SUBJECT:

Hearthside Care Center,

Petitioner,

Health Care Financing Administration

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

Petitioner, Coos Bay Rehabilitation, Inc. d/b/a Hearthside Care Center (Petitioner), appealed the March 24, 2000 decision of Administrative Law Judge Steven T. Kessel. Hearthside Care Center, DAB CR656 (2000) (ALJ Decision). The ALJ Decision entered disposition in favor of the Health Care Financing Administration (HCFA) and imposed a civil money penalty (CMP) against Petitioner in the amount of $16,000 ($200 per day for the period November 12, 1998 through February 1, 1999). Petitioner excepted to three findings of facts and conclusions of law (FFCLs) made by the ALJ and requested that the CMP be reduced to $4,000 ($50 per day for the period of noncompliance).

We have reviewed Petitioner's exceptions and, for the reasons discussed below, find them to be without merit. Accordingly, we affirm the ALJ Decision in its entirety.

Factual Background

There are no disputed facts in this case. Petitioner is a long-term care facility located in Coos Bay, Oregon. On November 12, 1998, the state survey agency conducted a compliance survey of Petitioner and found that it failed to comply substantially with conditions of participation for long-term care facilities. There were eight deficiencies identified by tag numbers, and one of these deficiencies caused actual harm to residents of Petitioner. HCFA Exhibit (Ex.) 1. Petitioner alleged that it was in full compliance on January 12, 1999, but a resurvey on January 21, 1999 found that Petitioner remained out of compliance with two previously identified tag numbers. HCFA Ex. 2. Petitioner was finally found to be in compliance in a resurvey on February 3, 1999.

On March 15, 1999, HCFA notified Petitioner that it was imposing a $200 per day CMP for the period November 12, 1998 through February 1, 1999, based on the two deficiencies that Petitioner had failed to correct until the latter date, and taking into consideration the regulatory factors of the facility's compliance history, its financial condition, the scope and severity of the deficiencies, and the culpability of the facility. Petitioner requested a hearing to contest the imposition of the CMP, arguing that the deficiencies established by HCFA merited, at most, the imposition of a CMP of $4,000. Petitioner later filed a readiness report in which it admitted all of the deficiencies found at both surveys and stipulated that no proceeding to receive testimony was necessary. HCFA filed a submission responding to Petitioner's readiness report as if it were a motion for summary judgment, and it asked the ALJ to summarily dispose of the case on the record. The ALJ Decision granted HCFA's motion. This appeal followed.

Applicable Regulations

Petitioner admits that there is a basis for imposing a CMP in this case pursuant to 42 C.F.R. � 488.430, but contends that the ALJ erred in his application of the factors used to calculate the amount of a CMP, including the seriousness of a deficiency. These factors are set out in 42 C.F.R. �� 488.438(f) and 488.404. The relevant subsection of 42 C.F.R. � 488.438 provides:

(f) Factors affecting the amount of penalty. In determining the amount of penalty, HCFA does or the State must take into account the following factors:
(1) The facility's history of noncompliance, including repeated deficiencies.
(2) The facility's financial condition.
(3) The factors specified in � 488.404.
(4) The facility's degree of culpability.

The seriousness of a deficiency is an element to be considered in selecting a remedy. As specified in 42 C.F.R. � 488.404(b), HCFA considers, at least, the following factors:

(1) Whether a facility's deficiencies constitute-
(i) No actual harm with a potential for minimal harm;
(ii) No actual harm with a potential for more than minimal harm, but not immediate jeopardy;
(iii) Actual harm that is not immediate jeopardy; or
(iv) Immediate jeopardy to resident health or safety.

(2) Whether the deficiencies-
(i) Are isolated;
(ii) Constitute a pattern; or
(iii) Are widespread.

This regulation also provides that-

Following the initial assessment, HCFA and the State may consider other factors, which may include, but are not limited to the following:

(1) The relationship of the one deficiency to other deficiencies resulting in noncompliance.
(2) The facility's prior history of noncompliance in general and specifically with reference to the cited deficiencies.

42 C.F.R. � 488.404(c).

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. Hillman Rehabilitation Center, DAB No. 1611, at 6 (1997).

Conclusion

Having reviewed all of the Petitioner's exceptions and found them to be meritless, we affirm and adopt the ALJ Decision in its entirety.

Petitioner did not except to FFCL 1 of the ALJ Decision: "A basis exists to impose a civil money penalty against Petitioner for each day of the period which begins on November 12, 1998 and which ends on February 1, 1999." We therefore affirm and adopt this FFCL.

Petitioner stated four exceptions to the following FFCLs:

2. HCFA established a prima facie case for imposition of civil money penalties against Petitioner in the amount of $200 per day for each day of the November 12, 1998 - February 1, 1999 period.

3. Petitioner did not rebut the prima facie case that HCFA established.

4. Civil money penalties of $200 per day for the period which begins on November 12, 1998 and which ends on February 1, 1999 are reasonable in light of HCFA's unrebutted prima facie case for the imposition of such penalties.

Since those exceptions all challenge all three of these FFCLs, we review each of Petitioner's exceptions in order.

Petitioner's Exception 1

Petitioner contended in its first exception that HCFA did not establish a prima facie case for the imposition of a $16,000 CMP, and that such a CMP is unreasonably high in light of the facility's compliance history. Petitioner contended that, given the inherent difficulty of retaining a stable, well-trained staff (in its geographic location) coupled with the chronic, debilitating nature of the illnesses affecting the majority of its resident population, its immediate response to these deficiencies should render its past compliance history a positive, rather than a negative, factor. Petitioner implied that it should therefore be subject only to the minimum CMP amount of $50 per day. Petitioner Appeal at 3.

This exception, as well as the rest of Petitioner's exceptions alleging that the ALJ erred in finding that HCFA established a prima facie case, rests upon a faulty notion of what establishing a prima facie case means. A party establishes a prima facie case by introducing enough probative evidence to establish a proposition in the absence of contrary evidence. "A prima facie case does not amount to an irrebuttable presumption, but rather to evidence sufficient to support a decision in a party's favor, absent contrary evidence. If the opposing party presents contrary evidence, the decision-maker must then, as the ALJ recognized, 'weigh all of the relevant evidence and base his or her decision on that evidence.'" Hillman Rehabilitation Center, DAB No. 1663 at 8 (1998) (citation omitted). In the present case, the ALJ concluded that HCFA provided such evidence for the facility's compliance history, its financial condition, and the scope and severity of the deficiencies. He then proceeded to consider whether Petitioner had adduced facts which rebutted HCFA's prima facie case. Petitioner's exceptions asserting that HCFA's evidence should not be taken at face value amount to a challenge to the ALJ's assessment of the record as a whole, rather than establishing that the ALJ erred in saying that HCFA's evidence was sufficient for a prima facie case.

Turning to HCFA's prima facie case with respect to Petitioner's history of compliance, HCFA showed that Petitioner had previously been found out of compliance at its annual survey on November 6, 1997, and in an abbreviated survey on May 14, 1998, and that the deficiencies found during those surveys (in the areas of Dietary Services, Infection Control, and Quality of Care) were repeated in either the November 1998 or January 1999 surveys. HCFA Ex. 3. Rather than challenging this showing as untrue, Petitioner contended:

Given the inherent difficulties of keeping a stable, well-trained staff in this region of the state, the disproportionate number of residents with chronic, debilitating conditions and the immediate response of the Facility to correct any deficiencies and provide the best possible care, Petitioner's history of compliance is remarkable.

Petitioner Appeal at 3.

Petitioner did not deny or present any evidence to rebut HCFA's showing that Petitioner consistently fell short of minimum standards in between surveys, and then brought itself back into compliance when its shortcomings were discovered by state surveyors. The regulations expressly provide that this type of history may be taken into account in setting the amount of CMP. See 42 C.F.R. � 488.404(c)(2). Consequently, the ALJ correctly did not honor Petitioner's request that its compliance history be considered to be a factor in favor of reducing the CMP to the lowest possible amount. We therefore affirm the ALJ's conclusion that this facility's history of noncompliance is a factor that supports $200 per day as a reasonable CMP amount.

Petitioner's Exception 2

Petitioner also argued that HCFA did not establish a prima facie case for the imposition of the $16,000 CMP by the introduction of a Medicare cost report for Hearthside Skilled Nursing Facility, LLC (HCFA Ex. 3, at 10-11), and that the ALJ erred in relying on that document in determining whether the CMP imposed by HCFA is reasonable in amount. Petitioner contended that the document reflects financial performance of an entirely different provider and an entirely different owner, i.e., its predecessor at that facility. Petitioner argued: "These irrelevant cost reports were the only evidence the ALJ relied upon in finding that Petitioner had substantial assets, and the Petitioner had removed equity from the facility." Petitioner Appeal at 4 (emphases in original). Petitioner submitted with its appeal an exhibit consisting of an affidavit from its Chief Operating Officer, with an attachment consisting of single-page profit and loss statements for each month from November 1998 through July 1999. Petitioner asked that this document be included in the record for this case "for good cause."

Petitioner's exception is spurious, because the ALJ did not at all rely on the Medicare cost report document submitted by HCFA.⁽¹⁾ Rather, for purposes of his decision, he accepted that the financial information in a document submitted by Petitioner and identified by the ALJ as Petitioner's Exhibit 2 was true, and he considered de novo whether the evidence demonstrated that the CMP proposed by HCFA was reasonable. ALJ Decision at 5. The ALJ correctly stated that the financial data shown in Petitioner's Exhibit 2 did not demonstrate that Petitioner's ability to continue to provide care would be jeopardized by requiring it to pay the CMP, and he noted that, in fact, Petitioner had not even made that explicit allegation. ALJ Decision at 6. In addition, the ALJ observed that Petitioner's Exhibit 2 showed that its purported losses did not preclude its owners from drawing over $176,000 from Petitioner during the period ending November 30, 1999. Id.

HCFA did not object to our admission of the additional exhibit provided by Petitioner with its appeal, so we will admit it as Petitioner Appellate Exhibit 1, with the caveat that this action does not mean that we accept Petitioner's assertion that it could not have submitted the document in the proceeding before the ALJ. Since the ALJ did not rely on HCFA's information, Petitioner's affidavit, which was introduced in support of its contention that the document relied upon by HCFA referred to a prior owner, is irrelevant. As for the attached profit and loss statements, Petitioner did not explain what they were intended to show, much less indicate how they were more reliable than the document Petitioner previously submitted to the ALJ, which provided financial data for a later period. Petitioner has therefore shown no error whatsoever in the ALJ's analysis of Petitioner's ability to pay this CMP, including his determination that Petitioner's owners drew over $176,000 from Petitioner during the period ending November 30, 1999. There is indeed substantial evidence in the record supporting the ALJ's conclusion that Petitioner had the ability to pay the $16,000 CMP proposed by HCFA, and we therefore affirm it.

Petitioner's Exception 3

In this exception, Petitioner challenged the ALJ's determination pursuant to section 438.404 that the deficiencies upon which the CMP was based were not isolated but were widespread and constituted a pattern. Although Petitioner did not contest that the deficiencies were present, it contended that the surveyors' findings in the January 1999 survey constituted only scattered, sporadic problems in an otherwise good facility. Petitioner Appeal at 6.

Petitioner's contention mischaracterizes the ALJ's determination on this factor as resting only on the January 1999 survey findings. The ALJ Decision discussed both the initial and followup surveys in the discussion of FFCL 2, which concluded that HCFA had established a prima facie case for the imposition of a $200 per day CMP for the entire period that Petitioner was out of compliance. ALJ Decision at 3. The ALJ found that two deficiencies, identified as Tags 314 and 324, were found at both surveys.⁽²⁾

In addition, Petitioner totally mischaracterizes the January 1999 survey finding with respect to Tag 314, having to do with prevention of pressure sores. Petitioner speaks of two of seven residents sampled having suffered "some minor skin breakdown." Petitioner Appeal at 5. However, the January 1999 survey actually found deficient care for four of seven residents, and the November 1998 survey had found the same for eight of ten residents sampled. HCFA Ex. 2, at 9; HCFA Ex. 1, at 14.

We therefore reject Petitioner's contention that the ALJ misapplied 42 C.F.R. � 488.404 by failing to conclude that Petitioner's deficiencies were sporadic and isolated.

Petitioner's Exception 4

Petitioner's final exception raises section 488.438(f)(4) (facility's degree of culpability). Petitioner stated, "The ALJ's conclusion that Petitioner showed neglect, indifference, or disregard for resident care, comfort or safety is not supported by the evidence." Petitioner Appeal at 7. Petitioner contended that it was therefore erroneous to conclude that the $16,000 CMP was sustainable.

The ALJ Decision did not state the conclusion asserted by Petitioner and, in fact, does not discuss culpability or cite this factor at all. Our review of the record before the ALJ shows that although culpability was mentioned by HCFA in its March 15, 1999 letter as one of the factors that it took into account in setting the amount of the CMP, HCFA never specifically introduced any evidence or made any arguments about this factor. Petitioner did raise it in its readiness report, stating that there was no showing in the survey findings that it disregarded, neglected, or showed indifference to its residents. It is evident that the ALJ's conclusion that the $16,000 CMP was reasonable was based only on the factors for which HCFA presented a prima facie case, i.e., the facility's compliance history, its financial condition, and the scope and severity of the deficiencies.

The regulations that permit HCFA to take into account in determining the amount of a CMP the degree of culpability of the facility also state, "The absence of culpability is not a mitigating circumstance in reducing the amount of the penalty." 42 C.F.R. � 488.438(f)(4). Consequently, even if the ALJ had addressed this factor and found in Petitioner's favor, that would not have changed his conclusion that, based on the factors that HCFA established and Petitioner did not rebut, the amount of the CMP was reasonable. Accordingly, the ALJ's failure to address this factor is harmless error. We therefore conclude that Petitioner's Exception 4 does not provide any basis for modifying the ALJ Decision.

Judith A. Ballard

Marc R. Hillson

M. Terry Johnson
Presiding Board Member

1. Since he chose to rely on the document supplied by Petitioner as rebuttal to HCFA's proffer of evidence in support of its case, the ALJ did not make an express finding that HCFA had made a prima facie case as to Petitioner's financial ability to pay the CMP. The record shows that HCFA had given Petitioner the opportunity to provide financial information prior to imposition of the CMP, and was obliged to seek such information elsewhere when Petitioner failed to respond. HCFA Ex. 3.

2. Petitioner's appeal also contained a discussion of the third repeat deficiency, Tag 364, but we need not review this contention since the ALJ Decision did not rely on that tag in finding that Petitioner's deficiencies had persisted to the date of the followup survey. ALJ Decision at 3.