Capitol Hill Community Rehabilitation and Specialty Care Center, DAB No. 1629 (1997)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Appellate Division

In the Case of:

Capitol Hill Community Rehabilitation and Specialty Care Center,

Petitioner,

- v. -

Health Care Financing Administration.

Civil Remedies CR469
Decision No. 1629
App. Div. Docket No.A-97-110
DATE: September 18, 1997


FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION

Capitol Hill Rehabilitation and Specialty Care Center
(Petitioner) appealed a March 24, 1997 decision by
Administrative Law Judge Mimi Hwang Leahy. See Capitol
Hill Community Rehabilitation and Specialty Care Center,
DAB CR469 (1997) (ALJ Decision). The Administrative Law
Judge (ALJ) granted summary judgment to the Health Care
Financing Administration (HCFA), which was seeking to
impose a civil money penalty in the amount of $80,400
against Petitioner. The civil money penalty was the
result of findings made during an on-site survey that
Petitioner was out of compliance with various
requirements for participation in Medicare and Medicaid.
The ALJ Decision granted summary judgment on the grounds
that Petitioner, who was challenging only the process by
which the amount of the civil money penalty was
calculated, had not stated a justiciable controversy
which entitled it to a hearing.

For the reasons stated below, we uphold the ALJ Decision
granting summary judgment to HCFA.

Applicable Law

Sections 1819(h)(2)(B) and 1919(h)(3)(C)(ii) of the
Social Security Act provide that the Secretary of Health
and Human Services may impose a civil money penalty (CMP)
not to exceed $10,000 for each day in which a
participating facility is found out of substantial
compliance with Medicare and Medicaid requirements.
The regulations provide that HCFA shall impose a CMP of
$3,050 to $10,000 per day when there are one or more
deficiencies that constitute immediate jeopardy to
patient health or safety. A penalty of $50 to $3,000
per day will be assessed for deficiencies that do not
constitute immediate jeopardy, but either caused actual
harm or caused the potential for more than minimal harm.
42 C.F.R. § 488.438(a). The regulations further provide
that the penalty will be increased for repeated
deficiencies. 42 C.F.R. § 488.438(d)(2).

Any provider who disagrees with a decision to impose a
CMP under these provisions may request a hearing before
an ALJ by filing a request under 42 C.F.R. Part 498
within 60 days of its receipt of notice of the CMP. 42
C.F.R. §§ 488.432(a)(1)(i) and 498.40(a). Under the
regulations, the ALJ's review is limited as follows:

When an administrative law judge or State hearing
officer (or higher administrative review authority)
finds that the basis for imposing a civil money
penalty exists . . . the administrative law judge or
State hearing officer (or higher administrative
review authority) may not --

(1) Set a penalty of zero or reduce a penalty
to zero;

(2) Review the exercise of discretion by HCFA
or the State to impose a civil money penalty; and

(3) Consider any factors in reviewing the
amount of the penalty other than those specified in
paragraph (f) of this section.

42 C.F.R. § 488.438(e). Paragraph (f) lists the four
factors the Administrative Law Judge may consider in
reviewing the amount of the penalty, as follows:

(1) the facility's history of non-compliance,
including repeated deficiencies;

(2) the facility's financial condition;

(3) [factors relating to the seriousness, scope
and number of deficiencies found]; and

(4) [the facility's degree of culpability,
although absence of culpability shall not be a
mitigating factor].

Thus, under the regulations governing these appeals, the
ALJ is limited to considering only whether a basis for
imposing a CMP exists, and, if so, whether the amount of
the CMP is reasonable based on the above factors.

On appeal, the Board's standard of review on a disputed
issue of fact is whether the finding of fact is based on
substantial evidence in the record. Our standard of
review on a disputed legal conclusion is whether the
legal conclusion is erroneous. See Rafael Convalescent
Hospital, DAB 1616 (1997) at 2; Hospicio San Martin, DAB
1554 (1996) at 8.


Facts

At all times relevant to this controversy, Petitioner was
certified as a skilled nursing facility to provide
services under Medicare and as a nursing facility to
provide services under Medicaid. On July 14-21, 1995,
the District of Columbia agency which surveys medical
facilities to determine if they are in compliance with
requirements for participation in the Medicare and
Medicaid programs visited Petitioner's facility. The
survey agency found that there were quality of care
deficiencies which presented an immediate jeopardy to
resident health and safety. Based on these findings,
HCFA notified Petitioner that it was imposing a CMP in
the amount of $4,000 per day. During an
August 9, 1995 revisit to Petitioner's facility, the
survey agency found that Petitioner had taken appropriate
actions to remove the threat of immediate jeopardy to
patients, but still was not in substantial compliance
with Medicare and Medicaid requirements. HCFA notified
Petitioner that it was reducing the amount of the CMP to
$200 per day, effective August 9, 1995. Finally, at
another site visit on August 29-30, 1995, the survey
agency found Petitioner in substantial compliance with
Medicare and Medicaid requirements. HCFA notified
Petitioner that the CMP would cease, effective August 30,
1995. The total CMP HCFA imposed was $80,400.*

It is undisputed that, in determining what HCFA
considered to be a reasonable amount of the CMP, HCFA
never contacted Petitioner directly to inquire about its
financial condition. Instead, HCFA contacted the
District of Columbia Department of Consumer and
Regulatory Affairs, the District's Medicaid agency, and
the fiscal intermediary (which administers the Medicare
program in Petitioner's local area). HCFA asked
representatives at each of these three organizations
whether they had any information indicating that
Petitioner was having financial difficulties, to which
these representatives each answered that they had no such
information.

Before the ALJ, Petitioner's counsel stated that
Petitioner did not dispute the existence of the
deficiencies which led HCFA to impose the CMP. See Order
Establishing Prehearing Briefing Schedule, September 24,
1996, at 1. Rather, Petitioner disputed only the manner
in which HCFA determined the amount of the CMP.
Petitioner asserted that HCFA erred by not considering
sufficient information about Petitioner's financial
condition prior to establishing the amount of the CMP,
and that the sources which HCFA did contact to determine
its financial condition were insufficient as a matter of
law. Petitioner suggested that HCFA should have
contacted it directly to determine its financial
condition. Petitioner's Brief at 2-3 (unnumbered).


The ALJ Decision and Arguments on Appeal

The ALJ Decision was based on 14 Findings of Fact and
Conclusions of Law (FFCLs). In those FFCLs, the ALJ
found that Petitioner was entitled under the regulations
to a hearing on only two issues: whether a basis existed
for HCFA to impose the CMP and, if so, whether the amount
was reasonable. The ALJ found that Petitioner was not
disputing either of those issues: Petitioner had
previously conceded that the basis for the CMP existed,
and Petitioner had not argued any legal theory or
produced any evidence which would show that the amount of
the CMP was unreasonable. (FFCL Nos. 5 and 6). Instead,
Petitioner was arguing only that the process by which
HCFA determined the amount of the CMP was unfair. (FFCL
No. 2). Finding that she did not have the authority to
review the process used by HCFA to determine the amount
of the CMP but only whether the final amount established
by HCFA was reasonable, the ALJ granted summary judgment
for HCFA. (FFCL Nos. 4 and 8).

On appeal to the Board, Petitioner likewise limited its
objection to the process HCFA used to assess Petitioner's
financial condition in setting the amount of the CMP.
Petitioner excepted to only one of the FFCLs, as quoted
here:

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.


ANALYSIS

We agree with the ALJ's reading of 42 C.F.R. § 488.438(e)
and (f). Those two subsections provide that an ALJ's
review is limited to consideration of whether a basis for
imposing an exclusion exists, and, if so, whether the
amount of the CMP is reasonable under the four factors
specified in subsection (f). The subsections do not
authorize an ALJ to review the particular process which
HCFA utilized to establish the amount of the CMP,
including what process HCFA utilized to determine the
financial condition of the provider.

The Board's review authority is also limited by the
provisions of 42 C.F.R. § 488.438(e) and (f). Subsection
(e) specifically limits the scope of review of an
administrative law judge, a State officer, or a higher
administrative review authority. Thus, the Board
likewise may review only whether a basis for imposing the
CMP exists and whether the amount of the CMP is
reasonable based on the factors in subsection (f).

As before the ALJ, Petitioner is not asserting that there
was an insufficient basis for imposing the CMP, nor is
Petitioner asserting that the ALJ erred in finding that
it had conceded that a basis for the CMP existed.
Moreover, Petitioner did not present any argument or
evidence on appeal to the ALJ or to the Board that the
amount of the CMP was unreasonable. Thus, Petitioner has
not disputed the findings or conclusions of the ALJ on
either of the two issues which the Board could consider.

When the matter was pending before the ALJ, the ALJ
stayed the case so that Petitioner could present
financial information to HCFA to support Petitioner's
request for HCFA to waive collection of the CMP. The ALJ
returned the case to active status for briefing, however,
when HCFA reported that Petitioner had not presented HCFA
with all of the information which HCFA requested. (ALJ
Decision at 2, FFCL Nos. 9 and 10, and Discussion Part
III.) Thus, Petitioner had the opportunity to submit
financial information directly to HCFA, yet did not
assert before the ALJ that the amount of the CMP was
unreasonable in light of its financial condition. (FFCL
Nos. 5 and 6.) Before the Board, Petitioner again
pursued only the process issue raised by its exception to
FFCL No. 3.

Moreover, the FFCL to which Petitioner objected contains
only the assertion that 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. This FFCL is not necessary to the
outcome of the decision. Thus, summary judgment would
have been warranted even without FFCL No. 3, since the
ALJ also found that Petitioner challenged only the
procedures used by HCFA, and that she had no authority to
dictate the procedures used by HCFA in setting the amount
of the CMP. Accordingly, any error in FFCL No. 3 would
be harmless error.

CONCLUSION

For the reasons stated above, we uphold the ALJ Decision
granting summary judgment for HCFA. We conclude that the
ALJ Decision was based on substantial evidence on the
record and was not erroneous. We affirm and adopt FFCLs
1-14 in the ALJ Decision.

___________________________
Donald F. Garrett

___________________________
M. Terry Johnson

___________________________
Cecilia Sparks Ford
Presiding Board Member
* The $80,400 was based on the following
calculation:

$4,000 per day x 19 days = $76,000
$ 200 per day x 22 days = + 4,400
TOTAL $80,400