

II. Decision on the Record

The parties have not objected to any of the submitted exhibits. Order § 7. Therefore, I
admit CMS Exs. 1-11 and P. Ex. 1 into the record.

CMS did not offer any witnesses to testify in this case and did not submit any written
direct testimony. Petitioner submitted a witness list with one witness, but did not provide
any written direct testimony as required by my Order. Order § 8. As stated in my Order,
an in-person hearing to cross-examine witnesses would only be necessary if a party files
admissible, written direct testimony, and the opposing party requests to cross-examine
the witness. Order J 10. Because there was no written direct testimony offered by the
parties, neither party could request to cross-examine a witness. Therefore, I will issue a
decision based on the written record. See Marcus Singel, D.P.M., DAB No. 2609, at 5-6
(2014).

III. Issue
Whether CMS had a legitimate basis for denying Petitioner’s enrollment application.
IV. Jurisdiction

The denial of a supplier’s enrollment in the Medicare program is an initial determination
that is subject to review by an administrative law Judge (ALJ). 42 U.S.C. § 1395cc(j)(8);
42 CFR. §§ 405.803; 498.3(b)(17); 498.5(1)(2); see also 42 C.F.R. § 405.812 (stating
tules for setting effective date of enrollment if an ALJ determines that a DMEPOS
supplier should not have been denied enrollment). Therefore, I have jurisdiction to
consider the issue stated above.
Without expressly challenging my jurisdiction, CMS indicates in its brief that once
Palmetto NSC approved Petitioner’s CAP and established the October 9, 2013 effective
date, Petitioner’s original reconsideration request of the denial of the enrollment
application (CMS Ex. 5) was moot. CMS Br. at 8. This is incorrect because Palmetto
NSC, following its decision to accept Petitioner’s CAP, established Petitioner’s effective
date as one that is later than could have been assigned should Petitioner have prevailed on
the merits of its reconsideration request. A determination on reconsideration by a
contract hearing officer or a decision by an ALJ favorable to Petitioner could have
resulted in an effective date as early as the date of the initial determination denying
Petitioner’s enrollment application (42 C.F.R. § 405.812), which in this case was
September 4, 2013. CMS Ex. 3 at 1. Therefore, because the approval of the CAP did not
provide full redress to Petitioner, Petitioner, as a prospective supplier, had the right to a
reconsidered determination as the initial determination still “affects” Petitioner.

42 CFR. § 498.22(a); see also 42 C.F.R. § 498.5(1)(1); Victor Alvarez, M.D., DAB No.
2325, at 3(2010) (indicating that CMS’s determination to set an effective date for billing
privileges that is later than the date sought by a supplier is consider to be a denial of
enrollment for purposes of appeal rights). Petitioner timely filed a reconsideration
request. Therefore, unless Palmetto NSC’s CAP decision granted Petitioner a fully
favorable determination, Palmetto NSC was under an obligation to issue a reconsidered
determination under 42 C.F.R. § 498.24-498.25; see also 42 C.F.R. §§ 405.803
(providing that suppliers have the right to appeal the initial determination to deny a
supplier’s enrollment application by following the procedures in 42 C.F.R. Part 498 and
indicating that a contract hearing officer will conduct the reconsideration), 405.806(d)
(discussing consequences of the reversal of a denial of enrollment), 405.812 (provides
instructions for setting an effective date for billing privileges if a contract hearing officer
determines that a DMEPOS supplier’s denied enrollment application meets the supplier
standards and any other requirements that apply).

Further, since the reconsidered determination that Palmetto NSC issued was not fully
favorable (CMS Ex. 11), Petitioner was still an affected party (see 42 C.F.R. § 498.2
(definition of Affected party) and has the right to ALJ review. 42 C.F.R. §§ 498.5(1)(2),
498 .40(a). In fact, both of Petitioner’s requests for hearing specifically continue to
dispute that Petitioner failed to be in compliance with three supplier standards, the reason
that Palmetto NSC denied Petitioner’s enrollment application in the initial determination.
Request for Hearing (RFH) at 2-3; CMS Ex. 9 at 2-3.

CMS’s assertion that Petitioner’s case was moot is enlightening as it provides an
explanation why Palmetto NSC refused to assign Petitioner’s timely reconsideration
request to a contract hearing officer so that a reconsidered determination could be issued,
and instead responded to Petitioner in an informal email. See CMS Ex. 8 at 2. Without
remand of this case, Petitioner would have been deprived of the review it sought of the
initial determination (review from the reconsideration level through judicial review), as is
Petitioner’s right under the Social Security Act (42 U.S.C. § 1395cc(j)(8)) and the
regulations (42 C.F.R. §§ 498.5-498.95). When a CMS contractor refuses to provide
review as required by the regulations, an ALJ may remand the case for CMS to consider
a reconsideration request. Victor Alvarez, M.D., DAB CR2070, at 5-6 (2010)
(interpreting a request for hearing as a reconsideration request and remanding to CMS to
issue a reconsidered determination) aff'd, DAB No. 2325, at 11-12 (“we conclude that the
ALJ appropriately remanded the case for reconsideration.”).

Although the procedural history of this case appears complex, the authority to review this
case is simple. Petitioner, as a prospective supplier that had been denied enrollment and
then provided an effective date later than it sought, is entitled to further review of CMS’s
actions. Between the contract hearing officer’s reconsidered determination and the
findings of fact and conclusions of law that follow, Petitioner has now been provided
with such review.

V. Findings of Fact and Conclusions of Law?

In order for a DMEPOS supplier to receive Medicare payments for items furnished to a
Medicare-eligible beneficiary, the Secretary of Health and Human Services (Secretary)
must first issue a supplier number to that supplier. 42 U.S.C. § 1395m(j)(1)(A). The
Social Security Act establishes as a basic requirement that a DMEPOS supplier must
maintain a physical facility on an appropriate site, and further authorizes the Secretary to
create other DMEPOS supplier requirements. Id. § 1395m(j)(1)(B)(ii). The Secretary
promulgated regulations establishing DMEPOS supplier enrollment standards that a
DMEPOS supplier must meet and maintain. 42 C.F.R. §§ 424.57(c)(1)-(30), 424.520(c),
424.57(b). Most important for this case, the supplier standards require that the supplier
maintain a permanent, visible sign in plain view and post its hours of operation. Id.

§ 424.57(c)(7)(i)(D). Additionally, the referenced standard requires that if the supplier’s
business is in a building complex, as is the case with Petitioner, then the posted sign
needs to be visible “at the main entrance of the building.” Id. CMS may conduct on-site
reviews and inspections to ascertain supplier compliance with enrollment requirements
and supplier standards. Id. §§ 424.57(c)(8), 424.510(d)(8), 424.517(a).

1. On the day of the site inspection (May 29, 2013), Petitioner did not have a
permanent, visible sign with Petitioner’s name posted on Petitioner’s facility.

On April 30, 2013, a site visit was ordered and the inspection took place of May 29,
2013. CMS Ex. 2 at 1. The reason for the inspection is listed as: “Application.” CMS
Ex. 2 at 1,2. The order for the inspection specifically requires the inspector to “take
pictures of the sign... .” CMS Ex. 2 at 1. The inspector reported that Petitioner did not
have “a permanent, visible sign with the supplier’s business name posted on the facility.”
CMS Ex. 2 at 2,3. The inspector commented: “[Petitioner] does not have a sign on the

My numbered findings of fact and conclusions of law appear in bold and italics.
building and supplier states . . . a sign will probably not be put up. There is a sign in the
building on the door.” CMS Ex. 2 at 7.

In addition to the evidence from the inspector’s report, Petitioner admitted in its
reconsideration request that it did not have a permanent sign posted on the building with
its name: “At the time of the site inspection a permanent sign had already been ordered.
The sign arrived and was installed shortly after the site inspector’s visit.” CMS Ex. 5

at 1. Petitioner even enclosed a picture of the new sign installed after the site visit. CMS
Ex. 5 at 7-8. Petitioner made the same admissions in the September 26, 2013 CAP it
submitted to Palmetto NSC. CMS Ex. 4.

Based on the undisputed evidence of record, I find that Petitioner failed to have a
permanent, visible sign posted on the outside of the building that housed its offices.

2. CMS was authorized to deny Petitioner’s Medicare enrollment because
Petitioner was not in compliance with Supplier Standard 7 (42 C.F.R.
§ 424.57(c)(7)(D)) at the time of the site inspection.

Supplier Standard 7 requires DMEPOS suppliers to maintain a permanent, visible sign in
plain view and post its hours of operation. 42 C.F.R. § 424.57(c)(7)(i)(D). Additionally,
the standard requires that if the supplier’s business is in a building complex, as is the case
with Petitioner, then the posted sign needs to be visible “at the main entrance of the
building.” Id. As found above, the record supports the conclusion that Petitioner did not
have a permanent, visible sign posted on the outside of the building at the main entrance.
Although the inspector’s external pictures are unhelpful because of their poor quality, the
inspector’s report, along with Petitioner’s admission, is sufficient to show that Petitioner
failed to meet Supplier Standard 7 at the time of the site visit. Further, it is Petitioner’s
obligation to show compliance with enrollment requirements. 42 C.F.R. § 424.545(c).
This, Petitioner did not do.

Petitioner argues in its request for hearing that it successfully passed an accreditation
survey and that this should be sufficient for it to have been found to be in compliance
with the DMEPOS supplier standards. RFH at 2. However, as CMS points out,
accreditation is a separate requirement and does not replace the CMS ordered site
inspection. 42 C.F.R. § 424.57(c)(22).

Based on the undisputed evidence, I conclude that Petitioner failed to comply with
Supplier Standard 7 because it did not maintain a permanent, visible sign in plain view as
required by 42 C.F.R. § 424.57(c)(7)(i)(D). Therefore, I conclude that CMS had a
legitimate basis to deny Petitioner’s enrollment application. A prospective DMEPOS
supplier must meet the supplier standards in section 424.57(c) to be enrolled. 42 C.F.R.
§ 424.57(c) (introductory text); see also 42 C.F.R. § 424.57(a) (definition of DMEPOS
supplier). A failure to meet even one of the supplier standards is sufficient to deny the
enrollment application. See 18661CPayday.com, L.L.C., DAB No. 2289, at 13 (2009);
42 CFR. § 424.57(c). Therefore, I do not need to consider the other alleged violations
of the supplier standards that served as the basis for denial.

3. I have no authority to grant equitable relief in this case.

CMS determined Petitioner’s effective date of enrollment as October 9, 2013. The
regulations specifically state that billing privileges cannot commence until a supplier
number issues. 42 C.F.R. §§ 424.57(b)(2), 424.520(c). Further, when a DMEPOS
supplier has been denied enrollment, the subsequently assigned effective date cannot be
earlier than the date of the original denial. 42 C.F.R. § 405.812. In the present case,
CMS concluded, based on Petitioner’s CAP, that Petitioner was in compliance by
October 9, 2013. The assigned effective date of October 9, 2013, is permissible under the
regulations.

Petitioner avers that it incurred substantial financial harm because of Palmetto NSC’s
failure to meet the requirement in Medicare Program Integrity Manual (MPIM)

§ 15.8.4(b) that a denial of enrollment should be issued within five days of determining
noncompliance. P. Br. at 2,3. Petitioner seeks an earlier effective date as a remedy.
P. Br. at 2-3.

Even if the MPIM places such a requirement on Palmetto NSC, the applicable regulations
in this case do not require the issuance of a determination in that time-frame. The MPIM
provides guidance and procedures, but cannot override the regulations. To the extent that
Petitioner’s request is based on equitable considerations, I have no authority to grant
equitable relief and must apply the regulations as written. See US Ultrasound, DAB No.
2302, at 8 (2010); 1866ICPayday.com, L.L.C., DAB No. 2289, at 14. Therefore, I uphold
the effective date assigned by Palmetto NSC.

V. Conclusion

For the reasons stated above, I affirm CMS’s determination to deny Petitioner’s
enrollment application.

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.
Whistlin’ Jack Lodge, Inc.,
Respondent.

Docket No. C-15-625
FDA Docket No. FDA-2014-H-2149

Decision No. CR3595

Date: January 23, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Whistlin’ Jack Lodge, Inc., alleging facts and legal authority
sufficient to justify imposing a $2,000 civil money penalty. Respondent did not timely
answer the Complaint, nor did Respondent request an extension of time within which to
file an Answer. Therefore, I enter a default judgment against Respondent and order that
Respondent pay a civil money penalty in the amount of $2,000.

CTP began this case by serving a Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent’s staff unlawfully sold cigarettes
to a minor and failed to verify that a cigarette purchaser was of sufficient age, thereby
violating the Federal Food, Drug, and Cosmetic Act (Act) and its implementing
regulations, found at 21 C.F.R. pt. 1140. CTP seeks a civil money penalty of $2,000.
On December 11, 2014, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days Respondent should pay the penalty, file
an answer, or request an extension of time within which to file an answer. CTP warned
Respondent that if it failed to take one of these actions within 30 days an Administrative
Law Judge could issue an initial decision by default ordering Respondent to pay the full
amount of the proposed penalty. 21 C.F.R. § 17.11.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Therefore, pursuant to 21 C.F.R. § 17.11(a), am required to
issue an initial decision by default if the Complaint is sufficient to justify a penalty.
Accordingly, I must determine whether the allegations in the Complaint establish
violations of the Act.

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

e Respondent owns Whistlin’ Jack Lodge, an establishment that sells tobacco
products and is located at 20800 State Route 410, Naches, Washington 98937.
Complaint § 3.

e CTP previously initiated a civil money penalty action, CRD Docket Number C-14-
752, FDA Docket Number FDA-2014-H-0262, against Respondent for two
violations of 21 C.F.R. pt. 1140 within a 12-month period. Specifically,
Respondent violated 21 C.F.R. § 1140.14(a) on March 10, 2013 and September 9,
2013 by selling tobacco products to a minor. Complaint § 10; March 10, 2014
Complaint §§ 1, 10.

e The previous civil money penalty action concluded when Doug Williams,
Respondent’s authorized representative, settled the action with CTP on
Respondent’s behalf. On March 20, 2014, Mr. Williams signed an
Acknowledgment Form in which he “admitt[ed] that the violations . . . occurred,
waiv[ed] Respondent’s ability to contest the violations in the future, and stat[ed]
that he understood that the violations may be counted in determining the total
number of violations for purposes of future enforcement actions against
Respondent.” The Administrative Law Judge closed the case on May 14, 2014.
Complaint § 11.

e During a subsequent inspection of Respondent’s establishment conducted on June
17, 2014, FDA-commissioned inspectors documented that “a person younger than
18 years of age was able to purchase a package of Marlboro cigarettes . . . at
approximately 2:20 PM[.]” The inspectors also noted that “the minor’s
identification was not verified before the sale... .” Complaint § 1.

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

21 U.S.C. § 387c(a)(7)(B); 21 C.F.R § 1140.1(b). The regulations prohibit the sale of
cigarettes or smokeless tobacco to any person younger than 18 years of age. 21 C.F.R.

§ 1140.14(a). The regulations also require retailers to verify, by means of photographic
identification containing the purchaser’s date of birth, that no purchaser of cigarettes or
smokeless tobacco is younger than 18 years of age. 21 C.F.R. § 1140.14(b)(1).

Here, Respondent had four violations of regulations found at 21 C.F.R. pt. 1140 within a
24-month period. Respondent acknowledged that two violations occurred when its
representative settled the previous civil money penalty action. Then, on June 17, 2014,
Respondent sold cigarettes to a person younger than 18 years of age, in violation of

21 C.F.R. § 1140.14(a). During that same transaction, Respondent failed to verify, by
means of photographic identification containing the bearer’s date of birth, that the
cigarette purchaser was 18 years of age or older, in violation of 21 C.F.R. §1140.14(b)(1).
Therefore, Respondent’s actions constitute violations of law that merit a civil money
penalty.

CTP has requested a fine of $2,000, which is a permissible fine for four violations of the
regulations found at 21 C.F.R. pt. 1140. 21 C.F.R. § 17.2. I thus find that a civil money
penalty of $2,000 is warranted and so order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

S and R Petro, Inc. / Zeinab Samhat
d/b/a Mystik,

Respondent.

Docket No. C-15-449
FDA Docket No. FDA-2014-H-1980

Decision No. CR3594
Date: January 22, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, S and R Petro, Inc. / Zeinab Samhat d/b/a Mystik, that alleges facts
and legal authority sufficient to justify the imposition of a $500 civil money penalty.
Respondent did not answer the Complaint, nor did Respondent request an extension of
time within which to file an answer. Therefore, I enter a default judgment against
Respondent and assess a $500 civil money penalty.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent sold cigarettes to minors, and
failed to verify, by means of photo identification containing a date of birth, that tobacco
purchasers were 18 years of age or older, thereby violating the Federal Food, Drug, and
Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations, Cigarettes
and Smokeless Tobacco, 21 C.F.R. pt. 1140 (2013). CTP seeks a civil money penalty of
$500.
On November 26, 2014, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days, Respondent should pay the proposed
penalty, file an answer, or request an extension of time within which to file an answer.
CTP warned Respondent that if it failed to take one of these actions within 30 days, an
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering Respondent to pay the full amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Pursuant to 21 C.F.R. § 17.11(a), 1 am required to “assume the
facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the
Act, issue a default judgment and impose a civil money penalty. Accordingly, I must
determine whether the allegations in the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Mystik, an establishment that sells tobacco products and is
located at 9365 Van Dyke Street, Detroit, Michigan 48213. Complaint 3.

e During an inspection of Respondent’s establishment on November 30, 2013, at
approximately 11:46 AM, an FDA-commissioned inspector observed that “a
person younger than 18 years of age was able to purchase a package of Newport
Box 100s cigarettes . . . [.]” The inspectors also documented that “the minor’s
identification was not verified before the sale... .” Complaint § 10.

¢ On February 12, 2014, CTP issued a Warning Letter to Respondent regarding the
inspector’s observations from November 30, 2013. The letter explained that the
observations constituted violations of regulations found at 21 C.F.R. § 1140.14(a)
and (b)(1), and that the named violations were not necessarily intended to be an
exhaustive list of all violations at the establishment. The Warning Letter went on
to state that if Respondent failed to correct the violations, regulatory action by the
FDA or a civil money penalty action could occur and that Respondent is
responsible for complying with the law. Complaint ¥ 10.

e By letter on April 7, 2014, Respondent’s owner, Mr. Samhat, responded to the
Warning Letter. “Mr. Samhat stated that an employee may have ‘misjudge[d] the
age’ of the minor.” “Mr. Samhat also indicated that Respondent has placed a
notice at the cash register reminding employees to check identification.”
Complaint § 11.

e During a subsequent inspection of Respondent’s establishment, conducted on May
21, 2014, at approximately 7:37 PM, FDA-commissioned inspectors documented

that “a person younger than 18 years of age was able to purchase a package of
Newport Box 100s cigarettes . . . [.]” The inspectors also documented that “the
minor’s identification was not verified before the sale... .” Complaint § 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

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

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

Respondent violated the prohibition against selling tobacco products to persons younger
than 18 years of age, 21 C.F.R. § 1140.14(a), on November 30, 2013 and May 21, 2014.
On those same dates, Respondent also violated the requirement that retailers verify, by
means of photo identification containing a purchaser’s date of birth, that no cigarette
purchasers are younger than 18 years of age. 21 C.F.R. § 1140.14(b)(1). Therefore,
Respondent’s actions constitute violations of law that merit a civil money penalty.

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

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Olasehmde Arowsaye
a/k/a Isaac Arowosaye
(OI File No. H-11-41769-9),

Petitioner,
v.
The Inspector General.
Docket No. C-14-1478
Decision No. CR3593
Date: January 22, 2015
DECISION

The Inspector General (IG) of the United States Department of Health and Human
Services excluded Petitioner, Olasehmde Arowsaye a/k/a Isaac Arowosaye, for 15 years
from participating in Medicare, Medicaid, and all other federal health care programs
based on Petitioner’s conviction of a felony related to the delivery of an item or service
under Medicare or a State health care program. Petitioner sought review of the exclusion.
For the reasons stated below, I conclude that the IG has a basis for excluding Petitioner
because Petitioner was convicted of a criminal offense related to the delivery of an item
or service under the New Jersery Medicaid program. Further, I affirm the length of the
exclusion because the IG proved that four aggravating factors exist to justify the 15-year
exclusion. Finally, the June 19, 2014 exclusion effective date is governed by regulation
and I have no authority to alter that date.

I. Background
By letter dated May 30, 2014, the IG notified Petitioner that he was being excluded from

Medicare, Medicaid, and all federal health care programs pursuant to 42 U.S.C. § 1320a-
7(a)(1) for a period of 15 years. IG Exhibit (Ex.) 1 at 1. The IG advised Petitioner that
the exclusion was based on his felony conviction “in the Essex County Superior Court of
the State of New Jersey, of a criminal offense related to the delivery of an item or service
under the Medicare or a State health care program, including the performance of
management or administrative services relating to the delivery of items or services, under
any such programs.” IG Ex. | at 1. Further, the IG imposed a length of exclusion in
excess of the five-year statutory minimum because: “[t]he court ordered [Petitioner] to
pay approximately $800,000 in restitution. . .”; “the acts occurred from about July 2005
to about April 2008”; “the court sentenced [Petitioner] to 3 years of incarceration”; and
because “the New Jersey State Office of the Medicaid Inspector General disqualified
[Petitioner] from participation in the Medicaid program.” IG Ex. 1 at 1-2.

Petitioner timely filed a request for hearing. I was assigned to hear and decide this case.
On August 20, 2014, I convened a prehearing conference by telephone, the substance of
which is summarized in my Order and Schedule for Filing Briefs and Documentary
Evidence (Order) dated August 22, 2014. See 42 C.F.R. § 1005.6. Pursuant to the Order,
the IG submitted a brief (IG Br.) together with ten exhibits (IG Exs. 1-10), Petitioner
submitted a response brief (P. Br.), and the IG submitted a reply brief.

II. Decision on the Record

Petitioner did not object to any of the IG’s proposed exhibits. Therefore, I admit IG Exs.
1-10 into the record. Order § 5. Petitioner did not submit any proposed exhibits.

The decision in this case will be based on the written record. See Order § 6. I ordered the
parties to complete and submit short form briefs. The IG filed a completed short form
brief and indicated that he did not believe an in-person hearing was necessary and that he
did not have any testimony to offer at a hearing. IG Br. at 14. Petitioner did not
complete the short form brief. In his submission, he did not indicate that an in-person
hearing was necessary or that he had testimony to offer. I previously informed Petitioner
that he had the right to request a video hearing and that the request must explain why a
video hearing is necessary. Order § 4. Petitioner did not request a video hearing or
explain why a video hearing was needed. Therefore, I issue this decision based on the
written record.

III. Issues
The issues in this case are limited to determining if there is a basis for exclusion and, if

so, whether the length of the exclusion imposed by the IG is unreasonable. 42 C.F.R.
§ 1001.2007(a)(1).
IV. Jurisdiction
Ihave jurisdiction to adjudicate this case. 42 U.S.C. § 1320a-7(f)(1); 42 C.F.R. § 1005.2.
V. Findings of Fact, Conclusions of Law, and Analysis!

A. The IG proved each of the required elements under 42 U.S.C. § 1320a-
7(a)(1); therefore, there is a basis to exclude Petitioner.

The IG cites 42 U.S.C. § 1320a-7(a)(1) as the basis for Petitioner’s mandatory exclusion.
IG Ex. |. The statute provides:

(a) Mandatory exclusion

The Secretary shall exclude the following individuals and
entities from participation in any Federal health care program
(as defined in section 1320a—7b(f) of this title):

(1) Conviction of program-related crimes

Any individual or entity that has been convicted of a
criminal offense related to the delivery of an item or
service under subchapter XVIII of this chapter or
under any State health care program.

Thus, the elements the IG must prove to sustain Petitioner’s exclusion pursuant to section
1320a-7(a)(1) in this case are: (1) Petitioner was convicted of a criminal offense, and (2)
Petitioner’s offense was related to the delivery of an item or service under Medicare or a
State health care program.

1. Petitioner pled guilty in Essex County Superior Court of the
State of New Jersey, to second-degree health care claims fraud,
a violation under N.J.S.A. § 2C:21-4.3(c), and the court entered
a Judgment of Conviction.

On April 26, 2010, Petitioner was arrested on several charges, including second-degree
health care claims fraud, in violation of N.J.S.A. § 2C:21-4.3(c). IG Ex. 2 at 2; IG Ex. 4,

' My findings of fact and conclusions of law are set forth in italics and bold font.
at 1. Count One of the Accusation charging Petitioner with “Health Care Claims Fraud-
Second Degree” states that:

between on or about July 2005, and on or about April 2008, at
the City or Orange, in the County of Essex . . . [Petitioner]
knowingly did make, or did cause to be made, a false,
fictitious, fraudulent, or misleading statement of material fact
in five or more records, bills, claims or other documents, in
writing, electronically or in any other form, and did submit
same or cause same to be submitted for payment or
reimbursement for health care services, and the aggregate
pecuniary benefit obtained or sought to be obtained was at
least one thousand dollars; that is, [Petitioner] did knowingly
submit or cause to be submitted to Medicaid five or more
claims valued at at least one thousand dollars for personal
care assistance services allegedly provided to Medicaid
beneficiaries when in fact the personal care assistance
services were not provided ....

IG Ex.5.

On August 4, 2010, Petitioner pled guilty to Count One of the Accusation, which the
Superior Court accepted. IG Ex. 6; IG Ex. 7 at 20-21. On December 6, 2013, the
Superior Court entered a Judgment of Conviction & Order for Commitment and
sentenced Petitioner to a three-year term of incarceration, with credit for 98 days already
served. IG Ex. 4; IG Ex. 8 at 14. The court also ordered restitution to the New Jersey
Division of Medical Assistance and Health Services (DMAHS)* in the amount of
$800,000. IG Ex. 4 at 1; IG Ex. 8 at 14; IG Ex. 10 at 2-3. As a condition of his plea
agreement, Petitioner agreed to be disqualified from participating in the New Jersey
Medicaid program for five years. IG Ex. 10 at 2; IG Ex. 7 at 19.

2. Petitioner must be excluded under 42 U.S.C. § 1320a-7(a)(1)
because he was convicted of a criminal offense related to the
delivery of an item or service under the New Jersey Medicaid
program.

The IG must exclude an individual from participation in all federal health care programs
if the individual has been convicted of a criminal offense related to the delivery of an
item or service under Medicare or any State health care program. 42 U.S.C. § 1320a-
7(a)(1). An individual is “convicted” of a criminal offense “when a judgment of

> DMAHS is responsible for the administration of the New Jersey Mediciad program.
See N.J.S.A. § 30:4D-4, 30:4D-5 (2009); http://www.nj.gov/humanservices/dmahs/home.

conviction has been entered against the individual . . . by a Federal, State, or local court .
...” Id. § 1320a-7(i)(1). Further, an individual is also “convicted” of a criminal offense
when “a plea of guilty . . . by the individual . . . has been accepted by a Federal, State, or
local court.” Id. § 1320a-7(i)(3). As previously discussed, Petitioner pled guilty to a
criminal offense, and the court accepted his plea and issued a judgment of conviction.
IG Exs. 4, 6-8. Further, Petitioner concedes he pled guilty and was convicted. P. Br. at
1-2. Accordingly, for purposes of exclusion, Petitioner was “convicted” of a criminal
offense.

Petitioner does not dispute that his conviction was related to the delivery of an item or
service under a State health care program. I find, moreover, that a nexus exists between
Petitioner’s criminal acts and the purported delivery of an item or service under Medicare
or a State health care program. See, e.g., Berton Siegel, D.O., DAB No. 1467 (1994)
(requiring an administrative law judge to find that some “nexus” or “common sense
connection” exists between the offense of which a petitioner was convicted and the
delivery of an item or service under Medicaid).

Count One of the Accusation, to which Petitioner pled guilty, involved Petitioner
“knowingly submit[ing] . . . to Medicaid five or more claims valued at at least one
thousand dollars for personal care assistance services allegedly provided to Medicaid
beneficiaries when in fact the personal care assistance services were not provided . . .

-’ IG Ex. 5 at 2. Courts have determined that the submission of a false claim to
Medicaid is “related” to the delivery of an item or service under a state health care
program. Jack W. Greene, DAB No. 1078 (1989), aff'd, Green v. Sullivan, 731 F. Supp.
835 (E.D. Tenn. 1990); Michael Travers, M.D., DAB No. 1237 (1991), aff'd, Travers v.
Sullivan, 791 F. Supp. 1471, 1481 (E.D. Wash. 1992), aff'd, Travers v. Shalala, 20 F.3d
993 (9th Cir. 1994). Thus, the offense of second-degree health care claims fraud, by
submitting claims for services that were never performed to the New Jersey Medicaid
program, has a nexus or common sense connection to the delivery of services under a
state health care program. 42 U.S.C. §§ 1320a-7(a)(1), 1320a-7(h)(1) (defining “State
ealth care program” to include a program under Title XIX of the Act, i.e., Medicaid);
42 CFR. § 1001.2 (definition of State health care program).

Moreover, where an individual is convicted of a crime, “proof that any sentence based on
that conviction included the payment of restitution to a protected program creates a
rebuttable presumption of a nexus or common-sense connection between the conviction
and the delivery of an item or service under [that] program.” Johnnelle Johnson Bing,
DAB CR1938 at 6 (2009) (citing Alexander Nepomuceno Jamias, DAB CR1480 (2006));
see also Gordon T. Noakes, D.D.S., DAB CR3044 (2013) (concluding that court-ordered
payment of restitution to the Ohio Department of Job and Family Services provided
evidence of a nexus to the Medicaid program). Thus, the fact that the court ordered
Petitioner to pay $800,000 in restitution to DMAHS as part of his sentence also supports
the nexus showing his offense was program-related. Therefore, I conclude that each
element under 42 U.S.C. § 1320a-7(a)(1) is satisfied and that Petitioner must be
excluded.

B. The presence of four aggravating factors and the absence of any mitigating
factors justifies excluding Petitioner for a period of 15 years.

Because I have concluded that a basis exists to exclude Petitioner pursuant to 42 U.S.C.
§ 1320a-7(a)(1), Petitioner must be excluded for a minimum period of five years.

42 U.S.C. § 1320a-7(c)(3)(B). While the IG must impose the five-year minimum
mandatory term of exclusion, the IG is authorized to lengthen that term if certain
aggravating factors exist. See 42 C.F.R. § 1001.102. Those aggravating factors are
detailed at 42 C.F.R. § 1001.102(b)(1)-(9). The IG added ten years to Petitioner’s
exclusion based on the presence of four aggravating factors: 42 C.F.R.

§§ 1001.102(b)(1) (the acts resulting in the conviction caused a financial loss to a
government program of $5,000 or more); (b)(2) (the acts resulting in the conviction were
committed over a period of one year or more); (b)(5) (the sentence imposed by the court
included incarceration); and (b)(9) (an adverse action taken by a State agency, based on
the same circumstances that serve as the basis for imposing the exclusion). I must uphold
the IG’s determination as to the length of exclusion so long as it is not unreasonable.

42 CFR. § 1001.2007(a)(1)(ii).

1. The acts resulting in Petitioner’s conviction caused, or were
intended to cause, a loss to a government program or to one or
more entities of $5,000 or more.

The IG has demonstrated sufficiently that the acts resulting in Petitioner’s conviction
resulted in a loss to a government program of $5,000 or more. 42 C.F.R.

§ 1001.102(b)(1). The record shows that the sentencing judge ordered Petitioner to pay
$800,000 in restitution to the New Jersey Medicaid program. IG Ex. 4 at 1; IG Ex. 10
at 2-3. It is well-established that an amount ordered as restitution constitutes proof of
the amount of financial loss. See, e.g., Juan de Leon, Jr., DAB No. 2533, at 5 (2013);
Craig Richard Wilder, DAB No. 2416, at 9 (2011).

I consider the enormity of the program’s financial losses here an exceptionally
aggravating factor that compels a period of exclusion significantly longer than the five-
year minimum. Governmental loss is an “exceptional aggravating factor” when, as here,
the loss is “very substantially greater than the statutory standard.” Jeremy Robinson,
DAB No. 1905 (2004); Donald A. Burstein, Ph.D., DAB No. 1865 (2003). On its own,
the governmental loss, 160 times greater the minimum needed to support an increase to
the exclusion period, strongly supports the 15-year exclusion period imposed here
because it is long enough to reflect the significant loss to the government and serves to
ensure that government programs are protected from an individual proven to be
untrustworthy when participating in such programs. See Michael D. Miran, et al., DAB
No. 2469, at 5-6 (2012) (upholding a 13-year exclusion based on $257,946 loss to
government program and one additional aggravating factor); Jeremy Robinson, DAB No.
1905, at 12 (upholding a 15-year exclusion based on a $205,000 loss to a government
program and two additional aggravating factors).

2. The acts resulting in Petitioner’s conviction were committed
over a period of one year or more.

The IG has also demonstrated that the acts resulting in the underlying conviction
occurred over a period of one year or more. 42 C.F.R. § 1001.102(b)(2). The sentencing
judge accepted Petitioner’s guilty plea to second-degree health care claims fraud and the
Accusation stated that “between on or about July 2005, and on or about April 2008 .. .
[Petitioner] knowingly did make, or did cause to be made, a false, fictitious, fraudulent,
or misleading statement of material fact in five or more records, bills, claims or other
documents ....” I.G. Ex.5. Therefore, Petitioner’s involvement in the scheme was for
more than one year.

The purpose of this aggravating factor “is to distinguish between petitioners whose lapse
in integrity is short-lived from those who evidence a lack of such integrity over a longer
period of time.” Donald A. Burstein, Ph.D., DAB No. 1865, at 8. Petitioner fraudulently
submitted claims to Medicaid for over two and a half years and this demonstrates
Petitioner’s lack of integrity was more than just “short-lived.” The length of Petitioner’s
conduct shows prolonged lack of integrity that supports the IG’s decision to increase the
five-year minimum exclusion period to 15 years.

3. The Superior Court of the State of New Jersey sentenced
Petitioner to a three-year term of incarceration.

The IG has also shown the presence of the aggravating factor that Petitioner’s sentence
included incarceration. 42 C.F.R. § 1001.102(b)(5). The District Court sentenced
Petitioner to three years of incarceration, with 98 days credit for time served. IG Ex. 4 at
1. See also IG Ex. 8 at 14; IG Ex. 9. A prison sentence of as little as nine months is
considered to be relatively substantial for exclusion purposes. Jason Hollady, M.D.,
DAB No. 1855, at 12 (2002). Petitioner’s sentence is four times longer than that and
represents a substantial period of time, which indicates the seriousness of his offense.
Accordingly, this aggravating factor provides significant support for the IG’s decision to
increase the exclusion well beyond the five-year minimum exclusion period to 15 years.
Even if the IG had only proven this aggravating factor and the aggravating factor
involving loss to the government, discussed above, I would conclude that the length of
Petitioner’s exclusion is not unreasonable.
4. Petitioner agreed to be disqulified from participating in the
New Jersey Medicaid program for a period of five years as a
result of his conviction.

I conclude that an enlargement of Petitioner’s exclusion is also not unreasonable given
the presence of the aggravating factor that Petitioner agreed to be disqualified from
participating in the New Jersey Medicaid program for five years as part of a Consent
Order of Disqualification and Restitution. IG Ex. 10 at 1-2; 42 C.F.R. § 1001.102(b)(9).
The fact that Petitioner was disqualified from participating in Medicaid for five years
based on his conviction is “additional evidence of the seriousness of [Petitioner’s]
underlying conduct.” Narendra M. Patel, M.D., DAB No. 1736, at 28-29 (2000). The
disqualification of Petitioner from participating in Medicaid based upon the same facts as
those underlying his Medicare exclusion falls within the ambit of 42 C.F.R.

§ 1001.102(b)(9). See Darren J. James, D.P.M., DAB CR860 (2002); Joseph Picciotti,
D.P.M., DAB CR769 (2001). Moreover, the fact that Petitioner was prohibited from
participating in the New Jersey Medicaid program for five years underscores the harm his
conduct caused and his lack of trustworthiness.

Based on these facts, I conclude that the IG proved that Petitioner was subject to an
adverse action by a state agency that was based on the same set of circumstances that
formed the basis for the IG’s exclusion. 42 C.F.R. § 1001.102(b)(9). Accordingly, the
presence of this additional aggravating factor further justifies Petitioner’s exclusion for
an extended period of 15 years.

5. Petitioner did not prove the existence of any mitigating factors
that would justify a reduction in the length of exclusion
imposed by the IG.

If the IG proves that an aggravating factor listed in the regulations exists to warrant an
exclusion of more than five years, then Petitioner may raise mitigating factors listed in
the regulations to seek a reduction in the length of exclusion. 42 C.F.R. § 1001.102(c).
Petitioner did not raise any mitigating factors listed in the regulations.

Petitioner raised two other issues in his brief. First, Petitioner asserts that the Medicaid
billing errors were untentional and that he has suffered financial hardship due to his
conviction. P. Br. at 1-2.

I cannot consider Petitioner’s arguments regarding the circumstances surrounding his
conviction as a basis for reducing his period of exclusion. Petitioner’s arguments
constitute an impermissible collateral attack upon his conviction. When an exclusion is
based on a criminal conviction, the underlying conviction is not reviewable and an
individual may not collaterally attack the conviction on substantive or procedural
grounds. 42 C.F.R. § 1001.2007(d); Joann Fletcher Cash, DAB No. 1725 (2000); Lyle
Kai, R-Ph., DAB No. 1979, at 8 (2005), aff'd, Kai v. Leavitt, Civ. No. 05-00514 BMK

Petitioner also contends that his plea agreement in the criminal case constituted a global
resolution of all the claims against him and that under that agreement Petitioner
“consented to be debar[red] from Medicaid and Medicare for 5 year[s] starting from
8/26/2010.” P. Br. at 2. Petitioner argues that an IG exclusion subjecting him to
additional punishment “is a double jeopardy.” P. Br. at 2.

I do not have jurisdiction to consider Petitioner’s constitutional argument that his
exclusion represents a second punishment violative of the Double Jeopardy Clause of the
Fifth Amendment to the United States Constitution. See 42 C.F.R. § 1005.4(c)(1).
Although I do not consider this argument, I note that double jeopardy is a criminal law
concept and this exclusion case is a civil administrative matter. Furthermore, as the IG
points out, the Consent Order of Disqualification and Restitution that Petitioner reached
with New Jersey did not purport to bind the United States. See I.G. Ex. 10, at 3. The
Consent Order of Disqualification and Restitution signed by Petitioner expressly states
that New Jersey would notify the IG of Petitioner’s conviction “which may result in legal
actions by the federal government against [Petitioner] including, but not limited to, the
exclusion of [Petitioner] from participation in any federally funded health care programs
pursuant to 42 U.S.C. § 1320a-7(a)(1).”

Therefore, Petitioner’s arguments have no merit and I am unable to reduce the length of
exclusion in this case.

C. The effective date of exclusion is June 19, 2014, and I have no authority to
modify that effective date.

Petitioner appears to argue that the effective date of exclusion should be retroactively
commenced to the date of his conviction in August of 2010. See P. Br. at 2. However,
exclusions are effective 20 days after the date of the notice. 42 C.F.R. § 1001.2002(b);
see also 42 U.S.C. § 1320a-7(c)(1). When an exclusion is effective before a decision is
issued by an administrative law judge, as it is in this case, that exclusion is “deemed to
commence on the date such exclusion originally went into effect.” 42 C.F.R.

§ 1005.20(b).

In the present matter, the IG issued the exclusion notice on May 30, 2014. IG Ex. | at 1.
Therefore, Petitioner’s exclusion commenced 20 days later, on June 19, 2014. I have no
authority to change the effective date. See 42 C.F.R. § 1005.4(c)(1).
10

VI. Conclusion

For the foregoing reasons, I affirm the IG ’s determination to exclude Petitioner for 15
years from participating in Medicare, Medicaid, and all federal health care programs
pursuant to 42 U.S.C. § 1320a-7(a)(1).

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Poojan, Inc. / Sanjay Patel
d/b/a Pee Dee Grocery,

Respondent.

Docket No. C-15-513
FDA Docket No. FDA-2014-H-2030

Decision No. CR3592

Date: January 20, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Poojan, Inc. / Sanjay Patel d/b/a Pee Dee Grocery that alleges facts
and legal authority sufficient to justify the imposition of a $250 civil money penalty.
Respondent did not answer the Complaint, nor did Respondent request an extension of
time within which to file an answer. Therefore, I enter a default judgment against
Respondent and assess a $250 civil money penalty.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent used a self-service display in a
non-exempt location and sold cigarettes to a minor, thereby violating the Federal Food,
Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seg., and its implementing regulations,
Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140 (2013). CTP seeks a $250 civil
money penalty.
On December 4, 2014, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days, Respondent should pay the proposed
penalty, file an answer, or request an extension of time within which to file an answer.
CTP warned Respondent that if it failed to take one of these actions within 30 days, an
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering Respondent to pay the full amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Pursuant to 21 C.F.R. § 17.11(a), 1 am required to “assume the
facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the
Act, issue a default judgment and impose a civil money penalty. Accordingly, I must
determine whether the allegations in the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Pee Dee Grocery, an establishment that sells tobacco products
and is located at 9150 Highway 701 South, Conway, South Carolina 29527.
Complaint § 3.

e During an inspection of Respondent’s establishment on January 16, 2014, an
FDA-commissioned inspector “observed a self-service display of Longhorn brand
smokeless tobacco located on the counter in an area of the establishment that is
open to the general public during business hours.” Complaint § 10.

¢ On March 13, 2014, CTP issued a Warning Letter to Respondent regarding the
inspector’s observation from January 16, 2014. The letter explained that the
observation constituted a violation of regulations found at 21 C.F.R. § 1140.16(c),
and that the named violation was not necessarily intended to be an exhaustive list
of all violations at the establishment. The Warning Letter went on to state that if
Respondent failed to correct the violation, regulatory action by the FDA or a civil
money penalty action could occur and that Respondent is responsible for
complying with the law. Complaint § 10.

e Although UPS records indicate that an individual named “Patel” received the
Warning Letter, CTP never received a response to the Warning Letter. Complaint

ql.

e During a subsequent inspection of Respondent’s establishment on June 5, 2014, at
approximately 11:31 AM, FDA-commissioned inspectors documented that “a
person younger than 18 years of age was able to purchase a package of Newport
Box cigarettes ....” Complaint § 1.
These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

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

§ 1140.14(a). Moreover, a self-service display is a method of sale expressly prohibited
by the regulations unless the self-service display is located in a facility in which the
retailer ensures that no person younger than 18 years of age is present, or permitted to
enter, at any time. 21 C.F.R. § 1140.16(c)(2)(ii).

Taking the above alleged facts as true, Respondent violated the prohibition against selling
cigarettes to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a), on June 5,
2014. Earlier, on January 16, 2014, Respondent violated 21 C.F.R. § 1140.16(c) by using
a self-service display to sell tobacco products in a facility that was open to minors.
Therefore, Respondent’s actions constitute violations of law that merit a civil money
penalty.

CTP has requested a fine of $250, which is a permissible fine under the regulations.
21 C.F.R. § 17.2. I thus find that a civil money penalty of $250 is warranted and so order
one imposed.

/s/
Steven T. Kessel
Administrative Law Judge