Michael Scott Edwards, OD, and M. Scott Edwards, OD, PA, DAB CR5074 (2018)

DECISION

Palmetto GBA (“Palmetto”), a Medicare administrative contractor acting on behalf of both the Centers for Medicare & Medicaid Services (CMS) and CMS’s National Supplier Clearinghouse, revoked the Medicare enrollment and billing privileges of Petitioner,1  Michael Scott Edwards, OD, and M. Scott Edwards, OD, PA, effective February 6, 2007. CMS upheld that determination in a reconsidered determination in which it determined that, pursuant to Medicare program regulations, Petitioner’s sole owner and managing employee had a felony conviction that was detrimental to the Medicare program and its beneficiaries. For the reasons stated below, I affirm the revocation of Petitioner’s Medicare enrollment and billing privileges.

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I. Background and Procedural History

Petitioner is an optometrist, herein referred to as “Dr. Edwards”, and his optometry practice. See CMS Exhibits (Exs.) 2; 8 at 9; 9. On February 6, 2007, Dr. Edwards, with the advice of counsel, waived indictment and was charged by information with felony2  obstruction of justice, in violation of the common law, in Wake County, North Carolina. CMS Ex. 5 at 1. The information charged that Dr. Edwards, from on or about January 2002 through January 2003, “unlawfully, willfully and feloniously did in secret and with malice obstruct public justice in his role as a campaign treasurer of the North Carolina Optometric Society Political Action Committee by soliciting and collecting campaign contributions in the form of checks that had blank payee lines and causing those checks to be distributed to political candidates without making proper disclosures of those contributions and expenditures to the State Board of Elections.” CMS Ex. 5 at 1. On February 6, 2007, Dr. Edwards entered a guilty plea3  to felony obstruction of justice. CMS Ex. 5 at 2-3. Dr. Edwards’s sentence included six-to-eight months of incarceration, all of which was suspended, along with 24 months of supervised probation. CMS Ex. 5 at 2. A special condition of probation included that Dr. Edwards may “NOT BE A TREASURER OR CARETAKER OF ANY MONEY IN ANY POLITICAL OR ANY OTHER ORGANIZATION.” CMS Ex. 5 at 3 (emphasis in original). The sentencing judge also ordered Dr. Edwards to pay restitution of $10,000 to an unspecified party.4  CMS Ex. 5 at 2. Petitioner, in Medicare enrollment applications dating back to January 15, 2008, reported Dr. Edwards’s conviction. CMS Exs. 6; 8 at 22; 9; 10 at 11, 15; see CMS Ex. 1 (May 2017 CMS determination referencing Petitioner’s multiple reports of Dr. Edwards’s conviction).

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By letters dated August 4 and 5, 2016, Palmetto revoked Petitioner’s Medicare enrollment and billing privileges, effective the date of Dr. Edwards’s conviction on February 6, 2007. CMS Ex. 2. Palmetto based the revocation, as relevant here, on noncompliance with 42 C.F.R. § 424.535(a)(3) because Dr. Edwards, who was both the owner and managing employee of the practice, had a felony conviction within the preceding 10 years.5  CMS Ex. 2. Palmetto also established a re-enrollment bar for a period of three years, effective 30 days from the postmark date of the letter. CMS Ex. 2 at 1, 4, 8.

On October 12, 2016, CMS’s Provider Enrollment & Oversight Group (PEOG) issued a reconsidered determination in which it upheld the revocation of Petitioner’s Medicare enrollment and billing privileges pursuant to, inter alia, 42 C.F.R. § 424.535(a)(3).6  CMS Ex. 4. CMS determined that, for purposes of revocation, Dr. Edwards had been convicted of the felony offense of obstruction of justice. CMS Ex. 4 at 3. CMS determined that Dr. Edwards’s offense was “a financial crime given that it arises out of facts related to inappropriate behavior concerning campaign finances,” and that the “conviction is detrimental to the program and beneficiaries because it involves the provider’s capacity to be truthful concerning money.” CMS Ex. 4 at 5.

Petitioner filed timely requests for hearing (RFHs) on December 8, 2016, that were docketed by the Civil Remedies Division as C-17-219, C-17-220, and C-17-221, and later consolidated under C-17-221. CMS filed an unopposed motion to remand the case, and an administrative law judge (ALJ) granted the motion on February 17, 2017. Petitioner (P.) Ex. 4.

The PEOG issued a revised reconsidered determination on May 3, 2017, in which it upheld the revocation based only on 42 C.F.R. § 424.535(a)(3). CMS Ex. 1. The PEOG explained that the “felony is similar to the enumerated financial crimes under 42 C.F.R. § 424.530(a)(3)(i)(B),7  which CMS has found to be per se detrimental to the Medicare program and its beneficiaries.” CMS Ex. 1 at 5. The PEOG additionally determined that Dr. Edwards’s felony conviction “is detrimental to the best interests of the Medicare program and its beneficiaries” because it “is related to his willful failure to disclose his organization’s role in collecting and distributing political contributions.” CMS Ex. 1 at 5.

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Petitioner again submitted a timely request for hearing by mail on June 29, 2017. Pursuant to my Acknowledgment and Pre-Hearing Order (Pre-Hearing Order), CMS filed a pre-hearing brief and motion for summary judgment (CMS Br.), along with 11 exhibits (CMS Exs. 1-11). Petitioner submitted a motion for summary judgment, pre-hearing brief, and opposition to CMS’s motion for summary judgment (P. Br.), along with four exhibits (P. Exs. 1-4). As neither party has objected to any of the proposed exhibits, I admit all submitted exhibits.

Neither party has submitted the written direct testimony of any witnesses, and a hearing is therefore unnecessary for the purpose of cross-examination of witnesses.8  Pre-Hearing Order, §§ 8-10. The record is closed, and the case is ready for a decision on the merits.9

II. Issues

Whether CMS has a legal basis to revoke Petitioner’s Medicare enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3) because Dr. Edwards, the practice’s owner and managing employee, had a felony conviction within the preceding 10 years.

III. 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).

IV. Findings of Fact, Conclusions of Law, and Analysis10

Petitioner is a “supplier” for purposes of the Medicare program. See 42 U.S.C. § 1395x(d); 42 C.F.R. §§ 400.202 (definition of supplier), 410.20(b)(1). In order to participate in the Medicare program, a supplier must meet certain criteria to enroll and receive billing privileges. 42 C.F.R. §§ 424.505, 424.510. CMS may revoke a supplier’s enrollment and billing privileges for any reason stated in 42 C.F.R. § 424.535(a).

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CMS may revoke a supplier’s enrollment based on the existence of a felony conviction, as set forth in 42 C.F.R. § 424.535(a)(3), which currently provides:

(3) Felonies. (i) 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.

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

* * *

(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. § 424.535(a)(3)(i) and (ii)(B).

1. 1. Dr. Edwards is the sole owner and managing employee of his medical practice.
2. 2. On February 6, 2007, the State of North Carolina charged, via information, that Dr. Edwards committed the offense of obstruction of justice “in his role as campaign treasurer of the North Carolina State Optometric Society Political Action Committee by soliciting and collecting campaign contributions in the form of checks that had blank payee lines and causing those checks to be distributed to political candidates without making proper disclosures of those contributions and expenditures to the State Board of Elections.”
3. 3. Dr. Edwards entered a guilty plea to the offense of felony obstruction of justice on February 6, 2007, at which time the sentencing judge ordered, inter alia, that Dr. Edwards pay $10,000 in restitution and that, while in probation status, he not serve as treasurer or caretaker of any money in any political or any other organization.
4. 4. Dr. Edwards’s conviction is for a felony offense that was a financial crime pursuant to 42 C.F.R. § 424.535(a)(3).

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1. 5. An offense listed in 42 C.F.R. § 424.535(a)(3) has been determined by CMS to be per se detrimental to the best interests of the Medicare program and its beneficiaries.
2. 6. CMS and Palmetto had a legal basis to revoke Petitioner’s Medicare enrollment and billing privileges.

Petitioner does not dispute that Dr. Edwards is the sole owner, president, and managing employee of the practice bearing his name. See CMS Exs. 8 at 15; 10 at 15. Nor does Petitioner dispute that Dr. Edwards has a felony conviction for purposes of section 424.535(a)(3). P. Br. at 2; see CMS Ex. 5. Petitioner also does not dispute that Dr. Edwards’s conviction is for a financial crime, which is an offense contemplated by 42 C.F.R. § 424.535(a)(3).11  Although Dr. Edwards was convicted of common law obstruction of justice, his offense conduct involved his role as the treasurer of a political action committee and, in his capacity as treasurer, he provided “checks that had blank payee lines” to political candidates in a manner that deliberately circumvented campaign finance and reporting requirements. CMS Ex. 5 at 1. Even though Dr. Edwards’s conviction was for obstruction of justice, his offense conduct involved, at its core, financial impropriety, as evidenced by the terms of his sentence. CMS Ex. 5 at 3. CMS has determined that financial crimes, “such as extortion, embezzlement, income tax evasion, insurance fraud and other similar crimes” warrant the revocation of enrollment. 42 C.F.R. § 424.535(a)(3)(ii)(B) (emphasis added). The words “such as” imply that the subsequent list of illustrative crimes, including crimes similar to those named in the list, are not the only set of crimes that may be considered “financial.” In fact, the DAB addressed a similar issue in Stanley Beekman, D.P.M., stating that “CMS may revoke Medicare billing privileges under the authority of section 424.535(a)(3) based on any financial crime, regardless of whether the supplier’s particular financial crime is specified in the regulation’s illustrative list of financial crimes.” DAB No. 2650 at 7 (2015) (emphasis in original). Thus, Dr. Edwards’s crime need not be one of the representative crimes listed in section 424.535(a)(3)(ii)(B), but rather, need only be a “financial crime” to render the regulation applicable.

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The DAB has held that CMS “may revoke a . . . supplier’s billing privileges based solely on a qualifying felony conviction, without regard to equitable or other factors.” Brian K. Ellefsen, D.O., DAB No. 2626 at 9 (2015). The DAB has also explained that CMS may revoke billing privileges based solely on a qualifying felony conviction it has determined by regulation to be detrimental to the best interests of the Medicare program and its beneficiaries. See Fady Fayad, M.D., DAB No. 2266 at 15-16 (2009). CMS’s regulations permit a revocation of enrollment in such an instance and do not require CMS to exercise discretion. 42 C.F.R. §§ 424.535(a)(3)(ii)(B) and 1001.2. CMS has determined that certain offenses, even if given lenient treatment by the criminal justice system, are nonetheless per se detrimental to the Medicare program and its beneficiaries.

Dr. Edwards, while serving as the campaign treasurer of a political action committee, “willfully and feloniously did in secret and with malice” solicit and collect “campaign contributions in the form of checks that had blank payee lines and causing those checks to be distributed to political candidates without making proper disclosures of those contributions and expenditures to the State Board of Elections.” CMS Ex. 5 at 1. Dr. Edwards’s offense is certainly a “financial crime” because willfully providing blank checks as campaign contributions, in an effort to subvert campaign finance and reporting requirements, is a financial crime.

For the aforementioned reasons, CMS had a reasonable basis to revoke Petitioner’s Medicare enrollment and billing privileges pursuant to section 424.535(a)(3).

1. 7. The effective date of the revocation is appropriate.

The regulation at 42 C.F.R. § 424.535(g) states that when a revocation is based on a felony conviction, the revocation of the supplier’s billing privileges is effective as of the date of the felony conviction. Petitioner’s revocation therefore became effective on February 6, 2007, the date of Dr. Edwards’s conviction.

Petitioner’s primary focus in its briefing is that its revocation should have been prospective, and not retroactive. Petitioner argues that based on the regulations in effect at the time of Dr. Edwards’s conviction, “the earliest that [Petitioner’s] supplier number and Medicare billing privileges could have been revoked was September 7, 2016, thirty days after the August 8, 2016, letter of revocation from CMS.”12  P. Br. at 7. Petitioner 

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further argues that not only did CMS fail to timely revoke its enrollment for a number of years after it first disclosed Dr. Edwards’s felony conviction, but that the version of section 424.535(g) in effect at the time of Dr. Edwards’s conviction “provided that revocation becomes effective within thirty days of the initial revocation notification.” P. Br. at 7. Petitioner also contends, for various reasons, that the application of section 424.535(g) to its case, and the resulting February 6, 2007 effective date of its revocation, amounts to an impermissible retroactive application of that regulation. P. Br. at 6-11.

I recognize Petitioner’s concerns regarding the effective date of its revocation, and in a previous decision, I expressed similar concerns and assigned a favorable effective date of revocation based on those concerns. Ian J. Griffith, PT, DAB No. CR4817 at 13 (2017) (“When Petitioner entered his plea of guilty, he did so at a time when then-existing law would not have subjected him to the possibility of a retroactive revocation of Medicare enrollment based on a 2008 criminal conviction” and that the petitioner “would have only faced the possibility of a prospective revocation 30 days in the future . . . .”).13  However,

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the DAB subsequently issued a decision in another case in which it determined that, pursuant to section 424.535(g), “a revocation based on a felony conviction is effective on the date of conviction.” Norman Johnson, M.D., DAB No. 2779 at 19-20 (2017). The DAB later explained, citing the same Norman Johnson, M.D., decision in support, that “[t]he Board has consistently held that the regulations in effect on the date of the initial determination to revoke a supplier’s enrollment apply in an appeal of a Medicare enrollment case.” Dennis McGinty, PT, DAB No. 2838 at 6 n.7 (2017) (emphasis added). As such, and pursuant to the version of section 424.535(g) that was in effect at the time of the revocation determination, the effective date of Petitioner’s revocation is February 6, 2007. See, e.g., 1866ICPayday.com, L.L.C., DAB No. 2289 at 14 (2009) (“[a]n ALJ is bound by applicable laws and regulations and may not invalidate either a law or regulation on any ground . . . .”).

1. 8. The three-year enrollment bar is not reviewable.

Petitioner does not challenge the three-year length of the re-enrollment bar. The DAB has explained that “CMS’s determination regarding the duration of the re‑enrollment bar is not reviewable . . . .” Vijendra Dave, M.D., DAB No. 2672 at 11 (2016). The DAB has further stated that “the only CMS actions subject to appeal under Part 498 are the types of initial determinations specified in section 498.3(b).” Id. The DAB also explained that “[t]he determinations specified in section 498.3(b) do not, under any reasonable interpretation of that regulation’s text, include CMS decisions regarding the severity of the basis for revocation or the duration of a revoked supplier’s re-enrollment bar.” Id. The DAB discussed that a review of the rulemaking history showed that CMS did not intend to “permit administrative appeals of the length of a re-enrollment bar.” Id. Therefore, I do not disturb the three-year re-enrollment bar.

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V. Conclusion

For the reasons explained above, I affirm the revocation of Petitioner’s Medicare enrollment and billing privileges, effective February 6, 2007.

1. I collectively refer to Michael Scott Edwards, OD (an individual optometrist) and M. Scott Edwards, OD, PA (Dr. Edwards’s medical practice, which was enrolled in Medicare as both a supplier of services and a supplier of durable medical equipment, prosthetics and orthotics supplies (DMEPOS)), as a single entity.
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2. Dr. Edwards’s felony offense is a “Class H” felony.  CMS Ex. 5 at 2.  The maximum period of incarceration for Dr. Edwards’s Class H felony was 25 months, making it a felony offense.  See North Carolina Sentencing and Policy Advisory Commission, Felony Punishment Chart and Minimum/Maximum Table for offenses committed on or after December 1, 1995, but before December 1, 2009, http://nccourts.org/Courts/CRS/Councils/spac/Documents/felonychart_12_01_95maxchart.pdf; 18 U.S.C. § 3559 (classifying a federal offense punishable by less than five years but more than one year of incarceration as a Class E felony).
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3. CMS identified CMS Ex. 6 as “Petitioner’s Guilty Plea, February 6, 2007” in its list of exhibits.  I observe that CMS Ex. 6 is not a guilty plea; rather, it is a “response to questions 7C and 9B from a Medicare enrollment application.”
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4. The judgment references an attached “Restitution Worksheet, Notice and Order (Initial Sentencing),” but this document has not been submitted into the evidentiary record.  CMS Ex. 5 at 2.
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5. Revocation was also based on noncompliance with 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(10), but CMS ultimately did not pursue these bases for revocation.  CMS Ex. 1.
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6. Neither party has furnished a copy of Petitioner’s request for reconsideration.
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7. See, e.g., 78 Fed. Reg. 25,013, 25,022 (April 29, 2013) (addressing similarities between sections 424.530 (denial of enrollment) and 424.535 (revocation of enrollment) with respect to felony convictions).
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8. Petitioner submitted a witness list that identified Dr. Edwards and former North Carolina State Senator James Mark McDaniel, Jr., as witnesses.  Petitioner did not submit written direct testimony for either of these witnesses.  See Pre-Hearing Order, § 8 (“A party must exchange as a proposed exhibit the complete, written direct testimony of any proposed witness.”).
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9. As an in-person hearing to cross-examine witnesses is not necessary, it is unnecessary to further address the parties’ motions for summary disposition.
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10. My numbered findings of fact and conclusions of law are set forth in italics and bold font.
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11. One of Petitioner’s arguments focuses on the fact that the initial revocation letter did not make the same specific findings that were later made in the reconsidered determination.  P. Br. at 16-18.  I note that the Departmental Appeals Board (DAB) has stated that an ALJ may only consider the basis for revocation stated in the reconsidered determination when deciding whether to affirm or reverse the revocation.  Neb Group of Arizona LLC, DAB No. 2573 at 7 (2014).  Although CMS developed a supporting rationale that was lacking in the initial determination, the basis for revocation, noncompliance with 42 C.F.R. § 424.535(a)(3), remained unchanged.  Even if the basis for revocation had changed since the initial revocation determination, which it did not, my review is limited to the four corners of the reconsidered determination.  Id.
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12. At the time of Dr. Edwards’s conviction, the provider and supplier enrollment and revocation regulations that were then in effect directed that all revocations were prospective, meaning that a revocation would be effective 30 days following notice of the revocation.  71 Fed. Reg. 20,754, 20,780 (Apr. 21, 2006); see 42 C.F.R. § 424.535(g) (2007).  In 2008, the Secretary proposed rulemaking that changed the effective date of revocations because providers and suppliers were not timely reporting adverse legal actions, and the rulemaking became effective on January 1, 2009.  73 Fed. Reg. 69,725, 69,777-78 (Nov. 19, 2008).
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13. It is important to note that Petitioner reported Dr. Edwards’s conviction on enrollment applications dating back to January 2008.  CMS Exs. 8, 9, 10.  For unknown and presumably inexplicable reasons, Palmetto failed to take any action to revoke Petitioner’s Medicare enrollment for well more than eight years after Petitioner first reported Dr. Edwards’s felony conviction.  CMS Exs. 8, 9, 10.  Palmetto’s failure to take timely action in response to information reported on various enrollment applications is inexcusable.  First, and quite significantly, if “Medicare beneficiaries may be at risk if [Petitioner] continues to participate in the program” and “[p]lacing Trust Funds at risk is detrimental to the beneficiaries” (CMS Ex. 1 at 6), then Palmetto had an obligation to expeditiously act in response to a report of such a felony conviction so that it could protect Medicare beneficiaries.  By ignoring the reports of Dr. Edwards’s felony conviction, Palmetto failed to protect the Medicare beneficiaries it is charged with protecting.  Second, by failing to timely take action to revoke Petitioner’s Medicare enrollment, Petitioner’s revocation is far less meaningful in furthering the goal of protecting beneficiaries than it would have been had the revocation been imposed in a timely manner; a lengthy period of time has passed since Dr. Edwards committed the criminal offense more than 15 years ago and was convicted more than eleven years ago.  Further, Palmetto allowed Petitioner, which acted in good faith after it reported Dr. Edwards’s conviction on an enrollment application, to provide in excess of $1 million in Medicare-reimbursable care to beneficiaries over the ensuing years, for which it now has an obligation to repay.  See P. Br. at 8 (“During that entire period, Dr. Edwards could have had no clue nor forewarning that the government might one day in the future (August 8, 2016) reverse the decisions that CMS has made in 2008 and 2013 and suddenly decide that Dr. Edwards’s conviction for common law obstruction of justice which CMS had found was not a problem in 2008 and 2013 all of a sudden on the same facts with the same disclosure was a problem so severe that Dr. Edwards must forfeit $1.4 million he earned . . . for services he performed in good faith . . . .”).  Palmetto’s inexcusable delay, and Petitioner’s understandable detrimental reliance on the 2008 and 2013 approvals of its enrollment applications that disclosed Dr. Edwards’s felony conviction, resulted in enormous financial liability for an eight and a half year period.  Nonetheless, in this forum I am not empowered to rectify this situation in Petitioner’s favor.  US Ultrasound, DAB No. 2302 at 8 (2010) (“[n]either the ALJ nor the Board is authorized to provide equitable relief by reimbursing or enrolling a supplier who does not meet statutory or regulatory requirements.”).
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