IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 14-60158

PERRY COUNTY NURSING CENTER, 

 Petitioner

v.

UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, 

 Respondent

Petition for Review of a Decision of the

Department of Health and Human Services

No A-13-86

Before JOLLY, WIENER, and CLEMENT, Circuit Judges.

PER CURIAM:*

Petitioner Perry County Nursing Center (“Perry”) seeks review of a final 

decision by Respondent, United States Department of Health and Human 

Services (“DHHS”), upholding an administrative determination that Perry

violated specified regulatory requirements pertaining to its participation in the 

Medicare program. We reject Perry’s challenge and dismiss its petition for 

review.

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not 

be published and is not precedent except under the limited circumstances set forth in 5TH 

CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

March 11, 2015

Lyle W. Cayce

Clerk

 

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I. FACTS AND PROCEEDINGS

Perry is a skilled nursing facility (“SNF”) located in Richton, Mississippi. 

It participates in the federal Medicare program, which is administered by the 

Centers for Medicare and Medicaid Services (“CMS”). CMS relies on the 

Mississippi State Department of Health (“MSDH”) to assist it in determining 

whether SNFs in the state are in compliance with Medicare regulations. 

MSDH does this by, inter alia, regularly inspecting SNFs and investigating 

complaints lodged against them through on-site visits called “surveys.”1

If MSDH finds a violation of Medicare regulations (a “deficiency”) during 

a survey, it reports it to CMS.2 Deficiencies reported to CMS are called “tags.” 

CMS then determines the scope and severity of the deficiencies and the amount 

of civil money penalties (“CMPs”) to be paid.3 If an SNF is assessed a CMP, it 

may appeal to an administrative law judge (“ALJ”).4 The ALJ’s decision is 

reviewed by DHHS’s Departmental Appeals Board (“DAB”).5 If the SNF is 

dissatisfied, it may then seek judicial review of the DAB’s decision.6

There are two surveys at issue in this case. The first occurred in January 

2010, after a Perry staff member stole 2,446 Lortabs, a controlled pain 

medication. This survey assessed two tags: Tag F224, for failure to develop 

written policies and procedures to ensure that facility staff do not 

misappropriate medications, and Tag F425, for lacking appropriate policies to 

manage the ordering and inventorying of medications. In April 2010, MSDH 

determined that Perry was back “in substantial compliance.”

1 See 42 U.S.C. § 1395i-3(g)(2), (4).

2 See id. § 1395i-3(h)(1).

3 See id. § 1395i-3(h)(2)(B)(ii); 42 C.F.R. § 488.402.

4 See 42 C.F.R. §§ 431.151(a)(1), 498.5(k).

5 See id. §§ 498.5(k), .80–.83.

6 See id. § 498.5(k).

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The second survey occurred in August 2011. It was not a routine survey 

and appears to have been prompted by concerns over Perry’s compliance with 

Medicare regulations. This survey assessed five tags: (1) Tag F281, for failing 

to provide prescribed medication to residents; (2) Tag F425, for failing to follow 

procedures in acquiring, receiving, storing, controlling, and reconciling 

medications; (3) Tag F520, for the failure of Perry’s quality assessment 

committee to address medication-related deficiencies; (4) Tag F514, for 

inadequate clinical recordkeeping; and (5) Tag F225, for failing to inform the 

local police about the Lortab theft. Of these five, the first three—F281, F425, 

and F520—were determined to create an Immediate Jeopardy to the health 

and safety of Perry’s residents. CMS assessed a CMP of $3,550 per day from 

April 30, 2011, the day the deficiencies were determined to have begun, to 

September 6, 2011, the day the immediate jeopardy classification was 

removed. Perry was then subject to a lower CMP of $150 per day until October 

17, 2011, when the facility was found to be in substantial compliance. In total, 

Perry incurred $467,500 in civil penalties.

Perry requested a hearing with an ALJ, challenging both MSDH’s 

authority to conduct the August 2011 survey and the specific tags cited. The 

ALJ found that the August 2011 survey was not unlawful and that Perry was 

not in substantial compliance with Medicare requirements. The ALJ only 

considered Tags F281 and F425, holding that those two tags “more than justify 

the penalties imposed.” Perry then appealed to the DAB, which affirmed the 

ALJ’s decision.

II. ANALYSIS

A. Standard of Review

We review the decision of the DAB according to the standards provided 

in the Administrative Procedure Act (“APA”) and the Medicare statute. The 

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APA “permits the setting aside of agency actions, findings, and conclusions 

that are ‘arbitrary, capricious, an abuse of discretion, or otherwise not in 

accordance with the law’ or ‘unsupported by substantial evidence.’”7 Under 

this standard, “there is a presumption that the agency’s decision is valid, and 

the plaintiff has the burden to overcome that presumption by showing that the 

decision was erroneous.”8 Moreover, under the Medicare statute, the agency’s 

factual findings, “if supported by substantial evidence on the record considered 

as a whole, shall be conclusive.”9 Finally, we “give substantial deference to an 

agency’s interpretation of its own regulations,” to which we assign “controlling 

weight unless it is plainly erroneous or inconsistent with the regulation.”10

B. Tags F281 and F425

Perry challenges its citations and penalties under Tags F281 and F425, 

the only two tags considered by the ALJ and DAB. Tag F281 arises from 

Perry’s alleged noncompliance with 42 C.F.R. § 483.20(k)(3)(i), which requires 

SNFs to “[m]eet professional standards of quality.” Tag F425 cites Perry for 

violating 42 C.F.R. § 483.60(a) and (b), which require SNFs to provide effective 

pharmaceutical services “including procedures that assure the accurate 

acquiring, receiving, dispensing, and administering of all drugs and 

biologicals”11 and to “employ or obtain the services of a licensed pharmacist” to 

maintain accurate drug receipt and dispensation records.12 The DAB upheld 

the ALJ’s determination that Perry was noncompliant with both regulations.

7 Cedar Lake Nursing Home v. U.S. Dep’t of Health & Human Servs., 619 F.3d 453, 

456 (5th Cir. 2010) (quoting 5 U.S.C. § 706(2)(A)–(E) (2010)).

8 Tex. Clinical Labs, Inc. v. Sebelius, 612 F.3d 771, 775 (5th Cir. 2010). 9 42 U.S.C. § 1320a-7a(e).

10 Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994) (quoting Udall v. 

Tallman, 380 U.S. 1, 16–17 (1965)) (internal quotation marks omitted); see also Auer v. 

Robbins, 519 U.S. 452, 461–62 (1997).

11 42 C.F.R. § 483.60(a).

12 Id. § 483.60(b).

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1. Tag F281

The substance of Perry’s challenge to Tag F281 is that, when the 

deficiency cited pertains to medication, 42 C.F.R. § 483.20(k)(3)(i)’s 

“professional standards of quality” requirement must be interpreted in 

accordance with 42 C.F.R. § 483.25(m), which defines the medication error 

rates that SNFs must not exceed. Under 42 C.F.R. § 483.25(m), an SNF “must 

ensure that—(1) [i]t is free of medication error rates of five percent or greater; 

and (2) [r]esidents are free of any significant medication errors.” Perry 

contends that, when medication is at issue, these two requirements form the 

exclusive basis for interpreting 42 C.F.R. § 483.20(k)(3)(i)’s requirement that 

SNFs “[m]eet professional standards of quality.” In other words, if Perry’s 

medication dispensation performance was compliant with 42 C.F.R. 

§ 483.25(m)—Perry contends that it was13—it could not have been 

noncompliant with 42 C.F.R. § 483.20(k)(3)(i).

Because CMS interprets 42 C.F.R. § 483.20(k)(3)(i) as defining a 

standard of performance independent of 42 C.F.R. § 483.25(m),14 Perry must 

show that CMS’s interpretation is plainly erroneous or inconsistent with the 

regulation. First, Perry relies on DHHS’s commentary when promulgating 42 

C.F.R. § 483.25(m), in which the agency noted that the regulation “left a facility 

free to create and manage its own [drug distribution] system in any way it sees 

fit as long as it does not make ‘significant’ medication errors and has an overall 

13 We doubt that Perry was compliant with 42 C.F.R. § 483.25(m). The DAB found 

that at least one resident experienced a significant medication error when Perry staff failed 

to provide a prescribed painkiller. As the regulation requires SNFs to operate “free of any

significant medication errors,” id. § 483.25(m)(2) (emphasis added), the DAB’s determination 

that Perry violated 42 C.F.R. § 483.20(k)(3)(i) even if the standards of 42 C.F.R. § 483.25(m) 

were applied was not erroneous.

14 CMS explains that its guidance documents clearly differentiate between “errors in 

the techniques of medication administration,” which should be cited under 42 C.F.R. 

§ 483.20(k)(3), and “actual medication errors,” which should be cited under 42 C.F.R. 

§ 483.25(m). CMS, STATE OPERATIONS MANUAL app. PP, at 155 (2015).

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medication error rate of less than five percent.”15 Perry reads this statement 

as granting SNFs virtual carte blanche in managing medications, limited only 

by the two listed criteria in 42 C.F.R. § 483.25(m). This interpretation would, 

however, render superfluous any regulation affecting SNFs’ drug distribution 

mechanisms. If we were to agree with Perry, the medication-error regulation 

would not only preempt 42 C.F.R. § 483.20(k)(3)(i) but also, for example, 42 

C.F.R. § 483.60, which establishes specific pharmaceutical procedures for 

SNFs to follow.16 Perry points to nothing to indicate that DHHS intended 42 

C.F.R. § 483.25(m) to have such an expansive reach.

Second, Perry asserts that a “plain reading” of the regulations supports 

its interpretation. We find no basis for this assertion. There is nothing in 42 

C.F.R. pt. 483 to suggest that 42 C.F.R. § 483.25 contains the exclusive 

definition of “professional standards of quality” as applied to SNFs’ drug 

distribution. 42 C.F.R. § 483.25(m) makes no reference to 42 C.F.R. 

§ 483.20(k)(3)(i) or to “professional standards of quality.” 

Third, Perry relies on Caretel Inns of Brighton, a 2012 decision in which 

an ALJ, in choosing a standard to apply when assessing compliance with 42 

C.F.R. § 483.20(k)(3)(i), held that “the regulation at 42 C.F.R. § 483.25(m)(2) 

establishes the standard of quality, supplanting any lesser standard.”17 

Critically, the ALJ chose 42 C.F.R. § 483.25(m)(2) over a less stringent 

standard, reasoning that “[t]he application of any lesser standard from another 

source would constitute a failure to follow the Secretary’s regulations.”18 Thus, 

15 Medicare and Medicaid; Requirements for Long Term Care Facilities, 56 Fed. Reg. 

48,826, 48,853 (Sept. 26, 1991) (emphasis added).

16 See, e.g., 42 C.F.R. § 483.60(c) (requiring every resident’s drug regimen to be 

“reviewed at least once a month by a licensed pharmacist”); id. § 483.60(d) (detailing drug 

labeling requirements); id. § 483.60(e) (setting drug storage requirements). 17 DAB No. CR2643, 2012 WL 5389866, at *11 (U.S. Dep’t of Health & Human Servs. 

Oct. 12, 2012) (emphasis added). 18 Id.

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Caretel does not support Perry’s approach; it indicates, at most, that 42 C.F.R. 

§ 483.25(m) establishes a floor for 42 C.F.R. § 483.20(k)(3)(i), not a ceiling.

Finally, Perry suggests that a specific regulation, such as 42 C.F.R. 

§ 483.25(m), trumps a general regulation, such as 42 C.F.R. § 483.20(k)(3)(i). 

This canon of construction, however, applies only when two regulations are 

inconsistent and cannot be reconciled.19 CMS’s interpretation does not present 

such a conflict.

In conclusion, Perry has not met its burden of showing that CMS’s 

interpretation of 42 C.F.R. § 483.20(k)(3)(i) was plainly erroneous or 

inconsistent with the regulation. Furthermore, Perry does not challenge the 

DAB’s specific findings that it failed to meet professional standards of quality

with respect to the distribution of medication.20 Accordingly, we affirm the 

DAB’s determination that Tag F281 was properly imposed.

2. Tag F425

Perry’s challenge to Tag F425 is similar. It asserts that 42 C.F.R. 

§ 483.60(a) and (b), like 42 C.F.R. § 483.20(k)(3)(i), address “medication errors”

and thus are governed by the standard defined in 42 C.F.R. § 483.25(m). We 

find this contention likewise unconvincing. 42 C.F.R. § 483.60(a) and (b)

require an SNF to have pharmaceutical procedures in place and a pharmacist 

to oversee those procedures. A facility could easily be found in compliance with 

the requirements of this section but not in compliance with the requirements 

of 42 C.F.R. § 483.25(m), or vice versa. Furthermore, these two regulations 

19 See United States v. Mackay, 757 F.3d 195, 199 (5th Cir. 2014).

20 The DAB upheld the ALJ’s determination that the medication deficiencies cited by 

CMS constituted violations of professional standards of quality. This conclusion is supported 

by substantial evidence.

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have different purposes, as 42 C.F.R. § 483.25(m) is plainly result-oriented,21

whereas 42 C.F.R. § 483.60(a) and (b) focus on process. The issues that CMS 

found justified Tag F425 were primarily documentation errors, hinging on

Perry’s failure to follow procedures, and not incidents of residents receiving 

incorrect medications. Accordingly, we affirm the DAB’s determination that 

Tag F425 was properly imposed.22

C. Tag F520

Perry also seeks to set aside Tag F520, which is based on an alleged 

violation of 42 C.F.R. § 483.75(o)(1)’s requirement that an SNF maintain a 

quality assessment and assurance committee. The ALJ did not consider this 

tag because she found that Tags F281 and F425 “more than justify the 

penalties imposed.” The DAB concluded that this decision was within the 

ALJ’s discretion. Perry does not challenge the ALJ’s determination that Tags 

F281 and F425 alone justify the CMPs imposed, but rather contends that it 

has the right to appeal all deficiencies cited because any deficiencies not

successfully appealed remain in its public record. It further contends that the 

imposition of Tag F520 is not supported by substantial evidence.

Although Perry raises a reasonable concern, it cites no persuasive legal 

authority for its position. DHHS has long interpreted its regulations to require 

ALJs to review only those findings that are material to the outcome of a case.23

Perry has failed to show that this approach is plainly erroneous or inconsistent 

with the regulation. The DAB’s decision to pretermit a review of Tag F520 was 

21 See Medicare and Medicaid; Requirements for Long Term Care Facilities, 56 Fed. 

Reg. 48,826, 48,853 (Sept. 26, 1991) (discussing DHHS’s decision to set an “outcome-oriented 

standard” for medication errors, rather than a process-oriented one).

22 As with Tag F281, Perry does not challenge the DAB’s factual finding that it violated 

pharmaceutical procedures. We find the DAB’s determination to be supported by substantial 

evidence.

23 See Alexandria Place, DAB No. 2245, 2009 WL 1455338, at *17 n.9 (U.S. Dep’t of 

Health & Human Servs. Apr. 30, 2009) (collecting cases).

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not arbitrary or capricious, and we decline to consider Perry’s substantive 

challenge to it.24

D. Legality of August 2011 Survey

Finally, Perry asserts that all of the tags should be set aside because 

CMS violated its own regulations in conducting the August 2011 survey. CMS 

may only reopen “initial or reconsidered determination[s] within 12 months 

after the date of notice of the initial determination.”25 According to Perry, the 

August 2011 survey constituted an illegal reopening of the April 2010 

determination that Perry was back in substantial compliance with Medicare 

regulations after the Lortab-theft incident. In support of this characterization, 

Perry notes that several MSDH documents concerning the August 2011 survey 

refer back to the January 2010 investigation. Specifically, the form containing 

the August 2011 survey results states that the prior complaint investigation 

had been “re-opened,” and MSDH sent Perry several letters to that effect, as 

well.

To the extent that Perry challenges the August 2011 tags as illegal 

reopenings of the April 2010 determination of substantial compliance, we are 

not convinced. None of the five deficiencies identified in August 2011 relate 

back to the April 2010 findings, and MSDH’s conclusion that Perry had 

successfully resolved the two tags cited in the January 2010 survey remains 

untouched. Furthermore, the CMPs at issue were imposed for a period of 

noncompliance starting on April 30, 2011. The actions that resulted in Tags 

F281, F425, F520, and F514 either occurred after this date or were ongoing as 

of it.

24 See Senior Rehab. & Skilled Nursing Ctr. v. Health & Human Servs., 405 F. App’x 

820, 825 (5th Cir. 2010) (per curiam) (unpublished) (citing Claiborne-Hughes Health Ctr. v. 

Sebelius, 609 F.3d 839, 847 (6th Cir. 2010)).

25 42 C.F.R. § 498.30.

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The only tag cited in August 2011 that even arguably implicates the 

April 2010 determination is Tag F225, which found a deficiency based on 

Perry’s failure to report the Lortab theft to the police. First, we note that the 

CMPs imposed on Perry may be justified without Tag F225.26 Second, Perry 

does not dispute that, as of April 30, 2011, it still had not reported the loss of 

Lortabs to the police. Third, and finally, we agree with CMS that Tag F225 is 

a new deficiency, not a reopening of an old one. Broadly, Tag F225 is related 

to Tag F224 from the January 2010 survey, as both penalize actions related to 

the same loss of Lortabs. That these two tags concern the same period of time 

and underlying facts is, however, not persuasive because they address different 

conduct. Penalizing Perry for failing to report the loss of narcotics is not a 

revision of the previous penalty for losing them. As Tag F225 does not revise, 

or even revaluate, Tag F224, there is no reopening. We thus conclude that Tag 

F225, like the other tags cited in August 2011, concerns deficiencies not 

relevant to the April 2010 substantial-compliance determination.

To the extent that Perry challenges the August 2011 survey itself as 

procedurally deficient under 42 C.F.R. § 498.30, and the tags imposed as 

tainted by this defect, we likewise find this contention wholly unconvincing. 

CMS interprets 42 C.F.R. § 498.30 as limiting only the agency’s ability to 

reopen determinations—that is, determinations that an SNF is in substantial 

compliance or noncompliance with the Medicare regulations.27 In CMS’s view, 

a survey, whether routine or instigated by a specific complaint, is not a 

determination, and CMS’s decision to survey Perry in August 2011 is not 

governed by 42 C.F.R. § 498.30.

26 Cf. Senior Rehab., 405 F. App’x at 825 (noting that only those findings material to 

the outcome of a case must be reviewed). 27 See 42 C.F.R. § 498.30.

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We defer to CMS’s interpretation of its own regulations, as it is neither 

plainly erroneous nor inconsistent with the regulation.28 The plain language 

of 42 C.F.R. § 498.30, as well as a structural reading of 42 C.F.R. pt. 498 as a 

whole, supports CMS’s approach. There is nothing in 42 C.F.R. § 498.30 about 

surveys. Moreover, 42 C.F.R. § 498.3(a)(1) notes that this set of regulations 

concerns the “procedures for reviewing initial determinations that CMS 

makes,” while 42 C.F.R. § 498.3(b) lists the decisions that constitute initial 

determinations by CMS. Nothing in that list suggests that a survey or 

complaint investigation is an initial determination, or that 42 C.F.R. § 498.30 

governs CMS’s decision to reopen such a survey or investigation.29 Perry’s 

complaint relies, essentially, on the fact that the word “reopen” appears in a 

regulation and the word “re-opened” appears in some of the documents

produced by the August 2011 survey. To give credence to this coincidence 

would be to exalt form over substance.

We also note that MSDH and CMS possess broad authority to survey 

SNFs. According to the Medicare statute and implementing regulations, each 

SNF must be inspected at least once every fifteen months (a “standard 

survey”), and any SNFs found to have provided a substandard quality of care

must be reinspected (an “extended survey”).30 Furthermore, MSDH and CMS

may specially investigate an SNF if the facility receives complaints; 

experiences “a change of ownership, management, or director of nursing”; or 

presents “other indicators of specific concern” (an “abbreviated standard 

survey”).31 Any SNF found to have provided a substandard quality of care 

28 See Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994). 29 The list of initial determinations includes, for example, determinations of 

“[w]hether a prospective provider qualifies as a provider,” id. § 498.3(b)(1), and “[w]hether to 

deny or revoke a provider or supplier’s Medicare enrollment,” id. § 498.3(b)(17).

30 42 U.S.C. § 1395i-3(g)(2)(A)(iii)(I), (B)(i).

31 42 C.F.R. § 488.301; see also id. § 488.308(e).

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during an abbreviated standard survey is also subject to reinspection (a 

“partial extended survey”).32 MSDH and CMS’s documentation are consistent 

in referring to the August 2011 survey as a “partially extended survey” or a

“partially extended complaint survey.” At oral argument, counsel for CMS 

explained that the survey was triggered—and, it turns out, justifiably—by 

Perry’s history of violations and by serious concerns over its continued 

noncompliance with Medicare regulations.33 In light of CMS’s broad authority 

to survey SNFs participating in the Medicare program, we cannot conclude 

that the August 2011 survey was an impermissible exercise of this authority.

III. CONCLUSION

The findings and conclusions of the DAB with regard to Perry’s violations

of 42 C.F.R. §§ 483.20(k)(3)(i) and 483.60(a)–(b) are not arbitrary or capricious, 

are in accordance with the law, and are supported by substantial evidence. 

Perry’s challenges to the legality of the August 2011 survey and the DAB’s 

decision not to review tags unnecessary to the outcome of this case are without 

merit. Accordingly, we DISMISS this petition for review.

32 Id. § 488.301. 33 See CMS, supra note 14, § 7205.2 (“Facilities with poor histories of compliance may 

be surveyed more frequently to ensure that residents are receiving quality care in a safe 

environment.”); id. (“The State may conduct surveys as frequently as necessary to determine 

if a facility complies with the participation requirements as well as to determine if the facility 

has corrected any previously cited deficiencies. There is no required minimum time which 

must elapse between surveys.”).

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