Document:

exv10w3

 

Exhibit 10.3

AMENDMENT TO CORPORATE INTEGRITY AGREEMENT

between the

Office of Inspector General

of the

Department of Health and Human Services

and

Beverly Enterprises Inc.

	I.	 	Preamble and Scope of Amendment

On February 3, 2000, the Office of Inspector General (“OIG”) of the Department
of Health and Human Services and Beverly Enterprises Inc. entered into a
Corporate Integrity Agreement (“CIA”). On August 1, 2002, the Superior Court
for the State of California, District of Santa Barbara, entered a Permanent
Injunction and Final Judgment (“PIFJ”) against Beverly Enterprises Inc. In
light of the PIFJ, Beverly and the OIG hereby enter into this Amendment to the
CIA pursuant to Section XI.C of the CIA.

	II.	 	Term and Scope of the Amendment

     A. The period of the compliance obligations assumed by Beverly under this
Amendment shall be five years from the effective date of this Amendment
(“Amendment Effective Date”) (unless otherwise specified). Notwithstanding the
foregoing, upon completion of the third year of this Amendment, the OIG, in its
sole discretion, may waive Beverly’s obligation under Section III.D infra to
retain an Independent Monitor for one or more of the remaining two years of the
Amendment. The Amendment Effective Date shall be the date on which the final
signatory of this Amendment executes this Amendment. Each one-year period,
beginning with the one-year period following the Effective Date, shall be
referred to as a “Reporting Period.”

     B. The scope of this Amendment shall be governed by the following
definitions:

          1. “Covered Facility,” except as expressly stated herein, includes the
nursing home facilities in California, Arizona, and Hawaii that are licensed,
operated, directed, or administered by Beverly or in which Beverly has an
ownership or control interest, as defined by 42 U.S.C. § 1320a-3(a)(3).

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          2. “Amendment Covered Persons” includes the employees, contractors
and agents who work at a Covered Facility who:

	 	 	 	(a) perform patient care or resident care duties;
	 
	 	 	 	(b) make assessments of patients or residents that affect
treatment decisions or reimbursement;
	 
	 	 	 	(c) perform billing, coding, or assessment functions
described in Section III.A.4. of this Amendment;
	 
	 	 	 	(d) perform management oversight on staffing, patient care,
resident care, reimbursement, or the CIA and this Amendment;
or
	 
	 	 	 	(e) perform any function that relates to or is covered by the
CIA and this Amendment.

Notwithstanding the above, any non-employee who is hired on a part-time or
temporary basis and who works less than 160 hours per year in a Covered
Facility or any non-employee private caregivers and/or attending physicians
hired by any resident or the family or friends of any resident of a Covered
Facility regardless of the hours worked per year in a Covered Facility are not
Amendment Covered Persons.

          3. “California Covered Persons” includes the employees, contractors, and
agents who are involved directly or indirectly in the delivery of patient or
resident care (including individuals who perform management oversight on
quality assurance, setting policies or procedures, or making staffing
decisions) at a Covered Facility located in the State of California.

Notwithstanding the above, any non-employee who is hired on a part-time or
temporary basis and who works less than 160 hours per year in a Covered
Facility or any non-employee private caregivers and/or attending physicians
hired by any resident or the family or friends of any resident of a Covered
Facility located in the State of California regardless of the hours worked per
year in a Covered Facility located in the State of California are not
California Covered Persons.

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	III.	 	Corporate Integrity Obligations

Beverly shall ensure that its compliance program required by the CIA includes
the following elements.

     A. Compliance Officer, Committees, and Internal Audit and Review
Functions.

          1. Compliance Officer. In addition to his or her other duties, the
Compliance Officer appointed pursuant to the CIA shall also provide reasonable
assurance that quality of care problems are being appropriately addressed and
corrected.

          2. Quality Compliance Committees.

	 	(a)	 	Corporate Quality Committees. Beverly has
established a Corporate Quality Council (“Corporate Quality
Committee”). The purpose of the Corporate Quality Committee
is to monitor and improve quality of care at Beverly’s nursing
homes. At a minimum, the Corporate Quality Committee includes
the Compliance Officer, the Corporate Medical Director, the
Chief Operating Officer of the Nursing Home subsidiary, the
Sr. Vice President of Professional Services, representatives
from Beverly’s Regions, and any other appropriate officers or
individuals necessary to thoroughly implement the requirements
of this Amendment that relate to quality of care in the
Covered Facilities.
	 
	 	(b)	 	Regional Quality Councils. Beverly has
established Regional Quality Councils (“Regional Quality
Compliance Committees”). The purpose of the Regional Quality
Compliance Committees is to address issues concerning quality
of care at Beverly’s nursing homes in each of its Regions. At
a minimum, the Regional Quality Compliance Committee includes
the Regional Vice President of Operations, the Regional
Director of Professional Services, and any other appropriate
officers or individuals necessary to thoroughly implement the
requirements of this Amendment that relate to quality of care
in the Covered Facilities. The Regional Quality Council for
the Region in which the Covered Facilities are located also
includes the California

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	 	 	 	Compliance Officer. For each Regional Quality Council
meeting in the Region in which the covered facilities are
located, there shall be senior representatives from the
Covered Facilities, chosen on a rotating and random basis,
to report to the committee on the adequacy of care being
provided at their applicable Covered Facility.

          3. Board of Directors’ Committee. Beverly currently has a Quality
Committee as part of its Board of Directors to provide oversight on quality of
care issues (“Quality Assurance Monitoring Committee”). This committee shall
continue to:

	 	(a)	 	review the adequacy of Beverly’s system of
internal controls, quality assurance monitoring, and patient
care;
	 
	 	(b)	 	ensure that Beverly’s response to state, Federal,
internal, and external reports of quality of care issues is
complete, thorough, and resolves the issue(s) identified; and
	 
	 	(c)	 	ensure that Beverly adopts and implements
policies and procedures that are designed to ensure that each
individual cared for at a Beverly facility receives the
highest practicable physical, mental and psychosocial level of
care attainable. The individuals who serve on this committee
shall be readily available to the Compliance Officer, the Sr.
Vice President of Professional Services, the Monitors, and the
Independent Review Organization(s) required under this
Amendment to respond to any issues or questions that might
arise. The names of the Board members and the charter for the
committee shall be provided to the OIG within ninety (90) days
after the effective date of this Amendment. When new members
are appointed, or the responsibilities or authorities of the
Board committee are substantially changed, Beverly shall
notify the OIG, in writing, within fifteen (15) days of such a
change.

          4. Quality Reviews. Beverly currently performs Quality reviews under the
“Beverly Quality System.” The Quality Reviews (including quality review
follow-ups) are described in a 2002 notebook, which Beverly has previously
provided to the OIG. Beverly shall continue to conduct Quality Reviews in the
manner described in the 2002 notebook until January 31, 2003, at which time it
will commence performing its Quality Reviews in a manner described in a 2003
notebook. The 2003 notebook will be provided

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to the OIG no later than February 1, 2003. After February 1, 2003, Beverly
will continue to conduct Quality Reviews in a manner that devotes at least
equal resources to performing the function of quality review at the covered
facilities as that described in the 2003 notebook. Beverly shall notify the
OIG within fifteen (15) days of any material changes to the form, manner, or
frequency of these Quality Reviews. The Quality Reviews shall:

	 	 	 	a. make findings of whether the patients and residents at Covered
Facilities are receiving the quality of care and quality of life
consistent with basic care, treatment and protection from harm
standards, including but not limited to, 42 C.F.R. Parts 482 and
483 and any other Federal and state statutes, regulations, and
directives;
	 
	 	 	 	b. make findings of whether the policies and procedures mandated by
this Amendment are created, implemented, and enforced;
	 
	 	 	 	c. make findings of whether training is performed in accordance
with this Amendment;
	 
	 	 	 	d. make findings of whether hotline complaints are appropriately
investigated;
	 
	 	 	 	e. make findings of whether the reporting obligations are complied
with in accordance with this Amendment; and
	 
	 	 	 	f. make findings of whether corrective action plans are timely
created, implemented, and enforced.

	 	Notwithstanding the above, the obligations and findings required by
Sections III.A.4(b), (c), (d), and (e) above may be made by Beverly’s
Internal Audit function or any other Beverly review function whose
primary responsibility is not to conduct Quality Reviews under the
Beverly Quality System.

	 	B. Written Standards.

     1. Policies and Procedures. Beverly has established written Policies and
Procedures regarding its Compliance Program and its compliance with relevant
Federal and state requirements, including, but not limited to, the requirements
of Federal health care

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programs. Beverly shall continue to assess and update as necessary the
Policies and Procedures at least annually and more frequently, as appropriate.
The Policies and Procedures shall be available to the OIG upon request. To the
extent not already accomplished, Beverly shall make the relevant portions of
its Policies and Procedures available to the appropriate Amendment Covered
Persons within 120 days after the Effective Date of this Amendment. Compliance
staff or supervisors shall continue to be available to explain any and all
Policies and Procedures. Within 120 days after the Effective Date of this
Amendment, Beverly shall review and analyze its Polices and Procedures to
ensure that, at a minimum, such Policies and Procedures specifically address
and/or include:

	 	a.	 	Measures designed to ensure that Beverly fully complies
with applicable portions of Titles XVIII and XIX of the Social
Security Act, 42 U.S.C. §§ 1395-1395ggg and 1396-1396v, and all
regulations pursuant to these statutes, including 42 C.F.R. 424
and 483;
	 
	 	b.	 	Measures designed to ensure that Beverly complies with
all applicable requirements of Medicare’s Prospective Payment
System (“PPS”) for long term care facilities, including, but not
limited to: ensuring the accuracy of the clinical data required
under the Minimum Data Set (“MDS”) as specified by the Resident
Assessment Instrument User’s Manual; ensuring that facilities are
appropriately and accurately using the current Resource
Utilization Groups (“RUG”) classification system; and ensuring
the accuracy of billing and cost report preparation policies and
procedures;
	 
	 	c.	 	Measures designed to ensure the provision of
coordinated interdisciplinary care to long term care residents,
including, but not limited to the following areas addressed in 42
C.F.R. 483: resident assessment and care planning; nutrition;
disease specific care; wound care; infection control; appropriate
drug therapies; appropriate mental health services; provision of
basic care needs, including the provision of Activities of Daily
Living (“ADL”); incontinence care; resident rights; physical and
chemical restraint use; therapy services; quality of life,
including accommodation of needs and activities; and assessment
of resident competence to make treatment decisions; and
professional services. Such Policies and Procedures shall
include the following specific items:

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	 	i.	 	Nutrition: Measures designed to facilitate
nutritional care of residents by the Registered Dietitian
including:

	 	 	 	(A) Nutritional measures for residents with wounds;
	 
	 	 	 	(B) Measures to accurately assess all residents’
appropriate body weight in order to determine an
appropriate healthy weight range for each resident on a
regular and consistent basis and clearly document such
findings in the residents’ charts; and
	 
	 	 	 	(C) Measures designed to ensure that Beverly identifies
and provides timely clinical responses to all
“nutritionally at risk” and “nutritionally compromised”
residents at the earliest possible time;

	 	ii.	 	Provision of Basic Care Needs, including those
Activities of Daily Living, such as bathing, oral care, and
positioning;
	 
	 	iii.	 	Use of Chemical & Physical Restraints, pursuant
to acceptable professional standards, including:

	 	 	 	(A) Measures designed to ensure that physical and chemical
restraints are used only pursuant to accepted professional
standards when less restrictive alternatives are not
effective and that they are never used as punishment or
for the convenience of staff;
	 
	 	 	 	(B) Measures designed to ensure that appropriate
physicians’ orders are obtained and followed before
physical restraints are used; and
	 
	 	 	 	(C) Measures designed to ensure that psychotropic
medication is used only in accordance with accepted
professional standards and only where there is an
appropriate psychiatric or neuropsychiatric diagnosis, and
that psychotropic medication is never used as punishment,
in lieu of a training program, for behavior control or in
lieu of a psychiatric or neuropsychiatric diagnosis or for
the convenience of staff.

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	 	iv.	 	Measures designed to ensure that Beverly
provides appropriate wound care (decubitus ulcer) treatment
and appropriate nutrition for residents with wounds; and
	 
	 	v.	 	Measures to assess that the resident’s drug
regime is free of unnecessary medications.

	 	d.	 	Measures designed to ensure the provision of a
safe and functional environment for all residents, allowing
all residents to be free from mistreatment, verbal, sexual,
physical and mental abuse, corporal punishment, involuntary
seclusion, neglect and misappropriation of property. Such
measures shall include:

	 	i.	 	Measures designed to ensure that Beverly
adequately supervises, monitors and safeguards all
residents, including those with histories of exhibiting
behaviors that cause injury to themselves or others, and
	 
	 	ii.	 	Measures designed to ensure that residents
shall be protected from being victimized by other
aggressive residents.

	 	e.	 	Measures designed to ensure the provision for an ongoing program of
meaningful activities both during the week and on the weekends,
which are structured and designed to meet individual needs and
interests and the physical, mental, and psychosocial well-being of
the residents;
	 
	 	f.	 	Measures designed to ensure the provision of
medically-related social services to attain the individual
interests and physical, mental, and psychosocial well-being of
each resident, and provides medically-related social services to
attain or maintain the highest practicable physical, mental, and
psychosocial well-being of each resident;
	 
	 	g.	 	Measures designed to ensure that physician services
are provided in a manner set forth in 42 C.F.R. 483.40, and to
provide in any contracts with independent physicians that they
render preventative, chronic, routine, acute, follow-up, and
emergency medical care in accordance with generally accepted
standards of care;

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	 	h.	 	Measures designed to ensure the provision of Nursing
Services as outlined in applicable portions of 42.C.F.R. 483.30;
and that nursing care is provided in keeping with the accepted
professional standards of care such as assessment, planning,
implementing and evaluating the care of the long term care
resident. Examples of such are:

	 	i.	 	Notifying physician of health related
issues;
	 
	 	ii.	 	Monitoring and intervening in keeping with
professional standards of care; and
	 
	 	iii.	 	Keeping appropriate records of the
residents’ health care status.

	 	i.	 	Measures designed to ensure that residents and patients
are discharged only for the reasons authorized by and in
accordance with the procedures established by applicable law and
not discharged for financial reasons unless authorized by law;
	 
	 	j.	 	Measures designed to ensure that staffing is in
compliance with Federal health care program requirements and
state laws, including, but not limited to, 42 C.F.R.
§§ 483.23(a)
and (b) (hospitals) and § 483.30 (nursing services, sufficient
staff), and not based on financial considerations;
	 
	 	k.	 	Measures that specify that if the director of nursing
(or other person who is making staffing decisions at the
facilities) disagrees with a staffing determination that is not
in compliance with state or federal regulations or this CIA or
the Amendment and that significantly affects patient care made by
the Administrator or other individuals at the regional or
corporate level, then that person must promptly call the hotline
and the Monitor;
	 
	 	l.	 	Measures designed to minimize the number of
individuals working at any Covered Facility who are not Amendment
Covered Persons, i.e., are on a temporary assignment or not
employed by Beverly, and measures designed to create and maintain
a standardized system to track the usage of such individuals at
each facility so that the number/proportion of or changing trends
in such staff can be adequately identified by Beverly and/or the

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	 	 	 	Monitor. Use of temporary staff will be reported to the Monitor on
an ongoing basis;
	 
	 	m.	 	Measures designed to ensure compliance with the
completion of accurate clinical assessments as required by
applicable Federal law;
	 
	 	n.	 	Measures designed to ensure that all residents and
patients are
served in the least restrictive environment and most
integrated setting appropriate to their needs;
	 
	 	o.	 	Disciplinary guidelines and methods for employees to
make
disclosures or otherwise report on compliance issues through
the Disclosure Program required by Section III.E of the CIA;
	 
	 	p.	 	Measures designed to promote adherence to the
compliance and quality of care standards set forth in the
applicable statutes, regulations, and in this Amendment, by
including such adherence as a significant factor in determining
the compensation to Administrators of the facilities, and the
individuals responsible for such compliance at the regional, and
corporate level;
	 
	 	q.	 	Measures designed to ensure cooperation by Beverly and
its employees, contractors, and agents with the Monitor in the
performance of his or her duties as set forth infra;
	 
	 	r.	 	Measures designed to ensure that compliance issues identified
internally e.g., through reports to supervisors, hotline complaints, internal
audits, patient satisfaction surveys, CHSRA quality indicators,
facility specific key indicators, or internal surveys) or externally
(e.g., through CMS or state survey agency reports, consultants,
audits performed by the Independent Review Organization, or
Monitor’s reports) are promptly and appropriately investigated and,
if the investigation substantiates compliance issues, Beverly
assesses the nature and scope of the problems, implements
appropriate corrective action plans, and monitors compliance with
such plans;

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	 	s.	 	Measures designed to effectively collect and analyze
staffing data, including staff-to-resident ratio and staff
turnover;
	 
	 	t.	 	Measures designed to ensure that individuals and
entities who fall within the ambit of the Covered Contractor
definition are appropriately supervised to ensure that the
Covered Contractor is acting within the parameters of Beverly’s
Policies and Procedures and the requirements of Federal health
care programs;
	 
	 	u.	 	Measures designed to ensure that appropriate and
qualified individuals perform the internal audits;
	 
	 	v.	 	Non-retaliation policies and methods for employees to
make disclosures or otherwise report on compliance issues through
the Disclosure Program required by Section III.E of the CIA;
	 
	 	w.	 	Disciplinary guidelines to reflect the Code of Conduct
requirements as specified in Section III.B.1 of the CIA;
	 
	 	x.	 	Measures designed to ensure that Provider has a system
to require and centrally collect reports relating to incidents,
accidents, abuse and neglect. The reports required under this
system shall be of nature to allow the Quality Assurance
Committees meaningful information to be able to determine: 1) if
there is a quality of care problem; and 2) the scope and severity
of the problem;
	 
	 	y.	 	Measures designed to inform Covered Persons of the
staffing requirements of Federal and state law; and
	 
	 	z.	 	Measures to inform Covered Persons during orientation
and during other training required by this Amendment that
staffing levels are a critical aspect of patient and resident
care, and if any person has a concern about the level of staffing
that there are many avenues available to report such concerns,
including, but not limited to, the Administrator, the Hotline (as
described in Section III.E of the CIA), individuals at the
district, regional, or corporate level, or directly to the
Compliance Officer or Monitor.

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Beverly shall assess and update as necessary the Policies and Procedures at
least annually and more frequently, as appropriate. The Policies and
Procedures will be available to OIG upon request.

     C. Training and Education.

     1. Training in Hawaii and Arizona facilities. Training conducted in
facilities located in Hawaii and Arizona will continue to be conducted in the
same manner as exists as of the date of this Amendment. Such training includes
includes: (a) Infection Control, Prevention of Communicable Diseases; (b)
Residents Rights; (c) Abuse Prevention;
(d) Safety and Accident Prevention; (e) Restraint Reduction/ Needs of the Aged;
(f) Fire and Disaster Preparedness; and (g) Facility Policies and Procedures.

     2. Supplemental Training to California Covered Persons. Pursuant to the
schedule set forth below, each California Covered Person shall receive
Supplemental Training in addition to the training required in the original CIA.
This Supplemental Training shall include a discussion of the policies and
procedures set forth in Section III.B, including, but not limited to:

	 	a.	 	policies, procedures, and other
requirements applicable to the
documentation of medical records; and
	 
	 	b.	 	the coordinated interdisciplinary
approach to providing care to residents, including, but
not limited to, resident assessment and care planning;
nutrition; diabetes care; wound care; infection control;
abuse and neglect policies and reporting procedures;
appropriate drug therapies; appropriate mental health
services; provision of basic care needs; incontinence
care; resident rights and restraint use; ADL care;
therapy services; quality of life, including
accommodation of needs and activities; and assessment of
the resident’s competence to make treatment decisions.

Supplemental Training on each topic in Sections III.C.1.a. and b. above shall
be given (to the extent it was not previously given within six (6) months prior
to the Effective Date of this Amendment by in-service training, orientation or
otherwise) at each Covered Facility located in California to each California
Covered Person. No later than one hundred and twenty (120) days after the
Effective Date of this Amendment, Beverly shall institute a

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rotating training program at the Covered Facilities located in California
whereby the Supplemental Training specified above shall be instituted in a
reasonable manner, one topic each week, until all topics specified above in
Sections III C.1.a. and b. has been completed. By the time the rotating
program is completed, all currently employed California Covered Persons and all
California Covered Persons retained in the interim period (between six (6)
months prior to the Effective Date of this Amendment and one hundred twenty
(120) days after the Effective Date), shall have received the Supplemental
Training, orientation (in the case of New California Covered Persons), or other
training regarding each topic as applicable. All subsequently retained
California Covered Persons shall enter into the rotating program within two (2)
weeks of their date of employment and shall receive the Supplemental Training
required by Section III C. of this Amendment by orientation, in-service, or
otherwise in each of the areas specified in Sections III. C.1. a. and b. above
as applicable and on a weekly basis consistent with the rotating training
program.

Beverly may arrange the Supplemental Training to be provided pursuant to the
provisions of this Amendment so that similar or even different topics can be
taught within the same in-service training program, orientation, or other
training. Separate in-service training programs, orientations or other
training are not required for each of the topics if some of the topics to be
taught can be reasonably combined into one in-service training program and/or
orientation and/or other training. If a California Covered Person has any
responsibility for the delivery of patient or resident care, then prior to
completing this specific training, a Beverly Covered Person who has completed
the substantive training shall monitor the untrained person’s work.

Every California Covered Person shall receive such Supplemental Training on an
annual basis.

In addition, each facility shall conduct periodic training on an “as needed”
basis on those quality of care issues identified by the Board of Directors
Committee, the Compliance Committee or through other means as set forth below.
In determining what training should be performed, these Committees will review
the complaints received, satisfaction surveys, staff turnover data, any state
or Federal surveys, including those performed by the Joint Commission on
Accreditation of Healthcare Organizations (“JCAHO”) or other such private
agencies, any internal surveys, and the CHSRA quality indicators. Such
training, at a minimum, shall include in-service training for each California
Covered Person at the applicable Covered Facility in California addressing the
issues set forth for

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each deficiency of a level F or higher (Federal F-tag) or for each B, A, or AA
citation (California-specific) received by a Covered Facility. Such training
will be provided to all California Covered Persons within sixty (60) days of
the Annual Report for that year or earlier.

Each individual trained will be evaluated through means such as testing,
monitoring, or supervision to confirm that each person trained understands the
topic taught, and is properly implementing the practices, policies, procedures
or techniques, which were taught. If it becomes evident to the instructor or
supervisor that the person trained does not understand the topic taught, and/or
is not properly implementing the practices, policies, procedures or techniques
which were taught, then “as-needed” training shall be conducted for such
California Covered Person until such time that the person being trained does in
fact understand the topic taught, and is implementing the practices, policies,
procedures or techniques that were taught. Any California Covered Person who
is not able to demonstrate that he or she understand the topic taught, or is
not able to demonstrate that he or she is properly implementing the practices,
policies, procedures or techniques which were taught in either the Supplemental
Training or “as-needed” training, shall not be allowed to engage in direct
patient care involving such practices, policies, procedures or techniques
without the direct supervision by a competent supervisor. Such practices,
policies, procedures or techniques shall not be performed by a California
Covered Person, even with the direct supervision by a competent supervisor, if
the attempted implementation of such practices, policies, procedures, or
techniques by the person being trained creates a reasonable possibility of
injury or harm to the resident being cared for if such implementation is not
done properly.

Training materials shall be made available to OIG upon request. Persons
providing the training must have sufficient expertise in the subject area.

     3. Certification. Each California Covered Person shall certify, in
writing, that he or she has attended the required training. The certification
shall specify the type of training received and the date received. Each
Covered Facility in California shall retain the certifications, along with
specific course materials. These shall be made available to OIG upon request
made to the Compliance Officer.

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     D. Independent Monitor.

Within sixty (60) days after the Effective Date of this Amendment, Beverly
shall retain an appropriately qualified monitoring team (the “Monitor”),
approved by the OIG. The Monitor may retain additional personnel, including,
but not limited to, independent consultants, if needed to help meet the
Monitor’s obligations under this Amendment. Beverly shall be responsible for
all fees and expenses incurred by the Monitor, including, but not limited to,
travel costs, consultants, administrative personnel, office space and
equipment, or additional personnel. The Monitor shall charge a reasonable rate
for his or her fees and expenses, which shall not exceed $750,000 per year
unless the OIG, after consultation with Beverly, determines that exceptional
circumstances necessitate additional expenditures. As a condition to retaining
the Monitor, Beverly shall require the Monitor to enter into a subcontract with
an individual or entity, approved by the OIG, that has the requisite expertise,
capacity and access to MDS data directly from CMS to perform quarterly Quality
Indicator data analysis reports of the type described in the attached Appendix
# 1. To assist Beverly in its budgeting process, the Monitor shall provide
Beverly with an estimated budget on an annual basis. Such budget shall be
provided to Beverly no later than November 1 of each year. Failure to pay the
Monitor within thirty (30) calendar days of submission of its invoices for
services previously rendered shall constitute a breach of the CIA and this
Amendment and shall subject Beverly to one or more of the remedies set forth in
Section VI infra. The Monitor may be removed solely at the discretion of the
OIG. If the Monitor resigns or is removed for any reason prior to the
termination of the Amendment, Beverly shall appoint another Monitor, after
approval by the OIG, with the same functions and authorities.

	 	 	 	1. The Monitor shall be responsible for assessing the
effectiveness, reliability and thoroughness of the following at or
with regard to Covered Facilities:

	 	 	 	a. Beverly’s Quality of Care internal quality control
systems, including, but not limited to, whether the systems
in place to promote quality of care and to respond to quality
of care issues are acting in a timely and effective manner;
whether the communication system is effective, allowing for
accurate information, decisions, and results of decisions to
be transmitted to the proper individuals in a timely fashion;
and whether the training programs are effective and thorough;

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	 	 	 	b. Beverly’s response to quality of care issues at Covered
Facilities, which shall include an assessment of:

	 	 	 	(1) Beverly’s ability to identify the problem;
	 
	 	 	 	(2) Beverly’s ability to determine the scope of the
problem, including, but not limited to whether the
problem is isolated or systemic;
	 
	 	 	 	(3) Beverly’s ability to create a corrective action
plan to respond to the problem;
	 
	 	 	 	(4) Beverly’s ability to execute the corrective action
plan; and
	 
	 	 	 	(5) Beverly’s ability to evaluate whether the
assessment, corrective action plan and execution of that
plan was effective, reliable, and thorough.

	 	 	 	c. Beverly’s development and implementation of corrective
action plans and the timeliness of such actions; and
	 
	 	 	 	d. Beverly’s proactive steps to ensure that each patient and
resident in a Covered Facility receives care in accordance
with: (1) basic care, treatment and protection from harm
standards; (2) the rules and regulations set forth in 42
C.F.R. Parts 482 and 483; (3) state and local statutes,
regulations, and other directives or guidelines; and (4) the
policies and procedures adopted by Beverly and set forth in
this Amendment.

	 	 	 	2. Access. The Monitor shall have access to:

	 	 	 	a. Covered Facilities, at any time and without prior notice;
	 
	 	 	 	b. The following types of documents: (1) the CMS quality
indicators (for Covered Facilities); (2) internal or external
surveys or reports applicable to Covered Facilities; (3)
Beverly’s hotline

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	 	 	 	complaints regarding Covered Facilities; (4) resident or
patient satisfaction surveys for each Covered Facility; (5)
staffing data for each Covered Facility in the format
requested by the Monitor, including but not limited to
reports setting forth the staff to patient ratios, temporary
staffing levels, and staff turnover data, as well as reports
of any facility where temporary agency staff constitutes more
than ten percent of the nursing and direct care staff; (6)
incident, accident, abuse, neglect or death reports for each
Covered Facility; (7) reports of incidents involving a
patient or resident that prompt a full internal investigation
at a Covered Facility; (8) patient or resident records for
Covered Facilities; (9) financial data for Covered
Facilities; (10) self-evaluative reports including, but not
limited to, those from quality assurance committees,
applicable to Covered Facilities; and (11) any other
pre-existing data, including the reconfiguring of existing
data that the Monitor may determine relevant to fulfilling
the duties required under this Amendment in the format
requested by the Monitor, to the extent practicable; and
	 
	 	 	 	c. Immediate access to Covered Facilities’ current
patients, residents, and staff subject to: (1) their
clinical condition; and (2) their consent to conduct
interviews outside the presence of Beverly supervisory staff
or counsel, provided such interviews are conducted in
accordance with all applicable laws and the rights of such
individuals.

	 	 	 	3. Beverly’s Obligations. Beverly shall:

	 	 	 	a. Not impede the Monitor’s access to its facilities
(pursuant to the provisions of this Amendment) and shall
provide any requested documentation within the time frame
specified by the Monitor, subject to any extensions and
modifications requested by Beverly and granted by the Monitor
(the Monitor shall balance the circumstances of the situation
with the burden on Beverly when making document requests);
	 
	 	 	 	b. Assist in contacting and arranging interviews of
Amendment Covered Persons, and not impede the cooperation by
such individuals;

17

 

	 	 	 	c. Provide access to current residents
or patients and contact information for their families
and guardians, in a manner consistent with the rights of
such individuals under state or Federal law, and not
impede their cooperation;
	 
	 	 	 	d. Provide the last known contact
information for former employees, contractors, and
agents, and not impede the cooperation from such
individuals, including but not limited to, refraining
from placing any provision in agreements that would
limit such cooperation;
	 
	 	 	 	e. Provide the last known contact information for former
residents, patients, their families, or guardians consistent
with the rights of such individuals under state or Federal
law, and not impede their cooperation;
	 
	 	 	 	f. Address any written recommendation made by the Monitor
either by substantially implementing the Monitor’s
recommendations or by explaining in writing why it has
elected not to do so;
	 
	 	 	 	g. Pay the Monitor’s bills for Monitor’s Costs within 30
days of receipt. While Beverly must pay all the Monitor’s
bills within 30 days, Beverly may bring any disputed
Monitor’s Costs or bills to OIG’s attention;
	 
	 	 	 	h. Not sue or otherwise bring any action against the Monitor
related to any findings made by the Monitor or related to any
exclusion or other sanction of Beverly under this Agreement;
provided, however, that this clause shall not apply to any
suit or other action based solely on the dishonest or illegal
acts of the Monitor, whether acting alone or in collusion
with others; and
	 
	 	 	 	i. Provide the Monitor a report within forty-eight hours of
becoming aware that any of the following occurrences may
exist:

	 	 	 	(1) Deaths or injuries related to the use of restraints;

18

 

	 	 	 	(2) Deaths or injuries related to the use of
psychotropic medications;
	 
	 	 	 	(3) Suicides;
	 
	 	 	 	(4) Deaths or injuries related to abuse or neglect (as
defined in the applicable Federal guidelines); and
	 
	 	 	 	(5) Any other incident that involves or causes actual
harm to a resident when such incident prompts a full
internal investigation.
	 
	 	 	 	Each such report shall contain the full name, Social
Security number, and date of birth of the resident, the
date of death or incident, and a brief description of
the events surrounding the death or incident.

	 	 	 	4. The Monitor’s Obligations. The Monitor shall:

	 	 	 	a. Respect the legal rights, privacy, and dignity of all
Amendment Covered Persons, residents, and patients;
	 
	 	 	 	b. Where independently required by applicable law or
professional licensing standard, to report any finding to an
appropriate regulatory or law enforcement authority,
simultaneously submit copies of such reports to the OIG and
to Beverly;
	 
	 	 	 	c. At all times act reasonably in connection with its duties
under the Amendment including when requesting information
from Beverly;
	 
	 	 	 	d. Simultaneously provide quarterly reports to Beverly and
OIG concerning the findings made to date;
	 
	 	 	 	e. Submit bills to Beverly on a consolidated basis no more
than once per month, and submit an annual summary
representing an accounting of its costs throughout the year
to Beverly and to OIG. Beverly shall have the opportunity to
review such bills and bring any issue of disputed bills or
costs to the attention of OIG. The Monitor

19

 

	 	 	 	shall submit to Beverly an annual report representing an
accounting of its costs throughout the year;
	 
	 	 	 	f. Not be bound by any other private or governmental
agency’s findings or conclusions, including, but not limited
to, JCAHO, CMS, or the state survey agency. Likewise, such
private and governmental agencies shall not be bound by the
Monitor’s findings or conclusions. The Monitor’s reports
shall not be the sole basis for determining deficiencies by
the state survey agencies. The parties agree that CMS and its
contractors shall not introduce any material generated by the
Monitor, or any opinions, testimony, or conclusions from the
Monitor as evidence into any proceeding involving a Medicare
or Medicaid survey, certification, or other enforcement
action against Beverly, and Beverly shall similarly be
restricted from using material generated by the Monitor, or
any opinions, testimony, or conclusions from the Monitor as
evidence in any of these proceedings. Nothing in the
previous sentence, however, shall preclude the OIG or Beverly
from using any material generated by the Monitor, or any
opinions, testimony, or conclusions from the Monitor in any
action under the CIA or this Amendment or pursuant to any
other OIG authorities or in any other situations not
explicitly excluded in this subsection subject to the
confidentiality provisions set forth in Section V. of this
Agreement;
	 
	 	 	 	g. Abide by the legal requirements of Beverly’s facilities
to maintain the confidentiality of each resident’s personal
and clinical records, and to maintain confidential and not to
disclose the records of Beverly’s Corporate Compliance
Committee, Corporate, Regional or District Quality Councils,
Facility QAA Committees and self-evaluative reports,
including, but not limited to, those from, Internal Audit,
the Hotline, medical review committees, if any, quality
assurance committees or peer review committees, if any. See
42 C.F.R. §§483.10 and 483.75(0)(3)). Nothing in the prior
sentence, however, shall limit or affect the Monitor’s
obligation to provide information, including information from
patient and resident clinical records, to the OIG, and, when
legally or professionally required, reporting to other
agencies;

20

 

	 	 	 	h. Except to the extent required by law, maintain the
confidentiality of any proprietary financial and operational
information, processes, procedures and forms obtained in
connection with its duties under this Amendment and not
comment publicly concerning its findings except to the extent
authorized by the OIG;
	 
	 	 	 	i. Visit each Covered Facility as often as the Monitor
believes it necessary to perform its functions;
	 
	 	 	 	j. Where appropriate, communicate
requests for access, documents or other information to
the Compliance Officer; and
	 
	 	 	 	k. When possible, identify the criteria
under which it intends to assess Beverly’s or individual
Covered Facilities’ activities as set forth herein and
communicate those criteria to Beverly in advance of its
assessments.

	 	 	 	5. Miscellaneous Provisions

	 	 	 	a. The Monitor may confer and correspond with Beverly and
OIG on an ex parte basis at any time.
	 
	 	 	 	b. If, after consulting with Beverly, the Monitor has
concerns about corrective action plans that are not being
enforced or systemic or repeated problems that could impact
Beverly’s ability to render quality care to its patients and
residents, the Monitor shall: (A) report such concerns in
writing to the OIG, which in its discretion shall relay such
concerns to the Consortium (the Consortium consists of
representatives of OIG, the Department of Justice (DOJ) and
CMS); and (B) provide notice and a copy of the report to the
Compliance Officer and the Board Committee. Beverly shall be
provided an opportunity to respond to the Consortium
concerning any such report. The Consortium shall seek to
resolve any such dispute between the Monitor and Beverly
prior to OIG seeking any remedies pursuant to the terms of
the CIA and this Amendment;
	 
	 	 	 	c. The Monitor shall not control, manage or operate Beverly.

21

 

     E. Reporting of Material Deficiencies. The definition of Material
Deficiency set forth in Section III.H.4(iii) of the CIA and Beverly’s reporting
obligations set forth in Section III.H.2 of the CIA are hereby amended to
provide that Beverly no longer must report occurrences or instances meeting the
definition of Material Deficiency set forth in Section III.H.4(iii) if those
occurrences or instances occur in a Covered Facility. Sections III.H.2 and
III.H.4(iii) shall continue to apply to Beverly with regard to all other
nursing home facilities owned or operated by Beverly not defined as Covered
Facilities in Section II. of this Amendment.

	IV.	 	Implementation and Annual Reports

     A. Implementation Report. On or before March 31, 2003, Beverly shall
submit a written report to OIG summarizing the status of its implementation of
the requirements of this Amendment. This Implementation Report shall include:

	 	 	 	1. the name, address, phone number and position description of all
individuals in positions described in Section III.A;
	 
	 	 	 	2. the charter for the Board of Directors’ Committee required in
Section
III.A;
	 
	 	 	 	3. the program(s) for the Quality Reviews required
in Section III.A.4;
	 
	 	 	 	4. a description of the training programs required by Section
III.C, including a description of the targeted audiences and a
schedule of when the training sessions were held; and
	 
	 	 	 	5. a certification by the Compliance Officer that, unless the
non-compliance is clearly and explicitly described in the
Implementation Report:

	 	a.	 	the Policies and Procedures required
by Section III.B have been developed, are being
implemented, and have been made available to all
pertinent employees, contractors, and agents; and
	 
	 	b.	 	all persons required by Section III.C
to have completed training and executed a certification
have done so.

22

 

The information and certifications required to be included on the
Implementation Report may be included in Beverly’s Annual Report filed pursuant
to Section V of the CIA.

     B. Annual Report. Each Annual Report required by the CIA shall include,
in addition to the information required by Section V.B. of the CIA, the
following:

	 	 	 	1. any change in the identity or position description of
individuals in
positions described in Section III.A of this Amendment, a change in
any of the committees’ structure or charter, or any change in the
Quality Review program;
	 
	 	 	 	2. a certification by the Compliance Officer that, unless the
non-compliance is clearly and explicitly described in the Annual
Report:

	 	a.	 	all California Covered Persons have completed the
training and executed the certification required by Section
III.C; and
	 
	 	b.	 	Beverly has effectively implemented
all plans of correction
related to problems identified under this Amendment Beverly’s
Compliance Program, or Quality Reviews.

	 	 	 	3. notification of any changes or amendments to the Policies and
Procedures required by Section III.B of this Amendment and the
reasons for such changes (e.g., change in contractor policy);
	 
	 	 	 	4. a summary of the Covered Facilities reviewed pursuant to
Section III.B.4., a summary of the findings of such review, and a
summary of the corrective action taken under the Quality Review
Program; and
	 
	 	 	 	5. Beverly’s response/corrective action plan to any issues raised
by the Monitor.

     C. Certifications. The Implementation Report and Annual Reports shall
include a certification by Beverly’s Compliance Officer, under penalty of
perjury, that: (1) Beverly is in compliance with all of the requirements of
this Amendment and the CIA (unless the non-compliance is clearly and explicitly
described in the Implementation or Annual Report), to the best of his or her
knowledge; and (2) the Compliance Officer has reviewed

23

 

the Report and has made reasonable inquiry regarding its content and
believes that, upon such inquiry, the information is accurate and truthful.
Each Report shall also include a certification the chair of the appropriate
committee(s) of Beverly’s Board of Directors certifying that the committee(s)’
members have reviewed the Annual Report.

	V.	 	Disclosures

The OIG will follow all applicable Federal laws concerning privacy and
confidentiality, including the Federal Privacy Act, 5 U.S.C. § 552a, to the
greatest extent allowed by law.

Consistent with HHS’s Freedom of Information Act (“FOIA”) procedures, set forth
in 45 C.F.R. Part 5, the OIG shall make a reasonable effort to notify Beverly
prior to any release by OIG of information submitted by Beverly pursuant to its
obligations under this Amendment or the CIA and identified upon submission by
Beverly as trade secrets, commercial or financial information and privileged
and confidential under the FOIA rules. Beverly shall refrain from identifying
any information as trade secrets, commercial, or financial information and
privileged and confidential under the FOIA rules. Beverly shall refrain from
identifying any information as trade secrets, commercial, or financial
information and privileged and confidential that does not meet the criteria for
exemption from disclosure under FOIA. With respect to the disclosure of
information, Beverly shall have the rights set forth in 45 C.F.R. § 5.65(d).
The OIG shall seek to protect confidential information under the FOIA rules to
the greatest extent allowed by law. The OIG shall provide the pre-disclosure
notice required pursuant to 45 C.F.R. § 5.65(d) to the Compliance Officer at
the address provided in Section VI of the CIA.

One of the purposes of the original CIA and this Amendment is to assist and
monitor Beverly to ensure that Beverly develops, revises, and maintains
effective internal controls that promote adherence to applicable Federal and
state laws and the program requirements of Federal and state health care
programs. Communication, record-keeping, reporting and frank and open
communication by and between the OIG and Beverly, its employees and its
Compliance Officer are essential to meeting the OIG’s expectations and the
purpose of the CIA and this Amendment.

Nothing in this Amendment or the CIA, or any communication or report made
pursuant to this Amendment or the CIA, shall constitute or be construed as a
waiver by Beverly or Beverly’s attorney-client, work product, peer review, or
other applicable privileges, including, without limitation, the protections
contained in 42 C.F.R. § 473.75(o).

24

 

Notwithstanding that fact, the existence of any such privilege does not affect
Beverly’s obligations to comply with the provisions of the CIA or this
Amendment or to provide documents and information to the OIG pursuant to the
CIA or this Amendment.

	VI.	 	Breach and Default Provisions

Beverly is expected to fully and timely comply with all of the obligations
herein throughout the term of this Amendment or other time frames herein agreed
to.

	 	A.	 	Specific Performance of Amendment Provisions. If OIG
determines that Beverly is failing to comply with a provision or
provisions of this Amendment and decides to seek specific
performance of any of these provisions, OIG shall provide Beverly
with prompt written notification of such determination
(“Noncompliance Notice”).
	 
	 	B.	 	Opportunity to Cure. Beverly will have thirty five (35) days
from receipt of the Noncompliance Notice either to demonstrate to
the OIG’s satisfaction that: (1) Beverly is in full compliance with
this Amendment; (2) the alleged failure to comply has been cured; or
(3) the alleged non-compliance cannot be cured within the
thirty-five (35) day period but that: (i) Beverly has begun to take
action to cure the non-compliance; (ii) Beverly is pursuing such
action with due diligence; and (iii) Beverly has provided to the OIG
a reasonable timetable for curing the non-compliance; or to reply
in writing that Beverly disagrees with the determination of
noncompliance and request a hearing before an HHS Administrative Law
Judge (“ALJ”), pursuant to the provisions set for in Section VI.E of
this Amendment. This purpose of the hearing is to determine whether
Beverly has failed to comply with the Amendment and whether Beverly
shall be required to implement the particular provisions at issue.
	 
	 	C.	 	Stipulated Penalties for Failure to Comply with Certain
Obligations. In addition to the Stipulated Penalty provisions of the
original CIA, as a contractual remedy, Beverly and OIG agree that
failure to comply with certain obligations set forth in this Amendment
may lead to the imposition of the following monetary penalties
(“Stipulated Penalties”) in accordance with the following provisions:
A Stipulated Penalty of $1,000 (which shall begin to accrue ten (10)
days after the date OIG provides notice to Beverly of the failure to
comply) for each day Beverly fails to comply fully and adequately with
an obligation of this Amendment that is widespread or systemic in
nature or

25

 

	 	 	 	reflective of a pattern or practice. In its notice to Beverly, the
OIG shall state the specific grounds for its determination that
Beverly has failed to comply fully and adequately with the CIA or
Amendment obligation(s) at issue. The “Opportunity to Cure”
provisions of Section VI.B. above apply to this Section as though
fully set forth herein.
	 
	 	D.	 	Exclusion for Material Breach of the CIA

          Material Breach. In addition to the definition of Material Breach set
forth in the original CIA, Material Breach also means:

	 	 	 	a. a failure to address concerns raised by the Monitor as set
forth in Section III.D.1. above or otherwise meet an
obligation under this Amendment that has a material impact
on the quality of care rendered to any residents or patients
of Beverly;
	 
	 	 	 	b. a failure to retain and use the Monitor in accordance with
Section III.D.

The notice and cure provisions of Section X.C. of the CIA apply equally to this
Section VI.D. of the Amendment as though fully set forth herein.

	 	E.	 	Dispute Resolution

          1. Review Rights. Upon the OIG’s delivery to Beverly of its
Noncompliance Notice, and as an agreed-upon contractual remedy for the
resolution of disputes arising under the obligations of this Amendment, Beverly
shall be afforded certain review rights comparable to those set forth in 42
U.S.C. § 1320a-7(f) and 42 C.F.R. Part 1005 as if they applied to the specific
performance, Stipulated Penalties, or exclusion sought pursuant to this
Amendment. Specifically, an action for specific performance shall be subject
to review by an ALJ and, in the event of an appeal, the Departmental Appeals
Board (“DAB”), in a manner consistent with the provisions in 42 C.F.R. §§
1005.2-1005.21. Notwithstanding the language in 42 C.F.R. § 1005.2(c), a
request for a hearing involving specific performance shall be made within
thirty (30) days of the date of the Demand Letter.

          2. Specific Performance Review. Notwithstanding any provision of Title
42 of the United States Code or Chapter 42 of the Code of Federal Regulations,
the only issues in a proceeding for specific performance of Amendment
provisions shall be:

26

 

(a) whether, at the time specified in the Noncompliance Notice, Beverly was in
full and timely compliance with the obligations of this Amendment for which the
OIG seeks specific performance; and (b) whether Beverly failed to cure.
Beverly shall have the burden of proving its full and timely compliance and the
steps taken to cure the noncompliance, if any. If the ALJ finds for the OIG,
Beverly shall take the actions OIG deems necessary to cure within (20) days
after the ALJ issues such a decision notwithstanding that Beverly may request
review of the ALJ decision by the DAB.

          3. Finality of Decision. The review by an ALJ or DAB provided for above
shall not be considered to be an appeal right arising under any statutes or
regulations. Consequently, the parties to this Amendment agree that the DAB’s
decision (or the ALJ’s decision if not appealed) shall be considered final for
all purposes under this Amendment, and Beverly agrees to waive any right it may
have to appeal the decision administratively, judicially or otherwise seek
review by any court or other adjudicative forum.

          4. Review by Other Agencies. Nothing in this Amendment shall affect the
right of CMS or any other Federal or State agency to enforce any statutory or
regulatory authorities with respect to Beverly’s compliance with applicable
Federal and state health care program requirements.

	VII.	 	Effective and Binding Agreement

     A. This Amendment shall be binding on the successors, assigns, and
transferees of Beverly, except that facilities and entities which Beverly
subsequently divests shall be excused from the obligations under the Amendment
upon the assignment of a provider agreement or the disposition of assets to an
entity unrelated to Beverly.

     B. All other sections of Beverly’s original CIA will remain unchanged and
in effect and applicable to this Amendment, unless specifically amended upon
the prior written consent of the OIG.

     C. The undersigned Beverly signatories represent and warrant that they
are authorized to execute this Amendment. The undersigned OIG signatory
represents that he is signing this Amendment in his official capacity and that
he is authorized to execute this Amendment; and any modifications to this
Amendment shall be made only with the prior written consent of the parties to
the CIA and this Amendment.

     D. The Effective Date of this Amendment shall be the date the last
signatory signs the Amendment.

27

 

     E. The original CIA and this Amendment are by and between the parties
hereto and for their sole benefit and not for the benefit of any third parties.
Notwithstanding any language in the original CIA or this Amendment, neither
the original CIA nor this Amendment shall create or be construed or interpreted
to create any benefit for any person not a party to the original CIA or this
Amendment or create any right or cause of action in or on behalf of any person
(including without limitation any resident, patient or customer of Beverly)
other than the parties hereto.

On behalf of the Office of Inspector General

of the Department of Health and Human Services

 

	 	 	 
	
 

	 	
 
	LEWIS MORRIS

	 	DATE
	Chief Counsel to the Inspector General

Office of Inspector General

U. S. Department of Health and Human Services
	 	 

28

 

On Behalf of Beverly Enterprises Inc.

 

	 	 	 
	
 

	 	
 
	WILLIAM R. FLOYD

	 	DATE
	Chairman and Chief Executive Officer
	 	 

29exv10w4

 

Exhibit 10.4

AMENDMENT TO CORPORATE INTEGRITY AGREEMENT

between the

Office of Inspector General

of the

Department of Health and Human Services

and

Beverly Enterprises Inc.

	I.	 	Preamble and Scope of Amendment

On February 3, 2000, the Office of Inspector General (“OIG”) of the Department
of Health and Human Services and Beverly Enterprises Inc. (“Beverly”) entered
into a Corporate Integrity Agreement (“CIA”). This Amendment supersedes the
January 17, 2003 Amendment to the CIA.

	II.	 	Term and Scope of the Amendment

     A. The period of the compliance obligations assumed by Beverly under this
Amendment shall be coterminous with the CIA (unless otherwise specified).
Notwithstanding the foregoing, upon completion of the third year of this
Amendment, the OIG, in its sole discretion, may waive Beverly’s obligation
under Section III.D infra to retain an Independent Monitor for the remaining
term of the Amendment. The effective date of this Amendment shall be the date
on which the final signatory executes this Amendment (“Amendment Effective
Date”). The “Reporting Period” shall be the calendar year. The first
Reporting Period shall be the period beginning with the Amendment Effective
Date through December 31, 2004.

     B. The scope of this Amendment shall be governed by the following
definitions:

	 	 	     1.“Covered Facility,” includes all the nursing home facilities
that are licensed, operated, directed, or administered by Beverly or in
which Beverly has an ownership or control interest, as defined by 42
U.S.C. § 1320a-3(a)(3).
	 
	 	 	     2.“Amendment Covered Persons” includes the employees, contractors
and agents who work at a Covered Facility who:

1

Beverly Quality Amendment: 2004

 

	 	 	 	(a) perform patient care or resident care duties;
	 
	 	 	 	(b) make assessments of patients or residents that affect
treatment decisions or reimbursement;
	 
	 	 	 	(c) perform billing, coding, or assessment functions
described in Section III.A.4. of this Amendment;
	 
	 	 	 	(d) perform management oversight on staffing, patient care,
resident care, reimbursement, or the CIA and this Amendment;
or
	 
	 	 	 	(e) perform any function that relates to or is covered by the
CIA and this Amendment.

Notwithstanding the above, any non-employee who is hired on a part-time or
temporary basis and who works less than 160 hours per year in a Covered
Facility or any non-employee private caregivers and/or attending physicians
hired by any resident or the family or friends of any resident of a Covered
Facility regardless of the hours worked per year in a Covered Facility are not
Amendment Covered Persons.

	III.	 	Corporate Integrity Obligations

Beverly shall ensure that its compliance program required by the CIA includes
the following elements.

     A. Compliance Officer, Committees, and Internal Audit and Review
Functions.

          1. Compliance Officer. In addition to his or her other duties, the
Compliance Officer appointed pursuant to the CIA shall also provide reasonable
assurance that quality of care problems are being appropriately addressed and
corrected.

          2. Quality Compliance Committees.

	 	(a)	 	Corporate Quality Committee. Beverly has
established a Corporate Quality Council (“Corporate Quality
Committee”). The purpose of the Corporate Quality Committee
is to monitor and improve quality of care at Beverly’s nursing
homes. At a

2

Beverly Quality Amendment: 2004

 

	 	 	 	minimum, the Corporate Quality Committee includes the
Compliance Officer, the Corporate Medical Director, the
Chief Operating Officer of the Nursing Home subsidiary,
the Sr. Vice President of Professional Services,
representatives from Beverly’s Regions, and any other
appropriate officers or individuals necessary to
thoroughly implement the requirements of this Amendment
that relate to quality of care in the Covered Facilities.
	 
	 	(b)	 	Regional Quality Councils. Beverly has
established Regional Quality Councils (“Regional Quality
Compliance Committees”). The purpose of the Regional Quality
Compliance Committees is to address issues concerning quality
of care at Beverly’s nursing homes in each of its Regions. At
a minimum, the Regional Quality Compliance Committee includes
the Regional Vice President of Operations, the Regional
Director of Professional Services, and any other appropriate
officers or individuals necessary to thoroughly implement the
requirements of this Amendment that relate to quality of care
in the Covered Facilities. For each Regional Quality Council
meeting in the Region in which the covered facilities are
located, there shall be senior representatives from the
Covered Facilities, chosen on a rotating and random basis, to
report to the committee on the adequacy of care being provided
at their applicable Covered Facility.

     3. Board of Directors’ Committee. Beverly currently has a Quality
Committee as part of its Board of Directors to provide oversight on quality of
care issues (“Quality Assurance Monitoring Committee”). This committee shall
continue to:

	 	(a)	 	review the adequacy of Beverly’s system of
internal controls, quality assurance monitoring, and patient
care;
	 
	 	(b)	 	ensure that Beverly’s response to state, Federal,
internal, and external reports of quality of care issues is
complete, thorough, and resolves the issue(s) identified; and

3

Beverly Quality Amendment: 2004

 

	 	(c)	 	ensure that Beverly adopts and implements
policies and procedures that are designed to ensure that each
individual cared for at a Beverly facility receives the
highest practicable physical, mental and psychosocial level of
care attainable. The individuals who serve on this committee
shall be readily available to the Compliance Officer, the Sr.
Vice President of Professional Services, and the Monitors to
respond to any issues or questions that might arise. When new
members are appointed, or the responsibilities or authorities
of the Board committee are substantially changed, Beverly
shall notify the OIG, in writing, within fifteen (15) days of
such a change.

     4. Quality Reviews. Beverly currently performs Quality reviews under the
Beverly Quality System. The Quality Reviews (known as the Facility Performance
Assessments), including quality review follow-ups, are described in a 2003
notebook, which Beverly has previously provided to the OIG. Beverly shall
continue to conduct Quality Reviews in a manner that devotes at least equal
resources to performing the function of quality review at the covered
facilities as that described in the 2003 notebook. Beverly shall notify the
OIG within fifteen (15) days of any material changes to the form, manner, or
frequency of these Quality Reviews. The Quality Reviews shall:

	 	 	 	a. make findings of whether the patients and residents at Covered
Facilities are receiving the quality of care and quality of life
consistent with basic care, treatment and protection from harm
standards, including but not limited to, 42 C.F.R. Parts 482 and
483 and any other Federal and state statutes, regulations, and
directives;
	 
	 	 	 	b. make findings of whether the policies and procedures mandated by
this Amendment are created, implemented, and enforced;
	 
	 	 	 	c. make findings of whether training is performed in accordance
with this Amendment;
	 
	 	 	 	d. make findings of whether hotline complaints are appropriately
investigated;
	 
	 	 	 	e. make findings of whether the reporting obligations are complied
with in accordance with this Amendment; and

4

Beverly Quality Amendment: 2004

 

	 	 	 	f. make findings of whether corrective action plans are timely
created, implemented, and enforced.

	 	 	Notwithstanding the above, the obligations and findings required by
Sections III.A.4(b), (c), (d), and (e) above may be made by Beverly’s
Internal Audit function or any other Beverly review function whose
primary responsibility is not to conduct Quality Reviews under the
Beverly Quality System.

        B. Written Standards.

     1. Policies and Procedures. Beverly has established written Policies and
Procedures regarding its Compliance Program and its compliance with relevant
Federal and state requirements, including, but not limited to, the requirements
of Federal health care programs. Beverly shall continue to assess and update
as necessary the Policies and Procedures at least annually and more frequently,
as appropriate. The Policies and Procedures shall be available to the OIG upon
request. To the extent not already accomplished, Beverly shall make the
relevant portions of its Policies and Procedures available to the appropriate
Amendment Covered Persons within 120 days after the Effective Date of this
Amendment. Compliance staff or supervisors shall continue to be available to
explain any and all Policies and Procedures. Within 120 days after the
Effective Date of this Amendment, Beverly shall review and analyze its Polices
and Procedures to ensure that, at a minimum, such Policies and Procedures
specifically address and/or include:

	 	 	 	a. Measures designed to ensure that Beverly fully complies with
applicable portions of Titles XVIII and XIX of the Social Security
Act, 42 U.S.C. §§ 1395-1395ggg and 1396-1396v, and all regulations,
written directives and guidelines promulgated pursuant to these
statutes, including 42 C.F.R. 424 and 483, and any other applicable
laws that address quality of care in nursing facilities;
	 
	 	 	 	b. Measures designed to ensure that Beverly complies with all
applicable requirements of Medicare’s Prospective Payment System
(“PPS”) for long term care facilities, including, but not limited to:
ensuring the accuracy of the clinical data required under the Minimum
Data Set (“MDS”) as specified by the Resident Assessment Instrument
User’s Manual; ensuring that facilities are appropriately and
accurately using the current Resource Utilization Groups

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	 	 	 	(“RUG”) classification system; and ensuring the accuracy of billing
and cost report preparation policies and procedures;
	 
	 	 	 	c. Measures designed to ensure the provision of coordinated
interdisciplinary care to long term care residents, including, but not
limited to the following areas addressed in 42 C.F.R. 483: resident
assessment and care planning; nutrition; disease specific care; wound
care; infection control; appropriate drug therapies; appropriate
mental health services; provision of basic care needs, including the
provision of Activities of Daily Living (“ADL”); incontinence care;
resident rights; physical and chemical restraint use; therapy
services; quality of life, including accommodation of needs and
activities; assessment of resident competence to make treatment
decisions; and professional services;
	 
	 	 	 	d. Measures designed to ensure that staffing needs are decided first
and foremost upon achieving the level of care for Beverly’s patients
and residents required by Federal and state laws, including, but not
limited to, 42 C.F.R. § 483.30 (nursing facilities);
	 
	 	 	 	e. Measures that specify that if the director of nursing (or other
person who is making staffing decisions at the facilities) disagrees
with a staffing determination that is not in compliance with state or
federal regulations or the CIA or this Amendment and that
significantly affects patient care made by the Administrator or other
individuals at the regional or corporate level, and is unable to
resolve the issue through the normal chain of responsibility, then
that person must promptly call the hotline and the Monitor. Nothing
in this subsection prohibits such person from contacting the hotline
or Monitor without first going through the normal chain of
responsibility;
	 
	 	 	 	f. Measures designed to ensure compliance with the completion of
accurate clinical assessments as required by applicable Federal law;
	 
	 	 	 	g. Measures designed to inform Covered Persons of the staffing
requirements of Federal and state law;
	 
	 	 	 	h. Measures to inform Covered Persons during orientation and during
other training required by this Amendment that staffing levels are a
critical aspect of patient and resident care, and if any person has a
concern about the level of staffing that there are many avenues
available to report such concerns,

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	 	 	 	including, but not limited to, the Administrator, the Hotline (as
described in Section III.E of the CIA), individuals at the district,
regional, or corporate level, or directly to the Compliance Officer or
Monitor;
	 
	 	 	 	i. Measures designed to minimize the use of individuals at any
Beverly facility who are from a temporary agency or not employed by
Beverly (not including those individuals who are included in the
definition of Covered Persons) and measures designed to create and
maintain a standardized system to track the number of individuals at
each facility who fall within this category so that the
number/proportion of or changing trends in such staff can be
adequately identified by Beverly and/or the Monitor;
	 
	 	 	 	j. Measures designed to ensure that all residents and patients are
served in the least restrictive environment and most integrated
setting appropriate to their needs;
	 
	 	 	 	k. Measures designed to promote adherence to the compliance and
quality of care standards set forth in the applicable statutes,
regulations, and in this Amendment, by including such adherence as a
significant factor in determining the compensation to Administrators
of the facilities, and the individuals responsible for such compliance
at the regional, and corporate level;
	 
	 	 	 	l. Measures designed to ensure cooperation by Beverly and its
employees, contractors, and agents with the Monitor in the performance
of his or her duties as set forth infra;
	 
	 	 	 	m. Measures designed to ensure that compliance issues identified
internally
e.g., through reports to supervisors, hotline complaints, internal
audits, patient satisfaction surveys, CHSRA quality indicators,
facility specific key indicators, or internal surveys) or externally
(e.g., through CMS or state survey agency reports, consultants, audits
performed by the Independent Review Organization, or Monitor’s
reports) are promptly and appropriately investigated and, if the
investigation substantiates compliance issues, Beverly assesses the
nature and scope of the problems, implements appropriate corrective
action plans, and monitors compliance with such plans;
	 
	 	 	 	n. Measures designed to effectively collect and analyze staffing
data, including staff-to-resident ratio and staff turnover;

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Beverly Quality Amendment: 2004

 

	 	 	 	o. Measures designed to ensure that individuals and entities who fall
within the ambit of the Covered Contractor definition are
appropriately supervised to ensure that the Covered Contractor is
acting within the parameters of Beverly’s Policies and Procedures and
the requirements of Federal health care programs;
	 
	 	 	 	p. Measures designed to ensure that appropriate and qualified
individuals perform the internal quality reviews;
	 
	 	 	 	q. Non-retaliation policies and methods for employees to make
disclosures or otherwise report on compliance issues through the
Disclosure Program required by Section III.E of the CIA;
	 
	 	 	 	r. Disciplinary guidelines to reflect the Code of Conduct
requirements as specified in Section III.B.1 of the CIA;
	 
	 	 	 	s. Measures designed to ensure that Provider has a system to require
and centrally collect reports relating to incidents, accidents, abuse
and neglect. The reports required under this system shall be of
nature to allow the Quality Assurance Committees meaningful
information to be able to determine: 1) if there is a quality of care
problem; and 2) the scope and severity of the problem; and
	 
	 	 	 	t. Measures designed to ensure that residents and patients are
discharged only for the reasons authorized by and in accordance with
the procedures established by applicable law and not discharged for
financial reasons unless authorized by law.

Beverly shall assess and update as necessary the Policies and Procedures at
least annually and more frequently, as appropriate. The Policies and
Procedures will be available to OIG upon request.

     C. Training and Education.

     1. Training in Covered Facilities. At least annual training conducted in
Covered Facilities will continue to be conducted in the same manner as exists
as of the date of this Amendment. Such training includes, at a minimum,
training covering the Policies and Procedures set forth in section B.1. above.

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     2. Additional Training. In addition, each facility shall conduct
periodic training on an “as needed” basis (but at least semi-annually) on those
quality of care issues identified by the Board of Directors Committee, the
Compliance Committee or through other means as set forth below. In determining
what training should be performed, these Committees will review and consider
the recommendations of the Monitor, the complaints received, satisfaction
surveys, staff turnover data, any state or Federal surveys, including those
performed by the Joint Commission on Accreditation of Healthcare Organizations
(“JCAHO”) or other such private agencies, any internal surveys, and the CHSRA
quality indicators. Such training will be for the length of time necessary to
teach the subject matter. Such training will be provided to all Covered
Persons at the facility who are responsible for patient or resident care, or
whose job function allows them to contribute to the correction of the alleged
deficiency. Beverly shall implement mechanisms to evaluate the individual’s
competence with respect to the training received.

Training materials shall be made available to OIG upon request. Persons
providing the training must have sufficient expertise in the subject area.

     3. Certification. An attendance log shall document the attendance of
each person who is required to attend the training. The member of the
Compliance Department or other person providing the training shall certify the
accuracy of the attendance log. The attendance log shall specify the type of
training received and the date received. Beverly shall retain the attendance
logs and certifications, and make all of these logs, certifications, and
materials available to OIG upon request.

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D. Independent Monitor.

Pursuant to the previous Amendment to the CIA, Beverly retained the Long Term
Care Institute (LTCI) as the appropriately qualified monitoring team (the
“Monitor”), approved by the OIG. Within thirty (30) days after the Effective
Date of this Amendment, Beverly shall revise its contract with LTCI to enable
LTCI to continue to serve as the Monitor pursuant to this Amendment. The
Monitor may retain additional personnel, including, but not limited to,
independent consultants, if needed to help meet the Monitor’s obligations under
this Amendment. Beverly shall be responsible for all fees and expenses
incurred by the Monitor, including, but not limited to, travel costs,
consultants, administrative personnel, office space and equipment, or
additional personnel. The Monitor shall charge a reasonable amount for his or
her fees and expenses, pursuant to a budget to be agreed upon by the Monitor,
Beverly and the OIG. Any dispute regarding the amount or the budget will be
resolved by the OIG. As a condition to retaining the Monitor, Beverly shall
require the Monitor to enter into a subcontract with an individual or entity,
approved by the OIG, that has the requisite expertise, capacity and access to
MDS data directly from CMS to perform quarterly Quality Indicator data analysis
reports of the type described in the attached Appendix # 1. Failure to pay the
Monitor within thirty (30) calendar days of submission of its invoices for
services previously rendered shall constitute a breach of the CIA and this
Amendment and shall subject Beverly to one or more of the remedies set forth in
Section VI infra. The Monitor may be removed solely at the discretion of the
OIG. If the Monitor resigns or is removed for any reason prior to the
termination of the Amendment, Beverly shall appoint another Monitor, after
approval by the OIG, with the same functions and authorities.

	 	 	 	1. The Monitor shall be responsible for assessing the
effectiveness, reliability and thoroughness of the following at or
with regard to Covered Facilities:

	 	 	 	a. Beverly’s Quality of Care internal quality control
systems, including, but not limited to, whether the systems
in place to promote quality of care and to respond to quality
of care issues are acting in a timely and effective manner;
whether the communication system is effective, allowing for
accurate information, decisions, and results of decisions to
be transmitted to the proper individuals in a timely fashion;
and whether the training programs are effective and thorough;

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Beverly Quality Amendment: 2004

 

	 	 	 	b. Beverly’s response to quality of care issues at Covered
Facilities, which shall include an assessment of:

	 	 	 	(1) Beverly’s ability to identify the problem;
	 
	 	 	 	(2) Beverly’s ability to determine the scope of the
problem, including, but not limited to whether the
problem is isolated or systemic;
	 
	 	 	 	(3) Beverly’s ability to create a corrective action
plan to respond to the problem;
	 
	 	 	 	(4) Beverly’s ability to execute the corrective action
plan; and
	 
	 	 	 	(5) Beverly’s ability to evaluate whether the
assessment, corrective action plan and execution of that
plan was effective, reliable, and thorough.

	 	 	 	c. Beverly’s development and implementation of corrective
action plans and the timeliness of such actions; and
	 
	 	 	 	d. Beverly’s proactive steps to ensure that each patient and
resident in a Covered Facility receives care in accordance
with: (1) basic care, treatment and protection from harm
standards; (2) the rules and regulations set forth in 42
C.F.R. Parts 482 and 483; (3) state and local statutes,
regulations, and other directives or guidelines; and (4) the
policies and procedures adopted by Beverly and set forth in
this Amendment.

	 	 	 	2. Access. The Monitor shall have access to:

	 	 	 	a. Covered Facilities, at any time and without prior notice;
	 
	 	 	 	b. The following types of documents: (1) the CMS quality
indicators (for Covered Facilities); (2) internal or external
surveys or reports applicable to Covered Facilities; (3)
Beverly’s hotline

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Beverly Quality Amendment: 2004

 

	 	 	 	complaints regarding Covered Facilities; (4) resident or
patient satisfaction surveys for each Covered Facility; (5)
staffing data for each Covered Facility in the format
requested by the Monitor, including but not limited to
reports setting forth the staff to patient ratios, temporary
staffing levels, and staff turnover data, as well as reports
of any facility where temporary agency staff constitutes more
than ten percent of the nursing and direct care staff; (6)
incident, accident, abuse, neglect or death reports for each
Covered Facility; (7) reports of incidents involving a
patient or resident that prompt a full internal investigation
at a Covered Facility; (8) patient or resident records for
Covered Facilities; (9) financial data for Covered
Facilities; (10) self-evaluative reports including, but not
limited to, those from quality assurance committees,
applicable to Covered Facilities; and (11) any other
pre-existing data, including the reconfiguring of existing
data that the Monitor may determine relevant to fulfilling
the duties required under this Amendment in the format
requested by the Monitor, to the extent practicable; and
	 
	 	 	 	c. Immediate access to Covered Facilities’ current
patients, residents, and staff subject to: (1) their
clinical condition; and (2) their consent to conduct
interviews outside the presence of Beverly supervisory staff
or counsel, provided such interviews are conducted in
accordance with all applicable laws and the rights of such
individuals.

	 	 	 	3. Beverly’s Obligations. Beverly shall:

	 	 	 	a. Not impede the Monitor’s access to its facilities
(pursuant to the provisions of this Amendment) and shall
provide any requested documentation within the time frame
specified by the Monitor, subject to any extensions and
modifications requested by Beverly and granted by the Monitor
(the Monitor shall balance the circumstances of the situation
with the burden on Beverly when making document requests);
	 
	 	 	 	b. Assist in contacting and arranging interviews of
Amendment Covered Persons, and not impede the cooperation by
such individuals;

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Beverly Quality Amendment: 2004

 

	 	 	 	c. Provide access to current residents or patients and
contact information for their families and guardians, in a
manner consistent with the rights of such individuals under
state or Federal law, and not impede their cooperation;
	 
	 	 	 	d. Provide the last known contact information for former
employees, contractors, and agents, and not impede the
cooperation from such individuals, including but not limited
to, refraining from placing any provision in agreements that
would limit such cooperation;
	 
	 	 	 	e. Provide the last known contact information for former
residents, patients, their families, or guardians consistent
with the rights of such individuals under state or Federal
law, and not impede their cooperation;
	 
	 	 	 	f. Address any written recommendation made by the Monitor
either by substantially implementing the Monitor’s
recommendations or by explaining in writing why it has
elected not to do so;
	 
	 	 	 	g. Pay the Monitor’s bills for Monitor’s Costs within 30
days of receipt. While Beverly must pay all the Monitor’s
bills within 30 days, Beverly may bring any disputed
Monitor’s Costs or bills to OIG’s attention for resolution by
OIG;
	 
	 	 	 	h. Not sue or otherwise bring any action against the Monitor
related to any findings made by the Monitor or related to any
exclusion or other sanction of Beverly under this Agreement;
provided, however, that this clause shall not apply to any
suit or other action based solely on the dishonest or illegal
acts of the Monitor, whether acting alone or in collusion
with others; and
	 
	 	 	 	i. When requested by the Monitor, provide the Monitor a
report of each of the following occurrences that may have
happened during the time period requested by the Monitor:

	 	 	 	(1) Deaths or injuries related to the use of restraints;

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Beverly Quality Amendment: 2004

 

	 	 	 	(2) Deaths or injuries related to the use of
psychotropic medications;
	 
	 	 	 	(3) Suicides;
	 
	 	 	 	(4) Deaths or injuries related to abuse or neglect (as
defined in the applicable Federal guidelines); and
	 
	 	 	 	(5) Any other incident that involves or causes actual
harm to a resident when such incident prompts a full
internal investigation.
	 
	 	 	 	Each such report shall contain the full name and date
of birth of the resident, the date of death or
incident, and a brief description of the events
surrounding the death or incident.

	 	 	 	4. The Monitor’s Obligations. The Monitor shall:

	 	 	 	a. Respect the legal rights, privacy, and dignity of all
Amendment Covered Persons, residents, and patients;
	 
	 	 	 	b. Where independently required by applicable law or
professional licensing standard, to report any finding to an
appropriate regulatory or law enforcement authority,
simultaneously submit copies of such reports to the OIG and
to Beverly;
	 
	 	 	 	c. At all times act reasonably in connection with its duties
under the Amendment including when requesting information
from Beverly;
	 
	 	 	 	d. Simultaneously provide semi-annual reports to Beverly and
OIG concerning the findings made to date;
	 
	 	 	 	e. Submit bills to Beverly on a consolidated basis no more
than once per month, and submit an annual summary
representing an accounting of its costs throughout the year
to Beverly and to OIG. Beverly shall have the opportunity to
review such bills and bring any issue of disputed bills or
costs to the attention of OIG for resolution

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Beverly Quality Amendment: 2004

 

	 	 	 	by OIG. The Monitor shall submit to Beverly an annual report
representing an accounting of its costs throughout the year;
	 
	 	 	 	f. Not be bound by any other private or governmental
agency’s findings or conclusions, including, but not limited
to, JCAHO, CMS, or the state survey agency. Likewise, such
private and governmental agencies shall not be bound by the
Monitor’s findings or conclusions. The Monitor’s reports
shall not be the sole basis for determining deficiencies by
the state survey agencies. The parties agree that CMS and its
contractors shall not introduce any material generated by the
Monitor, or any opinions, testimony, or conclusions from the
Monitor as evidence into any proceeding involving a Medicare
or Medicaid survey, certification, or other enforcement
action against Beverly, and Beverly shall similarly be
restricted from using material generated by the Monitor, or
any opinions, testimony, or conclusions from the Monitor as
evidence in any of these proceedings. Nothing in the
previous sentence, however, shall preclude the OIG or Beverly
from using any material generated by the Monitor, or any
opinions, testimony, or conclusions from the Monitor in any
action under the CIA or this Amendment or pursuant to any
other OIG authorities or in any other situations not
explicitly excluded in this subsection subject to the
confidentiality provisions set forth in Section V. of this
Agreement;
	 
	 	 	 	g. Abide by the legal requirements of Beverly’s facilities
to maintain the confidentiality of each resident’s personal
and clinical records, and to maintain confidential and not to
disclose the records of Beverly’s Corporate Compliance
Committee, Corporate, Regional or District Quality Councils,
Facility QAA Committees and self-evaluative reports,
including, but not limited to, those from, Internal Audit,
the Hotline, medical review committees, if any, quality
assurance committees or peer review committees, if any. See
42 C.F.R. §§ 483.10 and 483.75(o)(3)). Nothing in the prior
sentence, however, shall limit or affect the Monitor’s
obligation to provide information, including information from
patient and resident clinical records, to the OIG, and, when
legally or professionally required, reporting to other
agencies;

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Beverly Quality Amendment: 2004

 

	 	 	 	h. Except to the extent required by law, maintain the
confidentiality of any proprietary financial and operational
information, processes, procedures and forms obtained in
connection with its duties under this Amendment and not
comment publicly concerning its findings except to the extent
authorized by the OIG;
	 
	 	 	 	i. Visit each Covered Facility as often as the Monitor
believes it necessary to perform its functions;
	 
	 	 	 	j. Where appropriate, communicate requests for access,
documents or other information to the Compliance Officer; and
	 
	 	 	 	k. When possible, identify the criteria under which it
intends to assess Beverly’s or individual Covered Facilities’
activities as set forth herein and communicate those criteria
to Beverly in advance of its assessments.

	 	 	 	5. Miscellaneous Provisions

	 	 	 	a. The Monitor may confer and correspond with Beverly and
OIG on an ex parte basis at any time.
	 
	 	 	 	b. If, after consulting with Beverly, the Monitor has
concerns about corrective action plans that are not being
enforced or systemic or repeated problems that could impact
Beverly’s ability to render quality care to its patients and
residents, the Monitor shall: (A) report such concerns in
writing to the OIG, which in its discretion shall relay such
concerns to the Consortium (the Consortium consists of
representatives of OIG, the Department of Justice (DOJ) and
CMS); and (B) provide notice and a copy of the report to the
Compliance Officer and the Board Committee. Beverly shall be
provided an opportunity to respond to the Consortium
concerning any such report. The Consortium shall seek to
resolve any such dispute between the Monitor and Beverly
prior to OIG seeking any remedies pursuant to the terms of
the CIA and this Amendment;
	 
	 	 	 	c. The Monitor shall not control, manage or operate Beverly.

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     E. Reporting of Material Deficiencies. The definition of Material
Deficiency set forth in Section III.H.4(iii) of the CIA and Beverly’s reporting
obligations set forth in Section III.H.2 of the CIA are hereby amended to
provide that Beverly no longer must report occurrences or instances meeting the
definition of Material Deficiency set forth in Section III.H.4(iii) if those
occurrences or instances occur in a Covered Facility.

	IV.	 	Annual Reports

     A. Annual Report. Each Annual Report required by the CIA shall include,
in addition to the information required by Section V.B of the CIA, the
following:

	 	 	 	1. any change in the identity or position description of
individuals in
positions described in Section III.A of this Amendment, a change in
any of the committees’ structure or charter, or any change in the
Quality Review program;
	 
	 	 	 	2. a certification by the Compliance Officer that, unless the
non-compliance is clearly and explicitly described in the Annual
Report:

	 	 	 	a. all Covered Persons have completed the training and
executed the certification required by Section III.C; and
	 
	 	 	 	b. Beverly has effectively implemented
all plans of correction
related to problems identified under this Amendment Beverly’s
Compliance Program, or Quality Reviews.

	 	 	 	3. notification of any changes or amendments to the Policies and
Procedures required by Section III.B of this Amendment and the
reasons for such changes (e.g., change in contractor policy);
	 
	 	 	 	4. a summary of the Covered Facilities reviewed pursuant to
Section III.A.4, a summary of the findings of such review, and a
summary of the corrective action taken under the Quality Review
Program; and
	 
	 	 	 	5. Beverly’s response/corrective action plan to any issues raised
by the Monitor.

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     B. Certifications. The Annual Reports shall include a certification by
Beverly’s Compliance Officer, under penalty of perjury, that: (1) Beverly is
in compliance with all of the requirements of this Amendment and the CIA
(unless the non-compliance is clearly and explicitly described in the
Implementation or Annual Report), to the best of his or her knowledge; and (2)
the Compliance Officer has reviewed the Report and has made reasonable inquiry
regarding its content and believes that, upon such inquiry, the information is
accurate and truthful. Each Report shall also include a certification the
chair of the appropriate committee(s) of Beverly’s Board of Directors
certifying that the committee(s)’ members have reviewed the Annual Report.

	V.	 	Disclosures

The OIG will follow all applicable Federal laws concerning privacy and
confidentiality, including the Federal Privacy Act, 5 U.S.C. § 552a, to the
greatest extent allowed by law.

Consistent with HHS’s Freedom of Information Act (“FOIA”) procedures, set forth
in 45 C.F.R. Part 5, the OIG shall make a reasonable effort to notify Beverly
prior to any release by OIG of information submitted by Beverly pursuant to its
obligations under this Amendment or the CIA and identified upon submission by
Beverly as trade secrets, commercial or financial information and privileged
and confidential under the FOIA rules. Beverly shall refrain from identifying
any information as trade secrets, commercial, or financial information and
privileged and confidential under the FOIA rules. Beverly shall refrain from
identifying any information as trade secrets, commercial, or financial
information and privileged and confidential that does not meet the criteria for
exemption from disclosure under FOIA. With respect to the disclosure of
information, Beverly shall have the rights set forth in 45 C.F.R. § 5.65(d).
The OIG shall seek to protect confidential information under the FOIA rules to
the greatest extent allowed by law. The OIG shall provide the pre-disclosure
notice required pursuant to 45 C.F.R. § 5.65(d) to the Compliance Officer at
the address provided in Section VI of the CIA.

One of the purposes of the original CIA and this Amendment is to assist and
monitor Beverly to ensure that Beverly develops, revises, and maintains
effective internal controls that promote adherence to applicable Federal and
state laws and the program requirements of Federal and state health care
programs. Communication, record-keeping, reporting and frank and open
communication by and between the OIG and Beverly, its employees and its
Compliance Officer are essential to meeting the OIG’s expectations and the
purpose of the CIA and this Amendment.

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Nothing in this Amendment or the CIA, or any communication or report made
pursuant to this Amendment or the CIA, shall constitute or be construed as a
waiver by Beverly or Beverly’s attorney-client, work product, peer review, or
other applicable privileges, including, without limitation, the protections
contained in 42 C.F.R. § 473.75(o). Notwithstanding that fact, the existence
of any such privilege does not affect Beverly’s obligations to comply with the
provisions of the CIA or this Amendment or to provide documents and information
to the OIG pursuant to the CIA or this Amendment.

	VI.	 	Breach and Default Provisions

Beverly is expected to fully and timely comply with all of the obligations
herein throughout the term of this Amendment or other time frames herein agreed
to.

	 	A.	 	Specific Performance of Amendment Provisions. If OIG
determines that Beverly is failing to comply with a provision or
provisions of this Amendment and decides to seek specific
performance of any of these provisions, OIG shall provide Beverly
with prompt written notification of such determination
(“Noncompliance Notice”).
	 
	 	B.	 	Opportunity to Cure. Beverly will have thirty five (35) days
from receipt of the Noncompliance Notice either to demonstrate to
the OIG’s satisfaction that: (1) Beverly is in full compliance with
this Amendment; (2) the alleged failure to comply has been cured; or
(3) the alleged non-compliance cannot be cured within the
thirty-five (35) day period but that: (i) Beverly has begun to take
action to cure the non-compliance; (ii) Beverly is pursuing such
action with due diligence; and (iii) Beverly has provided to the OIG
a reasonable timetable for curing the non-compliance; or to reply
in writing that Beverly disagrees with the determination of
noncompliance and request a hearing before an HHS Administrative Law
Judge (“ALJ”), pursuant to the provisions set for in Section VI.E of
this Amendment. This purpose of the hearing is to determine whether
Beverly has failed to comply with the Amendment and whether Beverly
shall be required to implement the particular provisions at issue.
	 
	 	C.	 	Stipulated Penalties for Failure to Comply with Certain
Obligations. In addition to the Stipulated Penalty provisions of the
original CIA, as a contractual remedy, Beverly and OIG agree that
failure to comply with certain obligations set forth in this Amendment
may lead to the imposition of the

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Beverly Quality Amendment: 2004

 

	 	 	 	following monetary penalties (“Stipulated Penalties”) in accordance
with the following provisions: A Stipulated Penalty of $1,000 (which
shall begin to accrue ten (10) days after the date OIG provides notice
to Beverly of the failure to comply) for each day Beverly fails to
comply fully and adequately with an obligation of this Amendment that
is widespread or systemic in nature or reflective of a pattern or
practice. In its notice to Beverly, the OIG shall state the specific
grounds for its determination that Beverly has failed to comply fully
and adequately with the CIA or Amendment obligation(s) at issue. The
“Opportunity to Cure” provisions of Section VI.B. above apply to this
Section as though fully set forth herein.
	 
	 	D.	 	Exclusion for Material Breach of the CIA

          Material Breach. In addition to the definition of Material Breach set
forth in the original CIA, Material Breach also means:

	 	 	 	a. a failure to address concerns raised by the Monitor as set
forth in Section III.D.1. above or otherwise meet an
obligation under this Amendment that has a material impact
on the quality of care rendered to any residents or patients
of Beverly;
	 
	 	 	 	b. a failure to retain and use the Monitor in accordance with
Section
III.D.

The notice and cure provisions of Section X.C. of the CIA apply equally to this
Section VI.D. of the Amendment as though fully set forth herein.

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     E. Dispute Resolution

     1. Review Rights. Upon the OIG’s delivery to Beverly of its
Noncompliance Notice, and as an agreed-upon contractual remedy for the
resolution of disputes arising under the obligations of this Amendment, Beverly
shall be afforded certain review rights comparable to those set forth in 42
U.S.C. § 1320a-7(f) and 42 C.F.R. Part 1005 as if they applied to the specific
performance, Stipulated Penalties, or exclusion sought pursuant to this
Amendment. Specifically, an action for specific performance shall be subject
to review by an ALJ and, in the event of an appeal, the Departmental Appeals
Board (“DAB”), in a manner consistent with the provisions in 42 C.F.R. §§
1005.2-1005.21. Notwithstanding the language in 42 C.F.R. § 1005.2(c), a
request for a hearing involving specific performance shall be made within
thirty (30) days of the date of the Demand Letter.

     2. Specific Performance Review. Notwithstanding any provision of Title
42 of the United States Code or Chapter 42 of the Code of Federal Regulations,
the only issues in a proceeding for specific performance of Amendment
provisions shall be:
(a) whether, at the time specified in the Noncompliance Notice, Beverly was in
full and timely compliance with the obligations of this Amendment for which the
OIG seeks specific performance; and (b) whether Beverly failed to cure.
Beverly shall have the burden of proving its full and timely compliance and the
steps taken to cure the noncompliance, if any. If the ALJ finds for the OIG,
Beverly shall take the actions OIG deems necessary to cure within twenty (20)
days after the ALJ issues such a decision notwithstanding that Beverly may
request review of the ALJ decision by the DAB.

     3. Finality of Decision. The review by an ALJ or DAB provided for above
shall not be considered to be an appeal right arising under any statutes or
regulations. Consequently, the parties to this Amendment agree that the DAB’s
decision (or the ALJ’s decision if not appealed) shall be considered final for
all purposes under this Amendment, and Beverly agrees to waive any right it may
have to appeal the decision administratively, judicially or otherwise seek
review by any court or other adjudicative forum.

     4. Review by Other Agencies. Nothing in this Amendment shall affect the
right of CMS or any other Federal or State agency to enforce any statutory or
regulatory authorities with respect to Beverly’s compliance with applicable
Federal and state health care program requirements.

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	VII.	 	Effective and Binding Agreement

     A. This Amendment shall be binding on the successors, assigns, and
transferees of Beverly, except that facilities and entities which Beverly
subsequently divests shall be excused from the obligations under the Amendment
upon the assignment of a provider agreement or the disposition of assets to an
entity unrelated to Beverly.

     B. All other sections of Beverly’s original CIA will remain unchanged and
in effect and applicable to this Amendment, unless specifically amended upon
the prior written consent of the OIG.

     C. The undersigned Beverly signatories represent and warrant that they
are authorized to execute this Amendment. The undersigned OIG signatory
represents that he is signing this Amendment in his official capacity and that
he is authorized to execute this Amendment; and any modifications to this
Amendment shall be made only with the prior written consent of the parties to
the CIA and this Amendment.

     D. The Effective Date of this Amendment shall be the date the last
signatory signs the Amendment.

     E. The original CIA and this Amendment are by and between the parties
hereto and for their sole benefit and not for the benefit of any third parties.
Notwithstanding any language in the original CIA or this Amendment, neither
the original CIA nor this Amendment shall create or be construed or interpreted
to create any benefit for any person not a party to the original CIA or this
Amendment or create any right or cause of action in or on behalf of any person
(including without limitation any resident, patient or customer of Beverly)
other than the parties hereto.

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Beverly Quality Amendment: 2004

 

On Behalf of the Office of Inspector General

of the Department of Health and Human Services

 

	 	 	 
	
 

	 	
 
	LARRY J. GOLDBERG

	 	DATE
	Assistant Inspector General for Legal Affairs

Office of Inspector General

U. S. Department of Health and Human Services
	 	 

23

Beverly Quality Amendment: 2004

 

On Behalf of Beverly Enterprises Inc.

 

	 	 	 
	
 

	 	
 
	DAVID DEVEREAUX

Executive Vice President and Chief Operating Officer

	 	DATE

24

Beverly Quality Amendment: 2004

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