Stephen R. Toothaker, M.D., and PCRMC Medical Group, Inc., DAB CR5577 (2020)

DECISION

In this troublesome case, I consider what it means for a Medicare contractor to "close" a supplier's enrollment application.

Petitioner, Stephen R. Toothaker, M.D., is a physician practicing in Missouri, and Petitioner, PCRMC Medical Group, Inc., is the medical practice that employs him.  Petitioner Toothaker applied to reassign his Medicare billing privileges to PCRMC.  The Medicare contractor granted the application with an effective date of May 11, 2017.  Complaining that they filed earlier applications that should have been processed to completion, Petitioners challenge that effective date.

Because Petitioners filed their subsequently-approved enrollment application on May 11, 2017, I find that May 11 is the correct effective date for the enrollment.  I have no authority to review the contractor's decisions to "close" Petitioners' earlier applications.

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Background

In a letter dated May 19, 2017, the Medicare contractor, Wisconsin Physicians Service, advised Petitioners that it approved Petitioner Toothaker's application to reassign his Medicare payments to PCRMC, effective April 12, 2017.  CMS Ex. 5.  In fact, as explained below, the contractor was granting Petitioners a billing date of April 12; the effective date of Petitioners' enrollment was May 11, 2017 (see discussion below).

Petitioners sought reconsideration to challenge that effective date, complaining (among other issues) that their earlier applications had been closed without notice.  CMS Ex. 4.  In a reconsidered determination, dated July 10, 2017, the contractor denied Petitioners an earlier effective date.  CMS Ex. 3.

Petitioners requested review by an administrative law judge.

Although CMS has moved for summary judgment, I find that this matter may be decided on the written record, without considering whether the standards for summary judgment are satisfied.  The initial order in this case instructed the parties to list any proposed witnesses and to submit their written direct testimony.  Acknowledgment and Prehearing Order at 3, 5 (¶¶ 4, 8) (September 20, 2017).  The order also directed the parties to indicate which, if any, of the opposing side's witnesses the party wished to cross-examine and explained that an in-person hearing would be needed only if a party wishes to cross-examine the opposing side's witness.  Id. at 5 (¶¶ 9, 10).  Neither party lists any witnesses.  Although Petitioner submits a written declaration from one individual, CMS has not asked to cross-examine him.  An in-person hearing would therefore serve no purpose, and I may decide this case based on the written record without considering whether the standards for summary judgment are met.

With its brief (CMS Br.), CMS submits ten exhibits (CMS Exs. 1-10).  Petitioners submit a brief (P. Br.) with three exhibits (P. Exs. 1-3).  In the absence of any objections, I admit into evidence CMS Exs. 1-10 and P. Exs. 1-3.

Discussion

1. Because Petitioners filed their subsequently-approved Medicare enrollment application on May 11, 2017, that is the correct effective date for reassignment of Petitioner Toothaker's billing privileges.  42 C.F.R. § 424.520(d).

Enrollment.  Petitioners participate in the Medicare program as "suppliers" of services.  Social Security Act § 1861(d); 42 C.F.R. § 498.2.  To receive Medicare payments for the services furnished to program beneficiaries, a prospective supplier must enroll in the program.  42 C.F.R. § 424.505.  "Enrollment" is the process by which CMS and its

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contractors:  1) identify the prospective supplier; 2) validate the supplier's eligibility to provide items or services to Medicare beneficiaries; 3) identify and confirm a supplier's owners and practice location; and 4) grant the supplier Medicare billing privileges.  42 C.F.R. § 424.502.

To enroll, a prospective supplier must complete and submit an enrollment application.  42 C.F.R. §§ 424.510(d)(1), 424.515(a).  A physician already enrolled in the program may reassign his Medicare payments to an employer and does so by filling out an enrollment application (CMS 855R).  42 C.F.R. §§ 424.80(b), 424.502.

An enrollment application is either a CMS-approved paper application or an electronic process approved by the Office of Management and Budget (PECOS).  42 C.F.R. § 424.502.  When CMS determines that a prospective supplier meets the applicable enrollment requirements, it grants Medicare billing privileges, which means that the supplier can submit claims and receive payments from Medicare for covered services provided to program beneficiaries.  The effective date for its billing privileges "is the later of the date of filing" a subsequently-approved enrollment application 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 Medicare contractors have created much confusion because they are inclined to conflate the effective date with the retrospective billing date, as the contractor did in this case.  See CMS Exs. 3, 5.  The reconsidered determination acknowledges that the contractor received Petitioners' application on May 11, 2017, but it nevertheless mischaracterizes the "effective date" as April 12, 2017.  CMS Ex. 3 at 2.  In fact, April 12 is the retrospective billing date.  The distinction is important; I have the authority to review "the effective date of . . . supplier approval."  42 C.F.R. § 498.3(b)(15).  But nothing in the regulations gives me the authority to review CMS's determinations regarding retrospective billing.

Here, on May 11, 2017, the Medicare contractor received Petitioners' enrollment application, which it subsequently approved.  CMS Exs. 5, 6.1  Thus, pursuant to section 424.520(d), the date Petitioners filed the subsequently-approved enrollment application – May 11, 2017 – is the correct effective date of enrollment.

Rejecting or denying an enrollment application.  CMS may reject an incomplete enrollment application if the prospective supplier "fails to furnish complete enrollment

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information on the . . . supplier enrollment application within 30 calendar days from the date of the contractor request for the missing information."  42 C.F.R. § 424.525(a) (emphasis added).  However, so long as the contractor continues to process that application to a decision, the effective date will relate back to the date of its filing.  Karthik Ramaswamy, M.D., DAB No. 2563 at 5 (2014) (en banc), aff'd, Ramaswamy v. Burwell, 83 F. Supp. 3d 846 (E.D. Mo. 2015).  I have no authority to review a rejected application.  42 C.F.R. § 424.525(d); see Guarav Lakhanpal, MD, DAB No. 2951 at 7 (2019); Ark. Health Grp., DAB No. 2929 at 7-9 (2019), and cases cited therein.

Petitioners' "closed" applications.  Petitioner Toothaker was enrolled in the Medicare program and sought to reassign his billing privileges to PCRMC.  On October 31, 2016, he and PCRMC filed the (then) appropriate enrollment application (CMS 855R).  CMS Ex. 1.  In a letter dated November 2, 2016, the contractor acknowledged receipt but advised Petitioners that it was "closing" the application because they filed it more than 60 days prior to the effective date listed (January 1, 2017).  CMS Ex. 1.  According to CMS, the contractor emailed the notice to the address provided in the application.  CMS Ex. 2 at 2; CMS Ex. 10; CMS Br. at 4.  Petitioners deny receiving the notice.  P. Ex. 1 at 1 (Mills Decl. ¶ 5); P. Br. at 2.2  They first learned that the application had been closed when their enrollment specialist affirmatively checked on its status.  P. Ex. 1 at 2 (Mills Decl. ¶ 7).

On March 20, 2017, Petitioners submitted a second enrollment application with an urgent letter asking for a January 1, 2017 effective date and complaining that they received no notice that their earlier application had been closed.  CMS Ex. 8.  The contractor responded in a letter dated March 22, 2017, advising Petitioners that it was closing the application because the version submitted (855R, version 11/12) "was not acceptable as of December 31, 2016."  The letter advised Petitioners to submit their application on the new version, 04/16.  CMS Ex. 7 at 1.  According to CMS, the contractor again emailed the notice to the address listed in the application.  CMS Br. at 4.  Petitioner denies

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receiving the notice.  P. Ex. 1 at 2 (Mills Decl. ¶ 9); P. Br. at 3.3  Petitioners learned that the application had been closed when their enrollment specialist affirmatively checked on its status.  P. Ex. 1 at 2 (Mills Decl. ¶ 10).

Upon learning that their March 20 application had been closed, Petitioners submitted a third application on May 11, 2017.  That application was subsequently approved.

Petitioners ask that I consider valid their October 31, 2016 application and change their effective date of enrollment to January 1, 2017.  They argue that their October 31, 2016 application could have been processed to completion, and, before the contractor could reject it, they were entitled to 30 days in which to submit a corrected application.  Without commenting on the contractor's failing to give Petitioners 30 calendar days in which to correct the application, CMS also characterizes, as "rejections," the contractor's closing Petitioners' October 2016 and March 2017 applications.  Citing 42 C.F.R. § 424.525(d), CMS then argues that I have no authority to review a rejected application.

But the contractor here did not reject the earlier applications.  An application is rejected if the prospective supplier fails to furnish complete information "within 30 calendar days from the date of the contractor request for the missing information" or, if the prospective supplier fails to submit missing documentation "within 30 calendar days of submitting the enrollment application."  42 C.F.R. § 424.525(a).  Here, the contractor offered Petitioners no opportunity to complete their applications.

The contractor's notice letters indicate that it "closed" the first two applications, an action that is not authorized by statute or regulation or even the manual provision cited in the reconsidered determination and CMS's brief:  Medicare Program Integrity Manual, Ch. 15, § 15.8.1.  Instead, the manual directs contractors to "return" an enrollment application that it receives more than 60 days prior to the effective date listed on the application and to "return" an application submitted on an outdated form.  Id.

Assuming the contractor "returned" the prior applications, its actions were not authorized by statute or regulation, but by a manual provision.  However, manual provisions are not subject to public notice and comment and, as the Departmental Appeals Board has opined in at least one case, may run afoul of the Act.  In Tri-Valley Family Medicine, Inc., DAB No. 2358 (2010), the Board held that returning an application is not a legally authorized method for disposing of an enrollment application.  It reasoned that section 1866(j) of the Act directs the Secretary "to establish by regulation the procedures for actions on applications, rather than relying merely on instruction manuals."  Tri-Valley, DAB No. 2358 at 9.  The regulations allow CMS to reject or deny an enrollment application, but

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not to return (or close) it.  Tri-Valley, DAB No. 2358 at 9; 42 C.F.R. §§ 424.525 and 424.530.

Judge Anderson recently noted that section 1871 of the Act further supports the Board's reluctance to give legal effect to sub-regulatory guidance that directly and negatively affects a supplier's effective date for enrollment.  Martina Sheftic, M.D., DAB CR5563 at 6 (2020).  Section 1871 provides:

No rule, requirement, or other statement of policy (other than a national coverage determination) that establishes or changes a substantive legal standard governing the scope of benefits, the payment for services, or the eligibility of individuals, entities or organizations to furnish or receive services or benefits under this title shall take effect unless it is promulgated by the Secretary by regulation. . . .

Act § 1871(a)(2); see Azar v. Allina, 139 S.Ct. 1804, 1810-14 (2019) (rejecting agency efforts to change reimbursement rules through sub-regulatory guidance).  CMS's policy of returning (or closing) enrollment applications must be viewed as a "substantive legal standard" that affects payment for services and the supplier's eligibility to furnish services and is, at best, suspect.

Based on the Board's reasoning in Tri-Valley, Petitioners' earlier applications might, arguably, be reopened.  However, Tri-Valley represented a bit of a departure.  The case involved an earlier application that, in the Board's view, "could have been processed to approval" had the contractor "properly requested" missing information.  Tri-Valley DAB No. 2358 at 1.  Even though that earlier application was rejected (a determination that is not reviewable), and the Board was reviewing the effective date of a subsequent application, the review panel in Tri-Valley accepted, as the effective date, the filing date of the original application.

Since Tri-Valley was issued, the Board has rejected supplier requests for review of prior applications under the guise of challenging the effective dates of their subsequently-approved applications.  Ramaswamy, DAB No. 2563.

We will not determine de novo that an application could have been processed to approval in the face of the contractor's actual determination to deny the application because it was not approvable.  To do so would improperly use the scope of review to revisit a legally binding and administratively final determination.

Ramaswamy, DAB 2563 at 9 (emphasis in original).  In Ramaswamy, the Board nevertheless agreed with the Tri-Valley conclusion that "while the contractor may require

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and request additional information to complete the application, the effective date will relate back to the date of filing so long as that application continues to be processed to a decision on whether to approve it."  Ramaswamy, DAB No. 2563 at 5 (emphasis in original).4

Here, however, I cannot conclude that Petitioners' earlier applications could have been processed to approval.  The application that was finally approved was submitted much later and was not even on the same form.  Because they were not processed to approval, I cannot base an effective date on either of those applications.

Petitioners submitted their subsequently-approved enrollment application on May 11, 2017, so May 11, 2017, is the correct effective date for the enrollment.

I have no authority to review the contractor's decisions to "close" Petitioners' earlier applications.5

Conclusion

Because Petitioners filed their subsequently-approved enrollment application on May 11, 2017, that is the correct date for reassignment of Petitioner Toothaker's billing privileges to PCRMC.

• 1. Medicare contractors stamp paper applications with a "Julian date stamp," which counts the days of the year consecutively.  Here, the first four digits stamped on the application indicate the year – 2017.  The next three digits indicate the date – the 131st day of 2017, or May 11, 2017.  CMS Ex. 6.
• 2. I agree that CMS's evidence of service is weak.  It does not include a copy of the email purportedly sent nor a statement from anyone claiming to have sent it.  Instead, CMS relies on the notice letter which is addressed to a street address, but was apparently not mailed (CMS Ex. 1), and what it characterizes as a "workflow screenshot" with multiple entries dated November 2.  CMS Ex. 10.  The screenshot identifies Petitioners' application; it mentions "create letter," "Email letter selected," and gives a number "selected to email the letter."  Based on this evidence, I cannot be sure that CMS sent the notice or that Petitioner received it.  Moreover, Petitioners present a written declaration from their Medicare enrollment specialist, to whom the email was purportedly sent.  P. Ex. 1 (Mills Decl.).  Inasmuch as he has demonstrated considerable diligence throughout the enrollment process, I find credible his assertion that he did not receive the email.  As discussed below, however, the question is irrelevant because my authority here is so limited.
• 3. For this notice, CMS submits no evidence of service.
• 4. Similarly, in Sheftic, based on facts very different from those presented here, Judge Anderson determined that the prospective supplier's initial application was processed to completion, and the date she filed it was her effective date of enrollment.  There, shortly after submitting her application, the prospective supplier noticed a small but significant typo on the first page (in error, she had written a 2019 effective date instead of a 2018 effective date).  After consulting with a representative of the CMS contractor, she immediately submitted a correction.  Judge Anderson interpreted the contractor's acceptance of the corrected information as a continued processing of the initial application rather than the processing of a new application.
• 5. Although I lack the authority to review the contractor's actions, I am not the final authority on this, and a federal court may find that it has the authority to review the application "closings," particularly if it determines that they violate sections 1866 and 1871 of the Act.  Moreover, courts have been known to take a dim view of an agency's failing to provide adequate notice of its actions, and, given the problems associated with service here, CMS may not like the result of a federal court action.