Opinion ID: 786733
Heading Depth: 2
Heading Rank: 4

Heading: The Amount of the Penalty

Text: 52 There are two issues germane to the distinct issues of the reasonableness of the penalty amount: (1) Crestview's ability to pay and (2) whether the ALJ can consider the facility's history of noncompliance in evaluating the reasonableness of a penalty levied against a new owner.
53 Crestview asserts that the imposition of a $400 per-day penalty was unreasonable because it cannot afford to pay the penalty. Crestview's argument fails for two reasons. First, the ALJ justifiably refused to evaluate this claim because Crestview did not raise it in its initial hearing request. In its hearing request, Crestview never mentioned its financial condition, in derogation of the regulation that hearing requests must identify the specific issues with which the party disagrees. 42 C.F.R. § 498.40(b); see Cmty. Nursing Home v. CMS, Docket No. A-01-86, CR 770, DAB No. 1807, 2002 WL 125182 (H.H.S.), at 9 (Jan. 11, 2002) (holding that untimely arguments regarding ability to pay are deemed waived). Crestview disingenuously charges that the ALJ spurned Crestview's financial-condition argument even though CMS raised the issue of ability to pay in its motion for summary judgment, but such protestations ignore the reality that CMS discussed ability to pay only in response to Crestview's novel introduction of the argument in its prehearing brief. 54 Second, given that the ALJ properly refused to admit the Cummins declaration (because it was tendered after the closing of the record), Crestview presented no evidence of an inability to pay. Crestview did not introduce the Cummins declaration until nearly a year after the parties exchanged exhibit and witness lists and the record was considered closed. Crestview's arguments that CMS gained an unfair advantage because CMS submitted additional declarations to rebut Cummins's declaration falls flat because ALJ Hughes excluded CMS's new evidence, as well as Crestview's. Moreover, even if Cummins's declaration were a part of the record, summary judgment was still proper. While Cummins's declaration suggests that Crestview in fact was suffering from heavy losses, financial losses, even if they are severe, are not enough by themselves to establish an inability of a provider to pay a civil money penalty. Wellington Specialty Care & Rehab. Ctr. v. Health Care Fin. Admin., Docket No. C-97-252, CR548, 1998 WL 673818 (H.H.S.), at 18 (Sept. 15, 1998). The proper standard for ability to pay is whether the penalty amount would put the facility out of business. Milpitas Care Ctr. v. CMS, Docket No. A-02-139, CR932, DAB No. 1864, 2003 WL 974618 (H.H.S.), at 12 (Feb. 5, 2003). Crestview never asserted that paying the $27,000 penalty would put it out of business, and thus its ability-to-pay argument must fail.
55 Crestview also contends that the ALJ erred when it accounted for the facility's history of noncompliance in evaluating Crestview's penalty. There was no error, and on remand the ALJ can again take into account the facility's history of violations when considering the reasonableness of the penalty. The guiding regulations permit exactly such consideration of past noncompliance: In determining the amount of penalty, CMS does ... take into account ... (1) The facility's history of noncompliance, including repeated deficiencies. 42 C.F.R. § 488.438(f)(1). In adopting its regulations, the HHS specifically stated, 56 A facility's prior compliance history should be considered regardless of a change in ownership. A facility is purchased as is. The new owner acquires the compliance history, good or bad, as well as the assets. While we agree that after consideration of the facility's compliance history, [CMS] or the State may conclude that such history is no longer a valid predictive factor of the facility's ability to achieve and maintain compliance (for example, following a change of ownership where the new owner cleans house) the burden of proof is on the new owner to demonstrate that poor past performance no longer is a predictive factor. 57 Medicare and Medicaid Programs; Survey, Certification and Enforcement of Skilled Nursing Facilities and Nursing Facilities, 59 Fed.Reg. 56,116, 56,174 (Nov. 10, 1994) (emphasis added) (quoted by CarePlex of Silver Spring v. Health Care Fin. Admin., Docket No. A-98-94, CR536, DAB No. 1683, 1999 WL 985363 (H.H.S.), at 7 (Apr. 13, 1999)); see also CarePlex, at 7 ([This language] presupposes that the facility's history remains a relevant consideration after a change of ownership, but does not foreclose a new owner from rebutting the presumption that the facility's history remains predictive of likely future compliance.). Crestview cannot be penalized for noncompliance that is the responsibility of prior owners in the sense that a penalty cannot be levied against Crestview for such noncompliance by others. But, according to the regulations, Crestview can be charged a $400 penalty, as opposed to a $350 penalty, based upon [t]he facility's history of noncompliance. 42 C.F.R. § 488.438(f)(1). The regulations clearly demonstrate that the ALJ did not err when it accounted for the facility's past deficiencies, regardless of ownership. Naturally, upon remand, Crestview can rebut the presumption that past noncompliance accurately predicts future problems. If Crestview can show that it cleaned house when it acquired this particular facility, the facility's history of past noncompliance may no longer be a factor, but conducting such an analysis is not our task today.