Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Carroll County Nursing and Rehabilitation Center
(CCN: 04-5295),

Petitioner
Vv.
Centers for Medicare and Medicaid Services.
Docket No. C-09-312
Decision No. CR2220
Date: August 13, 2010
DECISION

Petitioner, Carroll County Nursing and Rehabilitation Center, was not in substantial
compliance with Medicare program participation requirements from November 3, 2008
through December 30, 2008, due to violations of 42 C.F.R. §§ 483.20(b), 483.25(h) and
483.75, during a November 7, 2008 survey. A civil money penalty (CMP) of $5,050 per
day for the period starting November 3, 2008 and continuing through November 5, 2008,
for the three immediate jeopardy deficiencies, and a $600 per day CMP for the period of
November 6, 2008 and continuing through December 30, 2008, due to Petitioner’s
continued noncompliance, for a total CMP of $48,150, are reasonable. I do not find
reasonable a $5,050 per day CMP being assessed against Petitioner for immediate
jeopardy level deficiencies for the period November 6 through 7, 2008.

I. Background

Petitioner is a dually participating nursing care facility located in Berryville, Arkansas.
Petitioner participates in the Medicare program. Sections 1819 and 1866 of the Social
Security Act (Act) and implementing regulations at 42 C.F.R. Parts 483 and 488, govern
its participation in Medicare. Its hearing rights in this case are governed by 42 C.F.R.
Part 498.

The Arkansas Department of Human Services (state survey agency) for compliance with
Medicare participation requirements on November 7, 2008 (November survey) and then
was resurveyed December 29, 2008 through January 1, 2009 (January survey) to
determine whether Petitioner had implemented its plan of correction and achieved
substantial compliance. During the November 7 survey, Petitioner was found to not be in
substantial compliance with 12 participation requirements — nine non-immediate jeopardy
deficiencies and three immediate jeopardy level deficiencies.” CMS Exhibit (Ex.) 2.
CMS determined to impose sanctions to remedy Petitioner’s alleged noncompliance.*
During the January survey Petitioner was found to still be in substantial noncompliance
with participation requirements and additional remedies were imposed by CMS. CMS
Ex. 1, at 7. Petitioner requested a hearing by letter dated March 11, 2009, challenging
only the findings and related remedies for the immediate jeopardy level deficiency tags
F272 (violation of 42 C.F.R. § 483.20(b) (Comprehensive assessment)), F323 (violation
of 42 C.F.R. § 483.25(h) (Accidents)), and F490 (violation of 42 C.F.R.

§ 483.75 (Administration)). The case was assigned to me for a hearing, related
proceedings, and a decision.

On June 24, 2009, CMS moved for partial summary disposition on the nine non-
immediate jeopardy deficiencies and related remedies that Petitioner did not appeal from
both the November and January surveys. Petitioner filed a response on July 14, 2009 to
CMS’s motion with attachments which included the three CMS notice letters it had
received. Petitioner filed its prehearing exchange on August 4, 2009, which included 24
proposed exhibits that it identified as P. Ex. 1 — P. Ex. 24. CMS filed its prehearing
exchange on August 4, 2009, which included 34 proposed exhibits that it identified as
CMS Ex. 1 — CMS Ex. 34. On August 11, 2009, Petitioner filed a subpoena request. On

' Petitioner is a nursing home facility both under the federal Medicare program (as an
SNF) and the state Medicaid program (as an NF) and is referred to as a “dually
participating facility.” See 42 C.F.R. § 488.301. SNFs are governed by section 1819 and
1866 of the Act and NFs are subject to section 1919 of the Act.

> The November survey findings include nine deficiency tags at the non-immediate
jeopardy level and related remedies which Petitioner is not appealing and which are
administratively final (see October 7, 2009 Ruling), and three immediate jeopardy level
deficiencies alleging violations of 42 C.F.R. §§ 483.20(b) (Tag F272), 483.25(h) (Tag
F323), and 483.75 (Tag F490).

* The sanctions were set forth in CMS notice letters dated December 8, 2008, January 14,
2009, and January 20, 2009. CMS Ex. 1.
August 24, 2009, Petitioner filed objections to several of CMS’s proposed exhibits. On
September 15, 2009, the parties each filed their prehearing briefs.

On September 17, 2009, a telephone prehearing conference was convened with the
parties to discuss proceedings in this matter and my rulings on (1) CMS’s motion for
partial summary disposition, and (2) Petitioner’s document production and subpoena
requests, objected to by CMS, and Petitioner’s response to CMS’s objections. During the
conference Petitioner confirmed that it was not challenging the nine non-immediate
jeopardy level findings resulting from the November survey of its facility, and all the
deficiency findings from the January survey. On October 7, 2009, I issued a ruling
affirming the unchallenged deficiencies and related remedies as administratively final,
and addressing Petitioner’s objections to CMS’s proposed exhibit. I incorporate that
ruling into this decision. See Ruling issued October 7, 2009; see also Petitioner's
Response dated July 14, 2009 (where Petitioner concedes that the unchallenged
deficiencies and related remedies are administratively final). Having found that
Petitioner raised a genuine issue of material fact as to the interpretation of the CMS
notice letters pertaining to the CMP of $600 per day for the period from November 8,
2008 through December 30, 2008 which stemmed from the November survey, I directed
the parties to present evidence to support their position regarding this factual issue. On
October 12, 2009, Petitioner filed an objection to my ruling on its request for document
production and, on October 21, 2009, I issued an order overruling Petitioner’s objection.

On January 14, 2010, Petitioner notified my office, by electronic correspondence, that it
wished to waive its right to an in-person hearing, and requested that the in-person hearing
be vacated. It further requested that I decide this matter on the written submissions of the
parties. A conference call was convened with the parties on January 15, 2010, to discuss
Petitioner’s email waiver notification. During the conference call, Petitioner reaffirmed
its request to waive an in-person hearing, and both parties advised me that testimony

rom witnesses would not be necessary. The parties asked that I decide the matter on the
written record. The parties’ request was granted and Petitioner was directed to file a
ormal written waiver. 42 C.F.R. § 498.66. An order was issued on January 20, 2010,
providing the parties with filing deadlines for the submission of their final briefs and
other supporting documents.

On January 28, 2010, Petitioner filed its formal written request waiving its right to an in-
person hearing, as well as its objections to 22 of CMS’s proposed exhibits. On February
4, 2010, CMS filed a request to present additional evidence but withdrew its request on
February 9, 2010. On February 5, 2010, the parties filed their Joint Stipulations of Fact
(Jt. Stip.), and on February 9, 2010, CMS filed its brief (CMS Brief), amended list of
proposed exhibits and witnesses. In response to Petitioner’s objections to CMS’s
proposed exhibits, CMS withdrew all of the exhibits Petitioner objected to, except for

CMS Exs. 7 and 14.* CMS did not file any objections to Petitioner’s exhibits. Petitioner
filed its brief (P. Brief) on March 31, 2010. CMS’s reply (CMS Reply) was filed on May
5, 2010.

I determine that the two exhibits proposed by CMS (CMS Exs. 7 and 14), and objected to
by Petitioner, are relevant and will be admitted. CMS Ex. 7 contains records related to
Resident 6, and CMS Ex. 14 contains records related to Resident 19’s records. Since
both of these residents are named in deficiency tags F323 and F490, the documents
contained in the exhibits are important for my consideration in reviewing the
reasonableness of CMS’s determination to impose a $600 per day CMP against Petitioner
for continued noncompliance with participation requirements at the non-immediate
jeopardy level for the period of November 8, 2008 and running to December 30, 2008.
Petitioner’s objections are therefore overruled, and I admit into the record CMS Exs. 1-4,
7, 10, 14, 15, 18-22, 33, 34, and P. Exs. 1-24.

CMS’s amended witness list, filed February 9, 2010, listed 10 witnesses; however, CMS
did not provide sworn affidavits for any of the listed witnesses.” Petitioner offered as
exhibits nine sworn affidavits.°

This decision is based on the complete record, which includes the parties’ arguments,
written submissions, and exhibits admitted into the record.

+ Petitioner objected to CMS proposed exhibits 5-9, 11, 12-14, 16, 17, 19, 20, 22, 23-32.
CMS withdrew CMS proposed exhibits 5, 6, 8, 9, 11-13, 16, 17, 23-32.

* CMS’s amended witness list included Susan LeBlanc, R.N. and Daniel McElroy, R.N.,
both from CMS’s Division of Medicaid and State Operations; surveyors Kathy Mitchell,
R.N., Joleen Newsbith, R.N., and Vicky Cummings, R.N.; and, from the state survey
office, Johanna Siebert, Shey Mclish, Pharmacist, Pat Ford, Dionne Hayes, R.N.,
Deborah Crows, R.N., and Linda Van Scotter.

° Petitioner offered the affidavits of Shannon Davidson, Director of Nursing (DON) (P.
Ex. 11); Anna Fultz, Certified Nurse Aide (CNA) (P. Ex. 12); Debra K. Parton, Licensed
Practical Nurse (LPN) (P. Ex. 13); Kathy Reichenberg, LPN (P. Ex. 14); Melody
Stephens, LPN (P. Ex. 15); Derrick Williams, CNA (P. Ex. 16); Shannon Shields, CNA
(P. Ex. 17); April Chaney, CNA (P. Ex. 19); Sheila McCutcheon, Administrator (P. Ex.
20). Petitioner also presented two documents titled as affidavits, but which were neither
signed nor sworn to: (1) affidavit of Vicki Smith, CNA (P. Ex. 18); and (2) John Michael
Storm, III, President of Storm Medical Equipment Company, Inc, a distributor of health
care equipment (P. Ex. 21).
II. Burden of Proof

The standard of proof or quantum of evidence required is a preponderance of the
evidence. CMS has the burden of coming forward with the evidence and making a prima
facie showing of a basis for imposition of an enforcement remedy. Petitioner bears the
burden of persuasion to show by a preponderance of the evidence that it was in
substantial compliance with participation requirements or any affirmative defense. See
Batavia Nursing & Convalescent Inn, DAB No. 1911 (2004); Batavia Nursing &
Convalescent Ctr., DAB No. 1904 (2004), aff'd, Batavia Nursing & Convalescent Ctr. v.
Thompson, 129 F. App’x 181 (6" Cir. 2005); Emerald Oaks, DAB No. 1800 (2001);
Hillman Rehab. Ctr., DAB No. 1611 (1997), aff'd, No. 98-3789, 1999 WL 34813783
(D.N.J. May 13, 1999); Cross Creek Health Care Ctr., DAB No. 1665 (1998).

Petitioner challenges the allocation of the burden of proof and relies on the Eight Circuit
decision in Grace Healthcare of Benton v. Dep’t of Health & Human Servs., 589 F.3d
926 (8" Cir. 2009), amended by 603 F.3d 412 (8" Cir. 2009), to support its claim that
placing the burden of proof to show substantial compliance on the facility violates the
Administrative Procedure Act (APA). Petitioner asks that I adhere to the requirements of
the APA and place the burden of proof on CMS. P. Brief at 1, 2. Petitioner’s reliance on
the Grace decision is misplaced. The Court did not reassign the burden of persuasion
and, in fact, expressly stated that the burden of proof issue had not been raised. Grace
Healthcare of Benton, 589 F.3d at 933 n.7. Although the Court discussed the Hillman
decision, it declined to address the Departmental Appeals Board’s (Board) allocation of
the burden of proof. The Court’s discussion of Board decisions addressing the burden of
proof was confined to a footnote and, as such, constitutes dicta.

I allocate the burden of proof in accordance with the Board’s precedent and Petitioner has
not advanced any reason for me to allocate the burden in any other way.

III. Issues, Findings of Fact, and Conclusions of Law
A. Issues
The issues in this case are whether:
1. Petitioner was in violation of 42 C.F.R. §§ 483.20(b) (Tag F272),
483.25(h) (Tag F323), and 483.75 (Tag F490) during the November 7,
2008 survey;

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

3. The remedies imposed were reasonable.
6

B. Findings of Fact and Conclusions of Law
I make the following findings of fact and conclusions of law (Findings).

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

For the reasons discussed below, I find that CMS presented evidence sufficient to
establish a prima face case that Petitioner was not complying with Medicare participation
requirements and that Petitioner’s violation of 42 C.F.R. §§ 483.20(b), 483.25(h); and
483.75 was at the immediate jeopardy level for the findings related to use of the Vander-
Lift II for resident transfers. Additionally, I find that Petitioner continued to not be in
compliance with the participation requirements of 42 C.F.R. §§ 483.25(h) and 483.75 at
the non-immediate jeopardy level through December 30, 2008.

a. Petitioner failed to comply substantially with the requirement of
42 C.F.R. § 483.20(b)(Comprehensive assessments, Tag F272),
at a scope and severity level of “K”.

The regulation at 42 C.F.R. § 483.20(b) states, in pertinent part:

Comprehensive assessments — (1) Resident assessment instrument. A
facility must make a comprehensive assessment of a resident’s needs, using
the resident assessment instrument (RAJ) specified by the State. .. . The
assessment process must include direct observation and communication
with the resident, as well as communication with licensed and nonlicensed
direct care staff members on all shifts.

The State Operations Manual (SOM) for tag F272 states that the assessment requirement
is an on-going process requiring the facility to identify the resident’s functional capacity
and health status.’ CMS maintains that Petitioner was found to not be in compliance
with

7 State Operations Manual, CMS Pub. 100-07, App. PP — Guidance to Surveyors for
Long Term Care Facilities (tag F272) (accessible at
http://www.cms.hhs.gov/Manuals/IOM/list.asp), Although the SOM does not have the
force and effect of law, the provisions of the Act and regulations interpreted clearly do
have such force and effect. State of Indiana by the Indiana Dep’t of Public Welfare v.
Sullivan, 934 F.2d 853 (7 Cir. 1991); Northwest Tissue Ctr. v. Shalala, | F.3d 522 (7"
Cir. 1993). Thus, while the Secretary may not seek to enforce provisions of the SOM, the
Secretary may seek to enforce the provisions of the Act or regulations as interpreted by
the SOM.

the assessment requirement because it failed to assess the needs of Residents 2 and 9 (R2,
R9) as to use of a mechanical lift (also referred to as a Vander-Lift II or Hoyer lift). CMS
argues that these failures were cited as immediate jeopardy level deficiencies. Petitioner
maintains that R2 and R9 were assessed for suitability for the Hoyer lift and for transfer.
P. Brief at 10.

1. Findings related to R2.

The parties do not dispute that on October 8, 2008, during a transfer from the resident’s
geri-chair to her bed, a Vander-Lift II was used and R2 is reported as having grabbed the
lift with her hands and repeatedly shook the lift during the transfer. CMS Ex. 4, at 15.

R2 then proceeded to fall, sustaining a fracture of her right hip. /d. at 21. During this
transfer, one staff person was transferring R2 with the lift, without any assistance. CMS
Ex. 4, at 15-16. Petitioner does not dispute that R2 required the assistance of two or more
persons for transfer. P. Brief at 10.

CMS asserts that Petitioner failed to produce evidence that it assessed R2’s transfer needs
which included: (1) suitability for transfer; (2) the proper transfer technique to use with
the resident; (3) the appropriate sling size to be used with R2; and (4) the number of staff
necessary to transfer the resident using a mechanical lift. CMS Brief at 9. Petitioner
disputed this allegation, stating that R2 was assessed for suitability for the Hoyer lift and
or transfer. P. Brief at 10.

A review of the evidence before me shows that R2 was admitted to Petitioner’s facility in
April of 2007, and is noted at the time of the incident at issue to have diagnoses that
include Alzheimer’s Disease, osteoporosis, and fractures of the left tibia fibula and right
ip. CMS Ex. 4, at 1. R2’s March 14, 2008 Minimum Data Set assessment (MDS) notes
er as having moderately impaired cognitive skills for daily decision-making. She also
required assistance of two or more persons for transfers and had to be lifted manually and
mechanically for transfers. /d. at 42-44. Her April 4, 2007 plan of care (POC), which
was updated on September 12, 2008, notes that the resident: had the potential for falls,
ad decreased physical abilities, had a tendency to move during transfers; and was
noncompliant with directions. /d. at 67. R2’s last activities of daily living (ADL)
Functional/Restorative Assessment and Progress (ADL) evaluation, completed
September 12, 2008 (prior to her October 8, 2008 fall), notes her as being dependent for
transfers, bed mobility, and positioning. I note, however, under the adaptive equipment
category, although there is an area where the use of a Hoyer lift with a resident should be
checked, R2’s assessment does not indicate that a Hoyer lift was to be used for transfers.
Id. at 63 (see also March 14, 2008 and June 13, 2008 ADL assessments (neither
document the Hoyer lift or any type of mechanical lift could be used for R2). Although
R2’s March MDS notes that she was assessed for lifts, and required either manual or
mechanical lifts for transfers, there is no indication in R2’s ADL evaluation that a Hoyer
lift was to be used. Rather, on the ADL evaluation, the section noting that a resident

requires a Hoyer lift for transfers is not checked off. Jd. at 44. I find that the information
in R2’s record is inconsistent as to her transfer needs and Petitioner has not provided any
argument or evidence to explain this inconsistency.

CMS states that the manufacturer’s instructions for the Vander-Lift II, which is the lift
Petitioner uses at its facility for mechanical transfers of residents, provide that staff assess
residents to determine which are suitable for transfer, the transfer techniques to be used,
the appropriate sling size to use when transferring a resident, and the number of staff
required for the transfer. CMS Ex. 18, at 22. CMS further states that Petitioner did not
have a policy in place addressing mechanical lifts, and CMS did not cite Petitioner solely
because it failed to follow the manufacturer’s instructions; rather, Petitioner was cited
due to a combination of Petitioner’s failure to follow the manufacturer’s instructions and
Petitioner’s failure to assess the two residents requiring mechanical transfers, which led
to the determination that Petitioner was not in compliance with regulatory requirements.
CMS Brief at 10.

Petitioner states it had a facility-wide policy that all transfers using a mechanical lift
required the assistance of two staff members. P. Brief at 6. Petitioner claims that a lapse
occurred that resulted in the unforeseeable activities by the staff member involved in the
transfer of R2 on October 8, 2008, without additional assistance. The thrust of
Petitioner’s argument is that the staff member acted against facility policy when lifting
R2 without additional assistance and that this incident is insufficient to claim a “systemic
problem” that justifies an immediate jeopardy level citation. /d. At 13-14. I find that the
evidence before me does not support Petitioner’s assertions. Ms. Fultz, the sole certified
nursing assistant (CNA) who was involved with the transfer of R2 on October 8, 2008,
admitted in her sworn affidavit, which Petitioner offered as P. Ex. 12, to having observed
other CNAs “do a solo lift of Resident 2 using the Vander lift.” P. Ex. 12 45. Based on
this testimony, it would appear that October 8, 2008 was not the first time staff at
Petitioner’s facility transferred R2 without the use of two or more persons. Moreover,
Petitioner failed to offer any evidence of its facility-wide policy in these proceedings.

Petitioner also failed to assess R2 as to the appropriate size sling necessary to ensure she
was safety transferred. According to the SOD, on November 3, 2008, the Assistant
Director of Nursing (ADON) was interviewed. She informed the surveyor that two
weeks prior, while she was present at the facility, R2 had slid out of a lift because staff
ad used too large a sling. CMS Ex. 2, at 15. The SOD also notes that when the Director
of Nursing (DON) was interviewed on November 4, 2008, she admitted that the facility
did not have assessments documenting the use of the Vander-Lift Il. When asked where
the documentation was for the CNA to look at to determine the proper sling size, the
DON stated that the CNAs could go to CNA 5. The SOD further notes that, when
surveyors asked where CNAs could find the information if CNA 5 was not available, the
DON responded, “[w]e don’t have it documented anywhere, it isn’t rocket science.”
CMS Ex. 2, at 16. Petitioner concedes that there is no documented evidence of what size

sling was to be used by R2. P. Brief at 10. But, Petitioner claims that its CNA staff were
trained to determine proper sling size, and Petitioner’s restorative aide, April Chaney
(CNA 5), was available as a resource. P. Ex. 19. However, according to the SOD, when
the surveyor interviewed CNAs 1, 3, 6, and 7 on November 4, 2008, they informed the
surveyor that “there was no place they knew to look to know anything about size sling to
use, they just used what was there or guessed at the size, and they had not seen
assessments or did not know about what was on the Care Plan.” CMS Ex. 2, at 16.

Petitioner maintains that the statement of the ADON can not be relied upon because she
had no first hand knowledge as to the sling used by R2. In addition, she did not
participate in the investigation of the resident’s fall. Based on this, Petitioner asserts that
the ADON’s statement to the surveyors is not reliable. P. Brief at 13. Petitioner relies
on the affidavit of Anna Fultz, who was the CNA who transferred R2 on October 8, 2008,
stating that Ms. Fultz said that the sling used in R2’s transfer was “a little large,” and that
Ms. Fultz did not state that the sling was the wrong size or unsafe. P. Ex. 12. Petitioner’s
reliance on Ms. Fultz’s affidavit to help establish it was in compliance with the
participation requirement at issue here is misguided. A review of the affidavit shows that
Ms. Fultz admits that, in the past, she had observed other CNAs do a “solo lift of
Resident 2 using the Vander lift.” P. Ex. 12 95. She further admits that she performed
the lift on October 8, 2008, without assistance. Jd. § 7. She also states “the sling that I
used looked a little large, but not too much so.” Jd. § 8. It is clear that Ms. Fultz believed
she was using the wrong size sling for R2 when she was transferring the resident on
October 8, 2008.

I find that Petitioner has failed to rebut CMS’s showing, by a preponderance of the
evidence, that Petitioner failed to comprehensively assess R2’s transfer needs in order to
ensure her safety. Moreover, CMS has shown that R2 sustained actual harm as a result of
Petitioner’s failure, having sustained a fracture to her right hip resulting from the fall on
October 8, 2008. CMS Ex. 4, at 21.

2, Findings related to R9.

Neither party disputes the following facts. On November 4, 2008 at 2:55 PM, a surveyor
observed two staff (CNA | and CNA 2) perform a lift on R9 using the Vander-Lift II. Jt.
Stip. 45. Following the surveyor’s observation, immediate jeopardy was called at 5:20

PM that same day for deficiencies related to the use of the Vander-Lift II. Jt. Stip. 45, 6.

What is in dispute is whether Petitioner properly assessed the need of R9 as to use of
mechanical lifts during transfers; specifically, whether Petitioner properly assessed the
proper sling size to be used for R9’s transfers.

A review of R9’s medical record shows that her July 11, 2008 MDS notes her as being
dependent on the physical assistance of two persons for all ADLs. CMS Ex. 10, at 22-27.
Her April 27, 2007 POC, updated October 8, 2008, notes the resident’s need for the use
of a Hoyer lift for transfers. CMS Ex. 10, at 22. However, the SOD notes that while the
surveyor observed the transfer of R9 on November 4, 2008 at 2:55 PM, the staff stated
that the sling was too small for the resident. CMS Ex. 2, at 17. According to the SOD,
when CNA | was interviewed by the surveyor later that day, he stated that he was aware
that the sling was too small and admitted that he did not know about her care plan. CMS
Ex. 2, at 17.

Although CMS claims R9 was at risk for serious harm or injury, Petitioner insists that the
transfer was done successfully and that R9 was not placed in harm. P. Brief at 6.
Petitioner claims that the two staff persons who were involved in R9’s transfer on
November 4, 2008, felt rushed when observed by the surveyor and that the staff reported
to Petitioner that the surveyor was “angry or upset.” P. Exs. 16 and 17. Petitioner states
that “CNA #1 testified that he did not tell the surveyor that the sling was too small, but
instead responded that the sling was a size small.” P. Brief at 6; P. Ex. 16. I find
Petitioner’s argument unavailing. Whether the sling was too small, or a size small has
the same result, it did not properly fit R9 and clearly placed her at risk for serious harm or

injury.

The evidence before me strongly supports the inference that Petitioner’s staff who are
tasked with doing resident transfers on a daily basis, were not knowledgeable as to how
to assess a resident for the proper sling size. Relying on one staff member, CNA 5, is not
an answer as it is unlikely that she works 24-hour shifts and would be there at all times.
A systemic problem existed at Petitioner’s facility, which placed any resident in need of a
transfer at great risk of falling. CMS has established R2 sustained actual harm and also
risk of harm existed for R9. Any other resident at Petitioner’s facility who required a
transfer and did not have a properly fitting sling was also at risk of harm.

Petitioner has not overcome CMS’s showing that it was not in compliance with the
regulatory requirements at 42 C.F.R. § 483.20(b). R2’s assessments as to the need for a
Hoyer lift were inconsistently documented, and she was not assessed for the correct size
of the sling. With respect to R9, the record showed that she needed a Hoyer lift, but she
was not assessed for the correct size of the sling.

b. Petitioner failed to comply substantially with the requirement of
42 C.F.R. § 483.25(h) for R2 and R9 (Accidents, Tag F323), at
a scope and severity level of “K”.

The regulation at 42 C.F.R. § 483.25(h) requires:
Accidents. The facility must ensure that—

(1) The resident environment remains as free of accident hazards as
is possible; and
(2) Each resident receives adequate supervision and assistance
devices to prevent accidents.

CMS states that Petitioner was found to not be in compliance with the requirements
outlined at 42 C.F.R. § 483.25(h) because it failed to provide R2 and R9 with adequate
supervision and assistance devices to prevent accidents during transfers.

1. Findings related to R2.

The CNA involved in the transfer of R2 on October 8, 2008, Ms. Fultz, admitted in a
sworn affidavit that the sling “looked a little large.” Although Ms. Fultz attempts to
qualify her statement by saying “but not too much so,” it does nothing to negate the fact
that the sling used for the resident was the wrong size. P. Ex. 12 § 8. The sworn affidavit
from LPN Melody Stephens confirms that Ms. Fultz was aware that the sling she was
using with R2 at the time of the October 8 fall was too large. P. Ex. 1594. And, as
discussed earlier, Petitioner concedes that there is no documented evidence of what size
sling was to be used by R2. P. Brief at 10. I also note that Petitioner does not dispute
that R2 required the assistance of two or more people during transfers, nor does Petitioner
dispute that the resident’s POC noted that she was known to engage in unpredictable
behaviors, i.e. grabbing the bar or sling during transfer. Moreover, several of Petitioner’s
staff noted, when completing a questionnaire on April 1, 2009, regarding the resident’s
October 8 incident, that they were aware of R2’s grabbing behaviors. CMS Ex. 4, at 67;
P. Ex. 9, at 3, 4, 6.

I find that R2’s behavior of grabbing the bar or sling during her transfer on October 8,
2008, was foreseeable. I further find that R2 sustained actual harm as a result of
Petitioner’s failure. Accordingly, I conclude that CMS has established a prima facie case,
which Petitioner has failed to overcome by a preponderance of the evidence, that
Petitioner’s staff did not provide proper care and supervision when only one staff person
transferred R2.

2, Findings related to R9.

Petitioner’s staff admitted to not following the manufacturer’s instructions when they
ailed to use the correct sling size. CMS Ex. 2, at 17; CMS Ex. 18, at 22. CNA 1
admitted that because he and CNA 3 felt rushed, they used the sling that was already
under the resident from a previous shift, thus failing to assess the appropriateness of the
sling size for R9. P. Ex. 1697; P. Ex. 1795.

CMS has established that Petitioner’s staff did not provide proper care and supervision to
R9, when they failed to use the correct sling size to transfer her on November 4, 2008.
Thus, they placed R9 at risk of harm. Petitioner has not provided evidence to overcome
CMS’s showing. Accordingly, I find that Petitioner’s failure to assess R9 for the correct
size sling prior to use, contrary to the manufacturer’s instructions, was a violation of the
participation requirements at 42 C.F.R. § 483.25(h) and placed R9 at risk for harm.

c. Petitioner failed to comply substantially with the requirement of
42 C.F.R. § 483.25(h) for R6 and R19 (Accidents, Tag F323), at a
non-immediate jeopardy level of compliance.

Also during the course of the November survey, Petitioner was found to be in violation of
42 C.F.R. §§ 483.25(h) and 483.75 (cited at Tags F323 and F490), for deficiencies related
to resident smoking. The parties have agreed that even though the resident smoking-
related deficiencies are cited at Tags F323 and F490 which are identified as immediate
jeopardy level tags, the allegations related to the resident smoking deficiencies do not
constitute immediate jeopardy level deficiencies. Jt. Stip. § 8,9. In its brief Petitioner
addresses tags F323 and F490 regarding the smoking deficiencies, stating that it would
not pursue these smoking-related deficiencies if I rule that they were not immediate
jeopardy level and did not contribute to the associated CMPs. I therefore undertake a
review of the findings related to both R6 and R19 in order to determine if there was a
basis for CMS to impose against Petitioner a $600 per day CMP from November 8, 2008
through December 30, 2008, based on Petitioner’s continued noncompliance at a non-
immediate jeopardy level.

Petitioner’s facility had a smoking policy which was effective September 1, 2005. It
provided that: residents would be issued cigarettes in the quantity deemed safe for them
to handle; staff would stay with the residents who needed supervision while smoking; and
that lighters would be kept at the nurse’s stations as residents should not have a lighter in
their possession. P. Ex. 1, at 2. On September 1, 2007, Petitioner’s smoking policy
changed, allowing for the issuance of cigarettes to residents in the quantity deemed safe
for them to handle. In addition, residents could have possession of a lighter, unless there
was a past problem or a problem developed. The requirement that staff would stay with
residents who needed supervision while smoking was not changed in the September 1,
2007 smoking policy. CMS Ex. 18, at 3. Petitioner’s September 1, 2005 and September
1, 2007 smoking policies both state that admission for a resident who smokes will be
contingent upon his or her agreement to abide by Petitioner’s smoking policy. P. Ex. 1,
at 1; CMS Ex. 18, at 3.

Petitioner presented sworn affidavits from its Administrator, Sheila McCutcheon, and its
DON, Shannon Davidson. P. Exs. 4 and 6. According to Petitioner, their testimony
shows that the September 1, 2007 smoking policy, allowing residents to keep lighters,
was the policy in place at the time of the November 7 survey. Petitioner claims both R6
and R19 were assessed, and then reassessed periodically as to their ability to safely
smoke unsupervised. And, if a resident was determined to be unsafe when smoking, then
he or she would be provided supervision to prevent injury. P. Brief at 7.
The SOD alleges that Petitioner failed to provide evidence that the two residents had
agreed to the facility’s 2007 smoking policy or evidence of an assessment of smoking for
resident safety. CMS Ex. 2, at 39, 41.

1. Findings related to R6.

The SOD notes that, on the morning of November 5, 2008, a surveyor interviewed R6.
R6 told the surveyor that he was allowed to smoke by himself and that he had a Scripto
lighter in his possession. CMS Ex. 2, at 36. Later that morning, while on a designated
smoker’s porch, the surveyor observed R6 take a lighter out of his shirt pocket and light
his cigarette. According to the SOD entry, the resident was with R19 and another male
resident, but there were no staff present. /d. at 36. A few minutes later, the surveyor
observed R6 pass his lighter to R19, who then used the lighter to light her own cigarette.
The SOD entry notes that no staff was present on the smoker’s porch with the residents.
Id. at 36-37. On November 6, 2008, the surveyor observed R6 enter a designated
smoking area and light a cigarette. The SOD entry notes that also on the porch were R19
and another resident, but there were no staff. The surveyor then observed R19 move to a
chair near R6 and use R6’s lighter to light her own cigarette. Id. at 36.

R6 was admitted to Petitioner’s facility on February 26, 2007, and signed Petitioner’s
September 1, 2005 smoking policy (most current at the time), on February 27, 2007.
CMS Ex. 7, at 1; P. Ex. 1. At the time of the survey, R6 had diagnoses which included
cerebrovascular accident, seizure disorder, left arm and leg weakness, ataxia, depression,
and malignant brain tumor with agitation. CMS Ex. 7, at 1. R6’s August 14, 2008 MDS
notes that he has moderately impaired cognitive skills for daily decision-making, is easily
distracted with mental functions that varied over the course of the day, had persistent
anger that was easily altered, and required extensive physical assistance of one person for
daily living activities with the exception of eating. CMS Ex. 7, at 89-90. The resident’s
March 2, 2007 POC, updated August 16, 2008, identified R6’s risk for injury to self and
others, and environment hazards related to his smoking, as a problem. CMS Ex. 7, at 22.
The August 16, 2008 POC lists the following approaches: (1) keep lighter at nursing
stations, (2) have staff light cigarettes, and (3) ensure that the resident does not smoke
alone. Jd. However, a July 21, 2008 POC, updated August 15, 2008, notes as problems
that R6: was hazardous to both himself and others, refused to wear a smoking apron, had
lighter fluid; and was a chain smoker at times. The July 21, 2008 POC, as updated on
August 15, 2008, lists the following approaches: (1) remove lighter fluid from the
resident’s possession; (2) a smoking apron should be placed on the resident when he is
taken to smoke or has a lit cigarette; (3) involve his family as reinforcement; and (4) have
his family remove his lighter fluid and not bring any more into the facility. An added
notation stating that as of August 15, 2008, the resident was allowed to keep a lighter.
CMS Ex. 7, at 27. It is clear that R6’s POC interventions for the same hazardous
behavior conflict, i.e., it is not clear whether R6 can: have a lighter in his possession;

even light cigarettes on his own, or can even smoke without staff supervision. Compare
CMS Ex. 7, at 22 and CMS Ex. 7, at 27.

An entry in the nurse’s note dated June 28, 2008, states that R6 got very close to setting
his mustache on fire while lighting a short cigar, and states that the resident might need
supervision with lighters. CMS Ex. 7, at 67. Additionally, from a medical perspective,
R6 was at risk for complications related to possible seizure activity. CMS Ex. 7, at 2.
Several nurse’s note entries state that R6 had seizures lasting from 30 seconds to 1
minute on October 7, 2008, October 29, 2008, and on November 5, 2008. /d. at 71, 75,
77. However, as noted above, from my review of the documents presented, it appears
that conflicting documentation exists as to whether R6 could smoke with the supervision
of staff, or even could carry a lighter.

I also find that CMS has presented evidence sufficient to establish a prima facie showing
which Petitioner has not successfully rebutted that R6 was not receiving adequate
supervision and assistance devices to prevent accidents, in violation of the participation
requirements outlined at 42 C.F.R. § 483.25(h). The evidence before me clearly shows
that R6 was in need of supervision when smoking and therefore, pursuant to Petitioner’s
September 1, 2007 smoking policy, if a resident was determined to be unsafe, as was R6,
the resident should be provided supervision to prevent injury. See CMS Ex. 18; P. Brief
at 7. Based on the evidence before me, Petitioner failed to do so with R6. Petitioner
admitted that R6 has a history of noncompliance, but stated that even though it made
several interventions to improve his behavior, the resident continued his noncompliant
behavior. P. Ex. 4; P. Brief at 11. Petitioner cannot negate its responsibility for the
safety of its residents by simply stating that the resident was noncompliant.

Although CMS has indicated that the findings related to R6’s smoking were not
cited at an immediate jeopardy level of compliance, I note that there is a potential
or Petitioner’s failure to result in actual harm to R6.

2. Findings related to R19.

R19 was admitted to Petitioner’s facility in February 1995. At the time of the survey, R19
ad diagnoses which included seizures, schizophrenia with fluid disorder, dementia with
anxiety, agitation with aggression, organize brain syndrome, and major depression. CMS
Ex. 14, at 1. A October 3, 2008 MDS notes R19 as moderately impaired in cognitive
skills for daily decision-making; is easily distracted; exhibits periods of restlessness; had
mental function that varied over the course of the day; and had persistent anger that was
not easily altered. /d. at 12-13. R19’s April 27, 2007 POC, updated October 3, 2008,
listed as problems: (1) at risk for injury to self and others; (2) environmental hazards
related to smoking; and (3) picks up cigarette butts and hides the cigarette butts to smoke
later. The POC interventions listed included: (1) R19 was not to have possession of a
lighter or matches; and (2) only staff were to light her cigarettes.

The SOD notes that on November 6, 2008, the DON was interviewed by a surveyor. The
DON is reported to have told the surveyor that R19 had set her bangs on fire while
smoking, and that the facility kept her cigarette and lighters locked up. CMS Ex. 2, at 40.
However, as noted above, on November 4, 2008, a surveyor reported observing R6 light a
cigarette for R19. This same behavior was observed by the surveyor the very next day,
on November 5, 2008. CMS Ex. 2, at 36-38.

Petitioner was unable to produce an executed copy for R19 of a signed smoker’s policy.
Petitioner states that R19 was admitted prior to September 1, 2005, and, therefore, there
is no policy signed by her in her file. Petitioner also states that although the SOD alleges
that it failed to show assessment of the residents for smoking safety, that both residents
had care plans in place addressing smoking and that these plans were assessed regularly.
P. Ex. 20 14; P. Exs. 4, 6. However, in spite of this, both R6 and R19 were
noncompliant with their care plans. P. Brief at 11. According to Petitioner, R19’s access
to lighters and cigarettes was monitored, but the resident continued to request such items
and sometimes gained access when staff were not present. P. Brief at 11; P. Ex. 20 4915,
16.

R19’s behaviors, as recognized and assessed by Petitioner, placed her at risk and also the
other residents at Petitioner’s facility. R19 had already set her bangs on fire while
smoking. Petitioner’s smoking policy advises residents who smoke that they will be
admitted only if they agree to abide by the facility’s smoking policy.

I find that CMS has made a prima facie showing that Petitioner was not in compliance
with the regulatory requirements set out at 42 C.F.R. § 483.25(h) based on its failure to
provide R19 with supervision while smoking to ensure that residents are kept safe.
Although CMS has indicated that the findings related to R6’s smoking were not cited at
an immediate jeopardy level of compliance, I note that there is a potential for Petitioner’s
failure to result in actual harm to R19, as evidenced by her already having set her own
bangs on fire with a lighter.

d. Petitioner failed to comply substantially with the requirement of
42 C.F.R. § 483.75 (Administration, Tag F490), at a scope and
severity level of “K”.

The regulation at 42 C.F.R. § 483.75 states:
A facility must be administered in a manner that enables it to use its
resources effectively and efficiently to attain or maintain the highest

practicable physical, mental, and psychosocial well-being of each resident.

CMS’s allegations that Petitioner’s facility was not administered in an efficient and
effective manner derive essentially from CMS’s allegations of the other deficiencies.
CMS’s argument is that responsibility for Petitioner’s failure to protect its residents rests
with Petitioner’s management inasmuch as the management’s duties included preventing
the kinds of systemic failures that were present at the facility. Specifically,

CMS states that the problems at Petitioner’s facility related to here were systemic in
nature. CMS Brief at 13. In support of its assertion, CMS states that staff interviews by
the surveyors revealed that they were not aware whether assessments had been completed
or the residents as to suitability for transfer using a mechanical lift, and they did not
now how to measure the sling used in transferring the residents. CMS Ex. 2, at 16-18;
CMS Ex.15. The regulation required that Petitioner’s management assure that its staff
identify and address resident needs and that they follow established procedures and
protocols. Petitioner’s assertions that staff were trained and that it was not aware of its
staff’s noncompliance does not relieve it of its obligation under the regulation.

Petitioner claims there was no systemic failure of the administration and, as such, there
should be no derivative deficiency at 42 C.F.R. § 483.75. Petitioner’s defense to CMS’s
allegations is to argue that they rest on a flawed premise that Petitioner was not in
compliance with the other participation requirements. However, the evidence before me
plainly establishes Petitioner’s noncompliance.

The evidence supports the finding that the facility administration failed to ensure that
staff were following its policies, as well as the manufacturer’s guidelines regarding
measuring for proper sling size. With R2, the CNA used the wrong sling during a
transfer; and, when interviewed, several CNAs reported to the surveyor that they did not
know about the care plans for the residents. CMS Ex. 2, at 16, 17-18. Petitioner
maintains that staff was provided in-service training reminding them that all lifts
performed using the Hoyer lift must be performed by two employees. P. Brief. at 6. But,
through a sworn affidavit, April Chaney, CNA 5, who was also the Restorative Aide who
provided the in-service training to Petitioner’s staff after the October 8, 2008 incident
with R2, states that the in-service to staff regarding proper use of the Vander-Lift II and
assessing residents for proper size slings was in the form of an informational sheet which
apparently “instructed and reminded” staff to use two people to transfer residents when
using the Vander-Lift II. CMS Ex. 1946. Ms. Chaney also stated that the in-service
“instructed and reminded” staff to use the proper sling size when performing transfers.
Moreover, Ms Chaney admitted that a demonstration or follow-up to the training was not
provided. The rationale Ms. Chaney provided was that the purpose of the training was
“simply informative and did not require a skills evaluation.” CMS Ex. 19 § 7, 8; see
also P. Brief at 6. Additionally, CNA 3, who was involved in the two-person transfer of
R9 on November 4, 2008, admitted that she had not been trained by Petitioner on how to
use a lift; but rather, she relied on the training she had received at her previous job. P.
Ex. 1747.

I find no dispute as to whether Petitioner’s facility was effectively or efficiently managed.

As for the deficiencies related to R6 and R19’s smoking, I find that the evidence CMS
relied on provides a strong basis for me to further conclude that the facility was neither
efficiently nor effectively managed. The only inference I can draw from the residents’
casual defiance of smoking policies is that Petitioner’s management had lost control over
the resident population. That is more than enough to support a finding of noncompliance.

The problems identified during the November survey resulted from the fact that facility
management was lax in enforcing existing policies or in developing interventions that
might protect the residents. Even now, Petitioner’s primary response to the deficiencies
identified at its facility is, essentially, to blame both staff and residents for their failure to
adhere to the policies.

2. CMS ’s finding of immediate jeopardy is not clearly erroneous.

“Immediate jeopardy” is a situation in which a facility’s noncompliance with
participation requirements is so egregious as to cause, or to be likely to cause, serious
injury, harm, impairment, or death to one or more residents. 42 C.F.R. § 488.301. The
level of noncompliance must be upheld unless it is clearly erroneous. 42 C.F.R.

§ 498.60(c)(2).

I find that CMS’s finding of immediate jeopardy was not clearly erroneous, and, in fact,
CMS has established a causal link between Petitioner’s act or omission and the asserted
harm or potential for harm. Petitioner failed to ensure that residents who required
mechanical assistance with transfers and who were assessed to need the assistance of two
or more people for a transfer, were provided with the necessary services while being
transferred for their safety. The evidence shows that R2’s fall, in which she sustained a
right hip fracture, resulted from Petitioner’s staff’s failure to follow both facility policy
and the resident’s plan of care. Petitioner’s failure to assess residents’ needs for transfer
when using the Vander-Lift II, its failure to ensure that each resident received adequate
supervision and assistance devices to prevent accidents (i.e. proper fitting sling), and the
facility’s administration’s failure to administer the facility in a manner that enabled it to
use its resources effectively and efficiently were causal factors in the harm sustained by
R2 and the potential for harm R9 was subjected to. I further find that these failures
constituted a finding of immediate jeopardy.

Petitioner contends that its failure to assign each resident a sling size did not create an
immediate jeopardy situation. P. Brief at 13. I find that Petitioner’s assertions are
unsupported by the evidence. R2 was transferred by staff using a Vander-Lift II with just
one single staff person in spite of the resident’s MDS which stated she required the
assistance of two or more persons for transfers. R2 sustained a serious injury. Moreover,
Petitioner failed to have systems in place to assess and supervise residents being
transferred. Lastly, Petitioner fails to explain the inconsistency between R2’s March
2008 MDS which notes the need for manual or mechanical lift to be used to transfer R2,
and the absence of such notation in the resident’s September 12, 2008 ADL evaluation,
thus bringing into question the comprehensiveness of Petitioner’s assessment of the
resident’s transfer needs.
CMS presented facts which provide ample support for the conclusion that Petitioner’s
noncompliance was at the immediate jeopardy level. Petitioner argues that CMS has
failed to establish a causal connection between its noncompliance and either the actual or
potential harm to the residents at issue. However, this argument fails. The regulations do
not require any finding of actual harm to justify a determination that immediate jeopardy
to residents existed. For these reasons, I conclude that CMS’s finding of immediate
jeopardy was not clearly erroneous.

3. CMS’s remedy determinations were 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)-(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)(2). In this case, CMS determined to impose a per day CMP of
$5,050 from November 3, 2008 through November 7, 2008 for the immediate jeopardy
deficiencies and a $600 per day CMP from November 8, 2008 through December 30,
2008, for a total CMP of $57,050.

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

With respect to facility history, Petitioner has a history of noncompliance as identified in
prior survey cycles. CMS Ex. 33, at 2; P. Ex. 23.

Petitioner maintains that its financial condition precludes it from paying the proposed
CMPs. Petitioner submitted copies of profit and loss sheets for a nine-month period only,
covering October 2008 through June 2009, and its balance sheet as of June 30, 2009,
which does not identify the beginning time period of the evaluation period. P. Ex. 24, at
1-2, 3-4. I find that Petitioner has not presented sufficient documentation to show that it
is unable to pay the CMPs imposed.

As for culpability, the deficiencies in this case were serious and Petitioner must be
considered culpable. Given the seriousness of injury or harm to the residents, the
imposed CMPs are reasonable. Petitioner knew of R2’s behaviors which placed her at
risk for serious injury during transfers.

The $5,050 CMP that CMS proposed to impose is at the mid-range of the range for per
diem CMPs for immediate jeopardy deficiencies, and the $600 per day CMP for
deficiencies at the non-immediate jeopardy level are fully supported by the evidence in
this case which establishes that Petitioner was not in substantial compliance with the
requirements of 42 C.F.R. § 483.20(b), 483.25(h), and 483.75.

What remains to be determined is the issue of duration. CMS conceded that the
immediate jeopardy was removed on November 5, 2008, for the three immediate
jeopardy tags F272, F323, and F490. CMS Reply at 3 n.1. The parties agree that
immediate jeopardy was removed on November 5, 2008, resulting in the deficiencies
being lowered to a “G” level, and a $600 per day CMP being imposed until substantial
compliance was achieved. Jt. Stip. § 5, 6, 7; CMS Reply at 3 n.1. Consequently, on
January 1, 2009, Petitioner was re-surveyed and although the conditions that represented
immediate jeopardy had been abated, CMS determined that Petitioner continued to be not
in substantial compliance which included 42 C.F.R. §§ 483.25(h) (Accidents) and 483.75
(Administration) which had been previously cited. Therefore, the $600 per day CMP was
continued through December 30, 2008.

Given that Petitioner abated immediate jeopardy on November 5, 2008, as CMS
conceded, I find that imposing against Petitioner a $5,050 per day CMP for immediate
jeopardy level deficiencies for November 6 and 7, 2008, is not reasonable. Rather, I find
that a $5,050 per day CMP for the period of November 3, 2008 through November 5,
2008, and a $600 per day CMP for the period of November 6, 2008 through December
30, 2008, are reasonable.

IV. Conclusion

For the foregoing reasons, I conclude that Petitioner was not in substantial compliance
with the Medicare program participation requirements at the immediate jeopardy level
during the November survey. I find as reasonable a $5,050 per day CMP for the period
starting November 3, 2008 and continuing through November 5, 2008, for the immediate
jeopardy level deficiencies, and a continuing CMP of $600 per day for the period of
November 6, 2008 and running through December 30, 2008.

/s/
Alfonso J. Montafio
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Gabriel R. Harden #08773-028,
Petitioner
Vv.
The Inspector General.
Docket No. C-10-225
Decision No. CR2218

Date: August 13, 2010

DECISION

This matter is before me on the Inspector General’s (1.G.’s) Motion for Summary
Judgment on the Written Record. I sustain the determination of the I.G. to exclude
Petitioner, Gabriel Harden, from participating in Medicare, Medicaid, and all federal
health care programs for a period of 25 years. The I.G.’s determination to exclude
Petitioner is based on section 1128(a)(1) of the Social Security Act (Act), 42 U.S.C.
§1320a-7(a)(1). Petitioner’s exclusion of 5 years is mandatory pursuant to section
1128(c)(3)(B) of the Act. An additional 20 year period of exclusion, for a total period of
exclusion of 25 years, is not unreasonable based on the four aggravating factors
established in this case and the absence of any mitigating factors. For the reasons set
forth below, I grant the I.G.’s Motion for Summary Judgment.

I. Background

By letter dated October 30, 2009, the LG. notified Petitioner that he was being excluded
from participating in Medicare, Medicaid, and other federally-funded health care
programs’ for a period of 25 years. The I.G. specifically informed Petitioner that he was
being excluded pursuant to section 1128(a)(1) of the Act, based on Petitioner’s
conviction in the United States District Court, Southern District of Indiana, of a criminal
offense related to the delivery of an item or service under the Medicare or a State health
care program, including the performance of management or administrative services
relating to the delivery of items or services, under any such program. Additionally, the
1.G. asserted that Petitioner’s exclusion was based on the presence of four aggravating
factors: (1) the loss to a government program of $5,000 or more; (2) the acts that resulted
in the conviction were committed over a period of more than one year; (3) the court
sentenced Petitioner to 41 months of incarceration; and (4) Petitioner was convicted of
other offenses besides those which formed the basis for the exclusion, or he was the
subject of any other adverse action by any Federal, State or local government agency or
board, if the adverse action is based on the same set of circumstances that serves as the
basis for imposition of the exclusion.

On December 4, 2009, Petitioner, acting pro se, timely appealed the I.G.’s exclusion
determination. The matter was docketed and assigned to me on December 23, 2009 for
hearing, related proceedings, and a decision. A letter was issued to the parties on January
12, 2010, notifying them that a prehearing conference had been set for January 21, 2010,
at 10:30 a.m. Eastern Time. The prehearing conference was conducted as scheduled.
Present during the telephone prehearing conference was Petitioner Gabriel R. Harden,
Geeta Wadhwa Kaveti, representing the I.G., and with me were Oliver Potts, then-Chief
and Terrah A. Dews, Team Leader, Civil Remedies Division.

During the conference, and because Petitioner appeared pro se, I explained to Petitioner
that he had the right to be represented by legal counsel in these proceedings. While
Petitioner acknowledged that he understood this right, he stated that he wished to
represent himself in this matter. Petitioner was also reminded that all material submitted
to this office must be provided in duplicate to the I.G. simultaneously with the
submission to this office. I explained to the parties the limits of my jurisdiction over this
matter. I further explained to Petitioner that I do not have the authority to re-litigate the
facts that formed the basis of Petitioner’s criminal conviction.

Both parties were provided an opportunity to state their positions as to the issues and
whether this case should be litigated through written submission or through an in-person
hearing. The I.G. maintained that the case involved purely legal issues and should

' Section 1128B(f) of the Act defines “federal health care program” as any plan or
program that provides health benefits, whether directly, through insurance, or otherwise,
which the United States Government, or any State health care program funds directly, in
whole or in part.
therefore be addressed through written submissions. Petitioner stated that he was
requesting an in-person hearing, because he wanted to call witnesses to testify to the
manner in which certified staff rendered the subject services. I explained to Petitioner
that if those witnesses were to testify relative to the facts of the conviction, I did not have
the authority to consider a collateral attack of the conviction that is the basis of the
criminal conviction. If the witnesses were to provide evidence as to the length of the
exclusion, I informed Petitioner that I can only consider evidence of testimony that
relates to the aggravating and mitigating factors enumerated in the regulations. I read the
relevant sections of the regulation to Petitioner. A copy of the regulations was provided
to Petitioner with the Summary of Prehearing Conference Order. I informed the parties
that the matter appeared to involve purely legal issues and would therefore proceed on the
basis of written submissions. Petitioner was informed he could renew his motion for an
in-person hearing in his response brief.

Petitioner also requested the documents used in his conviction in Indiana, as he believed
it would be helpful in refuting the arguments made in the brief that the I.G submitted. I
denied Petitioner’s request noting that Petitioner’s document request appeared to be an
effort to re-litigate the criminal conviction in this case. I informed Petitioner he could
renew his request in his response brief and articulate how the requested documents relate
to the limited issues before me.

The L.G. filed a Motion for Summary Judgment on the Written Record, accompanied by
four exhibits (I.G. Exs. 1-4). Petitioner did not file a timely response to the I.G.’s Motion
in accordance with my Order dated January 26, 2010. On April 19, 2010, I issued an
Order to Show Cause directing Petitioner to show cause in writing on or before April 30,
2010 as to why I should not dismiss the case for abandonment. On April 19, 2010,
Petitioner submitted a letter dated April 10, 2010 requesting permission to file his motion
via facsimile by April 25, 2010. Petitioner submitted a brief and a request for extension
dated April 23, 2010, but the brief had a certificate of service date of March 19, 2010.
Petitioner’s brief was accompanied by Petitioner (P.) Exs. 1 -10. On May 18, 2010, the
1.G. filed a Reply to Petitioner’s Submissions. On June 14, 2010, Petitioner filed a Reply
to the I.G.’s Submissions, along with P. Exs. 13 — 15. In the absence of any objection, I
admit into the record I.G. Exs. 1 - 4, P. Exs. 1 - 10 and P. Exs. 13 — 15. On June 25,
2010, I issued an Order Closing the Record in this matter.

IL. Issues
1. Whether the LG. has a basis pursuant to section 1128(a)(1) of the Act to

exclude Petitioner from participation in Medicare, Medicaid, and all other federal
health care programs;
2. Whether the I.G. is entitled to summary judgment on the ground that
undisputed facts demonstrate that the I.G. properly determined to exclude
Petitioner from participating in Medicare, Medicaid, and all other federal health
care programs; and

3. Whether the 25 year exclusion is reasonable.
Ill. Controlling Statutes and Regulations

Section 1128(a)(1) of the Act requires exclusion from participation in Medicare,
Medicaid, and all federal health care programs of any “individual or entity that has been
convicted of a criminal offense related to the delivery of an item or service under Title
XVIII or under any State health care program.” The terms of section 1128(a)(1) are
restated in regulatory language at 42 C.F.R. § 1001.101(a). Federal regulations set forth
criteria for determining the length of exclusions imposed pursuant to section 1128 of the
Act. 42 C.F.R. § 1001.102. Individuals excluded under section 1128(a)(1) must be
excluded for a period of not less than five years. Act § 1128(c)(3)(B). Factors set out at
42 C.F.R. § 1001.102(b) serve as a basis for lengthening the mandatory period of
exclusion, and mitigating factors that serve to decrease the period of exclusion are found
at 42 C.F.R. § 1001.102(c). Mitigating factors may be considered as a basis for reducing
the period of exclusion to no less than five years only if aggravating factors justify an
extension of the exclusion.

Section 1128(i) of the Act defines a “conviction” to include instances when: (1) a
judgment of conviction has been entered against an individual by a federal, state, or local
court, regardless of whether there is an appeal pending or whether the judgment of
conviction or other record relating to criminal conduct has been expunged; (2) there has
been a finding of guilt against the individual by a federal, state, or local court; (3) a
federal, state, or local court accepts a plea of guilty or nolo contendere; or (4) the
individual has entered into participation in a first offender, deferred adjudication, or other
arrangement or program where judgment of conviction has been withheld. 42 C.F.R. §
1001.2 repeats these definitions. The Secretary has delegated authority to impose
exclusions to the I.G. 42 C.F.R. § 1001.401(a). As long as the period of exclusion is
within a reasonable range and based on demonstrated criteria, an ALJ does not have
authority to change it. Joann Fletcher Cash, DAB No. 1725, at 7 (2000) (citing 57 Fed.
Reg. 3298, 3321 (1992)).

The Act provides that an exclusion pursuant to section 1128(a) “shall be effective at such
time and upon such reasonable notice to the public and to the individual or entity
excluded as may be specified by regulations . .. .” Act § 1128(c)(1).

42 C.F.R. Part 1005 does not specify summary disposition procedures, but summary
disposition is explicitly authorized by the terms of 42 C.F.R. § 1005.4(b)(12).
Summary disposition is appropriate in an exclusion case when no disputed issues of
material fact exist and when the undisputed facts, clear and not subject to conflicting
interpretation, demonstrate that one party is entitled to judgment as a matter of law.
Michael J. Rosen, M.D., DAB No. 2096 (2007); Tanya A. Chuoke, R.N., DAB No. 1721
(2000); David A. Barrett, DAB No. 1461 (1994); Robert C. Greenwood, DAB No. 1423
(1993); Thelma Walley, DAB No. 1367 (1992); Catherine L. Dodd, R.N., DAB No. 1345
(1992); John W. Foderick, M.D., DAB No. 1125 (1990). All the facts, and the inferences
reasonably to be drawn from those facts, must be viewed in the light most favorable to
the nonmoving party. See Pollock v. American Tel. & Tel. Long Lines, 794 F.2d 860, 864
(3d Cir. 1986); Brightview Care Ctr., DAB No. 2132 (2007); Madison Health Care, Inc.,
DAB No. 1927, at 5-7 (2004). When the undisputed material facts of a case support
summary disposition, no need exists for a full evidentiary hearing, and neither party has
the right to one. Surabhan Ratanasen, M.D., DAB No. 1138 (1990); John W. Foderick,
M.D., DAB No. 1125.

The standard of proof is a preponderance of the evidence, and there may be no collateral
attack of the conviction that is the basis of the exclusion. 42 C.F.R. § 1001.2007(c), (d).
Petitioner bears the burden of proof on any affirmative defenses or mitigating factors, and
the I.G. bears the burden on all other issues. 42 C.F.R. § 1005.15(b).

IV. _ Findings and Discussion

1. The IG. has a basis to exclude Petitioner pursuant to
section 1128(a)(1) of the Act.

Petitioner owned and operated a mobile dental service, generally known as “Dental
Express” in Indiana, Kentucky, and Ohio from September 2000 to May 2004. Dental
Express applied for, and received, authorization to bill Medicaid in Indiana, Kentucky,
and Ohio for its services. 1.G. Ex. 2. In 2006, Petitioner was indicted for ordering and
directing employees of “Dental Express” to provide services that were not medically
necessary or reimbursable by Medicaid, and then billed Medicaid for these services. Id.
Petitioner also ordered and directed employees to document that they provided services,
which were not provided, and billed Medicaid based on falsified documentation. Jd.

Specifically, it was alleged that Petitioner engaged in a scheme to defraud Medicaid by:
(1) targeting Medicaid-eligible children as a customer base, then billing Medicaid for
dental services for those children that were either not provided or medically unnecessary;
and (2) directing and applying pressure to Dental Express employees to provide services
that were either not provided or medically unnecessary. I.G. Ex. 2 at 4—5.

In April 2006, Petitioner was charged with two counts of Health Care Fraud in violation
of 18 U.S.C. § 1347, and nine counts of Illegal Monetary Transaction in violation of 18
U.S.C. § 1957. I.G. Ex. 2 at 7— 10. Petitioner pled guilty to two counts of Health Care
Fraud and one count of Illegal Monetary Transaction. I.G. Ex. 1, at 1. He was sentenced
to 41 months of incarceration and ordered to pay an assessment of $300 and restitution in
the amount of $1,683,412.32. I.G. Ex. 1, at 2-5.

The essential elements necessary to support an exclusion based on section 1128(a)(1) of
the Act are: (1) the individual to be excluded must have been convicted of a criminal
offense; and (2) the criminal offense must have been related to the delivery of an item or
service under Title XVIII of the Act (Medicare), or any state health care program.
Tamara Brown, DAB No. 2195 (2008); Thelma Walley, DAB No. 1367; Boris Lipovsky,
M._D., DAB No. 1363 (1992); Lyle Kai, R.Ph., DAB CR1262 (2004), rev'd on other
grounds, DAB No. 1979 (2005); see Russell Mark Posner, DAB No. 2033, at 5-6 (2006).

The court records the I.G. has submitted as exhibits conclusively establish these two
essential elements. Petitioner was convicted of: two counts of Health Care Fraud; and
one count of Illegal Money Transaction. I.G. Ex. 1, at 1. The record includes the District
Court’s judgment of Petitioner’s guilt and conviction of the criminal offenses outlined in
the Indictment. I.G. Ex. 1.

2. The LG. is entitled to summary judgment on the ground that it properly
determined that Petitioner should be excluded from participation in all
federal health care programs for a period of 25 years.

With regard to the resolution of this case by summary judgment, the regulations allow an
Administrative Law Judge (ALJ) to decide a case on summary judgment or disposition,
when no disputed issue of material fact exists. 42 C.F.R. § 1005.4(b)(12). The
Departmental Appeals Board (Board) held in Michael J. Rosen, M.D., DAB No. 2096, at
4, that an ALJ may:

“Tu]pon motion of a party, decide cases, in whole or in part, by summary judgment
where there is no disputed issue of material fact...” 42 C.F.R. § 1005.4(b)(12).
A requirement affording the opportunity for oral hearing is not contravened by
summary judgment if there are no genuine issues of material fact. Travers v.
Shalala, 20 F.3d 993, 998 (9m Cir. 1994). Thus, summary judgment is appropriate
if the affected party either had conceded all of the material facts or proffered
testimonial evidence only on facts which, even if proved, clearly would not make
any substantive difference in the result. Big Bend Hospital Corp., DAB No. 1814
(2002), aff'd, Big Bend Hospital Corp. v. Thompson, No. P-02-CA-030 (W.D.
Tex. Jan. 2, 2003).

Whether summary judgment is appropriate is a legal issue that we address de
novo, viewing the proffered evidence in the light most favorable to the non-
moving party. See, e.g., Crestview Parke Care Center, DAB No. 1836 (2002),
aff'd in part, Crestview Parke Ctr. v. Thompson, 373 F. 3d 743 (6th Cir 2004);
Timothy Wayne Hensley, DAB No. 2044 (2006).

Petitioner’s arguments do not call a material fact into issue in this case. The record and
the nature of the crime to which he pleaded guilty contradict Petitioner’s position. The
crime of health care fraud is based on an intent to violate the law; in this case, the
Petitioner’s actions intend to defraud Medicaid. Whether Petitioner committed the acts
that led to his conviction are not at issue before me. His current disclaimer that he did
not commit the acts for which he was convicted is an impermissible collateral attack on
the underlying conviction in his case. Where an exclusion is based on an underlying
conviction, the basis for the underlying conviction is not reviewable by the ALJ and
cannot be contested on substantive or procedural grounds. 42 C.F.R. § 1001.2007(d).

3. The minimum period of exclusion under section 1128(a) is five years, and an
additional period of exclusion of 20 years, for a total period of exclusion of
25 years, is not unreasonable in this case based on the presence of four
aggravating factors and no mitigating factors.

My determination of whether the exclusionary period in this case is unreasonable
depends on whether: (1) the I.G. has shown the existence of aggravating factors; (2)
Petitioner has shown a mitigating factor exists that the .G. failed to consider; and (3) the
period of exclusion is within a reasonable range.

The L.G. relies on four aggravating factors set out at 42 C.F.R. §1001.102(b)(1),(2),(5),
and (9) in seeking to increase the period of Petitioner’s exclusion beyond the mandatory
minimum of five years to that of 25 years.

a. Petitioner’s criminal conduct resulted in a financial loss to a government
program of $5,000 or more.

The court records show that Petitioner’s misconduct, from approximately September
2000 through May 2004, resulted in his receiving reimbursement from the Medicaid
program in excess of $4 million dollars. Petitioner’s actions resulted in a program
financial loss well in excess of $5,000. The court determined that Petitioner participated
in a scheme to defraud Medicaid, and the total loss for guideline purposes was
$1,595,814.30. I.G. Ex. 3, at 4. Iam bound to accept the court’s findings. See 42 C.F.R.
§ 1001.2007(d); Joann Fletcher Cash, DAB No. 1725; Chander Kachoria, R.Ph., DAB
No. 1380, at 8 (1993). Here, the sentencing court made specific findings as to the dollar
amount of losses sustained as a result of Petitioner’s offenses, based on his conviction,
and ordered Petitioner to make restitution accordingly. I.G. Ex. 1, at 5.
b. Petitioner was sentenced to incarceration for a period of 41 months.

The regulations state that an aggravating factor is present, and may be considered to
lengthen the period of exclusion, if the sentence that the court imposes includes
incarceration. 42 C.F.R. § 1001.102(b)(5). The I.G. argues that, because the sentence
that the District Court Judge imposed included incarceration, the imposition of
incarceration justifies lengthening Petitioner’s exclusion period beyond the 5 year
mandatory minimum. The evidence in this case establishes that Petitioner was sentenced
to 41 months of incarceration. 1.G. Ex. 1, at 2. Therefore, the aggravating factor of
Petitioner’s incarceration is a legitimate basis for increasing Petitioner’s exclusion period
beyond the 5 year mandatory minimum.

c. Petitioner’s offense was committed over a period of one year or more.

In its Motion for Summary Judgment, the LG. argues that Petitioner pled guilty to health
care fraud, and the plea agreement states that “from on or about September 2000 through
on or about October 2002, Petitioner engaged in a scheme to defraud a health care benefit
institution in violation of 18 U.S.C. § 1347 (Health Care Fraud).” LG. Ex. 3, at 1.
Therefore, the I.G. asserts that the presence of this aggravating factor is a legitimate basis
upon which to lengthen Petitioner’s exclusion beyond the mandatory minimum of 5
years. Petitioner responds the act was committed during a period of ignorance. Clearly,
Petitioner’s ignorance is not a valid defense to the proposed exclusion.

d. Petitioner was the subject of an adverse action by a state agency based on his
conviction.

The exhibits that the I.G. submitted demonstrate that Petitioner was excluded from
participation in the Ohio Medicaid program. I.G. Ex. 4. The Ohio Department of Jobs
and Family Services (ODJFS), which administers the Ohio Medicaid Program, excluded
Petitioner based on Petitioner’s conviction for health care fraud on November 13, 2008 in
the United States District Court for the Southern District of Indiana. Therefore,
Petitioner was the subject of an adverse action by a state agency based on the same set of
circumstances that forms the basis for imposing the exclusion. In addition, the state
action was a legitimate basis upon which to lengthen Petitioner’s exclusion beyond the
mandatory minimum of five years.

In response to the four aggravating factors that the I.G. outlined, Petitioner presents
several arguments, including: (1) ineffective assistance of counsel; (2) the presence of
transparency with reporting all claims using 3 party NCR Authorization forms; and (3) no
knowledge, or willingness, to defraud the Government of any monies. See generally P.
Brief. Unfortunately, however real Petitioner’s problems were relative to his legal
representation during the criminal proceedings, he does not raise any relevant arguments
over which I have jurisdiction or authority. The regulations explicitly preclude my
review of the facts underlying Petitioner’s conviction. Further, the regulations prohibit
Petitioner from collaterally attacking his criminal conviction in this proceeding. When
the exclusion is based on the existence of a criminal conviction where the facts were
adjudicated and a final decision was made, the basis for the underlying conviction is not
reviewable in this forum. Therefore, Petitioner may not collaterally attack his conviction
either on substantive or procedural grounds before me. 42 C.F.R. § 1001.2007(d); Joann
Fletcher Cash, DAB No. 1725; Paul R. Scollo, D.P.M., DAB No. 1498 (1994).

e. Petitioner has failed to prove any mitigating factors.

The period of exclusion can be reduced if mitigating factors are proven. The Petitioner
bears the burden of proving any mitigating factor by a preponderance of the evidence.
Dr. Darren James, D.P.M., DAB No. 1828 (2002); Barry D. Garfinkel, M.D., DAB No.
1572 at 8 (1996).

42 C.F.R. § 1001.102(c) outlines three mitigating factors, which are: (1) a petitioner was
convicted of three or fewer misdemeanor offenses and the resulting financial loss to the
program was less than $1500; (2) the record demonstrates that a petitioner had a mental,
physical, or emotional condition that reduced his culpability; and (3) a petitioner’s
cooperation with federal or state officials resulted in others being convicted or excluded,
or additional cases being investigated, or a civil money penalty being imposed.

Here, the first mitigating factor is not applicable, since Petitioner’s conviction involved
program financial losses in excess of $1,500. Further, Petitioner neither claims that any
medical condition reduced his culpability nor argues that he cooperated with government
officials, which resulted in others being convicted, excluded, or led to the investigation of
other cases. Thus, this case presents no mitigating factors that I can consider that would
reduce the period of exclusion.

Because Petitioner appears here pro se, I have taken care in reading his filed submissions,
his exhibits, and his request for hearing. I have been guided by the Board’s reminders
that pro se litigants should be offered “some extra measure of consideration” in
developing their records and their cases. Louis Mathews, DAB No. 1574 (1996); Timothy
L. Stern, M.D., DAB No. 1314 (1992); Edward J. Petrus, Jr.. M.D., DAB No. 1264
(1991). However, I have been unable to find any argument or contention in Petitioner’s
submissions that might raise a valid defense to the proposed exclusion.

Sf, The 25 year period of exclusion is not unreasonable.

The regulations do not limit the additional period of exclusion the I.G. may impose based
upon the presence of aggravating factors. The regulations also do not specify how much
of an extension is warranted by the existence of an aggravating factor. The Board has
indicated that it is not the number of aggravating factors that is determinative, but, rather,
10

it is the quality of the circumstances, whether aggravating or mitigating, which controls
in analyzing these factors. Barry D. Garfinkel, M.D., DAB No. 1572.

I have found that the aggravating factors the 1.G. considered are present in this case. The
evidence establishes that Petitioner knowingly engaged in a scheme that involved
providing dental services that were not medically necessary or reimbursable by Medicaid
and then billed Medicaid for these services. Petitioner also directed employees to
document that services were provided, which, in fact, were not provided and billed
Medicaid based on falsified documentation. This criminal activity continued over a
period of more than one year. Petitioner submitted claims totaling more than $4 million
dollars to the Medicaid program. Based on this illegal conduct, Petitioner was convicted
and sentenced to incarceration of 41 months. Finally, Petitioner was the subject of an
adverse action by a state agency based on his conviction. Considering these facts and the
magnitude of Petitioner’s abuse of the Medicaid program, a significant period of
exclusion is justified. Further, and as noted above, no mitigating factors offset these
aggravating factors. The evidence establishes that Petitioner deliberately engaged in
criminal acts for his own financial gain. I find that Petitioner presents a significant risk to
program integrity, and the 25 year exclusion falls within a reasonable range.

V. Conclusion

Because no genuine issue to any material fact exists, and for the reasons set forth above,
the I.G.’s Motion for Summary Judgment must be, and is, GRANTED. Further, I sustain
the I.G.’s determination to exclude Petitioner from program participation in Medicare,
Medicaid, and all other federal health care programs, and I find the 25 year exclusion
from program participation is not unreasonable.

/s/
Alfonso J. Montafio
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

John G. Cavalli, D.P.M.
(OI File No. 2-02-40-482-9),

Petitioner,
Vv.
The Inspector General.
Docket No. C-10-314
Decision No. CR2217

Date: August 13, 2010

DECISION

In this case, the parties agree that John G. Cavalli, D.P.M., was convicted of health care
fraud related to the delivery of items or services under the Medicare program

and that he is therefore subject to a minimum five-year exclusion from participation in
federal health care programs under sections 1128(a)(1) and 1128(a)(3) of the Social
Security Act (Act). They dispute the length of his exclusion. The Inspector General
(LG.) proposes a 10-year exclusion, and Petitioner argues that any exclusion in excess of
five years is unreasonable.

For the reasons set forth below, I find that a10-year exclusion is reasonable.
I. Background

By letter dated October 30, 2009, the LG. notified Petitioner that he was excluded from
participation in Medicare, Medicaid, and all federal health care programs for a period of
10 years, because he had been convicted of a felony criminal offense related to: 1) the
delivery of an item or service under the Medicare or state health care program; and 2)
fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial
misconduct in connection with the delivery of a health care item of service. The letter
explained that sections 1128(a)(1) and 1128(a)(3) of the Act authorize the exclusion.
Petitioner concedes that he was convicted and is subject to exclusion under these
sections. Order and Schedule for Filing Briefs and Documentary Evidence at 2 (Mar. 15,
2010); P. Brief (Br.) at 1.

Each party submitted a written argument (I.G. Br.; P. Br.). The I.G. also submitted five
exhibits (I.G. Exs. 1-5) and a reply brief (I.G. Reply). In the absence of an objection, I
admit into evidence I.G. Exs. 1-5.

The I.G. indicates that an in-person hearing is not necessary to resolve this case.
Petitioner contends that an in-person hearing is “justified” but does not explain why. In
my pre-hearing order, I observed that the case seemed to present no disputes of fact that
would require in-person testimony. I directed the parties to indicate whether an in-person
hearing is necessary and, if so, to “describe the testimony it wishes to present, the name
of the witness it would call, and a summary of each witnesses’ proposed testimony.” I
also directed the parties to explain why the testimony would be relevant. Order and
Schedule for Filing Briefs and Documentary Evidence at 2 (Mar. 15, 2010). Petitioner
has not satisfied the mandates of my order, because he names no witness and provides no
explanation as to why an in-person hearing is necessary. Moreover, as the following
discussion establishes, the material facts in this case were already resolved by the federal
district court, and that court’s judgment may not be collaterally attacked. 42 C.F.R. §
1001.2007(d); Joann Fletcher Cash, DAB No. 1725 (2000). An in-person hearing is
therefore not necessary — indeed, it would serve no purpose.

II. Issue

Because the parties agree that the I.G. has a basis upon which to exclude Petitioner from
program participation, the sole issue before me is whether the length of the exclusion (10
years) is reasonable. 42 C.F.R. § 1001.2007.

II. Discussion

Section 1128(a)(1) of the Act mandates that the Secretary of Health and Human Services
exclude an individual who has been convicted under federal or state law of a criminal
offense related to the delivery of an item or service under Medicare or a state health care
program. 42 C.F.R. § 1001.101(a).

Section 1128(a)(3) says that an individual or entity convicted of felony fraud, theft,
embezzlement, breach of fiduciary responsibility, or other financial misconduct in
connection with the delivery of a health care item or service must be excluded from
participation in federal health care programs for a minimum of five years. 42 C.F.R.
§§ 1001.101(c), 1001.102(a).
The facts here are not in dispute: Petitioner was a podiatrist, licensed to practice in the
State of New Jersey. He had his own podiatry practice, for which he served as president
and chief executive officer. 1.G. Ex. 1 at 1, 13. On October 16, 2008, he pled guilty in
federal district court for the District of New Jersey to one felony count of conspiracy to
commit health care fraud, in violation of 18 U.S.C. § 1349. LG. Ex. 3. Petitioner
admitted that from “at least as early as” January 2003 until January 2005, he, personally
and as part of a conspiracy with other named podiatrists, billed the Medicare program for
services provided by unqualified and untrained (or inadequately trained) personnel,
claiming that he rendered the services himself. IG. Ex. 1 at 7-8, 15-16; see LG. Ex. 4 at
1. He knowingly submitted claims for services that were not medically necessary and,
thus, not eligible for Medicare reimbursement. He claimed to have provided more costly
services than he actually provided, a practice referred to as “upcoding.” I.G. Ex. 1 at 8-9,
16-18. He and his co-conspirators also obstructed Medicare’s prepayment review
process; he misrepresented the procedures he performed, and, knowing that the Medicare
contractor was auditing his bills, he submitted claims under the provider numbers of his
co-conspirators. I.G. Ex. 1 at 10-19.

The court sentenced Petitioner to twelve months and one day in prison, followed by three
years supervised release, and ordered him to pay restitution in the amounts of:
$87,870.93 to the Medicare program; $1,212.51 to Horizon Blue Cross/Blue Shield; and
$3,800 to Aetna Life Insurance Company (total restitution $92,883.44). I.G. Ex. 3 at 2-3,
5.

A, Based on the aggravating factors present in this case, the
10-year exclusion falls within a reasonable range.'

An exclusion under either section 1128(a)(1) or 1128(a)(3) must be for a minimum
period of five years. Act § 1128(c)(3)(B); 42 C.F.R. §§ 1001.102(a), 1001.2007(a)(2).
Federal regulations set forth criteria for lengthening exclusions beyond the five-year
minimum. 42 C.F.R. § 1001.102(b). Evidence that does not pertain to one of the
aggravating or mitigating factors listed in the regulation may not be used to decide
whether an exclusion of a particular length is reasonable.

Among the factors that may serve as bases for lengthening the period of exclusion are the
four that the I.G. relies on in this case: 1) the acts resulting in the conviction, or similar
acts, caused a government program or another entity financial losses of $5,000 or more;
2) the acts that resulted in the conviction, or similar acts, were committed over a period of
one year or more; 3) the sentence imposed by the court included incarceration; and 4) the
convicted individual has been the subject of any other adverse action by any federal, state

' My findings of fact and conclusions of law are set forth, in italics and bold, in the
discussion captions of this opinion.
or local government agency or board, if the adverse action is based on the same set of
circumstances that serves as a basis for the exclusion. 42 C.F.R. § 1001.102(b). The
presence of an aggravating factor or factors, not offset by any mitigating factor or factors,
justifies lengthening the mandatory period of exclusion.

Program financial loss: The district court ordered Petitioner to pay $92,883.44 in
restitution to the Medicare program and the private insurers. I.G. Ex. 3 at 5. Restitution
has long been considered a reasonable measure of program losses. See Jason Hollady,
M.D., DAB No. 1855 (2002). Petitioner agrees that his fraud caused these financial
losses but points out that the amount falls short of $1.4 million, the amount alleged in his
indictment. P. Br. at 1. This may be so, but the undisputed financial loss is nevertheless
substantial — more than 18 times greater than the threshold amount necessary to establish
an aggravating factor — and thus justifies lengthening the period of exclusion.

Length of criminal conduct. Citing generally to his plea agreement, Petitioner argues that
his “so-called fraud” occurred over only a five-month period. P. Br. at 1. Upon careful
review of that document, I found no evidence to support his assertion. I.G. Ex. 4.
Moreover, the count to which he pled guilty explicitly says that his illegal conduct lasted
for two years, from January 2003 until January 2005, twice as long as necessary to justify
increasing the period of exclusion. I.G. Ex. 1 at 14.

Incarceration. The sentence imposed by the criminal court included a period of
incarceration for one year and one day. I.G. Ex. 3 at 2.

Other adverse action. As part of his plea agreement, Petitioner agreed to surrender his
license to practice podiatry. I.G. Ex. 4 at 2. Ina final consent order that the New Jersey
Board of Medical Examiners issued on June 5, 2009, Petitioner surrendered his license to
practice podiatry for a minimum of five years. I.G. Ex. 5. In the order, the Board notes
that it earlier summoned him to explain his billing practices. Thereafter, he was indicted
and convicted for billing fraud. The State Attorney General filed a six-count complaint
against him for similar misconduct (e.g., fraudulent billing and fee splitting). In addition
to the license revocation, the Board ordered Petitioner to pay a civil penalty of $60,000.
1.G. Ex. 5 at 4. Thus, based on the circumstances that underlay his conviction, the state
board imposed another adverse action.

These aggravating factors underscore the threat that Petitioner poses to program integrity.
He engaged in fraud for at least two years, costing health insurance programs,
particularly Medicare, a large amount of money. His actions were egregious enough to
merit incarceration and loss of his license to practice podiatry. Based on these factors, I
find that the ten-year exclusion falls within a reasonable range.
B. No mitigating factors justify decreasing the period of
exclusion.

The regulations consider mitigating just three factors: 1) a petitioner was convicted of
three or fewer misdemeanor offenses and the resulting financial loss to the program was
less than $1,500; 2) the record in the criminal proceedings demonstrates that a petitioner
had a mental, physical, or emotional condition that reduced his culpability; and 3) a
petitioner’s cooperation with federal or state officials resulted in others being convicted
or excluded, or additional cases being investigated, or a civil money penalty being
imposed. 42 C.F.R. § 1001.102(c) (emphasis added). Characterizing the mitigating
factor as “in the nature of an affirmative defense,” the Departmental Appeals Board has
ruled that Petitioner has the burden of proving any mitigating factor by a preponderance
of the evidence. Barry D. Garfinkel, M.D., DAB No. 1572 at 8 (1996).

Obviously, because Petitioner’s felony conviction involved program financial losses
many times greater than $1,500, the first factor does not apply here. Nor does Petitioner
claim any mental, physical, or emotional condition that reduced his culpability. He does
not allege cooperation with government officials.

Instead, Petitioner raises other issues, arguing that he presents no danger to the public and
that his patients loved him. He asserts that, since his conviction, he has acted
responsibly. Under the statute and regulations, none of these factors are considered
mitigating.

IV. Conclusion

The I.G. has the authority to impose exclusions for convictions relating to health care
fraud. 42 C.F.R. § 1001.201(a). So long as the period of exclusion is within a reasonable
range, based on demonstrated criteria, I have no authority to change it. Joann Fletcher
Cash, DAB No. 1725 at 7 (citing 57 Fed. Reg. 3298, 3321 (1992)). In this case,
Petitioner’s crime demonstrates that he presents a significant risk to the integrity of health
care programs. The financial loss he caused greatly exceeds the regulatory threshold for
aggravation. His crime continued for at least two years and was serious enough to merit
incarceration and loss of his professional license. | find that these aggravating factors,
which are not set off by any mitigating factor, more than justify a 10-year exclusion.

/s/
Carolyn Cozad Hughes
Administrative Law Judge