Court Opinion

ID: 2995790
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:22:29.020367+00
Date Added: 2024-06-11T15:03:11.972055
License: Public Domain

In the
 United States Court of Appeals
                For the Seventh Circuit
                         ____________

No. 01-4088
FAIRFAX NURSING HOME,
INCORPORATED,
                                                            Petitioner,
                                v.

UNITED STATES DEPARTMENT
OFHEALTH & HUMAN SERVICES,
                                                       Respondent.
                         ____________
           Petition for Review of a Final Decision of the
            Department of Health and Human Services
          Department Appeals Board, Appellate Division.
                           DAB No. 1794
                         ____________
      ARGUED MAY 29, 2002—DECIDED AUGUST 15, 2002
                         ____________

 Before RIPPLE, DIANE P. WOOD and EVANS, Circuit Judges.
  RIPPLE, Circuit Judge. Fairfax Nursing Home is a skilled
nursing facility participating in Medicare and Medicaid.
Fairfax was assessed a civil monetary penalty (“CMP”) by
the Center for Medicare and Medicaid Services (“CMS”)
because of its failure to comply substantially with Medi-
care regulations governing the care of respirator-depend-
ent nursing home residents. Fairfax appealed to the De-
partment Appeals Board of the Department of Health and
2                                                   No. 01-4088

Human Services (“HHS”); after a hearing before an Ad-
ministrative Law Judge, both the ALJ and the Appellate
Division affirmed the CMP. Pursuant to 42 U.S.C. §§ 1320a-
7a(e) and 13951-3(h)(2)(B)(ii), Fairfax appeals that deci-
sion to this court. Fairfax argues that the Department Ap-
peals Board (“DAB”) erroneously placed the burden of
proof on Fairfax and that the ALJ applied the incorrect legal
standard in determining that Fairfax had violated HHS
regulations. For the reasons set forth in the following opin-
ion, we affirm the decision of the Appeals Board.

                                I
                       BACKGROUND
A. Facts
   Fairfax is a skilled nursing facility (“SNF”), see 42 U.S.C.
§ 1395i-3(a); 42 C.F.R. § 488.301, participating in Medicare
and Medicaid (collectively “Medicare”) as a provider. Reg-
ulation of SNFs is committed to the Center for Medicare
and Medicare Services, formerly known as the Health Care
                                          1
Financing Administration (“HCFA”), and to state agen-
cies with whom the Secretary of Health and Human Ser-
vices has contracted. See 42 U.S.C. § 1395aa(a). The pri-
mary method of regulation is by unannounced surveys
of SNFs, conducted in this case by surveyors of the
Illinois Department of Public Health (“IDPH”). See 42

1
   We shall refer to this agency by its present name, CMS, because
it has been more than one year since the name change was
implemented. See 66 Fed. Reg. 35,437 (July 5, 2001). However,
in some places, when quoting from the record or the decisions of
the ALJ and the Appellate Division, the agency is referred to as
HCFA.
No. 01-4088                                                     3

U.S.C. § 1395i-3(g). These surveys are conducted at least
once every 15 months. See id. § 1395i-3(g)(2)(A)(iii). If the
state survey finds violations of Medicare regulations,
the state may recommend penalties to CMS. The civil
monetary penalty imposed here was based on an IDPH
recommendation.
  CMS imposed the penalty because of series of failures
in Fairfax’s care of ventilator-dependent residents. On De-
cember 20, 1996, R10, a ventilator-dependent resident at
Fairfax, suffered respiratory distress and required emer-
             2
gency care. Respiratory therapists administered oxygen
directly to R10, and one therapist turned off R10’s ventilator
because the alarm was sounding. Once R10 was stabilized,
the therapists left, but neglected to turn the ventilator back
on. As a result, R10 died. Prompted by this incident, Fairfax
began to develop a policy for the care of ventilator-depend-
ent residents. That policy was completed in February 1997
and was implemented in early March of that year. The
policy provided that once the resident was stabilized
following an episode of respiratory distress:
      the nurse will check the resident & chart Q 15 minutes
      X 4 (for a total of 1 hr.) encompassing the following:
      vital signs/respiratory status oxygen stats [saturation]
      /lung sounds/vent settings/level of consciousness/
      odor color and consistency of secretions & comfort level
      of the resident.
Admin. R., App. A at 517.
  On March 2, 1997, R126 was observed to have a low
oxygen saturation level, an elevated pulse and temperature,
and to be breathing rapidly. These signs indicated that the

2
    All residents are denoted by number to respect their privacy.
4                                              No. 01-4088

resident was having respiratory difficulties. R126’s physi-
cian was called; he ordered a chest x-ray and gave sev-
eral other instructions. However, contrary to Fairfax’s pol-
icy, R126’s medical chart did not reflect whether these
orders were carried out. R126 died shortly thereafter.
  On March 5, 1997, R127 was found with low oxygen
saturation and mottled extremities. Fairfax staff failed to
make a complete assessment, took no vital signs, made no
follow-up assessments and did not notify a physician. On
March 7, R127 was found cyanotic and required five
minutes of ambu-bagging. Nurses charted four follow-up
notes, but only observed R127’s color and oxygen satura-
tion and took no other vital signs. Also on March 7, during
the 7 a.m. to 3 p.m. shift, three episodes of respiratory
distress were noted, each of which required ambu-bagging.
No physician was called. On March 10, R127’s skin was
observed turning blue, but there was no record of treat-
ment for respiratory distress and no vital signs or assess-
ments were charted. On March 21, R127 had another
episode, this time with mottled legs, shaking and a danger-
ously low oxygen saturation. The physician was present;
R127 was ambu-bagged and administered Valium. There
was no complete assessment and no follow-up. On March
25, R127 was found to have a severe infection and died on
March 27.
  On March 23, 1997, R83 was found nonresponsive with
low oxygen saturation, low blood pressure, an elevated
pulse rate and a low respiratory rate. R83 was ambu-
bagged, and the treating physician was called. The first
noted follow-up was an hour later and 2-1/2 hours passed
before R83 was monitored again.
 On April 2, 1997, a state surveyor observed a Fairfax
employee fail to use sterile procedures while perform-
No. 01-4088                                                     5

ing tracheostomy care on R6 and R11. The same employee
also neglected to hyper-oxygenate the residents before
                                      3
or after suctioning the tracheostomy.
  On April 3, 1997, R68 became cyanotic, with low oxygen
saturation, which required ambu-bagging and an increase
in the amount of oxygen given through the ventilator. The
records for R68 failed to note R68’s vital signs, and the
record did not reflect whether R68 oxygen saturation level
ever returned to a normal level. On April 4, R68 was not
sufficiently stable to permit a routine tracheostomy change.
  After a survey on April 8, 1997, IDPH surveyors deter-
mined that Fairfax’s actions and omissions posed “immedi-
ate jeopardy” to the health and safety of its residents.
Specifically, Fairfax had violated 42 C.F.R. § 483.25(k),
which pertains in part to the special care of ventilator-
dependent residents. CMS concurred and notified Fairfax
by a letter dated May 7, 1997, that CMS was imposing a
CMP of $3,050 per day for a 105-day period, from Decem-
ber 20, 1996, through April 3, 1997, during which Fairfax
was not in substantial compliance with HHS regulations
governing the care of ventilator-dependent residents. CMS
also assessed a penalty for a period of noncompliance
running from April 4, 1997, through May 14, 1997. The to-
tal penalty for this latter period was $2,050, and Fairfax
did not challenge it.

3
   Hyper-oxygenation refers to “giv[ing] the patient or resident
more air prior to suctioning, because when you introduce the
suction catheter that’s attached to the suction machine and you’re
actually drawing out both secretions and air, and when you
hyper-oxygenate a patient or resident you’re giving them air
to . . . help them through the process.” Admin. R., App. A at 294.
This procedure should be followed both before and after suc-
tioning. See id. at 295.
6                                               No. 01-4088

B. Administrative Law Judge’s Decision
  Fairfax appealed the CMP to the HHS Department
Appeals Board (“DAB”), which reviews the imposition of
CMPs pursuant to a provider’s right of review under 42
C.F.R. § 498.5. The DAB assigned the case to an administra-
tive law judge who held a hearing in late May and early
June 2000. Applying an earlier DAB Appellate Division
decision, Hillman Rehabilitation Center v. United States, DAB
No. 1611 (1997), the ALJ required that CMS make out a
prima facie case for the imposition of the CMP, but assigned
the ultimate burden of proof to Fairfax. Thus, Fairfax had
to prove, by a preponderance of the evidence, that it was
substantially compliant with the applicable regulations.
The ALJ affirmed CMS’ initial determination to impose
a CMP of approximately $320,000 on Fairfax. In doing so,
the ALJ found that a state of immediate jeopardy pre-
vailed at Fairfax from December 20, 1996, until April 3,
1997, due to Fairfax’s violations of 42 C.F.R. § 483.25(k).
  The ALJ discussed each of the violations found by the
state surveyors, beginning with the death of R10. R10 died,
in part, the ALJ concluded, because Fairfax did not have
in place a policy for the monitoring of ventilator-depend-
ent residents following an episode of respiratory distress.
This lack of a policy and later failures to comply with the
new policy posed severe risk to the health and well-being
of the patients. The ALJ found that all but one of the sur-
veyors’ reported violations constituted a risk to patients
at the immediate jeopardy level. The ALJ emphasized
the repeated monitoring failures and the threat those
failures posed to the residents. The ALJ found that “there
is not only a prima facie case of noncompliance here, but
the preponderance of the evidence is that Petitioner was
not complying substantially” with the regulations govern-
ing the proper care of vent-dependent residents. Admin. R.
No. 01-4088                                             7

at 24. Finally, the ALJ found that the amount of the CMP
was reasonable.

C. Department Appeals Board, Appellate Division De-
   cision
  Fairfax appealed the ALJ’s decision to the DAB Appel-
late Division. Fairfax argued that the ALJ erred follow-
ing the Appellate Division’s earlier ruling in Hillman
and assigning the ultimate burden of proof to Fairfax.
It further contended that the ALJ applied the wrong le-
gal standard, linked together unrelated incidents and
that the amount of the CMP was punitive, rather than
remedial.
  With respect to the burden of proof, CMS submitted
that Fairfax had waived the issue by not raising it before
the ALJ. The Appellate Division took note of this objec-
tion, but decided the issue on the merits. The Appellate
Division first concluded that the burden of proof was
irrelevant because the evidence was not in equipoise. The
Appellate Division nevertheless reaffirmed Hillman and
rejected Fairfax’s argument. The Appellate Division also
rejected Fairfax’s other arguments, determining that the
ALJ applied the proper legal standard, that the ALJ’s
decision was supported by substantial evidence and
that the amount of the CMP was reasonable. Fairfax ap-
peals. We have jurisdiction under 42 U.S.C. § 1395i-
3(h)(2)(B)(ii) and 42 U.S.C. § 1320a-7a(e).

                            II
                     DISCUSSION
  We must now determine whether substantial evidence
supports CMS’ conclusion that a state of immediate jeop-
8                                                      No. 01-4088

ardy prevailed at Fairfax from December 20, 1996, until
               4
April 4, 1997.

4
  In Hillman Rehabilitation Center v. United States, DAB No. 1611
(1997), available at 1997 WL 123708, the Appellate Division of
the HHS Department Appeals Board held that in termination
hearings before an ALJ, the sanctioned facility bears the burden
of persuasion once HHS has made a prima facie showing to
justify the CMP. See Hillman, at 1; Appellant’s App. 1. This rule
was extended to civil monetary penalty cases by Cross Creek
Health Care Center v. HCFA, DAB No. 1665 (1998), available at 1998
WL 479291. Fairfax argues that the Hillman rule violates the
Administrative Procedure Act in two ways.
  HHS argues that Fairfax waived its objection to HHS’ assign-
ment of the burden of proof to Fairfax by failing to raise the issue
before the ALJ. Fairfax did raise the issue on appeal to the DAB
Appellate Division. Under the statute governing our review, a
party must raise an issue before “the Secretary” in order to
preserve the issue. See 42 U.S.C. § 1320a-7a(e). Nevertheless, we
think raising the issue on appeal within the DAB is sufficient
to preserve it for our review. Further, the Appellate Division it-
self did not rely on waiver and resolved the merits of Fairfax’s
appeal.
  Fairfax submits that the Secretary was required to promulgate
this rule by notice-and-comment rulemaking and that such a
rule could not be adopted by adjudication. Second, Fairfax argues
that Hillman violates APA § 7(c), which places the burden of
proof on the “proponent of a rule or order.” 5 U.S.C. § 556(d).
  We believe that several reasons militate against our address-
ing this issue at this time. First, the issue does not affect the
outcome in this case. By its own terms, the rule in Hillman is
operative only when the evidence is in equipoise, and, as our
discussion in the text indicates, the evidence in this case certainly
cannot be characterized as in equipoise. Secondly, we believe
that this issue ought to be addressed with great prudence
                                                       (continued...)
No. 01-4088                                                    9

                               A.
   We first address Fairfax’s argument that the ALJ em-
ployed the incorrect legal standard. The regulations set up
two basic categories of conduct for which CMPs may be
imposed. See 42 C.F.R. §§ 488.408, 488.438. The upper range,
permitting CMPs of $3,050 per day to $10,000 per day,
is reserved for deficiencies that constitute immediate jeop-
ardy to a resident or, under some circumstances, repeated
deficiencies. See id. § 488.438(a)(i). By contrast, the lower
range of CMPs, which begin at $50 per day and run to
$3,000 per day, is reserved for “deficiencies that do not
constitute immediate jeopardy, but either caused actual
harm or have the potential for causing more than minimal
harm.” See id. § 488.438(a)(ii). “Immediate jeopardy” is
defined as “a situation in which the provider’s noncompli-
ance with one or more requirements of participation has
caused, or is likely to cause, serious injury, harm, impair-
ment, or death to a resident.” Id. § 488.301.
  Fairfax emphasizes the ALJ’s use of the term “potential”
to describe the probability of harm in several of the
ALJ’s findings. It submits that the ALJ’s use of this termi-
nology establishes that the deficiencies in question were
deserving of “lower range” penalties. We take each in turn.

4
  (...continued)
and caution. The Appellate Division has not addressed the ap-
plication of this rule to civil monetary penalties in any compre-
hensive manner. Premature adjudication on our part will not
be helpful in achieving accuracy or clarity in this important
area of administrative practice. Definitive adjudication on our
part is best reached after that administrative body has had the
opportunity to set forth in more plenary fashion than it has in
this case the justification for this rule.
10                                                No. 01-4088

  Finding 1(b):
     Petitioner failed to carry out the treating physician’s
     orders and failed to properly document R126’s medical
     charts. This had the potential for serious injury, harm,
     impairment, or death to the resident and constitutes
     immediate jeopardy.
Admin. R. at 8. Fairfax contends that potential for serious
harm is insufficient to constitute immediate jeopardy, which
requires that the provider’s omission be likely to cause
serious harm or death. However, in the discussion below
this finding, the ALJ found that “Petitioner was woefully
inadequate in the treatment and care of R126. . . . Such
conduct caused or was likely to cause serious injury, harm,
impairment or death to the resident.” Id. at 9. The ALJ
found that “[t]he record presents a picture of a lackadaisi-
cal staff, rather than a staff aggressively treating a pneu-
monia that was further aggravating the resident’s already
compromised health.” Id. at 10. The ALJ clearly was aware
of the proper standard for immediate jeopardy and ap-
plied it correctly.
  Finding 1(c) addressed Fairfax’s failure to monitor
R127 after R127’s episodes of respiratory distress. The ALJ
found that this monitoring failure “had the potential for
serious injury, harm, impairment, or death to the resident
and constitutes immediate jeopardy.” Admin. R. at 11.
Fairfax argues that this is an indication of the ALJ’s applica-
tion of a lower standard than immediate jeopardy as
defined in the regulations. Again, the ALJ’s discussion
of this finding demonstrates that he was well aware of the
proper standard and applied it correctly. The ALJ devoted
four pages of his opinion to discussing the treatment of
R127, and addressed the specific risks posed to the resi-
dent by Fairfax’s failure to monitor R127 after several
respiratory episodes in close succession. He closes his anal-
No. 01-4088                                                 11

ysis with a finding that the failures of the staff to assess
properly and monitor the patient, as well as the failure
to call the treating physician, “exposed the resident to
risk of serious injury, harm, impairment, or death.” Id. at 16.
  The other findings of the ALJ that are questioned by
Fairfax, when read in context, likewise make clear that the
lapses were of a severe nature.
  Finding 1(d) discussed Fairfax’s failure to monitor R83
and R68, which “had the potential for serious injury, harm,
impairment, or death to the resident and constitutes im-
mediate jeopardy.” Admin. R. at 16. In finding 1(e), which
addressed Fairfax’s failure to ensure that R6 and R11
received proper tracheostomy care, the ALJ concluded
that “[t]his had the potential for serious injury, harm,
impairment, or death to the residents and constitutes
immediate jeopardy.” Id. at 18. Fairfax again cites the
ALJ’s failure to use the precise terminology of 42 C.F.R.
§ 388.301 as evidence that he applied the wrong standard.
Close attention to the body of the opinion, once again,
reveals that the ALJ both understood the term’s mean-
ing and applied it correctly.
  In finding 1(c), the ALJ had already discussed the risks
posed by Fairfax’s failure to monitor residents following
an episode of respiratory distress, so there was no need to
repeat that discussion in finding 1(d), which dealt with the
same issue. The ALJ’s conclusion with respect to R83
makes manifestly clear that there was no misunderstand-
ing of the applicable standard: “That R83 survived Peti-
tioner’s incompetent care and treatment does not excuse
the fact that he was placed at risk of serious injury, harm,
impairment, or death.” Admin. R. at 17. With respect to
R68, the ALJ remarked in a similar vein: “Ms. Daniels
testified that it was ‘pretty lucky’ that nothing serious hap-
pened to R68, because, in a matter of minutes, brain dam-
12                                               No. 01-4088

age could be sustained from lack of oxygen. Petitioner’s
duty to provide appropriate respiratory care to its ven-
tilator-dependent residents cannot be a matter of chance.”
Id. at 17-18 (citation omitted). Under finding 1(d), the ALJ
did point out Fairfax’s violation of its guidelines and its
monitoring errors. The conclusion is inescapable that the
monitoring failures described in finding 1(d) could lead to
the same dire consequences the ALJ chronicled in find-
ing 1(c). The same is true with respect to finding 1(e). In
similar language, the ALJ concluded that patients R6 and
R11 were “placed at serious risk of injury, harm, impair-
ment or death” from the “deficient tracheostomy” care
that they received. Id. at 20.
  As the members of the Appellate Division noted, a fair
reading of the ALJ’s opinion also makes clear that he
focused not simply on the situation of each individual
patient, but also on the entire state of readiness in the
facility during the time in question. Fairly read, his “bottom
line” is that a respiratory patient in Fairfax during the time
in question was in continuous jeopardy of serious injury
or death because of the systemic incapacity of the facility
to render the necessary care to sustain life and avoid ser-
ious injury. The record is replete with references to the
danger of infection to vent-dependent residents living in
nursing homes. The death of R10 was the beginning of a
series of events that document all too graphically the
finding of the ALJ.
  Finally, we note that the ALJ carefully and correctly
delineated the entire regulatory scheme before he em-
barked on his analysis of the individual situations of the
patients. This manifestation of his understanding of the
distinctions that he is now accused of misunderstand-
ing and misapplying supports further the Appellate Divi-
sion’s estimation—and ours—that he both understood the
law and properly applied it.
No. 01-4088                                               13

                            B.
  We also believe that the HHS’ decision is supported by
substantial evidence. The state surveyors documented
numerous instances of Fairfax’s failure to care adequately
for its respirator-dependent residents. The common thread
running through most of these omissions is Fairfax’s re-
peated lack of follow-up and monitoring after a resident
experienced respiratory distress. Beginning with the death
of R10, and continuing throughout the period in ques-
tion, Fairfax did not ensure that, once a resident had
an episode, that resident was examined at regular inter-
vals in the time immediately following the incident. The
record firmly supports HHS’ determination that a state
of immediate jeopardy to resident health existed at Fairfax
from December 20, 1996, until April 3, 1997.

                       Conclusion
  The Board’s decision was supported by substantial evi-
dence and, therefore, it is affirmed.
                                                  AFFIRMED

A true Copy:
       Teste:

                          _____________________________
                          Clerk of the United States Court of
                            Appeals for the Seventh Circuit

                   USCA-97-C-006—8-15-02