ABC Pharmacy, Inc., DAB CR5291 (2019)

DECISION

The Centers for Medicare & Medicaid Services (CMS) revoked the supplier number and Medicare billing privileges of Petitioner, ABC Pharmacy, Inc.  Petitioner requested a hearing to challenge its revocation.  I affirm the revocation of Petitioner’s Medicare supplier number and billing privileges based on its failure to comply with Medicare supplier standards.

I. Background

Petitioner was enrolled in the Medicare program as a supplier of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).  CMS Exhibit (Ex.) 4.

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In a letter dated March 6, 2017, the National Supplier Clearinghouse1 (NSC) informed Petitioner that it was in violation of supplier standards.2 CMS Ex. 2.  As relevant here, NSC informed Petitioner that it had received notice that Petitioner’s surety bond policy with Old Republic Insurance Company had been cancelled.  CMS Ex. 2 at 1.  NSC informed Petitioner that a surety bond is required pursuant to 42 C.F.R. § 424.57(c)(26), and it directed Petitioner to submit, within 21 days of the postmark date of the letter, documentation that it had a surety bond.  CMS Ex. 2 at 1-2.  NSC sent the letter via the U.S. Postal Service to 5401 8th Avenue, Store A, Brooklyn, NY, 11220 (CMS Ex. 2 at 1), and the letter was delivered, as reflected by certified mail tracking, on March 10, 2017.  CMS Ex. 3.

On May 16, 2017, after not receiving a response to its previous letter, NSC issued an initial determination revoking Petitioner’s Medicare supplier number, retroactive to January 8, 2017.  CMS Ex. 4 at 1.  NSC determined that Petitioner was not in compliance with, inter alia, two supplier standards:  42 C.F.R. § 424.57(c)(21) (failing to provide information in response to the March 6, 2017 letter) and 42 C.F.R. § 424.57(c)(26) (failing to have a surety bond).  CMS Ex. 4 at 1-2.  NSC barred Petitioner from re-enrolling in the Medicare program for two years, effective 30 days from the postmark date of the letter.  CMS Ex. 4 at 1.  NSC mailed the May 16, 2017 letter to the same address to which it mailed the March 6, 2017 letter.

On July 11, 2017, Petitioner, through counsel, filed a request for reconsideration with NSC that included supporting documents.  CMS Ex. 5.  Petitioner argued that it did not receive the March 6, 2017 letter that requested it to provide specific information within 21 days.  CMS Ex. 5 at 2.  Petitioner stated that it had renewed its surety bond with a different company, International Fidelity Insurance Company, and it provided a copy of an October 1, 2015 policy with that company.  CMS Ex. 5 at 2, 16-17.

On August 28, 2017, an NSC hearing officer issued an unfavorable reconsidered determination upholding the revocation of Petitioner’s Medicare billing privileges based on noncompliance with supplier standards 21 and 26 (42 C.F.R. § 424.57(c)(21), (26)).  CMS Ex. 1.  NSC explained that although Petitioner submitted a copy of a surety bond policy it had with International Fidelity Insurance Company, NSC had been notified by that company that the policy had been cancelled in October 2016.  CMS Ex. 1 at 3; see

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CMS Ex. 8 (September 20, 2016 letter from International Fidelity Insurance Company to CMS).  NSC also explained that it also had been notified of the cancellation of a different surety bond with Old Republic Insurance Company.  CMS Ex. 1 at 2; see CMS Ex. 7.  NSC remarked that, in light of the cancellation of both surety bond policies, it had called and emailed Petitioner’s counsel, without success, in an effort to obtain updated surety bond information.  CMS Ex. 1 at 3.  NSC stated:  “The supplier has not submitted verifiable documentation showing compliance with 42 C.F.R. [§ ]424.57(c)(26) as the surety bond written through International Fidelity cannot be verified with the surety and the NSC has not received proof of reinstatement or a copy of the surety bond written through Old Republic Insurance Company.”  CMS Ex. 1 at 3.

On October 25, 2017, Petitioner, through counsel, timely filed a request for hearing before an administrative law judge (ALJ).3 CMS filed a motion for summary judgment and supporting brief (CMS Br.), along with eight exhibits (CMS Exs. 1-8).  Petitioner submitted a brief (P. Br.).  In the absence of any objections, I admit CMS Exs. 1-8 into the evidentiary record.

Neither party has submitted written direct testimony, and therefore, a hearing is unnecessary for the purpose of cross-examination of witnesses.  Acknowledgment and Pre-Hearing Order4 (Pre-Hearing Order), §§ 8-10.  The matter is ready for a decision on the merits.5

II. Issue

Whether CMS had a legitimate basis to revoke Petitioner’s Medicare enrollment and billing privileges based on its failure to comply with DMEPOS supplier standards 21 and 26 (42 C.F.R. § 424.57(c)(21), (26)).

III. Jurisdiction

I have jurisdiction to decide this case.  42 C.F.R. §§ 424.545(a), 498.3(b)(17), 498.5(l)(2); see also 42 U.S.C. § 1395cc(j)(8).

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IV. Findings of Fact, Conclusions of Law, and Analysis6

1. NSC sent Petitioner a letter on March 6, 2017, in which it requested that Petitioner provide, inter alia, documentation that it meets the surety requirements set forth in 42 C.F.R. § 424.57(c)(26).

2. The U.S. Postal Service verified delivery of NSC’s March 6, 2017 letter on March 10, 2017.

3. International Fidelity Insurance Company terminated Petitioner’s surety bond coverage, effective October 20, 2016, based on non-payment of the premium.

4. Old Republic Insurance Company terminated Petitioner’s surety bond coverage, effective January 8, 2017, based on non-payment of the premium.

5. Petitioner did not provide documentation of a valid surety bond policy in response to NSC’s March 6, 2017 request, nor has it provided documentation of a valid surety bond policy at any point since that time.

6. CMS had a legitimate basis to revoke Petitioner’s Medicare supplier number because Petitioner did not provide documentation in response to NSC’s request, as required by 42 C.F.R. § 424.57(c)(21), and it did not maintain a surety bond, as required by 42 C.F.R. § 424.57(c)(26).

To receive Medicare payments for items furnished to a Medicare beneficiary, a supplier of medical equipment and supplies must have a supplier number issued by the Secretary of Health and Human Services.  Social Security Act (Act) § 1834(j)(1)(A); 42 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), 424.535(a)(1).  Among the standards set forth in section 424.57(c), a supplier must provide “any information required by the Medicare statute or implementing regulations” upon request.  42 C.F.R. § 424.57(c)(21).  Further, a DMEPOS supplier must have a surety bond.  42 C.F.R. § 424.57(c)(26).  CMS may revoke a currently enrolled DMEPOS supplier’s Medicare enrollment and billing privileges if CMS determines that the DMEPOS supplier fails to meet the supplier standards.  42 C.F.R. §§ 424.57(d)(6)(ii)-(iii), (11)(i), 424.57(e)(1), 424.535(a)(5)(ii).  After a DMEPOS supplier’s Medicare enrollment and billing privileges are revoked, it is barred from re-enrolling in the Medicare program for a period of one to three years. 

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42 C.F.R. § 424.535(c).  Ordinarily, but with exceptions, a revocation is effective 30 days from the date the supplier is sent the notice of revocation.  42 C.F.R. §§ 424.57(e)(1), 424.535(g).

Petitioner did not comply with the requirements listed above.  Petitioner’s request for hearing does not specifically challenge its revocation based on 42 C.F.R. § 424.57(c)(26), stating in its entirety:

Pursuant to 42 CFR 498, Petitioner hereby requests a hearing before an administrative law judge in the nature of an appeal of the unfavorable decision by the Medicare Hearing Officer dated August 28, 2017 in response to the Petitioner’s request for reconsideration dated July 11, 2017 of the revocation of the Petitioner’s Medicare Supplier Number dated May 16, 2017 and two year re-enrollment bar.

Petitioner contends that: 1) revocation of the Supplier should be reversed because the Supplier did not receive the 21 day letter; 2) revocation of the Supplier should be reversed because the Supplier complied with Supplier standards 10 and 22 and; [sic] in the alternative, 3) if the revocation is not reversed the two year re-enrollment bar should be reduced to one year based on foregoing and based on the technical nature of the Supplier’s alleged failures to comply with the Supplier standards.

Likewise, even though CMS argued that revocation pursuant to section 424.57(c)(26) is warranted because Petitioner did not have a surety bond, Petitioner fails to challenge CMS’s arguments.  Petitioner’s brief, which was submitted by its counsel, states in its entirety:

The facts generally set forth in CMS’s Prehearing Brief and Motin [sic] for Summary Judgement [sic] as supplemented by the letter of Daniel Goldberg dated July 11, 2017 designated as Petitioner’s Reconsideration. CMS Ex 5 p1 and Petitioner’s Letter for Reconsideration – Corrective Action Plan. C5 p7.

The facts set forth in those exhibits establish that Petitioner substantially complied with the supplier standards and acted in good faith.  The facts are sufficient to put in issue whether Petitioner complied with the Supplier Standards.

Any technical defects and administrative lapses on Petitioner’s part should not result in the revocation from the Medicare Program, which may serve a [sic] a basis for cessation of Petitioner’s relationship with the Medicaid Program, was [sic] well, which will be financially crippling.  In view of the 

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sevee [sic] consequences that may flow from revocation, the imnposition [sic] of a 2 year bar against reenrollment bar was an abuse of discretion for technical defects.

Based upon for [sic] foregoing, CMS’s motion should be denied.

Petitioner has not argued, either in its request for hearing or its brief, that it had a surety bond as required by 42 C.F.R. § 424.57(c)(26).  Nor has Petitioner submitted any evidence7 that it actually had a surety bond.8 I affirm Petitioner’s revocation based on its failure to comply with 42 C.F.R. § 424.57(c)(26).

CMS presented evidence that NSC mailed the March 6, 2017 letter to Petitioner via certified mail, and that Petitioner received the letter on March 10, 2017.  CMS Exs. 2 at 1; 3.  Despite the fact that the U.S. Postal Service confirmed delivery of this letter (CMS Ex. 3), Petitioner contends that it did not receive the letter.  However, Petitioner has provided no support for this bare claim, nor has it submitted any evidence to rebut the evidence showing it received the letter on March 10, 2017.  Further, Petitioner has not submitted any evidence that it provided a timely response to the request for information contained in the letter.  Because the evidence demonstrates that Petitioner received the letter requesting information on March 10, 2017 and it did not provide a timely response to that letter, I affirm the revocation pursuant to 42 C.F.R. § 424.57(c)(21) based on Petitioner’s failure to provide requested information to NSC.

To the extent that Petitioner’s request for relief is based on principles of equitable relief, I cannot grant such relief.  US Ultrasound, DAB No. 2302 at 8 (2010) (“Neither the ALJ nor the Board is authorized to provide equitable relief by reimbursing or enrolling a supplier who does not meet statutory or regulatory requirements.”).  Petitioner points to no authority by which I may grant it relief from the applicable regulatory requirements, and I have no authority to declare statutes or regulations invalid or ultra vires.  1866ICPayday.com, L.L.C., DAB No. 2289 at 14 (2009) (“An ALJ is bound by

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applicable laws and regulations and may not invalidate either a law or regulation on any ground.”).

7. The two-year re-enrollment bar is not reviewable.

Petitioner asks that the two-year re-enrollment bar be reduced based on a flawed belief that its revocation is simply based on “technical defects.”  P. Br. at 1.  Petitioner’s enrollment was revoked based on its failure to comply with two supplier standards.  Not only did Petitioner fail to provide NSC information that had been requested, but it failed to comply with the surety bond requirement.  The DAB has explained that “CMS’s determination regarding the duration of the re‑enrollment bar is not reviewable . . .”  Vijendra Dave, M.D., DAB No. 2672 at 11 (2016).  The DAB has further stated that “the only CMS actions subject to appeal under Part 498 are the types of initial determinations specified in section 498.3(b).”  Id.  The DAB also explained that “[t]he determinations specified in section 498.3(b) do not, under any reasonable interpretation of that regulation’s text, include CMS decisions regarding the severity of the basis for revocation or the duration of a revoked supplier’s re-enrollment bar.”  Id.  The DAB discussed that a review of the rulemaking history showed that CMS did not intend to “permit administrative appeals of the length of a re-enrollment bar.”  Id.  Therefore, I do not disturb the two-year re-enrollment bar.

V.  Conclusion

For the reasons stated above, I affirm the revocation of Petitioner’s DMEPOS supplier number and Medicare billing privileges, pursuant to 42 C.F.R. § 424.57(c)(21), (26).

• 1. “The National Supplier Clearinghouse is the single organizational entity responsible for issuing and revoking Medicare supplier billing privileges for suppliers of [DMEPOS].” https://www.palmettogba.com/palmetto/providers.nsf/DocsCatHome/Providers~National%20Supplier%20Clearinghouse?Open (last visited April 4, 2019). Palmetto GBA is the administrative contractor for NSC.
• 2. DMEPOS suppliers must meet the standards listed in 42 C.F.R. § 424.57(c) in order to maintain their Medicare billing privileges. 42 C.F.R. § 424.57(e).
• 3. Petitioner appealed its revocation based on supplier standards 10 and 22 (42 C.F.R. § 424.57(c)(10), (22)). However, the reconsidered determination does not cite either of those supplier standards as a basis for revocation. CMS Ex. 1.
• 4. ALJ Leslie A. Weyn issued the Pre-Hearing Order; the case was reassigned to me on March 8, 2019.
• 5. As an in-person hearing to cross-examine witnesses is not necessary, it is unnecessary to further address CMS’s motion for summary judgment.
• 6. My findings of fact and conclusions of law are set forth in italics and bold font.
• 7. I reiterate that Petitioner did not submit any proposed exhibits. For example, Petitioner could have submitted the testimony of the employees who were working at the pharmacy store at 11:45 am on March 10, 2017 (the delivery date and time of the March 6, 2017 letter according to the U.S. Postal Service). CMS Ex. 3; see Pre-Hearing Order, § 8 (providing for the submission of sworn testimony as a proposed exhibit).
• 8. Petitioner’s request for reconsideration included an International Fidelity Insurance Company surety bond policy that went into effect on October 1, 2015. CMS Ex. 5 at 16-17. However, International Fidelity Insurance Company informed NSC that the policy had been terminated, effective October 20, 2016. CMS Ex. 8 at 1. Thus, Petitioner provided a copy of a policy that was no longer in effect.