The Springs at the Watermark, DAB CR5172 (2018)

Department of Health and Human Services
Civil Remedies Division

Docket No. C-18-1060
Decision No. CR5172


I deny the application for attorneys’ fees and expenses (Application) of Petitioner, The Springs at the Watermark. 

I.  Background

Petitioner filed the Application pursuant to the Equal Access to Justice Act (EAJA), 5 U.S.C. § 504, and implementing regulations at 45 C.F.R. § 13.1 et seq.  The Application arises from my decision in The Springs at the Watermark, DAB CR5064 (2018).  The Centers for Medicare & Medicaid Services (CMS) filed a brief opposing the Application (Opposition).  Petitioner then filed a reply brief and CMS moved to strike that brief.1

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II.  Issues, Findings of Fact and Conclusions of Law

A. Issue

The issue is whether CMS’s litigation position in The Springs at the Watermark was substantially justified.

B. Findings of Fact and Conclusions of Law

The Springs at the Watermark adjudicated a determination by CMS to impose daily civil money penalties against Petitioner, a skilled nursing facility, for immediate jeopardy level noncompliance with Medicare participation requirements.  CMS determined to impose daily penalties against Petitioner based on findings and recommendations emanating from a survey conducted by the Pennsylvania Department of Health (state survey agency).  CMS’s determination found immediate jeopardy level noncompliance beginning on September 12, 2016, and ending on February 3, 2017.  The total penalties that CMS determined to impose based on these immediate jeopardy noncompliance findings exceeded $1 million.

In my decision I sustained CMS’s determination that Petitioner manifested immediate jeopardy level noncompliance beginning September 12, 2016.  However, I disagreed with CMS’s determination of the duration of that noncompliance, finding that Petitioner took remedial measures on its own initiative that abated the immediate jeopardy on September 14, 2016.  I imposed immediate jeopardy level civil money penalties against Petitioner, but only for the September 12-14, 2016 period.  My decision substantially reduced Petitioner’s liability, from in excess of $1 million, as CMS determined to impose, to $26,373.

Neither Petitioner nor CMS appealed my decision and that decision is now administratively final.

Petitioner predicates its application on the disparity between the penalty CMS determined to impose and the penalty amount that I imposed.  Petitioner contends that it is entitled to attorneys’ fees because:

CMS’ demand for a . . . CMP . . . is substantially in excess of the final decision’s . . . CMP and is unreasonable in comparison . . . .

Application at 2.  As Petitioner states it, the test for awarding EAJA attorneys’ fees and expenses is whether the initial penalty determination by CMS is “substantially in excess” of what is ultimately awarded and is therefore unreasonable in comparison with that final

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award.  Effectively, Petitioner reduces the test for awarding EAJA attorneys’ fees and expenses to a straightforward and simple comparison of the penalty amount initially determined by CMS against what is ultimately imposed.  Under Petitioner’s analysis a large disparity between what is demanded and what is imposed would always be a basis for the awarding of EAJA attorneys’ fees and expenses.

That misstates the legal test for whether EAJA attorneys’ fees and expenses are justified in a case.  The analysis of whether attorneys’ fees and expenses ought to be awarded begins with a comparison between what penalties CMS determined to impose and what an administrative law judge ultimately imposes.  But, it does not end there.  There is another factor that must be considered in every case in which EAJA attorneys’ fees and expenses are sought, and that is whether CMS’s position in the case is unreasonable based on the evidence and the parties’ arguments.  CMS’s position may be determined to be reasonable even if it ultimately loses the case on the merits, or even if an administrative law judge ultimately imposes a small percentage of the penalty amount that CMS originally determined to impose.

EAJA and implementing regulations state a two-step test for deciding whether EAJA attorneys’ fees and expenses are merited.  First, CMS’s penalty determination must be for an amount that substantially exceeds that which ultimately is awarded.  Second, that demand must be unreasonable when measured against the facts and circumstances of the case.  EAJA states that attorneys’ fees and expenses may be ordered:

If, in an adversary adjudication . . . the demand by the agency is substantially in excess of the decision of the adjudicative officer and is unreasonable when compared with such decision, under the facts and circumstances of the case . . . .

5 U.S.C. § 504(a)(4) (emphasis added).  Implementing regulations restate this test.  A party may be awarded attorneys’ fees and expenses pursuant to EAJA only where the demand “substantially exceeded the ultimate decision and was unreasonable when compared with that decision.”  45 C.F.R. § 13.5(a) (emphasis added).  Attorneys’ fees and expenses may only be awarded where the demand leading to a proceeding “was substantially in excess of the ultimate decision in the proceeding, and that demand is unreasonable when compared with that decision, given all the facts and circumstances of the case.”  45 C.F.R. § 13.5(c)(1) (emphasis added).

There is a substantial disparity between the penalty amounts that I ultimately determined to impose against Petitioner and the amounts that CMS originally determined to impose.  That satisfies the first step of the two-step test for awarding attorneys’ fees and expenses.  However, I find that the second step of the test is not met here.  CMS’s determination was reasonable based on the evidence available to CMS at the time that CMS made that determination and throughout the litigation on which I based my decision.  That I

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ultimately disagreed in part with CMS’s determination is obvious, but my disagreement with CMS’s determination and the fact that I ultimately awarded substantially less in penalties than CMS determined to impose does not render CMS’s litigating position unreasonable.

I found in favor of Petitioner on the issue of duration of noncompliance based on the totality of the record before me.  Petitioner offered much of that evidence towards the end of case development.  CMS’s litigating position may have been unpersuasive in part based on the entire record of the case but it never was unreasonable.

CMS based its initial determination to impose civil money penalties against Petitioner predicated on the statement of deficiencies that the state survey agency prepared after investigating the circumstances at Petitioner’s facility.  It was reasonable for CMS to rely on those findings, which led to a conclusion that Petitioner was noncompliant with participation requirements at the immediate jeopardy level of noncompliance.  Indeed, in my decision, I relied on those findings in part to find immediate jeopardy level noncompliance.  CMS was not required to look behind the state survey agency findings or to independently investigate those findings before determining to impose penalties.  Park Manor Nursing Home, DAB No. 2005 at 15 (2005).

It is unnecessary that I restate the findings of the statement of deficiencies here.2   Suffice it to say that it spelled out Petitioner’s noncompliance in detail.

I based my findings as to the duration of Petitioner’s noncompliance, which were the linchpin of my decision to impose civil money penalties that were substantially less than those that CMS initially determined to impose, largely on evidence generated by Petitioner after the completion of the survey report (i.e. the statement of deficiencies) and not made available to CMS until Petitioner filed a pre-hearing exchange of proposed exhibits and a brief.3   In fact, I found Petitioner’s hearing request to be deficient in spelling out Petitioner’s litigation position and I took the unusual step of requiring Petitioner to file its pre-hearing exchange first, reversing the usual order in which CMS goes first.  Thus, CMS could not have known about Petitioner’s evidence and arguments at the time that it made its determination to impose penalties.  Furthermore, Petitioner offered additional evidence – some of which affected my decision – after CMS made its pre-hearing exchange in response to Petitioner’s initial exchange.

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For example, late in the litigation process, Petitioner offered exhibits that went to the heart of the duration of noncompliance issue.  CMS’s determinations of noncompliance and duration centered around Petitioner’s failure to take reasonable measures to protect against demented residents of its facility eloping from the premises.  The surveyors who conducted the survey that led to CMS’s noncompliance and penalty determinations found that Petitioner’s premises were vulnerable to elopement because, among other things, fire doors were easily accessible to residents, alarms were inadequately monitored, and staff did not respond appropriately to possible elopements.  Petitioner did not offer exhibits that related to these issues until it supplemented its pre-hearing exchange two months after it had already filed its exchange.  Petitioner’s Motion to Supplement; P. Ex. 23-P. Ex. 29.

The totality of the record supported CMS’s litigating position even if it did not ultimately sustain it.  The record when considered in its entirety substantially justified CMS’s position.

  • 1. I find it unnecessary that I rule on CMS’s motion to strike.  I do not find the arguments or additional facts that Petitioner offered in its reply brief to be persuasive.
  • 2. The statement of deficiencies is in the case record of Docket No. C-17-1019 as CMS Ex. 1.  Departmental Appeals Board Electronic Filing (DAB E-File) Item # 11c.
  • 3. I decided the case based on the parties’ pre-hearing exchanges, including opening and final briefs, after the parties waived an in-person hearing.