Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
In the Case of:
Guaynabo Hospice Care, Inc., DATE: May 8, 1995
Petitioner,

Docket No. C-94-362
Decision No. CR374

-v.-

Health Care Financing
Administration.

DECISION

This action was brought by the Guaynabo Hospice Care, Inc.
(Petitioner), to challenge the actions of the Health Care
Financing Administration (HCFA) to terminate Petitioner's
participation in the Medicare program, effective June 9,
1994. I have reviewed the arguments of the parties as well
as the evidence I received into the record during an in-
person hearing in Puerto Rico.

ISSUE

The issue in this case is whether HCFA was authorized to
terminate Petitioner's participation in the Medicare program
after having conducted a survey on March 11, 1994 anda
resurvey on June 6, 1994.
2

FINDINGS

Based on the record as a whole,' I find as follows on the
issues of law and fact presented by the parties:?

1.

HCFA has placed only one condition of

participation ("physician services") in issue. (My
reasons are set forth at p. 10.)

2.

In this administrative hearing, the correct

evidentiary standard is proof by the preponderance
of the evidence, and HCFA has the burden of
establishing the correctness of its findings and
conclusions. (My reasons are set forth at 11 -
14.)

3. Based on only the March 1994 survey results,
HCFA's determination of Petitioner's noncompliance
with the physician services condition is

sustainable.

A. The manner in which HCFA conducted the
initial survey of March 1994 is valid, as
are HCFA's reasons for conducting that
survey.

B. HCFA reached valid factual findings
and legal conclusions as a result of the
March 1994 survey.

Cc. Petitioner's defenses are not
sufficient to rebut the validity of
HCFA's conclusions based on the March
1994 survey.

(My reasons are set forth at pp. 14 - 24.)

I refer to the parties’ exhibits, their briefs, and

the transcript of the hearing as follows:

Petitioner's exhibit P. Ex. (number) at (page)

HCFA's exhibits HCFA Ex. (number) at (page)

Petitioner's posthearing P. Br. at (page)
brief

HCFA's posthearing HCFA Memo at (page)
memorandum

Petitioner's additional P. Supp. Br. at (page)
brief

HCFA's supplemental brief HCFA Supp. Br. at (page)

2

I will be discussing in a separate section below my

denial of HCFA's motion to correct the transcript of hearing.
3

4. Based on the results of the June 6, 1994
revisit survey, I set aside HCFA's determination
that Petitioner was out of compliance with the
requirements of the Medicare program, and I find no
basis for terminating Petitioner's provider
agreement.

A. After issuing the termination notice
dated April 7, 1994, HCFA acted within
its discretion to solicit and approve a
plan of correction from Petitioner and to
conduct a revisit survey to ascertain
Petitioner's success in implementing its
plan of correction.

B. After approving the revised plan of
correction from Petitioner on May 20,
1994, HCFA was obligated to conduct its
revisit survey and make determinations in
a manner consistent with the terms of the
approved plan and in accordance with its
usual practices.

Cc. HCFA's findings from the June 1994
revisit survey concerning the plans of
care for patients do not justify
terminating Petitioner's provider
agreement.

D. HCFA's findings from the June 1994
revisit survey concerning the failure of
Petitioner's doctors to meet the general
medical needs of patients do not justify
terminating Petitioner's provider
agreement.

E. HCFA selected inappropriate records
for review during the revisit survey and
reached conclusions concerning patient
discharges, certifications, and
recertifications that do not justify
terminating Petitioner's provider
agreement.

(My reasons are set forth at pp. 24 - 37.)

DISCUSSION
I. OVERVIEW OF RELEVANT LAWS AND REGULATIONS

Title XVIII of the Social Security Act (Act) established a
national health insurance program which is now commonly known
as Medicare. The Secretary of Health and Human Services
(Secretary) is responsible for administering the Medicare
program, and she is authorized to prescribe such regulations
4

as may be necessary to implement the requirements of the law.
Section 1871(a)(1) of the Act. By regulation, the Secretary
has delegated certain enforcement responsibilities under the
program to HCFA. 49 Fed. Reg. 35,247 - 49 (1984).

Title A of the Medicare program entitles its beneficiaries to
have payments made on their behalf to cover certain types of
health care costs incurred when, for example, they are
hospitalized, receive home health services, or receive
hospice care.? See generally sections 1811 and 1812 of the
Act. Section 1861 of the Act specifies those services that
are "covered," for which payments may be made by the Medicare
program. See 42 C.F.R. §§ 418.1, 418.301.

Those entities qualified to provide the covered health care
services may participate in the Medicare program and become
eligible to receive payments thereunder by filing an
agreement with the Secretary to abide by certain terms
specified by the Act. Section 1866(a)(1) of the Act.‘
However, the Secretary may refuse to enter into, refuse to
renew, or terminate an agreement with a provider upon
reasonable notice to the provider after the Secretary has
determined that the provider ". . . fails to comply
substantially . . . with the provisions of this title [i.e.,
Title XVIII] and regulations thereunder ... [or]...
fails substantially to meet the applicable provisions of
section 1861... ." Section 1866(b) (2) of the Act; 42
C.F.R. §§ 488.28, 489.53.

As applicable to providers of hospice services, the
Secretary's implementing regulations explain that, in order
to be approved for participation in the Medicare program, a
provider seeking participation (i.e., a prospective provider)
must meet the applicable statutory definition contained in
section 1861 of the Act and be in compliance with the
applicable conditions prescribed in part 418 of the

3 The beneficiary must elect to receive hospice care in
lieu of other types of services. The election requirements
are contained in section 1812(d)(1) of the Act.

‘ For example, the provider must agree to refrain from
charging a Medicare beneficiary for an item or service
payable by and under the program, and the provider must agree
to make provisions for the return of any moneys incorrectly
collected from Medicare beneficiaries or other persons.
Section 1866(a)(1)(A), (C). See also, 42 C.F.R. § 489.20.

There is no allegation in this case that Petitioner had
violated any of the terms or provisions specified in section
1866(a)(1) of the Act.
5

Secretary's regulations. 42 C.F.R. § 488.3(a).° After the
provider has entered into a participation agreement under
Medicare, HCFA has the authority to terminate the agreement
for any one of the reasons enumerated by regulation,
including where the provider is not complying with the
provisions of Title XVIII and the applicable regulations of
42 C.F.R. Chapter IV, or when the provider no longer meets
the appropriate conditions of participation. 42 C.F.R. §
489.53(a) (1), (3).

To provide "hospice care" under Medicare, a provider must

satisfy the definition of a "hospice program." Section
1861(dd)(1) of the Act. The Act defines a "hospice program"
in terms of "hospice care" and "terminally ill." "Hospice

care" denotes only the eight statutorily enumerated types of
services provided to a "terminally ill" Medicare beneficiary.
Section 1861(dd)(1)(A) - (H) of the Act; 42 C.F.R. § 418.202.
A Medicare beneficiary is considered "terminally ill" for
purposes of receiving hospice care if he or she has a medical
prognosis that his or her life expectancy is six months or
less. Sections 1861(dd)(1) and (3) (A) of the Act. Thus, a
“hospice program" is a public agency or private organization
(or a subdivision thereof), which is primarily engaged in
providing those hospice care and services covered by the
program. Section 1861(dd)(2) of the Act.

The Secretary's regulations which implement the hospice care
provisions of the Act's section 1861 are codified at Part 418
of 42 C.F.R. 42 C.F.R. § 418.1. According to the
Secretary's interpretations, section 1861 of the Act
specifies the services covered as hospice care and the
conditions that a hospice program must meet in order to
participate in the Medicare program. Iq. Part 418

5 This regulation and others cited in this decision
refer to both prospective providers and suppliers. However,
a hospice is defined as “a provider of services or provider"
and not a supplier. 42 C.F.R. § 488.1.

In addition, several of the regulations cited in this
decision refer also to "conditions of coverage" (or whether a
supplier is covered under Medicare) and "requirements." I
note here for the sake of clarity that suppliers are
entities, such as chiropractors and independent laboratories,
that must meet "conditions for coverage," and suppliers that
meet the conditions of coverage are then eligible to be
“covered under the Medicare program." 42 C.F.R. §§ 488.1,
488.10(a) (2), 488.12(a)(1). Providers or prospective
providers such as hospices or hospitals must meet "conditions
of coverage," and the providers that meet such conditions are
eligible to “participate in the Medicare program." Id.
Skilled nursing facilities (SNFs) and nursing facilities
(NFs) are a type of provider or prospective providers that
must meet "requirements" in order to “participate in the
Medicare program." Id.
6

underscores also the requirement that a hospice under the
Medicare program must be primarily engaged in providing care
to terminally ill individuals. 42 C.F.R. § 418.3.

Even though a hospice may arrange for another entity to
deliver certain covered services, it retains its
participatory status under Medicare only if it". .
routinely provide[s] directly substantially all of each of
the services described in subparagraphs (A), (C), (F), and
(H)" of section 1861(dd)(1) -- i.e., nursing services,
medical social services, physician services, and counseling
services. Section 1861(dd) (2) (A) (ii) (I) of the Act. The
Secretary refers to these four types of services as "core
services" in her regulations, and, pursuant to her authority
to administer the Medicare program, she has interpreted the
manner in which these core services must be provided and
designated them as "conditions of participation" for
hospices. 42 C.F.R. § 418, subpart F; section 1866(b)(2) of
the Act.

The Act expressly prohibits Medicare payments for any hospice
item or service that is not reasonable and necessary for the
palliation or management of a terminal illness. Section
1862(a)(1)(C) of the Act. To receive payment for reasonable
and necessary services to a terminally ill Medicare
beneficiary, a hospice provider also must submit the
necessary documentation concerning the certification of
terminal illness, the creation of a written plan of care and
the periodic review of such a plan, and the delivery of care
pursuant to the plan of care. Section 1814(a)(7) of the Act;
42 C.F.R. §§ 418.200 - 418.311. The Secretary's regulation
summarizes these requirements thusly:

(1) the service must be reasonable and necessary
for the palliation or management of the terminal
illness as well as related conditions;

(2) before the service is provided, the individual
must elect hospice care in accordance with 42
C.F.R. § 418.24 and a plan of care must be
established as set forth in 42 C.F.R. § 418.58;

(3) the service must be consistent with the plan of
care; and

(4) a certification that the individual is
terminally ill must be completed as set forth in 42
C.F.R. § 418.22.

42 C.F.R. § 418.200.

II. RELEVANT PROCEDURAL HISTORY

In the foregoing statutory and regulatory context, HCFA
accepted Petitioner's application to participate in the
7

Medicare program as a provider of hospice services, effective
March 13, 1992. P. Ex. 1. Also, HCFA notified Petitioner
that its facility would be surveyed on a regular basis by
HCFA's agent, the Puerto Rico Department of Health,* to
determine the status of Petitioner's compliance with Medicare
requirements. P. Ex. 1. With respect to any deficiencies
that may be found pursuant to the surveys, HCFA informed
Petitioner that:

(a)jny deficiencies cited at the time of the

+ . . (survey) visits, that have not been completely
corrected, are expected to be corrected as stated in
your plan of correction.

P. Ex. 1.

On March 10 and 11, 1994, HCFA surveyed Petitioner's
compliance under the program. HCFA Ex. 15; HCFA Ex. 54 at 12
- 13. The HCFA surveyors reported their findings and
conclusions in a "Statement of Deficiencies" (SOD), which was
sent to Petitioner on or about April 7, 1994. HCFA Ex. 15.

By letter dated April 7, 1994, HCFA notified Petitioner that
it was found to be out of compliance with these four
conditions of participation:

42 C.F.R. § 418.50 -- general provisions;

42 C.F.R. § 418.62 -- informed consent;
42 C.F.R. § 418.80 -- core services;
42 C.F.R. § 418.86 -- physician services.

HCFA Ex. 15. HCFA informed Petitioner that HCFA was also
terminating Petitioner's Medicare contract effective June 9,
1994 because Petitioner was out of compliance with the above-
cited four conditions of participation. Jd. However, HCFA
gave Petitioner an opportunity to continue participating in
the program by providing HCFA with an acceptable plan of
correction. Id.

Petitioner sent a plan of correction to HCFA on April 18,
1994. HCFA Ex. 16. HCFA did not find Petitioner's initial
plan fully acceptable and explained its reasons to Petitioner
by letter dated April 26, 1994. HCFA Ex. 17.

$§ By law, HCFA is authorized to enter into agreements
with State or local surveying agencies to determine whether
providers or prospective providers meet the Medicare
conditions of participation. 42 C.F.R. § 488.10 = .12.
8

On May 11, 1994, Petitioner submitted a revised plan of
correction. HCFA Ex. 18.’ On May 20, 1994, HCFA informed
Petitioner by telephone that its plan of correction had been
approved. HCFA Ex. 19.

On May 25, 1994, Petitioner submitted a request for hearing
to challenge HCFA's determination that Petitioner had been
out of compliance with four conditions of participation.
Hearing Request. Petitioner contended, inter alia, that
there was no evidence in HCFA's findings that Petitioner had
failed to comply with 42 C.F.R. § 418.86 (physician
services). Hearing Request.

On June 6, 1994, HCFA conducted a resurvey visit. HCFA Ex.
20. The purpose of the revisit survey was, according to
HCFA, "to evaluate the facility's success in implementing its
plan of correction." HCFA Ex. 21.

On June 7, 1994, HCFA notified Petitioner of the outcome of
the June 6th resurvey. HCFA Ex. 21. HCFA determined that
Petitioner's provider contract must be terminated effective
June 9, 1994 because Petitioner had remained out of
compliance with the following conditions of participation:

42 C.F.R. § 418.50 -- general provisions;
42 C.F.R. § 418.80 -- core services;
42 C.F.R. § 418.86 -- physician services.

HCFA Ex. 21.

III. RULING ON HCFA'S MOTION TO CORRECT TRANSCRIPT

Before discussing the merits of the case, I will first rule
on HCFA's motion to correct the transcript.®

I rejected the first set of proposed changes contained in a
14-page handwritten document from HCFA, and I directed HCFA
to refrain from unnecessarily increasing proceedings by
submitting changes that were immaterial or not attributable
to transcription errors. Order dated October 26, 1994.
Subsequently, HCFA again submitted 152 proposed changes.
Petitioner does not object to most of these proposed changes.
Petitioner's actions in this regard are consistent with my

7 Pursuant to my February 14, 1995 Order Directing
Additional Briefing by Parties, HCFA has resubmitted HCFA Ex.
18 on March 8, 1995 in order to include those attachments
that were a part of Petitioner's revised plan of correction.

* pue to the different cultural customs reflected in
the transcript of hearing, I was sometimes referred to as
Judge Leahy and sometimes as Judge Hwang. Similarly,
Petitioner's attorney was alternately referred to as Mr.
Morales-Coll, Mr. Morales, or Mr. Coll.
9

directive to the parties that they avoid unnecessary
proceedings and controversies. For the reasons that follow,
I have decided to deny HCFA's motion to alter the transcript,
except with respect to correcting the caption of this case to
show that HCFA (and not the Inspector General) is the
Respondent.

HCFA's proposed changes included many that were immaterial to
the issues in this case. For example, HCFA proposed changing
the title of HCFA's attorney from “Assistant Regional
Attorney" to "Senior Trial Attorney;" changing "changed" to
"changes;" inserting "that" after "mental status." HCFA
Motion and Memorandum in Support of Corrections To the
Guaynabo Transcript. There were other proposed changes that
altered the meaning of the testimony I heard during hearing,
such as HCFA's request to change “conditions" to
"provisions;" to change "provisions" to "Physician Services;"
to change "[19}94" to "[(19]93" at four places; and to insert
“of time given his natural course" after "period." Id. Some
of the blanks in the transcript which HCFA attempts to fill
in with its proposed words (e.g., substituting " “ with
"Survey Protocol”) may have been due to transcription error
or equipment malfunction. However, and there was other
evidence of record introduced also by HCFA (e.g., patient
records and surveyors’ written reports) which gave meaning to
some of the incomplete sentences.

I have read the transcript of hearing with and without the
proposed changes, and I did not arrive at different
conclusions concerning the meaning of the testimony or the
credibility of witnesses. Neither parties' arguments
posthearing turned on any change proposed by HCFA. Moreover,
some of HCFA's proposed changes reflect only HCFA's efforts
to supplement or modify its witnesses' testimony when there
was no longer an opportunity for cross-examination and after
I had directed HCFA to refrain from proposing changes that
were not attributable to transcription errors. Such proposed
changes would also impact adversely on the opportunity I had
to hear, observe, and request clarifications from HCFA's
witnesses during the hearing. Additionally, having reviewed
the record as a whole, I did not find those blanks in the
transcript HCFA is seeking to fill in posthearing to have
substantially effected the weight or substantive meaning of
the testimony. In sum, I do not find it appropriate or
necessary to set aside the court reporters' certification
that a full, true, and correct transcription of the hearing
had been made. I grant only the change in case caption to
correctly identify HCFA as the respondent.
10
Iv. ANALYSIS OF FACTS AND ARGUMENTS

A. HCFA has placed only one condition of participation in
issue.

I find as a preliminary matter that the issue of Petitioner's
compliance with 42 C.F.R. § 418.62 (informed consent) has
become moot. HCFA did not find any problems relating to
informed consent during the revisit survey. HCFA Ex. 20. In
terminating Petitioner's provider agreement on June 9, 1994,
HCFA did not rely on any asserted deficiencies under 42
C.F.R. § 418.62. HCFA Ex. 21. Therefore, it is not
necessary for me to review the evidence on informed consent.

I find also that two of the regulations cited in HCFA's June
7, 1994 notice -=- 42 C.F.R. § 418.50 (general provisions) and
418.80 (furnishing of core services) -- do not provide
independent bases for terminating Petitioner's provider
agreement.

To the extent 42 C.F.R. § 418.50 (general provisions) applies
at all to HCFA's theory of the case, it is because said
regulation incorporates the other two regulations cited by
HCFA in its termination notice (42 C.F.R. §§ 418.86
(physician services) and 418.80 (core services). See HCFA
Exs. 15,° 20; HCFA Memo at 5, n.2. As HCFA explained at
hearing, "({i]f any condition is out, then General Conditions
is out as a cross reference. So, General Conditions will be
out for the same reason as the Provisions are... ." Tr.
at 17. Similarly, HCFA alleges that Petitioner was out of
compliance with 42 C.F.R. § 418.80 (core services) during the
June 1994 survey only because HCFA had determined that
Petitioner has failed to provide the core physician services
specified in 42 C.F.R. § 418.86. The SOD from the June
survey does not even mention 42 C.F.R. § 418.80 (core
services) or any finding outside those the surveyors have
attributed to physician services. HCFA Ex. 20.

In sum, the essence of HCFA's determination before me is that
Petitioner was noncompliant with a single condition of
participation -- the one for physician services at 42 C.F.R.
§ 418.86, which states:

(i] In addition to palliation and management of
terminal illness and related conditions, physician
employees of the hospice, including the physician
member(s) of the interdisciplinary group, must also
meet the general medical needs of the patients to
the extent that these needs are not met by the
attending physician.

° HCFA cited noncompliance with 42 C.F.R. §§ 418.80 and
418.86 among its findings that support Petitioner's
noncompliance with 42 C.F.R. § 418.50.
11

B. i tate e ev ti ta a

bu: i i ve ing: corre a

is the id vid nd mu:
ve thi tnes: its determination.

HCFA contends that "Petitioner is, in effect, asking for the
benefit or privilege of being a Medicare provider entitled to
federal funds to reimburse costs associated with the
provision of services to patients in a hospice program who
are eligible for Medicare hospice services." HCFA Memo at
23. HCFA notes that, in a long line of cases involving
individuals applying for retirement or disability benefits
under Title II of the Act, it has been held that those
seeking to establish their entitlement to payments have the
burden of establishing their eligibility to benefits. HCFA
Memo at 23. HCFA therefore concludes that the burden of
proof must be placed on Petitioner in this administrative
hearing to demonstrate its entitlement to the privilege of
receiving Medicare reimbursements for providing hospice
services to program beneficiaries. HCFA Memo at 23 - 24.

HCFA seeks also to assign to itself the burden of introducing
only substantial evidence in support of its position at
hearing. It contends that the only issue in this case is
whether HCFA's determinations are supported by substantial
evidence. HCFA Memo at 5.

By contrast, HCFA seeks to have Petitioner bound by a much
heavier evidentiary burden. HCFA argues that, because HCFA
surveyors work within the framework set up by the survey and
certification procedures of 42 C.F.R. Part 488, Petitioner
must prove that the surveyors’ interpretations of
noncompliance are clearly erroneous. HCFA Memo at 29.

I find that HCFA has incorrectly stated the evidentiary
standards and burdens for this administrative hearing. The
correct standard is proof by the preponderance of the
evidence -- not by substantial evidence for HCFA nor by the
quantum of evidence necessary for Petitioner to establish
HCFA's commission of clear error. HCFA must show the
correctness of its contract termination action. The burden
is not on Petitioner to prove entitlement to a benefit under
the Act in this case.

Contrary to HCFA's view, Petitioner is not a prospective
provider applying to form a contract with HCFA, and

there is no request before me by Petitioner for any Medicare
reimbursement. In March of 1992, HCFA had already determined
that Petitioner met all requirements to participate in the
program. P. Ex. 1. HCFA, as an administrator for our
national health insurance program, entered into a contract
with Petitioner under which HCFA agreed to reimburse
Petitioner for the delivery of covered services to eligible
Medicare beneficiaries. Pursuant to the laws and regulations
discussed above, HCFA agreed to maintain such a contract with
Petitioner so long as Petitioner continues to meet the
12

requirements of law. This case arose only because HCFA
determined that Petitioner breached a condition of
participation under the contract and HCFA initiated contract
termination proceedings. Contrary to HCFA's arguments, the
situation that gave rise to the disputes in this case is not
at all analogous to one where an individual files an
application with the Secretary in order to prove that she is
entitled to receive monthly retirement or disability
benefits.

I agree with Judge Kessel's opinions on the allocations of
the burdens of coming forward with evidence and persuasion in
Feet where HCFA has terminated existing provider agreements.

See Hospicio en e] Hogar de Lajas, CR366 at 6 - 8, (1995);
Arecibo Medical Hospice Care, CR363 at 8 - 13, (1995). TI,
too, emphasize that this is a de novo hearing, wherein an
independent adjudicator (an administrative law judge) decides
whether to affirm, modify, or reverse HCFA's termination
decision based on the evidence presented by the parties.
Section 1866(h)(1) of the Act (incorporating section 205(b)
of the Act). HCFA, as agent for the Secretary, is supposed
to have made findings of fact in reaching its decision to
terminate a provider agreement. See id. The hearing rights
conferred on the provider is only “with respect to such
decision" made by HCFA. Id. In the hearing process, the
administrative law judge's right to affirm, modify, or
reverse is over HCFA's "findings of fact and . . . decision."
Section 205(b)(1) of the Act. In other words, the
correctness of HCFA's findings and determination are at the
center of each case that is heard pursuant to section
1866(h)(1) of the Act. Therefore, it is both fair and
consistent with the Act that HCFA should have the burden of
persuasion and of coming forward with evidence to show that
its findings and conclusions are correct.

In the context of conducting a de novo evidentiary hearing
specified by the Act, I reject also HCFA's argument that it
need support its position with only “substantial evidence."
Substantial evidence is a reviewing standard the federal
courts must apply in considering the factual basis of those
final decisions issued for the Secretary after a de novo
administrative hearing.” In such court reviews of the

record from the evidentiary hearing below, the findings of
fact made by or for the Secretary are "conclusive" if they
are supported by substantial evidence. Section 205(g) of the
Act (incorporated by section 1866(h)(1)). In contrast,
hearings before administrative law judges are held in
accordance with section 205(b) of the Act, which does not
contain any reference to a “substantial evidence" standard of
proof for either party. The conduct of hearing under

0 substantial evidence means “more than a scintilla.
It means such relevant evidence as a reasonable mind might
accept to support a conclusion." Vv.
NLRB, 305 U.S. 197, 229 (1938).
13

sections 205(b) and 1866(h)(1) of the Act rest generally
within the discretion of the presiding administrative law
judge. Richardson v. Perales, 402 U.S. 389, 401 (1971).

The usual standard of proof in de novo evidentiary hearings
is the preponderance of evidence. Neither the Act nor the
Secretary's regulations implementing the Medicare statutes
state otherwise. Moreover, there is no case precedent
supporting HCFA's argument that it is entitled to prevail at
hearing based on only substantial evidence; nor is there any
case involving breach of contract allegations wherein the
substantial evidence standard was applied at trial or at
hearing to determine which party prevails. Therefore, in the
absence of regulations, laws, or legal precedents specifying
otherwise, I conclude that the truth of any material
proposition in issue must be proven by a preponderance of the
evidence.

For the same reasons, I reject also HCFA's contention that,
in order for Petitioner to successfully refute the surveyors'
interpretations of fact and law that have resulted from their
use of professional judgment, Petitioner must show that the
surveyors' interpretations are clearly erroneous. HCFA Memo
at 29. This argument is legally untenable even if one of
HCFA's two surveyors from the June 1994 revisit survey had
not testified that she became employed as an inspector for
the Puerto Rico Department of Health only on May 2, 1994;
that she was receiving on-the-job training from May 2 until
the end of June 1994; that she had conducted no surveys prior
to May 2, 1994; and that her only experience with hospices
was in inspecting them during her training period. E.g., Tr.
at 331 - 34, 356 - 59." In addition, every professional

j "HCFA had every opportunity to elicit accurately this
witness' participation in the June 1994 survey. Even before
HCFA called this witness (Merta Fernandez) to testify, HCFA
had elicited the information from another surveyor that Ms.
Fernandez was present during the June survey to lend
assistance and to receive “in-service training on how to
survey hospice facilities." Tr. at 298. In answer to HCFA's
question, the other surveyor testified that the "in-service
training" for Ms. Fernandez consisted of her spending
approximately one hour with Ms. Fernandez going over what
they were looking for, reviewing hospice regulations, and
discussing issues that arose at the survey site. Id.

During HCFA's direct examination of Ms. Fernandez, Petitioner
objected repeatedly because HCFA appeared to suggest with its
questions that Ms. Fernandez had more substantial
participation in the June survey (e.g., making findings and
reaching conclusions, as opposed to making recommendations)
than implied by the contents of HCFA's list of proposed
witnesses, which stated that Ms. Fernandez would testify
concerning her "assistance." E.g., Tr. at 338, 339, 344,
(continued...)
14

witness can legitimately claim to have exercised professional
judgment. The correctness of any professional's conclusions
or findings can be ascertained only in light of the total
evidentiary record, including what he considered, what he
should have considered, and what he failed to consider,
together with the laws that are applicable. Petitioner
cannot be required to establish that HCFA's determinations
are clearly erroneous when HCFA's determinations carry no
presumption of correctness and may not be proven correct by a
preponderance of the evidence.

In provider termination cases such as this, HCFA must at
least show that all material conclusions it formulated in
order to terminate the provider agreement are supported by a
preponderance of the evidence and are based on a correct
interpretation of the laws and regulations. Where, as here,
HCFA has found a plan of correction acceptable and has
conducted a resurvey visit to ascertain the provider's
success in implementing that plan (HCFA Ex. 21), HCFA must
establish also that the provider failed to implement that
plan or failed to implement that plan in accordance with its
stated terms. If HCFA's evidence establishes the prima facie
validity of its position, then the burden of moving forward
shifts to Petitioner to put on evidence in support of its
arguments.

Cc. '
fe} iti ' cc jance wit! ician s ic
conditi was sta .

HCFA bases its termination action on the theory that
Petitioner continued to violate the physician services
condition from prior to the initial survey until the time of
the resurvey, despite Petitioner's contention that it had
implemented a plan of correction acceptable to HCFA. See Tr.
at 50.

If HCFA had not accepted a revised plan of correction from
Petitioner and if HCFA had not conducted the resurvey in June
of 1994, I would affirm HCFA's determination to terminate
Petitioner's provider contract.

1. The manner in which HCFA conducted the initial
survey of March 1994 was valid, as were HCFA's
reasons for conducting that survey.

"(,, continued)
348. HCFA's counsel also took the position that Ms.
Fernandez was acting as HCFA's agent in the June 1994 survey
of. Petitioner. Tr. at 348. I sustained the objections,
remarked on the notice issue, and repeatedly instructed
counsel for HCFA to first pose questions that would clarify
the extent and nature of Ms. Fernandez's “assistance.” Tr.
at 338 - 49.
15

I especially note the context in which HCFA decided to
conduct the survey in March 1994 because, as discussed
herein, HCFA had valid reasons for not following the letter
of the regulation applicable to most surveys. The
Secretary's regulations on surveys provides as follows in
relevant parts:

(b) [t]he State agency must adhere to the following
principles in determining compliance with
participation requirements:

(2) {t]he survey process uses resident
outcomes as the primary means to
establish the compliance status of
facilities. Specifically surveyors will
directly observe the actual provision of
care and services to residents, and the
effects of that care, to assess whether
the care provided meets the needs of
individual residents;

(4) [f]ederal procedures are used by all
surveyors to ensure uniform and
consistent application and interpretation
of [fJederal requirements.

(d) The survey agency must ensure that a facility's
actual provision of care and services to residents
and the effects of that care on residents are
assessed in a systematic manner.

42 C.F.R. § 488.26.

In this case, even though the Puerto Rico Department of
Health was under contract to perform surveys for HCFA, HCFA
conducted the survey of Petitioner due to fiscal
considerations. HCFA Ex. 54 at 10, 12.

HCFA decided to survey all 46 hospice providers in Puerto
Rico because, over an extended period of time, HCFA and its
agents had received complaints about the services and
"nonservices" rendered in Puerto Rico. HCFA Ex. 54 at 13 -
14. The complaints were primarily in areas that included
hospices' failure to provide required services, the lack of
terminal diagnosis, the inaccurate certification and
recertification for benefits, the falsification of records,
the payments made for referrals by doctors and others, and
the "stealing and luring away" of patients from home health
associations and other hospices. HCFA Ex. 54 at 14 - 16.

There is no complaint against Petitioner in evidence.
However, HCFA considers all of the surveys it conducted in
Puerto Rico to be “complaint surveys;" that is, the surveys
were supposed to focus on specific areas within the
16

conditions of participation that correlated with the
complaints received by HCFA. HCFA Ex. 54 at 21. HCFA
instructed its surveyors to select records from the Puerto
Rico hospice providers with groupings of diagnosis that have
been referenced in the complaints. HCFA Ex. 54 at 22.”
Also, HCFA told its surveyors that, due to time constraints
and the number of facilities to be surveyed, the surveyors
should limit their review of patient records. Tr. at 36, 45.
According to a written "Modified Hospice Survey Protocol"
issued by HCFA, those surveying Puerto Rican hospices with
less than 200 patients were instructed to review 10 active
patient records, to select active patient records containing
certain specified diagnoses, and to visit 3 of the
aforementioned active patients at home. HCFA Ex. 12; Tr. at
45.

On March 10 and 11, 1994, HCFA surveyors surveyed Petitioner
by using the instructions and criteria issued by their
office. They chose a total of 10 records of active patients
who had a diagnosis of Alzheimer's disease and had been
receiving Petitioner's services since 1992, or who had a
diagnosis of cancer and had been receiving Petitioner's
services for at least the first two election periods.” Tr.
at 45. In addition, the surveyors randomly selected for
review the records of two recently discharged patients to
evaluate the reasons for their discharge. Tr. at 45.

Marilyn Stephens, the lead surveyor, reviewed 7 of the 10
active files and 2 of the discharge files; Nyda Del Moral,
who assisted Ms. Stephens during the survey, reviewed the
records of the 3 remaining active patients and visited them
at home. Tr. at 36, 45. Ms. Stephens testified that the
surveyors reviewed records in March 1994 by focusing on
whether the patients met the regulatory criteria for
receiving hospice services, on the information written by
physicians concerning the patients' terminal illness, on the
nature and extent of information that was made available to
physicians when they formed their assessments, on whether
pain management or palliative types of treatment were
provided by physicians, and on whether physicians ordered
restorative or aggressive treatment for the sampled patients.
Tr. at 25 - 29.

Petitioner has not challenged the validity or reasonableness
of the instructions and criteria applied by HCFA. Nor has

2 At hearing, HCFA explained that there is no list of
illnesses that are considered to be terminal. Tr. at 24.
HCFA makes case-by-case evaluations during its surveys. Id.

3A Medicare beneficiary may elect to receive hospice
care for an initial period of 90 days, for a subsequent
period of 90 days, for a subsequent period of 30 days, and
for a subsequent extension period of unlimited duration
during the beneficiary's lifetime. 42 C.F.R. § 418.21.
17

Petitioner challenged the size of the sample patients
surveyed. I find that HCFA issued and implemented its
instructions and criteria for the March 1994 survey within
the proper exercise of its discretion to enforce the
requirements of Medicare.

2. HCFA reached valid factual findings and legal
conclusions as a result of the March 1994 survey.

In their SOD, the surveyors concluded, inter alia, that
Petitioner was out of compliance with a standard for "Central
clinical records" (42 C.F.R. § 418.74(a)) because, of the 10
active patients' records reviewed, there were documentation
problems associated with the physicians' recertification of
all 10 patients' terminal illness. HCFA Ex. 15. The
surveyors used the documentation problems in nine of the same
10 patients' cases to explain their finding that Petitioner
was out of compliance with 42 C.F.R. § 418.86 (physician
services) because hospice doctors were providing palliative
and management care to nine patients in the sample who did
not meet the regulatory criteria (42 C.F.R. §§ 418.20,
418.22) for a terminal illness. HCFA Ex. 15 at 8. In
concluding that the patients who were receiving palliative or
management care from Petitioner's doctors do not meet the
criteria for terminal illness, the surveyors cited two
regulations that are titled "Eligibility requirements" and
"Certification of terminal illness," respectively. Id. The
surveyors found, however, that the care provided by the
doctors were of the palliative and management nature. HCFA
Ex. 15 at 8.

In order to be eligible to elect and receive hospice services
under the Medicare program, the individual must not only be a
Medicare beneficiary, but he or she must also be certified as
being terminally ill in accordance with § 418.22." The
hospice must obtain written certification of the terminal
illness for each of the beneficiaries' election periods. 42
C.F.R. § 418.22. For the initial 90-day election period, the
hospice must obtain the written certification from the
beneficiary's attending physician and the hospice's medical
director or the physician member of the hospice's
interdisciplinary group. JId. For subsequent election
periods, the certification must be made by the hospice's
medical director or the physician member of the hospice's
interdisciplinary group. Jd. Each certification must
specify that the beneficiary's prognosis is for a life

All of the pages in HCFA Ex. 15 were not numbered
consecutively. Thus, I have renumbered the pages in this
exhibit and the SOD begins on page 3.

'S HCFA's witness explained also the certification
requirements and their ramifications for Medicare
beneficiaries. Tr. at 38 - 43, 108.
18

expectancy of six months or less if the terminal illness runs
its normal course. Id.

In addition, the hospice must establish and maintain a
clinical record for every individual receiving care and
services in accordance with accepted principles of practice.
42 C.F.R. § 418.74.'© Each clinical record is supposed to be
a comprehensive compilation of information, which should
include entries for all services provided, the initial and
subsequent assessments of patients, the plan of care for
patients, the patients’ pertinent medical history, and
complete documentation for all services and events such as
evaluations, treatments, progress notes. 42 C.F.R. §
418.74(a). The hospice is charged with safeguarding the
clinical records against loss or destruction. 42 C.F.R. §
418.74(b).

The evidence concerning the March survey establishes that,
out of the 10 active records selected for review,
Petitioner's documentation for nine patients' prognosis, life
expectancy, history, progress, course of treatment, or
reasons for receiving care from a hospice were inadequate,
not present, contradictory, or otherwise fraught with
problems. E.g., HCFA Ex. 15 at 3 - 13; Tr. at 58, 61. As
summarized by HCFA's witness, "the paperwork was there" in
most cases, but there was not enough assessment information
to explain or substantiate that the nine active patients
surveyed had terminal conditions within the definition of the
Act that warranted their receiving hospice services, as
opposed to other levels of Medicare covered services. Tr. at
40, 41, 58.

In one example cited by HCFA during hearing, Petitioner's
records at the time of survey contained no indication of the
patient's history, and no reasons were given on the physician
referral form to explain why the doctor believed the patient
to be terminally ill. Tr. at 61. In another sample
patient's case, none of the forms signed by physicians to
recertify the patient for the continued receipt of hospice
care contained any indication of the patient's potential life
expectancy at the time of recertification. HCFA Ex. 15 at 8.
Even though the life expectancy of Petitioner's Medicare
patients should be six months or less from the time of
initial certification and each recertification, the available
records on nine of the 10 patients reviewed by HCFA in March
of 1994 showed that all nine patients had been receiving
hospice care for more than six months, and some for two or
more years. HCFA Ex. 15 at 3 - 13. In addition, instead of
containing notations of the decline typical of people with
six months or less to live from the time of admission to or
recertification for hospice care, the patient records
reviewed by the surveyors contained notations that one

‘© In the SOD for the March survey, the surveyors noted
a violation under 42 C.F.R. § 418.74(a). HCFA Ex. 15.
19

patient showed improvement after the doctor placed him on
physical therapy for ambulation and to strengthen him; five
patients had routine tests done repeatedly on physicians'
orders with no indications of deterioration or changes; and
the physician's progress notes for one patient described his
condition as "stable." HCFA Ex. 15 at 8 - 13; see Tr. at 26
- 29.

Because 10 active patients' records were sampled and nine
contained the serious and extensive problems discussed
herein, HCFA's evidence on the March survey gives rise to the
strong and reasonable inference that, in many different ways,
Petitioner was not providing hospice services to Medicare
beneficiaries in accordance with the letter or intent of the
law. Dr. Alma Rivera, an expert witness for HCFA,
specifically testified that it is a common practice in the
medical field to write down everything that forms a basis of
an opinion. Tr. at 406 - 08. Petitioner did not present any
evidence to contradict Dr. Rivera's opinion. Therefore, I
find it reasonable and proper for HCFA to conclude from the
very poor and incomplete documentation it reviewed in March
1994 that Petitioner's doctors were providing palliative or
management care to Medicare beneficiaries without having
applied the assessment criteria specified in the Secretary's
regulations. See HCFA Ex. 15 at 8.

I infer from HCFA's finding of a condition-level deficiency
for physician services based on its March survey that HCFA
believes that Petitioner's doctors were providing palliative
and management care also to other similarly situated patients
who cannot be considered to have met the criteria of terminal
illness within the meaning of the Act; therefore, either
Petitioner was substantially limited in its ability to render
adequate care to patients, or the actions of Petitioner's
doctors had adversely affected the health and safety of
patients. As specified in the Secretary's regulations, the
decision as to whether there is compliance with a particular
condition of participation depends on the manner and degree
to which the provider satisfies the various standards within
each condition. 42 C.F.R. § 488.26. A provider is
considered to be out of compliance with the conditions of
participation where its deficiencies are of such character to
substantially limit the provider's capacity to render
adequate care or which adversely affect the health and safety
of patients. 42 C.F.R. § 488.24.

Since a hospice provider under the Medicare program must be
engaged primarily in caring for those who are terminally ill
within the meaning of the law -- e.g., section 1861(dd) (2) of
the Act and 42 C.F.R. § 418.3, Petitioner's failure to be in
possession of adequate or necessary documentation on its
Medicare patients' prognosis and life expectancy is
persuasive proof that Petitioner has been substantially
limited in its capacity to render the care required for
participation in the Medicare program. Also, as discussed
above, the Act and regulations contain a complex system of
20

coverage or reimbursement restrictions to discourage hospices
from providing medically unnecessary or unreasonable services
to Medicare beneficiaries who should be receiving a different
or more aggressive level of care under the Act. E.g., 42
C.F.R. § 418, subpart F. The obvious intent of such
restrictions is to ensure the health and safety of Medicare
patients. Where, as here, the evidence shows that
Petitioner's doctors have been giving Medicare beneficiaries
hospice level care for extended periods of time on the basis
of improperly or inadequately documented prognosis and life
expectancies, such evidence logically implies significant
health risks for the Medicare beneficiaries. As Dr. Alma
Rivera testified, physicians need complete information on
patients in order to plan properly for their care. Tr. at
423. In addition, proper and thorough documentation of the
patients' past and present conditions enables other health
care professionals to form opinions for reasons other than
those gathered from personal examinations of the patients.
Tr. at 408.

3. Petitioner's defenses are not sufficient to
rebut the validity of HCFA's conclusions based on
the March 1994 survey.

The totality of evidence relevant to the March 1994 survey,
including Petitioner's defenses discussed below, convinces me
that HCFA correctly cited Petitioner for failure to comply
with the physician services condition of participation
pursuant to the March 1994 survey.

Petitioner has pointed out consistently that HCFA's surveyors
are nurses, and, therefore, they are not qualified to make
medical diagnoses, determine whether a patient is terminally
ill, or decide what kind of treatment a patient should
receive. E.g., Tr. at 34 - 35. I agree. Moreover,
Petitioner's patients were never examined by the nurse
surveyors or the physician HCFA called as an expert to
testify at hearing. Tr. at 34, 428. Even HCFA's termination
notice contains no allegation concerning the true medical
conditions of those receiving hospice level care from
Petitioner's doctors. In fact, HCFA merely had suggested as
follows in its April 7, 1994 notice to Petitioner:

. . . there are indications that Medicare
beneficiaries may be receiving inappropriate
services.

HCFA Ex. 15 at 2.

However, I find also that the true medical conditions of
those patients surveyed in March 1994 should not be in
21

controversy before me. It was an illusory issue
unnecessarily interposed by counsel for both sides during the
hearing process. For example, HCFA appears to have
misinterpreted evidence such as its surveyors' reference to
"patients . . . who do not meet the criteria of having a
terminal illness as defined in CFR 418.20 [Eligibility
requirement] and CFR 418.22 [Certification requirement]."
HCFA Ex. 15 at 8. Noting that HCFA may look behind
certifications and recertification to determine whether, in
fact, Petitioner's patients needed or received palliative
care for the treatment of a terminal illness, HCFA's counsel
contends incorrectly that HCFA has demonstrated conclusively
that Petitioner's doctors were treating patients who were
not, in fact, terminally ill. HCFA Memo at 5, 10, 25.

HCFA has not demonstrated conclusively or by a preponderance
of the evidence that Petitioner's doctors were treating
patients who were not, in fact, terminally ill at the time of
certification or recertification. Nevertheless, the validity
of HCFA's determination under physician services does not
turn on whether HCFA has succeeded in proving that, at the
time of each certification or recertification, Petitioner's
patients had life expectancies of more than six months if
their terminal illnesses ran their normal course. Even
though attorneys for both parties attempted to cast the
surveyors' conclusions as diagnoses of medical illnesses
during hearing, I note that Ms. Stephens, the lead surveyor,
specifically explained that she and other surveyors were not
auditing the physicians' medical determinations during the
survey. Tr. at 320.

The surveyors were questioning the assessment system used by
Petitioner's physicians and its interdisciplinary team, which
must have a physician member. Tr. at 320; 42 C.F.R. §
418.68. Ms. Stephens testified that she could not find
evidence in the record concerning why Petitioner's doctors
made the terminal illness decisions; therefore, she
questioned the assessment procedure that was used by the
hospice and its physicians. Tr. at 318, 319. She disagreed
with the doctors' prognosis on life expectancy of six months
or less based on the absence of documentary support and, as
in one example she used, because the patient has been
receiving Petitioner's services for 18 months. Tr. at 319.

Ms. Stephen's explanations are consistent with HCFA's
correspondence with Petitioner concerning appropriate
corrective actions after the March 1994 survey. For example,
HCFA informed Petitioner in writing that it needed to give
assurances concerning the implementation of systems and
criteria. HCFA Ex. 17. Later at hearing, Ms. Stephens
explained also that she and HCFA expected Petitioner to
analyze its systems and procedures which caused HCFA to
determine deficiencies in the first instance. Tr. at 94.
22

In essence, the problems determined by HCFA under physician
services in March 1994 were that Petitioner's doctors failed
to apply the evaluation and documentation systems required by
law prior to delivering palliative and management care to
Medicare beneficiaries. After receiving the SOD, Petitioner
conceded that its documentations were poor and informed HCFA
that “due to incomplete documentation the hospice criteria
was not specified in these [nine] cases." HCFA Ex. 16 at 11.
In response to the deficiencies cited in individual cases,
Petitioner then summarized its physician's reasons for having
found eight of the nine patients with a terminal illness or
life expectancy of six months or less. Id. at 11 - 17.
(Petitioner's doctor found that one patient, # 120, did not
have a terminal prognosis. Id. at 14.)

Petitioner's responses in individual cases were not
accompanied by the types of documentation missing from the
March 1994 survey. Moreover, these summaries of Petitioner's
doctors addressed only the eight patients' status or life
expectancy during the most recent recertification.

Therefore, I agree with HCFA that Petitioner's responses were
inadequate for addressing the deficiencies cited, which
included the doctor's enabling Medicare beneficiaries to
begin receiving hospice level care without proper
certification and then allowing these beneficiaries to
continue receiving hospice care during various election
periods without a proper assessment of their continued
eligibility to receive such care. I reject the defense that
Petitioner was at fault merely for having maintained poor
records in March of 1994.

Petitioner alleges further that HCFA has incorrectly equated
a violation of a provider's condition of participation in the
program with a patient's eligibility to receive hospice
services under the program. P. Br. at 8. Petitioner notes,
for example, that the certification and recertification
requirements discussed by HCFA are not contained in any
subpart listing a provider's conditions of participation. P.
Br. at 6. The requirements for Petitioner's doctors to
provide certifications and recertification are contained in
subpart B, titled “Eligibility, Election and Duration of
Benefits." 42 C.F.R. § 418.20. By contrast, all conditions
of participation are listed in subparts C, D, and E of 42
C.F.R. Part 418.

I reject the distinction drawn by Petitioner, for several
reasons. First, HCFA was not limited to using a condition of
participation to terminate Petitioner's provider agreement.
HCFA was authorized also to terminate Petitioner on the basis
of Petitioner's substantial failure to comply "with the
23

provisions of Title XVIII and the applicable regulations of
this chapter (Chapter IV] ... ." 42 C.F.R. §
489.53(a)(1)."’ This section of the regulation is consistent
with section 1866(b)(2) of the Act, which states that the
Secretary may terminate agreements when a provider "fails to
comply substantially . . . with the provisions of this title
{i.e., Title XVIII] and regulations thereunder ... [or]. .
. fails substantially to meet the applicable provisions of
section 1861 . ..." Section 1866(b)(2) (A), (B) of the Act.
If, as suggested by Petitioner's affirmative arguments, HCFA
may terminate provider agreements only if the violation
corresponds to a condition of participation listed in the
regulations, then 42 C.F.R. § 498.53(a) (1) would become
superfluous.

The requirement for Petitioner's doctors to certify and
recertify terminal illnesses as defined by the Act and
regulations is contained in section 1814(a)(7) of the Act;
this requirement is implemented by the Secretary's
regulations at 42 C.F.R. § 418.22 (certification of terminal
illness). In addition, other regulations are relevant,
including 42 C.F.R. § 418.66 (condition of participation--
quality assurance) and 418.74 (condition of participation--
central clinical records).' The evidence showing the
substantiality of Petitioner's failure to comply with these
provisions of the Act and regulations are the same as those
that led HCFA to determine the deficiencies related to
physician services. Thus, even if HCFA had incorrectly
concluded that Petitioner was out of compliance with the
physician services' requirement as opposed to other
requirements or criteria of the law, Petitioner has not
proven that the March 1994 survey findings are inadequate to
support the contract termination action.

7 I read this subsection of the regulation as
applicable to those situations where the consequences of the
provider's noncompliance are as serious as if the provider
had a violation of a condition of participation, but no
condition of participation precisely describes the
noncompliance. See 42 C.F.R. §§ 488.24, 488.26.

1% I have discussed earlier the relevant requirements
for Petitioner to meet the condition of participation for
central clinical records. Under the quality assurance
condition of participation, Petitioner should have been
conducting ongoing, comprehensive, and integrated self-
assessments of the quality and appropriateness of the care
provided. The findings from such self-evaluations should
have been used to correct identified problems and to revise
hospice policies if necessary. 42 C.F.R. § 418.66. The
problems discerned by HCFA's surveyors during March 1994
could have just as properly been attributed to Petitioner's
noncompliance with the conditions of participation for
quality assurance or central clinical records.
24

I conclude that HCFA also reasonably linked the certification
and recertification problems to the ensuing delivery of
physician services under 42 C.F.R. § 418.86. Each regulation
does not correspond to only one requirement specified in the
Act. The Act provides that, when a Medicare beneficiary
makes an election for hospice care, he does so at the
exclusion of all other types of Medicare covered services.
Section 1812(d)(1) of the Act. Therefore, for the health and
safety of the beneficiary, it is incumbent upon the provider
to ensure, through the certification process and the
documentation requirements encompassed by the certification
process, that this program beneficiary is indeed terminally
ill within the meaning of the law and that, moreover, hospice
services are medically reasonable and necessary to the
individual's condition. E.g., section 1862(a)(1)(C). of the
Act.

While certification is listed as an eligibility criterion for
program beneficiaries under 42 C.F.R. § 418.20, Petitioner's
doctors are the only ones who can make a Medicare beneficiary
legally eligible for hospice care. 42 C.F.R. §§ 418.20,
418.22. Petitioner and its doctors have no one to blame
except themselves for their subsequent delivery of physician
services to people whom they have not properly determined to
meet the Medicare criteria for receiving palliative and
management services. Petitioner is wrong in drawing lines
between the various regulations which, in their totality,
implement the interrelated statutory requirements for the
participation of a hospice in the program.

D. Based on the results of the June 6, 1994 revisit survey, I
set_ aside HCFA's determination that Petitioner was out of
ian t! i i an

I find basis £ - n Petiti 7 vid
contract.

1. After issuing the termination notice dated
April 7, 1994, HCPA acted within its discretion to
solicit and approve a plan of correction from
Petitioner and to conduct a revisit survey to
ascertain Petitioner's success in implementing its
plan of correction.

HCFA was not required by the Act or the Secretary's
regulations to offer Petitioner an opportunity to submit and
implement a plan of correction acceptable to HCFA following
the March 1994 survey. Nor was HCFA required by law to
conduct another survey after it approved a plan of
correction. The regulation cited by Petitioner, 42 C.F.R. §
488.28, applies to situations where HCFA finds that a
provider has deficiencies in one or more standards.” See P.

9 Compliance with a condition depends on the manner and
degree to which the provider satisfies the various standards
(continued...)
25

Br. at 4. The regulation does not state that, when HCFA
finds noncompliance with a condition of participation, HCFA
must also grant the provider a reasonable time to achieve
compliance. 42 C.F.R. § 488.28.

Nevertheless, HCFA did offer Petitioner an opportunity to
submit a plan of correction, and HCFA accepted a revised plan
of correction from Petitioner on or about May 20, 1994. HCFA
Exs. 15 - 19. HCFA then conducted a revisit survey on June
6, 1994 in order to evaluate Petitioner's success in
implementing its plan of correction. HCFA Ex. 20.

HCFA explained that its usual survey process includes the
solicitation and review of a plan of correction to remedy
condition-level noncompliance. HCFA Ex. 54 at 11, 26 - 31;
Tr. at 311. If HCFA finds the plan unacceptable in whole or
in part, HCFA gives its reasons for having found the plan
unacceptable. HCFA Ex. 54 at 28. Before the date set by
HCFA for terminating a provider agreement, HCFA will
generally work with a provider to bring about an acceptable
plan of correction; in some cases, HCFA has "gone back" to
providers three or four times concerning a plan of
correction. HCFA Ex. 54 at 29.

If HCFA receives a plan of correction that it finds
acceptable, HCFA will schedule a revisit survey after the
last date for correction under the plan but prior to the date
of termination itself. HCFA Ex. 54 at 29; Tr. at 311.
According to HCFA, it would never terminate a provider's
participation agreement before such a revisit survey. Id.

In some cases, HCFA has "pushed back" the termination date to
accommodate the revisit surveys. HCFA Ex. 54 at 29, 30.

According to HCFA's explanations of its usual practices, a
revisit survey is not a full survey. HCFA Ex. 54 at 30. The
surveyors conducting the revisit surveys are supposed to
examine only those conditions cited in the earlier notice of
deficiencies. HCFA Ex. 54 at 30. If the surveyors discover
that the provider is now in compliance with the conditions
cited earlier by HCFA -- but the provider is now out of
compliance with other conditions -- HCFA would need toa
rescind its earlier initiated termination action and begin
the foregoing process anew based on its new findings. HCFA
Ex. 54 at 30.

HCFA states that, in Petitioner's case, it followed its usual
procedures for soliciting and reviewing plans of correction

and for conducting a revisit survey. HCFA Ex. 54 at 30 - 31.
I find HCFA's solicitation, review, and acceptance of a plan

%(.. continued)
within each condition. 42 C.F.R. § 488.26. HCFA is not
authorized to terminate a provider agreement due to
deficiencies in standards which do not amount to condition-
level noncompliance. 42 C.F.R. § 489.53.
26

of correction from Petitioner, as well as HCFA's use of
revisit surveys in general, to be permissible exercises of
HCFA's authority to enforce those requirements providers must
satisfy to maintain participation in the Medicare program.
Before actually terminating a provider's Medicare
participation agreement, HCFA has the discretion to enforce
the various conditions of participation in a manner it deems
appropriate. Even though the regulations do not require HCFA
to make available to providers the opportunity to remedy
condition-level noncompliance, neither do the regulations bar
HCFA from offering such opportunities or implementing
generally applicable procedures for the effectuation of its
enforcement goals. It is reasonable for HCFA to encourage
providers to remedy their problems. It is reasonable also
for HCFA to cooperate with providers in their efforts to
avoid termination of their participation agreement.

2. After approving Petitioner's revised plan of
correction on May 20, 1994, HCFA was obligated to
conduct its revisit survey and make determinations
in a manner consistent with the terms of the
approved plan and in accordance with its usual
practices.

HCFA contends that it conducted the June 6, 1994 revisit
survey and provided notice of the problems in accordance with
its usual practices, as discussed above. HCFA Ex. 54 at 30,
31. HCFA has presented also no legitimate reason which would
justify treating Petitioner differently than HCFA treats
similarly situated providers. Therefore, I find that HCFA
was required to conduct the revisit survey and provide notice
of problems in accordance with its usual practices, as
explained by HCFA.

I find also that HCFA is bound by the terms of the revised
plan it approved. The correctness of HCFA's reasons for
finding Petitioner's revised plan acceptable is not
reviewable since Petitioner has no hearing rights on that
issue. 42 C.F.R. § 498.3. However, the provider agreement
HCFA wishes to terminate in this case is the equivalent of a
contract between HCFA and Petitioner. HCFA and Petitioner
had the right to reach agreements on the supplementation of
those contractual terms that are required by law, and the
parties had the right to stipulate to the methods for
correcting alleged breaches and for verifications of such
corrections. The supplemental agreements discussed herein,
which were reached after the initial survey by HCFA, are not
prohibited by law, and they were reached by the parties
voluntarily.

The evidence establishes that, in addition to HCFA's claim to
have followed its usual practices discussed above, HCFA
informed Petitioner repeatedly that it would be resurveyed on
the basis of its plan of correction that HCFA found
acceptable. When initially notifying Petitioner that its
27

application to become a Medicare provider had been accepted,
HCFA stated the following term to Petitioner:

({aJny deficiencies cited at the time of the

. . + [survey] visits, that have not been completely
corrected, are expected to be corrected as stated in
your plan of correction.

P. Ex. 1. Thereafter, when HCFA was notifying Petitioner of
the findings from the March survey and the date on which the
provider agreement would terminate, HCFA again told
Petitioner:

{sJhould your Plan of Correction provide reasonable
assurance that condition level compliance will be
attained, a follow up survey will be conducted . .

HCFA Ex. 15. Even after HCFA had completed the revisit
survey and decided to terminate the provider agreement, HCFA
again told Petitioner that the purpose of the revisit survey
had been:

+ . » to evaluate the facility's success in
implementing its plan of correction.

HCFA Ex. 21.

Petitioner has never objected to or refused to follow the
process outlined by HCFA. Prior to HCFA's terminating its
provider contract on June 9, 1994, Petitioner took certain
actions based on HCFA's representations. For example, on
April 15, 1994, Petitioner submitted a plan of correction,
which HCFA did not find fully acceptable. HCFA Exs. 16, 17.
With respect to physician services, HCFA stated the following
to Petitioner:

1) The Poc {plan of correction] is unacceptable
because it does not identify the primary systems
breakdown in admission assessments and
certification of patients with non-terminal
diagnosis. What system and criteria will be
implemented to ensure that hospice services are
provided only to those who have a terminal
diagnosis which will result in death within 6
months based on the normal progress of the disease?

2) Use of a voluntary program as identified in
addendum 1 does not meet hospice regulation because
patients in the indefinite period should be a
rarity and not a common occurrence[.] [T]herefore,
the establishment of specific criteria for hospice
admission is a necessity.

HCFA Ex. 17 at 2.
28

In response to the foregoing criticisms, Petitioner submitted
a revised plan, which HCFA found acceptable. HCFA Exs. 18,
19.

With respect to physician services in the revised plan found
acceptable by HCFA, Petitioner represented that, in order to
ensure that hospice services are provided only to those
patients who have a terminal diagnosis that will result in
death within six months based on the normal progress of the
disease, Petitioner has now included the hospice eligibility
requirements in its Administrative Manual, and Petitioner is
now using those requirements in its referral and admission
procedures. HCFA Ex. 18 at 3, 5.” Petitioner then went on
to identify in its revised plan of correction the important
aspects of the referral and admission procedures it has
placed into effect on May 5, 1994. HCFA Ex. 18 at 3 - 4.
Petitioner stated, for example, that its interdisciplinary
group "will meet" to establish and revise plans of care, and
"the group will monitor" the status of the patients’ terminal
illness and deterioration of their condition during the
recertification process; the attending physician "is
included" more actively in the evaluation process, so that
the physician "will" confirm the terminal diagnosis in
accordance with Petitioner's recertification procedure; and
after the patient "is admitted," the patient's clinical
record "is audited" by quality assurance personnel, and if
there are insufficient findings of a terminal condition, the
information "will be" brought to the attention of the
interdisciplinary group for decision on recertification or
discharge. HCFA Ex. 18 at 4 - 5, 11 - 16.

In the revised plan of correction accepted by HCFA,
Petitioner made no commitment to revise or alter the
certifications or other documents already in existence prior
to May 5, 1994, when it placed its new procedures into
effect. Nothing of record shows that HCFA had conditioned
its acceptance of Petitioner's plan based on Petitioner's
reevaluating all patients admitted, referred, or certified
prior to May 5, 1994. Petitioner's revised plan states on
its face that Petitioner had instituted certain policy
changes on May 5, 1994, and, by using the future tense of
verbs -- e.g., “will meet," “will monitor," "will be
confirmed," (HCFA Ex. 18 at 5) -- Petitioner indicated that
those changes would be carried out with respect to patients
who were admitted, referred, certified, or recertified on and
after May 5, 1994.

For the foregoing reasons, I find that the terms of the
revised plan are binding on both parties on the issue of
whether Petitioner was in compliance with the condition of
physician services by the time of the revisit survey, and

2» By “referral,” Petitioner means a referral from, or
the receipt of a referral form from, attending physicians,
hospitals, or community health facilities. HCFA Ex. 18 at 4.
29

HCFA was required to follow its usual procedures with respect
to the revisit survey.

3. HCFA improperly terminated the provider
agreement with Petitioner pursuant to the June 6,
1994 revisit survey results.

On June 6, 1994, HCFA reviewed the records of six active
patients and six recently discharged patients. HCFA Ex. 20
at 2. Based on such a review, the surveyors concluded that
Petitioner's physicians were not involved in assessing,
planning, or providing for the medical needs of eight
patients. HCFA Ex. 20 at 2. HCFA surveyors further
concluded that some of these same eight patients' records
also show that Petitioner's physicians were not evaluating
and recommending them for certifications of eligibility based
on the regulatory definition of terminal illness. HCFA Ex.
20 at 4. HCFA classified all these problems under physician
services and notified Petitioner by letter dated June 7, 1994
that the revisit survey conducted "to evaluate the facility's
success in implementing its plan of correction" showed that
Petitioner remained out of compliance with 42 C.F.R. § 418.86
(physician services). HCFA Ex. 21. Therefore, HCFA was to
terminate Petitioner's participation in the Medicare program
effective June 9, 1994. HCFA Ex. 21.

I agree with Petitioner that, where Petitioner's doctors were
allegedly not planning for patients' care, HCFA is not
permitted to conclude that Petitioner was out of compliance
with physician services during the revisit survey and
terminate the provider agreement as a consequence. P. Br. at
5.

In the first place, HCFA's notice letter and SOD from the
first survey never mentioned problems with physicians'
participation in the plan of care. There is also a separate
condition of participation for plan of care (42 C.F.R. §
418.58), which was not cited pursuant to the first survey.
Even though Petitioner's revised plan of correction did
mention plan of care, Petitioner's words cannot be read
fairly as meaning that Petitioner was on notice for or
intended to correct the type of planning problems listed in
HCFA's resurvey visit SOD. See HCFA Exs. 18, 20.

Even more importantly, a plan of care is not established by
the hospice physicians alone; it is established by the
hospice physicians, the patient's attending physician (who
may not be an employee of the hospice), and the hospice's
interdisciplinary team. 42 C.F.R. § 418.58(a). Problems
with patients' plans of care cannot be fairly or properly
placed under a provider's obligation to provide physician
services as a core service. If the plan of care problems
discerned during the revisit survey were substantial, then
30

HCFA would need to rescind its prior notice of termination
based on physician services and proceed under plan of care,
in accordance with the normal process described by HCFA. HCFA
Ex. 54 at 30.

I find untenable as well HCFA's argument that Petitioner
violated physician services because the regulation states in
part that "physician employees of the hospice . . . must also
meet the general medical needs of the patients to the extent
that these needs are not met by the attending physician." 42
C.F.R. § 418.86; HCFA Memo at, e.g., 12, 16. In contending
that Petitioner's doctors failed to meet the general medical
needs of patients, such as one patient's one-arm pain,
another patient's obstetrical/gynecological problems, and
another patient's decubitus ulcer (HCFA Memo at 12, 16), HCFA
introduced no evidence to show that attending physicians were
also not meeting such problems. There is no indication, for
example, that the attending doctors of hospice patients were
even contacted by the surveyors on this issue.

Moreover, HCFA's position under physician services appears to
be that, even though HCFA does not consider a hospice patient
to be truly terminally ill, the hospice doctors must meet
that individual's “general medical needs" nonetheless. Tr.
at 398. I find this position to be flawed. By definition,
the hospice must be primarily engaged in providing palliative
and management care. See 42 C.F.R. §§ 418.3, 418.86. In
addition, treatment should be provided only by a hospice if
the hospice level of care is medically reasonable and
necessary for the patient's terminal condition. See 42
C.F.R. § 418.200. When HCFA believes that the hospice doctor
has misdiagnosed or has not adequately assessed whether their
patients have a terminal illness in the first instance, it
does not follow logically that certain medical problems
should then be designated as the patients' "general medical
needs,” which the hospice doctor must meet "{iJn addition to
palliation and management of terminal illness and related
conditions(.)" 42 C.F.R. § 418.86. -Interpreting the
regulation as HCFA does can raise concerns for the health and
safety of those patients who have not been properly evaluated
by the hospice doctor for the existence of a terminal illness
and related condition, as distinguished from their other
"general medical needs."

Finally, I find that HCFA failed to conduct the revisit
survey in a manner consistent with its obligation to
ascertain whether Petitioner had implemented the plan of
correction approved by HCFA. As already discussed,
31

Petitioner represented that it had put into place on May 5,
1994 certain procedures for evaluating the patients's medical
condition for admissions, certifications, and
recertification. These procedures were devised to especially
address HCFA's requirement for identification of “the primary
systems breakdown in admission assessments and certifications
of patients with non-terminal diagnosis." HCFA Ex. 17 at 2.

All of the procedures described in the approved plan of
correction have prospective application only. The manner in
which Petitioner receives referral of patients from other
sources and admits them under its new procedures cannot be
applied retrospectively. (That is to say, admissions and
receipt of referrals can happen only once in time; once the
referral is accepted and the patient is admitted, the patient
stays admitted until discharged.) The certifications and
recertification for terminal illness must take place at the
times and with the intervals set by law. 42 C.F.R. §§
418.21, 418.22. In its revised plan of correction,
Petitioner specified, for example, that its interdisciplinary
group “will collect recertification dates on each patient on
a monthly basis," and all recertified patients "will continue
receiving services until the next evaluation date ...."
HCFA Ex. 18 at 14, 16.

When HCFA was reviewing Petitioner's plan of correction, HCFA
did not require Petitioner to redo any certification or
recertification that existed or should have existed prior to
Petitioner's implementation of its plan. HCFA approved
Petitioner's plan without any such commitment by Petitioner.
The tense of verbs used repeatedly by Petitioner establishes
that Petitioner was seeking to remedy its prior noncompliance
by applying its new procedures to admissions, referrals, and
certifications that occur on and after May 5, 1994. HCFA Ex.
18.

Yet, when HCFA resurveyed Petitioner on June 6, 1994, it
looked at records of only those people who were admitted or
referred during prior years. E.g., HCFA Supp. Br. at 6.
Similarly, nearly all of the certifications and
recertifications reviewed by HCFA predated May 5, 1994, the
date on which Petitioner implemented its approved plan of
correction. E.g., HCFA Memo at 12 - 22; HCFA Ex. 20. A few
of the patients were discharged prior to or shortly after May
5, 1994, but HCFA cited these discharges as evidence of
Petitioner's noncompliance with physician services as well.
HCFA Ex. 20° at 4 - 6.

As I noted earlier, during this revisit survey, one surveyor
was receiving “in-service training" by reviewing five
patients' records and interviewing one patient; most of the
deficiencies listed on the SOD corresponded to the patient
records reviewed by this trainee surveyor. HCFA Ex. 20; Tr.
at 298, 299, 331 - 59; see also n.10. HCFA's witnesses did
not testify as to why they chose to review the records they
did on June 6, 1994. Nothing of record indicates that, in
32

providing in-service training to the new surveyor by allowing
her to review records and help formulate findings, HCFA
informed her of the approved plan of corrections or how the
plan's contents should correspond to the manner in which the
revisit survey is conducted and the conclusions that were to
be drawn.

After I raised these and like problems posthearing and
directed counsel to submit supplemental briefs on the issues,
HCFA's counsel argued that the surveyors used these four
document-selection criteria on June 6, 1994:

1) active records of new patients who were admitted
after the March 1994 survey;

2) active patients who were admitted in late 1993
who have been recertified at least once between the
March 1994 survey and the June 1994 revisit survey;

3) patients who were admitted following the March
1994 survey and were revoked or discharged before
the revisit survey in June 1994, or patients who
revoked their hospice election or were discharged
between March and June 1994 regardless of whether
they were admitted;

4) patients who had been recertified in the
extension period of unlimited duration since
January 1994 with diagnoses that were questionable
as terminally ill.

HCFA Supp. Br. at 5.

There is no witnesses' testimony concerning such criteria. I
do not construe counsel's arguments to be evidence, and I do
not consider the use of such criteria to be proven facts.
Moreover, these criteria are specious, and even the
application of these criteria would not render the resurvey
results valid.

With respect to the first criterion, HCFA asserts without any
evidentiary foundation that Petitioner did not provide HCFA
with active records of anyone who was admitted after March of
1994 because there was no such admissions. HCFA Supp. Br. at
6. Even assuming that admissions records from prior to May
5, 1994 would be relevant, the mere absence of new admissions
records from March until June 6, 1994 shows that HCFA lacked
certain essential facts for proving that Petitioner failed to
implement its new admissions and referral criteria in
accordance with its plan of correction.
33

There is nothing improper to be inferred from the absence of
new admissions between March and June of 1994. I note, for
example, that HCFA's April 7, 1994 letter “strongly urged"
Petitioner to refrain from admitting any new Medicare
patients “effective with the date of receipt of this letter,
until such time as this office has determined that all
Conditions of Participation are met." HCFA Ex. 15 at 2.

(2). HCFA's arguments and evidence concerning the

With respect to the third selection criterion alleged by
HCFA, HCFA contends that the criterion was applied to
ascertain whether the discharges resulted from the
interdisciplinary group's implementation of the revised plan
of correction and determination of nonterminal illness, or
whether the discharges occurred for other reasons, such as
the patient's revocation of his election or insistence by the
family. HCFA Supp. Br. at 6. Whether or not records were
Selected on this basis, the reasons for the discharges do not
support HCFA's decision to terminate Petitioner's provider
agreement.

HCFA reviewed discharge records in the first survey but found
no problems with physician services in those discharge
records. HCFA Ex. 15 at 3 - 11. Yet in citing Petitioner
for noncompliance with physician services after the June 6,
1994 revisit survey, HCFA's SOD listed at least three
instances where patients were discharged. HCFA Ex. 20. There
was no evidence that the discharges were inappropriate or in
contravention of the plan of correction.

In addition, HCFA has never explained its reasons for
differentiating between discharges based on the medical
diagnosis, the patients' revocation of their elections, or
the family's insistence for another type of care. All are
permissible reasons for a hospice to discharge a patient.
There is no showing by HCFA, for example, that patients
revoked their election or the family removed the patients
from the hospice shortly after Petitioner's doctors had
certified them as eligible under the revised plan of
correction.

HCFA uses the evidence from these discharged patients’
records to draw conclusions which I do not find to be
appropriate. I note as an example the situation of one
34

patient (# 5 or # 308)*! whose records were placed into
evidence by HCFA. After the date on which Petitioner was to
have implemented its revised plan of correction, the
physician's progress notes of June 4, 1994 indicated that the
patient had improved and had a life expectancy of more than
six months. Tr. at 135 - 36. This patient's recertification
was scheduled for June 7, 1994; but, as of June 4, 1994,
Petitioner had learned that the patient's family wished to
move him out of Puerto Rico. HCFA Ex. 41 at 12. HCFA did
not allege that this patient's subsequent discharge proved
noncompliance on its SOD. HCFA Ex. 20. However, HCFA's
surveyor described the foregoing events, including the
circumstances concerning the patient's discharge, to support
the conclusion that Petitioner was out of compliance with
physician services, because the patient was not terminally
ill. Tr. at 135. I do not agree that the foregoing evidence
establishes noncompliance as of the revisit survey date. If
anything, the evidence shows that after Petitioner was
supposed to have implemented its revised plan, Petitioner's
doctor began evaluating this patient properly and this
patient was discharged based on the family's decision made
prior to the scheduled date for his recertification.

HCFA states also in its supplemental brief that patient # 1f
was discharged on April 4, 1994 because Petitioner determined
him not to be terminally ill. HCFA Supp. Br. at 15.

However, instead of conceding that Petitioner acted correctly
in discharging him, HCFA takes the position that this
patient's discharge proves Petitioner understood the Medicare
requirement of terminal illness in April and Petitioner
should have "taken measures to correct this problem through
the recertification process of each patient to determine
whether they were terminally ill." See HCFA Supp. Br. at

14 - 15. HCFA's attribution of fault is unfounded when it
has not shown when all patients of the hospice were due for
recertification and, as discussed below, it cited Petitioner
for having improperly recertified patients before Petitioner
even submitted its revised plan for approval.

I conclude on the record as a whole that HCFA's evidence
concerning the discharge of patients between March and June
6, 1994 does not support the conclusion that Petitioner's
provider contract was properly terminated.

21 I have avoided identifying patients more frequently
in this case due to the time consuming nature of explaining
the identification processes. HCFA used two systems for
identifying patients by numbers after having entered into
record the relevant documents containing the patients' names.
(The last page of HCFA Ex. 20 provides a cross-reference for
the various patient numbers applicable to the resurvey.)
During hearing, Petitioner used the patients' names of record
as well as one or more of HCFA's identification numbers.
With respect to the second and fourth selection criteria,
HCFA contends that they were used to assure that Petitioner
"had corrected the existing systemic problem and had
established new on-going procedures to assure the systemic
problems would not recur." HCFA Supp. Br. at 6. HCFA
contends that correcting existing problems means that
Petitioner must take actions such as recertifying each of its
patients to determine whether they were terminally ill. HCFA
Supp. Br. at 14. The fundamental flaw in these arguments is
that when HCFA accepted the revised plan of correction, HCFA
agreed for Petitioner to correct the existing systemic
problems through the prospective application of certain
specified new procedures.

HCFA's letter dated April 7, 1994 required only a plan that
provides "reasonable assurances that conditional level
compliance will be attained ...." HCFA Ex. 15 at 2
(emphasis added). During the hearing, I asked HCFA's lead
surveyor during both the March and June surveys whether it
was necessary for a provider to have corrected all of the
problems by the time of the revisit survey. Tr. at 99. I
note specifically the following part of her answer, which
contradicts HCFA's current contention that Petitioner should
have reevaluated every patient by the time of the resurvey:

We wouldn't expect that every patient that we went
back to see, that we would pull those old records
and that things had been corrected with those
patients, but what we would look for is to say "all
right, this is what you said you were going to do,
now you've admitted X number of people in this
period of time; have you followed your plan of
correction," and you know, if it's shown that they
have followed the plan of correction, then they
would be back into compliance. We don't expect
total perfection, but we expect enough corrections
to have taken place to show that they understand
what the original deficiency was and that they are
working towards it not re-occurring.

Tr. at 100.

HCFA attempts to circumvent the terms of Petitioner's revised
plan and its usual expectations on revisit surveys by arguing
that it reviewed records under criteria 2 and 4 because
Petitioner was on notice since at least April of 1994 that it
was required to correct existing problems by treating and
36

meeting the medical needs of the terminally ill. HCFA Supp.
Br. at 6, 9. (HCFA uses the April date because the SOD from
the first survey was sent to Petitioner on April 7, 1994.
HCFA Ex. 15.) This type of argument ignores the parties'
actions since HCFA issued its April 7, 1994 letter.

The evidence of record shows that nearly all of the problems
that may be associated with the use of these two criteria
arose prior to May 5, 1994. E.g., HCFA Memo at 11 - 22; HCFA
Ex. 20.% HCFA did not identify in its briefs even one
instance of improper recertification or failure to timely
recertify that which occurred after May 5, 1994. Instead,
HCFA improperly relies on certifications such as the one done
on April 12, 1994, for which HCFA concludes that supporting
documentation and a prognosis were lacking. HCFA Ex. 20 at
5. I agree with Petitioner that HCFA improperly used other
examples as well to allege noncompliance when the
certifications in those examples occurred before the date
Petitioner implemented the revised plan. P. Supp. Br. at 2 -
4.

As an example, I note that HCFA specifically introduced
testimony to establish the impropriety of various
certifications that were made prior to May 5, 1994 for one
patient (patient # 6 or # 277). Tr. at 281-97. Yet, the
documents submitted by HCFA show also, as correctly noted by
Petitioner (P. Supp. Br. at 3 - 4), that this patient
underwent the recertification process after May 5, 1994 and
was discharged on June 29, 1994 pursuant to the results of
the interdisciplinary group meeting. HCFA Ex. 42 at 6. The
available evidence concerning Petitioner's actions on this
patient after May 5, 1994 does not indicate deviation from
the revised plan of care. In addition, since Petitioner did
not receive the resurvey SOD until after July 14, 1994 and
HCFA did not allege any problems with this particular patient
until the time of hearing, there is no evidence that
Petitioner specifically discharged this patient due to HCFA's
revisit survey findings. HCFA Exs. 20, 22, 23.

After reviewing the other relevant exhibits and testimony
concerning recertification done after May 5, 1994, I found
only information that did not amount to a substantial
deviation from Petitioner's obligation to implement its
revised plan of correction. For example, for one patient

2 As parts of certain exhibits, HCFA did submit some
documents that it could not have reviewed during the June 6,
1994 resurvey. For example, there is a page showing a
notation on June 16, 1994, indicating that the doctor will
visit patients soon to decide whether to continue
"illegible;" there is another notation dated June 29, 1994
indicating that the same patient was found not to be
terminally ill and would be discharged. HCFA Ex. 42 at 6. I
assume HCFA came into possession of such documents pursuant
to prehearing discovery.
37

whose records HCFA reviewed (see HCFA Ex. 41), the
interdisciplinary group's minutes of May 19 and June 2, 1994
were not in the file at the time of the revisit survey on
June 6. Tr. at 135. However, Petitioner told HCFA surveyors
that the minutes were being typed at that time. Tr. at 135.
HCFA did not present any evidence to contradict Petitioner's
explanation.

Nor did I find persuasive HCFA's argument that its fourth
criteria (selecting records of patients recertified in the
extension period of unlimited duration since January 1994
with diagnoses that were questionable as terminally ill) was
based on Petitioner's statements in its revised plan of
correction at Addendum I, items 11 and 13. HCFA Supp. Br. at
5. Item 11 of Addendum I cited by HCFA states that
Petitioner's interdisciplinary group “will monitor" the
status of a patient as part of the recertification process.
HCFA Ex. 18 at 5. Item 13 of Addendum I cited by HCFA refers
to an audit to be conducted by Petitioner's quality assurance
personnel after a patient is admitted. Id. According to the
revised plan of correction, the purpose of the audit is to
ensure that the documentation in the record evidences the
patient's terminal prognosis and, "“[i]f there is not
sufficient findings of the terminal condition, this
information will be brought to the attention of the
Interdisciplinary Group for decision making for
recertification or discharge (Enclosure 8)." Id.

The words in the part of the revised plan cited by HCFA do
not support HCFA's contention that it may properly evaluate
Petitioner's success in implementing the revised plan for
physician services by surveying the records of patients who
were recertified in the extension period of unlimited
duration since January of 1994. As earlier noted,
Petitioner's new recertification procedures were to involve
the taking of specified actions on or shortly before the date
each patient was due for recertification. See HCFA Ex. 18 at
14 - 16. For example, the interdisciplinary group “will
collect recertification dates on each patient on a monthly
basis." HCFA Ex. 18 at 14. Moreover, in arguing that item
13 of Addendum I supports HCFA's selection of records for the
revisit survey, HCFA failed to include the "Enclosure 8"
referenced in said item.% The information before me does

not indicate that, as a part of its revised plan of
correction Petitioner had committed to reassess or recertify
those patients whose records HCFA said it reviewed under the
fourth criteria.

2% When I ordered the parties to submit supplemental
briefs, I gave them the opportunity to file any “enclosure”
referenced in the revised plan of correction. Order of
February 14, 1995. HCFA then resubmitted its exhibit 18 with
additional pages but without “Enclosure 8."
38
CONCLUSION

For all of the reasons stated above, I set aside HCFA's
decision of June 7, 1994 to terminate Petitioner's provider
agreement effective June 9, 1994 based on the results of the
June 6, 1994 revisit survey. See HCFA Ex. 21.

However, if HCFA wishes to pursue those plan of care problems
noted during the June 6, 1994 revisit survey, HCFA may follow
its usual procedures by proceeding with a new notice to
Petitioner based on the plan of care condition of
participation. In addition, HCFA may take other actions not
inconsistent with my findings in this decision with respect
to physician services.

I note especially my finding that HCFA's evidence from the
March 1994 survey adequately supported the conclusion that
Petitioner was out of compliance with the physician services
condition as of March 1994. I have not held in this decision
that Petitioner has implemented its revised plan of
correction as alleged or has come into compliance with the
condition of participation of physician services. My ruling
against HCFA on the termination issue is based on HCFA's
failure to sustain its burden of proof with respect to the
June 6, 1994 revisit survey, the results of which HCFA used
to justify terminating the provider agreement on June 9,
1994. HCFA Ex. 21. Primarily because HCFA had selected
inappropriate patient records for review during the June 6,
1994 revisit survey, HCFA lacked the requisite relevant
evidence for proving that Petitioner failed to remedy its
physician services problems in accordance with the plan of
correction approved by HCFA. HCFA is not precluded by this
decision from taking other actions to ascertain and enforce
Petitioner's compliance with the physician services condition
of participation.

/s/

Mimi Hwang Leahy

Administrative Law Judge