Ruth Taylor Institute, DAB CR430 (1996)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division


In the Case of:

Ruth Taylor Institute,

Petitioner,

- v. -

Health Care Financing Administration.

DATE: August 21, 1996
Docket No. C-96-100
Decision No. CR430


DECISION

I decide that Petitioner does not have a right to a
hearing concerning HCFA's determinations that Petitioner
failed to comply substantially with Medicare
participation requirements.

I. Background

Petitioner is a skilled nursing facility (SNF) and a
participating provider in Medicare. The conditions for
participation in Medicare by SNFs are set forth in
regulations contained in 42 C.F.R. Part 483. As an SNF,
Petitioner is subject to the survey, certification, and
remedies provisions of 42 C.F.R. Part 488. Petitioner's
right to a hearing concerning an adverse determination by
HCFA, made pursuant to 42 C.F.R. Parts 483 and 488, is
established by 42 C.F.R. Part 498.

On December 9, 1995, Petitioner requested a hearing
concerning determinations that HCFA made on August 23,
1995 and on October 11, 1995, that Petitioner was not
complying substantially with Medicare participation
requirements. The case was assigned to me for a hearing
and a decision. At a prehearing conference which I
conducted by telephone, I raised the issue of whether
Petitioner had a right to a hearing. The parties agreed
that the issue of whether Petitioner had a right to a
hearing could be heard and decided without the taking of
in-person testimony. The parties submitted briefs, reply
briefs, and exhibits. 1/ I base my decision in this
case on the exhibits submitted by the parties, the
governing law, and the parties' arguments.


II. Issues, findings of fact and conclusions of law

The issues in this case are whether Petitioner has a
right to a hearing concerning:

1. HCFA's August 23, 1995 determination; and

2. HCFA's October 11, 1995 determination.

I base my decision on the following findings of fact and
conclusions of law (Findings). I discuss my Findings in
detail, below.

1. On August 23, 1995, HCFA notified Petitioner
that HCFA had determined that Petitioner was not
complying substantially with Medicare participation
requirements.

2. In the August 23, 1995 determination, HCFA told
Petitioner that it must submit a plan of correction
to correct the deficiencies that were identified by
HCFA.

3. The plan of correction that Petitioner was told
to submit is not a directed plan of correction
within the meaning of relevant regulations.

4. On October 11, 1995, HCFA notified Petitioner
that HCFA had determined that, although Petitioner
had corrected some of the deficiencies identified by
HCFA on August 23, 1995, Petitioner continued not to
be complying substantially with Medicare
participation requirements.

5. In the October 11, 1995 determination, HCFA told
Petitioner that HCFA would impose a remedy
consisting of denial of payment for new admissions.

6. HCFA did not impose the remedy of denial of
payment for new admissions, because, prior to the
date that the remedy was to be implemented, HCFA
determined that Petitioner had attained substantial
compliance with Medicare participation requirements.

7. HCFA did not impose a remedy against Petitioner,
either as a consequence of HCFA's August 23, 1995
determination, or as a consequence of HCFA's October
11, 1995 determination.

8. Petitioner is not entitled to a hearing.

9. HCFA may not give a provider a right to a
hearing where the provider has no right to a hearing
under applicable regulations.

10. HCFA's argument that the case is moot is
irrelevant.


III. Discussion

A. The facts (Findings 1, 2, 4 - 6)

On August 11, 1995, the State of New York Department of
Health (Department of Health) surveyed Petitioner on
behalf of HCFA. P. Ex. 1. On August 23, 1995, HCFA
advised Petitioner that the Department of Health had
found Petitioner not to be complying substantially with
Medicare participation requirements. Id. at 1. HCFA
advised Petitioner further that the Department of Health
had found the deficiencies to be so severe as to
constitute immediate jeopardy to the health and safety of
residents at Petitioner's facility. Id. HCFA told
Petitioner that it concurred with the findings of the
Department of Health. Id. at 3.

In the August 23, 1995 notice, HCFA told Petitioner that
Petitioner must submit a plan of correction to the
Department of Health. P. Ex. 1 at 1 - 2. HCFA
identified four specific elements that Petitioner had to


address in the corrective action plan. Id. These
consisted of the following:

1. The corrective action that Petitioner would
implement for those residents found to have
been affected by Petitioner's deficiencies;

2. How Petitioner would identify other
residents having the potential to be affected
by Petitioner's deficiencies, and the
corrective action that Petitioner would take to
address these potential consequences;

3. The corrective actions that Petitioner
would implement to assure that deficiencies did
not recur; and

4. How Petitioner would monitor its corrective
action to assure that deficiencies did not
recur.

Id. HCFA told Petitioner that if, by September 3, 1995,
Petitioner did not resolve the deficiencies causing
immediate jeopardy to residents, then HCFA would
terminate Petitioner's participation in Medicare. Id. at
3.

In the August 23, 1995 notice, HCFA advised Petitioner
that, if it disagreed with HCFA's determination,
Petitioner could request a hearing before an
administrative law judge. Id. at 2. Petitioner was told
that it must request the hearing within 60 days from its
receipt of the August 23, 1995 notice letter. Id.
Petitioner was advised also that it could question the
findings of deficiencies through an informal dispute
resolution process. Id.

Petitioner submitted a plan of correction which addressed
the deficiencies that were identified in the August 11,
1995 notice. HCFA Ex. 1. Petitioner opted also to
engage in the informal dispute resolution process in
order to challenge the findings of deficiencies. See P.
Ex. 3.

On August 30, 1995, the Department of Health conducted a
resurvey of Petitioner. P. Ex. 4. On October 11, 1995,
HCFA advised Petitioner that the Department of Health had
found that Petitioner had corrected its deficiencies to
the extent that there no longer existed deficiencies that
posed immediate jeopardy to the health and safety of
residents. Id. at 1. HCFA advised Petitioner
additionally that the Department of Health had found that
Petitioner continued not to be complying substantially
with Medicare participation requirements. Id. HCFA
advised Petitioner that it concurred with the Department
of Health's findings. Id. at 2.

In the October 11, 1995 notice, HCFA advised Petitioner
that it would impose a remedy against Petitioner,
consisting of denial of payment for new admissions. Id.
The implementation date for this remedy was to be
November 9, 1995. Id.

Additionally, HCFA advised Petitioner that, inasmuch as
Petitioner's deficiencies included providing substandard
quality of care to residents, it would be necessary to
send a notice of the finding of substandard care to each
attending physician of each resident to whom this finding
applied. Id. at 1. HCFA told Petitioner also that, on
October 25, 1995, HCFA would publish in a newspaper
notice of its determination to deny Petitioner payment
for new admissions. Id. at 2.

In the October 11, 1995 notice, HCFA advised Petitioner
that, if Petitioner disagreed with the determination
stated in the notice, Petitioner had a right to request a
hearing before an administrative law judge. Id. at 2 -
3. In a letter to Petitioner dated October 20, 1995,
HCFA restated that Petitioner could request a hearing
from the determination announced in the October 11, 1995
notice. P. Ex. 5. This letter was in response to a
letter from Petitioner's attorney, in which Petitioner's
attorney recited that HCFA had agreed that the October
11, 1995 determination superseded the August 23, 1995
determination. P. Ex. 15. In the October 20, 1995
letter, HCFA told Petitioner additionally that the
October 11, 1995 notice superseded the information that
HCFA had provided to Petitioner in its August 23, 1995
notice. P. Ex. 5; see P. Ex. 1.

HCFA did not implement the remedy of denial of payment
for new admissions. On October 24, 1995, the Department
of Health conducted a resurvey of Petitioner. HCFA Ex.
4; P. Ex. 12. On November 7, 1995, the Department of
Health advised Petitioner that it had determined that
Petitioner was in substantial compliance with Medicare
participation requirements. HCFA Ex. 4 at 1. The
Department of Health advised Petitioner that it would
notify HCFA that Petitioner had achieved substantial
compliance with participation requirements. Id. The
Department of Health told Petitioner, additionally, that
it would withdraw any recommendations that it had made
previously to HCFA that HCFA impose a remedy against
Petitioner. Id.

The record contains no communication from HCFA to
Petitioner in which HCFA states that it would not be
imposing the remedy of denial of payment for new
admissions. It is evident, however, that HCFA did not
impose this remedy against Petitioner.

There is no evidence of record to establish whether, on
October 25, 1995, or on any other date, HCFA published in
a newspaper a notice of its determination that Petitioner
was not substantially complying with Medicare
participation requirements. Nor is there evidence of
record to establish whether HCFA or the Department of
Health ever sent notices to individual physicians that
residents who were the patients of these physicians were
receiving substandard care from Petitioner. For purposes
of this decision, however, I am assuming that HCFA may
have taken both of these actions.

Petitioner avers that, as an additional consequence of
HCFA's determination that Petitioner was not complying
substantially with Medicare participation requirements,
its nurse aide training program will be suspended.
Petitioner's Brief (P. Br.) at (unnumbered page) 9.
Also, according to Petitioner, a record of HCFA's finding
of noncompliance will be retained for up to four years.
Id.

The record does not contain evidence which proves that
these averred additional consequences will occur. On the
other hand, HCFA has not denied that these asserted
additional consequences will occur. For purposes of this
decision, therefore, I am concluding that the
consequences of HCFA's finding of deficiencies averred by
Petitioner, consisting of maintenance by HCFA of a record
of its findings of Petitioner's failure to comply with
participation requirements, and suspension of
Petitioner's nurse aide training program, may occur.

B. Whether Petitioner has a right to a hearing
(Findings 3, 7, 8)

At issue in this case are two determinations by HCFA that
Petitioner was not complying substantially with Medicare
participation requirements. HCFA communicated its first
determination to Petitioner on August 23, 1995. P. Ex.
1. HCFA communicated its second determination to
Petitioner on October 11, 1995. P. Ex. 4. In the notice
of each determination, HCFA announced that it intended to
impose a remedy against Petitioner. Each of the notices
advised Petitioner that it had a right to a hearing
concerning the determination announced in the notice.

HCFA now argues that Petitioner is not entitled to a
hearing concerning either determination. According to
HCFA, no remedy was ever imposed against Petitioner.
HCFA asserts that Petitioner has no right to a hearing
where HCFA determines Petitioner to be deficient in
complying with Medicare participation requirements, but
where HCFA does not impose a remedy against Petitioner.
Furthermore, according to HCFA, the issues which might be
heard and decided in this case are moot, inasmuch as
Petitioner is now complying substantially with Medicare
participation requirements and no remedy was imposed
against Petitioner.

Petitioner argues that each determination by HCFA
included the imposition of a remedy. Petitioner argues
additionally that the issues raised by these
determinations are not moot.

This case raises issues that coincide with those I heard
and decided in Fort Tryon Nursing Home, DAB CR425 (1996).
In the Fort Tryon case, the provider, an SNF, made a
hearing request concerning a determination by HCFA that
the provider was not complying substantially with
Medicare participation requirements. In the notice of
its determination, HCFA told the provider that HCFA was
going to impose remedies against it, consisting of denial
of payment for new admissions and termination of that
provider's participation in Medicare. Prior to the dates
that the remedies were to go into effect, the provider
satisfied HCFA that it had attained substantial
compliance with Medicare participation requirements.
Based on that, HCFA imposed no remedies against the
provider.

In Fort Tryon, I held that an SNF's hearing rights
concerning a determination made by HCFA are defined by
two regulations. These regulations are 42 C.F.R. §
488.408(g)(1), and 42 C.F.R. § 498.3(b)(12). The
language of the two regulations is similar, but not
identical. 2/ The Fort Tryon decision reconciles the
language differences between the two regulations and
decides what the regulations mean.

I held that the two regulations have the same meaning.
Fort Tryon, DAB CR425, at 5. Under either 42 C.F.R. §
488.408(g)(1) or § 498.3(b)(12), a provider may request a
hearing concerning a determination by HCFA that the
provider is not complying substantially with Medicare
participation requirements, only where HCFA actually
imposes a remedy against that provider. Id. The word
'remedy' is defined in 42 C.F.R. § 488.406. An action
taken by HCFA against a provider is a 'remedy' if that
action constitutes one of the remedies enumerated under
42 C.F.R. § 488.406. The provider does not have hearing
rights from an action by HCFA unless the action is
defined to be a remedy under 42 C.F.R. § 488.406.
Furthermore, a provider does not have a right to a
hearing from a threat by HCFA to impose a remedy as
defined in 42 C.F.R. § 488.406, if the remedy is not
implemented by HCFA. Id. at 5 - 6.

In Fort Tryon, there was no dispute that the remedies
proposed by HCFA, but never imposed, denial of payment
for new admissions and termination, would, if
implemented, be remedies within the meaning of 42 C.F.R.
§ 488.406. My decision in Fort Tryon that the provider
had no right to a hearing was based on the fact that the
proposed remedies were not imposed.

Petitioner does not dispute that the remedy that HCFA
proposed to implement in its October 11, 1995 notice,
denial of payment for new admissions, was not
implemented. Nor does Petitioner appear to be arguing
that, in the absence of a remedy, it would have a right
to a hearing. To that extent, then, Petitioner seems to
agree with the holding in Fort Tryon. Instead,
Petitioner argues that HCFA imposed remedies against
Petitioner, thereby giving Petitioner a right to a
hearing concerning HCFA's determinations.
According to Petitioner, HCFA imposed the remedy of a
directed plan of correction with its August 23, 1995
determination. And, according to Petitioner, the actions
which may have been taken by HCFA pursuant to the October
11, 1995 determination, consisting of publication of
HCFA's findings of deficiencies, notification of
individual providers by HCFA of findings of deficiencies,
maintenance of a record of HCFA's findings that
Petitioner was deficient, and suspension of Petitioner's
nurse aide training program, are remedies.

I do not find that HCFA imposed any remedies, as
described in 42 C.F.R. § 488.406, against Petitioner,
either as a consequence of the August 23, 1995
determination, or as a consequence of the October 11,
1995 determination. Therefore, Petitioner has no right
to a hearing.

1. The August 23, 1995 notice and
determination

I do not find that HCFA imposed any remedies against
Petitioner as a consequence of its August 23, 1995
determination. In the notice of that determination, HCFA
threatened to impose the remedy of termination of
Petitioner's participation in Medicare. P. Ex. 1 at 3.
However, HCFA never imposed that remedy. In that same
notice, HCFA told Petitioner that Petitioner must develop
and submit a plan of correction which addressed specific
concerns identified by HCFA. Id. at 1 - 2. Petitioner
characterizes the plan that it developed in response to
the notice as being a directed plan of correction, which
is one of the remedies identified in 42 C.F.R. § 488.406.
I do not find that the plan of correction was a directed
plan of correction as is described in relevant
regulations.

One of the remedies described in 42 C.F.R. § 488.406 is a
directed plan of correction. 42 C.F.R. § 488.406(a)(7).
The phrase 'directed plan of correction' is not defined
in 42 C.F.R. § 488.406. It is described by another
regulation, 42 C.F.R. § 488.424. Under that regulation:

HCFA, the State survey agency, or the temporary
manager (with HCFA or State approval) may
develop a plan of correction and HCFA, the
State, or the temporary manager require a
facility to take action within specified time-
frames. 3/

It is apparent from 42 C.F.R. § 488.424 that a directed
plan of correction is a plan of correction in which the
specifics are first developed by HCFA or by an agent of
HCFA. HCFA then directs the facility to implement the
plan. Development of the specifics of the plan by HCFA
or its agents distinguishes a directed plan of correction
from a plan of correction that is developed by a facility
and is approved by HCFA. A plan of correction is not a
directed plan of correction within the meaning of the
regulations -- even assuming that HCFA tells a facility
that the facility must develop an acceptable plan of
correction as a precondition to avoiding the imposition
of a remedy such as termination -- where HCFA or its
agents do not develop the specifics of the plan.

Indeed, the regulations distinguish between a directed
plan of correction that is developed by HCFA or its
agents, which is a remedy, and a plan of correction that
may be developed by a provider to address substantial
deficiencies that are found by HCFA. A provider which is
found to be substantially deficient must submit for
approval by HCFA a plan of correction that the provider
develops, regardless which remedy is implemented by HCFA.
42 C.F.R. § 488.402(d)(1). Where a provider submits
such a plan, the plan of correction is not a directed
plan of correction, it is an action by the provider that
augments any remedy that might be imposed by HCFA.

In the August 23, 1995 notice, HCFA told Petitioner to
submit a plan of correction to the Department of Health
within 10 days of Petitioner's receipt of the form which
specified the deficiencies identified by the Department
of Health. P. Ex. 1 at 1. Petitioner was told by HCFA
that the plan must describe specified remedial actions
which would be taken by Petitioner to address the
deficiencies identified by the Department of Health. Id.
at 1 - 2.

The plan which Petitioner submitted in response to this
instruction is not a directed plan of correction. HCFA
Ex. 1, P. Ex. 14. Although HCFA told Petitioner that it
had to submit a plan, and told Petitioner also what items
must be addressed by the plan, HCFA did not tell
Petitioner specifically what the plan must say. Neither
HCFA nor the Department of Health developed the specifics
of the plan of correction. Petitioner developed the plan
that it submitted in response to HCFA's requirement,
including the specific elements of that plan. HCFA Ex.
1; P. Ex. 14.

During the course of the parties' briefing of this case,
I expressed a concern to the parties that, assuming the
plan that Petitioner developed in response to the August
23, 1995 notice from HCFA was a directed plan of
correction and, thus, a remedy within the meaning of 42
C.F.R. § 488.406, then Petitioner might nonetheless not
have a right to a hearing concerning the determination
contained in that notice. That is because Petitioner did
not request a hearing until December 9, 1995, more than
60 days after it received the August 23, 1995 notice. In
its reply brief, Petitioner argued that its request was
timely or that, alternatively, good cause existed for
Petitioner not making its request timely.

I do not decide the issues of whether Petitioner made a
timely request for a hearing from the August 23, 1995
notice, or whether it had good cause for not making a
request timely. It is unnecessary for me to do so,
because Petitioner had no right to a hearing concerning
the determination in the August 23, 1995 notice.

2. The October 11, 1995 notice and
determination

In its October 11, 1995 notice to Petitioner, HCFA
threatened that it would impose a denial of payment for
new admissions by Petitioner unless Petitioner complied
substantially with Medicare participation requirements.
P. Ex. 4 at 2. However, HCFA never imposed that remedy.
I do not find that HCFA imposed any other remedy as a
consequence of the October 11, 1995 notice.

The other actions which HCFA may take against Petitioner
-- publishing a notice of Petitioner's deficiencies,
notifying individual physicians of Petitioner's
deficiencies as they affected patients of those
physicians, maintenance of a record of HCFA's findings
that Petitioner was deficient, and suspension of
Petitioner's nurse aide training program -- are not
remedies described in 42 C.F.R. § 488.406. The fact that
HCFA may take these actions against Petitioner does not
give Petitioner any right to a hearing. Furthermore, 42
C.F.R. § 498.3(d)(11) specifies that the loss of nurse
aide training is not an initial determination by HCFA.
Thus, as to the loss of nurse aide training, the
regulation is explicit that it is not subject to
administrative review.

Petitioner argues also that, if at some date in the
future HCFA finds that Petitioner is again deficient, it
might impose a more stringent remedy against Petitioner
than it would otherwise impose. According to Petitioner,
HCFA could base its determination to impose a remedy
against Petitioner in the future not just on a future
finding of a deficiency, but on the findings which are at
issue here, as well. Because of this potential,
Petitioner argues that these deficiencies will lead to
the imposition of enforcement actions within the meaning
of the regulations. Therefore, according to Petitioner,
it would be a denial of due process for Petitioner not to
be given a hearing concerning the deficiencies that are
at issue here.

The provider in the Fort Tryon case made the same
assertion in that case. I concluded that, if HCFA were
ever to base a remedy on the deficiencies that were at
issue in Fort Tryon, then the provider would be entitled
to a hearing as to those deficiencies. Fort Tryon, DAB
CR425, at 7 - 8. I reach the same conclusion here. 4/

C. Whether HCFA may give a provider a right to a
hearing where the provider has no right to a hearing
under applicable regulations (Finding 9)

In both the August 23, 1995 notice and the October 11,
1995 notice, HCFA told Petitioner that it had a right to
a hearing concerning the determination that was announced
in the notice. In doing so, HCFA raises the question
whether it can confer on a provider a right to a hearing
where no right exists under applicable regulations. I
conclude that a provider's right to a hearing in any case
is defined by the applicable regulations. HCFA may not
confer on a provider a right to a hearing where that
right does not exist under the regulations.

HCFA did not intend to give Petitioner a right to a
hearing beyond whatever rights Petitioner had under the
regulations. It is evident from the context of the
hearing rights language in the August 23, 1995 and
October 11, 1995 notices, that the hearing right that
HCFA was advising Petitioner of in each notice was
predicated on the imposition by HCFA of the remedies that
were described in each notice. HCFA never imposed a
remedy.

However, even if HCFA had intended the notices to serve
as unconditional announcements to Petitioner of a right
to a hearing, the notices would not confer hearing rights
where none existed under the regulations. The
regulations are a statement by the Secretary of the
Department of Health and Human Services of the universe
of circumstances under which a provider has a right to a
hearing. HCFA has no authority to create hearing rights
beyond that which is explicitly stated in the
regulations.

In Fort Tryon, I observed that I and other administrative
law judges were receiving many requests for hearings in
cases involving HCFA that were either premature, or
where, in fact, no hearing rights existed. DAB CR425, at
9. The reason for that is the timing of the proposed
remedies announced in HCFA's notices to providers. Under
the regulations, a provider must request a hearing within
60 days from receipt of notice of an adverse
determination by HCFA. 42 C.F.R. § 498.40. However,
frequently, HCFA's notice to a provider announces HCFA's
intent to impose a remedy more than 60 days from the date
of the notice. In that situation, the provider has no
choice but to request a hearing before the date that the
remedy may be imposed.

D. Mootness (Finding 10)

HCFA contends, as it has in other cases, that
Petitioner's request for a hearing is moot, inasmuch as
HCFA imposed no remedy against Petitioner. I conclude
here, as I did in Fort Tryon, that it is unnecessary for
me to decide this issue, inasmuch as Petitioner has no
right to a hearing. Fort Tryon, DAB CR425, at 9.


IV. Conclusion

I conclude that Petitioner does not have a right to a
hearing. I dismiss Petitioner's request for a hearing.


________________________
Steven T. Kessel
Administrative Law
Judge


* * * Footnotes * * *

1. Petitioner submitted 13 exhibits with its
initial brief which it designated "Exhibit A" through
"Exhibit M." Petitioner submitted two additional
exhibits with its reply brief which it designated
"Exhibit N" and "Exhibit O." For purposes of uniformity,
I have redesignated these exhibits sequentially, as P.
Ex. 1 (which Petitioner submitted as "Exhibit A"),
through P. Ex. 15 (which Petitioner submitted as "Exhibit
O"). HCFA submitted four exhibits, designated as HCFA
Ex. 1 through HCFA Ex. 4. Neither party objected to my
admitting into evidence the exhibits that were offered by
the other party. I hereby admit into evidence P. Ex. 1 -
15 and HCFA Ex. 1 - 4.
2. Pursuant to 42 C.F.R. § 488.408, a
provider may request a hearing concerning "a
certification of noncompliance leading to an enforcement
remedy." Pursuant to 42 C.F.R. § 498.3(b)(12), an SNF
may request a hearing concerning "the finding of
noncompliance leading to the imposition of enforcement
actions specified in § 488.406 of this chapter, . . . ."
3. Under circumstances defined by the
regulations, HCFA or a State survey agency may appoint a
temporary manager of a facility. 42 C.F.R. §§
488.406(a)(1), 488.415. Those circumstances do not apply
here.
4. Petitioner argues that it will not be
entitled to contest the findings of deficiencies from the
1995 surveys if it is again found deficient in future
years. P. Br. at 8. Petitioner cites the State
Operations Manual (SOM), section 7320, which provides:

A hearing about the current finding of
substandard quality of care will not examine
the previous 2 survey cycles' findings of
substandard quality of care.

This provision does not alter my conclusion that
Petitioner would have a right to a hearing if, in the
future, HCFA imposes remedies based, in part, on
Petitioner's 1995 deficiencies. First of all, it is not
clear that HCFA would interpret the SOM provision to
deprive Petitioner of a right to a hearing under those
circumstances. However, if HCFA were to argue that
Petitioner would not have a right to a hearing, based on
this provision, I would reject that argument. The SOM is
an interpretive guideline issued by HCFA. It is not a
regulation, and it does not have the force and effect of
law. Therefore, if the provision were applied in
contravention of 42 C.F.R. §§ 488.408 and 498.3(b)(12), I
would give no force or effect to the SOM provision.