Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Julio Ortiz, M.D., and
Julio Ortiz, M.D., Medical Services, P.A.,

Petitioners,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-13-515
Decision No. CR2886

Date: August 9, 2013

DECISION

In August 2012, Petitioners, Julio Ortiz, M.D. (Dr. Ortiz) and his medical practice, Julio
Ortiz, M.D., Medical Services, P.A. (Medical Services), submitted Medicare enrollment
applications to First Coast Services Options (First Coast), an administrative contractor for
the Centers for Medicare & Medicaid Services (CMS). Before then, and since 1969, Dr.
Ortiz was enrolled in the Medicare program, but on April 13, 2012, First Coast
deactivated his Medicare billing privileges for reasons other than nonsubmission of a
claim. Also, while Medical Services had been issued a National Provider Identifier
(NPI), it was never enrolled in the Medicare program prior to the August 2012 enrollment
applications. First Coast processed Petitioners’ August 2012 enrollment applications and
established an effective date for Petitioners’ Medicare billing privileges. Dissatisfied
with the effective date granted, Petitioners appealed arguing that First Coast erroneously
deactivated Dr. Ortiz’s billing privileges in April 2012, and based on that error, Dr. Ortiz
and Medical Services should be entitled to an effective date retroactive to Dr. Ortiz’s
deactivation date.
For the reasons explained below, I find that the deactivation of Dr. Ortiz’s billing
privileges is not a determination subject to review in this proceeding and that First Coast
properly established the effective date for Petitioners’ Medicare billing privileges based
on its receipt of Petitioners’ August 2012 enrollment applications.

I. Background and Procedural History

On September 30, 2011, First Coast requested that Dr. Ortiz revalidate his existing
Medicare enrollment information. See CMS Exhibit (Ex.) 12, at 2 49. In response, on
October 3, 2011, Dr. Ortiz submitted a form CMS-855] — an enrollment application — to
revalidate his information. CMS Ex. 3. Several sections of the 8551 were incomplete,
and Dr. Ortiz listed, for the first time, Medical Services as a practice location. CMS Ex.
3, at 21-26. Before the October 2011 enrollment application, Dr. Ortiz had been
affiliated with a practice group named Cardiology Associates of A.M.I. Kendall, Inc.
(Cardiology Associates). See CMS Ex. 6, at 2. However, in this latest application, Dr.
Ortiz did not list Cardiology Associates as a current practice location, nor did he provide
a valid NPI number for Medical Services. CMS Ex. 3, at 21-22.

By two letters dated March 12, 2012, First Coast advised Dr. Ortiz and Medical Services
of the deficiencies in the October 2011 enrollment application. First Coast required that
Dr. Ortiz and Medical Services correct the errors and omissions within 30 days, i.e., no
later than April 11, 2012. CMS Ex. 6. Neither Dr. Ortiz nor Medical Services responded
to the request for more information. Accordingly, by letter dated April 13, 2012, First
Coast denied the October 3, 2011 enrollment application. CMS Ex. 10, at 1-4. First
Coast also informed Dr. Ortiz by separate letter (also dated April 13, 2012) that it had
deactivated his Medicare billing privileges pursuant to 42 C.F.R. § 424.540(a) for his
“failure to respond to the request for additional information mailed on March 12, 2012.”
CMS Ex. 10, at 5, 8. The deactivation notice advised Dr. Ortiz that he had to submit a
new enrollment application to reactivate his billing privileges. CMS Ex. 10, at 5.

On August 9, 2012, Petitioners submitted new enrollment applications, which First Coast
received on August 14, 2012. CMS Ex. 7. First Coast processed the applications to
completion, and, on December 19, 2012, notified Dr. Ortiz and Medical Services that
both were enrolled in Medicare with an “effective date” of July 15, 2012.' CMS Ex. 2.

' First Coast inaccurately used the term “effective date” to refer to the date when
Petitioners may retrospectively bill for Medicare services. By regulation, the “effective
date” would ordinarily be the date First Coast received Petitioners’ application that it
eventually approved. See 42 C.F.R. § 424.520(d). CMS may, however, permit
Petitioners to “retrospectively bill” for services for up to 30 days prior to that effective
date. 42 C.F.R. § 424.521(a). For clarity, this decision uses “effective date” in later
sections to refer to the effective date of enrollment that is established by regulation, not
the date when Petitioners’ retrospective billing begins.
Petitioners requested reconsideration of the effective date. On January 22, 2013, First
Coast affirmed its prior determination that the effective date of Petitioners’ enrollment
and billing privileges was based on the receipt of the August 9, 2012 enrollment
applications.? CMS Ex. 1. On February 27, 2013, Petitioners timely filed a request for
hearing (RFH) to challenge the effective date of their Medicare billing privileges.

On March 15, 2013, I issued an Acknowledgment and Pre-Hearing Order (March 15
Order), which directed the parties to file written briefs and documentary evidence. On
April 19, 2013, CMS filed its prehearing brief (CMS Br.) and 12 proposed exhibits (CMS
Exs. 1-12), including the written direct testimony of one witness (CMS Ex. 12). On May
15, 2013, Petitioners filed a prehearing brief (P. Br.) and four proposed exhibits (P. Exs.
1-4). In the absence of objections, I admit CMS Exs. 1-12 and P. Exs. 1-4 into the
record. In the March 15 Order, I directed the parties to request a hearing if necessary to
cross-examine witnesses. See March 15 Order at § 9. Petitioner did not present any
witness testimony subject to cross-examination, and Petitioner did not request a hearing
to cross-examine CMS’s witness. Accordingly, I find that there is no need to convene a
hearing, and I decide this case on the written record.

IL. Discussion
A. Issue Presented
This case presents the following issue:
Whether First Coast, acting on behalf of CMS, properly established the

effective date for the reactivation of Dr. Ortiz’s Medicare billing privileges
and the enrollment of Medical Services in the Medicare program.

> The effective date at issue is the date First Coast reactivated Dr. Ortiz’s billing
privileges based on the August 2012 application (pursuant to 42 C.F.R. § 424.540(b)(1))
and the date First Coast enrolled Medical Services as a supplier of services in the
Medicare program (pursuant to 42 C.F.R. § 424.510(a)). The effective date of
reactivation for Dr. Ortiz’s billing privileges and the effective date of the enrollment of
Medical Services are “initial determinations” under 42 C.F.R. § 498.3(b)(15). See, e.g.,
John Heverin, Ph.D., ALJ Ruling 2013-6, at 3 (Mar. 19, 2013) (“While the determination
to reactivate a supplier’s billing privileges is not an ‘initial determination,’ and therefore
not subject to review before an ALJ, establishing an effective date for supplier approval,
and thus the supplier’s billing privileges, is an ‘initial determination’ by regulation.”).
B. Background Law

Suppliers* such as Petitioners must enroll in the Medicare program to “receive payment
for covered Medicare items or services from either Medicare (in the case of an assigned
claim) or a Medicare beneficiary (in the case of an unassigned claim) ....” 42 C.F.R.

§ 424.505. The regulations at 42 C.F.R. Part 424, subpart P, establish the requirements
for a supplier to enroll in the Medicare program. Id. §§ 424.510 — 424.516; see Social
Security Act § 1866(j)(1)(A) (authorizing the Secretary of the U.S. Department of Health
and Human Services to establish by regulation the process for enrolling providers and
suppliers in the Medicare program). Prospective suppliers must, among other things,
submit an enrollment application in order to begin the enrollment process. 42 C.F.R.

§ 424.510(a).

Deactivated suppliers must also submit a new enrollment application to reactivate their
billing privileges if the basis for deactivation was “for any reason other than the
nonsubmission of a claim.” 42 C.F.R. § 424.540(a)(3), (b)(1). The effective date of
enrollment for physicians, nonphysician practitioners, and physician and nonphysician
practitioner organizations is “the later of the date of filing of a Medicare enrollment
application that was subsequently approved by a Medicare contractor or the date an
enrolled physician or nonphysician practitioner first began furnishing services at a new
practice location.” Id. § 424.520(d).

C. Findings of Fact & Conclusions of Law

1. Petitioners are not entitled to review of the April 13, 2012 deactivation
of Dr. Ortiz’s billing privileges.

Petitioners explain in their hearing request that the deactivation of Dr. Ortiz’s billing
privileges was the result of a “great degree of confusion and miscommunication” between
Dr. Ortiz’s office and First Coast. RFH at 2. Petitioners claim that First Coast
deactivated Dr. Ortiz’s billing privileges because of “a technicality” and an
“administrative glitch.” RFH at 2-3. Petitioners request reversal of the contractor’s
decision and an effective date retroactive to the date of deactivation. RFH at 3.

At its core, Petitioners’ hearing request challenges the appropriateness of First Coast’s
decision to deactivate Dr. Ortiz’s billing privileges on April 13, 2012. However, the
decision of CMS or its contractor to deactivate the billing privileges of a provider or
supplier is not an “initial determination” subject to review by an ALJ. See 42 C.F.R.
§ 498.3(b). By regulation, only an “initial determination” by CMS or its contractor

>A “supplier” is “a physician or other practitioner, or an entity other than a provider, that
furnishes health care services under Medicare.” 42 C.F.R. § 400.202.
triggers the appeal rights to an ALJ for an affected provider or supplier. 42 C.F.R.

§ 498.5(/)(1). Therefore, because the deactivation of Dr. Ortiz’s billing privileges is not
an “initial determination” subject to review, I do not have jurisdiction to consider whether
First Coast properly deactivated Dr. Ortiz’s billing privileges on April 13, 2012.4

2. The denial of the October 2011 enrollment application is final and
binding because Dr. Ortiz did not request further review.

The denial of a Medicare enrollment application is an “initial determination” subject to
review as long as the affected party preserves its appeal rights by requesting
reconsideration and, if necessary, requesting a hearing before an administrative law
judge. 42 C.F.R. §§ 498.3(b)(17), 498.5()(1)-(2). First Coast denied the October 2011
enrollment application because Dr. Ortiz and Medical Services submitted an incomplete
application and did not respond to First Coast’s request for additional information. CMS
Ex. 10, at 1.

Neither Petitioners nor CMS submitted evidence showing that Petitioners requested
further review of First Coast’s April 13, 2012 denial of the enrollment application within
the 60-day timeframe for doing so. Accordingly, I find that Petitioners did not challenge
the denial of the October 2011 application in accordance with the regulations. See 42
C.F.R. §§ 498.22(b)(3), 498.40(a)(2). That denial, therefore, is final and binding. 42
C.F.R. § 498.20(b). Petitioners have not requested an extension of time to request review
of that denial, nor have they proffered any showing of good cause to extend the filing
deadline for a request for review. Thus, there is no basis to extend the deadline to request
review of the April 13, 2012 contractor’s denial.

3. Dr. Ortiz was required to submit a new enrollment application after
First Coast deactivated his billing privileges and denied the October
2011 enrollment application.

On April 14, 2012, First Coast deactivated Dr. Ortiz’s billing privileges because he had
not provided updated enrollment information in response to First Coast’s request, nor had
Dr. Ortiz timely notified First Coast of a change in his practice location. See CMS Ex.
10, at 5; 42 C.F.R. § 424.540(a)(2). Upon being deactivated “for any reason other than
the nonsubmission of a claim,” the regulation required Dr. Ortiz to submit “a new
enrollment application to reactivate [his] Medicare billing privileges, or when deemed
appropriate, at a minimum, recertify that the information currently on file with Medicare
is correct.” 42 C.F.R. § 424.540(b)(1). The conspicuous language of the deactivation
notice also advised Dr. Ortiz of this regulatory requirement: “In order to resume billing,
immediately submit an updated provider enrollment paper application 855 form or

* The regulations permit a deactivated provider or supplier to file a “rebuttal” pursuant to
42 CFR. § 405.374. 42 C.F.R. § 424.545(b).
review, update and certify your information via the internet-based PECOS [Provider
Enrollment, Chain, and Ownership System].” CMS Ex. 10, at 5 (emphasis in original).

Based on Dr. Ortiz’s change in practice location, it was not an appropriate option for him
to “recertify that the information currently on file with Medicare is correct,” because that
information did not include the Medical Services practice location. Therefore, because
First Coast deactivated Dr. Ortiz’s billing privileges for a reason other than the
nonsubmission of a claim, he had to submit a new enrollment application to reactivate his
billing privileges. Dr. Ortiz recognized this requirement and submitted an enrollment
application in August 2012.

4. First Coast properly established the effective date of Petitioners’
Medicare billing privileges as August 14, 2012, with retrospective
billing starting July 15, 2012.

The regulation addressing the effective date of providers’ and suppliers’ Medicare billing
privileges states:

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

42 C.F.R. § 424.520(d) (emphasis added). The “date of filing” is the date that the
Medicare contractor “receives” a signed provider enrollment application that the
Medicare contractor is able to process to approval. 73 Fed. Reg. 69,726, at 69,769
(Nov. 19, 2008).

On August 14, 2012, First Coast received Petitioners’ enrollment applications dated
August 9, 2012. See CMS Ex. 7, at 74 (certified mail envelope containing “MEDICARE
Received” date-stamped August 14, 2012). Petitioners do not dispute the date First Coast
received the enrollment applications. Therefore, I find that for purposes of establishing
an effective date pursuant to 42 C.F.R. § 424.520, First Coast received Petitioners’
enrollment applications on August 14, 2012.

First Coast notified Petitioners that it approved their August 2012 Medicare supplier
enrollment applications with a retrospective billing date of July 15, 2012. CMS Ex. 2,

at 1, 6. First Coast based the effective date on “the receipt date of the application,” which
is August 14, 2012. CMS Exs. 2, at 1; 7, at 74. The reconsidered determination found
that the initial determination properly established the effective date of Petitioners’ billing
privileges.
First Coast ultimately approved the enrollment applications that it received on August 14,
2012. Dr. Ortiz stated in his enrollment application that he began furnishing services to
patients at the Medical Services location on June 1, 1998. Accordingly, the regulation
requires that the “effective date” for Petitioners be August 14, 2012, which is the later of
the date First Coast received Petitioners’ approvable enrollment application versus the
date Dr. Ortiz first saw patients at the Medical Services location. See 42 C.F.R.

§ 424.520(d).

Further, under the regulations, CMS may permit retrospective billing if a practitioner
meets all program requirements:

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

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

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

42 CFR. § 424.521 (a).

Here, the earliest effective date for retrospective billing privileges that could be granted
was 30 days prior to August 14, 2012. Thirty days prior to August 14, 2012, is July 15,
2012. Therefore, First Coast made a valid discretionary decision to permit Petitioners to
bill for Medicare services back to July 15, 2012.

Il. Conclusion

For the foregoing reasons, I conclude that First Coast properly determined that the
effective date of Petitioners’ Medicare billing privileges was based on its receipt of
Petitioners’ August 2012 enrollment applications. Petitioners’ effective date, therefore, is
August 14, 2012, with retrospective billing privileges starting on July 15, 2012.

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,

Complainant

Vv.

Mashiana Paradise Plaza, Inc.,

Respondent.

Docket No. C-13-899

FDA Docket No.

FDA-2013-H-0726

Decision No. CR2884

Date: August 9, 2013

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP)

filed an administrative complaint

(Complaint) against Respondent, Mashiana Paradise Plaza, Inc., alleging facts and
legal authority sufficient to justify the imposition of a civil money penalty of

$2,000. Respondent did not timely answ
request an extension of time within whic
default judgment against Respondent an
penalty in the amount of $2,000.

CTP began this case by serving the Com

er the Complaint, nor did Respondent
to file an answer. Therefore, I enter a
order that Respondent pay a civil money

plaint on Respondent and filing a copy of

the Complaint with the Food and Drug Administration’s (FDA) Division of

Dockets Management. The Complaint al

leges that Respondent’s staff unlawfully

sold regulated tobacco products to a minor on two separate occasions, failed to

verify that the tobacco purchasers were o

f sufficient age prior to those transactions

and impermissibly used a self-service display in a non-exempt facility, thereby
violating the Federal Food, Drug, and Cosmetic Act (Act) and its implementing
regulations found at 21 C.F.R. Part 1140. CTP seeks a civil money penalty of
$2,000.

On June 19, 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, pursuant to

21 C.F.R. § 17.11, issue an initial decision by default ordering Respondent to pay
the full amount of the proposed penalty. Respondent did not take any of the
required actions within the time provided by regulation.

lam required to issue an initial decision by default if the Complaint is sufficient to
justify a penalty, and the respondent fails to answer timely or to request an
extension. 21 C.F.R. § 17.11(a). For that reason, I must decide whether a default
judgment is appropriate here, and I conclude that it is merited based on the
allegations of the Complaint and Respondent’s failure to answer them.

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 Mashiana Paradise Plaza, an establishment that sells
tobacco products and is located at 486 South 50 East Bypass 31, Rochester,
Indiana 46975.

e¢ On June 16, 2012, an FDA-commissioned inspector observed two
violations of regulations found at 21 C.F.R. Part 1140 while inspecting
Respondent’s establishment. First, Respondent violated 21 C.F.R. §
1140.14(a) when Respondent’s staff sold tobacco products to a minor.
Specifically, a person younger than 18 years of age was able to purchase a
package of “Camel Blue” cigarettes at approximately 2:17 PM. Second,
during this same transaction, Respondent’s staff violated 21 C.F.R. §
1140.14(b)(1) when Respondent’s staff failed to verify, by means of
photographic identification containing the bearer’s date of birth, that the
tobacco purchaser was 18 years of age or older.

e¢ On August 23, 2012, CTP issued a Warning Letter to Respondent detailing
the inspector’s observations from June 16, 2012. In addition to describing
the violations, the letter advised Respondent that the FDA may initiate a
civil money penalty action or take other regulatory action against
Respondent if Respondent failed to correct the violations. The letter also
stated that it was Respondent’s responsibility to comply with the law.

¢ On September 24, 2012, Preety Mashiana responded in writing to the
Warning Letter on behalf of Respondent. In her letter, Ms. Mashiana stated
that “the sale was ‘an oversight by the employee selling the cigarettes.’”
She also stated that “the establishment will retrain all employees regarding
the importance of checking photo IDs for any individual under the age of
30.”

¢ On December 9, 2012, FDA-commissioned inspectors documented
additional violations during another inspection of Respondent’s
establishment. Specifically, at 3:02 PM ET, Respondent’s staff sold a
package of “Grizzly Long Cut Wintergreen” smokeless tobacco to a person
younger than 18 years of age. In addition, Respondent’s staff failed to
verify the minor’s photographic identification prior to this transaction as
required by 21 C.F.R. § 1140.14(b)(1). The inspectors also noted a
violation of 21 C.F.R § 1140(c) because Respondent’s establishment
contained a tobacco self-service display yet the facility did not qualify as
one where minors are not permitted to enter at any time,

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). Under

21 C.F.R. § 1140.14(a), no retailer may sell cigarettes or smokeless tobacco to any
person younger than 18 years of age. Under 21 C.F.R. § 1140.14(b)(1), a retailer
must verify, by means of photo identification containing the bearer’s date of birth,
that no person purchasing cigarettes or smokeless tobacco is younger than 18 years
of age. Finally, under 21 C.F.R § 1140.16(c), a retailer may sell cigarettes or
smokeless tobacco only in a direct, face-to-face exchange between the retailer and
the consumer. A self-service display is a method of sale that is not permitted
under the regulations. However, self-service displays are permitted in facilities
where the retailer ensures that no person younger than 18 years of age is present,
or permitted to enter, at any time. See 21 C.F.R. § 1140.16 (c)(ii).

Here, Respondent’s staff sold cigarettes or smokeless tobacco to a minor on two
separate occasions, June 16, 2012, and December 9, 2012. Prior to these
transactions, Respondent’s staff did not verify, by checking the tobacco
purchaser’s photographic identification, that the tobacco purchasers were 18 years
of age or older as required by the regulations. In addition, Respondent’s
establishment contained a tobacco self-service display but was not exempt from
the requirement that its staff sell tobacco products only through a direct, face-to-
face exchange because minors were permitted to enter the establishment.
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.
Accordingly, I find that a civil money penalty of $2,000 is permissible under 21
C.F.R. § 17.2 and order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
La Paz Regional Hospital
(CCN: 03-0067),
Petitioner,
v.
Centers for Medicare & Medicaid Services.

Docket No. C-13-520

Decision No. CR2883

Date: August 5, 2013

DECISION AND REMAND

Petitioner, La Paz Regional Hospital, was not ineligible for designation as a critical
access hospital (CAH) pursuant to section 1820(c)(2)(B) of the Social Security Act (Act)
(42 U.S.C. § 1395i-4(c)(2)(B)) or 42 C.F.R. pt. 485, subpt. F,' because of its proximity to
an Indian Health Service (IHS) facility that was approved by the Centers for Medicare &
Medicaid Services (CMS) to participate in the CAH program.
CMS did not complete processing the enrollment application of Petitioner to be certified

a CAH. Accordingly, remand to CMS to fulfill the Secretary’s statutory duty under
section 1820(e) of the Act is required.

' Citations are to the 2012 revision of the Code of Federal Regulations (C.F.R.) in effect
at the time of the initial determination, unless otherwise stated.
I. Background

Petitioner submitted an application to enroll and be certified in Medicare as a CAH with
swing-beds in February 2012, with subsequent amendments in March and April 2012.
Petitioner’s Exhibits (P. Exs.) 12 at 7-8; 15;16. CMS provided Petitioner a preliminary
decision in July 2012, and advised Petitioner that it would deny its application to enroll as
a CAH based on its proximity to the Parker Indian Health Center, which CMS
characterized as a Medicare-certified CAH that was less than 2.5 miles from Petitioner.

P. Ex. 12 at 9. On January 10, 2013, CMS notified Petitioner that Petitioner’s application
to enroll as a CAH was denied because Petitioner did not meet the location standard of 42
C.F.R. § 485.610(c) because it was less than 2.5 miles from the Parker Indian Health
Center. P. Ex. 1.

Petitioner requested a hearing before an administrative law judge (ALJ) by letter dated
March 4, 2013. Petitioner submitted with its request for hearing P. Exs. | through 14.
The case was assigned to me on March 13, 2013, and an Acknowledgment and
Prehearing Order (Prehearing Order) was issued at my direction.

On April 11, 2013, CMS filed a motion for summary judgment (CMS Br.) with CMS
Exhibits (CMS Exs.) 1 and 2. CMS advised me by letter dated April 26, 2013, that other
than the two exhibits filed with its motion for summary judgment, “CMS [did] not intend
to call any witnesses, request subpoenas, file affidavits, additional exhibits, declarations
or transcripts of prior testimony or other statements and will not rely on expert witnesses
in any fashion.”

On May 14, 2013, Petitioner filed its brief in opposition to the CMS motion for summary
judgment and its cross-motion for summary judgment (P. Br.). Petitioner also filed P.
Ex. 15, 16, and 17. CMS waived the filing of a reply brief by letter dated June 4, 2013.”

The parties have not objected to my consideration of CMS Exs. | and 2 and P. Exs. 1
through 17, and all are admitted as evidence.

> Although in a technical sense Petitioner’s cross-motion is unopposed, I resolve the case
upon the motions of the parties and the evidence filed rather than based upon waiver or
default.
IL. Discussion
A. Issue

Whether Petitioner’s application to enroll in Medicare and be certified as a CAH must be
denied pursuant to section 1820(c)(2)(B)(i)(D) of the Act and 42 C.F.R. § 485.610(c)
based on its proximity to an IHS facility approved by CMS to participate in the CAH
program.

B. Applicable Law
1. The Critical Access Hospital Program

A CAH is a facility certified by the Secretary of Health and Human Services (Secretary)
pursuant to section 1820(e) of the Act. Act § 1861(mm)(1). Inpatient CAH services are
items and services furnished to an inpatient of a CAH. Outpatient CAH services are
medical and other health services furnished by a CAH on an outpatient basis. Act §
1861(mm)(2) and (3). A facility enrolled in Medicare as a CAH generally receives
higher payments from Medicare than it would if enrolled as a hospital. Act §§ 1814(1),
1834(g), 1861(v). The Medicare Rural Hospital Flexibility Program was enacted by
Congress in 1997 to replace a prior program, the Essential Access Community
Hospital/Rural Primary Care Hospital program which operated in only seven states. The
new program allowed states to designate rural facilities as CAHs and thereby improve
access to hospital and other health services for rural residents. Balanced Budget Act of
1997, § 4201, Pub. L. 105-33 (1997) (codified at 42 U.S.C. § 1395i-4) (Act § 1820); 62
Fed. Reg. 45,965, 45,970 (Aug. 29, 1997).

The Act provides that a state may submit an application to the Secretary to establish a

Medicare rural hospital flexibility program. Act § 1820(a)-(b). The state is required as
part of its rural hospital flexibility program to develop at least one rural health network
and designate one or more facilities in the state as a CAH. Act § 1820(c). The criteria
for a state to designate a facility a CAH are:

(B) Criteria for designation as critical access hospital —
A State may designate a facility as a critical access hospital if
the facility—

(i) is a hospital that is located in a county (or equivalent unit
of local government) in a rural area (as defined in section
1886(d)(2)(D)) or is being treated as being located in a rural
area pursuant to section 1886(d)(8)(E) and that—

(1) is located more than a 35—mile drive (or, in the case of
mountainous terrain or in areas with only secondary roads
available, a 15—mile drive) from a hospital, or another
facility described in this subsection; or

(ID is certified before January 1, 2006, by the State as
being a necessary provider of health care services to
residents in the area;

(ii) makes available 24-hour emergency care services that a
State determines are necessary for ensuring access to
emergency care services in each area served by a critical
access hospital;

(iii) provides not more than 25 acute care inpatient beds
(meeting such standards as the Secretary may establish) for
providing inpatient care for a period that does not exceed, as
determined on an annual, average basis, 96 hours per patient;

(iv) meets such staffing requirements as would apply under
section 1861(e) to a hospital located in a rural area, except
that—

(1) the facility need not meet hospital standards relating to
the number of hours during a day, or days during a week,
in which the facility must be open and fully staffed, except
insofar as the facility is required to make available
emergency care services as determined under clause (ii)
and must have nursing services available on a 24-hour
basis, but need not otherwise staff the facility except when
an inpatient is present;

(ID the facility may provide any services otherwise
required to be provided by a full-time, on site dietitian,
pharmacist, laboratory technician, medical technologist,
and radiological technologist on a part-time, off site basis
under arrangements as defined in section 1861(w)(1); and

(IIL) the inpatient care described in clause (iii) may be
provided by a physician assistant, nurse practitioner, or
clinical nurse specialist subject to the oversight of a
physician who need not be present in the facility; and
(v) meets the requirements of section 1861(aa)(2)(D.

Congress provided that the Secretary “shall certify” a facility as a CAH if: (1) the
facility is located in a state that has a rural hospital flexibility program established in
accordance with the Act; (2) the state has designated the facility a CAH; and (3) the
facility meets other criteria established by the Secretary. Act § 1820(e) (emphasis
added). As already mentioned, a CAH is specifically defined by Congress as a facility
certified by the Secretary as a CAH pursuant to section 1820(e) of the Act. Act

§ 1861(mm)(1).

The Secretary promulgated regulations that establish conditions and standards for a CAH
to participate in Medicare. 42 C.F.R. pt. 485, subpt. F. A state with a rural hospital
flexibility program may designate one or more facilities as CAHs if the facilities meet the
conditions of participation set forth in the regulations. 42 C.F.R. § 485.606(a). CMS is
required to certify a facility as a CAH if the facility is designated a CAH by the state in
which it is located; the facility has been surveyed by the state survey agency or CMS; and
the facility is found to meet the conditions for participation in 42 C.F.R. pt. 485 subpt. F
and pt. 489. 42 C.F.R. § 485.606.

State Operations Manual (SOM) provisions related to CAHs are at §§ 2254-62 (rev. 1,
May 21, 2004). CMS states that the Medicare Rural Hospital Flexibility Program allows
for the creation of CAHs and is designed to promote rural health planning, network
development, and improve access to health services for rural residents of the state. CMS
states that the program is available to any state with rural facilities which elects to
establish a program and submits an acceptable plan to CMS. SOM § 2254A. The SOM
describes: the requirement for submission of a state plan; acceptance of the state plan by
CMS; the requirements for CAHs; the CAH application process; the CAH survey
process; the CAH approval process; the CAH notification procedure; and the CAH
effective date of participation. SOM §§ 2254C-56C. The SOM provides that the CAH
applicant must show that there is no driving route from the applicant to any other CAH or
hospital that is 35 miles or less in length. The CAH applicant bears a similar burden if it
seeks application of the 15 mile rule for mountainous terrain. SOM § 2256A.

2. Indian Health Service

The maintenance and operation of hospital and health facilities for Indians? is the
responsibility of the Surgeon General and the Public Health Service under the supervision

> The term as used in the statutes and regulations includes Indians in the “Continental
United States, and Indians, Aleuts and Eskimos in Alaska.” 42 C.F.R. § 136.1. A more
specific definition is found at 42 C.F.R. § 137.10.
of the Secretary. 42 U.S.C. § 2001. Congress granted the Secretary authority to
promulgate necessary regulations. 42 U.S.C. § 2003. IHS operations are subject to 42
C.F.R. pts. 136, 136a, and 137. “Indian health program” refers to health service
programs administered by the IHS, which is part of the Department of Health and Human
Services. 42 C.F.R. § 136.1. IHS services are available “to persons of Indian descent
belonging to the Indian community served by the local facilities and programs” including
non-Indian women pregnant with an eligible Indian’s child. 42 C.F.R. § 136.12(a).
Individuals not eligible may be provided temporary care and treatment at IHS facilities as
an act of humanity in an emergency. 42 C.F.R. § 136.14. Congress and the Secretary
recognize the right to self-government based upon the sovereign status of Indian Tribes
and Nations. 42 C.F.R. §§ 137.2(a), 137.6. CMS has adopted the policy that the survey
and certification of an IHS hospital or skilled nursing facility (SNF) will be done by CMS
rather than the state survey agency due to “questions of intergovernmental jurisdiction.”
SOM, CMS Pub. 100-07, chap. 1 § 1018A (rev. 1, eff. May 21, 2004). The policy
provides that the state agency is responsible to determine whether the facility meets
Medicaid certification requirements. CMS makes any determinations regarding
jurisdiction. SOM § 1018A.

A hospital or SNF of the IHS, whether operated by IHS or an Indian tribe or tribal
organization, may be eligible for payments from Medicare so long as the facility meets
all conditions and requirements for such payments as are applicable to hospitals or SNFs
under Medicare (Title XVIII of the Act) notwithstanding the general prohibition on
payments from Medicare to federal facilities. Act § 1880(a). The SOM does not
describe any process for an IHS facility to be designated a CAH.

3. Right to Hearing and Judicial Review

The Act requires that the Secretary issue regulations that establish a process to enroll
providers and suppliers* in Medicare, including the right to a hearing and judicial review
in the event of denial or non-renewal. Act § 1866(j) (42 U.S.C. § 1395cc(j)). The

* A “supplier” furnishes items or services under Medicare and the term supplier applies
to physicians or other practitioners and facilities that are not included within the
definition of the phrase “provider of services.” Act § 1861(d) (42 U.S.C. § 1395x(d)). A
“provider of services,” commonly shortened to “provider,” includes hospitals, critical
access hospitals, skilled nursing facilities, comprehensive outpatient rehabilitation
facilities, home health agencies, hospice programs, and a fund as described in sections
1814(g) and 1835(e) of the Act. Act § 1861(u) (42 U.S.C. § 1395x(u)); 42 C.F.R.

§ 498.2. The distinction between providers and suppliers is important, as they are treated
differently under the Act for some purposes.
procedures for enrollment are found at 42 C.F.R. pt. 424, subpt. P. Pursuant to 42 C.F.R.
§ 424.505, a provider or supplier must be enrolled in the Medicare program and be issued
a billing number to have billing privileges and to be eligible to receive payment for
services rendered to a Medicare eligible beneficiary. A provider, such as a hospital, must
also enter a provider agreement with CMS as described in 42 C.F.R. pt. 489, subpt. B. A
provider must meet the conditions of participation set forth in the regulation. 42 C.F.R.

§ 489.10(a). CMS may deny enrollment for any of the reasons listed in 42 C.F.R.

§ 424.530(a), including failure to give satisfactory assurance of compliance with the Act
and Medicare enrollment requirements. 42 C.F.R. § 424.530(a)(1).

If enrollment is denied, the prospective provider or supplier has a right to request a
hearing before an ALJ following the procedures of 42 C.F.R. pt. 498. Act § 1866(h)(1),
(j)(8), 42 C.F.R. § 424.545(a). A provider or supplier whose enrollment and billing
privileges have been revoked or not renewed has a right to request a hearing by an ALJ,
further review by the Departmental Appeals Board (Board), and judicial review. Act

§ 1866(h)(1), (j)(8); 42 C.F.R. §§ 424.545, 498.3(b)(17), 498.5, 498.90, 498.95. A
hearing on the record, also known as an oral hearing, is required under the Act.
Crestview Parke Care Ctr. v. Thompson, 373 F.3d 743, 748-51 (6th Cir. 2004). The
provider or supplier bears the burden to demonstrate that it meets enrollment
requirements with documents and records. 42 C.F.R. § 424.545(c).

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.

The Act and regulations make a hearing before an ALJ available to Petitioner.

As noted above, a hearing on the record, also known as an oral hearing, is required under
the Act. Crestview Parke Care Ctr., 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 does not waive the right to oral hearing or otherwise
consent to decision based only upon the submissions or pleadings. The parties have filed
cross-motions for summary judgment and disposition on the written record may be
permissible if disposition by summary judgment is appropriate.

Summary judgment is not automatic upon request but is rather limited to certain specific
conditions. 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. 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 Arizona v. Cities Serv. Co., 391 U.S. 253 (1968); see also Fed. R. Civ. P. 56(c);
Garden City Med. Clinic, DAB No. 1763 (2001), Everett Rehab. and Med. Ctr., DAB
No. 1628, at 3 (1997) (in-person hearing required where non-movant shows there are
material facts in dispute that require testimony); Big Bend Hosp. Corp., d/b/a Big Bend
Med. 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); Cherrywood Nursing and Living Ctr., DAB No. 1845
(2002). In opposing a motion for summary judgment, the opposing party bears the
burden of showing that there are material facts that are disputed either affecting the prima
facie case or that might establish a defense. Everett Rehab., DAB No. 1628;
Cherrywood, DAB No. 1845. It is insufficient for the opposing party to rely upon mere
allegations or denials to defeat the motion and proceed to hearing. Petitioner must, by
affidavits or other evidence which set forth specific facts, show that there is a genuine
issue for trial. If a party opposing a motion for summary judgment cannot show by some
credible evidence that there exists some genuine issue for trial, then summary judgment is
appropriate and the movant must prevail as a matter of law. See Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 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. See Pollock v. Am. Tel. & Tel. Long
Lines, 794 F.2d 860, 864 (3rd Cir. 1986).

I conclude after reviewing the parties’ briefs and documentary evidence that summary
judgment is appropriate in this case. As discussed hereafter, there are no disputed issues
of material fact and resolution of the issue before me requires interpretation and
application of the Act and regulations to the undisputed facts.

2. Petitioner’s proximity to Parker Indian Health Center does not
constitute noncompliance with 42 C.F.R. § 485.610(c).

3. Parker Indian Health Center is not a CAH within the meaning of
section 1820 of the Act.

4. Parker Indian Health Center is not a hospital within the meaning of
section 1820 of the Act.

5. Remand is necessary to permit CMS and its contractors to complete
processing Petitioner’s application to enroll in Medicare and be
certified as a CAH with swing beds.
a. Facts.

Neither party disputes the assertions of fact in the opposing party’s pleadings or
documentary evidence. The parties were advised by the Prehearing Order § II.G that “a
fact alleged and not specifically denied, may be accepted as true for purposes of a motion
or cross-motion for summary judgment [and] evidence will be considered admissible and
true unless specific objection is made to its admissibility or accuracy.”

Petitioner represents in its brief that it is a 25-bed acute care hospital located in Parker
Arizona. P. Br. at 4. A document submitted by Petitioner indicates, however, that when
it applied to enroll as a CAH and swing bed facility it was licensed for 39 beds with a
plan to reduce the number of beds to 25 to meet the requirements for a CAH with swing
beds. P. Ex. 15 at 91. Petitioner’s Arizona license issued August 1, 2011 also indicates a
capacity of 39 beds. P. Ex. 15 at 21. Whether Petitioner had 39 or 25 beds at the time of
application does not affect the decision in this case and it is not a fact that requires
resolution. Petitioner is the only general acute care hospital serving La Paz County,
Arizona, an area of 4,518 square miles, 10,417 households, plus 20,000 visitors to the
area each winter. According to the 2010 census, the average age of the population of La
Paz is the oldest in the United States. P. Br. at 4. According to Petitioner’s application,
Petitioner was incorporated on June 1, 2000.5 P. Ex. 15 at 5; P. Ex. 16 at 8. On
December 29, 2000, Petitioner was granted federal income tax exemption. P. Ex. 2; P.
Ex. 15 at 22. Petitioner is located less than 15 miles from the Parker Indian Health
Center.® P. Ex. 8; P. Br. at 4; CMS Br. at 4-5.

The Parker Indian Health Center is located in Parker Arizona. CMS submitted evidence
that on January 10, 2003, CMS approved the Parker Indian Health Center to participate in
the “Critical Access Hospital Program.” CMS Ex. 1. The January 10, 2003 letter from
Steven Chickering, Manager, Hospital and Community Care Operations, Division of
State Operations, CMS, to Robert A. Hallowell, Chief Executive Officer, Parker Indian
Health Center, 12033 Agency Road, Parker, AZ, states that the Joint Commission on the
Accreditation of Healthcare Organizations completed an accreditation and deeming

> Policy documents submitted by Petitioner reflect an effective date of December 5,
1988, indicating Petitioner may have been in operation as early as 1988. P. Ex. 15 at 50,
74. Ineed not resolve exactly when Petitioner began operations as a hospital as that fact
would not affect the decision in this case.

° The assertions regarding the exact distance differ and Petitioner’s evidence shows that
the distance may only be 1.4 miles. But there is no dispute that Petitioner is less than 15
miles from the Parker Indian Health Center, which is the material fact.
10

survey on November 7, 2002; that the CMS Regional Office granted approval to
participate in the CAH Program; that Parker Indian Health Center’s current enrollment
would be voluntarily terminated effective January 31, 2003; and its enrollment as a new
CAH would be effective February 1, 2003. CMS Ex. 1. The evidence does not suggest
that the location of either Petitioner or Parker Indian Health Center was different in 2003
than at present. CMS Exs. 1, 2; P. Exs. 15, 16. Therefore, the CMS evidence shows that
CMS approved Parker Indian Health Center to participate as if it was a CAH despite the
fact that Petitioner was operating as a hospital approximately 1.4 miles from Parker
Indian Health Center.

Petitioner submitted the affidavit of the Honorable Wayne Patch, Sr., Chairman of the
Tribal Council of the Colorado River Indian Tribes. The Tribe includes 4,000 members
in or near Parker Arizona. Chairman Patch states that he has knowledge of the services
provided by Parker Indian Health Center, which is operated by the IHS, based on his
position as Chairman of the Tribal Council. He states that Parker Indian Health Center
does not provide any services to persons who are not Tribal members except in
emergencies and prenatal care for women pregnant with Indian babies. He states that
Parker does not maintain a blood supply, does not maintain a surgery department, does
not provide 24-hour ultrasound, does not have equipment to perform a CAT scan or MRI,
and does not have a cardiac care unit or cardiac catheterization laboratory. Non-Tribal
members and Tribal members requiring services not available at Parker Indian Health
Center are transported to Petitioner for treatment. P. Ex. 17. A letter from the prior
Tribal Chairman, Eldred Enas, indicates that the Colorado River Indian Tribes are
federally recognized as a Native American Tribe and sovereign nation composed of the
Mohave, Chemehuevi, Navajo, and Hopi members. Chairman Enas also states that
Parker Indian Health Center is an IHS facility that is limited to treatment of Tribal
members; Parker does not provide services to the general public; and Parker cannot
provide all necessary hospital services. P. Ex. 15 at 82-83, 86-87.

b. Analysis

Petitioner applied to enroll in Medicare and be certified as a CAH with swing beds in
February 2012. P. Ex. 15 at 26-27. CMS issued a preliminary determination in July
2012 that Petitioner could not enroll as a CAH because Parker Indian Health Center was
a CAH and less than 2.5 miles from Petitioner. CMS Ex. 12 at 9. On January 10, 2013,
CMS denied the enrollment application on grounds that Petitioner did not meet the
standard for participation at 42 C.F.R. § 485.610(c) because Petitioner is less than 2.5
miles from Parker Indian Health Center, which CMS considers a Medicare-certified
CAH. CMS stated that it had no authority to waive the standard. P. Ex. 1.

CMS argues that it is undisputed that Petitioner is within 3 miles of an existing CAH, the
Parker Indian Health Center, and therefore Petitioner is not in compliance with the
standard established by 42 C.F.R. § 485.610(c). CMS Br. at 4. CMS argues that Iam
11

bound by the applicable law, including the Act and regulations, and may not invalidate
either and that I have no authority to grant equitable relief. CMS Br. at 4, 6. I agree with
CMS that the Secretary, CMS, the Board and J are all bound to comply with the
provisions of the Act and regulations. I also agree with CMS that it is not within my
authority or that of the Board to grant equitable relief. CMS argues that if a provision of
the Act is subject to more than one interpretation, CMS’s reasonable interpretation is
entitled to deference. CMS Br. at 4-5. There is no question that in certain circumstances
the courts have held that an executive agency’s interpretation of its enabling statutes is
entitled to deference. CMS concedes that for deference to apply its interpretation must be
reasonable. No deference is due CMS in this case because the provision of the Act at
issue is not subject to more than one interpretation and the interpretation proposed by
CMS is not only not reasonable, it is plainly incorrect.’ CMS argues that the statutory
and regulatory provisions at issue do not permit CMS any option but to deny Petitioner’s
application, and only Congress can change the Act. CMS Br. at 6-7. CMS is correct that
only Congress can amend the Act. However, CMS errs in concluding that section 1820
of the Act has any application to the Parker Indian Health Center. CMS argues that
Congress did not exempt IHS facilities from application of section 1820 of the Act. CMS
Br. at 8. However, as discussed in more detail hereafter, section 1820 of the Act clearly
does not apply to IHS facilities and, therefore, no exception for IHS facilities was
necessary in section 1820. I conclude that CMS is in error in its interpretation and
application of section 1820 of the Act and 42 C.F.R. § 485.610 because Parker Indian
Health Center is not a hospital or a CAH within the meaning of section 1820.

CMS denied Petitioner’s application to enroll as a CAH because CMS concluded that
Petitioner did not meet the location standard of 42 C.F.R. § 485.610(c), which provides:

(c) Standard: Location relative to other facilities or necessary
provider certification. The CAH is located more than a 35-
mile drive (or, in the case of mountainous terrain or in areas
with only secondary roads available, a 15-mile drive) from a
hospital or another CAH, or before January 1, 2006, the CAH
is certified by the State as being a necessary provider of
health care services to residents in the area. A CAH that is
designated as a necessary provider on or before December 31,
2005, will maintain its necessary provider designation after
January 1, 2006.

7 T do not accept the CMS implication that an ALJ or the Board is bound to follow
whatever interpretation of the Act or regulations that CMS might wish to advance. If that
were true, the right to administrative review granted by Congress pursuant to sections
1866(h) and (j) would be meaningless.
12

The regulation is based on section 1820(c)(2)(B) of the Act which provides:
(2) State designation of facilities —

oe Rk

(B) Criteria for designation as critical access hospital —A
State may designate a facility as a critical access hospital if
the facility—

(i) is a hospital that is located in a county (or equivalent unit
of local government) in a rural area (as defined in section
1886(d)(2)(D)) or is being treated as being located in a rural
area pursuant to section 1886(d)(8)(E) and that—

(I) is located more than a 35—mile drive (or, in the case of
mountainous terrain or in areas with only secondary roads
available, a 15—mile drive) from a hospital, or another facility
described in this subsection; or

(ID is certified before January 1, 2006, by the State as being a
necessary provider of health care services to residents in the
area;

CMS erred in its application of the foregoing provisions of the Act and regulation,
because Parker Indian Health Center is not a CAH or a hospital within the meaning of
those provisions.

(i) Parker Indian Health Center is not a CAH within the
meaning of the Act.

Congress established a very specific definition for a CAH as a facility certified by the
Secretary as a CAH pursuant to section 1820(e) of the Act. Act § 1861(mm)(1). Section
1820(e) requires that the Secretary certify a facility as a CAH when: (1) the facility is
located in a state that has established a Medicare rural hospital flexibility program in
accordance with section 1820(c) of the Act; (2) the state has designated the facility a
CAH; and (3) the facility meets other criteria established by the Secretary. The statute is
clear that the Secretary’s authority to designate a facility a CAH is dependent upon the
state having designated the facility a CAH. In this case, the Parker Indian Health Center
is administered by the federal government through the IHS for the benefit of Tribal
members and a limited number of non-Tribal members, and the undisputed evidence is
that Parker is part of a sovereign Indian nation, not the State of Arizona. P. Ex. 15 at 82-
13

83, 86-87, P. Ex. 17. Therefore, the State of Arizona had no authority to designate the
Parker Indian Health Center a CAH. Because the State of Arizona had no authority to
designate Parker a CAH, the Secretary had no authority to certify Parker a CAH under
section 1820(e) of the Act.

It is not clear from the CMS evidence by what authority CMS declared Parker Indian
Health Center to be part of the CAH program. CMS does not specifically state the source
of CMS’s authority in its brief, other than a reference to section 1880 of the Act. Section
1880 permits Medicare to pay IHS hospitals and SNFs, as an exception to the prohibition
on Medicare payments to federal facilities, if the facilities meet the conditions and
requirements for participation generally applicable to hospitals and SNFs. Section 1880
loes not refer to CAHs or section 1820 of the Act or specifically grant the Secretary
authority to designate an IHS facility a CAH.

The CMS evidence suggests that CMS did not intend to designate Parker Indian Health
Center a CAH. The CMS letter to Parker Indian Health Center dated January 10, 2003,
stated that Parker was approved “‘to participate in the Critical Access Hospital Program.”
CMS Ex. 1. The letter does not state that Parker was certified by the Secretary or CMS

as a CAH as required for CAH status by section 1820(e) of the Act. Thus, the CMS letter
from 2003 could be read to authorize Parker to receive the higher CAH payment rates
pursuant to the authority of section 1880, without certification of Parker as a CAH
because there was no authority for such a certification under either section 1820 or
section 1880.

I also note that because Parker Indian Health Center was less than 15 miles from
Petitioner it would have been a clear violation of section 1820(c)(2)(B)(i)(I) of the Act
for CMS to certify Parker Indian Health Center a CAH within the meaning of section
1820 of the Act. The explanation that is consistent with finding no violation by CMS is
that CMS merely approved Parker Indian Health Center to receive the higher CAH rates
under authority of section 1880, even though Parker could not be certified by the
Secretary as a CAH under section 1820.

I conclude that Parker Indian Health Center cannot be, and is not, a CAH within the
meaning of sections 1861(mm)(1) and 1820 of the Act.

(ii) Parker Indian Health Center is not a hospital within
the meaning of section 1820 of the Act.

Because Parker Indian Health Center is not a CAH there remains an issue as to whether
or not Parker’s status as a hospital caused Petitioner not to be in compliance with section
1820(c)(2)(B) of the Act and 42 C.F.R. § 485.610(c).
14

In Cibola General Hospital, DAB No. 2387 (2011), an appellate panel of the Board
concluded that the presence of an IHS facility within 35 miles of Cibola General Hospital
did not preclude certification of Cibola as a CAH. I find the Board’s analysis in Cibola
persuasive for the case before me.

Cibola General Hospital was a 25-bed acute care hospital in rural New Mexico. Cibola
was designated to be a CAH by the State of New Mexico and Cibola filed an application
to enroll in Medicare as a CAH. CMS denied the application because Acoma, an IHS
facility that had participated in Medicare since 1981, was less than 19 miles from Cibola.
Cibola, DAB No. 2387, at 3. Before the ALJ, CMS argued that Acoma was a hospital for
purposes of section 1820(c)(2)(B)(i)(I) of the Act. The ALJ concluded that Acoma was a
hospital and that Cibola did not meet the location requirement to be certified as a CAH.
Cibola, DAB No. 2387, at 4. The Board focused upon the meaning of the term “hospital”
as used in section 1820(c)(2)(B)(i)(1) of the Act and specifically “whether an IHS facility
that has a Medicare provider agreement but lacks a state license and cannot serve non-
Indian patients (except in emergencies) meets the definition of ‘hospital’ for purposes of
disqualifying a nearby general purpose hospital from CAH designation.” Cibola , DAB
No. 2387, at 5. The Board concluded that Acoma, the IHS facility, was not a hospital
within the meaning of section 1820(c)(2)(B)(i)(I) of the Act and Cibola was not
disqualified from certification as a CAH due to its proximity. Cibola, DAB No. 2387, at
10-14. The Board reasoned that ensuring the availability of hospital services to rural
Medicare beneficiaries was the purpose of the Rural Flexibility Program and the state
designation of CAHs under that program and, therefore, Congress must have intended the
term hospital to refer to an institution that offers meaningful access to hospital services to
Medicare beneficiaries in the rural area. Jd. at 10-11. An IHS facility is limited by law to
offering services to a limited Medicare population and does not offer hospital services to
the general Medicare beneficiary population in the rural area. Thus, concluding that the
presence of an IHS facility disqualifies an otherwise qualified hospital from being
designated a CAH is inconsistent with the purpose of Congress.

The Board’s analysis in Cibola is persuasive in this case. There is no dispute that Parker
Indian Health Center is operated by the IHS, is part of a sovereign Indian nation, and not
subject to state regulation. There is no dispute that, as a matter of law and fact, Parker
can only deliver services to Tribal members, non-Tribal women who carry Tribal babies,
and limited emergency services to non-Tribal members. There is no dispute that Parker’s
services are more limited than those available from Petitioner and that Medicare-eligible
Tribal members seek treatment from Petitioner that is not available from Parker.
Applying the analysis of the Board in Cibola to the case before me, I conclude that
Parker Indian Health Center is not a hospital within the meaning of section
1820(c)(2)(B)(i)(D) or 42 C.F.R. § 485.610(c). Accordingly, I conclude that the proximity
of Parker Indian Health Center to Petitioner does not disqualify Petitioner from
certification as a CAH.

15

(iii) Remand is required to permit CMS to comply with
section 1820(e) of the Act.

The CMS letter to Petitioner dated January 10, 2013, notifying Petitioner of the denial of
its application states that because Petitioner did not meet the “threshold” standard of 42
C.F.R. § 485.610, no onsite survey was completed to assess compliance with other
conditions of participation that Petitioner must meet in order to be certified a CAH. P.
Ex. 1. CMS implies in argument that I cannot order CMS to certify Petitioner a CAH.
CMS Br. at 4. I agree. However, having concluded that CMS erroneously found
Petitioner ineligible to be certified a CAH, it is necessary to remand the case to CMS to
fulfill the Secretary’s statutory duty under section 1820(e) of the Act:

(e) Certification by the Secretary—The Secretary shall
certify a facility as a critical access hospital if the facility—

(1) is located in a State that has established a medicare
tural hospital flexibility program in accordance with
subsection (c);

(2) is designated as a critical access hospital by the State
in which it is located; and

(3) meets such other criteria as the Secretary may
require.

II. Conclusion

For the foregoing reasons, this matter is remanded to CMS for further processing of
Petitioner’s application to enroll in Medicare as a CAH and certification as a CAH if all
conditions for participation under the Act and regulations are satisfied.

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Lynwood Medical Imaging,
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-13-708
ALJ Ruling No. 2013-18

Date: August 1, 2013

RULING AND ORDER DISMISSING CASE

On April 17, 2013, Petitioner filed a request for a hearing (RFH) before an
Administrative Law Judge (ALJ). Petitioner’s one-page RFH states that Petitioner
requests “‘a hearing in front of an ALJ on our case, since we highly disagree with the
decision that was made on our reconsideration appeal. Attached please find a copy of
C2C Solutions decision.” Petitioner did not include this decision with its RFH; however,
Petitioner subsequently faxed a dismissal dated April 4, 2013 issued by C2C Solutions,
Inc., a Medicare Part B Qualified Independent Contractor (QIC), to the Civil Remedies
Division. Shortly thereafter, Petitioner faxed a letter dated January 4, 2013, from
Palmetto GBA regarding a Medicare overpayment appeal.

Based on Petitioner’s RFH and subsequent filings, counsel for the Centers for Medicare
& Medicaid Services (CMS) inquired as to whether the Civil Remedies Division had
jurisdiction over what appeared to be an appeal regarding a Medicare overpayment.'

' The Director of the Civil Remedies Division forwarded Petitioner’s RFH to the Office
of Medicare Hearings and Appeals (OMHA), which reviews overpayment appeals.
Generally, appeals regarding Medicare claims for coverage and payment as well as
overpayment are guided by the appeal provisions at 42 C.F.R. Part 405, Subpart I,
whereas appeals regarding revocation of enrollment in the Medicare program are guided
However, Petitioner stated it also wished to appeal the revocation of its Medicare billing
privileges. Thus, the case was docketed and I permitted CMS the opportunity to file a
motion to dismiss explaining CMS’s position and for Petitioner to respond.

On May 23, 2013, CMS moved for dismissal pursuant to 42 C.F.R. § 498.70(b) and
argued that Petitioner failed to submit a request for ALJ hearing that meets regulatory
requirements and that this tribunal lacks jurisdiction to consider the subject matter of
Petitioner’s request. CMS argued that neither the statute nor the regulations authorize me
to review the QIC dismissal dated April 4, 2013, as the Civil Remedies Division is
limited to reviewing initial determinations under 42 C.F.R. Part 498. CMS contends that
the QIC dismissal is not an initial determination under Part 498 and jurisdiction is
lacking.

Petitioner filed a response and essentially contends that its enrollment in the Medicare
program was revoked and therefore I have jurisdiction to hear the appeal. Petitioner’s
owner appears to argue that the medical imaging company applied for “recertification in
the Medicare program” in January of 2012 and this process lasted until April of 2013.
Petitioner asserts that around December of 2012, it learned that Petitioner’s enrollment as
a supplier in the Medicare program was revoked when it received a letter from Medicare
about an overpayment. After receiving the December 2012 letter, Petitioner reports that
it submitted a rebuttal and “reconsideration statement” to CMS. Petitioner also asserts
that from January to April 2013, it submitted many letters to CMS. Then, on April 4,
2013, Petitioner received the QIC dismissal indicating that a revoked supplier number
(PTAN/NPI) was not appealable. Petitioner believes it has a right to a hearing on a
determination regarding its status as a supplier and believes the CMS motion to dismiss
should be denied and its appeal go forward to a decision on the merits.

The process for appealing the revocation of a supplier’s Medicare enrollment differs from
the process for appealing a Medicare overpayment. Petitioner is correct in asserting that
there is a right to a hearing on a revocation of Medicare enrollment, provided certain
requirements are met. Although the QIC stated that a revoked supplier number was not
an appealable action, it should be clarified that it is not an appealable action within that
appeal process. The QIC is part of the appeal process governed by the regulations at 42
C.F.R. Part 405, of which I do not have jurisdiction to review.

In order to appeal a determination by CMS to revoke a supplier’s Medicare enrollment,
the supplier must first receive a notice of initial revocation determination. 42 C.F.R.

§ 498.20(a). Under the review procedures in Part 498, a supplier “dissatisfied with an
initial determination or revised initial determination related to the... revocation of
Medicare billing privileges may request reconsideration in accordance with § 498.22(a).”

the provisions of 42 C.F.R. Part 498. These are separate and distinct appeal procedures
and they are governed by the regulations applicable to the specific type of appeal.
42 C.F.R. § 498.5(1)(1). CMS or one of its contractors “reconsiders an initial
determination that affects a prospective provider or supplier . . . if the affected party files
a written request in accordance with paragraphs (b) and (c) of this section.” 42 C.F.R.

§ 498.22(a). CMS then makes a reconsidered determination pursuant to 42 C.F.R.

§ 498.24. A supplier dissatisfied with a reconsidered determination may request a
hearing before an ALJ. 42 C.F.R. § 498.5(1)(2).

Petitioner has provided me with neither a notice of an initial revocation determination by
CMS nor a reconsidered determination of an initial determination to revoke. Section
1866(h)(1) of the Social Security Act (Act) provides: “[a]n institution or agency
dissatisfied with a determination by the Secretary that it is not a provider of services or
with a determination described in subsection (b)(2) shall be entitled to a hearing thereon.”
The implementing regulations further specify that review is limited to “initial
determinations” under Part 498 and individuals and entities may appeal only initial
determinations. See Better Health Ambulance, DAB No. 2475 (2012); Hiva Vakil, M.D.,
DAB No. 2460 (2012); High Tech Home Health, Inc., DAB CR1583 (2007); Mira Vista
Care Center, Inc., DAB No. 1789 (2001); Comprehensive Mental Health Center of Baton
Rouge, et al., DAB No. 1774 (2001). A list of initial CMS determinations is set forth at
42 CFR. § 498.3(b).

LS

The QIC dismissal Petitioner requests that I review is not an “initial determination”
included in the exhaustive list at 42 C.F.R. § 498.3(b). The list of reviewable initial
determinations includes a determination by CMS “to deny or revoke a provider or
supplier’s Medicare enrollment in accordance with 42 C.F.R. § 424.530 or 42 C.F.R.

§ 424.535.” 42 C.F.R. § 498.3(b)(17). However, the April 4, 2013 QIC dismissal is not a
reconsidered determination on CMS’s decision to revoke Petitioner’s Medicare
enrollment, but rather states the finding by the QIC that Petitioner’s request for
reconsideration is not appealable pursuant to 42 C.F.R. § 405.926." As the Departmental
Appeals Board (Board) has explained, under the regulations “only reconsidered
determinations related to the denial or revocation of billing privileges are eligible for ALJ
review.” Denise A. Hardy, D.P.M., DAB No. 2464, at 4 (2012); cf: Hiva Vakil, M.D.,
DAB No. 2460, at 5 (noting that “the regulations plainly require that CMS or one of its
contractors issue a ‘reconsidered determination’ before the affected party is entitled to
request a hearing before an ALJ”). The record in this matter does not indicate that
Petitioner ever received a reconsidered determination regarding a decision by CMS to

> A QIC’s dismissal is not reviewable by this tribunal. As CMS noted, a QIC’s dismissal
or decision may be reviewable elsewhere. The regulations at 42 C.F.R. Part 405, Subpart
I, 42 C.F.R. § 405.900 et seq., establish a structure for providers and suppliers to
challenge adverse claims determinations, including the dismissal by a QIC of a request
for reconsideration. CMS asserts that a party to a QIC dismissal has a right to have the
dismissal reviewed by an OMHA ALJ, provided certain filing requirements are met. 42
C.F.R. § 405.1004.
revoke its Medicare enrollment and therefore I do not have jurisdiction to hear this
matter. Better Health Ambulance, DAB No. 2475.

Petitioner also makes a number of arguments that essentially amount to claims of
equitable estoppel. It is established by federal case law, and in Board precedent, that: (1)
estoppel cannot be the basis to require payment of funds from the federal fisc; (2)
estoppel cannot lie against the government, if at all, absent a showing of affirmative
misconduct, such as fraud; and (3) I am not authorized to order payment contrary to law
based on equitable grounds. It is well settled that those who deal with the government
are expected to know the law and may not rely on the conduct of government agents
contrary to law. See, e.g., Office of Personnel Mgmt. v. Richmond, 496 U.S. 414 (1990);
Heckler v. Cmty. Health Servs. of Crawford County, Inc., 467 U.S. 51 (1984); Oklahoma
Heart Hosp., DAB No. 2183, at 16 (2008); Wade Pediatrics, DAB No. 2153, at 22 n.9
(2008), aff'd, 567 F.3d 1202 (10th Cir. 2009); U.S. Ultrasound, DAB No. 2302, at 8
(2010). Therefore, Petitioner’s equitable estoppel arguments must be rejected.

An ALJ may dismiss a hearing request when the party requesting the hearing is either not
a proper party or “does not otherwise have a right to a hearing.” 42 C.F.R. § 498.70(b).
For the reasons explained above, I conclude that this matter should be, and it is,
DISMISSED.

/s/
Richard J. Smith
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Tasmina Sheikh, M.D., P.A.,
(NPI: 1659376150),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-13-104
ALJ Ruling No. 2013-17

Date: July 31, 2013

DISMISSAL

Petitioner, Tasmina Sheikh, M.D., P.A., is a psychiatrist who participated in the Medicare
program. The Centers for Medicare & Medicaid Services (CMS) revoked her Medicare
enrollment, citing abuse of billing privileges. Petitioner appealed and her appeal was
assigned to me.

On November 14, 2012, I issued an acknowledgment and prehearing order directing the
parties to file their respective prehearing exchanges. On December 19, 2012, CMS
timely filed its prehearing exchange by electronic filing. Pursuant to my order, Petitioner
was to file her exchange no later than January 23, 2013. Petitioner did not file her
exchange nor request an extension of time for filing.

lissued an order on February 6, 2013, suggesting that Petitioner’s failure to file her
submissions as ordered might indicate that she had abandoned her request for hearing.

42 C.F.R. § 498.69. If she did not intend to abandon her request, I directed her to file, no
later than February 19, 2013, her exchange and a written statement showing good cause
why I should not dismiss this case pursuant to 42 C.F.R. § 498.69(b).
Petitioner, who is represented by counsel, thereafter submitted her exchange with a letter
dated February 19, 2013. In that letter she said that she had “meritorious defenses” and
suggested that she had not timely filed her submissions because the facts of her case “are
quite involved from an accounting point of view.” She also claimed that she needed
“significant time and analysis,” given “the nature of the accounting and the thousands of
pages that were submitted to CMS for the audit, together with the fact that much of the
audit findings were not provided to the Petitioner until CMS filed its Prehearing Brief
(which contained some detail in its exhibits)... .”

CMS asks that the appeal be dismissed, arguing that Petitioner fails to show good cause
for the untimely filing. I agree and, for the reasons set forth below, dismiss pursuant to
42 C.F.R. § 498.69(b).!

Petitioner does not claim that any factor beyond her ability to control — or any outside
factor at all — prevented her from responding timely to my order. Rather, she effectively
admits that she decided to disregard my deadlines and establish her own, without notice
to CMS or to me. I do not consider this good cause. Moreover, I find disingenuous
Petitioner’s suggestion that she was unaware of the case against her until after she
received CMS’s submission.

I may dismiss a hearing request if the party who requested a hearing abandons it.

42 C.F.R. § 498.69. The request is abandoned if the party does not file submissions as
ordered and (in responding to an order to show cause) does not show good cause for the
untimely filing. 42 C.F.R. § 498.69(b); Osceola Nursing and Rehabilitation Center,
DAB No. 1708 at 11-12 (1999). The regulations do not define good cause but leave that
determination to the Administrative Law Judge (ALJ). For the most part, the ALJs who
handle Part 498 appeals have been guided by the Social Security Administration’s
(SSA’s) regulatory definition of good cause: circumstances beyond a party’s ability to
control.” See, e.g., Oak Park Healthcare Center, DAB CR1917 (2009); The Heritage
Center, DAB CR1219 (2004); Hillcrest Healthcare, L.L.C., DAB CR976 (2002), aff'd
DAB No. 1879 (2003); Hammonds Lane Center, et al., DAB CR913, aff'd DAB No.
1853 (2002); Glen Rose Medical Center, DAB CR918 (2002), aff'd DAB No. 1852

' Petitioner may move to vacate this dismissal. However, an ALJ may vacate a dismissal
only if the party files its request to that effect within 60 days from receipt of the notice of
dismissal and shows good cause for vacating. 42 C.F.R § 498.72.

> Under SSA’s regulations, the ALJ considers: 1) the circumstances that kept the
affected party from making the request on time; 2) whether any SSA action misled him;
3) whether the affected party understood the requirements for filing; and 4) whether the
affected party had any physical, mental, educational, or linguistic limitation that
prevented him from filing a timely request or from understanding or knowing about the
need to file a timely request for review. 20 C.F.R. § 404.911.
(2002); Parkview Care Center, DAB CR785 (2001); Hospicio San Martin, DAB CR387
(1995), aff'd DAB No. 1554 (1996); 20 C.F.R. §§ 404.911, 404.933(c). In fact, as far as
I can determine, this is the only standard articulated by any adjudicator in a Part 498 case.

For its part, the Departmental Appeals Board “has never attempted to provide an
authoritative or complete definition of the term... .” Hillcrest Healthcare, L.L.C., DAB
No. 1879 at 5 (2003). Certainly, the Board has consistently supported dismissal when it
found that a party did not show good cause under “any reasonable definition of that
term.” See, e.g., Brookside, DAB No. 2094 at 6 (2007). Otherwise, it has not articulated
any definition, but adjudicates case-by-case.

In any event, applying SSA’s definition has made eminently good sense. SSA’s
regulations derive from the same statutory authority as the section 498 regulations —
section 205(b) of the Social Security Act. The SSA definition has been subject to notice-
and-comment rulemaking. It has been the most widely-employed definition of “good
cause” in the context of a section 205(b) hearing. If an ALJ correctly applies the “good
cause” definition long employed by the largest administrative review body in the country
(and probably in the world), he/she can hardly be found to have abused his/her discretion
or acted arbitrarily. If anything, an adjudicator could justifiably hold Medicare providers
and suppliers to a more stringent standard than that set forth in the SSA regulation. See
Cary Health and Rehabilitation, DAB No. 1771 at 21, n.5 (2001) (finding “considerably
more justification” for holding the affected party to the rules, and “considerably less
justification” for such a party’s inaction in response to federal notices where that affected
party is not an individual or a program beneficiary, but a provider/supplier who hopes to
participate in federal programs).

ALJ’s began applying SSA’s “good cause” definition to Part 498 cases in the absence of
any alternative. In recent years, however, CMS has published regulations governing
hearings in benefit appeals under Medicare Parts A and B. 42 C.F.R. § 405.1000 et seq.
While those regulations do not specifically define “good cause,” they provide guidance
for determining whether good cause exists and offer examples. 42 C.F.R. § 1014(c)(3);
42 C.F.R. § 405.942(b)(2) and (3). The CMS regulations borrow heavily from the SSA
regulations, but they are more stringent, reflecting the view that providers and suppliers
(and potential providers and suppliers) should understand program requirements. The
CMS regulations thus omit the instruction that the ALJ consider whether the affected
party understood the legal requirements. Compare 42 C.F.R. § 405.942(b)(2) with 20
C.F.R. § 404.911(a). Similarly, both sets of regulations include the same examples of
good cause (serious illness, death, records destroyed, etc.), except that the CMS
regulations omit the three SSA examples that relate generally to a party’s understanding

of program requirements.* 20 C.F.R. 404.911(b)(4), (5), and (9); 42 C.F.R. §
405.942(b)(3).

Arguably, it makes more sense to apply the CMS standard in this case involving a
Medicare supplier. However, even under the more generous SSA standard, Petitioner has
not shown good cause for late filing. She has not established that any factor beyond her
control prevented her from responding to my order. She does not claim that she was
unaware of or misunderstood the deadline; she does not point to some excusable error
that prevented her from responding. Instead, she justifies her inaction by characterizing
the case as too complicated for timely response and suggesting that CMS’s findings were
new to her.

In fact, CMS has presented a fairly simple, straight-forward case. Nothing in its short
brief (7 pages) and 8 relatively small exhibits is new or surprising, and Petitioner does not
point to any specific audit finding, submission, or argument that CMS raised for the first
time before this tribunal.* CMS’s case is based on complaints from two Medicare
beneficiaries and a subsequent audit of Petitioner’s own records, to which she has
obviously always had access. See CMS Ex. 7 at 2 (Duran Decl. 4 12). Nor is there
anything very complicated about the auditor’s techniques. From Petitioner’s electronic
claims data,” the auditor counted the number of hours Petitioner billed the program per
day for a period of time, and documented her findings on a spreadsheet. CMS Ex. 6;
CMS Ex. 7 at 1 (Duran Decl. § 7).

The audit occurred back in June 2011. CMS Ex. 7 at 1 (Duran Decl. § 4). As early as
October 4, 2011, if not earlier, Petitioner was represented by counsel. CMS Ex. 4. She
requested reconsideration on January 27, 2012. CMS Ex. 2. CMS denied her request for
reconsideration on September 10, 2012. CMS has added no new issues. Petitioner has
thus had ample time to prepare her defenses and timely file her submissions. Because she

* 1) Although she tried very hard, the party did not find necessary information within the
time allotted; 2) The party asked the agency for additional information and then sought
review within specified time frames after receiving that information; and 3) Because of
unusual or unavoidable circumstances, the party could not have known of the need to file
timely.

+ The regulations frown on new submissions and specifically preclude a provider or
supplier from submitting new evidence in these proceedings, absent a showing of good
cause. 42 C.F.R. § 498.56(e); see Acknowledgment and Prehearing Order at 5 ( 6).

* Although Petitioner refers to “thousands of pages submitted to CMS for audit,”
Medicare claims can only be submitted electronically. CMS Ex. 7 at 1 (Duran Decl. § 8).
failed to do so and has not demonstrated good cause for that failure, I dismiss her hearing
request pursuant to 42 C.F.R. § 498.69(b).

/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.
Khalsa Enterprises LLC d/b/a Crown Fried Chicken,
Respondent.

Docket No. C-13-814
FDA Docket No. FDA-2013-H-0629

Decision No. CR2882

Date: July 31, 2013

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) initiated the above-captioned matter when it
filed an Administrative Complaint for Civil Money Penalties (Complaint) with the
Departmental Appeals Board, Civil Remedies Division (CRD) and the Food and Drug
Administration’s (FDA) Division of Dockets Management. CTP seeks to impose civil
money penalties under the Federal Food, Drug, and Cosmetic Act (Act) and the Act’s
implementing regulations.

The Complaint alleges the following facts. Respondent owns an establishment located at
1385 Springfield Avenue, Irvington, New Jersey 07111, that does business under the
name Crown Fried Chicken, and that sells tobacco products. Complaint § 3. CTP
conducted two inspections of the establishment. Complaint § 9. During an August 6,
2012 inspection, an FDA-commissioned inspector observed that Respondent:
2
[Sold] tobacco products to a minor, in violation of 21 C.F.R. § 1140.14(a);
[and] [failed] to verify the age of a person purchasing tobacco products by
means of photographic identification containing the bearer's date of birth,
as required by 21 C.F.R. § 1140.14(b)(1).

Complaint § 10.

On October 18, 2012, CTP issued a warning letter to Respondent specifying the
violations that the inspector observed. Complaint § 10. The letter warned Respondent
that if it failed to correct the violations, civil money penalties could be imposed on it and
that it was Respondent’s responsibility to ensure compliance with the law. Complaint

4 10. CTP did not receive a response to the warning letter. Complaint § 11.

During a subsequent inspection, an FDA-commissioned inspector documented that “a
person younger than 18 years of age was able to purchase a package of Newport Box
100s on March 2, 2013, at approximately 4:46 PM ET.” Complaint § 1. The inspector
also documented that “the minor's identification was not verified before the sale . . . on
March 2, 2013, at approximately 4:46 PM ET.” Complaint § 1.

In compliance with 21 C.F.R. §§ 17.5 and 17.7, CTP served Respondent with the
Complaint on June 3, 2013, via United Parcel Service. CTP charged Respondent with
violating 21 C.F.R. § 1140.14(a) (sale of tobacco products to a minor) and 21 C.F.R.

§ 1140.14(b)(1) (failure to verify the age of a person purchasing tobacco products by
means of photographic identification containing the bearer’s date of birth). Complaint
4 1, 10. CTP asked the CRD to impose a $500 civil money penalty based on three
alleged violations of the regulations in a 24-month period. Complaint § 13.

The Complaint provided detailed instructions related to filing an answer and requesting
an extension of time to file an answer. Complaint {J 14-18, 20-22. The Complaint stated
that failure to file an answer could result in the imposition of a civil money penalty
against Respondent. Complaint § 19. Respondent neither filed an answer nor requested
an extension of time within the 30-day time period prescribed in 21 C.F.R. § 17.9.

If a respondent does not file an answer within 30 days of a properly served complaint, the
regulations provide that:

the presiding officer shall assume the facts alleged in the complaint to be
true, and, if such facts establish liability under the relevant statute, the
presiding officer shall issue an initial decision within 30 days of the time
the answer was due, imposing:
(1) The maximum amount of penalties provided for by law for the
violations alleged; or

3
(2) The amount asked for in the complaint, whichever amount is smaller.

21 C.F.R. § 17.11(a). Further, a failure to file a timely answer means that “the
respondent waives any right to a hearing and to contest the amount of the penalties and
assessments” imposed in the initial decision. 21 C.F.R. § 17.11(b).

Accepting the facts alleged in the Complaint as true, I find that those facts establish
Respondent’s liability under the Act. See 21 U.S.C. §§ 333(f)(9), 387c(a)(7)(B), 387£(d);
21 C.F.R. §§ 1140.1(b), 1140.14. Lalso find that CTP’s request to impose a $500 civil
money penalty is permissible. See 21 C.F.R. § 17.2.

Therefore, Respondent is directed to pay a civil money penalty in the amount of $500.00.
This initial decision becomes final and binding upon both parties 30 days after the date of
its issuance. 21 C.F.R. § 17.11(b).

It is so ordered.

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Empowered Intimates, Inc.,
(PTAN: 6692360001),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-13-476
Decision No. CR2880

Date: July 31, 2013

DECISION

Petitioner, Empowered Intimates, Inc., appeals the Centers for Medicare & Medicaid
Services’ (CMS’s) decision to revoke its Medicare supplier number and billing
privileges. As explained below, the undisputed evidence establishes that Petitioner was
not in compliance with Medicare program requirements. Therefore, I uphold CMS’s
determination to revoke Petitioner’s enrollment in the Medicare program.

I. Background

Petitioner was enrolled in the Medicare program as a supplier of durable medical
equipment, prosthetics, orthotics and supplies (DMEPOS). In a letter dated October 26,
2012, National Supplier Clearinghouse (NSC), a Medicare contractor, notified Petitioner
that its supplier number would be revoked retroactive to October 11, 2012. CMS Exhibit
(Ex.) 3, at 1. The notice letter stated that the basis for the revocation was that Petitioner
was in violation of 42 C.F.R. § 424.57(c)(7) and 42 C.F.R. § 424.535(a)(5)(ii) because it
was closed during posted hours of operation on October 5 and 11, 2012, when an NSC
inspector attempted to complete site inspections to verify Petitioner’s compliance with
supplier standards. CMS Ex. 3, at 2. The notice letter also stated that Petitioner was
barred from re-enrolling in the Medicare program as a supplier for two years from the
effective date. CMS Ex. 3, at 3.

Petitioner requested a reconsideration determination by letter dated November 5, 2012.
CMS Ex. 4; P. Ex. F. On December 18, 2012, the hearing officer issued an unfavorable
decision and upheld the revocation of Petitioner’s billing number because Petitioner was
not in compliance with the Medicare enrollment requirements. CMS Ex. 5. Petitioner
timely requested a hearing with the Civil Remedies Division of the Departmental Appeals
Board. On March 1, 2013, I issued an Acknowledgment and Pre-Hearing Order (Order).
Pursuant to that Order, CMS filed a Pre-Hearing Brief and Motion for Summary
Judgment (CMS Br.), along with six exhibits. On May 10, 2013, Petitioner filed a letter
that I accept as Petitioner’s Brief and response to CMS’s motion for summary judgment
(P. Br.). Along with its brief, Petitioner filed Exs. A-N, three photos, one business card
and two brochures. I admit all the proffered exhibits into the record.

My Order advised the parties that they must submit written direct testimony for each
proposed witness and that an in-person hearing would only be necessary if the opposing
party requested an opportunity to cross-examine a witness. Pre-hearing Order §f 8, 9,
and 10; see Vandalia Park, DAB No. 1940 (2004); Pacific Regency Arvin, DAB No.
1823, at 8 (2002) (holding that the use of written direct testimony for witnesses is
permissible so long as the opposing party has the opportunity to cross-examine those
witnesses). CMS counsel listed one proposed witness for whom he also filed an affidavit
of written direct testimony. CMS Ex. 6. Petitioner did not request to cross-examine
CMS’s proposed witness. I find, therefore, that an in-person hearing in this case is
unnecessary, and I issue this decision on the full merits of the written record.

Il. Applicable Law

Pursuant to section 1834(j)(1)(A) of the Social Security Act (Act), 42 U.S.C.

§ 1395m(j)(1)(A), a DMEPOS supplier may not be reimbursed for items provided to an
eligible Medicare beneficiary unless the supplier has a supplier number issued by the
Secretary of the U.S. Department of Health & Human Services (Secretary). To receive a
supplier number, a DMEPOS supplier must meet and maintain each of the supplier
enrollments standards set forth in 42 C.F.R. §§ 424.57(c)(1)-(29). Among other things, a
DMEPOS supplier must maintain a physical facility on an appropriate site which is in a
location that is accessible to the public, staffed during posted hours of operation, and
maintained with a visible sign and posted hours of operation. 42 C.F.R. §424.57(c)(7).
Also, a DMEPOS must permit CMS or its agent to conduct on-site inspections to
determine supplier compliance with each of the enrollment standards. 42 C.F.R.

§ 424.57(c)(8). CMS will revoke a currently-enrolled Medicare supplier’s billing
privileges if CMS or its agent determines that the supplier is not in compliance with any

supplier enrollment standard. 42 C.F.R. § 424.57(d); see also 1866I1CPayday.com, DAB
No. 2289, at 13 (2009) (“[F]ailure to comply with even one supplier standard is a
sufficient basis for revoking a supplier’s billing privileges.”).

In addition, if an on-site visit reveals that a supplier is no longer operational, or otherwise
fails to meet one of the supplier standards, CMS may revoke the supplier’s Medicare
billing privileges. 42 C.F.R. § 424.535(a)(5)(ii). A provider or supplier is operational if
it “has a qualified physical practice location, is open to the public for the purpose of
providing health care related services, is prepared to submit valid Medicare claims, and is
properly staffed, equipped, and stocked . . . to furnish these items or services.” 42 C.F.R.
§ 424.502. The effective date of revocation is the date CMS determines the supplier was
no longer operational. 42 C.F.R. § 424.535(g). Suppliers who have had their billing
privileges revoked “are barred from participating in the Medicare program from the
effective date of the revocation until the end of the re-enrollment bar,” which is “a
minimum of | year, but not greater than 3 years depending on the severity of the basis for
revocation.” 42 C.F.R. § 424.535(c).

Til. Issue

The issue before me is whether CMS had a legitimate basis to revoke Petitioner’s
Medicare supplier number.

IV. Findings of Facts and Conclusions of Law

A. CMS had a legitimate basis to revoke Petitioner’s Medicare supplier number
when an inspector found it closed during attempted inspections on October 5,
2013 and October 11, 2013.

Suppliers must maintain physical facilities that are “accessible and staffed during posted
hours of operation.” 42 C.F.R. § 424.57(c)(7)(i)(C). In addition, suppliers must permit
CMS or its agents to conduct on-site inspections to determine the supplier’s compliance
with the regulatory standards. 42 C.F.R. § 424.57(c)(8). Petitioner was a DMEPOS
supplier that participated in the Medicare program. Petitioner’s posted hours of operation
were Monday through Friday, 9:00 a.m. through 4:00 p.m. CMS Ex. 2, at 3. On October
5, 2012 at 11:50 a.m., an NSC site inspector attempted to inspect Petitioner’s facility and
found the facility was closed. CMS Ex. 2, at 2. The site inspector attempted a second
site visit on October 11, 2012, at 10:27 a.m., but again Petitioner’s facility was closed.
CMS Ex. 2, at 2. On both occasions, the inspector knocked with no answer and the lights
were off. CMS Ex. 2, at 7. Petitioner does not dispute these facts.

While acknowledging that its facility was closed at the time of the two attempted site
visits, Petitioner states, “I decided to go around the community in the mornings, once or
twice a week throughout [October] . . . [], but I was still in my store every day by noon or
1:00 p.m.” P. Br. at 3. Petitioner also provides documentary evidence to show that the
business was active during the relevant period. Essentially, Petitioner argues that it was
operational during the time period of the two site visits despite the office being closed at
the time of the site visits. For a supplier to be “operational,” it must be “open to the
public for the purpose of providing health care related services . . . and [be] properly
staffed . . . to furnish these services.” 42 C.F.R. § 424.502. “A supplier is neither
‘staffed’ nor ‘accessible,’ if the supplier’s location is closed and locked.” Amman’s
Orthopedics and Prosthetics, Inc., DAB CR2337, at 5 (2011). Thus, while I assume
Petitioner’s statements are true, the regulations require Petitioner to make whatever
reasonable arrangements are necessary to keep its business open during ail of its posted
hours of operation. A to Z DME, LLC, DAB CR1995, at 6 (2009), aff'd A to Z DME,
LLC, DAB No. 2303 (2010) (“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.”).

B. Iam unauthorized to consider Petitioner’s remedial efforts or grant
Petitioner’s requests for equitable relief despite not meeting the legal
requirements.

Petitioner’s assertion that it now has “someone in my store during the posted business
hours” is also of no avail. P. Br. at 3. Even if I fully accept Petitioner’s statement as
true, I am still bound by the applicable regulations. The issue before me is whether CMS
had a legitimate basis to revoke Petitioner’s supplier number at the time of the revocation
action. Restwell Mattress Company d/b/a Restwell Mattress Factory, DAB CR2194, at 5
(2010) (citing 73 Fed. Reg. 36,448, 36,452 (June 27, 2008) (“[A] . . . supplier is required
to furnish evidence that demonstrates that the Medicare contractor made an error at the
time an adverse determination was made, not that the . . . supplier is now in
compliance.”)). As previously stated, the undisputed facts establish that the site inspector
was unable to inspect Petitioner’s facility at the time of the two attempted site visits
because the facility was closed. Thus, because there is a legitimate basis for CMS’s
determination, I must uphold the revocation.

While arguing her Medicare supplier number should not be revoked, Petitioner also
explains the circumstances and reasons why she entered the post-mastectomy business.
Petitioner further alleges generally that there are other DMEPOS suppliers that commit
similar violations but have not had their supplier numbers revoked. P. Br. at 4. These are
appeals to equity. I am without authority to order CMS to provide an exemption to
Petitioner under the circumstances because Petitioner’s equitable arguments give me no
grounds to restore Petitioner’s billing privileges. See US Ultrasound, DAB No. 2302, at
8 (2010) (“[nJeither the ALJ nor the Board is authorized to provide equitable relief by
reimbursing or enrolling a supplier who does not meet statutory or regulatory
requirements.”). Moreover, I have no authority to declare statutes or regulations invalid
or ultra vires. 18661CPayday.com, L.L.C., DAB No. 2289, at 14 (2009) (“[a]n ALJ is
bound by applicable laws and regulations and may not invalidate either a law or
regulation on any ground.”).

V. Conclusion

I find the undisputed facts establish Petitioner was not open and accessible at the times of
the two attempted site visits during Petitioner’s posted hours of operation. Therefore, I
sustain the revocation of Petitioner’s supplier number for DMEPOS Medicare billing
privileges, effective October 11, 2012. Accordingly, Petitioner is barred from re-
enrolling for two years from the effective date of its revocation.

/s/
Joseph Grow
Administrative Law Judge