Health Law Daily Wrap Up, STRATEGIC PERSPECTIVES: Five timeless DAB themes that will not be new in the new year, (Dec 29, 2015)

By Kayla R. Bryant, J.D.

Despite the high number of Departmental Appeals Board (DAB) decisions issued each year, most involve the same few fact patterns and outcomes. The administrative appeals process is notoriously backlogged, resulting in long delays and frustrations on both sides. According to the Office of Medicare Hearings and Appeals (OMHA), the average processing time for appeals is 547.1 days. Yet despite the long waiting times and clear precedent in these similar cases, providers continue to appeal their exclusions and penalties, hoping that they will be one of the rare instances of a successful appeal. This Strategic Perspective will discuss revocations of billing privileges, civil monetary penalties for facilities, enrollment effective dates, revocation due to other agency action, and durable medical equipment supplier adherence to conditions of participation.

1. Revocation of billing privileges due to criminal conviction

Under 42 U.S.C. §1320a-7(a), the Secretary of HHS shall exclude providers from participating in federal health care programs if they are convicted of a crime related to the delivery of an item or service, patient abuse, health care fraud, or controlled substances. This is a mandatory exclusion section. However, some providers employ creative arguments in an attempt to skirt around this mandate. Section 7(b) permits the exclusion of a provider convicted of a criminal offense involving a misdemeanor related to the delivery of a health care item or service, such as fraud, theft, or embezzlement. This permissive exclusion section also covers conviction relating to obstruction of an investigation, a controlled substances misdemeanor, and losing a license to practice.

What is a conviction, exactly? In Hogan v. Inspector General, a provider appealed his exclusion following a conviction based on his involvement in a health fraud conspiracy in which the perpetrators filed claims for psychotherapy services that were not medically necessary. The provider was sentenced to five years in prison and ordered to pay nearly a million dollars in restitution. Following his conviction, the Inspector General (IG) notified the provider that he was excluded from participation in federal health care programs for a period of 18 years due to aggravating factors in the underlying conviction.

Although this seems to be a clear-cut exclusion, the provider argued that despite the jury’s verdict, he was innocent and he should not be excluded because his case was pending appeal. In upholding the exclusion, the administrative law judge (ALJ) cited §1320a-7(i)(1), noting that the definition of “conviction” is satisfied when a judgment of conviction has been entered, “regardless of whether there is an appeal pending.”

2. High civil monetary penalties for facilities whose residents are placed in immediate jeopardy

Health care regulations take resident safety extremely seriously. When facilities are found to be not in substantial compliance with regulations, particularly in cases where such noncompliance poses immediate jeopardy to residents, those facilities can be slapped with hefty civil monetary penalties (CMPs). In Kenwood Manor v. CMS, a long-term care facility received penalties totaling $767,850 for failing to protect residents from physical and verbal abuse inflicted by another resident.

When CMS issues a finding of immediate jeopardy, the minimum fine per day is $3,050. This adds up quickly, as Kenwood Manor learned, for 251 days of immediate jeopardy. When appealed to the DAB, an immediate jeopardy determination must be upheld unless “clearly erroneous” (42 C.F.R. sec. 498.60(c)).

3. Effective date of enrollment

Providers are also fond of appealing CMS contractor determinations of their effective date of enrollment. Regulations clearly state that a physician or practice group’s enrollment date is based on the date of filing of a Medicare enrollment application that was eventually approved (or the date that an already enrolled physician first begins providing services at a new location) (42 C.F.R. sec. 424.520(d)). However, some providers think that the rules should not apply to their situation. No matter what seems “fair” according to the facts, the DAB does not have the authority to change an outcome to provide equitable relief.

In Hartford County Cardiology, PC v. CMS, a provider appealed its effective date, arguing that the date should be based on its first of two applications. The first application that it submitted did not contain all of the information necessary for approval, and on appeal the provider even admitted that this application contained statements that were or later became inaccurate. The first application was voluntarily withdrawn, and a second application was filed and eventually approved. The provider’s effective date was based on the filing date of the second application, about three and a half months after the filing date of the first application.

The outcome of the appeal seems obvious upon reviewing the applicable regulations, but the provider tried to place the blame on the CMS contractor that approved the application. The provider argued that the contractor stated that the first application was so erroneous that it needed to be withdrawn, rather than amended, and a new application filed. The provider argued that this was “affirmative misconduct” on the part of the contractor by providing incorrect instructions, and that the provider would not have withdrawn the application had it known the effective date would be impacted. The DAB didn’t bite, noting that the regulations contain nothing allowing an ALJ to override the decision on equitable grounds in order to provide a more “fair” result.

4. Revocation due to other agency action, including Medicaid termination

When another agency takes action against a provider due to some sort of wrongdoing, the entire house of cards comes tumbling down—including Medicare participation. Regulations allow CMS to revoke Medicare billing privileges when a state agency terminates a provider’s Medicaid enrollment (42 C.F.R. sec. 424.535(a)(12)). In Osaro v. CMS, a physician was terminated from the Iowa Medicaid program after he required a Medicaid enrollee to pay cash for an appointment during which he prescribed controlled substances. Although the physician appealed the Medicaid decision to an administrative law judge (ALJ), he seemingly did not choose to appeal beyond this level. After the appeal window expired, CMS notified the physician of the revocation of his billing privileges.

Although Medicaid termination is a trigger for revocation from participation in all federal health programs, CMS cannot do so until appeal rights are exhausted. This physician stated that he was a victim of a “flawed administrative process” and that he intended to appeal, but did not realize that the Medicaid ALJ decision was final until it was too late to do so. Similar to the DAB’s inability to consider equitable relief, the DAB also does not have the authority to consider challenges to the underlying Medicaid termination or apply discretion if CMS has acted under its proper regulatory authority.

In addition to Medicaid actions, CMS can use an underlying state licensing agency action as a reason to snatch away billing privileges—and it’s not just for doctors. In Tira v. The Inspector General, a certified nursing assistant’s (CNA) professional license was revoked by the State of Florida Board of Nursing. The CNA had influenced a patient to sign or co-sign contracts to purchase vehicles for herself and her daughter, and the board revoked her license on the basis of financial integrity. The Inspector General (IG) has the authority to exclude a provider if a state licensing authority has revoked his or her license to provide health care for reasons related to professional competence, professional performance, or professional integrity (Soc. Sec. Act. §1128(b)(4)). The CNA argued that she did not unduly induce a patient to sign for the cars and that a patient never actually paid for the cars, but it was too late. The IG’s decision stemmed from the board’s action, and the DAB did not have the authority to make a judgment regarding her guilt or innocence.

5. Durable medical equipment supplier not open for business

Suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) love to lock their doors. The DAB sees a shocking number of appeals of revocation of DMEPOS supplier billing privileges involving bad excuses. In Orthotic Prosthetic Associates, Inc. v. CMS, a CMS contractor attempted to inspect a supplier’s business site on two occasions, October 22 and 31, 2014. During both visits, despite posted hours stating that the business should be open, it appeared to be closed, no staff was present, and there were no signs of customer activity. A DMEPOS supplier is held to a set of 30 standards, which require that a location be open and accessible during business hours (42 C.F.R. sec. 424.57(c)). The supplier stated that during the first attempt, the staff locked the door to take a short break, as they are given flexible lunch and break times when no appointments are scheduled. During the second attempt, the facility was allegedly closed in order to allow staff to celebrate Halloween. As usual, the ALJ wasn’t having it, and found that the supplier was in noncompliance with supplier standards.

Conclusion

Many providers appeal exclusions, penalties, and other enforcement actions even when they were clearly in the wrong and in violation of CMS regulations. To protect due process, ALJs and appeal boards must take each case seriously and give it the attention due in the rare event that CMS makes a mistake. It is up to providers to realize when an appeal is worth the government’s time, and when they have no shot at changing the outcome.

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