Medfusion Supplies, Inc., DAB CR6940 (2026)

DECISION

Here, we again consider what it means for a supplier of durable medical equipment to be “operational.”

Petitioner, Medfusion Supplies, Inc., is a supplier of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), located in Austin, Texas.  It applied to enroll in the Medicare program as a supplier of services.  On behalf of the Centers for Medicare & Medicaid Services (CMS), the Medicare administrative contractor, Palmetto GBA, denied its enrollment application, finding that the supplier was not “operational” within the meaning of 42 C.F.R. § 424.530(a)(5).

Petitioner appealed.

For the reasons discussed below, I find that CMS properly denied Petitioner’s enrollment application because the provider was not “operational” within the meaning of 42 C.F.R. § 424.530(a)(5).

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Background

On October 6, 2025, Petitioner applied to enroll in the Medicare program as a DMEPOS supplier, using CMS’s electronic process, PECOS (Provider Enrollment, Chain, and Ownership System).  CMS Ex. 6.  In a letter dated January 8, 2026, the Medicare contractor, Palmetto GBA, advised Petitioner that its application was denied pursuant to 42 C.F.R. § 424.530(a)(5), because site inspectors were unable to conduct an on-site inspection, despite two attempts made during the supplier’s posted hours of operation on December 9 and December 12, 2025.  The inspectors found that the business was closed, and no staff were present.  CMS Ex. 5 at 6.

Petitioner sought reconsideration.  CMS Ex. 5 at 1-5.  In a reconsidered determination, dated March 19, 2026, a contractor representative, acting on behalf of CMS, agreed that the provider was not operational and affirmed the enrollment denial, citing 42 C.F.R. § 424.530(a)(5).  CMS Ex. 1.

Pursuant to 42 C.F.R. § 424.545, Petitioner now appeals that determination.

Hearing on the written record.  Although CMS has moved for summary judgment, I find that this matter may be decided on the written record, without considering whether the standards for summary judgment are satisfied.  In my initial order, I instructed the parties to list their proposed witnesses (if any) and to submit those witnesses’ written direct testimony.  Acknowledgment and Pre-hearing Order at 4, 5 (¶¶ 4(iv), 8) (April 20, 2026).  I also directed each party to state, affirmatively, whether it intended to cross-examine any proposed witness.  Pre-Hearing Order at 5 (¶ 9).  An in-person hearing is necessary “only if a party files admissible, written direct testimony, and the opposing party asks to cross-examine.”  Pre-Hearing Order at 6 (¶ 10).

CMS lists no witnesses.  Although Petitioner did not comply with my pre-hearing order to list its witnesses, it submitted, with its hearing request, the written declaration of its employee, Austin Lanier.  P. Ex. D.  CMS has not asked to cross-examine him.  Because there are no witnesses to be examined further or cross-examined, an in-person hearing would serve no purpose, and I may decide the case based on the written record, without considering whether the standards for summary judgment are satisfied.  See CRD Procedures ¶ 19b; El Medical, Inc., DAB No. 3117 at 15 (2023).

That I decide this case based on the written record does not mean that Petitioner has not had a hearing.  Courts recognize that, although a case may be decided on summary judgment or based on the written record, the administrative law judge, by considering the evidence and applying the law, has granted the petitioner a hearing.  See CNG Transmission Corp. v. FERC, 40 F.3d 289, 293 (D.C. Cir. 1994) (holding that a “paper hearing” satisfies statutory requirements for “notice and opportunity for hearing.”).

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The parties’ submissions.  With its motion and brief (CMS Br.), CMS submits five exhibits (CMS Exs. 1-3 and 5-6, omitting CMS Ex. 4).1  In the absence of any objections, I admit into evidence CMS Exs. 1-3 and 5-6.  See Pre-Hearing Order at 5 (¶ 7).

Again, disregarding my order, Petitioner did not file a brief or any other documents in response to CMS’s submissions.  Pre-Hearing Order at 3 (¶ 4).  Absent Petitioner’s showing good cause for failing to comply with my order, I could dismiss this appeal.  See El Medical, Inc., DAB No. 3117 at 15; Chit-Chat, Inc., DAB No. 2936 at 9 (2019) (“Compliance with ALJ orders is not optional.”).  Instead, I decide the appeal, considering the arguments made in Petitioner’s Request for Reconsideration and its Request for Administrative Law Judge Hearing.  See Anil Hanuman, DAB No. 3080 at 12 (2022).

CMS’s objections to Petitioner’s exhibits.  With its hearing request, Petitioner submitted eight exhibits, marked P. Exs. A-H.  CMS objects to my admitting P. Exs. B-H, citing 42 C.F.R. § 498.56(e), because Petitioner has not shown good cause for failing to submit them at the reconsideration level.

Although CMS has not objected to it, I decline to admit P. Ex. A, a copy of the Reconsideration Determination, because it is in the record as CMS Ex. 1.

With one exception – P. Ex. D – I decline to admit the documents that Petitioner submitted with its hearing request, P. Exs. B-H.  I am required to examine any new documentary evidence to determine whether the provider has good cause for submitting it for the first time at the ALJ level of review.  If I find that good cause does not exist, I must exclude the evidence and may not consider it in reaching a decision.  42 C.F.R. § 498.56(e), see 42 C.F.R. § 405.803(e).

Petitioner was, or should have been, aware of this requirement.  In its January 8, 2026 notice letter, advising Petitioner of its right to request reconsideration, the contractor warned:

[I]f you have additional information that you would like a Hearing Officer to consider during the reconsideration or, if necessary, an Administrative Law Judge (ALJ) to consider during a hearing, you must submit that information with your request for reconsideration.  This is your only opportunity toi

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submit information during the administrative appeals process unless an ALJ allows additional information to be submitted.

CMS Ex. 5 at 7.

In my pre-hearing order, I again advised Petitioner of the good cause requirement:

Petitioner may not offer new documentary evidence in this case absent a showing of good cause for failing to present the evidence previously to CMS.  If Petitioner offers such evidence, the evidence must be specifically identified as new, and Petitioner’s brief must explain why good cause exists for me to receive it.  I must exclude any new evidence for which a showing of good cause has not been made pursuant to 42 C.F.R. § 498.56(e).

Pre-Hearing Order at 5 (¶ 6).

Petitioner claims that its request for reconsideration “did not include the medical documentation now presented herein” because the supplier “was in the process of obtaining that documentation.”  Req. for Hr’g (DAB E-file # 1) at 2.  Most of Petitioner’s newly-submitted evidence has nothing to do with medical documentation and should have been readily available to Petitioner at the time of reconsideration.  Those proposed exhibits include a lease agreement (P. Ex. B); utility bills (P. Ex. C); undated photographs of the supplier premises (CMS Ex. G); and phone records, that are undated, but Petitioner maintains are for calls made from December 9 through 12, 2025 (CMS Ex. H).  Because Petitioner has not established good cause for failing to submit the documents at the reconsideration stage, I must exclude the evidence and may not consider it in reaching my decision.  Mohammad Nawaz, M.D., & Mohammad Zaim, M.D., PA, DAB No. 2687 at 12-13 (2016), aff’d, Nawaz v. Price, 2017 WL 2798230 (E.D. Tex. June 28, 2017) (finding that the ALJ did not abuse his discretion when he did not find good cause to admit documents not offered at reconsideration because the regulation itself provided notice of the requirements to provide all documents on reconsideration).

P. Ex. E is a contingency staffing operation, which was apparently approved on March 25, 2026, so it would not have been available at the time of the reconsideration.  Nevertheless, I decline to admit it because it is irrelevant.  42 C.F.R. § 498.60(b) (directing the ALJ to receive in evidence testimony and documents that are relevant and material).  Corrections made after CMS denied enrollment are immaterial to whether CMS correctly denied enrollment in the first place.  See Marcus Singel, D.P.M., DAB No. 2609 at 7 (2014).  Moreover, Petitioner submitted P. Ex. E as part of a corrective action plan (CAP).  The opportunity to submit a CAP is limited to denials pursuant to

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section 424.530(a)(1) and is not available in actions brought under section 424.530(a)(5).  See A TO Z DME, LLC, DAB No. 2303 at 9 (2010). 2

The medical documentation that Petitioner refers to is P. Ex. F, a physician’s letter, dated March 30, 2026, indicating that the supplier’s owner was undergoing medical treatment in Houston on September 22, 2025.  From November 3 through December 4, 2025, he would have been too ill to perform normal business activities, according to the physician.  I recognize that the document itself was not available at the time of the reconsideration; however, the owner’s health issues were not even raised as an issue at that time.  Rather, Petitioner asserted that, on December 9, the responsible staff member (who was not the owner) “had an emergency, and coverage on such short notice was not available”; on December 12, “staff went to lunch.” CMS Ex. 5 at 5; see CMS Ex. 1 at 2-3.  Petitioner has not shown good cause for failing to raise the issue of the owner’s medical status earlier.  See 42 C.F.R. § 498.56(a)(2) (citing section 498.56(e) as limiting my authority to add new issues).

In addition, Petitioner has not explained why the owner’s incapacity prevented the supplier from remaining open and staffed nor why the supplier failed to post a viable telephone number.  According to Petitioner, an employee, who was supervised by a different employee, was responsible for keeping the premises open.  See P. Ex. D.

I therefore decline to admit P. Ex. F.

Because P. Ex. D is testimony and not documentary evidence, section 498.56(e) does not apply.  Arkady B. Stern, M.D., DAB No. 2329 at 4 n.4 (2010) (observing that “[t]estimonial evidence that is submitted in written form in lieu of live in-person testimony is not ‘documentary evidence’ within the meaning of 42 C.F.R. § 498.56(e).”).

For these reasons, I decline to admit P. Exs. A-C and E-H.  I admit into evidence P. Ex. D.

Discussion

1. CMS properly denied Petitioner’s Medicare enrollment because the supplier was not operational; it was not staffed or accessible during its posted hours of operation.  42 C.F.R. § 424.530(a)(5).3

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Requirements for a DMEPOS supplier’s Medicare participation.  To receive Medicare payments for items furnished to a Medicare-eligible beneficiary, a supplier of medical equipment and supplies must be enrolled in the Medicare program and must have a supplier number issued by the Secretary of Health and Human Services.  Social Security Act (Act) § 1834(j)(1)(A); 42 C.F.R. § 424.505.  To possess a supplier number, the statute requires, among other standards, that the DMEPOS supplier “maintain a physical facility on an appropriate site”; and that it “meet such other requirements as the Secretary may specify.”  Act § 1834(j)(1)(B).  Those requirements are at 42 C.F.R. Part 24, subpart P (sections 424.500 through 424.575).  Among those requirements, the provider must be “operational.”

To be operational, the supplier must, among other requirements, have a qualified physical practice location, be open to the public, and be properly staffed, equipped, and stocked to furnish items and services.  42 C.F.R. §§ 424.502, 424.510(d)(6).  CMS may deny a supplier’s enrollment if it determines, based on “on-site review or other reliable evidence, that the [supplier] is not operational.”  42 C.F.R. § 424.530(a)(5); Mission Home Health et al., DAB No. 2310 (2010), appeal dismissed, Garcia v. Sebelius, No. 5:10-cv-00456 (W.D. Tex. Apr. 6, 2011).

The supplier must also meet the standards set forth in 42 C.F.R. § 424.57(c), which include that it be accessible and staffed during posted hours of operation and that it allow CMS or its agents to conduct on-site inspections to ascertain its compliance with governing regulations.  42 C.F.R. § 424.57(c)(7), (8).  Where, as here, an inspector finds the facility locked and devoid of business activity during its posted hours of operation, the supplier does not meet the requirements of section 424.57(c) and CMS may appropriately deny its enrollment application.  Arguably, unless a DMEPOS supplier meets the section 424.57 standards, it cannot be considered “operational” within the meaning of sections 424.530(a)(5) and 424.502.

CMS, however, did not rely on section 424.57(c) in its initial nor reconsidered determinations.  CMS Ex. 5 at 6-8; CMS Ex. 1.  During these proceedings, CMS mentions that regulation but does not rely on it. see CMS Br. at 13.

Petitioner’s enrollment application and the site investigations.  On October 6, 2025, Petitioner applied for enrollment in the Medicare program as a DMEPOS supplier.  CMS Ex. 6.  In an email, sent on November 24, 2025, the Medicare contractor advised the supplier that an unannounced site visit was required at its Austin, Texas location.  The letter directed the supplier to “ensure that staff at the location . . . are aware that CMS contractor personnel will be conducting a site visit in the coming days.”  CMS Ex. 2 at 1.  The email also reminded the supplier that the hours of operation posted at the location “must match the information in PECOS.”  Id.  CMS thus gave the supplier fair warning that an inspection was imminent.

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The supplier’s posted hours of operation were Monday through Friday, from 9:00 a.m. to 4:00 p.m., closed for lunch from noon to 12:30 p.m.  CMS Ex. 3 at 5-6, 16.

• On Tuesday, December 9, 2025, at 10:45 a.m., a site inspector went to Petitioner’s business location to conduct the required on-site inspection.  The business was closed; no one was present; and the inspector was not able to get in.  CMS Ex. 3 at 2, 4.  The inspector called the telephone number posted on the door and two other numbers, but no one answered.  CMS Ex. 3 at 7, 10, 11, 14-16.; see CMS Ex. 6 at 11 (for additional contact numbers, listed in PECOS).
• On Friday, December 12, 2025, at 2:30 p.m., the site inspector returned to the business location.  Again, the business was closed; no one was present; and the inspector could not get in. No one answered the inspector’s telephone calls.  CMS Ex. 3 at 2, 4, 7, 10, 11, 14-16.

Petitioner concedes that its office was closed and no one was present on the dates that the contractor attempted site inspections.  Petitioner has offered several inconsistent excuses for the locked door and absence of staff.  When it requested reconsideration, Petitioner claimed that, on December 9, “staff . . . had an emergency and coverage on short notice was not available.”  CMS Ex. 5 at 5.  Petitioner claimed that, on December 12, “staff went out to lunch.”  Id.  Petitioner did not explain why no one answered the phone when the investigator called.

These claims made at reconsideration are puzzling, inasmuch as the staff member in question had signed his written declaration on December 23, 2025, even before CMS denied the supplier’s enrollment application and well before the supplier requested reconsideration.  P. Ex. D.

The employee declaration is not consistent with the representations Petitioner made at the reconsideration stage.  The employee claims that he was ill on the morning of December 9 and “physically unable to report to work.”  He asserts that he contacted “MSI management to notify them of [his] absence prior to [his] scheduled shift start time.”  P. Ex. D at 1 (Lanier Decl. (¶ 2).  “MSI management,” was apparently the employee’s supervisor, “Manager Sarah Hatten,” who is mentioned later in the declaration.  P. Ex. D at 1, 2 (Lanier Decl. at 2 (¶¶ 4, 6)).

Supplier staff knew that the owner would be unavailable beginning in September 2025, and they had known since November 24 that an inspection was looming.  Yet the employee does not explain why, at a minimum, the supplier did not post a telephone number that would be answered.

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Further, the employee’s shift was supposed to start at 9:00 a.m., so, presumably, he notified management of his absence sometime before that.  “Management” had notice that the premises would not be open.  Yet, Petitioner does not explain what, if any efforts, management made to open and staff the premises or, at least, to post a new phone number.

I find even more problematic Petitioner’s inconsistent claims regarding December 12.  Petitioner no longer claims that the employee was at lunch at 2:30 p.m. that day (well after the posted lunch time); it now claims that the employee left the premises at 11:00 a.m. to “briefly attend to what [he] expected would be a short personal errand,” and blames the employee’s failure to return on an unspecified but “urgent, unexpected emergency involving a serious problem at [the employee’s] apartment residence.”  P. Ex. D (Lanier Decl. at 1 (¶ 3)).  This time the employee did not notify Manager Sarah Hatten that he was leaving the office.  P. Ex. D (Lanier Decl. at 1 (¶ 4)).  Inasmuch as management had not staffed the premises on December 9, his failing to alert his manager that he was leaving probably did not make much difference.

Even if I accepted Petitioner’s otherwise unsupported claims about why the employee left the premises on December 9 and 12 (and I find them highly questionable), I do not find credible Petitioner’s assertion that the supplier was open and staffed at all times except the two isolated instances when an inspector showed up.  I find it more likely that the premises were often closed and unstaffed.  That the employee left the premises during the supplier’s posted hours of operation (11:00 a.m.) instead of waiting until the premises were closed (noon to 12:30 p.m. or after 4:00 p.m.) suggests that he did not take seriously keeping the premises open and staffed during posted business hours.

Moreover, staff had been warned that an inspection was coming, and, if anything, I’d have expected them to be hyper-vigilant about ensuring that the premises were open and staffed during the posted hours.  Knowing that the owner would be unavailable for months, I’d also have expected the supplier to post a functional telephone number and to have in place a reasonable backup plan in the likely event that the one employee was not available at any given time.

Notwithstanding the contractor’s pre-inspection warning, the inspector found the supplier’s premises locked and empty, with no staff or customer activity.  The supplier’s premises were not open to the public and not properly staffed.  The supplier was therefore not “operational,” and CMS has properly denied its enrollment application.

Having determined that CMS had a legal basis for the denial of enrollment, I must uphold that determination.  Cardiac Imaging Associates A Medical Corporation, DAB No. 3133 at 16 (2024); Thomas Falls, M.D., DAB No. 3056 at 8 (2022); Vamet Consulting & Medical Services, DAB No. 2778 at 6 (2017).

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Conclusion

Because the supplier premises were not operational at its “practice location,” CMS justifiably denied its Medicare enrollment application pursuant to section 424.530(a)(5).