Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Oceanside Nursing and Rehabilitation Center
(CCN: 11-5459),

Petitioner
Vv.

Centers for Medicare and Medicaid Services.
Docket No. C-09-569
Decision No. CR2269

Date: October 15, 2010

DECISION

I sustain the determination of the Centers for Medicare and Medicaid Services (CMS) to
impose remedies against Petitioner, Oceanside Nursing and Rehabilitation Center,
consisting of the following:

¢ Civil money penalties of $5,200 per day for each day of a period that began on
March 13, 2009 and that ran through May 3, 2009; and

¢ Civil money penalties of $350 per day for each day of a period that began on May
4, 2009 and that ran through June 24, 2009.

I. Background

Petitioner is a skilled nursing facility in the State of Georgia. It participates in the
Medicare program. Its participation in Medicare is governed by sections 1819 and 1866
of the Social Security Act (Act) and by implementing regulations at 42 C.F.R. Parts 483
and 488. Its right to a hearing is governed by regulations at 42 C.F.R. Part 498.
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CMS determined to impose the remedies that I describe in this decision’s opening
paragraph based on findings of noncompliance that were made at a survey of Petitioner’s
facility completed on April 25, 2009 (April Survey). Petitioner requested a hearing, and
the case was assigned to me for a hearing and a decision. I held a hearing in Savannah,
Georgia on July 6, 2010. At the hearing I received into evidence exhibits from CMS that
are identified as: CMS Ex. 1; CMS Ex. 2; CMS Ex. 4— CMS Ex. 6; CMS Ex. 8 - CMS
Ex. 10; CMS Ex. 12; and CMS Ex. 15 — CMS Ex. 46. I received into evidence exhibits
from Petitioner that are identified as P. Ex. 1 — P. Ex. 21.

IL. Issues, Findings of Fact, and Conclusions of Law
A. Issues
The issues are whether:

1. Petitioner failed to comply substantially with Medicare participation
requirements;

2. CMS’s determination of immediate jeopardy noncompliance is clearly
erroneous; and

3. CMS’s remedy determinations are reasonable.
B. Findings of Fact and Conclusions of Law

The surveyors who conducted the April Survey found that Petitioner manifested five
deficiencies that were so egregious as to pose immediate jeopardy for Petitioner’s
residents. I discuss each of these deficiencies in detail, and I sustain CMS’s findings of
noncompliance with respect to each of them. The surveyors also found several instances
of non-immediate jeopardy level noncompliance. I do not address these in this decision
inasmuch as the findings of immediate jeopardy level noncompliance are sufficient to
justify the remedies that CMS determined to impose and that I sustain.

I make the following findings of fact and conclusions of law (Findings).

1. Petitioner failed to comply substantially with the requirements of 42
CF.R. § 483.13(c).

A skilled nursing 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 word “neglect” is defined to mean the
“failure to provide [a resident with] goods and services necessary to avoid physical harm,
mental anguish, or mental illness.” 42 C.F.R. § 488.301.
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The regulation is broadly worded, but its intent is unmistakable. Its purpose is to assure
that residents receive necessary care and services and to assure also that skilled nursing
facilities do not omit to provide that which is necessary.

CMS bases its allegations that Petitioner neglected to provide necessary care to its
residents on Petitioner’s treatment of four residents who are identified as Resident # 8,
Resident T, Resident # 6, and Resident C. The weight of the evidence supports CMS’s
allegations concerning Residents #s 8 and 6 and Resident T. I do not find that there is
credible evidence supporting allegations of neglect concerning Resident C. However, the
evidence pertaining to the other three residents amply supports a finding of
noncompliance with the anti-neglect regulation.

a. Resident #8

At the time of the April Survey Resident # 8 was a relatively young individual, aged 51.
CMS Ex. 42 at 6. He had been incapacitated by strokes, had lost the use of both of his
legs, was unable to turn his lower body, and was unable to ambulate. Jd. at 7. The
resident was dependent on Petitioner’s staff for transfers. Id.

The resident had used a wheelchair in the past. CMS Ex. 42 at 7. That had provided the
resident with inadequate protection, because he was not able to be positioned
appropriately in a wheelchair. Jd. He was placed in a chair known as a “Broda chair” to
provide him with additional protection. I take notice that a Broda chair is a device that
maintains its occupant’s body at an angle and is intended to be inherently more stable
than a wheelchair that positions its occupant’s upper body in an upright position.
However, the staff knew that putting the resident in a Broda chair would not provide the
resident complete protection from falling. Accordingly, the resident’s care plan
instructed the staff to monitor Resident 8 for appropriate positioning while he was in his
Broda chair. Jd. at 9.

Petitioner’s staff was aware that the resident was at risk for falls and injury when he was
not in his Broda chair. They were particularly aware that the resident would be at risk
when he was transferred to and from a doctor’s appointment in a regular wheelchair. The
resident’s care plan instructed the staff to:

Make sure to place [the resident] back in Broda chair following doctors
appointments where he is transferred via w/c.

CMS Ex. 42 at 10.

Resident # 8 is a smoker. Petitioner’s staff knew that this resident was potentially at risk
for injury when he smoked, due to his physical impairments and the difficulty keeping
the resident positioned in a stable manner when he was not in bed. The resident’s care
plan instructed that the resident would be permitted to smoke only when under the staff’s
supervision. CMS Ex. 42 at 8.
On January 8, 2009, Resident # 8 fell, sustaining a fractured clavicle. CMS Ex. 42 at 6.
The circumstances of his fall establish that Petitioner’s staff neglected to comply with the
directives in the resident’s care plan concerning: his use of a Broda chair; monitoring the
resident; and supervising him while he smoked. On January 8, the resident was
transported to and from a doctor’s appointment in a regular wheelchair. The resident was
not transferred from the wheelchair to a Broda chair on his return to the facility. Rather,
he remained in a regular wheelchair, unsupervised by Petitioner’s staff. Jd. at 5. The
resident then was taken to Petitioner’s patio, apparently by another resident, where he
attempted to smoke unsupervised. While there and unsupervised, the resident fell from
the wheelchair and was injured. Id.

This is unequivocal evidence of neglect. The staff had a protocol for dealing with
Resident # 8’s problems, which they ignored on January 8. The staff should have assured
that the resident was transferred to his Broda chair immediately upon his return to the
facility from his doctor’s appointment. They should have monitored him while he was in
his Broda chair to assure that he remained positioned correctly and was stable. And, they
should not have permitted the resident to smoke unsupervised. They contravened the
express instructions in the resident’s care plan when they failed to assure his safe transfer
to a Broda chair, failed to monitor the resident, and allowed him to smoke unsupervised.

Petitioner argues that the events of January 8, 2009, are only:

an isolated event in which another resident was able to circumvent the
Facility’s policies and procedures. There is not even any evidence that the
Facility should have been on notice of a practice or propensity for other
residents to take Resident #8 outside for unsupervised smoking.

Petitioner’s Post-Hearing Brief at 14-15. I disagree. I am not persuaded that the events
of January 8 establish merely an isolated event or an aberration. Rather, they show a
breakdown in the support and surveillance system that Petitioner’s staff supposedly had
implemented for Resident # 8. The staff was put on notice that the resident was to be
transferred immediately to a Broda chair upon his return to the facility. That not only did
not happen, but there was a whole sequence of events in which the resident remained in a
regular wheelchair without staff intervention. He entered the facility in a regular
wheelchair. He was taken by Petitioner’s staff, while in a regular wheelchair, to
Petitioner’s dining room where he was served a meal. He was then transported to the
patio by a resident, without intervention by the staff. There, he smoked while
unsupervised, and he fell.

b. Resident T

Resident T was admitted to Petitioner’s facility from a local jail on June 23, 2008. At
that time, the resident was 60 years old. He had resided at Petitioner’s facility previously
but had been incarcerated for a probation violation. CMS Ex. 43 at 14. The resident had
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diagnoses of angina pectoris and cerebrovascular disease and had sustained multiple
gunshot wounds at some point in the past. /d. He had gait problems and sometimes
walked with the aid of a walker. Jd.

Petitioner’s staff knew that Resident T had behavioral problems. He would consume
alcohol while outside of Petitioner’s premises. CMS Ex. 43 at 15. He was at times
verbally abusive towards other residents. Jd. He had altercations with his roommate.

On January 5, 2009, Resident T returned to Petitioner’s facility, evidently from an
unescorted off premises sojourn. CMS Ex. 43 at 10. He had been drinking. Jd. at 15-16.
Shortly after his arrival the resident began shouting, cursing, and demanding that
Petitioner’s staff attend to him. /d. at 10. He then threw an object (a can of cookies) at a
nursing assistant and continued to curse and throw objects from his room into a hallway.
Id. at 11. The resident refused to calm down, and Petitioner’s staff called the police. The
resident eventually was transferred to a local hospital for evaluation.

Resident T plainly was a violence prone, abusive individual. Indeed, on April 26, 2009,
months after the January 5 incident, Petitioner’s staff assessed the resident as follows:

Resident has high potential for violence. This is brought on by alcohol
consumption. Resident becomes surly and verbally aggressive towards
others . . . Resident is ambulatory and goes outside facility and buys his
own alcohol. He has friends and family who sign him out for the day and
travel to Savannah. He is aware of the facility’s policy prohibiting alcohol
from being brought into the building.

CMS Ex. 43 at 5. During the period between the resident’s June 23, 2008 admission to
the facility and this April 26, 2009 note, Petitioner’s staff never developed a plan of care
that specifically addressed the resident’s behavior and proclivities, notwithstanding his
history and his clearly violent behavior and Petitioner’s staffs insight into the resident’s
personality and propensities. The staff knew that the resident was a dangerous
individual, that his personal problems were exacerbated by his access to alcohol, and that
he occasionally engaged in outbursts that posed risks for other residents. Yet, at no time,
did they plan systematically to address these issues. This failure to plan for, and to
address, the resident’s problems strongly supports a finding that the staff neglected not
only the needs of Resident T but those of other residents who were potential victims of
the resident’s anger.

In its defense, Petitioner focuses almost exclusively on the January 5, 2009 incident
involving Resident T. Petitioner’s Post-Hearing Brief at 11-13. Petitioner argues that the
resident’s anger on that occasion was directed at Petitioner’s staff and not at other
residents. Therefore, according to Petitioner, the incident did not evidence any potential
risk to the welfare of other residents. Moreover, according to Petitioner, the resident was
not manifesting any psychiatric signs or symptoms after he was transported to the
hospital on that date. From this, Petitioner argues that the resident’s outburst was not

6

significant evidence of truly dangerous behavior. It contends also that the resident had
calmed down by the time he returned to Petitioner’s facility and, therefore, posed no
threat. Id.

Petitioner’s argument misses the point. Petitioner did not neglect to provide care for
Resident and T and other residents affected by Resident T’s anger solely as a
consequence of the January 5, 2009 incident. That incident is evidence of the resident’s
propensity for violent behavior and, Petitioner’s contentions to the contrary, evidences a
danger that the resident could direct violence at anyone, not just a member of the staff.
But, the neglect runs far deeper than the failure by Petitioner’s staff to prevent that unique
incident from occurring. The problem that is graphically illustrated by the evidence is a
lack of planning by Petitioner’s staff to address the obviously violent proclivities of
Resident T.

c. Resident #6

Resident # 6 was, as of the April Survey, an individual who was highly prone to
sustaining injuries from falls. He had fallen on numerous occasions prior to March 13,
2009. On that date, the resident sustained a fall in his room, while he was getting up to
use the bathroom. CMS Ex. 28 at 19, 28.

On March 14, the day following the fall, the resident began complaining of pain to his
right leg and quadriceps area. CMS Ex. 28 at 28. The pain was evident on palpation of
the resident’s leg and also on rotation. However, Petitioner’s staff gave the resident no
pain medication on that date nor did they report the resident’s complaints and their
associated findings to the resident’s physician.

The following day, March 15, 2009, the resident continued to complain of pain in his
right leg with movement of that limb. /d. Again, the staff did not give the resident pain
medication nor did they consult with the resident’s treating physician. On the morning of
March 16, the resident again complained of pain upon movement. Once more, the staff
did not give the resident pain medication. The resident’s physician did order an x-ray of
the resident’s right hip. CMS Ex. 28 at 25, 28-29. Petitioner’s staff gave the resident a
single dose of a non-prescription pain medication on the evening of March 16. CMS Ex.
28 at 29. The resident again complained of pain on March 17, 2009 and was given
Tylenol as a pain relieving medication. Jd. at 29. However, the staff continued not to
consult with the resident’s physician concerning his complaint of pain.

On March 18, 2009, the resident was examined by his physician, who ordered that the
resident be given a CT scan of his right hip at a local hospital. CMS Ex. 28 at 30. The
scan revealed a fractured femur and dislocation of the resident’s right hip.

The resident returned to the facility on the evening of March 18 with a prescription for
Lortab, a pain medication, to be administered every six hours as needed for pain ranging
from mild to severe (the dosage varied depending on the amount of pain the resident was
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experiencing). /d. at 27,30. The staff assessed the resident’s pain on March 19, 2009 as
being of moderate severity with the pain being assessed as worse when the resident
moved. CMS Ex. 38 at 31. Petitioner’s staff administered Lortab to the resident on the
18th but did not administer another dose to the resident until March 26. CMS Ex. 28 at 9.

There is no evidence that Petitioner’s staff ever met to address systematically this
resident’s persistent complaints of pain, and there is no evidence that they ever developed
a plan to deal with his complaints. On March 18, 2009, the staff had a meeting to address
some of the resident’s problems. CMS Ex. 28 at 30. They discussed the resident’s tube
feedings, his continued chemotherapy and radiation therapy for esophageal cancer, and
the weakness that the resident experienced as a result of his cancer and associated
treatment. /d. However, there was no discussion of the resident’s complaints of pain nor
was any planning done to address those complaints.

The evidence that I have just discussed is strong proof that Petitioner neglected the needs
of Resident # 6 by failing to plan for, and to take actions to address, the resident’s
complaints of pain. This resident was in at least intermittent pain beginning on March
14, 2009, and, yet, Petitioner’s staff never systematically addressed that pain. No
planning was done to address the resident’s complaints, and no discussions about
managing the resident’s pain were held with the resident’s physician. Furthermore, the
staff was to say the least unsystematic in actually providing care to address the resident’s
complaints of pain. The staff gave the resident non-prescription pain medication only
twice during the five day period before the resident was hospitalized for diagnosis of his
fractured femur and dislocated hip. After his hospitalization, they gave the resident
Lortab only once, notwithstanding their assessment of the resident’s pain as being of
moderate severity.

Petitioner’s response to this evidence is to argue that the resident’s complaints of pain
were infrequent and were addressed by Petitioner’s staff when he voiced them. Petitioner
argues also that its staff engaged in “repeated consultation” with the resident’s physician
about the resident’s complaints. Petitioner’s Post-Hearing Brief at 10. I do not find these
arguments to be persuasive. First, the resident’s complaints of pain were not minimal.
He voiced complaints of pain with movement of his leg. There is nothing to suggest that
the resident lay perfectly still for hours on end with only sporadic movement of his leg.
Moreover, he voiced these complaints consistently, for a period of several days,
whenever he was asked by Petitioner’s staff. Yet, these complaints did not prompt the
staff to do a systematic assessment of the resident’s pain nor did they prompt the staff to
develop a plan to deal with that pain. It is true that Petitioner’s staff consulted with the
resident’s physician, eventually. But, that consultation did not take place until several
days had elapsed after the resident sustained his fall. In the interim, the resident
complained of pain, and those complaints did not prompt consultation.
d. Resident C

CMS also cited the care that Petitioner’s staff allegedly gave to Resident C as support for
its contention that Petitioner’s staff neglected residents’ needs. As I have stated, the
evidence of neglect respecting Residents #s 6 and 8 and Resident T is ample support for a
finding that Petitioner neglected its residents’ needs. I sustain the finding of
noncompliance with the requirements of 42 C.F.R. § 483.13(c) based on that evidence.
The allegations concerning Resident C are not necessary to my finding of neglect. And,
in fact, these allegations are not supported by the evidence.

The allegations rest on the assertions that Resident C made to a surveyor during the April
survey. She complained to the surveyor that, on March 13, 2009, she asked a member of
the staff to assist her while she took a shower. According to the resident, the staff
member — a nursing assistant — initially agreed to help the resident but then failed to assist
er. The resident complained that the nursing assistant was eating, when the resident
presented herself to the nursing assistant as being ready for her shower. The resident then
averred that she went to take a shower on her own, fell in the shower, and was injured.

It is true that the resident fell in the shower while attempting to shower alone and that she
was injured. It is also true that the staff had assessed the resident as needing assistance to
bathe. Furthermore, it is true that the resident was attempting to shower without
supervision or assistance when she fell. But, there is no persuasive evidence that shows
that Petitioner’s staff neglected the resident’s needs on the day she sustained her fall. In
particular, there is no credible evidence that the staff refused the resident’s request that
she be assisted.

The resident’s complaint about the nursing assistant’s refusal to help her is hearsay
evidence and was made without corroboration. CMS has offered no evidence that would
enhance the probative value of the resident’s hearsay complaint. I find Resident C’s
complaint to be unreliable, because there is nothing that supports it. I find it to be
suspect, because the resident delayed making her complaint for several weeks. The
resident did not complain about the care she received until the April Survey, more than a
month after she had sustained her fall.

2. Petitioner failed to comply substantially with the requirements of 42
CF.R. § 483.20(k)(3)(ii)

A skilled nursing facility must provide services to each of its residents by qualified
persons in accordance with that resident’s written plan of care. 42 C.F.R. §
483.20(k)(3)(ii). CMS alleges, and I find, that Petitioner failed to provide services to
several of its residents in accord with these residents’ plans of care. The allegations made
by CMS address the care that Petitioner gave to residents who are identified as Residents
#s 8,4, and 5, and Resident C. I sustain CMS’s allegations as respects Residents #s 8, 4,
and 5. I do not sustain them as respects resident C, for the reasons I have explained at
Finding 1 of this decision. I find, however, that the proof of noncompliance as respects
9

the other three residents is sufficient to sustain an overall finding of noncompliance by
Petitioner.

a. Resident #8

As I discuss at Finding 1, Petitioner’s staff was instructed to keep Resident # 8 in a Broda
chair, with special emphasis on assuring that he would be transferred immediately to this
chair upon return from a visit to his doctor, and he was supposed to be supervised while
smoking. Petitioner plainly failed to provide these services to the resident.

Petitioner has provided no argument to respond to this evidence except to contend that
what happened to the resident was an isolated incident. I explain at Finding 1 why I find
this argument to be unpersuasive.

b. Resident # 4.

Resident # 4 was very susceptible to falling. Petitioner’s staff assessed him as being a
high risk for falling. CMS Ex. 26 at 16. Between June 20, 2008 and October 7, 2008, the
resident fell on four occasions while he was in his room. /d. at 11. He fell again on
January 22, February 7, and March 27, 2009.

Petitioner’s staff developed, and the resident’s physician ordered, interventions to protect
the resident against falling, including: 1) on February 4, 2009 the resident’s physician
ordered that the resident be supplied with a bed alarm (CMS Ex. 26 at 10); and 2)
Petitioner’s staff planned to check the bed alarm every two hours. CMS Ex. 26 at 9.

In fact, Petitioner’s staff failed to implement these measures, either consistently or at all.
After the February 7, 2009 fall by Resident # 4, the staff discovered that his bed alarm
was not working. CMS Ex. 26 at 7,9. Although the staff was instructed to check the
alarm for functioning at two hour intervals, facility documents show that the alarm was
being checked only once every eight-hour shift. Jd. at 25. When nurses were interviewed
by a surveyor during the April Survey, two of the three nurses who were interviewed
were unable to say which residents were supposed to have their alarms monitored, and
they admitted that there was no system in place at Petitioner’s facility for checking
alarms. CMS Ex. 18 at 1, 3.

CMS now alleges additionally that the resident was observed by surveyors not wearing a
seatbelt that had been prescribed by the resident’s physician. However, no reference is
made to this allegation in the statement of deficiencies for the April survey nor did CMS
make the allegation in its pre-hearing brief. Consequently, I do not consider it here.

Petitioner contends that it implemented the interventions that I have described “but that
on a few isolated occasions they were discovered not to be working or to have been
removed by the resident.” Petitioner’s post-hearing brief at 16. However, the evidence
that I have described shows more than a “few isolated occasions” of noncompliance.
10

There was a clear failure by Petitioner’s staff to follow instructions to check the
resident’s bed alarm at two-hour intervals. There was also confusion by Petitioner’s staff
concerning which residents were to be monitored and whether there was a system for
assuring that monitoring would take place.

c. Resident # 5

This resident was a greatly debilitated individual. The resident suffered from flexion
contractures of her hands. Her plan of care directed that she be supplied with hand rolls
and palm protectors for both hands. Jd. at 8.

There is persuasive evidence showing that Petitioner’s staff failed to comply with these
instructions in providing care to Resident #5. A surveyor observing Resident # 5 on
several occasions on April 23 and 24, 2009, found that the resident was not wearing palm
protectors or hand rolls. CMS Ex. 27 at 16. Deborah Herring, one of the surveyors who
participated in the April survey, testified persuasively that hand rolls, while they cannot
reverse contractures, can prevent further contractures. Tr. at 59-61. Preventing
contractures from worsening is important, because such protection can protect the skin
from breaking down and protect against the development of pressure sores. Jd.

Petitioner argues essentially that hand rolls and palm protectors would not have been
effective had they been supplied to the resident. Petitioner’s Post-Hearing Brief at 18-19.
However, the issue is not whether the hand rolls and palm protectors would have
prevented the development of skin breakdown or pressure sores. Rather, the issue is
whether Petitioner implemented the care plan it had developed for Resident #5. Plainly,
it did not. Arguing now that there would have been no benefit in following the plan that
Petitioner’s own staff developed begs the question of compliance. Petitioner’s staff
developed a plan for the resident. They were obligated to follow that plan. If they
determined that the plan was not effective — and there is no evidence in the record of this
case to show that the staff made that determination with respect to Resident # 5’s use of
hand rolls and palm protectors — then the staff could have modified the plan to reflect
their new assessment. But, absent such an assessment and modification, the staff had no
license to ignore their own care plan.

CMS now alleges additionally that Petitioner failed to follow a physician’s instructions
for tube feeding Resident 5. However, these allegations were not made in the statement
of deficiencies for the April survey at an immediate jeopardy level of noncompliance.
CMS Ex. 5 at 30-32. Nor did CMS seek to amend its allegations in either its pre-hearing
brief or at any time prior to hearing. For that reason, I do not consider the allegations
now.
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3. Petitioner failed to comply substantially with the requirements of 42
C.F.R. § 483.25(h).

A skilled nursing facility must ensure that its resident environment must remain as free of
accident hazards as is possible, and it must also ensure that each of its residents receives
adequate supervision and assistance devices to prevent accidents. 42 C.F.R. §
483.25(h)(1), (2). The regulation does not make a facility strictly liable for accidents that
its residents may sustain, but it does require that a facility take all reasonable measures to
protect residents against accidents.

CMS asserts that Petitioner failed to comply with this regulation in providing care to
Residents #s 8 and 4 and Resident C. I do not find noncompliance in providing care to
Resident C for the reasons that I explain at Finding 1. But, there is ample evidence to
establish noncompliance in providing care to Residents #s 8 and 4, and this evidence is
sufficient to establish noncompliance by Petitioner with the regulation’s requirements.

a. Resident #8

As I discuss at Finding 1, Petitioner failed to provide Resident # 8 with the care he
needed to protect him from falling. Specifically, Petitioner’s staff failed to: assure that
the resident was immediately transferred from a wheelchair to a Broda chair upon his
return to the facility from a doctor’s appointment; monitor him while he was on the
premises; and supervise him while he smoked. These failures plainly establish
noncompliance with the requirements of 42 C.F.R. § 483.25, because they are failures to
supervise and to provide the resident with an assistance device, a Broda chair.

b. Resident #4

As I discuss at Finding 2, Petitioner failed to provide Resident # 4 with the care he
needed to protect him against falling by its staffs failure to assure that the resident’s bed
alarm was checked as often as directed. Additionally, Petitioner failed to have in place a
system that would tell its staff which of its residents needed to have his or her alarm
checked.

Petitioner has provided no defenses to CMS’s allegations of noncompliance with 42
C.F.R. § 483.25 other than those which it raised in response to other allegations of
noncompliance. I discussed those defenses at Findings | and 2, and I do not need to re-
address them here.

4. Petitioner failed to comply substantially with the requirements of 42
CF.R. § 483.75.

A skilled nursing 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 of its residents. 42 C.F.R. § 483.75. The
12

evidence of Petitioner’s noncompliance with this regulation lies in the noncompliance
that I have discussed at Findings 1 — 3 of this decision. The failures of care that I discuss
in those Findings are, ultimately, a failure of Petitioner’s management to implement
policies and procedures that protect residents against staff misfeasance. For example,
Petitioner should have had a system in place to assure that its residents who wore, or
were supplied with, alarms had those devices checked regularly. A non-functioning
alarm is worse than no alarm at all, because the staff assume that an alarm that is supplied
to a resident will work as intended. But, Petitioner — although being cognizant of the
need to check its residents’ alarms — failed to create or implement a system that would
assure that the alarms were checked.

The failure of Petitioner’s staff to assure that Resident # 8 was in a Broda chair at all
times when he was on Petitioner’s premises and awake is a failure by Petitioner’s
management to assure that staff was properly trained to assure that the resident received
the care that had been ordered for him. On January 8, 2009, the resident had to have been
seen by numerous members of Petitioner’s staff while in a wheelchair and not in a Broda
chair. He was brought into the facility from outside the premises in a regular wheelchair.
He was wheeled into the facility’s dining room by one of Petitioner’s staff to receive a
meal along with other residents. And, yet, none of the staff reacted to an obvious
deviation from the care plan that had been written for the resident.

Petitioner offers no evidence to address specifically the allegations of noncompliance
with 42 C.F.R. § 483.75. Rather, it reasserts the defenses it raised previously and which I
have discussed at Findings 1, 2, and 3 of this decision. I do not need to re-address those
defenses here.

5. Petitioner failed to comply substantially with the requirements of 42
CF.R. § 483.75(0)(1).

A skilled nursing facility must have a quality assessment and assurance committee that
meets at least quarterly to identify issues concerning quality assessment and assurance
and that develops and implements appropriate plans of action to correct identified quality
assurance issues. 42 C.F.R. § 483.75(0)(1). CMS asserts that Petitioner did not have a
meaningful quality assurance committee, in that its committee failed to identify and
address certain quality of care issues.

As support for this argument, CMS refers to an interview that a surveyor conducted with
Petitioner’s quality assurance coordinator. This individual acknowledged to the surveyor
that Petitioner’s quality assurance committee had not discussed who would assure that
restraints and safety devices would be monitored appropriately. She acknowledged that
Petitioner did not have any program in place to identify residents who are at risk for
falling. She admitted that the quality assurance committee had not identified any resident
who had a problem with pain. Nor had the committee discussed problems associated
with resident behavior. Finally, the quality assurance coordinator was unable to say
13

whether Petitioner had conducted previously planned in-service training of its staff to
implement a pain assessment protocol. CMS Ex. 30 at 13-14.

This evidence supports a finding that Petitioner did not have an effective quality
assurance committee. As I have discussed at Findings | — 4, there were obvious quality
of care problems at Petitioner’s facility. These included a failure by Petitioner to
implement a system for monitoring alarms. They also included a failure to assure that
falls prone residents were systematically and adequately protected. And, they included a
failure to address residents’ pain in a systematic and thorough manner. The failure of the
quality assurance committee to identify and address these problems shows that this
committee was ineffective.

Petitioner has offered no defense to the evidence of inadequate quality assurance other
than to cite evidence that I have addressed previously. I find it unnecessary to re-visit
Petitioner’s arguments here.

6. Petitioner did not prove CMS’s findings of immediate jeopardy level
noncompliance to be clearly erroneous.

The term “immediate jeopardy” means noncompliance that is so egregious that it causes,
or is likely to cause, serious injury, harm, impairment, or death to a resident. 42 C.F.R. §
488.301. CMS determined that Petitioner’s noncompliance with each of the regulations
that I discuss at Findings 1 — 5 of this decision was so egregious as to comprise
immediate jeopardy.

The evidence strongly supports CMS’s determinations of immediate jeopardy level
noncompliance. Residents #s 4, 6, and 8 were all at risk of serious harm as a
consequence of Petitioner’s failure to provide them with care that complied with
regulatory requirements. Petitioner’s failure to address systematically and
comprehensively the violent outbursts of Resident T put other residents, at least, at a risk
for serious harm. Petitioner offered no evidence to rebut CMS’s immediate jeopardy
determination except to argue that, in fact, it was complying with participation
requirements. I have addressed these arguments at Findings | — 5.

Petitioner argues that CMS found that immediate jeopardy level noncompliance
commenced on March 13, 2009, citing to the report of the April Survey. See CMS Ex. 5
at 1. From this Petitioner asserts that much of the evidence concerning the care that
Petitioner gave to its residents, including Residents #s 4 and 8, and Resident T, is
irrelevant, because it pertains to incidents that took place prior to March 13.

I disagree. It is true that CMS determined that, for purposes of imposing remedies,
immediate jeopardy commenced on March 13, 2009. But, that does not mean that
evidence that predates March 13 is irrelevant to whether immediate jeopardy existed on
that date. Noncompliance is not bounded by the duration of an incident or care that fails
to comply with regulatory requirements. For example, in the case of Resident # 8,
14

Petitioner’s staff plainly failed to comprehend their duties to supervise and protect the
resident and to monitor his activities. The fact that this failure was exposed in January
2009 does not mean that Petitioner’s staff corrected their noncompliance immediately
after the incident. Indeed, as of March 13, 2009, Petitioner and its staff had done nothing
to address the problems that were revealed by the January incident concerning Resident #
8.

Petitioner also argues that, even if there was immediate jeopardy level noncompliance,
the duration of its noncompliance was less than was determined by CMS. It asserts that,
on April 27, 2009, it conducted in-service training for its staff on all issues that were
identified by the surveyors at the April Survey. Thus, according to Petitioner, all staff
were trained to avoid the problems cited by the surveyors by no later than April 27.

The evidence relied on by Petitioner as proof that it corrected all of its deficiencies by
April 27 consists of records of the in-service training that was conducted after the April
Survey. P. Ex. 5—P. Ex. 13. Each of these records addresses a specific subject. For
example, P. Ex. 7 is a record of in-service training conducted to address the risks
associated with residents falling. The exhibit contains a synopsis of the material that was
covered during the training plus the initials of the staff members who attended it. Jd.

I find these exhibits to be unpersuasive evidence that Petitioner corrected its deficiencies
by April 27, for two reasons. First, the exhibits do not prove that Petitioner’s staff
actually was thoroughly trained to address the problems identified by the surveyors.
They are merely lists of the course material that ostensibly was taught to the staff. They
do not prove how thoroughly this material was taught, how well the staff absorbed the
subject matter that was taught to them, or whether the staff then put into practice the
information that they received from the in-service training.

Furthermore, the documentary evidence that Petitioner offered is, as a matter of law,
insufficient to establish that Petitioner corrected its deficiencies. The undisputed facts
establish that these deficiencies share a feature in that each deficiency involved errors by
Petitioner’s staff in determining how, and in what way, to provide care.

Where CMS imposes a remedy to address a deficiency or deficiencies that remedy will
continue in effect until:

The facility has achieved substantial compliance, as determined by CMS or
the State based upon a revisit or after an examination of credible written
evidence that it can verify without an on-site visit... .

42 C.F.R. § 488.454(a)(1). The regulation does not specify the circumstances where a
revisit is necessary or where CMS might be able to verify written evidence of compliance
without revisiting a facility. That issue was addressed in the Secretary’s comments in the
15
preamble to the Part 488 regulations:

There are other cases in which documentation cannot confirm the
correction of noncompliance, and in these cases an on-site revisit is
necessary. For example, one of the requirements for Infection Control is
that personnel must handle, store, process and transport linens so as to
prevent the spread of infection as specified in § 483.65. Ifa deficiency is
cited for a violation of this requirement and a civil monetary penalty is
imposed, submitting written documentation would not confirm the
correction of the violation. An on-site revisit to observe personnel behavior
is necessary in this case to confirm that the facility is, in fact, back in
substantial compliance with this regulatory provision.

59 Fed. Reg. 56,207 (Nov. 10, 1994). The preamble clarifies the regulation by defining
the circumstances in which documentation alone will not serve to establish compliance.
Deficiencies that involve staff members’ providing care to residents are not deficiencies
that normally can be certified as corrected based solely on a review of documents,
because documents alone cannot prove that staff are actually providing care according to
professionally recognized standards of care. For such deficiencies, observation of
performance is a critical element of certifying compliance.

Deficiencies that involve the providing of care by staff are distinguishable from those that
involve mechanical issues or equipment. This latter type of deficiency is one in which
correction can be certified based on documents. For example, a Life Safety Code
deficiency might be based on the failure of a specific piece of equipment at a facility. In
that circumstance, a facility might be able to prove compliance by offering written proof
that the faulty piece of equipment had been repaired or replaced.

The deficiencies that I have found at Findings 1 — 5 all fall into the category of
deficiencies that cannot be certified as having been corrected based solely on documents.
Each of these deficiencies is, at bottom, a failure by Petitioner’s staff to provide care to
residents in accord with professionally recognized standards of care. For example,
Petitioner’s staff failed to address appropriately a resident’s pain. Retraining the staff in
identifying complaints of pain and addressing them certainly is a critical part of
correcting this deficiency. But, retraining alone is not sufficient. There must be proof
that the staff absorbed the information provided by the retraining and that they applied it
in practice. That aspect of compliance cannot be established simply by documents but
requires observation.

Thus, and as a matter of law, Petitioner could not establish compliance with the
deficiencies that I describe in Findings 1 — 5 based solely on documents representing that
its staff had been retrained. What was minimally necessary to establishing compliance
was that the staff be observed actually providing the care implicated in the deficiencies.
Certification of that required a revisit to the facility. That revisit occurred on May 4,
2009, and that was the date on which CMS determined that immediate jeopardy had been
16

abated. As a matter of law, May 4 was the earliest date when immediate jeopardy could
have been abated due to the nature of Petitioner’s noncompliance.

7. CMS’s remedy determinations are reasonable.

The civil money penalties that CMS determined to impose fall into two ranges, that
which is reserved for immediate jeopardy level deficiencies and that which applies to
those deficiencies that are substantial but which are not at the immediate jeopardy level
of scope and severity. The permissible range of immediate jeopardy level penalties is
from $3,050 to $10,000 per day. 42 C.F.R. § 488.438(a)(1)(i). The permissible range of
non-immediate jeopardy level penalties is from $50 to $3,000 per day. 42 C.F.R. §
488.438(a)(1)(ii).

There are regulatory criteria that must be used for deciding what is a reasonable penalty
amount for a penalty that falls within either of the two penalty ranges. These criteria
include: the seriousness of a facility’s noncompliance; its culpability; its compliance
history; and its financial condition. 42 C.F.R. §§ 488.438(f)(1) — (4) (incorporating 42
C.F.R. § 488.404 by reference into 42 C.F.R. § 488.438(f)(3)).

I discuss the two penalty amounts that CMS determined to impose as follows.
a. $5,200 per day for immediate jeopardy level noncompliance

A civil money penalty of $5,200 per day for immediate jeopardy level noncompliance
falls at the middle of the permissible immediate jeopardy penalty range. I find that
amount to be reasonable because of the seriousness of Petitioner’s noncompliance. That
is measured by the seriousness of individual immediate jeopardy level deficiencies but
also by the fact that Petitioner manifested five of them. Each of these deficiencies was
serious in its own right. Petitioner put several of its residents at great risk of injury or
harm by virtue of its failure to provide care for them that met professional standards of
care and regulatory requirements. Thus, for example, Petitioner allowed a resident
(Resident T) to reside on its premises for an extended period, knowing that this resident
was prone to alcohol abuse and violence, yet failing to develop a comprehensive plan to
deal with the resident’s proclivities. Petitioner identified another resident (Resident # 4)
as being at great risk for falls and, yet, failed to implement the basic protections that the
staff had determined to be necessary for the resident. As another example, Petitioner’s
staff knew that Resident # 8 was highly vulnerable to falling if not placed in a protective
Broda chair, and, despite that knowledge, the staff allowed the resident to be in the
facility in an ordinary wheelchair and to smoke unsupervised.

The seriousness of the individual deficiencies is magnified by the fact that Petitioner was
noncompliant at an immediate jeopardy level of noncompliance across a whole range of
regulatory requirements.

17

Petitioner asserts that immediate jeopardy level penalties of $5,200 would be unfair given
its financial condition. Petitioner asserts that its long term financial condition is such that
it would not be able to survive the impact of the penalties that CMS determined to
impose. Petitioner’s Post-Hearing Brief at 22-24.

In assessing Petitioner’s arguments, I note first that, under no circumstance, may I reduce
an immediate jeopardy level penalty to a daily sum that is less than $3,050. That amount
is the minimum immediate jeopardy penalty amount, and I have no authority to waive it.
That having been said, I am not persuaded by Petitioner’s contention that it merits a
reduction of penalties, if only to an amount of $3,050 per day.

The thrust of Petitioner’s argument is that the entity that is Petitioner is losing money
with a net income loss during the first five months of more than $282,000 and an
operating loss for the last two years. Tr. at 89, 95. But, that assertion does not tell the
entire story of Petitioner’s financial condition. Petitioner is one of several interrelated
entities with common ownership. Tr. at 85. The gross revenue of all of these companies,
including Petitioner, is about $75 million per year. Tr. at 93.

I cannot adjudicate Petitioner’s arguments about its financial condition while wearing
blinders. That Petitioner exists as an entity that is legally separate from other, similar
entities with common ownership likely means that the other entities do not share in the
legal responsibility to pay Petitioner’s debts and liabilities. But, that does not mean that
Petitioner is without access to very significant resources that could be used to pay the
civil money penalties that are at issue here. Indeed, considering Petitioner’s status in
isolation is in my opinion an artificial way of addressing its financial status, given that it
is owned in common with other facilities which, obviously, have enormous resources and
large assets at their disposal and under their control. Moreover, considering Petitioner as
an isolated entity without looking at the broader picture would simply encourage skilled
nursing facilities that are held in common with other similar facilities to contend that they
must be treated as isolated facilities regardless of the financial wherewithal of the entity
or individual that owns them along with other similar facilities. That would be an open
invitation for skilled nursing facilities to avoid paying civil money penalties.

Furthermore, even if Petitioner is considered as an isolated entity, the evidence does not
establish that it would be unable to pay the penalties that are at issue here. Petitioner’s
owner contended that it would contemplate bankruptcy if forced to pay the penalties. Tr.
at 97. But, he did not contend that the facility would be forced to close its doors. Rather,
he acknowledged that a prospective bankruptcy would be under Chapter 11, a form of
bankruptcy that would enable Petitioner to continue to operate even if insolvent. Id.

Petitioner also characterizes the total penalty amount that CMS determined to impose —
more than $283,000 — as an “incredible amount of money.” Petitioner’s post-hearing
brief at 24. I take that characterization to mean that Petitioner is contending that the total
penalty amount is unreasonably large. I do not agree. The amount reasonably takes into
consideration the presence of five immediate jeopardy level deficiencies that persisted for
18

weeks at Petitioner’s facility. As I have stated, it constitutes only very slightly more than
one half the maximum penalty amount for deficiencies of this type.

b. $350 per day for non-immediate jeopardy level noncompliance

This penalty amount covers the period between May 4, 2009, when immediate jeopardy
was abated, and June 24, 2009, when CMS determined that Petitioner finally attained
compliance with all participation requirements. The daily penalty amount is modest.
$350 per day is less than 12 percent of the maximum non-immediate jeopardy level
amount. Petitioner did not contend that this amount is unreasonable nor did it offer any
evidence to show that it is unreasonable aside from its argument that Petitioner lacks the
wherewithal to pay civil money penalties. Consequently, I sustain it.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Human Services Board Serving North Central Health Care
(PTAN: 0750600001),

Petitioner
Vv.
Centers for Medicare & Medicaid Services.
Docket No. C-10-638
Decision No. CR2266

Date: October 13, 2010

DECISION

For the reasons set forth below, I grant the Centers for Medicare & Medicaid Services’
(CMS’s) motion for summary judgment. The undisputed evidence establishes that
Petitioner, Human Services Board Serving North Central Health Care, a durable medical
equipment, prosthetics, orthotics, and supplies (DMEPOS) supplier, was not in
compliance with the Medicare program surety bond requirement. CMS was therefore
authorized to revoke Petitioner’s Medicare supplier number.

I. Applicable Law and Regulations

Section 1834(a)(16)(B) of the Social Security Act (Act), 42 U.S.C. § 1395m(a)(16)(B),
states that the Secretary of Health and Human Services (Secretary) “shall not provide for
the issuance (or renewal) of a provider number for a supplier of durable medical
equipment for purposes of payment” for DMEPOS furnished by the supplier “unless the
supplier provides the Secretary on a continuing basis . . . with a surety bond in a form
specified by the Secretary and in an amount that is not less than $50,000.”
CMS’s regulations implement these requirements among the “supplier standards” at 42
C.F.R. § 424.57(c), which DMEPOS suppliers must meet to maintain Medicare billing
privileges. As relevant here, section 424.57(c) provides:

(c) Application certification standards. The supplier must meet and must
certify in its application for billing privileges that it meets and will continue
to meet the following standards. The supplier:

oR RK

(26) Must meet the surety bond requirements specified in paragraph (d) of
this section.

The surety bond requirements at 42 C.F.R. § 424.57(d), referenced in supplier standard
26, state, as relevant here, that “beginning October 2, 2009, each Medicare-enrolled
DMEPOS supplier must meet the requirements of paragraph (d),” which include “a bond
that is continuous,” which “meet[s] the minimum requirements of liability coverage
($50,000),” and provides that “[t]he surety is liable for unpaid claims, CMPs [civil money
penalties], or assessments that occur during the term of the bond.” 42 C.F.R.

§ 424.57(d)(1)(ii), (4), (5). “The term of the initial surety bond must be effective on the
ate that the application is submitted to the NSC [National Supplier Clearinghouse, a
Medicare contractor].” 42 C.F.R. § 424.57(d)(2).

The regulations provide that failure to submit a surety bond as required is grounds for
revocation of a supplier’s billing privileges. 42 C.F.R. § 424.57(d)(4)(ii)(B); see also 42
C.F.R. § 424.57(d)(11) (“CMS revokes the DMEPOS supplier’s billing privileges if an
enrolled supplier fails to obtain, file timely, or maintain a surety bond as specified in this
subpart and CMS instructions.”). The regulations also provide more generally that CMS
“will revoke a supplier’s billing privileges if it is found not to meet” the supplier
standards or other requirements in section 424.57(c). 42 C.F.R. § 424.57(e) (formerly

§ 424.57(d)).!

A supplier that has had its billing privileges revoked is “barred from participating in the
Medicare program from the effective date of the revocation until the end of the re-
enrollment bar. The re-enrollment bar is a minimum of | year, but not greater than 3
years depending on the severity of the basis for revocation.” 42 C.F.R. § 424.535(c).

' Paragraph (e) of section 424.57 was previously designated paragraph (d) and was
redesignated by the rulemaking that imposed the surety bond requirements at paragraph
(d); however, the redesignations have not yet been incorporated into the Code of Federal
Regulations. See 42 C.F.R. Ch. IV § 424.57, Editorial Note (Oct. 1, 2009). References
are to the regulation as redesignated.
CMS may at any time require a DMEPOS supplier to show compliance with the surety
bond requirement. 42 C.F.R. § 424.57(d)(12).

II. Background

By letter dated April 19, 2010, Petitioner requested review of the Medicare contractor’s
reconsideration decision dated February 19, 2010 (HR). The contractor found Petitioner
noncompliant with 42 C.F.R. § 424.57(c)(22) which sets accreditation requirements,” and
424.57(c)(26), which requires that suppliers “[m]ust meet surety bond requirements
specified in paragraph (d) of [42 C.F.R. § 424.57].” The contractor stated that, despite
Petitioner’s apology for “inadvertently missing the deadline of October 2, 2009, for
submission of the surety bond,” the applicable regulations permit “no time extension for
the submission of a surety bond.” The hearing officer added that the “document provided
does not have many of the required elements directed by CMS to be considered an
acceptable bond for DMEPOS suppliers as mandated. . . .”

With its hearing request letter, Petitioner submitted documentation including: a copy of
the initial revocation notice; a copy of Petitioner’s request for reconsideration; a copy of
the contractor’s reconsideration decision; a copy of a nursing home surety bond for
patient funds to be held in trust through WAUSAU Insurance Companies; a Rider
advising that WAUSAU Insurance Company is replaced by Liberty Mutual Insurance
Company; and copies of invoices, a check, and a general agreement of indemnity from
Liberty Mutual Insurance Company, all related to a nursing home surety bond.

lissued an order on April 23, 2010, acknowledging receipt of Petitioner’s hearing request
and setting a briefing schedule for the parties. In accordance with my order, CMS filed a
motion for summary disposition, accompanied by exhibits 1-8. On July 15, 2010,
Petitioner indicated that it had no additional information to submit and would stand on
the written record.

III. Issue
The issue in this case is whether CMS is entitled to summary disposition on the ground

that the undisputed facts demonstrate that the revocation of Petitioner’s Medicare billing
privileges was legally authorized.

> Petitioner argues that the hearing officer improperly introduces a new reason for
revocation, i.e., the accreditation requirement, which was not part of the initial notice of
revocation. HR. CMS does not address the contractor’s finding regarding accreditation
and I do not address it since my resolution of the surety bond issue makes it unnecessary
to reach the question of whether Petitioner required or had accreditation.
IV. Applicable Standard

CMS’s motion made clear that the disposition it sought was in the nature of summary
judgment. CMS Br. at 4-5. The Board stated the standard for summary judgment as
follows.

Summary judgment is appropriate when the record shows that there is no
genuine issue as to any material fact, and the moving party is entitled to
judgment as a matter of law. . .. The party moving for summary judgment
bears the initial burden of showing that there are no genuine issues of
material fact for trial and that it is entitled to judgment as a matter of

law. ... To defeat an adequately supported summary judgment motion, the
non-moving party may not rely on the denials in its pleadings or briefs, but
must furnish evidence of a dispute concerning a material fact — a fact that, if
proven, would affect the outcome of the case under governing law. . . . In
determining whether there are genuine issues of material fact for trial, the
reviewer must view the evidence in the light most favorable to the non-
moving party, drawing all reasonable inferences in that party’s favor.

Senior Rehab. & Skilled Nursing Ctr., DAB No. 2300, at 3 (2010) (citations omitted).
The role of an ALJ in deciding a summary judgment motion differs from the ALJ’s role
in resolving a case after a hearing. The ALJ should not assess credibility or evaluate the
weight of conflicting evidence. Holy Cross Vill. at Notre Dame, Inc, DAB No. 2291, at 5
(2009).

V. Findings of Fact, Conclusions of Law, and Discussion

I make a single finding and conclusion set out below, followed by my supporting
discussion:

CMS was authorized to revoke Petitioner’s billing privileges based on
undisputed evidence that Petitioner had not obtained a surety bond as 42 C.F.R.
§ 424.57(c)(26) and (d) required.

As noted above, the statute states that the Secretary shall not issue or renew a DMEPOS
supplier number “unless the supplier provides the Secretary on a continuing basis . . .
with a surety bond... .” 42 U.S.C. § 1395m(a)(16)(B).

This requirement for continuous compliance is implemented in the regulations that the
Secretary issued. The introductory language of 42 C.F.R. § 424.57(c) states, in pertinent
part, “[t]he supplier must meet and must certify in its application for billing privileges
that it meets and will continue to meet” the supplier standards listed within. Those
standards include section 424.57(c)(26) (supplier standard 26), which states that a
supplier “[m]ust meet the surety bond requirements specified in paragraph (d) of this
section.” It follows that a supplier must meet the surety bond requirements specified in
paragraph (d) on a continuing basis.

Consistent with this, the preamble to the final rule on appeals of CMS enrollment
determinations states that CMS believes that “all providers and suppliers must meet and
maintain all Federal and State requirements for their provider or supplier type to enroll or
maintain their enrollment in the Medicare Program.” 73 Fed. Reg. 36,448, 36,452 (June
27, 2008).

In its hearing request, Petitioner does not deny this requirement but contends that an
exception to the surety bond requirement for government-operated DMEPOS suppliers
applies. HR. That exception is governed by 42 C.F.R. § 424.57(d)(15), which reads, in
pertinent part:

(15) Exception to the surety bond requirement---(i) Qualifying entities
and requirements. (A) Government-operated DMEPOS suppliers are
provided an exception to the surety bond requirement if the DME supplier
has provided CMS with a comparable surety bond under State law.

Petitioner argues that the Liberty Mutual surety bond submitted with its hearing request
meets the requirements of a comparable surety bond under the exception and was
effective prior to the October 2, 2009, deadline. CMS takes exception to Petitioner
raising this new argument when it was not before the hearing officer on reconsideration.
CMS further contends that Petitioner does not meet the requirements for a government-
operated DMEPOS supplier and that Petitioner has not provided CMS with a comparable
surety bond as required under the exception.

Petitioner has not identified any factual evidence which could be construed as placing in
dispute whether Petitioner is a “government-operated” DMEPOS supplier as
contemplated under the exception. Petitioner simply relies on its unverified assertion that
it is one of the county boards responsible for the provision of a range of treatment and
rehabilitation services as enacted by State statute. HR. As explained above, a mere
assertion or denial in a pleading does not suffice to block summary judgment. The non-
movant must proffer some evidence that, viewed in the most favorable light, could
support an inference that would defeat the movant’s position. Petitioner did not present
documentary evidence of its ownership status and did not offer testimonial evidence on
the topic.

Furthermore, the undisputed facts show that Petitioner has not submitted proof that it had
in place on October 2, 2009 a “comparable surety bond under State law” to meet this
exception. The Liberty Mutual surety bond Petitioner relies upon is on its face wholly
inadequate. The bond does not purport to protect CMS from loss due to overpayments or
civil money penalties incurred by a DMEPOS supplier, but rather protects nursing home
residents’ funds.

The purposes of the surety bond requirement are to:

(1) Limit the Medicare program risk to fraudulent DME suppliers; (2)
enhance the Medicare enrollment process to help ensure that only
legitimate DME suppliers are enrolled or are allowed to remain enrolled in
the Medicare program; (3) ensure that the Medicare program recoups
erroneous payments that result from fraudulent or abusive billing practices
by allowing CMS or its designated contractor to seek payments from a
Surety up to the penal sum; and (4) help ensure that Medicare beneficiaries
receive products and services that are considered reasonable and necessary
from legitimate DME suppliers.

72 Fed. Reg. 42,003 (Aug. 1, 2007).

The surety bond Petitioner submitted does not even relate to Petitioner as a DMEPOS
supplier, let alone provide the protections envisioned by this regulation. Even assuming
Petitioner can raise this argument at this point in the appeal process, and even if
Petitioner had established that it is a government-operated DMEPOS supplier, it is clear
that Petitioner failed to submit a “comparable surety bond” as the exception requires.
The terms of the bond are clear on its face and thus are not in dispute. No matter how
favorably the terms of the bond are viewed, they neither meet the specific requirements
for the content of compliant surety bonds nor provide assurance comparable in any
meaningful sense. I therefore uphold the contractor’s determination that Petitioner failed
to establish compliance with the surety bond requirement under section 424.57(c)(26).

The regulation at 42 C.F.R. § 424.535 plainly authorizes CMS to revoke a
supplier’s Medicare enrollment whenever the supplier fails to maintain
compliance with enrollment requirements. Section 424.535(a)(1) provides that a
supplier’s billing privileges are revoked when the supplier “is determined not to be
in compliance with the enrollment requirements described in this section, or in the
enrollment application applicable for its provider or supplier type, and has not
submitted a plan of corrective action as outlined in part 488 of this chapter.”

It is an enrollment requirement that “[t]he supplier must meet and must certify in its
application for billing privileges that it meets and will continue to meet” the supplier
standards in 42 C.F.R. § 424.57(c), which includes the surety bond requirement of section
424.57(c)(26). CMS may revoke the supplier’s Medicare billing privileges if the supplier
fails to meet any of these standards. 42 C.F.R. § 424.57(e); 1866I/CPayday.com, L.L.C.,
DAB No. 2289, at 13 (2009) (‘[F]ailure to comply with even one supplier standard is a
sufficient basis for revoking a supplier’s billing privileges.”).

Section 424.57(d)(11) further makes abundantly clear the consequences of a failure to
maintain a compliant surety bond:

CMS revokes the DMEPOS supplier’s billing privileges if an enrolled
supplier fails to obtain, file timely, or maintain a surety bond as specified in
this subpart and CMS instructions. Notwithstanding paragraph (e) of this
section, the revocation is effective the date the bond lapsed and any
payments for items furnished on or after that date must be repaid to CMS
by the DMEPOS supplier.

42 CFR. § 424.57(d)(11); see also 42 C.F.R. § 424.57(c)(26).

The regulatory language is plain. A supplier must comply with all standards, or CMS
will revoke its billing privileges. And I must sustain CMS’s determination where the
facts establish noncompliance with one or more of the regulatory standards.

I therefore conclude that CMS acted within its regulatory authority to revoke Petitioner’s
Medicare supplier number, because Petitioner was not compliant with the surety bond
requirements of 42 C.F.R. § 424.57(c)(26) and (d) by October 2, 2009.

VI. Conclusion

For the reasons explained above, I grant summary judgment in favor of CMS and sustain
the revocation of Petitioner’s enrollment in Medicare.

/s/

Leslie A. Sussan
Board Member


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
Clairmont Nichols Opticians
(PTAN: 0869270001),

Petitioner
Vv.

Centers for Medicare & Medicaid Services.
Docket No. C-10-715
Decision No. CR2265

Date: October 8, 2010

DECISION

For the reasons set forth below, I grant the Centers for Medicare & Medicaid Services’
(CMS’s) motion for summary judgment. The undisputed evidence establishes that
Petitioner, Clairmont Nichols Opticians (Clairmont/Petitioner), was not in compliance
with the Medicare program surety bond requirement. As a consequence, CMS has the
authority to revoke Petitioner’s Medicare supplier number.

I. Applicable Law and Regulations

Section 1834(a)(16)(B) of the Social Security Act (Act), 42 U.S.C. § 1395m(a)(16)(B),
states that the Secretary of Health and Human Services (Secretary) “shall not provide for
the issuance (or renewal) of a provider number for a supplier of durable medical
equipment for purposes of payment” for durable medical equipment, prosthetics,
orthotics and supplies (DMEPOS) furnished by the supplier “unless the supplier provides
the Secretary on a continuing basis . . . with a surety bond in a form specified by the
Secretary and in an amount that is not less than $50,000.”
CMS’s regulations implement these requirements among the “supplier standards” at 42
C.F.R. § 424.57(c), which DMEPOS suppliers must meet to maintain Medicare billing
privileges. As relevant here, section 424.57(c) provides:

(c) Application certification standards. The supplier must meet and must
certify in its application for billing privileges that it meets and will continue
to meet the following standards. The supplier:

oR RK

(26) Must meet the surety bond requirements specified in paragraph (d) of
this section.

The surety bond requirements at 42 C.F.R. § 424.57(d), referenced in supplier standard
26, state, as relevant here, that “beginning October 2, 2009, each Medicare-enrolled
DMEPOS supplier must meet the requirements of paragraph (d),” which include “a bond
that is continuous,” which “meet[s] the minimum requirements of liability coverage
($50,000),” and provides that “[t]he surety is liable for unpaid claims, CMPs [civil money
penalties], or assessments that occur during the term of the bond.” 42 C.F.R.

§ 424.57(d)(1)(ii), (4), (5)(emphasis added). “The term of the initial surety bond must be
effective on the date that the application is submitted to the NSC [National Supplier
Clearinghouse, a Medicare contractor].” 42 C.F.R. § 424.57(d)(2)(emphasis added).

The regulations provide that failure to submit a surety bond as required is grounds for
revocation of a supplier’s billing privileges. 42 C.F.R. § 424.57(d)(4)(ii)(B).

Section 424.57(d)(11) further makes abundantly clear the consequences of a failure to
maintain a compliant surety bond:

CMS revokes the DMEPOS supplier’s billing privileges if an enrolled supplier
fails to obtain, file timely, or maintain a surety bond as specified in this subpart
and CMS instructions. Notwithstanding paragraph (e) of this section, the
revocation is effective the date the bond lapsed and any payments for items
furnished on or after that date must be repaid to CMS by the DMEPOS
supplier.

The regulations also provide more generally that CMS “will revoke a supplier’s billing
privileges if it is found not to meet” the supplier standards or other requirements in
section 424.57(c). 42 C.F.R. § 424.57(e) (formerly § 424.57(d)). |

' Paragraph (e) of section 424.57 was previously designated paragraph (d) and was
redesignated by the rulemaking that imposed the surety bond requirements at paragraph
(d); however, the redesignations have not yet been incorporated into the Code of Federal
Regulations. See 42 C.F.R. Ch. IV § 424.57, Editorial Note (Oct. 1, 2009). References
are to the regulation as redesignated.
A supplier that has had its billing privileges revoked is “barred from participating in the
Medicare program from the effective date of the revocation until the end of the re-
enrollment bar. The re-enrollment bar is a minimum of 1 year, but not greater than 3
years depending on the severity of the basis for revocation.” 42 C.F.R. § 424.535(c).

CMS may at any time require a DMEPOS supplier to show compliance with the surety
bond requirement. 42 C.F.R. § 424.57(d)(12).

II. Background

By letter received May 20, 2010, Petitioner requested review of the Medicare hearing
officer’s reconsideration decision dated April 23, 2010 (HR).” The hearing officer found
Petitioner noncompliant with supplier standard 26. The hearing officer stated in the
reconsideration decision:

Lloyd A. Malsin, president of Clairmont Nichols of 1 Ave Inc. in his
reconsideration request stated in pertinent part, “For some reason we did
not receive information regarding the need for a surety bond and have been
compliant except for the bond. We have now secured the necessary bond
effective 12-3-2009, Policy #70836196 through CNA Ins Co.” To educate
the supplier community, information was posted on the NSC Web site-

> With its hearing request letter, Petitioner submitted: a copy of the reconsideration
decision; a copy of an email from Mr. Malsin to Colleen Jais, the Medicare Hearing
Officer, indicating that he sent the required surety bond to Ms. Jais; a copy of the
acknowledgment of request for reconsideration decision by hearing officer; a copy of a
surety bond with an effective date of December 3, 2009; a copy of a letter dated
November 23, 2009 from Bollinger, Inc., an insurance agency, to Mr. Malsin regarding
the renewals of two insurance policies; a copy of an invoice for a new surety bond
effective December 3, 2009; a memorandum dated December 15, 2009 to Petitioner from
Bollinger, Inc., indicating the surety bond for durable medical equipment effective
December 3, 2009 is attached; a copy of the surety bond indicated in the memorandum
dated December 15, 2009; a letter from Palmetto GBA — National Supplier
Clearinghouse (NSC), a CMS contractor, dated August 12, 2009 indicating re-enrollment
is updated for Clairmont; a letter from NSC dated July 8, 2009 requesting additional
information that was missing from Clairmont’s re-enrollment application; a letter from
NSC dated June 8, 2009 notifying Clairmont that it is required to submit a re-enrollment
application at this time and enclosed a preprinted CMS 8558S form; a copy of the CMS
855S form and attachments; a copy of Clairmont’s letter requesting a corrective action
plan and/or reconsideration; a copy of Clairmont’s fax log for a facsimile transmission
sent on November 17, 2009; and a copy of page 2 of form 10-E DMEPOS including
indemnity information and signed November 23, 2009 by Mr. Malsin.
www.palmettogba.com/nsc regarding the surety bond requirements starting
January 2009. On August 21, 2009 the NSC notified providers whose
supplier file did not reflect the required surety bond.

Sent to this hearing officer from Clairmont Nichols of 1“ Ave Inc. is a copy
of their surety bond with an effective date of December 3, 2009. However,
Clairmont Nichols of 1“ Ave Inc. has passed the allotted time to satisfy the
requirement for a surety bond, which was October 2, 2009, as noted in the
terms set forth for the bond, mandated by 42 CFR 424.57(c) and 42 CFR
424.57(d). The supplier Clairmont Nichols of 1° Ave Inc., failed to obtain
their surety bond in the time frame allotted; consequently the NSC revoked
their billing privileges appropriately.

The appeal was assigned to me pursuant to 42 C.F.R. § 498.44(a). I issued an order on
May 24, 2010, acknowledging receipt of Petitioner’s hearing request and setting a
briefing schedule for the parties. In accordance with my order, CMS filed a motion for
summary disposition accompanied by CMS exhibits 1 through 15. My staff attorney
telephoned Petitioner after not receiving a response to CMS’s motion, in order to confirm
that Petitioner received CMS’s motion. Petitioner indicated at that time that it did receive
CMS’s motion but had no additional information to submit.

III. Issue

The issue in this case is whether CMS is entitled to summary disposition on the ground
that the undisputed facts demonstrate that the revocation of Petitioner’s Medicare billing
privileges was legally authorized.

IV. Applicable Standard

CMS’s motion made clear that the disposition it sought was in the nature of summary
judgment. CMS Br. at 11-12. The Board stated the standard for summary judgment as
follows.

Summary judgment is appropriate when the record shows that there is no
genuine issue as to any material fact, and the moving party is entitled to
judgment as a matter of law. . .. The party moving for summary judgment
bears the initial burden of showing that there are no genuine issues of
material fact for trial and that it is entitled to judgment as a matter of

law. ... To defeat an adequately supported summary judgment motion, the
non-moving party may not rely on the denials in its pleadings or briefs, but
must furnish evidence of a dispute concerning a material fact — a fact that, if
proven, would affect the outcome of the case under governing law. . . . In
determining whether there are genuine issues of material fact for trial, the
reviewer must view the evidence in the light most favorable to the non-
moving party, drawing all reasonable inferences in that party’s favor.

Senior Rehab. & Skilled Nursing Ctr., DAB No. 2300, at 3 (2010) (citations omitted).
The role of an ALJ in deciding a summary judgment motion differs from the ALJ’s role
in resolving a case after a hearing. The ALJ should not assess credibility or evaluate the
weight of conflicting evidence. Holy Cross Vill. at Notre Dame, Inc., DAB No. 2291, at
5 (2009).

V. Findings of Fact, Conclusions of Law, and Discussion

I make a single finding and conclusion set out in bold and italics below, followed by my
supporting discussion:

CMS was authorized to revoke Petitioner’s billing privileges based on
undisputed evidence that Petitioner had not obtained a surety bond by October
2, 2009 as 42 C.F.R. § 424.57(c)(26) and (d) required.

As noted above, the statute states that the Secretary shall not issue or renew a DMEPOS
supplier number “unless the supplier provides the Secretary on a continuing basis . . .
with a surety bond... .” 42 U.S.C. § 1395m(a)(16)(B).

This requirement for continuous compliance is implemented in the regulations that the
Secretary issued. The introductory language of 42 C.F.R. § 424.57(c) states, in pertinent
part, “[t]he supplier must meet and must certify in its application for billing privileges
that it meets and will continue to meet” the supplier standards listed within. Those
standards include section 424.57(c)(26) (supplier standard 26), which states that a
supplier “[m]ust meet the surety bond requirements specified in paragraph (d) of this
section,” as of October 2, 2009. It follows that a supplier must meet the surety bond
requirements specified in paragraph (d) on a continuing basis starting October 2, 2009.
Consistent with this, the preamble to the final rule on appeals of CMS enrollment
determinations states that CMS believes that “all providers and suppliers must meet and
maintain all Federal and State requirements for their provider or supplier type to enroll or
maintain their enrollment in the Medicare Program.” 73 Fed. Reg. 36,448, 36,452 (June
27, 2008).

In its hearing request letter, Petitioner admits that it was not in compliance with the surety
bond requirement, but asserts that, at the time of the hearing request, it had achieved
compliance because it obtained a surety bond with an effective date of December 3, 2009
as soon as it was notified that a surety bond was required. HR. Petitioner explains that it
submitted an application to re-enroll in June 2009, as required by the Medicare
6

regulations for the three-year revalidation,’ and none of the correspondence regarding the
re-enrollment notified Petitioner of the surety bond requirement. HR.

The issue before me is not whether Petitioner has belatedly achieved compliance with the
surety bond requirement, but whether CMS correctly found that, at the time of the
revocation, Petitioner was not in compliance and that CMS therefore had authority to
revoke Petitioner’s enrollment. Petitioner does not dispute that it did not have a
compliant surety bond at the time of the revocation. A belatedly obtained surety bond
does not satisfy the statutory and regulatory purpose of providing continuous protection
to the Medicare program from the risk of loss due to a supplier’s fraud or abuse. That a
surety was later willing to undertake to cover Petitioner does not mean that CMS was
protected from fraud or billing errors by Petitioner continuously from October 3, 2009 to
December 3, 2009.4

In regard to notification of the surety bond requirement during Petitioner’s July 2009 re-
enrollment correspondence, a surety bond was not yet required at that time. Therefore, I
find no relevance to the Petitioner’s arguments that the requirement was not mentioned in
the correspondence. The requirement that Petitioner submit a copy of a surety bond arose
not from the regular three-year revalidation, but from the change in regulations adding
the surety bond requirement. See Baker’s Bay Nursing Ass’n, DAB CR2177, at 9-10
(2010). The request amounted to an off-cycle revalidation under section 424.515(d),
empowering CMS to request information demonstrating compliance with applicable
requirements at any appropriate time.

In regard to notification of the surety bond requirement in general, the Hearing Officer
stated:

> A DMEPOS supplier must resubmit and recertify the accuracy of its enrollment
information every three years. 42 C.F.R. §§ 424.515 and 424.57(f).

* CMS goes further in its brief suggesting that permitting Petitioner to comply ona
retroactive basis would “undermine legislative intent and regulatory mandate.” CMS Br.
at 13. CMS’s own regulations, however, do allow for the possibility of achieving
compliance belatedly by permitting suppliers who receive a revocation notice to submit
corrective action plans (CAPs) (within 30 days) showing that they are now in compliance
and/or to seek reconsideration (within 60 days). 42 C.F.R. §§ 424.535(a)(1); 498.22.
Petitioner sought both. CMS Ex. 8. Its CAP was rejected on January 26, 2009 because it
did not include the required surety bond. CMS Ex. 9. Petitioner did not dispute that,
although the effective date of the bond was December 3, 2009, the bond was not
submitted to CMS or NSC until Petitioner sent it to the NSC Hearing Officer on March 3,
2010. The rejection of a CAP is not appealable and the reconsideration, which is
appealable, determines whether the Petitioner was in compliance at the time of the
revocation not whether compliance was achieved later.
To educate the supplier community, information was posted on NSC Web
site —- www.palmettogba.com/nsc regarding the surety bond requirements
starting January 2009. On August 21, 2009 the NSC notified providers
whose supplier file did not reflect the required surety bond.

Reconsideration Decision dated April 23, 2010, at 2. CMS further asserts that NSC
notified suppliers of the surety bond requirement in its newsletters to existing suppliers.
CMS Br. at 16. CMS also maintains that NSC sent all suppliers that had not yet met the
surety bond requirement a letter dated August 21, 2009, notifying suppliers that their
billing privileges would be subject to revocation if they failed to submit proof of a surety
bond by October 2, 2009. ° CMS Br. at 12; CMS Ex. 6. For purposes of summary
judgment, however, I accept the Petitioner’s factual assertion that it did not receive actual
notice that the surety bond requirement applied to it until the revocation notice dated
November 9, 2009 and that Petitioner thereafter moved quickly to acquire a surety bond.
HR; CMS Ex. 7, at 1.

Regardless, as the Supreme Court has stated, participants in the Medicare program have a
“duty to familiarize [themselves] with the legal requirements for cost reimbursement.”
Heckler v. Cmty. Health Servs. of Crawford County, Inc., 467 U.S. 51, 64 (1984).
Petitioner’s failure to realize that it was subject to the surety bond requirement is no
ground for relief. As a Medicare supplier, Petitioner was charged with knowing the
requirements for maintaining enrollment. See Waterfront Terrace, Inc., DAB No. 2320,
at 7 (2010), citing Heckler, 467 U.S. at 63-64 (‘As a participant in the Medicare program,
respondent had a duty to familiarize itself with the legal requirements” of the program);
see also Manor of Wayne Skilled Nursing & Rehab., DAB No. 2249, at 10-11 (2009) and
Regency on the Lake, DAB No. 2205, at 5-6 (2008) (noting facilities participating in
Medicare have constructive notice of regulations). The law expressly holds Medicare
suppliers responsible for knowing the regulatory requirements and the information in the
accompanying preambles published in the Federal Register and treats such publication as
constructive notice whether or not the supplier actually was aware of the requirements.
42 CFR. § 411.406(e)(2).

Therefore, even accepting that Petitioner did not receive any of the letters or newsletters
to existing suppliers announcing the requirement and did not visit any of the NSC or
CMS websites with information about DMEPOS surety bonds, I cannot conclude that
Petitioner lacked legal notice of a requirement in a regulation published in the Federal
Register. The preamble to the regulation states in regard to 42 C.F.R. § 424.57(d)(2):
“Twle specify that, unless a DMEPOS supplier meets the requirements for an exception in

> However, I give this evidence of notice no weight because this letter is addressed to
supplier types subject to both the accreditation and surety bond requirements. CMS Ex. 6
(“Although certain supplier types are exempt from the surety bond and/or the
accreditation requirement, our records indicate that your supplier type is subject to

both ....” (emphasis added)). Moreover, CMS has not submitted any evidence that this
letter was sent to Petitioner.

§ 424.57(d)(15), the enrolling Medicare DMEPOS supplier or the Medicare-enrolled
DMEPOS supplier must obtain a surety bond for each National Provider Identifier (NPI)
from an authorized surety.” 74 Fed. Reg. 165, 185-86 (Jan. 2, 2009). Petitioner does not
claim that it met the requirements in section 424.57(d)(15). The applicable regulations
thus unambiguously required Petitioner to have in place a compliant surety bond by
October 2, 2009. Petitioner cannot excuse the failure to comply on the basis that it did
not receive individualized notice that the requirement was applicable to it.

Petitioner also asserts that it received misleading information in consulting NSC while
completing a re-enrollment application for the three-year revalidation in June 2009.
Thus, Petitioner asserts:

Referring to section 12 [of the re-enrollment application] and in regard to
surety bond we called the phone number indicated [on the application] and
explained that we do not accept assignment of any services. We bill so as
to get reimbursement for [M]edicare members. We were told to check box
on section A of page 26 indicating we were not required to obtain surety
bond and we proceeded to section 13 as indicated. Again we were told by
Palmetto GBA that the bond was not necessary as we were not billing
[M]edicare on our own behalf.

HR.

It is well-established that the government cannot be estopped from applying the law or
forced to expend federal funds based on inaccurate representations by its agents absent, at
the least, a showing of affirmative misconduct about which Petitioner makes no
allegations. Office of Personnel Mgmt. v. Richmond, 496 U.S. 414 (1990); Heckler, 467
U.S. 51; Schweiker v. Hansen, 450 U.S. 785 (1981); Shenandoah Prof’! Stds. Review
Found., DAB No. 652 (1985). I therefore need not reach whether all of the traditional
elements of estoppel, including reasonable reliance, were met. As I noted earlier,
though, a core element would appear not to present, since the information about no surety
bond being required appears to have been accurate at the time it was given to Petitioner.

The regulation at 42 C.F.R. § 424.535 plainly authorizes CMS to revoke a supplier’s
Medicare enrollment whenever the supplier fails to maintain compliance with enrollment
requirements. Section 424.535(a)(1) provides that a supplier’s billing privileges are
revoked when the supplier “is determined not to be in compliance with the enrollment
requirements described in this section, or in the enrollment application applicable for its
provider or supplier type, and has not submitted a plan of corrective action as outlined in
part 488 of this chapter.”

In summary, it is an enrollment requirement that “[t]he supplier must meet and must
certify in its application for billing privileges that it meets and will continue to meet” the
supplier standards in 42 C.F.R. § 424.57(c), which includes the surety bond requirement
of section 424.57(c)(26). CMS may revoke the supplier’s Medicare billing privileges if
the supplier fails to meet any of these standards. 42 C.F.R. § 424.57(e);
18661CPayday.com, L.L.C., DAB No. 2289, at 13 (2009) (“[FJailure to comply with even
one supplier standard is a sufficient basis for revoking a supplier’s billing privileges.”).
The regulatory language is plain. A supplier must comply with all standards, or CMS
will revoke its billing privileges.

I therefore conclude that the undisputed facts establish that CMS acted within its
regulatory authority to revoke Petitioner’s Medicare supplier number, because Petitioner
was not compliant with the surety bond requirements of 42 C.F.R. § 424.57(c)(26) and
(d) by October 2, 2009.

VI. Conclusion

For the reasons explained above, I grant summary judgment in favor of CMS and sustain
the revocation of Petitioner’s enrollment in Medicare.

/s/

Leslie A. Sussan
Board Member