SUBJECT:

Park Manor,

Petitioner,

Centers for Medicare & Medicaid Services.

DECISION DENYING APPLICATION
FOR FEES PURSUANT TO
EQUAL ACCESS TO JUSTICE ACT

I deny the application of Petitioner, Park Manor, made pursuant to the Equal Access to Justice Act (EAJA), 5 U.S.C. � 504, for attorneys' fees, costs and expenses. The Centers for Medicare and Medicaid Services (CMS) was substantially justified in seeking remedies against Petitioner. I issue this decision pursuant to EAJA and implementing regulations at 45 C.F.R. �� 13.1 - 13.30.

I. Background

Petitioner is a nursing facility. It participates in the Medicare program and its participation is governed by sections 1819 and 1866 of the Social Security Act. Petitioner's participation in Medicare also is governed by regulations at 42 C.F.R. Parts 483 and 488.

The case on which Petitioner bases its EAJA petition began with a compliance survey that the Wisconsin State survey agency conducted of Petitioner's facility in March 2001. The surveyors concluded that Petitioner was not complying substantially with several Medicare participation requirements. CMS determined to impose civil money penalties against Petitioner based on the surveyors' findings. CMS imposed additional remedies consisting of a denial of payment for new admissions and loss of nurse aide training.

Petitioner requested hearings from CMS's remedy determinations. These requests were assigned to me for a hearing and a decision. I heard the case in Milwaukee, Wisconsin, on February 25, 2003. By the hearing date the issues in the case had narrowed to whether Petitioner was complying with Medicare participation requirements between March 22 and June 10, 2001, and whether civil money penalties of $150 per day were reasonable for any noncompliance that Petitioner exhibited during this period. The total civil money penalty amount that was at stake as of the date of the hearing was $12,150. ⁽¹⁾

I issued my decision on September 30, 2003. I sustained the imposition of civil money penalties of $150 per day for each day of the March 22 - June 10, 2001 period, thereby sustaining the $12,150 in civil money penalties that were at issue. I did so based on my finding that Petitioner failed to comply with the requirements of 42 C.F.R. � 483.10(b)(11), a regulation that requires a nursing facility to consult immediately with a resident's treating physician about any significant changes in a resident's medical condition. I concluded additionally that the penalty amount - comprising only five percent of the maximum amount permitted by regulation for a non-immediate jeopardy level deficiency - was reasonable in light of the seriousness of Petitioner's noncompliance.

In my decision I noted that CMS had premised its case for the imposition of $12,150 in penalties on the presence of five alleged deficiencies. I found it unnecessary that I decide whether Petitioner was complying substantially with anything other than with the physician consultation requirement because my finding that Petitioner failed to comply with this requirement was in and of itself sufficient to support the civil money penalties that were at issue. Consequently, I made no findings as to the four additional alleged deficiencies.

Petitioner appealed my decision to the Departmental Appeals Board (Board). On June 17, 2004, an appellate panel of the Board issued a decision reversing my decision. In this decision the Board not only reversed my noncompliance and remedy findings but held that it was unnecessary to remand the case to me for a decision as to the additional four noncompliance findings that I had declined to address in my decision. Thus, the Board effectively ended CMS's case as to the four alleged deficiencies that I did not address in my decision. The panel reaffirmed this decision in an August 16, 2004 ruling on CMS's request to reopen the decision.

In its EAJA petition Petitioner asked that I award it attorneys' fees, costs, and expenses totaling $253,837.90. ⁽²⁾ Petitioner has now increased its request to ask for an additional $35,778.73, to account for the fees and costs it contends it incurred in preparing a reply to CMS's objections to the EAJA petition and in supplementing the fee request. ⁽³⁾ The total fees and costs demanded by Petitioner at this juncture of the case exceed the amount of civil money penalties that I imposed by about 24 times and the amount of penalties that CMS originally determined to impose by about 9 times. Petitioner also moved that I withhold from public disclosure certain financial information that it submitted in support of its EAJA petition.

CMS objects to the EAJA petition. It contends that its remedy determination and litigation of the case were substantially justified and that special circumstances render unjust the awarding of EAJA fees to Petitioner.

Petitioner submitted ten affidavits to support its petition. It did not identify these affidavits with exhibit numbers or with other designations. To facilitate a decision I am identifying these affidavits as follows: Robert M. Hesslink, Jr. - Petitioner's Exhibit (P. Ex.) 1; Jenean M. Erickson - P. Ex 2; Carla Kundinger - P. Ex. 3; Mary Jane Merkley-Zimmerman - P. Ex. 4; Wendy G. (Barbeln) Meyer - P. Ex. 5; Paula Kock - P. Ex. 6; Karen Haegerl - P. Ex. 7; Jennifer Timm - P. Ex. 8; Sharon Schultz - P. Ex. 9; and, Dennis B. Bowen - P. Ex. 10.

CMS submitted three exhibits. These include: the declaration of Barbara Altman; a chart which analyzes the hours allegedly spent on the case by experts, Petitioner's counsel and supporting staff, including those of another attorney and paralegal staff; and an affidavit of Mr. Hesslink that was submitted to support an application for attorneys' fees in the State hearing. I am identifying Ms. Altman's declaration as CMS Exhibit (CMS Ex.) 1, the chart as CMS Ex. 2, and Mr. Hesslink's affidavit in the State hearing as CMS Ex. 3. I receive into the record of this case P. Ex. 1 - P. Ex. 10 and CMS Ex. 1 - CMS Ex. 3.

II. Ruling on Petitioner's motion to exclude financial information from public disclosure

I deny Petitioner's motion to exclude from public disclosure the information that is contained in P. Ex. 10. Petitioner has provided me with no explanation as to why any of this information falls within one or more of the specific exemptions from mandatory disclosure under the Freedom of Information Act (FOIA), 5 U.S.C. section 552(b)(1) - (9).

The information in question is information which describes the net worth and financial condition of Petitioner and of an individual who is the owner of a majority financial interest in Petitioner. P. Ex. 10, at 1 - 4. Petitioner submitted this information to satisfy a requirement at 45 C.F.R. �13.11(a) that an applicant for EAJA fees must provide with its application a detailed exhibit (net worth exhibit) showing the net worth of the applicant and of any affiliates. Under EAJA and governing regulations individuals and entities are only eligible for awards of fees and associated costs and expenses if their net worth is equal to or below specific cutoff amounts.

There are strict criteria described at 45 C.F.R. � 13.11(c) which, if met, would qualify exempting the net worth exhibit from public disclosure. An applicant who requests such an exemption must explain, in detail, why the information in the net worth exhibit falls within one or more of the specific exemptions from mandatory disclosure under FOIA, why public disclosure of the information would adversely affect the applicant, and why disclosure is not in the public interest. Merely asserting conclusions will not suffice to establish a basis for rendering an exhibit disclosure-exempt. A party may not, for example, qualify for the exemption simply by asserting that it would suffer injury if the exhibit is disclosed. At a minimum the party must explain how and why it would be injured by disclosure.

Petitioner did not satisfy those criteria. It states only that the net worth exhibit contains:

detailed financial information about the applicant and its affiliate which is of a confidential nature and which is protected from public disclosure by 5 U.S.C. � 552(b)(4). Prior to its submission in this case, this information had been maintained by the affiliate and her accountants in the strictest of confidence. Its disclosure to the public at this time would cause the applicant and its affiliate irreparable injury and the interest of the applicant and the affiliate in continued non-disclosure outweighs any interest of the public in having access to this financial information.

Motion to Withhold Financial Information from Public Disclosure at 1 - 2.

Petitioner states only conclusions - in effect, simply parroting the language of FOIA and the regulation - without providing any detailed supporting information that establishes these conclusions to be reasonable. It has not explained how or why it or its affiliate would be injured by disclosure of any of the information that is contained in P. Ex. 10.

III. Issues, findings of fact and conclusions of law

A. Issues

The issues in this case are whether:

1. Petitioner's net worth and its affiliate's net worth qualify Petitioner to submit an EAJA petition.

2. CMS was substantially justified in determining to impose remedies against Petitioner.

3. EAJA fees and costs should be awarded to Petitioner - even if CMS's position was substantially justified - on the ground that CMS's remedy determination was substantially in excess of the remedy that was sustained.

A case in which a party seeks fees and costs pursuant to EAJA potentially involves an issue other than those that I address in this decision. The potential additional issue is whether any special circumstances exist that make an award unjust. I do not address this issue here because it is unnecessary that I do so. It is made irrelevant by my decision that CMS's position in this case was substantially justified.

B. Findings of fact and conclusions of law

I make findings of fact and conclusions of law (Findings) to support my decision in this case. I set forth each Finding below as a separate heading. I discuss each Finding in detail.

1. Petitioner's net worth and its affiliate's net worth qualify Petitioner to submit an EAJA petition.

Petitioner and its affiliate satisfy the net worth limitations for individuals and corporations that are contained in 45 C.F.R. �� 13.4(b)(1) and 13.4(b)(5). P. Ex. 10. CMS did not challenge the information submitted by Petitioner in its net worth exhibit.

2. CMS was substantially justified in determining to impose remedies against Petitioner.

The purpose of EAJA is to enable a qualified applicant who has successfully litigated against an agency of the federal government to obtain attorneys' fees and associated costs and expenses where the agency's position in the case was not substantially justified. EAJA specifies that fees and associated costs will be denied if:

the adjudicative officer of the agency finds that the position of the agency was substantially justified or that special circumstances make an award unjust. Whether or not the position of the agency was substantially justified shall be determined on the basis of the administrative record, as a whole, which is made in the adversary adjudication for which fees and other expenses are sought.

5 U.S.C. section 504(a)(1). The standard for awarding EAJA fees and expenses is spelled out in detail by regulation:

Awards will not be made for fees and expenses where the Department . . . [of Health and Human Services'] position in the proceeding was substantially justified at the time the proceeding was initiated. The fact that a party has prevailed in a proceeding does not create a presumption that the Department's position was not substantially justified. The burden of proof that an award should not be made to an eligible prevailing applicant is on the agency's litigating party, which may avoid an award by showing that its position was reasonable in law and fact.

45 C.F.R. � 13.5(a).

Both EAJA and the regulation make it evident that EAJA does not automatically burden the government with a requirement that it pay a prevailing non-government party's legal fees and costs. The clear intent of EAJA is to require the government to pay fees and costs only in the circumstance where its action, viewed from the perspective of hindsight, is unreasonable.

The term "substantially justified" means that the agency's position must be "justified in substance or in the main - that is, justified to a degree that could satisfy a reasonable person." Pierce v. Underwood, 487 U.S. 552, 565 (1988) (internal quotation marks omitted). An agency's position is substantially justified "if a reasonable person could think it correct, that is, if it has a reasonable basis in law and in fact." Id. at 566 n.2.

One must look at the overall agency determination in order to decide whether the agency was substantially justified. Commissioner, INS v. Jean, 496 U.S. 154, 161 - 162 (1990). It is inappropriate to split an agency's determination into individual components in order to decide whether any one of them was not substantially justified. Rather, the determination must be examined globally to decide whether, on the whole, it was substantially justified.

I find that CMS's position was substantially justified when these principles are applied to the facts and law of the case.

a. CMS was substantially justified in alleging that Petitioner failed to comply with the requirements of 42 C.F.R. � 483.10(b)(11).

The regulation at issue provides in relevant part:

(i) A facility must immediately inform the resident; consult with the resident's physician; and if known, notify the resident's legal representative or an interested family member when there is -

* * *

(B) A significant change in the resident's physical, mental, or psychosocial status (i.e., a deterioration in health, mental, or psychosocial status in either life-threatening conditions or clinical complications); . . . .

42 C.F.R. � 483.10(b)(11).

CMS reads this regulation to mean that a facility's staff has a duty to consult immediately with a resident's treating physician about any significant changes in a resident's condition. It applies the plain meaning of the regulation to define a significant change as being any objective change in a resident's condition that is either life-threatening or a clinical complication. CMS interprets the regulation as giving a facility little discretion. If a significant change occurs a facility must consult. CMS assumes, consistent with the regulation's plain meaning, that a change in a resident's condition may be life-threatening and, therefore, significant, even in the absence of evidence establishing that the resident is in pain or discomfort.

This case involved a resident whose medical condition deteriorated over a four-day period. ⁽⁴⁾ At the end of this period the resident died. Prior to the inception of the period, the resident's physician, after consulting with Petitioner's staff and suspecting that the resident was suffering from a urinary tract infection, prescribed tests and antibiotic therapy. The evidence offered by CMS showed that, during the ensuing four days, the resident lost the ability to ambulate, became nonresponsive, and showed mottling of his extremities, all signs of either grave deterioration in his medical condition or of impending death. The staff did not consult with the physician during these four days, and only did so afterwards, when the resident's death was imminent.

In making its case against Petitioner, CMS relied on the plain meaning of the regulation and on proof that the resident's condition deteriorated dramatically during the four-day period. From CMS's perspective, the case was actually quite simple. A resident progressed from being ambulatory to death over a period of four days, without any consultation by Petitioner's staff with the resident's physician despite strong objective proof of the resident's deterioration. By the objective standards utilized by CMS, the resident's deterioration and the mileposts of that deterioration, including the loss of ability to ambulate, nonresponsiveness, and mottling of the extremities, were significant changes because they satisfied the plain meaning of a "life-threatening" clinical change in a resident's condition.

I found the evidence, viewed in the context of CMS's interpretation of the regulation, to be persuasive proof that Petitioner's staff had failed to consult with the resident's physician despite clinical evidence that the resident had experienced significant changes in his condition. I agreed with CMS that the plain meaning of the regulation required immediate consultation with the physician about clinical changes that were harbingers of the resident's death. ⁽⁵⁾ Additionally, I found that Petitioner's failure to notify the resident's physician of these objective changes potentially harmed the resident because, by not consulting with the physician, Petitioner's staff deprived the physician of the opportunity to make medical judgments that he was uniquely qualified to make. ⁽⁶⁾

The Board reached a different conclusion. The Board found that the changes manifested by the resident over the four days in question were not significant, in part because it found that they were part of a continuum of clinical changes. In the Board's view, the resident's pre-existing lethargy diminished the significance of his clinical changes during the four days that were at issue. ⁽⁷⁾ It concluded additionally that CMS had not shown that the resident's clinical changes were significant because CMS failed to offer prima facie evidence that the resident experienced pain or discomfort. The Board concluded that Petitioner's staff acted within its discretion by making a nursing judgment as to whether the changes manifested by the resident were significant. The Board also found that the failure by Petitioner's staff to consult with the resident's physician was consistent with the wishes that had been expressed by the resident's guardian.

The Board's decision rested on its interpretation and application of 42 C.F.R. � 483.10(b)(11) to the evidence in a way that is very different from CMS's understanding and application of the regulation. It rejected CMS's understanding that the regulation gave a facility little discretion when to consult with a physician. To the contrary, the Board decided that Petitioner and its staff had considerable leeway under 42 C.F.R. � 483.10(b)(11) to decide when changes in a resident's medical condition are significant. As the Board seemed to view the regulation, it is not sufficient to judge a facility's compliance using only objective criteria for deciding whether a resident's clinical changes are significant. And, contrary to CMS's understanding of the regulation's meaning, the Board appeared to conclude that a facility has broad discretion to evaluate changes and make a nursing judgment whether a physician ought to be consulted based on, in addition to objective evidence of a resident's condition, subjective factors, including a resident's long-term medical history, the wishes of a resident's guardian, and the staff's judgment as to whether the resident is experiencing pain or discomfort.

At the heart of the Board's decision is the Board's apparent understanding of the meaning of the phrase "life-threatening" in 42 C.F.R. � 483.10(b)(11). The Board seemed to find that even a clinical change that is a harbinger of death is not a "life-threatening" clinical change, as the regulation employs that term, absent proof that the change is accompanied by pain or suffering, even though there is nothing in the text of the regulation that would support this interpretation. This interpretation appears to be the basis for the Board's conclusion that CMS failed to establish a prima facie case that the changes manifested by the resident over the four days posed a potential for more than minimal harm, because CMS had not introduced evidence to show that the resident actually experienced pain or discomfort.

Moreover, the Board appeared to read out of the regulation the explicit requirement that a facility consult with a resident's physician immediately about a significant change in a resident's condition. The Board acknowledged that the mottling that the resident displayed in his extremities on the final day of the four day period may have been significant. Indeed, the undisputed evidence - not challenged by Petitioner - was that such a change was an extremely grave sign. But, the Board then excused Petitioner for not consulting with the resident's physician for 12 hours after this sign was observed based on its conclusion that there was no prima facie evidence that the resident was experiencing pain or suffering. Additionally, the Board concluded that there was no evidence that the physician would have altered the resident's treatment at this point. In so doing the Board appeared to say that it was within the purview of the facility's staff to decide not only whether a change was significant, but whether even a significant change in condition would necessitate physician consultation.

I conclude that CMS's position in this case was substantially justified. CMS relied on proof establishing that, during the four days in question, the resident manifested objective clinical changes that were harbingers of the resident's death. The record did not necessarily establish - and clearly, the resident's physician did not believe - that the resident's death was inevitable during this period and, consequently, it was reasonable for CMS to contend that the resident might have benefitted from physician consultation. And, even if death was inevitable, the evidence of the resident's clinical changes offered by CMS met the plain meaning of the regulation's reference to "life-threatening" changes that necessitate physician consultation. Consequently, CMS was substantially justified in concluding that Petitioner's failure to consult with the physician during the four days over which the resident manifested these changes was noncompliance with the requirements of 42 C.F.R. � 483.10(b)(11).

The interpretation of 42 C.F.R. � 483.10(b)(11) that the Board applied in this case is novel and not one of which CMS was forewarned or had reason to believe that the Board would apply. Clearly, the Board is free to interpret a regulation in any case and its interpretation might well be novel, as is the case here. But, CMS should not be penalized for failing to anticipate that the Board might utilize a standard of analysis that departs from the regulation's plain meaning and that which CMS had assumed reasonably to be the standard. CMS could not reasonably have assumed in advance that the Board would have decided this case in the manner in which it decided it. That the Board found this case to be one of first impression and its interpretation of the regulation to be novel is evident from the way in which the Board analyzed the regulation. The Board discussed at length comments that were published by the Secretary with the initial publication of the regulation and it relied on these comments as support for its interpretation. The Board did not discuss or even refer to previous decisions in which it had addressed the issue of what evidence proved the existence of a significant change that necessitates physician consultation. See, e.g., Batavia Nursing and Convalescent Center, DAB No. 1904, at 27 (2004); Georgian Court Convalescent Center, DAB No. 1866 (2003).

Neither the Board nor administrative law judges are vested with authority by the Secretary to make policy on his behalf. Our decisions, including our interpretations of regulations, are not precedential. Having said that, however, both the Board and administrative law judges often cite to previously issued decisions in an effort to give context to their decisions and to be consistent. The fact that the Board cited to no previous decision in interpreting 42 C.F.R. � 483.10(b)(11) is significant here, because it underscores the novelty of the regulatory interpretation that the Board applied to the case.

Petitioner gives three reasons for asserting that CMS's position was not substantially justified. First, Petitioner contends that CMS's position was not substantially justified because CMS failed to offer prima facie proof as to one of the essential elements of its case, the potential for more than minimal harm. Park Manor's Reply to Answer to Application for Attorney's fees, Costs and Expenses (Reply) at 14. Although Petitioner does not explain what it means by its assertion, I assume that it is referring to the Board's conclusion that CMS did not prove a prima facie case because it did not offer evidence to prove that the resident experienced pain or discomfort. As I discuss above, that finding of a failure of proof depends precisely on the novel interpretation of 42 C.F.R. � 483.10(b)(11) that the Board adopted in its decision. ⁽⁸⁾ Under the plain meaning application of the regulation that CMS has relied on historically there would have been no need for CMS to offer proof of pain or discomfort because, under CMS's application of the regulation, the existence of a "life-threatening" change does not depend on the presence of pain or discomfort. CMS could not have known in advance that the Board would issue a new interpretation of the regulation which appeared to substitute subjective standards of proof for pre-existing objective standards. CMS's failure to offer prima facie evidence to meet these apparent new standards of proof does not, in my judgment, detract from my conclusion that CMS had substantial justification for its position.

Second, Petitioner contends that there was "undisputed evidence showing that the significant changes alleged by CMS were not, in fact, changes at all." Reply at 14 (italics original). However, Petitioner does not explain what this allegedly undisputed evidence consists of. It asserts that CMS did not introduce any evidence concerning the resident's condition prior to Petitioner's calls to the resident's physician. Id. at 15 - 16. I am not certain as to what calls Petitioner is referring. But, it is untrue to assert that CMS offered no evidence as to the resident's condition prior to the four-day period that preceded the resident's death. As I discuss in my decision in the case and above, the evidence introduced by CMS showed a sharp - indeed dramatic - decline in the resident's condition, as measured against the resident's condition prior to his physician's initiation of treatment for a possible urinary tract infection, which satisfied the objective criteria for significant medical changes stated in 42 C.F.R. � 483.10(b)(11). Moreover, Petitioner conceded that at least one of the changes manifested by the resident (mottling of his extremities) was significant. The fact that the Board found these changes not to be significant depended not on the evidence offered by CMS - which, under the standard traditionally applied by CMS was compelling proof of Petitioner's noncompliance - but on the Board's novel interpretation of the regulation.

Third, Petitioner contends that "CMS misconstrued the regulations as requiring a physician notification where the resident and his guardian indicated a desire for no medical intervention." Reply at 14. In fact, there is nothing in the record of the case to suggest that the resident, as opposed to his guardian, indicated a desire for no medical intervention. The Board's conclusion that the resident's guardian did not desire medical intervention was based on disputed evidence. I held that the evidence supported CMS's contentions in this respect. The Board reinterpreted that evidence to reach a different outcome, but that does not mean that CMS lacked substantial justification for the position it took. Furthermore, under the interpretation of the regulation that CMS traditionally applied, the wishes of the resident's guardian would not have trumped Petitioner's consultation obligation in any event. ⁽⁹⁾ That the Board decided that the guardian's wishes were a subjective factor that could justify Petitioner's failure to consult merely underscores the fact that up until then, CMS relied on an objective standard based on the regulation's plain meaning.

b. CMS was substantially justified in alleging four additional deficiencies that might, in and of themselves, have served as a basis for the imposition of remedies.

In my original decision I declined to address the four additional deficiencies that CMS cited as a basis for its remedy determination, not because they were insubstantial, but because I found it unnecessary that I do so in light of my findings concerning Petitioner's noncompliance with the requirements of 42 C.F.R. � 483.10(b)(11). Thus, I made no findings as to the merits of the additional allegations of noncompliance.

On appeal, the Board decided that CMS would not have the opportunity to argue on remand that the remedies it determined to impose were justified by the four additional alleged deficiencies. In the Board's eyes, CMS forfeited the opportunity to address these additional alleged deficiencies on remand because it had failed to ask, on appeal, that the case be remanded in the event that my decision as to Petitioner's noncompliance with 42 C.F.R. � 483.10(b)(11) was reversed.

Nothing in the Board's decision can be read to conclude that there was insubstantial justification for CMS to have made its determination originally based in part on the four additional alleged deficiencies. The decision not to remand rested solely on procedural grounds.

Petitioner contends that the Board's refusal to remand the case for a decision as to the four additional alleged deficiencies "suggests that the . . . [Board] probably concluded that these four alleged deficiencies, even if valid, would not have justified the remedies still being sought . . . ." Reply at 18. That is entirely unsupported speculation on Petitioner's part. The fact is that the Board, neither in its decision nor in its subsequent order declining reconsideration, even hinted at how it would evaluate the merits of the four remaining allegations. And justly so, inasmuch as the Board's authority is appellate and I had not addressed the merits of the allegations.

I conclude that CMS was substantially justified in making its original determination based, not only on Petitioner's alleged noncompliance with the requirements of 42 C.F.R. � 483.10(b)(11), but on the four additional alleged deficiencies. Each of these additional alleged deficiencies was potentially relatively serious. Any one of them, if sustained, could have supported remedies including civil money penalties of as much as $150 per day.

CMS based its determinations about these four additional alleged deficiencies on a reasonable analysis of the applicable law and on the evidence. First, it contended that Petitioner failed to develop a comprehensive care plan for a resident as is required by 42 C.F.R. � 483.20(k)(1). This allegation was based on evidence showing that the care plan did not contain measures to address the resident's risk of developing aspiration pneumonia and failed also to address the resident's problems with dehydration. I reach no finding here as to whether I would have found that the weight of the evidence supported these contentions. But, there clearly was evidence in the record from which a reasonable fact finder could have made such a finding. Furthermore, the interpretation of the regulation advocated by CMS was noncontroversial.

Second, CMS asserted that Petitioner failed to provide the necessary care and services to enable a resident to attain and maintain his highest practicable physical, mental, and psychosocial well being, in contravention of the requirements of 42 C.F.R. � 483.25. CMS based this allegation on a surveyor's observations that the resident, who was at risk for aspiration pneumonia due to dysphagia (swallowing difficulties), had access to food without being provided with supervision. Again, I make no finding as to whether I would have agreed with CMS's assertions. However, the interpretation of the regulation advocated by CMS was not novel and I conclude that the evidence that I discuss here was sufficient to allow a reasonable fact finder to conclude that Petitioner was not complying with the regulation's requirements.

Third, CMS argued that Petitioner did not comply with the requirements of 42 C.F.R. � 483.25(m)(1) because, allegedly, it manifested a medication administration error rate of five percent or more. CMS based this allegation on evidence that Petitioner's staff mis-administered inhaled medication to a resident. Petitioner's defense to this allegation was that the medication was administered consistent with applicable nursing standards. It did not dispute the facts as alleged by CMS concerning the manner in which the medication was administered. I make no findings as to the validity of CMS's contentions. But, I am persuaded that a reasonable fact finder, viewing the record in its entirety, could have concluded from the evidence presented by CMS that Petitioner was not complying with the requirements of the regulation.

Fourth, CMS determined that Petitioner violated the requirements of 42 C.F.R. � 483.75(e)(5) by employing as a nurse aide an individual who performed nursing duties but who had not completed a State-approved nurse aide training and competency evaluation program. As with the other alleged deficiencies I make no finding here that I ultimately would have agreed with CMS's determination. But, there was evidence showing that Petitioner had, in fact, employed as a nurse aide an individual who had not completed requisite training and a reasonable person could well have concluded from that evidence that Petitioner had not complied with the requirements of the regulation. For that reason, I conclude that CMS was substantially justified in making this allegation.

Petitioner asserts that, even if I had addressed the four additional alleged deficiencies in my decision, I probably would not have sustained them. Reply at 21. It rests this contention on its analysis of the evidence that related to the four additional alleged deficiencies. Id. at 18 - 21. Petitioner's analysis merely shows that there was a controversy as to the significance of the evidence. It fails to detract from CMS's argument that its position was substantially justified.

c. CMS's remedy determination was substantially justified.

The remedy that CMS sought and which I ultimately sustained - civil money penalties of $150 per day for each day of Petitioner's noncompliance - was clearly not excessive in light of the alleged deficiencies that I discuss at Parts a. and b. of this Finding. CMS's determination to impose penalties in this amount was reasonable given that CMS's assertions as to these alleged deficiencies were substantially justified. As I found in my original decision, the remedy that CMS determined to impose is only five percent of the maximum allowable civil money penalties for non-immediate jeopardy level deficiencies. See 42 C.F.R. � 488.438.

3. There exists no basis for me to conclude that EAJA fees and costs are justified on the ground that CMS's remedy determination was substantially in excess of that which was imposed.

Petitioner contends that CMS's remedy determination in this case was "excessive" and that it is entitled to EAJA fees and costs whether or not CMS's allegations of noncompliance were substantially justified. Petitioner premises its contention on section 504(a)(4) of EAJA and on 45 C.F.R. � 13.5(c). Section 504(a)(4) provides:

If, in an adversary adjudication arising from an agency action to enforce a party's compliance with a statutory or regulatory requirement, the demand by the agency is substantially in excess of the decision of the adjudicative officer and is unreasonable when compared with such decision, under the facts and circumstances of the case, the adjudicative officer shall award to the party the fees and other expenses related to defending against the excessive demand, unless the party has committed a willful violation of law or otherwise acted in bad faith . . . .

Petitioner argues that CMS's remedy determination was "excessive" measured against what ultimately was imposed by the Board (nothing). Petitioner's brief at 17. Consequently, according to Petitioner, CMS's original demands were, as a matter of law, substantially excessive and unreasonable. Id.

Petitioner's reasoning is that CMS's remedy determination is excessive simply by virtue of the fact that CMS did not prevail in this case. Petitioner thereby advocates a "loser pays" rule by which a non-government party to a case involving CMS would be entitled automatically to EAJA fees and costs if it prevailed ultimately on the merits irrespective of whether CMS was substantially justified in making its determination. Petitioner's logic would make any remedy determination - no matter whether it is based reasonably on the law and evidence - excessive if measured against a decision not to impose a remedy against the non-government party.

I find this argument to be without merit. Petitioner's asserted reading of EAJA and the regulation would make meaningless the intent of EAJA. As I discuss above, EAJA was not intended to make the government liable automatically for fees and costs whenever it loses at an administrative proceeding. The clear intent of EAJA is to require the government to reimburse a prevailing party only in the circumstance where its determination to bring the action is not substantially justified.

Section 504(a)(4) of EAJA and 45 C.F.R. � 13.5 must be read to be consistent with this overall purpose. The purpose of section 504(a)(4) of EAJA was not to provide an alternative basis to section 504(a)(1) for awarding EAJA fees and costs to a prevailing party. Rather, it was written to enable a non-prevailing party to obtain EAJA fees and costs in a case where the adjudicative officer finds that the amount that the government demands is substantially in excess of the amount that the officer awards. In other words, the section does not apply to a case where a party prevails entirely. In that circumstance, the decision to award or not to award EAJA fees and costs is governed exclusively by the "substantially justified" language of section 504(a)(1). Exactly that result was reached by the United States Court of Appeals for the D.C. Circuit in addressing an EAJA fee and cost petition filed in the context of a judicial proceeding. ⁽¹⁰⁾ American Wrecking Corp. v. Secretary of Labor, 364 F.3d 321, 327 - 328 (D.C. Cir. 2004).

Petitioner contends that this analysis would lead to absurd consequences. Reply at 29. According to Petitioner, this analysis means that, if CMS takes a factually correct position (and, presumably, prevailed on the merits) it would nonetheless be liable for EAJA fees and costs if the original demand was excessive. But, where CMS loses a case, it would be liable for EAJA fees and costs only if there was no substantial justification for its original determination. Id.

This is a correct articulation of the intent of EAJA but it is not absurd. In the first example cited by Petitioner, CMS would be liable for EAJA fees and costs because it made an unreasonable demand of Petitioner for a remedy that was not justified by the facts of the case. In the second instance, CMS would be liable if it made an unreasonable assessment of the overall case. In either instance, a non-government party would be compensated for CMS's unreasonable determination. That is entirely consistent with EAJA's statutory intent. But, as Petitioner would have it, it should be compensated even where CMS acts reasonably as I find that it acted in this case. That outcome is utterly inconsistent with EAJA's statutory intent.

Petitioner also asserts that CMS would preclude a party from obtaining EAJA fees and costs: "Where the governmental agency proves liability, but its demand for relief is pared down to a shadow of itself . . . ." Reply at 29. I disagree with that assertion. If CMS's demand for a remedy - either its original demand or its demand as of the hearing - is excessive in fact, then, that would suggest an absence of substantial justification for its position. Petitioner would be eligible for EAJA fees and costs under section 504(a)(1) of EAJA in that event.

I do not find from the record of this case that there was ever a point in the proceeding where CMS's remedy demand was excessive in fact. CMS's original demand of approximately $31,000 in civil money penalties was reasonable based on the record that related to the deficiencies that were the basis of CMS's original remedy determinations. As the case progressed, some of these deficiencies dropped out. As they did, CMS reasonably scaled back its determination to suit the changing circumstances of the case. But, in no event and at no point during the proceeding did CMS ever demand an excessive remedy.

A significant part of the original remedy determination dropped out of this case as a consequence of my decision to issue partial summary judgment for Petitioner. That decision was, for the most part, predicated on a non-substantive issue. At a State informal dispute resolution proceeding (IDR), the State determined to delete one of the deficiency findings that was the basis for CMS's initial remedy determination. Under Departmental regulations, a State withdrawal of a deficiency finding nullifies that finding unless CMS disagrees with that action. In awarding partial summary judgment for Petitioner I held that CMS had not taken the necessary steps to register disagreement with the State action. However, although my decision affected the remedies that remained at issue, it did not address the substance of CMS's original allegations or the reasonableness of CMS's original remedy determination. My decision cannot be read as a finding that CMS's allegations lacked substance or that its remedy determination was unreasonable even if CMS failed to take the requisite procedural step to preserve them after the completion of IDR. I note, moreover, that my decision to award summary disposition in Petitioner's favor turned on a legal issue that I had decided for the first time only shortly prior to Petitioner filing its motion. See NHC Healthcare - Moulton, DAB CR898 (2002). CMS's decision to proceed against Petitioner was made prior to my decision in the Moulton case and it had no forewarning that I would decide the issue as I did.

Steven T. Kessel

Administrative Law Judge

1. At one time CMS entertained the possibility of imposing civil money penalties of $43,400 against Petitioner. That amount was based on CMS's conclusion that Petitioner manifested deficiencies at the immediate jeopardy level. However, CMS dropped consideration of the immediate jeopardy level penalties and, in its initial notice to Petitioner, dated September 21, 2001, CMS proposed to impose civil money penalties totaling $31,000.

2. In its original and first supplemental fee application, Petitioner asked that it be awarded $272,148.51. In its second supplemental and amended application, Petitioner reduced the amount requested.

3. I refer here to the amount requested in Petitioner's second supplemental and amended application.

4. In my original decision in this case I discussed the evidence that CMS relied on to assert its position. Park Manor, DAB CR1090 (2003). I find it unnecessary to revisit that evidence in detail here.

5. In my decision I did not discuss whether CMS's application of the regulation was correct. That is because I found it to be noncontroversial.

6. Under applicable regulations the potential for more than minimal harm is enough to make noncompliance substantial and to justify the imposition of a remedy. See 42 C.F.R. � 488.301.

7. In reaching this finding the Board evidently discounted the apparent conclusion of the resident's physician, at the inception of the four-day period, that the resident's condition had not deteriorated so much as to make unnecessary potentially life-saving measures, such as ordering laboratory tests and prescribing antibiotics.

8. Although Petitioner relies heavily on the Board's interpretation of 42 C.F.R. � 483.10(b)(11) as reason to conclude that there was no substantial justification for CMS's position, it, like the Board, cites to no decision that predates the Board's decision in this case in which the Board ever applied that interpretation.

9. In my decision I did not address the issue of whether a facility could avoid its obligation to consult with a physician based on the wishes of a resident or his or her family. I found only that the evidence did not establish that, in fact, the resident's guardian had instructed the facility not to consult. But, it is at least arguable that, under the interpretation of 42 C.F.R. � 483.10(b)(11) that CMS applied prior to the Board's decision in this case, a facility is under an absolute obligation to consult with a physician in the event of a significant change. Arguably, the duty to consult may be absolute, as opposed to the duty to treat, which might, under certain circumstances, be subject to a resident's wishes.

10. EAJA fees and costs in judicial proceedings are governed by 28 U.S.C. � 2412. The standards applied under section 2412 are identical to those that are applied under section 504 to administrative proceedings.