Carlton Medical Supply, Inc., DAB CR5600 (2020)

DECISION

The Centers for Medicare & Medicaid Services (CMS), acting through its Medicare administrative contractor, Palmetto GBA (Palmetto), denied Carlton Medical Supply, Inc.’s (Petitioner’s) Medicare enrollment application pursuant to 42 C.F.R. § 424.530(a)(3).  Palmetto and CMS denied Petitioner’s enrollment application because, within the preceding 10 years, Petitioner’s sole owner was convicted of a felony that CMS determined was detrimental to the interests of the Medicare program and its beneficiaries.  Petitioner challenges the enrollment denial.  For the reasons set forth below, I affirm that CMS had a legal basis to deny Petitioner’s Medicare enrollment application.

I.  Background and Procedural History

Petitioner is a supplier of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) operating in Georgia.  See CMS Exhibit (Ex.) 3 at 6.  In May 2019, Petitioner applied for enrollment in the Medicare program by completing Form CMS‑855S, the Medicare Enrollment Application for DMEPOS Suppliers (enrollment application).  Id. at 23-24.  The enrollment application listed James W. Turner (Mr. Turner) as

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Petitioner’s owner and managing employee.  Id. at 19.  Petitioner disclosed on the enrollment application that Mr. Turner had a final adverse legal action, namely a conviction for theft by taking in 2012.  Id. at 15, 17, 19.

In March 2008, a grand jury convened in the Superior Court of Henry County, Georgia (state court) indicted Mr. Turner on six counts of theft by taking, a felony offense.  CMS Exhibit (Ex.) 1.  Following a jury trial in September 2012, Mr. Turner was found guilty on three counts of theft by taking; the remaining counts were dismissed.  CMS Ex. 2 at 1‑2.  See also Petitioner’s Exhibit (P. Ex.) 2.  On or about September 19, 2012, the state court sentenced Mr. Turner to 15 years’ confinement with 5 years to be served in a penal institution and the remaining 10 years to be served on probation.  CMS Ex. 2 at 1.

By letter dated July 30, 2019, Palmetto denied Petitioner’s enrollment application pursuant to 42 C.F.R. § 424.530(a)(3), citing Mr. Turner’s felony conviction for theft by taking that occurred within the preceding 10 years.  CMS Ex. 4.  In a letter dated August 9, 2019, Petitioner requested reconsideration.  CMS Ex. 5.  By letter dated October 1, 2019, a hearing officer in CMS’s Provider Enrollment and Oversight Group1 issued a reconsidered determination finding the enrollment denial proper pursuant to 42 C.F.R. § 424.530(a)(3).  CMS Ex. 6.

Petitioner timely filed a hearing request (RFH).  See Docket Entry # 1 in the Departmental Appeals Board (DAB) Electronic Filing System (E-File).  The case was assigned to me and, on November 12, 2019, my office acknowledged Petitioner’s hearing request and provided a copy of my Standing Prehearing Order (Prehearing Order).  Pursuant to the Prehearing Order, CMS submitted a Motion for Summary Judgment (CMS Br.) and six exhibits (CMS Exs. 1‑6).  Petitioner filed a brief opposing summary judgment (P. Br.), along with six exhibits (P. Exs. 1‑6).  Neither party objected to the exhibits offered by the opposing party.  Therefore, in the absence of objection, I admit CMS Exs. 1‑6 and P. Exs. 1-6 into the record.

My Prehearing Order advised the parties that they must submit written direct testimony for any proposed witness and that an in-person hearing would only be necessary if the opposing party requested an opportunity to cross-examine a witness.  Prehearing Order ¶¶ 8-10; Civil Remedies Division Procedures (CRDP) §§ 16(b), 19(b); 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 the written direct testimony of any witness.  Consequently, an in-person hearing is not required, and I issue this decision based on the written record, without regard to whether the standards for summary

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judgment are met.  Prehearing Order ¶¶ 8-11; CRDP § 19(d).  I deny CMS’s motion for summary judgment as moot.

II.  Issue

The issue in this case is whether CMS had a legal basis to deny Petitioner’s Medicare enrollment application.

III.  Jurisdiction

I have jurisdiction to hear and decide this case.  42 C.F.R. §§ 498.3(b)(17), 498.5(l)(2); see also Social Security Act (Act) § 1866(j)(8) (codified at 42 U.S.C. § 1395cc(j)(8)).

IV.  Discussion

A. Statutory and Regulatory Background

The Act authorizes the Secretary of Health and Human Services (Secretary) to establish regulations for enrolling providers and suppliers in the Medicare program, and for establishing requirements for DMEPOS suppliers to obtain a supplier number.  Act §§ 1834(j)(1)(B), 1866(j)(1)(A) (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.  In order to enroll in the Medicare program and receive billing privileges, suppliers must meet certain criteria.  42 C.F.R §§ 424.505, 424.510.  CMS may deny a prospective supplier’s enrollment application for any reason stated in 42 C.F.R § 424.530(a).

Specifically, the regulation provides:

(3) Felonies. The provider, supplier, or any owner or managing employee of the provider or supplier was, within the preceding 10 years, convicted (as that term is defined in 42 C.F.R. [§] 1001.2) of a Federal or State felony offense that CMS determines is detrimental to the best interests of the Medicare program and its beneficiaries.

(i) Offenses include, but are not limited in scope or severity to—

* * *

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(B) Financial crimes, such as extortion, embezzlement, income tax evasion, insurance fraud and other similar crimes for which the individual was convicted, including guilty pleas and adjudicated pretrial diversions.

42 C.F.R. § 424.530(a)(3), (a)(3)(i)(B).

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

1.  CMS had a legal basis to deny Petitioner’s Medicare enrollment application under 42 C.F.R. § 424.530(a)(3) because, within the 10 years preceding the application, Petitioner’s owner was convicted of a felony offense that CMS has determined to be detrimental to the best interests of the Medicare program or its beneficiaries.

CMS may deny a supplier’s enrollment in the Medicare program if, within the preceding 10 years, the supplier, or any owner or managing employee of the supplier, was convicted of a felony offense that CMS “determines is detrimental to the best interests of the Medicare program and its beneficiaries.”  42 C.F.R. § 424.530(a)(3); see also Act § 1842(h)(8) (42 U.S.C. § 1395u(h)(8)) (authorizing the Secretary to deny or terminate enrollment after ascertaining that a supplier has been convicted of a felony offense the Secretary has determined is “detrimental to the best interests of the program or program beneficiaries.”).  Offenses for which enrollment may be denied include ‒ but are not limited to ‒ felony crimes against persons such as murder, rape, assault, and similar crimes; financial crimes such as extortion, embezzlement, income tax evasion, insurance fraud, and similar crimes; felonies that place the Medicare program or its beneficiaries at immediate risk, such as convictions for criminal neglect or misconduct; and felonies that would result in mandatory exclusion under section 1128(a) of the Act.  42 C.F.R. § 424.530(a)(3)(i)(A)-(D).

a.  Petitioner’s owner, Mr. Turner, was convicted of a felony offense within the 10 years preceding Petitioner’s application to enroll in Medicare.

Section 424.530(a)(3) defines a conviction for which enrollment may be denied by cross‑referencing the definition at 42 C.F.R. § 1001.2.  In turn, section 1001.2 provides:

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Convicted means that—

(a) A judgment of conviction has been entered against an individual or entity by a Federal, State or local court, regardless of whether:
1) There is a post-trial motion or an appeal pending, or
2) The judgment of conviction or other record relating to the criminal conduct has been expunged or otherwise removed;
(b) A Federal, State or local court has made a finding of guilt against an individual or entity;
(c) A Federal, State or local court has accepted a plea of guilty or nolo contendere by an individual or entity; or
(d) An individual or entity has entered into participation in a first offender, deferred adjudication or other program or arrangement where judgment of conviction has been withheld.

Petitioner does not dispute that Mr. Turner is Petitioner’s sole owner and managing employee.  CMS Ex. 3 at 19; P. Br. at 2.  On or about September 19, 2012, a state court jury found Mr. Turner guilty of three counts of theft by taking.  CMS Ex. 2 at 1.  The state court’s sentencing order notes that the offenses were felonies.  Id.  Petitioner acknowledges these facts, as well.  P. Br. at 2.  These facts establish that Petitioner’s owner was convicted of a felony offense within the meaning of 42 C.F.R. sections 424.530(a)(3) and 1001.2.

Petitioner urges me to conclude that Mr. Turner’s conviction was not within 10 years of Petitioner’s enrollment application because the criminal conduct underlying the conviction occurred in 2006.  RFH at 2-3; see also P. Br. at 2.2  Petitioner argues that, if Mr. Turner’s criminal case had been resolved quickly, his conviction would have fallen outside the 10-year window.  RFH at 3.  These arguments are without merit.  The language of section 424.530(a)(3) is clear on its face:  it is the date of conviction ‒ not the date of the underlying conduct ‒ from which the 10-year period is measured.  Mr. Turner was convicted on September 19, 2012.  CMS Ex. 2 at 2.  See also RFH at 14, 20.  Petitioner applied for enrollment in the Medicare program in or around May 2019.  CMS Ex. 3.  Thus, Mr. Turner’s conviction was within approximately 7 years of Petitioner’s application ‒ well within the 10-year window.  As such, CMS was authorized to deny

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Petitioner’s Medicare enrollment if felony theft by taking is considered a financial crime described in 42 C.F.R. § 424.530(a)(3)(i)(B).

b.  Mr. Turner’s felony conviction for theft by taking was for a financial crime similar to those described in 42 C.F.R. § 424.530(a)(3)(i)(B).

In promulgating 42 C.F.R. § 424.530(a)(3), CMS determined that the enumerated crimes are detrimental per se to Medicare.  See Letantia Bussell, M.D., DAB No. 2196 at 9 (2008).3  CMS argues that Mr. Turner’s felony offenses are financial crimes, “akin to [those] enumerated in 42 C.F.R. § 424.530(a)(3)(i)(B).”  CMS Br. at 5.  Petitioner appears to disagree, arguing that “CMS admits that [42 C.F.R. § 424.530(a)(3)(i)(B)] does not apply to the crimes stated in the felony conviction of Mr. Turner.”  P. Br. at 2.  The basis for Petitioner’s contention is unclear.  However, if Petitioner’s point is that the crime of “theft by taking” is not one specifically mentioned in section 424.530(a)(3)(i)(B), this is not dispositive.

Section 424.530(a)(3)(i) uses the following introductory language:  “Offenses include, but are not limited in scope or severity to” before listing certain named offenses.  An appellate panel of the DAB has explained that the “words ‘include’ or ‘including’ are not terms of limitation or exhaustion” and, “[w]hen followed by a list of items, those words are reasonably read as signifying that the list contains merely illustrative examples of a general proposition or category that precedes the word and is not intended to preclude unmentioned items from being considered supportive or part of the general proposition or category.”  Fady Fayad, M.D., DAB No. 2266, at 8 (2009), aff’d, Fayad v. Sebelius, 803 F. Supp. 2d 699 (E.D. Mich. 2011).  This interpretation gains further support from the addition of the phrase “or other similar crimes” following the listed offenses in section 424.530(a)(3)(i)(B).  Accordingly, if Mr. Turner’s conviction for theft by taking is similar to the enumerated financial crimes, it is per se detrimental to Medicare and provides a basis to deny Medicare enrollment.

I find that at least one crime for which Mr. Turner was convicted is such a financial crime.  Count 1 of the indictment charged that Mr. Turner took “lawful United States currency, the property of Wachovia Corporation d/b/a Wachovia Bank, N.A., with a value greater than five hundred dollars ($500.00), with the intention of depriving said

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owner of said property[.]”  CMS Ex. 1 at 2.  Mr. Turner was convicted of Count 1.  CMS Ex. 2 at 1.  In its hearing request, Petitioner explains that Count 1 of the indictment “was about ‘bad [c]hecks’ written by James Turner on his business account with all moneys [sic] involved repaid.”  RFH at 2.  I have no trouble concluding that passing bad checks is a financial crime, regardless of whether Mr. Turner ultimately repaid the bank the amounts involved.  Checks are financial instruments used in commerce.  An account holder who writes a check, knowing that his account has insufficient funds to cover the check, engages in a crime similar to embezzlement because the account holder is able to pass the bad check based on his business relationship with the bank, all the while knowing that the bank will bear the loss if it negotiates the bad check.

I therefore find that CMS had a legal basis to deny Petitioner’s application for Medicare enrollment because at least one of Mr. Turner’s felony convictions was for a financial crime similar to those described in section 424.530(a)(3)(i)(B).  But, even if the felony of theft by taking were not such a financial crime, CMS would nevertheless be authorized to deny Petitioner’s application if CMS determined, based on a case-specific inquiry, that the offense is detrimental to the best interests of the Medicare program and its beneficiaries.

c.  Even if Mr. Turner’s felony conviction for theft by taking is not similar to a financial crime described in 42 C.F.R. § 424.530(a)(3)(i)(B), CMS acted within its discretion to determine that the conviction is detrimental to the best interest of the Medicare program and its beneficiaries.

Even if a conviction is for a crime not enumerated in 42 C.F.R. § 424.530(a)(3), CMS is authorized to determine, on a case-by-case basis, that a particular felony conviction is detrimental to Medicare and its beneficiaries and therefore supports denial.  See, e.g., Saeed A. Bajwa, M.D., DAB No. 2799 at 5 n.4, 10-12 (2017) (42 C.F.R. § 424.535(a)(3)(i) authorizes CMS to determine what felony convictions are a basis for revocation; CMS is not limited to the felonies enumerated as examples).

In this case, it is apparent that CMS exercised its discretion, pursuant to 42 C.F.R. § 424.530(a)(3)(i), to determine that Mr. Turner’s felony conviction (if not described in section 424.530(a)(3)(i)(B)) is nonetheless detrimental to the Medicare program and its beneficiaries and, accordingly, justifies denying Petitioner’s enrollment application.  See Bajwa, DAB No. 2799 at 8, 10-11.  If I am satisfied that CMS exercised its discretion under 42 C.F.R. § 424.530(a)(3)(i), I may not substitute my own determination as to whether a given felony is detrimental to the Medicare program and its beneficiaries for that of CMS.  See Brian K. Ellefsen, DO, DAB No. 2626 at 7 (2015).

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The record before me amply demonstrates that CMS exercised its discretion.  CMS itself issued the reconsidered determination in which it expressly found that Mr. Turner’s conviction is detrimental to the Medicare program and its beneficiaries.  The reconsidered determination states:

CMS finds that Mr. Turner’s felony conviction is detrimental to the best interests of the Medicare program based on the facts and circumstances surrounding it.  From 2006 to 2007, Mr. Turner intentionally and unlawfully took the property of a bank, a corporation[,] and an insurance agency[4]. . . .  Mr. Turner’s fraudulent and deceitful actions call his honesty and integrity into question in his dealings with the public. . . .  Mr. Turner’s actions also call into question his propensity for good judgment and his ability and willingness to follow federal laws, rules, and program instructions.  Mr. Turner is listed as a 5% or greater owner with managing control on the enrollment records for [Petitioner].  As a result, CMS finds that Medicare beneficiaries, and thereby, the Trust Funds may be at risk if [Petitioner] is allowed to participate in the Medicare program, with Mr. Turner as its owner and managing employee.

CMS Ex. 6 at 3.  As I have explained, it is not my role to second-guess CMS’s exercise of discretion to determine that a conviction is detrimental to the best interests of the Medicare program.  However, even if I were to exercise such oversight, I would not find that CMS’s conclusion that Mr. Turner’s conviction is evidence that he might pose a risk to the Medicare Trust Fund was unreasonable.

Because CMS exercised its discretion to determine that Petitioner’s conviction was one that is detrimental to Medicare and its beneficiaries, I may not second-guess that determination.  Accordingly, even if I accept Petitioner’s arguments that Mr. Turner is

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rehabilitated and unlikely to offend again, this is not a basis to reverse CMS’s judgment that Petitioner’s conviction is detrimental to Medicare.

2.  Petitioner’s other arguments, which are essentially equitable, are not a basis to overturn CMS’s determination denying Petitioner’s application to enroll in Medicare.

Petitioner argues that Mr. Turner is a Desert Storm veteran and that he has paid his debt to society and has not reoffended since his conviction in 2012.  P. Br. at 2-3.  Petitioner’s request that I consider Mr. Turner’s contributions as a veteran as well as his efforts to rehabilitate himself are essentially contentions that denying Petitioner’s enrollment application is inequitable under the circumstances.  However, such general appeals to equity are not a basis to overturn CMS’s decision.  I have no authority to grant Petitioner equitable relief.  US Ultrasound, DAB No. 2302 at 8 (2010); cf. Abdul Razzaque Ahmed, M.D.,DAB No. 2261 at 19 (2009), aff’d, Ahmed v. Sebelius,710 F. Supp. 2nd 167 (D. Mass. 2010) (if CMS establishes the regulatory elements necessary for revocation, an administrative law judge may not substitute his or her “discretion for that of CMS in determining whether revocation is appropriate under all the circumstances”).

V.  Conclusion

For the foregoing reasons, I affirm CMS’s determination to deny Petitioner’s application for Medicare enrollment and billing privileges.  I deny CMS’s motion for summary judgment as moot.

• 1. The Provider Enrollment and Oversight Group is a component of CMS itself, not an administrative contractor.
• 2. I cite to the PDF page numbers in DAB E-File, as Petitioner did not separately number the pages of his hearing request or his brief.
• 3. The Bussell decision considered grounds for revoking a provider or supplier’s Medicare enrollment found at section 424.535(a)(3) of the regulations.  Subsequent decisions have noted that the language of section 424.530(a)(3) (denial) largely parallels that of section 424.535(a)(3) (revocation).  See, e.g., John A. Hartman, D.O., DAB No. 2911at 13 n.14 (2018).  Therefore, as the appellate panel did in Hartman, I find it appropriate to look to decisions interpreting section 424.535(a)(3) for guidance in interpreting section 424.530(a)(3).
• 4. The reconsidered determination asserts that Mr. Turner was convicted for taking the property of an insurance agency, among other victims.  CMS Ex. 6 at 3.  My reading of Mr. Turner’s indictment and conviction leads me to conclude that Mr. Turner was not convicted of the insurance-related counts of the indictment.  Counts 5 and 6 of the indictment charged Mr. Turner with theft from “Lawrence Neal d/b/a Lawrence Neal Insurance Agency, Inc.” and from “Marzelle Fairman d/b/a Marzelle Fairman Insurance Agency, Inc.” respectively.  CMS Ex. 1 at 3-4.  Mr. Turner was convicted of Counts 1, 3, and 4 of the indictment; Counts 2, 5, and 6 were dismissed (nolle prosequi).  CMS Ex. 2 at 1.  In any event, whether or not Mr. Turner’s crimes victimized insurance companies is not material to my analysis.