Isu Inc., DAB CR6069 (2022)

DECISION

The Medicare enrollment and billing privileges of Petitioner are revoked pursuant to 42 C.F.R. §§ 424.57(d)(11)(i) and 424.535(a)(1)1 based on a violation of 42 C.F.R. § 424.57(c)(26) (Supplier Standard 262 ) which incorporates by reference 42 C.F.R. § 424.57(d).  Revocation is effective October 30, 2020.  42 C.F.R. § 424.57(d)(11)(i).

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I.  Procedural History and Jurisdiction

On August 12, 2021, Palmetto GBA, a National Supplier Clearinghouse Medicare administrative contractor (MAC), notified Petitioner that Petitioner’s Medicare enrollment and billing privileges were revoked retroactively to October 30, 2020, the date Petitioner’s surety bond was cancelled.  The MAC cited 42 C.F.R. §§ 405.800, 424.57(e), 424.57(d)(11) and 424.535(a)(1) and (g),3 as the legal authority for the revocation based on a violation of 42 C.F.R. § 424.57(c)(26) (Supplier Standard 26).  The MAC notified Petitioner that it was subject to a two-year bar to re-enrollment pursuant to 42 C.F.R. § 424.535(c).  Centers for Medicare & Medicaid Services (CMS) Exhibit (Ex.) 1 at 36-44. 

On October 1, 2021, Petitioner requested reconsideration of the MAC’s initial determination to revoke Petitioner’s Medicare enrollment and billing privileges.  CMS Ex. 1 at 22-35.  The MAC treated Petitioner’s request as a request for reconsideration and as a corrective action plan (CAP).  Regarding the CAP, on October 7, 2021, the MAC notified Petitioner that it was unable to accept the CAP because it was not timely submitted.  The MAC explained that a CAP must be received within 35 calendar days of August 12, 2021, the date of the initial determination letter.  Petitioner’s CAP was not received by the MAC until October 4, 2021.  The MAC found that Petitioner failed to show good cause for its late submission of its CAP and concluded that it could not render a decision on the CAP.  CMS Ex. 1 at 15. 

Regarding Petitioner’s reconsideration request, on November 5, 2021, a MAC hearing officer issued a reconsidered determination in which the revocation of Petitioner’s Medicare enrollment and billing privileges based on a violation of 42 C.F.R. § 424.57(c)(26) (Supplier Standard 26) and the two-year bar to re-enrollment were upheld.  CMS Ex. 1 at 2-5.  My review in this case is limited to the bases for revocation upheld in the reconsidered determination.  Neb Grp. of Ariz. LLC, DAB No. 2573 at 7; 42 C.F.R. § 498.5(l)(2). 

Petitioner requested a hearing before an administrative law judge (ALJ) on November 17, 2021 (RFH).  The case was assigned to me for hearing and decision on November 18,

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2021, and an Acknowledgment Letter and Standing Order (Standing Order) were issued at my direction.  Petitioner’s request for hearing was timely and I have jurisdiction. 

On December 13, 2021, CMS filed a motion for summary judgment (CMS Br.) with CMS Ex. 1.  On February 28, 2022, Petitioner filed a letter that I treat as Petitioner’s brief (P. Br.).  Departmental Appeals Board Electronic Filing System (DAB E-File) #14_a.  Petitioner filed four additional unmarked documents on February 28, 2022, three of which I treat as Petitioner’s exhibits (P. Exs.) 1 through 3, respectively.  DAB E-File ##14(b)-(d).  The fourth document filed on February 28, 2022 is an OMHA-102 form dated February 12, 2022.  DAB E-File #14.  On March 14, 2022, CMS filed a reply brief and objections to Petitioner’s submissions.  The CMS objections are overruled.  Petitioner’s exhibits are admitted and considered as evidence for purposes of ruling on the pending motion for summary judgment.4  Petitioner did not object to CMS Ex. 1, and it is admitted and considered as evidence.

II.  Discussion

1. Applicable Law

Section 1831 of the Social Security Act (the Act) (42 U.S.C. § 1395j) establishes the supplementary medical insurance benefits program for the aged and disabled known as Medicare Part B.  Administration of the Part B program is through the MACs.  Act § 1842(a) (42 U.S.C. § 1395u(a)).  Only eligible providers of services and suppliers may enroll in Medicare to receive payments for services rendered to Medicare-eligible beneficiaries.5   Act §§ 1834(j)(1) (42 U.S.C. § 1395m(j)(1)); 1835(a) (42 U.S.C.

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§ 1395n(a)); 1842(h)(1) (42 U.S.C. § 1395u(h)(1)). Petitioner is supplier of Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS). 

Section 1834 of the Act (42 U.S.C. § 1395m) establishes special payment rules for particular items and services, including durable medical equipment.  Section 1834 (a)(16)(B) of the Act states that the Secretary of Health and Human Services (Secretary) shall not issue or renew a Medicare provider number to a DMEPOS supplier unless the supplier “provides the Secretary on a continuing basis . . . with a surety bond in a form specified by the Secretary and in an amount that is not less than $50,000.” 

The Act requires the Secretary to issue regulations that establish a process for the enrollment in Medicare of providers and suppliers, including the right to a hearing and judicial review of certain enrollment determinations such as revocation of enrollment and billing privileges.  Act § 1866(j) (42 U.S.C. § 1395cc(j)). 

Section 424.57(c) of 42 C.F.R. requires that a supplier “must meet and must certify in its application for billing privileges that it meets and will continue to meet the following standards,” including the requirement found at 42 C.F.R. § 424.57(c)(26) that it “[m]ust meet the surety bond requirements specified in paragraph (d)” of 42 C.F.R. § 424.57.  The surety bond requirement provides that effective October 2, 2009, each DMEPOS supplier must meet the surety bond requirements for each National Provider Identifier assigned to the DMEPOS supplier that is granted Medicare billing privileges.  42 C.F.R. § 424.57(d)(1). 

A DMEPOS supplier must submit a bond that is continuous.  42 C.F.R. § 424.57(d)(4)(i).  The bond must guarantee payment to CMS by the surety of unpaid claims, civil money penalties, or assessments that occur during the term of the bond.  42 C.F.R. § 424.57(d)(5).  The initial surety bond must be filed with and must be effective on the date that the DMEPOS supplier’s Medicare enrollment application is submitted to the CMS contractor.  42 C.F.R. § 424.57(d)(2)(i).

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The Secretary has delegated authority to CMS or its Medicare contractor to revoke an enrolled supplier’s Medicare enrollment and billing privileges and any supplier agreement for any of the reasons listed in 42 C.F.R. § 424.535.  CMS is required to revoke a DMEPOS supplier’s Medicare billing privileges if the supplier fails to obtain, file timely, or maintain a surety bond.  42 C.F.R. § 424.57(d)(11).  When CMS revokes a supplier’s Medicare billing privileges for failing to obtain, file timely, or maintain a surety bond as specified in the subpart and CMS instructions, the revocation is effective the date the bond lapsed.  Id.  Any payments for items furnished by the DMEPOS supplier on or after the effective date of revocation of billing privileges must be repaid to CMS by the DMEPOS supplier.  Id.  After a supplier’s Medicare enrollment and billing privileges are revoked, the supplier is barred from re-enrolling in the Medicare program for one to ten years, with certain exceptions not relevant in this case.  42 C.F.R. § 424.535(c). 

A supplier whose enrollment and billing privileges have been revoked may request reconsideration and review as provided by 42 C.F.R. pt. 498.  42 C.F.R. §§ 405.803; 424.545.  A supplier submits a written request for reconsideration to CMS or its contractor.  42 C.F.R. § 498.22(a).  CMS or its contractor must give notice of its reconsidered determination to the supplier, giving the reasons for its determination and specifying the conditions or requirements the supplier failed to meet, and advising the supplier of its right to an ALJ hearing.  42 C.F.R. § 498.25. 

If the decision on reconsideration is unfavorable to the supplier, the supplier has the right to request a hearing by an ALJ and further review by the Departmental Appeals Board (the Board).  Act § 1866(j)(8) (42 U.S.C. § 1395cc(j)(8)); 42 C.F.R. §§ 424.545; 498.3(b)(17); 498.5(l)(2).  CMS is also granted the right to request ALJ review of a reconsidered determination with which it is dissatisfied.  42 C.F.R. § 498.5(l)(2).  A hearing on the record, also known as an oral hearing, is required under the Act.  Crestview Parke Care Ctr. v. Thompson, 373 F.3d 743, 748-51 (6th Cir. 2004).  The DMEPOS supplier bears the burden to demonstrate that it meets enrollment requirements with documents and records.  42 C.F.R. § 424.545(c).  A supplier or provider whose enrollment and billing privileges are revoked pursuant to 42 C.F.R. § 424.535(a)(1) also has the right to submit one CAP.  Denial of a CAP, which is also a denial of reinstatement of a provider’s or supplier’s billing privileges, is not an initial determination and there is no right to ALJ or Board review of the denial under 42 C.F.R. pt. 498.  42 C.F.R. § 405.809(b)(2). 

2. Issue

Whether summary judgment is appropriate; and

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Whether there was a basis for the revocation of Petitioner’s billing privileges and Medicare enrollment. 

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

1. Summary judgment is appropriate.

A provider or supplier denied enrollment in Medicare or whose enrollment has been revoked has a right to a hearing and judicial review pursuant to sections 1866(h)(1) and (j)(8) of the Act and 42 C.F.R. §§ 498.3(b)(17) and 498.5(l).  A hearing on the record, also known as an oral hearing, is required under the Act.  Act §§ 205(b); 1866 (h)(1) and (j)(8); Crestview, 373 F.3d at 748-51.  A party may waive appearance at an oral hearing but must do so affirmatively in writing.  42 C.F.R. § 498.66.  In this case, Petitioner has not waived the right to oral hearing or otherwise consented to a decision based only upon the documentary evidence or pleadings.  Accordingly, disposition on the written record alone is not permissible, unless the CMS motion for summary judgment has merit. 

Summary judgment is not automatic upon request but is limited to certain specific conditions.  The Secretary’s regulations that establish the procedure to be followed in adjudicating Petitioner’s case are at 42 C.F.R. pt. 498.  42 C.F.R. §§ 405.800; 405.803(a); 424.545(a); 498.3(b)(5), (6), (15), (17).  The regulations do not establish a summary judgment procedure or recognize such a procedure.  However, the Board has long accepted that summary judgment is an acceptable procedural device in cases adjudicated pursuant to 42 C.F.R. pt. 498.  See, e.g., Ill. Knights Templar Home, DAB No. 2274 at 3‑4 (2009); Garden City Med. Clinic, DAB No. 1763 (2001); Everett Rehab. & Med. Ctr., DAB No. 1628 at 3 (1997).  The Board also has recognized that the Federal Rules of Civil Procedure (Fed. R. Civ. Pro.) do not apply in administrative adjudications such as this.  However, the Board has accepted that Fed. R. Civ. Pro. 56 and related cases provide useful guidance for determining whether summary judgment is appropriate.  Furthermore, a summary judgment procedure was adopted as a matter of judicial economy within my authority to regulate the course of proceedings and made available to the parties in the litigation of this case by my Standing Order.  The parties were given notice by the Standing Order that summary judgment is an available procedural device and that the law as it has developed related to Fed. R. Civ. Pro. 56 will be applied.  Standing Order ¶¶ D, G. 

Summary judgment is appropriate when there is no genuine dispute as to any issue of material fact for adjudication and/or the moving party is entitled to judgment as a matter of law.  The party requesting summary judgment bears the burden of showing that there are no genuine issues of material fact for trial and/or that it is entitled to judgment as a matter of law.  In determining whether there are genuine issues of material fact for trial, the reviewer must view the evidence in the light most favorable to the non-moving party,

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drawing all reasonable inferences in that party’s favor.  Generally, the non-movant may not defeat an adequately supported summary judgment motion by relying upon the denials in its pleadings or briefs but must furnish evidence of a dispute concerning a material fact, i.e., a fact that would affect the outcome of the case if proven.  Mission Hosp. Reg’l Med. Ctr., DAB No. 2459 at 4 (2012) (and cases cited therein); Experts Are Us, Inc., DAB No. 2452 at 4 (2012) (and cases cited therein); Senior Rehab. & Skilled Nursing Ctr., DAB No. 2300 at 3 (2010) (and cases cited therein); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

The standard for deciding a case on summary judgment and an ALJ’s decision-making in deciding a summary judgment motion differs from that used in resolving a case on the merits after a hearing or when hearing is waived.  On summary judgment, the ALJ does not make credibility determinations, weigh the evidence, or decide which inferences to draw from the evidence, as would be done when finding facts after a hearing on the record.  Rather, on summary judgment, the ALJ construes the evidence in a light most favorable to the non-movant and avoids deciding which version of the facts is more likely true.  Holy Cross Vill. at Notre Dame, Inc., DAB No. 2291 at 5 (2009).  The Board also has recognized that on summary judgment it is appropriate for the ALJ to consider whether a rational trier of fact could find that the party’s evidence would be sufficient to meet that party’s evidentiary burden.  Dumas Nursing & Rehab., L.P., DAB No. 2347 at 5 (2010).  The Secretary has not provided in 42 C.F.R. pt. 498 for the allocation of the burden of persuasion or the quantum of evidence required to satisfy the burden.  However, the Board has provided some persuasive analysis regarding the allocation of the burden of persuasion in cases subject to 42 C.F.R. pt. 498.  Batavia Nursing & Conv. Ctr., DAB No. 1904 (2004), aff’d, Batavia Nursing & Conv. Ctr. v. Thompson, 129 Fed. App’x 181 (6th Cir. 2005). ;

I conclude that there is no genuine dispute as to any material fact pertinent to revocation pursuant to 42 C.F.R. §§ 424.57(d)(11) and 424.535(a)(1) that requires a trial in this case.  Petitioner does not dispute that the Philadelphia Indemnity Insurance Company cancelled Petitioner’s $100,000 DMEPOS bond effective October 30, 2020.  CMS Ex. 1 at 44.  I accept as true for purposes of summary judgment Petitioner’s assertions that it obtained a new bond in the amount of $100,000 from the Platte River Insurance Company effective September 1, 2021.  CMS Ex. 1 at 5, 12-14, 23-25, 28-30, 33-35.  However, Petitioner does not assert that it had any bond in effect from October 31, 2020 through August 31, 2021.  Congress provided in section 1834(a)(16)(B) of the Act that the Secretary is required to ensure that a DMEPOS supplier has a surety bond of no less than $50,000 in effect on a continuing basis.  Because there is no dispute that Petitioner did not have a surety bond in effect from October 31, 2020 through August 31, 2021, CMS was required to revoke Petitioner’s enrollment and terminate Petitioner’s billing privileges pursuant to 42 C.F.R. § 424.57(d)(11), effective October 30, 2020, the date that the bond issued by the Philadelphia Indemnity Insurance Company lapsed due to its cancellation.  There are

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no disputes of material fact and this matter must be resolved against Petitioner as a matter of law.  Accordingly, summary judgment is appropriate. 

2. Petitioner violated the requirements of 42 C.F.R. §§ 424.57(c)(26) (Supplier Standard 26) and 424.57(d).

3. There is a basis for revocation of Petitioner’s enrollment and billing privileges pursuant to 42 C.F.R. §§ 424.57(d)(11) and 424.535(a)(1).

4. The effective date of revocation of Petitioner’s enrollment and billing privileges is determined pursuant to 42 C.F.R. § 424.57(d)(11) and is October 30, 2020, which is the effective date of the cancellation of the bond issued by the Philadelphia Indemnity Insurance Company.

1. Undisputed Facts

The material facts are not disputed, and any inferences are drawn in Petitioner’s favor on summary judgment. 

1. CMS was notified by the Philadelphia Indemnity Insurance Company that Petitioner’s DMEPOS surety bond (Bond No. PA11729000062 with CMS as obligee) was cancelled for nonpayment effective October 30, 2020. The letter was signed and sealed by the Philadelphia Indemnity Insurance Company on November 16, 2020.  CMS Ex. 1 at 44. 
2. I accept as true for purposes of summary judgment that Petitioner obtained a DMEPOS surety bond number PR2731649, in the amount of $100,000, with CMS as obligee, issued by the Platte River Insurance with an effective date of September 1, 2021. CMS Ex. 1 at 5, 12-14, 23-25, 28-30, 33-35; P. Exs. 1-3 (DAB E-File #14(b)-(d)). 
3. There is no dispute that Petitioner did not have a surety bond in effect from October 31, 2020 through August 31, 2021. RFH; CMS Ex. 1 at 22-35; P. Br.; P. Ex. 2 (DAB E-File #14_c). 

2. Analysis

In this case, summary judgment in favor of CMS is appropriate.  There are no genuine disputes as to any fact material to the decision in this case and judgment is based on application of the law to the undisputed facts.  All favorable inferences are drawn for Petitioner’s favor and Petitioner’s assertions are accepted as true for purposes of summary judgment.  Petitioner’s alleged defenses are without merit and must be resolved

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against Petitioner as a matter of law.  Summary judgment is appropriate as to revocation based on Supplier Standard 26.

Supplier Standard 26 requires:

(c) Application certification standards.  The supplier must meet and must certify in its application for billing privileges that it meets and will continue to meet the following standards:

* * * *

(26) Must meet the surety bond requirements specified in paragraph (d) of this section.

42 C.F.R. § 424.57(c)(26).

Congress required in section 1834(a)(16)(B) of the Act that the Secretary must ensure that a DMEPOS supplier has a surety bond of no less than $50,000 continually in effect.  The Secretary established the requirement in 42 C.F.R. § 424.57(d).  Under the regulation, a DMEPOS supplier must continuously have in effect a $50,000 (or such amount as CMS requires) surety bond for the benefit of CMS as the obligee.  The regulation provides that if a DMEPOS supplier fails to obtain, maintain, and timely file the required surety bond, CMS revokes the supplier’s Medicare enrollment and billing privileges, effectively terminating the supplier’s Medicare enrollment.  The regulation is very specific that revocation is effective the date a surety bond lapses.  42 C.F.R. § 424.57(d)(11).

A violation of Supplier Standard 26 is a basis for revocation under 42 C.F.R. § 424.57(d)(11).  CMS is also authorized to revoke the Medicare enrollment and billing privileges of any provider or supplier who does not comply with Medicare enrollment requirements.  The Board has recognized that under 42 C.F.R. § 424.57(d), even a single violation of a single supplier standard is an adequate basis for revocation of billing privileges and enrollment.  1866ICPayday.com, L.L.C., DAB No. 2289 at 13 (2009).  Furthermore, once I find a basis for revocation, I have no authority to review the exercise of discretion by CMS or the MAC to revoke.  Abdul Razzaque Ahmed, M.D., DAB No. 2261 at 19 (2009), aff’d, Ahmed v. Sebelius, 710 F. Supp. 2d 167 (D. Mass. 2010).  My authority is limited to determining whether there is a legal basis for revocation of Petitioner’s Medicare enrollment and billing privileges and if there is a basis for revocation, I have no discretion not to uphold the revocation.Id.

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There is no dispute that the Philadelphia Indemnity Insurance Company cancelled Petitioner’s DMEPOS surety bond number PA11729000062 effective October 30, 2020.  CMS Ex. 1 at 44.  Petitioner argues, and I accept as true for purposes of summary judgment, that it obtained a DMEPOS surety bond effective September 1, 2021.  However, Petitioner does not allege that it had any DMEPOS surety bond in effect from October 31, 2020 through August 31, 2021.  Accordingly, I conclude that there is a prima facie showing of a violation of 42 C.F.R. § 424.57(c)(26), which is a basis for revocation under 42 C.F.R. §§ 424.57(d)(11) and 424.535(a)(1).

Petitioner offers no excuse or defense for not having a DMEPOS surety bond in effect from October 31, 2020 through August 31, 2021.  Petitioner has failed to meet its burden to rebut the CMS prima facie case.  Accordingly, Petitioner’s Medicare enrollment and billing privileges are revoked, and, pursuant to 42 C.F.R. § 424.57(d)(11) the effective date of revocation is October 30, 2020.

Petitioner’s arguments may be viewed as requests for equitable relief.  However, I have no authority to grant any equitable relief.  US Ultrasound, DAB No. 2302 at 8 (2010).  I am required to follow the Act and regulations.  1866ICPayday.com, L.L.C., DAB No. 2289 at 14.

The record includes an Office of Medicare Hearings and Appeals (OMHA) Form OMHA-102.  The form is dated February 10, 2022, but is unsigned.  DAB E-File #12_a, at 1-2.  A box on the form is checked indicating that Petitioner objects to the ALJ assigned, but Petitioner does not state why in the space provided.  To the extent Petitioner intended to object to my assignment to this case, I conclude that I have no grounds to recuse myself as I am not prejudiced in favor of either party and remain impartial, and I have no interest affected by the outcome in this case.  Petitioner subsequently filed another OMHA-102 on February 28, 2022, dated February 12, 2022 and signed, and the box indicating objection to the assigned ALJ is not checked.  DAB E-File #14 at 2.

III.  Conclusion

For the foregoing reasons, I conclude that there is a basis to revoke Petitioner’s Medicare enrollment and billing privileges pursuant to 42 C.F.R. §§ 424.57(d)(11) and 424.535(a)(1) for a violation of 42 C.F.R. § 424.57(c)(26) (Supplier Standard 26).  The effective date of revocation is October 30, 2020.

1. Citations are to the 2020 revision of the Code of Federal Regulations (C.F.R.), which was in effect at the time of the initial determination, unless otherwise indicated.  An appellate panel of the Departmental Appeals Board (Board) concluded in Mark A. Kabat, D.O., DAB No. 2875 at 9-11 (2018) that the applicable regulations are those in effect at the time of the initial determination.  The Board previously concluded that the only determination subject to my review in a provider and supplier enrollment case such as this is the reconsidered determination.  Neb Grp. of Ariz. LLC, DAB No. 2573 at 9 (2014).  In this case, the regulations did not change between the issuance of the initial and reconsidered determinations.
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2. The application certification standards established by 42 C.F.R. § 424.57(c) are commonly referred to as Supplier Standards.
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3. The MAC erroneously cited 42 C.F.R. §§ 405.800 and 424.535(g) as authority to revoke.  The former regulation grants a provider or supplier the right to appeal the denial or revocation of billing privileges, and the latter establishes the effective date of a revocation.
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4. In its reply brief, CMS urged that I dismiss this case for abandonment based on Petitioner’s repeated failures to submit a timely prehearing exchange, and for its failure to file a prehearing exchange that conformed to the requirements of my Standing Order.  Petitioner is not represented by an attorney.  I find Petitioner’s evidence is relevant to its position.  I find that CMS has not been prejudiced.  I also find that the delay in this case due to Petitioner’s failures is not significant and there is no evidence that Petitioner intentionally delayed or disrupted proceedings.  I conclude that Petitioner’s failure to comply with my Standing Order is not a basis for a sanction, particularly not the ultimate sanction of dismissal.
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5. A “supplier” furnishes services and supplies under Medicare.  The term supplier applies to physicians or other practitioners and facilities that are not included within the definition of the phrase “provider of services.”  Act § 1861(d) (42 U.S.C. § 1395x(d)).  A “provider of services,” commonly shortened to “provider,” includes hospitals, critical access hospitals, skilled nursing facilities, comprehensive outpatient rehabilitation facilities, home health agencies, hospice programs, and a fund as described in sections 1814(g) and 1835(e) of the Act.  Act § 1861(u) (42 U.S.C. § 1395x(u)).  The distinction between providers and suppliers is important because they are treated differently under the Act for some purposes.
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