Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
Franklin Care Center, ) Date: November 20, 2007

)
Petitioner, )
)

-Vv.- ) Docket No. C-03-414

) Decision No. CR1694
Centers for Medicare & Medicaid )
Services. )
)

DECISION

For the reasons set forth below, I find that Franklin Care Center (Petitioner), was not in
substantial compliance with program participation requirements during the period from
January 20, 2003 through January 22, 2003, at a level which posed immediate jeopardy to
resident health and safety. I therefore affirm the imposition of a per day civil money
penalty of $3,100 for that period. I also find that Petition was not in substantial
compliance for the period from January 23, 2003, through February 24, 2003, and I affirm
the $100 per day civil money penalty for that period of time.

I. Background

Petitioner is a skilled nursing facility located in Franklin Park, New Jersey, and is
licensed to participate in the Medicare program. Its participation in that program is
governed by sections 1866 and 1819 of the Social Security Act and by implementing
regulations at 42 C.F.R. Parts 483 and 488.
2

A complaint survey conducted on January 28, 2003, by the New Jersey Department of
Health and Senior Services (NJDOHSS) found several deficience relating to the quality of
care provided to the residents at Franklin Care Center. By letter dated February 14, 2003,
CMS notified Petitioner of its determination, based upon the NJDOHSS survey, to

impose a CMP in the amount of $3,100 per day for the period January 20, 2003 to

January 22, 2003, and $100 per day from January 23, 2003 until February 24, 2003. The
total CMP imposed by CMS against Petitioner is $12,600.

The survey concluded that Franklin Care Center was out of compliance with the
following three Medicare participation requirements:

42 C.F.R. § 483.13(b) (Tag F223) (Abuse)
42 C.F.R. § 483.13(c) (Tag F226) (Staff Treatment of Residents)
42 C.F.R. § 483.13(h)(2) (Tag F324) (Quality of Care)

Noncompliance with 42 C.F.R. § 483.13(b) and 42 C.F.R. § 483.13(c) were determined to
be at the immediate jeopardy level “J,” while 42 C.F.R. § 483.25(h)(2) was determined to
be a level G deficiency.

Petitioner timely requested a hearing and the case was assigned to me for a hearing and a
decision. I convened an in-person hearing in Newark, New Jersey. Mr. Joseph Gorrell
appeared on behalf of Petitioner, and Mr. David Rawson appeared on behalf of CMS.
CMS filed 29 exhibits which it designated as CMS Ex. 1 - CMS Ex. 29. Petitioner filed
34 exhibits which it designated as P. Ex. | - P. Ex. 34. Neither party objected to the
opposing party’s exhibits. I receive the exhibits filed by both parties into evidence.

At hearing, CMS presented the testimony of Ann Yates, NJDOHSS Surveyor.

Petitioner presented the testimony of Kathryn Maguire, Director of Social Services.
Each party submitted post-hearing briefs.

If. Applicable Law

The Social Security Act (Act) sets forth requirements for skilled nursing facility
participation in the Medicare and Medicaid programs, and authorizes the Secretary of
Health and Human Services (Secretary) to promulgate regulations implementing the
statutory provisions. Act, sections 1819 and 1919. The Secretary’s regulations governing
skilled nursing facility participation in the Medicare program are found at 42 C.F.R. Part
483.
3

Facilities that participate in Medicare may be surveyed on behalf of CMS by state survey
agencies in order to determine whether the facilities are complying with federal
participation requirements. 42 C.F.R §§ 488.10- 488.28; 42 C.F.R. §§ 488.300 - 488.335.
Pursuant to 42 C.F.R. Part 488, CMS may impose either a per day CMP or a per instance
CMP against a long-term care facility when a state survey agency concludes that the
facility is not complying substantially with federal participation requirements. 42 C.F.R.
§§ 488.406, 488.408, and 488.430. The penalty may start accruing as early as the date
that the facility was first out of compliance until the date substantial compliance is
achieved or the provider agreement is terminated. 42 C.F.R. § 488.440.

The regulations specify that a per day CMP that is imposed against a facility will fall into
one of two broad ranges of penalties. 42 C.F.R. §§ 488.408, 488.438. The upper range of
CMPs, of from $3,050 per day to $10,000 per day, is reserved for deficiencies that
constitute immediate jeopardy to a facility's residents, and in some circumstances, for
repeated deficiencies. 42 C.F.R. §§ 488.438(a)(1), (d)(2). The lower range of CMPs, of
from $50 per day to $3,000 per day, is reserved for deficiencies that do not constitute
immediate jeopardy, but either cause actual harm to residents, or cause no actual harm,
but have the potential for causing more than minimal harm. 42 C.F.R. § 488.438
(a)()(ii).

The regulations define the term “substantial compliance” to mean:
[A] level of compliance with the requirements of participation
such that any identified deficiencies pose no greater risk to
resident health or safety than the potential for causing
minimal harm.

42 C.F.R § 488.301.

“Immediate jeopardy” is defined to mean:
a situation in which the provider’s noncompliance with one or
more requirements of participation has caused, or is likely to

cause, serious injury, harm, impairment, or death to a resident.

42 C.F.R § 488.301.
4

The Act and regulations make a hearing available before an Administrative Law Judge
(ALJ) to a long-term facility against whom CMS has determined to impose a CMP. But
the scope of such hearings is limited to whether an initial determination made by CMS is
correct. Act, section 1128A(c)(2); 42 C.F.R. §§ 488.408(g), 498.3(b)(12) and (13). The
hearing before an administrative law judge is a de novo proceeding. Anesthesiologists
Affiliated, et al, DAB CR65 (1990), aff'd 941 F2d. 678 (8" Cir. 1991).

In civil money penalty cases CMS’s determination as to the level of noncompliance of a
skilled nursing facility (SNF) must be upheld unless it is clearly erroneous. 42 C.F.R.

§ 498.60(c)(2). CMS bears the burden of coming forward with evidence sufficient to
establish a prima facie case that Petitioner was not in substantial compliance with the
participation requirements at issue. See Batavia Nursing and Convalescent Center, DAB
No. 1904 (2004). Once CMS has established a prima facie case, Petitioner has the
ultimate burden of persuasion: to prevail, Petitioner must prove by a preponderance of the
evidence that it was in substantial compliance with each participation requirement at
issue. See Hillman Rehabilitation Center, DAB No. 1611 (1997), aff'd., Hillman
Rehabilitation Center v. United States, Department of Health and Human Services,
Health Care Financing Administration, No. 98-3789 (GEB), slip op. at 25 (D.N.J. May
13, 1999).

III. Issues

A. Whether the facility was complying substantially with federal participation
requirements on the dates CMS determined to impose a CMP.

B. Whether CMS’s determination of immediate jeopardy was clearly erroneous.

C. Whether the amount of the penalty imposed by CMS is reasonable, if
noncompliance is established.

IV. Findings and Discussion
I make findings of fact and conclusions of law (Findings) to support my decision in this

case. I set forth each Finding below as a separate heading. I discuss each Finding in
detail.
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A, Petitioner failed to comply substantially with the requirements of 42 C.F.R.
§ 483.13(b) during a period from January 20 - January 22, 2003. (Tag F223).

A resident has the right to be free from verbal, sexual, physical, and mental abuse,
corporal punishment, and involuntary seclusion as provided by 42 C.F.R. § 483.13(b).

Based on record review, resident, and staff interviews, Ann Yates, a state surveyor
(Surveyor Yates) found that Petitioner failed to intervene and/or implement effective
interventions to protect one of its residents, Resident 1 (R1), from inappropriate sexual
contact (sexual abuse) by one of its certified nursing assistant’s (CNA’s). CMS Ex. 2, at
. Transcript, (Tr.) at 26.

CMS specifically alleges that Petitioner was out of compliance with Tag F233 because

R1 was sexually abused by CNA | and as the result of the abuse R1 suffered post-
traumatic stress disorder. During the 11 p.m. - 7 a.m. shift, on January 19-20, 2003, CNA
entered the room of R1 under the guise of changing R1's diaper. CNA | apparently
issed the resident on the cheek and fondled her genitalia. CMS Ex. 8. CNA | pretended
to wash the resident, but had no towel or water. CMS Ex. 2, at 1; Tr. at 30-31. CNA 1
entered the resident’s room a second time, some time later, and did the same thing. When
e entered the resident’s room a third time, R1 told him to get out and CNA | left. CMS
Ex. 9, at 1-2; Tr. at 30-32. R1 told two other CNA’s, Kanta Alhawite (CNA 2) (7 a.m. - 3
p.m. shift) and Phyllis Henry (CNA 3)(3 p.m. -11 p.m. shift), about what happened during
the night shift on January 19-20. Neither of the two CNAs reported what had occurred to
the administration. Tr. at 32-33. CNA 3 told R1 not to tell anyone about what had
occurred, and she would speak to CNA 1 herself. CMS Ex. 9, at 2. CNA 2 said she
forgot to report the incident because she was so busy.

CNA | returned for his scheduled shift from 11 p.m. -7 a.m. on January 21-22. CNA 1
was assigned to care for R1, but upon entering R1's room she refused care and told him to
get out of her room. R1 then reported the incident involving CNA | to a nurse (nurse 1)
on the 11 a.m. - 7 a.m. shift at approximately 2:30 a.m. on January 23, 2003. Nurse 1
then reported the incident to the 7 a.m. - 3 p.m. nurse (Nurse 2). The 7 a.m. - 3 p.m.
Nurse 2 then reported the abuse incident to the administration which immediately
initiated an investigation. CNA 1 was interviewed and terminated on January 23, 2003
and the non reporting CNAs were placed on leave until an investigation could be
completed. CNA 3 was subsequently terminated. CMS Exs. 22, 24, 25; Tr. at 36.
6

Petitioner does not dispute that the abuse occurred. Petitioner contends that it did all it
could do under the circumstances. Petitioner contends that the abuse occurred on the
11:00 p.m. to 7:00 a.m. shift on January 21-22, the event was reported and CNA | was
terminated the next day. It is clear from the record, Petitioner’s own investigation and
Petitioner’s termination of CNA 1, that the sexual abuse occurred. The argument, that
Petitioner terminated the offending CNA as soon as it learned of the abuse, while
indicative of when the immediate jeopardy was corrected, does not, however, rebut
CMS’s prima facie showing of abuse.

The thrust of Petitioner’s principle arguments rest on the premise that the surveyor and
CMS are confused as to the dates of the alleged abuse. Petitioner argues that the abuse
incident took place on the 11 p.m. -7 a.m. shift on January 21-22, 2003, and not as Ms.
Yates testified, on the 11 p.m. - 7 a.m. shift on January 19-20. Petitioner maintains that
the offending CNA was terminated the next day January 23, 2003, and did not return to
work at the facility after the abuse occurred. According to Petitioner, all three incidents
in which CNA | went into R1’s room occurred on the same shift. Petitioner maintains
that CNA 2, and CNA 3 reported that the incident occurred on January 21-22. Pet. Br. at
12. In addition, Petitioner argues that the memory of R1 is not reliable and, essentially,
that R1 should not be believed due to her emotional state, poor short term memory and
alleged disorientation as to time and date. Pet. Br. at 13.

I do not find the arguments advanced by Petitioner to be persuasive. I give little weight to
the reports of the two CNAs who failed to report the sexual abuse. Both of the non-
reporting CNAs would be highly motivated to limit the period of time they knew of an
incident of sexual abuse and did not report it. Only one of the non-reporting CNAs,
(CNA 3), was discharged after the incident. Petitioner did not call any other CNA, nurse,
or any other employee to testify as to when the abuse occurred. As to alleged
disorientation as to time and date, Petitioner cites no medical record which documents
that R1 was disorientation as to time and date.

Surveyor Yates testified that she interviewed R1 and indicated that R1 was able to recall
when the incident actually happened. Ms. Yates also testified that the medical record
showed R1 as not having focal deficits and documenting her as alert, oriented and able to
communicate her needs. CMS Br. at 14; Tr. at 28; CMS Ex. 2, at 1; CMS Ex. 9, at 4.
Ms. Yates also testified that she relied on statements made by Franklin’s staff as to when
the sexual abuse was reported to them and compared them to time cards and schedules to
determine when those employees involved in the matter worked. Tr. at 60, 83, 84.
Furthermore, Petitioner’s own report to the Ombudsman’s Office from Petitioner’s
7

Assistant Administrator documents the incident as taking place on January 20, 2003.
CMS Br. at 15; CMS Ex. 8. Surveyor Yates also indicates that the sequence of events she
described were prepared “according to” the Director of Nursing and the Assistant
Administrator. CMS Ex. 9, at 5; CMS Br. at 15.

Based on the evidence before me, I find the time line argued by CMS to be the most
persuasive and supported by the record in this case. In view of the foregoing, I find that
CMS has established a prima facie case that Petitioner failed to intervene and/or
implement effective interventions to protect one of its residents from inappropriate sexual
contact (sexual abuse) by one of its CNA’s. Petitioner has not overcome CMS’s prima
facie case by a preponderance of the evidence. Therefore I sustain CMS determination to
impose a CMP in the amount of $3,100 for three days — from January 20 through January
22, 2003.

B. Petitioner’s failure to comply substantially with the requirements of
42 C.F.R. § 483.13(b) continued at a Level “G” from January 23, 2003 -
February 24, 2003.

While CMS determined that the immediate jeopardy was corrected on January 23, 2003,
CMS also determined that the deficiency continued to be cited at a level G until February
24, 2003. The basis for the continuation of the deficiency was a therapist’s diagnosis of
R1 as suffering from post-traumatic stress disorder. Tr. at 38. Surveyor Yates also
testified that the deficiency ended on February 24, 2003, because it was at that time that a
revisit survey was conducted and Petitioner had conducted in-service training to address
the issue of sexual abuse. Tr. at 94.

State Surveyor Yates interviewed R1 and found that the psychotherapy progress notes for
January 24, 2003, indicated that the therapist diagnosed R1 with post-traumatic stress
disorder. R1 was reported to have felt guilty for reporting the incident which resulted in
adverse actions to the CNAs.
The state surveyor testified and noted in the statement of deficiencies that

+ Resident | was tearful and frightened.

+ Resident 1 required psychological intervention and psychoactive medication.

+ Resident 1 expressed feeling of guilt because she “got staff in trouble.”
8

+ When the surveyor interviewed Resident 1 on January 28, 2003, she continued
to be tearful and frightened.

Tr. at 34, 36-37; CMS Ex. 2, at 3; CMS Ex. 9, at 2.

At hearing, Petitioner presented one witness, Kathryn Maguire, Director of Social
Services. When asked on direct examination what she knew of R1, Ms. Maguire

indicated that R1 was quite sociable and would often come into her office to chat.
Ms. Maguire also indicated that when she interviewed R1 concerning the incident

there was some tearfulness as she related exactly what had occurred. But
there was — I did not get the sense of overall sadness, you know, complete
break down or sadness. There was this immediate cheerfulness as she

related the incident to me.

Tr. at 104-106.

Petitioner also argued in its post-hearing brief that

Resident | had a tearful disposition prior to the incident, and therefore, was
not necessarily suffering from post-traumatic stress disorder. Resident had
a history of bipolar disorder. Also, prior to the sexual assault incident,
Resident 1 was described as crying and feeling she was cheated and
abandoned by her family. Also prior to the sexual assault incident, Resident
was noted crying in her room several times. Thus, Resident 1 was upset
and subject to tears even before the sexual assault incident. Resident 1 was
diagnosed with adjustment disorder with anxious mood, which proves that
she was an anxious person even before the sexual abuse... Thus, the
severity of the level G deficiency is inappropriate because Resident | did
not suffer the extreme emotional trauma from the incident that CMS
alleges. In fact, after the sexual assault incident, Resident 1 never stopped
operating her rolling store.

Petitioner’s Post-hearing brief at 14-15; Tr. at 72.

Petitioner seems to imply that it was impossible to tell whether the resident was upset by
the sexual assault because she suffered from an “adjustment disorder” and always cried
about one thing or another. However, Petitioner failed to provide any expert testimony as
to R1’s mood, affect, or post-traumatic stress. Moreover, R1’s diagnosis is based on the
facility’s own consulting therapist. The diagnosing therapist was not called by Petitioner
to testify at hearing as to R1’s post-traumatic stress disorder. Thus, while Petitioner does
9

not dispute that the sexual abuse occurred, it uses selected parts of the medical record to
speculate that the victim was not affected by that sexual abuse. I do not find Petitioner’s
line of argument to be persuasive or credible.

Based upon my review of all of the evidence and testimony in this case, I find that CMS
has established, prima facie, that the deficiency continued at a level “G” for 33 days —
from January 23, 2003 until February 24, 2003. Petitioner has not overcome CMS’s
prima facie case by a preponderance of the evidence. Therefore, I sustain CMS
determination to impose a CMP in the amount of $100 for 33-days for a total amount of
$3,300.

C. CMS established that the facility failed to report all violations involving
mistreatment, neglect or abuse as required by 42 C.F.R. § 483.13(c)(Tag F226).

The facts underlying this deficiency, Tag F226, are identical to the facts underlying Tag F
223. The focus of the citation of Tag 226 is on the failure of four members of Franklin’s

staff to report an allegation of sexual abuse for three days after the incident occurred. Tr.
at 40.

Facility policy documented that employees who have knowledge of abuse will be
interviewed and a statement of each interview will be written and signed by the person

being interviewed. There were no written statements for CNA 2, CNA 3, or Nurse 1, who
all had knowledge of the abuse incident. The facility’s policy fails to indicate that the
allegations of abuse should be reported to the Administrator.

Section 483.13(c)(2) of 42 C.F.R. provides that all alleged violations of mistreatment,
neglect or abuse must be immediately reported to the facility administrator and to other
officials in accordance with State law, including the State survey and certification agency.
Based on record review and staff interviews, the surveyors found that the facility failed to
follow federal regulations and its own policy on reporting and investigating allegations of
inappropriate sexual contact between CNA | and R1.

Every facility is required to develop and implement policies and procedures that prohibit
mistreatment, neglect, and abuse of residents. The facts of this case establish that the
facility staff, CNA 2, CNA 3 and Nurse | were aware of particular events and allegations
of abuse, but failed to immediately report them or to take appropriate action as required
by the policies. Cedar View Good Samaritan, DAB CR997 (2003); see also Beverly
Health and Rehabilitation Center - Williamsburg, DAB No. 1748 (2000). The
preponderance of the evidence here demonstrates a failure by Petitioner’s staff to
appropriately and immediately report instances of abuse as required by federal regulations
and its own policy.
10

There is certainly no question that CNAs 2 and 3 and Nurse | had a duty to report CNA
1’s sexual abuse of Rl. Yet they failed to immediately report the incident. CMS alleged
that Petitioner’s employees failed to report an allegation of sexual abuse for three days
after the incident of sexual abuse occurred. Thus, CNA # | was able to return to work
and was assigned to provide care for R1, the resident he sexually abused. CMS argues
that this failure placed R1 and other residents at potential risk.

Petitioner’s only defense to this Tag is that CMS has placed the abuse on the wrong date.
As previously noted, I find that Petitioner’s argument as to when the sexual abuse
occurred not persuasive.

Based on record review and staff interviews, the surveyors found that the Petitioner failed
to follow the facility’s abuse policy and procedures related to immediately reporting such
incidents to the administrator. In so doing, Petitioner failed to provide protection for one
of its residents who was sexually abused. In view of the evidence and testimony at
earing, I find that CMS has established a prima facie case that the facility staff failed to
notify its administrator of the existence of an allegation of abuse regarding R1. Petitioner
as not overcome CMS’s prima facie case by a preponderance of the evidence.

D. Petitioner violated 42 C.F.R. § 483.25(h)(2) (Tag F324) and there is a basis
for imposing a CMP.

According to the statement of deficiencies the nursing staff failed to consistently
implement new interventions and effective measures for | of 2 sampled residents to
prevent falls and injury. As a result, Resident 5 sustained falls with injury on October 24,
2002, December 13, 2002, and December 23, 2002. Tr. at 42; CMS Ex. 2, at 6.

Resident 5 (R5) was admitted to the facility on February 19, 1999 with a diagnosis of
hypertension, angina, senile dementia and atherosclerosis. Her Minimum Data Set dated
December 1, 2002 documented long and short term memory impairment with moderately
impaired decision making skills. R5 required supervision with transfers, was independent
in bed mobility and had a history of falls within the last 31-190 days. Tr. at 44; CMS Ex.
2, at 6, CMS Ex. 10, at 1.

R5’s nursing care plan dated December 5, 2001, and updated through December 2002,
indicated that Resident 5 was at risk for falls due to an unsteady gait. CMS Ex. 2, at 6;
CMS Ex. 29, at 12. Interventions included using a wheelchair as a rolling walker,
checking for proper foot wear, the mandatory use of non-skid socks while in bed, as well
as the use of a wheelchair. R5 also required a bed alarm, and required a low bed and
crash mat. Tr. at 46; CMS Ex. 2, at 6; CMS Ex. 29, at 13-15.
11

A nurses note dated October 24, 2002 documented that R5 was found sitting on the
bathroom floor on her buttocks yelling “help me.” She sustained a deep laceration,
approximately 8 cm in length, to the left side of her head. She was transferred to the
emergency room for evaluation and returned to the facility the same day with eleven
sutures. Tr. at 47; CMS Ex. 10, at 1. There was no documentation in the nurses notes or
investigative report to indicate a bed alarm was in place or that the resident was wearing
non-skid socks at the time of the fall. Tr. at 48; CMS Ex. 29, at 8-10.

A nurses note dated December 13, 2002, documented that R5 was found on the floor with
a bed sheet wrapped around her leg. She was calling for help and she had a hematoma on
her head. Tr. at 49; CMS Ex. 29, at 19-21. The was no documentation in the nurses notes
of a fall investigation to indicate that the bed alarm was in place or that the crash mat was
in place at the time of the fall. Tr. at 49; CMS Ex. 29, at 19-21.

A investigation report dated December 23, 2002, documented that R5 was heard
screaming in her room. When a nurse arrived RS was found on the bathroom floor with
her right leg twisted — a fracture was suspected. The report documented that R5 was not
wearing the appropriate footwear. Tr. at 50; CMS Ex. 29, at 3. The report recommended
that the alarm should be turned on while the resident was in bed. Tr. at 50. There was no
documentation in the nurses notes that the bed alarm was in place or the resident was
wearing non-skid socks at the time of the fall. Tr. at 50; CMS Ex. 10, at 2; CMS Ex. 29,
at 3. R5 was sent to the emergency room for evaluation and admitted with a right hip
fracture. She was readmitted to the facility on December 30, 2002.

Petitioner admits that R5 needed assistance with ambulation, but suggest that there were
times when RS ignored requesting assistance. P. Brief at 21; Tr. at 76. Petitioner argues
that it did all it could to comply with CMS requirements. For example, following R5's
hospitalization, the facility’s IDT met and immediately revised safety precautions to
accommodate R5's change in condition; further assessments were performed by Physical
and Occupational Therapy; and a bed alarm and wheel chair alarm, along with a self-
releasing belt, were put into place and added to the care plan. In addition, R5 was
maintained in supervised areas while awake. P. Brief at 20; P. Ex. 32, 34.

CMS argues that Petitioner presented no testimony at hearing relative to the surveyor’s
findings that there was no documentation indicating that the bed alarm or crash mat was
in place or that the resident was wearing non-skid socks at the time of any of her falls.
CMS Brief at 19. Petitioner alleges that it had care planed for R5's falls and just because
the record does not indicate that the alarms or socks or crash pad were in place at the time
of the falls does not mean the assistive devices were not in place. Tr. at 78-79; P. Brief at
12

22. Petitioner also argues that it did not present witnesses on this at hearing because the
record is clear that the facility complied with the requirement. I do not find the record
that the facility complied with the regulatory requirements to be clear. Nor do I find
Petitioner’s arguments to be persuasive.

Under the statute and the “quality of care” regulation, a facility must ensure that “[e]ach
resident receives adequate supervision and assistance devices to prevent accidents.” 42
C.F.R. § 483.25(h)(2). An “accident” is “an unexpected, unintended event that can cause
a resident bodily injury,” excluding “adverse outcomes associated as a direct consequence
of treatment or care (e.g., drug side effects or reactions).” State Operations Manual
(SOM), App. P, page PP-105, Guidance to Surveyors for Long Term Care Facilities, Part
2, F324, Quality of Care (Rev. 274, June 1995), Woodstock Care Center, DAB No. 1726,
at 4 (2000). The Board has explained the requirements of 42 C.F.R. § 483.25(h)(2) in
numerous decisions. Golden Age Skilled Nursing & Rehabilitation Center, DAB No.
2026 (2006); Estes Nursing Facility Civic Center, DAB No. 2000 (2005); Northeastern
Ohio Alzheimer's Research Center, DAB No. 1935 (2004); Woodstock Care Center, DAB
No. 1726, at 28 (2000), aff'd, Woodstock Care Center v. Thompson, 363 F.3d 583 (6th
Cir. 2003). Section 483.25(h)(2) does not make a facility strictly liable for accidents that
occur, but it does require that a facility take all reasonable steps to ensure that a resident
receives supervision and assistance devices that meet his or her assessed needs and
mitigates foreseeable risks of harm from accidents. Woodstock Care Center v. Thompson,
363 F.3d at 590 (a SNF must take “all reasonable precautions against residents’
accidents”). A facility is permitted the flexibility to choose the methods of supervision it
uses to prevent accidents, but the chosen methods must be adequate under the
circumstances. Id.

Whether supervision is “adequate” depends in part upon the resident’s ability to protect
himself or herself from harm. Jd. RS fell three times and required help ambulating. An
investigation of each fall indicated that her care plan was not followed as to the devices
required to prevent accidents. The evidence in this case demonstrates that the facility
failed to provide adequate supervision and assistance devices to prevent accidents, given
what was reasonably foreseeable. Therefore, I find that CMS has established a prima
facie case that Petitioner was not in substantial compliance with federal requirements for
skilled nursing facilities participating in Medicare/Medicaid. Petitioner has not overcome
CMS’s showing by a preponderance of the evidence.
13

E. CMS’s finding of immediate jeopardy was not clearly erroneous.

The regulations define immediate jeopardy as a situation in which a provider’s non-
compliance with one or more requirements of participation has caused, or is likely to
cause, serious injury, harm, impairment, or death to a resident. 42 C.F.R. § 488.301.
A finding of immediate jeopardy does not require “a finding of present harm, but also
encompasses a situation that is [likely to cause] harm.” Britthaven, DAB No. CR1259
(quoting Hermina Traeye Memorial Nursing Home, DAB No. 1810 (2002)).

CMS’s determination of immediate jeopardy must be upheld unless it is clearly
erroneous. 42 C.F.R. § 498.60(c)(2). The burden rests on the provider to prove that
CMS’s determination of immediate jeopardy is clearly erroneous. Based on the evidence
and arguments before me, I find that Petitioner has not met that burden here.

F. A per-day CMP of $3,100 for the three days of immediate jeopardy and a per-
day CMP of $100 for a period of January 23 - February 24 is reasonable.

In determining whether the amount of the CMP is reasonable, the following factors
specified at 42 C.F.R. § 488.438 (f) must be considered: (1) the facility’s history of non-
compliance, including repeated deficiencies; (2) the facility’s financial condition; (3) the
seriousness of the deficiencies as set forth at 42 C.F.R.§ 404; and (4) the facility’s degree
of culpability. Both the CMP amounts for the immediate jeopardy citation as well as the
non-immediate jeopardy citation in this case are at the low-end of the applicable range.
CMS has offered no evidence of past noncompliance for me to consider. Petitioner has
not argued or submitted any evidence that it is unable to pay the CMP.

I have concluded that Petitioner has not met its burden of showing that CMS’s
determinations of immediate jeopardy were “clearly erroneous” for the period January 20
2003 through January 22, 2003. The imposition of a CMP of $3,100 per day for this
period, imposed for noncompliance at the immediate jeopardy level is therefore supported
by the evidence in this case.

CMS imposed a per day civil money penalty in the amount of $3,100 for three days to
remedy the immediate jeopardy. Regulations provide that CMS may impose either a per-
diem or per-instance civil money penalties to remedy a nursing facility’s deficiencies.

42 C.F.R. § 488.438(a)(1), (2). Penalties in the range of $3,050 to $10,000 per day are
imposed for deficiencies constituting immediate jeopardy. 42 C.F.R. § 488.438. The per-
day CMP of $3,100 is at the lower end of the applicable range. Based on the evidence
before me, | find that the per-day CMP of $3,100 for 3 days is supported by the evidence
in this case and is reasonable.
14

CMS also imposed a $100 per day civil money penalty for the non-immediate jeopardy
deficiency for the period from January 23, 2003 to February 24, 2003. The regulations at
42 C.F.R. § 488.438(a)(1)(ii) provide that the range for non-immediate jeopardy
deficiencies is between $50.00 and $3,000 per day. I have found that CMS has
established a prima facie case of noncompliance relative to the non-immediate jeopardy
citation. Petitioner has not rebutted CMS’s case by a preponderance of the evidence. The
$100 per day CMP is also at the low end of the applicable range and I find that the
amount is fully supported by the evidence in this case. Therefore, I find that the $100 per
day imposed by CMS in this case is reasonable.

V. Conclusion

Based on the testimony offered at the hearing, the documentary evidence, the arguments
of the parties, and the applicable law and regulations, I find that Petitioner was not in
substantial compliance with medicare requirements at the immediate jeopardy level for
the period of January 20, 2003 through January 22, 2003. I further find that the $3,100
per day CMP for the period of the immediate jeopardy is reasonable. | also find that
Petitioner’s non-compliance continued from January 23, 2003 through February 24, 2003
at a non-immediate jeopardy level. Therefore, I also sustain the CMP of $100 per day for
the period of January 23, 2003 through February 24, 2003.

/s/
Alfonso J. Montano
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Decision No. CR1692
Centers for Medicare & Medicaid
Services.

In the Case of: )
)

Niklo Products, Inc., ) Date: November 20, 2007
)
Petitioner, )
)

-V.- ) Docket No. C-06-50

)
)
)
)

DECISION DISMISSING HEARING REQUEST

I dismiss the hearing request of Petitioner, Niklo Products, Inc. I do so because Petitioner
does not have a right to a hearing before me. Even if Petitioner did have a right to a
hearing, the hearing request is untimely and Petitioner has failed to establish good cause
for its untimely request.

I. Background

By letter dated December 30, 2003, the Centers for Medicare & Medicaid Services
(CMS), acting through the National Supplier Clearinghouse (NSC),' notified Niklo
Products, Inc. (Petitioner) that its Medicare supplier number for Durable Medical
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) issued by NSC would be
revoked. In the December 30, 2003 letter, NSC stated that the reason for the revocation

' NSC is the entity authorized by CMS to issue, revoke, and reinstate DMEPOS
supplier numbers. If NSC revokes an entity’s supplier number, NSC notifies the entity
that revocation is effective 15 days after NSC mails notice of its determination. Payment
is not allowed for items furnished by the supplier beginning with the effective date of
revocation. 42 C.F.R. § 405.874(a) and (b).
2

of the supplier number was Petitioner’s noncompliance with Supplier Standard numbers
two (Petitioner was providing oxygen, diabetic supplies and diabetic footwear without
notifying NSC) and ten (Petitioner had failed to provide information on a required
insurance policy).

By letter dated January 15, 2004, Petitioner requested that its supplier number be
reinstated. By letter dated April 28, 2004, NSC notified Petitioner that its supplier
number was reinstated, effective April 28, 2004. By letter dated September 3, 2004,
Petitioner requested that the reinstatement of its supplier number be made retroactive.

Petitioner sent a letter to NSC, dated October 24, 2005, with a courtesy copy to the
Departmental Appeals Board (DAB), stating that its Medicare supplier number should
never have been revoked and requesting that it be allowed to “retroactively charge to
Medicare all billing statements that resulted between the dates of January 2004 thru April
2004.” P. Ex. 3. The October 24, 2005 letter was received by the DAB, construed as a
earing request, and docketed as C-06-50. Thereafter, the case was assigned to me for
earing and decision.

On April 5, 2006, NSC submitted a letter accompanied by four exhibits, NSC Exhibits
(NSC Exs.) 1-4. On April 7, 2006, I convened a prehearing conference. During the
prehearing conference, I informed the parties that I was construing NSC’s April 5, 2006
etter as a motion to dismiss. I informed Petitioner that it would have an opportunity to
respond to the motion to dismiss. On April 24, 2006, Petitioner submitted its Response
brief accompanied by five exhibits, Petitioner Exhibits (P. Exs.) 1-5. On May 19, 2006,
NSC submitted a letter in reply accompanied by three additional exhibits which I have
remarked as NSC Exs. 5-7. By letter dated June 5, 2006, Petitioner waived its right to file
a sur-reply. I admit into evidence P. Exs. 1-5 and NSC Exs. 1-7. My decision is based on
the parties’ submissions, including exhibits and the applicable law.

If. Applicable Law

Section 1861 of the Social Security Act (Act) defines medical and other health services
that are eligible for Medicare reimbursement by DMEPOS suppliers. Under section
1834(j)(1)(A) of the Act, “no payment may be made under this part . . . for items
furnished by a supplier of medical equipment and supplies unless such supplier obtains
(and renews at such intervals as the Secretary may require) a supplier number.” Act,
section 1834(j)(1)(A). Pursuant to section 1834(j)(1)(B) of the Act, “a supplier may not
obtain a supplier number unless . . . the supplier meets revised standards prescribed by the
Secretary ... that shall include requirements that the supplier... meet such other
requirements as the Secretary may specify.” Act, § 1834()(1)(B)(i)(IV).
3

CMS regulations set forth the conditions that a DMEPOS supplier must meet in order to
receive payment for a Medicare-covered item. See 42 C.F.R. § 424.57(b) and (c). CMS
will revoke a supplier’s billing privileges if it does not meet the standards in 42 C.F.R.

§ 424.57(b) and (c). 42 C.F.R. § 424.57(d). Additionally, a supplier cannot be paid for
an item furnished during the period in which its billing privileges were revoked. 42
C.F.R. § 424.57(b)(3).

Section 1866(j) of the Act, as amended by section 936(b)(3) of the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, authorized the
Secretary of Health and Human Services (Secretary) to establish a process for the
enrollment in the Medicare program of providers of services and suppliers. Specifically,
section 1866(j)(2) of the Act grants “[a] provider of services or supplier whose
application to enroll (or, if applicable, to renew enrollment) under this title is denied” a
“hearing and judicial review of such denial under the procedures that apply under
subsection (h)(1)(A).”” Those procedures are set out at 42 C.F.R. Part 498, et seq. and
provide for hearings by administrative law judges (ALJs) and review by the DAB.

The DAB has held that section 1866(j)(2) of the Act gives appeal rights to suppliers.
“Section 1866(j)(2) of the Social Security Act (the Act) gives suppliers appeal rights, for
certain determinations involving enrollment, using the procedures that apply under
section 1866(h)(1)(A) of the Act. Those procedures are at 42 C.F.R. Part 498 and provide
for ALJ [administrative law judge] hearings and Board review.”* MediSource
Corporation, DAB No. 2011, at 2 (2006). Further, the Board has recognized the
procedures and the burden of persuasion established by the Secretary in the Program
Integrity Manual (PIM, Pub. 100-08) at Chapter 10, § 19. “The Medicare Provider
Integrity Manual provides: ‘The burden of persuasion is on the .. . supplier. . . to show
that its enrollment application was incorrectly disallowed or that the revocation of its
billing number was incorrect.’ [Citing PIM, Ch. 10, § 19.B.] This provision is consistent
with the Board’s conclusion in provider appeals under 42 C.F.R. Part 498 that a provider
must prove substantial compliance by the preponderance of the evidence, once CMS has
established a prima facie case that the provider was not in substantial compliance with
relevant statutory or regulatory provisions.” Jd. at 2-3.

> Previously, supplier appeals were governed by 42 C.F.R. § 405.874, which
provided for review by a fair hearing officer and then a CMS official, designated by the
Administrator of CMS.

> A proposed rule, not yet effective, would extend to suppliers the due process
procedures of 42 C.F.R. Part 498, including the right to a hearing by an ALJ. See 72 Fed.
Reg. 9479 (March 2, 2007).
III. Issues

The issues in this case are whether Petitioner has a right to a hearing and, if so, whether
the hearing request should be dismissed as untimely.

IV. Discussion

I make findings of fact and conclusions of law (Findings) to support my decision in this
case. I set forth each Finding below as a separate heading. I discuss each Finding in
detail.

A, Petitioner has no right to a hearing before me.

By letter dated December 30, 2003, CMS, acting through NSC, notified Petitioner that its
DMEPOS Medicare supplier number issued by NSC would be revoked. In the December
30, 2003 letter, NSC stated that the reason for the revocation of the supplier number was
Petitioner’s noncompliance with Supplier Standard numbers two (Petitioner was
providing oxygen, diabetic supplies and diabetic footwear without notifying NSC) and ten
(Petitioner had failed to provide information on a required insurance policy).

The December 30, 2003 letter informed Petitioner of its right to contest the revocation:

You have the right to contest this decision. You have two
options. If you think that NSC has made a factual error or
you have corrected the problem, you may submit a request for
reconsideration. If you decide to do so, you have 60 days
from the postmark of this notice to file such a written request.
You may complete a corrective action plan and provide
sufficient evidence that you are in compliance with the
Medicare requirements. Upon satisfactory completion of a
corrective plan to which CMS has agreed, the NSC may
reinstate your supplier number.
5

The second option is the right to contest this decision by
requesting a hearing. If you request a hearing, an independent
fair hearing officer will conduct this hearing. A request for
hearing must be made within 60 days from the postmark of
this notice. The hearing officer’s decision may be appealed to
CMS for final administrative review within 60 days after the
receipt of the decision.’

Your request for a reconsideration or a hearing must be made
in writing and sent to the following address:

National Supplier Clearinghouse
Attn: Hearings and Appeals
P.O. Box 100142

Columbia, S. C. 29202-3142

P. Ex. 4.

On January 15, 2004, Petitioner wrote a letter to NSC at the address referenced above.
Petitioner’s January 15, 2004 letter states that on October 24, 2003 it sent to NSC
information about comprehensive liability insurance and also states that NSC claims
“that we sell something that we have never done even though We [sic] are authorized to
sell oxygen if we wanted to do so, but we are not interested and never have been.” P. Ex.
5. Petitioner requested that its supplier number be reinstated in its January 15, 2004
letter. Petitioner’s January 15, 2004 letter was a request for reconsideration to NSC anda
corrective action plan providing evidence of compliance with Medicare’s insurance
requirement. Petitioner chose to take the first option when it was notified of the
revocation of its supplier number in NSC’s December 30, 2003 letter. Nothing in the
December 30, 2003 letter stated that the two options were mutually exclusive. Petitioner,
after prompt results from filing its corrective action plan did not materialize and having
been specifically informed that there was a time limit to requesting a hearing by a fair
hearing officer, could have also requested such a hearing. It did not do so.

By letter dated April 28, 2004, NSC reinstated Petitioner’s supplier number, effective
April 28, 2004. The April 28, 2004 letter notified Petitioner that its reinstated supplier
number would not be retroactive to the original revocation date. This letter informed
Petitioner that “[t]he reinstatement is effective immediately and will not be retroactive to

4 The December 30, 2003 letter contained information about the reconsideration
and appeal rights available to a supplier at that time. On December 30, 2003, suppliers
did not have a right to a hearing before an ALJ at the DAB.
6

the original revocation date. Since you failed to notify the NSC of products or services
you were billing to Medicare, your supplier number is effective the date the information
on your application was verified, 4/28/04.” P. Ex. 1. This letter did not inform Petitioner
of any appeal rights. On April 28, 2004, suppliers did not have a right to a hearing before
an ALJ at the DAB.

Petitioner claims that, upon receipt of the April 28, 2004 letter, it contacted NSC by
telephone and spoke to a NSC representative. Petitioner claims that the NSC
representative informed Petitioner that it would be receiving payment only for those
services that were not in violation of DMEPOS supplier standards between January and
April 2004, the time period from the date of revocation to the date of reinstatement.

P. Brief (Br.) at 2. When Petitioner did not receive any payment, Petitioner claims that it
contacted NSC again by telephone. Petitioner claims that a different NSC representative
informed Petitioner that it would not be receiving payment for any services provided
tween January and April 2004. Petitioner further claims that it was not informed of any
appeals rights during either of these telephone conversations. P. Br. at 3.

n addition, Petitioner claims that immediately after the second telephone conversation it
sent a letter dated September 3, 2004 to NSC requesting payment for services between
January and April 2004. P. Ex. 2. In its September 3, 2004 letter, Petitioner states that its
supplier number was revoked because it was “handling orthotics and diabetic shoes and
ad not specifies [sic] it in our enrollment form.” /d. Evidently, there was other
communications or letters between the parties concerning orthotics and diabetic shoes
that were not provided as exhibits to me. The September 3, 2004 letter does not refer to
either of the telephone calls that Petitioner now claims it made to NSC or to receiving
conflicting information about payment from NSC representatives. Petitioner claims that
it never received a reply to its September 3, 2004 letter from NSC. P. Br. at 3.

After a period of almost 14 months, Petitioner sent a certified letter dated October 24,
2005 (P. Ex. 3) to NSC requesting payment for services rendered from January until April
2004. A courtesy copy of this letter was sent to the DAB. This letter was received by the
Civil Remedies Division of the DAB, construed as a request for hearing, docketed, and
assigned to me for hearing and decision.

Providers and suppliers were afforded hearing rights before ALJs at the DAB by section
1866(j)(2) of the Act. Section 1866(j)(2) of the Act was enacted by section 936(b)(3) of
the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public
Law 108-173, which provides that “Section 1866(j)(2) of the Social Security Act... shall
apply to denials occurring on or after such date (not later than 1 year after the date of the
enactment of this Act as the Secretary specifies.” (emphasis added). The one year period
after the enactment of the Medicare Prescription Drug, Improvement, and Modernization
Act ended on December 8, 2004.
7

CMS argues in its May 19, 2006 submission that NSC did not inform Petitioner of any
appeal rights because Petitioner did not have any appeal rights. CMS indicates that
Petitioner was reinstated under a corrective action plan. A supplier number may be
reinstated after revocation when an entity completes a corrective action plan, to which
CMS (through NSC) has agreed and provides sufficient assurance of its intent to comply
fully with supplier standards. 42 C.F.R. § 405.874(f). NSC decides what day Petitioner
is in compliance, and there is no appeal from that decision provided under 42 C.F.R.

§ 405.874.

I agree with the arguments advanced by CMS. First, on the dates that Petitioner’s
supplier number was revoked (December 30, 2003) and then reinstated (April 28, 2004),
Petitioner did not have the right to appeal either the revocation or the reinstatement to any
ALJ at the DAB. Act, section 1866(j)(2).

Second, the right to request a hearing is triggered by notice of one of the initial
determinations enumerated at 42 C.F.R. § 498.3(b). Petitioner argues that it is entitled to
appeal the reinstatement date citing 42 C.F.R. § 498.5(e) which provides that, “[a]ny
supplier dissatisfied with any initial determination that the services subject to the
determination no longer meet the conditions of coverage, is entitled to a hearing before an
ALJ.” However, administrative actions that do not amount to initial determinations,
examples of which are cited at 42 C.F.R. § 498.3(d), do not trigger appeal rights.
Petitioner’s reliance on section 498.5(e) is misplaced. Section 498.5(e) applies to a denial
or a revocation of a supplier number, not a reinstatement of a supplier number after a
corrective action plan. In this case, reinstatement that occurs subsequent to the supplier’s
submission of a corrective action plan is an administrative action which does not trigger
appeal rights. 42 C.F.R. §§ 405.874, 498.3(b), 498.5(e).

Section 1866(j)(2) of the Act does not give suppliers hearing rights before an ALJ in the
case of a reinstatement that results after a supplier submits a corrective action plan.
However, section 1866(j)(2) does give suppliers hearing rights before an ALJ following a
hearing officer’s decision. I agree with CMS’s persuasive argument that under the
regulations there is no appeal from the date NSC decides to reinstate a supplier number
when it does so after a supplier submits a corrective action plan. 42 C.F.R. § 405.874(f).
Therefore, Petitioner was not apprised of any hearing rights in the reinstatement letter of
April 28, 2004 because it was not entitled to a hearing before an ALJ and the time had run
for it to request a hearing before a fair hearing officer. As previously noted, Petitioner
was specifically informed of its right to a hearing before a fair hearing officer and was
specifically informed of the time limits in which to request a fair hearing. However,
Petitioner did not request a fair hearing. I also note that Petitioner did not seek
permission to rebut CMS’s argument on these critical points.
8

Third, this case involves a reinstatement of a supplier number and not a denial. Section
1866(j)(2) of the Act specifically indicates that it applies to “denials.” Section 1866(j)(2)
does not apply to reinstatements of supplier numbers. After receipt of the notice letter
informing Petitioner of its reinstatement, Petitioner allegedly contacted NSC twice by
telephone, and then sent a letter requesting reconsideration of payments for services on
September 3, 2004. P. Ex. 2. Petitioner did not receive a response to its request for
reconsideration and more than a year later sent another request to NSC with a courtesy
copy to the DAB on October 24, 2005. Petitioner never requested a hearing before an
ALJ in any of its requests for reconsideration. The only time Petitioner dealt with the
ALJ hearing process was when the parties addressed CMS’s motion to dismiss.

B. Assuming arguendo that Petitioner does have a right to a hearing,
Petitioner’s hearing request was not timely filed.

The regulations are clear regarding the requirements for timely filing a request for
hearing. The regulation at 42 C.F.R. § 498.40(2) provides:

The affected party or its legal representative or other
authorized official must file the request in writing within 60
days from receipt of the notice of initial, reconsidered, or
revised determination unless that period is extended ....

The 60 days run from the date of receipt by the affected party, which is presumed to be
five days after the date of the notice unless it is shown that the notice was received earlier
or later. 42 C.F.R. §§ 498.40(a)(2) and 498.22(b)(3). I have discretion to extend the
period for filing a request for hearing if the petitioner files a “written request for
extension of time stating the reasons why the request was not filed timely,” and I find that
good cause for the late filing is stated. 42 C.F.R. § 498.40(c). The requirement for timely
filing a written request for hearing is commonly viewed as the means by which
administrative finality can be achieved, i.e., if there is no deadline for filing and an
affected party may file at anytime, the record on an action may never be closed.

Petitioner did not file a hearing request within 60 days. The initial notice letter to
Petitioner was dated December 30, 2003. The date of the letter reinstating Petitioner’s
supplier number was April 28, 2004. However, the letter sent to the DAB was dated
October 24, 2005. This letter, as mentioned earlier in this decision, did not specifically
request a hearing but merely requested payment for services from January to April 2004.
For purposes of this section of my decision I will assume that the October 24, 2005 letter
amounted to a hearing request and that Petitioner was entitled to a hearing before me.
9

Iam authorized to dismiss a request for hearing if it was not timely filed and I have not
granted an extension of the period to file. 42 C.F.R. § 498.70(c). There is no dispute that
Petitioner’s hearing request was dated eighteen months after the letter reinstating its
supplier number and was clearly untimely.

C. Petitioner has not shown “good cause” to extend the time for filing a hearing
request.

The regulations governing the timing of hearing requests in cases involving CMS state
explicitly that a request must be filed within 60 days of the date a party receives CMS’s
notice. 42 C.F.R. § 498.40(a)(2). A request is presumed to have been received five days
after the date of its mailing. /d.; 42 C.F.R. § 498.22(b)(3). Ifa request is untimely filed
an ALJ must dismiss it unless a facility establishes good cause for its failure to file the
request timely. 42 C.F.R. §§ 498.40(c)(2); 498.70(c).

The regulations do not define the term “good cause.” It is settled, however, that good
cause for not filing a hearing request timely consists only of an event or events that are
beyond a party’s ability to control, but for which, that party would have been able to file
its request timely. Hospicio San Martin, DAB No. 1554 (1996).

Petitioner has not established good cause here because it has not proven that it failed to
file its request only as a consequence of an event or events that were beyond its ability to
control. Petitioner offers three grounds as good cause for its untimely hearing request in
its response to CMS’s motion to dismiss: the language barrier that exists between those
in Puerto Rico interacting with agencies of the Unites States; the alleged incorrect
information that was provided to Petitioner by an NSC representative based on a
telephone call made shortly after receiving the April 28, 2004 letter where Petitioner was
incorrectly informed that it would be receiving payment only for those services that were
not in violation of DMEPOS supplier standards between January and April 2004; and,
that Petitioner was not notified of its appeal rights and of the time limits for filing a
hearing request in the April 28, 2004 reinstatement letter or any time afterward.

Petitioner’s first ground for good cause, the language barrier, does not amount to good
cause. It is completely within Petitioner’s control to acquire assistance in understanding
NSC’s communications to it. The Commonwealth of Puerto Rico is an unincorporated
territory of the United States, and as such, entities in Puerto Rico have frequent contact
and communication in English with agencies in the United States. Petitioner cannot rely
on this ground as good cause for late filing.
10

Petitioner’s second ground for good cause is the alleged incorrect information it received.
A NSC representative, allegedly in a telephone call made shortly after receiving the April
28, 2004 letter, incorrectly informed Petitioner that it would be receiving payment only
for those services that were not in violation of DMEPOS supplier standards between
January and April 2004. Petitioner provides no evidence of this telephone call. When
Petitioner did not receive any payment, Petitioner claims that it contacted NSC again by
telephone. Petitioner claims that a different NSC representative informed Petitioner that
it would not be receiving payment for any services provided between January and April
2004. Petitioner provides no evidence of this second telephone call. Petitioner further
claims that it was not informed of any appeals rights during either of these telephone
conversations. P. Br. at 3. Immediately after the second telephone conversation,
Petitioner sent a letter dated September 3, 2004 to NSC requesting payment for services
between January and April 2004. P. Ex. 2. The September 3, 2004 letter does not refer to
either of the telephone calls that Petitioner now claims it made to NSC, nor does it claim
that Petitioner received conflicting information on payment from NSC representatives.
Petitioner has presented no evidence that these telephones calls were ever made. Even
the September 3, 2004 letter which was written immediately after the alleged second
telephone call does not refer to either telephone call. Petitioner cannot claim reliance on
incorrect information given to it verbally from some unknown NSC representative for
which there is no evidence. | find Petitioner’s second ground does not amount to good
cause for filing late.

I have previously addressed CMS’s alleged failure to notify Petitioner of its appeals rights
in this decision. I stated previously in this decision that Petitioner cannot rely on this
alleged failure as good cause because it was not entitled to an appeal at that time.
However, since I am assuming arguendo that Petitioner did have appeal rights, it was
completely in Petitioner’s control to vigorously pursue payment for the time period
between January and April 2004. Instead, the only evidence that I have before me is that
Petitioner sent one letter on September 3, 2004 (five months after the April 28, 2004
reinstatement letter) and then nothing else until October 25, 2005 (18 months after the
reinstatement letter). Petitioner had the NSC address. Petitioner was aware of at least the
second option of requesting a hearing before an independent fair hearing officer
mentioned in the original December 30, 2003 notice letter of revocation. Petitioner did
not attempt to request such a hearing and did nothing for almost 14 months between its
September 3, 2004 letter and its October 25, 2005 letter. I find that it was completely
within Petitioner’s sole control to vigorously pursue payment and it did not do so.
11

V. Conclusion

For the foregoing reasons, Petitioner’s request for hearing is dismissed.

/s/
Alfonso J. Montano
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)

Social Security Administration, ) Date: November 14, 2007
Office of the Inspector General, )
)

-V.- ) Docket No. C-07-410
) Decision No. CR1690

Rebecca Harn Walther, )
)
Respondent. )
)

DECISION

In applying for benefits under the Social Security program, Respondent Rebecca Harn
Walther claimed that disabilities prevented her from employment. After the Social
Security Administration (SSA) determined that she was eligible for benefits, Respondent
continued to sign SSA forms declaring that she was unemployed and unable to work. An
investigation revealed, however, that Respondent was the owner and operator of her own
business. The Inspector General (IG) for SSA now charges that Respondent
misrepresented her employment status on two SSA forms in violation of section 1129 of
the Social Security Act (Act). SSA proposes imposing against Respondent a $10,000
civil money penalty (CMP) and an assessment of $52,393, representing the amount of
benefits Respondent allegedly improperly received.

For the reasons set forth below, I agree that Respondent knowingly misrepresented
material facts to SSA for its use in determining her eligibility for benefits, and,
accordingly I sustain against Respondent the CMP of $10,000 and assessment of $52,393.

I. Background

I hear and decide this case pursuant to section 1129 of the Social Security Act (Act).
Section 1129(a)(1) of the Act authorizes the I.G. to impose civil money penalties and an
assessment against any person who:
2

(A) makes, or causes to be made, a statement or representation of a material
fact, for use in determining any initial or continuing right to or the amount
of monthly insurance benefits under [Social Security] or benefits under
[other programs including Medicare], that the person knows or should know
is false or misleading,

(B) makes such a statement or representation for such use with knowing
disregard for the truth, or

(C) omits from a statement or representation for such use, or otherwise
withholds disclosure of, a fact which the person knows or should know is
material to the determination of any initial or continuing right to or the
amount of... benefits or payments under title... XVI, if the person
knows, or should know, that the statement or representation with such
omission is false or misleading or that the withholding of such disclosure is
misleading ....

See also 20 C.F.R. § 498.102(a) (authorizing the IG to impose a penalty against any
person who has made a statement or representation of a material fact for use in
determining any initial or continuing right to or amount of Title II or Title XVI benefits,
and who knew, or should have known, that the statement or representation was false or
misleading, or who omitted a material fact, or who made such a statement with “knowing
disregard for the truth.”)

The Act defines a “material fact” to be a fact that the Commissioner of Social Security
may consider in evaluating whether a person is eligible for Social Security or other
benefits. Act, section 1129(a)(2).

The Commissioner of Social Security has delegated to the IG the authority to impose civil
money penalties of not more than $5,000 for each statement or representation that
contravenes section 1129(a)(1) and, in addition, an assessment in lieu of money damages
of not more than twice the amount of benefits paid as a consequence of such statement or
statements. Act, section 1129(a)(1).

On March 5, 2007, the IG notified Respondent of his intent to impose a CMP of $10,000
and an assessment of $52,393 against her based on false statements made by Respondent
relating to her work activity while receiving Social Security disability benefits.
Respondent requested a hearing and the case was assigned to me for a hearing and a
3

decision. On May 30, 2007, I held a pre-hearing conference at which I set a briefing
schedule for the parties. The IG subsequently submitted a brief with 15 exhibits which
are identified as SSA Ex. 1 - SSA Ex. 15. Respondent, acting pro se,' responded with a
submission primarily centering on her inability to repay any funds to SSA”?

In her hearing request Respondent suggested that, because of her health, she would prefer
not to leave her house to attend an in-person hearing. At the pre-hearing conference, I
advised the parties that I would review their submissions to determine whether an in-
person hearing was necessary. May 31, 2007 Order. After reviewing the parties’
submissions, I determine that an in-person hearing is not necessary to decide this case.

II. Issues

The issues in this case are:
1. Did Respondent deliberately make false or misleading statements, as are
described at section 1129(a)(1) of the Act, concerning her eligibility for

Social Security disability benefits, and

2. If she made such statements, are the proposed penalty and assessment
reasonable?

Ill. Discussion

A, Respondent deliberately made false or misleading statements concerning
her eligibility for disability benefits.’

At issue in this case are two statements made by Respondent to SSA concerning her work
activity. I find that these statements are deliberately false and misleading as to material
facts. In making these statements Respondent concealed from SSA work or work-related

'T advised Respondent that she had a right to counsel to represent her in this matter
and afforded her ample time to engage an attorney. Respondent asked that this office
provide her an attorney free of charge, but I have no authority to do so.

> Respondent made her submission by electronic mail on October 17, 2007. In that
submission Respondent stated that she would be sending additional material by mail. As
of the date of this decision, however, I have received nothing further from Respondent.

>] make findings of fact and conclusions of law (findings) to support my decision
in this case. I set forth each finding, in italics, as a separate heading.
4

activity that she performed during the period when she received Social Security disability
benefits thereby depriving SSA of information that it needed in order to evaluate whether
she was eligible to receive such benefits.

On February 24, 1999, Respondent applied for Social Security disability benefits,
completing the SSA form, Application for Disability Insurance Benefits. SSA Ex. 2.
SSA, using this form, approved Respondent for benefits beginning June 1999. Also on
February 24, 1999, Respondent competed the SSA form, Disability Report - Adult, in
which she listed her work activity as an advertising agent and stated that she had stopped
working on August 15, 1997, due to the advancement of her liver disease. SSA Ex. 3, at
2. On April 18, 2001, Respondent executed another SSA form, Report of Continuing
Disability Interview, in which she stated that she was unable to return to work. SSA Ex.
5. On April 12, 2002, Respondent executed another SSA form, Reconsideration Report
for Disability Cessation, in which Respondent repeated that she was unable to return to
work. SSA Ex. 6.

Yet at the time Respondent was executing the above SSA forms certifying that she was
not working and was unable to work, she was the owner and operator of Rebecca
Advertising & Public Relations in Savannah, Georgia. SSA Ex. 8, at2. Respondent
acknowledged that she profited at least $2,100 a month from January 1999 to May 2002
from her company. SSA Ex. 1. As stated above, Respondent began receiving benefits in
June 1999.

The two false statements for which SSA is imposing the $10,000 CMP are the statements
Respondent made on SSA forms in April 2001 and April 2002. The proposed assessment
of $52,393 represents the amount of the overpayments of benefits that Respondent owes
SSA.

In her October 17, 2007 submission by electronic mail, Respondent has equivocated as to
her liability for the funds sought by SSA, stating —

My memory and recollection of events relating to my company’s business
that took place shortly before and for several years after my liver transplant
in April 1999 are very poor, making it impossible for me to admit liability
or the truth of the contents in [SSA’s March 5, 2007 notice letter],
particularly the allegation that I engaged in substantial gainful activity
within the meaning of the law after April 1999.

Yet some fours years earlier in June 2003, when the events in questions were relatively

recent and her memory of the events was presumably better, Respondent acknowledged
liability in that she admitted to SSA investigators that she had received income from her
company during the period she was certifying to SSA that she was unable to work:
5

I, Rebecca Harn, profited at least $2,100 per month from 1/99 to 5/02 from
my company. I knew I was supposed to tell SSA about this work activity,
but I did not. I made false statements to SSA from 2/99 to 5/03 so that SSA
would not find out about my work activity.

SSA Ex. 1.

Thus, in ail the statements Respondent made to SSA since her application for benefits in
February 1999, not just the two cited by SSA as the basis for the CMP, Respondent was
untruthful. Accordingly, I have no difficulty in finding that Respondent made false or
misleading statements concerning her eligibility for SSA benefits. Additionally, I find
that the misrepresentations were of a material fact within the meaning of section
1129(a)(1) of the Act, in that Respondent’s income, if accurately reported by Respondent,
would certainly have affected her eligibility to receive or continue to receive the benefits
she claimed from SSA.

B. The IG proposes a reasonable penalty against Respondent.

The statute authorizes imposition of a CMP of “not more than $5,000 for each such
statement or representation,” and an “assessment, in lieu of damages . . . of not more than
twice the amount of benefits or payments paid as a result of such a statement or
representation.” Act, section 1129(a)(1); 20 C.F.R. §§ 498.103(a), 498.104.

I now apply the regulatory criteria to assess the appropriateness of the penalty. Iam
specifically authorized to affirm, deny, increase, or reduce the penalties proposed by the
IG. 20 C.F.R. § 498.220. In determining the appropriateness of the penalty, I must take
into account: 1) the nature of the statements and representations and the circumstances
under which they occurred; 2) the degree of culpability of the person committing the
offense; 3) the history of prior offenses of the person committing the offense; 4) the
financial condition of the person committing the offense; and 5) such other matters as
justice may require. 20 C.F.R. § 498.106.

Under the first three criteria, Respondent deliberately made false statements to obtain
Social Security benefits and continued to make false statements over a period of years in
order to keep receiving these benefits. The penalties SSA proposes are unquestionably
appropriate under these circumstances.

In imposing a $10,000 CMP, I am, however, troubled by Respondent’s financial
condition. In her hearing request, Respondent claimed that her monthly expenses
exceeded her monthly income by $537. She claims that she currently has no funds with
which to pay the CMP. But Respondent has the burden of proving by a preponderance of
the evidence that her financial condition prevents her from being able to the pay the
6

penalties she is facing here. Clara Stone, DAB CR1081, at 28 (2003). Respondent has
offered mere assertions about her financial condition, listing her monthly expenses. Her
statements allude to some assets (dividends from stocks, monthly payment to 401K
account, a house, cars), but, aside from claiming these assets are insufficient and subject
to liens by other entities, Respondent does not describe them with any specificity.
Respondent’s hearing request, first attachment. She did not provide any financial records,
such as bills or tax returns, to support her claims of financial hardship. Mere assertions,
without complete information concerning Respondent’s total resources, are insufficient to
provide me a basis for finding that Respondent is unable to pay the penalties SSA is
proposing. See Anthony Koutsogiannis, DAB CR1569, at 12 (2007).

Even accepting Respondent’s unsupported claims as to her financial condition, I would
have to justify the penalty. Over a period of years, Respondent deliberately deceived
SSA. Such repeated conduct merits a significant penalty. Moreover, SSA questioned
Respondent’s veracity about her financial condition, arguing that Respondent deliberately
overstated the cost of her prescription drugs on a financial disclosure form completed
shortly before SSA proposed the penalty at issue here. SSA Ex. 12, at 5 - 7.

In addition, SSA acknowledges that Respondent is a likely candidate to receive Social
Security benefits in the future. SSA Brief at 15. Presumably any benefits that
Respondent is entitled to receive could be offset by the CMP and the assessment.

Finally, inasmuch as SSA is seeking an assessment of only an amount equal to the
amount of the benefits Respondent improperly received, I find no basis for lowering the
amount of either the CMP or the assessment.

IV. Conclusion

Respondent violated section 1129 of the Act when she knowingly misrepresented
material facts to SSA for its use in determining her eligibility for Title XVI benefits. I
consider reasonable the imposition of a $10,000 CMP and an assessment of $52,393.

/s/
Carolyn Cozad Hughes
Administrative Law Judge