Pulmonary Solutions, P.C., DAB CR5318 (2019)

DECISION

National Government Services (NGS), an administrative contractor for the Centers for Medicare & Medicaid Services (CMS), revoked the Medicare enrollment and billing privileges of Pulmonary Solutions, P.C. pursuant to 42 C.F.R. § 424.535(a)(3). NGS relied on the felony conviction and three-year enrollment bar of Petitioner's owner, Jose Sanchez-Pena, M.D. to revoke Petitioner. Petitioner timely requested a hearing before an administrative law judge (ALJ) to dispute the revocation. Because Petitioner's owner is barred from the Medicare program due to his felony conviction, I must affirm CMS's revocation action.

I. Background and Procedural History

On March 8, 2016, NGS issued a notice letter revoking Petitioner's Medicare privileges retroactively from October 14, 2010, pursuant to 42 C.F.R. § 424.535(a)(3). CMS Ex. 3. NGS explained that the basis for the revocation was the felony conviction of Petitioner's

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owner, Jose Sanchez‑Pena, M.D., for "Willful Failure to Collect or Pay Over Tax." Id. at 1. NGS also imposed a three‑year enrollment bar, effective 30 days after the postmark of the notice letter. Id. at 2.

Petitioner requested reconsideration of the revocation, arguing that it:

[S]ufficiently notified CMS previously of the facts and circumstances surrounding the temporary suspension of his medical license in New Jersey which were [sic] not related to patient care, and CMS thereafter approved Dr. Sanchez‑Pena's Medicare privileges. Therefore, since CMS has already considered the license suspension and conviction, and subsequently approved Dr. Sanchez‑Pena's application, [the CMS contractor] should not now retroactively revoke its approval and require Dr. Sanchez‑Pena to disgorge payments already disbursed.

CMS Ex. 2 at 3. Petitioner also argued that Dr. Sanchez‑Pena's conviction was unrelated to Petitioner's business or indeed, provision of any patient care by him at all. Id. On July 26, 2016, NGS issued a reconsidered determination that upheld the revocation pursuant to 42 C.F.R. § 424.535(a)(3) because Dr. Sanchez‑Pena was convicted of a felony and was revoked from the Medicare Program with a three-year enrollment bar, effective April 7, 2016. Id.

Petitioner, through counsel, timely requested an administrative law judge (ALJ) hearing. ALJ Scott Anderson was designated to hear and decide this case. On October 24, 2016, Judge Anderson issued an Acknowledgment and Pre-hearing Order (Pre-hearing Order) setting forth a briefing schedule. CMS requested multiple extensions to file its pre‑hearing exchanges, citing that the parties were working to resolve this matter without need for a hearing; however, the parties were ultimately unable to resolve the matter before CMS's final deadline. CMS submitted its pre-hearing exchange to include a brief and motion for summary judgment (CMS Br.) and Exs. 1-9 on December 23, 2016. There being no objection from Petitioner, I admit CMS Exs. 1-9 into the record.

Petitioner also submitted several requests for extensions to file its pre‑hearing exchange and Judge Anderson ultimately required Petitioner to file its exchange by February 14, 2017. Petitioner filed its exchange, including a brief and cross motion for summary judgment (P. Br.), on February 15, 2017. On February 17, 2017, CMS submitted objections (CMS Objections) to Petitioner's exchange and Petitioner thereafter filed a response (P. Resp.). This case was transferred from Judge Anderson to me on August 25, 2017.

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II. Admission of Petitioner's Exchange and Decision on the Record

CMS has objected to the timeliness of Petitioner's exchange. CMS Objections at 1. Specifically, CMS argues that Petitioner failed to file its exchange by the February 14, 2017 deadline set by Judge Anderson and did not provide an explanation for the late filing. Id. Petitioner's counsel explains he attempted to file his submissions on February 14, 2017, believed erroneously he had succeeded, and corrected his error the next day when he discovered he had not done so. P. Resp. at 1. I find Petitioner had good cause for its untimely filing, overrule CMS's objection, and accept its pre-hearing exchange into the record.

Judge Anderson's Pre-hearing Order required the parties to submit written direct testimony for each proposed witness and advised an in‑person hearing would only be necessary if the opposing party requested an opportunity to cross‑examine a witness. Pre‑hearing Order ¶¶ 8, 10; Civ. Remedies Div. P. 16(b), 19(b); Pacific Regency Arvin, DAB No. 1823 at 8 (2002) (holding that the use of written direct testimony for witnesses is permissible so long as the opposing party has the opportunity to cross‑examine those witnesses). Neither Petitioner nor CMS submitted written direct testimony for any witnesses. Consequently, I will not hold an in‑person hearing in this matter, and I issue this decision based on the written record.1 Pre‑hearing Order ¶¶ 8, 10; CRDP § 19(d).

III. Issue

Whether CMS had a legitimate basis to revoke Petitioner's Medicare enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3).

IV. Jurisdiction

I have jurisdiction to decide this case. 42 C.F.R. §§ 493.3(b)(17), 498.5(l)(2).

V. Findings of Fact, Conclusions of Law, and Analysis2

The Social Security Act authorizes the Secretary of Health and Human Services (Secretary) to create regulations governing the enrollment of suppliers in the Medicare program, and to discontinue the enrollment of a physician or other supplier who "has been convicted of a felony under Federal or State law for an offense which the Secretary determines is detrimental to the best interests of the [Medicare] program or program beneficiaries." 42 U.S.C. §§ 1395u(h)(8), 1395cc(j). By regulation, CMS may revoke a currently enrolled provider or supplier's Medicare billing privileges if:

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The provider, supplier, or any owner or managing employee of the provider or supplier was, within the preceding 10 years convicted . . . of a Federal or State felony offense that CMS determines is detrimental to the best interests of the Medicare program and its beneficiaries.

42 C.F.R. § 424.435(a)(3)(i).

42 C.F.R. § 424.502 defines an "owner" as "any individual or entity that has any partnership interest in, or that has 5 percent or more direct or indirect ownership of the provider or supplier." The regulations specify several criminal offenses that the Secretary deems to be per se detrimental to the Medicare program and its beneficiaries, including "[f]inancial crimes, such as extortion, embezzlement, income tax evasion, insurance fraud and other similar crimes for which the individual was convicted . . . " as being offenses that form a basis for CMS to revoke a provider's or supplier's enrollment. Id. at § 424.535(a)(3)(ii).

1. Dr. Sanchez-Pena is an owner of Petitioner within the definition at 42 C.F.R § 424.502.

The record reflects, and Petitioner does not dispute, that at all relevant times, Dr. Sanchez‑Pena was an "owner" as that term is contemplated in the Secretary's regulations. CMS Ex. 7 at 14.

2. Dr. Sanchez‑Pena was convicted of a felony offense within the ten years preceding Petitioner's revocation.

On October 14, 2010, the U.S. District Court for the District of New Jersey (District Court) entered judgment against Dr. Sanchez‑Pena and convicted him for violation of 26 U.S.C. § 7202, Failure to Truthfully Account for and Pay Over Federal Income Taxes. CMS Ex. 4 at 1. The District Court sentenced Dr. Sanchez‑Pena to five years' probation and imposed a $20,000 fine. Id. at 2, 6. NGS issued its notice of revocation on March 8, 2016. CMS Ex. 3. I therefore conclude Petitioner's owner, Dr. Sanchez-Pena, was convicted of a felony offense within the ten years preceding Petitioner's revocation.

3. CMS had a legitimate basis to conclude Dr. Sanchez-Pena's offense of conviction was detrimental to the best interests of the Medicare program and its beneficiaries.

Petitioner contests CMS's determination that Dr. Sanchez-Pena's offense of conviction was detrimental to the best interests of the Medicare program and its beneficiaries. P. Br. at 5-9. The level of deference I show to CMS's determination depends on the offense in

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question. Felony offenses specifically enumerated3 in the regulations enjoy the greatest level of deference, because the Secretary has determined these offenses to be per se detrimental, and my authority does not extend to disregarding validly promulgated regulations. Letantia Bussell, M.D., DAB No. 2196 at 13 n.13 (2008) ("[o]nce the Secretary . . . has exercised that authority by regulation as to a class of felonies, an ALJ cannot revisit that determination ....").

I accord less deference where CMS relies on felony offenses which do not appear in the regulations, but are similar to them in terms of offense elements.4 The regulations prescribe no method or criteria for judging whether an offense is similar to one of the financial crimes named in section 424.535(a)(3)(i)(B). Abdul Razzaque Ahmed, M.D., DAB No. 2261 at 11 (2009), aff'd Ahmed v. Sebelius, 710 F.Supp. 2d 167 (D. Mass. 2010) ("Absent explicit regulatory guidance to the contrary. . . it is reasonable to conclude that a supplier's offense of conviction is similar to a financial crime when the facts and circumstances that are admitted to be the basis for the conviction would appear to satisfy one or more elements of a named financial crime.").

Here, CMS argues that Dr. Sanchez‑Pena's felony conviction is "clearly synonymous with 'income tax evasion," and therefore per se detrimental to the interests of the Medicare program. CMS. Br. at 8. Perhaps recognizing the inherent weakness of claiming that two felony offenses housed in neighboring statutory provisions describing different conduct are the same, CMS alternatively contends that Dr. Sanchez-Pena's offense of conviction is a similar crime to tax evasion and therefore detrimental to the interest of the Medicare program. Id. at 8-9.

Petitioner argues that Dr. Sanchez‑Pena's conviction is neither synonymous with nor similar to tax evasion, since the latter offense requires a willful attempt to evade or defeat an imposed tax, while his failure to properly pay quarterly taxes stemmed from an effort to maintain payroll for his employees. P. Br. at 6-7, citing 26 U.S.C. § 7201. Petitioner also points out that the maximum penalty for tax evasion under 26 U.S.C. § 7201 is $100,000, while the maximum penalty for his offense of conviction under 26 U.S.C. § 7202 is only $10,000, suggesting the disparity demonstrates a lack of similarity between the two offenses. P. Br. at 7.

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Looking at the two offenses in question, I cannot agree with Petitioner's notion they are dissimilar. 26 U.S.C. § 7201 criminalizes any willful attempt "to evade or defeat any tax imposed by this title," while 26 U.S.C. § 7202 criminalizes the willful failure "to collect or truthfully account for and pay over" a tax, where an individual is required to collect, account for, and pay such a tax. Contrary to Petitioner's belief, there is no significant difference in the level of intent required for either crime; one punishes willful conduct while the other punishes willful omission of conduct. Both offenses relate to the obligation to pay taxes, and only materially differ as to the role of the offender – 26 U.S.C. § 7201 punishes the entity that owes a tax that avoids paying it, while 26 U.S.C. § 7202 punishes an entity obliged to collect a tax and to pay it that fails to do so. Both forms of conduct are deemed to merit criminal sanction, and both demonstrate a lack of integrity CMS could reasonably consider to be detrimental to the Medicare program and its beneficiaries. Finally, Petitioner's reliance on the variance in statutory penalties is without merit. A difference in severity of punishment does not demonstrate dissimilarity in the nature of the offenses. I have no difficulty concluding these offenses are similar. Accordingly, I conclude CMS had a valid basis to determine Petitioner's offense of conviction to be a financial crime detrimental to the Medicare program and its beneficiaries that merited revocation of Petitioner's billing privileges pursuant to 42 C.F.R. § 424.535(a)(3).

4. CMS's redetermination decision meets statutory requirements.

Petitioner argues that CMS failed to provide a rationale in the reconsidered determination that adequately explained its decision to revoke Petitioner's Medicare enrollment and billing privileges. P. Br. at 5. Petitioner also cites to 42 C.F.R. § 498.25, regulations at 42 C.F.R. Part 405, and the Medicare Claims Processing Manual (MCPM) to argue that CMS did not properly review the redetermination request. P. Req. for Hearing at 3-4. Petitioner further argues in its brief that the reconsidered determination notice "does not address the issue of NGS approving Petitioner to bill Medicare knowing of Pena's felony conviction, and then subsequently revoking Petitioner's privileges from 2010 to the present" and that it is "evident that an evaluation of the documentation/supporting information is lacking" due to the use of "boilerplate language." P. Br. at 5.

CMS is correct in arguing that the regulations at 42 C.F.R. § 405 and the policies in the MCPM do not apply to the proceedings here. CMS Br. at 6. These rules apply to the appeals process for Medicare claims and payment appeals and do not apply to enrollment determinations such as the one here. The regulations instead oblige CMS to provide notice as follows:

1. CMS mails notice of a reconsidered determination to the affected party.
2. The notice gives the reasons for the determination.

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3. If the determination is adverse, the notice specifies the conditions or requirements of law or regulations that the affected party fails to meet, and informs the party of its right to a hearing.

42 C.F.R. § 498.25.

In reviewing the reconsidered determination, I find that CMS met these requirements. Petitioner does not dispute that CMS mailed the notice. The notice provides a reason for the determination and the conditions or requirements of law or regulations that Petitioner failed to meet, stating Petitioner's Medicare enrollment was revoked pursuant to 42 C.F.R. § 424.535(a)(3) because Dr. Sanchez‑Pena "is currently revoked from the Medicare Program with a three year enrollment bar effective 04/07/2016 for reason of 'CONTINUED BILLING AFTER FELONY CONVICTION.'" CMS Ex. 1 at 1 (emphasis in original). The notice also advised Petitioner of the means to request a hearing if it was dissatisfied with the reconsidered determination. Id. at 2.

Petitioner also objects to the timing of CMS's revocation action, which took place well after Dr. Sanchez-Pena's conviction and suspension. While I am sympathetic to Petitioner's position, CMS is not obliged to revoke Petitioner's billing privileges within a certain timeframe or with any alacrity, as Petitioner suggests. See Horace Bledsoe, M.D. and Bledsoe Family Medicine, DAB No. 2753 at 9 (2016)("It is important to note that the Medicare statute and regulations do not require CMS to take action within a specified time frame after discovering information about a Medicare enrollee's conviction. CMS may revoke at any time based on a conviction if the regulatory elements in section 424.535(a)(3) are satisfied."). Where CMS revokes based on the felony conviction of a supplier or provider's owner, it need only act within 10 years. 42 C.F.R. § 424.535(a)(3)(i). It did so here, rendering Petitioner's claim as to the timing of the revocation without merit.5

5. I do not have the authority under the regulations to review CMS's imposition of an overpayment assessment.

Petitioner argues that I should determine whether CMS's imposition of an overpayment resulting from the revocation is appropriate, claiming the proceedings to challenge an overpayment and the revocation before me are "nearly impossible to separate." P. Br. at 5. Petitioner's claim fails because my review is limited to the validity of initial

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determinations, in this case the determination to deny or revoke a supplier's Medicare enrollment in accordance with 42 C.F.R. § 424.535. 42 C.F.R. § 498.3(b)(17); Bussell, DAB No. 2196 at 12-13 (ALJ review of revocation of enrollment for felony offenses is "limited to whether CMS has established a legal basis for its actions.").

Although the overpayment resulted from the revocation action, overpayment determinations are not subject to my review. I have no authority to consider the collateral payment-related consequences of CMS's decision to revoke Petitioner's billing privileges. Lorrie Laurel, PT, DAB No. 2524 at 7-8 (2013) ("Having no authority to review CMS's exercise of discretion, it follows that we have no authority to consider factors, such as retroactive payment consequences, that CMS might decide to take into consideration when exercising its discretion."). Instead, the regulations set forth a separate process by which a party subject to an overpayment can seek review of that determination. See 42 C.F.R. §§ 405.370 – 405.379.

VI. Conclusion

For the foregoing reasons, I affirm CMS's revocation of Petitioner's Medicare enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3).

• 1. The parties' motions for summary judgment are accordingly denied as moot.
• 2. My findings of fact and conclusions of law are set forth in italics and bold font.
• 3. Section 424.535(a)(3)(ii) sets forth four categories of felony offenses that can serve as a basis for revocation: felony crimes against persons; any felony that placed the Medicare program or its beneficiaries at immediate risk; any felonies that would result in mandatory exclusion under section 1128(a) of the Social Security Act; and applicable here, financial crimes.
• 4. The use of the words "include" or "including" in 42 C.F.R. § 424.535(a)(3)(ii) signifies that the list of proscribed financial crimes is not intended to be exhaustive but illustrative. 42 C.F.R. § 424.535(a)(3)(ii)(B); see Fady Fayad, M.D., DAB No. 2266 at 8 (2009).
• 5. Petitioner also argued at reconsideration that CMS acted unreasonably in revoking its billing privileges because Petitioner had already disclosed Dr. Sanchez-Pena’s felony conviction in 2014. CMS Ex. 2 at 4 5. Petitioner has not presented this argument to me, suggesting it recognized its lack of merit. In any event, CMS correctly observed that the Board has consistently found attacks related to CMS’s discretion are essentially equitable arguments that I may not entertain. CMS Br. at 11, citing Bledsoe, DAB No. 2753 at 10-11.