Zille Shah v. Alex Azar, Secretary, HHS

Case: 17-40897 Document: 00514913759 Page: 1 Date Filed: 04/12/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
April 12, 2019
No. 17-40897
Lyle W. Cayce
Clerk
ZILLE SHAH, Medical Doctor; ZILLE HUMA ZAIM, Medical Doctor,
Physicians Assistant,
Plaintiffs - Appellants
v.
ALEX M. AZAR, II, SECRETARY, U.S. DEPARTMENT OF HEALTH AND
HUMAN SERVICES,
Defendant - Appellee
Consolidated With 17-40898
MOHAMMAD NAWAZ, Medical Doctor; MOHAMMAD ZAIM, Medical
Doctor, Physicians Assistant,
Plaintiffs - Appellants
v.
ALEX M. AZAR, II, SECRETARY, U.S. DEPARTMENT OF HEALTH AND
HUMAN SERVICES,
Defendant - Appellee
Appeals from the United States District Court
for the Eastern District of Texas
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Before HIGGINBOTHAM, DENNIS, and COSTA, Circuit Judges.
PATRICK E. HIGGINBOTHAM, CIRCUIT JUDGE:
These consolidated appeals concern the revocation of two physicians’
Medicare privileges. Physicians Mohammad Nawaz and Zille Shah are
married. They submitted Medicare claims for services provided on dates that
they were out of the country and the Centers for Medicare and Medicaid
Services (“CMS”) revoked their billing privileges. The district court considered
the two cases together and affirmed the revocation decisions of the Secretary.
We consolidated their appeals and now affirm.
I.
Mohammad Nawaz is a Texas-based cardiologist and Zille Shah is a
Texas-based primary care physician. 1 Both doctors participated in the
Medicare program until the revocation of their Medicare privileges. The events
that precipitated the revocation of privileges are straightforward. The
physicians concede that they were both out of the country during the following
periods: June 18–20, 2011; September 27–October 2, 2011; May 2–4, 2012; and
May 20–June 4, 2013. During that time, Nawaz submitted over 100 claims for
reimbursement at the physician billing rate for medical services using his
unique Medicare National Provider Identifier (“NPI”) and Shah submitted over
ninety Medicare claims for reimbursement at the physician billing rate using
her unique NPI.
CMS administers the Medicare reimbursement program, including
Medicare Part B, which covers medically necessary preventative services and
supplies. 2 CMS contracts with a private firm, Novitas Solutions (“Novitas”) to
1 Nawaz practices under the Professional Association Mohammad Zaim, M.D., P.A.
and Shah practices under the Professional Association Zille Huma Zaim, M.D., P.A.
2 See generally What Part B Covers, Medicare.gov, available at
https://www.medicare.gov/what-medicare-covers/part-b/what-medicare-part-b-covers.html.
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provide administrative services. On September 25, 2014, Novitas contacted
Nawaz and informed him that his Medicare privileges were being revoked
because he had submitted “in excess of one hundred Medicare claims during
documented periods of travel outside the United States.” The letter informed
Nawaz that the revocation was effective October 25, 2014 and notified him of
his right to submit a Corrective Action Plan (“CAP”) within 30 calendar days
if he believed he was “able to correct the deficiencies and establish [his]
eligibility to participate in the Medicare program.” Shah received a similar
letter on September 30, 2014, identifying over ninety submitted claims for
services performed while Shah was out of the country; informing her that her
Medicare privileges would be revoked effective October 30, 2014; and inviting
her to submit a CAP providing evidence of compliance. The letters informed
the physicians that their Medicare privileges were being revoked pursuant to
42 C.F.R. § 424.535(a)(8), the regulation defining “Abuse of Billing Privileges.”
The physicians were informed that Novitas was establishing a re-enrollment
bar for a period of three years pursuant to 42 C.F.R. § 424.535(c).
The physicians each submitted a CAP. In his CAP, Nawaz conceded that
the claims at issue were for services performed by nurse practitioners while he
was out of the country. 3 He stated that he was “unaware that services for a
nurse practitioner could not be billed under [his] NPI number unless [he] was
physically present with them at all times.” For her part, Shah explained in her
CAP that she had “hired experts to guide [her] through the process of
correcting billing errors” and “discontinued the use of nurse practitioners
altogether.” CMS, through Novitas, acknowledged receipt of both CAPs but
determined that it would not overturn the initial revocations. CMS
3He continued, acknowledging that “[t]he billing for Nurse practitioners using [his]
NPI number was in error, however, this was not done knowingly with the intent to defraud
Medicare.”
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acknowledged that the CAPS gave an “explanation of the circumstances” but
did not “negate the fact that claims were submitted for services that could not
have been furnished by [either physician] on the dates of service reported.”
Without verifiable evidence of compliance with the regulations at the time of
the revocation, CMS maintained that the CAPs “must be denied.” CMS then
denied the physicians’ requests for reconsideration.
Then began the administrative review process. The physicians sought
review of CMS’s decision to revoke their privileges before an ALJ. Across both
proceedings, CMS and the physicians filed cross-motions for summary
judgment and CMS prevailed before the ALJ. In both decisions, the ALJ noted
that the physicians did not deny that they were out of the country on dates on
which they submitted claims for services they allegedly provided. The ALJ
determined that “concession is all that CMS needs in order to authorize
revocation of [the physicians’] participation” in the Medicare program. Both
Nawaz and Shah then appealed the adverse determinations to HHS’s
Departmental Appeals Board (“DAB”). The DAB affirmed each decision after
oral argument, noting that the uncontested facts showed that each physician
had been outside of the country while using personal NPI numbers to bill
Medicare. Nawaz and Shah then sought review by the district court under 42
U.S.C. § 405(g). After briefing and oral argument, the district court issued a
consolidated decision affirming CMS’s revocation of the physicians’ Medicare
privileges. Both physicians timely appealed.
II.
The parties dispute the proper standard of review. The Secretary
contends that this case is governed by 42 U.S.C. § 405(g), which the Medicare
statute specifically incorporates. 4 Section 405(g) confines the inquiry to “(1)
4 42 U.S.C. § 1395cc(h).
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whether the Secretary applied the proper legal standards; and (2) whether the
Secretary’s decision is supported by substantial evidence on the record as a
whole.” 5 The physicians contend that the APA provides the applicable standard
of review of the Secretary’s decision, pointing to 5 U.S.C. § 706 which provides
that the reviewing court shall set aside agency actions that are “arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law.” 6
As in this court’s decisions in Maxmed Healthcare and Baylor County Hospital,
“[b]ecause the standard of review ‘probably makes no difference’” we will
“‘assume only for the sake of argument that the APA’s arbitrary and capricious
standard applies.’” 7
III.
The physicians’ interpretation of the relevant regulations lies at the
heart of their appeal. The physicians contend that billing for services incident
to the service of a physician does not require “the personal, on-site presence of
the billing physician” and allows direct supervision to be provided by an “other
practitioner.” They argue that the ALJ and DAB misread the regulations
because the regulatory scheme “recognizes that the billing physician may make
arrangements with an other practitioner.” They maintain that the claims at
issue did not violate the regulations because the services were actually
rendered, those services were performed by nurse practitioners acting under
5 Maxmed Healthcare, Inc. v. Price, 860 F.3d 335, 340 (5th Cir. 2017) (quoting Estate
of Morris v. Shalala, 207 F.3d 744, 745 (5th Cir. 2006) (holding that because the Medicare
Act incorporates § 405(g), the substantial evidence standard controls) (internal alterations
and quotation marks omitted)).
6 5 U.S.C. § 706(2)(A). The physicians concede that, with respect to findings of fact,
the standard of review is the same because the APA provides for substantial evidence review.
§ 706(2)(E).
7 Maxmed Healthcare, 860 F.3d at 340 (quoting Baylor Cty. Hosp. Dist. v. Price, 850
F.3d 257, 261 (5th Cir. 2017)).
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the physicians’ orders after their initial evaluations, and they were performed
“with covering [physicians] available.”
Medicare Part B covers certain kinds of medically necessary and
preventive services. 8 One category of covered services consists of those
provided “incident to a physician’s professional service, of kinds which are
commonly furnished in physicians’ offices and are commonly either rendered
without charge or included in the physicians’ bills.” 9 These services are often
provided by non-physician practitioners such as nurse practitioners or
physician assistants. In this case, in fact, they were provided by nurse
practitioners on the dates during which Nawaz and Shah were out of the
country.
In order to fit within this category of “incident to” services, however, a
variety of requirements must be met, which CMS outlines in its published
regulations. At issue here is the requirement that services or supplies be
furnished “under the direct supervision of the physician.” 10 The governing
regulation establishing this requirement, as it read at the time of the
physicians’ conduct in this case, explained the following:
(b) Medicare Part B pays for services and supplies incident to the service
of a physician (or other practitioner).
...
(5) Services and supplies must be furnished under the direct supervision
of the physician (or other practitioner). The physician (or other
practitioner) directly supervising the auxiliary personnel need not be the
same physician (or other practitioner) upon whose professional service
the incident to service is based. 11
8 See generally What Part B Covers, Medicare.gov, available at
https://www.medicare.gov/what-medicare-covers/part-b/what-medicare-part-b-covers.html.
9 42 U.S.C. § 1395x(s)(2)(A).
10 42 C.F.R. § 410.26(b)(5) (emphasis added).
11 42 C.F.R. § 410.26(b). As the Secretary points out in his brief, the physicians
repeatedly quote the version of the regulations that are currently in effect rather than the
version in effect at the time the subject services were provided. With the exception of the new
argument physicians raised at oral argument with respect to “general supervision,” see infra
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Thus, the physician “upon whose professional service the incident to
service is based” (that is, the “ordering physician”) need not be the same as the
one providing direct supervision. In this case, Nawaz and Shah were the
ordering physicians for all of the “incident to” procedures they billed to
Medicare—they had established the treatment plans and ordered the
services—while the nurse practitioners who performed the services were the
“auxiliary personnel.” 12
The regulations in turn define “direct supervision” as follows 13: “Direct
supervision in the office setting means the physician must be present in the
office suite and immediately available to furnish assistance and direction
throughout the performance of the procedure. It does not mean that the
physician must be present in the room when the procedure is performed.” 14 In
other words, the regulations make clear that when Plan-B-eligible “incident
to” services are furnished, a physician or other practitioner must be physically
“present in the office suite” to directly supervise the services.
Each physician who participates in the Medicare program receives an
NPI number. 15 When a member of the “auxiliary personnel” category (such as
note 19, the revisions do not affect the issue to be resolved in this case. Citations to the
regulations throughout this opinion are to the version operative at the time the services were
provided.
12 42 C.F.R. § 410.26(a)(1) defines auxiliary personnel to mean “any individual who is
acting under the supervision of a physician (or other practitioner).” 42 C.F.R. § 410.26(a)(1).
“Practitioner” is defined as “a non-physician practitioner who is authorized by the Act to
receive payment for services incident to his or her own services.” 42 C.F.R. § 410.26(a)(7).
13 42 C.F.R. § 410.26(a)(2) cross-references another section of the regulation for the
definition, explaining that “[d]irect supervision means the level of supervision by the
physician (or other practitioner) of auxiliary personnel as defined in § 410.32(b)(3)(ii).” 42
C.F.R. § 410.26(a)(2).
14 42 C.F.R. § 410.32(b)(3)(ii) (emphasis added).
15 See, e.g., Ass’n of Am. Physicians & Surgeons, Inc. v. Sebelius, 901 F. Supp. 2d 19,
40 (D.D.C. 2012) (“The regulations implementing HIPAA adopted the National Provider
Identifier (‘NPI’) as the universally recognized identifier.”).
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a physician assistant or nurse) described in 42 C.F.R. § 410.26(b)(5) provides
“incident to” services and the ordering physician also directly supervises those
services, the Medicare bill is made under that ordering physician’s NPI
number. 16 If no physician is present to directly supervise the auxiliary
personnel, then the service must be billed under the NPI of the auxiliary
personnel—this results in a reduction from a 100% billing rate for the medical
service to an 85% billing rate. 17
A separate regulation outlines the reasons for which CMS may revoke
Medicare privileges. One such reason is for “[a]buse of [b]illing [p]rivileges,”
which the operative regulation defines to include situations in which:
(i) 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
16 See 66 Fed. Reg. 55267 (Nov. 1, 2001) (in response to a comment expressing
confusion about whose billing number should be used when billing for incident to services,
the agency responded: “Inherent in the definition of an incident to service is the requirement
that the incident to service be furnished incident to a professional service of a physician (or
other practitioner). When a claim is submitted to Medicare under the billing number of a
physician (or other practitioner) for an incident to service, the physician is stating that he or
she either performed the service or directly supervised the auxiliary personnel performing
the service. Accordingly, the Medicare billing number of the ordering physician (or other
practitioner) should not be used if that person did not directly supervise the auxiliary
personnel.”); Glaser v. Wound Care Consultants, Inc., 570 F.3d 907, 911 (7th Cir. 2009) (“[A]
health-care provider may use a doctor’s identification number to bill Medicare and Medicaid
for services performed by a physician’s assistant—and thus obtain reimbursement at the
doctor’s rate—if the assistant rendered services ‘incident to’ the services of a physician. Most
relevant for purposes of this case, an assistant’s services are ‘incident to’ a physician’s
services only if the doctor directly supervises the assistant’s performance.” (emphasis added));
U.S. ex rel. Lockyer v. Haw. Pac. Health, 490 F. Supp. 2d 1062, 1078 (D. Haw. 2007) (“The
incident to rules prohibit billing for services under the provider number of a physician who
was not present in the office at the time the alleged supervision took place.”).
17 See United States v. R&F Props. of Lake Cty., Inc., 433 F.3d 1349, 1353 (11th Cir.
2011) (“Alternatively, a provider may bill Medicare for physician assistant and nurse
practitioner services under the physician assistant’s or nurse practitioner’s own [NPI].
Billing Medicare in this second way indicates that the physician assistant or nurse
practitioner has performed the service under some level of supervision by a physician, but
the requirements of 42 CFR § 410.26 have not necessarily been met. For services billed under
a physician assistant’s or nurse practitioner’s [NPI], the [fiscal intermediary] pays 85% of
what it would pay for the same services billed under a physician’s [NPI].”).
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service. These instances include but are not limited to the following
situations:
(A) Where the beneficiary is deceased.
(B) The directing physician or beneficiary is not in the state or
country when services were furnished.
(C) When the equipment necessary for testing is not present where
the testing is said to have occurred. 18
In other words, the revocation regulation specifically contemplates the issue
here: the physicians could not have provided direct supervision because they
were not in the country when the services at issue were furnished.
The physicians reject the conclusion of the ALJ and DAB that direct
supervision by the billing provider was required. It is not entirely clear if the
physicians are suggesting that the nurse practitioners qualified as “other
practitioners” or whether they contend that they had made arrangements for
covering physicians who themselves provided direct supervision—or some
hybrid of the two. 19
18 42 C.F.R. § 424.535(a)(8)(i) (emphasis added).
19 At oral argument, the physicians suggested a new theory regarding their compliance
with 42 C.F.R. § 410.26(b)(5). They argued that the regulation contemplates different levels
of physician supervision, and because the services at issue here were “chronic care
management,” “general supervision” was all that was required, not “direct supervision.”
physicians did not make this general supervision argument in any of the tribunals below or
in their briefs before this court. New arguments or legal theories first raised at oral argument
are waived, and we need not consider the merits of the argument. Comsat Corp. v. F.C.C.,
250 F.3d 931, 936 n.5 (5th Cir. 2001) (citing Whitehead v. Food Max of Miss., Inc., 163 F.3d
265, 270 (5th Cir. 1998)). We note briefly, however, that the physicians’ argument relies on a
new version of the regulation that was not in place when the services at issue here were
provided. Section 410.26(b)(5) as written at the time the services were performed did not
contemplate allowing a physician to bill for services “incident to the service of a physician”
furnished under general supervision, rather it allowed only services provided under direct
supervision. The regulation was amended in November 2014—after the services at issue here
were provided—to allow “[s]ervices and supplies furnished incident to transitional care
management and chronic care management services [to] be furnished under general
supervision of the physician (or other practitioner) when these services or supplies are
provided by the clinical staff.” 79 Fed. Reg. 67548-01, 68002 (Nov. 13, 2014). The regulation
at the time the services were provided did not allow services incident to the service of a
physician to be furnished under general supervision, contrary to the new argument
introduced by counsel to the physicians at oral argument.
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The Secretary does not dispute that the directing physician may make
arrangements with another physician to provide or directly supervise “incident
to” services. Indeed, the regulations are quite clear on this point. Here
however, the physicians billed for the services using their own NPI numbers,
which would have required them to be physically present in the office suite and
providing direct supervision. Further, as discussed below, the physicians failed
to provide competent evidence that they had arranged covering physicians who
provided the requisite direct supervision. With respect to the nurse
practitioners who provided the services, the physicians make no argument that
they were “non-physician practitioner[s] who [are] authorized by the Act to
receive payment for services incident to [their] own services.” 20 Even if they
did qualify as other practitioners for purposes of the regulation, they would
have been required to bill under their own NPIs at a reduced rate of 85%, since
no physician was supervising. 21 The physicians cannot escape the plain
language of the regulation—they billed for services using their own NPIs
without providing direct supervision while traveling outside of the country. 22
IV.
The physicians also contend that the ALJ’s summary judgment dismissal
of their claims was not supported by substantial evidence. First, the physicians
challenge the declaration of Matthew Kirk, a special agent for the Secretary’s
Office of Inspector General, submitted by CMS on summary judgment. They
20 42 C.F.R. § 410.26(a)(7).
21 See, e.g., Landau v. Lucasti, 680 F. Supp. 2d 659, 671 (D.N.J. 2010) (“Quite plainly,
Medicare requires the physician’s personal supervision, including physical presence, to bill
at the physician services rate; otherwise, assuming the assistants or nurses administering
the infusion therapy are qualified non-physician practitioners, the Medicare reimbursement
can be sought only at the lower rate for such practitioners.”).
22 Perez v. Mortg. Bankers Ass’n, 135 S. Ct. 1199, 1222 (2015) (“[W]e should assume
that the ordinary meaning of the regulation’s language expresses its purpose and enforce it
according to its terms.”) (internal alterations and quotation marks omitted).
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argue that Kirk’s declaration was unreliable and that it contained hearsay
evidence and false assertions. The physicians also aver that they presented
sufficient proof—in the form of their own affidavits—to create a material issue
of fact as to whether they had secured covering physicians when they were out
of the country.
The physicians’ challenge to CMS’s evidence focuses entirely on the Kirk
declaration. The physicians fail to give any explanation for their contention
that the declaration is hearsay, but the challenge fails for a simpler reason: the
ALJ specifically disclaimed reliance on the affidavit in reaching his conclusion.
The ALJ explained with respect to Nawaz:
Petitioner asserts—without explanation—that the declaration of
Matthew Kirk is not credible. I need not address that argument in
order to issue summary judgment favorable to CMS because CMS
does not rely on anything in the affidavit to establish facts that are
in dispute. As I have explained, Petitioner admits that he was out
of the country during periods of time when he claimed
reimbursement for services that he ostensibly provided to
Medicare beneficiaries.
The ALJ offered the same explanation to an identical challenge to Kirk’s
declaration raised by Shah. The ALJ relied instead on the physicians’ own
admissions that they were out of the country when the services at issue were
performed and nonetheless billed for the services using their own NPI
numbers. Under CMS’s reasonable interpretation of the governing regulation
outlined above, the ALJ’s decision was supported by substantial evidence.
The physicians’ claims about the evidentiary value of their own affidavits
also fail. In their affidavits submitted to the ALJ, the physicians assert that
they had arranged coverage by other physicians while they were out of the
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country. 23 As a preliminary matter, the DAB found that the affidavits
submitted by the physicians did not establish that the physicians arranged for
other cardiologists or primary care providers to furnish the direct supervision
required by CMS regulations. The DAB noted that the vague statements
provided—that Nawaz had two cardiologists “covering for [him]” and that Shah
had “lined up primary care providers for coverage in case of emergency”—do
not establish direct supervision. The suggestion that the physicians submitted
evidence of covering physicians providing direct supervision is further
undercut by other statements in the record. For example, Nawaz argued that
“CMS has no evidence to suggest that this necessity arose” and that “[n]o other
cardiologists are willing or able . . . to tend to Medicare beneficiaries in nursing
homes.” The physicians failed to satisfy their burden of identifying “specific
evidence in the summary judgment record demonstrating that there is a
material fact issue” concerning whether they had arranged for covering
physicians to provide direct supervision. 24 Even if the physicians had pointed
to specific evidence that covering physicians had provided direct supervision,
it is undisputed that the physicians billed using their own NPI numbers while
out of the country. As explained above, the regulatory scheme precludes that
method of billing, even if covering physicians are used.
V.
The physicians also raise a host of constitutional challenges. First, they
contend that their due process rights were violated by the ALJ’s decision to
23 Nawaz asserted: “Also, I had 2 cardiologists . . . covering for me on the above dates
as well as the medical director at each facility.” Similarly, Shah stated: “On the three day
trips, my husband lined up a nurse practitioner from his separate practice to assist me and I
lined up primary care providers for coverage in the case of an emergency if the nurse
practitioner or the facility needed emergent intervention from the primary care providers for
my patients.”
24 Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir. 1994) (“[U]nsubstantiated assertions
are not competent summary judgment evidence.”).
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grant the Secretary’s summary judgment motions without an oral hearing.
Next, the physicians argue CMS violated their due process rights by failing to
consider the physicians’ corrective action plans and reverse the revocation
decision in light of those CAPs. Finally, the physicians claim that CMS’s
revocation decisions amounted to an unconstitutional taking without
compensation.
The physicians’ contention that their due process rights were violated by
the ALJ’s decision to grant summary judgment for CMS without an oral
hearing retreads the substantial evidence challenge disposed of above. They
concede that an ALJ is empowered to dispose of a claim on summary judgment,
but argue that here, CMS failed to meet its burden of demonstrating that there
were no genuine issues of material fact—again pointing to the fact that the
services were actually rendered and the evidentiary flaws with Kirk’s
declaration. The physicians argue that they would have fleshed out the
“necessary details of the ‘coverage’” that they secured during their travels if
the ALJ had granted them an oral hearing. At base, the physicians’ contention
regarding their entitlement to an oral hearing is an attack of the wisdom of the
ALJ’s decisions, not the constitutionality of the procedure. As the physicians
concede, it is well-established that an ALJ is empowered to decide a case on a
motion for summary judgment without an evidentiary hearing. 25 As explained
above, the physicians failed to present competent evidence of a covering
physician to create a genuine issue of material fact; they have demonstrated
25 Cedar Lake Nursing Home v. U.S. Dep’t of Health and Human Servs., 619 F.3d 453,
457 (5th Cir. 2010) (“Judge Posner noted that giving heightened deference to administrative
decisions is appropriate, even on appeal from summary judgment, because agencies have
particular subject-matter experience and expertise and ‘are given more decisional latitude by
legislatures than trial courts are . . . .’ This holding is consistent with opinions of other circuit
courts concerning judicial review of decisions made without evidentiary hearings by agencies
other than the DHHS. We find Judge Posner’s reasoning . . . persuasive.” (internal citations
omitted)).
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no constitutional violation stemming from the Kirk declaration, on which the
ALJ and DAB disclaimed reliance; and their insistence that the services were
actually provided by nurses is beside the point given the plain language of the
regulations.
The physicians also object to CMS’s “categorical refusal” to consider their
CAPs, contending that their failure to consider the plans violated their due
process rights. Reviewing the determinations of Novitas, CMS’s contractor, the
physicians overstate their claim. CMS did not “categorical[ly] refus[e]” to
consider the CAPs, but rather informed the physicians that
Based on our evaluation of the information provided in your CAP,
we have determined you have not provided verifiable evidence you
were in compliance with Medicare requirements at the time
revocation was issued; therefore, we are not overturning our initial
decision.
The letters go on to consider the content of the CAPs, finding that although the
CAPs gave an explanation for the circumstances, they did not demonstrate
compliance with the regulations. Further, plaintiffs offer no support for their
contention that CMS’s failure to accept a CAP constitutes a due process
violation. To the contrary, the regulations explicitly grant CMS or its
contractor the authority to review a CAP and the discretion to either (1)
reinstate the provider’s billing privileges if the provider has supplied
“sufficient evidence to CMS or its contractor that it has complied fully with the
Medicare requirements” or (2) “refuse[] to reinstate a provider or supplier’s
billing privileges.” 26 The regulations provide that “[t]he refusal of CMS or its
contractor to reinstate a provider or supplier’s billing privileges based on a
corrective action plan is not an initial determination. . .” and is therefore not
26 42 C.F.R. § 405.809(b).
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appealable. 27 Because the regulations made clear that the agency’s decision
not to reinstate billing privileges after reviewing a CAP is not an appealable
“initial determination,” and the physicians cite no authority to the contrary or
explain how the agency’s refusal violated their right to due process, their
constitutional claim fails. 28
Finally, the physicians assert that they had “an established property
right in possessing and utilizing a Medicare provider number.” Therefore, the
physicians claim, CMS’s revocation decision amounted to an unconstitutional
taking without compensation. The Secretary argues that the physicians cannot
show entitlement to continued participation in the Medicare program. “A
property interest requires ‘more than a unilateral expectation’ of a benefit.’
Instead, a person must ‘have a legitimate claim of entitlement to it.’” 29 While
this court has not directly addressed whether a healthcare provider has a
property interest in being a provider in federal health care programs, a number
of other circuits have determined that a provider does not have such a
protected interest. 30 Because health care providers “are not the intended
27 Id.; 42 C.F.R. § 498.3(d) (“Administrative actions that are not initial determinations
(and therefore not subject to appeal under this part) include but are not limited to the
following: . . . (5) The determination not to reinstate a suspended or excluded practitioner,
provider, or supplier because the reason for the suspension or exclusion has not been
removed, or there is insufficient assurance that the reason will not recur.”)
28 See, e.g., Comm. Mental Health Care of Alexandria v. SSA, 86 Fed App’x 777, 777–
78 (5th Cir. 2004) (per curiam).
29 Personal Care Prods., Inc. v. Hawkins, 635 F.3d 155, 158 (5th Cir. 2011) (holding
that a Medicaid provider did not have a property right in its Medicaid reimbursements
withheld pending a fraud investigation) (quoting Bd. of Regents of State Colleges v. Roth, 408
U.S. 564, 577 (1972)).
30 Parrino v. Price, 869 F.3d 392, 397–98 (6th Cir. 2017) (collecting cases). Although
the Fourth Circuit has reached a contrary conclusion, holding that a physician’s “expectation
of continued participation in the [M]edicare program is a property interest protected by the
due process clause of the fifth amendment,” Ram v. Heckler, 792 F.2d 444, 447 (4th Cir. 1986),
four circuits have explicitly rejected that conclusion. Parrino, 869 F.3d at 398 (“And though
the Fourth Circuit has declared that providers do have a property interest in continued
participation in federal health care programs, it provided no accompanying analysis for its
conclusion. We find persuasive the rationale of the First, Ninth, and Tenth Circuits in finding
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beneficiaries of the federal health care programs . . . they therefore do not have
a property interest in continued participation or reimbursement.” 31 While the
physicians may be correct that they lost a considerable amount of money in
reimbursable services because of their inability to participate in Medicare for
three years, the income losses do not rise to the level of a protected property
interest because “no clear promises have been made by the Government” that
would create a legitimate claim of entitlement. 32 We agree with our four other
sister circuits that have determined participation in the federal Medicare
reimbursement program is not a property interest.
VI.
Finally, the physicians take aim at CMS’s decision to bar them from re-
enrolling in the Medicare program for three years. They maintain that this
punishment was disproportionate to their violations, and therefore should be
reversed as arbitrary. The physicians emphasize that all services billed for
were in fact rendered to the patients and contend that the violation of the direct
supervision requirement and use of the incorrect billing numbers does not
justify the “draconian punishment” imposed here. To highlight the alleged
disproportionality, they point to the small dollar amount of actual overbilling
that occurred by billing at the physician rates as opposed to the nurse
practitioner rates—$1,500 in the case of Nawaz and $900 in the case of Shah.
The physicians’ argument fails to grapple with the simple fact that the
governing regulation specifically contemplates a re-enrollment bar between
no property interest.” (internal citation omitted); Erickson v. U.S. ex rel. Dep’t of Health &
Human Servs., 67 F.3d 858, 862 (9th Cir. 1995) (“We do not find Ram to be persuasive
authority for plaintiffs’ position. In contrast, the First and Tenth Circuits have provided
reasoned analyses for their conclusion that physicians do not have a property interest in
continued participation in Medicare.”); Koerpel v. Heckler, 797 F.2d 858, 863–65 (10th Cir.
1986); Cervoni v. Sec’y of Health, Ed. & Welfare, 581 F.2d 1010, 1018–19 (1st Cir. 1978).
31 Parrino, 869 F.3d at 398.
32 Koerpel, 797 F.2d at 864.
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one and three years. 33 CMS’s decision to impose a three-year bar fell within its
express regulatory authority. The regulation gives CMS the discretion to
impose a ban between one and three years, “depending on the severity of the
basis for revocation.” 34 “[W]here 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.” 35 “The sanction may be overturned only if it is ‘unwarranted in
law or without justification in fact.’” 36 The physicians offer no support for their
suggestion that the severity of the violation should be measured by the dollar
amount of the windfall enjoyed by the physicians. The Secretary points to
another measure of severity—the large number of erroneous claims submitted
by the physicians: over 90 for Shah and 100 for Nawaz. As the ALJ noted, the
provision at issue here is “not an anti-fraud regulation so much as it is intended
to allow CMS to disassociate itself from providers and suppliers who are not
rigorous in assuring that their claims are accurate.” The physicians here
evinced a pattern of submitting inaccurate claims. Because the agency’s
decision to impose a re-enrollment ban at the high end of the enumerated range
was neither unwarranted in law or without factual justification, we defer to
the agency’s assessment of the appropriate sanction. 37
33 42 C.F.R. § 424.535(c). After a revocation of billing privileges, a provider is “barred
from participating in the Medicare program . . . [for] a minimum of 1 year, but not greater
than 3 years, depending on the severity of the basis for revocation.”
34 Id.
35 Butz v. Glover Livestock Comm’n Co., 411 U.S. 182, 185 (1973) (internal citation and
quotation marks omitted).
36 Knapp v. U.S. Dep’t of Agric., 796 F.3d 445, 455 (5th Cir. 2015) (quoting Butz, 411
U.S. at 186)).
37 See Escobar v. U.S. Dep’t of Agric., 68 F.3d 466, 466 (5th Cir. 1995) (per curiam).
The cases cited by the physicians do not teach otherwise. In Commc’ns. and Control, Inc. v.
FCC, the D.C. Circuit deemed the FCC’s harsh treatment of a typographical error arbitrary
and capricious because it marked a stark departure from its previous practice “of correcting,
without much ado, [such] typographical errors” without any explanation. 374 F.3d 1329, 1335
(D.C. Cir. 2004). In In re Bell Petroleum Servs., this Court reversed an EPA penalty as
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VII.
For the foregoing reasons, we affirm the decision of the district court.
arbitrary and capricious because it forced a party to bear the entire cost of an expensive
system that the court concluded was illogically implemented. 3 F.3d 889, 906 (5th Cir. 1993)
(“[O]n the basis of the administrative record, it appears that the AWS did not even reduce,
much less eliminate, any public health threat. No technical expertise is necessary to discern
that the EPA’s implementation of the AWS was arbitrary and capricious, as well as a waste
of money.”). In Young v. Hampton, an employment case, the Seventh Circuit examined the
“unique circumstances” raised by an agency’s refusal to reinstate a member of the civil service
for conduct off the clock, in the face of “uncontradicted credible evidence that his misconduct
had no detrimental effect on the efficiency of the service.” 568 F.2d 1253, 1266 (7th Cir. 1977).
None of these decisions, nor any of the others cited by the physicians, address an agency’s
decision to issue a penalty specifically authorized by its regulations for conduct that the
regulation made clear was prohibited.
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