Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division

Anthony Lynn Hester,
(O.I. No. 6-93-40136-9),

Petitioner,
v.
The Inspector General.
Docket No. C-11-671
Decision No. CR2529
Date: April 19, 2012
DECISION

This matter is before me on the Inspector General’s (1.G.’s) Motion for Summary
Disposition affirming the I.G.’s determination to exclude Petitioner pro se Anthony Lynn
Hester from participation in Medicare, Medicaid, and all other federal health care
programs for a period of 15 years. The I.G.’s Motion and determination to exclude
Petitioner are based on section 1128(a)(1) of the Social Security Act (Act), 42 U.S.C. §
320a-7(a)(1). The undisputed material facts of this case demonstrate that the minimum
five-year exclusion must be imposed, and that the I.G.’s determination to enhance that
period to 15 years based on the aggravating factors found at 42 C.F.R. § 1001.102(b)(1),
(2), and (5) is reasonable. Accordingly, I grant the I.G.’s Motion for Summary
Disposition.

I. Procedural Background

On December 3, 1996, the Federal Grand Jury sitting for the United States District Court
for the Southern District of Texas handed up an Indictment charging Petitioner Anthony
Lynn Hester with 20 counts of Mail Fraud, in violation of 18 U.S.C. §§ 1341 and 2. Each
Count of the Indictment was based on a lengthy and detailed recitation of Petitioner’s
scheme to defraud Medicare, Medicaid, and private insurers by submitting false claims
for ambulance services and related items.

Four months later, on April 11, 1997, Petitioner appeared with counsel in the District
Court and pleaded guilty to Counts 1, 8, 10, and 16 of that Indictment. On August 15,
1997 Petitioner returned to the District Court and was sentenced to three concurrent 60-
month terms of imprisonment on Counts 1, 8, and 10, and a three-month term of
imprisonment on Count 16 to be served consecutively to the 60-month concurrent terms,
for a total prison term of 63 months. He was ordered to serve a three-year term of
supervised probation following his release from prison, and was ordered to pay restitution
of $1,326,217.73 to Medicare, $332,780.00 to Medicaid, and $38,467.61 to private
insurers and individuals — a total of $1,697,465.34 — and an assessment of $200.00.

On July 31, 1998 the I.G. wrote to Petitioner giving notice that he was to be excluded
pursuant to the terms of section 1128(a)(1) of the Act for a period of 15 years, beginning
on or about August 20, 1998.' The I.G.’s letter told Petitioner that the mandatory
minimum five-year period of exclusion would be enhanced based on the presence of
three aggravating factors. Acting pro se, Petitioner sought review of the I.G.’s
determination in a request for hearing dated August 5, 2011.

I convened a prehearing conference by telephone on August 29, 2011, pursuant to 42
C.F.R. § 1005.6, in order to discuss procedures for addressing the issues presented by this
case. By order of August 30, 2011 I established a schedule for the submission of
documents and briefs on the question of the timeliness of Petitioner’s request for hearing.

The dates of the I.G.’s notice-of-exclusion letter and Petitioner’s request for hearing
presented an obvious jurisdictional issue requiring resolution as a threshold matter. 42
C.F.R. § 1005.2(e)(1). Following the parties’ briefing and the I.G.’s proffer of certain
exhibits, I found that Petitioner had made a “reasonable showing” sufficient to overcome
the presumption that the I.G.’s notice-of-exclusion letter had been delivered in due
course. My Ruling and Order of December 14, 2011 explained how the very specific
facts surrounding that mailing and Petitioner’s incarceration left the presumption
unreliable, denied the I.G.’s Motion to Dismiss, and established a schedule for the
briefing of this case on its merits.

The evidentiary record on which I decide the issues before me contains eight exhibits.
The LG. proffered six exhibits with the Motion to Dismiss, marked I.G. Exhibits 1-6 (1.G.

' Petitioner’s Answer Brief asserts, without further explanation, that the “Petitioner’s
exclusion began in October 1993 long before his conviction, and the 15 year period was
to end October 2008.” P. Ans. Br. at 1. The I.G.’s July 31, 1998 notice-of-exclusion
letter announced the effective date of exclusion to be “20 days from the date of this
letter.” That effective date is prescribed by section 1128(c)(1) of the Act and 42 C.F.R. §
1001.2002(b). The period of Petitioner’s exclusion will end on or about August 20, 2013.
Exs. 1-6) and two additional exhibits with subsequent briefing, marked I.G. Exhibits 7-8
(1.G. Exs. 7-8). Petitioner has proffered no exhibits of his own. In the absence of
objection, I have admitted all proffered exhibits.

By the terms of the Ruling and Order of December 14, 2011, the record in this case
closed for purposes of 42 C.F.R. § 1005.20(c) on March 26, 2012.

II. Issues

The legal issues before me are limited to those set out at 42 C.F.R. § 1001.2007(a)(1). In
the context of this record, they are:

a. Whether the LG. has a basis for excluding Petitioner from participating
in Medicare, Medicaid, and all other federal health care programs pursuant
to section 1128(a)(1) of the Act; and

b. Whether the length of the proposed period of exclusion is unreasonable.

These issues must be resolved in favor of the I.G.’s position. Because his predicate
conviction is established in the record before me, section 1128(a)(1) of the Act mandates
Petitioner’s exclusion. A five-year period of exclusion is the minimum period
established by section 1128(c)(3)(B) of the Act, 42 U.S.C. § 1320a-7(c)(3)(B). The
enhancement of that period to 15 years is not unreasonable because the three aggravating
factors relied on by the I.G. and found at 42 C.F.R. § 1001.102(b)(1), (2), and (5) are
established in the record, and because Petitioner has not demonstrated any mitigating
factor that would reduce the proposed period of exclusion.

III. Controlling Statutes and Regulations

Section 1128(a)(1) of the Act, 42 U.S.C. § 1320a-7(a)(1), requires the exclusion from
participation in Medicare, Medicaid, and all other federal health care programs of any
individual or entity convicted of a criminal offense related to the delivery of an item or
service under title XVIII of the Act (the Medicare program) or any state health care
program (the Medicaid program). The terms of section 1128(a)(1) are restated in similar
language at 42 C.F.R. § 1001.101(a). Section 1128(a)(1) does not distinguish between
felonies and misdemeanors as predicates for exclusion.

The Act defines “conviction” as including those circumstances “when a judgment of
conviction has been entered against the individual . . . by a Federal . . . court,” Act

§ 1128(4)(1); “when there has been a finding of guilt against the individual ... by a
Federal .. . court,” Act § 1128(i)(2); or “when a plea of guilty . . . by the individual . . .
as been accepted by a Federal . . . court,” Act § 1128(i)(3). These definitions are
repeated at 42 C.F.R. § 1001.2.

An exclusion based on section 1128(a)(1) is mandatory and the I.G. must impose it for a
minimum period of five years. Act § 1128(c)(3)(B), 42 U.S.C. § 1320a-7(c)(3)(B). The
regulatory language of 42 C.F.R. § 1001.102(a) affirms the statutory provision. The
mandatory minimum period of exclusion may be enhanced in some limited circumstances
and on the I.G.’s proof of certain narrowly-defined aggravating factors listed at 42 C.F.R.
§ 1001.102(b). In this case, the LG. relies on the three aggravating factors set out at 42
C.F.R. § 1001.102(b)(1), (2) and (5) in seeking to enhance the period of Petitioner’s
exclusion to 15 years.

In cases such as this, when the LG. proposes to enhance the period of exclusion by
relying on one or more aggravating factors, a petitioner may attempt to limit or nullify the
proposed enhancement through proof of certain mitigating factors, carefully defined at 42
C.F.R. § 1001.102(c)(1)-(3).

The standard of proof is a preponderance of the evidence and there may be no collateral
attack on the conviction that is the basis for the exclusion. 42 C.F.R. § 1001.2007(c) and
(d). Petitioner bears the burden of proof and persuasion on any affirmative defenses or
mitigating factors and the L.G. bears the burden on all other issues. 42 C.F.R. §
1005.15(b) and (c).

IV. Findings and Conclusions
I find and conclude as follows:

1. On his accepted pleas of guilty on April 11, 1997, in the United States District Court
for the Southern District of Texas, Petitioner Anthony Lynn Hester was found guilty of
four counts of Mail Fraud, in violation of 18 U.S.C. §§ 1341 and 2. I.G. Exs. 7, 8.

2. Petitioner was sentenced on his guilty pleas, and a judgment of conviction was entered
against him, in the United States District Court on August 15, 1997. As part of his
sentence, Petitioner was ordered to serve a 63-month term of imprisonment, and was
ordered to pay restitution to the Medicare and Medicaid programs in the sum of
$1,658,997.73. I.G. Ex. 8.

3. The judgment of conviction, finding of guilt, and accepted pleas of guilty described
above in Findings | and 2 constitute a “conviction” within the meaning of sections
1128(a)(1) and 1128(i)(1), (2), and (3) of the Act, and 42 C.F.R. § 1001.2.

4. A nexus and a common-sense connection exist between the criminal offenses of which
Petitioner was convicted, as noted above in Findings 1, 2 and 3, and the delivery of an
item or service under the Medicare and Medicaid programs. I.G. Exs. 7, 8; Berton Siegel,
D.O., DAB No. 1467 (1994).
5. By reason of Petitioner’s conviction, a basis exists for the 1.G.’s exercise of authority,
pursuant to section 1128(a)(1) of the Act, 42 U.S.C. § 1320a-7(a)(1), to exclude
Petitioner from participation in Medicare, Medicaid, and all other federal health care
programs.

6. Because the acts resulting in Petitioner’s conviction caused a financial loss to the
Medicare and Medicaid programs of more than $5000, the aggravating factor set out at
42 C.F.R. § 1001.102(b)(1) is present.

7. Because the acts resulting in Petitioner’s conviction were committed over a period of
one year or more, the aggravating factor set out at 42 C.F.R. § 1001.102(b)(2) is present.

8. Because Petitioner was sentenced to a term of imprisonment, the aggravating factor
set out at 42 C.F.R. § 1001.102(b)(5) is present.

9. None of the mitigating factors set out at 42 C.F.R. § 1001.102(c)(1)-(3) are present.

10. The I.G.’s exclusion of Petitioner for a period of 15 years is supported by fact and
law. It is within a reasonable range and is therefore not unreasonable. Findings 1-10
above.

11. There are no disputed issues of material fact and summary disposition is
therefore appropriate in this matter. Michael J. Rosen, M.D., DAB No. 2096 (2007);
Thelma Walley, DAB No. 1367 (1992); 42 C.F.R. § 1005.4(b)(12).

V. Discussion

The essential elements necessary to support an exclusion based on section 1128(a)(1) of
the Act are: (1) the individual to be excluded must have been convicted of a criminal
offense; and (2) the criminal offense must have been related to the delivery of an item or
service under title XVIII of the Act (Medicare) or any state health care program
(Medicaid). Tamara Brown, DAB No. 2195 (2008); Thelma Walley, DAB No. 1367;
Boris Lipovsky, M.D., DAB No. 1363 (1992); Lyle Kai, R.Ph., DAB CR1262 (2004),
rev'd on other grounds, DAB No. 1979 (2005), aff'd sub nom. Kai v. Leavitt, Civ. No.
05-005 14 (D. Haw. July 17, 2006); see also Russell Mark Posner, DAB No. 2033, at 5-6
(2006). Those two essential elements are fully demonstrated in the evidence before me.
Although the two elements essential to the basic exclusion are not the points on which
Petitioner rests his opposition to the I.G.’s exclusion, it is helpful to point out briefly the
evidence of those two essential elements.

Petitioner’s conviction is shown by LG. Ex. 8. The District Court’s acceptance of
Petitioner’s four guilty pleas on April 11, 1997, and its Judgment of Conviction on
August 15, 1997 satisfied the definitions of “conviction” set out at sections 1128(i)(1),
1128(i)(2), and 1128(i)(3) of the Act. The first essential element is established by the
record.

The evidence also shows that Petitioner’s conviction is related to the delivery of an item
or service under the Medicare program. Petitioner admitted that he submitted fraudulent
claims to Medicare for ambulance services and related items by mail on May 5, 1992,
January 18, 1994, January 31, 1994, and April 19, 1994. I.G. Exs. 7, 8. The submission
of false claims to the Medicaid or Medicare programs has consistently been held to be a
program-related crime within the reach of section 1128(a)(1). Douglas Schram, R.Ph.,
DAB No. 1372 (1992); Dewayne Franzen, DAB No. 1165 (1990); Jack W. Greene, DAB
No. 1078 (1989), aff’d sub nom. Greene v. Sullivan, 731 F. Supp. 835 (E.D. Tenn. 1990).
I find the facts of Petitioner’s offenses demonstrate the required nexus and common-
sense connection between the criminal acts and the Medicare and Medicaid programs.
Berton Siegel, D.O., DAB No. 1467. The second essential element is established by the
record.

The LG. relies on three aggravating factors set out at 42 C.F.R. § 1001.102(b)(1), (2) and
(5) in seeking to enhance the period of Petitioner’s exclusion to 15 years. Although
Petitioner’s Answer Brief is not always clear, it does obviously object to the length of the
period, and so must first be construed to challenge the aggravating factors on which the
1G. relies.

The aggravating factor set out at 42 C.F.R. § 1001.102(b)(1) is present when there is a
showing of financial loss to a government program or certain other entities of more than
$5000. After 1998, this loss threshold was revised upward from $1500 to $5000. The
District Court records show that Petitioner was required to pay restitution to the Medicare
and Medicaid programs in the sum of $1,658,997.73. I.G. Ex. 8. The record before me
does not disclose how much of the ordered restitution has been paid, but restitution has
long been considered a reasonable measure of program losses. See Jason Hollady, M.D.,
DAB No. 1855 (2002). Petitioner’s crimes caused the Medicare and Medicaid programs
financial losses vastly in excess of the $5000 threshold for aggravation. The
Departmental Appeals Board (Board) has characterized amounts substantially greater
than the statutory standard as an “exceptionally aggravating factor” entitled to significant
weight. Jeremy Robinson, DAB No. 1905 (2004); Donald A. Burstein, Ph.D., DAB No.
1865 (2003). I explicitly observe that the massive plundering of the protected programs
shown here — even in the absence of any other aggravating factors — more than justifies
a significant increase in the period of exclusion.

The aggravating factor set out at 42 C.F.R. § 1001.102(b)(2) is present when “[t]he acts
that resulted in the conviction, or similar acts, were committed over a period of one year
or more.” The Counts of the Indictment to which Petitioner pleaded guilty and the
Judgment of Conviction itself all note that the conduct directly resulting in Petitioner’s
convictions lasted from May 5, 1992 through April 19, 1994. I.G. Exs. 7, 8. The
“duration of offense” factor is therefore present here, and it demonstrates something far
more sinister than the “short-lived lapse of integrity” to which the Board alluded in
Burstein, at 8. When the regulation’s “similar acts” language is recalled, then the
Indictment’s specification that the “duration of offense” factor might be as long as the
period between January 1991 and October 1994 renders it even clearer that the need to
protect the programs from Petitioner would — even in the absence of any other
aggravating factors — amply support a substantial enhancement of the period of
exclusion.

The aggravating factor set out at 42 C.F.R. § 1001.102(b)(5) is present when the
“sentence imposed by the court included incarceration.” In this case, Petitioner was sent
to prison for a total of 63 months. I.G. Ex. 8. The “incarceration” aggravating factor is
present here, but there is more to this matter than the simple observation that Petitioner
was imprisoned over five years for his crimes. It is important to note that the structure of
the 63-month sentence was obviously intended to enhance the sentence’s effect: three
concurrent terms of 60 months’ confinement were imposed on the first three violations,
but a consecutive term of 3 months was “stacked” on the concurrent 60-month sentences.
1.G. Ex. 8, at 2. Plainly, both the total length of Petitioner’s confinement and the
consecutive nature of the second part of his sentence underscore the serious view of
Petitioner’s crimes taken by the District Court. I adopt that serious view. The length of
Petitioner’s prison term is sufficient, in and of itself, to warrant a considerable increase in
the period of exclusion.

Evidence relating to aggravating factors may be countered by evidence relating to any of
the mitigating factors set forth at 42 C.F.R. § 1001.102(c)(1)-(3). Since any petitioner’s
invocation of a mitigating factor is in the nature of an affirmative defense, the petitioner
who claims the factor bears the burden of proving it. This allocation of the burden of
proof is set out at 42 C.F.R. § 1005.15(b)(1) and is acknowledged in Board decisions.
Russell Mark Posner, DAB No. 2033; Stacey R. Gale, DAB No. 1941 (2004); Dr. Darren
James, D.P.M., DAB No. 1828, at 7-8 (2002); Barry D. Garfinkel, M.D., DAB No. 1572
(1996).

As I have written above, Petitioner objects to the length of his exclusion. Although he
does not explicitly rely on any of the factors defined by regulation, he does assert that
“mitigating factors” or “mitigating circumstances” are present. He offers the suggestion
that he “took responsibility” for what he now hints were his own ignorance of billing
procedures and the failings of his employees and staff. P. Ans. Br. at 2-3. Next,
Petitioner asserts that the effects of his exclusion have extended into his real estate
practice and his personal life, and that those effects should be treated as a mitigating
factor. P. Ans. Br. at 4-6. These claims do not invoke any of the mitigating factors
defined and enumerated at 42 C.F.R. § 1001.102(c)(1)-(3). Nothing in this record hints at
the presence of any of those enumerated and defined mitigating factors, and Petitioner is
entitled to claim no mitigating factor set out at 42 C.F.R. § 1001.102(c)(1)-(3).

A review of Petitioner’s remaining arguments shows no basis to overturn the I.G.’s
exclusion or the I.G.’s enhancement of the exclusion period. Petitioner’s argument that
e “was not convicted of Health Care Fraud, but mail fraud” is unavailing, because the
statute requires only that the conviction be for conduct “related to the delivery of an item
or service” in a protected program. James Randall Benham, DAB No. 2042 (2006). The
remainder of his challenges amount to collateral attacks on his conviction and sentence.
They are irrelevant here, for the regulations explicitly preclude any collateral attack on
Petitioner’s conviction. “When the exclusion is based on the existence of a criminal
conviction . . . where the facts were adjudicated and a final decision was made, the basis
for the underlying conviction . . . is not reviewable and the individual or entity may not
collaterally attack it either on substantive or procedural grounds, in this appeal.” 42
C.F.R. § 1001.2007(d); Joann Fletcher Cash, DAB No. 1725 (2000); Chander Kachoria,
R.Ph., DAB No. 1380, at 8 (1993).

But even though the LG. has proven the aggravating factors exactly as alleged, and even
though Petitioner has failed to prove even a single mitigating factor, Petitioner’s claim
that the 15-year length of his exclusion is unreasonably long raises an issue that may be
more complex than it has been heretofore.

Until recently, the Administrative Law Judge (ALJ) evaluating such a claim could rely on
a clear and settled line of authority in doing so. According to that line of authority, the
1.G.’s discretion when weighing the importance of aggravating and mitigating factors
commanded great deference when reviewed by an ALJ. Jeremy Robinson, DAB No.
1905; Keith Michael Everman, D.C., DAB No. 1880 (2003); Stacy Ann Battle, D.D.S., et
al., DAB No. 1843 (2002). The rationale of that doctrine was identified by the drafters of
the regulations as the I.G.’s “vast experience” in implementing exclusions. 57 Fed. Reg.
3298-3321 (January 24, 1992). According to that line of authority, an ALJ might not
substitute his or her own view of what period of exclusion might appear best in any given
case for the view of the I.G. on the same evidence. So long as the period chosen by the
1.G. was within a reasonable range and was based on demonstrated criteria, the ALJ was
forbidden to alter it. Jeremy Robinson, DAB No. 1905; Joann Fletcher Cash, DAB No.
1725, at 20. According to that line of authority, an ALJ might reduce an exclusionary
period only when the ALJ discovered some meaningful evidentiary failing in the
aggravating factors upon which the LG. relied, or when the ALJ was shown evidence
reliably establishing a mitigating factor not considered by the LG. in setting the enhanced
period. Jeremy Robinson, DAB No. 1905.

That line of authority may have been modified in the recent decision of the Board in
Craig Richard Wilder, M.D., DAB No. 2416 (2011). Although the Wilder ALJ found
that the I.G. had considered all proven aggravating and mitigating factors, and although
the Board acknowledged that there were no differences whatsoever between the record of
those factors before it and the record before the ALJ and the I.G., the Board nevertheless
departed from its own settled rule and revised the 35-year period of exclusion downward
to 18 years, so that it might conform more satisfactorily to what the Board considered
best. In doing so, the Board appears to have rejected the I.G.’s and the ALJ’s assessment
of the value of Wilder’s cooperation with authorities and substituted its own assessment.

The Board has returned to this narrow issue only once since Wilder.’ It may be too soon
to tell whether Wilder signals new responsibility for the Board and ALJs in overseeing
the I.G.’s application of his “vast experience,” and whether Wilder vouchsafes the ALJ
with discretion to alter — that is, to lengthen or to shorten — the period determined by
the I.G. In my Ruling and Order of December 14, 2011, I asked the parties to comment
on this question. The I.G. declined to address the question directly, and simply asserted
that this proposed period is, even in light of Wilder, still within a reasonable range.
Petitioner did not comment on the question, and it will be remembered that Petitioner
appears here pro se.

At this point in the history of Wilder as precedent, it is impossible for me not to conclude
that the Robinson-Everman-Battle-Cash line of authority has been in large measure
vitiated by Wilder. I have suggested as much in Edward Alexander Birts, DAB CR2516,
at 9, n.1 (2012) and Marcellius Jnekwuoba Anunobi, DAB CR2480, at 10 (2012), cases
in which, as here, each Petitioner appeared pro se. Neither of those decisions has been
reviewed by the Board, and no further gloss on Wilder is available in any other appeal to
date. But I cannot see a reason why, if the Robinson-Everman-Battle-Cash rule no longer
restricts an ALJ’s considering what term of exclusion might be best on the facts o
record, an ALJ lacks the authority to lengthen as well as to shorten the term proposed by
the LG.

> The Board’s very recent decision in Vinod Chandrashekhar Patwardhan, M.D., DAB
No. 2454 (April 10, 2012) does not mention Wilder, and seems to acknowledge the
Robinson-Everman-Battle-Cash line of authority. But it also affirms — on proof of the
same three aggravating factors here proven, and in the absence of any mitigating factors
— the ALJ’s reduction of the I.G.’s proposed 23-year period of exclusion to 12 years.
Dr. Patwardhan bilked the programs of $1.313 million, did so over approximately three
years, and was sentenced to nine months of unmonitored home detention.

> Were it not for two considerations — first, the fact that this exercise of the I.G.’s
expertise and discretion took place 14 years ago, and second, the fact that this Petitioner
appears pro se — this case might present an attractive opportunity to exercise that
authority and lengthen the period of this exclusion. An array of cases including Mark A.
Maher, DAB CR678 (2000); Golden G. Higgwe, D.P.M., DAB CR1229 (2004); Peggy A.
Bisig, a/k/a Peggy A. Fritz, DAB CR1416 (2006); Dinesh Dayabhai Shah, DAB CR2143
(2010); and Edward Alexander Birts, DAB CR2516 suggests that this 15-year exclusion
10

But here it will suffice to repeat that all three of the aggravating factors relied on by the
1.G. have been established as pleaded and Petitioner has established none of the
mitigating factors defined in 42 C.F.R. § 1001.102(c)(1)-(3). Overall, the record in this
case establishes that Petitioner is untrustworthy and a danger to the protected health care
programs. He is a felon convicted of crimes based on fraud. His crimes constituted a
1.658-million-dollar attack on the financial resources of Medicare and Medicaid. He
demonstrated a constancy of purpose and method in doing so: his scheme spanned
approximately two years. His crimes were serious enough to earn a sentence of 63
months in prison. Given these considerations, the 15-year term of Petitioner’s exclusion
is not unreasonably long. Comparison with other cases is of limited utility and is
certainly not controlling, but it can illustrate what a reasonable range has been understood
to mean when the ALJ examines a lengthy exclusion. Paul D. Goldenheim, M.D., et al.,
DAB No. 2268, at 29 (2009). The length of this exclusion is commensurate with the
range established as reasonable in Russell Mark Posner, DAB No. 2033; Stacey R. Gale,
DAB No. 1941; Jeremy Robinson, DAB No. 1905; Thomas D. Harris, DAB No. 1881
(2003); Fereydoon Abir, M.D., DAB No. 1764 (2001); and Joann Fletcher Cash, DAB
No. 1725.

I note once more that Petitioner appears here pro se. Because of that I have adhered to
the Board’s admonition that pro se litigants should be offered “some extra measure of
consideration” in developing their records and their cases. Louis Mathews, DAB No.
1574 (1996); Edward J. Petrus, Jr., M.D., et al., DAB No. 1264 (1991). I have searched
all of Petitioner’s pleadings for any arguments or contentions that might raise a valid,
relevant defense to the I.G.’s Motion, but have found nothing that could be so construed.

Resolution of a case by summary disposition is particularly fitting when settled law can
be applied to undisputed material facts. Michael J. Rosen, M.D., DAB No. 2096; Thelma
Walley, DAB No. 1367. Summary disposition is authorized by the terms of 42 C.F.R. §
1005.4(b)(12). This forum looks to FED. R. CIv. P. 56 for guidance in applying that
regulation. Robert C. Greenwood, DAB No. 1423 (1993). The material facts in this case
are undisputed and unambiguous. They support summary disposition as a matter of
settled law. This Decision issues accordingly.

falls short of a “reasonable range” and would be best lengthened. The Board’s decision
in Patwardhan contains nothing to argue otherwise.
11

VI. Conclusion

For the reasons set forth above, the I.G.’s Motion for Summary Disposition should be,
and it is, GRANTED. The I.G.’s exclusion of Petitioner Anthony Lynn Hester

from participation in Medicare, Medicaid, and all other federal health care programs for a
period of 15 years pursuant to the terms of section 1128(a)(1) of the Act, 42 U.S.C.

§ 1320a-7(a)(1), is sustained.

/s/
Richard J. Smith
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Dawn Sea Kahrs, DC,
Petitioner
v.
Centers for Medicare and Medicaid Services.
Docket No. C-12-60
Decision No. CR2528

Date: April 16, 2012

DECISION

Petitioner, Dawn Sea Kahrs, DC (Petitioner), appeals a reconsideration decision issued on
August 26, 2011. I grant summary judgment and sustain the determination of the Centers
for Medicare and Medicaid Services (CMS) finding that the undisputed evidence
establishes that CMS properly enrolled Petitioner in the Medicare program effective June
7, 2011.

I. Background and Procedural History

CMS notified Petitioner by letter dated July 27, 2011 that her Medicare enrollment
application had been approved effective May 9, 2011.' CMS Exhibit (CMS Ex.) 6, at 1.
On August 8, 2011, Petitioner requested reconsideration of the initial decision and
requested that her effective enrollment date be changed to March 7, 2011, the date

' The letter was in error as the Declaration of Denise Bossingham explained. CMS Ex.
1, at 2. CMS’s determination was that the effective date of Petitioner’s enrollment was
June 7, 2011, the date the CMS contractor received her enrollment application. However,
the CMS contractor authorized Petitioner to file claims for services retrospective to May
9, 2011. CMS Ex. 1, at 2.
Petitioner first began providing services to Medicare patients. CMS Ex. 7. On August
26, 2011, a contractor hearing officer issued a reconsideration decision denying
Petitioner’s request for an earlier effective date of enrollment. CMS Ex. 8.

Petitioner then filed a hearing request (HR) with the Civil Remedies Division of the
Departmental Appeals Board, and the case was assigned to me for hearing and decision.
In accordance with my Acknowledgment and Pre-hearing Order issued on October 26,
2011, CMS filed a Motion for Summary Judgment and Pre-Hearing Brief (CMS Br.),
accompanied by eight exhibits (CMS Exs. 1-8), on November 29, 2011. Petitioner did
not respond to the CMS Motion for Summary Judgment, and I subsequently issued an
Order to Show Cause on February 1, 2012. On February 6, 2012, Petitioner responded to
my Order to Show Cause (P. Response) and explained that she did not realize she “was
supposed to respond to CMS’s pre-hearing brief and motion.” P. Response at 2. At this
time, Petitioner filed a Pre-Hearing Brief and Motion for Summary Judgment, Proposed
Witness List, Proposed Exhibit List, and three exhibits (P. Exs. 1-3). On February 24,
2012, CMS responded to Petitioner’s Motion for Summary Judgment and submitted a
Motion to Exclude New Documentary Evidence (CMS Response) and a Supplemental
Witness List accompanied by three additional exhibits (CMS Exs. 9-11). CMS did not
object to Petitioner’s submission as untimely and did not suggest that I dismiss this case;
however, CMS moved to exclude Petitioner’s new documentary evidence, namely P. Ex.
3. In the event I were to deny the CMS Motion to Exclude New Documentary Evidence,
CMS requests the admission of its supplemental exhibits in response to Petitioner’s new
documentary evidence. On March 15, 2012, Petitioner replied to the CMS Motion to
Exclude New Documentary Evidence (P. Reply) and submitted one additional exhibit.’

CMS argues that Petitioner did not present any documentary evidence or raise any
allegations relating to a Presidentially-declared disaster exception during the
reconsideration review and that Petitioner has not shown good cause for submitting new
evidence for the first time at this late date. As discussed in more detail below, I sustain
CMS’s objection to Petitioner’s new evidence and exclude from evidence P. Ex. 3 and
Petitioner’s supplemental exhibit, P. Ex. 10. I also exclude CMS Exs. 9-11. In the
absence of further objections, I admit CMS Exs. 1-8 and Petitioner’s Exs. 1-2 into the
record.

Il. Applicable Law

Section 1831 of the Social Security Act (the Act) (42 U.S.C. § 1395j) establishes the
supplementary medical insurance benefits program for the aged and disabled known as
Medicare Part B. Payment under the program for services rendered to Medicare
beneficiaries may only be made to eligible providers of services and suppliers. Act

? Petitioner labeled this exhibit in a non-sequential manner as P. Ex. 10.
§§ 1835(a) (42 U.S.C. § 1395n(a)); 1842(h)(1) (42 U.S.C. § 1395(u)(h)(1)). The Act
requires the Secretary of Health and Human Services (the Secretary) to issue regulations
that establish a process for the enrollment of providers and suppliers, including the right
to a hearing and judicial review of certain enrollment determinations. Act § 1866(j) (42
U.S.C. § 1395cc(j)).

Pursuant to 42 C.F.R. § 424.505, a provider or supplier must be enrolled in the Medicare
program and be issued a billing number to have billing privileges and to be eligible to
receive payment for services rendered to Medicare eligible beneficiaries. The effective
date of a provider or supplier’s enrollment in Medicare is governed by regulations at 42
C.F.R. § 424.520(d). The effective date of enrollment for a supplier may only be the later
of two dates: (1) the date when the supplier filed an application for enrollment that was
subsequently approved by a Medicare contractor charged with reviewing the application
on behalf of CMS or (2) the date when the supplier first began providing services at a
new practice location. Jd. The date of filing of the enrollment application is the date
when the designated Medicare contractor receives the complete enrollment application
and supporting documentation. 42 C.F.R. § 424.510(d)(1); 73 Fed. Reg. 69,725, 69,769
(Nov. 19, 2008). An enrolled provider or supplier may bill Medicare for services
provided to Medicare eligible beneficiaries up to 30 days prior to the effective date of
enrollment, if circumstances precluded enrollment before the services were provided.
Retrospective billing for up to 90 days prior to the effective date of enrollment is
permitted only in case of a Presidentially-declared disaster, pursuant to 42 C.F.R. §
424.521.

Ill. Issue, Findings of Fact, Conclusions of Law
A. Issue

The issue in this case is whether CMS’s contractor and CMS had a legitimate basis for
determining Petitioner’s effective Medicare enrollment date and retrospective billing date
for Medicare billing privileges.

B. Applicable Standard
The Departmental Appeals Board (Board) stated the standard for summary judgment:

Summary judgment is appropriate when the record shows that there is no
genuine issue as to any material fact, and the moving party is entitled to
judgment as a matter of law. . . . The party moving for summary judgment
bears the initial burden of showing that there are no genuine issues of
material fact for trial and that it is entitled to judgment as a matter of
law. ... To defeat an adequately supported summary judgment motion, the
non-moving party may not rely on the denials in its pleadings or briefs, but
must furnish evidence of a dispute concerning a material fact — a fact that, if
proven, would affect the outcome of the case under governing law. .. . In
determining whether there are genuine issues of material fact for trial, the
reviewer must view the evidence in the light most favorable to the non-
moving party, drawing all reasonable inferences in that party’s favor.

Senior Rehab. & Skilled Nursing Ctr., DAB No. 2300, at 3 (2010) (citations omitted).

The role of an Administrative Law Judge (ALJ) in deciding a summary judgment motion
differs from the ALJ’s role in resolving a case after a hearing. The ALJ should not assess
credibility or evaluate the weight of conflicting evidence. Holy Cross Vill. at Notre
Dame, Inc., DAB No. 2291, at 5 (2009).

C. Findings of Fact and Conclusions of Law

1) CMS’s contractor and CMS properly determined Petitioner’s effective
date of Medicare enrollment.

The relevant facts are not disputed, and I draw all reasonable inferences in favor of
Petitioner. Petitioner is the owner and operator of Graceful Waves Chiropractic in
Wheeler, Oregon. HR; CMS Ex. 2. Petitioner began seeing patients on March 7, 2011.
HR. Petitioner subsequently submitted a Medicare enrollment application to the
Medicare contractor, Noridian Administrative Services (““Noridian”). CMS Ex. 2. It is
undisputed that Noridian received Petitioner’s Medicare enrollment application on June
7, 2011. On June 27, 2011, Noridian approved Petitioner’s enrollment application with
an effective date of June 7, 2011 with retrospective billing privileges commencing on
May 9, 2011. CMS Ex. | at 2; CMS Ex. 6.

Petitioner contends that her effective date of enrollment should be March 7, 2011, the
date she began rendering services to Medicare beneficiaries. Petitioner does not deny
that CMS received her completed enrollment application on June 7, 2011. However,
Petitioner argues that her effective date should be earlier because Petitioner believed she
had 90 days to submit her enrollment application. She further argues the refusal of CMS
to compensate Petitioner for the 60 days she provided services to Medicare beneficiaries
prior to submitting her enrollment application caused an extreme financial hardship. HR;
P. Response.

Petitioner states that she provided services “in good faith to the American people in my
medically under-served rural area.” HR. Petitioner further argues that she found the
Medicare enrollment application to be misleading and believed she had 90 days to submit
the enrollment application. Petitioner further asserts that completing the application
“early” was not the highest priority due to her challenging personal circumstances and
pressures related to starting a new business. P. Response at 3-4. Petitioner also states
that she recalls speaking to a Noridian staff member over the phone prior to submitting an
enrollment application, and this employee of the CMS contractor told her “that it wasn’t a
problem for me to go ahead and provide care to Medicare beneficiaries. [The employee]
emphasized that I should just indicate the actual ‘effective date’ on the forms, and I
would be paid for the work I did. [The employee] did not suggest that I rush to complete
the application, nor did [the employee] disclose to me that I only had 30 days to submit
the application or I would not be paid.” P. Response at 5. (Emphasis in original).

The effective date of Medicare enrollment and billing privileges is dictated by 42 C.F.R.
§ 424.520(d). The regulation provides:

(d) Physicians, nonphysician practitioners, and physician and
nonphysician practitioner organizations. The effective date
for billing privileges for physician, nonphysician
practitioners, and physician and nonphysician practitioner
organizations is the later of the date of filing of a Medicare
enrollment application that was subsequently approved by a
Medicare contractor or the date an enrolled physician or
nonphysician practitioner first began furnishing services at a
new practice location.

(Emphasis added).

The regulation is clear, and the effective date for Medicare billing privileges is
determined according to the latter of the two dates specified by the regulation. The “date
of filing” is the date that the Medicare contractor receives a signed enrollment application
that the Medicare contractor is able to process to approval. 42 C.F.R. § 424.510(d)(1); 73
Fed. Reg. 69,725, 69,769 (Nov. 19, 2008). Because it is undisputed that the contractor
received Petitioner’s enrollment application on June 7, 2011, which is after the date
Petitioner began providing services, the regulation dictates that this is the effective date
of Petitioner’s enrollment, and I have no discretion to determine an earlier effective date.

Petitioner made various arguments for equitable relief at the reconsideration level, and
during this appeal, despite not meeting the legal requirements for an earlier effective date.
These arguments pertained to her personal circumstances, her extreme financial hardship
for not being compensated by CMS for 60 days of providing services to Medicare
beneficiaries, the ambiguity of the CMS enrollment application and relevant regulations,
and “misguidance and misinformation from Noridian Medicare staff prior to beginning
the application process.” See P. Response at 11. Petitioner did not argue that she filed
an application on an earlier date than CMS determined or that the contractor or CMS
incorrectly applied the regulatory criteria. | am without authority to order either Noridian

or CMS to provide an exemption to Petitioner under the circumstances, even though I
may sympathize with Petitioner’s predicaments. Even accepting all of Petitioner’s
assertions as true, Petitioner’s equitable arguments give me no ground to grant Petitioner
an earlier effective date of enrollment. See US Ultrasound, DAB No. 2302, at 8 (2010)
(“[nJeither the ALJ nor the Board is authorized to provide equitable relief by reimbursing
or enrolling a supplier who does not meet statutory or regulatory requirements.”).
Moreover, I have no authority to declare statutes or regulations invalid or ultra vires.
1866I1CPayday.com, L.L.C., DAB No. 2289, at 14 (2009) (“[a]n ALJ is bound by
applicable laws and regulations and may not invalidate either a law or regulation on any
ground.”). Thus, I have no authority to change Petitioner’s Medicare enrollment date
based upon equitable considerations.

Additionally, Petitioner’s claims regarding misleading advice given to her by CMS
employees and contractors may also be construed to be equitable estoppel arguments.
Even assuming Petitioner accurately described what transpired during Petitioner’s
telephone conversations with a Noridian staff member, Petitioner does not allege any
affirmative misconduct, and I am unable to grant the relief that Petitioner requests.
Federal case law and Board precedent establishes that: (1) estoppel cannot be the basis to
require payment of funds from the federal fisc; (2) estoppel cannot lie against the
government, if at all, absent a showing of affirmative misconduct, such as fraud; and (3) I
am not authorized to order payment contrary to law based on equitable grounds. It is
well-settled that those who deal with the government are expected to know the law and
may not rely on the conduct of government agents contrary to law. See, e.g., Office of
Personnel Mgmt. v. Richmond, 496 U.S. 414 (1990); Heckler v. Cmty. Health Servs. of
Crawford County, Inc., 467 U.S. 51 (1984); Oklahoma Heart Hosp., DAB No. 2183, at
16 (2008); Wade Pediatrics, DAB No. 2153, at 22 n.9 (2008), aff'd, 567 F.3d 1202 (10th
Cir. 2009).

Accordingly, I conclude that Petitioner’s effective date of Medicare enrollment was June
7, 2011, the date on which she submitted a complete enrollment application that could be
processed to approval. Petitioner was also properly authorized to bill Medicare for
services provided to Medicare beneficiaries up to 30 days prior to her effective date of
enrollment, i.e., May 9, 2011.

2) Petitioner has not shown good cause pursuant to 42 C.F.R. § 498.56(e)
Sor submitting new evidence.

I sustain CMS’s objection to Petitioner’s new evidence that was not provided at the
reconsideration level regarding Petitioner’s eligibility for retrospective Medicare billing
for up to 90 days prior to the effective date of enrollment due to a Presidentially-declared
disaster.

In her letter requesting reconsideration of the initial decision dated August 8, 2011,
Petitioner did not mention anything regarding a Presidentially-declared disaster which
precluded her Medicare enrollment prior to providing services. Instead, Petitioner waited
to advance this argument and submit new evidence until after receiving the CMS pre-
hearing exchange and Motion for Summary Judgment. Petitioner argues that she was
unaware of the “undisclosed . . . loophole, to account for a 90-day retrospective billing
period.” P. Response at 11.

While the Board has never precisely defined the term “good cause,” it is clear to me that
Petitioner has not shown good cause for submitting evidence relating to a Presidentially-
declared disaster for the first time in response to the CMS Motion for Summary
Judgment. Petitioner claims that she was not informed of the need to argue that she
qualified for 90 days of retrospective Medicare billing due to a Presidentially-declared
disaster by employees of CMS or its contractors; otherwise, she would have raised this
argument previously. P. Reply at 7. Petitioner also argues that she did not notice “the
90-day reference” in her reconsideration decision and “took great care to keep the letters
succinct and limited to one page, in the hopes it would actually be read by someone.” P.
Reply at 8. Petitioner contends that she left out certain details, such as a national disaster
declared in Oregon, because these details “didn’t seem as important for me to mention at
the time” and instead focused on explaining other personal circumstances which
prevented her submitting an enrollment application prior to June 7, 2011.

I conclude that Petitioner’s arguments do not demonstrate good cause for her submission
of new evidence at this late date because circumstances beyond her control did not
prevent her from advancing it at her reconsideration review. Thus, even if I were to
assume for purposes of summary judgment that a Presidentially-declared disaster
prevented Petitioner from submitting her enrollment application prior to June 7, 2011, it
is undisputed that she did not present this evidence or advance these arguments at the
reconsideration level, or even in her request for hearing. Therefore, I am now in effect
precluded from considering those arguments.

IV. Conclusion

After reviewing the evidence in the light most favorable to Petitioner, I conclude there is
no genuine issue of material fact at issue here. I therefore grant summary judgment in

> Petitioner’s claims to the exception relate to a one-day Presidentially-declared disaster
in select Oregon counties after the ill-fated events of the tsunami that struck Japan in
March 2011.
favor of CMS because Petitioner submitted an application, which was subsequently
approved by the contractor, on June 7, 2011 and find CMS’s determination of Petitioner’s
effective date of Medicare enrollment was consistent with regulatory requirements. I
have no authority to order CMS to make payment for claims prior to May 9, 2011 that
were provided outside of the applicable 30-day retrospective billing period provided by
regulation.

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Boone County Hospital
(CCN: 16-5558),

Petitioner
v.
Centers for Medicare and Medicaid Services.

Docket No. C-10-588

Decision No. CR2526

Date: April 12, 2012

DECISION

There is no basis for the termination of the provider agreement of Petitioner, Boone
County Hospital, and its participation in Medicare as a distinct part skilled nursing
facility (SNF).
I. Background
Petitioner is a hospital located in Boone, Iowa, that participates in Medicare as a critical
access hospital under 42 C.F.R. Part 485.' Petitioner also has a provider agreement, first
granted in 2005, to participate in Medicare as a 14-bed distinct part SNF. Petitioner was
subject to an initial survey in 2005 and to annual surveys in 2006, 2007, and 2008. In
September 2009, surveyors of the lowa Department of Inspections and Appeals (the state

agency) attempted to conduct an inspection of the distinct part SNF but could not
complete the survey, as there were no residents in the distinct part SNF. On October 14,

' References are to the 2009 revision of the Code of Federal Regulations (C.F.R.) in
effect at the time of the termination action, unless otherwise indicated.
2009, the distinct part SNF had four residents, and the state agency surveyors completed
asurvey. The October 14, 2009 survey cited one deficiency, but that survey is not at
issue before me. Transcript (Tr.) at 38-39, 54; P. Ex. 25, at 1-2, §§ 1-11 (the parties’
Joint Stipulation of Fact); P. Exs. 14; 15. On November 16, 2009, two federal surveyors
from the Centers for Medicare and Medicaid Services (CMS) attempted to conduct a
federal monitoring survey but found no residents in the distinct part SNF. P. Ex. 25, at 2,
q 12.

CMS notified Petitioner of its decision to terminate Petitioner’s provider agreement and
participation in Medicare as a distinct part SNF by letter dated February 23, 2010. CMS
Exhibit (CMS Ex.) 2. The parties stipulated that the termination was based on the fact
that the distinct part SNF had few residents for over a year, which caused CMS to
conclude that the distinct part SNF was not providing services to the community on an
ongoing basis. P. Ex. 25, at 4, § 26; CMS Ex. 2, at 2. CMS terminated the provider
agreement for Petitioner’s distinct part SNF effective March 31, 2010. P. Ex. 25, at 4, J
29; CMS Ex. 2, at 2.

Petitioner requested a hearing before an administrative law judge (ALJ) on March 17,
2010. The case was assigned to me for hearing and decision on April 5, 2010, and an
Acknowledgement and Prehearing Order was issued at my direction. On March 8, 2011,
a hearing was convened in Des Moines, Iowa, and a 241-page transcript of the
proceedings was prepared. CMS offered CMS exhibits (Exs.) 1 through 10. CMS
withdrew page 22 of CMS Ex. 2 and also withdrew CMS Exs. 4; 5; 6; 7; 8; and 10. Tr. at
19-24. CMS Exs. 1; 2 (pages | through 21, 23, and 24); 3; and 9 were admitted as
evidence. Tr. at 24. Petitioner offered P. Exs. 1 through 26, and all were admitted as
evidence. Tr. at 30. Petitioner’s printed Power Point® presentation, which was used
during opening statement, was marked as P. Ex. 27 for identification but not admitted as
evidence. Tr. at 99-101. CMS called the following witnesses: Surveyor Christina
McCuen, RN; and Paul Shumate, Branch Manager, Division of Survey and Certification,
Kansas City Regional Office of CMS. Petitioner called the following witnesses: Joseph
S. Smith, Chief Executive Officer for Petitioner; David Mellett, Chief Financial Officer
for Petitioner; and Sandra Puntenney, Petitioner’s Director of Nursing (DON) during the
relevant period. The parties filed post-hearing briefs (CMS Br. and P. Br., respectively)
and post-hearing reply briefs (CMS Reply and P. Reply, respectively).

II. Discussion
A. Issues
Whether there is a basis for the termination of Petitioner’s
participation in Medicare as a distinct part SNF, including

termination of Petitioner’s provider agreement and revocation
of Petitioner’s billing privileges.
B. Applicable Law

There is no dispute that, since 2005, Petitioner has been certified to participate in
Medicare, with a provider agreement and billing privileges, as a distinct part SNF located
within the Boone County Hospital. P. Ex. 25, at 1, 9 1, 3.

Congress established requirements for SNFs and the quality of care they are to deliver. *
A SNF is an institution or a distinct part of an institution that is primarily engaged in
providing its residents skilled nursing care and related services or rehabilitation services.
A SNF may not be primarily for the care and treatment of mental diseases. A SNF must
have a transfer agreement with one or more hospitals authorized to participate in
Medicare. A SNF must also meet other specific requirements set forth in the Social
Security Act (Act) related to the provision of services, resident’s rights, and
administration. Act § 1819(a)-(d) (42 U.S.C. § 1395i-3(a)-(d)). The Secretary of Health
and Human Services (the Secretary) has promulgated regulations in accordance with
section 1871 of the Act (42 U.S.C. § 1395hh), establishing participation requirements for
SNFs. The regulatory requirements for participation as a SNF are at 42 C.F.R. Part 483,
subpart B.

The definition of a “distinct part” SNF and related requirements are at 42 C.F.R. §
483.5(b):

(1) Definition. A distinct part SNF or NF is physically
distinguishable from the larger institution or institutional
complex that houses it, meets the requirements of this
paragraph and of paragraph (b)(2) of this section, and meets
the applicable statutory requirements for SNFs or NFs in
sections 1819 or 1919 of the Act, respectively. A distinct part
SNF or NF may be comprised of one or more buildings or
designated parts of buildings (that is, wings, wards, or floors)
that are: In the same physical area immediately adjacent to
the institution's main buildings; other areas and structures that

> Long-term care facilities authorized to participate in Medicare are referred to as SNFs,
and those authorized to participate in Medicaid are referred to as nursing facilities (NFs).
Participation of a NF in Medicaid is governed by section 1919 of the Social Security Act
(42 U.S.C. § 1396r). Section 1919(h)(2) of the Act gives enforcement authority to the
states to ensure that NFs comply with their participation requirements established by
sections 1919(b), (c), and (d) of the Act.

are not strictly contiguous to the main buildings but are
located within close proximity of the main buildings; and any
other areas that CMS determines on an individual basis, to be
part of the institution’s campus. A distinct part must include
all of the beds within the designated area, and cannot consist
of a random collection of individual rooms or beds that are
scattered throughout the physical plant. The term “distinct
part” also includes a composite distinct part that meets the
additional requirements of paragraph (c) of this section.

(2) Requirements. In addition to meeting the participation
requirements for long-term care facilities set forth elsewhere
in this subpart, a distinct part SNF or NF must meet all of the
following requirements:

(i) The SNF or NF must be operated under common

ownership and control (that is, common governance) by
the institution of which it is a distinct part, as evidenced
by the following:

(A) The SNF or NF is wholly owned by the
institution of which it is a distinct part.

(B) The SNF or NF is subject to the by-laws and
operating decisions of a common governing body.

(C) The institution of which the SNF or NF is a
distinct part has final responsibility for the distinct
part’s administrative decisions and personnel
policies, and final approval for the distinct part’s
personnel actions.

(D) The SNF or NF functions as an integral and
subordinate part of the institution of which it is a
distinct part, with significant common resource
usage of buildings, equipment, personnel, and
services.

(ii) The administrator of the SNF or NF reports to and
is directly accountable to the management of the
institution of which the SNF or NF is a distinct part.
(iii) The SNF or NF must have a designated medical
director who is responsible for implementing care
policies and coordinating medical care, and who is
directly accountable to the management of the
institution of which it is a distinct part.

(iv) The SNF or NF is financially integrated with the
institution of which it is a distinct part, as evidenced by
the sharing of income and expenses with that
institution, and the reporting of its costs on that
institution's cost report.

(v) A single institution can have a maximum of only
one distinct part SNF and one distinct part NF.

(vi) (A) An institution cannot designate a distinct part
SNF or NF, but instead must submit a written request
with documentation that demonstrates it meets the
criteria set forth above to CMS to determine if it may
be considered a distinct part.

(B) The effective date of approval of a distinct part
is the date that CMS determines all requirements
(including enrollment with the fiscal intermediary
(FI)) are met for approval, and cannot be made
retroactive.

(C) The institution must request approval from
CMS for all proposed changes in the number of
beds in the approved distinct part.

The Act requires that the Secretary issue regulations that establish a process for the
enrollment of providers and suppliers,’ including the right to a hearing and judicial
review in the event of denial or non-renewal. Act § 1866(j) (42 U.S.C. § 1395cc(j)). The

> A “supplier” furnishes items or services under Medicare and the term supplier applies to
physicians or other practitioners and facilities that are not included within the definition
of the phrase “provider of services.” Act § 1861(d) (42 U.S.C. § 1395x(d)). A “provider
of services,” commonly shortened to “provider,” includes hospitals, critical access
hospitals, skilled nursing facilities, comprehensive outpatient rehabilitation facilities,
(Footnote continued next page.)
procedures for enrollment are found at 42 C.F.R. Part 424, subpart P. Pursuant to 42
C.F.R. § 424.505, a provider or supplier must be enrolled in the Medicare program and be
issued a billing number to have billing privileges and to be eligible to receive payment
for services rendered to a Medicare eligible beneficiary. A provider, such as a SNF, must
also enter a provider agreement with CMS as described in 42 C.F.R. Part 489, subpart B.

Congress established an enforcement process to ensure that SNFs maintain compliance
with the participation requirements established by section 1819(b), (c), and (d) of the Act.
Congress granted the Secretary authority to impose enforcement remedies, including
termination of participation in Medicare, to ensure compliance or to remove
noncompliant providers and suppliers from participation. Act § 1819(h). The Act
provides that the Secretary may terminate a provider agreement for several reasons,
including a provider’s failure to comply substantially with the provisions of the Act and
regulations, or the terms of the provider agreement. Act § 1866(b)(2).

The regulations establish a procedure for the survey and certification of long-term care
facilities and delegate the Secretary’s authority to enforce compliance to CMS. 42 C.F.R.
Part 488, subpart F. State survey agencies on behalf of CMS, or CMS surveyors, survey
facilities that participate in Medicare to determine whether the facilities are complying
with federal participation requirements. 42 C.F.R. §§ 488.10-.28, 488.300-.335. The
regulations specify the enforcement remedies that CMS may impose, in addition to
termination of participation, if a facility is not in substantial compliance with Medicare
participation requirements. 42 C.F.R. § 488.406. Pursuant to 42 C.F.R. § 488.456(b),
CMS may terminate a facility’s provider agreement for noncompliance with statutory or
regulatory participation requirements, among other reasons. The regulation requires that
CMS give the provider notice prior to the termination. 42 C.F.R. § 488.456(c). The
procedures for termination are those specified by 42 C.F.R. § 489.53. 42 C.F.R. §
488.456(d)(1). A facility has a right to request review of the termination decision by an
ALJ and the Departmental Appeals Board (the Board) and to judicial review of a
“certification of noncompliance leading to an enforcement remedy.” 42 C.F.R. §
488.408(g)(1); 42 C.F.R. §§ 488.330(e), 498.3.

(Footnote continued.)

home health agencies, hospice programs, and a fund as described in sections 1814(g) and
1835(e) of the Act. Act § 1861(u) (42 U.S.C. § 1395x(u)); 42 C.F.R. § 498.2. The
distinction between providers and suppliers is important, as they are treated differently
under the Act for some purposes.
The Secretary has delegated authority to CMS to terminate provider agreements on the
grounds listed in 42 C.F.R. § 489.53. Grounds for termination include, inter alia: failure
to comply with the participation requirements established by the Act and regulations;
failure to comply with the terms of the provider agreement; and revocation of Medicare
enrollment. 42 C.F.R. § 489.53(a)(1), (3), and (15). A provider must be given advance
notice of termination of its provider agreement. 42 C.F.R. § 489.53(d). A provider may
obtain review by an ALJ, with an appeal to the Board, and judicial review. 42 C.F.R. §
489.53(e).

The Secretary has also delegated authority to CMS to revoke Medicare enrollment,
billing privileges, and any related provider agreement. 42 C.F.R. § 424.535(a).
Authorized grounds for revocation of billing privileges include a determination by CMS
after an on-site review that the provider or supplier is no longer operational to deliver
Medicare covered items or services or is not meeting participation requirements under the
Act and regulations. 42 C.F.R. § 424.535(a)(5).

Operational means the provider or supplier has a qualified
physical practice location, is open to the public for the
purpose of providing health care related services, is prepared
to submit valid Medicare claims, and is properly staffed,
equipped, and stocked (as applicable, based on the type of
facility or organization, provider or supplier specialty, or the
services or items being rendered), to furnish these items or
services.

42 C.F.R. § 424.502. Pursuant to 42 C.F.R. § 424.535(b), revocation of a provider’s
billing privileges terminates any provider agreement effective the date of revocation of
the billing privileges. A provider or supplier has a right to ALJ review of the CMS
revocation decision, with further review by the Board, and judicial review. 42 C.F.R. §
424.545(a). When both the revocation of billing privileges and the termination of the
provider agreement are at issue, the regulations provide that the procedures related to
revocation of billing privileges apply. 42 C.F.R. § 424.545(a)(1)(ii).

The procedures for ALJ and Board review are set forth in 42 C.F.R. Part 498. The
hearing before an ALJ is a de novo proceeding. The Residence at Salem Woods, DAB
No. 2052 (2006); Cal Turner Extended Care Pavilion, DAB No. 2030 (2006);
Beechwood Sanitarium, DAB No. 1906 (2004); Emerald Oaks, DAB No. 1800, at 11
(2001); Anesthesiologists Affiliated, DAB CR65 (1990), aff'd, 941 F.2d 678 (8th Cir.
1991). The standard of proof, or quantum of evidence required, is a preponderance of the
evidence. CMS has the burden of coming forward with evidence and making a prima
facie showing of a basis for imposition of an enforcement remedy. Petitioner bears the
burden of persuasion to show by a preponderance of the evidence that it was in
substantial compliance with participation requirements or any affirmative defense.
Batavia Nursing & Convalescent Inn, DAB No. 1911 (2004); Batavia Nursing &
Convalescent Ctr., DAB No. 1904 (2004), aff'd, Batavia Nursing & Convalescent Ctr. v.
Thompson, 129 F. App’x 181 (6th Cir. 2005); Emerald Oaks, DAB No. 1800; Cross
Creek Health Care Ctr., DAB No. 1665 (1998); Hillman Rehab. Ctr., DAB No. 1611
(1997), aff'd, Hillman Rehab. Ctr. y. United States, No. 98-3789 (GEB), 1999 WL
34813783 (D.N.J. May 13, 1999).

C. Findings of Fact, Conclusions of Law, and Analysis

My conclusions of law are set forth in bold text followed by my findings of fact and
analysis. I have carefully considered all the evidence and the arguments of both parties,
though not all may be specifically discussed in this decision. I discuss in this decision the
credible evidence given the greatest weight in my decision-making.* The fact that
evidence is not specifically discussed should not be considered sufficient to rebut the
presumption that I considered all the evidence and assigned such weight or probative
value to the credible evidence that I determined appropriate within my discretion as an
ALJ. There is no requirement for me to discuss the weight given every piece of evidence
considered in this case, nor would it be consistent with notions of judicial economy to do
so.

CMS notified Petitioner by letter dated February 23, 2010, of its decision to terminate
Petitioner’s participation in Medicare as a distinct part SNF. CMS cited the following
findings of fact as the bases for its determination:

¢ On November 16, 2009, no survey could be performed as there were no residents.
Information provided by Petitioner showed that during a 13 month period,
Petitioner had no residents 198 days and had residents 198 days;

¢ On October 14, 2009, a survey was conducted and four residents were present;

e Medicare Cost Report data for the facility’s fiscal year ended June 30, 2009,
showed only 456 patient/resident days of a total possible 5,110 patient/resident
days,° a utilization rate of 8.9%;

* “Credible evidence” is evidence that is worthy of belief. Black’s Law Dictionary 596
(18th ed. 2004). The “weight of evidence” is the persuasiveness of some evidence
compared to other evidence. /d., at 1625.

> The 5,110 possible patient/resident days was determined by multiplying the 14 beds in
the facility x 365 days. Tr. at 69-70.
e Petitioner’s documents showed that there was no Registered Nurse (RN) serving
as Director of Nursing (DON) for the facility who worked 35 hours per week;

e Petitioner’s policy provided that the RN/DON position would be staffed only as
needed;

e Petitioner’s work schedule for September 27 through October 24, 2009, showed
that there was no 24-hour RN coverage for 20 of 29 days;

e Petitioner’s infection control policies and procedures did not direct staff on the
proper cleaning and/or disinfecting procedures for resident multi-use items;

e Petitioner’s documents did not show that an Administrator was designated;

e Petitioner’s documents did not show that the DON, a physician, and three other
staff met quarterly to review quality issues; and

e Petitioner’s abuse policy and procedure did not include provisions related to the
protection of residents during investigation of alleged abuse and neglect.

CMS Ex. 2, at 1-2.
CMS also cited the following conclusions in its notice:

e Petitioner has had few residents over a year and has not been providing services to
the community on an ongoing basis;

e Petitioner has not been operating as a fully functioning business on a continuous
basis;

e Petitioner has not admitted residents for an extended period of time; and

e Petitioner cannot demonstrate that it fully meets the conditions for participation in
Medicare, with specific reference to staffing requirements.

CMS Ex. 2, at 2.
Based upon the findings and conclusions, CMS notified Petitioner that its participation in

Medicare was terminated effective March 31, 2010. Although not specifically stated in
the CMS notice, the initial determination to terminate Petitioner’s provider agreement as
10

a distinct part SNF also terminated Petitioner’s billing privileges and Petitioner’s
enrollment in Medicare as a distinct part SNF.°

CMS argues to me that termination of Petitioner’s provider agreement was appropriate on
only two grounds:

e Petitioner was not primarily engaged in providing certain nursing services (CMS
Br. at 1-12; Tr. at 56); and

e Petitioner did not have a designated full-time DON as required by 42 C.F.R. §
483.30(b)(2) (CMS Br. at 12-13).

1. The fact that Petitioner had no SNF residents for periods of time is
not alone a sufficient basis for termination of Petitioner’s provider
agreement, or revocation of Petitioner’s enrollment in Medicare and
billing privileges.

2. Petitioner was primarily engaged in providing skilled nursing
services or rehabilitation services and was a SNF within the meaning of
section 1819(a) of the Act.

3. Petitioner was operational within the meaning of 42 C.F.R. §
424.535(a)(5).

4. CMS has not made a prima facie showing of noncompliance with
requirements for participation under the Act or regulations.

5. There were no bases for termination of Petitioner’s provider
agreement or revocation of Petitioner’s enrollment and billing
privileges.

® Act § 1866(a)(1) (to be eligible to participate in Medicare and to be eligible to receive
payments from Medicare, a provider, including a SNF, must have a provider agreement);
42 C.F.R. §§ 424.505 (provider must be enrolled, have billing privileges; and be issued a
valid billing number); 424.535(b) (revocation of billing privileges terminates any related
provider agreement); 489.53(a)(15) (revocation of enrollment in accordance with 424.535
is grounds to terminate the provider agreement), 489.55 (payment is available for certain
providers up to 30 days after the effective date of termination but not for SNFs).
11

a. Facts
The material facts of this case are not disputed.

The parties stipulated that Petitioner is a licensed Iowa hospital that is enrolled in
Medicare as a critical access hospital.’ Petitioner is also enrolled in Medicare to operate
a 14-bed distinct part SNF that is located in the hospital. The parties stipulated that
Petitioner has authority under state and federal law to use its hospital beds for hospital
patients and as “swing-beds” for providing skilled nursing care. P. Ex. 25, at 1, 4 1-3.

The evidence shows that Petitioner applied for and was issued a Certificate of Need by
the Iowa Department of Health in February 2005. Petitioner was at that time licensed for
49 hospital beds using swing beds as necessary to provide skilled nursing care for
patients. Petitioner proposed to become a critical access hospital with 25 acute and/or
swing beds and 14 beds in a distinct part SNF. Petitioner’s stated goals were to increase
its financial viability by qualifying for the higher rate of reimbursement as a critical
access hospital while also continuing to provide skilled nursing services to the population
served. The application and the decision granting the Certificate of Need show that
Petitioner’s distinct part SNF was not intended for long-term delivery of skilled nursing
and rehabilitation services. Rather, the distinct part SNF was intended for short-term
rehabilitation stays. The application and decision show that Petitioner’s hospital at the
time had many days with an acute care census in the low to mid-twenties. The
application and decision show that the hospital’s skilled care patients had an average
length stay of just 14.8 days, and the patients typically: were recovering from hip or knee
replacement, hip fracture, or stroke; needed skilled care to regain activities of daily
living; or required the care of a registered nurse or therapist following an acute illness or
surgery. P. Exs. 1; 2; Tr. at 200.

The parties stipulated that: Petitioner’s SNF had its initial survey on May 9 through 11,
2005, with recertification surveys in July 2006, July 2007, October 2008, and October
2009; any deficiencies identified during those surveys were corrected; and Petitioner was
certified to be compliant with participation requirements as a SNF. P. Ex. 25, at 1-2, 9§
4-9. The evidence shows that Petitioner was never cited by the state agency for any
deficiency related to staffing.

7 Critical access hospitals are limited to a total of 25 beds including both critical care
beds and swing beds (those used for extended skilled care). Beds that are part of the
distinct part SNF are not counted against the total beds permitted. Act §§ 1820(f),
1861(mm); 42 C.F.R. §§ 485.620, 485.645; Tr. at 103.
12

The parties stipulated that, in September 2009, state surveyors attempted to conduct a
survey but could not, as there were no residents. On October 14, 2009, the state
surveyors returned, Petitioner’s SNF had four residents, and a survey was completed. P.
Ex. 25, at 2, §§ 10-11. The evidence shows that Surveyor Christine McCuen, RN, who
testified at hearing, participated in all the surveys of Petitioner’s distinct part SNF. P.
Exs. 3-15; CMS Ex. 1; CMS Ex. 2, at 23-24; Tr. at 37-38. Surveyor McCuen stated in
her declaration dated April 13, 2010, and she testified at hearing, that most surveys
required multiple attempts because no residents were present in Petitioner’s SNF. She
testified that she had no reason to think that the nursing facility was not open to the
public in September 2009. Surveyor McCuen testified that she did not view the rooms
during the unsuccessful attempt to survey Petitioner in September 2009. However, when
she viewed the SNF rooms during the October 2009 survey, she saw that the rooms were
equipped as SNF rooms would normally be equipped, and she had no question regarding
the serviceability of the equipment and furnishings she saw. Surveyor McCuen testified
that the only deficiency cited during the October 2009 survey related to failure to do
employee background checks prior to employment. CMS Ex. 2, at 23; Tr. at 39, 46, 49-
50. The Statement of Deficiencies for the survey that ended on October 14, 2009, cites
only a violation of 42 C.F.R. § 483.13(c) that allegedly posed a risk for more than
minimal harm, based on Petitioner’s failure to obtain a criminal and abuse background
check prior to hiring one employee. CMS Ex. 1, at 22-23.

On November 16, 2009, when two federal surveyors attempted to conduct a federal
monitoring survey, no residents were present in Petitioner’s SNF. P. Ex. 25, at 2, 4 12; P.
Ex. 26; Tr. at 27-28.

The parties stipulated that all the services provided to residents by Petitioner’s SNF were
skilled nursing and related care and services. P. Ex. 25, at 4,30. The parties stipulated
that a registered nurse was assigned to the SNF when residents were present but not on
lays when no residents were present. The parties also stipulated that the same registered
nurse served as the DON for the hospital and the SNF on a full-time basis. P. Ex. 25, at
4, 931-33.

The parties stipulated that, from 2005 to March 31, 2010, the SNF operated continuously,
in the same location, with the same configuration, with the same policies and practices,
with the same staffing assignments, and with similar occupancy. P. Ex. 25, at 4, 27.
The parties stipulated that, during Petitioner’s fiscal year from July 1, 2008 through June
30, 2009, the SNF had residents in beds only 456 out of 5,110 possible resident-days (14
beds multiplied by 365 days yields 5,110 possible resident-days). The parties also
stipulated that from October 2008 through October 2009, there were only 198 days when
the SNF had at least one resident, and 198 days when the SNF had no residents. P. Ex.
25, at 2-3, J§ 13-16. Uncontested data that Petitioner presented, as summarized in the
following table, shows that: from July 2008 through October 2009, there were only two
months when the SNF had no residents; on average, Petitioner had at least one resident in

13

the SNF 46.31% of the time; 671 resident-days were used of a total available resident-

days of 6,832, an average rate of use of 9.82%; and for 12 of 16 months use exceeded 5%

(2 months exceeded 20% use, 6 months exceeded 10% use).

Days With ‘Available

Days | At Least Resident Days

In One (14 Beds x No. | Resident

Month | Resident % Days in Month) | Days Used %

2008
July 31 0 | 0.00% 434 0 0.00%
August 31 15 | 48.39% 434 38 8.76%
September 30 30 | 100.00% 420 103 24.52%
October 31 15 | 48.39% 434 35 8.06%
November 30 6 | 20.00% 420 23 5.48%
December 31 9 | 29.03% 434 17 3.92%
2009
January 31 o| 0.00% 434 0 0.00%
February 28 21 |_75.00% 392 55 14.03%
March 31 7 | 22.58% 434 17 3.92%
April 30 15 | 50.00% 420 28 6.67%
May 31 19 | 61.29% 434 82 18.89%
June 30 41 | 36.67% 420 31 7.38%
July 31 22 | 70.97% 434 46 10.60%
August 31 9 | 29.03% 434 24 5.53%
September 30 20 | 66.67% 420 80 19.05%
October 31 27 |_ 87.10% 434 92 21.20%
Totals | __488 226 | 46.31% 6832 671 9.82%

P. Ex. 16; CMS Ex. 3, at 1-19. A data summary in P. Ex. 18 includes data that is
inconsistent in some respects with the data found in P. Ex. 16. I treat the data in P. Ex.

16 as more reliable than that in P. Ex. 18 based on the fact that the source

of the data in P.

Ex. 16 is Petitioner’s patient accounts department and Petitioner’s chief financial officer.

Petitioner prepared the data summary in P. Ex. 18 for submission to CMS

during the

survey process, the data reflected is more favorable for Petitioner than that at P. Ex. 16,

and the source of the data in P. Ex. 18 is not disclosed. Nurse Puntenney
data that appears in P. Ex. 18, and she agreed during her testimony that so:
was inconsistent. Tr. at 213-19, 223-24.

Paul Shumate, the CMS decision-maker, testified that the longest period tl
had no SNF residents was 76 days. Tr. at 72,77. According to CMS Ex.
76 days to which Mr. Shumate referred were after the October 2009 surve
31, 2009 through January 14, 2010. According to Petitioner’s data, other

prepared the
me of the data

at Petitioner

3, at 12-14, the

y, from October
periods of more

than 30 days between July 1, 2008 and October 31, 2009, during which Petitioner had
had no SNF residents were: 47 days from July 1, 2008 through August 16, 2009; 32 days
from October 16, 2008 through November 16, 2008; 53 days from December 17, 2008

14

through February 7, 2009; and 31 days from March 8, 2009 through April 7, 2009. CMS
Ex. 3; P. Ex. 16.

The evidence shows that the distinct part SNF is in an area of the hospital apart from the
critical access hospital. The distinct part is on the third floor of the hospital, a single hall
of 14 rooms with 14 beds and a nurse’s station. Directions to the distinct part SNF are
clearly marked, and signs and directions to the distinct part SNF are located by the
elevators and on the third floor. Tr. at 43-45, 186-87. Joseph Smith, Chief Executive
Officer for Boone County Hospital, testified: that nurses that staffed the SNF were the
hospital nurses; that the ratio of residents to registered nurses was at worst ten to one but
usually three or four to one; physical therapy, occupational therapy, and speech therapy
were all present on the same floor as the SNF; SNF residents had access to a common
activity and dining room; the hospital emergency room was several floors away with an
emergency physician on duty at all times; wound care nurses were available; pharmacy
services were in the hospital; infection control, quality control, safety, nursing education,
and the dietary department were all administered through the hospital. Tr. at 107-14. He
testified that there was always a registered nurse on duty when there was a resident in the
SNF. He testified that there was a DON for the SNF who was also the DON for the
hospital. Mr. Smith testified that hospital staff was designated to operate the SNF, and
DON Puntenney agreed with him that it only took 30 to 60 minutes to get the distinct part
SNF ready for occupancy when a patient was ready for transfer. Tr. at 114-15, 132, 185-
86. Mr. Smith’s testimony is credible and unrebutted.

DON Puntenney testified that she was the DON for both the hospital and the SNF. She
testified that she handled staffing and another nurse supervised nursing care. She
testified that there was always a registered nurse on duty in the SNF when there was a
resident present. She testified that staffing the SNF was not a problem as the hospital had
nurses who worked part-time and wanted the additional time, and contract nurses were
also used as needed. Tr. at 179-81, 204. DON Puntenney testified that the SNF was
cleaned and maintained even if no residents were present. Tr. at 186. She testified that
nurses and therapists maintained their skills and competency even when the SNF was
closed because they worked in the hospital. Tr. at 203-04. She testified that she did not
spend 35 hours per week doing SNF work, but she estimated that she split her time 60
percent to the hospital and 40 percent to the SNF when there were residents and 90 to 95
percent to the hospital and 5 to 10 percent to the SNF when there were no SNF residents.
Tr. at 206-07. DON Puntenney’s testimony is unrebutted and credible.

15

b. Analysis
To participate in Medicare a SNF must:

© Meet the statutory definition of a SNF in section 1819(a) of the Act and, in this
case, the regulatory definition of a distinct part SNF at 42 C.F.R. § 483.5(b)(1);

e Be enrolled in Medicare pursuant to 42 C.F.R. §§ 424.505, 424.510, 424.516;
e Be issued billing privileges pursuant to 42 C.F.R. § 424.505;

e Continuously be in substantial compliance with statutory and regulatory
participation requirements found in section 1819(b), (c), and (d) of the Act and 42
C.F.R. Part 483; and

e Enter and continuously substantially comply with the terms of a provider
agreement with the Secretary pursuant to 42 C.F.R. Part 489, subpart B.

Pursuant to a delegation of Secretarial authority, CMS is granted authority to terminate a
provider’s or supplier’s participation in Medicare pursuant to section 1866(b)(2) of the
Act, 42 C.F.R. § 488.456(b),42 C.F.R. § 489.53(a)-(c), and 42 C.F.R. § 424.535(b).
CMS argues in this case that Petitioner was no longer primarily engaged in providing
skilled nursing or rehabilitation services as required by section 1819(a)(1) of the Act and
that termination was appropriate on that basis. CMS Br. at 3-12. CMS concedes that the
termination of Petitioner’s provider agreement in this case was not pursuant to 42 C.F.R.
§ 424.535. CMS Br. at 14-15. CMS does not argue and the evidence does not show that
Petitioner’s provider agreement was terminated for: failure to comply with enrollment
requirements; not having or abusing billing privileges; not being in substantial
compliance with program participation requirements; or failure to have a provider
agreement.

CMS argues in its brief that Petitioner failed to meet staffing requirements of 42 C.F.R. §
483.30(b)(2), because Petitioner did not have a DON that worked 35 hours per week on
SNF business. CMS Br. at 12-13. However, I do not construe that argument to be that
Petitioner was terminated because it was not in substantial compliance with the program
participation requirement established by 42 C.F.R. § 483.30(b)(2). Petitioner was never

8 4.M. Home Health Servs., Inc., DAB No. 2354 (2010); United Med. Home Health
Care, Inc., DAB No. 2194 (2008); Arizona Surgical Hosp., LLC, DAB No. 1890 (2003).
16

cited by a survey for inadequate staffing in violation of 42 C.F.R. § 483.30(b)(2), and
there is no evidence that a surveyor ever concluded that a staffing violation posed a risk
for more than minimal harm to any resident. CMS points to no evidence that, if there
was a violation of 42 C.F.R. § 483.30(b)(2), the violation posed a risk for more than
minimal harm to any resident. Evidence that violation of a program participation
requirement posed a risk for more than minimal harm is necessary for CMS to make a
prima facie showing that Petitioner was not in substantial compliance, which is necessary
to trigger the CMS authority to impose enforcement remedies such as termination.”
Furthermore, Mr. Shumate, the CMS official who made the decision to terminate
Petitioner, explained in his testimony that he inferred based upon the periods when
Petitioner had no SNF residents that Petitioner did not have a full-time DON, and he
considered that as evidence that Petitioner was not primarily engaged in providing SNF
care and services. Mr. Shumate did not testify that Petitioner was terminated because it
was not in substantial compliance with 42 C.F.R. § 483.30(b)(2). Tr. at 70-74.

Mr. Shumate testified that his decision was not based upon consideration of the grounds
for termination authorized by 42 C.F.R. § 424.535. Tr. at 77-79. Therefore, the CMS
argument regarding whether Petitioner was operational within the meaning of 42 C.F.R. §
424.535(a)(5) (CMS Br. at 15-16) does not merit consideration, as that was admittedly
not the basis for the CMS action in this case and Petitioner was not notified of that basis
for revocation.

Mr. Shumate testified that Petitioner’s provider agreement was not terminated based on a
quality of care issue. He admitted that there was no dispute that Petitioner provided SNF
care and services when residents were in the unit. Tr. at 79-80. The fact that CMS
admits that the SNF had no uncorrected quality of care issues related to caring for
residents supports my conclusion that Petitioner was compliant with the participation
requirements of section 1819(b), (c), and (d) of the Act and 42 C.F.R. Part 483.

° “Substantial compliance means a level of compliance with the requirements of
participation such that any identified deficiencies pose no greater risk to resident health
or safety than the potential for causing minimal harm.” 42 C.F.R. § 488.301 (emphasis in
original). A deficiency is a violation of a participation requirement established by
sections 1819(b), (c), and (d) of the Act or the Secretary’s regulations at 42 C.F.R. Part
483, subpart B. Noncompliance refers to any deficiency that causes a facility not to be in
substantial compliance, i.e., a regulatory or statutory violation and a risk for more than
minimal harm. 42 C.F.R. § 488.301.
17

I conclude that the narrow issue before me is whether there is a basis for termination of
Petitioner’s provider agreement, with resulting termination of its participation in
Medicare and its authority to bill Medicare, because Petitioner was not primarily engaged
in providing skilled nursing, rehabilitation, and related services to covered individuals as
required for a provider to be a SNF under section 1819(a)(1) of the Act.'°

Section 1866(b)(2)(B) of the Act authorizes the Secretary to terminate a provider
agreement if it is determined that the provider does not “substantially” meet the
provisions of section 1861 of the Act. United Med. Home Care, Inc., DAB No. 2194, at
3. Section 1861(j) of the Act is the applicable provision in this case and provides that a
SNF is defined by section 1819(a) of the Act. Section 1819(a)(1) of the Act provides that
a SNF is an institution or a distinct part of an institution that is “primarily engaged” in
providing to residents skilled nursing care and related services or rehabilitation services,
but not primarily the care and treatment of mental diseases. The Secretary has delegated
authority to CMS to terminate a provider agreement on the grounds that the provider is
not complying with the applicable provisions of the Act and regulations or the terms of
the provider agreement. 42 C.F.R. §§ 489.53(a)(1), 424.535(a)(5).

The Act and regulations provide no definition or explanation of the phrase “primarily
engaged.”'! The Board has considered the phrase in three cases and did not provide a
definition but rather looked to the facts to decide in two cases that the ALJs properly
granted summary judgment against a hospital and a home health agency and in the third
to decide that the ALJ’s decision that the home health agency was not primarily engaged
was supported by substantial evidence. A.M. Home Health Servs., Inc., DAB No. 2354;
United Med. Home Health Care, Inc., DAB No. 2194; Arizona Surgical Hosp., LLC,
DAB No. 1890. In this case the issue of whether Petitioner was “primarily engaged” in
providing residents skilled nursing care and related services or rehabilitation services also
turns on the facts. CMS urges two facts as sufficient to support a conclusion that
Petitioner was not primarily engaged as a SNF: (1) the fact that there were multiple
periods when Petitioner’s SNF had no residents; and (2) the fact that Petitioner did not

'° CMS has never asserted that Petitioner did not have a transfer agreement in effect as
required by section 1819(a)(2) of the Act.

'' CMS argues that its interpretation should be given deference citing Auer v. Robbins,
519 U.S. 452, 462 (1997) and Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc.,
467 U.S. 837 (1984). CMS Br. at 5; CMS Reply at 2. CMS overlooks the fact that it is
no longer the final decision-maker on behalf of the Secretary when review of its initial
decision is requested. 42 C.F.R. §§ 498.74(b), 498.90(a), 498.103(b).
18

have a full-time RN as DON but shared nursing staff. Neither fact is disputed. Although
these undisputed facts could be viewed as sufficient to raise an inference that Petitioner
was not “primarily engaged,” consideration of all the facts leads to the conclusion that
Petitioner was primarily engaged as a SNF, despite periods without residents and the
sharing of registered nursing staff.

In the prior cases decided by the Board, the fact that the home health agency or hospital
was not providing services for a period was a significant fact supporting the
determination to terminate the provider agreement and participation in Medicare.
However, the prior Board decisions involve significantly longer periods of inactivity by
the provider than in the case before me. In A.M. Home Health Servs., Inc., the home
health agency had vacated its office location registered with CMS and it had not provided
services for at least ten months. In United Med. Home Health Care, Inc., the home health
care agency had not provided home health services for six months. In Arizona Surgical
Hospital, LLC, the state had barred the hospital from accepting inpatients for four months
and the hospital failed to show it was providing any services to inpatients during the
period. In the case of the SNF before me, the longest period without a resident identified
by CMS was 76 days from October 31, 2009 through January 14, 2010. The evidence
shows that the next longest period was 53 days from December 17, 2008 through
February 7, 2009. The only other periods in excess of 30 days were: 47 days from July
1, 2008 through August 16, 2009; 32 days from October 16, 2008 through November 16,
2008; and 31 days from March 8, 2009 through April 7, 2009. CMS Ex. 3; P. Ex. 16; Tr.
at 72,77. Mr. Shumate testified that there is no requirement that a SNF always have
residents and that there is no minimum rate of use under statute, regulation, or policy
specified for participation by a SNF."* Tr. at 81, 86-88. The Board has never suggested
that there is a minimum rate of use applicable to SNFs or that a SNF must always be

2 CMS has not persuasively explained away the possible inconsistency between its
position in this case and 42 C.F.R. § 424.540. The regulation states that CMS “may
deactivate a provider or supplier’s Medicare billing privileges” if “[t]he provider or
supplier does not submit any Medicare claims for 12 consecutive calendar months.” 42
C.F.R. § 424.540(a)(1). Deactivation is distinguishable from revocation of billing
privileges, and the regulation provides that deactivation has no effect on a provider
agreement or the conditions of participation. 42 C.F.R. § 424.540(c). Petitioner argues
that the regulation shows that a SNF may have no residents for periods of time and that
periods of inactivity of up to 12 months are not a sufficient basis to conclude that a SNF
is not primarily engaged in functioning as a SNF. P. Br. at 5. My decision does not turn
on this potential inconsistency and I need not resolve it. However, Petitioner’s argument

as some logical appeal, as it seems unlikely that a SNF would be providing care and
(Footnote continued next page.)

19

delivering care and services to at least one resident. In 4.M. Home Health Servs., Inc.,
the Board expressed concern that in the absence of a resident a survey could not be
performed. However, the evidence in this case, including the testimony of Surveyor
McCuen who participated in every survey of Petitioner from 2005 through 2009, clearly
shows that the brief periods Petitioner had no residents did not cause Petitioner not to
timely receive its annual surveys.

In the case of the SNF before me, it is not disputed that the staff that worked the SNF
were mostly the same staff that worked the hospital. The Boone County Hospital was not
subject to a bar on admitting patients like Arizona Surgical Hospital. Thus, the Boone
County Hospital and SNF staff continued to deliver care and services and were able to
maintain their competency to deliver skilled nursing and rehabilitation services despite
brief periods when there were no SNF residents. As Mr. Shumate admitted in his
testimony, there were no issues of quality of resident care that he considered when he
determined to terminate Petitioner. Tr. at 76, 79-80.

The fact that Petitioner did not have a full-time DON during periods when no residents
were present, and shared a DON with the hospital when residents were present, is not
determinative. Under the statute and the regulations, the issue is whether Petitioner was
substantially compliant. Act § 1866(b)(2)(A) (stating Secretary may terminate if
determines provider fails to comply substantially); 42 C.F.R. § 488.301 (noting
substantial compliance is compliance to the extent that no identified deficiency poses a
risk for more than minimal harm). CMS has pointed to no evidence of any risk for harm
to residents due to Petitioner’s staffing arrangement. The fact that no survey has ever
alleged a deficiency related to staff that posed any risk for harm is also consistent with
my conclusion that Petitioner’s staffing arrangement did not amount to failure to
substantially comply with program participation requirements or sufficient evidence to
support a conclusion that Petitioner was not primarily engaged in providing SNF
services.

The facts, when considered as a whole, show that Petitioner was engaged and primarily
engaged in providing its residents skilled nursing care and related services or
rehabilitation services within the meaning of section 1819(a)(1) of the Act. The brief
periods without SNF residents do not alone establish that Petitioner was not primarily
engaged as a SNF. Accordingly, I conclude that CMS had no basis to terminate

(Footnote continued.)

services for a Medicare eligible beneficiary and simply not bill Medicare for 12
consecutive months.
20

Petitioner’s participation in Medicare by termination of its distinct part provider
agreement or revocation of the related billing privileges.

III. Conclusion

For the foregoing reasons, I conclude that Petitioner’s participation in Medicare as a
distinct part SNF should not have been terminated.

/s/
Keith W. Sickendick
Administrative Law Judge