SUBJECT: North Ridge Care Center,

Petitioner,

Centers for Medicare & Medicaid Services

FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION

The Centers for Medicare & Medicaid Services (CMS) ⁽¹⁾ requested review of the May 31, 2002 decision by Administrative Law Judge Ann Blair. See North Ridge Care Center, DAB CR910 (2002)(ALJ Decision). The ALJ Decision set aside a civil money penalty (CMP) against North Ridge Care Center, a Minnesota skilled nursing facility, for a period of alleged "past noncompliance" with Medicare participation requirements. Section 488.430(b) of Title 42 of the Code of Federal Regulations provides that CMS may impose a CMP "for the number of days of past noncompliance since the last standard survey." The ALJ ruled that section 488.430(b) barred the CMP against North Ridge because the days of alleged past noncompliance -- June 20 to October 28, 1996 -- occurred before the "last standard survey." CMS contended, however, that the CMP is valid, and that, under the circumstances of this case, section 488.430(b) does not prohibit a CMP for past noncompliance prior to a standard survey.

For the reasons stated below, we conclude that section 488.430(b) implements the Secretary's statutory authority to impose a CMP for noncompliance in a "previous period" by defining the previous period as the days of noncompliance since the facility's last standard survey. We further find, however, that North Ridge's "last standard survey" ended on July 18, 1996, not on October 28, 1996, as the ALJ found. Consequently, CMS may impose a CMP for noncompliance that occurred on or after July 19, 1996. Because North Ridge challenged the noncompliance findings on which the CMP was based, we remand this case to the ALJ for further proceedings.

I. Regulatory Background

To participate in the Medicare program, a skilled nursing facility must be certified as meeting federal standards, set out in 42 C.F.R. Part 483, designed to ensure resident health and safety. State agencies under agreement with CMS monitor compliance with these participation requirements by conducting onsite inspections called "surveys." 42 C.F.R. §§ 488.11, 488.330(a). A facility that is determined not to be in "substantial compliance" ⁽²⁾ with the requirements in Part 483 is subject to remedies specified in section 1819(h)(2) of the Social Security Act (Act) and 42 C.F.R. Part 488, Subpart F. See 42 C.F.R. § 488.330(b).

A participating skilled nursing facility is subject to a "standard survey" at intervals of no less than 15 months (and on average at least once a year). 42 C.F.R. § 488.308. In a standard survey, surveyors examine the quality of care furnished to a representative sample of patients and investigate the facility's compliance with statutory requirements regarding resident rights. 42 C.F.R. § 488.305.

A facility may be subject to other types of surveys. For example, an "extended survey" is a "survey that evaluates additional participation requirements subsequent to finding substandard quality of care during a standard survey." 42 C.F.R. § 488.301. An "abbreviated standard survey" is "a survey other than a standard survey" that may be premised on resident complaints, facility ownership changes, or "other indicators of specific concern." 42 C.F.R. § 488.301. Interpretive guidelines published by CMS in the State Operations Manual (SOM) use the term "complaint investigation" to refer to an abbreviated standard survey that is premised on a complaint. SOM, App. P, sec. VII(A). ⁽³⁾

Based on a survey's findings, surveyors prepare a Statement of Deficiencies (form HCFA-2567), which identifies and describes each failure to meet a participation requirement. ⁽⁴⁾ See SOM § 7316. If a survey reveals that a facility is not in "substantial compliance" with federal participation requirements, the facility must submit a plan of correction for approval by the survey agency. 42 C.F.R. §§ 488.402(d), 488.408(f)(2). Even if the plan of correction is accepted, the facility may not be regarded as in substantial compliance until the survey agency determines, following an onsite revisit or other means of verification, that the deficiency no longer exists. See 42 C.F.R. § 488.440(h); SOM § 7316.

The remedies available to CMS to enforce compliance with federal participation requirements include the power to direct a correction plan, appoint temporary management, deny future program payments, and terminate the facility's right to participate. 42 U.S.C. § 1395i-3(h)(2)(B); 42 C.F.R. § 488.406. In addition, CMS may impose CMPs for days or "instances" of substantial noncompliance. 42 U.S.C. § 1395i-3(h)(2)(B); 42 C.F.R. §§ 488.430, 488.438.

II. Factual Background

This case concerns two separate surveys of North Ridge, the second of which resulted in the disputed CMP. In Minnesota, nursing home surveys are performed by components of the Minnesota Department of Health (MDH). CMS Ex. 5 ¶ 1.

On July 15, 1996, employees of MDH commenced a standard survey of North Ridge. Stip. of Facts ¶ 4. The exit conference for this survey was held on July 18, 1996. Id. On August 13, 1996, an employee of the Licensing and Certification Program (LCP), the unit in MDH responsible for initial and continuing certification of skilled nursing facilities, notified North Ridge by letter that it was not in substantial compliance with Medicare participation requirements. CMS Ex. 5 ¶ 1 & Ex. 8. The Statement of Deficiencies attached to the letter cited a failure to provide a safe and clean environment due to the presence of urine odors in certain areas of the facility. Stip. of Facts ¶ 5 & Ex. A. The August 13 letter advised North Ridge that state monitoring would be imposed if substantial compliance was not achieved within one month. CMS Ex. 8, at 2.

On August 22, 1996, North Ridge submitted a plan of correction and notified MDH that the cited deficiency would be corrected by August 30, 1996. Stip. of Facts ¶ 6. On October 11, 1996, LCP employees revisited North Ridge and determined that the deficiency had been corrected. CMS Ex. 11. Shortly afterward, in an October 28, 1996 letter, MDH notified North Ridge that it was in substantial compliance with federal requirements as of August 30, 1996, and that the remedies outlined in the August 13, 1996 letter would not be imposed. Id.

The second survey at issue stemmed from the death of North Ridge resident #6650. Resident #6650 died on July 20, 1996, two days after the standard survey exit conference. Stip. of Facts ¶ 2; North Ridge Ex. 3 ¶ 4. The medical examiner's report identified the cause of death as "positional asphyxiation with chest compression" and stated that Resident #6650 had been found wedged at the chest between her bed and the bed's siderail. CMS Ex. 6, at 7.

On July 23, 1996, the medical examiner reported the resident's death to the Office of Health Facilities Complaints (OHFC), the unit in MDH responsible for investigating complaints concerning Medicare and Medicaid providers. CMS Ex. 5 ¶ 1, Ex. 6, at 7. On August 22, 1996, OHFC's intake staff requested records from North Ridge about the resident. CMS Ex. 6, at 8. Based on this information, OHFC determined that her death required further investigation. Id. at 2. However, an investigator was not assigned to the case until January 3, 1997. Id. at 2-3. On January 7, 1997, the investigator made an unannounced visit to North Ridge. Id. at 3. Afterward, OHFC learned that a second North Ridge resident, Resident #7789, had died in December 1996 of possible side rail entrapment. Id. at 4; North Ridge Ex. 3 ¶ 11. On July 9, 1997, OHFC made an unannounced visit to North Ridge to investigate the death of Resident #7789. CMS Ex. 6, at 5.

On October 21, 1997, OHFC notified North Ridge of its findings regarding the two side rail deaths. Stip. of Facts ¶ 11-14; CMS Exs. 2-4. OHFC found that North Ridge's care of Resident #6650 had placed her in "immediate jeopardy" in violation of Medicare participation requirements, and that North Ridge had failed to take timely and appropriate corrective action following her death. Stip. of Facts ¶ 14. Based on these findings, CMS imposed a CMP of $7,500 per day for the period June 20, 1996 to July 20, 1996, and $300 per day for the period July 21, 1996 to January 7, 1997. Stip. of Facts ¶ 15. CMS notified North Ridge of this penalty in a December 7, 1997 letter. Id.; North Ridge Ex. 1. That letter, in conjunction with OHFC's Statement of Deficiencies, advised North Ridge that the penalty was being imposed for days of "past noncompliance," which the State Operations Manual (SOM) defines as noncompliance that "is corrected at the time of the current survey." North Ridge Ex. 1; CMS Ex. 4; SOM § 7510. North Ridge subsequently requested an ALJ hearing on this matter.

III. Procedural History

North Ridge requested summary judgment in the ALJ proceeding, contending (among other things) that 42 C.F.R. § 488.430(b) prohibited CMS from imposing a CMP for any days prior to October 28, 1996, the day MDH determined that the facility was in substantial compliance as a result of the standard survey and revisit. Judge Leahy granted that motion in part, finding that: (1) the 1996 standard survey of North Ridge ended on October 28, 1996; (2) section 488.430(b) precluded CMS from imposing a CMP for the past noncompliance that occurred on or before October 28, 1996; and (3) North Ridge was not entitled to summary disposition concerning the CMP for the period October 29, 1996 to January 7, 1997.

In addition, Judge Leahy found that MDH's October 28, 1996 letter, referred to in the summary judgment ruling and elsewhere as a "certification of compliance," was an "initial determination" that could not be revised or superseded unless it was "reopened" within one year in accordance with the procedures in 42 C.F.R. Part 498. Summary Judg. Ruling at 23-27. According to the ALJ, because CMS did not reopen the certification of compliance within one year, imposition of a CMP for noncompliance that occurred prior to October 28, 1996 would "nullify the reopening regulations and alter the effect of the certification of compliance issued on October 28, 1996 after that certification had already become binding upon [CMS] by operation of law." Id. at 14.

After Judge Leahy issued her summary judgment ruling, the case was reassigned to ALJ Ann Blair, who scheduled a hearing to address the $300 per day CMP for the period October 29, 1996 to January 7, 1997. However, CMS rescinded that penalty prior to the hearing and requested a final decision. Finding no other issues to adjudicate, Judge Blair issued a decision adopting Judge Leahy's factual and legal findings and entered judgment for North Ridge concerning the CMP for the period June 20, 1996 to October 28, 1996.

IV. CMS's Exceptions

CMS raised three objections to the ALJ Decision. First, it contended that the standard survey ended on July 18, 1996 and not, as the ALJ found, on October 28, 1996. CMS Br. at 58. Second, CMS contended that the October 28, 1996 certification of compliance was not an initial determination under the relevant regulations. Id. at 57. CMS's third, and principal, contention was that the ALJ erroneously interpreted section 488.430(b) as placing a mandatory limitation on the agency's authority to impose a CMP for noncompliance that preceded North Ridge's 1996 standard survey. Id. at 28-57. Regarding the third contention, CMS argued that limiting its authority to impose a CMP in this case: (1) is inconsistent with the regulation's plain language, history, and purpose; (2) disregards statutory language that instructs the Secretary to construe his remedial powers broadly to safeguard resident health and safety; (3) conflicts with section 1819(h)(2)(A) of the Act and the regulation's preamble, which place no limit on the period for which CMS may impose a CMP for past noncompliance; (4) ignores well-settled rules of statutory construction; and (5) undercuts the effectiveness of complaint investigations as an enforcement tool.

Our 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. See 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). The bases for modifying, reversing or remanding an ALJ decision include the following: a finding of material fact necessary to the outcome of the decision is not supported by substantial evidence; a legal conclusion necessary to the outcome of the decision is erroneous; the decision is contrary to law or applicable regulations; or a prejudicial error of procedure (including an abuse of discretion under the law or applicable regulations) was committed. See Guidelines for Appellant Review.

We first address the ALJ's finding that the October 28, 1996 certification of compliance was subject to regulations governing reopening of initial determinations. Next, we examine the ALJ's legal conclusions regarding the meaning of 42 C.F.R. § 488.430. Finally, we address the ALJ's finding that the "last standard survey" ended on October 28, 1996.

A. The October 28, 1996 certification of compliance is not an "initial determination" within the meaning of 42 C.F.R. Part 498.

As indicated, the ALJ's decision regarding the CMP was based partly on a finding that MDH's October 28, 1996 letter -- the so-called certification of compliance -- was a binding "initial determination" that could not be superseded by the October 1997 noncompliance findings because it was not reopened in accordance with the regulations in 42 C.F.R. Part 498. CMS argued that this finding is erroneous because a certification of compliance is not designated by the regulations as an initial determination subject to reopening. North Ridge offered no substantial rebuttal to this particular exception.

Before addressing CMS's objection, we note that the ALJ did not need to construe the October 28, 1996 certification of compliance as an initial determination given her previous ruling that section 488.430(b) plainly limited the Secretary's authority to impose CMPs for past noncompliance. However, we must address CMS's objection because a finding that the certification of compliance has prospectively binding effect would alter the outcome of the case if allowed to stand.

The regulations at 42 C.F.R. Part 498 set forth procedures for reviewing "initial determinations that [CMS] makes with respect to the matters specified" in 42 C.F.R. § 498.3(b). 42 C.F.R. § 498.3(a)(1). An initial determination is binding on an affected party unless it is "reconsidered" in accordance with the regulations, reversed or modified by a hearing decision, or reopened within 12 months and revised in accordance with the regulations at section 498.32. 42 C.F.R. § 498.20(b).

The October 28, 1996 certification of compliance is not among the actions listed in section 498.3(b) as being an initial determination. By its very terms, Part 498 provides appeal rights only for these listed actions. 42 C.F.R. § 498.3(a) ("This part sets forth procedures for reviewing initial determinations that [CMS] makes with respect to matters specified in paragraph (b)"). Because a certification of compliance is not specified in section 498.3(b), and because we can find no other regulation that makes the procedures in Part 498 applicable to such a certification, we conclude that it is not an initial determination under Part 498. ⁽⁵⁾

We note that the actions specified in section 498.3(b) are ones that have significant adverse consequences for a provider's or prospective provider's participation in the Medicare program. For example, section 498.3(b) indicates that an initial determination includes a "finding of noncompliance that results in the imposition" of certain remedies such as a CMP. 42 C.F.R. § 498.3(b)(13). ⁽⁶⁾ In this case, the certification of compliance was not accompanied by the imposition of remedies or any other apparent adverse consequences that affected North Ridge's participation in the Medicare program.

We also note that treating a certification of compliance as having prospectively binding effect would conflict with regulations in Part 488 that govern survey frequency. These regulations provide that a certification of noncompliance may supersede a previous certification of compliance, and that a facility may be surveyed as frequently as necessary to verify its compliance with participation requirements. 42 C.F.R. § 488.308(c); 42 C.F.R. § 488.20(c) ("[a] State survey agency certification . . . that a provider or supplier is no longer in compliance with the conditions of participation . . . will supersede the State survey agency's previous certification").

Although we conclude that the October 28, 1996 certification of compliance was not an initial determination, we agree with the ALJ's conclusion that section 488.430(b) limits the scope of a permissible CMP for past noncompliance.

B. The regulations do not provide for a CMP for the days of alleged noncompliance prior to the last standard survey.

CMS's contention that a CMP may be imposed for the period prior to North Ridge's 1996 standard survey requires us to interpret section 488.430(b). To determine a regulation's meaning one looks first to its language. United States v. Turkette, 452 U.S. 576, 580, 101 S.Ct. 2524, 2527 (1981). The meaning of statutory or regulatory language, plain or not, depends on context. King v. St. Vincent's Hospital, 502 U.S. 215, 221, 112 S.Ct. 570, 574 (1991). This requires that we "not be guided by a single sentence or member of a sentence" but that we "look to the provisions of the whole law, and to its object and policy." U.S. National Bank of Oregon v. Independent Insurance Agents, 508 U.S. 439, 455, 113 S.Ct. 2173, 2182 (1993) (internal citations omitted). We have often looked to the preamble of a final regulation to confirm the plain meaning of a regulation. New York State Department of Social Services, DAB No. 1536 (1995) (and cases cited therein). When the meaning of a provision is plain, it must be enforced in accordance with that meaning. See, e.g., Exportal Ltda. v. United States, 902 F.2d 45, 50 (D.C. Cir. 1990).

Section 488.430 provides:

Civil money penalties: Basis for imposing penalty. ⁽⁷⁾

(a) [CMS] or the State may impose a civil money penalty for either the number of days a facility is not in substantial compliance with one or more participation requirements or for each instance that a facility is not in substantial compliance, regardless of whether or not the deficiencies constitute immediate jeopardy.

(b) [CMS] or the State may impose a civil money penalty for the number of days of past noncompliance since the last standard survey, including the number of days of immediate jeopardy. [footnote added]

On its face, section 488.430(b) authorizes a CMP subject to a temporal limitation: when imposing a remedy for past noncompliance, CMS may reach back no further than the "last standard survey" to do so. Past noncompliance is defined in the SOM and elsewhere as noncompliance that began and ended prior to the "current survey" that uncovered it. ⁽⁸⁾ Accordingly, the "last standard survey" must, in the context on this case, refer to the standard survey immediately preceding the "current survey" (i.e., the complaint investigation) that uncovered the past noncompliance. ⁽⁹⁾

Despite its seemingly plain language, CMS asked us to interpret section 488.430(b) as placing no mandatory limits on its authority with respect to past noncompliance. In particular, CMS argued that subsection (a) of section 488.430 "is properly read as implementing the Secretary's full statutory authority [to impose a CMP] for both present and past noncompliance," and that subsection (b)'s limited purpose is to "clarify" or "highlight" that a CMP may be imposed for a particular instance of past noncompliance. CMS Br. at 39, 40. However, the structure and provenance of subsection (b) compel us to reject this argument.

CMS's authority to impose CMPs, as well as other enforcement remedies, is based on section 1819(h) of the Act, which Congress enacted as part of the Omnibus Budget Reconciliation Act (OBRA) of 1987 (Public Law 100-203). Section 1819(h)(2) authorizes the Secretary to impose one or more of the remedies described in subparagraph (h)(2)(B) -- including denial of future payment, temporary management, and CMPs -- if he finds, pursuant to a state recommendation, ⁽¹⁰⁾ that a facility "no longer meets" a federal participation requirement. 42 U.S.C. § 1395i-3(h)(2). Section 1819(h)(2) then states:

Nothing in this subparagraph shall be construed as restricting the remedies available to the Secretary to remedy a skilled nursing facility's deficiencies. If the Secretary finds, or pursuant to the recommendation of the State under paragraph (1) finds, that a skilled nursing facility meets such requirements but, as of a previous period, did not meet such requirements, the Secretary may provide for a civil money penalty under subparagraph (B)(ii) for the days on which he finds that the facility was not in compliance with such requirements.

Id. (emphasis added).

The Act does not define the term "previous period," and a definite meaning cannot be inferred from surrounding provisions or the statute's legislative history. Under the circumstances we think that Congress left it to the Secretary to define the "previous period" subject to a CMP and to work out the other details of implementing that remedy. The Secretary's statutory authority regarding past noncompliance is, in fact, discretionary: section 1819(h) states that the Secretary "may provide for" a CMP for days in a previous period. In addition, section 1819(h) expressly directs the Secretary to specify, presumably by regulations, criteria "as to when and how" CMPs (and the other remedies in section 1819(h)(2)(B)) are to be applied. 42 U.S.C. § 1395i-3(h)(2)(B).

Pursuant to this statutory authority, the Secretary published a proposed rule to implement OBRA's enforcement and other provisions. 57 Fed. Reg. 39,278 (Aug. 28, 1992). The proposed rule contained the following provision:

Section 488.230 Civil money penalties.

(a) Basis for imposing penalty.

(1) [CMS] or the State may impose a civil money penalty on any facility that is out of compliance with one or more participation requirements, regardless of whether or not the deficiencies constitute an immediate and serious threat.

(2) [CMS] or the State may impose a civil money penalty for the number of days of noncompliance between two certifications of compliance.

Id. at 39,313 (emphasis added).

On November 10, 1994, the Secretary published a final rule. 59 Fed. Reg. 56,116. The final rule redesignated section 488.230(a) as section 488.430 and adopted the language now in dispute. The final rule's preamble explained section 488.430(b) as follows:

Comment: Several commenters were confused and requested that we clarify the number of days of noncompliance between two certifications of compliance at proposed § 488.230(a)(2).

Response: We revised this paragraph . . . .It now provides that [CMS] or the State may impose a civil money penalty for the number of days of past noncompliance since the last standard survey, including the days of immediate jeopardy. We believe that this revision implements sections 1819(h) and 1919(h) of the Act, which state that if a facility meets the requirements of subsections (b), (c), and (d), but as of a previous period did not meet such requirements, a civil money penalty could be imposed for the days in which the facility was not in compliance with the requirements. We believe this statutory provision permits a civil money penalty to be imposed whenever there is past noncompliance with the participation requirements between standard surveys. The following example illustrates one application of this provision: A facility had a survey on July 1, 1993, and it was in substantial compliance with all of the participation requirements. During the orientation tour at the next survey, June 15, 1994, surveyors observed questionable infection control procedures. This observation prompted the surveyors to further examine records and the facility's infection control program. This examination indicated that the facility was out of compliance with infection control requirements (§ 483.65) from October 15 to October 30, 1993. However, at the time of the June 15, 1994, survey, the facility was again in substantial compliance with participation requirements. The number of days of noncompliance would be 16, which is the number of days between (and including) October 15 and October 30. This noncompliance existed for 16 days, but it did not exist at the time of either survey.

59 Fed. Reg. 56,116, 56,199 (Nov. 10, 1994)(emphasis added). In response to a suggestion that the final rule list the remedies other than termination that CMS found acceptable, the preamble's drafters indicated that such a list could be found in section 488.406(a) and (b). Id. at 56,177. That list includes CMPs. There is no indication that other remedies, even if authorized by the statute, were contemplated.

The foregoing excerpts and discussion make it clear that, in promulgating section 488.430(b), the Secretary was exercising his discretion, granted by the statute, to "provide for" a CMP for noncompliance in a "previous period." ⁽¹¹⁾ In exercising that statutory authority, the Secretary chose to define the words "previous period" in section 1819(h)(2) as the days "since the last standard survey." We find no basis to conclude that this choice is anything but a self-imposed limitation on the Secretary's remedial power. CMS must therefore adhere to the limitation in the regulation. ⁽¹²⁾ Service v. Dulles, 354 U.S. 363, 371-73, 77 S.Ct. 1152, 1156-58 (1957) (though statute granted agency "absolute discretion" regarding employee discharge decisions, agency must still comply with its own regulations); Exportal Ltda. v. United States, 902 F.2d at 49 ("even assuming that the Secretary could adopt a rule preserving his discretion to deny a waiver to a foreign producer . . . , the fact remains that the Secretary has adopted [a regulation] under which the Secretary's discretion has been strictly limited by the plain terms of the regulation").

According to CMS, the only statutory limitation on its authority to remedy past noncompliance is section 1128A of the Act, which provides that the Secretary "may not initiate an action under this section with respect to any claim, request for payment, or other occurrence described in this section later than six years after the date the claim was presented, the request for payment was made, or the occurrence took place." 42 U.S.C. § 1320a-7a(c)(1). However, section 1128A creates only a limitations period for initiating an enforcement action; it does not purport to define the period for which a CMP may be applied. Moreover, section 1819(h) contains a clear (if undefined) limitation: a CMP is authorized only for days of past noncompliance in a "previous period." ⁽¹³⁾

We do not agree with CMS that section 488.430(a) defines the Secretary's remedial authority with respect to both present and past noncompliance. The structure and background of the regulation do not support such an interpretation. As the November 1994 preamble (quoted at length above) indicates, section 488.430(b) has independent significance insofar as it implements the Secretary's authority in section 1819(h) to provide for a CMP for days of noncompliance in a "previous period." In addition, the components of section 488.430 -- subsection (a), which addresses a facility that is not in compliance during the current or most recent survey, and subsection (b), which addresses a facility found to have days of past noncompliance -- mirror the statutory framework, which distinguishes between the remedies for facilities found to be noncompliant during the current or most recent survey (a facility that "no longer meets" participation requirements), and the remedy for facilities found to be noncompliant in a previous period. See 42 U.S.C. § 1395i-3(h).

We find CMS's other arguments to be equally unpersuasive. For example, CMS contended that the word "may" in subsection (b) is an indication that the regulation provides a non-exclusive and non-exhaustive description of its authority. The fact that it "may" impose a CMP for days of past noncompliance since the last standard survey does not, according to CMS, mean that it "may not" take other remedial action authorized elsewhere in the statute or regulations. However, because section 488.430(b) itself implements a statutory limitation, and because there is no other regulation that purports to implement the Secretary's remedial authority with respect to past noncompliance, we think that the word "may" merely indicates that CMS's authority to impose any CMP at all is discretionary.

CMS suggested that its authority to impose a remedy for days of noncompliance prior to the standard survey may properly rest on 42 C.F.R. § 488.440(a)(1), which provides that a CMP "may start accruing as early as the date that the facility was first out of compliance" (emphasis added). However, we agree with the ALJ that section 488.430(b) would be superfluous if section 488.440(a)(1) were interpreted to permit a CMP for any days of past noncompliance. We must strive to construe a regulation in a manner that does not render its words superfluous or insignificant. Astoria Federal Savings and Loan Assn. v. Solimino, 501 U.S. 104, 112, 111 S.Ct. 2166, 2171-2172 (1991). As we have explained, section 488.430(b) constitutes an exercise of the Secretary's authority to define and implement a remedy for past noncompliance and thus cannot be regarded as subordinate to a regulation, such as section 488.440(a), that does not purport to address that aspect of the enforcement scheme. In addition, regulations "having the same purpose or object (in pari materia) should be read together as complementary, not contradictory." New York Department of Social Services, DAB No. 908 (1987). Sections 488.440(a) and 488.430(b) clearly have the same purpose or object -- defining the basis or scope of a CMP. Read together, they provide that a CMP for past noncompliance begins to accrue no earlier than the last standard survey.

Finally, CMS contended that the ALJ failed to interpret section 488.430(b) in harmony with the statutory and regulatory enforcement scheme. CMS Br. at 34, 41. According to CMS, the Secretary created section 488.430(b) to ensure that facilities found to be in compliance during standard surveys stay in compliance between those surveys. In CMS's view, the regulation was not intended to limit the agency's authority to impose remedies for past noncompliance uncovered during a complaint investigation, whose period of concern may overlap with the period covered by a previous standard survey. CMS contended that a limitation on its authority to impose a CMP under these circumstances makes the previous standard survey a "safe harbor," effectively precluding a remedy for any deficiency, even a serious one, that occurs before the standard survey but is not uncovered and investigated until afterward. ⁽¹⁴⁾ Such a result, said CMS, would "subordinate other types of surveys, such as complaint investigations, to the standard survey process, thereby restricting the effectiveness of such other types of surveys as an enforcement tool." CMS Br. at 50.

Although section 488.430(b) could, as interpreted here, serve to limit the duration of CMPs for periods of past noncompliance, CMS did not show that this shortcoming substantially undermines the program's enforcement scheme. ⁽¹⁵⁾ Moreover, there are plausible reasons why the regulation may have restricted CMS's remedial authority concerning past noncompliance. Looking back no further than the last standard survey avoids potential problems with the quality and quantity of evidence available to support a deficiency finding. It also encourages state survey agencies to conduct complete and thorough standard surveys and to ensure that all pertinent information about a facility is shared with the persons who conduct them. In addition, section 488.430(b)'s drafters might reasonably have thought that a penalty for noncompliance that was corrected long before the most recent survey does not serve the enforcement scheme's chief remedial purpose, which is to detect deficiencies and bring noncompliant facilities into compliance as quickly as possible. ⁽¹⁶⁾ A CMP for past noncompliance does not serve this purpose because the facility is already in compliance. Finally, a limitation on CMS's remedial powers regarding past noncompliance mitigates the unfairness, real or perceived, of a deficiency finding that should have been addressed -- and may have been resolved in the facility's favor -- during the last standard survey.

Finally, CMS contended that its interpretation of the regulation is reasonable and therefore entitled to deference. It is well-settled, of course, that an agency's interpretation of its own regulations, of which a party has notice, is entitled to substantial deference unless it is plainly erroneous or inconsistent with the regulation. Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414, 65 S.Ct. 1215, 1217 (1945); New York State Department of Social Services, DAB No. 1429 (1993) (where a number of interpretations of statute or regulation are possible, Board must sustain administering agency's interpretation as long as it is reasonable). However, no deference is owed if the regulation's meaning is clear, as it is here. Pfizer, Inc. v. Heckler, 735 F.2d 1502, 1509 (D.C. Cir. 1984). Furthermore, we give no deference in this case because there is nothing in the record to indicate that CMS articulated its interpretation of section 488.430(b) in its manuals, regulatory preambles, or any other forum except this administrative appeal. See Bowen v. Georgetown University Hospital, 488 U.S. 204, 212-13, 109 S.Ct. 468, 473-74 (1988) (finding it appropriate not to give deference to an agency's convenient litigating position).

In short, we conclude that section 488.430(b) plainly limits CMS's authority to impose a CMP for past noncompliance and does so in a manner not inconsistent with Congress's mandate. The regulation must therefore be applied according to its terms. Cf. Chevron, 467 U.S. at 843-44, 104 S.Ct. 2778, 2782 (deference to agency interpretation is warranted if Congress has left a gap for the agency to fill pursuant to an express or implied delegation of authority to the agency).

C. The 1996 standard survey of North Ridge ended on July 18, 1996.

The ALJ found that the standard survey in this case ended on October 28, 1996, the day MDH issued the certification of compliance. We agree with CMS that this finding is inconsistent with the regulations and with agency administrative practice. ⁽¹⁷⁾

Pursuant to sections 1819 and 1919 of the Act, the Secretary has established a "survey process" or protocol to guide state surveyors in assessing compliance with federal quality standards and to "ensure uniform and consistent application and interpretation" of those requirements. See 42 U.S.C. §§ 1395i-3(g)(2)(C), 1396r(g)(2)(C); 42 C.F.R. § 488.26(c). A detailed description of the survey process is found in Appendix P and other sections of the SOM. See SOM § 7203 & Appendix P. These guidelines specify the components of various surveys, the methods to be used in performing them, and the procedures for verifying correction of identified deficiencies. ⁽¹⁸⁾

A "standard survey" is defined in the regulations as "a periodic, resident-centered inspection which gathers information about the quality of service furnished in a facility to determine compliance with the requirements for participation." 42 C.F.R. § 488.301. Section 488.305 of the regulations provides that a standard survey includes all of the following tasks: (1) a sample of residents; (2) a quality of care survey; (3) an audit of written plans of care and resident assessments; and (4) a review of compliance with resident rights requirements. In addition, the SOM describes the standard survey as a series of discrete tasks, beginning with offsite survey preparation and an "entrance conference" and ending with an "exit conference." SOM App. P, sec. II.

At the exit conference, the survey agency notifies the facility of any deficiencies. SOM § 2724 & App. P, sec. II . A Statement of Deficiencies is given to the facility no later than 10 days after the "last day of the survey." SOM § 7319. If the facility submits a plan of correction, the survey agency may subsequently perform a "post-survey revisit" to confirm that the facility is in compliance and has the ability to remain in compliance. SOM App. P, sec. I (defining a post-survey revisit as an "on-site visit intended to verify correction of deficiencies cited in a prior survey" (emphasis added)). "The purpose of the post-survey revisit (follow-up)," according to the SOM, "is to re-evaluate the specific care and services that were cited as noncompliant during the original standard, abbreviated standard, extended or partial extended survey(s)." SOM App. P, sec. VI (emphasis added).

What is apparent from these regulations and guidelines is that a standard survey is distinct from the surveys or other actions that may ensue from it (such as an extended survey or a post-survey revisit), and that a standard survey typically ends with the onsite exit conference and no later than the day that the Statement of Deficiencies is issued. See 59 Fed. Reg. 56,116, 56,154 (Nov. 10, 1994) (noting that a certification of compliance or noncompliance is issued by the state survey agency 20 to 25 days "after the last day of the survey"). In this case, the Statement of Deficiencies on form HCFA-2567 was sent to North Ridge on August 13, 1996. There is no evidence that MDH inspected North Ridge at any time between the exit conference on July 18, 1996 and August 13, 1996, or that between those dates MDH asked the facility for information to assess the facility's compliance with federal requirements. Moreover, although the October 11, 1996 revisit was part of the broader survey process and may have included some elements of a standard survey, it did not contain all of the elements of a standard survey. Rather, it was, as the record shows (CMS Ex. 11), a focused inspection to verify the correction of deficiencies found during the "original" or prior survey.

Given these circumstances, we find that the 1996 standard survey of North Ridge ended on July 18, 1996, the date of the exit conference. In addition to being consistent with the above-cited regulations and guidelines, our finding is consistent with the regulations establishing enforcement timetables based on the last day of a survey. See, e.g., 42 C.F.R. § 488.412 (allowing a noncompliant facility in a non-immediate-jeopardy case to continue to participate for six months "from the last date of the survey"); 42 C.F.R. § 488.310 (requiring survey agency to perform an "extended survey" within two weeks after completion of the standard survey).

Because the last standard survey ended on July 18, 1996, CMS may, in accordance with section 488.430(b), impose a CMP only for days of past noncompliance after July 18, 1996.

Conclusion

For the reasons explained above, we affirm the ALJ Decision to the extent it set aside the CMP for the days of alleged noncompliance between (and including) June 20, 1996 and July 18, 1996. We reverse the ALJ Decision regarding the period from (and including) July 19, 1996 to October 28, 1996 and find that CMS may impose a CMP for the days in that period in which North Ridge was not in substantial compliance with Medicare participation requirements.

This case is remanded to the ALJ for additional proceedings not inconsistent with this decision. In view of the age of this case, the ALJ shall expedite the proceedings on remand.

Judith Ballard

Marc R. Hillson

Donald F. Garrett
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 when quoting documents that refer to HCFA.

2. A facility "substantially" complies with federal participation requirements if the care, though technically falling short of the requirements, has not resulted in any harm to residents and poses no more than a risk of minimal harm in the future. 42 C.F.R. §§ 488.301, 488.408(f)(2).

3. Citations to the State Operations Manual (SOM) are to the version of the manual in effect when the surveys in this case occurred.

4. A "deficiency" is defined in the regulations as a failure to meet a federal participation requirement. 42 C.F.R. § 488.301.

5. Even if we concluded that the certification of compliance was an initial determination, that determination was reopened within one year when MDH, acting as CMS's agent, notified North Ridge on October 21, 1997 of the complaint investigation's findings and recommended remedy.

6. Conversely, section 498.3(b) implicitly excludes from the list of appealable determinations any determination of noncompliance that does not result in a CMP or other remedy. See 42 C.F.R. § 498.3(b)(13). In addition, section 498.3(d)(1) expressly excludes any deficiency findings with respect to a provider that is "determined to be in compliance with the conditions or requirements for participation or coverage."

7. The only language added after the November 10, 1994 promulgation was the language in subsection (a) authorizing a "per instance" penalty. See n.12 (below).

8. See State Operations Manual (SOM) § 7510 ("[CMS] or the State may consider imposing a CMP as a remedy for egregious past noncompliance that is corrected at the time of the current survey"); SOM App. P, sec. VII(A)(5) ("If a deficiency is not present now, but was present and has been corrected (past noncompliance), notify the facility orally and in writing that the complaint was substantiated because deficiencies existed at the time that the complaint situation occurred"); 59 Fed. Reg. 56,116, 56,161 (Nov. 10, 1994)(section 1819(h)(1) "expressly authorizes the imposition of [CMPs] even if, at the time of the survey, the facility is in substantial compliance"). CMS did not dispute the characterization of the alleged deficiencies as past noncompliance.

9. In this case, CMS did not deny that the complaint investigation was the "current survey" and did not allege that the investigation was merely a part of or an extension of the standard survey that began on July 15, 1996.

10. Section 1819(h)(1) of the Act provides that a state may, based on a survey, recommend that one or more remedies, including CMPs, be imposed on a facility that "no longer meets" federal requirements. 42 U.S.C. § 1395i-3(h)(1). In a separate passage, section 1819(h)(1) states:

If a State finds that a skilled nursing facility meets [federal participation requirements] but, as of a previous period, did not meet such requirements, the State may recommend a civil money penalty . . . for the days in which it finds that the facility was not in compliance with such requirements.

Id. (emphasis added).

11. Cf. Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 843, 104 S.Ct. 2778, 2782 (1984)("The power of an administrative agency to administer a congressionally created ... program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress." (quoting Morton v. Ruiz, 415 U.S. 199, 231, 94 S.Ct. 1055, 1072 (1974)).

12. Our assessment of section 488.430(b)'s purpose is bolstered by a 1999 rulemaking that amended section 488.430(a). As originally written, subsection (a) authorized CMS to impose a "per day" CMP "for the number of days a facility is not in substantial compliance." On March 18, 1999, the Secretary issued a final rule amending section 488.430(a) to provide that CMS may impose a CMP for a particular "instance" of noncompliance, in addition to a "per day" penalty. 64 Fed. Reg. 13,354. In amending section 488.430(a), the Secretary noted that the statute offered "greater flexibility than we have exercised up to now." Id. at 13,356. That comment supports our conclusion that, regardless of whether the statute authorizes a broader CMP for past noncompliance under these circumstances, the regulations are the means of specifying how the Secretary's statutory authority will be exercised.

13. CMS objected to certain comments by the ALJ on page 14 of the summary judgment ruling, interpreting them as a finding that it lacked the authority to exercise "the full statutory authority of the Secretary to impose a CMP for past noncompliance." CMS Br. at 32; see also Summ. Judg. Ruling at 14. This objection was a prelude to CMS's larger argument, which is that the statute gives the Secretary, and by extension CMS (via the relevant delegations of authority), essentially unlimited and self-implementing authority to impose a CMP for past noncompliance. As indicated, however, the Secretary's statutory authority to impose a CMP for past noncompliance is limited to days in a "previous period." Once the Secretary issues a regulation defining that term to mean days "since the last standard survey," CMS is bound to apply the regulation according to its terms, an obligation it may not ignore simply because it may not have anticipated the circumstances here when it drafted the regulation.

14. For example, if a complaint investigation performed one month after a standard survey identified a period of noncompliance that occurred only two months before the standard survey, CMS would be powerless to impose a CMP for that deficiency.

15. We note that the disputed limitation on the CMP could have been avoided with better coordination and communication between MDH's survey components. For example, MDH could have expanded the standard survey to encompass the information it received on July 23, 1996 about the death of Resident #6650 See SOM § 7205 & App. P., sec. I (indicating that a complaint investigation may be expanded to a standard survey). Instead, the investigation of Resident #6650's death did not begin until almost six months later. Such a lengthy delay is disturbing, particularly because it involved the death of a patient.

16. 42 C.F.R. § 488.402 ("The purpose of remedies is to ensure prompt compliance with program requirements"); H.R. Rep. No. 100-391(I), 100^th Cong., 1^st Sess., at 452, reprinted in 1987 U.S.C.C.A.N. 2313-1, 2313-272 (OBRA's "central purpose . . . is to improve the quality of care for Medicaid-eligible nursing-home residents, and to bring substandard facilities into compliance with Medicaid quality of care requirements or to exclude them from the program").

17. North Ridge did not respond to CMS's contentions regarding this issue.

18. Because the interpretive guidelines in the SOM are consistent with the statute and regulations, we accord them considerable weight in determining when North Ridge's 1996 standard survey ended. See Louisiana Dept. of Health and Hospitals, DAB No. 1772 (2001); Thomas Jefferson University v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 2386-87 (1994)(a court must give an agency's interpretation of its own regulations controlling weight unless it is plainly erroneous or inconsistent with the regulations).