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Plott Nursing Home v. Burwell

United States Court of Appeals, Ninth Circuit

March 3, 2015

SYLVIA MATHEWS BURWELL, [*] Secretary of the United States Department of Health and Human Services, Respondent

Argued and Submitted, Pasadena, California: October 11, 2013.

Page 976

On Petition for Review of an Order of the Department of Health & Human Services. HHS No. A-11-66.


Medicare Act

The panel reversed in part the Secretary of Health and Human Services' imposition of a civil monetary penalty for violations of the Medicare Act's standards of care for nursing home patients, and remanded.

The panel affirmed the Secretary's determination that the Plott Nursing Home in California violated the quality of care for bed sores, reversed the Secretary's determination that the nursing home violated the quality of care for urinary tract infection, and held that the nursing home was entitled to administrative review of all cited deficiencies and a remand with directions to review or dismiss the violations that were not reviewed by the agency.

The panel also held that regarding the public website, the agency need not afford review before survey results were posted, but must allow review and correction as required by the Medicare Act. The panel remanded to the Department of Health and Human Services Appeals Board to review or dismiss the unreviewed and appealed deficiencies alleged, and to reconsider the civil money penalty assessed against the nursing home.

Judge Christen concurred with the majority's holding concerning the two deficiencies that formed the basis for the $500 per day penalty (bed sores and urinary tract infection). Judge Christen dissented from Part C of the majority's analysis concerning the holding as to the unreviewed deficiencies.

Joseph L. Bianculli, Health Care Lawyers, PLC, Arlington, Virginia; Elizabeth Plott Tyler and Terry Schneier, Tyler & Wilson, Los Angeles, California, for Petitioner.

Helen L. Gilbert and Michael S. Raab, Attorneys, Stuart F. Delery, Acting Assistant Attorney General, Department of Justice, Washington, D.C.; William B. Schultz, Acting General Counsel, Ann Hall, Chief Counsel, Region IX, and Claire D. Chazal, Assistant Regional Counsel, Department of Health and Human Services, San Francisco, California, for Respondent.

Before: Andrew J. Kleinfeld and Morgan Christen, Circuit Judges, and John W. Sedwick, District Judge.[**] Opinion by Judge Kleinfeld; Partial Concurrence and Partial Dissent by Judge Christen.


Page 977

Andrew J. Kleinfeld, Senior Circuit Judge:

Plott Nursing Home (" Plott" ) petitions for review of a civil money penalty imposed by the Secretary of the United States Department of Health and Human Services for Plott's violations of the Medicare Act's standards of care for nursing home patients.

I. The Regulatory Scheme

Skilled nursing facilities that participate in the federal Medicare and Medicaid programs must satisfy minimum standards of patient care in order to receive reimbursement for patient services.[1] The Centers for Medicaid and Medicare Services (" CMS" ), a division of the United States Department of Health and Human Services, contracts with state agencies to conduct unannounced compliance surveys of participating skilled nursing facilities.[2] The surveys must be performed at least every 15 months.[3] Most surveyors are Health Facilities Evaluator Nurses (HFENs). To become qualified as an HFEN in California, an individual must be a registered nurse and have one year of nursing experience, and six months of nursing supervisory experience.[4] A Master's Degree in a health-related field can be substituted for the required nursing experience and a Bachelor's of Science degree in Nursing can be substituted for the required supervisory experience.[5] All successful applicants must score at least 70% on the HFEN Training and Experience Examination.[6] Among other subjects, the examination tests knowledge of health facilities and services regulations, standards of patient care, medical terminology, techniques of health facility management, and investigative methods.[7]

Page 978

Survey teams may also include surveyors with specialized knowledge, such as dieticians and pharmacists. CMS guidance requires the number of surveyors be assigned based on the size of the facility, the history of non-compliance, the existence of special care units and the need for inexperienced surveyors to accompany experienced surveyors as part of their training.[8] All surveyors assigned to a facility should have received the required training, and at least one member of the team should be a registered nurse.[9]

Surveyors record violations, otherwise known as " deficiencies" and rate them as to scope and severity. The deficiencies are then referred to CMS for various enforcement actions, including program disqualification, temporary management, denial of reimbursement payments, state monitoring, transfer of residents, closure of the facility, directed plans of correction and training, and civil money penalties.[10] Before imposing a remedy, CMS must consider the scope and severity of a deficiency, the relationship of the deficiencies to each other, and the facility's prior history of noncompliance.[11] If a facility is cited for deficiencies reflecting a substandard quality of care during three consecutive surveys, CMS must deny reimbursement payments and monitor the facility.[12]

In this case, the state surveyors cited Plott for deficiencies and CMS imposed a civil money penalty. CMS may impose " per day" or " per instance" civil money penalties based on a deficiency's scope and severity.[13] The penalties start at $50 per day, and are imposed in $50 increments.[14] For deficiencies of lesser severity, CMS may impose penalties ranging from $50 to $3,000 per day.[15] For deficiencies with the highest severity rating of " immediate jeopardy" the facility may be fined $3,050 to $10,000 per day.[16] If penalties are imposed per instance, instead of per day, the permissible range is $1,000 to $10,000.[17]

The penalty must be " reasonable." [18] In setting the civil money penalty amount, CMS must take into account several factors, including the scope and severity of the deficiency, the facility's history of noncompliance, repeated deficiencies, the facility's financial condition, and the facility's degree of culpability.[19] The statute directs CMS to " provide for the imposition of incrementally more severe fines for repeated or uncorrected deficiencies." [20]

Nursing facilities are entitled to a hearing before an administrative law judge (" ALJ" ) to challenge civil money penalties.[21] CMS has the initial burden of proving a prima facie case of noncompliance. Then the burden switches to the facility to

Page 979

prove, by a preponderance of the evidence, that they were in " substantial compliance." [22] " Substantial compliance" means a level of noncompliance such that " any identified deficiencies pose no greater risk to resident health or safety than the potential for causing minimal harm." [23]

A facility may appeal the ALJ's decision to the Department of Health and Human Services Appeals Board (" Board" ), which reviews the ALJ's findings for substantial evidence on the record as a whole. The Secretary has delegated to the Board her " authority to make final decisions on review of . . . decisions of Administrative Law Judges involving enforcement actions, including . . . civil money penalties." [24] " Any person adversely affected by a determination of the Secretary" may appeal the Board's decision to a United States Court of Appeals.[25]

II. Plott's 2008 Surveys

Plott Nursing Home is a Medicare and Medicaid participating skilled nursing facility in California. On September 24, 2008, the California Department of Public Health conducted an unannounced survey of Plott. Ten surveyors completed the survey. Eight of Plott's surveyors were HFENs, one was a registered dietician, and one was a Health Facilities Evaluator Supervisor (HFES).[26]

During compliance surveys, state surveyors identify categories of deficiencies with a " Tag" designation.[27] The " Tag" identifies the regulatory provision allegedly violated.[28] Each Tag also has an accompanying alphabetical scope and severity code ranging from A to L.[29]

Scope and severity levels A through C indicate that the cited deficiency poses no actual harm and has a potential for minimal harm. Levels D through F indicate the deficiency poses no actual harm, but has the potential for more than minimal harm. Levels G through I indicate that the deficiency poses actual harm that does not rise to immediate jeopardy. Levels J through L indicate that the deficiency poses immediate jeopardy to resident health or safety. In each of the four alphabetical levels, the lowest letter indicates the deficiency is " isolated," the middle letter indicates that there is a " pattern" of the deficiency, and the highest letter indicates that the problem is " widespread." Facilities whose deficiencies do not rise beyond a C in scope and severity are considered in substantial compliance. No penalty is imposed for facilities who are found to be in substantial compliance.[30]

In September 2008, the surveyors cited Plott for 33 different Tag numbered deficiencies above a D in scope and severity. Four of the 33 were a G, H, or I, (actual harm, but not immediate jeopardy) the rest were a D, E or F (no actual harm, but potential for minimal harm.) A follow-up survey in December 2008 found one additional

Page 980

D level deficiency. The state agency referred all 34[31] deficiencies to CMS. Based on the 33 September deficiencies, CMS fined Plott $500 per day from September 24 through December 3, 2008, and $100 per day from December 4 through December 15, 2008 for the one December deficiency.

Plott requested an ALJ hearing to dispute the results of both surveys. The ALJ consolidated the two proceedings and noted at the beginning of the hearing that many of the surveyors only had two years of surveying experience, and that there was a large number of " low level" deficiencies. He said " my initial impression is a lot of these deficiencies are very finely honed. They are very pointed deficiencies . . . usually I see gross problems." After a four-day evidentiary hearing, the ALJ upheld the entire penalty imposed by CMS on the basis of three deficiencies for three different patients, two during the September 2008 survey and one during the December 2008 survey. During the September survey, Plott's care of Resident Six violated the standard of care for bed sores,[32] and Plott's care of Resident Five violated the standard of care for urinary tract infections (" UTIs" ).[33] During the December survey, Plott violated the standard of care for UTIs for another patient.

During informal dispute resolution prior to the ALJ hearing, CMS deleted the deficiency alleging that residents have access to the outdoor garbage containers. CMS failed to make a prima facie case on five other deficiencies,[34] such as a staff member storing a lunchbox in a resident's room, slow response to call lights, and foods served at the wrong temperature, when CMS presented no evidence to support these deficiencies at the hearing. The ALJ did not review the 25 remaining deficiencies from the September survey, even though CMS initially imposed the $500 per day civil money penalty based on all 33 deficiencies. The ALJ held that it was " not necessary to address all the other alleged deficiencies from the September 2008 survey" because the bedsore and UTI violations " provide a sufficient basis for the enforcement remedies that CMS proposes."

The Department of Health and Human Services Appeals Board affirmed the $500 per day penalty based on the bedsores and UTI deficiencies from the September survey, but reversed the UTI deficiency and eliminated the $100 per day penalty from the December survey. The Board found that ...

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