New South Development Corporation, DAB CR5488 (2019)

DECISION

The Medicare enrollment of Petitioner, New South Development Corporation, is denied pursuant to 42 C.F.R. § 424.530(a)(1), as required by 42 C.F.R. § 424.518(d)(2)(i) based on a violation of 42 C.F.R. § 424.518(d)(1).1

I. Procedural History and Jurisdiction

National Government Services, a Medicare administrative contractor (MAC) for the Centers for Medicare & Medicaid Services (CMS), notified Petitioner by letter dated May 14, 2019, that Petitioner’s application to enroll in Medicare as a home health agency (HHA) was denied. The MAC stated that the denial was authorized by 42 C.F.R. § 424.530(a)(1) because Petitioner failed to comply with the requirement of 42 C.F.R. § 424.518(d) and submit fingerprints for S.W., an individual with a five percent or greater ownership interest in Petitioner. The MAC explained that Petitioner, which seeks to enroll as an HHA, is subject to “screen[ing] at the ‘high’ risk level upon initial

Page 2

enrollment” and a fingerprint-based background check is required for all individuals with a five percent or greater ownership interest in Petitioner pursuant to 42 C.F.R. § 424.518(d).  The MAC specifically advised Petitioner that the submission of S.W.’s fingerprints was required.  The MAC advised Petitioner that it could file a corrective action plan (CAP) or a request for reconsideration.  CMS Exhibit (Ex.) 1 at 17-19.

Petitioner submitted a reconsideration request dated May 21, 2019, that CMS treated as a combined CAP and reconsideration request.  CMS Ex. 1 at 1, 20-21.  On July 29, 2019, CMS issued a reconsidered determination rejecting Petitioner’s CAP and upholding the denial of Petitioner’s enrollment pursuant to 42 C.F.R. § 424.530(a)(1) based on a violation of 42 C.F.R. § 424.518(d).  CMS Ex. 1 at 1-3.

On August 11, 2019, Petitioner filed a request for hearing (RFH) before an administrative law judge (ALJ).  On August 16, 2019, the case was assigned to me for hearing and decision, and I issued an Acknowledgment and Prehearing Order (Prehearing Order).

On September 16, 2019, CMS filed a motion for summary judgment and prehearing brief with CMS Ex. 1.  On October 22, 2019, Petitioner filed two copies of its request for hearing that I treat as Petitioner’s response in opposition to the CMS motion for summary judgment (P. Br.).  CMS waived reply.  Petitioner has not objected to my consideration of CMS Ex. 1 and it is admitted as evidence.

II. Discussion

A. Applicable Law

Sections 1811 through 1821 of the Social Security Act (the Act) (42 U.S.C. §§ 1395c‑1395i-5) establish the hospital insurance benefits program for the aged and disabled known as Medicare Part A. Section 1831 of the Act (42 U.S.C. § 1395j) establishes the supplementary medical insurance benefits program for the aged and disabled known as Medicare Part B.2 Administration of both the Part A and B programs is through the MACs. Act §§ 1816(a), 1842(a) (42 U.S.C. §§ 1395h(a), 1395u(a)). Payment under the programs for services rendered to Medicare-eligible beneficiaries may

Page 3

only be made to eligible providers of services and suppliers.3 Act §§ 1815, 1817, 1834(j)(1), 1835(a), 1842(h)(1) (42 U.S.C. §§ 1395g, 1395i, 1395m(j)(1), 1395n(a), 1395u(h)(1)).  Petitioner, an HHA, is a provider.  CMS Ex. 1 at 6.

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

Pursuant to 42 C.F.R. § 424.505, a provider must be enrolled in the Medicare program and be issued a billing number to have billing privileges and be eligible to receive payment for services rendered to a Medicare-eligible beneficiary.  The Act sets forth requirements for HHAs participating in the Medicare and Medicaid programs and authorizes the Secretary to promulgate regulations implementing the statutory provisions. Act §§ 1861(m), (o), and 1891 (42 U.S.C. §§ 1395x(m), (o), and 1395bbb). The Secretary requires by regulation that the MACs “screen all initial applications” for enrollment in Medicare “based on a CMS assessment of risk and assignment to a level of ‘limited,’ ‘moderate,’ or ‘high.’”  42 C.F.R. § 424.518.  Newly enrolling HHAs are deemed to be high risk and that requires the MACs to apply more stringent screening requirements.  42 C.F.R. § 424.518(c)(1)(i), (c)(2).  New HHAs are subject to the same screening requirements that apply to providers and suppliers that CMS assesses are in the limited and moderate risk categories.  Additionally, the MACs must require each prospective HHA to submit a complete set of fingerprints of all individuals who have a five percent or greater direct or indirect ownership interest in the HHA.  42 C.F.R. § 424.518(c)(2).  Fingerprints for people with a five-percent or greater ownership interest must be submitted with the Medicare enrollment application or within 30 days of a MAC’s request.  42 C.F.R. § 424.518(d)(1).  Medicare enrollment and billing privileges are denied or revoked, if the HHA does not submit required fingerprints. 42 C.F.R. § 424.518(d)(2)(i).

Page 4

The Secretary has delegated the authority to accept or deny enrollment applications to CMS.  Pursuant to the Secretary’s regulations, CMS may deny a provider’s or supplier’s enrollment application for any of the reasons set out in 42 C.F.R. § 424.530(a). In this case, the MAC denied Petitioner’s application under 42 C.F.R. § 424.530(a)(1) because the fingerprints of S.W., who had more than a five percent ownership interest in Petitioner, were not submitted within 30 days in accordance with the MAC’s instructions in violation of 42 C.F.R. § 424.518(d).    

A prospective provider whose enrollment application is denied may request reconsideration and review as provided by 42 C.F.R. pt. 498.  42 C.F.R. § 424.545(a). A prospective provider submits a written request for reconsideration to CMS or its contractor.  42 C.F.R. § 498.22(a), (b).  CMS or its contractor must give notice of its reconsidered determination to the prospective provider, giving the reasons for its determination, specifying the conditions or requirements the prospective provider failed to meet, and advising of the right to an ALJ hearing.  42 C.F.R. § 498.25(a).  If the decision on reconsideration is unfavorable to the prospective provider, the prospective provider has the right to request a hearing by an ALJ and further review by the Departmental Appeals Board (the Board). Act § 1866(j)(8) (42 U.S.C. § 1395cc(j)(8)); 42 C.F.R. §§ 424.545, 498.3(b)(17), 498.5(l). A hearing on the record, also known as an oral hearing, is required under the Act.  Crestview Parke Care Ctr. v. Thompson, 373 F.3d 743, 748-51 (6th Cir. 2004).  The prospective provider bears the burden to demonstrate that it meets enrollment requirements with documents and records.  42 C.F.R. § 424.545(c).

B. Issues

Whether summary judgment is appropriate; and

Whether there is a basis to deny Petitioner’s application to enroll in the Medicare program.

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

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

1. Summary judgment is appropriate in this case.

A provider or supplier denied enrollment in Medicare or whose enrollment has been revoked has a right to a hearing and judicial review pursuant to section 1866(h)(1) and (j) of the Act (42 U.S.C. § 1395cc(h)(1) and (j)) and 42 C.F.R. §§ 498.3(b)(1), (5), (6), (8), (15), (17), 498.5. A hearing on the record, also known as an oral hearing, is required under the Act.  Act §§ 205(b), 1866(h)(1), (j)(8) (42 U.S.C. §§ 405(b), 1395cc(h)(1),

Page 5

(j)(8)); Crestview, 373 F.3d at 748-51.  A party may waive appearance at an oral hearing, but must do so affirmatively in writing.  42 C.F.R. § 498.66.  In this case, Petitioner has not waived the right to oral hearing.  Accordingly, disposition on the written record alone is not permissible, unless CMS’s motion for summary judgment has merit.

Summary judgment is not automatic upon request but is limited to certain specific conditions. The Secretary’s regulations that establish the procedure for adjudicating Petitioner’s case are at 42 C.F.R. pt. 498.  42 C.F.R. §§ 424.545(a), 498.3(b)(17), 498.5(l).  The regulations do not establish a summary judgment procedure or recognize such a procedure.  However, the Board has long accepted that summary judgment is an acceptable procedural device in cases adjudicated pursuant to 42 C.F.R. pt. 498.  See, e.g., Ill. Knights Templar Home, DAB No. 2274 at 3-4 (2009); Garden City Med. Clinic, DAB No. 1763 (2001); Everett Rehab. & Med. Ctr., DAB No. 1628 (1997). The Federal Rules of Civil Procedure do not apply in administrative adjudications such as this. However, the Board has accepted that Rule 56 of the Federal Rules of Civil Procedure and related court decisions provide useful guidance for determining whether summary judgment is appropriate.  The parties were advised by the Prehearing Order, paragraph II.G, that a summary judgment procedure was adopted as a matter of judicial economy within my authority to regulate the course of proceedings and that court decisions related to Rule 56 may be applied.

Summary judgment is appropriate when there is no genuine dispute as to any issue of material fact for adjudication and/or the moving party is entitled to judgment as a matter of law.  In determining whether there are genuine issues of material fact for trial, the reviewer must view the evidence in the light most favorable to the non-moving party, drawing all reasonable inferences in that party’s favor.  The party requesting summary judgment bears the burden of showing that there are no genuine issues of material fact for trial and/or that it is entitled to judgment as a matter of law.  Generally, the non-movant may not defeat an adequately supported summary judgment motion by relying upon the denials in its pleadings or briefs but must furnish evidence of a dispute concerning a material fact, i.e., a fact that would affect the outcome of the case if proven.  Mission Hosp. Reg’l Med. Ctr., DAB No. 2459 at 5 (2012) (and cases cited therein); Experts Are Us, Inc., DAB No. 2452 at 5 (2012) (and cases cited therein); Senior Rehab. & Skilled Nursing Ctr., DAB No. 2300 at 3 (2010) (and cases cited therein); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

The standard for deciding a case on summary judgment, and an ALJ’s decision-making in deciding a summary judgment motion, differ from that used in resolving a case after a hearing. On summary judgment, the ALJ does not make credibility determinations, weigh the evidence, or decide which inferences to draw from the evidence, as would be done when finding facts after a hearing on the record. Rather, on summary judgment, the ALJ construes the evidence in a light most favorable to the non-movant and avoids

Page 6

deciding which version of the facts is more likely true.  Holy Cross Vill. at Notre Dame, Inc., DAB No. 2291 at 5 (2009).  The Board also has recognized that on summary judgment it is appropriate for the ALJ to consider whether a rational trier of fact could find that the party’s evidence would be sufficient to meet that party’s evidentiary burden.  Dumas Nursing & Rehab., L.P., DAB No. 2347 at 5 (2010).  The Secretary has not provided in 42 C.F.R. pt. 498 for the allocation of the burden of persuasion or the quantum of evidence required to satisfy the burden.  However, the Board has provided some persuasive analysis regarding the allocation of the burden of persuasion in cases subject to 42 C.F.R. pt. 498.  Batavia Nursing & Convalescent Ctr., DAB No. 1904 (2004), aff’d, Batavia Nursing & Convalescent Ctr. v. Thompson, 129 F. App’x 181 (6th Cir. 2005).

Petitioner has not shown that there is a genuine dispute as to any material fact pertinent to denial of enrollment under 42 C.F.R. § 424.530(a)(1) that requires a trial.  Petitioner does not deny that its enrollment application listed S.W. as an individual with a 49 percent ownership interest in Petitioner.  CMS Ex. 1 at 9-10.  Petitioner also does not deny that S.W.’s fingerprints were not submitted within 30 days in accordance with the MAC’s request and instructions.  These undisputed facts are a sufficient basis for denial of enrollment pursuant to 42 C.F.R. § 424.530(a)(1) because denial of enrollment is required by 42 C.F.R. § 424.518(d)(2)(i), which specifies that enrollment will be denied if fingerprints are not submitted as required.  Petitioner argues that S.W. is no longer a part owner of Petitioner.  I accept as true for purposes of summary judgment Petitioner’s representation that S.W. is no longer an owner of Petitioner.  However, Petitioner’s argument must be resolved against it as a matter of law as Petitioner offers no evidence  that S.W.’s ownership interest in Petitioner ended before the MAC was required by 42 C.F.R. § 424.518(d)(2)(i) to deny Petitioner’s enrollment application.  I conclude, as a matter of law, that the undisputed material facts establish a basis for the denial of Petitioner’s enrollment in Medicare pursuant to 42 C.F.R. § 424.530(a)(1) as required by 42 C.F.R. § 424.518(d)(2)(i).  Accordingly, I conclude that summary judgment is appropriate.

2. Petitioner violated 42 C.F.R. § 424.518(d)(1) because it failed to submit with its enrollment application or when requested by the MAC, the fingerprints of S.W., who was reported in the application to have a 49 percent ownership interest in Petitioner.

3. Petitioner’s enrollment application must be denied pursuant to 42 C.F.R. § 424.530(a)(1) based on Petitioner’s violation of 42 C.F.R. § 424.518(d)(1).  42 C.F.R. § 424.518(d)(2)(i).

Page 7

a.  Facts

The material facts are undisputed.  On August 25, 2018, the MAC received Petitioner’s application (CMS-855A) to enroll in Medicare as an HHA.  In section 6 of the application entitled “Ownership Interest & Managing Control Info (Individuals),” Petitioner identified two individuals, J.T. and S.W., as having ownership interests in Petitioner.  S.W. is listed as having a 49 percent ownership interest. CMS Ex. 1 at 6-12. There is no dispute that S.W. had a 49 percent ownership interest in Petitioner as of August 25, 2018.  Petitioner does not allege that S.W.’s fingerprints were submitted with the August 25, 2018 application.  RFH; P. Br. 

The MAC informed Petitioner by letters dated September 5, 2018, that fingerprints must be submitted for S.W. and Petitioner was instructed to contact Accurate Biometric regarding submission of S.W.’s fingerprints. The MAC advised Petitioner that failure to submit S.W.’s fingerprints within 30 days of September 15, 2018, may4 result in denial of Petitioner’s enrollment. The MAC directed Petitioner to notify it if S.W. was no longer an owner of Petitioner.  CMS Ex. 1 at 13-16.

On May 14, 2019, the MAC issued its initial determination denying Petitioner’s enrollment as an HHA.  The MAC cited 42 C.F.R. § 424.530(a)(1) as authority for the denial.  The MAC cited the failure to submit S.W.’s fingerprints as the factual basis that caused the violation of 42 C.F.R. § 424.518(d). The MAC informed Petitioner of its rights to submit a CAP and request for a reconsidered determination. CMS Ex. 1 at 17-19. 

Petitioner filed a request for reconsideration dated May 21, 2019 (also referred to in the July 29, 2019 CMS reconsidered determination as a CAP).  Petitioner states in the reconsideration request that S.W. completed a DOJ/FBI live scan on May 20, 2019.  Petitioner submitted with its request for reconsideration a copy of a California Department of Justice live scan service request that includes some personal information for S.W. and indicates that a fee of $89 was paid for a live scan of S.W.’s fingerprints.  CMS Ex. 1 at 20-21.  Petitioner does not allege that it ever contacted Accurate Biometric to accomplish submission of S.W.’s fingerprints for the criminal background check.  Petitioner also does not allege in its request for reconsideration that S.W. was at that time

Page 8

no longer a 49 percentowner of Petitioner.  In its request for hearing, Petitioner alleges for the first time that S.W. is no longer an owner of Petitioner.  I accept the assertion as true for purposes of summary judgment, even though Petitioner has submitted no affidavit or declaration in support of the assertion.  However, Petitioner does not allege that S.W. divested ownership in Petitioner either before the initial determination by the MAC or before the reconsidered determination by CMS. Therefore, I can draw no favorable inference for Petitioner related to when S.W. divested the ownership interest in Petitioner. Petitioner has raised no genuine dispute of material fact related to divesture occurring before the initial or reconsidered determinations.  Rather, Petitioner’s reconsideration request is strong evidence that S.W. was still an owner at the time of that request as Petitioner represented that it had arranged for S.W. to be fingerprinted, though not that the fingerprints were submitted to the MAC or CMS.

b.  Analysis

Petitioner, a new HHA, fell into the “high” categorical risk category designated by CMS.  42 C.F.R. § 424.518(c)(1)(i).  Therefore, Petitioner’s enrollment application was subject to the enhanced screening requirements established by 42 C.F.R. § 424.518(c)(2).  Under the enhanced screening requirements, all individuals who owned a five percent or greater interest in Petitioner were required to submit a set of fingerprints for a national background check either with the enrollment application or within 30 days of any request for fingerprints made by the MAC.  42 C.F.R. § 424.518(2)(ii), (d)(1).  The regulation is clear that if an individual required to submit fingerprints fails to do so “the provider . . . will have its billing privileges . . . [d]enied under [42 C.F.R.] § 424.530(a)(1).”  42 C.F.R. § 424.518(d)(2)(i) (emphasis added).  The emphasized language shows that denial of a prospective HHA’s enrollment application pursuant to 42 C.F.R. § 424.530(a)(1) is mandatory if any of the HHA’s owners that own five percent or more of the HHA, do not submit fingerprints as required.

The undisputed facts of this case establish a basis for mandatory denial of Petitioner’s August 25, 2018 enrollment application.  The application shows, and Petitioner does not dispute, that S.W. had a 49 percent ownership interest in Petitioner as of August 25, 2018, when the enrollment application was filed with the MAC.  The initial determination by the MAC was issued on May 14, 2019.  Petitioner’s reconsideration request shows that S.W.’s ownership interest continued at least through May 21, 2019, the date of the request for reconsideration.  It is also undisputed that Petitioner or S.W. never submitted S.W.’s fingerprints to the MAC or CMS in accordance with the MAC’s instructions for submitting S.W.’s fingerprints.  Accordingly, CMS and the MAC not only had a legal basis for denying Petitioner’s application to enroll in Medicare pursuant to 42 C.F.R. § 424.530(a)(1), they were required to do so by 42 C.F.R. § 424.518(d)(2)(i).

Page 9

Petitioner raises only one argument in its defense.  It claims that S.W. “is no longer part owner of the agency” and that it “tried many times to inform CMS Provider Enrollment of [S.W.’s] status with our organization.”  RFH; P. Br.  Petitioner states that it is “still interested in becoming a CMS provider for Medicare. . . .”  RFH; P. Br. Even accepting Petitioner’s assertions to be true, I must resolve this argument against Petitioner as a matter of law.  In the September 5, 2018 letters, the MAC expressly directed Petitioner to notify the MAC if S.W. was no longer one of Petitioner’s owners. Petitioner has presented no evidence from which I might infer that Petitioner informed the MAC, before the MAC made its initial determination, that S.W. no longer owned five percent or more of Petitioner. Petitioner also did not assert in its reconsideration request that S.W. was no longer an owner of Petitioner.  Petitioner makes no allegation as to precisely when S.W. ceased having an ownership interest of five percent or more.  Based on the undisputed facts, no reasonable fact finder could find that S.W. ceased owning five percent or more of Petitioner before May 21, 2019, the date of Petitioner’s request for reconsideration. Generally, action taken after the MAC denied Petitioner’s enrollment application is irrelevant to determining whether there was a legal basis for the denial. When a MAC makes an adverse enrollment determination, the issue on review by the ALJ and the Board is limited to whether the provider or supplier was eligible to enroll when the MAC made the adverse determination. The issue is not whether the provider or supplier meets Medicare enrollment requirements at the time of ALJ or Board review.  73 Fed. Reg. 36,448, 36,452 (June 27, 2008).

To the extent that Petitioner’s argument may be viewed as a request for equitable relief, I have no authority to grant such relief. US Ultrasound, DAB No. 2302 at 8 (2010). I am required to follow the Act and regulations and have no authority to declare statutes or regulations invalid. 1866ICPayday.com, L.L.C., DAB No. 2289 at 14 (2009).

III. Conclusion

For the foregoing reasons, I conclude there was a basis to deny Petitioner’s enrollment application to enroll in Medicare pursuant to 42 C.F.R. § 424.530(a)(1).

• 1. Citations are to the 2018 revision of the Code of Federal Regulation (C.F.R.), unless otherwise stated.
• 2. In the case of Medicare-eligible beneficiaries not enrolled in Medicare Part B, home health services are paid under Part A subject to the limitations specified in section 1812(a)(3) of the Act (42 U.S.C. § 1395d(a)(3)). Home health services are also covered under Medicare Part B for those enrolled. Act § 1832(a)(2)(A) (42 U.S.C. § 1395k(a)(2)(A)). Thus, HHAs, which are defined as providers by section 1861(u) of the Act (42 U.S.C. § 1395x(u)), may be reimbursed under Part A or Part B depending upon the facts of the particular case.
• 3. A “supplier” furnishes services under Medicare and includes physicians or other practitioners and facilities that are not included within the definition of the phrase “provider of services.” Act § 1861(d) (42 U.S.C. § 1395x(d)). A “provider of services,” commonly shortened to “provider,” includes hospitals, critical access hospitals, skilled nursing facilities, comprehensive outpatient rehabilitation facilities, home health agencies, hospice programs, and a fund as described in sections 1814(g) and 1835(e) of the Act (42 U.S.C. §§ 1395f(g), 1395n(e)). Act § 1861(u) (42 U.S.C. § 1395x(u)). The distinction between providers and suppliers is important because they are treated differently under the Act for some purposes.
• 4. Pursuant to 42 C.F.R. § 424.518(d)(2), the MAC and CMS will deny or revoke enrollment for failure to submit required fingerprints. The MAC’s suggestion that it had discretion not to deny Petitioner’s enrollment is, therefore, in error, but I conclude that error did not prejudice Petitioner as the requirement to submit fingerprints was clearly stated.