Opinion ID: 786733
Heading Depth: 2
Heading Rank: 3

Heading: The ALJ's Summary Disposition of Crestview's Claim

Text: 16 Evaluating Crestview's claim that it had a right to an in-person hearing plunges us deep into the thicket of statutes, published regulations, and interpretive rules governing administrative hearings conducted by CMS. The first question is whether the ALJ could resolve Crestview's appeal of the penalty without conducting an in-person hearing. The second subsequent question is whether, assuming an in-person hearing is not always required, the ALJ properly denied Crestview an in-person hearing in this particular case. We answer the first question in the affirmative, but the second in the negative: HHS's interpretive rule for summary proceedings is valid, but the ALJ misapplied it to Crestview's appeal.
17 The starting point is the Administrative Procedure Act (APA), which establishes a detailed set of procedures for formal agency adjudications. These procedures mirror the elements of a judicial trial and establish the proper method of conducting an oral evidentiary hearing. See 5 U.S.C. §§ 554(a), 556(d), 557. Agencies need only employ this set of formal adjudication procedures if there is an adjudication required by statute to be determined on the record after opportunity for an agency hearing. 5 U.S.C. § 554(a). Lower courts have explicitly held that a formal adjudication featuring an oral evidentiary hearing is required by the APA only when a statute explicitly calls for a hearing on the record. Chem. Waste Mgmt., Inc. v. EPA, 873 F.2d 1477, 1481-82 (D.C.Cir.1989); 1 Richard J. Pierce, Administrative Law § 8.2, at 536-39 (collecting cases) (4th ed.2002). The Supreme Court has also implied that formal adjudication procedures are only necessary when a statute uses the magic words on the record. Cf. United States v. Fla. E. Coast Ry., 410 U.S. 224, 237-38, 93 S.Ct. 810, 35 L.Ed.2d 223 (1973) (holding that formal rulemaking procedures prescribed by 5 U.S.C. §§ 556, 557 are required only when a statute mandates that rules be made on the record); Vt. Yankee Nuclear Power Corp. v. Natural Res. Def. Council, Inc., 435 U.S. 519, 548, 98 S.Ct. 1197, 55 L.Ed.2d 460 (1978) (ruling that courts cannot require an agency to use more formal rulemaking procedures than those required by statute); PBGC v. LTV Corp., 496 U.S. 633, 654-55, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990) (upholding an informal agency adjudication without an oral hearing when the statute did not require a hearing to be on the record). 18 The statute authorizing the imposition of penalties on skilled nursing facilities, such as Crestview, requires CMS to hold a hearing on the record. If skilled nursing facilities fail to meet an applicable requirement, the HHS Secretary may impose a civil money penalty in an amount not to exceed $10,000 for each day of noncompliance. 42 U.S.C. § 1395i-3(h)(2)(B)(ii). The provisions of section 1320a-7a of this title (other than subsections (a) and (b)) shall apply to a [penalty] ... in the same manner as such provisions apply to a penalty or proceeding under section 1320a-7a(a) of this title. Id. The referent section provides, 19 The Secretary shall not make a determination adverse to any person under subsection (a) or (b) of this section until the person has been given written notice and an opportunity for the determination to be made on the record after a hearing at which the person is entitled to be represented by counsel, to present witnesses, and to cross-examine witnesses against the person. 20 42 U.S.C. § 1320a-7a(c)(2) (emphasis added). The statute clearly includes the magic words that invoke the panoply of procedures described by the formal-adjudication provisions of the APA. 21 In conjunction with the use of the statutory language on the record, the regulations regarding CMS hearings strongly imply that an in-person, oral evidentiary hearing is generally required. Under the statutory authority to publish rules and regulations, see 42 U.S.C. § 1302(a), HHS has promulgated regulations concerning administrative hearings. The regulations establish procedures for reviewing initial determinations that CMS makes. 42 C.F.R. § 498.3(a)(1). [I]nitial determinations encompass: (1) a finding of noncompliance that results in the imposition of a remedy specified in § 488.406 of this chapter, id. at § 498.3(b)(13), and (2) [t]he level of noncompliance found by CMS in a [skilled nursing facility] or [nursing facility], but only if a successful challenge on this issue would affect ... the range of [penalty] amounts that CMS could collect. Id. at § 498.3(b)(14)(i); see also id. at § 488.406 (granting CMS authority to levy penalties). The regulations further state, Under the circumstances specified in § 431.153(g) and (h) of this chapter, [a nursing facility] has a right to a hearing before an ALJ, to request Board review of the hearing decision, and to seek judicial review of the Board's decision. Id. at § 498.5(k); see also id. at § 488.330(e)(3)(ii) (stating that the provisions of part 498 ... apply when the following providers, including skilled nursing facilities, request a hearing on ... certification of noncompliance leading to an enforcement remedy). 22 Subpart D of part 498 establishes the regulations for CMS hearings and strongly suggests that oral hearings are required. Only one regulation in this subpart actually uses the term oral hearing, but the statutory requirement that hearings be on the record implies that the term hearing, as used throughout this subpart of the regulations, refers to a formal adjudicatory hearing, which includes an in-person component. Section 498.66 states, If the affected party waives the right to appear and present evidence, the ALJ need not conduct an oral hearing, except during certain circumstances that are inapplicable here. Id. at § 498.66(b). This provision powerfully implies that if the affected party does not waive the right to present evidence, the ALJ must conduct an oral hearing. Other regulations lead to the same conclusion. They fix a time and place for the hearing and a method for changing the time and place. Id. at §§ 498.52, 498.53. They describe the conduct of the hearing. Id. at §§ 498.60(a) (The hearing is open to the parties and their representatives....); 498.60(b)(1) (The ALJ ... receives in evidence the testimony of witnesses and any documents that are relevant and material.); 498.60(b)(3) (The ALJ decides the order in which the evidence and the arguments of the parties are presented and the conduct of the hearing.). The regulations also contain procedures for the receipt of evidence, id. at § 498.61, and rules governing witness testimony. Id. at § 498.62. 23 HHS has created an internal procedure that provides an alternative to in-person, oral hearings. The HHS procedure reads, 24 An in-person hearing (i.e., a hearing at which witnesses are called and testify) is not the only vehicle for the [ALJ] to hear and decide the case. If, after giving the parties the opportunity to present their views, the judge determines that there are no genuine issues of material fact, the judge might decide the case based on the undisputed facts and the applicable law. If there are genuine issues of material fact which can be decided on the basis of documentary evidence, the judge might proceed without an in-person hearing. 25 Dep't of Health & Human Servs., Dep't Appeals Bd., Civil Remedies Div., Procedures, at 1, available at http:// www.hhs.gov/dab/civil/procedurescms.html (last visited Feb. 3, 2004). This rule constitutes an interpretive rule that is issued by an agency to advise the public of the agency's construction of the statutes and rules which it administers. Shalala v. Guernsey Mem'l Hosp., 514 U.S. 87, 99, 115 S.Ct. 1232, 131 L.Ed.2d 106 (1995) (quotation omitted). Interpretive rules do not require notice and comment[;] ... they also do not have the force and effect of law and are not accorded that weight in the adjudicatory process. Id. We generally give substantial deference to an agency's interpretations of its own regulations. St. Francis Health Care Ctr. v. Shalala, 205 F.3d 937, 943 (6th Cir.2000). However, this deference is limited when an interpretation is plainly erroneous or inconsistent with the [published] regulation. Id. at 944 (quoting Harris County Hosp. Dist. v. Shalala, 64 F.3d 220, 221 (5th Cir.1995)). The reason for this limited deference is to prevent agencies from gaming the rulemaking provisions of the APA, see 5 U.S.C. § 553, by creating interpretive regulations that undercut regulations passed through notice-and-comment rulemaking. 26 Our deference to the HHS's interpretive rule, which is akin to the summary judgment standard contained in Federal Rule of Civil Procedure 56, depends on whether the interpretive rule can be reconciled with the CMS regulations that carry the force of law. On its face, the internal procedure appears inconsistent with the statutory and regulatory provisions because the procedure offers an alternative to an in-person hearing, yet the plain meaning of on the record in the statute and the implications of the regulations suggest that there is only one vehicle for an ALJ to decide a case: an oral evidentiary hearing. 27 Nonetheless, it would seem strange if disputes could not be decided without an oral hearing when there are no genuine issues of material fact. Given that federal district courts can decide cases as a matter of law without an oral hearing when it is clear there are no genuine material disputes to be resolved in a trial, it would be bizarre if administrative agencies, which are in many respects modeled after the federal courts and which indeed often have more informal proceedings than federal courts, could not follow a similar rule. See Fed.R.Civ.P. 56; 1 Richard J. Pierce, Administrative Law § 8.3, at 542 (Even when an agency is required by statute or by the Constitution to provide an oral evidentiary hearing, it need do so only if there exists a dispute concerning a material fact.). It may make as good, if not more, policy sense to have a standard for summary judgment in HHS administrative proceedings as it does to have one in federal court proceedings. See Puerto Rico Aqueduct & Sewer Auth. v. EPA, 35 F.3d 600, 605-07 (1st Cir.1994) (describing the structure and validity of administrative summary judgment and stating, summary judgment often makes especially good sense in an administrative forum, for, given the volume of matters coursing through an agency's hallways, efficiency is perhaps more central to an agency than to a court). Furthermore, the Supreme Court has upheld the use of summary procedures in other administrative contexts, although only when a party fails to convince an agency at the threshold that the agency should waive a rule or regulation that would otherwise prevent the party from adjudicating its claim. Weinberger v. Hynson, Westcott & Dunning, Inc., 412 U.S. 609, 621, 93 S.Ct. 2469, 37 L.Ed.2d 207 (1973); Fed. Power Comm'n v. Texaco, Inc., 377 U.S. 33, 39-45, 84 S.Ct. 1105, 12 L.Ed.2d 112 (1964). Therefore, HHS's interpretive rule allowing ALJs to grant summary judgment without an in-person hearing is valid. 28
29 While HHS's interpretive rule is valid, we hold that it was improperly applied here, and thus summary judgment was not proper. Consequently, we remand this case to the ALJ for an oral hearing. The ALJ erred both procedurally and substantively in deciding the case without an oral hearing. 30
31 The procedure employed by the ALJ was inconsistent with the interpretive rule. The ALJ canceled the in-person hearing on December 12, 2001, after the record had been closed and both parties had filed prehearing briefs, but before any motion for summary judgment had been filed. The prehearing briefs, to which all affidavits and declarations were appended, were designed only to give the ALJ a better idea of what to expect during the hearing, to state the facts that each party intended to prove at the hearing, and to explain how the evidence would help to prove these facts. See J.A. at 143 (Order to Submit Briefing). There was no warning that these briefs would be used to determine whether an in-person hearing should occur, and the phrasing of the order requesting the briefs did little to reduce the expectancy of a hearing. 32
33 Summary disposition of this case without an oral hearing was also improper because there were indeed genuine issues of material fact that may have impacted the determination of whether the penalty was reasonable. The penalty was levied against Crestview because of multiple different infractions. We hasten to note that Crestview has not disputed every alleged deficiency. While Crestview challenges each aspect of the grant of summary judgment, which held that the penalty was reasonable, it is clear that for several of the acts of noncompliance there are no disputes or genuine issues of material fact. 34
35 First, there was no dispute that Crestview failed to provide adequate emergency power. During the August 12, 1999, survey, the Crestview staff was unable to start the emergency generator on three separate occasions. There was also no indication that the generator had been tested on a weekly basis, as is required. Crestview's response that the generator had always worked before the unknown and unexplained, J.A. at 263 (Hrybiniak Decl.), failure to start in front of the inspector does not contradict the basic observation that the generator's malfunction deprived Crestview of the ability to provide emergency power. 36 Second, there is no factual dispute regarding all but one of the twenty-seven alleged housekeeping violations. To counter the surveyors' reports of these violations, Crestview presented evidence of cleaning schedules, procedures, and duties in an attempt to demonstrate that the facility is clean, safe, and well maintained. J.A. at 264 (Hrybiniak Decl.). This evidence established only that Crestview failed in the execution of its procedures, because the surveyors' observations showed that the facility was noncompliant. Crestview's contention that the facility may be observed as unclean at any time because the facility is constantly being used does not rebut the evidence of noncompliance amassed during the survey. 37 Third, Crestview has not offered evidence challenging most of the alleged food-service deficiencies. The ODH observed seventeen different violations of the regulation that skilled nursing facilities [s]tore, prepare, distribute, and serve food under sanitary conditions. 42 C.F.R. § 483.35(h)(2). While Crestview challenged seven of the alleged violations, offering alternative rationales for the infractions, Crestview presented no evidence challenging the other ten deficiencies aside from general statements of Crestview's diligence in storing and preparing food in a sanitary fashion, which do little to contest specific claims of noncompliance. 38 Fourth, Crestview presented no evidence to contest its failure to provide at least twelve hours of in-service training each year for its nurse aides. 42 C.F.R. § 483.75(e)(8)(i). Crestview's 1998 records indicate that fourteen of twenty-nine nurse aides received less than twelve hours of in-service training in that year. Crestview did not offer any evidence that these aides actually received the statutorily required training. 1 39
40 Factual disputes attend several of the other alleged acts of noncompliance, but some of these disputes are not material. The initial two disputes involve the cleanliness of the facility environment in general, see 42 C.F.R. § 483.15(h)(2), and of the dietary services in particular, see 42 C.F.R. § 483.35. Summary judgment as to the violation of these regulations was nonetheless proper because these disputes are not material. First, of the twenty-seven alleged sanitary housekeeping violations, there is a factual dispute concerning the cleanliness of the ice-machine. Second, there is a factual dispute regarding seven of the seventeen food preparation infractions. In its opinion, the ALJ assumed that Crestview had not committed these disputed violations, as is proper when evaluating whether summary judgment should be granted. Nonetheless, the ALJ concluded that Crestview still violated the applicable regulations because the large number of undisputed observations demonstrated that Crestview was not in substantial compliance with 42 C.F.R. §§ 483.15, 483.35. As a matter of law, we cannot say that the ALJ erred in reaching this conclusion: the cumulative undisputed infractions suffice to show that Crestview stood in violation of the guiding regulations, even though some of the instances of unsanitary conditions may not have occurred. 41
42 The most serious potential genuine disputes of material fact concern the care of four patients at Crestview's facility (Residents 44, 68, 90, and 93). For Residents 44 and 90, Crestview allegedly failed to provide the necessary care and services to attain or maintain the highest practicable physical, mental, or psychosocial well-being, in accordance with the comprehensive assessment and plan of care. 42 C.F.R. § 483.25. The ODH surveyors observed Residents 44 and 90 without elbow and heel protectors at multiple times during the days of observation, even though physicians had ordered the protectors to be worn at all times because of the high danger of pressure-sore development. 2 Crestview responds by arguing: 1) the residents did not need the protectors because the protectors would not prevent the development of unavoidable sores and because other treatments, such as the use of pressure-relief mattresses, were employed to prevent the development of sores; and 2) the protectors were not observed on the patients because the residents moved, shifted, or displaced the protectors or because the protectors were removed by staff to provide treatment. J.A. at 252-54 (Pet. Prehearing Br.); J.A. at 264-65 (Hrybiniak Decl.). We emphatically reject Crestview's first argument. Crestview cannot defend an alleged failure to adhere to a physician's orders by contending that those orders are incorrect or misguided. If the staff of a facility believes that a resident does not need protectors or some other treatment ordered by a physician, the proper course of action is to rework the patient's comprehensive plan of care in a venue other than HHS's administrative appeals process. Barring such revision, a facility must follow the plan of care. 43 Crestview's second argument is different, because it posits that the patients themselves interfered with the implementation of a physician's order. Crestview did not dispute that the protectors were not on the residents, but rather presented evidence, solely in the form of an administrator's affidavit, that it did not violate § 483.25 because the residents moved or shifted the protectors, the residents were uncooperative with care, or the staff removed the protectors to provide other treatment. This evidence suggests not that the doctor's orders were inappropriate, but rather that Crestview did not fully execute them because of patient interference or because of the necessity of other intervening treatments. Consequently, we must assess whether the mere fact that the surveyors saw two patients without heel protectors, which were supposed to be worn at all times, by itself is a violation of § 483.25. In other words, is Crestview strictly liable such that it cannot offer reasons for the observed deviations from the comprehensive plan of care? 44 There is, unfortunately, not a clear answer. In our lone case evaluating § 483.25, Woodstock Care Ctr. v. Thompson, 363 F.3d 583 (6th Cir.2003), we noted that the HHS DAB did not employ a strict-liability standard when evaluating whether a provider achieved compliance under a subsection of § 483.25, which required a facility to ensure that ... [e]ach resident receives adequate supervision and assistance devices to prevent accidents. Id. at 589 (quoting 42 C.F.R. § 483.25(h)(2)). We affirmed the DAB's imposition of a penalty. Id. at 590. In the administrative decision below, the DAB had held that the regulatory standard does not amount to strict liability or require absolute success in an obviously difficult task ... [and] that an element of reasonableness is inherent in the regulation's requirements. Woodstock Care Ctr. v. Health Care Fin. Admin, Docket No. A-2000-32, CR 623, DAB No. 1726, 2000 WL 900609 (H.H.S.), at 19 (May 30, 2000) (quotation omitted). Subsequent DAB decisions have confirmed this holding as it applies to § 483.25(h)(2), the regulation governing accident prevention. Josephine Sunset Home v. CMS, Docket No. A-03-85, CR 1038, DAB No.1908, 2004 WL 714959, at 10 (Feb. 9, 2004) (affirming Woodstock and listing other cases that decline to impose strict liability). At least one ALJ has also ruled that strict liability does not control § 483.25(m)(2). See Living Ctr. West v. CMS, Docket No. C-00-844, CR 988, 2002 WL 31906315 (H.H.S.), at 9 (Dec. 18, 2002) (ruling that [a]bsent ... a regulation or ruling of strict liability for any `missed dose' under 42 C.F.R. § 483.25(m)(2), the factual circumstances of the deficiency must be considered). 45 The lack of strict liability in § 483.25(h) does not automatically mean that a violation of the general language of § 483.25 is not a strict-liability infraction, but the use of the word practicable in § 483.25 suggests that a party can offer reasons for the failure to adhere to a comprehensive plan of care. The regulation employs the phrase highest practicable physical, mental, and psychosocial well-being, 42 C.F.R. § 483.25 (emphasis added), which suggests that a reasonableness standard inheres in the regulation. Similar to the word adequate in § 483.25(h)(2), practicable intimates that it is possible for a petitioner to show that there was a justifiable reason for the violation of § 483.25. 3 Lacking any other guidance from HHS aside from its statements in Woodstock and progeny, we conclude that § 483.25 is not a strict-liability regulation. 46 Crestview has presented some evidence that Residents 44 and 90 were observed without their ordered skin protectors because the residents removed or shifted the protectors or the staff members removed the protectors to provide other treatment. Crestview's evidence in this vein is not strong, chiefly because Crestview has failed to point to any patient records or preserved staff observations of such behavior, but the relative weakness of the evidence in comparison with the observations by the ODH surveyors is not a proper consideration on summary judgment. Upon remand, the ALJ may conclude in fact that Crestview has not proven it acted reasonably in failing to adhere to these residents' plans of care. Nonetheless, taking the evidence in the light most favorable to Crestview, a genuine dispute of material fact exists regarding the violation of § 483.25. Summary judgment without an in-person hearing on the issue of the asserted violations involving these two residents was thus improper. 47 For Residents 68 and 93, Crestview was cited for failing to prevent the development of avoidable new pressure sores and to provide the necessary treatment to promote healing of preexisting sores. 42 C.F.R. § 483.25(c)(2). To counter the observations of pressure sores on Resident 68, Crestview introduced evidence that Resident 68's pressure sores were clinically unavoidable. Crestview also asserted that Resident 68 rested on a pressure-relieving mattress to help avoid pressure sores and that the pressure sore observed on the left elbow was successfully treated within thirty days. J.A. at 254 (Pet. Prehearing Br.); J.A. at 265 (Hrybiniak Decl.). As regards Resident 93, Crestview presented evidence that the dirty protector reapplied to Resident 93's heel never made contact with his skin, because his foot was rebandaged, such that the allegedly dirty protector did not contribute to the development of any pressure sores. J.A. at 255 (Pet. Prehearing Br.); J.A. at 265 (Hrybiniak Decl.). Crestview did not offer any evidence to dispute the surveyor's observation that a dirty heel protector was earlier applied directly against Resident 93's open pressure sore before the nurse rebandaged the sore and placed the dirty protector against the clean bandage. 48 Crestview appears not to dispute that Resident 68 was not wearing heel protectors, but such a concession does not negate the existence of a genuine dispute of material fact. The evidence as presented, and taken in the light most favorable to Crestview, shows that Crestview took measures to halt the development of avoidable pressure sores and to promote the healing of existing sores. Crestview claims that the pressure sores were unavoidable and that it succeeded in treating other pressure sores affecting Resident 68. Whether these sores were unavoidable and whether Crestview succeeded in preventing and treating the sores are factual questions that should not have been resolved in a summary fashion without a hearing. CMS certainly presented evidence that Crestview violated 42 C.F.R. § 483.25(c)(2), but CMS's evidentiary effort with regards to Resident 68 only reinforces our conclusion that summary judgment (and thus disposition without a hearing) is improper in the face of disputes of material fact. 49 The same cannot be said of Crestview's evidence regarding Resident 93. Crestview has failed to dispute the surveyor's observation that a dirty heel protector had been applied directly against an open pressure sore. That the same dirty heel protector was later reapplied over clean bandages does not remedy the initial instance of unclean treatment of pressure sores. In evaluating Crestview's noncompliance with § 483.25(c)(2), the ALJ did not consider the appropriateness of applying the dirty heel protector to the resident's bandaged feet, but rather focused on the initial application of the protector to an open sore. Because Crestview failed to challenge this observation, there is no genuine dispute of material fact regarding the violation of § 483.25(c)(2) with regards to Resident 93. 50
51 In sum, the ALJ's error in applying the HHS rule that governs the cancellation of in-person hearings sprang from its misapplication of the summary judgment standard, and the dissent falls into the same trap. In evaluating whether summary judgment is proper, we do not weigh the evidence, but rather view the evidence in the light most favorable to Crestview to divine the existence of a genuine dispute of material fact. With regards to the care of Patients 44, 68, and 90 the ALJ, and the dissent, evaluate the strength of Crestview's evidence relative to CMS's evidence, but it is clear such a comparison is improper at this stage of the proceedings. Crestview offers evidence and several different arguments for why its actions were in compliance with the applicable regulations, and CMS proffers different evidence: this is a factual dispute at its essence. This factual dispute makes the cancellation of an in-person hearing improper, but it does not prevent the ALJ from ruling against Crestview upon remand. In reexamining this case, the ALJ may conclude that a $400-per-day penalty is reasonable. The ALJ should determine whether the resolution of the disputed deficiencies in juxtaposition with the deficiencies for which Crestview is undeniably responsible justify the enforcement of the penalty.