Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

John J. Hainkel, Jr. Home and Rehabilitation Center,
(CCN: 19-5149),

Petitioner
v.
Centers for Medicare & Medicaid Services.
Docket No. C-12-1166
Decision No. CR3350

Date: August 28, 2014

DECISION

Petitioner, John J. Hainkel, Jr. Home and Rehabilitation Center (Petitioner or facility), is
a long-term care facility located in New Orleans, Louisiana, that participates in the
Medicare program. Based on a complaint survey completed on June 8, 2012, the Centers
for Medicare & Medicaid Services (CMS) determined that Petitioner was not in
substantial compliance with Medicare participation requirements relating to prevention of
resident abuse and administration of the facility in a manner to maintain the highest
practicable well-being of each resident.

Specifically, this case involves Petitioner’s former Office Manager, who when confronted
with allegations that she was misappropriating funds from residents, was able to
immediately access and aggressively confront one of the complaining residents during
the pending investigation. Further, at the time of hiring, Petitioner did not document any
reference checks for the Office Manager, or eight other employees, despite a facility
policy to perform complete reference checks. CMS did not dispute, though, that the
facility did perform criminal background checks on the employees.
I sustain CMS’s determinations that Petitioner was not in substantial compliance with
three Medicare participation requirements. | also find the $2000 per instance civil money
penalties (PICMPs) that CMS imposed for each of these violations are reasonable
enforcement remedies. I do not sustain the deficiency or PICMP for Tag F225, which
alleged a violation of 42 C.F.R. § 483.13(c)(1)(ii)-(iii), because Petitioner performed
criminal background checks for the employees.

I. Procedural Background

Surveyors from the Louisiana State Department of Health and Hospitals, Health
Standards Section (state survey agency) conducted a survey of Petitioner on June 8, 2012.
The state survey agency determined that Petitioner was not in substantial compliance
with several Medicare participation requirements.

By letter dated June 19, 2012, CMS notified Petitioner that the survey found the facility
was not in substantial compliance with Medicare participation requirements and that the
conditions constituted immediate jeopardy to the health and safety of Petitioner’s
residents. CMS informed Petitioner that it was imposing the following remedies: five
PICMPS, each in the amount of $2,000, for the alleged violations of 42 C.F.R.

§ 483.13(b) and (c)(1)(i) (Tag F223), 42 C.F.R. § 483.13(e) (Tag F224), 42 CFR.

§ 483.13(c)(1)(ii)-(iii), (c)(2)-(4) (Tag F225), 42 C.F.R. § 483.13(c) (Tag F226), and 42
C.F.R. § 483.75 (Tag F490) (total PICMP amount of $10,000); a denial of payment for
new admissions (DPNA) effective June 13, 2012, which would continue until the day
before the facility achieved substantial compliance or its provider agreement was
terminated; and termination of Petitioner’s provider agreement if it had not achieved
substantial compliance before July 1, 2012. CMS Exhibit (Ex.) 1.

By letter dated July 13, 2012, CMS notified Petitioner that the state survey agency
conducted another survey on June 27, 2012, and found that the immediate jeopardy had
been removed, but the facility remained out of substantial compliance with the five
Medicare participation requirements cited in its previous notice letter. CMS stated
further that the state survey agency conducted another survey on June 28, 2012, and
based on that survey, the state agency found that Petitioner was also not in substantial
compliance with the Medicare participation requirement, 42 C.F.R. § 483.13(c)(1)(ii)-
(iii), (c)(2)-(4) (Tag F225, scope and severity level D), for another incident. With respect
to the remedies, CMS advised Petitioner that the DPNA and PICMPs imposed in the June
19, 2012 letter remained in effect, but it was extending the termination date to December
8, 2012. CMS Ex. 2.

In a letter dated July 31, 2012, CMS notified Petitioner that it had achieved substantial
compliance with Medicare participation requirements. CMS advised Petitioner that it had
rescinded the termination remedy, and the DPNA, which was already imposed, was in
effect from June 13, 2012 through July 15, 2012. CMS advised Petitioner further that the
PICMPs, totaling $10,000, were already imposed and remained in effect. CMS Ex. 3.

On August 10, 2012, Petitioner timely requested a hearing before an administrative law
judge (ALJ) to contest CMS’s findings of noncompliance cited in the June 8, 2012
survey. I was assigned this case for hearing and decision on August 27, 2012. On
August 27, 2012, I issued an Acknowledgment and Initial Pre-hearing Order (Pre-hearing
Order).

On May 22, 2013, I convened a video hearing from the offices of the Departmental
Appeals Board in Washington, D.C. CMS counsel participated from a video location in
Dallas, Texas. Petitioner’s counsel and the parties’ witnesses participated from a video
location in Baton Rouge, Louisiana. I admitted into evidence CMS Exs. 1-25 and
Petitioner Exhibits (P. Exs.) 1-14. Order Following Telephone Conference (March 1,
2013); Transcript (Tr.) at 7.

In accordance with my Pre-hearing Order, Petitioner offered direct testimony in the form
of declarations from Petitioner’s Administrator (P. Ex. 7), Petitioner’s Human Resources
Director (P. Ex. 8), Petitioner’s Occupational Therapist (P. Ex. 9), who was contracted to
work at the facility, Petitioner’s Facility Maintenance employee (P. Ex. 12), and
Petitioner’s General Manager (P. Ex. 14). CMS offered direct testimony in the form of
declarations from two state survey agency surveyors (CMS Exs. 24, 25).

At the video hearing, Petitioner cross-examined one of the surveyors, and CMS cross-
examined Petitioner’s Administrator and Petitioner’s Human Resources Director.
Petitioner had also requested to cross-examine the other surveyor; however, she was
unavailable to testify. I advised the parties that I would hold the record open so that CMS
could provide me with a status report on the surveyor’s availability. By email dated July
8, 2013, CMS counsel provided a status report in which he stated that the surveyor had
not returned to work and her return to work date was still not definite. CMS counsel,
therefore, withdrew CMS Ex. 25, the surveyor’s declaration. The CMS exhibits admitted
in the record are now CMS Exs. 1-24.

The parties have filed pre-hearing briefs (CMS Pre-hrg. Br.; P. Pre-hrg. Br.) and post-
hearing briefs (CMS Br.; P. Br.). The parties also filed post-hearing reply briefs (CMS
Reply; P. Reply).

IL. Issues
In its pre-hearing brief (footnote 1) and post-hearing brief (footnote 3), CMS noted that

Tag F224 (42 C.F.R. § 483.13(e)) was deleted during the state Informal Dispute
Resolution (IDR) process and therefore is not an issue before me.
This case now presents the following issues:

1) Whether Petitioner was in substantial compliance with the Medicare
participation requirements at 42 C.F.R. § 483.13(b) and (c)(1)(i) (Tag
F223);

2) Whether Petitioner was in substantial compliance with the Medicare
participation requirements at 42 C.F.R. § 483.13(c)(1)(ii)-(iii), (c)(2)-(4)
(Tag F225);

3) Whether Petitioner was in substantial compliance with the Medicare
participation requirement at 42 C.F.R. § 483.13(c) (Tag F226);

4) Whether Petitioner was in substantial compliance with the Medicare
participation requirement at 42 C.F.R. § 483.75 (Tag F490);

5) If Petitioner was not in substantial compliance, whether the enforcement
remedies that CMS imposed — a $2,000 PICMP for each deficiency — are
reasonable.

In its submissions, Petitioner asked that I review CMS’s immediate jeopardy
determination for the alleged noncompliance with each of these alleged deficiencies. P.
Hearing Request; P. Pre-hrg. Br. at 22-23; P. Br. at 24. However, as I explained during
my February 27, 2013 telephone prehearing conference, and in my March 1, 2013 Order
Following Telephone Conference, I have no authority here to review whether CMS’s
scope and severity determinations were clearly erroneous for these deficiencies. An ALJ
may review CMS’s scope and severity findings (which include a finding of immediate
jeopardy) only if a successful challenge would affect the range of the CMP that CMS
could impose or if CMS has made a finding of substandard quality of care that results in
the loss of the facility’s authority to conduct a nurse aide training and competency
evaluation program. 42 C.F.R. §§ 498.3(b)(14); 498.3(d)(10); see, e.g., Fort Madison
Health Ctr., DAB No. 2403, at 12-14 (2001).

Neither of those two elements is present in this case - CMS proposes PICMPs, and the

regulations provide for only one range of PICMP ($1,000 to $10,000) without regard to
the scope and severity of noncompliance. Further, Petitioner indicated that the facility

does not have a nurse aide training program. Order Following Telephone Conference,

March 1, 2013.' Therefore, the immediate jeopardy finding is not reviewable here

' Even if Petitioner had a nurse aide training program, CMS’s scope and severity finding
would not affect approval of such a program. If CMS imposes a penalty of $5,000 or
more, the state agency cannot approve the program, so the facility would lose its program
because it does not affect the range of the CMP or cause the facility to lose approval of its
nurse aide training program. Therefore, I will only review issues of substantial
compliance with the participation requirements and the reasonableness of the amount of
the PICMPs.

III. Statutory and Regulatory Framework

The Social Security Act (Act) establishes the requirements that a long-term care facility
must meet to participate in the Medicare and Medicaid programs and authorizes the
Secretary of the U.S. Department of Health and Human Services (Secretary) to
promulgate regulations implementing those statutory requirements. Act §§ 1819 (42
U.S.C. § 1395i-3), 1919 (42 U.S.C. § 1396r).? Specific Medicare participation
requirements for long-term care facilities are found at 42 C.F.R. Part 483. A long-term
care facility must remain in substantial compliance with program requirements to
participate in Medicare. 42 C.F.R. § 483.1(b). “Substantial compliance” means “a level
of compliance with the requirements of participation such that any identified deficiencies
pose no greater risk to resident health or safety than the potential for causing minimal
harm.” 42 C.F.R. § 488.301. “Noncompliance” means “any deficiency that causes a
facility to not be in substantial compliance.” Jd.

The Act authorizes the Secretary to impose enforcement remedies against a long-term
care facility for failure to comply substantially with the federal participation
requirements. The Secretary has delegated to CMS and the states the authority to
impose those remedies. State agencies survey facilities on behalf of CMS to
determine whether the facilities comply with federal participation requirements. 42
C.F.R. §§ 488.10-.28, 488.300-.335. The regulations specify the enforcement
remedies that CMS may impose if a facility is not in substantial compliance with
Medicare requirements. 42 C.F.R. § 488.406.

The statement of deficiencies (SOD) is a contemporaneous record of the state survey
agency’s observations and investigative findings, and the Board has made it clear that
CMS may make a prima facie showing of noncompliance based on that document if the
factual findings and allegations it contains are specific, undisputed, and not inherently
unreliable. Glenburn Home, DAB No. 1806, at 25 (2002); see also Florence Park Care
Ctr., DAB No. 1931, at 13 (2004) (“CMS is obligated to present evidence only with
respect to factual assertions that are in dispute.”); Emerald Oaks, DAB No. 1800, at

approval without regard to the immediate jeopardy finding. Social Security Act (Act)
§ 1819(£)(2)(B) (42 U.S.C. § 1395i-3(f)(2)(B)); 42 C.F.R. § 483.151(b)(2)(iv).

> ‘The Act, as amended, is available at http://www.ssa.gov/OP_Home/ssact/ssact.htm.
On this website, each section of the Act contains a reference to the corresponding chapter
and code in the United States Code.
42 n.18 (2001) (concluding that a statement of deficiencies constituted evidence of the
facility’s prior medication problems because the facility failed to contest the basis for the
deficiency citation); Guardian Health Care Ctr., DAB No. 1943 (2004).

CMS may impose a per-day CMP for the number of days a facility is not in substantial
compliance or a per-instance CMP for each instance of the facility’s noncompliance.

42 C.F.R. § 488.430(a). A per-day CMP may range from either $50 to $3,000 per day for
less serious noncompliance or $3,050 to $10,000 per day for more serious noncompliance
that poses immediate jeopardy to the health and safety of residents. 42 C.F.R.

§ 488.438(a)(2). “Immediate jeopardy” exists when “the provider’s noncompliance with
one or more requirements of participation has caused, or is likely to cause, serious injury,
harm, impairment, or death to a resident.” 42 C.F.R. § 488.301.

If CMS imposes one or more enforcement remedies against a long-term care facility
based on a noncompliance determination, the facility may request a hearing before an
ALJ to challenge the noncompliance finding and enforcement remedies. Act

§§ 1128A(c)(2) (42 U.S.C. § 1320a-7a(c)(2)), 1866(h) (42 U.S.C. § 1395ce(h)); 42 C.F.R.
§§ 488.408(g), 498.3(b)(13).

IV. Findings of Fact and Conclusions of Law

1. Petitioner was not in substantial compliance with participation requirements
at 42 C.F.R. § 483.13(b) and (c)(1)(i) (Tag F223) because it did not take
reasonable steps to protect Resident 3 from abuse by a staff member.

A resident “has the right to be free from verbal, sexual, physical, and mental abuse,
corporal punishment, and involuntary seclusion.” 42 C.F.R. § 483.13(b). A facility must
not use “verbal, mental, sexual, or physical abuse, corporal punishment, or involuntary
seclusion” against a resident. 42 C.F.R. § 483.13(c)(1)(i). Medicare regulations define
the term “abuse” to mean “the willful infliction of injury, unreasonable confinement,
intimidation, or punishment with resulting physical harm, pain or mental anguish.”

42 CFR. § 488.301.

The phrase “willful infliction” means that the actor must have acted deliberately, not that
the actor must have intended to inflict injury or harm. Merrimack Cnty. Nursing Home,
DAB No. 2424, at 4 (2011); Britthaven, Inc., d/b/a Britthaven of Smithfield, DAB No.
2018, at 4 (2006). According to the CMS State Operations Manual (SOM), Appendix
PP, Tag F223, verbal abuse is “the use of oral, written or gestured language that willfully
includes disparaging and derogatory terms to residents or their families, or within their
hearing distance, regardless of their age, ability to comprehend, or disability.” The SOM
describes mental abuse as including, but not limited to “humiliation, harassment, threats
of punishment or deprivation.”
The Board has held that “[p]rotecting and promoting a resident’s right to be free from
abuse necessarily obligates the facility to take reasonable steps to prevent abusive acts,
regardless of their source.” Western Care Mgmt. Corp. d/b/a Rehab Specialties Inn,
DAB No. 1921, at 12 (2004); Pinehurst Healthcare & Rehab. Ctr., DAB No. 2246, at 6
(2009). The Board has also held that noncompliance with 42 C.F.R. § 483.13(b) and
(c)(1)(i) can be found even if no actual abuse of a resident occurred. Honey Grove
Nursing Ctr., DAB No. 2570, at 3 (2014); see also Holy Cross Vill. at Notre Dame, Inc.,
DAB No. 2291, at 7 (2009) (citation omitted). As the Board has explained:

The goal of section 483.13(b) is to keep residents free from
abuse. This goal cannot be achieved if a facility could be
found in compliance even though it failed to take reasonable
steps to protect residents from potentially injurious acts which
it knew or should have known might occur and which

might be willful... .

Honey Grove Nursing Ctr., DAB No. 2570, at 3 (citing Western Care Mgmt. Corp., DAB
No. 1921). “It is sufficient for CMS to show that the facility failed to protect residents
from reasonably foreseeable risks of abuse.” Holy Cross Vill. at Notre Dame, Inc., DAB
No. 2291, at 7 (citing Western Care Mgmt. Corp., DAB No. 1921, at 15). However, the
Board has also noted that “considerations of foreseeability are inapposite when staff
abuse has occurred” because “a facility acts through its staff and cannot disown the
consequences of the actions of its employee.” Honey Grove Nursing Ctr., DAB No.
2570, at 4 (quoting Gateway Nursing Ctr., DAB No. 2283, at 8 (2009)).

The SOD alleges that, based on review of documents and interviews, Petitioner violated
42 C.F.R. § 483.13(b) and (c)(1)(i) (Tag F223) because Petitioner “failed to protect and
prevent verbal abuse” of Resident 3. CMS Ex. 4, at 1. The alleged deficiency centers on
an incident that took place between Petitioner’s Office Manager and Resident 3.
According to the SOD, on May 24, 2012, Petitioner’s Office Manager, who had just been
suspended pending an investigation into misappropriation of resident funds, found and
confronted Resident 3. The SOD alleges that the Office Manager moved through the
facility, went upstairs, yelled at, and verbally threatened Resident 3 until she gave the
Office Manager a money order receipt that proved that the Office Manager had stolen
money from Resident 3. The SOD alleges that Resident 3 was left alone during this
incident, and police soon after arrived to escort the Office Manager out of the facility.
CMS Ex. 4, at 1.

I find that the totality of the evidence shows that Petitioner’s Office Manager abused
Resident 3 and that Petitioner’s staff failed to take all reasonable steps to protect Resident
3. As discussed below, therefore, I find that Petitioner was not in substantial compliance
with participation requirements at 42 C.F.R. § 483.13(b) and (c)(1)(i) (Tag F223).

a. Petitioner’s Office Manager verbally abused Resident 3 on May 24,
2012.

On the evening of May 23, 2012, a facility resident went to Petitioner’s Administrator to
discuss an issue “that was upsetting him.” CMS Ex. 20, at 1; see P. Ex. 7, at 4. The
resident told the Administrator that the Office Manager had told him that he owed the
facility $500, and that if he didn’t pay the money, the General Manager (who was the
Administrator’s wife) would kick him out of the facility. P. Ex. 7, at 4; CMS Ex. 20, at 1.
The resident told the Administrator that he paid the amount. P. Ex. 7, at 4. According to
the Administrator, “this . . . struck [him] as strange” because another resident, Resident 3,
had also expressed a concern to him that she did not think she would be able to stay at the
facility much longer because she could not afford it. P. Ex. 7, at 4; CMS Ex. 20, at 1.
The Administrator stated that Resident 3 did not relate the circumstances to anything
being amiss with her funds; rather, she questioned whether she owed the facility
additional funds. P. Ex. 7, at 5. The Administrator assured both residents that he would
look into the matter. P. Ex. 7, at 4; CMS Ex. 20, at 1.

Petitioner’s Administrator asked his administrative assistant to investigate the billing for
these two residents who claimed that the Office Manager had told them they owed money
to the facility. P. Ex. 7, at 4-5; CMS Ex. 20, at 1. The following day, on May 24, 2012,
Petitioner’s assistant reported that neither resident owed any money to the facility. CMS
Ex. 20, at 1. According to Petitioner’s Administrator, his administrative assistant
discovered that the Office Manager told Resident 3 that she owed $1600, but she could
pay $800 or else the Administrator “would kick her out of the home.” CMS Ex. 20, at 1.
Resident 3 paid $800 to the Office Manager in the form of a money order. CMS Ex. 20,
at 1-2; see P. Ex. 7, at 5; CMS Ex. 22, at 3. The assistant reported that the Office
Manager neither deposited the funds she collected from the two residents into any facility
account nor credited the residents’ accounts. P. Ex. 7, at 5.

That morning, after obtaining this information, in the presence of Petitioner’s Human
Resources Director, the Administrator advised the Office Manager of the allegations
against her involving possible theft of resident funds. The Administrator informed the
Office Manager that he was suspending her pending an investigation and ordered her to
leave the building. Tr. 85. He instructed the Human Resources Director to escort the
Office Manager from the facility. P. Ex. 7, at 5; P. Ex. 8, at 2; P. Pre-hrg. Br. at 2; Tr.
85, 86-87. The Administrator stated that he then initiated an “OTIS [Online Tracking

> Although there are conflicting versions in the record as to whether the Office Manager
actually left the building at some point after she was suspended, | do not find this detail to
be material to my findings.
Incident System] report,” an incident report that the facility filed with the state survey
agency. P. Ex. 7, at 5.*

According to the Administrator’s testimony and his June 5, 2012 statement which was
provided to the state surveyors, instead of leaving the premises as ordered, the Office
Manager proceeded to make her way through the building to find Resident 3. Tr. 111;
CMS Ex. 20, at 2; see P. Ex. 8, at 2. According to the Human Resources Director, he
followed the Office Manager and ordered her to leave the building. P. Ex. 8, at 2; CMS
Ex. 20, at 11; see P. Ex. 7, at 3; Tr. 90. Petitioner’s records show that the Office Manager
went upstairs and confronted Resident 3 in a hallway. CMS Ex. 22, at 15; P. Ex. 1, at 7;
see CMS Ex. 20, at 2; see Tr. 90, 111. Petitioner’s Incident Witness Statement notes that
the Office Manager proceeded to yell at Resident 3, demanding the money order receipt
from her. CMS Ex. 23, at 2. The Occupational Therapist, who was transporting a
resident back to her room, stated that he “had no idea what was going on” but “[he]
stopped and tried to get [the Office Manager] to lower her voice.” P. Ex. 9, at 2. The
Incident Witness Statement notes that Resident 3 handed over the receipt because she felt
scared by the Office Manager’s conduct. CMS Ex. 23, at 2; see P. Ex. 1, at 2; CMS Ex.
20, at 2; CMS Ex. 22, at 4. The Human Resources Director stated that he left the area
and went back to the Administrator’s office to get assistance. P. Ex. 8, at 2; CMS Ex. 20,
at 2,11. According to the Administrator’s June 5, 2012 statement, the General Manager
called the police, who soon arrived and escorted the Office Manager from the building.
CMS Ex. 20, at 2.

Petitioner’s management terminated the Office Manager’s employment on May 29, 2012.
P. Ex. 3, at 16. In the facility’s “Separation Notice,” the Human Resources Director
stated the “reason for separation” as follows: “Employee interfered in an active
investigation of resident abuse. Employee violated company policy on conduct.
Employee violated company abuse and neglect policy. Employee arrested for theft.
Falsified job application.” P. Ex. 3, at 16. When asked on cross-examination whether the
Office Manager’s violation of the facility’s abuse and neglect policy was derived from

er verbal abuse of Resident 3, Petitioner’s Administrator stated “it was not.” Tr. 110.
The Administrator stated that the Office Manager violated the facility’s abuse policy
because she “disregarded a direct order by me to leave the facility, and accordingly she
interrupted an OTIS investigation, which is grounds for termination.” Tr. 110.

Despite the Administrator’s testimony, I find that record evidence shows the Office
Manager’s conduct amounted to verbal abuse against a resident. See 42 C.F.R.

§ 483.13(b); 42 C.F.R. § 483.13(c)(1)(i). I find further that there was willful intimidation
and resulting mental anguish. See 42 C.F.R. § 488.301.

* Petitioner’s Administrator stated that the OTIS report is “the mechanism established
through the Louisiana Dept. of Health and Hospitals for reporting potential abuse and/or
misappropriations of resident funds.” P. Ex. 7, at 5.
10

Statements of Petitioner’s management and Petitioner’s incident report created during the
course of its investigation strongly suggest that the Office Manager engaged in abusive
behavior towards Resident 3. In an Incident Witness Statement completed
contemporaneously to the incident, the Human Resources Director stated that the Office
Manager “was told to punch out & go home because 2 residents reported that they were
asked to pay bills & the money was missing. [Office Manager] was found on 2™ floor
yelling at [Resident 3] — trying to get the money order receipt from her.” He stated
further that “[Resident 3] said that she didn’t know what was going on, but [the Office
Manager] was yelling at her and demanding that she give her the money order receipt.
Resident 3] said that she was scared & gave it to her.” CMS Ex. 23, at 2.

Further, in an undated statement, the Human Resources Director states that the Office
Manager “confronted the resident in the hallway,” she “continued to refuse to leave,” and
e “rushed downstairs to get the administrator. The entire incident occurred in less than 5
minutes.” P. Ex. 1, at 7. In an Incident Report dated May 31, 2012, which Petitioner
submitted to the state survey agency, Petitioner’s Administrator reported that an
investigation had substantiated an allegation of financial exploitation against the Office
Manager and that her victims included Resident 3. In the summary, the Administrator
stated that after he suspended the Office Manager, the Office Manager went to the second
floor of the facility and “verbally abused” Resident 3. P. Ex. 1, at 1-2. The
Administrator stated further that “[Resident 3] was counseled and she told us that she had
been frightened when [the Office Manager] demanded that she give her the money order
receipt.” P. Ex. 1, at 1-2.

In his statement dated June 5, 2012, which he provided to the state surveyors, the
Administrator stated that they “discovered that when [the Office Manager] when [sic]
upstairs she had found [Resident 3] and forced her to give her the receipt for the money
order. [Resident 3] was very upset.” CMS Ex. 20, at 2; see P. Ex. 7, at 2. In an undated
and unsigned statement, a staff member (apparently Petitioner’s General Manager) relates
what happened on May 24, 2012, and states she called 911 and told the police operator
that “a disgruntled employee” was “harassing patients.” CMS Ex. 20, at 4.°

> As CMS notes in its post-hearing brief, this statement is missing a page and the author
is not identified. However, based on the context, CMS states that it believes the
statement was written by Petitioner’s General Manager. CMS Br. at 4 n.2. Petitioner
refers to this statement as “Unknown author’s narrative” in its post-hearing brief but does
not dispute CMS’s claim that it was written by Petitioner’s General Manager. P. Br. at 7;
see P. Reply at 12. Given the context and that Petitioner does not object to CMS’s belief
that the author of the statement is the General Manager, I find that it was most likely
written by Petitioner’s General Manager.
11

Resident 3 was alert and oriented, was not cognitively impaired, and was wheelchair-
bound. P. Ex. 2, at 3, 8. Although facility progress notes indicate that she had adequate
vision, Petitioner’s Administrator represented that Resident 3 is legally blind. P. Ex. 2, at
8; CMS Ex. 20, at 2. I have no reason to discount Resident 3’s statements that she felt
“frightened” and “scared” when the Office Manager began yelling at her, demanding that
she hand over the money order receipt. Even though she did not know the entirety of the
situation, Resident 3 reported to the Administrator’s assistant that she handed over the
receipt because she felt threatened and intimidated by the Office Manager. P. Ex. 1, at 7;
CMS Ex. 20, at 2; CMS Ex. 23, at 2. There can be little doubt that the Office Manager
engaged in abusive conduct towards Resident 3.°

Petitioner argues that the May 24, 2012 incident involving the Office Manager and
Resident 3 was not abuse. Petitioner attempts to downplay what occurred, and, in
challenging the claim that Resident 3 was abused, relies on the declarations of its Human
Resources Director, its General Manager, an Occupational Therapist who was contracted
to work at Petitioner’s facility, and a Facility Maintenance employee. P. Br. at 11-12.

In his declaration, Petitioner’s Human Resources Director claims that “under no
circumstance did [he] hear [the Office Manager] utter any disparaging, derogatory,
inflammatory, curse or threatening remarks. Furthermore, during the entire period
witnessed by me, at no time was [the Office Manager] in close proximity to R#3 such
that [the Office Manager] could have threatened, abused, harmed, touch [sic] or in any
way contacted R#3.” P. Ex. 8, at 3.

According to the Occupational Therapist, he was transporting a resident back to her room
when he saw the Office Manager in the hall. He declares that the Office Manager was
“asking [Resident 3] why she was saying she [the Office Manager] had done something
wrong.” P. Ex. 9, at 2. He states that he “had no idea what was going on” but he
“stopped and tried to get [the Office Manager] to lower her voice.” P. Ex. 9, at 2. The
Occupational Therapist claims that “under no circumstance did [he] hear [the Office
Manager] utter any disparaging, derogatory, inflammatory, curse or threatening remarks.
P. Ex. 9, at 2. He declares further that he “witnessed [the Office Manager] questioning
[Resident 3] but did not believe that the Office Manager was close to Resident 3 such that
she “could have threatened, abused, harmed, or touched” the resident. P. Ex. 9, at 2. He
states that if he had believed Resident 3 was in distress, he would have intervened to
protect her. P. Ex. 9, at 2.

° The fact that Petitioner’s investigation substantiated the allegations that the Office
Manager stole money from Resident 3 (and another resident) establishes that Resident 3
was also a victim of extortion, another form of abusive conduct. See P. Ex. 6, at 3; CMS
Ex. 13, at 5. Petitioner did not dispute this with its own evidence.
12

Petitioner’s Facility Maintenance employee declares that he saw the Office Manager in
the hallway as he was on his way to make a repair in the restorative gym and “thought it
was normal business.” P. Ex. 12, at 2. He claims that he “did not hear anything.” P. Ex.
12, at 2. Like the Human Resources Director and the Occupational Therapist, the Facility
Maintenance employee maintains that “[u]nder no circumstance did [he] hear [the Office
Manager] utter any disparaging, derogatory, inflammatory, curse or threatening remarks.”
P. Ex. 12, at 2. He claims further that he did not believe that “staff members or residents
were being threatened or abused.” P. Ex. 12, at 2.

Petitioner contends further that the General Manager’s testimony also calls into question
whether Resident 3 was yelled at, threatened or scared. See P. Br. at 12. In her
declaration, the General Manager states that, on the morning of May 24, 2012, she and
the Administrator’s assistant spoke to Resident 3, who told them that she had given a
money order for $800 to the Office Manager. P. Ex. 14, at 1. The General Manager
reviewed the money order receipt. She declares that the police interviewed Resident 3
later that morning, and she was present at the interview. P. Ex. 14, at 2. The General
Manager claims that the police asked Resident 3 “the same questions that [the
Administrator’s Assistant] and I had asked earlier.” P. Ex. 14, at 2. According to the
General Manager, “[a]t no time did [Resident 3] seem upset or scared.” P. Ex. 14, at 2.

To the extent that Petitioner’s witnesses claim in their declarations that they do not
believe that the Office Manager threatened Resident 3, I do not find their testimony
credible. Their testimony does not corroborate with Petitioner’s contemporaneous
written reports and other evidence that show that the Office Manager confronted Resident
3 and yelled at her. CMS Ex. 23, at 2; P. Ex. 1, at 1, 7. The statements by the Human
Resources Director, the Occupational Therapist, and the Facility Maintenance employee
that they did not hear the Office Manager “utter any disparaging, derogatory,
inflammatory, curse or threatening remarks” are clearly inconsistent with the May 31,
2012 Incident Report submitted to the state survey agency. As discussed above,
Petitioner’s Administrator states in that report that the Office Manager went to the second
floor of the facility and “verbally abused” Resident 3. P. Ex. 1, at 1-2. Moreover, I note
that in the facility’s Incident Witness Statement, the Human Resources Director himself
had stated that the Office Manager was “yelling at [Resident 3] — trying to get the money
order receipt from her.” CMS Ex. 23, at 2. Nowhere in his declaration, which was
executed approximately seven months after the incident, does the Human Resources
Director mention that the Office Manager yelled at Resident 3. Considering he does not
reconcile this important inconsistency, I find his statements in his declaration regarding
the Office Manager’s demeanor to be less than believable. I note further that Petitioner’s
Facility Maintenance employee admits in his declaration that he “did not hear anything.”
Given that he did not hear anything, his testimony that he did not believe that the Office
Manager was verbally abusing Resident 3 is entitled to little weight. P. Ex. 12, at 2.
13

Further, I note that the General Manager did not witness the Office Manager’s
confrontation of Resident 3 and thus has no first-hand knowledge of what occurred.
According to her declaration, the General Manager apparently interviewed Resident 3
before the confrontation with the Office Manager, and then she was present when the
police interviewed Resident 3 after the incident. Based on what appears to be her
undated and unsigned statement, the General Manager was in an office downstairs and
called the police, stating that “a disgruntled employee” was “harassing patients.” CMS
Ex. 20, at 4; see supra p. 11 n.6. While her statement that Resident 3 did not seem “upset
or scared” after the incident may be true, this does not persuade me that an abusive
confrontation did not occur earlier between the Office Manager and Resident 3.

I thus assign little weight to the testimony that Petitioner has put forth to dispute that the
Office Manager abused Resident 3. I find that Petitioner’s contemporaneous
documentation and evidence relating to the May 24, 2012 incident is more reliable and
entitled to more weight than the after the fact statements of Petitioner’s witnesses in
declarations executed several months later.

Petitioner contends that CMS relies solely on “unauthenticated hearsay” as support for its
arguments. P. Reply at 2. I note that Petitioner makes specific objections to CMS Exs. 4,
5, 6, and 10, which I address in a separate section below, as well as the more general
assertion that CMS relies on “anecdotes of documents” that are “untested through direct
evidence testimony or cross-examination.” P. Br. at 2-3; P. Reply at 4.

Petitioner’s claims regarding hearsay evidence are misplaced. I am allowed to admit and
consider hearsay statements in these administrative proceedings even if they would be
inadmissible under the rules of evidence applicable to court proceedings. See 42 C.F.R.
§ 498.61; Florence Park Care Ctr., DAB No. 1931 (2004). The Board has recognized
that hearsay statements “may be accorded appropriate weight, if supported by adequate
indicia of reliability.” Omni Manor Nursing Home, DAB No. 1920, at 16 (2004). The
weight an ALJ accords hearsay is “determined by the degree of reliability, based on
relevant indicia of reliability and whether the hearsay is corroborated by other evidence
in the record as a whole.” Jd. at 17. I note further that, at the hearing, the parties raised
no objections to the authenticity of the exhibits already entered into the record. Tr. 16.

Here, the staff statements, Resident Incident Report, and Incident Witness Statement to
which Petitioner objects as containing hearsay, were generated by Petitioner either
contemporaneously to the incident or during the course of its own investigation. See P.
Reply at 7; CMS Ex. 20, at 1-4, 13; CMS Ex. 23, at 1-2. Because the statements in these
documents describing the incident between the Office Manager and Resident 3 are
generally consistent with each other, I assign them great weight because they possess
sufficient indicia of reliability.

14

Petitioner contends further that Resident 3 suffered no mental anguish or behavioral
changes as a result of the confrontation with the Office Manager. According to
Petitioner, when the police interviewed Resident 3 following the incident, she did not
seem “upset or scared.” P. Ex. 14, at 2. Petitioner notes further that the social worker,
who checked on Resident 3 twice on May 24, 2012, documented that Resident 3 denied
being upset and stated that she was “fine.” P. Ex. 2, at 5-6.

However, there is troublesome evidence that the Office Manager “confronted” Resident
3, “yelled” at her, “demanded” the money order receipt, and “forced” the resident to give
it to her. P. Ex. 1, at 7; CMS Ex. 20, at 2; see CMS Ex. 23, at 2. Resident 3 stated that
she “didn’t know what was going on” when the Office Manager began yelling at her, but
she handed over the money order receipt because she felt intimidated and threatened.
CMS Ex. 20, at 2; CMS Ex. 23, at 2. As Petitioner’s Administrator’s own statement
shows, Resident 3 was “very upset” and staff calmed her down. CMS Ex. 20, at 2.
Contrary to what Petitioner argues, | find that it is reasonable to infer that Resident 3
clearly suffered some emotional distress as a result of the abusive incident with the Office
Manager. Although it is not the focus of the violation, Resident 3 must have also been
distressed at the thought that she could possibly no longer afford to live at the residence
due to the Office Manager’s scheme to defraud money from her due to a purported
facility price increase.

The Office Manager’s conduct also constituted “abuse” within the meaning of
Petitioner’s own abuse prevention policy. Petitioner’s policy stated that “[v]erbal
conduct may be abusive because of either the manner of communication or the content of
the communication,” and listed the following as examples of abusive verbal conduct:
“yelling, cursing, ridiculing, harassment, coercion, threats, intimidation and other
communication which is derogatory or disrespectful.” P. Ex. 6, at 3; CMS Ex. 13, at 5.
Here, there is no dispute that, at a minimum, the Office Manager was yelling at Resident
3. CMS Ex. 23, at 2; see P. Ex. 1, at 1-2; P. Ex. 9, at 2. Even if I were to accept
Petitioner’s position that no abuse occurred, which I do not, the Board has held that
actual abuse need not occur for a facility to violate 42 C.F.R. § 483.13(b) and (c)(1)(i).
Honey Grove Nursing Ctr., DAB No. 2570, at 3 (2014); see also Holy Cross Vill. at
Notre Dame, Inc., DAB No. 2291, at 7 (2009) (citation omitted).

b. Petitioner’s management and staff failed to take all reasonable steps to
protect Resident 3 from the Office Manager’s abusive conduct.

To carry out its duty to protect its residents from abuse, a facility must “take reasonable
steps to prevent abusive acts, regardless of their source.” Western Care Mgmt. Corp.,
DAB No. 1921, at 12; Pinehurst Healthcare & Rehab. Ctr., DAB No. 2246, at 6 (2009).
Here, I find that Petitioner’s management and staff failed to take all reasonable steps to
protect Resident 3 from the Office Manager’s abusive confrontation.
15

As discussed above, the Office Manager refused to obey the Administrator’s order to
leave the premises after he suspended her, and instead she roamed the facility to find
Resident 3. The Human Resources Director followed the Office Manager once he
realized that she was not leaving the premises, which was a reasonable step to protect the
residents from any potential harm from the Office Manager. However, the Human
Resources Director and other facility staff in the vicinity should have taken appropriate
measures to protect the resident and prevent the abusive confrontation. Instead, the
Human Resources Director and other staff essentially watched while the Office Manager
yelled at a vulnerable wheelchair-bound resident and created a situation of intimidation.

By taking no effective action, Petitioner’s management and staff did not protect Resident
3 from the Office Manager’s abusive conduct. Petitioner was obligated to ensure that
Resident 3 was free from abuse, and its own abuse prevention policy explicitly requires
staff to “[t]ake immediate protective action if needed to remove resident from danger.”
CMS Ex. 13, at 2. The measures a facility takes to protect its residents from abuse are
left to its discretion so long as they were reasonable. See Woodstock Care Ctr. v.
Thompson, 363 F.3d 583, 586 (6th Cir. 2003).

Here, given the Office Manager’s aggressive and threatening behavior, the decision of
Petitioner’s Human Resources Director to permit the confrontation with Resident 3 to
occur clearly did little to protect the resident. Once the Human Resources Director
realized that the Office Manager’s “target” was Resident 3, he could have physically
intervened between them, removed Resident 3 from the area so that Resident 3 would not
continue to be victimized by the Office Manager, or asked other staff members for
assistance. Any of these actions would certainly have been a reasonable step to protect
Resident 3.

Petitioner contends that its staff responded appropriately and took reasonable steps to
protect Resident 3 and the other residents from the Office Manager’s conduct on May 24,
2012. Petitioner points out that upon learning that the Office Manager may have
misappropriated residents’ funds, Petitioner’s Administrator addressed the allegations
quickly and seriously. Petitioner notes that, consistent with the facility’s abuse
prevention policy, the Administrator opened an investigation and immediately suspended
the Office Manager on May 24, 2012, and ordered her to leave the facility. See P. Ex. 6,
at 2; CMS Ex. 13, at 3. Petitioner contends further that the Office Manager had never
displayed any acts of insubordination in the past, and thus, its staff had no reason to
anticipate that she would defy orders and victimize Resident 3. P. Br. at 13; see P. Ex. 8,
at 3. Petitioner states that at no time was Resident 3 left “alone, unattended, [or]
unsupervised” in the presence of the Office Manager, there were several staff members in
close proximity, and “[t]he entire interaction occurs over approx. 2 minutes.” P. Pre-hrg.
Br. at 11; P. Br. at 7, 12; P. Ex. 7, at 3; Tr. 105-06.
16

Petitioner’s staff may have potentially anticipated the Office Manager’s refusal to leave
the premises and her confrontation with Resident 3 if it had complied with its reference
check policy, which I discuss more later. Specifically, if Petitioner called the Office
Manager’s previous employers, perhaps staff would have been able to learn about any
past improprieties and would have been able to avert the resident abuse. Ultimately
owever, a facility is responsible for the acts of its employees and “considerations of
foreseeability are inapposite when staff abuse has occurred.” Honey Grove Nursing Ctr.,
DAB No. 2570, at 4 (citing Gateway Nursing Ctr., DAB No. 2283, at 8 (2009))
(emphasis added). Thus, the fact that Petitioner’s staff may or may not have foreseen the
Office Manager’s abusive behavior is irrelevant.

Moreover, the fact that the abuse may have only lasted a few minutes is not a defense to
Petitioner’s failure to protect Resident 3 from abuse. Nothing in the regulations or even
in Petitioner’s own abuse prevention policy states that an abusive act must be of a certain
duration to satisfy the definition of “abuse.” That the confrontation may have been very
brief is irrelevant and does not detract from the fact that the Office Manager verbally
abused, scared, and intimidated the resident. Furthermore, I find this abuse started days
earlier with the Office Manager’s extortionist threats to evict Resident 3 and another
elderly resident from their home unless they provided her with money.

2. Petitioner was not in substantial compliance with the participation
requirement at 42 C.F.R. § 483.13(c) (Tag F226) because it did not implement
its abuse prevention policy and reference check policy.

A facility must “develop and implement written policies and procedures that prohibit
mistreatment, neglect, and abuse of residents and misappropriation of resident property.”
42 C.F.R. § 483.13(c). The SOD alleges that, under Tag F226, based on review of
documents and interviews, Petitioner violated 42 C.F.R. § 483.13(c) because Petitioner’s
staff “failed to implement their abuse policy to immediately take protective action as
needed to remove a resident from danger.” CMS Ex. 4, at 16. The citation refers to the
confrontation that took place between Petitioner’s Office Manager and Resident 3 on
May 24, 2012. CMS Ex. 4, at 15-20.

In its prehearing brief, CMS expands upon the factual allegations for Petitioner’s
noncompliance under Tag F226 in the SOD, arguing that the citation “involve[s]
Resident #3, and the failure to perform background checks on employees.” CMS Pre-
hrg. Br. at 10. Although CMS did not include the failure to perform reference checks as
part of the Tag F226 citation in the SOD, I do not find that CMS is precluded from
expanding upon the allegations in the SOD. The Board has explained that the SOD “‘is a
notice document, and is not designed to lay out every single detail in support of a finding
that a violation has been committed... .’ Alden Town Manor Rehab. & HCC, DAB No.
2054, at 17-18 (2006).
17

In providing guidance in interpreting 42 C.F.R. § 483.13(c), the SOM states,

The facility must develop and operationalize policies and
procedures for screening and training employees, protection
of residents and for the prevention, identification,
investigation, and reporting of abuse, neglect, mistreatment,
and misappropriation of property. The purpose is to assure
that the facility is doing all that is within its control to prevent
occurrences.

SOM, App. PP, Tag F226.

As I discuss below, I find that Petitioner, although having developed valid abuse
prevention policies, failed to effectively implement them, and accordingly, was not in
substantial compliance with 42 C.F.R. § 483.13(c).

a. Petitioner’s failure to separate and protect Resident 3 from the Office
Manager’s abusive confrontation demonstrates that Petitioner did not
implement its abuse prevention policy.

There is no dispute that Petitioner developed an abuse prevention policy as required by
42 C.F.R. § 483.13(c). P. Ex. 6; CMS Ex. 13, at 1-5. Consistent with the regulatory
requirements, Petitioner’s policy regarding abuse and neglect prohibits the “abuse or
neglect of any resident by any person, whether employee, contractor, other provider, legal
guardian, family or other person.” P. Ex. 6, at 1; CMS Ex. 13, at 1. In listing “examples
of the type of conduct which constitutes abuse,” the policy states in relevant part:

Verbal/Emotional/Psychological Abuse: Verbal conduct may
be abusive because of either the manner of communication or
the content of the communication. Examples include yelling,
cursing, ridiculing, harassment, coercion, threats, intimidation
and other communication which is derogatory or
disrespectful. Non-verbal communication, such as gestures,
that have the same effect may be considered emotional or
psychological abuse.

P, Ex. 6, at 3; CMS Ex. 13, at 5.’

7 Additionally, Petitioner’s policy lists extortion as another type of abusive conduct and
describes it as follows: “Attempting to acquire or acquiring something of value from a
client or a client’s family by physical force, intimidation, or abuse of official authority.
Examples include coercing a client to give up something of value or soliciting payment
18

The policy provides further that the facility must “[t]ake immediate protective action if
needed to remove resident from danger” and that if there is an allegation of abuse, such
action routinely includes transfer of the employee from direct care of the resident during
the investigation. CMS Ex. 13, at 2.

Petitioner’s Administrator began an investigation into allegations that the Office Manager
had misappropriated residents’ funds. On the morning of May 24, 2012, he suspended
the Office Manager pending the investigation and ordered her to leave the facility
immediately. However, instead of leaving the facility’s property, the Office Manager
sought out Resident 3 in another part of the building. In the presence of the Human
Resources Director, the Office Manager yelled at Resident 3, frightening her into handing
over a money order receipt that apparently implicated the Office Manager. Neither the
Human Resources Director nor other staff members that were in the area took any
effective steps to separate or shield Resident 3 from the Office Manager’s yelling.

Upon learning the Office Manager may have misappropriated residents’ funds,
Petitioner’s Administrator immediately initiated an investigation and an OTIS report. P.
Ex. 7, at 5. Further, the Administrator suspended the Office Manager when she came
into work on May 24, 2012, and ordered her to leave the facility. I agree with Petitioner
that this was a reasonable measure to ensure that the Office Manager had no further
contact with the residents and to protect the residents from any further harm while the
investigation was ongoing. P. Pre-hrg. Br. at 16; P. Reply at 12.

However, the evidence also shows that Petitioner did not take subsequent action to
separate and protect Resident 3 from the Office Manager’s abusive conduct, and this
instance of abuse violated Petitioner’s abuse prevention policy. Petitioner’s Office
Manager was able to confront Resident 3, a vulnerable, wheelchair-bound resident, and
created a situation of intimidation in which she verbally abused and threatened the
resident.

Petitioner does not dispute that the Human Resources Director did not physically
intervene between the Office Manager and Resident 3 or attempt to remove the resident
from the area. Instead, the Human Resources Director observed the confrontation and
then left Resident 3 in the hallway to get assistance. Petitioner also does not dispute that
no other staff member stepped in to protect Resident 3 or remove her from the
confrontation with the Office Manager. See P. Pre-hrg. Br. at 11; P. Br. at 7, 11-12; Tr.
105-07.

from a client or family by threatening the client with harm.” P. Ex. 6, at 3; CMS Ex. 13,
at 5.
19

Petitioner claims that Resident 3 “was never alone, unattended nor unsupervised in the
presence of” the Office Manager following the Office Manager’s suspension. P. Br. at
12. While Petitioner’s assertion may be true, this does not demonstrate compliance with
its own abuse prevention policy, which explicitly requires its staff to“[t]ake immediate
protective action if needed to remove resident from danger.” CMS Ex. 13, at 2. In
retrospect, the Office Manager’s goal in confronting the resident appears to have been to
obtain evidence of the money order funds she extorted from the resident. However, it
would have been a reasonable expectation that she would have sought out the resident for
exposing her illegal misappropriation of funds, and the facility should have planned how
it would safeguard the resident from potential harm from with the Office Manager, even
before the Administrator informed the Office Manager of the allegations against her.

The SOM explains:

The facility must develop and operationalize policies and
procedures for screening and training employees, protection
of residents and for the prevention, identification,
investigation, and reporting of abuse, neglect, mistreatment,
and misappropriation of property. The purpose is to assure
that the facility is doing all that is within its control to prevent
occurrences.

SOM, App. PP, Tag F226. I find that the evidence shows that Petitioner’s management
and staff did not do all that was within its control to protect Resident 3 from abuse. By
failing to take actions to further protect Resident 3 from contact with the Office Manager,
who, as it turns out, did in fact exploit this resident financially, Petitioner failed to
implement its abuse prevention policy.

b. Petitioner’s lack of documentation for required reference
checks demonstrates that Petitioner failed to implement its reference
check policy.

Petitioner’s April 9, 2012 reference check policy states:
Policy

In keeping with [Petitioner’s] commitment to provide the
highest quality service possible, this policy establishes the
facility’s position on reference checks for candidates for
employment and on background checks for certain
individuals in any category of employment, including existing
employees, independent contractors, and volunteers.
20

Reference Checks

All appointing authorities, through their supervisory
personnel, are required and responsible for performing a
complete reference check prior to making an offer of
employment to a candidate. The reference check may include
verification of employment, performance and any factual
information represented on the application.

CMS Ex. 13, at 9.

The employment application Petitioner used contains a section titled “Reference and
Prior Employment Check.” In this section, there are spaces to add the names of three
references and spaces in which to record the “Results of Check.” See CMS Ex. 16, at 8.
For each of the nine employment applications in question during the survey, the section
for documenting the results of reference checks is blank. CMS Br. at 14; CMS Ex. 16, at
4, 8, 12, 16, 20, 24, 28, 31; CMS Ex. 17, at 9. The applications lack any documentation
that Petitioner’s staff had performed the requisite reference checks.

Petitioner’s former Office Manager is among the nine employees whose personnel files
lack evidence of documentation of reference checks. See CMS Ex. 4, at 8. The Office
Manager’s personnel file contained a checklist of documents that were required to be in
her file, and although the item “reference checks” is on the list, there was no indication
that staff had placed any such documents in her file. CMS Ex. 17, at 6. Petitioner’s
Human Resources Director, who testified that he is responsible for performing reference
checks on applicants, did not contest these facts. Tr. 123. When directed to look at the
Office Manager’s employment application and the application of another employee, he
conceded that they were “not annotated” to indicate that staff had completed reference
checks. Tr. 118-23, 124; see CMS Ex. 16, at 8; CMS Ex. 17, at 6, 9.

Petitioner’s policy imposed upon staff the duty to perform a “complete reference check”
before making an offer of employment. CMS Ex. 13, at 9. It is undisputed that,
however, for all nine employees, Petitioner did not have any documentation that its staff
performed reference checks prior to their hiring. Without proof of documentation,
Petitioner had no reliable way to verify, or prove here for that matter, that its staff carried
out its duty under the policy to perform complete reference checks. Accordingly, I find
the evidence establishes that Petitioner did not effectively implement its reference check
policy, and thus, Petitioner was not in substantial compliance with 42 C.F.R. § 483.13(c).

Petitioner contends that its reference check policy does not require that staff document
reference checks, and CMS therefore improperly relies on Petitioner’s policy to
demonstrate noncompliance. P. Br. at 15-16; P. Reply at 9. Petitioner argues further that
21

CMS has not produced any evidence to show that its staff had not completed reference
checks for the specific employees. P. Br. at 16, 25; Tr. 37.

I find Petitioner’s claim that its reference check policy contains no requirement that
reference checks be documented disingenuous. Although the language of Petitioner’s
reference check policy does not explicitly require documentation, it is only logical that
such a requirement would be inherent in the policy. Without documentation, Petitioner
as no way to prove in good faith that its staff complied with its policy and performed
complete reference checks that included “verification of employment, performance and
any factual information represented on the application.” See CMS Ex. 13, at 9.
Petitioner’s employment application contains spaces in which to record the results of
reference checks, which suggests Petitioner’s intention that hiring personnel would
document the results of its reference checks. By failing to document that they had
performed reference checks for nine identified employees, Petitioner’s staff failed to
follow its own policy.

I do not find credible Petitioner’s claim that its staff completed reference checks for the
Office Manager. See Tr. 35, 37; P. Br. at 16; P. Reply at 10-11, 14. Petitioner maintains
that its Human Resources Director had informed one of the surveyors that he had
performed reference checks on the Office Manager but had no documentation. Tr. 35;
see CMS Ex. 9, at 6. At the hearing, Petitioner’s Human Resources Director testified that
it was not his practice to annotate employment applications to indicate that he had
performed reference checks. Tr. 120. With respect to the Office Manager, the Human
Resources Director states in his declaration that he “contacted all three references
provided by [the Office Manager] on her employment application.” P. Ex. 8, at 4. The
Human Resources Director states that “[f]rom those calls, [he] received no information
that would have suggested [the Office Manager] was unfit to work within the skilled
nursing home environment.” P. Ex. 8, at 5. Petitioner’s Administrator also states in his
declaration that his staff “contacted all three references provided by [the Office Manager]
on her employment application.” P. Ex. 7, at 7.

As for the other eight employees for whom CMS alleges that Petitioner failed to
document that reference checks were done, Petitioner asserts that CMS cannot rely on the
statements of the surveyor whose declaration was withdrawn and contends that the other
surveyor admitted that he cannot recall which personnel files he had reviewed. Tr. 47.
Based on these grounds, Petitioner argues that CMS has failed to produce prima facie
evidence that Petitioner failed to perform reference checks on the other eight employees.
P. Br. at 17; P. Reply at 11.

Considering that Petitioner has produced no documentation that reference checks were
done, I assign little weight to the statements of Petitioner’s Human Resources Director
and Administrator regarding unannotated contacts of the Office Manager’s references.
Moreover, had the Human Resources Director called the Office Manager’s references, it
22

does not strike me as credible that he would not have taken the time to document having
done a reference check, especially where the employment application contains a space to
enter this information. Petitioner has not come forward with any plausible explanation as
to why it would not require documentation of its reference checks.

Neither the Human Resources Director nor the Administrator represented that staff
performed reference checks on the eight other employees. The burden was on Petitioner
to produce actual documentation, or credible testimony, of the reference checks, and it
produced no definitive evidence to show that reference checks were done. Absent
credible evidence to the contrary, I will presume that Petitioner did not perform reference
checks for these employees. Cf: Evergreene Nursing Care Ctr., DAB No. 2069, at 24-25
(2007) (finding, where a facility routinely maintains a treatment record whose purpose is
to confirm that a necessary medical item or service was provided, in the absence of
documentation that the item or service was provided, the fact-finder may presume, absent
credible evidence to the contrary, that the item or service was not provided).

3. Petitioner was not in substantial compliance with the participation
requirement at 42 C.F.R. § 483.75 (Tag F490) because, by not protecting
against resident abuse and by not implementing its abuse prevention policies,
Petitioner did not administer its facility in a manner that ensured the highest
practicable well-being of its residents.

A facility “must be administered in a manner that enables it to use its resources
effectively and efficiently to attain or maintain the highest practicable physical, mental,
and psychosocial well-being of each resident.” 42 C.F.R. § 483.75. A violation of this
participation requirement is usually based on findings of noncompliance with other
participation requirements. Honey Grove Nursing Ctr., DAB No. 2570, at 11; Cedar
View Good Samaritan, DAB No. 1897, at 23-24 (2003); Asbury Ctr. at Johnson City,
DAB No. 1815, at 11 (2002).

I find that Petitioner’s administration was directly implicated in the abuse incident of
May 24, 2012, because of its failure to protect Resident 3 from the Office Manager’s
abusive behavior. The Office Manager was allowed to access and confront Resident 3,
and facility staff did not take preventative measures to stop the exchange, such as
physically intervening between her and the Office Manager or removing Resident 3 from
the area. Instead staff observed as the Office Manager verbally abused and intimidated
the vulnerable resident. That management and staff did not do more to protect Resident 3
from the Office Manager’s abuse demonstrates that Petitioner did not administer its
facility in a manner that ensured that residents are free from abuse, let alone in a manner
that ensured the highest practicable well-being of residents.

Additionally, the evidence shows that Petitioner failed to implement its reference check
policy effectively, and this also demonstrates a deficiency in administration. The
23

objective of Petitioner’s reference check policy was to ensure that Petitioner’s
management would not hire anyone who was unfit for service as a facility employee. It
is evident that meaningful implementation of the policy required documentation of
reference checks on new employees. Because its staff failed to have documentation that
they had performed reference checks, Petitioner’s management potentially put all of its
residents at risk for harm by putting them in the care of possibly unfit employees. The
fact that Petitioner lacked this crucial documentation and claimed that none was needed
under its policy, establishes that Petitioner did not administer its facility in a manner so
that its resources were used effectively to ensure the highest practicable well-being of its
residents.

Petitioner argues that there exists no objective standard by which to measure whether a
facility’s resources are being used effectively. P. Br. at 20-21. Petitioner objects to
CMS’s reliance on the other citations as the basis for finding noncompliance with 42
C.F.R. § 483.75. Petitioner also objects to CMS’s citing of 42 C.F.R. § 483.75, without
specifying a particular subsection. P. Br. at 22-23.

Petitioner’s arguments are unpersuasive. Whether a facility is in substantial compliance
with this participation requirement will necessarily turn on the unique facts and
circumstances presented by a particular case. As noted above, the Board has held that a
deficiency in administration can be based on findings of other deficiencies. The text of
42 C.F.R. § 483.75, moreover, is not dependent on any of the subsections and can stand
alone as a Medicare participation requirement. Here, it is clear that Petitioner was
deficient in management and administration, for it failed to protect against resident abuse
and failed to effectively carry out its reference check policy.

4. Petitioner was in substantial compliance with the participation requirements
at 42 C.F.R. § 483.13(c)(1)(ii)-(iii), (c)(2)-(4) (Tag F225) because Petitioner’s
staff performed criminal background checks on the employees the state agency
surveyed.

A facility may not employ individuals who have either been found guilty of abusing,
neglecting, or mistreating residents, or who have been listed on a state nurse aide registry
for abuse, neglect, mistreatment of residents, or misappropriation of resident property. 42
C.F.R. § 483.13(c)(1)(ii). A facility must report to the state nurse aide registry or
licensing authority any knowledge the facility has of court actions against an employee
that indicates unfitness for service as a nurse aide or other facility staff. 42 C.F.R.

§ 483.13(c)(1)(iii).

Although CMS combined its arguments for Tags F225 and F226, basing them on the
same facts, CMS imposed a separate CMP for each deficiency. CMS’s arguments related
to Tag F225 centered on Petitioner’s non-implementation of its policy for complete
reference checks. Specifically, from the survey’s SOD, CMS alleges that Petitioner
24

failed to comply with the above regulatory requirements because it failed to follow its
own policy and procedures for documentation of reference checks for nine employees
whom the facility recently had hired. CMS Ex. 4, at 6-10; CMS Br. at 12-16; see CMS
Ex. 13, at 9. In its briefs, CMS also bases its CMP for Tag F225 on its conclusion that
Petitioner had failed to follow its own policy and procedures to conduct reference checks
on the nine new employees. CMS Pre-hrg. Br. at 12; CMS Br. at 12-13.

Although I upheld the deficiency involving Tag F226 because Petitioner clearly did not
implement its reference check policy involving complete reference checks (which was
also a partial basis for finding noncompliance with the derivative Tag F490 for non-
efficient and non-effective administration), I do not uphold a deficiency and CMP for Tag
F225 as CMS argues. This tag, as cited, requires criminal background checks, with the
immediate reporting of negative results, for nursing home employees. CMS is not
disputing, however, that Petitioner performed criminal background checks on the
employees in question and that there were no reportable results. See Tr. 43. Further,
CMS did not make any arguments that this deficiency was based upon a less than
thorough investigation of abuse allegations or that the facility failed to prevent further
abuse during a pending investigation.

5. I deny Petitioner’s request to strike CMS Exs. 4, 5, 6, and 10.

In its post-hearing brief, Petitioner requests that I strike CMS Ex. 4 (the SOD), CMS Ex.
5 (Petitioner’s plan of correction for the June 8, 2012 survey, which also includes the
SOD), CMS Ex. 6 (the state agency survey tracking form and notification of immediate
jeopardy determination, both signed by the surveyor who was not available to testify),
and CMS Ex. 10 (the unavailable surveyor’s survey notes for the June 8, 2012 survey)
based on hearsay and authentication objections. P. Br. at 2-3, 10, 13; P. Reply at 12.
Petitioner takes the position that because CMS failed to produce one of the surveyors for
cross-examination, I should prohibit CMS from introducing any evidence which she
might authenticate, including any exhibits which she retrieved during her investigation.
P. Reply at 5. Petitioner argues that “all evidence and exhibits which originate solely
through [the unavailable surveyor] should likewise be withdrawn, deemed inadmissible,
and/or stricken.” P. Br. at 10; see P. Reply at 6.

I deny Petitioner’s objections to CMS Exs. 4, 5, 6, and 10 and deny its request that these
exhibits be stricken from the record. Petitioner’s objections are without merit.

I reiterate that hearsay statements are admissible in this administrative proceeding even if
they are inadmissible under the rules of evidence applicable to court proceedings.
Florence Park Care Ctr., DAB No. 1931 (2004); see 42 C.F.R. § 498.61. The fact that a
surveyor was not available to attend the hearing and submit to cross-examination does
not mean that I must automatically reject evidence or statements attributed to her or
obtained by her during the course of her investigation. Rather, her unavailability for
25

cross-examination means that her statements, while admissible, may be subject to less
weight. Although Petitioner claims that CMS “fail[ed] to produce [surveyor] for
testimony,” if Petitioner believed there was a problem with the allegations, Petitioner
could have requested a subpoena to compel her attendance and testimony; however, it did
not do so. P. Reply at 5.

Moreover, the surveyor who was unavailable to testify did not personally witness the
May 24, 2012 incident involving Petitioner’s Office Manager and Resident 3. Her
factual findings are the result of her review of facility documents, including investigation
reports and contemporaneous statements of employees regarding the May 24, 2012
incident, and her interviews with staff. Therefore, the quality of the surveyor’s
information gathering or thought processes are of minimal value because the compliance
issues presented are ones that I decide de novo based on the evidence that the parties
present. The Board has explained that an ALJ hearing is not a review of how or why
CMS decided to impose remedies, nor is it “restricted to the facts or evidence that were
available to CMS when it made its decision. Rather, the ALJ hearing provides a fresh
look by a neutral decision-maker at the legal and factual basis for the deficiency findings
underlying the remedies.” Britthaven of Chapel Hill, DAB No. 2284, at 6 (2009)
(citations and internal quotations omitted). Petitioner had ample opportunity in this
proceeding to present its own documentation and testimony to refute any surveyor
findings, which were essentially based on Petitioner’s own documentation as well.

6. The three PICMPs, each in the amount of $2,000, that CMS imposed for the
substantiated deficiencies are reasonable.

In determining whether a CMP is reasonable, I consider the factors listed in 42 C.F.R.

§ 488.438(f): 1) the facility’s history of noncompliance, including repeated deficiencies;
2) the facility’s financial condition; 3) factors specified in 42 C.F.R. § 488.404; and 4)
the facility’s degree of culpability, which includes neglect, indifference, or disregard for
resident care, comfort, or safety. The absence of culpability is not a mitigating factor.
The factors in 42 C.F.R. § 488.404 include: 1) the scope and severity of the deficiency;
2) the relationship of the deficiency to other deficiencies resulting in noncompliance; and
3) the facility’s prior history of noncompliance in general and specifically with reference
to the cited deficiencies. I also consider whether the evidence supports a finding that the
amount of the CMP is at a level reasonably related to an effort of a provider to produce
corrective action with the kind of deficiencies found. CarePlex of Silver Spring, DAB
No. 1683, at 8 (1999).

The Board has held that “tan ALJ or the Board properly presumes that CMS considered
the regulatory factors and that those factors support the amount imposed.” Pinecrest
Nursing & Rehab. Ctr., DAB No. 2446, at 23 (2012) (emphasis in original). Thus, CMS
is not required to present evidence regarding each regulatory factor. Instead, the burden
is on Petitioner “to demonstrate, through argument and the submission of evidence
26

addressing the regulatory factors, that a reduction is necessary to make the CMP amount
reasonable.” Jd. (quoting Oaks of Mid City Nursing & Rehab. Ctr., DAB No. 2375, at
26-27 (2011)).

Here, CMS imposed a $2,000 PICMP for each of the three substantiated deficiencies
(total amount of $6,000). A PICMP has only one range, $1,000 to $10,000, regardless of
whether or not immediate jeopardy is present. 42 C.F.R. § 488.438(a)(2).

In its prehearing brief, Petitioner claims that the PICMPs are unreasonable. P. Pre-hrg.
Br. at 23. Petitioner argues that its staff’s actions to protect Resident 3 and the other
residents from the Office Manager during its investigation demonstrate that it has
minimal culpability. P. Pre-hrg. Br. at 23-24. Petitioner contends that its Office Manager
did not verbally abuse Resident 3, and it notes that the Office Manager was never alone
and unsupervised with Resident 3 after she was suspended. P. Pre-hrg. Br. at 24.
Petitioner contends further that it screened its employees, including the Office Manager,
prior to their employment. P. Pre-hrg. Br. at 23.

As discussed above, I have concluded that Petitioner was not in substantial compliance
with the participation requirements at: 42 C.F.R. § 483.13(b) and (c)(1)(i); 42 C.F.R.
§ 483.13(c); and 42 C.F.R. § 483.75. These regulatory violations were based on
Petitioner’s failure to protect Resident 3 from abuse and its failure to have evidence of
documentation of reference checks on nine employees, including the Office Manager
who succeeded in defrauding and abusing the resident here.

Petitioner’s violations were serious. Petitioner failed to ensure that its residents were free
from abuse. Here, Petitioner’s Office Manager verbally abused a vulnerable resident,
causing her to feel intimidated and frightened. As stated above, Petitioner is responsible
for the acts of its employees. Honey Grove Nursing Ctr., DAB No. 2570, at 4 (citing
Gateway Nursing Ctr., DAB No. 2283, at 8 (2009)) (emphasis added). Although
Petitioner’s Human Resources Director and other staff members were present and could
have taken action, no one took all reasonable steps to separate and protect the resident
from the employee’s abusive confrontation. I find the lack of proactive steps to protect
Resident 3 establishes culpability on Petitioner’s part.

Petitioner was also highly culpable for its failure to have documentation of reference
checks. Petitioner’s reference check policy in effect at the time of the survey required its
staff to perform a “complete reference check” on applicants. Any meaningful
implementation of the policy required the documentation of reference checks. By failing
to have this documentation for nine new employees, Petitioner’s staff potentially
endangered the safety and welfare of its residents by entrusting them in the care of
possibly unfit employees. In fact, the abusive Office Manager was one of the nine
identified employees whose file lacked documentation that staff had performed reference
checks.
27

The three PICMPs that CMS imposed for the deficiencies I substantiated here, each in the
amount of $2,000, are in the lower half of the PICMP range. 42 C.F.R. § 488.438(a)(2).
CMS did not offer evidence of any history of noncompliance of Petitioner, and Petitioner
has not claimed that its financial condition affects its ability to pay the relatively small
PICMPs. Accordingly, I conclude that the three $2,000 PICMPs are reasonable.

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Re

medies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-0882)

Complainant

Vv.

8 Mile and Gratiot, Inc. / Salah Jaern d/b/a Gulf,

Respondent.

Docket

No. C-14-1385

Decision No. CR3348

Date: August 28, 2014

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP)

began this matter by serving an administrative

complaint on Respondent, 8 Mile and Gratiot, Inc. / Salah Jaern d/b/a Gulf, at 15000 East
8 Mile Road, Detroit, Michigan 48205, and by filing a copy of the complaint with the

Food and Drug Administration’s (FDA)

Division of Dockets Management. The

complaint alleges that Gulf unlawfully sold cigarettes to minors and failed to verify, by

means of photo identification containing

a date of birth, that cigarette purchasers were 18

years of age or older, thereby violating the Federal Food, Drug, and Cosmetic Act (Act),

21US.C. § 301 et seq., and its imp

lementing regulations, 21 C.F.R. pt. 1140. CTP

seeks to impose a $500 civil money penalty against Respondent Gulf.

As provided for in 21 C.F.R. §§ 17.5 and
complaint on Respondent Gulf by United

17.7, on July 1, 2014, CTP served the
Parcel Service. In the complaint and

accompanying cover letter, CTP explained that, within 30 days, Respondent should pay

the penalty, file an answer, or request an
CTP warned Respondent that, if it failed

extension of time in which to file an answer.
to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

Respondent Gulf has neither filed an answer within the time prescribed, nor requested an
extension of time within which to file an answer. Pursuant to 21 C.F.R. § 17.11, 1
assume that the facts alleged in the complaint (but not its conclusory statements) are true.
Specifically:

e At Respondent’s business establishment, 15000 East 8 Mile Road, Detroit,
Michigan 48205, on June 20, 2013, at approximately 10:15 AM, an FDA-
commissioned inspector observed Respondent’s staff sell a package of Newport
Box 100s cigarettes to a person younger than 18 years of age. The inspector also
noted that Respondent’s staff failed to verify, by means of photo identification
containing the bearer’s date of birth, that the cigarette purchaser was 18 years of
age or older;

e Ina warning letter issued on July 18, 2013, CTP informed Respondent of the
inspector’s observations from June 20, 2013, and that such actions violate federal
law, 21 C.F.R. § 1140.14(a) and (b)(1). The letter further warned that if
Respondent failed to correct its violations, the FDA could impose a civil money
penalty or take other regulatory action;

e At Respondent’s business establishment, 15000 East 8 Mile Road, Detroit,
Michigan 48205, on November 21, 2013, at approximately 5:07 PM, FDA-
commissioned inspectors documented Respondent’s staff selling a package of
Newport Box 100s cigarettes to a person younger than 18 years of age. The
inspectors also noted that Respondent’s staff failed to verify, by means of photo
identification containing the bearer’s date of birth, that the cigarette purchaser was
18 years of age or older.

These facts establish Respondent’s liability under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if sold or distributed in violation of regulations issued under section 906(d) of the Act.

21 US.C. § 387£(d); see 21 U.S.C. § 387¢(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C. §
387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21 C.F.R. § 1140.14(a),
no retailer may sell cigarettes or smokeless tobacco to any person younger than 18 years
of age. Under 21 C.F.R.
§ 1140.14(b)(1), retailers must verify, by means of photo identification containing the
bearer’s date of birth, that no cigarette or smokeless tobacco purchaser is younger than 18
years of age.

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

For these reasons, I enter default judgment in the amount of $500 against Respondent 8
Mile and Gratiot, Inc. / Salah Jaern d/b/a Gulf. Pursuant to 21 C.F.R. § 17.11(b), this
order becomes final and binding upon both parties after 30 days of the date of its
issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
Grace Living Center - Northwest OKC,
(CCN: 37-5209),
Petitioner,
v.
Centers for Medicare & Medicaid Services.

Docket No. C-14-748

Decision No. CR3347

Date: August 27, 2014

DECISION

I grant summary judgment in favor of the Centers for Medicare & Medicaid Services
(CMS) and against Petitioner, Grace Living Center - Northwest OKC. I sustain CMS’s
determination to impose the following remedies against Petitioner.

e A per day civil money penalty of $4550 for one day, October 31, 2013.

e Per day civil money penalties of $50 for each day of a period beginning on
November 1, 2013 and running through January 6, 2014.

e Denial of payment for all new Medicare admissions for each day of a period
beginning December 4, 2013 and running through January 6, 2014.

I. Background
Petitioner is a skilled nursing facility doing business in the State of Oklahoma. It filed a

hearing request in order to challenge the remedies that I cite in the opening paragraph of
this decision. CMS moved for summary judgment, filing a brief and exhibits that it
identified as CMS Ex. 1 - CMS Ex. 7. Petitioner opposed the motion and filed exhibits
that it identified as P. Ex. 1 — P. Ex. 8. I receive the parties’ exhibits into the record for
purposes of deciding CMS’s motion.

IL. Issues, Findings of Fact, and Conclusions of Law
A. Issues

The sole issue that I must decide is whether Petitioner was substantially noncompliant
with Medicare participation requirements between November 12, 2013 and November
25, 2013.

This case arises from compliance surveys that were conducted at Petitioner’s facility on
November 1, 2013 (November | survey) and November 25, 2013 (November 25
survey).' The surveyors found Petitioner to be noncompliant with Medicare participation
requirements at each survey. Petitioner does not dispute that it was noncompliant nor
does it dispute the level of its noncompliance at the November | survey (immediate
jeopardy). Furthermore, Petitioner does not deny that it was noncompliant with Medicare
participation requirements between November 25, 2013 and January 6, 2014. Petitioner’s
argument is that it attained compliance with Medicare participation requirements
effective November 12, 2013 and remained compliant until the November 25 survey.
Finally, Petitioner does not dispute that the remedies that CMS imposed against it,
including civil money penalties and a denial of payment for new admissions, are
reasonable or within CMS’s authority to impose assuming that it was noncompliant.

B. Findings of Fact and Conclusions of Law

The undisputed facts are as follows. On November 25, 2013, Petitioner filed a plan of
correction with the Oklahoma State Department of Health (OSDH) addressing the
immediate jeopardy level noncompliance that was identified at the November | survey.
CMS Ex. 3. That plan included several steps that Petitioner pledged to take in order to
assure that the deficiency would be abated. These steps included the following:

Random daily audits will be conducted by the [Director of
Nursing], administrator and/or designee for 30 days and
findings will be reported to the Quality Assurance

' The immediate jeopardy-level noncompliance that was identified at the November 1
survey relates to an incident in which a resident of Petitioner’s facility drank cleaning
fluid. The surveyors found that Petitioner’s staff left dangerous chemicals such as
cleaning fluid and hand sanitizer unattended in unlocked carts to which residents of the
facility had access. CMS Ex. | at 5-9.
Committee. The Quality Assurance Committee will then
determine further interventions if needed to ensure
compliance.

CMS Ex. 3 at 3. The quoted part of the plan contained two critical elements for attaining
compliance. There would be daily audits to assure that corrections were being
implemented. And, just as critical, those audits would be reviewed and assessed by
Petitioner’s Quality Assurance Committee. In other words, the audits would be
conducted for purposes of obtaining evidence of compliance and the committee would
evaluate the findings made at the audits in order to assure that corrections were being
implemented.

Petitioner envisioned that this process would take 30 days to complete. That is why it
represented specifically that the audits and assessments would last for a 30-day period.

It is obvious that Petitioner did not complete by November 12, 2013 the essential
corrective actions that it had represented it would implement over a period of 30 days. It
could not possibly have done so, because assuming that Petitioner began its corrective
actions as of the determination of immediate jeopardy on November 1, its own plan
envisioned a 30-day period of audits and assessments. Petitioner has not offered any
explanation of how it could have completed or did complete its plan in 12, rather than 30,
days.

Petitioner now argues that there is a fact dispute as to whether it attained compliance on
November 12, as it contends, or remained noncompliant through November 25, when a
re-survey found additional instances of noncompliance. Petitioner predicates its
arguments on an OSDH certification of November 12 as the compliance date plus
evidence that it contends contains facts that support a finding of a November 12
compliance date. I find that Petitioner’s assertions do not raise a dispute of material fact.

Petitioner hangs its argument primarily on a re-survey of its facility that OSDH
completed on January 31, 2014. P. Ex. 1. In the re-survey report the surveyor notes —
without any explanation whatsoever — that on November 12, 2013, Petitioner corrected
the deficiency identified at the November | survey. Jd. The surveyor makes no reference
to Petitioner’s plan of correction nor does the surveyor offer any explanation at all as to
how Petitioner completed 30 days of audits and assessments in 12 days.” Id.

> The plan of correction shows a completion date for the audits and committee meetings
of November 12, 2013. CMS Ex. 3 at 3 and 12. However, the plan itself specifies that
the audits and meetings would continue for 30 days. I find that the schedule of audits and
meetings set forth in the plan is determinative of the plan’s intent because it obviously
would have been impossible for Petitioner to complete 30 days of audits and committee
meetings by November 12, 2013.
It is irrelevant that OSDH might have said that Petitioner attained compliance by
November 12 if there is no evidence to back up that conclusion. CMS is not bound by
OSDH’s findings. It has the ultimate authority to decide issues of compliance and
noncompliance and its determination of failure to attain compliance takes precedence
over any findings that OSDH makes. 42 C.F.R.

§ 488.452(a)(2).

It might be a different story if OSDH, at its January 31 survey, had obtained evidence that
Petitioner actually attained compliance on November 12, 2013 and Petitioner were now
to offer that evidence as proof that there is a legitimate dispute as to whether, by
November 12, Petitioner did all that it represented it would do. There, I would not accept
OSDH’s conclusion as binding CMS, but I would nevertheless look closely at the
underlying proof. However, Petitioner did not offer such evidence. Petitioner provided
nothing to show how OSDH could have concluded that Petitioner attained compliance
without completing the audits and assessments that Petitioner represented as a necessary
prerequisite for compliance.

Petitioner says that its exhibits, P. Ex. 1 — P. Ex. 8, contain evidence that it attained
compliance as of November 12. However, Petitioner cites to nothing in those exhibits
that raises a genuinely disputed issue of material fact. Indeed, Petitioner refers to these
exhibits only in passing and it says merely that the exhibits raise disputed issues of fact
without explaining exactly what those fact disputes might be.

Nevertheless, I have examined P. Ex. 1 — P. Ex. 8 and I find nothing in these exhibits that
addresses CMS’s central contention that Petitioner could not have completed the
necessary audits and assessments by November 12 after representing explicitly that it
would take 30 days to do that. P. Ex. 1 and P. Ex. 2 are reports of surveys completed
after November 12 that do not address the issue of audits at all. I have already explained
that P. Ex. 1, while it certifies Petitioner as having attained compliance on November 12,
2013, contains no findings that would substantiate that certification.

P. Ex. 3 and P. Ex. 4 are records of in-service training that Petitioner gave to its staff. In-
service training may have been a necessary element of Petitioner’s corrective action but
Petitioner offers no evidence to show that such training substitutes for the audits and
assessments that Petitioner averred it would perform. Indeed, Petitioner doesn’t even
assert that contention.

P. Ex. 5 is the minutes of Petitioner’s Quality Assurance Committee for a single day,
November 12, 2013. The exhibit establishes that, on that date, the committee discussed
issues related to the immediate jeopardy level noncompliance that was found at the
November | survey. The exhibit says nothing at all about why subsequent audits and
committee meetings would be unnecessary and so, does not evidence or even suggest that
Petitioner completed its promised corrections ahead of schedule.

P. Ex. 6 is a 235-page exhibit that Petitioner does not discuss at all in its brief. It consists
of a series of documents that are headed with the term “compliance rounds” and the
documents appear to be reports of checks that staff made to assure that the facility safely
stored potentially hazardous chemicals. It appears to consist of the audits that were
promised in Petitioner’s plan of correction. The documentation establishes that
Petitioner’s staff was conducting compliance audits for weeks after November 12, 2013.
The exhibit contains “compliance rounds” reports that are for dates in January 2014.

The “compliance rounds” reports do not allow for an inference that Petitioner attained
compliance by November 12, 2013. To the contrary, the reports allow only for the
inference that Petitioner found it necessary to continue compliance audits well after
November 12, precisely what it represented would be necessary in its plan of correction.

P. Ex. 7 is a copy of the November | survey report. It identifies Petitioner’s
noncompliance but says nothing at all about correction of noncompliance.

P. Ex. 8 is an affidavit signed by Amber Nowling, R.N., Petitioner’s director of clinical
services. In her affidavit Ms. Nowling avers that she attended Petitioner’s November 12,
2013 Quality Assurance Committee meeting. She discusses the meeting. However, she
does not aver that a determination was made then — or ever — that this meeting would
obviate the need for the subsequent meetings that Petitioner promised in its plan of
correction. Nor does Ms. Nowling explain why subsequent meetings would be
unnecessary, particularly in that Petitioner obviously had determined that additional
“compliance rounds” would be needed after November 12.

Ms. Nowling also asserts that an employee of OSDH told her that OSDH had found that
Petitioner attained compliance by November 12. This adds nothing to the evidence
because her assertion merely reiterates what is stated in P. Ex. 1. As I have found, the
fact that OSDH may have found compliance as of November 12 is not meaningful absent
evidence that Petitioner actually attained compliance by that date. Nothing supplied by
Petitioner explains how it could have avoided completing the promised audits and
committee meetings and still attained compliance.

The $4550 civil money penalty imposed by CMS for immediate jeopardy leve
noncompliance on November 1, 2013 is not at issue. The $50 daily penalty amount for
non-immediate jeopardy level noncompliance is not at issue either, because $50 is the
minimum daily penalty amount that CMS may impose for noncompliance that is
substantial but not at the immediate jeopardy level. 42 C.F.R. § 488.438(a)(1)(ii).
Petitioner asserts that $50 daily penalties may not be imposed for the period of November
12 — 25, 2013 because it alleges that it was in substantial compliance on those dates.

However, I find that there is no genuinely disputed material fact as to Petitioner’s
noncompliance on the dates in question and, therefore, imposition of $50 penalties on
each of those dates is lawful.

Finally, CMS is authorized to impose denial of payment for new admissions for each day
of the December 4, 2013 — January 6, 2014 period. That remedy is lawful even if I were
to find a dispute as to Petitioner’s compliance during the November 12 — 25, 2013 period.
There is no dispute that Petitioner failed to comply substantially with Medicare
participation requirements during the period between December 4, 2013 and January 6,
2014. Petitioner has not challenged CMS’s noncompliance findings for that period. CMS
is authorized to impose the remedy of denial of payment for new admissions for each day
that a facility is noncompliant. 42 C.F.R. § 488.417(a). That authority is based on the
noncompliance that is present on the days when the remedy is imposed. The authority to
impose the remedy does not hinge on findings of previous noncompliance. So, the
admitted fact that Petitioner was noncompliant from December 4, 2013 through January
6, 2014 is all that is needed to sustain CMS’s determination to impose the remedy.
Petitioner’s compliance or noncompliance on dates prior to December 4 is irrelevant.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-0879)

Complainant
v.
Miraj 3, Inc. d/b/a J and P Flash Market 392/Citgo,
Respondent.
Docket No. C-14-1373
Decision No. CR3345

Date: August 26, 2014

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Miraj 3, Inc. d/b/a J and P Flash Market 392/Citgo, at 288
South Broadview Street, Greenbrier, Arkansas 72058, and by filing a copy of the
complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The complaint alleges that J and P Flash Market 392/Citgo unlawfully sold
cigarettes to minors and failed to verify, by means of photo identification containing a
date of birth, that a cigarette purchaser was 18 years of age or older, thereby violating the
Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its
implementing regulations, 21 C.F.R. pt. 1140. CTP seeks to impose a $500 civil money
penalty against Respondent J and P Flash Market 392/Citgo.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on July 1, 2014, CTP served the
complaint on Respondent J and P Flash Market 392/Citgo by United Parcel Service. In
the complaint and accompanying cover letter, CTP explained that, within 30 days,
Respondent should pay the penalty, file an answer, or request an extension of time in
which to file an answer. CTP warned Respondent that, if it failed to take one of these
actions within 30 days, the Administrative Law Judge could, pursuant to 21 C.F.R. §
17.11, issue an initial decision ordering it to pay the full amount of the proposed penalty.

Respondent J and P Flash Market 392/Citgo has neither filed an answer within the time
prescribed, nor requested an extension of time within which to file an answer. Pursuant
to 21 C.F.R. § 17.11, l assume that the facts alleged in the complaint (but not its
conclusory statements) are true. Specifically:

e At Respondent’s business establishment, 288 South Broadview Street, Greenbrier,
Arkansas 72058, on June 18, 2013, at approximately 3:14 PM, an FDA-
commissioned inspector observed Respondent’s staff sell a package of L&M Blue
Pack cigarettes to a person younger than 18 years of age;

e Ina warning letter issued on July 18, 2013, CTP informed Respondent of the
inspector’s observation from June 18, 2013, and that such an action violates
federal law, 21 C.F.R. § 1140.14(a). The letter further warned that if Respondent
failed to correct its violation, the FDA could impose a civil money penalty or take
other regulatory action;

e At Respondent’s business establishment, 288 South Broadview Street, Greenbrier,
Arkansas 72058, on September 23, 2013, at approximately 12:44 PM, FDA-
commissioned inspectors documented Respondent’s staff selling a package of Pall
Mall Blue cigarettes to a person younger than 18 years of age. The inspectors also
noted that Respondent’s staff failed to verify, by means of photo identification
containing the bearer’s date of birth, that the cigarette purchaser was 18 years of
age or older.

These facts establish Respondent’s liability under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if sold or distributed in violation of regulations issued under section 906(d) of the Act.

21 US.C. § 387f(d); see 21 U.S.C. § 387¢(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C. §
387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21 C.F.R. § 1140.14(a),
no retailer may sell cigarettes or smokeless tobacco to any person younger than 18 years
of age. Under 21 C.F.R. § 1140.14(b)(1), retailers must verify, by means of photo
identification containing the bearer’s date of birth, that no cigarette or smokeless tobacco
purchaser is younger than 18 years of age.

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

For these reasons, I enter default judgment in the amount of $500 against Respondent
Miraj 3, Inc. d/b/a J and P Flash Market 392/Citgo. Pursuant to 21 C.F.R. § 17.11(b), this
order becomes final and binding upon both parties after 30 days of the date of its
issuance.

/s/
Catherine Ravinski
Administrative Law Judge