Dr. Joseph Hummel and Prime MD, PC, DAB CR6032 (2022)

DECISION

Petitioner, Joseph Hummel, M.D., was an emergency room and private practice physician in North Carolina, who participated in the Medicare program as a supplier of services.  Petitioner, Prime MD PC, was his physician practice organization and included a supplier of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).  The DMEPOS business is referred to as Prime DME.  Petitioner Hummel participated in some shady real estate transactions, and, when questioned about them by the Internal Revenue Service, he lied.  He was subsequently convicted on one felony count of corruptly obstructing the due administration of the internal revenue laws.  Petitioners did not timely report the conviction to their Medicare contractors.

The Centers for Medicare & Medicaid Services (CMS) subsequently determined that Petitioner Hummel had been convicted of a felony, detrimental to the Medicare program and its beneficiaries, and that Petitioners did not report the conviction to their Medicare contractors.  Based on the conviction and the failure to report, CMS revoked Petitioners' Medicare enrollments under 42 C.F.R. §§ 424.535(a)(3) and 424.535(a)(9), imposed a three-year reenrollment bar (42 C.F.R. § 424.535(c)), and placed Petitioners on CMS's preclusion list (42 C.F.R. § 422.2).

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Petitioners now appeal.

I find that CMS is authorized to revoke the Medicare enrollments of Petitioners Hummel, Prime MD, and Prime DME, impose a three-year reenrollment bar, and add them to its preclusion list because, within the ten years preceding, Petitioner Hummel was convicted of a felony that CMS reasonably determined is detrimental to the best interests of the Medicare program and its beneficiaries.  In the alternative, CMS may also revoke the Medicare enrollments of Petitioners Hummel and Prime MD (but not Prime DME) because they did not report the conviction to the Medicare contractors.  I therefore affirm CMS's determinations.

Background

By letters dated September 30, 2019, and October 2, 2019, the Medicare contractors, Palmetto GBA and Novitas Solutions, advised Petitioners that their Medicare privileges were revoked, effective December 11, 2018.  The letters explain that the contractors revoked the Medicare enrollments for two reasons: 

1) pursuant to 42 C.F.R. § 424.535(a)(3), because Petitioner Hummel was convicted of a felony – corrupt endeavor to obstruct IRS laws; and

2) pursuant to section 424.535(a)(9), because Petitioners did not report an adverse legal action within 30 days, as required by 42 C.F.R. § 424.516(d).

The contractors imposed a three-year reenrollment bar, pursuant to 42 C.F.R. § 424.535(c).  The contractors also added Petitioners to CMS's preclusion list, effective March 1, 2020, as authorized by 42 C.F.R. §§ 422.2, 422.222, 423.100, and 423.120(c)(6).  CMS Exs. 6, 7, 8, 9.

Petitioners requested reconsideration.  In a reconsidered determination, dated January 6, 2020, a CMS hearing officer upheld all of the revocations under section 424.535(a)(3).  She also upheld the revocations of Petitioners Hummel and Prime MD under section 424.535(a)(9) but, finding that section 424.535(a)(9) did not apply to DMEPOS suppliers at the time the revocation was implemented, reversed the revocation of Prime DME under that section.  She upheld the inclusion of all three suppliers on CMS's preclusion list.  CMS Ex. 15.

Petitioners timely appealed.

CMS moves for summary judgment.  However, this matter may be decided on the written record without considering whether the standards for summary judgment have been met.  CMS proposes no witnesses.  Petitioners propose two witnesses and, (more or less) in

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accordance with my pre-hearing order, have submitted their written declarations (P. Exs. 2, 3).  I decline to admit the testimony of one of Petitioners' witnesses (see below) and, in any event, CMS has not asked to cross-examine either of Petitioners' witnesses.  CMS Response at 2 n.1; see Acknowledgment and Pre-hearing Order at 4, 5, 6 (¶¶ 4(c.)(iv.), 8, 9, 10) (March 9, 2020).  Because there are no witnesses to be further examined or cross-examined, an in-person hearing would serve no purpose, and I may decide this case based on the written record.1

CMS submits its brief (CMS Br.) and 22 exhibits (CMS Exs. 1-22).  Petitioners submit their brief (P. Br.) and eight exhibits (P. Exs. 1-8).  CMS responded to Petitioners' brief with objections to two of Petitioners' exhibits (CMS Response).  Petitioners filed a sur‑reply (P. Sur-reply), with an amended affidavit, and CMS replied to the sur-reply (CMS sur-reply).

Exhibits.  CMS objects to two of Petitioners' exhibits:  P. Ex. 3, which is the unsworn affidavit of Sean Donegan, the director of an organization that provides staffing services to medical groups; and P. Ex. 8, which appears to be data from the Health Resources and Services Administration (HRSA), an agency of the Department of Health and Human Services.

CMS objects to P. Ex. 3 because it was neither notarized nor signed under penalty of perjury.  In response, Petitioners substituted a notarized version of the written statement, which corrects its technical difficulties.  Departmental Appeals Board E-file Docket Entry #9b.  However, that correction doesn't make the affidavit relevant.

CMS objects to P. Ex. 8 because Petitioners submitted the document, for the first time, at this level, and Petitioners have not shown good cause for failing to submit it at an earlier stage of review, as required by 42 C.F.R. § 498.56(e).  Petitioners maintain that they have good cause for failing to submit the document earlier:  they had "no reason to believe in the relevance of the document until CMS issued its reconsideration determination."  P. Sur-reply at 8.  In fact, Petitioners have good reason to consider the document irrelevant because it is irrelevant, at least at this stage of the review process.

As discussed below, my authority here is limited.  My review is confined to deciding "whether CMS has established the existence of one or more of the specified permissible grounds for revocation."  Norman Johnson, M.D., DAB No. 2779 at 11 (2017), and cases

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cited therein.  I may not second-guess CMS's determination to exercise its discretion to revoke, nor the factors that it considered or failed to consider.  Exhibits 3 and 8 address the purported need for medical services in a particular community, which may be a legitimate issue for CMS to consider when it determines whether to exercise its discretion to revoke a supplier's Medicare enrollment.  However, it is not relevant to my determining whether CMS had the authority to revoke in the first place.  William Garner, M.D., DAB No. 3026 at 16 (2020) (finding no authority to reverse a lawful revocation based on "community needs").

I admit evidence that is relevant and material.  42 C.F.R. § 498.60(b)(1).  Because I find the exhibits irrelevant, I decline to admit P. Exs. 3 and 8.

In the absence of any additional objections, I admit into evidence CMS Exs. 1-22 and P. Exs. 1-2 and 4-7.

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
• Part D is the voluntary prescription drug benefit program.  Act § 1860D (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 entities that furnish healthcare services may participate in the program as "suppliers" of services; however,

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they must enroll in the program in order to receive Medicare payments.  Act § 1861(d), (q), (r) (42 U.S.C. § 1395x(d), (q), (r)); 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 the Medicare enrollment of Petitioners Hummel, Prime MD, and Prime DME, pursuant to 42 C.F.R. § 424.535(a)(3), because, within ten years preceding the revocation, Petitioner Hummel was convicted of a felony that CMS reasonably finds detrimental to the best interests of the Medicare program and its beneficiaries.  In the alternative, CMS may revoke the Medicare enrollments of Petitioners Hummel and Prime MD, pursuant to section 424.535(a)(9), because they did not timely report, to the Medicare contractors, Petitioner Hummel's felony conviction.2

Revocation of enrollment.  CMS may revoke a supplier's Medicare 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.

CMS may also revoke a supplier's Medicare enrollment if it 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), physicians and physician organizations must report to their Medicare contractor, within 30 days, "[a]ny adverse legal action."

Petitioner Hummel's conviction.  In an indictment dated October 29, 2018, a Grand Jury charged Petitioner Hummel with "corrupt endeavor to obstruct and impede the due administration of the Internal Revenue laws," in violation of 26 U.S.C. § 7212(a).  Specifically:

• Petitioner Hummel agreed to purchase a property from one of his accomplices ("Aubrey") and to pay off the mortgage.  But he did not spend his own money for

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any of this; Aubrey gave him the money to cover the costs plus provided him with a profit.3

• Petitioner Hummel also agreed to return the property at some future, unspecified date.  With the assistance of a third party (Aubrey's brother, "Jotham"), he and Aubrey completed the transaction.  Aubrey continued to live at the property, rent-free.
• When Aubrey subsequently wanted solar panels for the property, he again funneled money through Jotham to Petitioner Hummel, who signed the sales contract for installation of the panels.
• Petitioner Hummel told his accountant that he'd purchased the property and that Aubrey would continue to live there but was not paying rent.  His 2010 tax return reported no rental income from the property.
• Petitioner Hummel agreed to a voluntary interview with IRS Special Agents who were assisting in a criminal investigation involving Aubrey, Jotham, and the property.  Petitioner falsely told the agents:  1) that Aubrey was renting the property from him and that he could produce the lease agreement; 2) that Aubrey made the rental payments to Jotham because Jotham had loaned Petitioner Hummel $60,000 for purchase of the solar panels; and 3) that he sold gold coins to Jotham for about $77,000; in fact, that money was a portion of what Petitioner was paid for purchasing the property.
• Petitioner Hummel later created a false lease agreement, which he and Aubrey signed, and which he then emailed to the special agents.
• Petitioner Hummel falsely told his accountant that Aubrey was paying rent.  The accountant amended his 2010 tax return, falsely claiming the rental income.
• For the subsequent tax years (2011, 2012), Petitioner Hummel's accountant claimed false expenses related to renting the property.

CMS Ex. 1.

On December 11, 2018, Petitioner Hummel pleaded guilty to the charge.  CMS Ex. 2.  The United States District Court for the Middle District of North Carolina then accepted

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the plea and, on March 26, 2019, entered judgment against him.  CMS Ex. 4 at 1.4   The court sentenced Petitioner Hummel to two years probation and ordered him to pay a $100 assessment, $100,000 fine, and $96,815 in restitution to the IRS.  CMS Ex. 4 at 2, 5.

Petitioners all but concede that CMS has the authority to revoke their enrollment.  P. Br. at 4 (agreeing that Petitioner Hummel's criminal activities are "worthy of reprimand and punishment").  Nevertheless, they fault CMS for focusing "only on the bad actions that formed the basis for revoking [Petitioners'] practice privileges, in the first instance."  P. Br. at 4.  In Petitioners' view, their Medicare enrollments should not be revoked because:  1) the community at large, including Medicare beneficiaries, will suffer without their services, particularly in light of the covid pandemic; 2) Petitioner Hummel did not engage in the illegal activity for financial gain, but "only to shield his friend";5 and 3) Petitioner Hummel is remorseful.  P. Br. at 3-4, 11-14.  None of these factors are relevant here.

The Departmental Appeals Board has consistently held that an administrative law judge's review of CMS's determination to revoke is limited to deciding whether CMS has established one or more of the grounds specified in section 424.535(a).  Garner, DAB No. 3026 at 16; Johnson, DAB No. 2779 at 11, 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.  I may not substitute my discretion for that of CMS in determining whether the revocation is appropriate.  Johnson, DAB No. 2779 at 11 (citing Care Pro Home Health, Inc., DAB No. 2723 at 9 n.8 (2016); Abdul Razzaque Ahmed, M.D., DAB No. 2261 at 19 (2009), aff'd, Ahmed v. Sebelius, 710 F. Supp. 2d 167 (D. Mass. 2010)).

CMS plainly had the authority to revoke Petitioners' Medicare enrollments under section 424.535(a)(3).  Petitioner Hummel was convicted of a financial crime similar to income tax evasion and insurance fraud, crimes that are specifically listed in the regulation.  Indeed, as the Departmental Appeals Board has observed, in promulgating section

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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)).

In the alternative, CMS had the authority to revoke the Medicare enrollment of Petitioners Hummel and Prime MD under section 424.535(a)(9) because, as they concede, they did not report Petitioner Hummel's felony conviction to the Medicare contractors within 30 days, as required by 42 C.F.R. § 424.516(d).

2. CMS acted within its authority when it added Petitioners to its preclusion list because their Medicare enrollments were revoked for conduct detrimental to the best interests of the Medicare program, and they are 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 prescribers, 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 Hummel's offense and the revocations.  I have discussed in some detail the elements of Petitioner Hummel's 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 and his practices' Medicare enrollment and billing privileges and to impose a reenrollment bar.  42 C.F.R. §§ 424.535(a)(3), 424.535(c).  Because their enrollments were revoked for a felony conviction deemed detrimental to the best interests

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of the Medicare program and its beneficiaries and because they are under a reenrollment bar, CMS is authorized to add them to the Medicare preclusion list.  42 C.F.R. §§ 422.2, 423.100.

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 Petitioners on the preclusion list, I must uphold its doing so.  See Foo, DAB No. 2904 at 3; Wassim Younes, M.D., 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 three-year reenrollment bar.

When a supplier's billing privileges are revoked, it may not participate in the Medicare program until the end of its reenrollment bar, which must be for a minimum of one year but no more than three years (except under circumstances 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 three-year reenrollment bar.  Petitioners challenge the length of that reenrollment bar and ask that I reduce it to one year.  I have no authority to review the length of the reenrollment bar imposed by CMS.  Vijendra Dave, M.D., DAB No. 2672 at 9-12 (2016); accord, Garner, DAB No. 3026 at 16; Lilia Gorovits, M.D., P.C., DAB No. 2985 at 15-16 (2020).

I am authorized to review initial determinations "to deny or revoke a provider's or supplier's Medicare enrollment in accordance with . . . [section] 424.535."  42 C.F.R. § 498.3(b)(17).  As the Board observed in Vijendra Dave, the regulations confer no such right to appeal CMS's determination concerning the duration of a post-revocation re‑enrollment bar.  Dave, DAB No. 2672 at 10.

Petitioners argue that Vijendra Dave was wrongly decided.  Pointing to 42 C.F.R. § 498.3(b)(17)(ii), Petitioners argue that the length of their reenrollment bars are reviewable initial determinations.  That section became effective on November 4, 2019 (after CMS imposed the reenrollment bar here).  84 Fed. Reg. 47,794 (Sept. 10, 2019).  However, it did not create appeal rights for reenrollment bars of one to three years.

In November 2019, CMS amended section 424.535(c), allowing CMS to increase the maximum reenrollment bar from three years to ten (and even 20) under certain circumstances.  A supplier affected by the change

could appeal CMS' imposition of additional years to the . . . supplier's existing reenrollment bar" under [section] 424.535(c)(2).  These appeal

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rights would be governed by 42 CFR part 498.  However, they would not extend to the imposition of the original reenrollment bar under [section] 424.535(c)(1); they would be limited to the additional years imposed under [section] 424.535(c)(2).

84 Fed. Reg. 47,794, 47,826 (emphasis added).  Thus, the amended regulation lists as an initial determination, subject to appeal, "[w]hether, under [section] 424.535(c)(2)(i) of this chapter, to add years to a . . . supplier's existing reenrollment bar."  42 C.F.R. § 498.3(b)(17)(ii) (emphasis added).  Lest there be any doubt as to the limits of a supplier's appeal rights, the amended version of section 424.535(c) also provides, in pertinent part, that a supplier's appeal rights "[d]o not extend to the imposition of the original reenrollment bar under paragraph (c)(1) of this section."  42 C.F.R. § 424.535(c)(2)(ii)(B) (emphasis added).

Conclusion

CMS justifiably determined that Petitioner Hummel was convicted of a felony detrimental to the best interests of the Medicare program and its beneficiaries; it may therefore revoke his, his medical practice's (Prime MD), and his DMEPOS supplier's (Prime DME) Medicare enrollments pursuant to section 424.535(a)(3).  In the alternative, because he and Prime MD did not timely report the conviction, CMS may revoke their enrollments pursuant to section 424.535(a)(9).

CMS was authorized to include Petitioners on the preclusion list because their Medicare enrollments were revoked for conduct detrimental to the best interests of the Medicare program, and because they are under a reenrollment bar.

For these reasons, I affirm CMS's determinations.

1. That I decide this case based on the written record does not mean that Petitioners have 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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2. 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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3. Apparently, the purpose for all this skullduggery was to conceal a "marijuana-growing/distribution operation and money laundering scheme."  Petitioner Hummel claimed that he was initially unaware of that scheme, although learning about it motivated him to lie to the IRS.  P. Ex. 1 at 14.
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4. When a revocation is based on a felony conviction, its effective date is the date of the conviction.  42 C.F.R. § 424.535(g).  Here, CMS determined that Petitioner Hummel was convicted on December 11, 2018, the date he pleaded guilty, and the court apparently accepted the plea.  See Michael Scott Edwards, OD, DAB No. 2975 at 2 (2019) (defining "convicted," as, among other definitions, a court's accepting a guilty plea).  Petitioner has not challenged the effective date.
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5. Petitioner Hummel insists that he "did not receive any financial benefit from the behaviors [that] led to his conviction."  P. Br. at 13.  I find this somewhat disingenuous.  While it is technically true that he was not paid to lie to the IRS (for which he was convicted), he was an integral player in a corrupt scheme, and admitted receiving at least $77,000 for his participation.  CMS Ex. 1 at 5.
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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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