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Department of Health and Human Services DEPARTMENTAL APPEALS BOARD Appellate Division |
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DATE: February 13, 2002 |
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Centers for Medicare & Medicaid
Services
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Docket No.
A-02-2 Civil Remedies CR804 Decision No. 1814 |
| DECISION | |
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FINAL DECISION ON REVIEW OF On October 4, 2001, Big Bend Hospital Corporation, d/b/a Big Bend Medical Center (Big Bend) requested review of the decision of Administrative Law Judge (ALJ) Steven T. Kessel, sustaining the determination of the Centers for Medicare and Medicare Services (CMS) to certify Big Bend to participate in the Medicare program effective February 3, 2000. Big Bend Hospital Corporation, d/b/a Big Bend Medical Center, DAB CR804 (2001) (ALJ Decision). Big Bend sought to have its provider agreement made effective October 27, 1999 rather than in February 2000. We agree with the ALJ that, in voluntarily withdrawing from the survey process when CMS sought to follow up on concerns about the state certification survey and stating that it would request a new survey when it was prepared, Big Bend clearly chose to restart the process of seeking to participate with a new certification survey. We conclude that Big Bend could not properly be heard to assert thereafter that its later showing of compliance in the new certification survey should relate back to the first state certification recommendation for purposes of claiming an earlier effective date for its provider agreement. We further agree that an in-person hearing was not required because the evidence which Big Bend proffered for such a hearing would not, even if credible, alter the effect of Big Bend's actions as established by its own correspondence. We therefore affirm the ALJ Decision in its entirety. Background The ALJ Decision set out the undisputed facts which we summarize briefly here to explain the context of the issue before us. ALJ Decision at 2-3. Big Bend is a hospital in rural Texas that applied to participate in Medicare by submitting an application package, including a HCFA-855 disclosure form, under which Big Bend was to be surveyed by the state survey agency in order to obtain certification that it was in compliance with applicable participation requirements. The state survey agency initially conducted a survey at Big Bend's request for this purpose on October 7, 1999, but found that Big Bend was out of compliance with multiple conditions, as well as deficient in regard to a number of additional participation requirements. CMS determined, based on the state survey agency's recommendation, not to certify Big Bend at that time. Less than three weeks later, the state survey agency returned, again at Big Bend's request, and conducted a second survey completed October 27th. The surveyors then found Big Bend in compliance with all participation requirements and recommended certification as of that date. CMS did not issue a determination after receiving this recommendation. Instead, CMS decided to conduct its own survey on December 7, 1999 to determine if the state survey findings were reliable. After that survey was underway, it is undisputed that a surveyor, Dodjie Guioa, told Big Bend Chief Executive Officer (CEO) David Conejo that the survey team had found deficiencies and that it would likely conclude that Big Bend was not in substantial compliance. Big Bend Br. at 8; Big Bend Ex. 4, at �� 5-6. The CEO then gave the surveyors a letter which read as follows: "This letter is a formal request to withdraw from the . . . [CMS] Validation Survey process. We will resubmit a request for an onsite survey at a later date." Big Bend Ex. 5. CMS responded in a letter dated December 20, 1999 which stated: "This is to confirm your request to withdraw your application to participate in the Medicare program effective December 7, 1999." CMS Ex. 6. CMS further advised that Big Bend could reapply at any time. Id. On January 4, 2000, Mr. Conejo wrote to CMS that Big Bend would be ready for another survey by January 12, 2000, and followed up with a letter to confirm his understanding that this survey request would be accepted under the original HCFA-855 application disclosures. CMS Exs. 7 and 8. CMS responded with a notation that the original HCFA-855 would remain valid until a survey team was sent to Big Bend. CMS Ex. 8. Pursuant to its request, Big Bend was surveyed by state agency surveyors, accompanied by federal survey officials, on February 3, 2000. The team certified, and CMS then determined, that Big Bend was in compliance and eligible to participate in Medicare effective February 3, 2000. Big Bend then requested a hearing before the ALJ challenging the effective date and asserting that it should have been certified to participate as of October 27, 1999. CMS sought summary judgment, arguing that Big Bend failed to "raise any genuinely disputed issues of material facts on essential elements" in its request for review. CMS Motion for Summary Judgment and Incorporated Brief, filed May 16, 2001. Big Bend opposed the motion, arguing that summary judgment was inappropriate because an in-person hearing was necessary to permit Big Bend to challenge the factual bases of the de facto assertion by CMS that Big Bend was not in compliance on October 27, 1999, and to allow Big Bend to present evidence that it did not in fact intend by its letter to voluntarily withdraw from the process initiated by the October 27, 1999 state survey. Big Bend Resp. to CMS Motion, filed June 20, 2001. Big Bend proffered an affidavit from its CEO to establish what it would show at an in-person hearing and indicated that it also sought to cross-examine CMS witnesses about the December federal survey and surrounding events. Big Bend Ex. 4, 37. The ALJ made the following three numbered findings of fact and conclusions of law (FFCLs), each supported by detailed analysis:
ALJ Decision at 4, 6, 10 (bold in original). The ALJ did not grant summary judgment, because he did not agree with CMS that no material issues of fact were in dispute. He characterized the question of whether or not Big Bend abandoned its claim to be certified as in compliance with the participation requirement on October 27, 1999 as one that involved a factual determination. Id. at 4. Nevertheless, he concluded that no hearing was required to resolve this factual question. He reasoned that the written correspondence unambiguously established that Big Bend had given up any basis to assert an earlier certification date, after withdrawing from the federal survey that would have resolved the acceptability of that earlier state recommendation and then requesting a new onsite survey by the state agency. Id. at 5. Hence, the ALJ concluded that the oral testimony of the CEO that Big Bend proffered by affidavit regarding the CEO's expectations of the effect of the withdrawal letter or about Big Bend's intent in sending the letter would be unnecessary and improper, because the legal effect of the withdrawal letter turned not on what Big Bend meant to say but on what it did say to CMS in its correspondence. Id. at 5-6. With no testimony proffered that could, if believed, alter the resolution of the sole fact-based question, the ALJ effectively concluded that a hearing would have no purpose.(1) Issues on Appeal Big Bend excepted to each of the FFCLs. Big Bend contended first that CMS acted in disregard of the Act, its own regulations, and provisions of its own State Operations Manual, HCFA-Pub. 7 (SOM), by (1) conducting a certification survey itself rather than relying on a state agency certification survey and (2) failing to make a determination based on the state survey agency recommendation (which Big Bend could then have appealed on the merits). Id. at 26-34. Big Bend further argued that the ALJ abused his discretion by denying it the right to an in-person hearing despite recognizing that a material factual dispute was "at the center of this case." Big Bend Br. at 18, quoting ALJ Decision at 4. Big Bend argued that the ALJ instead should have heard testimony and permitted cross-examination to test CMS's version of events at the federal survey and to explore oral, as well as written, communications between the parties. Big Bend Br. at 20-22. Big Bend contended that the ALJ erred in refusing to accept testimony on the grounds that it would constitute impermissible "parol evidence" as to the intended meaning of the written withdrawal. Big Bend Br. at 26. Big Bend asked that the Board not only find that an in-person hearing is necessary, but also that the Board remove to itself Big Bend's hearing request. Id. at 36. Big Bend reasoned that the ALJ had already announced his intention of excluding as inadmissible testimony that Big Bend would seek to present at such a hearing. Id. at 37. Big Bend also asserted that the ALJ failed to follow the rule that, in resolving a summary judgment motion, a judge should draw all reasonable inferences in favor of the non-moving party. Id. Big Bend argued in the alternative that, if the Board did not itself hold a hearing, it should enter judgment itself setting the earlier effective date based on what Big Bend considered the reasonable inferences establishing that CMS did not set out a prima facie case in support of its refusal to accept that date. Id. at 39. Further, Big Bend argued that even the evidence already of record contradicted the ALJ's finding that Big Bend had abandoned the contention that it qualified for the earlier certification date. Id. at 23. The CEO's letter itself, Big Bend noted, spoke only of withdrawing from the "Validation Survey process." Id. at 24. Big Bend asserted instead that CMS unilaterally recharacterized Big Bend's letter as withdrawing Big Bend's application to participate rather than as simply withdrawing from one survey. Id. We note that the other material factual dispute pressed by Big Bend - the question of whether it was in compliance on October 27, 1999 - is moot in light of our conclusion that Big Bend cannot now be heard to assert that it should have been found eligible to participate based on the first state certification recommendation. Furthermore, Big Bend argued that the timing of its discovery of an investigative report made by the surveyors involved in the aborted federal survey and its contents raised unanswered questions. Big Bend pointed to CMS's incomplete response to a Freedom of Information Act (FOIA) request for documents made by Big Bend while the case was before the ALJ as making even more evident the need for an in-person hearing. Id. at 10. Big Bend proffered on appeal two documents relating to the FOIA process to which CMS objected on the ground that the record was already closed. Id. at 10-11 and attached exhibits numbered Big Bend Exs. 12 and 13; CMS Br. at 24. Standard of Review Our standard of review on appeal from an ALJ decision of a disputed issue of law is whether the initial decision is erroneous. See Guidelines for Appellate Review of Decisions of Administrative Law Judges Affecting a Provider's Participation in the Medicare and Medicaid Programs; Carehouse Convalescent Hospital, DAB No. 1799 (2001); Lake Cook Terrace Nursing Center, DAB No. 1745 (2000). 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. Id. 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; a prejudicial error of procedure (including an abuse of discretion under the law or applicable regulations) was committed. Id. |
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| ANALYSIS | |
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Below, we first address Big Bend's challenge to the legality of the process conducted by CMS in reviewing the state agency's recommendation that Big Bend be certified to participate in Medicare. We conclude that CMS had authority to conduct its own survey to determine whether it could rely on the state agency recommendation. We next consider whether the ALJ erred in denying an in-person hearing and reaching a decision on the merits based on the undisputed facts and written exhibits. We conclude that Big Bend proffered no testimonial evidence that, even if credible, would be material to whether it was entitled to assert an earlier certification date (nor did Big Bend seek cross-examination that, if successful, would undercut factual evidence necessary to the decision). We conclude therefore that the ALJ did not err in denying an in-person hearing. We next consider and reject Big Bend's claim that CMS's failure to issue a determination on the October 1999 certification recommendation prejudiced it or demonstrated that its withdrawal could not mean what it appeared to say. Finally, we reject as inapposite Big Bend's arguments about the FOIA process.
On appeal, Big Bend acknowledged that CMS was not required to accept the recommendation made by the state survey agency. Big Bend Br. at 18, 26-27. Big Bend argued that CMS was nevertheless required to make a determination based on solely the results of and recommendation for certification arising from the October 27, 1999 state agency survey without looking behind those results by conducting its own survey. Id. Big Bend further argued that CMS was not authorized to conduct its own survey as any part of the certification process because authority to perform surveys for certification is vested solely in the state survey agencies for providers like Big Bend. Big Bend Br. at 27-31. In this regard, Big Bend emphasized that a list of various kinds of federal monitoring and comparative surveys in the State Operations Manual (SOM) does not mention surveys of prospective providers for purposes of reviewing a certification decision.(2) Big Bend took the position that any consideration of the results of a federal survey was legally impermissible as part of the process of resolving whether to approve a state certification recommendation. Big Bend Br. at 33. We agree with the ALJ that CMS was not constrained in the manner suggested by Big Bend. CMS would be on the horns of a troubling dilemma if it disbelieved survey results but could express its concerns only by an immediate denial of certification. Such denials are appealable, as Big Bend itself highlighted, and CMS would not be able to document whether or not its concerns were justified without collecting information sufficient to resolve them. For CMS to act independently to confirm or overturn the findings underlying the state survey recommendation thus protects beneficiaries from a provider not in compliance with the statutory and regulatory requirements, while providing a sound record for CMS to make and the provider to appeal the ultimate decision. We would be loath to read into the law some prohibition against CMS taking that course absent a clear provision unambiguously imposing it. We see no basis in the statute, regulations, or manual provisions cited by Big Bend to support the position that CMS was required to make a determination based on a questioned survey without conducting its own survey to validate the results or obliged to make its determination "based on the October 27, 1999 [state agency] certification, regardless of the results of the December 7, 1999 survey," as Big Bend asserted. Big Bend Reply Br. at 13; Big Bend Br. at 29-35. The provision of the Act relied on by Big Bend reads as follows:
Section 1864(a) of the Act (emphasis added). The plain language of this provision will not bear the construction put on it by Big Bend in concluding that CMS "usurped a responsibility statutorily delegated to the state survey agency." Big Bend Br. at 30. It is not disputed that CMS did make an agreement with the appropriate state agency. The statutory language is clearly permissive, however, as to how much reliance the Secretary may find appropriate to put on a state certification. In fact, the provision vests authority in the Secretary to determine to what extent such reliance is appropriate and even then does not mandate treating the state certification as conclusive. Hence, if anything, this provision provides general authority for the federal agency to proceed as it deems appropriate to make a determination about how to treat a certification. Big Bend confuses two stages in the process of achieving participation in Medicare in its argument. Certification determinations are indeed not undertaken by CMS in the first instance (where a state agency has agreed to perform them), but arise from a recommendation by a state survey agency based on an initial survey. It does not follow that CMS may not take independent measures to verify compliance where the state survey recommendation does not include evidence satisfactory to CMS of a provider's compliance with participation requirements, since CMS retains the ultimate responsibility to accept only providers who have satisfactorily assured CMS of their substantial compliance. 42 C.F.R. � 489.12(a)(3). Thus, the Act expressly authorizes the Secretary to "refuse to enter into an agreement" where the Secretary "has determined that the provider fails to comply substantially with the provisions of" the provider agreement, the Act, the regulations, or a plan of correction requirement. Section 1866(b)(2)(A); ALJ Decision at 11. Possible bases for CMS to deny an agreement are specified by regulation in section 489.12(a) and permit CMS to refuse to enter an agreement whenever the "prospective provider is unable to give satisfactory assurance of compliance with the requirements of title XVIII of the Act." 42 C.F.R. � 489.12(a)(3). This regulation does not dictate that CMS give the prospective provider an opportunity in a federal survey to demonstrate compliance where state certification survey results do not provide CMS with satisfactory assurance. It does make clear, however, that the criteria for approval are that CMS have such assurance and that the responsibility for providing that assurance lies with the prospective provider. We find it evident that the statutory and regulatory scheme reserves an inherent authority in CMS to take steps to assure itself that a prospective provider is able to comply with the requirements in place to protect patients before making a determination on a certification recommendation. See CMS Br. at 10, n.10. The regulations to which Big Bend refers as barring such CMS surveys are similarly unavailing. Big Bend Br. at 31, 33-34. Section 488.10(a) merely summarizes the statutory provision above, stating that it requires CMS to enter an agreement "with any State that is able and willing to do so" under which the state agency will determine, inter alia, whether prospective providers meet the participation conditions. 42 C.F.R. � 488.10(a). The next section provides that the function of the state agency in this regard is to "[s]urvey and make recommendations regarding the issues listed in � 488.10." 42 C.F.R. � 488.11(a). Further, the regulations explicitly provide that "[c]ertifications by the State represent recommendations" to CMS on the basis of which CMS will determine whether a provider is eligible to participate in the Medicare program. 42 C.F.R. � 488.12 (emphasis added). In addition, it is clear that "acceptance of a provider as a participant" requires an independent action by CMS. 42 C.F.R. � 489.11(a). Thus, it is only if CMS "determines that the provider meets the requirements" that CMS is then to send out notice and a provider agreement. Id. This determination action by CMS implies something more than a mandatory resolution based solely on the state's recommendation and evidence, however inadequate. Nor does anything in these regulations restrict what CMS may do to evaluate the state agency recommendation. The ALJ cited another regulation for the proposition that CMS had authority "to conduct a provider certification survey . . . even though it contracts with state survey agencies to perform surveys on its behalf." ALJ Decision at 11, citing 42 C.F.R. � 489.13(a)(1)(i). The cited regulation provides for how to determine the effective date of an agreement to participate and applies by its terms (with exceptions not relevant here) to entities that "[a]re subject to survey and certification by [CMS] or the State survey agency." We agree with Big Bend that the ALJ's reliance on this regulation as a direct mandate for CMS to conduct follow-up surveys to evaluate state recommendations is misplaced. Big Bend Br. at 33. The reference to entities subject to survey and certification by CMS does not add anything to the argument about what CMS has authority to do upon a state agency's recommendation. We disagree with Big Bend's further contention that this regulation somehow restricts CMS to conducting surveys only where no willing or able state agency exists. Big Bend at 34. The regulation does not directly speak to the question of whether or when CMS may conduct a survey as part of deciding whether to accept a recommendation. We thus find no support in the Act or regulations for Big Bend's claim that CMS acted in contravention of the statute or in disregard of its own regulations(3) in undertaking the federal survey to follow-up on its concerns about the validity of the state certification recommendation. We also agree with the ALJ that the SOM's guidance to state agency surveyors describing various kinds of federal surveys does not limit CMS's authority to conduct surveys for other purposes. ALJ Decision at 10-11, and cites therein. We find that the SOM simply does not address how CMS may proceed when confronted with a state survey agency certification recommending approval which CMS finds inadequate.(4) In fact, a review of the SOM makes clear that the excerpts cited by Big Bend are taken out of context. The relevant sections of the SOM, read as a whole, lead to the opposite conclusion. First, the SOM explains that certification is a state agency function which consists in the Medicare program of submission of evidence and recommendations to CMS. The CMS Regional Office has the ultimate responsibility for deciding whether a provider may participate in the program, so that participation is a federal decision. See SOM, Ch. 2, � 2000. Hence, CMS's survey is better understood as a part of the federal decision about whether to approve participation rather than as part of the state process leading to the decision of whether to certify compliance. For this reason, we find inapposite the provisions in the Regional Office Manual (HCFA Pub. 23-2 (ROM)), which Big Bend cited, to the effect that a comparative survey will not substitute for a state agency resurvey inspection, which will be performed if significant problems are found, and will not result in a certification decision. Big Bend Br. at 32-33, citing ROM �� 3028, 6657, and 6672. There is no indication that the federal survey here was intended to "substitute for" a state re-survey nor to lead to a certification decision, but rather to contribute a CMS participation determination. Whether CMS would have issued a participation approval determination after completing the federal survey, however, or would have required the state agency to resurvey if CMS still found serious deficiencies, or taken some other action is moot in light of the logical effect of Big Bend's own actions here. We find no merit either in Big Bend's assertion that CMS must use notice and comment rulemaking to publish a regulation under the Administrative Procedure Act before it could use a federal monitoring survey to make a certification decision. Big Bend at 35, citing 5 U.S.C. � 552(a)(1)(D). First, we disagree with that characterization of what CMS did here, as explained above. Second, the authorities relied upon by Big Bend refer to the need to adopt by notice and comment a substantive rule, defined as "a rule that effects a change in existing law or policy or affects individual rights and obligations." Id. at 35-36, and cases cited therein.(5) We do not discuss the applicability of the cited cases further because no substantive rule is being applied here. As discussed above, we do not find the conduct of the survey at issue to amount to a change in or to be inconsistent with the existing law and policy. Given our conclusion above that CMS did not violate or disregard any provision in the Act, regulations or manuals by conducting this survey, we need not address arguments about whether the manuals have the force of law or are binding on CMS. We conclude that the CMS survey was within CMS's authority.
Big Bend argued that a prior Board decision, which concluded that the ALJ in that case made a prejudicial error of procedure by denying an in-person hearing, compelled the ALJ to hold an in-person hearing in the present case. Big Bend Br. at 20; Garden City Medical Clinic, DAB No. 1763 (2001). The narrow holding of Garden City was that the ALJ could not rely on affidavits submitted by CMS to support summary judgment as if they were undisputed, where the facility expressly sought to cross-examine the affiants and the ALJ did not explain why cross-examination was unnecessary. DAB No. 1763. In the present case, the ALJ did not rely on CMS affidavits in resolving the controverted factual issue but rather on the documentary record of correspondence submitted by both parties. Big Bend did not question the authenticity of any of the correspondence. Big Bend argued, however, that Garden City should be read to establish that the only exception to the requirement to provide an in-person hearing is where no issues of material fact exist so that summary judgment is justified. Big Bend Br. at 20. This overstates the guidance of that case. We do not lightly uphold any limitation on statutory hearing rights. Fairview Nursing Plaza, Inc., DAB No. 1715 (1999), and cases cited therein. Nevertheless, an in-person hearing is not required or even meaningful in every case. In some cases, parties waive that right; in others, no issue of material fact is presented; and, in some cases, any factual issue is resolved on the face of the written record because the proffered testimony, even if accepted as true, would not make a difference. The last situation is much less common, and it is worth observing why the possibility has arisen in this case. Big Bend did not seek a hearing when CMS originally denied certification based on the unfavorable state agency recommendation. Since Big Bend asked to terminate the CMS follow-up survey, no deficiency findings resulted for Big Bend to appeal. Hence, this case presents itself in an unusual posture with no dispute about surveyor findings.(6) The factual issue defined by the ALJ is one heavily mixed with legal questions, that is, what effect did Big Bend's withdrawal from the federal survey process and request for a later survey have on the proper effective date. Our conclusion that no evidentiary hearing is required in such circumstances is entirely consistent with our decision in Garden City, which explained:
DAB No. 1763, at 11-12 (emphasis added). The Board was not directly confronted in Garden City with a situation where an ALJ found a material factual dispute but found that the evidence proffered for hearing would not make a difference to its resolution. In a recent case, the Board revisited the question of when an ALJ may decide a case without holding an in-person hearing where the petitioner has not expressly waived in writing its right to appear and present evidence.(7) Glenburn Home, DAB No. 1806 (2002). In Glenburn, the Board found that the ALJ did not have sufficient support for a conclusion that Glenburn waived its right to an oral hearing, in a case complicated by the ALJ having ruled on an issue raised in a request for hearing filed in another matter not before him and having failed generally to clarify the scope of the dispute and the nature of the motions before him. DAB No. 1806, at 2-3, 16-24. On the legal standard for denying an oral hearing, the Board held that an express written statement is not always a prerequisite, explaining this holding as follows:
DAB No. 1806, at 16-17 (emphasis added). The last is the situation in the case before us. We reject Big Bend's assertions that this standard in any way impinges on "traditional notions" of procedural due process. Big Bend Br. at 19-20.(8) To convene an in-person hearing where no proffered evidence would have any effect on the outcome would be an empty formalism and a waste of administrative and litigant resources. Cross-examination serves the purpose of testing the credibility and reliability of assertions of sources relied on by the opposing party. The crucial evidence here was a letter from Big Bend's CEO; secondary evidence included further correspondence between CMS and Big Bend. The intentions of the authors of these letters were not germane. The core conclusion here was that Big Bend, in interrupting the federal surveyors seeking to determine whether to rely on the state agency recommendations and choosing to seek an onsite survey at a later date of its choosing, took action in light of which Big Bend is now barred from relying on the October 27 survey findings and resulting recommendation. The later correspondence simply shows CMS acting in accord with that request, and Big Bend's continued action in accord with the resulting circumstances. Hence, the correspondence is relied on solely as a demonstration of the actions of the parties taken by sending them (and for purposes of considering the legal effects of those actions), rather than as declarations of the authors concerning their intended meaning or state of mind or expectations. While the ALJ might perhaps have been clearer in developing the rationale, he sufficiently explained the absence of any basis for an in-person hearing where no testimony (including cross-examination, regardless of how credible it might be), could alter the relevant factual findings.(9) Big Bend also cited as error the ALJ's passing reference to what Big Bend sought to present at a hearing as inappropriate parol evidence to interpret the meaning of statements in the CEO's letter, which the ALJ concluded was clear on its face. See Big Bend Br. at 26; ALJ Decision at 6. The parol evidence rule relates to the interpretation of contract provisions and limits the admissibility of evidence of oral communications extrinsic to a written agreement to situations where the language of an agreement is ambiguous. The rule specifically bars such evidence where used to contradict written terms that are clear and complete on their face. See, e.g., Norfolk Shipbuilding & Drydock Corp. v. Seabulk Transmarine Partnership, Ltd., __ F.3d __, 2001 WL 1504682 (5th Cir. 2001); Telecom Intern. America, Ltd. v. AT & T Corp., __ F.3d __, 2000 WL 33650021 (2nd Cir. 2000); see generally Community Relations - Social Development Commission, DAB No. 323 (1982). Big Bend argued that the parol evidence rule was inapplicable and that, even if it were applicable, testimony of its CEO should have been admitted because the correspondence was ambiguous and no "meeting of the minds" occurred. We find that the rule was not on point, and the question of a "meeting of the minds" was irrelevant, because the writing at issue was a unilateral action by Big Bend and not a quid pro quo agreement between the parties. Not all testimony about a transaction or event is barred simply because a written record also exists. Here, the testimony proffered by Big Bend did not seek to clarify an ambiguity but to create one. The issue properly before the ALJ, as we discuss next, was not the intended meaning of the CEO's letter but its legal effect. While the analogy to parol evidence may have been imperfect, the ALJ did not err in determining that no testimony was required to address this issue. We address the substance of Big Bend's challenges to the ALJ's resolution of this issue in the next section. We consider there whether the record before the ALJ supported his conclusion that Big Bend effectuated an abandonment of any claim to an earlier effective date. At this point, however, we simply conclude that neither our prior decisions nor any other cited authority compels provision of an in-person hearing if the proffered testimony would not make a difference and the decision does not depend on the credibility of witnesses for whom cross-examination is sought. We conclude therefore that the ALJ did not err here by declining to convene an in-person hearing if he was correct to conclude that no testimony was proffered or cross-examination sought that would make a difference in resolving any material issue of fact in dispute. We next consider whether the ALJ erred in determining that the case before him met that test.
Big Bend made a general assertion that the ALJ applied an erroneous standard in weighing the evidence in the record. Big Bend contended that the ALJ should have been bound by the rule that an adjudicator must draw all reasonable inferences in favor of the non-movant party in resolving a summary judgment motion. Big Bend Br. at 37; Big Bend Reply Br. at 22, and cases cited therein. We find the cited rule inapplicable here. The ALJ did not grant, and in fact denied, summary judgment. Having done so, and having determined that the proffered evidence for an in-person hearing was not relevant to resolving the dispute, he proceeded to decision on the record before him. The proper standard for resolving the merits of a case is the preponderance of the evidence based on the evidence in the record as a whole and the reasonable inferences to be drawn therefrom, without presumptions favoring either party. A careful review of the ALJ Decision demonstrates that the ALJ applied this standard to resolving the issues presented to him. In describing summary judgment as an inaccurate characterization, the ALJ noted the presence of a factual dispute "at the center of this case." ALJ Decision at 4. The single dispute which he referenced was whether Big Bend "abandoned any right it may have had to argue that it was in compliance with Medicare participation requirements as of the October 27, 1999 survey or on dates between October 27, 1999 and running through December 7, 1999." Id. The ALJ's discussion of this issue makes clear, however, that he understood that the factual component of this issue (what action Big Bend took with what result) was entangled with the legal determination of what the effects of those acts were. That is, the factual element is what Big Bend wrote to CMS that resulted in the early termination of the federal survey. The legal element is what effect Big Bend's withdrawal request had as a matter of law on its rights in seeking to participate in the Medicare program. The ALJ concluded, correctly in our view, that the testimony that Big Bend was proffering could make no difference to resolving any material issue in this case, including testimony about what effect Big Bend intended or expected its letter to have, what CMS surveyors or authors of CMS's correspondence understood about Big Bend's expectations or meant by their statements, and whether CMS could show a prima facie case that Big Bend was not in substantial compliance at the time the state survey agency first certified that it was. We conclude that no material facts were in dispute that turned on any testimony that was proffered for an in-person hearing. In that situation, the ALJ made no prejudicial error of procedure in denying an in-person hearing, rejecting summary judgment, and resolving the case on its merits on the record before him. In resolving the case on the undisputed facts and written record, the ALJ did not err in applying the preponderance of the evidence standard. Even had he resolved this matter by means of summary judgment, as noted above, the application of an inference in favor of Big Bend would not make any difference to the outcome because he did not rely on any inferences but on the effect that followed logically from undisputed events.
The core of the disagreement between the parties on appeal concerns the ALJ's conclusion that admission of testimony about Big Bend's intent or expectations in its correspondence with CMS would be both unnecessary to determine the content of Big Bend's representation and prejudicial to CMS. ALJ Decision at 6. In essence the ALJ's determination in that regard was founded on the premise that the written record resolved the outstanding material issues of fact and that no testimony was proffered that could alter his findings even were he to find it credible. We therefore address this issue next. Big Bend's proffer was embodied in an affidavit by its CEO, David Conejo. Big Bend Ex. 4. He asserted that he was present when the federal survey occurred and that Mr. Guioa told him that its purpose was to "validate the results of the survey of the hospital performed October 25-27, 1999" by the state survey agency (the favorable initial certification survey). Id. at � 4. Mr. Conejo further averred that Mr. Guioa informed him after lunch that the team "had found deficiencies in the hospital's operations, and had been hampered by the absence of the Pharmacist and the Director of Nursing [DON]," and that "based on the initial findings, if the full three day survey was completed it was likely the hospital would be found out of compliance with the Medicare conditions of participation." Id. at � 6. In addition, according to Mr. Conejo, Mr. Guioa stated that Big Bend "could withdraw from the validation survey process without penalty and the effect would be as if the survey had never taken place." Id. Mr. Conejo asserted that he understood this to mean that withdrawing from the federal survey would "not have any effect on the hospital's certification process" and that a later re-survey, if successful, would result in approval of the original effective date. Id. at � 7. Mr. Conejo declared that, had he understood that asking for a later survey date would result in a later effective date, he would have asked that the survey continue in the expectation that the outcome might improve when the pharmacist and DON returned. Id. at � 9. The letter which Mr. Conejo then handed to the surveyors, however, contained nothing of this purported understanding nor did it assert that the withdrawal was contingent on a guarantee that a later successful survey performed upon Big Bend's request would result in a certification date relating back to the prior state agency recommendation. In fact, the entire text of the letter read as follows:
Big Bend Ex. 5. We agree with the ALJ that Big Bend's subjective intent or understanding in drafting its letter is irrelevant where the the letter itself is clear and had evident consequences.(10) The letter requested the termination of the federal survey already underway. Mr. Conejo acknowledged that the context of the letter was that CMS was seeking to validate by its own survey the validity of the state survey finding that no deficiencies at all persisted at the facility (where serious and multiple deficiencies had been found a short time before). He also acknowledged that he had already been informed that deficiencies had been found and that it was unlikely that Big Bend would qualify to participate in Medicare if the federal survey ran its course. CMS acted in reliance on the withdrawal request and did not complete its survey, finalize its findings, or proceed to deny participation. CMS accepted the alternative requested by Big Bend, that is a new onsite survey upon its request. Big Bend argued that its request was only to withdraw from "'the validation survey process' not the application and certification process." Big Bend Br. at 23-24. What is unambiguously established on the face of Mr. Conejo's letter is that Big Bend voluntarily sought to end the survey then underway and to resubmit its request for an onsite survey at a later date. Big Bend does not dispute, however, that the federal survey was unannounced, whereas the onsite survey was to occur when Big Bend asserted it was prepared to demonstrate compliance, which implies that it would be an initial certification survey. Even accepting as true Mr. Conejo's report of Mr. Guioa's statement that the effect of a withdrawal "would be as if the survey had never taken place," it does not follow Mr. Conejo could reasonably claim that the prior state recommendation would remain outstanding until whatever date in the future Big Bend was prepared to show compliance. The status quo ante of the federal survey was that CMS was not satisfied that the state agency recommendation was reliable. One way for CMS to obtain the required satisfactory assurance of compliance was to complete its own survey. We rejected above Big Bend's arguments that CMS had no authority to conduct a survey for this purpose. Neither in Mr. Conejo's account of the conversation nor in its letters did Big Bend assert that the survey was improper or demand the surveyors leave on the grounds that it was unauthorized. Nor did he seek a CMS final determination on the prior state agency recommendation based on the information available. Instead, he expressly asked the surveyors not to go forward to complete formal findings as to whether or not Big Bend had met the required conditions, and asked instead for another survey to be conducted when Big Bend was prepared. The effective date of an agreement with a prospective provider is the date that a certification survey is completed "if on that date the provider . . . meets all applicable Federal requirements." 42 C.F.R. � 498.13(b). If the provider fails to meet any requirements as of that date, the agreement will be effective on the date when the provider "meets all requirements" or has lower level deficiencies for which an acceptable plan of correction is submitted. 42 C.F.R. � 489.13(c)(2). When the federal surveyors arrived, as the Conejo affidavit effectively acknowledged, they were not satisfied that Big Bend had met all applicable conditions because they questioned the validity of the state agency survey findings. CMS has the authority to "refuse to enter into an agreement" with a prospective provider which is "unable to give satisfactory assurance of compliance." 42 C.F.R. � 489.12(a)(3). Thus, the effective date may be based on a state certification survey only if the provider demonstrated that it met the necessary requirements in a way that gave CMS satisfactory assurance of compliance. That had not happened here at the time the federal surveyors arrived at Big Bend. We agree with the ALJ that CMS would be impermissibly prejudiced were Big Bend now heard to assert that it was in substantial compliance from October 27, 1999 forward, despite what it said in its withdrawal letter. Big Bend expressly stated in the letter that it would resubmit its request for a survey at a later date. Nothing in the letter suggested that Big Bend was asking for a repeat federal survey for Big Bend to again try to validate the results of the October 1999 survey, the very process from which it withdrew. The plain meaning of the letter, and the meaning confirmed by later correspondence between the parties, is that what was sought was a new initial certification survey at a time of Big Bend's choosing. The Regional Office of CMS sent a follow-up letter to Big Bend after the surveyors had terminated their visit at Mr. Conejo's request. The body of that letter read as follows:
CMS Ex. 6 (emphasis added). Clearly, CMS accepted the withdrawal letter as ending Big Bend's effort to obtain participation based on the October 1999 state recommendations and expected Big Bend to reapply for an initial certification survey. Big Bend did not respond that the Regional Office letter misstated its expectations. Thus, even accepting as true the proffered testimony about what the surveyor said and what Big Bend's understanding was based on that about the effective date it anticipated, at least by the exchange of correspondence Big Bend had notice quite soon after the federal survey that any conflicting understanding it may have held was in error. Yet, Big Bend took no steps to clarify and, in fact, used wording in its response inconsistent with such an understanding. Big Bend's next communication did advise that Big Bend would "be prepared for the HCFA survey, under its original HCFA-855 application, by January 12, 2000," but went on to ask for the team to "perform the certification survey." CMS Ex. 7.(11) The reference to a "HCFA-855 application" created some confusion in this case. A HCFA-855 is not synonymous with an application to participate in Medicare based on a state agency certification. The HCFA-855 is a part of an application by a prospective provider submitted to a state survey agency containing certain required information about the prospective provider. When an applicant is denied participation for noncompliance, the original enrollment application including the HCFA-855 remains outstanding for three months to allow for a new initial survey if the applicant chooses to "reapply" for certification, but the entire enrollment process must be repeated if more than three months pass prior to another survey. State Operations Manual (SOM), Ch. 2, � 2005. Big Bend's three-month period expired in January 2000. Consequently, Mr. Conejo wrote to Mr. Guioa on January 20, 2000 asking for confirmation that the certification survey would be conducted on the basis of the outstanding HCFA-855 since it was requested before January 19, 2000. CMS Ex. 8. Mr. Guioa responded in a handwritten note that "the approved HCFA-855 is valid until the survey team arrives at your hospital to conduct the initial Medicare survey." Id. It is evident that the upshot of this correspondence is entirely consistent with the December 7th withdrawal letter. Big Bend had to "reapply" for a new initial certification survey after withdrawing from the survey process growing out of the state recommendation, but would not have to resubmit a new set of paperwork to support its application as long as it requested the survey within three months of the end of the prior certification survey which had been effectively abandoned. The initial certification survey (unlike provider compliance surveys) follows a request by the prospective provider asserting that it is ready to demonstrate its compliance. SOM, Ch. 2, � 2005.A.2. Big Bend's withdrawal from the federal survey and request for a new initial survey after January 12, 2000, when it would be "prepared," was tantamount to an admission that it was not ready to demonstrate compliance at an earlier date. Had Big Bend requested a decision based on the questioned October 27, 1999 state survey, CMS would have had the option to either decline the state survey agency's recommendation and deny participation or insist that Big Bend submit to the completion of the December federal survey before CMS decided whether to accept the certification recommendation. One inevitable consequence of Big Bend's actions was that CMS stopped the process that would have resulted in a CMS determination on the state survey agency recommendation, and, if that determination was adverse, an opportunity for Big Bend to challenge the basis for CMS's concerns (by proving that it was in compliance at the time of the state survey recommendation).
We first address in this section a number of statements in Big Bend's briefing and explain why they do not present issues requiring resolution before us. On appeal, Big Bend recited in great detail the nature of the large, sparsely-populated county which it serves, the history of its corporate parent's acquisition of the hospital facility, its status as the sole hospital in its town, and the efforts the new owners made to upgrade and prepare for the initial and subsequent surveys. Big Bend Br. at 2-4; Big Bend Reply Br. at 2-5. Big Bend attributed its failure in the initial survey to the former CEO and Quality Director (carry-overs from the former facility) who reinstated old policies and procedures immediately before the survey, and both of whom Big Bend then fired. Big Bend Br. at 4-5. Big Bend also asserted that it spent a great deal of money treating Medicare patients in reliance on the state agency's recommended certification date, which it would not have continued to do in non-emergency situations absent an expectation of reimbursement. Big Bend Br. at 7-8; Big Bend Reply Br. at 12-13. None of these factual assertions is material to the issue on which this appeal turns, i.e., whether Big Bend 's decision to withdraw from the federal survey and request a new survey when it was prepared amounted on its face to abandoning any effort to prove that it was in compliance at the time of the state's certification survey. This issue is not resolved by any evidence concerning whether the hospital would serve a useful role in its community or whether its management made good faith efforts to achieve compliance. Big Bend did not appeal the first denial of certification and its retrospective explanations of its failure are hence irrelevant now. Big Bend denied CMS's contention that the claim that Big Bend relied on an expectation of reimbursement to its detriment amounted to an effort to found its appeal on equity. Big Bend Reply Br. at 15. Big Bend did allege that it had equitable claims resting on a quantum meruit argument for the services provided, but asserted that it was pressing before the Board only administratively justiciable arguments about CMS's alleged deviation from the statutory and regulatory framework for certification determinations. Big Bend Reply Br. at 15, n.18. The existence or amount of unreimbursed services has no bearing on what the legal effect of the undisputed events and the written correspondence was under the law and regulations. We addressed above Big Bend's claim that CMS acted outside its authority by conducting the December 1999 survey or by failing to make a non-certification determination. We therefore neither make any findings based on these assertions nor discern any need to remand for the ALJ to consider additional factual findings.
Big Bend argued that had CMS formally disapproved the certification, the disapproval notice would have triggered its right to a hearing on whether it was in substantial compliance on October 27, 1999. Hence, Big Bend contended that it has been prejudiced by the loss of its right to contest that issue as a result of CMS's failure to issue an initial determination formally approving or disapproving the state's certification recommendation. We note first that this case does not present a situation in which CMS simply never issued a determination after receiving a state survey certification recommending participation. In such a situation, a facility might argue that the inaction deprived it of an opportunity for a hearing. We do not address what rights a facility in such a case might have. Big Bend was not in that situation. The record before the ALJ provided substantial evidence in support of his determination that the December 7, 1999 survey was expressly conducted for the purpose of reaching a conclusion about whether or not to accept the outstanding certification recommendation, and Big Bend did not dispute this finding. ALJ Decision at 7-9. The decision-making process was terminated when the federal survey was terminated prematurely at Big Bend's request. Big Bend's own actions interrupted the steps that would have led to a determination. Hence, the absence of a formal, appealable denial of participation resulted here not from CMS inaction but from Big Bend's intervening actions. Big Bend argued, however, that the result attributed to its withdrawal letter could not be, as the ALJ found, that its claim of certification as of the earlier date was abandoned because that outcome would be even worse than the result of any completed, unfavorable survey. Big Bend Reply Br. at 11-13. That is, a negative outcome from a finished survey would have at least implied a right to appeal its basis. Hence, Big Bend contended it could not have intended to abandon any right to contest a denial of an earlier effective date, but rather sought only to have another opportunity to demonstrate compliance which would then affirm the state recommendation. Big Bend's basis for this assertion depends on its claim, which we have already rejected, that CMS had no authority to consider the results of its own survey in evaluating the state agency's recommendation.
The arguments pressed by Big Bend here are the kind that invited speculation by the ALJ about why Big Bend had incentives to prefer restarting the certification process with a new initial survey to pressing forward for a CMS determination on the October 27, 1999 survey and recommendation. We do not find it necessary, however, to resolve any question of how Big Bend could have acted to worsen its position or why it might have chosen a course it now depicts as unadvisable. It suffices that, as we have found already, it is clear that Big Bend sought a new initial certification survey by its unambiguous written communications. We further conclude that CMS did not breach a duty to Big Bend by failing to issue an initial determination on the state agency certification recommendation, in light of Big Bend's withdrawal before CMS completed the steps which it had informed Big Bend that it undertook to evaluate its concerns about the reliability of the recommendation.
Big Bend also suggested that an additional reason compelling an in-person hearing is that CMS did not fully respond to a FOIA document request until after the ALJ had issued his decision. Big Bend Br. at 10-12. Big Bend submitted with its appellate brief two exhibits consisting of (1) letters from the CMS FOIA Division showing the date of production as August 29, 2001(12) and describing documents withheld and (2) Big Bend's counsel's letter appealing the withholding decision, along with attachments. Big Bend Exs. 12 and 13. Correspondence relating to the original document requests to CMS and to the state agency is already in the record. See Big Bend Exs. 6, 7, and 9. Big Bend also accused CMS of responding in bad faith and deliberately excluding facts from the record, in that the state agency provided to Big Bend an investigative report into the October 27, 1999 survey, which CMS had received but had not produced to Big Bend. Big Bend Br. at 11. Big Bend contended that only a hearing would provide Big Bend with an opportunity to cross-examine CMS witnesses to determine if additional information was withheld. CMS objected to the admission of the additional exhibits on three bases: (1) that the record is closed; (2) that FOIA requests fall under a separate process; and (3) that the documents are irrelevant and cast unnecessary "aspersions on CMS's integrity." CMS Br. at 25. In addition, CMS asserted that the investigative report was not produced because CMS did not think it was relevant. Id. CMS's objection on the first basis is simply mistaken. The regulations expressly authorize the Board to admit evidence into the record on appeal in addition to the evidence of record before the ALJ "if the Board considers that the additional evidence is relevant and material to an issue before it," and even to require on its own motion the production of additional relevant evidence that appears available. 42 C.F.R. � 498.86. Furthermore, since the exhibits were created after the ALJ Decision, it is obvious that Big Bend had no opportunity to present them earlier. CMS is correct, however, that the FOIA process is independent of the Part 498 appeal process. A dispute over the production of documents in response to a FOIA request cannot be resolved as part of the appeal of an effective date. The ALJ has the power to subpoena both witnesses and documents "if they are reasonably necessary for the full presentation of a case." 42 C.F.R. � 498.58(a). If Big Bend was concerned that relevant documents were being withheld, its remedy was to seek the assistance of the ALJ to obtain them for the record. Moreover, the investigative report was in Big Bend's possession before the ALJ ruled and was admitted to the record. Big Bend Ex. 10. Nothing in that exhibit addresses the issue on which the resolution of this case turned. We see no reason to hold an in-person hearing in the hope that some further evidence might be adduced at this late date. We thus agree that the documents are not relevant to any issue before us on appeal and decline to admit them to the record. We do note, however, that we agree with Big Bend that it is troubling that CMS stated that it failed to produce the investigative report because it "did not consider the submission of this report would be useful or relevant to resolve the specific certification questions resulting from the December 7, 1999 and February 3, 2000 surveys." CMS Br. at 25. Determining the relevance of evidence is an adjudicatory function of the ALJ and should not be preempted by CMS in deciding whether to produce material. We find no prejudice in this case because the document was obtained and placed on the record and because Big Bend apparently relied on the FOIA process rather than seeking to obtain documents through the ALJ. Conclusion For the reasons detailed above, we affirm the ALJ Decision in its entirety. |
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| JUDGE | |
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Judith A. Ballard Donald F. Garrett Marc R. Hillson |
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1. We note that CMS did not appeal the ALJ's denial of summary judgment. For that reason, we do not address whether the issue of the effect of Big Bend's withdrawal letter and other actions could more properly be viewed as one of law. Big Bend did not dispute either that it sent the letter nor what the letter said. 2. Big Bend repeatedly emphasized its view that the nature of the federal survey was "deeply shrouded in mystery" and that CMS had referred to it by a variety of names, such as monitoring, comparative, focused comparative, or validation survey. See, e.g., Big Bend Br. at 8, n.10. The implication seemed to be that the use of different names supported Big Bend's contention that CMS lacked authority to conduct a survey under the circumstances and for the purposes at issue here. We do not attribute particular significance to the adjectives used by the federal surveyor or in CMS briefs, but rather inquire about the substance and purpose of the visit. As discussed in the text, furthermore, we agree with the ALJ that CMS need not have included the specific type of survey here in its list of subcategories of federal monitoring surveys in the SOM in order to support its authority to conduct this survey. See ALJ Decision at 11-12. 3. In light of this discussion, we do not address the various authorities Big Bend cited for the proposition that CMS must abide by its own regulations. It does not follow from a requirement that an agency not act in disregard of its own regulations once promulgated that an agency may not undertake any actions not addressed in published regulations, where the statute, as here, provides it with authority to act. 4. In this case, the record indicates that CMS lacked confidence in the survey report giving the hospital a clean rating with no deficiencies only 20 days after the same state agency had found multiple condition-level deficiencies. CMS indicated that it questioned how the particular findings could have been resolved so quickly. See CMS Ex. 4, at 1-2. Whether CMS's concerns had merit is now a moot point. 5. APA Section 501(a) requires publication in the Federal Register of procedural rules and provides that no person may be adversely affected by information required to be published that was not, unless they have actual notice. While the notice given during the survey may have been ambiguous about the procedural effect of a withdrawal, later correspondence from CMS was sufficiently clear in context to charge Big Bend with actual notice. Big Bend took no action in response to suggest that it was unaware of the implications of its actions or to rescind the withdrawal. We conclude that Big Bend did not lack notice under the APA. 6. That is to say, the threshold issue is whether the withdrawal from the federal follow-up survey and Big Bend's subsequent actions effectively terminated the process of reviewing the state certification recommendation based on the October 1999 state survey not whether Big Bend would ultimately have been found in compliance at the federal survey (and certified to participate in Medicare) or found not in compliance (and the state recommendation rejected) had the federal surveyors completed their work. Only if Big Bend prevailed on this threshold matter, which we conclude it does not, would the question of whether Big Bend could prove compliance as of October 27, 1999 (and the findings of the state surveyors as of that time) become live factual issues. 7. The regulations provide that "[i]f an affected party wishes to waive its right to appear and present evidence at the hearing, it must file a written waiver with the ALJ." 42 C.F.R. � 498.66(a). In the present case, Big Bend did not rely on this provision in its appeal to us. Big Bend's arguments went largely to the claim that the ALJ should not have gone beyond rejecting CMS's summary judgment motion to ask whether any material issues of fact were genuinely disputed as to which testimonial evidence would be germane and that, having asked that, the ALJ erred in resolving it against Big Bend. 8. Big Bend cited two Supreme Court cases in which confrontation and cross-examination of witnesses was required even in non-criminal cases. Big Bend Br. at 20, citing Greene v. McElroy, 360 U.S. 474 (1959) and Goldberg v. Kelly, 397 U.S. 254 (1970). Neither case requires an in-person hearing in every instance when a material fact is in dispute. 9. A possible source of confusion on this point may have arisen from statements in the ALJ Decision speculating on what might have occurred if the CMS survey team had completed its work and found non-compliance and why Big Bend's CEO might well have been anxious to forestall such a formal finding of noncompliance by asking for a later survey rather than pressing for a determination based on the October 27, 1999 certification survey, as well as why CMS may have found this approach acceptable. ALJ Decision at 7. None of this discussion is necessary to the ALJ's conclusion, however. 10. Big Bend also argued that oral communications between its CEO and Mr. Guioa during the federal survey should have been included in the ALJ's determination of what Big Bend "actually told" CMS and what CMS "actually told" Big Bend, as well to establish the intended meaning of the later writings. Big Bend Br. at 21-22, quoting ALJ Decision at 6. We do not find error in the ALJ's decision not to examine the discussions in this light. Any confusion resulting from alleged statements by the surveyor could not serve to estop CMS from requiring a satisfactory showing of substantial compliance before permitting Big Bend to participate in the Medicare program. 11. Mr. Conejo also specifically asked that Mr. Guioa return with that team, and the initial certification was conducted by a joint state-federal team which included Mr. Guioa. 12. The ALJ Decision was issued August 1, 2001. |
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