SUBJECT: Beechwood Sanitarium,

Petitioner,

Centers for Medicare & Medicaid Services

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

Petitioner, Beechwood Sanitarium (Beechwood), appealed an October 3, 2001 decision by Administrative Law Judge (ALJ) Steven T. Kessel. Beechwood Sanitarium, DAB CR821 (2001) (ALJ Decision). The ALJ found that the Centers for Medicare & Medicaid Services (CMS)⁽¹⁾ properly imposed the following remedies against Beechwood --

1) Termination of Beechwood's participation in the Medicare program effective June 17, 1999; and

2) Denial of payment for new Medicare admissions, effective with Beechwood's receipt of notice from CMS dated May 21, 1999, in which CMS informed Beechwood of its determination to impose this remedy.

On appeal, Beechwood generally alleged that the ALJ committed prejudicial errors -- 1) in denying Beechwood's requests for subpoenas; 2) in dismissing its hearing request with respect to a directed plan of correction (DPOC) and civil money penalties (CMPs) that were also imposed on it; 3) in pre-hearing rulings subsequently incorporated into his decision; 4) in setting post-hearing procedures; 5) in limiting the scope of his decision to only a few of the deficiencies found in the May and June 1999 surveys of Beechwood; and 6) in his evaluation of the evidence.

We have reviewed the ALJ Decision, the record before the ALJ and the parties' arguments on appeal. We conclude that the ALJ's rulings regarding Beechwood's subpoena requests were erroneous and may have prejudiced Beechwood's ability to present its case. We also conclude that the ALJ erred by dismissing Beechwood's request for hearing on the DPOC imposed upon it. We reject Beechwood's other procedural challenges to the ALJ's decision. Consequently, we remand this decision to the ALJ for action consistent with our analysis. The ALJ may reinstate some or all of the findings in the ALJ Decision in his subsequent consideration of the case. However, the nature of the procedural errors necessitates that we reverse the ALJ Decision and remand the case to the ALJ. In light of our reasons for remanding the case, we make no determination on any of the substantive aspects of the ALJ's evaluation of the evidence currently in the record or the parties' arguments on appeal about specific deficiencies.

Background

Beechwood is a skilled nursing facility (SNF) located in Rochester, New York. Beechwood participated in Medicare and in the New York State Medicaid program. Beechwood's participation in these programs was governed by relevant sections of the Social Security Act (Act) and by participation requirements that are set out at 42 C.F.R. Part 483.

In 1999, surveyors employed by the New York State Department of Health, Division of Health Care Standards and Surveillance (New York State survey agency) surveyed Beechwood on several occasions in order to determine Beechwood's compliance with federal participation requirements. The 1999 surveys included surveys that were completed on the following dates: April 22, 1999 (April 1999 survey); May 12, 1999 (May 1999 survey); and June 14, 1999 (June 1999 survey). At each of these surveys, the surveyors concluded that Beechwood was not complying substantially with federal participation requirements. CMS concurred with these determinations and imposed remedies against Beechwood consisting of denial of payment for new Medicare admissions and termination of Beechwood's participation in the Medicare program.

Standard of Review

Our standard of review of an ALJ decision on a disputed issue of law is whether the ALJ decision is erroneous. Our standard of review on a disputed issue of fact is whether the ALJ decision as to that fact is supported by substantial evidence on the record as a whole. Carehouse Convalescent Hospital, DAB No. 1799 (2001).

The bases for modifying, reversing or remanding an ALJ decision include the following: a finding of material fact necessary to the outcome of the decision is not supported by substantial evidence; a legal conclusion necessary to the outcome of the decision is erroneous; the decision is contrary to law or applicable regulations; or a prejudicial error of procedure (including an abuse of discretion under the law or applicable regulations) was committed. See Guidelines for Appellate Review of Decisions of Administrative Law Judges Affecting a Provider's Participation in the Medicare and Medicaid Programs, � 4(b), at http://www.hhs.gov/dab/guidelines/prov.html; see also Community Nursing Home, DAB No. 1807 (2002).

1. The ALJ erred in denying Beechwood's requests for subpoenas.

On January 19 and 24, 2000, Beechwood asked the ALJ to subpoena CMS' certification file on Beechwood, which it asserted was necessary to its case. Beechwood stated that it had never received the requested information from the Department of Health and Human Services Freedom of Information Act (FOIA) Office despite repeated requests to expedite release due to the pending appeal. The ALJ denied Beechwood's request during a telephone conference on February 2, 2000. There is no explanation of the parties' arguments about the subpoena or the basis for the denial in the letter memorializing that call for the record. Beechwood Appellate (App.) Ex. 11.

On October 13, 2000, Beechwood renewed its subpoena request. On October 27^th, counsel for CMS informed the ALJ and Beechwood that CMS -

did not object to supplying Beechwood with documents that are relevant to the issues in this case. . . this office will ask HCFA to provide copies of the . . . documents requested . . . October 13, 2000.

Beechwood App. Ex. 13 at 2. On November 1, 2000, the ALJ denied Beechwood's October 13^th subpoena request on the basis that he did not have the authority "to order the broad discovery that Petitioner seeks. . . [or] to intercede . . . concerning any . . . FOIA request that Petitioner may have made." Beechwood App. Ex. 14 at 3.

On November 10, 2000, Beechwood, citing 42 C.F.R. � 498.58, asked the ALJ to subpoena CMS for production of all notes and work papers pertaining to the surveys of Beechwood. On November 20^th, the ALJ amended his November 1^st Order directing CMS to provide, as part of its February 5, 2001 pre-hearing exchange submission, all the surveyor notes and work papers (the certification file). However, the ALJ denied Beechwood's request for a subpoena. Beechwood Br. at 7-8.

On February 16, 2001, Beechwood notified the ALJ that CMS had failed to produce the certification file or any other notes or work papers prepared by any federal surveyor. Consequently, Beechwood requested a subpoena duces tecum. Id. at 8.

On appeal, Beechwood reiterated that it had never received anything from CMS and asserted that the ALJ simply ignored Beechwood's February 16^th request for a subpoena duces tecum. Beechwood asserted that under the regulations the ALJ did indeed have the authority to issue the subpoena. Beechwood argued that lack of access to these materials constituted a denial of due process which severely prejudiced its case. Beechwood Br. at 7-8.

While the ALJ correctly ruled that he did not have the authority to intercede in Beechwood's FOIA request, the ALJ did have authority to issue a subpoena for documents apparently relevant to Beechwood's case. In pertinent part, 42 C.F.R. � 498.58 provides:

(a) Basis for Issuance. The ALJ . . . may issue subpoenas if they are reasonably necessary for the full presentation of a case.

* * *

(c) Content of request. The request must:

(1) Identify the . . . documents to be produced;

(2) Describe their . . . locations . . .; and

(3) Specify the pertinent facts the party expects to establish by . . . the documents, and indicate why those facts could not be established without the use of the subpoena.

The regulation clearly permits an ALJ to issue a subpoena for documents reasonably necessary to a party's case. The ALJ in effect determined that the documents were reasonably necessary when he issued the amended order on November 20, 2000. Moreover, the documents sought by Beechwood here were identified both generally and more specifically over the course of proceedings before the ALJ. See Beechwood App. Exs. 9, 12 and 15. The documents' location was never an issue as they were CMS' papers. Neither CMS nor the ALJ questioned the relevancy of the requested documentation. In fact, CMS offered the documentation to Beechwood voluntarily on more than one occasion, well before the hearing before the ALJ. See CMS Readiness Report at 9 (March 7, 2000) and Beechwood App. Ex. 13 (CMS Letter to the ALJ, October 27, 2000).

Finally, it is clear that because the documents requested are part of the survey record, Beechwood has specified the pertinent facts sought to be established and why the facts sought to be established by the documents could not be obtained without a subpoena. CMS ultimately refused to turn the documents over, even after the ALJ's November 20, 2000 Amended Order directed it to provide the documentation. Thus, all of the requirements in 42 C.F.R. � 498.58 for issuance of a subpoena were met.

Accordingly, once it became apparent that CMS would not provide the documents in response to the amended order, the appropriate procedure was to immediately issue the subpoena sought by Beechwood. The record shows that Beechwood expressed a sense of urgency to the ALJ to have this case resolved in an expeditious fashion, following a lengthy State administrative proceeding, but there is no indication that Beechwood was willing to forego access to the documents in question in order to proceed to a hearing more quickly. The February 16^th subpoena request was submitted well in advance of the date the hearing actually started.

We have not seen the documents sought by Beechwood, nor is there sufficient information in the record regarding the nature of the documents sought by Beechwood to enable us to evaluate whether the documents will necessarily affect the disposition of Beechwood's case on the merits. Consequently, it is not possible for us to require Beechwood to demonstrate just how the procedural error alleged was prejudicial to it. However, Beechwood was entitled to receive these documents so that it could make a full presentation of its case. We must therefore reverse the ALJ Decision and remand the case to the ALJ so that he may rectify this procedural error.

2. The ALJ erred in failing to consider the deficiencies found in the April survey.

On April 27, 1999, following the April 1999 survey, the State survey agency issued a letter to Beechwood informing it that the State survey agency had identified a pattern of deficiencies that constituted actual harm at an immediate jeopardy level. The State survey agency imposed a DPOC effective immediately and told Beechwood that it was recommending to CMS that Beechwood's participation in the Medicare and Medicaid programs be terminated effective May 15, 1999, unless all deficiencies related to the immediate jeopardy finding were corrected by

May 13, 1999. HCFA Ex. 1 at 1-2. The letter also informed Beechwood that it had appeal rights to the Departmental Appeals Board. Id. at 5. In a May 21, 1999 letter, the State survey agency informed Beechwood that the immediate jeopardy had been removed but that the DPOC was continued based on the deficiencies found at the post-survey revisit. HCFA Ex. 3 at 1.

The ALJ dismissed that part of Beechwood's appeal based on the April 1999 survey results. The ALJ concluded:

Dismissal of a hearing request is appropriate where a party has no right to a hearing. 42 C.F.R. � 498.70(b). Petitioner has no right to a hearing concerning the April 1999 survey findings because they are not the basis for any remedy determination made by CMS. 42 C.F.R. �� 498.3, 498.5.

Petitioner argues that, in fact, remedies were imposed against it based on the findings of noncompliance that were made at the April 1999 survey. However, the two remedies that Petitioner identifies as being imposed as a consequence of the April 1999 survey - a State-directed plan of correction and State-imposed civil money penalties - are remedies that the New York State survey agency determined to impose and are not remedies that CMS determined to impose. CMS imposed no remedies against Petitioner based on the findings of noncompliance that were made at the April 1999 survey.

There is neither a basis in the Act or in regulations for me to provide Petitioner with a hearing so that it may challenge State-imposed remedies. The Act is the statutory source of authority for the Secretary of the Department of Health and Human Services (Secretary) to impose remedies against long term care facilities. The Act confers hearing rights on providers who challenge determinations made by the Secretary or CMS acting as the Secretary's delegate. Act, sections 1819(h), 1866(h)(2). The Act does not provide for hearings to challenge State survey agency determinations. Id.; Rulings at 2-3. The Secretary has implemented the Act with regulations at 42 C.F.R. Parts 483, 488 and 498. These regulations confer hearing rights on long term care facilities to challenge certain determinations that are made by CMS. 42 C.F.R. �� 498.3, 498.5. They do not confer hearing rights to challenge determinations that have been made by State survey agencies.

ALJ Decision at 4-6.

On appeal, Beechwood argued that --

[c]ontrary to the ALJ's conclusion, multiple remedies were imposed . . . resulting from the findings of the April survey, namely: (1) termination of the provider agreement. . . ; (2) a directed plan of correction; and (3) a state-imposed civil monetary penalty . . . Thus, Beechwood was entitled to a hearing regarding its alleged noncompliance in April that contributed to those remedies . . . .

Beechwood Br. at 10.⁽²⁾

CMS responded that the Board need not decide whether the ALJ erred in dismissing Beechwood's hearing request insofar as it pertained to the April 1999 survey because the DPOC (and the CMPs subsequently imposed in May 1999) were state-imposed and because review of the April survey findings would have no effect on the outcome of the CMS-imposed termination and DPNA.

We conclude that Beechwood had a right to a hearing based on the imposition of the DPOC. Consequently, we conclude that the ALJ erred in dismissing Beechwood's request for a hearing as to the April survey. The ALJ concluded that since the DPOC was issued by the State, it was not an initial determination by CMS as defined by 42 C.F.R. � 498.3(b) to which a right to a hearing attached. As we discuss below, however, CMS' procedures provide that a state-issued DPOC that is not disapproved by CMS is authorized by it, and, in this case, CMS has not disapproved the DPOC.⁽³⁾

Section 7314 of CMS' State Operations Manual (SOM) provides:

SPECIAL PROCEDURES FOR RECOMMENDING AND IMPOSING CATEGORY 1 REMEDIES

When the SA [state agency] recommends that a category 1 remedy be imposed, the SA notifies the RO [CMS regional office] and the SMA [state Medicaid agency] of its recommendation to impose directed in-service training, a DPOC, or State monitoring.

The notice to the RO or SMA can be electronic or written. If the RO or SMA has not indicated its disapproval of the category 1 remedies within 2 calendar days (at least one of which is a work day) of the date of notice, the SA sends a letter to the facility stating that a category 1 remedy is being imposed "as authorized by the Secretary for SNFs [skilled nursing facilities] or SNF/NFs" [SNF/nursing facilities] and/or "as authorized by the SMA for NFs only." An SA official signs the letter on behalf of the RO and SMA. A copy of the letter is sent to the RO and SMA. Except in the most extraordinary circumstances, the RO and the SMA should rely on the SA's recommendation and will not disapprove a category 1 remedy.

Under this provision, a state agency may impose a Category 1 remedy, including a DPOC, on behalf of the Secretary. Further, the regulation at 42 C.F.R. � 488.330(e)(3) provides that the provisions of 42 C.F.R. Part 498 apply when a provider such as Beechwood requests a hearing on a denial of participation or certification of non-compliance leading to an enforcement remedy. While CMS noted that the State survey agency did not give the CMS Regional Office advance notice of its intent to impose such a remedy, as required by the SOM, CMS stated that it did not take the position in this matter that the DPOC was improperly imposed. CMS Br. at 18-19, n.8.

Moreover, CMS was certainly on notice of the State's action when it received its copy of the April 27, 1999 letter. Even if the State had not previously sought CMS approval, CMS should have indicated its disapproval, if any, at that time. We therefore conclude that the ALJ erred, and that Beechwood has a right to a hearing on the deficiencies underlying the DPOC imposed on it by the April 27, 1999 letter.

CMS asserted, however, that any hearing right with respect to the DPOC was extinguished by CMS' subsequent action terminating Beechwood's provider agreement. We disagree. CMS' termination action does not moot any impact that the DPOC might have on Beechwood. If the termination were reversed, Beechwood could be obliged to comply with a DPOC that it had never had the opportunity to challenge. The DPOC is also relevant to at least one deficiency finding in the June 1999 survey. Specifically, at F-Tag 490, �3, the State surveyors found that several elements in the DPOC imposed on April 27, 1999 were not implemented. HCFA Ex. 9 at 9. Although this F-Tag was not among those discussed by the ALJ in his decision, it may be relevant to his decision on remand if he chooses to address this F-Tag.

The ALJ had permitted both parties to provide evidence and arguments concerning the deficiency findings made at the April and May 1999 surveys. Upon remand, he should permit introduction of any further evidence and arguments resulting from the production of documents ordered by this decision, and should make a determination as to whether a basis exists for the imposition of the DPOC.

3. The ALJ did not err in dismissing Beechwood's request for hearing with respect to the State-imposed monetary assessments.

In contrast to the imposition of the DPOC, which is documented in the record by the April 27, 1999 and May 21, 1999 letters from the State survey agency to Beechwood, there is no document that reflects the State survey agency's imposition of what was characterized by Beechwood as civil money penalties (CMPs). CMS disputed this characterization and called the state action "a fine imposed by the State of New York along with other penalties such as revocation of Petitioner's operating certificate under the State's licensure laws." CMS Br. at 19. In addition, CMS noted that, unlike a DPOC, a CMP is not a Category I remedy that the State survey agency may impose on its own in accordance with SOM � 7314. CMS Br. at 19, n.9.

Beechwood asserted that the penalty imposed by the State survey agency against it was an "additional remedy" under New York's Medicaid plan and thus was approved by CMS as part of its plan approval process. Beechwood provided copies of what it deemed as relevant sections of New York's Medicaid plan showing how the State would apply federal standards in making its CMP determination. Beechwood App. Ex. 5 at G. Beechwood maintained that CMS' approval of this plan made the State survey agency CMS' agent when it imposed CMPs under the plan. Beechwood contended that 42 C.F.R. � 488.330(e)(3)(ii), which states that appeals by dually participating facilities are governed by 42 C.F.R.

Part 498, indicates that, contrary to the ALJ ruling quoted above, Beechwood had a right to a hearing under 42 C.F.R. � 498.3(b).

The ALJ did not err in dismissing Beechwood's request for hearing with respect to the monetary assessments imposed by the State survey agency as a result of its surveys. We find no support in the record for Beechwood's assertion that these monetary assessments were an initial determination under 42 C.F.R. � 498.3(b) for which Beechwood was entitled to a hearing by a federal ALJ. Beechwood admitted that the assessments were not imposed by CMS. Beechwood Br. at 13. Although CMS disputed Beechwood's characterization of the assessments as CMPs, Beechwood did not supply any documentation to support its claim that the assessments were CMPs. Beechwood's production of sections of the New York Medicaid plan alone does not establish the nature of the assessments. Moreover, unlike the situation with the DPOC, Beechwood did not supply a letter stating that it may file a Part 498 appeal of the assessments. In addition, there is an indication in the record that the state administrative hearing that took place from June through August 1999 provided Beechwood with its opportunity to appeal the assessments. August 13, 1999 letter from Beechwood to ALJ at 1 ("In the state proceeding, the DOH [Department of Health, the State survey agency] has sought a revocation of Beechwood's state operating certificate, and civil penalties."). Consequently, it appears that Beechwood has already had the administrative hearing on the assessments to which it was entitled.

4. The ALJ did not err in his four September 5, 2000 Rulings.

The ALJ incorporated into his decision a series of rulings he issued on September 5, 2000 (September Rulings). The September Rulings formed the basis of the ALJ's decision to grant CMS' motion for partial summary disposition as to certain issues of law. ALJ Decision at 3-4. In two of those rulings, the ALJ determined that he did not have the authority to hear and decide Beechwood's challenges (1) to actions taken against it by the New York State Survey Agency and by CMS as failing to comply with CMS survey protocols and regulations; and (2) to the constitutionality of actions taken by the State of New York or CMS. Beechwood did not challenge the ALJ's ruling on his authority to reach constitutional issues, but only sought to preserve those issues for judicial review.

In reaching his rulings, the ALJ relied on the following analysis:

Beechwood's arguments exceed the bounds of that which I have the authority to hear and decide. I have limited authority in hearing and deciding cases involving imposition of remedies by HCFA against long-term care facilities. The scope of what I may hear and decide is established by regulation. I may hear and decide whether a finding of noncompliance by a long-term care facility leading to the imposition of a remedy by HCFA against that facility is supported by the evidence. 42 C.F.R. � 498.3(b)(12). I may also decide whether the amount of a civil money penalty or penalties imposed by HCFA against a facility is reasonable. 42 C.F.R. � 488.438(e).

I have held that my authority to decide the foregoing issues is de novo authority. I do not conduct an appellate review of HCFA's determinations for sufficiency. Rather, in any case where the basis for imposing the remedy or the amount of a civil money penalty is at issue I conduct a de novo hearing in which I examine independently from HCFA the evidence which relates to the issues that I may hear and decide.

However, that authority does not extend to the lawfulness of processes or procedures that were used by a State survey agency to obtain evidence of a facility's noncompliance or that HCFA used to make its determinations. Those issues are plainly outside the scope of the authority that has been delegated to me.

September Rulings at 2; see also September Rulings at 3.

On appeal, Beechwood stated that the program regulations are "replete with mandatory directives concerning the structure of the process used to ensure that the provider is properly certified." Beechwood Br. at 2. Citing 42 C.F.R. �� 442.30(a)(5)(i) and 488.26(c)(1), Beechwood noted that the state survey process is the means to assess compliance with federal health, safety and quality standards. Beechwood alleged that it had identified for the ALJ multiple "gross violations" of survey protocol. Moreover, Beechwood asserted that there was nothing in the law or regulations limiting the ALJ's authority to address this matter. Beechwood agreed that pursuant to 42 C.F.R. � 488.318(b), "invalid procedure does not invalidate adequately documented deficiencies." However, Beechwood asserted that the process employed to uncover the deficiencies at issue here failed to meet even minimal regulatory standards. Beechwood Br. at 2-3. Beechwood asserted that the statutory and regulatory procedural violations committed by the State survey agency clearly led to improperly documented findings. Id. at 3-4.

We agree with the ALJ that alleged defects in survey procedures or in CMS' procedure in reaching its remedy decision are not grounds for dismissal of the remedies against a facility. It is the findings of Beechwood's noncompliance with the substantive requirements of 42 C.F.R. Part 483 that are the bases of the remedies imposed upon it. How those deficiencies were discovered is irrelevant so long as Beechwood had notice of and a fair opportunity to contest them. See Hermina Traeye Nursing Home, DAB No. 1810, at 22 (2002); see also Hillman Rehabilitation Center, DAB No. 1663 (1998), aff'd Hillman Rehabilitation Ctr. v. HHS, No. 98-3789 (GEB) (D. N.J. May 13, 1999); Golden State Manor and Rehabilitation Center, DAB No. 1597 (1996).

In the third of the September Rulings to which Beechwood excepted, the ALJ determined that CMS is not required by law to use "reasonable time frames" to evaluate a facility's performance before terminating that facility's performance in Medicare based on the facility's noncompliance with federal participation requirements.

The ALJ recounted Beechwood's argument before him to be --

that HCFA's determination to terminate Petitioner's participation based on the presence of non-immediate jeopardy level deficiencies was premature. . . According to Petitioner, HCFA or the State survey agency must take into account the facility's compliance history and statistics pertaining to the quality of care that the facility provides and must employ "reasonable time frames" in determining when to invoke the remedy of termination of participation.

September Rulings at 4.

On appeal, Beechwood reiterated its arguments before the ALJ and noted that the program regulations are designed to ensure a facility's prompt compliance, not force closure or bankruptcy. Beechwood also argued that the regulatory enforcement scheme at 42 C.F.R. �� 488.404 and 488.408 correlated the seriousness of the deficiencies to the chosen remedy. Beechwood Br. at 4.

Beechwood is wrong. As the ALJ noted, we have upheld his prior determination on this issue finding:

The statute and regulations permit HCFA to delay terminating the provider agreements of noncompliant facilities for up to six months after a survey first finds them out of substantial compliance, if the deficiencies do not pose immediate jeopardy. Section 1819(h)(2)(C); 42 C.F.R. �488.412(a); see also 42 C.F.R. � 488.450. They do not require that facilities be granted six months to make corrections before complying. In fact, that option is permissible only on several conditions, including the state survey agency finding alternative remedies "more appropriate to impose" than termination (which it did not do here). 42 C.F.R.

� 488.412(a). If the required conditions for continued participation are not present or correction is not achieved, termination is then required. 42 C.F.R. � 488.12(b) and (d).

Beverly Health and Rehabilitation - Spring Hill, DAB No. 1696, at 30-31 (1999)⁽⁴⁾ (emphasis in original).

Accordingly, the ALJ's ruling on this issue was not erroneous.

In the fourth of the September Rulings to which Beechwood excepted the ALJ concluded that CMS' determinations imposing termination and a denial of payment for new admissions (DPNA) are not invalidated by any irregularities in notices that CMS issued to Beechwood or gave to the public. September Rulings at 4-5. The ALJ reviewed the applicable regulation at 42 C.F.R. � 488.402 and found that, as of May 7, 1999, CMS was required to give Petitioner only two days' notice of its intent to impose a remedy of termination against Beechwood. Additionally, the ALJ ultimately found that CMS provided Beechwood with 15 days' notice prior to imposing the DPNA and far more than two days' notice of its intent to terminate Beechwood's participation. Id. at 6-7.

According to the ALJ, Beechwood asserted the following before him:

HCFA did not provide it with required advance notice of its determinations to impose remedies consisting of denial of payments for new admissions and termination of participation. Therefore . . . HCFA's notices were improper and, as an asserted consequence, HCFA was without authority to impose either . . . [remedy].

September Rulings at 4-5.

On appeal, Beechwood indicated that CMS published notice of the May 7^th termination in a local paper on May 13, 1999, but published a retraction two days later (May 15^th) because Beechwood had cured its immediate jeopardy status. Beechwood noted that on May 12, 1999 it had been subject to a revisit by the State survey agency. On May 21, 1999, Beechwood received the State survey agency report for the revisit. There, the State indicated that while Beechwood's immediate jeopardy status was abated, there continued to be deficiencies constituting substandard quality of care, as well as new deficiencies. Consequently, the report stated, the State survey agency was recommending to CMS that Beechwood should be subject to an immediate DPNA. By letter dated May 21, 1999, CMS notified Beechwood that while the termination action was being rescheduled, a DPNA was being imposed immediately. Beechwood Br. at 5.

Beechwood insisted that CMS' May 7, 1999 notice addressed only a termination remedy. Beechwood contended that since its immediate jeopardy status had been abated as a result of the May 12, 1999 revisit, CMS had failed to give the proper 15-day notice for the DPNA as required by 42 C.F.R. � 488.402(f)(4). Beechwood asserted that since a DPNA was an inherent part of a termination, CMS' subsequent decision to reschedule the termination required CMS to provide Beechwood with a separate notice of DPNA and restart the notice period for that remedy. Beechwood argued that the ALJ erred by permitting CMS' May 7^th letter to serve as notice for a remedy (the DPNA), which resulted from a survey conducted on May 12th, five days after the CMS notice letter. Beechwood Br. at 5-6.

As the ALJ determined, the May 7^th notice informed Beechwood of CMS' intent to impose a DPNA remedy, so that the facility received the notice it was due. Specifically, the notice provided that "Medicare . . . will not make payment for residents who are admitted after May 15, 1999." Beechwood App. Ex. 6. The DPNA remedy was a component of the larger termination remedy also imposed by that notice. The fact that Beechwood's immediate jeopardy status was abated by May 12^th clearly did not remove the possibility that Beechwood would be subject to the remedies set out in the May 7^th notice. Due to serious deficiencies still in existence at Beechwood at the time of the May 12^th revisit, the termination was merely rescheduled to June 17^th. The need for the DPNA was reaffirmed in the revisit. In spite of its arguments to the contrary, Beechwood was not harmed. Beechwood was alerted on May 7^th that it would be terminated effective May 15^th. The DPNA would have gone into effect on that date as part of the termination. The revisit served to provide Beechwood with an extra week before the DPNA became effective on May 21st. As the ALJ concluded, there is nothing in 42 C.F.R. � 488.402(f) requiring CMS to provide a new notice and time frames for remedies where a facility has abated its immediate jeopardy status, but not all deficiencies.

Accordingly, we conclude that the ALJ's ruling on this issue was not erroneous.

5. The ALJ did not err regarding the publication and notice issues relative to the June 17, 1999 termination.

Beechwood alleged that the ALJ erred in his conclusion that the June 17, 1999 termination was proper even though CMS did not publish a public notice until July 1^st. Beechwood argued that the ALJ ignored the language of 42 C.F.R. � 488.456(c) which prescribes the manner in which both the facility and the public "must" be notified of termination. Beechwood asserted that CMS' lack of notice left patients, the public and the provider "in the dark" as to whether CMS was going to concur with the State survey agency's recommendation to terminate "until two weeks after the termination had purportedly occurred." Beechwood maintained that the mere fact that it had been forewarned that a termination "might occur" did not relieve CMS of its duty to provide proper public notice. Beechwood Br. at 6-7.

Beechwood's arguments are not persuasive. As we have recounted above, Beechwood was first informed that it would be terminated on May 7^th. That termination was subsequently rescheduled to June 17^th. By letter dated June 16, 1999, the State survey agency informed Beechwood that a June 14^th revisit had reaffirmed that Beechwood was not in substantial compliance with program requirements; further, a new deficiency had been discovered. The State survey agency's letter continued, "Your facility will be terminated from the Medicare/Medicaid Program effective 6/17/99 as recommended by HCFA." HCFA Ex. 6.

The ALJ correctly determined that nothing in 42 C.F.R. � 488.456 suggests that failure to comply strictly with the publication requirements would be a basis for invalidating the termination.

Moreover, 42 C.F.R. � 488.402(f)(5) states that the 2-day and the 15-day notice periods begin "when the facility receives the notice." The mere fact that section 488.456 also requires notice to the public does not provide a basis for delaying the effective date until after the public receives the notice. The reason for the notice periods (due process) as well as for notice to the public are discussed at 59 Fed. Reg. 56,170, 56,197 and 56,220 (1994). The publication requirement is not a prerequisite for implementing a termination. From at least May 7^th, Beechwood was on notice of the existence of serious deficiencies as well as the consequences of its failure to cure them. CMS' failure to timely notify the public, while regrettable, did not invalidate the notice to Beechwood.⁽⁵⁾

6. The ALJ did not err in his June 27, 2001 Ruling regarding hearing procedure and briefing schedule.

Beechwood indicated that on June 20, 2001 (June Requests) it had renewed "in detail its previously stated request" that the ALJ rule on the sufficiency of CMS' prima facie case. Additionally, Beechwood pointed out that it had proposed "practical" post-hearing steps to allow a more logical and economical development of the record in view of the volume of information involved. Beechwood noted that, notwithstanding its efforts, the ALJ summarily rejected Beechwood's proposals in his June 27, 2001 ruling.

Beechwood argued that the ALJ erred by declining to rule on the adequacy of CMS' prima facie case prior to demanding Beechwood's response to CMS' claims. Beechwood contended that the ALJ's refusal to rule on the adequacy of CMS' prima facie case was contrary to good practice and precedent in the Civil Remedies Division. Beechwood asserted that the ALJ's actions were unfair and impractical and hampered Beechwood's efforts to put forward its case in the most effective and efficient manner possible. Beechwood Br. at 8-9.

Beechwood's arguments have no merit. The regulation at 42 C.F.R. � 498.60 addresses the ALJ's conduct of a hearing. Subsection 498.60(b)(3) provides that the "ALJ decides the order in which the evidence and arguments of the parties are presented . . . ." Beechwood's argument concerns post-hearing briefing, part of the hearing process. The regulation clearly provides that the ALJ has discretion to set the process for presentation of the parties' arguments.

Moreover, the authority cited by Beechwood does not support its position that the ALJ must affirmatively rule on CMS' prima facie case prior to the post-hearing briefing process. In its June Requests, Beechwood alleged that Vitas Healthcare Corporation of California, DAB CR783 (2001); aff'd Vitas Healthcare Corporation of California, DAB No. 1782 (2001), provided compelling precedent requiring the ALJ to act as Beechwood requested. Precedent is not an issue here. While an ALJ may adopt an action or holding by a fellow ALJ, an ALJ is not required to do so. In affirming Vitas the Board did not hold that the procedures urged here by Beechwood were required, but rather that the ALJ there did not abuse her discretion in proceeding in that fashion.

Under the procedures at 42 C.F.R. Part 498, no such two-step process is required. There is no evidence that Beechwood was harmed by the briefing procedures adopted by the ALJ.

Accordingly, we conclude that the ALJ's ruling on these issues was not erroneous.

7. The ALJ did not err by limiting his findings on the bases of the DPNA and termination remedies.

Although CMS and Beechwood presented evidence and argument on all of the deficiencies found by the state surveyors at the April, May, and June 1999 surveys, the ALJ chose not to make findings on all of them. The ALJ noted that the applicable law authorizes termination of a provider agreement and imposition of a DPNA if a provider is found to be out of substantial compliance with even a single program requirement. ALJ Decision at 6, citing � 1866(b)(2) of the Act and 42 C.F.R. � 488.456(b)(1)(i); ALJ Decision at 20. Therefore, the ALJ concluded that he need not review any of the deficiencies found in April because it was Beechwood's failures to be in substantial compliance at the May and June surveys that were the bases for the DPNA and termination remedies.⁽⁶⁾ In addition, the ALJ determined that he need not make findings on all the deficiencies found at the May and June 1999 surveys because the evidence established that Beechwood was out of compliance with at least one participation requirement at each survey. The ALJ then made findings about three deficiency allegations for the June survey that were the basis for termination and two for the May survey that were the basis for the DPNA. He specifically stated that he made no findings about the other deficiency allegations.

Beechwood contended that the ALJ erred because, even though CMS was authorized to impose remedies based on one finding of noncompliance, the CMS letters imposing the remedies stated that these actions were being taken due to the deficiencies found at all of the surveys. Beechwood argued that the regulations provide it with a right to a hearing on all of the allegations leading to a remedy, not just some of them. Beechwood Br. at 14, citing 42 C.F.R. � 498.3(b)(7), (12) and (13). Beechwood asserted that complete resolution of all deficiencies was particularly important because the ALJ Decision is subject to review by the Board and the federal district court and could be reversed in either of those forums. According to Beechwood, the ALJ should have made determinations on all of the deficiency allegations and remanded the matter to CMS if he found that any deficiencies were unsubstantiated, so that CMS could consider whether it would continue to impose the same remedies based on the reduced number of deficiencies.

Although CMS had originally identified the April survey as among the issues properly before the ALJ, CMS argued that the Board should sustain the ALJ's determination that the deficiencies found at the April survey were irrelevant to the ultimate issue of whether he should sustain the imposition of the DPNA and the termination. CMS also affirmed its support for the ALJ's interpretation of the statute and regulations as permitting the imposition of remedies for a single deficiency and urged the Board to uphold his decision. However, CMS did not endorse the ALJ's choice to review only some of the deficiencies from the May and June surveys. CMS stated, "CMS believes it would be proper to have all factual and legal issues which are material to the ultimate outcome of this review process decided at the close of the hearing so as to ensure that there is a final decision of the Secretary, as that is understood in section 205 of the Social Security Act, 42 U.S.C. � 405, which reflects the entire record. However, the ALJ's approach does not amount to an error of law." CMS Br. at 19-20, n.10.

We are not persuaded that the ALJ's approach is reversible error. Beechwood conceded that the ALJ correctly interpreted the Act and the regulations. Beechwood's insistence that all of the deficiencies from all of the surveys need to be addressed rests chiefly on its interpretation of CMS' letters as indicating that CMS chose the remedies that it did only because of the number of deficiencies found during the series of surveys. However, CMS has not endorsed Beechwood's interpretation of those letters, and rejected the notion that the results of the April survey had any bearing on its imposition of remedies at the time they were imposed in May and June. Moreover, it has ratified (albeit unenthusiastically) the ALJ's final decision that the remedies may be upheld as based on the deficiencies that the ALJ elected to review from the May and June surveys, all of which he found to be well-grounded.

Additionally, the regulations cited by Beechwood as support for its position simply list the CMS actions that are initial determinations subject to appeal. Beechwood did not explain its interpretation of those regulations as requiring the ALJ to act on all of the deficiencies.⁽⁷⁾ Moreover, the choice of what remedy is to be imposed if there is a basis for a remedy is reserved by regulation to CMS; it is not appealable. 42 C.F.R. � 498.3(d)(14). Under these circumstances, the result proposed by Beechwood - requiring the ALJ to make findings on all alleged deficiencies and to remand to CMS for a redetermination on the remedy - is not warranted.

The possibility of reversal of the deficiency findings on review also does not persuade us that the ALJ should be required to make more findings than is necessary to support the remedies imposed. The ALJ exercised his judgment and chose to discuss several deficiencies that he determined to be persuasively established, thereby acknowledging but minimizing the risk that the case would have to be remanded to him should one of his findings be overturned. We conclude that this exercise of judicial economy is within the ALJ's discretion. Although Beechwood criticized the ALJ's action, it likely provided Beechwood with a more timely decision on the merits of this case, for which Beechwood had sought expedited treatment, than otherwise would have been possible.

We therefore conclude that the ALJ did not err in limiting his findings to the deficiencies found at the May and June 1999 surveys in determining whether there was a basis for the DPNA and the termination.

As discussed above, we are remanding this case to the ALJ for further proceedings, including a new decision. The ALJ should issue a subpoena either to compel CMS' compliance with his November 20, 2000 Amended Order or to satisfy the request for a subpoena duces tecum sought by Beechwood on February 16, 2001. He shall permit Beechwood to supplement the record with any new information that it obtains from the subpoena, and he may consider reopening the hearing if Beechwood demonstrates that new material warrants it. The ALJ will permit CMS to respond to Beechwood's submissions and Beechwood to reply to any CMS response. The ALJ may also consider the arguments raised by the parties in their briefs before the Board.⁽⁸⁾ The ALJ will then issue a revised decision that addresses whether deficiencies identified in the April, May, and June 1999 surveys provide bases for the respective remedies imposed by CMS.

The ALJ may take any further action consistent with this remand order.

Judith A. Ballard

Cecilia Sparks Ford

M. Terry Johnson
Presiding Board Member

1. CMS was previously named the Health Care Financing Administration (HCFA). See 66 Fed. Reg. 35,437 (July 5, 2001). We use "CMS" in this decision unless we are quoting documents or exhibits, before the ALJ, that refer to HCFA.

2. Beechwood also contended that the deficiencies found in the April survey served as the basis for the termination and DPNA remedies later imposed by CMS. We discuss that contention later in this decision as part of our analysis of the proper scope of an ALJ decision on the bases for those remedies.

3. The regulation at 42 C.F.R. � 498.3 sets forth procedures "for reviewing initial determinations that CMS makes with respect to matters specified in paragraph (b) of this section . . . ." Among those specified matters are "a finding of noncompliance that results in the imposition of a remedy specified in � 488.406 . . . ." 42 C.F.R. � 498.3(b)(13). The remedies specified in section 488.406 include a directed plan of correction. 42 C.F.R. � 488.406(a)(7).

4. This decision is currently on appeal in the United States Court of Appeals for the D.C. Circuit, Docket No. 99-1371.

5. In fact, any potential harm to the public was further minimized by the fact that Beechwood had been subject to DPNA since May 21^st.

6. We have already concluded above that the ALJ erred in excluding from consideration the April 1999 survey because it was the basis for a DPOC. Thus, upon remand the ALJ is to make findings on whether there was a basis for the DPOC. In this section, we discuss the April survey, as it is cited by Beechwood as included in the bases for the other remedies. Obviously, our analysis of whether the ALJ could properly limit his findings to the minimum deficiencies needed to provide a basis for a remedy is equally applicable to his review of the April survey upon remand.

7. CMS likewise did not explain its terse citation to 42 U.S.C. � 405. There are subsections (a) through (s) to section 405, it is 24 pages long, and it does not contain the language suggested by CMS concerning "the entire record."

8. Beechwood contended that the ALJ committed an error of law with respect to his findings on Residents No. 3, No. 12, and No. 1 in the June survey and Residents No. 23 and No. 28 in the May survey by "downgrading" the deficiencies alleged concerning these residents to a severity level of potential for harm, as opposed to the actual harm level alleged by CMS. The ALJ does not specifically mention any of the allegations of actual harm, however, so it is unclear that his finding of potential for harm was, as Beechwood maintained, an intentional rejection of CMS' prima facie case. Since the ALJ's analysis of the deficiencies may change on remand, it is not yet necessary for us to address this issue.