SUBJECT:

Hearthside Care Center,

Petitioner,

Background

Petitioner is a long-term care facility that is located in Coos Bay, Oregon. Petitioner participates in the Medicare program. This case arises from HCFA's determination to impose civil money penalties against Petitioner because Petitioner was not in substantial compliance with federal participation requirements during the November 12, 1998 through February 1, 1999 period.

HCFA filed five proposed exhibits (HCFA Ex. 1 - HCFA Ex. 5) in support of its motion for summary disposition. Petitioner filed one exhibit (P. Ex. 1) in opposition to the motion. Subsequently, Petitioner submitted an additional document which contains financial information about Petitioner. Petitioner did not identify this additional document as an exhibit. I am identifying it as P. Ex. 2. Petitioner has not opposed the admission into evidence of HCFA's proposed exhibits. HCFA has not opposed the admission into evidence of Petitioner's proposed exhibits. I hereby admit into evidence HCFA Ex. 1 - HCFA Ex. 5 and P. Ex. 1 - P. Ex. 2.

Issue

The only issue in this case is whether the amount of the civil money penalties that HCFA imposed against Petitioner - $200 per day for each day of the period which begins November 12, 1998 and which ends on February 1, 1999 for a total of $16,000 - is reasonable.

HCFA based its determination to impose civil money penalties against Petitioner on the results of compliance surveys that were performed on November 12, 1998 and January 21, 1999. HCFA Ex. 1; HCFA Ex. 2. At both of these surveys Petitioner was found not to be complying substantially with federal participation requirements. Ids. Petitioner does not dispute the findings of deficiencies. Nor does Petitioner deny that it was not complying substantially with participation requirements between November 12, 1998 and February 1, 1999. Petitioner contends only that the amount of the civil money penalties imposed against it is unreasonable. Petitioner asserts that it should be liable only for civil money penalties which do not total more than $4,000.

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 separately numbered heading. I discuss each Finding in detail.

1. A basis exists to impose a civil money penalty against
Petitioner for each day of the period which begins on
November 12, 1998 and which ends on February 1, 1999.

HCFA is authorized to impose a civil money penalty against a long-term care facility for each day that the facility is not complying substantially with federal participation requirements. Social Security Act (Act), sections 1819(h)(2)(B)(ii); 42 C.F.R. � 488.430(a). A failure to comply substantially with participation requirements occurs where a facility is found to be deficient in complying with any of those requirements to the extent that there exists a potential for more than minimal harm to the facility's residents. 42 C.F.R. � 488.301.

There is no dispute that Petitioner failed to comply substantially with participation requirements. The surveyors who conducted the November 12, 1998 and January 21, 1999 surveys of Petitioner found at each survey that Petitioner was not complying substantially. HCFA Ex.1; HCFA Ex. 2. Petitioner has not challenged these findings of noncompliance. Nor is there any dispute as to the duration of Petitioner's noncompliance. Therefore, HCFA is authorized to impose civil money penalties against Petitioner for each day of the November 12, 1998 - February 1, 1999 period.

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

HCFA may impose a civil money penalty which ranges from $50 to $3,000 for each day that a facility is not complying substantially with participation requirements in the event that the noncompliance poses a potential for more than minimal harm to facility residents but does not constitute immediate jeopardy to the health and safety of facility residents. 42 C.F.R. � 488.438(a)(ii); see 42 C.F.R. � 488.301. The $200 per day civil money penalty that HCFA determined to impose against Petitioner falls within the range of penalties that is reserved for deficiencies that are substantial but which do not constitute immediate jeopardy.

The penalties that HCFA determined to impose against Petitioner are based on deficiencies that fall within the range of deficiencies that allow for a $50 - $3,000 per day civil money penalty. These penalties are at the lower end of the $50 - $3,000 per day range, indicating that HCFA determined that the deficiencies that Petitioner manifested - while substantial - were relatively modest in nature. However, Petitioner argues that these relatively low level civil money penalties are nonetheless unreasonable given the character of its deficiencies.

The regulations which govern the imposition of civil money penalties describe those factors which HCFA may consider in determining the amount of any civil money penalties that it determines to impose. 42 C.F.R. �� 488.404; 488.438(f). These factors include the seriousness of deficiencies; their relationship to each other; the facility's past compliance history; the facility's financial condition; and, the facility's culpability. Ids.

The evidence offered by HCFA establishes a prima facie case that the civil money penalties it determined to impose against Petitioner are reasonable. First, the evidence shows that the deficiencies were sufficiently serious so as to justify the imposition of more than minimal civil money penalties. Petitioner manifested a substantial number of deficiencies. And, some of these deficiencies caused actual harm to residents of Petitioner.

The undisputed findings that the surveyors made at the November 12, 1998 survey of Petitioner established that Petitioner manifested eight substantial deficiencies. These deficiencies are identified at Tags 246, 309, 312, 314, 318, 324, 353, and 444 of the report of the November 12, 1998 survey. HCFA Ex. 1. Some of these deficiencies are relatively severe. For example, under Tag 246, the surveyors found that, in the cases of five residents, Petitioner was not providing reasonable accomodations of the residents' needs. The residents' needs for prompt assistance were not being met by Petitioner. Nor was Petitioner assuring that these residents' physical environment and activities were adequate. In the case of one of these residents, Resident 3, Petitioner was found to have caused harm to the resident by failing to respond adequately to the resident's needs for assistance. HCFA Ex. 1 at 1 - 3. Petitioner has not challenged these findings.

Moreover, Petitioner had not corrected all of these deficiencies as of the January 21, 1999 resurvey of Petitioner. Two of the deficiencies, identified at Tags 314 and 324, were found to have persisted notwithstanding Petitioner's representations that it had corrected them. HCFA Ex. 2.

Second, HCFA established that Petitioner has a history of noncompliance with participation requirements. HCFA Ex. 3. Petitioner had been found to be deficient prior to the November 12, 1998 survey at surveys that were conducted of Petitioner on November 6, 1997, May 14, 1998. Id. Moreover, some of the deficiencies that the surveyors identified at previous surveys recurred in subsequent surveys of Petitioner. For example, Petitioner's failure to provide care of an adequate quality was cited at Tag 314 of the report of the November 6, 1997, May 14, 1998, November 12, 1998, and January 21, 1999 surveys. Id.; HCFA Ex. 1; HCFA Ex. 2.

Finally, HCFA made a prima facie showing that Petitioner's ability to provide care to its residents would not be jeopardized by requiring it to pay the civil money penalties that HCFA imposed against Petitioner. Petitioner provided HCFA with only limited data concerning its financial status. HCFA Ex. 4. However, the information that Petitioner provided does not suggest that Petitioner would be unable to pay the civil money penalties that HCFA imposed against it. Id.

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

Petitioner asserts that the deficiencies established by HCFA merit, at most, the imposition of civil money penalties against Petitioner totaling $4,000. That sum equates to a $50 per day civil money penalty against Petitioner, which would be the minimum civil money penalty that HCFA might impose for failure to comply substantially with participation requirements.

Petitioner argues that the deficiencies that it manifested qualified for "category 1" remedies that did not merit the imposition of civil money penalties. In effect, this argument is that the scope and severity of Petitioner's deficiencies is so modest as to not justify imposition of civil money penalties against Petitioner.

A category 1 remedy is a remedy that HCFA may impose for deficiencies that: (1) are isolated deficiencies that constitute no actual harm to residents and which have a potential for causing more than minimal harm to residents but which are not so severe as to constitute immediate jeopardy to residents; or (2) comprise a pattern of deficiencies that cause no actual harm to residents and which have a potential for causing more than minimal harm to residents but which are not so severe as to constitute immediate jeopardy to residents. 42 C.F.R. � 488.408(c). Category 1 remedies do not include the remedy of a civil money penalty.

HCFA acknowledges that the deficiencies that were identified at the January 21, 1999 survey of Petitioner were of a scope and severity that would normally merit the imposition of a category 1 remedy or remedies against Petitioner. However, as HCFA notes, the deficiencies that were identified at the November 12, 1998 survey justified a higher category of remedy than category 1, inasmuch as there were findings of actual harm to residents made at that survey. HCFA Ex. 1. Petitioner has not disputed the findings of actual harm that were made at the November 12, 1998 survey of Petitioner. Consequently, even if Petitioner's argument that no civil money penalties could be imposed for deficiencies that justified category 1 remedies had merit, that argument could only apply to penalties that HCFA imposed after January 21, 1999.

Moreover, the regulations which govern the imposition of civil money penalties expressly permit HCFA to impose a civil money penalty or penalties where deficiencies are substantial but where they normally would justify the imposition only of a category 1 remedy or remedies. 42 C.F.R. � 488.408(d)(3). HCFA has the discretion to impose a civil money penalty or penalties in the case where normally it might not do so. HCFA may impose a civil money penalty or penalties in any instance where a facility is found not to be complying substantially with participation requirements. What HCFA plainly opted to do in this case is to impose civil money penalties against Petitioner after January 21, 1999 in light of Petitioner's continuing noncompliance with participation requirements after that date. That is a remedy that HCFA plainly is authorized to impose.

Petitioner argues also that its financial condition justifies a reduction of the civil money penalties that HCFA determined to impose against it. Petitioner asserts that the financial information that HCFA relied on relates not to Petitioner but to another entity, Hearthside Skilled Nursing Facility, LLC. See P. Ex. 1. According to Petitioner, it leases the real and personal property of the nursing care facility in question from Hearthside Skilled Nursing Facility, LLC. Petitioner characterizes Hearthside Skilled Nursing Facility, LLC, as an "unrelated third party entity." Petitioner asserts that the financial information that HCFA relied on pertains to Hearthside Nursing Facility, LLC, and not to Petitioner. According to Petitioner, Petitioner's balance sheet shows a "continual loss of revenue" and represents a more accurate statement of Petitioner's financial condition from which to make a determination as to whether the civil money penalties imposed by HCFA are reasonable.

Petitioner has also submitted a document which it characterizes to be a "true and accurate Profit and Loss Summary for Petitioner for the eleven months ending November 30, 1999, and a true and accurate balance sheet for the same date." P. Ex. 2 at 1. Evidently, Petitioner contends that the financial information that is contained in P. Ex. 2 demonstrates that Petitioner is unable to pay civil money penalties which total $16,000 in this case.

I am assuming, for purposes of this decision, that the financial information that is contained in P. Ex. 2 is true. I conclude nonetheless that Petitioner has not shown that it is unable to pay the civil money penalties that HCFA determined to impose and which I sustain.

Petitioner has not satisfied me that its financial condition is so precarious that it will not be able to pay the civil money penalties that I am sustaining here and continue to provide care consistent

with federal participation requirements. See 42 C.F.R. � 488.438(f)(2). Indeed, Petitioner has not even alleged explicitly that its financial condition will prevent it from paying the penalties.

The financial data which Petitioner submitted purports to show that Petitioner sustained a net loss of more than $45,000 during the fiscal year running through November, 1999. P. Ex. 2 at 2. But, the fact that Petitioner may have lost money during any period of time does not demonstrate that Petitioner's ability to continue to provide care will be jeopardized by requiring it to pay the civil money penalties that are at issue here. Moreover, in spite of its losses, Petitioner continues to possess substantial current assets, totalling more than $250,000. Id. at 3. Petitioner's total assets continue to exceed its current liabilities. Id. at 4 - 5. And, Petitioner's purported losses did not preclude its owners from drawing over $176,000 from Petitioner during the period ending November 30, 1999. Id. at 5.

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

HCFA established a prima facie case to support the imposition of civil money penalties against Petitioner of $200 per day for each day of the November 12, 1998 - February 1, 1999 period. Petitioner has offered neither evidence nor persuasive argument to rebut this prima facie case. Consequently, I find the civil money penalties to be reasonable.

Steven T. Kessel
Administrative Law Judge