Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Cases of:

Nazareno Medical Hospice DATE: August 18, 1995

Fajardo,
Caguas,
cayey,
Petitioners, Docket Nos. C-94-383
C-94-384
- veo C-94-386

Decision No. CR386
Health Care Financing
Administration.

DECISION

These are my decisions in the above three captioned
cases. I am issuing the decisions as a single document.!
I do so for the following reasons. The cases involve
common issues of law. Each Petitioner provides hospice
care to Medicare beneficiaries. The Petitioner in each
of these cases is owned by the same corporation and each
Petitioner is represented by the same counsel. The cases
involve similar, but not identical, facts.

Although = have consolidated my decisions in a single
document, I have not consolidated the cases. My decision
in each case is separate. To the extent that a party
wishes to appeal any of these decisions, that party
should specifically appeal that decision.

In each of these cases, the Health Care Financing
Administration (HCFA) terminated the Petitioner's
participation in Medicare, based on its determination
that the Petitioner failed to comply with conditions of
participation in the Medicare program. In each case, I
conclude that HCFA failed to prove, by a preponderance of

' There is a fourth case which I heard along with
the three cases decided herein. That is the case of
Nazareno Medical Hospice Carolina, Docket No. C-94-385.

I am issuing a separate ruling in that case.

2

the evidence, that the Petitioner did not comply with
conditions of participation. Therefore, in each case, I
issue a decision that HCFA did not prove a basis for
terminating the Petitioner's participation in Medicare.

Each Petitioner requested a hearing and the cases were
assigned to me for hearings and decisions. I conducted
hearings in San Juan, Puerto Rico, on March 21 - 23,
1995.’ After HCFA had rested in each of the cases, the
Petitioner requested leave to move for a decision in its
favor on the grounds that HCFA had failed to meet its
burden of persuasion.’ HCFA did not object to deferring
the Petitioners' presentation of evidence so that the
Petitioners could submit their proposed motions. I
deferred the Petitioners' presentation of evidence so
that they could submit their motions.

It is not customary for me to issue a decision in a case
without first having heard all of the evidence offered by
each party to that case. Here, however, I conclude that
the evidence adduced by HCFA did not establish a basis
for HCFA's determinations to terminate the participation
in Medicare of these Petitioners. No legitimate purpose
would be served here in requiring the Petitioners to
offer evidence, inasmuch as HCFA failed to meet its
burden of coming forward with evidence and establishing a
prima facie case against each Petitioner.

I have organized these decisions in the following manner.
First, I provide a consolidated background for the three
cases. I then identify issues of law which are present
in all of the cases and I decide those issues of law as
common issues. Then, I identify the issues which are

? The parties agreed to present evidence ina
consolidated form, rather than in separate hearings for
each Petitioner. In part, this process was the
consequence of the fact that State agency surveyors who
testified on behalf of HCFA often participated in the
survey of more than one of the Petitioners. It would not
have been efficient to recall these witnesses to testify
separately as to each Petitioner. However, I made it a
point to have each witness identify the Petitioner about
which the witness was testifying. See, e.g., Tr. at 104.

+ The consolidated hearings included a hearing as
to Petitioner Carolina in the case of Nazareno Medical
Hospice Carolina, Docket No. C-94-385. Petitioner
Carolina moved also for a decision based on the evidence
adduced by HCFA. As I note above, I am issuing a
separate ruling as to Petitioner Carolina.
3

unique to each case and I make findings of fact and
conclusions of law which pertain only to that specific
case.

I. Bac ound

The facts and law which I recite as background to these
cases are not in dispute. The Petitioners in these cases
are the following entities: Docket No. C-94-383,
Nazareno Medical Hospice Fajardo (Petitioner Fajardo) ;
Docket No. C-94-384, Nazareno Medical Hospice Caguas,
(Petitioner Caguas); Docket No. C-94-386, Nazareno
Medical Hospice Cayey (Petitioner Cayey). Each of the
Petitioners is owned by Nazareno Medical Hospice Care,
Inc., which is not a party to any of these cases.

In each of these cases, the Petitioner is a hospice which
did business in a community in Puerto Rico. A hospice is
described under section 1861(dd) (1) of the Social
Security Act (Act) as a Medicare provider which offers
care and services to a terminally ill beneficiary
pursuant to a written plan of care established and
periodically reviewed by the beneficiary's attending
physician, the hospice's medical director, and its
interdisciplinary group. Under the Medicare program, an
individual is considered to be "terminally ill" if that
individual has a medical prognosis that he or she is
expected to live six months or less. Act, section
1861(dd) (3) (A).

The central purpose of a hospice is to provide dying
beneficiaries with palliative, rather than curative,
care. Hospice care enables the beneficiary to select an
alternative to traditional care which, hopefully,
alleviates the beneficiary's symptoms and provides peace
of mind to the beneficiary and his or her family.

Under Medicare, a hospice provides its care and services
in the beneficiary's home, on an outpatient basis, and in
some instances, on a short-term inpatient basis. Act,
section 1861(dd) (2) (A) (ii). Hospice services include:
nursing care, physical and other therapy, medical social
services, home health aide services, medical supplies,
physicians' services, short-term inpatient care, and
counseling. JIda., section 1861(dd)(1)(A) - (H). In
addition, a hospice provides bereavement counseling for
the immediate family of a terminally ill beneficiary.
Id., section 1861(dd) (2) (A) (i).

The Secretary of the United States Department of Health
and Human Services (Secretary) has published regulations
which govern the manner in which hospices participate in
4

the Medicare program. These are contained in 42 C.F.R.
Part 418. These regulations establish the basic
conditions of participation for a hospice. 42 C.F.R. §§
418.50 - 418.100. They define the circumstances under
which a beneficiary may be eligible to receive hospice
care. 42 C.F.R. § 418.20. The regulations define the
circumstances under which a hospice may provide care to
eligible beneficiaries. 42 C.F.R. §§ 418.21 - 418.30.
They identify the services that a hospice must provide to
beneficiaries under its care. 42 C.F.R. §§ 418.200 ~
418.204.

The Act and regulations governing the Medicare program
establish the procedure whereby HCFA, acting as the
Secretary's delegate, assures that providers comply with
participation requirements. Pursuant to section 1864(a)
of the Act, the Secretary has entered into agreements
with State survey agencies to survey providers for
compliance with Medicare participation requirements and
to report their findings to HCFA. Act, section 1864(a);
42 C.F.R. §§ 488.10 - 488.11.

Each of the Petitioners was surveyed in April 1994 by
surveyors from the Puerto Rico Department of Health, the
State survey agency for Puerto Rico. Petitioners Fajardo
and Caguas were surveyed on April 19, 1994, and
Petitioner Cayey was surveyed on April 26, 1994. The
surveyors concluded that each of the Petitioners was not
in compliance with conditions of participation in
Medicare. C-94-383, HCFA Ex. 15; C-94-384, HCFA Ex. 15;
C-94-386, HCFA Ex. 15.*

4 In each of these cases, I received into

evidence exhibits that are unique to that case. Also, I
received into evidence a number of exhibits that are
common to all of the cases and one exhibit that is common
to two of the cases. An exhibit which is in evidence
only in a particular case is marked with the docket
number of that case and with the unique exhibit number
for that exhibit. Thus, C-94-383, HCFA Ex. 15 is an
exhibit which is in evidence only in Docket No. C-94-383
(Petitioner Fajardo) and is not in evidence in any other
case.

An exhibit which is in evidence in all of the cases is
marked with the docket numbers of all of the cases as
well as the exhibit number. The exhibits which are in
evidence as common exhibits in the three cases which I
have decided here are in evidence also in a fourth case,
Nazareno Medical Hospice Carolina, Docket No. C-94~385,
which I have not decided here. In that fourth case, I

5

Based on these survey results, HCFA advised each
Petitioner that it intended to terminate that
Petitioner's participation in Medicare. However, HCFA
afforded each Petitioner the opportunity to submit to
HCFA a plan of correction to address the deficiencies
that the State agency had identified in April 1994. Each
Petitioner submitted a plan of correction to HCFA. On
June 23, 1994, HCFA accepted revised plans of correction
from Petitioners Fajardo, Caguas, and Cayey. C-94-383,
HCFA Ex. 19; C-94~384, HCFA Ex. 18; C-94~-386, HCFA Ex.
20.

At HCFA's direction, State survey agency surveyors
resurveyed each of the Petitioners. The Petitioners were
resurveyed on the following dates: July 6, 1994,
Petitioner Fajardo; July 8, 1994, Petitioner Caguas; and
July 20, 1994, Petitioner Cayey. The surveyors found
that each of the Petitioners continued to be deficient in
complying with conditions of participation in Medicare.
C-94-383, HCFA Ex. 21; C-94-384, HCFA Ex. 19; C-94~-386,
HCFA Ex. 21. Based on these findings, HCFA terminated
the participation in Medicare of each of the Petitioners.

The Petitioners and HCFA simultaneously filed briefs and
reply briefs. I base my decisions in these cases on the
law, the evidence which was received at the hearings, and
the parties' arguments.

II. Common legal issues and conclusions of law

The parties have raised legal issues which are common to
all of these cases. These are:

1. Which party has the burdens of coming forward
with evidence and proof?

have issued a ruling separately in which I conclude that
additional proceedings may be necessary. The exhibits
which I admitted as common exhibits in all of the cases
are C-94~-383 - C-94-386, HCFA Exs. 7 - 9, 12 ~- 14, and
62.

The exhibit which I received as a common exhibit in two
of the cases only is C-94-383 - C-94-386, HCFA Ex. 4.
This exhibit was admitted in the cases of Petitioners
Fajardo and Caguas.

Finally, I rejected certain exhibits which HCFA offered
as common exhibits in all of the cases. These exhibits
are C~94-383 - C-94-386, HCFA Exs. 1 - 2 and 10 ~ 11.
6

2. What effect does a plan of correction that has
been accepted by HCFA have on a provider's
obligation to comply with conditions of
participation in Medicare?

I reach the following conclusions as to these issues of

law. After each conclusion, I cite to the page or pages
of these decisions at which I discuss my conclusions in

detail.

1. HCFA has the burdens of coming forward with
evidence and proving, by a preponderance of the
evidence, that its determination to terminate a
provider's participation in Medicare is
justified (I refer to these burdens
collectively as the burden of persuasion).
Pages 6 ~ 17.

2. The terms of a plan of correction that has been
accepted by HCFA define the provider's
obligation to comply with those participation
requirements that are addressed in the plan.
Where HCFA determines to terminate a provider's
participation in Medicare after it has accepted
a plan of correction from that provider, HCFA
must prove, by a preponderance of the evidence,
that the provider is not complying with the
terms of the plan of correction, to the extent
that those terms address conditions of
participation with which HCFA contends the
provider is noncompliant. Pages 19 ~ 23.

A. urden o ersuasio
1. Allocation to HCFA of the burden of
persuasion

HCFA has the burdens of coming forward with evidence and
proving, by the preponderance of the evidence, that its
determination to terminate each Petitioner's
participation in Medicare is justified. This conclusion
is identical to that which I made in Hospicio en el Hogar
de Utuado, DAB CR371, at 6 ~ 10 (1995); Hospicio en el
Hogar de Lajas, DAB CR366, at 6 - 8 (1995); and in
Arecibo Medical Hospice Care, DAB CR363, at 8 - 13
(1995). Administrative Law Judge Leahy held the same in

Guaynabo Hospice Care, Inc., DAB CR374, at 11 - 14
(1995).

Neither the Act nor regulations allocate the burden of
persuasion to a specific party in a case involving
termination of a provider's participation in Medicare.
7

See Act, sections 205(b), 1866(b) (2) (A), (h) (1); 42
C.F.R. Part 498. However, the Secretary has given
administrative law judges broad authority to manage the
presentation and receipt of evidence in hearings
concerning whether terminations of participation are
justified. 42 C.F.R. § 498.60(b)(3). From this, TI
conclude, as I did in Utuado, Lajas, and Arecibo, that
administrative law judges who preside over hearings
concerning the propriety of terminations of participation
in Medicare have discretion to allocate the burden of
persuasion consistent with the requirements of due
process.

The criteria which I use to allocate the burden of
persuasion are fairness and efficiency. In a case
involving termination by HCFA of a provider's
participation in Medicare, it is both consistent with the
requirements of due process and efficient to allocate to
HCFA the burden of persuasion.’ As Judge Leahy observed
in Guaynabo, "the correctness of HCFA's findings and
determination are at the center of each case that is
heard pursuant to section 1866(h)(1) of the Act."
Guaynabo at 12. In such a case, HCFA will have obtained
facts -- usually as a result of a survey of the provider
-- which HCFA believes justify the determination that the
provider is not complying with conditions of
participation. HCFA is thus in the best position to
identify the facts which support its determination and to
prove those facts.

It would be neither fair nor efficient to allocate to the
provider the burden of persuasion in a case involving
HCFA's determination to terminate that provider's
participation in Medicare. The provider would be placed
in the position of having to prove a negative proposition
~~ that it did not fail to comply with conditions of
participation -- without necessarily knowing what or how
much evidence might be needed to establish that

> IT am not suggesting here that the burden of
persuasion should be allocated to HCFA in every case
involving a dispute between HCFA and a provider or an
applicant for participation in Medicare. There are
circumstances where it may be appropriate to allocate the
burden of persuasion to a party other than HCFA. For
example, in a case where the issue involves the date when
deficiencies have been corrected by an applicant for
participation (for example, in a case where the correct
date of certification is at issue), it may be appropriate
to allocate to the applicant the burden of proving the
date that it corrected the deficiencies.
8

proposition. Allocating the burden of persuasion to the
provider would invite a massive and unfocused submission
of evidence from the provider. This would be an
inappropriate allocation of the burden of persuasion in
light of the fact that HCFA ought to be in possession of
facts sufficient to justify its determination to
terminate a provider's participation in Medicare.

HCFA has not claimed in any of these cases that imposing
the burden of persuasion on it would be unfair or
unreasonable. Notwithstanding, HCFA asserts that its
determination to terminate a provider's participation in
Medicare must be presumed to be correct unless the
provider proves otherwise.°

HCFA asserts that there is a presumption of correctness
attached to its determination that a provider is not
complying with conditions of participation. It asserts,
in effect, that the administrative hearing in a case
involving termination of a provider's participation in
Medicare is essentially an appellate review of HCFA's
determination. In Utuado, HCFA argued that, in order to
prevail, a provider must prove HCFA's determination to be
incorrect with "clear and convincing evidence." Utuado
at 7. HCFA argued also in Utuado and Guaynabo that its
findings must be sustained if they are supported by
"substantial evidence." Utuado at 7; Guaynabo at 12.’

HCFA argues that it would not be unfair or inefficient to
impose the burden of persuasion on the Petitioners. HCFA
asserts that the Petitioners ought to know what evidence
to produce on their behalf, because they are on notice of
HCFA's specific allegations of failure to comply with
conditions of participation. According to HCFA, the
specifics of its allegations are set out in the
statements of deficiencies which were produced by State
survey agency surveyors and provided to the Petitioners,

* HCFA does not object to coming forward first,
in an administrative hearing, with evidence supporting
its determination. There is an absence of logic to
HCFA's position. If, in fact, HCFA's determination is
presumed to be correct, then HCFA would have no burden of
coming forward with evidence to support its
determination,

7 HCFA did not reiterate explicitly in these
cases the arguments it made in Utuado and Guaynabo, aside
from asserting that its determinations are presumptively
correct. However, HCFA has not retreated from these
arguments.
9

recording the results of surveys. See, e.g., in the case
of Petitioner Fajardo, C-94-383, HCFA Ex. 21.

I do not find that the statements of deficiencies
describe HCFA's findings with such precision that a
Petitioner would know what evidence to offer to rebut
those findings. Indeed, even HCFA is not confident that
the statements of deficiencies describe completely its
cases against Petitioners, as is demonstrated by HCFA's
presentation of additional evidence in these cases.

The statements of deficiencies are not sufficiently
precise to allow a Petitioner to rebut HCFA's allegations
of noncompliance completely. They do not enunciate,
except in sketchy terms, the evidence on which HCFA
relies to justify its determinations. For example, in
the case of Petitioner Fajardo, HCFA made a finding based
on the July 6, 1994 resurvey that the condition for
participation stated in 42 C.F.R. § 418.54 (medical
director) had not been met. The rationale for this
finding is that:

Based on record review of ten active and five
inactive records done on July 6, 1994 and
review of minutes of discussion by the
Interdisciplinary Group, it was determined that
the Medical Director is not carrying out full
responsibility for the coordination of hospice
care.

C-94-383, HCFA Ex. 21 at 3.

This rationale goes on to state that the findings
"include but are not limited to" certain specified
examples. Id. The examples listed thereafter include
examples from some, but not all, of the "ten active and
five inactive records" that the surveyors reviewed. The
examples do refer to deficiencies in specified patient
records. However, they do not identify the documents in
those records on which the surveyors relied as evidence
for their findings.

It is not possible to ascertain from the statement of
deficiencies resulting from the resurvey of Petitioner
Fajardo which of Petitioner Fajardo's records, aside from
those few that are specifically cited as examples, form
the basis for the surveyors' findings. The statement of
deficiencies does not contain a list of the "ten active
and five inactive records" reviewed by the surveyors, nor
is there evidence in the case that HCFA provided
Petitioner Fajardo with that list. There is no evidence
that HCFA provided Petitioner Fajardo with a list of the
10

specific documents in any patient records which formed
the basis for the surveyors' findings. Nor do the
findings specify which minutes of meetings of Petitioner
Fajardo's interdisciplinary group the surveyors relied on
for their findings.

In order for Petitioner Fajardo to rebut HCFA's findings,
assuming the findings are presumed to be valid,
Petitioner Fajardo would have to guess which of its
active and inactive records, other than those cited in
the statement of deficiencies, were the "ten active and
five inactive records" to which the surveyors were
alluding. It would have to guess also which specific
documents formed the basis for the findings cited more
specifically in the statement of deficiencies.
Petitioner Fajardo would have to guess which of its
interdisciplinary group's minutes were allegedly
deficient.

Also, Petitioner Fajardo would find it difficult to gauge
the significance of the alleged deficiencies from the
statement of deficiencies sent to it by HCFA. As I
discuss at Part II.A.2. of this decision, in order to
sustain a determination to terminate a provider's
participation in Medicare, HCFA must prove not only the
presence of deficiencies, but must prove also that the
deficiencies are substantial.

As HCFA concedes, there is nothing in either the Act or
the regulations which supports HCFA's assertions that its
determinations are presumptively correct and that
administrative hearings are only appellate reviews of
HCFA's determinations. HCFA bases its assertions on what
it argues are the implications of the regulations and on
its interpretation of principles of administrative law.
There are three elements to HCFA's argument:

O HCFA observes that, under 42 C.F.R. §§ 498.25 and
498.40, an administrative determination by HCFA
becomes final unless an affected provider requests a
hearing from that determination. From this, HCFA
argues that logic dictates that the burden of
persuasion should fall on the provider who requests
a hearing, inasmuch as that provider is seeking to
overturn a decision by HCFA that would be final.

© HCFA avers that an established principle of
administrative law is that an agency's action is
presumptively correct. It characterizes its
determinations in these cases as agency actions and
argues, therefore, that they are presumptively
correct.
11

© HCFA asserts that, ordinarily, in an
administrative hearing, the burden of persuasion
falls on the applicant for relief, benefits, or a
privilege. It characterizes Petitioners as
applicants, and argues, therefore, that the burden
of persuasion falls on them.

I am not persuaded by HCFA's analysis. HCFA
mischaracterizes the purpose of the administrative
hearing guaranteed to providers by Congress. Congress
did not afford a provider whose participation in Medicare
has been terminated by HCFA only an appellate review of
HCFA's determination. Congress directed that such a
provider be afforded a de novo hearing at which the
evidence is reviewed independently by the Secretary or
her delegate, an administrative law judge. Furthermore,
HCFA misconstrues the basic principles of administrative
law on which it has relied in support of its argument.

A provider whose participation in Medicare has been
terminated by HCFA pursuant to section 1866(b) of the Act
is afforded a right to a hearing under section 205(b) of
the Act. Act, section 1866(h)(1). Section 205(b) has
been interpreted uniformly and often as conferring a
right to a de novo hearing. Robert M. Matesic, R.Ph.,
DAB 1327 (1992); Bernardo G. Bilang, M.D., DAB 1295
(1992). In a de novo hearing, the administrative law
judge makes an independent decision, based on the weight
of the evidence admitted at the hearing. Neither party's
actions are entitled to a presumption of correctness.
Section 205(b) provides specifically that, in any case
brought pursuant to it, the decision shall be based "on
evidence adduced at the hearing." This section neither
states nor suggests that, in such a hearing, an appellate
standard of review shall apply, nor that the Secretary's
determination is entitled to a presumption of
correctness.

Regulations which provide that a determination by HCFA
becomes final unless a hearing is requested neither state
nor suggest that the determination is presumptively valida
if challenged. There is no general rule to that effect
in administrative law. In fact, the general rule is to
the contrary. Both in civil money penalty cases brought
under section 1128A of the Act and 42 C.F.R. Part 1003,
and in exclusion cases brought under section 1128 of the
Act and 42 C.F.R. Part 1001, the administrative
determination is final if a hearing is not requested by
the affected individual or entity. However, if a hearing
is requested, the burden falls on the Secretary or her
delegate (in such cases, the Inspector General) to prove
12

by a preponderance of the evidence that the determination
is justified.

HCFA misinterprets the doctrine of presumptive validity
which, in law, attaches to the final actions of
administrative agencies. See Maryland-National Capital
Park & Planning Comm'n _v. Lynn, 514 F.2d 829, 834 (D.C.
Cir. 1975); Mazaleski v. Treusdell, 562 F.2d 701, 717
n.38 (D.C. Cir. 1975). These decisions, cited by HCFA as
support for its argument that its determinations are
presumptively valid, do not hold that an agency
determination must be presumed to be valid when it is
reviewed at an internal administrative hearing. Rather,
they hold that the final determination of an
administrative agency is presumed to be valid if
challenged in a suit in a federal court. These decisions
confirm that, normally, federal courts conduct an
appellate review of agency determinations if those
determinations are challenged.

Consistent with this concept, section 205(g) of the Act
adopts a substantial evidence standard of review for any
challenge brought in federal district court to a hearing
decision made under section 205(b) of the Act. Under
section 205(g), the "final" decision which is entitled to
a presumption of validity is the administrative law judge
decision, or if that decision is reviewed by the
Departmental Appeals Board, the decision of the
Departmental Appeals Board.

HCFA asserts unrealistically that the Petitioners are
merely applicants for relief, benefits, or a privilege.
Guaynabo at 11; Utuado at 9; Lajas at 7 - 8; Arecibo at
11 - 13. In a case involving a determination to
terminate a provider's participation in Medicare, the
provider is not an applicant for a privilege, but, in
fact, has already received a privilege from HCFA, which
HCFA has determined to extinguish. That provider's
ongoing business activities -- and, in some cases, its
very existence -- will be ended as a consequence of
HCFA's termination of the provider's participation in
Medicare.

Thus, it is incorrect to characterize the Petitioners as
applicants. Providers who are participants in Medicare,
including the Petitioners, have a contractual
relationship with HCFA. The terms of these contracts are
stated in the Act, in applicable regulations, and in the
participation agreements executed by providers. And, as
I describe in Part TI.B. of these decisions, these terms
are stated also in the plans of correction that HCFA
accepted. Judge Leahy found in Guaynabo that that case
13

arose only because HCFA determined that the petitioner
"breached a condition under the contract and HCFA
initiated contract termination proceedings." Guaynabo at
13. I reach the same conclusion in these cases.

In Arecibo and Lajas, I discussed the authorities on
which HCFA relies to support its characterization of
Petitioners as "applicants." Arecibo at 10 - 13; Lajas
at 8. It is unnecessary for me to discuss these
authorities again, except to say that HCFA has offered no
new arguments here which would support HCFA's assertions
that these authorities are precedent for deeming the
Petitioners to be "applicants." I note however, that my
decision in SRA, Inc., d/b/a St. Mary Parish Dialysis
Center, DAB CR341 (1994), on which HCFA appears to rely
as authority for its argument that Petitioners have the
burden of persuasion, and which HCFA did not cite as
authority in Arecibo and Lajas, does not support HCFA's
argument. The Petitioner in SRA was an applicant for
certification as a Medicare supplier. The case did not
involve a determination by HCFA to terminate a contract
with a provider or a supplier.

HCFA argues also that the Petitioners in this case occupy
the same status in the administrative proceeding as do
beneficiaries in Social Security disability cases. HCFA
contends that beneficiaries in Social Security disability
cases are regarded as applicants, even after they are
found to be entitled to benefits, and are under a
continuing burden to prove their entitlement. This
argument misstates the law. The decision cited by HCFA
in its briefs, Mathews v. Eldridge, 424 U.S. 319 (1976),
no longer describes the operative law governing a
beneficiary's continuing entitlement to disability
benefits. Indeed, and as HCFA concedes, the current law
places the burden of proof on the Secretary to show that
a beneficiary's medical condition has improved, as a
prerequisite to terminating that beneficiary's
entitlement to disability benefits. 20 C.F.R. §
404.1594(b) (2) - (5).

In sum, I conclude that I have the discretion to allocate
the burden of persuasion in these cases. Considerations
of fairness and efficiency direct me to allocate that
burden to HCFA. I am not persuaded by HCFA's arguments
that I am required to allocate this burden to
Petitioners.
14

2. The elements of HCFA's burden of persuasion

HCFA's burden of persuasion in these cases consists of
three elements.* In order to establish a basis for
terminating a provider's participation in Medicare, HCFA
must prove the following:

O The existence of the participation requirements
which a provider has allegedly not complied with.

As I discuss below at Part II.B. of these decisions,
these requirements may necessarily include the terms
of a corrective action plan.

© The facts which establish that the provider
failed to comply with a Medicare participation
requirement.

© That a provider's failure to comply with a
Medicare participation requirement is so substantial
as to justify terminating that provider's
participation in Medicare.

Participation requirements are stated both in the Act and
in implementing regulations and may be stated also ina
corrective action plan entered into between a provider
and HCFA. Many of these requirements are stated plainly
and unambiguously. If HCFA is relying on the plain
language of the Act, a regulation, or an agreement with a
provider, as establishing a requirement for
participation, HCFA need only identify that requirement
in order to satisfy the first element of its burden of
persuasion. For example, in Arecibo and Lajas, HCFA
asserted that the Petitioners failed to comply with the
plain language of 42 C.F.R. § 481.58(b), a section which
governs the way in which hospices are required to review
patient plans of care and to document their reviews.
Arecibo at 19 - 22; Lajas at 17 - 18.

HCFA assumes additional burdens when it relies on an
interpretation of law that is not apparent from the plain
meaning of that law. In that event, HCFA must prove that
its interpretation is reasonable and that the provider
had notice of the interpretation.

In both Arecibo and Lajas, I held that the Secretary
delegated authority to HCFA to interpret reasonably the
criteria which governed the participation of providers.
Arecibo at 22; Lajas at 12 - 13. There may be

* My analysis here is substantially the same as

in Utuado. Utuado at 10 - 14.
15

ambiguities in some regulations which are susceptible to
reasonable interpretation by HCFA.’ HCFA does not have
the authority to use the vehicle of interpretation to
create participation requirements which exceed the
specific requirements of the Act or regulations.” Nor
does HCFA have the authority to interpret ambiguous
language unreasonably.

Furthermore, HCFA has the duty to communicate its
interpretations to providers as a prerequisite for
holding providers accountable to such interpretations. A
provider is not required to divine HCFA's intent from
language that is unclear. In Utuado, Lajas, and Arecibo,
HCFA argued that providers were required to comply with
HCFA's interpretations of the Act or regulations even if
HCFA did not communicate its interpretations to
providers. I found that position to be unreasonable in
those cases, and reaffirm my conclusion here. Utuado at
11 - 12; Lajas at 13; Arecibo at 25.

HCFA meets the second element of its burden of
persuasion, the burden of proving that there exist facts
which justify its determination, by proving the existence
of those facts by a simple preponderance of the evidence.
Evidence proving those facts may consist of the testimony
by State survey agency surveyors concerning their fact
findings. It may also consist of supporting materials,
such as patient records.

HCFA meets the third element of its burden of persuasion,
the burden of proving that a failure to comply with a
participation requirement is substantial, by proving that
the noncompliance substantially limits the provider's

° As an appellate panel of the Departmental
Appeals Board noted in Center Clinical Laboratory, DAB
1526 at 11, n.4 (1995), where a regulation is susceptible
to more than one reasonable interpretation, the
interpretation advocated by the agency is entitled to
deference.

“For example, in Utuado, I held that HCFA could
not use its authority to interpret regulations to read
into the regulations a requirement that was not specified
in the regulations. In Utuado, HCFA argued that the
regulations subsumed a requirement that a hospice provide
laboratory services to its patients. I concluded that
there was no such requirement in the regulations and that
HCFA could not use the vehicle of "interpretation" to
create such a requirement, where the requirement did not
exist. Utuado at 17 - 21.
16

capacity to render adequate care or that it adversely
affects the health and safety of patients. Utuado at 12;
42 C.F.R. § 488.24(a).

Termination of a provider's participation in Medicare is
a remedy and not a punishment. Thus, the paramount
question which must be resolved in deciding whether
termination is reasonable is whether a provider's failure
to comply with participation requirements predicts a
likelihood that the provider will not be able to deliver
care in the future consistent with the requirements of
the Act and regulations. However, as I held in Utuado,
the Act and regulations make it plain that an inference
may be drawn from a provider's substantial failure to
comply with participation requirements that the provider
is likely to remain deficient in the future. Utuado at
13.

Some of the criteria for participation are so fundamental
to the requirement that a provider render adequate care,
or so necessary to protect the health and safety of
patients, that a failure to comply with any of those
criteria is on its face a substantial deficiency
justifying termination of participation. Utuado at 13.
That is evident where the deficiency is a failure to meet
a broadly stated condition of participation. It may be
evident also where the deficiency constitutes a
systematic or wholesale failure to comply with a
participation requirement.

There may also be circumstances where a deficiency is
not, on its face, substantial. That is particularly true
where the evidence of the deficiency addresses a standard
of participation, and not a broad condition of
participation.

The regulations establishing participation criteria for
hospices often state broad conditions of participation
and state additionally components of those conditions as
standards. For example, 42 C.F.R. § 418.68 requires a
hospice, as a condition of participation, to designate an
interdisciplinary group composed of individuals who
provide or supervise the services provided by the
hospice. It states also as standards specific
requirements for the performance of the interdisciplinary
group. 42 C.F.R. § 418.68(a) - (d).

Failure by a hospice to establish an interdisciplinary
group would, on its face, be a failure to comply with the
condition of participation and would be a substantial
deficiency. Failure by a hospice to comply with one of
the standards governing its interdisciplinary group might
17

be so egregious as to constitute a failure of the overall
condition of participation. However, that would depend
on the evidence. Isolated examples of failure to comply
with one of the standards might not be persuasive
evidence of failure to comply with the overall condition.
Evidence of systematic failure to comply with one of the
standards might be persuasive evidence of failure to
comply with the overall condition.

Therefore, in some cases, HCFA may have to prove not only
the presence of a deficiency, but may have to prove also
that the deficiency is substantial. In proving impact,
expert opinion as to the likely impact of the deficiency
on the capacity of the provider to provide care may be
important.

3. Testimony offered by State survey agency
surveyors

In these three cases, as it has in previous cases, HCFA
urges that I accord a great deal of importance to the
testimony offered by State survey agency surveyors. For
example, in the case of Petitioner Caguas, HCFA argues
that the opinions of State survey agency surveyors are
expert opinions which should be given "immense weight."
HCFA posthearing brief (Caguas) at 17. Indeed, HCFA
seems to be saying in the case of Petitioner Caguas that
an unrebuttable presumption of validity attaches to the
opinions expressed by State survey agency surveyors. Id.
In Utuado, HCFA argued also that the findings and
opinions of State survey agency surveyors should be
sustained unless a provider could prove them to be
"clearly erroneous." Utuado at 7.

State survey agency surveyors may qualify as expert
witnesses and may offer expert opinion on issues of fact.
However, I do not accept HCFA's assertion that the
opinions of State survey agency surveyors qualify
automatically as "expert" opinion which must be presumed
to be correct.

The regulations which govern surveys by State survey
agency surveyors state that surveyors are "professionals
who use their judgment, in concert with Federal forms and
procedures, to determine compliance . .. ." 42 C.F.R. §
488.26(a)(3). The regulations affirm that surveyors are
supposed to possess expertise in the activities of the
providers which they survey, as well as knowledge of
applicable law and regulations.

But that is not to say that every individual who conducts
a survey qualifies automatically as an expert. Neither
18

do the regulations state or suggest, as HCFA has at times
appeared to argue, that surveyors are vested with
authority to issue fact findings, or to interpret law and
regulations, definitively on behalf of the Secretary.

Nor do the regulations imply that even the qualified
expert opinions of surveyors are vested with a
presumption of correctness.

In order for a State survey agency surveyor to qualify as
an expert witness, that individual must demonstrate
expertise in the area about which he or she is
testifying. The credibility of that individual's opinion
as to facts will depend in large measure on the degree of
expertise that the individual possesses concerning the
subject area of those facts, as well as on the extent to
which the facts are proven.

Furthermore, the fact that a State survey agency surveyor
may qualify as an expert in a particular subject does not
suggest that the surveyor is qualified to testify about
all related subjects. For example, as I shall discuss in
my analysis of the individual cases, the State agency
surveyors whose testimony HCFA presented in these cases
are nurses who are qualified experts to testify in the
field of nursing. That expertise is limited, however. I
do not find that any of the nurses whose testimony HCFA
presented are qualified to opine as to the propriety of
care ordered or provided by physicians.

In Center Clinical Laboratory, the appellate panel
concluded that, in making a finding of immediate jeopardy

in a case involving a clinical laboratory's failure to
comply with CLIA (Clinical Laboratory Improvement
Amendments of 1988) and implementing regulations, HCFA
"had relied on the judgment of state survey officials,
which it clearly had the right to do under the statute
and regulations." Center Clinical Laboratory at 22. The
appellate panel's decision addressed a situation where a
State survey agency had brought to the attention of HCFA
exigent circumstances which the State survey agency
concluded would jeopardize the health and safety of the
public if not addressed immediately by HCFA. As
described by the appellate panel, the situation called
for an immediate response by HCFA.

That circumstance is distinguishable from an
administrative hearing held after the fact which
addresses the propriety of a remedy imposed by HCFA.
There, the issue is not whether HCFA should react
immediately to the findings brought to its attention in
order to deal with exigent circumstances, but whether, in
light of the evidence, HCFA's action was appropriate. In
19

the context of the hearing and HCFA's overall burden of
persuasion, it is reasonable to require HCFA to prove
that its action was justified. Furthermore, it is
reasonable at a hearing to require HCFA to prove that the
surveyors upon whom HCFA relied possess expertise
sufficient to make credible their findings. The judgment
of the surveyors will be found to be reliable where HCFA
proves that the surveyors have the requisite expertise to
make judgments and where the surveyors' findings are
supported by the evidence.

The dichotomy between an agency's right to rely on
information brought to its attention by its agents and
its burden of proving that that information is reliable
at a subsequent administrative hearing is illustrated
precisely in section 1128(b)(7) of the Act. That section
permits the Secretary, or her delegate, the Inspector
General (I.G.), to exclude individuals or entities, who
are engaging in fraud or unlawful kickbacks with respect
to federally funded health care programs. In the usual
case, an exclusion under this section becomes effective
only after an administrative hearing held pursuant to
section 205(b) of the Act resulting in findings favorable
to the Secretary. Act, section 1128(f)(2). An exclusion
may go into effect prior to the administrative hearing
where the Secretary determines that the health or safety
of individuals receiving services warrants the exclusion
taking effect earlier. Id.

However, the fact that the Secretary or the I.G. may
determine to impose an exclusion under section 1128(b) (7)
prior to an administrative hearing does not mean that the
I.G.'s burden of persuasion at the hearing is less, or
that the witnesses called by the I.G. are vested
automatically with greater credibility. Whether the
exclusion is imposed prior to or after the hearing, the
same standards of proof apply.

B. fhe significance of a corrective action plan

In each of these cases, HCFA and the Petitioner entered
into a corrective action plan to address the deficiencies
that were identified at the first survey of that
Petitioner.'' In each of these cases, the Petitioner was
resurveyed after the date HCFA had accepted that
Petitioner's corrective action plan. Based on these
resurveys, HCFA concluded that each Petitioner continued

"The specific provisions of each corrective
action plan vary, depending on the deficiencies that were
addressed by the plan.
20

to be deficient in complying with conditions of
participation that were addressed in that Petitioner's
corrective action plan.

These facts raise a question which is common to these
cases. To what extent does a corrective action plan
agreed to by a provider and HCFA define that provider's
obligations and duties? I conclude that a corrective
action plan that has been accepted by HCFA becomes an
element of the contract between HCFA and the provider.
The corrective action plan defines the manner in which a
provider is expected to remedy deficiencies addressed in
the plan. HCFA may not ignore a corrective action plan
once it has accepted it. In determining whether a
provider is complying with conditions of participation,
HCFA is obligated to consider the provider's compliance
with the terms of the corrective action plan, to the
extent that they address any condition for which
compliance is being evaluated.

My conclusions here are essentially the same as those
which Judge Leahy made in Guaynabo. Guaynabo at 14, 26.
The Utuado, Lajas, and Arecibo cases are distinguishable
from these cases in that in none of those cases did the
petitioner argue that its relationship with HCFA was
governed by a corrective action plan.

HCFA appears to argue that the corrective action plan
which it entered into with each Petitioner in these cases
is irrelevant to the issue of whether that Petitioner
failed to comply with conditions of participation.

First, HCFA seems to assert that it may predicate its
determination to terminate a Petitioner's participation
in Medicare on evidence predating the acceptance date of
a corrective action plan, even where the evidence
pertains to deficiencies that the plan proposes to
address prospectively. According to HCFA, a
determination to terminate participation based on preplan
evidence must be sustained even if the plan of correction
promises that, prospectively, the Petitioner will
undertake steps to bring it into compliance.

Second, HCFA seems to argue that a corrective action plan
cannot supplant the specific compliance requirements set
forth in regulations. Thus, if there exists any
aifference between what is required by the regulations
and what might be promised in a corrective action plan,
the requirements of the regulations must prevail.
Alternatively, HCFA argues that a corrective action plan
should be construed to impose requirements on a provider
in addition to what is stated in regulations.
21

In sum, HCFA is arguing that it is free to disregard the
terms of a corrective action plan that it has accepted,
except to the extent that failure by the provider to
comply with the plan gives HCFA an additional ground upon
which to premise its determination to terminate that
provider's participation. I find HCFA's position to be
untenable. HCFA's arguments ignore the purpose of a
corrective action plan.”

Where HCFA finds that a provider is not complying with a
condition of participation, it is not required to offer
the provider the opportunity to submit a corrective
action plan or to accept such a plan from the provider.
In the case of a condition-level deficiency, HCFA may
simply terminate the deficient provider's participation
in Medicare. See 42 C.F.R. § 488.28. In such a case,
HCFA has also the option, in lieu of immediate
termination, of offering the provider the opportunity to
submit a corrective action plan and of accepting that
plan, assuming HCFA finds that it proposes a satisfactory
remedy for the provider's deficiencies. That is the
option HCFA chose with each of the Petitioners in these
cases.

Once HCFA accepts a corrective action plan, both HCFA and
the provider are bound by its terms. Where HCFA opts to
accept a corrective action plan which addresses
condition-level deficiencies, in effect HCFA tells the
provider that, if the provider does what it has promised
to do in the plan, it will be deemed to have corrected
the deficiencies. Thus, compliance by a provider with a
corrective action plan becomes the measure of whether the
provider has corrected the deficiencies that are
addressed by the plan.

Furthermore, where a plan proposes to address
deficiencies prospectively, and HCFA accepts the plan, in
effect it tells the provider that HCFA will evaluate its

2 What HCFA did not argue in these cases, but
which would not be an unreasonable position for HCFA to
advocate, is that a corrective action plan becomes a
basis for future performance evaluation by HCFA for only
those deficiencies addressed in the plan. Thus, if HCFA
were to resurvey a provider pursuant to a plan and were
to find that provider to be failing to comply with some
condition of participation other than that which is
addressed by the plan, HCFA would be within its rights to
terminate that provider's participation based on the
provider's failure to comply with that additional
condition of participation.
22

compliance with the conditions addressed in the plan
beginning with the date of the plan, and pursuant to the
remedies identified in the plan. Under those
circumstances, evidence as to deficiencies predating the
plan may be irrelevant to the issue of compliance.

It would be punitive, and inimical to the remedial
purpose of the corrective action plan, for HCFA to agree
to accept a plan from a provider and then to terminate
that provider's participation for deficiencies which
predate the plan, but which the plan proposes to correct
prospectively. It would be punitive also for HCFA to
disregard what it had agreed to accept from a provider as
a method of compliance with participation requirements.

HCFA argues that, in these cases, it advised each
Petitioner that HCFA would hold it accountable not only
for compliance with the terms of the corrective action
plan, but also for compliance with arguably different
requirements. See, e.g., in the case of Petitioner
Fajardo, C-94-383, HCFA Ex. 19. The advisory language
relied on by HCFA to support this argument tells each
Petitioner that a resurvey of that Petitioner "will
evaluate whether or not you have successfully implemented
your plan of correction and achieved compliance with the
Medicare Hospice Conditions of Participation." Id.

I do not read this statement as telling the Petitioners,
as HCFA seems to be arguing, that HCFA would be
evaluating their performance both pursuant to the terms
of the corrective action plans and under separate (and
arguably different) conditions of participation. Rather,
I believe that this statement must be taken to mean what
it says. It says, simply, that HCFA would be evaluating
each Petitioner's performance under that Petitioner's
corrective action plan and, from that evaluation, would
determine whether the Petitioner met conditions of
participation.

Furthermore, I am troubled by the implications of HCFA's
argument. HCFA seems to be saying that the terms of a
corrective action plan may relate to remedies that
address something in addition to what is contained in the
regulations governing Medicare participation. That is
not what a corrective action plan is intended to achieve.
The purpose of a corrective action plan is to bring a
deficient provider into compliance with Medicare
participation requirements. It would make no sense
whatsoever for HCFA to enter into a corrective action
plan with a provider unless HCFA concluded that, by
complying with the elements of the plan, the provider
would remedy the deficiencies addressed by the plan and
23

would thereby be in compliance with Medicare
participation requirements.

III. Analysis of the issues and evidence relating to
Petitioner Fajardo (Docket No. C-94~-383)

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

At the July 6, 1994 resurvey of Petitioner Fajardo, the
State survey agency surveyors found that Petitioner
Fajardo failed to comply with conditions of participation
stated in the following regulations: 42 C.F.R. § 418.50
(general provisions); 42 C.F.R. § 418.54 (medical
director); 42 C.F.R. § 418.62 (informed consent); and 42
C.F.R. § 418.86 (physician services). The issue in this
case is whether Petitioner Fajardo failed to comply with
any of these conditions of participation.

I base my analysis of this issue on the evidence admitted
at the hearing, the parties' arguments, and the
applicable law (which includes my general conclusions of
law stated at Part II of these decisions). I make the
following findings of fact and conclusions of law. After
each finding or conclusion, I state the page or pages of
this decision at which I discuss the finding or
conclusion in detail.

1. HCFA did not prove that Petitioner Fajardo
failed to comply with the condition of
participation contained in 42 C.F.R. § 418.50.
Page 24.

2. HCFA did not prove that Petitioner Fajardo
failed to comply with the condition of
participation contained in 42 C.F.R. § 418.54.
Pages 24 - 28.

3. HCFA did not prove that Petitioner Fajardo
failed to comply with the condition of
participation contained in 42 C.F.R. § 418.62.
Pages 28 - 30.

4. HCFA did not prove that Petitioner Fajardo
failed to comply with the condition of
participation contained in 42 C.F.R. § 418.86.
Pages 30 - 41.

5. HCFA did not prove a basis for terminating
the participation in Medicare of Petitioner
Fajardo. Page 41.
24

B. The alleged failure of Petitioner Fajardo to
comply with the general provisions condition of
articipation contained in 42 C.F.R. 418.50

According to HCFA, 42 C.F.R. § 418.50 imposes on a
hospice as a condition of participation the requirement
that the hospice comply with all other conditions of
participation stated in the regulations. Thus, a failure
by a hospice to comply with a condition of participation
stated elsewhere in the regulations is automatically a
failure by that hospice to comply with the condition of
participation contained in 42 C.F.R. § 418.50. HCFA
contends that Petitioner Fajardo failed to comply with
this condition of participation because it failed to
comply with conditions of participation stated elsewhere.

I find this argument to be moot, because HCFA did not
prove that Petitioner Fajardo failed to comply with
conditions of participation stated in regulations other
than 42 C.F.R. § 418.50. It is, therefore, not necessary
for me to analyze in this case HCFA's arguments
concerning the meaning of 42 C.F.R. § 418.50.

However, in Utuado and Lajas, I concluded that the
Secretary did not intend 42 C.F.R. § 418.50 to inflate a
hospice's failure to comply with conditions of
participation. Utuado at 16 - 17; Lajas at 20 = 21.

HCFA has not made any new arguments here that would cause
me to question the analysis I made in those decisions.

Cc. The alleged failure of Petitioner Fajardo to
comply with the medical director condition of
participation contained in 42 ¢.F.R. § 418.54

HCFA argues that, when it resurveyed Petitioner Fajardo
on July 6, 1994, Petitioner Fajardo failed to comply in
two respects with the medical director condition of
participation contained in 42 C.F.R. § 418.54. First,
the medical director was not assuring that patients were
being certified for hospice services in accordance with
Medicare certification requirements. C-94-383, HCFA Ex.
21 at 3; HCFA posthearing brief (Fajardo) at 16 - 17.
Second, the medical director had failed to discharge his
responsibilities by allowing Petitioner Fajardo to treat
patients who were not eligible for hospice care. C-94-
383, HCFA Ex. 21 at 5; HCFA posthearing brief (Fajardo)
at 18.

8 The surveyors who conducted the July 6, 1994
resurvey of Petitioner Fajardo identified a third alleged
failure of this Petitioner to comply with the medical
25

HCFA failed to meet its burden of persuasion with respect
to both of these assertions. I find that HCFA's proof is
deficient in the following respects:

Oo The performance of Petitioner Fajardo's medical
director was made subject to the terms of a
corrective action plan accepted by HCFA on June 23,
1994. HCFA has the burden of proving that, after
June 23, 1994, Petitioner Fajardo failed to comply
with the corrective action plan. However, HCFA
failed to offer the relevant parts of the plan as
evidence, and, therefore, the record is devoid of
the operative document by which the performance of
the medical director must be measured.

O Even if the relevant part of the corrective
action plan had been offered by HCFA, HCFA failed to
offer evidence which relates to the performance of
Petitioner Fajardo's medical director after the
critical date of June 23, 1994,

© HCFA's assertion that the medical director
allowed Petitioner Fajardo to treat patients who
were not eligible for hospice care is not supported
by credible evidence.

The regulation governing the duties of a hospice medical
director states, as a condition of participation, that:

{t]he medical director must be a hospice
employee who is a doctor of medicine or
osteopathy who assumes overall responsibility
for the medical component of the hospice's
patient care program.

42 C.F.R. § 418.54.

In Utuado, I analyzed the requirements of this
regulation. Utuado at 21 - 22. I held that the plain
meaning of the regulation is that a hospice medical

director condition of participation. This had to do with
alleged failure of the medical director to assure that
patient plans of care were being reviewed and revised as
necessary. C-94-383, HCFA Ex. 21 at 3 - 5. However,
HCFA did not make any arguments concerning this alleged
deficiency in its posthearing brief. See HCFA
posthearing brief (Fajardo) at 15 - 18. Thus, I conclude
that HCFA is no longer asserting that this alleged
deficiency establishes a violation of the medical
director condition of participation.
26

director must assume supervisory and management
responsibility for the medical services that the hospice
provides to its patients. Id. In Utuado, I held further
that the duties of a hospice medical director included
assuring that patients of the hospice be certified as
being eligible for hospice care, pursuant to the
requirements of applicable regulations. Id. at 23 - 24.
Finally, I held that the duties of a hospice medical
director included supervising the performance of the
hospice's interdisciplinary group. Id. at 22 - 23.

The medical director condition was a condition that HCFA
had concluded Petitioner Fajardo was not complying with
as a consequence of the initial survey of Petitioner
Fajardo, conducted in April 1994. C-94-383, HCFA Ex. 15.
On May 16, 1994, Petitioner Fajardo submitted its
proposed corrective action plan to HCFA. Among other
things, this proposed plan addressed the deficiencies
which HCFA found in Petitioner Fajardo's compliance with
the medical director condition. C-94-383, HCFA Ex. 16 at
5 - 6.

On May 31, 1994, HCFA advised Petitioner Fajardo that it
found the proposed corrective action plan to be
unacceptable insofar as it addressed the role of the
medical director. C-94-383, HCFA Ex. 17.4

Specifically, Petitioner Fajardo had proposed to prepare
a manual which outlined the duties of its medical
director. HCFA refused to accept the corrective action
plan, insofar as it addressed the duties of the medical
director, without first reviewing and approving the
manual. C-94-383, HCFA Ex. 17 at 2.

On June 14, 1994, Petitioner Fajardo submitted a revised
corrective action plan to HCFA which included a medical
director manual. C-94-383, HCFA Ex. 18 at 2. HCFA
accepted the revised corrective action plan on June 23,
1994, C-94-383, HCFA Ex. 19.

The medical director manual, which is a part of the final
corrective action plan accepted by HCFA from Petitioner
Fajardo, is not in evidence in this case. HCFA did not

4 Also, HCFA found the corrective action plan to
be unacceptable because of the manner in which Petitioner
Fajardo proposed to advise its patients of their rights
and obligations under 42 C.F.R. § 418.62. C-94-383, HCFA
Ex. 17 at 3. I discuss the issue of Petitioner Fajardo's
alleged failure to comply with the informed consent
condition of participation below, at section III.C. of
these decisions.
27

offer the document as an exhibit. HCFA did attach a
purported English translation of the document to its
posthearing brief. Petitioner Fajardo objected to my
receiving this document into evidence.

I do not admit the medical director manual into evidence,
and I do not rely on it as part of my analysis. HCFA did
not justify offering the document untimely, nor did it
prove an absence of prejudice to Petitioner.

At the hearing, I commented that HCFA's case might be
deficient without the medical director manual being in
evidence. Tr. at 498 - 500. HCFA did not offer the
document. Also, HCFA did not elicit testimony from the
surveyors concerning whether any of them had reviewed the
performance of Petitioner Fajardo pursuant to the medical
director manual. HCFA rested its case without suggesting
that it wished to offer the manual at a later date.

Not only has HCFA not shown good cause for my considering
the medical director manual at this point, but it would
be prejudicial to Petitioner. HCFA has not proven the
purported translation to be accurate, and the parties
have not stipulated to its accuracy. Furthermore,
Petitioner would be deprived of the opportunity to cross-
examine the surveyors concerning whether they reviewed
Petitioner's performance pursuant to the manual.

HCFA's failure to offer timely into evidence the remedial
plan which governed the performance of Petitioner
Fajardo's medical director after June 23, 1994,
constitutes a fatal gap in HCFA's proof. Having accepted
a corrective action plan from Petitioner Fajardo, HCFA
has the burden of proving that Petitioner Fajardo failed
to comply with it. It is not possible for me to evaluate
Petitioner Fajardo's compliance with the medical director
condition of participation after June 23, 1994, given
that the part of the corrective action plan which
addresses this condition of participation is not in
evidence.

Not only did HCFA not offer as evidence the part of the
corrective action plan that related to the medical
director condition, but also it is not apparent from the
record that the State survey agency surveyors even
considered whether Petitioner Fajardo was complying with
it in conducting their July 6, 1994 resurvey of
Petitioner. None of the testimony of these individuals
relates in any respect to whether or not Petitioner
Fajardo complied with the corrective action plan. See
Tr. at 184 - 218, 496 - 537.
28

Furthermore, it is unclear from the evidence offered by
HCFA that the evidence would prove that Petitioner
Fajardo failed to comply with the corrective action plan
after June 23, 1994, assuming that the part of the plan
relating to the medical director was in evidence. That
is so because the evidence does not prove that it relates
to events after June 23, 1994.

HCFA bases its assertion that the medical director was
not properly supervising the certification of patients
for hospice services on its finding that, in seven of
eight patient records reviewed on July 6, 1994, the
recertification documents lacked statements as to the
patient's present health status, prognosis, and life
expectancy. C=93-383, HCFA Ex. 21 at 3. The statement
of deficiencies prepared by the State agency surveyors
after the July 6, 1994 resurvey does not note the dates
of any of these records. Id. Testimony offered by HCFA
at the hearing relates to recertifications of two
patients, patient # 2 and #9. Tr. at 214 - 215, 507 -
508. However, the patient records relied on by HCFA show
that the recertification of patient # 2 was made on May
9, 1994, and the recertification of patient # 9 was made
on May 18, 1994. C-94-383, HCFA Ex. 36 at 20 - 21; C-94-
383, HCFA Ex. 43 at 10 - 14. Both of these
recertifications were made prior to June 23, 1994.

Finally, I am not persuaded that Petitioner Fajardo
failed to comply with the medical director condition of
participation because it discharged 66 patients between
May 27 and July 6, 1994. HCFA asserts that this is proof
that Petitioner Fajardo was treating patients who were
not eligible to receive hospice care, and that its
medical director was deficient in allowing Petitioner
Fajardo to provide such treatment. The record is devoid
of meaningful evidence pertaining to the circumstances
under which these patients were discharged. Furthermore,
assuming for the sake of argument that HCFA correctly
asserts that these patients were not eligible to receive
hospice care, then, by discharging these patients,
Petitioner Fajardo was attaining compliance with the
criteria for providing hospice care. That can hardly be
a basis for finding Petitioner Fajardo to be deficient as
of the July 6, 1994 resurvey.

D. The alleged failure of Petitioner Fajardo to
comply with the informed consent condition of
participation contained in 42 C.F § 418.62

HCFA asserts that, as of July 6, 1994, Petitioner Fajardo
was not complying with the condition of participation
governing informed consent of patients, contained in 42

29

C.F.R. § 418.62. HCFA bases this assertion on the
findings of the State agency surveyors who conducted the
July 6, 1994 resurvey of Petitioner Fajardo. The
surveyors examined ten patient records and concluded that
none of them contained the informed consent form that
Petitioner Fajardo developed as part of its corrective
action plan. C-94-383, HCFA Ex. 21 at 6 - 7.

Petitioner Fajardo does not dispute this evidence. It
argues, however, that the evidence does not prove that it
failed to comply with the informed consent condition of
participation. It asserts that its obligations under the
corrective action plan are prospective only. According
to Petitioner Fajardo, insofar as the corrective action
plan pertained to the issue of informed consent, it
required Petitioner Fajardo to obtain patient consent on
the newly developed form from any patient admitted after
June 23, 1994. Petitioner Fajardo argues that HCFA
failed to prove that Petitioner Fajardo did not live up
to this obligation, inasmuch as the ten patients whose
records were examined by the surveyors had all been
admitted to hospice care prior to June 23, 1994.

HCFA responds to this argument by asserting that the
obligation to obtain informed consent from a patient is a
continuing obligation. It argues that the corrective
action plan did not excuse Petitioner Fajardo from
obtaining executed consents from all of its patients on
the newly developed form, including those who were
admitted prior to June 23, 1994.

Petitioner Fajardo could have concluded reasonably from
its communications with HCFA that HCFA intended that it
use the new informed consent prospectively, to advise
patients admitted after June 23, 1994 of the services
available to them. HCFA did not tell Petitioner Fajardo
that it was to have the new form executed by both
existing and future patients.

Petitioner Fajardo sent its first proposed corrective
action plan to HCFA on May 16, 1994. C-94-383, HCFA Ex.
16. In that document, Petitioner Fajardo took issue with
HCFA's assertion that an informed consent form must
recite all of the services that Petitioner Fajardo would
supply to its patients. Id. at 12 - 13. Petitioner
Fajardo asserted that, in fact, all of its patients had
been informed of the services to be provided to them in
other forms which Petitioner Fajardo had supplied to
these patients. Id. Notwithstanding, Petitioner Fajardo
proposed to correct deficiencies in the manner in which
it obtained informed consent by creating a manual to be
30

provided to patients which detailed the services that
would be offered to them. Id.

HCFA found this proposal to be unacceptable. Id.; C-94-
383, HCFA Ex. 17 at 3. It advised Petitioner Fajardo
that Petitioner Fajardo was obligated to obtain informed
consent on a single form which addressed all services to
be provided to patients under its care. Id. On June 14,
1994, Petitioner Fajardo responded to HCFA by providing
HCFA with a proposed new informed consent form. C-94-
383, HCFA Ex. 18.'5 on June 23, 1994, HCFA accepted the
new form. C-94-383, HCFA Ex. 19.

There is nothing in the correspondence between HCFA and
Petitioner Fajardo concerning the corrective action plan
in which HCFA states its intent concerning how Petitioner
Fajardo was to use the new informed consent form. HCFA
never told Petitioner Fajardo that it assumed that
Petitioner Fajardo would have the new form executed by
patients who had been admitted previously to its care.

I do not find it unreasonable that Petitioner Fajardo
would have concluded that the form was to be utilized
prospectively, with patients admitted after the date the
form was found to be acceptable by HCFA. I find this to
be so, particularly, because Petitioner Fajardo was
contending that it had complied with the spirit, if not
the letter, of the informed consent requirement.
Petitioner Fajardo told HCFA that it had advised its
patients of all of the services it would be providing to
them, albeit in a format that was different from the one
insisted on by HCFA. HCFA did not take issue with this
statement.

Thus, the evidence presented by HCFA does not prove that
Petitioner Fajardo was failing to comply with the
informed consent condition after June 23, 1994. At most,
it proves a misunderstanding between HCFA and Petitioner
Fajardo concerning Petitioner Fajardo's obligations.

E. The alleged failure of Petitioner Fajardo to
comply with the physician services condition of
participation contained in 42 C.F.R. § 418.86

At the July 6, 1994 resurvey of Petitioner Fajardo, the
State survey agency surveyors identified seven

'S As with the medical director manual, the new
informed consent form, part of the corrective action
plan, was not made an exhibit by HCFA and is not in
evidence.
31

deficiencies which they concluded established that
Petitioner Fajardo was not complying with the physician
services condition of participation contained in 42
C.F.R. § 418.86. C-94-383, HCFA Ex. 21 at 12 - 14. I
have examined carefully the evidence that HCFA offered
pertaining to these alleged deficiencies. I conclude
that this evidence does not prove that, as of July 6,
1994, Petitioner Fajardo had failed to comply with the
physician services condition of participation.

The regulation which governs physician services provided
by a hospice states:

{ijn addition to palliation and management of
terminal illness and related conditions,
physician employees of the hospice, including
the physician member(s) of the
interdisciplinary group, must also meet the
general medical needs of the patients to the
extent that these needs are not met by the
attending physician.

42 C.F.R. § 418.86.

The meaning of this regulation is plain. It requires
physicians who are employed by a hospice to provide
palliation and management of patients' terminal illnesses
and related conditions. It requires also that physicians
who are employed by a hospice provide care to meet the
general medical needs of hospice patients if those needs
are not met by the patients' attending physicians.

The term "attending physician" is defined elsewhere in
the regulations. Under 42 C.F.R. § 418.3, an attending
physician is a doctor of medicine or osteopathy who is
identified by the patient at the time he or she seeks
hospice care "as having the most significant role in the
determination and delivery of the . . . (patient's)
medical care."

At the hearing, I questioned whether HCFA had shown that
the physicians whose services HCFA had found to be
deficient were employed by Petitioner Fajardo. My
preliminary assessment was that HCFA's burden of
persuasion under 42 C.F.R. § 418.86 included the duty to
prove that any deficiency under the regulation was the
direct consequence of a failure by a physician employed
by the hospice to provide that service personally.

On further reflection, however, I conclude that, in
expressing these concerns I missed a broader and more
fundamental point. Under 42 C.F.R. § 418.86, the hospice
32

(and its physician employees) assume the burden of
providing physician services to a patient only to the
extent that the services are not being provided by the
patient's attending physician. The necessary predicate
to establishing deficient care by the hospice physician
is to first prove that the care is not being provided by
the patient's attending physician. Guaynabo at 30.

Therefore, in order to prove that a hospice is deficient
under 42 C.F.R. § 418.86, HCFA must prove that a
patient's attending physician has not provided a service
required by the regulation and that the hospice physician
also has not provided that service. Guaynabo at 30.
HCFA does not meet its burden of persuasion under 42
C.F.R. § 418.86 by proving only that a hospice physician
failed to provide necessary care to a patient. Such
evidence is not meaningful unless HCFA first proves that
the service that was not being provided by the hospice
physician was also not provided by the patient's
attending physician.

HCFA appears to concede that it must prove that a
patient's needs are not being met, both by that patient's
attending physician and by the hospice physician, in
order to prove a deficiency under 42 C.F.R. § 418.86.
HCFA reply brief at 11. However, HCFA seems to argue,
without explanation, that it has accomplished this task
simply by offering excerpts of hospice records which show
that a necessary service was not provided by an
individual whom HCFA asserts to be the hospice physician.
Id. HCFA argues also that it would be unreasonable to
expect it to prove that a patient's attending physician
did not provide required services as a prerequisite to
proving that a hospice is deficient under the physician
services regulation. According to HCFA, it would be
faced with the unreasonable requirement of having the
attending physician admit against his or her self-
interest that he or she had not provided required
services. Id. at 10 - 11.

I am not persuaded that it would be unreasonable to
require HCFA to prove that a patient's attending
physician had not provided required services as a
prerequisite to proving that the hospice had not complied
with 42 C.F.R. § 418.86. First, that is what is required
by the regulation. Second, the burden is not difficult
for HCFA to meet.

In any case where State agency surveyors find that
necessary physician services are not documented in a
hospice record for a patient, the surveyors could ask the
hospice personnel or the patient's family whether that
33

patient had an attending physician other than the hospice
physician. If the surveyors established that the patient
had no physician other than the hospice physician, a
deficiency in providing physician services would be a
deficiency under 42 C.F.R. § 418.86. If the surveyors
established that the patient did have an attending
physician, they could then ask that physician whether he
or she had records to document that necessary services
which were not documented in the hospice record had been
provided to the patient. If that physician did not
produce such records, an inference could be drawn that
the physician had not provided the necessary services.
HCFA has not offered any evidence regarding whether the
patient's attending physician failed to provide necessary
services. Therefore, HCFA has not established a
necessary element to proving a deficiency pursuant to 42
C.F.R. § 418.86.

HCFA failed to meet its burden of proving that the
hospice physician failed to provide necessary medical
services that had not been provided by an attending
physician. The patient records it offered consist of
fragments of the hospice records. It does not appear
that the State agency surveyors made any effort to
determine whether the patients ha@ attending physicians,
other than the hospice physician, and whether records
existed elsewhere for services provided by the attending
physicians."

Furthermore, I am not persuaded by the evidence offered
by HCFA that in fact it proved that the services which it
asserts to be deficient are deficient. My analysis of
the evidence relating to the seven alleged deficiencies
cited by the surveyors follows.”

'§ It is possible that a patient's attending
physician could be a physician employed by a hospice.
The regulations plainly contemplate that, in some cases,
a patient could designate the hospice physician as his or
her attending physician. In that event, HCFA would meet
its burden of persuasion under 42 C.F.R. § 418.86 by
proving a deficiency in the treatment afforded by the
hospice physician. However, HCFA did not prove that the
hospice physician served as the attending physician for
the patients of Petitioner Fajardo.

” petitioner Fajardo's compliance with a plan of
correction is not at issue here. That is so because the
alleged deficiencies in physician services which the
surveyors identified at the July 6, 1994 resurvey of
Petitioner Fajardo were not addressed in the plan of
34

1. Patient # 2

The surveyors found that, on May 10, 1994, the physician
who treated patient # 2 ordered that the patient be
administered the medication Prozac in the amount of 20
mg, but failed to indicate the frequency of
administration and the route of administration. C-94-
383, HCFA Ex. 21 at 12. HCFA asserts from these findings
that the physician's order was incomplete and,
consequently, Petitioner Fajardo was deficient under 42
C.F.R. § 418.86. I am not satisfied that HCFA proved
that the service provided by the physician to patient # 2
was substantially deficient.

The evidence HCFA offered at the hearing to support the
surveyors! findings concerning the order to administer
Prozac to patient # 2 consisted of the testimony of Alba
N. Mufioz, a surveyor who participated in the July 6, 1994
resurvey of Petitioner Fajardo. Tr. at 186 - 188. Ms.
Mufoz is a nurse, and it is apparent, both from her
resume and from her testimony, that she has extensive
training and work experience in the nursing profession.
C-94-383, HCFA Ex. 61; Tr. at 179 - 183. HCFA offered
the testimony of Ms. Mufioz as expert testimony to prove
that the services she reviewed did not comport with the
standards of care which governed the physicians who
provided services to the patients cared for by Petitioner
Fajardo.

I accept as credible Ms. Mufioz' testimony that the
failure of the physician to specify the route and
frequency of administration of Prozac to patient # 2 isa
failure to comply with a generally accepted requirement
that a physician's order specify the route and frequency
of administration of medications that are prescribed in
that order. Tr. at 187. Ms Mufioz' experience as a nurse
qualifies her to attest to what is usually contained ina
physician's order. Furthermore, her testimony was
supported on this point by the testimony of Alma V.
Rivera, M.D., a physician. Tr. at 655.

However, Ms. Mufoz did not testify as to the possible
adverse consequences that might have resulted to patient
# 2 from the failure of the physician to specify the
route and frequency of administration of Prozac to that
patient. Neither did Dr. Rivera. Indeed, Dr. Rivera did
not review the treatment records of patient # 2, or of

correction accepted by HCFA. See C-94-383, HCFA Ex. 15
at 22 - 26; C-94-383, HCFA Ex. 16 at 21 - 23; C-94-383,
HCFA Ex. 17; C-94-383, HCFA Ex. 18.
35

any of the patients whose records are in evidence in
these cases. Tr. at 659.

HCFA offered no evidence, either through Ms. Mufioz or Dr.
Rivera, as to the medical purpose of Prozac, or of the
usual route and frequency of administration of that
medication. HCFA did not offer evidence to show that
misinterpretation of a physician's order to administer
Prozac to a patient might produce harmful consequences to
that patient. Thus, there is no evidence of record to
prove that the incomplete order to administer Prozac to
patient # 2 might have adversely affected the health and
safety of that patient. Absent such evidence, I cannot
fairly conclude that the failure to specify the route and
frequency of administration of Prozac to patient # 2 is a
substantial deficiency in the providing of physician
services to that patient.

HCFA did not argue that the failure to properly document
the order to administer Prozac to patient # 2 was a
failure by Petitioner Fajardo to comply with the clinical
records condition of participation contained in 42 C.F.R.
§ 418.74. Nor did it argue that other alleged failures
by Petitioner Fajardo or of the other Petitioners in
these cases to maintain accurate records of medical
treatments ordered for and provided to patients were
failures to comply with that condition. I might have
found that such alleged failures constituted failures to
comply with the clinical records condition, had HCFA
alleged that and provided the Petitioners with notice of
its allegations.

2. Patient # 3

The surveyors found that, as of June 13, 1994, the plan
of care for patient # 3 indicated that the patient's
breathing problems had been solved. However, nursing
documentation recorded on June 19 and 29, 1994 showed
that the patient was again experiencing breathing
problems and was receiving respiratory therapy for these
problems. C-94-383, HCFA Ex. 21 at 12. HCFA asserts
that these findings demonstrate that Petitioner Fajardo
was not documenting properly the services it was
providing to the patient, nor was it planning that
patient's care. According to HCFA, this comprises a
failure to comply with 42 C.F.R. § 418.86.

HCFA did not prove that Petitioner Fajardo was deficient
in providing physician services to patient # 3. There is
nothing in the surveyors' statement to suggest or show
that inadequate or improper services were supplied to
this patient. There is no suggestion that the patient's
36

physician failed to diagnose or to treat the patient's
breathing problems. Ms. Mufioz offered nothing in her
testimony that would support the conclusion that the
physician who treated patient # 3 provided inadequate
care to that patient. See Tr. at 188 - 197.

At the hearing, HCFA asserted that the deficiency with
respect to patient # 3 was a failure by Petitioner
Fajardo to amend its plan of care for that patient to
reflect breathing problems that developed after June 13,
1994. If so, that is not a deficiency in the services
provided by a physician, so much as it is a deficiency in
recording the plan of care of the patient. There is a
regulation which governs the requirement for a hospice to
plan a patient's care and to document that care. 42
C.F.R. § 418.58. I do not find that regulation to be
incorporated by reference into 42 C.F.R. § 418.86. Thus,
an alleged failure by a hospice to properly plan the care
it provides to a patient cannot automatically be
attributed to a deficiency in the services provided by a
hospice physician.

At the hearing, I observed that HCFA seemed to be arguing
that most of the regulations governing hospices are
incorporated by reference into most of the other
regulations governing hospices. Thus, HCFA asserts that:
deficiencies under other regulations are automatically
deficiencies under 42 C.F.R. § 418.50; virtually any
failure by a hospice to provide care to a patient
consistent with the requirement of some regulation is a
deficiency in the performance of the hospice medical
director under 42 C.F.R. § 418.54; and a deficiency in
planning a patient's care may be construed to be a
deficiency in the performance of a hospice physician
employee under 42 C.F.R. § 418.86. I observed then, and
I reiterate, that the Secretary did not intend the
regulations governing hospices to be interpreted so
loosely. And, even if that is the Secretary's intent,
HCFA has not established that it has communicated that
intent to hospices in a manner which would put them on
notice of their obligation to comply.. Tr. at 194 = 197.

3. Patient # 4

The surveyors found that patient # 4 was first admitted
to the care of Petitioner Fajardo on June 29, 1992. On
May 23, 1994, this patient was hospitalized with chest
pain. The hospice records for this patient document
visits to the patient during the patient's
hospitalization by various professionals, but not by the
hospice physician. On June 2, 1994, the hospice
physician noted that the patient was not terminally ill
37

and that the hospice planned to transfer the patient to
the services of home care. C-94-383, HCFA Ex. 21 at 13;
Tr. at 198.’ HCFA argues from these findings that
Petitioner Fajardo failed to comply with the requirements
of 42 C.F.R. § 418.86 in that a physician or physicians
in its employ should not have been providing services to
a patient who was not terminally ill. Tr. at 200 - 201.

I am not persuaded, either by the evidence or by HCFA's
argument as it relates to patient # 4, that HCFA proved
that Petitioner Fajardo did not comply with the physician
services condition in its treatment of this patient.
First, 42 C.F.R. § 418.86 does not address the
allegations raised by HCFA with respect to this patient.
The regulation was intended to insure that hospice
patients received physician services. It cannot be read
to state that hospice physicians who treat hospice
patients who may not be terminally ill are somehow
deficient in providing services to these patients.

That is not to say that a hospice may accept and treat
patients whom it knows not to be terminally ill. Both
the Act and the regulations limit coverage for hospice
care to patients who are terminally ill and impose
requirements on hospices to certify that their patients
are terminally ill. But those requirements are not
incorporated implicitly into 42 C.F.R. § 418.86.

Second, HCFA offered no qualified evidence to prove that
Petitioner Fajardo misjudged the medical condition of
patient #4. It offered the testimony of Ms. Mufioz, who
is a nurse and not a physician, to demonstrate that the
patient's treatment records did not establish the patient
to be terminally ill. Tr. at 205 = 210. I do not find
her opinion to be credible on this issue. Indeed, under
regulations governing hospices, the Secretary has
determined that only a physician is qualified to adjudge
whether a patient is terminally ill. 42 C.F.R. §§ 418.20
~ 418.22.

4. at! ir Pa t
The surveyors found that, on June 26, 1994, the physician

who treated patient # 2 ordered a consultation with a
“physical medicine physician" for whirlpool treatment. C-

'"§ The statement of deficiencies contains an
obvious error in that it recites that "on June 2, 1994,
the physician documented that the patient was
terminally."
38

94-383, HCFA Ex. 21 at 13. As of the July 6, 1994
resurvey, the patient had not yet been evaluated nor had
the patient received whirlpool treatment. HCFA argues
from this that the patient had not received services
ordered by a physician and that, therefore, Petitioner
Fajardo was not complying with the physician services
condition of participation.

I am not persuaded that these findings document a failure
by Petitioner Fajardo or by a physician employed by it to
provide a service that is covered under 42 C.F.R. §
418.86. There is proof that the patient did not receive
services that the physician had ordered. However, the
evidence offered by HCFA does not establish that the
physician had it within his or her ability to control
whether the services were delivered. The evidence
establishes only that the physician directed that there
be a consultation with another individual. The evidence
does not establish whether that individual is an employee
of the hospice, or whether the physician who ordered the
consultation had it within his or her ability to assure
that the consultation took place.

Under the regulation, a physician who is employed by a
hospice has a duty to order that necessary services be
provided to a patient, to the extent that those services
are not provided by the patient's attending physician.
The hospice physician has the additional obligation to
assure that services which are under his or her control
are delivered to the patient. But the regulation does
not impose on a hospice physician the duty to assure that
third parties, who may not be under the physician's
control, deliver services that have been ordered. Thus,
a failure to supply a service to a patient that has been
ordered by a hospice physician is not automatically a
failure to deliver a physician service under 42 C.F.R. §
418.86.

Arguably, Petitioner Fajardo may have had an obligation
under some regulation other than 42 C.F.R. § 418.86 to
assure that services provided by a third party, but
ordered by a hospice physician, actually are provided to
a patient. However, HCFA did not make that assertion
here. I find only that HCFA cannot attribute the

' The surveyors! findings and the testimony
offered at the hearing do not establish whether the
physician ordered that the patient be seen by a physician
who specialized in physical medicine or by a physical
therapist.
39

deficiency in providing a service to a hospice physician
who ordered that service, where it is unclear from the
record that the physician had the power to assure that
the service was delivered to the patient.

Furthermore, HCFA did not offer any credible evidence to
show that a 10-day delay in providing whirlpool
treatments to patient # 2 constituted a substantial
deficiency, if indeed it is a deficiency. HCFA offered
no evidence as to what adverse consequences this patient
might suffer from a failure to provide whirlpool
treatments to the patient.

5. Patient # 7

The surveyors found that patient # 7 was admitted to the
care of Petitioner Fajardo on June 23, 1993, with a
diagnosis of "COPD." C-94-383, HCFA Ex. 21 at 13.% on
June 21, 1994, a physician issued a statement that
patient # 7 was terminally ill. This patient was
discharged on July 5, 1994 with a finding that her
medical condition was stable. C-94-383, HCFA Ex. 45 at
10. The surveyors found no evidence in that patient's
record that the patient had been reevaluated between June
23, 1994 and July 1, 1994. From this, HCFA asserts that
the patient was deprived of necessary physician services.

HCFA argues that "the absence of medical evidence showing
that

.» . [the patient] was reevaluated prior to being
discharged suggests that her medical needs were not being
met." HCFA posthearing brief (Fajardo) at 22. In
effect, HCFA is saying that there must have been
deficient services to this patient because the reasons
for her discharge were not explained fully in her
treatment records. I conclude that this argument is
speculative, and not supported by any credible evidence.
HCFA has simply not identified a deficiency in the care
provided to this patient.

6. Patient 10

The surveyors found that patient # 10, who was diagnosed
to be suffering from "COPD," was receiving the medication
Theodur in a dose of 200 mg, at 12-hour intervals,
beginning March 24, 1994. C-94-383, HCFA Ex. 21 at 14.

* There is an error in the statement of
deficiencies prepared by the surveyors. It states
incorrectly that the patient was admitted to hospice care
on June 23, 1994. Id.
40

They found that the patient's records showed that, on
June 3, 1994: "Theophyllin levels were 0.2 mcg/ml (normal
range 10.0~-20.0 mg)." Id. The surveyors concluded that:
"Eventhough [sic] the result was below normal range, no
intervention was indicated."

HCFA has not explained what it intends these findings to
signify. Ms. Mufioz offered no testimony concerning
alleged deficiencies in the treatment provided to patient
# 10. HCFA made no argument in its posthearing brief
concerning alleged deficiencies in the treatment provided
to patient # 10. There is no evidence in the record
defining or explaining any of the technical language
contained in the surveyors! findings. I can find no
deficiency in the services provided to patient # 10 by
Petitioner Fajardo in the absence of a credible
explanation from HCFA as to why the findings by the State
agency surveyors establish a deficiency.

7. Discharge of 66 patients

The surveyors found that Petitioner Fajardo had
discharged 66 patients between May 27, 1994 and July 5,
1994, with findings that these patients were medically
stable. C-94-383, HCFA Ex. 21 at 14. The surveyors
concluded that these discharges showed that Petitioner
Fajardo was not complying with admission criteria for
terminally ill patients.

I do not conclude that these findings, assuming them to
be true, support a determination that Petitioner Fajardo
was not complying with the physician services condition
of participation. First, HCFA has not shown how
admission criteria relate to the services which
Petitioner Fajardo must provide pursuant to 42 C.F.R. §
418.86. The fact that Petitioner Fajardo discharged many
of its patients in a short period of time does not prove
that its physician employees were not providing the
patients with required medical services. Second, as I
find above, the fact that Petitioner Fajardo discharged
many of its patients between the first survey, conducted
on April 19, 1994, and the resurvey of July 6, 1994 may
show an attempt by Petitioner Fajardo to bring its
operations into compliance with HCFA conditions of
participation.

At the hearing, I noted that a persistent theme in HCFA's
cases against all of the Petitioners appeared to be that
these Petitioners had treated many patients who were not,
in fact, eligible to receive hospice care. That may be
so. But HCFA made no specific allegation that these
alleged practices by the Petitioners constituted a
41

failure by them to comply with participation
requirements. Nor am I convinced that HCFA may use
generalized allegations of improprieties by the
Petitioners as a technique to strengthen less-than-
probative evidence relating to allegations of failures by
the Petitioners to comply with specific conditions of
participation.

F. Conclusion as to Petitioner Fajardo

HCFA did not establish a prima facie case that Petitioner
Fajardo failed to comply with conditions of
participation. Therefore, HCFA did not prove a basis for
terminating the participation in Medicare of Petitioner
Fajardo.

IV. Analysis of the issues and evidence relating to
Petitioner Caguas (Docket No. C-94~-384)

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

At the July 8, 1994 resurvey of Petitioner Caguas, the
State survey agency surveyors found that Petitioner
Caguas failed to comply with conditions of participation
stated in the following regulations: general provisions,
42 C.F.R. § 418.50 and medical director, 42 C.F.R. §
418.54. The issue in this case is whether Petitioner
Caguas failed to comply with either of these conditions
of participation.

I make the following findings of fact and conclusions of
law with respect to Petitioner Caguas:

1. HCFA did not prove that Petitioner Caguas
failed to comply with the condition of
participation contained in 42 C.F.R. § 418.50.
Page 42.

2. HCFA did not prove that Petitioner Caguas
failed to comply with the condition of
participation contained in 42 C.F.R. § 418.54.
Pages 42 ~ 44.

3. HCFA did not prove a basis for terminating
the participation in Medicare of Petitioner
Caguas. Page 44.
42

B. The alleged failure of Petitioner Caguas to
comply with the general provisions condition of
participation contained in 42 C.F.R. § 418.50

HCFA makes the same argument concerning the alleged
failure of Petitioner Caguas to comply with the general
provisions condition of participation as it makes with
respect to Petitioner Fajardo. Here, as it did with
respect to Petitioner Fajardo, HCFA asserts that a
failure by a hospice to comply with a condition of
participation stated elsewhere in the regulations also is
a failure to comply with the general provisions
condition.

I do not find that HCFA proved that Petitioner Caguas
failed to comply with the requirements of 42 C.F.R. §
418.50, for the same reasons that I found that HCFA
failed to meet its burden with respect to Petitioner
Fajardo. HCFA's argument is moot, because HCFA failed to
prove that Petitioner Caguas did not comply with other
conditions of participation. Furthermore, I do not agree
with HCFA's assertion that the Secretary intended that 42
C.F.R. § 418.50 be read to mandate a finding that a
hospice be found not to have complied with the condition
of participation stated in the regulation if it is found
not to have complied with a condition of participation
stated elsewhere.

Cc. The alleged failure of Petitioner Caguas to
comply with the medical director condition of
participation contained in 42 C.F.R. § 418.54

HCFA argues that the findings of the surveyors at the
July 8, 1994 resurvey of Petitioner Caguas establish that
the Petitioner was not complying with the medical
director condition of participation as of that date. The
gravamen of HCFA's argument was that the medical director
was failing to exercise his supervisory responsibility
over the medical component of Petitioner Caguas'
operations to assure that only patients who were
terminally ill were being treated by Petitioner Caguas.

I conclude that HCFA did not prove that Petitioner Caguas
was not complying with the medical director condition of
participation. I base this conclusion on the following:

© As was the case with Petitioner Fajardo, the
duties of the medical director of Petitioner Caguas
were the subject of a corrective action plan that
HCFA accepted on June 23, 1994. C~94-383, HCFA Ex.
18. However, HCFA failed to offer as evidence the
portion of the corrective action plan that described
43

the duties of the medical director.”) The critical
compliance issue related to the medical director
condition is whether Petitioner Caguas was complying
with the plan that HCFA accepted. I cannot find
that Petitioner Caguas was failing to comply with
its obligations, given HCFA's failure to offer as
evidence the document which describes those
obligations.

Cc As was also the case with Petitioner Fajardo, the
witnesses whose testimony HCFA offered concerning
the compliance of Petitioner Caguas with conditions
of participation made no attempt in their testimony
to explain whether Petitioner Caguas was complying
with the medical director portion of its corrective
action plan. Tr. at 218 - 235, 496 - 515. It is
unclear whether these witnesses even reviewed that
part of the plan as an element of their resurvey of
Petitioner Caguas.

© I do not find that HCFA proved that any of the
patients whose records are at issue were not
terminally ill. The two witnesses whom HCFA called
to testify about the alleged failure of Petitioner
Caguas to comply with the medical director condition
were Alba Mufioz and Mirta Fernandez. Both Ms. Mufioz
and Ms. Fernandez are nurses (I discussed Ms. Mufioz'
qualifications in Part III of this decision). HCFA
offered both of these witnesses as experts. These
witnesses opined that the various patient records
they reviewed at the July 8, 1994 resurvey failed to
establish that the patients were terminally ill. c-
94-384, HCFA Ex. 19 at 2 ~ 4; Tr. at 221, 530. From
this, HCFA asserts that the medical director was
failing to exercise his supervisory responsibility
to assure that Petitioner Caguas treated only
terminally ill patients.

HCFA did not establish that either Ms. Mufioz or Ms.
Fernandez possesses the necessary qualifications to opine
whether a patient's treatment record establishes that
patient to be terminally ill. Nothing in these

As was the case with Petitioner Fajardo, HCFA
also attempted to offer a purported English translation
of the medical director portion of the corrective action
plan as an appendix to its posthearing brief. HCFA
posthearing brief (Caguas), Appendix. Petitioner Caguas
objected to my admitting this document into evidence. I
do not accept it for the same reasons that I refused to
accept HCFA's offer concerning Petitioner Fajardo.
44

witnesses' backgrounds, including their education and
training as nurses, would suggest that they possess the
medical training and expertise to make such judgments.
Neither witness gave testimony at the hearing to suggest
that she possessed the experience to offer such a
judgment.

HCFA argues that the testimony of Ms. Mufioz and Ms.
Fernandez is expert testimony that must be accorded
"immense weight." HCFA posthearing brief (Caguas) at 17.
As I conclude at Part II.A.3. of this decision, State
survey agency surveyors may qualify as experts and their
testimony may constitute important expert opinion.
However, an expert witness' opinion as to an issue is
probative only insofar as it is supported by the
credentials of that expert to render an opinion. Here, I
find that HCFA failed to prove that Ms. Mufioz and Ms.
Fernandez have the training, skills, or knowledge to make
medical judgments from patients' treatment records as to
whether the patients are terminally ill.

As I observed in the case of Petitioner Fajardo, the
Secretary has deternined that only a physician is
qualified to decide whether an individual is terminally
ill, and thus eligible for hospice care. 42 C.F.R. §§
418.20 - 418.22. HCFA had available at the hearing a
physician, Dr. Rivera, who might have offered persuasive
evidence as to whether the records of the patients in
question showed these patients to be terminally ill.
However, HCFA did not ask Dr. Rivera any questions about
these records.

D. Ci usi as_to Petitioner Caqua

HCFA did not establish a prima facie case that Petitioner
Caguas failed to comply with conditions of participation.
Therefore, HCFA did not prove a basis for terminating the
participation in Medicare of Petitioner Caguas.

V. Analysis of the issues and evidence relating to
Petitioner Cayey (C-94~-386)

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

At the July 20, 1994 resurvey of Petitioner Cayey, the
State survey agency surveyors found that Petitioner Cayey
failed to comply with conditions of participation stated
in the following regulations: general provisions, 42
C.F.R. § 418.50; medical director, 42 C.F.R. § 418.54;
45

and physician services, 42 C.F.R. § 418.86.” C-94-386,
HCFA Ex. 21. The issue in this case is whether
Petitioner Cayey failed to comply with any of these
conditions of participation.

I make the following findings of fact and conclusions of
law with respect to Petitioner Cayey:

1. HCFA did not prove that Petitioner Cayey
failed to comply with the condition of
participation contained in 42 C.F.R. § 418.50.
Page 45.

2. HCFA did not prove that Petitioner Cayey
failed to comply with the condition of
participation contained in 42 C.F.R. § 418.54.
Page 46.

3. HCFA did not prove that Petitioner Cayey
failed to comply with the condition of
participation contained in 42 C.F.R. § 418.86.
Page 47 ~ 50.

4. HCFA did not prove a basis for terminating
the participation in Medicare of Petitioner
Cayey. Page 50.

B. The alleged failure of Petitioner Cayey to
comply with the general provisions condition of
participation contained in 42 C.F.R. § 418.50

HCFA makes the same argument concerning the alleged
failure of Petitioner Cayey to comply with 42 C.F.R. §
418.50 as it did with Petitioners Fajardo and Caguas. I
do not find that HCFA proved that Petitioner Cayey failed
to comply with this regulation for the same reasons that
I concluded that HCFA did not prove that Petitioners
Fajardo and Caguas faile@ to comply with the regulation.

c. The alleged failure of Petitioner Cayey to

comply with the medical director condition of
participation contained in 42 C.F.R. § 418.54

The medical director of a hospice is required to
supervise the delivery of the medical component of
hospice care. This includes assuring that physicians
employed by the hospice provide care in accord with the

2 The statement of deficiencies states
incorrectly that Petitioner Cayey was noncompliant with
physician services, 42 C.F.R. § 418.85.
46

requirements of 42 C.F.R. § 418.86. HCFA asserts that
Petitioner Cayey failed to comply with the medical
director condition of participation. HCFA bases this
argument on its assertion that, as of the July 20, 1994
resurvey, Petitioner Cayey was not complying with the
physician services condition. Therefore, according to
HCFA, the hospice medical director was deficient in
supervising the delivery of physician services.

The statement of deficiencies which the State survey
agency surveyors prepared after the July 20, 1994
resurvey of Petitioner Cayey asserted several alleged
specific failures by the medical director to supervise
the delivery of care. C-94+386, HCFA Ex. 21 at 2 - 3.
However, in its posthearing brief, HCFA did not assert
that any of these alleged specific failures constituted
proof that Petitioner Cayey had failed to meet the
medical director condition of participation. HCFA
posthearing brief (Cayey) at 15. Rather, HCFA argues
only that the alleged failure of Petitioner Cayey to
comply with the medical director condition derives from
its alleged failure to comply with the physician services
condition.

I do not find that HCFA proved that Petitioner Cayey
failed to comply with the medical director condition of
participation. First, as I discuss below at Part V.D.
of these decisions, HCFA did not prove that Petitioner
Cayey had failed to comply with the physician services
condition of participation. HCFA's argument concerning
Petitioner Cayey's alleged noncompliance with the medical
director condition thus fails.

Furthernore, I do not find that HCFA proved a condition-
level failure of Petitioner Cayey to comply with the
medical director condition of participation, even
assuming that HCFA proved some failures by Petitioner
Cayey to meet the physician services requirement of
participation. I am not persuaded by the evidence, of a
few possible failures to deliver physician services in
accord with Medicare participation requirements, that
there was an overall failure by the medical director to
supervise the delivery of medical services.

D. The alleged failure of Petitioner Cayey to
comply with the physician services condition of
participation contained in 42 C.F.R. § 418.86

HCFA asserts that Petitioner Cayey was deficient in
providing physician services. The evidence on which HCFA
relies to prove this assertion is the findings of the
State survey agency surveyors. At the July 20, 1994

47

resurvey of Petitioner Cayey, State agency surveyors
found that, in two patient records that they reviewed,
there were missing orders for physician services. C-94-
386, HCFA Ex. 21 at 5 - 6. Additionally, they found
that, in one of the two records, there was evidence that
services had been provided for which no written
justification by a physician existed. Id. at 6.

I am not persuaded by this evidence that Petitioner Cayey
failed to comply with the physician services condition of
participation.

I find this evidence not to be persuasive, for the
following reasons:

© As with Petitioner Fajardo, HCFA did not offer
proof that there exists any deficiency in the
services provided by the attending physicians of the
patients. HCFA's argument thus assumes facts which
it did not prove, that there exist underlying
deficiencies in the services provided by the
patients' attending physicians which the hospice
physician became responsible for providing.

© HCFA did not prove that physicians failed to
provide necessary services to patients of Petitioner
Cayey. The fact that written orders may not exist
for all services that were provided to a patient
does not mean necessarily that the services that
were ordered by the physicians were not provided.
For example, with respect to patient # 1, the State
agency surveyors found that there were no orders in
the patient's record for a nasogastric tube, a
"Foley" (apparently, a Foley catheter), and
"Osmolite 60 cc/hr." C-94-386, HCFA Ex. 21 at 5 -
6. However, the treatment record for patient # 1
establishes that this patient was in fact receiving
all of these items or services. C-94-386, HCFA Ex.
25 at 4, 16, 18, 20, 26. The State agency surveyors
did not find that these services were unnecessary or
that they were not being provided correctly to the
patient.

© HCFA did not prove that failure to document the
ordering of a service is necessarily a failure to
provide a service, within the meaning of 42 C.F.R. §
418.86. The regulation does not contain specific
record-keeping requirements. It does not state or
suggest that a hospice is deficient in meeting
patient needs if it provides medical care for
patients, but fails to document that care with
complete accuracy.
48

Arguably, the evidence which HCFA offered concerning the
alleged failure of Petitioner Cayey to record orders for
physician services or treatment delivered pursuant to
those orders might prove a failure by Petitioner Cayey to
comply with the record-keeping requirements of 42 C.F.R.
§ 418.74. That regulation requires a hospice to maintain
complete and detailed records of all services that are
provided to a patient. However, HCFA has not argued that
the alleged failures by Petitioner Cayey to maintain
records of orders for treatment or of treatments provided
constitute deficiencies under 42 C.F.R. § 418.74.
Therefore, I make no findings as to whether Petitioner
Cayey was deficient under 42 C.F.R. § 418.74.

It is certainly possible that, in a given circumstance, a
failure by a physician to document adequately the reason
why he or she orders or provides care to a patient, or to
explain the treatments that he or she provides, may
constitute a deficiency in the providing of care to that
patient. But I am not satisfied that it follows
automatically that a failure to record accurately a
treatment order or the failure to explain a treatment
constitutes a failure to meet the medical needs of a
patient. HCFA has the burden of proving why that is so
in a particular instance.

Here, HCFA did establish a prima facie case that failure
to provide a written order for the changing of a Foley
catheter is a deficiency in the underlying service (the
administration of the catheter to the patient). I am
persuaded by Dr. Rivera's testimony that, in the case of
patient # 1, failure to provide written instructions for
the changing of the patient's catheter might impair the
appropriate use of the catheter. Tr. at 653 - 654.3

However, HCFA did not prove that failure to document
other services is a deficiency. HCFA did offer the
testimony of one of the surveyors, Delia Fortis, to show
that a written physician's order is a necessary
prerequisite for obtaining laboratory tests. Tr. at 394.
This testimony was offered to prove that failure to

Again, HCFA did not prove that the patient's
attending physician failed to issue written orders for
the administration and management of the Foley catheter.
It proved only that a physician whom HCFA asserts to be
the hospice physician did not issue such orders.

However, a failure by the hospice physician to issue such
orders would be a deficiency only if HCFA proved that
such orders had not been made by the patient's attending
physician.
49

maintain a written order by a physician for laboratory
tests supplied to patient # 2 constituted a deficiency in
providing physician services to that patient. C-94-386,
HCFA Ex. 21 at 6. However, the fact is that, in the case
of patient # 2, tests were obtained for that patient.
Thus, even if a written order signed by a physician
usually is a prerequisite for obtaining test results, the
evidence in this case offered by HCFA proves that the
results were obtained without a written order. HCFA has
offered nothing to show how this would have adversely
affected the health of patient # 2.

© HCFA did not prove that a single deficiency in
the providing of physician services by Petitioner
Cayey, assuming that these services had not been
provided by the patient's attending physician, is so
substantial as to constitute a failure to comply
with the condition of participation contained in 42
C.F.R. § 418.86. As I conclude at Part II.A.2. of
these decisions, HCFA's burden is to prove that a
deficiency constitutes a substantial failure to
comply with participation requirements. The test
for substantial noncompliance is stated in 42 C.F.R.
§ 488.24. In order to be substantial, a deficiency
or deficiencies must be "of such character as to
substantially limit the provider's . . . capacity to
render adequate care or which adversely affect the
health and safety of patients." 42 C.F.R. § 488.24.

I am not satisfied that this test has been met here. In
this case, the only deficiency in the providing of
physician services that HCFA arguably proved was the
failure of a physician to provide written instructions
for maintenance of one patient's Foley catheter. I am
not satisfied that this one possible deficiency proves an
overall inability by Petitioner Cayey to provide adequate
care to its patients.

Furthermore, I am not convinced that one deficiency in
management of a patient's Foley catheter proves that
Petitioner Cayey engaged in practices which adversely
affected the health and safety of its patients ina
manner which is so substantial as to constitute a failure
under 42 C.F.R. § 488.24. At most, the evidence proves a
potential to adversely affect the health and safety of
one patient.

Dr. Rivera testified that, where a Foley catheter is not
changed regularly, there exists an increased risk that a
patient may suffer from an infection. Tr. at 654 - 655.
However, Dr. Rivera did not review the specific patient
record at issue. She did not testify that the patient
50

was put at risk. There is no evidence of record to show
that the patient suffered from an infection as the result
of improper management of the Foley catheter.

VI. Conclusions

I conclude that HCFA did not prove, by a preponderance of
the evidence, that Petitioners Fajardo, Caguas, and Cayey
were not complying with conditions of participation in
Medicare as of the dates of the resurveys that were
conducted of these Petitioners in July 1994. HCFA has
not proven a basis for terminating the participation in
Medicare of these Petitioners.

/s/

Steven T. Kessel
Administrative Law Judge