Somers Manor Nursing Home, Inc., CR No. 420 (1996)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division


In the Case of:

Somers Manor Nursing Home, Inc.,

Petitioner,

- v. -

Health Care Financing Administration.

DATE: June 4, 1996
Docket No. C-96-054
Decision No. CR420


DECISION

I sustain the determination of the Health Care Financing
Administration (HCFA) to suspend payments for new
admissions by Petitioner for the period beginning
November 1, 1995 and ending November 9, 1995. HCFA is
not estopped from imposing a remedy. Furthermore, I do
not have the authority to decide that HCFA's choice of
remedy, denial of payment for new admissions, is
incorrect.

I. Background

Petitioner is a skilled nursing facility (SNF). On
October 16, 1995, Petitioner was notified by HCFA that
HCFA had determined that Petitioner was not complying
substantially with federal participation requirements for
nursing homes participating in the Medicare and Medicaid
programs. HCFA advised Petitioner that it had determined
to impose remedies against Petitioner, including denial
of payment for new admissions, effective November 1,
1995. 1/ The denial of payment for new admissions
remained in effect until November 9, 1995, when it ended,
as a result of a determination that Petitioner had
attained substantial compliance with participation
requirements.

Petitioner requested a hearing. Petitioner asserted that
the determination to impose a denial of payment was
unreasonable. The parties agreed that the case could be
heard and decided based on written submissions and
briefs, without an in-person hearing. HCFA submitted
five exhibits (HCFA Ex. 1 - 5) and an affidavit.
Petitioner submitted an affidavit and three exhibits,
which I have designated as P. Ex. 1 - 4. 2/ Neither
party objected to my admitting any of the exhibits into
evidence. I have received into evidence HCFA Ex. 1 - 6,
and P. Ex. 1 - 4.


II. Issues, findings of fact and conclusions of law

Petitioner characterizes this case as being about whether
HCFA's determination to deny Petitioner payments for new
admissions is reasonable in light of the fact that,
acting on behalf of HCFA, the State of New York
Department of Health (New York State Agency) incorrectly
informed Petitioner on September 21, 1995, that
Petitioner had corrected a deficiency which had been
identified at the July 21, 1995 compliance survey of
Petitioner. Petitioner contends that had it been
notified that the deficiency had not been corrected,
Petitioner would have promptly corrected the deficiency
and there never would have been a need for HCFA to impose
a remedy.

Petitioner does not dispute that a deficiency existed as
of September 21, 1995, nor does Petitioner assert that it
corrected that deficiency before November 9, 1995, the
date that the New York State Agency concluded that the
deficiency was corrected. Petitioner's framing of the
case in this way raises two issues. These are whether:

1. HCFA may be estopped from imposing a remedy
against Petitioner by virtue of the New York State
Agency's failure to correctly notify Petitioner of
the deficiency in Petitioner's operations; and

2. I have authority to hear and decide the
question of whether HCFA's choice of remedy--denial
of payment for new admissions by Petitioner--is
reasonable.

In sustaining HCFA's imposition of denial of payment for
new admissions by Petitioner, I make the following
findings of fact and conclusions of law (Findings). I
discuss each of my findings in detail, at part III of
this decision.

1. On September 21, 1995, Petitioner was advised,
incorrectly, by the New York State Agency that
Petitioner had corrected a deficiency in its
compliance with Medicare participation requirements
when, in fact, Petitioner had not corrected the
deficiency.

2. Petitioner was unable to correct the deficiency
prior to an October 3, 1995 resurvey of Petitioner,
after being notified by the New York State Agency on
September 29, 1995 of that agency's erroneous
finding.

3. Based on the October 3, 1995 resurvey of
Petitioner, HCFA determined that Petitioner was not
in substantial compliance with Medicare
participation requirements and, as a remedy, imposed
on Petitioner a denial of payment for new
admissions, effective November 1, 1995.

4. HCFA subsequently determined that Petitioner had
corrected its deficiency on November 9, 1995 and
ended the denial of payment for new admissions,
effective that date.

5. HCFA is not estopped from imposing a remedy by
the incorrect notification of Petitioner by the New
York State Agency that Petitioner had corrected a
deficiency when, in fact, Petitioner had not
corrected the deficiency.

6. I do not have authority to hear Petitioner's
request for a hearing concerning HCFA's choice of
remedy.


III. Discussion

A. The facts (Findings 1 - 4)

The facts are not in dispute. On July 21, 1995, acting
on HCFA's behalf, the New York State Agency conducted a
compliance survey of Petitioner. On August 1, 1995, the
New York State Agency notified Petitioner that Petitioner
was not complying with all applicable Medicare
participation requirements. HCFA Ex. 1. The
deficiencies identified by the New York State Agency
included a failure by Petitioner to comply with the
participation requirement governing the use of
restraints. HCFA Ex. 1 at 3 - 5. This finding is
identified in the New York State Agency's survey report
by ID Prefix Tag F 221. Id.

After the September 21, 1995 compliance survey of
Petitioner, the New York State Agency found, incorrectly,
that Petitioner had corrected its failure to comply
substantially with the participation requirement
governing the use of restraints. HCFA Ex. 2; P. Ex. 3.
The New York State Agency advised Petitioner's
administrator, incorrectly, that Petitioner had achieved
substantial compliance with the participation requirement
governing the use of restraints. P. Ex. 1 at 1.
Additionally, the New York State Agency advised
Petitioner, incorrectly, that Petitioner was not
complying with the participation requirement governing
plans of care. P. Ex. 1 at 1. In fact, Petitioner was
complying with the participation requirement for plans of
care.

On September 29, 1995, the New York State Agency advised
Petitioner that it had erred in advising Petitioner that
Petitioner was not complying with the participation
requirement governing plans of care, and had erred also
in advising Petitioner that Petitioner had achieved
substantial compliance with the participation requirement
governing the use of restraints. P. Ex. 1 at 1. The New
York State Agency told Petitioner's administrator that
another survey would be conducted. Id.

On October 3, 1995, the New York State Agency conducted a
resurvey of Petitioner. Although, in the days between
September 29, 1995 and October 3, 1995 Petitioner had
attempted to comply with the participation requirements
governing the use of restraints, it was unable to achieve
compliance by October 3, 1995. HCFA Ex. 4; P. Ex. 1 at
2.

Although the incorrect information that the New York
State Agency imparted to Petitioner on September 21, 1995
may have hindered Petitioner's efforts to correct its
failure to comply with the requirement governing the use
of restraints in the period between September 29, 1995
and October 3, 1995, the incorrect information would not
in any way have prevented Petitioner from attaining
compliance in the two months between the July 21, 1995
survey and the September 21, 1995 survey. The New York
State Agency correctly notified Petitioner of the
deficiency after the July 21, 1995 survey.

Based on the October 3, 1995 resurvey of Petitioner, HCFA
determined that Petitioner was not complying
substantially with the participation requirement
governing the use of restraints. HCFA determined to
impose a remedy against Petitioner, consisting of a
denial of payment for new admissions. This remedy went
into effect on November 1, 1995.

On November 9, 1995, the New York State Agency conducted
another resurvey of Petitioner. HCFA Ex. 5. The New
York State Agency found that, as of that date, Petitioner
had attained substantial compliance with participation
requirements, including the requirement governing the use
of restraints. Id. at 1. Based on this finding, HCFA
ended the denial of payment for new admissions, effective
November 9, 1995. Id.

Petitioner does not deny that, prior to November 9, 1995,
it was not complying substantially with the participation
requirement governing the use of restraints. Nor does
Petitioner deny that the date on which it finally
attained compliance with this requirement was November 9,
1995.

B. Estoppel (Finding 5)

The gravamen of Petitioner's case is that, but for the
incorrect notification that it received from the New York
State Agency on September 21, 1995, it would have
attained compliance with the participation requirement
governing the use of restraints prior to the October 3,
1995 resurvey. According to Petitioner, it was misled
into believing that it had attained compliance with the
requirement governing the use of restraints and,
therefore, devoted no resources to correcting its
deficiency prior to being notified by the New York State
Agency on September 29, 1995 that the findings of that
agency had been communicated erroneously to Petitioner.

Petitioner asserts also that, between September 21, 1995
and September 29, 1995, it devoted its resources to
addressing alleged deficiencies in its compliance with
plan of care participation requirements. This effort was
counterproductive, because Petitioner was not, in fact,
failing to comply with the plan of care participation
requirements. Petitioner contends that, by diverting its
resources to addressing the alleged deficiency in the
plan of care requirement, Petitioner was without adequate
resources to address the deficiency in the requirement
governing the use of restraints.

Petitioner argues, essentially, that HCFA is estopped
from imposing a remedy against Petitioner by virtue of
the error of HCFA's agent, the New York State Agency.
For purposes of this decision, I accept as true
Petitioner's representation that, but for the incorrect
notification by the New York State Agency, Petitioner
would have been able, between September 21, 1995, and
October 3, 1995, to correct its failure to comply with
the participation requirement governing the use of
restraints.

Petitioner's argument on the issue of estoppel does not
address HCFA's choice of the remedy it imposed against
Petitioner (denial of payment for new admissions).
Petitioner argues, in effect, that HCFA is precluded by
principles of estoppel from imposing any remedy, because
of the incorrect and misleading communication made on
September 21, 1995. HCFA responds to this argument by
asserting that, as a matter of law, it may never be
estopped from imposing a remedy. HCFA argues also that,
to order that its remedy be rescinded would be an
impermissible retroactive finding that Petitioner had
complied with participation requirements at a date
earlier than HCFA determined Petitioner to have complied
with those requirements.

I am not persuaded by HCFA's assertion that Petitioner is
seeking an impermissible retroactive finding that it
complied with participation requirements at a date
earlier than HCFA found Petitioner to have complied with
those requirements. In fact, Petitioner concedes that it
did not comply with those requirements prior to November
9, 1995, the date when HCFA determined that Petitioner
was in compliance. What Petitioner is actually arguing
is that it ought not to be the subject of a remedy based
on Petitioner's failure to comply with participation
requirements because, ostensibly, some of the fault for
Petitioner's failure to comply should be borne by HCFA.
3/

It is not necessary for me to resolve the issue of
whether HCFA could ever be estopped from imposing a
remedy against a provider. I conclude that, based on the
facts of this case, there exists no basis for me to find
that HCFA is estopped from imposing a remedy against
Petitioner.

It is true that the New York State Agency imparted
inaccurate and misleading information to Petitioner on
September 21, 1995. Put simply, the New York State
Agency told Petitioner that Petitioner had rectified a
deficiency which, in fact, Petitioner had not rectified.
That incorrect communication may have hindered Petitioner
in its efforts to correct the deficiency between
September 29, 1995, when the New York State Agency
corrected its error, and October 3, 1995, when Petitioner
was resurveyed. Certainly, it would have caused
Petitioner to believe, between September 21, 1995 and
September 29, 1995 that it need not take remedial steps
concerning its compliance with the participation
requirement governing use of restraints. However, the
incorrect communication did not preclude Petitioner from
rectifying the deficiency at an earlier date, when it had
accurate notice of the deficiency.

Petitioner has not shown that it was harmed by the
incorrect communication that was made to it by the New
York State Agency. In a very real sense, that incorrect
communication redounded to Petitioner's advantage.
Petitioner was on notice from July 21, 1995 until
September 21, 1995 that it was not complying with the
participation requirement governing the use of
restraints. Petitioner had ample time during this two-
month period to correct the deficiency. HCFA could have
imposed a remedy against Petitioner, effective September
21, 1995, based on Petitioner's failure to have rectified
its deficiency by that date. Petitioner actually had
more time within which to correct its failure to comply
with the participation requirement governing the use of
restraints prior to a remedy being imposed than
Petitioner would have had if the New York State Agency
had accurately recorded its findings and communicated
them to Petitioner.

Not only am I not persuaded that Petitioner was actually
harmed by the incorrect communication, but I am also
unconvinced that it would be in the interests of program
beneficiaries to bar HCFA from imposing a remedy against
Petitioner, given what happened here. A purpose of
imposing a remedy for a provider's failure to comply with
participation requirements is to provide incentive for
that provider to correct its failure. HCFA had every
reason to conclude that such an incentive was necessary
here, given the long period of time during which
Petitioner was not complying with the requirement
governing the use of restraints.

C. Choice of remedy (Finding 6)

Neither HCFA nor Petitioner addressed the issue of
whether I have authority to review HCFA's choice of
remedy, denial of payment for new admissions. However,
implicit in Petitioner's request for hearing is the
assertion that, given the facts of this case, HCFA
elected to impose the wrong remedy.

I do not have authority to decide that HCFA elected to
impose the wrong remedy or whether, despite Petitioner's
admitted failure to comply with participation
requirements, HCFA should not have imposed a remedy. The
regulations which govern extended care facilities,
including SNFs, make it plain that I do not have such
authority.

This case is brought pursuant to regulations which govern
long-term care facilities, including SNFs, which went
into effect in July 1995. 59 Fed. Reg. 56,116 - 56,252
(1994). These regulations include revised regulations,
at 42 C.F.R. Part 488, which govern surveys and
certification of long-term care facilities. 42 C.F.R.
488.11 - 488.456.

Among these revised regulations are regulations which
govern the remedies that HCFA may impose to address any
deficiency that HCFA determines may exist in the
operation of an extended care facility. 42 C.F.R.
488.406, 488.408. The remedies available to HCFA include
denial of payment for new admissions. 42 C.F.R.
488.406(a)(2)(ii). The revised regulations state that a
provider may request a hearing from a determination that
it is not complying with a participation requirement. 42
C.F.R. 488.408(g)(1). The revised regulations state
also, however, that a provider may not request a hearing
concerning HCFA's choice of remedy, assuming that HCFA
determines correctly that the provider is not complying
with participation requirements. 42 C.F.R.
488.408(g)(2).

The intent of the regulations is plain. While the
existence or nonexistence of a deficiency in a given case
is an issue about which a provider has hearing and appeal
rights, the provider does not have such rights to
challenge HCFA's discretion to decide which remedy to
impose if a deficiency does exist. This means that I may
not decide that HCFA's choice of a remedy, including its
choice to impose a remedy as opposed to not imposing one,
is incorrect in a case involving a long-term care
facility where, as in this case, it is undisputed that
the provider is not complying with participation
requirements.


IV. Conclusion

I conclude that HCFA is not estopped from imposing a
remedy against Petitioner. I have no authority to decide
that HCFA should have exercised discretion to not impose
a remedy, or to decide that HCFA's choice of remedy was
wrong. Therefore, I sustain HCFA's determination to deny
Petitioner payment for new admissions from November 1,
1995 until November 9, 1995.


Steven T. Kessel
Administrative Law Judge

1. HCFA advised Petitioner additionally that
Petitionerþs participation in Medicare would be
terminated effective January 17, 1996, if Petitioner did
not achieve substantial compliance by that date.
Petitioner achieved substantial compliance, effective
November 9, 1995, and Petitionerþs participation was not
terminated.

2. HCFA did not assign an exhibit number to the
affidavit of Philip G. Labasi. I have designated that
exhibit as HCFA Ex. 6. Petitioner did not assign an
exhibit number to the affidavit of Janice Depp. I have
designated that exhibit as P. Ex. 1. Petitioner
designated its three exhibits as þP. Ex. A,þ þP. Ex. B,þ
and þP. Ex. C.þ In order to maintain a uniform record, I
have redesignated P. Ex. A as P. Ex. 2, P. Ex. B as P.
Ex. 3, and P. Ex. C as P. Ex. 4. I would note also that
P. Ex. 3 is identical to HCFA Ex. 2.

3. Although not an issue in this case, providers have
contended in some cases that they complied with
participation requirements at an earlier date than HCFA
certified them to be in compliance. In such a case, I
have afforded the provider a hearing so that it could
attempt to prove its contention. National Hospital for
Kids in Crisis, DAB CR413 (1996).