First Health Specialty Pharmacy Inc., DAB CR6413 (2023)

Petitioner, First Health Specialty Pharmacy Inc., appeals the reconsidered determination by the Centers for Medicare & Medicaid Services (CMS) to revoke its Medicare enrollment and billing privileges.  For the reasons explained below, I find that there was a legitimate basis for CMS to revoke Petitioner’s Medicare enrollment and billing privileges, based on 42 C.F.R. §§ 424.535(a)(1) and 424.57(e), for failure to comply with the provisions of 42 C.F.R. § 424.57(c)(2)(21)(22)(25). 

I. Background and Procedural History

Petitioner was enrolled in the Medicare program as a supplier of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).  CMS Exhibit (Ex.) 2.  In a determination dated September 22, 2022, Petitioner was notified that its Medicare supplier number for DMEPOS would be revoked 30 days from the date of the letter because it was not in compliance with the supplier standards set forth in:  1) 42 C.F.R. § 424.57(c)(2) for making false statements or misrepresentations on its application for billing privileges; 2) 42 C.F.R. § 424.57(c)(21) for failure to respond to a request for information; 3) C.F.R. § 424.57(c)(22) for lack of verification of accreditation by a CMS-approved accreditation organization; and 4) C.F.R. § 424.57(c)(25) for billing Medicare for glucose monitors after being notified that accreditation must be obtained.  CMS Ex. 16. 

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Petitioner filed a request for reconsideration, which was received by Palmetto GBA (Palmetto), the Medicare contractor responsible for monitoring compliance with DMEPOS supplier standards at all times relevant, on October 24, 2022.  CMS Ex. 24.  Petitioner asserted that its accreditation never expired, but rather that it was held as pending because of a backlog until final review of the renewal.  Id.  A copy of an accreditation certificate was included.  Id.  However, in a reconsideration determination dated November 18, 2022, Palmetto concluded that there was no error made in the determination to revoke Petitioner’s Medicare billing number and, as a result, the revocation of its Medicare billing privileges was upheld.  CMS Ex. 26.  In the same notice, Petitioner was also barred from re-enrolling in the Medicare program for a period of one year from the effective date of the application.  Id. 

Petitioner filed a request for hearing (RH) on January 22, 2023.  The case was assigned to Judge Leslie Weyn, who issued a Standing Prehearing Order (Order) on January 23, 2023.¹  In its prehearing exchange, CMS filed a Pre-Hearing Brief and Motion for Summary Judgment (CMS Br.) and 27 proposed exhibits, including the declaration of one proposed witness.  Petitioner did not object to any of CMS’s proposed exhibits and did not request to cross examine CMS’s proposed witness.  As a result, CMS Exs.  1-27 are admitted to the record. 

Petitioner submitted two documents:  a Certificate of Accreditation from the Accreditation Commission for Health Care (ACHC) for Community Retail Services for the period from February 16, 2023 through May 10, 2025 (CRD Dkt. Entry No. 8) and a document entitled Explanation for ACHC Accreditation Certificate dated April 3, 2023 (CRD Dkt. Entry No. 9).  CMS filed an objection to these documents on the basis that they were not material to the issue of whether there was a legitimate basis for the revocation of Petitioner’s Medicare billing privileges as of October 22, 2022.  In response to the objection from CMS, Petitioner filed a document entitled Explanation and Response (P. Explanation and Response) on May 1, 2023. 

Considering first the documents in CRD Dkt. Entries No. 8 and 9, there are several problems with admitting them into the record as exhibits to be considered in my decision.  First of all, they were not submitted in accordance with the Order, which required proposed exhibits to be marked with specific information, including document and exhibit numbers.  Order at 4, ¶ 5.  Judge Weyn’s Order clearly indicated that an exhibit that had not been prepared in the specified manner may be excluded from evidence.  Id. at 5. 

More significantly, 42 C.F.R. § 498.60(b)(1) provides that I receive into evidence only documents that are “relevant and material.”  In this case, the submitted documents are not 

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relevant or material to the issue before me:  whether there was a legitimate basis for revoking Petitioner’s billing privileges as of October 22, 2022.  Information relating to subsequent accreditation beginning in February 2023 is not relevant to that issue.  As a result, CMS’s objection to the admission of these documents is sustained.  CRD Dkt. Entries No. 8 and 9 are not admitted to the record and have not been considered in this decision. 

As indicated above, Petitioner also submitted a document entitled Explanation and Response.  CRD Dkt. Entry No. 11.  Because it contains arguments from Petitioner, rather than an attempt to establish a fact, I am treating this document as a brief and have considered those arguments in reaching a decision in this matter. 

According to the Order, an in-person hearing to cross-examine witnesses is necessary only if a party files admissible, written direct testimony of a proposed witness, and the opposing party requests to cross examine the witness.  Order at 6, ¶ 10.  Petitioner has not requested to cross-examine the proposed witness of CMS.  As a result, an in-person hearing is not necessary, and I issue this decision based on the written record.  Order at 7, ¶ 12.  Accordingly, I deny CMS’s Motion for Summary Judgement as moot. 

II. Issues

Whether CMS had a legitimate basis for revoking Petitioner’s enrollment and billing privileges, pursuant to the provisions of 42 C.F.R. §§ 424.535(a)(1) and 424.57(e)(1), for failure to comply with the provisions of 42 C.F.R. § 424.57(c)(2)(21)(22)(25).

III. Jurisdiction

I have jurisdiction to decide this case.  42 U.S.C. § 1395cc(j)(8); 42 C.F.R. §§ 488.3(b)(17)(i), 498.5(l)(2).  

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

The Social Security Act (Act) authorizes the Secretary of Health and Human Services to establish regulations for enrolling providers and suppliers in the Medicare program.  42 U.S.C. § 1395(j)(1)(A).  Suppliers must enroll in the Medicare program and receive a billing number in order to obtain payment for services rendered to Medicare beneficiaries.  42 C.F.R. § 424.505. 

The regulations delegate to CMS the authority to revoke the enrollment and billing privileges of suppliers.  42 C.F.R. § 424.535.  CMS or a Medicare contractor may revoke a supplier’s Medicare enrollment and billing privileges for a number of specified reasons, including, as relevant here, if it is determined to be out of compliance with the enrollment 

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requirements for its supplier type.  42 C.F.R. § 424.535(a)(1).  In addition, 42 C.F.R. § 424.57(e)(1) authorizes CMS to revoke a DMEPOS supplier’s billing privileges if, as relevant here, it is found not to meet the standards in paragraph (c) of that section, which governs application certification standards. 

A. The evidence establishes that Petitioner was not in compliance with the DMEPOS application certification standards set forth in 42 C.F.R.§ 424.57(c)(2)(21)(22)(25).

The facts in this matter are not in dispute.  First Health has been enrolled in Medicare as a DMEPOS supplier since 2015.³  CMS Ex. 1.  On April 30, 2021, Petitioner submitted a Change of Information (COI) application to the National Supplier Clearinghouse (NSC), updating its enrollment by adding, deleting or changing information, specifically its address.  CMS Ex. 3 at 2-3.  In that application, Petitioner indicated that it was accredited by the ACHC, with an expiration date of December 21, 2020.  Id. at 3.  On May 4, 2021, First Health was notified that the COI application had been approved, with changes made to its practice, mailing, medical records, and pay-to addresses, and liability insurance.  CMS Ex. 4.  A second COI application was filed by Petitioner on June 10, 2021.  CMS Ex. 6.  On June 18, 2021, First Health was notified that the NSC had approved the COI application, noting that the mailing address had been changed.  CMS Ex. 8 at 1.  Petitioner was also informed that “[a]ccreditation [is] not required if you only bill for non-accredited products.”  Id. 

In the interim, a site investigation for suppliers of DMEPOS was initiated on April 27, 2021.  Subsequent to this investigation, Petitioner was notified on November 29, 2021 that the NSC had found the facility in violation of six supplier standards⁴, including, as relevant herein: 

1. 42 C.F.R. § 424.57(c)(2), False Statement or Misrepresentations.  NSC found that Petitioner had stated in its enrollment application that it only provided non-accredited products, but billed Medicare for products requiring accreditation. CMS Ex. 10 at 1.  The NSC requested Petitioner obtain accreditation and submit a CMS-855S enrollment application to update its products and services. Id.

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2. 42 C.F.R. § 424.57(c)(22), Accreditation. The NSC stated that a review of Petitioner’s billing found it was billing for glucose monitors, a product for which it had not provided proof of the requisite accreditation.  Id. at 2-3.  The NSC requested Petitioner to prove compliance with this standard by submitting documentation that it was in the process of obtaining accreditation with a CMS-approved accrediting organization.  Id. 
3. 42 C.F.R. § 424.57(c)(25), Disclosure of All Products and Services. The NSC found that a review of Petitioner’s billing revealed it was billing for glucose monitors, a product for which it had not provided accreditation, and that Petitioner was not authorized to receive reimbursement for glucose monitors until it was accredited. Id. at 3.  The NSC instructed Petitioner that if it decided not to obtain accreditation, it would need to submit a statement in writing on dated company letter head that it would cease billing for glucose monitors until it obtained accreditation.  Id. It added that this statement must be specific in listing the products/services and must be signed by the authorized official listed on file with the NSC. Id.

In response to the compliance letter, Petitioner submitted a Certification of Accreditation for Specialty Pharmacy Services from ACHC showing that it was an accredited pharmacy from December 22, 2017 through December 21, 2020.  CMS Ex. 11.  On April 5, 2022, the NSC sent an email to Emil Trokel, of First Health, indicating that the Certificate of Accreditation from ACHC expired on December 21, 2020 and, additionally, that its file with the NSC indicated that it was exempt from accreditation by providing Non-Accredited Products-prescription drug only.  CMS Ex. 12 at 2.  Petitioner was asked to provide a letter indicating that it would cease billing for glucose monitors until accreditation was obtained.  Id. 

On September 22, 2022, Petitioner was notified that its Medicare supplier number for DMEPOS would be revoked effective 30 days after the postmark of that letter for being out of compliance with supplier standards at 42 C.F.R. § 424.57(c)(2)(21)(22) and (25).  CMS Ex. 16.  First Health was specifically cited for continuing to bill Medicare for glucose monitors after being notified that accreditation must be obtained and for failing to send a letter stating it would cease billing for glucose monitors until accreditation was obtained.  Id. at 2.  Petitioner then submitted a Corrective Action Plan (CAP), asserting that its accreditation plan never expired, but was held as pending, due to a backlog.  CMS Ex. 17.  It included with that submission a Certificate of Accreditation for Specialty Pharmacy Services from ACHC from May 11, 2022 through May 10, 2025.  Id. at 2.  Subsequent investigation by Palmetto GBA included contact with ACHC from October 23, 2022, which stated that Petitioner was “not accredited for DMEPOS products.”  CMS Ex. 21 at 2.  However, Medicare billing records during the period from October 1, 2021

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through May 1, 2022 documented that Petitioner submitted claims for glucose monitors throughout this period.  CMS Ex. 2 at 2-3; CMS Ex. 14 at 2-3; CMS Ex. 15 at 2-3. 

In a reconsidered determination dated October 24, 2022, the NSC concluded that there had been no error in the determination to revoke First Health’s Medicare Billing number. The NSC determined that First Health had not provided a verifiable explanation for its noncompliance with 42 C.F.R. § 424.57(c)(2)(21)(22) and (25) as it “has been improperly billing for glucose monitors in which they are not accredited to provide, and without prior notification to the NSC they would be providing this product.”  CMS Ex. 22 at 6. 

In P. Explanation and Response, dated April 28, 2023, First Health indicated that it had served its communities for nearly a decade and had always been in good standing with all boards and agencies and its error in thinking that its Specialty Pharmacy accreditation encompassed blood glucose strips and monitors was a misunderstanding of its accreditation, rather than an act of malice.  CRD Dkt. Entry No. 11. 

In determining whether CMS had a legitimate basis for revoking Petitioner’s enrollment and billing privileges, I have considered each of the application certification standards of 42 C.F.R. § 424.57(c) that were cited by CMS as the basis for its revocation action.  42 C.F.R. § 424.57(c)(2) requires the supplier to meet and certify in its application for billing privileges that it meets and will continue to meet certain standards, including that it: 

[h]as not made, or caused to be made, any false statement or misrepresentation of a material fact on its application for billing privileges. (The supplier must provide complete and accurate information in response to questions on its application for billing privileges. The supplier must report to CMS any changes in information supplied on the application within 30 days of the change.).

42 C.F.R. § 424.57(c)(2).  Similarly, 42 C.F.R.§ 424.57(c)(25) provides that all DMEPOS suppliers must disclose upon enrollment all products and services, including the addition of new product lines, for which they are seeking accreditation.  If a new product line is added after enrollment, the DMEPOS supplier will be responsible for notifying the accrediting body of the new product so that the DMEPOS supplier can be re-surveyed and accredited for these new products.  Id. 

In this case, Petitioner filed an application to update its enrollment on June 10, 2021.  CMS Ex. 6.  In that application, it indicated it furnished only non-accredited products.  Id. at 6.  Subsequent Medicare billing records establish that Petitioner had been billing for glucose monitors, a product requiring accreditation, since at least October 1, 2021.  CMS

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Ex. 13 at 2-3.  However, there is no evidence that First Health reported this change as required by the above regulation. 

Petitioner does not assert that it reported the furnishing of products requiring accreditation on the application it filed on June 10, 2021.  Nor does it assert, at any time after that, that it reported the additional product lines after its application was approved. Rather, it argues in P. Explanation and Response that this was an error based on misunderstanding.  CRD Dkt. Entry No. 11.  However, I am not aware of any provisions in the above regulations that waive the reporting requirements under any circumstances, including the asserted lack of intention to deceive.  Given the above facts, I must find that Petitioner was not in compliance with the DMEPOS application certification standards set forth in 42 C.F.R. § 424.57(c)(2) and (25).

42 C.F.R.§ 424.57(c)(21) requires the DMEPOS supplier to provide to CMS, upon request, any information required by the Medicare statute and implementing regulations. On June 18, 2021, Petitioner was notified by Palmetto that the NSC had approved its COI application.  CMS Ex. 8 at 2.  It was notified at that time that accreditation was not required if it only billed for non-accredited products.  Id.  Palmetto notified Petitioner on November 29, 2021 that additional information was necessary in order to be found in full compliance with DMEPOS standards.  P. Ex. 10.  In response, on December 6, 2021, Petitioner provided a Certificate of Accreditation from the ACHC for Petitioner for Specialty Pharmacy Services from December 22, 2017 through December 21, 2020.  CMS. Ex. 11.  On April 5, 2022, the NSC notified Petitioner that its certificate expired on December 21, 2020 and its file with the NSC indicated that it was exempt from accreditation by providing only nonaccredited products.  CMS Ex. 12 at 2.  Petitioner was specifically requested to “provide a letter that you will cease billing for glucose monitors until accreditation is obtain [sic].”  Id. (emphasis in original).  There is nothing in the record to establish that Petitioner ever provided such a letter, much less that it ceased billing for glucose monitors, as discussed below.  Given the above facts, I must find that Petitioner was not in compliance with the DMEPOS application certification standards set forth in 42 C.F.R. § 424.57(c)(21). 

Under the provisions of 42 C.F.R.§ 424.57(c)(22), all suppliers of DMEPOS and other items and services must be accredited by a CMS-approved accreditation organization in order to receive and retain a supplier billing number.  The accreditation must indicate the specific products and services for which the supplier is accredited in order for the supplier to receive payment for those specific products.  Similarly, 42 C.F.R.§ 424.57(c)(25) provides that all DMEPOS suppliers must disclose upon enrollment all products and services, including the addition of new product lines for which they are seeking accreditation.  If a new product line is added after enrollment, the DMEPOS supplier will be responsible for notifying the accrediting body of the new

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product so that the DMEPOS supplier can be re-surveyed and accredited for these new products. 

As noted above, when Petitioner filed an application to update its enrollment on June 10, 2021, it did not indicate that it was providing any products requiring accreditation.  CMS Ex. 6.  In that application, it indicated it furnished only non-accredited products.  Id. at 6.  It was informed at the time of the application approval on June 18, 2021 that accreditation was not required if it only billed for non-accredited products.  CMS Ex. 8 at 1.  However, at least as of October 1, 2021, it was billing Medicare for products requiring accreditation, specifically glucose monitors.  CMS Ex. 13 at 3.  As was also noted above, there is no evidence that Petitioner subsequently notified Medicare that it had added a new product that required accreditation. 

More significantly, there was no evidence to establish that Petitioner was accredited for DMEPOS products at any time relevant to this proceeding.  When asked on November 29, 2021 to provide documentation that it was obtaining or had obtained accreditation to supply glucose monitors, it provided a Certificate of Accreditation that had expired on December 21, 2020.  CMS Ex. 10 at 3; CMS Ex. 11 at 3.  It was notified on April 5, 2022 that it must cease billing for glucose monitors until accreditation was obtained.  CMS Ex. 12 at 2.  Yet, Petitioner continued to bill the Medicare program for glucose monitors through at least May 1, 2022.  CMS Ex. 14 at 3-4; CMS Ex. 15 at 3-4. 

Petitioner asserted that its certification had never expired and, instead, was being “held as pending” because of a backlog.  CMS Ex. 17 at 1.  However, a subsequent communication with the ACHC documented that Petitioner was not accredited for DMEPOS products.  CMS Ex. 21 at 2.  As a result, whether or not the certification had expired or was merely being held, the fact remained that Petitioner was never accredited for the purpose of billing Medicare for the glucose monitors it had supplied. 

Petitioner has also argued that it was unaware that its Specialty Pharmacy accreditation did not cover blood glucose strips and monitors and, once it became aware of this, it immediately took action to correct the deficiency.  P. Explanation and Response.  It stressed that the error was not made out of malice and was, instead, a misunderstanding of what the Specialty Pharmacy accreditation included.  While I do not ascribe any nefarious intent to the actions of Petitioner, I also note that it was given clear and specific notice on April 5, 2022 that it must cease billing for glucose monitors until accreditation was obtained.  CMS Ex. 12 at 2.   Moreover, as the Board stated in Meadowmere Emergency Physicians, PLLC, “Medicare providers and suppliers, as participants in the program, have a duty to familiarize themselves with Medicare requirements.”  DAB No. 2881 at 11-12 (2018) (citations omitted).  Thus, while I accept the representations that the billing for glucose monitors was the result of ignorance or misunderstanding, as asserted by Petitioner, the fact remains that it continued to bill Medicare for these products, even

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after receiving specific notice that it did not have the credentials to do so.  As a result, after considering the evidence presented, I find that Petitioner was not in compliance with the standards in 42 C.F.R. § 424.57(c)(2)(21)(22)(25). 

B. The evidence establishes that there was a legitimate basis to revoke Petitioner’s Medicare enrollment and billing privileges, pursuant to 42 C.F.R. § 424.57(e)(1).

As noted above, 42 C.F.R. § 424.57(e)(1) authorizes CMS to revoke a DMEPOS supplier’s billing privileges if, as relevant here, it is found not to meet the standards in paragraph (c) of that section, governing application certification standards.  The above discussion established that Petitioner was not in compliance with the application certification standards of 42 C.F.R. § 424.57(c)(2)(21)(22)(25).  As a result, there was a legitimate basis to revoke Petitioner’s Medicare enrollment and billing privileges under the provisions of 42 C.F.R. § 424.57(e)(1). 

C. The evidence establishes that there was a legitimate basis to revoke Petitioner’s Medicare enrollment and billing privileges, pursuant to 42 C.F.R. § 424.535(a)(1).

As noted above, 42 C.F.R. § 424.535(a)(1) provides that CMS may revoke a currently-enrolled supplier’s Medicare enrollment if the supplier is determined to not be in compliance with the enrollment requirements applicable for its supplier type.  As a supplier of DMEPOS, Petitioner was required to meet, as relevant herein, the certification standards set forth in 42 C.F.R. § 424.57(c).   The above discussion established that Petitioner was not in compliance with the certification standards of 42 C.F.R. § 424.57(c)(2)(21)(22)(25).  Because DMEPOS suppliers must meet specified certification standards to obtain and maintain billing privileges and Petitioner was determined not to meet the above specified certification standards, it was not in compliance with the enrollment requirements applicable for its supplier type.  As a result, there was a legitimate basis to revoke Petitioner’s Medicare enrollment and billing privileges under the provisions of 42 C.F.R. § 424.535(a)(1). 

In its Explanation and Response, Petitioner has requested that revocation not be effectuated because it has remedied its deficiencies and the revocation would impact the communities it serves.  However, in reviewing a revocation determination, I am limited to deciding whether CMS had a valid ‘legal basis’ for that action.” Care Pro Home Health, DAB No. 2723 at 5 (2016) (italics added), citing Letantia Bussell, M.D., DAB No. 2196 at 12-13 (2008) (stating that an ALJ’s review of revocation is “limited to whether CMS had established a legal basis for its actions”; once the ALJ found the “elements required for revocation were present” the ALJ “was obliged to uphold the revocation, as are we”); Abdul Razzaque Ahmed, M.D., DAB No. 2261 at 17, 19 (2009)

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(“the scope of administrative review before the ALJ and the Board is limited to determining whether CMS had a sufficient legal predicate . . . for its revocation determination [and] we may not substitute our discretion for that of CMS in determining whether revocation is appropriate under all the circumstances”), aff’d, Ahmed v. Sebelius, 710 F. Supp. 2d 167 (D. Mass. 2010).  In this case, the stated basis for revocation, that of Petitioner’s failure to meet the application certification standards set forth in 42 C.F.R. § 424.57(c), is grounded in law and fact.  Accordingly, I find that CMS had a legitimate basis for revoking Petitioner’s Medicare enrollment and billing privileges, effective April 26, 2021, pursuant to the provisions of 42 C.F.R. §§ 424.535(a)(1) and 424.57(e)(1). 

V. Conclusion

For the reasons explained above, I affirm the revocation of Petitioner’s Medicare enrollment and billing privileges, pursuant to 42 C.F.R. §§ 424.535(a)(1) and 424.57(e)(1). 

Endnotes

¹  This case was assigned to me on September 28, 2023. 

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

³ Its enrollment has not been continuous due to reasons not relevant to this adjudication.  CMS Ex. 1 at 1. 

⁴ Three of the cited violations were subsequently resolved and were not included as a basis for the subsequent revocation action.  As a result, they are not addressed in this decision.