HPC, LLC, DAB CR6056 (2022)

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, HPC, LLC, pursuant to, inter alia, 42 C.F.R. § 424.535(a)(3), effective March 5, 2020, because an indirect owner, Greg Lindberg, had been convicted of felony financial crimes.  Thereafter, CMS upheld Palmetto’s determinations.  For the reasons stated below, I affirm the revocation of Petitioner’s DMEPOS supplier number (Provider Transaction Access Number (PTAN) # 4985740001), with a modified effective date of revocation of September 4, 2020.  Because CMS limited its arguments to the revocation of Petitioner’s DMEPOS supplier number and did not address the revocation of

Page 2

Petitioner’s Part B enrollment, I reverse the revocation of Petitioner’s Part B enrollment (PTAN # 051528586).

I.     Background and Procedural History

An enrollment record for Petitioner listed only one person, Greg Lindberg, who held an individual ownership interest in the company.  CMS Ex. 3 at 5-6.  Petitioner identified Mr. Lindberg as an “indirect owner.”2   CMS Ex. 3 at 6.

On or about March 18, 2019, a federal grand jury returned a true bill of indictment charging that Mr. Lindberg, as the owner of a managing company for several insurance and reinsurance companies, engaged in a scheme to offer more than a million dollars in bribes to the Commissioner of the North Carolina Department of Insurance in exchange for favorable official action, to include the removal of a Senior Deputy Assistant Commissioner who oversaw regulation of Mr. Lindberg’s interests.  CMS Ex. 1 at 1-4.  Count One of the indictment charged that Mr. Lindberg engaged in a conspiracy to commit honest services wire fraud, in violation of 18 U.S.C. § 1349, and Count Two charged that Mr. Lindberg committed bribery concerning programs receiving federal funds and aiding and abetting, in violation of 18 U.S.C. §§ 666(a)(2) and 2.  CMS Ex. 1 at 3-19. 

A federal jury returned guilty verdicts for each count on March 5, 2020.  CMS Ex. 2.  On August 19, 2020, the district court sentenced Mr. Lindberg to an 87-month term of incarceration.  Shortly thereafter, on September 4, 2020, the district court entered judgment of conviction.  P. Ex. 8 at 1.  

Petitioner submitted the unsworn written direct testimony of Rich Hoover, who identified himself as the chief operating officer of HCPSP Investments, LLC (HCPSP).  P. Ex. 14.  Mr. Hoover stated that HCPSP owned Petitioner, and that Mr. Lindberg had divested his ownership of HCPSP on June 3, 2021.  P. Ex. 14 at 1.  Petitioner also submitted the unsworn testimony of Mike Pereira, who did not identify his position.  P. Ex. 15.  Mr. Pereira explained that “[a] true and accurate copy of the HPC Trust Documentation effectuating [Mr. Lindberg’s] divestment” had been submitted as P. Ex. 15.O.2.3   P. Ex.

Page 3

15 at 1.  Mr. Pereira also reported that Mr. Lindberg had an ownership interest in HPCSP Holdings, LLC, and “[on] June 2, 2021, HPCSP had an indirect ownership interest in HPC, LLC.”  P. Ex. 15 at 1.

Shortly after Petitioner updated its enrollment record on June 4, 2021 (CMS Ex. 3 at 1),4 Palmetto issued notices, dated June 22, 2021, revoking Petitioner’s enrollment as both a Part B and DMEPOS supplier, effective March 5, 2020.  P. Exs. 2, 3.  One notice mailed to an address in Memphis, Tennessee, informed Petitioner that Palmetto had revoked Petitioner’s enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3), (a)(4), and (a)(9).5   P. Ex. 2 at 1.  The other notice, mailed to an address in Mobile, Alabama, revoked Petitioner’s enrollment as a DMEPOS supplier pursuant to 42 C.F.R. § 424.535(a)(3) and (a)(9).  P. Ex. 3 at 1.  In both letters, Palmetto informed Petitioner of the limited opportunity to submit supporting documentary evidence, explaining:

[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 (ALJ) 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 unless an ALJ allows additional information to be submitted.  

P. Exs. 2 at 3; 3 at 2-3.  Palmetto informed Petitioner that it would not be eligible to re‑enroll in the Medicare program until March 6, 2030.  P. Exs. 2 at 3; 3 at 1, 3.

Petitioner, through its current counsel, submitted a letter dated July 20, 2021, in which it requested reconsideration of the determinations revoking its Medicare enrollment and billing privileges.  P. Ex. 4.  Petitioner summarized that “Mr. Lindberg, in his capacity as chairman for non-related companies Eli Global, LLC and Global Bankers Insurance Group conspired with another to give money to the Commissioner of the North Carolina

Page 4

Department of Insurance in exchange for specific official action that would remove the insurance regulator assigned by the State of North Carolina to Global Bankers Insurance Group.”  P. Ex. 4 at 2.  Petitioner also stated that “[p]rior to June 3, 2021, Mr. Lindberg, by virtue of his ownership in HPCSP Holdings, LLC . . . was the owner of HPC.”  P. Ex. 4 at 2.  Petitioner reported that “[e]ffective June 3, 2021, HPC’s organization structure was modified and Mr. Lindberg divested his ownership, and all of Mr. Lindberg’s membership interest in HPCSP (e.g. right, title, interests) was severed, when he transferred his interest in HPCSP Grantor, LLC which then transferred said interest to the HPCSP Trust . . . under the control and direction of Trustee Hugh Steven Wilson.”  P. Ex. 4 at 3.  Petitioner reported:  “Mr. Lindberg is wholly divested from his ownership.”  P. Ex. 4 at 3.

Petitioner did not dispute that revocation would be warranted pursuant to 42 C.F.R. § 424.535(a)(3) based on Mr. Lindberg’s felony convictions, but rather, argued that “Mr. Lindberg was divested before the revocation notice was issued” and “had been disassociated from HPC for nearly three (3) weeks before the revocation notice was issued.”  P. Ex. 4 at 4.  Petitioner explained that “42 C.F.R. § 424.535(e) expressly permits reversal of any revocation if the owner, upon whom the revocation is based, becomes disassociated with the company.”  P. Ex. 4 at 4.  Although Petitioner invoked CMS’s discretionary authority to reverse a revocation pursuant to 42 C.F.R. § 424.535(e), it did not submit any evidence that Petitioner and Mr. Lindberg had terminated their business relationship.  P. Ex. 4 at 4.  Petitioner also disputed the effective date of the revocation, arguing that the March 5, 2020 jury verdict should not be the basis for the effective date because a jury verdict, in and of itself, is not a conviction.6   P. Ex. 4 at 5.

On October 1, 2021, CMS’s Provider Enrollment & Oversight Group issued separate reconsidered determinations in which it upheld the revocation of both Petitioner’s Part B enrollment and DMEPOS supplier number, effective March 5, 2020, pursuant to 42 C.F.R. § 424.535(a)(3).  P. Exs. 5 (identified by CMS in document header as a “Part B enrollment” determination); 6 (identified by CMS in document header as a “DMEPOS enrollment” determination).  CMS explained that revocation pursuant to 42 C.F.R. § 424.535(a)(3)(ii)(B) was warranted because Mr. Lindberg, as an owner, 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.  P. Exs. 5 at 4-6; 6 at 4-6.

CMS also addressed whether it should exercise its discretionary authority to reverse the revocation.  P. Exs. 5 at 4; 6 at 4; see 42 C.F.R. § 424.535(e).  CMS explained:

Page 5

CMS notes that although HPC’s attorney . . . states “as evidenced here [in the reconsideration letter], Mr. Lindberg has divested before the revocation notice was issued”, HPC has not provided any documentary evidence or proof along with its reconsideration to CMS to enable us to verify this information.  HPC correctly cites the regulation pursuant to § 424.535(e), which states that[, “]if the revocation was due to adverse activity (sanction, exclusion, or felony) against an owner…..of the provider or supplier furnishing Medicare reimbursable services, the revocation may be reversed if the provider. . . terminates and submits proof that it has terminated its business relationship with that individual within 30 days of the revocation notification”, HPC failed to submit such required proof that it terminated Mr. Lindberg, within its 30 days.  In [the] absence of such proof, HPC did not satisfy its burden to show that Mr. Lindberg was terminated.  As such, CMS continues to believe that Mr. Lindberg may still be an indirect owner of HPC as listed in the Medicare enrollment record.  Therefore, CMS will not use our discretionary authority to reverse HPC’s Medicare enrollment.  

P. Exs. 5 at 4; 6 at 4 (emphasis in originals).

On November 24, 2021, Petitioner timely filed a request for an administrative law judge (ALJ) hearing that appealed both reconsidered determinations.  Upon docketing the request for hearing, the Civil Remedies Division issued a notice on December 1, 2021, acknowledging that the request for hearing encompassed a single NPI and two PTANs. 

CMS filed a pre-hearing brief and motion for summary judgment (CMS Br.), along with three exhibits (CMS Exs. 1-3).  Petitioner submitted a memorandum in opposition to CMS’s motion for summary judgment (P. Br.), along with 17 exhibits (P. Exs. 1-15, 15.O.1, and 15.O.2).  CMS submitted a reply brief (CMS Reply).  

I exclude P. Ex. 15.O.2 from the evidentiary record because it is new documentary evidence that was not accompanied by a statement of good cause.  42 C.F.R. § 498.56(e).  Section 10 of my standing pre-hearing order, issued on December 1, 2021, provided the following direction to the parties:

With respect to enrollment-related cases, Petitioner may not offer new documentary evidence absent a showing of good cause for failing to present that evidence previously to CMS.  If Petitioner offers such evidence, the evidence

Page 6

must be specifically identified as new and Petitioner must explain, in a separate filing from its brief, why good cause exits for its submission.  Petitioner must file the request contemporaneous with its pre‑hearing exchange.  Absent a showing of good cause as required by 42 C.F.R. § 498.56(e), evidence that could have been submitted to CMS prior to the filing of the request for hearing will be excluded.

(emphasis in original).  Despite this clear instruction, Petitioner submitted new documentary evidence that was not accompanied by a statement of good cause.  Although CMS has not objected to the submission of new documentary evidence, 42 C.F.R. § 498.56(e) requires that an ALJ determine whether new documentary evidence is admissible.  42 C.F.R. § 498.56(e)(2)(ii); see Care Pro Home Health, Inc., DAB No. 2723 at 11 (2016).  

In its request for reconsideration, Petitioner argued that “[a]s of the date of issuance” of the revocation notices on June 22, 2021, “Mr. Lindberg had no relationship with HPC.”  Petitioner argued that “Mr. Lindberg was divested before the revocation notice was issued” and “had been disassociated from HPC for nearly three (3) weeks before the revocation notice was issued.”  P. Ex. 4 at 4.  Petitioner also reported:

Effective June 3, 2021, HPC’s organization structure was modified and Mr. Lindberg divested his ownership, and all of Mr. Lindberg’s membership interest in HPCSP (e.g. right, title, interests) was severed, when he transferred his interest in HPCSP to HPCSP Grantor, LLC which then transferred said interest to the HPCSP Trust (the “Trust”) under the control and direction of Trustee Hugh Steven Wilson.  Mr. Lindberg is wholly divested from his ownership.  The Trust now holds all ownership interest in HPCSP (which holds all ownership interest of HPC).  None of these entities (Trust, HPCSP, or HPC) are or can be owned or controlled, directly or indirectly, by Mr. Lindberg.  In fact, with the transfer, a Board of Managers (including Michael Workman, J. Anthony Clancy, and Justin Holbrook) is the only entity that can direct or manage the affairs of HPCSP.

P. Ex. 4 at 3.  Petitioner further claimed that, “[o]n June 4, 2021, after HPC effectively separated from Mr. Lindberg, HPC executed the CMS 855 enrollment application.”  P. Ex. 4 at 3; see CMS Ex. 3.  Petitioner block-quoted the text of 42 C.F.R. § 424.535(e), which states that CMS may exercise its discretionary authority to reverse a revocation that was “due to adverse activity (sanction, exclusion, or felony) against an owner” when

Page 7

the provider or supplier “submits proof that it has terminated its business relationship” with that individual.  P. Ex. 4 at 4.

Despite Petitioner’s stated familiarity with the section 424.535(e) requirement that it submit “proof” of its divestment from Mr. Lindberg (P. Ex. 4 at 4), along with Palmetto’s prior instruction that Petitioner must submit any evidence it wanted a hearing officer or ALJ to review (P. Exs. 2 at 3; 3 at 2-3), Petitioner did not submit any documentary evidence to support its claim that it had divested from Mr. Lindberg on June 3, 2021.  P. Ex. 4; see P. Exs. 5 at 1-2; 6 at 1-2 (lists of exhibits considered by CMS at the time it issued its reconsidered determinations that does not include any documentation regarding termination of the business relationship).7   When Petitioner submitted this evidence with its pre-hearing exchange, it neither identified P. Ex. 15.O.2 as “new” nor made a showing of good cause, despite the clear instructions in Section 10 of the standing pre-hearing order.  

While “good cause” is not defined in the regulations, the Departmental Appeals Board (DAB) has explained: 

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). 

Care Pro , DAB No. 2723 at 11.  Because Petitioner has not offered any showing of good cause for submitting new documentary evidence at the ALJ level, I exclude P. Ex. 15.O.2

Page 8

from the evidentiary record.  I admit CMS Exs. 1-3 and P. Exs. 1-15 and 15.O.1 into the evidentiary record.  

Neither party has requested a hearing for the purpose of cross-examination of any witnesses, and a hearing is therefore unnecessary.8   Pre-Hearing Order §§ 12-14.  The record is closed, and the case is ready for a decision on the merits.9

II.    Issues

1. Whether CMS waived its opportunity to submit arguments in support of the reconsidered determination addressing Petitioner’s Part B enrollment under PTAN # 051528586, such that reversal is warranted.
2. Whether CMS had a legal basis to revoke Petitioner’s Medicare enrollment and billing privileges based on the felony convictions of its indirect owner within the preceding 10 years.
3. Whether CMS correctly determined the effective date of Petitioner’s revocation.

III.   Jurisdiction

I have jurisdiction to decide this case.  42 C.F.R. §§ 498.3(b)(17)(i), 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.  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

Page 9

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:

(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).

CMS, in defining “convicted” for purposes of 42 C.F.R. § 424.535(a)(3), relies on the Inspector General’s definition of “convicted” found at 42 C.F.R. § 1001.2 (defining numerous terms used by the Inspector General).  As relevant here, subsection (a) of that definition defines “convicted” as “[a] judgment of conviction has been entered against an individual . . . by a Federal, State or local court.”  Subsection (b) of the regulatory definition of “convicted” defines “convicted” as “[a] Federal, State or local court has made a finding of guilt against an individual.” 

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)(1); 42 C.F.R. § 424.535(a)(1).

Page 10

1.  Count One of a federal indictment charged Mr. Lindberg with engaging in a conspiracy to commit honest services wire fraud.  

2.  Count Two of a federal indictment charged Mr. Lindberg with bribery concerning programs receiving federal funds and aiding and abetting.

3.  On March 5, 2020, a federal jury returned a verdict finding Mr. Lindberg guilty of both counts charged by indictment.  

4.  Following Mr. Lindberg’s sentencing on August 19, 2020, the court entered judgment of conviction on September 4, 2020.

5.  Petitioner updated its enrollment record on June 4, 2021, at which time it continued to list Mr. Lindberg as an indirect owner and did not list any individuals with an ownership or management interest who replaced Mr. Lindberg.

6.  Petitioner has not disputed that Mr. Lindberg’s felony convictions would warrant revocation because the convictions are for financial crimes that are per se detrimental to the best interests of the Medicare program and its beneficiaries.

7.  On June 22, 2021, Palmetto issued an initial determination revoking Petitioner’s supplier number pursuant to 42 C.F.R. § 424.535(a)(3) based on the felony convictions of its indirect owner.

8.  Prior to its filing of the instant request for hearing, Petitioner did not submit proof that it had terminated its business relationship with Mr. Lindberg.  

9.  In a reconsidered determination dated October 1, 2021, CMS did not exercise its discretionary authority to reverse the revocation because Petitioner had not submitted proof that it had terminated its business relationship with Mr. Lindberg, as required by C.F.R. § 424.535(e).

10.I have no authority to review CMS’s refusal to exercise its discretion, and Petitioner did not comply with the requirement pursuant to 42 C.F.R. § 424.535(e) that it submit proof that it had terminated its business relationship with Mr. Lindberg.  

11.Because an indirect owner of Petitioner had felony convictions for financial crimes that are detrimental to the Medicare program and its beneficiaries, CMS and Palmetto had a legitimate basis to revoke

Page 11

Petitioner’s DMEPOS supplier enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3)(ii)(B).

12.The court entered judgment of conviction on September 4, 2020.  

13.Pursuant to subsection (b) of the definition of “convicted” found at 42 C.F.R. § 1001.2, the date of Mr. Lindberg’s convictions is the date the court entered judgment of conviction on September 4, 2020.

14.Pursuant to 42 C.F.R. §§ 424.535(g) and 1001.2, the effective date of Petitioner’s revocation is September 4, 2020.

15.Petitioner was dually enrolled in the Medicare program under the same NPI, 1174584544, but different PTANs, # 051528586 and # 498574000

16.Although Petitioner appealed both of CMS’s reconsidered determinations, CMS did not address Petitioner’s appeal of one of those determinations.  Therefore, reversal of the determination involving PTAN # 051528586 is warranted. 

I reverse the October 1, 2020 reconsidered determination upholding the revocation of Petitioner’s Part B enrollment under PTAN # 051528586 because CMS did not address that determination in its briefing. 

Petitioner unquestionably appealed both of CMS’s October 1, 2021 reconsidered determinations.  See DAB E-File Docket Entry No. 1 (Request for Hearing at 1).  And CMS acknowledged that Petitioner’s request for hearing encompassed appeals of both determinations.  See DAB E-File Docket Entry No. 3 (CMS’s December 1, 2021 Notice of Appearance listing Petitioner’s NPI and the PTANs listed on both reconsidered determinations).  However, CMS limited its briefing to only the reconsidered determination upholding the revocation of Petitioner’s enrollment as a supplier of DMEPOS.  See, e.g., CMS Br. at 1 (“Prior to the revocation, the Petitioner had been enrolled as a supplier of durable medical equipment, prosthetics, orthotics or supplies (“DME”).”); 5 (“CMS’ revocation decision rested on two of the bases specified in 42 C.F.R. § 424.535(a) . . .”); passim (repeatedly referencing a single “Originating Decision” (i.e., reconsidered determination)).11   Even after Petitioner pointed out that CMS had failed to address the Part B enrollment reconsidered determination in its brief

Page 12

(P. Br. at 1 n.1), CMS filed a reply brief that neither refuted this allegation nor addressed the Part B enrollment reconsidered determination. 

Because Petitioner appealed the reconsidered determination upholding the revocation of its Part B enrollment and CMS failed to defend that determination, I reverse the October 1, 2021 determination pertaining to PTAN # 051528586.  Inasmuch as I uphold the separate revocation determination pertaining to the same corporate entity, HPC, LLC, with the same NPI, 1174584544, it appears that reversal of the Part B enrollment revocation may have little, if any, meaningful and practical significance. 

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

Petitioner claims “there is no basis for revocation of [its] Medicare enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3) on the basis that any owner of a supplier was convicted of a felony within the preceding 10 years,” which appears to be based on an unsupported claim that Mr. Lindberg was no longer an owner at the time Palmetto issued the June 22, 2021 determination revoking Petitioner’s DMEPOS enrollment.  P. Br. at 5, 12 (capitalization and bold omitted).  Although Petitioner does not specifically dispute that Mr. Lindberg has felony convictions that would warrant revocation of its enrollment pursuant to 42 C.F.R. § 424.535(a)(3)(ii)(B), it disputes the March 5, 2020 effective date of its revocation.  P. Br. at 14. 

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.  Fady Fayad, M.D., DAB No. 2266 at 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).  Mr. Lindberg was convicted of conspiracy to commit honest services wire fraud and bribery concerning programs receiving federal funds and aiding and abetting.  CMS Exs. 1 at 3, 19; 2.  The felony offenses involved Mr. Lindberg’s role in offering the Commissioner of the North Carolina Department of Insurance more than one million dollars in exchange for favorable official actions.  CMS Ex. 1 at 4.  Mr. Lindberg’s felony crimes were undoubtedly financial crimes, and as such, are per se detrimental to the best interests of the Medicare program and its beneficiaries. 

Petitioner does not dispute that Mr. Lindberg committed the type of felony offense that would warrant revocation pursuant to 42 C.F.R. § 424.535(a)(3).  Petitioner also does not dispute that Mr. Lindberg was an indirect owner at the time the court adjudged his

Page 13

convictions on September 4, 2020, nor does it dispute that Mr. Lindberg continued to be an indirect owner through at least June 3, 2021.  Petitioner also does not claim that it had updated its enrollment record to remove Mr. Lindberg as an owner and manager or report new owners and/or managers.  See Request for Hearing at 2-3 (reporting that Michael Workman, J. Anthony Clancy, and Justin Holbrook had “authority to manage the business and affairs” of HPCSP as the “Board of Managers” following the divestment from Mr. Lindberg).  In summary, Petitioner does not dispute that, for approximately nine months, it continued to be owned and managed by a felon who had been convicted of financial crimes that are per se detrimental to the best interests of the Medicare program. 

Petitioner claims, without supporting evidence, that it had already terminated its relationship with Mr. Lindberg by the time Palmetto issued the June 22, 2021 notice revoking its enrollment.  This claim is undermined by the fact that, only a day after the purported divestment from its indirect owner on June 3, 2021, Petitioner certified as true that it continued to be owned by Mr. Lindberg and did not provide any information regarding its new “Board of Managers.”  CMS Ex. 3 at 5-6; P. Ex. 14 at 2 (“To the extent that Mr. Lindberg remained included in the application, it was an error and excusable neglect.”); see Request for Hearing at 2-4.  It is simply implausible that Petitioner, literally within hours of a major corporate transformation to divest from a convicted felon who jeopardized its continued enrollment in the Medicare program, would have overlooked reporting these ownership and management changes when it updated other less significant information in its enrollment record. 

Regardless of the specific date in 2021 that Petitioner completed its divestment from Mr. Lindberg, the effective date of Petitioner’s revocation far pre-dates the divestment.  42 C.F.R. § 424.535(g) (mandating that the effective date of a revocation is the date of the felony conviction).  Therefore, even if Petitioner had successfully terminated its business relationship with Mr. Lindberg on June 3, 2021, Palmetto had a legitimate basis to revoke Petitioner’s enrollment pursuant to 42 C.F.R. § 424.535(a)(3) retroactive to the date of Mr. Lindberg’s convictions.  42 C.F.R. § 424.535(g).

Because Petitioner’s revocation is based on 42 C.F.R. § 424.535(a)(3), it had two means to pursue reversal of the revocation.  First, Petitioner could have argued that 42 C.F.R. § 424.535(a)(3) is inapplicable as a revocation authority because it did not have an owner or managing employee who had been convicted of a felony offense that is detrimental to the best interests of the Medicare program and its beneficiaries.  Petitioner has not advanced such an argument.  Otherwise, and within 30 days of the revocation notice, Petitioner could have submitted proof that it had terminated its business relationship with Mr. Lindberg and requested that CMS exercise its discretionary authority to revoke the revocation.  42 C.F.R. § 424.535(e).  In its request for reconsideration, Petitioner block‑quoted the regulatory requirement that it submit “proof” that it had terminated its business relationship with Mr. Lindberg within 30 days of the revocation notification.  P.

Page 14

Ex. 4 at 4 (quoting 42 C.F.R. § 424.535(e)).  Yet, Petitioner did not submit any supporting evidence in response to the notices revoking its enrollment.12

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); Cent. Kan. Cancer Inst., DAB No. 2749 at 12 (2016) (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.  Main St. Pharmacy, LLC, DAB No. 2349 at 8 (2010) (use of the term “may” in the regulation implies that CMS’s authority to reverse a revocation is discretionary and “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.  

An ALJ, unlike CMS, is not afforded the discretion pursuant to section 424.535(e) to reverse a revocation.  Petitioner did not submit any “proof” that Mr. Lindberg was no longer an owner of Petitioner; to the contrary, Petitioner’s then-current enrollment record continued to list Mr. Lindberg as an indirect owner.  CMS Ex. 3 at 5-6.  Because Petitioner did not submit proof that it had terminated its business relationship with Mr. Lindberg, CMS appropriately declined to exercise its discretion pursuant to 42 C.F.R. § 424.535(e) to reverse the revocation.  P. Ex. 6 at 4 (Petitioner “failed to submit such required proof that it terminated Mr. Lindberg, within its 30 days” and in the “absence of

Page 15

such proof, [Petitioner] did not satisfy its burden to show that Mr. Lindberg was terminated.”) 

In summary, Petitioner has not demonstrated any error in the determinations to revoke its enrollment as a DMEPOS supplier pursuant to 42 C.F.R. § 424.535(a)(3).  Palmetto and CMS had a legitimate basis to revoke Petitioner’s enrollment and billing privileges.

The effective date of the revocation is properly September 4, 2020

As previously discussed, subsections (a) and (b) of the definition of “convicted” found at 42 C.F.R. § 1001.2 respectively define “convicted” to mean when “[a] judgment of conviction has been entered against an individual . . . by a Federal, State or local court” or “[a] Federal, State, or local court has made a finding of guilt against an individual.”  Id.  In its request for reconsideration, Petitioner squarely argued that based on these definitions, the effective date of its revocation should not be based on the date of the jury’s March 5, 2020 verdict because “a jury’s verdict is not a conviction.”13   P. Ex. 4 at 5.  CMS’s reconsidered determination was dismissive of this argument, implying in a footnote, without any supporting explanation, that a jury finding of guilt is a court finding of guilt.  P. Ex. 6 at 2 n.1. 

In its briefing, CMS was equally dismissive of this argument, stating: 

In any event, it is not clear why Mr. Lindberg’s conviction date (the date of the jury finding, in March, 2020 or the date of sentencing, in September, 2020) is material to the question of whether an owner of the Petitioner had been convicted of a felony within 10 years of CMS learning of the crime and revoking enrollment.

CMS Br. at 7.  Although CMS disputes the authorities cited by Petitioner, it has not identified any authority supporting that the date of a conviction, as contemplated by 42 C.F.R. § 1001.2, is the date a jury announced a verdict rather than the date a court adjudicated guilt.  To the contrary, CMS recognized that the conviction date could be the date of the judgment of conviction.  CMS Br. at 7 (“Mr. Lindberg’s conviction date, even if it were to be considered to be September, 2020 . . .”). 

Page 16

Although the date of the conviction does not affect the applicability of 42 C.F.R. § 424.535(a)(3) as a basis for revocation, Petitioner has properly raised the effective date of revocation as an issue for consideration, claiming that the retroactivity has caused “catastrophic harm” owing to “recoupment and exclusion dates.”  P. Br. at 6, 9.  CMS is incorrect that Petitioner’s argument is immaterial to the issues before me.  CMS Br. at 7.

The regulatory definition of “convicted” used by CMS and the Inspector General is based on the statutory definition of “convicted” provided by Congress for purposes of Inspector General exclusions.  Compare 42 C.F.R. § 1001.2 with 42 U.S.C. § 1320a-7(i).  When Congress framed this definition, it sought to broaden the Secretary’s authority to exclude individuals who were guilty of certain crimes, but for whom a judgment of conviction had never been entered by a court because the individual had successfully completed a first offender or deferred adjudication program.  See H.R. Rep. 99-727, 99th Cong., 2d Sess. 75 (July 31, 1986), reprinted in 1986 U.S.C.C.A.N. 3607, 3665 (“The Committee is concerned . . .that individuals who have entered guilty or nolo pleas to criminal charges of defrauding the Medicaid program are not subject to exclusion from either Medicare or Medicaid.”). 

CMS points to no authority supporting that a jury verdict, in and of itself, is a finding of guilt by a court.  Nor has CMS shown that the definition of “convicted” found at 42 C.F.R. § 1001.2 intended to set the date of a conviction earlier than the date of judgment of conviction in a circumstance where the offender had neither entered a guilty plea nor previously been adjudged guilty by the trial judge.  The statutory definition of “convicted” that 42 C.F.R. § 1001.2 is based upon lacks such support.

For good reason, a jury operates separately from the court and does not speak for the court.  And even when a jury has issued a guilty verdict, court procedures may nonetheless allow the trial judge to acquit a defendant, such as when it is necessary to remedy unfairness in the process.  Thus, a jury verdict is not necessarily binding on the court and is therefore not the finding of the court.14  When the trial court enters judgment of conviction, it has formally adopted a jury’s verdict of guilty.

In the absence of any showing by CMS that a jury finding of guilt is the equivalent of a courtfinding of guilt, as contemplated by 42 C.F.R. § 1001.2, the date of Mr. Lindberg’s convictions is the date the court entered judgment of conviction on September 4, 2020.  42 C.F.R. § 1001.2.  Therefore, the effective date of Petitioner’s revocation is September 4, 2020.  42 C.F.R. § 424.535(g).

Page 17

V.     Conclusion

For the reasons explained above, I affirm the revocation of Petitioner’s enrollment and billing privileges as a Medicare DMEPOS supplier, effective September 4, 2020.

1. “The National Supplier Clearinghouse is the single organizational entity responsible for issuing and revoking Medicare supplier billing privileges for suppliers of Durable Medical Equipment, Orthotics and Supplies (DMEPOS).”  National Supplier Clearinghouse MAC, Palmetto GBA,  https://www.palmettogba.com/palmetto/nsc.nsf (last visited March 25, 2022).  The NSC is an administrative contractor for CMS.
• back to note 1
2. Petitioner, under a single National Provider Identifier (NPI) of 1174584544, was enrolled as both a Part B and DMEPOS supplier under separate PTANs.  The application data report submitted as CMS Ex. 3 pertains to Petitioner’s Part B enrollment under PTAN # 051528586 (CMS Ex. 3 at 3), which CMS did not otherwise address in its briefing.
• back to note 2
3. Mr. Pereira referenced P. Ex. “O.2” in his testimony.  Because I ordered Petitioner, on February 4, 2022, to re-file a compliant pre-hearing exchange, the “Trust Documentation” was later redesignated as P. Ex. 15.O.2.
• back to note 3
4. Petitioner updated its business information, correspondence address, practice location information, and enrollment application contact person.  CMS Ex. 3.  Petitioner did not update the section pertaining to individuals who had an ownership interest and managing control information, which reported, in part, that Mr. Lindberg had been an indirect owner since April 13, 2018, and had never had a final adverse legal action imposed against him.  CMS Ex. 3 at 3-7.
• back to note 4
5. Based on both administrative efficiency and Petitioner’s dispute of the retroactive effective date of its revocation, I limit the discussion herein to Petitioner’s revocation under 42 C.F.R. § 424.535(a)(3).  See 42 C.F.R. § 424.535(g) (mandating that a section 424.535(a)(3) revocation becomes effective on the date of the felony conviction).
• back to note 5
6. Petitioner argued that the date of Mr. Lindberg’s sentencing, August 19, 2020, should be considered the date of his conviction.  P. Ex. 4 at 5.
• back to note 6
7. It appears that, as of the date it filed its request for reconsideration, Petitioner did not have “proof” that it had terminated its business relationship with Mr. Lindberg.  See P. Ex. 15 at 1 (witness testimony that P. Ex. 15.O.2 is a “true and accurate copy of the HPC Trust Documentation effectuating this divestment”).  Specifically, numerous documents in the “Trust Documentation” reflect that the Board of Directors and shareholders did not document their consent until at least July 26, 2021.  P. Ex. 15.O.2 at 5, 10, 19, 24, 34, 39, 44, 49, 54, 59, 64, 69, 74, 79, 84, 89.  Further, even though a June 3, 2021 effective date is reported throughout the Trust Documentation, the earliest date of execution for any of the documents appears to be July 14, 2021.  See P. Ex. 15.O.2 at 1, 15, 94, 101, 104, 108, 112, 140, 167, 179; 29 (indicating consent provided on July 19, 2021).  I additionally observe that the “Trust Documentation” documenting a $95,000,000 transaction lacks any dates accompanying the numerous signatures executing the agreements.
• back to note 7
8. The individual who notarized P. Exs. 14 and 15 reported that the affidavits were “[s]ubscribed and sworn to,” but did not provide any further detail, such as whether the testimony was given under penalty of perjury.  See Pre-Hearing Order § 12 (“Witness testimony must be submitted in the form of an affidavit made under oath or as a written declaration under penalty of perjury for false testimony.”).  CMS raised this concern, but did not object to the admission of P. Exs. 14 and 15.  In the absence of an objection, I admit both exhibits into the evidentiary record.
• back to note 8
9. As an in-person hearing to cross-examine witnesses is not necessary, it is unnecessary to further address CMS’s motion for summary judgment.
• back to note 9
10. My numbered findings of fact and conclusions of law are set forth in italics and bold font.
• back to note 10
11. The reconsidered determination upholding the revocation of Petitioner’s Part B enrollment was based in part on 42 C.F.R. § 424.535(a)(4), which CMS did not address in its briefing.  P. Ex. 5; CMS Br.; CMS Reply.
• back to note 11
12. In addition to not timely submitting proof that it had terminated its business relationship with Mr. Lindberg, Petitioner did not avail itself of other opportunities to prevent an enrollment revocation and otherwise mitigate the retroactive impact of a revocation.  See P. Br. at 6 (alleging “catastrophic harm” resulted from the retroactive revocation).  Petitioner could have divested from Mr. Lindberg at any time prior to his conviction so that a convicted felon would never have held an ownership interest in Petitioner.  And instead of quickly divesting from Mr. Lindberg after his conviction, Petitioner allowed Mr. Lindberg to continue for approximately nine months as an indirect owner, while also not informing CMS of the felony conviction.  As a result, Petitioner exposed itself to a lengthier period of retroactivity for its revocation.
• back to note 12
13. I note that Petitioner argued in its reconsideration request that the date of sentencing should be the date of conviction.  P. Ex. 4 at 5.  Petitioner modified this position in its brief, at which time it argued that the judgment of conviction is the date of the conviction.  P. Br. at 7.
• back to note 13
14. However, a jury finding of acquittal is binding on a court.  See, e.g., U.S. Const. amend. V.
• back to note 14