SUBJECT:

Lakewood Plaza Nursing Center,

Petitioner,

Health Care Financing Administration

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

Lakewood Plaza Nursing Center (Lakewood) appealed the August 22, 2000 decision of Administrative Law Judge (ALJ) Steven T. Kessel dismissing Lakewood's hearing request. Lakewood Plaza Nursing Center, DAB CR691 (2000) (ALJ Decision). The ALJ dismissed the hearing request because he concluded that Lakewood had no right to a hearing since HCFA rescinded both remedies which it had imposed, i.e., a civil monetary penalty (CMP) and a denial of Medicare payments for new admissions (DPNA). ALJ Decision at 2-4. The ALJ further denied Lakewood's motion for extended time to refile an amended hearing request regarding its loss of approval for nurse aide training (known as "NATCEP"), which was automatically triggered by the extended survey which Lakewood underwent. ALJ Decision at 4. Determinations leading to the loss of NATCEP became appealable for the first time under regulations published July 23, 1999. 64 Fed. Reg. 39,934 (July 23, 1999). We conclude that the ALJ did not err in determining that Lakewood had no right to a hearing and that Lakewood could not refile or amend its hearing request to appeal the loss of NATCEP. For the reasons explained below, we affirm the ALJ Decision and affirm and adopt the Findings of Fact and Conclusions of Law (FFCLs).

Factual Background

The parties do not dispute the facts relevant to the dismissal, but rather their legal significance. We summarize briefly here the facts set forth in the ALJ Decision. On May 25, 1999, HCFA notified Lakewood, a skilled nursing facility (SNF) in Arkansas, that based on the results of a state survey, HCFA would impose two remedies on Lakewood, CMPs totaling about $130,000 and a DPNA to run from May 27, 1999 through July 4, 1999. On July 1, 1999, Lakewood requested an ALJ hearing on HCFA's initial determination to impose these remedies.

However, on March 28, 2000, before the hearing was scheduled to occur, HCFA rescinded both remedies, and thereafter moved to dismiss Lakewood's hearing request. The substance of HCFA's rescission notice was as follows:

Dear Administrator:

THIS NOTICE IS BASED ON THE ORIGINAL SURVEY DATED MAY 20, 1999:

After discussion with our Office of General Counsel, it has been determined that the following actions be taken:

� Civil money penalties in the amount of $5,050.00 per day for the period May 14, up to and including June 7, 1999 and $350.00 per day for the period June 8, up to and including July 4, 1999: RESCINDED;

� Denial of payment for new admissions for the period May 27, up to and including July 4, 1999: RESCINDED.

Therefore, your eligibility for Medicare/Medicaid participation remains in effect in regard to this particular action.

HCFA Ex. 2 (emphasis in original). HCFA's rescission made no other reference to the status of the original survey findings or to Lakewood's loss of NATCEP.

Legal Background

Section 1866(h)(2) of the Social Security Act (Act) provides a right to a hearing, inter alia, for a provider dissatisfied with a determination by the Secretary under section 1866(b)(2) to terminate its provider agreement in certain circumstances, including where the Secretary has determined that "the provider fails to comply substantially" with the provisions of its agreement or with applicable legal requirements. The regulations on certification of long-term care facilities at 42 C.F.R. � 488.301 elucidate what it means to fail to comply substantially by means of the following definitions:

Deficiency means a SNF's or NF's failure to meet a participation requirement specified in the Act or in Part 483, subpart B of this chapter.

Noncompliance means any deficiency that causes a facility not to be in substantial compliance.

Substantial compliance means a level of compliance with the requirements of participation such that any identified deficiencies pose no greater risk to resident health or safety than the potential for causing minimal harm.

Under section 1819(h) of the Act, if a State or the Secretary finds, as a result of a survey, that a skilled nursing facility is not in substantial compliance, the Secretary may choose to impose alternative remedies other than termination and may continue payments for a period of not longer than six months after the effective date of the survey findings with respect to a skilled nursing facility not in substantial compliance with one or more requirements, if certain prerequisites are met. HCFA by regulations extended the actions giving rise to appeal rights under section 1866(h)(2) of the Act and the regulations at part 498 to include as appealable initial determinations findings of noncompliance leading to the imposition of such alternative remedies (except loss of NATCEP and state monitoring). 59 Fed. Reg. 56,116, 56,158 (November 10, 1994); 42 C.F.R. � 498.3.

If a facility has not complied within three months, then the Secretary is statutorily required to impose a DPNA. Section 1819(h)(2)(D) of the Act. The Act also mandates that the State impose a two-year prohibition against operation of a NATCEP on any facility subject to an extended survey (which occurs whenever substandard quality of care is found on a standard survey). Section 1819(f)(2)(B)(iii)(I)(b).

In a section of the regulations entitled "appeal rights," an "affected party" is defined to include a prospective provider or a provider that is "affected by an initial determination or by any subsequent determination or decision issued under this part . . . ." 42 C.F.R. � 498.5 and � 498.2. Regulatory provisions implementing hearing rights for providers specify that a facility is entitled to request a hearing where HCFA has made an adverse initial determination of a kind specified in 42 C.F.R. � 498.3(b). Appealable initial determinations included, under the regulation in effect as of the time of Lakewood's filing, "a finding of noncompliance that results in the imposition of a remedy specified in � 488.406, except the State monitoring remedy and the loss of the approval for a nurse-aide training program." 42 C.F.R. � 498.3(b)(12)(1998 version).⁽¹⁾ Among the remedies specified in � 488.406 are CMPs and DPNAs. 42 C.F.R. � 488.406(a)(2)(ii) and (3).

An ALJ has discretion to dismiss a hearing request, under the relevant provisions, where the party requesting the hearing "does not . . . have a right to a hearing" or "did not file a hearing request timely and the time for filing has not been extended." 42 C.F.R. � 498.70(b) and (c).

Lakewood's Arguments

Lakewood excepted to all four FFCLs in the ALJ Decision, which are set out below:

1. HCFA rescinded all of the initial determinations that it made against Petitioner.

2. Petitioner has no right to a hearing where HCFA has rescinded its initial determinations to impose remedies.

3. There is no basis for me to grant Petitioner's motion to extend the time within which it may file its hearing request.

4. Dismissal of Petitioner's hearing request is appropriate.

ALJ Decision at 2-4.

Lakewood also argued that the ALJ should have given it an extension of time in which to refile its hearing request, because the initial time period for filing had not expired when Lakewood filed its hearing request. Lakewood contended that by refiling it would become entitled to challenge its loss of NATCEP because of a regulatory change that took effect after its original filing date.

Standard of Review

There are no material facts in dispute. Therefore, we review Lakewood's appeal from the ALJ's dismissal as a disputed issue of law. The applicable standard for review of questions of law is whether the ALJ decision is erroneous. See, e.g., Lake Cook Terrace Nursing Center, DAB No. 1745 (2000). The standard of appellate review of an ALJ's exercise of discretion on whether to dismiss, once we determine that the ALJ was legally authorized to dismiss, is whether the ALJ has abused his or her discretion. Osceola Nursing and Rehabilitation Center, DAB No. 1708, at 2 (1999); Rulings on Request for Removal of Hearing to Board (attached) in Rehabilitation & Healthcare Center of Tampa, App. Div. Docket No. A-99-95 (August 16, 1999) and Four States Care Center, App. Div. Docket No. A-99-66 (June 7, 1999) (regulation specifying that an ALJ "may" dismiss means ALJ has discretion to determine whether dismissal is appropriate based on the circumstances of the case).

The ALJ did not err in concluding that Lakewood no longer had a right to a hearing once HCFA rescinded all the remedies it had imposed.

Lakewood essentially disputed before the ALJ and on appeal the proposition that HCFA had effectively extinguished Lakewood's right to a hearing on the deficiency findings by rescinding the CMP and DPNA remedies on the eve of the hearing. Lakewood Br. to ALJ at 1; Lakewood Br. at 1-5. Lakewood argued to the ALJ that this result improperly denied due process to Lakewood since it had already suffered harm as a result of HCFA's determination that was not cured by the rescission. Lakewood Br. to ALJ at 1-6. On appeal, Lakewood did not press its due process argument. Instead, Lakewood focused on claims that its appeal should be permitted to proceed as a matter of law and equity. Specifically, Lakewood argued that the DPNA had already gone into effect before the purported rescission, and therefore its right to appeal based on that initial determination could not retroactively be extinguished. HCFA argued, and the ALJ found, that claims for services provided to any eligible residents admitted during the period the DPNA was in effect could be retroactively approved. HCFA Br. at 5-6; ALJ Decision at 2. Nevertheless, Lakewood argued that it was already harmed by the HCFA determination in that it was forced to turn away recipients and also suffered damage to its reputation. According to Lakewood, a rescission did not suffice to undo this harm.

Lakewood acknowledged that the Board has previously upheld dismissals of hearing requests where HCFA had rescinded all remedies. Lakewood Br. at 4-5. For example, in Schowalter Villa, DAB No. 1688 (1999), HCFA rescinded a CMP and DPNA after Schowalter had requested a hearing. DAB No. 1688, at 2. The facility pressed its request for a hearing on the grounds that it was still subject to loss of NATCEP and was concerned about the effect on its compliance record. Id. The appellate panel quoted with approval the ALJ's conclusion that the express language of the regulation at section 498.3(b)(12) had resulted in uniform holdings that "a petitioner loses its right to a hearing if HCFA rescinds the remedies it previously imposed" and that no right to a hearing survives merely to "correct [a] compliance record" upon rescission of all remedies listed in 42 C.F.R. � 488.406. Id., quoting Schowalter Villa, DAB CR568, at 2-3 (1999). In other cases, the Board reached similar conclusions when no remedy listed in 42 C.F.R. � 488.406 remained in dispute. See, e.g., The Lutheran Home - Caledonia, DAB No. 1753 (2000) (reduction of CMP to zero is tantamount to rescission and terminated facility's hearing rights as a matter of law); Rafael Convalescent Hosp., DAB No. 1616 (1997) (loss of NATCEP alone unappealable as a matter of law, under the regulation then in effect, so not sufficient to maintain a right to a hearing); Country Club Center II, DAB No. 1614 (1997) (no appeal of loss of NATCEP because no initial determination under regulations then in effect).

Nevertheless, Lakewood sought to distinguish its situation on the ground that, since the DPNA had already gone into effect before the rescission action, Lakewood had already been barred from admitting new residents during the period from May 27, 1999 through July 4, 1999. A retroactive rescission of the remedy alone, according to Lakewood, would fail to compensate it for the loss of revenue from recipients who were "without authority to apply for admission" because the remedy was "an absolute bar to [their] even seeking admission, through no involvement of the facility." Lakewood Br. at 2. Hence, Lakewood considered the DPNA an "applied penalty" for which rescission was ineffective to defeat the right for a hearing on the merits. Id.

In at least one case, the Board has upheld dismissal of a hearing request after rescission of a DPNA, even though the remedy had already gone into effect. Arcadia Acres, Inc., DAB No. 1607 (1997). In that case, HCFA had imposed a DPNA on the facility by letter dated March 4, 1996, to take effect March 24, 1996. The facility had appealed on March 15, 1996. On April 1, 1996, HCFA rescinded the remedies based on a February 27, 1996 survey revisit finding substantial compliance. The facility argued that its right to appeal survived the rescission action even though no enforcement actions remained in dispute. The Board (without commenting on the effect of the period from March 24 to April 1 when the DPNA was evidently in effect) upheld the ALJ's determination in that case that "regulations do not require that Petitioner receive a hearing under the circumstances" presented in that case. Id. at 4. We do not find a basis to depart from long-standing precedent holding that rescission of all alternative remedies ab initio creates a situation where no determination resulting in a remedy exists any longer, and no appeal lies under section 498.3(b)(12).

We do not lightly conclude that no right to a hearing exists when a provider alleges that it is aggrieved. Alden-Princeton Rehabilitation and Health Care Center, Inc., DAB No. 1709 (1999); Birchwood Manor Nursing Center, DAB No. 1669, at 10 (1998), aff'd Birchwood Manor Nursing Center v. Dept. of Health and Human Services, No. 98-60695 (5^th Cir., June 29, 1999). Here, however, the allegation is that Lakewood was aggrieved not because it was denied payment for new admissions, but because, since the remedy went into effect before it was rescinded, Lakewood may not have admitted some patients it otherwise would have admitted.

The Secretary has concluded that, in certain circumstances, the statutory emphasis on the urgency of protecting vulnerable residents outweighs adverse effects on a provider that might result from delay in access to a hearing. See, e.g., 59 Fed. Reg. at 56,116, 56,155. For example, the decision not to provide hearings to providers before remedies take effect inevitably presents the possibility that, even if it prevails on the merits, a provider may have already incurred some harm (to income or reputation) that will not be undone by a later finding that HCFA did not have an adequate basis to impose the remedy. The policy choice to provide only post-remedy hearings in most cases places the interests of beneficiaries in need of protection from improper conditions in their facilities above some economic and business concerns of facilities. This is a choice that has been upheld in court as consistent with the purposes of the Act. See, e.g., cases cited at 59 Fed. Reg. 56,165. Even terminations may go into effect before a hearing is provided, because the Secretary concluded
that --

the private interest that facilities have in their continued participation in the Medicare and Medicaid programs must give way to the Government's interest in protecting the health and safety of the resident population. . . . . Apart from the support of case law, the nursing home reform statutory provisions clearly reflect the desire expressed in the enactment's legislative history that remedies be applied swiftly once deficiencies are identified.

59 Fed. Reg. 56,166. Similarly, as we noted in a prior decision, in addressing the effect of its regulations on appeals in which informal dispute resolution at the State level is provided on the immediate imposition of temporary management, "HCFA recognized that a later ruling in such a proceeding that the agency had erred in finding immediate jeopardy would have little effect, since the temporary management would already have been instituted and the facility have either achieved substantial compliance or been terminated." Beverly Health and Rehabilitation - Spring Hill, DAB No. 1696 (1999); see 59 Fed. Reg. at 56,179. HCFA had nevertheless rejected suggestions to provide prior hearings even in such cases precisely because of the overriding need to protect residents. Id.

The difficulty complained of by Lakewood is analogous. Lakewood had a right to appeal the determination to impose remedies, including the DPNA, upon it based on the survey findings. It had no right to insist that the hearing be held before the remedy went into effect. By the time a hearing could be held, no remedy any longer resulted from the survey findings (because all remedies had been voided by retroactive rescission), and hence no hearing right existed. Its situation then became like that of a provider found to be out of compliance but not subjected to a remedy. Had the Act required, or the regulations provided, for hearings to be held prior to the effective date of a DPNA, a provider would not incur the theoretical financial losses which may occur during a period when a remedy that was ultimately rescinded ab initio was in effect.⁽²⁾ The Secretary, however, has concluded that the purposes of the statute are best served by prompt imposition of remedies without delay in order to provide pre-effect hearings.

Lakewood argued, however, that a right to appeal a remedy, once imposed, survived regardless of whether any actual loss of money occurred. Lakewood Br. at 2. Lakewood thus argued simultaneously that it was unfair for its right to a hearing to be extinguished because the rescinded remedy had harmed it but also that actual harm should be irrelevant to its continuing right to a hearing. This position is both self-contradictory and inadequate to overcome the need to promptly protect beneficiaries.

Lakewood did assert the findings of noncompliance in themselves caused harm to its reputation and compliance record. This reasoning would logically require a hearing any time a survey made deficiency findings, regardless of whether HCFA was imposing any enforcement remedy as a result. Such a broad reading of the scope of hearing rights was plainly not accepted in the regulations adopted by the Secretary. In the preamble to its enforcement regulations, HCFA expressly rejected comments seeking to have hearings provided to facilities found not to be in substantial compliance even where no remedy (or only a minor remedy such as state monitoring) was imposed. 59 Fed. Reg. at 56,158. HCFA concluded that, absent a remedy being imposed, the deficiency findings alone do not result in harm such as to create a right to hearing. Id.

The ALJ further held that there was no relief that he could offer Lakewood "to compensate it for its not admitting residents during the May 27 - July 4, 1999 period." ALJ Decision at 3. He explained that he lacked authority to order HCFA to pay Lakewood for residents that were never admitted even if he found after a hearing that HCFA failed to prove a basis for its imposition of the DPNA remedy. Id. Lakewood did not argue to us that the ALJ erred in concluding that he would not have authority to order compensation for the alleged injuries to Lakewood resulting from the period during which the DPNA was in effect before being rescinded. See Lakewood Br. at 3-4. Nor did Lakewood suggest any available remedy that would respond to the harm of which it complained. Id.

Lakewood has thus shown no error in the ALJ's conclusion that no hearing right exists to review noncompliance findings when no remedy is currently being imposed, even if HCFA originally made an initial determination imposing a remedy (and even if at one point that remedy was in effect).⁽³⁾ Once the initial determination and resulting remedy are rescinded ab initio, there is literally no further remedial action that the ALJ can take under the regulations. Lakewood argued, nevertheless, that the error in the ALJ's interpretation that no hearing right remained where no relief was available could be illustrated by the example of an appeal from a termination. Lakewood Br. at 3-4. Lakewood pointed out that an ALJ has no authority "to order HCFA to compensate a nursing facility for patients it did not admit as a result of a termination of its provider agreement, yet in a similar situation the right to appeal a termination is not lost." Lakewood Br. at 3. The ALJ resolved the issue of whether a hearing right exists based on the wording of the regulation and the facts of the case. While he supported his determination to dismiss by pointing out that Lakewood was seeking relief that he could not grant, Lakewood erred in reading this as necessarily meaning that the lack of authority of grant relief alone governs whether a hearing right exists.⁽⁴⁾

We therefore affirm FFCL Nos. 1 and 2.

The ALJ did not err in denying Lakewood leave to file an amended hearing request.

Lakewood also sought to amend or refile its hearing requests in order to establish an appeal date late enough to permit it to challenge the remaining remedy, i.e., loss of NATCEP. The ALJ denied Lakewood's request because he found no showing of good cause. The ALJ viewed Lakewood's request as a tactical maneuver to frustrate the Secretary's choice to apply the new appeal rights only prospectively. ALJ Decision at 4. We agree with the ALJ's conclusion.

It is undisputed that regulations expressly precluded any right to a hearing to contest the loss of NATCEP at the time that HCFA made its determination that resulted in Lakewood's loss of NATCEP (May 25, 1999), as well as at the time Lakewood filed its notice of appeal (July 1, 1999). HCFA explained in the preamble to its enforcement regulations that it did not view loss of NATCEP as a discretionary remedy that it imposed based on deficiency findings but rather as an "automatic statutory consequence" of specific events (including a nurse staffing waiver, an extended survey, or the imposition of an adverse action). 59 Fed. Reg. at 56,176. The State found that Lakewood fell within the Act's prohibition on operation of a NATCEP for three reasons, i.e., within the previous two years it had been subject to a denial of payment, been assessed a CMP greater than $5,000, and been subject to an extended (or partial extended) survey. HCFA Ex. 1, at 2-3. Since HCFA's rescission letter revoked two of these reasons (the DPNA and CMP), but did not alter the fact that an extended survey had taken place, we conclude that the denial of NATCEP remained in effect, but did not give rise to appeal rights under this policy.

HCFA altered this policy by issuing on July 23, 1999 an interim final regulation permitting appeals of loss of NATCEP resulting from findings of substandard quality of care that triggered an extended or partial extended survey. HCFA stated that "previous regulations have provided only for an informal hearing when facilities lose training programs and do not otherwise face enforcement remedies under the Medicare and Medicaid programs." 64 Fed. Reg. 39,934 (July 23, 1999). HCFA explained that, while it could continue its previous policy, experience had convinced it that the loss of NATCEP could have a sufficiently serious impact on some facilities, given existing constraints in availability of nurse aides and training programs, that HCFA had concluded that it should provide full hearings to review the underlying factual basis of the substandard quality of care findings, even where no other remedy was being imposed. 64 Fed. Reg. at 39,935.

Lakewood explicitly sought to refile or amend for the purpose of taking advantage of the change in the regulations by dating its new or amended hearing request after July 23, 1999, "so that it may challenge" the loss of its NATCEP. Lakewood Br. at 5-6. Lakewood contended that the ALJ should have considered that the deadline for it to appeal did not expire until August 22, 1999, due to an extension granted by HCFA, so that it could have waited until after the interim regulation's effective date to file. Lakewood Br. at 6.

Lakewood's line of argument is based on the erroneous premise that the new regulations apply to all hearing requests dated after the effective date. The preamble to these regulations expressly addressed the question of how to apply them to existing cases, as follows:

We intend that these changes to the regulations be effective upon publication. Thus, we will apply the new rules to determinations made after the effective date of this interim final rule in which we or the States find substandard quality of care (communicated to the facility in a statement of deficiencies on HCFA 2567) that leads to the facility's loss of its ability to train nurse aides.

64 Fed. Reg. 39,934, 39,936 (July 23, 1999) (emphasis added). Clearly, the Secretary contemplated that these regulations would have no retroactive effect on loss of NATCEP resulting from determinations finding substandard quality of care which had already been made by HCFA or the states before July 23, 1999, regardless of the date that a hearing might be requested on those actions. The determination that led to Lakewood's loss of NATCEP was made by HCFA on May 25, 1999. The later rescission of the specific remedies imposed by HCFA, as we have noted, did not mention any new or changed survey findings or any change to the disapproval of NATCEP which had already gone into effect automatically before the effective date of the regulatory change. Therefore, we conclude that Lakewood's loss of NATCEP would not be subject to appeal, even if Lakewood's hearing request had been filed July 23^rd or later. Hence, the ALJ did not err in concluding that there was no basis for him to grant an extension to Lakewood to refile its hearing request. See ALJ Decision at 4, citing DAB No. 1688 (1999).⁽⁵⁾

Accordingly, we affirm FFCL No. 3. Since FFCL No. 4 follows logically from the preceding FFCLs, we also affirm it without further discussion.

Conclusion

As explained in detail above, we affirm the ALJ Decision and affirm and adopt FFCL Nos. 1 through 4 set out therein.

Judith A. Ballard

M. Terry Johnson

Donald F. Garrett
Presiding Board Member

1. Except as to the amendment regarding NATCEP in 1999, the other regulations cited were not changed in any relevant way during the period involved in this case. Determinations resulting in the loss of NATCEP approval were also expressly made unappealable by 42 C.F.R.  498.3(d)(10)(iii) (1998).

2. We can only consider potential lost income, since Lakewood did not provide any evidence of the actual occurrence or magnitude of any such loss in this case, arguing that actual loss was irrelevant.

3. Lakewood made certain unsupported assertions in its challenge to the ALJ's analysis underlying FFCL No. 1. Lakewood conceded that payment for residents admitted during the DPNA period could be claimed retroactively once the remedy was rescinded, but objected to the ALJ's statement that Lakewood was never barred from admitting new residents (instead losing only the guarantee of program payments for those new admissions during the DPNA period). See Lakewood Br. at 2-3; ALJ Decision at 2-3. Lakewood argued that its ability to admit and retroactively claim for new residents was meaningless because Medicaid/Medicare recipients could not even apply for admission. ALJ Decision at 3. We find no basis for the assertion that the imposition of a DPNA legally prevented these individuals from applying for admission or being admitted to Lakewood. The bare regulatory citations offered by Lakewood for this proposition are simply irrelevant to it.

4. While in theory the rescission itself might be viewed as a revised determination, as Lakewood requested, we need not consider here whether that characterization is correct. Cf. Lakewood Resp. to Board Question at 7. A revised determination triggers appeal rights only where it constitutes an appealable adverse action by HCFA. See 42 C.F.R. Part 498, Subparts B and C. Since the only action taken in the rescission letter was to remove two adverse actions imposed on Lakewood, in this case no adverse action was taken therein, and so no new right could arise, even if the letter were treated as a revised determination.

5. The ALJ Decision, in concluding that any harm to Lakewood from the denial of an extension does not provide a basis to grant it, stated that the "Secretary made a decision to distinguish between hearing requests that were filed before July 23, 1999 and those requests that were filed after that date." ALJ Decision at 4. This is a misstatement, since the Secretary in fact distinguished between determinations finding substandard quality of care made before and such determinations made after the publication date. The error is harmless, since the ALJ nevertheless reached the right result.

ATTACHMENT I:

Re: Rehabilitation & Healthcare Center of Tampa
Civil Remedies Docket No. C-99-294
Appellate Division Docket No. A-99-95

Joseph L. Bianculli
Law Offices of Joseph L. Bianculli
1001 N. Highland Street
Suite 500
Arlington, VA 22201

and

Carol W. Napier
Assistant Regional Counsel
HHS - Region IV
Atlanta Federal Center
61 Forsyth Street, S.W.
Suite 5M60
Atlanta, Georgia 30303-8909

HCFA sought review of language in the ALJ's ruling stating that, in the future, he will not hear a motion to dismiss an allegedly insufficient hearing request unless HCFA first attempts to resolve informally its concerns about the adequacy of the request, and that he will dismiss a request for inadequacy only where the request was not made in good faith and the party requesting the hearing is unwilling or unable to conform its request to the requirements of the regulations. HCFA argued that this aspect of the ALJ ruling imposes unlawful burdens upon HCFA and may subject HCFA to sanctions in future cases in which it seeks dismissal. HCFA requested that the case be removed for the limited purpose of a ruling "on the validity of these new standards," and remanded to the ALJ "for a determination in accordance with the law." HCFA Request for Removal, at 8.

In a recent ruling on another HCFA request for Board removal following the ALJ's denial of HCFA's motion to dismiss a hearing request, the Board concluded that an ALJ has discretion under 42 C.F.R. � 498.70 to determine whether to dismiss a particular request for hearing, based on the circumstances of the case. Four States Care Center, Docket No. C-98-344, Ruling on Request for Removal of Hearing to Board.

We have reviewed the request for removal and find no allegation that the ALJ did not properly exercise his discretion in declining to dismiss the provider's request for a hearing in this case. HCFA did not show that the ALJ's denial of HCFA's motion to dismiss was based either on an erroneous legal standard or an abuse of discretion.

HCFA sought removal of the case based solely on the ALJ's discussion of actions he may take in future cases when presented with motions to dismiss hearing requests, rather than on any action taken in this case. These premises are insufficient to support the Board's removal of this particular request for a hearing. The ALJ here did not refuse to hear HCFA's motion for dismissal and did not require HCFA to show that the hearing request was not made in good faith. The Board will not interfere with an ALJ's prerogative to state his preferences about HCFA's future procedural practices. HCFA did not demonstrate an abuse of discretion in this case; indeed, the ALJ's explanation for his refusal to dismiss is reasonable.

Moreover, HCFA failed to demonstrate that the Board is authorized to grant the requested relief. The regulation authorizing Board removal of ALJ hearings to the Board provides that upon removal, the Board is to conduct the hearing in accordance with the rules that apply to ALJ hearings under this subpart. 42 C.F.R. � 498.76(c).

HCFA did not cite any support for the proposition that the Board is empowered to remove a case from the ALJ for the limited purpose of issuing an interlocutory order and then remand the case to the ALJ. Applying HCFA's interpretation of � 498.76(c) could lead to frequent interruptions in the proceedings before the ALJ. Thus, the Board will not assume that it has authority to do what HCFA requested in the absence of express provision therefor.

In a submission filed in response to HCFA's request for removal, the provider has asked the Board for an award of attorney's fees it incurred in responding to the request for removal. Even assuming arguendo that the Board has authority to award such fees, no such award is appropriate here since no brief was required of or requested from the provider. If HCFA should file any further motions which the provider considers frivolous and unfounded (the grounds asserted by the provider as supporting its request for fees), the provider may contact the Board to determine if a response is required.

Judith A. Ballard
Cecilia Sparks Ford
M. Terry Johnson
Presiding Board Member

ATTACHMENT II:

Leslie M. Stafford
Assistant Regional Counsel
Department of Health and Human Services
1301 Young Street, Suite 1138
Dallas, Texas 75202

and

Christine Tabor
Delores M. Garlo
Law Offices of Delores M. Garlo
505 East Huntland Drive, Suite 335
Austin, Texas 78752-3714

The Health Care Financing Administration (HCFA) filed a request that the Departmental Appeals Board (DAB) remove from Administrative Law Judge Steven Kessel (the ALJ) a hearing assigned to him in the matter of Four States Care Center (Four States), Docket No. C-98-344. In its request, HCFA contended that: (1) the DAB has the authority to remove a case from an ALJ, citing 42 C.F.R. � 498.76; (2) the ALJ's ruling denying HCFA's motion to dismiss Four Care's request for hearing was contrary to the DAB Appellate Division decision in Birchwood Manor Nursing Center, DAB No. 1669 (1998), and is not supported by statute or regulation; and (3) the ALJ's ruling creates a conflict among the ALJs of the Civil Remedies Division. HCFA therefore requested DAB removal for consideration of the question of whether 42 C.F.R. � 498.70 gives an ALJ discretion to determine not to dismiss a request for hearing that did not meet the requirements of � 498.40.

Although the DAB is reluctant to entertain what is in effect a request for interlocutory review, the primary basis for HCFA's request is its position that the ALJ is proceeding to conduct a hearing when the regulations required him to dismiss the hearing request. We have therefore reviewed the interpretation of the regulations propounded by HCFA and conclude that the ALJ did not err. Consequently, we deny HCFA's request for removal of the hearing to the DAB.

In his May 4, 1998 ruling, the ALJ read the regulation at � 498.70, which states that an ALJ "may" dismiss an untimely filed request for hearing, as giving him the discretion to consider the particular circumstances surrounding the request for hearing in determining whether a request for hearing should be dismissed. HCFA contends that the ALJ is absolutely required to dismiss any request for hearing that does not meet the requirements of � 498.40(b) because that regulation states that the request for hearing "must" identify the specific issues and findings of fact with which the requester disagrees and specify the basis for contending that the findings and conclusions are incorrect. In HCFA's view, failure to comply with this requirement means that the requester has no right to a hearing, and the ALJ must accordingly dismiss the request. HCFA contended that its position was supported by the DAB's ruling in Birchwood, which HCFA characterized as stating that a facility had no right to a hearing when it failed to comply with the regulatory requirements.

We agree with the ALJ that the use of the word "may" in the dismissal regulation means that he has discretion to determine whether a particular request for hearing shall be dismissed, based on the circumstances in that case. HCFA's interpretation of the hearing regulations as stating that a request for hearing may never be supplemented after the initial 60-day submission period is inconsistent with the ALJ's authority to grant extensions of time for good cause shown. See 42 C.F.R. � 498.40(c). Moreover, as the ALJ stated, our holdings in Birchwood and other cases are inapposite to this case, because the facilities in those cases never supplemented or even sought to supplement their deficient requests for hearing. Our statement that those facilities had no right to a hearing because they had failed to follow the procedures for requesting a hearing did not address the question of whether an ALJ could determine, as the ALJ did here, that dismissal was not appropriate because the intent of the procedures had been fulfilled.

In the present case, the ALJ recognized the important principle that a request for hearing must be complete enough to provide notice of the issues, but he determined that the defect in the initial request for hearing had been remedied and that HCFA had in effect waived its objection to that request. He therefore elected not to exercise his discretion to dismiss the request for hearing, and ordered the parties to move forward with hearing preparations.

Since we find that the ALJ correctly determined that he had the discretion under the regulations to deny HCFA's motion to dismiss, and that he reasonably exercised that discretion here, we deny HCFA's request that we remove the hearing to the DAB.

Judith A. Ballard
Donald F. Garrett
M. Terry Johnson
Presiding Board Member