$05:Civil Money Penalty
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Carmel Convalescent
Hospital,
Petitioner,
- v. -
Health Care Financing Administration.
DATE: August 25, 1995
Docket No. C-95-008
Decision No. CR389
DECISION
I. BACKGROUND
The above-captioned action was brought by Petitioner, a skilled
nursing facility, to challenge the decision of the Health Care
Financing Administration (HCFA) to terminate Petitioner's Medicare
provider agreement effective June 25, 1994. As I will discuss
below, HCFA has issued three notices concerning the termination of
Petitioner's provider agreement:
1. HCFA's letter dated January 24, 1994 informed
Petitioner that its provider agreement would terminate on February
5, 1994 because Petitioner had failed to submit a plan of
correction to address the deficiencies found during a Life Safety
Code survey conducted on November 16, 1993;
2. HCFA's letter dated May 25, 1994 informed Petitioner
that HCFA had reviewed the findings of deficiencies from the
November 16, 1993 Life Safety Code survey, reviewed Petitioner's
plan of correction, denied Petitioner's request for waiver of some
of the deficiencies, and concluded that the date for terminating
Petitioner's provider agreement should be changed from February 5
to June 25, 1994;
3. HCFA's letter dated July 7, 1994 informed Petitioner
that HCFA had upheld its May 25, 1994 determination to terminate
Petitioner's provider agreement on June 25, 1994. HCFA stated as
its rationale for upholding its May 25, 1994 determination that it
had considered the evidence upon which its earlier termination
decision was based, as well as additional new information such as
the results of a resurvey conducted on June 16, 1994, which
indicated that the deficiencies had not been corrected.
Petitioner filed a hearing request on August 22, 1994, which
stated:
We are asking for an appeals hearing based on the fact that
all work [to correct deficiencies] had been completed by 6-25-94.
HCFA moved to dismiss Petitioner's hearing request as untimely
filed because it had not been filed within 60 days after receipt of
HCFA's May 25, 1994 notice. Petitioner opposed HCFA's motion. In
response to an order from me, the parties submitted supplemental
briefs addressing both the timeliness issue and the question of
whether Petitioner's hearing request stated a claim on which I
could grant relief. For the reasons stated below, I conclude that
Petitioner's hearing request was timely filed after receipt of
HCFA's July 7, 1994 letter. However, I also conclude that the law
and the uncontested facts demonstrate that HCFA was authorized to
terminate Petitioner's provider agreement. Petitioner's letter
requesting a hearing has not raised any issue on which Petitioner
might be entitled to relief. Therefore, I am granting HCFA's
motion to dismiss.
II. SUMMARY OF FINDINGS AND CONCLUSIONS
I am granting HCFA's motion to dismiss pursuant to the following
findings and conclusions detailed in the text below:
1. HCFA's letter of January 24, 1994 was HCFA's initial
determination. Pages 10 - 11.
2. HCFA's May 25, 1994 letter was HCFA's revised
determination. Pages 11 - 12.
3. HCFA's July 7, 1994 letter was also a revised
determination. Pages 12 - 14.
4. Petitioner's hearing request dated August 22, 1994 was
timely filed. Page 14.
5. In accordance with governing regulations, HCFA made its
decision to terminate Petitioner's provider agreement on June 25,
1994 based on the results of surveys conducted on November 16, 1993
and June 16, 1994. Pages 17 - 18.
6. In challenging HCFA's determination that Petitioner's
provider agreement should terminate on June 25, 1994, the only
matter raised by Petitioner in its hearing request is the
contention that all work to correct the deficiencies found during
the November 16, 1993 and June 16, 1994 surveys had been completed
by June 25, 1994. Pages 15 - 16.
7. After filing its hearing request, Petitioner admitted
that it had not completed all the remedial work by June 25, 1994,
as alleged in its hearing request. Pages 18 - 20.
8. Even if true, Petitioner's asserted completion of all
remedial work after HCFA's last survey and by the date of
termination does not raise any material issue for hearing. Pages
16 - 18.
9. Even if true, Petitioner's asserted completion of
remedial work after HCFA's last survey and by the date of
termination fails to raise any matter on which relief may be
granted. Pages 18 - 21.
10. Based only upon the contents of Petitioner's hearing
request, HCFA's notices attached to the hearing request, and the
relevant regulations, HCFA is entitled to prevail on its motion to
dismiss Petitioner's hearing request under 42 C.F.R. 498.70(b).
Pages 14 - 17; Findings 6, 8, and 9.
11. As of the June 16, 1994 survey, and through at least June
25, 1994, Petitioner was out of compliance with the condition of
participation for physical environment. Pages 18 - 21.
12. Based on the pleadings and the evidence of record
before me, HCFA is entitled to summary judgment in its favor on the
issue of whether the termination of Petitioner's provider agreement
was proper. Pages 18 - 21.
III. APPLICABLE AUTHORITY
To participate in the Medicare program, long-term care facilities
such as skilled nursing facilities (SNFs) and nursing facilities
(NFs) must meet certain requirements which are imposed by the
Medicare statutes and which the Secretary of Health and Human
Services has determined to be necessary for the health and safety
of individuals to whom services are furnished in the facilities.
42 C.F.R. 483.1. The survey process is the means by which HCFA
and its agents assess providers' compliance with federal health,
safety, and quality standards. 42 C.F.R. 488.26(b)(1). The
regulations contained in 42 C.F.R. Part 483, Subpart B, serve as
the basis for survey activities. 42 C.F.R. 483.1(b). HCFA may
terminate an agreement with any provider if HCFA finds that the
provider "no longer meets the appropriate conditions of
participation or requirements (for SNFs and NFs) . . . ." 42
C.F.R. 489.53(a)(3). HCFA's termination of a provider agreement
is defined as an "initial determination." 42 C.F.R.
498.3(b)(7).
A provider within the meaning of the regulation is not entitled to
have HCFA reconsider its initial determination to end the provider
agreement. 42 C.F.R. 498.2, 498.22. Under the regulations,
HCFA's initial determination to terminate a provider agreement
remains binding unless (a) the provider obtains a hearing decision
from an administrative law judge that reverses or modifies the
initial determination, or (b) the initial determination is revised
by HCFA in accordance with 42 C.F.R. 498.32 or 498.100. 42
C.F.R. 498.20(b).
HCFA has the discretion to reopen and revise any initial
determination within 12 months after the date of the initial
determination. 42 C.F.R. 498.30, 498.32. Like an initial
determination to terminate a provider agreement, HCFA's revised
determination on the termination of a provider agreement is also
binding unless the affected party requests a hearing before an
administrative law judge and obtains a hearing decision that
reverses or modifies the revised determination, or HCFA further
revises the revised determination on its own initiative. 42 C.F.R.
498.32(b).
Any provider dissatisfied with HCFA's initial or revised
determination to terminate its provider agreement is entitled to a
hearing before an administrative law judge. 42 C.F.R. 498.5(b).
The regulation codified at 42 C.F.R. 498.40 specifies the time
limit for requesting a hearing to challenge HCFA's initial
determination or revised determination:
(a)(2) The affected party or its legal representative or
other authorized official must file the request in writing within
60 days from receipt of the notice of initial . . . or revised
determination unless that period is extended in accordance with
paragraph (c) of this section.
(c) Extension of time for filing a request for hearing. If
the request was not filed within 60 days --
(1) The affected party or its legal representative
or other authorized official may file with the ALJ a written
request for extension of time stating the reasons why the request
was not filed timely.
(2) For good cause shown, the ALJ may extend the
time for filing the request for hearing.
42 C.F.R. 498.40(a)(2) and (c).
The regulations authorize an administrative law judge to dismiss a
hearing request if the hearing request was not timely filed and if
the administrative law judge does not find good cause for extending
the filing period. 42 C.F.R. 498.40(c), 498.70(c). An
administrative law judge also may dismiss the hearing request if a
party requesting a hearing is not a proper party or "does not
otherwise have a right to a hearing." 42 C.F.R. 498.70(b).
IV. THE PARTIES' SUBMISSIONS
A. HCFA's motion to dismiss the hearing request for
untimeliness under HCFA's May 25, 1994 notice letter and
Petitioner's request for extending the 60-day filing period for
good cause
On March 31, 1995, HCFA filed a Motion to Dismiss, pursuant to 42
C.F.R. 498.70(c). 1/ According to HCFA, Petitioner's hearing
request dated August 22, 1994 was untimely filed because HCFA's
notice of termination was dated and sent on May 25, 1994, and
Petitioner received the notice on May 26, 1994. HCFA Mem. 1 - 2;
HCFA Exs.
1 - 4. HCFA's letter dated May 25, 1994 contained notification to
Petitioner of its hearing rights, the time period within which a
hearing should be requested, and the information that must be
contained in a hearing request. HCFA Ex. 1.
Petitioner did not dispute that HCFA's termination notice dated May
25, 1994 was received at Petitioner's facility on May 26, 1994.
Instead, Petitioner argued that I should extend the filing period
because Petitioner had good causes for having failed to request a
hearing within 60 days of its receiving the May 25, 1994
termination notice. According to Petitioner, it was not until
August 22, 1994 that Petitioner received HCFA's letter dated July
7, 1994, in which HCFA stated also that Petitioner's provider
agreement had been terminated on June 25, 1994. P. Mem. 5.
Petitioner noted that the July 7, 1994 letter did not contain
Petitioner's post office box number and, consequently, that letter
was not delivered until August 22, 1994. Id. See also P. Ex. 1 at
7.
Petitioner argued, inter alia, that, until it received HCFA's July
7, 1994 letter on August 22, 1994, it was operating under the
assumption that HCFA was reconsidering the termination decision
dated May 25, 1994 and, therefore, there was no need to file an
appeal until Petitioner obtained a subsequent response from HCFA.
P. Mem. 5 - 6, 10. Petitioner said it formed its assumptions on
the basis of its prior dealings with HCFA, when HCFA had changed
its mind after notifying Petitioner by letter dated January 24,
1994 that its provider agreement would be terminated on February 5,
1994. P. Mem. 5 - 6. Petitioner argued also that I should find
good cause for extending the filing period in order to avoid an
inequitable result. P. Mem. 11 - 14. According to Petitioner, it
had completed all required work except for placing flame retardant
curtains in 50 percent of the patient rooms by the date of
termination. P. Ex. 1 at
5 - 6.
B. The parties' supplemental submissions on the legal effect
of HCFA's other notice letters, on whether Petitioner's August 22,
1994 letter constitutes a valid hearing request, and on whether the
reason for Petitioner's seeking a hearing has been rendered invalid
by its own admissions
Having reviewed the parties' arguments and evidence, especially as
they pertained to the three notice letters from HCFA concerning the
termination of Petitioner's provider agreement (HCFA's letter dated
January 24, 1994, HCFA's letter dated May 25, 1994, and HCFA's
letter dated July 7, 1994), I directed the parties to file
additional briefs and evidence to address the following issues:
1. Which (if any) of HCFA's three termination notices to
Petitioner should be considered a revised determination or a
further revision of a revised determination by HCFA.
2. Whether Petitioner's August 22, 1994 hearing request
should be considered timely filed within the 60 days specified by
42 C.F.R. 498.40(a) because HCFA's July 7, 1994 notice letter
constituted a revised determination (or a further revision of a
revised determination) by HCFA.
3. Whether Petitioner's statement in its August 22, 1994
hearing request ("We are asking for an appeals hearing based on the
fact that all work had been completed by 6-25-94") meets the
criteria of 42 C.F.R. 498.40(b), which specifies that a hearing
request must --
(1) Identify the specific issues, and the
findings of fact and conclusions of law with which the affected
party disagrees; and
(2) Specify the basis for contending that
the findings and conclusions are incorrect.
4. Whether the reason for Petitioner's requesting a
hearing to challenge the termination of its provider agreement on
June 25, 1994 (i.e., "We are asking for an appeals hearing based on
the fact that all work has been completed by 6-25-94") has been
rendered invalid or obviated by Petitioner's admission that the
required flame retardant curtains had not been installed in 50
percent of the patient rooms by June 25, 1994.
Order Directing Parties to File Additional Arguments and Evidence
(June 7, 1995). My reasons for raising these issues were fully
explained in my order. The parties filed additional submissions by
the deadline I had set. 2/
In its supplemental memorandum, HCFA argues that its January 25,
1994 notice was its initial determination, that its May 25, 1994
notice was either an initial determination or a revised
determination, and that its July 7, 1994 notice was merely a
statement of reaffirmation which did not revise its earlier
determination. HCFA Supp. Mem. 2. Based on the foregoing
characterization of the notices and its previous arguments, HCFA
maintains that the Petitioner's hearing request should be dismissed
for untimeliness. HCFA Supp. Mem. 2 - 8. HCFA argues also that
Petitioner has no right to a hearing because Petitioner's August
22, 1994 letter did not meet the content requirements of a hearing
request, and Petitioner, through its admissions that the work on
flame retardant curtains was only 50 percent completed by June 25,
1994, has no legitimate basis for further disputing HCFA's
termination action. HCFA Supp. Mem. 8 - 12.
Petitioner argues in its supplemental memorandum that HCFA's letter
dated July 7, 1994, by its incorporation of new evidence from the
June 16, 1994 resurvey, constituted a revised determination and
triggered a new 60-day period for filing a hearing request. P.
Supp. Mem. 3 - 5. Therefore, Petitioner contends that its August
22, 1994 hearing request was timely filed. Id. Petitioner is also
of the view that its letter dated August 22, 1994 suffices as a
hearing request because the letter "clearly gave HCFA adequate
notice of Petitioner's allegations so that HCFA could respond[,]"
Petitioner was not represented by legal counsel at the time, and
HCFA has accepted Petitioner's letter as an adequate hearing
request. P. Supp. Mem. 5 - 7.
In addition, Petitioner argues that it has a legitimate basis for
disputing HCFA's decision to terminate the provider agreement,
notwithstanding the admissions made on Petitioner's behalf. 3/
According to Petitioner, having 50 percent or less non-flame
retardant patient room curtains "is a legally insufficient reason
upon which to base termination of a provider agreement[,]" and
termination of the provider agreement is a "draconian sanction
given the relative seriousness of the infraction." P. Supp. Mem.
8 (emphasis in original). Petitioner reasons that having no flame
retardant curtains in patient rooms cannot be construed as posing
a serious and immediate threat to patient safety because the
situation is not specifically identified as a fire hazard in the
Medicare and Medicaid Guide, which includes as an example of crisis
situations where there is "[f]ailure to maintain the integrity of
fire and smoke barriers, such as removal of stairway doors and
major unprotected openings in corridor walls." P. Supp. Mem.
8 - 9.
According to Petitioner and the Supplemental Declaration of Floyd
Hardcastle, Petitioner hired a seamstress in November of 1993 to
begin making new curtains out of inherently noncombustible material
even though Petitioner was not required to do so under the law. P.
Ex. 13 at
2 - 3. Mr. Hardcastle, the facility's Administrator, stated that
the same curtains had been hanging in the patient rooms for at
least 10 years before a 1992 survey found them to be deficient.
Id. at 3. Mr. Hardcastle thought it would have been acceptable to
dip these old curtains in a flame retardant substance. 4/ After
the seamstress had completed only 50 percent of the new curtains
around June of 1994, she broke her arm. Mr. Hardcastle said he
then directed that the remaining old curtains be dipped in a flame
retardant substance. Id. at 2. Mr. Hardcastle said he learned
after August 22, 1994 that the dipping process had not been
completed by June 25, 1994. Id. at 2 - 3.
V. THE MERITS OF HCFA'S MOTION TO DISMISS AND RELATED ISSUES
A. HCFA's letter of January 24, 1994
There is no dispute between the parties that HCFA's letter of
January 24, 1994 was an initial determination. The letter notified
Petitioner that, effective February 5, 1994, Petitioner would no
longer have the right to participate in the Medicare program as a
skilled nursing facility. As stated in the letter, HCFA made this
initial determination on the basis of deficiencies found during the
November 16, 1993 survey and Petitioner's failure to submit a plan
of correction to address those deficiencies. HCFA Ex. 20. HCFA
informed Petitioner in its January 24, 1994 letter, "Federal
regulations at 42 C.F.R. 488.28 state that a provider found to
be deficient in one or more level B requirements may participate in
the Medicare program only if an acceptable plan of correction is
submitted." HCFA Ex. 20 at 1. 5/
There is no dispute that Petitioner filed no hearing request in
response to HCFA's January 24, 1994 letter. Instead of requesting
a hearing to challenge the results of the November 16, 1993 survey,
Petitioner submitted a plan of correction and requested waiver of
certain requirements. P. Ex. 1 at 2 - 3; P. Ex. 3.
B. HCFA's letter of May 25, 1994
I agree with the parties that HCFA's May 25, 1994 letter
constituted a revised determination. In this letter, HCFA changed
the effective date of termination from February 5, 1994 to June 25,
1994. More importantly, HCFA made known for the first time in the
May 25, 1994 letter its conclusion that the deficiencies from the
November 16, 1993 survey were seriously jeopardizing the health and
safety of Petitioner's patients, and the "Level A requirement found
at the C.F.R. 483.70 (Physical Environment) is not met." P. Ex. 3.
These conclusions revised HCFA's earlier solicitation of a plan of
correction under 42 C.F.R. 488.28, which governs situations
where a provider has been deficient only in Level B requirements
which do not jeopardize the health and safety of patients. See 42
C.F.R. 488.28(a).
There is no dispute that Petitioner did not file a hearing request
within 60 days of having received HCFA's May 25, 1994 letter. I do
not find it necessary to determine whether Petitioner had good
cause for not filing a hearing request until August 22, 1994. As
I will discuss below, HCFA issued a further revision of its May 25,
1994 letter on July 7, 1994, and Petitioner's hearing request dated
August 22, 1994 was timely filed with respect to HCFA's revised
determination of July 7, 1994. Petitioner filed its August 22,
1994 hearing request in response to HCFA's July 7, 1994 letter, as
evidenced by Petitioner's statement at the beginning
of the hearing request, "One [letter] dated May 25, 1994 . . . we
did not appeal because we talked to your staff and let them know we
would have the [corrective] work done before June 25, 1994." HCFA
Ex. 6. In addition, the outcome would be the same whether
Petitioner's basis for requesting a hearing (i.e., its assertion
that "all work had been completed by 6-25-94") was directed to
HCFA's May 25, 1994 determination referencing the November 16, 1993
survey, or to HCFA's July 7, 1994 revised determination referencing
both the November 16, 1993 and June 16, 1994 surveys.
C. HCFA's letter of July 7, 1994 and the timeliness of
Petitioner's hearing request dated August 22, 1994
As noted above, HCFA has the discretion to reopen and revise its
initial determinations or revised determinations within 12 months
after the date of such determinations. 42 C.F.R. 498.30,
498.32. In this case, less than 12 months after issuing its
determination in the May 25, 1994 letter, HCFA issued another
letter to Petitioner on July 7, 1994. On its face, HCFA's letter
dated July 7, 1994 revised the bases of the determination contained
in the May 25, 1994 letter. HCFA stated in its July 7, 1994 letter
that it had reviewed the evidence upon which the May 25, 1994
determination was based, "as well as additional evidence submitted
since our initial determination, including evidence gathered from
a survey of your facility completed on June 16, 1994." P. Ex. 7.
Therefore, until it received the July 7, 1994 letter, Petitioner
could not have known of HCFA's conclusions with respect to the
"additional evidence submitted" since HCFA's May 25, 1994
determination or the results of the June 16, 1994 survey. Until it
received the July 7, 1994 letter, Petitioner lacked the opportunity
and basis for disputing HCFA's termination action grounded on
events, observations, or conclusions that were not a part of HCFA's
May 25, 1994 determination.
I do not find persuasive HCFA's argument that its July 7, 1994
letter cannot be viewed as a revision of the May 25, 1994
determination because HCFA did not change the previously stated
effective date of termination or rescind its termination action.
See HCFA Supp. Mem. 6 - 7. Without doubt, HCFA may change the
effective date of terminations or reverse itself altogether when it
issues a revised determination. But not doing so and changing only
the factual basis and rationale of its determination still
constitute material revisions which afford the provider with an
opportunity to appeal. See 42 C.F.R. 498.40(a)(2).
The regulations on reopening and revisions do not require that HCFA
modify, reverse, or rescind every aspect of its preceding
determination. Whether HCFA should have changed the effective date
of termination when it issued its July 7, 1994 letter is beyond the
scope of the disputes before me. 6/ HCFA's failure to rescind its
termination action based upon the new information HCFA chose to
consider may constitute a basis for a valid hearing request. For
example, a provider may choose not to appeal an initial
determination because the provider agreed with the findings from
the first survey and agreed that it should correct the deficiencies
cited by HCFA in order to avoid the termination of its provider
agreement. However, if HCFA subsequently surveys the corrective
actions allegedly undertaken by the provider and again concludes
that the provider agreement should be terminated due to outstanding
deficiencies, these additional actions by HCFA may give rise to a
legitimate dispute over matters such as whether HCFA's subsequent
survey should have found the provider in compliance with Medicare
requirements as a result of the provider's corrective actions. The
opportunity to appeal a revised determination by HCFA exists by
regulatory fiat even when, as in this case, HCFA did not inform
Petitioner that it had 60 days within which to challenge the
contents of HCFA's July 7, 1994 letter.
Nor was I persuaded by HCFA's argument that its July 7, 1994 letter
is not a revised determination because the letter is an example of
good government, which resulted from the courtesy extended by a
public official who wished to keep Petitioner well-informed. HCFA
Supp. Mem. 7. Whatever his motives may have been, the author of
the July 7, 1994 letter relayed material new information and
conclusions on behalf of HCFA. His motives and the principles of
good government cannot legitimately bar the affected provider from
disputing material new matters contained in HCFA's letter.
HCFA argues also that construing documents such as its July 7, 1994
letter as revised determinations is likely to result in extending
a provider's appeal rights indefinitely. HCFA Supp. Mem. 7. I
share HCFA's concern but note that HCFA holds the solution to the
problem it fears. Nothing requires HCFA to conduct follow-up
surveys, solicit new information, or issue new findings after it
has determined initially to terminate a provider agreement. While
there is nothing improper with HCFA's efforts to further buttress
or re-verify its initial conclusions with additional facts and
analysis, HCFA cannot also nullify the affected provider's right to
challenge those additional facts or rationales asserted by HCFA.
For the foregoing reasons, I conclude that HCFA's July 7, 1994
letter constituted a revised determination (i.e., a further
revision of the revised determination dated May 25, 1994), and,
therefore, Petitioner's hearing request dated August 22, 1994 was
timely filed under 42 C.F.R. 498.40(a)(2) with respect to HCFA's
July 7, 1994 revised determination.
D. The failure of Petitioner's hearing request to raise any
matter which entitles it to a hearing or for which relief may be
granted
Having found that Petitioner's request for hearing dated August 22,
1994 was timely filed with respect to HCFA's July 7, 1994 revised
determination, I now reach the question of whether Petitioner's
request has placed before me any issue which should be adjudicated
pursuant to a hearing or which can result in relief for Petitioner.
HCFA has argued that Petitioner's hearing request, even if timely
filed, should be dismissed because Petitioner "does not otherwise
have a right to a hearing." 42 C.F.R. 498.70(b).
In substance, HCFA's motion is the equivalent of either a motion
for judgment on the pleadings or a motion to dismiss for failure of
the pleading to state a claim upon which relief can be granted.
See Fed. R. Civ. P. 12 (b)(6) and 12(c). Using the Federal Rules
as guidance, I note that when matters outside the pleadings are
used in support of such motions, the motions should be treated as
motions for summary judgment. Id. Accordingly, I have evaluated
the pleadings (consisting of Petitioner's request for hearing and
HCFA's notices of termination attached to Petitioner's request), as
well as the evidence outside of the pleadings the parties cite, in
a light most favorable to Petitioner as the nonmoving party in
deciding whether Petitioner's August 22, 1994 hearing request
states a cause of action upon which relief can be granted or
whether HCFA is entitled to prevail as a matter of law. For the
reasons that follow, I conclude that, based on the pleadings alone,
Petitioner "does not otherwise have a right to a hearing," and,
therefore, Petitioner's hearing request should be dismissed.
Alternatively, when I evaluate the evidence submitted in addition
to the pleadings, I conclude that there are no material issues of
fact in dispute and HCFA is entitled to judgment as a matter of
law.
The regulation specifies that a hearing request must --
(1) Identify the specific issues, and the findings of fact
and conclusions of law with which the affected party disagrees; and
(2) Specify the basis for contending that the findings and
conclusions are incorrect.
42 C.F.R. 498.40(b). Even though HCFA's July 7, 1994 letter did
not state the foregoing requirements, it referred Petitioner to the
appeal rights stated in HCFA's May 25, 1994 letter. P. Ex. 7. The
top of HCFA's May 25, 1994 letter contained the advice "IMPORTANT
NOTICE - PLEASE READ CAREFULLY," and the body of the letter
informed Petitioner that "[t]he hearing request must state the
specific issues, or findings of fact, and conclusions of law with
which you disagree and your rationale." HCFA Ex. 1.
In the letter dated August 22, 1994, Petitioner, by its
Administrator and owner, Floyd Hardcastle, stated only as follows:
We are asking for an appeals hearing based on the fact that
all work had been completed by 6-25-94.
P. Ex. 8; HCFA Ex. 13 at 1.
Mr. Hardcastle stated no other basis for seeking a hearing to
dispute HCFA's decision to terminate the provider agreement. Even
though Petitioner alleges that Mr. Hardcastle was not represented
by counsel in August of 1994 (P. Supp. Mem. 6), nothing before me
establishes that Mr. Hardcastle was unable to read, understand, or
follow the very simple instructions provided by HCFA on what to
place into a hearing request. Nor do I believe that Mr.
Hardcastle, as Petitioner's owner and operator (HCFA Ex. 13),
lacked the intelligence or resources to obtain the assistance of
counsel if he were uncertain about what to place in Petitioner's
hearing request or what could be placed in the hearing request.
Therefore, I conclude that the sole basis for the hearing sought by
Petitioner is Petitioner's assertion of "the fact" that it had
completed all work by June 25, 1994.
Petitioner argues that Mr. Hardcastle's statement suffices as a
valid hearing request because HCFA accepted the August 22, 1994
letter as a hearing request. P. Supp. Mem. 6. As should be clear
from the regulations, it is not within HCFA's authority to either
accept or dismiss requests for hearings. 42 C.F.R. 498.70.
Moreover, HCFA's motion to dismiss the hearing request is proof
that HCFA does not accept Petitioner's August 22, 1994 letter as a
valid hearing request.
Petitioner argues also that Mr. Hardcastle's statement suffices as
a valid hearing request because it placed HCFA on notice as to what
HCFA needed to defend against. P. Supp. Mem. 6. I agree that under
the principle of notice pleading, Petitioner's August 22, 1994
letter imparted adequate notice of the fact which Petitioner wished
to prove at hearing and against which Petitioner believes HCFA
should defend. However, I find that the adequacy of Petitioner's
notice does not provide Petitioner with a right to be heard on an
assertion of a fact that is false by Petitioner's own admissions
and which, even if assumed to be true in the absence of
Petitioner's admissions, cannot make invalid HCFA's decision to
terminate Petitioner's provider agreement. These conclusions apply
equally whether the contents of Petitioner's August 22, 1994 letter
are evaluated in light of HCFA's May 25, 1994 notice or HCFA's July
7, 1994 notice.
HCFA correctly points out that Petitioner's merely stating in its
hearing request that all work had been completed by the date of
termination, June 25, 1994, does not provide Petitioner with a
valid basis for a hearing. HCFA Supp. Mem. 9. By asserting that
the completion of all work by June 25, 1994 was the sole issue of
fact it wished to pursue at hearing, Petitioner waived its right to
challenge the deficiencies found by HCFA during the November 16,
1993 and June 16, 1994 surveys. In essence, Petitioner's hearing
request is an admission that the deficiencies HCFA relied on in its
July 7, 1994 revised determination were in existence on June 16,
1994, as found by the survey. See P. Ex. 7.
The June 16, 1994 survey found Petitioner out of compliance with
four Life Safety Code requirements: (1) failure to meet minimum
construction standards for a two- story structure, in that the
facility was not constructed of two-hour fire resistive materials;
(2) failure to have one-hour fire resistive walls in a basement
storage room; (3) failure to have a smoke barrier on each floor;
and (4) failure to have flame retardant curtains in all patient
rooms. HCFA Ex. 8. By failing to challenge these findings in its
hearing request, Petitioner admitted their existence, as of the
survey date.
I note that with respect to the first of these deficiencies from
the June 16, 1994 survey, evidence introduced into the record
suggests that, in 1995, the Fire Marshall may have granted a waiver
request, which exempted Petitioner from having to meet the Code's
requirement on the use of two-hour fire resistive construction
materials in two-story structures. See HCFA Ex. 15. However,
there is no evidence or allegation that Petitioner had been granted
such a waiver when Petitioner was surveyed, when its provider
agreement was terminated, or when it filed its hearing request.
According to other evidence generated or submitted by Petitioner,
Petitioner did not seek a waiver for this requirement (HCFA Prefix
Tag #K12) until December 26, 1994. HCFA Exs. 1, 13; P. Ex. 3.
Petitioner has also argued in its brief that the Fire Marshall
confirmed after a survey that the facility has always had a smoke
barrier in place. P. Mem. 13. This argument is misleading because
the Fire Marshall stated that, as of March 31, 1995, he verified
that a smoke barrier existed, but that it showed evidence of recent
repair. HCFA Ex. 18. The Fire Marshall's statement is in accord
with the information Petitioner provided to HCFA by letter dated
December 26, 1994, stating that Petitioner was still awaiting a
construction permit for the "construction and/or repairs to the
existing second floor smoke barrier wall" at that time. HCFA Ex.
13 at 1.
Notwithstanding the foregoing evidence and arguments added to the
record by the parties, the fact remains that Petitioner's hearing
request did not challenge the existence of any deficiency found by
HCFA. Therefore, the deficiencies cited in HCFA's July 7, 1994
revised determination remain binding upon Petitioner. 42 C.F.R.
498.20(b), 498.32(b). Based on the relevant regulations and
Petitioner's failure to challenge the deficiencies found during the
June 16, 1994 survey, HCFA is entitled to dismissal of the hearing
request.
HCFA used the results of the June 16, 1994 survey to determine that
Petitioner was not in compliance with the Life Safety Code. P. Ex.
7. As Petitioner is aware, the survey found Petitioner out of
compliance with a requirement of participation for "physical
environment," which incorporates the Life Safety Code requirements.
P. Supp. Mem. 9 - 10; P. Ex. 14. "Physical environment" is
contained in Subpart B of 42 C.F.R. 483, which lists all of the
requirements an institution must meet in order to qualify to
participate as a SNF in the Medicare program or as a NF in the
Medicaid program. See 42 C.F.R. 483.1(b). Regulations such as
the one governing "physical environment" also serve as a basis for
the surveying activities which determine whether a facility meets
the requirements for participation in Medicare and Medicaid. Id.
When the survey shows that a SNF or NF is no longer meeting the
appropriate requirements for participation, HCFA has the authority
to terminate the provider agreement. 42 C.F.R. 483.1(b),
488.26(a)(1), 489.53(a)(1). For these reasons, HCFA's rationale
for terminating Petitioner's provider agreement is valid on its
face and is in accord with the relevant regulations.
HCFA has never used the status of Petitioner's work completion as
of June 25, 1994 or the conditions at Petitioner's facility on June
25, 1994 as grounds for its termination action. Thus, Petitioner's
claim that it had completed all work by that date can have no
impact on the validity of HCFA's termination decision. Nor does
Petitioner's asserted fact constitute a valid affirmative argument.
As a matter of law, Petitioner's claim of work completion by June
25, 1994 does not constitute a valid basis for relief or
affirmative defense because the regulations specify that surveys
shall be the means by which HCFA assesses providers' compliance
with federal health, safety, and quality standards. 42 C.F.R.
488.26(a)(1). HCFA conducted no additional survey after June 16,
1994 and before terminating Petitioner's provider agreement on June
25, 1994. No law or regulation compelled HCFA to conduct another
survey after finding deficiencies on June 16, 1994 and before
actually effectuating its termination decision. Thus, it is
immaterial whether Petitioner then completed all work to correct
the deficiencies after the June 16, 1994 survey. HCFA's prima
facie valid termination of Petitioner's provider agreement cannot
be set aside on the basis of the conditions at Petitioner's
facility post-survey.
Additionally, HCFA is entitled to summary judgment in its favor
when the pleadings are considered together with the evidence of
record. It will not be possible for Petitioner to prove its
alleged completion of all work by June 25, 1994, even if such a
fact were relevant or could constitute a valid affirmative claim
for relief. Petitioner's owner and operator, Floyd Hardcastle,
recently admitted that, on June 25, 1994, 50 percent of the patient
room curtains were not made of a flame retardant material and not
all of the remaining curtains had been treated with a flame
retardant substance. P. Ex. 13 at 2 - 3. 7/ His admissions make
untrue his earlier contention in the hearing request: "the fact
that all work had been completed by 6-25-94." In both the November
16, 1993 and June 16, 1994 surveys, HCFA found the same violation
under the same Life Safety Code section (LSC 17-4151) because
"patient room curtains are not flame retardant." HCFA Exs. 7, 12.
8/ Even setting aside Petitioner's additional admissions that all
of its patient rooms have had the same non-flame retardant curtains
for at least 10 years prior to 1992 and that Petitioner's owner and
operator failed to discover until after August 22, 1994 that not
all patient room curtains had been made flame retardant as of June
25, 1994, the fact remains that Petitioner had not succeeded in
making all of its patient room curtains flame retardant during the
seven month period between being cited for the deficiency in
November of 1993 and having its provider agreement terminated on
June 25, 1994. P. Ex. 13 at 1 - 3.
With respect to other deficiencies cited by HCFA pursuant to the
November 16, 1993 and June 16, 1994 surveys, the evidence shows
that Petitioner informed HCFA on December 26, 1994 that the work on
constructing or repairing its second floor smoke barrier wall would
begin as soon as Petitioner received a construction permit. HCFA
Exs. 8, 13. Petitioner has been told since the November 16, 1993
survey that it failed to meet the requirement for a smoke barrier
wall on each floor and that Petitioner should obtain the necessary
construction permit. HCFA Ex. 8 at 4; HCFA Ex. 13 at 4 - 5. Yet,
Petitioner's December 26, 1994 letter to HCFA indicates that, more
than one year after the deficiency was noted, Petitioner was making
phone inquiries concerning the issuance of a construction permit.
HCFA Ex. 13 at 1. Whatever the merits of Petitioner's reasons for
the delay, 9/ Petitioner had not yet constructed or repaired a
second floor fire barrier wall by December 26, 1994. Id.
Therefore, I conclude that the information contained in
Petitioner's December 26, 1994 letter to HCFA also makes untrue
Petitioner's August 22, 1994 contention that all remedial work had
been completed by June 25, 1994.
There is no legitimate reason why this case should proceed to a
hearing for the purpose stated in Petitioner's hearing request:
for Petitioner to prove the fact that all work had been completed
by June 25, 1994. Such proof does not exist, according to
Petitioner's admissions. With respect to the four deficiencies
still in existence as of the June 16, 1994 survey, Petitioner will
not be able to prove that "all work had been completed by 6-25-94"
even if Petitioner could prove the truth of his statements that a
seamstress' broken arm had caused the work-stoppage, that Mr.
Hardcastle's subordinate had disregarded his directive to dip the
remaining old curtains in a flame retardant by June 25, 1994, or
that construction or repair work had not begun on the second floor
fire barrier wall by December 26, 1994 due to Petitioner's failure
to seek a construction permit at an earlier time. See P. Ex. 13 at
2 - 3; HCFA Ex. 13. Moreover, as noted earlier, in 1995,
Petitioner sought a waiver of Code requirements in order to resolve
the cited deficiency on construction materials required of a
two-story building. See HCFA Exs. 13, 15. In its brief and the
supporting declaration of Mr. Hardcastle, Petitioner does not claim
to have done any work to correct the construction materials
deficiency because the building was erected in 1929 and strict
compliance with Code requirements would "require that the building
be demolished and rebuilt." P. Ex. 1 at 5; P. Mem. 12. At best,
Petitioner had completed the work to remedy only one of the four
cited deficiencies by June 25, 1994: the failure to have one-hour
fire resistive walls in a basement storage room. E.g., P. Exs. 1,
5.
I find also that, even if the conditions at Petitioner's facility
on June 25, 1994 were relevant, no genuine issue of material fact
is raised by Petitioner's arguments that the absence of flame
retardant curtains in all patient rooms posed only minor safety
risks to patients and therefore cannot legally justify HCFA's
"draconian sanction" of terminating Petitioner's provider
agreement. See P. Supp. Mem. 8 - 9. First, the Life Safety Code
provision submitted by Petitioner in support of its arguments
states plainly that "All combustible draperies, cubicle curtains,
and curtains for decorative and acoustical purposes shall be
rendered and maintained flame retardant." P. Ex. 14. (emphasis
added). More importantly, Petitioner's arguments incorrectly
suggest that the lack of flame retardant curtains was the only
deficiency still in existence at the date of termination. As noted
above, Petitioner had not corrected the smoke barrier wall
deficiency on its second floor even when it corresponded with HCFA
on December 26, 1994, and there is no allegation or evidence that
the requirement for using two-hour fire resistive construction
materials had been waived on or before June 25, 1994. HCFA Exs. 8,
13, 15, 18. Even though Petitioner minimizes the importance of
flame retardant curtains in patient rooms, Petitioner acknowledges
that the alleged noncompliance with smoke barrier walls and
construction materials (neither of which allegation was disputed in
Petitioner's hearing request) posed serious threats to patient
care. P. Supp. Mem. 9. Thus, if conditions at Petitioner's
facility on June 25, 1994 were relevant, I would still conclude
that HCFA's decision to terminate Petitioner's provider agreement
is valid irrespective of the merits of Petitioner's arguments
concerning its failure to replace or dip all patient room curtains.
VI. CONCLUSION
Based only upon the pleading and the relevant regulations discussed
above, I grant HCFA's motion to dismiss Petitioner's hearing
request under 42 C.F.R. 498.70(b) for Petitioner's failure to
raise any claim for which relief may be granted. Further, based on
the pleadings and other evidence of record before me, I conclude
that HCFA is entitled to summary judgment as a matter of law.
________________________
Mimi Hwang Leahy
Administrative Law Judge
1. HCFA filed a Memorandum in Support of Motion to Dismiss
Petitioner's Untimely Hearing Request (HCFA Mem.) accompanied by
eight exhibits (HCFA Exs. 1 - 8). Petitioner filed a Memorandum of
Points and Authorities in Support of Opposition to Motion to
Dismiss (P. Mem.) accompanied by four declarations by witnesses and
documentary evidence. I have marked the declarations and documents
as Petitioner's Exhibits (P. Exs.) 1 - 12. HCFA filed a reply
accompanied by HCFA Exs. 9 - 19. Neither party objected to any of
the exhibits. Accordingly, I have admitted them into evidence.
2. HCFA filed a Supplemental Memorandum in Support of HCFA's
Motion to Dismiss Petitioner's Untimely Hearing Request (HCFA Supp.
Mem.) accompanied by HCFA Ex. 20. Petitioner filed its Response to
Order Directing Parties to File Additional Arguments and Evidence
(P. Supp. Mem.) accompanied by supplemental declarations and
documents. I have marked these as P. Exs. 13 and 14. In the
absence of objection, I have admitted the additional exhibits
submitted by the parties.
3. Floyd Hardcastle is Petitioner's Administrator and owner.
HCFA Ex. 13 at 1. He stated, "As of June 25, 1994, the facility
had completed the process of installing flame retardant curtains in
approximately fifty percent (50%) of the patient rooms." P. Ex. 1
at 6.
4. I note that HCFA's surveyors did not require new curtains
made of flame retardant materials. The Life Safety Code relied
upon by HCFA during both the November 16, 1993 and June 16, 1994
surveys specified only that all combustible curtains and drapes
shall be "rendered and maintained flame retardant." HCFA Exs. 7,
12 at 4 - 5. Thus, there is no real issue as to whether Petitioner
could have dipped its existing curtains in a flame retardant
substance. Petitioner could have done so and satisfied the
requirement of the Life Safety Code relied upon by HCFA.
5. The regulation cited by HCFA specifies also that, in order
for a skilled nursing facility deficient in one or more level B
requirements to continue participating in the Medicare program with
an acceptable plan of correction, its level B deficiencies should
"neither jeopardize the health and safety of patients nor are of
such character as to seriously limit the provider's capacity to
render adequate care." 42 C.F.R. 488.28(a).
6. Petitioner's hearing request does not contain any allegation
that, based upon HCFA's issuance of a revised determination on July
7, 1994, HCFA should have also changed the effective date for
terminating the provider agreement. Nor has Petitioner made such
an argument in its other submissions to me. At this point, I deem
the matter waived by Petitioner.
7. I note that Mr. Hardcastle did not mention in his initial
declaration that Petitioner was hanging up new curtains made of
flame retardant material as well as dipping old curtains in a flame
retardant substance. What he stated in his initial declaration
was, "the facility had completed the process of installing flame
retardant curtains in approximately fifty percent (50%) of the
patient rooms" and, by June 25, 1994, Petitioner had completed all
items of work "except 50% of the curtains. . . ." P. Ex. 1 at 6.
However, for the purposes of deciding HCFA's motion to dismiss and
whether HCFA is entitled to summary judgment, I have assumed all of
the facts asserted by Mr. Hardcastle to be true and construed them
in a light most favorable to Petitioner.
8. According to the evidence of record, the requirements for
Life Safety Code 17-4151 is as follows:
All combustible draperies, cubicle curtains, and curtains
for decorative and acoustical purposes shall be rendered and
maintained flame retardant.
HCFA Exs. 7, 12; P. Ex. 14.
9. The November 16, 1993 and June 16, 1994 survey reports cited
a deficiency under the requirement for a smoke barrier wall on each
floor used for sleeping rooms "for more than 30 institutional
occupants." HCFA Ex. 8 at 4. Petitioner's December 26, 1994
letter claimed that Mr. Hardcastle did not associate the deficiency
with the second floor because he thought the November 16, 1993
survey found a deficiency with the fire wall on the first floor,
which housed less than 30 patients. HCFA Ex. 13 at 1. Petitioner
did not dispute the need to construct or repair a fire barrier wall
on its second floor. HCFA Ex. 13.