SUBJECT:

Tyson Health and Rehab Center,

Petitioner,

Centers for Medicare & Medicaid Services.

DECISION

I dismiss as moot the hearing request of Petitioner, Tyson Health and Rehab Center. I also deny Petitioner's motion to stay this case indefinitely.

I. Background

Petitioner is a skilled nursing facility in Montgomery, Alabama. It participates in the Medicare program. Its participation is governed by sections 1819 and 1866 of the Social Security Act (Act) and federal regulations at 42 C.F.R. Parts 483 and 488. On September 12, 2003, surveyors from the Alabama Department of Public Health surveyed Petitioner for compliance with Medicare participation requirements (September survey). The surveyors determined that Petitioner failed to comply substantially with Medicare participation requirements. The Centers for Medicare & Medicaid Services (CMS) concurred with these findings and determined to impose remedies against Petitioner consisting of civil money penalties of $250 per day, beginning on September 12, 2003, for each day of Petitioner's noncompliance with participation requirements.

A re-survey was conducted at Petitioner's facility on November 25, 2003 (November survey). On this occasion the surveyors determined that Petitioner remained out of compliance with one or more participation requirements. CMS concurred with these findings and increased the amount of civil money penalties that it imposed against Petitioner to $300 per day, effective November 26, 2003. On December 17, 2003, Petitioner was re-surveyed for a second time and was found to be complying substantially with participation requirements.

On November 24, 2003, Petitioner filed a hearing request in which it challenged one of the noncompliance findings that was made at the September survey. Petitioner did not challenge the 14 remaining September survey deficiencies nor did it file a hearing request in which it challenged any of the deficiency findings that were made at the November survey. Nor did Petitioner challenge the reasonableness of the amounts of the civil money penalties that were imposed, either as a consequence of the September or the November surveys.

The case was assigned to me for a hearing and a decision. I issued a pre-hearing order in which I established a schedule for the parties to complete pre-hearing exchanges consisting of pre-hearing briefs and proposed exhibits, including the written direct testimony of all proposed witnesses. The parties complied with this schedule. With its exchange CMS filed a motion to dismiss Petitioner's hearing request. Petitioner opposed this motion and moved that this case be stayed indefinitely pending the outcome of an informal dispute resolution (IDR) proceeding in the State of Alabama. Petitioner then filed its pre-hearing exchange.

CMS designated its proposed exhibits, including the written direct testimony of its proposed witnesses, as CMS Ex. 1 - CMS Ex. 9. Petitioner designated its proposed exhibits, including the written direct testimony of its proposed witnesses, as P. Ex. 1 - P. Ex. 23. Additionally, Petitioner attached exhibits which it labeled as Exhibits "A" through "G" to its opposition to CMS's motion to dismiss. I am making all of the aforementioned exhibits part of the record of this case. I cite to some of them, where relevant, in this decision.

II. Issue, findings of fact and conclusions of law

A. Issue

The issue raised by CMS in its motion is whether Petitioner's hearing request is moot.

B. Findings of fact and conclusions of law

I make findings of fact and conclusions of law (Findings) to support my decision in this case. I set forth each Finding below as a separate heading. I discuss each Finding in detail.

1. Petitioner's challenge to the deficiency finding made at Tag 314 of the September survey is moot because the remaining unchallenged findings of noncompliance give CMS a basis to impose remedies, including civil money penalties, against Petitioner.

Regulations governing the imposition of remedies against skilled nursing facilities provide that CMS may impose civil money penalties against a facility for each day that the facility fails to comply substantially with one or more Medicare participation requirements. 42 C.F.R. � 488.406(a)(3). The regulations direct CMS to impose civil money penalties against a facility where the scope and severity of one or more of that facility's deficiencies is classified at "Category 2" or higher. Category 2 deficiencies exist where there are:

(i) Widespread deficiencies that constitute no actual harm with a potential for more than minimal harm but [which are not] immediate jeopardy; or

(ii) One or more deficiencies that constitute actual harm that is not immediate jeopardy.

42 C.F.R. � 488.408(d)(2)(i), (ii).

I take notice that State survey agencies, including the Alabama Department of Public Health, indicate in their survey findings the scope and severity of any deficiency that they identify by attaching a letter rating to it. A rating of "D" signifies that the deficiency constitutes isolated noncompliance with participation requirements with the potential for causing more than minimal harm to residents. A rating of "E" means that the surveyors found a pattern of noncompliance with the potential for causing more than minimal harm to residents. A rating of "F" indicates that the deficiency demonstrates widespread noncompliance with the potential for causing more than minimal harm to residents. A rating of "G" signifies that the deficiency is causing actual harm to one or more residents. Thus, the regulations direct CMS to impose civil money penalties to address deficiencies having scope and severity ratings of "F" and above, because a rating of "F" or higher meets or exceeds the regulatory definition of a Category 2 deficiency.

That is not to say that CMS may impose civil money penalties only in the case where the scope and severity of a deficiency is at level "F" or higher. The regulations direct CMS to impose civil money penalties to remedy level "F" or higher level deficiencies but they do not preclude CMS from imposing such penalties as remedies that address lower level deficiencies. Section 1819 of the Act and the pertinent regulations permit CMS to impose civil money penalties for deficiencies that are substantial, and any deficiency that is rated at level "D" or higher is a substantial deficiency. I take notice that CMS has imposed civil money penalties in cases where deficiencies are only at the "D" or "E" levels.

The September survey identified 15 deficiencies in Petitioner's operation that the surveyors assessed at levels "D" and above. CMS Ex. 2. ⁽¹⁾ Of these, 11 deficiencies were rated at level "D." CMS Ex. 2, at 2 - 24; 26 - 30. One was rated at level "E." Id. at 35 - 38. Two were rated at level "F." Id. at 30 - 31; 32 - 35. One was rated at level "G." Id. at 24 - 26.

In its hearing request, Petitioner challenged the level "G" deficiency, but it did not contest the 14 additional findings of substantial deficiencies that were made in the report of the September survey, including two findings at level "F." CMS Ex. 2. These uncontested findings became administratively final by virtue of Petitioner's failure to file a hearing request challenging them. See 42 C.F.R. � 498.40. ⁽²⁾ They provide a basis for CMS to impose civil money penalties against Petitioner independent from that which would exist were I to sustain the level "G" deficiency finding that was made in the report of the September survey.

Petitioner's challenge to the single "G" level deficiency is moot when it comes to deciding the question of whether CMS has the authority to impose civil money penalties against Petitioner because a basis exists to impose such remedies independent of the level "G" deficiency. The existence or non-existence of an additional "G" level deficiency is simply unnecessary to deciding the question of whether CMS has the authority to impose civil money penalties against Petitioner. ⁽³⁾ Regulations direct CMS to impose civil money penalties against Petitioner based on the existence of the two unchallenged "F" level deficiencies. 42 C.F.R. � 488.408(d)(2)(i), (ii). CMS also has discretion to impose civil money penalties based on the presence of "D" or "E" level deficiencies.

Petitioner asserts that I should take no action in this case until IDR of the level "G" deficiency is resolved because CMS will allegedly rescind the remedy determination if Petitioner prevails at IDR. Petitioner does not deny that CMS could impose civil money penalties for the level "F" and lower-level deficiencies, even in the absence of the single level "G" deficiency. However, Petitioner asserts that, as a matter of policy, CMS does not impose civil money penalties for such lower level deficiencies. ⁽⁴⁾ It asserts that CMS never would have imposed penalties in this case but for the presence of the level "G" deficiency. Petitioner contends that CMS acknowledged to Petitioner that it likely would rescind its penalty determination in this case if the finding of a "G" level deficiency were eliminated at IDR.

The fundamental problem with Petitioner's argument is that CMS's determination to impose remedies is not contingent on the outcome of IDR. CMS would not be arguing that Petitioner's hearing request is moot if its remedy determination were contingent on the IDR outcome.

Moreover, Petitioner's argument notwithstanding, I discern nothing in the record of this case which supports Petitioner's argument that CMS would rescind the penalties if Petitioner prevailed in its IDR challenge to the "G" level deficiency. What is of record from CMS points in the opposite direction. CMS issued nothing by way of notice to Petitioner that supports Petitioner's contention that the remedies it determined to impose in this case address only the single level "G" deficiency that was found at the September survey or that CMS had no interest in imposing remedies for the level "F" and other, lower level, deficiencies. The notice document that CMS sent to Petitioner plainly advises Petitioner that all of the remediable deficiencies found at the September survey were or could be the basis for imposition of remedies. CMS Ex. 5, at 1 - 3. The notice of remedies that CMS sent to Petitioner on September 26, 2003 states that Petitioner's facility was not in substantial compliance with "participation requirements." (emphasis added). Id. It advises Petitioner that remedies had been proposed by the Alabama Department of Health "as a result of the survey findings." (emphasis added). Id. The notice tells Petitioner also that CMS was imposing civil money penalties "as evidenced by the findings of the September . . . survey." (emphasis added). Id.

In its brief in opposition to CMS's motion Petitioner suggests that an employee of CMS advised Petitioner that CMS would rescind the civil money penalty determination in this case should Petitioner prevail at IDR in its challenge to the "G" level deficiency finding. However, the affidavit of Jenny Scott, R.N., an employee of Petitioner's parent corporation, avers an exchange that falls short of establishing anything in the nature of a promise by CMS to rescind the civil money penalty determination should Petitioner prevail at IDR. P. Ex. A. In her affidavit Ms. Scott recites a conversation that she had with Connie Melton, an employee of CMS's Atlanta regional office, in which Ms. Melton allegedly told Ms. Scott that:

[I]f . . . [Petitioner] were to prevail at IDR and the . . . [Alabama Department of Health] were to recommend that the . . . [civil money penalties] be withdrawn or reduced; and if CMS agrees with the IDR result, then CMS could withdraw or reduce the . . . [civil money penalties].

P. Ex. A, at 2. The statement that is attributed to Ms. Melton is not a promise by CMS to do anything. Ms. Melton commits to nothing on behalf of CMS other than expressing the obviously true observation that CMS could modify its remedy determination should Petitioner prevail at IDR. But, having the discretion and capacity to do something is not the same thing as agreeing to do it. Nor does it suggest that CMS was likely to modify its remedy determination if Petitioner prevailed at IDR.

Petitioner contends additionally that it has a right to contest the level "G" deficiency finding via IDR but that dismissing the request for hearing unfairly would make meaningless any IDR outcome as to the level "G" deficiency. ⁽⁵⁾ I agree with Petitioner that the IDR proceeding may become academic if I sustain the imposition of remedies against Petitioner based solely on the presence of other, non-level "G" deficiencies at the September survey. But, that inevitably is the consequence of the fact that CMS has authority to impose remedies against Petitioner based on the existence of deficiencies other than the level "G" deficiency. CMS certainly is not obligated to impose remedies against Petitioner based on the level "G" deficiency in order to give Petitioner a meaningful right to IDR as to that deficiency.

Nor is there any reason for me to stay this case so as to give meaning to Petitioner's IDR proceeding. The outcome of this case will be identical whether or not Petitioner prevails at IDR. If Petitioner prevails at IDR, then CMS may nevertheless impose remedies based on the other, non-level "G" deficiencies that Petitioner did not challenge. If Petitioner does not prevail at IDR then CMS arguably would have two bases for imposing remedies - the level "G" deficiency - and the non-level "G" deficiencies. But, inasmuch as CMS may impose remedies based on the non-level "G" deficiencies, which Petitioner has not challenged, the possible presence of another basis for remedies adds nothing to the case.

2. I sustain the imposition of civil money penalties of $250 per day against Petitioner because Petitioner has not challenged the reasonableness of the penalty amount.

The civil money penalties of $250 per day that CMS determined to impose against Petitioner, based on the deficiency findings that were made at the September survey, fall within the range of civil money penalties of between $50 and $3,000 per day that CMS may impose for deficiencies that are substantial but which are not at the immediate jeopardy level of severity. 42 C.F.R. � 488.438. The reasonableness of the amount of a civil money penalty determination is potentially an issue in any case where CMS determines to impose such penalties. In such a case the skilled nursing facility has the right to argue, and to offer evidence to prove, that the penalty amount determination is unreasonable.

The penalty determination in this case is based on all 15 of the deficiencies that were identified at the September survey. ⁽⁶⁾ Petitioner challenged only one of these deficiencies. However, Petitioner still might argue that the penalty amount determination is unreasonable. In theory, Petitioner might argue that, if it prevailed in its challenge to the single level "G" deficiency, the scope and severity of the remaining deficiencies is not sufficient to justify penalties of $250 per day. Or, Petitioner might argue that all 15 of the deficiencies are insufficient to justify penalties of $250 per day given evidence that pertains to the regulatory factors which govern penalty amounts. See 42 C.F.R. �� 488.438(f); 488.404 (incorporated by reference into 42 C.F.R. � 488.438(f)(3)).

However, Petitioner has not made these arguments in this case. Petitioner offered no challenge to the issue of the reasonableness of the penalty amount in its hearing request. The hearing request fails to address that issue in any respect. Moreover, Petitioner concedes that the 14 deficiencies which it did not challenge could be sufficient to justify imposition of penalties of $250 per day against Petitioner. Petitioner's brief in opposition to CMS's motion to dismiss at 7.

Petitioner's entire argument as to penalty amount reduces to the contention that CMS would never have imposed the penalties that are at issue in this case - and would, in fact, rescind them - in the absence of the single level "G" deficiency that Petitioner challenged here. But, that is not an argument that the penalty amounts are unreasonable or that they are not justified by the 14 deficiencies that Petitioner did not challenge. Rather, it is an argument that CMS would not as a matter of discretion impose the penalties in the absence of the level "G" deficiency. I find this argument to be without merit. How CMS might exercise its discretion is not an issue which I may hear and decide. I may only decide whether the law supports CMS's actions given the scope of Petitioner's hearing request. The law plainly provides such support because the penalties that CMS determined to impose fall within the range of penalties that apply to the unchallenged non-immediate jeopardy level deficiencies that are present in this case and because Petitioner offered no challenge to the reasonableness of the penalty amount.

Steven T. Kessel

Administrative Law Judge

1. There were also two level "C" deficiencies for which CMS does not impose remedies. Id.

2. I note that in its hearing request, Petitioner stated that ". . . in the event that Beverly prevails in IDR on the single 'actual harm' deficiency and CMS nevertheless presses a CMP based only on the 'potential for harm' citations, Beverly reserves the right to challenge such citations" (Petitioner's hearing request at 2). However, this is not an effective challenge to the 14 non-level "G" deficiencies. The regulations do not permit a facility to defer filing a hearing request as to the issues in a case.

3. The "G" level deficiency would be significant if its presence were necessary to justify the amount of the civil money penalties that CMS imposed. Below, at Finding 2, I explain that Petitioner's failure to challenge the reasonableness of the penalty amount renders moot any issue of reasonableness.

4. In its opposition to CMS's motion, Petitioner incorrectly asserts that all of the deficiencies other than the single level "G" deficiency were at level "D." It is unclear whether Petitioner would contend that CMS's policy is not to impose civil money penalties for level "E" and "F" deficiencies.

5. In its opposition to CMS's motion Petitioner asserts that CMS incorrectly - and arguably unfairly - represents that Petitioner did not seek IDR. If CMS characterized Petitioner's actions inaccurately that is unfortunate, but it has no bearing on my decision. At bottom, whether or not Petitioner sought IDR with respect to the "G" level decision is irrelevant because Petitioner failed to challenge other deficiency findings which, in and of themselves, justify the outcome of this case.

6. In its opposition to CMS's motion to dismiss, Petitioner avers that CMS's notice of intent to impose remedies "did not specify which deficiency or deficiencies formed the regulatory basis" for the imposition of civil money penalties. Petitioner's brief in opposition to CMS's motion to dismiss at 3. I disagree. The notice letter, which I have discussed above, clearly states that the remedy determination is based on all of the deficiencies that were found at the September survey. CMS Ex. 5, at 1 - 3.