Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)

Marc J. Blatstein, M.D., ) Date: August 23, 2007
)
Petitioner, )
)

-Vv.- ) Docket No. C-07-245

) Decision No. CR1638
The Inspector General. )
)
)

DECISION

I sustain the determination of the Inspector General (I.G.) to exclude Petitioner, Marc J.
Blatstein, M.D., from participating in Medicare and other federally funded health care
programs for a period of 13 years.

I. Background

At all times relevant to this case, Petitioner was a podiatrist licensed in the
Commonwealth of Virginia. I.G. Ex. 4, at 1; 1.G. Ex. 5, at 1. On November 30, 2006, the
LG. notified Petitioner that he was being excluded from participating in Medicare and
other federally funded health care programs pursuant to section 1128(a)(3) of the Social
Security Act (Act) (42 U.S.C. § 1320a-7(a)(1)). The basis cited for Petitioner’s exclusion
was his felony conviction in the United States District Court for the Eastern District of
Virginia, Richmond Division Court, of a criminal offense related to fraud, theft,
embezzlement, breach of fiduciary responsibility, or other financial misconduct in
connection with the delivery of an item or service. Petitioner was informed that the I.G.
had imposed the 13-year exclusion based on the presence of certain aggravating factors.
2

By letter dated January 29, 2007, Petitioner requested a hearing. The case was assigned
to me for a hearing and a decision. On February 28, 2007, I convened a pre-hearing
conference by telephone, during which I established a schedule for the parties to submit
riefs and proposed exhibits. In addition, I apprised the parties that they could request an
in-person hearing if they felt that it was necessary to address any material facts that are in
dispute. Neither party requested that I convene an in-person hearing. During the pre-
earing conference counsel for Petitioner was informed that the two issues over which I
ave jurisdiction are: 1) whether the I.G. has the authority to exclude Petitioner from
participation in the Medicare and Medicaid programs; and 2) whether the period of
exclusion imposed by the I.G. is reasonable.

On April 16, 2007, I received the I.G.’s motion for summary affirmance, together with a
rief in support of the motion and seven exhibits, I.G. Exhibits (Exs.) 1-7. On May 29,
2007, I received Petitioner’s response to the I.G.’s motion and four documentary exhibits
which were labeled as A, B, C, and D, with attachments, but which I have marked as
Petitioner’s Exhibits (P. Exs.) 1-4 respectively. On July 3, 2007, I received the 1.G.’s
reply along with an additional exhibit, I.G. Ex. 8. Neither party filed objections to the
exhibits offered by the other party; therefore, I admit I.G. Exs. 1-8 and P. Exs. 1-4 into
evidence.

II. Issue

The I.G. has excluded Petitioner from participation in the Medicare, Medicaid, and all
federal health care programs for a period of 13 years. Petitioner agrees that the I.G. has a
basis upon which to exclude him; however, Petitioner claims that the length of the
exclusion should be decreased to the statutory minimum period of five years. Therefore,
the sole issue before me is whether the length of Petitioner’s exclusion — 13 years — is
reasonable. 42 C.F.R. § 1001.2007.

Ill. Applicable Law

Petitioner’s right to a hearing by an administrative law judge and judicial review of the
final action of the Secretary of the Department of Health and Human Services (Secretary)
is provided by section 1128(f) of the Act (42 U.S.C. § 1230a-7(f)). Petitioner’s request
for a hearing was timely filed and I have jurisdiction over this matter.
3

Section 1128(a)(3) of the Act directs the Secretary to exclude an individual convicted ofa
felony “relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other
financial misconduct” in connection with the delivery ofa health care item or service.

See 42 C.F.R. § 1001.101(c)(1). Individuals excluded under section 1128(a)(3) must be
excluded for a period of not less than five years. Act, section 1128(c)(3)(B).

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

The Secretary has delegated to the I.G. the authority to impose exclusions. 42 C.F.R.

§ 1001.401(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 (2000), citing 57 Fed. Reg. 3298, 3321 (1992).

IV. Findings of Fact and Conclusions of Law

I make findings of fact and conclusions of law (Findings) to support my decision in this
case. I set forth each Finding below, in italics, as a separately lettered heading.

A, There is evidence in this case relevant to four aggravating factors and none
relevant to any mitigating factor.

The I.G. has excluded Petitioner for a period of 13 years. The I.G. determined that the
following aggravating factors justified extending Petitioner’s period of exclusion beyond
the mandatory minimum five-year period:

(1) the acts resulting in the conviction, or similar acts, resulted in a financial loss to
Medicare and the state health care programs of $5,000 or more. 42 C.F.R.
§ 1001.102(b)(1)

On October 5, 2005, Petitioner pled guilty to a felony charge of mail fraud in violation of
18 U.S.C. §§ 1341 and 1342. I.G. Ex. 3. The Court accepted Petitioner’s guilty plea and
entered a judgment of conviction against him on February 8, 2006. The Court ordered
Petitioner to pay restitution in the amount of $272,704.05 to Humana, Aetna, Cigna, and
the Federal Employees Health Benefits Program.
4

(2) the acts that resulted in the conviction, or similar acts, were committed over a
period of one year or more. 42 C.F.R. § 1001.102(b)(2)

Petitioner’s illegal conduct spanned a period from January 1999 to approximately
December 2003. LG. Ex. 4, at 2.

(3) the sentence imposed by the court included incarceration. 42 C.F.R.
§ 1001.102(b)(5)

The Court sentenced Petitioner to 12 months and one day of incarceration. I.G. Ex. 2, at
1-2. The court subsequently increased the period of incarceration from 12 months to 24
months.

(4) the convicted individual or entity has been 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. 42 C.F.R. §1001.102(b)(9).

Petitioner was subject to adverse action by the Virginia Board of Medicine that was based
on the same set of circumstances that serves as the basis for his exclusion. On or about
February 24, 2006, Petitioner surrendered his medical license to the Virginia Board of
Medicine. I.G. Ex. 6. Additionally, on July 18, 2006, the Office of Personnel
Management (OPM) debarred Petitioner for a five-year period based on his felony
conviction.

Petitioner does not dispute the fact that he was convicted of a criminal offense within the
meaning of section 1128(i) of the Act. Instead, Petitioner claims that the length of the
exclusion should be decreased to the statutory minimum period of five years. The crux of
Petitioner’s argument is that “while the I.G. has cited certain factors as aggravating, the
.G. does not adequately explain how the presence of those factors justifies an exclusion
more than 2-1/2 times that imposed by OPM.” Petitioner’s brief (P. Br.) at 2. Petitioner
argues that OPM, after holding an in-person hearing on the same set of facts as here,
reduced Petitioner’s suspension from seven years to five years. Petitioner also argues that
the proposed period is so lengthy as to be obviously punitive. Jd.

5

Section 1128 of the Act is a remedial statute having the purpose of protecting federally
funded health care programs and their beneficiaries and recipients from untrustworthy
individuals. Evidence establishing that an individual is highly untrustworthy will support
a lengthy exclusion. Under the applicable regulations, I am not bound by nor can I
consider as mitigating factors, actions by OPM in my determination as to whether the 13-
year exclusion by the I.G. is reasonable.

Petitioner offered the following mitigating factors to justify a minimal period of
exclusion:

First, Petitioner contends he cooperated with the government officials on
more than one occasion to attempt to assist the government in potential
investigations. Second, Petitioner maintains that he made substantial
restitution payments which have left him virtually penniless and homeless.
Third, Petitioner argues that his actual sentence was approximately 10
months. Fourth, Petitioner asserts that he voluntarily surrendered his
license to the Virginia Board of Health Profession. Fifth, Petitioner argues
that the conduct for which he pled guilty evolved over time from his
legitimate efforts to set up an ambulatory surgery center that complied with
accreditation requirements. Having failed in his efforts to achieve his stated
goal, he ultimately billed insurers for facility fees in instances where he had
not complied with their requirements to legitimately bill.

P. Br. at 4.

The regulations limit what I can consider to be mitigating factors. The regulations dictate
that I can consider as mitigating, only 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 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)(1)-(3). Characterizing a mitigating factor as “in the nature of an
affirmative defense,” the Departmental Appeals Board has ruled that a 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).
6

The first factor does not apply to this case because Petitioner was convicted of a felony
which involved financial losses to the program in an amount significantly greater than
$1,500. Petitioner does not claim that any medical condition should be considered in
reducing his culpability. Thus, I cannot consider the second mitigating factor. Petitioner
argues that he has cooperated with government officials on more than one occasion to
attempt to assist the government in potential investigations. This argument raises the
potential application of the mitigating factor listed at 42 C.F.R. § 1001.102(c)(3).
However, the mitigating factor of cooperation requires that an individual’s cooperation
with federal or state officials results in: (1) others being convicted or excluded from
federal health care programs; (2) additional cases being investigated or reports being
issued by law enforcement authorities identifying program vulnerabilities or weaknesses;
or (3) the imposition of civil monetary penalties or assessments. Petitioner bears the
burden of proving the existence of a mitigating factor by a preponderance of the evidence.
See 42 C.F.R. § 1001.102(c)(3); see also, Garfinkel, DAB No. 1572, at 8 (1996).
Petitioner has provided no specific evidence that his cooperation with federal or state
officials has fulfilled any of the requirements specified in 42 C.F.R. § 1001.102(c)(3).
Thus, Petitioner has not met his burden of proving the existence of a mitigating factor
relative to his cooperation with state and federal officials.

B. Based on the aggravating factors presented in this case, the 13-year
exclusion falls within a reasonable range. 42 C.F.R. § 1001.102(b)(2).

Federal regulations set forth criteria for determining the length of exclusions imposed
pursuant to section 1128 of the Act. In determining whether the length of an exclusion is
reasonable, the administrative law judge considers and evaluates all of the evidence in a
case pertaining to the existence of aggravating and mitigating factors set forth in 42
C.F.R. § 1001.102, and whether the I.G.’s determination is within a reasonable range.
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.

Petitioner did not establish the presence of any mitigating factors that would justify
reducing the period of his exclusion. See 42 C.F.R. § 1001.102(c). Therefore, I must
evaluate the reasonableness of Petitioner’s exclusion based solely on evidence that is
relevant to the four aggravating factors that I have discussed. Contrary to Petitioner’s
arguments, all four of the aggravating factors relied on by the I.G. in determining to
enhance the exclusion period to 13 years have been clearly established and proven.
7

Petitioner has not pleaded or proven any of the mitigating factors recognized by
regulation which I am bound to consider. The evidence advanced by the I.G. clearly
establishes that the proposed length of the period of exclusion is within a reasonable
range, and is therefore not unreasonable. The Secretary has delegated to the IG. 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. Cash, DAB No. 1725, at 7 (2000),
citing 57 Fed. Reg. 3298, 3321 (1992).

In this case, Petitioner’s misconduct demonstrates that he presents a significant risk to the
financial integrity of federal health care programs. The financial loss of more than
$270,000 he caused greatly exceeded the regulatory threshold for aggravation. His crime
was serious enough for the Court to have sentenced Petitioner to 12 months of
incarceration. Moreover, in considering a “downward departure” in his sentence, the
Court decided to increase Petitioner’s period of incarceration from 12 months to 24
months. I.G. Ex. 8, at 2. Finally, Petitioner surrendered his medical license to the
Virginia Board of Medicine as the result of his felony conviction. Based upon all of these
factors, I am unable to find that a 13-year exclusion is outside a reasonable range.

V. Conclusion

Considering the totality of the evidence, I conclude that the I.G. has a basis for excluding
Petitioner from participation in Medicare, Medicaid, and all other federal health care
programs. I also conclude that the I.G. has established that the 13-year exclusion is
within a reasonable range. Therefore, I sustain the I.G.’s exclusion of Petitioner for a
period of 13 years.

/s/
Alfonso J. Montano
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)

Anna Gravich, M.D., ) Date: August 24, 2007
)
Petitioner, )
)

-Vv.- ) Docket No. C-07-230

) Decision No. CR1637
Centers for Medicare & Medicaid )
Services. )
)

DECISION

l affirm the determination of the Medicare Part B Hearing Officer (Hearing Officer) to
revoke the Medicare billing privileges of Petitioner, Anna Gravich, M.D.

I. Background

By letter dated September 26, 2006, the Centers for Medicare & Medicaid Services
(CMS), acting through the National Heritage Insurance Company, Inc. (NHIC), the
Medicare Part B carrier for California, notified Petitioner that her Medicare billing
privileges would be revoked effective October 26, 2006, pursuant to 42 C.F.R.

§ 424.535(a)(3)(i)(B), based on her 1999 federal felony convictions for income tax
evasion and subscribing to a false income tax return. Petitioner requested a
reconsideration-level carrier hearing. By decision dated December 18, 2006, the
Medicare Hearing Officer issued an unfavorable decision which upheld the revocation by
the Medicare carrier. By letter dated January 30, 2007, Petitioner requested a hearing to
appeal the unfavorable decision by the Medicare Hearing Officer.

I convened a prehearing conference in this matter on March 19, 2007. During the
conference, I set a briefing schedule so that the parties could address the issues of this
case. Petitioner filed her brief (P. Br.) on April 30, 2007 along with seven exhibits,
2

Petitioner Exhibits (P. Exs.) 1-7. On May 18, 2007, CMS filed its brief in response (CMS
Br.) along with two exhibits, CMS Exhibits (CMS Exs.) 1-2, and four attachments, CMS
Attachments (CMS Atts.) 1-4. On June 1, 2007, Petitioner filed her brief in response

(P. Response Br.) to CMS’s brief. By order dated June 8, 2007, I noted that Petitioner, in
a footnote of her Response brief, reserved for an in-person hearing the issue of whether
CMS failed to exercise its discretion in making the decision to revoke Petitioner’s billing
privileges. See P. Response Br. at 9,n.4. In a June 8, 2007 Order, I stated that this issue
is not a factual issue appropriate for an in-person hearing, but, rather, a legal issue
appropriate for briefing. I set a further briefing schedule for the parties to discuss whether
I have authority to question CMS’s discretion, and, if so, whether CMS should exercise
its discretion in this case. Subsequently, on July 3, 2007, Petitioner filed her response to
my June 8, 2007 Order. In Petitioner’s July 3, 2007 response, she withdrew her claim
regarding the exercise, or non-exercise of CMS’s discretion, and also withdrew her
request for an in-person hearing on this issue. Instead, Petitioner requested that I make
my decision based on the written briefs. On July 26, 2007, CMS filed its response to my
June 8, 2007 Order and rested on its previous submissions. CMS did not request an in-
person hearing in any of its submissions. Because Petitioner has withdrawn its claim
concerning CMS’s exercise of discretion, I do not discuss the merits of this claim in my
decision.

I make my decision based on the applicable law and the parties’ briefs and exhibits.
If. Applicable Law

Section 1842(h)(8) of the Social Security Act (Act), 42 U.S.C. § 1395u(h)(8), grants the
Secretary of the Department of Health and Human Services (Secretary) discretion to
refuse to enter into an agreement, or to terminate or refuse to renew an agreement, with a
physician or supplier that “has been convicted of a felony under Federal or State law for
an offense which the Secretary determines is detrimental to the best interests, of the
program.”

Section 1866(j) of the Act, 42 U.S.C. § 1395cc(j), requires the Secretary to “establish by
regulation a process for the enrollment of providers of services and suppliers under this
title,” and grants “[a] provider of services or supplier whose application to enroll (or, if
applicable, to renew enrollment) under this title is denied” a “hearing and judicial review
of such denial under the procedures that apply under subsection (h)(1)(A).” Act, section
1866(j)(1)(A) and (2).
3

The regulation governing revocation of enrollment provides:

(a) Reasons for revocation. CMS may revoke a currently enrolled provider’s or
supplier’s Medicare billing privileges and any corresponding provider agreement
or supplier agreement for the following reasons .. .

(3) Felonies. The provider, supplier or any owner of the provider or supplier,
within the 10 years preceding enrollment or revalidation of enrollment, was
convicted of a Federal or State felony offense that CMS has determined to be
detrimental to the best interests of the program and its beneficiaries . . .

(i) Offenses include. . .

(B) Financial crimes, such as extortion, embezzlement, income tax evasion,
insurance fraud and other similar crimes for which the individual was convicted,
including guilty pleas and adjudicated pretrial diversions.

42 C.F.R. § 424.535.

The Departmental Appeals Board (Board) has held that section 1866(j)(2) of the Act
gives appeal rights to suppliers. “Section 1866(j)(2) of the Social Security Act (the Act)
gives suppliers appeal rights, for certain determinations involving enrollment, using the
procedures that apply under section 1866(h)(1)(A) of the Act. Those procedures are at 42
C.F.R. Part 498 and provide for ALJ [administrative law judge] hearings and Board
review.”' MediSource Corporation, DAB No. 2011, at 2 (2006). Further, the Board has
recognized the procedures and the burden of persuasion established by the Secretary in
the Program Integrity Manual (PIM, Pub. 100-08) at Chapter 10, § 19. “The Medicare
Provider Integrity Manual provides: ‘The burden of persuasion is on the .. . supplier...
to show that its enrollment application was incorrectly disallowed or that the revocation
of its billing number was incorrect.’ [Citing PIM, Ch. 10, § 19.B.] This provision is
consistent with the Board’s conclusion in provider appeals under 42 C.F.R. Part 498 that
a provider must prove substantial compliance by the preponderance of the evidence, once
CMS has established a prima facie case that the provider was not in substantial

' A proposed rule, not yet effective, would extend to suppliers the due process
procedures of 42 C. F. R. Part 498, including the right to a hearing by an ALJ. See 72
Fed. Reg. 9479 (March 2, 2007). CMS consents to the application of the procedures in 42
C.F.R. Part 498 to the matter before me.
4

compliance with relevant statutory or regulatory provisions.” Jd. at 2-3.
Ill. Issue

The issue in this case is whether CMS was authorized to revoke Petitioner’s Medicare
billing privileges effective October 26, 2006.

IV. Discussion

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

1. The regulation found at 42 C.F.R. § 424.535(a)(3)(i)(B) was not applied
retroactively.

On or about June 8, 1999, Petitioner was convicted in the United States District Court,
Central District of California, Western Division-Los Angeles, of felony income tax
evasion, in violation of 26 U.S.C. § 7201, and subscribing to a false income tax return, in
violation of 26 U.S.C. § 7206(1). P. Ex. 3. Petitioner has admitted these convictions.

P. Br. at 2,n.1. Based on these convictions, CMS revoked Petitioner’s Medicare billing
privileges, effective October 26, 2006, pursuant to 42 C.F.R. § 424.535(a)(3)(i)(B).

Petitioner argues that the regulation found at 42 C.F.R. § 424.535(a)(3)(i)(B) was applied
retroactively. The effective date of this regulation was June 20, 2006. However, the
felony convictions upon which CMS rests Petitioner’s revocation occurred in 1999.
Petitioner argues that under Bowen v. Georgetown University Hospital, 488 U.S. 204, 109
S.Ct. 468 (1988), congressional enactments and administrative rules will not be construed
to have retroactive effect unless their language requires this result and that therefore

42 C.F.R. § 424.535(a)(3)(i)(B) was applied retroactively in the case before me.

Petitioner’s argument is without merit. The regulation at 42 C.F.R. § 424.535(a)(3)(i)(B)
implements the statutory provision at section 1842(h)(8) of the Act. Section 1842(h)(8)
of the Act was enacted as part of the Balanced Budget Act of 1997, which predates
Petitioner’s 1999 felony convictions. Section 1842(h)(8) of the Act grants the Secretary
discretion to refuse to enter into an agreement, or to terminate or refuse to renew an
agreement, with a physician or supplier that “has been convicted of a felony under
Federal or State law for an offense which the Secretary determines is detrimental to the
best interests of the program or program beneficiaries.” See H.R. Conf. Rep. 105-217,
H.R. Conf. Rep. No. 217, 105" Cong., 1° Sess. 1997, 1997 U.S.C.C.A.N. 176, 1997 WL
5

541276. Section 1842(h)(8) predates Petitioner’s 1999 felony convictions and therefore
has not been applied retroactively.

The language of the regulation is clear and unambiguous. The regulation applies to
convictions “within 10 years preceding enrollment or revalidation of enrollment” that are
determined to be detrimental to the best interests of the program and its beneficiaries.

42 C.F.R. § 424.535(a)(3). The regulations specifically include income tax evasion as an
offense which is detrimental to the best interests of the program and its beneficiaries.

42 C.F.R. § 424.535(a)(3)(i)(B).

Further, the Secretary stated in the preamble:

[W]e believe it is necessary for us to impose the requirements of this regulation on
existing providers and suppliers and to establish safeguards to enable us to deny
enrollment of unqualified providers and suppliers, and to revoke the billing
privileges of egregious offenders whose actions place the Medicare Trust Funds at
risk.

71 Fed. Reg. 20,754, 20,773 (2006). Petitioner’s conviction for felony income tax
evasion has been determined to be detrimental to the best interests of the program and its
beneficiaries. It is clear that CMS has applied this regulation to Petitioner exactly as
intended, completely consistent with the plain meaning of the language of the regulation
and the preamble.

Petitioner’s reliance on Bowen is misplaced. The regulation at issue in Bowen appears to
have violated the Administrative Procedures Act (APA), which forbids retroactive
rulemaking. I am bound to follow the Secretary’s rules. While I may decide whether
CMS’s interpretations of a regulation are correct or not, I lack authority to find a
regulation invalid because the Secretary did not comply with the provisions of the APA.
Vermillion Behavioral Health Center, DAB CR751 (2001); Marion Citrus Mental Health
Center, DAB CR864 (2002).

2. Revocation gives rise to appeal rights, while deactivation gives rise to rebuttal
rights.

Petitioner argues that since she was not given an initial opportunity to file a rebuttal
statement, her billing privileges were improperly revoked. Petitioner is mistaken. The
opportunity to file a rebuttal statement only arises when billing privileges are deactivated
under 42 C.F.R. § 424.545(b). Petitioner’s billing privileges were not deactivated, but
were revoked under 42 C.F.R. § 424.535, a different regulation than the one relied on by
6

Petitioner. Revocation means that a provider’s or supplier’s billing privileges were
terminated. 42 C.F.R. § 424.502. Revocation gives rise to appeal rights, while
deactivation gives a petitioner an opportunity to file a rebuttal statement. 42 C.F.R.
§ 424.545(a) and (b).

3. Petitioner’s Medicare billing privileges may be revoked based on a felony
income tax evasion conviction which occurred within 10 years prior to
enrollment or revalidation of enrollment.

Petitioner claims that a revalidation in this case did not occur and, therefore, Petitioner’s
billing privileges must be reinstated. Petitioner argues that there was no revalidation, but
merely an updating of Dr. Gravich’s records based on her notification to the Medicare
program ofa change of address. Petitioner urges that the updating of Petitioner’s file
occurred pursuant to 42 C.F.R. § 424.520(b), which requires that, following enrollment, a
provider or supplier must report to CMS any changes to the information furnished on the
enrollment application.

On or after May 24, 2005, Petitioner submitted a change of information to NHIC ona
CMS Form 8551, identifying a new practice location and a new mailing address for
purposes of Medicare payments. CMS Ex. 1, at § 9. However, 42 C.F.R. § 424.520(b),
under which Petitioner claims she was updating her file, did not go into effect until 2006
and could not have affected Petitioner’s May 24, 2005 change of information. At the
time that Petitioner submitted her change of information form, procedures for verification
and validation of information were then located in section 16 of Chapter 10 of the PIM
pursuant to revisions made by CMS’s Transmittals 41 and 42 dated May 23, 2003. Jd. at
4 10; CMS Att. 3. The procedures in effect when Petitioner submitted her CMS Form
8551 provided that when a physician (supplier) submitted a change of information, that
the verification process was followed to validate the information being changed and, by
this method, a supplier’s Medicare enrollment was revalidated. Jd. at { 8. CMS provided
me with evidence that the revalidation process in effect at the time Petitioner submitted
her Form 8551 was followed by NHIC. CMS Exs. 1, 2.

Petitioner’s Medicare billing privileges were revoked pursuant to 42 C.F.R.

§ 424.535(a)(3). The validation process followed by NHIC in 2005 qualifies as a
revalidation of enrollment within the meaning of 42 C.F.R. § 424.535(a)(3). Prior to the
new regulations that are currently in effect, procedures already existed for validation,
revalidation and changes of information. CMS Atts. 1-4. The previous procedures
allowed for existing enrollment information in the system to be checked against new
7

information. The new regulations merely allow for more structure, but do not change the
essence of the revalidation procedures and require all providers and suppliers to undergo
the revalidation procedure to ensure continued compliance with Medicare requirements.

V. Conclusion

I conclude that CMS properly revoked Petitioner’s Medicare billing privileges.

/s/
Alfonso J. Montano
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
SunBridge Care and Rehabilitation ) Date: August 13, 2007

for Pembroke, )
(CCN: 34-5409), )
)
Petitioner, )
)

-Vv.- ) Docket No. C-06-593

) Decision No. CR1636
Centers for Medicare & Medicaid )
Services. )
)

DECISION

sustain the determination of the Centers for Medicare & Medicaid Services (CMS) to
impose civil money penalties against Petitioner, Sunbridge Care and Rehabilitation for
Pembroke, in amounts of $4,000 per day for each day of a period that began on March 6,
2006 and which ended on May 11, 2006, and $50 per day for each day of a period that
egan on May 12, 2006 and which ended on June 19, 2006.

I. Background

Petitioner is a skilled nursing facility doing business in Pembroke, North Carolina. It
participates in the Medicare program. Its participation in Medicare is governed by
sections 1819 and 1866 of the Social Security Act (Act) and by regulations at 42 C.F.R.
Parts 483 and 488.

Petitioner was surveyed for compliance with Medicare participation requirements on May
2, 2006 (May survey). The surveyors found two distinct failures by Petitioner to comply
substantially with these requirements and they found that, in both instances, Petitioner’s

2

noncompliance was so egregious as to comprise immediate jeopardy for its residents.’
CMS concurred with the surveyors’ findings and determined to impose the civil money
penalties that I describe in the opening paragraph of this decision.

Petitioner requested a hearing and the case was assigned to me for a hearing and a
decision. I held an in-person hearing at Raleigh, North Carolina on June 5, 2007. I
received into evidence exhibits from CMS which it identified as CMS Ex. 1 - CMS Ex.
19 and exhibits from Petitioner which it identified as P. Ex. 1 - P. Ex. 46. Additionally, I
heard the cross-examination and redirect testimony of three witnesses whose sworn
written direct testimony is in evidence as exhibits. Each party filed pre- and post-hearing
briefs.

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

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

2. Petitioner proved to be clearly erroneous CMS’s determination that
Petitioner’s noncompliance was at the immediate jeopardy level; and

3. CMS’s remedy determinations are reasonable.
B. Findings of fact and conclusions of law
I make findings of fact and conclusions of law (Findings) to support my decision in this

case. I set forth each Finding below as a separate heading. I discuss each Finding in
detail.

' “Immediate jeopardy” is defined at 42 C.F.R. § 488.301 to mean noncompliance
with one or more participation requirements that has caused, or is likely to cause, serious
injury, harm, impairment, or death to a resident.
3

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

The regulation that is at issue here requires a facility to ensure that its resident
environment be as free of accident hazards as is possible. This regulation has been the
subject of much litigation before the Departmental Appeals Board and its administrative
law judges. It is settled that the regulation imposes on a facility the duty to anticipate
possible accidents from all hazards that it knows or should know about and to take all
reasonable measures in order to forestall the occurrence of preventable accidents.

The allegations of noncompliance in this case center on Petitioner’s transportation of
wheelchair-bound residents to appointments away from its premises. Petitioner maintains
a van for such transportation, equipped to carry wheelchair bound residents, and its staff
includes individuals who drive the van to and from appointments. CMS alleges that
during the period that is at issue in this case Petitioner’s staff failed to transport
wheelchair-bound residents safely in its van.

Specifically, CMS contends that Petitioner’s staff failed properly to secure residents in
their wheelchairs while they were being transported. The consequence, according to
CMS, was that residents could fall from their chairs during transportation with the
likelihood of serious and even life-threatening injuries.

As part of its evidence, CMS cites accidents that occurred to two residents while they
were being transported in Petitioner’s van. The first of these accidents occurred on
August 8, 2005 and involved a resident who is identified in the report of the May survey
as Resident # 1. CMS Ex. 4, at 11 - 13. The second incident occurred on March 6, 2006
and involved a resident identified in the May survey report as Resident #3. CMS Ex. 4,
at 1-3. In the case of Resident # 3, it is undisputed that she slid out of her wheelchair
while she was being transported and fell to the floor of the van, sustaining a fractured hip.
In the case of Resident # 1, it is undisputed that there was an accident involving the
resident while he was being transported that caused him to sustain abrasions and shoulder
pain.”

? The parties dispute whether Resident # 1 fell out of his wheelchair while being
transported. CMS contends that the resident fell to the floor of the van. Petitioner argues
that he was jostled while in the wheelchair and that he never actually fell. I find it
unnecessary to resolve this fact dispute. I note, however, that Petitioner’s own
investigation of the accident involving the resident reports that the resident slid out of his
wheelchair while in the van. P. Ex. 11, at 1.
4

Petitioner’s noncompliance, according to CMS, lay in the manner in which it secured its
wheelchair bound residents while they were being transported. Petitioner’s van is
designed to carry residents in their wheelchairs. The van is not equipped with seats
except for the driver’s seat and a passenger seat that is next to the driver’s seat. P. Ex. 25,
at 7. The remainder of the van is an empty shell into which residents and their
wheelchairs may be placed. /d., at 1. It is designed to hold more than one row of
wheelchairs. Jd. For each row, there are tie-downs located on the van’s floor to which
the wheels of a wheelchair may be secured. /d., at 1, 3.

The van also contains harnesses that are designed to hold passengers securely in their
wheelchairs and to prevent residents from coming out of their chairs in the event of an
accident. The harnesses are intended to be anchored at three points: on the van’s side
panel; its ceiling; and, on the floor. P. Ex. 25, at 1,2. Each harness is permanently
fastened to the side panel and ceiling anchors. In order to restrain a passenger, a harness
must also be attached to an anchor point on the floor of the van. A wheelchair bound
resident will be securely held in his or her wheelchair if the chair is tied down securely to
the van’s floor and if he or she is harnessed correctly.

CMS offered persuasive evidence that harnessing a resident “correctly” means attaching
the harness to an anchor point that is located behind the resident’s wheelchair. When the
arness is attached in this manner, it fits snugly across a resident’s hips and prevents the
resident from sliding out of the wheelchair or lurching forward in the event of a sudden
stop or accident. Tr. at 42, 44, 45-46; P. Ex. 25, at 3 (images at top and lower right
portion of page).

However, there is also an incorrect way of attaching the harness. If the harness is
attached to an anchor point on the van’s floor that is in front of the resident’s wheelchair
it fails to provide any pelvic restraint. Tr. at 40-42. In that circumstance, a wheelchair
ound resident could slip out of the harness. /d., at 31-32; see P.Ex. 25, at 3 (image at
lower left portion of page).

The evidence offered by CMS supports the conclusion that Petitioner’s staff did not
understand the need to attach passenger harnesses to floor anchors that were located
ehind the wheelchairs of those residents who they were transporting. As a consequence,
the staff failed to provide the residents with the protection that the harnesses were
designed to provide. At the May 12 survey a surveyor asked Petitioner’s staff to
demonstrate how a wheelchair and its resident is secured while in the van. The
demonstration was conducted by one of Petitioner’s drivers with Petitioner’s maintenance
supervisor present. The driver fastened the harness to a floor anchor located in front of
the chair, thus enabling the surveyor, who was seated in the chair, to slip out of the chair
by leaning forward. CMS Ex. 4, at 6; Tr. at 41-42.

5

The evidence offered by CMS supports the additional conclusion that the staff routinely
attached the harnesses to anchors located in front of the chairs thereby often putting
residents at risk. The demonstration witnessed by the surveyor was not an isolated error,
but established the staff’s usual way of attaching the harnesses. And, it was an obvious
error that was noticed immediately by Petitioner’s maintenance supervisor. At the
demonstration that I describe above, Petitioner’s maintenance supervisor showed the
driver how properly to fasten the harness to a floor anchor that was located behind the
chair. However, the driver protested that she was unable to accomplish this when there
were multiple wheelchairs present in the van. CMS Ex. 4, at 6 - 7; Tr. at 46. According
to the surveyor the driver told her that:

[In transporting four residents, as . . . [the driver] did some days of the
week, ... there was no way to secure those residents with the — with the
harness going behind the chair, which would secure the resident, that she
was not able to do that, that she could only secure the resident by the — by
securing to the front of the van.

Tr. at 46; CMS Ex. 4, at 7.

The foregoing evidence, if not rebutted, strongly supports a finding that Petitioner
routinely was transporting its wheelchair bound residents unsafely and in a manner that
made serious injury, harm or even death likely. By routinely attaching the residents’
harnesses incorrectly, Petitioner’s staff made practically useless these essential safety
devices. The hazard caused by improper fastening of the harnesses was entirely
foreseeable because even a simple demonstration of their use established the
consequences of fastening a harness to a floor anchor located in front of, as opposed to
one located behind, a wheelchair.

In reaching this conclusion it is unnecessary for me to decide whether failure to attach the
harnesses correctly was the cause of the accidents and injuries sustained by Residents #s 1
and 3, although it is highly likely that an improperly attached harness, in the case of
Resident # 3, caused that resident to slide out of her wheelchair. The risks to residents
were inherent in Petitioner’s staff’s failure to comprehend how properly to use a
necessary safety device that had been installed in the van by its manufacturer. Those
risks created a high likelihood of eventual serious injury, harm, impairment, or death to a
resident whether or not the improper fastening of the harnesses was the specific cause of
the accidents sustained by the two residents. However, the fact that two residents
sustained accidents while being transported should have, at the very least, put Petitioner
and its staff on notice that something might be seriously wrong in the way that residents
were being secured while they were transported.

6

The evidence offered by CMS thus proves that residents routinely were being transported
in an unsafe manner and also that Petitioner’s staff failed to heed obvious warnings that
its manner of transporting these residents was unsafe.’ At a minimum, and certainly after
the accident involving Resident # 3 (the second of the two accidents), Petitioner’s staff
should have intensively reviewed the way in which residents were being transported. It is
reasonable to conclude that, had it done so, the staff would have determined that
harnesses were being attached incorrectly, thereby causing a likelihood of serious injury,
harm, impairment, or death to residents.

Petitioner makes various arguments in response to CMS’s case which I discuss below.
But, it is important at the outset of my analysis of these arguments to identify what
Petitioner does not challenge with affirmative evidence. Petitioner does not contest
explicitly CMS’s evidence showing that its staff routinely fastened the restraining
harnesses in its vans to floor anchors located in front of the residents’ wheelchairs. It has
offered no affirmative proof showing that the harnesses were, in fact, routinely fastened
behind the residents. Neither does it offer evidence to contest the evidence offered by
CMS which proves that a resident would be capable of falling out of a wheelchair in the
circumstance where the harness is fastened in front of, and not behind, the resident. Nor
does Petitioner challenge CMS’s assertion that fastening the harnesses in front of

> There is another potential issue relating to Petitioner’s transportation of residents
in its van. At the hearing, I voiced a concern that Petitioner possibly had failed to assess
its residents for suitability of van transportation. I premised my concern on the obviously
frail and debilitated state of Resident # 3 and I wondered whether that resident should
have been in Petitioner’s van at all. I identified this as a new issue and I invited the
parties to brief the evidence in terms of how it related to this issue. 42 C.F.R. § 498.56.
CMS’s counsel failed to address this issue in her post-hearing brief. Consequently, I
decline to decide it here.
7

residents put them at risk of accidents.’ And, finally, Petitioner does not deny that an
intensive review of its procedures after the accident sustained by Resident # 3 would have
made its staff's unsafe transportation practices apparent.

Petitioner asserts that its staff investigated the accident involving Resident # 3 thoroughly
at the time and that Petitioner’s maintenance director found no defect or problem with the
van or its harnesses. Petitioner’s post-hearing brief at 16. Petitioner concludes: “it
appears that the van’s safety equipment worked exactly as designed and intended to
secure the Resident in place and to prevent serious injury.” /d. This assertion dodges the
issue. As I discuss in detail below, there is no dispute in this case that, had the harnesses
in the van been attached properly, they would have restrained the residents who were
being transported. Nor has CMS contended that the harnesses were defective or
inherently unsafe. Therefore, the issue is not whether the van and its equipment worked
as designed, as Petitioner asserts, but whether the staff was utilizing the equipment
properly. The overwhelming and unrebutted evidence is that it was not.

Furthermore, the evidence offered by Petitioner does not satisfy me that it conducted the
thorough and intensive investigation that it contends it conducted. It is apparent that,
whatever investigation transpired, it failed to reveal the obviously erroneous way in
which the van’s drivers were attaching the harnesses to the van’s floor. And, that error
was so obvious that it was noticed immediately by a surveyor and by Petitioner’s
maintenance supervisor at a demonstration of the harnesses’ use.

Petitioner’s staff completed an event/incident report on August 8, 2005, after the accident
involving Resident # 1. P. Ex. 11. The report contains a statement describing what
happened to the resident, concluding a finding that the resident slid out of his wheelchair
when the van made a sudden stop. /d., at 1. But, the report contains no analysis of why
the resident slid out of the wheelchair. In particular, it is devoid of any analysis of the
functioning of the van’s safety features. After the accident involving Resident # 3, on
March 6, 2006, Petitioner’s management collected statements from members of the staff.

* Petitioner did not offer any evidence supporting an argument that the harnesses
were intended to be fastened in front of residents or that they would function properly if
fastened that way. However, among Petitioner’s exhibits is a Department of Veterans
Affairs publication entitled, “Preliminary evaluation of wheelchair occupant restraint
system usage in motor vehicles.” P. Ex. 40. The document contains a diagram (Figure 1)
describing “zones of preferred and optional angles for pelvic restraints.” /d., at 3. The
diagram clearly shows that the preferred and optional angles for such restraints depend on
fastening the restraints behind an individual’s wheelchair. Jd. The document also
contains a photograph (Figure 3) showing a harness’s pelvic belt crossing over the
armrest of a wheelchair and fastened to the floor behind the chair. /d., at 4.
P. Ex. 19. The statements include a statement from Petitioner’s maintenance director in
which he says:

Upon looking at the safety equipment in the facility van, my inspection of
all fasteners, belts and floor brake hookups I found nothing requiring repair
and nothing defective due to improper use.

Id., at 5. It is evident from this statement that the maintenance supervisor examined the
van’s safety equipment, including the harnesses, to determine whether they were broken
or had been rendered defective from improper use. But, it does not suggest that he
queried the van’s drivers to determine whether they were attaching the harnesses
properly. It is reasonable to infer that the maintenance director did not ask the drivers to
demonstrate how they attached the harnesses when he made his inspection after the
March 6, 2006 incident because, when such a demonstration was performed for the
surveyor on May 12, 2006, it was the maintenance supervisor who noticed that the
harness would function properly if attached behind, and not in front of, a wheelchair. Tr.
at 46.

Although Petitioner does not directly contest CMS’s evidence concerning how harnesses
were fastened, it asserts that there was a “dispute at the hearing” regarding how the
harnesses were attached to the floor of the van. Petitioner’s post-hearing brief at 10. It
seems to contend that the survey report and/or testimony concerning how the harnesses
were attached is vague and inconclusive. It also contends that the surveyor who
conducted the May survey “suggested, but never actually directly said, that she was able
slide under the belt for . . . [the reason that the belt was fastened in front of her] but had
the belt been fastened behind the wheelchair, she would not have been able to slide out.”
Id. 1 disagree with these characterizations of the record. There was nothing vague about
the survey report or the surveyor’s testimony regarding the issue of how the harnesses
were attached by Petitioner’s staff. To the contrary, both the survey report and the
surveyor’s testimony identify the attachment of harnesses to floor anchors located in front
of residents as an unsafe method of securing residents which caused a likelihood that
residents would fall out of their chairs while being transported in the van.

In challenging CMS’s noncompliance finding, Petitioner argues that CMS has no
authority to regulate Petitioner’s transportation of residents to off-premises sites. The
logic of Petitioner’s argument is that CMS’s authority to regulate nursing facilities ends at
a facility’s doorstep. Thus, as Petitioner would have it, its staff's manner of
transportation of residents — even if unsafe — is simply beyond the pale of what CMS is
authorized by the Act and regulations to regulate. Petitioner argues also that motor
vehicle safety regulation is uniquely within the purview of State regulations and is thus
exempt from any authority that CMS might exercise.
9

I find Petitioner’s argument to be without merit. The identical argument was addressed
and rejected by an appellate panel of the Departmental Appeals Board in Liberty Nursing
and Rehabilitation Center - Mecklenburg County, DAB No. 2095 (2007). CMS’s
authority to regulate the care given by a participating skilled nursing facility is not limited
by the exterior walls of a facility’s structure. There is literally nothing in either the Act or
implementing regulations that suggests such limitations. Rather, the Act and regulations
extend regulatory authority over the functions and operations of a nursing facility whether
those functions and operations transpire within or outside of a facility’s structure.

Moreover, there is nothing in the Act or regulations that suggests that CMS must or will
defer to State or local authorities when it comes to regulating nursing facility care. There
are many instances in which federal and State authority overlap. For example, CMS
regulates the safety of facility structures through enforcement of the Life Safety Code.
The fact that States may have their own laws or regulations (such as fire safety codes)
which also regulate the safety of structures has never served as an impediment to CMS’s
authority.

Obviously, Petitioner operated its van as part of its facility and offered van transportation
to residents as part of the care that it provided to them. The van in question is owned and
maintained by Petitioner. It is driven by Petitioner’s salaried staff. Petitioner trains its
staff in safe operation of the van and ensures that the staff complies with facility policies
and rules. I can discern no separation of the care provided to residents through their
transportation by van from the care that Petitioner provides its residents within the walls
of its facility.

Petitioner’s reading of the Act and regulations would produce absurd results. For
example, the regulation that is at issue here has long been held to require a facility to
ensure that known or knowable risks of resident elopement are eliminated. A facility is
responsible, under this analysis, for the safety of its residents inside the facility’s
structure. But, it is also responsible for its residents’ safety in the event of their
unauthorized departure (elopement). Petitioner’s analysis would eliminate that
responsibility.

Petitioner argues also that “the mere fact that a resident (or surveyor) could (or did) slip
under an original-equipment vehicle safety belt does not necessarily mean that
Petitioner’s use of the safety equipment in the van was improper or unreasonable.”
Petitioner’s post-hearing brief at 20. I find this argument to be unpersuasive. CMS’s
case is not premised on the “mere fact” of a resident slipping under a harness. The hazard
in this case was not present in spite of Petitioner’s proper use of safety equipment but it
was caused by the staff’s improper fastening of the van’s harnesses. The surveyor was
10

able to slip out from under a harness during the staff's demonstration of its use because it
was not fastened properly. She would not have been able to do so had it been fastened
properly. Staff routinely fastened the harnesses improperly. Had the staff fastened the
harnesses correctly then the hazard would have been eliminated.

Petitioner’s central argument appears to be that CMS is unfairly contending Petitioner to
be deficient “simply because Resident # 3 suffered a serious injury while being
transported in Petitioner’s van.” Petitioner’s post-hearing brief at 28. More specifically,
Petitioner argues that CMS’s position is that the harnesses in Petitioner’s van were
inadequate to protect Petitioner’s residents — even when they were used exactly as is
directed — and that Petitioner is liable for not having provided these residents with some
additional protection such as supplementary lap belts. Petitioner reiterates this argument
with slightly different phrasing, contending that: “the crux of this case is that CMS is
attempting to impose liability against Petitioner because a safety device intended for one
purpose — in this case, a vehicle safety belt system designed, used and intended to prevent
catastrophic injury in a collision — failed to serve some other purpose — in this case,
positioning or restraining a resident into a wheelchair.” Petitioner’s post-hearing brief at
32.

But, in fact, CMS does not assert that Petitioner was deficient notwithstanding its use of
harnesses consistent with safety instructions. Nor does CMS contend that the harnesses
were defective or were inadequate to protect residents in the van. Petitioner’s argument is
a straw man and does not in any sense reflect the true nature of Petitioner’s
noncompliance. Petitioner’s assertion notwithstanding, the crux of this case is improper
use of safety harnesses by Petitioner’s staff. The improper use of these harnesses made
residents vulnerable to precisely the type of accident that Petitioner contends that the
harnesses were designed to protect against.*

2. Petitioner failed to comply substantially with the requirements of 42
C.F.R. § 483.75.

The regulation that is at issue here requires that a facility 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. The

* To support its argument Petitioner contends that the surveyor insisted that
Petitioner could only correct its noncompliance by employing supplemental lap belts as
addition to the van’s harnesses. But, that is not what the surveyor required. The surveyor
did not give the facility specific instructions as to how to correct its deficiency. Tr. at 57 -
58. Correction of the deficiency was Petitioner’s responsibility and the way in which it
corrected the deficiency was Petitioner’s choice.
11

regulation’s requirements include imposing a duty on a facility’s management to assure
that its staff identify and address accident hazards. It also requires a facility’s
management to assure that the staff follow established safety procedures and protocols.

CMS’s allegations of Petitioner’s noncompliance with this regulation derive in some
measure from its contentions concerning Petitioner’s failure to comply with the
requirements of 42 C.F.R. § 483.25(h)(1). The logic behind CMS’s argument is that
Petitioner’s failure to protect its residents against accident hazards embodied to a
substantial extent a failure by its management to recognize and to address a serious
accident risk resulting from the way Petitioner’s staff transported its residents.

I find CMS’s arguments to be persuasive and not rebutted by Petitioner. It is apparent
that Petitioner’s management failed to comprehend that Petitioner’s staff was not properly
fastening the van’s safety harnesses and that this failure was an ongoing problem. The
accident involving Resident # 3, which occurred on March 6, 2006, should have put
Petitioner’s management on notice that, potentially, there was a serious problem relating
to the way its residents were being transported. But, Petitioner’s management failed to
investigate the manner of transportation adequately to reveal what turned out to be a
glaring error by its staff, one that was being repeated each time the van was used to
transport multiple wheelchair bound passengers (reported by one driver to occur on more
than one day per week). Tr. at 46.

Petitioner argues that: “CMS offered no evidence that Petitioner’s administration had any
reason for unusual concern about use of its van... .” Petitioner’s post-hearing brief at
45. I disagree. The two accidents that are at issue in this case — especially the accident
involving Resident # 3 on March 6, 2006 — put Petitioner’s management on notice that
something might be seriously wrong with the way in which residents were being
transported. And, had Petitioner’s management looked closely at the way in which
residents were being transported, it should have known immediately that the van drivers
were routinely attaching safety harnesses incorrectly. The failure of management in this
case was a failure properly to perform oversight and to identify and resolve an obvious
safety hazard.

CMS also contends that Petitioner’s management was deficient in failing to assure that
the staff followed prescribed emergency procedures in dealing with consequences of the
accident to Resident # 3. CMS Ex. 4, at 20. Petitioner’s instructions to its van drivers for
dealing with the consequences of an accident included an instruction that an injured
person should not be moved if movement was likely to cause further injury. P. Ex. 27, at
12

22. CMS offered evidence to show, that in the immediate aftermath of the accident to
Resident # 3, Petitioner’s management instructed the driver to return the van to the
facility with the resident lying on the floor of the van. That instruction clearly
contradicted Petitioner’s own policy and, potentially, put the resident at risk for
exacerbation of her injury (a broken femur).

Petitioner argues that the instruction made sense in the context of the event. The accident
occurred only a short distance from Petitioner’s facility and, according to Petitioner, it
was only logical, given the close proximity of the facility to the site of the accident, to
return the van with its passenger to the facility so that facility staff could assess and
provide care to the resident. That was particularly reasonable, according to Petitioner,
ecause the nearest hospital is about a 30 minutes’ drive from its facility.

do not find this argument to be persuasive. The van driver was not a nurse and was not
trained to assess the resident’s condition. When Petitioner’s management instructed the
driver to return the van to the facility, its professional staff was unaware of the extent of
the resident’s injuries (grave, as it turned out) and were in no position to make an
informed judgment about whether it was safe to drive the unrestrained resident, lying on
the van’s floor, for even a short distance.

3. Petitioner failed to prove that CMS’s determination of immediate
jeopardy was clearly erroneous.

Where CMS makes a determination that noncompliance is at the immediate jeopardy
level, the burden falls on the facility to prove that determination to be clearly erroneous.
n this case there is considerable evidence to support CMS’s determination and I find that
Petitioner failed to rebut it. Consequently, I find that Petitioner did not prove the
immediate jeopardy determination to be clearly erroneous.

The risk to residents posed by improper attachment of harnesses is self-evident. As
Petitioner acknowledges, these harnesses were designed to protect wheelchair bound
residents being transported in Petitioner’s van from the consequences of accidents to the
same extent as shoulder and lap harnesses in any passenger vehicle are designed to
protect the vehicle’s occupants. Obviously, the devices must be attached correctly in
order to perform their intended function. The evidence offered by CMS and not rebutted
y Petitioner shows not only that the harnesses routinely were not being attached
correctly but that the consequence of incorrect attachment was that they failed to give the
protection that they were designed to provide. Residents being transported in Petitioner’s
van were thus highly vulnerable to serious injuries or death as a consequence of the
staff’s failure to attach harnesses correctly.

13

Petitioner has offered nothing to rebut this proof. Its assertion that the harnesses — if
employed properly — would have protected its residents begs the question of whether its
residents were at immediate jeopardy while being transported because, in this case, the
overwhelming evidence is that the harnesses were not properly employed.

4. Petitioner failed to prove that the duration of its noncompliance was
for a shorter period than was determined by CMS.

CMS found that Petitioner was deficient at the immediate jeopardy level beginning with
the accident sustained by Resident # 3 on March 3, 2006.° It determined that immediate
jeopardy persisted until May 12, 2006 and it found continued noncompliance, albeit at a
non-immediate jeopardy level until June 19, 2006.

Where, as in this case, one or more deficiencies is established, the burden falls entirely on
the facility to prove that it corrected the deficiency or deficiencies by a given date. In
other words, assuming a deficiency or deficiencies to be present, there is a presumption of
continued noncompliance until such time as the facility demonstrates that it has
eliminated the deficiency or deficiencies. A facility must overcome the presumption of
continued noncompliance with affirmative evidence if it alleges that it corrected its
deficiency or deficiencies at an earlier date than that which CMS has determined to be the
compliance date.

Petitioner did not meet that burden here. The evidence offered by CMS establishes that
Petitioner’s staff continued to attach improperly the van’s harnesses during the period
between March 6 and May 12, 2006. As I discuss above, the van’s driver acknowledged
on the date of the survey that she was routinely attaching the harnesses to floor anchors
located in front of the residents’ wheelchairs. This evidence shows that immediate
jeopardy persisted during the entire period between March 6 and May 12. Petitioner
offered nothing to rebut it.

Moreover, Petitioner has not offered any proof showing that it, in fact, attained full
compliance with participation requirements at any date earlier than June 19, 2006.
Petitioner’s plan of correction addressing the deficiencies in this case cites June 2, 2006
as the date when all correction would be completed. P. Ex. 1. However, Petitioner did
not argue that, in fact it had fully complied with participation requirements by that date.

® In fact, it found that Petitioner’s immediate jeopardy level noncompliance with
42 C.F.R. § 483.75 commenced in October 2005 with the accident involving Resident #
1. However, CMS imposed no remedy for the period between that accident and the
accident involving Resident # 3 and, for that reason, it is unnecessary for me to address
whether immediate jeopardy existed during the earlier period.
14

5. CMS’s civil money penalty determinations are reasonable.

Regulations establish that civil money penalties for immediate jeopardy level deficiencies
may be imposed in amounts of from $3,050 to $10,000 per day. For non-immediate
jeopardy level deficiencies, the civil money penalty amount must fall within a range of
from $50 to $3,000 per day. 42 C.F.R. § 488.438(a)(i), (ii). The regulations also
establish criteria for deciding the reasonableness of a penalty falling within one of the two
penalty ranges. Those criteria include: the seriousness of a facility’s noncompliance; its
compliance history; its culpability; and its financial condition. 42 C.F.R. §§
488.438(f)(1) - (4); 488.404 (incorporated by reference into 42 C.F.R. § 488.438(f)(3)).

My responsibility in deciding what penalty amounts are reasonable is to make a de novo
analysis of the evidence as it relates to the regulatory criteria governing penalty amounts.
In other words, I do not simply review CMS’s determination for reasonableness but,
rather, consider the record of the case de novo in deciding what is reasonable.

Neither party offered evidence or analysis concerning Petitioner’s financial condition or
its compliance history. Consequently, I must base my decision as to penalty amounts
solely on the seriousness of the deficiencies and Petitioner’s relative culpability for them.

I find that the penalties for immediate jeopardy level noncompliance — $4,000 per day —
are reasonable based on my analysis of the evidence as it pertains to these two criteria. I
note initially that $4,000 is a relatively low immediate jeopardy penalty amount because it
is close to the minimum daily penalty amount of $3,050. The evidence shows that
Petitioner’s noncompliance was serious. The consistent failure by Petitioner’s staff to
attach the van’s safety harnesses correctly rendered these devices inadequate for the
purpose for which they were designed. Residents being transported in Petitioner’s van
were unprotected from the dangers associated with accidents. The dangers to the
residents were magnified by their physical and mental conditions. Obviously, many of
the residents who were being transported were elderly, frail, and demented individuals
who were far less capable of withstanding the consequences of an accident than would
have been younger and healthy individuals. This conclusion is more than demonstrated
by the injury sustained by Resident # 3 — a fractured femur — caused merely by sliding
out of her wheelchair while the van was in motion.

Petitioner had a very high duty of care when it came to transporting its residents. It was
required to do everything within its ability to assure that the van’s safety harnesses were
attached properly, in order to protect these frail and ill individuals. It failed routinely to
do that.
15

There is also an element of culpability which supports the $4,000 daily penalty. The
drivers’ failures to attach the harnesses correctly should have, and would have, been
apparent to Petitioner’s management had it closely investigated the cause of the accident
to Resident # 3. It is obvious to me that management failed to discover this glaring and
persistent error because it failed to ask the right questions or to look closely at the way in
which its staff was transporting residents.

As for the $50 daily non-immediate jeopardy penalty amount, I sustain this because it is
the minimum penalty amount for non-immediate jeopardy level deficiencies. Therefore,
it is reasonable as a matter of law.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
Jean Gaddy Johnson, ) Date: August 9, 2007
)
Petitioner, )
)
-Vv.- ) Docket No. C-07-275
) Decision No. CR1635
The Inspector General. )
)
DECISION

I sustain the determination of the Inspector General (I.G.) to exclude Petitioner, Jean
Gaddy Johnson, from participating in Medicare and other federally-funded health care
programs for a period of five years. The exclusion in this case is mandated under section
1128(a)(2) of the Social Security Act (Act) by Petitioner’s conviction of a criminal
offense relating to patient abuse in connection with the delivery ofa health care item or
service.

I. Background

On December 29, 2006, the L.G. notified Petitioner that he was excluding her for five
years pursuant to section 1128(a)(2) of the Act. Petitioner requested a hearing and the
case was assigned to me for a hearing and a decision. I held a pre-hearing conference by
telephone at which I identified the issues in the case. I directed the parties to submit
briefs and proposed exhibits addressing these issues and I gave the I.G. a reply brief
opportunity. I also provided each party with the opportunity to request to present
testimony in person. The LG. and Petitioner then each submitted briefs and proposed
exhibits. Neither party requested that I receive testimony in person, nor did either party
object to my receiving any of the proposed exhibits. The I.G. filed 13 proposed exhibits
which it identified as I.G. Ex. 1 - 1.G. Ex. 13. Petitioner submitted a single exhibit which
she identified as P. Ex. 1. I receive I.G. Ex. 1 - I.G. Ex. 13 and P. Ex. | into evidence.

2

II. Issues, findings of fact and conclusions of law
A. Issues
The issues are whether:
1. Petitioner’s exclusion is mandated by section 1128(a)(2) of the Act; and

2. The five year exclusion imposed by the I.G. is reasonable as a matter of
law.

B. Findings of fact and conclusions of law

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

1. Petitioner’s exclusion is mandated by section 1128(a)(2) of the Act.

The prerequisite elements for a mandatory exclusion under section 1128(a)(2) are that:
an individual must be: (1) convicted of a criminal offense; (2) relating to patient neglect
or abuse in connection with the delivery of a health care item or service. The evidence in
this case unequivocally establishes the presence of both elements. Consequently, the I.G.
must exclude Petitioner.

First, Petitioner was convicted of a criminal offense. On August 23, 2006, Petitioner pled
no contest to two misdemeanor charges of disturbing the peace, in violation of the
California penal code. I.G. Ex. 8, at 2. As a consequence Petitioner was sentenced to 24
months’ probation and was ordered to attend an anger management class. I.G. Ex. 9; LG.
Ex. 10.

Second, the evidence establishes that Petitioner’s conviction was of a criminal offense
relating to patient neglect or abuse in connection with the delivery of a health care item or
service. Petitioner worked as a certified nursing assistant (CNA) at a nursing facility in
California. On June 27, 2006 she was charged in a criminal complaint with a single count
of the crime of elder and dependent adult abuse. I.G. Ex. 7. The factual premise of this
complaint consisted of allegations that Petitioner, in the course of performing her CNA
duties, shoved the wheelchair of an elderly, dependent resident, causing the wheelchair,
with the resident seated in it, to roll freely for a distance, and then yelled and directed
profane language at the resident. I.G. Ex. 2; 1.G. Ex. 3; LG. Ex. 4; LG. Ex. 5; LG. Ex. 6,
at 2-3.
3

The criminal charge against Petitioner was subsequently modified to two counts of
disturbing the peace, thereby eliminating explicit charges that Petitioner physically
abused the resident. I. G. Ex. 8, at 2. Petitioner pleaded no contest to these modified
charges and not the original complaint. However, the modified charges clearly are based
on allegations that Petitioner abused a resident while performing her duties as a CNA.
The disturbing the peace charges would be based on abuse allegations even if they rested
only on allegations that Petitioner yelled at and directed profanity towards the resident.
Verbal abuse is “abuse” under section 1128(a)(2) as is physical abuse.' Thus, Petitioner’s
conviction of disturbing the peace constitutes a criminal conviction pursuant to section
1128(a)(2) for which exclusion is mandatory.

Petitioner makes three arguments to support her contention that no basis exists in this case
for an exclusion. First, she contends that her conviction is in no sense connected with
abuse. In effect, Petitioner asserts that her conviction was simply a way of disposing of
the charges against her, but does not have as its basis the charge of abuse. This argument
is belied by the undisputed record of Petitioner’s conviction. It is evident from that
record that the two counts of disturbing the peace to which Petitioner entered her no
contest plea related to allegations of at least verbal abuse of a resident by Petitioner while
she was performing her CNA duties.

Second, Petitioner asserts that her agreement to plead no contest is in no sense an
admission by her that she is guilty of the underlying allegations of abuse. But, it is clear
as a matter of law that Petitioner’s no contest plea is a “conviction” for purposes of
section 1128(a)(2) as much as would be a guilty verdict after a trial. Section 1128(i) of
the Act explicitly defines as a conviction circumstances where a person pleads nolo
contendere (no contest) to a criminal charge without expressly admitting his or her guilt
to the charge. Act, section 1128(i)(3). And, such a conviction is a conviction for
purposes of the Act even where it is subsequently expunged. /d., section 1128(i)(1).

Finally, Petitioner argues at length that she is not, in fact, guilty of the charges to which
she pled no contest. She contends, among other things, that allegations by various
witnesses are false or inaccurate. | find this argument to be without merit because the Act
makes it explicit that the I.G.’s duty to exclude an individual convicted of a crime falling
within section 1128(a)(2) derives from that individual’s conviction. Because the

' There is nothing in the record of this case to suggest that there was some other
conduct outside of that abuse that formed the basis for the modified criminal charges to
which Petitioner pleaded no contest. Therefore, the only allegations on which the
disturbing the peace charges could have been based were allegations of Petitioner’s
abusive conduct.
4

exclusion derives from the conviction, an individual may not challenge his or her
exclusion by arguing that he or she is not really guilty of the crime of which he or she was
convicted.”

2. The length of Petitioner’s exclusion is, in this case, mandated by law.

The minimum period for an exclusion mandated by section 1128(a)(2) of the Act is five
years. Act, section 1128(c)(3)(B). Petitioner’s five year exclusion is for the statutory
minimum period and is, therefore, reasonable.

/s/
Steven T. Kessel
Administrative Law Judge

? There would be no basis for an exclusion if a conviction is reversed on appeal.
However, if a person wishes to challenge the basis for his or her conviction he or she
must do so through the appropriate State or federal appeals process.


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

)
In the Case of: )
) Date: August 1, 2007
Wade Pediatrics, )
CLIA No. 37D0965880 )
) Docket No. C-07-06
Petitioner, ) Decision No. CR1630
)
-V.- )
)
Centers for Medicare and Medicaid )
Services. )
DECISION

Petitioner’s certificate to operate as a clinical laboratory under the Clinical Laboratory
Improvement Amendments of 1988 (CLIA)' is revoked for a period of one year effective
the date of this decision. The Centers for Medicare and Medicaid Services’ (CMS)
motion for summary judgment is granted.

I. Background

Petitioner is a clinical laboratory located in Muskogee, Oklahoma. Petitioner was
subjected to a re-certification survey by the Oklahoma Department of Health (the state
agency) on June 28, 2006. CMS notified Petitioner by letter dated September 6, 2006,
that the state agency survey found Petitioner was in violation of the condition for
participation established by 42 C.F.R. § 493.801. CMS also advised Petitioner that it
proposed to revoke Petitioner’s CLIA certificate and to cancel Petitioner’s authorization
to receive Medicare payment for its services pursuant to 42 U.S.C. § 263a.

' Pub. L. 100-578, codified at 42 U.S.C. § 263a.
2

Petitioner requested a hearing by letter dated October 4, 2006. The case was assigned to
me for hearing and decision on October 11, 2006. A Notice of Case Assignment and
Prehearing Case Development Order (Prehearing Order) was issued at my direction on
October 11, 2006. On December 6, 2006, CMS filed its motion for summary judgment
(CMS Brief). Petitioner filed its brief in response (P. Brief) to the CMS motion on
January 4, 2007, with exhibits (P. Ex.) | through 4.

II. Discussion
A. Findings of Fact

The following findings of fact are based upon the pleadings and exhibits submitted
related to the motion for summary judgment, considering the facts and all inferences
drawn therefrom in a light most favorable to the nonmovant, the Petitioner.

I. Petitioner possessed a valid CLIA certificate and was authorized to receive
Medicare payments at all relevant times.

2. Petitioner was at all pertinent times enrolled in a proficiency testing (PT) program
through the Wisconsin State Laboratory of Hygiene (WSLH). CMS Brief at 6.

3. Petitioner does not dispute that as part of the PT program, WSLH sent Petitioner
samples to test for PT events 2006-1 and 2006-2. CMS Brief at 7.

4. Petitioner does not deny that PT hematology samples for PT event 2006-1 were
sent to the Muskogee Regional Medical Center laboratory (Muskogee Regional)
where they were tested in February 2006.

5. Petitioner does not deny that PT hematology samples for PT event 2006-2 were
also sent to and tested at Muskogee Regional in June 2006.

6. It is not disputed that the PT samples were also tested by Petitioner, which had the
capability to do such testing, and that the results of Petitioner’s testing were
reported to WSLH. CMS Brief at 7-9; P. Brief at 2, 4; P. Ex. A.

7. Petitioner relied upon the suggestion of a CMS field investigator and the fact that
its plan of correction from a earlier survey was accepted when it decided to send
PT samples to another laboratory for testing. P. Brief at 3-4; P. Ex. 4, at 1-2, 4.
3

Petitioner’s laboratory was surveyed by the state agency on June 28, 2006.

CMS notified Petitioner by letter dated September 6, 2006, that it proposed to
revoke Petitioner’s CLIA certificate and authorization to receive Medicare
payments based on the findings of the survey completed on June 28, 2006, that
Petitioner sent PT samples to another laboratory.

Petitioner requested a hearing on October 4, 2006.
B. Conclusions of Law
Petitioner’s request for hearing was timely and I have jurisdiction.

A laboratory must not send PT samples or portions of PT samples to another
laboratory, intentionally or unintentionally, for analysis which it is certified to
perform in its own laboratory, or for any other reason. 42 C.F.R. § 493.801(b)(4).

The motives of the laboratory that sends PT samples to another laboratory for
analysis that the sending laboratory is certified to perform, are irrelevant and not a
defense to violation of 42 C.F.R. § 493.801(b)(4).

The fact that the laboratory that sends PT samples to another laboratory for
analysis that the sending laboratory is certified to perform, never reports the
analysis of the proficiency samples to the proficiency program is irrelevant and not
a defense to a violation of 42 C.F.R. § 493.801(b)(4).

CMS is not bound or estopped by prior agency action when that action was based
on an erroneous interpretation and application of the statute and regulations.

There are no material facts in dispute and the only issues may be resolved as
questions of law, therefore summary judgment is appropriate.

Petitioner violated 42 C.F.R. § 493.801(b)(4) by admittedly sending PT samples to
another laboratory.

CMS is required to revoke Petitioner’s CLIA certificate for a period of not less
than one year for sending PT samples to another laboratory. 42 U.S.C.
§ 263a(i)(4); 42 C.F.R. §§ 493.801(b)(4) and 493.1840(b).
4

9. CMS must cancel Petitioner’s approval to receive Medicare payments when its
CLIA certificate is revoked. 42 C.F.R. § 493.1842(a).

10. Revocation of Petitioner’s CLIA certificate is effective the date of this decision.
42 C.F.R. §493.1844(d)(2).

C. Issues
Whether summary judgment is appropriate in this case.

Whether there is a basis for Respondent’s revocation of
Petitioner’s CLIA certificate.

D. Law Applicable

CLIA establishes requirements for all laboratories that perform clinical diagnostic tests on
human specimens and provides for federal certification of such laboratories. Pub. L. No.
100-578, amending § 353 of the Public Health Service Act, codified at 42 U.S.C. § 263a
et seq. The purpose of CLIA is to ensure the accuracy and reliability of laboratory tests,
and hence the public health of all Americans. See H.R. Rep. No. 899, 100" Cong. 2d
Sess. 8, 18 (1988), reprinted in 1988 U.S.C.C.A.N. 3828, 3839. CMS certification of a
laboratory under CLIA is dependent upon whether the laboratory meets the conditions for
certification set out in the statute and regulations. 42 U.S.C. § 263a(f)(1)(E); 42 C.F.R.

§ 493.1 et seg. Pursuant to CLIA the Secretary of Health and Human Services (the
Secretary) has broad enforcement authority, including the ability to suspend, limit, or
revoke the certificate of a laboratory that is out of compliance with one or more
requirements for certification.

The Secretary has exercised his authority under 42 U.S.C. 263a(f) and issued regulations
implementing CLIA codified at 42 C.F.R. Part 493. The regulations specify standards
and the specific conditions for certification that a laboratory must meet to achieve
compliance and must maintain in order to be certified to test human specimens and to
participate in Medicare . The regulations confer broad authority on CMS to ensure that
laboratories perform as Congress intended, including authority to inspect and sanction
laboratories that fail to comply with the regulatory requirements. CMS has the delegated
authority to suspend, limit, or revoke the CLIA certificate of a laboratory that is out of
compliance with one or more CLIA conditions, and may also impose alternative sanctions
such as a directed plan of correction or monitoring by the state. 42 C.F.R. § 493.1806.
5

The regulations provide as a condition for participation that a laboratory conducting
moderate or high complexity testing, as was Petitioner, must enroll in an approved PT
program or programs that cover all the specialties and sub-specialties for which the
laboratory seeks certification. The laboratory is required to test PT samples in the same
manner as its regular patients’ specimens. 42 C.F.R. § 493.801. Standards established to
satisfy this condition level requirement are set forth at 42 C.F.R. § 493.801(b)(1) through
(6). Subsection 493.801(b)(4) provides that a laboratory must not send PT samples or
portions thereof to another laboratory for any analysis that it is certified to perform and if
it intentionally does so, CMS must revoke its CLIA certificate for a year. 42 U.S.C.

§ 263a(i)(4); 42 C.F.R. §§ 493.801(b)(4) and 493.1840(b). CMS must also cancel a
laboratory’s approval to receive Medicare payments when CMS suspends or revokes the
laboratory’s CLIA certificate. 42 C.F.R. § 493.1842(a).

CLIA provides at 42 U.S.C. § 263a(i)(1) that a laboratory’s certificate may be suspended,
revoked, or limited only after reasonable notice and opportunity for hearing to “the owner
or operator of the laboratory...” The Secretary’s regulations provide that a laboratory or
prospective laboratory dissatisfied with an initial determination listed in 42 C.F.R.

§ 493.1844(b) is entitled to a hearing before an administrative law judge (ALJ).

42 C.F.R. § 493.1844(a). The hearing procedures found in subpart D of 42 C.F.R. Part
498 are incorporated by reference. 42 C.F.R. § 493.1844. The “suspension, limitation or
revocation of the laboratory’s CLIA certificate ... because of noncompliance...” is the
first listed initial determination subject to hearing before an ALJ. 42 C.F.R.

§ 493.1844(b)(1). Generally when a hearing is requested, suspension or revocation of a
CLIA certificate is not effective until after a hearing decision is issued by the ALJ.

42 C.F.R. § 493.1844(d)(2).

E. Analysis
1. Summary judgment is appropriate.
Pursuant to 42 C.F.R. § 493.1844(f), I presume that Petitioner has a right to a hearing in
this case. See Garden City Medical Clinic, DAB No. 1763 (2001), citing 42 U.S.C.

§ 263a(i)(1) and 42 C.F.R. § 493.1844(a). However, the Departmental Appeals Board
(the Board) has recognized that the use of summary judgment procedures may be
6

appropriate in cases before the Board or an ALJ pursuant 42 C.F.R. Parts 498 and 1005.”
See, e.g., Vandalia Park, DAB No. 1939 (2004); Madison Health Care, Inc., DAB No.
1927 (2004); Lebanon Nursing and Rehabilitation Center, DAB No. 1918 (2004);
Crestview Parke Care Center, DAB No. 1836 (2002), rev'd sub nom, Crestview Parke
Care Center v. Thompson, 373 F.3d 743 (6th Cir. 2004). Summary judgment may be
entered for a party when the record shows that there is no genuine dispute as to any
material fact, and the moving party is entitled to judgment as a matter of law. Lebanon
Nursing and Rehabilitation Center. The party moving for summary judgment bears the
initial burden of showing the basis for its motion and identifying the portions of the
record that it believes demonstrate the absence of a genuine factual dispute. See Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). This burden may be discharged by showing
that there is no or insufficient evidence to support a judgment for the non-moving party.
/d. at 325. Ifa moving party carries its initial burden, the non-moving party must “come
forward with specific facts showing that there is a genuine issue for trial.” Matsushita
Elec. Industrial Co. v. Zenith Radio, 475 U.S. 574, 587 (1986) (quoting Fed. R. Civ. P.
56(e)). To defeat an adequately supported summary judgment motion, the non-moving
party may not rely on the denials in its pleadings or briefs, but must furnish evidence of a
dispute concerning a material fact — a fact that, if proven, would affect the outcome of
the case under governing law. /d. at 586, n.11; Celotex, 477 U.S. at 322. In deciding a
summary judgment motion, an adjudicator may not make credibility determinations or
weigh conflicting evidence but must instead view the entire record in the light most
favorable to the non-moving party, drawing all reasonable inferences from the evidence
in that party's favor. Madison Health Care, Inc., DAB No. 1927 (2004). ?

? Regulations at 42 C.F.R. Part 498 establish the procedures applicable in appeals
by providers and suppliers subject to enforcement proceedings by CMS. The regulations
do not mention summary judgment. However, the Board has long recognized the
availability of summary judgment and the Board’s interpretative rule has been recognized
by the Sixth Circuit Court of Appeals. Crestview Parke Care Center,373 F.3d, at 749-50
(6" Cir. 2004). Furthermore, a summary judgment procedure was adopted as a matter of
judicial economy within my authority to regulate the course of proceedings and made
available to the parties in the litigation of this case by my Notice of Case Assignment and
Prehearing Case Development Order, paragraph ASb, dated October 11, 2006.

> The Board’s views on summary judgment are generally consistent with that of
the majority of courts. See LOA Charles Alan Wright, Arthur R. Miller, Mary Kay Kane,
Federal Practice and Procedure Civil, § 2727 (3d ed. 1998); 11 James William Moore,
Moore’s Federal Practice, § 56.11 (3d ed. 2005).
7

Summary judgment is appropriate in this case. As discussed in detail hereafter, there is
no genuine dispute as to any material fact necessary to establish the CMS prima facie
case. Petitioner raises the defense of estoppel. However, even accepting all the facts
related to the defense as true for purposes of this motion, the defense fails as a matter of
law.

2. Petitioner violated 42 C.F.R. § 483.801(4).

The regulation requires that a clinical laboratory must enroll in an approved PT program.
42 CFR. § 493.801. There is no dispute that Petitioner was at all pertinent times
enrolled in a PT program through WSLH. CMS Brief at 6. Petitioner does not dispute
that as part of the PT program, WSLH sent Petitioner samples to test for PT events 2006-
| and 2006-2. CMS Brief at 7.

The regulation requires that PT samples must be tested in the same manner as a
laboratory’s patient specimens. 42 C.F.R. § 493.801. The methods or procedures
necessary to satisfy the requirement to test PT samples in the same manner as patient
specimens are explained in 42 C.F.R. § 493.801(b). Subsection § 493.801(b)(4) of 42
C.F.R. specifies that a “laboratory must not send PT samples or portions of samples to
another laboratory for any analysis which it is certified to perform in its own laboratory.”
The plain language of the regulation is that a PT sample may not be sent to another
laboratory, either intentionally or unintentionally. The regulation establishes an absolute
bar to sending PT samples to another laboratory for testing if the sending laboratory is
certified to do the same testing.

The regulation further provides that if CMS determines that a laboratory “intentionally”
sent a PT sample to another laboratory, then the sending laboratory’s CLIA certificate
must be revoked for at least a year. 42 C.F.R. § 493.801(b)(4). The regulation is based
upon the statutory requirement that: “(a)ny laboratory that the Secretary determines
intentionally refers its proficiency testing samples to another laboratory for analysis shall
have its certificate revoked for at least one year....” 42 U.S.C. § 263a(i)(4). Section
493.1840(b) of 42 C.F.R. directs that CMS revoke a laboratory’s CLIA certificate for one
year if CMS determines the laboratory intentionally referred PT samples to another
laboratory for analysis and authorizes the imposition of a civil money penalty (CMP).
The statute and regulations allow for no exceptions to the prohibition on sending PT
samples to another laboratory. Although CMS has discretion as to whether a CMP will
be imposed for a violation, the regulation does not give CMS discretion to choose not to
terminate an offending laboratory’s CLIA certificate once there is a determination that
there was an intentional referral of a PT sample.
8

Petitioner does not deny that PT hematology samples for PT event 2006-1 were sent to
the Muskogee Regional where they were tested in February 2006. Petitioner also does
not deny that PT hematology samples for PT event 2006-2 were also sent to and tested at
Muskogee Regional in June 2006. It is not disputed that the PT samples were also tested
by Petitioner, which had the capability to do such testing, and that the results of
Petitioner’s testing were reported to WSLH. CMS Brief at 7-9; P. Brief at 2, 4; P. Ex. A.

The undisputed facts satisfy the CMS burden to make a prima facie showing of a
violation of 42 C.F.R. § 483.801(b)(4). Petitioner concedes that it sent PT samples to
another laboratory for analysis that it was certified to perform. Petitioner asserts in its
response that it did not “intentionally” refer PT samples to another laboratory for analysis
but only to test the calibration of Petitioner’s equipment. P. Brief 1-2; P. Ex. A. The
Affidavit of Kevin Wade, M.D., Petitioner’s laboratory director, clearly shows that
Petitioner’s PT samples were sent to Muskogee and this is the determinative fact. For
purposes of summary judgment, construing facts in a light most favorable to Petitioner, I
accept that Petitioner did not send PT samples to Muskogee Regional with the intent to
submit the results to WSLH or for any purpose other than to see how the Muskogee
Regional test results compared with its own. However, the motives of the laboratory that
sends PT samples to another laboratory for analysis that the sending laboratory is certified
to perform, are irrelevant. The fact that the sending laboratory never reports the analysis
of the proficiency samples to the proficiency program is not mentioned by the statutes or
regulations as an exception or defense to the prohibition, and is also irrelevant. The act
prohibited is the sending of PT samples to another laboratory for analysis when the
sending laboratory is certified to do the analysis. Lackawanna Group Medical
Laboratory, DAB No. 1870 (2003).

Petitioner also argues that CMS should be estopped from revoking its CLIA certificate
and cancelling Petitioner’s approval to received Medicare payments. Petitioner argues
that in 2005, after Petitioner failed a PT test event, a “CMS field investigator” suggested
to the laboratory director that it would be beneficial if Petitioner received training and
comparison testing from another CLIA certified laboratory such as Muskogee Regional.
P. Brief at 3. Petitioner also argues that it submitted a Plan of Correction to CMS in
March 22, 2006, that indicated it had in the past and would continue to send PT samples
to Muskogee Regional for comparison testing. Petitioner argues it detrimentally relied
upon the suggestion of the CMS field investigator and the fact that its plan of correction
was accepted. P. Brief at 3-4; P. Ex. 4, at 1-2,4. Although Doctor Wade does not attest
that the investigator told him to send PT samples to another laboratory and the language
of the plan of correction may be subject to other reasonable interpretations, for purposes
of summary judgment, I must construe the facts alleged in a light most favorable to
9

Petitioner. Even though I accept as true, for purposes of this motion only, the facts
alleged by Petitioner as a basis for its estoppel defense, the estoppel defense must be
resolved against Petitioner as a matter of law. CMS cannot be bound or equitably
estopped by prior agency action where that action was based on an erroneous
interpretation and application of the statute and regulations such as that discussed above.
The decisions of the United States Supreme Court in Office of Personnel Management v.
Richmond, 496 U.S. 414, 110 S.Ct. 2465, 110 L.Ed.2d 387 (1990) and Heckler v.
Community Health Services of Crawford County, Inc., 467 U.S. 51, 104 S.Ct. 2218, 81
L.Ed.2d 42, 5 Soc.Sec.Rep.Ser..29 (1984) make clear that equitable estoppel will not lie
against the federal government in cases involving benefits to be paid from the Treasury,
particularly in the complicated area of Medicare.*

I conclude that Petitioner violated 42 C.F.R. § 493.801(b)(4) by sending PT samples to
another laboratory. I further conclude, as a matter of law, that estoppel will not lie
against the government in this case. CMS is required to revoke Petitioner’s CLIA
certificate for a period of not less than one year from the date of this decision. 42 U.S.C.
§ 263a(i)(4); 42 C.F.R. §§ 493.801(b)(4) and 493.1840(b). CMS must also cancel the
laboratory’s approval to receive Medicare payments. 42 C.F.R. § 493.1842(a).

III. Conclusion

For the foregoing reasons, the CMS motion for summary judgment is granted.
Petitioner’s CLIA certificate is revoked for a period of one year effective the date of this
decision and Petitioner’s approval to receive Medicare payments is cancelled.

/s/

Keith W. Sickendick
Administrative Law Judge

* It has been consistently held that ALJs do not have the authority to hear and
decide claims of estoppel against CMS or the Secretary related to alleged dilatory
processing of applications. GranCare Home Health Service & Hospice, DAB CR464
(1997); The Rivers Health Care Resources, Inc., DAB CR446 (1996); SRA, Inc. D/B/A St.
Mary Parish Dialysis Center, DAB CR341 (1994); T.L.C. Mental Health Center, DAB
CR636 (1999); Therapeutic Rehabilitation Centers, Inc., DAB CR531 (1998). However,
I find no similar limit to my jurisdiction where Petitioner asserts estoppel as a defense to
an enforcement action. Accord Stacy Ann Battle, D.D.S., DAB 1843 (2002).