Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
Reeves-Sain Extended Care, LLC, ) Date: January 22, 2008

)
Petitioner, )
)

-Vv.- ) Docket No. C-06-616

) Decision No. CR1727
Centers for Medicare & Medicaid )
Services. )
)

DECISION

l affirm the determination of the Medicare Hearing Officer (Hearing Officer) to deny the
application of Reeves-Sain Extended Care, LLC, (Petitioner) for a Medicare supplier
number for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS).

I. Background

Petitioner is co-owned by W. Shane Reeves, and Richard Sain. Mr. Reeves and Mr. Sain
operate three businesses in Tennessee. The three businesses are: Murfreesboro
Pharmaceutical and Nursing Supply d/b/a/ Reeves Medical Equipment and Supply
(Murfreesboro), established in 1993; Reeves-Sain Infusion Services, Inc. (Infusion), a
Sub-Chapter S corporation, established in 1994; and Petitioner, a long-term care
pharmacy, established in 1995. All three businesses are located at 1809 Memorial
Boulevard in Murfreesboro, Tennessee. The business address of all three businesses is
the same, except that the infusion business includes the designation “Suite C” in the
business address. In addition, Mr. Reeves and Mr. Sain are equal owners in a fourth
Tennessee corporation known as Reeves-Sain Family of Medical Services, Inc.
(management corporation), which provides management services for the other businesses
owned by Mr. Reeves and Mr. Sain. P. Br. at 7.
2

By letter dated April 25, 2006, the Centers for Medicare & Medicaid Services (CMS),
acting through the National Supplier Clearinghouse (NSC),' notified Petitioner that its
application fora DMEPOS Medicare supplier number was denied. In the April 25, 2006
letter, NSC stated that the reason for the denial of the supplier number was Petitioner’s
noncompliance with supplier standard number seven.

Supplier standard number seven states that a supplier must maintain a physical facility on
an appropriate site. 42 C.F.R. § 424.57(c)(7). The site must contain space for storing
usiness records. Jd. The April 25, 2006 letter stated that Petitioner was not compliant
with supplier standard seven because it was sharing space with two other suppliers with
active provider numbers. CMS Ex. 1.

By letter dated May 23, 2006, Petitioner filed a hearing request with NSC. CMS Ex. 2.
By ruling dated June 30, 2006, the Hearing Officer affirmed the decision to deny
Petitioner’s application fora DMEPOS Medicare supplier number. CMS Ex. 4. By letter
dated August 7, 2006 Petitioner requested that the Hearing Officer’s denial be reviewed

y the Departmental Appeals Board (DAB). This case was assigned originally to Chief
Administrative Law Judge (ALJ) Marion Silva and subsequently transferred to me for
earing and decision.

convened a prehearing conference on September 16, 2006. At the conference,

Mr. Reeves participated pro se as the representative for Petitioner. The parties agreed
that an in-person hearing would not be necessary and that this case could be decided on
written submissions. | set a briefing schedule. By motion dated November 13, 2006,
Petitioner moved for an extension of time to file its brief because Petitioner had retained
counsel to represent it and the parties had conferred and proposed a revised briefing
schedule. I granted the request for an extension of time.

On October 16, 2006, CMS filed a brief accompanied by eight exhibits, CMS Exhibits
(CMS Exs.) 1-8. On December 18, 2006, Petitioner submitted its Response brief
accompanied by three exhibits, labeled A through C. To conform to Civil Remedies
Division procedures, I have remarked these exhibits as Petitioner Exhibits (P. Exs.) 1-3.
On January 8, 2007, CMS submitted a reply brief. I admit into evidence CMS Exs. 1-8
and P. Exs. 1-3. My decision is based on the parties’ submissions, including exhibits and
the applicable law.

' NSC is the entity authorized by CMS to issue, revoke, and reinstate DMEPOS
Medicare supplier numbers.
If. Applicable Law

Section 1861 of the Social Security Act (Act) defines medical and other health services
that are eligible for Medicare reimbursement by DMEPOS suppliers. Under section
1834(j)(1)(A) of the Act “no payment may be made under this part . . . for items furnished
by a supplier of medical equipment and supplies unless such supplier obtains (and renews
at such intervals as the Secretary may require) a supplier number.” Act, § 1834(j)(1)(A).
Pursuant to section 1834(j)(1)(B) of the Act, “a supplier may not obtain a supplier
number unless . . . the supplier meets revised standards prescribed by the Secretary .. .
that shall include requirements that the supplier . . . meet such other requirements as the
Secretary may specify.” Act, § 1834G)(1)(B)Gi)(IV).

CMS regulations set forth the conditions that a DMEPOS supplier must meet in order to
receive payment for a Medicare-covered item. See 42 C.F.R. § 424.57(b) and (c). CMS
will deny an application for a supplier number if an entity does not meet the standards in
42 C.F.R. § 424.57(b) and (c). An application for a supplier number is also known by its
application number, “CMS 855S.”

Section 1866(j) of the Act, as amended by section 936(b)(3) of the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, authorized the
Secretary of Health and Human Services (Secretary) to establish a process for the
enrollment in the Medicare program of providers of services and suppliers. Specifically,
section 1866(j)(2) of the Act grants “[a] provider of services or supplier whose
application to enroll (or, if applicable, to renew enrollment) under this title is denied” a
“hearing and judicial review of such denial under the procedures that apply under
subsection (h)(1)(A).”? Those procedures are set out at 42 C.F.R. Part 498, et seq. and
provide for hearings by ALJs and review by the DAB.

The DAB has held that section 1866(j)(2) of the Act gives appeal rights to suppliers.
“Section 1866(j)(2) of the Social Security Act (the Act) gives suppliers appeal rights, for
certain determinations involving enrollment, using the procedures that apply under
section 1866(h)(1)(A) of the Act. Those procedures are at 42 C.F.R. Part 498 and provide
for ALJ hearings and Board review.” MediSource Corporation, DAB No. 2011, at 2
(2006).

> Previously, supplier appeals were governed by 42 C.F.R. § 405.874, which
provided for review by a fair hearing officer and then a CMS official, designated by the
Administrator of CMS.
4

Further, the Board has recognized the procedures and the burden of persuasion
established by the Secretary in the Program Integrity Manual (PIM, Pub. 100-08) at
Chapter 10, § 19.

The Medicare Provider Integrity Manual provides: ‘The burden of persuasion is
on the... supplier... to show that its enrollment application was incorrectly
disallowed or that the revocation of its billing number was incorrect.’ [Citing PIM,
Ch. 10, § 19.B.] This provision is consistent with the Board’s conclusion in
provider appeals under 42 C.F.R. Part 498 that a provider must prove substantial
compliance by the preponderance of the evidence, once CMS has established a
prima facie case that the provider was not in substantial compliance with relevant
statutory or regulatory provisions.

Id. at 2-3.
Ill. Issue

The issue in this case is whether Petitioner’s application for a supplier number was
properly denied.

IV. Discussion

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’s application for a DMEPOS supplier number was properly denied.

An entity that wishes to bill Medicare as a supplier of DMEPOS must meet the 21
supplier standards listed at 42 C.F.R. § 424.57(c). Supplier standard seven requires that a
supplier:

Maintains a physical facility on an appropriate site. The physical facility must
contain space for storing business records including the supplier’s delivery,
maintenance, and beneficiary communication records. For purposes of this
standard, a post office box or commercial mailbox is not considered a physical
facility. In the case of a multi-site supplier, records may be maintained at a
centralized location.

42 C.F.R. § 424.57(c)(7).
5

This regulation implements similar language in the Social Security Act which states: “A
supplier may not obtain a supplier number unless . . . the supplier. . . maintain[s] a
physical facility on [an] appropriate site.” Act, § 1834(G)(1)(B)Gi(UD. This statutory
language was enacted in 1994 as part of an effort to curb supplier abuses and provide
additional protection for beneficiaries. An appellate panel of the DAB in Medisource
Corp., DAB No. 2011, at 9 discussed the effort to curb supplier abuses, provide
additional protection for beneficiaries and the reason behind the requirement for a
physical facility on an appropriate site and stated, “[t]he physical facility required by
suppliers is the place where patients can contact the supplier directly .. . [s]taff must be
available at the facility during posted hours of operation.”

NSC interprets the language of supplier standard seven to mean one provider, one
location. Consequently, NSC denied Petitioner’s application fora DMEPOS Medicare
supplier number because two other businesses, Murfreesboro and Infusion, each having
their own Medicare supplier numbers, were operating at the same address.

a. Petitioner did not disclose the existence of a managing corporation on
its 855S application.

The Hearing Officer, in her June 30, 2006 decision, affirmed NSC’s decision to deny
Petitioner a DMEPOS Medicare supplier number. The Hearing Officer gave five reasons
for her decision. The Hearing Officer found “most troubling” that Petitioner had not
disclosed on the 855S application all of its ownership and managing control interests.
CMS Ex. 4, at 2. During the telephone hearing before the Hearing Officer, Petitioner’s
Vice-President of Finance Nancy Robinson gave testimony that there exists a fourth
corporation, a management company, that provides management of the other corporations
owned by Mr. Reeves and Mr. Sain.’ The management company provides “payroll
operations and delivery staff’ for Murfreesboro, Infusion and Petitioner. P. Br. at 7.
Petitioner claims that this omission was made by Ms. Robinson inadvertently and that it
was Ms. Robinson’s first time filling out an Medicare supplier 855S application.

I find Petitioner’s argument unpersuasive. Ms. Robinson was Petitioner’s financial vice-
president. In her position, as a financial vice-president, Ms. Robinson cannot claim
ignorance. Further, the regulations require that the application be complete and accurate
prior to certification as a Medicare supplier. 42 C.F.R. § 424.57(c)(2). Even Petitioner

> The Hearing Officer and CMS refer to the managing company as a holding
company. Petitioner denies that the management company is a holding company and
since this determination is not necessary for this Decision, I do not address this dispute.
P. Ex. 2.
6

admits in its brief that, “this entity probably should have disclosed [the existence of the
managing company] in Section 5.” P. Br. at 5. Petitioner’s failure to disclose the
existence of the managing company, by itself, is enough to affirm the Hearing Officer’s
decision.

b. Murfreesboro, Infusion and Petitioner have only one sign that
identifies all three businesses.

Murfreesboro, Infusion and Petitioner have the same physical address. All three
usinesses are located at 1809 Memorial Boulevard in Murfreesboro, Tennessee. The
usiness address of all three businesses is the same, except that the infusion business
includes the designation “Suite C” in the business address. The photographs provided to
me show the sign in front of the building. The words “REEVE — SAIN”, are in large
letters, and then underneath is the word “MEDICAL”, in medium letters, and then further
underneath are the words “- EXTENDED CARE-”, in smaller letters, and then at the
ottom of the sign is the word “— INFUSION — ”, also in smaller letters. CMS Ex. 4, 5.
The Hearing Officer stated when viewing the photographs of the sign in front of the
uilding at 1809 Memorial Boulevard that in her opinion “if one enters the door marked
809, one would find the medical, extended care, and infusion company all in one. There
does not appear to be any clear demarcation to the Medicare public as to where one
company starts and the other begins.” CMS Ex. 4, at 9. Iagree. The sign is confusing to
the Medicare public.

The Act at section 1834(j)(1)(B)(@i)CD) requires a supplier to maintain a physical facility
at an appropriate site. This requirement has been interpreted as serving the purpose of
giving the Medicare public a place where a supplier can be contacted directly.
Medisource Corp., DAB No. 2011. A sign that is confusing to the Medicare public does
not serve this purpose.

Petitioner urges that any confusion could be cured by changing the sign. Petitioner also
argues that it does not serve customers off the street and therefore there will be no actual
confusion of the Medicare public. Petitioner urges that no confusion will actually occur
since it serves residents in nursing homes only and the pharmaceuticals are delivered to
the nursing homes. However, Petitioner’s argument fails because it does not address the
issue of a family member or representative of a resident of a nursing home who has a
grievance or other matter it wishes to discuss in person with Petitioner’s staff. Since all
three businesses are all in one building and the sign is unclear, it would be confusing as to
where an individual would go to deal directly with Petitioner. Petitioner’s plan to change
the sign might, depending on how any new sign would read, cure the current problem
with the sign, but would not cure the other defects which prohibit Petitioner from
complying with supplier standard seven.
7

c. Three companies exist at the same physical building.

Murfreesboro, Infusion and Petitioner have the same physical address. All three
businesses are located at 1809 Memorial Boulevard in Murfreesboro, Tennessee. The
business address of all three businesses is the same, except that the infusion business
includes the designation “Suite C” in the business address. The building that houses all
three companies is relatively small. The sign suggests that the three companies are really
one. Both Murfreesboro and Infusion already have Medicare supplier numbers. If
Petitioner were to be granted its own Medicare supplier number, then there would be
three companies with Medicare supplier numbers at the same physical address.

In her declaration, Shanna Goldsborough, project coordinator of NSC, states that the Act
prohibits more than one supplier number per address. The aim of the Act is to “prevent
Medicare fraud where one company has billing issues or problems and its supplier
number is revoked, but continues billing Medicare through another business at the same
address.” CMS Ex. 7. Ms. Goldsborough stated that her “experience working in this area
for four years leads me to think that Reeves-Sain was able to get a second supplier
number because the infusion service’s business address includes a suite.” CMS Ex. 3, at
3. A third supplier number at the same physical address runs into the problem that
Murfreesboro and Petitioner have completely identical business addresses, without
differentiating suite numbers. I conclude that NSC properly denied Petitioner’s
application for a third supplier number at the same physical address because it did not
meet supplier standard seven because there were already two other businesses with
Medicare supplier numbers operating at the same address, one of which has an identical
business address in that neither Petitioner nor Murfreesboro has any designation of a suite
in their business address.

d. Murfreesboro, Infusion and Petitioner have a commingling of
operations.

As previously discussed the management company provides payroll services and delivery
staff to Murfreesboro, Infusion, and Petitioner. In addition, Petitioner shares at least one
employee, Lee Golden, who is listed as the Pharmacy Director for both Infusion and
Petitioner. CMS Ex. 8. This one employee is a key employee since Petitioner is a
long-term care pharmacy.

Petitioner argues that Murfreesboro, Infusion, and Petitioner are separate and distinct
entities. However, if the three companies were indeed separate and distinct there would
be no commingling of operations and they would not share any employees, certainly not a
prominent and key employee, such as the Pharmacy Director in a company that is a
long-term care pharmacy.
8

e. Petitioner does not fit within the subsidiary exception of the Act.

The main thrust of Petitioner’s argument is that it is entitled to a supplier number under
the subsidiary exception of the Act. CMS counters this argument by claiming that the
subsidiary exception does not apply to Petitioner because Petitioner is not a subsidiary
corporation but a limited liability company (LLC). The Hearing Officer also concluded
that the subsidiary exception could not be applied to Petitioner because it was a limited
liability company. Petitioner responds that subsidiary, within the meaning of section
1834(j)(1)(D) of the Act means “under another’s control.” Petitioner argues that the term
subsidiary is not limited to corporations and that a subsidiary corporation is only an
example of being under another’s control. P. Br. at 3-4.

The subsidiary exception of the Act provides that:

PROHIBITION AGAINST MULTIPLE SUPPLIER NUMBERS - The Secretary
may not issue more than one supplier number to any supplier of medical
equipment and supplies unless the issuance of more than one number is
appropriate to identify subsidiary or regional entities under the supplier’s
ownership or control.

Act, § 1834(j)(1)(D).

The plain meaning of this section of the Act is that where there is a controlling entity that
has a DMEPOS Medicare supplier number, a subsidiary or regional entity may be granted
an additional supplier number under this exception for purposes of identity. Whether the
subsidiary entity is a subsidiary corporation or not, as the parties have argued before me,
is not a question that I need reach in this case. Both parties have totally ignored the fact
that the management company, the controlling entity in this case, does not have its own
DMEPOS Medicare supplier number. It is clear that the subsidiary exception cannot be
applied to Petitioner because the controlling entity, the management company, does not
itself have a DMEPOS supplier number which is a necessary prerequisite under the Act.
Only Murfreesboro and Infusion, the other two companies at the same address as
Petitioner, have supplier numbers. Furthermore, Petitioner has consistently argued that
Murfreesboro, Infusion, and Petitioner are separate and distinct entities.

In addition, the subsidiary exception implies that the subsidiary be at another location
from the controlling entity, either another site or region. Petitioner is in the same building
as two other businesses of similar name and therefore the exception does not apply. No
information was provided to me about the location of the management company.
V. Conclusion

For the reasons discussed above, I find that CMS properly denied Petitioner’s application
fora DMEPOS Medicare supplier number.

/s/
Alfonso J. Montano
Administrative Law Judge


Department of Health and Human Services
DEPARTM ENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
Woods Edge Pointe ) Date: January 22, 2008

(CCN: 36-6209), )
)
Petitioner, )
)

-Vv.- ) Docket No. C-04-510

) Decision No. CR1726
Centers for Medicare & Medicaid )
Services. )
)

DECISION

I sustain the determination of the Centers for Medicare & Medicaid Services (CMS) to
impose civil money penalties (CMP) against Petitioner, Woods Edge Pointe, in the
amount of $400 per day, for a period that began on May 21, 2004 and which ended on
June 30, 2004.

I. Background

Petitioner is a skilled nursing facility doing business in Cincinnati, Ohio. It participates in
the Medicare and Medicaid programs. Petitioner was surveyed for compliance with
Medicare participation requirements on May 21, 2004 (May survey) by surveyors
employed by the Ohio Department of Health (Survey agency). The surveyors found that
Petitioner was not complying substantially with 25 Medicare participation requirements.
On June 30, 2004, the Survey agency conducted a revisit survey and found that Petitioner
had resumed substantial compliance as of that date.
2
CMS concurred with the surveyors’ findings of noncompliance and proposed to impose
sanctions against Petitioner consisting of a CMP of $400 per day for the period of May 21
through to June 30, 2004, totaling $16,000, and the disqualification of Petitioner’s nurse
aide training program (NATCEP) for a period of two years. CMS notices dated June 25,
2004 and July 19, 2004."

On August 23, 2004, Petitioner requested a hearing before an administrative law judge
(ALJ). The case was assigned to me for a hearing and a decision. In its request for
hearing, Petitioner challenged all 25 deficiencies noted during the May survey. A
schedule was established for the parties to file written pre-hearing submissions including
proposed exhibits and briefs.

An in-person hearing was held in this matter from May 24, 2005 through May 25, 2005,
in Cincinnati, Ohio. The following exhibits were admitted into evidence: CMS exhibits
(Exs.) 1-19,? and Petitioner’s exhibits (P. Exs.) 1-10, 12-18.° Transcript (Tr.) at 14, 105-
06. Also admitted into evidence as ALJ Ex. | was a demonstrative diagram offered by
Petitioner during witness testimony. Tr. at 230-34.

At the commencement of the hearing, the parties waived presentation of evidence and
testimony for nine life-safety code tags identified in the May Statement of Deficiencies
(SOD). The parties agreed not to proceed on the life-safety code tags maintaining that
they were not considered as a basis for CMS’s imposition of a CMP or other remedy, and
that they are not at issue in this matter. Tr. at 16-17. Based on the representations of the
parties, the life-safety tags are not considered in my analysis of the evidence and decision
in this case. Additionally, the parties agreed that CMS would present testimonial
evidence on only the quality of care citations listed in the May SOD, specifically, F-tags

' The June 25, 2004 notice additionally proposed a denial of payment for new
admissions (DPNA) effective August 21, 2004, and termination of Petitioner’s provider
agreement as of November 21, 2004. As Petitioner achieved substantial compliance by June 30,
2004, the DPNA remedy and the provider agreement termination were not effectuated. CMS
notices dated June 25, 2004 and July 19, 2004.

> Subsequent to the submission of the parties’ proposed witness and exhibit lists, CMS
moved to supplement its exhibit list with CMS Ex. 19. Petitioner objected. On June 8, 2005, I
issued a ruling granting CMS’s motion to supplement its exhibit list with CMS Ex. 19.
Additionally, at the commencement of the hearing, Petitioner raised a concern that CMS’s
exhibits were not redacted and, therefore, contained resident identifying information. CMS
agreed to amend its submission with a redacted version. Those exhibits were received on June
13, 2005, and have substituted CMS’s prior set of exhibits. Tr. at 10-12. Also, as requested by
Petitioner at the hearing, I take judicial notice that although CMS’s list of exhibits are identified
as “Facility Records,” the exhibits themselves include surveyor notes and are not exclusively
facility records. Tr. at 11-12.

> At the hearing, P. Ex. 11 was stricken from the record per the agreement of the parties
as counsel for Petitioner was unable to locate the document which corresponded with proposed
P. Ex. 11. Counsel surmised that the exhibit may not have been proffered. Tr. at 105.
3
309, 312, 314, 316, 318, 324, 328, 332. Tr. at 16. CMS chose to present testimonial
evidence at the hearing on eight of the 16 quality of care deficiency tags identified in the
May SOD. CMS also chose to submit the May SOD as evidence of the allegations for the
non-quality of care citations without providing testimonial evidence as to the tags.

Three surveyors testified for CMS at the hearing: Debbie Truett, Registered Nurse
(R.N.), Bernie Poole, R.N., and Patricia Butjckowski, Licensed Social Worker (LSW).
Petitioner presented the testimony of two witnesses: Kristina Convoy, Licensed Practical
Nurse (LPN) and Clinical Advisor, and Brenda Nelson, Director of Nursing (DON).

Subsequent to the hearing, the parties were provided with a copy of the certified transcript
of the hearing and opportunity to note any prejudicial errors - none were noted. CMS
filed an initial post-hearing brief (CMS Br.) Petitioner filed a post-hearing response brief
(P. Br.) and its findings of fact and conclusions of law. CMS filed a reply brief (Reply)
and its proposed findings of facts and conclusions of law.

This decision is based on the complete record which includes the parties’ arguments,
written submissions, all exhibits admitted into the record, and the witness testimony
adduced during the hearing.

II. Issues

The issues in this case are whether a sufficient basis existed for CMS to impose its
remedies for the May survey and, if so, are they reasonable.

Il. Applicable Law

Long-term care providers, such as Petitioner, participate in the Medicare program by
entering into provider agreements with the Department of Health and Human Services
(HHS). Requirements of participation are imposed by statute and regulation. Social
Security Act (Act) §§ 1819, 1919; 42 C.F.R. Parts 483, 488, and 489. In order to
continue participation in the Medicare program, providers must remain in substantial
compliance with program requirements. To be in substantial compliance, a facility’s
deficiencies may pose no greater risk to resident health and safety than “the potential for
causing minimal harm.” 42 C.F.R. § 488.301.

If a facility is not in substantial compliance with program requirements, CMS has the
authority to impose one or more of the enforcement remedies listed in 42 C.F.R.

§ 488.406, which includes imposing a CMP. Act, § 1819(h). CMS may impose a CMP
for the number of days that the facility is not in substantial compliance with one or more
program requirements, or for each instance that a facility is not in substantial compliance.
4
42 C.F.R. §§ 488.430(a); 488.440. The presence of a single deficiency cited at the D-
level or above is sufficient to establish a facility’s noncompliance with applicable
regulations and authorize the imposition of remedies. Beechwood Sanitarium, DAB No.
1824 (2002).

The regulations specify that a CMP imposed against a provider will fall into one of two
broad ranges of penalties. 42 C.F.R. §§ 488.408; 488.438. As applicable in the matter
before me, the lower range of CMPs, from $50 per day to $3,000 per day, is reserved for
deficiencies that do not constitute immediate jeopardy, but either cause actual harm to
residents, or cause no actual harm, but have the potential for causing more than minimal
harm. 42 C.F.R. § 488.438(a)(1)(ii).

IV. Burden of Proof

When a penalty is imposed and appealed, CMS must established a prima facie case that
the facility was not in substantial compliance with federal participation requirements. To
prevail, the facility must overcome CMS’s showing by a preponderance of evidence.*
Emerald Oaks, DAB No. 1800, at 4 (2001); Cross Creek Health Care Center, DAB No.
665 (1998), applying Hillman Rehabilitation Center, DAB No. 1611 (1997), aff'd
Hillman Rehabilitation Center v. HHS, No. 98-3789 (GEB), slip op. at 25 (D.N.J. May
3, 1999). I adopt the burden as set forth in the Board’s decision in the Hillman case, and
as stated and discussed in detail in the Batavia Nursing and Convalescent Center and
Batavia Nursing and Convalescent Inn cases. See Batavia Nursing and Convalescent
Center, DAB No. 1904 (2004); and Batavia Nursing and Convalescent Inn, DAB No.
911 (2004).

V. Findings of fact, conclusions of law and discussion.

make findings of fact and conclusions of law (Findings) to support my decision in this
case. However, I do not make a Finding on every deficiency in controversy during these
proceedings. The Board has previously sustained an ALJ’s discretion to exercise judicial
economy and not discuss each and every alleged deficiency. Beechwood Sanitarium,
DAB No. 1824 (2002), at 22; Beechwood Sanitarium, DAB No. 1906 (2004). I discuss
only those deficiency citations which I have determined support the noncompliance and
the remedies imposed.

* Throughout these proceedings, Petitioner has voiced its objection to my use of the
Hillman standard in determining the parties’ burden of proof. As noted in section IV above, the
application of this standard has been sufficiently outlined in prior ALJ and Board decisions and,
therefore, I need not further address this issue. However, I note that Petitioner has properly
preserved its argument for appeal. Tr. at 6.
5
A. Petitioner failed to comply substantially with Medicare participation
requirements during the May survey.

The May SOD sets forth one deficiency at the G-level of scope and severity in which
“actual harm” not at the immediate jeopardy level was alleged (F-tag 314); and 15
deficiencies constituting a “potential for harm” including 13 deficiency citations at the D-
level (F-tags 157, 221, 248, 250, 272, 278, 281, 309, 312, 316, 318, 328, and 332) and
two deficiency citations at the E-level (F-tags: 253, 324). CMS Ex. 1.

I first address the G-level deficiency, F-tag 314, where CMS alleges that Petitioner
caused “actual harm” to a resident due to alleged inadequate care of the resident’s skin
which CMS maintains caused the develop of an avoidable pressure sores.

1. CMS has established that, as of the May survey, Petitioner failed to
comply substantially with the requirements of 42 C.F.R.
§ 483.25(c) - F-tag 314(G) - Pressure Sores.

The regulation that is at issue governs the prevention and treatment of pressure sores.
The regulation provides that a resident who enters a facility does not develop pressure
sores unless his or her clinical condition makes the development unavoidable. 42 C.F.R.
§ 483.25(c)(1). Therefore, a facility has a duty to take all reasonable measures to ensure
that a resident does not develop a pressure sore. Although not a strict liability regulation,
it does presume that pressure sores are avoidable. To establish its prima facie case that a
facility was deficient under this tag, CMS must show that a resident developed a pressure
sore after admission. Where a resident develops a pressure sore, the burden thus falls on
the facility to show that the pressure sore was clinically unavoidable. Koester Pavillion,
DAB No. 1750, at 34 (2000).

Petitioner was cited for noncompliance with this requirement because it failed to provide
care and services necessary to prevent pressure sores from developing and subsequently
worsening for resident R55.° Specifically, CMS alleges that R55, who was identified as
at risk for the development of pressure sores, developed an avoidable pressure sore while
at Petitioner’s facility. CMS Br. at 23-26; CMS Exs. 1, at 22-24; 7, at 8-15

* Although the May SOD lists, in Example Two of tag F-314, allegations related to a
second resident, at hearing I dismissed Example Two of tag 314. Example Two deals with
surveyor observations of R30, however, at hearing CMS’s witness relied on notes during her
testimony which were not made available to Petitioner. My ruling striking testimony related to
R30, Example Two, is available in the transcript at page 130. I also strike from the record in this
case portions of pages 25-26 in CMS’s post-hearing brief which pertain to example two and R30
under the F-314 citation.
6
CMS maintains that R55's diagnoses placed her at risk for the development of pressure
sores. CMS Br. at 23; CMS Ex. 19, at 1. On May 5, 2004, R55 was assessed to have
developed recent pressure sores. CMS Br. at 23; CMS Ex. 19, at 3. CMS maintains that
R55's plan of care, dated February 6, 2004, required staff to bi-hourly turn and reposition
R55; apply a fleece pad in her chair; check her for incontinence every two hours; and
provide appropriate incontinence care as needed. CMS Br. at 23; CMS Ex. 19, at 3.

Surveyor Debbie Truett, RN., testified that on May 19, 2004, beginning at 12:23 p.m. and
for over a period in excess of four hours, she observed as R55 sat in her wheelchair in the
dinning room. Tr. at 28. During this period of time she noted that facility staff failed to
check R55 for incontinence and failed to reposition her. Tr. at 28, 30. According to Ms.
Truett, at 2:30 p.m. that afternoon she noticed R55's pants were wet. Tr. at 77. She
testified as to having approached staff approximately three times to change R55, but to no
avail. Tr. at 81.

It was not until 4:10 p.m. that same day that R55 received incontinence care. Tr. at 81.
When two aides transferred R55 from her wheelchair to her bed, Ms. Truett noticed a
puddle of urine on the R55's wheelchair. Tr. at 77. Ms. Truett reported that R55's
“clothing and the incontinent brief were so soiled that she was wet from her back, the
middle of her back, to her knees . . . when they took her brief off, there was urine and
feces just all over her.” Tr. at 29. Ms. Truett noted that during the incontinence care of
R55, an open bloody pressure sore was found to the left of R55's sacral bone. Tr. at 29.
The wound measured 1.2 by .5 by .2 centimeters in size and was determined to be a stage
II pressure sore. CMS Br. at 24. When Ms. Truett checked R55's clinical record she
could not find documentation of the noted pressure sore. Tr. at 29.

The following day, Ms. Truett interviewed the DON. Ms. Truett testified that the DON
acknowledged that the pressure ulcer had been discovered on May 18, 2004, but the
treating nurse had not documented it. The DON also admitted that R55's physician had
not been notified of the pressure sore, and R55 had not received any treatment for the
wound. Tr. at 32-33. The DON then stated to Ms. Truett that the treating nurse who
provided care to R55 would be discharged. Tr. at 33.

Petitioner maintains that “[t]o the extent any pressure areas/sores were proven, such were
clinically unavoidable and/or properly treated and any failure to deliver timely care was
singularly aberrational.” P. Br. at 4. Petitioner further asserts that the fleece pad was
unwarranted, had no pressure relieving value, and R55 was seated in a pressure relieving
seating system in a special wheelchair, with BAZA cream applied properly. P. Br. at 4
citing to Tr. 219-22. Petitioner maintains that the observations in the May SOD are
“unverifiable and/or not reliable,” and that Ms. Truett’s “testimony is not credible.” P.
Br. at 5.
7

Despite Petitioner’s assertions that Ms. Truett’s testimony is not credible, Petitioner did
not provide any support or documentary evidence to rebut Ms. Truett’s testimony.
Petitioner makes no reference to R55's clinical record to contradict the surveyor’s
observations. Additionally, Petitioner has failed to rebut the testimony that R55's plan of
care required staff to bi-hourly turn and reposition R55; apply a fleece pad in her chair;
check her for incontinence every two hours; and provide appropriate incontinence care as
needed. Petitioner’s assertions regarding Ms. Truett’s credibility unsupported by
evidence is not sufficient to rebut a prima facie case by a preponderance of the evidence.

Ms. Truett’s testimony regarding her observations are documented in her surveyor
notations and I accord her testimony and her notations the proper credit. See Meadow
Wood Nursing Home, DAB No. 1841 (2002). I observed Ms. Truett’s testimony, find it
to be credible, and weigh it accordingly. Ms. Truett has been a state surveyor for twelve
years performing long-term care surveys in nursing homes, residential care facilities and
intermediate care facilities for the mentally retarded. Tr. at 25. Her testimony was not
proffered as expert testimony on legal conclusions, but instead as the opinion of a state
surveyor trained pursuant to federal requirements, with relevant education background
and significant work experience, and direct and relevant knowledge of the instant survey
process and deficiency findings.

The burden of persuasion throughout a provider enforcement case under Hillman and it’s
progeny is on the provider to show substantial compliance by the preponderance of the
evidence once CMS has established its prima facie case of non-compliance. I find that
Petitioner failed to prove the pressure sore which R55 developed while at its facility was
unavoidable.

I also find that Petitioner has failed in its duty to take all reasonable measures to ensure
that R55 did not develop a pressure sore. At a minimum, Petitioner’s staff should have
provided routine incontinence care, routine repositioning, and treatment to the pressure
sore once it developed. Staff were aware of the pressure sore prior to the survey but
failed to document it. As reported, the attending nurse had been informed by staff of the
pressure sore the day before. Additionally, the surveyor directly observed an episode of
incontinence that was not dealt with in a timely manner, leaving a resident who was at
risk for pressure sores to sit for an extended period of time in her own urine and feces.

While it is not disputed that some appropriate care was provided to R55, such as the
assessment and provision of a pressure relieving seating system in a special wheelchair,
and the application of BAZA cream, Petitioner attempts to characterize the care as
sufficient for me to conclude the pressure sore was unavoidable. I disagree.
8

A clinically unavoidable sore is one that occurs when all that reasonably can be done to
prevent the sore is done. All that reasonably can be done does include, at a minimum, a
facility adhering to its own plan of care for a resident. Here, Petitioner’s staff failed to
exercise their responsibility to provide the necessary interventions in order to minimize
the adverse effects toward R55 of the development of a pressure sore. What was
observed by Ms. Truett was failure to provide minimal routine care. I find that
Petitioner’s staff also failed to provide repositioning and routine incontinence care to
R55. The record before me is absent of credible evidence that Petitioner’s staff
repositioned R55, provided proper incontinence care, or made efforts to keep R55 dry.

The weight of the evidence is that R55 developed a pressure sore while residing at
Petitioner’s facility. Petitioner has not advanced evidence to show that the development
of R55's pressure sore was unavoidable. Therefore, I find that Petitioner failed to provide
all necessary care and services to prevent the development of pressure sores to R55 and
conclude that CMS has established a prima facie case that Petitioner was not in
substantial compliance with 42 C.F.R. § 483.25(c)(1), and Petitioner has failed to rebut
the evidence presented.

2. CMS has established that, as of the May survey, Petitioner failed to
comply substantially with the requirements of 42 C.F.R.

§ 483.25 - F-tag 309(D) - Resident Assessment.

This regulation requires a facility to provide necessary care and services to residents in
the interest of attaining their highest practicable physical, mental and psychosocial well-
being consistent with their comprehensive assessment and plan of care. CMS alleges that
Petitioner did not meet the requirements of this regulation when it failed to maintain
padded bed rails in an upright position while R70 was in bed, as required by his plan of
care and physician’s order. CMS Br. at 20; CMS Exs. 1, at 20; 5, at 9, 33; Tr. at 146-48.

Surveyor Patricia Buczkowski, LSW, testified at the hearing that on two separate
occasions during the survey (May 15 at 3:43 p.m. and May 19 at 8:38 a.m.) she observed
R70 in his bed without the bed-rails in the required position. She also observed that the
bed-rails did not have the required padding. Tr. at 146-47.

Petitioner does not deny that R70's bed-rails were not in the required position, nor does
Petitioner challenge Ms. Buczkowski’s observations on May 15 and May 19 that the bed-
rails were not padded. In response to the allegations, Petitioner states that R70 was not at
risk for harm and, at most, if R70 did have a seizure, he “would collide with some
unspecified force with an unpadded side rail.” P. Br. at 3. Unfortunately for Petitioner,
this argument - standing alone- does not provide any support for its assertion that R70
was not at risk for harm.
9

Due to a seizure disorder, R70 had been identified by his physician to be in need of
padded bed rails. Both his plan of care and his Minimum Date Set assessment (MDS)
identify the need for the padded bed-rails. CMS Ex. 5, at 33. Petitioner does not dispute
that on May 15 and 19, R70 was not provided with the care that had been ordered for him
y his physician and as observed by Ms. Buczkowski.

Petitioner’s witness, Kristina Convoy, LPN and Clinical Advisor to the facility, testified
that there were times during the provision of care to R70 where the bed-rails and
paddings were removed. Tr. at 217. However, Nurse Convoy’s testimony does not rebut
the fact that when the surveyor observed R70, his bed rails were down. Even if care had
een provided to R70 right before the surveyor entered the room, it still does not explain
why staff would have left the room without replacing the bed rail padding and lifting the
ed rail after they had completed R70's care.

find Ms. Buczkowski’s account of her observations of R70 on May 15 and May 19 to be
credible. Petitioner’s staff placed R70 at risk for more than minimal harm by not
ensuring R70's bed-rails were properly placed and padded in accordance with R70's
assessed needs as identified both by his physician and his clinical record. Petitioner has
failed to successfully rebut CMS’s prima facie showing as to this citation. I conclude that
Petitioner was not in compliance during the May survey with participation requirements
as outlined in the regulations at 42 C.F.R. § 483.25.

3. CMS has established that as of the May survey, Petitioner failed to
comply substantially with the requirements of 42 C.F.R.
§ 483.25 (a)(3) - F-tag 312(D) - Resident Assessment.

A facility’s obligations with respect to quality of care (activities of daily living) are set
forth, in relevant part, at 42 C.F.R. § 483.25(a)(3), which provides that based on the
comprehensive assessment of a resident, the facility must ensure that .. . [a] resident who
is unable to carry out activities of daily living receives the necessary services to maintain
good nutrition, grooming, and personal and oral hygiene. CMS alleges that Petitioner
failed to comply with the requirements of this regulation because, on two observations
during the May survey, Petitioner’s staff failed to provide two residents with required oral
care - R33 and R34. Both residents were identified by Petitioner’s staff as needing oral
care, and each was identified as being dependant and unable to carry out their own oral
hygiene needs.
10

a. R33

A review of R33's June 26, 2003 plan of care indicates that staff are to “[p]rovide oral
hygiene q day and PRN.” CMS Ex. 14, at 2. During facility observations on May 19,
2004, Surveyor Bernie Poole, R.N., observed that during R33's morning care, she was not
furnished with oral care as required in her MDS. Tr. at 112. According to Ms. Poole,
facility staff conceded that they had failed to provide the resident with the required daily
oral care. Tr. at 113. Ms. Poole avers that the lack of daily oral hygiene for an individual
who is fed by a gastronomy tube can lead to halitosis, saliva buildup, and eventually
dental cavities. Ms. Poole maintained that there was a potential for more than minimal
harm with regard to Petitioner’s omission of oral care of R33, as the buildup of saliva, in
itself, can cause dental cavities. Tr. at 114.

Petitioner maintains that Ms. Poole made a half-hour observation of R33 and concluded
that a failure to provide oral care to the resident during this time placed her at risk for
more than minimal harm. P. Br. at 3. Petitioner states that R33 was not being fed
anything by mouth and, therefore, could not develop cavities as claimed by Ms. Poole.

Id. at 3-4. However, Petitioner provides no documentary evidence to dispute R33's plan
of care which provides that staff are to provide oral care to R33 daily and as needed. Nor
does Petitioner refute Ms. Poole’s testimony that on the day following her observation she
discussed her concerns about R33 not receiving oral care at a meeting at which staff
confirmed to her that oral care should have been provided to R33 during her morning
routine care. Tr. at 113.

Petitioner claims that if the allegations are proven, no actual harm occurred and therefore
a CMP assessment is not warranted. P. Br. at 6-7. To support this assertion, Petitioner
provided the testimony of its witness, Krystina Conroy, LPN and Clinical Advisor, who
stated that oral care was not tracked specifically as oral care but rather as morning care by
the facility. Ms. Conroy stated that since R33 was not taking anything in by mouth there
could not be harm to the resident by not having oral care provided the day of the
surveyor’s observation. Tr. at 217-18.

First, with a D-level deficiency citation, actual harm does not have to be established.
Rather, the potential for more than minimal harm must be shown. Second, R33's plan of
care called for staff to provide her with oral care each day as determined by her
interdisciplinary team. Just because R33 was not taking food orally does not eliminate
her susceptibility to cavities, dry mouth and other oral problems.
11

Petitioner has introduced nothing that would suggest that, when Ms. Poole made her
observations, R33 had been given oral care as prescribed by the plan of care.
Consequently, I conclude that R33 was not provided the necessary services to maintain
oral hygiene as required by 42 C.F.R. § 483.25(a)(3).

b. R34

R34's physician’s order required staff to provide oral care to her three times per day after
meals. Tr. at 113. CMS claims that R34 was assessed to need the oral care order
following the diagnosis of an abscessed tooth. CMS Br. at 22. Ms. Poole observed R34
on May 19, 2004, at 7:30 a.m., in her room. She noted that R34 was dressed and waiting
for breakfast. On May 20, 2005, Ms. Poole interviewed the nurse aide regarding R34's
oral care. Ms. Poole reported that the nurse aide informed her that staff on the night shift
assisted R34 in getting out of bed the morning of May 19. The nurse aide then stated that
she had swabbed R34's mouth out prior to breakfast but did not provide any oral care
after breakfast. The nurse assistant also informed Ms. Poole that she did not perform any
oral care for R34 after her lunch on May 19, 2004. Tr. at 113.

4

During the hearing, Ms. Conroy, Petitioner’s facility clinical advisor, did not dispute that
R34 did not receive oral care after breakfast the morning of May 19. Tr. at 218. Ms.
Conroy confirmed that several months prior to the survey, R34 had an abscessed tooth
which resulted in the order for oral care after each meal. According to Ms. Conroy,
however, the abscessed tooth had been resolved and the physician’s order was “an order
that did not get discontinued.” Tr. at 218.

CMS has established that there was a current physician’s order for R34 to receive oral
care after each meal, and Petitioner does not dispute this. Petitioner also does not dispute
that oral care as required by the physician’s order was not provided to R34 after her
breakfast on May 19. In its defense, Petitioner presented three exhibits which contained
portions of R34's clinical records (P. Exs. 8-10). However, Petitioner does not direct me
to any documentary evidence establishing that R34's physician did, in fact, discontinue
the oral care order, thus establishing that there was no longer a need to continue the oral
care. I have carefully reviewed P. Exs. 8-10, and do not find such documentation.
Consequently, I find that the evidence before me does not support Petitioner’s assertions
that the abscessed tooth had been resolved and the physician’s order was just not
discontinued.

CMS has established that R34 had an abscessed tooth which necessitated a physician’s
order for oral care, and that order was still current at the time of the survey. Petitioner
does not dispute that oral care was not provided to R34 as noted by Ms. Poole. At the
12

hearing, Ms. Poole testified that the lack of oral care created a potential of more than
minimal harm to R34. I agree and, therefore, find that Petitioner’s omission of necessary
oral care for R34, in accordance with her physician orders, placed R34 at risk for more
than minimal harm.

Petitioner failed in its rebuttal to prove that it was in substantial compliance with the oral
hygiene requirements for R33 and R34 and, based on the evidence presented, I conclude
that Petitioner was not in substantial compliance with requirements of 42 C.F.R.

§ 483.25(a)(3) during the May survey.

4. CMS has established that, as of the May survey, Petitioner failed to
comply substantially with the requirements of 42 C.F.R.
§ 483.25(d)(2) - F-tag 316(D) - Incontinence Care.

The regulation under 42 C.F.R. § 483.25(d)(2) requires that a resident who is incontinent
of bladder receive appropriate treatment and services in order to prevent urinary tract
infections and to restore as much normal bladder function as possible.

During observation of incontinence care to three residents, R33, R46, R54, surveyors
observed a facility nurse aide use an improper technique to clean the residents’ perineal
area.

On May 19, 2004, Ms. Poole observed a nurse aide provide R33 with incontinence care
by applying a washcloth repeatedly, in an up-and-down motion to the resident’s perineal
area while the resident was lying on her back. CMS Ex. 1, at 25; Tr. at 116. The nurse
aid then turned the resident on her side and used the same soiled washcloth to clean R33's
perineal and coccygeal area in repeated back and forth motions. CMS Ex. 1, at 25. CMS
avers that this technique was improper as it could spread bacteria normally found in stool
and around the coccygela area into the urinary tract, thus exposing R33 to the risk of
urinary tract infections. CMS Br. at 27; CMS Ex. 1, at 25-26; Tr. at 116.

R46's clinical record indicates that she has a history of urinary tract infections and her
plan of care requires incontinence checks every two hours. Tr. at 43; CMS Ex. 19, at 9;
P. Ex. 15, at 2. Ms. Truett observed incontinence care of R46 on May 19, 2005. Ms.
Truett found R46 was in her wheelchair all afternoon in the dining/activities area without
having been checked for incontinence. Tr. at 44. R46 told Ms. Truett that she had not
received incontinence care since “she had gotton up in the morning.” Tr. at 44. The
information R46 reported to Ms. Truett was confirmed by the nurse aide responsible for
R46's care. Tr. at 45. Ms. Truett also noted that a review of R46's clinical record
disclosed that R46 had a recent history of urinary tract infection that was E-coli. Tr. at
44. At 3:30 p.m. on May 19, Ms Truett observed a nurse aid transport R46 to her room
where she was checked for incontinence. R46's brief was filled with urine and feces. Ms.
Truett noted dried feces surrounded the outer areas of R46's buttocks. Ms. Truett then
13

observed the nurse aid use a soiled washcloth to clean the befouled areas. Tr. at 45-46;
CMS Exs. 1, at 27; 19, at 42. Ms. Truett concluded that this technique placed R46 at risk
of contamination of her perineal area and her outer urinary tract area. Tr. at 45.

Ms. Truett observed incontinence care of R54 on May 20, 2004, and also reported the use
of a soiled washcloth to clean the incontinent resident. Ms. Truett reported that the nurse
aide wiped both the perineal area and the catheter site of R54 with a visibly noticeable
feces-soiled cloth. Tr. at47; CMS Ex. 1, at 27. The nurse aide then proceeded to clean
R54's in-dwelling catheter as well with the same feces-soiled cloth. Tr. at 47.

Petitioner challenged whether Ms. Truett made “consistent observations” during the time
period she alleges; specifically, Petitioner challenges the length of time that passed before
the onset of incontinence services. Petitioner questions why both surveyors did not
themselves intervene when they saw incontinence care being performed incorrectly. P.
Br. at 6. Petitioner also questions the hearsay statement from the nurse aide confirming
that R46 had not received incontinence care and further maintains that Ms. Poole’s survey
notes do not support her claim about talking to staff. /d. at 6-7. Petitioner concludes its
argument by stating that “[n]Jo actual harm occurred,” and the facility was in substantial
compliance by June 4, 2004. Jd. at 7.

Petitioner presented the testimony of Ms. Conroy who testified that nurse aides attend a
training program prior to commencement of work at the facility. Ms. Conroy also
testified that a quality assurance program is provided three times a week where a nurse
observes the certified nurse aides. Tr. at 223, 225. Ms. Conroy was queried on direct
examination as follows:

Q Do you know whether residents 33, 46 or 54 had a UTI within - - urinary

tract infection, within say the month after the survey?

A o, I do not.

Q Are there any other reasons you can identify for the tribunal as to your

disagreement with the citation of the facility under this tag?

A 0.

Q Did you actually speak to any of the nurse aides that were alleged to have

performed the incontinence care at issue under tag F-316?

A o, I did not.
Tr. at 224. I find it surprising that Ms. Conroy, as the clinical advisor to the facility, did
not seek out the nurse aides who were on duty during the surveyors’ observations. She
could have easily have looked at the staff schedule to determine which nurse aides were

working with R33, R46, and R54. She also could have examined the clinical records for
these residents in order to ascertain whether they had been diagnosed with any urinary
tract infections. But, she did not.
14

Even if none of the residents at issue under this tag had developed urinary tract infections
subsequent to the survey, that does not show that they were not at risk for harm. It is a
long settled principle that CMS is not required to demonstrate that residents have suffered
actual harm in order to establish a prima facie case of a violation. See Beechwood
Sanitarium, DAB No. 1906 (2004). An appellate panel of the Board noted that “implicit
in Congress’ requirement that a facility [substantially comply with each regulation] is a
finding that a failure to do so poses a threat of more than minimal harm.” See Beverly
Health & Rehabilitation-Springhill, DAB CR 553 (1998), aff'd DAB No 1696

(1999).

As for Petitioner’s challenge to Ms. Truett’s “consistent observations” during the time
period she alleges. I am not persuaded that Ms. Truett’s pattern of making observations
shows the observations themselves to be unreliable. Petitioner provides no bases upon
which I can find Ms. Truett’s observations to be unreliable other than to argue that Ms.
Truett made more than one observation relatively close in time as the survey progressed.
Petitioner has introduced neither evidence to attack the reliability of Ms. Truett’s personal
observations nor evidence that CMS was mistaken in its conclusion that incontinence care
offered to R33, R46 and R54 on the dates in question was inadequate.

Petitioner also questions why both surveyors did not themselves intervene when they saw
incontinence care being performed incorrectly. I note that it is not the role of the
surveyor to intervene and assist the facility staff in their responsibility to provide the
appropriate care and services to the residents. The surveyors are at the facility on behalf
of CMS as observers of care, not to intervene and assist staff.

Petitioner also questions Ms. Poole’s hearsay assertion that the nurse aid providing care to
R46 confirmed that R46 had not received incontinence care, stating that Ms. Poole’s
survey notes do not support her claim about talking to staff. Petitioner seems to suggest
that Ms. Poole’s testimony based on hearsay should be discounted, although Petitioner
must know that hearsay is admissible in these proceedings.

I find Ms. Truett and Ms. Poole’s account of what they observed on May 19 and 20, 2004
to be credible. I also find that Petitioner has not provided either documentary or
testimonial evidence to rebut CMS’s prima facie case that R33, R46, and R54 were not
provided with proper incontinence care to prevent urinary tract infections. CMS has
established that the actions of Petitioner’s staff when they used improper techniques in
cleaning the residents perineal areas placed R33, R34, and R56 at risk. I find that the
improper practices by Petitioner’s staff placed these residents at risk for more than
minimal harm as bacteria from feces can contaminate the residents’ urinary tract resulting
in urinary tract infections. Based on this finding, I conclude that based on the evidence
before me, CMS has established that as of the May survey, Petitioner failed to comply
substantially with the requirements of 42 C.F.R. § 483.25(d)(2).
15

5. CMS has established that, as of the May survey, Petitioner failed to
comply substantially with the requirements of 42 C.F.R.
§ 483.25(e)(2) - F-tag 318(D) - Range of Motion.

The regulation at issue requires a facility to ensure that a resident with a limited range of
motion receives appropriate treatment and services to increase the resident’s range of
motion and/or to prevent further decrease in their range of motion.

CMS maintains that R33 had a physician’s order for hand splints to be applied to both her
ands between 9:00 a.m. and 3:00 p.m. daily. Tr. at 116; CMS Ex. 14, at 6. Ms. Poole
reported that on May 19, 2004, the hand splints were not applied to R33's hands as
required. Tr. at 116-17. Ms. Poole testified that she discussed this omission with
Petitioner’s staff and was told that R33 should have had the hand splints on. Tr. at 117;
CMS Ex. 1, at 28.

R75 had a physician’s order for splints/braces to be applied to both legs. CMS Ex. 18, at
38. On May 21, 2004, Ms. Buczkowski observed the velcro strap on R75's left leg brace
was broken and did not fit securely on his leg. Tr. at 149. When she inquired about the
roken strap, a staff nurse on the unit advised her that the strap had been broken for as
long as six months. Tr. 149. CMS maintains that this created a potential risk for more
than minimal harm in that R75's brace did not fit securely to his leg while he was
receiving services to work with assistance in transferring.

n its post-hearing brief, Petitioner indicated that based on the evidence at hearing, it
wished to waive argument on tag F-318. P. Br. at 7. Therefore, I find that Petitioner has
not successfully rebutted CMS’s showing that facility staff failed to apply R33's hand
splints on May 19, 2004, nor has Petitioner provided evidence to refute that R75's leg
race was broken. The language of the regulation does not require that there be a
showing of actual harm, only that treatment or services were not delivered.

CMS has established a prima facie case as to R33 and R75. Thus, Petitioner bears the
urden of rebutting the prima facie case. I find that Petitioner has not successfully done
so here. I therefore conclude that Petitioner was not in substantial compliance with the
requirements of 42 C.F.R. § 483.25(e)(2) at the time of the May survey.

6. CMS has established that, as of the May survey, Petitioner failed to
comply substantially with the requirements of 42 C.F.R.
§ 483.25(h)(2) - F-tag 324(D) - Supervision and Accidents.

The regulation at 42 C.F.R. § 483.25(h)(2) requires that each resident be provided with
adequate supervision and assistance devices in order to prevent accidents. In interpreting
and applying section 483.25, the Board has been consistent in the opinion that providers
are not strictly liable as insurers or unconditional guarantors of good outcomes in the
16

delivery of services to facility residents. Rather, the quality of care provisions of section
483.25 impose an affirmative duty upon providers to deliver services designed to achieve
the best possible outcomes to the highest practicable degree. Woodstock Care Center,
DAB No. 1726, at 25 (2000), aff'd, Woodstock Care Center v. Thompson, 363 F.3d 583
(6" Cir. 2003). This interpretation is based upon the legislative history of the Act and
regulations which reflect that Congress and the Secretary chose to focus upon the desired
ends or results of care, thus allowing facilities to meet the requirements for individual
care in a variety of ways. See Omnibus Budget Reconciliation Act of 1987, Pub. L. No.
00-203 (Dec. 22, 1987); 54 Fed. Reg. 5316 (Feb. 2, 1989).

The specific manner by which facilities are to deliver care and services is not prescribed
by 42 C.F.R. § 483.25(h)(2). A facility is permitted to determine the means to achieve
the regulatory end which is the prevention of accidental injury of facility residents.
Therefore, in order to evaluate Petitioner’s compliance with section 483.25(h)(2), it is
necessary to examine whether the facility provided adequate supervision designed to meet
the residents’ assessed needs and to mitigate foreseeable risks of harm to them.
Northeastern Ohio Alzheimer’s Research Center, DAB No. 1935 (2004); Tri-County
Extended Care Center, DAB No. 1936 (2004).

The level and kind of supervision provided to the residents is reviewed in order to
determine whether it was sufficient to prevent any untoward events. Whether the
supervision or assistance devices are adequate depends on what kind of measures would
be determined to prevent potential accidents from occurring given the known or
reasonably foreseeable risks. For instance, in Woodstock, the Board considered whether
the facility had notice of, or should reasonably have anticipated, the risk of the types of
events that occurred and whether any reasonable means were available to prevent them
without violating the residents’ rights. Woodstock, DAB No. 1726, at 26-27. In the case
before me, the question has to be answered as to whether the facility did “everything in its
power to prevent accidents.” Odd Fellow and Rebekah Health Care Facility, DAB No.
1839, at 6-7 (2002), quoting Asbury Center at Johnson City, DAB No. 1815, at 12 (2002)
and Koester Pavilion, DAB No. 1750, at 25-26 (2000).

Based on the regulation and the cases addressing this provision, CMS will meet its burden
in establishing a prima facie case if it shows that Petitioner failed to do what it could to
supervise residents or provide assistance devices to minimize risks that could lead to
accidents. If CMS establishes a prima facie case, the burden shifts to Petitioner and the
record will then be considered in terms of where the preponderance of the evidence lay.

CMS contends that Petitioner failed to ensure that three residents (R30, R44, and R53)
were provided with adequate supervision and assistance devices necessary to prevent an
accident from occurring.
17

a. R30

CMS alleges that R30 did not receive adequate supervision because she was improperly
transferred with less than total assistance. CMS Br. 32. R30 had a history of falls within
the previous 31-180 days and her May 2, 2004 MDS assessment indicated that she
required a two-person transfer. Tr. at 118.

On May 18, 2004, surveyor Buczkowski observed R30 being transferred from the
wheelchair to the bed by only one staff member who used a gait belt and a stand-and-
pivot transfer. When the transfer was first attempted, Ms. Buczkowski observed R30
holding the arm of the wheelchair not letting go. On the second transfer attempt, R30 did
not let go of the wheelchair and was dragged by the staff from the chair to the bed ina
pivoting motion. Tr. at 118-19.

Petitioner does not dispute the May 18, 2004 observations of Ms. Buczkowski, nor does
Petitioner dispute that R30 was transferred with just one staff person, not two as oultined
inher MDS. As a comment regarding the transfer of R30 observed by the surveyor,
Petitioner stated “perhaps that was not advisable.” P. Br. at 7. Petitioner maintains that at
no time during the incident observed by the surveyor did R30 bear weight on any part of
her body that placed her at risk. /d. Further, Petitioner questions CMS’s assertion of
possible harm to R30 stating that if R30 was strong enough to resist her transfer by
grabbing onto her wheelchair, it is highly unlikely that she was at risk of a bone fracture.
Id.

I find that CMS has met its burden. CMS has first established that on May 18, 2004,
proper care and supervision was not provided by Petitioner’s staff when R30 was
transferred by one staff rather than the two staff required. The improper transfer placed
R30 at risk of harm. Furthermore, CMS has shown that Petitioner’s staff failed to do
what they could do and what was required in R30’s plan of care. Having established a
prima facie case, the burden shifts to Petitioner and I find that Petitioner has not presented
either documentary or testimonial evidence to rebut CMS’s prima facie showing.
Petitioner has denied this allegation only to the extent that it maintains that it was unlikely
the R30 was at risk for harm. | therefore sustain the citation of noncompliance relative to
this resident.

b. R44
CMS alleges that Petitioner’s staff failed to use an alarm device intended to provide

protection to R44 from accidents in accordance with his plan of care. CMS Br. at 31;
CMS Ex. 19, at 19. R44's MDS assessment, dated February 12, 2004, noted that he
18

required physical assistance with transfers and ambulation. Tr. at 35; CMS Ex. 19, at 18.
R44 fell on October 27, 2003, and was found on the facility floor. As the result of that
fall R44 was assessed to need a pressure sensitive alarm in both his bed and wheelchair to
minimize the risk of further falls. R44's plan of care identified his risk and the
intervention included the use of the alarm. Tr. at 35, 37-39.

On February 16, 2004, R44 was found on the floor on his back. Tr. at 37; CMS Exs. 11,
at 5319, at 22. The record documenting this fall notes that the alarm device was planned
but was not in place at the time of the fall. Tr. at 37; CMS Exs. 1, at 29-30; 11, at 1-2; 19,
at 19.

At hearing, surveyor Truett testified to the following direct observations:

(1) At 2:25 p.m. on May 19, 2004, R44 was awake and lying in bed stating
that he planned on getting up and out of bed. An alarm box was observed
on the bed, but the alarm was turned off. Tr. at 36. Facility staff verified to
Ms. Truett that the alarm was not functioning. The same staff shook the
alarm a few times and the light began to flash. Tr. at 36-37.

(2) At 7:55 a.m. on May 20, 2004, R44 was lying in bed on his back. The
alarm box was on the bed, but the green light was not flashing. Ms. Truett
testified that facility staff informed her that the alarm was not functioning

and stated that the alarm box was actually turned off. Tr. at 37-38.

According to Ms. Truett, the alarm was available and on the bed, but it was not turned on
or it was not functioning correctly. Tr. at 38.

Petitioner suggests that R44 could have deactivated the alarm himself. P. Br. at 8; Tr. at
227. Petitioner also maintains that the alarm was only one intervention used for R44 and
staff were “readily nearby when both ‘incidents’ occurred.” P. Br. at 8; Tr. at 226-28.
Additionally, Petitioner states that R44's room is near the nursing station in the hallway
which is staffed with six to seven staff members including Ms. Conroy, who was at the
corner of the nursing station on the day the surveyor noted that R44's alarm was not
functioning - May 20, 2004. P. Br at 8; Tr. at 226-27.

However, as Ms. Truett testified during cross examination, there was no assessment or
other notation in R44's clinical record that identified R44 as deactivating his alarm
himself. If there were such an assessment or notation, then staff should have not
continued use of the device as it was then ineffective. Tr. at 83. Ms. Truett further
testified that staff kept the pressure sensitive alarm as their primary device for fall
prevention although they did have other interventions in place as well. Tr. at 83.
19

I find that staff should have been aware if R44 had, in fact, intentionally turned off the
device as this would defeat the purpose of having the alarm. I also find that staff were not
using the alarm intended to provide R44 protection from accidents in accordance with
R44's plan of correction — the device simply was not functioning. That R44 did not have
any recorded incidents of falls from February 16, 2004 through May 20, 2004 does not
negate the need for a fall intervention to be effective. Given R44's history of falls, I find
that there was risk of more than minimal harm that could result in injury to R44 in the
event he fell. Additionally, Petitioner did not present any documentation that the
physician who ordered the alarm device had ever been informed that R44 deactivated the
alarm as Petitioner alleges. I find that there is no indication that the facility tried to
safeguard R44 by at least documenting the alleged problem of R44 deactivating his alarm
or informing his physician of this alleged practice. Documentation of R44's alleged
practice of deactivating his alarm would have placed the physician and the
interdisciplinary team on notice that other interventions should be utilized. Based on the
evidence before me, I conclude that R44 was not provided with the necessary device and
supervision as required by 42 C.F.R. § 483.25(h)(2).

ce. R53

As to the allegations presented by CMS pertinent to R53, I conclude that CMS has not
established a prima facie case in showing that R53 did not receive adequate supervision.
R53 had been assessed as at high risk for falls, had an unsteady gait, impaired vision and
vertigo. Tr. at 40; CMS Ex. 1, at 26. R53's plan of care identified the need for use of a
call light to be kept within reach. Tr. at 41; CMS Ex. | at 31. During the survey, Ms.
Truett observed that R53's call light was located out of R53's reach. Tr. at41. She
observed R53 sitting in his wheelchair and his call light was on the other side of the room.
Ms. Truett maintained that R53 would not be able to get around the bed as there was not
sufficient room to maneuver around the foot of the bed. Tr. at 85. R53 was in a two-
person room and his roommate also had a call light. Tr. at 85.

Petitioner maintains that although CMS cited the facility for failure to place a call light
within R53's reach, he was in a wheelchair in a two-person bedroom and could easily
ave wheeled himself over to the call light and that he was sufficiently mobile and vocal
enough to either get help or call out for it. P. Br. at 8. Ms. Conroy testified and drew a
floor plan of R53's room which was marked as ALJ Ex. 1 and admitted into the record. I
ave considered the parties’ arguments related to R53, the testimony of both Ms. Truett
and Ms. Conroy, and I have reviewed the diagram of R53's room. I find that given the
dimensions of the room and objects located within the room that R53, as Ms. Conroy
testified, had sufficient space to be able to get around his bed and maneuver to where his
call light was placed. The parties agree that the access space to the call light is six feet.
R53's wheelchair is approximately 46-48 inches as represented by Petitioner and not
disputed by CMS. Tr. at 240. Even if R53 was seated in his wheelchair near the
athroom door when Ms. Truett walked into his room, it appears feasible that based on

20

the relative locations of objects in his room, R53 had sufficient room to propel his
wheelchair to the location of the call light. ALJ Ex. 1, Tr. at 239-42. Irely on Ms.
Conroy’s personal familiarity with R53's room as well as her personal experience with
R53's usage of his room. Ms. Conroy testified that R53 could not have been to the left of
his bed when Ms. Truett entered his room as there is a refrigerator located in that area.

Tr. 85,229. Ms. Conroy further stated that while in his room, R53 frequents the space
next to the bathroom door in order to sit and look out into the hallway. Tr. at 229. I find
this very likely and given the location of the call light in the room and that there is six feet
of access space for R53 to propel himself to the call light, I conclude that it is more likely
than not that R53's call light was accessible to him.

However, while I find that CMS did not establish a prima facie case for the allegations
related to R53 under F-tag 324, I previously determined that based on the evidence before
me, Petitioner’s staff failed to provide the necessary supervision to R30 and R44.
Therefore, for the reasons previously outlined for R33 and R44, I conclude that, as of the
May survey, Petitioner failed to comply substantially with the requirements of 42 C.F.R.
§ 483.25(h)(2).

7. CMS has established that, as of the May survey, Petitioner failed to
comply substantially with the requirements of 42 C.F.R.
§ 483.25 (m)(1)- F-tag 332(D) - Medication Error.

The regulation requires that a facility not exceed a medication error rate of five percent.
CMS maintains that during the May survey, Petitioner was determined to have a
medication error rate of nine percent which included three omitted medications and one
dosage error. CMS Br. at 35; CMS Ex. 1, at 34-36.

Petitioner does not dispute that the medication dosages were not administered. P. Br. at
9-10. Rather, Petitioner maintains that observation of eight medication passes is
statistically insignificant for a facility with over 80 residents and thousands of
medications passed each day. P. Br. at 9. Petitioner directs me to Pacific Regency Arvin,
CR792 (2001) to support its assertion that there is an incongruity in the sampling
methodology applied by the surveyors in this case. I have read the Pacific Regency Arvin
case and the Board’s review of that decision and find that Petitioner’s reliance on this
case is misplaced. I note, and as CMS has pointed out, Petitioner’s argument has already
been sufficiently addressed by the Board in Pacific Regency Arvin. The Board rejected
the ALJ’s approach in that case in that he required surveyors to document not just errors
but also to demonstrate the statistical validity of its medication pass procedures in order to
establish its prima facie case. The Board concluded that the regulation in no way imposes
such a requirement by stating: “[t]here is no basis for the ALJ’s imposing on CMS an
additional requirement of a showing of statistical significance to establish a prima facie
case that the medication error regulation was violated.” Pacific Regency Arvin, DAB No.
1823, at 12 (2002).

21

Petitioner does not deny the medications errors occurred and, based on the record before
me, I find that CMS has established a prima facie case that at the time of the May survey
Petitioner’s medication error rate was higher than five percent. I therefore conclude that
Petitioner was not in substantial compliance with the requirements of 42 C.F.R.

§ 483.25(m)(1).

B. Remaining deficiencies cited during the May survey of Petitioner’s facility.

As previously noted, Petitioner was cited for lack of substantial compliance with 25
Medicare participation requirements during the May survey of its facility. The parties
waived presentation of evidence and testimony for nine life-safety code tags identified in
the May SOD based on CMS’s assertion that they were not considered as a basis for the
imposition of a CMP or other remedy. In addition, the parties agreed that CMS would
present testimonial evidence on only the quality of care citations listed in the May SOD,
specifically, F-tags 309, 312, 314, 316, 318, 324, 328, 332. CMS chose to present
testimonial evidence at the hearing on eight of the 16 quality of care deficiency tags
identified in the May SOD and to submit the May SOD as evidence of the allegations for
the non-quality of care citations without providing testimonial evidence as to the
remaining tags.

I have addressed allegations in the SOD related to seven quality of care deficiency F-tags:
314 (42 C.F.R. § 483.25 (c)); 309 (42 C.F.R. § 483.25); 312 (42 C.F.R. § 483.25(a)(3));
316 (42 C.F.R. § 483.25(d)(2)); 318 (42 C.F.R. § 483.25(e)(2)); 324 (42 C.F.R.

§ 483.25(h)(2)); and 332 (42 C.F.R. § 483.25). I do not find a need to continue to review
any of the other alleged deficiencies identified by CMS and outlined in the May SOD
because, as noted above, I discuss only those deficiency citations which I have
determined support the noncompliance and the remedies imposed. Therefore, for
purposes of judicial economy, I will not review the 200 series deficiencies which CMS
alleged in the May SOD, nor do I analyze tag F-328 as I have determined that the
deficiencies I have reviewed and sustained, as identified above, provide a sufficient basis
for the CMP imposed in this case.

Cc. A CMP of $400 per day for each day of the May 21, 2004 through June 30,
2004 period is reasonable.

Having found a basis for imposing a CMP, I now consider whether the $400 per day
CMP is reasonable. I apply the four factors listed at 42 C.F.R. § 488.438(f), which
include: (1) the facility’s history of noncompliance, including repeated deficiencies; (2)
the facility’s financial condition; (3) the seriousness of the deficiencies as set forth at 42
C.F.R. § 488.404; and (4) the facility’s degree of culpability.
22

First, with regard to Petitioner’s history of noncompliance, the deficiency in the previous
survey is not at issue in this appeal except for the purpose of showing relevant survey
history which is considered here for the limited purpose of evaluating the facts supporting
the reasonableness of the CMP. CMS has established and Petitioner has not refuted that it
was cited for a G-level deficiency at tag F314 in its previous standard survey which also
involved a failure to provide adequate pressure sore treatment for residents.

Second, as to Petitioner’s financial condition, Petitioner did not submit evidence that the
financial viability of the facility was at risk by paying the CMP. While an ALJ may
consider a facility’s financial condition in determining whether the amount of a CMP is
within a reasonable range, the facility must initially raise that issue as a basis for
disputing the reasonableness of the amount of the CMP; otherwise, the ALJ can properly
exercise his discretion in excluding it. Community Nursing Home, DAB No. 1807, at 21,
26 (2002). Where either party fails to take advantage of its opportunity to submit
evidence of a facility’s financial condition, that opportunity is waived. Jd. at 15-16;
Emerald Oaks, DAB No. 1800 (2001). In this case, the record is silent as to Petitioner’s
financial solvency, and Petitioner has not claimed that its financial condition makes the
amount of the CMP unreasonable.

Third, I find that all of these deficiencies are serious failure on the part of this Petitioner.
Specifically, Petitioner’s staff’s failure to provide care and services necessary to prevent
pressure sores from developing on R55; failure to provide R70 with his bed rail padding
and place the rails in the required position; failure to provide oral hygiene care to both
R33 and R34; failure to use proper washing techniques when providing incontinence care
to R33, R46, and R54; failure to apply R33's hand splints and ensure R75's leg brace was
not broken; failure to provide adequate supervision to R30 and R44; and failure to
maintain a medication error rate of less than five percent.

Fourth, Petitioner manifests a high degree of culpability for the deficiencies that were
identified at the May survey of Petitioner’s facility. The deficiencies are not simply
isolated dereliction of care as Petitioner would have me conclude. Together, they show
that Petitioner and its staff were not diligent in meeting the fundamental responsibility to
residents to ensure that the residents be provided with the necessary care and services as
required by regulation.

Where there is no immediate jeopardy alleged, a CMP may be imposed within a range
from $50 — $3,000 per day for each day of continued noncompliance. 42 C.F.R.

§ 488.438(a)(1)(ii). As I mention above, it is well established that a single deficiency at a
D-level or above is sufficient to authorize CMS to certify a finding of noncompliance. 42
C.F.R. §§ 488.301, 488.408(c)(2)(i); see also Beechwood Sanitarium, DAB No. 1824
(2002); Wisteria Care Center, DAB No. 1892 (2003).
23

I have weighed Petitioner’s evidence relevant to the regulatory factors in order to contest
the reasonableness of the amount of the CMP. Based on the testimony offered at the
hearing, the documentary evidence, the arguments of the parties, and the applicable law
and regulations I conclude that the CMP which CMS determined to impose here - $400
per day - which is at the lower end of the non-immediate jeopardy range, is reasonable.
Petitioner has offered no evidence that would rebut or detract from the foregoing. I
further conclude that as Petitioner was out of substantial compliance with several quality
of care requirements, CMS is acting within its authority to disqualify Petitioner’s
NATCEP for a two-year period. A finding of substandard quality of care results in the
loss of approval for the facility’s NATCEP. 42 C.F.R. § 498.3(b)(14); see Alden-
Princeton Rehabilitation and Health Care Center, DAB No. 1978 (2005).

VI. Conclusion

Based on my consideration of all of the evidence before me, I sustain the determination of
CMS to impose a CMP against Petitioner in the amount of $400 per day, for a period that
began on May 21, 2004 and which ended on June 30, 2004 and to disqualify Petitioner’s
NATCEP for two years.

/s/
Alfonso Montano
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

)
In the Case of: )
) Date: January 16, 2008
John Shell, )
)
Petitioner, ) Docket No. C-07-619
) Decision No. CR1725
-v.- )
)
The Inspector General. )
oo )
DECISION

Petitioner, John Shell, is excluded from participation in Medicare, Medicaid, and all other
federal health care programs pursuant to section 1128(a)(3) of the Social Security Act
(the Act) (42 U.S.C. § 1320a-7(a)(3)), effective June 20, 2007, based upon his conviction
after 1996, of a criminal offense of fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct in connection with the delivery of a health
care item or service in a health care program operated by, or financed, in whole or in part,
by any federal, state, or local government agency; and his conviction for a criminal
offense after 1996 consisting of a felony relating to the unlawful manufacture,
distribution, prescription, or dispensing of a controlled substance. There is a proper basis
for exclusion. Petitioner’s exclusion for the minimum period’ of five years is mandatory
pursuant to section 1128(c)(3)(B) of the Act (42 U.S.C. § 1320a-7(c)(3)(B)).

' Pursuant to 42 C.F.R. § 1001.3001, Petitioner may apply for reinstatement only
after the period of exclusion expires. Reinstatement is not automatic upon completion of
the period of exclusion.
I. Background

The Inspector General for the Department of Health and Human Services (the I.G.)
notified Petitioner by letter dated May 31, 2007, that he was being excluded from
participation in Medicare, Medicaid, and all federal health care programs for the
minimum statutory period of five years, pursuant to section 1128(a)(3) and (4) of the Act.
The basis cited for Petitioner’s exclusion was his conviction in the Court of Common
Pleas, Hamilton County, Ohio, ofa criminal offense of fraud, theft, embezzlement, breach
of fiduciary responsibility, or other financial misconduct in connection with the delivery
of a health care item or service in a health care program operated by, or financed, in
whole or in part, by any federal, state, or local government agency; and his conviction for
a criminal offense after 1996 consisting of a felony relating to the unlawful manufacture,
distribution, prescription, or dispensing of a controlled substance. See Act, section
1128(a)(3) and (4); 42 U.S.C. § 1320a-7(a)(3) and (4); and 42 C.F.R. § 1001.101(c) and

(d).

Petitioner timely requested a hearing by letter dated July 22, 2007. The case was
assigned to me for hearing and decision on August 15, 2007. On September 14, 2007, I
convened a prehearing telephonic conference, the substance of which is memorialized in
my Order dated September 17, 2007.

The L.G. filed a motion for summary judgment and supporting brief on October 15, 2007
(1.G. Brief), with I.G. Exhibits (I.G. Exs.) 1 through 8. Petitioner filed an opposition to
the motion for summary judgment on November 12, 2007, with no exhibits attached (P.
Brief). The L.G. filed a reply brief on December 11, 2007 (1.G. Reply). Petitioner
objects to the admission as evidence and my consideration of I.G. Ex. 4 on grounds that it
refers to much misconduct not relevant to the issue before me and includes findings based
upon a lesser quantum of evidence than required by a court to establish guilt. P. Brief at
1-2. Petitioner’s objection is overruled, except that I will limit my consideration of I.G.
Ex. 4 to the fact that it shows Petitioner’s license to work as a pharmacist or dispense
dangerous drugs was suspended by the Ohio State Board of Pharmacy on April 7, 2006.
LG. exhibits 1 through 3 and 5 through 8 are also admitted.

II. Discussion
A. Findings of Fact
The following findings of fact are based upon the uncontested and undisputed assertions

of fact in the pleadings and the exhibits admitted. Citations may be found in the analysis
section of this decision if not included here.
3

On March 17, 2005, Petitioner was charged with stealing hydrocodone, a
dangerous drug, from Sam’s Pharmacy on January 24, 2005, and with making,
uttering, selling, or knowingly possessing a false or forged prescription for
hydrocodone, a dangerous drug, on October 9, 2004. LG. Ex. 3.

Pursuant to a plea bargain, Petitioner entered a no contest plea, withdrawing a
prior plea of not guilty to the count of drug theft and the count of illegal possession
of false or fraudulent drug documents. I.G. Ex. 5.

Petitioner’s plea bargain was accepted by the state criminal court judge and
Petitioner was placed on probation for three years. P. Brief at 2; 1.G. Ex. 7.

On September 25, 2006, Petitioner was released from probation, the indictment
was dismissed, and community control was terminated. I.G. Ex. 8.

The L.G. notified Petitioner by letter dated May 31, 2007, that he was being
excluded from participation in Medicare, Medicaid, and all federal health care
programs for the minimum statutory period of five years, pursuant to section
128(a)(3) and (4) of the Act.

Petitioner timely requested a hearing by letter dated July 22, 2007.

B. Conclusions of Law

Petitioner’s request for hearing was timely and I have jurisdiction.

Summary judgment is appropriate.

Petitioner received a deferred adjudication, which is a conviction within the
meaning of section 1128(i) of the Act.

Petitioner was convicted within the meaning of section 1128(a)(3) of the Act, ofa
felony criminal offense related to health care fraud that occurred after August 21,
996, the date of enactment of the Health Insurance Portability and Accountability
Act of 1996 (HIPAA).

There is a basis for Petitioner’s exclusion pursuant to section 1128(a)(3) of the
Act.

Pursuant to section 1128(c)(3)(B) of the Act, the minimum period of exclusion
under section 1128(a) is five years and that period is presumptively reasonable.
C. Issues

The Secretary of the Department of Health and Human Services (the Secretary) has by
regulation limited my scope of review to two issues:

Whether there is a basis for the imposition of the exclusion; and,
Whether the length of the exclusion is unreasonable.
42 C.F.R. § 1001.2007(a)(1).

n this case, there is no issue as to the reasonableness of the proposed period of exclusion
as it is the minimum period of five years mandated by the Act. The standard of proof is a
preponderance of the evidence and there may be no collateral attack of the conviction that
is the basis for the exclusion. 42 C.F.R. § 1001.2007(c) and (d). Petitioner bears the
urden of proof and persuasion on any affirmative defenses or mitigating factors and the
.G. bears the burden on all other issues. 42 C.F.R. §1005.15(b) and (c).

D. Applicable Law

Petitioner’s right to a hearing by an ALJ and judicial review of the final action of the
Secretary is provided by section 1128(f) of the Act (42 U.S.C. § 1320a-7(f)). Petitioner’s
request for a hearing was timely filed and I do have jurisdiction.

Pursuant to section 1128(a)(3) of the Act, the Secretary must exclude from participation
in Medicare and Medicaid programs any individual convicted of a felony criminal offense
related to health care fraud that occurred after August 21, 1996, the date of enactment of
HIPAA.

Pursuant to section 1128(a)(4) of the Act, the Secretary must exclude from participation
in Medicare and Medicaid programs any individual convicted of a felony relating to a
controlled substance that occurred after August 21, 1996, the date of enactment of
HIPAA.

Pursuant to section 1128(i) of the Act, an individual is “convicted” of a criminal offense
when a judgment of conviction has been entered by a federal, state, or local court whether
or not an appeal is pending or the record has been expunged; or when there has been a
finding of guilt in a federal, state, or local court; or when a plea of guilty or no contest has
een accepted in a federal, state, or local court; or when an accused individual enters a
first offender program, deferred adjudication program, or other arrangement where a
judgment of conviction has been withheld.

5

Section 1128(c)(3)(B) of the Act provides that an exclusion imposed under section
1128(a) of the Act shall be for a minimum period of five years. Pursuant to 42 C.F.R.

§ 1001.102(b), the period of exclusion may be extended based on the presence of
specified aggravating factors. Only if the aggravating factors justify an exclusion of
longer than five years may certain mitigating factors be considered as a basis for reducing
the period of exclusion to no less than five years. 42 C.F.R. § 1001.102(c).

E. Analysis
1. Summary judgment is appropriate in this case.

Pursuant to section 1128(f) of the Act, a person subject to exclusion has a right to
reasonable notice and an opportunity for a hearing. The right to hearing before an ALJ is
accorded to a sanctioned party by 42 C.F.R. § 1005.2 and the rights of both the sanctioned
party and the LG. to participate in a hearing are specified in 42 C.F.R. § 1005.3. Either or
both parties may choose to waive appearance at an oral hearing and to submit only
documentary evidence and written argument for my consideration. 42 C.F.R.

§ 1005.6(b)(5). The ALJ may also resolve a case, in whole or in part, by summary
judgment. 42 C.F.R. § 1005.4(b)(12). Summary judgment is appropriate and no hearing
is required where either: there are no disputed issues of material fact and the only
questions that must be decided involve application of law to the undisputed facts; or, the
moving party must prevail as a matter of law even if all disputed facts are resolved in
favor of the party against whom the motion is made. A party opposing summary
judgment must allege facts which, if true, would refute the facts relied upon by the
moving party. See, e.g., Fed. R. Civ. P. 56(c); Garden City Medical Clinic, DAB No.
1763 (2001); Everett Rehabilitation and Medical Center, DAB No. 1628, at 3 (1997) (in-
person hearing required where non-movant shows there are material facts in dispute that
require testimony); Thelma Walley, DAB No. 1367 (1992); see also New Millennium
CMHC, DAB CR672 (2000); New Life Plus Center, CMHC, DAB CR700 (2000).

There are no genuine issues of material fact in dispute in this case. The sole issue in
dispute before me is a question of law, i.e., whether Petitioner was convicted within the
meaning of the Act. P. Brief at 2-3. Accordingly, summary judgment is appropriate.

2. There is a basis for Petitioner’s exclusion pursuant to section
1128(a)(3) of the Act.

Petitioner does not dispute that on March 17, 2005, a two count indictment was filed
against him in the Court of Common Pleas of Hamilton County, Ohio. Petitioner was
charged with stealing hydrocodone, a dangerous drug, from Sam’s Pharmacy on January
24, 2005, and with making, uttering, selling, or knowingly possessing a false or forged
6

prescription for hydrocodone, a dangerous drug, on October 9, 2004. I.G. Ex. 3. The I.G.
has presented evidence that Petitioner entered a no contest plea, withdrawing a prior plea
of not guilty to the count of drug theft and the count of illegal possession of false or
fraudulent drug documents. I.G. Ex. 5. Petitioner admits that a plea bargain was worked
out in his case under which the judge did not transfer his case to the drug court and he
was placed on a probation for three years. Petitioner asserts that the judge warned him
that if he violated probation he would be brought back to court, tried, and sentenced.
Petitioner also asserts that he was never asked to enter a plea and the judge never stated
that his plea was accepted. P. Brief at 2. Petitioner does not dispute that the judge
executed a document titled “Entry Finding Defendant Eligible for Treatment In Lieu of
Conviction, Staying Proceedings, and Ordering Period of Rehabilitation,” which
document shows that the judge found him eligible for treatment in lieu of conviction; that
Petitioner entered a plea of no contest; that ordered a stay of all pending criminal
proceedings pending treatment; that placed Petitioner on probation for three years; and
that established the terms of Petitioner’s probation. I.G. Ex. 7. On September 25, 2006,
the criminal court judge released Petitioner from probation, ordered that the indictment be
dismissed and that community control was terminated. I.G. Ex. 8.

Petitioner’s argument is that the documents submitted by the I.G. do not show that he was
given intervention in lieu of conviction under Ohio law; that he never entered a plea, and
that the facts show a deferred prosecution rather than a conviction within the meaning of
the Act. Petitioner cites the decision of the Ninth Circuit Court of Appeals in Travers v.
Shalala, 20 F.3d 993, 996-99 (9" Cir. 1994) in support of his position. However, the
decision in Travers is actually contrary to Petitioner’s position. The court in Travers
recognized the important points that it is the Social Security Act, not the state law, that
provides the definition for the term “conviction,” and that it is necessary to look at the
substance of the proceedings in the criminal court rather than rely upon labels or
characterizations used by the state or the parties in those proceedings. The court in
Travers also defined a “deferred prosecution” as an agreement between the prosecutor
and the defendant pursuant to which the prosecutor delays prosecuting the charges. The
court recognized that a “deferred adjudication” does not involve a deferral of prosecution
by the prosecutor. 20 F.3d at 996-97.

I have considered the substance of the proceeding in this case and conclude that it was a
deferred adjudication rather than a deferred prosecution as argued by Petitioner. The
documents presented reflect that the judge accepted a plea of no contest and imposed
probation without entering a finding of guilt. My conclusion is consistent with
Petitioner’s representation that a plea bargain was worked out in chambers with the judge.
The prosecutor did not defer prosecution in this case. Rather, the case was before the
judge, a plea bargain was agreed to by the parties before the judge, and the judge accepted
that bargain and the resulting no contest plea. The deal involved the prosecutor,
7

defendant and the judge, not just the prosecutor and defendant. Even accepting
Petitioner’s statement as true that the judge never discussed the plea in open court, that
omission by the judge is not controlling, rather the substance of what occurred controls. I
conclude that Petitioner received a deferred adjudication which is a conviction within the
meaning of the Act.

The L.G. also notified Petitioner that he was being excluded based upon section
1128(a)(4) of the Act. Because I have found that there is a basis for exclusion pursuant to
section 1128(a)(3) which requires Petitioner’s exclusion, it is not necessary for me to
examine whether section 1128(a)(4) provides another basis for exclusion.

3. Pursuant to section 1128(c)(3)(B) of the Act, the minimum period of
exclusion under section 1128(a) is five years.

Petitioner has not disputed that the minimum period of an exclusion pursuant to section
1128(a)(3) is five years as mandated by section 1128(c)(3)(B), if I determine Petitioner is
subject to mandatory exclusion. I have found there is a basis for Petitioner’s exclusion
pursuant to section 1128(a)(3) and the minimum period of exclusion is thus five years.

Ill. Conclusion

For the foregoing reasons, Petitioner is excluded from participation in Medicare,
Medicaid and all federal health care programs for a period of five years, effective June
20, 2007, 20 days after the May 31, 2007, L.G. notice of exclusion.

/s/
Keith W. Sickendick
Administrative Law Judge