Sunsites Pearce Fire District, DAB CR5926 (2021)

DECISION ON REMAND

I sustain the determination of a Medicare contractor, as affirmed on reconsideration, to revoke the Medicare billing privileges of Petitioner, Sunsites Pearce Fire District, effective March 4, 2013.

I.  Background

As I discuss below, this case involves a determination by a Medicare contractor to terminate Petitioner’s Medicare billing privileges based on two events:  the conviction of Petitioner’s manager (fire chief) of a felony that CMS determined to be detrimental to the interests of the Medicare program and a failure by Petitioner to report that conviction to the contractor.  Throughout, Petitioner has contended that the contractor and CMS are required to reverse that determination because Petitioner allegedly severed its management relationship with the fire chief.

I issued an initial decision granting summary judgment to the Centers for Medicare & Medicaid Services (CMS), sustaining revocation of Petitioner’s Medicare billing privileges.  Sunsites Pearce Fire District, DAB CR5012 (2018).  Petitioner appealed my

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decision to the Departmental Appeals Board (Board).  A Board appellate panel affirmed my decision.  Sunsites Pearce Fire District, DAB No. 2926 (2019).  Petitioner appealed the Board decision to a United States District Court.  The District Court affirmed my decision in part and remanded it in part to the Board.  Sunsites-Pearce Fire Dist. v. Azar, No. CV-19-00203-TUC-RCC, 2020 WL 3971401 (D. Ariz. July 14, 2020).

The Board then remanded the case back to me for additional proceedings.  In its remand order, the Board stated that the sole purpose of the remand was to accept evidence and to rule on whether Petitioner terminated its relationship with its fire chief, and whether Petitioner’s Medicare billing privileges should be reinstated on that basis.  Departmental Appeals Board Remand, at 2.

I held a hearing on May 25, 2021, at which I allowed counsel for CMS to cross-examine witnesses whose testimony Petitioner provided as written declarations.  At the hearing, I received into evidence exhibits from CMS, identified as CMS Ex. 1-CMS Ex. 13, and exhibits from Petitioner, identified as P. Ex. 1-P. Ex. 18.  The declarations of Petitioner’s witnesses, Joshua Steinberg, Robert Fino, and Lillian Reed are in evidence as P. Ex. 16, P. Ex. 17, and P. Ex. 18.

The parties filed final briefs.

II.  Issues, Finding of Fact and Conclusions of Law

A.  Issues

In this decision I incorporate by reference all of the findings of fact and conclusions of law in my initial decision that were affirmed by the Board’s appellate panel and affirmed on appeal by the United States District Court.

As ordered by the United States District Court, and further ordered by the Board, I address the issue of whether Petitioner terminated its relationship with its fire chief and whether Petitioner should be reinstated on that basis.  In addressing this issue, I answer the following questions that are subsumed, both in the District Court’s decision, and in the Board’s remand order:

1. What, if any, assurances did a Medicare contractor give Petitioner about reversing the contractor’s order to revoke Petitioner’s Medicare billing privileges?
2. How did Petitioner redefine the involvement of its fire chief in the activities of its ambulance service so as to convince the contractor to reverse the revocation?
3. Was the contractor required to reverse its determination as a consequence of actions undertaken by Petitioner?

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B. Findings of Fact and Conclusions of Law

On March 3, 2011, Joshua Steinberg was charged with a felony under Arizona law.  The complaint alleged that he recklessly handled and discharged a firearm in the presence of another individual.  CMS Ex. 12 at 1.  The charges were resolved when Mr. Steinberg entered an arrangement allowing him to participate in an adult diversion program.  Id. at 2-12.

Mr. Steinberg became Petitioner’s interim fire chief in 2013.  CMS Ex. 4 at 7.  As chief, he managed the operations of Petitioner’s ambulance service, which participated in the Medicare program.  Petitioner filed a form with the contractor (CMS-855B), listing Mr. Steinberg as a managing employee and certifying that he had not been subject to any final adverse legal actions.  Id., CMS Ex. 8 at 7.

On March 31, 2017, the contractor notified Petitioner that it was revoking Petitioner’s Medicare billing privileges, effective March 4, 2013.  CMS Ex. 1.  The contractor premised its determination on its conclusion that Mr. Steinberg had been convicted of a felony occurring within the previous 10 years and that revocation was in the best interest of the Medicare program.  Additionally, the contractor found that Petitioner had failed to report an adverse legal action against Mr. Steinberg.  The contractor relied on the provisions of 42 C.F.R. § 424.535(a)(3) and (4) as authority for its determination.

Subsequent to the contractor’s determination, Petitioner adopted a resolution that purported to terminate Mr. Steinberg’s duties with regard to all Medicare services.  CMS Ex. 10 at 1.  It further resolved to reassign all Medicare duties to another employee.  Id.  However, Mr. Steinberg remained an employee of Petitioner.  On April 26, 2017, Petitioner filed a new form CMS-855B with the contractor designating an employee other than Mr. Steinberg as Petitioner’s managing employee and deleting Mr. Steinberg as a manager.  CMS Ex. 11 at 29-31.

In my initial decision, I held that the diversion agreement that Mr. Steinberg entered into was a felony conviction for purposes of deciding whether the contractor and CMS had the authority to revoke Petitioner’s Medicare billing privileges.  The Board and the District Court sustained this conclusion.  I held further that Mr. Steinberg’s conviction and the false assertion that he had not been subject to adverse legal actions were grounds for revocation of Petitioner’s Medicare participation.  These conclusions were also upheld on appeal, both at the level of the Board and by the District Court.

Pursuant to the District Court’s decision to remand this case in part and the Board’s remand order, I have considered whether the contractor committed to reverse the revocation determination in response to Petitioner’s promise to remove Mr. Steinberg from management of its ambulance service.  I find that it did not do so.

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A contractor or CMS has discretion to reverse a determination to revoke Medicare billing privileges in the following circumstance:

If the revocation was due to adverse activity . . . against an owner, managing employee, or an authorized or delegated official; . . . the revocation may be reversed if the provider or supplier terminates and submits proof that it has terminated its business relationship with that individual within 30 days of its revocation notification.

42 C.F.R. § 424.535(e).

The regulation’s use of the word “may” means that this authority is discretionary.  Neither a contractor nor CMS must reverse a revocation, even in the circumstances described by the regulation.  Ultimately, a determination as to whether a reversal is in the best interest of the Medicare program is vested in a contractor and CMS.

Petitioner argues that it received a firm commitment from the contractor that, if Petitioner severed Mr. Steinberg from managing the ambulance service’s Medicare operations, then the contractor would reverse the revocation.  In effect, Petitioner asserts that the contractor made a binding promise.

I find that the contractor did not commit to reverse its determination.  There is no evidence that supports Petitioner’s contention.  The contractor never stated in writing that it would reverse the determination to revoke.

Employees of the contractor did tell Petitioner’s representatives that the contractor might react favorably if Petitioner removed Mr. Steinberg from management of the ambulance service.  However, those employees never committed the contractor to reverse its determination.  Indeed, they made it clear to Petitioner, and Petitioner’s representatives understood, that they lacked the authority to do so.

Petitioner’s witnesses testified that based on conversations with the contractor’s employees, they believed that the revocation of Petitioner’s billing privileges would be reversed if Petitioner severed Mr. Steinberg’s management ties.  However, no witness testified that he or she received concrete assurances from the contractor that the contractor would take this action.  Ms. Reed received no guarantee from the contractor’s employee that the contractor would reverse the revocation.  Testifying about her conversation with the contractor’s employee, Ms. Reed was asked: 

But she didn't speak to whether it would be an automatic reversal or whether there was still -- CMS had discretion?

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Tr. at 24.  She responded by stating:

No. No, there was no conversation about -- It wasn't her authority to say anything.

Id.

Mr. Fino was chairman of the Sunsites Pearce Fire District Board from 2008 to 2018.  P. Ex. 17 at 1.  He averred that sometime in 2017, the Fire District’s chief counsel reported that he had had a conversation with two employees of the contractor.  Id. at 2.  Mr. Fino asserts that counsel reported that these employees had told him that the “revocation should be reversed” if the Fire District relieved Mr. Steinberg of his Medicare-related financial duties.  Id.  Mr. Fino said that counsel reported that “relieving Chief Steinberg of all Medicare duties would resolve any problems and would allow [the contractor and CMS] to reverse the revocation decision.”  Id.

The reported statements of the Fire District’s chief counsel are hearsay and would be inadmissible under the Federal Rules of Evidence.  I allowed these statements to be admitted under the relaxed evidentiary standards that I apply in administrative hearings.  However, they are of little evidentiary value given that their credibility cannot be tested through cross examination.

Furthermore, nothing in the reported statements of counsel consist of a recitation of a binding promise by the contractor to reverse the revocation determination.  At most, they are a prediction by the contractor’s employees that corrective actions taken by Petitioner “should” reverse the revocation determination.  “Should” is not synonymous with “will.”

Mr. Steinberg admitted that he understood that the contractor’s employee could not provide binding assurance.  He acknowledged that the contractor’s employee did not give Petitioner a definitive guarantee that the revocation would be reversed.  Tr. at 59.  In recalling his conversation with that employee, Mr. Steinberg testified:

[S]he actually stated, and if I recall correctly, she stated that she thought that [removing Mr. Steinberg from management of the ambulance service] was a very good option and that she saw no issue with it, but again, was not able to give a definitive answer as she said she could not do that at her level.

Id. at 62.

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Not only did Petitioner not receive a promise from the contractor that the revocation would be reversed, but the actions undertaken by Petitioner to sever Mr. Steinberg from the management of its ambulance service did not compel the contractor or CMS to reverse the determination to revoke Petitioner’s Medicare billing privileges.

The authority conferred on CMS and the contractor by regulation is, as I have stated, discretionary.  Nothing in the regulation commands a contractor or CMS to reverse a determination.  Thus, Petitioner would not be entitled to reversal of the revocation determination even if it had completely separated Mr. Steinberg from all operations of its ambulance service.

However, Petitioner did not do that.  A business relationship between Petitioner and Mr. Steinberg clearly continued to exist after April 2017.  I find that Petitioner did not completely terminate its business relationship with Mr. Steinberg, a necessary predicate for the contractor or CMS to act pursuant to 42 C.F.R. § 424.535(e).

Although Petitioner terminated Mr. Steinberg’s management of the ambulance service in April 2017, he continued to work for that entity.  He remained intimately involved with Petitioner’s performance of Medicare-reimbursable services.  He continued to perform duties that either directly or indirectly involved reimbursable services provided to Medicare beneficiaries.  He continued to serve as the Sunsites Pearce fire chief.  Tr. at 71.  He continued to go out on ambulance calls daily.  Id. at 70.  He prepared reports about the care that he provided.  Id. at 66.  Furthermore, Mr. Steinberg continued to supervise and have the authority to hire and fire the paramedics and emergency medical technicians that the ambulance service employed.  Id. at 18-19; 47; 77-78.  His general supervisory authority continued including supervising Ms. Reed.  Id. at 12-13; 69.

While the contractor ultimately has discretion to decide whether a provider or supplier has sufficiently terminated its business relationship with an individual to justify reversing a revocation determination, I find that in this case, Mr. Steinberg’s business relationship had not been entirely terminated.  Here, ending his management duties did not suffice to completely sever him from Medicare-related duties, including duties for which Petitioner would claim reimbursement.  Consequently, there is no basis for me to conclude that the contractor abused its discretion.