A1A Medical Supply, Inc., DAB CR5336 (2019)

DECISION

The Centers for Medicare & Medicaid Services (CMS) revoked the Medicare enrollment and billing privileges of A1A Medical Supply, Inc. (A1A or Petitioner) because A1A filed 11 Medicare claims over 11 months for durable medical equipment (DME) that A1A provided to Medicare beneficiaries in states where A1A had no state license to sell DME. A1A requested a hearing to dispute the revocation. Considering this length of time, the number of claims involved, and the fact that Petitioner violated state laws and Medicare's licensing requirements, I uphold the revocation under 42 C.F.R. § 424.535(a)(8)(ii) (i.e., engaging in a pattern or practice of filing claims that do not meet Medicare requirements).

I. Background and Procedure History

A1A was enrolled in the Medicare program as a supplier of Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS). 42 U.S.C. § 1395x(d), (u).

In a September 12, 2017 initial determination, CMS revoked Petitioner's Medicare enrollment and billing privileges, effective October 12, 2017, for the following reason:

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42 CFR § 424.535(a)(8)(ii) – Abuse of Billing Privileges

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Data analysis was conducted on claims billed by A1A Medical Supply for the dates of service between June 1, 2015 and April 15, 2016, revealing seven (7) claim submissions for six (6) beneficiaries. See Enclosure A. A1A Medical Supply provided DMEPOS for a period of ten (10) months without a [Nevada] license. The lack of the [Nevada] license is a violation of a basic enrollment requirement. Thus, the billing between June 1, 2015 and April 15, 2016 was abusive and improper.

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Data analysis was conducted on claims billed by A1A Medical Supply for dates of service between May 12, 2015 and March 16, 2016, revealing four (4) claim submissions for three (3) beneficiaries. See Enclosure B. A1A Medical Supply provided DMEPOS for a period of ten (10) months without a license. The lack of a Connecticut registration is a violation of a basic enrollment requirement. Thus, the billing between May 12, 2015 and March 16, 2016 was abusive and improper.

Petitioner (P.) Exhibit (Ex.) C at 1-2 (emphasis in original). CMS also barred Petitioner from re-enrollment in the Medicare program for three years. P. Ex. C. at 2.

Petitioner requested reconsideration. Petitioner stated that it "agrees that it should not have provided products to these beneficiaries without a license ...." P. Ex. D at 3. However, Petitioner asserted that it "unintentionally erred when it submitted the claims in question. It did not market nor did it intentionally violate state licensure requirements when it provided products to these beneficiaries." P. Ex. D at 2. Petitioner further argued that the "percentage of claims at issue ... represent about three percent of A1A's brace claims." P. Ex. D at 2. Also, Petitioner said that A1A has been enrolled in Medicare since 2006, and during that time, has had no adverse actions. P. Ex. D at 3. Finally, Petitioner stated that its improper actions occurred over a short period of time. P. Ex. D at 3.

In the reconsidered determination, a CMS hearing officer upheld the revocation. The hearing officer concluded that Petitioner's failure to have proper state licenses for selling DME in two states violated Medicare requirements for DMEPOS suppliers. The hearing

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officer also cited to the preamble to the final rule that established the original version of 42 C.F.R. § 424.535(a)(8) for the proposition that three or more non-compliant Medicare claims constitutes a pattern or practice of abuse of billing. The hearing officer further noted that various factors in 42 C.F.R. § 424.535(a)(8)(ii) were present to substantiate a pattern and practice of abusing billing. One of the enumerated factors involved the length of the conduct, which the hearing officer noticed was from May 12, 2015, to April 15, 2016. The hearing officer also considered that, in some of the claims, the physicians ordering the DME were located in different states from the beneficiaries, thus raising the inference that the physicians may not have been treating the beneficiaries. P. Ex. A.

Petitioner timely requested administrative law judge (ALJ) review, asserting similar arguments raised in the reconsideration request and stating that the hearing officer should not have categorically considered a pattern of abusive billing practices to exist simply because three or more improper claims had been filed. Petitioner also filed four exhibits with the hearing request (P. Exs. A-D). On March 9, 2018, Judge Leslie A. Weyn issued an Acknowledgement and Pre-hearing Order (Order). In compliance with the Order, CMS filed a prehearing brief and motion for summary judgment, along with three exhibits (CMS Exs. 1-3). Petitioner filed a prehearing brief and opposition to CMS's motion for summary judgment.

On November 20, 2018, I was assigned to hear and decide this case.

II. Decision on the Record

Because neither party objected to any of the proposed exhibits, I admit CMS Exs. 1-3 and P. Exs. A-D into the record. Pre-hearing Order ¶ 7; Civil Remedies Division Procedures (CRDP) § 14(e).

The Pre-hearing Order advised the parties that an in-person hearing would only be necessary if a party submitted the written direct testimony of a proposed witness and the opposing party requested an opportunity to cross-examine a witness. Order ¶¶ 8-10; CRDP § 16(b); see Vandalia Park, DAB No. 1940 (2004); Pac. Regency Arvin, DAB No. 1823 at 8 (2002) (holding that the use of written direct testimony for witnesses is permissible so long as the opposing party has the opportunity to cross-examine those witnesses). Neither party submitted any written direct testimony. Therefore, I do not need to hold a hearing in this case and I decide this case based on the written record. Order ¶ 11; CRDP § 19(b), (d).

III. Issue

Whether CMS had a legitimate basis for revoking Petitioner's Medicare enrollment and billing privileges under 42 C.F.R. § 424.535(a)(8)(ii).

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IV. Jurisdiction

I have jurisdiction to decide this case. 42 C.F.R. §§ 498.3(b)(17), 498.5(l)(2); see also 42 U.S.C. § 1395cc(j)(8).

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

My findings of fact and conclusions of law appear in bold and italics.

The Social Security Act (Act) authorizes the Secretary of Health and Human Services to establish regulations for enrolling providers and suppliers in the Medicare program, and for establishing requirements for DMEPOS suppliers to obtain a supplier number. 42 U.S.C. §§ 1395m(j)(1)(B), 1395cc(j)(1)(A). DMEPOS suppliers must enroll in the Medicare program and receive a billing/supplier number in order to obtain payment for services rendered to Medicare beneficiaries. 42 C.F.R. §§ 424.57, 424.505.

The regulations delegate to CMS the authority to revoke the enrollment and billing privileges of suppliers. 42 C.F.R. § 424.535. CMS or a Medicare contractor may revoke a supplier's Medicare enrollment and billing privileges for any of the reasons listed in 42 C.F.R. § 424.535(a). 42 C.F.R. §§ 405.800(b)(1), 424.535(a). If CMS revokes a supplier's Medicare enrollment and billing privileges, the revocation becomes effective 30 days after CMS or one of its contractors mails the revocation notice to the supplier, subject to some exceptions not applicable in this case. 42 C.F.R. §§ 405.800(b)(2), 424.535(g). After CMS revokes a supplier's enrollment and billing privileges, CMS bars the provider from reenrolling in the Medicare program for a minimum of one year, but no more than three years. 42 C.F.R. § 424.535(c).

1. From May 2015 to April 2016, A1A filed 11 Medicare claims for DME provided to beneficiaries in states where A1A was not licensed to sell DME.

Petitioner had been enrolled in the Medicare program as a DMEPOS supplier since 2006. CMS Ex. 2 at 5-6; P. Ex. D at 3. Petitioner is located in Maryland, licensed in Maryland, and provides DME to individuals in Maryland. CMS Ex. 1 at 34-35; CMS Ex. 2 at 5-6; P. Ex. D at 3.

Petitioner filed 11 Medicare claims for DME provided to beneficiaries some of which were located in Connecticut and others were located in Nevada. The earliest date of service was May 12, 2015, and the last date of service was April 15, 2016. P. Ex. C at 3-4; CMS Ex. 3. Petitioner is not licensed to sell DME in either Connecticut or Nevada. CMS Ex. 2 at 2-3. Petitioner does not dispute any of these facts. P. Ex. D at 2-3.

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2. There is a legitimate basis to revoke Petitioner's Medicare enrollment and billing privileges under 42 C.F.R. § 424.535(a)(8)(ii).

CMS revoked Petitioner's Medicare enrollment and billing privileges based on 42 C.F.R. § 424.535(a)(8)(ii). That provision allows CMS to revoke a provider that: 1) has filed claims that do not meet Medicare requirements, and 2) the filing of such claims constitute a "pattern or practice." The regulation states several factors that CMS considers "as appropriate or applicable" in order to determine if there is a "pattern or practice."

a) Petitioner, as a DMEPOS supplier, filed Medicare claims for which Petitioner was not eligible to receive payment because Petitioner was not properly licensed to sell the DME in the states in which the beneficiaries lived.

The Act prohibits payment to a DMEPOS supplier unless the DMEPOS supplier obtains a supplier number. 42 U.S.C. § 1395m(j)(1)(A). The Act provides certain standards for obtaining and maintaining the right to payment by a DMEPOS supplier, which includes: "comply[ing] with all applicable State and Federal licensure and regulatory requirements." 42 U.S.C. § 1395m(j)(1)(B)(I); 42 C.F.R. § 424.57(c)(1)(ii).

In the present case, Petitioner billed Medicare 11 times for DME sold to beneficiaries in states for which Petitioner did not have a license to do so. Both Nevada and Connecticut require entities to obtain a license to sell medical devices. See Nev. Rev. Stat. § 639.233; Conn. Gen. Stat. § 21a-70. However, Petitioner did not obtain the necessary licenses. Therefore, Petitioner filed claims with Medicare that did not meet Medicare requirements for payment to Petitioner.

b) Petitioner engaged in a pattern or practice of submitting claims for DME that were not in compliance with Medicare requirements under 42 C.F.R. § 424.535(a)(8)(ii).

In determining whether a provider has engaged in a pattern or practice of submitting claims that are not in compliance with Medicare requirements, CMS will consider the following factors "as appropriate or applicable":

(A) The percentage of submitted claims that were denied.

(B) The reason(s) for the claim denials.

(C) Whether the provider or supplier has any history of final adverse actions (as that term is defined under § 424.502) and the nature of any such actions.

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(D) The length of time over which the pattern has continued.

(E) How long the provider or supplier has been enrolled in Medicare.

(F) Any other information regarding the provider or supplier's specific circumstances that CMS deems relevant to its determination as to whether the provider or supplier has or has not engaged in the pattern or practice described in this paragraph.

42 C.F.R. § 424.535(a)(8)(ii).

In its reconsidered determination, CMS's hearing officer discussed three circumstances under 42 C.F.R. § 424.535(a)(8)(ii)(A)-(F) when determining that Petitioner engaged in a pattern or practice of improper Medicare billing. The hearing officer considered the reason why the submitted claims should have been denied, which was because Petitioner was not licensed to provide DME in the states where the beneficiaries lived. P. Ex. A at 4. The hearing officer also considered the length of time over which the pattern continued by noting that it commenced in May 2015 and ended in April 2016. P. Ex. A at 4-5. Finally, the hearing officer noted the specific circumstances involving these claims and CMS's concern that the physicians who ordered the DME, in some of the claims, lived in a different state than the beneficiaries. These facts caused CMS to believe that those physicians had never treated the beneficiaries in question. P. Ex. A at 5.

In response to the finding of a pattern or practice, Petitioner argued that CMS should not have concluded that there was a pattern or practice based on concluding that three or more improper claims were involved in this matter. Rather, Petitioner asserted that the six factors in the regulations needed to be considered and that some of those factors mitigated against a finding of a pattern and practice. Petitioner pointed out that Petitioner has been a Medicare supplier since 2006, and during that time Petitioner had no adverse actions. Further, Petitioner asserted that during the period at issue, Petitioner filed 300 claims for braces, but only 11 of the claims were improper. Petitioner argues that a three percent rate of improper claims is very low. P. Br. at 4-6.

As an initial matter, I agree with Petitioner that three instances of improperly billed claims do not automatically show a pattern or practice of abusive billing practices under § 424.535(a)(8)(ii). It is true that when the original language for § 424.535(a)(8) was promulgated, the preamble to the final rule indicated that CMS would not revoke a supplier based on accidental or isolated billing mistakes, but that evidence of three or more instances of improper billing would not be considered accidental when determining if abusive billing occurred. See 73 Fed. Reg. 36,448, 36,455 (June 27, 2008). However,

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when § 424.535(a)(8)(ii) was added, the original text of § 424.535(a)(8) became § 424.535(a)(8)(i). 79 Fed. Reg. 72,500, 72,513, 72,520 (Dec. 5, 2014). Therefore, the preamble language that states three or more improper claims relate to a finding of a pattern of abusive billing only directly applies to revocation under § 424.535(a)(8)(i).

Rather, for the present case, the determination as to whether there is a pattern or practice is made by considering certain enumerated factors. See 42 C.F.R. § 424.535(a)(8)(ii)(A-F). However, none of the factors are considered more important than another and all factors need not be considered.

We have decided not to give certain factors greater weight in our § 424.535(a)(8)(ii) determinations than other[s], for the importance of each factor may vary based on the particular situation. We have also decided not to establish a minimum percentage threshold for claim denials; as stated earlier, we need flexibility to address a variety of scenarios.

79 Fed. Reg. at 72,517.

Further, in the preamble to the December 2014 final rule, CMS repeatedly refers to "a careful and thorough consideration of the factors" outlined in the new regulation to determine whether a pattern or practice is present. Id. at 72,519. As opposed to a hard threshold, CMS indicated that it would judge cases based on the "specific facts." Id.It is instructive that "[t]he term 'abusive,' as used in the context of § 424.535(a)(8)(ii), is meant to capture a variety of situations in which a provider or supplier regularly and repeatedly submits non-compliant claims over a period of time." Id. at 72,515.

In the present matter, Petitioner submitted 11 improper claims over an 11 month period. The length of time involved in this conduct is sufficient to establish that the improper billing was made over a meaningful period of time. However, the period of time involved is sufficiently narrow so that 11 instances of improper billing occurred often enough to show a pattern of noncompliant billing, as opposed to "sporadic instances [where] providers or suppliers may submit claims in error." 79 Fed. Reg. at 72,520.

Petitioner asserted that it was enrolled in the Medicare program in 2006. P. Ex. D at 3; CMS Ex. 2 at 5-6. Having been enrolled for more than nine years before the improper billing started gave Petitioner sufficient time to learn that it must only provide DME to beneficiaries in states where it was licensed to do so.

Petitioner did not have a history of adverse actions prior to its revocation by CMS. CMS Ex. 1 at 16; CMS Ex. 2 at 16. Therefore, Petitioner had been enrolled for a significant period of time without an adverse action.

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The reason why Petitioner's claims were subject to denial was due to Petitioner's failure to have proper state licenses to provide DME to beneficiaries in Nevada and Connecticut. This factor is particularly detrimental because it involved Petitioner violating the laws of two states relating to providing medical equipment to Medicare beneficiaries. The percentage of submitted claims that were subject to denial is not readily discerned from the record in this case. Petitioner estimates it at three percent. P. Ex. D at 2. Even accepting this as true, that is a sufficiently high rate during the period in question to support a pattern.

Finally, CMS raised as a specific circumstance that some of the claims in question were ordered by physicians not located in the same state as the beneficiaries for whom the DME was ordered. CMS was concerned that this was evidence that the physicians were not treating the beneficiaries prior to ordering the DME. P. Ex. A at 5. CMS produced data from its records, and it appears that three of the claims involved physicians ordering DME for beneficiaries who live in a different state from the physician. CMS Ex. 3 at 4, 9. Petitioner did not dispute CMS's allegations. Therefore, I accept this as providing some additional support for establishing a pattern or practice of abusive billing. However, this support is minimal due to the number of claims and the lack of clarity as to whether the physicians did or did not treat the beneficiaries before ordering the DME.

Based on the factors above, Petitioner's improper billing in this case, which went on for nearly a year, cannot be dismissed as "isolated" errors. 79 Fed. Reg. at 72,520. Therefore, I conclude that CMS was warranted in concluding that a pattern or practice of abusive billing was present and that, therefore, CMS had a basis to revoke Petitioner's enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(8)(ii).

3. It is no defense to a revocation action for abuse of billing privileges under 42 C.F.R. § 424.535(a)(8)(ii) that the improper claims were due to inadvertent or unintentional errors.

Although Petitioner admits that it improperly billed the 11 claims in question, Petitioner has always asserted that they were not intentional and were just errors. P. Ex. D at 2-3. Even if I accepted Petitioner's position, it would not change the outcome of this case. The plain language of 42 C.F.R. § 424.535(a)(8)(ii) contains no reference to the culpability of the supplier or any requirement of fraudulent intent. Further, there is no knowledge requirement. 79 Fed. Reg. at 72,516, 72,520. As the preamble to the final rule stated:

Proposed new paragraph (a)(8)(ii) would permit revocation if we determine that the provider or supplier has a pattern or practice of billing for services that do not meet Medicare requirements such as, but not limited to, the requirement that the service be reasonable and necessary. We explained that a

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provider or supplier should be responsible for submitting valid claims at all times and that the provider or supplier's repeated failure to do so poses a risk to the Medicare Trust Funds. We note that the responsibility for submitting valid claims exists irrespective of whether the provider or supplier itself submits the claims or hires a billing agency to perform this function; in either case, the claims are submitted on behalf of the provider or supplier.

79 Fed. Reg. at 72,513. Petitioner was responsible under the regulations for ensuring that it submitted claims that fully complied with Medicare requirements.

VI. Conclusion

For the foregoing reasons, I affirm CMS's revocation of Petitioner's Medicare enrollment and billing privileges under 42 C.F.R. § 424.535(a)(8)(ii).