Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)

Neil E. Norwood, ) Date: April 28, 2008
)
Petitioner, )
)

-Vv.- ) Docket No. C-08-216

) Decision No. CR1780
The Inspector General. )
)
DECISION

I sustain the determination of the Inspector General (I.G.) to exclude Petitioner, Neil E.
Norwood, from participating in Medicare and other federally funded health care programs
for a period of at least 25 years.

I. Background

On October 31, 2007 the I.G. notified Petitioner that he was being excluded from
participating in Medicare and other federally funded health care programs for at least 25
years. The LG. told Petitioner that the exclusion was the consequence of Petitioner’s
conviction of crimes as are described at sections 1128(a)(1) and (a)(3) of the Social
Security Act (Act). Petitioner requested a hearing and the case was assigned to me fora
hearing and a decision.

I held a pre-hearing conference at which I directed the parties to file briefs and exhibits
addressing the issues in the case. The I.G. filed a brief and nine proposed exhibits, which
he designated as I.G. Ex. 1 - 1.G. Ex. 9. Petitioner filed a brief and an exhibit which he
designated as Pet. Ex. A. I receive each party’s proposed exhibits into evidence.
Additionally, Petitioner requested that I convene an in-person hearing in order to receive
testimony from him and a witness. For reasons that I discuss below I find an in-person
hearing not to be necessary.

2

II. Issues, findings of fact and conclusions of law
A. Issues
The issues in this case are whether:

1. The I.G. must exclude Petitioner based on his conviction of crimes that
are described at sections 1128(a)(1) and (a)(3) of the Act; and

2. Assuming the I.G. must exclude Petitioner, an exclusion of 25 years is
reasonable.

B. Findings of fact and conclusions of law

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

1. The I.G. must exclude Petitioner because he was convicted of crimes
that are described at sections 1128(a)(1) and (a)(3) of the Act.

Petitioner does not dispute that he was convicted of crimes that are described at sections
1128(a)(1) and (a)(3) of the Act. Section 1128(a)(1) mandates the exclusion of any
individual who is convicted of a criminal offense related to the delivery of a Medicare or
a State Medicaid item or service. Section 1128(a)(3), in relevant part, mandates the
exclusion of any individual who is convicted of a felony relating to theft committed in
connection with the delivery of a health care item or service.

The undisputed facts in this case are that, on December 20, 2006, Petitioner, a pharmacist,
pled guilty in a New York State court to two felony counts of grand larceny in the first
degree. I.G. Ex. 2, at 19. His crimes consisted of theft from the New York State
Medicaid program and from the Oxford Insurance Company, a private health insurer. Jd.
at 14. Petitioner admitted perpetrating against these entities a variety of different
insurance scams including, but not limited to, improperly substituting generic for brand-
name medication while billing as if the medication were brand name medication,
improperly shorting patients on medication but billing as if he had supplied them with
larger quantities, and improperly compounding medication that he was not authorized to
compound. /d. at 14-15, 16. In pleading guilty Petitioner admitted that he stole more
than $1 million from each of these two health care programs and about $3 million overall
from these two health care programs and other insurers.

3

Petitioner’s crimes clearly fall within the purview of sections 1128(a)(1) and (a)(3).
Consequently, the I.G. is mandated to exclude Petitioner pursuant to these sections.
Petitioner’s crimes were related to the delivery of State Medicaid items or services and
thus (a)(1) offenses in that he stole from Medicaid by filing false claims for Medicaid
items or services that he had purported to provide. Second, the crimes were related to
theft in connection with the delivery of a health care item or service and thus (a)(3)
offenses because Petitioner admitted to stealing from a private health insurer by filing
false claims with that insurer for health care items or services that he had purported to
provide.

2. An exclusion of 25 years is reasonable.

Exclusions that are imposed pursuant to sections 1128(a)(1) and (a)(3) of the Act must be
for a minimum of five years. Act, section 1128(c)(3)(B). In this case the I.G. determined
to impose an exclusion of at least 25 years. The I.G.’s determination to impose an
exclusion for more than the statutory minimum period raises the issue of whether this
exclusion is reasonable.

Section 1128 is a remedial statute. Its purpose is not to impose punishment in addition to
that which is imposed by the criminal justice system but to protect federally funded health
care programs and these programs’ beneficiaries and recipients from individuals whose
conduct establishes them to be untrustworthy. Ultimately, then, the issue in any case
where the reasonableness of the exclusion is at issue is whether the exclusion is
reasonably necessary to attain the Act’s remedial goal of protection.

The Secretary has published regulations which must be utilized in evaluating whether an
exclusion is reasonable. For exclusions imposed pursuant to sections 1128(a)(1) and
(a)(3), the relevant regulation is 42 C.F.R. § 1001.102. The regulation establishes factors,
designated as “aggravating” and “mitigating” factors, that are set forth at 42 C.F.R.

§ 1001.102(b) (aggravating factors) and (c) (mitigating factors) that function very much
like rules of evidence in deciding whether an exclusion is reasonable. I may only
consider as evidence of reasonableness evidence that relates to an aggravating ora
mitigating factor. Evidence which does not relate to one of these factors is irrelevant and
I may not consider it.

Like rules of evidence, the aggravating and mitigating factors tell me what evidence is
relevant but they do not contain directions as to how much weight I must assign to
relevant evidence. The regulations contain no formula for calculating the length of an
exclusion. Therefore, I must weigh all evidence that relates to an aggravating or a
mitigating factor against the underlying remedial purpose of protecting programs and
their beneficiaries and recipients against someone who is untrustworthy.

4

In this case the evidence relating to aggravating factors proves Petitioner to be manifestly
untrustworthy. Petitioner has offered no evidence which relates to a regulatory mitigating
factor. As a consequence, an exclusion of 25 years is certainly reasonable because it
comports with the Act’s remedial purpose.

The I.G. presented evidence relating to the following aggravating factors.

+ Petitioner’s theft caused health insurers to sustain losses of more than $5000.
42 C.F.R. § 1001.102(b)(1). Petitioner admitted to stealing about $3,000,000 from
the New York Medicaid program and private health insurers. I.G. Ex. 2, at 18.

+ Petitioner committed his crimes over a period lasting longer than a year. 42
C.F.R. § 1001.102(b)(2). Petitioner’s crimes extended from about January 1, 2000
to about June 18, 2005, a period of more than five years. I.G. Ex. 2, at 14.

+ Petitioner was sentenced to incarceration for his crimes. 42 C.F.R.
§ 1001.102(b)(5). He was sentenced to imprisonment for a term of between two
and six years. I.G. Ex. 4, at 9.

Petitioner was subject to an adverse action by a State government agency based
on the facts that underlie his convictions and the I.G.’s exclusion determination.
42 C.F.R. § 1001.102(b)(9). On May 22, 2007 Petitioner surrendered his license
to practice pharmacy in New York in the face of an investigation that addressed
the same facts as were the basis for his convictions and exclusion. I.G. Ex. 5.
Additionally, Petitioner was excluded from participating in the New York State
Medicaid program as a consequence of his guilty plea. I.G. Ex. 9, at 3.

This evidence, if not offset by mitigating evidence, is strong support for an exclusion of at
least 25 years. It shows that Petitioner perpetrated theft on a grand scale, committed over
a period of five years, against a State Medicaid program and private insurers. The sheer
magnitude of Petitioner’s admitted crimes — about $3,000,000 in all — is in and of itself
sufficient to justify the exclusion determined by the I.G. Evidence of his incarceration
and remedial actions taken against him by other government entities is additional support.

Petitioner argues that his culpability is in fact less than what he pled to. For example, he
asserts that the extent of his crimes is magnified in the documents relating to his plea
because those documents do not offset the admitted amount of his crimes by the value of
the items or services he actually provided (as in generic drugs in substitution for brand
name drugs). I find this argument to be without merit because it is an attempt by
Petitioner to reopen and relitigate his conviction. The fact is that Petitioner admitted in
open court — when it was in his self interest to do so — that he stole about $3,000,000 from
5

insurers including Medicaid. Now, when it is in his self interest to minimize the effect of
his crimes, he attempts to do that. That assertion is impermissible in this setting because
the evidence that relates to aggravating and mitigating factors derives from Petitioner’s
admissions at the time he made his plea. Moreover, his arguments are not credible at this
juncture because they are so obviously self-serving.

Petitioner also attempts directly to challenge his conviction in the setting of this case by
arguing that the prosecution in his criminal case relied on statistically invalid evidence. I
find this argument effectively to be an attempt by Petitioner to retract his plea in this
forum after that plea had become final under State law. Such an effort by Petitioner, at
this late stage, is transparently self serving. Moreover, it is impermissible because of the
derivative nature of exclusions imposed pursuant to sections 1128(a)(1) and (a)(3) of the
Act.

Petitioner asserts, while admitting that his assertions do not comprise mitigating evidence
under 42 C.F.R. § 1001.102(c), that his age and 20 years of problem free practice as a
licensed pharmacist should weigh in his favor. But, such evidence clearly is irrelevant.

Petitioner contends that there is a mitigating factor in this case, arguing that he “fully
cooperated with the prosecution of this matter.” Petitioner’s brief at 6. But, cooperation,
even full cooperation, is not a mitigating factor. Cooperation with prosecuting authorities
is a mitigating factor under 42 C.F.R. § 1001.102(c)(3) only if it results in: others being
convicted or excluded from federally funded health care programs; additional cases being
investigated or reports being issued by appropriate law enforcement agencies identifying
program vulnerabilities or weaknesses; or the imposition of a civil money penalty or
assessment against another individual or entity. Petitioner has made no showing that any
of these results occurred as a consequence of his cooperation.

Finally, Petitioner asserts that his surrender of his license to practice pharmacy makes him
less of a threat to health care programs and their beneficiaries and recipients than if he’d
continued to practice. But, that argument loses all force if Petitioner should regain his
license before the termination of his exclusion. At that point federally funded programs
might be faced with a licensed but nevertheless untrustworthy provider. That is why the
LG. is vested with authority to exclude that is independent from authority vested in State
licensing agencies.
6

3. There is no reason to convene an in-person hearing.

Petitioner contends that there should be an in-person hearing in this case so that he might
testify to “the problems with the audits and the circumstances under which he agreed to
plead guilty.” Petitioner’s brief at 6. Petitioner avers, apparently, that his testimony
would be corroborated by that of another witness. I find that Petitioner’s demand to
present testimony creates no legitimate basis for me to convene an in-person hearing. As
I discuss above, his assertion that his guilty plea was made in the face of flawed evidence
is nothing less than an improper attempt to relitigate his criminal conviction in this forum.
Ihave no authority to allow that inasmuch as Petitioner’s exclusion derives from his
conviction. If Petitioner now wishes to challenge his conviction he must do so in an
appropriate State court.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
Ocean Springs Nursing Center, ) Date: April 28, 2008
(CCN: 25-5142) )
)
Petitioner, )
)
-Vv.- ) Docket No. C-07-534
) Decision No. CR1778
Centers for Medicare & Medicaid )
Services. )
)
DECISION

I sustain the Centers for Medicare & Medicaid Services (CMS’s) determination to impose
a per-instance civil money penalty of $7,500 against Petitioner, Ocean Springs Nursing
Center.

I. Background

Petitioner is a skilled nursing facility doing business in the State of Mississippi. It
participates in the Medicare program. Its participation in Medicare is governed by
sections 1866 and 1818 of the Social Security Act (Act) and by implementing regulations
at 42 C.F.R. Parts 483 and 488. Additionally, its right to a hearing in this case is subject
to regulations at 42 C.F.R. Part 498.

Petitioner was surveyed for compliance with Medicare participation requirements on
April 20, 2007 (April survey). The surveyors found that Petitioner had failed to comply
substantially with a Medicare participation requirement stated at 42 C.F.R.

§ 483.25(m)(2). The regulation at issue mandates that a facility ensure that its residents
are free from any significant medication errors.
2

CMS concurred with the surveyors’ findings and determined to impose a $7,500 per-
instance civil money penalty as a remedy. Petitioner requested a hearing and the case was
assigned to me for a hearing and a decision. The parties completed pre-hearing
exchanges in compliance with a pre-hearing order that I issued. Based on the parties’
exchanges I scheduled an in-person hearing.

Petitioner then moved for summary disposition. CMS opposed the motion and cross-
moved for summary disposition. Petitioner opposed CMS’s cross motion. In opposing
CMS’s motion Petitioner averred that it was willing to forego an in-person hearing and to
rest its case based on its written submissions provided that CMS did not offer additional
evidence to support its case. CMS has made no request that I convene an in-person
earing. Therefore, I find this case to be ready for decision without the need for an in-
person hearing.

Each party offered proposed exhibits as part of its pre-hearing exchange or in connection
with the motions for summary judgment. CMS offered 17 proposed exhibits with its pre-
earing exchange which it designated as CMS Ex. 1 - CMS Ex. 17. Petitioner offered 11
proposed exhibits with its pre-hearing exchange which it designated as P. Ex. | - P. Ex.

1. It offered an additional exhibit, P. Ex. 12, in response to CMS’s cross motion. CMS
then filed a motion objecting to P. Ex. 12 and offered as a supplemental exhibit, CMS Ex.
8, which consists of photographs of two of Petitioner’s residents whose care is at issue in
this case. I overrule CMS’s objections to P. Ex. 12. While I do not find that Petitioner
made any misrepresentations in offering the exhibit, I conclude that the statements in the
exhibit are not particularly germane to my decision and I do not rely on it. As to CMS
Ex. 18, I am not receiving that exhibit because it is unnecessary, but also out of privacy
considerations. Therefore, I receive into evidence CMS Ex. | - CMS Ex. 17, and P. Ex. 1
- P. Ex.12.

II. Issues, findings of fact and conclusions of law
A. Issues
The issues in this case are:

1. Whether Petitioner failed to comply substantially with the requirements
of 42 C.F.R. § 483.25(m)(2); and

2. Assuming noncompliance, whether a per-instance civil money penalty of
$7,500 is a reasonable remedy.
3

It is unnecessary that I address a third potential issue, that being whether the case is ripe
for summary disposition, inasmuch as the parties have expressed their willingness to have
the case decided based on their written submissions.

1. Petitioner failed to comply substantially with the requirements of 42
C.F.R. § 483.25(m)(2).

On March 20, 2007, a nurse working at Petitioner’s facility gave medications to a resident
(identified as Resident #1 in the report of the April survey) whom she misidentified as
another resident. CMS Ex. 1, at 2. The medications that the nurse incorrectly
administered to the resident included several drugs that would cause reduced blood
pressure. Subsequently, Resident #1 experienced profound hypotension that required her
to be hospitalized and treated in that hospital’s intensive care section with intravenous
anti-hypotensive medications. /d., at 1, 5-6; CMS Ex. 5, at 17-19.

The prima facie evidence offered by CMS establishes the medication administration error
to be an obvious episode of negligence by a member of Petitioner’s nursing staff. The
nurse who committed the error did not regularly administer medications but, on the day in
question, substituted for another nurse who was absent from work. CMS Ex. 5, at 4. The
nurse who mis-administered the medications acknowledged that she had confused
Resident #1 with another resident. She failed to take even basic measures — such as
checking the resident’s records for identifying information — to verify the resident’s
identity before administering medications to her.

On its face the negligence that occurred in this case is noncompliance with the
requirements of 42 C.F.R. § 483.25(m)(2). The regulation imposes a burden on a facility
to take all reasonable measures to ensure that residents are not victims of medication
errors. In this case the actions of the nurse who mis-administered medications to Resident
#1 clearly were not reasonable. The evidence offered by CMS establishes that the nurse
was not closely familiar with the residents to whom she was administering medications
and did not take effective measures to be certain that she was administering medications
to the right resident.

Petitioner acknowledges that an error was committed by one of its staff. But, it contends
that holding it responsible for the error of its nurse would amount to a finding of strict
liability that is contrary to the intent of the Act and implementing regulations. It asserts
that the “receipt of a single dose of the wrong medication by a resident cannot be the
basis for finding a violation.” Petitioner’s motion for summary disposition at 3.
Petitioner also argues that even if the nurse erroneously administered medications to the
wrong resident she did so in compliance with accepted nursing practices and standards. It
contends that the nurse may have “made an unfortunate mistake, but it was not because
she failed to follow any required policy or nursing practice.” Jd.
4

I find neither of these arguments to be persuasive. First, a facility is not immunized from
a finding of noncompliance on the ground that the noncompliance is confined to error —
even isolated error — by a single employee. In fact, what comprises compliance or
noncompliance by a facility is the work product of its employees. Ultimately, it is a
facility’s employees that provide the care that is subject to regulatory requirements.
When an employee errs that error must be evaluated as if it were committed by the
facility itself. Moreover, the error that is at issue here is hardly inconsequential. It was
employee negligence that jeopardized the life of one of Petitioner’s residents. The fact
that the negligence constituted a single event does nothing to diminish its significance.

Finding Petitioner noncompliant given the facts of this case hardly is a finding of “strict
liability.” There was obvious negligence here in the failure of the nurse to administer
medications properly to a resident. And, as I have discussed, the negligence of the nurse
appropriately is imputed to the facility.

Second, I am not persuaded that the nurse in question — and, by extension, Petitioner —
acted consistent with accepted nursing practices and standards in administering
medications to Resident #1. The gravamen of Petitioner’s argument is that, prior to
administering medications to the resident, the nurse addressed her by name and the
resident responded positively to that (admittedly incorrect) greeting by saying “good
morning.” Petitioner’s motion for summary disposition at 2. This, according to
Petitioner, was consistent with applicable nursing practices and standards to provide
reasonable assurance to the nurse that she was giving medications to the correct resident.
Petitioner argues that accepted nursing practices and standards require that a nurse do
nothing more than greet a resident who is not cognitively impaired before administering
medications to that individual. Under Petitioner’s analysis the fact that the nurse was
misled by the asserted response of Resident #1 to the nurse’s greeting may have been
unfortunate but establishes nothing to show that the nurse failed to discharge her duty
appropriately.

But, the facts of this case show clearly why simply greeting the resident was an
inadequate way of identifying her. Administering medications to residents including
Resident #1 was not part of the nurse’s normal duties. She was a substitute, being asked
to do something that was not part of her normal routine. Her error was a direct
consequence of her relative lack of familiarity with the resident. The fact that the nurse
was being asked to do something that was not part of her normal daily work routine
imposed on her the duty to exercise great caution in identifying residents and
administering medications to them. What might have sufficed in the case of a nurse who
was intimately familiar with a resident and with the medications that she took clearly was
inadequate under the circumstances pertaining to the substitute nurse’s administration of
medications.

5

Moreover, the fact that the nurse was a substitute imposed a duty on her supervisors and
Petitioner’s management to exercise extra caution to assure that the nurse provided
medications correctly to residents. The nurse — given that she was a substitute and not the
nurse who regularly administered medications to the residents — should have been
counseled to make absolutely certain of each resident’s identity before administering
medications to the resident.

And, in fact, that easily could have been done here. Petitioner had in place systems that —
had they been utilized by the nurse — ought to have eliminated the possibility that
medications would be administered erroneously.

Residents in Petitioner’s facility wore identifying armbands and their files contained
photographs that could have been used to identify them. P. Ex. 4; P. Ex. 8; P. Ex. 10.
Petitioner imposed no obligation on its staff to check a resident’s armband or photograph
prior to administering medications to him or her except in the circumstances where a
resident is cognitively impaired and unable to respond appropriately to a greeting by staff
and where the staff has some doubt about the resident’s identify. /d. But, in this case,
given the nurse’s relative unfamiliarity with the routine of administering medications to
the residents, it would have been a simple matter to counsel her in advance of her
performing her duties to make certain by, if necessary, checking each resident’s
identifying information, that she was providing medications appropriately to the correct
resident. She certainly would have identified Resident #1 and avoided the mis-
administration of medications to the resident had she looked at the resident’s armband or
checked her treatment record.

2. A per-instance civil money penalty of $7500 is reasonable.

A per-instance civil money penalty may range from $1,000 to $10,000. 42 C.F.R.

§ 488.438(a)(2). Criteria for deciding where a per-instance penalty should fall within that
range are established at 42 C.F.R. §§ 488.438(f)(1) - (4) and 488.404 (incorporated by
reference into 42 C.F.R. § 488.438(f)(3)). These criteria include: the seriousness of a
facility’s noncompliance; its noncompliance history; its culpability for noncompliance;
and its financial condition. Jd.

In this case the evidence shows that the deficiency was extremely serious. The
consequence of the nurse’s negligence was that Resident #1 suffered adverse medical
consequences that she had to be hospitalized for a time in intensive care. The
noncompliance caused serious injury to the resident and even jeopardized her life.
Moreover, and as I have discussed above, the error that caused harm to the resident may
have been a single event but it emanated from critical misjudgments by Petitioner’s
management and the nurse who committed that error. There was a palpable failure on
the part of Petitioner to recognize that putting a nurse into a situation where she would be

6

asked to perform acts that were not part of her daily routine could pose extreme risk to
residents if appropriate safeguards — even safeguards that exceeded the facility’s ordinary
routine — were not employed.

I find that a $7500 penalty is reasonable given the injury caused by the error and by the
misjudgment that the error revealed. I note that Petitioner has offered no evidence that its
financial condition precludes it from paying a penalty of this amount.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:

Evergreen Washington Healthcare
Frontier, d/b/a Frontier Health and
Rehabilitation Center II,

(CCN: 50-5276), Date: April 24, 2008
Petitioner,
Docket No. C-08-160
Decision No. CR1777

Centers for Medicare & Medicaid
Services.

DECISION

n this case, we revisit the narrow question as to whether a long-term care facility has a
right to a hearing when the Centers for Medicare & Medicaid Services (CMS) withdraws
the enforcement remedies provided for in 42 C.F.R. § 488.406. I conclude that the
facility is not entitled to a hearing and grant CMS’s motion to dismiss.

Petitioner, Evergreen Washington Healthcare Frontier d/b/a Frontier Health and
Rehabilitation Center, is a skilled nursing facility located in Longview, Washington,
certified to participate in the Medicare and Medicaid programs as a provider of services.
On September 12, 2007, the Washington State Division of Residential Care Services,
Aging and Disability Services Administration completed a survey of Petitioner’s facility
and found noncompliance. In a notice letter dated October 9, 2007, CMS advised
Petitioner that, based on those survey findings, it intended to impose the remedy of denial
of payment for new admissions (DPNA), effective October 24, 2007. However, in a letter
to Petitioner dated November 7, 2007, CMS informed Petitioner that a revisit survey
confirmed that Petitioner had achieved and maintained substantial compliance with
Medicare participation requirements. The November 7 letter further informed Petitioner
that no action would be taken regarding the DPNA. Petitioner requested a hearing on
December 6, 2007.

2

On March 5, 2008, CMS filed a Motion to Dismiss and a Memorandum in Support of
Motion to Dismiss arguing that Petitioner has no right to a hearing because no
enforcement remedy has been imposed. CMS also attached 10 Exhibits (CMS Exs. 1-10)
to support its motion to dismiss. By Order dated March 11, 2008, I directed Petitioner to
file a response to CMS’s motion within twenty days of its receipt. Petitioner did not
respond to the motion, and the time for response has since passed.

Petitioner has no right to a hearing because CMS has not
imposed a remedy.'

The hearing rights of a long-term care facility are established by federal regulations at 42
C.F.R. Part 498. A provider dissatisfied with CMS’s initial determination is entitled to
further review, but administrative actions that are not initial determinations are not
subject to appeal. 42 C.F.R. § 498.3(d). The regulations specify which actions are
“initial determinations” and set forth examples of actions that are not. A finding of
noncompliance that results in the imposition of a remedy specified in 42 C.F.R. § 488.406
is an initial determination for which a facility may request an administrative law judge
(ALJ) hearing. 42 C.F.R. § 498.3(b)(13). Unless the finding of noncompliance results in
the imposition of a specified remedy, however, the finding is not an initial determination.
42 C.F.R. § 498.3(d)(10)(ii). Where CMS rescinds its remedy determination, Petitioner
no longer has a hearing right because the determination that is subject to a hearing no
longer exists. Schowalter Villa, DAB No. 1688 (1999).

CMS’s letters of November 7, 2007 and February 14, 2008 plainly state that the DPNA
was rescinded, and nothing else suggests that any other remedy has been imposed. CMS
Ex. 6, CMS Ex. 10. Petitioner therefore no longer has a right to an ALJ hearing, and I
may dismiss pursuant to 42 C.F.R. § 498.70(b).

Accordingly, I order that this case be dismissed.

/s/
Carolyn Cozad Hughes
Administrative Law Judge

' T make this one finding of fact/conclusion of law.


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:

Neglex Inc., d-b.a. Latina Pharmacy &
Discount (Supplier No. 5434010001),

Date: April 22, 2008

Docket No. C-07-291
Decision No. CR1776

Petitioner,

Centers for Medicare & Medicaid
Services.

erevevevevvrvvvvwy

DECISION

The determination of the National Supplier Clearinghouse (NSC) and the Centers for
Medicare & Medicaid Services (CMS) to revoke the supplier number of Petitioner,
Neglex Inc., d.b.a. Latina Pharmacy & Discount (Neglex), reflected in the CMS notice
dated December 18, 2006, was incorrect as there was no basis for revocation. The
revocation action is reversed and Petitioner’s supplier number is reinstated as of the
effective date of the purported revocation.

I. Background

Petitioner is a retail pharmacy that, prior to the revocation in issue in this case, was
enrolled in Medicare as a supplier of durable medical equipment, prosthetics, orthotics
and supplies (DMEPOS). CMS notified Petitioner by letter dated December 18, 2006,
that its Medicare supplier number would be revoked 15 days from the postmark of the
notice. CMS stated as grounds for the revocation that Petitioner was either no longer at
the location or it was not open when representatives of CMS made multiple attempts to
visit Petitioner’s site. Thus, CMS could not determine whether or not Petitioner was
complying with the standards for participation as a supplier. CMS Exhibit (CMS Ex.) 5.
2

Petitioner requested a hearing by a Medicare hearing officer. On February 19, 2007, the
hearing officer issued his decision in which he determined that the revocation of
Petitioner’s supplier number was appropriate. CMS Ex. 1, at 2. On February 22, 2007,
Petitioner requested a hearing by an administrative law judge (ALJ) of the Departmental
Appeals Board (DAB). The case was assigned to me for hearing and decision on March
5, 2007.

I convened a prehearing conference by telephone on March 28, 2007. The substance of
the prehearing conference is contained in my Prehearing Conference Order dated March
29, 2007. I established a schedule for further development of the evidentiary record and
the filing of briefs. On April 6, 2007, CMS objected to the Prehearing Conference Order
arguing that the procedures established by 42 C.F.R. Part 498 should control in this case
rather than those in 42 C.F.R. Part 405, based upon revisions to the Social Security Act
(the Act) which have not yet been implemented by the Secretary of Health and Human
Services (the Secretary) through promulgation of revised regulations.’ On April 27, 2007,
T issued an Order granting the CMS motion and establishing the procedures and schedule
for hearing. I ruled that the proceedings in this case would be subject to 42 C.F.R. Part
498. On July 11, 2007, CMS moved for summary judgment. On August 2, 2007, I
denied CMS’ motion for summary judgment, finding that there were disputed issues of
material fact and I scheduled a hearing for September 27, 2007.

I conducted a hearing in this case on September 27, 2007, in Miami, Florida. CMS
offered as evidence, and I admitted, CMS exhibits 1 through 8. Transcript (Tr.) 18.
Petitioner offered, and I admitted, Petitioner’s exhibits (P. Ex.) 1 and 3. Tr. 47, 122. I
also marked and admitted a declaration of Liliana Mederos with photographs attached as
Court Ex. | (Tr. 28), and a copy of an email from Barry J. Bromberg to Gwendolyn L.
Johnson, date/time September 26, 2007, 9:36 a.m., Subject Re: 07-291 Neglex, as Court
Ex. 2 (Tr. 35). CMS presented telephonic testimony of one of the site inspectors, Patricia
Snyder. Mr. Negrin testified on Petitioner’s behalf. The parties filed post-hearing briefs,
Petitioner filed a post-hearing reply brief, and CMS waived its post-hearing reply brief.

II. Discussion
A. Findings of Fact

The findings of fact are based upon the exhibits admitted and the witness testimony.
Citations not provided here may be found in the analysis section of this decision.

' See 72 Fed. Reg. 9,479 (Mar. 2, 2007).
3

1. Petitioner’s DMEPOS supplier site at 200 SW 107 Avenue, Suite 114, Miami,
Florida 33174, was inspected by Lilian Mederos, an employee of the NSC
contractor, on June 8, 2005.

2. Following the site inspection on June 8, 2005, Petitioner was issued a Medicare
illing number as a supplier of DMEPOS.

3. Petitioner’s retail pharmacy store was operational, open, and accessible to
Medicare beneficiaries and the public on November 29, 2006.

4. Petitioner’s retail pharmacy store was operational, open, and accessible to
Medicare beneficiaries and the public on December 1, 2006.

5. Evidence that Petitioner’s retail pharmacy store was not operational, open, and
accessible to Medicare beneficiaries and the public on November 29, 2006 and on

December 1, 2006, is not credible.

B. Conclusions of Law

1. Petitioner’s request for hearing was timely and I have jurisdiction.
2. The inspections conducted on November 29 and December 1, 2006, established no
asis for revocation of Petitioner’s supplier billing privileges, i.e. the billing
number.
3. Petitioner’s billing number must be reinstated effective the date of its revocation

y NSC and CMS.
C. Issue

Whether CMS had basis to revoke Petitioner’s supplier
privileges, i.e., the billing number.

D. Applicable Law

Section 186lof the Act defines medical and other health services that are eligible for
Medicare reimbursement to DMEPOS suppliers. Pursuant to section 1834(j)(1)(A) of the
Act, a supplier of medical equipment and supplies may not be paid for items provided to
an eligible beneficiary unless the supplier has a supplier number issued by the Secretary.
A supplier may not obtain a supplier number unless the supplier meets the standards
established by the Secretary, which must include, inter alia, the requirement to maintain a
physical facility on an appropriate site. Act § 1834()(1)(B).
4

The Secretary has established special payment rules for payment of DMEPOS suppliers
and the issuance of supplier billing privileges. 42 C.F.R. § 424.57. A prospective
DMEPOS supplier must meet 21 standards specified at 42 C.F.R. § 424.57(c)(1) through
(21) to be issued supplier billing privileges, i.e. to obtain a billing number. Revocation
of a supplier’s billing number is governed by 42 C.F.R. § 424.535. CMS or its contractor
NSC, will revoke a supplier’s billing privileges if the supplier does not meet the standards
in 42 C.F.R. § 424.57(b) and (c). 42 C.F.R. § 424.57(d). CMS can use an on-site review
to determine whether a “supplier is no longer operational to furnish Medicare covered
items or services, or is not meeting Medicare enrollment requirements under statute or
regulation to supervise treatment of, or to provide Medicare covered items or services for,
Medicare patients.” 42 C.F.R. § 424.535(a)(5). A supplier is operational when “the
provider or supplier has a qualified physical practice location, is open to the public for the
purpose of providing health care related services, is prepared to submit valid Medicare
claims, and is properly staffed, equipped, and stocked . . . to furnish these items or
services.” 42 C.F.R. § 424.502. NSC gives the supplier notice that its billing number
will be revoked effective 15 days after NSC mails the notice of revocation. 42 C.F.R.

§ 405.874(b). A supplier cannot be paid for an item furnished during the period during
which its billing privileges were revoked. 42. C.F.R. § 424. 57(b)(3).

Section 1866(j) of the Act, as amended by section 936 of the Medicare Prescription Drug,
mprovement, and Modernization Act of 2003, Pub. L. No. 108-173, requires that the
Secretary establish a process for the enrollment in the Medicare program of providers of
services and suppliers. Section 1866(j)(2) of the Act gives providers and suppliers equal
appeal rights as described by section 1866(h)(1)(A) of the Act.? The procedures for
earings and appeals are set out in 42 C.F.R. Part 498.

The hearing before an ALJ is a de novo proceeding. Anesthesiologists Affiliated, et al,
DAB CR65 (1990), aff'd, 941 F.2d 678 (8" Cir. 1991); Emerald Oaks, DAB No. 1800, at
1 (2001); Beechwood Sanitarium, DAB No. 1906 (2004); Cal Turner Extended Care,
DAB No. 2030 (2006), The Residence at Salem Woods, DAB No. 2052 (2006). The
procedures for hearings and appeals pursuant to 42 C.F.R. Part 498, do not include
specific provisions regarding the burden or going forward with the evidence or the burden
of persuasion. However, in cases subject to Part 498 the Board has found that CMS must
make a prima facie showing of a regulatory violation and the regulated entity bears the
urden of persuasion by a preponderance of the evidence to show that it was compliant
with the Act or regulations or that it had a defense. Batavia Nursing and Convalescent

? Previously, supplier appeals were governed by 42 C.F.R. § 405.874, which
provided for review by a fair hearing officer and then a CMS official, designated by the
Administrator of CMS. Revision of the regulations is pending. See 72 Fed. Reg. 9,479
(Mar. 2, 2007).
5

Center, DAB No. 1904 (2004); Batavia Nursing and Convalescent Inn, DAB No. 1911
(2004); Emerald Oaks, DAB No. 1800; Cross Creek Health Care Center, DAB No. 1665
(1998); Evergreene Nursing Care Center, DAB No. 2069, at 7-8 (2007). The Board
found this allocation of the burden of going forward with the evidence and the burden of
persuasion properly applied in the DMEPOS supplier case MediSource Corporation,
DAB No. 2011, at 2-3 (2006). The parties have urged no different allocation in this case.

E. Analysis

Petitioner’s billing number was revoked by NSC because two investigators determined
that Petitioner was no longer operational when they allegedly went, on two separate
occasions, to the address on file for Petitioner’s business and found the store front
location empty. The CMS notice states as grounds for revocation both that Petitioner’s
site was no longer open and that it was not possible for the investigators to verify
compliance with all 21 supplier standards. CMS Ex. 5, at 1. The Medicare hearing
officer found that on November 29, 2006 and December 1, 2006, two investigators of the
NSC Supplier Audit and Compliance Unit attempted to inspect Petitioner’s location.
However, on both occasions Petitioner’s business was closed. CMS Ex. 1, at 2. The
hearing officer rejected Petitioner’s testimony and other evidence and decided, based
upon the report of the investigators, that there was a basis for revocation because
Petitioner did not show its business was operational at the time of the visits. CMS Ex. 1,
at 2. CMS argues before me that the two investigators visited Petitioner’s location on
November 29 and December 1, 2006, the location was closed and appeared to be vacant,
and Petitioner’s supplier number was revoked on that basis citing 42 C.F.R. §
424.535(a)(5).> CMS Post-hearing Brief (CMS Brief) at 2,6. CMS urges me to find the
testimony of Patricia Snyder, her declaration at CMS Ex. 8, and her report at CMS Ex. 4
credible and Petitioner incredible. CMS Brief at 6-17. Petitioner argues that this is a case
of mistaken identity, i.e. the investigators attempted to inspect the wrong address, and that
he was in fact open and ready for business on the dates and at the times the investigators
allege they visited his site. Petitioner’s Post Hearing Brief and Reply. I find Petitioner’s
evidence more credible and persuasive than the CMS evidence.

* NSC, the hearing officer, and CMS have characterized the basis for revocation
both as the supplier site was closed and not accessible when the investigators attempted
the visits and the site was vacant and no longer operational. I note that either the failure
to comply with the 21 standards including the requirement to be accessible to both CMS
and beneficiaries during posted business hours established by 42 C.F.R. § 424.57, or that
Petitioner was no longer operational as indicated by a vacant store would be a sufficient
basis for revocation pursuant to 42 C.F.R. § 424.535(a)(5). In this case, the investigators
allege specifically that the site they visited was vacant and not operational. CMS Ex. 4, at
1,4; CMS Ex. 8; Tr. 63, 84.
6

Patricia Snyder stated in her declaration that she had been employed by the CMS Office
of Financial Management, Program Integrity Group, for about 13 years and that her
responsibilities included conducting site inspections of DMEPOS and pharmacy
suppliers. CMS Ex. 8, at 1. At hearing, she testified that she was not responsible, as part
of her job, for doing site visits. In fact, she was asked to do site visits as part of a one-
time special project to investigate suppliers in Miami-Dade, Broward, and Palm Beach
Counties in Florida, and one of the suppliers she was assigned to investigate was
Petitioner. Tr. 51. She testified that she did not actually work in the DMEPOS supplier
area. Tr. 76. Thus, contrary to the impression created by her declaration, the evidence
does not show that Ms. Snyder was an experienced investigator. She states in her
declaration that she and Julio Hernandez attempted to visit Petitioner’s site on November
30, 2006; that she could observe inside through the window; that she observed the
pharmacy was vacant and did not appear operational; that she did not see any medical
equipment, supplies, office equipment, or employees; that the pharmacy was vacant; that
she did not observe any beneficiaries or customers attempt to access the office; and that
she observed a sign with business hours. CMS Ex. 8, at 1-2. Ms. Snyder testified that her
declaration was incorrect in stating that her first visit to Petitioner’s site was on
November 30, 2006. Rather, she would rely upon her notes from the visit as being more
accurate and those notes at CMS Ex. 4 show her initial visit was actually on November
29, 2006. Tr. 51-52. Ms. Snyder also testified in conflict with her declaration that she
could not recall who got out of the car to look through the windows of the site she thought
was Petitioner’s site. Tr. 55,59, 70. Her declaration indicates that she and Mr.
Hernandez returned to the site on December 1, 2006, and the supplier’s location was
vacant and not operational. CMS Ex. 8.

Ms. Snyder indicated on the record that she was from Baltimore (Tr. 49) and she testified
that Mr. Hernandez was from Los Angeles (Tr. 73). Ms. Snyder testified that the special
project was her first visit to Miami and she testified that she believed that it was also Mr.
Hernandez’s first trip to Miami. Tr. 79-80. Ms. Snyder testified that she did
approximately 80 site visits in 8 days while she was in the Miami area. Tr. 53.

Ms. Snyder testified that they were to do a limited inspection at each site she and Mr.
Hernandez were assigned to investigate. They were instructed not to look at all 21
supplier standards. They were instructed to try to enter the facility, to look for DME
supplies, and to note whether the hours of operation were posted. They were instructed
not to take any pictures or ask any questions of those present at the site being inspected.
nvestigators were also instructed to complete for each site investigated the form at CMS
Ex. 4. Tr. 52-55. Ms. Snyder and Mr. Hernandez navigated to certain sites using a GPS
(global positioning satellite) device. She testified that the GPS was used to locate
Petitioner’s site. Tr. 55. She testified that she was the note taker for most of the 80 sites
visited and she recognized her hand-writing on CMS Ex. 4. Tr. 56. She testified that she
recognized the pictures of Petitioner’s pharmacy, as she visited no more than three
pharmacies during the project. Tr. 59. However, when I questioned her, she could not

7

recall whether or not the three pharmacies were similar even in general appearance such
as whether they were store fronts with signs in Spanish, such as Petitioner’s. Tr. 70. She
admitted on cross-examination that she checked “Office Suite in Office Building” on the
form for Petitioner’s site at CMS Ex. 4, at 1, and that Petitioner’s site would be more
accurately described as a storefront. Tr. 67. She agreed that she did not properly
complete item 3 of the checklist (CMS Ex. 4, at 2) because, if she was actually at
Petitioner’s site, she should have observed that the name on the store sign was different
than the name on the form. Tr. 67-68. She testified that there is no way they could have
confused Petitioner’s site with another as they “had a GPS” that they had rented with the
rental car. Tr. 73. She described the GPS as one that gave audible directions to an
address that was entered by the user. Tr. 80-81. She testified that she and Mr. Hernandez
would verify their locations by looking at street signs and numbers, but she could not
describe how streets signs were posted in the area; instead she relied upon Mr.
Hernandez’s navigation skills, as he was formerly a police detective in Los Angeles. Tr.
81-82.

I do not find Ms. Snyder’s testimony credible or persuasive. I have no evidence that she
was trained as an investigator. Rather, she accepted a special project assignment and took
a trip to Miami. The inconsistencies between her declaration and her testimony and the
inconsistencies in the form she completed at CMS Ex. 4 show that she was not attentive
to detail. She also admitted that her recollection of events just eight or nine months
previous was not good and that she had to rely upon her notes at CMS Ex. 4, which she
also admitted are inaccurate and not complete. She also revealed that this was her and her
partners’ first visit to Miami, thus neither was familiar with the area and had to rely upon
a GPS device for directions. Although she testified she could specifically recall the
appearance of Petitioner’s pharmacy, she could not recall whether the appearance of the
other two pharmacy sites she visited were similar even in general details. Although the
investigator who initially inspected Petitioner’s site in 2005 took multiple photographs to
support her investigation of Petitioner for approval to participate as a supplier (P. Ex. 1),
Ms. Snyder and her partner were instructed to take no pictures that might have confirmed
that they visited Petitioner’s site and that it was vacant.

The evidence shows that Petitioner’s site at 200 SW 107 Avenue, Suite 114, Miami,
Florida 33174, was inspected by Lilian Mederos, an employee of the NSC contractor, on
June 8, 2005. Ms. Mederos took multiple photographs of Petitioner’s site, interior and
exterior. Ct. Ex. 1; P. Ex. 3. There is no dispute that Petitioner was subsequently
approved for billing privileges and issued a supplier billing number.

Alex Negrin, part-owner of the corporation that owns Petitioner, testified that he was
motivated to obtain a supplier number so he could obtain reimbursement for test strips
provided to his diabetic clients, and that otherwise he did not want to deal with Medicare.
Tr. 98-99, 128-29. Mr. Negrin testified that he took the photographs admitted as P. Ex. 1,
8

on April 15, 2007 (Tr. 100-01, 106), which I note to be 135 days after the alleged visit by
Ms. Snyder and Mr. Hernandez on December 1, 2006. The photographs in P. Ex. 1 show
a pharmacy window that is nearly full of items and shelves with items such as one would
find ina pharmacy. P. Ex. 1, at 1, 2, 4-6; Tr. 103. Mr. Negrin testified that the
photographs taken on April 15, 2007 depict his site in much the same condition as it
would have appeared on November 29 and December 1, 2006. Tr. 126. He testified that
his pharmacy was open at 2:15 p.m. on November 29, 2006 and at 9:30 a.m. on December
1, 2006. Tr. 127.

I do not find credible the evidence that NSC investigators visited Petitioner’s pharmacy
on November 29, 2006 at about 2:15 p.m. and found that store closed or vacant. I also do
not find credible the evidence that NSC investigators visited Petitioner’s pharmacy on
December 1, 2006 at about 9:30 a.m. and found the store closed or vacant. I do fin
credible the testimony of Mr. Negrin and the other evidence which shows that Petitioner’s
store was not vacant on June 8, 2005 and it was not vacant on April 15, 2007. I find
credible the testimony of Mr. Negrin that his store appeared much the same on April 15,
2007 as it would on November 29 and December 1, 2006. I also find credible Mr.
Negrin’s testimony that his store was open for business at the times and on the dates the
investigators allege his store was vacant. CMS argued that Mr. Negrin’s testimony was
uncertain and self-serving. CMS Brief at 14-17. However, while Mr. Negrin may have
been uncertain as to some dates from 2004 and 2005, his demeanor and the consistency of
his statements show that his testimony is credible. I also note that his unrebutted
testimony is that his billing for diabetic test strips was only a small part of his business.
Tr. 128. Based upon all the evidence I find that Petitioner has shown by a preponderance
of the evidence that his retail pharmacy store was operational, open, and accessible to
Medicare beneficiaries and the public on November 29, 2006 and on December 1, 2006.

Accordingly, I conclude that there was no basis for the revocation of his Medicare billing
privileges.

Ill. Conclusion

For the foregoing reasons, Petitioner’s supplier number was inappropriately revoked and
should be reinstated effective the date of revocation.

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
Trisun Care Center Meadow Creek, )
(CCN: 67-6031) ) Date: April 21, 2008
)
Petitioner, )
)
-Vv.- ) Docket No. C-06-629
) Decision No. CR1773
Centers for Medicare & Medicaid )
Services. )
)
DECISION

Based on a survey completed March 30, 2006, I decide that Petitioner Trisun Care Center
Meadow Creek was not in substantial compliance with federal participation requirements
governing skilled nursing facilities by failure to ensure that one of its residents received
adequate nutrition as alleged by the Centers for Medicare & Medicaid Services (CMS).

I. Background

Petitioner, located in San Angelo, Texas, is a skilled nursing facility (SNF) certified to
participate in the Medicare program and the Texas Medicaid program as a nursing facility
(NF). On March 30, 2006, the Texas Department of Aging and Disability Services
(“TDADS?” or “state agency”) conducted a complaint survey of Petitioner’s facilities.
As a result of the survey Petitioner was determined to be out of substantial compliance
with Medicare and Medicaid participation requirements. The state agency subsequently
recommended to the CMS that remedies be imposed. By letter dated June 19, 2006,
citing a violation of 42 C.F.R. § 483.25(i)(1) (Tag F325), CMS notified Petitioner that it
was imposing a per-instance civil money penalty (CMP) in the amount of $2,000. The
letter also informed Petitioner that the state-recommended termination of the facility’s
provider agreement and denial of payment for new admissions had been rescinded.

By letter dated August 21, 2006, Petitioner requested a hearing before an administrative
law judge (ALJ). The case was assigned to me for hearing and decision on September 5,
2006, and a Pre-hearing Order was issued at my direction on that date. On November 2,
2

2006, Petitioner filed an unopposed motion for a 30-day stay of the pre-hearing schedule
for the purpose of settlement. That motion was granted by order dated November 14,
2006. On December 15, 2006, CMS filed its report of readiness. On December 15, 2006,
Petitioner filed its exhibits, exhibit list, and witness list. Petitioner submitted Exhibits (P.
Exs.) 1-4, which I admit into evidence without objection. On January 5, 2007, CMS
“requested clarification” for filing documents in this case. On January 29, 2007, for the
purpose of establishing exchange deadlines, I held a pre-hearing telephone conference in
this matter. During the pre-hearing conference I set this case for hearing April 25-26,
2007, and I established a briefing schedule. On March 9, 2007, CMS filed its final list of
witnesses and exhibits. CMS submitted Exhibits (CMS Exs.) 1-15 which I admit into
evidence without objection. By letter dated March 26, 2007, pursuant to 42 C.F.R.

§ 488.66(a), Petitioner waived its right to appear (in-person) and present evidence at oral
hearing stating that “Petitioner and Respondent agree that the essential and relevant facts
are not at issue .. . Similarly the credibility of statements and evidence are not at issue.”
See Petitioner’s Waiver of Oral Hearing. In an order dated April 6, 2007, I canceled the
hearing and established a new briefing schedule.’ On April 30, 2007 CMS filed its brief
(CMS Brief). On May 31, 2007, Petitioner filed its written submission in lieu of oral
hearing (P. Brief). On June 15, 2007 Respondent filed a reply brief (CMS Reply); and on
June 28 Petitioner filed a sur-reply brief (P. Sur-Reply).

If. Applicable Law

The Social Security Act (Act) sets forth requirements for long-term care facility
participation in the Medicare and Medicaid programs and authorizes the Secretary to
promulgate regulations implementing the statutory provisions. Act §§ 1819 and 1919.
The Secretary’s regulations governing nursing facility participation in the Medicare
program are found at 42 C.F.R. Part 483. Regulations governing survey, certification,
and enforcement procedures, and regulations governing provider agreements, are found at
Parts 488 and 489, respectively. Regulations governing appeals procedures are found at
Part 498.

' In my Order cancelling the hearing I cautioned the parties that their final briefs
must address each and every issue that they believe to be relevant to the case. Moreover,
a party must cite specifically to any exhibit that it believes is relevant to its arguments. It
is not sufficient for a party to refer generally to exhibits as support for a contention
without explaining why those exhibits provide the alleged support. Nor is it sufficient for
a party to say that it is relying on unspecified exhibits or testimony to support its
contentions of fact. Ifa party relies on an exhibit it must cite to the specific exhibit and
page that it believes to be relevant and must explain why it believes that the citation is
relevant. Ifa party fails to support a contention with appropriate citations I may find that
the contention is without support or I may decide that the party has abandoned the
contention.
3

To participate in the Medicare and Medicaid programs, facilities periodically undergo
surveys to determine whether they comply with applicable statutory and regulatory
requirements for Medicare and/or Medicaid. They must maintain substantial compliance
with program requirements, and, to be in substantial compliance, a facility’s deficiencies
may pose no greater risk to resident health and safety than “the potential for causing
minimal harm.” 42 C.F.R. § 488.301. Ifa facility is not in substantial compliance with
program requirements, CMS has the authority to impose, in addition to termination, one
or more of the enforcement remedies listed in 42 C.F.R. § 488.406, including a denial of
payment for new admissions, directed in-service training, and imposition of a CMP. See
Act § 1819(h).

CMS may impose a CMP against a facility either for the number of days during which the
facility fails to comply substantially with one or more participation requirements or for
each instance in which a facility fails to comply substantially with a participation
requirement. 42 C.F.R. § 488.430(a). Therefore, CMS may impose a per-instance CMP
within the range of $1,000 to $10,000 for each instance of noncompliance regardless of
whether or not the deficiencies constitute immediate jeopardy. 42 C.F.R. § 488.438(a)(2).
The specific amount of the per instance CMP must be reasonable. Ifa basis to impose is
found, the ALJ cannot reduce the per-instance CMP below $1,000. In this case, CMS
imposed a per instance CMP in the amount of $2,000 in this case.

A facility has a right to appeal a “certification of noncompliance leading to an
enforcement remedy.” 42 C.F.R. § 488.408(g)(1); see also 42 C.F.R. §§ 488.330(e) and
498.3. However, a facility may not appeal the choice of remedies by CMS or the factors
CMS considered when choosing a remedy. 42 C.F.R. § 488.408(g)(2).

When a remedy is imposed, CMS must make a prima facie showing that the facility has
failed to comply substantially with federal participation requirements. To prevail, a long-
term care facility must overcome CMS’s showing by a preponderance of the evidence.
Batavia Nursing and Convalescent Center, DAB No. 1904 (2004); Batavia Nursing and
Convalescent Inn, DAB No. 1911 (2004); Emerald Oaks, DAB No. 1800 (2001); Cross
Creek Health Care Center, DAB No. 1665 (1998); Hillman Rehabilitation Center, DAB
No. 1611 (1997), aff'd Hillman Rehabilitation Center v. U.S. Dep’t. of Health & Human
Servs., No. 98-3789 slip. op. at 25 (D.N.J. May 13, 1999). A preponderance of evidence
is “superior evidentiary weight that, though not sufficient to free the mind wholly from all
reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the
issue rather than the other.” Black’s Law Dictionary (7th ed. 1999) (cited by the
Departmental Appeals Board (Board) in Beechwood Sanitarium, DAB No. 1906, at 38
(2004)).

Scope and severity levels are used by CMS and a state when selecting remedies. The
scope and severity level is designated by an alpha character, A through L, selected by
CMS or the state agency from the scope and severity matrix published in the State
4

Operations Manual (SOM), section 7400E; see also 42 C.F.R. § 488.408. A scope and
severity level of A, B, or C indicates a deficiency that presents no actual harm but has the
potential for minimal harm. Facilities with deficiencies of a level no greater than C
remain in substantial compliance. 42 C.F.R. § 488.301. A scope and severity level of D,
E, or F indicates a deficiency that presents no actual harm but has the potential for more
than minimal harm that does not amount to immediate jeopardy. A scope and severity
level of G, H, or I indicates a deficiency that involves actual harm that does not amount to
immediate jeopardy. Scope and severity levels J, K, and L are deficiencies that constitute
immediate jeopardy to resident health or safety. The matrix, which is based on 42 C.F.R.
§ 488.408, specifies which remedies are required and optional at each level based upon
the frequency of the deficiency. See SOM, section 7400E.

In this instance, the remedy imposed by CMS against Petitioner was determined to be at
the scope and severity level of “G” — actual harm that does not amount to immediate
jeopardy.

III. Issues

The issues are —

Whether Petitioner was in substantial compliance with 42 C.F.R.
§ 483.25(i)(1) (Tag F325); and

Whether the amount of the per-instance CMP imposed by CMS is reasonable.
IV. Discussion

A. Findings of Fact
The following findings of fact are based upon the parties’ arguments and the exhibits
admitted. Citations to exhibit numbers related to each finding of fact may be found in the

analysis section of this decision if not indicated here.

1. Petitioner is a long-term care facility located in San Angelo, Texas, that was
authorized to participate in the Medicare and Medicaid programs.

2. The state agency conducted a complaint survey of Petitioner’s facility on March
30, 2007.
3. The state agency determined that Petitioner was not in substantial compliance with

federal program participation requirements at 42 C.F.R. § 483.25(i)(1) (Tag F325).

4. The violation of 42 C.F.R. § 483.25(i)(1) involved one resident in a sample of six.
On August 21, 2007, Petitioner requested a hearing before an ALJ.

Resident 1 experienced an unplanned weight loss of 5.4 pounds between March 2,
and March 23, 2006.

Resident 1’s unplanned weight loss was due to inadequate nutrition.
Resident 1’s unplanned weight loss was not unavoidable.

B. Conclusions of Law

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

Petitioner violated 42 C.F.R. § 483.25(i)(1) (Tag F325) by failing to ensure that
Resident 1 maintained acceptable parameters of nutritional status.

CMS made a prima facie showing of a violation of 42 C.F.R. § 483.25(i)(1) (Tag
F325).

Petitioner failed to rebut CMS’s prima facie showing of a violation of 42 C.F.R.
§ 483.25(i)(1) (Tag F325) by a preponderance of the evidence.

Petitioner’s violation of 42 C.F.R. § 483.25(i)(1) presented a pattern of actual
arm.

V. Analysis

A. Petitioner was not in substantial compliance with C.F.R. § 483.25(i)(1) (Tag
F325).

Under 42 C.F.R. Part 488, CMS may impose remedies against a long-term care facility

where a state agency ascertains that the facility is not in substantial compliance with

participation requirements. “Substantial compliance” means a level of compliance with
the requirements of participation such that any identified deficiencies pose no greater risk

to the resident health or safety than the potential for causing minimal harm. 42 C.F.R.
§ 488.301. In the instant case, CMS determined that Petitioner was not in substantial
compliance with the quality of care requirement at 42 C.F.R. § 483.25(i)(1).
The regulation requires that:

Each resident must receive and the facility must provide the
necessary care and services to attain or maintain the highest
practicable physical, mental, and psychosocial well-being, in
accordance with the comprehensive assessment and plan of
care.

Based on a resident’s comprehensive assessment, the facility
must ensure that a resident --

(1) Maintains acceptable parameters of nutritional status, such as
body weight and protein levels, unless the resident’s clinical condition
demonstrates that this is not possible... .

42 C.F.R. § 483.25(i)(1).

CMS alleges that Petitioner failed to maintain acceptable nutritional parameters to
prevent weight loss for Resident 1. CMS Ex. 2, at 1. To support the allegation that
Petitioner failed to comply with the requirements set forth above, CMS relied on the
surveyors’ detailed findings in a SOD and the SOM. CMS Ex. 2.

The Guidance to Surveyors from the SOM provides that “(p)arameters of nutritional
status which are unacceptable include unplanned weight loss as well as other indices such
as peripheral edema, cachexia and laboratory tests indicating malnourishment (e.g., serum
albumin levels).” SOM, app. P, at PP-106 (June 1995). The SOM also includes an
investigative protocol for unintended weight loss which has two objectives: (1) to
determine if identified weight loss is avoidable or unavoidable, and (2) to determine the
adequacy of the facility’s response to the weight loss. The protocol requires surveyors to
determine whether: (1) the facility properly assessed a resident for risks for unintended
weight loss; (2) the facility assessed the resident’s nutritive and fluid requirements, need
for dining assistance including need for assistive devices, food preferences, allergies, and
frequency of meals; (3) there is information or documentation of identified causes for the
weight loss; (4) a care plan was developed based on clinical conditions and risk factors
identified by the assessment for the unintended weight loss and whether interventions
were developed; and (5) the care plan was evaluated and revised based on the response,
outcomes, and needs of the resident. SOM, app. P, at P-45 to 46.1 (rev. 10).

The surveyors are instructed for all cases of unintended weight loss to make observations
to determine whether interventions have actually been implemented. The protocol states
that unintended weight loss may be found unavoidable if the facility properly assessed,
care planned and implemented the care plan, evaluated outcomes, and revised the care
plan as necessary. If the facility failed to do any of the steps, then the weight loss should
be considered avoida

P-45 to 46.1 (rev. 10).

The Board discussed

DAB No. 1942 (2004

Carehouse, the Boar
resident’s weight at a
liable for a resident’s

7

le and the facility cited for violation of Tag F325. SOM, app. P, at

deficiency citations under Tag F325 in both The Windsor House,

), and Carehouse Convalescent Hospital, DAB No. 1799 (2001). In
interpreted the regulation not to require that a facility maintain a
fixed level. The Board also determined that a facility is not strictly
weight loss. The Board said that the regulation requires

maintenance of weight only to the extent that weight is a “parameter of nutritional status,”

i.e., if a resident recei

ves adequate nutrition and weight loss is due to non-nutritive

factors, then the weig!
alone is not a basis fo

t loss is not a “parameter of nutritional status and the weight loss
ra deficiency finding.” Carehouse, at 21. Nevertheless, the Board

concluded that weight loss raises an inference of inadequate nutrition sufficient to be a

CMS prima facie sho

wing of a deficiency. Jd. at 22.

A prima facie case based upon the inference arising from weight loss is rebutted if the

facility shows by a pr

eponderance of the evidence that it “provided the resident with

adequate nutrition” or weight loss was due to non-nutritive factors. Carehouse, at 22.

In Windsor the Boar

used the formulation that a “facility is responsible for taking all

reasonable steps to ensure that the resident receives nutrition adequate to his or her

needs.” Windsor, at
based on weight loss
did receive adequate
the resident’s clinica
exception” is a narro
provide nutrition ade
unavoidable. Jd. Th

15. The Board explained that if CMS makes a prima facie showing
, the facility may rebut that showing with evidence that the resident
nutrition or that weight loss was due to non-nutritive factors, such as
condition. Jd. The Board commented that the “clinical condition
w one that applies only when the facility demonstrates that it cannot
quate for the resident’s overall needs so that weight loss is

e Board affirmed the ALJ’s findings and conclusions in Windsor

indicating that the A

LJ correctly concluded that the presence of a significant clinical

condition alone does not prove that maintaining acceptable nutrition is unavoidable.
Rather, the Board further indicated that the ALJ correctly focused upon Windsor’s own
assessment of the residents’ nutritional needs and whether Windsor met its own plan for
how to meet those needs. Jd. at 17.

Turning to the facts of this case, the weekly weight recorded for Resident 1, from January
through March 2006, showed the following weights:

January 4, 2006 90.0 Ibs
January 11,2006 88.0 lbs
January 18,2006 90.2 lbs
January 25,2006 90.6 lbs
8

There were no weekly weights for the month of February 2006.

March 2, 2006 89.4 Ibs
March 9, 2006 87.6 lbs
March 16, 2006 85.0 lbs
March 23, 2006 84.0 Ibs
March 30, 2006 84.6 lbs

P. Ex. 1, at 32-33.

A review of Resident 1’s weekly weights revealed that between January 4, 2006 and
March 30, 2006, Resident | lost 5.4 pounds (a 6.0 percent weight loss); and between
March 2, 2006 and March 30, 2006 the resident lost 4.8 pounds (a 5.3 percent weight
loss). Severe weight loss can be demonstrated by a loss of more than 5 percent of body
weight in one month. See SOM, App. PP.

Petitioner does not dispute that Resident 1 lost weight as alleged by CMS. P. Brief at 11,
13-14; P. Reply at 1. Petitioner contends, however, that Resident 1’s weight loss was
unavoidable. Based on the language of 42 C.F.R. § 483.25(i)(1) and the Board’s analysis
in Carehouse and Windsor, | conclude that the admitted weight loss, supported by the
clinical records admitted as evidence, are sufficient to establish a prima facie case of a
violation.

B. Petitioner has not proven by a preponderance of the evidence that Resident 1
received adequate nutrition.

Once CMS has made a prima facie case that nutritional parameters have not been
maintained for Petitioner’s residents, then the burden of persuasion by a preponderance of
the evidence is upon Petitioner to show it took all reasonable steps to ensure that the
residents received adequate nutrition but that weight loss nevertheless occurred or that
weight loss was unavoidable. To establish that it took all reasonable steps, Petitioner
must show that it complied with regulatory requirements to assess the resident’s
nutritional needs (42 C.F.R. § 483.20(b)), that it care planned to meet the resident’s
nutritional needs and followed the care plan including implementation of planned
interventions (42 C.F.R. § 483.20(k)), and that it reviewed the efficacy of care planned
interventions and revised as necessary (42 C.F.R. § 483.20(k)(2)(iii)). If Petitioner fails
at any step in the process, it cannot show that the weight loss was unavoidable.

Petitioner does not dispute that Resident 1 lost weight as alleged by CMS. P. Brief at 11,
13-14. Petitioner contends, however, that Resident 1’s weight loss was unavoidable due
to multiple factors including advanced age; chronic pain; chronic obstructive pulmonary
9

disease (COPD); pulmonary fibrosis; exercise limitations due to pulmonary impairment;
and gastric reflux disease. P. Brief at 14.

Additionally, Petitioner argues that the facility nursing staff intervened by providing
nutritional supplements; conducting weekly weight monitoring; providing dietician
consultation; conducting a pharmacy evaluation of medication that may cause anorexia;
pain management; modification of meals/substitutes; providing gastric medication to
reduce reflux; weight committee monitoring. P. Brief at 13-14.

Weekly weight monitoring

Petitioner contends that the resident was monitored by the weight committee on several
occasions, as demonstrated by the meetings conducted on May 26, 2005, August 4, 2005
and August 18, 2005 that addressed the resident’s weight status. These meetings confirm
nursing staff members were aware of the resident’s weight issues. P. Ex. 2, at 1-3. Yet
despite Petitioner’s awareness of Resident 1’s “weight issues” Petitioner failed to (1)
perform a comprehensive assessment of Resident 1’s nutritional needs, (2) obtain updated
physician’s orders, and (3) implement a plan of care to prevent weight loss. CMS Ex. 2,
at 2; P. Ex. 2, at 1-3, CMS Ex. 8, at 1; CMS Ex. 6, at 1-9; CMS Ex. 7, at 1-6; CMS 9, at
1. Asa result, no goals were established with respect to total caloric intake and weight
for Resident 1. The mere fact that Petitioner weighed Resident 1 weekly and documented
her meal intake, does not demonstrate that Petitioner paid attention to Resident 1’s
nutritional needs.

Nutritional supplement

The most recent physician’s order for Resident 1, dated March 6, 2006, included the
following: multi vitamin supplement (ordered September 27, 2001); daily snacks at 2:00
p.m. (ordered October 17, 2004); a regular diet without dairy products (ordered December
3, 2004); and an order dated December 3, 2004 that a substitute should be offered to
Resident | if she consumed less than 50 percent of any meal. CMS Ex. 9, at 1. There
were no orders regarding Resident 1’s diet after December 3, 2004. Jd. The facility
failed to implement any nutritional approaches to address Resident 1’s nutritional
problem. Resident 1’s care plan, dated February 2, 2006, neither identified her as having
a nutritional problem nor revealed interventions to address Resident 1’s nutritional status.
CMS Ex. 2, at 2; CMS Ex. 7.

Dietician consultation
According to the November consultation visit report dated November 29, 2005, the

dietician recommended that Resident | receive a dietary supplement called Med Pass 2.0
(2 ounces four times a day). CMS Ex. 2, at 2; CMS Ex. 8, at 1. A review of the
10

Residents current physician orders and Medication Administration Record (MAR) both
dated March 2006, reveal no order for the Med Pass supplement. According to an
interview with the Director of Nursing (DON) on March 29, 2006, the fax sheet sent to
the physician that would normally contain the dietician’s recommendations could not be
found. The DON could not locate any documentation to indicate the physician was
notified regarding Resident 1’s weight loss or the request for Med Pass supplement.
CMS Ex. 2, at 3.

Indeed, Resident 1 did not receive Med Pass or any other nutritional supplement even
though Resident | consumed insufficient calories. CMS Ex. 5, at 2.

Pharmacy consultation

Petitioner argues that there was appropriate intervention by the pharmacy consultant.
Specifically, Petitioner asked the pharmacy consultant to review all of Resident 1’s
medications to ensure none of her medication would cause a loss of appetite. Petitioner’s
Written Submission; P. Ex. 3, at 2,5. However, there is no evidence that the pharmacy
consultation took place prior to the March survey. Petitioner also arranged for a nurse
consultant to interview Resident 1 regarding her recent illness, weight history, food/meal
intake habits and to discuss various ideas for weight gain with Resident 1. Petitioner’s
Written Submission; P. Ex. 3, at 4. All of the evidence indicates that any type of
intervention occurred months before and/or months after the March survey. For example,
Petitioner’s dietary consultant recommended that Resident | be given Med Pass in
November 2005, however, the Med Pass supplement was not given until March 31, 2006,
four weeks after it was recommended.

Pain management

Petitioner asserts that the resident had been ill with an acute respiratory condition, with
symptoms of cough sore throat, sore mouth and emesis that affected her oral intake and
appetite, thus resulting in weight loss. Entries in the nurses notes reflect the
administration of antibiotics during the latter part of January and early February 2006.
The resident received antibiotic therapy, cough syrup, cough drops, inhaler, Phenegran
suppositories, and fluids to combat her illness. Petitioner has presented no evidence that
during Resident 1’s illness it planned well-balanced meals to assure adequate nutrition for
Resident 1.

Meal modification/substitutes

The dietary records from December 2005 through March 2006 confirm that Resident 1’s
intake was usually 25-50 percent of her meal. She refused substitutes. P. Ex. 1, at 42; P.
Ex. 1, at 27-30. However, the facility failed to implement any nutritional approaches to
11

address Resident 1’s nutritional problem. Petitioner has presented no evidence that it
attempted to provide Resident 1 with a modified meal plan. In fact, Resident 1’s care
plan, dated February 2, 2006, neither identified her as having a nutritional problem nor
revealed interventions to address Resident 1’s nutritional status. CMS Ex. 2, at 2; CMS
Ex. 7.

Gastric medication to reduce reflux

Petitioner argues that Resident 1’s diagnoses of gastroesophageal (gastric) reflux disease
may have contributed to the resident’s weight loss, despite the use of Zantac, a gastric
acid inhibitor and Reglan, a gastric motility medication. See P. Ex. 1, at 12-13. Yet,
surprisingly, Petitioner explains that “adequate nutrition can be assured by careful
planning of well-balanced meals spacing them so that the stomach is not overloaded at
any one time, perhaps five small meals a day.” P. Brief at 15. There is no evidence that
Petitioner attempted to provide Resident 1 with the meal approach it suggests to assure
adequate nutrition relative to Resident 1’s gastric reflux disease.

Additionally, Petitioner argues that due to the resident’s ongoing acute respiratory illness
and the need for antibiotic therapy, she was predisposed to side effects of gastric upset
and nausea. P. Brief at 14. According to Petitioner, it is not surprising that the resident
exhibited a decline in weight loss during her two-month illness. /d. Again, Petitioner has
presented no evidence that during Resident 1’s illness that it planned well-balanced meals
to assure adequate nutrition for Resident 1.

Petitioner lists a myriad of possible reasons for Resident 1’s weight loss. While they all
could or may have contributed to the resident’s weight loss, Petitioner has not shown,
based on the evidence before me, that Resident 1’s weight loss was unavoidable.
Resident | was at risk for weight loss and Petitioner was aware of the risk. The evidence
shows that Petitioner did not have a planned approach to prevent Resident 1’s weight
loss. Petitioner was under an obligation to monitor Resident 1’s weight loss, pay
adequate attention to her nutritional needs, and address her weight loss through further
assessments and interventions. Rolling Hills Health Center, DAB CR1354 (2006). In
this case, Petitioner did none of the above. Petitioner failed to conduct a comprehensive
evaluation of Resident 1’s nurtional status taking into consideration Resident 1’s medical
diagnoses and, develop a plan and implement appropriate interventions to address
Resident 1’s nutritional needs to prevent weight loss. Petitioner has not proven that
Resident 1’s weight loss was unavoidable. Petitioner’s argument without supporting
evidence or testimony does not make a case for substantial compliance.
12

Petitioner also argues that based on Texas law the state surveyor is not qualified to make
the findings that were made in this case. Petitioner states “Similarly, the requirement
itself calls for more analysis than the surveyor at issue should be allowed to make.” P.
Brief at 20. I find this argument unpersuasive. Surveyors, using their professional
judgment, evaluate a provider’s performance against a particular requirement and
document the nature and extent of their findings in a statement of deficiencies. 42 C.F.R.
§ 488.26(b). Additionally, the regulations specifically recognize surveyors as
professionals who use their judgment, in concert with federal forms and procedures, to
determine compliance with a particular requirement for Medicare participation. 42 C.F.R.
§ 488.26(c)(3). Findings by state surveyors have always been given prudent
consideration by ALJ’s based on their experience and expertise. I find the state surveyor
qualified in making the findings that were made in this case.

Petitioner has not shouldered its burden of proof by a preponderance of the evidence.
Petitioner failed to provide Resident 1 with adequate nutrition. All Petitioner has shown
is that Resident | had a difficult time maintaining weight. Unintended weight loss is
unavoidable if the facility properly assessed, care planned, implemented the care plan,
evaluated the resident outcome, and revised the care plan as needed. If Petitioner does
not take the afore-mentioned actions the weight loss is avoidable. Petitioner has failed to
show that it did everything within its power to maintain the nutritional status of Resident
1. I find that CMS has made a prima facie case that Petitioner was not in substantial
compliance with 42 C.F.R. § 483.25(i)(1). Moreover, Petitioner has failed to rebut
CMS’s prima facie showing by a preponderance of the evidence.

C. A per-instance CMP in the amount of $2,000 is reasonable.

Regulations provide that CMS may impose either a per-diem or per-instance CMP to
remedy a nursing facility’s deficiencies. 42 C.F.R. §§ 488.438(a)(1), 488.438(a)(2).
CMS may impose penalties in the range of $3,050 to $10,000 per day for deficiencies
constituting immediate jeopardy, and $50 to $3,000 per day for non-immediate jeopardy
deficiencies. 42 C.F.R. § 488.438(a)(1). A per-instance CMP may range from $1,000 to
$10,000 regardless of whether or not the deficiencies constitute immediate jeopardy. 42
C.F.R. § 488.438(a). In this case CMS determined to impose a per-instance CMP in the
amount of $2,000.

In determining whether the amount of the CMP is reasonable, the following factors
specified at 42 C.F.R. § 488.438(f) must be considered: (1) the facility’s history of non-
compliance, including repeated deficiencies; (2) the facility’s financial condition; (3) the
seriousness of the deficiencies as set forth at 42 C.F.R. § 488.404; and (4) the facility’s
degree of culpability.
13

Neither party has offered complete evidence concerning the regulatory factors which bear
on the per-instance penalty amount. CMS has offered no evidence of past noncompliance
for me to consider. Petitioner has not argued or submitted any evidence to demonstrate
that it is unable to pay the CMP in this matter. Petitioner’s argument suggests that
Resident 1’s weight loss was not that serious. CMS argues that Petitioner’s culpability is
clearly established through the documentary evidence in this matter.

I must weigh the evidence that relates to the penalty amount independently and without
regard to how CMS evaluated the same evidence. Thus, I base my decision to uphold the
penalty determination of Petitioner’s noncompliance on the evidence before me. I have
found that CMS has established a prima facie case of noncompliance relative to the non-
immediate jeopardy citation. Petitioner has not rebutted CMS’s case by a preponderance
of the evidence. The $2,000 per-instance CMP is at the low end of the applicable range
and I find that the amount is fully supported by the evidence in this case. Therefore, I
find that the $2,000 per-instance imposed by CMS in this case is reasonable.

VI. Conclusion

For the reasons addressed above, I sustain CMS’s determination and find that Petitioner
was not in substantial compliance with program participation requirements at 42 C.F.R.
§ 483.25()(1). I further sustain CMS’s determination to impose a per-instance CMP and
I find the CMP of $2,000 in this case to be reasonable.

/s/
Alfonso J. Montano
Administrative Law Judge