Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of: Capitol Hill Community )
Rehabilitation and Specialty Care Center, Petitioner,
- v. -
Health Care Financing Administration.
DATE: March 24, 1997
Docket No. C-96-014
Decision No. CR469
DECISION
BACKGROUND
Pending before me is the issue of what relief, if any,
Petitioner is entitled to receive as a result of the
allegedly unreasonable manner in which the Health Care
Financing Administration (HCFA) determined the amount of
the civil money penalty (CMP) to be paid by Petitioner.
HCFA imposed the CMP after having found Petitioner out of
compliance with various Medicare and Medicaid
participation requirements. By notice dated September
20, 1995, HCFA issued its determination that Petitioner
should pay a total of $80,400 for 41 days of
noncompliance, calculated at the rate of $4000 per day
for the first 19 days and $200 per day for the subsequent
22 days.
I was informed during the initial prehearing conference
that Petitioner was disputing the portion of the CMP
calculated at the rate of $4000 per day. Letter by
Direction of ALJ to Parties dated Dec. 8, 1995. As
Petitioner also reconfirmed during a subsequent
prehearing conference, Petitioner did not dispute the
existence of the deficiencies found by HCFA. Order of
Sept. 24, 1996, at 1. Instead, Petitioner explained that
it was challenging the manner in which HCFA had imposed
the CMP because, in Petitioner's view, HCFA had failed to
consider certain relevant information concerning
Petitioner's financial condition. Id.
From December 1995 until September 1996, I stayed the
proceedings before me at the parties' request. During
the stay, counsel for HCFA filed written status reports
which informed me that the parties had not reached any
settlement agreements, but that HCFA was considering
Petitioner's request for HCFA to waive collection of the
CMP imposed against Petitioner. Status Reports dated
Feb. 16, 1996 and Mar. 29, 1996. HCFA informed me also
that it had committed to make a decision on Petitioner's
waiver request based on those financial documents
Petitioner had submitted and would submit pursuant to
HCFA's request. Id. However, I returned the case to
active status after counsel for HCFA reported that
Petitioner did not provide the additional financial data
requested by HCFA by the date agreed to by Petitioner.
Status Report dated July 12, 1996.
I established a briefing schedule pursuant to the
parties' agreement to identify the pertinent legal issues
in writing and file appropriate motions for a resolution
of those issues. Order dated September 24, 1996. With
supporting briefs and exhibits 1/, HCFA has requested
that I grant summary disposition in favor of HCFA on the
issue of whether HCFA had properly considered
Petitioner's financial condition, as required by 42
C.F.R. § 488.438(f)(2), in calculating the amount of the
CMP assessed against Petitioner. Petitioner has filed a
brief in support of its request that I vacate the CMP
determination issued by HCFA and return the matter to
HCFA for further consideration of Petitioner's financial
condition. P. Br. at 7. 2/
In this decision, I grant HCFA's motion for summary
disposition and deny Petitioner's request for remand.
FINDINGS OF FACT AND CONCLUSIONS OF LAW (FFCLS)
I summarize below my findings and conclusions, annotated
with the section of the decision where I have analyzed
the relevant facts and law:
1. In any CMP case, a petitioner is entitled to a
hearing on the merits in this forum on only two issues:
whether a basis exists for HCFA's imposition of a CMP,
and (if so) whether the amount of CMP imposed by HCFA is
reasonable. Discussion, I.
2. Petitioner has challenged only the procedures used by
HCFA to investigate Petitioner's financial condition for
the purpose of determining a CMP amount. Background;
Discussion, I and II.
3. HCFA has the discretion to use whatever process it
deems appropriate to evaluate a provider's financial
condition prior to issuing a notice imposing a CMP.
Discussion, II.
4. I have no authority to dictate the process HCFA must
follow prior to reaching its determination. Discussion,
II.
5. Petitioner has not articulated any legal theory to
support a possible reduction of the $4000 per day CMP
amount based on Petitioner's financial condition.
Discussion, II.
6. Petitioner has not made any argument or showing that,
if the case were to proceed to an evidentiary hearing,
Petitioner has evidence which may prove the
unreasonableness of the $4000 per day CMP amount set by
HCFA. Discussion, II.
7. Petitioner's complaint against HCFA's procedures does
not constitute a justiciable controversy entitling it to
an evidentiary hearing. Discussion, II.
8. HCFA is entitled to summary disposition in its favor.
Discussion, II; FFCLs 1 - 7.
9. While the proceedings in this case were stayed by
agreement of the parties, Petitioner submitted a request
for HCFA to waive the collection of the CMP, and HCFA had
agreed to process the waiver request with use of
financial information Petitioner had provided and would
provide by an agreed-to date. Discussion, III.
10. Petitioner did not provide the additional financial
information requested by HCFA for deciding Petitioner's
waiver request. Discussion, III.
11. The merits of Petitioner's waiver request are beyond
the scope of these proceedings. Discussion, III.
12. The parties' dealings with one another pursuant to
the waiver request filed by Petitioner are relevant to
the issue of whether this case should be remanded to HCFA
for consideration of Petitioner's financial condition
based on documents and information requested directly
from Petitioner. Discussion, III.
13. Independent of the reasons for granting summary
disposition in favor of HCFA, I find that no useful
purpose can be served by granting Petitioner's request
that this case be remanded to HCFA for further
consideration of Petitioner's financial condition.
Discussion, III.
14. It is appropriate to deny Petitioner's request for
remand. Discussion, III; FFCLs 9 - 13.
DISCUSSION
I. The issue in this case and the parties' arguments
As I had explained in a ruling in Baltic Country Manor,
v. HCFA, C-96-281, there are only two main issues on
which a petitioner may request a hearing in a CMP case:
whether there existed a basis for HCFA's imposition of a
CMP, and, assuming that a basis exists, whether the CMP
amount imposed by HCFA is reasonable. Ruling on CMP
Issue (Dec. 11, 1996). Here, as discussed above,
Petitioner has expressly waived any challenge to the
basis alleged by HCFA in imposing the CMP. Accordingly,
the findings of noncompliance contained in the survey
reports and HCFA notice letters of record (e.g., HCFA Ex.
2, 4, 5, 7) are accepted as true.
The record evidence establishes that there are two rates
of CMP imposed by HCFA. HCFA Ex. 7. For the period from
July 21 until August 8, 1996, HCFA imposed the CMP amount
of $4000 per day 3/ pursuant to its determination that
Petitioner's noncompliance constituted immediate jeopardy
to residents during these 19 days. For the period from
August 9 until August 29, 1996, HCFA imposed the CMP
amount of $200 per day 4/ pursuant to HCFA's
determination that Petitioner was still not in compliance
with program requirements but had eliminated the
immediate jeopardy to its residents. Id.
As Petitioner has made clear during the prehearing
conferences and in its brief to me, its objection is to
HCFA's having decided to impose a CMP at the rate of
$4000 per day without having first solicited information
from Petitioner concerning its financial condition.
Letter by Direction of ALJ dated Dec. 8, 1995; P. Br. at
1 - 3. Both parties agree that HCFA was under an
affirmative duty pursuant to 42 C.F.R. § 488.438(f)(2) to
consider Petitioner's financial condition in setting the
amount of a CMP. HCFA did not deny that it had decided
to impose the $4000 per day amount without having
solicited relevant financial information from Petitioner.
HCFA relied upon various affidavits (e.g., HCFA Ex. 3, 8,
9, 10) to explain that it had used an indirect method of
inquiry to evaluate Petitioner's financial condition.
Instead of soliciting information from Petitioner, HCFA
had contacted Petitioner's Medicare fiscal intermediary,
the State surveying agency, and the Medicaid agency in
order to find out whether these entities knew of any
financial problems experienced by Petitioner. HCFA Br.
at 7. HCFA argued that its pre-determination method of
inquiry was valid in this case because, as demonstrated
by the affidavits it submitted, the State surveying
agency, Medicare intermediary, and Medicaid agency may be
reasonably expected to have information or clues bearing
on program providers' fiscal soundness. HCFA Br. at 14 -
20.
Petitioner argued in response that the process used by
HCFA in deciding the CMP amount was flawed. Petitioner
observed that HCFA's process was not designed to obtain
information about a facility's financial condition, but
"to determine if third parties know anything that might
indicate that the facility is in financial difficulty."
P. Br. at 3. Petitioner complained that HCFA had chosen
such a course when it could have simply asked some direct
questions of Petitioner. Id. Petitioner argued also
that the process used by HCFA has forced Petitioner to
take an appeal, when HCFA was required by law to consider
Petitioner's financial condition before HCFA decides on a
CMP amount. P. Br. at 5.
II. Reasons for granting of HCFA's motion for summary
disposition
Even though Petitioner's criticisms of HCFA's process
appear to have logical merit, I am granting HCFA's motion
for summary disposition. I do so because HCFA has the
discretion to use whatever process it deems appropriate
to evaluate a provider's financial condition prior to
issuing a notice imposing a CMP. I have no authority to
dictate the process HCFA must follow prior to reaching
its determination. Petitioner has not articulated any
legal theory to support a possible reduction of the $4000
per day CMP amount based on Petitioner's financial
condition. In addition, Petitioner has not made any
argument or showing that, if the case were to proceed to
an evidentiary hearing, Petitioner has evidence which may
prove the unreasonableness of the $4000 per day CMP
amount set by HCFA. I discuss below each of these main
reasons for granting summary disposition in favor of
HCFA. 5/
Neither the regulations nor statutes specify the
procedures HCFA must follow in determining a facility's
financial condition. As explained in the preamble to the
regulations, no factors were specified in the regulations
for determining a facility's financial conditions because
such factors are considered unique for each facility. 59
Fed. Reg. 56,204 (Nov. 10, 1994). Additionally, as
discussed in my ruling in Baltic Country Manor, the only
two issues which may be presented to an administrative
law judge for adjudication are HCFA's basis for imposing
a CMP and the reasonableness of the CMP amount.
Therefore, as a matter of law, I cannot compel HCFA to
use a process which solicits financial information
directly from providers prior to HCFA's formulating a
determination on the amount of CMP to be assessed. Nor
can I enjoin HCFA from gathering information about a
facility's financial condition by indirect means or from
third parties. I must uphold HCFA's authority to
exercise its discretion in the manner it sees fit (which
I do here by granting HCFA's motion for summary
disposition), irrespective of whether Petitioner or I
think HCFA has acted prudently. There is no right to a
hearing on the issue of whether the process used by HCFA
in ascertaining a provider's financial condition was
reasonable or unreasonable. 42 C.F.R. § 498.3.
If Petitioner believed that financial information not
gathered by HCFA has resulted in HCFA's imposing an
unreasonably high amount of CMP, Petitioner had the
opportunity to make such arguments to me and disclose the
existence of its supporting evidence pursuant to my
scheduling order. In using Rule 56 of the Federal Rules
of Evidence for guidance in evaluating HCFA's motion for
summary disposition, I note the following relevant
provisions:
When a motion for summary judgment is
made and supported as provided in this
rule, an adverse party may not rest upon
the mere allegations or denials of his
pleading, but his response, by affidavits
or as otherwise provided in this rule,
must set forth specific facts showing
that there is a genuine issue for trial.
If he does not so respond, summary
judgment, if appropriate, shall be
entered against him.
Rule 56(e), Fed. R. Civ. P.
I note in addition that a provider's financial condition
is only one of several factors HCFA is required to
consider in determining the amount of a CMP to be
imposed. 42 C.F.R. §§ 488.404; 488.438(f). In this
case, HCFA showed by affidavit that it followed the
regulatory requirements by having considered also
Petitioner's compliance history and the seriousness of
Petitioner's noncompliance in determining the $4000 per
day rate. HCFA Ex. 3. In evaluating Petitioner's
compliance history (42 C.F.R. § 488.438(f)(1)), HCFA's
agent concluded that, since Petitioner was opened and
certified in 1993, "this was the second time in three
years that it was found to be in serious noncompliance
with Medicare requirements." HCFA Ex. 3, at 3 - 4. In
evaluating the seriousness of Petitioner's deficiencies
(42 C.F.R. § 488.404(b)), HCFA's agent stated also that
he and his colleagues compared Petitioner's deficiencies
to those in other facilities where immediate jeopardy to
residents had been found. Even though HCFA ultimately
determined that Petitioner's deficiencies were serious
enough to constitute immediate jeopardy to residents for
the first 19 days (HCFA Ex. 5, 7), HCFA did not impose a
penalty near the $10,000 per day maximum potential rate
because its agents found several mitigating factors when
Petitioner's deficiencies were compared to those of other
facilities also having noncompliance at the immediate
jeopardy level. HCFA Ex. 3, at 4 - 5. Therefore,
whether or not the $4000 per day amount is reasonable
cannot be decided solely on the basis of Petitioner's
financial condition. Petitioner has offered nothing to
refute HCFA's evidence that additional factors were
material to HCFA's determination of the CMP amount, that
Petitioner had a poor compliance history, and that
severity of Petitioner's noncompliance was at immediate
jeopardy level. 6/
Here, even assuming that HCFA had not made its
determination based on any other factor specified by
regulation, HCFA has filed a motion for summary
disposition with affidavits showing that it made
inquiries concerning Petitioner's financial condition
with entities reasonably expected to have such
information and that no information came to HCFA's
attention to indicate that imposing a CMP of $4000 per
day would be inappropriate to Petitioner's financial
condition. HCFA Br. at 13 - 14 and affidavits cited
therein. In opposition to HCFA's motion for summary
disposition, Petitioner has not even alleged to me that
the $4000 per day amount is unreasonably high given
Petitioner's financial condition. Petitioner has not
introduced any evidence to show that Petitioner's
financial status was materially worse than that perceived
by HCFA and would, therefore, make a CMP in the amount of
$4000 per day appear unreasonable. 7/ Nor has
Petitioner set forth any reason for its failure to
identify or include such evidence at this time.
Petitioner has not even articulated any legal theory
related to its financial condition in support of a
possible reduction of the CMP amount. HCFA contended in
seeking summary disposition that, as a matter of law, an
otherwise appropriate CMP amount cannot be lowered unless
imposing that amount would put the affected facility out
of business. HCFA Br. at 9 - 10 (relying on the agency
comment that "it is not our intention to put facilities
out of business[,]" published at 59 Fed. Reg. 56,116,
56,204 (Nov. 10, 1994)). Accordingly, HCFA has requested
summary disposition based on its theory and evidence that
Petitioner's payment of the CMP amount would not put it
out of business. HCFA Br. at 9 - 10, 22.
Petitioner's response brief does not include any
disagreement with HCFA's theory that "putting a facility
out of business" is the only legally valid measuring
stick for deciding whether an otherwise appropriate CMP
amount should be lowered. Nor has Petitioner alleged or
attempted to demonstrate that paying the CMP amount would
put it out of business. In the absence of any
disagreement from Petitioner on the foregoing legal and
factual matters asserted by HCFA, it is immaterial
whether Petitioner is experiencing financial
difficulties.
Petitioner has made known since the prehearing
conferences in this case that it is seeking redress for
its complaint that HCFA had set the CMP amount at $4000
per day without having soliciting financial information
directly from Petitioner. As discussed below, the
redress Petitioner seeks for its complaint is a remand of
the case to HCFA for further considerations. Petitioner
is, in essence, seeking only to change the procedures
used by HCFA. Petitioner's complaint against HCFA's
procedures does not constitute a justiciable controversy
entitling it to an evidentiary hearing.
Accordingly, I grant HCFA's motion for summary
disposition.
III. Denial of Petitioner's request that the financial
condition issue be remanded to HCFA for further
consideration
The regulation codified at 42 C.F.R. § 498.56(d) permits
the remand of a case to HCFA for further proceedings when
new issues impinging on the rights of an affected party
arise following the filing of a hearing request. In this
case, Petitioner has a right to contest the
reasonableness of the amount of a CMP imposed against it.
The methods used by HCFA in arriving at what HCFA
considered to be a reasonable CMP amount were not known
to Petitioner until HCFA filed its motion for summary
disposition. Since Petitioner was never given notice
that HCFA was considering imposing a CMP in the amount of
$4000 per day, Petitioner had no opportunity to transmit
relevant financial information to HCFA before HCFA
decided to impose a CMP in said amount. Accordingly, I
have construed Petitioner's request that I "vacate the
CMP imposed by HCFA and ... return it [i.e., the question
of Petitioner's financial condition] to HCFA for further
consideration" (P. Br. at 7) as a request for remand
under 42 C.F.R. § 498.56(d).
I have considered Petitioner's remand request
independently of those reasons which led me to grant
summary disposition in favor of HCFA.
I am denying Petitioner's request for remand because,
after the first prehearing conference was held, HCFA gave
Petitioner the opportunity to submit financial
information for HCFA's consideration. While the
proceedings before me were stayed at the parties'
request, HCFA was willing to and did in fact consider the
financial information submitted by Petitioner. HCFA Ex.
12, 14. These actions were undertaken by HCFA in
response to Petitioner's request for HCFA to waive
collection of the CMP from Petitioner. 8/ HCFA Ex. 11;
Status Report dated February 16, 1996. However, despite
Petitioner's apparent agreement to do so, Petitioner then
failed or refused to provide HCFA with the follow-up
information HCFA deemed necessary. HCFA Ex. 12 - 14;
Status Report dated July 12, 1996.
I have reviewed HCFA's reasons for requiring additional
information from Petitioner. There is nothing inherently
unreasonable in HCFA's requests for additional documents.
In its brief to me, Petitioner has given no explanation
for its failure or refusal to provide the information
HCFA requested. Nor has Petitioner indicated that it
would be more willing to provide such information to HCFA
should I grant its remand request. Petitioner has
demonstrated no practical need for a remand.
The merits of Petitioner's request for waiver are not
within the scope of the proceedings before me. See,
Ruling on CMP Issues (Dec. 10, 1996) in Baltic Country
Manor. However, the parties' dealings with one another
pursuant to Petitioner's request for waiver are relevant
to whether a remand of this case to HCFA is necessary,
appropriate, or of potential benefit to either party.
Given the evidence of record concerning Petitioner's
request for waiver, I conclude that remanding this case
to HCFA for further consideration of Petitioner's
financial condition would be nonproductive and therefore
inappropriate.
CONCLUSION
For the reasons stated above, the amount of the CMP
imposed by HCFA is upheld pursuant to my granting of
HCFA's motion for summary disposition and my denial of
Petitioner's request for remand.
________________________
Mimi Hwang Leahy
Administrative Law Judge
* * * Footnotes * * *
1. HCFA's brief in chief ("Brief of the
Health Care Financing Administration in Support of its
Motion for Summary Disposition" will be abbreviated as
"HCFA Br.," and HCFA's reply brief will be abbreviated
as "HCFA Reply." The 13 exhibits submitted by HCFA will
be denoted as "HCFA Ex. 1 through 5" and "HCFA Ex. 7
through 14." (HCFA Ex. 6 is a blank page and HCFA Ex. 14
corrects a typographical error contained in paragraph 10
of HCFA Ex. 12.) I receive into evidence HCFA Ex. 1
through 5 and 7 through 14.
2. I use "P. Br." to denote the document
titled "Brief of Capitol Hill Community Rehabilitation
and Specialty Care Center in Opposition to Motion for
Summary Disposition." Petitioner has filed no exhibits
in support of its position.
3. HCFA is authorized to impose a CMP within
the range of $3050 to $10,000 per day for deficiencies
which constitute immediate jeopardy. 42 C.F.R. §
488.438(a)(1).
4. HCFA is authorized to impose a CMP within
the range of $50 to $3000 per day where the deficiencies
do not constitute immediate jeopardy but either caused
actual harm or have the potential for causing more than
minimal harm. 42 C.F.R. § 488.438(a)(2).
5. To the extent HCFA has asserted any other
basis for seeking summary disposition, I have rejected
them.
6. The regulation codified at 42 C.F.R. §
498.61(b) states, "In civil money penalty cases, HCFA's
conclusions as to a [skilled nursing facility]'s or
[nursing facility]'s level of noncompliance must be
upheld unless clearly erroneous."
7. After having submitted financial
information to HCFA in order to request that HCFA waive
collection of the CMP (HCFA Ex. 11), Petitioner argued
that HCFA's Exhibits 11, 12, and 13 show that the
financial information submitted to HCFA would "tend to
support a contention that it is in financial difficulty."
P. Br. at 6. However, Petitioner has not made the
contention that Petitioner is in financial difficulty.
Petitioner argued instead that HCFA's refusal to consider
Petitioner's information adequate "cast[s] doubt upon
HCFA's stated policy to seek and consider additional
information when it has reason to believe a facility is
experiencing financial difficulties[,]" and that "HCFA
now, at least, has sufficient reasons to go back to Blue
Cross of Maryland, one of its primary sources for its
initial conclusion, and to inquire as to whether it now
has information ... to believe that [Petitioner] is
experiencing financial difficulty." P. Br. at 6.
Moreover, even if I were to assume that the documents
from Petitioner referenced in HCFA's Exhibits 11, 12, and
13 show that Petitioner is experiencing financial
difficulties, there has been no effort by Petitioner to
assert whether its financial difficulties are serious in
light of its known assets, or to correlate the extent of
its financial problems with any possible theory that
$4000 per day should be considered an unreasonable amount
of CMP.
8. In its brief, Petitioner has objected to
HCFA's use of certain documents because Petitioner
believes that "discussions of a settlement nature should
not be included as evidence in a case." P. Br. at 3.
Petitioner did not specify the exhibits to which it was
objecting. However, as HCFA correctly noted, the
documents referenced by HCFA were financial documents
which Petitioner submitted in support of its request for
a "hardship waiver" -- not as part of its offer to
compromise the CMP amount. HCFA Reply at 7; HCFA Ex. 11,
at 1 (Petitioner stated, "Since you indicated that your
client did not look favorably upon the foregoing offer
[of paying $200 per day for 41 days], we would like to
pursue a waiver of the penalty upon grounds of financial
hardship. Enclosed herein are financial statements of
the nursing home ....").
The efforts made by the parties pursuant to Petitioner's
waiver request were reported to me in the various Status
Reports filed by HCFA between February and July of 1996.
When Petitioner received copies of those Status Reports,
Petitioner did not inform me that the documents submitted
to HCFA were for compromising the CMP amount by
agreement, as opposed to supporting the request for
waiver. Moreover, I have not used HCFA's exhibits
referencing those financial documents provided by
Petitioner for the purpose of ascertaining Petitioner's
liability for the CMP amount of $4000 per day. Instead,
I have used such exhibits to evaluate the feasibility of
adopting the remand procedure requested by Petitioner.