Five Star Healthcare, LLC, DAB No. 3089 (2023)

FINAL DECISION ON REVIEW OF ADMINISTRATIVE LAW JUDGE DECISION

Five Star Healthcare, LLC (Petitioner), a home health agency, appeals a decision of an administrative law judge (ALJ) sustaining a determination by the Centers for Medicare & Medicaid Services (CMS) to revoke Petitioner’s Medicare billing privileges effective January 24, 2018.  Five Star Healthcare, LLC, DAB CR6109 (ALJ Decision).  The ALJ concluded that the revocation was lawful under 42 C.F.R. § 424.535(a)(3) based on the felony conviction of Petitioner’s managing employee for income tax invasion, and under 42 C.F.R. § 424.535(a)(2) based on that same employee’s subsequent exclusion from all federal health care programs.  For the reasons explained below, we affirm the ALJ’s conclusion upholding the revocation under section 424.535(a)(3) because it is supported by substantial evidence and free of legal error, and we decline to reach the question of whether CMS had a lawful basis for the revocation under section 424.535(a)(2).  Pursuant to 42 C.F.R. § 424.535(g), the effective date of Petitioner’s revocation is January 24, 2018 – the date of the managing employee’s felony conviction.

Legal Background

To participate in Medicare, health care providers and suppliers must be enrolled in the program.  42 C.F.R. § 424.500.  A home health agency, such as Petitioner, is considered a “provider.”  Id. § 400.202 (defining “provider”).  Enrollment confers “billing privileges,” the right to claim and receive payment for health care services provided to Medicare beneficiaries.  Id. §§ 424.502, 424.505.  CMS regulations in 42 C.F.R. Part 424, Subpart P establish requirements for enrolling in Medicare and for securing and maintaining enrollment in the program.¹  CMS may revoke a currently enrolled provider’s billing privileges and any corresponding provider agreement for any of the reasons listed under 42 C.F.R. § 424.535(a).

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Under section 424.535(a)(3), CMS may revoke a provider’s billing privileges if “any owner or managing employee of the provider . . . was, within the preceding 10 years, convicted . . . of a Federal or State felony offense that CMS determines is detrimental to the best interests of the Medicare program and its beneficiaries.”  42 C.F.R. § 424.535(a)(3)(i) (emphasis added).  “Managing employee means a general manager, business manager, administrator, director, or other individual that exercises operational or managerial control over, or who directly or indirectly conducts, the day-to-day operation of the provider or supplier,” regardless of that individual’s status as a contractor or W-2 employee.  Id. § 424.502.  Section 424.535(a)(3)(ii) further specifies certain criminal offenses or categories of criminal offenses that CMS has determined to be per se detrimental to the Medicare program and its beneficiaries.  See id. § 424.535(a)(3)(ii)(A)-(D); see also Meadowmere Emergency Physicians, PLLC, DAB No. 2881, at 2 (2018).  One such offense category is “financial crimes, such as extortion, embezzlement, income tax evasion, insurance fraud and other similar crimes.”  42 C.F.R. § 424.535(a)(3)(ii)(B) (emphasis added).

Under section 424.535(a)(2), CMS may revoke a provider’s billing privileges if “any owner, managing employee, authorized or delegated official, medical director, supervising physician, or other health care personnel of the provider or supplier is . . . [e]xcluded from the Medicare, Medicaid, and any other Federal health care program[.]”  42 C.F.R. § 424.535(a)(2) (emphasis added).  “Authorized official means an appointed official,” including but not limited to an owner, “to whom the organization has granted the legal authority to enroll it in the Medicare program,” change or update the organization’s Medicare status, and “commit the organization to fully abide by” Medicare statutes, regulations, and program instructions.  Id. § 424.502.

When a revocation is based on a felony conviction, the revocation’s effective date is the date of conviction.  42 C.F.R. § 424.535(g).  A revoked provider is barred “from participating in the Medicare program from the effective date of the revocation until the end of the re-enrollment bar.”  Id. § 424.535(b), (c).  At the time of the revocation here, CMS regulations set the re-enrollment bar for a period between one and three years, depending on the severity of the basis for the revocation.  Id. § 424.535(c).

A provider may appeal a revocation determination in accordance with the procedures in 42 C.F.R. Part 498.  The provider must first request “reconsideration” of the initial revocation determination.  42 C.F.R. §§ 498.5(1)(1), 498.22.  If dissatisfied with the reconsidered determination, the provider may request a hearing before an ALJ.  Id. § 498.40.  A party dissatisfied with an ALJ’s decision may seek review by the Board.  Id. § 498.80.

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Case Background²

Petitioner was a home health agency enrolled in Medicare.  ALJ Decision at 1; CMS Ex. 3, at 3.  In 2012, Petitioner submitted a Medicare enrollment revalidation application indicating in Section 6 of the application that it employed Maria Larkin (Ms. Larkin), who served as an “Officer” and “W-2 Managing Employee” with “Operational/ Managerial Control” effective April 1, 1999.  ALJ Decision at 1; CMS Ex. 11, at 31, 33-35.  The application indicated that Ms. Larkin held the title “Administrator” and had 100% control as an officer and managing employee of Petitioner.  CMS Ex. 11, at 33.

On January 24, 2018, Ms. Larkin was convicted in the United States District Court for the District of Nevada on one count of felony income tax evasion under 26 U.S.C. § 7201 and sentenced to a term of imprisonment of one year and one day.  CMS Ex. 5, at 1-2; CMS. Ex. 13.  At the time of conviction, Ms. Larkin was ordered to begin serving her sentence on April 27, 2018.  CMS Ex. 5, at 2.

On February 16, 2018, Petitioner sent a letter to Ms. Larkin, stating that Ms. Larkin was “hereby effectively removed from all managerial positions effective Jan. 1, 2018.”  ALJ Decision at 2; P. Ex. 1, at 10.  Ms. Larkin remained employed by Petitioner at the same salary and with all “outstanding vacation/sick time” and bonuses incorporated into Ms. Larkin’s monthly check.  P. Ex. 1, at 10.

On April 25, 2018, the United States Court of Appeals for the Ninth Circuit granted Ms. Larkin’s motion for bail pending appeal, permitting Ms. Larkin to remain out of prison during the appeal of the criminal conviction.  CMS Ex. 4.³

Two days later, on April 27, 2018, National Government Services (NGS), a Medicare contractor, received Petitioner’s application to revalidate its Medicare enrollment.  ALJ Decision at 2; CMS Ex. 12, at 1.⁴  While Petitioner no longer identified Ms. Larkin as an “Officer,” Petitioner continued to identify Ms. Larkin on Section 6 of the application as a “W-2 Managing Employee” with “Operational/Managerial Control” effective April 25, 2018.  ALJ Decision at 2; CMS Ex. 12, at 35, 37-38.  The application further indicated

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that Ms. Larkin held the title “Operations Coordinator.”  ALJ Decision at 2; CMS Ex. 12, at 37-38.

Ms. Larkin and Petitioner’s owner, in their capacity as “authorized officials,” signed certification statements on behalf of Petitioner in Section 15 of the application.  CMS Ex. 12, at 56. Ms. Larkin signed and dated the application on April 24, 2018, certifying, among other things:  “I have read the contents of this application.  My signature legally and financially binds this provider to the laws, regulations, and program instructions of the Medicare program.  By my signature, I certify that the information contained herein is true, correct, and complete . . . .”  Id.  Petitioner’s owner signed and dated the application on April 20, 2018, and by signing made the same certification.  Id.

By letter dated June 12, 2018, NGS notified Petitioner that its revalidation application had been approved.  P. Ex. 1, at 16.  NGS confirmed that Ms. Larkin was no longer an “officer,” but remained a “W-2 managing employee” having “operational/managerial control.”  Id. at 16-17.  NGS requested that Petitioner “verify the accuracy of [its] enrollment information” and further reminded Petitioner that it is “required to submit updates and changes to [its] enrollment information in accordance with specified timeframes pursuant to 42 CFR § 424.516.”  Id. at 18.

Petitioner, having learned that Ms. Larkin was to be excluded from federal health care programs by the Office of Inspector General (I.G.), notified Ms. Larkin by letter of February 6, 2019, that it was terminating her employment as of February 15, 2019.  ALJ Decision at 2; P. Ex. 1, at 15.⁵  Pursuant to section 1128(a)(3) of the Social Security Act (Act), the I.G. excluded Ms. Larkin from participation in all federal health care programs effective February 20, 2019.  P. Ex. 1, at 12; CMS Ex. 6, at 2.

On March 15, 2019, NGS notified Petitioner that its Medicare billing privileges were being revoked effective January 24, 2018.  ALJ Decision at 2; CMS Ex. 2, at 1.  The revocation letter identified two bases for the revocation:  (i) 42 C.F.R. § 424.535(a)(2) because Ms. Larkin was listed in Petitioner’s enrollment record as a W-2 managing employee with operational/managerial control and had been excluded by the I.G. pursuant to section 1128(a)(3) of the Act; and (ii) 42 C.F.R. § 424.535(a)(3) because Ms. Larkin had been convicted of felony income tax evasion on January 24, 2018.  ALJ Decision at 2; CMS Ex. 2, at 1.  NGS established a three-year re-enrollment bar pursuant to section 424.535(c).  CMS Ex. 2, at 2.

Petitioner timely requested reconsideration of the initial determination, arguing that

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Ms. Larkin had been “completely removed from Managerial/Operational duties as of [January 1, 2018]” and that “[Ms.] Larkin is not an owner, not an officer, not a director, not even an authorized official for [Petitioner] when the revalidation was made.”  P. Ex. 1, at 6.  Petitioner further stated that it had believed Ms. Larkin’s signature on the revalidation application was necessary to transfer Ms. Larkin’s duties as an authorized official of the agency.  Id.at 3, 6.  Petitioner stated that it relied on the assistance of a consulting firm to complete its enrollment application and that “[i]t appears that the form may not have been completed correctly to have deleted Maria Larkin from any role that she held at Five Star Healthcare.”  Id. at 3.  In support of its reconsideration request, Petitioner submitted copies of the February 2018 letter purporting to remove Ms. Larkin from “all managerial positions” and the February 2019 letter terminating her employment.  Id.at 10, 15.

On July 2, 2019, CMS issued a reconsidered determination sustaining the revocation under 42 C.F.R. § 424.535(a)(2) and (3).  ALJ Decision at 2; CMS Ex. 14.  CMS stated that it had considered the documentation supporting Petitioner’s reconsideration request but determined that Petitioner had “not sufficiently demonstrated that it terminated its business relationship with Ms. Larkin.”  CMS Ex. 14, at 4.  CMS found the February 16, 2018 letter purporting to remove Ms. Larkin from managerial duties was not “credible because it is dated a month and a half after Ms. Larkin was allegedly removed of her managerial duties.”  Id. at 3.  CMS further noted that Ms. Larkin signed Petitioner’s April 2018 revalidation application as Petitioner’s “authorized official” and that the application listed “Ms. Larkin as having managerial/operational control and as [Petitioner’s] W-2 managing employee, effective April 25, 2018[.]”  Id.

Petitioner requested an ALJ hearing to challenge the reconsidered determination.

The ALJ Proceedings and Decision

The ALJ issued an Acknowledgment and Pre-Hearing Order (Pre-Hearing Order) that directed the parties to file briefs and exhibits as part of their pre-hearing exchange.  Pre-Hearing Order at 4 (¶ 5).  The Pre-Hearing Order directed the parties to submit the written direct testimony of any proposed witnesses and explained that an in-person hearing would be necessary only if a party filed admissible, written direct testimony and the opposing party requested cross-examination.  Id. at 6 (¶¶ 9, 11).

In accordance with the Pre-Hearing Order, CMS filed a motion for summary judgment and 14 proposed exhibits.  ALJ Decision at 3.  Petitioner filed a brief in opposition to CMS’s motion for summary judgment along with four proposed exhibits, including the written direct testimony of its former administrator, Marites Castillo Bustamante, RN, BSN (Nurse Bustamante).  Id.  CMS submitted a request to cross-examine Petitioner’s witness if its motion for summary judgment were denied.  Id.

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The case was subsequently re-assigned to a different ALJ, who determined that an in-person hearing was unnecessary because the record was “sufficient to issue a ruling” and because cross-examination of Petitioner’s proposed witness by CMS was unnecessary.  ALJ Decision at 3.  The ALJ admitted all of the parties’ proposed exhibits and issued a decision based on the written record.  Id.⁶  Accordingly, the ALJ deemed CMS’s motion for summary judgment moot.  Id.

The ALJ found Petitioner was enrolled in the Medicare program and employed Ms. Larkin as a W-2 managing employee and as an individual with operational/ managerial control effective April 1, 1999.  ALJ Decision at 4.  The ALJ found Ms. Larkin was convicted of one felony count of tax evasion on January 24, 2018, and that CMS has determined such an offense is detrimental to the best interests of the Medicare program.  Id.  The ALJ further found that on April 25, 2018, three months after her conviction, Ms. Larkin signed Petitioner’s Medicare revalidation application as an “authorized official” on Petitioner’s behalf; that the application identified Ms. Larkin as a W-2 managing employee and an individual having operational/managerial control; and that by signing the application Ms. Larkin certified “that the information contained [in the revalidation application] is true, correct, and complete . . . .”  Id. The ALJ concluded that CMS had a lawful basis to revoke Petitioner’s Medicare billing privileges under 42 C.F.R. § 424.535(a)(3) because Ms. Larkin “remained a W-2 managing employee with managerial/operational control after her felony conviction for tax evasion.”  Id.

The ALJ rejected Petitioner’s argument that Ms. Larkin was not authorized to sign the revalidation application based on the February 16, 2018 letter that purported to retroactively remove Ms. Larkin’s managerial authority effective January 1, 2018.  ALJ Decision at 4 (discussing P. Ex. 1, at 10).  The ALJ rejected Petitioner’s contention that “managerial authority held at one point in time can be retroactively removed at a future date.”  Id.at 6 n.3.  “Such an action,” said the ALJ, “would allow all providers that have had their billing privileges revoked under 42 C.F.R. § 424.535(a)(3) to simply write a letter to an employee retroactively removing their managerial authority to a date prior to conviction.”  Id.Thus, the ALJ found that Petitioner did not “revoke” Ms. Larkin’s managerial authority until February 16, 2018 – 23 days after her conviction.  Id. at 6.  Based on this fact alone, the ALJ determined CMS had a lawful basis to revoke Petitioner’s billing privileges under section 424.535(a)(3).  Id.

Additionally, the ALJ found that Ms. Larkin signed Petitioner’s April 2018 revalidation application as an “authorized official” and that application stated that Ms. Larkin remained a W-2 managing employee with operational/managerial control.  ALJ Decision

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at 3, 6.  The ALJ found that Ms. Larkin’s signature as an authorized official demonstrated her continuing managerial control even after Petitioner purported to remove her managerial authority on February 16, 2018.  Id. at 6.  Accordingly, the ALJ concluded that CMS also had a lawful basis for the revocation under section 424.535(a)(3) based on the information (certified to be true) in Petitioner’s April 2018 revalidation application.  Id.

Finally, the ALJ found that CMS was entitled to rely on the information in Petitioner’s April 2018 revalidation application in support of its revocation determination under section 424.535(a)(2).  ALJ Decision at 7.  The ALJ concluded that CMS had a lawful basis to revoke Petitioner’s billing privileges under section 424.535(a)(2) because Ms. Larkin remained listed as a W-2 managing employee with managerial/operational control at the time of her exclusion in February 2019.  Id.

Petitioner timely requested Board review of the ALJ Decision.

Standard of Review

The standard of review on a disputed factual issue is whether the ALJ’s decision is supported by substantial evidence in the record as a whole.  The standard of review on a disputed issue of law is whether the ALJ’s decision is erroneous.  See Guidelines -- Appellate Review of Decisions of Administrative Law Judges Affecting a Provider’s or Supplier’s Enrollment in the Medicare Program (“Guidelines”), “Completion of the Review Process,” ¶ c, available at https://www.hhs.gov/about/agencies/dab/different-appeals-at-dab/appeals-to-board/guidelines/enrollment/index.html?language=en.

Analysis

1. The ALJ properly concluded that an in-person hearing was not necessary to resolve the factual disputes at issue in this matter.

Before the Board, Petitioner argues that the ALJ erred by concluding that “a hearing was unnecessary.”  Request for Review (RR) at 1.  According to Petitioner, “[t]here are disputed issues of material fact in this case such that a hearing is required.”  Id. at 2.  Petitioner contends that the ALJ erred by “determining that CMS was entitled to rely solely on information” in Petitioner’s April 2018 revalidation application without considering “the disputed material facts in this case.”  Id.  In its response brief, CMS argues that the ALJ did not err in concluding that an in-person hearing was unnecessary and deciding the appeal on the written record.  See CMS Brief in Response to Appeal (CMS Br.) at 10-11.  Petitioner expands on its argument in its reply brief, arguing that the ALJ was required to hold a hearing because CMS (the prevailing party) made a request to cross-examine Petitioner’s witness.  Reply Brief to CMS’ Brief in Response to Appeal (Reply) at 6-7.  Petitioner asks that the Board vacate the ALJ Decision and remand the

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case for a hearing to resolve the disputed issues of material fact.  RR at 2; Reply at 12.

We find no merit to Petitioner’s argument, which misconstrues the ALJ proceedings and decision.  The ALJ did not decide this case on summary judgment or conclude that there were no disputed issues of material fact.  Rather, the ALJ ruled that cross-examination of Petitioner’s witness by CMS was unnecessary and issued a decision on the merits based on the written record.  ALJ Decision at 3.  In doing so, the ALJ considered the parties’ respective arguments, considered the evidence presented by both parties, and ultimately resolved the disputed issues of material fact in favor of CMS.  See id. at 3-7.

Although disputed issues of material fact preclude summary judgment, they do not preclude a decision on the written record.  The Pre-Hearing Order informed the parties that an in-person hearing, as opposed to review based on the written record, would be necessary only if a party filed written direct testimony of a witness and the opposing party requested cross-examination.  Pre-Hearing Order at 6 (¶ 11).  Thus, the sole purpose of convening an in-person hearing would be for cross-examination.  Id.  “Deciding [a] case based on the written record, including any written direct testimony, is consistent with due process so long as in-person cross-examination is available.”  George Yaplee Med. Ctr., DAB No. 3003, at 5 (2020) (collecting cases).  Where no witness testimony is proffered or all witness testimony is submitted in writing and no cross-examination is sought, there is no need to convene an in-person hearing.  Id.

Here, CMS did not proffer the written direct testimony of any witness.  Petitioner does not (and cannot) complain that it was deprived of the right to cross-examine any witness.  While CMS requested the opportunity to cross-examine Petitioner’s witness (if its summary judgment motion were denied), the ALJ ruled it unnecessary for CMS to cross-examine Petitioner’s witness and upheld CMS’s revocation determination based on the written record.  ALJ Decision at 3.  Petitioner suffered no prejudice by the ALJ not permitting the cross-examination of its own witness by CMS.  For its part, CMS has not appealed the ALJ’s ruling and agrees that the ALJ properly resolved this case on the written record.  CMS Br. at 10.  Accordingly, we find no error in the ALJ’s determination that an in-person hearing was unnecessary.

2. The ALJ’s determination that CMS had a lawful basis to revoke Petitioner’s Medicare billing privileges under 42 C.F.R. § 424.535(a)(3) is supported by substantial evidence and free of legal error.

On review of a determination to revoke a Medicare provider’s 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).  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

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discretion . . . .”  Acute Care Homenursing Servs., Inc., DAB No. 2837, at 9 (2017).  Thus, if the regulatory elements for revocation are satisfied, “then the revocation must be sustained.”  Douglas Bradley, M.D., DAB No. 2663, at 13 (2015).

Section 424.535(a)(3)(i) provides that CMS may revoke a provider’s billing privileges if “any owner or managing employee of the provider . . . was, within the preceding 10 years, convicted . . . of a Federal or State felony offense that CMS determines is detrimental to the best interests of the Medicare program and its beneficiaries.”  42 C.F.R. § 424.535(a)(3)(i) (emphasis added).  Petitioner does not challenge the ALJ’s finding that its employee, Ms. Larkin, was convicted of felony income tax evasion in federal district court on January 24, 2018.  ALJ Decision at 4; CMS Ex. 5.  Nor does Petitioner dispute that CMS determined that “income tax evasion” is an offense detrimental to the best interests of the Medicare program and its beneficiaries.  See 42 C.F.R. § 424.535(a)(3)(ii)(B); Donna Maneice, M.D., DAB No. 2826, at 6 (2017) (“[T]he regulation expressly identifies ‘income tax evasion’ as one of numerous examples of financial crimes detrimental to the best interests of the Medicare program and its beneficiaries.”); Letantia Bussell, M.D., DAB No. 2196, at 9 (2008) (“When section 424.535(a)(3) is considered in the context of the preamble, it is clear that CMS has determined that income tax evasion by a provider is detrimental per se to the program and its beneficiaries.”).

Petitioner challenges the ALJ’s conclusion that CMS had a legal basis for the revocation under section 424.535(a)(3) because, according to Petitioner, it “removed” Ms. Larkin “from any position of operational control on January 1, 2018.”  RR at 1-2.  Petitioner insists that “Ms. Larkin had no managerial/operational responsibilities after her conviction . . . .”  Id. at 3.  While there is conflicting evidence on this issue, the ALJ evaluated the weight and credibility of the record evidence and found that Ms. Larkin remained a W-2 managing employee of Petitioner after her felony conviction on January 24, 2018.  ALJ Decision at 4-6.  “[U]nder the substantial evidence standard applicable to findings of fact by an ALJ (or other trier-of-fact), the Board does not make credibility findings, re-weigh the evidence, or substitute its evaluation of the evidence for that of the ALJ.”  E & I Med. Supply Servs., Inc., DAB No. 2363, at 9 (2011).  Rather, the Board will “defer to the ALJ’s determinations of the credibility accorded to witness testimony and of the weight given to evidence, absent a compelling reason to do otherwise.”  Adel A. Kallini, MD, DAB No. 3021, at 11 (2020).  For the reasons explained below, we find no compelling reason to disturb the ALJ’s assessment of the record evidence and find the ALJ’s determination that Ms. Larkin remained a W-2 managing employee following her conviction for tax evasion is supported by substantial evidence.

There is no dispute that at the time Petitioner submitted its Medicare revalidation application in 2012, Ms. Larkin was an officer, W-2 managing employee, and individual having 100% operational/managerial control over Petitioner.  CMS Ex. 11, at 31, 33-35; see also P. Ex. 3, at 1-2.  Moreover, there is no dispute that Petitioner did not update or

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amend its Medicare enrollment information regarding Ms. Larkin’s status or role at any time before the submission of Petitioner’s revalidation application in April 2018.

Before the ALJ, Petitioner submitted two letters in support of its contention that Ms. Larkin was not a managing employee on or after the date of her conviction.  The first letter, dated February 16, 2018, purported to advise Ms. Larkin, that she was “effectively removed from all managerial positions effective Jan. 1, 2018.”  P. Ex. 1, at 10.  The letter stated that Ms. Larkin would maintain the same salary and receive all “outstanding” vacation/sick time and bonuses in her monthly check.  Id.  The letter further stated (in future verb tense) that Ms. Larkin “will be reporting” to the operations manager “and/or” another individual whose title, if any, was not identified.  Id.  Thus, while the letter purported to remove Ms. Larkin’s managerial role retroactively, it prospectively required Ms. Larkin to begin reporting to others after February 16.  Still further, the letter conspicuously fails to indicate that Petitioner made a decision before February 16 to remove Ms. Larkin’s managerial authority.

As the ALJ found, the February 16 letter was dated 23 days after Ms. Larkin’s felony conviction and “purports to retroactively remove” Ms. Larkin’s managerial duties.  ALJ Decision at 6 & n.3.  The ALJ was unconvinced by Petitioner’s attempt to “retroactively remove” Ms. Larkin’s managerial duties and found that Petitioner did not revoke Ms. Larkin’s managerial authority until February 16, 2018 – more than three weeks after her conviction.  Id.  This fact alone, the ALJ concluded, provided a basis for CMS to revoke Petitioner’s billing privileges under section 424.535(a)(3).  Id. at 6.

The second letter, dated January 5, 2018, was from Ms. Larkin to Petitioner asking to be removed “from any and all managerial position . . . effective Jan. 1, 2018.”  P. Ex. 4.  Oddly, this letter was not directed to any manager, supervisor, or anyone else with authority and it was not included with Petitioner’s reconsideration request in March 2019 (CMS Ex. 1) or supplemental reconsideration request in April 2019 (P. Ex. 1).⁷  Moreover, the January 5 letter undermines Petitioner’s contention that Ms. Larkin was not a managing employee as of January 1, 2018, because the “request” itself would not have been necessary if, in fact, Ms. Larkin had already been removed from any managerial/operational control.

Petitioner further asserts in its reply that Ms. Larkin “expressly renounced” all managerial control in her January 5 letter.  Reply at 11 (citing Restatement (Third) of Agency at § 3.10(b)-(c)).  Petitioner did not make this argument before the ALJ nor any other argument based on the Restatement (Third) of Agency.  “A party appearing before

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the Board is not permitted to raise on appeal issues that could have been raised before the ALJ but were not.”  Meadowmere at 15 (citing Guidelines, “Completion of the Review Process,” ¶ (a) (“The Board will not consider issues not raised in the request for review, nor issues which could have been presented to the ALJ but were not.”)).  Petitioner did not present this issue to the ALJ and made no showing that it could not have done so; accordingly, the issue is not properly before the Board.  See id. (applying the Board’s Guidelines to exclude arguments not raised before the ALJ).

Even if Petitioner had raised this argument before the ALJ, we would not find it persuasive.  Ms. Larkin did not purport to “renounce” any authority in the January 5 letter; rather, Ms. Larkin made a request to be “removed” from any managerial position.  P. Ex. 4.  The “request” was not directed to any supervising authority and, according to Petitioner’s Medicare enrollment information on file at that time, Ms. Larkin had 100% control of Petitioner as an officer and managing employee.  CMS Ex. 11, at 33.  Petitioner has made no showing as to how such an individual could simply “renounce” that authority (retroactively) by way of a letter directed to the entity and without making any arrangement for a successor.

Still further, there is no dispute that on April 27, 2018, more than three months after Ms. Larkin’s conviction, Petitioner submitted a Medicare enrollment revalidation application, certified to be “true, correct, and complete” by both Petitioner’s owner and Ms. Larkin in their capacity as “authorized officials.”  CMS Ex. 12, at 1, 56.  The application identified Ms. Larkin as a W-2 managing employee with operational/ managerial control effective April 25, 2018.  Id. at 35, 37-38.  The application further indicated that Ms. Larkin held the title “Operations Coordinator,” in her capacity as a W‑2 managing employee having operational/managerial control.  Id. at 37-38.  As the ALJ found, the fact that Ms. Larkin signed and certified the application on behalf of Petitioner further demonstrates that Ms. Larkin continued to exercise operational and managerial control despite the February 16 letter purporting to remove such authority.  ALJ Decision at 6.

Petitioner attributes the alleged inaccuracies listed on the revalidation application to the consultant firm that it enlisted to assist with the reenrollment process.  Reply at 5.  But the consultant firm did not sign and certify the information in the application to be “true, correct, and complete.”  Rather, Petitioner’s owner and Ms. Larkin herself provided the required certification on Petitioner’s behalf.  While Petitioner submitted a declaration from Nurse Bustamante suggesting that the information about Ms. Larkin was inaccurate, P. Ex. 3, at 4-5 (¶¶ 11-12), neither of the “authorized officials” who certified the application to be “true, correct, and complete” submitted a statement retracting their certifications.

By letter dated June 12, 2018, NGS notified Petitioner that its revalidation application had been approved.  P. Ex. 1, at 16.  NGS properly addressed the letter to Petitioner’s

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contact person as identified in the application.  Id.; CMS Ex. 12, at 55.  The approval letter confirmed that Ms. Larkin was a W-2 managing employee having operational/ managerial control.  P. Ex. 1, at 16-17.  Although the letter requested that Petitioner “verify the accuracy of [its] enrollment information,” id. at 18, Petitioner did not notify CMS or its contractor that the description of Ms. Larkin as a W-2 managing employee with operational/managerial control was incorrect or inaccurate at any time before Petitioner’s billing privileges were revoked.

As mentioned above, Petitioner submitted a declaration from Nurse Bustamante, who stated that “[f]or the relevant time period at issue in this case,” she was Petitioner’s administrator.  P. Ex. 3, at 1 (¶ 2).⁸  According to Nurse Bustamante, Petitioner decided to remove Ms. Larkin from “any position of managerial control” sometime before deciding Ms. Larkin’s compensation and benefits.  Id. at 2 (¶ 7).  Nurse Bustamante, however, never stated precisely when Petitioner made either of these decisions and Petitioner submitted no business records or other documentary evidence to corroborate these assertions.  Nurse Bustamante also failed to identify which person or persons exercised the authority on behalf of Petitioner to remove Ms. Larkin from all managerial control.  The only evidence of when Petitioner decided to remove Ms. Larkin’s managerial authority is the letter of February 16, 2018.

Nurse Bustamante further asserted that “[a]fter January 1, 2018, Ms. Larkin did not hold any position of control or have any managerial responsibilities . . . .”  P. Ex. 3, at 5 (¶ 13) (original underlining replaced with italics).  This assertion, however, is directly contradicted by Petitioner’s April 2018 revalidation application, signed and certified to be true by Petitioner’s owner and Ms. Larkin.  Petitioner insists that it “was in the best position to know and understand what actually occurred in terms of Ms. Larkin’s role.”  Reply at 14.  If that is true, then the April 2018 revalidation application, which was signed and certified by Petitioner’s owner and Ms. Larkin, is powerfully persuasive evidence concerning Ms. Larkin’s role on behalf of Petitioner following her conviction.

Petitioners rely on Cleveland Back & Pain Management Center, Inc., DAB CR5257 (2019), but that reliance is misplaced.  First, as the ALJ correctly recognized, “ALJ decisions are not precedential and are not binding authority on the Board or other ALJs.”  Zahid Imran, M.D., DAB No. 2680, at 12 (2016); see ALJ Decision at 5 (citing Imran).  We do not accept or adopt the legal and evidentiary framework applied by the ALJ in that case.  Second, Cleveland Back is factually distinguishable from Petitioner’s case in every material respect.  The ALJ concluded in Cleveland Back that CMS did not have a basis to revoke a supplier’s billing privileges under section 424.535(a)(3) because the supplier’s physician owner was no longer an owner or manager at the time of his felony conviction.

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The ALJ found that the supplier had submitted a stock sale agreement establishing that the physician owner, several months before his conviction, had transferred 100% of his ownership interest in the practice to another doctor, was removed as an employee of the supplier, and gave up all decision-making authority.  Cleveland Back at 3-5.  This documentary evidence corroborated the written direct testimony of the supplier’s office manager, who testified that the former owner “made no decisions on behalf” of the supplier after transferring his ownership interest.  Id. at 4.  Unlike Petitioner, the supplier in Cleveland Back submitted no Medicare revalidation application after the conviction that directly contradicted the supplier’s evidence (in the form of the sale agreement and the office manager’s testimony).  Rather, the most problematic evidence that the supplier had to overcome was a change of address form submitted to CMS bearing the former owner’s signature as the supplier’s authorized representative (after the transfer of his ownership interest but before his conviction).  Id.at 3, 6.  The office manager, according to the ALJ, “testified persuasively” that the submission of the form was an “error on her part” because the office manager stamped the former owner’s signature on the form.  Id. at 6.  Thus, unlike in Petitioner’s case, the alleged owner/manager of the supplier in Cleveland Back did not even sign the form that purportedly established his status as an owner/manager based on his signature.

Petitioner complains that the revocation is “an excessively harsh and punitive administration action [that] was taken on the basis of one form filed with CMS, while discounting other admissible and credible evidence.”  Reply at 14.  While we reject Petitioner’s characterization that the revocation under section 424.535(a)(3) was based on the submission of a single form, we agree that the ALJ, faced with conflicting evidence, made determinations about the credibility and weight to be given to the evidence.  In doing so, the ALJ found that “Ms. Larkin remained a W-2 managing employee with managerial/operational control after her felony conviction for tax evasion.”  ALJ Decision at 4.  Based on our review of the record, we find that determination is supported by substantial evidence.  We affirm the ALJ’s conclusion that CMS had a legal basis to revoke Petitioner’s billing privileges under section 424.535(a)(3) because it is supported by substantial evidence and free of legal error.

3. Petitioner’s revocation was effective on the date of Ms. Larkin’s conviction.

In accordance with 42 C.F.R. § 424.535(g), the ALJ upheld CMS’s determination that the effective date of Petitioner’s revocation was January 24, 2018 – the date of Ms. Larkin’s felony conviction.  ALJ Decision at 1, 8; see also 42 C.F.R. § 424.535(g) (providing that when a revocation is based on a felony conviction, the revocation is effective on the date of that conviction).  Throughout its briefing, Petitioner repeatedly refers to the revocation of its billing privileges as a “retroactive revocation.”  See, e.g.,RR at 2-4; Reply at 1-3, 10-11, 16.  Petitioner complains that CMS’s revocation determination was issued on March 15, 2019, but its billing privileges were revoked “back to January 24, 2018.”

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Reply at 2.  Petitioner asserts that CMS had no basis to “retroactively revoke” its billing privileges.  Id. at 1.  We find no merit to this argument.

Section 424.535(a)(3) authorizes CMS to revoke a provider’s Medicare billing privileges based on the qualifying conviction of the provider’s managing employee, and section 424.535(g) requires CMS to make such a revocation effective on the date of the managing employee’s conviction.  See Pennsylvania Physicians, P.C., DAB No. 2980, at 9 (2019) (rejecting argument that CMS had “no authority” to impose a “retroactive revocation” based on the date of the supplier owner’s felony conviction).  The effective date of a supplier or provider’s revocation is “controlled by operation of 42 C.F.R. § 424.535(g)” and neither ALJs nor the Board may “depart from, or ignore, that regulation’s plain text.”  Meadowmere at 13 (citation and internal quotation marks omitted).  When a revocation of a provider’s Medicare billing privileges is based on a felony conviction under section 424.535(a)(3), the revocation is effective on the date of the felony conviction.  Id. (citing 42 C.F.R. § 424.535(g)).  We find no error in CMS’s determination that the effective date of Petitioner’s revocation was January 24, 2018.

Petitioner further argues that there is “no policy rationale to support the retroactive revocation or how reversing the retroactive revocation would somehow harm the Medicare program or its Medicare beneficiaries.”  RR at 3.  Petitioner asserts that it provided high-quality, medically necessary services for over 20 years and specialized in providing services that other home health agencies did not provide.  Id. at 4.  According to Petitioner, upholding the revocation in this case “is against principles of fairness and justice and neither serves the public good, nor the Medicare population in need of these types of service.”  Id.  Petitioner’s arguments amount to a request for equitable relief and “neither the ALJ nor the Board has authority to reverse an authorized revocation for reasons of equity.”  Maneice at 7; see also Michael Scott Edwards, OD, et al., DAB No. 2975, at 16-17 (2019) (collecting cases).  For all these reasons, we uphold the revocation of Petitioner’s billing privileges under section 424.535(a)(3) with a revocation effective date of January 24, 2018.

4. We do not reach the issue of whether CMS had a lawful basis for revocation under 42 C.F.R. § 424.535(a)(2).

Before the Board, CMS argued that it was authorized to revoke Petitioner’s billing privileges under both sections 424.535(a)(3) and 424.535(a)(2).  CMS Br. at 6-9.  CMS noted, however, that the Board “need not find noncompliance with more than one of the bases for revocation in section 424.535(a) in order to uphold the revocation.”  Id. at 9, n.2 (quoting Meadowmere at 8 (citing Jason R. Bailey, M.D., P.A., DAB No. 2855, at 15 (2018))).  After Petitioner submitted its reply brief, the Board requested further briefing

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from CMS on two issues:

1. If the Board were to affirm the ALJ’s determination that CMS had a lawful basis to revoke Petitioner’s billing privileges under 42 C.F.R. § 424.535(a)(3), would the Board also need to determine whether the ALJ properly sustained Petitioner’s revocation under 42 C.F.R. § 424.535(a)(2)?
2. Under the specific facts and circumstances of this case, would CMS need to reassess the length of Petitioner’s re-enrollment bar if Petitioner’s revocation were based only on section 424.535(a)(3)?

Order for Further Briefing (Oct. 18, 2022).

CMS filed a supplemental response brief answering both questions in the negative.  First, CMS stated that “to sustain a revocation, CMS only needs to establish one basis for revocation under section 424.535(a)” and, therefore, the Board “need not consider whether CMS had a basis to revoke under section 424.535(a)(2) unless it concludes that CMS lacked a basis to revoke under section 424.535(a)(3).”  CMS Supp. Resp. Br.at 2-3.  Second, CMS stated that it would have imposed a three-year re-enrollment bar even if it had revoked Petitioner’s enrollment only under section 424.535(a)(3) because CMS policy in the Medicare Program Integrity Manual (MPIM) called for imposing a three-year bar for revocation under section 424.535(a)(3) and specified that felony convictions “always entail a 3-year bar.”  Id. at 3 (citing MPIM, CMS Pub. 100-08, Ch. 15, § 15.27.2 (Rev. 756, eff. Jan. 1, 2018)).  Although the Board expressly permitted Petitioner to file a reply to CMS’s response, Petitioner did not do so.  See Order for Further Briefing at 3.

It is well-settled that to sustain a revocation of a provider or supplier’s Medicare billing privileges, the ALJ need only find that CMS had one basis for revocation under section 424.535(a).  See, e.g., Meadowmere at 8; Bailey at 15; Maneice at 8.  Here, we affirm the ALJ’s conclusion that CMS had a lawful basis for the revocation of Petitioner’s billing
privileges under section 424.535(a)(3), but we decline to reach the question of whether CMS had an alternative basis to revoke under section 424.535(a)(2).

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Conclusion

For the reasons stated, we affirm the ALJ’s conclusion that CMS had a lawful basis to revoke Petitioner’s Medicare billing privileges under 42 C.F.R. § 424.535(a)(3), and we decline to reach the question of whether CMS had a lawful basis for the revocation under 42 C.F.R. § 424.535(a)(2).  Consistent with 42 C.F.R. § 424.535(g), the effective date of Petitioner’s revocation is January 24, 2018.

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Endnotes

¹   Although CMS revised the Medicare enrollment regulations effective November 4, 2019, see 84 Fed. Reg. 47,794 (Sept. 10, 2019), we cite to and apply the regulations in effect on March 15, 2019, the date of the revocation determination (CMS Ex. 2).  See Meadowmere Emer. Phys., PLLC, DAB No. 2881, at 2 n.2 (2018). 

²   The factual information in this section is drawn from the ALJ Decision and the record and is not intended to replace, modify, or supplement the ALJ’s findings of fact.

³   The District Court had previously denied Ms. Larkin’s motion for release on personal recognizance bond pending appeal.  See United States v. Larkin, Case No. 2:12-cr-319, 2018 WL 1413966 (D. Nev. Mar. 21, 2018).  The Ninth Circuit later affirmed Ms. Larkin’s conviction but remanded the case to the District Court to conform the written judgment to the oral pronouncement of sentence.  United States v. Larkin, 779 F. App’x 435 (9th Cir. June 13, 2019).

⁴   CMS Ex. 12 appears to be a complete copy of Petitioner’s April 2018 revalidation application.  The record also includes relevant excerpts of that same application.  See CMS Ex. 9.  For ease of reference, we cite only to CMS Ex. 12 throughout this decision.

⁵   The ALJ accepted Petitioner’s explanation that the letter was mistakenly dated February 6, 2018, and should have been dated February 6, 2019.  ALJ Decision at 2 n.1.

⁶   Before the ALJ, Petitioner objected to the admissibility of CMS Ex. 13 (Ms. Larkin’s second superseding criminal indictment).  See Petitioner’s Pre-Hearing Brief at 22.  Although the ALJ did not address this objection, Petitioner has not appealed the ALJ’s ruling admitting the parties’ respective exhibits into evidence.

⁷   NGS’s initial determination letter advised Petitioner that its reconsideration request was Petitioner’s “only opportunity to submit information during the administrative appeals process,” unless an ALJ permits consideration of additional evidence.  CMS Ex. 2, at 2.

⁸   Nurse Bustamante did not specify the dates of “the relevant time period.”  Nurse Bustamante was not listed as an “Administrator” on Petitioner’s 2012 or 2018 revalidation applications.  See CMS Ex. 11; CMS Ex. 12.