Dhulmar Health Care Services LLC, DAB CR6357 (2023)

DECISION

The Centers for Medicare & Medicaid Services (CMS) revoked the Medicare enrollment and billing privileges of Dhulmar Health Care Services, LLC (Dhulmar or Petitioner).  CMS concluded that Petitioner had abused their billing privileges within the meaning of 42 C.F.R. § 424.535(a)(8)(ii).  As I explain in greater detail below, I find that CMS did not demonstrate that Petitioner engaged in a “pattern or practice of submitting claims that fail to meet Medicare requirements” within the meaning of this provision.  I therefore reverse CMS’s revocation of Petitioner’s Medicare enrollment and billing privileges, and CMS’s determination to include Petitioner on the preclusion list.

I.    Background and Procedural History

Petitioner is a home health agency (HHA) in Columbus, Ohio and first enrolled in Medicare in December 2011.  CMS Exhibit (Ex.) 15 at 1-2.  Petitioner challenges CMS’s revocation of its billing privileges after CMS concluded that Petitioner had engaged in a pattern or practice of submitting claims that failed to meet Medicare requirements

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pursuant to 42 C.F.R. § 424.535(a)(8)(ii).  Petitioner also challenges its placement on the Preclusion List and 10-year re-enrollment bar.

By letter dated January 26, 2021, CMS, through its administrative contractor Palmetto GBA (Palmetto), notified Petitioner that its Medicare privileges were revoked, effective February 25, 2021, pursuant to 42 C.F.R. § 424.535(a)(8)(ii).  CMS Ex. 2.  Petitioner was the subject of two targeted probe and educate prepayment reviews by a Medicare Administrative Contractor (MAC) and one post-payment medical probe review by a United program Integrity Contractor (UPIC), which forms the basis of CMS’s decision to revoke Petitioner:

• An August 23, 2016 prepayment review (“first review”) of five claims had determined that all five claims failed to meet Medicare requirements and were denied.  The denied claims had dates of service from February 15, 2016 through May 4, 2016.  CMS Ex. 9.  Petitioner did not appeal the determinations in this pre-payment review.
• An April 28, 2017 pre-payment review (“second review”) of five additional claims determined that four of those claims failed to meet Medicare requirements and were denied.  The denied claims had dates of service from November 2, 2016 through January 18, 2017.  CMS Ex. 11.  Petitioner did not appeal the determinations in this pre-payment review.
• An August 28, 2019 post-payment non-statistical sample audit (“third review”) for services rendered between June 19, 2018 through July 13, 2019 resulted in an overpayment amount of $45,044.94.  CMS Ex. 13 at 4 (“On August 28, 2019, CoventBridge requested medical records for a non-statistical sample of claims.  Medical review of the 28 claims/361 claims line items resulted in a 92.86% medical review error rate and an actual overpayment of $45,044.94.” (footnote omitted)).  Of the 28 claims reviewed, the UPIC determined that 26 of those claims failed to meet Medicare requirements.  CMS Exs. 2 at 1-2; 15 at 3.¹   

Petitioner timely requested reconsideration to Palmetto on February 24, 2021.  On May 6, 2021, a CMS Hearing Officer issued an unfavorable decision upholding revocation

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pursuant to 42 C.F.R. § 424.535(a)(8)(ii) and the corresponding re-enrollment bar established under 42 C.F.R. § 424.535(c).  The CMS Hearing Officer also upheld Petitioner’s placement on the Preclusion list and advised Petitioner of its rights to appeal a hearing request before an Administrative Law Judge (ALJ) in the Civil Remedies Division (CRD).  Id. at 8-9.

II.    Decision on the Record

On July 2, 2021, Petitioner requested a hearing before an ALJ.  The revocation hearing request was docketed as C-21-887, and I was designated to hear and decide the case.  On July 7, 2021, I issued an Acknowledgment and Pre-hearing Order (Pre-hearing Order) in which I instructed the parties to file pre-hearing exchanges.  CMS filed a motion for summary judgment and brief (CMS Br.) along with 16 proposed exhibits (CMS Exs. 1-16) on August 11, 2021.  Petitioner filed a brief opposing summary judgment (P. Br.) and offered one proposed exhibit (P. Ex. 1) on September 15, 2021.  CMS filed a notice waiving its reply to Petitioner’s brief opposing summary judgment on September 30, 2021.  Neither party objected to the other party’s proposed exhibits.  Therefore, in the absence of objection, I admit CMS Exhibits 1-16 and Petitioner Exhibit 1 into the record.

CMS has moved for summary judgment or, in the alternative, for a decision on the written record.  Petitioner has indicated that it does not intend to call any witnesses at an oral hearing.  Consequently, an in-person hearing is not required, and I issue this decision based on the written record, without regard to whether the standards for summary judgment are met.  Civil Remedies Division Procedures (CRDP) § 19(d). I deny CMS’s motion for summary judgment as moot.

III.    Issue

The issue in this case is whether CMS had a legal basis to revoke Petitioner’s Medicare enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(8)(ii) (2021), and whether CMS has a legitimate basis to place Petitioner on the preclusion list.  42 C.F.R. §§ 422.2 and 423.100.

IV.    Jurisdiction

I have jurisdiction to hear and decide this case.  42 C.F.R. §§ 498.3(b)(17), (20), 498.5(l)(2), (n)(2); see also Social Security Act (Act) § 1866(j)(8) (codified at 42 U.S.C. § 1395cc(j)(8)).

V.    Discussion

1. Applicable Law

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Home health agencies participate in the Medicare program as “providers.”  See 42 U.S.C. § 1395x(u); 42 C.F.R. § 400.202.  Providers may participate in the Medicare program and receive reimbursement for their services to eligible beneficiaries only if they comply with all applicable laws and regulations governing their participation.  See, e.g. 42 C.F.R. § 424.22.  “As a condition of payment for home health services under Medicare Part A or Medicare Part B, a physician or other allowed practitioner must certify the patient’s eligibility for the home health benefit.”  42 C.F.R. § 424.22(a)(1).  The medical record must support that certification.  Id.  Among other requirements, the record and certification must establish that (1) the individual needs skilled nursing care, (2) the individual is confined to a home, except when receiving outpatient services, (3) a plan of care for furnishing the services has been established and will be periodically reviewed by a physician, (4) the beneficiary was under the care of a physician, and (5) the physician performed a face to face encounter with the beneficiary within a specified timeframe.  42 C.F.R. § 424.22(a)(1)(i)-(v).  The certification of the need for home health services must be obtained at the time the plan of care is established or as soon thereafter as possible and must be signed and dated by the physician who establishes the plan.  42 C.F.R. § 424.22(a)(1)(v)(B)(2).  If care extends beyond 60 days, the physician must recertify eligibility.  42 C.F.R. § 424.22(b)(1).  “The certifying physician plays the role of gatekeeper in ascertaining whether a patient is homebound and qualifies for home health services; Medicare relies on the independent and honest professional judgment of the certifying physician for that purpose.”  United States v. DeHaan, 896 F.3d 798, 807 (7th Cir. 2018).

CMS is authorized to revoke the Medicare enrollment and billing privileges of a provider if a provider abuses its billing privileges, because “CMS determines that the provider or supplier has a pattern or practice of submitting claims that fail to meet Medicare requirements.”  42 C.F.R. § 424.535(a)(8)(ii).  In making this determination, CMS considers the following: 

(A) The percentage of submitted claims that were denied. 

(B) The reason(s) for the claim denials.

(C) Whether the provider or supplier has any history of final adverse actions (as that term is defined under § 424.502) and the nature of any such actions. 

(D) The length of time over which the pattern has continued. 

(E) How long the provider or supplier has been enrolled in Medicare.

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(F) Any other information regarding the provider or supplier’s specific circumstances that CMS deems relevant to its determination as to whether the provider or supplier has or has not engaged in the pattern or practice described in this paragraph.

42 C.F.R. § 424.535(a)(8)(ii)(A)-(F).²  

The effect of revocation is to terminate any provider agreement and to bar the provider or supplier “from participating in the Medicare program from the effective date of the revocation until the end of the re-enrollment bar.”  42 C.F.R. § 424.535(b), (c).  CMS may impose a re-enrollment bar anywhere from one to ten years.  42 C.F.R. § 424.535(c).  CMS also may place providers on the Preclusion List if the provider is revoked, under a re-enrollment bar, and CMS has determined the underlying conduct was detrimental to the best interests of the Medicare program.  42 C.F.R. § 422.2.

2.  Findings of Fact, Conclusions of Law, and Analysis³ 

1. Petitioner submitted five claims with dates of service between February 15 and May 4, 2016 seeking reimbursement for services provided to Medicare beneficiaries where the claims failed to meet a variety of Medicare requirements.

In the initial probe and educate pre-payment review which was related to the Calendar Year 2015 Home Health Prospective Payment System Final Rule CMS-1611-F (“CY 2015 HH PPS Final Rule”), the MAC denied five out of the five claims in the targeted sample for the following denial reasons: 

1. 5F023/5T023 – Medical records did not contain a plan of care established and approved by a physician, and/or did not contain a certification or recertification signed by a physician (CMS Ex. 9 at 1-2);

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2. 5F072/5T072 – Medical records did not contain sufficient physician’s orders or the order was obtained after services were rendered (id. at 6-7);
3. 5FT10/5AT10 – Medical records did not contain documentation that indicated and supported the beneficiary is unable to leave home (homebound status) (id. at 3-4);
4. 5FF2F/5TF2F – Medical records submitted for review did not contain adequate documentation of a required face to face encounter (id. at 2-3);
5. 5F041/5A041 – Medical records submitted did not contain documentation to justify continued skilled observation and assessment was reasonable and necessary, because the documentation submitted “indicated that the abnormal findings are part of a longstanding pattern of the patient’s condition and there is no attempt to change the treatment to resolve them” (id. at 4-6; see also id. at 10 (granular error key 1154:  “the documentation submitted was insufficient to support that the skilled nurse services billed was/were reasonable and necessary”)).

The charges for the five denied claims totaled $9,697.44.  Id. at 8.  Petitioner did not appeal these claim denials. 

Within the above denial reasons, there are granular error codes that fall under the above umbrella denial codes.  See id.  Importantly to this matter, only one of the claims was denied, in part, due to lack of documentation justifying continued skilled observation and assessment was reasonable and necessary (5F041/5A041).  Id. at 12.  Further detail is not provided as to the specifics for why the MAC determined the documentation was inadequate in this regard.  See id.

During the time period of this first review, Petitioner had submitted approximately thirty-four claims, and only the five claims above were denied.  CMS Ex. 1 at 2.⁴   

2. Petitioner submitted four claims with dates of service between November 2, 2016 and January 8, 2017 seeking reimbursement for services provided to Medicare beneficiaries where the claims failed to meet a variety of Medicare requirements.

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In the updated probe and educate pre-payment review which was also related to the CY 2015 HH PPS Final Rule, the MAC denied four out of the five claims in the sample for the following denial reasons: 

1. 5F023/5T023 – Medical records did not contain a plan of care established and approved by a physician, and/or did not contain a certification or recertification signed by a physician (CMS Ex. 11 at 2-3);
2. 5F070/5T070 – Documentation of the services billed was not submitted/legible/complete and therefore medical necessity for the rendered services could not be determined (id. at 3);
3. 5F072/5T072 – Medical records did not contain sufficient physician’s orders or the order exceeded the physician’s orders (id. at 5);
4. 5FT10/5AT10 – Medical records did not contain documentation that indicated and supported the beneficiary is unable to leave home (homebound status) (id. at 4);
5. 5FF2F/5TF2F – Medical records submitted for review did not contain adequate documentation of a required face to face encounter (id. at 4-5);
6. 5F041/5A041 – Medical records submitted did not contain documentation to justify continued skilled observation and assessment was reasonable and necessary, because the documentation submitted “indicated that the abnormal findings are part of a longstanding pattern of the patient’s condition and there is no attempt to change the treatment to resolve them” (id. at 5-7; see also id. at 13 (granular error key 1928:  “the documentation submitted was insufficient to support that the skilled nurse services billed was/were reasonable and necessary”)).

The charges for the four denied claims totaled $8,401.40.  Id. at 8.  Petitioner did not appeal these claim denials. 

Within the above denial reasons, there are granular error codes that fall under the above umbrella denial codes.  See id.  Similar to the initial probe and educate review, only one of the claims was denied, in part, due to lack of documentation justifying continued skilled observation and assessment was reasonable and necessary (5F041/5A041).  Id. at 13.  Further detail is not provided as to the specifics for why the MAC determined the documentation was inadequate in this regard.  See id.

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During the time period of this second review, Petitioner had submitted approximately twenty-six claims, and only the four claims above were denied.  CMS Ex. 1 at 2.⁵  

3. Petitioner submitted nineteen claims with dates of service between June 19, 2018 and July 13, 2019 seeking reimbursement for services provided to Medicare beneficiaries where the claims failed to meet essentially one of the Medicare home health requirements.

Unlike the probe and educate reviews conducted by the MAC which were related to the then new patient certification requirements for Home Health agencies in the CY 2015 HH PPS Final Rule, this third review was conducted by a Uniform Program Integrity Contractor (UPIC) that used “proactive data analysis” to target claims associated with beneficiaries that might not meet the homebound requirement for home health coverage.  CMS Ex. 13 at 4.  The UPIC selected a non-statistical sample of twenty-eight claims for review and denied twenty-six of the claims amounting to a $45,044.94 initial overpayment.  Id.  The twenty-six claims were denied initially for a variety of reasons, e.g., “nursing not medically necessary,” “invalid face to face,” “face to face requirements not met,” “invalid recertification,” “invalid nursing orders,” “invalid orders for nursing visits,” and “beneficiary not homebound.”⁶  

Following the initial twenty-six denials, Petitioner submitted them for redetermination, and the MAC overturned four out of the twenty-six denials.⁷   Compare CMS Ex. 15 at 3

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with CMS Ex. 5.  Petitioner then submitted the remaining twenty-two denials to the Qualified Independent Contractor (QIC) for reconsideration, and on February 17, 2021 the QIC overturned an additional three denials.  CMS Ex. 5.  On September 28, 2022, the Office of Medicare Hearings and Appeals (OMHA) ALJ issued an unfavorable decision upholding the denials of the remaining 19 claims.  See OMHA Appeal No. 3-9748626701 (September 28, 2022).  Petitioner was also informed of its rights to appeal the decision to the Medicare Appeals Council within 60 calendar days of receipt.  Petitioner did not file an appeal, so this decision is now administratively final and binding.⁸

With respect to these nineteen claim denials, all of the beneficiaries had multiple diagnoses and complex health histories, e.g., schizophrenia, COPD, and restless leg syndrome (id. at 5); coronary artery disease, type 2 diabetes, and dementia (id. at 7); blindness, hyperlipidemia, cervicalgia, and essential hypertension (id. at 11); cerebral infarction, aphasia, and major depressive disorder (id. at 15); and Alzheimer’s disease, osteoarthritis, and dysthymic disorder (id. at 23).

The OMHA ALJ found for each beneficiary that the record did not demonstrate that “the nursing services were so inherently complex that the services could have been safely and effectively performed only by or under the supervision of professional or technical personnel.”  See generally OMHA Appeal No. 3-9748626701.  The OMHA ALJ explained that

For intermittent nursing services to be considered reasonable and necessary, the nursing services must be skilled services.  42 C.F.R. § 409.42(c)(1); MBPM [(Medicare Benefit Policy Manual)], ch. 7, § 40.1.  To be considered a skilled service, the nursing service must be so inherently complex that the service can be safely and effectively performed only by or under the supervision of professional or technical personnel.  42 C.F.R. § 409.32(a); MBPM, ch. 7, § 40.1.1.  Although a patient’s overall medical condition

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should be considered in deciding whether skilled services are needed, a patient’s diagnosis should never be the sole factor in deciding whether a service is skilled.  MBPM, ch. 7, § 40.1.1.

Id. at 3.  Therefore, the OMHA ALJ found that the home health services billed for in the nineteen claims were not reasonable and necessary.  See id.  To be clear, it was not that the services provided were not medically necessary, but that the ALJ determined the services could have been safely and effectively performed by or under the supervision of non-professional or non-technical personnel.  Id.  Importantly, “the condition of the patient may cause a service that would ordinarily be considered unskilled to be considered a skilled nursing service,” and “[t]his would occur when the patient's condition is such that the service can be safely and effectively provided only by a nurse.”  MBPM, ch. 7, § 40.1.1.  Despite the complexity of the patients’ conditions, the ALJ found that the services provided remained unskilled.  OMHA Appeal No. 3-9748626701 at 5-43.

With the exception of one of the nineteen claims – which was additionally denied because the record did not support that the beneficiary was homebound (id. at 30-31) – that the services provided were not skilled services was the sole reason for the denials of the remaining eighteen claims.

During the time period of this UPIC review, Petitioner had submitted approximately two hundred and thirty-two claims, and only the nineteen claims above were denied.  CMS Ex. 1 at 3.⁹   This is an approximate 8.2% denial rate for this time period.

4. Although Petitioner filed 27 claims that did not meet Medicare requirements, Petitioner did not engage in a pattern or practice of abusive billing within the meaning of 42 C.F.R. § 424.535(a)(8)(ii), and CMS therefore did not have a legal basis to revoke Petitioner’s Medicare enrollment and billing privileges.

In implementing the abuse of billing authority under 42 C.F.R. § 424.535(a)(8)(ii), CMS stated that it would not define the term “pattern or practice,” but would implement a revocation under this basis:  (1) in situations where the behavior could not be considered sporadic, and (2) after the most careful and thorough consideration of the relevant factors.  See 79 Fed. Reg. 72,517 (December 5, 2014)).  The preamble explained that “[t]he term ‘abusive,’ as used in the context of § 424.535(a)(8)(ii), is meant to capture a variety of situations in which a provider or supplier regularly and repeatedly submits non-compliant

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claims over a period of time.”  Id. at 72,515.  The expectation stated in the preamble is that “a repeated pattern of submitting non-compliant claims indicates that the associated claims denials are not altering the provider’s behavior . . . . this final rule is focused on providers who cannot or will not come into compliance with our payment requirements after repeated claims denials.”  Id.  The preamble additionally states that CMS will only apply 42 C.F.R. § 424.535(a)(8)(ii) “in situations where the behavior could not be considered sporadic,” instead focusing on “providers and suppliers that engage in a systemic, ongoing, and repetitive practice of improper billing.”  Id. at 72,514, 72,519. 

In concluding that Petitioner’s Medicare enrollment should be revoked pursuant to 42 C.F.R. § 424.535(a)(8)(ii), CMS reasoned that “Dhulmar was provided several instances of specific education from 2016-2019, and the noncompliant billing occurred over three years, CMS considers this behavior systematic and not sporadic.”  CMS Ex. 15 at 5.  CMS reviewed the six factors enumerated at 42 C.F.R. § 424.535(a)(8)(ii)(A)-(F) in making its determination.  Id.  For the reasons discussed below, the relevant factors as discussed in CMS’s redetermination decision do not support that Petitioner engaged in a pattern or practice of filing abusive claims.  See CMS Ex. 15.

With respect to the first factor – the percentage of submitted claims that were denied – CMS acknowledges that Petitioner asserts it submitted 617 claims between 2016 and 2019 and only 5% of the claims were denied.  CMS Ex. 15 at 5.  However, CMS asserts that “the percentage of Dhulmar’s submitted claims that were denied from the various reviews are 100%, 80%, and 67.86%, respectively,” and “CMS considers the aforementioned percentages to be very high error rates.”  While CMS is correct about the error rates of each of the three reviews that formed the basis of its revocation decision, these error rate percentages are not synonymous with the percentage of submitted claims that were denied.  As discussed above, each of the three reviews were non-statistical and non-random.  Because the samples used in all the reviews were specifically selected to target certain types of claims – CY 2015 HH PPS Final Rule compliance in the first two reviews and those at high risk for not meeting the homebound requirement in the third review –  and were not representative of the population of submitted claims, it is improper to equate the denial rates of the sample reviews to the population of submitted claims for the same time frame.  See 42 C.F.R. § 424.535(a)(8)(ii)(A).  Therefore, as CMS argues that the period at issue is from 2016-2019, the correct percentage of denied claims pursuant to the first factor would be 27 denials over 617 claims, or 4.4%.¹⁰

With respect to the first factor, CMS explained in the preamble why it chose not to establish numerical thresholds:

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[W]e have concluded that numerical thresholds should not be established because we need the flexibility to address a myriad of scenarios.  For example, merely because a provider had over 30 percent of its claims denied does not automatically mean that a § 424.535(a)(8)(ii) revocation should be imposed; likewise, an under-30 percent denial rate does not mean that a § 424.535(a)(8)(ii) revocation is never warranted.  Each case must be judged on its own specific facts, and establishing numerical thresholds would, we believe, hinder our ability to do so.  

79 Fed. Reg. at 72,514.  While 4.4% is considerably lower than 30%, we still must consider the specific facts of this case. 

In the reconsideration decision, CMS stated the following pertaining to the first factor:

Despite being given targeted and specific education, the percentages of Dhulmar’s claim denials remained high as it continued to submit noncompliant claims and refused to correct its previously identified billing errors.  Still, regardless of the education CMS provides, suppliers have a duty to submit claims for payment that meet Medicare requirements.

CMS Ex. 15 at 5-6.  Again, while the sample claim denial percentages in the reviews were high, the denied percentage of submitted claims was low over the three years.  Even limiting the submitted claims to the specific time periods of each of the three reviews yields considerably lower denied percentages of submitted claims than the non-statistical, non-random sample review error rates:

• First review (2016):  5 denied claims out of 34 submitted claims = 14.7%
• Second review (2017):  4 denied claims out of 26 submitted claims = 15.4%
• Third review (2019):  19 denied claims out of 232 submitted claims = 8.2%

As illustrated, the denied percentage of submitted claims for the third review was about half of the denial rate of the first two reviews which evidences significant improvement.  To put these error rates in additional context, the initial denial percentage of the third review was 26 out of 28 claims (93%) and through the claims appeal process the denial rate was reduced to 19 out of 28 claims (67.9%), which evidences that the contractor conducting the third review had a claims denial error rate of 7 out of 26 (27%) itself.  Moreover, when the reasons for the claims denials are taken into consideration, only one of the nineteen denied claims in the third review was denied, in part, for one of the

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specific denial reasons provided in the first two reviews:  homebound status unsupported.  Compare CMS Exs. 9, 11, with OMHA Appeal No. 3-9748626701.  Therefore, directly contrary to CMS’s assessment, Petitioner demonstrated that it overwhelmingly corrected for the previously identified billing errors from the first two reviews after receiving education. 

Lastly, CMS highlighted in the reconsideration decision that suppliers have a duty to meet Medicare requirements regardless of the education CMS provides.  CMS Ex. 15 at 5-6.  This is correct, but CMS specifically included the following in the preamble in relation to when submissions of denied claims rise to the level of an abusive pattern or practice to fall within the scope of CMS’s discretionary authority to revoke:  “[u]nder [CMS’s] current rules and practices, by the time CMS would revoke a provider or supplier under § 424.535(a)(8)(ii), the provider would have received information and education about the reasons for the claim denials on multiple occasions.”  Id. at 72,514.  On this point, a commenter stated that a “provider often will not be aware of a pattern of alleged improper billing under § 424.535(a)(8)(ii) until after a contractor performs an audit,” and that under such circumstances “the provider should be given an opportunity to correct the allegedly improper billing via a plan of correction.”  Id. at 72,520.  In response, CMS stated:  “we acknowledge that in sporadic instances providers and suppliers may submit claims in error due to a misunderstanding of Medicare policies.  It is not our intention to revoke billing privileges under § 424.535(a)(8)(ii) for such isolated misinterpretations.”  Id. at 72,520.  The preamble further contemplates that in order for a provider’s billing to rise to a pattern or practice of non-compliant, abusive billing subject to potential revocation, the provider would have received numerous claims denials from CMS and the opportunity to demonstrate reformed billing as a result of the feedback:  “[w]e believe that frequent claim denials should alert the provider that there may be an issue with its claim submissions and that remedial action may be required.”  Id. at 72,518; see also id. at 72,515 (“We agree that a claim denial can serve as an adequate remedy in many cases.  However a repeated pattern of submitting non-compliant claims indicates that the associated claim denials are not altering the provider’s behavior.  More serious remedial action—specifically, the revocation of billing privileges under § 424.535(a)(8)(ii)—may thus be necessary in some cases.”).

Here, Petitioner demonstrated reformed billing following the claims denials and associated education from the first two reviews.  The submitted claims denial rate during the third review time period was half that of the prior two review periods, and the third review denied claims were almost entirely due to a single reason that was not specifically remarked upon in the first two reviews.  The uniformity of the denial reason in the third review supports that Petitioner misunderstood Medicare’s policy on the threshold for when a service is “skilled” in instances where a beneficiary has a complex medical condition(s).  As such, the third review appears more akin to the situation commented on in the preamble where a “provider often will not be aware of a pattern of alleged improper billing under § 424.535(a)(8)(ii) until after a contractor performs an audit,” and

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to which CMS responded:  “we acknowledge that in sporadic instances providers and suppliers may submit claims in error due to a misunderstanding of Medicare policies.  It is not our intention to revoke billing privileges under § 424.535(a)(8)(ii) for such isolated misinterpretations.”  Id. at 72,520; see also id. at 72,514 (“Furthermore, as we have already noted, we recognize that Medicare has many requirements and that in isolated instances claims are submitted erroneously due to a provider’s misinterpretation of these policies.  Such occasional misunderstandings will generally not rise to the level of a ‘pattern or practice’ of improper billing, and thus will not warrant revocation under § 424.535(a)(8)(ii).”).  Neither the initial determination nor the reconsideration decision consider whether Petitioner’s billing was further reformed after Petitioner received the results of the third review.  Indeed, CMS revoked Petitioner on January 26, 2021 which was a few months after the MAC’s partially favorable October 27, 2020 redetermination decision and prior to the QIC’s partially favorable reconsideration decision on February 17, 2021.  In sum, given the specific facts and circumstances of this case, Petitioner’s submitted claims denial rate does not rise to the level of abusive billing under § 424.535(a)(8)(ii) as articulated in the preamble to the final rule.

With respect to the second factor – the reason for the denial of the claims – CMS highlighted in the reconsideration decision the denial reasons described above for the first two reviews, but erroneously considered the initial denial reasons for the third review rather than the denial reasons stated after the claims from the third review had been appealed.  CMS Ex. 15 at 6 (“The claims denied from the third review were for services not reasonable and necessary, homebound requirements, physician orders, and physician certification and recertification (see [CMS] Exhibit 14).”).  At the time of the reconsideration decision, CMS was already aware that following the partially favorable QIC reconsideration, only 19 out of the original 26 claims remained denied.  CMS Ex. 15 at 5.  However, CMS recites the original claim denial reasons for the original 26 denied claims as memorialized in Exhibit 14.  CMS Ex. 15 at 6.  Based on this misstep, the hearing officer then erroneously continues to conclude:

While the reasons for the claims denials were not identical from review to review, each shared commonalities.  This establishes that Dhulmar has a habit of submitting the same types of claims that continued to be denied for similar reasons.  This demonstrates Dhulmar’s refusal to implement the necessary changes as indicated in the education provided and its refusal to submit Medicare compliant claims.

Id.  The 19 denied claims from the third review are now administratively final, and the OMHA ALJ upheld the denials for all 19 claims on the basis that the services provided were not skilled services and therefore not medically necessary.  OMHA Appeal No. 3-9748626701.  To be clear, it is not that the patients did not need the services, but rather that the services could have been provided by non-professional or non-technical

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personnel.  While the first two reviews each had a claim denial for lack of medical necessity broadly, the specific reason differed from that in the third review:  the medical records submitted did not contain documentation to justify continued skilled observation and assessment was reasonable and necessary, because the documentation submitted “indicated that the abnormal findings are part of a longstanding pattern of the patient’s condition and there is no attempt to change the treatment to resolve them.”  CMS Ex. 9 at 4-6; CMS Ex. 11 at 5-7.  Lastly, 1 of the 19 denied claims was also denied for failure to meet homebound status.  OMHA Appeal No. 3-9748626701 at 30-31.  This is the same reason found in the first two reviews, but it only comprises 1 of the 28 claims in the third review – a review which was specifically targeting claims likely to have errors with respect to homebound status.  Contrary to CMS’s conclusion, therefore, Petitioner demonstrated that it had successfully implemented the necessary changes based on the education from the first two reviews with the exception of one “sporadic” error.

As to the third factor, CMS’s reconsideration decision acknowledges that Petitioner has not been the subject of any final adverse actions.  CMS Ex. 15 at 6.

Regarding the fourth factor – the length of time over which the pattern has continued – CMS identified the length of time of the pattern as three years with a consistently high error rate:  “CMS considers a pattern of three years of engaging in submitting noncompliant claims that fail to meet the Medicare requirements, where the denial rate is consistently high, to be a significant period of time that justifies revocation.  This is a clear demonstration of systematic, noncompliant behavior.”  CMS Ex. 15 at 6.  As discussed above, if the length of time of three years is accepted, then the submitted claim error rate is actually rather low – 4.4%.  More accurately, the length of time over which the pattern continued would be for seven months with respect to the errors in the first two reviews, and over one year for the main error in the third review.

Regarding the fifth factor – how long the supplier has been enrolled in Medicare – CMS found it “particularly concerning that Dhulmar has been enrolled in the Medicare program since 2011, a period of 10 years.”  CMS Ex. 15 at 6.  Not only had Petitioner only been enrolled for approximately five to six years at the time of the first two reviews and approximately eight years at the time of the third review (instead of ten years), but the longer a provider or supplier is enrolled does not inherently equate to lower tolerance for claim denials.  Medicare regulations and policies are in a relatively frequent state of flux, which can be seen in this case as the first two reviews were prompted by a change in Medicare regulations from the CY 2015 HH PPS Final Rule.  Additionally, as Petitioner argues, the proportional length of time of the submitted denied claims as compared to the enrollment time is also relevant to the analysis of this factor.  P. Br. at 8-9.  Here, the record contains no evidence that Petitioner had any submitted claims denied for approximately five years of its enrollment period.  CMS also states under this factor, that Petitioner was educated three times and made aware of how to correct its billing errors and nevertheless continued to engage in noncompliant billing practices for a period of at

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least three of the years it was enrolled.  CMS Ex. 15 at 6-7.  Here, Petitioner demonstrated it was able to correct the mistakes leading to the denials in the first two reviews, and as discussed above, the record does not contain any evidence as to whether Petitioner corrected the error after receiving the results from the third review or continued to submit claims with the same errors.  It is therefore inaccurate to characterize Petitioner as engaging in noncompliant billing practices after being educated three times.

With respect to the sixth and final factor – any additional relevant information – CMS responded in its reconsideration decision to Petitioner’s argument that it only received education after the second review.  CMS Ex. 15 at 7.  CMS is correct that Petitioner received education in the form of an explanation as to the denial reason(s) for each denied claim.

Taken together in light of the above analysis of the six factors, I find, by a preponderance of the evidence presented, that Petitioner did not engage in a pattern or practice of abusive billing as articulated in 42 C.F.R. § 424.535(a)(8)(ii).  CMS has misconstrued the submitted claims denial rate as the error rate of non-statistical, targeted reviews – two of which with a very small sample size.  CMS also erroneously characterized the denial reasons in the third review and failed to recognize Petitioner’s demonstration of changed billing practices as a result of the feedback from the first two reviews.  The record before me does not demonstrate that Petitioner could not or would not come into compliance with Medicare payment requirements, despite repeated claims denials.  See 79 Fed. Reg. at 72,515 (“[T]his final rule is focused on providers who cannot or will not come into compliance with our payment requirements after repeated claim denials.”).

5. CMS did not have a legitimate basis to impose a 10-year reenrollment bar and place Petitioner on the preclusion list.

CMS imposed a 10-year reenrollment bar and added Petitioner to its preclusion list, because CMS revoked Petitioner's Medicare billing privileges.  Because CMS did not prove that it had a legal basis to revoke Petitioner's Medicare billing privileges, CMS did not have a legitimate basis to impose a reenrollment bar and include Petitioner on the preclusion list.

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VI.    Conclusion

Based on the record before me, I do not find that Petitioner engaged in a pattern or practice of abusive billing within the meaning of 42 C.F.R. § 424.535(a)(8)(ii).  For the reasons explained in this decision, I conclude that CMS did not have a legal basis to revoke Petitioner’s Medicare enrollment and billing privileges.  I therefore reverse CMS’s revocation of Petitioner’s Medicare enrollment and billing privileges, inclusion of Petitioner on the preclusion list, and imposition of a 10-year reenrollment bar.

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Endnotes

¹  The UPIC conducted another post-payment audit from a statistical sampling for services rendered between March 26, 2016 through November 14, 2019, which resulted in an extrapolated overpayment in the amount of $646,498.00.  CMS Ex. 13 at 4.  As acknowledged in CMS’s brief, this audit was not referenced in CMS’s determination to revoke (CMS Ex. 2) or in CMS’s reconsideration decision (CMS Ex. 15).  CMS Br. at 6 n.3.  As such, it is also not a factor in the disposition of this case.

²  All citations to 42 C.F.R. § 424.535(a)(8)(ii) are to the provisions effective in 2021.  Subsequent to CMS’s initial determination to revoke on February 24, 2021 and CMS’s May 6, 2021 reconsideration decision upholding the revocation, CMS issued a final rule amending 42 C.F.R. § 424.535(a)(8)(ii) effective January 1, 2022.  See 86 Fed. Reg. 64996, 65334-6 (Nov. 19, 2021).  The final rule revised, in part, the factors CMS considers when determining whether a provider has engaged in a pattern or practice of abusive billing.  See id.

³  My conclusions of law appear as headings in bold and are followed by pertinent findings of fact and analysis.

⁴  The record does not contain evidence of the number of claims that Petitioner submitted during this time period, but CMS has not disputed the accuracy of this number.

⁵   The record does not contain evidence of the number of claims that Petitioner submitted during this time period, but CMS has not disputed the accuracy of this number.

⁶  It is uncertain from the record the initial UPIC denial reason for four of the twenty-six denied claims, because four of the initial denials were overturned at the redetermination stage.  As such, they were not appealed to the Qualified Independent Contractor (QIC) for reconsideration and are not addressed in the parties’ submitted exhibits.

⁷  The Act provides a Medicare adjudication process that includes an initial determination as to whether a claim should be paid and then four levels of administrative appeal if the claim is not paid.  42 U.S.C. § 1395ff(a)-(d).  If a party is dissatisfied with an initial determination, that party has the right to file a request for redetermination.  42 C.F.R. §§ 405.940-405.946.  A CMS contractor will render a redetermination, based on the evidence of record, that affirms or reverses the initial determination.  42 C.F.R. § 405.954.  Significantly, an initial determination concerning a claim for items or services is binding on all parties to the initial determination unless a redetermination is issued or CMS revises the initial determination.  42 C.F.R. § 405.928.  If a party is not satisfied with the redetermination, the party may request reconsideration by a QIC, which will issue a reconsideration decision that includes a summary of the facts, an explanation of pertinent law, and a rationale for the determination.  42 C.F.R. §§ 405.960, 405.976.  A party may further appeal to an ALJ at OMHA and later to the Medicare Appeals Council.  42 C.F.R. §§ 405.1000, 405.1102.  However, unless a party continues to appeal each determination, the last determination or decision issued is binding on the parties.  42 C.F.R. §§ 405.958, 405.978, 405.1048.

⁸  On January 26, 2021, a few weeks prior to the QIC’s partially favorable reconsideration decision, Palmetto notified Petitioner that its billing privileges were revoked effective February 25, 2021.  CMS Ex. 2.  At the time, the 19 remaining claims were under review before an ALJ at OMHA.  CMS Ex. 6.  As these claim denials are now final, the parties’ arguments with respect to the impact of lack of finality on CMS’s determination to revoke are now moot.

⁹  The record does not contain evidence of the number of claims that Petitioner submitted during this time period, but CMS has not disputed the accuracy of this number and the CMS hearing officer accepted it as true during reconsideration.

¹⁰  The record does not contain direct evidence of the number of claims Petitioner submitted between 2016-2019, but CMS does not contest Petitioner’s representation.