Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Legend Healthcare and Rehabilitation - Euless,
(CCN: 67-6029),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-13-471
Decision No. CR3415

Date: October 9, 2014

DECISION

Following a complaint investigation survey, the Texas Department of Aging and
Disability Services (state agency) determined that Legend Healthcare and Rehabilitation -
Euless (Petitioner or the facility) was not in substantial compliance with Medicare
participation requirements for long-term care facilities and that its noncompliance posed
immediate jeopardy to the health and safety of its residents. The Centers for Medicare &
Medicaid Services (CMS) agreed with the state agency’s determination and imposed a
$6,650 per-day civil money penalty (CMP) against Petitioner for nine days of immediate
jeopardy and a $1,000 per-day CMP for 47 days of substantial noncompliance that was
not immediate jeopardy, for a total penalty of $106,850. Petitioner now appeals.

As explained below, I find Petitioner was not in substantial compliance with Medicare
participation requirements, CMS’s determinations of immediate jeopardy to resident
health and safety were not clearly erroneous, and the CMPs CMS imposed are reasonable
in amount and duration.
I. Background

The parties do not dispute the following facts unless otherwise noted. Petitioner is a
long-term care facility located in Euless, Texas, that participates in the Medicare program
as a skilled nursing facility. The facts giving rise to this case involve an 83-year-old male
resident admitted to Petitioner’s facility on June 24, 2011, referred to during the survey
and these proceedings as “Resident 1.” Resident 1 had a medical history of non-
Alzheimer’s dementia, anemia, heart failure, hypertension and diabetes mellitus. CMS
Ex. 8, at 1,4. Resident 1 was also severely cognitively impaired and was totally
dependent upon nursing staff for assistance with eating, mobility, bathing, dressing, and
personal hygiene. CMS Ex. 4, at 4. Resident 1 also had dysphagia, a swallowing
disorder, and he received the majority of his food and nutrition through a feeding tube;
however, his family wanted Resident | to have to option to attempt to eat pureed food by
mouth. P. Pre-hrg. Br. at 5; CMS Ex. 4, at 4-5; CMS Ex. 8, at 10.

On April 19, 2012, Resident 1’s physician referred him to speech and swallowing therapy
after a nurse reported “pocketing [and] mucus production during meals.” CMS Ex. 8, at
24. The speech therapist assessed Resident 1’s oral motor function at a moderate to
severe degree of impairment, and the speech therapy swallowing evaluation noted that
Resident | had some difficulty managing bolus, including some residue. CMS Ex. 8, at
24. Resident 1’s physician reviewed the speech therapist’s plan of treatment and certified
that the assessment was medically necessary. CMS Ex. 8, at 25. The speech therapist
noted that Resident 1 was at risk for aspiration and alerted nursing staff and the physician
assistant to the possibility of aspiration and that continued speech therapy was needed “to
treat continued oral residue issues [and] signs of aspiration, e.g. watering eyes, wet vocal
quality.” CMS Ex. 8, at 26-27. The speech therapist also noted that Resident 1 coughed
and had a wet vocal quality and watery eyes and that “CNA [certified nursing assistant]
aware of these signs of aspiration” and spoke to the charge nurse regarding checking
Resident 1’s lung sounds reporting any signs and symptoms of aspiration (wet cough and
watering eyes) to the physician assistant. CMS Ex. 8, at 26-27.

On the morning of November 22, 2012, the Thanksgiving holiday, a facility employee
who routinely provided care to Resident 1, CNA C, noted that Resident 1 coughed up and
discharged phlegm from his mouth, which she did not find particularly unusual.

P. Closing Br. at 2; P. Ex. 2, at 1. Resident | did not eat breakfast that morning, and
CNA C removed him from the dining room and took him to his room. P. Closing Br. at
2. Resident 1 was given a bolus tube feeding later that morning. P. Ex. 2, at 1. After the
feeding, CNA C checked on Resident | and again observed phlegm discharging from
Resident 1’s nose and mouth. P. Closing Br. at 2-3; P. Ex. 2, at 1. Petitioner’s staff took
Resident | to the dining room for lunch, but because he was discharging phlegm, another
CNA, CNA B, asked N.O., a floor tech, to take Resident 1 out of the dining room and
deliver him to CNA C before lunch concluded. P. Ex. 2, at 1; P. Closing Br. at 3.
Surveyor notes reflect that at approximately 12:40 p.m., CNA B observed Resident 1
coughing with his mouth closed and noticed “copious amounts of phlegm” draining from
the side of his mouth. CMS Ex. 5, at 4. CNA B stated that Resident 1 “sometimes ha[d]
runny nose, cough; but not like that[,] it was too much phlegm that day.” CMS Ex. 5, at
4. The surveyor also noted that around this time the CNAs told the assistant director of
nursing (ADON) that Resident 1 “was coughing and they were going [to] take him out.”
CMS Ex. 5, at 5.

After N.O. brought Resident 1 back to his room after lunch, CNA C “found that the
phlegm had significantly increased and was coming from his mouth and it seemed to be
getting worse.” P. Ex. 2, at 1. CNA C wiped a moderate to large amount of phlegm from
Resident 1’s face with a towel and then went to the nurses’ station to show her
supervisor, LVN A, the towel’s contents. P. Closing Br. at 3; P. Ex. 2, at 2. CNA C told
LVN A “how this had come on over the last couple or three hours and seemed to be
getting progressively worse” and “all of a sudden he had a lot of phlegm . . . [i]t came up
quickly .. . it was really thick...” P. Ex. 2, at 2; CMS Ex. 5, at 8. According to CNA C,
LVN A instructed her to “take [Resident 1] and clean him up.” CMS Ex. 5, at 8. CNA C
also states that LVN A told CNA C that it was time for another bolus feeding and she
would see Resident 1 momentarily and assess him, however, LVN A “did not react with
... urgency”. P. Ex. 2, at 2; P. Closing Br. at 3. CNA C then went back to working on
her other duties. P. Ex. 2, at 2; P. Closing Br. at 3.

After receiving the report from CNA C regarding Resident 1, LVN A either “ignored it or
decided to delay acting upon it....” P. Pre-hrg. Br. at 7; CMS Ex. 5, at 2-3. It appears
that LVN A did not assess Resident 1 at this time, but she instead left Resident 1
unattended in his room. See CMS Ex. 5, at 2-3. LVN A reported that she did not see
Resident | until 1:30 p.m., as she passed his door while “taking care of [other] residents.”
CMS Ex. 5, at 2. LVN A told the state surveyors that she walked by Resident 1’s door
and noted “he was in [his] geri-chair” and “appeared to be comfortable.” CMS Exs. 5, at
2; 18 at 4. Petitioner admits that this walk-by visual assessment from outside of Resident
1’s room occurred approximately 45 minutes after LVN A received the report of Resident
1’s increasing production of phlegm from CNA C. CMS Ex. 5, at 2-3, P. Pre-hrg. Br. at
7. LVN A also told state surveyors that fifteen minutes later she passed back by Resident
1’s room and she “saw him with stuff on his face, [she] went in, and there were no signs
of life.” CMS Exs. 5, at 3; 18 at 4-5. At 1:45 p.m., the nurses’ notes indicate that
Resident | had a moderate amount of “frothy phlegm on his face and chin” and required a
full code. CMS Ex. 8, at 34. LVN A administered CPR before Petitioner’s staff
transferred Resident | to the hospital where he died two days later, on November 24,
2012. CMS Ex. 5, at 2-3. A hospital physician diagnosed Resident | with aspiration
pneumonia prior to his death. CMS Ex. 9, at 8. Petitioner does not dispute that its staff
did not call Resident 1’s physician “until 2:20 p.m. on November 22, 2012, but by that
time the resident was being treated in an emergency room and no consultation with the
physician was necessary for the care of the resident.” P. Closing Br. at 9.
On November 23, 2012, Petitioner’s director of nursing (DON) reviewed Resident 1’s
chart after learning of his hospitalization. P. Ex. 3, at 1. According to her declaration,
the DON noticed LVN A’s “failure to chart her assessment of Resident 1 the day before”.
P. Ex. 3, at 1. The DON confronted LVA A about the issue, and she “shrugged [the
DON] off”. P. Closing Br. at 3. The DON then began to initiate termination procedures.
P. Ex. 3, at 1. The DON also stated that during the investigation of the events
surrounding Resident 1 on November 22, 2012, she learned “for the first time that not
only did [LVN A] fail to chart an assessment of Resident 1 . . . but she failed to perform
an assessment . . . after being told by [CNA C] of the residents change in condition
during the late morning and early afternoon of November 22, 2012.” P. Ex. 3, at 1.
Immediately upon learning this new information, the DON received authority to
terminate LVA’s employment with Petitioner, which she did on November 30, 2012. P.
Closing Br. at 3; P. Ex. 3 at 1-2.

After receiving a complaint about the incident, the state agency inspected the facility
from November 29, 2012 through November 30, 2012. On December 18, 2012, a state
surveyor returned to inform the facility of an immediate jeopardy determination to the
health and safety of its residents. CMS Exs. 1, 3. During the survey, state surveyors
conducted staff interviews and reviewed the facility’s records. As a result of the survey,
the state agency determined that Petitioner was not in substantial compliance with the
following Medicare participation requirements:

© 42 C.F.R. § 483.10(b)(11) (Tag F-157) — (Notification of changes) a facility must
immediately inform the resident, consult with the resident’s physician, and if
known, notify the resident’s legal representative or an interested family member
when the resident has a significant change in physical, mental, or psychosocial
status;

© 42 C.F.R. § 483.13(c) (Tags F-224 and 226) — (Staff treatment of residents) a
facility must develop and implement written policies and procedures prohibiting
mistreatment, neglect, and abuse of residents; and

e 42 C.F.R. § 483.25 (Tag F-309) — (Quality of care) a facility must provide
residents the necessary care and services to attain or maintain the highest
practicable physical, mental, and psychosocial well-being, in accordance with the
comprehensive assessment and plan of care.

The state agency determined that Petitioner’s noncompliance was at a scope and severity
level “K,” meaning the noncompliance demonstrated a pattern of immediate jeopardy.
On December 17, 2012, the state agency then determined that the facility had not yet
attained substantial compliance but that its noncompliance no longer posed immediate
jeopardy.
By letter dated January 16, 2013, CMS accepted the state agency’s findings and imposed
a $6,650 per day CMP from November 22, 2012 through November 30, 2012 and a
$1,000 per day CMP continuing until further notice. CMS Ex. 1. CMS also imposed
enforcement remedies of termination of Petitioner’s Medicare provider agreement, denial
of payment for new Medicare admissions, and directed in-service training. CMS Ex. 1.
By letter dated February 20, 2013, CMS notified Petitioner that the facility achieved
substantial compliance with the requirements for Medicare participation on January 17,
2013, and the $6,650 per day CMP for nine days would remain in effect. CMS Ex. 2.
CMS also imposed a $1,000 per day CMP, beginning December 1, 2012 and continuing
through January 16, 2013 (47 days), contending that Petitioner did not achieve substantial
compliance with all participation requirements until the completion of a directed in-
service training conducted on January 16, 2013. CMS Closing Br. at 1-2; CMS Ex. 2, at
1. CMS rescinded all other proposed enforcement remedies. CMS Ex. 2.

On February 22, 2013, Petitioner requested a hearing to challenge the noncompliance
findings and enforcement remedies. Following my prehearing order, CMS submitted a
prehearing brief (CMS Pre-hrg. Br.) and 19 proposed exhibits (CMS Exs. 1-19).
Petitioner then submitted a prehearing brief (P. Pre-hrg. Br.) and eight proposed exhibits
(P. Exs. 1-8). On September 18, 2013, I convened a prehearing conference by telephone,
and I admitted CMS Exs. 1-19 and P. Exs. 1-8 into the record. During the prehearing
conference, the parties declined the opportunity to cross-examine each other’s witnesses,
whose affidavits of direct testimony are part of the written record. The parties agreed that
I would base my decision on a final exchange of written briefs and the documentary
evidence of record. At my direction, each party submitted a final closing brief (CMS
Closing Br. and P. Closing Br.).

II. Issues Presented

1. Whether Petitioner was in substantial compliance with Medicare participation
requirements between November 22, 2012, and January 16, 2013;

2. If Petitioner was not in substantial compliance, whether CMS’s determination
was clearly erroneous that the deficiencies posed immediate jeopardy to the
health and safety of residents in Petitioner’s facility; and

3. Whether the enforcement remedies imposed, a $6,650 per day CMP for nine
days of immediate jeopardy, from November 22, 2012 through November 30,
2012, and $1,000 per day CMP for 47 days of substantial noncompliance that
was not immediate jeopardy, from December 1, 2012 through January 16,
2013, are reasonable.
III. Statutory and Regulatory Framework

The Social Security Act (Act) establishes the requirements that a long-term care facility
must meet to participate in the Medicare program and authorizes the Secretary of Health
and Human Services (Secretary) to promulgate regulations implementing those statutory
requirements. Act § 1819.' Medicare participation requirements for long-term care
facilities are found at 42 C.F.R. Part 483. The Secretary contracts with state survey
agencies to conduct periodic onsite surveys to assess compliance with those
requirements. Act §§ 1819(g), 1864(a); 42 C.F.R. Part 488, subpart E. A “deficiency” is
a “failure to meet a participation requirement specified in the Act or [42 C.F.R. Part
483].” 42 C.F.R. § 488.301. A long-term care facility must remain in substantial
compliance with program requirements to participate in Medicare. See 42 C.F.R.

§ 483.1(b). “Substantial compliance” means “a level of compliance with the
requirements of participation such that any identified deficiencies pose no greater risk to
resident health or safety than the potential for minimal harm.” 42 C.F.R. § 488.301. The
regulatory term “noncompliance” is defined as “any deficiency that causes a facility not
to be in substantial compliance.” Jd.

State surveyors consider the “seriousness” of the facility’s noncompliance and may
consider other factors specified in the regulations. 42 C.F.R. § 488.404(a), (c).
“Seriousness” is a function of two factors: (1) “severity” — that is, whether the
noncompliance has created a “potential” for “more than minimal” harm to residents,
resulted in “actual harm,” or placed residents in “immediate jeopardy”; and (2) “scope” —
whether the noncompliance is “isolated,” constitutes a “pattern,” or is “widespread.” 42
C.F.R. § 488.404(b); State Operations Manual, CMS Pub. 100-07, Appendix P - Survey
Protocol for Long Term Care Facilities, Part 1, Chapter IV (“Deficiency
Categorization”). “Immediate jeopardy” exists when “the provider’s noncompliance with
one or more requirements of participation has caused, or is likely to cause, serious injury,
harm, impairment, or death to a resident.” 42 C.F.R. § 488.301.

Based on a survey’s findings, CMS may impose various remedies on a facility that is
found not to comply substantially with the participation requirements, including a per-day
CMP for the number of days that the facility is not in substantial compliance. 42 C.F.R.

§ 488.408(d), (e). For deficiencies that do not constitute immediate jeopardy, CMS may
impose per-day CMPs in amounts ranging from $50 to $3,000 per day. 42 C.F.R.

§ 488.438(a)(1)(ii). For deficiencies that constitute immediate jeopardy and any repeated
deficiencies for which a lower level penalty amount was previously imposed, CMS may
impose per-day CMPs of $3,050 to $10,000. 42 C.F.R. § 488.438(a)(1)(i), (d)(2).

' The Act, as amended, is available at http://www.ssa.gov/OP_Home/ssact/ssact.htm.
On this website, each section of the Act contains a reference to the corresponding chapter
and code in the United States Code.
If CMS imposes one or more enforcement remedies against a facility based on a
noncompliance determination, the facility may request a hearing before an administrative
law judge (ALJ) to challenge the noncompliance finding and enforcement remedies. Act
§§ 1128A(c)(2), 1866(h); 42 C.F.R. §§ 488.408(g), 498.3(b)(13). In its appeal, the
facility may also contend that the amount of the CMP imposed for the noncompliance is
unreasonable. See Lutheran Home at Trinity Oaks, DAB No. 2111, at 21 (2007).

IV. Findings of Fact and Conclusions of Law

1. Petitioner was not in substantial compliance with 42 C.F.R.
§ 483.10(b)(11) (Tag F-157) because Petitioner did not immediately
consult with Resident 1’s physician when Resident 1 experienced a life
threatening condition.

a. Petitioner’s staff knew, or should have known, that Resident 1
was at risk for aspiration, which could cause a significant
deterioration in his physical health.

On June 24, 2011, when Resident 1 was admitted to the facility, Petitioner was aware that
he suffered from dysphagia, a swallowing disorder. CMS Ex. 8, at 1. Due to his
dysphagia, Resident 1’s comprehensive plan of care dated July 14, 2012, required a
pureed diet and Petitioner’s staff to monitor Resident 1 for changes in his ability to eat.
CMS Ex. 8, at 10. Also, Resident 1’s quarterly MDS dated October 1, 2012, noted his
swallowing disorder and his need for nutrition by tube feeding. CMS Ex. 8, at 5. In the
spring of 2012, Resident 1 also underwent a speech therapy and swallowing evaluation to
assess his difficulty swallowing which resulted in his pocketing of food and producing
mucus during meals. CMS Ex. 8, at 24. The speech therapist alerted nursing and
physician assistants to the possibility of aspiration. CMS Ex. 8, at 26. The speech
therapist directed Petitioner’s staff to check Resident 1’s lung sounds and to report wet
cough, watering eyes, and gurgled vocal quality as these are signs and symptoms of
aspiration. CMS Ex. 8, at 26-27.

CMS submitted as an exhibit a document it asserts was located at Petitioner’s facility
entitled Facility Spring 2011 Health Bulletin: Signs of Aspiration & Aspiration
Pneumonia, which is a document from the “Division of Developmental Disabilities” and
contains the facility’s stamped address. CMS Ex. 13; CMS Pre-hrg. Br. at 7. According
to the bulletin, aspiration is a common problem among people who have dysphagia or
difficulty swallowing and occurs when food or fluids that should go into the stomach
instead go into the lungs. CMS Ex. 13. The bulletin states that coughing before or after
swallowing, much drooling (especially during meals) and nose running or sneezing are
signs of aspiration. CMS Ex. 13. The bulletin also indicates that food and materials
going into the lungs can cause aspiration pneumonia, which can quickly worsen if it is
not properly diagnosed and treated, and that frequent coughing and the expulsion of foul-
smelling phlegm are signs or symptoms of aspiration pneumonia. CMS Ex. 13. The
bulletin states that “[a]lthough, symptoms of aspiration pneumonia take several days to
appear, do not neglect them” and aspiration pneumonia should be treated as a life
threatening emergency. CMS Ex. 13. Petitioner’s staff, therefore, was aware that
Resident | was at risk for aspiration, and he needed to be carefully monitored for signs of
aspirating, which could pose a life threatening risk to his physical health.

b. Petitioner did not take reasonable steps to immediately consult
with Resident 1’s physician when he experienced a significant
change in his condition.

Facility staff must immediately consult with a resident’s physician and notify the
resident’s legal representative, or an interested family member, when the resident
experiences a significant change such as a deterioration in health in either life-threatening
conditions or clinical complications. 42 C.F.R. § 483.10(b)(11).

Here, there were no such immediate notifications. For several hours on November 22,
2012, Resident 1 experienced, and staff observed, phlegm dripping from his mouth and
he received no intervention other than staff wiping his mouth and “cleaning him up.”
CMS Ex. 5, at 2-3, 8. This started during the morning of November 22, 2012 and
worsened around lunchtime. P. Exs. 2, 3; CMS Exs. 5, at 8; 18, at4. As CNA C
monitored Resident | throughout the morning she observed that the phlegm coming from
his mouth had become “really thick” and “progressively worse.” P. Ex. 2; CMS Exs. 5,
at 8; 18, at 4. However, although Petitioner’s staff was on notice that Resident 1 was at
risk for aspiration, Petitioner’s staff did not immediately consult with Resident 1’s
physician. CMS Ex. 5, at 2-3, 7-8. Eventually, CNA C recognized that Resident 1’s
phlegm had significantly increased, a lot of phlegm was coming out of both sides of his
mouth, and she then reported this to her charge nurse, LVN A. P. Ex. 2, at 1.

According to Resident 1’s therapy progress report in the spring of 2012, the speech
therapist educated Petitioner’s staff on recognizing the signs of aspiration and specifically
informed the charge nurse to check Resident 1’s lung sounds and report back to the
physician assistant. CMS Ex. 8, at 26-27. Despite this history, when LVN A received a
report from CNA C that Resident 1 was discharging phlegm from this mouth after lunch,
she still did not immediately assess Resident 1 and consult with Resident 1’s physician.
CMS Ex. 5, at 2, 8. LVN A expressed to the surveyor that “if [she] could have been able
to do things different; she would have taken vitals and listen[ed] to his lungs,” and if she
had thought he needed to be supervised, she would not have left him alone in his room.
CMS Ex. 5, at 3. However, LVN A admitted that she only checked on Resident | as she
passed by his door while taking care of other residents, rather than immediately assessing
Resident | and consulting with his physician. Thus, Petitioner failed take reasonable
steps to immediately assess Resident 1 and consult with his physician despite a
significant change in Resident 1’s physical condition on November 22, 2012. See P. Ex.

2, at 1; CMS Ex. 18, at 5. When interviewed about the incident, the facility’s
administrator acknowledged Petitioner’s failure and stated that “there [was] no excuse for
[LVN A] to have not followed through and assess [Resident 1] when there was a change
of condition.” CMS Ex. 5, at 10.

Petitioner does not deny that Resident 1’s physician was not immediately consulted
regarding a significant change in his condition. However, Petitioner attempts to shift the
blame for its noncompliance to LVN A and argues that she alone ignored Resident 1’s
significant change in condition. P. Pre-hrg. Br. at 7. However, as the Board has
previously explained, for the purpose of evaluating a facility’s compliance with the
Medicare participation requirements, the facility acts through its staff and cannot
dissociate itself from the consequences of its employees’ actions. Beverly Health Care
Lumberton, DAB Ruling No. 2008-5 (Denial of Petition for Reopening Decision No.
2156) at 6-7 (2008); Emerald Oaks, DAB No. 1800, at 7, n.3 (2001).

Petitioner argues that its failure to comply with 42 C.F.R. § 483.10(b)(11) was beyond
Petitioner’s control or knowledge. P. Br. at 6-8. Petitioner relies on Koester Pavilion,
DAB 1750 (2000), and argues that a facility is not required to perform the impossible or
guarantee against unforeseeable occurrences, but it is only required to do everything in
the facility’s power to prevent accidents from occurring. However, under the
circumstances present in this case, I find that Petitioner’s failures involved occurrences
that were foreseeable and within Petitioner’s control. It was possible for LVN A, or
another employee of the facility who noticed Resident 1’s worsening condition, to
immediately consult with Resident 1’s physician. Other actions were certainly possible,
as LVN A told the state surveyors “if she could have done things different[ly], she would
have taken [Resident 1’s] vitals and listen[ed] to his lungs.” CMS Ex. 5, at 3. These
actions were not impossible or beyond Petitioner’s control but were actually
recommended interventions for Resident 1’s aspiration risk.

2. Petitioner was not in substantial compliance with 42 C.F.R.
§ 483.13(c) (Tags F-224 and 226) because the facility did not develop
and implement policies and procedures that prohibit neglect of
residents.

A facility must develop and implement policies and procedures that prohibit
mistreatment, neglect, and abuse of residents and misappropriation of resident property.
42 C.F.R. § 483.13(c). Petitioner has a policy entitled “Abuse Prevention Policy” that
was effective January 2005 and revised in June 2009. CMS Ex. 10. This policy defines
abuse to be “deprivation by an individual, including a caretaker of goods and services
that are necessary to attain or maintain physical, mental and psychosocial well-being,
presuming that the instance of abuse causes physical harm . . . .” and defines neglect as
“failure to provide goods and services necessary to avoid harm, mental anguish or mental
illness.” CMS Ex. 4, at 16; CMS Ex. 10. The Abuse Prevention Policy specifically
10

states that the facility will prohibit abuse and neglect for all patients through the
implementation of seven components: screening of potential employees, training of
employees, prevention of occurrences, identification of possible incidents or allegations
which need investigation, investigation of incidents and allegations, protection of patients
during investigation, and reporting of incidents, investigations and facility response to the
results of their investigations. CMS Ex. 10, at 1. Petitioner’s policy also defined
“prevention” and states “[f]or any concerns or questions, place notes in the
Administrators box or contact the administrator personally. Supervisors will immediately
correct and intervene in identified situations such as neglect, abuse, or misappropriation
of patient’s property.” CMS Ex. 10, at 3.

Despite the awareness of multiple staff members that something was wrong with
Resident | during the morning and early afternoon, and despite Resident 1’s documented
risk for aspiration, Petitioner admittedly failed to assess Resident 1 and immediately
consult with his physician when he experienced a significant change in his condition.

P. Exs. 2; 3; CMS Exs. 5, at 2-3, 8; 18, at 4. Petitioner’s termination of LVN A supports
CMS’s findings because Petitioner cited her for not assessing Resident 1’s change in
condition and for substandard performance of her duties. P. Ex. 4.

Petitioner does not deny that a failure occurred. P. Br. at 3, 5, 7-8. However, Petitioner
suggests that a “single nurse” did not implement Petitioner’s policies and procedures as
she was trained and licensed to do. P. Br. at 10. This “single nurse” however, was a
supervisory employee of Petitioner, and she provided care to Resident | within the
normal scope of her employment at the facility. The care any facility renders to its
residents depends on the performance of the facility’s individual staff members. Staff
members assess the resident’s condition, plan the resident’s care, and implement care
planning decisions. Thus, a facility is responsible for all of its staff’s actions because it is
those actions which comprise the care that residents receive. Emerald Oaks, DAB No.
1800, at 7, n.3; Barn Hill Care Ctr., DAB No. 1848, at 10-12 (2002).

Petitioner also claims that CMS is unfairly holding the facility to a strict liability
standard. P. Pre-hrg. Br. at 10. However, Petitioner misconstrues the relevant
requirements. Requiring Petitioner to abide by the standard set forth in the Medicare
participation regulations is not akin to applying a strict liability standard. Tri County
Extended Care Ctr., DAB No. 2060, at 5 (2007) (explaining that an ALJ holding a
facility to the standards enunciated in the relevant Medicare participation requirements
and its own policies and care plans is not tantamount to applying “strict liability”).

The breakdown in the implementation of Petitioner’s anti-neglect policies was not limited
to one staff member on one occasion. Contrary to Petitioner’s allegation that LVN A
“hid” the failures, the evidence suggests that other staff also knew of Resident 1’s
significant change in condition around lunch time. P. Pre-hrg. Br. at 11; P. Ex. 2, at 1-2.
CNA C stated that “right before lunch was served, Resident | had a lot of phlegm coming
11

out of both sides of his mouth, at which time [CNA B] asked [N.O,] to bring Resident 1
from the lunch room to me and he did.” P. Ex. 2, at 1-2. Moreover, even though CNA C
stated that LVN A did not react with urgency upon receiving her report of significant
change in resident health, CNA C did not follow up on the report or attempt to alert other
staff members about LVN A’s non-responsiveness. See P. Ex. 2, at 2. Petitioner’s staff
had the opportunity to ensure that Resident 1 received appropriate care by implementing
Petitioner’s policies and procedures but, instead, neglected Resident | by failing to assess
Resident 1’s worsening condition and failing to immediately consult with his physician.
Thus, within a several hour window of time, multiple staff members violated Petitioner’s
anti-neglect procedures, demonstrating an underlying breakdown in the facility’s
implementation of its abuse prevention policy.

3. Petitioner was not in substantial compliance with 42 C.F.R. § 483.25
(Tag F-309) because Petitioner failed to provide Resident 1 the
necessary care and services to attain or maintain his highest physical
well-being in accordance with his comprehensive assessment and plan
of care.

The Board has held that 42 C.F.R. § 483.25 requires facilities to furnish the care and
services set forth in a resident’s care plan, to implement physicians’ orders, to monitor
and document residents’ conditions, and to follow its own policies. Life Care Center of
Bardstown, DAB No. 2479, at 22 (2012). The regulation “imposes on facilities an
affirmative duty designed to achieve favorable outcomes to the highest practicable
degree.” Jd. citing Windsor Health Care Ctr., DAB No. 1902, at 16-17 (2003), aff'd
Windsor Health Care Ctr. v. Thompson, No. 04-3018 (6" Cir. 2005). As previously
discussed under the subsection 483.13(c) noncompliance, I find Petitioner did not follow
its abuse prevention policy when attending to Resident 1 on November 22, 2012, which
also supports a deficiency under 42 C.F.R. § 483.25.

Further, the facility did not provide the requisite care when it did not follow Resident 1’s
care plan and speech and swallowing evaluations, which were approved by Resident 1’s
doctor. CMS Ex. 8, at 10, 25, 32. When admitted to the facility, Resident 1 had a
swallowing disorder and his plan of care required nectar-thickened liquids and
monitoring for changes in his ability to eat and swallow. CMS Ex. 8, at 1,5, 10. The
care plan’s approach required nursing staff to notify a doctor when Resident 1’s ability
changed. CMS Ex. 8, at 10. Approximately seven months before his death, Resident 1
underwent a speech therapy swallowing evaluation, and the speech therapist assessed
Resident | as an aspiration risk with oral motor function to be moderately to severely
impaired. CMS Ex. 8, at 24-26. The speech therapist also noted that she spoke to the
charge nurse regarding checking Resident 1’s lungs and to report a wet cough and
watering eyes. CMS Ex. 8, at 27. When discharging him from speech therapy on May
19, 2012, the speech therapist noted that she educated staff on strategies to use to
decrease Resident 1’s risk of aspiration. CMS Ex. 8, at 31.

12

Despite Resident 1’s treatment approaches, on November 22, 2012, Resident 1 began to
cough up phlegm while getting ready for breakfast, and CNA C did not report this until
several hours later, when the amount and thickness of the phlegm began to increase. P.
Ex. 1. Then, LVN A did not assess Resident 1 when she received the report from CNA
C, and did not immediately monitor Resident 1’s lung sounds, despite the fact he was
susceptible to aspirating. CMS Ex. 5, at 2-3; CMS Ex. 8, at 34. The facility’s
administrator acknowledged that Petitioner failed to provide necessary services to
Resident 1 and stated that “there [was] no excuse for [LVN A] to have not followed
through and assess [Resident 1]... .” CMS Ex. 5, at 10.

4. Petitioner has not demonstrated that CMS’s determination of
“immediate jeopardy” was clearly erroneous.

Immediate jeopardy exists when “the provider’s noncompliance with one or more
requirements of participation has caused, or is likely to cause, serious injury, harm,
impairment, or death to a resident.” 42 C.F.R. § 488.301. CMS asserts that Petitioner’s
noncompliance constituted a pattern of “immediate jeopardy” (level “K’) for nine days
from November 22, 2012 through November 30, 2012. I must uphold an immediate
jeopardy determination unless it is “clearly erroneous.” 42 C.F.R. § 498.60(c). The
“clearly erroneous” standard imposes on facilities a heavy burden to show no immediate
jeopardy, and the Board has sustained determinations of immediate jeopardy where CMS
presented evidence “from which ‘[o]ne could reasonably conclude’ that immediate
jeopardy exists.” See Barbourville Nursing Home, DAB No. 1962, at 11 (2005) (citing
Florence Park Care Ctr., DAB No. 1931, at 27-28 (2004)).

I have found Petitioner neglected its duty to immediately consult with a physician
regarding significant changes in Resident 1’s condition. Due to Petitioner’s inaction,
medical treatment for Resident 1 was delayed, and Petitioner’s failures placed him at risk
for developing aspiration pneumonia, which “can worsen quickly if not properly
identified and treated” and “can result in death.” CMS Ex. 13.

Here, Petitioner in fact died with a diagnosis including aspiration pneumonia within two
days of the events of November 22, 2012. There were also several other residents at the
facility who received tube feedings and speech therapy and were similarly at risk of not
receiving timely treatment due to the inaction of Petitioner’s staff. CMS Ex. 18, at 6. As
the surveyor noted, “the failures could affect 22 residents who received speech therapy
and placed them at risk for not having the signs and symptoms of aspiration recognized
and treated in a timely manner.” CMS Ex. 18, at 6.

Petitioner argues that the case involves one resident and one nursing staff member’s
actions “for approximately one hour” and that there is no evidence in the record regarding
any basis for determining there to be immediate jeopardy to residents after Resident 1
13

was discharged from the facility on November 22, 2012. P. Pre-hrg. Br. at 11-12.
However, LVN A, the “rouge” employee, continued to be employed at the facility until
November 30, 2012, Petitioner has not come forward with any evidence to show she was
not treating patients during this time, and Petitioner has not contested that other residents
were similarly situated to Resident 1. Although Petitioner argues this was an isolated
incident and one nurse was at fault, the charge nurse (LVN A) as well as CNA B and
CNA C were aware of Resident 1’s condition, yet no staff member intervened.

Petitioner has not offered any evidence to dispute CMS’s finding that the facility failed to
meet the regulatory requirements with regard to the care of Resident 1 from November
22, 2012 to November 30, 2012, but instead it complains of irregularities in the survey
process such as the state surveyors reopening the survey two weeks after exiting the
facility on November 30, 2012 and declaring immediate jeopardy at that time. P. Pre-hrg.
Br. at 3-5. However, Petitioner’s complaints about the survey process are not relevant to
my determination because inadequacies or irregularities in the survey process do not
invalidate adequately documented deficiencies or relieve a facility of its obligations to
meet all requirements for participation in Medicare. See 42 C.F.R. § 488.318(b).

5. The CMPs CMS imposed are reasonable.
a. The amount of the CMP is reasonable.

CMS must consider several factors when determining the amount of a CMP, which I
consider de novo when evaluating the reasonableness of the CMP, which are: (1) the
facility’s prior history of noncompliance, including repeated deficiencies; (2) the
facility’s financial condition, i.e., its ability to pay the CMP; (3) the severity and scope of
the noncompliance; (4) the relationship of one deficiency to other deficiencies resulting
in noncompliance; and (5) the facility’s degree of culpability, which includes neglect,
indifference, or disregard for resident care, comfort or safety. 42 C.F.R. §§ 488.438(f),
488.404(b),(c). Unless a facility contends that a particular regulatory factor does not
support the CMP amount that CMS imposed, I must sustain it. Coquina Ctr., DAB No.
1860, at 32 (2002).

The deficiencies here are very serious. After Petitioner’s staff became aware that Resident
1 had suffered a significant change in condition, it did not immediately consult with his
physician, which delayed necessary treatment. CMS Exs. 5, at 2-3; 17, 19; P. Exs. 2, 3.
Resident | died two days later after being diagnosed with aspiration pneumonia. CMS Ex.
9, at 8. Petitioner’s noncompliance with several regulations caused serious harm to
Resident 1. Accordingly, a significant CMP is justified.

Also, Petitioner was highly culpable for its overall noncompliance. Petitioner’s staff
members either did not recognize their duty to consult with Resident 1’s physician
regarding significant changes in his condition or demonstrated an indifference to
14

Resident 1’s signs of aspiration. Petitioner characterizes the series of events on November
22, 2012, as an isolated incident that LVN A hid from the facility. P. Pre-hrg. Br. at 11-12.
However, as previously discussed, Petitioner is responsible for the acts of its employees and
cannot escape its significant culpability by blaming its employee.

With regard to Petitioner’s financial condition and ability to pay the CMP, CMS states
that the CMP total of $106,850 represents 3.58% of the estimated annual

Medicaid gross revenue for Petitioner’s facility. Petitioner presents only a non-specific
affidavit from Petitioner’s Chief Financial Officer as evidence of its financial condition.
The affidavit states that “[c]omparing the revenue for the period of March through May
2013, I note that such revenue has declined 5.4%. Also ... Medicaid revenue does not
cover the costs of providing Medicaid services and a civil money penalty will further
impede Petitioner’s quality to provide nursing facility services consistent with state and
federal standards.” P. Ex. 8.

L assign little weight to this testimony because it is not probative of whether Petitioner
lacks the ability to pay the CMP without going out of business or jeopardizing resident
health and safety. See Meadowwood Nursing Center, DAB No. 2541, at 18 (2013). The
Board has explained that non-specific information, such as information about a facility’s
“annual profits or losses, may not be an accurate reflection of a facility's financial health
or ability to pay and must be considered in the light of such other indicators as the
facility's financial reserves, assets, credit-worthiness, and ‘other longterm indicia of its
survivability.”’ Meadowwood Nursing Center, DAB No. 2541, at 18; citing Guardian
Care Nursing & Rehab. Ctr., DAB No. 2260, at 8 (2009), citing Kenton Healthcare,
LLC, DAB No. 2186 (2008) (explaining all indicia of a facility’s financial situation, as
well as financing options and not merely cash flow, should be considered for this factor)
and Windsor Health Care, DAB No. 1902 (2003) (explaining that adequacy of assets, not
profits, is the relevant inquiry). The information Petitioner provided is insufficient to
establish that payment of the CMP would put Petitioner out of business or compromise
resident health and safety, and there is no evidence to suggest that Petitioner is unable to
pay the total CMP imposed. P. Ex. 8; P. Pre-hrg. Br. at 12.

CMS has also presented evidence of Petitioner’s history of noncompliance. CMS Ex.
16.” CMS states that “this was the eighth noncompliance cycle and fourth enforcement
action since October 2009” involving Petitioner. CMS Ex. 17, at 8. In October of 2009,
Petitioner was cited for 42 C.F.R. § 483.25, (Tag F-309), a pattern of actual harm for
failing to thoroughly assess and intervene on behalf of a resident with bruising and knee

> CMS Ex. 16 consists of a “Provider Full Profile.” The first six pages of the report
appear to relate to another facility. However, the last four pages (CMS Ex. 16, at 7-10)
clearly relate to Petitioner. I have not considered CMS Ex. 16, at 1-6, as this portion of
the exhibit is not relevant to this case.

15

pain and failure to intervene on behalf of a resident who had a painful itching rash for
two months. In March of 2011, Petitioner was cited for 42 C.F.R. § 483.25(h), (Tag F-
323) for isolated actual harm when failing to provide adequate supervision to prevent
accidents for one resident who exited the building without staff knowledge and rolled off
the porch in his wheelchair. Further, in July of 2012, Petitioner was cited for 42 C.F.R.

§ 483.25(h), (Tag F-323), at a scope and severity determination of isolated immediate
jeopardy, for failing to provide adequate supervision to prevent accidents for one resident
who fell from bed and subsequently died. CMS Ex. 17, at 8. This similarity in citations
as well as the scope and severity of the noncompliance in the several years prior to the
instant case is significant and also supports a higher CMP.

In assessing the reasonableness of a CMP amount, I am required to look at the per-day
amount, rather than the total amount of CMP accrual. See Kenton Healthcare, LLC,
DAB No. 2186, at 28-33. I have found immediate jeopardy level noncompliance to be
not clearly erroneous, and therefore the minimum CMP I am required to sustain is
$3,050 per day for the period of immediate jeopardy. The $6,650 per day CMP that
CMS imposed is in the middle range for immediate jeopardy level noncompliance.
CMS also imposed a CMP of $1,000 per-day for the period of noncompliance which
was not immediate jeopardy, which is also in the middle range deficiencies that do not
constitute immediate jeopardy. In light of all of the factors discussed, I find that the
moderate CMP of $6,650 per day for nine days from November 22, 2012 through
November 30, 2012, and $1,000 per day for 47 days from December 1, 2012 through
January 16, 2013 is reasonable in amount in light of the seriousness of Petitioner’s
noncompliance, culpability, and history of noncompliance.

b. The duration of the CMP is reasonable.

i. CMS’s determination of the duration immediate jeopardy was
not clearly erroneous.

A “determination by CMS that a [facility’s] ongoing compliance remains at the level of
immediate jeopardy during a given period constitutes a determination about the ‘level of
noncompliance’ and, therefore, is subject to the clearly erroneous standard of review
under section 498.60(c)(2).” Brian Ctr. Health & Rehab./Goldsboro, DAB No. 2336, at
7-8 (2010). In addition, Petitioner bears the burden of persuasion regarding the entire
duration of immediate jeopardy noncompliance. In Owensboro Place and
Rehabilitation Ctr, DAB No. 2397 (2011), the Board stated:

The burden of persuasion is on the facility. The Board has made it clear
that the facility bears the burden of showing that it returned to substantial
compliance on a date earlier than that determined by CMS and has rejected
the idea that CMS must establish a lack of substantial compliance during
each day in which a remedy remains in effect... .
16

DAB No. 2397, at 12 (citations omitted).

I find that CMS’s determination that Petitioner was not in substantial compliance with
participation requirements at the immediate jeopardy level beginning on November 22,
2012, the date Resident 1 was sent to the hospital, and ending November 30, 2012, the
date Petitioner culminated the process of terminating LVN A, was not clearly erroneous.

Petitioner argues that the facility took certain actions to reduce the risk to its residents
starting on November 23, 2012, when the DON identified LVN A’s failure to chart an
assessment for Resident 1 and when Petitioner began the process of retraining staff.

P. Pre-hrg. Br. at 2-3; P. Closing Br. at 4. Petitioner explains the facility “immediately
began the task of retraining all health care staff on identifying aspiration, treating
residents at risk of aspiration, assessing changes in condition, notification of physician
and family, and compliance with [Petitioner’s] abuse and neglect policy.” P. Closing Br.
at 4. Petitioner contends that it implemented new quality assurance procedures and tools
and that the state surveyor “observed these corrective measures and the modification of
the quality assurance procedures, and based on those observations she was not inclined to
declare [immediate jeopardy] upon her exit on December 3, 2012.” P. Closing Br. at 4.

However, immediate jeopardy is abated “only when the facility has implemented
necessary corrective measures so that there is no longer any likelihood of serious harm.”
Life Care Ctr. of Bardstown, DAB No. 2479, at 35 (2012), citing Pinehurst Healthcare &
Rehab. Ctr., DAB No. 2246, at 15 (2009). Also, in Fairfax Nursing Home, Inc., DAB
No. 1794, at 13-14 (2001), the Board stated that “a finding of immediate jeopardy is not
contingent on a finding that each individual incident placed a resident at such a degree of
potential or risk of serious harm that there was a likelihood of harm to that specific
resident at that particular time .... Findings about incidents related to individual
residents are not themselves the deficiencies that must be corrected — the deficiency is the
underlying failure to meet a participation requirement evidenced by the incident.” Aff’d,
Fairfax Nursing Home v. Dep’t of Health & Human Servs., 300 F.3d 835 (7th Cir. 2002),
cert. denied, 537 U.S. 1111 (2003).

Here, the facility did not fully address the underlying situation that resulted in immediate
jeopardy until after November 30, 2012. Petitioner states that the facility “began the
process of terminating [LVN A’s] employment on November 25, 2012 .. . which
culminated on November 30, 2012.” P. Pre-hrg. Br. at 3; P. Exs. 1, 3, 4. Petitioner also
contends it implemented significant modifications and provided extensive training to staff
on November 30 and December 1, 2012. P. Pre-hrg. Br. at 4; CMS Ex. 4, at 17-25.
Petitioner recognized that corrective actions and additional staff training were necessary
to ensure the safety of its residents. Until the facility completed these tasks, the
likelihood of serious harm to residents had not been eliminated.
17

Overall, Petitioner has not offered any specific evidence or argument that the period of
noncompliance at the immediate jeopardy level was shorter than cited. Accordingly,
Petitioner has not met its heavy burden of demonstrating that CMS’s determination about
the duration of the period of immediate jeopardy was clearly erroneous.

ti. Petitioner did not meet its burden of demonstrating by a
preponderance of the evidence that it returned to substantial
compliance prior to January 17, 2013.

I now must determine whether the facility demonstrated by a preponderance of the
evidence that it returned to substantial compliance with Medicare participation
requirements sometime after November 30, 2012 and before January 17, 2013, as CMS
determined. I first note that, in both of its briefs, CMS appears to confuse the period of
substantial noncompliance that was not immediate jeopardy and references a “$1,000 per
day [CMP] from December 1, 2012, through January 16, 2012” and a “$1,000 per-day
CMP from December 1, 2012 through December 17, 2012.” CMS Pre-Hrg. Br. at 2;
CMS Closing Br. at 2, 16. However, both the official notice letter and Petitioner’s
closing brief reference CMS’s determination that Petitioner was found to not be in
substantial compliance with Medicare requirements at a level that was not immediate
jeopardy for 47 days beginning December 1, 2012 and continuing through January 16,
2013. CMS Ex. 2, at 1; P. Closing Br. at 4-5.

A facility must ultimately show by a preponderance of evidence that it returned to
substantial compliance at a date earlier that CMS determined. See Golden Living Ctr. —
Foley, DAB No. 2510, at 28-31 (2013). The burden is on the facility to show that it
timely proposed an acceptable plan of correction and completed the implementation of
that plan, and “[i]t is not enough that some steps have been taken, but rather the facility
must prove that the goal has been accomplished.” Lake Mary Health Care, DAB No.
2081, at 29 (2007).

CMS contends that the facility remained out of compliance until January 17, 2013,
because the facility had not completed the required directed in-service training and
Petitioner “was still inservicing staff and monitoring the effectiveness of the Plan of
Removal.” CMS Ex. 4, at 3, 27. Petitioner argues, however, “that there is no question
that it was in substantial compliance with the regulations cited against it” at the time of
the initial on-site survey on December 3, 2012. P. Closing Br. at 1-2. Petitioner contends
that the DON immediately began to retrain staff on assessing changes in condition and
the requirements for notification of physician and family to ensure compliance with
Petitioner’s policies and procedures. P. Closing Br. at 4; P. Ex. 3, at 2. Petitioner states
that when the CMS surveyor returned to the facility on December 18, 2012, Petitioner
presented her with a corrective action plan, which contained all of the retraining and
quality assurance measures Petitioner accomplished on November 30, 2012 and
December 1, 2012. P. Ex. 3, at 2. According to Petitioner, the surveyor accepted the

18

plan and asked the DON to prepare a quiz to test the efficacy of the retraining conducted.
P. Ex. 3, at 2. The DON prepared the quiz, and the surveyor used it to ask Petitioner’s
staff some questions. P. Ex. 3, at 2. Petitioner argues that when the CMS surveyor left
the facility on December 17, 2012, she had “accepted the corrections performed prior to
December 3, 2012 as the acceptable corrective action plan and lifted the [immediate
jeopardy] on December 18, 2012 based upon those corrective action measures taken prior
to December 3, 2012 and the staff’s ability to respond to questions regarding such
measures taken.” P. Closing Br. at 4; P. Ex. 3 at 2.

On January 7, 2013, however, Petitioner received the statement of deficiencies and
learned that CMS was requiring it to complete a directed in-service training, by a third
party acceptable to the state agency, prior to its certification of return to substantial
compliance. P. Closing Br. at 5. Petitioner explained the directed in-service training
took approximately nine days to schedule before staff conducted it on January 16, 2013.
P. Closing Br. at 5; P. Ex. 3 at 2. Petitioner argued this directed in-service training was
“redundant and even less informative, than the training that was conducted prior to
December 3, 2012.” P. Closing Br. at 4. Petitioner also argues that the directed in-
service on January 16, 2013 “‘was not as comprehensive as that prior re-training and did
not address any quality assurance tools and measures such as we implemented in that
November 30 and December 1, 2012 re-training effort.” P. Ex. 3, at 2-3. Petitioner
presents documentation relating to the re-training on November 30, 2012 and December
1, 2012 (P. Ex. 5) and documentation relating to the directed in-service on January 16,
2013 (P. Ex. 6).

Despite Petitioner’s argument that the directed in-service was redundant and less
informative than its own retraining efforts, the documentation relating to directed in-
service appears more extensive (67 pages) than the materials relating to the November
30-December 1, 2012 re-training effort (23 pages). I find further the information
provided to staff does not appear to cover the same material. See P. Exs. 5, 6. It appears
the directed in-service training provided detailed information on the violations of the
facility, relevant regulatory requirements, and medical literature regarding pneumonia in
older residents of long-term care facilities. P. Ex. 6, at 2-56. Petitioner’s staff also
received questionnaires regarding topics of “F157 Change of Condition” and “F309
Aspiration (Quality of Care)”. P. Ex 6, at 2, 57-60. In contrast, the documentation from
Petitioner’s internal retraining focused on instructions for implementing the “Interact
Early Warning Tool,” a form to help identify and document significant changes in
residents’ conditions, and Petitioner’s policies for medication administration. See P. Ex.
5, at 3-13.

In sum, although Petitioner presented evidence of its efforts to retrain its staff from
November 30 to December 1, 2012, including providing a quiz about aspiration and
aspiration pneumonia (P. Ex. 5, at 13-14), CMS did not accept this as credible written
evidence that the facility had achieved substantial compliance and required the facility to
19

still perform the directed in-service training, facilitated by a third party. See CMS Ex. 4,
at 25; CMS Ex. 17, at 2. The training evidence supports that the in-service training,
completed on January 16, 2013, was more comprehensive and interactive than
Petitioner’s earlier staff trainings. Compare P. Ex. 5 and P. Ex. 6. Petitioner has not
provided any other evidence, such as witness testimony, to persuade me otherwise.
Considering Petitioner has concurrently claimed it was in substantial compliance with all
of the substantive deficiencies I have upheld here, I find it reasonable that CMS required
a third party trainer to provide the requisite care training and did not solely rely upon the
facility’s internal instruction as evidence that returned it to substantial compliance. I
conclude, therefore, that Petitioner did not meet its burden showing that it had returned to
substantial compliance on a date earlier than that which CMS determined.

/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-0929)

Complainant,
v.
M and G Petro, Inc. / Gus Faraj d/b/a Sunoco,

Respondent.

Docket No. C-14-1421

Decision No. CR3414

Date: October 9, 2014

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, M and G Petro, Inc. / Gus Faraj d/b/a Sunoco, at 15441
Plymouth Road, Detroit, Michigan 48227 and by filing a copy of the complaint with the
Food and Drug Administration’s (FDA) Division of Dockets Management. The
complaint alleges that Sunoco unlawfully sold cigarettes to minors and failed to verify,
by means of photo identification containing a date of birth, that cigarette 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 Sunoco.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on August 12, 2014, CTP served the
complaint on Respondent Sunoco by United Parcel Service. In the complaint and
accompanying cover letter, CTP explained that, within 30 days, Respondent should pay
the penalty, file an answer, or request an extension of time in which to file an answer.
CTP warned Respondent that, if it failed to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.
Respondent Sunoco has neither filed an answer within the time prescribed, nor requested
an extension of time within which to file an answer. Pursuant to 21 C.F.R.

§ 17.11, L assume that the facts alleged in the complaint (but not its conclusory
statements) are true. Specifically:

e At Respondent’s business establishment, 15441 Plymouth Road, Detroit,
Michigan 48227, on May 25, 2013, at approximately 10:36 AM, an FDA-
commissioned inspector observed Respondent’s staff sell a package of Newport
100s cigarettes to a person younger than 18 years of age. The inspectors also
observed that Respondent’s staff failed to verify, by means of photo identification
containing the bearer’s date of birth, that the cigarette purchaser was 18 years of
age or older;

e Ina warning letter issued on September 19, 2013, CTP informed Respondent of
the inspector’s observations from May 25, 2013, and that such actions violate
federal law, 21 C.F.R. § 1140.14(a) and (b)(1). The letter further warned that if
Respondent failed to correct its violations, the FDA could impose a civil money
penalty or take other regulatory action;

e At Respondent’s business establishment, 15441 Plymouth Road, Detroit,
Michigan 48227, on December 1, 2013, at approximately 1:52 PM, FDA-
commissioned inspectors documented Respondent’s staff selling a package of
Newport Box 100s cigarettes to a person younger than 18 years of age. The
inspectors also documented that Respondent’s staff failed to verify, by means of
photo identification containing the bearer’s date of birth, that the cigarette
purchaser was 18 years of age or older.

These facts establish Respondent’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 CFR. 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
photo identification containing the bearer’s date of birth, that no cigarette or smokeless
tobacco purchaser is younger than 18 years of age.

A $500 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $500 against Respondent
M and G Petro, Inc. / Gus Faraj d/b/a Sunoco. Pursuant to 21 C.F.R. § 17.11(b), this
order becomes final and binding upon both parties after 30 days of the date of its
issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1093)

Complainant
v.

Tri and Tri States Enterprises Inc.
d/b/a Sams Market,

Respondent.
Docket No. C-14-1586
Decision No. CR3413

Date: October 8, 2014

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an
administrative complaint on Respondent, Tri and Tri States Enterprises Inc. d/b/a
Sams Market, at 222 Admiral Street, Providence, Rhode Island 02908, and by
filing a copy of the complaint with the Food and Drug Administration’s (FDA)
Division of Dockets Management. The complaint alleges that Sams 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 Sams Market.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on August 12, 2014, CTP served
the complaint on Respondent Sams Market by United Parcel Service. In the
complaint and accompanying cover letter, CTP explained that, within 30 days,
Respondent should pay the penalty, file an answer, or request an extension of time
in which to file an answer. CTP warned Respondent that, if it failed to take one of
these actions within 30 days, the Administrative Law Judge could, pursuant to

21 C.F.R. § 17.11, issue an initial decision ordering it to pay the full amount of the
proposed penalty.

Respondent Sams Market has neither filed an answer within the time prescribed,
nor requested an extension of time within which to file an answer. Pursuant to
21 C.F.R. § 17.11, l assume that the facts alleged in the complaint (but not its
conclusory statements) are true. Specifically:

e At approximately 4:00 p.m. on April 23, 2013, at Respondent’s business
establishment, 222 Admiral Street, Providence, Rhode Island 02908, an
FDA-commissioned inspector observed Respondent’s staff selling a
package of Newport Non-Menthol Box 100s cigarettes to a person younger
than 18 years of age. The inspector also observed 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 issued May 16, 2013, CTP informed Respondent of the
inspector’s April 23, 2013 observations, and that such actions violate
federal law, 21 C.F.R. § 1140.14(a) and (b)(1). 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 7:48 p.m. on October 24, 2013, at Respondent’s business
establishment, 222 Admiral Street, Providence, Rhode Island 02908, FDA-
commissioned inspectors documented Respondent’s staff selling a package
of Newport 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.

These facts establish Respondent Sams 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. § 387£(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 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.

A $500 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $500 against
Respondent Tri and Tri States Enterprises Inc. d/b/a Sams Market. Pursuant to 21
C.F R. § 17.11 (b), this order becomes final and binding upon both parties after 30
days of the date of its issuance.

Is/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1154)

Complainant
v.

Race Supermarket Inc.,
Respondent.
Docket No. C-14-1663
Decision No. CR3411

Date: October 9, 2014

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Race Supermarket Inc., at 156 North 52nd Street, Philadelphia,
Pennsylvania 19139, and by filing a copy of the complaint with the Food and Drug
Administration’s (FDA) Division of Dockets Management. The complaint alleges that
Race Supermarket Inc. impermissibly sold cigarettes to a minor 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. The complaint likewise alleges that
Respondent Race Supermarket Inc. previously paid a $500 civil money penalty for
violations of regulations found at 21 C.F.R. pt. 1140. CTP now seeks to impose another
$500 civil money penalty against Respondent Race Supermarket Inc.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on August 13, 2014, CTP served the
complaint on Respondent Race Supermarket Inc. by United Parcel Service. In the
complaint and accompanying cover letter, CTP explained that, within 30 days,
Respondent should pay the penalty, file an answer, or request an extension of time in
which to file an answer. CTP warned Respondent that, if it failed to take one of these
actions within 30 days, the Administrative Law Judge could, pursuant to 21 C.F.R.
§ 17.11, issue an initial decision ordering it to pay the full amount of the proposed
penalty.

Respondent Race Supermarket Inc. has neither filed an answer within the time
prescribed, nor requested an extension of time within which to file an answer. Pursuant
to 21 C.F.R. § 17.11, L assume that the facts alleged in the complaint (but not its
conclusory statements) are true. Specifically:

¢ CTP previously issued a warning letter to Respondent Race Supermarket Inc. on
September 15, 2011, citing violations of 21 C.F.R. pt. 1140 on June 24, 2011, at
Respondent’s business establishment, 156 North 52nd Street, Philadelphia,
Pennsylvania 19139;

e¢ On June 7, 2012, CTP initiated a previous civil money penalty action, CRD
Docket Number C-12-788, FDA Docket Number FDA-2012-H-0561, against
Respondent for three violations of 21 C.F.R. pt. 1140 within a twenty-four month
period. CTP alleged those violations to have occurred on June 24, 2011 and
February 10,2012. Two of the violations were charged for selling tobacco
products to a minor, and failing to verify age by means of photographic
identification bearing date of birth, on February 10, 2012;

e The previous action concluded when Race Supermarket Inc. paid the civil money
penalty. The Administrative Law Judge closed the case on July 27, 2012;

e At approximately 11:30 AM on October 14, 2013, at Respondent’s business
establishment, 156 North 52nd Street, Philadelphia, Pennsylvania 19139, FDA-
commissioned inspectors documented Respondent’s staff selling a package of
Newport Menthol Gold Box cigarettes to a person younger than 18 years of age.

These facts establish Respondent’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 USC. § 387£(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 CFR. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387£(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 to any person younger than 18 years of age.

Under 21 C.F.R. § 17.2, a $500 civil money penalty is permissible for three violations of
the regulations found at 21 C.F.R. pt. 1140.
Order

For these reasons, I enter default judgment in the amount of $500 against Respondent
Race Supermarket Inc. Pursuant to 21 C.F.R. § 17.11(b), this order becomes final and
binding upon both parties after 30 days of the date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Gil S. Caminong
(OI File No. H-13-41888-9),

Petitioner,
v.
The Inspector General.
Docket No. C-14-918
Decision No. CR3410

Date: October 08, 2014

DECISION

Petitioner, Gil S. Caminong, appeals the determination of the Inspector General for the
U.S. Department of Health and Human Services (I.G.) to exclude him from participating
in Medicare, Medicaid, and other federal health care programs pursuant to section
1128(a)(3) of the Social Security Act (Act) (42 U.S.C. § 1320a-7(a)(3)) for a period of
five years. For the reasons explained below, I find that there is a legitimate basis for the
1.G. to exclude Petitioner, and an exclusion for the minimum period of five years is
mandatory pursuant to section 1128(c)(3)(B) of the Act (42 U.S.C. § 1320a-7(c)(3)(B)).

I. Background and Procedural History

On March 31, 2014, the LG. notified Petitioner that he was being excluded, effective 20
days from the date of the I.G.’s letter, from participating in Medicare, Medicaid and other
federal health care programs pursuant to section 1128(a)(3) for a period of five years. As
a basis for the exclusion, the I.G. cited Petitioner’s felony conviction in the Superior
Court of Arizona, Maricopa County, of a criminal offense related to fraud, theft,
embezzlement, breach of fiduciary responsibility, or other financial misconduct in
connection with the delivery of a health care item or service.
On April 8, 2014, Petitioner filed a timely request for a hearing, and the case was
assigned to me. I ordered the parties to file briefs and their proposed exhibits including
the written direct testimony of any proposed witnesses. Prehearing Order dated April 23,
2014. The LG. filed a brief together with 15 exhibits identified as I.G. Ex. 1 - 1G. Ex.
15. Petitioner filed a brief and one exhibit identified as P. Ex. 1. Absent objections, I
admit all of the exhibits into the record. Both parties indicated that an in-person hearing
was not necessary and agreed that that I may decide this matter based upon the parties’
written submissions. P. Br. at 4; I.G. Br. at 7.

Il. Issue

The sole issue in this case is whether there is a legitimate basis under section 1128(a)(3)
of the Act for the I.G. to exclude Petitioner from participation in Medicare, Medicaid, and
other federal health care programs.

IH. Discussion
A. Findings of Fact and Conclusions of Law

The essential facts of this case are undisputed. Petitioner was a Medicaid provider of
adult foster care and the owner and operator of G and B Adult Foster Care Home (G and
B Home) in Phoenix, Arizona. I.G. Exs. | and 2. G and B Home is a Medicaid provider
licensed by the Arizona Department of Health Services and regulated as a health care
institution. I.G. Ex. 2.

M.L.M. was a resident of G and B Home. I.G. Ex. 4. As a resident, she received care as
required by the resident’s needs described in her admission forms and in her service plan.
Under a residency agreement, G and B Home’s monthly fee provided, amongst other
things, a private room and furnishings, bed and bath linens, personal care needs, all meals
and snacks, housekeeping, and activities. Under her Resident Service Plan, G and B
Home provided M.L.M. with total assistance with grooming, bathing, dressing,
incontinence care, toileting, mobility, and medication administration. LG. Exs. 4,5. On
March 30, 2011, M.L.M. passed away at G and B Home with a hospice chaplain, a
hospice nurse, M.L.M’s power of attorney delegate, Petitioner, and Petitioner’s wife all
in the room at the time. I.G. Ex. 6 at 13. Moments after her death, Petitioner witnessed
M.L.M.’s power of attorney sign a document with M.L.M.’s hand. I.G. Exs. 6, 7, 9.
Petitioner then wrote his name as a witness to a donation instrument conveying M.L.M’s
property to the Catholic Community Foundation. LG. Exs. 6, 7, 9.

Petitioner and the power of attorney were indicted by a Grand Jury on May 17, 2011 and
Petitioner was charged with forgery (Count 1). That count provided that Petitioner, with
intent to defraud, falsely made, completed or altered a written instrument or one which
contains false information and that conduct occurred when the defendants signed a
document with M.L.M.’s hand after she was deceased that stated that M.L.M. wished to
donate her personal property, home and money to the Catholic Community Foundation.
1.G. Ex. 9 at 2. On August 19, 2011, Petitioner entered into a plea agreement to an
amended count | that identified the charge as possession of a forgery device.’ I.G. Ex. 8.

On November 29, 2011, the Superior Court of the State of Arizona, County of Maricopa,
issued a judgment that Petitioner was guilty of possession of a forgery device, a class 6
undesignated felony, in violation of Arizona Revised Statutes (A.R.S.) sections 13-2003,
13-2001, 13-301-304, 13-701, 13-702, and 13-801. I.G. Ex. 10. The Superior Court
sentenced Petitioner to nine months of probation and ordered him to pay restitution in the
amount of $1,000 to the Medicaid Fraud Control Unit. I.G. Ex. 10.

Arizona state law provides as follows:

13-603. Authorized disposition of offenders

oe

B. Ifa person is convicted of an offense, the court, if authorized by
chapter 9 of this title, may suspend the imposition or execution of
sentence and grant such person a period of probation except as
otherwise provided by law. The sentence is tentative to the extent
that it may be altered or revoked in accordance with chapter 9 of this
title, but for all other purposes it is a final judgment of conviction.

13-604. Class 6 felony: designation

A. Notwithstanding any other provision of this title, if a person is
convicted of any class 6 felony not involving a dangerous offense
and if the court, having regard to the nature and circumstances of the
crime and to the history and character of the defendant, is of the
opinion that it would be unduly harsh to sentence the defendant for a
felony, the court may enter judgment of conviction for a class 1
misdemeanor and make disposition accordingly or may place the
defendant on probation in accordance with chapter 9 of this title and

' Arizona Revised Statutes § 13-2003 provides that a person commits criminal
possession of a forgery device if the person “makes or possesses with knowledge of its
character and with intent to commit fraud any plate, die, or other device, apparatus,
equipment, software, access device, article, material, good, property or supply
specifically designed or adapted for use in forging written instruments” and that such a
violation is a class 6 felony.
refrain from designating the offense as a felony or misdemeanor
until the probation is terminated. The offense shall be treated as a
felony for all purposes until such time as the court may actually
enter an order designating the offense a misdemeanor. This
subsection does not apply to any person who stands convicted of a
class 6 felony and who has previously been convicted of two or
more felonies.

B. Ifa crime or public offense is punishable in the discretion of the
court by a sentence as a class 6 felony or a class | misdemeanor, the
offense shall be deemed a misdemeanor if the prosecuting attorney
files any of the following:

1. An information in superior court designating the offense as a
misdemeanor.

2. A complaint in justice court or municipal court designating the
offense as a misdemeanor within the jurisdiction of the respective
court.

3. A complaint, with the consent of the defendant, before or during
the preliminary hearing amending the complaint to charge a
misdemeanor.

ARS. §§ 13-603(B), 13-604.

On February 17, 2012, consistent with Arizona Rule of Criminal Procedure 27.4(a),
Petitioner’s probation officer petitioned the Superior Court for early termination of
Petitioner’s probation because Petitioner had complied with all the conditions of
probation and paid all restitution.” I.G. Ex. 14. On March 22, 2012, the Superior Court
ordered Petitioner discharged from probation and further ordered pursuant to A.R.S.

§ 13-604 that the Class 6 undesignated felony offense be designated as a misdemeanor.
1G. Ex. 15.

> Ariz. R. Crim. P. 27.4(a) provides as follows:

Early Termination of Probation

a. Discretionary Probation Termination. At any time during the term of
probation, upon motion of the probation officer or on its own initiative, the
court, after notifying the prosecutor, may terminate probation and discharge
the probationer absolutely as provided by law.
1. The IG. had a legitimate basis for excluding Petitioner under section
1128(a)(3) of the Act.

The four essential elements necessary to support an exclusion based on section
1128(a)(3) of the Act are: (1) the individual to be excluded must have been convicted of
a felony offense; (2) the felony offense must have been based on conduct relating to
fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial
misconduct; (3) the felony offense must have been for conduct in connection with the
lelivery of a health care item or service, or the felony offense must have been with
respect to any act or omission in a health care program operated by or financed in whole
or in part by any federal, state, or local government agency; and (4) the felonious conduct
must have occurred after August 21, 1996. See also 42 C.F.R. § 1001.101(c).

The facts establish Petitioner to have been convicted of a felony as described in section
1128(a)(3) of the Act. Section 1128(i) of the Act provides that an individual is
considered to have been “convicted” of a criminal offense —

(1) when a judgment of conviction has been entered against the individual .

. . by a Federal, State or local court, regardless of whether there is an

appeal pending or whether the judgment of conviction or other record
relating to criminal conduct has been expunged;

(2) when there has been a finding of guilt against the individual .. . by a
Federal, State, or local court;

(3) when a plea of guilty or nolo contender by the individual . . . has been
accepted by a Federal, State, or local court; or

(4) When the individual . . . has entered into participation in a first
offender, deferred adjudication, or other arrangement or program where
judgment of conviction has been withheld.

Act § 1128(i); see also 42 C.F.R. § 1001.2.

There is no question that the November 29, 2011 order of the Superior Court
stated that the Petitioner knowingly, intelligently and voluntarily entered a plea of
guilty and that —

IT IS THE JUDGMENT of the Court [that Petitioner] is guilty of the
following:

OFFENSE: Count | (amended): Possession of a Forgery Device

Class 6 Undesignated felony

ARS. § 13-2003, 13-2001, 13-301, 13-302, 13-303, 13-304, 13-701, 13-
702 and 13-801

Date of Offense: 3/30/2011

Non Dangerous — Non Repetitive
1.G. Ex. 10. Consistent with the provisions of A.R.S. §13-604, the court further ordered
that it would suspend imposition of the sentence and place Petitioner on unsupervised
probation for a period of time. LG. Ex. 10.

Therefore, I conclude that Petitioner can be considered convicted under section 1128(i) of
the Act. Petitioner agreed to plead guilty to a Class 6 undesignated felony under Count 1,
the court accepted his plea of guilt, and the Superior Court entered a judgment of
conviction against Petitioner for Possession of a Forgery Device, a class 6 undesignated
felony. See Act § 1128(i)(1),(2), and (3); 42 C.F.R. § 1001.2.

Petitioner however contends that the later re-designation of his offense as a misdemeanor
after he successfully completed the terms of his probation means he was not convicted of
a “felony,” a necessary element of a mandatory exclusion pursuant to section 1128(a)(3).
Even though Petitioner’s sentence was suspended pending Petitioner’s satisfactory
completion of the terms of his probation, his offense is still considered a felony
conviction under the Act because the offense cannot be re-designated as a misdemeanor
offense unless and until there has been successful completion of the probation. In fact,
A.R.S. §13-604 specifically provides that “[t]he offense shall be treated as a felony for all
purposes until such time as the court may actually enter an order designating the offense
a misdemeanor.” This is the kind of first offender, deferred adjudication or other type of
post-conviction program envisioned by 1128(i)(4) of the Act. The re-designation of
Petitioner’s offense under A.R.S. § 13-604 from a felony to a misdemeanor was not
based on a decided appeal of his conviction on grounds of legal, factual, or procedural
error that would invalidate the conviction and would require reversal of his conviction.
Petitioner pled guilty to a felony offense and the Superior Court accepted that plea and
entered a judgment of conviction for a felony offense. Thus, for purposes of the Act, the
re-designation to a misdemeanor based on completion of his probation does not alter the
fact that Petitioner is considered “convicted” of a felony under sections 1128(i) and
1128(a)(3).

I also conclude that Petitioner’s conviction was for a felony offense related to
fraud. The offense for which Petitioner was convicted, criminal possession of a
forgery device, includes as one of its elements, the intention to commit fraud.
A.R.S. § 13-2003 A.1. Thus, the fact that Petitioner was convicted of such an
offense is sufficient to satisfy the second essential element under section
1128(a)(3).

Petitioner also argues that his offense did not occur in connection with a health
care item or services because it occurred after M.L.M. died. However, for an
offense to be “in connection with the delivery of a healthcare item or service,”
there need only be a “common sense connection or nexus” between the offense
and the delivery of the health care item or service, which I do find here. See
Kevin J. Bowers, DAB No. 2143 (2008), aff'd, Bowers v. Inspector Gen. of the
Dep't of Health & Human Servs., No. 1:08-CV-159, 2008 WL 5378338 (S.D.
Ohio Dec. 19, 2008). The “in connection with” language has been interpreted
broadly. Here, at all times relevant, M.L.M resided at G and B Home, owned and
operated by Petitioner, and where Petitioner provided services as a personal care
attendant. I.G. Exs. 1, 4. Petitioner is a licensed Medicaid provider who manages
G and B home as the licensee and sponsor of the facility. I.G. Exs. 1,4. Gand B
Home is licensed and regulated by the Arizona Department of Health Services as a
health care institution. As a resident of G and B Home, M.L.M. received services
and almost total assistance with most of her activities of daily living such as
grooming, bathing, dressing, incontinence care, medication administration and
mobility from Petitioner under a written service plan. The fact that the
commission of the criminal offense occurred after M.L.M died is of no
consequence. There is an obvious “common sense connection” between
commission of Petitioner’s criminal offense and the delivery of health care
services at G and B Home. If M.L.M. was not a resident at G and B Home,
Petitioner would not have had the opportunity to commit the criminal activity for
which he was convicted. At the time of her death and at the occurrence of the
offense, Petitioner was nevertheless responsible for, and entrusted with, the care
and safety of M.L.M.

Petitioner also argues that his conviction was not program related, meaning it was
not related to the Medicare or Medicaid or any other federal health care program.
However, only mandatory exclusions pursuant to section 1128(a)(1) require the
conviction to be for criminal offense related to the delivery of an item or service
under Medicare or Medicaid. Section 1128(a)(3) has no such requirement.

And, finally, Petitioner’s conviction occurred after August 21, 1996, satisfying the
fourth essential element.

2, An exclusion of at least five years is mandatory.

The LG. is required by law to exclude any individual who is convicted of a felony
that is described in section 1128(a)(3) of the Act. By law, the minimum length of
a mandatory exclusion is at least five years. Act § 1128(c)(3)(b); 42 C.F.R.

§ 1001.102(a). The I.G. excluded Petitioner for five years, the minimum
mandatory exclusion period. Therefore, the length of the exclusion is reasonable
as a matter of law.

/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-1149)
Complainant
v.
Barbara Reed d/b/a Cromwell General Store,
Respondent.
Docket No. C-14-1652
Decision No. CR3409
Date: October 8, 2014
INITIAL DECISION AND DEFAULT JUDGMENT
The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Barbara Reed d/b/a Cromwell General Store, at 101 South
Shawnee Avenue, Cromwell, Oklahoma 74837,' and by filing a copy of the complaint
with the Food and Drug Administration’s (FDA) Division of Dockets Management. The
complaint alleges that Cromwell General Store unlawfully sold tobacco products to
minors and failed to verify, by means of photo identification containing a date of birth,

that a tobacco purchaser was 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,

' My office sent an Initial Order Establishing Procedures to the Respondent at this
address indicating that it must respond to CTP’s complaint within 30 days of service of
the complaint or the Administrative Law Judge assigned to this case would decide this
matter without a hearing. The United States Postal Service returned the mailing as
undeliverable. However, CTP filed a proof of service of their complaint and cover letter
which informed the Respondent that it must take action within 30 days after delivery of
the complaint. Therefore, the Respondent had notice of the complaint and that it is
subject to default.
21 CFR. pt. 1140. CTP seeks to impose a $500 civil money penalty against Respondent
Cromwell General Store.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on August 11, 2014, CTP served the
complaint on Respondent Cromwell General Store by United Parcel Service. In the
complaint and accompanying cover letter, CTP explained that, within 30 days,
Respondent should pay the penalty, file an answer, or request an extension of time in
which to file an answer. CTP warned Respondent that if it failed to take one of these
actions within 30 days the Administrative Law Judge could, pursuant to 21 C.F.R.

§ 17.11, issue an initial decision ordering it to pay the full amount of the proposed
penalty.

Respondent Cromwell General Store has neither filed an answer within the time
prescribed, nor requested an extension of time within which to file an answer. Pursuant
to 21 C.F.R. § 17.11, L assume that the facts alleged in the complaint (but not its
conclusory statements) are true. Specifically:

e At Respondent’s business establishment, 101 South Shawnee Avenue, Cromwell,
Oklahoma 74837, on September 5, 2013, at approximately 10:49 AM, an FDA-
commissioned inspector observed Respondent’s staff sell a package of Grizzly
Fine Cut Premium Natural smokeless tobacco to a person younger than 18 years of
age;

e Ina warning letter issued on October 31, 2013, CTP informed Respondent of the
inspector’s observation from September 5, 2013, and that such an action violates
federal law, 21 C.F.R. § 1140.14(a). The letter further warned that if Respondent
failed to correct its violation, the FDA could impose a civil money penalty or take
other regulatory action;

e At Respondent’s business establishment, 101 South Shawnee Avenue, Cromwell,
Oklahoma 74837, on February 15, 2014, at approximately 10:34 AM, FDA-
commissioned inspectors documented Respondent’s staff selling a package of
Camel Blue cigarettes to a person younger than 18 years of age. The inspectors
also documented that Respondent’s staff failed to verify, by means of photo
identification containing the bearer’s date of birth, that the cigarette purchaser was
18 years of age or older.

These facts establish Respondent’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 photo identification containing the bearer’s date of birth, that no cigarette or
smokeless tobacco purchaser is younger than 18 years of age.

A $500 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order
For these reasons, I enter default judgment in the amount of $500 against Respondent

Barbara Reed d/b/a Cromwell General Store. Pursuant to 21 C.F.R. § 17.11(b), this order
becomes final and binding upon both parties after 30 days of the date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge