SUBJECT:

Hamilton Continuing Care Center,

Petitioner,

Centers for Medicare & Medicaid Services.

DECISION AND ORDER

This case revisits the question of a nursing facility owner's responsibility for deficiencies largely attributable to the actions of its predecessor.

Petitioner, Hamilton Continuing Care Center (Petitioner or facility), is a long term care facility certified to participate in the Medicare and Medicaid programs as a provider of services. In a motion for summary judgment, Petitioner argues that the facility's current owner, SeniorCare of Hamilton, LLC, (SeniorCare), should not be held accountable for what it characterizes as "an isolated incident" that occurred under the facility's prior owner. The Centers for Medicare & Medicaid Services (CMS) opposes summary judgment. CMS concedes that, in finding noncompliance, the state surveyors cited only one incident, which dated from the time of the prior ownership. Nevertheless, CMS argues, under the regulations governing facility participation in the Medicare program, a new owner who accepts assignment of an existing provider agreement is responsible for the deficiencies.

I deny Petitioner's motion. As explained below, on summary judgment I am required to draw all inferences in the light most favorable to the nonmoving party, and doing so here puts the facility within the ambit of two well-established principles:

1) Even though no other incidents have occurred, where a facility's deficiency has the potential for more than minimal harm, the presumption is that its noncompliance continues until it has implemented an acceptable plan of correction designed to assure that no such incidents occur in the future. The burden is thus on the facility to prove that it has achieved compliance; and

2) A change of ownership/management does not relieve the facility of its obligation to meet program participation requirements.

Because I must infer that the facility's noncompliance continued under the new ownership, I do not reach the more difficult question as to whether the regulations make a new owner, who accepts assignment of an existing provider agreement, responsible for deficiencies that occurred but were corrected prior to the change of ownership.

Petitioner also argues that CMS abused its discretion "to remove the deficiencies and penalty assessed." As discussed below, I have no authority to review CMS's exercise of its discretion.

Petitioner has not established that it must prevail as a matter of law, and summary judgment must therefore be denied.

I. Background

The parties agree that on November 21, 2000, SeniorCare, whose sole member is SeniorCare Montchanin, Inc., acquired the facility, and accepted assignment of the facility's existing Medicare provider agreement and provider number. Petitioner's Brief (P. Brief) at 3; CMS Reply Brief (CMS Brief) at 2; CMS Exhibit (Ex.) 1. Thereafter, on February 14, 2001, the New Jersey Department of Health and Senior Services (State Agency) completed a standard survey of the facility. The record is silent as to the State Agency's findings; both parties assert, without explanation, that on April 1, 2001, the facility was found to be in substantial compliance. ⁽¹⁾ P. Brief at 3; CMS Brief at 2.

The State Agency apparently missed something during the February survey, because, responding to a complaint from the Office of the New Jersey Ombudsman, state surveyors returned to the facility on April 5, 2001, conducted a complaint investigation (abbreviated survey), and determined that the facility was not in substantial compliance. Specifically, the State Agency found that the facility did not meet requirements for quality of care, 42 C.F.R. � 483.25(h)(2), and physician services, 42 C.F.R. � 483.40(b)(1)-(3), at a "G" level of scope and severity (isolated instances of actual harm), because it allowed a resident to go unexamined and untreated for months after staff detected a significant lump in her right breast.

CMS agreed with the State Agency, and so advised the facility in a letter dated July 13, 2001. For the two deficiencies CMS imposed a per instance civil money penalty (CMP) totaling $2,500 ($1,500 for the quality of care deficiency, and $1,000 for the physician services deficiency). The letter also advised that no additional penalties would be imposed because the facility was found to be in substantial compliance as of June 14, 2001. CMS Ex. 4.

Petitioner timely appealed, and the case was assigned to me. Petitioner moves for summary judgment, and has filed a brief in support of summary judgment (P. Brief), accompanied by one exhibit. CMS has filed its reply accompanied by four exhibits (CMS Exs. 1-4). Petitioner also filed a reply brief (P. Reply). In the absence of objection, for purposes of this summary judgment ruling, I admit P. Ex. 1 and CMS Exs. 1-4.

II. Issue

The sole issue before me is whether summary judgment is appropriate.

III. Discussion

A. Petitioner is not entitled to summary judgment because it has not established that, based on the undisputed facts, it is entitled to judgment as a matter of law. ⁽²⁾

An administrative law judge (ALJ) may decide a case on summary judgment, without an evidentiary hearing, if the case presents no genuine issue of material fact, and the moving party establishes that, based on the undisputed facts, it is entitled to judgment as a matter of law. Crestview Parke Care Center, 373 F.3d 743 (2004); Guardian Health Care Center, DAB No. 1943, at 8 (2004). In reaching a decision, the ALJ may neither make credibility determinations nor weigh conflicting evidence, but must view the record in the light most favorable to the nonmoving party, drawing all reasonable inferences from the evidence in that party's favor. Livingston Care Center v. Dep't. of Health and Human Services, No. 03-3489, 2004 WL 1922168; Guardian Health Care Center, DAB No. 1943, at 8. Here, the facts are not in dispute. However, based on the undisputed facts, Petitioner has not established that it is entitled to judgment as a matter of law.

1. The facility's inaction, after staff detected a lump in Resident #1's (R1's) breast, constitutes failure to provide the necessary care and services to allow R1 to attain or maintain the highest practicable physical, mental, and psychosocial well-being, as required by 42 C.F.R. � 483.25, and a failure to provide adequate physician services, as required by 42 C.F.R. � 483.40(b).

The undisputed evidence establishes that on May 26, 2000, a nurse aide notified the unit nurse that R1, a facility resident who suffered from dementia, had a lump in her breast. A nursing assessment detected a 2 cm x 2 cm lump in R1's right breast. The attending physician was notified, apparently did not respond, and the facility took no further action.

Sometime thereafter, R1's family asked that she be transferred to another physician's service, and on June 28, 2000, she was transferred. Review of the second physician's monthly progress notes from June 28, 2000, to September 15, 2000, showed no evidence that the new physician was even aware of the presence of the lump.

Nurses' notes dated September 25 and 27, 2000 again document the presence of a "firm lump in the right chest wall." The nursing supervisor was notified and "the physician was to be notified in the morning." Either the physician was not then notified, or (s)he was notified but did not respond. (S)he "was paged" at 1:00 p.m. on October 4, 2000, and again at 10:25 a.m. on October 5, 2000. A physician finally examined R1 at noon on October 5, 2000, more than four months after the lump was detected. The resident was subsequently admitted to the hospital, and, on October 23, 2000, underwent a right mastectomy for breast cancer. She died on December 18, 2000. According to the death certificate, the primary cause of death was breast cancer. Staff told the surveyors that the lump had been visible to the eye. P. Ex. 1; CMS Ex. 3.

At the facility's request, Alex T. Makris, M.D., C.M.D., reviewed R1's treatment record. In a letter dated May 30, 2001, Dr. Makris concluded that the initial physician's failure to evaluate the breast mass when notified of it on May 26, 2000, "did not meet the standard of care." He opined that a clinical assessment should have been done then, followed by discussion with the family to determine an appropriate response. In addition to recommending actions specific to the negligent physician (who apparently continued to attend to facility residents), Dr. Makris recommended institutional changes, including that the facility develop a process to insure that staff follow up appropriately on calls to physicians and that the facility monitor the process to assure its effectiveness. CMS Ex. 3, at 18-19.

Based on these undisputed facts, the parties agree that the facility was out of substantial compliance with the quality of care regulation, 42 C.F.R. � 483.25, which requires the facility to provide "the necessary care and services to allow a resident to attain or maintain the highest practicable physical, mental, and psychosocial well-being," and with the physician services regulation, 42 C.F.R. � 483.40, which requires appropriate physician visits and review.

2. Petitioner has not met its burden of demonstrating that the facility corrected its deficiencies prior to the change of ownership, and, the presumption is that it did not.

As discussed below, a long line of cases hold that a new owner, who accepts assignment of the facility provider agreement, is responsible for the facility's deficiencies, even though those deficiencies are largely attributable to the actions of its predecessor. Petitioner attempts to distinguish itself from those cases by characterizing the facility's deficiencies as an isolated incident that did not continue under its new ownership. However, Petitioner has not established that the noncompliance did not continue. To the contrary, the evidence before me suggests that the deficiencies were ongoing, and that the facility finally achieved compliance in June 2001, well after the change of ownership.

Petitioner's position is based on the misapprehension that the absence of additional incidents establishes its compliance. The Board has repeatedly explained that, under the regulatory scheme, any deficiency that has a potential for more than minimal harm is necessarily indicative of problems in the facility that need to be corrected. Barn Hill Care Center, DAB No. 1848, at 12-18 (2002); Lake City Extended Care Center, DAB No. 1658, at 14 (1998). Substantial compliance means not only that the specific cited instances of substandard care were corrected, and that no other instances have occurred, but also that the facility has implemented a plan of correction designed to assure that no such incidents occur in the future. No additional findings that the facility violated the standard of care are required in order to find the facility out of substantial compliance; evidence of instances in which the facility met the standard of care do not change the fact that the facility is out of substantial compliance. Barn Hill, DAB No. 1848; Lake City, DAB No. 1658, at 15. The burden is on the facility to prove that it has resumed complying with program requirements, not on CMS to prove that the deficiencies continued to exist after they were discovered. Hermina Traeye Memorial Nursing Home, DAB No. 1810 (2002). See also Asbury Center at Johnson City, DAB No. 1815, at 19-20 (2002); Cross Creek Health Care Center, DAB No. 1665 (1998).

Because R1 was examined and treated prior to the ownership change, Petitioner seems to assume that its deficiencies were corrected at that time. But aside from eventually providing R1 with care, the facility took no action "designed to assure that no such incidents occur in the future." The facility acknowledged in its plan of correction that "all residents have the potential to be affected from a physician notification and assessment perspective." CMS Ex. 3, at 2. As late as May 30, 2001, the facility's own consulting physician, Dr. Makris, concluded that institutional changes were required to prevent future failures to meet the standard of care. Drawing all reasonable inferences in the light most favorable to the nonmoving party, the evidence before me establishes that until it submitted its plan of correction - May 30, 2001 - the facility had not even initiated an investigation of the attending physician's failure to respond to notification of R1's symptoms, much less taken any affirmative corrective action. CMS Ex. 3. CMS therefore appropriately found that the facility was out of substantial compliance until June 14, 2001.

3. A change of ownership/management does not relieve the facility of its obligation to meet program participation requirements.

The regulations provide that, when a facility changes ownership, the existing provider agreement is automatically assigned to the new owner, subject to all applicable statutes and regulations and to the terms and conditions under which it was originally issued, including, but not limited to: 1) any existing plan of correction; and 2) compliance with applicable health and safety standards. 42 C.F.R. � 489.18(c) and (d). As Petitioner recognizes, the regulation plainly requires that new owners comply with all participation requirements from the time of the assignment of the agreement, and therefore supports the conclusion that all providers are subject to the normal enforcement authorities. CarePlex of Silver Spring, DAB No. 1683 (1999), and CarePlex of Silver Spring, DAB No. 1627 (1997).

From the point when [the facility] accepted assignment of the provider agreement, it undertook to represent to Medicare that it was capable of complying with the terms of the agreement and operating in accordance with the participation requirements. [The facility] was undeniably responsible for its correction of or its perpetuation of inadequate conditions, regardless of who initially created the conditions.

CarePlex, DAB No. 1627, at 4. Petitioner here is thus responsible for the deficiencies that resulted in R1's poor treatment, and that continued following the change of ownership.

B. I have no authority to review CMS's exercise of its discretion to impose a penalty.

Petitioner argues that CMS abused its discretion when it imposed the CMP. Petitioner points out that the statutory purpose for imposing penalties is remedial, and argues that since the facility was under new ownership and "had nothing to correct," a CMP serves no purpose here, and CMS abused its discretion by imposing one.

The most obvious problem with Petitioner's argument is that the facility was not in substantial compliance following the change of ownership. As discussed above, not only is there a presumption of its ongoing noncompliance, the facility's own consulting physician concluded, in late May 2001, that the facility still needed to implement institutional changes in order to prevent future incidents.

Moreover, since I have concluded that the facility was not in substantial compliance, I have necessarily found a basis for imposing a CMP. 42 C.F.R. � 488.430 (CMS may impose a CMP for either the number of days a facility is not in substantial compliance with one or more participation requirements, or for each instance a facility is not in substantial compliance.) The regulations therefore preclude me from reviewing CMS's exercise of its discretion to impose a remedy.

Review of the penalty. When an administrative law judge . . . finds that the basis for imposing a civil money penalty exists, as specified in � 488.430, the administrative law judge . . . may not . . .

(2) Review the exercise of discretion by CMS . . . to impose a civil money penalty.

42 C.F.R. � 488.438(e)(2).

On the other hand, Petitioner may challenge as unreasonable the amount of the CMP. To determine the reasonableness of the CMP, I consider the factors listed in 42 C.F.R. � 488.438(f): 1) the facility's history of noncompliance; 2) the facility's financial condition; 3) 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. The section 488.404 factors 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. I am neither bound to defer to CMS's factual assertions, nor free to make a wholly independent choice of remedies without regard for CMS's discretion. Community Nursing Home, DAB No. 1807, at 22 (2002), et seq.; CarePlex, DAB No. 1683, at 8.

Although Petitioner does not present its argument within the framework of 42 C.F.R. � 488.438, it discusses at length the decisions in CarePlex of Silver Spring. There, notwithstanding the facility's significant history of noncompliance, the ALJ reduced a CMP from $750 to $50 per day. The Board affirmed the reduction, noting that although the facility history "remains a relevant consideration" following a change of ownership, the new owner may nevertheless rebut "the presumption that the facility's history remains predictive of likely future compliance." CarePlex, DAB No. 1683, at 8. Here, I have before me virtually no evidence as to the facility's history of noncompliance, and the parties may not consider that they have fully addressed this issue. In any event, the penalty imposed, $2,500, which is at the lower end of the mandatory range ($1,000 to $10,000 per instance), appears fairly minimal in light of the seriousness of the deficiencies, without regard to the facility's history.

IV. Conclusion and Order

For the reasons set forth above, I deny Petitioner's motion for summary judgment. I note that CMS did not file a cross motion for summary judgment, and I am not able to determine what, if anything, remains for resolution in this case. I therefore direct the parties, within ten days of receipt of this decision and order, to advise me: 1) what, if any, issues remain unresolved; and 2) what, if any, material facts remain to be resolved by an in-person hearing.

Carolyn Cozad Hughes

Administrative Law Judge

1. In fact, the February survey findings could provide additional evidence as to the facility's level of compliance following the change of ownership. That the facility did not achieve substantial compliance until April 1, suggests that it had deficiencies. On the other hand, it also appears that no penalties were imposed, which could suggest either that CMS did not consider those deficiencies significant, or that CMS gave the facility a pass based on its correcting the deficiencies within a reasonable time. Of course, as discussed below, the February surveyors were not aware of the facility's significant deficiencies with respect to Resident #1.

2. I make findings of fact and conclusions of law to support my decision in this case. I set forth each finding, in italics and bold, as a separate heading.