SUBJECT: Ridge Terrace,

Petitioner,

Centers for Medicare & Medicaid Services

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

Ridge Terrace appealed a February 4, 2002 decision by Administrative Law Judge (ALJ) Steven T. Kessel sustaining the determination of the Centers for Medicare & Medicaid Services (CMS) to impose civil money penalties (CMPs) for the period beginning January 12, 2000 and ending March 26, 2000, but reducing the amounts of the CMPs.⁽¹⁾ CMS had imposed a CMP of $3,950 per day for the period January 12 - 26 and a CMP of $700 per day for the period January 27 - March 26 based on surveys conducted by the Ohio Department of Health, the State survey agency. Those surveys found that Ridge Terrace was not in substantial compliance with several Medicare participation requirements and, for the period January 12 - 26, that there was a deficiency that posed immediate jeopardy to resident health and safety. For the reasons discussed below, we find that the ALJ's findings of deficiencies and of the immediate jeopardy posed by one deficiency are supported by substantial evidence. However, we conclude that the ALJ erred in his determinations of what constituted a reasonable CMP amount for the non-immediate jeopardy deficiencies because he did not consider Ridge Terrace's arguments and evidence with respect to its financial condition.

Accordingly, we reverse the ALJ's Findings of Fact and Conclusions of Law (FFCLs) numbered 4 and 5 and remand the case to the ALJ to issue a revised decision addressing this factor. The Board could consider the arguments and evidence in the ALJ record regarding Ridge Terrace's financial condition in the first instance without remanding to the ALJ. See 42 C.F.R. § 498.88. However, we have determined that a remand is appropriate since much of the evidence provided by both parties is testimonial in nature and the credibility of witnesses is therefore at issue.

Legal Background

The regulatory requirements for long-term care facilities are set forth at 42 C.F.R. Part 483. At issue in this case are several specific requirements under the general "quality of care" requirement at section 483.25, which provides:

Each resident must receive and the facility must provide the necessary care and services to attain or maintain the highest practicable physical, mental, and psychosocial well-being, in accordance with the comprehensive assessment and plan of care.

Compliance with these requirements is determined through the survey and certification process, set out at 42 C.F.R. Part 488, Subpart E. Surveys are generally conducted by a state survey agency under an agreement with CMS. Subpart F of Part 488 specifies the remedies that may be imposed by CMS based on a finding that a facility is not in substantial compliance with the requirements.

The regulations define "substantial compliance" as "a level of compliance with the requirements of participation such that any identified deficiencies pose no greater risk to resident health or safety than the potential for causing minimal harm." 42 C.F.R. § 488.301.

One of the available remedies is a CMP. For deficiencies that constitute immediate jeopardy, a CMP in the range of $3,050 - $10,000 per day of noncompliance may be imposed. 42 C.F.R.
§ 488.438(a)(1)(i). For deficiencies that do not constitute immediate jeopardy, but either caused actual harm or caused no actual harm but have the potential for more than minimal harm, a CMP in the range of $50 - $3,000 per day may be imposed. 42 C.F.R. § 488.438(a)(1)(ii).

"Immediate jeopardy" is defined as -

a situation in which the provider's noncompliance with one or more requirements of participation has caused, or is likely to cause, serious injury, harm, impairment, or death to a resident.

42 C.F.R. § 488.301.

The factors to be taken into account in setting the amount of a CMP are --

(1) The facility's history of noncompliance, including repeated deficiencies.

(2) The facility's financial condition.

(3) The factors specified in § 488.404 [relating to the seriousness of the deficiencies].

(4) The facility's degree of culpability. . . .

42 C.F.R. § 488.438(f) (italics in original).

A facility may appeal a certification of noncompliance leading to an enforcement remedy. 42 C.F.R. § 488.408(g). A determination with respect to the level of noncompliance may be appealed only if a successful challenge on this issue would affect the range of CMP amounts that CMS could collect. 42 C.F.R. §§ 498.3(b)(13)(i) and 498.3(d)(10)(i). CMS's determination as to the level of noncompliance "must be upheld unless it is clearly erroneous." 42 C.F.R. § 498.60(c)(2).⁽²⁾ This includes CMS's finding of immediate jeopardy. Woodstock Care Center, DAB No. 1726, at 9, 38 (2000).

Standard of review

The standard of review on a disputed issue of law is whether the ALJ decision is erroneous. The standard of review on a disputed factual issue is whether the ALJ decision is supported by substantial evidence in the record as a whole. Guidelines for Appellate Review of Decisions of Administrative Law Judges Affecting a Provider's Participation in the Medicare and Medicaid Programs; see also South Valley Health Care Center, DAB No. 1691 (1999), aff'd South Valley Health Care Center v. HCFA, 223 F.3d 1221 (10^th Cir. 2000); Lake Cook Terrace Center, DAB No. 1745, at 6 (2000) ("it is not our role to substitute our evaluation of the evidence for that of the ALJ, but only to determine whether his factual findings are supported by substantial evidence in the record as a whole").

Ridge Terrace excepted to all of the ALJ's numbered FFCLs. Below, we quote each FFCL, summarize the discussion of the FFCL in the text of the ALJ Decision, and discuss Ridge Terrace's exceptions to the FFCL.

FFCL 1. "I incorporate my rulings of February 8, 2001 into this decision." ALJ Decision at 4.

This FFCL refers to the ALJ's earlier ruling, on CMS's motion for summary disposition, that Ridge Terrace failed to comply substantially with 42 C.F.R. § 483.25(m)(2), which provides that "[t]he facility must ensure that . . . [r]esidents are free of any significant medication errors." The ALJ found that the undisputed material facts showed that, during the period January 12 - 26, 2000, Ridge Terrace employed a nurse who administered overdoses of Dilantin to Resident #2, resulting in her hospitalization for Dilantin toxicity. The ALJ determined that this constituted a deficiency that posed immediate jeopardy.

On appeal, Ridge Terrace argued that the ALJ erred in ruling that Ridge Terrace was not in substantial compliance with section 483.25(m)(2) as well as in finding that the deficiency posed immediate jeopardy. Ridge Terrace acknowledged "that there had been a prior misadministration" of Dilantin. Ridge Terrace Br. at 10. Ridge Terrace asserted, however, that--

one cannot conclude without speculation that this misadministration occurred more than once, let alone repeatedly on each of the dates cited by the surveyors (i.e., January 12-26). There is nothing in the record that demonstrates that the nurse at issue misadministered Dilantin to R.2 on each of these dates.

Id. Citing Mediplex of Massachusetts, Inc., DAB CR584 (1999), Ridge Terrace took the position that the facts here did not establish "any pattern of misadministration" and that there was no deficiency, much less any immediate jeopardy. Id. at 9-10. In addition, Ridge Terrace challenged the imposition of the CMP for the five days in the 15-day CMP period when the nurse was not on duty.

We conclude that the ALJ's findings that Ridge Terrace was not in substantial compliance with section 483.25(m)(2) and that this posed immediate jeopardy are supported by substantial evidence. The ALJ's ruling described the evidence as follows:

The survey report establishes that a nurse was observed attempting to administer a dose of Dilantin to Resident #2 which was five times the prescribed dose. HCFA Ex. 3 at 21-22. It establishes also that the nurse admitted to the surveyor that she had administered overdoses of Dilantin to the resident on previous occasions. Id. It establishes that the resident manifested a blood level of Dilantin that was three times the maximum therapeutic level for such medication. Id. It establishes that the resident manifested signs of Dilantin toxicity for which the resident was hospitalized. Id.

Corroborative evidence supports the statements in the survey report. This corroborative evidence includes the affidavit of Jacqueline S. Kardasz, the surveyor who observed the attempted administrative of the overdose on January 27, 2000. HCFA Ex. 4. The corroborative evidence also includes a laboratory report showing the blood level of Dilantin in Resident #2 to be three times the maximum therapeutic level. HCFA Ex. 6; see also HCFA Ex. 19. It also includes a statement by the nurse in question in which she admits that she incorrectly measured the wrong dose of Dilantin, to be administered to Resident #2. HCFA Ex. 11. It includes a copy of the medication administration record for Resident #2 showing that the nurse in question administered Dilantin to the resident beginning on January 12, 2000. HCFA Ex. 12. And, it includes an excerpt from the Physician's Desk Reference (PDR) which discusses the maximum therapeutic dose of Dilantin and the effects and toxicity of Dilantin. HCFA Ex. 19. The PDR excerpt states that toxicity may result from overdoses of Dilantin, producing effects which include nausea, vomiting, coma, and death due to respiratory and circulatory depression. Id. at 3.

Rulings Denying Petitioner's Motion for Summary Disposition, Granting in Part Health Care Financing Administration's Motion for Summary Disposition, and Establishing Prehearing Exchange Date and Hearing Date (Rulings), dated 2/8/01, at 6-7. The ALJ could reasonably infer from this evidence that there were significant errors in the administration of Dilantin to Resident #2. As the ALJ noted, Ridge Terrace "offered no evidence to challenge the accuracy of either the survey report or the corroborative evidence that HCFA offered," nor "any affirmative evidence to challenge the facts relied on by HCFA." Id. at 7. Instead, both before the ALJ and on appeal to this Board, Ridge Terrace simply argued that the ALJ's finding of significant medication errors could not be supported without evidence of a pattern of errors pertaining to more than one resident, such as that found in Mediplex. We agree with the ALJ, however, that the regulations do not contain any requirement for such a pattern of errors. Rulings at 8. Indeed, even one isolated instance of non-compliance having a potential for more than minimal harm may be the basis for a finding that the petitioner is not substantially complying with the applicable participation requirement. See, e.g., Lake City Extended Care Center, DAB No. 1658 (1998). Moreover, as the ALJ noted, "there was a pattern of giving overdoses of Dilantin to Resident #2." Id. That pattern was established by evidence that the nurse gave overdoses on more than one occasion during the period January 12 - 26.

We also find without merit Ridge Terrace's challenge to the imposition of a CMP for the five days that the nurse was not on duty. There was still a potential for more than minimal harm as long as Ridge Terrace continued to employ the nurse without ensuring that she would give the correct dose of Dilantin whenever she was on duty.⁽³⁾

Accordingly, the ALJ properly granted CMS's motion for summary disposition on the issue of whether there was a deficiency under section 483.25(m)(2) for the period January 12 - 26, 2000.

Moreover, the evidence cited in the ruling and quoted above supports the ALJ's conclusion that this deficiency posed immediate jeopardy.⁽⁴⁾ The ALJ noted that "[t]he unrebutted evidence is that the resident suffered serious injury and harm from Dilantin overdoses. The resident experienced the side effects of Dilantin toxicity to the extent that hospitalization was required." Rulings at 8. Moreover, the record cited elsewhere in the ALJ Decision shows that overdoses of Dilantin could potentially result in death. Thus, this deficiency met the definition of immediate jeopardy in section 488.301.

Ridge Terrace also argued, citing Rose Care of Little Rock, DAB CR532 (1998), that it was "in substantial compliance with the requirements" since the nurse in question was licensed by the State of Ohio to administer medications. Ridge Terrace Br. at 9. In addition, Ridge Terrace argued that it is "inherent" in the quality of care regulations that a facility is required to do only "that which is reasonable and practicable in discharging its obligations" and should not be held strictly liable for its failure to prevent an employee's "unpredicted misfeasance or malfeasance, whether of an intentional or accidental nature." Id. at 10.

These arguments are unavailing. The ALJ correctly stated that-

[t]he Rose Care case is distinguishable from this case because it involves a different section of the regulations than that which is at issue here. HCFA does not allege that the employee whose care is at issue here was not a "qualified person" under Ohio State law. What is at issue here is the quality of care that was provided to Resident #2 and not the qualifications of the person who provided that care to the resident.

Rulings at 8. Moreover, Ridge Terrace could not disavow responsibility for the nurse's acts. Contrary to Ridge Terrace's suggestion, the requirement in section 483.25 that a facility provide to each resident "the necessary care and services to attain or maintain the highest practicable physical, mental, and psychosocial well-being" means that a facility must provide care and services so that a resident attains the highest level of well-being the resident is capable of attaining, not that a facility is excused from providing such care and services if it is not "practicable" to monitor its staff to ensure compliance. Moreover, the Act specifically provides that "[a] principal is liable for penalties, assessments, and an exclusion under this section for the actions of the principal's agent acting within the scope of the agency." Section 1128A(l) of the Act, made applicable to CMPs by section 1819(h)(2)(B)(ii) of the Act. Clearly, the nurse here was acting within the scope of her authority in administering Dilantin to Resident #1, although the manner in which she exercised this authority was incorrect. The Board addressed a similar issue in Emerald Oaks, DAB No. 1800 (2001), stating:

Emerald Oaks went on to suggest . . . that the ALJ should have accepted its evidence that it could not fairly be held responsible for the nurse's actions because she had received proper training and yet had acted so far outside her duties . . . . We do not find this suggestion persuasive. It is clear from the uncontested findings that the nurse was acting within the scope of her employment responsibilities, that is to provide care for the residents of Emerald Oaks. Her employer cannot disown the consequences of the inadequacy of the care provided by the simple expedient of pointing the finger at her fault, since she was the agent of her employer empowered to make and carry out daily decisions.

Emerald Oaks at 7, n.3. Similarly, Ridge Terrace was responsible here for the acts of the nurse in question here.

Accordingly, we uphold FFCL 1.

FFCL 2. "Civil money penalties of $3,950 for each day of the January 12 - 26, 2000 period are not reasonable. Civil money penalties of $3,050 per day are reasonable." ALJ Decision at 5.

Ridge Terrace excepted to this FFCL only to the extent that it held that there was any basis for a CMP due to its alleged failure to comply substantially with 42 C.F.R. § 483.25(m)(2). Ridge Terrace Br. at 6, n. 4. Since we sustain FFCL 1's conclusion that Ridge Terrace did not substantially comply with this regulation, we also uphold FFCL 2.

FFCL 3. "There is a basis for imposing non-immediate jeopardy level civil money penalties against Petitioner for each day of the period that ran from January 27 through March 26, 2000." FFCL 3.a. "Petitioner had non-immediate jeopardy level deficiencies as of January 27, 2000."

FFCL 3.a.i. "Tag 314." ALJ Decision at 8-9.

In the text following this FFCL, the ALJ found that Ridge Terrace was not in substantial compliance with 42 C.F.R. § 483.25(c), captioned "Pressure sores," which provides in pertinent part:

Based on the comprehensive assessment of a resident, the facility must ensure that-

(1) A resident who enters the facility without pressure sores does not develop pressure sores unless the individual's clinical condition demonstrates that they were unavoidable . . . .

The ALJ found specifically that Ridge Terrace's staff failed to prevent two residents--Resident #26 and Resident #2--from developing avoidable pressure sores. ALJ Decision at 9-11.

With respect to Resident #26, the ALJ found that the resident "developed a pressure sore on her right heel because Petitioner's staff failed to take appropriate measures against development of a sore despite the presence of obvious risk factors." Id. at 9. The ALJ further found that the risk arose because the resident had to wear an abductor splint to immobilize her leg while she was in bed so that her fractured hip could heal, causing her right heel to bear weight for lengthy periods of time. The ALJ noted that Ms. Combs, a nurse who appeared as a witness for Ridge Terrace, had testified (1) that Resident #26's pressure sore was not caused by the resident wearing an abductor splint because Ridge Terrace had positioned the resident in bed to alleviate pressure from the splint and used an air and water mattress to protect the resident against developing a pressure sore while in bed, and (2) that Resident #26's pressure sore was instead caused by the rubbing of the resident's shoe against her right heel as she shuffled her feet while ambulating and was unavoidable because the resident continued to shuffle her feet notwithstanding staff warnings not to do so. The ALJ stated, however, that he found this testimony not to be credible. The ALJ found that there was nothing in the treatment records of Resident #26 "that shows that Petitioner's staff recognized that pressure from the resident's abductor splint necessitated repositioning the resident while she was in bed," nor was there any evidence in these records that the resident was given an air or water mattress prior to the time when she was first observed to have a pressure sore. ALJ Decision at 10. The ALJ further found that there was no observation in the resident's care plan or other clinical records that her foot shuffling put her at risk for developing a pressure sore, nor anything in her record "that shows that Petitioner's staff undertook any preventive measures to address the resident's foot shuffling if, in fact, the resident was shuffling her feet." Id.

On appeal, Ridge Terrace argued that the ALJ erred in finding Ms. Combs' testimony not credible. Ridge Terrace asserted that Ms. Combs' testimony was supported by the surveyor's testimony on cross-examination (at Tr. 57) that she had not detected any pressure sore near the abductor splint. According to Ridge Terrace, such a sore "might be expected if the immobility of the resident or the wearing of the splint were causal factors in the development of the sore." Ridge Terrace Br. at 13. However, Ridge Terrace failed to explain, much less provide supporting evidence for, its view that a pressure sore would be expected to develop at a location near the splint if there was a sore on the resident's heel. Ridge Terrace also did not attempt to reconcile the inconsistencies that the ALJ noted between Ms. Combs' testimony and the resident's record. Moreover, we generally defer to the ALJ's evaluations of the credibility of the witnesses who appeared before him. See, e.g., Koester Pavilion, DAB No. 1750, at 21 (2000). Thus, we do not find any error in the ALJ's determination that Ms. Combs' testimony was not credible.

With respect to Resident #2, the ALJ found specifically that "Petitioner's staff failed to protect the resident against developing a pressure sore caused by friction resulting from wearing plastic oxygen tubing . . . that rests behind the resident's ear." ALJ Decision at 11. The ALJ further found that Ridge Terrace's staff knew that the resident was at risk for developing such a sore since the resident had recently had a sore there that healed, yet "the staff failed to implement protective measures designed to prevent sores from developing again." Id.

On appeal, Ridge Terrace argued that "[t]he ALJ characterized what was essentially a pimple . . . as a pressure sore . . . ." Ridge Terrace Br. at 12. The survey report states that there was a "pressure ulcer" (CMS Ex. 3, at 8), however, and Ridge Terrace did not cite to any evidence in the record that contradicted this finding. Ridge Terrace also suggested that it could not reposition the plastic tubing to avoid a pressure sore because Resident #2 wore glasses and, further, that it could not "realistically and practically" prevent a pressure sore without "padding all points of contact between the skin of the resident and anything external . . . ." Ridge Terrace Br. at 12-13. However, Ridge Terrace did not point to anything in the record that established that the glasses precluded repositioning the tubing. Moreover, Ridge Terrace's unsupported assertion that it could not otherwise have prevented the pressure sore from developing is contradicted by the testimony of the surveyor that the sore could have been avoided by something as simple as wrapping the tubing behind the ear with gauze or applying a foam device to the tubing. Tr. at 49. Ridge Terrace also asserted that the resident received "bathing, grooming and other such care" which would have permitted observation of the resident's skin and reduced the risk of skin breakdown. Ridge Terrace Br. at 12. Clearly, however, the bathing and grooming were not effective to prevent a pressure sore from developing.

Accordingly, we uphold FFCL 3.a.i.

FFCL 3.a.ii. "Tag 323." ALJ Decision at 11.

In the text following this FFCL, the ALJ found that Ridge Terrace was not in substantial compliance with 42 C.F.R. § 483.25(h)(1), which provides that "[t]he facility must ensure that . . . [t]he resident environment remains as free of accident hazards as is possible." The ALJ found specifically that Ridge Terrace failed to correctly position the padding ordered by Resident #31's physician for the side rails on the resident's bed, resulting in the resident reopening an elbow abrasion that had been sustained earlier from striking the elbow against the unprotected side rails. ALJ Decision at 12. The ALJ noted that the surveyors had observed that the padding was fastened to the lower half of the full side rails--rather than to the upper half, as required to protect the resident's arms--both the morning and afternoon of the survey. Id., citing CMS Ex. 3, at 14 and Tr. at 70. Responding to Ridge Terrace's assertion that Resident #31 moved the padding down, the ALJ stated:

[Ridge Terrace's] staff had a duty to protect the resident whether or not the resident moved the padding that Petitioner's staff placed on the rails. If the resident moved the padding, then Petitioner's staff should have attempted other measures to protect the resident.

There were measures that Petitioner's staff might have attempted to better protect the resident. The staff did not need additional orders from the resident's physician to pad the entire rails on the resident's bed. Or, the staff could have attempted to tie the pads on more securely. Petitioner has offered no evidence that its staff attempted to take any of these measures.

I find there to be no merit in Petitioner's argument that a facility has no duty to protect a resident from an accident hazard where the hazard is created by a resident. . . . That is not to suggest that there may not be circumstances where a facility does everything that is reasonable to protect a resident and the resident thwarts those measures. In that instance, the facility would not be liable.

But here, Petitioner did nothing to protect Resident #31 once it became evident that the resident was possibly moving the pads that petitioner's staff had placed on the resident's bed side rails. And, additional reasonable protective measures were well within Petitioner's capacity to implement.

ALJ Decision at 13-14 (italics in original).

On appeal, Ridge Terrace argued that there was no evidence that the padding was not attached as securely as possible, and that it had "no practicable manner" of preventing the resident from moving the padding "short of implementing restraints on the resident" which had not been ordered. Ridge Terrace Br. at 16.

Even assuming that the padding could not have been attached more securely, however, Ridge Terrace did not specifically dispute that it could have padded the entire side rail to prevent the padding on the upper half of the rail from moving down. Ridge Terrace also argued that it was not responsible for "instantaneously" repositioning the pads after the resident moved them. Id. at 15. Nothing in the ALJ Decision suggests that this was the standard that the ALJ used in finding a violation of the regulation, however.

Thus, the ALJ reasonably concluded that Ridge Terrace did not keep the resident's environment as free from accident hazards as possible, as required by section 483.25(h)(1).

Accordingly, we uphold FFCL 3.a.ii.

FFCL 3.a.iii. "Tag 324." ALJ Decision at 14.

In the text following this FFCL, the ALJ found that Ridge Terrace was not in substantial compliance with 42 C.F.R. § 483.25(h)(2), which provides that "[t]he facility must ensure that . . . [e]ach resident receives adequate supervision and assistance devices to prevent accidents." The ALJ found specifically that Ridge Terrace did not provide Resident #12 with protective elbow pads after January 24, 2000, even though the resident's physician had ordered that such pads be provided. The ALJ further found that this "clearly was a failure by Petitioner to provide assistive devices to the resident to prevent accidents" since "[t]he resident was known to be at high risk for falling" and "[h]is physician had prescribed elbow pads precisely because of that risk and the injuries that the resident had sustained in the past." ALJ Decision at 15. The ALJ rejected Ridge Terrace's argument that its failure to provide protective elbow pads to prevent injuries to Resident #12 from accidental falls was not a violation of the regulation "because the pads would not have prevented the resident from falling." Id. at 16. The ALJ stated that the "obvious intent" of the regulation-

is not just to assure that a facility prevent events that cause injuries but that it also protect its residents against the reasonably foreseeable consequences of such events. Here, the reasonably foreseeable consequence of a fall was that Resident #12 might injure his arms and elbows. . . ."

Id. (italics in original).

On appeal, Ridge Terrace argued that, contrary to the ALJ Decision, the relevant inquiry was not whether it could have prevented injury from a fall but whether it could have prevented a fall in the first instance. We disagree. The ALJ's construction of the regulation is consistent with the ordinary meaning of "accident." The Board has observed that this meaning-

includes any unexpected and undesirable event, which suggests untoward events or injuries suffered by an individual who neither expected nor wished it to occur. See Webster's II New Riverside University Dictionary (1984). Black's Law Dictionary also defines the term broadly enough to encompass this understanding . . . . Black's Law Dictionary (6^th Ed.)(West's Pub. 2000)(Black's). Woodstock at 20. The Board also noted the definition of "accident" in the State Operations Manual (SOM) issued by CMS as "an unexpected, unintended event that can cause a resident bodily injury . . . ." Woodstock at 4, citing SOM Appendix PP, Guidance to Surveyors, Part 2, SOP 483.25 Quality of Care (Rev. 274, June 1995). An injury, or the likelihood of one, is thus an integral part of an accident as that term is usually defined. If the potential for injury is removed, then the accident has in a sense been prevented. The ALJ thus reasonably concluded that, by failing to provide protective elbow pads to Resident #12, Ridge Terrace did not ensure that the resident received "adequate supervision and assistance devices to prevent accidents," regardless of whether Ridge Terrace could have prevented Resident #12 from falling in the first instance.

Accordingly, we uphold FFCL 3.a.iii.

FFCL 3.b. "Petitioner had at least one non-immediate jeopardy level deficiency as of the March survey." ALJ Decision at 16.

This FFCL refers to the ALJ's finding, in the text that follows the FFCL, that, as of the March resurvey, Ridge Terrace failed to comply with 42 C.F.R. § 483.25(c)(2). This section requires that "[t]he facility ensure that . . . [a] resident having pressure sores receives necessary treatment and services to promote healing, prevent infection and prevent new sores from developing." The ALJ found specifically that Ridge Terrace's staff "wiped a stool-stained washcloth directly across" two small pressure sores on Resident #58's buttocks. ALJ Decision at 16, The ALJ concluded that "[u]se of a septic washcloth to clean open sores is not care that is designed to promote healing or to prevent infection." Id. The ALJ also noted that the surveyor testified that "she saw staff apply Vaseline Intensive Care lotion to the resident's buttocks instead of the barrier cream that had been prescribed by the resident's physician." Id. The ALJ did not make any finding regarding the truth of this allegation, however, noting that Ridge Terrace had "not offered any evidence to address the more serious allegation that its staff attempted to clean the resident's sores with a stool-stained washcloth." Id. at 16-17.

On appeal, Ridge Terrace, referring to both of the surveyor's findings with respect to Resident #58, asserted that "the observations and assumptions made (or relied upon) by the surveyors were shown to be incredible or incorrect." Ridge Terrace Br. at 14. Since FFCL 3.b. is based only on the findings regarding the washcloth, however, we need not consider Ridge Terrace's arguments regarding the barrier cream. The only basis Ridge Terrace offered to support its challenge to the surveyor's findings regarding the washcloth was that the surveyor "witnessed peri-care to this resident on only one occasion . . . ." Id. We fail to see how this shows that the surveyor's findings were either not credible or incorrect. Moreover, as noted above, a finding of noncompliance may be based on a single violation of the applicable requirements. Thus, to the extent that Ridge Terrace intended to argue that a single observation by the surveyor of inappropriate peri-care was insufficient to support FFCL 3.b., we reject this argument.

Accordingly, we uphold FFCL 3.b.

FFCL 3.c. "Petitioner did not prove that it attained compliance with participation requirements prior to March 27, 2000." ALJ Decision at 17.

Although Ridge Terrace stated that it was contesting all of the FFCLs, it did not specifically address this FFCL. Accordingly, we uphold it without further discussion.

In addition, since we have upheld all of the subparts of FFCL 3, we uphold FFCL 3 as well.

FFCL 4. "Civil money penalties of $700 per day are reasonable for each day of the period that began on January 27, 2000 and which ran through March 12, 2000." ALJ Decision at 17.

In the text following this FFCL, the ALJ found that the $700 per day CMP imposed by CMS was justified based on the seriousness of the three deficiencies found in the January 2000 survey, all of which caused actual harm, and based on the fact that all three deficiencies involved a failure by Ridge Terrace's staff to devote adequate attention to the needs of the residents, from which the ALJ inferred "an overall inattentiveness of petitioner's staff to the residents' needs." ALJ Decision at 17. The ALJ stated that CMS had not supported its allegation that Ridge Terrace had a poor compliance history, which CMS had argued further supported the $700 per day CMP. The ALJ concluded, however, that the deficiencies in the January survey alone were sufficiently serious to justify this CMP amount. Finally, the ALJ stated:

I note that Petitioner did not argue that its financial condition was such that it was unable to pay the $700 per day non-immediate jeopardy level civil money penalties that CMS imposed although it did make such an argument concerning the $3,950 per day civil money penalties that CMS imposed for the immediate jeopardy level deficiency that was identified at the January survey. See Finding 2; see also P. Br. at 14-16. For this reason, I make no findings concerning whether Petitioner's financial condition would make the $700 per day civil money penalties unreasonable.

Id. at 18.

On appeal, Ridge Terrace disputed the ALJ's finding that the three deficiencies demonstrated Ridge Terrace's "overall inattentiveness" to its residents, asserting that they were "at best a few instances of alleged deficiencies in a busy, 77-bed facility." Ridge Terrace Br. at 20. Ridge Terrace's characterization of the deficiencies as "alleged" is unwarranted, since we concluded above that there is substantial evidence to support the deficiencies found in FFCLs 3.a.i, 3.a.ii., and 3.a.iii. Moreover, the ALJ reasonably concluded that the existence of these three deficiencies, all relating to quality of care, demonstrated overall inattentiveness by Ridge Terrace's staff.

Ridge Terrace also argued that the ALJ erred in not considering Ridge Terrace's financial condition in determining the reasonableness of the $700 per day CMP imposed by CMS. Ridge Terrace asserted that, contrary to what the ALJ found, it had in fact argued below that this CMP amount was unreasonable in light of its financial condition.⁽⁵⁾

For the reasons identified below, we find that Ridge Terrace raised the issue of its financial condition in challenging the reasonableness of the $700 per day CMP before the ALJ. Accordingly, we conclude that the ALJ erred in not considering Ridge Terrace's financial condition in determining whether this CMP was reasonable.

o Ridge Terrace's hearing request stated: "Ridge Terrace challenges the imposition of a Civil Money Penalty ("CMP") of $3,950.00 per day beginning January 12, 2000 through January 26, 2000, $700.00 per day beginning January 27, 2000. Ridge Terrace does not have a sufficient cash reserve or profit to support a monetary penalty, or the loss in revenue produced by the imposition of a monetary penalty. Ridge Terrace will offer financial data and information in support of this position." Request for Hearing dated 4/24/00, at 1. Thus, from the outset of the proceeding, it was clear that Ridge Terrace relied on its financial condition as a basis for challenging both the CMP based on the immediate jeopardy deficiency and the CMP based on the non-immediate jeopardy deficiencies.

o The ALJ appeared to base his conclusion that Ridge Terrace did not rely on its financial condition in challenging the reasonableness of the $700 per day CMP on the fact that Ridge Terrace's post-hearing brief included a section (at page 14) captioned "Ridge Terrace's financial condition does not merit more than a minimum upper-range CMP" and did not include a comparable caption relating to the CMP that was based on the non-immediate jeopardy deficiencies. However, there are numerous other statements in the post-hearing brief that evidence an intent to challenge the reasonableness of the latter CMP on the basis of Ridge Terrace's financial condition. See Post-Hearing Merit Brief of Petitioner Ridge Terrace dated 9/20/01, at 2-4, 16-18. Thus, the ALJ's determination rested on a flaw in the structure of Ridge Terrace's brief; he apparently overlooked several statements that contradicted this particular heading.

o CMS stated in its opening statement at the hearing: "You'll also hear evidence of what [CMS's health quality review specialist] considered in determining that the facility was financially sound and that the facility was able to pay the civil money penalty." Tr. at 16. The fact that CMS did not make any distinction between the two CMPs shows that CMS understood that Ridge Terrace was raising the issue of the reasonableness of both CMPs based on its financial condition.

o Ridge Terrace's witness Mr. Lipson (a principal in the corporation that owns and operates Ridge Terrace) testified at the hearing that Ridge Terrace was unable to pay a "$101,000 civil money penalty." Tr. at 196 (affirmative response to question on cross-examination). This is the total amount of the penalties imposed for both the immediate jeopardy deficiency and the non-immediate jeopardy deficiencies. Thus, CMS counsel by his question and Mr. Lipson by his response clearly indicated that both CMPs were at issue.

o The total amount of CMS's CMP based on the immediate jeopardy deficiency ($3,950 per day for 15 days) was $59,250. The total amount of CMS's CMP based on the non-immediate jeopardy deficiencies was $42,000 ($700 per day for 60 days). It is unlikely that Ridge Terrace would have argued that its financial condition was such that it could not pay the $59,250 CMP but at the same time conceded that it could pay the substantial $42,000 CMP.

Since the ALJ failed to consider Ridge Terrace's argument that the $700 per day CMP was not reasonable in light of its financial condition, we reverse FFCL 4 and remand the case to the ALJ to issue a revised decision addressing this argument.⁽⁶⁾

FFCL 5. "Civil money penalties of $700 per day for each day of the March 13 - 26, 2000 period are not reasonable. Civil money penalties of $250 per day are reasonable." ALJ Decision at 18.

In the text following this FFCL, the ALJ found that it was unreasonable for CMS to impose a CMP in the same amount for the period following the March survey as for the period preceding the March survey since Ridge Terrace "had made considerable progress in correcting its deficiencies." ALJ Decision at 18. The ALJ noted that the surveyors found only three deficiencies at the March survey, none of which caused actual harm, whereas three of the 10 deficiencies identified at the prior survey caused actual harm. The ALJ therefore reduced the CMP to $250 per day for the period March 13 - 26.

On appeal, Ridge Terrace argued that the $250 per day CMP was unreasonable because the total imposed for three deficiencies that did not cause actual harm ($3,500) was more than the minimum CMP that must be imposed where there is a deficiency that involves immediate jeopardy ($3,050).⁽⁷⁾ Ridge Terrace also argued that the CMP amount was unreasonable in light of the facility's financial condition. Ridge Terrace contended that, if a CMP is imposed, it should be no more than the minimum of $50 per day.⁽⁹⁾

The Board has previously held that "[t]he regulation [at 42 C.F.R. § 488.483(f)] clearly demands that at a minimum the ALJ set out a reasoned basis for why his consideration of the regulatory factors leads to the conclusion that the amount imposed by CMS is not reasonable and that a reduction of a particular magnitude is appropriate in light of the sustained deficiencies and other regulatory factors." Pacific Regency Arvin, DAB No. 1823, at 22 (2002). It can be inferred from the ALJ's discussion summarized above that the ALJ reduced the CMP to approximately one-third of its original amount because there were approximately one-third as many deficiencies as found in the January survey and the deficiencies were less serious than some of the deficiencies found in the January survey. This adequately explains the ALJ's reduction of the CMP amount to $250 per day. As we found above, however, the ALJ failed to consider Ridge Terrace's financial condition as required by section 488.438(f)(2). Accordingly, we reverse FFCL 5 and remand the case to the ALJ to issue a revised decision addressing this matter.

Conclusion

For the foregoing reasons, we uphold and adopt FFCLs 1-3 (including all of the sub-parts of FFCL 3), reverse FFCLs 4 and 5, and remand the case to the ALJ to issue a revised decision addressing Ridge Terrace's financial condition in determining what constitutes a reasonable CMP amount for the non-immediate jeopardy deficiencies.

Cecilia Sparks Ford

Donald F. Garrett

M. Terry Johnson
Presiding Board Member

1. CMS was previously named the Health Care Financing Administration (HCFA). See 66 Fed. Reg. 35,437 (July 5, 2001). We use "CMS" in this decision unless we are quoting from documents that refer to HCFA.

2. We cite to the regulations as they appeared prior to their amendment in April 2000, when some of the sections cited were redesignated.

3. This issue is not addressed in the ALJ Decision. At best, it was raised below in a very oblique fashion. See Ridge Terrace Reply in Support of Motion for Summary Affirmance, dated 12/8/00, at 9.

4. CMS's determination as to immediate jeopardy must be upheld unless clearly erroneous. 42 C.F.R. 498.60(c)(2).

5. Ridge Terrace's argument applies to the CMP for the period March 13 - 26, which the ALJ reduced from $700 per day to $250 per day in FFCL 5, as well as to the $700 per day CMP for the period January 27 - March 12 sustained by the ALJ in FFCL 4. Ridge Terrace did not make this argument with respect to the $3,050 per day CMP the ALJ found was reasonable for the period January 12 - 26, since the regulations preclude any reduction of that CMP amount (the minimum for an immediate jeopardy deficiency).

6. CMS argued that Ridge Terrace "is essentially disputing the relative weight attributed by the judge to the factors in 42 C.F.R. §§ 488.438(f) and 488.404(c) . . . ." and that "there is no authority requiring the ALJ to weigh the factors . . . in a prescribed manner." CMS Br. at 48-49. The lack of such a requirement does not mean that the ALJ need not have at least considered Ridge Terrace's financial condition, however.

7. The only deficiency for the period March 13 - 26 discussed in the ALJ Decision is that relating to Resident #58 (FFCL 3.b.). Ridge Terrace's hearing request did not challenge the other two findings of deficiencies in the March survey. Compare Request for Hearing, dated 4/24/00, and CMS Ex. 27, at 3-6.⁽⁸⁾

8. Thus, the ALJ Decision properly contained no discussion of these two deficiencies.

9. Ridge Terrace also stated in support of its exception to this FFCL: "The CMP constitutes the what appears to be the cost of doing business in the 'wind-down' period of the survey, and specifically a fine for the alleged tag F-314 violation in providing peri-care for R. 58." Ridge Terrace Br. at 22. We are unable to discern in this statement any cogent argument and therefore do not address it further. Since Ridge Terrace made other, cogent arguments supporting its exception to FFCL 5, however, we fail to understand CMS's assertion that Ridge Terrace "failed to appeal from the ALJ's finding imposing a $250 per day CMP for the March 13 - 26 period." CMS Br. at 57.