Jordan Sudberg, MD and Jordan Sudberg, MD, PC, DAB CR6246 (2023)

DECISION

Petitioner Jordan Sudberg, MD, is a New York physician who participated in the Medicare program as a supplier of services.  Petitioner Jordan Sudberg, MD, PC, is his medical practice.  Petitioner Sudberg is the practice’s sole owner and managing employee.  On November 23, 2021, he was convicted of felony income tax evasion.

The Centers for Medicare & Medicaid Services (CMS) subsequently determined that Petitioner Sudberg had been convicted of a felony offense that was detrimental to the best interests of the Medicare program, which his medical practice failed to report to the Medicare contractor.  CMS revoked his and his practice’s Medicare enrollments, imposed ten-year reenrollment bars, and placed Petitioner Sudberg on the Medicare Preclusion List.

Petitioners have appealed.

I affirm CMS’s determinations.  I find that CMS is authorized to revoke the Medicare enrollments of Petitioner Sudberg and his medical practice, impose ten-

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year reenrollment bars, and place Petitioner Sudberg on the preclusion list because, within the preceding ten years, he was convicted of a felony that CMS reasonably deems detrimental to the best interests of the Medicare program.

Because I find that one regulatory basis justifies the revocation, I need not decide whether the medical practice is subject to revocation because it failed to report, timely, to the Medicare contractor, Petitioner Sudberg’s criminal conviction.  See Five Star Healthcare, LLC, DAB No. 3089 at 14-15.

Background

By letters dated January 21, 2022, the Medicare contractor, National Government Services, advised Petitioner Sudberg and his medical practice that their Medicare privileges were revoked, effective November 23, 2021: 

• In the letter addressed to Petitioner Sudberg, the contractor advised him that, effective November 23, 2021, his Medicare privileges were revoked pursuant to 42 C.F.R. § 424.535(a)(3) because he had been convicted of felony tax evasion.  The letter also advised him that, pursuant to section 424.535(c), he was under a reenrollment bar until November 24, 2031.  Finally, the letter told him that he was being added to the CMS Preclusion List, as authorized by 42 C.F.R. §§ 422.2, 422.222, 423.100, and 423.120(c)(6).  CMS Ex. 5.

• The letter addressed to the medical practice explains that the contractor was revoking the medical practice’s Medicare enrollment pursuant to 42 C.F.R. §§ 424.535(a)(3) and 424.535(a)(9) because Petitioner Sudberg – the practice’s sole owner and managing employee – was convicted of felony tax evasion and did not timely report the adverse legal action to CMS, as required by 42 C.F.R. § 424.516(d).  Citing 42 C.F.R. § 424.535(c), the letter also advised that CMS was imposing a reenrollment bar, which would be effective until November 24, 2031.  CMS Ex. 6; see CMS Ex. 16 at 7 (indicating the medical practice’s ownership and control). 

Petitioners requested reconsideration.  CMS Exs. 3, 4. 

In reconsidered determinations, dated June 3, 2022, a CMS hearing officer upheld both of the revocations that were based on section 424.535(a)(3) and the medical practice’s revocation that was based on section 424.535(a)(9).  She also affirmed the duration of the reenrollment bars and Petitioner Sudberg’s placement on the preclusion list.  CMS Exs. 1, 2.

Petitioners timely appealed, and the matter is now before me.

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CMS has filed a motion for summary judgment with a pre-hearing brief (CMS Br.) and 18 exhibits (CMS Exs. 1-18).  Petitioners filed their own brief in opposition to summary judgment and pre-hearing brief (P. Br.) with one exhibit (P. Ex. 1).  Because neither party proposes any witnesses, this matter may be decided on the written record without considering whether the standards for summary judgment have been met.  See Acknowledgment and Pre-hearing Order at 4, 6 (¶¶ 4(c)(iv), 8, 9, 10) (August 3, 2022).¹ 

In the absence of any objections, I admit into evidence CMS Exs. 1-18 and P. Ex. 1.

Discussion

The Medicare Program.  The Medicare program, Title XVIII of the Social Security Act (Act), is a federally-subsidized insurance program that provides health care benefits to the elderly, disabled, and those suffering from end stage renal disease.  Medicare is divided into four parts: 

• Part A is the hospital insurance program.  It covers hospital services, post-hospital extended care, home health, and hospice care.  Act § 1811 (42 U.S.C. § 1395c);
• Part B, which is voluntary, is the supplementary medical insurance program, covering physician, home health, outpatient rehabilitation, and other services.  Act § 1832 (42 U.S.C. § 1395k);
• Part C is the Medicare Advantage program, which allows its participants to enroll in “Medicare + Choice” plans, managed by organizations, such as health maintenance organizations, that receive a fixed payment for each enrollee.  Act § 1851 (42 U.S.C. § 1395w-21); and
• Part D is the voluntary prescription drug benefit program.  Act § 1860D (42 U.S.C. § 1395w-101). 

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The Medicare program is administered by CMS, acting on behalf of the Secretary of Health and Human Services.  CMS contracts with Medicare administrative contractors, who process and pay reimbursement claims and perform other duties necessary to carry out program purposes.  Act § 1842 (42 U.S.C. § 1395u).  Contractors pay claims to “providers” (Part A) and “suppliers” (Part B).  Physicians and other entities that furnish healthcare services may participate in the program as “suppliers” of services; however, they must enroll in the program in order to receive Medicare payments.  Act § 1861(d), (q), (r) (42 U.S.C. § 1395x(d), (q), (r)); 42 C.F.R. §§ 400.202, 424.505.

Physicians and their medical practices, such as Petitioners, may participate in the program as “suppliers” of services.  Act § 1861(d), (q), (r) (42 U.S.C. § 1395x(d), (q), (r)); 42 C.F.R. § 400.202.

1. CMS may revoke the Medicare enrollments of Petitioner Sudberg and his medical practice (Jordan Sudberg, MD, PC), pursuant to 42 C.F.R. § 424.535(a)(3), because, within ten years preceding the revocation, Petitioner Sudberg was convicted of a felony that CMS reasonably finds detrimental to the best interests of the Medicare program and its beneficiaries.² 

Revocation of enrollment.  Section 424.535(a) authorizes CMS to revoke a supplier’s Medicare enrollment and billing privileges on one or more of the grounds set forth under that subsection.  So long as CMS shows that one of the regulatory bases exists, I must uphold the revocation.  Wassim Younes, M.D. and Wassim Younes, M.D., P.L.C., DAB No. 2861 at 8 (2018) (citing Patrick Brueggeman, D.P.M., DAB No. 2725 at 15 (2016)).

Among the regulatory bases, CMS may revoke a supplier’s Medicare billing privileges if, within the preceding ten years, the supplier or any owner or managing employee was convicted of a “felony offense that CMS determines is detrimental to the best interests of the Medicare program and its beneficiaries.”  42 C.F.R. § 424.535(a)(3)(i); see also Act §§ 1842(h)(8), 1866(b)(2)(D).  Offenses for which billing privileges may be terminated include – but are not limited to – financial crimes such as extortion, embezzlement, income tax evasion, insurance fraud, and other similar crimes.  42 C.F.R. § 424.535(a)(3)(ii)(B).

Petitioner Sudberg’s tax evasion scheme.  An Information, signed by the United States Attorney for the Southern District of New York, charged Petitioner Sudberg

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with felony tax evasion, in violation of 26 U.S.C. § 7201.  Specifically, the information charged that, for the calendar years 2015 through 2017, Petitioner Sudberg “devised and perpetrated” a scheme to evade paying a substantial portion of the personal income taxes that he owed.  CMS Ex. 10 at 2. 

The scheme involved two subchapter “S” corporations, which Petitioner Sudberg owned and through which he operated his medical practice.³    CMS Ex. 10 at 1.  He wrote hundreds of checks to outside companies, purportedly for business services the companies had performed for the S corporations.  In fact, the companies performed no services.  Instead, they paid Petitioner Sudberg – in cash – the amounts on the checks he had written to them, minus 3% to 6%.  CMS Ex. 10 at 3.  Petitioner Sudberg then falsely reported to the IRS that the checks were for the S corporations’ legitimate business expenses, claiming deductions in the amounts of the checks.  This allowed Petitioner Sudberg to understate substantially his income and tax liability for those three years.  CMS Ex. 10 at 3-4; CMS Ex. 12 at 5. 

Through this scheme, Petitioner “Sudberg falsely claimed more than $1.2 million in false deductions[,] resulting in a tax loss of $551,660.”  CMS Ex. 12 at 14. 

The conviction.  On November 23, 2021, Petitioner Sudberg pleaded guilty to the felony charge, acknowledging that he was, in fact, guilty.  CMS Ex. 12 at 6, 13. The United States District Court for the Southern District of New York accepted the plea and entered judgment against him.  CMS Ex. 9 at 2-3; CMS Ex. 12 at 16.⁴    The court sentenced Petitioner Sudberg to a prison term of “time served” and three years of supervised release.  P. Ex. 1 at 2-3.  The Court ordered him to pay a $100 assessment, $25,000 fine, and $500,213 in restitution to the IRS.  P. Ex. 1 at 6.  According to the sentencing documents, his total “criminal monetary penalty” was $768,570.00.  P. Ex. 1 at 6, 7.⁵ 

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CMS’s authority.  The Departmental Appeals Board has consistently held that an administrative law judge’s review of CMS’s determination to revoke is limited to deciding whether CMS has established one or more of the grounds specified in section 424.535(a).  William Garner, M.D., DAB No. 3026 at 16 (2020); Norman Johnson, M.D., DAB No. 2779 at 11 (2017), and cases cited therein.  CMS has the discretion to consider “unique or mitigating circumstances in deciding whether, or how, to exercise its revocation authority.”  I do not have similar authority.  I may not substitute my discretion for that of CMS in determining whether the revocation is appropriate.  Norman Johnson, DAB No. 2779 at 11 (citing Care Pro Home Health, Inc., DAB No. 2723 at 9 n.8 (2016)); Abdul Razzaque Ahmed, M.D., DAB No. 2261 at 19 (2009), aff’d, Ahmed v. Sebelius, 710 F. Supp.2d 167 (D. Mass. 2010). 

Contrary to Petitioners’ suggestion that the Medicare enrollments should not be revoked because Petitioner Sudberg’s crime did not involve patient care or the Medicare program itself, CMS plainly had the authority to revoke Petitioners’ Medicare enrollments under section 424.535(a)(3).  Petitioner Sudberg was convicted of income tax evasion, a crime that is specifically listed in the regulation.  Indeed, as the Departmental Appeals Board has observed, in promulgating section 424.535(a)(3), “CMS has ‘deem[ed] all financial crimes’ to be detrimental to Medicare.”  Cornelius M. Donohue, DPM, DAB No. 2888 at 4-5 (2018) (quoting Stanley Beekman, D.P.M., DAB No. 2650 at 7 (2015)).  Thus, the Board has upheld revocations in cases involving a wide variety of financial felonies that were not related to patient care or to any health care program.  See, e.g., Daniel Wiltz, M.D., DAB No. 2864 (2018) (making false statements to investigators in an insurance fraud probe); Francis J. Cinelli Sr., D.O., DAB No. 2834 (2017) (aiding and abetting the filing of a false tax return); Donna Maneice, M.D., DAB No. 2826 (2017) (attempted income tax evasion and filing a false tax return); Stanley Beekman, DAB No. 2650 (2015) (making false statements on a bank loan application).

Moreover, I reject Petitioners’ efforts to minimize Petitioner Sudberg’s culpability.  His was not a minor transgression.  I agree with the CMS Hearing Officer and the U.S. Attorney’s office: 

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[Petitioner] Sudberg engaged in a years-long pattern of fabricating false business expenses to conceal from the IRS large portions of his substantial income earned from his medical practices.  [Petitioner] Sudberg fraudulently claimed more than $1 million in deductions that should have been reported to the IRS as taxable income and allowed other individuals to create purportedly legitimate origin for their illicit cash in the process. 

CMS Ex. 1 at 4; CMS Ex. 2 at 4 (both quoting CMS Ex. 13 at 1).

2. I have no authority to review CMS’s determination to impose ten-year reenrollment bars. 

When a supplier’s billing privileges are revoked, it may not participate in the Medicare program until the end of its reenrollment bar, which must be for a minimum of one year but no more than ten years (except under circumstance that don’t apply here), depending on the severity of the underlying offense.  42 C.F.R. § 424.535(c)(1).  Here, CMS imposed a ten-year reenrollment bar.

Petitioners complain about the length of the reenrollment bar, arguing that, at the time Petitioner Sudberg was committing his crime, an enrollment bar could be no greater than three years; thus, in Petitioners’ view, imposing a ten-year reenrollment bar “is an ex post facto violation.”  P. Br. at 6.  

I reject Petitioner’s argument, which would require me to disregard the Medicare statute and its regulations.  I am bound by those authorities and cannot invalidate them based on constitutional claims (or for any other reason).  1866ICPayday.com, L.L.C., DAB No. 2289 at 14 (2009).

Even if I had such authority, Petitioners’ argument fails for multiple other reasons.  In claiming an ex post facto violation, Petitioners misconstrue the Constitution.  From the earliest days of the republic, the Supreme Court recognized that the doctrine of ex post facto applies to criminal – not civil – laws.  Calder v. Bull, 3 U.S. 386 (1798); see Smith v. Doe, 538 U.S. 84 (2003).  As discussed below, imposing a reenrollment bar (or placing someone on the preclusion list) is not a criminal punishment; it is a civil remedial measure intended to protect the program and its beneficiaries from fraud, abuse, and other harm.  Robert F. Tzeng, M.D., DAB No. 2169 at 14 (2008); see Pennsylvania Physicians, P.C., DAB No. 2980 at 7-8 (2019).

Moreover, CMS does not impose the reenrollment bars retroactively.  A law is not retroactive “merely because it is applied in a case arising from conduct that predates the law’s enactment or because it ‘upsets expectations based in prior

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law[.]’” Tzeng, DAB No. 2169 at 13 (quoting Landgraf v. USI Film Products, 511 U.S. 244, 270 (1994)).  When CMS revokes Medicare enrollment and imposes a reenrollment bar, it considers information about prior convictions to determine a supplier’s eligibility for future Medicare participation.  Those actions do not impair rights that the supplier possessed when he engaged in his illegal conduct nor impose new duties that apply to transactions already completed.  Tzeng, DAB No. 2169 at 14.  They are a “future-oriented and remedial form of relief, rather than a backward-looking consequence for a past act.”  Tzeng, DAB No. 2169 at 15 (citing Narendra M. Patel, M.D., DAB No. 1736 (2000), aff’d, Patel v. Thompson, 319 F.3d 1317 (11th Cir. 2003)).

Further, exclusions, reenrollment bars, and placements on the preclusion list are all based on the supplier’s conviction.  I see no support, and Petitioners cite none, for the proposition that the time of the criminal conduct, rather than the time of the conviction, would control.  And Petitioner was convicted well after November 4, 2019, the date the regulation changed.

Finally, I have no authority to review the length of a reenrollment bar.  42 C.F.R. § 498.3(b); Linda Silva, P.A., DAB No. 2966 at 11 (2019); Vijendra Dave, M.D., DAB No. 2672 at 9-12 (2016); accord, William Garner, M.D., DAB No. 3026 at 16 (2020), Lilia Gorovits, M.D., P.C., DAB No. 2985 at 15-16 (2020).  I am authorized to review initial determinations “to deny or revoke a provider or supplier’s Medicare enrollment in accordance with . . . [section] 424.535.”  42 C.F.R. § 498.3(b)(17)(i).  As the Board observed in Vijendra Dave, the regulations confer no such right to appeal CMS’s determination concerning the duration of a post-revocation re-enrollment bar.  Dave, DAB No. 2672 at 10.

CMS made this clear when it amended section 424.535(c) to allow CMS to add three or more years to an existing reenrollment bar if it found that the provider or supplier had attempted to circumvent an existing reenrollment bar.  CMS afforded appeal rights to providers and suppliers affected by the change.  Thus, if CMS adds years to an existing reenrollment bar, the supplier can “appeal CMS’ imposition of additional years to the . . . supplier’s existing enrollment bar under [section] 424.535(c)(2).  These appeal rights would be governed by 42 CFR part 498.”  However, CMS was explicit that those appeal rights “would not extend to the imposition of the original reenrollment bar under [section] 424.535(c)(1); they would be limited to the additional years imposed under [section] 424.535(c)(2).” 84 Fed. Reg. 47,794, 47,826 (Sept. 10, 2019) (emphasis added). 

Thus, the amended regulation lists as an initial determination, subject to appeal, “whether under [section] 424.535(c)(2)(i) of this chapter, to add years to a . . . supplier’s existing re-enrollment bar.”  42 C.F.R. § 498.3(b)(17)(ii) (emphasis added).  Lest there be any doubt as to the limits of a supplier’s appeal rights, the

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amended version also provides that a supplier’s appeal rights “[d]o not extend to the imposition of the original reenrollment bar under paragraph (c)(1) of this section.”  42 C.F.R. § 424.535(c)(2)(ii)(B).

3. CMS acted within its authority when it added Petitioner Sudberg to its preclusion list because, within the preceding ten years, he was convicted of a felony that CMS reasonably determined is detrimental to the best interests of the Medicare program.

The preclusion list.  Effective January 1, 2019, CMS implemented a “preclusion list” as part of its effort to “prevent fraud, waste, and abuse, and to protect Medicare enrollees,” particularly with respect to prescription drug abuse.⁶  Pursuant to 42 C.F.R. § 422.2 (Part C) and 42 C.F.R. § 423.100 (Part D), CMS’s “preclusion list” includes individuals and entities that have “been convicted of a felony under Federal or State law within the previous 10 years that CMS deems detrimental to the best interests of the Medicare program.  Factors that CMS considers in making such a determination under this paragraph [(3)] are:  i) the severity of the offense; ii) when the offense occurred; and iii) any other information that CMS deems relevant to its determination.”  42 C.F.R. §§ 422.2, 423.100 (defining “preclusion list”).

Petitioner’s placement on the preclusion list.  I have discussed in some detail the elements of Petitioner Sudberg’s crime.  He was convicted of a serious crime that is detrimental to the best interests of the Medicare program and its beneficiaries.  He involved others in criminal activity.  For three years, he lied to a federal agency in order to avoid paying the taxes that he owed.  His conduct shows that he cannot be trusted to abide by government rules. 

CMS was therefore authorized to add him to the Medicare preclusion list.  42 C.F.R. §§ 422.2, 423.100. 

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4. I have no authority to review the length of time Petitioner remains on the preclusion list. 

As noted above, by regulation an individual included on the preclusion list remains on that list for ten years from the date of his conviction, unless CMS determines that a shorter length of time is warranted.  42 C.F.R. §§ 422.222(a)(5)(iii), 423.120(c)(6)(vii).

Here, CMS placed Petitioner Sudberg on the preclusion list for the standard ten years.  Petitioner Sudberg complains that this length of time is not justified.  I have no authority to review that determination, however.  My authority is limited to review of initial determinations, which are listed in 42 C.F.R. § 498.3(b).  Among those reviewable determinations are whether “an individual or entity is to be included on the preclusion list as defined in [sections] 422.2 [and] 423.100.”  42 C.F.R. § 498.3(b)(20).  The regulations confer no such right to appeal CMS’s determination concerning the length of time the individual or entity remains on the preclusion list.  For the same reasons that administrative law judges may not review CMS’s determination as to the length of a reenrollment bar, I may not review its determination as to how long an individual or entity remains on the preclusion list.  See Vijendra Dave, M.D., DAB No. 2672 at 9-12 (2016); accord, William Garner, M.D., DAB No. 3026 at 16 (2020), Lilia Gorovits, M.D., P.C, DAB No. 2985 at 15-16 (2020). 

Conclusion

CMS justifiably determined that, within the preceding ten years, Petitioner Sudberg was convicted of a felony detrimental to the best interests of the Medicare program and its beneficiaries.  CMS is therefore authorized to revoke the Medicare enrollments of Petitioner Sudberg and his medical practice, impose reenrollment bars on them, and place Petitioner Sudberg on the preclusion list.

For these reasons, I affirm CMS’s determinations.

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Endnotes

¹  That I decide this case based on the written record does not mean that Petitioner has not had a hearing.  Courts recognize that, although a case may be decided on summary judgment or based on the written record, the administrative law judge, by considering the evidence and applying the law, has granted the petitioner a hearing.  See CNG Transmission Corp. v. FERC, 40 F. 3d 1289, 1293 (D.C. Cir. 1994) (holding that a “paper hearing” satisfies statutory requirements for “notice and opportunity for hearing.”). 

²  My findings of fact/conclusions of law are set forth, in italics and bold, in the discussion captions of this decision.

³   Subchapter “S” corporations are taxed on a “flow-through basis,” which means that tax liabilities from income (or deductions from losses) are passed on to the corporation’s shareholders, who are taxed at their personal, not the corporate, level.  Petitioner Sudberg was the sole shareholder for each of the corporations. 

⁴   When a revocation is based on a felony conviction, its effective date is the date of the conviction.  42 C.F.R. § 424.535(g).  Here, CMS determined that Petitioner Sudberg was convicted on November 23, 2021, the date he pleaded guilty, and the court accepted the plea.  See Michael Scott Edwards, OD, DAB No. 2975 at 2 (2019) (defining “convicted,” as, among other definitions, a court’s accepting a guilty plea).  

⁵   Because Petitioner’s sentencing was delayed, CMS did not have the sentencing documents when it filed its motion, brief, and exhibits.  Petitioner submitted the sentencing documents but did not explain the significance of the $768,570.00 criminal monetary penalty.  But see CMS Ex. 11 at 2; CMS Ex. 13 at 1 (explaining that, as part of his plea agreement, Petitioner Sudberg agreed to forfeiture of $243,257, plus restitution of $551,660).

⁶   Apparently, CMS considered requiring Medicare enrollment for all providers and suppliers of Medicare Advantage services and subscribers of Part D drugs but, ultimately, opted for a preclusion list instead.  CMS concluded that the burden of requiring Medicare enrollment for hundreds of thousands of additional providers, suppliers, and prescribers would be too great and would threaten beneficiary access to prescriptions and services.  See 82 Fed. Reg. at 56,442, 56,448 (Nov. 28, 2017); 83 Fed. Reg. 16,646 (Apr. 16, 2018).