Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division

DATE: March 2, 1999

In the Case of:

Care Inn of Gladewater,
Petitioner,

- v. -

Civil Remedies Docket No. C-96-210
App. Div. Docket No. A-98-61
Decision No. 1680

FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE RULING

Care Inn of Gladewater (Care Inn, Petitioner) appealed a March 4, 1998 ruling by Administrative Law Judge Mimi Hwang Leahy that Petitioner failed to timely request a hearing to challenge the Health Care Financing Administration's (HCFA) imposition of Civil Monetary Penalties (CMPs) for noncompliance with specified Medicare requirements for long term care facilities. See Care Inn of Gladewater v. HCFA, Ruling Granting HCFA's Motion to Dismiss and Order Dismissing Case. The ALJ determined that Petitioner failed to file a request for a hearing within 60 days after receiving HCFA's notice of determination to impose CMPs, as required by the regulations at 42 C.F.R. . 498.40(a).

Before deciding to impose CMPs, HCFA had proposed to terminate Petitioner's Medicare agreement, and Petitioner had filed a letter seeking a hearing on HCFA's determination. HCFA later rescinded the proposed termination and imposed CMPs based on the same noncompliance findings, but Petitioner did not file a further request for a hearing on HCFA's later determination. The ALJ ruled that Petitioner's letter seeking a hearing on the proposed termination was not sufficient to challenge the subsequent CMPs, because it was filed before their imposition.

In her ruling, the ALJ also noted that Petitioner's letter requesting a hearing on the termination did not comply with the regulations governing the content of hearing requests. The ALJ, however, did not cite this finding as a basis for her ruling, and instead dismissed the case on the grounds related to the timing of Petitioner's filing, discussed above.

Care Inn argued that its April 15, 1996 letter requesting a hearing on the termination was sufficient to appeal the subsequent imposition of CMPs based on the same non-compliance findings. Care Inn also argued that its April 15, 1996 letter complied with the regulations governing the content of hearing requests.

Because the issue concerning the content of Petitioner's filing had not been developed before the ALJ, the Board ordered Petitioner to show cause why the ALJ's dismissal of its appeal should not be upheld based on Petitioner's failure to file a hearing request that complied with the applicable regulatory requirements. The Board's Order noted that even if the Board accepted Care Inn's argument that its April 15, 1996 letter was filed at a proper time to challenge the imposition of CMPs, the ALJ's dismissal could still be sustained on the basis that Care Inn's letter was not a proper request for a hearing under section 498.40(b).

As discussed below, we conclude, based on the rationale in Birchwood Manor Nursing Center, DAB 1669 (1998), and Regency Manor Healthcare Center, et. al., DAB 1672 (1998), that Petitioner's April 15 letter was not a legally sufficient hearing request which would afford Petitioner the right to a hearing. Therefore, the issue of whether that letter was filed at the proper time to challenge the CMPs is ultimately irrelevant. The standard of review on a disputed issue of law is whether the ALJ decision is erroneous. We conclude that the ALJ did not err in determining that Care Inn failed to file a hearing request that complied with the regulations governing the content of requests for hearings at 42 C.F.R. . 498.40(b). We thus affirm the ALJ's dismissal of Petitioner's hearing request, but modify her ruling to reflect the basis of the dismissal.

Applicable regulations

An affected party entitled to a hearing to challenge a HCFA determination, such as a determination to terminate a provider agreement or impose CMPs, must file its request for a hearing within 60 days from receipt of the notice of initial, reconsidered, or revised determination. 42 C.F.R. . 498.40(a). The request for hearing 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. 42 C.F.R. . 498.40(b).

The ALJ may dismiss a hearing request if the affected party did not file a hearing request timely and the time for filing has not been extended for good cause shown. 42 C.F.R. .. 498.40(c)(2), 498.70(c). The dismissal of a request for a hearing is binding unless it is vacated by the ALJ or the Departmental Appeals Board. 42 C.F.R. . 498.71(b). The Board may remand, affirm, modify, or reverse the ALJ's decision. 42 C.F.R. . 498.88.

Background

In a letter dated March 5, 1996, HCFA notified Petitioner that it was not in compliance with Medicare requirements for long term care facilities. The letter stated that Care Inn's Medicare agreement would terminate on June 11, 1996, that payment would be denied for all new Medicare and Medicaid admissions (DPNA) effective March 22, 1996, and that HCFA might impose CMPs of $500.00 per day retroactive to December 11, 1995. The letter stated that HCFA would send Petitioner a separate notice if it decided to impose CMPs. The letter stated that Petitioner could request a hearing before an ALJ by filing a written request no later than 60 days from receipt of the notice, and that Petitioner could appeal the finding of noncompliance which led to an enforcement action, but not the enforcement action or the remedy itself. The letter informed Petitioner that procedures governing the appeal process were set out in section 498.40 of 42 C.F.R.

Care Inn filed an appeal by letter dated April 15, 1996. The letter stated in relevant part:

By letter dated March 5, 1996, the above-referenced facility was advised of its right to request an appeal of the finding of noncompliance by the Texas Department of Human Services. The facility respectfully requests such an appeal. The specific issues with which the facility disagrees are the alleged noncompliance with certification requirements that lead to the threatened enforcement action. The facility intends with this hearing request to preserve its right to challenge the allegation of noncompliance in the event a decision is made to either impose civil monetary penalties or terminate the facility's Medicare agreement, as described in the March 5, 1996, notice letter.

HCFA subsequently informed Petitioner, in a letter dated June 19, 1996, that it was imposing a CMP of $500 per day for the period December 11, 1995 through March 6, 1996, based on Petitioner's "previous non-compliance with Medicare/Medicaid Requirements." The letter stated that "procedures governing the appeals process are set out in .498.40 et seq and are detailed in our letter of March 5, 1996." The letter went on to state that because the deficiencies which were the basis of the proposed termination and DPNA had been corrected, the portion of the March 5, 1996 notice letter imposing those remedies had been rescinded. Again, the letter stated that Care Inn could appeal the finding of noncompliance which led to an enforcement action, but not the enforcement action or the remedy itself.

In a status report sent to the ALJ on July 8, 1996, Petitioner stated that a follow-up survey occurred on June 21, 1996, that proposed penalties had been increased to $1,000 per day, and that Petitioner was in the process of responding to the follow-up survey. Petitioner requested that the proceedings be stayed for another 30 days, and stated that HCFA counsel did not object to the stay.

On July 28, 1997, HCFA moved to dismiss the appeal on the grounds that Petitioner had failed to timely request a hearing to appeal the CMPs and had not demonstrated good cause for its failure to do so.

The ALJ Ruling

The ALJ granted HCFA's motion to dismiss on the basis that Petitioner failed to timely request a hearing to contest HCFA's June 19, 1996 notice of its determination to impose CMPs. The ALJ found that HCFA's June 19, 1996 letter, by rescinding the termination and DPNA, rendered moot Petitioner's April 15, 1996 letter requesting a hearing on the March 5, 1996 notice, and extinguished whatever hearing rights Petitioner may have had pursuant to that request. The ALJ also found that Petitioner acquired no right to challenge the imposition of CMPs by filing its April 15, 1996 letter, because no CMPs had been imposed at the time it was filed. The ALJ held that the statement in HCFA's March 5, 1996 notice that a CMP might later be imposed was not an appealable determination under 42 C.F.R. . 498.3, as a provider does not have the right to file an anticipatory request for a hearing. ALJ Ruling at 4, citing Sharwood Health Center, DAB CR460 (1997). Accordingly, the ALJ concluded, no rights were created by Petitioner's statement in its April 15, 1996 hearing request that it wished to preserve its appeal right.

In a footnote to her ruling, the ALJ stated:

Petitioner's letter dated April 15, 1996 does not comply with the requirements of 42 C.F.R. . 498.40(b) and, therefore, cannot be considered a request for a hearing. For these reasons, Petitioner never acquired any hearing rights under 42 C.F.R. Part 498 through the filing of its letter dated April 15, 1996. However, for the other reasons discussed in this ruling, it is not necessary for me to use Petitioner's failure to comply with 42 C.F.R. . 498.40(b) as a basis for granting HCFA's Motion to Dismiss.

Ruling at 4, n. 2.

In its appeal to the Board, Care Inn took issue with the ALJ's findings regarding the adequacy of its April 15, 1996 letter requesting a hearing. Care Inn developed its position further in response to the Board's Order to Show Cause. Care Inn argued that its letter complied with section 498.40(b) because it stated that Care Inn disagreed with HCFA's findings of noncompliance with the certification requirements underlying the proposed termination. Care Inn also appealed the primary basis for the ALJ's ruling, her determination that Care Inn acquired no rights to challenge the CMP determination through its April 15 letter. However, as noted above, it is not necessary to reach this issue because we find that the April 15 letter was not a legally sufficient hearing request in any event.

The Birchwood Decision

While this case was pending, the Board in Birchwood and Regency sustained the same ALJ's joint order of dismissal of several other appeals on the grounds that the petitioners' letters requesting hearings did not comply with the requirements of section 498.40(b).

In Birchwood, a skilled nursing facility sought a hearing to challenge the imposition of CMPs by submitting a letter stating:

Regarding the above-referenced facility, we hereby request a hearing to contest the remedies, certification issues and any and all remedies and adverse actions recommended as a result of the survey conducted on July 19, 1996, including any and all follow-up surveys which led to the enforcement of this action.

The ALJ's joint ruling, which denied petitioners' motions to strike HCFA's determination letters as deficient, stated that "the documents purporting to be hearing requests do not appear to satisfy the requirements specified in 42 C.F.R. . 498.40" and ordered petitioners "to show cause why the actions should not be dismissed for failure to comply with 42 C.F.R. . 498.40(b)." Birchwood at 6, citing ALJ Ruling. The ALJ subsequently dismissed the facilities' appeals, holding that no hearing requests had been timely filed because the facilities' letters requesting hearings did not comply with section 498.40(b) and thus did not constitute hearing requests within the meaning of the regulation.

The ALJ incorporated by reference the legal analysis and conclusions set forth in her ruling in another case presenting a similar issue, Canton Healthcare Center, Docket No. C-96-266 (December 12, 1997). That ruling stated in part:

The fact that 42 C.F.R. . 498.40(a) sets forth a 60-day filing deadline cannot be logically construed as meaning that an affected party has a right to maintain an action against HCFA because it has filed a piece of paper containing words "request a hearing."

ALJ Ruling at 30.

The Board sustained the ALJ's dismissal in Birchwood. The Board noted that the petitioner's letter seeking a hearing did not identify the specific issues in the case or the findings of fact and conclusions of law with which the petitioner disagreed, and did not specify the basis for contending that the findings and conclusions were incorrect. Since this information is required by section 498.40(b), the Board reasoned, it necessarily follows that a document lacking this information is not a request for hearing. The Board concluded that dismissal by the ALJ was thus appropriate on the grounds that the petitioner had not filed a timely hearing request. Birchwood at 9-10.

The Board in Birchwood found "compelling reasons" for adherence to the clear requirements of the regulations. The Board noted that Part 498 does not require any further submission by a petitioner to identify the disputed issues in a case following the filing of a hearing request, meaning that HCFA might be deprived of the opportunity to prepare adequately for a hearing if the ALJ were to accept as a hearing request a document that did not comply with section 498.40(b). The Board also noted that resolution of a case could be substantially delayed if the ALJ were to permit the petitioner to identify the issues in dispute after accepting a deficient submission as a hearing request. The Board cited the ALJ's observation in Canton that a petitioner's willingness and ability to identify the facts and legal interpretations in controversy served the regulations' reasonable expectation that litigation will be initiated and maintained only for legitimate reasons. Birchwood at 10-12.

Based on the holding in Birchwood, the Board upheld the ALJ's dismissals of the appeals by Regency and the three other facilities for failure to comply with the content requirements of section 498.40(b). Regency Manor Healthcare Center, et al., DAB 1672 (1998).

Analysis

1. Care Inn's letter requesting a hearing did not comply with section 498.40(b).

Care Inn's April 15, 1996 letter was not a legally sufficient hearing request because it failed to comply with the plain language of the regulations that a request for a hearing "identify the specific issues and findings of fact with which a petitioner disagrees" and "specify the basis for contending that the findings and conclusions are incorrect." 42 C.F.R. . 498.40(b)(1), (2).

Care Inn's April 15 letter stated that it disagreed with the "alleged noncompliance findings" underlying HCFA's determination. Care Inn argued that it was clear from the letter that it disagreed with all of the noncompliance findings, and, that by referring to HCFA's March 5 letter, Care Inn specified that the basis of its appeal was that the state survey agency's allegations were false.

While Care Inn's April 15 letter may have permitted the conclusion that Care Inn disputed all of HCFA's findings of noncompliance, Care Inn's failure to specify those findings individually rendered it unable to fully comply with section 498.40(b). Even accepting Care Inn's argument that its April 15 letter identified the issues with which it disagreed, the letter was still not a legally sufficient hearing request because it did not "specify the basis for contending that the findings and conclusions are incorrect." 42 C.F.R. . 498.40(b)(2).

Section 498.40(b) calls for more than a general statement that HCFA's findings have not been proven; i.e., that the noncompliance findings are "alleged." Section 498.40(b) requires that a petitioner specifically state the basis of its disagreement. In Regency, the Board noted that the petitioner's letter seeking a hearing failed to "give any reasons for disputing even the one finding of non-compliance on which Regency alleged HCFA relied." Regency at 9. Here, Care Inn likewise failed to give any reasons for disputing HCFA's noncompliance findings. Care Inn failed to indicate whether, for example, it considered the state agency's survey findings to be factually erroneous, or whether it maintained that the state agency applied incorrect interpretations of law and policy in making its determinations. As the Board observed in Regency, the plain language of section 498.40(b) mandates that a hearing request not only identify "the specific issues and the findings of fact and conclusions of law that the petitioner disputes," but also that it "specify the basis for its position." Id. As Care Inn failed to do the latter, dismissal pursuant to section 498.70(c) was clearly warranted based on the analysis in Birchwood.

Care Inn argued that the ALJ in Life Care Center of Hendersonville, DAB CR542 (1998), held that section 498.40(b)(2) does not require a "bill of particulars" in requesting a hearing. However, in that case there was no allegation that the petitioner's hearing request was fatally defective for failure to comply with the content requirements of section 498.40; rather, the question was whether failure to articulate precisely a legal defense in a hearing request would forever bar the petitioner from asserting that defense. Here, by contrast, Care Inn's request did not specify any basis for its disagreement with the noncompliance findings, and thus failed to meet the threshold standards for the content of hearing requests.

2. Other cited cases do not support reversal.

Care Inn argued that its case was distinguishable from other appeals which were dismissed based on failure to comply with section 498.40(b), and, that the analyses in those cases supported its position.

Care Inn argued that the reasons for requiring adherence to the clear requirements of the regulations that the Board discussed in Birchwood did not apply to its appeal. Care Inn argued that the Board's concern that an incomplete hearing request might deprive HCFA of the opportunity to prepare adequately for a hearing was not applicable because Care Inn contested all of the factual allegations relied on by HCFA, and that HCFA thus knew it had to be prepared to meet its burden of proof as to all of those issues. Similarly, Care Inn reasoned that the ALJ's concern in Canton, which the Board cited in Birchwood, that section 498.40(b) is intended to ensure that litigation be initiated only for legitimate reasons, did not apply because Care Inn has not initiated illegitimate litigation.

The fact that these concerns might not apply to the facts of a particular case provides no basis for overturning an ALJ's dismissal of a hearing request that failed to meet the regulatory requirements. The Board did not base its ruling in Birchwood on a finding that Birchwood had filed illegitimate litigation, or that HCFA had been prejudiced by Birchwood's failure to file a hearing request that complied with the requirements of section 498.40(b). Rather, the concerns cited by the Board in Birchwood supported the Board's interpretation of the regulations as requiring strict adherence by petitioners to the regulations' requirements when filing hearing requests. Care Inn's argument that failure to comply with the regulations should be excused where the concerns cited in Birchwood do not apply would effectively require the ALJ to engage in inquiries to determine whether the litigation is legitimate or whether HCFA has been prejudiced, whenever a petitioner files a hearing request that fails to comply with the regulations. Forcing the ALJ to engage in such an inquiry could result in the very delays that strict adherence to the regulations is intended to avoid.

Care Inn also argued that its April 15, 1996 letter was distinguishable from hearing requests found to be defective in other cases because Care Inn adhered to the instructions in HCFA's determination letter and did not attempt to appeal the proposed enforcement actions. Response to Order at 8-9, citing Birchwood; Sharwood; Canton Healthcare Center v. HCFA, DAB CR443 (1996). This argument is unavailing. There is no indication in those cases that the hearing requests were dismissed because the petitioners might have attempted to appeal the enforcement remedies proposed by HCFA. In Sharwood, the letter requesting a hearing was found not to constitute a legally sufficient hearing request because it was filed before HCFA had even rendered an initial determination, when the facility had no appeal rights. In Canton, the hearing request was dismissed as untimely. While the ALJ in Canton found that the "vague content" of the disputed hearing request precluded it from being considered a timely-filed hearing request under 42 C.F.R. . 498.40, there is no indication that her finding was based on the petitioner's attempt in that case to contest the remedies imposed by HCFA. The fact that Care Inn did not attempt to appeal the remedies proposed by HCFA does not negate its failure to comply with the content requirements of section 498.40(b).

Care Inn also argued that the dismissal of its appeal violated its constitutional right to due process by denying it a hearing prior to the imposition of CMPs. Care Inn cited the Supreme Court's holding that a hearing is required before a person may be deprived of property interests. Wolff v. McDonnell, 418 U.S. 539 (1974); Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123 (1951). However, this due process argument must fail because Care Inn did not file an adequate hearing request that complied with the regulations.

The analyses in the Supreme Court decisions cited by Care Inn are couched in terms of affording a person an opportunity for a hearing. See Wolff, 418 U.S. at 643-49; Joint Anti-Fascist Refugee Committee, 341 U.S. at 161-72. Here, Care Inn failed to avail itself of its opportunity for a hearing by filing within the requisite time frame a request for a hearing that complied with section 498.40(b). The Board has held that a provider which fails to timely request a hearing cannot complain that its due process rights have been violated. Hospicio San Martin, DAB 1554 (1996).

Care Inn also argued that it suffered a due process violation similar to that found in Greene v. McElroy, 360 U.S. 474 (1959). Care Inn characterized that decision as a case of one federal agency imposing a penalty based on another agency's recommendation, which, Care Inn argued, mirrored HCFA's imposition of sanctions based on the state agency's findings. However, the Court's decision in Greene turned on the fact that the hearings in question denied the plaintiff the traditional procedural safeguards of confrontation and cross-examination. 360 U.S. at 493. Here, by contrast, Petitioner would have had the opportunity to confront and cross examine HCFA's witnesses at an ALJ hearing, had Petitioner complied with the regulations mandating the content of requests for hearings.

As part of its due process claim, Care Inn also argued that dismissal of its hearing request would unfairly relieve HCFA of its burden of production since HCFA has not submitted any evidence into the record. Response to Order to Show Cause at 10, citing Hillman Rehabilitation Center, DAB 1611 (1997). Our holding in Hillman does not bar dismissal here. In Hillman, the Board held that HCFA was required to set forth a specific basis for its determination and, if challenged, come forward with evidence establishing its case on any disputed findings. Here, HCFA's notice of determination set forth the basis for its determination by reference to the findings of the state survey agency. HCFA was never faced with its burden of coming forward with evidence on any disputed findings because Petitioner never disputed those findings by filing a legally adequate hearing request.

Finally, Care Inn argued that, to the extent that section 498.40(b) requires a particularized statement of a petitioner's reasons for its disagreement with HCFA's finding of noncompliance, then it is an unconstitutionally vague and invalid regulation. This argument provides no basis for relief before the Board, as the Board has no authority to review the validity of a regulation that was properly promulgated.

Conclusion

We affirm the ALJ's dismissal of Care Inn's request for review, but modify her ruling to reflect that the basis of the dismissal is the ALJ's finding that Care Inn failed to file a timely hearing request that complied with the requirements of 42 C.F.R. . 498.40(b). We make the following findings of fact and conclusions of law:

1. The applicable regulations require that a request for hearing identify the specific issues and the findings of fact and conclusions of law with which the petitioner disagrees, and specify the basis for contending that the findings and conclusions are incorrect. 42 C.F.R. . 498.40(b).

2. Care Inn's April 15, 1996 letter requesting a hearing to challenge HCFA's March 5, 1996 notice of determination of noncompliance did not identify individually the issues or the findings of fact and conclusions of law with which Care Inn disagreed, and did not specify the basis of Care Inn's disagreement with HCFA's findings and conclusions.

3. Care Inn failed to file a timely hearing request that complied with the requirements of section 42 C.F.R. . 498.40(b), and its case is properly dismissed pursuant to 42 C.F.R. . 498.70(c).

Cecilia Sparks Ford

M. Terry Johnson

Donald F. Garrett
Presiding Board Member