Health Law Daily Wrap Up, ADMINISTRATION OF MEDICARE/MEDICAID PROGRAMS—DAB DECISIONS: Revocation of billing privileges upheld against pharmacy that failed to update status change, (Nov 17, 2025)

By Leah S. Poniatowski, J.D.

The pharmacy’s administrative error following its transition to direct service during the COVID-19 pandemic was sufficient to revoke billing privileges for three years.

The HHS Departmental Appeals Board (DAB) determined that a pharmacy that stopped its retail operations during the COVID-19 pandemic in April 2020, but failed to notify CMS of its operational changes when it continued business as a direct supplier as part of its Medicare provider enrollment, failed to show any facts in dispute to successfully challenge revocation of its enrollment and billing privileges and the three-year bar from re-enrollment (Group Health Plan, Inc., DAB No. CR6523, Doc. No. C-23-487 (Aug. 14, 2024)).

Background. The pharmacy had been enrolled in Medicare since 2005 as a DMEPOS supplier and operated a retail pharmacy. During the COVID-19 pandemic, in April 2020 the pharmacy closed its retail operations and terminated its state retail pharmacy license but continued its business under the same Provider Transaction Access Number (PTAN). Although the pharmacy operated its direct mailing operations thereafter, it did not report the changes to its operations to CMS. Under applicable law, all changes to operations must be submitted to CMS within 30 days of those changes.

In October 2022, the pharmacy was notified through is Medicare Administrative Contractor (MAC) that its Medicare enrollment and billing privileges were revoked, beginning 30 days from issue of the notice. The notice also provided that the pharmacy was subject to a three-year re-enrollment ban. Additionally, the notice stated that the pharmacy could request a reconsidered determination and could submit a corrective action plan (CAP).

The pharmacy engaged with the MAC over the following weeks, requesting reconsideration and submitting a corrective plan. However, the MAC dismissed the corrective plan because it had not been signed by an authorized or delegated official.

Procedural history. A MAC hearing officer upheld the enrollment and billing privilege revocation, holding that the pharmacy had violated several regulations pertaining to supplier standards (see 42 C.F.R. § 424.57(c)(1), (2), (9), (17), (21), and (22)). The officer also did not change the duration of the re-enrollment bar. The pharmacy requested a hearing with an administrative law judge (ALJ). Before the hearing, CMS submitted a motion for summary judgment and the pharmacy filed an opposition to the motion. Both parties submitted pre-hearing briefs.

Summary judgment.The ALJ in the present matter held that summary judgment was appropriate, and that it should be granted to CMS. In appeals before the DAB, summary judgment may be granted in accordance with precedent established by prior DAB decisions.

In the matter at bar, the ALJ concluded that there were no material facts in dispute. The pharmacy did not dispute that it had been enrolled as a DMEPOS supplier and was subject to all the rules thereunder. The pharmacy did not dispute that it failed to update its change from a retail pharmacy to a direct-service pharmacy. Accordingly, there was no dispute that the applicable regulation had been violated and, thus, there was a legal basis to revoke enrollment and billing privileges.

The pharmacy proffered several arguments, including that there had been a miscommunication about the closure of the retail pharmacy, and that it had been a business decision during the COVID-19 pandemic. The pharmacy asserted that there had not been any change to address, authorized official, hours of operation, corporate structure, or ownership. However, the ALJ stated that the pharmacy did not operate under the same PTAN as the retail pharmacy and these facts did not reflect that the pharmacy complied with the regulation requiring notice of changes to enrollment information within 30 days of change.

Further, the pharmacy’s arguments that it was denied a meaningful opportunity to submit its corrective action plan when it communicated via email informally with the MAC, which the MAC considered to fulfill the CAP requirement, were not sufficient to overcome the determination. The pharmacy had participated in the review process and had received determinations according to due process.

The pharmacy’s argument that it did not know the MAC expected to be notified of the operational changes until the pharmacy had received the notice from the MAC was without merit because it raised an issue of law. Because the regulation, 42 C.F.R. § 424.57(c)(2), had been duly published, the pharmacy was subject thereto.

The pharmacy’s arguments that the penalty of three years of enrollment revocation was a “disproportionately severe penalty” and that the impact of the COVID-19 pandemic should be considered appeared to the ALJ to be equitable relief requests. However, under governing precedent, ALJs have no authority to grant equitable relief or otherwise exercise discretion to change the scope of a determination. Therefore, there was a basis to revoke the privileges, the effective date of revocation was 30 days from the notice sent in October 2022, and the duration of the re-enrollment bar remained three years.

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