Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
CarePlex of Silver Spring,
Petitioner,
- v. -
Health Care Financing Administration.
Date: January 31, 1997
Docket No. C-96-324
Decision No. CR457
DECISION
I enter summary disposition in favor of the Health Care Financing
Administration (HCFA) and against Petitioner, CarePlex of Silver
Spring. I sustain HCFA's determination to impose a civil money
penalty against Petitioner of $750 a day, beginning on September
28, 1995 and ending on December 15, 1995, for a total amount of
$59,250.
I. Background
On March 14, 1996, HCFA notified Petitioner that HCFA concurred
with a recommendation from the Maryland Department of Health and
Mental Hygiene (Maryland State survey agency) to impose a civil
money penalty against Petitioner in the amount of $750 a day for
the period beginning September 28, 1995, and ending on December
15, 1995, for a total civil money penalty of $59,250. HCFA Ex.
11 at 1; see HCFA Ex. 4. 1/ HCFA advised Petitioner that the
penalty was based on findings made by the Maryland State survey
agency at a survey of Petitioner conducted on September 12 - 15,
18 - 22, and 25 - 28, 1995 (September 1995 survey). Id. HCFA
noted that, in that survey, the Maryland State survey agency had
found that Petitioner was not complying with federal requirements
governing its participation in Medicare and Medicaid programs.
Id.
Petitioner requested a hearing, and the case was assigned to me
for a hearing and a decision. On August 29, 1996, I held a
prehearing conference. At the conference, the parties agreed
that this case involved only a legal issue, that being whether,
as a matter of law, Petitioner could be held to be responsible
for the deficiencies that had been identified by the Maryland
State survey agency at the survey it conducted of Petitioner in
September 1995. Petitioner stated that, if it were found to be
responsible for the deficiencies, it would not contest either the
existence of the deficiencies that were identified by the
Maryland State survey agency or the amount of the civil money
penalty that HCFA had determined to impose. Prehearing Order,
September 11, 1996, Paragraph 2.
I established a schedule for simultaneous submissions by HCFA and
Petitioner of motions for disposition. I permitted the parties
to submit response briefs as well. The parties submitted their
briefs and proposed exhibits in compliance with my prehearing
order. I base my decision in this case on the undisputed
material facts, the law, and the parties' arguments.
II. Issue, findings of fact and conclusions of law
The issue in this case is whether, as a matter of law, Petitioner
may be held responsible for the deficiencies which the Maryland
State survey agency identified in its September 1995 survey of
Petitioner. More specifically, the issue is whether Petitioner
is responsible for a civil money penalty that HCFA determined to
impose based on the deficiencies identified by the Maryland State
survey agency at its September 1995 survey, in light of the fact
that Petitioner acquired the facility which was the subject of
the Maryland State survey agency's survey on September 11, 1995,
one day before the inception of the September 1995 survey.
In its brief, Petitioner asserts that there is an additional
issue. Petitioner asserts that it has not waived its right to
contest the amount of the civil money penalty that HCFA
determined to impose against Petitioner. Petitioner's Brief at
8, n.5. Therefore, according to Petitioner, it remains entitled
to a hearing as to the amount of the penalty, should I decide
that it is responsible for the penalty. As I discuss below, at
Part III.C. of this decision, Petitioner has waived its right to
contest the amount of the civil money penalty that HCFA
determined to impose.
I make the following findings of fact and conclusions of law
(Findings) in support of my decision that Petitioner is
responsible for the deficiencies that were identified by the
Maryland State survey agency in its September 1995 survey of
Petitioner. I discuss each of my Findings below, at Part III of
this decision.
1. On September 11, 1995, Petitioner acquired ownership of the
long-term care facility that is the subject of this case (the
facility).
2. The Maryland State survey agency surveyed the facility on
September 12 - 15, 18 - 22, and 25 - 28, 1995, and, based on that
survey, found the facility to be deficient in complying with
federal requirements governing participation of nursing
facilities in the Medicare and Medicaid programs.
3. On December 15, 1995, Petitioner attained substantial
compliance with federal participation requirements.
4. Petitioner did not cause or create the deficiencies that the
Maryland State survey agency identified at its September 1995
survey.
5. Petitioner did not correct the deficiencies that the Maryland
State survey agency identified at its September 1995 survey prior
to December 15, 1995.
6. The privilege which a Medicare provider agreement confers on
a provider to claim reimbursement from Medicare for items or
services provided to beneficiaries is conditioned on the
provider's compliance with applicable laws and participation
requirements.
7. Medicare participation requirements provide that, where there
is a change of ownership of a facility which participates in
Medicare, that facility's provider agreement will automatically
be assigned to the facility's new owner.
8. Under regulations which govern participation in Medicare, a
lease of a provider facility constitutes a change of ownership of
that facility.
9. An assigned provider agreement is subject to all of the
requirements which applied prior to assignment of the agreement,
including the requirement that the holder of the agreement comply
with all applicable Medicare and Medicaid participation
requirements.
10. Where a provider takes assignment of a provider agreement,
that provider becomes responsible for assuring that the facility
covered by the agreement complies with applicable Medicare
participation requirements and becomes responsible for any
remedies that HCFA may impose for failure to comply with
applicable Medicare and Medicaid participation requirements.
11. The responsibilities that a provider assumes when it takes
assignment of a provider agreement include the responsibility to
correct any deficiency that may predate the assignment, and to
comply with any remedy imposed by HCFA based on that deficiency.
12. Although Petitioner did not cause the deficiencies that the
Maryland State survey agency identified at its September 1995
survey, Petitioner is responsible for correcting the
deficiencies, and for complying with any remedy that might be
imposed by HCFA as a consequence of the deficiencies.
13. Petitioner is responsible for any civil money penalty that
is imposed against it, based on its noncompliance with federal
participation requirements between September 28, 1995 and
December 15, 1995.
14. Petitioner is responsible for a civil money penalty of $750
per day, beginning on September 28, 1995 and ending on December
15, 1995, for a total civil money penalty of $59,250.
15. Petitioner waived its right to contest the amount of the
civil money penalty imposed against it by HCFA.
III. Discussion
A. The undisputed material facts (Findings 1 - 5)
Effective November 10, 1989, Sylvan Manor Health Care Center was
certified by HCFA to participate in Medicare as a skilled nursing
facility. HCFA Ex. 1 at 1. The facility operated at 2700 Barker
Street, Silver Spring, Maryland, and did business as Sylvan Manor
Nursing Home. See HCFA Ex. 2 at 1 - 2. Effective September 11,
1995, the facility underwent a change of ownership. HCFA Ex. 2
at 3. On that date, the facility was leased from its previous
operator by Continuum Care Corporation of Maryland, Inc., d/b/a
Sylvan Manor Health Care Center (Continuum Care Corporation). On
December 4, 1995, Continuum Care Corporation changed its name to
Continuum Care Corporation of Maryland, Inc., d/b/a CarePlex of
Silver Spring. P. Ex. 1 at 1; HCFA Ex. 3. Continuum Care
Corporation of Maryland, Inc. is the Petitioner in this case.
The Maryland State survey agency conducted its September 1995
survey of Petitioner's facility on September 12 - 15, 18 - 22,
and 25 - 28, 1995. HCFA Ex. 4 at 1. The September 1995 survey
thus began on the day after Petitioner acquired the facility. On
October 20, 1995, the Maryland State survey agency advised
Petitioner that it had identified deficiencies in Petitioner's
compliance with federal participation requirements. Id. 2/
These asserted deficiencies were specifically identified in a
survey report which the Maryland State survey agency furnished to
Petitioner. Id.; HCFA Ex. 5. The Maryland State survey agency
advised Petitioner that it would recommend to HCFA that HCFA
impose a civil money penalty, beginning September 28, 1995, of
$750 per day, which would accrue until the facility corrected its
outstanding deficiencies and was found to be in substantial
compliance with the terms of its provider agreement. HCFA Ex. 4
at 1 - 2.
In a letter to HCFA dated October 23, 1995, the Maryland State
survey agency informed HCFA that it was recommending that the
facility be classified as a "poor performer" and that a civil
money penalty of $750 per day be imposed against it. HCFA Ex. 6.
The Maryland State survey agency advised HCFA that its
determination that the facility was a "poor performer" was based
on the facility's compliance history. Id. at 1. The Maryland
State survey agency observed that, on September 11, 1995, the
facility had changed ownership. Id. It noted that the new owner
objected strongly to it being made subject to remedies based on
the poor performance of its predecessor. Id. at 1 - 2.
Notwithstanding, the Maryland State survey agency told HCFA that
it believed that it had made the correct determination. Id. at
2.
On November 3, 1995, Petitioner submitted a plan of correction to
the Maryland State survey agency. See HCFA Ex. 8 at 1. In that
plan of correction, Petitioner advised the Maryland State survey
agency that some of the deficiencies that had been identified at
the September 1995 survey would not be corrected until after
December 28, 1995. See Id.
On December 18 - 20, 1995, the Maryland State survey agency
conducted a resurvey of Petitioner's facility. HCFA Ex. 9. The
Maryland State survey agency concluded from the resurvey that
Petitioner was in substantial compliance with federal
participation requirements. Id. On February 21, 1996, the
Maryland State survey agency advised Petitioner that it was
recommending to HCFA that a civil money penalty be imposed
against Petitioner in the amount of $750 per day, beginning
September 28, 1995 and ending on December 15, 1995. HCFA Ex. 10
at 1.
On March 14, 1996, HCFA advised Petitioner that it concurred with
the recommendation for imposition of a civil money penalty that
had been made by the Maryland State survey agency. HCFA Ex. 11.
HCFA announced that, based on the recommendation, it had
determined to impose against Petitioner a civil money penalty in
the amount of $750 per day, beginning September 28, 1995 and
ending on December 15, 1995, for a total penalty of $59,250. Id.
at 1.
There is no evidence to show that Petitioner created or caused
any of the deficiencies that were identified by the Maryland
State survey agency at its September 1995 survey. Indeed, from
the evidence which the parties offered in support of their
respective positions, it is fair to infer that Petitioner did not
cause or create these deficiencies. The Maryland State survey
agency began its September 1995 survey on September 12, 1995, the
day after Petitioner acquired the facility that was the subject
of the survey. Petitioner could not have asserted the control or
lack of control that would have caused the deficiencies that were
identified at the September 1995 survey.
It is fair also to conclude that the deficiencies that were
identified at the September 1995 survey persisted until they were
corrected by Petitioner. The date of correction was determined
by the Maryland State survey agency and by HCFA to be December
15, 1995. Petitioner has not offered any evidence in conjunction
with the motion for summary disposition to show that the
deficiencies that were identified at the September 1995 survey
were corrected prior to December 15, 1995. Indeed, in its plan
of correction, Petitioner averred that some of the deficiencies
that were identified at the September 1995 survey would not be
corrected before December 28, 1995. HCFA Ex. 8 at 1.
The Maryland State survey agency reluctantly made its February
1996 recommendation to HCFA that HCFA impose civil money
penalties against Petitioner. The unrebutted testimony of Carol
Benner, Director of Licensing and Certification Administration of
the Maryland State survey agency, is that the Maryland State
survey agency made its civil money penalty recommendation to HCFA
after receiving direction from HCFA to do so. P. Ex. 2.
Furthermore, her unrebutted testimony is that it was not the
Maryland State survey agency's intention that a significant civil
money penalty be imposed against Petitioner, because Petitioner
had actually corrected deficiencies which were attributable to
the previous owner of the facility at issue. Id. at 3.
B. Governing law (Findings 6 - 11)
A facility may not participate in Medicare unless it enters into
a provider agreement with HCFA. Social Security Act (Act),
section 1866(a)(1); see 42 C.F.R. §§ 489.3, 489.11(b). A
provider agreement gives a facility a privilege to claim
reimbursement from Medicare for items or services that it
provides to beneficiaries. That privilege is conditioned on the
provider complying with Medicare participation requirements. The
Secretary, or her delegate, HCFA, may terminate a facility's
provider agreement where the facility is not complying
substantially with Medicare participation requirements. Act,
section 1866(b)(2)(A). Where a facility is a long-term care
facility, HCFA may impose additional remedies against that
facility if it fails to comply substantially with Medicare
participation requirements. These remedies may include
imposition of a civil money penalty. Act, section 1819; 42
C.F.R. §§ 488.400 et seq.
Under applicable regulations which govern a provider's
participation in Medicare, a facility's provider agreement
automatically is transferred to a new owner of the facility at
the time that ownership of the facility is transferred. 42
C.F.R. § 489.18(c). Acquisition of a facility by leasing that
facility constitutes a transfer of ownership of the facility. 42
C.F.R. § 489.18(a)(4). Where an individual or entity leases a
facility that participates in Medicare, that individual or entity
automatically acquires the facility's provider agreement.
Transfer of a provider agreement is a transfer of both the
privilege of participating in Medicare and of the obligation to
comply with all participation requirements. An assigned
agreement is subject to all applicable statutes and regulations
and to the terms and conditions under which it was issued. 42
C.F.R. § 489.18(d). Where an individual or entity obtains a
provider agreement through transfer of that agreement, that
individual or entity assumes all of the obligations and
responsibilities that were incurred by the original holder of
that agreement. Responsibilities that are assumed include
responsibilities that may predate the date of transfer of the
provider agreement. United States v. Vernon Home Health, Inc.,
21 F.3d 693 (5th Cir. 1994), cert. denied, 115 S. Ct. 575 (1994)
[hereinafter Vernon Home Health, Inc.]
The responsibilities that are assumed by an entity which acquires
a facility, and therefore, that facility's provider agreement,
may include the duty to correct any deficiencies in the entity's
compliance with Medicare participation requirements, even if
those deficiencies were caused by the facility's previous owner
and predate the date of transfer of ownership. See Vernon Home
Health, Inc., 21 F.3d at 696. Those responsibilities include
also the responsibility to comply with any remedy imposed by HCFA
for failure to correct the deficiencies.
Petitioner argues that Vernon Home Health, Inc. does not support
a conclusion that a provider which acquires a facility assumes
responsibility for remedies that might be imposed due to
deficiencies that predate the date of the acquisition.
Petitioner notes that the preexisting liability in Vernon Home
Health, Inc. was a Medicare overpayment. Petitioner asserts that
an overpayment is distinguishable from other liabilities, such as
a failure to comply with Medicare participation requirements.
Petitioner's Reply Brief at 7. I am not persuaded that the
Vernon Home Health, Inc. decision should be read so narrowly as
Petitioner asserts. The decision stands for a broader principle
that any preexisting obligation to Medicare by a facility becomes
the responsibility of the provider that acquires the facility.
More importantly, as I shall discuss in detail below, this case
does not, strictly speaking, involve Petitioner's responsibility
for a preexisting deficiency. It is true that the deficiencies
which are the basis for the civil money penalty in this case
originated prior to Petitioner's acquisition of the facility.
But, the penalty is based on those deficiencies that continued
after Petitioner acquired the facility and which Petitioner did
not correct until December 15, 1995. My decision here is not
based on a direct application of the Vernon Home Health, Inc.
decision to the facts, but on Petitioner's obligation to correct
deficiencies that existed after it acquired the facility.
C. Application of the law to the undisputed material
facts (Findings 12 - 14)
Application of the law to the undisputed material facts
establishes Petitioner to be responsible for the civil money
penalty that HCFA determined to impose. When Petitioner acquired
the facility, it assumed responsibility for any deficiencies that
predated Petitioner's assumption of ownership, which continued
after the date of acquisition and for any remedies that might
result from those deficiencies. Thus, Petitioner became
responsible for the deficiencies that were identified at the
September 1995 survey and for any remedies that HCFA imposed,
based on the continuation of the deficiencies until they were
corrected. Petitioner was responsible for any penalties that
accrued, until the date that the facility attained substantial
compliance with Medicare participation requirements. That date
was December 15, 1995. Therefore, Petitioner is responsible for
a civil money penalty which began to accrue on September 28, 1995
through December 15, 1995. The daily amount of the penalty is
$750, and the total amount is $59,250.
Petitioner asserts that, for several reasons, it would be
unlawful or unreasonable to make Petitioner liable for a civil
money penalty. I have considered each of the arguments made by
Petitioner to support its assertion that it is not responsible
for a civil money penalty. I disagree with each of them.
1. Petitioner's assertion that there is no
authority for HCFA's determination to impose a civil
money penalty (Petitioner's Brief at 11 - 12)
Petitioner asserts that there is not either in the Act or in
implementing regulations a specific provision which gives HCFA
authority to impose a civil money penalty against Petitioner as a
"successor to a wrongdoer." To be sure, neither section 1819 of
the Act nor implementing regulations governing long-term care
facilities states expressly that an entity which acquires a long-
term care facility is responsible for a civil money penalty that
may be based on deficiencies that predate the acquisition but
which the acquiring entity does not correct until a date
subsequent to the date of the acquisition. However, given these
circumstances, I conclude that the intent of both the Act and the
regulations is to impose such a responsibility on the acquiring
entity. I find that this intent is made clear by 42 C.F.R. §
489.18(d), which provides in effect that a provider who acquires
a facility is responsible for any deficiencies caused by its
predecessor.
Petitioner argues that the only regulation which addresses the
liability of a provider for deficiencies caused by its
predecessor is 42 C.F.R. § 488.414(d)(3). This section provides
that a facility may not avoid a remedy based on findings of
substandard care at repeated surveys of that facility, on the
ground that the facility has undergone a change of ownership.
Petitioner asserts that this section was not used by HCFA as a
basis for imposing a remedy here. From this, Petitioner asserts
that HCFA failed to rely on the one section in the regulations
which gives it explicit authority to impose a remedy on a
provider for deficiencies attributable to that provider's
predecessor. Petitioner's Brief at 11. I do not agree with this
argument. The fact that HCFA may not have relied on 42 C.F.R. §
488.414 to impose a remedy against Petitioner does not derogate
from its authority to impose a remedy in this case. 3/
The provisions of 42 C.F.R § 488.414(d)(3) reinforce my
conclusion that the Act and regulations impose responsibility on
an acquiring provider to correct the deficiencies caused by its
predecessor. The regulation makes it explicit that such
requirement exists in the case of a facility that has been found
previously to have provided substandard care. However, it does
not suggest that the responsibility to correct deficiencies that
predate acquisition of a facility applies only to a provider that
acquires an entity that has been found previously to be providing
substandard care.
2. Petitioner's argument that the penalty is
punitive (Petitioner's Brief at 13 - 17)
Petitioner argues that it would be inconsistent with the Act's
remedial purpose, and unlawfully punitive, to impose a civil
money penalty against it. Petitioner's Brief at 13 - 18.
Petitioner asserts that the remedial purpose of the provisions of
the Act which relate to long-term care facilities, including
those provisions which authorize the Secretary and HCFA to impose
civil money penalties against those facilities that are not
complying substantially with federal participation requirements,
is to improve quality of care and to bring substandard facilities
into compliance with federal requirements. Petitioner's Brief at
13. According to Petitioner, it is inconsistent with that
remedial purpose for HCFA to impose a civil money penalty against
it -- and, therefore, punitive -- because Petitioner is blameless
for the deficiencies which are the basis of the penalty.
I agree with Petitioner that the Act's purpose is remedial, and
not punitive. A remedy that is imposed may be unlawfully
punitive if it does not comport with the Act's remedial purpose
and with the regulations that implement the Act. However, I
conclude that the civil money penalty that HCFA determined to
impose in this case is consistent with the Act's remedial
purpose.
The remedial purpose of a civil money penalty is to spur a
deficient provider to take corrective action. The deficient
provider is put on notice that, if it does not correct a
substantial deficiency, it will be penalized in an amount that
reflects the seriousness of the deficiency and other relevant
factors. 42 C.F.R. § 488.408. The spur to correction is
enhanced by the fact that the penalty will continue to accrue for
each day that the deficiency is not corrected.
The fundamental premise on which Petitioner rests its argument
that the civil money penalty which HCFA determined to impose is
punitive is Petitioner's assertion that the civil money penalty
which HCFA determined to impose is for deficiencies that predated
Petitioner's acquisition of the facility. That premise is not
accurate. The civil money penalty that HCFA determined to impose
is premised on Petitioner's failure to correct continuing
deficiencies, and is not a punishment based solely on
deficiencies that predated Petitioner's acquisition of the
facility. The deficiencies at issue originated previous to
Petitioner's acquisition of the facility. But they continued to
exist, by Petitioner's own admission, after Petitioner acquired
the facility and until December 15, 1995.
I do not mean to make light of Petitioner's efforts to correct
these deficiencies, but it is nevertheless an undisputed fact
that the deficiencies continued for a time after Petitioner
acquired the facility. The civil money penalty that HCFA
determined to impose against Petitioner does not penalize
Petitioner for any dates prior to the date that Petitioner
acquired the facility. It begins on September 28, 1995, more
than two weeks after the date that Petitioner acquired the
facility.
Petitioner asserts that HCFA determined to impose the civil money
penalty against it only after Petitioner corrected the
deficiencies that were identified at the September 1995 survey.
Petitioner argues that a civil money penalty would serve no
remedial purpose in this case because, inasmuch as the penalty
was imposed after the deficiencies were corrected, it could not
operate as a spur to induce Petitioner to correct the
deficiencies.
HCFA's determination to impose a civil money penalty is a
ratification of a recommendation that was made to HCFA before the
date that the deficiencies were corrected, and of which
Petitioner had notice. The likelihood that a penalty might be
imposed against Petitioner constituted a remedial inducement for
Petitioner to correct deficiencies. It is true that HCFA made
its final determination to impose a civil money penalty only
after Petitioner had corrected the deficiencies that were
identified at the September 1995 survey. But, in fact,
Petitioner was notified by the Maryland State survey agency on
October 20, 1995, weeks prior to the date that Petitioner
corrected the deficiencies, that the Maryland State survey agency
would recommend to HCFA that HCFA impose a civil money penalty of
$750 a day until the deficiencies were corrected. HCFA Ex. 4.
Thus, Petitioner did have advance notice that a penalty might be
imposed against it for failure to correct deficiencies, and that
the penalty might accrue for each day that the deficiencies were
not corrected.
3. Petitioner's argument that HCFA failed to
comply with statutory requirements in determining to
impose a civil money penalty (Petitioner's Brief at 17
- 21)
Petitioner argues that, in several respects, HCFA did not comply
with the requirements of the Act in determining to impose a civil
money penalty against Petitioner. First, Petitioner asserts that
the regulations which govern HCFA's determination of the amount
of a civil money penalty may, in at least one respect, contravene
the requirements of the Act, and therefore may be ultra vires.
Second, Petitioner contends that the Act contains a notice
requirement which HCFA failed to comply with in giving Petitioner
notice of its determination to impose a civil money penalty.
Sections 1819 and 1919 of the Act, which authorize the Secretary
to impose a civil money penalty against a long-term care facility
that fails to comply substantially with federal participation
requirements under Medicare (section 1819) and State health care
programs (section 1919), require that any civil money penalty be
imposed in the same manner as would apply to a civil money
penalty imposed pursuant to section 1128A of the Act. Section
1128A requires that, in imposing a civil money penalty, the
Secretary take into account factors which include the nature of
the deficiencies present at a facility, the provider's degree of
culpability, history of prior offenses, and financial condition,
and such other matters as justice may require.
Petitioner argues that HCFA's actions are deficient when measured
against these statutory requirements. First, according to HCFA,
the regulations which implement the civil money penalty
provisions may be ultra vires. Petitioner observes that 42
C.F.R. § 488.438(f), which describes the factors which are to be
considered by HCFA in determining the amount of a civil money
penalty, provides, at 42 C.F.R. § 488.438(f)(4), that a
facility's degree of culpability is to be considered as follows:
Culpability for purposes of this paragraph
includes, but is not limited to, neglect, indifference,
or disregard for resident care, comfort or safety. The
absence of culpability is not a mitigating circumstance
in reducing the amount of the penalty. (Emphasis
added).
Petitioner asserts that the emphasized language may limit
unreasonably, and in a way that Congress did not contemplate in
enacting the civil money penalty provisions of the Act, HCFA's
authority to consider a facility's culpability in determining a
civil money penalty.
I do not have authority to decide whether a regulation is ultra
vires. I am an agent of the Secretary for purposes of hearing
and deciding cases involving HCFA, and the Secretary's
implementing regulations are as binding on me as they are on
HCFA. Therefore, I make no decision as to whether 42 C.F.R. §
488.438(f)(4) is ultra vires.
However, the provisions of 42 C.F.R. § 488.438(f)(4) may be
consistent with the Act's requirement that culpability be
considered as a factor in determining the amount of a civil money
penalty. Section 1128A(d)(2) of the Act requires the Secretary
to take into account a person's "degree of culpability" in
determining the amount of a civil money penalty. It does not
prescribe how the Secretary is to evaluate culpability.
Petitioner asserts that the law implicitly requires HCFA to
advise an entity against whom it has determined to impose a civil
money penalty precisely how it has weighed the factors which are
the basis for the penalty. Petitioner argues that the notice
that HCFA sent to Petitioner advising Petitioner of HCFA's
determination to impose a civil money penalty is defective.
According to Petitioner, the notice merely states as conclusions
that HCFA considered factors mandated by law, without stating
precisely how HCFA evaluated these factors, and the weight that
HCFA assigned to them. Petitioner asserts that, for example, it
is not possible to tell from HCFA's notice whether HCFA actually
considered Petitioner's culpability in determining to impose a
civil money penalty against Petitioner.
The notice requirements that HCFA must adhere to in advising a
provider of its intent to impose a civil money penalty are
contained in 42 C.F.R. § 488.434. That regulation provides that,
in its notice, HCFA must advise the provider, among other things,
of: the nature of the provider's noncompliance; the statutory
basis for the civil money penalty; the amount of penalty per day
of noncompliance by the provider; and any factors that are
specified in 42 C.F.R. § 488.438(f) that were considered by HCFA
in determining the amount of the penalty. The factors enumerated
in 42 C.F.R. § 488.438(f) include: the facility's compliance
history; the facility's financial condition; other factors
specified in 42 C.F.R. § 488.404; and the facility's degree of
culpability.
Petitioner seems to suggest that, either under the regulations or
under section 1128A of the Act, there exists a requirement for
HCFA to state in its notice of a civil money penalty the precise
rationale used by HCFA for determining to impose a penalty,
including the rationale used to calculate the amount of the
penalty. I do not find that such a requirement exists in the
regulations or in the Act. The regulations and the Act plainly
require HCFA to state, generally, what penalty it has determined
to impose and the basis for the penalty. They do not require a
bill of particulars from HCFA. Nor is that requirement contained
in the Act.
The notice which HCFA sent to Petitioner in this case states
precisely the beginning and end dates of the penalty that HCFA
determined to impose and the amount of the penalty. HCFA Ex. 11
at 1. Additionally, the notice advises Petitioner that:
In addition to taking into account the scope and
severity of the recent deficiencies, [HCFA] considered
your facility's past history including repeat
deficiencies, its degree of culpability and its
financial condition in determining the amount of the
civil money penalty that [HCFA is] imposing for each
day of noncompliance.
Id. The notice thus tells Petitioner that the penalty is
premised on the facility's compliance history, on the level of
Petitioner's culpability for the deficiencies, and on
Petitioner's financial ability to repay the penalty. That it
does not state how HCFA weighted these factors is obvious. Nor
is it clear from the notice what HCFA means by the term "degree
of culpability."
HCFA's notice letter complies, barely, with what is required by
the Act and the regulations. The notice is adequate to advise
Petitioner what factors HCFA relied on in determining the amount
of the civil money penalty. It is sufficient, therefore, to put
Petitioner on notice as to what would be addressed at a hearing
concerning the penalty. That is consistent with the notice
requirements of 42 C.F.R. § 488.434.
I am not suggesting by this conclusion that HCFA could rely on a
notice of this character as prima facie proof that its
determination to impose a civil money penalty is reasonable, at a
hearing concerning the amount of the penalty. At such a hearing,
HCFA might be required to prove exactly how it determined to
impose the penalty. 4/ All I conclude here is that the notice
that HCFA sent to Petitioner is minimally sufficient to tell
Petitioner what would be at issue if Petitioner challenged the
determination to impose a civil money penalty.
Petitioner asserts also that section 1128A of the Act requires
that HCFA consider other factors that justice may require in
determining to impose a civil money penalty. Petitioner asserts
that it is not clear from the notice that HCFA did so in this
case. The notice regulation, 42 C.F.R. § 488.434, and the two
regulations that are incorporated therein, 42 C.F.R. §§ 488.404
and 488.438, do not specifically state that HCFA must consider
other factors that justice may require as a part of its
determination to impose a civil money penalty. Arguably, the
factors described in these regulations subsume such other
factors. In any event, HCFA's notice comported with the specific
requirements of 42 C.F.R. § 488.434. In order to find that
HCFA's notice is defective because it did not recite that HCFA
considered other factors that justice may require, I would have
to decide that the notice regulation is ultra vires. As I
explain above, I have no authority to make such a finding.
4. Petitioner's argument that imposition of a
civil money penalty against it is unfair (Petitioner's
Brief at 21 - 29)
Petitioner argues that imposition of a civil money penalty
against it would be unfair. Petitioner asserts that it is being
penalized by HCFA for the deficiencies caused by its predecessor
which predated Petitioner's acquisition of the facility and not
for anything that Petitioner did or did not do.
My authority in a civil money penalty case is to decide whether
HCFA's action comports with the requirements of the regulations
which implement the relevant provisions of the Act. I do not
have authority to decide questions of equity. Thus, the short
answer to Petitioner's argument is that HCFA's action must be
sustained if it complies with the provisions of the Act and
regulations, even if it could be viewed as being "unfair" to
Petitioner. However, I am not persuaded from Petitioner's
argument that HCFA's determination in this case actually
manifests unfairness.
Petitioner's argument that HCFA is acting unfairly rests on its
characterization of HCFA's determination as being predicated
solely on deficiencies that predate Petitioner's acquisition of
the facility, and for which Petitioner bears no responsibility.
However, as I have discussed above, that is not an accurate
characterization of what HCFA determined in this case. HCFA's
remedy is predicated on the fact that deficiencies were
identified at the September 1995 survey whose origin must have
predated Petitioner's acquisition of the facility. But in fact,
the entire amount of the civil money penalty is based on the
failure by Petitioner to correct those deficiencies until
December 15, 1995. The penalty did not begin to accrue until
September 28, 1995, more than two weeks after the acquisition
date. Had Petitioner corrected the deficiencies before September
28, then, presumably, there would be no penalty.
5. Petitioner's argument that imposition of a
civil money penalty against it is poor public policy
and is inconsistent with the purposes of the Act
(Petitioner's Brief at 29 - 31)
Petitioner argues that to impose a civil money penalty against it
would frustrate the Act's purpose to encourage facilities to
comply with federal participation requirements. In particular,
Petitioner asserts that the remedy in this case serves as a
disincentive to providers to acquire facilities that might be
deficient, and to correct those deficiencies. Moreover,
Petitioner observes that the Maryland State survey agency only
reluctantly recommended that a penalty be imposed against
Petitioner.
I have no authority to consider the public policy implications of
HCFA's determination. My authority is limited to deciding
whether HCFA's determination comports with the requirements of
the Act and regulations. In this case, I find that it does.
D. Petitioner's waiver of its right to contest the
amount of the civil money penalty (Finding 15)
I find that Petitioner waived its right to contest the amount of
the civil money penalty. At the August 29, 1996 prehearing
conference, Petitioner advised me explicitly that it wished to
argue only the issue of its legal responsibility for the civil
money penalty. My September 11, 1996 prehearing order made it
plain that the motion and briefing schedule that I was
establishing was based on Petitioner's decision not to contest
the amount of the penalty.
I am not suggesting that there would never be a case where I
would permit a party to change its position as to the issues it
wished to assert. However, where, as happened in this case, a
party explicitly announces that it is abandoning an issue, that
party ought to at least make a showing of good cause as grounds
to reinstate that issue. Petitioner has not made any such
showing of good cause here.
IV. Conclusion
I conclude that, as a matter of law, HCFA is authorized to impose
a civil money penalty against Petitioner. I sustain a civil
money penalty which accrues from September 28, 1995 until
December 15, 1995, in the amount of $750 per day, for a total
amount of $59,250.
________________________
Steven T. Kessel
Administrative Law Judge
* * * Footnotes * * *
1. HCFA submitted 11 exhibits in support of its
motion for summary disposition (HCFA Exs. 1 - 11). Petitioner,
in opposing the motion, submitted nine exhibits (P. Exs. 1 - 9).
The parties have not objected to my receiving into evidence any
of these exhibits. Therefore, I receive into evidence HCFA Exs.
1 - 11 and P. Exs. 1 - 9.
2. The October 27, 1995 notice was addressed to
"Sylvan Manor Health Care Center." HCFA Ex. 4 at 1. However, by
that date Petitioner had acquired the facility. HCFA Ex. 2 at 3.
3. It is not entirely clear that the past performance
of the facility had no bearing on HCFA's determination of the
remedy. The Maryland State survey agency told HCFA on October
23, 1995, that it was basing its recommendation of a civil money
penalty in part on the facility's history as a substandard
performer. HCFA Ex. 6.
4. However, the provider would have the ultimate
burden of proving that HCFA's conclusion as to the level of the
provider's noncompliance is clearly erroneous. 42 C.F.R. §
498.61(b). That burden does not derogate from HCFA's initial
burden of establishing how it came up with its determination to
impose a penalty.