Carthage Health and Rehabilitation Center, LLC, DAB CR6412 (2023)

DECISION

Carthage Health and Rehabilitation Center, LLC (hereinafter referred to as “Carthage” or “Petitioner”) challenges the determination by the Centers for Medicare & Medicaid Services (CMS) that it was not in substantial compliance with Medicare participation requirements.

As explained below, the record supports the facility’s noncompliance with Medicare requirements.  There is a basis for the imposition of enforcement remedies and the per-day civil monetary penalty (CMP) amount is reasonable.

I.  Background and Procedural History

Petitioner is a long-term care facility located in Carthage, Missouri that participates in the Medicare program.  CMS Ex. 6.

On August 27, 2021, an abbreviated survey was conducted at Carthage by the Missouri Department of Health and Senior Services (state agency) to determine if the facility was in compliance with participation requirements for nursing homes participating in

Page 2

Medicare and Medicaid programs.  CMS Ex. 6 at 1.  The survey conducted by the state agency found that Petitioner was not in substantial compliance with the Medicare participation requirements.  CMS Ex. 6 at 1.

On October 26, 2021, the state agency completed a revisit survey at the facility to determine if corrections were made.  The state agency surveyors found, and CMS later agreed, that the facility was not in substantial compliance with the following Medicare participation requirement:  42 C.F.R. § 483.12 – Free from Misappropriation/Exploitation (Tag F602), scope and severity (S/S) level E (pattern of noncompliance that causes no actual harm with the potential for more than minimal harm).¹  CMS Ex. 3.

By letter dated November 29, 2021, CMS informed Petitioner that a CMP in the amount of $330 per day was being imposed beginning October 19, 2021.  CMS Ex. 3 at 1.  CMS noted that it considered the seriousness and scope of the deficiencies, as well as the facility history, in determining the amount of the CMP for each day of noncompliance.  CMS Ex. 3 at 1.  The letter explained that the CMP would continue to accrue until Petitioner made the necessary corrections to achieve substantial compliance with the Medicare participation requirements.  CMS Ex. 3 at 1.  CMS also noted that the facility would receive additional information from the state agency regarding Nurse Aide Training and Competency Evaluation Programs (NATCEP) and indicated that the Denial of Payment for New Medicare and Medicaid Admissions (DPNA) would be effective November 29, 2021.  CMS Ex. 3 at 3, 5.

Petitioner participated in an Informal Dispute Resolution (IDR) process to dispute the cited deficiency.  On January 20, 2022, Petitioner was notified by letter that the IDR decision upheld the citation at F602, and the corresponding state tag as originally cited.  CMS Ex. 7.

Page 3

By letter dated February 3, 2022, CMS informed Petitioner that it was notified by the state agency that Petitioner made the necessary corrections and substantial compliance was achieved effective November 12, 2021.  CMS. Ex. 4 at 1.  CMS also noted that the DPNA was not effectuated, and the total imposed CMP was $7,920.  CMS Ex. 4 at 1.

Petitioner filed an untimely request for hearing on February 18, 2022.  An Acknowledgement and Prehearing Order was issued on March 2, 2022, ordering CMS to address the timeliness of Petitioner’s hearing request.

On March 14, 2022, Petitioner filed a Motion for Summary Judgment along with five exhibits (P. Exs. 1-5).

On March 21, 2022, CMS filed a notice stating that it did not intend to contest the timeliness of Petitioner’s hearing request after “[h]aving fully investigated the timeliness issue.”  Departmental Appeals Board (DAB) E-Filing No. 7.

CMS filed a prehearing exchange that included a Prehearing Brief and Reply to Petitioner’s Motion for Summary Judgment (CMS Br.), as well as 33 proposed exhibits (CMS Exs. 1-33).  CMS identified one witness and included the written direct testimony of that witness as CMS Ex. 33.

On October 30, 2022, Petitioner filed a brief (P. Br.) along with P. Exs. 6-16.  Petitioner’s submission also included the written direct testimony of four identified witnesses.

II.  Admission of Exhibits and Decision on the Record

On November 21, 2022, the parties submitted a joint motion for a decision on the written record, which was granted on November 28, 2022.  Therefore, Petitioner’s motion for summary judgment is moot.  On November 29, 2023, Petitioner filed a motion to reopen the record (P. M. Reopen) requesting to add an exhibit (P. Ex. 17) to its exchange.   Petitioner explained that proposed P. Ex. 17 is a Felony Information, filed by the prosecutor’s office of Jasper County, Missouri, charging former Carthage employee D.R. (who Petitioner identifies as “the perpetrator of the theft of narcotics” at the facility), with two Class D felonies under sections 570.030 and 570.090.1(1) of the Revised Statutes of Missouri, respectively.  P. M. Reopen at 1; P. Ex. 17 at 1.  At the time of this decision CMS has not responded to Petitioner’s motion to reopen.  Therefore, I grant Petitioner’s motion and admit P. Ex. 17 into the record.

The record is closed, and this decision will be issued based on the written record.  Standing Prehearing Order ¶ 13; Civil Remedies Division Procedures § 19(b), (d).

Absent objections, all exhibits (CMS Exs. 1-33 and P. Exs. 1-17) are admitted into the record.

Page 4

III.  Issues

The issues are as follows:

1. Whether Petitioner was in substantial compliance with 42 C.F.R. § 483.12 (Tag F602, s/s level E).
2. If Petitioner was not in substantial compliance, whether the CMP imposed by CMS is reasonable.

IV.  Jurisdiction

This tribunal has jurisdiction to hear and decide this case.  Social Security Act (Act) §§ 1128A(c)(2), 1819(h)(2)(B)(ii) (codified at 42 U.S.C. §§ 1320a-7a(c)(2), 1395i‑3(h)(2)(B)(ii)); 42 C.F.R. §§ 488.408(g), 488.434(a)(2)(viii), 498.3(b)(13).

V.  Legal Authorities

The Act sets requirements for skilled nursing facilities (SNFs) to participate in the Medicare program and authorizes the Secretary of Health & Human Services (Secretary) to promulgate regulations implementing those statutory provisions.  Act § 1819 (42 U.S.C. § 1395i-3).  The Secretary’s regulations are found at 42 C.F.R. part 483 and 488.

To participate in the Medicare program, a SNF must maintain substantial compliance with program requirements.  42 U.S.C. § 1395i-3(a)(3), (b)-(d); 42 C.F.R. pt. 483, subpt. B.  When a SNF fails to meet a statutory or regulatory participation requirement, then the SNF has a "deficiency."  42 C.F.R. § 488.301; see 42 U.S.C. § 1395i-3(h)(1).  "Noncompliance" means "any deficiency that causes a facility to not be in substantial compliance."  42 C.F.R. § 488.301; see also 42 U.S.C. § 1395i-3(h)(3).  To maintain "substantial compliance," a SNF's deficiencies may "pose no greater risk to resident health or safety than the potential for causing minimal harm."  42 C.F.R. § 488.301.

When CMS selects an enforcement remedy to impose on a SNF, it determines the scope (i.e., the number of residents affected or potentially affected) and severity (i.e., the degree of harm or potential harm) for each deficiency.  See 42 C.F.R. § 488.404(a)-(b); see also 42 U.S.C. § 1395i-3(h)(2)(B)(ii)(III)(bb).

CMS may impose a per-day CMP for the number of days a SNF is not in substantial compliance.  42 U.S.C. § 1395i‑3(h)(2)(A), (h)(2)(B)(ii)(I); 42 C.F.R. § 488.430(a).  For CMPs assessed on or after November 15, 2021, if the deficiencies occurred on or after November 2, 2015, the CMP amounts may range as follows:  $113 to $6,774 per day for less serious noncompliance; or $6,888 to $22,584 per day for noncompliance that poses

Page 5

immediate jeopardy to the health and safety of residents.²  45 C.F.R. § 102.3 (2021); 86 Fed. Reg. 62,928, 62,942 (Nov. 15, 2021); see 42 C.F.R. § 488.438(a)(1) (providing original CMP amounts before statutory inflation adjustments).

If CMS imposes a remedy based on a noncompliance determination, then the facility may request a hearing before an administrative law judge to determine whether there was a basis for the deficiency findings that led to the imposition of the remedy and whether the CMP imposed was reasonable.  Act §§ 1128A(c)(2) (42 C.F.R. § 1320a-7a(c)(2)), 1819(h)(2)(B)(ii) (42 U.S.C. § 1395i(h)(2)(B)(ii)); 42 C.F.R. §§ 488.408(g), 488.434(a)(2)(viii), 498.3(b)(13).  However, the facility may not appeal CMS’s choice of remedies.  42 C.F.R. § 488.408(g)(2).

CMS must make a prima facie showing that the facility failed to comply substantially with federal participation requirements.  If this occurs, the facility must prove substantial compliance by a preponderance of the evidence in order to rebut CMS’s showing and to prevail.  Hillman Rehab. Ctr., DAB No. 1611 at 8 (1997), aff’d sub nom. Hillman Rehab. Ctr. v. U.S. Dep’t of Health & Human Servs.,No. Civ. A 98-3789 (GEB), 1999 WL 34813783 (D.N.J. May 13, 1999); Batavia Nursing & Convalescent Ctr., DAB No. 1904 (2004), aff’d sub nom. Batavia Nursing & Convalescent Ctr. v. Thompson,129 F. App’x 181 (6th Cir. 2005); Emerald Oaks, DAB No. 1800 (2001); Cross Creek Health Care Ctr., DAB No. 1665 (1998).

VI.  Findings of Fact

1. On January 3, 2021, Petitioner’s Director of Nursing (DON) became aware that approximately 60 Norco (a narcotic pain reliever that combines hydrocodone with acetaminophen) pills, delivered for a resident at Carthage, were missing.  CMS Ex. 8 at 4, 17.  The DON initiated an investigation into the missing medication.  CMS Ex. 8 at 3-4.
2. The investigation found that a registered nurse (RN) accepted the medication that was delivered from Omnicare, but did not open or review the package.  CMS Ex. 8 at 3.  The RN then gave the medication to the charge nurse who did not place the medication in “lock up”, but instead left it in a patient’s room.  CMS Ex. 8 at 2, 3.  Another staff member later found the package and put it on the charge nurse’s station.  CMS Ex. 8 at 3-4.  The Norco was missing, and Petitioner was unable to verify whether the medication was delivered because its staff accepted the medication without proof of delivery.  Petitioner paid to replace the missing medication.  CMS Ex. 8 at 4.  In addition to conducting an internal investigation,

Page 6

2. Petitioner required its staff to participate in trainings regarding the facility’s narcotic delivery process; regarding abuse, neglect, and exploitation; and regarding misappropriation of resident property and funds.  CMS Ex. 29 at 2-6.
3. Despite the training provided by the facility, similar incidents involving Norco occurred on February 5 and 24, 2021.  CMS Ex. 8 at 5.  As a result, Petitioner instituted a policy requiring that all delivery manifests for narcotics be signed by two nurses and faxed to Omnicare.  CMS Ex. 8 at 6.
4. On August 27, 2021, the state agency completed an on-site survey at Carthage and determined that the facility was not in substantial compliance with 42 C.F.R. § 483.12 at S/S Level D (Tag F602)—Free from Misappropriation/Exploitation due to misappropriation of narcotic medications for two residents identified as Residents # 1 and # 2.  CMS Ex. 1 at 1-10.  The surveyor also determined that the facility was not in substantial compliance with 42 C.F.R. § 483.25 at S/S Level D (Tag F684)—Quality of Care due to failing to accurately document medication administration on two resident’s Medication Administration Records (MARs).  CMS Ex. 1 at 10-14.
5. On September 20, 2021, Petitioner’s Director of Nursing noticed that multiple narcotic medications for several residents were missing from residents’ medication supply.  Notes show that the medications were replaced, reordered, or reimbursed at the facility’s expense.  CMS Ex. 23.
6. On October 8, 2021, Petitioner became aware of additional missing narcotics and possible drug diversion.  P. Req. for Hrg.; P. Ex. 3 at 2.  The investigation showed that medication was missing for three residents.  CMS Ex. 28 at 3.  In response, Petitioner initiated an investigation and notified the state agency.  P. Req. for Hrg. at 4.  On the same date, Petitioner notified the Carthage  Police Department that 143 hydrocodone pills were stolen from the facility.  CMS Ex. 20 at 5.
7. During the course of the investigation, Petitioner became aware of additional missing narcotics prescribed to residents on October 14, 18, 19, and 22, 2021.  P. Ex. 4 at 2.  In response to the missing medication, corporate insight was initiated, and administrators implemented a daily counting and review of the narcotics logbook.  P. Ex. 4 at 3.
8. Narcotic medications are delivered to the facility in blister packs that typically contain 24 or more pills.  P. Br. at 15.  Each blister pack is labelled with the resident’s name, type of medication, dosage, and frequency of administration.  P. Br. at 15.  The medication is placed in a locked drawer in the medication cart.  Petitioner maintains a logbook where nurses note the date and time that medication is administered, the amount of medication given, and the amount left.

Page 7

8. CMS Ex. 20 at 5-6.  Once a resident leaves the facility or a medication is finished or discontinued, the narcotics sheet is folded over.  P. Ex. 14.  On the reverse side, staff members were expected to document why the medication was no longer on the medication cart and provide signature.  Besides the logbook, there was no other system for tracking when the cart was accessed.  CMS Ex. 20 at 6.
9. On October 26, 2021, a revisit survey was conducted, and the surveyor found that the deficiency for 42 C.F.R. § 483.12 was uncorrected.  The surveyor noted that Petitioner failed to develop and implement an adequate system to prevent the misappropriation of medications and failed to follow its own policies.  CMS Ex. 33 at 3.
10. Carthage Police interviewed a former employee, D.R., a certified medical tech (CMT), who worked for the facility for five years.  Though CMT’s are not permitted to pass narcotic medications, D.R. admitted to passing narcotics on several occasions.  CMS Ex. 11 at 20.  D.R. explained that her husband had an addiction and admitted to taking between 9-15 pills per day to support his habit.  CMS Ex. 20 at 12.  D.R. also admitted to police that she began taking the pills in 2021 because the nurses would leave the narcotics carts unlocked.  She admitted to putting whole blister packs of pills in her bag and she would “fold over” the page that the narcotics were on and go back and add signatures to the medication surrender.  CMS Ex. 20 at 12.
11. The former Carthage employee responsible for the misappropriation was later arrested and charged with one felony count of stealing for appropriating hydrocodone, a controlled substance, and one count of felony forgery because “with the purpose to defraud, made a writing, namely a signature on a disposal log, so that it purported to have been made by another.” P. Br. at 23; P. Ex. 17.

VII.  Analysis and Conclusions of Law³

1. Petitioner was not in substantial compliance with 42 C.F.R. § 483.12 (Tag F602). 

Under the Act and the regulations, residents have the right to be free from abuse, neglect, misappropriation of resident property, and exploitation.  42 C.F.R. § 483.12.  The regulations define “misappropriation of resident property” as the “deliberate misplacement, exploitation, or wrongful, temporary or permanent use of a resident’s belongings or money without the resident’s consent.”  42 C.F.R. § 483.5.  Additionally, Section 483.12(c)(3) requires that the facility prevent further potential abuse, neglect, exploitation, or mistreatment while the investigation is in progress.

Page 8

A facility may fail to comply substantially with section 483.12(b)(1) if it fails to develop policies or procedures adequate to prevent abuse, or if it fails to implement such policies.  See, e.g., Southpark Meadows Nursing & Rehab. Ctr., DAB No. 2703 at 6 (2016) (quoting Glenoaks Nursing Ctr., DAB No. 2522 at 14 (2013)).  CMS argues that Petitioner’s practices were deficient in four ways:  1) Petitioner failed to accurately document medication administration on residents’ MARS; 2) Petitioner failed to properly train staff for narcotics delivery; 3) Petitioner failed to train staff on locking their carts; and 4) Petitioner failed to properly train and monitor staff as demonstrated by unapproved staff being allowed to dispense medication to residents.  CMS Br. at 9.

Petitioner argues that the facility provided training and extensive monitoring of employees who were handling narcotics.  P. Br. at 24.  While the record shows that staff members received training after the misappropriation was discovered, the record is silent as to what training staff members received prior to this incident.  Regardless, it is clear that staff members did not follow Petitioner’s procedures regarding the handling of narcotic medications and policies against misappropriation of resident property.

The evidence shows that nurses mishandled prescription narcotic medications and failed to document prescription narcotic medication deliveries by Omnicare, with one nurse even leaving medication unattended in a patient’s room.  CMS Ex. 8 at 2.  During an interview with police, the administrator for Petitioner reported that, prior to October 20, 2021, there was a long chain attached to the wall in the medication bay which contained all of the master keys to the medication carts.  CMS Ex. 20 at 13.  The investigation further revealed that nurses often left medication carts unlocked, which allowed D.R. access to steal medications.  CMS Ex. 20 at 12.  Additionally, a CMT who worked at Carthage, reported to police that they observed another CMT with a key for the narcotics cabinet.  CMS Ex. 20 at 14.  The employee also saw D.R. forge signatures of nurses on charts and narcotic books.  Id.  Additionally, while CMT’s are not permitted to dispense narcotic medications, a CMT admitted to police that she dispensed narcotics while working at the facility.  CMS Ex. 20 at 10; P. Ex. 7 at 4.  In the medication logs, staff members merely confirmed that a page was folded over instead of verifying signatures on the medication records.  Due to these failures, a CMT, who should not have had access to narcotics, was able to misappropriate hundreds of narcotic medications from several residents in the facility.  The evidence shows that Petitioner failed to follow and implement its own policies and, therefore, failed to protect residents from misappropriation.

a. For purposes of the regulation at 42 C.F.R. § 483.12, the misappropriated medications were the property of residents in the facility.

Petitioner does not dispute that misappropriation occurred at the facility, but argues that CMS has not proven that the misappropriated medications were the property of residents.

Page 9

Pet. Req. for Hrg. at 3; P. Br. at 24.  According to Petitioner, medications are the property of Carthage until they are administered, and a resident’s ownership of narcotic medications begins when the medications are administered to the resident. P. Br. at 33.  Petitioner points to the criminal information filed against D.R. which states, “in or between August 29, 2021 and October 29, 2021 in the County of Jasper, State of Missouri, the defendant appropriated hydrocodone, a controlled substance which property was owned by Carthage Health & Rehab…”.  Petitioner argues, without authority, that Missouri laws must be used to determine whether medications delivered to a facility, but not yet administered, are the property of the resident, because the facility is located in Missouri.  P. Br. at 28.  Petitioner also cites to Louisiana real property law and criminal cases from the 1800s in furtherance of this argument.  P. Br. at 26-27.  However, it is unnecessary to directly address each of these arguments and citations because CMS’s authority in this matter is well-settled.

The SOM, in providing guidance for 42 C.F.R. § 483.12, clearly includes resident medication as an example of misappropriation of resident property, stating, “another example of misappropriation of resident property is the diversion of a resident’s medication(s), including, but not limited to, controlled, substances for staff use or personal gain.”  Additionally, the evidence shows that the prescriptions were written for specific individual residents at the facility.   CMS Ex. 8 at 16, 17.  Petitioner is merely in charge of safekeeping and distributing medication to patients at the appropriate times.  In addition, Petitioner’s own policy provides,

[m]isappropriation of resident/guest property means the deliberate misplacement, exploitation, or wrongful, temporary or permanent use of a resident/guest(s) belongings or money without the resident/guest(s) consent.  Acts that may constitute the misappropriation of resident/guest property include, but are not limited to, the theft or attempted theft of a resident/guest(s) money or personal property of any value or type, theft of a resident/guest(s) medication, or the use of resident/guest(s) funds including credit cards or checks.

CMS Ex. 25 at 1 (emphasis added); P. Ex. 8 at 5.

Notably, neither the SOM nor Petitioner’s policy contain any caveat or requirement that medication must be first administered or directly furnished to a resident (e.g., placed in the resident’s room or on their person) before the diversion of that medication can constitute misappropriation of the resident’s property.  Moreover, Petitioner’s argument ignores the fact that the misappropriated medications were prescribed by medical professionals and sent to Petitioner for use by specific residents.  Petitioner’s argument blatantly contradicts its own policy, which specifically states that misappropriation includes theft of a resident’s medication.  Because the SOM and Petitioner’s own policy

Page 10

both include theft of resident medication as an act that constitutes misappropriation,  I  find it unnecessary to parse through the litany of criminal cases cited by Petitioner in support of its argument.

The record shows that the facility failed to protect multiple residents from misappropriation of narcotic medications on several occasions.  Though Petitioner had a policy in place to protect residents from misappropriation and conducted an investigation into the missing medications, the facility’s employees did not comply with its own policy, nor did it comply with the regulations.  A CMT was able to gain access to residents’ prescription narcotic medications on multiple occasions and even gained access to additional medications during the course of Petitioner’s investigation.  The misappropriation was not an isolated incident.  The evidence shows that Petitioner was not in substantial compliance and the deficiency had the potential to cause more than minimal harm to the residents of the facility.  See CMS Ex. 31 at 1 (explaining that “[r]isks to patients include . . . potentially unsafe care due to the health care worker’s impaired performance” and “e undue suffering to patients who don’t receive analgesic relief.”); CMS Ex. 33 at 3 (explaining that drug diversion poses a serious risk that residents will not receive medications that have been prescribed to them to address their medical conditions).

In the present case, there is no dispute that residents’ prescription narcotic medications were stolen by a Carthage employee.  Accordingly, I find that Petitioner was not in substantial noncompliance with 42 C.F.R. § 483.12.  Petitioner makes additional arguments regarding CMS’s determination of substantial noncompliance which are addressed in detail below.

b. The Statement of Deficiencies (SOD) was sufficient to put Petitioner on notice as to the cited deficiencies.

Petitioner argues that CMS has not provided evidence of any deficient practices by the facility.  P. Br. at 6.  Specifically, Petitioner argues that CMS failed to list any deficient practices in the SOD, also known as the CMS-2567.  P. Br. at 10.   The CMS-2567 is the record of the survey where the survey team documents and justifies its determination of compliance and informs the provider or supplier of its state of compliance with the requirements for participation in the Federal programs.  CMS State Operations Manual (SOM) Appendix 7A.  The document’s primary purpose is to advise the facility of its deficiencies so that they can be corrected.  See SOM, Appendix P – Part III (“[W]rite the statement of deficiencies in terms specific enough to allow a reasonably knowledgeable person to understand . . . the requirement(s) that is (are) not met.”).  The SOD states that the facility failed to protect residents from misappropriation of resident property when the narcotic medications of five residents (Resident # 20, # 21, # 22, # 23, and # 24) went missing while in possession of facility staff.  CMS Ex. 2 at 1.

Page 11

In support of its argument, Petitioner notes that Appendix 7A states “[a]ny evidence that supports a finding and affects the deficiency determination must be incorporated into the deficiency citation”.  P. Br. at 11.  However, Appendix 7A merely serves as guidance for surveyors and even states that it is not meant to “impose obligations” on providers or surveyors.  CMS SOM Appendix 7A at 1.  The Department Appeals Board (Board) has stated that “the statement of deficiencies does not rigidly frame the scope of evidence to be admitted concerning any allegation relating to a cited deficiency, nor does it require formal amendment to allow additional supporting evidence.”  N. Mont Care Ctr., DAB No. 1930 at 26 (2004).  Additionally, the Board has ruled that “the 2567 is a notice document and is not designed to lay out every single detail in support of a finding that a violation has been committed.”  Pac. Regency Arvin, DAB 1823 (2002).  Here, the SOD includes the surveyor’s detailed record review of the surveyor’s investigation, a review of the facility’s internal investigation, review of the affected resident’s narcotic count sheets and MARS, and the cited regulation alleged to have been violated by Petitioner.  CMS Ex. 2.  Accordingly, I find that the SOD created in this matter was sufficient to put Petitioner on notice of the identified deficiencies and the related underlying facts.

c. A finding of noncompliance with Medicare and Medicaid regulations does not constitute the imposition of strict liability.

Petitioner argues that Congress has not authorized CMS to impose strict liability on nursing homes and regulatory liability may only be imposed when a facility fails to take reasonable steps to prevent theft of property.  P. Br. at 3.  Under 42 C.F.R. § 483.12, a resident has the right to be free from abuse, neglect, misappropriation of resident property, and exploitation as defined in this subpart.  Petitioner argues that misappropriation of resident property is also addressed in 42 C.F.R. § 483.5, 42 C.F.R § 483.10(i)(1)(ii), and 42 C.F.R § 483.85(c)(6).⁴  Without authority, Petitioner argues that the words “as defined in this subpart” must be read in pari materia with all Subpart B regulations addressing the resident’s right to be free from misappropriation.  P. Br. at 4.  According to Petitioner, when reading all of the aforementioned regulations together, “regulatory culpability requires evidence that a facility failed to act reasonably in the circumstances, i.e., what a facility did or did not do to prevent and detect a violation of the regulations, not merely that an undesirable outcome occurred”.  P. Br. at 6.

Page 12

However, the concept of in pari materia typically applies when there is ambiguity in statutes or regulations.  In Pari Materia,Black’s Law Dictionary (11th ed. 2019).  Here, there is no ambiguity in the regulations.  The regulations clearly state that a facility must be in “substantial compliance” with the requirements in 42 C.F.R. Part 483, subpart B.  Substantial compliance is defined as “a level of compliance with the requirements of participation such that any identified deficiencies pose no greater risk to resident health or safety than the potential for causing minimal harm.”  42 C.F.R. § 488.301.  However, based on the facts of this case, even if Petitioner’s assertion was correct and reasonableness was the standard, the facility did not act reasonably to prevent the misappropriation of residents’ property.  Holding Petitioner responsible for complying with Medicare and Medicaid regulations does not amount to strict liability.  The Board has ruled that “strict liability” is a tort concept that is inapplicable in proceedings conducted under 42 C.F.R. Part 498.  Springhill Senior Residence, DAB No. 2513 at 14 (2013) (citing Jennifer Matthew Nursing & Rehab. Ctr., DAB No. 2192 (2008); Briarwood Nursing Ctr., DAB No. 2115 at 11 n.8 (2007)).  Holding facilities “to standards set forth in the Medicare and Medicaid participation regulations . . . is not tantamount to applying ‘strict liability.’”  Springhill, DAB No. 2513 at 14.

d. CMS has the legal authority for the enforcement action against Petitioner.

Petitioner claims that the only basis for the enforcement action taken against the facility is the sub-regulatory guidance found in the Appendix PP of the SOM for Tag F600.  P. Req. for Hrg. at 5.  Petitioner also argues that the sub-regulatory guidance in Appendix PP of the SOM imposes a substantive legal standard that was not adopted through notice-and-comment rule making and is therefore prohibited by Azar vs. Allina Health Servs., 139 S. Ct. 1804 (2019).  P. Req. for Hrg. at 5.  However, Petitioner seemingly ignores the regulation at 42 C.F.R. § 483.12 that serves as the legal basis for CMS’s determination.

Even without the guidance found in the SOM, the regulation provides that skilled nursing facilities have an obligation to protect residents from misappropriation of resident property.  42 C.F.R. § 483.12.  In support of its argument, Petitioner references a 2019 memo issued by CMS’s Chief Legal Officer addressing the Allina ruling.  P. Req. for Hrg. at 6.  However, Petitioner’s claims regarding the memo are misleading.  In determining whether CMS may take enforcement action, the memo states that the critical question to ask, “is whether the enforcement action could be brought absent the guidance document.”  P. Ex. 5 at 3.  The memo goes on to state, “if the answer is no, then the guidance document establishes a norm and, under Allina, is invalid unless issued through notice-and-comment rulemaking.”  P. Ex. 5 at 3.  Here, the SOM provides guidance and informs facilities of examples of what is considered misappropriation, including residents’ medication.  The enforcement action taken by CMS could be brought absent the guidance document because it is based on a regulation.  Petitioner’s argument is again without merit.

Page 13

 e. Petitioner cannot separate itself from the acts of its employee.

Petitioner argues that the facility should not be held liable for the unauthorized and unforeseeable actions of an employer who acted outside of the scope of employment.  P. Req. for Hrg. at 3, 6-7.  Additionally, Petitioner argues that since theft is outside of the scope of the employee’s duties, Petitioner cannot be held responsible for its employee’s acts of theft.  Id.

However, it is well-settled that Petitioner cannot distance itself from the actions of its employee, who had access to residents and their property by virtue of her employment at Carthage.  The Act specifically states that “[a] principal is liable for penalties . . . under this section for the actions of the principal’s agent acting within the scope of the agency.”  Act § 1128A(l) (42 U.S.C. § 1320a-7a(l)); see also Act § 1819(h)(2)(B)(ii)(I) (42 U.S.C. § 1395i-3(h)(2)(B)(ii)(I)) (making the provisions of Act § 1128A, other than subsections (a) and (b), applicable to civil money penalties (CMPs) against nursing homes).  The Board has consistently held that a SNF acts through its staff and administrators, who as agents of their employers “make and implement policies, provide care, and perform the various responsibilities called for” by federal programs.  Madison Cnty. Nursing Home, DAB No. 2895 at 8 (2017) (citing Beverly Health Care Lumberton, DAB No. 2156 at 6 (2008)).  The Board has made clear, an employee’s deliberate wrongdoing – and even criminal misconduct – may properly be imputed to the facility where the employee had “the means and opportunity” to commit the misfeasance, by virtue of his or her assigned duties and facility access.  Madison, DAB No. 2895at 9.

CMS has met its burden and proven that Petitioner was not in substantial compliance with the regulations.  Despite Petitioner’s arguments, the evidence shows that an employee was able to misappropriate residents’ property, i.e., residents’ medications.  Petitioner has failed to meet its burden to show by a preponderance of the evidence that it was in substantial compliance with 42 C.F.R.§ 483.12.

f. Allegations of deficient surveyor performance are irrelevant. 

Petitioner sets forth several arguments attempting to discredit the survey process and the facts obtained, yet not disputed, during the survey.  P. Br. at 9-10.  However, it is well-settled that the validity of CMS’s noncompliance determination does not depend on a state survey agency’s compliance with survey performance requirements in section 1819(g) of the Act and 42 C.F.R. Part 488, subpart E.  Instead, the purpose of the administrative appeal process is not to identify defects in the conduct of the survey, but to evaluate evidence of the SNF’s compliance or noncompliance, regardless of the procedures or methods by which the evidence was collected.  See BGI Retirement, LLC, d/b/a Crossbreeze Care Center, DAB No. 2620 at 11 (2013) (stating “alleged shortcomings or improprieties in the survey and enforcement process are generally irrelevant in this type of proceeding.”) (additional citations omitted).

Page 14

g. The CMP amount imposed, $330 per day from October 19, 2021 through November 12, 2021, is reasonable.

In determining whether the CMP amount is reasonable, I must apply the following factors which are listed in 42 C.F.R. § 488.438(f):  1) the facility’s history of noncompliance; 2) the facility’s financial condition; 3) the factors specified in 42 C.F.R. § 488.404; and 4) the facility’s degree of culpability, which includes neglect, indifference, or disregard for resident care, comfort, or safety.  See 42 U.S.C. §§ 1320a-7a(d)(2), 1395i-3(h)(2)(B)(ii)(I).  The absence of culpability is not a mitigating factor.  42 C.F.R. § 488.438(f).  The factors listed in 42 C.F.R. § 488.404 include:  1) the scope and severity of the deficiency; 2) the relationship of the deficiency to other deficiencies resulting in noncompliance; and 3) the facility’s prior history of noncompliance in general and specifically with reference to the cited deficiencies.  See 42 U.S.C. §§ 1320a-7a(d)(1), (3), 1395i-3(h)(2)(B)(ii)(I).

The regulations leave the decision regarding the choice of remedy to CMS, and the amount of the remedy to CMS and the ALJ, requiring only that the regulatory factors at 42 C.F.R. §§ 488.438(f) and 488.404 be considered when determining the amount of a CMP within a particular range.  42 C.F.R. §§ 488.408, 488.408(g)(2); 42 C.F.R. § 498.3(d)(11); see also 42 C.F.R. § 488.438(e)(2), (3); Alexandria Place, DAB No. 2245 at 27 (2009); Kenton Healthcare, LLC, DAB No. 2186 at 28-29 (2008).

In this case, CMS imposed a $330 per day CMP from October 19, 2021, through November 12, 2021, totaling $7,920.  CMS Ex. 4.  CMS considered the scope and seriousness of the deficiencies, in addition to the facility history in determining the amount of the imposed CMP.  CMS Ex.4.  Petitioner has not disputed the duration of the noncompliance period, nor has it disputed the amount of the CMP.  The Board has explained that “there is a presumption that CMS has considered the regulatory factors in setting the amount of the CMP and that those factors support the CMP amount imposed by CMS.  Unless a facility contends that a particular regulatory factor does not support that CMP amount, the ALJ must sustain it.”  Coquina Ctr., DAB No. 1860 at 32 (2002) (emphasis added).  Considering the regulatory factors here, I conclude that the CMP amount imposed is reasonable.

Page 15

VIII.  Conclusion

Petitioner was not in substantial compliance with the participation requirements at 42 C.F.R. § 483.12 (Tag F602).  Therefore, there is a basis for the imposed remedies and the penalty amounts imposed are reasonable.

Endnotes

¹ CMS or the state agency designates the scope and severity level using a letter from A through L based on a scope and severity matrix published in the State Operations Manual (SOM), Ch. 7, § 7400.3.1 (Rev. 185, Eff. Nov. 16, 2018).  The matrix, which is based on 42 C.F.R. § 488.408, specifies which remedies are required and optional at each scope and severity level.  “Scope” describes how many residents are potentially affected by a particular deficiency.  Deficiencies may be “isolated,” “pattern,” or “widespread” in scope.  “Severity” describes the possible harm that a deficiency may cause.  A scope and severity level of A, B, or C describe a deficiency that causes no actual harm with the potential for minimal harm.  Facilities cited with deficiencies at level C or lower remain in substantial compliance.  42 C.F.R. § 488.301.  A scope and severity level of D, E, or F describe a deficiency that has caused no actual harm with the potential for more than minimal harm that is not immediate jeopardy.  A scope and severity level of G, H, or I describe deficiencies that have caused actual harm but do not constitute immediate jeopardy.  Scope and severity levels J, K, and L describe deficiencies that pose immediate jeopardy to resident health or safety.

² CMS increases the CMP amounts annually to account for inflation in compliance with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, Pub. L. No. 114-74, § 701, 129 Stat. 584, 599 (2015).  See 86 Fed. Reg. 62,928 (Nov. 15, 2021).

³ My findings of fact and conclusions of law are set forth in italics and bold font.

⁴ 42 C.F.R. § 483.5 defines “misappropriation of resident property” as the “deliberate misplacement, exploitation, or wrongful, temporary, or permanent use of a resident’s belongings without the resident’s consent.”  42 C.F.R. § 483.10(i)(1)(ii) states, in pertinent part, that “the facility shall exercise reasonable care for the protection of the resident’s property from loss or theft.”  42 C.F.R § 483.85(c)(6) states, in pertinent part, that the facility take “reasonable steps to achieve compliance with the program’s standards, policies, and procedures.”