Prescribed Care, Inc., DAB CR492 (1997)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: Prescribed Care, Inc., Petitioner,
- v. -
Health Care Financing Administration.

Date: September 16, 1997

Docket No. C-96-234
Decision No. CR492

DECISION

For the reasons stated below, I conclude that Petitioner was not
in compliance with Medicare conditions of participation governing
home health agencies. Accordingly, the Health Care Financing
Administration (HCFA) was authorized to terminate Petitioner's
Medicare participation agreement.

I. Background

A. Applicable law and regulations

Petitioner is a home health agency that participated in the
Medicare program. The services provided by home health agencies
that are covered by the Medicare program are described in section
1861(m) of the Social Security Act (Act). The statutory
requirements of participation for a home health agency are
described in section 1861(o) of the Act.

The Secretary of the United States Department of Health and Human
Services (Secretary) has published regulations which govern the
participation in Medicare of home health agencies. These are
contained in 42 C.F.R. Part 484. The regulations which define
the Secretary's requirements for Medicare participation of home
health agencies establish conditions of participation for these
agencies. 42 C.F.R. §§ 484.10 - 484.52. The regulations express
these conditions of participation as broadly stated participation
criteria. The regulations also state standards of participation
as subsidiary components of the conditions of participation.

The Secretary is required to determine whether a Medicare
participant, including a home health agency, is complying
substantially with the Medicare participation requirements
established by the Act and regulations. Act, section 1866(b)(2).
The Secretary may terminate the participation in Medicare of a
provider which the Secretary finds not to be complying
substantially with participation requirements. Act, section
1866(b)(2)(A).

The process and criteria for determining whether a provider is
complying substantially with Medicare participation requirements
are established by regulations contained in 42 C.F.R. Part 488.
1/ Pursuant to the Act and regulations, the Secretary has
entered into agreements with State survey agencies to conduct
periodic surveys of providers, including home health agencies, in
order to ascertain whether these providers are complying with
Medicare participation requirements. Act, section 1864(a); 42
C.F.R. §§ 488.10, 488.11, 488.20.

HCFA may terminate the participation in Medicare of a provider
when it determines, either on its own initiative or based on a
survey report from a State survey agency, that the provider is
not complying with one or more Medicare conditions of
participation. See 42 C.F.R. §§ 488.20, 488.24, 488.26. 2/
Failure to comply with a condition of participation occurs where
deficiencies, either individually or in combination, are:

. . . of such character as to substantially limit
the provider's . . . capacity to furnish adequate care
or which adversely affect the health and safety of
patients;

42 C.F.R. § 488.24(b); see 42 C.F.R. § 488.28(b).

Where HCFA determines that there is a deficiency, but that the
deficiency is not so severe as to constitute a condition-level
deficiency, then HCFA may not terminate the provider's
participation in Medicare without first affording the provider
the opportunity to correct the deficiency. 42 C.F.R. § 488.28.

Termination of participation is a remedy intended to protect the
health and safety of program beneficiaries and not a punishment.
Termination of participation should be invoked in the
circumstance where a provider's deficiencies establish that the
provider is substantially incapable of providing care consistent
with Medicare participation requirements. Termination should not
be invoked unless the evidence proving a provider's failure to
comply with participation requirements establishes that the
provider cannot provide care consistent with that which is
required by the Act and regulations.

Generally, a determination as to whether a provider is complying
with a condition of participation depends on the extent to which
that provider is found not to be complying with the standards
that are components of the condition. 42 C.F.R. § 488.26(b). A
provider may be found not to have complied with a condition of
participation where it is shown that a provider has committed a
pattern of failures to comply with the standards that comprise
the condition. But, proof of a pattern of failures to comply
with a standard or standards may not be the only basis to find
that a provider has failed to comply with a condition of
participation. The determinative issue in any case where
noncompliance is demonstrated is whether the failure to comply is
so egregious as to show that the provider is not capable of
providing care consistent with that which is required by the Act
and regulations.

B. History of this case

On November 10, 1995, the California Department of Health
Services (CA DHS) completed a recertification survey of
Petitioner. Transcript (Tr.) 193; HCFA Ex. 1. Based on that
survey, Petitioner was found not to be complying with three
conditions of participation. HCFA Ex. 1. The CA DHS conducted a
second survey of Petitioner which was completed on January 12,
1996. HCFA Ex. 3. On February 7, 1996, HCFA notified Petitioner
that, based on the second survey, HCFA had determined that
Petitioner was not complying with three conditions of
participation. HCFA Ex. 5. These conditions are:

(1) 42 C.F.R. § 484.14 (Organization, services, and
administration);

(2) 42 C.F.R. § 484.18 (Acceptance of patients,
plan of care, and medical supervision); and

(3) 42 C.F.R. § 484.48 (Clinical records).

Id. HCFA terminated Petitioner's participation in Medicare,
effective February 23, 1996.

Petitioner requested a hearing, and the case was assigned to me
for a hearing and a decision. I held a hearing in Santa Ana,
California, on October 15 - 16, 1996, and I heard testimony by
telephone on November 5, 1996. I ordered the parties to submit
posthearing briefs, response briefs, and reply briefs. On March
26, 1997, I afforded the parties time to brief the issues raised
by the decision of an appellate panel of the Departmental Appeals
Board in the case of Hillman Rehabilitation Center, DAB No. 1611
(1997). 3/ HCFA did not avail itself of the opportunity.
Petitioner submitted a one page response out of time (on May 16,
1997) and requested that, to respond to Hillman, I re-open the
record to allow it to present additional evidence at an in-person
hearing. I granted Petitioner's request and scheduled a hearing
to commence on August 5, 1997. However, by letter of July 8,
1997, citing a lack of resources to go forward with the hearing,
Petitioner requested that the hearing be cancelled and that I
decide the case on the evidence of record. I granted
Petitioner's request. However, I also afforded Petitioner one
last opportunity to offer additional documentary evidence and
briefing. Petitioner chose not to avail itself of the
opportunity. I base my decision in this case on the governing
law, the evidence I received at hearing, and on the parties'
arguments as expressed in their briefs.

II. Discussion

A. Petitioner was out of compliance with the condition of
participation governing organization, services, and
administration, 42 C.F.R. § 484.14.

HCFA is authorized to terminate Petitioner's Medicare provider
agreement if Petitioner is out of compliance with any condition
of participation. Petitioner's own statements demonstrate that,
as of the date of the follow-up survey, Petitioner remained out
of compliance with the condition of participation governing
organization, services, and administration, codified at 42 C.F.R.
§ 484.14. Among other things, this regulation requires that a
home health agency provide at least one of a list of qualifying
services directly through agency employees. The service which
Petitioner was to provide is skilled nursing. 4/ HCFA alleged
that Petitioner failed to comply with this requirement, in that
Petitioner was providing skilled nursing services through
contract nurses. The State surveyors testified that
representatives of Petitioner present at the surveys admitted
that Petitioner was providing skilled nursing services via
contract nurses. Tr. 58, 119-20; HCFA Ex. 1 at 6; HCFA Ex. 3 at
2. I find credible the testimony that such admissions were made,
because it is corroborated by Petitioner's own statements in its
plans of correction. P. Ex. 14 at 2.

In its first plan of correction, Petitioner stated that it would
recruit employee nurses by advertising in newspapers and nursing
publications, to "gradually replace all registry nurses." HCFA
Ex. 1 at 5. Petitioner undertook to complete this action by
December 10, 1995. Based on this evidence, I find that there is
no real dispute as to the fact that, as of the first survey,
Petitioner was out of compliance with the requirement to furnish
at least one service directly. Similarly, in its second plan of
correction, Petitioner averred, "Contractual nursing agreements
with individuals who are not employees of the Agency would be
discontinued by the completion date [2/12/96]." P. Ex. 14 at 1.

Petitioner has nowhere contended that it was, in fact, in
compliance with the requirement that it furnish at least one
service directly. Instead, Petitioner argues that HCFA should
have found credible its assertion that it would recruit and hire
additional nursing staff at some time after the follow-up survey.
Petitioner's Reply Brief at 5. Petitioner states that this
deficiency "could not reasonably be remedied in just a short week
or so." Id. This argument is unpersuasive for two reasons.
First, Petitioner had notice that it was required to provide at
least one service directly through employees as of its receipt of
the CA DHS's letter of November 15, 1995, enclosing the statement
of deficiencies from the November 10, 1995 survey. 5/ The
follow-up survey was completed on January 12, 1996. Thus,
Petitioner had already been afforded approximately two months in
which to come into compliance with this requirement. Second, the
fact that Petitioner might have corrected its deficiencies at
some time after the date of the second survey is irrelevant to my
determination as to whether HCFA was authorized to terminate
Petitioner's provider agreement. HCFA's termination decision
must be evaluated based on conditions prevailing at Petitioner on
the date of the survey. Carmel Convalescent Hospital, DAB CR389
(1995), aff'd in part and rev'd in part, DAB No. 1584 (1996).

In Carmel, the administrative law judge reasoned that, under the
regulations, surveys are the means by which HCFA assesses
providers' compliance with federal health, safety, and quality
standards. 42 C.F.R. § 488.26(c)(1). Therefore, according to
Carmel, the conditions which are relevant to HCFA's authority to
terminate are those which prevail at a facility at the time of
the survey, and not at some later time. Moreover, the
administrative law judge ruled that no law or regulation compels
HCFA to conduct another survey after finding deficiencies at a
follow-up survey before actually effectuating its termination
decision. I agree with the interpretation of the regulations
set forth in the Carmel decision, and I adopt it here.

At the time of the follow-up survey, HCFA proved and Petitioner
admitted that Petitioner remained out of compliance with the
requirement that one of its services be provided directly by
employees. It is not a defense to HCFA's finding of non-
compliance that Petitioner submitted a plan of correction
promising to hire additional direct employees at some future
time. HCFA was under no obligation to conduct a second follow-up
survey to determine whether Petitioner had, in fact, brought
itself into compliance. Insuring that a home health agency
provide one of its services directly through its employees rather
than through contractors is necessary to protect Medicare
beneficiaries and is basic to the operation of a home health
agency.

Petitioner's failure to provide at least one service directly
through its employees seriously limits Petitioner's capacity to
render adequate care, because a facility which does not satisfy
this requirement fails to meet the basic definition of a home
health agency. HCFA's nurse consultant, Ms. Patience, testified
that to qualify as a home health agency, a provider must have
control over at least one service, delivering that service
through individuals employed by the provider. Tr. 262. If the
provider does not have control over at least one service, then it
does not meet the definition of a home health agency, but rather
is operating more as a nursing registry. Id. at 262-63. That in
January 1996, Petitioner was still unable to meet the threshold
requirement to be certified as a home health agency, raises
serious questions as to Petitioner's ability to render adequate
care and fully justifies HCFA's determination to terminate
Petitioner's provider agreement.

Thus, HCFA's decision to terminate Petitioner's provider
agreement is authorized based on this deficiency alone.
Consequently, I conclude that Petitioner's termination was
authorized.

B. Petitioner was out of compliance with the condition of
participation governing acceptance of patients, plan of care, and
medical supervision, 42 C.F.R. § 484.18.

HCFA proved that Petitioner failed to comply with the condition
of participation governing acceptance of patients, plan of care,
and medical supervision, as of the date of the follow-up survey.
Among other things, this condition of participation requires
that a home health agency follow physician orders for each
patient in a written plan of care. 6/

Following the initial survey of November 1995, and based on the
clinical record review done by the CA DHS surveyors, HCFA
determined that Petitioner failed to ensure that physician's
orders in the written plan of care were followed, failed to
notify physicians of changes in patients' conditions, and failed
to ensure that drugs and treatments were administered only on
physicians' orders. HCFA Ex. 1 at 14-17; Tr. 101-103.
Specifically, HCFA determined that: a patient's physician was
not notified when a patient with insulin dependent diabetes
mellitus had blood sugar values that were too low on 20 different
occasions during a one month period (HCFA Ex. 1 at 14; Tr. 102);
skilled nursing instruction was not provided to a patient's
caregiver as per physician's instructions (HCFA Ex. 1 at 15-16);
a physical therapy evaluation was still not done two months
after it was ordered (HCFA Ex. 1 at 15); medical social worker
visits and skilled nursing visits were missed and the patients'
physicians were not notified of the missed visits nor were the
physicians notified of a change in the patients' conditions (HCFA
Ex. 1 at 16-17; Tr. 76); and medicated eye drops and medication
to treat pressure sores were administered by the staff without
physician's orders for such medication. HCFA Ex. 1 at 17-18.
Petitioner submitted no evidence to rebut HCFA's determinations.

Instead, Petitioner responded in a plan of correction that it
would in-service its staff on the necessity of adherence to a
plan of treatment, the importance of documentation, and the
necessity of informing physicians of missed visits. Petitioner
assured also that the Director of Patient Care Services would
monitor compliance weekly. HCFA Ex. 1 at 13-16.

However, despite Petitioner's assurances, at the follow-up survey
in January 1996, the surveyors found that, for 10 of 10 patients,
the clinical records that were reviewed showed that home visits
and other services were not furnished in accordance with the
physicians' orders in the patients' plan of care. HCFA Ex. 3 at
4-8; Tr. 123, 126-127.

It was established by the testimony of Ms. Patience (the nurse
consultant employed by HCFA who reviewed the survey findings) and
Ms. Sabino (one of the home health evaluator nurses that surveyed
Petitioner for the CA DHS) that there is an established nursing
standard of practice that every action taken by nurses and other
staff must be documented. Tr. 177-178, 264-265. They testified
that if there is a lack of documentation, then the action is
considered as not having been done. Id. The purpose of this
nursing standard of practice is to show that what was ordered was
indeed done and "to provide a record for other staff, to indicate
the patients progress or lack thereof or stability. To document
the condition of the patient. To assist the agency or to assist
anybody in determining if there are further needs for that
patient." Tr. 266.

Ms. Patience testified that it is also an established nursing
practice that a physician's orders are to be "implemented as soon
as possible" and "certainly within a few days." Tr. 266. Ms.
Sabino confirmed this nursing practice by noting that a
physician's orders should be carried out at least within 72 hours
of their issuance. Tr. 129-130.

Based on the follow-up survey, HCFA proved that there were delays
in following a physician's plan of care, in one instance by 13
days and in another instance by 17 days, which is well outside
the established standard of practice. HCFA Ex. 3 at 4-5; Tr.
127. HCFA also proved that Petitioner repeatedly missed
providing skilled nursing visits, home health aide visits, and
therapy services, in direct violation of physicians' orders as
stated on plans of care. HCFA Ex. 3 at 5-8; Tr. 130-134. In
fact, eight patients out of the 10 reviewed missed services that
they should have received under a physician's written plan of
care in excess of 50 times. Since the missed visits and therapy
services were nowhere documented in the patients' clinical
records, under standard nursing practices, as noted by HCFA's
witnesses, they have to be assumed to not have taken place.
Indeed, nowhere has Petitioner claimed that the missing services
were performed as ordered. No witnesses or records were offered
to show that the services did, in fact, occur. Under Hillman,
HCFA provided Petitioner with notice of the deficiencies which
were the basis for citing this condition of participation.
Petitioner, who provided the alleged deficient care, should have
been in a position through its own medical records and testimony
of caregivers to rebut the evidence offered by HCFA if such
evidence was in existence. Since Petitioner chose to offer no
such evidence, I must assume there is no such evidence.

HCFA also proved that, in the case of Patient #4, the physical
therapy evaluation that was ordered on December 19, 1995 had not
been received by this patient at the time of the follow-up survey
of January 12, 1996, 24 days after the evaluation was ordered.
HCFA Ex. 3 at 6. Not only were there repeated services entirely
missed and delays in the implementation of physician's orders,
but there was no notification to physicians of these failures to
carry out orders both timely and as directed. HCFA Ex. 3 at 5-6.

In fact, in Petitioner's second plan of correction in response to
the January 12th revisit survey, the Petitioner claims that it
had conducted additional in-service training for its staff to
address this deficiency, and that the training was completed on
January 25, 1996. P. Ex. 14 at 4. Therefore, by Petitioner's
own admission, it did not adequately address this deficiency
until after the January 12, 1996 revisit survey.

Petitioner argues that HCFA relies on "assumptions and nebulous
concepts like "standard nursing practices", that "if something is
not written down it is thereby not actually done" and that the
"72 hours standard" is "arbitrary and without basis in the
regulations." Petitioner's Posthearing Response Brief at 5. I
disagree. Standard nursing practices perform a necessary
function to memorialize that physicians orders have been carried
out so that different medical staff can be kept abreast of the
current condition of the patient in order that the staff can
continuously provide the best care possible. Ms. Sabino
testified that the "72 hours standard" is necessary so that a
delay would not cause a patient to lose the progress the patient
had gained during a hospital stay. Tr. 129. These are not
assumptions, or nebulous concepts, nor are they arbitrary.
Instead, they are necessary in order to provide adequate medical
care. Although the witnesses could not point to a regulation
that states these nursing practices, they were both firm in the
existence of these practices. Their testimony is credible.
Also, I note that Petitioner did not claim that such nursing
practices do not exist. Nor did it offer any evidence to
demonstrate that some other standard of care should be applied or
that the standards referenced by HCFA's witnesses were invalid.
Even though the specific standards are not contained in the
regulations, HCFA can reasonably expect that home health agencies
will apply and be in conformity with recognized nursing standards
of care in meeting the specified regulatory standards.

Patients of home health agencies depend on the services they get
from a home health agency. Repeatedly missing nursing, therapy
and other services will adversely affect the health and safety of
these vulnerable patients. Petitioner repeatedly missed
providing its patients with a variety of services as required by
physicians orders in a written plan of care. This is evidence of
Petitioner's failure to comply with participation requirements
and establishes that Petitioner cannot provide care consistent
with that which is required by the Act and regulations.

C. Petitioner was out of compliance with the condition of
participation governing clinical records, 42 C.F.R. § 484.48.

HCFA proved that, as of the date of the follow-up survey,
Petitioner failed to comply with the condition of participation
governing clinical records. The regulation, at 42 C.F.R. §
484.48, requires, generally, that a home health agency maintain
clinical records "containing pertinent past and current findings
in accordance with accepted professional standards." CA DHS
initially found that Petitioner failed to comply with this
condition of participation during the November 1995
recertification survey. HCFA Ex. 1 at 23; Tr. 113-15. At this
survey, CA DHS surveyors found that 100 percent of the 16
clinical records sampled were incomplete. HCFA Ex. 1 at 24.

At the follow-up survey, the surveyors concluded that, far from
being corrected, the state of Petitioner's clinical records had
deteriorated further. Ms. Sabino testified that, during the
January 1996 survey, the surveyors requested clinical records for
certain patients, which were not immediately forthcoming from
Petitioner's staff. Tr. 142-43. Upon investigating the reason
for the delay, Ms. Sabino went to the area where records were
kept and observed that there were stacks of loose papers that had
not been filed. Tr. 143. 7/ Moreover, when the patient
records were assembled and produced, the records were found to be
incomplete. Tr. 145.

HCFA's nurse consultant, Ms. Patience, testified that the
condition of participation governing clinical records is
important to delivering adequate care to patients because:

[The] clinical record is the documentation, the journal,
if you will of what's happening with the patient and it's
important that those records be maintained in a professional
fashion so the information that's necessary for the care of
the patient gets communicated to all staff and is kept.

Tr. 269. The witness testified further that maintaining clinical
records completely and timely is necessary in order:

To assess whether or not the patient is making progress
or is regressing and also to determine that the physician's
orders are being carried out . . . .

Tr. 270. When Petitioner's clinical record-keeping practices are
measured against these goals, it is apparent that HCFA was
justified in concluding that Petitioner failed to comply with the
condition of participation governing clinical records.

The lack of order that prevailed in Petitioner's record keeping
practices would seriously limit Petitioner's capacity to deliver
adequate care to its patients. If caregivers cannot refer to a
patient's clinical record and find current and complete
information on the patient's condition, it would seem difficult,
if not impossible, to coordinate the care being given by
different disciplines. I take this to be what Ms. Patience was
referring to when she testified that the clinical record should
serve to communicate the information necessary for the care of
the patient to all staff. In addition, lack of adequate record-
keeping would also be detrimental to a home health agency's
efforts to monitor the quality of services provided to its
patients. See, 42 C.F.R. § 484.48, which imposes such an
obligation on home health agencies.

Petitioner has argued, in general, that I should not rely on the
testimony of HCFA's witnesses because they lack present
recollection of the facts underlying the deficiencies noted in
the HCFA form 2567. However, for me to resolve this case I need
not decide whether HCFA failed to meet its burden of proof if its
witnesses at hearing lacked present recollection of the facts
reported in the HCFA form 2567. In the case of Ms. Sabino's
testimony regarding the condition of Petitioner's record storage
area, there is no such defect. Ms. Sabino's recollection as to
the unfilled stacks of paper she observed was clear and dramatic.
I have no difficulty in concluding that the conditions described
do not comport with professionally recognized standards for
record-keeping. For these reasons, I conclude that HCFA was
justified in concluding that Petitioner failed to comply with the
condition of participation governing clinical records. Even
should I accept Petitioner's contention that HCFA's witness
lacked specific recollection of the events to establish proof of
the condition of participation, that would not overcome HCFA's
responsibility under Hillman to provide notice only. Clearly,
HCFA's witnesses, along with the 2567, provided Petitioner with
notice of this condition. Again, Petitioner chose to offer no
proof to rebut the evidence presented by HCFA or to show it was
in substantial compliance with this condition of participation.

I have concluded that on the date of the follow-up survey,
Petitioner was out of compliance with the conditions of
participation governing organization, services, and
administration (42 C.F.R. § 484.14); acceptance of patients, plan
of care and medical supervision (42 C.F.R. § 484.18); and
clinical records (42 C.F.R. § 484.48). Since providers that
participate in Medicare are required to be in compliance with all
conditions of participation, HCFA was fully justified in
terminating Petitioner's Medicare participation agreement based
on these findings.

Of particular significance in this case is Petitioner's failure
to provide any evidence to rebut evidence presented by the
surveyors relating to these conditions of participation.
Petitioner had the opportunity at and subsequent to the hearing
to present testimonial and documentary evidence challenging the
testimony of the CA DHS surveyors. Despite repeated
opportunities, no evidence was presented. Petitioner was in the
best position to counter the testimony of the State surveyors.
If such evidence was available, it was never presented.

D. HCFA is not estopped from terminating Petitioner's
participation requirement.

Petitioner argues, essentially, that HCFA should be estopped from
terminating its participation agreement because Petitioner was
not given an opportunity to correct the deficiencies found after
the CA DHS' 1/12/96 follow-up survey, which opportunity
Petitioner alleges was afforded it by the CA DHS in a letter of
January 19, 1996. HCFA Ex. 4. Petitioner alleges that the
letter afforded it 10 days in which to submit a response to the
statement of deficiencies, which would be included in the public
record of the survey and forwarded to HCFA for its
"consideration." HCFA Ex. 4. Petitioner asserts that this is an
"official promise ... made by respondent to petitioner inviting
petitioner's reliance and action upon said promise."
Petitioner's Initial Post-hearing Brief at 6.

As an initial matter, I note that it is not clear that estoppel
will ever lie against the federal government. See, e.g.,
Colorado Dep't of Social Services, DAB QC6 (1991); Kansas Dep't
of Social Services, DAB QC61 (1994); Virginia Dep't of Social
Services, DAB QC75-R (1994). See also Wisconsin Dep't of Health
and Social Services, DAB No. 1493 (1994). But even if estoppel
could lie against HCFA, Petitioner has not proved the elements of
estoppel in this case.

A party seeking to assert estoppel must prove that: 1) the party
against whom estoppel is sought made false representations; 2)
the party claiming estoppel relied on the false representations
to the party's detriment; and 3) the reliance was reasonable, in
that the party claiming the estoppel neither knew nor should have
known that its adversary's conduct was misleading. Heckler v.
Community Health Services, 467 U.S. 51, 59 (1984). Petitioner
has not proved that these conditions exist here.

I do not read the January 19, 1996 letter from the CA DHS as
inviting Petitioner to submit a second plan of correction or a
credible allegation of compliance, nor does it promise Petitioner
that it will be afforded a second follow-up survey, unlike the
November 16, 1995 letter from the CA DHS which offered Petitioner
the opportunity to submit evidence of correction and promised a
follow-up survey if the evidence was found credible. See HCFA
Ex. 2. The November 15, 1995 letter informed Petitioner also
that if it was found out of compliance with any condition of
participation after the follow-up survey, the CA DHS would be
obliged to recommend termination to HCFA. In contrast, there
were no false representations or official promises made to
Petitioner in the January 19, 1996 letter stating that Petitioner
had the right to submit further evidence of correction or the
right to a second re-survey, and nowhere in the Act or
regulations does such a right exist.

Moreover, even if Petitioner misled itself to believe that the
response cited in the January 19, 1996 letter was an invitation
to submit a second credible allegation and evidence of
compliance, Petitioner's reliance on it to assert that HCFA was
thus not authorized to terminate its provider agreement is not
reasonable. In a situation such as this, where a provider has
been found out of compliance with a condition of participation
and a follow-up survey has found it still out of compliance with
that condition, HCFA is not required to review any more
information prior to terminating that provider. HCFA is
authorized to terminate the provider agreement of any provider if
it concludes that, on balance, the deficiencies reasonably
support a conclusion that a provider no longer meets any one
condition of participation. 42 C.F.R. §§ 489.53(a)(1), (3),
488.24(b). Further, I note that the decision as to whether a
follow-up survey should be performed is not an initial
determination subject to review by me. 42 C.F.R. § 498.3.

III. Conclusion

For the reasons set forth above, I have concluded that HCFA was
authorized to terminate Petitioner's Medicare participation
agreement.


Edward D. Steinman
Administrative Law Judge


* * * Footnotes * * *

1. In July 1995, the Part 488 regulations were
revised and amended substantially as they apply to long-term care
facilities, including nursing facilities and skilled nursing
facilities. 42 C.F.R. § 488.301 et seq. The revisions and
amendments are not at issue in this case because Petitioner is
not a nursing facility or a skilled nursing facility.
2. The criteria which govern the circumstances under
which HCFA may impose a remedy, including termination, against a
nursing facility or a skilled nursing facility are stated at 42
C.F.R. §§ 488.402 - 488.456.
3. In my June 12, 1996 Order and Notice of Hearing, I
placed on HCFA the burden of coming forward with evidence as to
all issues and of proving, by a preponderance of the evidence,
that Petitioner failed to comply with Medicare participation
requirements. I placed on Petitioner the burden of proving, by a
preponderance of the evidence, any affirmative defenses. I
afforded the parties also the opportunity to brief the issue of
which party had the burden of proof during their post-hearing
briefing. Tr. 18. The Hillman decision, however, places on HCFA
only the burden of coming forward with evidence to establish a
prima facie case that it has a legally sufficient basis for
termination, and imposes on a provider the burden of proving, by
a preponderance of the evidence, that the provider was in
substantial compliance with participation requirements. In its
May 16, 1997 submission, Petitioner alleges that it would be very
prejudicial and unfair to apply the Hillman decision
retroactively. This argument is unpersuasive. First, the
appellate panel never excluded from application of Hillman cases
that were pending decision. Second, Petitioner was given the
opportunity to offer additional proof under the guidelines of the
Hillman case. In making my decision as to whether Petitioner met
its burden of offering evidence demonstrating by a preponderance
of the evidence that it was in substantial compliance with the
conditions of participation, below I find repeatedly that HCFA
not only established a prima facie case, but it also proved, by a
preponderance of the evidence, that Petitioner failed to comply
with Medicare participation requirements. Such a conclusion, by
definition, means that Petitioner failed to meet its burden of
proof under Hillman.
4. Petitioner never argued it would provide any
service by its own employees other than skilled nursing.
5. Irrespective of this notice, Petitioner can be
held to have notice of this requirement from the regulations
themselves. When Petitioner commenced its operation of a home
health agency, it assumed the responsibility to be in substantial
compliance with the conditions of participation. That compliance
includes knowledge of the regulatory requirements.
6. An additional deficiency was cited in the follow-up
survey based on the failure to obtain a physician's
countersignature for orders given orally. This violated section
484.18(c), which was removed by technical changes to the
regulation which had not been conveyed to the surveyors at the
time of the follow up survey in January 1996. See Tr. 311. As a
result, HCFA is not pursing this deficiency against Petitioner.
HCFA Opening Memorandum at 28.
7. Ms. Sabino's testimony is transcribed as follows:
"I saw staff in front of files of loose papers." Tr. 143
(emphasis added). However, the context suggests that the word
was "piles" rather than "files." For example, on page 144 of the
transcript, counsel refers to "stacks" of paper. Similarly, the
2567 reports: "agency staff were attempting to retrieve clinical
notes from stacks of paper for filing into the requested clinical
records." HCFA Ex. 3 at 12.