Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Brookewood Nursing and Rehabilitation Center,
(CCN: 04-5287),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-13-276
Decision No. CR3824
Date: April 30, 2015
DECISION

In this case, we again consider a long term care facility’s obligation to protect its
residents from the abusive behaviors of others.

Petitioner, Brookewood Nursing and Rehabilitation Center, is a long-term care facility,
located in De Queen, Arkansas, that participates in the Medicare program. Based on a
complaint investigation survey, completed September 20, 2012, and a follow-up survey
completed November 14, 2012, the Centers for Medicare and Medicaid Services (CMS)
determined that the facility was not in substantial compliance with Medicare program
requirements and that its deficiencies posed immediate jeopardy to resident health and
safety. CMS imposed civil money penalties of $4,050 per day for 58 days of immediate
jeopardy, followed by $600 per day for 56 days and then $50 per day for 21 days of
substantial noncompliance that was not immediate jeopardy. Petitioner appeals.

For the reasons set forth below, I find that, from July 23 through December 4, 2012, the
facility was not in substantial compliance with Medicare program requirements and that,
from July 23 through September 18, 2012, its substantial noncompliance posed

immediate jeopardy to resident health and safety. The penalties imposed are reasonable.
I. Background

The Social Security Act (Act) sets forth requirements for nursing facility participation in
the Medicare program, and authorizes the Secretary of Health and Human Services to
promulgate regulations implementing those statutory provisions. Act § 1819. The
Secretary’s regulations are found at 42 C.F.R. Part 483. To participate in the Medicare
program, a nursing facility must maintain substantial compliance with program
requirements. To be in substantial compliance, a facility’s deficiencies may pose no
greater risk to resident health and safety than “the potential for causing minimal harm.”
42 CFR. § 488.301.

The Secretary contracts with state survey agencies to conduct periodic surveys to
determine whether skilled nursing facilities are in substantial compliance. Act § 1864(a);
42 C.F.R. § 488.20. Each facility must be surveyed annually, with no more than fifteen
months elapsing between surveys. 42 C.F.R. § 488.308(a). Facilities must be surveyed
more often, if necessary, to ensure that identified deficiencies are corrected. Act

§ 1819(g)(2)(A); 42 C.F.R. §§ 488.20(a); 488.308. The state agency must also
investigate all complaints. Act § 1819(g)(4).

In this case, surveyors from the Arkansas Department of Human Services (state agency)
completed a complaint investigation survey on September 20, 2012. Based on their
findings, CMS determined that the facility was not in substantial compliance with
multiple program requirements, specifically:

© 42 C.F.R. §§ 483.13(b) and 483.13(c)(1)(i) (Tag F223) (abuse and staff treatment
of residents), at scope and severity level K (pattern of noncompliance that poses
immediate jeopardy to resident health and safety);

© 42 CFR. §§ 483.13(c)(1)(ii)-(ili), 483.13(c)(2)-(4) (Tag F225 — investigate/report
allegations of abuse) at scope and severity level K;

© 42 C.F.R. § 483.13(c) (Tag F226 — policies to prohibit abuse and neglect) at scope
and severity level K;

e 42C.F.R. § 483.75 (Tag F490 — administration) at scope and severity level K.

CMS Ex. 3.

Surveyors returned to the facility and completed a follow-up survey on November 14,
2012. CMS determined that the facility’s deficiencies no longer posed immediate
jeopardy but that its substantial noncompliance continued. Thereafter, CMS determined
that the facility returned to substantial compliance on December 5. CMS Ex. | at 4-8, 16;
CMS Ex. 2.
CMS imposed against the facility CMPs of $4,050 per day for 58 days of immediate
jeopardy (July 23 — September 18, 2012), $600 per day for 56 days of substantial
noncompliance that was not immediate jeopardy (September 19 — November 13, 2012),
and $50 per day for an additional 21 days of substantial noncompliance that was not
immediate jeopardy (November 14 — December 4, 2012), for a total penalty of $269,550
($234,900 + $33,600 + $1,050 = $269,550). CMS Ex. | at 4. Petitioner timely requested
review.

The parties have filed opening briefs (CMS Br.; P. Br.) and exhibits, which included the
written direct testimony of their witnesses. CMS submitted 27 exhibits (CMS Exs. 1-27)
and Petitioner submitted 17 exhibits (P. Exs. 1-17). Following a pre-hearing conference,
I admitted into evidence CMS Exs. 1-27 and P. Exs. 1-17. Summary of Pre-hearing
Conference and Order Establishing Procedures for Hearing (June 14, 2013). Thereafter,
because neither party elected to cross-examine any witnesses, we did not convene an in-
person hearing. Order (July 22, 2013). Each party submitted a closing brief (CMS Cl.
Br; P. Cl. Br.) and a reply (CMS Reply; P. Reply).

CMS attached to its closing brief, marked as Closing Brief Exhibit A (CMS Ex. A), a
copy of the facility’s compliance history. Petitioner attached to its closing brief, marked
as Attachments FN 82, FN 85, and FN 86, copies of email correspondence between
facility employees and state agency and CMS employees.’

In the absence of any objections, I admit into evidence CMS Ex. A and Petitioner’s
Attachments (P. Attach.) FN 82, FN 85, and FN 86.

IL. Issues
The issues before me are:

1. Was the facility in substantial compliance with Medicare participation
requirements from July 23 through December 4, 2012;

2. If, from July 23 through September 18, 2012, the facility was not in substantial
compliance with Medicare participation requirements, did its deficiencies then
pose immediate jeopardy to resident health and safety; and

3. If the facility was not in substantial compliance with Medicare participation
requirements, are the penalties imposed reasonable.

' The “EN” refers to the footnotes in Petitioner’s closing brief that cite the email
correspondence.
Petitioner points out that, from October 18 until December 4, 2012, CMS also denied the
facility payment for new admissions (DPNA). Petitioner argues that I should review
whether imposing this remedy is reasonable. But such review is beyond my authority. I
may review CMS’s finding of noncompliance that results in its imposing a remedy. 42
C.F.R. § 498.3(b)(13). I may not review CMS’s choice of remedy nor the factors it
considered in determining the remedy. 42 C.F.R. §§ 488.408(g)(2); 498.3(d)(14);
Beverly Health & Rehab. Servs., Inc. v. Thompson, 223 F. Supp. 73, 111 (D.D.C. 2002)
(holding that the “determination of what remedy to seek is beyond challenge.”). I
therefore decline to consider whether the DPNA is reasonable.

Petitioner also challenges CMS’s finding that the facility’s deficiencies constituted a
“pattern” of noncompliance. P. Cl. Br. at 19. Again, my authority is limited. I may
review CMS’s scope and severity findings (which include finding a pattern of
noncompliance) only if a successful challenge would affect the range of the CMP or if
CMS has made a finding of substandard quality of care that results in the loss of approval
of a facility’s nurse aide training program. 42 C.F.R. § 498.3(b)(14). The finding of
immediate jeopardy here is reviewable because it affects the range of the CMP, moving it
from a category 2 remedy ($50 — $3,000 per day) to a category 3 remedy ($3,050 —
$10,000 per day). The scope of the deficiency (i.e., pattern of noncompliance) does not.”

III. Discussion

A, The facility was not in substantial compliance with 42 C.F.R. §§ 483.13(b)
and (c) and 483.75 because its administration and staff allowed one of its
residents to abuse her roommates; administration and staff failed to
intervene, investigate, or report, as required by the regulations and as called
for in the facility’s written policies and procedures.

Program requirements: “Abuse” means the willful infliction of injury, unreasonable
confinement, intimidation, or punishment with resulting physical harm, pain, or mental
anguish. 42 C.F.R. § 488.301.

Facility residents have the right to be free from verbal, sexual, physical, and mental
abuse. 42 C.F.R. § 483.13(b) (Tag F223). To this end, a facility must develop and
implement written policies and procedures that prohibit mistreatment, neglect, and abuse

> Nevertheless, I am authorized to consider scope and severity in determining whether
the penalty imposed is reasonable. 42 C.F.R. § 488.404. As discussed below, the
deficiencies here were not isolated; they involved three residents and multiple staff
members.

> My findings of fact and conclusions of law are set forth, in bold and italics, as captions
in the discussion section of this decision.
of residents. 42 C.F.R. § 483.13(c). It must ensure that all alleged violations are reported
immediately to the facility administrator and appropriate state officials. The facility must
have evidence that all alleged violations are thoroughly investigated, and it must prevent
further potential abuse while the investigation is in progress. The results of all
investigations must be reported to the administrator (or designated representative) and to
the appropriate state officials within 5 working days of the incident. If the violation is
verified, the facility must take appropriate action. 42 C.F.R. § 483.13(c)(2), (3), and (4)
(Tags F225, F226).

The facility must also be governed in a manner that enables it to use its resources
effectively and efficiently to attain or maintain the highest practicable physical, mental,
and psychosocial well-being of each resident. 42 C.F.R. § 483.75 (Tag F490).

The facility’s abuse policies. CMS has expressed no criticism of the facility’s written
policies and procedures for preventing abuse, and those policies generally reflect program
requirements. Consistent with the regulations, the policies aim at protecting facility
residents from abuse, including verbal and mental abuse. The policies reflect the
regulatory definition of abuse (§ 488.301) and define verbal abuse as “any use of oral,
written, [or] gestured language that willfully includes disparaging and derogatory terms
to residents or their families, or within hearing distance, regardless of their age, ability to
comprehend or disability.” Mental abuse “includes, but is not limited to, humiliation,
harassment, threats of punishment or deprivation that are likely to provoke fear or alarm.”
CMS Ex. 12 at 12, 13.

The policies direct “any person(s) witnessing or having knowledge of potential or actual
abuse” to report immediately to the administrator (or designee). In the alternative, the
witness may report to the charge nurse, who then must follow the reporting procedures.
CMS Ex. 12 at 14; see also CMS Ex. 12 at 1,5. The witness must complete a written
report that includes names, dates and times, those involved, witnesses, and other pertinent
information. CMS Ex. 12 at 14. The report must be submitted to the facility
administrator within 24 hours. CMS Ex. 12 at 14.

Elsewhere, the policies say that “immediately” after an incident is discovered, the charge
nurse must complete an incident and accident report. The director of nursing (DON)
“immediately” receives a copy of the report for review and investigation. CMS Ex. 12 at
6.

The facility administrator (or designee) must investigate thoroughly all allegations,
making sure that the investigation is timely and effective. The administrator is given the
original report “after the required follow-up documentation is completed” by a licensed
nurse or physician. CMS Ex. 12 at 6. Within 24 hours of the incident’s occurrence, the
administrator must notify the resident’s representative and state and federal agencies of
the incident. At the same time, the administrator (or designee) must take steps to prevent
“further potential abuse” while the investigation is in progress. CMS Ex. 12 at 1, 6, 7.

Results of the investigation must be reported to state (specifically, the Office of Long
Term Care) and federal agencies within five working days. The investigative report must
include: 1) name and age of the residents involved; 2) cognitive level of any resident
with disabilities; 3) description of the incident; 4) date and approximate time of the
incident; 5) where the incident took place; 6) type and location of any injuries; 7) name
and title of the person who discovered or observed the incident; 8) name and title of the
person to whom the incident was reported; 9) list of people in the area at the time of the
incident; 10) name and title of the person suspected; and 11) names of people outside the
facility who were notified of the incident, the date and time they were notified, and the
name of the individual who notified them. CMS Ex. 12 at 2, 6-7.

With respect to resident-on-resident abuse, the policy is explicit: “If the accused is a
resident or resident’s roommate, the individual should be placed in a supervised
temporary separation in order to ensure that the rights of the residents-at-large will be
protected.” CMS Ex. 12 at 1, 9 (emphasis added). The policy directs the DON (or
lesignee) to assess the residents involved (victim and perpetrator) and to document the
findings in the residents’ medical records and care plans. The DON must notify the
resident’s physician of the allegation, status of the investigation, and the resident’s
condition. CMS Ex. 12 at 2, 6.

The facility is supposed to keep at the nurses’ station a list of residents known to be at
risk for abusing others. CMS Ex. 12 at 9. A resident may be subject to discharge from
the facility if her abusive conduct is substantiated. CMS Ex. 12 at 2.

Finally, the facility must correct substantiated allegations of abuse, neglect, or
mistreatment, and document the correction. CMS Ex. 12 at 14.

Resident 1 (R1) was a 73-year-old woman whose diagnoses included transient ischemic
attack, coronary artery disease, diabetic neuropathy, depression, and anxiety. CMS Ex. 5
at 1.

From at least as early as January 2011, R1’s care plan identified her “socially
inappropriate behavior.” She would claim, falsely, that others took her belongings. She
was often angry and unhappy. The plan directed staff to notify her son of the behaviors,
to “intervene to ensure safety of others by confronting [R1] with known untruths,” and to
remind her to lock her valuables in a safe. The plan also said that if R1’s needs could not
be met and she continued to be unhappy and angry, social services staff should assist her
to find a more suitable living environment. CMS Ex. 5 at 20.

R1 occupied the most desirable room in the facility. Not only was it the facility’s largest
room, it was the only one with a private bath and walk-in closet. P. Ex. 1 at 3 (Battiest
Decl.).

It seems that R1 did not like having a roommate and made miserable the lives of those
unfortunate enough to share her room. See, e.g., CMS Ex. 5 at 7 (quoting R1
complaining that her roommate was “getting on her nerves”); CMS Ex. 5 at 8 (describing
R1 as crying because she did not like her roommate); CMS Ex. 5 at 18 (listing 10
“Roommates that R1 Has Had”); CMS Ex. 6 at 32 (indicating that, since her admission,
R1 had 10 to 15 roommates). Yet the facility continued to place residents in her room
and, as the following discussion shows, made minimal — if any — efforts to protect them
from her abuse.

Specifically:

Resident 6 (R6) was R1’s roommate in July 2012. R6 was 67 years old and suffered
from a variety of ailments, including chronic obstructive pulmonary disease, congestive
heart failure, Parkinson’s disease, depression, and anxiety. CMS Ex. 7 at 1. She had
been acutely ill for several days when, on the morning of July 23, 2012, she complained
to the facility’s social services director that R1 was “very mean.” R1 had been “cussing
her” and accused her of stealing. R1 told R6 that she was “glad” R6 was sick. Social
Services Director Cindy Webb, PhD, described R6 as “crying and very upset.” R6 told
Social Services Director Webb that she was willing to move anywhere to get away from
her roommate. CMS Ex. 7 at 5; P. Ex. 13 at 3 (Webb Statement); see P. Ex. 9 (R6 Decl.).
Social Services Director Webb promised that she would “work on getting [R1] moved
out of the room,” which R6 agreed “would be fine.” P. Ex. 13 at 3 (Webb Statement).

Social Services Director Webb reported R6’s complaints “to (unspecified) department
supervisors.” P. Ex. 13 at 3 (Webb Statement). The facility administrator, Dana Battiest,
did not report or investigate R6’s complaints. In fact, no evidence suggests that anyone
informed her of the problem at that time.

R6 was moved out of the room on July 25, 2012. CMS Ex. 14 at 3 (Smith Decl. § 8).

On September 19, R6 told the survey team that R1’s objectionable behavior started on
day one, when she accused R6 of taking $150. “She didn’t want anyone in the room but
her.” R6 said that she was afraid of her roommate and slept outside every night. “Most
of the time I was sitting there crying. Nobody did a thing — they said they would.” They
did not move me “until my nerves were shot.” According to the resident, staff
administered her medications and snacks outside the room. CMS Ex. 6 at 4.
Following the July incident, R1’s behavior did not improve. A social history update,
ated August 30, 2012, describes her as “selfish at times and complains a lot. She is
always hateful to her roommates.” According to her family, “she has been like that her
whole life.” CMS Ex. 5 at 27 (emphasis added).

Resident 2 (R2) was a 79-year-old woman suffering from hypertension, non-insulin-
lependent diabetes, depression, and other ailments, who became R1’s roommate on
August 29, 2012. CMS Ex. 6 at 1; P. Ex. | at 3 (Battiest Decl.).

At 4:00 a.m., on September 6, 2012, R6 told Licensed Practical Nurse (LPN) Jewel Sons
that R1 had been mean to R2. R6 reported that R1 threw a bracelet at R2 and hit her in
the head. She also pinched R2’s foot with a “grabber.” In response, R2 refused to go
into her room all night; instead, she stayed up visiting another resident and watching TV.
CMS Ex. 6 at 5. LPN Sons has admitted that she did not immediately report the
complaint and did not investigate. She did not even ask R2 about it “because it was
hearsay” and she considered R6 a trouble-maker. P. Ex. 17 at 3 (Sons statement). Two
hours after hearing the complaint, LPN Sons mentioned it during the shift change.

A nurse’s note indicates that, at 6:15 that morning, a nurse and a nurse aide encouraged
R2 to go to bed and elevate her swollen feet and ankles. But the resident refused. She
told the nurse aide that she would not sleep in her bed. At about that time, the nursing
shifts changed. At 6:40 a.m., another nurse, identified as LPN Latisha Castillo, spoke to
R2. R2 told her that her roommate (R1) had been yelling and calling her names. She
confirmed that R1 used a “grabber” device to pinch her feet, claiming that she was
snoring. R1 cussed at her. R2 advised LPN Castillo that she slept in a chair in the front
lobby in order to avoid her roommate. CMS Ex. 6 at 5, 10-11; CMS Ex. 5 at 6; P. Ex. 16
at 3 (Castillo Decl.).

In a written declaration, LPN Castillo confirms R2’s complaints, and adds that R2 woke
up to find a bracelet in her bed. R1 told R2 that she’d thrown it at her to awaken her
because she was snoring. P. Ex. 16 at 3 (Castillo Decl.). LPN Castillo reported R2’s
complaints to Administrator Battiest. CMS Ex. 5 at 6; CMS Ex. 6 at 5, 10-11; P. Ex. 16
at 3.

R2 filed a grievance, complaining that her roommate threw a bracelet at her and hit her in
the foot with a grabstick. The facility’s response was minimal; staff met with R1’s son,
who said he would contact his uncle for advice. CMS Ex. 6 at 32. The administrator did
not investigate further or take steps to protect R2 from R1. She did not report the
incident to the appropriate state agency.
In her

own written declaration, R2 confirms that R1 poked her with a grabber stick while

she napped, accused her of stealing money, and demanded that she leave the room when
R1 had certain visitors. R2 also confirms that R1 threw a bracelet at her and that she
(R2) reported the incidents to the activities director. P. Ex. 3.

Even after all of this, facility staff made no significant changes to R1’s care plan, but
continued with interventions that had proved ineffective. A plan entry, dated September
6, 2012, again describes R1’s behavior as “socially inappropriate”; it says that R1 falsely
accused others of taking her belongings, was “often angry and unhappy,” and did not get
along with other residents, “especially roommates.” She frequently instigated arguments.
CMS Ex. 5 at 22. Again, staff were directed to “intervene to ensure safety of others by

T

confro!

nting with known untruths.” CMS Ex. 5 at 22. The social services staff (and

others) seem to have disregarded the longstanding plan intervention directing them to
“assist [R1] to find a more suitable living environment” if the resident “continued to be

unhap

py and angry.” See CMS Ex. 5 at 20.

R2 filed a second grievance on September 18, 2012, complaining that R1 verbally and
mentally abused her. According to DON Jessica Houser, RN, on September 18,
Activities Director Sarah Short told her and Administrator Battiest that R2 complained

that R

had been mean. Specifically, R2 said that R1 poked her in the foot while she was

sleeping and threw a bracelet at her.’ She said that R1 “would pour coffee on her and not

let her

use the bathroom.” P. Ex. 2 at 3 (Short Decl.); P. Ex. 14 at 3 (Houser Decl.); CMS

Ex. 6 at 30. R2 voiced similar complaints to Nurse Surveyor Paula Smith. She told the
surveyor that R1 would not allow her to use the bathroom and, as a result, she wet

hersel

. R1 poured coffee on R2 (Sept. 18 Incident Report). See CMS Ex. 14 at 3 (Smith

Decl. 8).

This time, the facility moved R2 out of the room and instructed R1’s family that she

would

have to leave the facility. CMS Ex. 6 at 32-33. The facility noted that R1 had

numerous roommates; she could not get along with the other residents or her own family.
The report describes her as “very manipulative with staff and other residents.” CMS Ex.

6 at 34.

September 18 Incident Report. The facility finally prepared an incident report, whi
accurately characterizes the September 18 incident as abuse — verbal, physical, and

emotional/mental. CMS Ex. 6 at 29. The report summarizes the incident as follows:

* The description of this incident is so similar to that of the September 6 incident tl

ich

at,

initially, it seemed that only one incident occurred, which the facility reported 12 days

later. However, the parties agree that R1 repeated her September 6 behavior on
September 18. Moreover, the evidence establishes that many of these behaviors w
common for R1. See, e.g., CMS Ex. 5 at 20,27; CMS Ex. 7 at 5.

ere
10

Sara Short, Activities Director, went into [R2’s] room to visit
with her. [R2] proceeded to tell [her] how miserable she is.
Sara asked her to elaborate on what she meant. [R2] said “my
roommate [R1] is mean to me.” “She [pokes] my feet at night
with her hand grabber when I start snoring. She pours coffee
on me, tells me I am crazy and I don’t belong here and how
fat my daughter is as well as she blocks the bathroom door
and tells me I can’t use it that she owns this place and I have
to wet in my pullup.” “She also will not let me and my
family visit in our room and when she has company she tells
me to leave the room and she will come get me when I can
come back then laughs and says that will be never!”
Administrator, Dana Battiest, and DON, Jessica Houser,
[were] notified immediately. The DON and Administrator
spoke with [R2] in the Administrator’s office and she
repeated what she told Sara Short.

CMS Ex. 6 at 30. According to the report, R2 was “immediately removed from the room
and placed in a separate room, on a separate hall, to prevent further abuse.” CMS Ex. 6
at 30-31."

Surveyor Smith interviewed R2 on September 19, 2012. R2 told her that she had been
afraid of R1 from the day she was admitted to the room because R1 accused her of
stealing money. R2 told the surveyor that she sat crying “many days” and had
complained to the facility administrator and the housekeepers. CMS Ex. 14 at 3 (Smith
Decl. 8).

R1 was discharged from the facility on September 18, 2012. CMS Ex. 5 at 5.

Petitioner now denies that R1 abused either of her roommates, characterizing their
interactions as “daily disagreements” and “a roommate dispute.” P. Cl. Br. at 10; P. Ex. 1
at 3 (Battiest Decl.). According to Administrator Battiest, “no signs of abuse were noted
by any of the staff or reported by either resident.” P. Ex. 1 at 3 (Battiest Decl.). This is
plainly incorrect, inasmuch as the facility’s September 18 incident report characterizes
R1’s exchange with R2 as verbal, physical, and emotional/mental abuse. CMS Ex. 6 at
29.

> According to Petitioner, facility policy directed staff to supervise R1, one-on-one,
while the facility investigated the allegations of abuse. Petitioner concedes that staff
disregarded that directive. It justifies the staff's failure to follow policies by claiming,
without support, that they “did not believe one-to-one sitting was necessary....” P. Br.
at 5-6.
11

Petitioner also submits written declarations from the residents themselves. The residents
describe R1’s abusive behavior, but neither realizes that she was abused. P. Exs. 3, 9.
The residents may not have recognized abuse, but, based on the regulatory definition as
well as the facility’s own policy definitions, R1 verbally and mentally abused them both.
The uncontroverted evidence establishes that R1 deliberately swore at them, ridiculed
them, and falsely accused them of stealing, leaving them tearful and upset. Her
comments were disparaging and derogatory. She forced them out of their own room and
would not allow them visitors. She denied them access to the bathroom and physically
attacked R2 several times. These actions constitute abuse.

Petitioner concedes that a “reasonable person could potentially view the incident on
September 18, 2012, as an incident of resident-to-resident abuse,” and, unlike the earlier
grievances, staff “interpreted this report as an allegation of potential abuse,” triggering a
report and investigation. P. Cl. Br. at 10. But R1’s September 6 conduct was virtually
identical to her September 18 conduct: swearing, name-calling, pinching (with grabber
device), and throwing a bracelet. Petitioner has not explained why the conduct should
not also have triggered a report and investigation on September 6, as indeed it should
have.

The regulations and facility policies require the facility to report and investigate
thoroughly all alleged violations. Even if I agreed that the July 23 and September 6
incidents were not abuse (which I do not), they were significant enough to trigger the
facility’s obligation to investigate and report.

Petitioner does not claim to have reported these incidents but suggests that it investigated
and, finding no evidence of abuse, declined to report. P. Cl. Br. at 16. Listening to a
resident’s complaint hardly qualifies as an investigation, and Petitioner submits no
incident reports or other documentation establishing that anyone investigated these
incidents beyond speaking to the victims.

Social Services Director Webb reported R6’s July 23 complaints “to the department
supervisors,” but neither she nor Administrator Battiest claims that anyone reported them
to the administrator or that Administrator Battiest took any action. See P. Ex. | (Battiest
Decl.); P. Ex. 13 (Webb Decl.); CMS Ex. 10 at 2 (indicating that Administrator Battiest
did not remember July 23 incident). With respect to R2’s September 6 complaints, LPN
Sons admits that, contrary to facility policies, she did not investigate at all and waited two
hours before reporting to anyone. P. Ex. 17 at 3 (Sons Decl.); P. Ex. 16 (Castillo Decl.);
see CMS Ex. 12 at 14 (requiring any person with knowledge of potential abuse to report
immediately and complete a written report for the administrator). When she learned of
the allegations, LPN Castillo appropriately notified Administrator Battiest, who spoke to
R2 and her daughter, offering the resident a room change, but otherwise took no action.
P. Ex. 1 (Battiest Decl.).
12

Nor am I persuaded that the facility discharged its duties to protect its residents from
abuse by offering to move them to less desirable rooms, a “solution” that seems to punish
the victim by requiring her to disrupt her living situation and move to a smaller room
with fewer amenities at an unknown location with an unknown roommate.° Besides, the
facility would not allow R1 to occupy the room by herself. P. Ex. 13 at 4 (Webb Decl.)
(“It was explained to [R1 and R6] that Medicaid does not allow for private room billing
in the nursing facility.”). Inevitably, someone else would have moved in with R1,
placing that individual at risk for abuse.

According to its policies, the facility was supposed to maintain and post a list of residents
at risk for abusing others. CMS Ex. 12 at 9. Facility staff were unable to produce such a
list. CMS Ex. 14 at 4-5 (Smith Decl. § 10). Petitioner claims it had no such list because
none of its residents were likely to abuse others. P. Cl. Br. at 17. From at least as early
as January 2011, R1’s care plan identified her “socially inappropriate” behavior,
specifically described some abusive behaviors (falsely accusing others), and directed staff
to “intervene to ensure the safety of others... .” CMS Ex. 5 at 20. Certainly, by July 23,
2012, when she abused R6, the facility was on notice that R1 was at risk for abusing
others. This establishes that the facility housed at least one resident who, according to
facility policies, should have been on that list.

Finally, Petitioner argues that section 483.13(c)(1)(i) prohibits staff abuse only, not
resident-to-resident abuse, so the facility did not violate that provision. P. Cl. Br. at 12.
This argument fails. Facilities are absolutely obligated to keep their residents free from
abuse, without regard to its source. 42 C.F.R. § 483.13(b). Section 483.13(c)(1)(i) puts
the onus on the facility to protect its residents by developing and implementing policies
that prevent abuse, including resident-to-resident abuse. See, e.g., Martha and Mary
Lutheran Services, DAB No. 2147, at 12-13 (2008) (finding substantial noncompliance
with section 483.13(c) where facility staff failed to implement facility policies and
procedures to prevent resident-to-resident abuse). Because the facility here did not
implement its own policies for preventing abuse, it was not in substantial compliance
with section 483.13(c).

Administration. A finding of substantial noncompliance in the facility’s administration
may derive from findings of substantial noncompliance in other areas.

[W]here a facility has been shown to be so out of compliance
with program requirements that its residents have been
placed in immediate jeopardy, the facility was not

® R6 initially declined the facility’s offer to relocate her. She apparently agreed only
after she personally found herself an acceptable alternative. P. Ex. 9.
13

administered in a manner that used its resources effectively to
attain the highest practicable physical, mental, and
psychosocial well-being of each resident.

Asbury Ctr. at Johnson City, DAB No. 1815, at 11 (2002); Odd Fellow and Rebekah
Health Care Facility, DAB No. 1839, at 7 (2002); Stone Cnty. Nursing and Rehab. Ctr.,
DAB No. 2276, at 15-16 (2009). As discussed below, I find that the facility’s
deficiencies posed immediate jeopardy to resident health and safety, which, by itself,
justifies the finding that the facility was not in substantial compliance with 42 C.F.R.

§ 483.75.

Moreover, as the above discussion establishes, the failures here were directly attributable
to administrative, as well as staff, failures. The facility’s administration disregarded
facility policies in failing to investigate thoroughly and report resident abuse. It also fell
short in protecting residents from R1’s abusive behavior and failed to maintain a list of
residents with such behavior issues, as called for in the facility policies. The facility was
therefore not administered in a manner that used its resources effectively to attain or
maintain the highest practicable physical, mental and psychosocial well-being of its
residents and was not in substantial compliance with 42 C.F.R. § 483.75.

State IDR Findings. In addition to pursuing this appeal, Petitioner disputed the survey
findings by means of the state’s IDR (Independent Dispute Resolution) process. 42
C.F.R. § 488.331. Petitioner claims that, based on findings of the state IDR panel, the
facility’s deficiencies existed for four hours only — from 8:30 a.m. until 12:30 p.m. on
September 18. P. Cl. Br. at 23; P. Attach. FN 85. According to Petitioner, because CMS
did not explicitly reject the IDR findings, it is bound by them. P. Cl. Br. at 23-25.
Petitioner’s argument is puzzling because the IDR determinations make no such finding
with respect to the duration of the noncompliance. To the contrary, for each of the
deficiencies cited, the panel recommended that the deficiency “remain as cited.” CMS
Ex. 13 at 2, 37, 38, 40. The panel refers to the hours 8:30 a.m. until 12:30 p.m. to point
out that the evidence presented “did not include what actions the [f]acility took to protect
all the other [rJesidents from [R1] on 9/18/12 from 8:30 a.m. until 12:30 p.m. when
discharged. .. .” CMS Ex. 13 at 3, 38, 39, 41. Pointing out the absence of evidence on a
narrow factual point obviously does not qualify as a “finding” that would merit CMS’s
response.

Moreover, to the extent that Petitioner is independently challenging the duration of the
immediate jeopardy and substantial noncompliance findings, the challenge fails. The
regulations provide that, once a facility has been shown to be noncompliant, the remedies
imposed “continue until . . . [t]he facility has achieved substantial compliance as
determined by CMS or the [s]tate based upon a revisit or after an examination of credible
written evidence that it can verify without an on-site visit” or until the facility is
terminated. 42 C.F.R. § 488.454(a). Based on this, the Departmental Appeals Board
14

(Board) “has long held that CMS is not obliged to ‘provide affirmative evidence of
continuing noncompliance for each day that a remedy is in place.’” Golden Living Ctr. —
Frankfort, DAB No. 2296, at 20 (2009), citing Coquina Ctr., DAB No. 1860, at 23
(2002); Regency Gardens Nursing Ctr., DAB No. 1858 (2002). The facility must
demonstrate that it has corrected the noncompliance and implemented measures to
prevent its recurrence. Golden Living Ctr., DAB No. 1860, at 20. Petitioner has not met
this burden.

With respect to the duration of immediate jeopardy, R1 began menacing her roommate at
least as early as July 23 (probably earlier), causing serious harm. So long as the facility
exposed residents to R1’s abusive behavior, the likelihood of serious harm continued and
did not abate until R1’s discharge on September 18. Thus, CMS properly found that the
facility’s noncompliance posed immediate jeopardy to resident health and safety from
July 23 through September 18, 2012.

R1’s discharge may have removed the immediate jeopardy, but it did not bring the
facility into substantial compliance. The facility’s deficiencies were systemic. Among
other problems, staff were unaware of the facility’s policies for preventing abuse. They
plainly did not recognize abuse (or chose to overlook it) and did not understand their
obligations to investigate and report. The facility has provided neither argument nor
evidence to establish that it corrected these underlying problems and achieved substantial
compliance any earlier than December 4, 2012.

B. CMS’s determination that, from July 23 through September 18, 2012, the
facility’s deficiencies posed immediate jeopardy to resident health and safety
is not clearly erroneous.

Immediate jeopardy. Immediate jeopardy exists if a facility’s noncompliance has caused
or is likely to cause “serious injury, harm, impairment, or death to a resident.” 42 C.F.R.
§ 488.301. CMS’s determination as to the level of a facility’s noncompliance (which
would include an immediate jeopardy finding) must be upheld unless it is “clearly
erroneous.” 42 C.F.R. § 498.60(c). The Board has observed repeatedly that the “clearly
erroneous” standard imposes on facilities a “heavy burden” to show no immediate
jeopardy, and has sustained determinations of immediate jeopardy where CMS presented
evidence “from which ‘[o]ne could reasonably conclude’ that immediate jeopardy
exists.” Barbourville Nursing Home, DAB No. 1962, at 8 (2004), citing Koester
Pavilion, DAB No. 1750 (2000); Daughters of Miriam Ctr., DAB No. 2067, at 7, 9
(2007).

Here, at least two facility residents were subjected to the abusive conduct of their
roommate, a situation likely to cause them serious harm. And the resulting distress they
endured is well-documented. R6 was described as “crying and very upset.” CMS Ex. 7
at 5. She complained that her “nerves were shot.” CMS Ex. 6 at 4. R2 described how
15

“miserable” she was. CMS Ex. 6 at 30. She had been “crying for many days.” CMS Ex.
14 at 3. Moreover, the residents refused to sleep in their own beds at night, preferring to
avoid potential abuse by sitting up or wandering the facility. CMS Ex. 6 at 4, 5, 10-11.
Indeed, after a night spent outside her room, R2’s feet and ankles were swollen and
should have been elevated. Yet, she refused to go to her bed, because doing so would
mean encountering her abusive roommate. CMS Ex. 6 at 5.

Because the facility’s deficiencies were likely to cause and did cause serious harm to two
facility residents, CMS’s determination that the deficiencies posed immediate jeopardy to
resident health and safety is not “clearly erroneous.”

C. The penalties imposed —$4,050 per day for the days of immediate jeopardy
and $600 per day, reduced to $50 per day, for the days of substantial
noncompliance that was not immediate jeopardy — are reasonable.

Here, CMS imposed a penalty of $4,050 per day for the period of immediate jeopardy,
which is at the very low end of the per-day penalty range for situations of immediate
jeopardy ($3,050-$10,000). 42 C.F.R. §§ 488.408(e)(1)(iii); 488.438(a)(1)(i).

To determine whether the CMPs are reasonable, I apply the factors listed in 42 C.F.R.

§ 488.438(f): 1) the facility’s history of noncompliance; 2) the facility’s financial
condition; 3) factors specified in 42 C.F.R. § 488.404; and 4) the facility’s degree of
culpability, which includes neglect, indifference, or disregard for resident care, comfort
or safety. The absence of culpability is not a mitigating factor. The factors in 42 C.F.R.
§ 488.404 include: 1) the scope and severity of the deficiency; 2) the relationship of the
deficiency to other deficiencies resulting in noncompliance; and 3) the facility’s prior
history of noncompliance in general and specifically with reference to the cited
deficiencies.

I consider whether the evidence supports a finding that the amount of the CMP is at a
level reasonably related to an effort to produce corrective action by a provider with the
kind of deficiencies found, and in light of the above factors. I am neither bound to defer
to CMS’s factual assertions, nor free to make a wholly independent choice of remedies
without regard for CMS’s discretion. Barn Hill Care Ctr., DAB No. 1848, at 21 (2002);
Cmty. Nursing Home, DAB No. 1807, at 22 et seg. (2002); Emerald Oaks, DAB No.
1800, at 9 (2001); CarePlex of Silver Spring, DAB No. 1683, at 8 (1999).

As a threshold matter, Petitioner complains that the state agency recommended, and CMS
initially considered, imposing four per instance CMPs, which would have totaled
$10,000. P. Cl. Br. at 20; compare CMS Ex. 1 at 16-17 with CMS Ex. 1 at 1-13. But
CMS opted to impose per day, rather than per instance, CMPs, which, given the duration
of the noncompliance, resulted in a much higher penalty. First, it is well-settled that,
when the state agency and CMS disagree as to remedies, CMS’s determination applies.

16

See, e.g.,42 C.F.R. § 488.452(d)(2). Second, as discussed above, I have no authority to
review CMS’s selection of remedies or its decision-making processes. 42 C.F.R.
§§ 488.408(g)(2); 498.3(d)(14).

With respect to the section 488.438(f) factors, I note first that the facility has a long and
dismal history of substantial noncompliance:

In June 2005, the facility was not in substantial compliance with multiple program
requirements, at scope and severity level E (pattern of noncompliance with the
potential for more than minimal harm). Deficiencies were cited under 42 C.F.R.

§ 483.20(k) (Tag F281), which relates to resident assessment: comprehensive care
plans. Three deficiencies were cited under 42 C.F.R. § 483.25(a) and (c) (Tags
F312, F314, and F316), which include requirements for quality-of-care. CMS
imposed no remedies;

In March 2006, the facility had F-level (widespread deficiencies with the potential
for more than minimal harm) life safety code deficiencies. It had four quality-of -
care deficiencies, cited under 42 C.F.R. § 483.25(g) (Tag F322); 42 C.F.R.

§ 483.25(h) (Tags F323, F324); and 42 C.F.R. § 483.25(m) (Tag F333). The
quality-of-care deficiencies were cited at scope and severity level E. The facility
was also not in substantial compliance with 42 C.F.R. §§ 483.35 (Tag F364) and
483.35(d) (Tag F371), which impose dietary services requirements. The facility
was not in substantial compliance with 42 C.F.R. § 483.75(1) (Tag F514),
administration requirements relating to clinical records, also at scope and severity
level E. Again, CMS imposed no remedies;

In July 2006, the facility was again not in substantial compliance with quality-of -
care requirements related to preventing accidents, 42 C.F.R. § 483.25(h) (Tag
F323). This deficiency was very serious; it was cited at scope and severity level K
(pattern of noncompliance that poses immediate jeopardy to resident health and
safety). CMS imposed a CMP of $3,250;

In December 2006, the facility was not in substantial compliance with 42 C.F.R.
§ 483.10(c) (Tag F159), which includes requirements for safeguarding resident
funds. The deficiency was cited at scope and severity level E. CMS imposed no
remedies;

In April 2007, the facility was again not in substantial compliance with life safety
code requirements at scope and severity level F. It was again not in substantial
compliance with quality-of-care requirements relating to accident prevention, 42
C.F.R. § 483.25(h) (Tag F323), and dietary services requirements, 42 C.F.R.

§ 483.35 (Tag F371), at scope and severity level E. Other deficiencies were cited
under 42 C.F.R. § 483.10(b) (Tag F157), which governs residents rights:
17

notification of changes, and 42 C.F.R. § 483.25 (Tag F309), quality-of-care, at
scope and severity level G (an isolated instance of noncompliance that causes
actual harm). CMS imposed no remedies;

In March 2008, the facility again had multiple deficiencies, including level D (an
isolated instance of noncompliance with the potential for more than minimal
harm) life safety code deficiencies; four quality-of-care deficiencies, violating 42
C.F.R. §§ 483.25(a) (Tag F312), 483.25(1) (Tag F329), and 483.25(m) (Tags F332,
and F333), cited at scope and severity level E. It was again not in substantial
compliance with dietary services requirements, 42 C.F.R. § 483.35(c) (Tag F363),
also at scope and severity level E. CMS imposed no remedies;

In January 2009, the facility had life safety code violations and dietary services
deficiencies, 42 C.F.R. 483.35 (Tag F371), at scope and severity level F. CMS
imposed no remedies;

In October 2009, the facility was again not in substantial compliance with quality-
of-care requirements, 42 C.F.R. § 483.25 (Tag F309) at scope and severity level
D. CMS imposed no remedies;

In February 2010, the facility had four quality-of-care deficiencies, 42 C.F.R. §§
483.25 (Tag F309), 483.25(a) (Tag F312), 483.25(c) (Tag F314), and 483.25(1)
(Tag F329). It was not in substantial compliance with 42 C.F.R. § 483.65 (Tag
F441), which governs infection control and 42 C.F.R. § 483.70(f) (Tag F 463),
which includes requirements for physical environment. All deficiencies were
cited at scope and severity level E. CMS imposed no remedies;

In August 2010, the facility was again not in substantial compliance with the
quality-of-care requirements for preventing accidents, 42 C.F.R. § 483.25(h) (Tag
F323), at scope and severity level D. It was not in substantial compliance with the
administration requirements relating to laboratory services, 42 C.F.R. 483.75(j)
(Tag 502), at scope and severity level E. CMS imposed no remedies;

In January 2011, the facility had more life safety code deficiencies and was again
not in substantial compliance with dietary services requirements, 42 C.F.R.

§ 483.35 (Tag F371), at scope and severity level F. It had deficiencies under 42
C.F.R. § 483.25(m) (Tag F333), which governs quality-of-care with respect to
medication errors, at scope and severity level E. CMS imposed no remedies;

In November 2011, the facility had more dietary services deficiencies, 42 C.F.R.
§ 483.35(c) (Tag F363), at scope and severity level F. CMS imposed no remedies;
18

e In March 2012, the facility was again not in substantial compliance with quality-of
-care requirements for preventing accidents, 42 C.F.R. § 483.25(h) (Tag F323).
These deficiencies were cited at scope and severity level H (pattern of actual
harm). CMS imposed a penalty of $1,950;

e In July 2012, the facility was not in substantial compliance with life safety code
requirements, at scope and severity level F, and the requirements for quality-of-
care, 42 C.F.R. 483.25 (Tag F309). It was not in substantial compliance with 42
C.F.R. § 483.10(b)(11) (Tag F371), which addresses resident rights: notification
of changes. CMS found a pattern of deficiencies serious enough to pose
immediate jeopardy to resident health and safety (scope and severity level K).
CMS imposed a $5,200 CMP.

CMS Ex. A.

Thus, twelve surveys, conducted over a period of seven years, found significant
deficiencies. Notwithstanding the seriousness of many of the deficiencies cited,
including findings of actual harm (April 2007), for the first six years, CMS imposed only
one penalty, a $3,250 CMP, based on a finding of immediate jeopardy in July 2006. In
March 2012, CMS imposed another relatively small penalty ($1,950), after finding a
pattern of noncompliance that caused actual harm. The CMP did not produce long-
standing corrective action. Four months later (July 2012), the facility still had
deficiencies, and these posed immediate jeopardy to resident health and safety. CMS
imposed another, higher CMP, $5,200. But this higher penalty was insufficient; just two
months later, the survey that is the subject of this appeal again found deficiencies that
posed immediate jeopardy.

This history alone justifies increasing the per day penalty beyond the minimum $3,050
mandated by the regulations. I consider the increase — to $4,050 — modest, especially
considering how ineffective the lower penalties have been in inducing the facility to
achieve and maintain substantial compliance.

With respect to financial condition, the facility has the burden of proving, by a
preponderance of the evidence, that paying the CMP would render it insolvent or would
compromise the health and safety of its residents. Van Duyn Home and Hosp., DAB No.
2368 (2011); Gilman Care Ctr., DAB No. 2357 (2010). Petitioner points out that CMS
determined that immediate full payment of the CMP into an escrow account would create
a financial hardship that would compromise the health and safety of residents. It
therefore allowed the facility to make monthly payments of $22,462.50, until the account
reached the full amount. P. Cl. Br. at 21; CMS Ex. | at 1-2. This suggests a cash-flow
issue; it does not establish that the facility would be rendered insolvent nor that the health
and safety of residents would be compromised if the facility were required to pay the
penalty imposed here.
19

Moreover, Petitioner has proffered no financial documentation or testimony to establish
its inability to pay. To meet the standard for lowering a CMP based on financial
condition, claims must be supported by compelling financial documentation. In
Guardian Care Nursing & Rehab. Ctr., DAB No. 2260 (2009), for example, the facility
could not even afford to represent itself on appeal. Its Medicaid census was 90%; its
annual shortfall was $250,000; and it relied on charitable contributions for its continuing
viability. The Board nevertheless criticized the absence of financial documentation and
concluded that the facility had not established that additional resources would not be
available. But see Columbus Nursing and Rehab. Ctr., DAB No. 2505 (2013) (finding
that the absence of documentation regarding the facility’s financial condition did not
preclude ALJ from concluding, based on witness testimony, that financial condition
justified reducing the CMP).

Applying the remaining factors, I find that the facility’s failing to protect R1’s roommates
justifies the penalties imposed. The deficiencies went well beyond the actions (or
inaction) of one or two individuals. The facility administrator and multiple staff members
repeatedly disregarded facility policies when they declined to investigate, report, and
protect the residents. They are culpable for these failings.

For these reasons, I find that the CMPs are reasonable.
IV. Conclusion

From July 23 through December 4, 2012, the facility was not in substantial compliance
with Medicare participation requirements, and, from July 23 through September 18,
2012, those deficiencies posed immediate jeopardy to resident health and safety. The
penalties imposed — $4,050 per day for the period of immediate jeopardy, $600 per day
and $50 per day for periods of substantial noncompliance — are reasonable.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Tatyana Usyk,
Petitioner,
v.
The Inspector General.
Docket No. C-15-612
Decision No. CR3811

Date: April 24, 2015

DECISION

I sustain the determination of the Inspector General (1.G.) to exclude Petitioner, Tatyana
Usyk, from participating in Medicare and other federally funded health care programs.
However, I reduce the exclusion imposed by the I.G. from 10 years to seven years in light
of the substantial cooperation that Petitioner gave to prosecuting authorities.

I. Background

Petitioner requested a hearing to challenge the I.G.’s determination to exclude her. The
LG. filed a brief, a reply brief, and seven exhibits that are identified as LG. Ex. 1 —1.G.
Ex. 7. Petitioner filed a brief and no exhibits. I admit the I.G.’s exhibits into the record.
Neither party requested an in-person hearing.

IL. Issues, Findings of Fact and Conclusions of Law

A. Issues

The issues are whether: the I.G. is mandated to exclude Petitioner; and the 10-year
exclusion imposed by the I.G. is reasonable.
B. Findings of Fact and Conclusions of Law

The L.G. excluded Petitioner pursuant to the provisions of section 1128(a)(3) of the Social
Security Act (Act). This section mandates the exclusion of any individual who is
convicted of a felony occurring after August 21, 1996, in connection with the delivery of
a health care item or service or with respect to any act or omission in a health care
program other than Medicare or a State Medicaid program, operated by or financed in
whole or in part by any federal, state, or local government agency, relating to fraud, theft,
embezzlement, breach of fiduciary responsibility, or other financial misconduct.

The evidence offered by the I.G. and not rebutted by Petitioner proves that, on November
14, 2013, Petitioner pled guilty to a federal felony offense consisting of conspiracy to
commit health care fraud. I.G. Ex. 2. She was part of an elaborate and, for a time, highly
successful conspiracy to defraud health care insurers by providing claims to those
insurers for items or services that were not provided at all or that were not medically
necessary. I.G. Ex. 3. Petitioner worked as a receptionist for two medical clinics that
systematically filed fraudulent claims with health insurers. /d. Her role in the scheme
was to coach patients to report to these clinics for medically unnecessary treatments. Her
responsibilities included making certain that patients reported for the unnecessary
treatments. Jd.

Petitioner’s plea and conviction describe all of the elements of a conviction mandating
exclusion under section 1128(a)(3). She was convicted of a felony that occurred after
August 21, 1996. The conviction plainly related to delivery of health care items or
services because Petitioner’s admitted role in the conspiracy was to assure that patients of
the two clinics that employed her were present for medical services, albeit unnecessary,
that were subsequently billed to health insurers. Her criminal offense related to fraud
because it was part of a fraudulent billing scheme that caused health insurers to make
payments.

Petitioner argues that she was not convicted of a felony within the meaning of section
1128(a)(3) because she is not a provider or supplier of health care items or services.
Nothing in this section requires an individual to be a health care provider or supplier in
order to be subject to its reach. It plainly applies to any individual who is convicted of a
felony described in that section.

The LG. is required to exclude Petitioner for a minimum of five years. Act

§ 1128(c)(3)(B). Here, the I.G. opted to exclude Petitioner for a period of 10 years. That
raises the question of whether the length of the exclusion is reasonable.

The purpose of any exclusion is remedial. The intent is not to punish, but to assure that
trust funds and their beneficiaries and recipients are protected from individuals who are
untrustworthy. The Secretary has published regulations, which identify the criteria that
may be used in determining whether any exclusion is reasonable. These criteria are
described as “aggravating” and “mitigating” factors. The regulations do not establish a
formula for measuring the length of an exclusion. Rather, the aggravating and mitigating
factors function very much as rules of evidence. Evidence that falls within an
aggravating or mitigating factor may be weighed to decide an individual’s
trustworthiness and whether an exclusion is reasonable.

In this case the evidence proves the existence of two aggravating factors. Moreover, the
evidence relating to aggravating factors shows that Petitioner was part of a conspiracy to
commit very serious and calculated fraud, fraud that establishes her to be untrustworthy.
An exclusion of 10 years would be reasonable given this evidence of aggravation. First,
Petitioner’s crimes caused financial damages to health insurers of well over $1 million.
42 C.F.R. § 1001.102(b)(1). Evidence proving the impact of Petitioner’s crime consists
of her being sentenced to pay restitution in excess of $1.2 million. I.G. Ex. 4; LG. Ex. 5.'
Second, she committed her crime over a period of nearly four years. I.G. Ex. 3 at 3;

42 C.F.R. § 1001.102(b)(2). The aggravating evidence, viewed in its totality, shows that
Petitioner was willfully contributing to a massive fraud scheme for a protracted period of
time. Ten years is certainly reasonable in light of that.

However, there is mitigating evidence in this case that offsets, at least in part, the
evidence of aggravation. Petitioner’s substantial cooperation with prosecuting authorities
contributed to the conviction of other individuals. That evidence must be weighed
against the aggravating evidence and it militates in favor of a somewhat reduced
exclusion. Based on all of the evidence — aggravating and mitigating — I find an
exclusion of seven years is reasonable in this case.

Petitioner provided extensive cooperation with prosecuting authorities. Her cooperation
was noted at the time of her sentencing and it was the reason that Petitioner avoided
incarceration for her crime. I.G. Ex. 7 at 4-5.

In order to be mitigating, cooperation must result in: other individuals being convicted or
excluded from Medicare and all other federal health care programs; additional cases
being investigated or reports being issued by the appropriate law enforcement agency
identifying program weaknesses or vulnerabilities; or other individuals or entities being

' Although the amount of the fraud committed by the conspiracy was huge, it would be
unfair to Petitioner to attribute all of that fraud to her. She was plainly a very small cog
in a very large conspiracy. Her sentence to pay restitution reflects her role in that
collective activity but it does not suggest that she personally committed fraud of in excess
of $1 million. Suffice it to say that Petitioner contributed to the scheme’s overall impact
without attempting to quantify her personal responsibility.
subjected to civil money penalties or assessments. 42 C.F.R. § 1001.102(c)(3). In other
words, the fact that Petitioner cooperated with prosecuting authorities is not by itself
enough to comprise a mitigating factor. Petitioner must prove that her cooperation led to
one of the results described in the regulation.

It is apparent from the record of Petitioner’s sentencing hearing that she provided
cooperation that led to the conviction of others. In the words of the sentencing judge,
Petitioner:

quickly became forthcoming and honest about her own conduct and that of
others. Her candor about her culpability was quickly notable relative to the
lack of candor of some of her co-defendants who attempted to cooperate.
Through the information . . . [Petitioner] provided the government, it was
able to expand its understanding of the roles and culpability of . . . [several
other co-conspirators].

LG. Ex. 7 at 5.

The I.G. argues that there is no evidence that Petitioner’s cooperation actually resulted in
others being convicted. I disagree. The sentencing judge’s statement is proof that
Petitioner’s cooperation was instrumental in the convictions of her co-conspirators. It is
unclear whether they would not have been convicted but for Petitioner’s cooperation, but
that is not what the regulation requires. The regulation requires that cooperation must
lead to the conviction of others. Here, Petitioner’s evidence plainly was instrumental in
achieving that result.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Nenice Marie Andrews,
(OI File No. 9-13-40133-9),
Petitioner,

v.

The Inspector General.
Docket No. C-15-10
Decision No. CR3810

Date: April 23, 2015

DECISION

Petitioner, Nenice Marie Andrews, was a registered nurse and adult nurse practitioner
licensed to practice in Oregon. She was convicted on two felony counts of tampering
with drug records. Pursuant to section 1128(a)(4) of the Social Security Act (Act), the
Inspector General (I.G.) has excluded her from participating in Medicare, Medicaid, and
all federal health care programs for a period of five years. Petitioner appeals the
exclusion.

For the reasons discussed below, I find that the I.G. is authorized to exclude Petitioner
and that the statute mandates a minimum five-year exclusion.

Background

Ina letter dated July 31, 2014, the I.G. advised Petitioner Andrews that she was excluded
from participating in Medicare, Medicaid, and all federal health care programs because
she had been convicted of a criminal offense related to the unlawful manufacture,
distribution, prescription, or dispensing of a controlled substance. I.G. Ex. 1. Petitioner
requested review.
The LG. has submitted its brief (I.G. Br.) and eight exhibits (I.G. Exs. 1-8). Petitioner
has submitted a brief (P. Br.) and one exhibit (P. Ex. 1), although, with her hearing
request, she filed additional documents, including a September 19, 2014 letter to a state
judge, with attachments. The I.G. filed a reply (I.G. Reply). In the absence of any
objection, I admit into evidence I.G. Exs.1-8 and P. Ex. 1.

I directed the parties to indicate in their briefs whether an in-person hearing would be
necessary, and, if so, to “describe the testimony that [it] wishes to present and provide the
name of any witness and a summary of each witness proposed testimony.” I specifically
directed the parties to explain why the testimony would be relevant. Order and Schedule
for Filing Briefs at 3 § 4); Informal Brief of Petitioner § III (November 12, 2014). The
LG. indicates that an in-person hearing is not necessary. IG. Br. at 14. Petitioner
suggests that a hearing may be necessary, and that, if allowed to testify, she would
explain the circumstances surrounding her conviction and the actions she took thereafter.
P. Br. at 7-9. But I may not look behind the fact of Petitioner’s conviction, so such
testimony would be irrelevant. See 42 C.F.R. § 1001.2007(d); Joann Fletcher Cash,
DAB No. 1725 (2000). Because I must exclude irrelevant or immaterial evidence, I must
exclude the testimony that Petitioner proposes, and an in-person hearing would serve no
purpose. I therefore decide this case based on the written record.

Discussion

Because Petitioner was convicted of a felony relating to
the unlawful manufacture, distribution, prescription, or
dispensing of a controlled substance, she must be
excluded from program participation for at least five
years. Act §§ 1128(a)(4), ((3)(B).!

Section 1128(a)(4) of the Act mandates that the Secretary of Health and Human Services
exclude from program participation any individual or entity convicted of a felony
criminal offense “relating to the unlawful manufacture, distribution, prescription, or
dispensing of a controlled substance.”

Here, Petitioner Andrews was unquestionably convicted of drug-related felonies, at least
initially. On March 12, 2014, she pled guilty to two (of eleven) felony counts of
tampering with drug records. Or. Rev. Stat. § 167.212. She specifically admitted that
she made false statements in a prescription for controlled substances. I.G. Ex. 4; see LG.
Ex. 3. The state court accepted her plea and entered judgment against her on March 20,
2014. The court sentenced her to 18 months of formal probation and imposed $400 in

' [make this one finding of fact/conclusion of law.
fines. I.G. Ex. 5. As part of its judgment, the court held that, after successfully
completing one year of probation, Petitioner could ask that her felony convictions be
reduced to misdemeanors. I.G. Ex. 5 at 1.

Six months later — on September 19, 2014 — Petitioner represented to the court that she
ad “fully complied with all conditions” of her probation, had “paid the entire financial
obligation,” and had completed chemical dependency treatment; she asked the court to
reduce her felony convictions to misdemeanors before she completed a full year’s
probation. She sought the expedited relief in an effort to avoid this mandatory exclusion.
See LG. Ex. 6. In an order dated September 23, 2014, the court granted Petitioner’s
request. I.G. Ex. 7.

Petitioner asserts that, because the court reduced her felony convictions to misdemeanors,
she was not convicted of a felony and is not subject to a mandatory exclusion.

The statute and regulations provide that a person is “convicted” when “a judgment of
conviction has been entered” regardless of whether that judgment has been expunged or
otherwise removed. Act § 1128(i)(1); 42 C.F.R. § 1001.2(a)(2). Further, individuals who
participate in “deferred adjudication or other program or arrangement where judgment of
conviction has been withheld” are also “convicted” within the meaning of the statute.

Act § 1128(i)(4); 42 C.F.R. § 1001.2(d). Based on these provisions, the Departmental
Appeals Board (Board) characterizes as “well established” the principle that a
“conviction” includes “diverted, deferred and expunged convictions regardless of
whether state law treats such actions as a conviction.” Henry L. Gupton, DAB No. 2058
at 8 (2007), aff'd sub nom. Gupton v. Leavitt, 575 F. Supp. 2d 874 (E.D. Tenn. 2008).

The Board explained why, in these I.G. proceedings, the federal definition of
“conviction” must apply. That definition differs from many state criminal law
definitions. For exclusion purposes, Congress deliberately defined “conviction” broadly
to ensure that exclusions would not hinge on the state criminal justice policies. Quoting
the legislative history, the Board explained:

The rationale for the different meanings of “conviction” for
state criminal law versus federal exclusion law purposes
follows from the distinct goals involved. The goals of
criminal law generally involve punishment and rehabilitation
of the offender, possibly deterrence of future misconduct by
the same or other persons, and various public policy goals.
footnote omitted] Exclusions imposed by the I.G., by
contrast, are civil sanctions, designed to protect the
beneficiaries of health care programs and the federal fisc, and
are thus remedial in nature rather than primarily punitive or
eterrent.... In the effort to protect both beneficiaries and

funds, Congress could logically conclude that it was better to
exclude providers whose involvement in the criminal system
raised serious concerns about their integrity and
trustworthiness, even if they were not subjected to criminal
sanctions for reasons of state policy.

Gupton, at 7-8.

Petitioner now argues that she was not convicted of a felony because her conviction was
reduced before she completed the full term of her probation (even though she appears to
have completed most of its terms). She points out that the state court deliberately
changed the convictions so that she could avoid a mandatory exclusion. P. Br. at 5.

Whatever the state court’s motivation, it does not have the authority to nullify the
exclusion statute. Had the court vacated Petitioner’s felony convictions because they
were made in error, Petitioner would not be subject to a five-year exclusion. In Jennifer
L. Stack, DAB CR3494 (2014), for example, the petitioner was not subject to exclusion
based on her felony conviction because the state court vacated that conviction pursuant to
a section of the Ohio statutes that allows a defendant to withdraw a guilty plea after
sentencing if she shows an extraordinary and fundamental flaw in the original plea
proceeding. In contrast, here, the sentencing court reduced Petitioner’s conviction
pursuant to a provision of the Oregon statutes that allows the court to “enter judgment of
conviction for a Class A misdemeanor” when the defendant “has successfully completed
a sentence of probation” and the court “believes that it would be unduly harsh to sentence
the defendant for a felony.” Or. Rev. Stat. § 161.705; I.G. Ex. 7. (Emphasis added).

In its judgment converting the felonies to misdemeanors, the court noted that the
defendant had been convicted of felonies but requested “misdemeanor treatment” of
those felonies. I.G. Ex. 7. The court emphasized that it stood by the original felony
convictions: “I felt it was appropriate that she have that felony and that she have the
motivation to earn the Court’s consideration.” I.G. Ex. 8 at 2-3. The court minimized the
significance of its acting before the year had passed, noting that the one-year waiting
period was “somewhat arbitrary,” and had been imposed because a year afforded “most
people” sufficient time to complete the terms of their probation. I.G. Ex. 8 at 2-4.

Petitioner was thus convicted of felonies, which, after she completed the primary
conditions of her probation (paid the fines and completed a drug treatment program) were
treated as misdemeanors. Her convictions fall squarely within the statutory and
regulatory definitions of “conviction.” Because she was convicted of a felony criminal
offense “relating to the unlawful manufacture, distribution, prescription, or dispensing of
a controlled substance,” she is subject to exclusion. An exclusion brought under section
1128(a)(4) must be for a minimum period of five years. Act § 1128(c)(3)(B); 42 C.F.R.

§ 1001.2007(a)(2).

Conclusion

For these reasons, I conclude that the 1.G. properly excluded Petitioner Andrews from
participation in Medicare, Medicaid, and all federal health care programs, and I sustain
the five-year exclusion.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Academic Institute of Pathology,
(CLIA No.: 45D0722508),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-881
Decision No. CR3808

Date: April 22, 2015

DECISION

Petitioner, Academic Institute of Pathology, appeals the determination of the Centers for
Medicare & Medicaid Services (CMS) to suspend and revoke Petitioner’s Clinical
Laboratory Improvement Amendments of 1988 (CLIA) certificate and to cancel
Petitioner’s approval to receive Medicare payments. For the reasons explained below,

I find that there is a legitimate basis for CMS to suspend Petitioner’s CLIA certificate and
cancel Petitioner’s Medicare payments effective February 11, 2014, and to revoke
Petitioner’s CLIA certificate, effective as of the date of this decision.

I. Background

Petitioner is a non-waived laboratory located in Bellaire, Texas, and holds a CLIA
certificate to perform high-complexity testing. CMS issued two notice letters to
Petitioner dated January 30, 2014. The first letter involved the findings from a complaint
investigation survey ended on July 10, 2013, by the American Society of
Cytotechnologists (ASCT). ASCT found Petitioner was not in substantial compliance
with four conditions of participation: 42 C.F.R. § 493.803, Successful participation;

42 C.F.R. § 493.1221, Cytology; 42 C.F.R. § 493.1441, Laboratories performing high

complexity testing, laboratory director; and 42 C.F.R. § 493.1447, Laboratories
performing high complexity testing, technical supervisor. Based on its determinations of
noncompliance, CMS informed Petitioner that it was proposing the cancellation of
Petitioner’s approval to receive Medicare payments for laboratory services, and
suspension of Petitioner’s CLIA certificate effective February 11, 2014. CMS also
informed Petitioner that if it imposed these sanctions and Petitioner filed an appeal, its
CLIA certificate would not be revoked pending a decision from an administrative law
judge (ALJ).

The second letter, also dated January 30, 2014, involved the findings from a
recertification survey by the Texas Department of State Health Services (DSHS) ending
on July 11, 2013. DSHS found that Petitioner was out of compliance with the conditions
required for participating in the CLIA program and also found that the deficiencies posed
immediate jeopardy to the patients that Petitioner serves. Specifically, CMS found
Petitioner out of compliance with the following conditions: 42 C.F.R. § 493.801,
Enrollment and testing of samples; 42 C.F.R. § 493.1240, Pre-Analytic System; and

42 C.F.R. § 493.1441, Laboratory Director, Laboratories performing high complexity
testing. CMS Ex. 1.

The notice further explained that DSHS determined that Petitioner was not in compliance
with CLIA conditions because Petitioner took its proficiency testing samples to another
CLIA laboratory for analysis and then reported those results to the proficiency testing
agency as if they had been performed at Petitioner’s laboratory. See 42 C.F.R. §§
493.801(b)(4) (2012) and 493.1840(a)(3) and (b) (2012). These condition-level
violations required revocation of a laboratory’s certificate for at least one year. Id.
Therefore, CMS informed Petitioner that, effective February 11, 2014, it was canceling
Petitioner’s approval to receive Medicare payments for its services and suspending
Petitioner’s CLIA certificate. CMS further informed Petitioner that its CLIA certificate
would be automatically revoked if Petitioner did not timely file an appeal, and if
Petitioner did appeal, the revocation would become effective on the date of the ALJ
decision if CMS’s determination was upheld.

On March 25, 2014, Petitioner filed an appeal. The case was assigned to me for hearing
and decision, and I issued an Acknowledgment and Prehearing Order (Prehearing Order).
1 instructed the parties to make all of their arguments in their prehearing exchanges,
including any motions for summary judgment. CMS timely filed a motion for summary
judgment and prehearing brief (CMS Br.) together with its supporting exhibits, CMS Exs.
1-34. In its prehearing brief, CMS explains that although the two surveys in July 2013
found Petitioner out of substantial compliance with the CLIA requirements, CMS
specifically imposed its sanctions based on the DSHS recertification survey findings.
CMS Br. at 4, 5.

In my Prehearing Order, I directed Petitioner to file its prehearing exchange, including its
list of proposed exhibits, copies of its proposed exhibits, a list of all proposed witnesses
(including the written direct testimony of any witness filed as an exhibit), and prehearing
brief by August 11, 2014. Petitioner did not file its prehearing exchange or a response to
CMS’s motion for summary judgment and prehearing brief by August 11, 2014.

I issued an Order to Show Cause on August 27, 2014, directing Petitioner to show cause,
in writing, by no later than September 11, 2014, why its case should not be dismissed for
abandonment and directing Petitioner to provide an explanation as to why I should find
good cause for Petitioner’s failure to timely file its required submission.

After I issued the Order to Show Cause, I received Petitioner’s prehearing brief, on
September 2, 2014, which was postmarked August 26, 2014. In its brief, Petitioner
states:

Petitioner notes its inadvertent oversight in failing to file this document by
the date of August 11, 2014 set by the Court. Petitioner begs the
indulgence of the Court and asks that it accept this filing only 15 days
late.

P. Br. at 1. Petitioner indicated it had no proposed exhibits “apart from those already on
file,”' and that it proposed Gonzales Uribe-Botero, M.D., the laboratory owner and
director, as its only witness. P. Br. at 1. However, Petitioner did not submit written
direct testimony for Dr. Uribe-Botero as required in my Prehearing Order. See
paragraphs la, 2, 4, and 6. Petitioner did not object to any of CMS’s exhibits, nor did it
indicate it wished to cross-examine CMS’s two proposed witnesses. I admit CMS Exs. 1-
34 into the record.

On September 4, 2014, Petitioner submitted its response to my Order to Show Cause.
Although Petitioner generally claims that good cause exists for its failure to meet the
deadlines set in my Order, it nevertheless admits its failure to timely file was due to “its
inadvertent oversight” and not because of any circumstances beyond its ability to control.
Response to Order to Show Cause at 1. In fact, Petitioner states that, in light of CMS’s
exchange, it determined as of the due date for its submission that it had nothing further to
add in the way of exhibits or argument other than what had previously been filed by the
parties. Response to Order to Show Cause at 3. Petitioner contends that the resolution of
the issues generally do not require any further extensive filing of documents or testimony

' With its hearing request, Petitioner submitted a copy of the January 30, 2014 notice
letter from CMS regarding the ASCT survey, two email chains from CMS to Petitioner’s
counsel dated February 13, 2014 and February 14, 2014, and a copy of the Form 2567
from the survey completed on July 10, 2013 by ASCT.
by either party except for testimony regarding steps Petitioner took to bring itself back
into compliance. Id.

I do not find Petitioner has shown good cause for the late filing of its submission under
any reasonable definition. However, Petitioner is not disputing any material fact from
either survey, specifically agreeing that it referred its Proficiency Testing (PT) samples to
another laboratory for testing and that it reported those PT results as if it had tested the
PT samples in its own laboratory. Thus Petitioner recognizes that its case involves a
question of law, and it asks that I exercise discretion to allow Petitioner to continue to
operate and to allow the lab director, Dr. Uribe-Botero, to continue to direct his other
laboratory, which he used to test Petitioner’s PT sample. CMS also did not believe it was
necessary to conduct an in-person hearing. Therefore, I decide this matter on the merits
of the written record.

Il. Issue

Whether CMS had a legitimate basis to cancel Petitioner’s Medicare payments
and to suspend and revoke Petitioner’s CLIA certificate.

Ill. Findings of Fact and Conclusions of Law

I. CMS had a legitimate basis for suspending and revoking Petitioner’s
CLIA certificate and for canceling Petitioner’s Medicare payments.

The applicable regulation for the time period in question requires, as a condition for
participation in the Medicare program, that a laboratory must enroll in a PT program and
must test PT samples it receives from the PT program in the same manner as it tests
patient samples. 42 C.F.R. § 493.801(b) (2012). That regulation further provides:

The laboratory must not send PT samples or portions of samples to another
laboratory for any analysis which it is certified to perform in its own
laboratory. Any laboratory that CMS determines intentionally referred its
proficiency testing samples to another laboratory for analysis will have its
certification revoked for at least one year. Any laboratory that CMS
receives proficiency testing samples from another laboratory for testing
must notify CMS of the receipt of those samples.

42 C.F.R. § 493.801(b)(4) (2012). Similarly, CMS must revoke a laboratory’s CLIA
certificate for at least one year if it determines the laboratory intentionally referred its PT
samples to another laboratory for analysis. 42 C.F.R. § 493.1840(b)(2012).

After a surveyor determined Petitioner reported another laboratory’s results as its own,
Petitioner’s director conceded he did not have a working hematology analyzer, and he
sent the samples to his other laboratory for testing. CMS Ex. 13, at 2. Because I find that
CMS had a legitimate and undisputed basis to revoke Petitioner’s CLIA certificate for at
least one year pursuant to 42 C.F.R. §§ 493.801(b)(4)(2012), 493.1840(a)(3) and
(b)(2012) for its PT practices, it is unnecessary for me to discuss the other deficiencies
CMS cited at 42 C.F.R. §§ 493.1240(2012) and 493.1441(2012).

The applicable regulations also provide that CMS cancel a laboratory’s approval to
receive Medicare payment for its services if CMS suspends or revokes the laboratory’s
CLIA certificate. The cancellation may be imposed before a petitioner files a hearing
request when, as here, CMS determines the condition-level violations pose immediate
jeopardy. See 42 C.F.R. §§ 493.1842(a) and (c)(2012), 493.1844(b)(4) and (d)(2),
(4)(2012).

2. I may not review CMS’s discretion to enforce CLIA and impose
sanctions against Petitioner.

Petitioner contended that, shortly after its filing deadline, it became aware that the Taking
Essential Steps for Testing (TEST) Act of 2012 (Pub. L. 112-202), approved on
December 4, 2012, amended, in part, 42 U.S.C § 263a. It argues that section 263a(i)(4)
now states that “[a]ny laboratory that the Secretary [of Health and Human Services]
determines intentionally refers its proficiency testing samples to another laboratory for
analysis may have its certificate revoked for at least one year... .” Emphasis added.
Petitioner asserts that since the TEST Act amendments changed the “shall” to “may,” the
Secretary now has discretion about when to revoke a laboratory’s CLIA certificate for
intentional referral of PT samples.”

Petitioner does not dispute that it intentionally referred its PT samples and reported the
results as its own. P. Br. at 3. Petitioner claims to have “misunderstood the CLIA
regulations and made a mistake.” Jd. Petitioner asks that I use my discretion to deny the
“harsh penalty of decertification” because this laboratory serves an “urban, generally
lower-income section” of Houston and CMS’s sanctions “would decrease the availability
of health services in the community.” P. Br. at 2. However, here the Secretary exercised
her discretion when CMS issued the January 30, 2014 letter notifying Petitioner of
CMS’s determination that Petitioner intentionally referred PT samples. CMS also
determined that this deficiency, as well as the other two condition-level deficiencies cited
in the survey, posed immediate jeopardy to the patients whom Petitioner served.
Petitioner does not dispute that these condition-level deficiencies existed. Rather,
Petitioner contends that it cooperated with CMS during the investigation and took
remedial measures to correct the alleged deficiencies.

> The regulations implementing the TEST Act changes, however, were not effective until
July 11, 2014, and therefore do not apply to the July 2013 survey or to the January 30,
2014 notice letter. See 79 Fed. Reg. 25,463 (May 2, 2014).
I am bound by the extant regulations, and there is no dispute here that Petitioner
intentionally referred its PT samples to another laboratory. I am unable to substitute my
discretion for the Secretary’s. My authority here is limited to determine if there was a
legitimate basis for the sanctions CMS imposed because Petitioner did not comply with
CLIA requirements, regardless of how well Petitioner may have cooperated or later
complied.

3. CMS’s enforcement actions were appropriate.

Petitioner cites Medimex Clinical Laboratory, DAB CR1025 (2003), for the proposition
that the purpose of CLIA is not to punish laboratories but to strengthen federal oversight
of laboratories in order to ensure that tests are accurate and reliable. P. Br. at 4.
Therefore, Petitioner argues CMS’s goals can be accomplished without revocation of its
CLIA certificate. However, in Medimex, the ALJ did not reverse CMS’s sanctions as
punitive measures but rather affirmed the sanctions.

The ALJ explained—

The purpose of the CLIA is not to punish laboratories, but to strengthen
federal oversight of laboratories in order to ensure that test results are
accurate and reliable. 57 Fed. Reg. 7218 (1992). Thus, the regulatory
enforcement scheme is designed to protect all individuals served by
laboratories against substandard testing of specimens, and to safeguard the
general public against health and safety hazards that might result from
laboratory activities. 42 C.F.R. § 493.1804(a)(1), (2). In light of the
principles here enunciated, I must consider whether the evidence supports a
finding of noncompliance and whether Petitioner violated one or more
conditions of participation. Once a basis for the imposition of principal
sanctions is established, the inexorable results will ensue, with the purpose
of protecting the public from improper and incompetent laboratory
activities.

DAB CR 1025 at VLF.1. I find that the Secretary’s determination to revoke Petitioner’s
CLIA certificate under the circumstances here, where Petitioner acknowledges there were
condition-level deficiencies, is an appropriate act to protect patients from inaccurate and
unreliable laboratory testing and comports with the purpose of CLIA.

IV. Conclusion
It is undisputed that Petitioner violated a condition-level requirement when it

intentionally referred its proficiency testing samples to another laboratory and reported
the results as its own. I find a legitimate basis, therefore, for CMS’s determination to
suspend Petitioner’s CLIA certificate and cancel Petitioner’s Medicare payments,
effective February 11, 2014, and to revoke Petitioner’s CLIA certificate, with the
revocation effective for at least one year from the date of this decision.

/s/

Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1921)

Complainant
v.

Fernandez Mini Market Corp. / Jorge Fernandez
d/b/a Fernandez Mini Market,

Respondent.
Docket No. C-15-390
Decision No. CR3779
Date: April 14, 2015
INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Fernandez Mini Market Corp. / Jorge Fernandez, d/b/a
Fernandez Mini Market, at 344 Orange Street, Springfield, Massachusetts 01108, and by
filing a copy of the Complaint with the Food and Drug Administration’s (FDA) Division
of Dockets Management. The complaint alleges that Fernandez Mini Market
impermissibly sold cigarettes to minors and failed to verify, by means of photo
identification containing a date of birth, that the purchasers were 18 years of age or older,
thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C.

§ 301 et seq., and its implementing regulations, 21 C.F.R. pt. 1140. CTP seeks to impose
a $500 civil money penalty against Respondent Fernandez Mini Market. During the
hearing process, Respondent has failed to comply with judicial directions to respond to
CTP’s request for discovery. I therefore strike Respondent’s answer and issue this
decision of default judgment.
I. Procedural History

Respondent timely answered CTP’s complaint and requested a hearing. I issued an
Acknowledgement and Prehearing Order (APHO) on December 24, 2014 that set
deadlines for parties’ submissions, including the January 23, 2015 deadline to request that
the opposing party provide copies of documents relevant to this case. The APHO further
stated that a party receiving such a request must provide the requested documents no later
than 30 days after the request. Also, item #16 “Sanctions for failure to comply with
orders,” stated that these included but were not limited to the dismissal of the complaint
or answer if a party failed to comply with any order.

CTP served Respondent with its request for documents on January 22, 2015. On
February 27, 2015, CTP filed a motion to compel discovery indicating that Respondent
did not respond to its request within the time limit, together with proof of delivery.

See 21 C.F.R. § 17.23(a). CTP also moved to stay all deadlines, citing Respondent’s
production of documents as necessary to prepare its pre-hearing exchange.

On March 19, 2015, by letter, I suspended CTP’s pre-hearing exchange deadline.

In addition, I ordered Respondent to file its reply to CTP’s motion to compel discovery or
file a protective order within 10 days from receipt of the letter dated March 19, 2015.
Furthermore, Respondent was again given notice that the ALJ may impose sanctions on a
party for failure to comply with a discovery order pursuant to 21 CFR 17.35. The name
and contact information for the Attorney handling the case was provided, and Respondent
was invited to call if there were any questions, or any information was required. To date,
Respondent has neither filed a motion for a protective order, nor complied with CTP’s
discovery request.

Il. Striking Respondent’s Answer

The record does not contain any evidence that Respondent complied with any discovery
requests, despite being ordered by the Court to do so on March 19, 2015.

I therefore strike Respondent’s Answer, issue this default decision, and assume the facts
alleged in CTP’s complaint to be true. See 21 C.F.R. §§ 17.35(c)(3), 17.11(a). The
harshness of the sanctions I impose upon either party must relate to the nature and
severity of the misconduct or failure to comply, and I find the failure to comply here
sufficiently egregious to warrant striking the answer and issuing a decision.

See 21 C.F.R. § 17.35(b). Respondent first ignored a discovery request that was
documented as having been received, after having been put on notice the previous month
that doing so could result in an effective dismissal of the case. In March 2015, given
another opportunity to respond to the discovery request and again warned of the
consequences of inaction, Respondent did not comply with my order, provided no
justification for not doing so, and in fact never responded at all, although urged to do so
and given contact information at the DAB. The record contains no evidence that suggests
the Respondent lacks the capacity to respond. Instead, it appears that Respondent has
chosen to ignore its discovery obligations and further ignore any requests for information.
Respondent has made no effort to respond to CTP’s motion to compel discovery or to
comply with the discovery request, by either producing documents or filing a protective
order before the extended deadline.

Ill. Default Decision

Striking Respondent’s answer leaves the Complaint unanswered. Therefore, I am
required to issue an initial decision by default if the complaint is sufficient to justify a
penalty. 21 C.F.R. § 17.11(a). Accordingly, I must determine whether the allegations in
the Complaint establish violations of the Act.

For purposes of this decision, I assume the facts alleged in the Complaint are true and
conclude that default judgment is merited based on the allegations of the Complaint and
the sanctions imposed on Respondent for failure to comply with my orders.

21 C.F.R. § 17.11. Specifically:

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on November 20, 2014, CTP served the
Complaint on Respondent Fernandez Mini Market by United Parcel Service.

e At approximately 12:54 PM on July 23, 2013, at Respondent’s business
establishment, 344 Orange Street, Springfield, Massachusetts 01108, an FDA-
commissioned inspectors observed Respondent’s staff selling a package of
Newport Non-Menthol Box cigarettes to a person younger than 18 years of age.
The inspectors also documented that staff failed to verify, by means of
photographic identification containing a date of birth, that the purchaser was 18
years of age or older;

e Ina warning letter dated September 5, 2013, CTP informed Respondent of the
inspector’s July 23, 2013 observations, and that such actions violate federal law,
21 C.F.R. § 1140.14(a). The letter further warned that Respondent’s failure to
correct its violations could result in a civil money penalty or other regulatory
action;

e At approximately 10:07 AM on May 21, 2014, at Respondent’s business
establishment, 344 Orange Street, Springfield, Massachusetts 01108, FDA-
commissioned inspectors documented Respondent’s staff selling a package of
Marlboro 100's cigarettes to a person younger than 18 years of age.
The inspectors also documented that staff failed to verify, by means of

photographic identification containing a date of birth, that the purchaser was
18 years of age or older.

These facts establish Respondent Fernandez Mini Market’s liability under the Act. The
Act prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product
is misbranded if sold or distributed in violation of regulations issued under section 906(d)
of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).
The Secretary of the U.S. Department of Health and Human Services issued the
regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1;
see 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21
C.F.R. § 1140.14(a), no retailer may sell cigarettes or smokeless tobacco to any person
younger than 18 years of age. Under 21 C.F.R. § 1140.14(b)(1), retailers must verify, by
means of photographic identification containing a purchaser’s date of birth, that no
cigarette purchasers are younger than 18 years of age.

I conclude, therefore, that a $500 civil money penalty is permissible under 21 C.F.R.
§ 17.2. This order becomes final and binding upon both parties after 30 days of the date
of its issuance. 21 C.F.R. § 17.11(b).

/s/
Catherine Ravinski
Administrative Law Judge