DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board
Civil Remedies Division
In the Case of: Summit Health Limited, dba Marina Convalescent Hospital, Petitioner,
- v. -
The Inspector General.
DATE: October 20, 1989
Docket No. C-108
DECISION OF ADMINISTRATIVE LAW JUDGE
ON MOTION FOR SUMMARY DISPOSITION
Petitioner requested a hearing to contest the Inspector General's (the I.G.'s)
determination excluding it from
participating in the Medicare program, and directing that it be excluded from
participating in State health
care programs. Petitioner moved to add as an additional Petitioner a corporation,
Summit Care-California,
Inc. (Summit Care), and the I.G. opposed this motion. Both parties moved for
summary disposition of this
case. Based on the undisputed material facts and the law, I deny Petitioner's
motion to add Summit Care as
a party to the case. I conclude that the exclusion imposed and directed against
Petitioner by the I.G. is
mandatory. Therefore, I am deciding this case in favor of the I.G.
BACKGROUND
On January 5, 1989, the I.G. notified Petitioner that it was being excluded
from participating in Medicare
and State health care programs for five years. The I.G. told Petitioner that
it was being excluded as a result
of its conviction in a California court of a criminal offense relating to the
neglect or abuse of patients in
connection with the delivery of a health care item or service. Petitioner was
advised that exclusions of
individuals and entities convicted of such an offense are mandated by section
1128(a)(2) of the Social
Security Act. The I.G. further advised Petitioner that the law required that
the minimum period of such an
exclusion be for not less than five years.
Shortly after Petitioner received this notice, Summit Care filed an action
in United States District Court
(Summit Care-California, Inc. v. Newman, Civil Action No. 89-0169 (D. D.C. 1989)),
seeking to enjoin
the Secretary of the Department of Health and Human Services (the Secretary)
from enforcing the
exclusion. On April 18, 1989, the court entered a decision in favor of the Secretary.
Petitioner timely requested an administrative hearing as to the exclusion,
and the case was assigned to me
for a hearing and decision. On September 7, 1989, I heard oral argument of the
parties' motions in San
Francisco, California.
ISSUES
The issues in this case are whether:
1. Petitioner is an "entity" within the meaning of section 1128(a)(2)
of the Social Security
Act.
2. Petitioner was "convicted" of a criminal offense within the meaning
of section 1128 of the
Social Security Act;
3. Petitioner was convicted of a criminal offense relating to neglect or abuse
of patients in
connection with the delivery of a health care item or service.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. Petitioner is an entity within the meaning of section 1128(a)(2) of the
Social Security Act.
Social Security Act, section 1128(a)(2).
2. On March 5, 1987 a criminal complaint was filed in the Municipal Court
of the Glendale
Judicial District, County of Los Angeles, California, against Petitioner and
others, charging them with
misdemeanor offenses. P. Ex. 4; I.G. Ex. 2.
3. Count XIV of the complaint charged that Petitioner committed a criminal
violation of the
Health and Safety Code of California by unlawfully and repeatedly violating
a rule promulgated pursuant
to the Health and Safety Code. P. Ex. 4/15-16; I.G. Ex. 2/15-16.
4. Count XIV of the complaint accused Petitioner of failing to plan a patient's
care, including
failing to identify the patient's care needs based upon initial written and
continuing assessments of needs
with input, as necessary, from health professionals involved in the patient's
care. P. Ex. 4/15-16; I.G. Ex.
2/15-16.
5. Count XIV of the complaint additionally charged that Petitioner had repeatedly
engaged in the
same criminal conduct with respect to another patient. P. Ex. 4/15-16; I.G.
Ex. 2-15/16.
6. Count XIX of the complaint charged that Petitioner committed a criminal
violation of the
Health and Safety Code of California by unlawfully and repeatedly violating
a rule promulgated pursuant
to the Health and Safety Code. P. Ex. 4/19; I.G. Ex. 2/19.
7. Count XIX of the complaint accused Petitioner of repeatedly failing to
administer to a patient
medications and treatments as prescribed. P. Ex. 4/19; I.G. Ex. 2/19.
8. Count XIX of the complaint additionally charged that Petitioner had repeatedly
engaged in the
same criminal conduct with respect to other patients. P. Ex. 4/19; I.G. Ex.
2/19.
9. On October 6, 1987, Petitioner pleaded nolo contendere to Counts XIV and
XIX of the
complaint. P. Ex. 6; I.G. Ex. 4.
10. Petitioner was sentenced to pay a fine, a penalty, and to comply with
conditions imposed by
the Court. P. Ex. 6/3-5; I.G. Ex. 4/3-5.
11. Petitioner was convicted of a criminal offense within the meaning of section
1128 of the
Social Security Act. Findings 2-10; Social Security Act, section 1128(a)(2);
1128(i).
12. Petitioner was convicted under California law of a criminal offense relating
to neglect or
abuse of patients in connection with the delivery of a health care item or service.
Findings 2-10.
13. The Secretary delegated to the I.G. the authority to determine, impose,
and direct exclusions
pursuant to section 1128 of the Social Security Act. 48 Fed. Reg. 21662 (May
13, 1983).
14. On January 5, 1989, the I.G. excluded Petitioner from participating in
the Medicare program
and directed that it be excluded from participating in Medicaid for five years,
pursuant to section
1128(a)(2) of the Social Security Act. I.G. Ex. 8.
15. The exclusion imposed and directed against Petitioner is mandated by law.
Findings 2-12;
Social Security Act, section 1128(a)(2).
ANALYSIS
There are no disputed material facts in this case. The parties have, for the
most part, relied on identical
documents to support their respective positions. The evidence establishes that
Petitioner was charged
under California criminal statutes with offenses concerning the operation of
two nursing homes. Petitioner
was charged with failing to plan patient care and with failing to administer
medications and treatments as
prescribed. Petitioner pleaded nolo contendere to these charges and was sentenced
to pay a fine, a penalty,
and to comply with court-imposed conditions.
The I.G. determined that these facts established that Petitioner was an entity
which had been convicted of a
criminal offense related to neglect or abuse of patients in connection with
the delivery of a health care item
or service. The I.G. excluded Petitioner from participating in Medicare and
directed that Petitioner be
excluded from participating in Medicaid, for five years.
The Social Security Act mandates such an exclusion of:
Any individual or entity that has been convicted, under Federal or State law,
of a criminal offense
relating to neglect or abuse of patients in connection with the delivery of
a health care item or service.
Social Security Act, section 1128(a)(2). The law further requires, at section
1128(c)(3)(B), that in the case
of an exclusion imposed and directed pursuant to section (a)(2), the minimum
term of such an exclusion
shall be at least five years. The I.G. contends that the exclusion imposed and
directed against Petitioner
was mandated by law.
Petitioner raises four principal arguments to contest the exclusion. First,
Petitioner asserts that it was not
the operator of the facility at which the offenses to which it pleaded nolo
contendere occurred. Petitioner
argues that the exclusion was intended to apply to the corporation which actually
operates the facility,
Summit Care. Petitioner claims that the exclusion is an unlawful de facto exclusion
of Summit Care.
Second, Petitioner argues that it was not "convicted" of a criminal
offense within the meaning of section
1128 of the Social Security Act. It premises this argument on its claim that,
as of the date it entered its
nolo contendere plea to criminal charges, the statutory definition of "conviction"
in section 1128(i) of the
Social Security Act applied to individuals but not to corporations or other
entities.
Third, Petitioner contends that it was not convicted of a criminal offense
related to neglect or abuse of
patients. It asserts that it was convicted of "regulatory deficiencies"
which do not amount to patient neglect
or abuse within the meaning of section 1128(a)(2). Petitioner also asserts that
the offense of which it was
convicted would not justify suspending or revoking its license under California
law. Therefore, according
to Petitioner, it is unreasonable to exclude Petitioner pursuant to section
1128.
Finally, Petitioner asserts that it has been victimized by the law's failure
to define the terms "neglect" and
"abuse," and the Secretary's failure to adopt regulations clarifying
the meaning of these terms. Petitioner
claims that, in the absence of definitions, these terms are ambiguous. It argues
that, given the alleged
ambiguity of these terms, it was not given fair notice that its nolo contendere
plea would result in the
imposition and direction of an exclusion against it.
I disagree with Petitioner's contentions. I conclude that if Petitioner was
an entity convicted of a criminal
offense as described in section 1128(a)(2), then the I.G. was required by law
to impose and direct an
exclusion against it. I find that Petitioner was an entity "convicted"
of a criminal offense within the
meaning of section 1128, and that the conviction was for an offense related
to the neglect or abuse of
patients in connection with the delivery of a health care item or service. I
conclude that the statutory terms
"neglect" and "abuse" are not ambiguous, and that Petitioner
was not prejudiced by the Secretary's not
having adopted regulations explaining the meaning of these terms.
1. Petitioner is an "entity" within the meaning of section 1128(a)(2)
of the Social Security
Act.
Petitioner claims that the I.G. is without authority to exclude it because
the offenses of which it was
convicted were in fact committed by its subsidiary, Summit Care. Petitioner
bases this argument on its
contention that Marina Convalescent Hospital is operated by Summit Care, and
not by Petitioner.
Petitioner supports its assertions by offering documents filed with or generated
by California's Medicaid
program which show Summit Care as the owner of the facility in question. P.
Ex. 2, 3. Petitioner asserts
that this corporate relationship should shield Petitioner from the reach of
the exclusion law. Petitioner
further argues that, as the subsidiary corporation (Summit Care) was not convicted
of an offense within the
meaning of section 1128(a)(2), then no exclusions may apply to it or to facilities
operated by it. P.'s Brief
at 5-8.
Petitioner also contends that the exclusion law contains a provision at section
1128(b)(8) which gives the
Secretary discretion to impose and direct exclusions against subsidiaries of
excluded entities. According to
Petitioner, if the I.G. intended to exclude a facility owned by a subsidiary
of Petitioner, the I.G.'s only
option was to proceed against the subsidiary pursuant to section 1128(b)(8).
The I.G. disputes these contentions. The thrust of the I.G.'s argument is that
prior to the imposition and
direction of exclusions against it, Petitioner never denied that it operated
Marina Convalescent Hospital.
According to the I.G., Petitioner was convicted as the operator of Marina Convalescent
Hospital, and it was
in that capacity that Petitioner was excluded pursuant to section 1128(a)(2).
The I.G. offers an exhibit to show that Petitioner has operated Marina Convalescent
Hospital. I.G. Ex. 5.
The I.G. notes that The criminal complaint against Petitioner named Petitioner
as "SUMMIT HEALTH,
LTD., a Corporation, doing business as `Canyon Convalescent' and `Marina Convalescent.'"
Petitioner did
not dispute at the time that it was charged with criminal offenses, or at the
time that it entered its nolo
contendere plea, that it was the operator of Marina Convalescent Hospital. The
I.G. also asserts that, in
rejecting Summit Care's suit for a temporary restraining order against the Secretary,
the United States
District Court found that Summit Care had represented that Petitioner was the
corporation doing business
as Marina Convalescent Hospital. Opposition to Motion to Add Party at 2; Summit
Care-California, Inc. v.
Newman, supra, at 4.
I conclude that, assuming that Petitioner was convicted of an offense within
the meaning of section
1128(a)(2), the I.G. was required by law to impose and direct exclusions against
it. Petitioner's assertion
that an entity other than Petitioner actually operates Marina Convalescent Hospital
is not relevant to the
issue of whether the I.G. was required by law to exclude Petitioner.
The mandatory exclusion requirements of section 1128(a)(2) apply to individuals
and entities. The term
"entity" is not defined in the law, but its presence, rather than
the presence of less inclusive terms such as
"corporation," means that Congress intended that the exclusion law
apply to corporations and to other
forms of business organization and operation. It is evident from Petitioner's
nolo contendere plea that
Petitioner is an entity convicted of a criminal offense. That document establishes
that Petitioner entered a
nolo contendere plea as a corporation, doing business as Marina Convalescent
Hospital. P. Ex. 6; I.G. Ex.
4. It is not relevant for Petitioner to argue that some other entity was actually
responsible for the conduct
which resulted in the conviction. The event which triggers the I.G.'s duty to
impose and direct an
exclusion pursuant to section 1128(a)(2) is a conviction as described in that
section. The law instructs the
Secretary to act on the conviction and to impose and direct exclusions. The
law does not permit the
Secretary to examine the facts of the case which resulted in the conviction
in order to determine whether
the party which was convicted actually committed the criminal offense that resulted
in the conviction. The
proper means of redress for such an alleged error would be an appeal from the
conviction or some
authorized collateral attack on the conviction itself.
Based on the nolo contendere plea entered by Petitioner, the I.G. could have
determined to exclude the
corporation Summit Health Ltd, rather than the entity Summit Health Ltd. d/b/a
Marina Convalescent
Hospital. However, the I.G. chose to define the excluded entity as "Summit
Health Ltd. d/b/a Marina
Convalescent Hospital." By doing so, the I.G. determined to narrowly apply
the exclusions imposed and
directed in this case only to the entity convicted as operator of Marina Convalescent
Hospital.
I conclude that the I.G. was justified in making this determination. Summit
Health Ltd. doing business as
Marina Convalescent Hospital is an "entity" within the meaning of
section 1128(a)(2). The possibility that
the I.G. could have more broadly applied the exclusion provisions than he did
does not derogate from his
decision to apply them only to Petitioner.
I am not persuaded that the I.G. should have proceeded against Summit Care
pursuant to section
1128(b)(8) of the Social Security Act in lieu of this mandatory exclusion of
Petitioner. Section 1128(b)(8)
permits the Secretary to exclude entities that are owned by an excluded individual.
This section does not
require the Secretary or the I.G. to exclude entities other than those which
have been convicted of offenses
which mandate exclusions under section 1128(a)(2). Petitioner, not Summit Care,
is the convicted entity.
I deny Petitioner's motion to add Summit Care as a party to this case. Summit
Care has no right to a
hearing under section 1128(f), because it is not an entity that has been excluded
or directed to be excluded
from participation in Medicare or Medicaid.
2. Petitioner was "convicted" of a criminal offense within the meaning
of section 1128 of the
Social Security Act.
Petitioner argues that on October 6, 1987, the date when it entered its nolo
contendere plea to state criminal
charges, the definition of "conviction" in section 1128 of the Social
Security Act applied only to physicians
or other individuals. Petitioner contends that, because it is an entity and
not a physician or other individual,
it was not "convicted" of an offense within the meaning of section
1128(a)(2), and any exclusions imposed
or directed against it are invalid.
The I.G. asserts that the purpose of section 1128(a)(2) was to mandate the
exclusion of both individuals
and entities that were convicted of criminal offenses relating to patient neglect
or abuse. The I.G. concedes
that as of October 6, 1987, the definition of "conviction" contained
in section 1128(i) expressly applied
only to physicians or other individuals. The I.G. argues that this was merely
a legislative oversight which
was corrected by enactment of clarifying language. The I.G. contends that when
Congress enacted
amendments to the exclusion law in August, 1987, it intended the definition
of "conviction" to encompass
entities.
Prior to August, 1987, the exclusion law applied only to physicians or other
individuals. The law in effect
prior to August, 1987 required the Secretary to exclude from participation in
Medicare, and to direct the
exclusion from participation in Medicaid of, any physician or other individual
who was convicted of a
criminal offense related to such individual's participation in the delivery
of medical care or services under
federally financed health care programs, including Medicare and Medicaid.
The August 1987 amendments comprehensively revised the law. The law's application
was expanded from
"physicians" and other "individuals" to "individuals"
and "entities." The categories of offenses for which
exclusion was mandated were enlarged to include convictions for criminal offenses
related to the delivery
of an item or service under the Medicare or Medicaid program (section 1128(a)(1))
and convictions for
criminal offenses related to patient neglect or abuse (section 1128(a)(2)).
A minimum exclusion period of
at least five years was prescribed for those individuals or entities who were
convicted of criminal offenses
as described in sections 1128(a)(1) and (2). Social Security Act, section 1128(c)(3)(B).
Sections were
added which permitted the Secretary to exclude individuals or entities convicted
of a range of offenses
other than those described in section 1128(a). Social Security Act, section
1128(b).
The exclusion law in effect prior to August 1987 contained a definition of
"conviction" at section 1128(f).
As with the remainder of the law then in effect, that definition applied to
physicians and other individuals.
The August 1987 amendments essentially incorporated this section at section
1128(i). Although the
exclusion law was comprehensively amended to apply to entities as well as to
individuals, the conviction
definition continued to be phrased in terms of physicians or other individuals.
Both the predecessor section
1128(f)(3) and section 1128(i)(3) defined "conviction" to include
acceptance by a federal, state or local
court of a plea of nolo contendere.
The language of section 1128(i) was revised by Congress with enactment of the
Medicare Catastrophic
Coverage Act of 1988 (Pub. L. 100-360). Section 411, entitled "Technical
Corrections to Certain Health
Care Provisions in the Omnibus Budget Reconciliation Act of 1987," revised
section 1128(i) by deleting
the words "physician or other individual" and inserting the words
"individual or entity," to conform with
the language of section 1128(a) and (b). Section 411(a)(2) provided that the
revision "shall be effective as
if . . . [it was] included in the enactment of that provision in OBRA [the Omnibus
Budget Reconciliation
Act of 1987]." The effective date of OBRA was December 22, 1987.
The revised definition of "conviction" contained in section 1128(i)
was not contained in the statute on the
date that Petitioner entered its nolo contendere plea. Petitioner premises its
argument that it was not
convicted of an offense within the meaning of section 1128(a)(2) on the absence
of this statutory definition
as of the date its plea was entered, arguing, in effect, that because there
was no definition of "conviction"
expressly applicable to entities, the provisions of section 1128(a)(2) did not
apply to entities.
However, Petitioner's nolo contendere plea is a "conviction" within
the meaning of section 1128. Congress
intended that section 1128(a)(2) apply equally to individuals and entities.
In order to effectuate that intent,
the definition of "conviction" must also apply equally to individuals
and entities. That was Congress'
purpose, even if the 1987 amendment to the exclusion law failed to specifically
include entities within the
definition of "conviction." Congress' omission of "entities"
from the statutory definition of "conviction" in
the 1987 revisions was a technical oversight which Congress subsequently corrected.
Congress' intent is evident from the structure and language of the 1987 amendments.
The law states,
throughout, that it shall apply to entities as well as to individuals. Initial
omission of the term "entities"
from the statutory definition of "conviction" was an anomaly. This
inadvertent omission did not suggest
that Congress intended to exempt entities from the reach of the law.
Congress' purpose to apply section 1128(a)(2) both to individuals and entities
is also apparent in the
legislative history of the 1987 amendments to the exclusion law:
The Secretary would be required to exclude from participation any individual
or entity convicted of a
criminal offense relating to neglect or abuse of patients in connection with
the delivery of a health care
item or service . . . .
S. Rep. No. 109, 100th Cong., 1st Sess. 6, reprinted in 1987 U.S. Code Cong.
& Admin. News 682, 686
(emphasis added).
Furthermore, the fact that the definition of "conviction" enacted
in August 1987 does not expressly explain
the meaning of the term as applied to entities does not suggest that Congress
intended to exempt entities
from the reach of the substantive provisions of the exclusion law. The definitions
are intended to clarify
and explain the substantive provisions of the law. The fact that a term may
not be defined does not mean
that Congress intended it to be meaningless, or that it be applied in so limited
a way as to vitiate the
substantive provisions of the law.
3. Petitioner was convicted of a criminal offense relating to neglect or abuse
of patients in
connection with the delivery of a health care item or service.
Petitioner contends that its conviction under California law is not a conviction
of neglect or abuse of
patients within the meaning of section 1128(a)(2). Petitioner asserts that it
was convicted of failure to
comply with state regulatory procedures. Petitioner notes that, under California
law, it could not be subject
to license suspension or revocation based on its conviction. It argues that
the exclusion law was not
intended to supplant State criminal penalties. Petitioner asserts that the purpose
of the law is to prevent
practitioners, "convicted in one state of serious non-program related crimes
involving patient abuse or
neglect, to move to another state and to continue to treat Medicare and Medicaid
patients." P.'s
Memornadum at 12.
Petitioner's argument essentially reduces to the contention that a state criminal
conviction will relate to
patient neglect or abuse under section 1128(a)(2) only in those circumstances
where the state law which the
individual or entity was convicted of violating carries severe penalties. I
disagree with this contention and
with the premises on which it is based. A conviction of an offense under state
law may carry minimal or
even no state penalty and still constitute a conviction relating to patient
neglect or abuse under section
1128(a)(2).
The purpose of section 1128 is different from state criminal law. The laws
of the states are designed to
punish wrongdoers for their transgressions. The exclusion law was enacted to
protect the Medicare and
Medicaid programs from individuals and entities who have demonstrated by their
conduct that they cannot
be trusted to treat program beneficiaries and recipients. The exclusion law's
purpose is remedial, not
punitive. The law is intended to provide remedies (designed to protect Medicare
and Medicaid
beneficiaries and recipients) which operate independently from whatever penalties
might be imposed as the
result of state or federal convictions. This purpose was evident in the original
enactment of the law in
1977. Successive amendments and revisions of the law have continued to express
this legislative purpose
in progressively stronger language. Leonard N. Schwartz, R. Ph. v. The Inspector
General, Docket No. C-
62, (1989).
Congress concluded in 1987 that individuals and entities convicted of patient
neglect or abuse were
deemed to be untrustworthy. The mandatory exclusion provisions of section 1128(a)(2)
embody the
legislative conclusion that parties convicted of patient neglect or abuse cannot
be trusted to treat program
beneficiaries and recipients for at least five years.
Congress did not defer to state laws with respect to the meaning of the terms
"neglect" and "abuse." It is
not necessary that a party be convicted of patient neglect or abuse within the
meaning of a state law for that
conviction to relate to neglect or abuse of patients within the meaning of section
1128(a)(2). The criteria
of section 1128(a)(2) are met so long as a conviction of a criminal offense
falls within the meaning of the
term "relating to neglect or abuse of patients" as that term is used
in the federal exclusion law.
Therefore, the fact that Petitioner may have been convicted of an offense which
could not, under California
law, have resulted in suspension or loss of license to provide care is not relevant
to the issue of whether
Petitioner was convicted of an offense within the meaning of section 1128(a)(2).
What is relevant is
whether Petitioner was convicted of patient neglect or abuse within the meaning
of the exclusion law. If
that is so, then the mandatory exclusion provisions of section 1128(c)(2) apply
to Petitioner.
Petitioner asserts that the terms "neglect" and "abuse"
are not defined and are ambiguous. Although the
law does not define these terms, they are not ambiguous. I conclude that in
the absence of a definition, the
words should be given their common and ordinary meaning.
"Neglect" is defined in Webster's Third New International Dictionary,
1976 Edition as "1: to give little or
no attention or respect to:. . . 2: to carelessly omit doing (something that
should be done) either altogether
or almost altogether . . . ." "Abuse" is defined as "4:
to use or treat so as to injure, hurt, or damage;
MALTREAT . . . ." I conclude from these common definitions that Congress
intended the statutory term
"neglect" to include failure to attend to the needs of patients in
circumstances where the treating individual
or entity is under a duty to provide care. "Abuse" was intended to
apply to those situations where there is a
willful failure to provide care.
It is evident from applying these common meanings to the undisputed facts of
this case that Petitioner was
convicted of a criminal offense relating to neglect of patients. Petitioner
was specifically charged with, and
convicted of, repeatedly failing to plan patient care and repeatedly failing
to administer to patients
medications and treatments as prescribed. Findings 3-9.
There can be no argument that Petitioner was under a duty to provide such services.
It was convicted of
failing to perform that duty.
I do not agree with Petitioner's assertion that by not adopting regulations
defining the terms "neglect" and
"abuse", the Secretary deprived Petitioner of fair notice that its
nolo contendere plea would result in
exclusions being imposed and directed against it. These terms are not ambiguous,
and the Secretary was
not required to define unambiguous statutory language. See Jack W. Greene v.
The Inspector General,
Civil Remedies Docket No. C-56, (1989), appeal docketed, Appellate No. 89-59,
Decision No. 1078
(1989).
CONCLUSION
Based on the undisputed material facts and the law, I conclude that the I.G.'s
determination to exclude
Petitioner from Medicare, and to direct that Petitioner be excluded from participation
in Medicaid, for five
years was mandated by law. Therefore, I am entering a decision in favor of the
I.G. in this case. The five-
year exclusion imposed and directed against Petitioner is sustained.
__________________________
Steven T. Kessel
Administrative Law Judge