Xiaoyan Dai, DMD, PC., DAB CR6399 (2023)

DECISION

The Centers for Medicare & Medicaid Services (CMS), through its Medicare administrative contractor, Palmetto GBA, acting as the National Supplier Clearinghouse Medicare Administrative Contractor (NSC), revoked the Medicare enrollment and billing privileges of Xiaoyan Dai, DMD, PC pursuant to 42 C.F.R. § 424.535(a)(1) and 42 C.F.R. § 424.57(c)(26).  Specifically, NSC found that Petitioner failed to maintain the surety bond requirements set forth in 42 C.F.R. § 424.57(c)(26).

As discussed more fully below, I find that there is a legitimate basis to revoke Petitioner's Medicare enrollment and billing privileges and uphold CMS's determination.

I.  Background and Procedural History

Petitioner is a durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) supplier located in Aston, Pennsylvania.  CMS Exhibit (Ex.) 6 at 1.

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In a letter dated April 14, 2022, NSC notified Petitioner that Petitioner's Medicare supplier number was revoked effective April 11, 2021, the date that Petitioner's surety bond on file with NSC cancelled.  Because Petitioner failed to maintain a valid surety bond as required by 42 C.F.R. § 424.57(c)(26), the revocation was effective the date the surety bond lapsed.  CMS Ex. 2 at 1.

In a May 12, 2022 email to NSC Appeals, Petitioner acknowledged receiving the revocation letter and stated that she "can get the surety bond" if the supplier number can be re-enrolled.  CMS Ex. 3 at 1.  By letter dated August 15, 2022, Petitioner filed a reconsideration request and attached a copy of a surety bond with an effective date of July 1, 2022.  CMS Ex. 6.

On September 22, 2022, NSC issued a reconsideration decision upholding the revocation of Petitioner's Medicare billing privileges due to its failure to maintain a surety bond.  CMS Ex. 7.  On October 3, 2022, Petitioner timely appealed the reconsideration decision.  While Petitioner did not specifically request a hearing with an Administrative Law Judge (ALJ), Petitioner clarified in a December 21, 2022, submission that Petitioner desired to proceed to a hearing.  Departmental Appeals Board (DAB) E-Filing System (E-File) Docket Entries No. 1, 6.

In accordance with the Prehearing Order of the ALJ¹ originally assigned to this matter, CMS filed a pre-hearing brief including a motion for summary judgment (CMS Br.) and seven proposed exhibits (CMS Exs. 1-7).  When Petitioner did not file a pre-hearing exchange as directed in the ALJ's Prehearing Order, the presiding ALJ issued an Order to Show Cause giving Petitioner a deadline to show why the case should not be dismissed for Petitioner's failure to meet the established deadlines.  DAB E-File Docket Entry No. 5.  After Petitioner timely filed a combined response and brief (P. Br.), the presiding ALJ issued an order discharging the Order to Show Cause and closing the record as of December 27, 2022.  DAB E-File Docket Entries No. 6, 7.  Petitioner did not submit any proposed exhibits.  Following the record's closing, Petitioner submitted a verification certificate from the surety bond company confirming payment for an effective surety bond for the period from July 1, 2023 to July 1, 2024, and Petitioner also submitted a letter.  DAB E-File Docket Entries No. 10, 12.

Petitioner did not object to CMS's exhibits.  In the absence of objection, I admit into the record CMS Exs. 1-7.  Pre-Hearing Order § 7.  The presiding ALJ's Pre-Hearing Order provided that an in-person hearing would be necessary only if a party files admissible, written direct testimony and the opposing party asks to cross-examine the declarant.  Pre-Hearing Order § 10.  Inasmuch as neither party proposed to call witnesses or submitted

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written direct testimony, there is no basis to conduct an in-person hearing.  Without considering whether the standard for summary judgment is met, I decide the case on the written record and deny CMS's motion for summary judgment as moot.

II.  Issue

Whether CMS had a legitimate basis to revoke Petitioner's enrollment and billing privileges pursuant to 42 C.F.R. § 424.535(a)(1) based on its failure to comply with 42 C.F.R § 424.57(c)(26).

III.  Jurisdiction

I have jurisdiction to hear and decide this case.  42 C.F.R. §§ 498.3(b)(17), 498.5(1)(2); see also Social Security Act (Act) § 1866(j)(8) (codified at 42 U.S.C. § 1395cc(j)(8)).

IV.  Discussion

1. Pertinent Regulations

To receive payment for services rendered to Medicare beneficiaries, a "supplier" of Medicare services must be enrolled in the Medicare Program and have "billing privileges."  42 C.F.R. §§ 400.202 (defining "Supplier"), 424.505, 424.502 (defining enrollment); see also Act § 1834(j)(1)(A).  Under the Act, the Department of Health and Human Services administers the Medicare program through CMS and administrative contractors.  Act §§ 1816, 1842, 1874A.

CMS may revoke an enrolled supplier's Medicare enrollment and billing privileges for any reason listed in 42 C.F.R. § 424.535(a).  Among other actions CMS may take, CMS may revoke a supplier's Medicare enrollment and billing privileges if the supplier "is determined to not be in compliance with the enrollment requirements described in . . . subpart P or in the enrollment application applicable for its . . . supplier type and has not submitted a plan of corrective action as outlined in [42 C.F.R.] part 488 of this chapter."  42 C.F.R. § 424.535(a)(1).

42 C.F.R. § 424.57(c) requires that a supplier must meet and certify in its application for billing privileges that it meets and will continue to meet specific standards.  One of those standards is the requirement that the supplier must meet surety bond requirements.  42 C.F.R. § 424.57(c)(26).  A DMEPOS supplier must submit a surety bond that is continuous.  42 C.F.R. § 424.57(d)(4)(i).  The bond must guarantee payment to CMS by the surety of unpaid claims, civil money penalties, or assessments that occur during the

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term of the bond.  42 C.F.R. § 424.57(d)(5).  CMS is required to revoke a DMEPOS supplier's Medicare privileges if the supplier fails to obtain, file timely, or maintain a surety bond.  42 C.F.R. § 424.57(d)(11).  When CMS revokes a supplier's Medicare billing privileges for failing to obtain, file timely, or maintain a surety bond, as specified in the subpart and CMS instructions, the revocation is effective the date the bond lapsed.  Id.

When evaluating a challenge to a revocation, an ALJ looks to determine whether CMS made a prima facie showing that the cited basis for the revocation exists.  If this occurs, the supplier must rebut the basis for the revocation by a preponderance of the evidence.  Hillman Rehab. Ctr., DAB No. 1611 (1997); see Adora Healthcare Servs., Inc., DAB No. 2714 at 5 (2016); Medisource Corp., DAB No. 2011 at 2-3 (2006).

2. Findings of Fact, Conclusions of Law, and Analysis²

(1) CMS had a legitimate basis to revoke Petitioner's Medicare enrollment and billing privileges under 42 C.F.R. § 424.535(a)(1) due to Petitioner's noncompliance with 42 C.F.R. § 424.57(c)(26)

a. Undisputed Facts

With a processing date of March 2, 2021, and a delivery date of March 12, 2021, Old Republic Surety Company served notice to NSC that the final cancellation date for Petitioner's surety bond would be April 11, 2021.  CMS Ex. 1.

On April 14, 2022, NSC issued a revocation letter to Petitioner, advising that pursuant to 42 C.F.R. §§ 405.800, 424.57(d)(11), 424.57(e), 424.535(a)(1), and 424.535(g), Petitioner's Medicare supplier number for DMEPOS, previously issued by NSC, was revoked retroactive to April 11, 2021, the date Petitioner's surety bond on file with NSC cancelled.  CMS Ex. 2 at 1.  Further, NSC stated that the supplier would be barred from re-enrolling in the Medicare program for a period of two (2) years effective 30 days after the postmark date of the letter.  CMS Ex. 2 at 4.  In an email dated May 12, 2022, Petitioner acknowledged receiving the notice of revocation and asserted that Petitioner could get the surety bond if Petitioner could be re-enrolled.  CMS Ex. 3.

On June 24, 2022, Old Republic Surety Company issued a new surety bond to Petitioner effective July 1, 2022, and Petitioner submitted a new application for a supplier number and billing privileges.  CMS Exs. 4, 5.  In a letter dated July 26, 2022, NSC explained

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that the application was being returned as Petitioner's billing privileges had been revoked and Petitioner was barred from participating in the Medicare program from the effective date of the revocation until the end of the re-enrollment bar.  NSC further explained that the re-enrollment bar must expire before any application can be submitted and processed by the NSC.  CMS Ex. 5.

On August 15, 2022, Petitioner told NSC:  "I am writing to appeal for the decision of our office being barred from re-enrolling for two years of the Medicare DME program because we did not meet the surety bond requirement.  After I got the letter about not meet[ing] the surety bond requirement, I did contact your office by email and by phone, stating the intention to get enrolled back in May and I have been working towards getting the surety bond reinstated and to enroll back to the program."  CMS Ex. 6 at 2.

Petitioner further asserted that because of the pandemic, the lack of workers in its office, and the medical leave of absence for the office coordinator for a few months, Petitioner was "not able to gather all the information and documents needed in a timely manner."  Id.  Petitioner attached a copy of the surety bond executed on June 24, 2022 and effective on July 1, 2022.  Id.

On September 22, 2022, NSC confirmed that the initial determination letter by the NSC was dated April 14, 2022, and Petitioner's reconsideration request was not received by NSC until August 26, 2022.  CMS Ex. 7 at 1.  Even though the reconsideration request was not timely received, NSC granted a good cause waiver and processed the reconsideration request.  CMS Ex. 7 at 1.  NSC stated that in reviewing the reconsideration request, it must determine whether there was an error in the initial determination based on the facts and circumstances at the time the initial determination was implemented.  CMS 7 at 2.  After reviewing the Petitioner's submitted documentation, the NSC was unable to find the supplier in compliance with 42 C.F.R. § 424.57(c)(26).  Although Petitioner submitted a copy of a new surety bond effective July 1, 2022, the prior bond was cancelled as of April 11, 2021.  Thus, NSC concluded that there is no error in the determination that resulted in a revocation.  CMS Ex. 7 at 2-3.

b. Analysis

Congress required in section 1834(a)(16)(B) of the Act that the Secretary must ensure that a DMEPOS supplier has a surety bond of no less than $50,000 continually in effect.  This requirement is further set forth in 42 C.F.R. § 424.57(d).  Under the regulation, a DMEPOS supplier must continuously have in effect a $50,000 surety bond for the benefit of CMS as the obligee.  42 C.F.R. § 424.57(c)(26), (d).  Should the DMEPOS supplier fail to obtain, maintain, and timely file the required surety bond, CMS revokes the

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supplier's Medicare enrollment and billing privileges, effectively terminating the supplier's Medicare enrollment.  42 C.F.R. § 424.57(d)(11)(i).  The regulation clearly provides that the revocation is effective the date a surety bond lapses.  Id.

There is no dispute that Petitioner obtained and submitted an active surety bond that was approved on June 24, 2022, and effective on July 1, 2022.  CMS Ex. 4.  Petitioner has not, however, presented any evidence that it had a DMEPOS surety bond in effect from April 2021 until July 1, 2022.  DMEPOS suppliers are not only required to have a compliant surety bond, but also must "maintain continuous surety coverage" requirements.  See Pepper Hill Nursing & Rehab. Ctr., LLC, DAB No. 2395 at 6 (2011).  The fact that Petitioner obtained a new replacement bond with an effective date of July 1, 2022 did nothing to cure the insufficient coverage because there was no liability coverage between April 11, 2021 and July 1, 2022.  Accordingly, I must conclude that there is a prima face showing of a violation of 42 C.F.R. § 424.57(c)(26), which is a basis for revocation under 42 C.F.R. §§ 424.57(d)(11) and 424.535(a)(1).

While Petitioner offers no excuse or defense for not maintaining the surety bond as required by 42 C.F.R. § 424.57(d), Petitioner offers several arguments why the revocation should be reversed.  P. Br. at 2.

In Petitioner's initial request for hearing (RFH), Petitioner asserts, "I never received your original letter you mentioned in your letter in April 2021.  I have some letters lost in the mail during the pandemic time.  I found out because we did have a few checks lost in the mail and that is why I think most likely your letter was lost in the mail."  RFH at 1.  Petitioner appears to refer to a statement in NSC's September 22, 2022 Reconsideration Request Decision.  The decision referenced a previous NSC letter advising that the revocation would be effective as of the date the surety bond cancelled.  DAB E-file Docket Entry No. 2.  Although Petitioner seems to be making the argument that she did not receive notice from NSC concerning the cancellation of the surety bond or the impending revocation of billing privileges in 2021, Petitioner does not deny that the surety bond was cancelled effective April 11, 2021.  Inasmuch as the surety bond coverage was executed between Petitioner and Old Republic Surety Company, it is reasonable that Petitioner would have had notice or discussions with Old Republic Surety Bond well in advance of the bond company's notice to NSC.  Even if Petitioner did not receive notice from Old Republic Surety Company regarding the cancellation of the surety bond, "[t]he absence of notice, however, does not relieve [Petitioner] of the requirement to obtain a compliant surety bond by [the required date].  The requirement for DMEPOS suppliers to obtain a surety bond was imposed by statute and regulation, and, like other participants in the Medicare program, Medicare suppliers are presumed to

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have constructive notice of the statutes and regulations that govern their participation as a matter of law."  Pepper Hill, DAB No. 2395 at 8.

Petitioner also argues that when she received the notice in April 2022, she began work on "updating" the new surety bond.  RFH at 1-2; P. Br. at 2.  She asserts, however, that because of the pandemic and lack of workers in her office and the medical leave of absence of her office coordinator who oversaw the Medicare DMEPOS program, she was not able to gather all the information and documents needed in a timely manner.  RFH at 1-2; P. Br. at 2.  Petitioner states that when she finally gathered all the information and documents needed to reapply, the deadline had already passed.  RFH at 2.  Petitioner further argues that she has patients who have been waiting to get approval to treat their sleep apnea and it is not easy for the patients to find another dentist with Medicare billing privileges to help them.  DAB E-File Docket Entry No. 8.

With these arguments, it appears that Petitioner is asking me to overturn the revocation of its Medicare enrollment on equitable grounds.  On review of a determination to revoke a supplier's Medicare enrollment and billing privileges, an ALJ and the Board "decide only whether CMS has established a lawful basis for the revocation."  Cornelius M. Donohue, DPM, DAB No. 2888 at 4 (2018) (citing Jason R. Bailey, M.D., P.A., DAB No. 2855 at 18 (2018)).  Although the regulation affords CMS discretion to revoke or not revoke in a particular case, the role of the ALJ and the Board "is limited to determining whether CMS's action is legally authorized and does not extend to second-guessing whether CMS properly exercised its discretion . . . ."  Acute Care Homenursing Servs., Inc., DAB No. 2837 at 9 (2017).  Thus, to the extent that Petitioner is seeking equitable relief, I am unable to grant equitable relief.  Arriva Med., LLC, DAB No. 2934 at 16 (2019) (citing Cent. Kan. Cancer Inst., DAB No. 2749 at 10 (2016)); see also US Ultrasound, DAB No. 2302 at 8 (2010) (wherein the Board determined that an ALJ may not grant equitable relief in an instance where statutory or regulatory requirements are not met.).  Furthermore, the Board has consistently held that it, as well as ALJ's, lack the authority to restore a supplier's billing privileges on equitable grounds.  Neb Grp. of Ariz. LLC, DAB No. 2573 at 6 (2014).

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V. Conclusion

For the foregoing reasons, I affirm CMS's revocation of Petitioner's Medicare enrollment and billing privileges pursuant to 42 C.F.R. §§ 424.57(d)(11) and 424.535(a)(1) for failure to be in compliance with 42 C.F.R. § 424.57(c)(26).  The effective date of the revocation is April 11, 2021, as established by the regulations.

Endnotes

¹  This matter was initially assigned to a different ALJ and was then transferred to the undersigned.

²  My findings of fact and conclusions of law are set forth in italics and bold font.