Paul Brody, DPM, DAB CR5799 (2021)

DECISION

The Centers for Medicare & Medicaid Services (CMS) upheld the determination of its administrative contractor, Noridian Healthcare Solutions (Noridian), to revoke the Medicare enrollment and billing privileges of Petitioner, Paul Brody, DPM, because, inter alia, he has a felony conviction for mail fraud within the preceding 10 years and his conviction is detrimental to the best interests of the Medicare program and its beneficiaries.  CMS also upheld Noridian’s placement of Petitioner on the preclusion list. 

Petitioner neither challenges the revocation of his enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3), nor his placement on CMS’s preclusion list.  Rather, Petitioner argues that revocation is not warranted pursuant to 42 C.F.R. § 424.535(a)(4) and (9), and that his revocation should not be retroactive to the date of his conviction.  Because Petitioner does not dispute his revocation under 42 C.F.R. § 424.535(a)(3) or his placement on the preclusion list, I uphold those determinations.  Noridian and CMS correctly determined that the effective date of Petitioner’s revocation is September 27, 2018, the date of his conviction. 

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I.  Background and Procedural History

Petitioner is podiatrist who was enrolled as a Medicare supplier in California.  See CMS Ex. 5 at 1.  On April 6, 2018, the United States Attorney for the Central District of California filed a one-count information charging that Petitioner committed felony mail fraud, in violation of 18 U.S.C. § 1341 and § 2(b), based on his scheme to defraud a health benefit plan when he “paid kickbacks to the owners and operators of [a medical clinic] in exchange for referrals of Plan members.”1  CMS Ex. 4 at 1, 5.  The information charged that Petitioner “attempted to disguise the nature of the checks by falsely characterizing the checks as payment for expenses including “Rent” or “Mgt fee,” when in truth, as [he] well knew, the payments were for referrals of Plan members to [a medical practice that he owned].”  CMS Ex. 4 at 5.  The information charged that Petitioner sent a payment in the amount of $50,982.92 through the U.S. Postal Service.  CMS Ex. 4 at 6.

A district court minute entry, filed on September 27, 2018, documents that Petitioner entered a plea of guilty to the information.  CMS Ex. 3.  The minute entry further reports:

The Court advises the defendant of his Constitutional rights and questions [Petitioner] regarding the plea of GUILTY.  The Court finds there is an independent factual basis for the plea and further finds the plea is made freely, intelligently and voluntarily, and with a full understanding of the nature of the charges, the consequences of the plea and of [Petitioner’s] Constitutional rights.  The Court accepts the plea and orders that the plea be entered.

CMS Ex. 3 at 1.2

On July 29, 2019, Petitioner submitted an enrollment application to update his Medicare enrollment record.  CMS Ex. 5 at 1.  Petitioner provided a negative response to the following question:  “Has a final adverse legal action ever been imposed against an applicant under any current or former name or business entity?”3   CMS Ex. 5 at 3. 

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On January 8, 2020, Noridian revoked Petitioner’s Medicare enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3), (4), and (9).4  CMS Ex. 2.  Noridian explained, in support of its determination that revocation was warranted pursuant to 42 C.F.R. § 424.535(a)(3), that it “has been made aware of [Petitioner’s] September 27, 2018, felony conviction, as defined in 42 C.F.R. § 1001.2, for Mail Fraud in violation of 18 U.S. Code §§ 1341 and 2 in the United States District Court, Central District of California.”  CMS Ex. 2 at 1.  Noridian also informed Petitioner that he would be placed on CMS’s preclusion list, effective July 1, 2020.  CMS Ex. 2 at 1.  Noridian informed Petitioner that it was establishing a bar to re-enrollment, and that “[h]e may be eligible to re-enroll on September 28, 2028.”   CMS Ex. 2 at 2; see 42 C.F.R. § 424.535(c).

Petitioner, through his current counsel, submitted a request for reconsideration arguing, in pertinent part, that he had not been convicted of a felony offense pursuant to 42 C.F.R. § 1001.2.  CMS Ex. 1 at 2.  Petitioner also “urge[d] the hearing officer to hold that the revocation should not be retroactive, which would result in substantial repayment demand.”  CMS Ex. 1 at 4.  Petitioner did not dispute his inclusion on CMS’s preclusion list.  CMS Ex. 1.

In a reconsidered determination dated May 12, 2020, CMS’s Provider Enrollment & Oversight Group informed Petitioner that Noridian had correctly revoked his enrollment and billing privileges pursuant to, inter alia, 42 C.F.R. § 424.535(a)(3).5   CMS provided the following discussion in support of its determination: 

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[Petitioner] contends he was not convicted of a felony because a plea, investigation by state or federal authorities, or other prejudgment action is not a conviction.  He also refers to the language of § 1001.2 which states, in part, that “convicted means…a judgment of conviction has been entered against an individual or entity by a Federal, state, or local court[.]”  However, [Petitioner’s] argument does not take into account the full definition of the term “convicted.”  Under § 1001.2, a conviction is also defined to include when “a Federal, State or local court has accepted a plea of guilty or nolo contendere by an individual or entity . . . .”  Here, as stated above, on September 27, 2018, [Petitioner] pleaded guilty, the court accepted his guilty plea, and entered a finding of guilt.  As a result, CMS considers [Petitioner’s] guilty plea to be a conviction, as defined under § 1001.2 for the purpose of a revocation under 42 C.F.R. § 424.535(a)(3).  Therefore, [Petitioner] was convicted of a felony within the preceding 10 years.

CMS considers certain enumerated offenses to be per se detrimental to the best interest of the Medicare program and its beneficiaries.  Under § 424.535(a)(3)(ii)(B), these offenses include 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.  CMS finds [Petitioner’s] felony offense of Mail Fraud similar to the crimes indicated under § 424.535(a)(3)(ii)(B), based on the particular circumstances surrounding his felony offense. 

CMS Ex. 8 at 3-4.  CMS also upheld Noridian’s placement of Petitioner on the preclusion list, stating:

Pursuant to 42 C.F.R. § 422.2 and § 423.100, CMS must consider if the individual, entity or prescriber, regardless of whether they are or were enrolled in Medicare, has been convicted of a felony under federal or state law within the previous 10 years that CMS deems detrimental to the best interests of the Medicare program.  In making this determination, CMS takes into consideration:

1) the severity of the offense; 2) when the offense occurred, and; 3) any other information that CMS deems relevant to its determination.

As stated above, [Petitioner] engaged in a fraudulent scheme by paying kickbacks to the owners and operators of [a clinic] in exchange for referrals of Plan Members to his own provider group . . . .  In order to pay the kickbacks to the owners and operators . . . [Petitioner] wrote checks to

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individuals and entities associated with [the clinic], disguising the nature of checks by falsely characterizing the check as payment for expenses.  CMS finds [Petitioner’s] conduct to be severe in nature because it calls into question his integrity and trustworthiness.  CMS relies on a provider’s honesty and transparency in order to ensure claims payment that are made are legitimate.  In addition, his payment of kickbacks calls into question the level of care he may have provided to patients.  [Petitioner’s] behavior indicates that he could negatively affect the integrity of the Medicare program.  The integrity of the Medicare program is dependent upon the integrity of its partners, and [Petitioner’s] behavior raises serious concerns for CMS that Trust Funds and beneficiaries may be at risk should [Petitioner] continue participating in the program.

CMS Ex. 8 at 6.   

Petitioner filed a request for hearing on July 13, 2020, in which he neither challenged his revocation pursuant to 42 C.F.R. § 424.535(a)(3) nor his placement on the preclusion list.  Rather, Petitioner challenged his revocation pursuant to 42 C.F.R. § 424.535(a)(4), (9), and disputed the effective date of the revocation of his enrollment and billing privileges.  

On July 15, 2020, the Civil Remedies Division issued my standing pre-hearing order, which directed the parties to file their respective pre-hearing exchanges.  CMS filed a pre-hearing brief and motion for summary judgment (CMS Br.), along with 11 exhibits (CMS Exs. 1-11).  Petitioner, through counsel, submitted a pre-hearing brief and opposition to CMS’s motion for summary judgment (P. Br.) and three exhibits (P. Exs. 12-14). 

CMS objects to Petitioner’s submission of P. Exs. 12 and 13 pursuant to 42 C.F.R.
§ 498.56(e).  CMS Br. at 19-21.  Based on Petitioner’s counsel’s sworn declaration that these documents were unavailable at the reconsideration stage, I find good cause for the late submission of this evidence.  42 C.F.R. § 498.56(e).  Therefore, I admit CMS Exs. 1-11 and P. Exs. 12-14 into the evidentiary record.  

Because neither party has submitted the written direct testimony of any witnesses, a hearing is not necessary for the purpose of cross-examination of any witnesses.  See Pre-Hearing Order §§ 11-14.  I consider the record in this case to be closed, and the matter is ready for a decision on the merits.6

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II.  Issue

Petitioner neither disputes the revocation of his enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3), nor his placement on the preclusion list; the sole issue for review is whether Noridian and CMS had a legitimate basis to revoke Petitioner’s enrollment and billing privileges effective September 27, 2018. 

III.  Jurisdiction

I have jurisdiction over the appeals of the types of initial determinations listed in, inter alia, 42 C.F.R. § 498.3(b)(17), (20).  See 42 C.F.R. § 498.5(l), (n)(2).

IV.  Findings of Fact, Conclusions of Law, and Analysis7

As a podiatrist, Petitioner is a “supplier” for purposes of the Medicare program.  See 42 U.S.C. §§ 1395x(d), (r); 42 C.F.R. §§ 400.202 (definition of supplier), 410.20(b)(3).  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 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).  The effective date of a revocation based on a felony conviction is the date of the conviction.  42 C.F.R. § 424.535(g).  When a supplier’s Medicare enrollment and billing privileges are revoked, the supplier is barred

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from re-enrolling in the Medicare program for a period of between one and ten years.  42 C.F.R. § 424.535(c).  

Petitioner concedes that he paid a clinic “a percentage of the collections he received from the surgeries he performed” on the beneficiaries of a specific health plan, and he also concedes that “the moneys transferred were . . . illegal kickbacks.”  P. Br. at 2.  Petitioner “is not challenging the fact that he committed certain fraudulent acts or that he plead guilty to committing said acts . . . .”  P. Br. at 3.  Notably, Petitioner “is not challenging the fact that he plead guilty or the facts regarding the underlying conduct that led to his plea,” and concedes that “CMS will still have grounds to terminate [his] privileges under 42 [C.F.R.] § 424.535(a)(3).”  P. Br. at 7.  Petitioner “accepts this determination.”  P. Br. at 7.8

Petitioner also does not contest his placement on CMS’s preclusion list, which is a single list of individuals and entities for whom Medicare Advantage plans cannot provide reimbursement for items and services they provide, and of prescribers to whom Medicare Part D plans cannot provide reimbursement for any prescriptions the individuals write.  42 C.F.R. §§ 422.222, 423.120(c)(6).  As relevant here, CMS may place the individual or prescriber on the preclusion list when the following requirements are met:

(3) The [individual or prescriber], regardless of whether . . . enrolled in Medicare, has been convicted of a felony under Federal or State law within the previous 10 years that CMS deems detrimental to the best interests of the Medicare program.  Factors that CMS considers in making such a determination under this paragraph [include:]

(A) The severity of the offense;
(B) When the offense occurred;

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(C) Any other information that CMS deems relevant to its determination.

42 C.F.R. §§ 422.2; 423.100.

1. On September 27, 2018, a federal district court accepted Petitioner’s guilty plea to a one-count information charging that he had committed felony mail fraud;

2. Pursuant to 42 C.F.R. §§ 424.535(a)(3)(i) and 1001.2, a person has a conviction when a plea of guilty has been accepted by a federal, state, or local court.

3. Pursuant to 42 C.F.R §§ 424.535(a)(3)(i) and 1001.2, Petitioner has a felony conviction.

4. Revocation is warranted pursuant to 42 C.F.R. § 424.535(a)(3)(i) when a supplier has a felony conviction in the preceding 10 years for an offense CMS determines is detrimental to the best interests of the Medicare program and its beneficiaries.

5. On January 8, 2020, Noridian revoked Medicare Petitioner’s enrollment and billing privileges pursuant to, inter alia, 42 C.F.R. § 424.535(a)(3), and placed Petitioner on the preclusion list, effective July 1, 2020, pursuant to 42 C.F.R. §§ 422.2, 422.222, 423.100, and 423.120(c)(6).

6. On May 12, 2020, CMS upheld Noridian’s determinations.

7. Because Petitioner does not dispute either the revocation of his enrollment and billing privileges based on his felony conviction or his placement on the preclusion list, I do not disturb these determinations.

8. Pursuant to 42 C.F.R. § 424.535(g), the effective date of a revocation based on a felony conviction is the date of the conviction.

9. Noridian and CMS correctly determined that the effective date of revocation is September 27, 2018, which is the date of Petitioner’s felony conviction.

The only remaining issue I must address is whether Noridian and CMS correctly determined that the effective date of Petitioner’s revocation is September 27, 2018.  The effective date of revocation is determined pursuant to 42 C.F.R. § 424.535(g), which provides:

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(g) Effective date of revocation.  Revocation becomes effective 30 days after CMS or the CMS contractor mails notice of its determination to the provider or supplier, except if the revocation is based on Federal exclusion or debarment, felony conviction, license suspension or revocation, or the practice location is determined by CMS or its contractor not to be operational.  When a revocation is based on a Federal exclusion or debarment, felony conviction, license suspension or revocation, or the practice location is determined by CMS or its contractor not to be operational, the revocation is effective with the date of exclusion or debarment, felony conviction, license suspension or revocation, or the date that CMS or its contractor determined that the provider or supplier was no longer operational. 

42 C.F.R. § 424.535(g). 

Petitioner entered his guilty plea on September 27, 2018.  CMS Ex. 3 at 1.  For purposes of 42 C.F.R. §§ 424.535(a)(3)(i) and 1001.2, Petitioner was convicted as of that date.  Therefore, the effective date of the revocation of Petitioner’s enrollment and billing privileges is September 27, 2018.  42 C.F.R. § 424.535(g); CMS Ex. 3 at 1.  The effective date of revocation, September 27, 2018, is set by regulation, and I have no authority to disturb that determination.  See, e.g., US Ultrasound, DAB No. 2302 at 8 (2010) (“Neither the ALJ nor the [Departmental Appeals Board] is authorized to provide equitable relief by reimbursing or enrolling a supplier who does not meet statutory or regulatory requirements.”).

V.  Conclusion

For the reasons explained above, the effective date of the revocation of Petitioner’s enrollment and billing privileges remains September 27, 2018.  I do not disturb the determination placing Petitioner on CMS’s preclusion list, effective July 1, 2020.

1. Mail fraud is a felony offense that is punishable by up to 20 years of incarceration.  18 U.S.C. § 1341; see 18 U.S.C. § 3559(a) (federal criminal code classifying a crime as a felony if the offense is punishable by more than one year of incarceration).
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2. The record does not include a judgment of conviction.
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3. Petitioner completed his applications via the internet-based Provider, Enrollment, Chain, and Ownership System (PECOS).  Section 3(a) of the application requires the applicant to report convictions, as defined by 42 C.F.R. § 1001.2, within the preceding 10 years.  CMS Ex. 10 at 12.
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4. Because Petitioner does not challenge his revocation pursuant to 42 C.F.R. § 424.535(a)(3), it is unnecessary to address any additional bases for revocation.  See CMS Br. at 15 n.1 (citing Daniel Wiltz, M.D. & Family Healthcare Clinic, APMC, DAB No. 2864 at 12 (2018) and arguing it may not be necessary to consider bases for revocation in addition to 42 C.F.R. § 424.535(a)(3)).  I note that the re-enrollment bar until September 28, 2028, coincides with the first day Petitioner is eligible to re-enroll in the Medicare program, and therefore, the additional bases for revocation under 42 C.F.R. § 424.535(a)(4) and (9) lack any impact.  CMS Ex. 2 at 2; see 42 C.F.R. § 424.530(a)(3).
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5. CMS misstated that Noridian had established a three-year bar to re-enrollment, when in fact, Noridian had imposed a bar to re-enrollment until September 28, 2028, which is 10 years and a day from the date of Petitioner’s conviction.  CMS Ex. 8 at 7; see CMS Ex. 2 at 2; 42 C.F.R. §§ 424.535(a)(3), 42 C.F.R. § 1001.2; see also 42 C.F.R. § 424.530(a)(3) (precluding enrollment within 10 years of a felony conviction that is detrimental to the best interests of the Medicare program and its beneficiaries).  A re-enrollment bar is not reviewable, and Petitioner has not disputed this issue.  See Vijendra Dave, M.D., DAB No. 2672 at 11 (2016). 
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6. Because a hearing is unnecessary, I need not address whether summary judgment is appropriate.
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7. My numbered findings of fact and conclusions of law are set forth in italics and bold font.
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8. Petitioner explained that the basis for his appeal is that “CMS simply does not have grounds to penalize [him] for violating 42 [C.F.R.] § 424.535(a)(4) and (9) . . . .”  P. Br. at 7.  As I previously stated, because Petitioner concedes that revocation is warranted pursuant to 42 C.F.R. § 424.535(a)(3), it is unnecessary to review the additional bases for revocation funder subsections 424.535(a)(4) and (9).  However, I briefly note that the premise of Petitioner’s arguments with respect to the other regulatory bases for revocation is unfounded, in that he misinterprets that an agreement relieved him of the obligation to report his guilty plea to the Medicare program.  P. Br. at 6-7; see P. Ex. 12.  Nothing in the four corners of the agreement purports to prohibit disclosure of Petitioner’s guilty plea to the Medicare program; the Medicare program is neither a federal and state licensing agency or board, nor a professional association or board.  P. Ex. 12.
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