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Foo v. Azar

United States District Court, D. Hawaii

September 23, 2019

WENDELL FOO, MD, Plaintiff,
ALEX M. AZAR II, Deputy and Acting Secretary of Health and Human Services, in his official capacity, Defendant.


          Jill A. Otake, United States District Judge

         Before 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.

         I. BACKGROUND

         A. Relevant Overview of Medicare Program

         The 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. § 1395kk-1.

         Every 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).

         CMS may 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).

         B. Revocation of Plaintiff’s Medicare Privileges

         Plaintiff 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.

         Plaintiff 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.

         On 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 location.” Id.

         After 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.

         C. Administrative Appeals

         Plaintiff 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. 16-6.

         In ALJ 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”)[1] 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”)[2] 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.[3] See Final Decision at 5–6, 15, ECF No. 16-6; ALJ Decision II at 8–10, ECF No. 16-5.

         Finneman 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, [4] 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.

         In the 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.

         D. Procedural History

         Plaintiff 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.


         Plaintiff’s 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).

         Thus, 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)).

         With 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 ...

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