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Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
IN THE CASE OF  


SUBJECT:

Desert Knolls Convalescent Hospital,

Petitioner,

DATE: March 9, 2001
                                          
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Health Care Financing Administration

 

Civil Remedies Docket Nos.C-00-42 & C-00-431
Docket No. A-01-3
Decision No. 1769
DECISION
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FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

By letter dated September 29, 2000, Desert Knolls Convalescent Hospital (Desert Knolls) appealed an order dated July 25, 2000 issued by Administrative Law Judge (ALJ) Alfonso J. Montano (ALJ Order). The ALJ dismissed Desert Knoll's request for a hearing on the grounds that he lacked jurisdiction. We reverse the ALJ Order and remand the case for further proceedings.

Background

Desert Knolls sought an expedited hearing to challenge deficiency findings made after a survey completed July 26, 1999 of its facility (located in Victorville, California). The State survey agency determined that the deficiencies constituted substandard quality of care.

The Social Security Act (Act) prohibits approval of a nurse aide training and certification evaluation program (NATCEP) at any facility "which, within the previous two years - . . . has been subject to an extended survey," which would be triggered by any finding of substandard quality of care. Act, § 1819(f)(2)(B)(iii)(I); see also § 1919(f)(2)(B)(iii)(I). HCFA's regulations implementing this requirement required state survey agencies to withdraw approval of a NATCEP for any facility subjected to an extended survey in the preceding two years. 42 C.F.R. § 483.151(e). Consequently, the State withdrew its approval of Desert Knolls's NATCEP.

Prior to July 23, 1999, HCFA's regulations expressly denied federal hearing rights to facilities seeking to appeal deficiency findings leading only to loss of approval for NATCEP. Appealable initial determinations included "a finding of noncompliance that results in the imposition of a remedy specified in § 488.406, except the State monitoring remedy and the loss of the approval for a nurse-aide training program." 42 C.F.R. § 498.3(b)(12) (1998); see also 42 C.F.R. § 498.3(d)(10)(iii)(1998).

On July 23, 1999, HCFA amended its regulations to include among the appealable initial determinations --

(13) The level of noncompliance found by HCFA . . . but only if a successful challenge on this issue would affect . . . [a] finding of substandard quality of care that results in the loss of approval [for a NATCEP]; and

(15) The finding of substandard quality of care that leads to the loss of [approval for a NATCEP].

64 Fed. Reg. 39,934, 39937 (July 23, 1999), amending 42 C.F.R. § 498.3(b)(13) and (b)(15)(2000); see also amended version of 42 C.F.R. § 498.3(d)(10)(iii)(2000).

The ALJ concluded that no initial determination by HCFA existed in the present case, because both the survey and the resulting loss of NATCEP approval took place at the State level without any direct action by HCFA to impose the loss of NATCEP. This appeal followed.

Discussion

HCFA initially sought to have the appeal to the Board dismissed as untimely. After permitting HCFA to file a motion and receiving briefing on this issue, we found that the appeal was filed timely in accordance with the governing regulations. HCFA's position had been based on the premise that Desert Knolls received the ALJ Order by fax on the day it was issued. This position was based on a declaration by HCFA counsel, essentially stating that HCFA received the ALJ Order by fax (facsimile transmission) on that date and that he had spoken to a staff member of the Civil Remedies Division who, according to HCFA counsel, indicated that she would have faxed it to both parties at the same time. Therefore, HCFA believed that counsel for Desert Knolls must have received the ALJ Order by fax on the same day on which HCFA counsel said that he had. Counsel for Desert Knolls stated that they had not received a faxed copy, but only a mail copy, and had no record of any fax nor any reason to be on notice that the ALJ Order might have been faxed. The official case record showed no evidence of the ALJ Order having been faxed to Desert Knolls or its counsel. Therefore, the receipt date was, in accordance with the regulations, presumed to be five days after issuance of the ALJ Order since no showing was made of another date of actual receipt.(1)

Having denied HCFA's motion to dismiss, we set a schedule for briefing, and for response to questions which we had previously sent out to clarify the issues. HCFA then submitted a brief receding from the position taken before the ALJ that a loss of NATCEP is appealable under the new regulations only if the determination resulting in the loss is issued by HCFA directly. HCFA Response Br. at 5. Counsel for HCFA explained that HCFA had recently "examined the actual practices of State survey agencies in initiating extended surveys based on a finding of substandard quality of care" and found that it was not unusual for extended surveys to take place "without involving HCFA." Id. at 5; see also attached Declaration of Joseph Stein and memorandum from Senior Attorney Jeffrey Golland. In such cases, approval for NATCEP would be lost, and, if the facility returned to substantial compliance without HCFA imposing any remedies, no determination would be made by HCFA. Id. HCFA asserted that its examination had convinced it to change its policy, and no longer "contest jurisdiction when such cases come before" the DAB, because "denying a facility a right to hearing when NATCEP is lost under such circumstances would not be consistent with the intent of 42 C.F.R. § 498.3(b)(16)." Id. HCFA's brief referenced a "clarifying memorandum" to this effect issued on February 15, 2000. Id.

Upon request by the Presiding Board Member, HCFA submitted this clarifying memorandum (reference number S&C 01-01). This memorandum was issued by the Director of HCFA's Survey and Certification Group at the Center for Medicaid and State Operations, to all State survey agency directors and to HCFA's associate regional administrators, to be effective immediately. The pertinent part of the memorandum (with original emphasis) is set out below:

It has come to our attention that Medicare-certified, or dually-certified nursing homes may not be receiving hearings to challenge their loss of authority to conduct a [NATCEP] even when they have sought such hearings. We wish to clarify the requirements of the regulations that provide for such hearings to make sure that we are implementing them in a proper and consistent fashion.

* * *

Appeal Rights When Loss of NATCEP occurs without other remedies imposed. - There are instances where a Medicare-certified, or dually-certified nursing home has been found to have provided substandard quality of care, but has not experienced any other adverse consequences other than the loss of its ability to conduct NATCEP. In these cases where no remedies have been imposed, some facilities may have sought review of the SQC determination before an Administrative Law Judge of the Departmental Appeals Board, but have been denied that review because there has been no action taken by HCFA against the facility. These situations do give rise to a hearing under Part 498 even though it is the State that is the responsible party for removing the approval of the facility to conduct NATCEP at the facility. When HCFA makes a determination of SQC that leads to the loss of NATCEP, this determination does give rise to a hearing under Part 498.

Under the regulations, it is the State, not HCFA, that acts to deny (or withdraw) approval of a nursing home's NATCEP program. While the hearings authorized under Part 498 are directed at actions initiated by HCFA, they are expressly designed to confer hearing rights on Medicare-certified, or dually-certified nursing homes that lost their NATCEP authority even where no other Federal remedies have been imposed. If we were to read the appeals regulations at Part 498 to permit challenges to a loss of NATCEP only when such losses are a result of actions taken by HCFA, these hearing rights would never be triggered since it is not HCFA that takes these actions. This is not a result that was intended by the NATCEP appeals regulation that was published on July 23, 1999 . . . .

In light of this clarification of the meaning of the NATCEP appeal regulations, HCFA no longer opposed Desert Knolls' request for hearing.

As HCFA's clarification explains, denying review of substandard quality of care findings that result in loss of NATCEP whenever HCFA has not actively intervened to impose another remedy would be inconsistent with the regulatory revision intended to provide "an opportunity for an evidentiary hearing if [a facility] loses its approved nurse aide training program." 64 Fed. Reg. at 39,935. Loss of NATCEP differs from most enforcement remedies in that it is triggered automatically by the extended survey rather than requiring a discretionary determination by HCFA about which remedy or remedies to impose and for what period. The regulations are intended to provide a federal hearing right when NATCEP approval is lost.

We therefore determine that Desert Knolls is entitled to a hearing on the merits.

Conclusion

For the reasons explained above, we vacate the ALJ Order and remand the case to the ALJ for hearing and other proceedings consistent with this decision.

 

JUDGE
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Judith A. Ballard

M. Terry Johnson

Donald F. Garrett
Presiding Board Member

FOOTNOTES
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1. We also rejected HCFA's baseless request to engage in a search of records from the Board's Civil Remedies Division and from the office of Desert Knolls's counsel in an effort to find some documentation to support the theory set out in the declaration by HCFA counsel.

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