In this decision, I grant the motion of the Health Care Financing Administration (HCFA) for summary affirmance of the civil money penalty (CMP) amounts, and I dismiss these consolidated cases.

I. Background

On August 18, 1998, I issued in this case my "Ruling Denying Petitioner's Summary Judgment Motion and Granting in Part HCFA's Cross Motion for Summary Judgment" (August 18 Ruling). In that ruling, I held that--

1. the issues raised by the parties in their motions for summary judgment were the same as those issues I decided in Orchard Grove Extended Care Center, DAB CR541 (July 20, 1998);

2. I was adopting and incorporating Rulings 1 through 3 of my Orchard Grove decision in denying Petitioner's motion for summary judgment;

3. in granting HCFA's motion for summary affirmance in part, I was adopting and incorporating only Subparts A, B, and C of Ruling 4 in the Orchard Grove decision;

4. I was not adopting Subparts D and E of Ruling 4 of the Orchard Grove decision due to material differences in the evidence and arguments advanced by the parties and because further proceedings would be necessary for resolving the issue of whether, in setting the CMP amount, HCFA had considered any information appropriate to determining Petitioner's financial status;

5. the only remaining issue to be resolved is, as framed by Petitioner in its hearing request, "[whether] HCFA has never looked at the facility's financial status . . . and therefore has never had any appropriate information from which to make any determination regarding financial condition." (Hearing Request at 3); and

6. given the content of Petitioner's request for hearing, Petitioner's arguments concerning HCFA's need to evaluate also matters such as the facility's "current" financial information and its "cash flow" situation are immaterial.⁽¹⁾

I then invited the parties to offer suggestions on how to resolve the one remaining issue of fact.

Thereafter, HCFA notified me that it wished to address the remaining issue by refiling a motion for summary affirmance with additional evidentiary support. In the absence of objections from Petitioner, I established a briefing schedule for the parties. On October 1, 1998, HCFA timely filed its "Motion for Summary Affirmance of the CMP Amounts" and supporting brief (HCFA Br.), together with the Declaration of Lorie Butler and copies of those documents referenced in her declaration.⁽²⁾ Petitioner filed its response in its "Brief in Opposition to HCFA's Renewed Motion for Summary Affirmance of the CMP Amount" (P. Br.).

The Declaration of Lorie Butler provides the factual basis for HCFA's present motion for summary affirmance of the CMP amounts.

Ms. Butler stated in her Declaration that she was the HCFA employee who prepared for the Associate Regional Administrator the two notice letters (dated June 20, 1997 and July 20, 1997) which imposed CMPs against Petitioner at differing rates and for different time periods. Declaration, Para 2. The letter dated June 20, 1997 imposed the total amount of $73,050 for the period from August 24, 1995 through January 11, 1996 and the July 20, 1997 letter imposed the total amount of $51,600 for the period from June 6 through November 24, 1996. Declaration, Para. 2. Ms. Butler also stated that, prior to issuing the June 20, 1996 notice letter to Petitioner, HCFA had considered the information provided by the Medicare Fiscal Intermediary, United HealthCare Insurance Company (UHC), that Petitioner had a net income of $518,290 as of September 30, 1996. Declaration, Para. 6.

Ms. Butler explained how she had obtained the cost report information reviewed by HCFA in determining to impose the specific CMP amounts against Petitioner on June 20, 1997. On April 14, 1997, she typed and then telefaxed a memorandum to Dave Gross of UHC, requesting the cost reports for Petitioner and certain other facilities in Michigan. Declaration, Para. 3 (referring to HCFA Exhibit 7). She explained which of the typed words on her memorandum referred to Petitioner. Id. She stated that, on April 16, 1997, she received from UHC a telefaxed⁽³⁾ copy of her original memorandum with certain handwritten information on it. Declaration, Para. 4 (referring to HCFA Exhibit 7). She explained how the handwritten information which was provided by UHC on April 16, 1997 and appears on HCFA's Exhibit 7 was interpreted to mean that Petitioner had a net income of $518,290 for its cost report period ending on September 30, 1996. Declaration, Para. 6. Ms. Butler stated also that, prior to HCFA's issuance of its June 20, 1997 CMP determination, she had telephoned UHC and verified the information appearing on the April 16, 1997 fax. Declaration, Para. 5.

To show how the cost report information relates to Petitioner's financial condition, Ms. Butler referred to the instructions and worksheet forms appearing in HCFA's publications. Declaration, Para. 6 (referring to attached copies from Medicare and Medicaid Guide, Parts I and II concerning "Cost Reports"). She stated that one of the attached documents, called "Schedule G-3," "is the Statement of Revenue and Expenses which is contained in the facility's balance sheet which is filed with its Medicare cost report." Declaration, Para. 6. "Line 32 [of Schedule G-3] is the facility's net income or loss for the cost report period and reflects and facility's entire operations--Medicare, Medicaid, and private pay." Id.

Even though Ms. Butler did not append the specific provisions of HCFA's published instructions which would explain how the Medicare fiscal intermediary, UHC, acquires possession of cost reports or completed versions of Schedule G-3, the information provided by Ms. Butler in her Declaration clearly indicates that UHC did in fact have such information on or before April 16, 1997. According to Ms. Butler's Declaration, such information was transmitted to and considered by HCFA on or before it issued the earlier of its two letters imposing CMPs.

I find that HCFA, with the use of Ms. Butler's Declaration and other attached documents, has established its entitlement to summary affirmance of its CMP determinations. In doing so, I have relied on the Federal Rules of Civil Procedure for guidance and applied the following relevant portion of Rule 56 to the facts and arguments before me:

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.

Fed. R. Civ. P., Rule 56(e).

In accordance with my August 18 Ruling (at 4-5, n.5), HCFA limited its motion for summary affirmance to the question of whether, prior to determining the CMP amount, HCFA had ever looked at Petitioner's financial status and, therefore, whether HCFA had any appropriate information from which to make a determination regarding Petitioner's financial condition. In its response, Petitioner did not dispute the truth of any information provided by Ms. Butler. Petitioner did not contend that, under the law, HCFA may not consider the facility's net profits for the cost report period ending on September 30, 1996 in determining the amount of Petitioner's CMP liability for periods of noncompliance during 1995 and 1996. Nor did Petitioner contend that the cost report information was not looked at by HCFA, as represented by Ms. Butler.

Petitioner alleged that its cash flow situation at the time in question was not accurately reflected by the cost report figure received by HCFA because, for example, the accrual method of accounting used for the cost report did not indicate the moneys which were due but were not yet collected, and the "raw figure" used by HCFA fails to account for the taxes owed by Petitioner. P. Br., 6-7. Additionally, Petitioner noted that it reinvests all of its profits in its own operations and physical plant and, therefore, "there are not funds available to pay a CMP at the rate stated by HCFA."⁽⁴⁾ Id. at 7.

I find that Petitioner's statements, even if true, are immaterial to the questions of whether HCFA had ever looked at Petitioner's financial status and had any appropriate information upon which to make a determination concerning its financial condition.⁽⁵⁾ I had already concluded in my August 18 Ruling that Petitioner's previous arguments concerning HCFA's failure to consider Petitioner's "cash flow" and "current" financial situation were immaterial. August 18 Ruling at 4. The problem of immateriality is not cured by Petitioner's repetition of those same or similar assertions. To date, Petitioner has provided no factual support for its affirmative defense that "HCFA has never looked at the facility's financial status . . . and therefore has never had any appropriate information from which to make any determination regarding financial condition." Hearing Request at 3.

I reject as inapposite Petitioner's arguments that this case should proceed to an evidentiary hearing because genuine disputes of material fact exist. See P. Br., 3. Petitioner has not shown the existence of any genuine factual dispute on the very limited questions raised by its own hearing request. The precise words chosen by Petitioner for use in its hearing request have been quoted repeatedly in this Decision and in my August 18 Ruling. Their limitations speak for themselves. There is no dispute that the correct legal test is not whether there are disputes of fact, but whether there exists any "genuine issue of material fact." P. Br., 3 (emphasis added). Petitioner's new arguments fail to meet this legal test.

Even though I had already rejected, in my August 18 Ruling, Petitioner's earlier efforts to expand its hearing request unreasonably, Petitioner's opposition to HCFA's present motion attempts, once again, to create new and broader issues. It attempts to take liberties with the contents of its own hearing request. For example, in interpreting its own words that "HCFA has never looked at the facility's financial status . . . and therefore has never had any appropriate information from which to make any determination regarding financial condition" (Hearing Request at 3)(emphasis added), Petitioner argues that there exists an issue of whether the nature, quality, and quantity of HCFA's deliberations after it received the cost report information was appropriate. Petitioner contends, for example, that I should review at an evidentiary hearing the important question of whether the "cost report information . . . and HCFA's analysis of it (assuming HCFA can show that it did an analysis, which it has not yet shown) appropriate to make a determination regarding Petitioner's financial status and for setting the CMP amount at $300.00 per day . . . .?" P. Br., 2 and 6.

Disregarding the content of its own hearing request, Petitioner also asks that I schedule an evidentiary hearing to resolve those challenges Petitioner alleges to have made to the scope and severity levels assigned by the state agency surveyors to each finding of deficiency. P. Br., 5. According to Petitioner, "there are factual issues regarding the scope and severity of each of the citations made by the Michigan Department of Consumer & Industry Services, and these facts have a direct bearing upon the reasonableness of the CMP amount." Id. (case citation omitted).

I find no reasonable relationship between what was actually raised and preserved in Petitioner's hearing request as to HCFA's consideration of financial information and those new challenges asserted by Petitioner in the hopes of defeating HCFA's motion for summary affirmance of the CMP determinations. Petitioner has not attempted to show good cause for adding these new and unrelated issues now. For the reasons explained above and in my Decision in Orchard Grove, I conclude that those issues newly asserted by Petitioner as its arguments are not properly before me for on-merit adjudication.

Additionally, with respect to Petitioner's efforts to add challenges to the scope and severity designations appearing on the state surveyors' report of deficiencies, I note that no part of Petitioner's hearing request even mentions any scope and severity designation. The portion of Petitioner's hearing request which took issue with HCFA's determination of the CMP amounts mentions only that HCFA had failed to look at the facility's financial status and "therefore has never had appropriate information . . . regarding financial condition." Hearing Request at 3 (emphasis added). Even in its broadest terms, the hearing request states only that Petitioner "challenges both the factual findings on which the citations were based, as well as the legal basis for imposition of the penalty." Hearing Request at 1. This language cannot be reasonably translated into a challenge to the state agency surveyors' scope and severity designations since the Secretary of Health and Human Services has chosen to hold providers to the "substantial compliance" standard of performance. 59 Fed. Reg. 56,226 (1994). The preamble to the relevant regulations states explicitly, "[w]e are not adopting the use of scope and severity scales to identify deficiencies because . . . the Act imposes limitations that make it impractical." Id. To the extent the seriousness of deficiencies are considered when HCFA is deciding which type of remedy to impose (42 C.F.R. � 488.408), the regulations state that I may not review the exercise of discretion by HCFA to impose a CMP instead of another remedy. 42 C.F.R. � 488.43(e)(2). However, the seriousness of the deficiencies was subject to challenge had Petitioner wished to dispute HCFA's determination of the CMP amounts on some basis in addition to HCFA's alleged failure to consider any appropriate financial information. 42 C.F.R. � 488.438(f)(3) (incorporating 42 C.F.R. � 488.404). Petitioner did not do so in its hearing request and, now, it has not argued or shown good cause for its belated efforts to take issue with the scope and severity designations made by State agency surveyors.

On the basis of the record before me, I find that HCFA has presented clear and unrefuted evidence that it had in fact looked at Petitioner's financial status and was in possession of some appropriate information from which to make determinations concerning Petitioner's financial condition. Even looking at all of the material facts and implications of record in a light most favorable to Petitioner does not permit the conclusion that, were I to deny HCFA's motion and authorize additional proceedings, Petitioner may be able to support its contention that "HCFA has never looked at the facility's financial status . . . and therefore has never had any appropriate information from which to make any determination regarding financial condition." Hearing Request at 3 (emphasis added). Petitioner's arguments have created no genuine issue of material fact. Accordingly, I grant HCFA's renewed motion for summary affirmance of its CMP determinations in this case.

With the addition of the above discussion, I now adopt and incorporate the conclusions and other relevant analysis set out in Rulings 4D and 4E of my Decision in Orchard Grove. Id. at 27-30.

There is no need for further proceedings in these consolidated cases. All outstanding issues have been resolved through summary judgment. Therefore, I hereby dismiss these two case.

1. With respect to Petitioner's arguments concerning the need for HCFA to gather "current" financial information, I noted also that HCFA's obligation was to consider Petitioner's financial condition before it imposed the CMP. August 18 Ruling at 5, n.5 (citing 42 C.F.R. � 488.438(f)(2)).

2. Those documents are:

a. A copy of HCFA's initial Notice of Imposition of Remedies, dated June 20, 1997, imposing a CMP against Petitioner at $3050 for one day of immediate jeopardy to residents on August 24, 1995 and at $500 per day for 140 days of noncompliance from August 25, 1995 through January 11, 1996.

b. A copy of HCFA's second Notice of Imposition of Remedies, dated July 20, 1997, imposing against Petitioner another CMP at the rate of $300 per day for an additional period of noncompliance from June 6 through November 24, 1996.

c. A copy of what had been previously identified and entered as HCFA Exhibit 7, the April 14, 1997 memorandum from Lorie Butler of HCFA to United Health Care Insurance Company, with handwritten notations.

d. A copy of some instructions and forms issued by HCFA in a published manual concerning the preparation of cost reports and related worksheets by program providers.

3. Ms. Butler also explained the machine-generated markings on HCFA Exhibit 7, which show that the return fax from UHC was received in HCFA's office on April 16, 1997. Declaration, Para. 4.

4. In support of this line of argument, Petitioner referenced an affidavit by Carmen Mills (the Mills Affidavit). In the cover letter accompanying its brief, Petitioner alleged that the Mills Affidavit would be submitted to me and HCFA under separate cover. Neither HCFA nor I have received the Mills Affidavit. The time for submission of the parties' briefs and supporting documentation has passed. Petitioner sought no extension of the filing deadlines.

5. The proposition that no CMP may be assessed reasonably by HCFA because Petitioner chooses to reinvest all of its profits back into its own business is untenable as a matter of law. For obvious reasons, Petitioner and other providers cannot foreclose the assessment or payment of CMPs by reinvesting its profits into its own business. When CMPs become due from facilities which allege no cash flow based on reinvestment choices, I trust that representatives of the federal government will have sufficient ingenuity and mechanisms for enforcing payments through the use of liens, orders enforcing judgment, or off-sets against future Medicare reimbursements.