Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
New Castle Health and Rehabilitation Center,
Centers for Medicare & Medicaid Services
Docket No. C-20-150
Ruling No. 2022-1
For the reasons set forth below, I conclude that Petitioner, New Castle Health and Rehabilitation Center, has waived its right to a hearing before an Administrative Law Judge. Because Petitioner has no right to a hearing, I dismiss its hearing request pursuant to 42 C.F.R. § 498.70(b).
Petitioner has waived its right to a hearing pursuant to 42 C.F.R. § 488.436 and may not rescind that waiver.1
The Social Security Act (Act) sets forth requirements for nursing facilities to participate in the Medicare program and authorizes the Secretary of Health and Human Services to promulgate regulations implementing those statutory provisions. Act § 1819. The Secretary’s regulations are found at 42 C.F.R. Part 483. To participate in the Medicare program, a nursing facility must maintain substantial compliance with program requirements. To be in substantial compliance, a facility’s deficiencies may pose no
greater risk to resident health and safety than “the potential for causing minimal harm.” 42 C.F.R. § 488.301.
The Secretary contracts with state survey agencies to survey skilled nursing facilities in order to determine whether they are in substantial compliance. Act § 1864(a); 42 C.F.R. § 488.20. Each facility must be surveyed annually, with no more than fifteen months elapsing between surveys, and must be surveyed more often, if necessary, to ensure that identified deficiencies are corrected. Act § 1819(g)(2)(A); 42 C.F.R. §§ 488.20(a), 488.308. The state agency must also investigate all complaints. Act § 1819(g)(4).
Petitioner here is a long-term care facility located in New Castle, Delaware, that participates in the Medicare program. Based on a survey completed on July 23, 2019, the Centers for Medicare & Medicaid Services (CMS) determined that the facility did not comply with multiple program requirements, including 42 C.F.R. § 483.25(i) – quality of care: respiratory care – which CMS cited at scope and severity level “J” (isolated instance of substantial noncompliance that poses immediate jeopardy to resident health and safety). CMS Ex. A at 1.
In a notice letter, dated October 4, 2019, CMS advised the facility that it was imposing a per-instance civil money penalty (CMP) of $20,930 for the deficiency cited under section 483.25(i). CMS Ex. A at 2. The letter also advised the facility of its appeal rights, explaining that, if the facility requested a hearing, CMS would collect the full amount of the CMP and hold it in escrow, pending a final administrative decision. Citing 42 C.F.R. § 488.436, the letter explained that the facility could waive its right to a hearing, reducing the amount of the CMP by 35%. The letter warned that, by waiving, the facility admits that the deficiency for which the penalty is imposed is valid. To waive its hearing rights, the letter instructed the facility to submit a written request for waiver within 60 calendar days from the date it received the notice. CMS Ex. A at 2-3.
On November 19, 2019, the facility submitted its written waiver of its right to a hearing and requested the 35% reduction in the CMP, reducing the penalty amount to $13,604.50. CMS Ex. B.
In a letter dated November 25, 2019, CMS acknowledged the waiver and advised the facility that the total CMP amount was $13,604.50, due and payable on December 20, 2019. CMS Ex. C at 1. The letter warned that, pursuant to 42 C.F.R. § 488.442, CMS would assess interest on any unpaid balance beginning on the due date. The rate of interest would be 10.125%. CMS Ex. C at 2.
On November 26, 2019, the facility paid the reduced penalty in full. CMS Ex. D.
Notwithstanding its waiver, the facility subsequently changed its mind, and, on December 3, 2019, it requested a hearing.
The regulations allow for waiver but do not provide for rescinding that waiver. Petitioner nevertheless argues that the facility’s waiver does not preclude it from requesting a hearing, so long as it does so within the 60-day deadline. According to Petitioner, the purpose of the waiver provision is to save the time and expense of litigation. Thus, to get the 35% reduction, a facility may not request a hearing, triggering CMS to initiate work on the case, and subsequently request waiver, claiming the 35% reduction. In Petitioner’s view, these same concerns do not exist where, as here, the waiver request is filed and subsequently rescinded.
But Petitioner looks at only one half of the equation. The drafters of the waiver regulation also recognized that, by allowing for waivers, CMS increases its own costs in the forms of increased record-keeping and reporting. Nevertheless, the agency reasoned that these costs would be offset by reduced litigation costs, including the “considerable investment of time necessary to prepare for and participate in a hearing.” 59 Fed. Reg. 56,116, 56,201 (Nov. 10, 1994). The drafters carefully balanced these relative costs, arriving at the 35% reduction amount based on states’ experiences as to increased administrative costs offset by the savings in litigation costs. Allowing providers to invoke but then rescind waiver defeats the purposes of the waiver provision. CMS incurs the costs of increased record-keeping and reporting – in fact, those costs are likely higher because of the efforts to rescind – and the litigation costs.
Moreover, Petitioner points to no reason why this waiver should not be binding. The facility has enjoyed the benefits of the waiver – it paid a lower CMP and avoided putting the full penalty amount into escrow. Its waiver was voluntary, deliberate, and informed. Enforcing the waiver undermines no compelling public policy. See Town of Newton v. Rumery, 480 U.S. 386 (1987). So long as a party acts knowingly and voluntarily, which the facility did here, an appeal waiver is enforceable. See United States v. Toth, 668 F.3d 374, 378 (6th Cir. 2012).
Petitioner therefore has no right to an ALJ hearing, and I may dismiss its hearing request. 42 C.F.R. § 498.70(b). I therefore grant CMS’s motion.
Carolyn Cozad Hughes Administrative Law Judge
1. I make this one finding of fact/conclusion of law.
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