Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:

Excelsior Health Care
Services, Inc.,

DATE: January 17, 1995

Petitioner,

Docket No. C-94-009
Decision No. CR352

-v-

Health Care Financing
Administration.

Ve Se SS eS Se Se Se

DECISION

On July 16, 1993, the Health Care Financing Administration
(HCFA) notified Petitioner that it had determined that
Petitioner no longer met the requirements for participation
as a provider of services under Medicare. HCFA told
Petitioner that it based its determination on the results of
a complaint investigation survey which was conducted on
HCFA's behalf from April 23, 1993 through June 2, 1993, by
the Service Facility Regulation Administration, District of
Columbia Department of Consumer and Regulatory Affairs (D.C.
survey agency). HCFA informed Petitioner that it concurred
with a D.C. survey agency finding that Petitioner had failed
to comply with a condition of participation in Medicare.
Specifically, Petitioner was found not to have met a
condition requiring it to protect and promote patient rights.
Petitioner was told that HCFA had determined to terminate
Petitioner's participation in Medicare based on this finding
and in light of Petitioner's history of failing to comply
with federal requirements for participating in Medicare.

Petitioner requested a hearing. The case was assigned to
Administrative Law Judge Charles E. Stratton for a hearing
and a decision. On March 8 and 9, 1994, Judge Stratton
conducted an in-person hearing in Washington, D.C. The
parties filed post-hearing briefs with Judge Stratton.
Unfortunately, Judge Stratton died before he could issue a
decision in the case. The case’ was reassigned to me.
2

I afforded the parties the option of having a new hearing. I
informed the parties that, if they accepted this option, I
would not consider any of the exhibits or testimony received
by Judge Stratton. Alternatively, I afforded the parties the
option of my deciding the case based on the record created at
the hearing conducted by Judge Stratton, including the
transcript of that hearing, and any exhibits received into
evidence at the hearing. As an element of this option, I
gave the parties the opportunity to propose to supplement the
record with additional exhibits. The parties accepted this
alternative option. HCFA has not offered additional
exhibits. Petitioner offered additional exhibits, P. Ex. 8 -
12.! I have admitted them into evidence in addition to those
exhibits admitted by Judge. Stratton.”

I have considered the evidence, the applicable law, and the
parties' arguments. I conclude that HCFA's termination of
Petitioner's participation in Medicare is supported by a
preponderance of the evidence and by the law and I sustain
it.

I. Issues indi of u. ns Oo

There are three issues in this case. In resolving these
issues, I make findings of fact and conclusions of law.

After each finding or conclusion, I cite to the pages of this
Decision at which I discuss the finding or conclusion in
detail.

A. Did Petitioner fail to comply with a Medicare
condition of participation?

! I refer to Petitioner's exhibits as P. Ex.
(number), (page number); I refer to the Health Care
Financing Administration's exhibits as HCFA Ex. (number),
(page number); I refer to the transcript of the hearing in
this case as Tr. at (page).

2 HCFA objected to the admission into evidence of
these exhibits, arguing that they contained hearsay and were,
thus, prejudicial to HCFA. Response of the Health Care
Financing Administration to Petitioner's Proposed Posthearing
Exhibits, December 20, 1994. I overrule these objections.
Hearsay is admitted routinely in administrative hearings, and
the fact that these exhibits contain hearsay is not in and of
itself a basis to deny their admission. I do not agree with
HCFA's assertion that it is prejudiced by the admission of
these exhibits. HCFA had the opportunity to offer exhibits
or other evidence to rebut the exhibits. I would have
afforded HCFA the opportunity to cross-examine the declarants
in Petitioner's exhibits had HCFA requested that opportunity.
3

1. As a condition of participation in Medicare,
Petitioner was obligated to inform patients of
their rights and to protect and promote the
exercise of those rights. Pages 4 - 5.

2. Petitioner failed to comply with this condition
in that it failed to inform a patient, E.R., of her
rights, failed to protect her rights, and failed to
document the manner in which her rights were being
protected. Pages 7 - 14.

B. Was HCFA authorized to terminate Petitioner's
participation in Medicare based on Petitioner's failure to
comply with the condition of participation concerning patient
rights?

3. HCFA may terminate a provider's participation
in Medicare where that provider fails to comply
with a condition of participation. Pages 5 - 7.

4. HCFA is not required to afford a provider the
opportunity to correct its failure to comply with a
condition of participation before terminating that
provider. Pages 5 - 7.

5. HCFA was authorized to terminate Petitioner's
participation in Medicare based on Petitioner's
failure to comply with the condition of
participation concerning patient rights. Page 14.

Cc. Did HCFA violate its obligation to give Petitioner
notice of its determination to terminate Petitioner's
participation in Medicare?

6. HCFA is required to give a provider 15 days'
notice of a determination to terminate that
provider's participation in Medicare. Page 15.

7. %XIn this case, HCFA gave Petitioner
approximately 30 days' notice of its determination
to terminate Petitioner's participation in
Medicare. Page 15.

8. HCFA did not violate its obligation to give
Petitioner notice of its determination to terminate
Petitioner's participation in Medicare. Pages 14 -
15.
II. Discussion

A. Background facts

The background facts of this case are not disputed.
Petitioner has participated in the Medicare program as a Home
Health Agency (HHA) under the provisions of sections 1861(0)
and 1891 of the Social Security Act (Act) and under
regulations contained in 42 C.F.R. Part 484. As an HHA,
Petitioner has acted as a provider that is "primarily engaged
in providing skilled nursing services and other therapeutic
services" to Medicare beneficiaries in their homes. Act,
section 1861(0)(1). At all times relevant to this case,
Petitioner's place of business has been Washington, D.c.

On June 1, 1989, Petitioner was certified by HCFA to
participate in Medicare. HCFA Ex. 1, page 1. Certification
included acceptance by HCFA of a provider agreement executed
by Petitioner's President, Jane V. Graham. Id. at 2.

Prior to the events which led up to Petitioner's termination
from participation in Medicare, Petitioner had been found out
of compliance with Medicare conditions of participation
during annual surveys conducted by the D.C. survey agency in
1991, 1992, and 1993. Petitioner came into compliance with
Medicare conditions of participation only after being
threatened with termination as a Medicare provider. Tr. 42,
53 - 55; HCFA Ex. 2 - 3, 10 - 19.

B. Governing law and requlations

1. Crite i i in Medicare b
HHA

The Act establishes requirements that an HHA must satisfy in
order to be certified as a Medicare provider. Act, sections
1861(0) (6), 1891. The Act gives the Secretary of the United
States Department of Health and Human Services (Secretary)
authority to establish requirements for participation in
Medicare by an HHA, in addition to those specified by the
Act, which are related to the health and safety of patients.
Act, section 1861(0)(6). Regulations published by the
Secretary implement the statutory requirements for
participation by an HHA in Medicare. 42 C.F.R. Part 484.

The statutory requirements for participation include specific
requirements designed to protect and promote the rights of
patients. Act, section 1891(a)(1)(A) - (G). Patients who
are cared for by an HHA are entitled to be fully informed in
advance about the care and treatment that the HHA intends to
provide and about any changes that the HHA may implement in
such care and treatment. Act, section 1891(a) (1) (A).
5

Patients of an HHA are entitled to participate in planning
their care and treatment, or any changes in their care and
treatment. Id.’ Patients of an HHA are entitled to have
their property treated with respect by the HHA. Act, section
1891(a)(1)(D). Patients of an HHA are entitled, in advance
of coming under the HHA's care, to be fully informed, both
orally and in writing, of: (i) all items and services
furnished by (or under arrangements with) the HHA for which
payment may be made under Medicare; (ii) the coverage
available under Medicare, Medicaid, or any other federal
program of which the HHA is reasonably aware; (iii) the HHA's
charges for any items or services which it provides which are
not covered under Medicare, and any charges that patients may
have to pay to the HHA for items or services furnished to
them by the HHA; and (iv) any changes in the charges or items
and services provided by the HHA. Act, section

1891(a) (1) (E).

The Act provides also that the Secretary has the duty and
responsibility to assure that the conditions for an HHA's
participation in Medicare are enforced adequately to protect
the health and safety of patients. Act, section 1891(b).
Regulations published by the Secretary are intended to
implement this duty and responsibility. The regulations
emphasize the responsibility of an HHA, as a prerequisite to
participating in Medicare, to protect and promote the rights
of patients. They state that, as a condition of
participation, an HHA has the duty to inform patients of
their rights and to protect and promote the exercise of those
rights. 42 C.F.R. § 484.10. Standards for protecting
patients' rights contained in the regulations restate the
requirements for protection of patients' rights stated in the
Act. 42 C.F.R. § 484.10; see Act, section 1891(a)(1)(A) -
(G).

' ipati

The Act provides that the Secretary may terminate a
participation agreement with an HHA where the Secretary finds
that the HHA is not complying with the requirements for
participation in Medicare. Act, section 1891(e). The
Secretary is mandated to take either immediate action to
correct a deficiency, or to terminate participation, where
she finds that an HHA's failure to comply with

3 An exception exists in the case where a patient is
adjudged to be incompetent. Id.
6

participation requirements immediately jeopardizes the health
and safety of patients. Act, section 1891(e) (1) .‘

The Act provides further that, where the Secretary determines
that an HHA is no longer complying with requirements for
participation and that the failure to comply does not pose
immediate jeopardy to the health and safety of patients, then
the Secretary may impose intermediate sanctions on the HHA in
lieu of terminating the HHA's participation in Medicare.

Act, section 1891(e) (2); see Act, section 1891(f). The
Secretary must terminate an HHA's participation in Medicare
where intermediate sanctions do not correct that HHA's
failure to comply with participation requirements. Act,
section 1891(e) (2).

Petitioner argues that HCFA should have given it the
opportunity to comply with participation requirements before
it terminated Petitioner's participation in Medicare,
inasmuch as HCFA made no finding that Petitioner's failure to
comply with participation requirements posed immediate
jeopardy to the health and safety of patients. I interpret
Petitioner's argument as being an assertion that HCFA could
not terminate Petitioner's participation in Medicare without
first imposing intermediate sanctions and evaluating
Petitioner's compliance with participation requirements under
those sanctions.

The Act plainly permits the Secretary (or HCFA) to terminate
an HHA's participation in Medicare based on a finding that
the HHA fails to comply with participation requirements and
where there is also a finding that this failure poses
immediate jeopardy to the health and safety of patients.
However, the Act is not so clear in addressing the
circumstance where there is a finding that an HHA has failed
to comply with a participation requirement, but where there
is no finding that the HHA's failure to comply with that
requirement poses immediate jeopardy to the health and safety
of patients. The language in section 1891(e)(2) authorizing
the Secretary (or HCFA) to impose intermediate sanctions in
such a case “in lieu" of termination might be read to require
the imposition of such sanctions as a prerequisite to
terminating an HHA's participation in Medicare. It might be
read also to give the Secretary (or HCFA) the option

of terminating a provider's participation in Medicare without
first imposing intermediate sanctions against that provider.

4 HCFA has not alleged that Petitioner's failure to
comply with the condition of participation governing patient
rights placed the health and safety of patients in immediate
jeopardy.
7

However, it would be inappropriate for me to interpret the
relevant statutory language, as the Secretary has established
her interpretation of the Act by regulation. The applicable
regulation authorizes HCFA to terminate a provider's
participation in Medicare based only on a finding by HCFA
that the provider is not complying with participation
requirements. 42 C.F.R. § 489.53(a)(1). I am bound by that
regulation.

The regulation states, in relevant part, that HCFA may
terminate a provider's participation in Medicare where the
provider is:

not complying with the provisions of title XVIII
(Medicare}] and the applicable regulations of this
chapter or with the provisions of the [provider]
agreement.

42 C.F.R. § 489.53(a)(1). This regulation thus authorizes
HCFA to terminate a provider's participation in Medicare
based on HCFA's determination that the provider is not
complying with participation requirements in the Act and
regulations. The authority given to HCFA by the regulation
to terminate a provider's participation in Medicare is not
contingent on a finding by HCFA that the provider's failure
to comply with certification requirements poses immediate
jeopardy to the health and safety of patients. There is no
requirement in the regulation that HCFA impose intermediate
sanctions against a provider as a prerequisite to terminating
that provider's participation in Medicare.’

c. Petiti 's fai wi on.
ing i icipation i are

HCFA asserts that Petitioner failed to comply with the
condition of participation stated both in the Act and in the
implementing regulations requiring that Petitioner protect
and promote the rights of patients under its care. This
assertion is amply supported by the evidence in this case.
The essentially unrebutted evidence is that Petitioner

5 In this case, HCFA avers that its determination to
terminate Petitioner's participation in Medicare without
first affording Petitioner the chance to comply with
participation requirements was justified by Petitioner's
history of non-compliance with participation requirements.
However, under 42 C.F.R. § 489.53, HCFA may terminate a
provider's participation in Medicare without regard to that
provider's compliance history, if HCFA determines that the
provider is not complying with a condition governing that
provider's participation in Medicare.
8

failed, in several ways, to respect the rights of a patient,
E.R. Petitioner's failures to respect E.R.'s rights
constitute violations of standards of care established by the
regulation (42 C.F.R. § 484.10) which implements section
1891(a)(1) of the Act. I conclude that, when considered
individually and collectively, these violations are so
serious as to constitute a violation of the condition of
participation that an HHA protect and promote patient rights.
1. . . .

agency and its findings

E.R., an elderly, female, Medicaid recipient, was admitted to
Petitioner's care on November 15, 1991 and remained under
Petitioner's care until April 23, 1993. Tr. at 125, 146,
154, 382; HCFA Ex. 8, page 1; HCFA Ex. 23, page 1. During
this period, E.R. lived alone and was totally dependent on
Petitioner for her care. On April 22, 1993, a social worker
from the Adult Protective Services of the District of
Columbia Department of Human Services filed a complaint
against Petitioner, alleging that Petitioner's President
exercised undue influence over E.R. Tr. at 378; HCFA Ex. 24.

Between April 23 and June 2, 1993, the D.C. survey agency
investigated the complaint. HCFA Ex. 8, page 1. The
principal investigator for the D.C. survey agency was Ms.
Ellen Yung-Fatah. Tr. at 107, 263.

During the investigation, Ms. Yung-Fatah and her staff
reviewed E.R.'s medical records, the clinical records
Petitioner maintained on E.R., records of personnel assigned
by Petitioner to care for E.R., and records of E.R.'s
expenditures, i.e., cancelled checks and receipts made
available by Petitioner. Either Ms. Yung-Fatah or her staff
interviewed Ms. Graham, E.R., four home health aides, E.R.'s
former physicians, social workers from Adult Protective
Services and In-Home Support Services, the chief of the Home
Care Services Bureau of the District of Columbia Department
of Human Services, a homemaker, and the manager of a
homemaker agency from which E.R. received services prior to
her admission by Petitioner. HCFA Ex. 8, pages 1 - 2.

At the hearing of this case, Petitioner called Ms. Yung-Fatah
as its principal witness to support the findings HCFA made
based on the extensive investigation which Ms. Yung-Fatah
conducted. Tr. at 84 - 322. HCFA buttressed Ms. Yung-
Fatah's testimony with exhibits, which included documents
which Ms. Yung-Fatah obtained during the course of the
investigation, and Ms. Yung-Fatah's investigative report,
which memorialized the results of the investigation. HCFA
9

Ex. 4, 8. I find that Ms. Yung-Fatah testified credibly, and
that her testimony is supported by the exhibits.°

Petitioner challenges Ms. Yung-Fatah's credibility and denies
that her investigative findings are accurate. Petitioner's
assertions include the allegation that Ms. Yung-Fatah
committed perjury during her testimony at the hearing.
However, Petitioner has not offered any evidence which
contradicts significantly the findings made by Ms. Yung-Fatah
or her testimony.’ There is nothing in the record to support
Petitioner's argument that Ms. Yung-Fatah testified
untruthfully.®

Petitioner attacks the evidence obtained by Ms. Yung-Fatah by
arguing also that she did not conduct her investigation
professionally and that she was prejudiced against
Petitioner. Petitioner's assertions include allegations that
Ms. Yung-Fatah pressured Petitioner's staff unreasonably,
causing employees to resign, and that she failed to keep

6 I was not present at the hearing conducted on March
8 - 9, 1994. Therefore, I make no findings as to Ms. Yung-
Fatah's credibility based on her demeanor as a witness. My
finding that Ms. Yung-Fatah testified credibly is based
solely on a review of the transcript and the exhibits. I
would note, however, that Petitioner has not argued that Ms.
Yung-Fatah's credibility was impeached by her demeanor as a
witness. Furthermore, I offered Petitioner the opportunity
to have a new hearing in this case and Petitioner decided not
to proceed in this manner.

7 In its posthearing brief, Petitioner makes a number
of allegations concerning E.R. and the manner in which she
was treated by Petitioner. These allegations are
intermingled with Petitioner's arguments that it did not
contravene standards governing its duty to protect and
promote patients' rights. Petitioner's Post-Hearing Brief at
2 - 13. These allegations are not supported by exhibits or
by testimony.

* The gravamen of Petitioner's assertion that Ms.
Yung-Fatah committed perjury is that Ms. Yung-Fatah gave
inconsistent testimony concerning the statements made to her
by E.R. Petitioner's Post-Hearing Brief at 7 - 8. I am not
persuaded that Ms. Yung-Fatah's testimony is materially
inconsistent. Furthermore, Ms. Yung-Fatah made it plain in
her testimony that E.R. was a confused individual who at
times made inconsistent statements to Ms. Yung-Fatah. The
inconsistencies asserted by Petitioner appear to be
inconsistent statements made by E.R. and not by Ms. Yung-
Fatah.
10

Petitioner informed about the progress of her investigation.
I find no support in the record of this case for these
assertions. Even if it is true that Ms. Yung-Fatah may have
been aggressive in pursuing her investigation into the
allegations concerning E.R., that is not a basis for finding
the results of her investigation, or her testimony, to be
less than credible.

The findings made by the D.C. survey agency, which I conclude
are substantiated by the preponderance of the evidence, are
as follows:

© On eleven occasions, E.R. made checks payable to an
employee of Petitioner, totalling $690. HCFA Ex. 4, pages 32
- 33. Two of these checks were for sums in excess of $100.
Id.; Tr. at 166. There is no evidence to show that
Petitioner ever authorized its employee to accept checks from
E.R. Petitioner did not maintain records documenting the
purpose of the checks.® When Petitioner learned that its
employee had accepted checks from E.R., it discharged the
employee. Tr. at 169. However, Petitioner did not reimburse
E.R. for the checks which E.R. had written to Petitioner's
employee. Id. Nor did Petitioner document that it had
learned that its employee had accepted checks from E.R., or
that it had discharged the employee. Tr. at 177 - 178.

O Between November 1992 and April 1993, Petitioner
arranged to have persons live in Petitioner's home without
paying rent to E.R. HCFA Ex. 4, pages 9 - 13. Petitioner's
decision to have persons reside in E.R.'s home was motivated
by its conclusion that Petitioner was unable to care for her
needs without around-the-clock assistance. Tr. at 122 - 125.
Petitioner did not obtain written permission from E.R. for
persons to reside in her home. Tr. at 123 - 124. It did

° Seven of the checks on their face were labeled
"food" and one check on its face was labeled "cab fare."
HCFA Ex. 4, pages 32 - 33. Although the record does contain
copies of food store receipts purporting to be for food
purchased for E.R. (HCFA Ex. 25, pages 1 - 7, 9 - 10),
Petitioner did not maintain records documenting that this
money was used for the purpose indicated on the face of the
checks or for the food indicated by the receipts. Thus,
there is no way to tell whether the funds represented by
these checks were used for the purposes indicated.

10 In an affidavit, E.R. states that the arrangement
to have individuals reside in her home was made with her
consent. P. Ex. 7. However, I find this statement to be of
little probative value, because E.R. had been determined to

(continued...)
11

not obtain instructions from a physician to have persons
reside in E.R.'s home. Tr. at 122 - 125. In at least one
instance, Petitioner did not document the arrangement it made
with an individual to reside in E.R.'s home. HCFA Ex. 4,
page 12; Tr. at 232 - 239.

© Petitioner did not supervise the activities of the
persons whom it authorized to reside in E.R.'s home. HCFA
Ex. 4, pages 11 - 12.

© Occasionally, Ms. Graham, Petitioner's President,
would bring E.R. to her home to reside on weekends. HCFA Ex.
4, page 11. Petitioner did not obtain written permission
from E.R. to remove her from her home.

Oo E.R. complained to an employee of Petitioner that
other employees of Petitioner were eating her food. Although
Petitioner was aware of this complaint, there is no
documentation showing that Petitioner investigated it. HCFA
Ex. 4, pages 11 - 12; Tr. at 112 - 113, 175 - 180.

© On several occasions, changes were made by Petitioner
in the manner in which it provided care to E.R. Tr. at 194 -
247; HCFA Ex. 23, pages 9, 11, 13, 15, 17, 19, 21, 23. For
example, Petitioner did not: 1) document that it informed
E.R. that her physician had ordered additional HHA services;
2) document that it informed E.R. what HHA services were
ordered; and 3) document that it informed E.R. concerning
what the cost of the additional HHA services would be to her.
Tr. 194 - 197; HCFA Ex. 23, page 9. Petitioner did not
inform E.R. about the changes in the care it was providing.
Tr. 194 - 247. Moreover, there is no evidence that
Petitioner solicited E.R.'s advice or consent concerning the
changes it was implementing in her care.

O Petitioner did not. provide E.R. with notice in
advance of the charges for some of the services which it was
providing to her. Tr. at 196 - 197.

I do not infer from the investigation conducted by the D.c.
survey agency, or from the evidence which HCFA offered in
this case, that Petitioner was exploiting its relationship
with E.R. for financial gain. It may be, as Petitioner
asserts, that its actions with respect to E.R. were motivated
by concern for her well-being. However, the record of this
case portrays a relationship between Petitioner and E.R.
which was, to say the least, unprofessional. Petitioner's

10(,. continued)
be incompetent at a date earlier than the date of her
affidavit. Tr. at 381 - 382.
12

President, Ms. Graham, appears to have treated E.R. more like
an aged relative in need of care than as a patient. The
arrangements which Petitioner made to care for E.R. were
informal, undocumented, and verged at times on a conflict of
interest.

Additional examples of this informal relationship include:

1) Ms. Graham's taking E.R. out of her house and into her own
home on weekends; 2) Ms. Graham obtaining a power of attorney
from E.R. which gave her authority to manage E.R.'s assets.
HCFA Ex. 4, pages 25 - 27; 3) Ms. Graham arranging to have
signing authority on E.R.'s checking account. HCFA Ex. 4,
pages 30 - 31; Tr. at 135 - 136; and 4) Ms. Graham writing
checks on this account payable to Petitioner's employees.
HCFA Ex. 4, page 30.

2. Petitioner's failure to protect and

re . '

As I find above, the regulation which requires an HHA to
protect and promote the rights of patients implements an
identical statutory requirement. 42 C.F.R. § 484.10; see
Act, section 1891(a)(1). The importance of this requirement
is apparent when it is considered in the context of the
functions performed by HHAs. An HHA is entrusted with the
unique responsibility of caring for aged and ill Medicare
beneficiaries in their homes. The individuals who are under
the care of an HHA may be frail and dependent on the HHA to
protect their rights and property. They are especially
vulnerable to exploitation. Where, as in this case, the
patient lives alone, that patient is not only dependent on
the HHA for care, but is utterly at the mercy of the HHA and
its employees.

I find that, in providing care to E.R., Petitioner
contravened the requirement that it protect and promote
E.R.'s rights in several significant respects. Petitioner
failed to treat E.R.'s property with respect. It failed to
investigate and document complaints voiced by E.R. concerning
alleged misuse of her property. It failed to apprise her of
changes in her treatment, or to obtain her consent before
implementing changes in her treatment. It failed to document
the care which it was providing to E.R.

The regulation which mandates that an HHA protect and promote
patient rights establishes as a standard that the patient has
the right to exercise his or her rights as a patient of the
HHA. 42 C.F.R. § 484.10(b). One element of this standard is
that the patient has the right to have his or her property
treated with respect. 42 C.F.R. § 484.10(b)(3). Another
element of this standard is that an HHA is obligated to
investigate complaints by a patient regarding any alleged
13

failure to respect that patient's property. 42 C.F.R. §
484.10(b) (5). This element requires an HHA that receives a
complaint concerning the abuse of a patient's property to
document specifically the complaint and its resolution. Id.

The evidence establishes plainly that Petitioner failed to
comply with the elements cited above and with the standard
that protected E.R.'s right to exercise her rights as a
patient. Petitioner's decision to authorize persons to
reside in E.R.'s home without obtaining E.R.'s written
consent constituted a violation of the element requiring that
it treat a patient's property with respect. Petitioner's
knowledge of its employee's acceptance of 11 checks from E.R.
is an additional violation of this element, insofar as
Petitioner failed to document the facts of the incident or
that it conducted any investigation of the incident.
Petitioner's failure to document the expenditures made by its
employees with checks written by E.R. constitutes another
violation of this element. Furthermore, Petitioner's failure
to investigate and document E.R.'s complaint that its
employees were eating her food is a violation of the element
requiring it to investigate complaints from a patient
regarding alleged failures to respect that patient's
property.

.The regulation specifies as an additional standard that a
patient of an HHA has a right to be informed, in advance, of
the care to be furnished by an HHA and of any changes in that
care. 42 C.F.R. § 484.10(c). A specific element in this
standard requires an HHA to advise a patient in advance of
implementing a change in the patient's care. 42 C.F.R. §
484.10(c)(1). Another element provides that a patient has a
right to participate in the planning of his or her care. 42
C.F.R. § 484.10(c)(2). Petitioner failed to comply with this
standard by implementing changes in E.R.'s care without
providing her with notice and without obtaining her
participation in decisions to change her care. This is
particularly evident in Petitioner's decision to authorize
persons to reside in E.R.'s home.

The regulation provides as a standard also that an HHA has an
obligation to provide a patient, in advance of the initiation
of care, with information on the extent to which payment for
the care may be expected from Medicare or other sources, and
the extent to which payment for the care may be expected from
the patient. 42 C.F.R. § 484.10(e). Petitioner contravened
this standard by failing to advise E.R., in advance of the
implementation of care, as to what the charges for her care
would be.

The regulation governing patient rights does not state
specifically under what circumstances violations of standards
14

or elements of standards may constitute a violation of the
condition of participation requiring an HHA to protect and
promote patient rights. However, it is apparent that where,
as is the case here, an HHA violates multiple elements or
standards of a condition, these violations in the aggregate
constitute a failure to comply with the condition. I
conclude that Petitioner's casual regard for E.R.'s rights
was so egregious as to constitute a violation of the
condition of participation requiring it to protect and
promote patient rights.

D. HCFA's authority to terminate Petitioner's
participation in Medicare

As I found at Part B of this discussion, HCFA may terminate
an HHA's participation in Medicare where it is established
that the HHA is not complying with the requirements of Title
XVIII and regulations governing its participation. 42 C.F.R.
§ 489.53(a)(1). HCFA is not obligated to afford the HHA an
opportunity to correct its deficiency before terminating the
HHA's participation.

Here, Petitioner engaged in conduct which materially violated
both the requirement of the Act and the regulations that it
protect and promote patient rights. Thus, Petitioner has
failed to comply with a statutory condition of participation
in Medicare. On that basis, HCFA is authorized to terminate
Petitioner's participation in Medicare.

HCFA cites, as an additional basis for terminating
Petitioner's participation, Petitioner's history of failing
to comply with conditions of participation. HCFA asserts
that, based on Petitioner's poor performance as a provider,
it is not required to afford it now with the opportunity to
correct its deficiencies. Although this may be a legitimate
policy basis for HCFA's determination to terminate
Petitioner's participation at this juncture, it is nota
legal prerequisite. The regulation which authorizes HCFA to
terminate an HHA's participation for failure to comply with
the requirements of the Act and the regulations does not
require HCFA to prove a history of noncompliance as a
prerequisite to terminating an HHA's participation in
Medicare.

E. ‘sc a: w. equirem
Petitioner argues that HCFA failed to provide it with

adequate notice of the findings of the D.C. survey agency's
investigation and HCFA's determination to terminate
15

Petitioner's participation in Medicare. In its argument,
Petitioner focuses on the alleged failure of Ms. Yung-Fatah
to discuss with Petitioner the conclusions of the D.C. survey
agency's complaint investigation. Petitioner's Post-Hearing
Brief at 15.

Ms. Yung-Fatah contradicts this assertion. She testified
that, on June 2, 1993, she informed Ms. Graham, Petitioner's
President, of the results of the complaint investigation.
Tr. at 160. However, it is not necessary for me to decide
whether Ms. Yung-Fatah discussed the results of the
investigation with Ms. Graham. HCFA was under no obligation
to provide Petitioner with such information where, as is the
case here, HCFA determined to terminate Petitioner's
participation in Medicare.

The regulation which governs termination of a provider's
participation in Medicare imposes no obligation on HCFA to
discuss investigative findings with a provider before
communicating to the provider its determination to terminate
that provider's participation in Medicare. The regulation
states only that HCFA must give a provider at least 15 days'
notice before terminating its participation in Medicare. 42
C.F.R. § 489.53(c) (1). The notice of termination which HCFA
sent to Petitioner on July 16, 1993 advised Petitioner that
its participation in Medicare would terminate on August 15,
1993, 30 days from the date of the notice.” HCFA Ex. 7,
page 2. Thus, Petitioner received the notice to which it was
entitled under the regulation.”

NI note that the D.C. survey agency attempted to
notify Petitioner, by certified letter dated July 9, 1993,
that it was recommending to HCFA that Petitioner be
terminated. This letter enclosed the statement of
deficiencies for the complaint investigation (as well as the
statement of deficiencies for the June 1993 follow-up
survey). The letter was sent to Petitioner's correct
address. However, Petitioner did not pick up the letter at
the post office, and the letter was returned to the D.c.
survey agency. HCFA Ex. 6. Had Petitioner picked up this
letter, it would have received notice of the D.C. survey
agency's recommendation prior to receiving HCFA's notice of
termination.

2 petitioner does not deny receiving the notice.

3 HCFA's Regional Office Manual suggests that HCFA
employ a process which covers a 90-day period, from the
conclusion of an initial survey of a provider to termination
of that provider's participation in Medicare, in a case where

(continued...)
16

III. Conclusion

I conclude that Petitioner failed to comply with the Medicare
condition of participation requiring it to protect and
promote the rights of patients. HCFA was justified in
terminating Petitioner's participation in Medicare, and I
sustain HCFA's determination to do so.

/s/

Steven T. Kessel
Administrative Law Judge

B(,. continued)
termination may be an appropriate remedy. HCFA Ex. 21, pages
3 - 4. This process is applicable to the case where HCFA
seeks to have a provider remedy a deficiency, in lieu of
terminating the provider's participation in Medicare. The
Regional. Office Manual does not mandate a 90-day process in
the case where, based on the outcome of a survey or
investigation, HCFA determines that termination of a
provider's participation is appropriate and that no attempts
should be made to remedy the deficiency prior to termination.
Indeed, the Regional Office Manual states specifically that
termination may be accomplished in less than 90 days, so long
as the requirements of the regulations are met. Id.
Equally, the State Operations Manual referenced by Petitioner
(P. Ex. 12) contemplates a 90-day termination process only in
the case where a State survey agency seeks to have a provider
remedy a deficiency.


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:

Transitional Hospitals
Corporation -- Las Vegas,

DATE: January 6, 1995

Petitioner,

Docket No. C-94-413
Decision No. CR350

-vwo

Health Care Financing
Administration.

wee ee ee eS SS Se

DECISION

On March 28, 1994, the Health Care Financing
Administration (HCFA) notified Petitioner that it had
approved its participation in Medicare as an acute care
hospital effective February 10, 1994. Petitioner
requested that HCFA reconsider this determination.
Petitioner contended that HCFA should have approved its
participation in Medicare effective January 20, 1994.
HCFA denied Petitioner's request for reconsideration.
Petitioner requested a hearing. The case was assigned to
me for a hearing and a decision.

HCFA moved for disposition of this case without an in-
person hearing, asserting that it was entitled to a
decision sustaining its determination based on the
undisputed material facts and the law. Petitioner
opposed the motion. Petitioner argued that there exist
disputed material facts such that an in-person hearing is
necessary to resolve the case.

I conclude that there is no need for an in-person hearing
in this case.' I find that HCFA is entitled to a
decision sustaining its determination to approve
Petitioner's participation in Medicare effective February
10, 1994.

1 In order to decide this case, I have accepted
as true all facts asserted by Petitioner to be material.
I discuss these facts below.
2

I. Issues, findings of fact, and conclusions of law

The issue in this case is whether HCFA correctly
certified Petitioner to participate in Medicare as an
acute care hospital effective February 10, 1994. In
deciding that HCFA correctly certified Petitioner's
participation effective February 10, 1994, I make
specific findings of fact and conclusions of law. After
each finding or conclusion, I cite to the page or pages
of the decision at which I discuss the finding or
conclusion.

1. A provider's participation in Medicare will
become effective as of the date that an onsite survey of
the provider is completed by or on behalf of HCFA if, on
that date, the provider meets all federal health and
safety requirements for participation and any other
requirements imposed by HCFA. Page 4.

2. If a provider does not meet all requirements for
participation as of the date that an onsite survey is
completed, then the provider's participation in Medicare
will become effective on the earlier of the following
dates:

a. The date on which the provider meets all
requirements for participation; or

b. The date on which the provider submits a
correction plan acceptable to HCFA, or an approvable
waiver request, or both.

Page 4.

3. HCFA may not certify a provider to participate
in Medicare where that provider has not met all
requirements for participation, submitted a plan of
correction acceptable to HCFA, or submitted an approvable
waiver request. Pages 4, 8 ~ 11.

4. Petitioner did not meet all requirements for
participation in Medicare as of January 20, 1994, the
date when an onsite survey of Petitioner was completed.
Pages 5 - 7.

5. The earliest date that Petitioner met all
requirements for participation in Medicare was February
10, 1994, the date that Petitioner submitted a plan of
correction acceptable to HCFA. Pages 7, 12 - 13.

6. Petitioner is not entitled to be certified for
participation in Medicare earlier than February 10, 1994,
due to the fact that the individuals who surveyed
Petitioner advised Petitioner's representatives on
3

January 20, 1994, that Petitioner met all conditions for
certification as a Medicare provider. Pages 5 - 6, ll -
12.

7. Petitioner is not entitled to be certified for
participation in Medicare earlier than February 10, 1994,
due to the fact that the individuals who surveyed
Petitioner did not tell Petitioner's representatives on
January 20, 1994, that Petitioner must correct
outstanding deficiencies before being certified as a
Medicare provider. Pages 6, 11 - 12.

8. Petitioner is not entitled to be certified for
participation in Medicare earlier than February 10, 1994,
even if the individuals who surveyed Petitioner failed to
follow the requirements of the operating manual governing
surveys of providers by State agency surveyors. Pages 6,
12.

II. Discussion
A. Governing law
1. Criteria for participation in Medicare

The statutory criteria for a hospital's participation in
Medicare are contained in section 1861(e) of the Social
Security Act (Act). Regulations which implement these
criteria, and which set forth additional requirements for
participation by a hospital, are contained in 42 C.F.R.
Part 482.

The purpose of both the Act and the regulations is to
establish criteria for a hospital's participation in
Medicare which promote and protect the health and safety
of Medicare beneficiaries. The criteria for
participation contained in the Act are, on their face,
intended to achieve this purpose. Act, section

1861(e) (1) - (9).2 The criteria contained in the
regulations are intended also to achieve this purpose.
42 C.F.R. §§ 482.1 - 482.66.

2 These criteria include the requirement that a
hospital: maintain clinical records on all patients; have
bylaws to govern its physician staff; require that all of
its patients be under the care of a physician; provide
24-hour nursing services rendered or supervised by a
registered professional nurse; have in effect a hospital
utilization review plan; and meet applicable State or
local licensing standards. Act, section 1861(e)(2) -

(7).
4

Regulations governing acute care hospitals' participation
in Medicare establish the conditions under which
hospitals may participate. A condition is generally set
forth at the beginning of each regulation governing
participation, in the form of a broadly stated
prerequisite to participation. The conditions of
participation established by these regulations generally
express conditions stated in the Act. For example, the
regulation which establishes medical staff requirements
for participating hospitals states, as a condition of
participation, staffing requirements that are contained
in the Act (although in somewhat broader language than
the statutory language). 42 C.F.R. § 482.22; see Act,
section 1861(e) (3).

These regulations establish also standards of
participation, which are criteria intended to elaborate
and to flesh out the conditions of participation. In
turn, these standards contain subdivisions (elements) .
For example, the medical staff condition of participation
provides as a standard under that condition that a
participating hospital must have a medical staff that is
“composed of doctors of medicine or osteopathy... ."
42 C.F.R. § 482.22(a). One element of this standard is
that the medical staff must conduct periodic appraisals
of its members. 42 C.F.R. § 482.22(a) (1).

2. The circumstances under which HCFA may
approve a provider's participation in Medicare

The circumstances under which HCFA may approve a
provider's participation in Medicare are established by
regulation. 42 C.F.R. § 489.10. An agreement between a
provider and HCFA becomes effective on the date that HCFA
completes an onsite survey of the provider if, on that
date, the provider meets all conditions of participation
and any other requirements imposed by HCFA. 42 C.F.R. §
489.13(a). As of the effective date of the agreement,
the provider will be eligible to receive Medicare
reimbursement for its services.

If the provider fails to meet any of the requirements
established by HCFA for certification on the date that
the survey is completed, then the agreement becomes
effective, and the provider becomes eligible to receive
Medicare reimbursement for its services, on the earlier
of two dates. These are: 1) the date on which the
provider meets all HCFA requirements; or 2) the date on
which the provider submits a plan of correction to HCFA
which HCFA accepts, or an approvable waiver request, or
both. 42 C.F.R. § 489.13(b) (1), (2).
B. Material facts

The following material facts are not disputed.
Petitioner is an acute care hospital in Las Vegas,
Nevada, which began operating in late December 1993.
Petitioner applied to participate as a provider in
Medicare. In January 1994, Petitioner was surveyed on
behalf of HCFA by surveyors from the Bureau of Licensure
and Certification of the Health Division of the Nevada
Department of Human Resources (Nevada State agency). Two
surveys were performed, consisting of a Medicare survey
and a Life Safety Code survey. These surveys were
completed, respectively, on January 19 and 20, 1994.

In both surveys, the surveyors identified deficiencies in
Petitioner's operations. The deficiencies identified by
the surveyors included failures to comply with
participation standards established by regulation, and
with elements of those standards. HCFA Ex. 1, 2.° By
letters of January 25 and 26, 1994, the Nevada State
agency gave Petitioner written notice of the
deficiencies. Id.; P. Ex. 4; HCFA Ex. 3. On February
10, 1994, Petitioner submitted to the Nevada State agency
its plans of correction. HCFA Ex. 1, 2.4 On March 28,
1994, HCFA advised Petitioner that it had accepted its
agreement to participate in Medicare as an acute care
hospital, effective February 10, 1994. HCFA Ex. 4.

Petitioner asserts the presence of additional facts. For
purposes of this Decision, I accept the following fact
contentions made by Petitioner. On January 20, 1994, at
the completion of the two surveys, the Nevada State
agency surveyors gave Petitioner's representatives a
verbal report of their findings. The surveyors advised

3 HCFA submitted six exhibits (HCFA Ex. 1 - 6).
Petitioner submitted four exhibits (P. Ex. 1 - 4).
Neither party has objected to the admission into evidence
of the other's exhibits. I admit all of the exhibits
into evidence, although, strictly speaking, it is not
necessary for me to do so, inasmuch as many of them are
evidence of facts which are not in dispute.

4 The documents in which the deficiencies are
identified are each captioned "Statement of Deficiencies
and Plan of Correction." HCFA Ex. 1, 2. Petitioner was
instructed to prepare written plans of correction to
resolve the deficiencies and to describe the proposed
corrections in the right-hand columns of the statements
of deficiencies. HCFA Ex. 3; P. Ex. 4. The statements
of deficiencies which are in evidence as HCFA Ex. 1 and 2
contain also Petitioner's plans of correction.
6

Petitioner's representatives that Petitioner met all
Medicare conditions of participation. However, they told
Petitioner's representatives also that they had
identified some deficiencies in Petitioner's operations.
P. Ex. 1, page 3; P. Ex. 2, page 2. The surveyors did
not provide Petitioner's representatives with a written
statement of the deficiencies that they found. P. Ex. 1,
pages 2 ~ 3; P. EX. 2, page 2. The surveyors told
Petitioner's representatives that they would take their
survey results back to their office, compile their
findings, and mail the written results to Petitioner. P.
Ex. 1, page 3.

The surveyors did not tell Petitioner's representatives
that the date when Petitioner would -be certified to
participate in Medicare would depend on Petitioner's
response to the written statement of deficiencies that
the surveyors would be preparing. P. Ex. 1, page 3; P.
Ex. 2, page 2. The surveyors did not tell Petitioner's
representatives when Petitioner would be certified to
participate in Medicare. P. Ex. 2, page 2.

Petitioner does not contend that the surveyors told its
representatives at the completion of the surveys that
Petitioner would be certified to participate in Medicare
as of the surveys' completion date (January 20, 1994).
Nor does Petitioner contend that the surveyors told
Petitioner's representatives that Petitioner would be
excused from the obligation to submit a plan of
correction of deficiencies as a prerequisite to becoming
certified to participate in Medicare.

For purposes of this Decision, I accept also Petitioner's
assertion that the surveyors did not conduct their exit
conference with Petitioner's representatives in full
compliance with the requirements of the State Operations
Manual (SOM). The SOM consists of HCFA's instructions to
State agencies which, in part, govern the manner in which
surveys of providers are to be conducted. I accept
Petitioner's representation that the SOM required the
surveyors to notify Petitioner that the effective date of
its participation in Medicare would be determined
according to the date that Petitioner submitted its plan
of correction of the deficiencies identified by the
surveyors, and that the surveyors failed to comply with
this requirement. Petitioner's Brief at 14 - 15.

Cc. i f the parties' it:

Relying on the language of 42 C.F.R. § 489.13, HCFA
argues that Petitioner could not be certified to
participate in Medicare on January 20, 1994, inasmuch as
Petitioner did not meet all of HCFA's participation
requirements on that date. HCFA asserts that the
7

earliest date that Petitioner qualified for certification
was February 10, 1994, the date on which Petitioner
submitted plans of correction to HCFA which HCFA
determined to be acceptable.

Petitioner does not deny that there were deficiencies in
its operations as of January 20, 1994. Nor does
Petitioner deny that the deficiencies constituted
failures to comply with HCFA's certification
requirements. Petitioner does not assert that it
corrected any of these deficiencies prior to February 10,
1994, the date on which it submitted its plans of
correction. Thus, Petitioner acknowledges that, under 42
C.F.R. § 489.13, Petitioner was not in compliance with
all of HCFA's requirements on January 20, 1994, and that
it did not come into compliance with those requirements
prior to February 10, 1994, the date on which it
submitted acceptable plans of correction.*

Petitioner argues that the requirements contained in 42
C.F.R. § 489.13 are not applicable here. It contends
that, through no fault of its own, it was misled by
Nevada State agency surveyors into believing that it did
not have to correct deficiencies as a prerequisite to
certification. Petitioner asserts that, had it known
that it had to correct deficiencies identified by the
surveyors as a prerequisite to certification, it would
have corrected them prior to February 10, 1994.
Therefore, according to Petitioner, it relied to its
detriment on misleading statements made by Nevada State
agency surveyors. It argues also that the surveyors'
failure to tell it, in contravention of SOM requirements,
that it would be certified as of the date it submitted
acceptable plans of correction, should estop HCFA from
denying certification as of the date of the completion of
the surveys. According to Petitioner, the reasonable
remedy would be for me to order that it be certified as a
Medicare provider, effective January 20, 1994.

As I explain below, I do not find that Petitioner can
assert reasonably that it was misled into believing that
it would be certified before it corrected the
deficiencies that the surveyors identified. However, I
would find that Petitioner is not entitled to be
certified prior to February 10, 1994, even if I were to
find that Petitioner had been misled as it contends.

That is so because I find no legal basis for Petitioner's
estoppel argument.

5 Petitioner did not request a waiver from
participation requirements. .
Central to my conclusion is that Petitioner's estoppel
argument relies on a fundamental misconstruction of
HCFA's obligations under the Act and implementing

..Yegulations. .The Act and regulations do not impose on
HCFA the duty to pay Medicare reimbursement to providers
who are not in compliance with participation
requirements. No such duty exists even where HCFA might
arguably mislead a provider into believing that it would
be certified to participate when, in fact, the provider
had not met participation requirements. The Act and the
regulations impose on HCFA the duty to protect the
welfare of Medicare beneficiaries. Where HCFA's agents
conduct a survey of an applicant for participation in
Medicare and find deficiencies, HCFA's obligation is to
refrain from certifying the applicant until the
deficiencies are corrected.

A provider's duty is to understand the implications of a
finding that deficiencies exist and to do whatever is
necessary to bring its operations into compliance with
the legal requirements for certification. A provider may
not rely on errors or omissions by HCFA's agents to
obtain certification in advance of the date when it
complies fully with certification requirements.

I analyze the relevant law and facts in this case as
follows.

© fhe provider certification regulations do not
permit HCFA to certify a provider to participate in
Medicare where that provider has not complied with all
certification requirements. The equitable principle of
estoppel does not supersede or supplant the requirements
of the regulations.

The regulation governing the date when a provider becomes
certified states plainly, and without exception, that a
provider must meet all federal requirements before being
certified. 42 C.F.R. § 489.13(a), (b). The regulation
does not permit a deficient provider to be certified
prior to correcting its deficiencies. This is true even
where the provider is aware of deficiencies, but
concludes incorrectly that it need not correct those
deficiencies as a prerequisite to certification. This is
true even if the provider has been misled by State agency
surveyors into believing that it need not correct
deficiencies prior to becoming certified.

Petitioner argues that, notwithstanding the plain
language of the regulations, the doctrine of estoppel may
be invoked to bar HCFA from denying certification to a
provider where HCFA misleads a provider into believing
that it will be certified prior to correcting
deficiencies. Petitioner cites Livingston Care Center,
9

Inc., OHA Appeals Docket No. 000-51-7010 (1989), as
precedent for this argument. In Livingston, a Social
Security Administration Office of Hearings and Appeals
administrative law judge held that HCFA had not
established a legitimate basis to terminate the
participation in Medicare of a skilled nursing facility.
Id. at 63 - 64. The administrative law judge based his
decision, in part, on his finding that the State agency
that surveyed the provider failed to comply with the
requirements contained in the SOM governing the
information which State agency surveyors were obligated
to impart to the provider as part of the inspection
process.” _.
I am not persuaded by the Livingston decision that HCFA
may be estopped from denying certification to Petitioner
at a date earlier than the date when Petitioner complied
with participation requirements. First, the

decision does not operate as precedent and I am not
required to accept it.

Second, the legal principle which governed the judge's
decision in Livingston does not operate here.

is a decision which upholds a provider's rights under the
Act. In Livingston, the administrative law judge found
that the provider had a statutory right to continue as a
Medicare provider while it was given a reasonable
opportunity to correct deficiencies. Id. The State
agency's surveyors' failure to impart necessary
information to the provider concerning the deficiencies
they found was held to deprive the provider of the
opportunity to correct its deficiencies.

Here, there are no statutory rights at issue. There is
no statutory right for a provider-applicant to be
certified as a Medicare provider while it attempts to
correct deficiencies.

My interpretation of the provider certification
regulations is similar to the analysis I made of the same
regulations in D/B St. Mary Parish Dialys
Center, DAB CR341 at 18 - 19 (1994). In SRA, as in this
case, I held that the regulations which govern

6 The Livingston decision is included in the
record of this case as Attachment A to Petitioner's
November 21, 1994 Brief.

7 Below, I explain why the failure of Nevada
State agency surveyors in this case to comply with the
requirements of an SOM does not entitle Petitioner to be
certified at a date earlier than the date it complied
with Medicare participation requirements.
10

certification of a provider to participate in Medicare do
not permit a provider to be certified until it complies
with all requirements for participation. Id.

Petitioner argues that the SRA decision is not applicable
here. Although the facts of SRA are somewhat different
from the facts of this case, the law on which that
decision is based is applicable also in this case.

In SRA, State agency surveyors conducted several surveys
and a complaint investigation of the petitioner which
identified deficiencies. The State agency provided the
petitioner with notices of these deficiencies. The
petitioner argued that the State agency did not provide
it with timely notice of the deficiencies. It argued
also that it had complied "substantially" with
certification requirements. It asserted that it ought to
have been certified at a date earlier than the
certification date established by HCFA, due to its
"substantial" compliance with certification requirements
and the alleged failure of the State agency and HCFA to
give it timely notice of deficiencies.

I held that the petitioner in SRA did not prove its
compliance with certification requirements at any date
prior to the certification date established by HCFA. I
held also that the requirement that the petitioner comply
with certification requirements was not vitiated by
alleged failures by the State agency or HCFA to provide
the petitioner with timely notice of deficiencies
(although I held also that the notices that were sent to
the petitioner were not untimely).

© The regulations are consistent with congressional
intent. The purpose of both the Act and the regulations
is to protect the welfare of Medicare beneficiaries by
assuring that only providers who comply with all
applicable criteria governing the delivery of services
are reimbursed for those services. SRA, at 19. It would
not be consistent with the purpose of the Act or the
regulations to permit a provider to claim reimbursement
for its services where that provider is not complying
with certification requirements.

Indeed, when the competing equities of Petitioner and
those Medicare beneficiaries who are served by Petitioner
are measured against this congressional intent, it is
apparent that Petitioner cannot prevail. Congress has
decided that Medicare beneficiaries have an interest in
being provided health care consistent with appropriate
health and safety requirements which is superior to
providers' interest in being reimbursed for services to
Medicare beneficiaries. Thus, Congress has decided that
11

providers who fail to meet certification requirements
must not be certified to provide services to
beneficiaries.

© Based on the facts contended by Petitioner,
Petitioner has not proved that it was misled by Nevada
State agency surveyors into believing that it need not
correct deficiencies in its operations as a prerequisite
to being certified. The surveyors made no affirmative
statements which were misleading. Furthermore,
Petitioner cannot assert, reasonably, that it was misled
by what the surveyors did not say.®

The surveyors said nothing affirmatively misleading to
Petitioner's representatives. The surveyors did not tell
Petitioner's representatives that Petitioner would be
certified at any date earlier than the date when
Petitioner corrected the deficiencies identified by the
surveyors. The record establishes only that the
surveyors told Petitioner's representatives that: 1)
there were deficiencies in Petitioner's operations; and
2) they would be providing Petitioner with written
notification of the deficiencies.°

Petitioner cannot assert credibly that it was misled into
believing, from statements that the surveyors did not
make to Petitioner's representatives, that it would be
certified prior to correcting the deficiencies that were
identified by the surveyors. It is within the realm of
possibility that a provider who is totally ignorant of
the survey and. certification process might conclude from
the surveyors' failure to state that certification would
be contingent on correction of deficiencies that it would
be certified to participate in HCFA before deficiencies
were corrected. But neither Petitioner nor other
applicants to become providers may rely on ignorance of
the certification process to assert that HCFA should be
estopped by its agents' failure to assertively link
certification to correction of deficiencies.

8 Nor is there any evidence to show that the
Nevada State agency was dilatory in notifying Petitioner
in writing about the deficiencies which were identified
at the January 19 and 20, 1994 surveys. The Nevada State
agency sent written notification and a request for plans
of correction to Petitioner on January 25 and 26, 1994,
three and four working days from January 20, 1994.

° For the reasons which I discuss above, I would
not find in favor of Petitioner even if Petitioner were
able to prove that the Nevada State agency surveyors had
told its representatives that it need not correct
deficiencies as a prerequisite to becoming certified.
12

An applicant for certification as a Medicare provider has
a duty to understand and comply with the requirements of
the applicable law and regulations. If Petitioner did
not know that it had to correct its deficiencies before
being certified, it had a duty to find that out. The
prerequisite that Petitioner correct deficiencies before
becoming certified would have been apparent to Petitioner
had it simply read the relevant regulation.

The statements made to Petitioner's representatives by
the Nevada State agency surveyors would not have misled
anyone familiar with the regulations governing
certification. Had Petitioner considered these
statements in the context of 42 C.F.R. § 489.13, it would
have known immediately that it would not be certified
until it corrected the deficiencies identified by the
surveyors.

© The failure by Nevada State agency surveyors to
comply with SOM requirements does not entitle Petitioner
to participate in Medicare at a date earlier than
February 10, 1994. The SOM establishes guidelines to be
followed by surveyors in the conduct of surveys. It does
not constitute a statement by the Secretary which
supersedes regulations. There is nothing to suggest that
the Secretary has directed that the SOM be distributed to
providers as an interpretation of the Act, or as a
statement of their rights in the survey and certification
process. In no respect does the SOM establish rights
which inure to the benefit of providers. Thus, the
controlling law and policy here remains the requirement
in the regulations that providers not be certified until
they comply with all requirements for participation.
Moreover, Petitioner does not allege that it relied on
the SOM to its detriment. Petitioner does not contend
that its representatives assumed that Petitioner would be
certified effective January 20, 1994, based on their
understanding of the SOM.

III. Conclusion

I conclude that summary disposition is appropriate in
this case and that there is no need for an in-person
hearing. Based on the undisputed material facts
(including those facts alleged by Petitioner which I have
accepted for purposes of this decision) and the law, HCFA
correctly certified Petitioner as a Medicare provider on
February 10, 1994, the date when Petitioner submitted its
13

plans of correction. There is no basis for me to order
that Petitioner be certified at any date prior to
February 10, 1994.

/s/

Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Ward General Practice Clinic, DATE: December 27, 1996
Petitioner,

Docket No. C-96-443
Decision No. CR451

-vwoe

Health Care Financing
Administration.

wee ere eevee

DECISION

I sustain the determination of the Health Care Financing
Administration (HCFA) to impose sanctions against Ward General
Practice Clinic (Petitioner), pursuant to the Clinical Laboratory
Improvement Amendments of 1988 (CLIA). Additionally, I direct
that Petitioner’s CLIA certification be revoked.

I. Background

On July 29, 1996, HCFA sent a notice to Petitioner advising it
that HCFA had determined that Petitioner no longer met the
requirements to perform testing under CLIA, because Petitioner
manifested deficiencies that represented an immediate jeopardy to
patients that it served. HCFA identified the conditions of
participation under CLIA which it had determined Petitioner was
not complying with. HCFA advised Petitioner that it had elected
to impose sanctions against Petitioner, including: suspension of
Petitioner’s CLIA certificate, effective August 10, 1996; and
cancellation of Petitioner’s approval to receive Medicare
payments for laboratory services, effective August 10, 1996.
Additionally, HCFA advised Petitioner that it proposed revocation
of Petitioner’s CLIA certificate, based on a decision by an
administrative law judge, should Petitioner appeal HCFA’s
determinations.

On August 8, 1996, HCFA again notified Petitioner that it was

imposing sanctions against Petitioner. HCFA advised Petitioner
that it had received from Petitioner a plan of correction which
purportedly addressed deficiencies that had been identified by
HCFA. HCFA advised Petitioner that the plan of correction did
2

not correct the deficiencies that HCFA had identified in its July
29, 1996 notice to Petitioner. HCFA affirmed that it would
impose against Petitioner the sanctions that it had described in
its July 29, 1996 notice.

Petitioner requested a hearing, and the case was assigned to me
for a hearing and a decision. I held a prehearing conference, at
which the parties agreed that the case could be heard and decided
based on written submissions. HCFA submitted a brief. With its
brief, HCFA submitted four exhibits (HCFA Ex. 1 - 4) and two
affidavits (Affidavit of Molly Crawshaw and Affidavit of Veronica
Margin). HCFA did not designate the two affidavits as exhibits,
although it plainly intends them to be received into evidence.
Therefore, I have designated the Affidavit of Molly Crawshaw as
HCFA Ex. 5, and the Affidavit of Veronica Margin as HCFA Ex. 6.

Petitioner submitted a written statement, along with several
attachments, which Petitioner designated as Enc # 1, Enc # 2A,
Enc # 2B, Enc # 3, Enc # 4, and Enc # 5. It is apparent that
Petitioner intends these attachments to its brief to be received
into evidence as exhibits. Therefore, I am redesignating
Petitioner’s attachments as follows: Enc # 1—P. Ex. 1; Enc #
2A — P Ex. 2; Enc # 2B — P. Ex. 3; Enc # 3 — P. Ex. 4; Enc # 4 —
P. Ex. 53 Enc # 5 — P. Ex. 6.

Neither party has objected to my receiving into evidence the
exhibits offered by the other party. Therefore, I receive into
evidence HCFA Ex. 1 - 6 and P. Ex. 1- 6. I base my decision in
this case on the parties’ exhibits and arguments and the
governing law.

II. Issue, findings of fact and conclusions of law

The issue in this case is whether HCFA is authorized to impose
sanctions against Petitioner, based on Petitioner’s failure to
comply with conditions of participation under CLIA. In
sustaining HCFA’s determination, I make the following findings of
fact and conclusions of law (Findings), which I discuss in
detail, below.

1. HCFA or its designee is authorized to conduct a
validation inspection of any accredited or CLIA-exempt
laboratory.

2. Where HCFA or its designee conducts an inspection of a
laboratory and where, based on the inspection, HCFA
determines the laboratory to be deficient in complying with
CLIA requirements, HCFA may impose sanctions against the
laboratory.
3

3. Where HCFA determines that a laboratory is not complying
with a condition or conditions of participation under CLIA,
HCFA may impose sanctions which may include: canceling the
laboratory’s approval to receive Medicare payments for its
services; suspension of the laboratory’s CLIA certificate;
and revocation of the laboratory’s CLIA certificate.

4. Where HCFA determines that a laboratory’s failure to
comply with a condition or conditions of participation under
CLIA poses immediate jeopardy to the health and safety of
patients, then HCFA may suspend the laboratory’s CLIA
certificate prior to a hearing before an administrative law
judge concerning whether HCFA’s determination is authorized.

5. Where an administrative law judge upholds a
determination by HCFA to suspend a laboratory’s CLIA
certificate, based on finding that the laboratory’s failure
to comply with a condition or conditions of participation
under CLIA poses immediate jeopardy to the health and safety
of patients, then the suspension of the laboratory’s CLIA
certificate shall become a revocation of that certificate.

6. It is a matter of discretion whether a laboratory that
has been found not to be complying with a CLIA condition or
conditions of participation may be permitted, in lieu of
imposition of sanctions against that laboratory, to change
the nature of its operations so as to provide only lower
levels of testing.

7. Petitioner failed to comply with CLIA conditions of
participation stated at 42 C.F.R. §§ 493.801, 493.1201,
493.1227, 493.1245, 493.1247, 493.1251, 493.1403, 493.1441,
and 493.1701.

8. Petitioner’s failure to comply with CLIA conditions of
participation posed immediate jeopardy to the health and
safety of patients.

9. Petitioner did not correct its failure to comply with
CLIA conditions of participation.

10. Petitioner has a history of not complying with CLIA
requirements.

11. HCFA was authorized to impose sanctions against
Petitioner, including: canceling the Petitioner’s approval
to receive Medicare payments for its services; suspension of
Petitioner’s CLIA certificate; and revocation of
Petitioner’s CLIA certificate.
4

12. It is reasonable to deny approval to Petitioner to
convert its operations to a lower level of testing, in lieu
of imposing sanctions against Petitioner, in light of the
nature of Petitioner’s failure to comply with CLIA
requirements, its history of noncompliance, and its failure
to correct its noncompliance.

III. Discussion
A. Governing law (Findings 1 = 6)

The Secretary of the United States Department of Health and Human
Services (Secretary) has published regulations which implement
CLIA. 42 C.F.R. Part 493. In these regulations, the Secretary
has established both performance criteria for clinical
laboratories and procedures for assuring that clinical
laboratories comply with statutory requirements.

The regulations authorize HCFA or its designee to conduct
validation inspections of any accredited or CLIA-exempt
laboratory, in order to determine whether the laboratory is in
compliance with CLIA requirements. 42 C.F.R. § 493.1780(a). The
regulations confer broad enforcement authority on HCFA, in order
to assure that laboratories comply with CLIA. 42 C.F.R. §
493.1800. Where HCFA determines that a laboratory is not
complying with one or more CLIA conditions, HCFA may impose
principal sanctions against that laboratory which include
suspension and/or revocation of the laboratory’s CLIA
certificate. 42 C.F.R. § 493.1806(a), (b). Additionally, HCFA
may cancel a laboratory’s approval to receive Medicare payments
for its services, where the laboratory is found not to be
complying with one or more CLIA conditions. 42 C.F.R. §
493.1807.

A laboratory that is dissatisfied with a determination by HCFA to
impose sanctions against it may request a hearing before an
administrative law judge to contest HCFA’s determination. 42
C.F.R. § 493.1844. In most circumstances, a determination to
suspend, limit, or revoke a CLIA certificate will not become
effective until after decision by an administrative law judge
upholding HCFA’s determination to impose such a remedy. 42
C.F.R. § 493.1844(d)(2)(i). However, if HCFA determines that a
laboratory’s failure to comply with CLIA requirements poses
immediate jeopardy to patients, then HCFA’s determination to
suspend or limit a laboratory’s CLIA certificate will become
effective in advance of a hearing and decision by an
administrative law judge, after HCFA gives notice to the
laboratory of its determination. 42 C.F.R. § 493.1844(d) (2) (ii).
Where an administrative law judge decides to uphold a
determination by HCFA to suspend a laboratory’s CLIA certificate,
based on a finding that the failure by the laboratory to comply
5

with CLIA requirements poses immediate jeopardy to the health and
safety of patients, then the suspension automatically becomes a
revocation of the laboratory’s CLIA certificate. 42 C.F.R. §
493.1844(d) (4).

The regulations are silent as to whether a laboratory that has
been found not to be complying with CLIA requirements may convert
its operations to a lower level of testing in order to avoid the
imposition of sanctions against it. I conclude that HCFA has
discretion to determine whether, as an alternative to imposing
sanctions against a laboratory, it should permit that laboratory
to convert its operations to a lower level of testing. It is
reasonable for HCFA to consider the nature of the laboratory’s
noncompliance with CLIA requirements, its compliance history, and
the efforts that the laboratory may have made to comply with CLIA
requirements, in determining whether to exercise discretion to
permit a noncompliant laboratory to convert its operations to a
lower level of testing in lieu of imposing sanctions against that
laboratory.

B. Relevant facts (Findings 7 - 10)

Petitioner is a clinical laboratory located in New Orleans,
Louisiana. HCFA Ex. 2 at 1. On July 18, 1996, the Louisiana
Department of Health and Hospitals (Louisiana State agency),
acting as HCFA’s designee, conducted a CLIA compliance survey of
Petitioner. The Louisiana State agency found that Petitioner was
not complying with nine CLIA conditions. Id. These conditions
are stated at 42 C.F.R. §§ 493.801, 493.1201, 493.1227, 493.1245,
493.1247, 493.1251, 493.1403, 493.1441, and 493.1701. Id. The
Louisiana State agency found Petitioner’s failure to comply with
these CLIA conditions to be so egregious as to pose immediate
jeopardy to the patients served by Petitioner. Id.

On July 29, 1996, HCFA advised Petitioner that it agreed with the
findings made by the Louisiana State agency. HCFA Ex. 2 at 1.
HCFA told Petitioner that it was prepared to impose sanctions
against Petitioner consisting of suspending Petitioner’s CLIA
certificate and canceling Petitioner’s approval to receive
Medicare payments for laboratory services, effective August 10,
1996. Additionally, HCFA advised Petitioner that it would seek
revocation of Petitioner’s CLIA certificate, should Petitioner
ask for review by an administrative law judge of HCFA’s
determinations. Id.

HCFA advised Petitioner that a laboratory that does not meet a
CLIA condition may not be certified to participate under CLIA.
HCFA Ex. 2 at 3. HCFA instructed Petitioner to submit a plan of
correction. Id. It advised Petitioner that, if Petitioner
alleged credibly that it was complying with CLIA requirements,
HCFA would determine whether Petitioner was, in fact, complying
with those requirements. Id. HCFA advised Petitioner that, if
6

Petitioner alleged that it was complying with CLIA requirements,
a resurvey would be conducted of Petitioner to determine whether,
in fact, it was complying with those requirements. HCFA told
Petitioner that, if Petitioner demonstrated at a resurvey that it
had attained compliance with CLIA requirements, then sanctions
would not be imposed against Petitioner. Id.

On July 29, 1996, Petitioner submitted a purported plan of
correction. HCFA Ex. 3. The document does not explain how
Petitioner intended to correct the deficiencies that were
identified in its operations. Rather, Petitioner tacitly
admitted that it had not been complying with CLIA requirements,
and averred that, as of July 24, 1996, only waived procedures and
physician performed testing was being done by Petitioner. Id.

Petitioner’s plan of correction does not explain what Petitioner
means by the terms “waived procedures” and “physician performed
testing.” See HCFA Ex. 3. However, regulations define the terms
“waived tests” and “provider-performed microscopy (PPM)
procedures.” 42 C.F.R. §§ 493.15, 493.19. I conclude that
Petitioner was referring to waived tests and PPM procedures when
it asserted that, as of July 24, 1996, it was performing only
waived tests and physician performed testing.

Under the regulations, waived tests are simple laboratory
examinations and procedures which are cleared by the Food and
Drug Administration for home use, employ methodologies that are
so simple and accurate as to render the likelihood of erroneous
results to be negligible, and which pose no reasonable risk of
harm to the patient if performed incorrectly. 42 C.F.R. §
493.15. The regulations characterize PPM procedures as being
tests of moderate complexity. 42 C.F.R. §§ 493.5(a) (2),
493.19(b)(2). In order to be a PPM procedure, a test must be
performed personally, by a physician, a midlevel practitioner, or
a dentist, on a specimen obtained during a visit by the patient.
42 C.F.R. § 493.19(b)(1)(i) - (iii).

A PPM procedure must be performed primarily by microscope. 42
C.F.R. § 493.19(b) (3). A specimen for a PPM procedure is labile,
or delay in performing the procedure might compromise the
accuracy of the test result. 42 C.F.R. § 493.19(b) (4). In a PPM
procedure, control materials are not available to monitor the
entire testing process. 42 C.F.R. § 493.19(b)(5). Limited
specimen handling or processing is required in performing a PPM
procedure. 42 C.F.R. § 493.19(b) (6). A laboratory may perform
PPM procedures only if it limits its testing to waived tests and
to the tests that are specified in 42 C.F.R. § 493.19(c). The
specified tests include urine sediment examinations. 42 C.F.R. §
493.19(c) (6). It is evident from the definition of a PPM
procedure that such a procedure is more than a simple test with
no risk to a patient if done improperly. Plainly, there exists a
7

potential for harm to a patient if a PPM procedure is not
performed properly.

On August 8, 1996, HCFA advised Petitioner that it had concluded
that Petitioner’s plan of correction did not correct the
deficiencies that had been identified by the Louisiana State
agency and with which HCFA had concurred. HCFA Ex. 4 at 1. HCFA
advised Petitioner that no provisions existed under CLIA
regulations to permit a laboratory to performed only waived tests
and PPM procedures to avoid the imposition of sanctions against
the laboratory for failure to comply with CLIA requirements. Id.
HCFA advised Petitioner that it was imposing the sanctions
enumerated in HCFA’s July 29, 1996 letter to Petitioner. Id. at
1 - 2; see HCFA Ex. 2.

I conclude that HCFA has established that, as of July 18, 1996,
Petitioner manifested failures to comply with CLIA conditions and
that these deficiencies posed immediate jeopardy to patients.
HCFA introduced evidence that Petitioner was not complying with
CLIA conditions as of July 18, 1996. The evidence includes the
survey report generated by the Louisiana State agency at its July
18, 1996 survey of Petitioner. HCFA Ex. 1. The evidence is
reinforced and corroborated by the affidavit of Veronica Margin,
one of the surveyors who conducted the July 18, 1996 survey.

HCFA Ex. 6. In her affidavit, Ms. Margin provides convincing and
unrebutted evidence that Petitioner’s deficiencies posed
immediate jeopardy to patients. Id. .

Petitioner has not denied that the deficiencies identified by
HCFA in fact existed as of July 18, 1996. Nor has Petitioner
denied that the deficiencies posed immediate jeopardy to
patients. Indeed, as I discuss above, the plan of correction
which Petitioner submitted is a tacit admission by Petitioner of
the deficiencies that were identified in Petitioner’s operations.
HCFA Ex. 3.

I conclude also that Petitioner did not correct these
deficiencies at any time after July 18, 1996. Petitioner’s plan
of correction does not explain how Petitioner intended to remedy
the deficiencies identified by the Louisiana State agency and
HCFA, except to say that Petitioner had converted its operations
to waived tests and PPM procedures. See HCFA Ex. 3. That
assertion does not address the specific deficiencies identified
by HCFA.

Petitioner asserts that it did correct the deficiencies
identified by the Louisiana State agency and by HCFA.
Petitioner’s Statement, dated November 15, 1996, at 1.

Petitioner seems to be asserting that it corrected the
deficiencies by ceasing to perform those tests and procedures in
the performance of which Petitioner was found to be deficient. I
do not find that Petitioner corrected its deficiencies simply by
8

ceasing to perform certain tests and procedures. The
deficiencies that the Louisiana State agency identified not only
involved specific failures by Petitioner to comply with protocols
and safety procedures in performing certain identified tests,
they involved pervasive and systematic failures by Petitioner to
comply with quality control procedures that apply to clinical
laboratories. HCFA Ex. 1; HCFA Ex. 6. Petitioner offers no
assurance that it has corrected these pervasive and systematic
failures merely by ceasing to perform certain tests.

The evidence establishes that Petitioner was found to be
deficient previously, approximately two years prior to the July
18, 1996 survey of Petitioner. HCFA Ex. 5. Thus, Petitioner has
a history of failing to comply with CLIA requirements.

Cc. Application of the law to the evidence (Findings 11 -
12)

As I find at Part III.B. of this decision, Petitioner has not
complied with CLIA conditions since at least July 18, 1996.
Petitioner’s noncompliance poses immediate jeopardy to the health
and safety of patients. Petitioner has not corrected its
deficiencies. As a consequence, HCFA is authorized to impose
sanctions against Petitioner. These include suspension of
Petitioner’s CLIA certificate and canceling Petitioner’s
authority to receive Medicare reimbursement for its services. 42
C.F.R. § 493.1807. Furthermore, my conclusion that HCFA is
authorized to suspend Petitioner’s CLIA certificate means that
Petitioner’s certificate is revoked, based on the evidence which
establishes that Petitioner’s noncompliance poses immediate
jeopardy to the health and safety of patients. 42 C.F.R. §
493.1844 (d) (4).

As I find above at Part III.A. it is a matter of HCFA’s
discretion whether to permit a laboratory to convert its
operations to procedures and tests other than those in the
performance of which it has been found to be deficient, in lieu
of imposing sanctions against that laboratory. Here, HCFA has
elected not to permit Petitioner to convert. its operations to
waived tests and PPM procedures. I find that exercise of
discretion to be reasonable.

Petitioner’s noncompliance with CLIA requirements is a systematic
failure by Petitioner to comply with basic protocol governing the
performance of tests. Petitioner’s noncompliance is so egregious
as to constitute immediate jeopardy to the health and safety of
patients. Given that, coupled with Petitioner’s failure to
correct or even to address its noncompliance, HCFA has ample
justification to conclude that conversion of Petitioner’s
operations would not be a viable substitute for the imposition of
sanctions.
9

Moreover, the deficiencies identified in Petitioner’s operations
raise serious questions as to whether Petitioner would be capable
of converting its operations to waived tests and, in particular,
PPM procedures, without continuing to pose health and safety
threats to patients. Petitioner was found to be deficient in
performing tests of moderate complexity. HCFA Ex. 1. PPM
procedures are tests of moderate complexity. 42 C.F.R. §
493.5(a) (2), 493.19(b)(2). Petitioner was found to be deficient
in performing urinalysis. Id. Certain types of urinalysis are
among the tests which are listed as PPM procedures. 42 C.F.R. §
493.19(c). Finally, Petitioner’s history of noncompliance gives
HCFA additional justification for not permitting Petitioner to
convert its operations to waived tests and PPM procedures.

Iv. Conclusion

I conclude that HCFA is authorized to impose sanctions against
Petitioner, including suspending Petitioner’s CLIA certificate
and canceling Petitioner’s authority to receive reimbursement
from Medicare. I direct that Petitioner’s CLIA certification be
revoked, inasmuch as Petitioner’s failure to comply with CLIA
requirements poses immediate jeopardy to patients and Petitioner
has not corrected outstanding deficiencies.

/s/

Stephen J. Ahlgren
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Rafic A. Amro, M.D., Date: December 13, 1996
Petitioner,

Docket No. C-96-314
Decision No. CR449

-vo-

The Inspector General.

DECISION

I sustain the 10-year exclusion from participating in Medicare
and State health care programs (including Medicaid) which the
Inspector General (I.G.) imposed against Rafic A. Amro, M.D.
(Petitioner) .

I. Background

On June 15, 1996, the I.G. notified Petitioner that he was being
excluded from Medicare and State health care programs, for a
period of 10 years. The I.G. advised Petitioner that he was
being excluded pursuant to section 1128(a) (1) of the Social
Security Act (Act) because Petitioner had been convicted of a
criminal offense related to the delivery of an item or service
under the Fennsylvania Medicaid program. The I.G. advised
Petitioner further that the length of the exclusion, 10 years,
was based on the presence of aggravating factors.

Petitioner requested a hearing, and the case was assigned to me
for a hearing and a decision. I held a prehearing conference, at
which the parties advised me that the case could be heard and
decided based on their written submissions. The I.G. submitted a
brief, along with four proposed exhibits (I.G. Ex. 1 - 4).
Petitioner submitted a brief and no exhibits. Petitioner did not
object to my receiving into evidence the I.G.’s proposed
exhibits. Therefore, I receive into evidence I.G. Ex. 1-4. I
base my decision in this case on the law, the exhibits, and on
the parties’ arguments.
2
II. Issue, findings of fact and conclusions of law

A case involving an exclusion of more than five years imposed
pursuant to section 1128(a)(1) of the Act may involve the issues
of whether: (1) the excluded individual has been convicted of a
criminal offense related to the delivery of an item or service
under Medicare or State health care programs, thereby giving the
I.G. authority to exclude that individual pursuant to section
1128(a) (1); and, (2) whether an exclusion of more than five years
is reasonable. Here, Petitioner concedes that he was convicted
of a program-related criminal offense as is described in section
1128(a)(1). Petitioner’s brief at 1. Therefore, the only issue
for me to decide is whether the 10-year exclusion that the I.cG.
imposed is reasonable.

In deciding that the exclusion is reasonable, I make the
following findings of fact and conclusions of law (Findings),
which I discuss in detail at Part III. of this decision.

1. The Act requires the Secretary, or her delegate, the
I.G., to exclude for at least five years any individual who
is convicted of an offense described in section 1128(a) (1)
of the Act.

2. Regulations provide that an exclusion of more than five
years may be imposed in any case where there exist factors
which the regulations define as aggravating, and that are
not offset by factors which the regulations define as
mitigating.

3. The I.G. proved that there exist two aggravating
factors.

4. Petitioner did not prove that there exist any mitigating
factors.

5. The evidence which is relevant to the aggravating
factors proves that Petitioner is a highly untrustworthy
individual.

6. A 10-year exclusion is reasonable in this case.

III. Discussion
A. Governing Law (Findings 1 - 2)

The I.G. excluded Petitioner pursuant to section 1128(a) (1) of
the Act. This section mandates the exclusion of any individual
who has been convicted of a criminal offense related to the
delivery of an item or service under Medicare or under any State
health care program. An exclusion imposed under section
3

1128(a) (1) must be for a minimum of five years. Act, section
1128(c) (3) (B).

The Secretary has published a regulation which establishes the
criteria for determining and evaluating whether an exclusion of
more than five years’ duration is reasonable in a case involving
an exclusion imposed pursuant to section 1128(a)(1) of the Act.
42 C.F.R. § 1001.102. The regulation provides that, where any of
several defined aggravating factors are present in a case, and
the aggravating factor or factors are not offset by any |
mitigating factor or factors, then an exclusion of more than five
years may be reasonable in that case. 42 C.F.R. §
1001.102(b),(c). The regulation makes it plain that, in
determining and deciding whether an exclusion of more than five
years is reasonable in a case involving section 1128(a)(1) of the
Act, the only evidence that may be considered on the issue of
reasonableness is evidence which pertains to one or more of the
defined aggravating and mitigating factors. Id.

The regulation contains no formula for assigning weight to
evidence that is relevant to an aggravating factor. or to a
mitigating factor. It is evident that, in any case, the
Secretary intends that this evidence be considered in light of
the Act’s remedial purpose. Congress intended that the Act,
including section 1128(a)(1), be applied to protect the integrity
of federally funded health care programs, and the welfare of
program beneficiaries and recipients, from individuals who have
been shown to be untrustworthy. Exclusions imposed pursuant to
section 1128(a)(1) which are for more than five years are
reasonable insofar as they comport with the Act’s remedial
purpose. Thus, evidence pertaining to aggravating and mitigating
factors must be considered in light of what the evidence says
about the excluded individual’s trustworthiness to provide care.
If such evidence shows the excluded individual to be highly
untrustworthy, then a lengthy exclusion may be reasonable.

B. The relevant evidence (Findings 3 - 4)

The evidence in this case establishes the presence of two
aggravating factors. Petitioner did not prove the presence of
any mitigating factors which might offset the aggravating
factors.

The two aggravating factors which the I.G. alleges, and which I
find to be established, are described in 42 C.F.R. §
1001.102(b)(1) and (2). First, the I.G. asserts that the acts
which resulted in Petitioner’s conviction, or similar acts,
caused financial loss to Medicare or State health care programs
of more than $1500. 42 C.F.R. § 1001.102(b)(1). In this case,
the I.G. asserts that Petitioner caused damage to the
Pennsylvania Medicaid program of more than $21,000. Second, the
I.G. asserts that the acts which resulted in Petitioner’s
4

conviction, or similar acts, were committed by Petitioner over a
period of more than one year. 42 C.F.R. § 1001.102(b) (2).
Specifically, the I.G. contends that Petitioner filed fraudulent
claims with the Pennsylvania Medicaid program over a period of
more than three years.

Petitioner does not deny that his unlawful conduct caused damage
to the Pennsylvania Medicaid program in excess of $1500.
However, Petitioner does not admit that his unlawful conduct
occurred over a period of more than one year and challenges the
I.G.’s assertion that the evidence proves that Petitioner’s
unlawful conduct occurred over an extended period of time.

The evidence in this case establishes that a six-count criminal
information was filed against Petitioner in a Pennsylvania State
court. I.G. Ex. 2. On January 12, 1996, evidently as part of a
plea bargain, Petitioner entered a nolo contendere plea to the
first count of the information. Id. at 4; I.G. Ex. 4. Counts
two through six of the information were dismissed. Id.

Count one of the information to which Petitioner pleaded nolo
contendere alleges that, between January 2, 1990 and August 17,
1993, Petitioner knowingly and intentionally presented for
allowance or payment false or fraudulent claims for Medicaid
reimbursement. I.G. Ex. 2 at 1. More specifically, this count
charges that, during the period between January 2, 1990 and
August 17, 1993, Petitioner knowingly and intentionally submitted
claims to Medicaid for electrocardiograms that he had not
performed. Id.

On January 12, 1996, a judgment was entered against Petitioner,
based on his plea of nolo contendere to count one of the
information. I.G. Ex. 3, 4. Among other things, Petitioner was
sentenced to pay restitution in the amount of $21,000.

It is true that, in pleading nolo contendere to count one of the
information, Petitioner did not explicitly admit his guilt of the
offense described in that count. However, his agreement to pay
restitution of $21,000 is a tacit admission that he engaged in
unlawful conduct that damaged the Pennsylvania Medicaid program
in at least the amount of the restitution payment. See I.G. Ex.
4 at 7.

Furthermore, the criminal information which was filed against
Petitioner is evidence of Petitioner’s unlawful conduct which I
can consider as proof of aggravating factors, even if Petitioner
has not explicitly admitted to any of the charges in the
information. The information is based on a criminal complaint
authored by the special agent of the Pennsylvania Attorney
General who investigated Petitioner. I.G. Ex. 1. The criminal
complaint is supported by an affidavit from the special agent.
I.G. Ex. 1 at 4 - 14.
5

Although I am not required to accept this evidence on its face, I
must consider it to the extent that it is relevant. And, I must
attach to it the probative value which it is due. The contents
of the criminal information and the complaint have not been
explicitly denied by Petitioner. Petitioner has not offered any
evidence to rebut or contradict the criminal information or
complaint. And, the circumstances under which the complaint was
made - it being issued under oath by a special investigator for
the Attorney General of Pennsylvania - suggest that it should be
afforded a high degree of probative value, in the absence of any
evidence which contradicts it or rebuts it.

The affidavit supporting the criminal complaint establishes that
the special agent reviewed Petitioner’s office records to
determine whether Petitioner had maintained records of the items
or services for which he submitted claims to Medicaid. I.G. Ex.
1 at 4. He interviewed Petitioner’s patients, as well as a
former employee of Petitioner. Id. The investigator determined
that 82 of Petitioner’s patients denied having had tests
performed by Petitioner, for which Petitioner had claimed
reimbursement from Medicaid. Id. at 10 - 11. The special agent
determined also that, of over 1700 electrocardiograms for which
Petitioner claimed reimbursement during the period from January
2, 1990 to August 17, 1993, there were records of only two test
results present in Petitioner’s files. Id. at 13. Of over 1100
spirometric w/bronchodilator tests for which Petitioner claimed
reimbursement during the period between March 3, 1992 through
April 19, 1993, there were records of only 14 test results
present in Petitioner’s files. Id.

I am persuaded from the affidavit of the special investigator,
and from the unrebutted allegations of the criminal complaint and
information, that the I.G. established both of the aggravating
circumstances alleged. Petitioner committed his crimes against
Medicaid over a period of more than three years. His crimes.
caused damages to Medicaid of at least $21,000.

C. Application of the law to the evidence (Findings 5 - 6)

The evidence as to aggravating factors establishes Petitioner to
be a highly untrustworthy individual. A 10-year exclusion is
reasonable in light of the evidence which proves that Petitioner
is not trustworthy.

The evidence proves a persistent pattern of false claims by
Petitioner. I am satisfied that, during the period between
January 2, 1990 and August 17, 1993, Petitioner submitted
hundreds of claims for Medicaid reimbursement for items or
services that he did not provide. This extended pattern of false
claims demonstrates that Petitioner’s crimes were not random or
spur-of-the-moment events. Rather, the evidence shows that
6

Petitioner’s crimes were calculated to extract systematically
funds from Medicaid to which Petitioner was not entitled.

The gravity of Petitioner’s crimes is made evident by the amount
of restitution that Petitioner was sentenced to pay. The sum of
$21,000 is significant, and it demonstrates that Petitioner’s
crimes were extensive.

I find that Petitioner’s pattern of unlawful conduct, coupled
with proof of the gravity of his crimes, is ample evidence of a
high degree of untrustworthiness. Given that degree of
untrustworthiness, a 10-year exclusion is reasonable.

Petitioner did not argue that the length of the exclusion imposed
against him by the I.G. should be limited by any agreement he
made in his criminal case. I note, however, that, as an aspect
of Petitioner’s plea arrangement, he agreed to a five-year
exclusion from the Pennsylvania Medicaid program. I1.G. Ex. 3 at
2. - That a State health care program may be willing to accept an
exclusion of a shorter duration than the I.G. determines to be
reasonable is not a factor that I may consider in deciding
whether an exclusion imposed pursuant to section 1128(a)(1) is
reasonable. Here, the reasonableness of the exclusion is
measured solely by evidence pertaining to aggravating factors,
which establishes Petitioner to be untrustworthy.

Iv. Conclusion

I conclude that the 10-year exclusion the I.G. imposed against
Petitioner is reasonable. Therefore, I sustain the exclusion.

/s/

Steven T. Kessel
Administrative Law Judge