EI Medical, Inc. d/b/a Wheelchair and Scooter Repair a/k/a WSR Solutions, DAB CR6187 (2022)

DECISION

Palmetto GBA (Palmetto), a Medicare administrative contractor acting on behalf of both the Centers for Medicare & Medicaid Services (CMS) and CMS’s National Supplier Clearinghouse (NSC),¹ revoked the Medicare supplier number of Petitioner, EI Medical, Inc., doing business as Wheelchair and Scooter Repair,² and also known as WSR

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Solutions, pursuant to 42 C.F.R. § 424.535(a)(3) and (9),³ effective February 24, 2021, based on the felony conviction of its sole owner, director, and managing employee, Stefanie Hirsch.⁴  Thereafter, CMS upheld Palmetto’s determination.  I affirm the revocation of Petitioner’s DMEPOS supplier number, effective February 24, 2021. 

I.    Background and Procedural History

Petitioner was enrolled as a supplier of DMEPOS.  CMS Ex. 13 at 2.  At the time Petitioner revalidated its Medicare enrollment on December 3, 2018, it listed only one individual, Stefanie Hirsch, who held an individual ownership interest in the company.  CMS Ex. 13 at 6.  Ms. Hirsch also served as a director/officer, authorized official, and managing employee.  CMS Ex. 13 at 6. 

On October 2, 2020, the United States filed a three-count information charging that Ms. Hirsch criminally violated the “HIPAA Statute” and that two co-defendants illegally received kickbacks in connection with a federal health care program.⁵  CMS Ex. 8.  The information outlined the following scheme: 

11.  [A co-defendant], his employees, and the call centers with which he worked improperly obtained Medicare beneficiaries’ individually identifiable health information using a healthcare clearinghouse called MVP.  HIRSCH gave [the co-defendant] access to MVP, charging [the co-defendant] approximately $0.25 for each patient eligibility check.  HIRSCH’s company, EI Medical, Inc.—unlike [the co-defendant’s] companies—was a Medicare enrolled-provider.  Because of EI Medical’s Medicare enrollment, EI Medical qualified for an MVP account with access to Medicare beneficiaries’ individually identifiable health information.  HIRSCH set up credentials for [the co-defendant] under EI Medical’s account.

12.  [The co-defendant], his employees, and the call centers with which he worked used MVP’s patient eligibility checks to obtain individually identifiable health information, including the individual’s demographic

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information, health information, and health care payment information.  In turn, [the co-defendant] disclosed individually identifiable health information to [another co-defendant] and other customers for commercial advantage and personal gain.

13.  [The co-defendant] used and caused others to use the MVP credentials that HIRSCH provided to access individually identifiable health information for more than 350,000 patients.

CMS Ex. 8 at 4.  Count 3 of the information charged that Ms. Hirsch violated 42 U.S.C. § 1320d-6 and 18 U.S.C. § 2, as addressed in paragraphs 1 through 13 of the information, when she “did knowingly use and cause to be used a unique health identifier, obtain individually identifiable health information relating to an individual, and disclose individually identifiable health information to another person.”⁶  CMS Ex. 8 at 7. 

On October 1, 2020, a day before the United States filed the aforementioned information, Ms. Hirsch, represented by one of Petitioner’s current counsel, entered into a plea agreement with the United States in which she waived indictment and agreed to enter a guilty plea to Count 3 of the information.  CMS Ex. 10 at 1.  The plea agreement reported that Ms. Hirsch “expressly and unequivocally admits that she committed the crime charged in count 3 of the Information, did so knowingly, and is in fact guilty of that offense.”  CMS Ex. 10 at 1.  The plea agreement specified that it was “made pursuant to Fed. R. Crim. P. 11(c)(1)(C),” and that “if the [district court] accepts this Plea Agreement, it must include the agreed disposition in the judgment.”  CMS Ex. 10 at 2.  The plea agreement further reported that “[i]f the Court rejects any aspect of this Plea Agreement, the U.S. Attorney may deem the Plea Agreement null and void.”  CMS Ex. 10 at 5.  Ms. Hirsch explicitly stated that she “understands and acknowledges that she may not withdraw her plea of guilty unless the Court rejects this Plea Agreement under Fed. R. Crim. P. 11(c)(5).”  CMS Ex. 10 at 2.  The agreed disposition included a $2,500 fine, a $100 special assessment, 36 months of supervised release, and no imprisonment.⁷  CMS Ex. 10 at 3.

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On February 24, 2021, Ms. Hirsch, accompanied by one of Petitioner’s present counsel, appeared before a federal district judge to enter her guilty plea.  The prosecutor, with Ms. Hirsch’s agreement, proffered the following statement of facts: 

EI Medical was a Medicare involved wheelchair and scooter repair company.  Because EI Medical was enrolled in Medicare, it qualified for an account with MVP, a healthcare clearinghouse that contains individually identifiable health information including demographic information, detailed medical treatment information, and insurance information of individuals, including Medicare beneficiaries. 

As a Medicare enrolled company Hirsch knew the stringent requirements that accompany Medicare enrollment and Hirsch knew, or should have known, that certain information was restricted to Medicare enrollees. 

At the same time Hirsch understood that [a co-defendant] . . . was running a for-profit durable medical equipment company and [another co-defendant] was generating leads for durable medical equipment. 

Although [the co-defendants] did not work for Hirsch’s company, Hirsch created MVP credentials for [the co-defendants] under EI Medical’s account.  Hirsch charged them between 25 cents and 31 cents for each patient search.  Hirsch did not profit from the arrangement.  Instead she used the money to pay her MVP fees for searches run by [the co-defendants].  With no direct involvement from Hirsch, [the co-defendants] used their MVP accounts to verify patient insurance information and patient referrals received from call centers, and [a co-defendant] ultimately used the information to prepare insurance claims.  [One co-defendant’s] credentials were used for more than 350,000 patient searches, while [the other co-defendant’s] credentials were used for 150,000 patient searches.

CMS Ex. 22 at 16-17.⁸  The presiding district judge acknowledged that the plea agreement was made pursuant to Rule 11(c)(1)(C) of the Federal Rules of Criminal Procedure, and he addressed that provision during the plea hearing:

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Now, if I accept your plea, I will do so conditionally, as [Ms. Hirsch’s counsel] has already said.  Let me ask you to turn to the second page of the [plea] agreement, and this is Section 3. 

The Federal Rules of Criminal Procedure have a provision which permits the parties to agree on a particular disposition.  The parties can’t require the court to impose that disposition.  The court may find the suggestion appropriate and ultimately impose it, but the court may for other reasons decide that it’s not an appropriate disposition of the case and decline to impose it.  In this Section 3 of the letter you and the government agree that if that should happen, if the court should reject the parties’ suggested disposition, you would have a right to withdraw your guilty plea and we’d proceed as if you’d never offered it. 

* * *

Now, if I conditionally accept your plea today, we’ll continue the case for sometime in the future, several months from now.

CMS Ex. 22 at 12.  After a colloquy, Ms. Hirsch entered her guilty plea.  CMS Ex. 22 at 17-18.  The presiding district judge then stated, “I will conditionally accept the plea subject to the rule, and we’ll accordingly find the defendant guilty at this point of the offense charged in Count Three of the indictment.”  CMS Ex. 22 at 18. 

Prior to her sentencing hearing, Ms. Hirsch submitted a memorandum in which she addressed, in pertinent part, her ownership of Petitioner.  Ms. Hirsch reported Petitioner is a “woman-owned small business,” and that if she “is not present to operate and maintain the business, EI Medical and WSR Solutions will likely go out of business and these employees—some of whom have been there for years—would lose their jobs and customers—who need these valuable services—would lose their independence.”  CMS Ex. 17 at 6.  Ms. Hirsch recognized “the potential for administrative proceedings which may result in adverse outcomes to her business.”  CMS Ex. 17 at 8. 

On September 21, 2021, Ms. Hirsch, accompanied by one of Petitioner’s present counsel, appeared for sentencing.  The presiding district judge explained: 

Well, as I’ve indicated, I’ve reviewed the papers that have been submitted both by the parties and probation, and I will accept the plea agreement that the parties have reached pursuant to 11(c)(1)(C).  I don’t remember whether I formally accepted the plea and found her guilty subject to revocation or whether I deferred it.  If I deferred it, I now will find the fact of guilt and impose the agreed disposition.

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P. Ex. 1 at 12-13.  The district court imposed sentence and judgment, to include the agreed upon disposition provided in the plea agreement.  CMS Ex. 5 at 3-6.  The following day, the Department of Justice posted a press release announcing Ms. Hirsch’s conviction on its website, captioned “California Woman Sentenced in Multi-Million-Dollar Medicare Fraud Scheme.”  CMS Ex. 12 at 1.  The press release reported that “on Feb[ruary] 24, 2021, Hirsch pleaded guilty to violating the HIPAA statute.”  CMS Ex. 12 at 1. 

Approximately two weeks later, on October 5, 2021, Palmetto revoked Petitioner’s supplier number pursuant to 42 C.F.R. § 424.535(a)(3) and (9), “effective February 24, 2021, which is the date [Ms. Hirsch’s] felony conviction became effective.”  CMS Ex. 4 at 2.  Palmetto explained that an owner and managing employee of Petitioner (Ms. Hirsch) had been convicted of a felony, as defined in 42 C.F.R. § 1001.2, on February 24, 2021, and that Petitioner had failed to timely report this conviction to CMS.⁹  CMS Ex. 4 at 2. 

In a request for reconsideration dated “October 8, 2021,”¹⁰ Petitioner, through counsel from the same law firm that currently represents it in this matter and also represented Ms. Hirsch in her criminal case, claimed that Ms. Hirsch had not been “convicted” of a felony offense, as contemplated by 42 C.F.R. § 1001.2, until September 21, 2021.¹¹  CMS Ex. 2 at 2 (“In this case, Ms. Hirsch was not convicted for purposes of 42 C.F.R. § 1001.2 and 424.535(a)(3) until the plea was accepted on September 21, 2021.”).  Petitioner reported that Ms. Hirsch’s guilty plea “was merely entered in February” but “was not accepted” until September 21, 2021.  CMS Ex. 2 at 2.  Petitioner further claimed that “[t]he fact that the plea was entered on February 24, 2021, has no bearing on when it was accepted.”  CMS Ex. 2 at 3.  Petitioner did not discuss that the district judge had conditionally accepted Ms. Hirsch’s guilty plea and made a finding of guilt on February 24, 2021.

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CMS Ex. 2; see CMS Ex. 22 at 18.  Petitioner claimed that Ms. Hirsch had sold the business to Evan Mulling on October 11, 2021 and argued, citing the discretionary authority at 42 C.F.R. § 424.535(e), that the revocation “must” be reversed.¹²  CMS Ex. 2 at 3; see CMS Exs. 6 at 2 (amended annual state corporation registration reflecting Petitioner’s sale on October 11, 2021); 7 (Form CMS-855S reporting changes in ownership and management to CMS); 14 at 24 (Bill of Sale, reporting sale for “$342,800 paid in the form of cash and a note”). 

On January 21, 2022, CMS’s Provider Enrollment & Oversight Group issued a reconsidered determination in which it upheld the revocation of Petitioner’s supplier number pursuant to 42 C.F.R. § 424.535(a)(3), effective February 24, 2021.  CMS explained that revocation pursuant to 42 C.F.R. § 424.535(a)(3) was warranted because Ms. Hirsch, as an owner, had been convicted of a felony financial crime in the previous 10 years, and such an offense is per se detrimental to the best interests of the Medicare program and its beneficiaries.  CMS Ex. 1 at 5.  CMS alternatively determined that, based on a case-specific-analysis, Ms. Hirsch’s felony offense was detrimental to the best interests of the Medicare program and its beneficiaries.  CMS Ex. 1 at 6.  CMS addressed Petitioner’s claim that a guilty plea had not been accepted on February 24, 2021, to include an explanation of its efforts to substantiate Petitioner’s claim.  CMS Ex. 1 at 4-5.  CMS determined that the district court accepted Ms. Hirsch’s guilty plea on February 24, 2021, and that, for purposes of 42 C.F.R. § 1001.2, Ms. Hirsch had been convicted as of that date.  CMS Ex. 1 at 5.  CMS also upheld Petitioner’s revocation pursuant to 42 C.F.R. §§ 424.535(a)(9) and 424.516(c) based on its failure to report Ms. Hirsch’s felony conviction within 30 days.  CMS Ex. 1 at 7.  CMS acknowledged Petitioner’s claim that it had sold the company to Mr. Mulling, but declined to exercise its discretionary authority to reverse the revocation.¹³  CMS Ex. 1 at 4; see 42 C.F.R. § 424.535(e).

On March 22, 2022, Petitioner timely filed a request for an administrative law judge (ALJ) hearing.  CMS filed a combined pre-hearing brief and motion for summary judgment (CMS Br.) and 22 exhibits (CMS Exs. 1-22).  Petitioner filed a combined brief, motion for summary judgment, and response to CMS’s motion for summary judgment (P. Br.), along with four exhibits (P. Exs. 1-4).  CMS submitted a reply brief (CMS Reply) and an opposition to Petitioner’s motion for summary judgment.

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CMS objects to P. Exs. 1¹⁴ and 2, on the bases that the documents are irrelevant and immaterial, and were submitted for the first time at the hearing level.  See 42 C.F.R. § 498.56(e) (requiring that an ALJ determine whether new documentary evidence is admissible); 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).”).  I overrule both objections. 

P. Ex. 1, the transcript of the sentencing hearing, was not available at the time Petitioner submitted its reconsideration request, and therefore, Petitioner could not have submitted this evidence.  See P. Ex. 1 at 15 (transcription date of February 1, 2022).  Further, P. Ex. 1 is relevant and material evidence that addresses the factual question of whether the district court accepted Ms. Hirsch’s guilty plea on February 24, 2021.  P. Ex. 2 is a copy of an email exchange between CMS and the federal prosecutor that was prompted by Petitioner’s claim, in its reconsideration request, that Ms. Hirsch’s plea had not been accepted on February 24, 2021.  See CMS Ex. 2 at 2-3.  Not only is P. Ex. 2 listed as an exhibit by CMS in its reconsidered determination, but it was also unavailable to Petitioner at the time it requested reconsideration.  I overrule CMS’s objection to P. Ex. 2.  See 42 C.F.R. § 498.61 (“Evidence may be received at the hearing even though inadmissible under the rules of evidence applicable to court procedure.  The ALJ rules on the admissibility of evidence.”).  

CMS also objects to P. Exs. 3 and 4, which is the written direct testimony of a retired United States District Judge, along with his biography.  See P. Ex. 3 at 2 (“[Counsel] asked me to review documents and case law to determine whether I could express expert opinions relating to whether the district court accepted Ms. Stefanie Hirsch’s Fed. R. Crim. P. 11(c)(1)(C) guilty plea and convicted her of one felony count of Violation of the HIPPA [sic] statute; Aiding and Abetting.”).  I offered the parties an opportunity to submit written direct testimony, and therefore, I will admit this written testimony.  See Standing Pre-Hearing Order, § 12. 

Petitioner’s witness, as a retired district judge, is qualified to address whether an individual has been convicted by the federal criminal justice system.  However, the definition of the “conviction” by the criminal justice system does not control when Ms. Hirsch was convicted under the broad definition of conviction set forth in 42 C.F.R. § 1001.2.  The witness did not provide any meaningful support for his determination that, “for purposes of 42 C.F.R. § 1001.2, the District Court ‘accepted’ Ms. Hirsch’s guilty

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plea at the September 21 hearing.”  P. Ex. 3 at 5.  Significantly, the witness limited his discussion to the factual matters that the district judge “conditionally accepted” the guilty plea and that Ms. Hirsch’s guilty plea was entered pursuant to Fed. R. Crim. P. 11(c)(1)(C), and omitted any discussion of other factual matters prominently raised in the transcripts of the plea and sentencing hearings that he reported he had examined.  See P. Ex. 3 at 2; see also P. Br. at 8 (stating that “[t]he transcripts from both plea hearing [sic] . . . are essential pieces of evidence for determining when the plea was formally accepted.”).  First, the witness did not recognize, much less address, that the presiding judge made an explicit finding of guilt at the February 24, 2021 plea hearing.  CMS Ex. 22 at 18 (“[W]e’ll accordingly find the defendant guilty as this point of the offense charged in Count Three of the indictment.”).  Second, the witness similarly did not recognize or address that the presiding district judge had explained, at the time of the sentencing hearing, that a conditionally accepted plea would have been accepted, but subject to revocation, if he ultimately rejected the plea agreement.  P. Ex. 1 at 13.

In addition to omitting discussion of the aforementioned facts, the witness misapplied a Departmental Appeals Board (DAB) decision to support his conclusion.  P. Ex. 3 at 5 (“Like Meadowmere, for purposes of 42 C.F.R. § 1001.2, the District Court accepted Ms. Hirsch’s guilty plea at the September 21 hearing.”); see Meadowmere Emergency Physicians, DAB No. 2883 at 3 (2018).  In Meadowmere, the DAB modified the effective date of revocation based on the date the district court accepted a guilty plea that had been entered before a magistrate judge who was not authorized to accept the felony guilty plea, which is irrelevant to the circumstances presented here.¹⁵

The witness also favorably referenced a circuit court decision that, when applied to the facts presented, eviscerates his opinion that Ms. Hirsch’s conditionally accepted plea could not have been accepted until acceptance of the plea agreement.  P. Ex. at 4 (citing U.S. v. Andrews, 857 F.3d at 734, 741 (6th Cir. 2017) (“[W]hen a district court, while on the record, explicitly defers any acceptance of a plea until a later point in time, the plea

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has not been accepted for the purposes of Rule 11(d).”)).  The plea hearing transcript factually demonstrates that the district judge “did not defer[] any acceptance of a plea,” but rather, conditionally accepted the guilty plea and made an explicit finding of guilt.  CMS Ex. 22 at 18.  In fact, Andrews discussed that “[t]he circuits that have considered what is required to indicate acceptance of a guilty plea appear to agree that the decision to ‘provisionally’ or ‘conditionally’ accept a guilty plea pending the court’s review of [the presentence report] is enough to establish acceptance [of the plea] . . . .”  857 F.3d at 740.  Andrews also observed, contrary to the witness’s opinion, that “[there] appears to be a consensus that a proper Rule 11 colloquy creates the presumption that a guilty plea was accepted.”¹⁶  Id. 

I reiterate that I admit this witness’s testimony, albeit with the caveat that the witness’s opinion is based on a limited factual discussion and is premised on caselaw that is contrary to the stated opinion. 

Petitioner objects to the admission of CMS Exs. 20 (sentencing memorandum submitted by the United States) and 21 (email communication between Ms. Hirsch and co-defendants).  Contrary to Petitioner’s claims, CMS need not show “good cause” to support the admission of this evidence; the good cause requirement at 42 C.F.R. § 498.56(e) is inapplicable to CMS.  Inasmuch as CMS’s reconsidered determination reported that CMS had “reviewed the case documents in PACER,” I admit CMS Ex. 20, which was available on the case docket at that time.  P. Ex. 2 at 1.  However, the record, even without consideration of CMS Ex. 20, is replete with evidence of Ms. Hirsch’s felonious conduct, and I do not cite to CMS Ex. 20 herein.  See, e.g., CMS Exs. 8, 10, 12, 15, 17, 22; P. Ex. 1.  I sustain Petitioner’s objection to CMS Ex. 21 because CMS has not offered a foundation or context for this document and there is no indication that this evidence is relevant to the determinations by Palmetto and CMS. 

I admit CMS Exs. 1-20 and 22 and P. Exs. 1-4.  Neither party has requested a hearing for the purpose of cross-examination of any witnesses, and a hearing is therefore

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unnecessary.¹⁷  Pre-Hearing Order §§ 12-14.  The record is closed, and the case is ready for a decision on the merits.¹⁸

II.    Issues

1. Whether CMS had a legal basis to revoke Petitioner’s supplier number based on the felony conviction of its owner within the preceding 10 years.
2. Whether CMS had a legal basis to revoke Petitioner’s supplier number because it did not timely update its enrollment record. 
3. Whether CMS correctly determined the effective date of Petitioner’s revocation. 

III.  Jurisdiction

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

IV.  Findings of Fact, Conclusions of Law, and Analysis¹⁹

Petitioner is a “supplier” for purposes of the Medicare program.  42 U.S.C. § 1395x(d); 42 C.F.R. §§ 400.202 (definition of supplier), 410.20(b)(1).  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 U.S.C. 1395m(j)(1)(A)); 42 C.F.R. § 424.505.  Additionally, a supplier must meet certain criteria to enroll and receive billing privileges in the Medicare program.  42 C.F.R. §§ 424.505, 424.510.

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CMS may revoke a supplier’s Medicare enrollment for any reason stated in 42 C.F.R. § 424.535(a).  One basis for revocation is set forth in 42 C.F.R. § 424.535(a)(3), which provides: 

(3) Felonies.  (i) The provider, supplier, or any owner or managing employee of the provider or supplier was, within the preceding 10 years, convicted (as that term is defined in 42 C.F.R. [§] 1001.2) of a Federal or State felony offense that CMS determines is detrimental to the best interests of the Medicare program and its beneficiaries.

(ii) Offenses include, but are not limited in scope or severity to—

* * * *

(B) Financial crimes, such as extortion, embezzlement, income tax evasion, insurance fraud and other similar crimes for which the individual was convicted, including guilty pleas and adjudicated pretrial diversions.

42 C.F.R. § 424.535(a)(3)(i) and (ii)(B).

CMS, in defining “convicted” for purposes of 42 C.F.R. § 424.535(a)(3), relies on the definition of “convicted” found at 42 C.F.R. § 1001.2 (defining numerous terms used by the Inspector General).  As relevant here, subsection (c) of that definition defines “convicted” as “[a] Federal, State, or local court has accepted a plea of guilty or nolo contendere by an individual or entity.”  The definition at subsection (b) also provides that an individual has been convicted when “a Federal, State or local court has made a finding of guilt against [the] individual.” 

CMS may also revoke a supplier’s enrollment when the supplier does not comply with the reporting requirements set forth in 42 C.F.R. §§ 424.516(c) and 424.57(c)(2).  42 C.F.R. § 424.535(a)(9).  Pursuant to 42 C.F.R. § 424.57(c)(2), a DMEPOS supplier must report a change of information supplied on its enrollment application within 30 days of the change.

When a supplier number is revoked, CMS is authorized to impose a bar to re‑enrollment for a minimum of one year, but no more than 10 years.  42 C.F.R. § 424.535(c)(1)(i).

1. Count Three of an information filed on October 2, 2020, charged that Ms. Hirsch violated 42 U.S.C. § 1320d-6 and 18 U.S.C. § 2 (“Violation of the HIPAA Statute; Aiding and Abetting”).  

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2. On the same day the United States filed the information, Ms. Hirsch executed a plea agreement in which she agreed to enter a guilty plea to the felony offense charged in Count Three of the information.
3. The plea agreement’s terms included no imprisonment, and stated, pursuant to Rule 11(c)(1)(C) of the Federal Rules of Criminal Procedure, that the district court “must include the agreed disposition in the judgment” if it accepted the plea agreement. 
4. On February 24, 2021, Ms. Hirsch entered a guilty plea.  That same day, the presiding district judge “conditionally accepted” the guilty plea and made a finding of guilt, but deferred approval of the plea agreement pending review of the presentence report. 
5. At a sentencing hearing on September 21, 2021, the presiding district judge explained that a previously accepted guilty plea would have been “subject to revocation” if he did not approve the plea agreement.  The district judge accepted the plea agreement and agreed to impose the plea’s agreement’s specified disposition.  
6. Petitioner revalidated its enrollment as a DMEPOS supplier in December 2018, at which time it reported that Ms. Hirsch was its sole owner and a director/officer, authorized official, and managing employee. 
7. On October 5, 2021, Palmetto revoked Petitioner’s Medicare enrollment pursuant to, inter alia, 42 C.F.R. § 424.535(a)(3) based on Ms. Hirsch’s felony conviction, effective February 24, 2021. 
8. Ms. Hirsch sold Petitioner to Mr. Mulling on October 11, 2021. 
9. In its request for reconsideration, Petitioner claimed that Ms. Hirsch’s guilty plea “was not accepted” on February 24, 2021. 
10. CMS investigated Petitioner’s claim that Ms. Hirsch’s guilty plea “was not accepted” on February 24, 2021, and obtained confirmation that the guilty plea was, in fact, accepted that day. 
11. In a reconsidered determination dated January 21, 2022, CMS informed Petitioner that it had confirmed that the guilty plea had been accepted on February 24, 2021.  CMS upheld Palmetto’s determination. 

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12. Ms. Hirsch, in committing a felony HIPAA violation, unlawfully granted two individuals access to a database that Petitioner had access to as a DMEPOS supplier, and thereby enabled these individuals to access the personal and medical data of hundreds of thousands of patients.  
13. CMS, in upholding the revocation, explained that Ms. Hirsch “was indeed involved in an illegal activity that put the Medicare program and its beneficiaries at risk.” 
14. Because an owner/manager/director of Petitioner had a felony conviction that is detrimental to the Medicare program and its beneficiaries, Palmetto was authorized to revoke Petitioner’s DMEPOS supplier number pursuant to 42 C.F.R. § 424.535(a)(3) and CMS had a legitimate basis to uphold the revocation. 
15. The district judge’s conditional acceptance of Ms. Hirsch’s guilty plea on February 24, 2021, establishes acceptance of a guilty plea by a federal court, as contemplated by 42 C.F.R. § 1001.2. 
16. Pursuant to 42 C.F.R. §§ 424.535(g) and 1001.2, the effective date of Petitioner’s revocation pursuant to 42 C.F.R. § 424.535(a)(3) is February 24, 2021.  
17. Pursuant to 42 C.F.R. §§ 424.516(c) and 424.57(c)(2), a DMEPOS supplier must report a final adverse legal action within 30 days, and CMS is authorized, pursuant to 42 C.F.R. § 424.535(a)(9), to revoke enrollment when a supplier does not comply with reporting requirements. 
18. Because Petitioner did not report Ms. Hirsch’s felony conviction to the Medicare program within 30 days of her conviction, as defined by 42 C.F.R. § 1001.2, CMS had a legitimate basis to uphold the revocation of Petitioner’s supplier number pursuant to 42 C.F.R. § 424.535(a)(9). 
19. I lack authority to review CMS’s refusal to exercise its discretion to reverse the revocation, pursuant to 42 C.F.R. § 424.535(e), based on Petitioner’s sale to Mr. Mulling on October 11, 2021. 
20. I lack authority to review the imposition of a 10-year bar to re-enrollment pursuant to 42 C.F.R. § 424.535(c) because it is not a reviewable initial determination. 

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CMS had a legitimate basis to revoke Petitioner’s supplier number pursuant to 42 C.F.R. § 424.535(a)(3) after Ms. Hirsch, the sole owner of Petitioner, was convicted of a felony offense. 

The DAB has held that CMS “may revoke a . . . supplier’s billing privileges based solely on a qualifying felony conviction, without regard to equitable or other factors.”  Brian K. Ellefsen, DO, DAB No. 2626 at 9 (2015).  The DAB has also explained that CMS may revoke enrollment and billing privileges based solely on a qualifying felony conviction it has determined by regulation to be detrimental to the best interests of the Medicare program and its beneficiaries.  See Fady Fayad, M.D., DAB No. 2266 at 15-16 (2009), aff’d, Fayad v. Sebelius, 803 F. Supp. 2d 699 (E.D. Mich. 2011); see also 42 C.F.R. § 424.535(a)(3).

In explaining how it would determine whether an offense is detrimental to the best interests of the Medicare program and its beneficiaries, CMS noted, in its rulemaking expanding its revocation authority under section 424.535(a)(3), that “[t]he determination of whether a particular conviction will or will not result in the revocation or denial of Medicare enrollment will depend upon the specific facts of each individual situation.”  79 Fed. Reg. 72,500, 72,510 (Dec. 5, 2014).  CMS explained: 

We believe that the term “determines” makes clearer that the lists of felonies in these two provisions are not exhaustive and include other felonies that CMS may deem as meeting the “detrimental” standard based on the particular facts of the case.  Second, and to further emphasize CMS’ discretion to use felonies other than those specified in §§ 424.530(a)(3) and 424.535(a)(3) as grounds for denial or revocation, we have included the phrase “but are not limited in scope or severity” within both provisions.

However, notwithstanding these changes, we again stress that we will only exercise our authority under §§ 424.530(a)(3) and 424.535(a)(3) after very careful consideration of the relative seriousness of the underlying offense and all of the circumstances surrounding the conviction.  It should in no way be assumed that every felony conviction will automatically result in a denial or revocation.

Id. at 72,511-12.  In stating such, CMS indicated that any determination that a felony not contained in the list at 42 C.F.R. § 424.535(a)(3)(ii)(A)-(D) would result in a revocation of enrollment would first require CMS to determine that the offense was detrimental to the best interests of the Medicare program and its beneficiaries.  Id.  Furthermore, CMS explained that it would only make such a determination after it carefully considered the relative seriousness of the underlying offense and all of the circumstances surrounding

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the conviction.  Id.  The plain language of the regulation is consistent with the discussion in the rulemaking, in that it limits revocations to instances in which CMS “determines” an offense is detrimental to the best interests of the Medicare program and its beneficiaries.  Therefore, CMS must make a determination that a given felony offense is detrimental to the best interests of the Medicare program and its beneficiaries relative to the facts of the specific case when revoking the enrollment, billing privileges, or supplier number of an entity that has committed a felony offense that is not listed in subsections (A) through (D) in the preceding 10 years. 

The DAB has also explained that it “has repeatedly held that if the conviction is for a crime other than one of the enumerated felonies, CMS may make the determination, on a case-by-case basis, whether the felony conviction at issue is detrimental to the Medicare program and its beneficiaries.”  Brenda Lee Jackson, DAB No. 2903 at 8 (2018).  The DAB stated that “[t]he ALJ’s . . . role in an appeal of CMS’s . . . revocation of enrollment in the Medicare program is to determine whether CMS had a legal basis for its action,” and “[i]f it did, then [the ALJ is] bound to affirm the . . . revocation.”  Dr. Robert Kanowitz, DAB No. 2942 at 4 (2019).  The DAB has also explained that “the right to review of CMS’s determination by an ALJ serves to determine whether CMS had the authority to revoke [the petitioner’s] Medicare billing privileges, not to substitute the ALJ’s discretion about whether to revoke.”  Letantia Bussell, M.D., DAB No. 2196 at 13 (2008) (emphasis omitted).  As such, the scope of my review is whether CMS had a legitimate basis to revoke Petitioner’s supplier number, and not whether I would make the same determination in the first instance. 

Petitioner does not dispute that Ms. Hirsch continued to own and manage Petitioner at the time Palmetto revoked its supplier number.  Nor does Petitioner dispute that Ms. Hirsch had been convicted of a felony offense when Palmetto revoked Petitioner’s enrollment on October 5, 2021.  See P. Br. at 21 (requesting that, if revocation is upheld, the effective date be modified to September 21, 2021).  In its request for reconsideration, Petitioner did not challenge that Palmetto was authorized to revoke its supplier number pursuant to  42 C.F.R. § 424.535(a)(3), but instead focused its arguments on the effective date of revocation and a request that CMS reverse the revocation pursuant to 42 C.F.R. § 424.535(e).  CMS Ex. 2. 

Even though Petitioner, in its request for reconsideration, did not challenge the underlying basis for the revocation pursuant to 42 C.F.R. § 424.535(a)(3), it argues in this proceeding that because Ms. Hirsch’s felony offense was not a financial crime, revocation is not warranted pursuant to 42 C.F.R. § 424.535(a)(3).  P. Br. at 13-16.  Even if Petitioner is correct, CMS would nonetheless have had a legitimate basis to uphold Petitioner’s revocation if it determined that Ms. Hirsch’s felony offense, based on a case-specific analysis, was detrimental to the best interests of the Medicare program and its beneficiaries.  42 C.F.R. § 424.535(a)(3); see 79 Fed. Reg. at 72,510.  CMS based its determination on both a per se and case-specific analysis of whether Ms. Hirsch’s felony

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offense was detrimental to the best interests of the Medicare program and its beneficiaries.  CMS Ex. 1 at 3-6.  Because CMS correctly determined, under a case-specific analysis, that Ms. Hirsch’s criminal offense was detrimental to the best interests of the Medicare program and its beneficiaries, I need not consider Petitioner’s claim that Ms. Hirsch’s felony offense was not an enumerated financial crime.²⁰  CMS Ex. 1 at 6. 

CMS’s reconsidered determination addressed the factual circumstances of Ms. Hirsch’s offense conduct, to include that Ms. Hirsch, as the “owner of record” of a “Medicare-enrolled wheelchair and scooter repair company that qualified for access to a healthcare clearinghouse that contains patients’ personal, medical and insurance information,” improperly gave two individuals access to the clearinghouse.  CMS Ex. 1 at 5.  CMS recognized that Ms. Hirsch, using Petitioner’s access to the clearinghouse, enabled two individuals to access hundreds of thousands of patients’ “personal and medical data.”  CMS Ex. 1 at 5.  CMS acknowledged that Ms. Hirsch received “about $.25 per patient eligibility check” and used this money to pay the access fees.²¹  CMS Ex. 1 at 5.  Regardless of Ms. Hirsch’s reason for allowing these individuals to illegally access a database hundreds of thousands of times, she, as Petitioner’s sole owner and manager, feloniously facilitated unauthorized access to hundreds of thousands of patient records.  CMS appropriately considered Ms. Hirsch’s felonious conduct to be detrimental to the best interests of the Medicare program and its beneficiaries.  Not only did CMS determine this criminal conduct was “dishonest” and displayed a “lack of good judgment,” but also determined that “Ms. Hirsch was indeed involved in an illegal activity that put the Medicare program and its beneficiaries at risk.”  CMS Ex. 1 at 6.  CMS further determined that the felony conviction “calls into question . . . trustworthiness and veracity,” and the “ability and willingness to obey and follow government regulations and protect individuals’ sensitive information.”  CMS Ex. 1 at 6.  CMS explained that “[p]ayment under the Medicare program is made for claims submitted in a manner that relies on the trustworthiness of our Medicare partners.”  CMS Ex. 1 at 6.  CMS offered adequate reasons to support its determination that the felony conviction of Petitioner’s owner, manager, and director relating to access to sensitive

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information of patients is detrimental the best interests of the Medicare program and its beneficiaries.  CMS Ex. 1 at 6.  In short, CMS’s determination conveyed that the felonious conduct of illegally enabling access to hundreds of thousands of records maintained in a database that Petitioner had been entrusted to use for legitimate business purposes was the type of felonious conduct that could place both Medicare funds and beneficiaries at risk.  

Although Petitioner argues that Ms. Hirsch sold Petitioner to Mr. Mulling, CMS noted that “Ms. Hirsch was listed on [Petitioner’s] Medicare enrollment as the sole owner, managing employee, director and authorized official at the time of her felony conviction.”  CMS Ex. 1 at 6.  Similarly, Petitioner argues that it, as the supplier of DMEPOS, “did not commit a crime” and did not commit misconduct, and therefore, should not be revoked.  P. Br. at 17.  The fact that Ms. Hirsch, who was the sole owner and a manager and director at the time she was convicted of a felony offense that CMS determined was detrimental to the Medicare program and its beneficiaries, offers CMS a legitimate basis, pursuant to 42 C.F.R. § 424.535(a)(3), to revoke Petitioner’s supplier number.  As I previously explained, my review is whether CMS had a legitimate basis to revoke Petitioner’s supplier number, rather than whether I would have taken the same action in the first instance.  CMS was authorized to revoke Petitioner’s supplier number because its sole owner and manager had been convicted of a felony offense that it determined was detrimental the best interests of the Medicare program and its beneficiaries. 

CMS had a legitimate basis, based on the definition of “conviction” found at 42 C.F.R. § 1001.2, to impose the revocation pursuant to 42 C.F.R. § 424.535(a)(3) effective February 24, 2021, which is the date Ms. Hirsch’s guilty plea was accepted by a federal court. 

The regulation defines conviction, as relevant here, as the date a “[f]ederal, [s]tate, or local court has accepted a plea of guilty or nolo contendere by an individual or entity.”  42 C.F.R. § 1001.2(c).  The same definition of conviction also includes when a “Federal, State, or local court has made a finding of guilt against an individual or entity.”²²

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42 C.F.R. § 1001.2(b).  Palmetto informed Petitioner that, pursuant to, inter alia, 42 C.F.R. § 424.535(a)(3), it had revoked its supplier number retroactive to “February 24, 2021, which is the date your felony conviction became effective.”  CMS Ex. 4 at 2.  Palmetto’s determination, albeit succinctly, provided “the basis or reasons for the determination, the effect of the determination, and the party’s right to reconsideration, if applicable.”  CMS Ex. 4; see 42 C.F.R. § 498.20(a)(1).  Palmetto reported that an owner, managing employee and director of Petitioner had a felony conviction, as contemplated by 42 C.F.R. § 1001.2, on February 24, 2021, and that the felony conviction warranted revocation pursuant to 42 C.F.R. § 424.535(a)(3).  Regardless of the specific evidence upon which it based this determination, Palmetto conveyed a factual and legal basis for its revocation of Petitioner’s supplier number. 

In its request for reconsideration, Petitioner argued that Ms. Hirsch “entered a plea of guilty under Federal Rule of Criminal Procedure 11(c)(1)(C) on February 24, 2021,” and that “the plea was merely entered in February.”  CMS Ex. 2 at 5 (emphasis in original).  Petitioner further claimed that “the plea was not accepted and there was not a final judgement until September 21, 2021.”  CMS Ex. 2 at 2.  Petitioner further stated that “[t]he fact that the plea was entered on February 24, 2021 has no bearing on when it was accepted.”  CMS Ex. 2 at 3.  Petitioner additionally stated that “Ms. Hirsch was not convicted for purposes of 42 C.F.R. §§ 1001.2 and 424.535(a)(3) until the plea was accepted on September 21, 2021.”  CMS Ex. 2 at 3.  Petitioner also reported that it had terminated its business relationship with Ms. Hirsch within 30 days of both the final adverse action and the notice of revocation, and stated that “the revocation must be reversed immediately.”  CMS Ex. 2 at 3-4.  Notably, Petitioner did not claim that Palmetto lacked the authority to revoke its supplier number pursuant to 42 C.F.R. § 424.535(a)(3).  CMS Ex. 2.  In fact, Petitioner did not offer any argument that revocation pursuant to 42 C.F.R. § 424.535(a)(3) was inappropriate.  CMS Ex. 2. 

In response to Petitioner’s allegation that Ms. Hirsch’s plea had not been accepted on February 24, 2021, CMS attempted to verify this claim through an inquiry to the Assistant United States Attorney (AUSA) who prosecuted Ms. Hirsch.  In a January 13, 2022 email message, CMS stated the following: 

CMS has taken administrative action against an entity, EI Medical, Inc., of which Stefanie Hirsch is the owner of record.  The action is based on Ms. Hirsch’s felony conviction.  CMS’ definition of conviction includes when a

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court accepts a guilty plea.  The effective date of our action is February 24, 2021, the date of Ms. Hirsch’s plea agreement.  EI Medical Inc. has appealed this action and is claiming that the date the court accepted Ms. Hirsch’s plea is September 21, 2021 and not the date of her guilty plea February 24, 2021, referencing Fed. R. Crim. P. 11(c)(1)(C) as the basis of its argument.  We need to determine the date her plea was accepted by the court.  We have reviewed the case documents in PACER, but do not see specific reference to the court’s acceptance of the plea.  Can you please confirm the date her plea was accepted by the court?

P. Ex. 2 at 2; see CMS Ex. 1 at 2, 4-5.  In response, the AUSA informed CMS that “[t]he court accepted Ms. Hirsch’s guilty plea on February 24, 2021,” and provided a screen shot of docket entry # 49 (electronic clerk’s notes for February 24, 2021 plea hearing).  P. Ex. 2 at 1-2; see CMS Ex. 1 at 2, 4-5.

In its reconsidered determination, CMS explained that the AUSA “confirmed . . . that the Court accept Ms. Hirsch plea of guilty and was convicted, as the term is defined in 42 C.F.R. § 1001.2, on February 24, 2021.”  CMS Ex. 2 at 5.  CMS further explained that it had maintained the effective date of Petitioner’s revocation, stating:

Although the Supplier argues that Ms. Hirsch was convicted by the Court for her felonious acts on September 21, 2021, the documentation and evidence indicates otherwise.  On February 24, 2021, when Judge George A. O’Toole accepted Ms. Hirsch’s plea of guilt and ordered presentencing documentation, he scheduled a sentencing date based on Ms. Hirsch’s plea of guilt (see Exhibits 8 and 10).  Thus, CMS finds that the effective date of revocation was properly determined to be February 24, 2021, when the Court accepted Ms. Hirsch’s guilty plea and she was convicted as the term is defined in § 1001.2.

CMS Ex. 4 at 5.

Petitioner alleges in its brief that CMS “referenced undisclosed evidence” and “unsworn, third-party conversations” in its reconsidered determination.  P. Br. at 6.  Petitioner also claims that CMS “included new rationales and findings for the first time, with no opportunity for EI Medical to respond.”  P. Br. at 6.  Petitioner is mistaken.  Palmetto, acting on behalf of CMS, had already determined that Petitioner’s Medicare enrollment should be revoked based on the felony conviction of Ms. Hirsch, effective February 24, 2021.  CMS Ex. 4.  CMS squarely upheld that determination.  CMS Ex. 1.  To the extent CMS developed new evidence, it did so to investigate and address Petitioner’s unsupported claims that Ms. Hirsch’s guilty plea was not accepted on February 24, 2021.  The evidence demonstrates that CMS objectively requested that the AUSA identify the date the district court accepted Ms. Hirsch’s guilty plea.  See P. Ex. 2 at 2 (email

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requesting that the AUSA “confirm the date [Ms. Hirsch’s] plea was accepted by the court.”).  P. Ex. 2 at 2.  CMS developed this evidence in order to address Petitioner’s claim in its request for reconsideration that the plea had not been accepted on February 24, 2021.  CMS Ex. 1. 

Petitioner erroneously argues that a guilty plea pursuant to Fed. R. Crim. P. 11(c)(1)(C) plea cannot be accepted until the plea agreement is accepted.  Ms. Hirsch agreed to enter a guilty plea and waive her right to indictment and trial based on an agreed upon disposition that included no possibility of imprisonment.  See CMS Ex. 10.  In making this agreement and entering a guilty plea, Ms. Hirsch agreed that she would be bound by her guilty plea and could only withdraw it if the judge rejected the plea agreement.  CMS Ex. 10 at 2.  Ms. Hirsch entered her guilty plea, and the district judge’s colloquy with Ms. Hirsch established that her plea was voluntary and supported by a factual basis.  CMS Ex. 22 at 17-18.  The district judge conditionally accepted the plea, which he later, at the time of sentencing, explained was, in actuality, a revocable acceptance of the guilty plea pending his approval of the plea agreement.  CMS Ex. 22 at 17-18; P. Ex. 1 at 13.  After conditionally accepting the plea, the judge explicitly made a finding of guilt, stating:  “[W]e’ll accordingly find the defendant guilty at this point of the offense charged in Count Three of the indictment.”  CMS Ex. 22 at 18.  Only after accepting the guilty plea and making a finding of guilt, the district judge scheduled the sentencing hearing.  CMS Ex. 22 at 18-19.  At sentencing, the district judge approved the plea agreement and reported that if he had not already “accepted the plea and found her guilty subject to revocation,” he was finding the fact of guilt and imposing the agreed disposition.  P. Ex. 1 at 12-13. 

The definition of “convicted” in 42 C.F.R. § 1001.2, which is a provision found in the Inspector General’s regulations governing exclusions, civil monetary penalties, and assessments, mirrors the definition of conviction provided by Congress in section 1128 of the Social Security Act, 42 U.S.C. § 1320a-7(i).  See S. REP. No. 100-109, 100th Cong., 1st Sess. 1-2 (1987), reprinted in 1987 U.S. Code Cong. & Admin. News 682 (legislative history discussing that a “conviction,” under a newly broadened definition,” applies to “individuals who have entered guilty or nolo pleas to certain program-related crimes,” and that when individuals “have admitted that they engaged in criminal abuse against a Federal health program . . . they should be subject to exclusion.”).  The definition of conviction authored by Congress and used by the IG and CMS is unquestionably broader than the definition of conviction commonly associated with the criminal justice system.  See 57 Fed. Reg. 3330 (Jan. 29, 1992) (“Congress has made clear that the Department’s exclusionary authority was expanded . . . to provide HHS with sufficient authority to better protect the integrity of the Medicare and Medicaid programs and program beneficiaries from providers who have plead guilty to criminal charges.”).

In addition to its witness’s reference to Andrews (P. Ex. 3), as previously discussed, Petitioner cites to Andrews in support of its claim that Ms. Hirsch’s conditionally

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accepted guilty plea was not accepted by the district court on February 24, 2021.  P. Br. at 11 (citing 857 F.3d 734, 741).  The Andrews decision addresses a defendant’s right to withdraw a guilty plea when a plea has been accepted under the “fair and just” standard, which is only applicable when a guilty plea has been accepted.²³  857 F.3d at 740.  The Circuit Court explained that “Rule 11 . . . explicitly allows a district court to accept a guilty plea, but defer on deciding whether it will accept the plea agreement.”  Id.  Significantly, Andrews summarized that “[t]he circuits that have considered what is required to indicate acceptance of a guilty plea appear to agree that the decision to ‘provisionally’ or ‘conditionally’ accept a guilty plea pending the court’s review of the defendant’s [pre-sentence report] is enough to establish acceptance and trigger the ‘fair and just’ standard for withdrawal under Rule 11(d)(2).”  Id.  Andrews observed that “[t]here also appears to be a consensus that a proper Rule 11 colloquy creates the presumption that a guilty plea was accepted,” and that this presumption has been rebutted “when the district court explicitly deferred acceptance of the plea.”  Id.²⁴  The district judge did not “explicitly defer acceptance” of the plea; rather, the district judge conditionally accepted the plea, made a finding of guilt, and explained that his acceptance of a guilty plea pending approval of a plea agreement is subject to revocation.  CMS Ex. 22 at 18; P. Ex. 1 at 13.

The Supreme Court similarly did not observe a meaningful distinction between conditionally accepted and fully accepted guilty pleas.  U.S. v. Hyde, 117 S. Ct. 1630, 1635 (1997) (“Respondent defends this cramped understanding of Rule 32(e) by arguing that the ‘fair and just reason’ standard was meant to apply only to ‘fully accepted’ guilty pleas, as opposed to ‘conditionally accepted’ pleas—i.e., pleas that are accepted but later withdrawn under Rule 11(e)(4) if the plea agreement is rejected.”).²⁵  The Supreme Court faulted the lower court for “equat[ing] acceptance of the guilty plea with acceptance of

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the plea agreement, and deferral of the plea agreement with deferral of the guilty plea.”  Id. at 1632-33.  The Supreme Court explained, “Nothing in the text of Rule 11 supports these conclusions.  In fact, the text shows that the opposite is true:  Guilty pleas can be accepted while plea agreements are deferred, and the acceptance of the two can be separated in time.”  Id.

Likewise, the Committee Notes for the 2002 amendments to the Federal Rules of Criminal Procedure states the following with respect to pleas that are entered and accepted pending approval of the plea agreement:

Amended Rules 11(c)(3) to (5) address the topics of consideration, acceptance, and rejection of a plea agreement.  The amendments are not intended to make any change in practice.  The topics are discussed separately because in the past there has been some question about the possible interplay between the court's consideration of the guilty plea in conjunction with a plea agreement and sentencing and the ability of the defendant to withdraw a plea.  See United States v. Hyde, 520 U.S. 670 (1997) (holding that plea and plea agreement need not be accepted or rejected as a single unit; "guilty pleas can be accepted while plea agreements are deferred, and the acceptance of the two can be separated in time.").  Similarly, the Committee decided to more clearly spell out in Rule 11(d) and 11(e) the ability of the defendant to withdraw a plea.  See United States v. Hyde, supra.

Petitioner, which has been assisted by counsel throughout the course of this matter, claims that “CMS cannot point to a court or DAB opinion that would have put EI Medical on notice of CMS’s interpretation and application of the definition of ‘conviction’ in the unique context of a Rule 11(c)(1)(C) plea.”  P. Br. at 20-21.  Contrary to Petitioner’s claim, this issue is not novel.  Rather, it appears to be well-settled.  Petitioner has not identified any authority or caselaw supporting that the conditional acceptance of a guilty plea pending approval of a plea agreement does not amount to acceptance of a guilty plea, either for the purpose determining whether a criminal defendant must demonstrate a “fair and just” reason to withdraw an accepted guilty plea or pursuant to the definition of conviction provided by 42 C.F.R. § 1001.2.  CMS is not counsel for Petitioner; it is simply preposterous that Petitioner would expect to be put “on notice” of how CMS would apply the law to a particular factual circumstance involving its owner’s entry of a felony guilty plea pursuant to Fed. R. Crim. P. 11(c)(1)(C), particularly when Petitioner’s own brief cites to a circuit court decision that stated “there . . . appears to be a consensus that a proper Rule 11 colloquy creates the presumption that a guilty plea was accepted.”  See P. Br. at 11 (citing Andrews, 857 F.3d at 740).  Petitioner, with the assistance of its counsel, opted to neither timely report Ms. Hirsch’s adverse legal action nor divest from Ms. Hirsch prior to October 11, 2021.  See CMS Ex. 22 at 18.  Petitioner cannot deflect blame on CMS for its own decisionmaking. 

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CMS had a legitimate basis to revoke Petitioner’s enrollment pursuant to 42 C.F.R. § 424.535(a)(9).

CMS may revoke a supplier number when a DMEPOS supplier does not comply with the reporting requirements set forth in 42 C.F.R. §§ 424.516(c) and 424.57(c)(2).  42 C.F.R. § 424.535(a)(9).  Pursuant to 42 C.F.R. § 424.57(c)(2), a DMEPOS supplier “must report to CMS any changes in information supplied on the application within 30 days of the change.”); see CMS Ex. 13 (December 2018 revalidation application that does not include any reported adverse legal actions against Ms. Hirsch); see also 42 C.F.R. § 424.516(c) (referencing DMEPOS reporting requirements found at 42 C.F.R. § 424.57(c)(2)).  As previously discussed, Ms. Hirsch was convicted, for purposes of 42 C.F.R. § 1001.2, on February 24, 2021.  Ms. Hirsch continued to own and manage Petitioner at the time Palmetto revoked Petitioner’s supplier number on October 5, 2021 and had yet to report any changes to Petitioner’s enrollment information.  CMS therefore had a legitimate basis, pursuant to 42 C.F.R. § 424.535(a)(9), to uphold Palmetto’s revocation of Petitioner’s supplier number.

CMS is not required to exercise its discretion to reverse the revocation, and I am not empowered to reverse a revocation pursuant to 42 C.F.R. § 424.535(e).

Petitioner has not identified any authority requiring CMS to reverse a revocation based an owner’s post-conviction sale of the supplier.  See CMS Ex. 2 at 3 (Petitioner’s claim that revocation “must” be reversed based on the sale of Petitioner).  Likewise, although CMS recognized that Petitioner had requested reversal of the revocation pursuant to 42 C.F.R. § 424.535(e), it declined to exercise its discretionary authority to reverse the revocation.  CMS Ex. 1.  CMS had a legitimate basis to uphold Palmetto’s revocation of Petitioner’s Medicare enrollment based on Ms. Hirsch’s felony conviction.

Petitioner argues that Petitioner “should be properly reinstated in accordance with 42 C.F.R. § 424.535(e) and should not be penalized for the conduct of its former owner.”²⁶  P. Br. at 19.  Pursuant to 42 C.F.R. § 424.535(e), when a supplier’s enrollment and billing privileges have been revoked pursuant to 42 C.F.R. § 424.535(a)(3), CMS

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may exercise its discretion to reverse the revocation if the supplier has terminated its business relationship with the individual against whom the adverse action was taken.  The use of the permissive word “may” means that a supplier that successfully terminated its business relationship with an owner within the specified time period would not have a right to have the determination reversed.  Main St. Pharmacy, LLC, DAB No. 2349 at 8 (2010) (use of the term “may” in the regulation implies that CMS’s authority to reverse a revocation is discretionary and “nothing in the language of section 424.535(e) requires CMS to demonstrate that it considered whether to exercise its discretionary authority . . . .”).  As a matter within the discretion of CMS, and not the ALJ, CMS is under no obligation to reverse a revocation, even in a circumstance where the owner has sold his or her ownership interest within 30 days of the revocation.  Id.  An ALJ, unlike CMS, is not afforded the discretion pursuant to section 424.535(e) to reverse a revocation.  CMS acknowledged Petitioner’s request for reversal of the revocation, and was legally authorized to decline to exercise its discretionary authority to grant this requested relief.²⁷  CMS Ex. 1 at 4. 

CMS was authorized to impose a 10-year bar to re-enrollment, which is not subject to review. 

Petitioner raises, essentially in a section heading, a dispute with the 10-year length of the re-enrollment bar.  P. Br. at 13.  The DAB has unambiguously explained that such a matter is beyond the scope of an ALJ’s review, stating:  

A decision by CMS or its contractor about how long to bar a revoked supplier from re-enrolling in Medicare, unlike the determination to revoke the supplier’s billing privileges, is not an appealable “initial determination” under 42 C.F.R. Part 498.  Blossomwood Medical, P.C., et al., DAB No. 2914 at 11 (2018); Vijendra Dave, M.D. [DAB No. 2672] at 8-11 (stating that the authority of an ALJ or the Board in a revocation appeal “does not extend to reviewing the length of the reenrollment bar imposed by CMS”).  We therefore cannot consider or act upon Petitioner’s contention that the three-year re-enrollment bar was excessive in her circumstances.

Linda Silva, P.A., DAB No. 2966 at 11 (2019).  Pursuant to 42 C.F.R. § 424.535(c)(1)(i), CMS may impose a re-enrollment bar for a minimum of one year and a maximum of 10 years.  

Petitioner argues that Ms. Hirsch’s “personal history,” to include her service on the Board of Directors of the Echoes of Hope foundation and her “leadership” of Petitioner as “a

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good and well managed business” somehow weighs against the imposition of a 10-year bar to re-enrollment.  P. Br. at 13-16.  Inasmuch as Ms. Hirsch sold Petitioner in October 2021, Ms. Hirsch’s “personal history” is irrelevant to whether CMS had a legitimate basis to impose a bar to Petitioner’s re-enrollment.  Regardless, Petitioner has not identified any legal error in CMS’s imposition of the re-enrollment bar, and I may not otherwise review the duration of the re-enrollment bar.  See Vijendra Dave, M.D., DAB No. 2672 at 11 (2016) (“CMS’s determination regarding the duration of the re-enrollment bar is not reviewable.”). 

V.    Conclusion

For the reasons explained above, I affirm the revocation of Petitioner’s supplier number, effective February 24, 2021.

---

Endnotes

¹  “The National Supplier Clearinghouse is the single organizational entity responsible for issuing and revoking Medicare supplier billing privileges for suppliers of Durable Medical Equipment, Orthotics and Supplies (DMEPOS).”  National Supplier Clearinghouse MAC, Palmetto GBA, https://www.palmettogba.com/palmetto/nsc.nsf (last visited November 3, 2022).  The NSC is an administrative contractor for CMS.

²  See Request for Hearing at 13 (reporting EI Medical, Inc. does business as “Wheelchair and Scooter Repair”); CMS Exs. 8 at 1 (reporting that EI Medical, Inc. does business as “Wheelchair and Scooter Repair”); 17 at 5-6 (in-court statement by Petitioner’s current counsel, “Her business, of which she is the sole owner, is called EI Medical.  It’s also known as WSR Solutions.”).

³  A revocation pursuant to 42 C.F.R. § 424.535(a)(3) is retroactive to the date of the felony conviction, whereas a revocation pursuant to 42 C.F.R. § 424.535(a)(9) becomes effective 30 days after the notice is mailed to the supplier.  42 C.F.R. § 424.535(g).

⁴  The record reflects that Ms. Hirsch is also known as Stefanie Goldstein.  See CMS Ex. 17 at 15.

⁵  Citing CMS Ex. 8, CMS claimed that Ms. Hirsch was indicted on October 2, 2020.  CMS Br. at 6.  The referenced document is a criminal information.  CMS Ex. 8.

⁶  Petitioner agreed to plead guilty to a felony offense.  See 42 U.S.C. § 1320d-6 (maximum period of incarceration of five years); 18 U.S.C. § 3559 (defining felony offenses); CMS Exs. 7 at 2 (plea agreement stating that the “base offense level is 9, because the offense of conviction has a statutory maximum term of imprisonment of more than one year”); 17 at 9 (Ms. Hirsch’s sentencing memorandum, stating: “Notably, it is significant that the Government required Ms. Hirsch to plead guilty to a felony, rather than a misdemeanor HIPAA violation.”).

⁷  The parties subsequently revised the plea agreement to reflect a disposition of 36 months of probation in lieu of 36 months of supervised release.  CMS Ex. 16 at 6; see 18 U.S.C. § 3585(a) (addressing the applicability of supervised released to a sentence that includes a term of imprisonment).

⁸  CMS incorrectly identifies CMS Ex. 22 as a transcript of a sentencing hearing; CMS Ex. 22 is the transcript of the plea hearing.

⁹  In revoking Petitioner’s supplier number pursuant to 42 C.F.R. § 424.535(a)(9), Palmetto referenced 42 C.F.R. § 424.516(d)(1).  CMS Ex. 4 at 2.  CMS clarified that 42 C.F.R. § 424.516(c) is the appropriate reference based on Petitioner’s enrollment as a supplier of DMEPOS.  CMS Ex. 1 at 3.  Other than challenging the date Ms. Hirsch was convicted pursuant to 42 C.F.R. § 1001.2, which it claims allowed it 30 days from September 21, 2021 to report Ms. Hirsch’s conviction, Petitioner has not otherwise challenged its revocation pursuant 42 C.F.R. § 424.535(a)(9) in any of its submissions to CMS or this tribunal.

¹⁰  Petitioner filed its reconsideration request on October 15, 2021.  P. Br. at 5.

¹¹  I observe that Petitioner, through its counsel, referenced information regarding the firm’s representation of Ms. Hirsch.  See CMS Ex. 2 at 2 (stating that “counsel for Ms. Hirsch and the government were still negotiating ultimate resolution of the case up until the week prior to September 21”).

¹²  Mr. Mulling is Ms. Hirsch’s son.  See CMS Ex. 17 at 15.

¹³  The reconsidered determination explained that although Petitioner had updated its enrollment record to reflect its sale to Mr. Mulling, “the [change of ownership] and removal of Ms. Hirsch from its Medicare enrollment record was not recorded because the change of ownership happened after the Supplier’s Medicare enrollment was revoked.”  CMS Ex. 1 at 8.

¹⁴  Although CMS objects to the admission of P. Ex. 1, it references this document on page 4 of its opposition to Petitioner’s motion for summary judgment.

¹⁵  A magistrate judge in the Northern District of Texas presided over the plea hearing and “issued a report recommending that the district court accept the plea,” which was subsequently accepted by a district judge.  Meadowmere, DAB No. 2833 at 4; see Meadowmere Emergency Physicians, PLLC, DAB CR4971 (2017).  The DAB  determined that the effective date of the revocation was the date the district court accepted the guilty plea.  Id.  Meadowmere did not involve a conditionally accepted plea, but rather, involved a guilty plea that could not be accepted at the time it was entered.  See U.S. v. Dees, 125 F.3d 261, 268 (5th Cir. 1997) (“The taking of a plea by a magistrate judge does not bind the district court to accept that plea.  Rather, the district court retains ultimate control over the plea proceedings, which are submitted to the court for its approval.”).  The instant issue involves whether a conditionally accepted plea has been accepted for purposes of 42 C.F.R. § 1001.2, and Meadowmere does not address a conditionally accepted guilty plea pending approval of a plea agreement.

¹⁶  The witness also cites to U.S. v. Head, which does not address the acceptance of a plea that is conditioned on the acceptance of a plea agreement.  P. Ex. 3 at 4 (citing U.S. v. Head, 340 F.3d 628 (2003)).  Aside from the lack of relevance to the instant issue involving the conditional acceptance of a guilty plea, the Head court addressed a factually dissimilar circumstance in which the district court had neither explicitly nor implicitly accepted a guilty plea and “ma[de] clear that the plea is not yet accepted.”  Id. at 640-41.

¹⁷  Although Petitioner listed the federal prosecutor and a CMS official as potential witnesses, it neither submitted these witnesses’ written direct testimony nor requested that I issue a subpoena to compel their testimony.  And even if Petitioner had requested the issuance of a subpoena, it is difficult to fathom how the testimony of either witness is “reasonably necessary for the full presentation of a case” or what relevant and material facts these witnesses would establish.  See 42 C.F.R. § 498.58.

¹⁸  As an in-person hearing to cross-examine witnesses is not necessary, it is unnecessary to further address the parties’ motions for summary judgment.  I decide this case on the merits.

¹⁹  My numbered findings of fact and conclusions of law are set forth in italics and/or bold font.

²⁰  To the extent Ms. Hirsch’s felony offense was a financial crime because it involved the receipt of payments in exchange for access to the MVP database, the evidence does not overtly indicate that Ms. Hirsch committed the offense for financial gain.  To the contrary, the United States informed the district judge that Ms. Hirsch “did not profit from the arrangement” and “used the money to pay her MVP fees for searches run by [her co-defendants].”  CMS Ex. 22 at 17.  I have opted to focus on CMS’s case-specific analysis of whether Ms. Hirsch’s felonious conduct was detrimental to the best interests of the Medicare program and its beneficiaries.

²¹  I observe that if there was any doubt whether Ms. Hirsch was fully aware of the scale of access to patient information she was enabling, she received reimbursement for and paid the fees covering hundreds of thousands of searches.

²²  Because CMS did not uphold revocation based on the district court’s finding of guilt on February 24, 2021, nor has it relied on that finding of guilt in connection with the instant proceeding, I do not rely on that provision of 42 C.F.R. § 1001.2 to uphold Petitioner’s revocation.  See CMS Exs. 1; 22 at 18.  However, the finding of guilt is nonetheless a fact raised by the same evidence that Petitioner has claimed is an “essential piece of evidence for determining when the plea was formally accepted.”  P. Br. at 8, referencing both CMS Ex. 22 (plea hearing transcript) and P. Ex. 1 (sentencing hearing transcript).  The finding of guilt undermines Petitioner’s claim that the district judge did not accept the guilty plea on February 24, 2021.  I reiterate that one of Petitioner’s counsel in this matter was present at the plea hearing as counsel for Ms. Hirsch, yet the request for reconsideration, in claiming that the guilty plea had merely been entered and not accepted on February 24, 2021, did not reveal that the district judge had both conditionally accepted the guilty plea and made a finding of guilt.  See CMS Ex. 2 at 2 (Petitioner’s submission referencing information regarding counsel’s representation of Ms. Hirsch, and also quoting the provision of the definition of “convicted” that addresses when a court has made a finding of guilt).

²³  If a guilty plea has not, in fact, been accepted, then logically there would be no reason for a defendant to withdraw the guilty plea.

²⁴  Andrews cited several supporting decisions as examples of when a district judge did not accept a guilty plea, to include U.S. v. Tyerman, 641 F.3d 936, 938, 940-43 (8th Cir. 2011) (“I’m going to put off accepting your plea because I want the opportunity to review the presentence report.”); U.S. v. Shaker, 279 F.3d 494, 495-98 (7th Cir. 2002) (“I am deferring my decision on acceptance or rejection of your guilty plea and your Plea Agreement until after I’ve had the opportunity to study the Presentence Report.  If your plea of guilty and your Plea Agreement are then accepted, I will so advise you.”).

²⁵  The Supreme Court referenced the then-codified Federal Rules of Criminal Procedure, which have subsequently been amended and renumbered.  See Fed. R. Crim P. committee notes to the 2002 amendment (“Amended Rule 11(e) is a new provision, taken from current Rule 32(e), that addresses the finality of a guilty or nolo contendere plea after the court imposes sentence.”).

²⁶  Ms. Hirsch informed the district court on September 16, 2021, that if she “is not present to operate and maintain the business, EI Medical and WSR Solutions will likely go out of business and these employees—some of whom have been there for years—would lose their jobs and customers—who need these valuable services—would lose their independence.”  CMS Ex. 17 at 6.  Yet, only weeks later, Ms. Hirsch sold Petitioner to Mr. Mulling.  CMS Ex. 14 at 30; see CMS Ex. 17 at 15.  On October 11, 2021, Mr. Mulling reported there was “no change to the policies, procedures, record keeping or management team.”  CMS Ex. 14 at 30. 

²⁷  Petitioner does not allege any error in CMS’s analysis under 42 C.F.R. § 424.535(e) in the reconsidered determination.  See P. Br. at 18-19.