Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Behdad Omrani, D.D.S.
(O.L. File No. H-11-42322-9),

Petitioner,
v.
The Inspector General.
Docket No. C-13-90
Decision No. CR2755

Date: April 12, 2013

DECISION

Petitioner, Behdad Omrani, D.D.S., is excluded from participating in Medicare,
Medicaid, and all federal health care programs pursuant to section 1128(a)(1) of the
Social Security Act (Act) (42 U.S.C. § 1320a-7(a)(1)) effective October 18, 2012, based
upon his conviction of a criminal offense related to the delivery of an item or service
under Medicare or a state health care program. There is a proper basis for exclusion.
Petitioner’s exclusion for the minimum period of five years is mandatory pursuant to
section 1128(c)(3)(B) of the Act (42 U.S.C. § 1320a-7(c)(3)(B)).'

' Petitioner may apply for reinstatement only after the period of exclusion expires.
Reinstatement is not automatic upon completion of the period of exclusion. 42 C.F.R.
§ 1001.3001.
I. Background and Procedural History

The Inspector General (I.G.) for the Department of Health and Human Services (HHS)
notified Petitioner by letter dated September 28, 2012, that he was being excluded from
participation in Medicare, Medicaid, and all federal health care programs for a period of
five years, the minimum statutory period. The I.G. advised Petitioner that he was being
excluded pursuant to section 1128(a)(1) of the Act based upon his conviction in the
Superior Court of California, County of Los Angeles, of a criminal offense related to the
delivery of an item or service under Medicare or a state health care program.

Petitioner timely requested a hearing by letter dated October 31, 2012 (Hearing Request).
The case was assigned to me for hearing and decision. I convened a prehearing telephone
conference on December 11, 2012, the substance of which is memorialized in my
Prehearing Conference Order and Schedule for Filing Briefs and Documentary Evidence
dated December 11, 2012. During the prehearing conference, counsel for the I.G.
requested an opportunity to file a motion for summary judgment prior to developing the
case for hearing. Accordingly, I set a schedule for the I.G. to file a motion for summary
judgment and for Petitioner to respond.

On January 10, 2013, the LG. filed a motion for summary judgment and supporting brief
(LG. Br.), along with I.G. exhibits (I.G. Exs.) 1 through 14. On February 11, 2013,
Petitioner filed a brief (P. Br.) in opposition to the I.G.’s motion for summary judgment
with Petitioner’s exhibits (P. Exs.) 1 through 5. Petitioner also filed objections (P.
Objections) to LG. Exs. 3 and 13, citing 42 C.F.R. § 1005.17, and arguing that the
exhibits are not relevant, are more prejudicial than probative, may confuse the issues,
may result in undue delay, or may be cumulative. On February 26, 2013, the I.G. filed a
reply brief to Petitioner’s opposition (I.G. Reply), as well as a response to Petitioner’s
evidentiary objections.

Petitioner’s objection to I.G. Ex. 3 is sustained, and the exhibit is not considered for
purposes of summary judgment. I.G. Ex. 3 is a “Declaration in Support of Issuance of
Felony Complaint and Arrest Warrant” made by a Special Agent of the California
Department of Justice during the investigation of Petitioner’s underlying criminal case.
The purpose of the declaration was to show that there was probable cause to support a
felony complaint and an arrest warrant. The declaration alleges a scheme to defraud the
California Medicaid program (Medi-Cal) and the related dental program (Denti-Cal) and
alleges that Petitioner actively participated in that scheme. The LG. has not shown that
the specific allegations of the declaration were proven by at least a preponderance of the
evidence or admitted during the underlying criminal proceedings as part of the plea
inquiry or the plea agreement. Thus, the IG. has not shown that the allegations in the
declaration are relevant to my consideration of the I.G.’s motion for summary judgment.
Accordingly, out of an abundance of caution, I.G. Ex. 3 is not admitted into the record or
considered as evidence for purposes of summary judgment. 42 C.F.R. § 1005.17(c), (d).

Petitioner’s objection to I.G. Ex. 13 is sustained in part and overruled in part. 1.G. Ex. 13
is a declaration by the prosecutor in Petitioner’s underlying criminal case. While the
declaration constitutes hearsay, that fact alone does not preclude its admission in this
proceeding. 42 C.F.R. § 1005.17(b). Petitioner does not dispute the authenticity of the
document or that the prosecutor has sufficient knowledge about the matters asserted in
the declaration. The prosecutor has sufficient knowledge of the criminal proceedings to
make the factual assertions he does regarding the procedural history of the case. The
declaration, therefore, is reliable and relevant. Contrary to Petitioner’s arguments, the
declaration does not contain evidence regarding plea negotiations that might be subject to
exclusion pursuant to 42 C.F.R. § 1005.17(f). P. Objections at 3. Rather, the prosecutor
simply relates the procedural history of the criminal case. I do not, however, accept the
legal opinion of the prosecutor regarding Petitioner’s conviction and its nexus to
Medicare, Medi-Cal, or Denti-Cal. Specifically, the prosecutor states that Petitioner’s
guilty plea “directly resulted from offenses related to Denti-Cal, a Federal health care
program, and other crimes.” I.G. Ex. 13, at § 7 (emphasis added). Whether Petitioner’s
conviction was “related to” the delivery of a health care item or service under Medicare
or a state health care program is an issue I must resolve in deciding this case and the
prosecutor’s opinion is not considered. Therefore, I admit I.G. Ex. 13 into the record,
striking paragraph 7.

Accordingly, LG. Exs. 1, 2 and 4 through 13 (paragraph 7 having been stricken) and 14
are admitted. P. Exs. | through 5 are admitted.

IL. Discussion
A. Applicable Law
The Act provides, in relevant part:

(a) Mandatory Exclusion. -- The Secretary [of HHS] shall
exclude the following individuals and entities from
participation in any Federal health care program (as defined
in section 1128B(f)):

(1) Conviction of program-related crimes. -- Any individual
or entity that has been convicted of a criminal offense related
to the delivery of an item or service under [Medicare] or
under any State health care program.

Act § 1128(a)(1) (42 U.S.C. § 1320a-7(a)(1)). The Secretary has promulgated
regulations implementing this provision of the Act. 42 C.F.R. § 1001.101(a).
Section 1128(f) of the Act (42 U.S.C. § 1320a-7(f)) provides Petitioner the right to a
hearing before an administrative law judge (ALJ) and judicial review of the final action
of the Secretary.

The standard of proof in a hearing before an ALJ is a preponderance of the evidence. 42
C.F.R. § 1001.2007(c). Petitioner may not collaterally attack the conviction that provides
the basis for the exclusion. Jd. § 1001.2007(c), (d). Petitioner bears the burden of proof
and the burden of persuasion on any affirmative defenses or mitigating factors, and the
1.G. bears the burden on all other issues. Jd. § 1005.15(b).

B. Issue

The Secretary has by regulation limited my scope of review to two issues:
Whether there is a basis for the imposition of the exclusion; and
Whether the length of the exclusion is unreasonable.

42 C.F.R. § 1001.2007(a)(1). Whether the length of exclusion is unreasonable is not an
issue in this case, as the five-year exclusion period imposed is the minimum period
specified by Congress and the Secretary. Act § 1128(c)(3)(B); 42 C.F.R. § 1001.102(a).

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

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

1. Petitioner’s request for hearing was timely, and I have jurisdiction.
2. Summary judgment is appropriate in this case.

Petitioner filed his request for hearing within 60 days of the date the I.G. notifie
Petitioner of the exclusion. I.G. Ex. 1, at 1; Hearing Request at 1. Petitioner’s request
for hearing was timely filed and preserved Petitioner’s right to review of justiciable

issues. 42 C.F.R. §§ 1001.2007, 1005.2(c). I have jurisdiction.

Pursuant to section 1128(f) of the Act, a person subject to exclusion has a right to
reasonable notice and an opportunity for a hearing. The Secretary has provided by
regulation that a sanctioned party has the right to hearing before an ALJ and both the
sanctioned party and the LG. have a right to participate in the hearing. 42 C.F.R.
§§ 1001.2007, 1005.2, 1005.3. Either or both parties may choose to waive appearance at
an oral hearing and to submit only documentary evidence and written argument for my

consideration. 42 C.F.R. § 1005.6(b)(5). An ALJ may also resolve a case, in whole or in

part, by summary judgment. 42 C.F.R. § 1005.4(b)(12). 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 prevails as a matter of law even if all disputed facts
are resolved in favor of the party against whom the motion is made. A party opposing
summary judgment must allege facts which, if true, would refute the facts relied upon by
the moving party. See, e.g., Fed. R. Civ. P. 56(c); Garden City Med. Clinic, DAB No.
1763 (2001); Everett Rehab. & Med. Ctr., DAB No. 1628, at 3 (1997) (holding in-person
hearing required where non-movant shows there are material facts in dispute that require
testimony); Thelma Walley, DAB No. 1367 (1992); see also New Millennium CMHC,
DAB CR672 (2000); New Life Plus Ctr., DAB CR700 (2000).

The material facts in this case are undisputed. Petitioner concedes that on August 14,
2010, he “was charged with crimes that related to services delivered under the Medi-Cal
program.” P. Br. at 1. Petitioner concedes that on November 3, 2010, he entered a plea
agreement pursuant to which he would plead guilty or no contest to a felony tax charge;
the prosecutor would allow him to withdraw his guilty plea to the felony tax charge at a
subsequent sentencing proceeding and he would be allowed to plead guilty to a
misdemeanor tax charge; he would be sentenced to three years’ probation; and he would
to make a voluntary payment of $60,000 to the California Healthcare Deposit Fund at the
time of execution of the plea agreement. P. Br. at 4; I.G. Ex. 5, at 1-3. Although not
mentioned by Petitioner in his summary of the terms of the plea agreement (P. Br. at 4),
Petitioner also agreed to a condition of probation that he not participate in the Medicaid,
Medicare, or Medi-Cal programs. I.G. Ex. 5, at 3. On November 3, 2010, Petitioner paid
$60,000 to the California Health Care Deposit Fund. I.G. Exs. 5, 6; P. Br. at 4. It is
undisputed that on November 16, 2010 Petitioner pled guilty to one felony count of filing
a false tax return and the court accepted his guilty plea. I.G. Exs. 5, 7, 8; P. Br. at 4.
During the plea colloquy, Petitioner agreed to a waiver under People v. Harvey, 25 Cal.
3d 754 (1979), which the criminal court judge explained meant that Petitioner would be
liable for restitution on all charged counts of the criminal complaint, not just the count to
which he pled guilty. I.G. Ex. 8, at 4. On November 18, 2011, the court permitted
Petitioner to withdraw his guilty plea to the felony tax charge and to enter a guilty plea to
one misdemeanor count of failure to file a tax return; the court accepted his plea; and the
court dismissed all other counts of the criminal complaint. Petitioner was sentenced to
three years probation and ordered not to participate in Medicare or Medi-Cal. I.G. Exs. 9,
10, 11, 12; P. Br. at 4.

Petitioner concedes he was “convicted” within the meaning of the Act for purposes of
exclusion. P. Br. at 6. Petitioner argues, however, that his convictions were not for an
offense “related to” the delivery of an item or service under Medicare or a state health
care program. Petitioner argues that summary judgment in favor of the I.G. is not
appropriate because his conviction is not program related as a matter of law and the
relationship between Petitioner’s conviction and Medi-Cal depends upon material facts
that are in dispute. P. Br. at 6-11. Contrary to Petitioner’s arguments, this case must be
resolved against Petitioner as a matter of law, because the offenses of which Petitioner
was convicted, the undisputed circumstances surrounding his conviction, and his waiver
of certain rights afforded under California law establish the nexus or connection between
Petitioner’s offenses and Medi-Cal and provides a basis for Petitioner’s exclusion.

Petitioner argues that summary judgment will not lie as there are material facts in dispute.
Specifically, Petitioner argues that the following material facts are in dispute: whether
Petitioner participated in a scheme to submit false claims to Medi-Cal; which facts,
charges, and allegations are the basis for the plea agreement; and whether the criminal
court ordered restitution. P. Br. at 12-16. Whether or not Petitioner participated in a
scheme to submit false claims to Medi-Cal is not a fact I need to find in this case. The
mixed question of law and fact that I must resolve is whether Petitioner was convicted of
an offense related to the delivery of an item or service under Medicare or a state health
care program, not whether Petitioner actually submitted false claims to Medi-Cal. I
resolve the legal issue based on the undisputed facts. There is also no issue that I need to
resolve regarding which facts, charges, and allegations are the basis for the plea
agreement. It is clear from the face of the plea agreement, and there seemed to be no
confusion on the part of Petitioner, that the agreement related to the charges then pending
against Petitioner. Petitioner has offered no evidence to suggest that his plea agreement
was intended to dispose of less than all the charges pending against him or that he was
subject to another criminal complaint or indictment. Regarding the issue of whether the
criminal court ordered restitution, I agree with Petitioner that there is no evidence that the
court ever ordered that Petitioner pay restitution as part of his sentence. Petitioner and
his criminal attorney both assert in their declarations that Petitioner’s payment of $60,000
to the California Health Care Deposit Fund was voluntary, which I accept as true for
summary judgment. P. Ex. 1; P. Ex. 2. However, whether or not Petitioner paid the
$60,000 without a court order for restitution has no impact upon my conclusion that
Petitioner was convicted of a program-related offense; that fact is not material.

The five-year period of exclusion is fixed by law and there are no material issues related
to the reasonableness of that period.

There is no genuine dispute as to any facts material to a determination of the issues
before me. Accordingly, summary judgment is appropriate.

3. The offenses for which Petitioner pled guilty were related to the
delivery of an item or service under Medicare or a state health care
program.

As explained above, the undisputed evidence shows that on April 14, 2010, Petitioner
was charged with grand theft, presenting false Medi-Cal claims, and receiving unlawful
Medi-Cal payments. I.G. Ex. 2, at 1-2. On November 3, 2010, Petitioner and the
Attorney General (A.G.) of California agreed that the A.G. would add one count of
felony failure to file a tax return to the criminal complaint, and Petitioner would plead
guilty to that charge. LLG. Ex. 5, at 1-2. As part of the plea agreement, the court would
withhold final judgment and Petitioner could later withdraw his guilty plea to the felony
charge and plead guilty to a misdemeanor offense of failure to file a tax return. The A.G.
would then move to dismiss the remaining charges. I.G. Ex. 5, at 1-2. Petitioner also
agreed to voluntarily pay $60,000 to the California Health Care Deposit Fund and not to
participate in the Medicare or Medi-Cal programs while on probation. I.G. Ex. 5, at 3.
On November 3, 2010, Petitioner paid $60,000 to the California Health Care Deposit
Fund. LG. Exs. 5, 6. Petitioner subsequently pled guilty on November 16, 2010, to
felony failure to file a tax return. 1.G. Ex. 7, 8. Petitioner stipulated to a factual basis for
the guilty plea, though the factual basis was never stated during the plea colloquy or in
the plea agreement. I.G. Ex. 8, at 4. Petitioner entered a Harvey waiver during the plea
colloquy. I.G. Ex. 8, at 4. On November 18, 2011, Petitioner withdrew his guilty plea.
The A.G. added one count of misdemeanor failure to file an income tax return, to which
Petitioner pled guilty. The court accepted Petitioner’s plea and sentenced Petitioner to
three years of probation. A condition of probation was that Petitioner not participate in
the Medicare and Medi-Cal programs during the period of probation. I.G. Exs. 9, 10, 11,
12.

Petitioner entered guilty pleas to two different offenses, a felony violation of Cal. Rev.

& Tax Code § 19705(a)(1), aiding and abetting the filing of a false tax return; and a
misdemeanor violation of Cal. Rev. & Tax Code § 19701(a). His guilty pleas to both the
felony and the misdemeanor were accepted. Pursuant to section 1128(i) of the Act, one is
convicted for purposes of exclusion when a plea of guilty has been accepted by a federal,
state, or a local court. Petitioner acknowledges that he was convicted within the meaning
of the Act. Hearing Request at 1; P. Br. at 6.

Petitioner opposes his exclusion on grounds that the offenses of which he was convicted
were not on their face crimes related to the delivery of a health care item or service under
Medicare or a state health care program.” However, the Board has long held that the

> The California statutes to which Petitioner pled guilty, Cal. Rev. & Tax Code
§§ 19701(a) and 19705(a)(1) provide:

19701. Any person who does any of the following is liable
for a penalty of not more than five thousand dollars ($5,000):

(a) With or without intent to evade any requirement of
Part 10 (commencing with Section 17001), Part 11

(Footnote continued next page.)
statutory terms of an offense do not control whether that offense is “related to” the
delivery of a health care item or service under Medicare or a state health care program for
purposes of an exclusion pursuant to section 1128(a)(1) of the Act. See, e.g., Dewayne
Franzen, DAB No. 1165 (1990) (inquiry is whether conviction is related to Medicaid
fraud, not whether the petitioner was convicted of Medicaid fraud). Rather, an ALJ must
examine whether there is a “common sense connection or nexus between the offense and
the delivery of an item or service under the program.” Scott D. Augustine, DAB No.
2043, at 5-6 (2006) (citations omitted). To determine whether there is such a nexus or
common-sense connection, “evidence as to the nature of an offense may be considered,”
including “facts upon which the conviction was predicated.” Jd. at 6-7. An ALJ may
also use extrinsic evidence to “[fill] in the circumstances surrounding the events which
formed the basis for the offense of which Petitioner was convicted.” Narendra M. Patel,
M.D., DAB No. 1736, at 7 (2000).

(Footnote continued.)

(commencing with Section 23001), or this part or any lawful
requirement of the Franchise Tax Board, repeatedly over a
period of two years or more, fails to file any return or to
supply any information required, or who, with or without that
intent, makes, renders, signs, or verifies any false or
fraudulent return or statement, or supplies any false or
fraudulent information, resulting in an estimated delinquent
tax liability of at least fifteen thousand dollars ($15,000).

* * *

19705. (a) Any person who does any of the following shall
be guilty of a felony and, upon conviction, shall be fined not
more than fifty thousand dollars ($50,000) or imprisoned
pursuant to subdivision (h) of Section 1170 of the Penal
Code, or both, together with the costs of investigation and
prosecution:

(1) Willfully makes and subscribes any return,
statement, or other document, that contains or is verified by a
written declaration that it is made under penalty of perjury,
and he or she does not believe to be true and correct as to
every material matter.
Petitioner cites Travers v. Shalala, 20 F.3d 993 (9th Cir. 1994) in support of an argument
that it is improper for an ALJ to look to the circumstances surrounding a conviction to
determine whether a conviction is program related. P. Br. at 6-7. Petitioner misreads
Travers, which focused on whether an individual had been “convicted” for purposes of a
mandatory exclusion, and whether there was a need for the IG. to conduct an evidentiary
hearing to relitigate the facts underlying the state court conviction. Jd. at 996-98. The
appellate panel that decided Travers discussed the mandatory nature of certain
exclusions, stating that the I.G. may not “delve into the facts surrounding the conviction”
once he determines that a program-related “conviction” actually exists because there is no
fact-finding in that determination. Id. at 999; see also Travers v. Sullivan, 801 F.Supp.
394, 403 (E.D. Wash. 1992). In short, the Travers panel recognized that Congress did
not intend that an exclusion proceeding under section 1128(a) of the Act be an
opportunity for an excluded individual or entity to collaterally attack an underlying
conviction for which exclusion is required. The Travers panel did not suggest that it is
inappropriate for the I.G., an ALJ, or the Board, to consider all the circumstances related
to the charges and underlying state court proceedings to determine whether an offense of
which one was convicted is actually program related. As the Board previously
recognized, it is necessary to look at the underlying state proceedings to “[fill] in the
circumstances” surrounding the conviction and, therefore, to avoid applying the I.G.’s
exclusion authority too narrowly. Patel, DAB No. 1736, at 7; see Kenneth M. Behr,
DAB No. 1997, at 7 (2005) (addressing Congress’s “intent that the mandatory exclusion
authority be used broadly to protect the integrity of covered programs”).

Petitioner’s reliance upon a recent district court case, Kabins v. Sebelius, 2012 WL
4498295 (D. Nev., Sept. 28, 2012), is also misplaced. Petitioner cites Kabins for the
proposition that the phrase found in various subsections of section 1128(a) of the Act —
“in connection with the delivery of health care” — limits the Secretary’s authority to
exclude to offenses involving the delivery of health care, not health care previously
delivered. As I understand Petitioner’s argument, Kabins establishes a rule that exclusion
may not be premised on an offense remotely related to the delivery of health care but may
only be for an offense directly related to the delivery of health care. Neither the Kabins
decision nor Petitioner explain the source of this limitation on the Secretary’s authority
other than a nonspecific reference to the statute’s fundamental purpose. Neither explains
how the perceived limitation on the Secretary’s authority to exclude is consistent with the
overarching Congressional intent that exclusion be used to protect the integrity of the
programs. It is important to recognize that the Kabins case was decided by an
unpublished order granting the motion of the plaintiff, Mark B. Kabins, M.D., for
summary judgment. The district court judge vacated the decision of the Secretary that
Dr. Kabins was excluded from participating in Medicare pursuant to section 1128(a)(3)
of the Act. The district judge in the Kabins case rejected the Secretary’s arguments that
her decision was entitled to deference. The district judge criticized the “nexus test” that
has been followed in exclusion cases for years, commenting that it may permit selective
enforcement and arbitrary results. In Travers, the Ninth Circuit recognized that the
10

Secretary’s decision that an individual’s criminal conviction was of a program related
offense is subject to review using the substantial evidence test rather than de novo
review. Travers, 20 F.3d at 998. However, the district judge in Kabins did not apply the
substantial evidence test but analyzed the case looking for the nexus between Dr. Kabins’
conviction and the delivery of a health care item or service. The district judge concluded
that Dr. Kabins’ offense was not one of those listed in section 1128(a)(3) that triggered
mandatory exclusion and that the offense was not program related. The unpublished
order that disposed of the Kabins case has doubtful precedential effect beyond that
specific case even in the district or circuit court where issued and the disposition should
be viewed as being limited to the facts of that case, particularly as it appears to be
inconsistent with the prior Ninth Circuit opinion in Travers. The district judge’s analysis
is not persuasive in this case.

Petitioner also argues that Congress intended that the Secretary’s authority to exclude be
limited to a “generic class of crimes” related to the delivery of items or services under
Medicare or Medicaid rather than the fact specific nexus test the Board has adopted. P.
Br. at 10-12. Petitioner cites no legislative history in support of his interpretation of
Congressional intent. Rather, Petitioner argues that both federal and state laws include a
class of crimes related to items and services delivered under Medicare and Medicaid and
cites that fact as evidence that Congress intended that exclusions be limited to
convictions for those crimes. Petitioner also relies upon his erroneous interpretation of
the decision in Travers to argue that the Ninth Circuit found it improper for the Secretary
to consider the facts and circumstances of an offense to determine whether or not it is
program related. Petitioner also asserts that the district court’s concern expressed in
Kabins that the Secretary’s nexus test poses a risk for arbitrary decision-making is well-
founded because exclusions were not imposed in an unrelated case involving
pharmaceutical companies. P. Br. at 12. Petitioner’s arguments are not persuasive. One
need look no further than the plain language of section 1128(i) of the Act to determine
that Congress intended to grant the Secretary broad, though not unfettered, discretion to
ensure that individuals not avoid exclusion through skillful plea negotiations. In section
1128(i), Congress adopted a broad definition of the term “conviction” that includes a
judgment of conviction whether or not on appeal or expunged; a finding of guilt; an
accepted plea of guilty or no contest; or a deferred adjudication or other arrangement by
which a judgment of conviction has been withheld. Act § 1128(i)(1)-(4). The broad
definition of conviction adopted by Congress is consistent with the Congressional goal of
protecting the programs from those who Congress intended that the Secretary exclude.
Considering the circumstances or facts underlying a conviction to determine whether or
not there is a nexus to the delivery of an item or service under Medicare or Medicaid is
also consistent with the Congressional purpose of protecting the programs by ensuring
that those who should be excluded do not avoid exclusion by skillful plea negotiations.

Here, the undisputed facts show that Petitioner’s convictions were related to the delivery
of an item or service under the Medi-Cal program because Petitioner’s convictions were
11

related to three other counts in the criminal complaint that alleged a scheme to defraud
Medi-Cal. Three undisputed material facts show the relationship between the charges of
which Petitioner was convicted and the Medi-Cal fraud charges for which Petitioner was
not convicted, and ergo the program-relatedness of Petitioner’s conviction. The three
undisputed facts that support the conclusion of law that Petitioner’s conviction was
program related are: (1) Petitioner’s Harvey waiver during his plea colloquy, which was
his consent to the criminal court’s consideration of all the charges for purposes of
restitution; (2) Petitioner’s agreement to a term of his plea agreement that he voluntarily
pay $60,000 to the California Health Care Deposit Fund; and (3) Petitioner’s agreement
not to participate in Medicare and Medi-Cal as a condition of probation.

Petitioner does not dispute that he knowingly and voluntarily entered a Harvey waiver
uring the plea hearing on November 16, 2010. I.G. Ex. 8, at 4. In Harvey, the trial
court accepted the defendant’s guilty plea to two counts of armed robbery, dismissed a
remaining third count that involved a separate armed robbery, and increased the
lefendant’s sentence based on facts related to the dismissed count. Harvey, 25 Cal. 3d. at
757. On appeal, the California Supreme Court determined that “it would be improper and
unfair to permit the sentencing court to consider any of the facts underlying the dismissed
count three for purposes of aggravating or enhancing defendant’s sentence.” Id. at 759.
The court explained that “[i]mplicit in . . . a plea bargain [such as the defendant’s] . . . is
the understanding (in the absence of any contrary agreement) that defendant will suffer
no adverse sentencing consequences by reason of the facts underlying, and solely
pertaining to, the dismissed count.” Jd.

[he California Penal Code has since been amended to reflect the decision in Harvey,
stating:

(a) A plea of guilty or nolo contendere to an accusatory
pleading charging a public offense ... which public offense
did not result in damage for which restitution may be ordered,
made on the condition that charges be dismissed for one or
more public offenses arising from the same or related course
of conduct by the defendant which did result in damage for
which restitution may be ordered, may specify the payment of
restitution by the defendant as a condition of the plea or any
probation granted pursuant thereto, so long as the plea is
freely and voluntarily made, there is factual basis for the plea,
and the plea and all conditions are approved by the court.

(b) If restitution is imposed which is attributable to a count
dismissed pursuant to a plea bargain, as described in this
section, the court shall obtain a waiver pursuant to People v.
12

Harvey (1979) 25 Cal. 3d 754 from the defendant as to the
dismissed count.

Cal. Penal Code § 1192.3. In cases where a Harvey waiver is necessary, the charge to
which the defendant pleads guilty may not have caused damage that would permit that
restitution be ordered. However, a court may order restitution based on damages
resulting from a dismissed charge, so long as the dismissed charge arises “from the same
or related course of conduct by the defendant” as the charge to which he pled guilty. Jd.
The court, therefore, must obtain a Harvey waiver in order to permit a valid restitution
order based on the dismissed charge.

In this case, Petitioner agreed to and the court accepted a Harvey waiver. By doing so,
Petitioner acknowledged, as a matter of law, that the offenses to which he pled guilty
(filing a false tax return and failure to file a tax return) were part of “the same or related
course of conduct” as the three other charges on the criminal complaint that resulted in
damage and were a basis for restitution to the State of California, including grand theft,
presenting false Medi-Cal claims, and receiving unlawful Medi-Cal payments.?
Accordingly, Petitioner’s convictions were presumptively under the California statute,
the result of the “same or related course of conduct” giving rise to the charges of
presenting false Medi-Cal claims and receiving unlawful Medi-Cal remuneration. It is
apparent from the plain language of the charges that the offenses of presenting false
Medi-Cal claims and receiving unlawful Medi-Cal remuneration are “related to” the
delivery of a health care item or service under Medi-Cal, a state health care program.
Berton Seigel, D.O., DAB No. 1467, at 5-6 (1994) (holding that false claims for payment
are “related to” the delivery of a health care item or service under Medicare or a state
health care program). Moreover, Petitioner need not admit to specific facts showing he
engaged in improper billing of the Medi-Cal program for there to exist a sufficient nexus
to the delivery of an item or service under the Medi-Cal program. Lyle Kai, R.Ph., DAB
No. 1979, at 7-8 (2005) (holding that exclusion was required based on a conviction for
selling misbranded commodities even though the excluded individual may have been
unaware of underlying Medicaid fraud). Petitioner’s acknowledgment through the

> Petitioner argues that the offenses for which he was convicted did not result in any loss
to the victim, which shows he did not admit to the facts alleging he defrauded Medi-Cal
of $306,462.25. P. Br. at 14. However, for a Harvey waiver the offense to which the
defendant pled guilty cannot cause any loss to the victim. Cal. Penal Code § 1192.3.
Rather, other charges that are dismissed must be the cause of any loss. Therefore, it was
a legal requirement under the California statute that the charge to which Petitioner pled
guilty did not result in loss to the victim so that Petitioner could make an effective
Harvey waiver and pay $60,000 as a term of his plea agreement.
13

Harvey waiver that the offenses to which he pled guilty were part of the same or related
course of conduct supporting the charges of submitting false Medi-Cal claims is a
sufficient nexus — a reasonable “common sense” connection — to the delivery of an item
or service under the Medi-Cal program.

Additionally, Petitioner voluntarily paid $60,000 to the California Health Care Fund as
part of his plea agreement with prosecutors. The only reasonable conclusion based on
Petitioner’s payment to the California Health Care Fund as part of the negotiated plea
agreement, which also resulted in the dismissal of charges alleging fraud against the
Medi-Cal program, is that the offenses to which Petitioner agreed to plead guilty were
related to the charges alleging that Petitioner’s conduct resulted in a loss to the Medi-Cal
program. As stated, Petitioner need not admit to defrauding Medi-Cal in order for his
conviction to be “related to” the delivery of an item or service under the Medi-Cal
program. Rather, his agreement to, among other things, pay the California Health Care
Fund in exchange for the dismissal of certain charges alleging Medi-Cal fraud is enough
to support a finding of a nexus between the conduct underlying his conviction and the
delivery of an item or service under the Medi-Cal program.

As noted above, Petitioner argues that the court did not order him to pay $60,000 in
restitution to the California Health Care Fund, but that Petitioner voluntarily made that
payment as part of the plea agreement. Petitioner goes so far as to imply that the $60,000
was a “gift” to the state health care fund. P. Br. at 15. Petitioner also asserts that “the
decisions involving court-ordered restitution are inapplicable” because the sentencing
court never actually ordered that Petitioner pay restitution. P. Br. at 15. Petitioner’s
claim that he provided a “gift” to the California Health Care Fund that happened to
coincide with his guilty plea, and was made part of his plea agreement, verges on
frivolity. Petitioner’s claim is a transparent attempt to create a dispute of fact where there
isnone. There is no other reasonable explanation for Petitioner’s payment at the time it
was made and in the manner it was made for a purpose other than to compensate the
California Health Care Fund for a loss that Petitioner caused. Petitioner agreed to make a
$60,000 payment to the California Health Care Fund in exchange for a conviction on a
misdemeanor offense. The agreement was accepted by the prosecutor and the court, and
Petitioner received the benefit of his bargain. Petitioner cannot relitigate factual issues
concerning his plea agreement in this forum. 42 C.F.R. § 1001.2007(d); Kai, DAB No.
1979, at 7. Therefore, the $60,000 payment to the California Health Care Fund is further
evidence that Petitioner’s conviction was “related to” the delivery of a health care item or
service under Medi-Cal.

Finally, a condition of probation ordered by the trial court was that Petitioner not
participate in the Medicare or Medi-Cal. The only reasonable conclusion based on
Petitioner’s inability to participate in the Medicare and Medi-Cal programs as part of his
probation is that the offenses for which Petitioner was convicted and sentenced were
related to those programs. Petitioner offers no other reasonable explanation for why the

14

state sought to prohibit his participation in Medicare or Medi-Cal or why he agreed to
such prohibition based solely upon his conviction for failing to file a tax return.
Petitioner argues that the prosecuting attorney “could have insisted on the [non-
participation] condition since his office was not likely to convict [Petitioner] for the
charges alleged” or that the condition was “‘a matter of office policy.” P. Br. at 16.
However, Petitioner’s speculation does not support an inference favorable for Petitioner.
The undisputed facts are that Petitioner agreed not to participate in the Medicare and
Medi-Cal programs after being charged with submitting false claims to Medi-Cal and he
also voluntarily paid $60,000 to the California Health Care Fund as part of a plea
agreement. Considering these facts together, it is apparent that the offense for which
Petitioner pled guilty was related to the delivery of an item or service under the Medi-Cal
program and the plea bargain reflects the nexus.

The following factors support my conclusion that the offense of which Petitioner was
convicted was program related: Petitioner’s Harvey waiver triggers a presumption that
the dismissed charges arise from the same or a closely related course of conduct as the
charge to which Petitioner pled guilty; the terms of Petitioner’s plea agreement required
the payment of $60,000 to the California Health Care Fund; and the terms of Petitioner’s
probation prohibited Petitioner’s participation in Medicare and Medi-Cal. Accordingly, I
conclude that Petitioner’s conviction for failing to file an income tax return was “related
to” the delivery of a health care item or service under Medicare or a state health care
program.

4. There is a basis to exclude Petitioner pursuant to section 1128(a)(1)
of the Act.

The I.G. must exclude an individual or entity under section 1128(a)(1) of the Act if the
individual has been convicted of an offense related to the delivery of a health care item or
service under Medicare or a state health care program. Petitioner does not dispute that he
was convicted within the meaning of section 1128(a)(1). I have concluded that
Petitioner’s convictions were related to the delivery of a health care item or service under
Medicare or a state health care program. Therefore, there is a factual and legal basis for
the I.G. to exclude Petitioner from participating in all federal health care programs. Act
§ 1128(a)(1).

5. Section 1128(c)(3)(B) of the Act establishes that five years is the
minimum period of exclusion imposed pursuant to section 1128(a)
of the Act.
15

6. Petitioner’s exclusion for five years is not unreasonable as a matter
of law.

Section 1128(c)(3)(B) of the Act provides that an exclusion imposed under section
1128(a) of the Act shall be for a minimum period of five years. Pursuant to 42 C.F.R.

§ 1001.102(b), the period of exclusion may be extended based on the presence of
specified aggravating factors. Only if the aggravating factors justify an exclusion of
longer than five years are mitigating factors considered as a basis for reducing the period
of exclusion to no less than five years. 42 C.F.R. § 1001.102(c). The LG. does not cite
any aggravating factors in this case and does not propose to exclude Petitioner for more
than the minimum period of five years.

I have concluded that Petitioner’s exclusion is required by section 1128(a)(1) of the Act.
Accordingly, the minimum exclusion period must be for five years, and that period is not
unreasonable as a matter of law.

II. Conclusion

For all of the foregoing reasons, Petitioner is excluded from participation in Medicare,
Medicaid, and all federal health care programs for the minimum statutory period of five
years effective October 18, 2012.

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Manchester Food Store, Inc.
d/b/a Krauszer’s Food Stores & Deli,

Respondent.

Docket No. C-13-474
FDA Docket No. FDA-2013-H-0237

Decision No. CR2753

Date: April 11, 2013

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an administrative complaint against
Respondent, Manchester Food Store, Inc. d/b/a Krauszer’s Food Stores & Deli,
that alleges facts and legal authority sufficient to justify the imposition of a civil
money penalty of $500. Respondent did not timely answer the complaint, nor did
Respondent request an extension of time within which to file an answer.
Therefore, I enter a default judgment against Respondent and assess a civil money
penalty of $500.

CTP began this case by serving a complaint on Respondent and filing a copy of
the complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. The complaint alleges that Respondent impermissibly sold
tobacco products to a minor on two separate occasions and failed to verify the age
of the purchaser through photographic identification on both of those occasions,
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 $500 for these violations.

On March 4, 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, the Administrative Law Judge could issue an initial
decision ordering Respondent to pay the full amount of the proposed penalty,
pursuant to 21 C.F.R. § 17.11.

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

Specifically, CTP alleges that:

e Respondent owns Krauszer’s Food Stores & Deli, an establishment that
sells tobacco products and is located at 305 Green Road, Manchester,
Connecticut 06042.

e On June 5, 2012, an FDA-commissioned inspector observed that
Respondent sold tobacco products to a minor and failed to verify the
purchaser’s age before the sale.

e “[O]n August 2, 2012, CTP issued a Warning Letter to Krauszer’s Food
Stores & Deli.” Complaint § 10. The letter informed Respondent of the
violations that the FDA-commissioned inspector had observed on June 5,
2012, and that the failure to correct violations could result in the imposition
of a civil money penalty or other regulatory action. Moreover, the letter
informed Respondent that the warning was not intended to provide an
exhaustive list of violations and that Respondent maintained the
responsibility to ensure that it complied with the law.

e Respondent provided a written response to CTP’s warning letter on August
8, 2012. Respondent informed CTP that the store would “train employees
to check photo ID before selling tobacco products to anyone under twenty-
seven, and that the establishment’s POS system would show a red flag
before selling tobacco products to anyone under twenty-seven.” Complaint

qi.

¢ On September 25, 2012, CTP acknowledged in writing that it had received
Respondent’s response and reminded Respondent that it had a continuing
duty to comply with the Act and implementing regulations.

e Pursuant to a two-part inspection conducted on October 23, and 31, 2012,
FDA-commissioned inspectors noted that “a person younger than 18 years
of age was able to purchase a package of Marlboro Gold Pack cigarettes on
October 23, 2012, at approximately 12:44 PM ET[,]” in violation of 21
C.F.R. § 1140.14(a). Complaint § 1(a).

e Further, the inspectors noted that “the minor’s identification was not
verified before the [October 23, 2012] sale,” in violation of 21 C.F.R. §
1140.14(b)(1). Complaint § 1(b).

e On November 2, 2012, CTP informed Respondent of the October 23, 2012,
inspector-documented violation through a Notice of Compliance Check
Inspection. The notice additionally informed Respondent “that other
potential violations of federal tobacco law may have been observed” and
that FDA may notify Respondent if CTP determined violations had
occurred. Complaint § 2.

Taking these facts as true, I must find pursuant to 21 C.F.R. § 17.11(a) that
Respondent is liable under the Act. The Act prohibits misbranding of a tobacco
product. 21 U.S.C. § 331(k). A tobacco product is misbranded if sold or
distributed in violation of regulations issued under section 906(d) of the Act,
codified at 21 U.S.C. § 387f(d). 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R § 1140.1(b).
Those regulations prohibit the sale of “cigarettes or smokeless tobacco to any
person younger than 18 years of age.” 21 C.F.R. § 1140.14(a). Those regulations
also require a retailer to “verify by means of photographic identification
containing the bearer’s date of birth that no person purchasing the product is
younger than 18 years of age[,]” 21 C.F.R. § 1140.14(b)(1), though “[n]o such
verification is required for any person over the age of 26[,]” 21 C.F.R. §
1140.14(b)(2).

Here, Respondent sold tobacco products to a minor on two separate occasions and
failed to verify the age of the purchaser on both of those occasions in violation of
the foregoing regulations. Respondent’s actions and omissions constitute
violations of law for which a civil money penalty is merited. The regulations
require the imposition of a civil money penalty in the amount that is either the
maximum provided for by law or the amount sought in the complaint, whichever
is smaller. 21 C.F.R. § 17.11(a). Respondent has committed four violations
within a 24-month period. The maximum penalty for the fourth violation
committed within a 24-month period is $2000. 21 C.F.R. § 17.2; Guidance for
FDA and Tobacco Retailers, Civil Money Penalties and No-Tobacco-Sale Orders
For Tobacco Retailers (Revised), November 2012, (available at
http://www.fda.gov/downloads/TobaccoProducts/GuidanceCompliance
RegulatoryInformation/UCM252955.pdf). CTP, through its Complaint, requested
a civil money penalty in the lesser amount of $500, which corresponds to the
maximum penalty that may be assessed for the third violation committed within a
24-month period. Therefore, I impose a civil money penalty in the amount of
$500.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

North End Boat Club,
Respondent.

Docket No. C-13-456

FDA Docket No. FDA-2013-H-0214
Decision No. CR2751

Date: April 9, 2013

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint
(Complaint) against Respondent, North End Boat Club, alleging facts and legal
authority sufficient to justify the imposition of a civil money penalty of $250.
Respondent did not timely answer the Complaint, nor did Respondent request an
extension of time within which to file an answer. Therefore, I enter a default
judgment against Respondent and order that Respondent pay a civil money penalty
in the amount of $250.

CTP began this case by serving a Complaint on Respondent and filing a copy of
the Complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. The Complaint alleges that Respondent used a vending
machine for tobacco products in a non-exempt facility and failed to ensure specific
tobacco-related items complied with applicable federal requirements, 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
$250.

On February 26, 2013, CTP served the Complaint on Respondent by United Parcel
Service (UPS), 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, the Administrative Law Judge could, pursuant to 21
C.F.R. § 17.11, issue an initial decision ordering Respondent to pay the full
amount of the proposed penalty. Respondent did not file an answer within the
time provided by regulation.

lam required to issue a default judgment 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 that the following facts alleged in the
Complaint are true. 21 C.F.R. § 17.11(a). Specifically:

e Respondent owns North End Boat Club, a business that sells tobacco
products and is located at 282 Merrimac Street, Newburyport,
Massachusetts 01950.

e¢ On December 2, 2011, an FDA-commissioned inspector observed
violations while inspecting Respondent’s establishment. These violations
included the following: Respondent sold cigarettes or smokeless tobacco in
a manner other than a direct, face-to-face exchange with its customer in a
facility that does not ensure that no person younger than 18 years of age is
present, or permitted to enter, at any time, in violation of 21 C.F.R. §§
1140.14(c) and 1140.16(c); and Respondent failed to remove or bring into
compliance all violative items that did not meet federal requirements in
violation of 21 C.F.R. § 1140.14(e).

e On January 19, 2012, CTP issued a Warning Letter to Respondent detailing
the inspector’s observations from December 2, 2011, and advising
Respondent that failure to correct the violations could result in the
imposition of a civil money penalty or other regulatory action by FDA.

e The FDA did not receive a response to the Warning Letter, but the delivery
records show that “Hawkes” received the Warning Letter on January 20,
2012.

e On July 20, 2012, FDA commissioned inspectors documented an additional
violation during a subsequent inspection of the establishment. Specifically,
the establishment contained a vending machine for tobacco products and
the bartender on duty at the time of the inspection admitted that the
establishment permitted minors to enter when accompanied by an adult.

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(c) and 1140.16(c), a retailer may sell cigarettes and smokeless
tobacco only in a direct, face-to-face exchange between the retailer and the
consumer unless the retailer ensures that no person younger than 18 years of age is
present, or permitted to enter, at any time. Under 21 C.F.R. § 1140.14(e), retailers
must ensure that all self-service displays, advertising, labeling, and other items,
that are located in the retailer’s establishment and that do not comply with the
requirements of 21 C.F.R. Part 1140, are removed or brought into compliance with
these requirements.

Here, Respondent sold cigarettes or smokeless tobacco at the establishment in a
manner other than a direct, face-to-face exchange on December 2, 2011. On that
date, Respondent’s establishment was not exempt from the requirement that
tobacco products be sold only via a direct, face-to-face exchange because minors
were permitted to enter the establishment if accompanied by an adult. Also on
December 2, 2011, Respondent had items in the establishment that did not comply
with applicable federal regulations, and these items were neither removed nor
brought into compliance with the requirements. On July 20, 2012, Respondent
had a vending machine for tobacco products at the establishment but continued to
allow minors to enter the establishment if accompanied by an adult. These actions
and omissions by Respondent constitute violations of law for which a civil money
penalty is merited. Therefore, I find that a civil money penalty of $250 is
permissible under 21 C.F.R. § 17.2 and enter a default judgment against
Respondent with an order that Respondent pay a civil money penalty in that
amount.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Jerry K. Pearson, M.D.,
(NPI: 1043252166),

Petitioner
v.
Centers for Medicare and Medicaid Services.
Docket No. C-12-1278
Decision No. CR2750
Date: April 8, 2013
DECISION

Wisconsin Physicians Service (WPS), an administrative contractor acting on behalf of the
Centers for Medicare and Medicaid Services (CMS), determined that Petitioner was not
eligible for enrollment in the Medicare program earlier than March 20, 2012, and that
Petitioner could not submit claims for payment of services performed or delivered earlier
than February 19, 2012. Petitioner appealed. For the reasons stated below, I affirm
WPS’s determination.

I. Case Background and Procedural History

On March 20, 2012, WPS received Petitioner’s Medicare enrollment application. CMS
Ex. 1, at 1; CMS Ex. 2, at 1. On June 11, 2012, WPS approved Petitioner’s Medicare
enrollment application with an effective date of March 20, 2012 and a retrospective
billing date of February 19, 2012. CMS Ex. 2.

By letter dated June 30, 2012, Mecosta Health Services (MHS), on behalf of Petitioner,
requested reconsideration of his effective date. CMS Ex. 3. In an August 21, 2012
reconsideration determination, WPS affirmed its initial decision concerning Petitioner’s
effective date and explained that Petitioner’s valid approvable application was received
on March 20, 2012, and that 30 days prior to receipt was February 19, 2012. CMS Ex. 5,
at 2. By letter dated September 6, 2012, Petitioner timely filed a request for a hearing
with the Departmental Appeals Board, Civil Remedies Division.

Following my October 5, 2012 Acknowledgment and Initial Docketing Order, CMS filed
seven exhibits (CMS Exs. 1-7), listed two witnesses, and provided declarations from
these witnesses. Petitioner filed nine exhibits (P. Exs. 1-9), listed four witnesses, and
provided declarations from two of its witnesses. I convened a prehearing conference by
telephone on February 12, 2013. During the conference, the parties agreed to submit this
case on the written briefs and I set a briefing schedule.

The parties filed their Initial Briefs on March 8, 2013. Along with Petitioner’s Initial
Brief, Petitioner attached a document labeled Exhibit A. Answer Briefs were timely
filed. CMS objects to P. Exs. 1, 2, 8, 9, and P. Ex. A. I rule on CMS’s objection below.
I decide this case based on the written record.

II. Discussion
A. Issue

Whether CMS had a legitimate basis for finding that March 20, 2012, was the effective
date for Petitioner’s Medicare enrollment and that Petitioner could retrospectively bill for
services rendered to Medicare beneficiaries only on or after February 19, 2012?

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

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

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

> A “supplier” furnishes services under Medicare, and the term supplier applies to
physicians and other nonphysician practitioners and facilities that are not included within
the definition of the phrase “provider of services.” 42 U.S.C. § 1395x(d).
1. WPS received Petitioner’s completed applications on March 20,
2012.

MHS, on behalf of Petitioner, sent in completed and signed enrollment and reassignment
application forms on March 16, 2012. P. Ex. 8, at 95. WPS acknowledged receiving
these application forms on March 20, 2012. CMS Ex. 1, at 1; CMS Ex. 2, at 1.
Therefore, the evidence of record supports the factual finding that WPS received
Petitioner’s enrollment and reassignment applications on March 20, 2012.

2. WPS properly concluded that Petitioner’s enrollment and
reassignment of Medicare benefits was effective on March 20, 2012,
with a retrospective billing period commencing on February 19,
2012.

WPS determined that Petitioner’s effective billing date or retrospective billing period was
February 19, 2012. CMS Ex. 2, at 1. WPS indicated that “[t]his effective billing date is
based on 30 days prior to the filing date [of March 20, 2012].” CMS Ex. 2, at 1; see also
CMS Ex. 5, at 1-2.

The Secretary’s regulations provide that the effective date of enrollment of physicians 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 . . . 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/supplier enrollment application that the Medicare contractor is able to process to
approval. 73 Fed. Reg. 69,726, 69,769 (Nov. 19, 2008); see also Caroline Lott Douglas,
PA, DAB CR2406, at 5-7 (2011), Rizwan Sadiq, M.D., DAB CR2401, at 5 (2011).
Because WPS received a complete, approvable application from Petitioner on March 20,
2012, WPS properly determined this date as Petitioner’s effective date.

The regulations applicable to this case permit limited retrospective billing for physician
services provided to Medicare beneficiaries for up to 30 days before the effective date of
enrollment. 42 C.F.R. § 424.521(a). Thus, WPS correctly determined, based on a March
20, 2012 date of filing, that the enrollment effective date is March 20, 2012, and
Petitioner could retrospectively bill for services provided to beneficiaries beginning on
February 19, 2012.

3. Petitioner’s presentation of new evidence is precluded by 42 C.F.R.
§§ 498.56(e) and 405.874(c).

Petitioner does not dispute that 42 C.F.R. § 424.520(d) means that the effective date for a
Medicare enrollment application is the date of filing. P. Br. at 5. However, Petitioner
asserts that he submitted a completed earlier Form CMS-855I and CMS-855R on
December 5, 2011. P. Br. at 4. Petitioner argues that the earlier submission date should
entitle him to an earlier enrollment.

Petitioner provided the following factual summary and chronology in support of his case.
MHS is wholly owned by Mecosta County Medical Center (MCMC). MHS also does
business as MHS Surgical Specialists. MHS Surgical Specialists employs Dr. Pearson.
On October 1, 2011, MHS and MHS Surgical Specialists submitted change-of-ownership
forms to CMS in order to bring those entities under the umbrella of MCMC. As a result
of the change of ownership all the physicians working for these entities, including Dr.
Pearson, had to file new reassignment forms, Form 855Rs. In October 2011, most of the
physicians submitted their Form 855Rs to CMS. However, Dr. Pearson was on vacation
and was unavailable to sign his reassignment form. Dr. Pearson signed the reassignment
form on November 8, 2011. P. Ex. 1. Terri Underhill, a coder at MHS, states in her
affidavit that she received Dr. Pearson’s reassignment form in late November or early
December 2011. Ms. Underhill does not explain the lengthy delay between the date Dr.
Pearson signed the reassignment form and her receipt of the form other than to state that
Dr. Pearson was located in another building and all correspondence was sent through
internal mail. Ms. Underhill states that she was “anxious” to receive the reassignment
form since it had not been sent with all the other physician’s forms in October of 2011.
Upon receipt of Dr. Pearson’s form, Ms. Underhill placed it in a certified mail envelope
and sent it to WPS by placing it in MHS’s internal mail system to be posted. She states
she posted another mailing to WPS also in late November or early December 2011.

Ms. Underhill attaches two certified mail receipts from WPS to her affidavit as evidence
of her mailings. P. Ex. 2; P. Ex. 8. She states that she is confident that Dr. Pearson’s
application was in one of those two mailings. P. Ex. 8; P. Ex. 9. As Petitioner states in
his brief, “WPS admittedly misplaced something from Dr. Pearson’s employer and there
are no documents missing other than Dr. Pearson’s original application.” P. Br. at 12
(emphasis in original).

Laurie Schafer, the Executive Director of MHS, states that CMS initially rejected almost
all the physician’s October 2011 reassignment forms because CMS did not recognize that
the reassignment forms were linked to the change of ownership forms. On March 16,
2012, the change of ownership was approved by CMS. Therefore, in March 2012, a
second set of applications were submitted for all the physicians, including Dr. Pearson.
CMS ultimately approved all the physicians, except Dr. Pearson, with effective dates of
October 1, 2011, the date of the original submissions. P. Ex. 9.

CMS provides two affidavits. Kim Richmond, the Manager of the Provider Enrollment
Department at WPS, states that the first application that WPS received from Dr. Pearson
was on March 20, 2011. Mr. Richmond asserts that there is no record of receiving an
earlier application from Dr. Pearson signed November 8, 2011. Mr. Richmond agrees
that two certified mail packages were received from MHS on December 5, 2011. It is
agreed by the parties that one package had documents not relevant to Petitioner. A
second certified mail package from MHS was received by the WPS mail room but was
never received by the WPS Provider Enrollment Department; its contents and final
whereabouts are unknown. CMS Ex. 6. Shawn Cook is the hearing officer who issued
the reconsideration decision related to Dr. Pearson’s application. Mr. Cook states that
that he received only a one-page letter requesting reconsideration and no other materials
connected with the reconsideration request. CMS Ex. 7. Therefore Petitioner’s
November 8, 2011 application, the certified mail receipt dated December 5, 2011, Ms.
Schafer affidavit, and Ms. Underhill’s affidavit were not provided to the Hearing Officer.

Section 498.56(e) precludes an ALJ from considering documentary evidence that had not
been presented to CMS prior to requesting a hearing, absent a showing of good cause for
submitting the new evidence for the first time at the ALJ-hearing level. Petitioner has
made a very weak attempt to demonstrate good cause for its failure to present such
evidence to CMS previously, which I find meritless.> Further, 42 C.F.R. 405.874(c)(5)
provides that the provider or supplier is precluded from introducing new evidence at
igher levels of the appeals process. Petitioner does not claim that it provided any new
documentary evidence with its reconsideration request even though it knew that the
effective date determination was based on the March 20, 2012 receipt of application date.
Indeed, the WPS hearing officer, Mr. Cook, affirmatively asserts that Petitioner did not
provide any new documentary evidence with its reconsideration request. It is clear that
the two certified mail receipts — and Petitioner’s argument based on them — are being
presented for the first time at the ALJ-hearing level.

Even if I were to consider the two certified mail receipts and the affidavits submitted by
Petitioner, this evidence merely shows that WPS received two packages from MHS on
December 5, 2011. One package definitely did not contain Dr. Pearson’s application.
The second package was received by the WPS mail room but it did not reach the WPS
Provider Enrollment Department. The contents of the second package are unknown. It is
only speculation that the second package contained Dr. Pearson’s approvable application
signed November 8, 2011. MHS itself has no independent record of what was in the
second package. Ms. Underhill explains that the purported initial application had Dr.
Pearson’s November 8, 2011 signature on it but that she did not receive it until late
November or early December. Ms. Underhill does not adequately explain the lengthy
delay in receiving the application from Dr. Pearson especially since she characterizes

In a weak attempt to establish good cause, Petitioner does argue that it was not aware
that the June 11, 2012 letter granting Dr. Pearson an effective date of March 20, 2012
was based on the receipt of Dr. Pearson’s application on March 20, 2012. Petitioner’s
argument is meritless because CMS’s June 11, 2012 letter states clearly in the first
sentence that “[w]e have approved your CMS 855 Medicare enrollment application,
which we received on 03/20/2012.” CMS Ex. 2.
herself as “anxious” to send it to WPS. The extended and unexplained delay between the
date of Dr. Pearson’s signature, November 8, 2011, and the date WPS received the
misplaced package on December 5, 2011, makes Petitioner’s claim doubtful in light of
the significant attenuation of any link between the two events. Additionally, I conclude
that the language used by Ms. Underhill in her affidavit is less than definite and is merely
speculative. Ms. Underhill concludes that she has “no reason to doubt” that Dr.
Pearson’s application was sent to WPS in late November or December 2011 and that
WPS’s receipt of two certified mail packages on December 5, 2011 “is consistent with
when I mailed Dr. Pearson’s application and I am confident that one of these two
certified mail envelopes contained” his application. P. Ex. 9, at 3. These statements by
Ms. Underhill are far from definite and do not show that WPS received an approvable
application from Dr. Pearson on December 5, 2011.

4. Tam unable to grant Petitioner’s request for an earlier effective date
based on equitable estoppel.

Petitioner essentially argues that WPS lost his application that was mailed in 2011. It is
undisputed that MHS sent two packages to WPS and the two packages were received by
the WPS mail room as evidenced by the certified mail receipts, however only one
package was received by the Provider Enrollment Department. Petitioner asserts that the
contents of the missing or lost package must contain his application.

Petitioner’s arguments amount to a claim of equitable estoppel. It is well-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. See, e.g., Armin
Aalami Harandi, DAB CR2682 (2013); Office of Personnel Mgmt. v. Richmond, 496
U.S. 414 (1990); Heckler 467 U.S. at 51; 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). Petitioner does not allege any affirmative misconduct here and I cannot grant
the relief that Petitioner requests.

II. Conclusion

WPS’s determination that Petitioner’s effective date of enrollment is March 20, 2012,
with a 30-day retrospective billing period commencing on February 19, 2012, is affirmed.

/s/
Richard J. Smith
Administrative law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.
Highland Marina LLC,
Respondent.

Docket No. C-13-459
FDA Docket No. FDA-2013-H-0216

Decision No. CR2749

Date: April 8, 2013

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint
(Complaint) against Respondent, Highland Marina LLC, alleging facts and legal
authority sufficient to justify the imposition of a civil money penalty of $500.
Respondent did not timely answer the Complaint, nor did Respondent request an
extension of time within which to file an Answer. Therefore, I enter a default
judgment against Respondent and assess a civil money penalty of $500.

CTP began this case by serving the Complaint on Respondent and filing a copy of
the Complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. The Complaint alleges that Respondent impermissibly sold
tobacco products to a minor and failed to verify the photo identification of a
purchaser of cigarettes or smokeless tobacco, thereby violating the Federal Food,
Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing
regulations, Cigarettes and Smokeless Tobacco, 21 C.F.R. Part 1140 (2012). CTP
seeks a civil money penalty of $500.
On February 26, 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 proposed penalty, file an answer, or request an extension of time within
which to file an Answer. CTP warned Respondent that if it failed to take one of
these actions within 30 days, an Administrative Law Judge could, pursuant to 21
C.F.R. § 17.11, issue an initial decision ordering Respondent to pay the full
amount of the proposed penalty.

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

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Highland Marina, an establishment that sells tobacco
products and is located at 7878 Highway 34, Granby, CO 80446.
Complaint § 2.

e On August 22, 2011, an FDA-commissioned inspector observed a violation
of 21 C.F.R. § 1140.14(a) at Respondent’s establishment when Respondent
or staff sold cigarettes or smokeless tobacco to a person under 18 years of
age. The inspector also observed a violation of 21 C.F.R. § 1140.14(b)(1)
at Respondent’s establishment when Respondent or staff failed to verify the
photo identification of a purchaser of cigarettes or smokeless tobacco in
order to ensure that no purchaser is less than 18 years of age. Complaint

49.

e¢ On October 20, 2011, CTP issued a Warning Letter to Respondent
regarding the inspector’s observations from August 22, 2011. The letter
explained that the observations constituted two violations of regulations
found at 21 C.F.R. § 1140.14(a) and 21 C.F.R. § 1140.14(b)(1). The letter
also stated that the named violations were not necessarily intended to be an
exhaustive list of all violations at the establishment and that failure to
correct the violations could result in the imposition of a civil money penalty
or other regulatory action by the FDA. Jd.
e Laurie Hedgecock, owner of Highland Marina LLC, responded to the
Warning Letter on Respondent’s behalf via a telephone call on October 27,
2011. Ms. Hedgecock “stated that she trains employees to ask for ID from
anyone purchasing tobacco products under 30 years of age and to refuse to
sell to anyone under 18 years of age,” and that she “would retrain the clerk
who sold the cigarettes to the minor.” Complaint § 10.

¢ On July 12, 2012, FDA commissioned inspectors observed additional
violations at Respondent’s establishment. Inspectors observed a violation
of 21 C.F.R. § 1140.14(a), when Respondent or staff sold a package of
“Marlboro Gold Pack” cigarettes to a person younger than 18 years of age
at approximately 11:20 AM MT. The inspectors also observed a violation
of 21 C.F.R. § 1140.14(b)(1), when Respondent or staff failed to verify the
photo identification of the purchaser during the sale. Complaint 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if distributed or offered for sale in any state in violation of regulations
issued under section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R §
1140.1(b). The Secretary issued the regulations at 21 C.F.R. Part 1140 under
section 906(d) of the Act. 21 U.S.C. § 387(a); 21 U.S.C. § 387f(d)(1); 75 Fed.
Reg. 13,229 (Mar. 10, 2010). The regulations prohibit the sale of cigarettes or
smokeless tobacco to any person younger than 18 years of age. 21 C.F.R.

§ 1140.14(a). The regulations also require retailers to verify the photo
identification, containing a date of birth, of purchasers of cigarettes or smokeless
tobacco in order to ensure that no purchaser is younger than 18 years of age. 21
C.F.R. § 1140.14(b)(1).

Taking the above alleged facts as true, Respondent had four violations of
regulations contained in 21 C.F.R. Part 1140 within a twelve month period.
Specifically, Respondent had two violations on August 22, 2011, and two
violations on July 12, 2012. Respondent’s actions violated regulations prohibiting
the sale of cigarettes or smokeless tobacco to individuals younger than 18 years of
age. 21 C.F.R. § 1140.14(a). Respondent’s actions likewise violated regulations
requiring retailers to verify the photo identification of purchasers of cigarettes or
smokeless tobacco in order to ensure that no purchaser is younger than 18 years of
age. 21 C.F.R. § 1140.14(b)(1). Therefore, Respondent’s actions constitute
violations of law for which a civil money penalty is merited.

The regulations require the imposition of a civil money penalty in the amount that
is either the maximum provided for by law or the amount sought in the Complaint,
whichever is smaller. 21 C.F.R. § 17.11(a)(1)-(2). The regulations currently
allow a maximum penalty of $2,000 for four violations within a twelve month
period. 21 C.F.R. § 17.2. CTP, however, has requested a fine in the amount of
$500. Therefore, I find that a civil money penalty of $500 is warranted and so
order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge