T&F Drugs Inc., DAB CR6363 (2023)

DECISION

National Supplier Clearinghouse (NSC) and Novitas Solutions, Inc. (Novitas), administrative contractors acting on behalf of Respondent, the Centers for Medicare & Medicaid Services (CMS), revoked the Medicare billing privileges of Petitioner, T&F Drugs Inc., and its subsidiaries¹ pursuant to 42 C.F.R. § 424.535(a)(3).  CMS reconsidered and affirmed these revocations because FM,² Petitioner’s director/officer, managing employee, and part owner, had been convicted of a felony offense in the preceding 10 years.  As explained herein, I affirm CMS’s revocation actions.

Page 2

I.    Background and Procedural History

Petitioner operated five entities enrolled as suppliers to the Medicare program:  Deblieck’s Pharmacy, Burgio’s Pharmacy, Ho‑Ho‑Kus Pharmacy, Sicomac Pharmacy, and Sicomac Pharmacy LTC.  P. Hearing Req. at 2 n.1.  On June 3, 2010, FM pleaded guilty to one felony count of health care fraud, in violation of 18 U.S.C. § 1347.  CMS Ex. 17 at 1.  FM admitted he submitted at least 400 fraudulent claims to federal employee health insurance plans between 2005 and 2008.  CMS Ex. 18 at 2-3.  FM received more than $28,000 for these fraudulent claims.  Id. at 3.  On November 23, 2010, the U.S. District Court for the District of New Jersey (District Court) entered judgment against FM and sentenced him to two years’ probation.  CMS Ex. 17 at 1-2.

On August 31, 2011, the Inspector General for the U.S. Department of Health & Human Services (IG) excluded FM from participation in all federal health care programs for five years.  CMS Ex. 19.  The IG premised the exclusion action on Section 1128(a)(3) of the Social Security Act (Act), asserting FM’s felony conviction related to fraud or other financial misconduct in connection with the delivery of an item or service in health care.  Id. at 1.  FN requested reinstatement by the IG to participate in federal health care programs, which the IG granted effective October 12, 2016.  CMS Ex. 20.

By means of revalidation or change of information applications, Petitioner and its subsidiaries notified NSC and Novitas that as of October 31, 2018, FM obtained an ownership interest greater than 5% of Petitioner’s five subsidiaries and became a director/officer, authorized official, and managing employee.  CMS Ex. 21 at 2, 6-7 (Jan. 30, 2019 revalidation application for Deblieck’s Pharmacy); 14, 17-19 (Aug. 26, 2019 revalidation application for Ho‑Ho‑Kus Pharmacy); 27-28, 32-33 (Feb. 20, 2020 revalidation application for Burgio’s Pharmacy); 39, 42 (Dec. 30, 2019 enrollment application summary for Sicomac Pharmacy); 45, 48-49 (Jan. 10, 2020 revalidation application for Sicomac Pharmacy LTD).  Each of these documents confirm Petitioner identified FM’s exclusion by the IG as of September 20, 2011, and each reflects Petitioner failed to disclose FM’s felony conviction for health care fraud in the Final Adverse Legal Actions category.  Id. at 6-7, 18, 32, 42, 50.

On April 7, 2020, Novitas notified Petitioner it had revoked its billing privileges as a mass immunization supplier as of October 31, 2018, the date Petitioner identified FM as an owner and director in its enrollment record.  CMS Ex. 8.  Novitas also advised it would place Petitioner and its subsidiary entities on CMS’s preclusion list.³  Id. at 2.  On April 9, 2020, NSC issued individual revocation notices to Petitioner and its subsidiaries, retroactively effective to October 31, 2018.  CMS Exs. 7, 9-12.  NSC cited FM’s felony

Page 3

conviction for health care fraud as the basis for its revocation action.  CMS Ex. 7 at 2; CMS Ex. 9 at 2; CMS Ex. 10 at 2; CMS Ex. 11 at 2; CMS Ex. 12 at 2.

Petitioner timely sought reconsideration of NSC’s revocation of billing privileges for it and its subsidiaries and for Novitas’ revocation of their mass immunization supplier privileges.  CMS Exs. 2-6.  Petitioner argued it had fully disclosed FM’s exclusion in each application and that in any event FM had since been reinstated and was not involved in the daily operation of any of the pharmacies.  CMS Ex. 3 at 1-3.

On September 14, 2020, CMS issued a reconsidered determination upholding the revocation actions against Petitioner and its subsidiaries as well as their placement on the preclusion list, finding Petitioner and its subsidiaries identified FM as an owner, director and managing employee, that he had been convicted of a felony offense within the prior ten years, and that his conviction for health care fraud was detrimental to the best interests of the Medicare program and its beneficiaries.  CMS Ex. 1 at 7.

Petitioner timely requested a hearing before an Administrative Law Judge in the Civil Remedies Division, resulting in my designation to hear and decide this case.  On November 13, 2020, I issued an Acknowledgment and Pre-hearing Order (Pre-hearing Order) setting forth a schedule for the parties to submit arguments and proposed evidence.  CMS submitted a pre-hearing brief and motion for summary judgment (CMS Br.) and 25 proposed exhibits (CMS Exs. 1-25).  Petitioner filed its brief (P. Br.) in opposition on January 22, 2021 with six proposed exhibits (P. Exs. 1-6). 

On February 3, 2021, Petitioner sought leave to file an “amended declaration” by FM as P. Ex. 7.  CMS opposed this motion, asserting Petitioner did not show good cause for failing to include FM’s testimony when it identified him as a witness in its pre‑hearing exchange.  I note Petitioner mischaracterized its request for relief as an opportunity to file an “amended declaration.”  P. Mtn. at 1.  But Petitioner never submitted a declaration for FM in the first place.  Petitioner appears to argue the summary it provided for FM’s testimony in its witness list constituted such a declaration that merely failed to meet the technical requirements for the submission of direct testimony set forth in my Pre-hearing Order.  Id.  More accurately, Petitioner failed to comply entirely and then sought the opportunity to supplement the record out of time.⁴

Nevertheless, while CMS’s objections are well-founded and Petitioner failed to accurately articulate the basis for its motion, I see no prejudice in permitting Petitioner to supplement the record, particularly where CMS counsel sought the same relief on the

Page 4

same day it filed its objections to Petitioner’s untimely filing.  I grant Petitioner’s motion.  I overrule CMS’s objections to Petitioner’s remaining exhibits.

CMS’s unopposed motion to re-file its pre-hearing exchange to correct inadvertent technical errors is granted.  Accordingly, I admit CMS Exhibits 1 through 25 and Petitioner’s Exhibits 1 through 7 into the record.

II.    Decision on the Record

My Pre-hearing Order in this case required the parties to submit written direct testimony for each proposed witness and advised an in‑person hearing would only be necessary if a party requested an opportunity to cross‑examine the opposing party’s witness.  Pre‑hearing Order ¶¶ 8, 10; Civ. Remedies Div. P. §§ 16(b), 19(b); Pacific Regency Arvin, DAB No. 1823 at 8 (2002).

CMS does not seek to cross-examine the witnesses identified by Petitioner.  Petitioner, however, seeks to examine a “Representative from CMS” concerning processing errors made in the approval of its revalidation applications.  P. Exhibit List and Witness List at 2-3.  Petitioner’s request is denied.  Cross-examination is limited to witnesses identified by the opposing party for whom direct testimony has been provided.  The only means by which parties may secure adverse witness testimony in these proceedings is to seek the issuance of a subpoena.  See 42 C.F.R. § 498.58.  Petitioner made no such request.

Because neither party sought to cross-examine a witness identified by the opposing party for whom direct testimony has been provided, I will not hold an in‑person hearing in this matter and issue this decision based on the written record.⁵  Civ. Remedies Div. P. § 19(b).

III.    Issue

Whether CMS had a legitimate basis to revoke Petitioner’s Medicare enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3).

IV.    Jurisdiction

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

Page 5

V.   Discussion

A. Applicable Law.

The Act authorizes the Secretary of Health and Human Services (Secretary) to promulgate regulations that establish a process for the enrollment in Medicare of providers and suppliers, including the right to a hearing and judicial review of certain enrollment determinations, such as revocation of enrollment and billing privileges.  Act § 1866(j) (42 U.S.C. § 1395cc(j)).  A “supplier” is “a physician or other practitioner, a facility, or other entity (other than a provider of services) that furnishes items or services” under the Medicare provisions of the Act.  42 U.S.C. § 1395x(d); see also 42 U.S.C. § 1395x(u).  Petitioner and its subsidiaries are suppliers.  42 C.F.R. § 498.2 (definition of Supplier).

To participate in the Medicare program as a supplier, an individual or entity must meet certain criteria to enroll and receive billing privileges.  42 C.F.R §§ 424.505, 424.510.  CMS may revoke a supplier’s Medicare enrollment and billing privileges for any reason stated in 42 C.F.R § 424.535(a), which includes felony convictions:

(3)  Felonies.

(i)  The provider, supplier, or any owner⁶ 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 –

* * * *

(D) Any felonies that would result in mandatory exclusion under section 1128(a) of the Act. 

* * * *

42 C.F.R. § 424.535(a)(3).

Page 6

When CMS revokes a supplier’s Medicare enrollment and billing privileges, it establishes a re-enrollment bar that may last a “minimum of one years, but not greater than ten years [], depending on the severity of the basis for revocation.”  42 C.F.R. § 424.535(c).

B. Findings of Fact and Conclusions of Law.

42 C.F.R. § 424.535(a)(3)(i) permits CMS to revoke a supplier’s Medicare billing privileges if its owner or managing employee had been convicted in the preceding ten years of a felony offense determined by CMS to be detrimental to the best interests of the Medicare program.  The record before me establishes CMS had a basis to revoke billing privileges for Petitioner and its subsidiaries pursuant to this regulation.

1. FM is an owner and managing employee of Petitioner and each of its subsidiaries. 

Petitioner and each of its subsidiaries identified FM as an owner with a more than 5% ownership share, a director/officer, an authorized official, and managing employee no later than October 31, 2018.  CMS Ex. 21 at 6-7, 18, 32, 42, 49.

2. FM was convicted of a felony offense within the ten years preceding the revocation actions against Petitioner and its subsidiaries.

FM pleaded guilty to one felony count of health care fraud on June 3, 2010, and the District Court entered judgment against him for that crime on November 23, 2010.  CMS Ex. 17 at 1-2.  Novitas and NSC issued its notices of revocation to Petitioner and its subsidiaries in April 2020.  Whether calculated from the date of FM’s guilty plea or the entry of judgment against him, FM’s felony offense of conviction occurred within the ten years preceding CMS’s revocation actions.

3. CMS had a legitimate basis to conclude FM’s offense of conviction was detrimental to the best interests of the Medicare program and its beneficiaries. 

CMS found Petitioner’s revocation appropriate because it determined his felony offense of conviction to be detrimental to the best interests of the Medicare program and its beneficiaries.  CMS Ex. 1 at 7.  Based on the record before me, I concur.  The level of deference I show to CMS’s determination depends on the offense in question.  Felony offenses specifically enumerated⁷ in the regulations enjoy the greatest level of deference

Page 7

because the Secretary has determined these offenses to be per se detrimental.  Letantia Bussell, M.D., DAB No. 2196 at 13 n.13 (2008) (“[o]nce the Secretary . . . has exercised that authority by regulation as to a class of felonies, an ALJ cannot revisit that determination . . . .”).

FM was convicted of a felony conviction that resulted in his exclusion by the IG from participation in all federal health care programs for five years.  CMS Ex. 19.  42 C.F.R. § 424.535(a)(3)(D) expressly identifies felony convictions that result in mandatory exclusion by the IG to be detrimental.  Even if the regulation did not require me to find FM’s conviction per se detrimental, CMS reinforced the propriety of its revocation action by articulating the circumstances surrounding FM’s conviction.  Hearing Officer Minisha Hicks observed FM submitted at least 400 fraudulent claims to federal employee health insurance plans over a three-year period and thereby improperly received over $28,000 in reimbursements.  CMS Ex. 1 at 7.  She found FM’s conduct raised concerns as to his trustworthiness to access Medicare Trust Funds and that this risk was a detriment to the Medicare program and its beneficiaries.  Id.  I cannot fault this analysis.

Petitioner first contests CMS’s revocation actions by asserting it in fact adequately disclosed FM’s adverse legal history, evidenced by contractor approval of revalidation applications it submitted in 2019 and 2020.  P. Br. at 3.  This claim is without merit.  As CMS notes, in several applications Petitioner disclosed the fact of FM’s exclusion and reinstatement but not his felony conviction.  CMS Br. at 7.  Petitioner did not reveal FM’s felony conviction until it submitted “reactivation applications” in June 2020, after NSC and Novitas had already revoked its subsidiaries’ billing privileges.  CMS Ex. 1 at 9.  Hearing Officer Hicks described this belated disclosure as “an initial omission designed to ensure enrollment approval.”  Id. at 8-9.  I cannot disagree with this characterization.  Petitioner cannot contest its revocation by relying on initial enrollment approvals it obtained by failing to provide complete and accurate information.

Petitioner otherwise contends the record does not support CMS’s determination that FM’s offense of conviction was detrimental because there is no evidence of deficient claims submitted by any of its pharmacies, FM’s underlying conduct occurred in the past, he won reinstatement from both the IG and the New Jersey Medicaid program, maintained an active pharmacist’s license in New Jersey, and was not involved in the daily operation of Petitioner’s pharmacies.  P. Br. at 4-5.  These claims have no bearing on the outcome here.  CMS established FM was an owner or managing employee convicted of a felony offense within the preceding ten years that resulted in mandatory exclusion, meaning his offense of conviction is deemed by regulation to be per se detrimental.  Bussell, DAB No. 2196 at 13 n.13.

Finally, Petitioner contends CMS improperly exercised its discretionary revocation authority.  P. Br. at 6-8.  I have no authority to consider Petitioner’s argument.  Where the regulations have granted CMS discretion to determine whether a provider or supplier’s

Page 8

underlying conduct is detrimental to the Medicare program, I may not substitute my own judgment as to whether CMS properly exercised that discretion.  Brian K. Ellefsen, D.O., DAB No. 2626 at 7 (2015); see also Pa. Physicians, P.C., DAB No. 2980 at 13 (2019).  This is particularly true for felony offenses deemed per se detrimental by the Secretary’s regulations.

In any event, CMS clearly articulated why it exercised its discretion to revoke Petitioner and its subsidiaries, despite the mitigating circumstances Petitioner highlighted in its request for reconsideration.  CMS Ex. 1 at 7.  Hearing Officer Hicks did not need to do more than articulate Petitioner’s revocation was appropriate because FM’s felony conviction resulted in his exclusion.  She nevertheless explained how the nature of his criminal offense undermined the trustworthiness any supplier must demonstrate to be allowed access to Medicare program funds.  Id. at 7-8.  Petitioner’s argument is both beyond the scope of my authority and plainly inconsistent with the record before me.

In sum, Petitioner and its subsidiaries identified FM as an owner and managing employee.  Within the preceding ten years of the revocation actions taken by NSC and Novitas, FM was convicted of a felony offense that resulted in his exclusion by the IG.  Petitioner identified FM’s exclusion in its revalidation applications but failed to disclose his felony conviction.  By regulation, Petitioner’s felony offense is per se detrimental to the Medicare program and its beneficiaries.  Accordingly, I find CMS had a valid basis to revoke the enrollment of Petitioner and its subsidiaries as suppliers to the Medicare program pursuant to 42 C.F.R. § 424.535(a)(3) as of October 31, 2018, the date Petitioner identified FM as an owner and managing employee.

VI. Conclusion

For the foregoing reasons, I affirm CMS’s revocation of the Medicare enrollment and billing privileges of Petitioner and its subsidiaries pursuant to 42 C.F.R. § 424.535(a)(3).

---

Endnotes

¹ Petitioner operated five pharmacies under its Employee Identification Number, each individually enjoyed billing privileges as suppliers to the Medicare program.  CMS Br. at 2; P. Hearing Req. at 2 n.1.  These entities were also collectively enrolled under a separate PTAN number as a mass immunization supplier.  CMS Ex. 8 at 1.  NSC revoked privileges for all five subsidiaries, CMS Exs. 7, 9-12, while Novitas revoked their collective status as a supplier of mass immunizations.  CMS Ex. 8 at 1.  Petitioner sought reconsideration of these revocation actions.  CMS Ex. 1 at 2.  CMS issued one reconsidered determination encompassing all of Petitioner’s revocation challenges.  Id. at 5.

² To minimize the disclosure of personally identifiable information in a publicly available decision, I abbreviate the full names of individuals who are not parties to this proceeding.

³ Petitioner challenged this placement in its requests for reconsideration to CMS.  However, it did not do so in its hearing request before me, thus waiving its appeal of that action.  My decision pertains solely to CMS’s revocation actions.

⁴ Petitioner’s counsel should take greater caution in the future to avoid mischaracterizing the basis for requests for relief.  The duty of candor all attorneys owe to any court does not diminish where such candor requires admission of a mistake.

⁵ CMS’s motion for summary judgment is denied as moot.

⁶ 42 C.F.R. § 424.502 defines an “owner” as “any individual or entity that has any partnership interest in, or that has five percent or more direct or indirect ownership of the provider or supplier.”

⁷ 42 C.F.R. § 424.535(a)(3)(ii) sets forth four categories of felony offenses that can serve as a basis for revocation:  felony crimes against persons; any felony that placed the Medicare program or its beneficiaries at immediate risk; financial crimes; and, applicable here, any felony that would result in mandatory exclusion under section 1128(a) of the Social Security Act.