Pukis v. Centers for Medicare and Medicaid Services, 5:19-cv-00232

Background

Plaintiffs Vytautas Pukis, M.D. and Blossomwood Medical, P.C. were Medicare-enrolled suppliers. CMS notified them on June 14, 2017 that it would revoke their billing privileges and impose a three-year re-enrollment bar.
CMS concluded plaintiffs submitted claims for services that could not have been furnished because Dr. Pukis was out of the country; CMS identified roughly 115 such claims and plaintiffs conceded over 100 impossible claims in the record.
The ALJ and the Departmental Appeals Board (DAB) treated the regulation governing revocation for "impossible claims" as requiring multiple (at least three) such instances and refused to consider certain proffered mitigating facts.
Plaintiffs exhausted administrative remedies; the DAB issued the final agency decision upholding revocation and the three-year bar. Plaintiffs sued in district court under the Medicare Act, the Administrative Procedure Act (APA), and the Fifth Amendment.
The district court reviewed (and accepted) the DAB’s legal interpretation and factual findings, concluding the DAB’s decision was supported by substantial evidence and not arbitrary or capricious, and affirmed the revocation and three-year re-enrollment bar.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Proper standard of review (Medicare Act v. APA)	Pukis: APA review applies and requires broader review of agency action	CMS: Medicare Act standards govern; in any event decision should be sustained	Court: did not decide which standard controls because the DAB decision is sustainable under either standard
Interpretation of 42 C.F.R. § 424.535(a)(8)(i) (must regulatorily consider mitigating facts or volume)	Pukis: DAB should have weighed materiality, relative billing volume, and other mitigating factors and applied (a)(8)(ii) factors	CMS: (a)(8)(i) permits revocation based on "impossible" claims (and agency reasonably requires multiple instances); (a)(8)(ii) not implicated here	Court: DAB’s interpretation (requiring multiple impossible claims and not considering the excluded mitigating factors under (i)) is reasonable and not plainly erroneous
Substantial-evidence and severity for three-year re-enrollment bar	Pukis: Record does not support severity or substantial evidence for maximum penalty; errors were de minimis/isolated	CMS: Plaintiffs admitted the impossible claims; >100 impossible claims support severity and a three-year bar is authorized and reasonable	Court: Substantial evidence supports the finding of >100 impossible claims and the imposition of the maximum three-year bar
Fifth Amendment substantive due process challenge	Pukis: Interpreting (a)(8)(i) to ignore intent/materiality deprives Medicare participation without adequate process	CMS: DAB’s interpretation is rationally related to legitimate CMS interests and not pretextual	Court: Assuming a protected interest, plaintiffs’ due-process claim fails because the DAB’s interpretation was rational and not arbitrary or pretextual

Key Cases Cited

Auer v. Robbins, 519 U.S. 452 (1997) (agency’s interpretation of its own regulation entitled to deference unless plainly erroneous)
Gulfcoast Medical Supply, Inc. v. Sec’y, Dept. of Health & Human Servs., 468 F.3d 1347 (11th Cir. 2006) (standard of review under Medicare Act)
Florida Medical Center of Clearwater, Inc. v. Sebelius, 614 F.3d 1276 (11th Cir. 2010) (applying APA review to Medicare decisions)
Shah v. Azar, 920 F.3d 987 (5th Cir. 2019) (upholding revocation where supplier admitted being out of country when services were billed)
Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (1994) (deference to agency interpretations of its rules)
Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359 (1998) (arbitrary-and-capricious standard review requires rationality)
Butz v. Glover Livestock Comm’n Co., 411 U.S. 182 (1973) (agency discretion in selecting remedies)
Hoefling v. City of Miami, 811 F.3d 1271 (11th Cir. 2016) (elements for substantive due process claim)