Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Arcadia Acres, Inc.
Petitioner,
- v. -
Health Care Financing Administration.
Date: June 26, 1996
Docket No. C-96-160
Decision No. CR424
DECISION
The threshold issue before me is whether Arcadia Acres, Inc.
(Arcadia) has a right to an evidentiary hearing on the merits of
the Health Care Financing Administration's (HCFA) March 4, 1996
determination that Arcadia was not in substantial compliance with
federal requirements for nursing homes participating in the
Medicare and Medicaid programs when it was surveyed on November
21, 1995 and January 18, 1996.
HCFA moved to dismiss Arcadia's hearing request 1/ on the basis
that, as Arcadia was apprised in a separate notice issued by
HCFA, no remedy was in fact imposed against Arcadia based on
those survey results. Even though HCFA had notified Arcadia of
the imposition of remedies by letter dated March 4, 1996, HCFA
later changed its mind and informed Arcadia by letter dated April
1, 1996, that HCFA was not imposing any remedy against Arcadia.
Citing 42 C.F.R. 498.3(b)(12), HCFA argued that, as a matter of
law, Arcadia has no right to an administrative hearing because a
hearing to contest HCFA's findings of deficiencies is available
only if HCFA has actually taken at least one of the enforcement
actions specified by regulation. HCFA Reply, at 8 - 11.
In its opposition to HCFA's motion, Arcadia contended that HCFA's
findings of deficiencies will have prospective consequences for
the facility, such as impacting on the amount of future penalties
HCFA might impose. Arcadia contended also that there are current
consequences of HCFA's findings, such as forcing Arcadia to make
HCFA's findings of deficiencies available to its residents.
According to Arcadia: 1) a regulatory equivalent of a "hit and
run" has occurred (Arcadia Response, at 1); 2) HCFA is seeking to
"wash its hands" of the matter after the surveying agency has
"done wrong" (id. at 7); 3) the procedural due process rights of
Arcadia will be left "without a guardian" if HCFA's motion is
granted (id. at 9); 4) Arcadia has been subjected to
"administrative arrest" and "punishment" in having had to
undergo
surveys and take follow-up actions "to free itself of absurd
deficiencies" (id. at 9 - 10); and 5) Arcadia has been "buffeted
by the winds of . . . surveys without the shelter of a hearing"
(id. at 10). Arcadia asked that we proceed to a hearing on the
findings of deficiencies in order to protect against "injustice"
resulting from unjust and inadequate survey results (id. at 1)
and because, "[i]f not in the instant appeal, where else will
Arcadia Acres have a forum?" (id. at 9). 2/
DISCUSSION
I have analyzed the parties' arguments, legal authorities, and
supporting evidence under two issues:
a) whether HCFA's March 4, 1996 notice letter, if
considered alone, contained a determination which
entitled Arcadia to a hearing before me;
and
b) whether Arcadia has a right to a hearing based on
HCFA's March 4, 1996 notice letter, notwithstanding
HCFA's subsequent decision contained in its April 1,
1996 notice letter that no remedy would be imposed
against Arcadia.
Having concluded that the first issue must be answered in the
affirmative and the second issue must be answered in the
negative, I grant HCFA's Motion.
I agree with HCFA that a health care provider's right to a
hearing arises solely under HCFA's regulations. I find that the
regulation codified at 42 C.F.R. 498.3(b)(12) is dispositive of
the issues before me. As relevant to the facts of this case, the
regulation makes applicable the administrative hearing procedures
only if HCFA has made an initial determination on the following
matters:
the finding of noncompliance leading to the
imposition of enforcement actions specified in
488.406 of this chapter....
42 C.F.R. 498.3(b)(12).
Arcadia is not entitled to a hearing in this case because,
according to the April 1, 1996 notice letter, HCFA has decided to
impose no enforcement action specified in 42 C.F.R. 488.406.
The regulation at 42 C.F.R. 498.3(b)(12) states in unambiguous
terms that, absent a finding of noncompliance leading to the
imposition of enforcement actions, HCFA's determination is not
subject to review under 42 C.F.R. Part 498.
Even if the meaning of "leading to" might appear ambiguous if
read in isolation, the Secretary's comments in promulgating 42
C.F.R. 498.3(b)(12) give clear meaning to the phrase "leading
to." Specifically, in response to public comments on the
enforcement regulations as proposed, the Secretary explicitly
disavowed the intent to make every finding of noncompliance
appealable:
Comment: Several commenters wanted a right to appeal all
deficiencies even if no remedy was imposed.
Response: We are not accepting this suggestion because if
no remedy is imposed the provider has suffered no injury
calling for an appeal....
59 Fed. Reg. 56158 (1994) (emphasis added).
Moreover, the limitation on hearing rights imposed by 42 C.F.R.
498.3(b)(12) is entirely consistent with the prohibition against
an appeal of "the finding that a provider . . . determined to be
in compliance with the conditions of participation . . . has
deficiencies." 42 C.F.R. 498.3(d)(1). 3/ There is no dispute
that Arcadia has continued to participate in the Medicare and
Medicaid programs as a provider of health care services
notwithstanding HCFA's finding of deficiencies. By letter dated
April 1, 1996, HCFA notified Arcadia of the determination that
Arcadia had come into substantial compliance with program
requirements as of February 27, 1996. HCFA Ex. 5.
I am issuing the following findings of fact and conclusions of
law to explain my reasoning that, even though HCFA's March 4,
1996 notice letter conferred hearing rights upon Arcadia to
challenge the noncompliance determined by HCFA, Arcadia's hearing
rights were extinguished by HCFA's subsequent issuance of its
April 1, 1996 notice letter. Moreover, as I find below, Arcadia
has been accorded all rights and process to which it was due
under the governing regulations.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Findings of background facts and procedural history
1. Based on a survey completed on November 21, 1995,
the Ohio Department of Health (ODH) notified Arcadia,
by letter dated December 12, 1995, of the following
information:
a. that Arcadia was not in
substantial compliance with
federal requirements for nursing
homes participating in the
Medicare and Medicaid programs;
b. that Arcadia must submit to ODH a plan
of correction addressing each cited
deficiency;
c. that ODH would recommend to HCFA
that the remedy of denial of payment
for new admissions (DPNA) be imposed
effective January 30, 1996, if Arcadia
failed to correct its deficiencies and
come into substantial compliance with
federal requirements by January 10,
1996; and
d. that Arcadia had the right to challenge
the cited deficiencies through the
"informal dispute resolution process" (IDR)
under 42 C.F.R. 488.331 and rule 3701-63-
02 of the Ohio Administrative Code.
HCFA Ex. 1.
2. By letter dated January 29, 1996, ODH notified
Arcadia of the following information:
a. that despite Arcadia's allegation of
substantial compliance by January 9, 1996,
a survey conducted on January 18, 1996,
found that Arcadia was not in substantial
compliance with certification requirements;
b. that Arcadia must submit to ODH a plan
of correction addressing each cited
deficiency;
c. that ODH was recommending to HCFA that
the remedies of DPNA and termination of
Arcadia's Medicare and Medicaid provider
agreements be imposed by HCFA, effective
February 21, 1996 and May 21, 1996,
respectively; and
d. that Arcadia had the right to challenge
any newly cited deficiencies through the
IDR process provided by 42 C.F.R. 488.331
and rule 371-63-02 of the Ohio
Administrative Code.
HCFA Ex. 2.
3. By letter dated March 4, 1996, HCFA notified
Arcadia of the following information:
a. that, in accordance with ODH's
recommendation, HCFA was imposing the
remedy of DPNA under the Medicare and
Medicaid programs, effective March 24, 1996
and continuing until either Arcadia was
determined to be in substantial compliance
or its provider agreement was terminated;
b. that, if Arcadia did not attain
substantial compliance by May 21, 1996,
HCFA would terminate Arcadia's
participation in the Medicare and Medicaid
programs;
c. that HCFA was in receipt of Arcadia's
allegation of compliance and plan of
correction and found these to be
acceptable;
d. that HCFA had asked ODH to conduct a
revisit survey in order to verify Arcadia's
compliance;
e. that, if Arcadia disagreed with HCFA's
determination, Arcadia had a right to
request a hearing before an administrative
law judge (ALJ) of the Departmental Appeals
Board (DAB) within 60 days of receiving
HCFA's March 4, 1996 notice letter; and
f. that the procedures governing Arcadia's
hearing rights are set out at 42 C.F.R.
498.40 et seq.
HCFA Ex. 3.
4. On March 15, 1996, prior to the effective dates of
the remedies identified in HCFA's March 4, 1996 notice
letter (HCFA Ex. 3, Finding 3), Arcadia requested a
hearing before an ALJ of the DAB for the following
reasons:
a. to dispute the deficiencies found
during the surveys conducted on November
21, 1995 and January 18, 1996; and
b. to request "an evidentiary hearing on
the remedies imposed."
HCFA Ex. 4, at 2.
5. By letter dated April 1, 1996, HCFA notified
Arcadia that, as a result of the revisit survey
conducted by ODH on February 27, 1996:
a. Arcadia was found to be in substantial
compliance with program participation
requirements; and
b. HCFA had determined that the remedies
of DPNA and termination of Arcadia's
participation agreement would not be
imposed.
HCFA Ex. 5.
6. Arcadia refused to withdraw its hearing request
after receiving HCFA's April 1, 1996 notice letter.
See, e.g., Order and Schedule for Filing Briefs and
Documentary Evidence (April 25, 1996).
Findings and conclusions on the issue of whether HCFA's March 4,
1996 notice letter, if considered alone, contained an initial
determination which entitled Arcadia to a hearing before me
7. The issues raised by Arcadia's request for hearing
are limited to those matters contained in HCFA's March
4, 1996 notice letter. Findings 4, 5.
8. Arcadia's hearing request was timely filed with
respect to HCFA's March 4, 1996 notice letter. See 42
C.F.R. 498.40(a).
9. Arcadia is a nursing home voluntarily participating
in the Medicare and Medicaid programs. See HCFA Ex. 3,
4.
10. In exchange for the right to receive Medicare and
Medicaid payments for providing health care services
under the Medicare and Medicaid programs, Arcadia
subjected itself to the relevant obligations and
limitations enumerated in regulations promulgated by
the Secretary of the Department of Health and Human
Services (Secretary). Finding 9; see generally, 42
C.F.R. 498.1 ("Statutory basis").
11. Part 498 of volume 42 of the Code of Federal
Regulations specifies the appeals procedures for
determinations that affect providers participation in
the Medicare and Medicaid programs. 42 C.F.R. Part
498.
12. Unless a disputed administrative action taken by
HCFA is among those listed in 42 C.F.R. 498.3(b), the
action cannot be considered an "initial determination"
by HCFA and is not subject to the appeals process of 42
C.F.R. Part 498. 42 C.F.R. 498.3(d).
13. As relevant to the facts of this case, an "initial
determination" is defined as a finding by HCFA of
"noncompliance leading to the imposition of enforcement
actions specified in 42 C.F.R. 488.406 of this
chapter . . . ." 42 C.F.R. 498.3(b)(12); Findings 3,
4.
14. The other regulatory definitions of "initial
determination" contained in 42 C.F.R. 498.3 are not
relevant to the facts of this case. See Findings 3 -
5, 7.
15. DPNA and termination of a provider agreement are
among the remedies listed in 42 C.F.R. 488.406. 42
C.F.R. 488.406(a).
16. The procedural rights accorded by 42 C.F.R.
498.3(b)(12) are consistent with the regulation
codified at 42 C.F.R. 498.5(b), which specifies also
that any provider dissatisfied with an "initial
determination" to terminate its provider agreement is
entitled to a hearing before an ALJ. Findings 12, 13,
15.
17. When imposing a remedy, HCFA is required to notify the
provider of: 1) the nature of noncompliance; 2) which
remedy is imposed; 3) the effective date of the remedy; and
4) the provider's right to appeal the determination leading
to the remedy. 42 C.F.R. 488.402(f); see 42 C.F.R.
488.456(c)(2) (before terminating a provider agreement based
on deficiencies which do not pose immediate jeopardy to
patients, HCFA must provide notice to the facility at least
15 calendar days before the effective date of termination).
18. HCFA's March 4, 1996 notice letter, entitled
"Notice of Imposition of Remedies," conforms to the
requirements for notice HCFA must provide when it is
imposing remedies against a provider. HCFA Ex. 3;
Findings 3, 17.
19. On March 4, 1996, HCFA imposed remedies against
Arcadia as a result of the noncompliance found during
the November 21, 1995 and January 18, 1996 surveys.
Findings 3, 18.
20. HCFA's March 4, 1996 notice letter contained an
appealable initial determination within the meaning of
42 C.F.R. 498.3(b)(12). Findings 3, 11 - 19.
21. Based only on the contents of HCFA's March 4, 1996
notice letter, Arcadia had the right to file its March
15, 1996 hearing request contesting the findings of
noncompliance that resulted in HCFA's imposition of
remedies. Findings 3, 11 - 20; 42 C.F.R. 498.40(a).
22. A provider may not appeal HCFA's determination as
to which remedy to impose. 42 C.F.R. 498.3(b)(12),
488.408(g)(2).
23. Arcadia did not have the right to a hearing to contest
the remedies imposed by HCFA in the March 4, 1996 notice
letter. HCFA Ex. 4 at 2; Findings 4, 22.
Findings and conclusions on the issue of whether Arcadia has a
right to a hearing based on HCFA's March 4, 1996 notice letter,
notwithstanding HCFA's subsequent decision and April 1, 1996
notice letter that no remedy would be imposed against Arcadia
24. Arcadia has not disputed HCFA's conclusion that,
in issuing its March 4, 1996 "Notice of Imposition of
Remedies," HCFA was unaware of ODH's February 27, 1996
revisit and finding of substantial compliance. HCFA
Reply, at 7.
25. Because ODH had conducted a revisit survey on
February 27, 1996, and found Arcadia in substantial
compliance, HCFA notified Arcadia by notice letter
dated April 1, 1996, that HCFA had rescinded the
remedies previously imposed against Arcadia. HCFA Ex.
5.
26. Arcadia was in substantial compliance prior to the
dates on which the remedies of DPNA and termination
were scheduled to take effect (March 24, 1996 and May
21, 1996, respectively). Findings 3, 25.
27. According to HCFA's March 4, 1996 notice letter,
termination of Arcadia's provider agreement would not
take effect if Arcadia achieved substantial compliance
by May 21, 1996. HCFA Ex. 3, at 2.
28. According to HCFA's March 4, 1996 notice letter,
DPNA (if it took effect on March 24, 1996, as
scheduled) would end either when Arcadia was found to
have achieved substantial compliance or when its
provider agreement had been terminated. HCFA Ex. 3, at
2.
29. Whether or not HCFA provided Arcadia with formal
notice that DPNA and termination would not be imposed,
the February 27, 1996 determination that Arcadia had
achieved substantial compliance satisfied the
requirement specified by HCFA for Arcadia to avoid the
imposition of the remedies. Findings 24 - 28.
30. There is no evidence or allegation that HCFA
actually implemented any remedy against Arcadia prior
to notifying Arcadia by letter dated April 1, 1996,
that the remedies had been rescinded.
31. HCFA's April 1, 1996 notice letter corrected the
consequences of HCFA's oversight with respect to the
results of the February 27, 1996 survey, and it
formally confirmed for Arcadia the fact that neither
the DPNA nor the termination remedy would go into
effect under the conditions specified in HCFA's March
4, 1996 notice letter. Findings 24 - 30.
32. In response to public comments regarding the
regulations governing this case, the Secretary specifically
rejected the suggestion that there should be a right to
appeal all findings of deficiencies even if no remedy is
imposed because, "[i]f no remedy is imposed, the provider
has suffered no injury calling for an appeal." 59 Fed. Reg.
56158 (1994).
33. The language of 42 C.F.R. 498.3(b)(12), which
requires a "finding of noncompliance leading to the
imposition of enforcement action specified in 488.406
of this chapter . . .," does not mean that Arcadia may
receive an evidentiary hearing on HCFA's findings of
deficiencies after HCFA has decided to rescind all
remedies without having ever implemented them. Finding
32.
34. The appeals procedures of 42 C.F.R. Part 498 do
not apply to any finding by HCFA that a provider is in
compliance with the conditions of participation but has
deficiencies. 42 C.F.R. 498.3(d)(1).
35. 42 C.F.R. 498.4 states that a nursing facility is
"subject" to the appeals process of 42 C.F.R. Part 498 if it
has in effect an agreement to participate in both Medicare
and Medicaid and is a non State-operated nursing facility
that is subject to compliance action as a result of HCFA's
review of the State's survey finding.
36. 42 C.F.R. 498.4 does not mean that Arcadia may
receive a hearing on HCFA's findings of deficiencies after
HCFA has decided to rescind all remedies without having ever
implemented them. Findings 32 - 34.
37. HCFA has the authority to reopen and revise an
initial determination on its own initiative, within 12
months after the notice date of the initial
determination. 42 C.F.R. 498.30, 498.32.
38. An initial determination issued by HCFA is not
binding if it has been revised in accordance with 42
C.F.R. 498.32. 42 C.F.R. 498.20(b)(3).
39. The regulations contain no criteria to which
HCFA's notices of reopenings and revisions of initial
determinations must conform.
40. HCFA's April 1, 1996 notice letter indicates that
HCFA had reassessed its initial determination on its
own initiative and had decided to rescind the remedies
specified in its March 4, 1996 notice letter. Findings
5, 31.
41. Whether or not a notice of reopening and revising
a determination must meet specific requirements of
form, HCFA's April 1, 1996 notice letter was issued
within 12 months of its March 4, 1996 initial
determination and served the same purpose as a notice
of reopening and revising a determination. Findings 3,
5, 37, 39, 40.
42. The entirety of HCFA's March 4, 1996 notice letter
had no legal force or effect after HCFA issued its
April 1, 1996 notice letter. Findings 24 - 29, 37 -
40.
43. Read in combination, HCFA's notice letters of
March 4, 1996 and April 1, 1996, mean that while HCFA
has made findings of noncompliance based on the surveys
of November 21, 1995 and January 18, 1996, HCFA has not
imposed against Arcadia any remedy within the meaning
of 42 C.F.R. 488.406. HCFA Ex. 3, 5; Findings 3, 5,
33 - 36, 42.
44. As of April 1, 1996, there was no determination issued
by HCFA to Arcadia that was subject to the hearing rights
specified under 42 C.F.R. Part 498. 42 C.F.R.
498.3(b)(12); Findings 31 - 43.
45. After HCFA issued its April 1, 1996 notice letter,
Arcadia was without a right to a hearing to contest the
noncompliance found during the November 21, 1995 and
January 18, 1996 surveys. Findings 21, 44.
46. The possibility that HCFA might impose remedies
against Arcadia in the future, based on the results of
the November 21, 1995 and January 18, 1996 surveys, is
speculative at best and outside any definition of an
initial determination entitling Arcadia to a hearing
under 42 C.F.R. Part 498. 42 C.F.R. 498.3.
47. Neither the current nor the potential prospective
harm alleged by Arcadia based on the findings of
noncompliance entitles Arcadia to a hearing under the
regulations. See Arcadia Response, 1 - 12; 42 C.F.R.
488.406, 498.3.
48. Dismissal of Arcadia's hearing request in its
entirety is appropriate under 42 C.F.R. 498.70(b),
due to the absence of Arcadia's right to a hearing on
any of the issues raised in its hearing request.
Findings 4, 22, 23, 45 - 47.
49. Arcadia has been accorded all rights and process
due it under the regulations. Findings 1 - 48.
CONCLUSION
For the foregoing reasons, I grant HCFA's Motion to Dismiss.
This case, which is based on Arcadia's March 15, 1996 hearing
request, is hereby DISMISSED.
Mimi Hwang Leahy
Administrative Law Judge
1. The parties filed their submissions in accordance with the
schedule I established. Order and Schedule for Filing Briefs and
Documentary Evidence (April 25, 1996). Herein, I will refer to
HCFA's Motion to Dismiss as "HCFA Motion," to Arcadia's
Memorandum in Opposition to Respondent's Motion to Dismiss as
"Arcadia Response," and to HCFA's Reply to Petitioner's
Memorandum in Opposition to HCFA's Motion to Dismiss as "HCFA
Reply."
I have accepted into the record all of the supporting evidence
submitted by each party for the limited purpose of ruling on
HCFA's Motion. However, I have re-marked the exhibits to conform
to the requirements referenced in my Order of April 25, 1996.
Therefore, I have redesignated what was previously marked by
Arcadia as its Exhibits A through E as Arcadia's Exhibits (Ex.) 1
through 5. I have redesignated what was previously marked by
HCFA as its Attachments I through V as HCFA Ex. 1 through 5.
2. Under the facts of this case, I do not find it necessary
to decide the hypothetical question of whether Arcadia will
become entitled to a hearing under the regulations on the issue
of its noncompliance if, in the future, remedies are actually
imposed by HCFA in reliance upon the prior unadjudicated findings
of noncompliance issued by HCFA. However, I note that my legal
interpretations applicable to the present facts would permit
Arcadia to obtain a hearing in this forum on the merits of any
past unadjudicated findings of noncompliance if and when HCFA
relies on them in the future to impose specified remedies against
Arcadia.
3. 42 C.F.R. 498.3(d) lists examples of those
administrative actions which are not subject to the appeals
procedures of 42 C.F.R. Part 498.