NNE Medical Supply and Equipment, Inc., DAB CR5097 (2018)

DECISION

The Centers for Medicare & Medicaid Services (CMS) revoked the Medicare supplier number and billing privileges of Petitioner, NNE Medical Supply and Equipment, Inc., after it concluded that Petitioner was not operational at the practice location on file with the National Supplier Clearinghouse (NSC) and that it was not accessible and staffed during posted hours of operation.  CMS’s Medicare administrative contractor for the NSC, Palmetto GBA (Palmetto), upheld the revocation in a reconsidered determination, and Petitioner requested a hearing to dispute the revocation.  I affirm the revocation of Petitioner’s Medicare enrollment and billing privileges.

I.   Background

Petitioner was enrolled in the Medicare program as a supplier of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) and it had a location on file with the NSC of 617 N. Euclid Street in Anaheim, California.  CMS Exhibit (Ex.) 1 at 2.  On December 13 and 20, 2016, a site inspector attempted to conduct site inspections at Petitioner’s location on file with CMS.  CMS Ex. 2.  The site inspector’s report documents that Petitioner had posted daily weekday hours of operation from 10:00 am

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until 4:30 pm, and that Petitioner had separately posted alternate hours for Thursdays.  CMS Ex. 2 at 1, 2, 4, 10.  The site inspector reported that she was unable to access Petitioner’s facility on two consecutive Tuesdays, at 11:29 am on December 13, 2016, and at 10:54 am on December 20, 2016.  CMS Ex. 2 at 2.  The site inspector reported the following:

Two attempts made during posted hours of operation.  Employees and/or owner were not on site during both attempts.  See site investigation report for more information.  Closed during first attempt.  First attempt made during posted hours of operation.

CMS Ex. 2 at 1 (capitalization omitted).  The site inspector further reported:

Supplier entrance locked during both attempts.  Chiropractic entrance used and contacted employee of chiropractic office during both attempts.  Chiro[practic] office employee stated she is not NNE Med Supply employee.  I was informed the owner nor employees of NNE Medical were onsite during both attempts.

CMS Ex. 2 at 2 (capitalization omitted).  The site inspector included more than a dozen digital photographs with her report.  CMS Ex. 2 at 3-15.

Palmetto thereafter, on January 12, 2017, issued an initial determination revoking Petitioner’s Medicare supplier number, retroactive to December 20, 2016.  CMS Ex. 3.   Palmetto informed Petitioner that it was not in compliance with, inter alia, the supplier standard at 42 C.F.R. § 424.57(c)(7), and that Petitioner was non-operational pursuant to 42 C.F.R. § 424.535(a)(5).  The letter provided the following information:

Recently, a representative of the NSC attempted to conduct a visit of your facility on December 13, 2016 and December 20, 2016; however, the visits were unsuccessful because the business was closed during posted business hours.  Because we could not complete an inspection of your facility, we could not verify your compliance with the supplier standards.  Based upon a review of the facts, we have determined that your facility is not operational to furnish Medicare covered items and services.  Thus, you are considered to be in violation of 42 CFR §§ 424.535(a)(5), all supplier standards defined in 42 CFR [§] 424.57(c) and pursuant to [42 C.F.R. §] 424.535(g), the revocation is effective the date CMS determined that you were no longer operational.

CMS Ex. 3 at 2 (italics omitted).  Palmetto also notified Petitioner that it would be barred from reenrolling in the Medicare program for a period of two years from the date of postmark of the letter.  CMS Ex. 3 at 1.  The letter informed Petitioner that if it believed

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the determination was incorrect, it should file a request for reconsideration.  CMS Ex. 3 at 3-4.

In a letter dated January 19, 2017, Petitioner submitted a corrective action plan in which it explained that a “staff member” spoke to the site inspector at the time of each visit.  CMS Ex. 4.  Petitioner did not identify the staff member who spoke with the site inspector on December 13, 2016, nor did Petitioner indicate whether this staff member was its own employee.  Petitioner explained that on December 20, 2016, a “staff member” who works for a neighboring chiropractic office spoke with the site inspector.  CMS Ex. 4.  Petitioner did not submit any evidence that its own employee was on site at the time of either site visit.  CMS Ex. 4 at 1-2.  Palmetto rejected the corrective action plan on February 28, 2017.  CMS Ex. 5.

Petitioner submitted a letter on April 14, 2017, which Palmetto construed to be a request for reconsideration of its revocation for not being operational at the time of the site visits.  CMS Ex. 6; see CMS Ex. 7 at 4.  Once again, Petitioner did not submit any evidence that it was open, staffed, and accessible at the time of either site visit.  CMS Ex. 6.  On May 24, 2017, a Medicare hearing officer issued a reconsidered determination that denied Petitioner’s request for reconsideration.  CMS Ex. 7.  The reconsidered determination upheld the determination that Petitioner was not open during the posted hours of operation and that it was closed during both attempted site visits,1 and found that Petitioner was noncompliant with 42 C.F.R. § 424.535(a)(5) and 42 C.F.R. § 424.57(c).  CMS Ex. 7 at 5-6.  The reconsidered determination stated, in pertinent part:

The NSC reserves the right to perform on-site inspections as a means of verifying information on file with the NSC and confirm compliance with the Supplier Standards.  If during an on-site review a facility is found closed or not accessible, this becomes grounds for denial because the facility was found not in operation.  A supplier must be found “operational” upon the site inspection in order to verify compliance with the Medicare Enrollment requirements.  “Operational means the provider or supplier has a qualified physical practice location, is open to the public for the purpose of providing healthcare related services, is prepared to submit valid Medicare claims and is properly staffed, equipped, and stocked.”  The fact remains that the site inspector could not access NNE Medical Supply and Equipment, Inc. facility to verify compliance with the supplier standards.

CMS Ex. 7 at 5 (emphasis in original).

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Petitioner filed a request for hearing before an administrative law judge (ALJ) that was received on July 20, 2017.  On August 15, 2017, I issued an Acknowledgment and Pre‑Hearing Order (Order).  Pursuant to the Pre-Hearing Order, CMS filed its brief (CMS Br.), along with seven proposed exhibits (CMS Exs. 1-7).  Petitioner filed a brief and eleven proposed exhibits (P. Exs. 1-11).

CMS objects to Petitioner’s submission of P. Exs. 3-7 on the basis that these proposed exhibits are duplicative of CMS Exs. 3-7.  However, while P. Exs. 3, 4, 5, and 7 are duplicative of CMS Ex. 3, 4, 5, and 7, I observe that P. Ex. 6 is not duplicative of CMS Ex. 6 because it contains four additional pages (8 through 12).  CMS has not addressed these non-duplicative pages in its objections, and therefore, I overrule CMS’s objection to the admission of P. Ex. 6.  I admit P. Ex. 6, but not P. Exs. 3, 4, 5, and 7, into the evidentiary record.

CMS objects to the admission of P. Exs. 2, 9, and 11 because Petitioner has not shown good cause for the belated submission of this evidence.  P. Ex. 2 is an undated diagram of Petitioner’s office suite, P. Ex. 9 is a collection of undated photographs of Petitioner’s storefront location, and P. Ex. 11 is a compendium of various documents, to include: printouts of information from Palmetto’s website that were posted in December 2016; an undated document on Petitioner’s letterhead that is apparently Petitioner’s internal policy for handling site visits; and payroll and training records for one of its employees.

I must examine new documentary evidence that is offered by a provider or supplier and determine whether good cause exists for submitting that evidence for the first time at the ALJ level.  42 C.F.R. § 498.56(e)(1).  I must exclude any new documentary evidence at the ALJ level of appeal if I do not find good cause for a petitioner’s failure to previously submit that evidence.  42 C.F.R. § 498.56(e)(2)(ii) (stating that “[i]f the ALJ determines that there was not good cause for submitting the evidence for the first time at the ALJ level, the ALJ must exclude the evidence from the proceeding and may not consider it in reaching a decision”); Care Pro Home Health, Inc., DAB No. 2723 at 11 (2016) (“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).”).  While “good cause” is not defined in the regulations, the Departmental Appeals Board (DAB) has explained that, in showing good cause in such a situation, a party must explain its “failure to submit [evidence] at the reconsideration stage (or earlier).”  Care Pro, DAB No. 2723 at 14.  Palmetto clearly explained, when it notified Petitioner of its revocation, that “[y]ou may submit additional information with the reconsideration that you believe may have a bearing on the decision” and that “if you have additional information with the reconsideration that you would like a hearing officer to consider during the reconsideration, or if necessary, an administrative law judge to consider during a hearing, you must submit that information with your request for

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reconsideration.”  CMS Ex. 3 at 3.  The letter further cautioned, citing to section 498.56(e), that the reconsideration request would be the “only opportunity” to submit this information unless permitted by an ALJ.  CMS Ex. 3 at 3.  Likewise, I reminded Petitioner of the good cause requirement in my Pre-Hearing Order when I instructed that it “may not offer new documentary evidence in this case absent a showing of good cause for failing to present that evidence previously to CMS.”  Order, § 6, citing 42 C.F.R. § 498.56(e).

Despite this previous guidance, Petitioner has not presented good cause for submitting this evidence for the first time at the hearing level.  Petitioner has not shown that either the diagram of its office suite (P. Ex. 2) or the photographs of its office location2 (P. Ex. 9) could not have been submitted as evidence in support of its reconsideration request or that there is good cause for their late submission.  Likewise, Petitioner has offered no explanation of good cause for submitting, for the first time, the documents contained in P. Ex. 11, which include printouts of Palmetto’s website, Petitioner’s site visit policy, and an employee’s payroll and training records.3  As Petitioner has not asserted good cause for the untimely submission of P. Exs. 2, 9, and 11, I may not admit this evidence.  42 C.F.R. § 498.56(e)(2)(ii).  Further, I note that even if Petitioner had shown good cause for the belated submission of this evidence, which it has not, Petitioner has not established that this evidence is relevant to the question of whether it was operational at its N. Euclid Street location at the time of site visits on December 13 and 20, 2016.  None of these documents establish that Petitioner was open, accessible, and staffed when the site inspector visited its location.

CMS also objects to the admission of P. Ex. 10, which I have construed as the written direct testimony of Ms. Lea Flores, on the basis that Ms. Flores did not offer the testimony under oath or the penalty of perjury.  Based on Petitioner’s re-filing of a substitute version of Ms. Flores’s testimony following a March 27, 2018 order directing it to re-file this testimony, I overrule CMS’s objection.

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In the absence of any other objections, I admit CMS Exs. 1-7 and P. Exs. 1, 6, 8 and 10 into the evidentiary record.

Finally, CMS has requested an opportunity to cross-examine Ms. Flores, who provided the testimony admitted as P. Ex. 10.  Even if I accept Ms. Flores’s testimony as true, her testimony does not establish that Petitioner was operational at the time of the December 20, 2016 site visit.  Therefore, a hearing for the purpose of allowing CMS an opportunity to cross-examine this witness is unnecessary and CMS will not be prejudiced if it does not have an opportunity to cross-examine this witness.  I consider the record to be closed and the matter ready for a decision on the merits.

II.  Issue

Whether CMS had a legitimate basis for revoking Petitioner’s Medicare billing privileges for failing to comply with Supplier Standard 7 (42 C.F.R. § 424.57(c)(7)(i)(C)) and failing to be operational (42 C.F.R. § 424.535(a)(5)(i)).

III.  Jurisdiction

I have jurisdiction to decide this case.  42 C.F.R. §§ 498.3(b)(17), 498.5(l)(2); see also 42 U.S.C. § 1395cc(j)(8).

IV.  Findings of Fact, Conclusions of Law, and Analysis4

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 (Secretary).  Social Security Act (Act) § 1834(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); 42 C.F.R. § 424.535(a)(1).  To receive direct-billing privileges, a DMEPOS supplier must meet and maintain each of the supplier enrollment standards, including the requirement to maintain a physical location that is accessible and staffed during posted hours.  42 C.F.R. § 424.57(c)(7)(i)(C).  The supplier must also permit CMS or its agents to conduct on-site inspections to ascertain its compliance with governing regulations and ensure its location is accessible to various entities such as the public, CMS, and the NSC.  42 C.F.R. § 424.57(c)(7), (8).

CMS may revoke a currently enrolled DMEPOS supplier’s Medicare enrollment and billing privileges if CMS determines, upon on-site review, that the DMEPOS supplier is

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no longer operational to furnish Medicare covered items or services, or the supplier fails to satisfy any of the Medicare enrollment requirements, or has failed to furnish Medicare covered items or services as required by the statute or regulations.  42 C.F.R. § 424.535(a)(5)(ii).  After a DMEPOS supplier’s Medicare enrollment and billing privileges are revoked, it is barred from reenrolling in the Medicare program for a period of one to three years.  42 C.F.R. § 424.535(c).

1. Petitioner’s location at 617 N. Euclid Street in Anaheim, CA, was not open, accessible, and staffed when a site inspector attempted to conduct a site inspection on both December 13 and 20, 2016.

On December 13, 2016, at 11:29 am, and December 20, 2016, at 10:54 am, a site inspector visited Petitioner’s 617 N. Euclid Street location and observed that Petitioner’s private entrance was locked, and the site inspector accessed the location by using another entrance that is shared with a separate chiropractic office.  CMS Ex. 2 at 2.  The site inspector visited during Petitioner’s posted hours of operation, which she observed were  from 10:00 am until 4:30 pm on weekdays (CMS Ex. 2 at 1) according to one sign, and the same daily hours but with a two-hour closure between noon and 2:00 pm on Thursdays based on other signage.  CMS Ex. 2 at 1, 4, 10.

Petitioner has not established that it was open, accessible, and staffed at the time of the site visits.  In fact, Petitioner has confusingly used the term “staff member” to refer to both its own employees and the employees of another office that shares common office space with Petitioner.  See CMS Ex. 4 (corrective action plan request referring to Ms. Flores, an employee of the chiropractic practice, as a “staff member”).

Regarding the December 13, 2016 site visit, Petitioner alleged in its corrective action plan that an unidentified “staff member” spoke with the site inspector.  CMS Ex. 4 at 1.  Petitioner initially did not indicate whether this staff member was its own employee, or rather, an employee of another medical office.  CMS Ex. 4 at 1.  Even though Petitioner claims in its brief that “NNE staff” spoke with the site inspector on December 13, 2016, Petitioner’s request for hearing does not reference the December 13, 2016 site visit.  Likewise, although Petitioner reported that “NNE staff” engaged with the site inspector (P. Br. at 3), it neither identified this individual nor submitted any evidence that this employee was on site at the time of the December 13, 2016 site visit; such evidence could include the timekeeping records Petitioner referenced in its request for hearing.  Further, even though Petitioner submitted the written direct testimony of an employee of another medical office, it did not submit the written direct testimony of its own employee who purportedly spoke with the site inspector that day.

With respect to the December 20, 2016 site visit, Petitioner asserted in its request for hearing that “[a]fter reviewing HR clock in and time sheets, it is noted that a staff

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member was present at the day of the inspection,” but that “during the specific time of the inspection (around 11 am), our staff was in the restroom.”  P. Ex. 8.  In its corrective action plan, Petitioner explained that the “staff member” who spoke to the site inspector was employed by the chiropractor who shared Petitioner’s office space (CMS Ex. 4 at 1‑2), and Petitioner submitted the written testimony of the chiropractic office employee, Ms. Flores, regarding her encounter on December 20, 2016.5  P. Ex. 10.  However, once again Petitioner did not submit any records evidencing that its unidentified staff member was “clock[ed] in” at the time of the December 20, 2016 site visit, nor did Petitioner submit the written direct testimony of this individual.  Request for Hearing.

The site visit inspector reported that Petitioner’s private entrance was locked at the time of both visits, and that she spoke with chiropractic staff who informed her that NNE staff were not onsite.  CMS Ex. 2 at 2.  Petitioner has submitted nothing more than vague allegations that it had an unidentified employee on site at the time of both site visits, and it has only established, at best, that the employee of the neighboring chiropractic office was available to speak with agents of CMS and the NSC and members of the public.  Petitioner has not demonstrated it was staffed, accessible, and open on either December 13 or 20, 2016.

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2. CMS had a legitimate basis to revoke Petitioner’s Medicare billing privileges because Petitioner was not accessible and staffed during posted hours of operation, and was not operational, as required by 42 C.F.R. §§ 424.57(c)(7) and 424.535(a)(5).

For a supplier to be “operational,” it must be “open to the public for the purpose of providing health care related services . . . and [be] properly staffed . . . to furnish these items or services.”  42 C.F.R. § 424.502 (emphasis added).  Further, DMEPOS suppliers must permit CMS or its agents to conduct on-site inspections to ascertain supplier compliance with enrollment standards, and the supplier must be accessible and staffed during posted hours of operation to both beneficiaries and CMS and its agents.  42 C.F.R. § 424.57(c)(7)(i)(C).  CMS may perform periodic site visits to determine whether the supplier is operational and complying with Medicare enrollment requirements.  42 C.F.R. §§ 424.510(d)(8), 424.515(c), 424.517(a).

The facts in this case establish that Petitioner’s location was not open and available for the site inspector to conduct an inspection on both December 13 and 20, 2016.  Therefore, CMS had a legitimate basis to conclude that Petitioner was not operational under 42 C.F.R. § 424.535(a)(5)(i) and was not in compliance with the supplier standards found at 42 C.F.R. § 424.57(c)(7)(i)(C).

A DMEPOS supplier is neither “open to the public” nor “accessible,” if the supplier location is closed because the staff is out for lunch, on a break, or making patient deliveries or visits.  See Ita Udeobong, d/b/a Midland Care Med. Supply & Equip., DAB No. 2324 at 6-7 (2010).  Even if Petitioner’s employee was “in the restroom” during one of the site visits (Request for Hearing), such circumstances do not excuse Petitioner’s failure to be accessible and properly staffed when the site inspector attempted two separate inspections during Petitioner’s posted hours of normal operation.  See Request for Hearing (alleging that Petitioner’s employee was in the restroom was when the site inspector arrived on December 20, 2016).  A supplier may not close, even temporarily, during its posted hours of operation.  Complete Home Care Inc., DAB No. 2525 at 5-6 (2013).  It is incumbent on Petitioner to make whatever reasonable arrangements are necessary to keep its business open while allowing for visits to doctors, patient consultations, and any necessary breaks for staff members.  See Norpro Orthotics & Prosthetics, DAB No. 2577 at 5 (2014) (“In any event, if the employee was present behind a locked door or behind the facility on a break when the inspector visited, the facility was not “staffed” then as section 424.57(c)(7) requires.”).  Further, in rulemaking that clarified, revised, and added to the supplier standards in 42 C.F.R. § 424.57, the Secretary considered allowing facilities to temporarily close during posted hours to account for circumstances including short-term closures yet nonetheless chose to emphasize that a supplier’s place of business must always remain publicly accessible during posted hours.  73 Fed. Reg. 4,503, 4,506 (Jan. 25, 2008) (proposed rule) and

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75 Fed. Reg. 52,629, 52,636 (Aug. 27, 2010) (final rule); see Complete Home Care Inc., DAB No. 2525 at 6.  In fact, the final rule explained, in addressing comments requesting an exemption for temporary closures due to reasons such as emergencies and unforeseen occurrences, that a supplier “should be available during posted business hours” and “should do its best to plan and staff for temporary absences.”  75 Fed. Reg. 52,629, 52,636.

The undisputed evidence establishes that Petitioner’s 617 N. Euclid Street location was not operational because it was not accessible and staffed during posted business hours; CMS properly revoked Petitioner’s Medicare billing privileges.  42 C.F.R.  §§ 424.57(c)(7)(i)(C), 424.535(a)(5).  See Care Pro, DAB No. 2723 at 6 (holding that CMS lawfully revoked a supplier’s Medicare enrollment based on its non-operational status at a single location); see also Viora Home Health, Inc., DAB No. 2690 at 13 (2016) (holding that CMS properly revoked Medicare enrollment when a practice location of record was not operational upon onsite review).

V.  Conclusion

I affirm the revocation of Petitioner’s DMEPOS supplier number and Medicare billing privileges, effective December 20, 2016, pursuant to 42 C.F.R. §§ 424.57(c)(7)(i)(C) and 424.535(a)(5)(i).

• 1. The reconsidered determination found compliance with 42 C.F.R. § 424.57(c)(1), which had previously been a separate basis for revocation.
• 2. I note that CMS submitted the photographs that the site inspector took at each site visit. CMS Ex. 2 at 3-15. Petitioner’s photographs are not dated, but likely post-date the site inspector’s photographs (P. Br. at 5-6), meaning that Petitioner’s photographs would not evidence the appearance of Petitioner’s location on the dates of the site visits.
• 3. None of the records provide evidence that Petitioner was open, accessible, and staffed on December 13 and 20, 2016. Although Petitioner stated in its request for hearing that ‘[a]fter carefully reviewing HR clock in and time sheets, it is noted that a staff member was present at the day of the inspection,” Petitioner did not submit these records with its request for reconsideration. Nor did Petitioner submit these records, with an accompanying statement of good cause, with its request for hearing or pre-hearing exchange.
• 4. My findings of fact and conclusions of law are set forth in bold and italics.
• 5. Ms. Flores, the office manager of the neighboring chiropractic practice, submitted written direct testimony regarding her encounter with the site inspector. P. Ex. 10. Petitioner has previously identified Ms. Flores as a “staff member” (CMS Ex. 4 at 1), but Ms. Flores is not an employee of Petitioner. P. Ex. 10 at 1. Petitioner’s owner and chief executive officer, Charina Berroya (CMS Ex. 1 at 6), who was not on site at the time of either site visit, argued in Petitioner’s request for hearing that Ms. Flores has a “language barrier,” and “spoke limited English and was unable to properly convey to the inspector that an NNE Staff member was in the restroom . . . .” This characterization of Ms. Flores’s English proficiency is inconsistent with the content and substance or Ms. Flores’s written direct testimony, which articulately states the following: “My name is Lea Flores and I am the office manager for Adeva Chiropractic. I can attest that on December 20, 2016[,] I saw the Medicare inspector for the NNE Medical walk through the main door and the reception area that we shared with NNE. She asked me if I work for NNE medical and I told her that I work for the Chiropractor. I never told her that there is no NNE Employee in the office. I offered to call on an NNE Employee but the Inspector said no and left right away.” P. Ex. 10. Although Petitioner alleges Ms. Flores was unable to effectively communicate with the inspector due to a language barrier, Ms. Flores has not made the same allegation in her testimony.