SUBJECT:

Walnut Creek at Hammond,

Petitioner,

Centers for Medicare & Medicaid Services.

I decide that the Centers for Medicare & Medicaid Services (CMS) is authorized to impose a civil money penalty (CMP) against Petitioner, Walnut Creek at Hammond, for the deficiencies found during the survey of July 19, 2001.

I. Background

On June 4, 2001, the Indiana State Department of Health (state agency) conducted a survey of Petitioner's facility to determine if it was in substantial compliance with federal requirements. The state agency determined that Petitioner was not in compliance with the regulations found at 42 C.F.R. � 483.25 (tag F 323) at an immediate jeopardy level (level K) and 42 C.F.R. � 483.15(f)(1) (tag F 248) at a scope and severity level of G (actual harm that is not immediate jeopardy). The immediate jeopardy was determined to exist on May 31, 2001 and was abated on that same day, but Petitioner remained out of compliance. By letter dated June 28, 2001, CMS notified Petitioner it was imposing a mandatory denial of payment for new admissions (DPNA), effective September 4, 2001, and a CMP in the amount of $3,050 for May 31, 2001. CMS further informed Petitioner that the CMP would be reduced to $250 per day, effective June 1, 2001, until substantial compliance was achieved.

A revisit survey was conducted by the state agency on July 19, 2001 and it was determined that Petitioner remained out of substantial compliance, with the most serious deficiency being tag F 323 at a scope and severity level D. As a result of this survey, CMS notified Petitioner, by letter dated August 15, 2001, that the remedies previously imposed remained in effect. The state agency recommended a reduction of the CMP from $250 per day to $100 per day effective July 19, 2001. However, in the August 15, 2001 letter, CMS determined that the CMP would remain at $250 per day based on Petitioner's history, financial condition, the scope and severity of the deficiencies, and the factors enumerated at 42 C.F.R. � 488.404. In addition, Petitioner was informed on July 27, 2001 that a Directed In Service Training, was being imposed effective August 27, 2001.

On October 18, 2001, Petitioner filed a hearing request contesting the findings of the revisit survey dated July 19, 2001 and the remedies imposed in the letter dated August 15, 2001.

On September 11, 2001, the state agency completed a complaint investigation and a second revisit survey. Immediate jeopardy findings were identified on September 10, 2001, and were abated on September 11, 2001. However, Petitioner continued to be out of substantial compliance after the abatement of the immediate jeopardy on September 11, 2001. By letter dated October 19, 2001, CMS determined that as a result of the second revisit survey of September 11, 2001, the DPNA already in effect, would remain in effect, and that a CMP in the amount of $3,550 was imposed for September 10 and 11, 2001. The CMP was then decreased to $300 per day, effective September 12, 2001, and would continue until substantial compliance was achieved or the provider agreement was terminated. Petitioner's October 18, 2001 hearing request was never amended to include the second revisit survey of September 11, 2001. No hearing request concerning the September 11, 2001 survey was ever filed by Petitioner.

CMS submitted a Motion for Summary Affirmance of the Civil Money Penalty or to Limit Issues for Hearing (Motion). Along with the Motion, CMS submitted 20 exhibits labeled CMS MSJ Exs. 1 - 20. Petitioner submitted its brief in response along with four exhibits (P. Exs. 1 - 4). CMS filed a reply brief. CMS attached seven exhibits to the reply brief but labeled the first exhibit attached to the reply brief also as CMS MSJ Ex. 20. In the interest of clarity, I am remarking the exhibit attached to the reply brief as CMS MSJ Ex. 20A. The other six exhibits attached to CMS's reply brief were marked as CMS MSJ Exs. 21 - 24 and 26 - 27. Neither party objected to my receiving any of these exhibits into evidence, and therefore, I admit into evidence P. Exs. 1 - 4 and CMS MSJ Exs. 1 - 20, 20A, 21 - 24, and 26 - 27.

II. Applicable Law and Regulations

Petitioner is considered a skilled nursing facility under the Social Security Act (Act) and regulations promulgated by the Secretary of Health and Human Services (Secretary). The statutory and regulatory requirements for participation by a skilled nursing facility are found at sections 1819 and 1919 of the Act and at 42 C.F.R. Part 483. Sections 1819 and 1919 of the Act vest the Secretary with authority to impose penalties against a skilled nursing facility for failure to comply substantially with federal participation requirements.

Pursuant to the Act, the Secretary has delegated to CMS and the states the authority to impose remedies against a skilled nursing facility that is not complying substantially with federal participation requirements. Part 488 of 42 C.F.R. provides that facilities that participate in Medicare may be surveyed on behalf of CMS by state survey agencies in order to determine whether the facilities are complying with federal participation requirements. 42 C.F.R. �� 488.10 - 488.28. A survey's findings are presented in a Statement of Deficiencies, which identifies each violation of (or instance of noncompliance with) a participation requirement. See State Operations Manual (SOM) Appendix (App.) P, Chapter (Ch.) IV. Deficiencies are identified by the survey agency using "tags" that correspond to the participation requirements in 42 C.F.R. Part 483. Id.

Based on the determination as to scope and severity of deficiencies and other relevant factors, CMS, with recommendations from the state, may select among available remedies. 42 C.F.R. �� 488.404, 488.406, and 488.408. The remedies that the Act and regulations specify "with respect to a finding that a facility has not met an applicable requirement," include a DPNA, civil money penalties, and termination of the facility's agreement to participate in Medicare. Sections 1819(h)(2)(B), 1919(h) of the Act; 42 C.F.R. �� 488.400, 488.406, 488.408, and 488.417. A CMP and a DPNA continues until either "(1) The facility has achieved substantial compliance, as determined by CMS or the State based upon a revisit or after an examination of credible written evidence that it can verify without an on-site visit;" or "(2) CMS or the State terminates the provider agreement." 42 C.F.R. �� 488.454(a), 488.417(d); 488.440; section 1819(h)(3) of the Act. A facility may appeal a certification of noncompliance leading to an enforcement remedy but not the choice of remedy. 42 C.F.R. � 488.408(g)(1), (2).

Pursuant to 42 C.F.R. Part 488, a state or CMS may impose a per instance or per day CMP against a long-term care facility when a state survey agency concludes that the facility is not complying substantially with federal participation requirements. 42 C.F.R. �� 488.406; 488.408; 488.430. The regulations specify that a CMP that is imposed against a facility on a per day basis will fall into one of two broad ranges of penalties. The upper range of CMP, of from $3,050 per day to $10,000 per day, is reserved for deficiencies that constitute immediate jeopardy to a facility's residents, and in some circumstances, for repeated deficiencies. The lower range of CMP, from $50 per day to $3,000 per day, is reserved for deficiencies that do not constitute immediate jeopardy, but either cause actual harm to residents, or cause no actual harm but have the potential for causing more than minimal harm. There is only a single range of $1,000 to $10,000 for a per instance CMP. 42 C.F.R. �� 488.408; 488.438.

The regulations define the term "substantial compliance" to mean "a level of compliance with the requirements of participation such that any identified deficiencies pose no greater risk to resident health or safety than the potential for causing minimal harm." 42 C.F.R. � 488.301.

If a survey reveals that a facility is not in "substantial compliance" with federal participation requirements, the facility must submit a POC for approval by the survey agency. 42 C.F.R. �� 488.402(d), 488.408(f). Even if the POC is approved, the facility may not be regarded as in substantial compliance until the survey agency determines, following an onsite revisit or other means of verification, that the deficiency no longer exists. 42 C.F.R. � 488.440(h); SOM App. P, Ch. IV � 7316.

The Act and regulations make a hearing before an Administrative Law Judge (ALJ) available to a skilled nursing facility against whom CMS has determined to impose a DPNA or a CMP. Act, section 1128A(c)(2); 42 C.F.R. �� 488.408(g), 498.3(b)(13). The hearing before an ALJ is a de novo proceeding. Anesthesiologists Affiliated, et al, DAB CR65 (1990), aff'd, 941 F2d. 678 (8^th Cir. 1991).

An affected party entitled to a hearing under 42 C.F.R. � 498.5 may file a request for hearing. It must be in writing and filed "within 60 days from receipt of the notice of initial, reconsidered, or revised determination . . . ." 42 C.F.R. � 498.40(a)(2). Additionally, the request for hearing must identify the specific issues, and the findings of fact and conclusions of law with which the affected party disagrees. 42 C.F.R. � 498.40(b).

III. Issue, findings of fact and conclusions of law

A. Issue

The issues in this care are whether there is a basis for imposing any remedy and if so, whether the amount of the CMP is reasonable.

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 and I discuss each Finding in detail.

CMS's Motion argues that I should grant summary affirmance of the $16,750 CMP that is imposed in this case as a result of the July 19, 2001 survey. CMS contends that there are no genuine issues of material fact to be litigated regarding the July 19, 2001 survey and that the CMP imposed is reasonable.

1. The June 4, 2001 survey findings are final and binding on Petitioner.

Petitioner's request for hearing is dated October 18, 2001. The hearing request contests the July 19, 2001 survey and the August 15, 2001 notice letter (the second notice letter) in which CMS imposed remedies against Petitioner. This hearing request does not mention the June 4, 2001 survey. In fact, Petitioner conceded that it did not appeal the findings of the June 4, 2001 survey in its response brief stating, "[t]he facility did not file a Request for Appeal of Notice I [the June 28, 2001 notice letter concerning the June 4, survey] and instead sought to rectify the deficiencies cited in Notice I." P. Br. at 8. The time to request a hearing for the June 4, 2001 survey is past and Petitioner has never sought to do so. Those deficiency findings, therefore, are final and establish that Petitioner was not complying substantially with federal participation requirements as of June 4, 2001 and are not before me.

2. Petitioner was not in substantial compliance with the regulation found at 42 C.F.R. � 483.25(h)(1) in the July 19, 2001 survey.

A revisit survey was conducted on July 19, 2001. CMS determined that Petitioner was not in substantial compliance with federal participation requirements with the most serious deficiency being with the regulation at 42 C.F.R. � 483.25(h)(1) (tag F 323) at a scope and severity level D. The regulation at 42 C.F.R. � 483.25(h)(1) (tag F 323) provides that :

The facility must ensure that -

(1) The resident environment remains free of accident hazards as is possible.

42 C.F.R. � 483.25(h)(1).

The undisputed facts are that a state surveyor observed an unlocked janitor's closet, located inside the Visitor/Employee bathroom. CMS MSJ Ex. 19, at 2; CMS MSJ Ex. 14; CMS MSJ Ex. 20, at 2. The surveyors found cleaning supplies and other hazardous substances in the unlocked closet. The janitor's closet remained unlocked for approximately four hours until surveyor Tuttle told the facility's administrator about her concerns regarding the unlocked closet. CMS MSJ Ex. 19. Petitioner does not dispute that the janitor's closet was unlocked. CMS contends that the unlocked closet and hazardous substances were easily accessible to the 29 cognitively impaired residents of the facility because the facility is small and only occupies a single floor. CMS argues that cleaning supplies easily accessible to cognitively impaired residents are a possible accident hazard. CMS argues that the employee bathroom was adjacent to the resident bathroom creating the risk that when the resident bathroom is occupied, residents might attempt to use the employee bathroom. CMS provides the affidavits of two surveyors attached to its Motion as evidence. CMS MSJ Ex. 19, 20. The two surveyors observed several residents walking or propelling themselves by wheelchairs independently in the vicinity of this employee bathroom. Id. Petitioner does not dispute that the unlocked janitor's closet was accessible to Petitioner's residents and that it contained hazardous materials. CMS further asserts that the only way Petitioner can overcome CMS's prima facie case is to prove that the door to the janitor's closet was locked on July 18, 2001, or that the closet was not accessible to the cognitively impaired residents. Petitioner has done neither.

Petitioner does not present any affirmative evidence in the form of citations to any exhibit it submitted to prove it was in compliance with the cited deficiency. Petitioner only filed as exhibits the three notice letters from CMS and its own October 18, 2001 request for hearing. Moreover, Petitioner does not raise any genuine issue of material fact relative to the July survey. Summary Judgment is appropriate in this case because, "there are no disputed issues of material fact and the only questions that must be decided involve the application of law to the undisputed facts." Dearborn Family Clinic, DAB CR919, at 10 (2002). It is appropriate for me grant the Motion for Summary Judgement before me "where conclusions to the moving party may be drawn from undisputed material facts and applicable law." Livingston Care Center, DAB CR906 at 4 (2002).

Petitioner makes three legal arguments in its submission. First, Petitioner states that the deficiency finding at tag F 323 from the initial survey of June 4, 2001 concerned hot water temperature. During the June 4, 2001 survey, the surveyors found that the water temperature in 18 out of 18 resident rooms exceeded 120 degrees Fahrenheit. CMS MSJ Ex, 20, at 23 - 28. Instead of filing a hearing request as to the survey of June 4, 2001, Petitioner claims to have corrected this deficiency and that it was in substantial compliance as of July 4, 2001. July 4, 2001 is the date that Petitioner alleged it achieved substantial compliance on its Plan of correction (POC). Petitioner asserts that, therefore, the CMP imposed as a result of the initial survey should have been discontinued as of July 4, 2001.

Second, Petitioner argues that the deficiency finding resulting from the revisit survey of July 19, 2001, while under the same tag number, was actually a new finding (the unlocked janitor's closet). Therefore, Petitioner argues it was in substantial compliance as to the deficiencies found during the first survey (June 4, 2001) on the day the revisit survey was conducted.

Third, Petitioner states that after the surveyor's concern with the unlocked janitor's closet was brought to its attention, a lock was promptly placed on this closet, thereby resolving the surveyor's concern and terminating the need for the imposition or any continuation of the CMP. Under this argument, Petitioner maintains that the CMP should have ended on July 19, 2001.

I reject Petitioner's first argument that CMS was required to find the facility in substantial compliance as of the date it alleged compliance in its POC. The regulations require that a CMP will remain in effect until the facility has achieved substantial compliance and that CMS must establish substantial compliance by either an on-site visit or by written credible evidence verifiable without an on-site visit. 42 C.F.R. � 488.454. A POC, by itself, does not establish substantial compliance. A "plan of correction constitutes a promise by Petitioner to take the remedial actions described in the plan. But it does not offer any proof that the actions were being effectuated." A.W. Schlesinger, DAB CR853, at 6 (2002).

A plan of correction is evidence of a facility's compliance efforts and it should be accorded the weight that is justified by its contents and the circumstances of its submission. However there is no requirement, either in applicable regulations or in principles of evidence, that these plans be found to be conclusive proof of compliance. The significance and evidentiary weight that attaches to a plan of correction depends on the contents of the plan and the attending circumstances of its submission. A plan of correction is not necessarily dispositive proof of compliance. In and of itself it is not necessarily sufficient to overcome the presumption of continuing noncompliance that is established by survey report findings. CMS is not obligated to accept as true the allegations made in a plan of correction, nor am I required to find the allegations made in a plan of correction to be proof of compliance that is sufficient to overcome a presumption of noncompliance resulting from past survey findings.

Schlesinger, at 4 - 5.

It is well settled that the state agency's acceptance of Petitioner's POC does not demonstrate that a facility has achieved substantial compliance. Generally, substantial compliance must be demonstrated by a revisit survey. Cross Creek Health Care Center, DAB No. 1665, at 3 (1998); Barn Hill Care Center, DAB No. 1848, at 14 (2002); Lake City, DAB No. 1658, at 12 - 13 (1998); Briar Oak Terrace Care Center, DAB No. 1798, at 8 (2001). Petitioner's claim that it achieved substantial compliance on July 4, 2001 is therefore rejected.

Petitioner's second argument is without merit. I note that Section 1819 of the Act requires that a skilled nursing facility must be in substantial compliance with all statutory and regulatory requirements of the Medicare and Medicaid programs at all times. If new deficiencies are identified during a revisit survey, even if previous deficiencies have been corrected, the remedies previously imposed remain in effect until the facility achieves substantial compliance. Desert Hospital, DAB No. 1623 (1997).

Petitioner's third argument is unavailing. Petitioner urges that the need for a CMP was discontinued by placing a lock on the janitor's closet. Surveyor Vargas stated in her sworn affidavit that Petitioner's Director of Nursing stated that the "closet used to be locked at all times and should have been locked." CMS MSJ Ex. 20, at 3. This is evidence of a systemic breakdown in the checks required by a facility to ensure that accident hazards would not be present in the resident environment in the future. Merely locking the door to the janitor's cleaning supply closet does not correct the systemic problem. A plan to systematically check locks of dangerous areas to prevent this type of hazard should have been implemented by the facility as part of its POC and the CMP should remain in effect until a revisit survey finds that this systematic breakdown is addressed and corrected.

CMS has clearly presented an unrebutted prima facie case that Petitioner was not in compliance with the regulation ensuring that the resident environment remains free of hazards found at 42 C.F.R. � 483.25(h)(1).

3. The September 11, 2001 survey findings are final and binding on Petitioner.

Petitioner argues that had CMS issued a rescission or discontinuation of remedies on July 4, 2001, the date of alleged compliance on the POC, the revisit survey of September 11, 2001 would never have been conducted and Petitioner would never have been subject to the CMPs imposed based on the September 11, survey. As I discussed above, Petitioner's reliance on the July 4, 2001 date as the date it achieved substantial compliance is misplaced. The September 11, 2001 revisit survey was properly conducted as part of the survey cycle. In CMS's October 19, 2001 notice letter, Petitioner was given an opportunity to contest these findings and did not do so. A request for hearing must be in writing and filed "within 60 days from receipt of the notice of initial, reconsidered, or revised determination . . . ." 42 C.F.R. � 498.40(a)(2). Petitioner had 60 days from receipt of the October 19, 2001 notice letter to file a request for hearing concerning the September 11, 2001 survey. It did not do so. The time to file a hearing request as to this survey is long past and the findings of the September 11, 2001 survey are now final and binding.

Petitioner argues unpersuasively that when it filed its October 18, 2001 request for hearing relative to the July 19, 2001 survey, it indicated that it "reserved the right to raise additional issues that may arise during the course of these proceedings." P. Ex. 3. Further, Petitioner argues that because all three notice letters included the same CMP case number, it believed that its October 18, 2001 request for hearing would cover any future actions or continuations of any CMPs that CMS might impose. This argument is unpersuasive. Each of the notice letters from CMS provides Petitioner with specific notice that it must appeal the finding of the survey which is the subject of the notice. The October 19, 2001 notice letter from CMS stated that based on the findings of the September 11, 2001 revisit, it was imposing revised remedies and again gave Petitioner the opportunity to request a hearing as to the findings from the September 11, 2001 survey. P. Ex. 4. Petitioner failed to do so. A CMP case number is of no legal significance. A request for hearing must be filed in response to each notice of the imposition of a remedy by CMS.

Even if I were to decide that Petitioner had met the requirements of 42 C.F.R. � 498.40(a), I find persuasive CMS's argument that Petitioner has not met the requirements of 42 C.F.R. � 498.40(b). Section 498.40(b) provides that the request for hearing must identify the specific issues, and the findings of fact and conclusions of law with which the affected party disagrees. No where in the briefing before me or anywhere else has Petitioner raised any specific issues or any factual basis for disagreeing with the survey findings of September 11, 2001. Therefore, Petitioner has not met the requirements of 42 C.F.R. � 498.40(b).

4. The CMP imposed on Petitioner is reasonable.

Having found a basis for imposing a CMP, I now consider whether that amount is reasonable, applying the factors listed in 42 C.F.R. �� 488.438(f) and 488.404. Emerald Oaks, DAB No. 1800, at 10 (2001); CarePlex of Silver Spring, DAB No. 1683, at 16 - 17 (1999); Capitol Hill Community Rehabilitation and Specialty Care Center, DAB No. 1629 (1997). The lower range of CMP, from $50 per day to $3,000 per day, is reserved for deficiencies that do not constitute immediate jeopardy, but either cause actual harm to residents, or cause no actual harm but have the potential for causing more than minimal harm.

I find the penalty amount of $250 per day to be reasonable based on evidence which relates to factors that are relevant to deciding the penalty amount. Those factors include the facilities history of noncompliance including repeated deficiencies, the facility's financial condition, the seriousness of the deficiencies, and Petitioner's culpability.

Petitioner was out of compliance in the June 4, 2001 survey and was found out of compliance with the very same requirement (tag F 323) in the July 19, 2001 survey. I also considered the history of noncompliance for previous survey cycles. In both the 1999 and 2000 survey cycles, Petitioner was found out of compliance with two requirements.

CMS argues that it considered the Petitioner's financial condition prior to setting the CMP amount. CMS submitted a statement of Petitioner's cash flow which indicated that while Petitioner had suffered a loss the year of the survey at issue, Petitioner still maintained a cash balance of $159,539 on June 30, 2000. CMS MSJ Exs. 7, at 3 and 9, at 2. CMS also gave Petitioner an opportunity to provide financial information. Petitioner did not file any form of financial information in respond to CMS's request. Petitioner responds in its brief by asserting that it was in a precarious financial state at the time of the survey, subsequently filed for bankruptcy on March 19, 2002, and that CMS did not properly investigate its financial position. Unfortunately, Petitioner did not file any evidence of the bankruptcy or any other financial information to rebut CMS arguments. Petitioner clearly had the opportunity to place the reasonableness of the CMP in issue by filing affidavits or financial evidence. It is incumbent upon Petitioner to do so. It did not do so. Petitioner only produced unsupported assertions that it was not in a financial position to pay the CMP amount in issue.

As to the seriousness of the deficiency cited, the janitor's closet containing hazardous substances was found to be unlocked and available to cognitively impaired residents. Even after Petitioner locked the closet, it did not institute any systematic checks to ensure that the janitor's closet would remain locked. Had a cognitively impaired resident been able to obtain access to any of the hazardous materials in the janitor's closet, it is possible that such a resident could have suffered more than minimal harm. I also note that the penalty imposed by CMS is close to the lower end of the CMP penalty range. Applying the factors listed in 42 C.F.R. �� 488.438(f) and 488.404, I am unable to find the imposition of a $250 per day CMP unreasonable.

IV. Conclusion

CMS's Motion for Summary judgment is granted. CMS is authorized to impose a CMP against Petitioner for the deficiencies found during the survey of July 19, 2001. The CMP imposed by CMS is reasonable.

Alfonso J. Montano

Administrative Law Judge