North Baldwin Family Pharmacy, LLC, DAB CR6489 (2024)

DECISION

The Centers for Medicare & Medicaid Services (CMS), through its administrative contractor, Novitas Solutions (Novitas), revoked the Medicare billing privileges of North Baldwin Family Pharmacy, LLC (Petitioner), based on a failure to comply with several standards applicable to durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) suppliers.  Petitioner requested a hearing to dispute the revocation. 

For the reasons stated below, I conclude that Petitioner was not in compliance with the DMEPOS supplier standards and affirm the revocation.  However, as noted by CMS in briefing, the effective date of revocation should be modified to one that is more favorable to Petitioner.  I agree and modify the effective date of revocation from December 8, 2022, to September 14, 2023.

I.  Background and Procedural History

Petitioner is a pharmacy that was enrolled in the Medicare program as a DMEPOS supplier no later than 2002.  CMS Ex. 6 at 1-2.  In an August 15, 2023 notice of initial determination, Novitas revoked Petitioner’s DMEPOS supplier number/Medicare billing

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privileges effective December 8, 2022, and set a two-year re-enrollment bar.  CMS Ex. 1 at 1.  Novitas alleged that Petitioner violated the following four DMEPOS standards: 

• 42 C.F.R. § 424.57(c)(2) – Petitioner “failed to notify [Novitas] regarding changes in [Petitioner’s] supplier file including, but not limited to, accreditation status.”  CMS Ex. 1 at 1.
• 42 C.F.R. § 424.57(c)(10) – Petitioner’s “general liability insurance policy on file with [Novitas] has expired[.]”  CMS Ex. 1 at 1.
• 42 C.F.R. § 424.57(c)(22) – “[Petitioner’s] American Board for Certification -Orth, Pros, Pedo Accreditation on file has expired.  Since you are not currently accredited, you are in violation of this standard.”  CMS Ex. 1 at 2.
• 42 C.F.R. § 424.57(c)(26) – “A surety bond cancellation notice was received from Western Surety Company effective December 8, 2022.  [Petitioner] failed to maintain a valid surety bond as required by law.  Therefore, pursuant to 424.57(d)(11) the revocation is effective the date the surety bond lapsed.”  CMS Ex. 1 at 2.

In August 2023, Petitioner filed a request for reconsideration and a corrective action plan (CAP).  CMS Ex. 2; CMS Ex. 3 at 1; CMS Ex. 5 at 3.  The reconsideration request only disputed the final allegation that its surety bond was cancelled.  CMS Ex. 2 at 1.  As proof, Petitioner provided a copy of a letter from CNA Surety indicating that it was rescinding a previous letter of cancellation of the bond and that “[t]his bond is to remain in full force and effect with no lapse in coverage.”  CMS Ex. 2 at 2. 

On October 17, 2023, CMS contractor National Supplier Clearinghouse (NSC) issued a CAP decision in which NSC found that Petitioner proved compliance with 42 C.F.R. § 424.57(c)(26).  CMS Ex. 3 at 4.  However, NSC upheld the other bases for revocation in the initial determination because Petitioner did not address them.  CMS Ex. 3 at 3-4. 

On December 14, 2023, an NSC hearing officer issued a reconsidered determination upholding the revocation of Petitioner’s Medicare billing privileges.  CMS Ex. 5.  Although the hearing officer found Petitioner in compliance with 42 C.F.R. § 424.57(c)(26), the hearing officer also found Petitioner noncompliant with 42 C.F.R. § 424.57(c)(2), (10), and (22).  CMS Ex. 5 at 5-6. 

Petitioner timely requested a hearing to challenge the revocation.  CMS Ex. 8.  Petitioner also submitted several proposed exhibits.  Electronic Filing System (E-File) Doc. Nos. 1b-1e.  On February 12, 2024, the Civil Remedies Division acknowledged the hearing request and issued my Standing Order.  In response to the Standing Order, CMS filed a brief (CMS Br.) and eight exhibits.  Petitioner did not file a brief or proposed exhibits.

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II.  Evidentiary Rulings

I admit CMS Exhibits 1 through 8 into the record because Petitioner did not object to any of them.  See Standing Order ¶ 10. 

Petitioner did not submit any marked exhibits in this case; however, Petitioner submitted four “supporting documents” with its hearing request.  E-File Doc. Nos. 1b-1e. 

The primary standard for the admission of evidence is whether it is relevant and material.  42 C.F.R. § 498.60(b).  Further, the regulations require suppliers to submit all evidence with its reconsideration request.  42 C.F.R. § 405.803(e).  Suppliers must show good cause to submit new evidence to an administrative law judge.  42 C.F.R. § 498.56(e). 

The document that Petitioner uploaded as E-File Doc. No. 1b was filed with the reconsideration request.  CMS Ex. 2 at 1; CMS Ex. 3 at 2.  CMS also submitted it as CMS Exhibit 2 at 2.  Therefore, I have admitted this document into the record. 

The document Petitioner uploaded as E-File Doc. No. 1d was not filed with the reconsideration request.  CMS Ex. 2 at 1; CMS Ex. 3 at 1-2.  It is a document involving liability insurance, which is an issue in this case.  CMS submitted a copy of this document as CMS Exhibit 4.  Therefore, I have admitted this document into the record. 

The documents Petitioner uploaded as E-File Doc. Nos. 1c and 1e are a September 17, 2009 Surety Bond and Petitioner’s various state licenses, respectively.  Petitioner did not previously submit these documents, and CMS did not submit these documents as proposed exhibits.  The surety bond document is no longer relevant to this case because the NSC hearing officer reversed the noncompliance finding concerning the surety bond, i.e., 42 C.F.R. § 424.57(c)(26), in the reconsidered determination.  CMS Ex. 5 at 5-6.  The licensure documents were never relevant to this case because a lack of licensure was not a basis for Petitioner’s revocation.  Because these documents are neither relevant nor material to this case and Petitioner did not provide good cause for submitting these documents for the first time with the hearing request, I exclude them from the record.  See Standing Order ¶ 9; CMS Ex. 1 at 4 (notifying Petitioner that all evidence must be filed with the reconsideration request and that there must be good cause to file new documents with an administrative law judge). 

III.  Decision on the Record

I directed the parties to submit written direct testimony from all witnesses that the parties wanted to present in this case and stated that the opposing party could request to cross-examine the witnesses.  Standing Order ¶¶ 11-12.  I also advised the following:

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If the parties either do not file any written direct testimony or the parties do not request to cross-examine any of the witnesses from whom written direct testimony has been submitted, I will consider such actions by the parties to serve as a constructive request for a decision on the written record because there will be no reason to hold an in-person hearing. 

Standing Order ¶ 7(g)(iii); see also Standing Order ¶ 13.  Therefore, “[u]nless a hearing is required for cross-examination of a witness or witnesses, the record will be closed and the case will be ready for a decision after all the submission deadlines have passed.”  Standing Order ¶ 14. 

In the present case, all deadlines for prehearing submissions have passed and neither party filed written direct testimony.  Therefore, I do not need to hold a hearing and may issue a decision based on the written record.  EI Medical, Inc., DAB No. 3117 at 15 (2023); Vandalia Park, DAB No. 1940 (2004). 

Further, Petitioner’s failure to timely file a prehearing exchange does not preclude me from issuing a decision based on the written record.  Anil Hanuman, D.O., DAB No. 3080 at 12 (2022).  Petitioner’s hearing request includes its arguments and four documents, two of which have been admitted into the record.  Therefore, I address Petitioner’s arguments and evidence in this decision. 

IV.  Issues

1) Whether CMS had a legitimate basis to revoke Petitioner’s Medicare billing privileges.

2) Whether the effective date of the revocation should be modified due to the NSC hearing officer’s finding that Petitioner complied with 42 C.F.R. § 424.57(c)(26).

V.  Jurisdiction

I have jurisdiction to decide this case.  42 C.F.R. §§ 498.1(g), 498.3(b)(17), 498.5(l)(2); see also 42 U.S.C. § 1395cc(j)(8). 

VI.  Findings of Fact, Conclusions of Law, and Analysis

The Social Security Act (Act) authorizes the Secretary of Health and Human Services (Secretary) to establish regulations for enrolling providers and suppliers in the Medicare program and establishing requirements for DMEPOS suppliers to obtain a supplier number.  42 U.S.C. §§ 1395m(j)(1)(B), 1395cc(j)(1)(A).  DMEPOS suppliers must enroll in the Medicare program and receive a supplier number to obtain payment for items and

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services provided to Medicare beneficiaries.  42 U.S.C. § 1395m(j)(1)(A); 42 C.F.R. §§ 424.57(b)-(c), 424.505.  The Secretary established DMEPOS supplier standards that must be met to enroll and remain enrolled in the Medicare program.  42 C.F.R. § 424.57(b)-(c).  CMS revokes a DMEPOS supplier’s billing privileges if the supplier fails to meet the supplier standards.  42 C.F.R. § 424.57(e)(1). 

1. Petitioner has not produced proof that it had DMEPOS liability insurance at the time of the initial determination.  Therefore, Petitioner was not compliant with 42 C.F.R. § 424.57(c)(10).

The August 15, 2023 notice of initial determination stated that Petitioner was not in compliance with 42 C.F.R. § 424.57(c)(10) because the general liability insurance policy that Novitas had on file for Petitioner had expired.  CMS Ex. 1 at 1.  In the reconsideration request, Petitioner neither disputed the factual assertion that its insurance policy expired nor the legal conclusion that Petitioner was not in compliance with § 424.57(c)(10).  CMS Ex. 2. 

The Act requires that the DMEPOS standards include requirements that the supplier “have proof of appropriate liability insurance.”  42 U.S.C. § 1395m(j)(1)(B)(ii)(III).  The Secretary effectuated this requirement by promulgating the following requirement: 

Has a comprehensive liability insurance policy in the amount of at least $300,000 that covers both the supplier’s place of business and all customers and employees of the supplier.  In the case of a supplier that manufactures its own items, this insurance must also cover product liability and completed operations.  Failure to maintain required insurance at all times will result in revocation of the supplier’s billing privileges retroactive to the date the insurance lapsed. 

42 C.F.R. § 424.57(c)(10). 

In the hearing request, Petitioner asserted: 

In reference to 42 C.F.R. § 424.57(c)(10), we have always carried General Liability insurance of over $1 Million however we could not update this during the revocation process therefore even though 42 C.F.R. § 424.57(c)(10) was not in the original revocation, it was then added as a reason to not remove the original revocation. 

CMS Ex. 8 at 1.  Petitioner submitted proof of a liability insurance policy, dated July 25, 2023, that became effective on September 1, 2023.  CMS Ex. 4.

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CMS argues in opposition that Petitioner’s proof of insurance does not prove coverage at the time Novitas issued the initial determination on August 15, 2023.  CMS Br. at 3. 

CMS is correct.  Petitioner has not provided proof that it had general liability insurance in effect as of August 15, 2023.  Further, the initial determination expressly included a failure to maintain the liability insurance as a basis for revocation.  Therefore, I conclude that Petitioner was not compliant with 42 C.F.R. § 424.57(c)(10). 

2. Petitioner is not accredited to sell durable medical equipment and has not shown that it meets an exception to the accreditation requirement.  Therefore, Petitioner was not compliant with 42 C.F.R. § 424.57(c)(22).

The August 15, 2023 notice of initial determination stated that Petitioner was not in compliance with 42 C.F.R. § 424.57(c)(22) because Petitioner’s accreditation by the “American Board for Certification -Orth, Pros, Pedo” expired.  CMS Ex. 1 at 2.  In the reconsideration request, Petitioner did not dispute this finding or the conclusion that Petitioner was not in compliance with § 424.57(c)(22).  CMS Ex. 2. 

The Act requires DMEPOS suppliers to submit to the Secretary evidence of accreditation by an approved accreditation organization.  42 U.S.C. § 1395m(a)(20)(F)(i).  DMEPOS supplies requiring accreditation include “ostomy bags, and supplies related to ostomy care” and “blood-testing strips and blood glucose monitors for individuals with diabetes without regard to whether the individual has Type I or Type II diabetes or to the individual’s use of insulin.”  42 U.S.C. § 1395x(m)(5), (n); see also 42 U.S.C. § 1395m(a)(13), (20)(D)(i).  The implementing regulations state:

All suppliers of DMEPOS and other items and services must be accredited by a CMS-approved accreditation organization in order to receive and retain a supplier billing number.  The accreditation must indicate the specific products and services, for which the supplier is accredited in order for the supplier to receive payment for those specific products and services.

42 C.F.R. § 424.57(c)(22).  Under limited circumstances, pharmacies may not need to receive accreditation.  42 U.S.C. § 1395m(a)(20)(G). 

In the hearing request, Petitioner asserted: 

[W]e have exempt status and no longer require accreditation through the American Board for Certification. 

CMS Ex. 8 at 1.

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CMS argues that Petitioner does not claim to be accredited but rather that it is exempt from accreditation.  CMS asserts that Petitioner has failed to prove it meets the requirements for exemption from accreditation.  CMS Br. at 4-5.

CMS submitted records showing that Petitioner was exempt from the accreditation requirement in early 2012 but has not been exempt since later in 2012.  CMS Ex. 6 at 2-3; CMS Ex. 7 at 1.  Those records show that Petitioner was accredited later in 2012.  As a result, CMS has shown sufficient evidence that Petitioner is no longer exempt from accreditation and Petitioner now has the burden to show that it was exempt from the accreditation requirement.  Tammy Dobbin, APN & Ebony Wellness, LLC, DAB No. 3136 at 12 (2024).

Petitioner did not show it met the requirements for an exemption from accreditation or otherwise respond to CMS’s evidence that it was no longer exempt as of 2012.   Therefore, I conclude that Petitioner was not compliant with 42 C.F.R. § 424.57(c)(22). 

3. CMS had a legitimate basis to revoke Petitioner’s DMEPOS supplier number/Medicare billing privileges based on Petitioner’s failure to comply with DMEPOS standards.

When CMS finds that a DMEPOS supplier is not compliant with a DMEPOS standard, CMS revokes the supplier’s billing privileges.  42 C.F.R. § 424.57(e)(1); see also Experts Are Us, Inc., DAB No. 2452 at 5 (2012) (A “failure to comply with one supplier standard is a sufficient basis for denying the enrollment application.”).  I have concluded that Petitioner failed to comply with two DMEPOS standards.  Therefore, CMS had a legitimate basis to revoke Petitioner’s Medicare billing privileges. 

Because I have upheld two violations of the DMEPOS standards, I decline to decide whether Petitioner complied with 42 C.F.R. § 424.57(c)(2). 

4. I modify the effective date for revocation to September 14, 2023.

In the notice of initial determination, Novitas imposed a retroactive revocation on Petitioner, effective December 8, 2022, based on an alleged violation of 42 C.F.R. § 424.57(c)(26).  CMS Ex. 1 at 1-2.  However, in both a CAP decision and the reconsidered determination, NSC found Petitioner in compliance with 42 C.F.R. § 424.57(c)(26).  CMS Ex. 3 at 4; CMS Ex. 5 at 4.  Despite this, NSC did not modify the effective date of revocation.  CMS states in its brief that the effective date for revocation should be modified to September 14, 2023.  CMS Br. at 3, 6. 

Unless there is an otherwise applicable exception, a revocation based on a failure to comply with DMEPOS standards is effective “30 days after the entity is sent notice of the

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revocation.” 42 C.F.R. § 424.57(e)(1).  In the present case, the notice of initial determination is dated August 15, 2023.  Therefore, I modify the effective date of revocation to September 14, 2023.¹

VII.  Conclusion

I affirm the revocation of Petitioner’s Medicare billing privileges.  I modify the effective date of revocation to September 14, 2023.

Endnotes

¹  A revocation based on 42 C.F.R. § 424.57(c)(10) is effective retroactive to the date that the liability insurance policy lapsed.  However, CMS has not specified when Petitioner’s liability insurance policy lapsed, other than indicating it occurred at some point before the August 15, 2023 initial determination.  Given this lack of information and CMS’s statement that the effective date should be September 14, 2023, I modify the effective date to the one requested by CMS, which is the most advantageous date for Petitioner.