Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Decision No. CR1741
Centers for Medicare &
Medicaid Services.

In the Case of: )
)

Edgemont Healthcare, ) Date: February 25, 2008
(CCN: 18-5389), )
)
Petitioner, )
)

-V.- ) Docket No. C-07-306

)
)
)
)

DECISION

sustain the determination of the Centers for Medicare & Medicaid Services (CMS) to
impose remedies against Petitioner, Edgemont Healthcare. The remedies that I sustain
include civil money penalties in daily amounts of $4,050 for each day of a period that
gan on November 14, 2006 and ran through January 15, 2007. Additionally, I sustain
civil money penalties against Petitioner in amounts of $250 for each day of a period that
gan on January 16, 2007 and which ran through February 1, 2007.

I. Background

Petitioner is a skilled nursing facility that is located in Cynthiana, Kentucky. It
participates in the Medicare program. Its participation in Medicare is governed by
sections 1819 and 1866 of the Social Security Act (Act) and by implementing regulations
at 42 C.F.R. Parts 483 and 488.

Petitioner was surveyed for compliance with Medicare participation requirements on
January 12, 2007 (January 12 survey). The surveyors and, subsequently CMS, found that
Petitioner failed to comply with several participation requirements. Allegedly, its
noncompliance with some of these requirements was so egregious as to pose immediate

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jeopardy for residents of Petitioner’s facility. “Immediate jeopardy” is defined in
regulations to mean a facility’s noncompliance with one or more participation
requirements that has caused or is likely to cause serious injury, harm, impairment, or
death to a resident. 42 C.F.R. § 488.301.

The surveyors and CMS determined that immediate jeopardy level noncompliance began
on November 14, 2006. On January 30, 2007, the surveyors made a followup visit at
which they determined that immediate jeopardy was abated on January 16, 2007. The
surveyors and CMS subsequently determined that Petitioner attained full compliance with
participation requirements effective February 2, 2007.

Based on these findings of noncompliance and duration, CMS determined to impose
remedies against Petitioner consisting of the civil money penalties that I cite in the
opening paragraph of this decision. Petitioner requested a hearing in order to challenge
these remedy determinations and the case was assigned to me for a hearing and a
decision.

I scheduled a hearing in Lexington, Kentucky. Shortly prior to the hearing the parties
advised me that they had agreed that the case could be heard and decided without an in-
person hearing and on the basis of their written exchanges. These exchanges included
proposed exhibits which, among other things, contained the written direct testimony of
the parties’ witnesses. Based on the parties’ representations, I cancelled the hearing and
ordered the parties to submit final briefs. The parties then submitted briefs.

CMS’s written exchange included proposed exhibits which it designated as CMS Ex. | -
CMS Ex. 55. Petitioner’s exchange included proposed exhibits which it designated as P.
Ex. | - P. Ex. 45. Neither party filed objections to my receiving any of the proposed
exhibits into evidence. Therefore, I receive into evidence all of the parties’ exhibits.
II. Issues, findings of fact and conclusions of law

A. Issues

The issues in this case are whether:

1. Petitioner failed to comply with one or more Medicare participation
requirements;

2. CMS’s determination that Petitioner’s noncompliance included instances
of immediate jeopardy is clearly erroneous; and
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3. 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. I discuss each Finding in
detail.

1. Petitioner failed to comply with Medicare participation requirements.

CMS’s allegations of noncompliance in this case focus on the care that Petitioner gave to
two of its residents who are identified as Resident # 14 and Resident # 5 in the January 12
survey report.' The report alleges that, in providing care to these residents, Petitioner
failed to comply with several distinct participation requirements. Five of these alleged
episodes of noncompliance are argued to be at the immediate jeopardy level.

All of CMS’s noncompliance allegations that I address in this decision emanate from the
way in which Petitioner and its staff addressed residents’ risk of developing pressure
sores. I take notice that pressure sores have long been identified as a major problem
confronting skilled nursing facilities. Residents who are elderly, who are very ill,
debilitated, and often demented, are at high risk for developing pressure sores because of
their lack of mobility and their deteriorated physical conditions. A pressure sore may
greatly diminish a resident’s quality of life and may even be lethal. Pressure sores may
develop very quickly in a debilitated and immobile resident. Once a sore develops it may
be extremely difficult to treat, and, in some cases, may lead to life threatening infection.

Regulations governing nursing facilities’ participation in Medicare specifically address a
facility’s obligation to anticipate and treat pressure sores. A facility is required, based on
its comprehensive assessment of a resident, to assure that: a resident who enters a facility
without pressure sores does not develop one unless development of a sore is unavoidable;
and that a resident having pressure sores receives necessary treatment and services to
promote healing, prevent infection, and prevent new sores from developing. 42 C.F.R. §
483.25(c).

' Specific allegations concerning the care that Petitioner gave to Resident # 5 are
addressed in only one of the five alleged immediate jeopardy level deficiencies cited by
CMS. That is Petitioner’s alleged failure to comply with the requirements of 42 C.F.R. §
483.25(c). CMS makes additional allegations of non-immediate jeopardy level
deficiencies that involve Petitioner’s care of Resident # 5 and relating to Petitioner’s
alleged failure to comply with the requirements of 42 C.F.R. § 483.10(b)(11), and 42
C.F.R. § 483.20(b)(1).
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There are also regulations that indirectly address a facility’s duty to prevent and to treat
pressure sores. For example, 42 C.F.R. § 483.20(k)(3)(i) requires that the care provided
by a facility must satisfy professional standards of quality. Implicitly, this regulation
requires a facility to assess a resident for the possibility of developing pressure sores and
to provide that resident with appropriate care sufficient to prevent the development of
avoidable sores.

A facility may not defend itself against evidence that it failed to do what was required to
prevent and/or treat a pressure sore on ground that a resident would have developed a sore
regardless of the efforts undertaken to protect that resident. The regulations impose the
identical duty of care on a facility with respect to every resident. They require a facility
to assume that no pressure sore is inevitable or unavoidable. A facility must do its utmost
to assure that none of its residents develops a sore. Inevitability may be a defense in the
circumstance where a facility takes all reasonable measures to protect a resident and the
resident develops a sore in spite of those measures. But, it is never a defense where a
facility has failed to discharge its regulatory obligations.

The essence of CMS’s allegations about the care that Petitioner gave to Residents #s 14
and 5 is that Petitioner’s staff failed to take all steps that were reasonable and necessary to
protect these residents against developing pressure sores. These allegations are restated
somewhat differently as they pertain to the various regulations with which Petitioner is
alleged to be deficient. But, at bottom, CMS’s case against Petitioner focuses on the
preventive care that it believes to have been required and that Petitioner allegedly failed
to provide to these residents.”

I sustain CMS’s allegations as they pertain to two immediate jeopardy level deficiencies,
Petitioner’s failure to comply with the pressure sore prevention requirements of 42 C.F.R.
§ 483.25 and, Petitioner’s failure to comply with quality of care requirements of 42
C.F.R. § 483.20(k)(3)(i). I find it unnecessary that I address Petitioner’s other alleged
deficiencies. The assertions of noncompliance relating to other alleged deficiencies all
emanate from the allegations that Petitioner failed to protect residents against developing
pressure sores that I address in this decision. Finding Petitioner to be noncompliant with
a series of derivative deficiencies does not add anything significant to my conclusion that
Petitioner failed, at an immediate jeopardy level of noncompliance, to provide reasonable
and necessary care to its residents.

> As I note above, at footnote 1, some of the immediate jeopardy deficiency
allegations other than the specific allegation that Petitioner failed to comply with the
pressure sore regulation, 42 C.F.R. § 483.25(c), relate only to the care that Petitioner gave
to Resident # 14.
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My analysis in this decision focuses first on the care that Petitioner gave to Resident # 14
because it is with this resident that Petitioner manifested its principal failure to comply
with participation requirements. The evidence establishes conclusively that Petitioner
and its staff failed to take measures in order to protect the resident against developing
pressure sores when faced with a dilemma as to how to provide care that reconciled a
physician’s order with the resident’s evident and enhanced risk of developing sores. As
for Resident # 5, the evidence shows that Petitioner’s staff failed to anticipate and to
address a problem that could lead to the resident developing a pressure sore.

a. Petitioner failed to comply substantially with the requirement in
42 C.F.R. § 483.25(c) that it protect its residents against the
development of pressure sores.

i. Petitioner failed to protect Resident # 14 against the
development of pressure sores.

Resident # 14 was a long-term resident of Petitioner’s facility. She had numerous
debilitating physical problems including cancer, peripheral vascular disease, degenerative
arthritis, chronic obstructive pulmonary disease, end stage congestive heart failure, and
nutritional deficits as a consequence of failure to thrive. P. Ex. 40, at 2; CMS Ex. 28, at
63. The resident also had psychiatric problems. Jd. In April 2006, the resident suffered a
fracture to her right femur that required surgery and the placement of a rod in her right
leg. In October 2006, she suffered a fall resulting in severe additional fractures in her leg.
CMS Ex. 28, at 258; P. Ex 35, at 2. Petitioner’s staff recognized that the resident’s
condition put her at a high risk for developing pressure sores and the staff expressed that
concern in the resident’s care plan. CMS Ex. 28, at 36. The staff was instructed to
perform weekly skin assessments as well as to monitor the resident’s skin condition
during every nursing shift. Id.

The resident was hospitalized to treat the fractures that she suffered in October 2006. The
hospital physician decided that her condition precluded surgery. He decided to treat her
fractures by applying an immobilizer to her leg. An immobilizer is a device that serves
the same function as a plaster cast. It holds a fractured extremity in position while
healing takes place. The immobilizer is held in place by a set of velcro straps that can be
loosened or opened. Thus, unlike a plaster cast an immobilizer may be removed
temporarily.

Resident # 14 was discharged from the hospital to Petitioner’s facility with the
immobilizer attached to her leg. The transfer document from the hospital included the
following physician’s order :
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“Knee immobilizer to . . . [right] knee at all times.”
P. Ex. 32, at 5

The immobilizer was removed on November 6, 2006 for purposes of performing an x-ray
of the resident’s leg. At that time no skin breakdown was observed. Other than on that
occasion, the immobilizer was not removed prior to November 14, 2006. With the
exception of November 6, 2006, Petitioner’s staff did not at any time check the condition
of the skin under the immobilizer. The staff limited its skin checks of the resident’s leg to
looking at the skin that remained exposed and checking around the edges of the
immobilizer. On November 14, 2006, an orthopedic physician removed the immobilizer
while examining the resident’s leg and discovered a Stage IV pressure sore over the
resident’s Achilles tendon and above her right ankle. I take notice that a Stage IV
pressure sore is an extremely severe wound. In Resident # 14’s case, the sore was so
deep that it exposed underlying structures in the resident’s leg.

CMS contends that Petitioner’s staff should have removed the immobilizer periodically in
order to check the condition of the resident’s skin. Their failure to do so, according to
CMS, led to the resident developing a Stage IV sore. CMS avers further that, if the staff
perceived any conflict between their duty to check the resident’s skin and the hospital
physician’s order concerning removal of the immobilizer, it was their duty to resolve that
conflict so as to protect the resident.

CMS avers that the hospital transfer order did not preclude Petitioner’s staff from
removing the immobilizer periodically and checking the resident’s skin. As support for
its interpretation of the order, CMS notes that the physician who signed it stated in a
January 16, 2007 letter in which he discussed the care that he provided to Resident # 14
that:

Clearly, the immobilizer could be removed for bathing and skin care.

CMS Ex. 28, at 23. CMS contends also that Petitioner’s medical director, who had
ordered that the resident’s skin be assessed weekly for possible pressure sores,
acknowledged that the immobilizer could be removed to check the resident’s skin, citing
a January 10, 2007 statement by him that: “the beauty of Velcro [is that] you can take it
off to bathe or do skin assessments.” CMS Ex. 9, at 13.

> The order is undated. However, the resident was readmitted to Petitioner’s
facility from the hospital on November 3, 2006 so I find that the order concerning the
immobilizer was written on or about that date. CMS Ex. 28, at 110.
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CMS argues additionally that if the order was read by Petitioner’s staff to preclude
removal of the immobilizer under any circumstance that interpretation conflicted with the
staff’s assessment of the resident as being at high risk for developing pressure sores and
with its own care plan that required the staff to perform skin assessments of the resident
weekly. It argues that it was incumbent on Petitioner’s staff to resolve that conflict if it
interpreted the order as precluding skin checks.

Petitioner asserts that the order literally meant that the immobilizer should not be
removed under any circumstance. As support for this argument it offers a declaration
from the physician who applied the immobilizer in which he qualifies his January 16,
2007 letter by averring that his comments in that letter are general comments which do
not represent the order that he gave concerning Resident # 14. P. Ex. 32, at 1. It also
offers a declaration by its medical director who, in contrast to the statement he gave on
January 10, 2007, asserts:

I did not consider my order to conduct weekly skin assessments for
Resident 14 which is facility protocol for all residents to be in conflict with
a more specific order from the orthopedic physician to leave the
immobilizer on at all times because the weekly skin assessment should be
done to the remainder of the body.

P. Ex. 33, at 2.

Petitioner also contends that, in fact, there was no conflict between the asserted
requirement that the immobilizer not be removed and its own determination that the
resident’s skin needed to be checked weekly. According to Petitioner, “between
November 3 and November 14, 2006 it is obvious that the applicable intervention
required staff to check around the edges instead of under the immobilizer.” Petitioner’s
final brief at 15 (emphasis in original). Its argument, essentially, is that the staff
reasonably concluded that the immobilizer should not be removed and determined that the
best practice would be to check only under the edges of the immobilizer for possible skin
breakdown. Thus, according to Petitioner’s medical director:

I do not think any obligation on the nursing staff arose to seek any
clarification of these two orders, as they were both consistent with the other.

P. Ex. 33, at 2-3.

According to Petitioner, the determination by its staff that it could avoid conflict with the
order concerning use of the immobilizer by checking only around the edges of the device
was not only a reasonable reconciliation of the hospital physician’s order and its own
assessment and care plan for the resident but was, in fact, consistent with prevailing
standards of medical care. As support for this contention Petitioner offers the testimony
of an expert orthopedic physician. P. Ex. 35. He asserts that, in the case of Resident

# 14, the immobilizer was intended to remain in place and not be removed by Petitioner’s
staff, “as such removal could have aggravated the patient’s pain and suffering and
exposed the patient to an increased risk of serious complications, including further
displacement of the bone fragments.” Jd., at 2. He avers further that he would not have
wanted Petitioner’s staff to remove the immobilizer to assess the resident’s skin
underneath because of the possibility that the resident might experience complications.
Id., at 3.

Iam not persuaded from the evidence offered by Petitioner that the physician who
ordered the immobilizer for Resident # 14 envisioned an absolute prohibition against
removing the device while the resident was at Petitioner’s facility. That physician’s
recent attempt to explain away his previous assertion that the immobilizer could be
removed for bathing and skin care is, on its face, not credible. And, indeed, the
immobilizer was removed on one occasion between November 3 and November 14, 2006
— on November 6, 2006 — when the resident’s leg was x-rayed. I find, therefore, that the
physician’s order that the immobilizer be left on the resident’s leg at all times did not
preclude the staff from removing it, if only momentarily, to check on the condition of the
resident’s skin.

But, Petitioner would not have been excused from its failure to do more for Resident # 14
even if the physician who applied the immobilizer had in fact ordered that the device not
be removed under any circumstances. Petitioner’s staff knew that Resident # 14 was at
high risk for developing pressure sores even before she sustained the fracture for which
she was prescribed the immobilizer. Moreover, it knew or should have known that, while
the resident wore the immobilizer, she was at a greatly increased risk for development of
pressure sores on the skin that was under the device. Indeed, Petitioner’s own expert
orthopedist concluded:

I do not find it surprising that . . . [a pressure sore] would occur in. . . [the]
area [under the immobilizer] since the risk of such pressure from the use of
an immobilizer is common, and I have seen such ulcers arise even where
immobilizers are removed regularly for skin assessments.

P. Ex. 35, at 3 (emphasis added). The heightened risks to Resident # 14 made it
incumbent on Petitioner’s staff to assess the resident’s risk for pressure sores on the area
beneath the immobilizer and to discuss with the resident’s physicians the best way to
address those risks. At the least, Petitioner’s staff should have identified the increased
risk to the resident and discussed it with the resident’s treating physicians. It should have
asked for advice as to what measures it could have taken in order to minimize the
resident’s risk of developing a sore.
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It is possible that such assessment and consultation might have led to a conclusion that
removing the immobilizer to check the resident’s skin posed greater risks to the resident
than leaving the immobilizer on at all times. And, it is also within the realm of reasonable
possibility that the resident might have developed a pressure sore in spite of the staff’s
best efforts at protecting her.* But, those possibilities do not excuse Petitioner’s staff
from failing to anticipate the risks to the resident and failing to attempt to develop
effective preventive measures. The staff’s failure to take action to protect the resident —
to assess and consult concerning the resident’s condition — is not excused in this case by
the possibility that her pressure sore was the inevitable result of the fractured leg and the
use of an immobilizer to stabilize that leg.

The Act and implementing regulations do not envision that a nursing facility will serve as
a passive residence for those beneficiaries whom it serves. The guiding spirit of the Act
and regulations is that a facility’s nursing staff play an active role in providing care to
residents. Where there is an obvious likelihood — as there was here — that a physician’s
order might cause collateral problems for a resident it is the staff’s duty to assess the
increased risks, to consult about them, and to do its best to plan the resident’s care
accordingly. Resident # 14’s circumstances mandated that Petitioner’s staff do more than
passively accept the possibility that she might develop a pressure sore under the
immobilizer. The staff had a duty to ask questions, to assess, and to consult. It failed to
exercise that duty with respect to Resident # 14.

Petitioner argues that the fact that the resident’s skin was checked on November 6, 2006
when the immobilizer was removed so that the resident’s leg could be x-rayed served as a
“weekly” skin check of the resident. Thus, according to Petitioner, it literally complied
with the care plan for Resident # 14 which called for weekly skin checks.

am not persuaded that Petitioner fulfilled its duty to the resident by checking her skin on
the 6” of November but not thereafter. The resident’s risk of development of a severe
pressure sore was such that even weekly checks of her skin may have been inadequate to
fully protect her. P. Ex. 35, at 3. Petitioner’s staff should have known that and should
ave factored that possibility into its investigation of how best to protect the resident.

But, clearly, it failed to do so.

* The parties argue whether Petitioner’s care caused Resident # 14 to develop the
sore on her leg. It is unnecessary that I decide whether the sore was caused by deficient
care even as it is unnecessary that I decide whether the sore in this case was inevitable.
What is at issue here is Petitioner’s failure to take all necessary protective actions and not
the end consequences of those failures. Similarly, I make no findings as to whether the
pressure sore developed by Resident # 14 ultimately led to her death (she died about one
month after the sore was first discovered).
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ii. Petitioner failed to protect Resident # 5 against the
development of pressure sores.

Resident # 5 was an individual who Petitioner’s staff knew to be at extremely high risk
for developing pressure sores. When he began his residence at Petitioner’s facility in
September 2006, the resident was afflicted with multiple pressure sores. P. Ex. 36, at 1;
CMS Ex. 21, at 10. The staff assessed the resident to be at high risk for pressure sores on
is admission to the facility and it was instructed that “any reddened area will be
identified and treatment initiated.” P. Ex. 2, at 8; CMS Ex. 21, at 31.

The resident’s several medical problems included a diagnosis of sleep apnea. The
treatment prescribed to the resident for that condition included his wearing a Continuous
Positive Airway Pressure (C-PAP) mask. P. Ex. 36, at2. The mask was affixed to the
resident’s head and face by means of adjustable straps. Petitioner’s staff was aware that
the mask’s pressure against the resident’s skin potentially could cause skin breakdown.
nformational material provided to Petitioner by the supplier of the C-PAP mask warned
against the possibility of skin irritation being caused by the mask or by its straps. CMS
Ex. 9, at 16.

CMS’s finding of noncompliance concerning the care Petitioner’s staff gave to Resident
#5 is based on the foregoing information plus information obtained by surveyors during
the January 12 survey. On January 8, 2007 a surveyor observed an area of redness and a
scab on the bridge of Resident # 5’s nose. CMS Ex. 9, at 14. On January 11 a surveyor
interviewed the resident. He told the surveyor that the C-PAP mask was ill-fitting and
that it had caused the sore on his nose. He stated further that the sore had been present for
a week or two, that he had reported the sore to Petitioner’s staff, that the staff was
supposed to be obtaining a better fitting mask, but had not done so as of yet. Jd.

A surveyor also interviewed one of the registered nurses on Petitioner’s staff. The nurse
told the surveyor that, on January 9, 2007 she had observed a sore on the resident’s nose
which, evidently, had been present for several days. However, she had not documented
the sore nor had she reported it to the resident’s physician or to Petitioner’s wound nurse.
CMS Ex. 9, at 15. The nurse averred that she had not been provided educational
information or in-service training by Petitioner on the issue of how to care for a resident
who wears a C-PAP mask. /d. Other members of Petitioner’s staff, including a day shift
nurse and Petitioner’s respiratory therapists also stated during interviews that they had not
been provided training concerning caring for a resident who wears a C-PAP mask. /d., at
15 - 16.

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The surveyors also interviewed the nurse responsible for preparing initial assessments of
residents. She acknowledged that she had failed to assess Resident # 5 for the risk of
pressure sore development associated with wearing a C-PAP mask. She acknowledged to
the surveyors that failing to develop a care plan to address the possible risks was an
oversight by Petitioner’s staff. CMS Ex. 9, at 16 - 17.

The interviews are in some respect confirmed by Resident # 5’s treatment record. There
is nothing in the record prior to the January 12 survey identifying the wound on the
resident’s nose. Nor is there documentation showing that specific treatment was being
provided for that injury. Finally, there is nothing in the record establishing that
interventions were developed to prevent further problems resulting from the resident’s
use of the C-PAP mask. CMS Ex. 9, at 17.

The evidence offered by CMS is strong prima facie support for the conclusion that
Petitioner and its staff failed to anticipate and to plan for, as well as react to, the problems
that Resident # 5 faced as a consequence of wearing a C-PAP mask. It shows that
Petitioner knew that the resident was at great risk for developing pressure sores. It shows
also that Petitioner knew, or should have known, that a C-PAP mask can cause skin
problems for the individual who wears it. But, notwithstanding that, the evidence offered
by CMS shows that the resident was not specifically assessed for the possibility that his
use of a C-PAP mask might cause skin problems. Nor were specific interventions
designed to protect him against skin breakdown caused by his use of the mask. When
problems became evident the staff failed to record them, assess them, and plan care
specifically to address them.

Petitioner has not responded to evidence offered by CMS showing a failure by its staff to
document the abrasion to the resident’s nose, to specifically assess it, and to develop a
care plan for dealing with it. Its primary argument in opposition to CMS’s case appears
to be that CMS has offered no evidence to prove that the injury suffered by Resident # 5
from wearing the C-PAP mask was avoidable. It asserts that: “[t]he fact that a small
scabbed, non-open abrasion developed with respect to the utilization of a required piece
of equipment does not support a conclusion of avoidability.” Petitioner’s final brief at 35.

Whether or not the injury suffered by Resident # 5 was avoidable is not a valid defense to
evidence showing that Petitioner failed to assess the resident for possible problems related
to using the C-PAP mask nor is it a defense to Petitioner’s staff’s failure to document the
injury once it occurred or to assess it. As I discuss above, asserting that an injury is
unavoidable is never a valid defense to evidence showing that a facility failed to take all
reasonable measures to prevent the development of a pressure sore.
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Petitioner also argues that, once the sore was identified, its staff took appropriate
measures to treat it. Petitioner’s final brief at 35. It is unnecessary that I decide whether
Petitioner appropriately treated the sore once it was identified because the issue here is
not whether it was ultimately treated appropriately but whether Petitioner’s staff took all
reasonable measures to prevent the injury from developing.

In an apparent response to CMS’s evidence showing that Petitioner’s staff received no
specific training in protecting residents against problems that might result from the use of
a C-PAP mask Petitioner contends that its staff was familiar with the risks associated with
the use of C-PAP masks and was trained to monitor all potential sources for pressure in
providing care for residents at high risk for skin breakdown. Petitioner’s final brief at 19,
citing P. Ex. 37, at 4 - 5; P. Ex. 38, at 5. However, the evidence cited by Petitioner avoids
addressing CMS’s specific allegations. What is at issue here is not whether the staff
received training on skin issues generally. The issue is whether the staff was trained
explicitly about using a device that posed a known hazard to a resident who was
vulnerable to the development of pressure ulcers. Nothing offered by Petitioner rebuts
evidence showing that the staff did not receive specific training in the risks of using a C-
PAP mask.

Nor has Petitioner rebutted evidence showing that Petitioner failed to assess Resident # 5
specifically for the risks caused by his use of the mask. Petitioner argues that its staff
assessed the resident generally for risks of pressure sores and that there was no need for it
to specifically assess the resident for risks caused by use of the C-PAP mask. I disagree.
The mask’s distributor had issued a specific warning that the mask posed a hazard of skin
abrasions to those who wore it. That put Petitioner and its staff on notice of a problem
that transcended the general issue of the resident’s vulnerability to skin problems. The
staff should have identified the problem in the case of Resident # 5 and should have
planned specifically for it.

b. Petitioner failed to comply substantially with the requirement of
42 C.F.R. § 483.20(k)(3)(i) that it provide care to its residents that
met professional standards of quality.

CMS’s assertion that Petitioner failed to comply with the professional standards of quality
requirement rests largely on the facts that I have described above as they pertain to
Resident # 14. CMS argues that professional standards of quality required Petitioner to
be diligent in assessing the condition of the resident’s skin. It avers that Petitioner’s staff
should have been especially alert to the likelihood that the resident would develop a
pressure sore given her greatly debilitated state and the risks that were associated with her
wearing an immoblizer. Yet, according to CMS, Petitioner did nothing to abate a
situation that posed a grave danger to the resident.
13

I find CMS’s argument to be persuasive when considered in light of the evidence that I
discuss at Part la. of this Finding. Petitioner’s own expert acknowledged the hazards
posed to Resident # 14 as a consequence of her wearing the immobilizer. P. Ex. 35, at 3.
The overwhelming evidence in this case is that Petitioner’s staff reacted passively to
those hazards.

As I discuss above, it is possible that nothing Petitioner’s staff could have done would
have ameliorated the risk to Resident # 14 that was caused by her overall condition and
the use of the immobilizer. And, it is certainly possible that the resident’s physicians, had
they been consulted, would have concluded that the risk resulting to the resident from
removing the immobilizer for frequent skin checks outweighed any benefit that might
have resulted from more regular monitoring of her skin condition. But, those possibilities
did not excuse Petitioner from at least considering whether more could be done to protect
Resident # 14 nor from exploring all possible treatment approaches in order to find a way
to better protect her. Its failure to do so was a violation of professional standards of
quality incorporated into the regulations.

Petitioner argues that CMS failed to identify specifically the professionally recognized
standard of quality that Petitioner allegedly contravened. I disagree. The standards of
quality to which a facility is required to adhere by 42 C.F.R. § 483.20(k)(3)(i) may be
standards that are recognized generally in the nursing profession and unstated in the
governing regulations. But, they also include those standards stated explicitly in the
regulations. Here, the applicable standard of quality is stated at 42 C.F.R. § 483.25(c). A
facility must take all reasonable measures to protect a resident against developing a
pressure sore.

Petitioner argues also that CMS’s case against it “boils down to the allegation that the
facility failed to follow Resident 14’s physician’s order for skin assessments by removing
the resident’s immobilizer.” Petitioner’s final brief at 22. As I discuss above, I conclude
that the hospital physician’s order that the immobilizer be left on at all times was not
intended to be read literally by nursing personnel. The order gave the staff leeway to
remove the immobilizer briefly to perform skin checks. But, if the order was meant to be
applied literally that set up a conflict between what was ordered at the hospital and the
staff’s knowledge of and concerns for the resident. Petitioner’s staff was under a duty to
resolve that conflict.

Petitioner also relies heavily on physicians who now contend that checking around the
edges of the immobilizer rather than removing the immobilizer to perform skin checks
was adequate protection of the resident given the need to maintain stability in her
fractured leg. Petitioner’s final brief at 23 - 24. I do not take issue with these physicians’
assessments of what was appropriate. But, I do take issue with the argument that the
hospital physician’s order was license for Petitioner’s staff to react passively in the face
14

of the risks to Resident # 14 of which they were certainly aware. The staff’s duty in this
case was to raise questions as to whether they were providing adequate care to the
resident by not checking under the immobilizer. They had an obligation to at least
explore the possibility that checking around the edges of the immobilizer was inadequate
care. Their passivity is made evident by the lack of any assessment in the resident’s
record prior to the January 12 survey showing that the staff conducted an inquiry into the
risks posed to the resident or considered alternatives that might better protect her. At the
least, the staff could have queried the residents’ physicians about the care that had been
prescribed.

2. Petitioner did not prove to be clearly erroneous CMS’s determination
that Petitioner’s failure to comply with the requirements of 42 C.F.R. §§
483.25(c) and 483.20(k)(3)(i) was so egregious as to comprise immediate
jeopardy.

There is convincing evidence in this case that Petitioner’s failure to take measures to
protect Residents #s 5 and 14 from developing pressure sores and its failure to provide
care that met professional standards of quality comprised immediate jeopardy for
Petitioner’s residents. As Petitioner’s own expert notes, there was a very high risk that
Resident # 14 would develop a pressure sore as a consequence of wearing an
immobilizer. The entity that distributed the C-PAP mask worn by Resident # 5 warned
that the mask could cause skin problems. Petitioner’s staff was aware of these risks.
Given that, their failure to act aggressively to take every reasonable measure to protect
the residents put these residents at a very heightened probability of serious injury, harm,
or death.

Petitioner offered no persuasive evidence to show that CMS’s determination of immediate
jeopardy was clearly erroneous. Petitioner has argued that the sores experienced by
Residents #s 14 and 5 were inevitable but, as I discuss above, the possibility that sores
were unavoidable gave Petitioner no excuse for failing to discharge its responsibilities.
Petitioner also argues that there is no solid evidence that heightened vigilance on the part
of its staff would actually have prevented Residents #s 14 and 5 from developing sores.
Speculation from the vantage point of hindsight as to whether the sores would or would
not have been prevented by increased vigilance is pointless. What is clear is that each of
these residents were at a greatly increased risk for developing pressure sores and
Petitioner’s staff failed to address those risks.

15

3. Civil money penalties of $4,050 per day for each day of the period of
immediate jeopardy are reasonable.

The period of immediate jeopardy determined by CMS in this case — and supported by the
evidence — encompasses the period between November 14, 2006, the date when Resident
# 14 was discovered to have developed a Stage IV sore under her immobilizer, and
January 15, 2007, the last date prior to Petitioner’s implementation of corrective actions
to abate immediate jeopardy.

Petitioner argues that, if there was immediate jeopardy, it ended on November 14, 2006,
the date when the pressure sore was discovered on Resident # 14’s extremity. It reasons
that the facility implemented appropriate care for this resident on that date thereby
removing any risk that the resident would suffer additional harm. However, the
immediate jeopardy in this case — while it certainly is evidenced by the deficiencies in
care that Petitioner provided to Residents #s 5 and 14 — is not confined to the very limited
circumstances in which Petitioner provided care to the two residents. The evidence
shows that Petitioner’s staff failed to recognize its obligations and to discharge them
properly. That is a general problem of staff training, education and performance,
evidenced to be sure by deficient conduct in caring for two residents, but not limited only
to the care that these residents received. Petitioner eliminated the immediate jeopardy
only when it implemented numerous corrective actions. These were not completed until
January 16, 2007. CMS Ex. 10.

Regulations provide for civil money penalties within a range of between $3,050 and
$10,000 per day as remedies for an immediate jeopardy level deficiency. 42 C.F.R. §
488.438(a)(1)(i). The regulations also provide criteria for deciding where within this
range an immediate jeopardy level penalty amount should fall. 42 C.F.R. §§
488.438(f)(1) - (4); 488.404 (incorporated by reference into 42 C.F.R. § 488.438(f)(3)).
These criteria include: the seriousness of deficiencies; a facility’s compliance history; its
culpability; and its financial condition.

The daily civil money penalty amount of $4,050 that CMS determined to impose is
relatively modest in that it is at the low end of the immediate jeopardy range. CMS
asserts that the penalty amount reflects the seriousness of Petitioner’s noncompliance and
its culpability. It has offered no evidence concerning Petitioner’s prior compliance
history. Petitioner disputes CMS’s assertions as to seriousness and culpability and
argues, additionally, that its financial condition should merit a reduction in penalty
amounts.
16

I find that the penalty amount of $4,050 per day is justified by the seriousness of
Petitioner’s noncompliance. As I discuss at the beginning of Finding 1, the problem of
pressure sores is among the most pernicious that a nursing facility must deal with. And,
the development of a pressure sore is, potentially, one of the most devastating events that
can occur to a resident. In view of that there is an extremely heavy burden on a facility to
assure that it leaves no stone unturned to protect its residents from developing pressure
sores. Petitioner clearly failed to satisfy its obligations here. Petitioner and its staff were
passive in the face of evidence that two of its residents were at greatly heightened risk for
developing pressure sores. That passivity put these residents in jeopardy.

As concerns Petitioner’s financial condition I conclude that it has not established that
civil money penalties of $4,050 per day would jeopardize its ability to provide nursing
care consistent with regulatory requirements.° Petitioner asserts that it is not part of a
chain of nursing facilities, that it operated at a loss last year, and that the penalty amounts
that CMS determined to impose against it would constitute an undue hardship. But,
Petitioner has not offered hard evidence to support these contentions. Thus, although it
has asserted that a daily penalty amount of $4,050 will adversely affect its ability to
provide care it has not offered any detailed evidence of its actual financial condition.

Petitioner asserts that it qualifies for a hardship exemption from the Kentucky State
Medicaid program’s annual delay in Medicaid funding as is experienced by Medicaid
certified facilities. Petitioner’s final brief at 44. It argues that I should reduce the civil
money penalty amount in light of the financial hardship acknowledged by the State of
Kentucky. I find this contention to be unpersuasive because Petitioner has not provided
me with evidence that explains how this asserted waiver came to be granted.

4. Civil money penalties of $250 for each day of the period beginning
January 16 and ending February 1, 2007 are reasonable.

CMS determined that, although Petitioner had abated its immediate jeopardy level
noncompliance by January 16, 2007, it remained noncompliant albeit at a reduced level
until February 1, 2007. It determined to impose civil money penalties of $250 per day for
each day of this period of non-immediate jeopardy level noncompliance.

* The regulations grant me no authority to adjust a civil money penalty downward
below the regulatory minimum level based on a facility’s financial condition. The
minimum daily civil money penalty amount that I may impose for Petitioner’s immediate
jeopardy level noncompliance is $3,050, irrespective of its financial condition. 42 C.F.R.
§ 488.438(a), (f); see 42 C.F.R. § 488.438(e). Nor do I have authority to adjust a total
civil money penalty amount that accrues over a period of noncompliance so that the
average daily penalty is below the regulatory minimum.
17

Before determining whether this penalty amount is reasonable I must resolve the
threshold issue of whether Petitioner’s noncompliance with participation requirements
persisted after January 16. Petitioner submitted a detailed plan of correction addressing
the immediate jeopardy level and other deficiencies that were identified at the January 12
survey. CMS Ex. 10. But, according to CMS, not all of the elements of Petitioner’s
corrective action plan were implemented as of January 16. CMS’s final brief at 22.

A finding of noncompliance creates a presumption of continuing noncompliance until the
noncompliant facility proves that it has met all requirements of participation. The burden
rests entirely on a facility to prove that it attained compliance at a date earlier than is
determined by CMS.

Petitioner has offered neither argument nor evidence — besides its assertion, which I have
found to be without merit that it abated immediate jeopardy by November 14, 2006 —
showing that it attained full compliance with participation requirements at a date prior to
February 1, 2007. Consequently, I sustain CMS’s determination as to the date when
Petitioner attained full compliance with participation requirements.

The range of permissible civil money penalty amounts to remedy deficiencies that are not
at the immediate jeopardy level is from $50 - $3,000 per day. 42 C.F.R. §
488.438(a)(1)(ii). The same regulatory criteria that apply to deciding where a penalty
amount should fall within the non-immediate jeopardy range apply to determining
reasonable immediate jeopardy amounts. 42 C.F.R. §§ 488.438(f)(1) - (4); 488.404
(incorporated by reference into 42 C.F.R. § 488.438(f)(3)). CMS contends that the
penalty amounts of $250 per day are reasonable inasmuch as they are based on
deficiencies that were quite serious when at the immediate jeopardy level and also
because they are set at less than 10 percent of the maximum non-immediate jeopardy
penalty amount.

I sustain CMS’s determination to impose penalties of $250 per day. The penalty amount
is actually extremely modest given the underlying noncompliance. Petitioner has offered
neither evidence nor argument to show that this amount is unreasonable.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
Theresa Seawright, ) Date: February 25, 2008
)
Petitioner, )
) Docket No. C-08-26
-Vv.- ) Decision No. CR1740
)
The Inspector General. )
)
DECISION

I sustain the determination of the Inspector General (I.G.) to exclude Petitioner, Theresa
Seawright, from participating in Medicare and other federally funded health care
programs for a period of at least five years. The exclusion in this case is mandated by
Petitioner’s conviction of a criminal offense as is described at section 1128(a)(1) of the
Social Security Act (Act).

I. Background

On September 28, 2007 the LG. notified Petitioner that she was being excluded from
Medicare and other federally funded health care programs for a minimum of five years
because she had been convicted of a criminal offense related to the delivery of an item or
service under a State Medicaid program. Petitioner requested a hearing in order to
challenge the I.G.’s determination and the case was assigned to me for a hearing and a
decision.

I held a pre-hearing conference by telephone at which I directed the parties to file briefs
and exhibits addressing their respective positions. Additionally, I informed the parties
that either of them had a right to request an in-person hearing. The I.G. timely submitted
a brief and three proposed exhibits which he identified as I.G. Exhibit (I.G. Ex.) 1, LG.
Ex. 2, and I.G. Ex. 3. Petitioner failed to file a brief or exhibits. Neither party filed a
request for an in-person hearing.
2

I sent an order to show cause to Petitioner directing her either to file her brief and
proposed exhibits or to explain her failure to do so. Petitioner did not respond to the
order to show cause. I have considered dismissing Petitioner’s hearing request in light of
her failure to file a brief, exhibits, or a response to my order to show cause. I have
decided, however, to resolve the merits of this case in light of the I.G.’s evidentiary
presentation. In doing so I address the arguments that Petitioner made in her hearing
request, which I am designating as Petitioner Exhibit (P. Ex.) 1. I receive into evidence
IG. Ex. 1, 1.G. Ex. 2, LG. Ex. 3, and P. Ex. 1.

II. Issue, findings of fact and conclusions of law
A. Issue

The issue in this case is whether the I.G. is required to exclude Petitioner from
participating in Medicare and other federally funded health care programs for a period of
at least five years.

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 each Finding in
detail.

1. Petitioner was convicted of a criminal offense as is described at section
1128(a)(1) of the Act.

Section 1128(a)(1) mandates the exclusion of any individual who is convicted of a
criminal offense related to the delivery of an item or service under Medicare or a State
Medicaid program. The unrebutted evidence offered by the I.G. proves that Petitioner
was convicted of such an offense.

Petitioner practiced as a nurse who worked as an independent provider for the Ohio
Medicaid program. On February 28, 2007 she entered a plea of guilty in an Ohio State
court to a single count of an indictment charging her, under Ohio law, with having
committed fraud against the Ohio Medicaid program. I.G. Ex. 2, at 1. She was sentenced
to pay $1,368 as restitution and to a period of probation. Id.

Petitioner does not deny that she was convicted of a criminal offense as is described at
section 1128(a)(1) of the Act. See P. Ex. 1. Her arguments address only the
reasonableness of her exclusion. Jd.
3

Petitioner’s crime consisted of filing false claims for Medicaid services which had not, in
fact, been provided. I.G. Ex. 3. Her conviction plainly was ofa crime that is related to
the delivery of items or services under the Ohio Medicaid program because it constituted
theft of program monies.

2. An exclusion of five years is mandatory.

The Act mandates an exclusion of at least five years of an individual who is convicted of
an offense as is described at section 1128(a)(1). Act, § 1128(c)(3)(B). Ihave no choice
in this case but to sustain the I.G.’s determination to exclude Petitioner for the minimum
statutory period inasmuch as she was convicted of an 1128(a)(1) offense.

In her hearing request Petitioner offers several equitable arguments against a five-year
exclusion. She asserts that she never jeopardized the well-being of her patients. She
acknowledges that she should not have submitted claims for services that she did not
perform. She requests that I take into consideration her history as a nurse and as a law
abiding citizen. She avers that the exclusion will comprise a hardship for herself and her
family. P. Ex. 1. However, and notwithstanding Petitioner’s arguments, I have no
authority to mitigate the exclusion in this case because it is for the minimum statutory
period.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
Robert Carter, )
(CCN: 18-3900), (CCN: 18-3908), ) Date: February 25, 2008

(CCN: 18-3879), (CCN: 18-3872),  )
(CCN: 18-3873), )
)
Petitioner, )
)

“Ver ) Docket No. C-07-759

) Decision No. CR1739
Centers for Medicare & Medicaid )
Services. )
oo )

DECISION

The Medicare billing privileges of the following rural health clinics owned by Petitioner,
Robert Carter, are revoked and any related supplier agreements are terminated effective
August 23, 2007: Corbin Family Practice Group (CCN: 18-3900); Crab Orchard Family
Practice Clinic (CCN: 18-3908); Knox County Family Practice Clinic (CCN: 18-3879);
Manchester Family Practice Clinic (CCN: 18-3872); and Williamsburg Family Practice
Clinic (CCN: 18-3873).

I. Background
Riverbend Government Benefits Administrator (Riverbend), a fiscal intermediary acting

on behalf of the Centers for Medicare & Medicaid Services (CMS), notified Petitioner !
by letters dated July 25, 2007, that the Medicare billing privileges of the above-named

' Although the letters to Petitioner refer twice to a “Robert Clark” rather than
“Robert Carter,” it is clear from the context of the letters, and it is not disputed, that the
letters were intended to refer to and were intended for Petitioner. CMS exhibit (CMS
Ex.) 1.
2

clinics were revoked effective August 23, 2007.2 CMS Ex. 1. Riverbend informed
Petitioner that revocation was based upon information it received that Petitioner was
convicted of felony offenses in the Commonwealth of Kentucky that involved the
conversion of Habitat for Humanity funds totaling $30,000 to his own use, and that he
had been sentenced to confinement for 15 years.

Petitioner requested a hearing on September 18, 2007. On November 8, 2007, I convened
a prehearing conference, the substance of which is memorialized in my Order dated
November 9, 2007. During the conference the parties waived an in-person hearing and
agreed that the case could be decided based on the submission of written briefs
accompanied by documentary evidence.

CMS filed a brief (CMS Br.), accompanied by five exhibits (CMS Exs. 1-5). Petitioner
filed a response (P. Br.), but did not submit any documentary evidence with the response.
CMS filed a reply (CMS Reply). By letter dated January 30, 2008, Petitioner filed an
Order from the Kentucky Court of Appeals based on his motion for a belated appeal. I
am marking this document as P. Ex. | and admitting it. No objection has been made to
the admission as evidence or my consideration of CMS Exs. 1-5 and they are admitted.

II. Discussion

A. Applicable Law
Section 1866(j)(1)(A) of the Act directs the Secretary to establish regulations for the
enrollment of providers of services and suppliers under Medicare. Section 1866(j)(2)

extends to suppliers the right to hearing and judicial review of a denial or refusal to renew
the supplier’s enrollment in Medicare.

> Riverbend also advised in its letter that revocation of the billing privileges for the
various rural health clinics also terminated their Medicare provider agreements.
However, rural health clinics are suppliers not providers. Social Security Act (Act),
section 1861(u); 42 C.F.R. §§ 400.202, 498.2; CMS Pub. 100-08, Chapter 10, section
12.1.13. CMS guidance to its contractors explains that rural health clinics are certified
suppliers that have supplier agreements with CMS similar to agreements executed by
providers. Chapter 10, section 12.1.13; see also, Act, section 1861(aa)(2). Petitioner’s
supplier agreements as rural health clinics are at CMS Ex. 4.
3

The Secretary’s regulations provide that CMS may revoke the Medicare billing privileges
of a provider or supplier who has, within the past 10 years preceding enrollment or
revalidation of enrollment, been convicted of a felony offense that CMS has determined
to be detrimental to the best interests of the Medicare program and its beneficiaries,
including financial crimes. 42 C.F.R. § 424.535(a) and (a)(3). The regulation specifies
that conviction includes guilty pleas and adjudicated pretrial diversions, and does not
require that a conviction be “final.” 42 C.F.R. § 424.535(a)(3)(B).

B. Issue

The only issue in this case is whether CMS had a basis upon which to revoke the
Medicare billing privileges of the clinics owned by Petitioner, and to terminate their
supplier agreements.

C. Findings of Fact

1. After a jury trial in the 34” Judicial Circuit, Whitley Circuit Court, Division I,
Commonwealth of Kentucky, Petitioner was found guilty of 15 counts of theft by
failing to make required dispositions of property (converting $30,000 in funds
from Habitat for Humanity to his own use), and he was found guilty, pursuant to
his plea, of one count of persistent felony offender. CMS Ex. 2; Petitioner’s
Hearing Request, Appeal Brief (P. H.R.) at 1.

2. Petitioner received a 15-year sentence, with a five-year enhancement for his
guilty plea to the persistent felony offender count, his sentence on all counts to be
served consecutively. CMS Ex. 2; P. H.R. at 1-2.

3. Petitioner did not timely appeal his conviction. P. H.R. at 2; CMS Ex. 3.

4. Petitioner filed a motion for belated appeal of his criminal conviction in the
Kentucky Court of Appeals. The Court of Appeals remanded the case to the
Whitley Circuit Court for an evidentiary hearing to determine whether Petitioner
waived his right to appeal. P. H.R. at 2; CMS Ex. 3; P. Ex. 1.

5. By letters dated July 25, 2007, Riverbend, on behalf of CMS, notified Petitioner
that the Medicare billing privileges for five rural health clinics he owned were
revoked based on his felony convictions and their supplier agreements terminated
effective August 23, 2007. CMS Ex. 1.

6. Petitioner timely requested a hearing.
D. Conclusions of Law

1. CMS may revoke the billing privileges of a Medicare provider or supplier if the
provider, supplier, or owner of the provider or supplier is convicted of a federal or
state felony offense that CMS determines to be detrimental to the best interests of
the program and its beneficiaries (including financial crimes), but not if the
conviction was more than 10 years preceding enrollment or revalidation of
enrollment. 42 C.F.R. § 424.535(a)(3).

2. CMS may revoke the billing privileges of a Medicare provider or supplier if the
owner of the provider or supplier is convicted of a felony offense that CMS
determines to be detrimental to the best interests of the Medicare program and its
beneficiaries, while the provider or supplier is currently enrolled in the Medicare
program.

3. Petitioner’s crime, converting $30,000 in funds from Habitat for Humanity for
his own use, constitutes a financial crime.

4. CMS was authorized to revoke the billing privileges of clinics owned by
Petitioner, upon determining that the felony financial offense for which he was
convicted was detrimental to the best interests of the Medicare program and its
beneficiaries.

5. Petitioner’s Medicare billing privileges for five rural health care clinics were
properly revoked and their supplier agreements terminated.

E. Analysis

CMS revoked Petitioner’s rural health clinics’ billing privileges because Petitioner, the
owner of the clinics, was convicted of felonies involving financial crimes. CMS’s
regulations authorize CMS to revoke a provider or supplier’s billing privileges if the
owner of the provider or supplier has been convicted of a felony involving a financial
crime. Thus, CMS was authorized to revoke Petitioner’s clinics’ Medicare billing
privileges and to terminate their supplier agreements.

Petitioner argues that his Medicare billing privileges should not have been revoked
because his conviction has not become final; because it was not clear from the notice
letters to Petitioner for each clinic the reason CMS was revoking his clinics’ billing
privileges; and he urges me to stay the revocation pending the transfer of the clinics to
new owners. Petitioner’s arguments are unavailing.
5

1. Petitioner’s conviction is a sufficient basis for the revocation of his
clinics’ billing privileges and supplier agreements.

CMS correctly notes that Petitioner does not have an appeal of his conviction pending at
this time because he did not timely appeal his conviction. Instead, Petitioner admits he
failed to file a timely appeal, he moved for leave to file an appeal out of time, and the
Kentucky Court of Appeals has remanded his case to the trial court for hearing, before
deciding whether an appeal should proceed. CMS Ex. 3; P. H.R. at 2; P. Ex. 1. When
CMS notified Petitioner of the revocation of his billing privileges, it was after expiration
of the 30 days Kentucky allows for appeals of convictions and Petitioner’s conviction was
effectively final. Kentucky Rules of Criminal Procedure, Rule 12.04. Although the
Kentucky Court of Appeals may ultimately find that Petitioner’s appeal should be
accepted out of time it has not done so and Petitioner does not currently have an appeal
pending, only the motion. Thus, I find Petitioner’s conviction is, in fact and law, final.

Moreover, | note that the regulation applicable does not specify that a conviction be
“final” to be a basis for revocation of billing privileges. Section 424.535(a)(3)(B) of 42
C.F.R. only refers to crimes of which one has been “convicted, including guilty pleas and
adjudicated pretrial diversions.” Also, “conviction” has been defined for purposes of
exclusion from the Medicare program to include instances where a judgment of
conviction has been entered against an individual or entity by a federal, state, or local
court, regardless of whether an appeal is pending. Act, section 1128(i)(1). Petitioner has
pointed to no authority that requires that appeals from criminal convictions be complete
before the conviction may be a basis to exclude one from participating in Medicare or to
withdraw their billing privileges. The purpose of exclusion and the revocation of billing
privileges is the protection of the Medicare program, including both the public fisc and
the beneficiaries, and protection should not be denied due to the pendency of an appeal.

2. Petitioner received adequate notice.

Petitioner argues in his hearing request that the CMS notice letters do not state which of
the 10 reasons for revocation set forth at CMS Pub., 100-08, Chapter 10, section 13.2,
CMS is relying on to revoke the billing privileges of his clinics. Although the contractor
refers to the CMS administrative policy document in the notice letters, the permissible
grounds for revocation are set forth at 42 C.F.R. § 424.535(a).* Petitioner is correct that

> Petitioner also argues that CMS Pub. 100-08, Chapter 10, section 13.2 was not
effective until July 2, 2007, and that it is being applied retroactively. Petitioner argues
that retroactive application of a regulation is impermissible. P. H.R. at 7-8. CMS Pub.
100-08 is not a regulation, it is not binding as law as a properly promulgated regulation
6

the contractor does not specifically cite which of the 10 grounds for revocation listed in
the regulation or the CMS policy the contractor relies upon for revocation. However, the
contractor does describe in detail the conduct that is the basis for the revocation.

Despite the contractor’s oversight in drafting, the notices are sufficiently specific for
Petitioner to recognize that Reason 6 from the CMS Pub., 100-08, Chapter 10, section
13.2 and 42 C.F.R. § 424.535(a)(3), is applicable. Reason 6 authorizes revocation based
on an owner’s felony offense which CMS determines to be detrimental to the best
interests of the program and its beneficiaries where the felony is within the 10 years
preceding enrollment or revalidation of enrollment. Petitioner argues that Reason 6
should not be applied in his case because his 2007 conviction was not within the 10 years
preceding enrollment given that his newest clinic was incorporated in October 2002. P.
H.R. at 5. I disagree. Petitioner misreads the regulation and urges a nonsensical
construction. The regulation prevents CMS or its authorized contractor from denying
enrollment or revoking billing privileges based upon a conviction that occurred more than
10 years prior to enrollment or revalidation of enrollment. 71 Fed. Reg. 20,754, 20,766
(Apr. 21, 2006). The regulation does not prevent CMS or its contractor from revoking
privileges for convictions that occur while one is enrolled as a provider or supplier in
Medicare. The notices to Petitioner are clear that the revocations were due to Petitioner’s
felony conviction which occurred while Petitioner was enrolled in Medicare. The
provision of the regulation which establishes the 10-year limitation is not applicable in
Petitioner’s case. Even though the contractor does not cite the specific policy manual or
regulatory provision applicable in this case, the basis for the revocation is clear.
Furthermore, Petitioner was certainly on notice to request a hearing.

3. Reversal of revocation based upon transfer of ownership is no
longer available.

Pursuant to 42 C.F.R. § 424.535(d), revocation of the billing privileges of a provider or
supplier may be reversed when the basis for revocation was the adverse activity of an
owner or other individual specified in the regulation, and the provider or supplier
terminates its relationship with that individual and gives notice that it has terminated its
usiness relationship with that individual, and it does so within 30 days of the revocation
notification.

would be, rather it is policy guidance to the Medicare contractors who administer the
program on behalf of CMS and participants. The controlling law is the Act and the
Secretary’s regulations at 42 C.F.R. Part 424, specifically 42 C.F.R. § 424.535(a)(3) in
this case. There is no problem with retroactive application of the regulation in this case,
as it was effective June 20, 2006. 71 Fed. Reg. 20,754 (Apr. 21, 2006).
7

In this case, there is no question that Petitioner received the revocation notices dated July
25, 2007. According to his September 18, 2007 request for hearing, he was in the process
of transferring ownership. P. H.R. at 9-10. In his reply to the CMS brief that he filed on
January 8, 2008, Petitioner admits that he was still trying to transfer ownership.
Petitioner acknowledged in his brief that the transfer had not occurred within 30 days of
the notice of revocation, but he nevertheless argues that he should be given more time to
effect the transfer. P. Br. at 3. The regulation grants CMS the discretion to reverse a
revocation, but only if it receives notice that the relationship between the provider or
supplier and the tainted individual is terminated within 30 days of the notice of the
revocation. The regulation grants CMS no discretion to extend the period as Petitioner
suggests. Accordingly, I conclude that reversal of the revocation based upon Petitioner
transferring his ownership in the clinics is no longer available in this case.

Ill. Conclusion

There is a basis for the revocation of the billing privileges of the five clinics referred to
herein that were owned by Petitioner.

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
Michael R. Swenson, M.D., ) Date: February 14, 2008

)
Petitioner, )
)

-Vv.- ) Docket No. C-07-667

) Decision No. CR1737
The Inspector General. )
)

DECISION

Michael R. Swenson, M.D. (Petitioner) appeals the decision of the Inspector General
(1.G.), made pursuant to section 1128(a)(4) of the Social Security Act (Act), to exclude
him from participation in Medicare, Medicaid, and all federal health care programs for a
period of five years. For the reasons discussed below, I find that the I.G. is authorized to
exclude Petitioner, and that the statute mandates a minimum five-year exclusion.

I. Background

By letter dated June 29, 2007, the I.G. notified Petitioner of his decision to exclude him
from program participation for five years. The letter explained that the I.G. took the
action pursuant to section 1128(a)(4) of the Act because Petitioner had been convicted of
a felony offense relating to the unlawful manufacture, distribution, prescription, or
dispensing of a controlled substance. I.G. Exhibit (1.G. Ex.) 1. Petitioner timely
requested review, and the matter has been assigned to me for resolution.

I held a telephone prehearing conference on October 4, 2007, at which Petitioner was
represented by counsel. The parties agreed that the issues before me were legal issues for
which an in-person hearing is not required, and we set a briefing schedule by Order dated
October 5, 2007. The I.G. has submitted his brief (I.G. Br.) with eight exhibits attached,
LG. Exs. 1-8. Petitioner filed his brief (P. Br.) with one exhibit. P. Ex. 1. The LG.
submitted a reply brief (1.G. Reply). In the absence of any objections, I admit into
evidence I.G. Exs. 1-8 and P. Ex. 1.

II. Issue

The sole issue before me is whether the I.G. had a basis for excluding Petitioner from
participation in the Medicare, Medicaid, and all federal health care programs. Because an
exclusion under section 1128(a)(4) must be for a minimum period of five years, the
reasonableness of the length of the exclusion is not an issue.

Ill. Discussion

A, Petitioner was convicted of a felony relating to the unlawful manufacture,
distribution, prescription, or dispensing of a controlled substance, within the
meaning of section 1128(a)(4) of the Act.'

Section 1128(a)(4) of the Act requires that any individual or entity convicted of a felony
criminal offense that occurred after the date of the enactment of the Health Insurance
Portability and Accountability Act (August 21, 1996) “relating to the unlawful
manufacture, distribution, prescription, or dispensing of a controlled substance” be
excluded from all federal health care programs.”

Petitioner is a physician who was licensed to practice medicine in the Commonwealth of
Kentucky. P. Ex. 1, at 5. He concedes that, on March 16, 2006, he pled guilty to six
felony counts of receiving stolen property that had a value of $300 or more. He also
concedes that those stolen items were prescription blanks. I.G. Exs. 4, 6; P. Br. at 2.
Nevertheless, he argues that his conviction was not related to the unlawful manufacture,
distribution, prescription, or dispensing of a controlled substance because neither the
statute under which he was convicted nor his guilty plea refers specifically to controlled
substances. Citing the district court decision in Travers v. Sullivan, 801 F. Supp. 394
(E.D. Wash. 1992), Petitioner suggests that I should consider only the language of the
statute under which he was convicted, and not any of the facts underlying that conviction.
In any event, he argues, I should not look beyond the language of the conviction itself.
Since the Kentucky criminal court documents say nothing about the facts underlying his
conviction, in Petitioner’s view, the I.G. cannot establish the necessary connection

' My findings of fact and conclusions of law are set forth, in italics and bold, in
the discussion headings of this decision.

> “Federal health care program” is defined in section 1128B(f) of the Act as any
plan or program that provides health benefits, whether directly, through insurance, or
otherwise, which is funded directly, in whole or in part, by the United States Government,
or any State health care program.
3

between his conviction and the “unlawful manufacture, distribution, prescription, or
dispensing of a controlled substance.”

I reject Petitioner’s argument. In Travers, the court held that a petitioner may not
collaterally attack the facts underlying his criminal conviction. 801 F. Supp. at 403. But,
as I previously held in Kenneth L. Mudd, DAB CR1634 (2007), this does not mean that I
am compelled to ignore the facts underlying the conviction. It is well-settled that the I.G.
may rely on extrinsic evidence to explain the circumstances of the offense of which a
party is convicted. Narendra M. Patel, M.D., DAB No. 1736 (2000); Tanya A. Chuoke,
R.N., DAB No. 1721 (2000); Bruce Lindberg, D.C., DAB No. 1280 (1991).

Here, although the Kentucky court records offer no explanation of the facts underlying
Petitioner’s felonious conduct, the Indiana State Court of Appeals adjudicated those
underlying facts in a related case involving Petitioner. According to the Indiana court,
Petitioner stole blank prescription forms from his treating physician, who practiced in
Indiana. Petitioner then forged prescriptions for hydrocodone (a Schedule II controlled
substance), and crossed state lines into Kentucky where he presented the forged
prescriptions to Louisville pharmacists, who filled them. A pharmacist reported him; he
was arrested in Kentucky, and subsequently pled guilty to the charges of receiving stolen
property. Swenson v. Indiana, 868 N.E. 2d 540, 541 (2007).

While the Kentucky charges were pending, Indiana prosecutors charged Petitioner with
felony theft and feloniously obtaining a controlled substance by fraud or deceit. Because
the prescriptions had been filled in Kentucky, the Indiana trial court dismissed the latter
charge for lack of jurisdiction. But the trial court refused to dismiss the theft charges, and
Petitioner appealed. The Indiana appellate court dismissed the theft charge, finding that
the same overt acts underlay Petitioner’s Kentucky conviction, so principles of double
jeopardy precluded the State of Indiana from prosecuting. 868 N.E. 2d at 543.

Petitioner asserts that I should not consider the Indiana court decision because it is “not
evidence” and “hearsay.” P. Br. at 6. I find Petitioner’s argument wholly without merit.
Petitioner was a party to the Indiana proceedings in which these facts — the same facts that
underlay his Kentucky conviction — were adjudicated and a final decision was rendered.
He had a full and fair opportunity to litigate the issues. Traditional principles of collateral
estoppel therefore preclude him from attacking in this forum that court’s findings.

note also that the Indiana court’s findings were based on Petitioner’s own admissions, so
even if hearsay mattered here, those facts would be admissible as exceptions to the

earsay rule. Indeed, even without the Indiana court decision, I could find the requisite
connection to controlled substances based on Petitioner’s written admissions to that court.
.G. Ex. 8, at 8-14.

4

As the Indiana court’s rendition of the facts establish, Petitioner’s crimes plainly related
to the unlawful manufacture, distribution, prescription, or dispensing of a controlled
substance, so the I.G. has a basis for imposing the exclusion.

B. The statute mandates a five-year minimum period of exclusion, and
mitigating factors may not be considered to reduce that period of
exclusion.

As Petitioner recognizes, an exclusion under section 1128(a)(4) must be for a minimum
mandatory period of five years. As set forth in section 1128(c)(3)(B) of the Act:

Subject to subparagraph (G), in the case of an exclusion under subsection
(a), the minimum period of exclusion shall be not less than five years... .

When the I.G. imposes an exclusion for the minimum mandatory five-year period, the
reasonableness of the length of the exclusion is not an issue. 42 C.F.R.
§ 1001.2007(a)(2).

IV. Conclusion

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

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the case of:
Date: February 8, 2008
In re CMS LCD COMPLAINT:
Drugs and Biologicals,
Non-Chemotherapeutic (L13354) Docket No. C-08-239

Decision No. CR1735

Lee eye yey

DECISION DISMISSING LCD COMPLAINT

An aggrieved Medicare beneficiary challenges a Local Coverage Determination (LCD),
L13354, issued by the Medicare Contractor, Trailblazer Health Enterprises, LLC. For the
reasons discussed below, I dismiss his complaint as untimely.

Discussion

The beneficiary’s complaint is unacceptable because it was
not timely filed.”

The Centers for Medicare & Medicaid Services (CMS) administers the Medicare program
(Social Security Act (Act), §§ 1102, 1871, 1874), and contracts with carriers and
intermediaries (Medicare contractors) to act on its behalf in determining and making
payments to providers and suppliers of Medicare items and services. Act, §§ 1816, 1842.
To this end, Medicare contractors issue written determinations, called LCDs, addressing
whether, on a contractor-wide basis, a particular item or service is covered. Act,

§ 1869(f)(2)(B). A Medicare beneficiary who has been denied coverage for an item or
service based on an LCD may challenge that LCD before an Administrative Law Judge
(ALJ) by timely filing an acceptable complaint. Act, § 1869(f)(2); 42 C.F.R. § 426.400.
An aggrieved party who chooses to file an LCD challenge after receiving the service must
file his complaint within 120 days of the initial denial notice. 42 C.F.R. § 426.400(b)(2).
The ALJ may dismiss any complaint that does not meet the requirements of 42 C.F.R.

§ 426.400. 42 C.F.R. § 426.405(c)(2).

* T make this one finding of fact/conclusion of law.
2

In this case, the denial notice is dated June 21, 2007. The beneficiary filed his complaint
more than 200 days later, on January 8, 2008. He explains the delay in filing by citing his
doctor’s medical condition “which prevented my obtaining his statement until recently.”
The regulations, however, provide no good-cause exception for untimely filing.

Moreover, even if I had the authority to make such an exception (which I do not), the
beneficiary here has not established good cause. Although his physician’s statement is
dated October 29, 2007 (130 days after the date of the notice), he waited an additional 70
days before filing his complaint. He provides no explanation for that additional delay.

Conclusion

Because the beneficiary’s complaint is untimely, I dismiss it pursuant to 42 C.F.R.
§ 426.405(c)(2).

The beneficiary or his representative has 30 days from the date of this Decision to file an
appeal with the Departmental Appeals Board, in accordance with 42 C.F.R. § 426.465.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
St. Vincent’s Catholic Medical Centers) Date: February 7, 2008

of New York, (CCN: 33-0290), )
)
Petitioner, )
)

-Vv.- ) Docket No. C-07-336

) Decision No. CR1734
Centers for Medicare & Medicaid )
Services. )
)

DECISION REMANDING CASE

I conclude that the Centers for Medicare & Medicare Services (CMS) has not provided a
rational basis for determining that Petitioner’s Comprehensive Cancer Center (Cancer
Center) does not qualify for designation as an on-campus provider-based department of
St. Vincent’s Catholic Medical Centers of New York (Petitioner or St. Vincent’s).
Therefore, for the reasons that follow, I hereby remand this case to CMS for further
proceedings.

I. Background

Petitioner is a non-profit provider of health care services in the greater New York
metropolitan area. Petitioner operates, among other facilities, a general hospital that
provides acute care and certain specialty services in Manhattan. Pertinent to the issue
present in this case is Petitioner’s Cancer Center, which is located within walking
distance from the hospital’s main buildings in the Greenwich Village neighborhood of
New York City. P. Br. at 1.

By letter dated December 12, 2003, Petitioner requested a determination by the CMS
New York Regional Office that its Cancer Center is located on the campus of Petitioner
for purposes of the provider-based regulations. The letter went on to say that the Cancer
Center is located at 325 West 15" Street and 8" Avenue, a distance of approximately 327
2

yards (“as the crow flies” according to P. Br. at 3) from St. Vincent’s main buildings,
located at 13" Street and 8" Avenue. P. Ex. 4.

By letter dated November 10, 2005, the CMS New York Regional Office determined that
the Cancer Center located at 325 West 15" Street, New York, N.Y. 10011, did not qualify
as an on-campus provider-based department of St. Vincent’s. P. Ex. 6.

Petitioner sought reconsideration of the initial denial by letter dated January 13, 2006. P.
Ex. 7. Ina letter dated January 26, 2007, CMS affirmed the initial determination. P. Ex.
9. On March 27, 2007, Petitioner filed a timely request for hearing before an
administrative law judge (ALJ) of the Departmental Appeals Board, and the case was
assigned to me for hearing and decision.

On July 17, 2007, the parties filed a joint Notice of Issues contending that the material
facts are not in dispute and that each side was entitled to judgment as a matter of law.
Accordingly, they proposed to submit their respective motions for summary judgment on
September 28, 2007. The parties subsequently submitted a joint motion, dated September
21, 2007, waiving their right to an in-person hearing. Consequently, I hereby issue this
decision without regard to the rules applicable to summary judgment.'

In compliance with my order of October 9, 2007, establishing a briefing schedule, the
parties filed their respective briefs (P. Br. and CMS Br.) on November 9, 2007. Petitioner
proffered 11 exhibits, which I have entered into the record without objection as P. Exs.
1-11. CMS proffered one exhibit, which I have entered into the record as CMS Ex. 1.
The parties submitted their reply briefs (P. Reply Br. and CMS Reply Br.) on November
29, 2007.

Based on the arguments of the parties, the documentary evidence admitted into the record,
and the applicable law and regulations, I find that it is appropriate to remand this case to
CMS.

If. Applicable Law and Regulations

The following definitions set forth at 42 C.F.R. § 413.65(a) are pertinent to the issue in
this case:

. Main provider means a provider that either creates, or acquires ownership of,
another entity to deliver additional health care services under its name, ownership,
and financial and administrative control.

' The parties have continued to mistakenly refer to the adjudication of this case as
one based on summary judgment.
3

Provider-based entity means a provider of health care services, . . . that is either
created by, or acquired by, a main provider for the purpose of furnishing health
care services of a different type from those of the main provider under the
ownership and administrative and financial control of the main provider.

Provider-based status means the relationship between a main provider and a
provider-based entity or a department of a provider, . . . that complies with the
provisions of [the regulations].

Campus means the physical area immediately adjacent to the provider’s main
buildings, other areas and structures that are not strictly contiguous to the main
buildings but are located within 250 yards of the main buildings, and any other
areas determined on an individual case basis, by the CMS regional office, to be
part of the provider’s campus.

42 C.F.R. § 413.65(b)(3)(i) provides that if a potential main provider seeks a
determination of provider-based status for a facility that is located on the campus of the
potential main provider, the provider would be required to submit an attestation stating
that the facility meets the criteria in paragraph (d) of 42 C.F.R. § 413.65, and, if it is a
hospital, also attest that it will fulfill the obligations of hospital outpatient departments
and hospital-based entities described in paragraph (g) of 42 C.F.R. § 413.65.

42 C.F.R. § 413.65(d) establishes that a facility for which provider-based status is sought,
whether located on or off campus of a potential main provider, must meet all of the
following requirements to be determined by CMS to have provider-based status:

(1) Licensure. The facility must operate under the same license as the main
provider, except where state law requires separate licensure.

(2) Clinical services. The facility’s clinical staff must have privileges at the main
provider, there is monitoring and oversight of the facility by the main provider,
medical records must be integrated with those of the main provider, and patients
must have full access to care at both facilities.

(3) Financial integration. The subordinate facility’s financial operations must be
fully integrated within the financial system of the main provider, as evidenced by
shared income and expenses between the main provider and the subordinate
facility.

(4) Public awareness. The public and other payers must be aware that the entity is
part of the main provider.
4

(5) Obligations of hospital outpatient departments and hospital-based entities. In
the case of a hospital outpatient department or a hospital-based entity, the facility
or organization must fulfill the obligations of hospital outpatient departments and
hospital-based entities described in paragraph (g) of 42 C.F.R. § 413.65.

A party against whom CMS has issued an adverse determination may request a hearing
before an ALJ of the Departmental Appeals Board, pursuant to 42 C.F.R. § 498.40, et seq.

Ill. The parties’ contentions

Petitioner contends that CMS has misinterpreted its own regulations, and has arbitrarily
and capriciously refused to apply its discretion to confer on-campus provider-based status
on Petitioner’s Cancer Center located beyond 250 yards from the main hospital.

CMS, on the other hand, maintains that its Regional Office’s decision to deny Petitioner’s
Cancer Center on-campus provider-based status is not arbitrary and capricious. In that
regard, states CMS, the New York Regional Office concluded that the Cancer Center is
77 yards beyond the limit given in the regulation’s definition of “campus.” Additionally,
CMS argues that in arriving at its determination, the Regional Office considered the
distance between the Cancer Center and the main campus, the number of streets that must
be crossed to walk between them, the lack ofa clear line of sight between the two
facilities, and the numerous non-medical businesses and residences separating the Cancer
Center from the main hospital.

IV. Discussion

CMS’s letter to Petitioner dated November 10, 2005, merely states that the denial of on-
campus provider-based status for the Cancer Center was grounded on the fact that the
distance between the Cancer Center and the main provider was 327 yards. P. Ex. 6. That
distance is greater than the 250 yards established in the regulation.

In the reconsideration determination dated January 26, 2007, the CMS New York
Regional Office stated the following additional reasons for denying Petitioner’s request
for on-campus designation of its Cancer Center:

. the dense urban nature of the location is a negative factor with regard to the
request;
. the street plan shows that there is no direct line of sight between the Cancer Center

and the Medical Center;
5

. to travel from one facility to the other requires a walk of over 400 yards across
three busy streets and a major avenue; and,

. between the facilities there are other businesses, residences and activities.
P. Ex. 9, at 1.

In the reconsideration determination, CMS recognizes that Petitioner’s Cancer Center
services had been provided on campus, but the facility was moved because of the need for
additional space, and that the Medical Center would have chosen a closer site if a suitable
one had been available. However, CMS considered that these factors are of no
consequence. P. Ex. 9, at 1.

In its discussion of the regulations on provider-based status, the Federal Register states
the following:

The Medicare law (section 1861(u) of the [Social Security] Act) lists
the types of facilities that are regarded as providers of services, but
does not use or define the term “provider-based.”” However, from
the beginning of the Medicare program, some providers, which
[CMS] refer[s] to . . . as “main providers,” have owned and operated
other facilities, such as [skilled nursing facilities] or [home health
agencies],.... The subordinate facilities may have been located on
the main provider campus or may have been located away from the
main provider. In order to accommodate the financial integration of
the two facilities without creating an administrative burden, [CMS]
[has] permitted the subordinate facility to be considered provider-
based.

65 Fed. Reg. 18,434, 18,504 (April 7, 2000).

The Federal Register states that the objective in issuing specific criteria for provider-
based status is to ensure that higher levels of Medicare payment and increases in
beneficiary liability for deductibles or coinsurance (which can all be associated with
provider-based status) are limited to situations where the facility or organization is clearly
and unequivocally an integral and subordinate part of a provider. 65 Fed. Reg. 18,434,
18,506 (April 7, 2000). CMS asserts that while there may be numerous administrative

> There is no direct statutory requirement to maintain explicit criteria for
determination of provider-based status.
6

advantages for a hospital in receiving provider-based status for a subordinate facility,
there is no difference in treatment by CMS of on-campus provider-based and off-campus
provider-based facilities. The level of Medicare reimbursement paid for services at on-
campus and off-campus facilities is the same. CMS Br. at 3. Petitioner agrees with
CMS’s assertion regarding reimbursement implications, but adds that the distinction is
crucial here because off-campus facilities are subject to additional administrative
requirements and restrictions (which can inhibit a main provider’s ability to operate its
facility efficiently), not imposed upon on-campus facilities. P. Br. at 7.

In order for CMS to determine whether a facility may be classified as on-campus
provider-based, it must find that the subordinate facility is within 250 yards of the main
provider, and, in addition, satisfy all of the requirements of 42 C.F.R. § 413.65(d). Ifthe
facility is not within 250 yards of the main provider, the definition of “campus” set out at
42 C.F.R. § 413.65(a) grants a CMS regional office the discretion to consider such facility
as on-campus. The Federal Register states that the definition of “campus” encompasses
“not only institutions that are located in self-contained, well-defined settings, but other
locations, such as in central city areas, where there may be a group of buildings that
function as a campus but are not strictly contiguous and may even be crossed by public
streets.” 65 Fed. Reg. 18,434, 18,511 (April 7, 2000). The Federal Register notes that
such a definition gives the regional offices discretion to make determinations, on a case-
y-case basis, as to what constitutes a hospital’s campus. Id.

n the case at hand, CMS did not consider whether Petitioner satisfied the conditions set
forth at 42 C.F.R. § 413.65(d). In the initial determination, CMS’s analysis was limited
to whether the subordinate facility satisfied the 250-yard distance contained in the
definition of “campus.” That analysis was insufficient because the CMS regional offices
ave been granted discretion in the regulation to consider a facility to be on-campus
provider-based, even if it is beyond the 250 yard limit. As stated above, in the
reconsidered determination, CMS added other reasons for denial of on-campus status to
Petitioner’s Cancer Center. These included the dense urban nature of the location, the
absence of a direct line of sight between the main provider and the Cancer Center, the
need to cross busy streets over a distance exceeding 400 yards, and the existence of
usinesses, residences, and other activities along the way. The absence of a direct line of
sight has no correlation to the distance between the facilities or the need to cross busy
streets. Structures that are within 250 yards of each other may require the crossing of
usy streets to get from one to the other while providing no line of sight. In contrast,
structures that are greater than 250 yards apart and do not require the crossing of busy
streets when walking from one to the other, may very well have a line of sight between
them.

7

The other factors considered by CMS in the reconsideration denial as being negative are
precisely the factors mentioned in the Federal Register commentary that CMS
acknowledges as possibly existing where a regional office considers exercising discretion
to award on-campus provider-based status to a facility that is beyond 250 yards from a
main provider. 65 Fed. Reg. 18,434, 18,511 (April 7, 2000). It is worthy of note that
although the regulations contemplate the possibility of having to travel more than 250
yards on foot, across streets, and past businesses and residences, there is no mention as to
whether the streets are busy or not. However, I do not see the busy nature of the streets
necessarily as a negative factor, because such streets would have traffic signals at the
intersections for pedestrian crossing. CMS argues that a hospital’s location in an urban
setting would not, in and of itself, give rise to the presumption of a need for more
flexibility when it comes to the 250 yard rule. CMS Reply Br. at 6. Assuming that to be
a correct rendering of the regulation, it does not lead, however, to the conclusion that
location in an urban setting, with its known urban density and scarcity of available real
estate for expansion of services in contiguous areas, is necessarily a negative factor. In
sum, CMS’s reasoning does not address the intent behind the adoption of regulatory
criteria for on-campus provider-based designation of facilities that are subordinate to
main providers. The determination whether to grant or deny an application for on-
campus provider-based status must hinge on the objective to be achieved by the
regulation, and the legitimate interests to be protected. Whether it is added beneficiary
financial liability, quality of service, or personal safety, CMS must articulate, in precise
terms, the basis for denial of a request for an on-campus provider-based designation.
CMS has failed to do so here.*

> In the affidavit of Peter Reisman, Associate Regional Administrator of the
Division of Medicare Financial Management and Fee For Services Operations (CMS Ex.
1), Mr. Reisman states that in making the determination to deny on-campus provider-
based designation to the Cancer Center, he consulted with other administrators, and,
while the regulations do permit exceptions to the policy that a provider-based facility
must be located within 250 yards of the main building to be considered on-campus, none
of the CMS administrators could cite an instance where an exception had been granted
under circumstances such as the ones present in this case. CMS Ex. 1, at 2. Mr. Reisman
does not say whether no exception exists because no request had ever been made or
whether a request was in fact made and a denial was issued. If such a decision was
issued, Mr. Reisman chose not to share the details of that case. Furthermore, that
rationale was not included in CMS’s initial or reconsidered determination, nor does it
suggest that a case-by-case approach as contemplated by the regulation was used.
It is not for me to establish guidelines in matters delegated by statute or regulation to a
regulatory agency or one of its components. Therefore, it is my decision to remand this
case to CMS, in order that it may articulate a reason or reasons for denial of Petitioner’s
request for designation of its Cancer Center as an on-campus provider-based entity. It
does not suffice for CMS to say that the subordinate facility is more than 250 yards from
the main provider, because the regulation acknowledges that a facility so situated may
still qualify as an on-campus provider-based entity. Additionally, CMS cannot base a
denial merely on grounds that there are other buildings and residences along the route
from one entity to the other, because the regulations also acknowledge that this may be a
possibility with respect to a facility that is designated as on-campus provider-based. If
the dense urban conditions are a factor considered by CMS, it must state in clear and
thoroughly articulated terms why approval would be to the detriment of beneficiaries of
the program or in some way run counter to the regulatory purpose of 42 C.F.R. § 413.65.

Petitioner argues that CMS has failed to exercise the discretion delegated by regulation,
and that, therefore, denial of on-campus provider-based status to its Cancer Center is
arbitrary and capricious. I disagree. In denying Petitioner’s request, CMS did exercise its
discretion. Of course, such exercise of discretion need not necessarily be favorable to
Petitioner. However, I agree with Petitioner that CMS “failed to articulate a satisfactory
explanation with a rational connection between the facts found and the choice made.” P.
Br. at 30-31. My ruling here is that in denying the request, CMS must set forth cogent
reasons consistent with the letter and spirit of the applicable regulations. Although this
issue is different than the one raised by Petitioner, I have the authority to remand this case
to CMS, on my own motion, for consideration of this new issue, issuance of a new
determination, and, if necessary, to direct the return of the matter to me for further
proceedings. 42 C.F.R. § 498.56(d).

V. Conclusion

In view of the foregoing, this case is remanded to CMS for re-issuance, within 30 days, of
a determination that articulates a rational basis for its conclusion. Failure to re-issue its
determination within the time provided may lead to the inference that no basis exists for
the adverse determination that is the subject of this request for hearing.

/s/
José A. Anglada
Administrative Law Judge