Opinion ID: 2783588
Heading Depth: 3
Heading Rank: 3

Heading: Unreviewed Deficiencies

Text: The agency dismissed one deficiency prior to the ALJ hearing and abandoned another 5 deficiencies from the September survey during the hearing. Plott appealed the other 28 (27 remaining from September and 1 from December), but the ALJ reviewed only 3 (2 from September and 1 from December), holding that it was “unnecessary” to review the other 25 undismissed and unsettled surveyor’s disputed allegations. The ALJ reviewed the $500 per day penalty for September 24 through December 3, 2008 from the September survey and upheld it based on 2 of the 33 deficiencies alleged. He also upheld the additional $100 per day penalty from December 4 through December 15, 2008 based on one deficiency from the December survey. The Board only reviewed the three deficiencies that the ALJ upheld, and reversed the December deficiency with the $100 per day penalty. One reason the ALJ and the Board gave for the superfluity of reviewing the other disputed allegations was that Plott had been cited before for urinary tract infections and bedsores. The Board’s reasoning for not reviewing any other deficiencies is basically that the $500 per day penalty could have been imposed for the remaining two September deficiencies, so the unreviewed surveyor’s allegations were “immaterial.” We cannot agree. Unreviewed allegations of deficiency do indeed affect penalties, as the Board decision demonstrates in this case. And the Board’s position that, so long as the penalty is within the maximum permitted, more deficiencies are immaterial, does not make sense. Penalties may be higher or lower within an authorized range, depending on the extent of deficiencies. The Board’s position is analogous to claiming that we need not review a criminal PLOTT NURSING HOME V. BURWELL 23 conviction for five bank robberies, if the statutory maximum sentence on one of them exceeded the sentence imposed. Even though the agency might be authorized to impose the same $500 a day penalty regardless of whether there were 33 deficiencies, or 2 or 1, that does not imply that it reasonably would have. Plott makes a constitutional argument we need not reach, because the statute requires that the claimed deficiencies be reviewed or dismissed when they affect penalties imposed. The right to be heard before the ALJ and the Board arises from the statutory language that “the Secretary shall not make a determination adverse to any person under . . . this section until the person has been given written notice and an opportunity for the determination to be made on the record.”54 Our jurisdiction arises from the provision that “any person adversely affected by a determination of the Secretary under this section may obtain a review of such determination in the United States Court of Appeals.”55 In Shalala v. Illinois Council on Long Term Care,56 the Supreme Court construed this statutory scheme as entitling providers to administrative and judicial review of determinations of penalties, though not, as in that case, of the regulations generally in the absence of any determination or penalty imposed in a particular case. “[T]he relevant determination that entitles a dissatisfied home to review is any determination that a provider has failed to 54 42 U.S.C. § 1320a-7a(c)(2). The Medicare Act, 42 U.S.C. § 1395i(h)(2)(B)(ii), incorporates and applies the review provisions of the Social Security Act to civil money penalties under section 1320a-7a(a). 55 Id. § 1320a-7a(e). 56 529 U.S. 1 (2000). 24 PLOTT NURSING HOME V. BURWELL comply substantially with the statute, agreements or regulations, whether termination or some other remedy is imposed.”57 The Board decision says that “noncompliance findings that are not material to the outcome of the appeal,” need not be addressed by the ALJ. The Board’s theory appears to be that since the ALJ had statutory authority to impose a $500 a day penalty for one, two, three, or 33 deficiencies, $500 would be within the reasonable range regardless, so the unreviewed deficiencies were immaterial to the result. Plott argues, not that immaterial determinations must nevertheless be reviewed, but rather that the unreviewed determinations were, in fact, material. Plott and their amicus, California Association of Health Facilities, have two materiality arguments: (1) that the agency posts the unreviewed deficiencies on a public website, and (2) that the unreviewed deficiencies are used to enhance penalties in future proceedings. We reject the first argument, but are persuaded by the second. The website argument cannot be correct, because the statute requires posting of surveyors’ deficiency allegations before they could possibly be reviewed.58 The statute requires the Secretary to establish a website linking to state surveys such as the one done in this case.59 The website must post staffing data, links to state inspection reports, responses 57 Id. at 21 (internal quotation marks omitted). 58 42 U.S.C. § 1395-3(b)(5)(E). 59 Id. § 1395i-3(i)(1)(A)(ii). PLOTT NURSING HOME V. BURWELL 25 to the reports, complaints, penalties, and other information to assist consumers.60 The website gives nursing homes stars, like hotels on a travel site, from one star to five stars, based partly on unreviewed deficiencies in survey reports. The inspection score is calculated, in part, by using points assigned to deficiencies.61 Review is allowed, but it comes later. The statute requires the Secretary to provide a review process for accuracy, clarity, timeliness, and comprehensiveness of the website’s content.62 If a nursing home disagrees with a rating that it receives, it can contact the “Five-Star hotline.”63 However, this review process only applies to the data provided by the nursing homes themselves such as selfreported quality and staffing data. The only way to dispute survey data is to appeal through the administrative process.64 Plott argues that it is entitled to review of all deficiencies not dismissed, and the Secretary argues that the posting, unlike a 60 Id. § 1395i-3(i)(1)(A)(ii). 61 Centers for Medicare and Medicaid Services, Design for Nursing Home Compare Five-Star Quality Rating System: Technical Users’ Guide (July 2012) at 4, available at https://www.cms.gov/Medicare/ProviderEnrollment-and-Certification/CertificationandComplianc/downloads/ usersguide.pdf. 62 42 U.S.C. § 1395i-3(i)(2)(A). 63 Centers for Medicare and Medicaid Services, Questions and Answers, Improving the Nursing Home Compare Web site: The Five-Star Nursing Home Quality Rating System (December 18, 2008) at 13, available at http://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/ CertificationandComplianc/downloads/QsandAsFinal.pdf. 64 Id. 26 PLOTT NURSING HOME V. BURWELL monetary penalty, is not a “remedy,” so it is not subject to review. Though the matter is not entirely without doubt, we conclude that the Secretary has the better of this argument. The Court in Illinois Council held that though unreviewed deficiencies are posted on the website,65 that nursing homes cannot challenge agency action until “termination or some other remedy is imposed.”66 Readers of the website deciding not to put their relatives in low-rated nursing homes is a not a “remedy” under the statute.67 The penalty is imposed, at least directly, by consumers, not the agency. The statute requires the Secretary to post survey information and statements of deficiencies “within 14 calendar days” of when the information is made available to the nursing homes.68 Congress cannot have contemplated an appellate process that could be concluded within 14 calendar days, so it must have determined that timeliness of website postings outweighed the importance of review prior to posting. That interpretation is consistent with the statutory command that the Secretary use survey information provided by the states to update the 65 Illinois Council, 529 U.S. at 22. 66 Id. at 21 (internal quotation marks omitted). 67 See e.g., 42 U.S.C. § 1395cc(h) (termination of participation agreements); 42 U.S.C. § 1395i-3(b)(3)(B)(ii) (civil money penalties for false statements in resident assessments); 42 U.S.C. § 1395cc(h)(C)(i)(II) (denial of payment and appointment of temporary management); 42 U.S.C. § 1395cc(h)(C)(i)(III) (loss of approval of skilled nursing facility’s nurse aide training program). 68 42 U.S.C. § 1395i-3(b)(5)(A). PLOTT NURSING HOME V. BURWELL 27 website “as expeditiously as practicable.”69 This statutory language compels the reading that Plott was not entitled to review of the deficiencies alleged in the survey prior to posting on the website. We agree with Plott’s other argument, that the unreviewed deficiency allegations do affect the penalty. In Illinois Council, the Secretary assured the Court that the agency did not increase sanctions in later cases on account of unreviewed deficiency findings in earlier instances: And, the Council’s amici assert, compliance actually harms the home by subjecting it to increased sanctions later on by virtue of the unreviewed deficiency findings, and because the agency makes deficiency findings public on the Internet, §488.325. The short conclusive answer to these contentions is that the Secretary denies any such practice.70 The assurance that the Secretary gave the Supreme Court, is not the Secretary’s practice now. The Board’s 2011 decision in this case held that deficiencies in 2005 and 2007 surveys not only may, but must, increase the penalty imposed in a later survey. The Board held that it was “prejudicial error” for the ALJ not to give weight to evidence of this history “merely because the earlier deficiencies were apparently quickly corrected, and required no enforcement penalties.” The Board holds that 69 Id. § 1395i-3(b)(5)(E). 70 Illinois Council, 529 U.S. at 21–22. 28 PLOTT NURSING HOME V. BURWELL weight must be given to prior noncompliance even if “no remedy was imposed at the time.”71 The Board cites the statutory language requiring “incrementally more severe fines for repeated . . . deficiencies.”72 That is correct as far as it goes. The implication, though, vitiates the soundness of the Board’s position that unpenalized deficiencies are unreviewable. The Board’s argument that the 25 unreviewed deficiency allegations are immaterial to the penalty cannot be reconciled with the Board’s argument that the penalties have to be increased if there is a history of prior deficiencies, even if they were not subject to review. A fair reading of the statute requires review of alleged deficiencies because they may affect future penalties. The Board addresses this with a footnote suggesting that earlier unreviewed deficiencies may be contested when they are used to determine the reasonableness of a penalty in a later proceeding. We cannot see why Congress would have meant that a deficiency unreviewable in 2005, because no penalty was imposed then, would become reviewable in 2011 because it established a prior history. Long delayed proceedings are generally disfavored because they are less reliable on account of the difficulties of obtaining evidence. In the nursing home context, the argument that a 2005 deficiency allegation is not reviewable in 2005, but is in a proceeding six years later, verges on the ridiculous. Residents of nursing homes, often the most important witnesses, tend to be old and sick. By the time review is 71 Id. 72 42 U.S.C. § 1395i-3(h)(2)(B). PLOTT NURSING HOME V. BURWELL 29 allowed under the Board’s interpretation, many will be dead. And many of the staff are likely to have moved on to other jobs and be difficult or impossible to locate. We are compelled, by the Board’s use of unreviewed deficiencies to increase current penalties, to conclude that survey allegations of deficiencies must be reviewed or dismissed. Of course a nursing home could waive review, but it did not waive review here. If it does not, the nursing home is entitled to review in the proceeding stemming from them, and need not await a subsequent proceeding when they are used to enhance penalties. Our sister circuits, to they extent they have spoken on this question, are split. The Eighth Circuit addressed the reviewability issue in Grace Healthcare v. United States Department of Health and Human Services.73 In that case, as in this one, the ALJ did not address most of the deficiencies alleged by the surveyor on the ground that the one reviewed “is, in and of itself, sufficient” to justify the penalty imposed.74 Grace Healthcare holds that all the adverse findings appealed should be either upheld or reversed75 because, the nursing home had argued and the government did not dispute that, the unreviewed findings “remain accessible to the public and can be used to support damage claims against the provider in private litigation.”76 73 603 F.3d 412 (8th Cir. 2010). 74 Id. at 417. 75 Id. 76 Id. at 423. 30 PLOTT NURSING HOME V. BURWELL The Sixth Circuit, in Claiborne-Hughes Health Center v. Sebelius,77 upheld a Board determination where only one of seven alleged deficiencies was reviewed. In Claiborne, unlike this case, the minimum statutory penalty was imposed, so it could not have been reduced even if all six unreviewed deficiency allegations had been overturned.78 The court held that in the interest of judicial economy, the agency could “choose to address only those deficiencies that have a material impact on the outcome of the dispute.”79 Claiborne is distinguishable because the penalty in our case could have been lower than it was, but we would disagree with it regardless. The Board holds that “repeated deficiencies” must necessarily be given weight and result in more severe fines, and reversed the ALJ in this case for not giving weight to prior unreviewed deficiencies. That means that unreviewed deficiencies do, in fact, have a material impact. One might argue that their impact is only on a future dispute, not the present one, but that implies the impractical result that review may take place only later, when it is less reliable, not earlier, when it can be more reliable. Also, since surveys are mandatory at least every fifteen months,80 the agency’s supervisory relationship with the nursing home is one continuing relationship, not an occasional discrete case. For materiality purposes, the history of prior deficiencies is always part of that nursing home’s continuing case, under the 77 609 F.3d 839 (6th Cir. 2010). 78 Id. at 842. 79 Id. at 847. 80 42 U.S.C. § 1395i-3(g)(2)(A)(iii). PLOTT NURSING HOME V. BURWELL 31 statutory requirement for incrementally more severe penalties as interpreted by the agency.