Foot & Ankle of West Georgia, P.C., and Foot & Ankle Surgery Center, DAB CR5619 (2020)

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 (NSC),1 revoked the Medicare enrollment and billing privileges of Petitioner,2 Foot & Ankle of West Georgia, P.C., and Foot & Ankle Surgery Center, effective January 16, 2019, because one of its owners had been convicted of a felony financial crime and it had not demonstrated that it was covered by a comprehensive

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liability insurance policy.  42 C.F.R. § 424.535(a)(3) and 42 C.F.R. §§ 424.535(a)(1), 424.57(c)(10).  CMS upheld Palmetto’s determinations.  For the reasons stated below, I affirm the revocation of Petitioner’s Medicare enrollment and billing privileges.

I.  Background and Procedural History

Petitioner is an ambulatory surgery center that also supplies DMEPOS.  CMS Exs. 11 at 1; 12 at 1.  In an enrollment application submitted in April 2018 with respect to its enrollment as an ambulatory surgery center, Petitioner reported that Alap Pravin Shah was its owner.  CMS Ex. 12 at 5.  Petitioner also reported that Dr. Shah was its president and served as a director/officer, authorized official, and managing employee.  CMS Ex. 12 at 5.  In an April 2018 DMEPOS supplier enrollment application, Petitioner reported that Dr. Shah held the corporate position of president, and was also a partner, director/officer, authorized official, and managing employee.  CMS Ex. 11 at 5-6.  Petitioner also reported that Michael Andrew Schreck was a partner, director/officer, and an authorized official, and that Morgan C. Hyneman was a partner and director/officer.  CMS Ex. 11 at 4-5.

On June 19, 2018, a federal grand jury returned a true bill of indictment charging Dr. Shah with conspiracy to defraud the United States (Count 1) and the receipt of health care kickbacks (Counts 2-4).3   CMS Ex. 1 at 1-11.  The charged offense conduct involved Dr. Shah’s solicitation and receipt of kickbacks in return for prescribing compounded medications to TRICARE beneficiaries.4   CMS Ex. 1 at 1-3.  On January 14, 2019, a jury found Dr. Shah was guilty of the offenses charged in Counts 1, 3, and 4 of the indictment.  CMS Ex. 2 at 1-2.

By letters dated April 10 and 11, 2019, Palmetto revoked Petitioner’s Medicare enrollment and billing privileges, effective the date of Dr. Shah’s conviction on January 16, 2019.5  CMS Exs. 3, 4.  Palmetto based the revocation, as relevant here, on noncompliance with 42 C.F.R. § 424.535(a)(3) resulting from Dr. Shah’s felony

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convictions for conspiracy to receive health care kickbacks and receipt of health care kickbacks.6   CMS Exs. 3 at 1; 4 at 1.  With respect to Petitioner’s enrollment as a supplier of DMEPOS, Palmetto also determined that revocation was warranted based on noncompliance with 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(10) because the liability insurance policy on file with NSC had expired.  CMS Ex. 3 at 1.  In both letters, Palmetto explained the following;

[I]f you have additional information that you would like a hearing officer to consider during the reconsideration or, if necessary, an administrative law judge to consider during a hearing, you must submit that information with your request for reconsideration.  This is your only opportunity to submit information during the administrative appeals process; you will not have another opportunity to do so unless an administrative law judge specifically allows you to do so under 42 CFR § 498.56(e).

CMS Exs. 3 at 3; 4 at 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 Exs. 3 at 1, 3; 4 at 2.

Petitioner, through Dr. Schreck, submitted a letter dated April 10, 2019, in which it requested reconsideration of the revocation of its enrollment and billing privileges.  P. Ex. 11 at 34.  Petitioner explained that “the remaining partners . . . are in legal proceedings in terms of a stock buy out situation since firing Dr. Shah.”  P. Ex. 11 at 34. 

Thereafter, Petitioner, through counsel, submitted letters, dated April 22, 2019, in which it again requested reconsideration of the determinations revoking its enrollment and billing privileges.  CMS Exs. 5 at 1-3; 6 at 1-3.  Petitioner explained that two of its three shareholders, Dr. Hyneman and Dr. Schreck, had “voted out” Dr. Shah as a shareholder.  CMS Exs. 5 at 1; 6 at 2.  Petitioner also explained that it had terminated Dr. Shah from his employment, and that he was no longer the managing employee.  CMS Exs. 5 at 1; 6 at 1-2.  Petitioner explained that Dr. Shah continued to maintain an ownership interest in the practice.  CMS Exs. 5 at 2; 6 at 2.  Petitioner reported that “Alap Shah was the operating interest holder of both entities and routinely failed to inform his fellow practitioners of his operating decisions, lawful or not.”  CMS Exs. 5 at 2; 6 at 2.  Petitioner explained that “a lawsuit is ongoing regarding Alap Shah’s ownership interest in [Petitioner] and the damage Alap Shah has done to the practice through his illegal actions.”  CMS Exs. 5 at 2; 6 at 2.  In correspondence dated May 3, 2019, Petitioner submitted a corrective action plan that listed four corrective actions:  terminating the

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business relationship, obtaining Dr. Shah’s “ownership interest,” putting Dr. Schreck in managerial control, and obtaining a reversal of the revocation determination.  CMS Ex. 5 at 4.  Petitioner reported that it had “[c]omplete[d]” two of those actions, in that it had “[t]erminate[d]” its business relationship with Dr. Shah and that Dr. Schreck had taken over managerial control of Petitioner.  Petitioner did not report that it had completed the action of obtaining Dr. Shah’s ownership interest; rather, it explained that a “[l]awsuit is ongoing at this time.”  CMS Ex. 5 at 4. 

Petitioner, through new counsel who continue to represent it in the instant proceeding, submitted additional correspondence, dated May 9, 2019, along with supporting evidence.  P. Exs. 11-13, 14, 17, 18; see CMS Exs. 7 at 2-3; 8 at 1-2 (reconsidered determinations listing the evidence received by CMS).  Petitioner argued that it “ha[d] terminated its business relationship with Alap Shah” in October 2018.  P. Exs. 11 at 1; 12 at 3; 13 at 2.  Petitioner submitted (or re-submitted) evidence that included the following documents:  corporate meeting minutes dated June 8 through September 7, 2018 (P. Ex. 14), records pertaining to a matter before the Georgia Department of Labor (P. Exs. 11 at 58-62, 12 at 58-62, 13 at 59-63), filings with the state’s corporation division (P. Exs. 11 at 67-69; 12 at 76-91), and an updated Medicare enrollment application (P. Ex. 17).  Petitioner also submitted what it described as a “a true and correct copy of the comprehensive liability insurance policies [that] have been effective since August 15, 2018, and meet the minimum policy limit amounts as required by 42 [C.F.R.] § 424.57(c)(10).”  P. Ex. 13 at 3; see CMS Ex. 10 at 1; P. Ex. 13 at 68 (Certificate of Insurance, “Professional Liability - Claims-Made,” effective August 15, 2018, Foot and Ankle of West Georgia, PC); P. Ex. 13 at 69 (Certificate of Insurance, “Professional Liability – Claims-Made,” effective August 15, 2018, Foot and Ankle Surgery Center, LLC).

On July 3, 2019, CMS’s Provider Enrollment & Oversight Group issued separate reconsidered determinations in which it upheld the revocation of Petitioner’s Medicare enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3) and 42 C.F.R. §§ 424.535(a)(1), 424.57(c)(10).  CMS Exs. 7 at 4-6; 8 at 4-5.  Specifically, CMS determined that revocation was warranted pursuant to 42 C.F.R. § 424.535(a)(1) because Petitioner was not in compliance with the requirement that it have a comprehensive liability insurance policy as required by 42 C.F.R. § 424.57(c)(10), in that it submitted “unacceptable” evidence and “failed to provide the proper documentation demonstrating that it maintains an active comprehensive liability insurance policy . . . .”  CMS Ex. 7 at 4‑5.  CMS explained that revocation pursuant to 42 C.F.R. § 424.535(a)(3)(ii)(B) was warranted because Dr. Shah, as an owner and manager, had been convicted of felony financial crimes in the previous 10 years and that his offenses were akin to the enumerated financial crimes that are per se detrimental to the best interests of the Medicare program and its beneficiaries.  CMS Ex. 8 at 4-5.

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CMS also addressed whether Petitioner’s revocation should be reversed pursuant to 42 C.F.R. § 424.535(e), which provides CMS the discretionary authority to reverse a revocation.  CMS Exs. 7 at 5-6; 8 at 4-5.  CMS recognized that Petitioner had terminated its business relationship with Dr. Shah as a managing employee.  CMS Exs. 7 at 5-6; 8 at 4-5.  However, CMS explained that Dr. Shah continued to be an owner of Petitioner, stating:

CMS finds that the documentation does not support the contention that it terminated its business relationship with Dr. Shah as a partner.  Moreover, [Petitioner] acknowledges that it did not yet purchase Dr. Shah’s ownership interest and that it is currently in legal proceedings with Dr. Shah to resolve this matter . . . .  As a result, CMS will not exercise its authority to reverse [Petitioner’s] revocation pursuant to § 424.535(e).  Therefore, CMS is upholding the revocation of its Medicare billing privileges under
§ 424.535(a)(3).   

CMS Exs. 7 at 6; 8 at 4.

Petitioner filed timely requests for hearing on August 30, 2019, that the Civil Remedies Division separately docketed as C-19-1072 and C-19-1073, and later consolidated under the latter docket number.  Pursuant to my Standing Pre-Hearing Order (Pre-Hearing Order), CMS filed a pre-hearing brief and motion for summary judgment (CMS Br.), along with 12 exhibits (CMS Exs. 1-12).  Petitioner submitted a brief and cross-motion for summary judgment (P. Br.), along with 25 exhibits (P. Exs. 1-25).7   CMS submitted a reply brief (CMS Reply).

CMS objects to the admission of P. Exs. 15, 16, 19, 20, and 23 on the basis that Petitioner has not demonstrated good cause to submit new documentary evidence, as required by 42 C.F.R. § 498.56(e).  Pursuant to 42 C.F.R. § 498.56(e), I must examine whether good cause exists for a provider or supplierto submit new documentary evidence for the first time at the ALJ hearing level.  42 C.F.R. § 498.56(e)(1).  I must exclude any new documentary evidence if I do not find good cause for its submission for the first time at the ALJ hearing level.  42 C.F.R. § 498.56(e)(2)(ii); Care Pro Home Health, Inc., DAB No. 2723 at 11 (2016) (“In enrollment revocation cases, an ALJ must exclude ‘new documentary evidence’ – that is, documentary evidence that a provider did not previously submit to CMS at the reconsideration stage (or earlier) – unless the ALJ determines that ‘the provider or supplier has good cause for submitting the evidence for the first time at

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the ALJ level.’  42 C.F.R. § 498.56(e)(1).”); see Pre-Hearing Order § 10 (directing Petitioner to contemporaneously file with its pre-hearing exchange a statement of good cause regarding the submission of any new documentary evidence); CMS Exs. 3 at 3; 4 at 2 (explaining that, pursuant to section 498.56(e), Petitioner’s only opportunity to submit evidence would be at the reconsideration stage unless an ALJ allows new evidence based on a showing of good cause).  While “good cause” is not defined in the regulations, the Departmental Appeals Board (DAB) has explained that, in showing good cause in such a situation, a party must explain its “failure to submit [evidence] at the reconsideration stage (or earlier).”  Care Pro, DAB No. 2723 at 14.

P. Exs. 15 and 16 are copies of comprehensive liability insurance policies that went into effect on February 10, 2019.  P. Ex. 19 is Petitioner’s April 4, 2019 “Answer and Counterclaim” in a civil action brought by Dr. Shah in the Superior Court of Muscogee County, Georgia.  P. Ex. 20 is a copy of Petitioner’s January 1, 2014 restrictive stock agreement.  P. Ex. 23 is a letter from Petitioner’s accountant, dated November 11, 2019.  P. Exs. 15, 16, 19, and 20 were in existence at the time Palmetto issued its initial determinations on April 10 and 11, 2019.  CMS Exs. 3 and 4.  Although P. Ex. 23 is a letter dated November 11, 2019, the letter discusses information that was available as far back as October 31, 2018 (addressing that Dr. Shah was “removed from [Petitioner’s] payroll as o[f] October 31, 2018.”).  CMS Ex. 23 at 1.  Petitioner must show good cause for the late submission of this documentary evidence that was available for submission at the time it requested reconsideration and submitted supporting evidence.  42 C.F.R. § 498.56(e)(2)(ii).

Petitioner submitted a memorandum (P. Memorandum) in which it contended that CMS raised a “new and unexpected” argument in the reconsidered determination that “Petitioners had terminated Dr. Shah as a managing employee but not as an owner.”  P. Memorandum at 3.  Petitioner is mistaken; Petitioner has repeatedly and explicitly reported that Dr. Shah continued to have an ownership interest in Petitioner.  P. Ex. 11 at 34 (Petitioner’s statement that it was “in legal proceedings in terms of a stock buy out situation since firing Dr. Shah.”); CMS Exs. 5 at 2; 6 at 2 (Petitioner’s April 22, 2019 statement that “[a] lawsuit is ongoing regarding Alap Shah’s ownership interest”); CMS Ex. 5 at 4 (Petitioner’s May 3, 2020 statement that “[a] lawsuit is ongoing regarding Alap Shah’s ownership interest” and submission of a corrective action plan that included an action item that it would “[o]btain Alap Shah’s ownership interest”).  Based on the aforementioned submissions by Petitioner, there is simply no basis for Petitioner’s claim that it “had no reason to believe CMS would make such a factual determination” that Dr. Shah continued to be an owner of Petitioner.  P. Memorandum at 3-4. 

Petitioner also argues that it has “retained multiple legal counsel to represent them in the various legal matters involving the claims at issue” and that its counsel “lacked knowledge of the information and/or documents regarding the underlying litigation.”  P. Memorandum at 4.  I note that the same counsel from Meacham & Earley, P.C., who

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initially represented Petitioner in its challenge to its revocation, also filed Petitioner’s “Answer and Counterclaim” in the Superior Court of Muscogee County.  Compare CMS Exs. 5 at 3, 5; 6 at 3 (counsel’s signatures on letters requesting reconsideration submitted in April and May of 2019) with P. Ex. 19 at 28 (counsel’s signature on the April 4, 2019 filing in the Superior Court of Muscogee County).  Likewise, Petitioner’s current counsel from Parsons Behle & Latimer filed more than 200 pages of arguments and supporting evidence in connection with Petitioner’s request for reconsideration in May 2019 (P. Exs. 11, 12, 13); Petitioner has not shown how any failure of its current counsel to submit documents with its request for reconsideration amounts to good cause.  In fact, Petitioner’s current counsel submitted Petitioner’s professional liability insurance policies (P. Ex. 13 at 68-69; CMS Ex. 10; see P. Ex. 13 at 3-4), even though Palmetto had clearly explained that Petitioner’s revocation was based on its failure to have a comprehensive liability insurance policy on file, as required by 42 C.F.R. § 424.57(c)(10).  Finally, Petitioner has not shown good cause for why it, for the first time, submitted the November 11, 2019 letter from its accountant addressing that Dr. Shah had been removed from its payroll as of October 31, 2018, when this information was available at the time it submitted its request for reconsideration.  P. Ex. 23.  In fact, Petitioner’s submissions in support of its request for reconsideration referenced that Dr. Shah had been “voted out,” fired, and terminated from Petitioner in October 2018.  P. Exs. 11 at 34, 58-62; 12 at 34, 58-62; 13 at 35, 59-63.

Petitioner failed to establish good cause for its submission of P. Exs. 15, 16, 19, 20, and 23 for the first time at the ALJ hearing level.  42 C.F.R. § 498.56(e)(2)(ii) (stating that “[i]f the ALJ determines that there was not good cause for submitting the evidence for the first time at the ALJ level, the ALJ must exclude the evidence from the proceeding and may not consider it in reaching a decision”); Care Pro, DAB No. 2723 at 11 (“In enrollment revocation cases, an ALJ must exclude ‘new documentary evidence’ – that is, documentary evidence that a provider did not previously submit to CMS at the reconsideration stage (or earlier) – unless the ALJ determines that ‘the provider or supplier has good cause for submitting the evidence for the first time at the ALJ level.’  42 C.F.R. § 498.56(e)(1).”).  I sustain CMS’s objections and exclude P. Exs. 15, 16, 19, 20, and 23 from the evidentiary record.  I admit CMS Exs. 1-12 and P. Exs. 1-14, 17-18, 21-22, and 24-25.

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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) and 42 C.F.R. §§ 424.535(a)(1), 424.57(c)(10) based on the felony convictions of its owner and managing employee within the preceding 10 years and its failure to demonstrate it had comprehensive liability insurance coverage.

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).

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:

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(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).

Further, to receive Medicare payments for items furnished to a Medicare beneficiary, a supplier of medical equipment and supplies must have a supplier number issued by the Secretary of Health and Human Services.  Social Security Act (Act) § 1834(j)(1)(A) (42 U.S.C. 1395m(j)(1)(A)); 42 C.F.R. § 424.505.  To obtain and retain its supplier number, a DMEPOS supplier must meet the standards set forth in 42 C.F.R. § 424.57(c), and CMS may revoke its billing privileges if it fails to do so.  42 C.F.R. §§ 424.57(c)(1), (e); 42 C.F.R. § 424.535(a)(1).  A DMEPOS supplier must operate in compliance with, inter alia, 42 C.F.R. § 424.57(c)(10), which requires that it have a comprehensive liability insurance policy.  After a DMEPOS supplier’s Medicare enrollment and billing privileges are revoked, it is barred from re-enrolling in the Medicare program for a period of one to three years pursuant to 42 C.F.R. § 424.535(c), as it was in effect at that time.

1. In January 2019, Dr. Shah was convicted of the federal felony offenses of conspiracy to receive kickbacks and receiving health care kickbacks.

2. Petitioner concedes that Dr. Shah’s felonious criminal conduct involved financial crimes that are detrimental to the best interests of the Medicare program and its beneficiaries.

3. At the time Palmetto issued initial determinations revoking Petitioner’s enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3), Petitioner’s Medicare enrollment record listed Dr. Shah as an owner, managing employee, and Petitioner’s president.

4. At the time Palmetto issued an initial determination revoking Petitioner’s enrollment and billing privileges pursuant to 42 C.F.R.

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§§ 424.535(a)(1) and 424.57(c), the comprehensive liability insurance policy information NSC had on file had expired.

5. In correspondence submitted on April 10, April 22, and May 3, 2019, Petitioner explained that Dr. Shah had been terminated and was no longer the managing employee and partner, but that he continued to have an ownership interest in Petitioner.

6. On May 9, 2019, Petitioner submitted a copy of its current professional liability insurance policies, but did not submit a copy of its current comprehensive liability insurance policy.

7. CMS’s July 2019 reconsidered determination explained that Petitioner had not yet purchased Dr. Shah’s ownership interest and it continued to have a business relationship with Dr. Shah, and that CMS would not exercise its discretionary authority pursuant to 42 C.F.R. § 424.535(e) to reverse the revocation.

8. Because Dr. Shah, as an owner and managing employee, had felony convictions that were detrimental to the Medicare program and its beneficiaries, CMS and Palmetto had a legitimate basis to revoke Petitioner’s Medicare enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3)(ii)(B).

9. Because Petitioner did not submit evidence that it had a comprehensive liability insurance policy, CMS and Palmetto had a legitimate basis to revoke Petitioner’s Medicare enrollment and billing privileges pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(10).

Revocation pursuant to 42 C.F.R. § 424.535(a)(3)(ii)(B)

Petitioner does not dispute that Dr. Shah has felony convictions for financial crimes.  P. Br. at 9; see CMS Exs. 1, 2.  Petitioner also does not dispute that Dr. Shah’s felony crimes are detrimental to the best interests of the Medicare program and its beneficiaries.  P. Br. at 9 (“The parties agree . . . that [Dr. Shah’s] conduct was detrimental to the Medicare fund . . . .”); see P. Ex. 21 (Inspector General’s June 27, 2019 letter imposing an exclusion against Dr. Shah based on his commission of felony financial crimes); 42 C.F.R. § 424.535(a)(3)(ii)(B) (listing felony financial crimes as offenses that are detrimental to the best interests of the Medicare program and its beneficiaries).  Further, Petitioner does not dispute that its enrollment record, as of April 2019 when Palmetto revoked its enrollment and billing privileges, reported that Dr. Shah was both an owner and managing employee of Petitioner.  P. Br. at 6-7; CMS Ex. 11; see CMS Exs. 3, 4; P. Ex. 17.  Because Petitioner’s then-current enrollment record indicated it was owned

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and managed by Dr. Shah, who had been convicted of a felony financial crime, CMS and Palmetto had a legitimate basis to revoke Petitioner’s enrollment and billing privileges.  42 C.F.R. § 424.535(a)(3)(ii)(B) (authorizing revocation when “an owner or managing employee of the . . . supplier was, within the preceding 10 years, convicted . . . of a Federal . . . felony offense that CMS determines is detrimental to the best interests of the Medicare program and its beneficiaries”); CMS Exs. 1, 2; see CMS Exs. 3, 4.

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, DO, 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).  The DAB has also explained 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.”  Stanley Beekman, D.P.M., DAB No. 2650 at 7 (2015) (emphasis in original).

Palmetto clearly explained that Petitioner’s revocation was based, in part, on 42 C.F.R. § 424.535(a)(3) and that “[i]f the revocation was due to adverse activity (sanction, exclusion, or felony) against an owner, managing employee, or an authorized or delegated official . . . , the revocation may be reversed if the provider or supplier terminates and submits proof that it has terminated its business relationship with that individual within 30 days of the revocation notification.”  CMS Ex. 3 at 2; see 42 C.F.R. § 424.535(e) (containing essentially identical language to the aforementioned statement in Palmetto’s initial determination).  Significantly, Petitioner submitted a “Corrective Action Plan” dated May 3, 2019, in which it discussed its plan to “[o]btain Alap Shah’s ownership interest,” but that its action had not yet been completed because a lawsuit was “ongoing.”  CMS Ex. 5 at 4; see P. Br. at 7 (Petitioner’s discussion of this letter); CMS Exs. 5 at 1-3; 6 at 1-3; P. Exs. 11 at 34 (various letters all providing similar information regarding Dr. Shah’s ongoing ownership interest).  In several filings dated May 9, 2019, Petitioner, through its new counsel, did not report that it had completed its plan to obtain Dr. Shah’s ownership interest or that it had resolved the lawsuit with Dr. Shah.  P. Exs. 11, 12, 13.  Further, although Petitioner now argues that “as a matter of law, Dr. Shah is precluded from holding such ownership interests” (P. Br. at 14), “had no ownership interest . . . after he was voted out of the partnership” (P. Br. at 9), and that Petitioner “is not legally obligated to make such a purchase” of Dr. Shah’s ownership shares (P. Br. at 13), Petitioner raised these arguments for the first time at the ALJ hearing level.  An ALJ, unlike CMS, is not afforded the discretion pursuant to section 424.535(e) to reverse a revocation based on proof that the business relationship has been terminated within

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30 days of the revocation.11   See CMS Ex. 5 at 1-3, 4-5; 6 at 1-3; P. Exs. 11 at 1-4; 12 at 1-4; 13 at 1-4.  Nothing in Petitioner’s seven submissions supporting its request for reconsideration put CMS on notice that Dr. Shah was no longer an owner of Petitioner; to the contrary, Petitioner’s arguments and supporting evidence repeatedly indicate otherwise.  P. Ex. 11 at 34 (April 10, 2019 letter stating that “the remaining partners  . . . are in legal proceedings in terms of a stock buy out situation since firing Dr. Shah”); CMS Ex. 5 at 4 (stating that “[a] lawsuit is ongoing regarding Alap Shah’s ownership interest”); P. Ex. 14 at 10 (meeting minutes reporting that “the company could not take further loans to purchase [Dr. Shah’s] stock as we are maxed out . . . and that . . . an associate . . . would need to work at this level for 2-3 years before buying in to the practice and ultimately then purchasing [Dr. Shah’s] stock”); P. Ex. 14 at 14 (meeting minutes reporting that corporate accountants would “valuate” the stock and that if Dr. Shah “wanted a secondary eval[uation] that he would have to get one at his own expense”); P. Ex. 11 at 59 (Petitioner’s report to the Georgia Department of Labor that Petitioner is “in legal proceedings to buy Dr. Shah’s ownership which will be a large payout to him!”).

CMS, in its reconsidered determination, recognized that although Dr. Shah was no longer a managing employee, he continued to have an “ownership interest” in Petitioner.  CMS Ex. 7 at 6.  Pursuant to 42 C.F.R. § 424.535(e), when a supplier’s enrollment and billing privileges have been revoked pursuant to 42 C.F.R. § 424.535(a)(3), CMS may exercise its discretion to reverse the revocation if the supplier has terminated its business relationship with the individual against whom the adverse action was taken.  The exercise of this discretion is premised on the supplier submitting “proof” that it has terminated its business relationship with that individual within 30 days of the revocation.  42 C.F.R. § 424.535(e); see Central Kansas Cancer Inst., DAB No. 2749 at 12 (2016) (discussing that in order to terminate a business relationship pursuant to 42 C.F.R. § 424.535(e), the convicted individual must sell his or her ownership interest).  The use of the permissive word “may” means that a supplier who successfully terminated its business relationship with an owner within the specified time period would not have a right to have the determination reversed.  See Main St. Pharmacy, LLC, DAB No. 2349 at 8 (2010) (stating that the use of the term “may” in the regulation implies CMS’s authority to reverse a revocation is discretionary and that “nothing in the language of section 424.535(e) requires CMS to demonstrate that it considered whether to exercise its discretionary authority . . . .”).  As a matter within the discretion of CMS, and not the ALJ, CMS is under no obligation to reverse a revocation, even in a circumstance where the owner has sold his or her ownership interest within 30 days of the revocation.  Id.

Because Petitioner had not shown that it had terminated its business relationship with Dr. Shah (i.e., that Dr. Shah was no longer an owner of Petitioner), CMS declined to exercise

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its discretion pursuant to 42 C.F.R. § 424.535(e) to reverse the revocation.  CMS Ex. 7 at 6 (“[Petitioner] acknowledges that it did not yet purchase Dr. Shah’s ownership interest and that it is currently in legal proceedings with Dr. Shah to resolve this matter . . . .  As a result, CMS will not exercise its authority to reverse [Petitioner’s] revocation pursuant to § 424.535(e).”).  While Petitioner argues that a “gross injustice” has occurred as a result of its revocation, it has failed to identify any authority requiring CMS to exercise its discretion to reverse the revocation, even if Petitioner had demonstrated that Dr. Shah was no longer an owner of Petitioner, which it did not do.  I recognize Petitioner’s claim that the revocation has caused hardship to it and its remaining partners, but Petitioner has not identified a legal error by CMS in its refusal to exercise its discretion to reverse the revocation.  See Sunsites Pearce Fire District, DAB No. 2926 at 15 (2019) (“The [DAB] has repeatedly held that section 424.535(e) is ‘permissive in nature’ in that ‘the term “may” in the regulation implies that CMS’s authority to reverse a revocation is discretionary, even when a supplier terminates its business relationship with the convicted individual and submits proper notice . . . .’”) (internal citations omitted).

Revocation pursuant to 42 C.F.R. §§ 424.535(a)(1), 424.57(c)(10)

As previously discussed, a DMEPOS supplier must meet the standards set forth in 42 C.F.R. § 424.57(c), and CMS may revoke a DMEPOS supplier’s billing privileges if it fails to do so.  42 C.F.R. §§ 424.57(c)(1), (e); 42 C.F.R. § 424.535(a)(1).  Among other requirements, a DMEPOS supplier must have “a comprehensive liability insurance policy in the amount of at least $300,000 that covers both the supplier’s place of business and all customers and employees of the supplier.”  42 C.F.R. § 424.57(c)(10).  Palmetto explained that Petitioner’s supplier number was being revoked, in part, because it did not have a current comprehensive liability insurance policy for Petitioner on file.  CMS Ex. 3 at 1.  Palmetto explained that for any revocation based on 42 C.F.R. § 424.535(a)(1), Petitioner could submit a corrective plan.  CMS Ex. 3 at 2.  Palmetto further explained that Petitioner’s supplier number could be reinstated based on review of the corrective action plan “and any additional evidence” if it is determined that Petitioner is “in compliance with all supplier standards (see 42 [C.F.R.] § 424.57(c)).”  CMS Ex. 3 at 2.  Despite this clear notice instructing Petitioner how it could overcome a revocation on this basis, Petitioner, who was represented by its current counsel, submitted a professional liability insurance policy and not a comprehensive liability insurance policy.12

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Therefore, Petitioner, despite having the opportunity to demonstrate compliance, failed to submit the necessary evidence to demonstrate that revocation was not warranted pursuant to 42 C.F.R. §§ 424.535(a)(1), 424.57(c)(10).

Petitioner has not addressed the effective date of the revocation or the duration of the re‑enrollment bar.  Therefore, I need not address these issues.  See 42 C.F.R. §§ 424.535(c), 498.3(b).

To the extent that Petitioner may be requesting equitable relief, I am unable to grant equitable relief.  See US Ultrasound, DAB No. 2302 at 8 (2010) (stating that an ALJ may not grant equitable relief in an instance where statutory or regulatory requirements are not met).  Petitioner points to no authority by which I may grant it relief from the applicable regulatory requirements.  1866ICPayday.com, L.L.C., DAB No. 2289 at 14 (2009) (“An ALJ is bound by applicable laws and regulations and may not invalidate either a law or regulation on any ground . . . .”).

V.  Conclusion

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

1. “The National Supplier Clearinghouse is the single organizational entity responsible for issuing and revoking Medicare supplier billing privileges for suppliers of [DMEPOS].”  National Supplier Clearinghouse MAC, Palmetto GBA, https://www.palmettogba.com/palmetto/providers.nsf/DocsCatHome/Providers~National%20Supplier%20Clearinghouse?Open (last visited May 12, 2020).  The NSC is an administrative contractor for CMS.
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2. I collectively refer to Foot & Ankle of West Georgia, P.C., and Foot & Ankle Surgery Center, as both an ambulatory surgical center and supplier of durable medical equipment prosthetics and orthotics supplies (DMEPOS), as a single entity.
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3. Petitioner does not dispute that Dr. Shah was convicted of a felony offense for a financial crime, and therefore, I do not need to address this criminal activity in greater detail.
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4. TRICARE is a federal health insurance program for active and retired servicemembers, eligible veterans, and family members of sponsoring beneficiaries.  CMS Ex. 1 at 1; see, e.g., 32 C.F.R. § 199.17(a).
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5. The foreperson of the jury signed the jury verdict on January 14, 2019, and the verdict was entered on January 16, 2019.  CMS Ex. 2 at 1-2.  Neither party disputes that the date of the conviction is January 16, 2019.
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6. Palmetto also revoked Petitioner’s enrollment as an ambulatory surgery center pursuant to 42 C.F.R. § 424.535(a)(9), but CMS found this provision to be inapplicable.  CMS Ex. 4 at 1; see CMS Ex. 8 at 4-5.
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7. Despite my instruction in Section 8 of the Pre-Hearing Order that “Petitioner should not file as proposed exhibits any documents that CMS has already filed among its proposed exhibits,” Petitioner filed numerous documents that CMS had already filed with its pre-hearing exchange.  (P. Exs. 2, 3, 5, 7, 8, 9, 10, 24, and 25).  When referring to these documents, I cite to the CMS exhibit.
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8. Petitioner did not submit any written direct testimony or file a witness list, yet it nonetheless asks for an “in-person evidentiary hearing with the ability to present live testimony and documentary evidence and to engage in oral argument.”  P. Br. at 1 (emphasis omitted).  The Pre-Hearing Order is quite clear; a live in-person hearing is only necessary for the purpose of cross-examination of witnesses.  Pre-Hearing Order § 14 (“An in-person hearing to cross-examine witnesses will be necessary only if a party files admissible, written direct testimony, and the opposing party asks to cross-examine the witness(es).”); see Pre-Hearing Order § 8(d)(iii) (directing that a pre-hearing exchange shall include a copy of each proposed exhibit).
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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 judgment.
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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. Because I am not authorized to reverse a revocation pursuant to section 424.535(e), I do not consider these arguments in the first instance.
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12. I note that the exhibits listed in the reconsidered determination include a June 5, 2019 email message sent by NSC to Petitioner “stating that the comprehensive liability insurance on file . . . expired on February 10, 2019.”  CMS Ex. 7 at 3.  NSC sent this email message several weeks after Petitioner submitted copies of professional liability policies in May 9, 2019.  P. Ex. 13 at 1, 68-69.  Further, an email message sent on June 5, 2019, would have been received nearly a month prior to CMS’s issuance of its reconsidered determination on July 3, 2019.  CMS Ex. 7 at 1.  Neither party submitted a copy of this document as a proposed exhibit.
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