Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
In the Case of:
CarePlex of Silver Spring,
Petitioner,
- v. -
Health Care Financing Administration.
DATE: August 26, 1997
Civil Remedies CR457
App. Div. Docket No.
A-97-081
Decision No. 1627
FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION
CarePlex of Silver Spring (CarePlex) appealed a
January 31, 1997 decision of Administrative Law Judge
(ALJ) Steven T. Kessel that sustained a civil money
penalty (CMP) of $59,250 imposed on CarePlex by the
Health Care Financing Administration (HCFA) under
sections 1819(h) and 1919(h) of the Social Security Act
(Act). CarePlex of Silver Spring, DAB CR457 (1997) (ALJ
Decision). CarePlex challenged HCFA's authority to
impose the CMP. CarePlex argued that HCFA could not
impose a CMP on it based on deficiencies identified in a
survey that began only one day after it acquired the
facility. CarePlex also disputed the ALJ's finding that
CarePlex had waived its right to contest the amount of
the CMP. We affirm the ALJ's conclusion that HCFA had
authority to impose the CMP under these circumstances but
reverse the finding that CarePlex waived its right to
contest the amount of the CMP. We remand the case to the
ALJ for further proceedings on the issue of the amount of
the CMP.
Background
The parties agreed that the question of HCFA's authority
to impose a CMP on a new owner of a facility under the
circumstances here is a matter of law that should be
decided on the documentary record. Prehearing Order of
September 11, 1996, at 1-2.
The following summary is derived from undisputed facts or
uncontested documents in the record. On September 11,
1995, CarePlex acquired the facility at issue, a long-
term care facility located in Silver Spring, Maryland and
formerly known as Sylvan Manor Health Care Center. ALJ
Decision at 3, Finding of Fact and Conclusion of Law
(FFCL) 1. 1/ CarePlex was assigned the Medicare
provider agreement and number of the prior operator. See
P. Ex. 1; HCFA Exs. 1, 2.
The Montgomery County, Maryland, Department of Health,
acting for the Maryland Department of Health and Mental
Hygiene (State survey agency), conducted a survey of the
facility beginning September 12, 1995 and ending
September 28, 1995. ALJ Decision at 3, FFCL 2. Based on
that survey, the facility was found to be deficient in
complying with numerous federal participation
requirements for Medicare and Medicaid. Id.; HCFA Ex. 5;
P. App. Br. at 3. The resulting statement of
deficiencies contained a comment that the ownership
changed on September 11, 1995 and that the "deficiencies
identified are results of poor practices of care and
services under previous ownership." HCFA Ex. 5, at 1;
P. Ex. 1.
The State survey agency notified CarePlex on October 20,
1995 that it recommended to HCFA a CMP of $750 per day
from September 28, 1995 until compliance was achieved.
HCFA Ex. 4; P. Ex. 6. 2/ The notice instructed the
facility to submit a written allegation of compliance
when it believed the cited deficiencies to be corrected
and substantial compliance to be achieved. HCFA Ex. 4,
at 1-2. The notice stated that the required plan of
correction could be used as a written allegation of
compliance (if the facility indicated that it so
desired), and that the CMP would cease to accrue on the
date the agency verified substantial compliance (by
revisit or otherwise). Id. at 2.
On November 9, 1995, HCFA notified the facility that it
concurred with the State survey agency's recommendation
that it impose a CMP. HCFA Ex. 7. HCFA's notice stated
that "we may impose a [CMP] effective September 28, 1995
in the amount of $750.00 for each day that your facility
is not in substantial compliance." Id.
On December 7, 1995, the State survey agency pointed out
to CarePlex that the plan of correction that CarePlex had
submitted to the agency on November 3, 1995 specified
that several deficiencies would not be corrected until
after a denial of payment for new admissions would be
required by operation of law. 3/ HCFA Ex. 8. The
record does not include CarePlex's response, but
apparently CarePlex alleged compliance as of December 15,
1995. See HCFA Ex. 10, at 1. The State survey agency
conducted a survey at CarePlex beginning on December 18,
1995 and verified that CarePlex achieved and maintained
substantial compliance as of December 15, 1995. Id.;
HCFA Ex. 9. 4/
The State survey agency notified CarePlex on February 21,
1996 that it was recommending to HCFA that the CMP in the
amount of $750 per day should begin on September 28, 1995
and end on December 15, 1995. HCFA Ex. 10. On March 14,
1996, HCFA concurred and imposed the recommended CMP,
totalling $59,250 for 79 days. HCFA Ex. 11, at 1.
HCFA's notice stated that, in reaching its determination
on the amount of the CMP, HCFA considered "the scope and
severity of recent deficiencies," as well as "the
facility's past history including repeat deficiencies,
its degree of culpability, and its financial condition."
Id. CarePlex appealed HCFA's determination.
We review on appeal whether a disputed conclusion of law
is erroneous and whether a disputed finding of fact is
supported by substantial evidence in the record. Golden
State Manor and Rehabilitation Center, DAB 1597, at 2
(1996); National Hospital for Kid in Crisis, DAB 1600,
at 1 (1996).
Exceptions
CarePlex asserted seven exceptions to the ALJ Decision in
which it disagreed, in whole or in part, with FFCLs 3, 5-
7 and 9-15. In its first three exceptions, CarePlex
argued that the ALJ erred in finding CarePlex responsible
for these deficiencies in that they were caused by the
prior owner but were not cited until after the change of
ownership, and that successor or vicarious liability is
improper in such circumstances. In the fourth exception,
CarePlex asserted that a CMP in such circumstances
constituted a penalty rather than a remedy, in that
CarePlex had corrected all the deficiencies by the time
the CMP was imposed. In the fifth and sixth exceptions,
CarePlex argued that HCFA's notice was substantively and
procedurally inadequate, in that HCFA did not consider a
statutorily-mandated factor (degree of culpability) and
did not sufficiently detail the bases for the factors
which it did consider. Finally, in the seventh
exception, CarePlex argued that the ALJ erred in finding
that it had waived its right to contest the amount of the
CMP.
Analysis
CarePlex is responsible for deficiencies during its
operation of the facility.
CarePlex's arguments on HCFA's authority to impose this
sanction are founded on the theory that HCFA invoked some
form of vicarious liability because the deficiencies
found in the survey were "caused" by the prior owner.
CarePlex emphasized repeatedly that it was undisputed
that it did not "cause" the deficiencies found at the
September 1995 survey, and further characterized the
survey findings as largely dealing with past events. 5/
The ALJ found that, although CarePlex did not cause the
deficiencies found in the September 1995 survey, CarePlex
was responsible for correcting them and complying with
any resulting remedy. FFCL 12, ALJ Decision at 4-6. We
agree.
The ALJ correctly determined that the fact that CarePlex
did not initially set into motion the practices and
conditions that triggered the survey results does not
mean that CarePlex had no responsibility for their
existence under its management. Counsel for CarePlex
specifically directed our attention to the factual
underpinnings of the deficiency findings in the statement
of deficiencies from the initial survey, as evidence that
"virtually every deficiency related to a specific event
that occurred prior to CarePlex taking control of the
facility." Id. at 16. A review of the statement of
deficiencies contradicts that characterization. For
example, the events listed in relation to one resident
who did not want a gastronomy tube but was nevertheless
scheduled for surgery to insert the tube without
alternative planning occurred on September 15 and 21,
after CarePlex took control. The resident's condition
had evidently been deteriorating since the preceding
month and the conduct of the staff may have reflected
policies of the prior owner, so that in that sense the
"cause" lay with the prior owner. Nevertheless, the
"specific events" to which the deficiency related
occurred subsequent to CarePlex taking control. HCFA Ex.
5, at 3-4 (tag no. F155). Further, the resident's
treatment was altered "following the surveyor's
intervention," not by intervention of the new management.
Id. at 4. Similarly, many findings related to
mistreatment of the residents by the staff observed
during the survey, the observed failure to provide proper
care, or the absence of proper documentation in records
reviewed during the survey, i.e. after CarePlex was in
control of staff and recordkeeping. See, e.g., HCFA Ex.
5, at 9-23, 53-57, 62-70, 82-83 (tag nos. F164, F174,
F176, F241, F314, F322, F324, F328, F368). CarePlex
contended that these issues were resolved once it did
proper training and that the documentation was absent
when it took over. Oral Argument Tr. at 18.
Nevertheless, the observed events occurred during
CarePlex's administration, and CarePlex provided no
evidence of when the needed training or upgrading of the
inadequate documentation occurred. 6/
Numerous other deficiencies related to the condition of
the physical facility and the availability of equipment
on the days of the survey (i.e., during CarePlex's
management). Some of these obviously required long-term
solutions (such as replacing lighting fixtures, drains,
and sinks); some appear more immediately correctable
(such as the failure to provide tissues at bedside, use
correct padding for bed sores, or execute fire drill
plans). Compare, e.g., HCFA Ex. 5, at 25-26,90-97 (tag
nos. F256, F441, F456, F467) with HCFA Ex. 5, at 23-25,
109-112 (tag nos. F246, F518). While these conditions
were caused, in the sense that they began, under prior
ownership, CarePlex is responsible for their continued
existence during its administration as documented
throughout the survey.
It is true that some of the most serious events did occur
before CarePlex took over, and it is also true that
CarePlex ultimately corrected the deficiencies. See,
e.g., HCFA Ex. 5, at 34-47 (tag no. F309); P. Ex. 8.
These facts do not demonstrate, however, that CarePlex
was not responsible for the observed existence of
deficiencies at a facility which it was operating.
CarePlex was responsible for complying with Medicare
requirements once it undertook to operate the facility.
It had ample opportunity to review the operations, staff,
and physical plant before it took control, and the record
is clear that it spent considerable time doing precisely
that. O'Brien Affidavit at 2; see also HCFA Ex. 2. In
fact, it is clear that, while the facility was not under
any sanctions at the time of the turnover, CarePlex was
well aware that it was acquiring a poorly-managed
facility in need of improvement and that "immediate
implementation of a plan to upgrade facility, programs
and staff was critical." O'Brien Affidavit at 2-3. In
fact, CarePlex's stated intention, for its first venture
into Maryland, was "to turn around a difficult facility
to demonstrate our expertise, strong management
capability, and good faith." Id. at 4. From the point
when CarePlex accepted assignment of the provider
agreement, it undertook to represent to Medicare that it
was capable of complying with the terms of the agreement
and operating in accordance with the participation
requirements. CarePlex was undeniably responsible for
its correction of or its perpetuation of inadequate
conditions, regardless of who initially created the
conditions. We agree with the ALJ that the CMP was not
imposed for conditions prior to CarePlex's ownership but
entirely for failure to achieve substantial compliance
for a period lasting from more than two weeks until
almost three months after CarePlex undertook such
responsibility. See ALJ Decision at 10.
HCFA did not require "special" regulatory authority to
impose a CMP on the current operator of a facility.
CarePlex suggested that the fact that the changeover
occurred merely one day before the survey began made this
case a "law-school hypothetical" test of HCFA's authority
to impose a remedy on a new owner. P. App. Br. at 5.
CarePlex did not explain how long a period it thought
should be granted to a new owner before holding it
responsible for deficiencies in its facility that
originated with prior management, nor did it point to any
statutory or regulatory basis for delaying
responsibility. Instead, CarePlex took the position that
HCFA was required to show some special regulatory basis
in order to hold new owners to the same standards for
participation and to impose the same remedies on
noncompliant new owners as on all other providers. We
agree with the ALJ that this position is unfounded.
CarePlex admitted, correctly, that the "operator of a
nursing facility is responsible to maintain regulatory
compliance, even if that means correcting deficiencies
caused by a prior owner," but argued that it was in the
process of doing that from the point when it took over.
P. App. Br. at 10. A new owner does not enjoy months of
immunity from compliance with the participation
requirements, however, simply because the facility which
it chose to acquire was in poor shape. The essential
premise of the participation requirements is that
Medicare beneficiaries and Medicaid recipients, who are
often poor, elderly and vulnerable, require protection
from inadequate care in substandard facilities. See
Hillman Rehabilitation Center, DAB 1611, at 12-14, and
nn. 10 and 11 (1997). It makes little difference to a
patient suffering from inadequate conditions in a nursing
home whether the management has changed unless and until
the conditions change. Further, limited federal funds
should not be spent on providers who cannot demonstrate
that they are both willing or able to comply with these
requirements. See id. at 12. Reading a delay of
responsibility into the regulations would create an
unacceptable gap in protection to those whom the programs
are designed to benefit and protect.
While HCFA and the State have some discretion in the
selection of remedies to impose, nothing in the
regulations or statute suggests that they are somehow
divested of authority to enforce the participation
requirements simply because of a recent change of
ownership. The regulations provide that, upon a change
of ownership, "the existing provider agreement will
automatically be assigned to the new owner" and will be
"subject to all applicable statutes and regulations and
to the terms and conditions under which it was originally
issued including, but not limited to, the following:
(1) Any existing plan of correction.
(2) Compliance with applicable health and safety
standards. . . ."
42 C.F.R. § 489.18(c) and (d). 7/ No "grace period" is
provided during which a new owner may operate in
violation of the participation requirements by showing
good faith efforts to begin to improve the facility. If
anything, the Act suggests that Congress was concerned
that ownership transitions might present particular risks
and facilities might need additional scrutiny at such
times. Thus, the survey provisions state that a special
survey may be conducted (if there has not already been a
standard survey under the normal time frames) within two
months of a change of ownership to determine if the
change caused any decline in quality of care. Act,
§ 1819(g)(2)(A)(iii)(II). Obviously, a survey conducted
within two months or less of a change of ownership may
well pick up deficiencies caused by conditions that began
under the prior regime. Yet, Congress made no special
provision to reduce the responsibility of new owners for
deficiencies found during these special surveys.
CarePlex argued that the only express authority for
imposing a remedy on a new owner contained in 42 C.F.R.
Part 488 was inapplicable and was not relied on by HCFA,
and that another regulation referenced by the ALJ (and
quoted above) at 42 C.F.R. § 489.18(d) was not even cited
by HCFA and did not directly support the action here. P.
App. Br. at 5, 11-13.
The authority to which CarePlex referred in Part 488, 42
C.F.R. § 488.414, provides for mandatory remedies to be
imposed on a facility "found to have provided substandard
quality of care on the last three consecutive standard
surveys." 42 C.F.R. § 488.414(a). 8/ In such cases,
the regulation provides that a termination would restart
the count of substandard quality of care findings but
that a "facility may not avoid a remedy on the basis that
it underwent a change of ownership," and that a change of
ownership alone does not restart the count unless the new
owner shows that past performance is no longer relevant.
42 C.F.R. § 488.414(b)(2) and (3).
As the ALJ noted, this regulation reinforces the
conclusion that a change of ownership is not assumed to
exempt new owners from compliance, but is not the source
of HCFA's authority to take action against a current
owner. ALJ Decision at 9. Hence, HCFA was not required
to specifically cite this regulation as authority to
impose a remedy here.
The enforcement provisions of 42 C.F.R. Part 488
(contained in Subpart F) authorize imposition of remedies
on any long-term care facility that is "not in
substantial compliance with the requirements for
participation in the Medicare and Medicaid programs" as
specified in sections 1819(h) and 1919(h) respectively of
the Social Security Act. 42 C.F.R. § 488.400. This
authority sufficiently supports the enforcement action
against CarePlex for the period when it was not in
substantial compliance.
Similarly, HCFA did not need to rely on the regulation at
42 C.F.R. § 489.18(d) governing assignment of provider
agreements to new owners (which was mentioned in the ALJ
Decision) as a source for its authority to impose the CMP
on CarePlex. CarePlex's argument that the ALJ based his
decision on a regulation on which HCFA itself had not
relied stemmed from CarePlex's misunderstanding of the
significance which the ALJ gave to the regulation in his
discussion. The ALJ did not suggest that this regulation
was the source of HCFA's enforcement authority but rather
pointed to it as further evidence that the regulations do
not provide an exemption for new owners from the normal
provisions requiring operation in compliance with all
participation requirements. CarePlex argued that the
regulation was not a source of authority for HCFA's
action because it "says only that a new owner of a
facility is bound by `any existing plan of
correction'(emphasis added) and various civil rights,
health and safety and disclosure requirements, none of
which is at issue here." P. App. Br. at 12. In fact,
the regulation provides that a new owner is not only
subject to any pre-existing plan of correction but also
to "all applicable statutes and regulations." 42 C.F.R.
§ 489.18(d). Contrary to CarePlex's argument, the
regulation thus plainly holds new owners to compliance
with all participation requirements from the time of the
assignment of the agreement and therefore supports the
conclusion that all providers are subject to the normal
enforcement authorities, regardless of how long they have
owned or operated their facilities.
CarePlex described as "critical to this case" the fact
that no previously-cited uncorrected deficiencies had
been found by the survey agency as of the date when
CarePlex acquired the facility and that no remedies were
outstanding against the prior owner to be assigned to
CarePlex upon the change of ownership. 9/ P. Appeal
Br. at 2. CarePlex apparently believed that these
circumstances demonstrated that it had not undertaken
liability for the admitted existence of the deficiencies
after the change of ownership, since the prior owner
created the underlying conditions but was not sanctioned
for them. 10/ To the contrary, that all deficiencies
at issue were found during a survey after the change of
ownership and the sanction at issue was imposed after and
based only on a period of noncompliance after the change
of ownership establishes that no question of "vicarious
liability" of any sort is involved here. CarePlex is not
being held responsible for any liability incurred by a
prior owner.
The ALJ correctly analyzed the relevance of the Vernon
case.
Much of the parties' dispute over the interpretation of
United States v. Vernon Home Health, Inc., 21 F.3d 693
(5th Cir. 1994), cert. denied 115 S.Ct. 575 (1994), is
inapposite, as the ALJ recognized. Vernon involved the
obligation of a purchaser of a Medicare provider to
reimburse HCFA for overpayments made to the prior
operator. The court held that, regardless of state law
governing transfer of liability in a corporate purchase,
any purchase involving the assignment of a Medicare
provider agreement is subject to federal statutory and
regulatory requirements, among them the reimbursement of
overpayments. 21 F.3d at 696. Therefore, the new owner
was jointly and severally liable with the original owner
for the overpayments owed to HCFA.
As the ALJ noted, the decision has some relevance in that
it confirms that the assignment of a provider agreement
includes the assumption of all obligations and
responsibilities of a provider under the statute and
regulations. ALJ Decision at 7. The court noted that
the purchaser "could have chosen not to accept the
automatic assignment of the provider agreement," but then
it would have had to apply as a new provider and it did
not want "a break in service while it awaited approval."
21 F.3d at 696. The court held that by accepting
assignment, the purchaser accepted "the terms and
conditions of the regulatory scheme." Id. Similarly,
here, once CarePlex decided to continue to operate under
the assigned provider agreement, it was immediately
subject to the requirements of the regulatory scheme.
However, as the ALJ also pointed out, the present case,
unlike Vernon, does not involve sharing responsibility
for a preexisting liability. ALJ Decision at 7. As
discussed above, the deficiencies may have originated
with the prior owner's practices but were cited during
CarePlex's administration. Vernon addresses the
situation where a new owner comes in after a provider has
incurred liability and holds that even in that situation,
i.e. where the new owner was not in control at the time
the liability was incurred, the new owner must assume
liability. We agree with the ALJ that CarePlex's
responsibility here derives not from a "direct
application" of Vernon but from CarePlex's own obligation
to operate in compliance with the participation
requirements and to correct the deficiencies in existence
after its acquisition of the facility. See ALJ Decision
at 7-8.
Counsel for CarePlex recognized that the prior owner
could not be charged with any of the deficiencies in this
case, since that provider was no longer participating in
the Medicare program as of the day before the September
1995 survey. Oral Argument Tr. at 30-31, 32-33.
However, CarePlex's argument was that the fact that
Vernon allows a new owner to be charged along with a
prior owner for the prior owner's liabilities does not
justify charging a new owner where a prior owner is not
liable. This argument has no merit. It is the normal
situation that a provider is itself liable for
deficiencies cited in a survey of a facility which it
operates. The absence of liability of a prior owner does
not defeat the liability of the current owner.
Substantial evidence in the record supports the
conclusion that CarePlex did not achieve substantial
compliance until December 15, 1995.
CarePlex argued that there was no evidence to show it was
not in compliance before the date on which the resurvey
happened to occur. See P. Appeal Br. at 6-7; ALJ
Decision at 10. This argument overlooks the fact that it
was CarePlex's responsibility to notify the State survey
agency when it alleged substantial compliance and was
ready for a resurvey. The notice of deficiencies clearly
informed CarePlex to submit a "written allegation of
compliance" or designate its plan of correction as such,
if it believed that the deficiencies were corrected.
HCFA Ex. 4, at 2. CarePlex was informed that, if this
allegation was confirmed on a revisit or by other means,
the CMP would cease to accrue as of the date of the
credible allegation.
Not only did CarePlex not allege compliance before
December 15, 1995, CarePlex did not dispute that its own
plan of correction submitted to the survey agency stated
that it would not achieve substantial compliance until
December 28, 1995. The State survey agency wrote to
point this out to CarePlex on December 7, 1995. HCFA Ex.
8, at 1. CarePlex did not proffer any evidence that it
made earlier allegations of compliance or even that the
deficiencies were in fact corrected at some specific
earlier date. 11/
Furthermore, given the numerous deficiencies found at a
survey conducted over the first two weeks of CarePlex's
operation of the facility, the ALJ was reasonable in
inferring that corrections would take some significant
time to achieve. CarePlex itself argued that correcting
the outstanding deficiencies required more than $1.2
million and "substantial improvements to the physical
plant, staffing, operations and clinical programs."
O'Brien Affidavit at 4. There is simply no evidence to
which CarePlex pointed in this record that would support
a finding of substantial compliance earlier than December
15, 1995, and CarePlex's own evidence is that
noncompliance persisted well into its period of
operations. Thus, the ALJ's finding that deficiencies
continued to exist "by Petitioner's own admission, after
Petitioner acquired the facility and until December 15,
1995" is supported by substantial evidence in the record.
Any disagreement of a State survey agency official with
the CMP imposed would not undercut HCFA's authority to
impose the CMP.
As mentioned in the background section, CarePlex
contended that the State survey agency opposed the
imposition of the CMP here. CarePlex called this "sort
of support for a petitioner by a [State survey agency]
extraordinary." P. App. Br. at 5. In support of this
position, CarePlex submitted before the ALJ an affidavit
from an official of the State survey agency that stated
that the agency made its recommendations only after
"receiving direction from HCFA." P. Ex. 2, at 2-3
(Affidavit of Carol Benner, Director of the Licensing and
Certification Administration of the State survey agency)
(Benner Affidavit). Ms. Benner also stated that her
staff indicated to HCFA officials that a CMP might not be
appropriate here and that the Licensing and Certification
Administration "does not support the imposition of a
substantial [CMP] against CarePlex in the circumstances
of this case." Benner Affidavit at 3.
There is some question as to what the actual stance of
the State survey agency is. Ms. Benner's affidavit is
undated and unexecuted and is inconsistent not only with
the recommendations of the October 20, 1995 and February
21, 1996 notices, discussed in the background section,
but also with other correspondence of the State survey
agency. On October 23, 1995, another official of the
State survey agency wrote to HCFA that the facility
should be classified as a "poor performer" despite the
strong objections of the new owners. HCFA Ex. 6, at 1.
This letter stated that the State survey agency believed
"we have made the correct decision based upon our
understanding of the concept of a `poor performer' and
that a change of ownership is irrelevant to the
determination of `poor performer' status," but that the
survey agency wanted to make HCFA "aware of the
possibility that the fine will be litigated based on the
new ownership's position that the current deficiencies
resulted from the inability of the previous ownership to
properly manage the facility." Id. at 2.
In any case, we need not resolve whether to credit the
written recommendations or the later affidavit of Ms.
Benner as the official position of the State survey
agency in regard to the CMP imposed on CarePlex. Even if
the State survey agency were considered to have disowned
its recommendation concerning the CMP, and therefore to
be in disagreement with HCFA about the choice of remedies
that should be imposed, that would not undercut HCFA's
authority to impose the remedy here. Federal regulations
provide that a remedy in lieu of or in addition to
termination will go into effect, where (as here) both the
State and HCFA found the facility not in substantial
compliance (but found no immediate jeopardy) but only one
established a remedy. 45 C.F.R. § 488.452(d). 12/
In any case, the affiant indicated that she expressed no
opinion concerning the legal issue of regulatory
interpretation which is the only issue before us. Benner
Affidavit at 3. Even if she had, the opinion of a state
official could not control the interpretation of federal
requirements.
Imposition of a CMP here was remedial, not punitive.
CarePlex argued that the CMP imposed on it is punitive,
rather than remedial in nature, in that it was imposed
only after CarePlex had made the required corrections and
so could not have been an inducement to CarePlex to do
what it was already doing. In support of this position,
CarePlex cited to two Supreme Court cases addressing the
question of when a civil penalty may be so
disproportionate as to constitute punishment, for
purposes of double jeopardy. P. App. Br. at 18-21,
citing United States v. Ursery, 116 S. Ct. 2135 (1996),
and United States v. Halper, 490 U.S. 435 (1989).
Further, CarePlex argued that any penalty must be
disproportionate to the harm done in these circumstances,
because it committed no harm. P. App. Br. at 21.
We agree with the ALJ that this argument is without
merit. The CMP was not irrationally imposed only long
after the corrections were made, as CarePlex argued.
Rather, CarePlex was notified by the State survey agency
and HCFA shortly after the survey of the intention to
impose a CMP from the point where the deficiencies were
found until substantial compliance was achieved and of
the recommended daily amount.
Clearly, the actual imposition of the CMP could occur
only after the amount was fixed by an end date (either
for substantial compliance or termination). 13/
Conceivably had the correction period proved brief, HCFA
might have determined not to impose the CMP. However,
HCFA's decision to impose the recommended CMP was not
unreasonable, and CarePlex had adequate notice of it. To
accept CarePlex's argument here would undercut the entire
purpose of the CMP provisions, i.e., to motivate
noncompliant providers to act quickly in making needed
corrections in order to stop the clock on the accruing
CMP. We agree with the ALJ that the CMP here served a
remedial purpose.
As the ALJ pointed out, CarePlex erroneously portrayed
the CMP as tied to deficiencies beyond its control and
therefore not rationally related to inducing it to
achieve compliance. See ALJ Decision at 10. In reality,
the CMP related solely to a period beginning more than
two weeks after CarePlex assumed ownership and ending
when CarePlex demonstrated that it had achieved
substantial compliance as of December 15, 1995. CarePlex
alone, and not the prior owner, had control over the
period of the CMP, by the date on which it alleged and
demonstrated that it was in substantial compliance with
federal requirements.
While CarePlex asserted that the affidavit of its
clinical director, Ms. O'Brien, demonstrated that it was
planning and acting to improve the facility regardless of
the CMP, it is impossible to know retrospectively what
role the pendency of the CMP remedy played in
accelerating the corrections. At most, Ms. O'Brien's
affidavit established that CarePlex knew that the
facility was badly managed, and was committed to, and
believed itself capable of, making corrections on which
it ultimately spent $1.2 million dollars. O'Brien
Affidavit passim. Nothing in Ms. O'Brien's affidavit,
nor in the affidavit of Ms. Benner from the State survey
agency to which CarePlex also cited, demonstrated that
the recommendation for a CMP resulting from the
deficiencies found at the survey was irrelevant to the
timing and scope of the corrections made. Even with the
threat of the CMP outstanding, compliance was not
achieved for almost three months. 14/ There is no
basis in the record to assume that no actual harm
occurred to residents during this period. Furthermore,
there is no requirement that actual harm to residents be
demonstrated as a prerequisite of imposing a remedy on a
provider who is not in substantial compliance with the
participation requirements.
The cases cited by CarePlex provide no support for its
position. CarePlex acknowledged that the purpose of the
remedies in the enforcement program is to enhance care to
residents and encourage compliance and prompt correction.
P. App. Br. at 19. Given these remedial purposes, a
particular remedy could only be considered punitive if it
bore no rational relationship to these goals at all so as
to negate the statute's purpose. See Ursery, 116 S.Ct.
at 2144. On the contrary, the daily accruing of a CMP
here had a rational relationship to providing financial
inducement for quick improvement in compliance, which is
entirely consistent with the statutory purposes.
The ALJ correctly found that the HCFA regulation on
absence of culpability as a mitigating factor is binding
on him and does not violate statutory requirements.
CarePlex argued that HCFA's action against it was not
valid because HCFA had failed to consider a statutorily-
mandated factor. The statute authorizes imposition of a
CMP on providers for failure to comply substantially with
Medicare or Medicaid requirements under the same
provisions as applicable to the general civil money
penalty authority at section 1128A of the Act. Sections
1819(h)(2)(B)(iii) and 1919(h)(3)(C)(ii). Section 1128A
requires the Secretary, in determining the amount of the
CMP, to take into account:
(1) the nature of the claims and the circumstances
under which they were presented,
(2) the degree of culpability, history of prior
offenses, and financial condition of the person
presenting the claims, and
(3) such other matters as justice may require.
Section 1128A(d) of the Act (emphasis added).
CarePlex argued before the ALJ that HCFA improperly
relied on its regulation, which CarePlex asserted was
inconsistent with this statutory mandate, in determining
what factors to consider. The regulation lists as
factors to be considered by HCFA in determining the
amount of a CMP the facility's history of noncompliance,
its financial condition, certain other factors (relating
to the seriousness of the deficiencies), and its degree
of culpability. 42 C.F.R. § 488.438(f). The regulation
then provides as follows:
Culpability for purposes of this paragraph includes,
but is not limited to, neglect, indifference, or
disregard for resident care, comfort or safety. The
absence of culpability is not a mitigating
circumstance in reducing the amount of the penalty.
Id. (emphasis added).
The ALJ held that he did not have authority to determine
whether the regulation defining the manner in which
culpability is considered in setting a CMP was ultra
vires of the statutory requirement. ALJ Decision at 12.
Further, he held that, in any case, the regulation need
not be read as inconsistent with the statute, since the
statute does not prescribe the precise manner in which
culpability is to be taken into account. Id. We agree.
CarePlex acknowledged on appeal that this is not the
correct forum to seek to set aside the Secretary's
regulations or declare the regulation at issue ultra
vires. P. App. Br. at 24. However, CarePlex
characterized the ALJ's holding as completely removing
any obligation for HCFA to consider "the fact that
CarePlex was not responsible for the deficiencies" or any
of the factors such as degree of culpability,
circumstances of the deficiencies, or other matters
required by justice. P. App. Br. at 23-24. Plainly, the
ALJ made no such holding. The ALJ found that CarePlex
was responsible for the deficiencies, although it was not
the original creator of the deficient conditions. See
ALJ Decision at 4, 10. The ALJ further held that HCFA's
regulation is not necessarily in conflict with the
statutory requirement that degree of culpability be taken
into account, since the statute does not prescribe the
manner of considering culpability. Id. at 12. The
regulation simply limits the consideration of the degree
of culpability to determining aggravation rather than
mitigation, which has the effect of imposing a greater
penalty on a provider whose conduct was more
reprehensible, all other things being equal, than on a
provider whose conduct was less blameworthy. This is a
reasonable interpretation of considering "degree of
culpability." 15/
CarePlex also argued that the regulation at issue could
and should be interpreted to "harmonize" with the
regulations implementing section 1128A, which it read as
"directly on point" and in conflict with the ALJ's
interpretation of the HCFA regulations. P. App. Br. at
24-25. Specifically, CarePlex referenced 42 C.F.R.
§ 1003.106(c)(1), which provides for reduction of a
penalty below the maximum amount permitted if there are
"substantial or several mitigating circumstances." In
discussing aggravating and mitigating considerations, the
regulations on section 1128A state as to degree of
culpability that it --
should be considered a mitigating circumstance if
the claim or request for payment for the item or
service was the result of unintentional and
unrecognized error in the process respondent
followed in presenting claims or requesting payment,
and corrective steps were taken promptly after the
error was discovered.
42 C.F.R. § 1003.106(b)(2). On its face, the language of
this regulation is not directly transferable to the
situation of a provider operating a facility not in
substantial compliance with participation requirements.
The regulation interprets "degree of culpability" in the
context of a billing error promptly corrected on
discovery. The Secretary could reasonably conclude that
this sort of billing error situation constitutes a
mitigating circumstance (for purposes of setting an
exclusion). At the same time, the Secretary could
reasonably conclude that it is not a mitigating
circumstance (for purposes of selecting remedies for
noncompliance with participation requirements) that a
provider operated a facility in violation of
participation requirements without purposely intending or
causing the violation. The purpose of the exclusion
provisions is to deter and protect the programs against
fraudulent billing, which is obviously less likely to
recur where the error was unintentional. In the case of
HCFA's CMP authority, the purpose is clearly to motivate
providers to take speedy corrective action to eliminate
deficiencies in facilities which they control. 16/
Given these different purposes, the Secretary could
reasonably interpret "degree of culpability" differently
in these two contexts.
HCFA made clear this reasoning in the preamble to the
nursing home regulations in which it distinguished the
typical false claims situation where the intent of the
individual involved "plays a prominent role" in setting
the CMP amount from the kinds of culpability
considerations involved in the enforcement setting. 59
Fed. Reg. 56,204 (November 10, 1994). Culpability in the
latter setting is not limited to situations where the
provider "intended" noncompliance, but may exist as a
"product of neglect, indifference or disregard." Id.
Nevertheless, a provider that acted intentionally may
reasonably be expected to be even more recalcitrant in
making required corrections. Hence, degree of
culpability is considered in setting the amount but
"absence of culpability is not a factor, as a facility is
always fully responsible for the health and safety of its
residents." Id.
For these reasons, we do not see these regulations as
conflicting or inconsistent.
HCFA was not required to provide more detailed notice of
how it weighed the factors considered in arriving at the
CMP.
In addition to its claim that HCFA substantively failed
to consider absence of culpability as required by
statute, CarePlex argued that HCFA's notice was
procedurally inadequate because the recitation of factors
considered was merely boilerplate. P. App. Br. at 25-
27. 17/ CarePlex asserted that the notice does not
make clear what findings HCFA made about the evidence
underlying the factors, what weight each factor was
given, or, in particular, "whether HCFA took into account
whether `justice requires' consideration of the fact that
CarePlex did not cause, but did correct the
deficiencies." P. App. Br. at 25.
The ALJ reviewed the contents of the notice provided by
HCFA that set out the dates and amounts of the CMP and
the factors on which it was based. ALJ Decision at 13.
He concluded that nothing in the Act or regulations
required HCFA to state the precise rationale for how it
used those factors to arrive at the amount of the CMP.
ALJ Decision at 12-13. We agree that the content of the
notice was sufficient to alert the provider to the basis
of the CMP and to define what would be addressed at a
hearing challenging the penalty.
CarePlex also argued that section 1128A of the Act
requires HCFA to consider "such other matters as justice
may require" but that HCFA's notice does not demonstrate
that it did so here. The ALJ found that HCFA complied
with the requirements of 42 C.F.R. § 488.434 (which
spells out the contents to be included in HCFA's notice
letters), and that arguably the factors incorporated
there from HCFA's regulations are intended to subsume all
other matters that justice requires to be considered
beyond those enumerated at section 1128A of the Act. ALJ
Decision at 13-14.
We agree that the notice is adequate. 18/ Section
1128A of the Act does not imply that there will, in every
case, be additional matters that must be considered, but
only that, when justice so requires, such matters be
given consideration. Therefore, it is also possible that
HCFA concluded that no such matters were present in this
case. While CarePlex may dispute the conclusion and
argue that justice requires consideration of the brevity
of its ownership at the time that the deficiencies were
found, such an argument would not make the notice
defective in setting out the factors that HCFA
considered.
CarePlex's contention that imposing a CMP on it in these
circumstances is bad public policy is properly addressed
to HCFA, not the Board.
CarePlex suggested that imposing a CMP on a new owner in
these circumstances was bad public policy and
inequitable. CarePlex asserted that its reputation was
unfairly tarnished by having to report and explain a CMP
for which it was not responsible. P. App. Br. at 5-6.
CarePlex argued that the imposition of liability on new
owners who seek to take over and upgrade deficient
facilities conflicts with the State survey agency's
stated policy of encouraging such changes of ownership as
a means of improving compliance. Oral Argument Tr. at
48-49; see also P. App. Br. at 2-3; Benner affidavit
at 1.
The ALJ rejected these arguments, on the grounds that he
did not accept CarePlex's factual premise that it had no
responsibility for deficiencies during the CMP period and
that he had no authority to decide issues of public
policy or equity. ALJ Decision at 14-15.
The decision to impose a remedy and the selection of the
appropriate remedies are matters for HCFA's discretion,
once the statutory and regulatory prerequisites are met.
See 42 C.F.R. § 488.438(e). HCFA indicated in the
briefing that, while it values the goal of finding
competent management for facilities, it is not prepared
to seek that goal by exempting new owners from the survey
and enforcement process. HCFA Resp. Br. at 22-23. The
pendency of a potential CMP may be a means of encouraging
new owners to give priority to prompt repairs and
improvements by shifting the financial incentives in
favor of speed. In any case, the balancing of the
possibly conflicting goals of encouraging takeovers by
better management and ensuring speedy corrections of
deficiencies is a policy matter to which our authority,
like that of the ALJ, does not extend.
CarePlex did not waive its right to contest the amount
of the CMP.
The ALJ found that CarePlex had waived its right to
contest the amount of the CMP 19/ through
representations made by its counsel at a prehearing
conference on August 29, 1996. Because the ALJ found
that CarePlex had "explicitly announce[d]" that it was
"abandoning" the issue, he required at least a showing of
good cause to support CarePlex's change in position. ALJ
Decision at 15. The ALJ concluded that CarePlex made no
such showing. Id.
CarePlex filed its hearing request on April 16, 1996 and
sent a second letter further articulating the bases for
the request on May 20, 1996. The first letter stated
that it was "inappropriate and unfair to assess a CMP"
against CarePlex for deficiencies for which it had "no
culpability whatsoever." P. Hearing Request at 2 (April
16, 1996). The second letter stated that --
CarePlex believes that HCFA has no regulatory
authority to impose a civil money penalty in the
circumstances of this case, and, that even if HCFA
does have such authority, the remedy is
unreasonable.
P. Letter at 2 (May 20, 1996). While the letters could
have been clearer in setting out the challenge to the
amount of the CMP, CarePlex adequately met the regulatory
requirement of identifying the issue of the
reasonableness and fairness of the particular CMP in
question, as well as HCFA's authority to impose any CMP
in the relevant circumstances. See 42 C.F.R.
§ 498.40(b).
The prehearing conference order issued by the ALJ set out
the following summary:
During the conference, Petitioner stated that it
does not contest either the existence of the
deficiencies cited during the September 1995 survey
or that the civil money penalty would be reasonable
if Petitioner were found to be liable for the
deficiencies on which the penalty is based.
Prehearing Order at 2. The order also provided that the
next submissions by the parties were to be simultaneous
briefs.
In its timely-filed brief below, CarePlex quoted the
above language from the order and responded as follows:
Petitioner indeed does not contest the existence of
the deficiencies, but Petitioner understood that the
ALJ would consider its legal arguments . . . as, in
effect, a Motion for Summary Judgment, and
Petitioner did not mean to suggest that it has
waived its right to contest the amount of the CMP
under 42 C.F.R. §488.438(e) should that be necessary
after the ALJ's decision on the legal issues
addressed here.
P. Br. at 8, n.5.
We thus find that CarePlex initially raised a challenge
to the reasonableness of the amount of the CMP and that,
upon receiving the prehearing order suggesting that it
had waived that issue, CarePlex promptly asserted (in the
first submission it was instructed to make after
receiving the order) that it had not intended such a
waiver. 20/ HCFA still had an opportunity to file its
responsive brief after CarePlex had clarified that no
such a waiver had been intended, and, in fact, did
respond to this portion of CarePlex's brief, by arguing
that the issue should not be reopened. HCFA Br. at 1-3.
HCFA did not represent that it altered its position or
took any action in reliance or was in any other way
prejudiced by its understanding that CarePlex had waived
this issue.
In oral argument on appeal, counsel for CarePlex
explained further his understanding of what occurred at
the preliminary conference. He stated that CarePlex
meant to indicate that the amount of the CMP would be
reasonable if CarePlex had caused the deficiencies, but
that the ALJ's summary presented this as a concession
that the amount was reasonable if CarePlex were found
liable for the deficiencies. Oral Argument at 36-38.
Clearly, there is a distinction between legal liability
for a deficiency and original causation of a deficiency.
As discussed more fully above, HCFA's position in this
case was never that CarePlex initially created the
deficiencies but rather that, upon assuming the provider
agreement for the facility, CarePlex became liable for
the deficiencies until they were corrected. Given this
explanation, we find it plausible that the ALJ
misunderstood the scope of the intended waiver by
CarePlex at the preliminary conference.
We agree with the ALJ that a party that has explicitly
abandoned an issue need not be permitted to reinstate the
issue at a later date without some showing of good cause.
Here, however, the contention is that no waiver was
originally intended. In such circumstances, where a
party promptly notifies the ALJ and its opposing party
that its intentions were misunderstood, sufficient good
cause has been established to permit the party to reopen
the issue.
For this reason, we reverse the two FFCLs relating to the
purported waiver and remand the case to the ALJ for
further proceedings to consider the reasonableness of the
amount of the CMP. 21/
CONCLUSION
For the reasons explained above, we reverse FFCLs 14 and
15, affirm the remaining FFCLs, and remand the case for
further proceedings on the issue of the amount of the CMP
only.
___________________________
Cecilia Sparks Ford
___________________________
Donald F. Garrett
___________________________
M. Terry Johnson
Presiding Board Member
* * * Footnotes * * *
1. FFCLs 1, 2, and 4 were not challenged by either
party and are hereby affirmed. See ALJ Decision at 3.
Except where helpful to follow our analysis, we do not
repeat here the text of the FFCLs, which can be found in
the ALJ Decision at 3-4. CarePlex included FFCL 8, quoted
below, in a listing of FFCLs which "essentially amplify"
the ALJ's holding that HCFA had authority to impose this
CMP on CarePlex and to which CarePlex therefore excepted.
FFCL 8. Under regulations which govern participation
in Medicare, a lease of a provider facility
constitutes a change of ownership of that facility.
ALJ Decision at 3; see P. App. Br. at 10. However,
CarePlex elsewhere expressly stated that the ALJ
"correctly found" that this lease constituted a change of
ownership for purposes of this case and nowhere set forth
any error in this FFCL. See P. App. Br. at 2, n.2. We
therefore summarily affirm this FFCL as well.
2. CarePlex argued that, despite this letter, the
State survey agency opposed imposition of the CMP here.
P. Appeal Br. at 4-5. We discuss in the analysis why we
do not believe that the position of the State survey
agency is relevant to the outcome of this appeal.
3. Denial of payment for new admissions is mandatory
where a facility is not in substantial compliance three
months after the last date of a survey identifying
noncompliance, in this case December 28, 1995. Act,
§ 1819(h)(2)(D); 42 C.F.R. § 488.417(b).
4. The State survey agency did find some
deficiencies, but at a level which posed no actual harm
and only potential for minimal harm, and required CarePlex
to submit a new plan of correction addressing those
deficiencies to avoid further remedies. HCFA Ex. 9.
5. All sides agreed that the deficiencies were not
"caused" by CarePlex, and HCFA offered to so stipulate.
See Oral Argument Tr. at 21.
6. Counsel for CarePlex compared the situation here
to imposing strict liability on the current possessor of a
polluted property who is forced to clean a site which it
did not pollute. Oral Argument Tr. at 33-34. However,
the better analogy might be to a factory that new owners
are continuing to operate in a way generating pollution
in violation of legal requirements but that they intend
over time to upgrade to correct the violations. While it
may be difficult (even with all good will) to end the
emissions immediately, the new owner is clearly the one
responsible for the ongoing effects of its operation in
the meantime.
7. The transfer of the provider agreement is
automatic but not involuntary. HCFA explained that a new
owner that refuses to accept the assignment is, in effect,
terminated and must follow the procedures for any new
applicant, including an initial certification survey.
HCFA Resp. Br. at 8, n.3.
8. As the ALJ noted, this facility did indeed have a
history of substandard quality of care findings at prior
surveys, and its prior poor performance was referenced in
the letters providing notice of the remedy. ALJ Decision
at 9, n.3; HCFA Exs. 4, 7 and 10. However, HCFA did not
impose the remedies called for by this regulation, such as
denial of payment for new admissions, possibly because the
record suggested that some of the prior findings were not
made during standard surveys. HCFA Ex. 6, at 3. In any
case, CarePlex can hardly complain that HCFA failed to
impose the more onerous remedies on it that would have
been required had HCFA acted under 42 C.F.R. § 488.414.
9. CarePlex erroneously described the remedy here as
an "assignment of a CMP," and then argued that was
impossible here because no CMP existed against the prior
owner to be "assigned." P. App. Br. at 12-13. What was
assigned here was a provider agreement, not a pre-existing
remedy, and CarePlex's liability here derived from its
failure to operate the facility in compliance with
applicable statutes and regulations during its period of
ownership.
10. As noted above, CarePlex did not claim that it
was unaware of the problems on taking over the facility.
11. At the oral argument, CarePlex's counsel
acknowledged that the affidavit of its clinical director
(on which it relied before the ALJ) contained no statement
as to when any particular deficiency was corrected, but
only the general statement that CarePlex was "never
responsible." Oral Argument Tr. at 24. Nevertheless, he
argued that the ALJ's finding that substantial compliance
was not achieved until December 15, 1995 amounted to
assuming that "CarePlex is lying" about fixing any
deficiencies and to requiring CarePlex to retroactively
prove a negative proposition as to when a deficiency
ceased to exist. Oral Argument Tr. at 24-25, 29-30, and
35. On the contrary, the ALJ, like the State survey
agency and HCFA, accepted CarePlex's own contemporaneous
allegation as to when it achieved substantial compliance
and corrected the deficiencies.
12. If both HCFA and the State establish
(differing) remedies in addition to or instead of
termination in such a situation, the regulations provide
that only the HCFA remedies apply. 42 C.F.R. §
488.452(d)(2).
13. HCFA pointed out that the imposition of a CMP
on a facility only after conditions were corrected was
anticipated by Congress in the legislative history which
noted that a CMP could be imposed "for each day in which a
facility was found out of compliance with one or more of
the requirements of participation, even if the facility
subsequently corrected its deficiencies and brought itself
into full compliance." H.R. Rep. 100-391(I), 1987
U.S.C.C.A.N. 2313-293 (emphasis added); HCFA Resp. Br. at
20. The goal is to provide a "financial incentive" to
achieve and maintain compliance. Id.
14. Even if CarePlex might have proceeded at the
same pace with making corrections without the spur to
correction embodied in an accruing CMP, the premise of the
CMP law is that many providers may not. It is certainly
not incumbent on HCFA to prove in each case what role the
accruing CMP may have played in a particular provider's
decisions about correction efforts.
15. We discuss in the next section whether HCFA was
required to go beyond reciting the factors considered to
define how the factors were applied and weighed and
whether other factors "required by justice" were
considered.
16. CarePlex also suggested that the preamble to
the regulations implementing section 1128A of the Act
somehow undercut the ALJ's holdings. The language relied
on by CarePlex is in relation to a comment to the effect
that inadvertence was not an appropriate mitigating factor
because the offense of submitting a false claim
presupposed a requirement of knowledge. The preamble
responded that liability under section 1128A(1)(A)
attaches when a respondent "knows or has reason to know"
that the claim is for items or services that were not
provided as claimed and that a respondent is not required
to have actual knowledge or intent. The preamble
concludes that, in weighing the relative degree of
culpability, it "seems reasonable to conclude that
Congress intended that those who had inadvertently and
unintentionally made a false or improper claim or request
for payment, all other things being equal, should not be
subject to as large a penalty . . . as those who did so
knowingly and intentionally." 48 Fed. Reg. 38,827, at
38,831 (August 26, 1983). If anything, this language
supports our conclusion that the HCFA regulations, which
have the same effect of ensuring that the more culpable
pay a larger penalty, serve the intended purpose, albeit
tailored for the context of enforcing compliance with
participation requirements rather than addressing billing
fraud.
17. In this regard, CarePlex also cited to the
Administrative Procedure Act to suggest that HCFA was
required to carry the burden of proof, and suggested that
case law required that the agency fully articulate the
basis for findings regarding each factor. P. App. Br.
at 26-27 and cases cited therein; 5 U.S.C. § 556(d). We
have previously discussed the allocation of the burden of
proof in Hillman Rehabilitation Center, DAB 1611 (1997).
The cases CarePlex cited are inapposite and relate to the
ultimate need for an agency to present evidence
establishing prima facie existence of the statutory bases
of its actions, not to the required contents of a notice.
18. CarePlex argued that the ALJ's holding was
inconsistent with a prior decision "holding HCFA strictly
to the letter of statutory notice requirements." P. App.
Br. at 26, citing Desert Hospital, DAB CR448 (1996). We
note that this decision was recently reversed on appeal.
Desert Hospital, DAB 1623 (1997).
19. Regulations preclude reviewing HCFA's exercise
of discretion in deciding to impose a CMP in the
particular circumstances or reducing it to zero, once the
ALJ (or the Board) has found that HCFA had a basis to
impose a CMP. 42 C.F.R. § 488.438(e)(1) and (2).
However, there is no bar to challenging the reasonableness
of the amount of the CMP imposed, although the review is
then limited to the factors listed in 42 C.F.R.
§ 488.438(f). See 42 C.F.R. § 488.438(e)(3).
20. The record does not include a tape or
transcript of the prehearing conference which was
memorialized in the order sent by the ALJ to both parties.
See Oral Argument at 45. It is hence impossible to
determine after-the-fact whether any miscommunication or
ambiguity in the discussion may have occurred. Under
those circumstances, we place considerable weight on
CarePlex's response to the language of the order. HCFA
argued that CarePlex should have objected to the summary
language earlier, since nearly two months elapsed between
the date of the order and the briefing date. Oral
Argument at 46. However, the order did not provide for
any earlier date for submission of objections to the
summary of the prehearing conference or provide any other
procedure for raising such concerns. We therefore
consider CarePlex's brief as its first opportunity to make
a submission after receiving the order. Our analysis
might have been different had CarePlex failed to contest
at the first available opportunity the portion of the
order memorializing the purported waiver.
21. The two FFCLs that we reverse are as follows:
FFCL 14. Petitioner is responsible for a civil money
penalty of $750 per day, beginning on September 28,
1995 and ending on December 15, 1995, for a total
civil money penalty of $59,250.
FFCL 15. Petitioner waived its right to contest the
amount of the civil money penalty imposed against it
by HCFA.
ALJ Decision at 4.