United States District Court, D. Hawaii
ORDER AFFIRMING DEPARTMENTAL APPEALS BOARD’S
FINAL DECISION ON REVIEW OF ADMINISTRATIVE LAW JUDGE
A. Otake, United States District Judge
the Court is Dr. Wendell Foo’s appeal seeking reversal
of the Final Decision on Review of Administrative Law Judge
Decision (“Final Decision”) issued on October 16,
2018 by the Department of Health and Human Services
Departmental Appeals Board (“DAB”), which
affirmed the revocation of his Medicare enrollment and
billing privileges for a two-year period. Pl.’s Compl.,
ECF No. 1. For the reasons set forth below, the Court affirms
the Final Decision.
Relevant Overview of Medicare Program
Medicare program provides health insurance benefits to people
sixty- five years old or older and to eligible disabled
persons. 42 U.S.C. § 1395c. The Secretary of the U.S.
Department of Health and Human Services (“the
Secretary”) has broad authority to administer the
Medicare program. 42 U.S.C. § 1302(a). To receive
payment for services rendered, Medicare “suppliers,
” including physicians, must be enrolled in Medicare
and maintain the enrollment requirements. 42 C.F.R. §
400.202; 42 C.F.R. § 424.500; 42 C.F.R. § 424.505.
The Secretary administers the Medicare program through the
Centers for Medicare and Medicaid Services
(“CMS”). 42 C.F.R. § 400.200. CMS contracts
with private administrative contractors to administer certain
aspects of the Medicare program. See 42 U.S.C.
five years, suppliers must submit new enrollment applications
to re-enroll as a Medicare supplier. 42 C.F.R. §
424.515. Suppliers do so by submitting form CMS-855I, or
through an online system called the “Provider
Enrollment, Chain and Ownership System”
(“PECOS”). 42 C.F.R. § 424.510; CMS Ex. 14,
ECF No. 18-23. When submitting enrollment applications,
suppliers must include “complete, accurate, and
truthful responses to all information requested, ” 42
C.F.R. § 424.510(d)(2)(i), and must sign a certification
statement attesting that “the information submitted is
accurate and that the provider or supplier is aware of, and
abides by, all applicable statutes, regulations, and program
instructions.” 42 C.F.R. § 424.510(d)(3).
revoke a supplier’s enrollment-and the supplier’s
ability to bill for services under the Medicare program-for
failure to abide by the enrollment requirements or other
specified reasons. 42 C.F.R. § 424.535; Final Decision
2, ECF No. 16-6. Relevant to this appeal, CMS maintains the
right to revoke a supplier’s enrollment if, after
conducting an on-site review or relying on other reliable
evidence, CMS determines that the supplier is not
“operational” to furnish Medicare-covered
services or otherwise fails to satisfy the enrollment
requirements. 42 C.F.R. § 424.535(a)(5).
Revocation of Plaintiff’s Medicare Privileges
Wendell Foo is an anesthesiologist who has been enrolled as a
Medicare supplier for over twenty-five years. Pl.’s
Compl. ¶ 1, ECF No. 1. He provides his anesthesiology
services to patients undergoing surgery at several Ambulatory
Surgery Centers (the “ASC Locations”).
Id. ¶ 13. He receives correspondence at a UPS
store with private mailboxes located at 4348 Waialae Ave
5-311 in Honolulu (the “Waialae Address”).
Id. ¶¶ 16, 28.
submitted Medicare enrollment applications in 2010 (the
“2010 Enrollment Application”), and 2014 (the
“2014 Enrollment Application”). CMS Ex. 11, ECF
No. 18-20; CMS Ex. 9, ECF No. 18-18. According to the
enrollment form instructions, a “practice
location” is “where [the supplier] render[s]
services to Medicare beneficiaries, ” and instructs
applicants to list each practice location. CMS Ex. 11 at 16,
ECF No. 18-20. The Waialae Address is not one of
Plaintiff’s practice locations; it is where Plaintiff
has a private mailbox. Pl.’s Compl. 7–8, ECF No.
1. The parties dispute whether Plaintiff listed his actual
practice locations-the ASC Locations-in his 2010 and 2014
Enrollment Application, or whether he listed the Waialae
Address as his practice location. The ALJ, however, found
that Plaintiff listed the Waialae Address as his practice
location on his 2010 Enrollment Application, and then
re-confirmed that address on his 2014 Enrollment Application.
See ALJ Decision II at 10, ECF No. 16-5.
March 5, 2015 and May 11, 2015, CMS’s administrative
contractor Noridian conducted on-site inspections at the
Waialae Address. CMS Ex. 5, ECF No. 18-14. Based on the two
inspections, Noridian revoked Plaintiff’s Medicare
enrollment. Id. In a letter to Plaintiff dated June
24, 2015, Noridian informed him that his Medicare privileges
were revoked pursuant to 42 U.S.C. § 424.535(a)(5)
because the Waialae Address was not a “practice
receiving the revocation letter, Plaintiff sought
reconsideration of his Medicare enrollment revocation. CMS
Ex. 4, ECF No. 18-13. On August 27, 2015, Noridian denied his
reconsideration request, affirming that his enrollment was
revoked because the Waialae Address was not a “practice
location.” CMS Ex. 2, ECF No. 18-10.
appealed his revocation to the Administrative Law Judge
(“ALJ”), who affirmed the revocation (“ALJ
Decision I”). ECF No. 16-3. Plaintiff appealed that
decision to the DAB, which remanded the matter back to the
ALJ to address certain evidentiary issues (“DAB
Decision I”). ECF No. 16-4. On remand, the ALJ again
affirmed the revocation (“ALJ Decision II”). ECF
No. 16-5. Plaintiff appealed ALJ Decision II to the DAB,
which affirmed the revocation in the Final Decision. ECF No.
Decision II, the ALJ found that Plaintiff did not update his
practice location in his 2014 Enrollment Application, and
therefore found that the Waialae Address, as stated in his
2010 Enrollment Application, remained as his practice
location on file. ALJ Decision II at 8–9, ECF No. 16-5.
In making this determination, the ALJ relied on the following
evidence: (1) a print-out of the application data contained
in Plaintiff’s 2010 Enrollment Application (the
“2010 Report”) which lists the Waialae Address as his
practice location, CMS Ex. 11, ECF No. 18-20; (2) the 2010
letter sent to Plaintiff from CMS’s prior
administrative contractor confirming that his physical
address was the Waialae Address as stated in the 2010
Enrollment Application, CMS Ex. 10, ECF No. 18-19; (3) a 2014
PECOS Application Record Data Report from May 2014
(“2014 Report”) stating “No Current Records
Exist for Practice Location(s), ” CMS Ex. 9, ECF No.
18-18; and (4) the testimony of Cherie Finneman, a Noridian
Project Analyst, responsible for processing enrollment
applications. See Final Decision at 5–6,
15, ECF No. 16-6; ALJ Decision II at 8–10, ECF No.
stated that the 2014 Report details the information Plaintiff
submitted in his 2014 Enrollment Application through PECOS.
CMS Ex. 13 ¶ 10, ECF No. 18-22. She testified that the
2014 Report states “No Current Records Exist” for
the sections in which the applicant did not change or update
the information already present in that section.
Id.; ALJ Decision II at 8, ECF No. 16-5.
Specifically, Finneman said that PECOS would have displayed
the Waialae Address as Plaintiff’s current practice
location when Plaintiff filled out the 2014 Enrollment
Application because that data was entered in the 2010
Enrollment Application, and PECOS would have also given
Plaintiff the option to change it. See Hr’g
Tr. 102:6–21, 117:3–9, ECF No. 19-2. The ALJ
found Finneman’s testimony credible,  and thus
concluded that Plaintiff did not change the Waialae Address
as his practice location in his 2014 Enrollment Application.
ALJ Decision II at 9–13, ECF No. 16-5. The ALJ affirmed
CMS’s revocation of Plaintiff’s enrollment
because the ALJ found that Plaintiff’s reported
practice location was not in fact an operational practice
location. Id. at 14–15. Although Plaintiff
attempted to undermine Finneman’s testimony by
highlighting alleged contradictions in the evidence, the ALJ
found Finneman’s testimony to be consistent with the
evidence. Id. at 10–13.
Final Decision, the DAB affirmed the ALJ. The DAB found there
was substantial evidence for the ALJ to find that Plaintiff
had provided CMS with the Waialae Address as his physical
practice location. Final Decision 20, ECF No. 16-6. The DAB
held that CMS had a valid basis to revoke Plaintiff’s
Medicare Privileges under 42 C.F.R. 424.535(a)(5), because
Plaintiff reported the Waialae Address as his physical
practice location in his 2014 Enrollment Application and CMS
discovered during its on-site reviews that he was not
operational at that address. Id. at 21–22. The
DAB also rejected Plaintiff’s additional arguments that
CMS should have taken more steps to determine his real
practice locations, that Congress cannot delegate
discretionary authority to private administrative contractors
to revoke Medicare enrollment privileges, and that equitable
concerns warranted reversal. Id. at 22–25.
filed the Complaint in this Court on December 14, 2018,
appealing the Final Decision under 42 U.S.C. §§
1395cc(h)(1)(A) and 405(g). Pl.’s Compl., ECF No. 1.
Plaintiff filed his Opening Brief on June 7, 2019.
Pl.’s Opening Br., ECF No. 23. Defendant filed an
Answering Brief on July 5, 2019. Def.’s Answering Br.,
ECF No. 24. Plaintiff filed a Reply Brief on August 2, 2019.
Pl.’s Reply Br., ECF No. 25. The Court heard oral
argument on August 30, 2019.
STANDARD OF REVIEW
appeal of the Final Decision is brought pursuant to 42 U.S.C.
§ 405(g), as required under 42 U.S.C. §
1395cc(h)(1)(A). Pl.’s Compl. ¶ 2, ECF No. 1. The
Secretary’s findings of fact “shall be
conclusive” if they are “supported by substantial
evidence.” 42 U.S.C. § 405(g). Defendant thus
argues that the Court’s review is limited to ensuring
that substantial evidence supports the Secretary’s
factual findings, and that the Secretary applied the
“correct legal standard.” Def.’s Answering
Brief 16, ECF No. 24. Plaintiff, however, argues that this
case is governed by the Administrative Procedure Act’s
(“APA”) arbitrary, capricious, or abuse of
discretion standard. Pl.’s Opening Brief 11–12,
ECF No. 23. The two standards, however, are largely the same.
See Maple Drive Farms Ltd. P’ship v. Vilsack,
781 F.3d 837, 852 n.22 (6th Cir. 2015) (“[T]he two
tests have a tendency to converge, and the difference between
the two is ‘largely semantic.’” (quoting
Ass’n of Data Processing Serv. Orgs., Inc. v. Bd.
of Governors of Fed. Reserve Sys., 745 F.2d 677, 684
(D.C. Cir. 1983))); Bangor Hydro-Elec. Co. v
F.E.R.C., 78 F.3d 659, 663 n.3 (D.C. Cir. 1996) (noting
that the “substantial evidence” and
“arbitrary and capricious” standards are
essentially the same substantive standard).
although Plaintiff and Defendant use different language, the
standard of review here is not in dispute: the
Secretary’s decision “will be set aside only if
it is ‘arbitrary, capricious, an abuse of discretion,
or otherwise not in accordance with law . . . or unsupported
by substantial evidence.’” Kaiser Found.
Hosps. v. Sebelius, 649 F.3d 1153, 1157 (9th Cir. 2011)
(quoting 5 U.S.C. 706(2)(A), (E)); see also Andrews v.
Shalala, 53 F.3d 1035, 1039 (9th Cir. 1995)
(Secretary’s determination “will be disturbed
only if it is not supported by substantial evidence or is
based on legal error”). In this context,
“substantial evidence” means “more than a
mere scintilla but less than a preponderance, ”
Tackett v. Apfel, 180 F.3d 1094, 1098 (9th Cir.
1999) (quoting Matney v. Sullivan, 981 F.2d 1016,
1018 (9th Cir. 1992)), and that “a reasonable mind may
accept it as adequate to support a conclusion.”
Travers v. Shalala, 20 F.3d 993, 996 (9th Cir. 1994)
(quoting Hudson v. Bowen, 849 F.2d 433, 434 (9th
Cir. 1988)). “If the evidence can support either
outcome, the court may not substitute its judgment for that
of the ALJ.” Aukland v. Massanari, 257 F.3d
1033, 1035 (9th Cir. 2001) (quoting Matney, 981 F.2d
at 1018). When determining whether the Secretary’s
conclusion was supported by substantial evidence, the Court
must “consider the record as a whole, weighing both
evidence that supports and evidence that detracts from the
Secretary’s conclusion.” Id. (quoting
Penny v. Sullivan, 2 F.3d 953, 956 (9th Cir. 1993)).
respect to the Secretary’s conclusions of law, the
Ninth Circuit gives “‘substantial
deference’ to the Secretary’s interpretation of
Medicare regulations.” Palomar Medical Ctr. v.
Sebelius, 693 F.3d 1151, 1159 (9th Cir. 2012) (citing
Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512
(1994)). “The Secretary’s interpretation is
controlling unless it is ...