Derrick A. Davis, DAB CR6553 (2024)

DECISION

Petitioner, Derrick A. Davis, is a physician assistant, licensed to practice in Florida.  He was embroiled in a massive conspiracy to traffic the narcotic, Oxycodone, and pleaded guilty to Accessory after the Fact to Racketeering – a felony.  When he subsequently applied to enroll in the Medicare program, he did not disclose the conviction.  Based on that conviction, as well as his failing to disclose it on his enrollment application, the Centers for Medicare and Medicaid Services (CMS) has denied his application to enroll in the Medicare program and has placed him on the Medicare “preclusion list.”  Petitioner now challenges these actions. 

I find that CMS is authorized to deny Petitioner Davis’s Medicare enrollment application and to place him on the preclusion list because, within the ten years preceding his filing the application, he was convicted of a felony that CMS reasonably determined is detrimental to the best interests of the Medicare program and its beneficiaries.  42 C.F.R. § 424.530(a)(3). 

For the same reason, CMS acted within its authority when it added Petitioner to its preclusion list.  

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I need not reach the issue of whether, in the alternative, CMS may revoke Petitioner’s Medicare enrollment because, on his enrollment application, he denied having any adverse legal history. 

Background

By letter dated September 26, 2023, the Medicare contractor, First Coast Service Options, Inc., denied Petitioner Davis’s application for enrollment in the Medicare program.  CMS Ex. 3.  The contractor based its denial on:  

• 42 C.F.R. § 424.530(a)(3) because, on [April] 21, 20161,  Petitioner was convicted of Accessory After the Fact to Racketeering, a felony, in violation of Florida Statute §§ 777.03(1) and (2); 895.03; and 777.011.  The letter explained that CMS determined that Petitioner’s felony conviction is detrimental to the best interests of the Medicare program and its beneficiaries; and
• 42 C.F.R. § 424.530(a)(4) because, notwithstanding his felony conviction, in responding to the Medicare application’s direct question, he denied any adverse legal history.   

The letter further advised Petitioner that, pursuant to 42 C.F.R. §§ 422.2, 422.222, 423.100, and 423.120(c)(6), he would be placed on the CMS preclusion list because, within the preceding ten years, he had been convicted of a felony that CMS deems detrimental to the best interests of the Medicare program.  CMS Ex. 3 at 1-2.  

Petitioner requested reconsideration.  CMS Ex. 2. 

In a reconsidered determination, dated April 23, 2024, a CMS hearing officer upheld the enrollment denial, citing both 42 C.F.R. §§ 424.530(a)(3) and 424.530(a)(4).  The hearing officer concluded that the enrollment denial was appropriate because, within the preceding ten years, Petitioner was convicted of a felony offense that CMS determined is “detrimental to the best interests of the Medicare program and its beneficiaries,” and because he failed to disclose his felony conviction on his July 25, 2023 enrollment application.  CMS Ex. 1 at 9. 

The hearing officer also concluded that Petitioner’s conviction “forms an appropriate” basis for including him on CMS’s preclusion list.  Id.  

Petitioner appealed. 

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Decision based on the written record.  The parties have filed cross-motions for summary judgment.  However, neither party proposes any witnesses.  See Acknowledgement and Pre-hearing Order at 4-6 (¶¶ 4(c)(iv), 8, 9, 10).  Because there are no witnesses to be examined or cross-examined, an in-person hearing would serve no purpose.  See Acknowledgment and Pre-hearing Order at 6 (¶ 10).  The matter may therefore be decided based on the written record, without considering whether the standards for summary judgment are satisfied.2 See EI Medical, Inc., DAB No. 3117 at 15 (2023).  

CMS has submitted its motion and brief (CMS Br.), along with 13 exhibits (CMS Exs. 1-13).  Petitioner has submitted his own motion and brief with no exhibits.  In the absence of any objections, I admit into evidence CMS Exs. 1-13. 

Discussion

The Medicare Program.  The Medicare program, Title XVIII of the Social Security Act (Act), is a federally-subsidized insurance program that provides health care benefits to the elderly, disabled, and those suffering from end stage renal disease.  Medicare is divided into four parts: 

• Part A is the hospital insurance program.  It covers hospital services, post-hospital extended care, home health, and hospice care.  Act § 1811 (42 U.S.C. § 1395c);
• Part B, which is voluntary, is the supplementary medical insurance program, covering physician, home health, hospice, and other services.  Act § 1831 (42 U.S.C. § 1395j);
• Part C is the Medicare Advantage program, which allows its participants to enroll in “Medicare + Choice” plans, managed by organizations, such as health maintenance organizations, that receive a fixed payment for each enrollee.  Act § 1851 (42 U.S.C. § 1395w-21); and
• Part D is the voluntary prescription drug benefit program.  Act § 1860D (42 U.S.C. § 1395w-101).   

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The Medicare program is administered by CMS, acting on behalf of the Secretary of Health and Human Services.  CMS contracts with Medicare administrative contractors, who process and pay reimbursement claims and perform other duties necessary to carry out program purposes.  Act § 1842 (42 U.S.C. § 1395u).  Contractors pay claims to “providers” (Part A) and “suppliers” (Part B). 

Practitioners, such as Petitioner, who furnish healthcare services, may participate in the program as “suppliers” of services; however, they must enroll in the program in order to receive Medicare payments.  Act § 1861(d) (42 U.S.C. § 1395x(d)); 42 C.F.R. §§ 400.202; 424.505.  If an enrollment application is denied, it means that the supplier is “ineligible to receive Medicare billing privileges for Medicare covered items or services provided to Medicare beneficiaries.”  42 C.F.R. § 424.502; Anthony Del Piano, M.D., DAB No. 3096 at 2 (2023). 

1. CMS may deny Petitioner’s enrollment in the Medicare program because, within the ten years preceding the date of his enrollment application, he was convicted of a felony that CMS reasonably finds detrimental to the best interests of the Medicare program and its beneficiaries. 42 C.F.R. § 424.530(a)(3).3 

Enrollment denial.  CMS may deny a provider’s or supplier’s enrollment in the Medicare program if, within the preceding ten years, he was convicted of a felony offense that CMS “has determined to be detrimental to the best interests of the program and its beneficiaries.”  42 C.F.R. § 424.530(a)(3); see also Act §§ 1842(h)(8) and 1866(b)(2)(D). 

Offenses for which billing privileges may be denied include – but are not limited to –financial crimes such as extortion, embezzlement, income tax evasion, insurance fraud, and similar crimes; and felonies “outlined in section 1128(a) of the Act.”  42 C.F.R. §§ 424.530(a)(3)(i)(B) and (a)(3)(i)(D).  Section 1128 crimes include crimes relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance.  See 42 C.F.R. §§ 1001.101(d). 

Petitioner’s felony offense and conviction.  Petitioner worked as a physician assistant at a pain management clinic that was trafficking in Oxycodone.  In an information, filed on April 21, 2016, he and five other defendants were charged with multiple counts of conspiracy, racketeering, trafficking in Oxycodone, and other felonies.  For his part, Petitioner Davis was charged with two felony counts of conspiracy to traffic in Oxycodone, two felony counts of trafficking in Oxycodone, and one felony count of racketeering.  CMS Ex. 9 at 5-6, 8-9, 12, 14. 

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On April 21, 2016, Petitioner pleaded guilty to one felony count of Accessory after the Fact to Racketeering, in violation of Fl. Stat. §§ 777.03(1) and (2); 895.03; and 777.011.  The Palm Beach County Circuit Court entered judgment against him the same day.  CMS Exs. 4, 10.  The Court sentenced Petitioner to three years of “reporting probation” with special conditions.  CMS Ex. 10. 

The ALJ’s authority.  The Departmental Appeals Board has consistently held that an administrative law judge’s review of CMS’s determination to deny or revoke enrollment is limited to deciding whether CMS has established one or more of the grounds specified in section 424.530(a).  Anthony Del Piano M.D., DAB No. 3096 at 11; Edward J.S. Picardi, DAB No. 3045 at 11 (2021); Ronald Paul Belin, DPN, DAB No. 2629 at 5 (2015); John A. Hartman, D.O., DAB No. 2911 at 17 (2018); see William Garner, MD, DAB No. 3026 at 16 (2020); Norman Johnson, M.D., DAB No. 2779 at 11 (2017), and cases cited therein.  CMS has the discretion to consider “unique or mitigating circumstances in deciding whether, or how, to exercise its revocation authority.”  I do not have similar authority.  I may not substitute my discretion for that of CMS in determining whether the denial of enrollment or revocation is appropriate.  Norman Johnson, DAB No. 2779 at 11 (citing Care Pro Home Health, Inc., DAB No. 2723 at 9 n.8 (2016); Abdul Razzaque Ahmed, M.D., DAB No. 2261 at 19 (2009), aff’d., Ahmed v. Sebelius, 710 F. Supp.2d 167 (D. Mass. 2010)).4 

Financial crime.  Although Petitioner’s crime is not specifically listed in the regulation, aiding others to commit a felony, specifically racketeering, for personal financial gain is a financial crime and is per se detrimental to the best interests of the Medicare program and its beneficiaries.  42 C.F.R. § 424.530(a)(3)(i)(B). 

Under Florida law, “racketeering activity” means “to commit or attempt to commit, to conspire to commit, or to solicit, coerce, or intimidate another person to commit” one of certain enumerated crimes, including crimes related to drug abuse prevention and control.  Chapter 893, Fla. Stat. § 895.02(1).  Petitioner was convicted of helping his (unrelated) co-defendants “avoid or escape detection, arrest, trial, or punishment” for racketeering.  CMS Ex. 9 at 14.  His co-defendants engaged in a criminal enterprise that involved money laundering, trafficking in Oxycodone, and conspiracy, all first-degree felonies, which the information characterizes as a “pattern of racketeering.”  CMS Ex. 9 at 2.  And these crimes involved financial transactions.  Money laundering is, by definition, a financial crime.  See CMS Ex. 9 at 2-3 (Count A1).  The remaining charges involve 

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selling or conspiring to sell Oxycodone “by means of a prescription written in bad faith.”  CMS Ex. 9 at 3-13.  As here, a sale involves the transfer of property for money or other consideration and is, by definition, a financial transaction.  See, e.g., Fl. Stat. § 896.101(2)(h)(i).  Illicitly selling a drug is thus a financial crime. 

The Board has determined that “‘all financial crimes’” are deemed “detrimental to Medicare.”  Cornelius M. Donohue, DPM, DAB No. 2888 at 4-5 (2018) (quoting Stanley Beekman, D.P.M., DAB No. 2650 at 7 (2015)) (emphasis added).  The Board has upheld denials of enrollment and revocations in cases involving a variety of financial crimes, including convictions for aiding and abetting or attempting to cover-up the financial crimes of others.  See, e.g., Daniel Wiltz, M.D., DAB No. 2864 (2018) (making false statements to investigators in an insurance fraud probe); Francis J. Cinelli, Sr., D.O., DAB No. 2834 (2017) (aiding and abetting the filing of a false tax return); Donna Maneice, M.D., DAB No. 2826 (2017) (attempted tax evasion and filing a false tax return); Stanley Beekman, DAB No. 2650 (2015) (conspiring to commit bank fraud and using false statements to obtain a bank loan). 

CMS is thus authorized to deny Petitioner’s enrollment application under section 424.530(a)(3)(i)(B). 

Mandatory exclusion.  Petitioner’s crime is also per se detrimental to the best interests of the Medicare program and its beneficiaries because he was convicted of a felony that would subject him to mandatory exclusion under section 1128(a) of the Act.

Section 1128(a)(4) mandates that the Secretary exclude from program participation any individual or entity convicted of a felony “relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance.”  See 42 C.F.R. § 1001.101(d). 

Because he was part of a scheme to traffic in Oxycodone, Petitioner’s felony conviction was directly related to the unlawful distribution, prescription, and dispensing of a controlled substance, subjecting him to exclusion under section 1128(a)(4).  CMS is thus authorized to deny Petitioner’s enrollment under section 424.530(a)(3)(i)(D). 

Petitioner’s argument.  Petitioner suggests that he is not subject to denial of his Medicare enrollment because he was not, in fact, convicted of a felony.  Although he pleaded guilty to a felony, and the Court accepted his plea, the Court withheld adjudication and did not ultimately convict.  See CMS Exs. 10, 11.  

Under federal law, notwithstanding the state court’s actions, Petitioner was convicted of a felony.  Section 424.535(a)(1) adopts the definition of “convicted” found at 42 C.F.R. § 1001.2.  That section and the statute itself provide that a person is “convicted” when:  1) “a judgment of conviction has been entered” regardless of whether that judgment has been (or could be) expunged; 2) there has been a finding of guilt; 3) a plea of guilty or 

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nolo contendere has been accepted by the court; or 4) the individual has entered into participation in a first offender, deferred adjudication, or other arrangement or program where the judgment of conviction has been withheld.  Act § 1128(i); 42 C.F.R. § 1001.2(a).  Thus, even though he entered a deferred adjudication program, Petitioner was still convicted within the meaning of the federal statute and regulations. 

By a long line of cases, the Board has confirmed that, under federal law, a “conviction” includes diverted, deferred, and expunged convictions, regardless of whether state law treats such actions as a conviction.  Federal law, not state law, controls what constitutes a “conviction” for the purpose of federal laws designed to protect the Medicare program and its beneficiaries.  See, e.g., Sunsites Pearce Fire District, DAB No. 2926 (2019); Stephen White, M.D., DAB No. 2912 (2018); Dennis McGinty, PT, DAB No. 2838 (2017); Kimberly Shipper, PA, DAB No. 2804 (2017); John Hartman, DAB No. 2564 (2014); Lorrie Laurel, PT, DAB No. 2524 (2013); Henry L. Gupton, DAB No. 2058 at 8 (2007), aff’d sub nom. Gupton v. Leavitt, 575 F. Supp. 2d 874 (E.D. Tenn. 2008).  For sound reasons, Congress deliberately defined “conviction” broadly to ensure that exclusions would not hinge on state criminal justice policies.  Funmilola Mary Taiwo, DAB No. 2995 at 6 (2020); Gupton, DAB No. 2058 at 7-8. 

The rationale for the different meanings of “conviction” for state criminal law versus federal exclusion purposes follows from the distinct goals involved.  The goals of criminal law generally involve punishment and rehabilitation of the offender, possibly deterrence of future misconduct by the same or other persons, and various public policy goals.  Exclusions imposed by the [Inspector General], by contrast, are civil sanctions, designed to protect the beneficiaries of health care programs and the federal fisc, and are thus remedial in nature rather than primarily punitive or deterrent . . . .  In the effort to protect both beneficiaries and funds, Congress could logically conclude that it was better to exclude providers whose involvement in the criminal system raised serious concerns about their integrity and trustworthiness, even if they were not subjected to criminal sanctions for reasons of state policy.  

Gupton, DAB No. 2058 at 7-8 (footnote omitted).  

So long as one regulatory basis for denying a supplier’s Medicare enrollment application exists, I must uphold the denial.  Robert Tomlinson, M.D., DAB No. 2916 at 5 (2018), aff’d sub. nom. Tomlinson v. Azar, No. 19-cv-05114, 2020 WL 376657 (W.D. Ark. Jan. 23, 2020).  I therefore need not reach the issue of whether CMS had a lawful basis to revoke under section 424.535(a)(4).  Five Star Healthcare, LLC, DAB No. 3089 at 15 

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(2023); Meadowmere Emergency Physicians, PLLC, DAB No. 2881 at 8 (2018); Jason R. Bailey, M.D., P.A., DAB No. 2855 at 15 (2018). 

2. CMS acted within its authority when it added Petitioner to its preclusion list because, within the previous ten years, he was convicted of a felony under state law that CMS reasonably deems detrimental to the best interests of the Medicare program. I have no authority to review CMS’s determination as to the length of time he remains on the preclusion list. 

 

The preclusion list.  Effective January 1, 2019, CMS implemented a preclusion list as part of its effort to “prevent fraud, waste, and abuse, and to protect Medicare enrollees,” particularly with respect to prescription drug abuse.5  Pursuant to 42 C.F.R. § 422.2 (Part C) and 42 C.F.R. § 423.100 (Part D), CMS’s preclusion list includes individuals and entities that: 

(3) regardless of whether they are or were enrolled in Medicare, [have] been convicted of a felony under Federal or State law within the previous 10 years that CMS deems detrimental to the best interests of the Medicare program.  Factors that CMS considers in making such a determination under this paragraph (3) are i) the severity of the offense; ii) when the offense occurred; and iii) any other information that CMS deems relevant to its determination. 

42 C.F.R. §§ 422.2; 423.100 (defining “Preclusion list”). 

An individual included on the preclusion list because of a felony conviction remains on that list for ten years, beginning on the date of the conviction, unless CMS determines that a shorter length of time is warranted.  42 C.F.R. §§ 422.222(a)(5)(iii), 423.120(c)(6)(vii). 

Review of Petitioner’s inclusion on the preclusion list.  My review here is limited to whether CMS had the authority to include Petitioner on the preclusion list.  42 C.F.R. 

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§ 498.3(b)(20); see 83 Fed. Reg. at 16,642-16,643 (explaining that appeals are limited to the individual’s inclusion on the preclusion list).  

As discussed above, within the previous ten years, Petitioner was convicted of a felony offense that CMS deems detrimental to the best interests of the Medicare program.

Not only was he convicted of a felony that is per se detrimental, CMS explicitly found that his conduct was “very severe.”  CMS Ex 1 at 8.  He aided and assisted others in racketeering Oxycodone while he was treating patients.  The Florida Department of Health concluded that his actions were “directly related to [his] practice of medicine in that it demonstrates a lack of sound judgment and/or a lack of integrity.”  Id.  CMS considers any felony offense related to patient care to be very severe, especially when it involves the illegal racketeering of drugs in the presence of patients.  Id.  Further, CMS determined that Petitioner’s actions “reflect poorly on the medical profession as a whole and jeopardizes public confidence in Medicare providers and suppliers.”  Id. 

CMS also considered when the offense occurred (between May 1 and August 1, 2010) but concluded that “this factor is not dispositive.”  CMS Ex.1 at 8. 

Having determined that CMS properly added Petitioner to the preclusion list, I have no authority to review CMS’s determination as to how long he remains there.  See 42 C.F.R. § 498.3(b); Vijendra Dave, M.D., DAB No. 2672 at 9-12 (2016) (limiting ALJ review to the determinations in section 498.3(b)).  

Although the effective date for placing an individual or entity on the preclusion list is generally the date the Medicare hearing officer denies his reconsideration request (42 C.F.R. §§ 422.222(a)(3)(i)(B), 423.120(c)(6)(v)(C)(1)(ii)), an individual placed on the preclusion list because of a felony conviction will remain on the list for ten years, beginning on the date of the felony conviction, in this case, April 21, 2016.  42 C.F.R. § 422.222(a)(5)(iii). 

Conclusion

CMS may deny Petitioner Davis’s Medicare enrollment application because he was convicted of a felony that CMS reasonably determined is detrimental to the best interests of the Medicare program and its beneficiaries.  CMS may also include him on the preclusion list, effective the date of his conviction, April 21, 2016. 

I affirm CMS’s determinations.