SUBJECT:

The Centers for Medicare & Medcaid Services/
The National Supplier Clearinghouse,

Petitioner,

Three B Financial Services, Inc.

DECISION

I affirm the determination of the Medicare Part B Hearing Officer (Hearing Officer) to reinstate Three B Financial Services, Inc.'s (Respondent) Medicare Supplier Number (supplier number) for the period at issue. In his decision, the Hearing Officer determined that Respondent met all Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) supplier standards as of July 24, 2004, and that therefore Respondent's supplier number should be reinstated from its current effective date of December 30, 2004, back to the original revocation date of July 24, 2004. I conclude, therefore, that the National Supplier Clearinghouse (NSC) ⁽¹⁾ must reinstate Respondent's supplier number effective July 24, 2004.

I. Applicable Authority

Section 1861 of the Social Security Act (Act) defines medical and other health services that are eligible for Medicare reimbursement by DMEPOS suppliers. Under section 1834(j)(1)(A) of the Act "no payment may be made under this part . . . for items furnished by a supplier of medical equipment and supplies unless such supplier obtains a supplier number." Act � 1834(j)(1)(A). Pursuant to section 1834(j)(1)(B) of the Act, "a supplier may not obtain a supplier number unless . . . the supplier meets revised standards prescribed by the Secretary [of Health and Human Services] that shall include requirements that the supplier . . . meet such other requirements as the Secretary may specify." Act � 1834(j)(1)(B)(i)(IV).

Centers for Medicare & Medicaid Services (CMS) regulations set forth the conditions that a DMEPOS supplier must meet in order to receive payment for a Medicare-covered item. See 42 C.F.R. � 424.57(b) and (c). CMS will revoke a supplier's billing privileges if it does not meet the standards in 42 C.F.R. � 424.57(b) and (c). 42 C.F.R. � 424.57(d). Additionally, a supplier cannot be paid for an item furnished during the period in which its billing privileges were revoked. 42. C.F.R. � 424. 57(b)(3). ⁽²⁾

Section 1866(j) of the Act, as amended by section 936 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, authorized the Secretary of Health and Human Services (Secretary) to establish a process for the enrollment in the Medicare program of providers of services and suppliers. Specifically, section 1866(j)(2) of the Act gives providers and suppliers appeal rights, for certain determinations involving enrollment, using the procedures that apply under section 1866(h)(1)(A) of the Act. ⁽³⁾ Those procedures are set out at 42 C.F.R. Part 498, et seq. and provide for hearings by Administrative Law Judges (ALJs) and review by the Departmental Appeals Board (Board).

II. Background

By letter dated July 9, 2004, NSC notified Respondent that its DMEPOS supplier number would be revoked effective 15 days from the postmark of the letter because Respondent failed to meet supplier standards 1, 4, 6, 8, 9, 12, 13, 14, 19, and 20 of 42 C.F.R. � 424.57(c). Respondent submitted a corrective action plan dated July 16, 2004, to NSC. By letter dated September 10, 2004, NSC notified Respondent that it was in compliance with supplier standards 1, 6, 8, 12, 13, 19, and 20, but that Respondent was still not in compliance with supplier standards 2, 4, 9, and 14. ⁽⁴⁾ By letter dated September 22, 2004, Respondent submitted a second corrective action plan and contended that it was in compliance with supplier standards 2, 4, 9, and 14 before July 16, 2004. By letter dated October 7, 2004, Respondent appealed the revocation and requested a hearing by a Hearing Officer. By letter dated November 3, 2004, NSC notified Respondent that it remained out of compliance with supplier standard 12. ⁽⁵⁾

The Hearing Officer conducted a hearing on December 28, 2004. The Hearing Officer's decision was issued on December 30, 2004. The Hearing Officer decided that the reinstatement of Respondent's supplier number could be approved. The Hearing Officer's December 28, 2004 Decision did not indicate an effective date for Respondent's supplier number. By letter dated January 10, 2005, NSC reinstated Respondent's supplier number with an effective date of December 30, 2005. NSC indicated in the January 10, 2005 letter that the effective date of December 30, 2005 was "the date that compliance with all 21 Medicare Supplier Standards was verified." By letter dated January 31, 2005, Respondent requested an in-person hearing before a fair hearing officer concerning the Hearing Officer's omission to state an effective date for reinstatement of the supplier number. On March 8, 2005, the Hearing Officer conducted another hearing to address the effective date of reinstatement for Respondent's supplier number. The Hearing Officer's decision regarding the effective date of Respondent's supplier number was issued on March 21, 2005. The Hearing Officer decided that the Respondent's supplier number should be reinstated back to the original revocation date of July 24, 2004.

NSC appealed the decision of the Hearing Officer to the Departmental Appeals Board by letter dated March 30, 2005. By letter dated April 28, 2005, NSC amended the March 30, 2005 appeal, by stipulating that it agreed with the Hearing Officer that Respondent was in compliance with all supplier standards and that NSC was "solely refuting the reinstatement date of the supplier number [for Respondent]." NSC April 28, 2005 Letter.

The case was assigned to me for a hearing and decision. I held a telephone conference on January 27, 2006. I explained the role of the Administrative Law Judge and the hearing process. The parties were informed that the case could be addressed through an in-person hearing or through written submissions. NSC requested that I decide this case based on written submissions. Respondent did not expressly waive the opportunity for an in-person hearing; however, they agreed that I could probably decide this case based on written submissions and they would reserve their right to request oral argument should it be warranted. The parties specifically agreed that the only issue in this case is whether the Hearing Officer has the authority to retroactively apply Respondent's supplier number back to the original revocation date of July 24, 2004. Because I find the issue a legal one, and fact finding is not necessary, I decide this case on the record.

NSC has filed its initial brief (NSC Br.), accompanied by 28 exhibits (NSC Exs. 1-28). Respondent has filed its response (R. Resp.) accompanied by three exhibits (R. Exs 1-3). NSC has filed its reply (NSC Reply) accompanied by one exhibit (NSC R. Ex. 1). Neither party objected to the record. Accordingly, I have admitted NSC Exs. 1-28, R. Exs. 1-3, and NSC R. Ex. 1 into the record of this case.

III. Issue and discussion

A. Issue

The issue in this case is whether the Hearing Officer has the authority to retroactively apply Respondent's supplier number back to the original revocation date of July 24, 2004.

B. Discussion

The Hearing Officer has the authority to retroactively apply Respondent's supplier number back to the original revocation date of July 24, 2004.

I note that NSC, Petitioner, does not suggest any facts are in dispute nor argue that an in-person hearing is necessary. NSC solely contends that the Hearing Officer does not have the authority to retroactively reinstate Respondent's supplier number. Whether the Hearing Officer has this authority is a question of law. For the reasons discussed below, I conclude that the Hearing Officer does indeed have the authority to retroactively reinstate Respondent's supplier number.

According to 42 C.F.R. � 405.874, NSC, with the concurrence of CMS, can revoke a supplier's billing number if it determines that the supplier is not in compliance with the supplier standards, as set forth in 42 C.F.R. � 424.57(supplier standards). If a supplier wishes to appeal either a denial of enrollment or a revocation of its billing number, it may do so pursuant to 42 C.F.R. � 405.874(c):

A fair hearing officer not involved in the original determination to disallow an entity's request for a billing number, or to revoke an entity's billing number, must schedule a hearing to be held within one week of receipt of an appeal, or later at the request of the entity. Both the entity and carrier may offer evidence. The hearing officer issues notice of his/her decision within 2 weeks of the hearing. . . . Either the carrier or entity may appeal the hearing officer's decision to CMS. ⁽⁶⁾

NSC contends throughout its initial brief that Respondent's billing privileges should not be retroactively granted and should be reinstated only on the date in which compliance is verified. NSC Br. at 1, 2. NSC asserts that it is the entity responsible for enforcing the supplier standards and that "the site inspection is NSC's most compelling mechanism for determining compliance of the Supplier Standards . . . ." NSC Br. at 1. NSC continues by asserting that "compliance that all standards were met was not verified until completion of a third site inspection, which was performed October 19, 2004." NSC Br. at 2.

While it is true that NSC is the primary entity responsible for enforcement of DMEPOS supplier standards and that any entity whose role is to enforce any type of rules, regulations, or standards must have the tools necessary to effectuate enforcement, this does not address the question at hand. NSC already conceded twice that it would not challenge whether the Respondent was in compliance with the supplier standards. See Amended Appeal dated April 28, 2005 and February 1, 2006 Order and Schedule for Filing Briefs.

Even though on its face NSC appears to be challenging the date that Respondent's supplier number was reinstated, the question before me is whether the Hearing Officer's authority extends beyond deciding whether a supplier is in compliance with the standards. Neither NSC's initial brief nor its reply brief adequately addresses whether and on what legal basis the Hearing Officer is authorized or not authorized to retroactively reinstate Respondent's billing privileges. NSC contends that "if the Hearing Officer deemed the supplier to be in compliance with all 21 Medicare Supplier Standards, the supplier number should be issued/reinstated the date that compliance of the Supplier Standards were verified." NSC Br. at 1. Because NSC is the entity that verifies the compliance of the supplier standards, NSC is asserting that the date of verification that a supplier is in compliance with all standards should be the earliest that a supplier's billing privileges can be reinstated. In effect, NSC is contending that a hearing officer does not have the authority to decide whether a supplier was in compliance before NSC's verification date. I do not agree. Hearing officers must have the authority not only to determine whether a supplier is in compliance with the standards promulgated in 42 C.F.R. � 424.57(c), they must also have the authority to determine when the supplier was in compliance with these standards. If a hearing officer does not have the authority to determine when a supplier is in compliance and the authority to retroactively reinstate the supplier's billing privileges, they will be unreasonably limited in the relief that they can grant a supplier. Furthermore, it would essentially make NSC the sole arbiter for purposes of determining the timing of substantial compliance.

According to 42 � 405.874(e):

A billing number is not issued, or remains revoked, and payment is not made, for items or services furnished by any entity which a carrier determines does not qualify for a billing number, until the carrier (upon reapplication of the entity), a fair hearing officer, or a CMS official designated to hear such appeals, determines that the entity qualifies for a billing number. Any claims for items or services furnished after revocation of the supplier's billing number and submitted by the entity during the appeals period are held and not processed, i.e., are neither approved, denied, or developed, until all administrative appeals have been exhausted. If an entity is determined not to have qualified for a billing number in one period but to have qualified in another, the carrier pays for claims for items sold or rented to beneficiaries during the period the entity qualified as a supplier. (Emphasis added).

If 42 C.F.R. � 405.874(e) is followed to its logical conclusion, a hearing officer does have the authority to determine the date or dates in which a supplier was eligible to bill for items or services. A hearing officer is given broad discretion to determine when - during which time period - a supplier was in compliance with the supplier standards, thereby allowing the supplier to have billing privileges during that specific period. If a hearing officer determines that the period extends back to the time when the supplier's billing privileges were revoked, the hearing officer has the authority to retroactively reinstate supplier's billing privileges back to the date of revocation. Respondent is correct in its assertion that "section 405.874(e) recognizes that claims are held pending resolution of the appeals." R. Resp. at 16. The primary reason the claims discussed in 42 C.F.R. � 405.874(e) would be held is that if a supplier's appeal is successful and a supplier is reinstated, its claims during the disputed period would be paid. If the carrier, in this case NSC, does not agree with the hearing officer's decision, it has the opportunity to appeal that decision. See 42 C.F.R. � 405.874(c).

Most notably in this instance NSC did not avail itself of the opportunity to challenge the facts of Respondent's compliance with the supplier standards during period at issue from July to December 2004. Rather it explicitly limited its challenge to the legal issue of whether the Hearing Officer has the authority to retroactively reinstate the date of Respondent's supplier number. On that sole legal issue, I find the Hearing Officer does have such authority.

For the reasons discussed above, the Hearing Officer does have the authority to determine the date that Respondent's supplier number can be reinstated. I therefore affirm the Hearing Officer's determination to reinstate Respondent's supplier number retroactively as of July 24, 2004.

Marion T. Silva

Chief Administrative Law Judge

1. NSC is the entity authorized by the Centers for Medicare & Medicaid Services (CMS) to issue, revoke, and reinstate DMEPOS supplier numbers. If NSC revokes an entity's supplier number, NSC notifies the entity that revocation is effective 15 days after NSC mails notice of its determination. Payment is not allowed for items furnished by the supplier beginning with the effective date of revocation. 42 C.F.R. �� 405.874(a) and (b), 421.210(e)(3); See 57 Fed. Reg. 27,290 (June 18, 1992); 58 Fed. Reg. 60,789 (Nov. 18, 1993).

2. Subsequent to NSC's request for hearing, new regulations entitled, "Requirements for Providers and Suppliers to Establish and Maintain Medicare Enrollment," have been promulgated. See 42 C.F.R Parts 420, 424, 489, and 498, effective June 20, 2006.

3. Previously, supplier appeals were governed by 42 C.F.R. � 405.874, which provided for review by a fair hearing officer and then a CMS official, designated by the Administrator of CMS.

4. Supplier standard 2 was not included in NSC's initial letter dated July 9, 2004.

5. Supplier standard 12 was included in NSC's letter dated July 9, 2004; however, in NSC's letter dated September 10, 2004, NSC found Respondent to be in compliance with supplier standard 12.

6. Section 1866(j)(2) of the Act, discussed previously, gives suppliers appeal rights using the procedures that apply under section 1866(h)(1)(A) of the Act, which include ALJ hearings instead of review by a CMS official as was done in the past.