247 Supply, Inc. d/b/a Mazal Med Supply, DAB CR6404 (2023)

DECISION

The Centers for Medicare & Medicaid Services (CMS), through its National Supplier Clearinghouse (NSC), revoked the supplier number and Medicare billing privileges of Petitioner, 247 Supply, Inc., which also operates under the assumed name Mazal Med Supply.  Petitioner requested a hearing to challenge the revocation.  Because NSC had a legitimate basis for its revocation determination, I affirm the revocation of Petitioner’s Medicare supplier number and billing privileges.

I.  Background

Petitioner was enrolled in the Medicare program as a supplier of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).  CMS Ex. 2 at 1 (enrollment record summary of application signed in March 2021); see P. Ex. 1 at 105-141 (December 2022 enrollment application); 143 (assumed name certificate).  

On December 21, 2021, NSC’s Supplier Audit and Compliance Unit (SACU) received a referral form for violations of DMEPOS supplier standards from SafeGuard Services, a Unified Program Integrity Contractor (UPIC).  The UPIC, based in part on interviews

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conducted between October 20 and 29, 2021, reported suspected violations of DMEPOS supplier standards, specifically, that beneficiaries received unsolicited telephone calls in which they were offered diabetic supplies at no cost and that these diabetic supplies were medically unnecessary.  CMS Ex. 5; see CMS Br. at 3.  Separately, on January 11, 2023, a Medicare administrative contractor requested action to process an overpayment because Petitioner “has provided diabetic shoes, pneumatic compressors, and diabetic supplies to Medicare beneficiaries in multiple states without the current licenses on file.”  CMS Ex. 4 at 1-2.  This report was based on billing reports submitted by the SACU, dated October 14, 2022, listing claims for reimbursement that had been submitted where “state license[s] [are] required” and in “states where certifications for diabetic footwear are needed.”  CMS Ex. 4 at 3-10. 

In an undated letter,¹ NSC, though Palmetto GBA (Palmetto), its administrative contractor, informed Petitioner that it had revoked its supplier number pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(1), (c)(2), (c)(10), (c)(11), (c)(12), and (c)(25).  CMS Ex. 3 at 1‑3.  The letter explained that Petitioner could submit a corrective action plan (CAP) in response to the revocation pursuant to 42 C.F.R. § 424.535(a)(1) and could also request reconsideration of the determination.  CMS Ex. 3 at 3. 

Petitioner, through counsel, submitted a CAP dated December 15, 2022.  CMS Ex. 6.  On January 19, 2023, NSC considered Petitioner’s CAP and determined that it had provided a “verifiable explanation” for its noncompliance with 42 C.F.R. § 424.57(c)(2), (10), and (25), but had “not provided a verifiable explanation for [its] noncompliance with 42 C.F.R. [§] 424.57(c)(1), (11), and (12).”  CMS Ex. 8 at 7.  With respect to the revocation pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(1)(ii), NSC determined that Petitioner, in its updated enrollment application, “continues to select diabetic shoes, pneumatic compressors, and diabetic supplies as products and services they intend to furnish and amongst others includes the states Alabama, Arizona, California, Florida, Illinois, and Texas as states where items are provided.”  CMS Ex. 8 at 4.  NSC also determined that Petitioner had not submitted evidence that it did not cold-call six beneficiaries.  CMS Ex. 8 at 5-6; see 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(11).  NSC further determined that Petitioner’s updated enrollment application continued to report that it intended to furnish diabetic shoes and limb prostheses, and that it was “unable to determine the supplier [is] in compliance with [the] standard, 42 C.F.R. § 424.57(c)(12).”²   CMS Ex. 8 at 6.

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On January 13, 2023, Petitioner submitted a request for reconsideration with supporting documents.  CMS Ex. 7.  NSC issued a reconsidered determination on March 28, 2023.  CMS Ex. 1.  In summarizing its determination, NSC explained the following:

The NSC concludes that there is no error made in the determination to revoke [Petitioner’s]³ billing number.  The supplier has not provided a verifiable explanation for their noncompliance with 42 C.F.R. §§ 424.57(c)(1), (11), and (12) as the supplier failed to submit verifiable proof of compliance they maintained the licenses required by the states in question, failed to provide proof they did not “cold-call” the Medicare Beneficiaries in question and failed to provide proof they had the appropriately qualified and licensed personnel available to provide the diabetic shoes-custom and limb prostheses services.  Therefore, the NSC cannot grant [Petitioner] access to the Medicare Trust Fund by way of a Medicare number. 

CMS Ex. 1 at 7.

On May 26, 2023, Petitioner, through its counsel, filed a request for an administrative law judge (ALJ) hearing.  The Civil Remedies Division issued my standing pre-hearing order (Pre-Hearing Order) on May 30, 2023, which directed the parties to file their respective pre-hearing exchanges.  CMS filed a combined pre‑hearing brief and motion for summary judgment (CMS Br.), along with 11 proposed exhibits (CMS Exs. 1-11).  Petitioner filed a combined brief, response to the motion for summary judgment, and motion for summary judgment (P. Br.),⁴ and two proposed exhibits (P. Exs. 1-2).  CMS submitted a reply and response to Petitioner’s motion for summary judgment.  In the absence of objections, I admit CMS Exs. 1-11 and P. Exs. 1-2 into the evidentiary record.  Because Petitioner has not requested an opportunity to cross-examine CMS’s witness, a hearing is unnecessary for the purpose of cross-examination of any witnesses.  Pre-Hearing Order §§ 12-14; see CMS Ex. 10 (written direct testimony submitted by CMS).  The matter is ready for a decision on the merits.⁵

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II.  Issue

Whether NSC, acting on behalf of CMS, had a legitimate basis to revoke Petitioner’s Medicare supplier number based on its noncompliance with 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(1)(ii), (11), and (12). 

III.  Jurisdiction

I have jurisdiction to decide this case.  42 C.F.R. §§ 424.545(a), 498.3(b)(17), 498.5(l)(2); see also 42 U.S.C. § 1395cc(j)(8). 

IV.  Findings of Fact, Conclusions of Law, and Analysis⁶

1. Petitioner was enrolled in the Medicare program as a supplier of DMEPOS, to include, but not limited to, diabetic shoes, pneumatic compressors, and diabetic supplies. 
2. NSC revoked Petitioner’s supplier number and billing privileges pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(1)(ii) (Supplier Standard # 1) because Petitioner provided diabetic shoes, pneumatic compressors, and diabetic supplies for Medicare beneficiaries in various states without holding the required state licenses. 
3. NSC revoked Petitioner’s supplier number and billing privileges pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(11) (Supplier Standard # 11) based on its direct solicitation of diabetic supplies to Medicare beneficiaries through “cold calls” despite the requirement that a supplier not contact a beneficiary by telephone except under enumerated circumstances. 
4. NSC revoked Petitioner’s supplier number and billing privileges pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(12) (Supplier Standard # 12) because Petitioner’s enrollment record reported its intent to furnish diabetic shoes - custom and limb prosthesis services without having a qualified practitioner who could provide beneficiaries with necessary information and instructions on how to use these items safely and effectively.

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5. Petitioner did not submit evidence disputing that it lacked the requisite licenses when it furnished diabetic shoes - custom and limb prostheses to beneficiaries in Alabama, Arizona, California, Illinois, and Texas where such licenses are required pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(1)(ii). 
6. Petitioner did not submit evidence disputing that it solicited six Medicare beneficiaries through “cold calls” when such a practice is the basis for revocation pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(11).  
7. Petitioner did not submit evidence disputing that it enrolled in the Medicare program with the intent to furnish diabetic shoes - custom and limb prostheses even though, pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(12), it was required to have a qualified practitioner who fits, delivers, and instructs the Medicare beneficiary on the use of those items.
8. Because Petitioner did not demonstrate compliance with Supplier Standards # 1, 11 and 12, CMS had a legitimate basis to revoke its Medicare supplier number and billing privileges pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(1), (11), and (12).  

To receive Medicare payments for items furnished to a Medicare beneficiary, a supplier of medical equipment and supplies must have a supplier number issued by the Secretary of Health and Human Services.  Social Security Act (Act) § 1834(j)(1)(A); 42 C.F.R. § 424.505.  To obtain and retain its supplier number, a DMEPOS supplier must meet the standards set forth in 42 C.F.R. § 424.57(c), and CMS may revoke its billing privileges if it fails to do so.  42 C.F.R. §§ 424.57(c)(1), (e), 424.535(a)(1).  To receive direct-billing privileges, a DMEPOS supplier must operate in compliance with, inter alia, state licensure and regulatory requirements.  42 C.F.R. § 424.57(c)(1)(ii).  CMS may revoke a currently enrolled DMEPOS supplier’s Medicare enrollment and billing privileges if the supplier contacts a beneficiary by telephone unless one of the enumerated exceptions applies.  42 C.F.R. § 424.57(c)(11).  CMS may also revoke a DMEPOS supplier that lacks documentation that it or another qualified party provided beneficiaries with necessary information and instructions on how to use Medicare-covered items safely and effectively.  42 C.F.R. § 424.57(c)(12).  After a DMEPOS supplier’s Medicare enrollment and billing privileges are revoked, it is barred from re-enrolling in the Medicare program for a period of between one and ten years.  42 C.F.R. § 424.535(c). 

A supplier may only submit a CAP for a revocation under section 424.535(a)(1) and the supplier ‘“has only one opportunity to correct all deficiencies that served as the basis of its revocation.’  42 C.F.R. § 405.809(a)(1)-(2).”  Village Apothecary, Inc., DAB No. 3060

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at 9-10 (2022).  The Departmental Appeals Board (DAB) has explained that a CAP pursuant to 42 C.F.R § 405.874(e) is “permissive” and “provides that if the ‘supplier completes the [CAP] and provides sufficient evidence to the CMS contractor that it has complied fully with Medicare requirements, the contractor may reinstate the billing privileges.’”  DMS Imaging, Inc., DAB No. 2313 at 10 (2010) (emphasis omitted).  The DAB further explained that the opportunity to submit a CAP under 42 C.F.R. § 405.874(e) “does not give a supplier an appealable ‘right’ to reinstatement pursuant to this opportunity even if the supplier could show that, under its CAP, it corrected the initial deficiency.”  Id.  The DAB, in a circumstance where a CAP had not been accepted as a basis to reinstate a supplier’s billing privileges, has affirmed a finding that “the sole issue . . . was ‘whether a basis existed to terminate [the petitioner’s] enrollment as of the point in time when [the Medicare administrative contractor] determined it to be deficient.’”  Id. at 8. 

Supplier Standard # 1

NSC’s revocation determination informed Petitioner that its supplier number had been revoked pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(1) because it had furnished items in states where a license was required to furnish those items but had not submitted documentation that it held the appropriate license.  CMS Ex. 3 at 1-2; see CMS Ex. 4 (documentation of the resulting overpayment, to include a spreadsheet listing claims for reimbursement of items furnished to beneficiaries in states where licensure is required).  NSC explained the following in its revocation determination: 

A review of your Medicare file revealed you are providing or planning on providing diabetic shoes, pneumatic compressors, and diabetic supplies to Medicare beneficiaries in multiple states without current licenses on file with the NSC.  You failed to obtain the required Alabama Therapeutic Shoe Fitter License; Alabama Home Medical Equipment Services Provider; Arkansas Orthotist or Pedorthist License; Arkansas Supplier of Medical Equipment, Legend Devices, Medical Gas Permit; Arizona Compressed Medical Gas/Durable Medical Equipment (CMS/DME) Supplier Permit; California Home Medical Device Retailer License; Connecticut Wholesaler of Drugs Medical Devices and Cosmetics Registration; Florida Home Medical Equipment Provider License; Hawaii Durable Medical Equipment Supplier License; Idaho Durable Medical Equipment Outlet Registration; Illinois Orthotist/Pedorthist License; Kentucky Home Medical Equipment License; North Dakota Durable Medical Equipment Retailer License; New Hampshire Limited Retail Drug Distributors License; and the Texas Orthotist License – Practitioner. 

CMS Ex. 3 at 1-2 (italics omitted).  Petitioner submitted an updated enrollment application with its CAP (P. Ex. 1 at 105-141), and NSC rejected the CAP because the

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updated application “continues to select diabetic shoes, pneumatic compressors, and diabetic supplies as products and services they intend to furnish and amongst others includes the states Alabama, Arizona, California, Florida, Illinois, and Texas as states where items are provided.”⁷   CMS Ex. 8 at 4.  NSC upheld the revocation in March 2023.  CMS Ex. 1 at 5-6. 

Petitioner argues in its brief that it “has taken action to cure any potential deficiencies” and “has ceased providing or planning on providing any items or services that a DMEPOS supplier must be licensed to provide.”  P. Br. at 9.  However, Petitioner has not cited any evidence that it was in compliance with Supplier Standard # 1 at the time NSC revoked its supplier number.  See P. Br. at 9.  The evidence establishes that Petitioner was out of compliance when it furnished items to beneficiaries in states where licensure is required.  See CMS Ex. 4. at 4-8 (listing claims for items furnished in Alabama, Arizona, California, Florida, Illinois, and Texas).  Therefore, NSC had a legitimate basis to revoke Petitioner’s supplier number pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(1).⁸  See, e.g, John P. McDonough III, Ph.D., Geriatric Psychological Specialists, and GPS II, LLC, DAB No. 2728 at 8 (2016) (“A plan to reduce improper billing in the future does not preclude CMS from taking action about improper claims already submitted.”).

Supplier Standard # 11

NSC’s revocation determination informed Petitioner that its supplier number had been revoked pursuant to 42 C.F.R. § 424.57(c)(11) based on information that it had solicited beneficiaries in order to provide free Medicare covered items and items not medically necessary.  CMS Ex. 3 at 2.  NSC explained that it had received a referral that seven beneficiaries (B.F., K.M., L.R., R.L., R.S., V.J., and W.D.)⁹ had been improperly contacted by Petitioner.  CMS Ex. 3 at 2; see CMS Ex. 5.  In its plan of correction, Petitioner provided supporting evidence pertaining to one of the seven Medicare

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beneficiaries, K.M.  P. Ex. 1 at 147-164.  Petitioner also submitted a copy of a non-solicitation policy that appears to post-date the revocation determination.  P. Ex. 1 at 163-164 (policy dated December 15, 2022).  Petitioner, in its request for reconsideration, “adamantly denie[d] knowingly engaging in any such contact alleged in the NSC Notice of Revocation” and claimed it had provided copies of the referrals for the seven beneficiaries (CMS Ex. 7 at 18), although a review of this submission reveals that it submitted records for only K.M. and no other beneficiaries.  CMS Ex. 7 at 86-101.  

In its reconsidered determination, NSC explained that Petitioner had demonstrated that K.M. had been referred by her provider, but that it was “unable to determine the supplier [was] in compliance with [the] standard . . . as evidence was not submitted to show [B.F.], [L.R.], [R.L.], [R.S.], [V.J.], and [W.D.] were not directly solicited.”  CMS Ex. 1 at 6. 

Petitioner, in its brief, claims that it submitted “a copy of the referrals pertaining to these specific patients” with its request for reconsideration.  P. Br. at 14, citing CMS Ex. 7 (Exhibit G).  However, as previously discussed, Exhibit G includes a referral for only K.M. and does not include any documentation regarding the other six beneficiaries.  CMS Ex. 7 at 86-101.  Petitioner also argues in its brief that it has adopted a non-solicitation policy.  P. Br. at 14-16.  In the absence of evidence that Petitioner did not solicit six Medicare beneficiaries through “cold calls,” it has not shown that NSC lacked a legitimate basis to revoke its supplier number pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(11).  See National Seating & Mobility, Inc., DAB No. 2984 at 9 (2010) (referencing “[DAB] precedent limiting the issue on appeal . . . to whether the supplier was in compliance with the relevant standard(s) at the time the contractor issued the denial.”). 

Supplier Standard # 12

NSC also informed Petitioner that it had revoked its supplier number because Petitioner lacks a licensed individual who is qualified to fit, deliver, and instruct on the use of diabetic shoes and lower limb prostheses.  CMS Ex. 3 at 2-3.  NSC explained that, pursuant to 42 C.F.R. § 424.57(c)(12), a supplier is responsible for the delivery of Medicare covered items to beneficiaries and to maintain proof of delivery, and “must document that it or another qualified party has, at an appropriate time, provided beneficiaries with necessary information and instructions on how to use Medicare-covered items safely and effectively.”  CMS Ex. 3 at 2. 

Petitioner submitted an updated enrollment application with its CAP (P. Ex. 1 at 105-141), and NSC determined that “in review of the updated . . . application, diabetic shoes and limb prostheses are selected as products and services intended to be furnished.”  NSC was “unable to determine the supplier [is] in compliance with . . . 42 C.F.R. § 424.57(c)(12), as a qualified practitioner must be one who administers these services

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and according to our records there is not a licensed individual qualified to provide these services.”¹⁰   CMS Ex. 8 at 6.

Petitioner argues in its brief that it “has stopped providing or planning on providing these diabetic shoes and the lower limb prostheses or any other supplies and items that require specialized instructions to beneficiaries regarding proper use and care instructions.”  P. Br. at 18.  However, Petitioner did not submit any evidence that, at the time of the initial revocation determination, it had a qualified practitioner who fits, delivers, and instructs Medicare beneficiaries on how to use diabetic shoes and lower limb prostheses, nor has it contended that it did not furnish supplies that were subject to that requirement.  Therefore, NSC had a legitimate basis to revoke Petitioner’s supplier number pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(12).  

I cannot review the length of the bar to re-enrollment. 

Petitioner disputes the one-year bar to reenrollment.  P. Br. at 23-24.  Pursuant to 42 C.F.R. § 424.535(c), CMS is authorized to impose a bar to reenrollment of a minimum of one year, and up to ten years, when it has revoked a supplier number.  NSC imposed the minimum one-year bar to reenrollment.  CMS Ex. 3 at 5.  The DAB has unambiguously explained that such a matter is beyond the scope of an ALJ’s review, stating: 

A decision by CMS or its contractor about how long to bar a revoked supplier from re-enrolling in Medicare, unlike the determination to revoke the supplier’s billing privileges, is not an appealable “initial determination” under 42 C.F.R. Part 498.  Blossomwood Medical, P.C., et al., DAB No. 2914, at 11 (2018); Vijendra Dave, M.D. [DAB No. 2672] at 8-11 [(2016)] (stating that the authority of an ALJ or the [DAB] in a revocation appeal “does not extend to reviewing the length of the reenrollment bar imposed by CMS”).  We therefore cannot consider or act upon Petitioner’s contention that the three-year re-enrollment bar was excessive in her circumstances. 

Linda Silva, P.A., DAB No. 2966 at 11 (2019).  Petitioner has not identified any legal error in the imposition of the reenrollment bar for the minimum period of one year, and I may not otherwise review the duration of the reenrollment bar.  See Vijendra Dave, M.D., DAB No. 2672 at 11 (2016) (“CMS’s determination regarding the duration of the re-enrollment bar is not reviewable.”).

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To the extent Petitioner has raised a plea for equitable relief, I cannot grant such relief.  P. Br. at 23 (stating, “as a practical matter it is nearly impossible for any company to sustain operations in light of the absence of any reimbursement during the revocation year”); see US Ultrasound, DAB No. 2302 at 8 (2010) (“Neither the ALJ nor the [DAB] is authorized to provide equitable relief by reimbursing or enrolling a supplier who does not meet statutory or regulatory requirements.”); see Donna Maneice, M.D., DAB No. 2826 at 7 (2017) (“On appeal of CMS’s revocation, neither the ALJ nor the [DAB] has authority to reverse an authorized revocation for reasons of equity.”) (citations omitted).  I cannot grant Petitioner relief on this basis because I do not have the authority to find invalid or refuse to follow Federal statutes or regulations or secretarial delegations of authority.  See, e.g., 1866ICPayday.com, L.L.C., DAB No. 2289 at 14 (2009) (“An ALJ is bound by applicable laws and regulations and may not invalidate either a law or regulation on any ground, even a constitutional one.”). 

V.  Conclusion

For the reasons stated above, I affirm the revocation of Petitioner’s DMEPOS supplier number and Medicare billing privileges, pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(c)(1), (11), and (12). 

Endnotes

¹  The reconsidered determination reported that the revocation notice was dated November 11, 2022.  CMS Ex. 1 at 2.  CMS’s witness testified that the notice “was sent to [Petitioner] by mail on November 11, 2022.”  CMS Ex. 10 at 2.

²  After NSC had issued its determination regarding Petitioner’s CAP, Petitioner sent the first of three emails clarifying its December 2022 enrollment application on January 31, 2023.  CMS Ex. 9 at 4-5.

³  CMS’s witness, a program manager employed by Palmetto, testified that this particular reference misidentified the name of the supplier.  CMS Ex. 10 at 7.

⁴  Petitioner quizzically devoted significant portions of its brief to bases for revocation that were not included in the reconsidered determination.  CMS Ex. 1 (reconsidered determination upholding revocation determination based on noncompliance with Supplier Standards # 1, 11, and 12); P. Br. at 10-13 (arguing compliance with Supplier Standards # 2 and 10) and 19-21 (arguing compliance with Supplier Standard # 25).

⁵  As an in-person hearing to cross-examine witnesses is not necessary, it is unnecessary to address the parties’ motions for summary judgment.

⁶  My findings of fact and conclusions of law are set forth in italics and bold font.

⁷  Petitioner submitted several email messages clarifying its updated enrollment application after the CAP had been rejected.  CMS Ex. 9. 

⁸  CMS’s witness summarized the relevant licensure requirements as follows: 

Alabama, Ala. Code § 34-25A-1 and Ala. Code § 34-14C-4; Arizona, Ariz. Admin. Code R4-23-693; California, Cal. Health & Safety Code § 111656.7; Illinois, 225 Ill. Comp. Stat. Ann. 84 and 68 Ill. Adm. Code Ch. VII, Subch. B, Pt. 1325; and Texas, Tex. Occ. Code Ann. T. 3, Subt. K, Ch. 605, and 16 Tex. Admin. Code Pt. 4, Ch. 114.  

CMS Ex. 10 at 4. 

⁹  To protect their privacy, I have redacted the names of the seven Medicare beneficiaries. 

¹⁰  As previously discussed, Petitioner submitted several email messages clarifying its updated enrollment application after the CAP had been rejected.  CMS Ex. 9.