Mercyhealth Visiting Nurses Association, Inc., d/b/a Mercyhealth at Home, DAB CR6417 (2024)

DECISION

The Centers for Medicare & Medicaid Services (CMS), through its Medicare administrative contractor, Palmetto GBA (Palmetto), revoked the Medicare enrollment and billing privileges of Petitioner, Mercyhealth Visiting Nurses Association, Inc., d/b/a Mercyhealth at Home, pursuant to 42 C.F.R. § 424.535(a)(8)(ii) because Petitioner engaged in a pattern or practice of submitting claims that failed to meet Medicare requirements.  This decision affirms the revocation of Petitioner’s Medicare enrollment and billing privileges by Palmetto because Petitioner submitted numerous claims for Medicare reimbursement when it did not maintain a surety bond.

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.) 1 at 2; CMS Ex. 5 at 1.  On September 15, 2017, the Platte River Insurance Company (Platte River) issued a Notice of Cancellation, stating that it elected to cancel Petitioner’s DMEPOS surety bond in its entirety, effective October 20, 2017.  CMS Ex. 2.

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In an initial determination dated July 26, 2022, Palmetto informed Petitioner that its Medicare billing privileges were revoked pursuant to 42 C.F.R. § 424.535(a)(8)(ii) effective 30 days after the postmark date of the notice.  CMS Ex. 4 at 1.  Palmetto also informed Petitioner that it was subject to a 10-year reenrollment bar.  CMS Ex. 4 at 1.  The initial determination stated that Petitioner “furnished services and/or items for a period of nearly seventeen (17) months without surety bond coverage” and Petitioner’s “billing for claims during a time period in which its surety bond was cancelled was abusive and improper.”  CMS Ex. 4 at 1.  Palmetto explained that data analysis revealed Petitioner submitted 14,559 claims for 2,348 unique beneficiaries for dates of service between October 20, 2017 and February 25, 2019.  CMS Ex. 4 at 1, 5.

Petitioner requested reconsideration.  On October 21, 2022, Palmetto issued an unfavorable reconsidered determination upholding the revocation under 42 C.F.R. § 424.535(a)(8)(ii).  Palmetto found that Petitioner submitted claims to Medicare while it did not maintain a surety bond from October 20, 2017 to February 25, 2019.  CMS Ex. 1 at 4.  According to Palmetto, Petitioner “engaged in a pattern or practice of submitting claims that failed to meet Medicare requirements, and therefore, [Petitioner] abused its billing privileges.”  CMS Ex. 1 at 4.

Petitioner timely requested a hearing before an administrative law judge (ALJ).  The case was assigned to me, and the Civil Remedies Division issued my Acknowledgment and Standing Prehearing Order dated December 21, 2022 (Prehearing Order).  The Prehearing Order directed each party to file a prehearing exchange consisting of a brief and any supporting documents.  Prehearing Order ¶ 6.  CMS filed a brief (CMS Br.), including a motion for summary judgment, and five proposed exhibits (CMS Exs. 1-5).  Petitioner filed a combined prehearing brief, response, and opposition to CMS’s motion for summary judgment (P. Br.), and three proposed exhibits (P. Exs. 1-3), including the affidavit of one witness (P. Ex. 3).

II.    Admission of Exhibits and Decision on the Record

Neither party filed objections to the opposing party’s exhibits.  Absent objection, CMS Exs. 1-5 and P. Exs. 1-3 are admitted into evidence.  CMS did not request to cross-examine Petitioner’s witness.  Because CMS did not request cross-examination of Petitioner’s witness, for whom written testimony has been submitted, no hearing is necessary, and this matter will be decided based upon the written record.  George Yaplee Med. Ctr., DAB No. 3003 at 5 (2020); Prehearing Order ¶ 12; Civil Remedies Division Procedures ¶ 19(d).  Because the matter will be resolved based on the written record, CMS’s motion for summary judgment is moot.

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III.   Jurisdiction

This tribunal has the authority to hear and decide this matter.  42 U.S.C. § 1395cc(j)(8); 42 C.F.R. §§ 424.545(a), 498.1(g), 498.3(b)(17), 498.5(l)(2).

IV.    Issue

The issue to be decided is whether CMS had a legitimate basis to revoke Petitioner’s Medicare enrollment and billing privileges under 42 C.F.R. § 424.535(a)(8)(ii).

V.     Legal Authorities

The Secretary of Health and Human Services must issue a billing number for a DMEPOS supplier to receive Medicare payments for items furnished to a Medicare-eligible beneficiary.  Social Security Act § 1834(j)(1)(A) (42 U.S.C. § 1395m(j)(1)(A)).  To receive direct billing privileges, a DMEPOS supplier must meet and maintain compliance with the supplier enrollment standards set forth in 42 C.F.R. § 424.57(c).  Among other standards, a DMEPOS supplier must meet the surety bond requirements specified in 42 C.F.R. § 424.57(d).  42 C.F.R. § 424.57(c)(26).  Section 424.57(d) requires each DMEPOS supplier to “submit a bond that is continuous,” meets the minimum requirements of liability coverage ($50,000), guarantees that the surety will pay CMS “up to the full penal amount of the bond” within 30 days of receiving written notice, and provides that “[t]he surety is liable for unpaid claims, [civil money penalties (CMPs)], or assessments that occur during the term of the bond.”  42 C.F.R. § 424.57(d)(4), (5).

CMS may revoke an enrolled supplier’s Medicare billing privileges and any corresponding supplier agreement for several reasons, including if CMS determines that a supplier has a pattern or practice of submitting claims that fail to meet Medicare requirements.  42 C.F.R. § 424.535(a)(8)(ii).  If CMS revokes a supplier’s Medicare billing privileges because CMS or one of its contractors determined the supplier engaged in a pattern or practice of submitting claims that failed to comply with Medicare requirements, the revocation becomes effective 30 days after CMS or its contractor mails notice of its revocation determination to the supplier.  42 C.F.R. § 424.535(g).  After a supplier’s Medicare enrollment and billing privileges are revoked, the supplier is barred from reenrolling in the Medicare program for a minimum of one year, and up to 10 years, for a first-time revocation.  42 C.F.R. § 424.535(c)(1).

VI.    Findings of Fact

1)  Petitioner is part of Mercyhealth Wisconsin and Illinois, a vertically integrated, multiregional health system.  P. Ex. 3 ¶¶ 3, 4.

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2)  On March 25, 2009, Petitioner secured a DMEPOS surety bond, bond # 41180046, from Platte River.  P. Ex. 3 ¶ 7; CMS Ex. 5 at 2.  The DMEPOS bond automatically renewed each year and could only be cancelled if the surety or principal provided 30 days advance notice of cancellation.  P. Ex. 3 ¶ 8.  While the DMEPOS surety bond was active, Petitioner also maintained an infusion surety bond, bond # 41184546, with Platte River.  P. Ex. 3 ¶ 10.  On October 20, 2015, Petitioner emailed Platte River requesting cancellation of the infusion surety bond.  P. Ex. 3 ¶ 11; P. Ex. 3 at 5-6.  Platte River did not take any action at that time and Petitioner again requested cancellation of the infusion surety bond in September 2016 after receiving a renewal notice for the infusion bond.  P. Ex. 3 ¶ 12; CMS Ex. 5 at 2.  By notice dated October 14, 2016, Platte River informed Petitioner that the infusion surety bond would be cancelled effective January 17, 2017, due to Petitioner’s request.  P. Ex. 3 ¶ 14; P. Ex. 3 at 7.

3)  In a notice dated September 15, 2017, Platte River cancelled the DMEPOS surety bond effective October 20, 2017, due to “Agent’s Request.”  CMS Ex. 2; P. Ex. 3 at 8.  Petitioner did not secure another surety bond until February 26, 2019.  CMS Ex. 3; P. Ex. 3 ¶ 25.

4)  Although Petitioner did not maintain DMEPOS surety bond coverage from October 20, 2017 through February 25, 2019, data analysis revealed that Petitioner continued to submit claims to Medicare for reimbursement.  CMS Ex. 4 at 1.  Petitioner submitted 14,559 claims for 2,348 beneficiaries for dates of service between October 20, 2017 through February 25, 2019.  CMS Ex. 4 at 1.  The noncompliant claims resulted in more than $769,000 in payments to Petitioner.  CMS Ex. 1 at 4.

VII.  Analysis and Conclusions of¹

1. 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) because Petitioner engaged in a pattern or practice of submitting claims that failed to meet Medicare requirements.

CMS may revoke a supplier’s billing privileges when it determines the 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, as appropriate or applicable, the following:

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(A) The percentage of submitted claims that were denied during the period under consideration.

(B) Whether the provider or supplier has any history of final adverse actions and the nature of any such actions.

(C) The type of billing non-compliance and the specific facts surrounding said non-compliance (to the extent this can be determined).

(D) Any other information regarding the provider or supplier’s specific circumstances that CMS deems relevant to its determination.

42 C.F.R. § 424.535(a)(8)(ii).

In the analysis of these factors, no one factor is given greater weight than the other factors and all factors need not be considered.  79 Fed. Reg. 72,500, 72,517 (Dec. 5, 2014) (“We have decided not to give certain factors greater weight in our § 424.535(a)(8)(ii) determinations than other[s], for the importance of each factor may vary based on the particular situation.”).  CMS explained it would undertake “a careful and thorough consideration of the factors” outlined in the new regulation to determine whether a pattern or practice of submitting noncompliant claims was present.  79 Fed. Reg. at 72,519.  CMS further indicated it would consider the “specific facts” present in each case.  79 Fed. Reg. at 72,519.  CMS noted that “[t]he term ‘abusive,’ as used in the context of [42 C.F.R.] § 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 claims over a period of time.”  79 Fed. Reg. at 72,515.

In the reconsidered determination, CMS’s hearing officer carefully considered the factors at 42 C.F.R. § 424.535(a)(8)(ii) and determined that factors (C) and (D) were relevant and supported revocation in this case.  CMS Ex. 1 at 3-4.  CMS noted that all claims submitted while there was a lapse in Petitioner’s surety bond coverage did not meet Medicare requirements.  CMS Ex. 1 at 3-4.  CMS further noted that even though Petitioner’s noncompliance may have been unintentional, Petitioner submitted noncompliant claims for nearly 17 months, which supports a pattern or practice of submitting claims that did not meet Medicare requirements.  CMS Ex. 1 at 3-4.  CMS also considered that the noncompliant claims resulted in an overpayment of more than $769,000 to Petitioner, further demonstrating the submission of noncompliant claims was a pattern or practice, rather than sporadic.  CMS Ex. 1 at 4.

Petitioner does not dispute that it did not have a valid surety bond from October 20, 2017 through February 25, 2019.  P. Br. at 2.  It is also undisputed that Petitioner submitted 14,559 claims for 2,348 beneficiaries for dates of service between October 20, 2017 through February 25, 2019.  However, Petitioner contends it was unaware Platte River

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had cancelled the DMEPOS surety bond.  P. Br. at 2, 3; P. Ex. 3 ¶ 19.  Petitioner explains that its insurance agent improperly cancelled the DMEPOS bond due to confusion between the DMEPOS and infusion bonds.  P. Br. at 4.  Petitioner claims once it learned of its cancelled surety bond during a routine enrollment revalidation process, it promptly secured a new surety bond.  P. Br. at 4.

Petitioner was unaware Platte River cancelled its DMEPOS surety bond.  However, inadvertent or unintentional billing errors is not a defense to a revocation action for abuse of billing privileges under 42 C.F.R. § 424.535(a)(8)(ii).  The regulation does not provide any exception for inadvertent or accidental billing errors.  Louis J. Gaefke, D.P.M., DAB No. 2554 at 7 (2013).  CMS explained in rulemaking for 42 C.F.R. § 424.535(a)(8)(ii) that “a provider or supplier should be responsible for submitting valid claims at all times and that the provider or supplier’s repeated failure to do so poses a risk to the Medicare Trust Funds.”  79 Fed. Reg. at 72,513.  It is the supplier’s responsibility to submit claims that comply with Medicare payment rules.  79 Fed. Reg. at 72,515, 72,519.  Petitioner was not in compliance with 42 C.F.R. § 424.57(c)(26), (d)(4) because it did not have a surety bond from October 20, 2017 through February 25, 2019.  Therefore, all claims submitted during that period violated Medicare requirements and were improper.

Petitioner argues that CMS presents no evidence to suggest it viewed Petitioner as a fraudulent DMEPOS supplier or that Petitioner’s conduct created any risk to the Medicare program.  P. Br. at 13 (citing P. Ex. 3 at 3).  However, the applicable regulation does not require CMS to demonstrate Petitioner intended to defraud Medicare to revoke Petitioner’s billing privileges.  79 Fed. Reg. at 72,516, 72,520; Gaefke, DAB No. 2554 at 7-8.

Petitioner also attempts to pass on to CMS its responsibility to comply with Medicare regulations and submit valid claims.  Petitioner asserts Platte River notified CMS of the bond cancellation in 2017, but CMS “took no action regarding this for five years, benefitted from nearly $800,000 worth of DMEPOS provided to Medicare beneficiaries, and now labels [Petitioner] as engaging in ‘abusive billing practices’ for claims made during CMS’ period of inaction.”  P. Br. at 9 (citing CMS Ex. 1).  Petitioner claims that if CMS denied one of those claims, it would have allowed Petitioner to correct the problem.  P. Br. at 15-17.  Petitioner also blames the overpayments it received on CMS’s failure to deny Petitioner’s claims.  P. Br. at 17.

CMS’s failure to deny noncompliant claims does not exempt Petitioner from complying with the surety bond requirements imposed by 42 C.F.R. § 424.57(c)(26), (d)(4) and submitting valid claims.  Medicare providers and suppliers, as participants in the program, have a duty to familiarize themselves with Medicare requirements.  Gulf South Med. & Surgical Inst., & Kenner Dermatology Clinic, Inc., DAB No. 2400 at 9 (2011), aff’d, Gulf South Med. & Surgical Inst., et al. v. Sebelius, 2:11-cv-02353 (E.D. La. Oct. 17, 2012).  As a DMEPOS supplier in the Medicare program, it is Petitioner’s

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responsibility to ensure it maintained a valid surety bond to receive payment for Medicare-covered items.  It is also Petitioner’s responsibility to ensure that when it submitted claims for reimbursement, it was compliant with all Medicare participation requirements.  Petitioner violated Medicare participation requirements when it submitted noncompliant claims for nearly 17 months without having a valid DMEPOS surety bond, regardless of whether CMS denied those claims.

Petitioner next contends the provider enrollment system was designed to allow for timely correction of good faith errors, but CMS did not afford Petitioner that opportunity.  Petitioner notes that CMS agreed with a commenter who stated, “if the surety mistakenly cancels a DMEPOS supplier’s surety bond, then the supplier can simply obtain a replacement bond.”  P. Br. at 9 (citing 74 Fed. Reg. 166, 175 (Jan. 2, 2009)).  Petitioner asserts it obtained a replacement bond once it knew Platte River mistakenly canceled the DMEPOS surety bond.  P. Br. at 9.

The issue in this case is not whether Petitioner timely obtained a replacement surety bond.  Rather, the issue is whether CMS had a legitimate basis to revoke Petitioner’s Medicare enrollment and billing privileges under 42 C.F.R. § 424.535(a)(8)(ii) for abuse of billing privileges.  Petitioner submitted tens of thousands of claims to Medicare while it did not have surety bond coverage for nearly 17 months, and, therefore, those claims failed to meet Medicare requirements and constituted abusive billing.  Moreover, Petitioner did not timely obtain a replacement bond.  Platte River cancelled the DMEPOS surety bond effective October 20, 2017, and Petitioner did not obtain a replacement bond until February 26, 2019, more than 16 months after the bond had been cancelled.  CMS Exs. 2, 3.  Because Petitioner failed to timely secure a replacement surety bond, the numerous claims it submitted during the period it did not have a surety bond were abusive and improper.

Petitioner also claims there was a single error in this case, the agent’s cancellation of the DMEPOS surety bond, rather than multiple instances of abusive billing practices.  P. Br. at 12; P. Ex. 2 at 5-6.  While the failure to maintain a surety bond may constitute a single error, Petitioner’s submission of 14,559 claims in nearly 17 months is not an isolated incident.  Submission of three or more improper claims is sufficient to establish a pattern or practice of abusive billing.  See Patrick Brueggeman, D.P.M., DAB No. 2725 at 2 (2016) (citing 73 Fed. Reg. 36,448, 36,455 (June 27, 2008) (CMS would “not revoke billing privileges under § 424.535(a)(8) unless there are multiple instances, at least three, where abusive billing practices have taken place)).  Additionally, as CMS considered, the noncompliant claims resulted in an overpayment of more than $769,000 to Petitioner, further demonstrating that Petitioner engaged in a pattern or practice of abusive billing practices, rather than sporadic instances of improper billing.

Finally, to the extent Petitioner argues the revocation should be reversed because CMS “chose not to bring this action until five years after the date of the alleged lapse” (P. Br.

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at 14), ALJ review is limited to whether CMS had a legitimate basis to revoke Petitioner’s billing privileges.  An ALJ has no authority to review CMS’s exercise of discretion to revoke.  Care Pro Home Health, Inc., DAB No. 2723 at 9 n.8 (2016) (quoting Douglas Bradley, M.D., DAB No. 2663 at 13 (2015)); Sandra E. Johnson, CRNA, DAB No. 2708 at 15-16 (2016); Letantia Bussell, M.D., DAB No. 2196 at 13 (2008) (citing Michael J. Rosen, M.D., DAB No. 2096 at 14 (2007)).  Furthermore, CMS’s delay in revoking Petitioner’s billing privileges is not a basis to reverse the revocation.  The regulation does not require CMS to revoke within a certain period after a supplier engages in a pattern or practice of abusive billing.  Petitioner has not identified any statute of limitations that legally bars the revocation or any other legal basis to invalidate the revocation action.

Petitioner was responsible under the regulations for ensuring it submitted claims that fully complied with Medicare regulations.  However, Petitioner engaged in a pattern or practice of abusive billing when it submitted 14,559 claims for 2,348 beneficiaries over nearly 17 months while failing to maintain a surety bond.  Therefore, CMS had a legal basis to revoke Petitioner’s enrollment and billing privileges under 42 C.F.R. § 424.535(a)(8)(ii).

2. An ALJ does not have the authority to review the length of the reenrollment bar.

In the initial determination, Palmetto imposed a 10-year reenrollment bar on Petitioner, and CMS upheld the 10-year reenrollment bar in its reconsidered determination.  CMS Ex. 4 at 3; CMS Ex. 1 at 4.  Petitioner asserts the 10-year reenrollment bar is not a proper remedy in this case because the remedy was not available to CMS at the time of the surety bond lapse.  P. Br. at 11.  Petitioner argues the regulation in effect at the time of the surety bond lapse barred revoked suppliers from reapplying to participate in the Medicare program for a maximum of three years.  P. Br. at 11.  Petitioner also contends the regulation states that revocation of Medicare enrollment due to a lapsed surety bond is “effective the date the bond lapsed.”  P. Br. at 11 (quoting 42 C.F.R. § 424.57(d)(11)).  Despite Petitioner’s arguments, the Board has ruled that ALJs do not have the authority to review the length of the reenrollment bar imposed by CMS.  Lilia Gorovits, M.D., P.C., DAB No. 2985 at 15 (2020), aff’d, Gorovits v. Becerra, No. 2:20-cv-01850 (E.D. Pa. May 17, 2021).

An ALJ is authorized to review CMS’s initial determination to “revoke a . . . supplier’s Medicare enrollment.”  42 C.F.R § 498.3(b)(17).  However, the determination of the reenrollment bar is not considered an initial determination and is not subject to review by an ALJ.  42 C.F.R. § 498.3(d).  “An appealable determination to revoke a supplier’s enrollment, and a decision about how long the revoked supplier must wait before being allowed to apply for reentry to the program, are factually distinct matters governed by different legal requirements.”  Vijendra Dave, M.D., DAB No. 2672 at 10 (2016).  Unlike

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a determination to revoke, the determination of the duration of the reenrollment bar is an action not listed as an initial determination, which means that it is not subject to review by an ALJ.  42 C.F.R. § 498.3(b); Vijendra Dave, M.D., DAB No. 2672 at 10.  Nonetheless, Petitioner’s arguments are addressed below.

Petitioner confuses the authority under which CMS revoked Petitioner’s billing privileges.  CMS did not revoke Petitioner’s billing privileges pursuant to 42 C.F.R. § 424.57(d)(11).  CMS revoked Petitioner’s billing privileges pursuant to 42 C.F.R. § 424.535(a)(8)(ii) because Petitioner demonstrated a pattern or practice of submitting noncompliant claims.  CMS Ex. 4.  The reenrollment bar for revocation pursuant to 42 C.F.R. § 424.535(a)(8)(ii) “begins 30 days after CMS or its contractor mails notice of the revocation and lasts a minimum of 1 year, but not greater than 10 years,” except in situations not applicable in this case.  42 C.F.R. § 424.535(c)(1)(i).

Additionally, contrary to Petitioner’s argument, the regulation in effect at the time of the revocation governs this case.  John P. McDonough III, Ph.D., DAB No. 2728 at 2 n.1 (2016).  CMS revoked Petitioner’s billing privileges on July 26, 2022.  CMS Ex. 4.  Therefore, the version of the regulation in effect on July 26, 2022, which allows up to a 10-year reenrollment bar, applies in this case.

3. An ALJ does not have the authority to grant equitable relief.

Petitioner argues its Medicare enrollment and billing privileges should be reinstated on equitable grounds.  P. Br. at 7.  However, “[t]he Board has consistently held that it (and the ALJs) lack the authority to restore a supplier’s billing privileges on equitable grounds.”  Neb Grp. of Ariz. LLC, DAB No. 2573 at 6 (2014) (citations omitted).  “[O]nce CMS has shown that one of the regulatory bases for revocation exists, the ALJ and the Board may not refuse to apply the regulation and must uphold the revocation.”  Donald W. Hayes, D.P.M., DAB No. 2862 at 15 (2018).  Because Petitioner submitted claims for Medicare reimbursement when it did not have a surety bond, CMS has a legal basis, pursuant to 42 C.F.R. § 424.535(a)(8)(ii), to revoke Petitioner’s Medicare enrollment and billing privileges.

Petitioner also argues it is entitled to equitable estoppel because CMS engaged in affirmative misconduct and fraud.  P. Br. at 14-15 (citing Pacific Islander Council of Leaders, DAB No. 2091 (2007); Office of Personnel Management v. Richmond, 496 U.S. 414, 421 (1990)).  Petitioner claims while it is “not CMS’[s] job to affirmatively warn suppliers of a surety bond lapse, it is CMS’[s] job to deny claims when it is aware of a surety bond lapse.”  P. Br. at 16.  However, Petitioner has not shown CMS’s failure to deny Petitioner’s claims was fraudulent or constitutes “affirmative misconduct” to support a claim of estoppel.  It was not reasonable for Petitioner to rely on CMS to deny any noncompliant claims, because, as discussed above, Medicare suppliers have a duty to familiarize themselves with Medicare requirements.  Richard Weinberger, M.D., and

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Barbara Vizy, M.D., DAB No. 2823 at 21 (2017) (citing Gulf South, DAB No. 2400 at 9; John Hartman, D.O., DAB No. 2564 at 3 (2014)).  Additionally, while Petitioner claims it was materially harmed by CMS’s repeated inaction, it is Petitioner’s responsibility to comply with all conditions of participation and submit valid claims.  79 Fed. Reg. at 72,513.  Therefore, equitable estoppel does not provide a basis to overturn the revocation of Petitioner’s Medicare enrollment and billing privileges. 

VII.    Conclusion

Based on the evidence set forth, CMS has established a legal basis for the revocation of Petitioner’s Medicare enrollment and billing privileges.  Therefore, the revocation of Petitioner’s Medicare enrollment and billing privileges under 42 C.F.R. § 424.535(a)(8)(ii) is affirmed.

Endnotes

¹  My conclusions of law are set forth in bold and italicized headings and followed by pertinent findings of fact and analysis.