Paul Ross Sanders, DAB CR6102 (2022)

DECISION

Petitioner, Paul Ross Sanders, is a Colorado physical therapist, who participated in the Medicare program as a supplier of services.  On January 14, 2019, he was convicted of felony insurance fraud.  Although he claims to have reported the conviction to the Medicare contractor, the Centers for Medicare & Medicaid Services (CMS) insists that he did not.  Based on his felony conviction and his purported failure to report, the Medicare contractor, Novitas Solutions, acting on behalf of CMS, revoked his Medicare billing privileges, imposed a ten-year reenrollment bar, and added his name to the Medicare preclusion list. 

Petitioner now appeals. 

I affirm CMS’s determination.  I find that CMS is authorized to revoke Petitioner’s Medicare privileges and to add his name to the Medicare preclusion list because, within the ten years preceding this action, Petitioner Sanders was convicted of a felony that CMS reasonably determined is detrimental to the best interests of the Medicare program and its beneficiaries. 

I need not reach the issue of whether Petitioner reported the conviction to the Medicare contractor.

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Background

By letter dated July 14, 2020, the Medicare contractor, Novitas Solutions, advised Petitioner that his Medicare privileges were revoked, effective January 14, 2019.  The letter explained that the contractor revoked Petitioner’s Medicare privileges for two reasons: 

1) pursuant to 42 C.F.R. § 424.535(a)(3), because Petitioner Sanders was convicted, as defined in 42 C.F.R. § 1001.2, of felony insurance fraud, in violation of Colorado Rev. Statutes § 18-5-211(1)(b)(4)); and

2) pursuant to 42 C.F.R. § 424.535(a)(9), because Petitioner did not notify CMS of the adverse legal action within 30 days, as required by 42 C.F.R. § 424.516. 

CMS Ex. 6 at 1-2.  The contractor imposed a ten-year reenrollment bar (until January 15, 2029), pursuant to 42 C.F.R. § 424.535(c).  CMS Ex. 6 at 3. 

The letter also advised Petitioner that the contractor added him to CMS’s preclusion list, as authorized by 42 C.F.R. §§ 422.2, 422.222, 423.100, and 423.120(c)(6).  It explained that, if Petitioner requested reconsideration, this action would become effective on the date the reconsidered determination was issued.  CMS Ex. 6; see CMS Ex. 8. 

Petitioner requested reconsideration.  In a reconsidered determination, dated October 27, 2020, a CMS hearing officer upheld the revocation under sections 424.535(a)(3) and 424.535(a)(9).  She also upheld the determination to include Petitioner’s name on CMS’s preclusion list, pursuant to sections 422.2 and 422.222.  CMS Ex. 8.  She noted that sections 423.100 and 423.120(c)(6) did not apply to Petitioner because he does not prescribe drugs.  CMS Ex. 8 at 1 n.1. 

Petitioner timely appealed. 

CMS has filed a motion for summary judgment, which Petitioner opposes. 

Summary judgment/decision based on the written record.  Petitioner characterizes as “genuine issue[s] of material fact,” the questions of whether CMS properly revoked Petitioner’s Medicare enrollment pursuant to sections 424.535(a)(3) and 424.535(a)(9), and whether CMS had a proper basis for placing Petitioner on the preclusion list.  P. Br. at 6, 8, 9.  These are not issues of material fact that would preclude my issuing summary judgment; they are conclusions of law.  In fact, they are the dispositive questions of law that I must decide. 

Nevertheless, this matter may be decided based on the written record, without considering whether the standards for summary judgment have been met.  Petitioner

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proposes no witnesses.  CMS proposes one witness and, in accordance with my pre-hearing order, has submitted her written declaration (CMS Ex. 5).  See Acknowledgment and Pre-hearing Order at 4-6 (¶¶ 4(c)(iv), 8-10) (Nov. 12, 2020).  The order directed Petitioner to indicate, affirmatively, that he wanted to cross-examine any witness, and he did not do so.  Id. at 5, 6 (¶¶ 9, 10).1   Because there are no witnesses to be examined further or cross-examined, an in-person hearing would serve no purpose, and I may decide this case based on the written record.2

Exhibits.  CMS submits its motion for summary judgment and brief (CMS Br.) with nine exhibits (CMS Exs. 1-9).  Petitioner submits his brief and opposition to summary judgment (P. Br.) with seven exhibits (P. Exs. 1-7).  

In the absence of any objections, I admit into evidence CMS Exs. 1-9. 

CMS objects to six of Petitioner’s exhibits (P. Exs. 1, 2, 4, 5, 6, 7).  Three of these proposed exhibits were offered, for the first time, at this level of review. 

• P. Ex. 1 is a police report, dated August 18, 2015; the report indicates that Petitioner reported that his unlocked garage was burgled on August 15, but he declined a police request to process the scene for fingerprints and DNA evidence;
• P. Ex. 2 is a copy of Form CMS-855I, which Petitioner now maintains he mailed to the Medicare contractor a few days after his conviction;
• P. Ex. 4 are samples of letters Petitioner claims he sent to his patients to inform them of his conviction.

CMS argues section 498.56(e) precludes my admitting these documents because Petitioner has offered no good cause for failing to submit them at the reconsideration level.  CMS also argues that P. Exs. 1 and 4 are irrelevant.

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With respect to the question of relevance, I agree that neither P. Ex. 1 nor P. Ex. 4 can change the result here.  As discussed below, Petitioner’s felony conviction, by itself, justifies the revocation, and he may not relitigate in this forum the facts underlying that conviction.  However, to the extent that his defenses have any merit (which I find they do not), these documents seem to undercut them. According to Petitioner, his insurance fraud conviction was, in fact, based on an innocent mistake.  His home was burgled, and, because he could not find receipts for the items stolen, he submitted his own estimates.  When he realized that he should not have done so, he immediately rescinded the submission.  P. Br. at 3; CMS Ex. 4 at 1. 

The proffered exhibits cast doubt on this scenario.  The police report shows that Petitioner did not immediately report the break-in and would not allow police to come to his home to process for fingerprints or DNA, explaining that, in the interim, he destroyed the evidence:  he painted his garage door and allowed multiple people into the garage.  P. Ex. 1 at 2.3   In one of the letters to his patients, he admits that he falsified a receipt (which explains why he was charged with two felony counts of forgery).  P. Ex. 4 at 1; see CMS Ex. 2 at 4. 

I nevertheless decline to admit these documents.  Unless I find that good cause exists for Petitioner’s submitting them, for the first time, at this level of review, I must exclude the evidence.  42 C.F.R. § 498.56(e).  The contractor’s July 14, 2020 notice letter warned Petitioner:

[Y]ou must submit [any additional] 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. 

CMS Ex. 6 at 3 (emphasis added). 

In my pre-hearing order, I directed Petitioner to “specifically identif[y]” new evidence and to explain why good cause exists for me to receive it.  Pre-hearing Order at 5 (¶ 6).  Petitioner does not identify any of these documents as new evidence.  Nor has Petitioner shown good cause for failing to submit them at an earlier stage of review, as required by 42 C.F.R. § 498.56(e).  He does not even mention why he failed to submit P. Exs. 1 and 4 at the reconsideration level.

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In his brief, Petitioner asserts, without providing underlying support, that he located Form CMS-855I (P. Ex. 2) “[a]fter an exhaustive search.”  P. Br. at 4.  I find this insufficient to establish good cause.  He does not explain why he could not have located the form earlier.  He does not explain why, at the reconsideration level, he did not even mention that the form existed; in his request for reconsideration, he told the hearing officer that he advised CMS of his conviction by letter.  CMS Ex. 7 at 3.  In the letter he submitted to the hearing officer he did not claim that he sent either a letter or a form advising the contractor of his conviction.  CMS Ex. 9 at 1-2. 

Because no good cause exists for Petitioner’s submitting the documents, for the first time, at this level of review, I exclude P. Exs. 1, 2, and 4.  42 C.F.R. § 498.56(e).  

CMS also objects to P. Exs. 5, 6, and 7.  These are decisions by administrative law judges.  They do not establish or support any facts; rather, they are submitted in support of Petitioner’s legal argument.  Under Civil Remedies procedures, such decisions may be attached to briefs or other submissions but should not be offered as exhibits.  Civil Remedies Division Procedures at 14 (¶ 14a).4  I therefore decline to admit P. Exs. 5, 6, and 7. 

In the absence of any additional objections, I admit into evidence P. Ex. 3. 

Discussion

The Medicare Program.  The Medicare program, Title XVIII of the Social Security Act (Act), is a federally-subsidized insurance program that provides health care benefits to the elderly, disabled, and those suffering from end stage renal disease.  Medicare is divided into four parts: 

• Part A is the hospital insurance program.  It covers hospital services, post-hospital extended care, home health, and hospice care.  Act § 1811 (42 U.S.C. § 1395c);
• Part B, which is voluntary, is the supplementary medical insurance program, covering physician, home health, hospice, and other services.  Act § 1832 (42 U.S.C. § 1395k);
• Part C is the Medicare Advantage program, which allows its participants to enroll in “Medicare + Choice” plans, managed by organizations, such as health maintenance organizations, that receive a fixed payment for each enrollee.  Act § 1851 (42 U.S.C. § 1395w-21); and

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• Part D is the voluntary prescription drug benefit program.  Act § 1860D-1 (42 U.S.C. § 1395w-101).

The Medicare program is administered by CMS, acting on behalf of the Secretary of Health and Human Services.  CMS contracts with Medicare administrative contractors, who process and pay reimbursement claims and perform other duties necessary to carry out program purposes.  Act § 1842 (42 U.S.C. § 1395u).  Contractors pay claims to “providers” (Part A) and “suppliers” (Part B). Physicians and other practitioners that furnish healthcare services may participate in the program as “suppliers” of services; however, they must enroll in the program in order to receive Medicare payments.  Act § 1861(d), (p) (42 U.S.C. § 1395x(d), (p)); 42 C.F.R. §§ 400.202; 424.505. 

Section 424.535(a) authorizes CMS to revoke a supplier’s Medicare enrollment and billing privileges on one or more of the grounds set forth under that subsection. 

1. CMS may revoke Petitioner Sanders’ Medicare enrollment, pursuant to 42 C.F.R. § 424.535(a)(3), because, within ten years preceding the revocation, he was convicted of a felony that CMS reasonably finds detrimental to the best interests of the Medicare program and its beneficiaries.5

Revocation of enrollment.  CMS may revoke a supplier’s Medicare enrollment and billing privileges if, within the preceding ten years, the supplier or any owner or managing employee was convicted of a “felony offense that CMS determines is detrimental to the best interests of the Medicare program and its beneficiaries.”  42 C.F.R. § 424.535(a)(3)(i); see also Act §§ 1842(h)(8) and 1866(b)(2)(D).  Offenses for which billing privileges may be terminated include – but are not limited to – financial crimes such as extortion, embezzlement, income tax evasion, insurance fraud, and similar crimes.  42 C.F.R. § 424.535(a)(3)(ii)(B). 

CMS may also revoke Medicare privileges if a supplier does not comply with the reporting requirements specified in section 424.516(d).  42 C.F.R. § 424.535(a)(9).  Under section 424.516(d), nonphysician practitioners must report to their Medicare contractor, within 30 days, “any adverse legal action.” 

Petitioner Sanders’ conviction.  In a felony complaint dated July 9, 2018, the Colorado Attorney General’s Office charged Petitioner Sanders with:

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• three felony counts of insurance fraud, in violation of section 18-5-211(1)(b), (1)(e), (4) of the Colorado Revised Statutes;
• one felony count of theft of between $20,000 and $100,000, in violation of section 18-4-401(1), (2)(h), (6); and
• two felony counts of forgery, in violation of section 18-5-102(1)(c). 

CMS Ex. 2 at 1-4.

On November 7, 2018, Petitioner Sanders agreed to plead guilty to one count of insurance fraud, Count 1 of the complaint.  Specifically, he admitted that between August 6 and December 16, 2015, he “knowingly and with an intent to defraud” presented or caused to be presented, to State Farm Insurance Company, a claim for loss or injury that “contained false material information or withheld material information.”  CMS Ex. 3 at 1-4. 

On January 14, 2019, the District Court for Mesa County, Colorado, accepted the plea and entered judgment against him.  CMS Ex. 4.  The court sentenced Petitioner Sanders to 15 days in jail followed by three years of supervised probation.  The court also ordered him to complete 75 hours of useful community service and to pay $24,355.93 in restitution to State Farm.  CMS Ex. 4 at 1, 3. 

Legal basis for revocation.  The Departmental Appeals Board has consistently held that an administrative law judge’s review of CMS’s determination to revoke a supplier’s Medicare enrollment is limited to deciding whether CMS has established one or more of the grounds specified in section 424.535(a).  William Garner, M.D., DAB No. 3026 at 16 (2020); Norman Johnson, M.D., DAB No. 2779 at 11 (2017), and cases cited therein.  Although CMS itself has the discretion to consider “unique or mitigating circumstances in deciding whether, or how, to exercise its revocation authority,” I do not.  Norman Johnson, DAB No. 2779 at 11 (citing Care Pro Home Health, Inc., DAB No. 2723 at 9 n.8 (2016)).  I may not substitute my discretion for that of CMS in determining whether the revocation is appropriate.  Norman Johnson, DAB No. 2779 at 11 (citing Abdul Razzaque Ahmed, M.D., DAB No. 2261 at 19 (2009), aff’d, 710 F. Supp.2d 167 (D. Mass. 2010)). 

Here, CMS plainly had the authority to revoke Petitioner’s Medicare enrollment under section 424.535(a)(3).  Petitioner was convicted of felony insurance fraud, a financial crime that is specifically identified in the regulation as “detrimental to the best interests of the Medicare program and its beneficiaries.”  Petitioner nevertheless argues that, because his crime was not related to the Medicare program itself, it was not detrimental to the best interest of the program and its beneficiaries and does not justify the revocation.  P. Br. at 6-8.  In support of his position, Petitioner cites three ALJ decisions

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in which a supplier’s Medicare enrollment was revoked based on a program-related crime.  P. Br. at 7.  It does not follow, however, that, because a program-related crime leads to a revocation, a financial crime must be program-related before Medicare privileges can be revoked. 

To the contrary, nothing in the regulation suggests that CMS’s revocation authority is limited to program-related crimes.  As the Board has observed, in promulgating section 424.535(a)(3), “CMS has ‘deem[ed] all financial crimes’ to be detrimental to Medicare.”  Cornelius M. Donohue, DPM, DAB No. 2888 at 4-5 (2018) (quoting Stanley Beekman, D.P.M., DAB No. 2650 at 7 (2015)).  Thus, the Board has upheld revocations in cases involving a wide variety of financial felonies that were not related to any health care program.  See, e.g., Daniel Wiltz, M.D., DAB No. 2864 (2018) (making false statements to investigators in an insurance fraud probe); Francis J. Cinelli Sr., D.O., DAB No. 2834 (2017) (aiding and abetting the filing of a false tax return); Donna Maneice, M.D., DAB No. 2826 (2017) (attempted income tax evasion and filing a false tax return); Stanley Beekman, D.P.M, DAB No. 2650 (2015) (making false statements on a bank loan application). 

Petitioner trivializes his felonious conduct, claiming that he “was merely under the mistaken belief that he should attempt to estimate the value of stolen goods for which he no longer possessed the receipts.”  P. Br. at 7.  Petitioner’s felony conviction says otherwise.  In pleading guilty, he admitted that his felonious conduct occurred between August 6 and December 16, 2015, a period of more than four months.  CMS Ex. 2 at 3.  He admitted that he acted “knowingly” and “with an intent to defraud,” which means that he knew that his conduct was “practically certain to cause the result” and that his “conscious objective” was “to cause the specific result proscribed by the statute defining the offense.”  CMS Ex. 3 at 3.  Moreover, where, as here, there was a finding of guilt and entry of judgment, and that judgment is final, Petitioner may not attack his conviction in this forum.  See Douglas Bradley, M.D., DAB No. 2663 at 16 (2015)(“Nothing in those regulations [governing these proceedings], or in the Medicare statute, even remotely suggests that they were intended [to] provide a forum to collaterally challenge adverse decisions by federal or non-federal regulatory bodies.”).

Further, contrary to Petitioner’s suggestion that State Farm suffered no losses as a result of his felony, the Court’s restitution order shows that his conduct cost the insurer $24,355.93.  CMS Ex. 4 at 3.  Restitution is considered a reasonable measure of financial losses.  See Edwin L. Fuentes, DAB No. 2988 at 13 (2020); Hussein Awada, M.D., DAB No. 2788 at 7 (2017); Juan de Leon, Jr., DAB No. 2533 at 5 (2013); Jason Hollady, M.D., DAB No. 1855 (2002).  

I need not consider whether section 424.535(a)(9) provides an alternative basis for revoking Petitioner’s Medicare privileges.  So long as CMS shows that one of the regulatory bases exists, I must uphold the revocation.  Wassim Younes, M.D. and Wassim

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Younes, M.D., P.L.C., DAB No. 2861 at 8 (2018) (citing Patrick Brueggeman, D.P.M., DAB No. 2725 at 15 (2016)). 

2. CMS acted within its authority when it added Petitioner to its preclusion list because his Medicare privileges were revoked for conduct detrimental to the best interests of the Medicare program, and he is under a reenrollment bar. 

The preclusion list.  Effective January 1, 2019, CMS implemented a “preclusion list” as part of its effort to “prevent fraud, waste, and abuse, and to protect Medicare enrollees,” particularly with respect to prescription drug abuse.6   Pursuant to 42 C.F.R. § 422.2 (Part C) and 42 C.F.R. § 423.100 (Part D) CMS’s “preclusion list” includes individuals and entities that: 

• are currently revoked from Medicare enrollment, are under an active reenrollment bar, and CMS determines that the underlying conduct leading to the revocation is detrimental to the best interests of the Medicare program; or
• have engaged in behavior for which CMS could have revoked the prescriber, individual, or entity had it been enrolled in the Medicare program, and CMS determines that the underlying conduct that would have led to the revocation is detrimental to the best interests of the Medicare program. 

Petitioner’s offense and the revocations.  I have discussed in some detail the elements of Petitioner Sanders’ crime.  He was convicted of a crime that is detrimental to the best interests of the Medicare program and its beneficiaries.  CMS was therefore authorized to revoke his Medicare enrollment and billing privileges and to impose a reenrollment bar.  42 C.F.R. §§ 424.535(a)(3)(ii)(B), 424.535(c).  Because his enrollment was revoked for a felony conviction deemed detrimental to the best interests of the Medicare program and its beneficiaries and because he is under a reenrollment bar, CMS is authorized to add him to the Medicare preclusion list.  42 C.F.R. § 422.2.7

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Again, I am not authorized to overturn a legally valid agency action based on equitable grounds or otherwise grant equitable relief.  Wendell Foo, M.D., DAB No. 2904 at 25 (2018) (citing Foot Specialists of Northridge, DAB No. 2773 at 18 (2017)).  I may review whether the regulations authorize CMS’s actions.  So long as CMS establishes a basis for placing Petitioner on the preclusion list, I must uphold its doing so.  See Foo, DAB No. 2904 at 3; Wassim Younes, M.D. and Wassim Younes, M.D., P.L.C., DAB No. 2861 at 8 (2018) (citing Patrick Brueggeman, D.P.M., DAB No. 2725 at 15 (2016)). 

 3. I have no authority to review CMS’s determination to impose a ten-year reenrollment bar. 

When a supplier’s billing privileges are revoked, he may not participate in the Medicare program until the end of his reenrollment bar, which must be for a minimum of one year but no more than ten years (except under circumstance that don’t apply here), depending on the severity of the underlying offense.  42 C.F.R. § 424.535(c)(1).  Here, CMS imposed a ten-year reenrollment bar.  Except to argue that his Medicare privileges should not have been revoked, so there should be no reenrollment bar, Petitioner has not challenged the length of the reenrollment bar imposed.  In any event, I have no authority to review its length.  Vijendra Dave, M.D., DAB No. 2672 at 9-12 (2016); accord, William Garner, M.D., DAB No. 3026 at 16 (2020); Lilia Gorovits, M.D., P.C., DAB No. 2985 at 15-16 (2020); see 42 C.F.R. § 498.3(b)(17).

Conclusion

CMS justifiably determined that Petitioner Sanders was convicted of a felony detrimental to the best interests of the Medicare program and its beneficiaries; it may therefore revoke his Medicare enrollment and billing privileges.  CMS was also authorized to include Petitioner on the preclusion list because his Medicare enrollment was revoked for conduct detrimental to the best interests of the Medicare program, and because he is under a reenrollment bar.

For these reasons, I affirm CMS’s determinations.

1. In any event, the witness testimony addresses the question of whether Petitioner reported his conviction.  Because I do not need to reach that issue, her testimony is not material.
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2. That I decide this case based on the written record does not mean that Petitioner has not had a hearing.  Courts recognize that, although a case may be decided on summary judgment or based on the written record, the administrative law judge, by considering the evidence and applying the law, has granted the petitioner a hearing.  See CNG Transmission Corp. v. FERC, 40 F.3d 1289, 1293 (D.C. Cir. 1994) (holding that a “paper hearing” satisfies statutory requirements for “notice and opportunity for hearing.”).
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3. He told the police that the stolen items included new hardwood flooring, valued at $2,500, and roofing shingles, valued at $500.  P. Ex. 1.  It seems unlikely that he paid cash for these items, and he has not explained why he was unable to obtain a credit card receipt for them.
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4. ALJ decisions can be found on the Departmental Appeals Board website:  https://www.hhs.gov/about/agencies/dab/decisions/alj-decisions/index.html.
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5. My findings of fact/conclusions of law are set forth, in italics and bold, in the discussion captions of this decision.
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6. Apparently, CMS considered requiring Medicare enrollment for all providers and suppliers of Medicare Advantage services and subscribers of Part D drugs but, ultimately, opted for a preclusion list instead.  CMS concluded that the burden of requiring Medicare enrollment for hundreds of thousands of additional providers, suppliers, and prescribers would be too great and would threaten beneficiary access to prescriptions and services.  See 82 Fed. Reg. 56,336, 56,442, 56,448 (Nov. 28, 2017); 83 Fed. Reg. 16,440, 16,646 (Apr. 16, 2018).
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7. Unless CMS finds that a shorter period is warranted, the supplier remains on the preclusion list for ten years, beginning on the date of the felony conviction.  42 C.F.R. § 422.222(a)(5)(iii).
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