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Shah v. Azar

United States Court of Appeals, Fifth Circuit

April 12, 2019

ZILLE SHAH, Medical Doctor; ZILLE HUMA ZAIM, Medical Doctor, Physicians Assistant, Plaintiffs - Appellants
ALEX M. AZAR, II, SECRETARY, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendant-Appellee MOHAMMAD NAWAZ, Medical Doctor; MOHAMMAD ZAIM, Medical Doctor, Physicians Assistant, Plaintiffs - Appellants

          Appeals from the United States District Court for the Eastern District of Texas

          Before HIGGINBOTHAM, DENNIS, and COSTA, Circuit Judges.


         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.


         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 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 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.


         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) 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]


         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 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]

         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 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 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 ...

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