SUBJECT: The Carlton at the Lake

Petitioner,

Centers for Medicare & Medicaid Services

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

On February 19, 2002, The Carlton at the Lake (Carlton) appealed the December 20, 2001 decision of Administrative Law Judge (ALJ) Richard J. Smith dismissing Carlton's hearing request and granting the motion for summary affirmance of the Centers for Medicare & Medicaid Services (CMS).⁽¹⁾ The Carlton at the Lake, DAB CR854 (2001) (ALJ Decision). As explained below, we reverse the dismissal and remand the matter for an expedited hearing.

Legal Background

The regulations governing the conduct of ALJ hearings at 42 C.F.R. Part 498 provide that a request for hearing must be filed within 60 days of receipt of notice of an appealable determination. Section 498.40(a)(2). The contents of the request must -

(1) Identify the specific issues, and the findings of fact and conclusions of law with which the affected party disagrees; and

(2) Specify the basis for contending that the findings and conclusions are incorrect.

Section 498.40(b). The ALJ may extend the filing time "for good cause shown." Section 498.40(c).

A hearing request may be dismissed inter alia if the "affected party did not file a hearing request timely and the time for filing has not been extended." Section 498.70(c). The regulations also provide that--

An ALJ may vacate any dismissal of a request for hearing if a party files a request to that effect within 60 days from receipt of the notice of dismissal and shows good cause for vacating the dismissal.

42 C.F.R. § 498.72. "Good cause" for these purposes is not defined in the statute or regulations and has been the subject of dispute in this and other cases.

Procedural Background and ALJ Decision

The present case arose from a series of surveys conducted at Carlton in 1998. By letter dated August 17, 1998, CMS notified Carlton that it was imposing a CMP totaling $5,550⁽²⁾ for a period of 111 days from April 10, 1998. The notice set out the events leading to the CMP as follows:

On April 10, 1998, a standard survey, and on April 16, a Life Safety Code (LSC) survey were completed at [Carlton] by the Illinois Department of Public Health (IDPH) to determine if your facility was in compliance with the Federal requirements for nursing homes participating in the Medicare/Medicaid programs. These surveys found the most serious deficiency in your facility to be a widespread deficiency in Life Safety Code (LSC) that constituted no actual harm with the potential for more than minimal harm that was not immediate jeopardy whereby corrections were required (K12, Level F). The IDPH previously advised you of the deficiencies which led to this determination and provided you with a copy of the HCFA-2567 [Statement of Deficiencies].

On April 30, 1998, the IDPH informed you that your facility could avoid the imposition of remedies if substantial compliance was achieved by May 25, 1998. [A revisit on June 9, 1998] found the health deficiencies had been corrected, but a LSC revisit had not verified compliance with the LSC deficiencies. The IDPH then conducted an abbreviated standard (complaint) survey at your facility on June 25, 1998. As the IDPH informed you in its letter of July 1, 1998, this survey revealed that your facility continued to not be in substantial compliance, with F309 again being cited not met (Level G). The IDPH has also previously advised you of the deficiencies which resulted in this determination and provided you with a copy of the HCFA-2567.

* * * *

[IDPH recommended remedies but] before these remedies could be imposed, the IDPH conducted a LSC revisit to your facility on July 2, 1998, which determined that substantial compliance with the LSC had been attained but that deficiencies remained at K12 and K71 at Level B. Then, on July 30, 1998, a health revisit was conducted, which found that your facility had attained substantial compliance effective July 30, 1998. . . . [B]ased on the period of time your facility was not in substantial compliance, we are imposing the CMP.

By letter dated August 18, 1998, Carlton sought a hearing to appeal the remedies imposed on it. The text of Carlton's hearing request read in relevant part as follows:

This office has been retained to represent [Carlton] regarding its continued participation in the Title XVIII Medicare Program. Reference is made to the Notice of Imposition of Remedies issued by [CMS] dated August 17, 1998, a copy of which is attached hereto for your reference.

In order to contest the imposition of remedies and the allegations referenced therein, we hereby request that a hearing be scheduled in accordance with 42 CFR 498. The basis for the facility's challenge is that: 1) that the procedures imposed by HCFA violate the facility's constitutionally guarantied [sic] due process rights; 2) that the interpretive guidelines and program letters are invalid because they have not been promulgated pursuant to the Administrative Procedure Act; 3) that the surveyors misapplied applicable laws and interpretive regulations; 4) that the surveyors improperly classified scope and severity levels in the violations; 5) that factual observations made by the surveyors were incorrect; 6) that procedures used to determine the facility's cycle and time for correction were misapplied; 7) that the conditions observed during Life Safety Code Surveys were not deficiencies; and 8) that [CMS] and the State are estopped from requiring building corrections after approving the building annually since 1985.

After this appeal was docketed, the ALJ then assigned to it granted a stay on October 28, 1998 until November 24, 1998 for purposes of settlement negotiation between the parties. On November 24, 1998, Carlton filed a letter indicating that settlement was impossible but that it sought an unopposed extension of the stay until December 31, 1998 to allow the parties to discuss narrowing the issues for hearing.

On March 17, 1999, the parties filed a joint notice of issues which identified a single issue - the adequacy of the hearing request under 42 C.F.R. § 498.40(b). CMS moved that the hearing request be dismissed pursuant to 42 C.F.R. § 498.70(c), or, alternatively, that summary adjudication be granted on the ground that the hearing request did not raise any issue over which the tribunal had jurisdiction or failed to preserve any issue of material fact. The parties agreed to a briefing schedule on this issue, and agreed that they would submit an amended notice of issues in the event that CMS did not prevail on its motion to dismiss and/or for summary adjudication.

On March 19, 1999, CMS filed its supporting brief challenging the adequacy of this hearing request to meet the regulatory requirements. CMS argued that Carlton failed to specifically identify any of CMS's findings or conclusions with which it disagreed. CMS Brief in Support of Motion at 7. Further, CMS argued that Carlton had not set out the bases for its contest because each ground for appeal was fatally lacking in specifics. Id. at 8-10.

On April 16, 1999, Carlton responded by arguing first that its hearing request adequately communicated that it was challenging the factual accuracy of the allegations of the surveyors set out in the surveys cited in HCFA's notice, as well as whether the life safety code findings actually constituted deficiencies, what the scope and severity of the deficiencies were⁽³⁾, and other legal arguments. Carlton Resp. to CMS Motion below at 5-8. Carlton stressed the unfairness of demanding that its initial filing provide a detailed statement of particulars setting rigid bounds to the scope of its appeal when responding to a notice of imposition of remedies from CMS which does not set out any corresponding level of detail. Id. at 8. Carlton pointed out that the CMS notice did not identify any specific deficiencies, factual findings, or bases. Alternatively, Carlton sought either to have a hearing held on new issues that impinge on its rights under 42 C.F.R. § 498.56 or to be permitted to amend its hearing request under 42 C.F.R. § 498.40(c). Id. at 9-10.

CMS filed a reply brief on May 26, 1999. No ruling had been issued on the motion by February 15, 2000, at which time Carlton sought to supplement the record with a Board decision issued on January 12, 2000, in Fairview Nursing Plaza, Inc., DAB No. 1715 (2000), which Carlton read as lending more guidance on the kind of language sufficient to constitute a hearing request. The ALJ did not immediately respond to this request, and on December 7, 2000, Carlton wrote again asking the status of the motion to dismiss in light of the passage of 1½ years since briefing was completed. Again, the record shows no immediate response, and again Carlton wrote with the same question on May 24, 2001.

The case was reassigned to a different ALJ, Richard J. Smith, who issued an order on July 18, 2001 permitting each party a short time to supplement its brief in light of the long delay. Both parties did so on August 3, 2001. The ALJ Decision appealed here dismissed Carlton's appeal on December 20, 2001.

The ALJ made the following six findings of fact and conclusions of law (FFCLs):

1. 42 C.F.R. § 498.40(b) requires that a request for a hearing identify the issues and the findings of fact and conclusions of law with which a petitioner disagrees and specify the basis for the petitioner's position.

2. Petitioner's August 18, 1998 hearing request did not identify the issues and the findings of fact and conclusions of law with which it disagreed, with respect to any issues relating to the surveys of April 10, 1998, April 16, 1998, June 25, 1998, and July 2, 1998.

3. Petitioner failed to file a timely hearing request that complied with the requirements of 42 C.F.R. § 498.40(b) with respect to any issues relating to the surveys of April 10, 1998, April 16, 1998, June 25, 1998, and July 2, 1998; accordingly, Petitioner's hearing request is properly dismissed pursuant to 42 C.F.R. § 498.70(c).

4. Petitioner failed to establish good cause within the meaning of 42 C.F.R. § 498.40(c) which would warrant an extension of time for filing a hearing request.

5. Petitioner has not established a basis for a hearing on new issues pursuant to 42 C.F.R. § 498.56(a).

6. The CMP remedy imposed by CMS, in the amount of $50 per day for 111 days (a total of $5,550), is sustained for the period beginning on April 10, 1998 and continuing through July 29, 1998.

ALJ Decision at 5.

Issues on Appeal

Carlton excepted to all six FFCLs. The core issues underlying the dispute are whether Carlton's initial hearing request should have been dismissed as inadequate and whether Carlton should have been permitted to amend the hearing request.

Standard of Review

Our standard of review of an ALJ decision on a disputed issue of law is whether the ALJ erred. Our standard of review on a disputed finding of fact is whether the ALJ decision is supported by substantial evidence on the record as a whole. See, e.g., Lake Cook Terrace Nursing Center, DAB No. 1745 (2000). The bases for modifying, reversing or remanding an ALJ decision include the following: a finding of material fact necessary to the outcome of the decision is not supported by substantial evidence; a legal conclusion necessary to the outcome of the decision is erroneous; the decision is contrary to law or applicable regulations; or a prejudicial error of procedure (including an abuse of discretion under the law or applicable regulations) was committed. See Guidelines for Appellate Review of Decisions of Administrative Law Judges Affecting a Provider's Participation in the Medicare and Medicaid Programs, ¶4(b), http://www.hhs.gov/dab/guidelines/prov.html; see also Community Nursing Home, DAB No. 1807 (2002).

A number of cases addressing the legal standards applicable to the dismissal of hearing requests have been resolved at the appellate level over the three years during which the present matter has been pending. We first review them here briefly to clarify the applicable standards. We then apply those standards to the dismissal order in the ALJ Decision.

1. The law on dismissal of hearing requests for inadequate content

In a series of decisions, the Board ruled that petitioners could not ignore the regulatory requirements to identify which findings or conclusions underlying a remedy were disputed and on what bases. See Birchwood Manor Nursing Center, DAB No. 1669 (1998), aff'd, Birchwood Manor Nursing Center v. Dep't of Health and Human Servs., No. 98-60695 (5^th Cir. June 29, 1999); Regency Manor Healthcare Center, et al., DAB No. 1672 (1998); Care Inn of Gladewater, DAB No. 1680 (1999). These decisions emphasized that administrative efficiency and the conservation of resources in order to resolve real disputes demanded that a petitioner be able to establish that material issues of fact actually exist and that a dispute be framed with some clarity.

Thereafter, the Board rejected efforts to use these requirements to frustrate the good faith efforts of petitioners to perfect appeals and exercise hearing rights created by the statute. Fairview Nursing Plaza, Inc., DAB No. 1715 (2000); Alden-Princeton Rehabilitation and Health Care Center, Inc., DAB No. 1709 (1999); and rulings in Four States Care Center, Docket No. A-99-66 (June 7, 1999) and Rehabilitation Health Care Center of Tampa, Docket No. A-99-95 (August 16, 1999).⁽⁴⁾ The Board stated that, if the hearing request gave timely notice of a challenge to the factual allegations in the statement of deficiencies and of the basis for challenging them, more detail could be developed by amendment or other record development short of dismissal. The Board emphasized that an ALJ has discretion not to dismiss and should not lightly conclude that a petitioner has failed in its effort to take advantage of its opportunity for a hearing.

In a recently-issued decision, the Board elucidated the weight to be given to realizing statutory hearing rights as against the use of dismissal as a tool for the strict enforcement of the regulatory requirements for the content of valid hearing requests. We held that the discretion to decline to dismiss a hearing request based on the inadequacy of its content under the regulations "must be exercised with a view to achieving the ends of the content requirements while preserving hearing rights for those affected parties seeking in good faith to exercise them." Alden Nursing Center - Morrow, DAB No. 1815, at (2002). Our decision in Alden - Morrow rested on the concept that an appeal by an affected party from an allegedly erroneous decision is not to be defeated by "gamesmanship" or hyper-technical procedural strictures. Thus, the Board stated that "[w]hile these proceedings are unquestionably adversarial processes, the government's interest ultimately lies in the factual and legal accuracy of its determinations affecting providers of services to vulnerable beneficiaries, not merely in victory in litigation by any means permissible." Alden - Morrow at 12. Assuring that federal funds serve the fundamental purpose of the federal health care programs funding for nursing homes requires equally that deficient providers be identified and brought into compliance and that compliant providers not divert resources from providing services to paying penalties imposed in error. Our approach embodies this philosophy.

2. Application of legal standards to the present case

We next address the ALJ's evaluation of the content of Carlton's hearing request and his decision to dismiss the case. We conclude that, in the context of the notice to which Carlton was responding, the hearing request was at least adequate to preserve Carlton's hearing rights. Further, we conclude that, to the extent the hearing request failed to provide sufficient notice of the intended scope of the issues for hearing, the ALJ should have chosen other remedies, short of outright dismissal, to effectuate the regulatory purposes.

The ALJ discussed the appellate cases issued as of the time of his decision and noted that he was required to "determine whether the language of Petitioner's hearing request, when read in the context of CMS's notice, meets the requirements set forth in the plain language of 42 C.F.R. § 498.40(b)," and only if the language fails to do so in that context, was he to then consider whether to exercise discretion to dismiss or not. ALJ Decision at 6. We agree that the hearing request can only be meaningfully evaluated in light of the notice to which it responds. We disagree with the ALJ's evaluation of that context in this case.

The ALJ stated that the bases set out in the hearing request might be "minimally adequate" if the specific findings of fact at issue were identifiable but found that he could not determine that from the hearing request because the CMS notice letter referred to "two health surveys (April 10 and June 25, 1998) and two Life Safety code surveys (April 16 and July 2, 1998)" and stated that each "of these four surveys cited deficiencies." ALJ Decision at 8. While the multiple surveys cited in the notice certainly add to the problem of framing the issues in this case, we conclude that the difficulty is attributable at least as much to the ambiguity in CMS's notice letter itself as to the hearing request. In this regard, this case illustrates especially vividly a persistent problem that has become evident in applying the content requirements for hearing requests to the documents exchanged in the real world of surveys, statements of deficiencies, and notices imposing remedies.

The CMS notice referred to only two HCFA-2567 forms having been sent to Carlton previously. The CMS notice did not itself contain findings of fact or conclusions of law and did not identify specific deficiencies from specific surveys on which the CMP was based but contained only the allegation that the CMP was for the period in which the facility was not in substantial compliance. In fact, the surveys described in the CMS notice in this case were both more numerous and less clear in their outcomes and relation to the remedy imposed than is clear from the ALJ's summary. Thus, the CMS notice referenced the following surveys with the following results:

Confronted with this CMS notice, Carlton might have assumed that CMS agreed with every factual allegation in every deficiency finding in each of the IDPH HCFA-2567s.⁽⁵⁾ It might have also assumed that CMS based the CMP on every one of these deficiency findings. On those assumptions, Carlton might have elaborated on its particular objections to the facts, legal interpretations, and conclusions in relation to each factual allegation in each deficiency finding in each survey which it disputed. Certainly, such a hearing request would have fully carried out the regulatory requirement. There is no basis in the regulation, however, for requiring a petitioner to make such a burdensome set of assumptions as a jurisdictional hurdle to perfecting an appeal right. Where the notice of imposition of remedies does not set out findings of fact and conclusions of law, furthermore, it is much harder to demand that the petitioner in its turn be specific in identifying its disagreement with them.

This is not to say that petitioners cannot be required to clarify and articulate their disagreement with the bases for CMS's actions. The ALJ understandably was concerned that the lack of clear referents in the CMS notice presented problems not presented in the hearing request in the Fairview case. ALJ Decision at 7, discussing Fairview Nursing Plaza, DAB No. 1715, at 13. In Fairview, the broad challenge to "all" the findings was sufficiently clear to identify all the findings on which CMP there relied. Here, Carlton did not use the words "all" or "each," though, as the ALJ recognized, its phrasing could be read to imply an intent to challenge all the allegations leading to the CMP, but for the problematic vagueness as to which allegations of which surveys that might encompass.

We find, however, that the solution to this problem does not lie in dismissal, with its resultant complete deprivation of hearing rights. It is well within the authority of the ALJ to require bills of particulars from either party as appropriate, to require amendment of the hearing request, to conduct pre-hearing proceedings to frame the dispute, and to take other steps to assure that the issues are clearly posed before hearing time is spent elucidating the material facts needed to resolve them.

We conclude that the ALJ should have exercised discretion to accept the hearing request as adequate to preserve a right to hearing in the context of this case (and then required any appropriate further clarification from Carlton by other means) or, alternatively, should have granted Carlton's request to permit it to amend its hearing request.

It must be said finally that the over-strict application of the regulatory requirements for a timely and valid hearing request is especially troubling in the face of the procedural history of this case. One day after the date on CMS's notice, Carlton sought a hearing to challenge it. A wait of close to three years to be told that the request was unacceptable raises some troubling implications for the fairness of the appeal process. Consequently, the ALJ should expedite the hearing in this matter as much as possible to prevent any further delay.

Conclusion

For the reasons explained above, the ALJ Decision is reversed, the FFCLS therein are vacated in their entirety, and the matter

is remanded for further proceedings consistent with the instructions herein.

Donald F. Garrett

Marc R. Hillson

M. Terry Johnson
Presiding Board Member

1. CMS was previously named the Health Care Financing Administration (HCFA). See 66 Fed. Reg. 35,437 (July 5, 2001). We use "CMS" in this decision unless we are quoting documents that refer to HCFA.

2. CMS's notice letter was inconsistent regarding the CMP amount in that it referred to a $50 per day CMP but a total of $11,000 for 111 days. The ALJ resolved this inconsistency by concluding that the total was in error and CMS has not appealed this conclusion, so we accept $5,550 as the amount imposed. See ALJ Decision at 2, n.2, and 12-13.

3. This issue appears to be moot at this point. The scope and severity of the deficiency findings were challenged in relation to whether the amount of the CMP imposed was reasonable. Since the ambiguity in the notice about the CMP amount has now been resolved in Carlton's favor at the minimum $50 per day amount, the reasonableness of the amount is no longer subject to challenge if CMS is found to have had a basis to impose a CMP during the period in question.

4. The two cited rulings have been published as attachments to Lakewood Plaza Nursing Center , DAB No. 1767 (2001).

5. It is not clear from the CMS notice which surveys generated the 2657s to which the notice refers, but it appears that there was one for the April surveys and one for the June 25, 1998 survey.