Stephen White, M.D., DAB CR5069 (2018)

Department of Health and Human Services
Civil Remedies Division

Docket No. C-18-55
Decision No. CR5069


The Centers for Medicare & Medicaid Services (CMS), acting through its administrative contractor, Noridian Healthcare Solutions (Noridian), denied Petitioner Steven White’s enrollment application pursuant to 42 C.F.R. § 424.530(a)(3) and § 424.530(a)(4). Petitioner challenges the enrollment denial. For the reasons discussed below, I affirm CMS’ denial of Petitioner’s enrollment application.

I. Background

Petitioner is a physician specializing in orthopedic surgery, who previously resided in Texas but now lives in the state of Washington. CMS Exhibit (Ex.) 1 at 3, 22. On November 2, 2010 he pleaded guilty to felony possession of less than one gram of a controlled substance in a Texas state court. CMS Ex. 1 at 25‑26. 

On February 9, 2017, Petitioner signed an enrollment application, Form CMS‑855I, as a “new enrollee” in the Medicare Program. Id. at 1, 20. In Section 1 of the enrollment application, Petitioner checked the box for “Final Adverse Actions/Convictions.” Id. at 2. In Section 3 of the application, Petitioner marked the box “Yes” in response to the

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question “Have you, under any current or former name or business identity, ever had a final adverse legal action listed on page 12 of this application imposed against you?” Id. at 10. In Section 3, Question 2, the form provides a Table into which applicants are to report “each final adverse legal action, when it occurred, the Federal or State agency . . . that imposed the action, and the resolution, if any.” Id. Petitioner wrote inside the first box of the Table, “please see attached letter,” and left the remaining boxes blank. Id. This form page also requested that the applicant “Attach a copy of the final adverse legal action documentation and resolution.” Id. Petitioner’s letter supplemented his answers stating:

10 years ago, during this period of time that I was not practicing medicine, and dealing with this substance abuse problem, I was arrested under the influence (once while asleep in my car and twice at ‘parties’ I was visiting). Although charged with controlled substance possession at each arrest, I was only convicted of a class A misdemeanor for possession of my antidepressant medication (samples of an ssri given to me by my psychiatrist but no prescription with me) and at the same time, a class B misdemeanor for driving while intoxicated (I was asleep in my car while intoxicated).

I did do two different deferred adjudications to not be charged for possession of a controlled substance that was found at the locations of the two arrests.

I was successful with the probation time and community service work. This helped me with my recovery as well. The Texas Medical Board monitored my recovery and compliance without a violation for 9 years following this.

I have no other record (and no other legal issues) than these misdemeanor violations from 10 years ago.

CMS Ex. 1 at 22. Petitioner also attached a 4‑page document titled “Texas Department of Public Safety Criminal History Search.” Id. at 23‑26.

By letter dated June 8, 2017, CMS contractor Noridian notified Petitioner that it was denying his Medicare enrollment application. CMS Ex. 2. Noridian cited two bases for denial: (1) 42 C.F.R. § 424.530(a)(3)-Felony Conviction because Petitioner pled guilty to Possession of controlled substance less than 1 gram on November 2, 2010; and (2) 42 C.F.R. § 424.530(a)(4)-False or Misleading Information on Application because Petitioner failed to report on his re-enrollment application that he was adjudged guilty of

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a felony in 2010. Id. at 1. Petitioner submitted a Corrective Action Plan (CAP) Request and request for Reconsideration. CMS Ex. 3. Noridian denied both the CAP and Reconsideration requests. CMS Ex. 4.

Petitioner, through counsel, timely requested a hearing before an administrative law judge (ALJ); I was designated to hear and decide this case. On October 24, 2017, I issued an Acknowledgment and Pre‑hearing Order (Pre‑hearing Order) setting forth a briefing schedule. CMS submitted its pre-hearing exchange (CMS Br.) and Exs. 1‑4 on November 29, 2017. Petitioner filed his brief (P. Br.) and Exs. 1‑10 on January 2, 2018. CMS objected (CMS Objections) to several of Petitioner’s exhibits, and Petitioner filed a response (P. Resp.).

II. Admission of Exhibits and Decision on the Record

There being no objection from Petitioner, I admit CMS Exs. 1‑4 into the record.

CMS objected to P. Exs. 2-9 and portions of P. Ex. 1. CMS Objections at 1. CMS argues that P. Exs. 2‑9 “represent new documentary evidence not presented previously to CMS during the reconsideration appeal.” Id. CMS cites to section 6 of my Pre‑hearing Order which states that “Petitioner may not offer new documentary evidence in this case absent a showing of good cause for failing to present that evidence previously to CMS” and contends that Petitioner has not made the requisite good cause showing. Id. at 1‑2. As it pertains to P. Ex. 1, CMS objects to pages 1‑3 because they contain legal argument and pages 61‑63 because they “include new documentary evidence,” that is, a letter “dated September 23, 2017, which falls after the Reconsideration Decision.” Id. at 2.

In response, Petitioner contends that he initially attempted to handle this appeal pro se and “[i]t never dawned on him that his answers were subjected to further legal interpretation.” P. Resp. at 2. Petitioner argues that the various documents might “be considered new documentary evidence,” but that the contents of the documents are “not new evidence as the documents support the facts and admissions of the Petitioner which are already known by CMS.” Id. Petitioner asserts that “[t]here is good cause to accept this evidence as the documents are the written support for the Petitioner’s factual allegations which are already in evidence.” Id. As it pertains to pages 61‑63 of P. Ex. 1, Petitioner argues that “this can’t be considered new documentary evidence as this letter was known to CMS, was in its possession and control.” Id. at 3. Finally, Petitioner reasons that “CMS cannot claim any surprise or disadvantage in the submission of these documents as they are in response to CMS’ legal arguments which were not brought forth through the reconsideration process” and “[t]he facts underlying these documents were known to CMS and these documents are in support [of] the facts previously submitted.” Id.

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I find that there is good cause to admit Petitioner’s exhibits. I therefore overrule CMS’ objections and admit all of Petitioner’s exhibits, P. Ex. 1-9, into the record.

My Pre‑hearing Order advised the parties that they must submit written direct testimony for each proposed witness and that an in-person hearing would only be necessary if the opposing party requested an opportunity to cross-examine a witness. Pre‑hearing Order ¶¶ 8-10; Civil Remedies Division Procedures (CRDP) §§ 16(b), 19(b); Pacific Regency Arvin, DAB No. 1823 at 8 (2002) (holding that the use of written direct testimony for witnesses is permissible so long as the opposing party has the opportunity to cross‑examine those witnesses). Petitioner submitted a declaration of his own testimony. P. Ex. 10. CMS did not request a hearing to cross‑examine him. CMS Objections at 2. Nor did CMS propose any witnesses of its own. CMS Br. Consequently, I will not hold an in-person hearing in this matter, and I issue this decision based on the written record. Pre‑hearing Order ¶¶ 8-11; CRDP § 19(d).

III. Issues

  1. Whether CMS has a legitimate basis to deny Petitioner’s enrollment application seeking Medicare billing privileges under 42 C.F.R. § 424.530(a)(3) based on Petitioner’s felony conviction of possession of a controlled substance.
  1. Whether CMS has a legitimate basis to deny Petitioner’s enrollment application seeking Medicare billing privileges under 42 C.F.R. § 424.530(a)(4) based on Petitioner submitting false or misleading information on the enrollment application.

IV. Jurisdiction

I have jurisdiction to decide this case. 42 C.F.R. §§ 498.3(b)(17), 498.5(l)(2).

V. Findings of Fact, Conclusions of Law, and Analysis1

As a physician, Petitioner is a supplier of health care services for purposes of the Medicare program. See 42 U.S.C. § 1395x(d); 42 C.F.R. §§ 400.202 (definition of supplier), 410.20(b)(1). In order to participate in the Medicare program as a supplier, an individual must meet certain criteria to enroll and receive billing privileges. 42 C.F.R §§ 424.505, 424.510. CMS may deny a supplier’s enrollment for any reason stated in 42 C.F.R § 424.530.

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A supplier’s enrollment application for Medicare billing privileges can be denied based on the existence of a felony conviction, as set forth at 42 C.F.R § 424.530(a)(3):

(3) Felonies. The provider, supplier, or any owner or managing employee of the provider or supplier was, within the preceding 10 years, convicted (as that term is defined in 42 CFR 1001.2) of a Federal or State felony offense that CMS determines is detrimental to the best interests of the Medicare program and its beneficiaries.

(i) Offenses include, but are not limited in scope or severity to-


(D) Any felonies that would result in mandatory exclusion under section 1128(a) of the Act.

42 C.F.R. § 424.530(a)(3). 

The criteria for mandatory exclusion from all federal health care programs referenced above is set forth in section 1128(a)(4) of the Social Security Act (Act), 42 U.S.C. § 1320a-7(a)(4), which states:


The Secretary shall exclude the following individuals and entities from participation in any Federal health care program (as defined in section 1128B(f)):



Any individual or entity that has been convicted for an offense which occurred after [August 21, 1996,] under Federal or State law, of a criminal offense consisting of a felony relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance.

Act § 1128(a)(4).

A supplier’s enrollment application can also be denied for providing false or misleading information, as set forth at 42 C.F.R. § 424.530(a)(4):

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(4) False or misleading information. The provider or supplier has submitted false or misleading information on the enrollment application to gain enrollment in the Medicare program. (Offenders may be referred to the Office of Inspector General for investigation and possible criminal, civil, or administrative sanctions.)

42 C.F.R. § 424.530(a)(4).

When a supplier is convicted of a felony specifically listed in the regulations, an ALJ applies the most deferential review standard, as these felonies are considered detrimental per seLetantia Bussell, M.D., DAB No. 2196 at 9 (2008).

A criminal offense not enumerated at section 1128(a)(4) of the Act may nevertheless be found to be detrimental to the best interests of the Medicare program and program beneficiaries if CMS determines that offense would place the Medicare program or its beneficiaries at immediate risk. Ahmed, DAB No. 2261 at 10, 12. In that instance, an ALJ must determine whether CMS’ determination that a felony offense is detrimental to the best interests of the program and its beneficiaries is reasonable. See Fady Fayad, M.D., DAB No. 2266 at 8, 16-17 (2009), aff’d, Fayad v. Sebelius, 803 F. Supp. 2d 699, 704 (E.D. Mich. 2011).

1. Petitioner was convicted of a felony offense within 10 years preceding enrollment for purposes of 42 C.F.R. § 424.530(a)(3).

The parties do not contest the basic facts underlying this case. On November 2, 2010, Petitioner pleaded guilty to felony possession of less than one gram of a controlled substance (Penalty Group 1), in violation of section 481.115(b) of the Texas Health & Safety Code, in the 124th Judicial District Court in Gregg County, Texas. P. Br. at 2; CMS Ex. 1 at 25‑26. Petitioner signed an enrollment application, Form CMS‑855I as a “new enrollee” on February 9, 2017. CMS Ex. 1 at 20; P. Br. at 2. The felony at issue therefore occurred within the 10 years preceding the date Petitioner submitted his enrollment application for Medicare billing privileges.

However, Petitioner insists that he was not “convicted” of a criminal offense under either federal or Texas state law. P. Br. at 3‑6. A conviction for enrollment denial purposes is defined at 42 C.F.R. § 1001.2, which states:

Convicted means that—

(a) A judgment of conviction has been entered against an individual or entity by a Federal, State or local court, regardless of whether:

(1) There is a post-trial motion or an appeal pending, or

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(2) The judgment of conviction or other record relating to the criminal conduct has been expunged or otherwise removed;

(b) A Federal, State or local court has made a finding of guilt against an individual or entity;

(c) A Federal, State or local court has accepted a plea of guilty or nolo contendere by an individual or entity; or

(d) An individual or entity has entered into participation in a first offender, deferred adjudication or other program or arrangement where judgment of conviction has been withheld.

42 C.F.R. § 1001.2. Petitioner contends that “[s]ubsections (a), (b), and (c) of the conviction definition do not apply because the State court did not enter a judgment of conviction, did not make a finding of guilt, and did not accept a guilty plea or defer adjudication. P. Br. at 4. He further asserts that “had a conviction been obtained, a judgment would have issued pursuant to [Texas Code of Criminal Procedure] Art. 42.01, including notices of, e.g., ineligibility to possess a firearm.” Id. at 5. Finally, Petitioner believes subsection (d) is inapplicable because his “deferral did not withhold judgment of conviction, but instead withheld a finding of guilt, which is a necessary pre-requisite to a judgment of conviction.” Id. (emphasis in original). Since Petitioner was “never found guilty; he was never convicted; and therefore never sentenced,” ultimately leading to the case being dismissed. Id. at 6.

CMS emphasizes that Petitioner has been convicted under the federal definition because a “person is considered convicted when they enter a ‘guilty plea’ which has been ‘accepted by a federal, state or local court.’” CMS Br. at 8 (citing Dinesh Patel, M.D., DAB No. 2551 at 3 (2013)). It is undisputed that Petitioner pleaded guilty to the felony crime of possession of a controlled substance; indeed, Petitioner concedes that the Texas state court received his guilty plea and made a finding that guilt was substantiated by the evidence. P. Br. at 2; CMS Ex. 1 at 26. 

The Departmental Appeals Board (the Board) has acknowledged that the definition of conviction used by CMS may be different than under states’ laws. The term “includes ‘diverted, deferred and expunged convictions’ without regard to whether state law treats such actions as a conviction.” Josh Hill, P.A., DAB CR4526 at 8 (2016) (citing Henry L. Gupton, DAB No. 2058 at 8 (2007)). Thus, I must conclude that Petitioner was convicted of a felony offense for purposes of denying enrollment in the Medicare program.

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2. Petitioner was not convicted of a felony that is per se detrimental to the best interests of the Medicare program or its beneficiaries.

CMS did not find Petitioner was convicted of a felony that was per se detrimental. It instead determined that Petitioner’s felony conviction for possession of a controlled substance was “akin to the enumerated crimes which result in mandatory exclusion pursuant to 42 C.F.R. § 424.530(a)(3)(i)(D).” CMS Br. at 9; CMS Ex. 4 at 4. Counsel for CMS acknowledges that “on the face of his Texas Criminal History Record, Petitioner’s felony conviction involved possessing a controlled substance, not manufacturing or distributing drugs, crimes that would result in mandatory exclusion.” CMS Br. at 9. 

Nonetheless, CMS argues that Petitioner’s conviction qualifies as a per se excludable offense because it is “akin” to these other crimes. Id. CMS emphasizes that the controlled substances listed in Penalty Group 1 include “(1) the following opiates, including their isomers, esters, ethers, salts, and salts of isomers, esters, and ethers, . . . (2) the following opium derivatives, their salts, isomers, and salts of isomers, unless specifically excepted,” and “(3) the following substances, however produced” to include ‘Opium and opiate,’ ‘Oxycodone,’ ‘Methadone,’ and numerous other listed substances.” Id. at 9-10 (emphasis in original); Texas Health and Safety Code, § 481.102 (Penalty Group 1) (2009). CMS thus concludes that

[p]er similarities (between Petitioner’s offense and per se detrimental offenses found under the Mandatory Exclusion statute), based on the severity and potency of controlled substances in Penalty Group 1, a reasonable inference may be drawn that CMS has determined Petitioner’s felony conviction appropriately fell within “CMS authority” to deny Medicare enrollment “as it is akin to a felony drug related offense that is deemed per se detrimental to the best interests of the Medicare program and its beneficiaries.”

CMS Br. at 10 (citing CMS Ex. 4 at 4).

Petitioner “disagrees with the bootstrapping analysis that possession of a controlled substance is a felony offense relating to ‘unlawful manufacture, distribution, prescription or dispensing of a controlled substance’” because “[p]ossession alone is not and has never been considered to be one of the enumerated mandatory exclusion crimes under 42 U.S.C. § 1128(a)(4).” P. Br. at 7‑8. Petitioner asserts that allowing felony possession to be considered an enumerated mandatory exclusion crime is a “liberal construction of the statute and amounts to overreaching.” Id. at 8.

Petitioner’s argument is more persuasive in this instance. Even if I were to find it appropriate to allow CMS to expand the list of per se offenses referenced at 42 C.F.R

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§ 424.530(a)(3)(i)(D), CMS cannot clear the “akin” hurdle it wishes me to apply. That regulation incorporates the offenses listed at Section 1128(a)(4) of the Act, which defines convictions involving distribution, manufacture, prescription, or dispensing of a controlled substance to be per se detrimental to the Medicare program and its beneficiaries. The common thread between these offenses is plain – Congress intended to automatically exclude individuals who provided controlled substances to others without regard for the law. The potential danger to the Medicare program and its beneficiaries from such criminal behavior is manifest. 

By contrast, Congress declined to include mere possession of a controlled substance by an individual as a basis for mandatory exclusion. I see no reasoning that would permit me to bootstrap Congressional intent to a type of offense that does not involve provision of controlled substances to others. Here, Petitioner’s possession of less than one gram of a controlled substance, while illegal, is simply not “akin” to the per se offenses contemplated by section 1128(a) of the Act. I conclude, therefore, CMS did not have a legitimate basis to deny his enrollment application for that reason.

3. CMS had a legitimate basis under 42 C.F.R. § 424.530(a)(3) to deny Petitioner’s Medicare enrollment application because Petitioner was convicted of a felony offense that CMS reasonably determined to be detrimental to the best interests of the Medicare program and its beneficiaries.

CMS alternatively argues that Petitioner’s felony conviction was detrimental to the best interests of the Medicare program and its beneficiaries because of its nexus to healthcare. CMS Br. at 10‑12; CMS Ex. 4 at 4. CMS reasoned that both the Texas and Oklahoma medical boards imposed significant limitations on Petitioner’s ability to practice medicine; the intense scrutiny and supervision those boards required lead CMS to argue a “reasonable inference may be drawn that, if the medical boards required monitoring of Petitioner, so too Medicare beneficiaries warranted protection by not putting them at risk with a practitioner having a felony drug conviction less than 10 years old.” CMS Br. at 11‑12. CMS further asserts that the “manner in which CMS exercises its discretion is not subject to review” and CMS “is not required to articulate a detailed basis for its determination.” Id. at 11.

Petitioner argues that CMS’s denial of his enrollment was unreasonable because there was no detriment to Medicare and its beneficiaries. Petitioner notes he self‑reported to CMS and was not practicing medicine, and thus could not have been a danger to the Medicare program or its beneficiaries. He also argues that as a policy matter, CMS’ denial was problematic because “voluntary self‑reporting is a good thing and not something that should carry a negative connotation for the physician.” P. Br. at 10.

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Petitioner believes agency policy to support his view, focusing on remarks from the Secretary of the Department of Health and Human Services (Secretary) concerning recent modifications to section 424.530(a)(3). Id. Responding to public comments related to that regulation, the Secretary stated that “[a]lthough we did propose to expand categories of felonies that can serve as the basis of a denial or revocation, we are not suggesting that every felony conviction will automatically result in such an action. Each case will be carefully reviewed on its own merits and we will act judiciously and with reasonableness in our determinations.” Id. at 10‑11 (emphasis in original) (citing 79 Fed. Reg. 72500, 72510). Petitioner further contends that there is no detriment to Medicare or its beneficiaries because he has fully complied with the terms of his modified license, which ultimately led to the Texas Medical board easing those restrictions and allowing him to practice medicine without limitation. P. Br. at 12; P. Exs. 4‑9.

The regulation at 42 C.F.R. § 424.530(a)(3) explicitly lists four categories of felony offenses that warrant a denial of enrollment for a period of ten years from the date of conviction, but indicates offenses “include, but are not limited in scope and severity” to those specified offenses. 42 C.F.R. § 424.530(a)(3)(i). As I discussed above, Petitioner’s felony conviction does not fall into a category that is per se detrimental. However, enrollment can be denied for any felony offense that CMS “determines is detrimental to the best interests of the Medicare program and its beneficiaries.” 42 C.F.R. § 424.530(a)(3)(i)(C). For the enrollment application of an individual who has committed a felony in the preceding 10 years that is not elsewhere addressed, CMS must make a case-by-case determination as to whether a given felony offense is detrimental to the best interests of the Medicare program and its beneficiaries. Subramanya K. Prasad, M.D., DAB CR4522 at 9 (2016).

In its reconsidered determination, CMS considered the facts surrounding Petitioner’s felony conviction and concluded that it was detrimental to the best interests of the Medicare program and its beneficiaries because it led to Petitioner’s monitoring by his state licensing board. CMS Ex. 4 at 4. Petitioner’s arguments focus on equitable factors and on the reasonableness of CMS’ action in exercising its discretion to determine that his felony conviction was detrimental to the Medicare program and its beneficiaries. 

I cannot say CMS’ position is unreasonable. The applicable regulation allows CMS to find detriment to the program and its beneficiaries for “[a]ny felony that placed the Medicare program or its beneficiaries at immediate risk. . .” (emphasis added). The facts indeed establish that Petitioner’s drug usage resulted in his felony conviction, and CMS reasonably found that the resultant monitoring and close supervision of Petitioner by the Texas medical board created the nexus between his conviction and the safety of the Medicare program and its beneficiaries.

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I must acknowledge the record demonstrates Petitioner’s significant efforts in achieving recovery and regaining his ability to practice medicine without supervision. It would be reasonable to conclude that Petitioner is no longer a threat to the Medicare program or to its beneficiaries. However, as I emphasized above, the regulatory language at issue only requires the felony to have “placed” the program and its beneficiaries at immediate risk; it does not require that felony to still be an immediate risk at the time of the denial of enrollment. 42 C.F.R. § 424.530(a)(3)(i)(C). Unfortunately, I am bound by the plain language of the regulation. Although Petitioner’s arguments for allowing his enrollment are persuasive, I cannot provide the equitable relief he seeks. See US Ultrasound, DAB No. 2302 at 8 (2010). 

I cannot say CMS has exercised its discretion regarding Petitioner’s enrollment in a way that actually makes the Medicare program or its beneficiaries any safer. But for the reasons outlined above, I must conclude that CMS had a legitimate basis to deny Petitioner’s enrollment application based on his felony conviction and the risk of harm it posed to the Medicare program and its beneficiaries. However, given that more than ten years since Petitioner’s felony conviction have now passed, and that no less than three state medical boards have deemed him capable of practicing medicine without need for monitoring or supervision, it is my expectation that CMS will better exercise its discretion concerning Petitioner’s next enrollment application. 

4. I do not need to decide whether CMS had a legitimate basis under 42 C.F.R. § 424.535(a)(4) to deny Petitioner’s enrollment application.   

Having concluded that CMS had a legitimate basis to deny Petitioner’s enrollment application based on his felony drug conviction, I need not consider whether denial of Petitioner’s enrollment application under section 42 C.F.R. § 424.530(a)(4) for making false or misleading statements was reasonable. 

VI. Conclusion

I affirm CMS’ determination to deny Petitioner’s Medicare enrollment application.

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