$05:Civil Money Penalty
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Hospicio en el Hogar Mayaguez, Inc.,
Petitioner,
- v. -
Health Care Financing Administration.
DATE: April 17, 1995
Docket No. C-94-366
Decision No. CR370
DECISION
Petitioner requested a hearing from a determination by the Health
Care Financing Administration (HCFA) to terminate Petitioner's
participation in Medicare. The case was assigned to me for a
hearing and a decision. I scheduled a hearing to be held in San
Juan, Puerto Rico, beginning on November 2, 1994. However, prior
to the commencement of the hearing, the parties advised me that
neither of them intended to offer in-person testimony. I received
exhibits into evidence and provided the parties with the
opportunity to submit briefs. The parties submitted briefs. I
concluded after reading the parties' briefs and the exhibits that
there was an issue in the case that had not been briefed in detail
by either party. I invited the parties to submit supplemental
briefs. On March 1, 1995, each party submitted a supplemental
brief. 1/
I have considered the evidence, the applicable law and regulations,
and the parties' arguments. I conclude that, by ceasing to do
business by June 10, 1994, Petitioner terminated its participation
in the Medicare program as of that date. The issue of whether HCFA
was authorized to terminate Petitioner's participation in Medicare
is moot.
I. Issues, findings of fact, and conclusions of law
The issue in this case is whether Petitioner terminated its
participation in Medicare on a date prior to the date that HCFA
might have effectuated its determination to terminate Petitioner's
participation in Medicare. In deciding that Petitioner terminated
its participation in Medicare prior to HCFA implementing its
determination to terminate Petitioner's participation, I make the
following findings of fact and conclusions of law. After each
finding or conclusion I cite to the page or pages of the decision
at which I discuss the finding or conclusion.
1. A provider who participates in the Medicare program
terminates its participation in Medicare by ceasing doing business,
effective on the date when it stops providing services to the
community. Pages 3 - 4.
2. Petitioner stopped providing services to the community by
June 10, 1994, thus terminating its participation in Medicare.
Pages 4 - 7.
3. Petitioner terminated its participation in Medicare on a
date prior to the date that HCFA might have effectuated its
determination to terminate Petitioner's participation in Medicare.
Pages 8 - 10.
4. The question of whether HCFA was authorized to terminate
Petitioner's participation in Medicare is made moot by Petitioner's
termination of its participation in Medicare. Page 10.
II. Discussion
A. Background
Petitioner has participated in the Medicare program as a hospice,
operating in Mayaguez, Puerto Rico. A hospice is described under
section 1861(dd)(1) of the Social Security Act (Act) as a Medicare
provider which offers care and services to a terminally ill
beneficiary pursuant to a written plan of care established and
periodically reviewed by the beneficiary's attending physician, the
hospice's medical director, and its interdisciplinary group. 2/
A hospice provides its care and services in the beneficiary's home,
on an outpatient basis, and, in some instances, on a short-term
inpatient basis. Act, section 1861(dd)(2)(A)(ii). Hospice
services include: nursing care, physical and other therapy,
medical social services, home health aide services, medical
supplies, physicians' services, short-term inpatient care, and
counseling. Id., section 1861(dd)(1)(A) - (H). In addition, a
hospice provides bereavement counseling for the immediate family of
a terminally ill beneficiary. Id., section 1861(dd)(2)(A)(i).
B. Circumstances under which a provider's participation
in Medicare may be terminated
A health care provider may participate in the Medicare program
where it has been certified by HCFA to participate and where it has
executed a participation agreement. The circumstances under which
a provider's participation in Medicare may be terminated are
established by the Act and by implementing regulations. Act,
section 1866(b)(2)(A) - (C); 42 C.F.R. 489.52, 489.53.
The Act authorizes the Secretary of the United States Department of
Health and Human Services (Secretary) to terminate a provider's
participation in Medicare for reasons which include a determination
by the Secretary that a provider has failed to comply substantially
with the provisions of its participation agreement or with
requirements contained in the Act and regulations. Act, section
1866(b)(2)(A). Regulations authorize HCFA to terminate a
provider's participation in Medicare for failure to comply with the
requirements of the Act and regulations, the conditions for
participation, and the terms of the provider agreement. 42 C.F.R.
489.53(a)(1), (3). The regulations state additional circumstances
under which HCFA may terminate a provider's participation in
Medicare. 42 C.F.R. 489.53(a)(2), (4) - (9).
The Act states that a provider may terminate an agreement to
participate in Medicare at such time and upon such notice to the
Secretary and the public as may be provided in regulations. Act,
section 1866(b)(1). Under the regulations, a provider that wishes
to terminate its participation in Medicare generally must send HCFA
written notice of its intent to do so. 42 C.F.R. 489.52(a)(1).
However, this regulation provides also that:
A cessation of business [by the provider] is deemed to be a
termination by the provider effective with the date on which it
stopped providing services to the community.
42 C.F.R. 489.52(a)(3).
The term "cessation of business" is not defined specifically by the
regulation. However a reasonable reading of the regulation is that
a "cessation of business" occurs when a provider stops providing
services to the community which it serves. That is evident from
the regulation's linkage of the term "cessation of business" with
a provider's ceasing to provide services to the community.
C. Relevant facts
On March 24, 1994, Petitioner was surveyed on behalf of HCFA by the
Puerto Rico Department of Health. HCFA Ex. 15 at 1. On April 20,
1994, HCFA notified Petitioner that, based on the survey, HCFA had
determined that Petitioner was not in compliance with conditions
for participation as a hospice in the Medicare program. Id. HCFA
advised Petitioner that HCFA intended to terminate Petitioner's
participation in Medicare effective June 22, 1994. Id. HCFA
stated that, on June 7, 1994, it would publish notice of its
determination to terminate Petitioner's participation in a Puerto
Rico newspaper. Id. at 2.
HCFA urged Petitioner to discontinue admitting new Medicare
patients until such time as HCFA determined that Petitioner met all
Medicare conditions of participation. Id. at 2. However, HCFA did
not prohibit Petitioner from admitting new patients, nor did HCFA
prohibit Petitioner from treating patients or requesting
reimbursement from Medicare for their treatment pending the
effectuation of termination.
HCFA advised Petitioner that, if it wished to continue to
participate in Medicare, it would be required to submit a plan of
correction to address the deficiencies that had been identified.
Id. at 2. HCFA told Petitioner that, if the plan of correction
provided reasonable assurance that compliance with conditions of
participation would be attained, a follow-up survey of Petitioner
would be conducted within 45 days or shortly thereafter. Id.
Petitioner submitted a plan of correction to HCFA. HCFA Ex. 17. 3/
On May 13, 1994, HCFA advised Petitioner that the plan of
correction was not fully acceptable to HCFA. HCFA Ex. 18. HCFA
attached to its May 13th letter a form which recited the part of
Petitioner's plan of correction which HCFA determined to be
unacceptable, and the reason for this determination. Id. at 2.
HCFA requested Petitioner to make appropriate revisions on the form
and to resubmit them within 10 days of Petitioner's receipt of
HCFA's May 13, 1994 letter. Id.
On May 18, 1994, Petitioner submitted a revision of its plan of
correction to HCFA which addressed the part of the original plan of
correction which HCFA determined to be unacceptable. HCFA Ex. 19.
HCFA appears to have accepted this revision on May 20, 1994. Id.
at 2. 4/ There is no evidence to establish whether HCFA told
Petitioner that it found the revised plan of correction to be
acceptable. Absent such evidence, I do not find that HCFA
communicated its acceptance of the revised plan of correction to
Petitioner.
On June 7, 1994, HCFA published a notice in the San Juan Star of
its intent to terminate Petitioner's participation in Medicare. On
June 10, 1994, surveyors employed by the Puerto Rico Department of
Health went to Petitioner's office in order to resurvey Petitioner.
HCFA Ex. 20. 5/ They interviewed Petitioner's administrator. Id.
at 1. The administrator stated that, as of that date, Petitioner
was not providing services to any patients. Id. More than 60
patients had been discharged by Petitioner in the month of May
1994. Id. The administrator stated further that, on May 31, 1994,
Petitioner had discharged 31 of its employees from their employment
with Petitioner. Id. at 2. The administrator stated also that on,
June 10, 1994, 12 additional employees would be discharged. Id.
The administrator stated also that, by June 10, 1994, the date of
the resurvey, Petitioner had discontinued its telephone service and
had moved its facilities to another location. Id.
The surveyors obtained the minutes of a meeting held by
Petitioner's management on June 7, 1994. HCFA Ex. 20 at 2, 4 - 5.
6/ The minutes stated that Petitioner would be discharging or
transferring its employees due to the fact that it was ceasing its
operations. Id. at 4. The minutes reported that Mr. Perez had
advised Petitioner's employees that the reason for Petitioner
ceasing its operations was that, according to a newspaper
announcement, Medicare had closed Petitioner. Id.
The surveyors reported a telephone conversation with Mr. Perez.
HCFA Ex. 20 at 3. During that conversation, Mr. Perez asserted
that Petitioner had not ceased its operations. Id.
As I note above, Petitioner does not dispute the accuracy of the
surveyors' account of their visit to Petitioner's facility on June
10, 1994. From that account, I conclude that, as of June 10, 1994,
Petitioner had:
ceased admitting and treating patients.
discharged many members of its professional staff
and had advised its employees that it was ceasing its operations.
closed its facility and discontinued its telephone
service.
D. The parties' arguments
HCFA asserts that, as of June 10, 1994, Petitioner had stopped
providing services to the community. From this, HCFA asserts that
Petitioner had ceased doing business within the meaning of 42
C.F.R. 489.52(b)(3) and, consequently, had terminated its
provider agreement with HCFA. HCFA argues that Petitioner's
asserted termination of its provider agreement prior to the date
when HCFA had announced it would terminate Petitioner's
participation in Medicare moots any question as to the propriety of
HCFA's determination. HCFA asserts that Petitioner's motive for
ceasing doing business is not relevant, because 42 C.F.R.
489.52(b)(3) does not permit consideration of a provider's motive
for ceasing doing business as an element of the issue of whether a
provider has terminated its participation in Medicare.
Petitioner argues that it did not cease doing business within the
meaning of 42 C.F.R. 489.52(b)(3). It argues that, in fact,
HCFA had "cancelled" its participation agreement with Petitioner
effective with the notice it sent to Petitioner on April 29, 1994.
Petitioner's supplemental memorandum at 2 - 4. According to
Petitioner, HCFA's cancellation of Petitioner's participation in
Medicare forced Petitioner to discharge its patients and its
employees. Id. 7/ Thus, according to Petitioner, it did not
voluntarily cease doing business and did not terminate its
participation agreement with HCFA. Id.
E. Analysis of the facts, the law, and the parties'
arguments
The uncontroverted facts establish that, as of June 10, 1994,
Petitioner had ceased providing services to the community within
the meaning of 42 C.F.R. 489.52(b)(3). Petitioner was no longer
treating patients and had discharged many, if not all, of its
employees. Petitioner had moved from its previous facility, and
had discontinued its telephone service.
Petitioner terminated its participation in Medicare no later than
June 10, 1994. Petitioner's discontinuation of services
constitutes a cessation of business within the meaning of 42 C.F.R.
489.52(b)(3). As I conclude at Part II B of this decision, a
discontinuation of services by a provider meets the test for
cessation of business. The regulation provides unequivocally that
a cessation of business by a provider is deemed to be a termination
by that provider of its participation agreement.
In reaching this conclusion, I have considered Petitioner's
argument that it could not have terminated its participation
because HCFA terminated Petitioner's participation previously.
This argument is not supported by the facts. The evidence
establishes that HCFA did not terminate Petitioner's participation
in Medicare prior to June 10, 1994. The notice which HCFA sent to
Petitioner on April 20, 1994 announces HCFA's intent to terminate
Petitioner's participation effective June 22, 1994. HCFA Ex. 15 at
1. HCFA did not prohibit Petitioner from participating in Medicare
between April 20, 1994 and June 22, 1994. While the notice
suggested that Petitioner not admit new patients after April 20,
1994, it did not prohibit Petitioner from doing so. Id. at 2.
Moreover, I do not conclude from the notice that Petitioner could
infer reasonably that HCFA terminated Petitioner's participation in
Medicare at any date prior to June 22, 1994. The notice plainly
states that Petitioner may continue to admit and to treat patients
through June 22, 1994. HCFA Ex. 15 at 1. The notice affords
Petitioner the opportunity to avoid termination, by submitting a
plan of correction to HCFA and correcting the deficiencies that
were identified in the notice. Id. at 2. The notice thus
conditions HCFA's determination to terminate Petitioner's
participation in Medicare on Petitioner not correcting outstanding
deficiencies by June 22, 1994.
I find from Petitioner's conduct after April 20, 1994 that
Petitioner understood that HCFA's determination to terminate
Petitioner's participation in Medicare was conditional. Petitioner
submitted a plan of correction to HCFA to address the deficiencies
that were identified in the April 20, 1994 notice. Petitioner
submitted also a revised plan to address HCFA's determination to
not accept in its entirety the original plan of correction. HCFA
Exs. 17, 19. I infer from this course of conduct that Petitioner
knew that it had the opportunity to avoid termination of its
participation in Medicare.
As I find above, the evidence establishes that HCFA accepted
Petitioner's revised plan of correction. However, there is no
evidence in the record to show whether HCFA communicated its
acceptance to Petitioner. I can understand how a possible failure
by HCFA to communicate its acceptance of Petitioner's revised plan
of correction to Petitioner might have caused Petitioner's managers
to experience uncertainty and anxiety. However, I do not find that
a failure by HCFA to communicate its acceptance would be a
legitimate basis for those individuals to conclude that the revised
plan had been rejected. Although HCFA may not have told Petitioner
that the revised plan had been accepted, neither is there evidence
to show that it told Petitioner that the plan was being rejected.
Petitioner's managers could have resolved any uncertainty or
anxiety they experienced by corresponding with HCFA.
I am not persuaded that Petitioner could have concluded reasonably
from the notice which HCFA published on June 7, 1994 of its intent
to terminate Petitioner's participation in Medicare that HCFA had
advanced the termination date to a date earlier than June 22, 1994.
Although the notice is not in evidence, it appears to be
uncontroverted that it did no more than announce HCFA's intent to
terminate Petitioner's participation effective June 22, 1994. HCFA
thus did no more than announce publicly what HCFA had told
Petitioner previously. Furthermore, the evidence shows that HCFA
had begun closing its operations in May 1994, well in advance of
the date of publication of the notice. Indeed, it appears that
Petitioner discharged most of its patients and employees before
June 1, 1994. HCFA Ex. 20 at 1.
Furthermore, I agree with HCFA that Petitioner's motives for
ceasing doing business are not relevant under 42 C.F.R.
489.52(b)(3). The regulation states only that a cessation of
business by a provider will be deemed to be a termination by that
provider of its participation agreement. Under the regulation, a
provider's motive for ceasing doing business is not a factor which
is to be considered in deciding that the provider has terminated
its participation in Medicare.
I conclude that Petitioner's termination of its participation in
Medicare prior to the date HCFA was to terminate Petitioner makes
moot the question of whether HCFA's determination to terminate
Petitioner's participation was authorized under the Act and
regulations. Petitioner had, on its own initiative, terminated its
participation in Medicare prior to the date when HCFA's
determination would have become effective. HCFA's determination
thus was never effectuated. No adverse consequences accrued to
Petitioner from HCFA's determination, inasmuch as Petitioner ceased
participating in Medicare before HCFA could effectuate its
determination. 8/
III. Conclusion
I conclude that, on or before June 10, 1994, Petitioner ceased
doing business, thus terminating its participation in Medicare.
Petitioner's termination of its participation in Medicare makes
moot the question of whether HCFA's determination to terminate
Petitioner's participation in Medicare effective June 22, 1994 was
authorized under the Act and regulations.
________________________
Steven T. Kessel
Administrative Law Judge
1. The issue which the parties had not briefed in detail is
whether Petitioner terminated its Medicare participation agreement
by ceasing its business operations.
2. Under the Medicare program, an individual is considered to
be "terminally ill" if that individual has a medical prognosis that
he or she is expected to live six months or less. Act, section
1861(dd)(3)(A).
3. Neither party offered evidence to show the date that
Petitioner submitted its plan of correction. However, from
handwritten notations on the plan, evidently made by a reviewer at
HCFA, it appears that it was submitted prior to May 2, 1994. HCFA
Ex. 16 at 2, 6 - 13.
4. The evidence which supports this finding is a handwritten
notation on the form that Petitioner submitted to HCFA which reads
"accepted M Stephens 5/20/94." The signature appears to be by the
same individual who made the reviewer's notes and signatures which
appear on HCFA Ex. 17. See HCFA Ex. 17 at 2, 6 - 13.
5. In my request that the parties submit supplemental briefs,
I specifically asked them to address whether they disputed the
accuracy of the contents or the truth of the facts stated in HCFA
Ex. 20. Petitioner advised me, with one exception, that it did not
dispute the accuracy or the truth of the contents of HCFA Ex. 20.
Petitioner's Supplemental Brief at 1 - 2. The exception is to a
portion of a statement made on page three of the exhibit in which
one of the surveyors relates that she spoke to Petitioner's
President, Alejandro Perez, by telephone. The portion of the
statement which Petitioner objects to is the surveyor's statement
that, during this conversation, she overheard Mr. Perez' wife
stating that Petitioner had withdrawn voluntarily from Medicare due
to not having received reimbursement from HCFA since March 1994.
It is unnecessary for me to make findings based on this asserted
statement in order for me to decide this case. Therefore, I make
no findings as to the statement by Ms. Perez which the surveyor
allegedly overheard.
6. The minutes which I refer to are an English translation of
a document which was prepared in Spanish and which is part of HCFA
Ex. 20 at 6 - 7. Petitioner has not objected to the accuracy or
completeness of the translation.
7. I have no record of either party offering a copy of a notice
from HCFA to Petitioner dated April 29, 1994. Thus, there is no
such document in evidence. Evidently, Petitioner is referring to
the notice which HCFA sent to Petitioner on April 20, 1994. See
HCFA Ex. 15.
8. In the April 20, 1994 notice to Petitioner, HCFA advised it
that, for patients receiving hospice care from Petitioner under
plans of care established before June 22, 1994, Petitioner would
remain eligible to receive payment for services provided for a
maximum of 30 days after June 22, 1994. HCFA Ex. 15 at 1. HCFA's
notice thus advised Petitioner that, not only was Petitioner not
prohibited from admitting and treating patients prior to June 22,
1994, but that HCFA would pay for services to patients admitted by
Petitioner prior to June 22, 1994 that were provided through July
21, 1994. Id.