GC Anesthesia, PLLC, Scottsdale Anesthesia Associates PLC, Southwest Anesthesia Services LLC, Benjamin Munroe DO PLLC, Morpheus Anesthesia Consultants, Inc., DAB CR5572 (2020)

DECISION

The Centers for Medicare & Medicaid Services (CMS), through its administrative contractor, Noridian Healthcare Solutions (Noridian), revoked the Medicare enrollment and billing privileges of Scottsdale Anesthesia Associates PLC, Southwest Anesthesia Services LLC, Benjamin Munroe DO PLLC, Morpheus Anesthesia Consultants Inc., and GC Anesthesia PLLC (collectively, Petitioners) pursuant to 42 C.F.R. § 424.535(a)(3) and (a)(4).  Noridian revoked Petitioners’ Medicare enrollment and billing privileges because Petitioners (1) employed a managing employee who, within the ten years prior to Petitioners’ Medicare enrollment, was convicted of a felony that CMS determined was detrimental to the interests of the Medicare program and its beneficiaries, and (2) failed to disclose such conviction in their enrollment applications.  Petitioners requested that CMS reconsider the revocations, and CMS issued unfavorable reconsidered

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determinations.  Petitioners then requested review by an administrative law judge.  For the reasons explained below, I affirm CMS’s determinations revoking Petitioners’ Medicare enrollment and billing privileges.

I.    Background and Procedural History

Petitioners comprise five anesthesia practices, which were enrolled as Medicare suppliers in the state of Arizona.  All five Petitioners retained Southwest Medical Billing (SMB) for billing services.  Petitioners’ Pre-Hearing Brief, Response to Motion for Summary Judgment, and Cross Motion for Summary Judgment (P. Br.) at 3.  In May 2016, SMB hired Mr. Marlon Uriel Gonzalez as an administrative agent.  Id.  All five practices designated Mr. Gonzalez as a managing employee on their Form CMS-855B Medicare enrollment applications filed in 2016.  CMS Exhibits (Exs.) 3 at 30; 13 at 8; 19 at 30; 25 at 30; 34 at 9.  

In their applications, Petitioners indicated that Mr. Gonzalez had never been subject to a final adverse legal action, such as a felony conviction.  CMS Exs. 3 at 30-31; 13 at 8-9; 19 at 30-31; 25 at 30-31; 34 at 9-10.1   Petitioners certified that the contents of their applications were “true, correct, and complete.”  CMS Exs. 3 at 37; 13 at 13; 19 at 37; 25 at 37; 34 at 11.  However, six years earlier, on or about June 14, 2010, in the Superior Court of the State of Arizona in and for Yavapai County (state court), Mr. Gonzalez was convicted for the felony offense of Possession of a Deadly Weapon by Prohibited Possessor, a violation of Title 13 of Arizona Revised Statute § 3102.  CMS Exs. 1, 2.

Noridian issued initial determination letters, each dated October 18, 2017, revoking Petitioners’ enrollment in Medicare pursuant to 42 C.F.R. § 424.535(a)(3) and (a)(4).  CMS Exs. 6, 14, 21, 28, and 35.  Each letter explained that the revocations occurred because Petitioners employed Mr. Gonzalez, who had been convicted of a felony offense within the proceeding ten years, as a managing employee, and because Petitioners failed to disclose his conviction on their enrollment applications.  The revocations were retroactive to the dates given below:

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Entity	Docket No.	Appl. Date	Revocation Date
Scottsdale Anesthesia Associates PLC	C-18-499	June 8, 2016	May 25, 2016
Southwest Anesthesia Services LLC	C-18-500	May 5, 2016	April 6, 2016
Benjamin Munroe DO PLLC	C-18-503	August 1, 2016	July 5, 2016
Morpheus Anesthesia Consultants Inc.	C-18-506	August 2, 2016	July 3, 2016
GC Anesthesia PLLC	C-18-508	June 24, 2016	May 25, 2016

Petitioners requested reconsideration of the revocations.  CMS Exs. 7, 15, 22, 29, and 36.  Each reconsideration request included, among other documents:  (1) an affidavit from Mr. Gonzalez attesting that he concealed his felony conviction from SMB, and (2) a letter of termination, dated May 22, 2017, from SMB to Mr. Gonzales, terminating his employment with SMB.2  CMS Exs. 8, 9, 16, 17, 23, 30, 31 and 37.  In their reconsideration requests, Petitioners explained that they had been unaware of Mr. Gonzalez’s felony conviction, but as soon as they learned of his conviction, they terminated his employment.  See, e.g., CMS Ex. 36 at 1.

CMS, through its Provider Enrollment & Oversight Group, issued an unfavorable reconsidered determination to each Petitioner.  CMS Exs. 10, 18, 24, 32, 38.  CMS declined to exercise its discretion to reverse the revocations pursuant to 42 C.F.R. § 424.535(e):

CMS has reviewed the documentation submitted by [Petitioner] in its reconsideration request and finds the information to lack credibility, because it conflicts with the timeline of [Petitioner’s] revocation.  Mr. Gonzalez’s termination letter dated May 22, 2017, indicates that he was terminated because his felony conviction caused the revocation of five entities in the Medicare program.  However, the Medicare revocation letters for all five entities were dated October 18, 2017, almost five months after Mr. Gonzalez was purportedly terminated from SMB on May 22, 2017.

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See, e.g., CMS Ex. 32 at 4.  CMS also concluded that the revocations were proper pursuant to 42 C.F.R. § 424.535(a)(3) and (a)(4).  Id. at 4-6.

Each Petitioner requested a hearing, and their cases were assigned to me.  I issued a substantially similar Acknowledgement and Pre-Hearing Order (Order) dated February 9, 2018, to each Petitioner.  Each Order directed the parties to file a pre-hearing exchange consisting of a brief and any supporting documents and also set forth the deadlines for those filings.  Order ¶¶ 4-5.  The Order required the parties to submit written direct testimony for any witnesses in lieu of in‑person direct testimony.  Order ¶ 9.  Finally, the Order explained that a hearing would only be necessary if a party offered the written direct testimony of a witness or witnesses and the opposing party requested cross-examination.  Order ¶ 11. 

Petitioners filed an Unopposed Motion to Consolidate their hearing requests.  Therefore, in the absence of objection, I issued an order consolidating Docket Nos. C‑18‑499, C‑18‑500, C‑18‑503, C‑18‑506, and C‑18‑508.

CMS timely filed its Prehearing Brief and a Motion for Summary Judgment (CMS Br.) and 38 proposed exhibits (CMS Exs. 1-38).  Petitioners, through counsel, timely filed their Brief, along with an Amended List of Proposed Exhibits and List of Proposed Witnesses (P. List) in which they proposed six exhibits (P. Exs. 1-6) and three witnesses.  Petitioners did not object to any of CMS’s proposed exhibits.

CMS filed Objections to Petitioners’ Proposed Exhibits and Witness List (CMS Obj.) and Petitioners filed a response (P. Resp. to Obj.).  CMS objected to all of Petitioners’ proposed exhibits on the grounds that they are new evidence, and Petitioners failed to show good cause for their admission.  CMS Obj. at 2 (citing 42 C.F.R. § 498.56(e)).  CMS additionally objected to P. Ex. 4 as irrelevant.3   CMS Obj. at 3.

Pursuant to 42 C.F.R. § 498.56(e), an administrative law judge must examine “any new documentary evidence submitted to the [administrative law judge] by a provider or supplier to determine whether the provider or supplier has good cause for submitting the evidence for the first time at the [administrative law judge] level.”  If the administrative law judge does not find good cause for the failure to submit the evidence earlier, the evidence must be excluded and may not be considered in reaching a decision.  42 C.F.R. § 498.56(e)(2)(ii).

Petitioners argue that there is good cause to admit their proposed exhibits because they concern issues that arose after Petitioners filed their reconsideration requests.  P. Resp. to

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Obj. at 2-4.  I find there is good cause to admit P. Exs. 1, 2, 3, and 5 because those documents did not exist at the time Petitioners filed their reconsideration requests; thus, they could not have been submitted at an earlier stage of these proceedings.  Additionally, Petitioners offer P. Exs. 1-3 to rebut what Petitioners contend is a factual error in CMS’s reconsidered determinations.  I therefore overrule CMS’s objection to P. Exs. 1, 2, 3, and 5.

I overrule CMS’s objection to P. Ex. 6 because I find that it is not new evidence.  P. Ex. 6 consists of Mr. Gonzalez’s employment application.  CMS referenced the very same employment application in several of its reconsidered determinations.  See, e.g., CMS Exs. 10 at 3; 32 at 3 (identifying the employment application as “Exhibit 8”); see also CMS Ex. 38 at 2 (identifying as “Exhibit 3” “other [SMB] employment agreements signed by Marlon Gonzalez on June 7, 2016”).  I therefore infer that Petitioners did submit Mr. Gonzalez’s employment application at the reconsideration level.  Moreover, the first page of the same employment application (on which Mr. Gonzalez falsely stated that he had never been convicted of a crime) is also included in CMS Ex. 23 at 3. 

I also overrule CMS’s objection to P. Ex. 4.  The exhibit consists of a reconsidered determination that CMS’s Provider Enrollment & Oversight Group issued to an unrelated supplier.  CMS contends the exhibit is irrelevant.  CMS Obj. at 3.  I acknowledge that the relevance of this document to the present case is somewhat attenuated.  However, I conclude it is at least marginally relevant to Petitioners’ argument that CMS should have exercised its discretion to reverse Petitioners’ revocations.  Furthermore, although I admit the exhibit, I accord it little weight, as I explain more fully below.

For the reasons stated, I admit P. Exs. 1-6.  Additionally, I admit into the record CMS Exs. 1-38, without objection.

In its motion for summary judgment, CMS argues that there are no material facts in dispute that would require a hearing.  CMS Br. at 3.  Petitioners oppose CMS’s motion and also move for summary judgment in their favor.  P. Br.  In the event I do not grant summary judgment for Petitioners, they request a hearing.  P. Br. at 3.  If I were to convene a hearing, Petitioner noted its intent to call three witnesses, to which CMS objected.  P. List at 2; CMS Obj. at 3.  However, Petitioners did not offer the written direct testimony of their proposed witnesses as required by paragraph 9 of my Order.  Moreover, as explained more fully below, even if Petitioners had proffered the written direct testimony of their witnesses, I would conclude that the proffered testimony is not material to any issue before me.

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II.    Issues

The issues in this case are:

Whether summary judgment is appropriate

Whether CMS had a legal basis to revoke the Medicare enrollment and billing privileges of Petitioners under 42 C.F.R. § 424.535(a)(3) because, during the preceding ten years, a managing employee of Petitioners was convicted of a felony offense that CMS determined is detrimental to the Medicare programs and its beneficiaries.

Whether CMS had a legal basis to revoke the Petitioners’ Medicare enrollment and billing privileges under 42 C.F.R. § 424.535(a)(4) because they failed to disclose such felony conviction on their enrollment applications.

III.    Jurisdiction

I have jurisdiction to decide this case.  42 C.F.R. §§ 498.3(b)(17), 498.5(l)(2); see also Social Security Act (Act) § 1866(j)(8) (codified at 42 U.S.C. § 1395cc(j)(8)).

IV.    Discussion

A.  Statutory and Regulatory Framework

As group practices offering physician services, Petitioners are considered “suppliers” for purposes of the Medicare program.  See 42 U.S.C. § 1395x(d); 42 C.F.R. §§ 400.202 (definition of supplier), 410.20(b)(1).  To participate in the Medicare program as a supplier, an individual or entity must meet certain criteria to enroll and receive billing privileges.  42 C.F.R. §§ 424.505, 424.510.  CMS may revoke the enrollment and billing privileges of a supplier for any reason stated in 42 C.F.R. § 424.535.  More specifically, CMS may revoke a provider or supplier that employs, in a management role, a felon convicted within the preceding ten years of an offense deemed detrimental to the best interests of the Medicare program and its beneficiaries under 42 C.F.R. § 424.535(a)(3) and for failing to disclose such conviction on their enrollment applications under 42 C.F.R. § 424.535(a)(4). 

When CMS revokes a supplier’s Medicare billing privileges, CMS establishes a reenrollment bar for a period ranging from one to three years.  42 C.F.R.

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§ 424.535(c).4  Generally, a revocation becomes effective 30 days after CMS mails the initial determination revoking Medicare billing privileges, but if the revocation is based on a felony conviction, the revocation is effective with the date of the conviction.  42 C.F.R. § 424.535(g).  CMS may reverse a revocation due to a felony conviction by an owner or managing employee if the supplier terminates the managing employee and submits proof thereof within 30 days of the revocation notice.  42 C.F.R. § 424.535(e).

B.  Findings of Fact, Conclusions of Law, and Analysis

1.  Summary judgment is appropriate because there is no dispute as to any material fact.5

Summary judgment is appropriate if “the record shows that there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law.”  Senior Rehab. & Skilled Nursing Ctr., DAB No. 2300 at 3 (2010) (citations omitted).  The moving party must show that there are no genuine issues of material fact requiring an evidentiary hearing and that it is entitled to judgment as a matter of law.  Id.  If the moving party meets its initial burden, the non-moving party must “come forward with ‘specific facts showing that there is a genuine issue for trial . . . .’”  Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986).  “To defeat an adequately supported summary judgment motion, the non-moving party may not rely on the denials in its pleadings or briefs, but must furnish evidence of a dispute concerning a material fact — a fact that, if proven, would affect the outcome of the case under governing law.”  Senior Rehab., DAB No. 2300 at 3 (citations omitted).  To determine whether there are genuine issues of material fact for hearing, an administrative law judge must view the evidence in the light most favorable to the non-moving party, drawing all reasonable inferences in that party’s favor.  Id.

There is no genuine dispute as to any material fact in this case.  Petitioners acknowledge that Mr. Gonzalez was convicted of a felony offense.  Petitioners do not allege that they disclosed Mr. Gonzalez’s conviction on their Medicare enrollment applications.  Nor do

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Petitioners contend that they or Mr. Gonzalez reported his conviction to CMS or its contractor within 30 days of their enrollment.  These are the only facts material to CMS’s determination to revoke Petitioners’ Medicare enrollment and billing privileges.

Petitioners contend that there are material facts in dispute.  They argue that CMS abused its discretion by revoking their billing privileges based on a felony committed by an employee of their common billing company prior to working for that company, which he concealed from his employer.  P. Br. at 3.  Petitioners also argue that the felony for which Mr. Gonzalez was convicted was not contemplated by the regulations, and that the felony has been since vacated.  Id.  Finally, Petitioners argue that CMS should have reversed the revocation, and would have done so, but for a typographical error or computer glitch in the date on Mr. Gonzalez’s termination letter that Petitioners provided to CMS on reconsideration.  P. Br. at 1.  With the possible exception of whether a computer or typographical error caused Petitioners’ termination letters to be misdated, these are not factual disputes, however, but disputes as to the legal significance of undisputed facts.

As I am required to do when ruling on motions for summary judgment, I accept as true Petitioners’ factual representations.  I therefore assume that the date on Petitioners’ termination letters was inaccurate due to human or computer error.  However, that fact is not material to any issue I may hear and decide.  Petitioners concede that each of them designated Mr. Gonzalez as a managing employee; that Mr. Gonzalez was convicted of a felony in 2010; and that Petitioners did not disclose the felony conviction on their Medicare enrollment applications, which they certified as true and complete.  Based on these facts, CMS is entitled to judgment as a matter of law.  Accordingly, summary judgment is appropriate.

2.  CMS had a legal basis to revoke Petitioners’ Medicare enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3) because Petitioners’ managing employee, Mr. Gonzalez, was convicted of a felony offense that CMS determined to be detrimental to the best interests of the Medicare program and its beneficiaries.

CMS may revoke a supplier’s enrollment in the Medicare program if, within the preceding ten years, the supplier was convicted of a felony offense that CMS “has determined to be detrimental to the best interests of the program and its beneficiaries.”  42 C.F.R. § 424.535(a)(3)(i); see also Act §§ 1842(h)(8) (authorizing the Secretary of Health and Human Services to deny enrollment to a supplier that has been convicted of a felony offense that the Secretary has determined is “detrimental to the best interests of the program or program beneficiaries”) and 1866(b)(2)(D) (authorizing the Secretary to deny or terminate enrollment after he ascertains that a supplier has been convicted of a felony that he “determines is detrimental to the best interests of the program or program beneficiaries”).  Offenses for which billing privileges may be revoked include – but are not limited to – felony crimes against persons, such as murder, rape, assault, and similar

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crimes; financial crimes such as extortion, embezzlement, income tax evasion, insurance fraud, and similar crimes; felonies that place the Medicare program or its beneficiaries at immediate risk (such as convictions for criminal neglect or misconduct); and felonies that would result in mandatory exclusion under section 1128 of the Act.  42 C.F.R. § 424.535(a)(3)(ii)(A)‑(D).

In promulgating 42 C.F.R. § 424.535(a)(3), CMS determined that certain enumerated crimes are detrimental per se to Medicare.  See Letantia Bussell, M.D., DAB No. 2196 at 9 (2008).  Subsection 424.535(a)(3)(ii) provides the list of offenses deemed per se detrimental.6   Petitioners argue Mr. Gonzalez’s felony conviction for unlawful possession of a deadly weapon is not “one of the enumerated felonies contemplated under 42 C.F.R. § 424.535(a)(3) to serve as a basis for revocation.”  P. Br. at 2.  However, CMS does not argue that Mr. Gonzalez’s conviction falls within one of the categories of enumerated felonies.  Rather, CMS argues that it made a case-specific determination that Mr. Gonzalez’s conviction was detrimental to the best interests of the Medicare program.  CMS Br. at 11. 

Mr. Gonzalez was convicted for the felony offense of Possession of a Deadly Weapon by Prohibited Possessor, a violation of Title 13 of Arizona Revised Statute § 3102.  CMS Exs. 1, 2.  A “prohibited possessor” includes, among others, persons who are deemed unfit to possess weapons, such as convicted felons, incarcerated persons, and the incompetent.  Ariz. Rev. Stat. Ann. § 3101 (2019).  A “deadly weapon means anything that is designed for lethal use,” including a firearm.  Id. 

I agree with Petitioners that the felony for which Mr. Gonzalez was convicted is not one described in 42 C.F.R. § 424.535(a)(3)(ii)(A)-(D), nor is it similar to the enumerated felonies.  See P. Br. at 10-12.  Nevertheless, CMS is correct in arguing that, even if a felony conviction is not for a crime enumerated in the regulation, CMS is authorized to determine, on a case-by-case basis, that other felony convictions are detrimental to Medicare and its beneficiaries and therefore support revocation under section 535(a)(3)(i).  See, e.g., Saeed A. Bajwa, M.D., DAB No. 2799 at 8, 10-11 (2017), appeal dismissed per stipulation, No. 3:17-cv-00792-GTS-DEP (N.D.N.Y. Dec. 28, 2017) (42

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C.F.R. § 424.535(a)(3)(i) authorizes CMS to determine what felony convictions are a basis for revocation; CMS is not limited to the felonies enumerated as examples).

It is apparent in this case that CMS exercised its discretion, pursuant to 42 C.F.R. § 424.535(a)(3)(i), to determine that a felony conviction not listed in 42 C.F.R. § 424.535(a)(3)(ii) is detrimental to the Medicare program and its beneficiaries and, accordingly, warrants revocation.  See Bajwa, DAB No. 2799 at 8, 10-11.  If I am satisfied that CMS exercised its discretion under 42 C.F.R. § 424.535(a)(3)(i), I may not substitute my own determination as to whether a given felony is detrimental to the Medicare program and its beneficiaries for that of CMS.  See Brian K. Ellefsen, DO, DAB No. 2626 at 7 (2015).  The record before me amply demonstrates that CMS exercised its discretion.  CMS itself issued the reconsidered determination in which it found that Mr. Gonzalez’s conviction raised concerns about whether Mr. Gonzalez, as a managing employee of Petitioners, can be trusted to exercise good judgment and deal honestly with Medicare:

[Mr. Gonzalez’s conviction] raises concerns that Medicare beneficiaries and Trust Funds may be at risk if Mr. Gonzalez and [Petitioner] are allowed to continue to participate in the Medicare program because being part of the Medicare program involves the supplier’s propensity for good judgment and the ability to follow federal Medicare related laws, rules, and program instructions.  Mr. Gonzalez’s conviction[] indicates a lack of good judgment and a failure to follow federal laws.  Payment in the Medicare program is made in a way that relies on the trustworthiness and honesty of CMS’s Medicare partners.  Mr. Gonzalez’s conviction calls both his trustworthiness and honesty into question given that he possessed a deadly weapon that he was prohibited, by law, from possessing.  This is further evidenced by Mr. Gonzalez admitting in his affidavit that he willfully withheld the fact that he had a history of criminal behavior from his employer, SMB.  It necessarily follows that placing Trust Funds at risk is also a detriment to the beneficiaries.

See, e.g., CMS Ex. 32 at 4-5 (substantially similar language appears in all CMS’s reconsidered determinations). 

Petitioners argue additionally that CMS’s revocation decisions were arbitrary and capricious and should be set aside because Petitioners’ situations are unlike the circumstances of other suppliers whose Medicare enrollment has been revoked based on the felony conviction of a managing employee.  P. Br. at 9-11.  However, Petitioners’ contention that I may overturn their revocations as “arbitrary and capricious” actions by CMS misunderstands my role as an administrative law judge in the administrative appeal process.

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The arbitrary and capricious standard, codified in the Administrative Procedure Act (APA), is a standard for court review of final agency actions.  5 U.S.C. § 706.  My role differs from that of a federal court reviewing final agency actions.  In administrative proceedings governed by 42 C.F.R. Part 498, neither CMS’s revocation determination nor my decision reviewing that determination is a final agency action.  Arriva Med., LLC, DAB No. 2934 at 15 (2019); see also 42 C.F.R. § 498.90 (providing that the appellate decision of the DAB is the final agency action that may be appealed to federal court).  As an appellate panel of the DAB held in Hanover Hill Health Care Ctr., “[n]othing in the APA . . . applies the ‘arbitrary and capricious standard’ to Board review of an [administrative law judge] decision on behalf of the Secretary . . . .”  DAB No. 2507 at 7 (2013); see also Cal Turner Extended Care Pavilion, DAB No. 2030 at 7 (2006) (discussing “the distinction between the oversight role of a federal court reviewing agency decisions to determine if an adequate basis is articulated and the internal agency appeals process for formulating final agency action”).

Moreover, appellate panels of the DAB have repeatedly rejected this line of argument.  See, e.g., Arriva, DAB No. 2934 at 15-16 (and cases cited therein).  My review of CMS’s discretionary decision to revoke Petitioners’ Medicare enrollment and billing privileges “is ‘limited to deciding whether CMS had a valid legal basis for that action.’”  Id. at 15 (quoting Care Pro Home Health, Inc., DAB No. 2723 at 5 (2016)).  I am not authorized to substitute my discretion for CMS’s discretion.  Id. (citing Abdul Razzaque Ahmed, M.D., DAB No. 2261 at 17, 19 (2009), aff’d, 710 F. Supp. 2d 167 (D. Mass. 2010)).

In summary, whether or not Mr. Gonzalez’s conviction was for an enumerated per se offense or not, CMS acted within the scope of its discretion to determine that Mr. Gonzalez was convicted of a felony detrimental to the best interests of the Medicare program and its beneficiaries.  Moreover, even if Petitioners’ Medicare enrollment and billing privileges were not subject to revocation based on Mr. Gonzalez’s conviction of a felony that CMS determined is detrimental to the best interests of the Medicare program and its beneficiaries, revocation would nevertheless be proper because, as discussed below, CMS had an additional legal basis to revoke their enrollment and billing privileges.

3.  CMS had a legal basis to revoke Petitioners’ Medicare enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(4) because Petitioners did not disclose Mr. Gonzalez’s felony conviction on their enrollment applications and thereby provided false or misleading information in the applications.

CMS may revoke a currently enrolled supplier’s billing privileges in the following circumstance, among others:

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The . . . supplier certified as “true” misleading or false information on the enrollment application to be enrolled . . . in the Medicare program.

42 C.F.R. § 424.535(a)(4).

Petitioners do not deny that they designated Mr. Gonzalez as a managing employee on their enrollment applications in May 2016.  CMS Exs. 3 at 30; 13 at 8; 19 at 30; 25 at 30; 34 at 9.  Instead, they assert that they were unaware of Mr. Gonzalez’s conviction at the time when they designated him, and that he misled and concealed that conviction from his employer.  P. Br. at 2.  The regulation, however, does not require intent to deceive, merely that false or misleading information be certified as true.  Mark Koch, D.O., DAB No. 2610 at 4-5 (2014) (“section 424.535(a)(4) does not require proof that [the petitioner] subjectively intended to provide false information, only proof that he in fact provided misleading or false information that he certified as true”).  See also Sandra E. Johnson, CRNA, DAB No. 2708 at 15 (2016).

Petitioners certified that their Medicare enrollment applications were accurate and complete, which was false and misleading because they omitted to disclose Mr. Gonzalez’s felony conviction.  Petitioners suggest that they were not at fault because Mr. Gonzalez concealed his felony conviction from SMB and, by extension, from them.  I accept as true that Mr. Gonzalez concealed his conviction from SMB and from Petitioners.  I do not accept that Petitioners “had no way of knowing” that their Medicare applications were incorrect.  See P. Br. at 7.  Without regard to Mr. Gonzalez’s false statement on his employment application, it was Petitioners’ responsibility to ensure that their Medicare enrollment applications were accurate and complete.  Further, it was certainly within Petitioners’ control to determine whether Mr. Gonzalez had a felony conviction by the simple expedient of performing a criminal background check before placing Mr. Gonzalez in a managerial position.  Therefore, I conclude that CMS had a legal basis to revoke the enrollment and billing privileges of Petitioners under 42 C.F.R. § 424.535(a)(4).

In addition to the arguments just discussed, Petitioners raise two other arguments:  (1) a recent order vacating Mr. Gonzalez’s conviction renders the basis for Petitioners’ revocations moot; and (2) CMS should have reversed the revocations on reconsideration, because Petitioners fired Mr. Gonzalez once they learned of his convictions.  In the following sections of this decision, I explain why I conclude that these arguments are without merit.

4.  The fact that the state court vacated Mr. Gonzalez’s conviction in 2018 is not a basis to reverse the revocations.

Petitioners present evidence that, in April 2018, the Superior Court of Yavapai County vacated Mr. Gonzalez’s 2010 conviction, noting that this recent order “fully restored his

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rights, including significantly (given the offense for which he was originally convicted), his right to possess a firearm.”  P. Br. at 12 (citing P. Ex. 5).  The court order consists of a one‑page form, in which the following fields were checked:

The Court finds:

Defendant has fulfilled the conditions of probation and been discharged.

Exceptions pursuant to A.R.S. § 13-907(E) do not apply.

At least 5 years have passed since date of discharge.

*    *    *    *

It is Ordered:

Setting Aside / Vacating the Judgment of Guilt and dismissing the accusations or information.

Restoring all civil rights lost, INCLUDING right to possess or carry a gun or firearm.

P. Ex. 5.

Petitioners argue that this order “renders moot any concerns CMS may have had regarding the past conviction and presents yet another basis for CMS to now reverse the revocation.”  P. Br. at 13.  I disagree.  The state court’s 2018 order reflects, at most, the state court’s opinion that, in the approximately eight years since his conviction, Mr. Gonzalez had fulfilled the obligations of his probation and (apparently) had not offended again, such that the court found it appropriate to restore his civil rights.  The state court’s order sheds no light on the circumstances surrounding Petitioners’ employment of Mr. Gonzalez as a managing employee in 2016.  More importantly, when Petitioners filed their enrollment applications in 2016, they could not have known that, in 2018, the state court would vacate Mr. Gonzalez’s conviction and restore his civil rights.  Thus, the state court’s action in 2018 cannot obviate Petitioners’ obligation to report Mr. Gonzalez’s felony conviction at the time when they filed their enrollment applications.

5.  I have no authority to review CMS’s decision declining to reverse the revocations of Petitioners’ enrollment and billing privileges based on 42 C.F.R. § 424.535(e).

If CMS revokes a supplier’s Medicare enrollment and billing privileges, the supplier may request that CMS reconsider the revocation, and CMS may reverse the revocation:

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Reversal of revocation.  If the revocation was due to adverse activity (sanction, exclusion, or felony) against an owner, managing employee, or an authorized or delegated official; or a medical director, supervising physician, or other personnel of the provider or supplier furnishing Medicare reimbursable services, the revocation may be reversed if the provider or supplier terminates and submits proof that it has terminated its business relationship with that individual within 30 days of the revocation notification.

42 C.F.R. § 424.535(e).

Petitioners argue that CMS should have reversed the revocations on reconsideration, consistent with 42 C.F.R. § 424.535(e).  P. Br. at 6-7.  Petitioners contend that CMS would have done so, but for the fact that the copy of SMB’s termination letter to Mr. Gonzalez that Petitioners submitted to CMS with their reconsideration requests was incorrectly dated May 22, 2017.  Id. at 5.  According to Petitioners, the letter in fact was written and sent in October 2017.  Id.  While CMS viewed the letter as evidence of Petitioners’ intent to deceive, Petitioners argue that the incorrect date resulted from an innocent typographical or computer error.  Id. at 1‑2.  Petitioners suggest that if CMS had known that they made a simple mistake without ill intent, or even better, if the mistake had never happened, CMS would have reversed the revocation as a matter of course.  Id. at 1-2, 5-7.

To support this argument, Petitioners offered their Ex. 4, a copy of a reconsidered determination in which CMS reversed the revocation of a supplier unrelated to Petitioners relying on 42 C.F.R. § 424.535(e).  Petitioners assert that the facts underlying the unrelated supplier’s revocation occurred “under nearly identical circumstances” to their own cases.7   P. Br. at 7.  Petitioners highlight the fact that SMB terminated Mr. Gonzalez “immediately upon confirming his felony conviction on October 24, 2017, and well within the 30 days described in 42 C.F.R. § 424.535(e).”  Id.  However, even if the facts described in P. Ex. 4 were identical to those in Petitioners’ case, Petitioners have pointed to no authority for the proposition that reconsidered determinations by CMS (or a contractor) are precedential, and I am aware of none.  Further, and more importantly, the language of 42 C.F.R. § 424.535(e) is permissive, not mandatory.  The regulation states that a “revocation may be reversed,” but not that CMS “must” or “shall” take any action.  Thus, the regulation authorizes CMS to exercise its discretion when deciding whether or not to reverse its decision to revoke.

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This point is significant because the regulations do not authorize me to review certain discretionary actions by CMS.  The Part 498 regulations permit suppliers dissatisfied with an “initial determination” by CMS or its agent to seek further review.  42 C.F.R. § 498.3(a).  By contrast, administrative actions that are not initial determinations are not subject to appeal.  Id.  The regulations specify the matters on which CMS makes initial determinations.  42 C.F.R. § 498.3(b).  The regulations also include examples of actions that are not considered initial determinations.  42 C.F.R. § 498.3(d).

As relevant here, CMS’s determination to revoke Petitioners’ Medicare enrollment and billing privileges is an appealable initial determination.  42 C.F.R. § 498.3(b)(17).  In contrast, CMS’s decision whether to reverse its decision to revoke is not included on the list of initial determinations.  I am aware that refusal to reverse a revocation pursuant to 42 C.F.R. § 424.535(e) is not specified in 42 C.F.R. § 498.3(d) as an action that is not an initial determination.  However, the list of actions in section 498.3(d) is not exclusive (“actions that are not initial determinations (and therefore not subject to appeal under this part) include but are not limited to the following”). 

In this regard, I find comparison with subsection 498.3(d)(5) instructive.  That subsection provides that the following is not an initial determination:

The determination not to reinstate a suspended or excluded practitioner, provider, or supplier because the reason for the suspension or exclusion has not been removed, or there is insufficient assurance that the reason will not recur.

42 C.F.R. § 498.3(d)(5).  While this provision does not directly address CMS’s decision to reverse (or not) revocation of Medicare enrollment and billing privileges, I find it analogous to Petitioners’ situation.  In summary, I conclude that the decision to reverse a revocation pursuant to 42 C.F.R. § 424.535(e) is similar to the actions described in 42 C.F.R. § 498.3(d) and, accordingly, is not an initial determination subject to review by an administrative law judge.

6.  I have no authority to reverse the revocation of Petitioners’ enrollment and billing privileges based on equitable principles.

Finally, to the extent Petitioners are arguing that revocation of their Medicare enrollment and billing privileges is inequitable under the circumstances presented, CMS’s discretionary act to revoke a provider or supplier is not subject to review based on equity or mitigating circumstances.  Bussell, DAB No. 2196 at 13.  Rather, “the right to review of CMS’s determination by an [administrative law judge] serves to determine whether CMS had the authority to revoke [the provider’s or supplier’s] Medicare billing privileges, not to substitute the [administrative law judge’s] discretion about whether to revoke.”  Id.  Once CMS establishes a legal basis on which to proceed with a revocation,

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then the CMS determination to revoke becomes a permissible exercise of discretion, which I am not permitted to review.  See Id. at 10; see also Ahmed, DAB No. 2261 at 19 (if CMS establishes the regulatory elements necessary for revocation, an administrative law judge may not substitute his or her “discretion for that of CMS in determining whether revocation is appropriate under all the circumstances”).

V.    Conclusion

For the reasons stated, I affirm CMS’s determination to revoke the Medicare enrollment and billing privileges of Scottsdale Anesthesia Assoc. PLC, Southwest Anesthesia Services LLC, Benjamin Munroe DO PLLC, Morpheus Anesthesia Consultants Inc., and GC Anesthesia PLLC.  There are no material facts in dispute and CMS is entitled to judgment as a matter of law.  Accordingly, I grant CMS’s motion for summary judgment and deny Petitioners’ cross-motion for summary judgment.

1. CMS Ex. 11 contains Southwest Anesthesia’s original application (signed on May 5, 2016), which doesn’t name Mr. Gonzalez; CMS Ex. 13 (signed June 6, 2016) is an update to the application which does designate Mr. Gonzalez.  Similarly, the original application for GC Anesthesia does not include Mr. Gonzalez as a managing employee; this designation was added later.  CMS Exs. 33 at 34; 34 at 9-10.
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2. While CMS states that each reconsideration request was accompanied by two supporting documents (CMS Br. at 4‑8, ¶¶ 7, 14, 21, 28, 35), the record indicates that some of Petitioners’ reconsideration requests included additional documents.  For example, several of the reconsideration requests included Mr. Gonzalez’s original application for employment with SMB; an employee statement of confidentiality; and a CMS-855B Medicare Change of Information Application, requesting to remove Marlon Gonzalez as one of Petitioners’ managing employees.  See, e.g., CMS Exs. 10 at 3; 32 at 3; 38 at 2.
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3. CMS frames its objection as applicable to P. Ex. 5.  CMS Obj. at 3.  However, the content of the objection makes clear that CMS intended to refer to P. Ex. 4 rather than P. Ex. 5.
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4. The regulation governing revocations recently underwent significant revisions, which took effect November 4, 2019.  84 Fed. Reg. 47,794, 47,794, 47,854-56 (Sept. 10, 2019).  Pursuant to the revisions, CMS now may establish a re‑enrollment bar for a period ranging from one to ten years for a first-time revocation, a range that increases to 20 years for a second revocation.  Id. at 47,855 (amending 42 C.F.R. § 424.535(c)).  These revisions took effect well after the initial determination to revoke issued in this case.  I apply the regulations in effect at the time of the initial determination.  Linda Silva, P.A., DAB No. 2966 at 1 n.1 (2019).
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5. My findings of fact and conclusions of law appear as numbered headings in bold italic type.
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6. Effective February 3, 2015, CMS modified 42 C.F.R. § 424.535(a)(3).  79 Fed. Reg. 72,500, 72,532 (Dec. 5, 2014).  In the prior version of the regulation, the enumerated felonies regarded as per se detrimental to Medicare appeared in subsection 424.535(a)(3)(i).  However, the descriptions of the enumerated felonies are unchanged.  Thus, prior decisions of Departmental Appeals Board (DAB) administrative law judges and appellate panels interpreting 42 C.F.R. § 424.535(a)(3)(i)(A)-(D) are relevant in interpreting the current provision at 42 C.F.R. § 424.535(a)(3)(ii)(A)-(D).  Further, the outcome in this case is the same whether I apply the original text or the amended text of that regulation.
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7. I note that the supplier at issue in P. Ex. 4 terminated the employment of a felon who failed to disclose his criminal record five months prior to revocation, not thereafter.  Therefore, that reconsidered determination appears distinguishable from ‒ not identical to ‒ Petitioners’ case.
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