Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
) In the Case of: ) DATE:
June 29, 1990 ) Summit Health Limited, dba ) Docket No. C-108
Marina Convalescent ) Decision No. 1173 Hospital,
) ) Petitioner, ) ) - v. - ) ) The Inspector
General. ) )
FINAL DECISION ON REVIEW OF ADMINISTRATIVE LAW JUDGE
DECISION
Summit Health Limited, doing business as (dba) Marina Convalescent
Hospital (Petitioner), requested review of an October 20, 1989 decision
by Administrative Law Judge (ALJ) Steven T. Kessel. The ALJ's decision
granted the Inspector General's (I.G.) motion for summary disposition of
Petitioner's appeal and upheld the I.G.'s determination excluding
Petitioner from participation in the Medicare program and directing its
exclusion from State health care programs for five years. 1/ See Summit
Health Limited, dba Marina Convalescent Hospital, DAB Civ. Rem. C-108
(1989).
Petitioner's exclusion was based on section 1128(a)(2) of the Act, which
provides:
(a) Mandatory Exclusion.--The Secretary shall exclude the
following individuals and entities from participation in any
program under title XVIII and shall direct that the following
individuals and entities be excluded from participation in any
State health care program . . . .
* * *
(2) Conviction relating to patient abuse.--Any individual or
entity that has been convicted, under Federal or State law, of
a criminal offense relating to neglect or abuse of patients in
connection with the delivery of a health care item or service.
Further, section 1128(c)(3)(B) provides:
In the case of an exclusion under subsection (a), the minimum
period of exclusion shall be not less than five years . . . .
Based on the following analysis, we affirm the ALJ's decision upholding
the exclusion of Petitioner.
Background
On March 4, 1987, Petitioner was named in a 25 count criminal complaint
filed by the State of California (State) alleging various violations of
the California Health and Safety Code at Marina Convalescent Hospital
(Marina), a long-term care facility. On October 6, 1987, Petitioner
pleaded nolo contendere to counts XIV and XIX of the State's complaint.
Count XIV charged that Petitioner's nursing service failed to plan
patient care. Count XIX charged that Petitioner failed to administer
medication and treatment as prescribed. See Summit Health Limited, pp.
3-4; see also I.G. Exhibit (Ex.) 4. 2/ On January 5, 1989, based on
Petitioner's nolo contendere plea, the I.G. excluded Petitioner from
participation in Medicare and directed that it be excluded from
participation in Medicaid for five years.
On January 24, 1989, Summit Care-California, Inc. (Summit Care) filed a
motion in the United States District Court for the District of Columbia
seeking a temporary restraining order (TRO) to enjoin the I.G. from
excluding the Petitioner. In that proceeding, Summit Care was
identified as an indirectly, wholly-owned subsidiary of Petitioner.
Summit Care challenged the substantive basis of the I.G.'s decision,
questioning whether any exclusion was justified under the circumstances
applicable to Petitioner. Specifically, Summit Care indicated that it,
not Petitioner, owned and operated Marina. Summit Care charged the I.G.
with the knowledge that Petitioner was not a provider, licensee, or
program participant and the knowledge that Summit Care had never been
convicted or entered a plea in a criminal case. Based on the premise
that Petitioner's exclusion would effectively exclude it as well, Summit
Care alleged that it, and its patients, would suffer irreparable harm as
a result of the I.G.'s decision.
Denying the motion for the TRO, the Court concluded that Summit Care had
failed to demonstrate a strong likelihood of success on the merits or
that it would suffer irreparable injury if the TRO was not granted. The
Court found that, in spite of Summit Care's assertion that Petitioner
did not operate Marina, Petitioner's nolo contendere plea was based on
facts occurring at Marina. Thus, the Court concluded, the State would
have been justified in bringing charges against either Petitioner or
Summit Care. See Summit Care-California, Inc. v. Newman, 705 Fed.
Supp. 36, 37 (D.D.C. 1989).
On April 18, 1989, the Court granted the Agency's motion for summary
judgment in the suit by Summit Care. The Court found that Summit
Care-California, Inc., was a wholly-owned subsidiary of yet another
entity, Summit Care Corporation, which, in turn, was a directly owned
subsidiary of Summit Health Limited (Petitioner). The Court noted that
while Summit Care contended that it was a separate entity from
Petitioner, Summit Care conceded that Petitioner was the corporation
doing business as Marina Convalescent Hospital. See Summit Care-
California, Inc. v. Newman, No. 89-0169 (D.D.C. April 18, 1989), pp.
2-4; I.G. Ex. 1.
On March 8, 1989, pursuant to 42 C.F.R. 498.5(i), Summit Care requested
ALJ review "as to the exclusion . . . of Marina . . . ." The appeal
was
docketed in the name of the Petitioner (Summit Health Limited) doing
business as Marina. Counsel for Summit Care (who was also counsel for
Petitioner) objected to this characterization of the appeal. The ALJ
treated the objection as a motion to add Summit Care as a party and the
appeal moved forward. See ALJ's Letter to the Parties dated May 17,
1989.
The ALJ's decision sustaining Petitioner's exclusion was supported by 15
findings of fact and conclusions of law (FFCLs). The ALJ also found
that Petitioner, not Summit Care, was the proper party to the exclusion
proceedings, and denied Petitioner's motion to add Summit Care as a
party. See Summit Health Limited, p. 9.
Petitioner's Appeal to The Board
On December 11, 1989, Petitioner and Summit Care appealed the ALJ's
decision to the Board. In its acknowledgment of Petitioner's appeal,
the Board dismissed the appeal by Summit Care. See Acknowledgment of
Request for Review and Dismissal of Appeal by Summit Care-California,
Inc. (January 4, 1990), p. 2.
On January 9, 1990 Summit Care requested that the Board reconsider its
ruling. The Board rejected Summit Care's request for reconsideration.
The Board found that Summit Care's request merely restated its original
arguments for inclusion as a party, which the Board had previously
rejected. Moreover, Summit Care failed to show that the Board's
original analysis supporting dismissal was incorrect. See Ruling on
Request for Reconsideration of Dismissal Ruling (February 1, 1990).
Exceptions
Petitioner's appeal did not cite the particular FFCLs to which it
objected. See 42 C.F.R. 498.82(b). Rather, Petitioner's December 11,
1989, cover letter set out the following issues:
1. The Administrative Law Judge erred in excluding Petitioner,
Summit Care-California, Inc., from the proceedings.
2. The Administrative Law Judge erred in failing to address the
preeminent issue raised by Summit Care- California, Inc.; that is
whether Summit Care- California, Inc., . . . may properly be
excluded from participation in the Medicare and Medicaid programs .
. . solely as a result of a nolo contendere plea entered by Summit
Health Ltd., its parent corporation.
3. The Administrative Law Judge erred in failing to find that as a
matter of law, Summit Care- California, Inc. could not be subject
to mandatory exclusion from participation in the Medicare and
Medicaid programs . . . solely as a result of a conviction of
Summit Health Ltd., its parent corporation.
4. The Administrative Law Judge erred in concluding that a
conviction under California Health & Safety Code section 1290 is a
"criminal offense related to neglect or abuse of patients" within
the meaning of . . . [section 1128(a)(2) of the Act].
Based on those arguments, it is apparent that Petitioner took exception
to the following FFCLs:
1. Petitioner is an entity within the meaning of section
1128(a)(2) of the Social Security Act. (Citation omitted)
11. Petitioner was convicted of a criminal offense within the
meaning of section 1128 of the Social Security Act. (Citations
omitted)
12. Petitioner was convicted under California law of a criminal
offense relating to neglect or abuse of patients in connection with
the delivery of a health care item or service. (Citations omitted)
15. The exclusion imposed and directed against Petitioner is
mandated by law. (Citations omitted) 3/
Analysis
I. The ALJ correctly determined that Summit Care is not a proper party
to appeal the exclusion.
Petitioner's arguments 1, 2, and 3, are merely variations on the general
question of whether Summit Care had standing to appeal the I.G.'s
decision to exclude Petitioner. That issue was correctly decided by the
ALJ. As we indicated in our Rulings precluding Summit Care's
participation in this appeal, Summit Care was not a party to the hearing
provided by the ALJ pursuant to section 1128(f) and as a consequence was
not entitled to request review by this Board as a party to the hearing
dissatisfied with the hearing decision. 42 C.F.R. 1001.126(c). We
also found, as had the ALJ, that section 1128(f) of the Social Security
Act provides an opportunity for a hearing only for the entity that is
excluded (or directed to be excluded) from participation under section
1128.
Under the facts of this case, a parent corporation, Petitioner, was
convicted of a criminal offense relating to neglect or abuse of patients
in a facility administered by a wholly-owned subsidiary. Since
Petitioner was convicted of the offense which gave rise to the
exclusion, the I.G. excluded Petitioner. This exclusion, however, was
limited to Petitioner "doing business as" Marina Convalescent Hospital.
While the exclusion does not affect Petitioner's operations in other
facilities either in California or elsewhere, it does preclude
Petitioner, or any subsidiary, from participating in Medicare or
Medicaid while doing business as Marina Convalescent Hospital.
Petitioner argues that since its subsidiary, Summit Care, is effectively
excluded by the exclusion of Petitioner, the subsidiary also is entitled
to appeal that exclusion.
As we previously concluded, however, this position is fundamentally
flawed. A mandatory exclusion is based on the conviction of a criminal
offense. Here, the parent corporation was convicted of the offense
mandating the exclusion. Therefore, the statute requires that the
parent corporation be excluded from the program. This result follows
directly from the express language of the exclusion statute mandating
the exclusion of the "entity . . . convicted . . . of a criminal offense
. . . ." While the exclusion here obviously will have an impact on
subsidiaries of Petitioner, such as the subsidiary that actually
administered Marina or even a subsidiary that potentially might
administer Marina, there is no authority to exclude those corporations
as such since they were not convicted of the criminal offense.
Aside from being required by the exclusion statute, this result clearly
furthers the purposes of the statute. Obviously, a large parent
corporation should not be able to avoid the effects of an exclusion
through paper charades involving its subsidiaries. Likewise, it makes
no sense to provide appellate rights for wholly-owned subsidiaries that
were not convicted of any offense, and consequently would not be subject
to a mandatory exclusion in their own name.
In this instance, we also find it relevant that both before and after
its conviction, Petitioner declared that it operated the Marina facility
in disclosure forms required by law to be filed with the California
Department of Health Services. See I.G. Ex. 5. Moreover, Petitioner
represented to the Glendale Municipal Court that it was responsible for
Marina when it entered its nolo plea and accepted the terms of a
sentence designed to improve the quality of care at Marina. Finally,
the subsidiary, Summit Care, subsequently admitted to the District Court
that it had represented that Petitioner was the operator of the Marina
facility. See I.G. Ex. 1.
Accordingly, on the basis of the foregoing, we conclude that the
subsidiary corporation, Summit Care, was not properly a party before the
ALJ in the appeal of the exclusion of Petitioner, its parent
corporation, and that, consequently, the ALJ did not err in failing to
address any issues related to the purported "exclusion" of the
subsidiary. In so doing, we affirm FFCL No. 1.
II. Petitioner's conviction under the California Health and Safety Code
is a criminal offense relating to neglect or abuse of patients within
the meaning of section 1128(a)(2) of the Act.
Before the Board, Petitioner asserted that whether there has been a
conviction of a criminal offense relating to neglect or abuse is a
question of state, not federal, law. Thus, the sanctions imposed under
state law were relevant in considering whether there has been a
conviction of an offense relating to neglect or abuse. Petitioner
contended that, absent a regulatory definition of the terms "neglect"
or
"abuse," the ALJ erred in finding that Petitioner had been guilty
of
neglect or abuse of patients. Petitioner indicated that it had entered
a plea to charges of not adequately documenting a plan of care and
failing to document the administration of medications and treatments.
Petitioner pointed out that, in terms of State sanctions, it had
received the lowest class of citation for a regulatory deficiency.
Additionally, Petitioner noted that in California a nolo contendere plea
could not be used as the basis for suspension or revocation of a
provider's license. Petitioner Br., pp. 10-17.
The ALJ, Petitioner asserted, had effectively found that any degree of
criminal sanction for an offense was sufficient to cause a convicted
party to be excluded regardless of the party's "scienter" (criminal
intent). Petitioner insisted that the offenses to which it pleaded were
not the type meant to trigger an exclusion. Petitioner maintained that
the statute was meant to exclude providers who by continued willful or
grossly negligent activities pose a threat to program participants.
Petitioner argued that the ALJ's decision had effectively removed the
phrase "relating to neglect or abuse" from the statute and would lead
to
arbitrary exclusions in the future. Id.
The ALJ concluded that Petitioner was convicted under California law of
a criminal offense relating to the delivery of a health care item or
service, and that an exclusion was, therefore, mandated under section
1128(a)(2). See FFCLs Nos. 11, 12, 15, supra. Petitioner's arguments
taking exception to these conclusions are largely reiterations of those
previously raised before the ALJ and considered by him. We conclude
that the ALJ's analysis of these issues was correct and affirm FFCLs
Nos. 11, 12, and 15.
The ALJ, in the absence of a statutory definition of the operative terms
"abuse" and "neglect," gave them their common and ordinary
meaning.
Petitioner pointed to no authority which would suggest that the terms
should be construed in some other manner. Furthermore, there is
absolutely no indication in the statute that the terms should be defined
by reference to state law. Rather, they should be defined consistent
with the purposes and intent of the law of which they are a part. See
Michael J. Burditt, DAB No. 1167 (1990), pp. 44-45. The exclusion law
is a federal law designed to protect the integrity of the Medicare and
Medicaid programs. Giving these unambiguous terms their common and
ordinary meaning reasonably fulfills that purpose. Petitioner's
position would subject the federal exclusion law to potentially
conflicting and inconsistent application. 4/
There can be no question that Petitioner here was convicted of a
criminal offense relating to neglect of patients within the common and
ordinary meaning of "neglect." Petitioner was specifically charged
with, and convicted of, repeatedly failing to plan patient care and
repeatedly failing to administer to patients medications and treatments
as prescribed. See Summit Health Limited, p. 4 (FFCLs Nos. 3-9). As
the ALJ concluded, there can be no argument that Petitioner was under a
duty to provide such services, and was convicted of failing to perform
that duty. Id. at 14. Obviously, patients in long term care facilities
who fail to receive medications and treatments as prescribed and whose
care is not properly planned are being "neglected" and may suffer
serious health consequences as a result. 5/
Further, as the I.G. argued, Petitioner clearly misconstrues the
legislative history of section 1128. See I.G. Br., pp. 9-10, n. 4;
Petitioner Br., pp. 11-12. The excerpt of the legislative history cited
by Petitioner was discussing the limitations of the law as of the time
of the 1987 amendments, and the need for broadening the Secretary's
authority to exclude practitioners convicted of non-program related
crimes, and has no direct applicability to the issues at hand here.
Moreover, contrary to what Petitioner has argued, there is no
requirement in section 1128(a)(2) that the entity or individual be
convicted of an offense with a particular level of intent as a necessary
element. Under section 1128(a)(2), the level of intent of the entity or
individual in committing the offense is not relevant. There need only be
a conviction under federal or state law of a criminal offense relating
to neglect or abuse of patients in connection with the delivery of a
health care item or service. As the I.G. argued, the fact that a
mandatory exclusion is required only after a criminal conviction
indicates that Congress intended that any questions of "scienter"
be
resolved as necessary under the statutes for criminal offenses and in
other forums-- the criminal courts. I.G. Br., p. 11. Congress was
entitled to determine, as it did, that entities convicted of criminal
offenses involving the abuse or neglect of patients constituted a class
posing a special danger to program beneficiaries meriting their
exclusion simply because of the conviction. Id. at 12-13. We recently
discussed this issue in the context of an exclusion under section
1128(a)(1) of the Act. Section 1128(a)(1) also relies on criminal
convictions as a basis for an exclusion. See Dewayne Franzen, DAB No.
1165 (1990). 6/
There is similarly no support for Petitioner's argument that only
convictions pursuant to a state's penal code should invoke the mandatory
exclusion provisions. The exclusion statute applies to all convictions,
under federal or state law, of criminal offenses relating to neglect or
abuse of patients.
Finally, it is of no relevance to an exclusion proceeding that a
particular conviction could not be used as a basis for suspension or
revocation of the facility's license under state law because the
conviction was pursuant to a plea of nolo contendere. Moreover, in
defining "convictions," the federal exclusion statute specifically
includes convictions entered pursuant to a plea of nolo contendere. See
section 1128(i) of the Act, which was subsequently amended by Pub. L.
100-360, sec. 411(k)(10)(D), effective December 22, 1987.
Accordingly, on the basis of the foregoing, we conclude that
Petitioner's arguments lack merit and affirm FFCLs Nos. 11, 12, and 15.
Conclusion
Based on the foregoing analysis, we affirm the ALJ's decision upholding
the exclusion of Petitioner. In so doing, we affirm each and every one
of the ALJ's findings of fact and conclusions of law and adopt them as
our own.
Theodore J. Roumel
Alexander G. Teitz
Donald F. Garrett Presiding Panel Member
1. "State health care program" is defined by section 1128(h) of the
Social Security Act (Act) to include any State Plan approved under Title
XIX of the Act (Medicaid). We use the term "Medicaid" from this point
forward.
2. The exhibits cited in this decision are those submitted in the
proceedings before the ALJ.
3. As for FFCL Nos. 2, 3, 4, 5, 6, 7, 8, 9, 10, 13, and 14, which
Petitioner did not challenge directly or by implication, we affirm these
without further discussion.
4. Petitioner's offenses, nevertheless, would clearly be "abuse"
or
"neglect" even by state standards, since the violations are defined
by
State law as having a direct or immediate relationship to the health,
safety, or security of long-term health care facility patients, other
than classes of violations that present imminent danger or serious harm
or which have caused death. Cal. Health & Safety Code, section 1424
(West). See I.G. Br., pp. 14-15.
5. Petitioner attempted to minimize its convictions by arguing that
they involved only inadequacies of documentation. The record clearly
does not support these allegations, however. The actual counts
themselves, as well as the Plea and Sentence agreement entered in the
Glendale Municipal Court (I.G. Ex. 4), demonstrate that the offenses
were correctly characterized by the ALJ and clearly went beyond
inadequate documentation.
6. In any event, Petitioner was convicted under a State statute which
applies, as pertinent here, when there is a willful or repeated
violation of any rule or regulation. California Health & Safety Code,
section 1290 (West). Thus, "scienter" could have been an element of
the
underlying violation of which Petitioner was convicted and, at the very
least, Petitioner would have had to repeatedly violate rules and
regulations. In fact, in the oral argument which was part of this
proceeding, Petitioner admitted to such repeat violations. See
Transcript of April 24, 1990 Oral Argument, pp.