Pukis v. Centers for Medicare and Medicaid Services

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

NORTHEASTERN DIVISION

VYTAUTAS PUKIS, M.D. AND )

BLOSSOMWOOD MEDICAL, )

P.C., )

)

Plaintiffs, ) Civil Action Number

v. ) 5:19-CV-00232-AKK

)

CENTERS FOR MEDICARE AND )

MEDICAID SERVICES, et. al., )

)

Defendants. )

)

MEMORANDUM OPINION

Vytautas Pukis, M.D. and Blossomwood Medical, P.C. were enrolled as

Medicare suppliers1 who provided healthcare to Medicare patients. Doc. 15-3 at 14.

On June 14, 2017, the Centers for Medicare and Medicaid Services (“CMS”)

informed Dr. Pukis and Blossomwood that 1) it intended to revoke their Medicare

billing privileges effective July 14, 2017 and 2) it would ban them from re-enrolling

as Medicare suppliers for three years. Docs. 15-55 at 27-28; 15-62 at 8-9. CMS

found Dr. Pukis and Blossomwood had violated 42 C.F.R. § 424.535(a)(8)(i) by

billing “for services rendered to one hundred eight (108) beneficiaries by Dr. Pukis

1 The Medicare statute defines doctors and medical practices as “suppliers.” See 42 U.S.C. §

1395x(d) (defining supplier); see also 42 U.S.C. § 1395x(u) (defining ‘provider of services’).

for periods of time when he was out of the country.” Docs. 15-55 at 27; 15-62 at 8.

Dr. Pukis and Blossomwood exhausted the administrative appeals process which

culminated in the Department of Health and Human Services Departmental Appeal

Board (“DAB”) upholding the revocation. Doc. 15-3 at 13. Dr. Pukis and

Blossomwood now present claims to this court that the revocation of their Medicare

billing privileges and the imposition of the three-year re-enrollment bar violated the

Administrative Procedures Act, the Medicare Act, and the United States

Constitution. The court has for consideration the parties’ respective motions for

judgment on the administrative record, docs. 23 and 26. For the reasons that follow,

the Defendants’ motion is due to be granted.

I.

The Defendants take issue with the Plaintiffs’ challenge under the Administrative

Procedure Act, contending that it does not apply in situations where, as here, the

Medicare Act governs. Docs. 26 at 8, n.3. There is conflicting caselaw precedent

on this issue.2 Further, these two laws impose slightly different standards of review.

The court does not have to resolve this conflict, because regardless of whether one

or both laws apply, the DAB Final Decision is due to be affirmed.

2 Compare Gulfcoast Med. Supply, Inc. v. Sec’y, Dept. of Health & Human Servs., 468 F.3d

1347, 1350, n.3 (11th Cir. 2006) (applying the standard outlined in the Social Security Act, 42

U.S.C. § 405(g)) with Fla. Med. Ctr. of Clearwater, Inc. v. Sebelius, 614 F.3d 1276, 1280 (11th

Cir. 2010) (applying the standard outlined in the Administrative Procedure Act).

A.

When reviewing a claim for a violation of the Medicare Act, 42 U.S.C. §

1395ff(b)(1)(A), the court may only ask “whether there is substantial evidence to

support the findings of the . . . [Secretary], and whether the correct legal standards

were applied.” Gulfcoast Med. Supply, 468 F.3d at 1350, n.3 (citing Wilson v.

Barnhart, 284 F.3d 1219, 1221 (11th Cir. 2002)). Similarly, for a claim sounding in

the Administrative Procedure Act, 5 U.S.C. § 706(2)(A) and (E), the court “must

abide by [the Secretary’s final decision] ‘unless [it was] arbitrary, capricious, an

abuse of discretion, not in accordance with law, or unsupported by substantial

evidence in the record taken as a whole.’” Fla Med. Ctr of Clearwater, Inc., 614

F.3d at 1280 (quoting Alacare Home Health Servs., Inc. v. Sullivan, 891 F.2d 850,

854 (11th Cir. 1990)). Under both standards, the court reviews whether the DAB

applied the law correctly. 5 U.S.C. § 706(2)(A-C); 42 U.S.C. 405(g) (incorporated

by 42 U.S.C. § 1395ff(b)(1)(A)). The court also determines if the substantial

evidence supports the DAB’s factual findings. 5 U.S.C. § 706(2)(E); 42 U.S.C.

405(g) (incorporated by 42 U.S.C. § 1395ff(b)(1)(A)). For a claim brought pursuant

to the Medicare Act, the review ends there. But, for an APA claim, the court further

asks whether the actions of the DAB were “arbitrary, capricious, or an abuse of

discretion.” 5 U.S.C. § 706(2)(A)).

B.

Dr. Pukis and Blossomwood contend the DAB “missaplied” the legal standard to

revoke their billing privileges. Doc. 23 at 8, 21. Essentially, they assert the DAB

should have considered the “material facts relating to the significance, materiality,

or relative weight and importance of the alleged billing errors in either absolute terms

or in comparison to overall billing volume and practices of the Plaintiffs.” Id. at 8.

And they argue also that the DAB erred by not applying the factors under 42 C.F.R.

§ 424.535(a)(8)(ii).3 Id. at 32. Therefore, the court must review initially whether

the DAB applied the proper legal standard. 5 U.S.C. § 706(2)(A-C); 42 U.S.C.

405(g) (incorporated by 42 U.S.C. § 1395ff(b)(1)(A)).

i.

The DAB refused to consider facts that Dr. Pukis and Blossomwood contend

mitigated their billing violations and are relevant under 42 C.F.R. § 424.535(a)(8)(i).

Doc. 15-3 at 17-19, 22-23. Instead, the DAB relied solely on Dr. Pukis’s and

Blossomwood’s submission of over 100 impossible claims to render its decision.

Doc. 15-3 at 21. Dr. Pukis and Blossomwood argue this failure to consider other

potentially mitigating factors is a misapplication of the law. Doc. 23 at 8, 25-28.

The court disagrees.

3 Dr. Pukis and Blossomwood do not assert that regulation cited to impose the three-year

enrollment bar was incorrect, so the court will not address that issue. See doc. 27 at 12 (noting 42

C.F.R. § 434.535(c) applied to the case at hand).

Section 424.535(a)(8)(i) provides CMS with the authority to “revoke a currently

enrolled provider or supplier’s Medicare billing privileges” if the supplier “submits

a claim or claims for services that could not have been furnished to a specific

individual on the date of service.” 42 C.F.R. § 424.535(a)(8)(i)(2015). The

regulation specifically allows for termination of a supplier’s enrollment when “[t]he

directing physician or beneficiary is not in the state or country when services are

furnished.” Id. at § 424.535(a)(8)(i)(B) (2015).

In deciding that Dr. Pukis and Blossomwood violated this rule, the

Administrative Law Judge (the “ALJ”) interpreted the rule to require “‘at least three’

claims that could not have been provided.” Doc. 15-3 at 10 (quoting 73 Fed. Reg.

36,448, 36,455). The DAB reiterated this interpretation and affirmed the ALJ’s

analysis. Doc. 15-3 at 18, 21. Both the DAB and the ALJ relied on CMS’s response

to a public comment in the Federal Register explaining, “we will not revoke billing

privileges under § 424.535(a)(8) unless there are multiple instances, at least three,

where abusive billing practices have taken place.” 73 Fed. Reg. 36,455; Doc. 15-3

at 10 (ALJ Decision); Doc. 15-3 at 18 (DAB Final Decision).

An agency’s interpretation of its regulation will control as long as it is not

“plainly erroneous or inconsistent with the regulation.” Auer v. Robbins, 519 U.S.

452, 461 (1997) (internal quotations omitted). By its plain language, Section

424.535(a)(8) allows CMS to revoke a supplier’s billing privileges if they billed for

services that “could not have been furnished . . . ” 42 C.F.R. § 424.535(a)(8)(i)(B)

(2015). And, the DAB’s interpretation of this regulation to require at least three

impossible claims for services is consistent with the regulation. Dr. Pukis and

Blossomwood are certainly correct that the DAB failed to consider the other facts

they presented and deemed them instead as being outside the scope of its review.

See doc. 15-3 at 8, 25-28. However, while strict and perhaps harsh, this

interpretation is not “plainly erroneous or inconsistent with the regulation.” Auer,

519 U.S. at 461.

ii.

Dr. Pukis and Blossomwood also contend that the DAB erred because it “did not

apply” the factors listed in 42 C.F.R. § 424.535(a)(8)(ii). Doc. 23 at 32-33. Section

424.535(a) lists the “[r]easons for revo[king]” a supplier’s Medicare enrollment. 42

C.F.R. § 424.535(a)(2015). Subsection (a)(8) provides for revocation when a

supplier has “[a]bused [their] billing privileges.” 42 C.F.R. § 424.535(a)(8)(2015).

This is defined to include two situations,4 and the DAB relied on the first of these

two: when “[t]he provider or supplier submits a claim or claims for services that

could not have been furnished to a specific individual on the date of service.” Id. at

§ 424.535(a)(8)(i)(2015). Dr. Pukis and Blossomwood contend that the DAB should

4 See 42 C.F.R. § 424.535(a)(8)(2015) (“Abuse of billing privileges includes either of the

following:”).

have relied instead on the second situation, i.e. when “CMS determines that the

provider or supplier has a pattern or practice of submitting claims that fail to meet

Medicare requirements.” Id. at § 424.535(a)(8)(ii) (2015); doc. 23 at 32.

Presumably, Dr. Pukis and Blossomwood believe they would prevail under this

standard. Even if true, the regulation allows the DAB to proceed on either sceniaro.

Here, CMS revoked Dr. Pukis’s and Blossomwood’s Medicare enrollment under

Section 424.535(a)(8)(i) because they submitted over 100 impossible claims—in

particular, claims for services at a time when Dr. Pukis was not in the country and

could not have provided the alleged services. Docs. 15-55 at 27-28; 15-62 at 8-9.

The revocation was not based on Section 424.535(a)(8)(ii), so CMS had no

obligation to consider whether there was “a pattern or practice” of abusive billing.

C.

In light of the court’s finding that the DAB applied the law correctly, the court

moves to the next step of the analysis and considers whether the substantial evidence

supports the DAB’s factual findings.5 5 U.S.C. § 706(2)(A); 42 U.S.C. 405(g)

5 Dr. Pukis and Blossomwood do not appear to contest that they filed impossible claims. Doc.

15-56 at 7-16 (admitting claims submitted in error); Blossomwood’s Request for Reconsideration

of Revocation, Doc. 15-4 at 20 (admitting “a majority of the Disputed Claims were the result of

CRNPs mistakenly billing for services under Dr. Pukis’ provider number, during periods of time

when he was abroad.”) To the extent they do contest this, the court finds the substantial evidence

supports the factual finding that they submitted more than 100 impossible claims. Dr. Pukis and

Blossomwood conceded they submitted claims for Dr. Pukis’s services when he was out of the

country. Docs. 15-56 at 7-16; 15-4 at 20; Shah v. Azar, 920 F.3d 987, 995 (5th Cir. 2019) (finding

substantial evidence supports an ALJ’s decision revoking billing privileges of suppliers who

admitted to being out of the country at the time services were issued).

(incorporated by 42 U.S.C. § 1395ff(b)(1)(A)). “Substantial evidence is ‘more than

a mere scintilla. It means such relevant evidence as a reasonable mind might accept

as adequate to support a conclusion.’” Dekalb Cnty. v. U.S. Dept. of Labor, 812 F.3d

1015, 1020 (11th Cir. 2016) (quoting Richardson v. Perales, 402 U.S. 389, 401

(1971). Dr. Pukis and Blossomwood allege the absence of substantial evidence to

support a factual finding that their conduct warrants the maximum three-year

enrollment bar. Doc. 27 at 12. The court disagrees.

Debarrment against a supplier is warranted, “[i]f [they have] their billing

privileges revoked . . . .” 42 C.F.R. § 424.535(c) (2015). CMS must impose a re-

enrollment bar that “lasts a minimum of 1 year, but not greater than 3 years,

depending on the severity of the basis of the revocation.” 42 C.F.R. § 424.535(c)(1)

(2015). Contrary to Dr. Pukis’s and Blossomwood’s contention that CMS did not

“establish a factual justification . . . addressing the ‘severity’ of the claimed action[,]”

doc. 27 at 12, CMS imposed the three-year enrollment bar after finding Dr. Pukis

and Blossomwood submitted 115 claims “for services rendered . . . for periods of

time when [Dr. Pukis] was out of the country.” Docs. 15-55 at 27-28 and 15-62 at

8-9. This conduct is not in contention. Indeed, Dr. Pukis and Blossomwood concede

that they submitted at least 100 of these impossible claims. Docs. 15-4 at 20 and 15-

56 at 7-16. While Dr. Pukis and Blossomwood may disagree, a reasonable mind

might accept that over 100 claims for alleged services they provided while Dr. Pukis

was out of the country rises to the severity level that warrants the maximum re-

enrollment bar. And, “where Congress has entrusted an administrative agency with

the responsibility of selecting the means of achieving the statutory policy[,] the

relation of remedy to policy is peculiarly a matter for administrative competence.”

Butz v. Glover Livestock Comm’n Co., 411 U.S. 182, 185 (1973) (internal quotations

omitted). Based on this record, the substantial evidence supports CMS’s factual

finding that the actions here warranted the maximum penalty.

D.

Finally, the court must evaluate whether the DAB decision was “arbitrary,

capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C.

§ 706(2)(A); Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359, 377 (1998).

The goal is to ensure that the agency’s decision was “logical and rational.”

Allentown Mack Sales & Serv., Inc., 522 U.S. at 374. The court “must give

substantial deference to an agency’s interpretation of its own regulations” allowing

the interpretation “controlling weight unless it is plainly erroneous or inconsistent

with the regulation.” Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994)

(internal quotations omitted).

Dr. Pukis and Blossomwood assert multiple reasons that purportedly show the

arbitrary and capricious or abuse of discretion nature of the decision: (1) the agency’s

interpretation of 42 C.F.R. § 424.535(a)(8)(i)(B) revoking supplier privileges for

three or more impossible billing claims, doc. 23 at 19; (2) the DAB purportedly

ignored several mitigating factors, doc. 23 at 8; and (3) the imposition of the

maximum three-year re-enrollment bar, doc. 27 at 11. These arguments are

unavailing.

i.

Section 424.535(a)(8)(i) states “The provider or supplier submits a claim or

claims for services that could not have been furnished to a specific individual on the

date of service . . . .” 42 C.F.R. § 424.535(a)(8)(i). The DAB interpreted this

provision as applying when a supplier has submitted three impossible billing claims.

The Plaintiffs challenge this interpretation. But, by its plain language, Section

424.535(a)(8)(i) only requires one impossible claim. Therefore, interpreting the

regulation to only apply when a supplier has filed three or more impossible claims

is reasonable. Moreover, the DAB has consistently applied this interpretation in

other cases.6 And, CMS stated this interpretation clearly when it implemented the

regulation. 73 Fed. Reg. 36,455 (stating Medicare billing privileges would only be

revoked if there were three or more impossible billing claims). Therefore, the court

rejects Dr. Pukis’s and Blossomwood’s contentions that the decision to interpret the

6 See Howard B. Reife, D.P.M., D.A.B. No. 2527, 2013 WL 5310189, at *5 (Aug. 1, 2013);

John M. Shimko, D.P.M., D.A.B. No. 2689, 2016 WL 30308513, at 6 (Apr. 25, 2016); and Louis

J. Gaefke, D.P.M., D.A.B. No. 2554, 2013 WL 12200935, at 7 (Dec. 24, 2013).

provision as requiring three or more impossible claims is arbitrary, capricious, an

abuse of discretion, or in violation of the regulation.

ii.

Dr. Pukis and Blossomwood argue also that the DAB failed to consider certain

allegedly mitigating factors. More specifically, they assert that the DAB failed to

consider that the billing “errors were isolated and accidental” and “unlikely to

prompt action from law enforcement . . . .” Doc. 23 at 25. Indeed, the DAB declined

to do so, citing to a prior decision that explained “whether improper billing resulted

from intentional fraud or accidental errors was immaterial.” Doc. 15-3 at 18 (internal

quotations omitted). While Dr. Pukis and Blossomwood obviously disagree, Section

434.535(a)(8)(i) does not include any language suggesting CMS should consider the

supplier’s intent, aside from the subsection heading: “Abuse of billing privileges.”

42 C.F.R. § 434.535(a)(8)(2015). The DAB interpreted this subheading to only

require proof of “wrong or improper use; misuse . . .” rather than consideration of

intent. Doc. 15-3 at 19 (internal quotations omitted). The DAB’s interpretation,

which it has repeatedly applied in other cases,7 is reasonable and is not arbitrary or

capricious.

7 See supra n. 6.

iii.

The Plaintiffs also assert that the three-year ban is arbitrary and capricious.

Section 424.535(c)(1) gives CMS the discretion to bar a supplier from enrolling in

Medicare from one to three years “depending on the severity of the basis of the

revocation.” 42 C.F.R. § 424.535(c)(1) (2015). Moreover, the regulation prohibits

billing for services provided to a Medicare recipient when, as here, the biller is

outside of the country. 42 C.F.R. 424.535(a)(8)(i) (2015); Docs. 15-55 at 27-28 and

15-62 at 8-9. And, the regulation specifically authorized CMS to bar re-enrollment

for one to three years. 42 C.F.R. § 424.535(c)(1) (2015). CMS chose to implement

a three-year bar after finding Dr. Pukis and Blossomwood had submitted over 100

claims in violation of the regulation. Docs. 15-55 at 27-28 and 15-62 at 8-9. CMS’s

determination that this conduct warranted the maximum three-year bar is reasonable.

Therefore, because CMS’s “decision to issue a penalty” is due deference as it was

“specifically authorized by its regulations for conduct that the regulation made clear

was prohibited,” Shah, 920 F.3d at 999, n. 37 (internal quotations omitted), the court

also rejects Dr. Pukis’s and Blossomwood’s contention that the imposition of the

three-year enrollment ban was arbitrary or capricious.8

8 Dr. Pukis and Blossomwood raise other contentions which are also unavailing. They claim

“it is an abuse of discretion for CMS to revoke a supplier’s Medicare enrollment based on such an

inconsequential number of claims. . . .” Doc. 23 at 22. This assertion regarding inconsequentiality

is inaccurate where, as here, CMS found over 100 impossible claims. Doc. 15-55 at 27.

Dr. Pukis and Blossomwood also challenge the DAB’s refusal to consider that the impossible

claims were only for “a deminimus amount . . . .” Doc. 23 at 22. The interpretation that Section

II.

Dr. Pukis and Blossomwood argue also that the interpretation of Section

424.535(a)(8)(i) to only require consideration of whether the supplier has submitted

three impossible claims violates their Fifth Amendment9 substantive due process

right to participate in Medicare.10 Doc. 27 at 19-20. The Fifth Amendment’s

protection “cover[s] a substantive sphere . . . barring certain government actions

regardless of the fairness of the procedures used to implement them.” Cnty. of

Sacremento v. Lewis, 523 U.S. 833, 840 (1998) (internal quotations omitted). “To

state a substantive due process claim, a plaintiff must allege (1) a deprivation of a

constitutionally protected interest, and (2) that the deprivation was the result of an

abuse of governmental power sufficient to raise an ordinary tort to the stature of a

424.535(a)(8)(i) does not require consideration of the low dollar amount of these billing violations

is reasonable. The regulation mentions no financial threshold for finding a violation. 42 C.F.R. §

434.535(a)(8); Gaefke, D.A.B. No. 2554, at 8; and Shimko, D.A.B. No. 2689, at 8.

9 The Fifth Amendment provides that “[n]o person shall . . . be deprived of life, liberty, or

property, without due process of law . . . .” U.S. Const. amend. V.

10 The Defendants assert this claim is not properly before this court. The court disagrees. The

DAB made the decision to revoke the Plaintiffs’ Medicare billing privileges final and affirmed the

basis for the revocation—that Dr. Pukis and Blossomwood had submitted over three impossible

claims. DAB Final Decision, Doc. 15-3 at 18 – 21; In re. Beverly Health & Rehab.- Spring Hill,

D.A.B. No. 1696, 1999 WL 482433, at *4 (July 1, 1999) (“The Board acts for the Secretary in the

hearing process by issuing the final agency decisions in appeals.”). The DAB also affirmed the

ALJ’s refusal to consider evidence allegedly mitigating the impossible claims as outside the scope

of review. Doc. 15-3 at 17-23. Dr. Pukis and Blossomwood contend this affirmance, finding

several allegedly mitigating factors irrelevant to the legal analysis, violated their substantive due

process rights. Doc. 27 at 20. And Dr. Pukis and Blossomwood could not have raised this claim

until the DAB issued its Final Decision. Therefore, the Plaintiffs have not waived this claim.

constitutional violation.” Hoefling v. City of Miami, 811 F.3d 1271, 1282 (11th Cir.

2016) (internal quotations omitted). Finally, “[a] deprivation is of constitutional

stature if it is undertaken for improper motive and by means that were pretextual,

arbitrary and capricious, and without rational basis.” Id. (quoting Executive 100,

Inc. v. Martin Cnty., 922 F.2d 1536, 1541 (11th Cir. 1991)).

Assuming, without deciding, that Dr. Pukis and Blossomwood have a

constitutionally protected property interest in participating in Medicare, the

application of the DAB’s interpretation of the regulation does not amount to a

constitutional violation. For the reasons stated above, the DAB’s interpretation that

Section 424.535(a)(8)(i) does not require consideration of any factor other than

whether the supplier made three impossible claims is not “arbitrary and capricious.”

This interpretation has a conceivable rational relation to CMS’s legitimate interest

in “ensur[ing] that Medicare billing privileges are given to trustworthy providers and

suppliers[,]” and “help[ing] protect the Medicare Trust Funds, and beneficiaries

from potentially unqualified providers and suppliers.” 73 Fed. Reg. 36,448, 36,454.

Finally, Dr. Pukis and Blossomwood have not alleged that the DAB’s decision was

pretextual.

III.

Based on the foregoing, substantial evidence supports the DAB Final Decision.

And the decision comports with the relevant legal standards and is not arbitrary,

capricious, or an abuse of discretion. Therefore, the decision is due to be affirmed,

and the Defendants’ motion for judgment is due to be granted. A separate order in

accordance with this memorandum of decision will be issued.

DONE the 21st day of September, 2020.

ABDUL K. KALLON

UNITED STATES DISTRICT JUDGE

15