Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:

Prescribed Care, Inc., Date: September 16, 1997

Petitioner,
- ve Docket No. C-96-234

Decision No. CR492

Health Care Financing
Administration.

DECISION

For the reasons stated below, I conclude that Petitioner was not
in compliance with Medicare conditions of participation governing
home health agencies. Accordingly, the Health Care Financing
Administration (HCFA) was authorized to terminate Petitioner's
Medicare participation agreement.

I. Background
A. Applicable law and regulations

Petitioner is a home health agency that participated in the
Medicare program. The services provided by home health agencies
that are covered by the Medicare program are described in section
1861(m) of the Social Security Act (Act). The statutory
requirements of participation for a home health agency are
described in section 1861(0) of the Act.

The Secretary of the United States Department of Health and Human
Services (Secretary) has published regulations which govern the
participation in Medicare of home health agencies. These are
contained in 42 C.F.R. Part 484. The regulations which define
the Secretary's requirements for Medicare participation of home
health agencies establish conditions of participation for these
agencies. 42 C.F.R. §§ 484.10 - 484.52. The regulations express
these conditions of participation as broadly stated participation
criteria. The regulations also state standards of participation
as subsidiary components of the conditions of participation.
2

The Secretary is required to determine whether a Medicare
participant, including a home health agency, is complying
substantially with the Medicare participation requirements
established by the Act and regulations. Act, section 1866(b) (2).
The Secretary may terminate the participation in Medicare of a
provider which the Secretary finds not to be complying
substantially with participation requirements. Act, section
1866(b) (2) (A).

The process and criteria for determining whether a provider is
complying substantially with Medicare participation requirements
are established by regulations contained in 42 C.F.R. Part 488.
Pursuant to the Act and regulations, the Secretary has entered
into agreements with State survey agencies to conduct periodic
surveys of providers, including home health agencies, in order to
ascertain whether these providers are complying with Medicare
participation requirements. Act, section 1864(a); 42 C.F.R. §§
488.10, 488.11, 488.20.

HCFA may terminate the participation in Medicare of a provider
when it determines, either on its own initiative or based ona
survey report from a State survey agency, that the provider is
not complying with one or more Medicare conditions of
participation. See 42 C.F.R. §§ 488.20, 488.24, 488.26.?
Failure to comply with a condition of participation occurs where
deficiencies, either individually or in combination, are:

. . . Of such character as to substantially limit the

provider's . . . capacity to furnish adequate care or
which adversely affect the health and safety of
patients;

42 C.F.R. § 488.24(b); see 42 C.F.R. § 488.28(b).

Where HCFA determines that there is a deficiency, but that the
deficiency is not so severe as to constitute a condition-level
deficiency, then HCFA may not terminate the provider’s

participation in Medicare without first affording the provider
the opportunity to correct the deficiency. 42 C.F.R. § 488.28.

' In July 1995, the Part 488 regulations were revised and

amended substantially as they apply to long-term care facilities,
including nursing facilities and skilled nursing facilities. 42
C.F.R. § 488.301 et seq. The revisions and amendments are not at
issue in this case because Petitioner is not a nursing facility
or a skilled nursing facility.

2 The criteria which govern the circumstances under which
HCFA may impose a remedy, including termination, against a
nursing facility or a skilled nursing facility are stated at 42
C.F.R. §§ 488.402 - 488.456.
3

Termination of participation is a remedy intended to protect the
health and safety of program beneficiaries and not a punishment.
Termination of participation should be invoked in the
circumstance where a provider’s deficiencies establish that the
provider is substantially incapable of providing care consistent
with Medicare participation requirements. Termination should not
be invoked unless the evidence proving a provider’s failure to
comply with participation requirements establishes that the
provider cannot provide care consistent with that which is
required by the Act and regulations.

Generally, a determination as to whether a provider is complying
with a condition of participation depends on the extent to which
that provider is found not to be complying with the standards
that are components of the condition. 42 C.F.R. § 488.26(b). A
provider may be found not to have complied with a condition of
participation where it is shown that a provider has committed a
pattern of failures to comply with the standards that comprise
the condition. But, proof of a pattern of failures to comply
with a standard or standards may not be the only basis to find
that a provider has failed to comply with a condition of
participation. The determinative issue in any case where
noncompliance is demonstrated is whether the failure to comply is
so egregious as to show that the provider is not capable of
providing care consistent with that which is required by the Act
and regulations.

B. History of this case

On November 10, 1995, the California Department of Health
Services (CA DHS) completed a recertification survey of
Petitioner. Transcript (Tr.) 193; HCFA Ex. 1. Based on that
survey, Petitioner was found not to be complying with three
conditions of participation. HCFA Ex. 1. The CA DHS conducted a
second survey of Petitioner which was completed on January 12,
1996. HCFA Ex. 3. On February 7, 1996, HCFA notified Petitioner
that, based on the second survey, HCFA had determined that
Petitioner was not complying with three conditions of
participation. HCFA Ex. 5. These conditions are:

(1) 42 C.F.R. § 484.14 (Organization, services, and
administration) ;

(2) 42 C.F.R. § 484.18 (Acceptance of patients, plan of
care, and medical supervision); and

(3) 42 C.F.R. § 484.48 (Clinical records).

Id. HCFA terminated Petitioner’s participation in Medicare,
effective February 23, 1996.
4

Petitioner requested a hearing, and the case was assigned to me
for a hearing and a decision. I held a hearing in Santa Ana,
California, on October 15 - 16, 1996, and I heard testimony by
telephone on November 5, 1996. I ordered the parties to submit
posthearing briefs, response briefs, and reply briefs. On March
26, 1997, I afforded the parties time to brief the issues raised
by the decision of an appellate panel of the Departmental Appeals
Board in the case of Hillman Rehabilitation Center, DAB No. 1611
(1997).> HCFA did not avail itself of the opportunity.
Petitioner submitted a one page response out of time (on May 16,
1997) and requested that, to respond to Hillman, I re-open the
record to allow it to present additional evidence at an in-person
hearing. I granted Petitioner's request and scheduled a hearing
to commence on August 5, 1997. However, by letter of July 8,
1997, citing a lack of resources to go forward with the hearing,
Petitioner requested that the hearing be cancelled and that I
decide the case on the evidence of record. I granted
Petitioner's request. However, I also afforded Petitioner one
last opportunity to offer additional documentary evidence and
briefing. Petitioner chose not to avail itself of the
opportunity. I base my decision in this case on the governing

3 In my June 12, 1996 Order and Notice of Hearing, I

placed on HCFA the burden of coming forward with evidence as to
all issues and of proving, by a preponderance of the evidence,
that Petitioner failed to comply with Medicare participation
requirements. I placed on Petitioner the burden of proving, by a
preponderance of the evidence, any affirmative defenses. I
afforded the parties also the opportunity to brief the issue of
which party had the burden of proof during their post-hearing
briefing. Tr. 18. The Hillman decision, however, places on HCFA
only the burden of coming forward with evidence to establish a
prima facie case that it has a legally sufficient basis for
termination, and imposes on a provider the burden of proving, by
a preponderance of the evidence, that the provider was in
substantial compliance with participation requirements. In its
May 16, 1997 submission, Petitioner alleges that it would be very
prejudicial and unfair to apply the Hillman decision
retroactively. This argument is unpersuasive. First, the
appellate panel never excluded from application of Hillman cases
that were pending decision. Second, Petitioner was given the
opportunity to offer additional proof under the guidelines of the
Hillman case. In making my decision as to whether Petitioner met
its burden of offering evidence demonstrating by a preponderance
of the evidence that it was in substantial compliance with the
conditions of participation, below I find repeatedly that HCFA
not only established a prima facie case, but it also proved, by a
preponderance of the evidence, that Petitioner failed to comply
with Medicare participation requirements. Such a conclusion, by
definition, means that Petitioner failed to meet its burden of
proof under Hillman.
5

law, the evidence I received at hearing, and on the parties’
arguments as expressed in their briefs.

II. Discussion

A. Petitioner was out of compliance with the condition of
participation governing organization, services, and
administration, 42 C.P.R. § 484.14.

HCFA is authorized to terminate Petitioner's Medicare provider
agreement if Petitioner is out of compliance with any condition
of participation. Petitioner's own statements demonstrate that,
as of the date of the follow-up survey, Petitioner remained out
of compliance with the condition of participation governing
organization, services, and administration, codified at 42 C.F.R.
§ 484.14. Among other things, this regulation requires that a
home health agency provide at least one of a list of qualifying
services directly through agency employees. The service which
Petitioner was to provide is skilled nursing.‘ HCFA alleged that
Petitioner failed to comply with this requirement, in that
Petitioner was providing skilled nursing services through
contract nurses. The State surveyors testified that
representatives of Petitioner present at the surveys admitted
that Petitioner was providing skilled nursing services via
contract nurses. Tr. 58, 119-20; HCFA Ex. 1 at 6; HCFA Ex. 3 at
2. I find credible the testimony that such admissions were made,
because it is corroborated by Petitioner's own statements in its
plans of correction. P. Ex. 14 at 2.

In its first plan of correction, Petitioner stated that it would
recruit employee nurses by advertising in newspapers and nursing
publications, to "gradually replace all registry nurses." HCFA
Ex. 1 at 5. Petitioner undertook to complete this action by
December 10, 1995. Based on this evidence, I find that there is
no real dispute as to the fact that, as of the first survey,
Petitioner was out of compliance with the requirement to furnish
at least one service directly. Similarly, in its second plan of
correction, Petitioner averred, "Contractual nursing agreements
with individuals who are not employees of the Agency would be
discontinued by the completion date [2/12/96}." P. Ex. 14 at 1.

Petitioner has nowhere contended that it was, in fact, in
compliance with the requirement that it furnish at least one
service directly. Instead, Petitioner argues that HCFA should
have found credible its assertion that it would recruit and hire
additional nursing staff at some time after the follow-up survey.
Petitioner's Reply Brief at 5. Petitioner states that this
deficiency "could not reasonably be remedied in just a short week

4 Petitioner never argued it would provide any service by

its own employees other than skilled nursing.
6

or so." Id. This argument is unpersuasive for two reasons.
First, Petitioner had notice that it was required to provide at
least one service directly through employees as of its receipt of
the CA DHS's letter of November 15, 1995, enclosing the statement
of deficiencies from the November 10, 1995 survey.’ The follow-
up survey was completed on January 12, 1996. Thus, Petitioner
had already been afforded approximately two months in which to
come into compliance with this requirement. Second, the fact
that Petitioner might have corrected its deficiencies at some
time after the date of the second survey is irrelevant to my
determination as to whether HCFA was authorized to terminate
Petitioner's provider agreement. HCFA's termination decision
must be evaluated based on conditions prevailing at Petitioner on
the date of the survey. Carmel Convalesce Hospital, DAB CR389
(1995), aff'd in part and rev'd in part, DAB No. 1584 (1996).

In Carmel, the administrative law judge reasoned that, under the
regulations, surveys are the means by which HCFA assesses
providers' compliance with federal health, safety, and quality
standards. 42 C.F.R. § 488.26(c)(1). Therefore, according to
Carmel, the conditions which are relevant to HCFA's authority to
terminate are those which prevail at a facility at the time of
the survey, and not at some later time. Moreover, the
administrative law judge ruled that no law or regulation compels
HCFA to conduct another survey after finding deficiencies at a
follow-up survey before actually effectuating its termination
decision. I agree with the interpretation of the regulations set
forth in the Carmel decision, and I adopt it here.

At the time of the follow-up survey, HCFA proved and Petitioner
admitted that Petitioner remained out of compliance with the
requirement that one of its services be provided directly by
employees. It is not a defense to HCFA's finding of non-
compliance that Petitioner submitted a plan of correction
promising to hire additional direct employees at some future
time. HCFA was under no obligation to conduct a second follow-up
survey to determine whether Petitioner had, in fact, brought
itself into compliance. Insuring that a home health agency
provide one of its services directly through its employees rather
than through contractors is necessary to protect Medicare
beneficiaries and is basic to the operation of a home health
agency.

5 Irrespective of this notice, Petitioner can be held to

have notice of this requirement from the regulations themselves.
When Petitioner commenced its operation of a home health agency,
it assumed the responsibility to be in substantial compliance
with the conditions of participation. That compliance includes
Knowledge of the regulatory requirements.
7

Petitioner's failure to provide at least one service directly
through its employees seriously limits Petitioner's capacity to
render adequate care, because a facility which does not satisfy
this requirement fails to meet the basic definition of a home
health agency. HCFA's nurse consultant, Ms. Patience, testified
that to qualify as a home health agency, a provider must have
control over at least one service, delivering that service
through individuals employed by the provider. Tr. 262. If the
provider does not have control over at least one service, then it
does not meet the definition of a home health agency, but rather
is operating more as a nursing registry. Id. at 262-63. That in
January 1996, Petitioner was still unable to meet the threshold
requirement to be certified as a home health agency, raises
serious questions as to Petitioner's ability to render adequate
care and fully justifies HCFA's determination to terminate
Petitioner's provider agreement.

Thus, HCFA's decision to terminate Petitioner's provider
agreement is authorized based on this deficiency alone.
Consequently, I conclude that Petitioner's termination was
authorized.

B. Petitioner was out of compliance with the condition of
participation governing acceptance of patients, plan of care, and
medical supervision, 42 C.F.R. § 484.18.

HCFA proved that Petitioner failed to comply with the condition
of participation governing acceptance of patients, plan of care,
and medical supervision, as of the date of the follow-up survey.
Among other things, this condition of participation requires that
a home health agency follow physician orders for each patient in
a written plan of care.°

Following the initial survey of November 1995, and based on the
clinical record review done by the CA DHS surveyors, HCFA
determined that Petitioner failed to ensure that physician's
orders in the written plan of care were followed, failed to
notify physicians of changes in patients' conditions, and failed
to ensure that drugs and treatments were administered only on
physicians' orders. HCFA Ex. 1 at 14-17; Tr. 101-103.
Specifically, HCFA determined that: a patient's physician was
not notified when a patient with insulin dependent diabetes

®* an additional deficiency was cited in the follow-up
survey based on the failure to obtain a physician's
countersignature for orders given orally. This violated section
484.18(c), which was removed by technical changes to the
regulation which had not been conveyed to the surveyors at the
time of the follow up survey in January 1996. See Tr. 311. Asa
result, HCFA is not pursing this deficiency against Petitioner.
HCFA Opening Memorandum at 28.
8

mellitus had blood sugar values that were too low on 20 different
occasions during a one month period (HCFA Ex. 1 at 14; Tr. 102);
skilled nursing instruction was not provided to a patient's
caregiver as per physician's instructions (HCFA Ex. 1 at 15-16);
a physical therapy evaluation was still not done two months after
it was ordered (HCFA Ex. 1 at 15); medical social worker visits
and skilled nursing visits were missed and the patients'
physicians were not notified of the missed visits nor were the
physicians notified of a change in the patients' conditions (HCFA
Ex. 1 at 16-17; Tr. 76); and medicated eye drops and medication
to treat pressure sores were administered by the staff without
physician's orders for such medication. HCFA Ex. 1 at 17-18.
Petitioner submitted no evidence to rebut HCFA's determinations.

Instead, Petitioner responded in a plan of correction that it
would in-service its staff on the necessity of adherence to a
plan of treatment, the importance of documentation, and the
necessity of informing physicians of missed visits. Petitioner
assured also that the Director of Patient Care Services would
monitor compliance weekly. HCFA Ex. 1 at 13-16.

However, despite Petitioner's assurances, at the follow-up survey
in January 1996, the surveyors found that, for 10 of 10 patients,
the clinical records that were reviewed showed that home visits
and other services were not furnished in accordance with the
physicians' orders in the patients' plan of care. HCFA Ex. 3 at
4-8; Tr. 123, 126-127.

It was established by the testimony of Ms. Patience (the nurse
consultant employed by HCFA who reviewed the survey findings) and
Ms. Sabino (one of the home health evaluator nurses that surveyed
Petitioner for the CA DHS) that there is an established nursing
standard of practice that every action taken by nurses and other
staff must be documented. Tr. 177-178, 264-265. They testified
that if there is a lack of documentation, then the action is
considered as not having been done. Id. The purpose of this
nursing standard of practice is to show that what was ordered was
indeed done and "to provide a record for other staff, to indicate
the patients progress or lack thereof or stability. To document
the condition of the patient. To assist the agency or to assist
anybody in determining if there are further needs for that
patient." Tr. 266.

Ms. Patience testified that it is also an established nursing
practice that a physician's orders are to be "implemented as soon
as possible" and "certainly within a few days." Tr. 266. Ms.
Sabino confirmed this nursing practice by noting that a
physician's orders should be carried out at least within 72 hours
of their issuance. Tr. 129-130.
9

Based on the follow-up survey, HCFA proved that there were delays
in following a physician's plan of care, in one instance by 13
days and in another instance by 17 days, which is well outside
the established standard of practice. HCFA Ex. 3 at 4-5; Tr.
127. HCFA also proved that Petitioner repeatedly missed
providing skilled nursing visits, home health aide visits, and
therapy services, in direct violation of physicians’ orders as
stated on plans of care. HCFA Ex. 3 at 5-8; Tr. 130-134. In
fact, eight patients out of the 10 reviewed missed services that
they should have received under a physician's written plan of
care in excess of 50 times. Since the missed visits and therapy
services were nowhere documented in the patients’ clinical
records, under standard nursing practices, as noted by HCFA's
witnesses, they have to be assumed to not have taken place.
Indeed, nowhere has Petitioner claimed that the missing services
were performed as ordered. No witnesses or records were offered
to show that the services did, in fact, occur. Under Hillman,
HCFA provided Petitioner with notice of the deficiencies which
were the basis for citing this condition of participation.
Petitioner, who provided the alleged deficient care, should have
been in a position through its own medical records and testimony
of caregivers to rebut the evidence offered by HCFA if such
evidence was in existence. Since Petitioner chose to offer no
such evidence, I must assume there is no such evidence.

HCFA also proved that, in the case of Patient #4, the physical
therapy evaluation that was ordered on December 19, 1995 had not
been received by this patient at the time of the follow-up survey
of January 12, 1996, 24 days after the evaluation was ordered.
HCFA Ex. 3 at 6. Not only were there repeated services entirely
missed and delays in the implementation of physician's orders,
but there was no notification to physicians of these failures to
carry out orders both timely and as directed. HCFA Ex. 3 at 5-6.

In fact, in Petitioner's second plan of correction in response to
the January 12th revisit survey, the Petitioner claims that it
had conducted additional in-service training for its staff to
address this deficiency, and that the training was completed on
January 25, 1996. P. Ex. 14 at 4. Therefore, by Petitioner's
own admission, it did not adequately address this deficiency
until after the January 12, 1996 revisit survey.

Petitioner argues that HCFA relies on "assumptions and nebulous
concepts like "standard nursing practices", that "if something is
not written down it is thereby not actually done" and that the
"72 hours standard" is "arbitrary and without basis in the
regulations." Petitioner's Posthearing Response Brief at 5. I
disagree. Standard nursing practices perform a necessary
function to memorialize that physicians orders have been carried
out so that different medical staff can be kept abreast of the
current condition of the patient in order that the staff can
continuously provide the best care possible. Ms. Sabino
10

testified that the "72 hours standard" is necessary so that a
delay would not cause a patient to lose the progress the patient
had gained during a hospital stay. Tr. 129. These are not
assumptions, or nebulous concepts, nor are they arbitrary.
Instead, they are necessary in order to provide adequate medical
care. Although the witnesses could not point to a regulation
that states these nursing practices, they were both firm in the
existence of these practices. Their testimony is credible.

Also, I note that Petitioner did not claim that such nursing
practices do not exist. Nor did it offer any evidence to
demonstrate that some other standard of care should be applied or
that the standards referenced by HCFA's witnesses were invalid.
Even though the specific standards are not contained in the
regulations, HCFA can reasonably expect that home health agencies
will apply and be in conformity with recognized nursing standards
of care in meeting the specified regulatory standards.

Patients of home health agencies depend on the services they get
from a home health agency. Repeatedly missing nursing, therapy
and other services will adversely affect the health and safety of
these vulnerable patients. Petitioner repeatedly missed
providing its patients with a variety of services as required by
physicians orders in a written plan of care. This is evidence of
Petitioner's failure to comply with participation requirements
and establishes that Petitioner cannot provide care consistent
with that which is required by the Act and regulations.

c. Petitioner was out of compliance with the condition of
participation governing clinical records, 42 C.F.R. § 484.48.

HCFA proved that, as of the date of the follow-up survey,
Petitioner failed to comply with the condition of participation
governing clinical records. The regulation, at 42 C.F.R. §
484.48, requires, generally, that a home health agency maintain
clinical records "containing pertinent past and current findings
in accordance with accepted professional standards." CA DHS
initially found that Petitioner failed to comply with this
condition of participation during the November 1995
recertification survey. HCFA Ex. 1 at 23; Tr. 113-15. At this
survey, CA DHS surveyors found that 100 percent of the 16
clinical records sampled were incomplete. HCFA Ex. 1 at 24.

At the follow-up survey, the surveyors concluded that, far from
being corrected, the state of Petitioner's clinical records had
deteriorated further. Ms. Sabino testified that, during the
January 1996 survey, the surveyors requested clinical records for
certain patients, which were not immediately forthcoming from
Petitioner's staff. Tr. 142-43. Upon investigating the reason
for the delay, Ms. Sabino went to the area where records were
kept and observed that there were stacks of loose papers that had
11

not been filed. Tr. 143.’ Moreover, when the patient records
were assembled and produced, the records were found to be
incomplete. Tr. 145.

HCFA's nurse consultant, Ms. Patience, testified that the
condition of participation governing clinical records is
important to delivering adequate care to patients because:

[The] clinical record is the documentation, the journal, if
you will of what's happening with the patient and it's
important that those records be maintained in a professional
fashion so the information that's necessary for the care of
the patient gets communicated to all staff and is kept.

Tr. 269. The witness testified further that maintaining clinical
records completely and timely is necessary in order:

To assess whether or not the patient is making progress or
is regressing and also to determine that the physician's
orders are being carried out... .

Tr. 270. When Petitioner's clinical record-keeping practices are
measured against these goals, it is apparent that HCFA was
justified in concluding that Petitioner failed to comply with the
condition of participation governing clinical records.

The lack of order that prevailed in Petitioner's record keeping
practices would seriously limit Petitioner's capacity to deliver
adequate care to its patients. If caregivers cannot refer to a
patient's clinical record and find current and complete
information on the patient's condition, it would seem difficult,
if not impossible, to coordinate the care being given by
different disciplines. I take this to be what Ms. Patience was
referring to when she testified that the clinical record should
serve to communicate the information necessary for the care of
the patient to all staff. In addition, lack of adequate record-
keeping would also be detrimental to a home health agency's
efforts to monitor the quality of services provided to its
patients. See, 42 C.F.R. § 484.48, which imposes such an
obligation on home health agencies.

7 Ms. Sabino's testimony is transcribed as follows:

"I saw staff in front of files of loose papers." Tr. 143
(emphasis added). However, the context suggests that the word
was "piles" rather than "files." For example, on page 144 of the

transcript, counsel refers to "stacks" of paper. Similarly, the
2567 reports: “agency staff were attempting to retrieve clinical
notes from stacks of paper for filing into the requested clinical
records." HCFA Ex. 3 at 12.
12

Petitioner has argued, in general, that I should not rely on the
testimony of HCFA's witnesses because they lack present
recollection of the facts underlying the deficiencies noted in
the HCFA form 2567. However, for me to resolve this case I need
not decide whether HCFA failed to meet its burden of proof if its
witnesses at hearing lacked present recollection of the facts
reported in the HCFA form 2567. In the case of Ms. Sabino's
testimony regarding the condition of Petitioner's record storage
area, there is no such defect. Ms. Sabino's recollection as to
the unfilled stacks of paper she observed was clear and dramatic.
I have no difficulty in concluding that the conditions described
do not comport with professionally recognized standards for
record-keeping. For these reasons, I conclude that HCFA was
justified in concluding that Petitioner failed to comply with the
condition of participation governing clinical records. Even
should I accept Petitioner's contention that HCFA's witness
lacked specific recollection of the events to establish proof of
the condition of participation, that would not overcome HCFA's
responsibility under Hillman to provide notice only. Clearly,
HCFA's witnesses, along with the 2567, provided Petitioner with
notice of this condition. Again, Petitioner chose to offer no
proof to rebut the evidence presented by HCFA or to show it was
in substantial compliance with this condition of participation.

I have concluded that on the date of the follow-up survey,
Petitioner was out of compliance with the conditions of
participation governing organization, services, and
administration (42 C.F.R. § 484.14); acceptance of patients, plan
of care and medical supervision (42 C.F.R. § 484.18); and
clinical records (42 C.F.R. § 484.48). Since providers that
participate in Medicare are required to be in compliance with all
conditions of participation, HCFA was fully justified in
terminating Petitioner's Medicare participation agreement based
on these findings.

Of particular significance in this case is Petitioner's failure
to provide any evidence to rebut evidence presented by the
surveyors relating to these conditions of participation.
Petitioner had the opportunity at and subsequent to the hearing
to present testimonial and documentary evidence challenging the
testimony of the CA DHS surveyors. Despite repeated
opportunities, no evidence was presented. Petitioner was in the
best position to counter the testimony of the State surveyors.
If such evidence was available, it was never presented.

D. HCFA is not estopped from terminating Petitioner's
participation requirement.

Petitioner argues, essentially, that HCFA should be estopped from
terminating its participation agreement because Petitioner was
not given an opportunity to correct the deficiencies found after
the CA DHS' 1/12/96 follow-up survey, which opportunity
13

Petitioner alleges was afforded it by the CA DHS in a letter of
January 19, 1996. HCFA Ex. 4. Petitioner alleges that the
letter afforded it 10 days in which to submit a response to the
statement of deficiencies, which would be included in the public
record of the survey and forwarded to HCFA for its
"consideration." HCFA Ex. 4. Petitioner asserts that this is an
“official promise ... made by respondent to petitioner inviting
petitioner's reliance and action upon said promise."

Petitioner's Initial Post-hearing Brief at 6.

As an initial matter, I note that it is not clear that estoppel
win ever lie against the federal government. See, e.g.,
Colorado Dep't of Social Services, DAB ace (1991); Kansas Dep't

ef Socia] Services, DAB QC61 (1994); n. 't of Social
Services, DAB QC75-R (1994). See aise Wisconsin Dep't of Health
and Social Services, DAB No. 1493 (1994). But even if estoppel

could lie against HCFA, Petitioner has not proved the elements of
estoppel in this case.

A party seeking to assert estoppel must prove that: 1) the party
against whom estoppel is sought made false representations; 2)
the party claiming estoppel relied on the false representations
to the party's detriment; and 3) the reliance was reasonable, in
that the party claiming the estoppel neither knew nor should have
known that its adversary's conduct was misleading. Heckler v.
Community Health Services, 467 U.S. 51, 59 (1984). Petitioner
has not proved that these conditions exist here.

I do not read the January 19, 1996 letter from the CA DHS as
inviting Petitioner to submit a second plan of correction or a
credible allegation of compliance, nor does it promise Petitioner
that it will be afforded a second follow-up survey, unlike the
November 16, 1995 letter from the CA DHS which offered Petitioner
the opportunity to submit evidence of correction and promised a
follow-up survey if the evidence was found credible. See HCFA
Ex. 2. The November 15, 1995 letter informed Petitioner also
that if it was found out of compliance with any condition of
participation after the follow-up survey, the CA DHS would be
obliged to recommend termination to HCFA. In contrast, there
were no false representations or official promises made to
Petitioner in the January 19, 1996 letter stating that Petitioner
had the right to submit further evidence of correction or the
right to a second re-survey, and nowhere in the Act or
regulations does such a right exist.

Moreover, even if Petitioner misled itself to believe that the
response cited in the January 19, 1996 letter was an invitation
to submit a second credible allegation and evidence of
compliance, Petitioner's reliance on it to assert that HCFA was
thus not authorized to terminate its provider agreement is not
reasonable. In a situation such as this, where a provider has
been found out of compliance with a condition of participation
14

and a follow-up survey has found it still out of compliance with
that condition, HCFA is not required to review any more
information prior to terminating that provider. HCFA is
authorized to terminate the provider agreement of any provider if
it concludes that, on balance, the deficiencies reasonably
support a conclusion that a provider no longer meets any one
condition of participation. 42 C.F.R. §§ 489.53(a)(1), (3),
488.24(b). Further, I note that the decision as to whether a
follow-up survey should be performed is not an initial
determination subject to review by me. 42 C.F.R. § 498.3.

III. Conclusion

For the reasons set forth above, I have concluded that HCFA was
authorized to terminate Petitioner's Medicare participation
agreement.

/s/

Edward D. Steinman
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD
Civil Remedies Division

In the Case of:
Bobby D. Layman, D.D.S., DATE: September 16, 1997
Petitioner,

Docket No. C-97-224
Decision No. CR491

-v-

The Inspector General.

DECISION

By letter dated November 22, 1996, Bobby D. Layman, D.D.S.,
the Petitioner herein, was notified by the Inspector General
(I.G.), of the U.S. Department of Health and Human Services,
of her determination to exclude Petitioner for a period of
five years from participation in the Medicare program and
from participation in the State health care programs
described in section 1128(h) of the Social Security Act
(Act), which are referred to herein as Medicaid. The I.G.'s
rationale was that exclusion, for at least five years, is
mandated by sections 1128(a)(1) and 1128(c) (3) (B) of the Act
because Petitioner had been convicted of a criminal offense
related to the delivery of an item or service under Medicaid.

Petitioner filed a request for review of the I.G.'s action by
an administrative law judge of the Departmental Appeals
Board. The I.G. moved for summary disposition.

Because I determined that there are no facts of decisional
significance genuinely in dispute, and that the only matters
to be decided are the legal implications of the undisputed
facts, I have granted the I.G.'s motion and decided the case
on the basis of the parties' written submissions. The I.G.
has submitted eight proposed exhibits (I.G. Exs. 1-8).
Petitioner did not object to these exhibits. Petitioner has
submitted 75 proposed exhibits. (P. Exs. 1-75) The I. G.
has not objected to these exhibits. I base my decision in
this case on these exhibits, the applicable law, and the
arguments of the parties.
2

I find no reason to disturb the I.G.'s determination to
exclude Petitioner from participation in the Medicare and
Medicaid programs for a period of five years.

I. Petitioner's Argument

Petitioner contends that his conviction falls within the
parameters of the permissive exclusion authority of section
1128(b) (1) of the Act. He also maintains that the length of
exclusion is excessive under the circumstances of his case.
He further contends that his exclusion should be waived
because he is the only dentist in the region that accepts
Medicaid patients and also that the Puna area, where
Petitioner practices, would "suffer greatly" as a result of
his exclusion. Finally Petitioner asserts that to exclude him
would "be to convict and sentence him twice."

II. Findings of Fact and Conclusions of Law

1. During the time relevant to this case, Petitioner was a
dentist licensed to practice in the State of Hawaii.

2. On November 3, 1994, a three-count complaint was filed
against Petitioner in the Circuit Court of the First Circuit
for the State of Hawaii, charging Petitioner with filing
false Medicaid claims in violation of section 346-43.5,
Hawaii Revised Statutes. I.G. Ex. 1.

3. Count 1 of the November 3, 1994 complaint charged that,
on or about January 20, 1993, Petitioner made a false claim
for reimbursement from the State of Hawaii's Medicaid program
in the treatment of patient Henry M. I.G. Ex. 1 and 2.

4. On November 15, 1994, Petitioner was convicted, on his
plea of no contest, to Count 1 of the November 3, 1994
complaint. I.G. Ex. 3.

5. As a result of his conviction, Petitioner was sentenced
to a 5-year term of probation and ordered to make restitution
in the amount of $1,732.68 and to perform 50 hours of
community service. I.G. Ex. 3.

6. Petitioner's plea of no contest which was accepted by the
court and the entry of a judgment of conviction both satisfy
the definition of conviction found in section 1128(i) of the
Act for purposes of mandatory exclusion.

7. Petitioner's criminal conviction for filing false
Medicaid claims is related to the delivery of an item or
service under the Medicaid program, within the meaning of
section 1128(a)(1) of the Act.
3

8. The Secretary is required by section 1128(a)(1) of the
Act to exclude Petitioner from participation in Medicare and
to direct the State to exclude him from participation in
State health care programs because of his conviction ina
program-related offense.

9. The mandatory minimum period of an exclusion of a person
convicted of a program-related offense is five years.
Section 1128(c)(3(B) of the Act.

10. The Secretary has delegated to the I.G. the duty to
impose the mandatory exclusion on a person convicted of a
program related offense. 48 Fed. Reg. 21,661 (1983); 42
C.F.R. ยง 1001.101.

11. Petitioner is subject to a minimum mandatory exclusion
of five years for his conviction of a criminal offense
related to the delivery of an item or service under the
Medicaid program.

III. Applicable Law

Sections 1128(a) (1) and 1128(c) (3) (B) of the Act make it
mandatory for any individual who has been convicted of a
criminal offense related to the delivery of an item or
service under the Medicare or Medicaid programs to be
excluded from participation in such programs for a period of
at least five years.

Iv. Discussion

The law relied upon by the I.G. to exclude Petitioner
requires, initially, that he be convicted of a crime.

Section 1128(i) of the Act provides that an individual will
be deemed convicted under any of the following circumstances:

(1) when a judgment of conviction has been entered
against the individual or entity by a Federal, State,
or local court, regardless of whether there is an
appeal pending or whether the judgment of conviction
or other record relating to criminal conduct has been
expunged;

(2) when there has been a finding of guilt against the
individual or entity by a Federal, State, or local
court;

(3) when a plea of guilty or nolo contendere by the
individual or entity has been accepted by a Federal,
State, or local court; or
4

(4) when the individual or entity has entered into
participation in a first offender, deferred
adjudication, or other arrangement or program where
judgment of conviction has been withheld.

In this case, sections 1128(i)(1) and (3) of the Act are
clearly applicable. The Circuit Court of the First Circuit
of Hawaii on November 15, 1994, accepted Petitioner's plea of
no contest and entered a judgment of conviction against him
for medical assistance fraud in violation of section 346-43.5
of the Hawaii Revised Statutes. The fact Petitioner pled no
contest to a crime and the court accepted his plea
constitutes a conviction within the meaning of section
1128(i)(3) of the Act. Also, the entry of the judgment of
conviction by the court is within the definition of
conviction as set forth in section 1128(i)(1) of the Act.
Petitioner was therefore convicted of a criminal offense
within the meaning of both section 1128(i)(1) and (3) of the
Act.

Petitioner's conviction was also related to the delivery of
items or services under the Medicaid program, as required by
section 1128(a)(1) of the Act. Petitioner himself concedes
that he was "convicted of medical assistance fraud in state
court in connection with the delivery of a health care
service or item under the Medicaid program." P. Br. at 3.
Petitioner's crime, defrauding the Medicaid program by
billing for dental appliances and fittings that were never
provided, is related to the delivery of Medicaid services
even though no services were in fact rendered with respect to
Petitioner's misconduct. Jack W. Greene, DAB CR19 (1989),
aff'd DAB No. 1078 (1989); aff'd Greene v. Sullivan, 731
F.Supp. 835 (E.D. Tenn. 1990). Exclusion under section
1128(a)(1) is mandated whenever, as here, an individual is
convicted in state court of a criminal offense related to the
delivery of items or services under the Medicaid program.
Section 1128(a)(1) of the Act.

Petitioner is therefore incorrect in his assertion that he
should be excluded under the permissive exclusion provision
of section 1128(b)(1) of the Act rather than the mandatory
exclusion provision of section 1128(a)(1). The DAB has
consistently held that the Secretary is under no obligation
to proceed under the permissive exclusion provisions of
section 1128(b) of the Act; once a person has been convicted
of a program-related criminal offense, exclusion is
5

mandatory. Muhammad R. Chaudhry, M.D., DAB CR326 (1994); Leon
Brown, M.D., DAB CR83, aff'd DAB No. 1208 (1990).

[It] is well settled that the I.G. has no discretion
to impose a permissive exclusion for conduct that is
program-related and falls within the ambit of the
mandatory exclusion provision of section 1128(a),
even if the conduct also can be fairly characterized
under either the permissive or mandatory exclusion
provisions.

Jack W. Greene, DAB No. 1078, at 9-11 (1989), aff'd Greene v.
Sullivan, 731 F. Supp 835, 838 (E.D. Tenn. 1990). In other
words, when a mandatory exclusion is appropriate, "it is
irrelevant that a petitioner's conduct might also satisfy the
permissive exclusion provisions of section 1128(b)." Brenda
J. Motley, DAB CR414 (1996), at 6.

Accordingly, Petitioner was appropriately excluded under the
mandatory exclusion provision of section 1128(a) because his
exclusion was based on a conviction for a Medicaid related
crime. "Proof that a criminal conviction had occurred, and
that the offense was program-related, ends the inquiry as to
qpetner the mapAB CRS exclusion is justified." Sudarshan K._

Singla, M.D., DAB CR332 (1994), at 4.

I further find that the length of the exclusion imposed on
Petitioner is appropriate because the minimum mandatory
length of exclusion under section 1128(a)(1) is five years.
Section 1128(c) (3)(B) of the Act; 42 C.F.R. section
1001.102(a). Despite the fact that the five-year minimum is
mandatory under section 1128(a) (1), Petitioner argues that
the actions that resulted in his criminal conviction are not
so egregious as to justify a five-year program exclusion. I
find no merit in his contention. The facts underlying
Petitioner's conviction are not relevant in this inquiry;
Petitioner's plea provides the requisite basis for his
mandatory exclusion and any arguments relating to the nature
or magnitude of his crime have no bearing on the I.G.'s
exclusion authority. Petitioner may not challenge the I.G.'s
authority to exclude him from the Medicare and State health
care programs by denying that he is guilty of the action for
which he was convicted at the state level. The I.G. and the
ALJ are not authorized to look behind the conviction to
determine whether it is valid and may not consider evidence
to mitigate the exclusion. Peter J. Edmondson, DAB No. 1330
(1992). Petitioner may not collaterally attack his criminal
conviction in this administrative forum. Sonia M.
Geourzoung, M.D., DAB CR286 (1993); Douglas Schram, M.D., DAB
No. 1372 (1992).
6

Petitioner also maintains that his exclusion should be
modified because his crime did not "rise to the same level"
as some of the offenses committed by others who have been
excluded under section 1128(a)(1) of the Act. I reject this
argument also. All exclusions imposed under section
1128(a)(1) must be imposed for a minimum period of five years
regardless of the facts surrounding the underlying
conviction. "It is not unlawful for the same exclusionary
period to be imposed upon individuals who commit crimes of
varying severity." Singla, at 3 (Petitioner was
appropriately excluded for five years under section
1128(a)(1) although he argued that he was convicted only of a
misdemeanor and was not convicted of having acted with
criminal intent); see also Maria M. Melendez, M.D., 18
(1995) (doctor excluded for five years under section
1128(a)(1) based on conviction for writing a false
prescription for which Medicaid was billed); Jack W. Greene,
supra, (pharmacist excluded for five years under section
1128(a)(1) based on conviction for billing the Medicaid
program for brand name drugs while he dispensed cheaper,
generic medication).

Petitioner further maintains that his exclusion should be
shortened because the community where he practiced will
suffer as a result and he has submitted numerous statements
of support from his former patients. I find that I have no
authority to consider Petitioner's alleged standing in the
community nor the community's need for dental services ina
section 1128(a)(1) exclusion. In Maria M. Melendez, M.D.,
supra, a petitioner's similar argument that any violation of
law on her part was more than offset by her community service
was irrelevant to the ALJ's review of her exclusion. In
Benjamin P. Council, M.D., DAB CR391 (1995), it was held that
the ALJ had no authority to consider statements attesting to
petitioner's extensive pro bono work and exemplary conduct as
a basis for reducing the mandatory minimum term of exclusion.
See also Roberta E. Miller, DAB CR367 (1995) (ALJ had no
authority to consider petitioner's successful completion of
probation and the statements attesting to her good
character). The sole issue is whether Petitioner was
convicted of a program related criminal offense and if so,
then he must be excluded for at least five years.

Petitioner also claims that his exclusion must be moderated
because he is the sole source of essential dental services in
his community who accepts Medicaid patients. Pursuant to
section 1128(c)(3)(B) of the Act, the Secretary may, at the
request of a State, waive an exclusion imposed under section
1128(a)(1) of an individual who is the sole community
physician or the sole source of essential specialized
services in a community. Petitioner does not assert that any
waiver request has been made by the State of Hawaii's
7

Medicaid director on his behalf. A waiver request must come
from the State Medicaid director and it is not sufficient
that the Petitioner requests the waiver. The I.G. can
consider a waiver request only upon "a request from a State
health care program" and this request "must be in writing and
from an individual directly responsible for administering the
State health care program." 42 C.F.R. ยง 1001.1801(a). The
ALJ has no authority to grant a waiver. Benjamin P. Council,

M.D., supra; Richard G. Philips, D.P.M., DAB No. 1279 (1991).

Finally, Petitioner maintains that "[t]Jo exclude him from the
program would be to convict and sentence him twice" because
he has made restitution, performed community service, and
abided by the terms of his probation, pursuant to the
sentence imposed by the State of Hawaii. Such claim is an
argument that exclusion following a state conviction violates
the Constitutional protection against double jeopardy. The
ALJ, however, has no authority to rule on the
constitutionality of the I.G.'s actions. See Roberta Miller,
DAB CR367 (1995). Moreover, the appellate panel of the DAB
and federal courts have both found that exclusions imposed
under section 1128 of the Act are remedial in nature, rather
than punitive, and do not violate the double jeopardy
provisions of the Constitution. Id. at 6-7; Manocchio v..
Kusserow, 961 F.2d 1539, 1541 (11th Cir. 1992); Kahn v.
Inspector General of the U.S. Dept. of Health and Human
Services, 848 F. Supp. 432 (S.D.N.ยฅ. 1994); Westin v.
Shalala, 845 F.Supp. 1446 (D. Kan. 1994). Because the
purpose of Petitioner's exclusion is to protect program
beneficiaries from future misconduct from a provider who has
proven himself to be untrustworthy, and not to punish
Petitioner, this exclusion is remedial in nature and not
violative of double jeopardy. Paul Karsch, DAB CR454 (1997).

Vv. Conclusion

Petitioner's exclusion, for at least five years, is mandated
by sections 1128(a)(1) and 1128(c)(3)(B) of the Act because
of his conviction of a criminal offense related to the
delivery of an item or service under the Medicaid program.

/s/

Joseph K. Riotto
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Date: August 28, 1997
Arie Oren, M.D,
Petitioner,
Docket No. C-97-201
=v. - Decision No. CR490

The Inspector General.

DECISION

By letter dated December 18, 1996, the Inspector General (I.G.),
United States Department of Health and Human Services, notified Arie
Oren, M.D. (Petitioner), that he would be excluded from participation
in Medicare, Medicaid, Maternal and Child Health Services Block Grant
and Block Grants to States for Social Services programs for a period
of ten years. The I.G. imposed this exclusion pursuant to section
1128 (b) (1) of the Social Security Act (Act), based on Petitioner's
conviction in the United States District Court for the Eastern
District of Pennsylvania for criminal offenses related to "fraud,
theft, embezzlement, breach of fiduciary responsibility or other
financial misconduct."

Petitioner requested review of his ten-year exclusion by letter dated
February 5, 1997. A prehearing conference was held on March 19, 1997.
During the conference, the parties agreed that the case could be heard
and decided based on written submissions, including briefs and
exhibits. The I.G. submitted a brief accompanied by 13 proposed
exhibits (1.G. Ex. 1 - 13). Petitioner submitted a response brief. The
I.G. submitted a reply brief. Petitioner did not object to my
receiving into evidence the I.G.'s proposed exhibits, and I receive
into evidence I.G. Ex. 1 - 13.

I affirm the I.G.'s determination to exclude Petitioner from
participating in Medicare and other federally-funded health care
programs, including Medicaid, for a period of ten years.
PETITIONER'S CONTENTIONS

Petitioner maintains that section 1128(b) (1) of the Act does not apply
to his situation because the criminal offenses to which he pled guilty
involved activity with private insurance companies. Petitioner argues
that the I.G. has no authority to exclude him, inasmuch as he was

not convicted of an offense against or involving a government-funded
health care program. He further contends that, even if the statute
does apply to such conduct as a result of a statutory amendment, his
criminal offenses occurred before the 1996 amendment of the Act and
that such amendment cannot, under the Ex-post Facto Clause of the
Constitution, apply in his case. Petitioner also maintains that the
length of exclusion is not reasonable because there are mitigating
circumstances present in his case which make a ten-year exclusion
excessive.

APPLICABLE LAW

Under section 1128(b) (1) of the Act, the Secretary may exclude "[a]ny
individual or entity that has been convicted, under Federal or State
law, in connection with the delivery of a health care item or service
or with respect to any act or omission in a program operated by

or financed in whole or in part by any Federal, State, or local
government agency, of a criminal offense relating to fraud, theft,
embezzlement, breach of fiduciary responsibility, or other financial
misconduct."*

42 C.F.R. § 1001.201(b) (1) provides that an exclusion imposed under
section 1128(b) (1) of the Act shall be for a period of three years,
unless specified aggravating or mitigating factors are present which
form a basis for lengthening or shortening the period of exclusion.

42 C.F.R. § 1001.201(b) (2) provides that the following factors may be
considered to be aggravating and a basis for lengthening the period of
exclusion "(i) [t]he acts resulting in the conviction, or similar
acts, resulted in financial loss of $1500 or more to a government
program or to one or more other entities, or had a significant
financial impact on program beneficiaries or other individuals. (The
total amount of financial loss will be considered, including any
amounts resulting from similar acts not adjudicated, regardless of
whether full or partial restitution has been made); (ii) [t]he acts
that resulted in the conviction, or similar acts, were committed over

‘congress amended section 1128 of the Act in 1996. One of the amendments
to section 1128 creates a new section, section 1128(a) (3), which mandates a
minimum exclusion of at least five years for any felony conviction for an
offense formerly described by section 1128(b) (1). Section 1128(b) (1) is
retained, but provides permissive exclusion authority for misdemeanor
convictions only. The I.G. states in footnote 3 of her reply brief that
section 1128(a) (3) applies to offenses which occur after the date of
enactment of the 1996 amendment, and that the I.G. did not exclude Petitioner
under this new exclusion authority.
a period of one year or more; (iii) [t]he acts that resulted in the
conviction, or similar acts, had a significant adverse physical or
mental impact on one or more program beneficiaries or other
individuals; (iv) [t]he sentence imposed by the court included
incarceration; or (v) [t]he convicted individual or entity has a prior
criminal, civil, or administrative sanction record."

42 C.F.R.§ 1001.201(b) (3) provides that only the following factors may
be considered as mitigating and a basis for reducing the period of
exclusion: "(i) [t]he individual or entity was convicted of 3 or fewer
misdemeanor offenses, and the entire amount of financial loss to a
government program or to other individuals or entities due to the acts
that resulted in the conviction and similar acts is less than $1500;
(ii) [t]he record in the criminal proceedings, including sentencing
documents, demonstrates that the court determined that the individual
had a mental, emotional, or physical condition, before or during the
commission of the offense, that reduced the individual's culpability;
(iii) [t]he individual's or entity's cooperation with Federal or State
officials resulted in -- (A) [o]thers being convicted or excluded from
Medicare or any of the State health care programs, or (B) [t]he
imposition of a civil money penalty against others; or (iv)
[a]lternative sources of the type of health care items or services
furnished by the individual or entity are not available."

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. Petitioner was a licensed medical doctor who practiced medicine,
among other places, at the C.H. Medical Center, Inc., in Philadelphia,
Pennsylvania. I.G. Ex. 1 atl

2. On November 10, 1994, an indictment (No. 94-465) was filed in the
United States District Court for the Eastern District of Pennsylvania
charging Petitioner and 10 other defendants with crimes related to a
scheme designed to obtain money from insurance companies by submitting
false medical bills and personal injury, property, and disability
claims. The indictment charged Petitioner with mail fraud, in
violation of 18 U.S.C. § 1341; racketeering in violation of 18 U.S.C.
§ 1962(c); RICO conspiracy in violation of 18 U.S.C. § 1962 (d); and
criminal forfeiture pursuant to 18 U.S.C. § 1963. I.G. Ex. 12 at 4,
I.G. Ex. 13 at 1.

3. The charges referenced in the November 10, 1994 indictment arose
out of an insurance fraud scheme involving a law office and three
medical centers. The object of the scheme was to defraud insurance
companies by filing false, fraudulent, and inflated personal injury
claims that were supported by fraudulent medical bills and reports
signed by Petitioner referring to treatment that was never rendered.
I.G. Ex. 13 at 1 - 2.

4. On December 13, 1994, another indictment (No. 94-515) was filed in
the United States District Court for the Eastern District of
Pennsylvania charging Petitioner and eight other defendants with
offenses including mail fraud in violation of 18 U.S.C. § 1341;
racketeering in violation of 18 U.S.C. § 1962(c); racketeering
conspiracy in violation of 18 U.S.C. § 1962(d); aiding and abetting in
violation 18 U.S.C. § 2; and racketeering forfeiture pursuant to 18
U.S.C. § 1963. I.G. Ex. 1, I.G. Ex. 3 at l.

5. The essence of the charges contained in Indictment No. 94-515
against Petitioner and his co-defendants was that they staged
automobile accidents and then reported these accidents to various
insurance companies including health insurers to collect fees for
services that were either not needed or never provided. I.G. Ex. 1,
I.G. Ex. 3 at 4-5.

6. On June 5, 1995, Petitioner entered into a plea bargain in which he
agreed to plead guilty to counts 38 and 40 of Indictment No. 94-465
(charging him with racketeering and criminal forfeiture) and counts 47
and 49 of Indictment No. 94-515 (also charging him with racketeering
and criminal forfeiture); to forfeit $250,000; to pay a special
assessment and to make full restitution; and to agree to consolidation
of the two indictments for sentencing purposes. I.G. Ex. 2.

7. On March 8, 1996, Petitioner was convicted in the United States
District Court for the Eastern District of Pennsylvania of the
offenses of racketeering and criminal forfeiture pursuant to counts 47
and 49 of Indictment No. 94-515. 1.G. Ex. 4.

8. As a result of his conviction Petitioner was ordered to pay
restitution in the amount of $272,000. I.G. Ex. 4 at 4.

9. As a result of his conviction, Petitioner was sentenced to 24
months incarceration and three years of supervised release. I.G. Ex. 4
at 2.

10. On April 26, 1996, Petitioner was ordered to forfeit assets valued
at $100,000 obtained through his racketeering. I.G. Ex. 5.

11. Petitioner's participation in an unlawful scheme to defraud
insurance companies lasted from 1990 to the latter part of 1992. I.G.
Ex. 1 at 15, I.G. Ex. 4 at 1.

12. Under section 1128(b) (1) of the Act, the I.G. is authorized to
exclude any individual or entity that has been convicted, under
federal or State law in connection with the delivery of a health care
item of service or with respect to any act or omission in a program
operated by or financed in whole or in part by any federal, State,

or local government agency, of a criminal offense relating to fraud,
theft, embezzlement, breach of fiduciary responsibility, or other
financial misconduct.

13. Where the I.G. determines to exclude an individual pursuant to
section 1128(b) (1) of the Act, the term of the exclusion will be for a
period of three years, in the absence of aggravating or mitigating
factors that would support an exclusion of more or less than three
years.

14. In a case involving an exclusion under section 1128(b) (1) of the
Act, an exclusion of more than three years may be justified where
there exist aggravating factors that are not offset by mitigating
factors.

15. Petitioner was convicted under federal law, in connection with the
delivery of a health care item or service, of criminal offenses
relating to fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct.

16. The I.G. is authorized to exclude Petitioner pursuant to section
1128(b) (1) of the Act.

17. The I.G. proved the presence of an aggravating factor, in that the
acts resulting in Petitioner's conviction, or similar acts, resulted
in financial loss of $1,500 or more to an insurance company.

18. The I.G. proved the existence of a second aggravating factor in
that the sentence that was imposed on Petitioner for his crimes
included a period of incarceration.

19. The I.G. proved the presence of a third aggravating factor in that
the acts that resulted in Petitioner's conviction, or similar acts,
were committed by Petitioner over a period of one year or more.

20. Petitioner did not prove the presence of any mitigating factor.

21. The evidence which relates to the aggravating factors proved by
the I.G. establishes Petitioner to be untrustworthy to provide care to
beneficiaries and recipients of federally-funded health care programs.

22. A ten-year exclusion of Petitioner is reasonable.
DISCUSSION

Petitioner does not dispute that he has been convicted under federal
law, in connection with the delivery of a health care item or service,
of criminal offenses relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct. Instead he
maintains that section 1128(b) (1) of the Act does not apply in his
case because he was convicted for activities related to defrauding
private insurers. He contends that section 1128(b) (1) of the Act
applies only if an individual is convicted of a criminal offense that
is related to the delivery of an item or service under a government-
funded health care program such as Medicare or a State Medicaid
program.

I find no merit to this argument. I conclude that section 1128 (b) (1)
of the Act is clearly written to encompass Petitioner's criminal
offenses, without any "requisite", as he contends, that such offenses
must be related to "a program operated by or financed in whole or part
by any Federal, State, or local government agency." Petitioner's brief
at 6.

Under section 1128(a) (1) of the Act, the I.G. is mandated to exclude
an individual who is convicted of a program-related offense of the
type described by Petitioner in his argument (i.e. involving a
government-financed program such as Medicare or Medicaid). However
the I.G.'s exclusion authority is not limited to exclusions for
convictions of program-related offenses. The other parts of section
1128, including section 1128(b) (1), authorize the I.G. to impose
exclusions for a far broader range of offenses than the program-—
related offenses that are described in section 1128(a) (1).

Section 1128(b) (1) plainly provides that an exclusion may be imposed
where an individual is convicted of an offense relating to fraud,
theft, embezzlement, breach of fiduciary responsibility, or other
financial misconduct, that is committed in connection with the
delivery of a health care item or service. There is no requirement in
this section that the offense be directed against a government-funded
program, although conviction of an offense against a government-funded
program would constitute an additional basis for an exclusion under
section 1128(b) (1).

The wording of the implementing regulations at 42 C.F.R.

§ 1001.201(a), which separates the statutory language into two
distinct bases for exclusion (one involving defrauding of private
parties and the other involving defrauding of government-funded
programs) makes this interpretation clear that either situation
justifies permissive exclusion under section 1128(b) (1) of the
Act.?

The legislative history of this provision also establishes that
Petitioner's interpretation is incorrect. Section 1128(b) (1) was
enacted by Congress as part of the Medicare and Medicaid Patient and
Program Protection Act of 1987, Pub. L. 100-93 (the MMPPPA). By
enacting the MMPPPA, Congress authorized the Secretary to exclude
persons or entities who have already been convicted of offenses
relating to financial integrity, "if the offenses occurred in
delivering health care to patients not covered by public programs." S.

? 42 C.F.R. § 1001.201 entitled "Conviction relating to program or
health care fraud" states in part:(a) Circumstance for exclusion. The [I.G.]
may exclude an individual or entity convicted under Federal or State law of a
criminal offense relating to fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct -(1) In connection with the
delivery of any health care item or service, including the performance of
management or administrative services relating to the delivery of such items
or services, or(2) With respect to any act or omission in a program operated
by, or financed in whole or in part by, any Federal, State or local
government agency.
Rep. No. 109, 100th Cong., 1st Sess. 7; reprinted in 1987 U.S.C.C.A.N.
687 (emphasis added). This provision therefore expanded the
Secretary's authority beyond section 1128(a) (1) to permit the
exclusion of individuals or entities convicted of criminal offenses
which are not related to Medicare or Medicaid or the other State
health care programs. In expanding the Secretary's authority,
"Congress reasoned that those who cheat private health care payers
cannot be trusted to deal honestly with program beneficiaries and
recipients." William D. Miles, M.D., DAB CR354 (1995) at 3. See David
E. Scheiner, D.P.M., DAB CR471 (1997); Chander Kachoria, R.Ph., DAB
No. 1380 (1993).

Petitioner also contends that, even if section 1128(b) (1) of the Act
applies in his case, such section was not enacted until August 21,
1996 and therefore cannot be a basis for his exclusion because he pled
guilty to the offenses prior to August 21, 1996. Petitioner's brief at
7. Petitioner is mistaken. As stated above, section 1128(b) (1) of the
Act was enacted by Congress as part of the MMPPPA. The MMPPPA was
enacted in 1987, approximately eight years prior to Petitioner's
agreement to plead guilty. I conclude that the 1987 statute covered
the activities for which Petitioner was excluded under section
1128 (b) (1).

I further find that the ten-year exclusion that the I.G. imposed
against Petitioner is reasonable. The evidence relating to the
aggravating factors established by the I.G. pursuant to 42 C.F.R. §
1001.201(b) (2) proves that Petitioner is a highly untrustworthy
individual. Petitioner failed to establish the existence of any
mitigating factors described in 42 C.F.R. §1001.201(b) (3). A ten-year
exclusion will serve as a reasonable protection for federally-funded
health care programs and the beneficiaries and recipients of those
programs in view of the unrebutted evidence of Petitioner's lack of
trustworthiness.

The I.G. proved the presence of three aggravating factors, consisting
of the following:

1) The acts resulting in Petitioner's conviction, or similar
acts, resulted in financial loss of $1,500 or more to a
government program or to one or more other entities. 42 C.F. R. §
1001.201(b) (2) (i). Petitioner's fraud caused very substantial
losses to be incurred by

entities other than government programs. The financial losses to
non-government entities caused by Petitioner's fraud approximated
$272,000. I make this conclusion based on Petitioner's sentence
that he pay restitution for his crimes in the amount of $272,000.
I infer that the amount of restitution is at least an
approximation of the damages that Petitioner caused by his fraud.
I.G. Ex. 4 at 4.

2) The acts that resulted in Petitioner's conviction, or other
similar acts, were committed by Petitioner over a period of one
year or more. 42 C.F.R. § 1001.201(b) (2) (ii). Petitioner
perpetrated his crimes from 1990 to the latter part of 1992. I.G.
Ex. 1 at 15, I.G. Ex. 4 at 1.

3) The sentence that was imposed upon Petitioner for his crimes
included a period of incarceration. 42 C.F.R. §
1001.201 (b) (2) (iv). Petitioner was sentenced to 24 months'
incarceration. I.G. Ex. 4 at 2.

The evidence which relates to the aggravating factors established by
the I.G. proves Petitioner is a highly untrustworthy individual.
Petitioner's lack of trustworthiness is established by his ongoing
involvement in a massive scheme to defraud insurers. Petitioner's
protracted involvement in that scheme demonstrates that he is capable
of engaging in well-organized and complex fraud. His fraud was
persistent and deliberate, not random or impulsive. The extent to
which Petitioner persisted in defrauding insurers is established by
the large losses he caused insurers to incur.

I find that Petitioner has not proved the existence of any mitigating
factors. Petitioner contends that, based on the fact that his Plea
Agreement (I.G. Ex. 2) contained a provision requiring him to
"cooperate fully and truthfully with the government" by agreeing to
"provide truthful, complete and accurate information and testimony,"
he has proved the existence of a mitigating factor under 42 C.F.R §
1001.201(b) (3) (iii). I.G. Ex. 2 at 2. Petitioner points out that the
applicable sentencing guidelines specify that he be sentenced to a
term of incarceration in the range of 33 to 41 months. He asserts
that, as a result of his cooperation, he was sentenced to
incarceration for a period of only 24 months. Petitioner's brief at 8
- 9.

Whether Petitioner cooperated with the federal government after his
federal conviction does not, without more, determine the existence of
a mitigating factor. The regulations governing the factors that may be
considered are clear. Petitioner has the burden of proving a
mitigating factor, which is in the nature of an affirmative defense,
under 42 C.F.R. § 1001.201 (b) (3) (iii). See Jose Ramon Castro, M.D.,
DAB CR259 (1993); James H. Holmes, M.D., DAB CR270 (1993); Joel Fass,
DAB CR349 (1994). His burden consists of proving: (1) that he
cooperated with officials; and (2) that his cooperation resulted in
the conviction, exclusion, or imposition of a civil money penalty
against another individual or individuals. 42 C.F.R. § 1001.

201 (b) (3) (iii).

Petitioner has failed to meet this burden. Even if the evidence
offered by Petitioner concerning his cooperation with prosecuting
authorities proves that he cooperated with them and that they
considered the information which he supplied to be valuable, there is
no evidence that Petitioner's cooperation has led to the conviction or
exclusion of other individuals or the imposition of civil money
penalties against others. It was found in Tito B. Trinidad, M.D., DAB

CR468 (1997) that a petitioner failed to meet this standard although
he had proved that he in fact cooperated with prosecuting authorities.
In that case, the petitioner's cooperation was the "principal reason
that the United States Attorney moved to have Petitioner's sentence of
incarceration set at a level below that which is normally required for
the crimes of which Petitioner was convicted." Id. at 7.° In the
absence of any evidence that others were convicted, excluded or fined
as a result of his cooperation, however, the petitioner failed to
prove the presence of a mitigating factor. Bali S. Reddy, DAB CR394
(1995).

Petitioner in this case has not shown that his alleged cooperation
with Federal or State government officials resulted in others being
convicted or excluded from Medicare or any of the State health care
programs or in the imposition of a civil money penalty. 42 C.F.R. §
1001.201. (b) (3) (iii).

CONCLUSION

I conclude that the I.G. was authorized to exclude Petitioner,
pursuant to section 1128(b) (1) of the Act. I find that the ten-year
exclusion is reasonable and I sustain it.

/s/
Joseph K. Riotto
Administrative Law Judge

*The regulation at issue in Trinidad is 42 C.F.R. § 1001.102(c) (3). The
language in that regulation is virtually the same as the language in 42
C.F.R. § 1001.201(b) (3) (idi), the regulation at issue in this case. I
conclude that the reasoning in Trinidad applies to this case.


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Tn the case of:
Hillcrest Health Facility, Inc., Date: August 6, 1997
Petitioner,

Docket No. C-97-251
Decision No. CR489

-v-

Health Care Financing
Administration.

DECISION DISMISSING REQUEST FOR HEARING

I grant the motion of the Health Care Financing Administration
(HCFA) to dismiss the hearing request of Petitioner, Hillcrest
Health Facility, Inc., from a determination by HCFA dated July
19, 1996 to impose a civil money penalty against Petitioner. I
do so because the hearing request is untimely and because
Petitioner has not shown good cause for its failure to make a
timely hearing request. My granting of HCFA’s motion means that
HCFA may collect from Petitioner a civil money penalty of $1,500
per day, beginning on March 1, 1996, and continuing until August
7, 1996. This decision does not affect Petitioner’s right to a
hearing from determinations by HCFA of February 3, 1997 and March
28, 1997 to impose civil money penalties against Petitioner.

I am separating this case, and my decision, from the cases which
involve Petitioner’s hearing requests from HCFA’s February 3,
1997 and March 28, 1997 determinations. These remaining cases
will be consolidated under a new docket number. I will advise
the parties in the near future of the procedures to be followed
in the remaining case. There is no reason to retain this
decision as an interlocutory order in the remaining case. By my
separating this decision from the remaining case, Petitioner will
be able to appeal this decision now, if it wishes to take an
appeal, rather than awaiting my decision in the remaining case.
2

On March 5, 1997, Petitioner requested hearings from two
determinations by (HCFA) to impose civil money penalties against
Petitioner. These two determinations consist of determinations:

(1) of July 19, 1996, to impose a civil money penalty of
$1,500 per day against Petitioner beginning on March 1,
1996. The total civil money penalty at issue under this
determination is $182,500; and

(2) of February 3, 1997, to impose a civil money penalty
of $450 per day against Petitioner beginning on November
7, 1996. The total civil money penalty at issue under
this determination is $72,900.

On March 28, 1997, HCFA determined to impose a third civil money
penalty against Petitioner, of $250 per day, commencing on
January 30, 1997. HCFA asserts that this civil money penalty
continued to accrue until April 18, 1997. Petitioner has also
requested a hearing from this determination and has requested
that the hearing be consolidated with the hearings concerning the
first two determinations.

HCFA moved to dismiss Petitioner’s request for a hearing from
HCFA’s July 19, 1996 determination. HCFA has not asserted that
the requests for hearings from HCFA’s February 3, 1997 and March
28, 1997 determinations should be dismissed.

HCFA submitted 13 exhibits (HCFA Ex. 1 - 13) to support its
motion. Petitioner has not objected to my considering these
exhibits in deciding HCFA’s motion. In opposing HCFA’s motion,
Petitioner submitted three exhibits (P. Ex. 1 - 3). HCFA has not
objected to my considering their exhibits. I am receiving HCFA
Ex. 1 - 13 as evidence in support of HCFA’s motion, and P. Ex.

1 - 3 in support of Petitioner’s opposition to the motion.

I make findings of fact and conclusions of law (Findings) in
support of my decision. I state each Finding below, as a
separate heading, and I discuss each Finding in detail.

1. In order to be entitled to a hearing from a
determination by HCFA, a party must file its hearing
request no more than 65 days from the date of HCFA’s
mailing to that party of the notice of HCFA’s
determination.

The regulations which govern hearings involving HCFA require that
a party file a hearing request no more than 65 days from the date
of mailing of notice of a determination by HCFA in order to be
entitled to a hearing from that determination. Specifically, a
party that is entitled to a hearing from a determination by HCFA
must make its request within 60 days from its receipt of the
notice of the determination. 42 C.F.R. § 498.40(a) (2). Receipt
3

of a notice of a determination is presumed to occur five days
from the date of mailing of the notice. Id. ; 42 C.F.R. § 498.22.

2. <A party may receive from an administrative law judge
an extension of time for filing a request for a hearing
from a determination by HCPA only where that party
establishes good cause for not filing timely its hearing
request.

If a party does not make a timely hearing request, that party is
not entitled to a hearing. See 42 C.F.R. § 498.40(a)(2). An
administrative law judge may dismiss a request for a hearing in a
case involving HCFA if the party requesting a hearing has not
filed its request timely and has not established good cause for
failing to file its request timely. 42 C.F.R. § 498.70(c).

A party requesting a hearing may receive from an administrative
law judge an extension of time for filing a hearing request if
that party establishes good cause for not filing a hearing
request timely. 42 C.F.R. § 498.40(c)(2). The regulation does
not define the term “good cause.” The term “good cause” has been
held to mean a circumstance or circumstances beyond a party’s
ability to control which prevented a party from making a timely
hearing request. Hospicio San Martin, DAB CR387, at 2, (1995).

3. Petitioner did not file timely its hearing request
from HCPA’s July 19, 1996 determination to impose a
civil money penalty against Petitioner and, therefore,
Petitioner is not entitled to a hearing from that
determination.

On July 19, 1996, HCFA provided Petitioner with notice of the
determination which is at issue here. Petitioner did not request
a hearing from this determination until March 5, 1997, more than
65 days from the date of mailing of this notice. Consequently,
Petitioner is not entitled to a hearing from HCFA’s July 19, 1996
determination. See 42 C.F.R. § 498.40(a) (2).

4. Petitioner did not establish good cause for its
failure to file timely its hearing request from HCFA’s
July 19, 1996 determination to impose a civil money
penalty against Petitioner.

Petitioner did not establish good cause for its failure to file
timely a hearing request from HCFA’s July 19, 1996 notice.
Petitioner has not established the presence of any circumstance
that was beyond Petitioner’s ability to control which prevented
Petitioner from filing timely a hearing request.
4

Petitioner contends that its failure to file timely a hearing
request from HCFA’s July 19, 1996 determination was a consequence
of Petitioner being misled by representatives of the Mississippi
State survey agency into believing that it need not file a
hearing request from the determination. Petitioner asserts that
it was told by agents of the Mississippi State survey agency that
a moratorium was in effect on the imposition of civil money
penalties by HCFA. Petitioner contends that it was led to
believe by these asserted representations that no adverse
consequences would accrue to it from the survey which was the
basis for HCFA’s July 19, 1996 determination. From this,
Petitioner asserts that it concluded that it was unnecessary for
it to request a hearing from HCFA’s July 19, 1996 determination.

Petitioner has not offered sworn statements of any of its
officers or employees to support its fact contentions. With one
exception, Petitioner has not identified the particulars of the
conversations in which the Mississippi State survey agency
representatives allegedly told Petitioner that there was a
moratorium in effect on the imposition of civil money penalties
by HCFA.

In its brief in opposition to HCFA’s motion, Petitioner asserts
that, after an informal dispute resolution meeting conducted by
the Mississippi State survey agency on May 29, 1997, Petitioner
was:

contacted and advised that none of the
deficiencies were going to be changed, but that
it was useless to carry the matter forward
since there was a moratorium on... [civil
money penalties] and any further appeal would
have no effect on outcome.

Petitioner’s brief at 3. It is unclear what communication
Petitioner is referring to, inasmuch as Petitioner has not
identified it more precisely than the assertion in its brief.
Petitioner has not introduced any documents or statements to
prove that the asserted communication occurred.

There is credible evidence which refutes Petitioner’s account of
this purported communication with the Mississippi State survey
agency. On June 6, 1996, the Mississippi State survey agency
wrote to Petitioner to advise Petitioner of the results of an
informal dispute resolution proceeding that occurred on May 31,
1996. HCFA Ex. 8. In that letter, the Mississippi State survey
agency told Petitioner that the deficiency that had been
identified in Petitioner’s operations was warranted. Id. The
letter is silent as to any moratorium on the imposition of civil
money penalties by HCFA. There is no suggestion in the letter
that a civil money penalty would not be imposed against
Petitioner based on the finding of a deficiency. Id.
5

Petitioner asserts that its conclusion that a civil money penalty
would not be imposed against it was reinforced by Petitioner’s
reading of policy statements in the State Operations Manual
(SOM). Petitioner asserts that the SOM makes it clear that HCFA
vests a great deal of authority in State survey agencies to
decide whether to recommend to HCFA to impose remedies against
long-term care facilities such as Petitioner. According to
Petitioner, the statements that Petitioner attributes to
representatives of the Mississippi State survey agency to the
effect that a civil money penalty would not be imposed were given
added weight by Petitioner’s understanding from its reading of
the SOM that HCFA would defer to the recommendation of the
Mississippi State survey agency.

Petitioner contends also that the SOM and associated documents
state that there was a moratorium on the imposition of civil
money penalties which was in effect on July 19, 1996. Petitioner
argues that it was reasonable for Petitioner to conclude that it
was subject to the moratorium, especially in light of the
purported statements that Petitioner attributes to
representatives of the Mississippi State survey agency.

Finally, Petitioner argues that it was misled into not filing a
hearing request from HCFA’s July 19, 1996 determination evidenced
by the fact that it had vigorously pursued its rights up through
informal dispute resolution by the State survey agency.
Petitioner asserts that it would not have abandoned pursuing its
rights had it concluded that it might be subject to liability.

HCFA disputes Petitioner’s contentions concerning the alleged
statements made by representatives of the Mississippi State
survey agency. As evidence that the State survey agency
employees would not have made the statements that Petitioner
alleges them to have made, HCFA points to the fact that, on four
occasions prior to July 19, 1996, the Mississippi State survey
agency acvised Petitioner in writing that it would be
recommenuing to HCFA that HCFA impose a civil money penalty of
$1,500 per day against Petitioner. HCFA Ex. 4 - 6; 10. By
contrast, there is nothing in writing from the Mississippi State
survey agency to Petitioner to suggest that Petitioner would not
have a civil money penalty imposed against it. HCFA argues that
it is not reasonable to conclude that State survey agency
employees would contradict orally the express written notices
that were sent to Petitioner by the Mississippi State survey
agency.

HCFA asserts that, even if for argument’s sake, representatives
of the Mississippi State survey agency had made misleading
statements to Petitioner concerning Petitioner’s potential
liability for a civil money penalty, HCFA provided Petitioner
with written notice, effective July 19, 1996, that HCFA had
determined to impose a civil money penalty against Petitioner of
6

$1,500 per day. HCFA Ex. 11. HCFA avers that the July 19, 1996
notice superseded anything that representatives of the
Mississippi State survey agency might have told Petitioner.
Furthermore, the July 19, 1996 notice explicitly told Petitioner
that it had appeal rights from HCFA’s determination which
Petitioner had to exercise within 60 days of its receipt of the
notice. HCFA Ex. 11 at 2 - 3.

I am not satisfied from the evidence presented by Petitioner that
representatives of the Mississippi State survey agency ever told
Petitioner that a civil money penalty would not be imposed, or
suggested to Petitioner that it could safely ignore HCFA’s July,
19, 1996 notice of its determination to impose a civil money
penalty. Petitioner has offered no credible evidence to
substantiate its assertions of statements by representatives of
the Mississippi State survey agency. The closest Petitioner has
come to identifying a communication that supports its contentions
is to assert that the Mississippi State survey agency told
Petitioner, in conjunction with its notice to Petitioner of the
results of an informal dispute resolution, that there was no
point in Petitioner pursuing its hearing rights because there was
a moratorium in effect on the imposition of civil money
penalties. But, contrary to Petitioner’s assertion, the
documentation of a communication between the Mississippi State
survey agency and Petitioner concerning the results of informal
dispute resolution contains nothing to suggest that a civil money
penalty would not be imposed. HCFA Ex. 8.

Furthermore, Petitioner’s assertions of what it purportedly was
told by representatives of the Mississippi State survey agency
are belied by the notices that were sent to Petitioner by the
Mississippi State survey agency. HCFA Ex. 4 - 6; 10. These
notices say nothing about a moratorium on the imposition of civil
money penalties. To the contrary, they advise Petitioner
expressly that the Mississippi State survey agency would
recommend that HCFA impose a civil money penalty against
Petitioner. Id.

I do not find that Petitioner had good cause for not requesting a
hearing timely from HCFA’s July 19, 1996 determination to impose
a civil money penalty against Petitioner even assuming that
representatives of the Mississippi State survey agency told
Petitioner that a civil money penalty would not be imposed
against it. Petitioner had no reasonable basis to rely on oral
representations in disregard of what it received in writing from
the Mississippi State survey agency. Whatever Petitioner might
have been told orally by representatives of the Mississippi State
survey agency, it was given specific written notice by that
agency on four separate occasions that the agency intended to
recommend that HCFA impose a civil money penalty against
Petitioner. HCFA Ex. 4 - 6; 10. At the very least, the clear
discrepancy between what Petitioner avers it was told orally and
7

what it was told in writing put Petitioner on notice that it
faced potential liability.

Furthermore, anything that the Mississippi State survey agency
might have communicated to Petitioner plainly was superseded by
HCFA’s July 19, 1996 notice to Petitioner. That notice
unequivocally told Petitioner that HCFA had determined to impose
a civil money penalty of $1,500 per day against Petitioner. And,
the July 19, 1996 notice stated in clear and unmistakable terms
that Petitioner was obligated to request a hearing within 60 days
from Petitioner’s receipt of the notice. Thus, even if
Petitioner was misled, prior to July 19, 1996, into believing
that no civil money penalty would be imposed by HCFA, that
misunderstanding would have been resolved by HCFA’s July 19, 1996
notice to Petitioner.

I find nothing in the excerpts from the SOM offered by Petitioner
to support Petitioner’s assertions that it was misled into not
requesting a hearing. The language of the SOM cited to by
Petitioner would not have given Petitioner a reasonable basis to
conclude that a civil money penalty would not be imposed against
it, even assuming that the Mississippi State survey agency
representatives made the oral representations that Petitioner
attributes to them.

First, the SOM does no more than restate a process that is stated
in regulations whereby a State survey agency makes a
recommendation to HCFA concerning whether to impose a civil money
penalty against a long term care facility. See 42 C.F.R. §
488.400 _" seq. The SOM states simply that HCFA will act ona
recommendation by a State survey agency and will defer to that
recommendation except in the most extraordinary circumstances.
What happened in this case is consistent with both the SOM and
the regulations. The Mississippi State survey agency made a
recommendation to HCFA that HCFA impose a civil money penalty
against Petitioner, and HCFA accepted that recommendation. All
of the notices that are in evidence plainly notify Petitioner of
this process. HCFA Ex. 4 - 6; 10; 11.

Second, the SOM and associated documents neither state nor
suggest that civil money penalties would not be imposed against
long-term care facilities, such as Petitioner, during the period
which included July 19, 1996, the date of HCFA’s notice to
Petitioner of HCFA’s determination to impose a civil money
penalty against Petitioner. Petitioner cites to communications
between HCFA and State survey agencies, dated January 7, 1997, in
which HCFA advised State survey agencies that a moratorium on the
imposition of some civil money penalties would be lifted. P. Ex.
3. In these documents, HCFA recites that, prior to January,
1997, civil money penalties were not processed for long-term care
facilities who manifested deficiencies at certain, specified,
lower levels of severity. P. Ex. 3 at 5. These documents do not
8

state that a moratorium ever was in effect on the imposition of
all civil money penalties.

Assuming that Petitioner was aware of a moratorium on the
imposition of some civil money penalties by HCFA, the most that
Petitioner could have concluded, reasonably, was that HCFA might
exercise discretion in some cases not to impose civil money
penalties for some lower level deficiencies. When Petitioner
received HCFA’s July 19, 1996 notice that HCFA had determined to
impose a civil money penalty against Petitioner, the only
reasonable conclusion that Petitioner could have reached is that
HCFA had determined that the deficiencies that were manifested by
Petitioner were not of such a low level as to fall within
whatever moratorium HCFA might have imposed.

I am unpersuaded by Petitioner’s argument that it would not have
abandoned its pursuit of its rights but for its being misled by
representatives of the Mississippi State survey agency. It is
evident that Petitioner committed a judgment error in not
requesting a hearing timely from HCFA’s July 19, 1996
determination. But, the issue here is not whether Petitioner
erred, or even whether it misunderstood the process. What is at
issue is whether any communications to Petitioner, either from
the State survey agency or from HCFA, were so deficient or
misleading as to cause Petitioner not to file a hearing request
timely. There is no evidence of communications that would have
so misled Petitioner.

/s/

Steven T. Kessel
Administrative Law Judge