Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:

Horizon Health Care, Inc., Date: November 13, 2007
Petitioner, Docket No. C-06-387
Decision No. CR1689

Centers for Medicare & Medicaid
Services.

DECISION GRANTING
MOTION FOR SUMMARY JUDGMENT

This matter is before me on the Motion for Summary Judgment dated July 31, 2006, filed
by the Centers for Medicare & Medicaid Services (CMS). CMS seeks summary
affirmation of its December 12, 2005 termination of the Medicare provider agreement of
Petitioner Horizon Health Care, Inc. (Petitioner or Horizon) effective December 29, 2005.
In support of its Motion, CMS proffered five Exhibits (CMS Exs. 1-5). CMS Exs. 3 and
4 each has an Attachment (Att.). All are admitted as designated.

Petitioner filed a “Motion to Deny CMS’s [R]equest for Summary Judgment,” dated July
31, 2006, and received on August 7, 2006. Petitioner did not proffer exhibits in support
of its Motion to Deny. On September 1, 2006, Petitioner filed its “Supplement to July
31, 2006 Motion to Deny CMS’s Motion for Summary Judgment,” along with five un-
numbered and unpaginated documents, which have been marked Petitioner’s Exhibits 1-5
(P. Exs. 1-5) and are admitted as designated.

By a September 14, 2006 filing, CMS requested leave to reply to Petitioner’s Motion to
Deny and filed Proposed Reply and Findings of Fact and Conclusions of Law. By Order
issued September 26, 2006, CMS was granted leave to reply and its proposed findings of
fact and conclusions of law were received into the record on September 14, 2006.
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CMS moves for summary affirmation of its termination of Petitioner’s Medicare provider
agreement on two bases. First, CMS asserts that Petitioner’s failure to furnish ownership
information to the State survey agency at the time the survey was conducted is
noncompliance with a Condition of Participation (COP) in 42 C.F.R. § 484.12, along with
42 C.F.R. § 489.53(a)(8), which authorizes termination of a provider agreement based on
noncompliance with section 484.12(b). Second, CMS argues that Petitioner’s failure to
make skilled nursing visits (SNVs) to one of its patients (P-8) consistent with P-8’s
physician-ordered plan of care is tantamount to condition-level noncompliance with the
COP in 42 C.F.R. § 484.30. Because there are no material facts in dispute as to the two
asserted bases and undisputed facts demonstrate entitlement to favorable judgment as a
matter of law, 1 GRANT CMS’s Motion for Summary Judgment.

Material Facts:

Petitioner is a home health agency located in Chino, California. Before the events from
which this proceeding arose, it provided services as a Home Health Agency (HHA) under
the Medicare program, pursuant to the general plan established at section 1861(0) of the
Social Security Act (Act), 42 U.S.C. § 1395x(o), and implementing regulations at 42
C.F.R. Part 484.

On or about May 10, 2005, Nikko Ashton-Cole sold all of her shares of common stock in
Horizon to H. Clifton Ross and his wife Travenna J. Ross. CMS Ex. 2 (copy of
Assignment of Stock Separate from Share Certificate). The Rosses, as sole owners of all
of Horizon’s common stock, in turn, sold all of their shares to Ruth Hernandez Guarina
on May 18, 2005. Thus, as of May 19, 2005, Ms. Guarina was the sole owner of Horizon,
the disclosing entity. CMS Ex. 3 (Declaration of Diane Greif, a CMS employee, executed
July 27, 2006), Att. (copy of Mr. Ross’s October 7, 2005 correspondence to Diane Grief,
describing the May 18, 2005 stock transfer to Ms. Guarina, with copies of documents
evidencing the stock sale). According to Mr. Ross, Mr. Sonny Agonias acted on behalf of
his principal Ms. Guarina, and he managed, directly or indirectly, all activities of
Petitioner as of the sale of the Rosses’ entire interest in Horizon to Ms. Guarina. CMS
Ex. 3, Att.

On July 21, 2005, the California Department of Health Services, Licensing and
Certification, San Bernardino Office (CDHS), initiated a complaint survey of Petitioner.
In connection with the survey, CDHS inquired about information on the ownership and
control of Horizon. Horizon’s staff were provided with a blank Form CMS-1513
(Disclosure of Ownership and Control Interest Statement) to complete. CMS Ex. 4
(Declaration of Donna Gilbreth, R.N.), at 1. Petitioner represented that Mr. Ross
(referred to as Owner A in the Statement of Deficiencies and Plan of Correction (Form
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CMS-2567, hereinafter, “2567”)) owned Horizon. CMS Ex. 4, at 1-2; CMS Ex. 1, at 10-
11 (documentation in the 2567 of Petitioner’s responses to surveyor request for ownership
information). Petitioner’s responses, most of which were furnished by Mr. Agonias, the
individual who presented himself as Horizon’s Chief Financial Officer (CFO), were to the
effect that the “owner” of Horizon, referring to Mr. Ross, could not be contacted because
he was “very sick in the hospital” (July 21, 2005), or “not available, I [Mr. Agonias]
spoke to him [Mr. Ross] a couple of days ago” (July 22, 2005), or that Mr. Ross is “out of
the country and we [referring to Horizon staff] don’t know where he is” (July 22, 2005).
CMS Ex. 1, at 10-11.

Also, as noted in the 2567 (CMS Ex. 1, at 10), CFO Mr. Agonias and another individual
acting as Horizon’s administrator and director of patient care services (DPCS) both
denied that a change in ownership had occurred. Mr. Agonias stated that a transfer of
shares had occurred, and that he believed that a transfer of shares was not tantamount to a
change in ownership. Mr. Agonias further stated that Horizon had had two owners, each
with a 50-percent ownership interest (referring to Mr. Ross and Mrs. Ross, who each held
a 50-percent ownership stake), but that on May 18, 2005, Owner B (referring to N.
Ashton-Cole) transferred her 50-percent share to Owner A (Mr. Ross). This
communication occurred in the morning, on July 21, 2005. CMS Exs. 1, at 10; 4, at 1-2.
On July 21, 2005, in the afternoon, Horizon’s administrator/DPCS returned the completed
Form CMS-1513, indicating “yes” to a change of ownership within the last year. CMS
Ex. 4, Att. (completed Form CMS-1513). That form, signed by Ms. E. Fischer, R.N., “as
administrator/DPCS,” identified only Owner A (Mr. Ross) as the individual with
ownership or controlling interest in Horizon. CMS Ex. 4; CMS Ex. 1, at 10.
Subsequently, the surveyor conducted an interview with the administrator/DPCS. The
administrator/DPCS stated that the person who presented himself as Horizon’s CFO
(referring to Mr. Agonias) is “currently in the process of buying the agency” and that “the
paperwork is being done.” CMS Ex. 1, at 10.

On July 26, 2005, the surveyor received a telephone call from a woman who identified
herself as “the most recent” administrator/DPCS before the “current administrator”
arrived in May 2005. That individual confirmed that a man and his wife (apparently
referring to the Rosses) sold their interest in the business to the “current administrator”
(presumably referring to Ms. Guarina) when Owner B (N. Ashton-Cole) “left back in
May [2005].” The surveyor then interviewed the current administrator/DPCS, and that
individual denied ownership, in whole or in part, and stated that a transfer of ownership to
the CFO was in progress. CMS Ex. 1, at 11. On July 28, 2005, a telephone interview was
conducted with Owner A (Mr. Ross), who denied that he had been abroad, hospitalized,
or for whatever reason unavailable for an interview from July 21 through July 26, 2005.
Mr. Ross confirmed that, on May 18, 2005, he and his wife became sole owners of
4

Horizon; that Owner B (N. Ashton-Cole) had transferred her 50-percent ownership to him
(with the other 50-percent share to his wife). The following day, on July 29, 2005, Mr.
Ross contacted the surveyor by telephone to clarify his prior communication as to
ownership, and stated that he had transferred his interest in Horizon to Owner C
(presumably referring to R. Guarina). He further stated that he had attended one
governing board meeting following the transfer on May 18, 2005, and had signed some
“papers,” but denied further involvement with Horizon since then. CMS Ex. 1, at 11-12.

In connection with the survey, on July 26, 2005, CMS identified another deficiency
deemed a basis for termination: failure to provide proper care to P-8, a home-bound,
68-year-old woman whose diagnoses included uncontrolled diabetes, asthma, elevated
cholesterol, and hypertension, by failing to adhere to her care plan. 42 C.F.R. § 484.30.
Specifically, P-8’s care plan required SNVs once a week for one week, and thereafter,
twice a week for eight weeks. P-8 was provided no SNV during a 15-day period, from
June 30, 2005 to July 15, 2005, following her enrollment as Horizon’s patient on June 28,
2005. CMS Ex. 1, at 6-8. Asa result, P-8 had no home care service consistent with her
physician’s care plan during the period immediately after admission to Horizon. CMS Ex.
1, at 58-60.

Although the 2567 and subsequent CMS correspondence refer to the survey as having
been completed on or about July 26, 2005, the survey was terminated on that date, before
completion, due to the surveyor’s determination that Petitioner had failed to produce the
records requisite to a complete survey. CMS Ex. 4, at 3.

By correspondence dated October 19, 2005, CMS notified Petitioner that the survey
documented noncompliance with four Medicare COPs, and that CMS had concluded that
Petitioner had refused to permit examination of its records. The latter is a separate basis
for termination under 42 C.F.R. § 489.53(a)(5). CMS advised Petitioner that, based on
these findings, it had initiated a process that would result in termination of Petitioner’s
Medicare provider agreement unless Petitioner promptly returned to compliance with
applicable Medicare requirements. Petitioner was provided an opportunity to submit its
credible allegation of compliance evidencing correction of all deficiencies.

On November 2, 2005, Petitioner submitted to CMS documentation alleging correction of
deficiencies cited in the 2567. CMS determined that the submitted documentation did not
credibly evidence correction of all identified deficiencies. CMS then proceeded with
termination of Petitioner’s provider agreement. By correspondence dated December 12,
2005, CMS advised Petitioner of termination effective December 29, 2005. By a June 30,
2006 Notice of Issues for Which Summary Judgment Will be Requested and Report of
Readiness to Present Evidence for Adjudication of the Case, CMS provided Horizon
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supplemental and amended notice that the termination of its provider agreement is based
on provisions in 42 C.F.R. § 489.53(a)(8) and on condition-level noncompliance with
COPs in sections 484.18 and 484.55, in addition to the bases for termination previously
notified.

Petitioner requested administrative review in correspondence dated February 9, 2006,
addressed to Deborah Romero, Manager, Hospital and Community Care Operation,
Division of Survey & Certification, Centers for Medicare and Medicaid Services, at 75
Hawthorne Street, 4"" Floor, San Francisco, California 94105 (CMS’s San Francisco,
California, Regional Office). Also, on what apparently was a simultaneous filing (it bears
a date of February 9, 2005, which appears to have been erroneous as to the year),
Petitioner submitted a separate appeal request addressed to the Administrative Law Judge
(ALJ), Departmental Appeals Board (DAB), but sent to the aforementioned address in San
Francisco. The latter request, addressed to the DAB, but sent to San Francisco, referred to,
and included, a document described as “Horizon’s position paper,” which, in turn, refers to
exhibits and attachments thereto.

CMS forwarded the former (February 9, 2006) appeal request to the Civil Remedies
Division (CRD) on April 10, 2006, commencing this proceeding. In correspondence
dated July 21, 2006, CMS forwarded the latter (February 9, 2005) appeal request,
together with Petitioner’s position paper, explaining that it “might... have inadvertently
omitted the request dated February 9, 2005” when it sent the request dated February 9,
2006 on April 10, 2006. In the same July 21, 2006 correspondence, CMS indicated it was
in the process of copying attachments and exhibits to which the February 9, 2005 appeal
request refers, and would forward them to the CRD under separate correspondence.

Then, by correspondence dated August 7, 2006, CMS sent to CRD the attachments and
exhibits referred to in Horizon’s position paper.

Controlling Law and Regulations:

Under the Medicare program, an HHA is a public agency or private organization that
provides skilled nursing and other therapeutic services to individuals primarily on the
basis of visits to their homes. Section 1861(m) of the Social Security Act (Act), 42
U.S.C. § 1395x(m), describes the covered services that HHAs provide under the Medicare
program. Section 1861(0) of the Act, 42 U.S.C. § 1395x(o), establishes the statutory
definitions that govern HHA participation in the Medicare program. Finally, section

1891 (a) of the Act, 42 U.S.C. § 1395bbb(a), creates a framework of conditions with
which HHAs must comply in order to participate in the Medicare program.
6

The Secretary of Health and Human Services (Secretary) has issued regulations at 42
C.F.R. Part 484 which further govern the participation of HHAs in the Medicare program.
Specifically, the provisions in 42 C.F.R. §§ 484.10-484.55 set forth the Secretary’s
refinement of the statutory requirements for HHAs’ participation in Medicare by
establishing fourteen general COPs. The regulations express these COPs as broadly-
stated criteria for HHA performance in various fields, such as patient rights, compliance
with local, state and federal laws, skilled nursing and therapy services, and patient
assessments. They also establish Standards of Participation (SOPs) as subsidiary
components of the COPs.

To determine whether an HHA is complying with all COPs, a state survey agency
evaluates the provider’s satisfaction of various SOPs within the fourteen COPs. 42
C.F.R. § 488.26(b). The state survey agency documents and records its findings on a
standardized Statement of Deficiencies Form, referred to as Form 2567 (and referred to as
“2567” herein). Failure to comply with a COP occurs where deficiencies, either
individually or collectively, are “of such character as to substantially limit the provider’s
or supplier’s capacity to furnish adequate care or which adversely affect the health and
safety of patients ...”. 42 C.F.R. § 488.24(b). After examining documented deficiencies,
CMS may terminate an HHA’s participation in Medicare if it determines, either based on
the state survey agency’s 2567 or on its own initiative, that the HHA is not complying
with one or more COP(s). Section 1866(b)(2)(A) of the Act, 42 U.S.C.

§ 1395cc(b)(2)(A); 42 C.F.R. §§ 488.20, 488.24, and 488.26.

As applicable to this case, 42 C.F.R. § 489.53(a)(8) requires disclosure of information
concerning an HHA’s ownership and management consistent with 42 C.F.R. § 420.206,
and a violation of section 489.53(a)(8) constitutes noncompliance with COPs in 42 C.F.R.
§ 484.12 (and SOP in 42 C.F.R. § 484.12(b)) and 42 C.F.R. § 489.53(a)(1). In relevant
part, 42 C.F.R. § 420.206 provides as follows:

(a) Information that must be disclosed. A disclosing entity must submit the
following information in the manner specified in paragraph (b) of this
section:

(1) The name and address of each person with an ownership or
control interest in the entity .. . totaling 5 percent or more. ...
(b) Time and manner of disclosure.

(1) Any disclosing entity that is subject to periodic survey and
certification of its compliance with Medicare standards must supply
the information specified by paragraph (a) of this section to the State
survey agency at the time it is surveyed. The survey agency will
promptly furnish the information to the Secretary.

(c) Consequences of failure to disclose.

(2) CMS terminates any existing agreement... of, any disclosing
entity that fails to comply with paragraph (b) of this section.

The SOP in 42 C.F.R. § 484.12(b) provides, in pertinent part:

The HHA must comply with the requirements of Part 420, Subpart C of this
chapter. The HHA also must disclose the following information to the State
survey agency at the time of the HHA’s initial request for certification, for
each survey, and at the time of any change in ownership or management:

(1) The name and address of all persons with an ownership or
control interest in the HHA as defined in §§ 420.201, 420.202, and
420.206 of this chapter.

As relevant here, section 420.201 defines “person with an ownership or control interest”
as “a person or corporation that . . . [h]as an ownership interest totaling 5 percent or more
in a disclosing entity.” “Disclosing entity” would include a “[a] provider of services.”
Because the SOP imposes Part 420, Subpart C requirements on HHAs, a violation of the
standard would necessarily invoke section 420.206(c)(2), which, as noted above, permits
CMS to “terminate[] any existing agreement” with a disclosing entity for failure to
furnish required information. As asserted by CMS, the language of this provision
mandates termination for failure to furnish ownership information at the time of the
survey, and that the SOP in section 484.12(b), which incorporates and applies section
420.206(c)(2) by reference, essentially defines a violation thereof as a condition-level
noncompliance.

Additionally, the COP set forth in 42 C.F.R. § 484.30 is relevant here. That COP
contains SOPs (section 484.30(a) and (b)) governing provision of skilled nursing services
to certain patients as required by their specific plans of care.
8

A decision by CMS to terminate an HHA’s provider agreement is an “initial
determination” that the HHA may appeal by requesting a hearing before an ALJ of this
forum. 42 C.F.R. §§ 489.53(d), 498.3(b)(8), 498.5(b). The terms of 42 C.F.R. Part 498
govern the litigation of any such appeal.

CMS has moved for summary judgment in its favor. Although FED. R. CIV. P. 56 is not
directly applicable to proceedings under 42 C.F.R. Part 498, it provides guidance on the
standard of review for motions seeking summary disposition in this forum. Summary
judgment is appropriate where the record presents no genuine dispute as to any material
fact and the undisputed facts clearly demonstrate that one party is entitled to judgment as
a matter of law. White Lake Family Medicine, P.C., DAB No. 1951 (2004); Lebanon
Nursing and Rehabilitation Center, DAB No. 1918 (2004). The movant, or party
seeking summary judgment, bears the initial burden of showing the basis for its motion
and identifying the portions of the record that it believes demonstrate the absence of
genuine factual dispute. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The
nonmoving party “may not rest upon the mere allegations or denials of his pleading, but .
. . must set forth specific facts showing that there is a genuine issue for trial.” Anderson
v, Liberty Lobby, Inc., 477 U.S. 242, 248 (1986), quoting First National Bank of Arizona
v. Cities Service Co., 391 U.S. 253, 249 (1968).

Discussion:

CMS has made a prima facie showing that there are no material facts in dispute as to
termination of its provider agreement with Petitioner based on noncompliance with 42
C.F.R. § 489.53(a)(8) associated with requisite disclosure of information on ownership or
control of Horizon during the July 2005 CDHS survey. I note that although Petitioner has
responded to CMS’s Motion and has proffered exhibits to support its opposition, those
filings do not provide a basis upon which I can conclude that Petitioner has shown an
existence of a genuine issue of material fact that precludes or defeats summary disposition
in CMS’s favor. DAB has clarified that summary judgment may be upheld “if the
affected party either had conceded all of the material facts of proffered testimonial
evidence only on facts which, even if proved, clearly would not make any substantive
difference in the result.” Lebanon, at 2, citing Big Bend Hospital Corp., DAB No. 1814
(2002), aff'd Big Bend Hospital Corp. v. Thompson, No. P-02-CA-030 (W.D. Tex. Jan. 2,
2003). Thus, Petitioner’s termination based on noncompliance with ownership disclosure
requirements is subject to summary affirmation if CMS has demonstrated entitlement to
judgment as a matter of law. As I explain below, I believe that the undisputed facts do
support CMS’s position. CMS is therefore entitled to prevail as a matter of law on its
Motion for Summary Judgment.
9

Petitioner did not furnish accurate ownership information — i.e., that Ms. Guarina owned
more than 5 percent of Horizon stock following the May 18, 2005 stock transfer — to
CDHS when asked to do so in connection with the July 2005 survey. As stated by the
surveyor, “the name and address of Ruth H. Guarina were never mentioned in response to
any of the questions I asked in order to obtain the ownership information the HHA was
required to furnish at the time of the survey.” CMS Ex. 4, at 2. Rather, Petitioner’s
response identified only Mr. Ross as the owner of Horizon even after Mr. Ross and his
wife had transferred their entire interest in Horizon to Ms. Guarina on May 18, 2005,
some two months before the date of the survey. Mr. Agonias, who represented himself as
Horizon’s CFO and was the primary source of communication from Horizon to CDHS in
connection with the survey, did not convey information about the May 18, 2005
transaction between the Rosses and Ms. Guarina. CMS Exs. 4, at 1-2; 1, at 10. Atno
time during the survey did any individual associated with Horizon communicate
information to the effect that Ms. Guarina had any ownership interest in Horizon totaling
a minimum 5 percent. CMS Ex. 4, at 2.

Further, it is evident that Petitioner’s responses were intended to convince CDHS that Mr.
Ross owned Horizon during the survey period. As noted, Form CMS-1513 (Disclosure of
Ownership and Control Interest Statement) supplied by Horizon at the request of the
surveyor, clearly lists a single owner named “Clifton Ross.” CMS Ex. 4, Att. (copy of
CMS-1513 executed by Horizon’s administrator/DPCS on July 22, 2005).

Ihave carefully considered Petitioner’s responses to survey findings and arguments
against summary disposition and find them ultimately unpersuasive to defeat summary
disposition in CMS’s favor. First, Petitioner contends that, although the stock transfer
from the Rosses to Ms. Guarina occurred on May 18, 2005, the transfer did not actually
become “effective” until some three months later, on August 26, 2005. The latter date
apparently was the date on which the required change in information associated with the
stock sale was provided to United Government Services, LLC, Petitioner’s Medicare
fiscal intermediary (FI). CMS Ex. 1, at 9. According to Form CMS-855A (CMS Ex. 5),
such changes are to be reported within 90 days of the effective date of the change. Thus,
Petitioner’s argument is that the “effective” date of the stock sale was in August 2005,
well after the survey from which the instant proceeding arose, and therefore, there was no
violation of ownership information disclosure requirements as of the survey date. The
reporting provision in Form CMS-855A, however, is separate and distinct from the
requirement to furnish ownership information to a State survey agency as the survey is
being conducted and is clearly established by aforementioned regulations. Those
regulations do not permit an HHA to delay or withhold provision of ownership
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information as requested by a State survey agency pending notice to an FI pursuant to
Form CMS-855A provisions, or otherwise provide for exceptions to the reporting
requirement based on any alternative reporting date consistent with Form CMS-855A or
some other document.

Petitioner also contends that it was not required to furnish ownership information to
CDHS at the time of the survey because there was no “actual” change in ownership,
arguing, in essence, that the corporate entity of Horizon Health Care, Inc., even after the
May 18, 2005 stock transfer, was the legal “owner.” See Petitioner’s position paper, at 3
(“[A] disclosure of the names and addresses of new persons with an ownership or control
interest in the agency except with regard to Mr. Ross was not disclosed as there was
nothing else to disclose.”). As noted, 42 C.F.R. § 489.53(a)(8) incorporates by reference
42 C.F.R. § 420.406, which provides that ownership information must be supplied to the
State survey agency when the survey is being conducted. And, the SOP in section
484.12(b) explicitly requires an HHA to disclose information concerning ownership or
management, in relevant part, for each survey, and as well, at the time of any change in
ownership or management. Notwithstanding the continued existence of Horizon Health
Care, Inc. as a corporate “person” and a distinct legal entity, before and after May 18,
2005, it is abundantly clear that, as of May 18, 2005, the Rosses had transferred their
entire shareholder interest in Horizon to Ms. Guarina. That, in my opinion, is change in
ownership or control that had occurred some two months before the date of the survey,
and therefore, Petitioner was required to disclose information about the May 18, 2005
transaction when asked to do so in July 2005.

Tam aware of the definition of “change of ownership” of a “corporation” as found in 42
C.F.R. § 489.18(a)(3), which, in pertinent part, provides: “Transfer of corporate stock ...
does not constitute change of ownership.” However, clear and distinct regulatory
provisions elsewhere, as aforementioned, require disclosure of information on ownership
or control of an HHA responsive to a surveyor’s request for such information coincident
to a survey. Petitioner has not complied with those provisions. Also worth noting is the
definition of “ownership interest” (42 C.F.R. § 420.201): “the possession of equity in the
capital, the stock, or the profits of the disclosing entity.” Under that definition, Ms.
Guarina, as of May 19, 2005, clearly had an “ownership interest” in Horizon, the
disclosing entity.

Further on this issue, I have considered Petitioner’s vague assertions to the effect that, due
to factors like alleged buyer failure to deliver stock certificates or make payment in
connection with the stock transfer on May 18, 2005, or failure of seller’s attorney to
record the transfer, or Mr. Ross’s alleged failure to resign as president and director of the
corporation, or a breach-of-contract dispute between buyers and seller, “change of
11

ownership” did not occur, or should not be deemed to have occurred, as of May 18, 2005.
Petitioner still has not proffered any evidence that Ms. Guarina did not have any
ownership interest in Horizon in July 2005. The evidence before me is overwhelmingly
to the contrary. On this point, Section 4 of the Stock Purchase Agreement Ms. Guarina
executed as Buyer, and the Rosses as Seller, provides that “[t]he transaction contemplated
by this Stock Purchase Agreement shall close on May 18, 2005 unless that date is
modified or changed by mutual written agreement of the parties.” CMS Ex. 3, Att. at 3.
Section 17(f) of the Stock Purchase Agreement provides that “this ... Agreement is
subject to amendment only by subsequent written, executed agreement by and between
the parties hereto.” CMS Ex. 3, Att. at9. There is no proffer of evidence, or even an
assertion by Petitioner, that the parties mutually exercised the option to delay or modify
the closing date of the May 18, 2005 transaction as scheduled, such that Ms. Guarina did
not acquire any ownership or controlling interest in Horizon until after the July 2005
survey. Further on this point, I am aware that Petitioner has proffered evidence
purportedly associated with the May 18, 2005 stock transfer bearing various dates before
and after then. P. Exs. 2-5. None of those items explicitly identifies the parties to the
May 18, 2005 transaction. P. Exs. 4 and 5 are duplicate items. The third and last page of
P. Exs. 4 and 5 is a copy of a facsimile transmission cover sheet from Mr. Ross to “Ruth”
(presumably Ruth H. Guarina) dated January 16, 2006, asking “Ruth” to send certain tax
records “from 5-18-05 thru 12-31-05 for filing the 2005 tax return” to an identified
accounting firm. That item, in my view, actually supports CMS’s position. It indicates
Mr. Ross’s and Ms. Guarina’s mutual understanding of the transfer of the former’s, and
his wife’s, collective controlling interest in Horizon to Ms. Guarina before July 2005.

Moreover, it is not only evident that Mr. Agonias, representing himself as Horizon’s CFO
and Ms. Guarina’s agent, played a major role in connection with communication to CMS
and CRD in connection with the survey and the instant proceeding, but that he also played
such a role in the negotiation and consummation of the May 18, 2005 stock transfer from
the Rosses to Ms. Guarina. More specifically, the Indemnity Agreement executed by and
between the Rosses and Mr. Agonias (CMS Ex. 3, Att. at 13) indicates that Mr. Agonias
held himself out to the Rosses as the prospective buyer until “the eve of the execution of”
the Stock Purchase Agreement, when he “elected to nominate Ruth H. Guarina as the
Buyer therein.” Such evidence, the authenticity of which is not disputed and where the
evidence before me shows no subsequent revocation or revision of the Indemnity
Agreement, is highly probative evidence indicative of Mr. Agonias’s awareness of his and
Ms. Guarina’s respective roles in the transaction and who would “own” Horizon after the
transaction was completed. In the face of such evidence, I am not persuaded by after-the-
fact arguments concerning what Mr. Agonias deems is the true “effective” date of the
transfer of ownership.
12

Furthermore, what I see as a theme in both arguments - that is, first, the stock transfer was
not “effective” until after the CDHS survey, and second, that there was no “actual”
change in ownership as of May 18, 2005 - is Petitioner’s apparent plea of ignorance or
mistake as to regulatory mandates. I agree with CMS that neither ignorance, nor mistake,
without more, is adequate to defeat summary judgment. Horizon, as an HHA, is held to a
standard of responsibility for complying with Medicare program requirements and is
presumed to understand what is required of it to remain a program participant. See
generally Cary Health and Rehabilitation Center, DAB No. 1771 (2001).

CMS is authorized to terminate a Medicare provider’s agreement based on condition-
level noncompliance. As stated, the COP at 42 C.F.R. § 484.12 is controlling on the issue
of failure to disclose ownership information at the time of the survey. Section 484.12(b)
sets forth an SOP, which incorporates by reference the provisions of section 420.206, and
section 420.206 authorizes CMS to terminate a provider agreement based on failure to
furnish ownership information. The facts of this case support a conclusion that
noncompliance with section 484.12(b) is tantamount to a condition-level noncompliance.
lagree with CMS on this point.

Based on the foregoing, I conclude that CMS has established a prima facie case that there
is no genuine issue of material fact and that it is entitled to summary judgment affirming
the termination of Petitioner’s Medicare provider agreement based on noncompliance
with ownership information disclosure requirements. It is clear to me that evidence of
such noncompliance in and of itself supports affirmation of CMS’s decision to terminate.

T also address, however, CMS’s second ground for its Motion: failure to furnish P-8
skilled nursing visits consistent with her plan of care. On this issue, Petitioner offers no
evidence specifically responsive to CMS’s determination as to noncompliance with
section 484.30. Rather, its responses seem to concede noncompliance, as it said in its
position paper, at 3, that, “to some extent” P-8 was not provided with physician-ordered
care. However, Petitioner did state that, once P-8 said that she did not receive a SNV, a
nurse visited her “immediately” and that the agency “constantly communicated with the
patient to ensure that she is comfortable and receiving adequate care.” Jd. Petitioner also
addressed corrective action taken, as it reported (CMS Ex. 1, at 39, 55) that the nurses
who provided service to a number of patients, including P-8, were counseled and
terminated. Be that as it may, the evidence is uncontradicted as to noncompliance with
section 484.30 with respect to P-8 during the time period in question. Action taken after
the fact to remedy a violation, or designed to ensure higher quality of services to patients
not limited to the patient whose care is the subject of a noncompliance determination,
13

does not mitigate the section 484.30 violation noted at the time of the survey. Petitioner’s
vague assertion to the effect that CMS “ignored” documented corrective actions and that
such dismissive CMS action is unfair and tantamount to abuse of CMS’s authority cannot
defeat summary judgment.

Also in connection with the second basis for CMS’s motion, I have considered, in
particular, P. Ex.1, which consists of six pages, each of which is a copy of Horizon’s
“Patient Satisfaction Survey Form” completed by patients, and all of which were signed
between July 28, 2005 and August 24, 2005, after the CDHS survey was ceased (with the
exception of one survey form, which is not dated), and in which the patients evaluated
Horizon’s nursing or physical therapy services as having been “excellent” or “good.”
Perhaps Petitioner’s intention, at least in part, was to convey its position that Horizon is
providing, and had provided during the time period contemporaneous to the survey date,
high-quality nursing care to its patients. (Note Petitioner’s statement, in its position
paper, at 3: “[P-8] mailed back to the agency a patient satisfaction survey indicating her
positive responses to the agency’s services.”) Assuming that was the intention, P. Ex. 1
does not refute undisputed facts specific to the failure to adhere to SNV requirements
consistent with P-8’s plan of care between June 30, 2005 and July 15, 2005. Evidence to
the effect that certain Horizon patients responded favorably to a patient care satisfaction
survey near the time of the July 2005 CDHS survey, under certain circumstances, could
be supporting evidence on corrective actions taken, but that, as with counseling and
termination of nurses who were found to have failed to provide required care to P-8 and
other patients, is not the issue here. The narrow issue before me is noncompliance with
specific care requirements to be met within a specific time period consistent with a
specific patient’s plan of care. I see no evidence contrary to CMS’s conclusion that
Petitioner did not comply with those requirements.

Findings and Conclusions:

I therefore find and conclude as follows:

1. Petitioner Horizon Health Care, Inc. failed to disclose information on ownership and
control of Horizon Health Care, Inc. consistent with 42 C.F.R. § 489.53(a)(8) at the time
of the survey in July 2005.

2. Petitioner Horizon Health Care, Inc. failed to comply with the conditions of
participation in 42 C.F.R. § 484.12(b) and termination of its Medicare provider agreement
is proper pursuant to 42 C.F.R. § 489.53(a)(1).

3. Petitioner Horizon Health Care, Inc. failed to comply with 42 C.F.R. § 484.30.
Conclusion:

Based on the foregoing reasons, CMS’s Motion for Summary Judgment should be, and
is, GRANTED. CMS’s decision to terminate Petitioner Horizon Health Care, Inc.’s
participation in the Medicare program as a home health agency effective December
29, 2005, is in all respects

AFFIRMED.

/s/
Richard J. Smith
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
Walter Borg, MD, )
(CLIA No. 19D0979152), ) Date: November 8, 2007

)
Petitioner, )
)

-V.- ) Docket No. C-07-520

) Decision No. CR1688
Centers for Medicare & Medicaid )
Services. )
)

DECISION

I enter summary judgment in favor of the Centers for Medicare & Medicaid Services
(CMS) sustaining CMS’s determination to revoke Petitioner’s (Walter Borg, M.D.)
provider certificate under the Clinical Laboratory Improvement Amendments of 1988
(CLIA).

I. Applicable Law and Regulations

Under CLIA, the Secretary of the United States Department of Health and Human
Services (Secretary) is authorized to inspect clinical laboratories and, in effect, license
them to perform tests. CLIA prohibits a clinical laboratory from soliciting or accepting
specimens for testing unless it has first received from the Secretary a certificate
authorizing it to perform the specific category of tests which the laboratory intends to
perform. 42 U.S.C. § 263a(b). CLIA directs the Secretary to establish standards to assure
that clinical laboratories certified by the Secretary perform tests that are valid and
reliable. 42 U.S.C. § 263a(f).
If. Background

Petitioner is a laboratory located in Lafayette, Louisiana, that holds a CLIA certificate of
provider-performed microscopy (PPM) testing.

On October 18 and 24, 2006, the Louisiana Department of Health and Hospitals (LDHH)
conducted a complaint investigation of Petitioner's laboratory and issued a statement of
deficiencies form 2567 (SOD). ALJ Exhibits (Exs.) 1, 2.' CMS reviewed the survey
report and determined that Petitioner was not in compliance with the conditions for
participating in the CLIA program. The complete listing of Petitioner's deficiencies is
found in the SOD. ALJ Ex. 2. Most significantly, Petitioner was found out of
compliance with the condition for laboratory director, laboratories performing PPM
procedures (42 C.F.R. § 493.1355), and the condition for inspection requirements
applicable to all CLIA-certified and CLIA-exempt laboratories (all laboratories). 42
C.F.R. § 493.1771. ALJ Exs. 1, 2.

By letter dated April 20, 2007, CMS served notice of proposed sanctions on Petitioner

pursuant to 42 C.F.R. §§ 493.1806(a), (b) and 1840(e). Specifically, CMS imposed the
principal sanction of revocation of the laboratory’s CLIA certificate pending a decision
by an administrative law judge (ALJ), if Petitioner chose to appeal the sanction.

In accordance with 42 C.F.R. § 493.1842(b)(2), Petitioner was granted until April 30,
2007, to submit written evidence or other information against the imposition of sanctions.
CMS found Petitioner’s response to be insufficient to provide a basis to alter its decision
to proceed with the enforcement action stated in the April 20, 2007 notice of proposed
sanctions. ALJ Exs. 1, 3.

By letter dated June 13, 2007, Petitioner requested a hearing. This case was assigned to
me for hearing and decision. On August 21, 2007, CMS filed a motion and memorandum
of law in support of summary judgment (CMS Brief). As noted, no exhibits accompanied
CMS’s motion. Petitioner filed a response in opposition on September 18, 2007 (P.
Brief), also with no supporting documentary evidence. CMS submitted a reply to
Petitioner’s opposition on September 26, 2007 (CMS Reply). Petitioner followed with a
sur-reply received on October 9, 2007 (P. Reply).

1 The only documents submitted in this case came in with Petitioner’s hearing
request. Neither party asked that I admit these documents, but I enter them into evidence
as ALJ Exs. 1-3, motu proprio. ALJ Ex. | is the April 20, 2007 notice of proposed
sanctions; ALJ Ex. 2 is the SOD dated October 24, 2006; and ALJ Ex. 3 is a May 4, 2007
letter from CMS to Petitioner informing him that CMS was not altering its decision to
proceed with the enforcement action noted in its April 20, 2007 notice letter.
For the reasons set forth below, I find that summary judgment is appropriate. Based on
the documentary evidence, arguments of the parties, and applicable law and regulations, I
find that there are no material issues of fact in dispute requiring an evidentiary hearing,
and that CMS is entitled to judgment as a matter of law. | further find that Petitioner
failed to meet the CLIA condition for laboratory director under 42 C.F.R. § 493.1355 and
the condition for inspection requirements under 42 C.F.R. § 493.1771. Revocation of the
laboratory’s CLIA certificate is within CMS’s discretion.

Ill. CMS’s Contentions

CMS asserts that Petitioner’s hearing request establishes that he is not contesting the
factual findings in the SOD, but rather the choice of sanctions. Therefore, CMS
maintains that the sole remaining issue is whether it abused its discretion by choosing to
revoke Petitioner’s CLIA certificate. CMS Brief at 7-9.

IV. Petitioner's Contentions

Petitioner concedes that he did not dispute the survey findings, but argues that the
sanction is too severe. Petitioner raises several points, which I discuss below, as a basis
for his contention that the revocation sanction is too severe. His principal argument,
however, appears to be that CMS did not properly weigh the factors established in the
regulations at 42 C.F.R. § 493.1804(d)’ prior to selecting revocation as the sanction in
this case. P. Brief at 4-7.

V. Issues

The issues in this case are whether:
Petitioner failed to comply with one or more conditions of participation
under CLIA, thereby giving CMS the authority to impose sanctions against

Petitioner; and, if so,

Whether CMS has abused its discretion by choosing revocation as the
sanction for Petitioner’s noncompliance.

2 Petitioner refers to 42 C.F.R. § 493.1800(d), whereas the correct reference here
is to 42 C.F.R. § 493.1804(d).
VI. Findings of Fact and Conclusions of Law

A. CMS may impose sanctions against Petitioner for his failure to
comply with two condition-level deficiencies.

The regulations provide that a laboratory director must meet established qualifications and
provide overall management and direction for a laboratory. 42 C.F.R. § 493.1355. The
laboratory director’s responsibility for the operation and management of the facility
includes the prompt, accurate, and proficient reporting of test results. The laboratory
director is also responsible for ensuring that testing is personally performed by an
individual who meets all regulatory requirements. 42 C.F.R. § 493.1359.

Here, the laboratory director failed to fulfill the responsibilities of a laboratory director and
restrict the laboratory’s reporting of testing to the PPM procedures. The laboratory
director also failed to ensure that testing personnel were qualified to perform testing.
Through interviews, observations, and document review, the surveyors determined that the
laboratory was conducting testing for specimens outside the scope of its CLIA microscopy
certificate, that testing was being performed in the absence of appropriate supervision, and
that testing was done by personnel lacking a license issued by the State of Louisiana. ALJ
Ex. 2, at 4-26.

The condition-level inspection requirements were not met in that the laboratory failed to
meet the requirements for maintaining a PPM procedure certificate by failing to restrict
testing to its CLIA microscopy certificate. Based on surveyor observation and interviews,
it was found that the laboratory failed to have all records and data accessible and
retrievable within a reasonable period of time during the course of inspection to determine
if the laboratory was in compliance. Additionally, there were no records that the
laboratory had performed quality control for any test performed and reported, or that the
laboratory was enrolled in proficiency testing. ALJ Ex. 2, at 26-51; 42 C.F.R. § 493.1771.

Petitioner concedes that he has not disputed the survey findings. P. Brief at 4.
Consequently, I must conclude that CMS’s determination that Petitioner incurred
condition-level deficiencies is final and non-reviewable. It is, thus, my finding that, as a
matter of law, Petitioner is in violation of 42 C.F.R. §§ 493.1355 and 1771. CMS is,
therefore, justified in imposing sanctions for noncompliance with condition-level
deficiencies.
B. CMS has not abused its discretion by choosing to revoke Petitioner’s
CLIA certificate.

Petitioner argues that the revocation sanction is too severe and that Petitioner is entitled to
a hearing before an ALJ to resolve the appropriateness of the sanction imposed. The
evidence that Petitioner would have me consider is that Petitioner believed that his
laboratory was operating under a certificate of compliance and not a PPM certificate, and
that there was a valid reason for the laboratory director’s absence from the laboratory at
the time of the survey. Petitioner also argues that CMS failed to appropriately weigh the
factors set forth at 42 C.F.R. § 493.1804(d). P. Brief at 4-5. Petitioner’s assertions have
no basis in fact or law.

On October 18, 2006, laboratory personnel provided the surveyor with a copy of the CLIA
certificate which indicated that the laboratory maintained a certificate of provider-
performed microscopy procedures. ALJ Ex. 2, at 5. Thus, Petitioner had no reason to
believe that the laboratory was operating under another category of CLIA certificate.

I agree with CMS that the absence of Petitioner and the laboratory director during the
survey is irrelevant to CMS’s discretion to impose a revocation sanction.

Concerning the penalty, Petitioner further argues that CMS has abused its discretion by
imposing the most severe sanction, revocation, against him where the regulations require a
weighing of factors under 42 C.F.R. § 493.1804(d), which lists a series of factors to be
considered in making a determination regarding which sanction to impose against a
laboratory. According to the regulation, CMS is granted discretion to consider one or
more of the listed factors when opting for the imposition of sanctions against a deficient
laboratory. CMS may also consider other factors not specifically mentioned in 42 C.F.R.
§ 493.1804(d).

As CMS notes (CMS Reply at 8), in a case such as this, where Petitioner concedes that:
for several years he has been performing tests that he was not licensed to perform; he
employed expired reagents in the testing process; he did not participate in a proficiency
testing program; and he reported results for testing that he did not have the equipment to
perform, a revocation sanction is most appropriate, and well within CMS’s discretion.
ALJ Ex. 2; see Edison Medical Laboratories, Inc., DAB No. 1713, at 17-18.

The existence of either of the two condition-level deficiencies in this case is sufficient to
support the principal sanction of revocation of Petitioner's CLIA certificate. The purpose
of the Act is to ensure the accuracy and reliability of laboratory tests, and hence protect the
public health of all Americans. The condition-level deficiencies present in this case create
a significant risk of inaccuracy and unreliability detrimental to the health of the American
public.

VII. Conclusion

Petitioner failed to meet the condition-level requirements for laboratory director,
laboratories performing PPM procedures (42 C.F.R. § 493.1355), and for inspection
requirements applicable to all laboratories (42 C.F.R. § 493.1771). Accordingly, CMS has
a basis to revoke Petitioner’s CLIA certificate and to cancel Petitioner’s approval to
receive Medicare payments for its services. 42 C.F.R. § 493.1842(a)(1). Petitioner’s
owners or operators are prohibited from owning, operating or directing a laboratory for at
least two years from the date of the revocation. 42 U.S.C. § 263a(i)(3); 42 C.F.R.

§ 493.1840(a)(8); 42 C.F.R. § 493.2.

/s/
José A. Anglada
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
Claiborne and Hughes Health )
Center, ) Date: November 09, 2007
(CCN: 44-5157) )
)
Petitioner, )
)
-Vv.- ) Docket Nos. C-07-31
) C-07-111
) Decision No. CR1687
Centers for Medicare & Medicaid )
Services. )
a )
DECISION

I sustain the determination of the Centers for Medicare & Medicaid Services (CMS) to
impose remedies against Petitioner, Claiborne and Hughes Health Care Center, consisting
of the following:

* Civil money penalties of $3,050 per day for each day of a period beginning on
July 18, 2006 and continuing through September 4, 2006; and

* Civil money penalties of $100 per day for each day of a period beginning on
September 5, 2006 and continuing through September 17, 2006.

+ Denial of payment for new admissions for each day of a period that began on
August 20, 2006 and continuing through September 17, 2006.
I. Background

Petitioner is a skilled nursing facility that is located in Franklin, Tennessee. Petitioner
participates in the Medicare program. Its participation in Medicare is governed by
sections 1819 and 1866 of the Social Security Act and by implementing regulations at 42
C.F.R. Parts 483 and 488. Additionally, its right to a hearing in these cases, and the
hearing process, are governed by regulations at 42 C.F.R. Part 498.

Surveys of Petitioner’s facility for compliance with Medicare participation requirements
were completed on August 14, 2006 (August survey) and on September 6, 2006
(September survey). Based on these surveys CMS determined that Petitioner was not
complying with Medicare participation requirements and determined to impose the
above-described remedies against Petitioner. Petitioner requested hearings from CMS’s
determinations and its hearing requests were docketed separately as Civil Remedies
Docket No. C-07-31 (the challenge to the August survey results and remedy
determination) and Civil Remedies Docket No. C-07-111 (the challenge to the September
survey results and remedy determination). The cases were assigned to me for hearings
and decisions.

n each case I directed the parties to file a pre-hearing exchange consisting of their
proposed exhibits, including the written direct testimony of their proposed witnesses, and
briefs. Each party completed its exchange in each case. In Docket No. C-07-31, CMS
filed a brief and proposed exhibits which it identified as CMS Ex. 1 - CMS Ex. 22. In
Docket No. C-07-111, CMS filed a brief and proposed exhibits which it identified as
CMS Ex. 1 - CMS Ex. 29. In Docket No. C-07-31, Petitioner filed a brief and proposed
exhibits which it identified as P. Ex. 1 - P. Ex. 29. In Docket No. C-07-111, Petitioner
filed a brief and proposed exhibits which it identified as P. Ex. 1 - P. Ex. 17.

consolidated these cases and scheduled them for an in-person hearing. Prior to the
earing the parties advised me that they agreed that the cases could be heard and decided
ased on their written submissions. I then cancelled the hearing but afforded each party
the opportunity to file an additional brief. Each party filed an additional brief in the
consolidated cases.

receive into evidence all of the parties’ proposed exhibits. In order to avoid confusion
where I cite to an exhibit in my decision I cite both to the exhibit number and to a docket
number prefix. For example, I cite to “07-31 CMS Ex. 1” when I cite to CMS Ex. | in
Docket No. C-07-31.
3

II. Issues, findings of fact and conclusions of law
A. Issues
The issues in these consolidated cases are whether:

1. Petitioner failed to comply substantially with Medicare participation
requirements; and,

2. Ifso, whether CMS’s remedy determinations are reasonable.
B. Findings of fact and conclusions of law

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

Each of the two survey reports alleges that Petitioner was noncompliant with Medicare
requirements in multiple respects. The August survey report avers that Petitioner failed to
comply substantially with seven distinct Medicare participation requirements and that
Petitioner’s failure to comply with each of these requirements was so egregious as to
comprise immediate jeopardy for Petitioner’s residents.' 07-31 CMS Ex. 1. The
September survey report alleges that Petitioner failed to comply substantially with three
Medicare participation requirements albeit not at the immediate jeopardy level of
noncompliance. 07-111 CMS Ex. 1.

It is not necessary for me to address all of the findings of noncompliance that were made
at the two surveys in order for me to sustain CMS’s remedy determinations. The $3,050
daily civil money penalties that CMS determined to impose based on the findings of
noncompliance made at the August survey are, as I discuss below, the minimum daily
amount that CMS may impose to remedy an immediate jeopardy level deficiency.
Consequently, the presence of only one immediate jeopardy level deficiency is sufficient
to sustain the penalty amount. The $100 daily civil money penalties that CMS
determined to impose based on the findings of noncompliance made at the September
survey are very close to the minimum permissible remedy amount for a non-immediate
jeopardy level deficiency and comprise only three percent of the maximum permissible

' The term “immediate jeopardy” is defined at 42 C.F.R. § 488.301 to mean:

a situation in which the provider’s noncompliance with one or more
requirements of participation has caused, or is likely to cause, serious
injury, harm, impairment, or death to a resident.
4

amount. For reasons that I discuss below, a finding of a single deficiency at the
September survey is sufficient to sustain that penalty amount. And, as I discuss below,
CMS has discretion to impose denial of payment for new admissions for each day that
Petitioner failed to comply substantially with a Medicare participation requirement.

In this decision I address a single immediate jeopardy level deficiency that was found at
the August survey, a failure by Petitioner’s staff to notify a resident’s family and consult
with that resident’s treating physician about a significant change in a resident’s condition
as is required by 42 C.F.R. § 483.10(b)(11). And, I address a single non-immediate
jeopardy level deficiency that was found at the September survey, similarly, a failure by
Petitioner’s staff to consult with a resident’s treating physician about a significant change
in a resident’s condition. Petitioner’s failure to comply with this requirement, both at the
immediate jeopardy level of noncompliance, and at the non-immediate jeopardy level, is
ample support for CMS’s remedy determinations in these two cases.”

1. As of the August survey Petitioner failed to comply substantially with
the requirements of 42 C.F.R. § 483.10(b)(11).

The regulation at issue requires that a facility immediately notify a resident’s family and
consult with that resident’s physician about:

A significant change in the resident’s physical, mental, or psychosocial
status (i.e., a deterioration in health, mental, or psychosocial status in either
life-threatening conditions or clinical complications) ....

CMS premises its allegation of immediate jeopardy level noncompliance by Petitioner
with this requirement on the care that Petitioner’s staff provided to a resident who is
identified in the August survey report as Resident #4. 07-31 CMS Ex. 1, at 1 - 4. It is
undisputed that this resident was a very sick individual. He was admitted to Petitioner’s
facility in September 2004 with diagnoses that included diabetes, dementia, and
depression. /d., at 2. Petitioner’s staff determined that the resident was at risk for
malnutrition, dehydration, and weight loss. 07-31 CMS Ex. 4, at 62. Reflecting that

> | do not suggest that Petitioner was either compliant or non-compliant with the
other participation requirements for which Petitioner was cited as being non-compliant in
the August and September surveys. I make no findings about the other allegations of
noncompliance because it is unnecessary that I do so.

* The August survey report also alleges a compliance failure with respect to
another resident who is identified as Resident #11. However, CMS does not allege that
Petitioner’s noncompliance in providing care for this resident was at the immediate
jeopardy level and, so, I do not address CMS’s allegations concerning Resident #11.
5

assessment, the care plan that Petitioner’s staff developed for the resident included
several interventions designed to assure that the resident received adequate nutrition and
fluids. Jd. Among other things the staff was supposed to maintain daily records
documenting the resident’s consumption of food and fluids. /d., at 64.

These concerns and the interventions listed in the care plan notwithstanding the
Resident’s appetite and consumption of food diminished sharply by mid-June 2006. In
June and July 2006, when the staff documented what the resident consumed, it
documented that the resident was eating less than the full portions that had been
prescribed to him. In June, the resident consistently only ate a fraction of the food offered
to him at dinner. 07-31 CMS Ex. 4, at 12. In July, the pattern of reduced consumption
continued. /d., at 13.

Even though the staff was instructed to document the resident’s food intake it failed to do
so consistently. In June 2006, Petitioner’s staff failed to document 23 out of 90 meals
offered to the resident. CMS Ex. 4, at 12. In July, the staff failed to document 11 of 56
meals. /d., at 13. Thus, over the period that corresponded with the resident’s weight loss,
staff failed to document what the resident consumed during about 1/5 of his meals. Asa
consequence of the staff’s failure to document food consumption it is impossible to state
with certainty exactly how much the resident consumed after mid-June 2006. It is,
however, evident, that his food consumption diminished sharply.

As of January 1, 2006, the resident’s weight was 126.3 pounds. /d., at 8. On June 13,
2006, the resident’s weight was recorded at 135 pounds. But, beginning with that date the
resident rapidly lost weight. Petitioner’s staff failed to record the resident’s weight during
the period between June 13 and July 18, but the staff weighed him on July 18 and on that
date his weight was recorded at 116.5 pounds, an 18.5 pound loss over a five-week
period. 07-31 CMS Ex. 1, at 2; 07-31 CMS Ex. 4, at 8. On July 19, 2006, the resident
was hospitalized. There, his weight was recorded at 110 pounds. 07-31 CMS Ex. 7, at
14. The resident died within days.

There is nothing in the resident’s treatment record to show that Petitioner’s staff notified
the resident’s family at any time during the period from mid-June to mid-July 2006 of the
resident’s anorexia or weight loss.’ Nor is there evidence to show that the staff alerted the

* Indeed, in a conversation with a surveyor, a member of the resident’s family
reported that she noticed the resident’s weight loss about two weeks before the resident’s
hospitalization on July 19, 2006 and brought it to the staffs attention. According to this
family member, the staff person to whom she spoke told her that the resident was fine.
07-31 CMS Ex. 4, at 3.
6

resident’s physician and consulted with him at any time prior to July 13, 2006 concerning
the decline that began in June. The resident’s treatment record is devoid of any record of
such communication. See 07-31 CMS Ex. 4.

The evidence offered by CMS supports a finding that the resident’s anorexia and weight
loss beginning in mid-June 2006 constituted a significant — in fact, a life threatening —
change in his condition.’ As a general matter malnutrition is a life-threatening problem
for frail and debilitated individuals. Without adequate nutrition the various systems of an
individual’s body will fail and, eventually, that person will die. 07-31 CMS Ex. 14, at 4.
A malnourished individual, especially one who is frail and beset with other illnesses, is at
an increased risk for developing infection. Jd. Without adequate nutrition and hydration
there is a significantly increased likelihood that a nursing home resident will succumb to
infection. Jd., at 4-5.

Not only is adequate nutrition important as an element of care for a nursing home
population, it was especially important for the well-being of Resident #4. As I have
discussed, the resident’s appetite and need to retain weight was a major problem
identified by Petitioner’s staff in its care plan for Resident #4. Consequently, a decline in
food consumption or apparent weight loss by this resident was a significant change,
measured not only by the medically mandated need to keep nursing home residents well
nourished but by the staff’s expressed concerns for this resident’s condition and his
vulnerabilities. This resident’s reduced consumption of food put Petitioner’s staff on
notice that something was seriously wrong and it should have prompted the staff
immediately to notify the resident’s family and to consult with his physician about the
change. Adequate consumption of both food and liquids was essential to protecting
Resident #4 from the risk of infection. 07-31 CMS Ex. 14, at 9.

The evidence offered by CMS establishes a strong basis for concluding that Petitioner
failed to comply with the requirements of 42 C.F.R. § 483.10(b)(11) by failing to notify
the resident’s family and to consult with the resident’s physician immediately about the
significant change in the resident’s condition established by his loss of appetite and
diminished consumption of food beginning in mid-June 2006. This was a change in the
resident’s condition that was a red flag that a competent staff should have observed and to
which it should have reacted immediately.

> CMS’s prima facie evidence relating to the nutritional needs of elderly and sick
individuals consists of the testimony of Larry Johnson, M.D., a professor of geriatric
medicine at the University of Arkansas. 07-31 CMS Ex. 14. I find Dr. Johnson to be
well-qualified to testify as to the subject and his testimony is persuasive. Petitioner
attacked the credibility of Dr. Johnson. Below, I explain why I am not persuaded by
Petitioner’s attack.
7

Petitioner offered neither argument nor evidence that rebuts CMS’s prima facie case. In
sum, Petitioner’s arguments and contentions are as follows:

* The report of the August survey is unreliable and provides no basis for finding it
to be deficient because it contains statements that are “inaccurate, misleading and
taken out of context.” Petitioner’s brief in lieu of hearing at 7.

* The facts cited in the August survey report concerning the care that Petitioner’s
staff provided to Resident #4 do not describe a significant change in the resident’s
condition. Petitioner’s brief in lieu of hearing at 12.

+ Furthermore, when notification was required, Petitioner timely notified the
resident’s physician and family members as appropriate. Petitioner’s brief in lieu
of hearing at 12.

+ Petitioner’s staff cared for Resident #4 as best as it could given the resident’s
condition. Petitioner’s brief in lieu of hearing at 19.

In support of its assertion that the August survey report is unreliable Petitioner focuses on
several alleged inaccuracies or misinterpretations in the report. But, none of the alleged
errors address the allegations made concerning Petitioner’s failure to meet regulatory
notification and consultation requirements while providing care to Resident #4. Petitioner
has not specifically challenged any of the surveyors’ fact findings concerning the care
that its staff gave to the resident. For these reasons I conclude that Petitioner has not
materially impeached the credibility or accuracy of the August survey report as concerns
the failure of Petitioner to comply with notification and consultation requirements.

The heart of Petitioner’s argument about its failure to notify and consult is that it was not
required to do so because Resident #4’s anorexia and weight loss did not constitute a
significant change in the resident’s condition. Petitioner characterizes the resident’s
anorexia and weight loss as “mere decline in intake” related to the resident’s “final state
of decline.” Petitioner’s brief in lieu of hearing at 13. Essentially, Petitioner asserts that
the resident was dying, that his anorexia and weight loss was a natural and not significant
consequence of the process of dying, and therefore, there was no need for the staff to
notify the resident’s family or to consult with his physician about this natural process.

However, there is no “dying resident” exception to the requirement that a facility
immediately notify a resident’s family and consult with that resident’s physician about a
significant change in a resident’s condition. The regulation imposes on a facility the
obligation to do everything reasonably possible to assist and to aid a resident. The
regulation does not permit a facility to write a resident off as a lost cause absent
consultation with a resident’s physician and notification of the resident’s family. Nor
does the regulation allow a facility simply to warehouse a resident and accept
reimbursement for that resident’s care.°

Petitioner’s staff had no way of knowing in June and July 2006 whether the resident’s
anorexia and weight loss was a sign that his death was inevitable because there is no
evidence that the staff made such an assessment in consultation with the resident’s
physician. As part of its case, Petitioner offered the entire treatment record of Resident
#4, 07-31 P. Ex. 8. The exhibit totals 778 pages. Yet, Petitioner did not cite to a single
entry in that enormous document showing an assessment by Petitioner’s staff of Resident

#4’s anorexia or weight loss in the period between June 13 and July 18, 2006.

Nor do I agree with Petitioner’s characterization of what happened to Resident # 4 as
being a “mere decline in intake.” Petitioner’s own staff had identified the resident as
being at risk for malnutrition. It was for that reason that it prepared a care plan that
specifically addressed that problem and which ordered interventions that were designed to
protect the resident. The staff therefore knew that a decline in food consumption by
Resident #4 was not a “mere” event. Based on its own assessment of the resident that
change was significant.

Petitioner offered no evidence to rebut CMS’s proof that, as a general medical matter, a
decline in food consumption by any resident who is at risk for malnutrition comprises a
significant change in that resident’s condition. 07-31 CMS Ex. 14, at 4. However,
according to Petitioner, Dr. Johnson’s testimony, which sets forth the applicable standards
of care, is not credible because he has never set foot in Petitioner’s facility, did not treat
Resident # 4, and was supplied by CMS with allegedly incomplete records. I do not find
these attacks on Dr. Johnson’s credibility to be persuasive. Dr. Johnson is plainly well

® Petitioner also seems to suggest, at times, that its staff was absolved of
responsibility for Resident #4 because the resident’s physician recommended that the
resident be fed via a feeding tube and the resident’s family declined this treatment. See
07-31 P. Ex. 24, at 2, 3,4. The resident’s guardians may have had the right to act on his
behalf to decline recommended care. But, that did not absolve Petitioner or its staff from
taking other measures on the resident’s behalf described in his plan of care nor did it
relieve the staff of responsibility to notify the resident’s family and consult with the
resident’s treating physician about the resident’s anorexia and loss of weight.
9

qualified to opine about the standards of care for elderly individuals who are at risk for
malnutrition. Petitioner has not shown how the fact that Dr. Johnson did not care directly
for the resident impeaches his credibility. Nor has it shown how Dr. Johnson’s testimony
was made less than credible by the records CMS supplied to him.

am not persuaded by Petitioner’s argument that Resident #4’s treating physician was
consulted appropriately about the resident’s anorexia and weight loss.’ Petitioner points
to nothing in the resident’s treatment record establishing any discussion between
Petitioner’s staff and the resident’s treating physician concerning the resident’s anorexia
and weight loss on dates between the middle of June and July 13, 2006. On that latter
date the physician saw the resident and observed his condition. 07-31 P. Ex. 24, at 3.
But, even that visit does not appear to have been prompted by a call from Petitioner’s
staff alerting the physician to the resident’s condition. See Id.

Resident #4’s treating physician averred in an affidavit that he was “aware of the
resident’s declining condition, including his nutritional status and poor appetite.” 07-31
P. Ex. 24, at 4. But, the physician’s awareness of the resident’s overall condition does not
relieve Petitioner or its staff from the obligation to consult with the physician about the
decline that began in mid-June 2006. In a nursing home a resident’s physician is not
constantly at the resident’s bedside. At best, a physician’s visits to his or her patient in a
nursing home are episodic. In between those visits the physician depends on the nursing
staff to keep him or her apprised continuously of any changes in the patient’s condition
that require physician attention. Here, there was an evident and ominous change in the
resident’s condition beginning in mid-June 2006. Yet, there is nothing to show any
communication between Petitioner’s staff and the resident’s physician about that change
at any time prior to July 13, 2006.

As part of its argument that the staff consulted with the resident’s physician Petitioner
appears to argue that there were no meaningful changes in the resident’s condition prior
to July 18, 2006 when the staff recorded an 18.5 pound decline in the resident’s weight
from June. But, the reality is that staff should have been alerted to the resident’s decline
long before it weighed him on July 18. The resident’s weight loss did not occur over
night. It logically was the consequence of a decline in food intake. Petitioner’s staff, up

7 Petitioner offered no affirmative evidence to establish that it notified the
resident’s family about the resident’s anorexia and weight loss at any time prior to July
18, 2006. Petitioner notified the family about the resident’s change in condition on that
date after it weighed him and recorded the 18.5 pound weight loss. 07-31 P. Ex. 26. AsI
discuss above, the resident’s treatment record runs to nearly 800 pages. Petitioner
pointed to nothing in that document establishing notification of the family prior to July
18.
10

until mid-June 2006, had been successful in maintaining and even increasing the
resident’s weight. 07-31 CMS Ex. 1, at 2. Something obviously happened after the
resident was weighed on June 13, 2006 that caused this resident to lose weight over the
next five weeks. Had the staff been observant, had it faithfully charted the resident’s food
intake, it would have been able to identify whatever changes were occurring and to
consult with the resident’s physician.

Petitioner argues that the resident’s weight loss was not necessarily due to a decline in
food consumption and may have been very precipitous. Petitioner’s brief in lieu of
hearing at 18. The basis for this argument is that the resident’s weight was recorded at
the hospital as 110 pounds on July 19, 2006, after the resident had been transferred there.
According to Petitioner the additional rapid weight loss shows that the resident’s body
was not losing weight because he was being improperly fed but because his body was
“just shutting down due to his finally reaching the final stages of his life.” Jd. Iam
unpersuaded by this argument. First, it is not possible to know whether the scales at the
hospital and Petitioner’s facility were calibrated to measure identical weights identically.
Thus, there is no way that I can conclude that the weight loss recorded at the hospital
reflects an actual additional loss of weight by the resident. Second, the unrebutted expert
testimony of Dr. Johnson persuades me that malnutrition was the most logical cause of
the resident’s weight loss between June 13 and July 18, 2006. 07-31 CMS Ex. 14, at 9.

Iam unpersuaded by Petitioner’s assertion that it did the best that it could to provide care
for Resident #4. As I have discussed in detail, the minimum that Petitioner should have
done for this resident included notifying the resident’s family and consulting with the
resident’s physician about any significant change in the resident’s condition. Petitioner
plainly failed to satisfy this requirement. Moreover, it is evident from the record that
Petitioner failed even to comply with its own plan of care for the resident. That plan
required, among other things, that Petitioner’s staff closely monitor the resident’s food
intake. That requirement was based on an assessment that the resident was at great risk
for malnutrition. The staff failed manifestly to comply with that directive.

2. Petitioner did not prove to be clearly erroneous CMS’s determination
of immediate jeopardy.

It is Petitioner’s burden to prove clearly erroneous a determination by CMS that a
deficiency puts residents at immediate jeopardy. 42 C.F.R. § 498.60(c)(2). Here,
Petitioner failed to offer any evidence challenging CMS’s immediate jeopardy
determination.
11

Petitioner’s argument as to immediate jeopardy is that there was no likelihood of serious
injury, harm, or death to Resident #4 because the resident’s decline was the inevitable
consequence of his condition. Consequently, according to Petitioner, there was nothing
that Petitioner did that put the resident at greater risk than was caused by his condition.
Petitioner’s brief in lieu of hearing at 20.

I find this argument to be unpersuasive. It is not possible to say now whether more timely
intervention by Petitioner’s staff, including consulting the resident’s physician early in the
process of the resident’s anorexia and weight loss, would have prolonged the resident’s
life. What is clear, however, is that as a general matter failure by a facility to be attentive
to its residents’ nutritional needs, including consulting with residents’ physicians about
anorexia and weight loss, will put frail and debilitated residents at great risk for injury,
harm, or death. The overwhelming evidence in this case is that Petitioner’s staff was
inattentive to the needs of Resident #4. And, it is reasonable that I infer from this
inattentiveness that Petitioner’s staff lacked a basic understanding of its responsibilities to
provide care for residents who, like Resident #4, were at risk of injury, harm, or death
from malnutrition. CMS’s determination that this lack of understanding and the
concomitant failure by Petitioner’s staff to provide required care to Resident #4 put
residents at immediate jeopardy is not clearly erroneous.

3. Petitioner did not prove that it corrected its immediate jeopardy level
noncompliance before September 5, 2006.

CMS determined that Petitioner’s immediate jeopardy level noncompliance persisted
through September 4, 2006. Petitioner disputes that determination, arguing that
immediate jeopardy, if it existed at all, ended on July 20, 2006, the date that Resident #4
died.

A facility that is out of compliance with Medicare participation requirements is presumed
to remain noncompliant until CMS certifies that the facility has corrected its deficiencies.
That presumption is rebuttable, but it is the facility’s burden to prove that it attained
compliance at a date earlier than the compliance date that is certified by CMS.

The death of Resident #4 is no proof that Petitioner eliminated immediate jeopardy earlier
than September 5, 2006. The failure by the staff to consult with the resident’s physician
and to notify the resident’s family about his decline is not a failure that is limited solely to
the care provided to the resident. As I discuss above, at Finding 2, it evidences a broader
problem at the facility, a failure by the staff to understand their obligations to attend to
nutritionally endangered residents and to consult with these residents’ physicians at the

12

first sign of anorexia or decline. The death of Resident #4 didn’t cure the problem at
Petitioner’s facility. That problem persisted after the resident’s death until Petitioner
undertook satisfactory corrective action to make sure that its staff understood their
obligations in future cases. Petitioner did not prove that this corrective action was
completed before September 5, 2006.

4. As of the September survey Petitioner failed to comply substantially
with the requirements of 42 C.F.R. § 483.10(b)(11).

CMS alleges that, as of the September survey, Petitioner remained out of compliance with
the physician consultation requirements of 42 C.F.R. § 483.10(b)(11). CMS bases its
allegation of noncompliance on the care that Petitioner gave to a resident who is
identified as Resident #1 in the report of the September survey. 07-111 CMS Ex. 1, at 1 -
3.

The resident was diagnosed with a seizure disorder and had been observed by Petitioner’s
staff to exhibit seizure activity. 07-111 CMS Ex. 1, at 2. The resident had a prescription
for anti-seizure medications consisting of Depakote and Dilantin. On August 18, 2006,
the resident’s physician ordered that the resident’s Depakote and Dilantin levels be
measured every week.

Laboratory tests of the resident’s Depakote levels taken on August 25, 2006 and again on
September 5, 2006 reported on both occasions that the resident’s Depakote levels were
low the normal therapeutic range for the medication. On August 25, the resident’s
Depakote level was reported at 29.0 (the normal therapeutic range being between 50 and
00) and on September 5, the resident’s Depakote level was reported at 44. However,
there was nothing in the resident’s record to establish that the resident’s physician had
een advised of these two test results. When interviewed the resident’s physician stated
that he would have wanted to know whether the resident’s Depakote levels were below
the normal therapeutic range for the medication. 07-111 CMS Ex. | at2 -3.

There is a high prevalence of seizures (epilepsy) among older individuals. 07-111 CMS
Ex. 18, at 4. The psychosocial effects of seizures in old age can profoundly affect quality
of life. Jd. A failure to control seizures in an elderly person can put that individual at risk
for serious harm. Seizures may increase the risk of falling and associated injuries
including head trauma and broken bones. 07-111 CMS Ex. 16, at 1 - 2; see 07-111 CMS
Ex. 25, at 2.

The evidence offered by CMS establishes a prima facie case that Petitioner failed to
comply with the regulation’s physician consultation requirements. It shows that Resident
#1 was not only at risk for seizures but that the resident’s physician wanted to be kept
informed of her anti-seizure medication levels in order that he could properly treat her. A
13

sub-therapeutic medication level in an individual such as Resident #1 is significant
because it exposes that individual to the enhanced risk of suffering potentially injurious
seizures. Consequently, a resident’s blood medication levels that are outside of a
therapeutic range constitutes a significant medical development necessitating consultation
with that resident’s treating physician. Failure to consult with the resident’s physician
about non-therapeutic blood levels, in light of the fact that the physician had ordered that
blood levels be taken weekly, constituted a failure to comply with the governing
regulation.

Petitioner does not deny that its staff failed to consult with Resident #1’s treating
physician about the resident’s August 25 and September 5, 2006 Depakote levels. But, it
argues that there was no significant change in Resident #1’s condition necessitating
consultation with the resident’s physician. In making this argument Petitioner focuses
entirely on the September 5 test result showing the resident’s Depakote level on that date
to be 44. Petitioner argues that this result was not so far out of range as to be considered
“abnormal” especially given the resident’s age and many impairments. It offers a
statement from the resident’s treating physician, Robert Hollister, M.D., to support this
argument. He asserts that:

While still below the “normal” range, this [Depakote level of 44] was the
highest level . . . [the resident] had experienced in over four months, and as
there were no seizures or adverse effects corresponding to that blood level
being manifested at the time, this did not constitute a significant change,
and certainly not a deterioration in Resident #1’s health, that would require
my immediate notification.

07-111 P. Ex. 5, at 5.

The problem with Petitioner’s argument is that it focuses only on the September 5 test
result. Even if Dr. Hollister’s characterization of the resident’s September 5 Depakote
level as being near normal is correct, that says nothing about the failure by Petitioner’s
staff to consult with Dr. Hollister about the resident’s Depakote level of 29.0 recorded on
August 25, 2006. That earlier level was sub-therapeutic by any measure and Petitioner
has offered no justification for its staff’s failure to consult with Dr. Hollister about it.

In fact, the staff’s error was particularly egregious in light of the fact that, just one week
prior to August 25, Dr. Hollister had ordered that the resident’s Depakote levels be
checked weekly. Obviously, Dr. Hollister was concerned about the resident’s tendency to
14

display a sub-therapeutic Depakote level and so he directed Petitioner’s staff to monitor
them closely. Checking the resident’s Depakote level weekly would be a meaningless
exercise if the results — particularly sub-therapeutic results — are not communicated
immediately to the resident’s treating physician.*

5. Petitioner did not prove that it corrected its noncompliance before
September 18, 2006.

CMS determined that Petitioner attained compliance with all participation requirements,
including the requirement described at 42 C.F.R. § 483.10(b)(11), on September 18,
2006. Petitioner has not offered affirmative evidence to show that it corrected its
noncompliance prior to that date. Consequently, I sustain CMS’s determination as to
duration of noncompliance.

6. CMS’s remedy determinations are reasonable.

a. Civil money penalties of $3,050 per day are reasonable as a
matter of law.

The $3,050 daily civil money penalties that CMS determined to impose to remedy
Petitioner’s noncompliance during the July 18 - September 4, 2006 period are at the
minimum daily civil money penalty amount that may be imposed as a remedy for an
immediate jeopardy level deficiency. 42 C.F.R. § 488.438(a)(1)(i). In this case the
$3,050 daily penalties are reasonable as a matter of law because Petitioner manifested an
immediate jeopardy level deficiency throughout the period for which CMS determined to
impose them.

b. Civil money penalties of $100 per day are reasonable.

CMS is authorized to impose civil money penalties ranging from $50 to $3,000 per day to
remedy a deficiency that is substantial but not at the immediate jeopardy level. 42 C.F.R.
§ 488.438(a)(1)(ii). The criteria for deciding where within that range a penalty amount
should be are stated at 42 C.F.R. §§ 488.438(f)(1) - (4) and 488.404 (incorporated by
reference into 42 C.F.R. § 488.438(f)(3)). These criteria include: the seriousness of a
deficiency, the relationship of one deficiency to another, a facility’s compliance history,
its culpability, and its financial condition.

* The validity of the physician’s concern is evidenced by the fact that the resident
had a seizure on September 2, 2006.
15

Neither party to this case offered argument concerning whether the $100 daily penalty
amount that CMS determined to impose during the September 5 - 17, 2006 as a remedy
for Petitioner’s non-immediate jeopardy noncompliance was reasonable. That may be
due to the fact that the penalty amount is minimal, comprising only three percent of the
possible maximum daily penalty that CMS may impose for a non-immediate jeopardy
level deficiency.

I find the penalty amount to be reasonable based on the evidence in this case considered
in light of the applicable regulatory factors. The non-immediate jeopardy level deficiency
that I discuss above, at Finding 4, was relatively serious. The potential for harm to
Resident #1 resulting from a sub-therapeutic anti-seizure medication level is apparent,
consisting of at least the possibility that she might be injured by a fall sustained during a
seizure. Obviously, the resident’s physician was aware of that potential because he
ordered her anti-seizure medication levels to be monitored weekly. Petitioner’s failure to
report sub-therapeutic levels to the resident’s physician put the resident at risk for
seizures and injuries.

Also, the penalty amount is reasonable in light of the facility’s compliance history. The
identical non-compliance — failure to consult with a resident’s physician about a
significant change in that resident’s condition — was manifested by Petitioner at both the
August and September surveys.

c. CMS has discretion to deny Petitioner payment for new
admissions during the period that began on August 20 and which
continued through September 17, 2006.

CMS may impose the remedy of denial of payments for new admissions for each day that
a facility is not complying substantially with Medicare participation requirements. 42
C.F.R. § 488.417(a). Asa matter of law CMS has discretion to deny payment to
Petitioner for new admissions for each day of a period that began on August 20 and which
continued through September 17, 2006 because Petitioner was not complying
substantially with Medicare participation requirements on each day of that period.

Aside from denying that it was out of compliance during the period Petitioner asserts, for
the following reasons, that the remedy of denial of payment for new admissions should
not be imposed for dates beginning September 6, 2006:

+ Ina letter dated September 11, 2006, the State of Tennessee told Petitioner that it
had attained substantial compliance as of September 6, 2006 and that,
consequently, the remedy of “suspension of admission of new residents to the
facility” was lifted. 07-111 P. Ex. 1.
16

+ Ina subsequent letter dated September 18, 2006, the State of Tennessee told
Petitioner that it had been found out of compliance at the September survey and
that, consequently, remedies including continued denial of payment for new
admissions were being imposed. 07-111 P. Ex. 2.

+ Petitioner relied to its detriment on the September 11 letter in that it began
admitting new residents. Consequently, it should not be denied payment for these
admissions.

But, Petitioner’s argument notwithstanding, the determination to impose denial of
payment for new admissions ultimately rests within CMS’s discretion. CMS is not bound
by State determinations and, moreover, I have no authority to question CMS’s exercise of
discretion. Here, the imposition of the remedy through September 17, 2006 was justified
by Petitioner’s noncompliance through that date and its imposition is a matter entirely
within the discretion of CMS.

/s/
Steven T. Kessel
Administrative Law Judge