Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Dinesh Patel, M.D.,
Petitioner,
v.
Centers for Medicare and Medicaid Services.
Docket No. C-13-724
Decision No. CR2838
Date: June 20, 2013

DECISION

This case is before me on the Centers for Medicare & Medicaid Services’ (CMS’s)
Motion for Summary Disposition. I find and conclude that the enrollment and billing
privileges of Petitioner, Dr. Dinesh Patel, in the Medicare program were properly
revoked. Petitioner was, within the 10 years preceding his enrollment or the revalidation
of his enrollment, convicted of a federal felony offense that CMS determined to be
detrimental to the best interests of the Medicare program and its beneficiaries, one of the
reasons for such revocation established by regulation at 42 C.F.R. § 424.535(a)(3).
Therefore, I sustain CMS’s determination and conclude that CMS had the authority to
revoke Petitioner’s billing privileges.

I. Procedural History

On October 5, 2012, Novitas Solutions, Inc. (Novitas), a Medicare contractor, notified
Petitioner that his Medicare enrollment and billing privileges were being revoked.
Novitas explained that the controlling regulation, 42 C.F.R. § 424.535(a)(3), allows the
revocation of a supplier’s Medicare enrollment and billing privileges if the supplier,
within the 10 years preceding enrollment or revalidation of enrollment, was convicted of
a federal or state felony offense that CMS has determined to be detrimental to the best
interests of the program and its beneficiaries. Novitas’ October 5, 2012 letter identified
the felony conviction on which it relied for its determination as Petitioner’s September
20, 2012 plea of guilty to participating in a cash-for-patients plan with a diagnostic
facility in Orange, New Jersey. CMS Ex. 6.

Petitioner timely sought reconsideration of Novitas’ determination. On March 12, 2013,
a reconsideration decision affirmed Novitas’ determination to revoke Petitioner’s
Medicare provider enrollment and billing privileges. The reconsideration decision based
its determination upon Petitioner’s plea of guilty to one count of a violation of the federal
ealthcare anti-kickback statute in September 2012. CMS Ex. 7.

Petitioner timely perfected this appeal by an April 30, 2013 Request for Hearing. My
May 2, 2013 Acknowledgment and Initial Docketing Order allows for motion practice.
On May 22, 2013, CMS filed a Motion for Summary Judgment (CMS Br.) and
proffered nine exhibits, CMS Exhibits 1-9 (CMS Exs. 1-9), to which Petitioner has not
objected, and they are admitted as designated. On June 11, 2013, Petitioner filed an
Opposition to CMS’s Motion for Summary Judgment (P. Answer Br.). Petitioner did
not proffer any exhibits for my consideration. The cycle of motion practice and
briefing closed on June 11, 2013.

II. Issue

The issue before me in this case is whether CMS, acting through Novitas, properly
revoked Petitioner’s Medicare Part B enrollment and billing privileges.

Ill. Controlling Statutes and Regulations

Section 1866(j)(1) of the Social Security Act (Act), 42 U.S.C. § 1395ce(j)(1), authorizes
the Secretary of Health and Human Services (Secretary) to establish a process for the
enrollment in the Medicare Part B program of providers of services and suppliers.
Section 1866(j)(2) of the Act, 42 U.S.C. § 1395cc(j)(2), gives providers and suppliers
appeal rights for certain determinations involving enrollment, using the procedures that
apply under section 1866(h)(1)(A) of the Act, 42 U.S.C. § 1395cc(h)(1)(A). These
procedures are set out at 42 C.F.R. Part 498 and provide for hearings before the
Administrative Law Judges (ALJs) of this forum, and for review of the resulting ALJ
decisions by the Departmental Appeals Board (Board).

In provider and supplier appeals under section 1866(j)(1) of the Act and 42 C.F.R. Part
498, CMS must make a prima facie showing that the provider or supplier has failed to
comply substantially with federal requirements. See MediSource Corporation, DAB No.
2011 (2006). To prevail, the provider or supplier must overcome CMS’s prima facie
showing by a preponderance of the evidence. Batavia Nursing and Convalescent Center,
DAB No. 1904 (2004), aff’d, Batavia Nursing and Convalescent Center v. Thompson,
129 Fed. Appx. 181 (6th Cir. 2005); Emerald Oaks, DAB No. 1800 (2001); Cross Creek
Health Care Center, DAB No. 1665 (1998).

Regulations define the circumstances in which CMS may reject the application of a
provider or supplier to participate in the Medicare program, or may revoke an enrollment
already granted. The regulation at 42 C.F.R. § 424.535(a) provides several specific
reasons for revocation, and, among those reasons, is the one at issue in this case, which
allows revocation if:

(3) Felonies. The provider, supplier, or any owner of the provider or supplier,
within the 10 years preceding enrollment or revalidation of enrollment, was
convicted of a Federal or State felony offense that CMS has determined to be
detrimental to the best interests of the program and its beneficiaries.

(i) Offenses include —

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

(B) Financial crimes, such as extortion, embezzlement, income tax evasion,
insurance fraud and other similar crimes for which the individual was
convicted, including guilty pleas and adjudicated pretrial diversions.

(C) Any felony that placed the Medicare program or its beneficiaries at
immediate risk, such as a malpractice suit that results in a conviction of

criminal neglect or misconduct.

(D) Any felonies that would result in mandatory exclusion under section
1128(a) of the Act.

42 C.F.R. § 424.535(a)(3).
IV. Findings and Conclusions
I find and conclude as follows:
1. On September 20, 2012, in the United States District Court for the District of

New Jersey, Petitioner pleaded guilty to a felony offense, a violation of 42
U.S.C. § 1320a-7b(b)(1)(A), Anti-Kickback statute. CMS Exs. 1, 2, 4, 9.
2. CMS has determined the felony offense of which Petitioner was convicted to
be detrimental to the best interests of the Medicare program and its
beneficiaries.

3. CMS, acting through Novitas, properly revoked Petitioner’s Medicare Part B
enrollment and billing privileges. 42 C.F.R. § 424.535(a)(3).

V. Discussion

CMS has moved for resolution of the issue in its favor by its Motion for Summary
Disposition. While Rule 56 of the Federal Rules of Civil Procedure is not directly
applicable to proceedings under 42 C.F.R. Part 498, it does provide guidance for the
standard of review for motions seeking summary disposition. Summary judgment is
generally appropriate when the record reveals that no genuine dispute exists as to any
material fact and the undisputed facts clearly demonstrate that one party is entitled to
judgment as a matter of law. White Lake Family Medicine, P.C., DAB No. 1951 (2004).
In evaluating whether there is a genuine issue as to a material fact, an administrative law
judge must view the facts and the inferences reasonably to be drawn from the facts in
the light most favorable to the nonmoving party. See Pollock v. American Tel. & Tel.
Long Lines, 794 F.2d 860, 864 (3rd. Cir. 1986); Oklahoma Heart Hospital, DAB No.
2183, at 9 (2008); Brightview Care Center, DAB No. 2132, at 9-10 (2007); Madison
Health Care, Inc., DAB No. 1927, at 57 (2004). I have employed that standard in this
case. The parties do not disagree concerning the very limited number of material facts
in this case.

The material facts on which the parties agree are Petitioner’s having been convicted on
his plea of guilty to a single count of violation of the Anti-Kickback statute, contrary to
42 U.S.C. § 1320a-7b(b)(1)(A) in the United States District Court for the District of New
Jersey on September 20, 2012. CMS Exs. 1, 2, 4, 9; P. Answer Br. at 3. On April 9,
2013, Petitioner was sentenced to three months of imprisonment, two years of supervised
release, fined $30,000 and ordered to forfeit $7,600 to the United States. CMS, Ex, 1, at
1, 2, 3, 6, 7; CMS Ex. 8. On September 24, 2012, Novitas revoked Petitioner’s and his
practice group’s billing privileges and imposed a three-year re-enrollment bar. CMS Ex.
6.

The two essential elements that must be proven in order to sustain a revocation under

42 C.F.R. § 424.535(a)(3) are (1) whether a provider, supplier, or any owner of the
provider or supplier, within the 10 years preceding enrollment or revalidation of
enrollment, was convicted of a federal or state felony offense and (2) whether CMS has
determined that offense to be detrimental to the best interests of the program and its
beneficiaries. Section 1842(h) of the Act explicitly places the authority to make the
determination of whether an offense is detrimental with the Secretary. The implementing

regulations at section 424.535(a)(3) delegate that authority to CMS, not to the ALJ.
Letantia Bussell, M.D., DAB No. 2196, at 12-13 (2008). My review of CMS’s
revocation of Petitioner’s Medicare billing privileges is thus limited to whether CMS had
established a legal basis for its actions. Here, Petitioner acknowledges that he was indeed
convicted of a federal felony in violation of the Anti-Kickback statute within 10 years of
a revalidation of his enrollment. P. Answer at 3.

The regulation at 42 C.F.R. § 424.535(a)(3)(i) gives examples of certain offenses already
determined by CMS to be detrimental to the Medicare program. Any offense that would
result in mandatory exclusion under section 1128(a)(1) of the Social Security Act is one
such example. 42 C.F.R. § 424.535(a)(3)(i)(D). It is well settled that felony convictions
of the Anti-Kickback statute justifies mandatory exclusion pursuant to section 1128(a)(1)
of the Social Security Act. Dan Anderson, DAB CR855 (2002) (citing Jitrendra C. Shah,
M.D., DAB CR720 (2000); Farhad Mohebban, M.D., DAB CR686 (2000); Muhammad
R. Chaudhry, DAB CR 326(1994); Asadolla Amrollahifa, Ph.D, DAB CR238 (1992);
Niranjana B. Parikh, M.D. et al. DAB No. 1334(1992); Boris Lipovsky, M.D., DAB
R208 (1992); aff'd, DAB No. 1363 (1992); Arthur V. Brown, M.D., DAB CR226

992); John Tolentino, M.D., DAB CR180 (1992). Therefore, CMS has determined that
Petitioner’s offense is detrimental to the Medicare program and its beneficiaries.

2a

Both essential elements have been established by CMS. Consequently, the legal basis for
CMS’s action is established. I may not substitute my discretion about whether to revoke
in place of CMS’ discretion. Michael J. Rosen, M.D., DAB No. 2096, at 14 (2007).
Once I find that both elements required for revocation are present (i.e., (1) felony
conviction and (2) CMS’s determination that the offense is detrimental), I am obliged to
uphold the revocation.

Petitioner does not agree that Novitas was correct in determining that his crime was
detrimental to the program and its beneficiaries, but that argument cannot succeed here.
The discretion exercised by CMS acting through Novitas in making that determination is
not subject to review by the ALJs of this forum:

The regulations governing denial and revocation of provider enrollment
give CMS the discretion to determine which convictions will be the basis
for denying enrollment or revalidation. I have no authority to look behind
CMS’s exercise of discretion and to substitute my judgment for that of
CMS. I cannot, on my own, decide whether an offense is detrimental to
the best interest of Medicare and its beneficiaries. Therefore, if I conclude
that Petitioner was convicted of a felony within the 10 years preceding the
date of his application and that CMS exercised its discretion, based on that
conviction, to deny revalidation to Petitioner, I must sustain CMS’s
determination. Michael J. Rosen, M.D., DAB No. 2096, at 14 (2007)
(citing Michael J. Rosen, M.D., DAB CR1566, at 11 (2007)).

oe Rk

It is sufficient, for purposes of my decision, to find that Petitioner was
convicted of a felony within the past 10 years and that CMS determined
that the conviction was detrimental to the best interests of the Medicare
program and its beneficiaries.

Dr. Randy Barnett, DAB CR1786, at 3-4 (2008). See generally Puget Sound Behavioral
Health, DAB No. 1944 (2004); Brier Oak Terrace Care Center, DAB No. 1798 (2001);
and Wayne E. Imber, M.D., DAB No. 1740 (2000).

Petitioner argues that “‘one must conclude that Dr. Patel’s revocation was based on a
financial crime identified in 42 C.F.R. § 424.535(a)(3)(B).” Petitioner arrives at this
conclusion because “CMS imposed a three (3) year re-enrollment bar, [and
consequently] CMS did not rely on the mandatory exclusion provision of 42 C.F.R.

§ 424.535(a)(3)(D) in determining to revoke Dr. Patel’s Medicare billing privileges. . . .
because had it done so] it would have been required by statute to exclude Dr. Patel for a
minimum of five (5) years, which is clearly not the case at hand.” P. Answer Br. at 2-3.
Petitioner’s argument stems from his mistaken attempt to conflate the statutory
provisions governing exclusions and the regulatory provisions governing revocations.
The Inspector General derives its authority to exclude a petitioner under section 1128 of
the Social Security Act (Act). An exclusion of participation applies to Medicare,
Medicaid and all other federal health care programs. The length of exclusions can vary
lepending on the basis of the exclusion. However, CMS revoked Petitioner’s billing
privileges under 42 C.F.R. Part 424. Unlike the Inspector General’s authority to
exclude, regulatory provisions governing revocations are limited to Medicare billing and
the re-enrollment bar is a minimum of one year but not more than three years,

lepending on the severity of the basis for the revocation. 42 C.F.R. § 424.535(c). It is
CMS’s, not an ALJ’s, discretion to determine the length of the re-enrollment bar that it
imposes. I have no authority to disturb CMS’s exercise of its discretion. The right to a
hearing is not extended to challenging CMS’s judgment as to the duration of a
revocation, where it falls clearly within the regulation. Emmanuel Brown, M.D. and
Simeon K. Obeng, M.D., DAB CR2145 (2010); 42 C.F.R. §§ 424.535(c), 498.3(b)(17).
Petitioner should note that a revocation of billing privileges does not preclude exclusion
under 1128(a)(1) of the Act. Gregory J. Salko, M.D., DAB NO. 2437, at 7 (2012).
Additionally, even if I were to accept Petitioner’s argument that his exclusion was based
on a financial crime identified in 42 C.F.R. § 424.535(a)(3)(i)(B), this argument would
be unavailing. Any offense under section 424.535(a)(3)(i)(B) would be another

example of an offense that CMS has already determined to be detrimental of the
Medicare program and it would still be within CMS’s discretion to impose a re-
enrollment bar of a minimum of one year but not more than three years.

In addition, Petitioner asserts that there are mitigating factors that should be considered.
P. Answer Br. at 4-6. Petitioner claims that: he has provided vital medical services to the
underserved and the elderly; there was no evidence of patient harm or abuse in his
offense; he has paid back all the monies he illegally received; he has already been
punished for his actions; and that a fellow physician received an exclusion period of one
year. Under section 424.535(a)(3), CMS “may” (in its discretion) revoke the billing
privileges of a supplier that was convicted, within the prescribed ten-year period, of a
felony crime that CMS has determined to be detrimental to the best interests of Medicare
and its beneficiaries. If CMS proves that the supplier was convicted of such a crime, and
that the supplier’s conviction was the basis for the challenged revocation, then the ALJ
and the Board must sustain the revocation, regardless of other factors, such as the scope
or seriousness of the supplier’s criminal conduct and the potential impact of revocation
on Medicare beneficiaries, that CMS might reasonably have weighed in exercising its
discretion. Abdul Razzaque Ahmed, DAB No. 2261, at 16-18 (2009).

VI. Conclusion

For the reasons set out above, | GRANT CMS’s Motion for Summary Disposition.
Petitioner, Dr. Dinesh Patel, is not entitled to the relief he seeks in this appeal, and the
revocation of Petitioner’s Medicare Part B enrollment and billing privileges should be,
and it is, AFFIRMED.

/s/
Richard J. Smith
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
TC Foundation, Inc.,
(NPI: 1619246261),
Petitioner,
v.
Centers for Medicare and Medicaid Services.
Docket No. C-13-263
Decision No. CR2834

Date: June 18, 2013

DECISION

This matter is before me on the Motion for Summary Disposition filed by the Centers for
Medicare and Medicaid Services (CMS). For the reasons set out below, I GRANT the
CMS Motion and AFFIRM the revocation of Petitioner TC Foundation’s enrollment and
billing privileges as a supplier in the Medicare program.

I. Procedural History

Petitioner TC Foundation was enrolled in the Medicare program to provide laboratory
services. On June 7, 2012, First Coast Service Options (First Coast), a Medicare
contractor, revoked Petitioner’s enrollment and billing privileges effective April 6, 2012
and barred Petitioner from reenrolling for a three-year period. CMS Exhibit (Ex.) 3.
Petitioner appealed and First Coast affirmed its revocation. CMS Ex. 6.

Petitioner timely requested a hearing (RFH) before an Administrative Law Judge (ALJ).
In accordance with my Acknowledgment and Prehearing Order, CMS submitted a
Motion for Summary Disposition and a brief in support of its Motion (CMS Br.), along
with seven exhibits identified as CMS Exs. 1-7. Petitioner filed its Response in
Opposition to Respondents’ Motion for Summary Disposition (P. Br.), and no exhibits.
In the absence of objection, I admit CMS Exs. 1-7 into the record.

IL. Applicable Law

Section 1831 of the Social Security Act (the Act) (42 U.S.C. § 1395j) establishes the
supplementary medical insurance benefits program for the aged and disabled known as
Medicare Part B. Payment under the program for services rendered to Medicare-eligible
beneficiaries may only be made to eligible providers of services and suppliers.!. When
applying for enrollment in the Medicare program, a supplier is required to provide
complete accurate and truthful responses to all information requested within each section
on the enrollment application applicable to the supplier type. 42 C.F.R. § 424.510
(d)(2)(i). Also, a supplier is obligated to report within 30 days any changes in the
supplier’s practice location and other changes to the supplier’s enrollment must be
reported within 90 days. 42 C.F.R. § 424.516(d). CMS may revoke a supplier’s
enrollment if the supplier “is determined not to be in compliance with the enrollment
requirements described in this section, or in the enrollment application applicable for its
provider or supplier type. ...” 42 C.F.R. § 424.535(a)(1). CMS may also revoke
supplier enrollment if it certified as “true” misleading or false information on the
Medicare enrollment application. 42 C.F.R. § 424.535(a)(4).

A supplier “must be operational to furnish Medicare covered items or services before
being granted Medicare billing privileges.” 42 C.F.R. § 424.510(d)(6). A supplier is
“operational” when it has a “qualified physical practice location, is open to the public for
the purpose of providing health care related services, is prepared to submit valid
Medicare claims, and is properly staffed, equipped, and stocked . . . to furnish these items
and services.” 42 C.F.R. § 424.502. CMS has a right to perform on-site inspections to
verify the accuracy of a supplier’s enrollment information and to determine the provider’s
compliance with Medicare enrollment requirements. 42 C.F.R. § 424.510(d)(8); see also
42 C.F.R. § 424.517(a)(1). The on-site inspection permits the Secretary “to verify . . .
that [she] is paying an entity that actually exists or that is providing a service that it
represented it would provide in its enrollment application.” 71 Fed. Reg. at 20,755.

CMS may revoke a supplier’s enrollment if, upon on-site review, CMS determines that a
“supplier is no longer operational to furnish Medicare covered items or services, or the

' A “supplier” furnishes services under Medicare and the term supplier applies to
physicians and other non-physician practitioners and facilities that are not included
within the definition of the phrase “‘provider of services.” Act § 1861(d) (42 U.S.C.
§ 1395x(d)). An Independent Clinical Laboratory (CLIA), such as Petitioner, is
considered a supplier under the regulations. See 42 C.F.R. § 400.202; 42 C.F.R.

§ 424.502.
supplier has failed to satisfy any or all of the Medicare enrollment requirements, or has
failed to furnish Medicare covered items or services as required by the statute or
regulations.” 42 C.F.R. § 424.530(a)(5)(ii).

Ill. Issue

The issue in this case is whether CMS was authorized to revoke Petitioner’s enrollment
and billing privileges in the Medicare program.

IV. Analysis

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

A. This case is appropriate for summary judgment

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

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

law. ... To defeat an adequately supported summary judgment motion, the
non-moving party may not rely on the denials in its pleadings or briefs, but
must furnish evidence of a dispute concerning a material fact — a fact that,
if proven, would affect the outcome of the case under governing law. . . .
In determining whether there are genuine issues of material fact for trial,
the reviewer must view the evidence in the light most favorable to the non-
moving party, drawing all reasonable inferences in that party’s favor.

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

The Board has further explained that the role of an Administrative Law Judge (ALJ) in
deciding a summary judgment motion differs from its role in resolving a case after a
hearing. The ALJ should not assess credibility or evaluate the weight of conflicting
evidence. Holy Cross Village at Notre Dame, Inc., DAB No. 2291, at 5 (2009). I find
that Petitioner has not disputed any fact material to my resolution of the case.
Accordingly, I conclude that summary judgment is appropriate in this case. Here, the
material facts are not disputed, and I draw all reasonable inferences in favor of Petitioner.
B. CMS was authorized to revoke Petitioner’s enrollment as a supplier in the
Medicare program because Petitioner was not “operational” because it
was not furnishing laboratory services

The facts in this case are not disputed. Petitioner, a nonprofit foundation, established a
clinical laboratory and sought to enroll it as a Medicare supplier. Petitioner filed its
application for Medicare enrollment on January 3, 2012, listing its effective date as
December 13, 2011 (the date that the State of Florida issued Petitioner’s CLIA license).
P. Br. at 1-3; CMS Ex. | at 2; RFH.

On March 13, 2012, while Petitioner’s application was still pending, Rolando O. Garcia-
Morales, MD, MHSA, Petitioner’s medical director and authorized official, contacted
First Coast to determine the status of its application. First Coast documented that

Dr. Garcia-Morales stated that the lab was going to start seeing patients once First Coast
approved the Medicare enrollment application. The First Coast representative advised
Petitioner that First Coast could not approve the application until after Petitioner had
begun seeing patients. The First Coast representative instructed Dr. Garcia-Morales to
contact First Coast once Petitioner began seeing patients so that they could disclose that
information on the application. CMS Ex. 7 at 3. Despite this discussion, First Coast
continued to process Petitioner’s application and approved Petitioner’s enrollment just
nine days later. First Coast established Petitioner’s effective date as December 13, 2011.
CMS | at 19; RFH.

Shortly thereafter, on April 6, 2012, the contractor conducted an on-site inspection of
Petitioner’s facility. During this inspection, Dr. Garcia-Morales informed the inspector
that Petitioner had not seen any patients yet, as recently discussed with First Coast.

Dr. Garcia-Morales stated that Petitioner intended to start seeing patients in about two
weeks. CMS Ex. 2.

Two months later, First Coast revoked Petitioner’s enrollment. CMS Ex. 3. The letter
notified Petitioner that the revocation was based on providing false or misleading
information under section 424.535(a)(4). The letter further informed Petitioner that it
was also barred from reenrolling for three years. CMS Ex. 3. Petitioner appealed. The
contractor reconsideration decision added two additional bases for revocation: that
Petitioner was not operational under section 424.535(a)(5), and that Petitioner had failed
to report a change in practice location under section 424.535(a)(9). CMS Ex. 6.

On appeal, CMS relies only on the “not operational” provision as the basis for revocation.
CMS argues that Petitioner was properly revoked pursuant to 42 C.F.R.

§ 424.535(a)(5)(ii) because Petitioner was not operational at the time that the on-site
inspection was conducted. Petitioner argued in its request for hearing that the facility has
been operational since before September 1, 2011, because that by that time:
a. All of our personnel had performed exhaustive clinical testing in all of
our instruments.

b. The experts for the State of Florida - Agency for Health Care
Administration's Laboratory Unit had thoroughly inspected the
laboratory and approved its licensure and,

c. A State of Florida - Clinical Laboratory License was received with
effective date as of December 13, 2011.

RFH at 2.

When used in the context of this case, the term “operational” is a term of art specific to
the regulations regarding Medicare enrollment and billing privileges. The regulations
define “operational” as follows:

[T]he provider or supplier has a qualified physical practice location, is
open to the public for the purpose of providing health care related services,
is prepared to submit valid Medicare claims, and is properly staffed,
equipped, and stocked (as applicable, based on the type of facility or
organization, provider or supplier specialty, or the services or items being
rendered), to furnish these items or services.

42 C.F.R. § 424.502.

The regulations do not further detail the “operational” requirement. However, the Board
has indicated that once enrolled, the supplier must not only be able to provide the items
or service, but actually be providing the items or service. Specifically, the Board has
explained that the requirement that Petitioner “be ‘operational’ means it must have a
qualified physical practice location and actually be furnishing the types of covered
Medicare services that it holds itself out as furnishing .” (emphasis added) CompRehab,
DAB No. 2406 at 7 (2011), citing 42 C.F.R. § 424.502; see also A To Z DME, LLC, DAB
No. 2303 at 9-10.

A supplier disputing a CMS revocation under section 424.535(a)(5)(ii) must show that it
in was in fact operational during the time period relevant to the on-site review. Under the
regulations, it is insufficient for a supplier to demonstrate that it became operational at a
later point in time. A To Z DME, LLC, DAB No. 2303 at 6-8; see 73 Fed. Reg. 36,448,
36,542 (June 27, 2008). Accordingly, for Petitioner to prevail, Petitioner must show that
it was operational — furnishing laboratory services to patients — around the April 6,
2012 inspection.

However, Petitioner has never argued that it was conducting laboratory testing at or
around April 6, 2012. Quite to the contrary, Petitioner has answered openly that it had
not seen patients at the time of enrollment, or during its on-site inspection. RFH; P. Br.
at 4-5. For example, during the on-site inspection, Dr. Garcia-Morales noted “N/A no
Patients” on the inspector’s form requesting a sample of current patient medical records.
CMS Ex. 2 at 6. Petitioner explains that it had a physical practice location that was
properly staffed, equipped, and stocked, and open to the public for the purpose of
providing laboratory services. P. Br. at 2-4. Petitioner clarified that “[up to the date of
the [inspection, Petitioner] did not see any Medicare patients because no Medicare
patients had been referred to be tested .. . up to that point....” P. Br. at 4.
Unfortunately, the term “operational” is interpreted for enrollment and billing purposes to
include the requirement that the provider or supplier actually be providing the service or
items that it was approved to provide.

Moreover, there simply is no exception to the regulations for businesses in “start-up
mode” at the time of the on-site review. A To Z DME, LLC, DAB No. 2303, at 5. In A to
Z DME v. CMS, the petitioner asserted that it was operational as shown by its receipt of a
Blue Cross/Blue Shield number, receipt of loans, insurance, bank account, among others.
In that case, the Board explained, “merely planning or preparing to do business with the
public is not equivalent to being actually operational as required.” Jd. at 5.

I do not have the authority to review CMS’s discretionary act to revoke a supplier’s
Medicare status. Letantia Bussell, DAB No. 2196, at 13 (2008). I must sustain CMS’s
revocation determination if a legitimate basis exists for that determination and where the
facts established noncompliance with one or more of the relevant regulations.
18661CPayday.com, DAB No. 2289, at 13 (2009). As the Board has stated, “the right to
review of CMS’s determination by an ALJ serves to determine whether CMS had the
authority to revoke [the supplier’s] Medicare billing privileges, not to substitute the
ALJ’s discretion about whether to revoke.” Busse/l, DAB No. 2196, at 13.

I must sustain a revocation where the facts establish that the provider or supplier was not
operational. There is nothing in the regulations that authorizes me to make an exception
on a petitioner’s showing of good cause for noncompliance, nor do I have the authority to
waive the regulations’ strict requirements on a showing of extenuating circumstances or
as a matter of equity.

Vv. Conclusion
The undisputed evidence establishes that CMS was authorized to revoke Petitioner’s

enrollment as a Medicare supplier because it was not operational in accordance with 42
C.F.R. § 424.535(a)(5). Accordingly, 1GRANT summary judgment in favor of CMS.
The revocation of Petitioner’s enrollment in the Medicare program must be, and it is,
AFFIRMED.

/s/
Richard J. Smith
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

PSI Premier Specialties, Inc. d/b/a Medical Express PSI,
(Supplier No. 0653700001;
NPI No. 1831101848)
Petitioner,
v.
Centers for Medicare and Medicaid Services.
Docket No. C-13-397
Decision No. CR2833
Date: June 18, 2013
DECISION
The Medicare enrollment and billing privileges of Petitioner, PSI Premier Specialties Inc.
d/b/a Medical Express PSI (Supplier No. 0653700001; NPI No. 1831101848), are revoked

pursuant to 42 C.F.R. § 424.535(a)(1)', effective September 2, 2012, for noncompliance
with 42 C.F.R. §§ 424.57(c)(1), (2), and (22).

' References are to the 2011 revision of the Code of Federal Regulations (C.F.R.), unless
otherwise indicated.
I. Background

The Supplier Audit and Compliance Unit of the National Supplier Clearinghouse,”
operated by Palmetto GBA (Palmetto), a Medicare contractor to the Centers for Medicare
and Medicaid Services (CMS), notified Petitioner by letter dated August 3, 2012, that
Petitioner’s Medicare DMEPOS supplier number’ was being revoked effective 30 days
from the postmark of the August 3, 2012 letter. Palmetto advised Petitioner that its
supplier number was being revoked for noncompliance with 42 C.F.R. § 424.57(c)(1)
based on a violation of 42 C.F.R. § 424.57(b)(1); 42 C.F.R. § 424.57(c)(2); and 42 C.F.R.
§ 424.57(c)(22). CMS Exhibit (CMS Ex.) 2.

Palmetto notified Petitioner by letter dated September 19, 2012, that Petitioner’s
Corrective Action Plan was insufficient to permit reinstatement of Petitioner’s billing
number due to continued noncompliance with 42 C.F.R. § 424.57(c)(1), (2), and (22).
CMS Exs. 3, 4. Petitioner requested reconsideration on October 1, 2012. The
reconsideration decision dated December 10, 2012, upheld the revocation of Petitioner’s
billing privileges because Petitioner failed to show that it was in compliance with 42
C.F.R. § 424.57(c)(1), (2), and (22). CMS Ex. 1.

Petitioner timely filed a request for a hearing (RFH) before an administrative law judge
(ALJ) on February 5, 2013. On February 8, 2013, the case was assigned to me for hearing
and decision and an Acknowledgement and Prehearing Order (Prehearing Order) was
issued at my direction. CMS filed a “Prehearing Brief and Motion for Summary
Judgment” (CMS Br.) with CMS Exs. | through 9 on March 8, 2013. Petitioner filed a
“Prehearing Brief and Response to Motion for Summary Judgment” (P. Br.) with no

> The National Supplier Clearinghouse is the contractor responsible for enrollment and re-
enrollment of Durable Medical Equipment, Orthotics, Prosthetics, and Supplies
(DMEPOS) suppliers. 42 C.F.R. § 424.57(a).

> Palmetto referred to revocation of Petitioner’s “supplier number,” also known as a
“billing number,” but it is the revocation of Petitioner’s billing privileges associated with
its billing number that is at issue. A DMEPOS supplier must have a supplier number,
which conveys billing privileges, in order to be paid by Medicare for the delivery of a
Medicare-covered item to a Medicare eligible beneficiary. 42 C.F.R. § 424.57(b)(2).
Revocation of a DMEPOS supplier’s billing or supplier number is revocation of the
supplier’s billing privileges and ends the supplier’s participation in Medicare until such
time as the supplier can again qualify to participate. 42 C.F.R. §§ 424.57(d); 424.502;
424.535(a) and (c).
exhibits on April 8, 2013. CMS filed a Reply Brief (CMS Reply) on April 24, 2012 with
CMS Ex. 10. Petitioner did not object to my consideration of any of CMS’s proposed
exhibits and CMS Exs. | through 10 are admitted and considered as evidence.

II. Discussion
A. Statutory and Regulatory Program Requirements

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

§ 1395u(h)(1)). Petitioner isa DMEPOS supplier.

The Act requires the Secretary of Health and Human Services (Secretary) to issue
regulations that establish a process for the enrollment in Medicare of providers and
suppliers, including the right to a hearing and judicial review of certain enrollment
determinations such as revocation of enrollment and billing privileges. Act § 1866(j) (42
U.S.C. § 1395cce(j)).

Pursuant to 42 C.F.R. §§ 424.57 and 424.505, a DMEPOS supplier such as Petitioner must
be enrolled in the Medicare program to be reimbursed for DME or POS sold or rented to
Medicare beneficiaries. Participation in Medicare imposes obligations upon a supplier.
Suppliers must submit complete, accurate and truthful responses to all information
requested in the enrollment application. 42 C.F.R. § 424.510(d)(2). Pursuant to 42 C.F.R.

* A “supplier” furnishes services under Medicare and includes physicians or other
practitioners and facilities that are not included within the definition of the phrase
“provider of services.” Act § 1861(d) (42 U.S.C. § 1395x(d)). A “provider of services,”
commonly shortened to “provider,” includes hospitals, critical access hospitals, skilled
nursing facilities, comprehensive outpatient rehabilitation facilities, home health agencies,
hospice programs, and a fund as described in sections 1814(g) (42 U.S.C. § 1395f(g)) and
1835(e) (42 U.S.C. § 1395n(e)) of the Act. Act § 1861(u) (42 U.S.C. § 1395x(u)). The
distinction between providers and suppliers is important because they are treated
differently under the Act for some purposes. A DMEPOS supplier generally sells or rents
durable medical equipment (DME), prosthetics orthotics, or supplies (POS) as defined by
section 1861(n) of the Act. 42 C.F.R. § 424.57(a).

§§ 424.502 and 424.510(d)(3), a supplier’s application to enroll in Medicare must be
signed by an authorized official, i.e., one with authority to bind the provider or supplier
both legally and financially. The regulation provides that the signature attests to the
accuracy of information provided in the application. The signature also attests to the fact
that the provider or supplier is aware of and abides by all applicable statutes, regulations,
and program instructions. 42 C.F.R. § 424.510(d)(3). DMEPOS suppliers have additional
conditions imposed by 42 C.F.R. § 424.54(b) to be eligible for payment from Medicare for
DMEPOS provided to Medicare-eligible beneficiaries: (1) the supplier must have
submitted a completed applications and enrollment forms for each separate physical
location it uses to furnish DMEPOS except those used solely as warehouses or repair
facilities; (2) the DMEPOS item for which reimbursement is sought must have been
furnished to the Medicare beneficiary on or after the date CMS granted the supplier billing
privileges as reflected by the supplier number, with one supplier number issued for each
of the supplier’s locations; (3) billing privileges must not have been revoked and the
supplier not excluded from Medicare during the period when the DMEPOS item was
furnished; (4) the supplier has a state issued license to dispense drugs if the DMEPOS
requires administration of a drug; and (5) the supplier provides CMS all information and
documents necessary to process the claim. A DMEPOS supplier must also meet at the
time of application and continue to meet thereafter the 30 supplier certification standards
established by 42 C.F.R. § 424.57(c). Once enrolled, the supplier receives billing
privileges and is issued the billing or supplier number that is required to receive payment
for DMEPOS furnished to a Medicare beneficiary. There is no issue in this case that
Petitioner was enrolled in Medicare as a DMEPOS supplier.

The Secretary has delegated authority to CMS or its Medicare contractor to revoke an
enrolled provider or supplier’s Medicare enrollment and billing privileges and any
provider or supplier agreement for any of the reasons listed in 42 C.F.R. § 424.535.
Noncompliance with enrollment requirements, such as those established by 42 C.F.R. §
424.57 for DMEPOS suppliers, is a basis for revocation of billing privileges and
enrollment in Medicare. 42 C.F.R. § 424.535(a)(1).

A provider or supplier that has been denied enrollment or whose enrollment and billing
privileges have been revoked has a right to request a hearing by an ALJ and further review
by the Departmental Appeals Board (Board). 42 C.F.R. §§ 424.545, 498.3(b)(17), 498.5.
A hearing on the record, also known as an oral hearing, is required under the Act.
Crestview Parke Care Ctr. v. Thompson, 373 F.3d 743, 748-751 (6th Cir. 2004). The
provider or supplier bears the burden to demonstrate that it meets enrollment requirements
with documents and records. 42 C.F.R. § 424.545(c).
B. Issues
Whether summary judgment is appropriate;

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

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

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

1. Summary judgment is appropriate.

A provider or supplier denied enrollment in Medicare or whose enrollment had been
revoked has a right to a hearing and judicial review pursuant to section 1866(h)(1) and (j)
of the Act and 42 C.F.R. §§ 424.454(a), 498.3(b)(1), (5), (6), (8), (15), (17), 498.5. A
earing on the record, also known as an oral hearing, is required under the Act. Act §§
205(b), 1866 (h)(1) and (j); Crestview Parke Care Ctr. v. Thompson, 373 F.3d 743, 748-
51. A party may waive appearance at an oral hearing, but must do so affirmatively in
writing. 42 C.F.R. § 498.66. In this case, Petitioner has not waived the right to oral
earing or otherwise consented to decision based only upon the documentary evidence or
pleadings. Accordingly, disposition on the written record alone is not permissible, unless
the CMS motion for summary judgment has merit.

Summary judgment is not automatic upon request but is limited to certain specific
conditions. The procedures established by 42 C.F.R. pt. 498 do not include a summary
judgment procedure. However, appellate panels of the Board have long recognized the
availability of summary judgment cases subject to 42 C.F.R. pt. 498, and the Board’s
interpretative rule has been recognized by the federal courts. See, e.g., Crestview, 373
F.3d at 749-50. Furthermore, a summary judgment procedure was adopted as a matter of
judicial economy within my authority to regulate the course of proceedings and made
available to the parties in the litigation of this case by my Prehearing Order.

Summary judgment is appropriate and no hearing is required where either: there are no
disputed issues of material fact and the only questions that must be decided involve
application of law to the undisputed facts; or, the moving party must prevail as a matter
of law even if all disputed facts are resolved in favor of the party against whom the
motion is made. The Board follows the general approach of the federal courts in
evaluating whether or not summary judgment in lieu of a hearing is appropriate. The
movant bears the initial burden of demonstrating that there are no genuine issues of
material fact for trial and that the movant is entitled to judgment as a matter of law.
When confronted with a properly supported motion for summary judgment, the

| nonmoving party “may not rest upon the mere allegations or denials of his pleading,
but... must set forth specific facts showing that there is a genuine issue for trial.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (quoting First Nat’l Bank of
Az. v. Cities Serv. Co., 391 U.S. 253, 249 (1968)); see also Fed. R. Civ. P. 56(c);
Venetian Gardens, DAB No. 2286, at 10-11 (2009); Ill. Knights Templar Home, DAB
No. 2274, at 3-4 (2009); Garden City Med. Clinic, DAB No. 1763 (2001), Everett Rehab.
& Med. Ctr., DAB No. 1628, at 3 (1997) (in-person hearing required where nonmovant
shows there are material facts in dispute that require testimony); Big Bend Hosp. Corp.,
d/b/a Big Bend Hosp. Ctr., DAB No. 1814, at 13 (2002) (in some cases, any factual issue
is resolved on the face of the written record because the proffered testimony, even if
accepted as true, would not make a difference).

In opposing a motion for summary judgment, the nonmovant bears the burden of
showing that there are material facts that are disputed either affecting the movant’s prima
facie case or that might establish a defense. It is insufficient for the nonmovant to rely
upon mere allegations or denials to defeat the motion and proceed to hearing. The
nonmovant must, by affidavits or other evidence that sets forth specific facts, show that
there is a genuine issue for trial. If the nonmovant cannot show by some credible
evidence that there exists some genuine issue for trial, then summary judgment is
appropriate and the movant prevails as a matter of law. Anderson, 477 U.S. at 247. A
test for whether an issue is regarded as genuine is if “the evidence [as to that issue] is
such that a reasonable jury could return a verdict for the nonmoving party.” Jd. at 248.
In evaluating whether there is a genuine issue as to a material fact, an ALJ must view the
facts and the inferences to be drawn from the facts in the light most favorable to the
nonmoving party. Pollock v. Am. Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3rd Cir.
1986).

The standard for deciding a case on summary judgment and an ALJ’s decision-making in
deciding a summary judgment motion differs from resolving a case after a hearing. On
summary judgment, the ALJ does not make credibility determinations, weigh the
evidence, or decide which inferences to draw from the evidence, as would be done when
finding facts after a hearing on the record. Rather, on summary judgment the ALJ
construes the evidence in a light most favorable to the non-movant and avoids deciding
which version of the facts is more likely true. Holy Cross Vill. at Notre Dame, Inc, DAB
No. 2291, at 5 (2009). The Board also has recognized that on summary judgment it is
appropriate for the ALJ to consider whether a rational trier of fact could find that a
party’s evidence, i.e., the movant’s evidence, would be sufficient to meet that party’s
evidentiary burden. Dumas Nursing and Rehab., L.P., DAB No. 2347, at 5 (2010); Ill.
Knights Templar Home, DAB No. 2274, at 8.

In deciding that summary judgment is appropriate in this case, I note that Petitioner
offered no affidavit or declaration in support of its opposition to the motion for summary
| judgment. Furthermore, Petitioner advised me by its prehearing exchange filed on
April 8, 2013, that it intended to offer at hearing no documentary evidence and only one
witness, Ed Stevens, who signed Petitioner’s Corrective Action Plan, which is offered as
evidence by CMS and is discussed in significant detail hereafter. I conclude, as discussed
hereafter, that the material facts in this case are not in dispute and there is no genuine
dispute as to any material fact that requires a trial. The issues in this case that require
resolution are issues of law related to the interpretation and application of the regulations
that govern enrollment and billing privileges in the Medicare program and application of
the law to the undisputed facts of this case. The issues in this case must be resolved
against Petitioner as a matter of law as discussed hereafter. Accordingly, I conclude
summary judgment is appropriate and the decision on summary judgment is dispositive of
all issues in this case obviating the need of a hearing.

2. Petitioner has not shown that it was in compliance with 42 C.F.R.
§ 424.57(c)(1) (Supplier Standard 15).

3. There is a basis for revocation of Petitioner’s billing privileges
pursuant 42 C.F.R. § 424.535(a)(1).

Supplier Standard 1 requires that suppliers comply with federal regulatory requirements;
state licensing and regulatory requirements; and local zoning requirements. 42 C.F.R.

§ 424.57(c)(1). The applicable federal regulations require that a DMEPOS “supplier must
enroll separate physical locations it uses to furnish Medicare covered DMEPOS, with the
exception of locations it uses solely as warehouses or repair facilities.” 42 C.F.R.

§ 424.57(b)(1).

The parties were advised by my Prehearing Order § IIC that the issue before me is:

Whether Petitioner met the requirements for participation in
Medicare when the reconsideration decision was made. 73 Fed. Reg.
36,448, 36,452 (June 27, 2008).

The formulation of the issue is based on the discussion in the Federal Register of the scope
of review available to a provider or supplier whose Medicare enrollment is denied or
revoked. The pertinent discussion is as follows:

> The regulation uses the phrase “application certification standards” rather than “supplier
standards.” 42 C.F.R. § 424.57(c). CMS uses the phrase “supplier standards” in its
Medicare Program Integrity Manual, CMS pub. 100-08, § 15.24.9 (rev. 463, May 17,
2013). “Supplier Standard” as used in this decision refers to the 30 standards listed in 42
C.F.R. § 57(c).
When a Medicare contractor makes an adverse enrollment
determination (for example, enrollment denial or revocation
of billing privileges), providers and suppliers are afforded
appeal rights. However, these appeal rights are limited to
provider or supplier eligibility at the time the Medicare
contractor made the adverse determination. Thus, if a
Medicare contractor determines that a provider or supplier
does not meet State licensure requirements on June 1, 2007, it
is the provider’s responsibility to demonstrate during the
appeals process that State licensure requirements were met on
June 1, 2007. Conversely, if a provider only can demonstrate
that State licensure requirements were met on a later date;
such as, August 16, 2007, we believe that the contractor made
the correct determination, and that the provider or supplier
may reapply for Medicare billing privileges. Accordingly, a
provider or supplier is required to furnish the evidence that
demonstrates that the Medicare contractor made an error at
the time an adverse determination was made, not that the
provider or supplier is now in compliance. Thus, we believe
that it is essential that providers and suppliers submit
documentation that supports their eligibility to participate in
the Medicare program during the reconsideration step of the
provider enrollment appeals process. This will allow a
hearing officer to review and make a decision using all
applicable facts. Moreover, the early presentation of
evidence will help to ensure an efficient and effective
administrative appeals process.

Id. (emphasis added). This regulatory history could be interpreted to mean that a
provider or supplier must show that it was in compliance with enrollment requirements as
of the date of the initial determination by CMS or its contractor. But such specific
language was not used by the drafters. Rather, the language chosen by the drafters refers
to “the adverse determination.” In this case the Medicare contractor Palmetto issued both
an adverse initial determination and an adverse reconsideration determination. CMS Exs.
1,2. The Federal Register discussion does not specify which adverse Medicare
contractor decision should be the focus at hearing. It may also be argued that the focal
point of a hearing should be the effective date of the revocation rather than the initial
determination date. The example cited by the drafters is, if the contractor determined that
the supplier did not meet state licensure requirements on June 1, on appeal the supplier
has the burden to show that it did meet state licensure requirements on June 1. The
regulation specifically lists several grounds for revocation, including license suspension
or revocation, when the date of revocation may be earlier than the date of the initial

determination. 42 C.F.R. § 424.535(g). In this case, I do not need to resolve the possible
inconsistency in what the drafters of the regulation intended. I consider the date of the
initial determination (August 3, 2012), the effective date of the revocation (September 2,
2012), and the date of the reconsideration determination (December 10, 2012). The date
chosen as the focal point does affect the conclusions as to specific issues, but not the
ultimate decision in the case. Considering whether a provider or supplier was in
compliance at the time of the adverse reconsideration decision by the contractor does,
however, ensure that Petitioner’s right to review is granted to the maximum extent
possible.

I conclude that there is no genuine dispute as to any issue of material fact related to the
Supplier Standard 1 and summary judgment is appropriate.

Petitioner admits in its August 30, 2012 Corrective Action Plan that it had patient facilities
at 11886 Greenville Avenue, Suite 114, Dallas, Texas and 1825 Troup Highway, Tyler,
Texas locations. Petitioner states that the facilities were not enrolled due to administrative
oversight and that enrollment applications were submitted for both as soon as the
oversight was recognized. Petitioner asserted in its Corrective Action Plan that it had
applied to enroll both sites before receiving notification of revocation from Palmetto.
CMS Ex. 4, at 2, 4. Thus, Petitioner clearly admitted in its Corrective Action Plan that it
recognized that the Greenville Avenue site in Dallas and the Troup Highway site in Tyler
were required to be enrolled in Medicare. Petitioner does not dispute that neither facility
was enrolled prior to the notice of revocation, the effective date of revocation, or the
reconsideration decision.

In the request for reconsideration, Petitioner’s counsel concedes that the Greenville
Avenue site in Dallas and the Troup Highway site in Tyler were licensed by the Texas
Board of Orthotics and Prosthetics and applications for both to enroll in Medicare had
been submitted to the National Supply Center in September 2011. Petitioner does not
argue that the sites were enrolled prior to revocation. Rather, Petitioner argues that neither
site was in the business of providing Medicare-covered DMEPOS. CMS Ex. 5. Petitioner
makes a similar assertion in the request for hearing (RFH at 2) and in its opposition to the
motion for summary judgment (P. Br. at 3-4). Petitioner’s assertion that the Greenville
Avenue and Troup Highway sites were not providing DMEPOS to Medicare-eligible
beneficiaries is inconsistent with the Corrective Action Plan signed by Ed Stevens, who is
listed as an authorized official of Petitioner. The Corrective Action Plan admits that both
sites were required to be enrolled, a fact that Petitioner asserts it recognized before
Palmetto gave notice of the revocation. CMS Ex. 4, at 2, 4. Petitioner’s Corrective
Action Plan satisfies the CMS evidentiary burden on summary judgment. Petitioner has
offered no evidence to rebut the CMS evidence. Petitioner has failed to show, by
affidavits or other evidence, that there is a genuine issue for trial. If the nonmovant cannot

10

show by some credible evidence that there exists some genuine issue for trial, then
summary judgment is appropriate and the movant prevails as a matter of law. Anderson,
477 US. at 247.

Supplier Standard 1 also requires that a supplier meet state licensing and regulatory
requirements. The August 3, 2012 Palmetto letter notified Petitioner that its billing
privileges were being revoked because Petitioner did not have licenses in Illinois, Indiana,
and Missouri, among other states. Petitioner’s admitted in its Corrective Action Plan that
it provided DMEPOS to physicians in Illinois, Indiana, and Missouri, though Petitioner
asserts and | accept for purposes of summary judgment, that it had no physical locations in
those states. Petitioner stated in the Corrective Action Plan that its failure to have state
licenses in Illinois, Indiana, and Missouri was an administrative oversight. CMS Ex. 4, at
2. Petitioner stated in the Corrective Action Plan that a license was obtained from
Indiana. The Indiana license was issued August 27, 2012, after the initial decision but
before the effective date, and it is valid to December 31, 2013. CMS Ex. 5 at 32-25.
Petitioner stated in the Corrective Action Plan that applications for licenses had been filed
in Missouri and Illinois, but Petitioner does not assert that the licenses had been issued
prior to reconsideration. CMS Ex. 4, at 2-4. Petitioner asserted in the request for
reconsideration and the request for hearing that a license is not required in Missouri; that
Petitioner had obtained an Indiana licensed; and that Petitioner was in the process of
obtaining a license in Illinois. CMS Ex. 5, at 3; RFH at 3.The assertion that no license is
required by Missouri is supported by evidence submitted with the request for
reconsideration and request for hearing and, based on that evidence, I draw an inference in
Petitioner’s favor for purposes of summary judgment. However, Petitioner’s Corrective
Action Plan also satisfies the CMS burden on summary judgment as it contains the
admission that Petitioner provided DMEPOS in Illinois without a license. Petitioner
suggests in its brief in opposition to summary judgment that DMEPOS may have been
provided by Petitioner to Medicare-eligible beneficiaries from Illinois when they were in
Texas but Petitioner presented no evidence to support such a finding. Therefore, I
conclude that Petitioner again failed to present credible evidence to show a genuine
dispute as to a material fact and summary judgment is appropriate.

There is no genuine dispute of the material fact that Petitioner had two locations that were
not enrolled in Medicare though Petitioner recognized they should have been. There is
also no genuine dispute of the material fact that Petitioner provided DMEPOS in Indiana
without a license. Accordingly, CMS has met its burden of making a prima facie showing
of noncompliance and Petitioner was not shown it was in compliance with Supplier
Standard 1 at the time of the initial determination, the effective date of revocation, or the
date of reconsideration.

4.. Petitioner has not shown that it was in compliance with 42 C.F.R.
§ 424.57(c)(2) (Supplier Standard 2).
11

5. There is a basis for revocation of Petitioner’s billing privileges
pursuant 42 C.F.R. § 424.535(a)(1)..

Supplier Standard 2 requires that a supplier not make or cause to be made any false
statement or misrepresentation of a material fact on its application for billing
privileges. The regulation explains parenthetically that the supplier must provide
complete and accurate information on its application for billing privileges and must
report any changes to information on the application within 30 days. 42 C.F.R.

§ 424.57(c)(2).

The August 3, 2013 Palmetto notice-letter advised Petitioner that it was not in
compliance with Supplier Standard 2 because it failed to report to the National Supplier
Clearinghouse the “additional locations used to provide service to Medicare
beneficiaries.” Petitioner conceded in its August 30, 2012 corrective action plan that it
had patient facilities at 11886 Greenville Avenue, Suite 114, Dallas, Texas and 1825
Troup Highway, Tyler, Texas that were not enrolled in Medicare as DMEPOS
suppliers. In its request for hearing and brief, Petitioner simply refers to its arguments
related to Supply Standard 1. RFH at 3; P. Br. at 4. Petitioner has not contested that
information about locations used to provide DMEPOS services to Medicare
beneficiaries is material to a determination as to whether or not a supplier should be
enrolled and continue to be enrolled in Medicare.

I conclude that there is no genuine dispute as to any material fact and summary judgment
is appropriate for the same reasons as discussed under Supplier Standard 1. CMS has met
its burden of making a prima facie showing of noncompliance and Petitioner was not
shown it was in compliance with Supplier Standard 2 at the time of the initial
determination, the effective date of revocation, or the date of reconsideration.

6. Petitioner has not shown that it was in compliance with 42 C.F.R.
§ 424.57(c)(22) (Supplier Standard 22).

7. There is a basis for revocation of Petitioner’s billing privileges
pursuant 42 C.F.R. § 424.535(a)(1)..

Supplier standard 22 requires that:

All suppliers of DMEPOS and other items and services must
be accredited by a CMS-approved accreditation organization
in order to receive and retain a supplier billing number. The
accreditation must indicate the specific products and services
for which the supplier is accredited in order for the supplier to
receive payment for those specific products and services.
12

42 C.F.R. § 424.57(c)(22). Supplier Standard 22 states that a supplier of DMEPOS must
be accredited but it does not specify that each location of a DMEPOS supplier be
accredited. However, Supplier Standard 22 must be read in context with Supplier
Standard 23 and Supplier Standard 24. Supplier Standard 23 provides that when a
DMEPOS supplier opens a new location the supplier must notify its accreditation
organization, which may accredit the new supplier location for three months before a site
visit is conducted. 42 C.F.R. § 424.57(c)(23). Supplier Standard 24 specifically requires
that all DMEPOS supplier locations must meet DMEPOS quality standards and be
separately accredited. 42 C.F.R. § 424.57(c)(24). It is clear from considering Supplier
Standard 22 in context with Supplier Standard 23 and 24 that the requirement is for each
DMEPOS supplier location to be accredited for the type of DMEPOS services and
equipment supplied to Medicare eligible beneficiaries.

The August 3, 2012 Palmetto notice-letter advised Petitioner that it was determined not in
compliance with Supplier Standard 22 because accreditation for the company could not be
verified. CMS Ex. 2, at 2. In its Corrective Action Plan, Petitioner states:

We have been enrolled with Medicare since 1999 with the
NPI # 06537000001. Our enrollment applications for all our
locations were always truthful and the lack of accreditation by
one of the approved Accreditation Organizations was
apparent from our enrollment applications. This was never
flagged as an issue by CMS, so we were operating under the
assumption that we were in compliance with Medicare.

CMS Ex. 4, at 6.

The Corrective Action Plan concedes that there was a “lack of accreditation by one of the
approved Accreditation Organizations” that was “apparent from . . . enrollment
applications.” The Corrective Action Plan also stated that Petitioner had begun the
process of obtaining accreditation for facilities that were not currently accredited. CMS
Ex. 4, at 6.

Petitioner submitted with its request for reconsideration a letter from the “American Board
for Certification in Orthotics, Prosthetics & Pedorthics, Inc.” dated September 26, 2012
addressed to Petitioner’s 8800 Shoal Creek Boulevard, Austin, Texas, which states that
that facility was accredited for three months effective from September 21, 2012 to
December 21, 2012. CMS Ex. 5, at 14. Petitioner also submitted with its request for
reconsideration two certificates from the American Board for Certification in Orthotics,
Prosthetics and Pedorthics, Inc. but neither certificate shows that it was issued for a
particular facility of Petitioner, except the indication that Petitioner was located in Austin.
CMS Ex. 5 at 37, 39. One of the certificates dated October 6, 2010, bears an expiration
date of April 1, 2014, and states that it is for a facility in Austin, Texas. CMS Ex. 15, at
13

37. The second certificate also states that it is for a facility in Austin, Texas, but the
effective and expiration dates are unreadable. CMS Ex. 15, at 39. Petitioner also
submitted on reconsideration a certificate issued by the Texas Board of Orthotics and
Prosthetics that states that Petitioner, with the address of 8800 B Shoal Creek Boulevard,
Austin, Texas, is credentialed in the State of Texas. The certificate bears an effective date
of March 23, 2011. Petitioner does not argue that the certificate issued by the State of
Texas is evidence of the accreditation required by Supplier Standard 22.

Petitioner argued on reconsideration that its evidence shows that Petitioner was accredited
as an entity. Petitioner also argues that the fact it is accredited as an entity is shown by the
fact that the American Board for Certification in Orthotics, Prosthetics and Pedorthics,
Inc. had no trouble issuing an accreditation certificate for the facility at 8800 Shoal Creek
Boulevard, which I note, was effective for only three months. CMS Ex. 5, at 3-4.
Petitioner also argues in its brief in opposition to the CMS motion for summary judgment
that Petitioner was accredited as a corporate entity. P. Br. at 4.

Petitioner’s arguments and evidence fail to show that there is a genuine dispute as to a
material fact regarding whether each of Petitioner’s facilities was accredited as the
regulation requires. Petitioner obtained a certificate of accreditation for the 8800 Shoal
Creek facility effective September 21, 2012, which was after the August 3, 2012 notice of
revocation and the September 2, 2012 effective date of revocation but prior to the
reconsideration decision on December 10, 2012. However, Petitioner has offered no
evidence and does not argue that it had received accreditation for its patient facilities at
11886 Greenville Avenue, Suite 114, Dallas, Texas and 1825 Troup Highway, Tyler,
Texas, prior to the reconsideration decision.

Petitioner also argues that as a “technical matter” it is not required to be accredited citing
the Medicare Program Integrity Manual, CMS pub. 100-08, § 15.21.6. P. Br. at 4-5; CMS
Ex. 5, at 4. Section 15.21.6 was reserved for future use by revision 430 to the Medicare
Program Integrity Manual, which was effective October 29, 2012, which was after the
notice of revocation and the effective date of revocation in this case but before
reconsideration in December 2012. Petitioner attached a copy of the section as it appeared
prior to the October 2012 revision, which included the following language:

Individual medical practitioners, inclusive of group practices
of same, shall not currently require accreditation for
enrollment. The practitioner types are those specifically
stated in Section 1848(K)(3)(B) and 1842(b)(18)(C) of the
Social Security Act as Amended. In addition, the practitioner
categories of physicians, orthotists, prosthetists, optometrists,
opticians, audiologists, occupational therapists, physical
14

therapists and suppliers who provide drugs and
pharmaceuticals (only) shall not currently require
accreditation for enrollment.

CMS Ex. 5, at 41. Similar language is now found in section 15.21.1B of the Program
Integrity Manual, which was effective October 29, 2012 under revision 430. Petitioner
does not offer an explanation for how this provision applies in its case. There is no
evidence that Petitioner is a practitioner or group of practioners as required for the
exemption to apply. The credential issued by the State of Texas characterizes Petitioner
as an Accredited Orthotic Facility and an Accredited Prosthetic Facility and does not
suggest that Petitioner is a medical practitioner or group of practitioners. CMS Ex. 5, at
10. Accordingly, I conclude there is no genuine dispute as to a material fact related to the
application of the exemption and I conclude it does not apply as a matter of law.

Petitioner’s assertion in the Corrective Action Plan that it was apparent from its
enrollment applications that it was not accredited but CMS never raised the issue, could be
construed to be an argument that CMS should be estopped from requiring accreditation.
CMS Ex. 4, at 6. As a general rule, the government cannot be estopped absent, at
minimum, a showing that the traditional requirements for estoppel are present (i.e., a
factual misrepresentation by the government, reasonable reliance on the misrepresentation
by the party seeking estoppel, and harm or detriment to that party as a result of the
reliance) and that the government’s employees or agents engaged in “affirmative
misconduct.” Office of Personnel Management v. Richmond, 496 U.S. 414, 421 (1990);
Linkous v. United States, 142 F.3d 271, 277-78 (5th Cir. 1998); Oaks of Mid City Nursing
and Reahab. Ctr., DAB No. 2375 at 30 (2011); Pacific Islander Council of Leaders, DAB
No. 2091, at 12 & n.11 (2007). Petitioner does not allege and has presented no evidence
that raises a genuine dispute as to the existence of the facts necessary to find that the
elements of equitable estoppel are present in this case.

I conclude that there is no genuine dispute as to any material fact and summary judgment
is appropriate . CMS has met its burden of making a prima facie showing of
noncompliance and Petitioner was not shown it was in compliance with Supplier Standard
22 at the time of the initial determination, the effective date of revocation, or the date of
reconsideration.
15

II. Conclusion

For the foregoing reasons, Petitioner’s Medicare enrollment and billing privileges were
properly revoked effective August 3, 2012, due to noncompliance with 42 C.F.R.
§§ 424.57(c)(1), (2), and (22).

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

FFJ, Inc.
d/b/a Dellwood Market,

Respondent.
Docket No. C-13-719
FDA Docket No. FDA-2013-H-0517
Decision No. CR2832

Date: June 18, 2013

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for To
(Complaint) again:

bacco Products (CTP) filed an administrative complaint
st Respondent, FFJ, Inc. d/b/a Dellwood Market, that alleges

facts and legal authority sufficient to justify imposing a $500 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 assess a civil money penalty of $500.

CTP began this case by filing a copy of the Complaint with the Food and Drug
Administration’s (FDA) Division of Dockets Management and serving the

Complaint on Res;

pondent. The Complaint alleges that Respondent unlawfully

sold tobacco products to minors and failed to verify that the purchasers of tobacco
products were of sufficient age on two separate occasions, thereby violating the
Federal Food, Drug, and Cosmetic Act (Act), codified at 21 U.S.C. §§ 301-399d,
and its implementing regulations found at 21 C.F.R. Part 1140. CTP seeks a civil
monetary penalty of $500 for these violations.

On May 6, 2013, 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 ordering Respondent to pay the full amount of the proposed penalty,
pursuant to 21 C.F.R. § 17.11.

Respondent has not filed an answer within the time provided by regulation or
timely requested an extension. Pursuant to 21 C.F.R. § 17.11(a), 1am required to
“assume the facts alleged in the complaint to be true, and, if such facts establish
liability under [the Act],” issue a default judgment and impose a civil monetary
penalty. Accordingly, I must determine whether the allegations in the Complaint
establish violations of the Act.

Specifically, CTP alleges that:

e Respondent owns Dellwood Market, an establishment that sells tobacco
products and is located at 1620 Chambers Road, Saint Louis, Missouri
63136. Complaint § 3.

e¢ On June 28, 2012, an FDA-commissioned inspector observed a violation of
21 C.F.R. § 1140.14(a) for “[s]elling tobacco products to a minor” and a
violation of 21 C.F.R. § 1140.14(b)(1) for “[fJailing to verify the age of a
person purchasing tobacco products by means of photographic
identification containing the bearer’s date of birth[.]” Complaint ¥ 10.

e CTP issued a Notice of Compliance Check Inspection on July 6, 2012,
informing Respondent that an inspection had been performed on June 28,
2012, at approximately 6:52 PM and that violations had been noted.
Complaint § 10.

e ‘“[O]n September 6, 2012, CTP issued a Warning Letter to Dellwood
Market.” Complaint § 10. The letter cited the violations the FDA-
commissioned inspector had observed on June 28, 2012, and explained that
Respondent could face a civil money penalty or other regulatory action if it
failed to correct the violations. Complaint § 10. Moreover, CTP explained
that the Warning Letter was not intended to provide an exhaustive list of
violations and that Dellwood Market was responsible for complying with
the law. Complaint § 10.

e United Parcel Service delivered the Warning Letter on September 7, 2012,
to “Musleh.” Complaint § 11. CTP, however, did not receive any response
to the Warning Letter. Complaint § 11.

e During a subsequent inspection, FDA-commissioned inspectors
documented two additional violations. Complaint § 1. “Specifically, a
person younger than 18 years of age was able to purchase a package of
Newport Box cigarettes on January 14, 2013, at approximately 4:35 PM
CT.” Complaint §j 1. Also, “the minor’s identification was not verified
before the [January 14, 2013,] sale... .” Complaint § 1.

e CTP informed Respondent on January 17, 2013, of the January 14, 2013,
inspection and documented violations through a Notice of Compliance
Check Inspection. Complaint § 2. The Notice warned “that other potential
violations of federal tobacco law may have been observed,” and, if
violations had occurred, FDA could notify Respondent further. Complaint

q2.

Taking these facts as true, I must find, pursuant to 21 C.F.R. § 17.11(a), 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,
codified at 21 U.S.C. § 387f(d). 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R § 1140.1(b).
Those 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). Those
regulations also require a retailer to “verify by means of photographic
identification containing the bearer’s date of birth that no person purchasing the
[tobacco] product is younger than 18 years of age[.]” 21 C.F.R. § 1140.14(b)(1).

Here, Respondent violated both 21 C.F.R. § 1140.14(a) and (b)(1). First, on June
28, 2012, Respondent unlawfully sold cigarettes to a minor and failed to verify
that the purchaser was of sufficient age. Then, most recently, on January 14,
2013, Respondent again unlawfully sold cigarettes to a minor without verifying
the purchaser’s age. Therefore, Respondent’s actions and omissions on two
separate occasions at the same retail outlet constitute violations of law for which a
civil money penalty is merited.

The regulations require me to impose a civil money penalty in the amount that is
either the maximum provided for by law or the amount sought in the Complaint,
whichever is smaller. 21 C.F.R. § 17.11(a). Respondent has committed a fourth
violation within a 24-month period, the maximum penalty for which is $2000. 21
C.F.R. § 17.2. CTP, however, requested a civil money penalty in the amount of
$500. 21 C.F.R. § 17.2. Therefore, I impose a civil money penalty in the amount
of $500.

/s/
Steven T. Kessel
Administrative Law Judge