Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
In the Case of:
National Hospital for Kids in Crisis, Petitioner,
-v-
Health Care Financing Administration.
DATE: October 3, 1996
Civil Remedies CR413
App. Div. Docket No.
A-96-121
Decision No. 1600
FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION
National Hospital for Kids in Crisis (Petitioner)
appealed a March 5, 1996 decision by Administrative Law
Judge (ALJ) Steven T. Kessel. See National Hospital for
Kids in Crisis, DAB CR413 (1996) (ALJ Decision).
Petitioner, a psychiatric hospital, had requested a
hearing before the ALJ on the determination of the Health
Care Financing Administration (HCFA) that Petitioner's
provider agreement be given an effective date of October
25, 1993. The ALJ concluded that the effective date
established by HCFA was proper under 42 C.F.R. § 489.13.
Our standard for review of an ALJ decision on a disputed
factual issue is whether the decision is supported by
substantial evidence in the record. Our standard for
review on a disputed issue of law is whether the decision
is erroneous. As discussed below, we conclude that the
ALJ's findings are supported by substantial evidence and
that the ALJ did not err when he concluded that HCFA
properly established the effective date of October 25,
1993 for Petitioner's provider agreement. Accordingly,
we sustain his decision.
The record on appeal includes the record before the ALJ,
the parties' briefs on appeal, and the transcript of a
July 30, 1996 telephonic oral argument before the
Presiding Board Member.
I. Background
A. Applicable authority
In order to be approved for participation in or coverage
under Medicare, a provider must meet the applicable
statutory definition and be in compliance with the
conditions or requirements for participation. 42 C.F.R.
§ 488.3. 1/ The survey and certification process set
out in 42 C.F.R. Part 488 is the means by which HCFA and
its agents (including state survey agencies) determine
whether a provider is complying with the applicable
conditions or requirements for participation.
The regulations that govern Medicare participation of
psychiatric hospitals are contained in 42 C.F.R. Part
482, including special staffing requirements. Among
other things, these regulations require that there be
adequate numbers of qualified professional staff. These
regulations describe three levels of requirements that a
psychiatric hospital must comply with in order to
participate in Medicare. These three levels of
requirements are known as "conditions," "standards," and
"elements" of participation. Conditions of participation
are fundamental requirements of participation. A
standard of participation is a subpart of a condition of
participation, and an element of participation is a
subpart of a standard and provides a detailed explanation
of the standard's requirements.
In some instances, a failure to comply with a standard or
an element of participation may be so egregious as to
comprise a failure to comply with the condition of
participation of which the standard or element is a
subpart. Specifically, the state survey agency will
certify to HCFA that the provider is not or is no longer
in compliance with the conditions "where the deficiencies
are of such character as to substantially limit the
provider's . . . capacity to render adequate care or
which adversely affect the health and safety of
patients." 42 C.F.R. § 488.24(a). If HCFA finds a
condition-level deficiency, HCFA requires a resurvey.
An applicant who is found not to be in compliance with a
standard of participation may obtain HCFA's permission to
participate if it assures HCFA of compliance within a
reasonable time by either correcting the deficiency or by
submitting to HCFA an acceptable plan of correction. 42
C.F.R. § 488.28. HCFA will permit an applicant who
submits an acceptable plan of correction to participate,
as of the date that the deficiency is corrected, or on
the date of an acceptable plan of correction or an
approvable waiver request, or both, whichever is the
earlier date. 42 C.F.R. § 489.13(b).
B. History of the case
The following facts were fully developed by the ALJ and
are not disputed by the parties. Petitioner is a
nonprofit hospital that provides care to children who are
hospitalized for treatment of mental disorders.
Petitioner applied to participate in the Medicare program
as a psychiatric hospital. On May 24 - 25, 1993,
Petitioner was surveyed by two psychiatric consultants
who had been retained by HCFA. The consultants found
that Petitioner was not in compliance with a Medicare
condition of participation stated in 42 C.F.R. § 482.62
(which describes special staffing requirements for
psychiatric hospitals), in that Petitioner did not have
an adequate number of nurses on duty at Petitioner's
facility to perform all of the services that should be
provided by nurses. Instead, the consultants found that
child care counselors (CCCs), who did not have the
professional training of nurses and who were not being
supervised by nurses, were providing some nursing
services to Petitioner's patients.
Petitioner had a total of four registered nurses
providing nursing services to patients. One nurse was
assigned to work the day shift, one nurse was assigned to
work the evening shift, and two nurses were assigned to
work the night shift. Consequently, on two of the three
shifts there was only one nurse on hand to provide
nursing services to the approximately 12 patients who
were hospitalized at Petitioner's facility. The
surveyors found that it was not possible for the one
nurse who was on duty most of the time to directly
observe all of Petitioner's patients and to provide
nursing services to all of them. HCFA accepted the
consultants' finding and informed Petitioner of the
finding on June 24, 1993.
HCFA advised Petitioner that Petitioner had a right to
request reconsideration, and Petitioner did so. While
the request was pending, Petitioner reapplied to HCFA to
be certified as a participating provider. On September
24, 1993, Petitioner was resurveyed. The surveyors
concluded that, as of that date, Petitioner was complying
with all Medicare conditions of participation.
Petitioner had reorganized its lines of authority, and
the CCCs now reported to, and were supervised by,
qualified nursing staff. However, the surveyors also
concluded that Petitioner was not complying with elements
of standards of participation contained in 42 C.F.R.
§ 482.61(a), the regulation which governs medical records
maintained by psychiatric hospitals. HCFA afforded
Petitioner the opportunity to submit a plan of correction
for the September 24, 1993 resurvey. Petitioner
submitted a plan of correction, which HCFA received on
October 25, 1993. On November 2, 1993, HCFA advised
Petitioner that HCFA had accepted the plan of correction.
Petitioner was certified to participate in Medicare
effective October 25, 1993.
Petitioner continued to request that HCFA reconsider its
June 24, 1993 determination. On January 24, 1994, HCFA
advised Petitioner that HCFA was sustaining its June 24,
1993 determination. HCFA restated that the effective
date of Petitioner's participation in Medicare was
October 25, 1993. Thereafter, Petitioner requested a
hearing.
In its request for a hearing, Petitioner disputed that
the deficiencies that were found at the May 24 - 25, 1993
survey were so severe as to establish that Petitioner was
not in compliance with a condition of participation in
Medicare. Petitioner asserted that HCFA should have
afforded it an opportunity to submit a plan of
correction, and that, if HCFA had done so, Petitioner
would have been certified at least by June 30, 1993.
Petitioner said that HCFA's failure to certify Petitioner
by this date meant that Petitioner not only lost
reimbursement for services provided between that date and
October 25, 1993, but also received a lower reimbursement
rate under Medicaid, as a result of having a different
base year for determining a Medicaid rate.
C. The ALJ Decision
The ALJ Decision contained ten supporting findings of
fact and conclusions of law (FFCLs). Petitioner did not
contest FFCLs 1, 3, 5, 6, and 7:
1. An applicant for participation in Medicare does
not comply with a Medicare condition of
participation where its failure to satisfy
requirements of participation substantially limits
that applicant's capacity to provide care or where
that failure adversely affects the health and safety
of patients.
3. It is a condition of participation in Medicare
that a psychiatric hospital have adequate numbers of
qualified professional staff, including nurses, to
evaluate patients, formulate written, individualized
comprehensive treatment plans, provide active
treatment measures, and engage in discharge
planning.
5. The facility for which Petitioner sought
certification treats children who are suffering from
serious mental problems.
6. Nursing services provided by Petitioner include
assessment of patients' physical and mental status,
secluding and restraining patients when necessary,
administering medications to patients, and
monitoring the effects of medications.
7. As of May 24 - 25, 1993, some of the nursing
services that Petitioner provided to its patients
were being provided by child care counselors who did
not have the professional training of nurses and who
were not supervised by nurses.
Therefore, we adopt and affirm these FFCLs without
further discussion. 2/
Petitioner excepted to FFCLs 2, 4, 8, 9, and 10 of the
ALJ Decision:
2. A condition-level deficiency exists where the
deficiency results in a potential for harm to
patients.
4. HCFA's finding of a condition-level deficiency
in this case relies on the plain meaning of the
regulation which governs the professional staff
which must be present at a psychiatric hospital.
8. As of May 24 - 25, 1993, Petitioner did not have
an adequate number of nurses on duty at its facility
to perform all of the services that should be
provided by nurses.
9. As of May 24 - 25, 1993, Petitioner's failure to
have an adequate number of nurses to provide the
services that should be provided by nurses
threatened the health and safety of Petitioner's
patients and substantially limited Petitioner's
ability to provide adequate care to patients.
10. As of May 24 - 25, 1993, Petitioner was not
complying with the condition of participation in
Medicare governing staffing in psychiatric
hospitals.
Petitioner alleged that the ALJ erred in reaching the
legal conclusions in FFCLs 2 and 4. With respect to
FFCLs 8, 9, and 10, Petitioner argued that they were not
based on substantial evidence. 3/
II. Analysis
In this section, we address first the legal conclusion in
FFCL 2 and then the legal conclusion in FFCL 4. Finally,
we address Petitioner's arguments concerning FFCLs 8, 9,
and 10.
A. Did the ALJ err in concluding that "[a]
condition-level deficiency exists where the
deficiency results in a potential for harm to
patients"?
Petitioner argued before the ALJ that, in order to show
that an entity is not complying with a condition of
participation, HCFA must prove that a deficiency in that
entity's operation is not just potentially harming, but
is actually harming, patients. The ALJ rejected this
argument as not supported by either the language of 42
C.F.R. § 488.24(a) or by logical application of that
language. ALJ Decision at 8.
Section 488.24(a) provides that the state survey agency
will certify that a provider is not in compliance with
the conditions of participation "where the deficiencies
are of such a character as to substantially limit the
provider's . . . capacity to render adequate care or
which adversely affect the health or safety of patients;
. . . ." The ALJ read this as providing that "a
deficiency will be of a condition level of severity where
the deficiency impairs a provider's capacity to provide
adequate care" and thus "encompasses both circumstances
where the deficiency causes actual harm to patients and
where it creates a potential for harm to patients." ALJ
Decision at 8 (emphasis in original). The ALJ also said
that "a finding of a deficiency that adversely affects
the safety of patients plainly would encompass a
situation where the deficiency poses a potential for harm
to patients." Id. Finally, the ALJ said that it would
undermine the purpose of Medicare certification -- to
protect the health and safety of program beneficiaries --
to read the regulation as defining a condition-level
deficiency to exist only where there is proof of harm to
patients.
Petitioner argued on appeal that, even if HCFA properly
found that its staffing arrangement had a potential for
harm (which Petitioner did not concede), HCFA was
required to allow Petitioner to submit a plan of
correction reflecting that Petitioner had corrected the
deficiencies noted during the survey. Petitioner's
appeal brief (P. App. Br.) at 6. Petitioner argued that
it is inconsistent with the plain meaning of the
regulations for HCFA to impose a condition-level
deficiency based on a finding of a potential for harm
since the regulations at sections 488.24(a) and 488.28 do
not specifically refer to "potential." P. App. Br. at 8.
Further, Petitioner reasoned that denying a facility the
opportunity to submit a plan of correction for situations
which might potentially, but do not presently, jeopardize
the health and safety of patients or limit the facility's
ability to provide adequate care renders meaningless the
distinction between standard-level deficiencies and
condition-level deficiencies. P. App. Br. at 6.
Petitioner also asserted that in a hospital like
Petitioner's where only the most acute patients are
treated, any deficiency may result in a "potential for
harm" under HCFA's reading of the regulations.
In addition, Petitioner argued that, by regulation, HCFA
has the authority to cite psychiatric hospitals for
different levels of deficiencies, i.e., deficiencies in
"standards" and "conditions." Petitioner maintained that
standard-level deficiencies are less serious to the
health and safety of patients than condition-level
deficiencies since the respective sanctions are less
stringent. P. App. Br. at 6. Finally, Petitioner cited
42 C.F.R. §§ 489.13 and 488.24(a) for its position that
any finding of a potential for harm should result in a
provider's ability to file a plan of correction, since a
plan of correction would comply with the purpose of
having a "pre-certification" process for participation in
Medicare.
Petitioner's reliance on the fact that section 488.24(a)
does not specifically refer to "potential" is
unwarranted. We agree with the ALJ that the use of the
terms "capacity" and "safety" clearly indicates that a
condition-level deficiency may arise from a potential for
harm to patients, as well as from circumstances which
result in actual harm. This result is also consistent
with the decision in Beverly California Corporation v.
Shalala, 78 F.3d 403 (8th Cir. 1996). The Eighth Circuit
in Beverly agreed with the Appeals Council that "the
relevant inquiry is not whether Medicaid patients
suffered actual harm" since a "standard requiring harm to
Medicaid patients before the Secretary could take action
would improperly subvert the Secretary's oversight of the
program." 78 F.3d at 409; see, also, Carmel Convalescent
Hospital, DAB 1584 (1996).
Contrary to what Petitioner argued, the distinction
between condition-level and standard-level deficiencies
is not rendered meaningless if section 488.24(a) is read
as encompassing a potential for harm. The regulation
distinguishes the two levels of deficiencies by whether
they "substantially limit" the provider's capacity to
provide adequate care or "adversely affect" the health or
safety of patients. Petitioner pointed out that the
Appeals Council decision upheld in Beverly stated that
the relevant considerations in determining whether a
condition-level deficiency exists are the "severity and
frequency" of any deficiency. This was based on HCFA's
regulations for nursing homes, which provided that
surveyors should analyze findings for "severity,
frequency of occurrence and impact on delivery of care or
quality of life" and which do not directly apply here.
See 42 C.F.R. § 488.110(i)(2)(1988-93). Under 42 C.F.R.
§ 488.26(a), however, the decision as to whether there is
compliance with a particular condition of participation
"will depend upon the manner and degree to which the
provider . . . satisfies the various standards within
each condition . . . ." Thus, it would be inconsistent
with the regulations to hold that any potential for harm,
no matter how de minimis or remote, should be considered
a condition-level deficiency. Petitioner is correct that
it is not enough to simply identify some potential for
harm and that it is important to look at the facts of the
individual case before refusing to certify a facility.
Nothing in the applicable regulations, however, supports
Petitioner's position that a provider is entitled in all
circumstances to submit a plan of correction for any
deficiency that results in a "potential for harm" rather
than actual harm. We read FFCL 2 as intended to reflect
the ALJ's correct conclusion in his analysis that a
showing of actual harm is not required to support a
condition-level deficiency.
Petitioner's reliance on 42 C.F.R. § 489.13(b) as
requiring HCFA to permit submission of a plan of
correction where there is only a potential for harm is
misplaced. That regulation addresses the effective date
of a provider agreement and provides that, if all federal
requirements are not met on the date of the survey, the
agreement will be effective on the earlier of the
following dates:
(1) The date on which the provider meets all
requirements.
(2) The date on which the provider submits a
correction plan acceptable to HCFA or an approvable
waiver request, or both.
That regulation does not set out criteria for when a
condition-level deficiency will be found, nor address
circumstances under which HCFA will permit a provider to
submit a correction plan, rather than requiring a new
survey. Instead, those issues are addressed in section
488.24(a) and 488.28.
Section 488.24(a), discussed above, sets the criteria for
when a condition-level deficiency requiring a new survey
will be found. Section 488.28 provides for granting a
reasonable time to achieve compliance to a provider that
submits an acceptable plan of correction if the provider
"is found to be deficient with respect to one or more of
the standards in the conditions of participation . . . ."
(Emphasis added.) This section makes certification with
deficiencies contingent on a finding that "the existing
deficiencies noted either individually or in combination
neither jeopardize the health and safety of patients nor
are of such a character as to seriously limit the
provider's capacity to render adequate care." This
wording, like that of section 488.24, clearly implies
that a potential for harm may be a basis for denying
certification. Finally, we note that, under § 489.12,
HCFA may refuse to enter into a provider agreement if the
prospective provider is "unable to give satisfactory
assurance of compliance with the requirements of title
XVIII of the Act [Medicare]."
Further, we reject Petitioner's argument that HCFA's
interpretation of the regulations would result in all
deficiencies being treated as condition-level
deficiencies in a facility like Petitioner's. This
assertion is negated by the very facts of this case.
Petitioner was resurveyed on September 24, 1993. While
the surveyors concluded that, as of that date, Petitioner
was complying with all Medicare conditions of
participation, the surveyors also concluded that
Petitioner was not complying with elements of standards
of participation contained in 42 C.F.R. § 482.61(a), the
regulation which governs medical records maintained by
psychiatric hospital. Because this was not a condition-
level deficiency, HCFA afforded Petitioner the
opportunity to submit a plan of correction, which HCFA
received on October 25, 1993. HCFA accepted the plan of
correction, and Petitioner was notified that it was
certified to participate in Medicare effective October
25, 1993. Contrary to Petitioner's argument, HCFA has
shown that it can differentiate between a situation where
a condition-level deficiency exists and a situation where
a deficiency of a lesser level exists.
Finally, we reject Petitioner's argument that allowing
Petitioner to submit a plan of correction here would
comply with the purpose of having a "pre-certification"
process for participation in Medicare as required by
sections 488.24(a) and 489.13. We assume that this
argument refers to the regulatory requirement that an
applicant is complying with all Medicare participation
requirements before being certified by HCFA to
participate in the Medicare program. However, the only
"pre-certification process" is the survey process
described in the regulations. The regulations provide
that certain types of deficiencies found in the survey
process (deficiencies that are less than condition-level)
may be corrected by submitting a plan of correction while
other types require a resurvey (condition-level
deficiencies). Petitioner's deficiency was a condition-
level one that would require a resurvey.
Petitioner's position was essentially that HCFA can meet
congressional and regulatory mandates to protect patients
sufficiently where there is only a potential for harm
without denying certification because HCFA may require
the facility either to correct the deficiencies or to
revise any plan of correction HCFA determines is not
acceptable. See Transcript of Oral Argument (App. Tr.)
at 8. HCFA pointed out, however, that requiring a
follow-up, on-site survey where a condition-level
deficiency has been identified ensures that the
deficiency has in fact been corrected, and HCFA does not
have the same assurance based solely on a representation
by a facility that it has or will correct the deficiency.
Thus, we determine that the ALJ did not err in concluding
that actual harm is not required to support a finding of
a condition-level deficiency. Therefore, we affirm FFCL
2, except that (solely for purposes of clarification) we
modify the FFCL to read as follows:
A condition-level deficiency may exist where the
deficiency results in a potential for harm to
patients, even if no actual harm resulted from the
deficiency.
B. Did the ALJ err in concluding that HCFA's
finding of a condition-level deficiency in this case
relies on the plain meaning of the regulation which
governs the professional staff which must be present
at a psychiatric hospital?
In explaining the conclusion in FFCL 4 that HCFA's
finding of a condition-level deficiency was based on the
plain meaning of the regulations, the ALJ Decision
stated:
The plain meaning of the regulation is that a
psychiatric hospital must have adequate numbers of
professionals on hand, including nurses, to perform
the duties that are within the province of the
professional staff. . . . HCFA determined that
Petitioner may not make up for a shortfall in
nursing personnel by assigning nursing duties to
non-nurses who are not under the supervision and
control of nurses.
ALJ Decision at 11.
Petitioner maintained that nothing in 42 C.F.R. § 482.62
requires CCCs to report to nurses, and that HCFA has not
cited any other regulation or written directive which
requires CCCs in psychiatric hospitals to report directly
to nurses. Thus, Petitioner argued, it has not violated
any regulation that requires CCCs to report directly and
formally to nurses since no such regulation exists.
Additionally, Petitioner argued that HCFA's regulations
failed to define "nursing services" and failed to
delineate what responsibilities may be delegated to CCCs.
The special staff requirements for psychiatric hospitals
are at 42 C.F.R. § 482.62. In relevant part, that
regulation states as a condition of participation:
The hospital must have adequate numbers of qualified
professional and supportive staff to evaluate
patients, formulate written, individualized
comprehensive treatment plans, provide active
treatment measures, and engage in discharge
planning.
The regulation also restates this requirement as a
standard for hospital personnel. 42 C.F.R. § 482.62(a).
In addition, the regulation provides:
(d) Standard: Nursing services. The hospital must
have a qualified director of psychiatric nursing
services. In addition to the director of nursing,
there must be adequate numbers of registered nurses,
licensed practical nurses, and mental health workers
to provide nursing care necessary under each
patient's active treatment program and to maintain
progress notes on each patient.
(1) The director of psychiatric nursing services
must . . . demonstrate competence to . . . direct,
monitor, and evaluate the nursing care furnished.
(2) The staffing pattern must insure the
availability of a registered professional nurse 24
hours each day. There must be adequate numbers of
registered nurses, licensed practical nurses, and
mental health workers to provide the nursing care
necessary under each patient's active treatment
program.
As HCFA argued, even though the regulations permit mental
health workers to provide nursing services in some
circumstances, the regulations clearly imply that all
such services must be under the direction, monitoring,
and evaluation of a qualified person.
Petitioner again, as it did before the ALJ, misstated
HCFA's determination that Petitioner failed to comply
with 42 C.F.R. § 482.62 as a determination that
Petitioner failed to require CCCs to report to nurses.
Instead, HCFA's determination is based on the survey's
finding that Petitioner failed to employ an adequate
number of nurses to provide necessary nursing services
and that the CCCs were not qualified to provide such
services without supervision by nurses. Petitioner's
decision to correct its non-compliance with section
482.62 by having CCCs report to nurses was Petitioner's
choice and is only one way in which the requirement for
adequate staff could be met. Indeed, Petitioner could
have elected to hire additional nurses. Simply because
HCFA was flexible in its determination to allow
Petitioner to meet the regulation's requirement by
allowing CCCs to report to nurses does not mean that HCFA
required that solution. 4/
While Petitioner is correct that the regulations do not
define "nursing services," this fact does not advance
Petitioner's case. Petitioner did not dispute the ALJ's
definition of nursing services which was based on
testimony that was unrebutted by Petitioner.
Thus, we determine that the ALJ did not err in concluding
that HCFA's finding of a condition-level deficiency in
this case relies on the plain meaning of the regulation
which governs the professional staff that must be present
at a psychiatric hospital. Accordingly, we affirm and
adopt FFCL 4.
C. Are FFCLs 8, 9, and 10 supported by substantial
evidence in the record?
The ALJ Decision thoroughly discussed the evidence
supporting FFCLs 8, 9, and 10, explaining why the ALJ
credited the testimony of HCFA's consultant surveyors as
experts and found that the testimony of Petitioner's
expert, while credible, did not rebut the key concerns
raised by the surveyors. Based on the testimony of the
surveyors, the ALJ found among other things that--
•. CCCs had authority to initiate decisions to
implement seclusion and restraint of patients
without first consulting with, or obtaining the
permission of, nurses. ALJ Decision at 18, citing
Tr. at 96.
•. CCCs provided, without the supervision of nurses,
one-on-one observation (used in treating seriously
disturbed patients, patients who are aggressive,
suicidal, or in danger of injuring themselves, and
patients who suffer from organic disturbances such
as seizure disorders). ALJ Decision at 18, citing
HCFA Ex. 4 at 4.
•. The training and experience possessed by CCCs did
not qualify them to work unsupervised by nurses to
assess a patient's mental status, to differentiate
between symptoms that might be caused by a patient's
condition or which might be produced by medications,
or to initiate seclusion or restraint of a patient.
ALJ Decision at 18, citing Tr. at 86, 88-92, 191-
192.
In assessing the consequences of Petitioner's staffing
arrangement, the ALJ found among other things that--
•. Petitioner's failure to have an adequate number of
nurses to provide nursing services, or to supervise
nursing services provided by CCCs, substantially
limited Petitioner's ability to provide adequate
care to its patients. ALJ Decision at 18, citing
HCFA Ex. 4; Tr. at 196-197.
•. Patients can experience harm from the failure to
provide psychiatric nursing services properly, such
as from an incorrect decision to seclude or restrain
a patient or from failure to have a nurse perform or
supervise one-to-one observation. ALJ Decision at
19, citing HCFA Ex. 4, at 3-5.
The ALJ concluded that Petitioner was not complying with
the condition of participation contained in 42 C.F.R.
§ 482.62.
In its initial brief on appeal, Petitioner noted that the
ALJ Decision defined nursing services to include
"assessment of patients' physical and mental status,
secluding and restraining patients when necessary,
administering medications to patients, and monitoring the
effects of medication." 5/ Petitioner argued that
there is no evidence in the record that nurses at
Petitioner's facility did not perform such services at
the time of the survey. Moreover, Petitioner asserted
that CCCs never hindered or interfered with the nursing
staff's performance of nursing services, nor did the CCCs
ever administer medication. P. App. Br. at 10.
These assertions are irrelevant, however. Neither HCFA
nor the ALJ found that the nurses at Petitioner's
facility did not perform nursing duties. Nor did HCFA
allege that CCCs interfered with the nursing staff's
performance of nursing services. Instead, HCFA provided
uncontradicted evidence to show that CCCs were providing
nursing services without being supervised by the nursing
staff.
As developed in its reply brief and oral argument, the
core of Petitioner's challenge to the ALJ Decision is
that the surveyors did not properly evaluate the facts of
Petitioner's situation in determining that a condition-
level, rather than a standard-level, deficiency existed.
According to the Petitioner, the surveyors should have
looked at "the type of care being delivered by the CCCs,
the low census and patient acuity, as well as the
informal supervision of the nursing staff that was
already in place at the time of the survey and of the
collegiality and teamwork that existed between the CCCs
and the nursing staff." P. App. Reply at 7. Petitioner
argued that, instead, HCFA concerned itself only with
numbers. Petitioner argued that, since Petitioner did
not have to hire additional staff to satisfy HCFA (but
merely change its reporting arrangement), it actually had
adequate numbers of staff at the time of the May 1993
survey. Petitioner suggested that if the surveyors had
properly analyzed its deficiency using the "severity and
frequency" test referred to by the Appeals Council in
Beverly, its deficiency would have been considered only a
standard-level deficiency because it caused no actual
harm and was easily corrected.
Petitioner's attack is in large part not a challenge to
the ALJ's factual findings, but a challenge to how the
legal definition of a condition-level deficiency was
applied to the facts. 6/ As the ALJ noted, this
presents a legal question.
In evaluating this question, we first note that the mere
fact that the staffing deficiency could be corrected
solely by a structural change in the reporting
requirements does not mean that the deficiency did not
substantially limit the provider's capacity to provide
adequate care or adversely affect the health and safety
of patients. To the contrary, the fact that the problem
with Petitioner's staffing was a structural one meant
that it affected all of Petitioner's patients and did not
represent merely an isolated incident. Nor does it
matter that Petitioner had only 12 patients at the time
of the survey. Clearly the deficiency would have
affected any future patients as well, if uncorrected.
Contrary to what Petitioner argued, HCFA did not concern
itself solely with numbers. Instead, HCFA evaluated what
services were required for Petitioner's patients, whether
the person providing them was qualified to do so, and
what the potential effects were of Petitioner's staffing
situation. HCFA surveyors testified that they considered
this situation to be a serious problem, particularly with
respect to decisions about seclusion and restraint of
patients and evaluation and observation of patients
necessary to ensure that physicians' treatment decisions
were well-informed. See, e.g., Tr. at 85-97, 191-197.
We asked Petitioner whether it could point to any
evidence it presented to rebut the surveyors' evaluation
of the problem, and Petitioner did not do so. App. Tr.
at 34-37. Indeed, Petitioner conceded that "any time you
have sick kids and there is anything that is not right,
it is a serious problem." App. Tr. at 37.
While Petitioner seemed to think that any problem was
overcome or minimized by the fact that Petitioner had a
team structure for providing services in which the CCCs
cooperated closely with nurses, we agree with the ALJ
that, even if this ameliorated somewhat the potential for
harm, it did not undercut the conclusion that a potential
for harm to patients existed in the way Petitioner
organized its staff. Further, we agree with HCFA that
that potential was serious. As HCFA argued, this is not
just a question of to whom the CCCs reported, but is a
question of who controlled them -- who was responsible
for them, who gave them direction on what things the CCCs
were supposed to report, when they were supposed to
report various matters, and, fundamentally, how the
psychiatric hospital operated. 7/
Moreover, the statutory and regulatory staffing
requirements for psychiatric hospitals are directed at
ensuring that federal funds are paid only for patients
who are receiving active treatment (at a hospital level)
according to their treatment plans, rather than merely
residential care. See § 1861(f)(2) of the Social
Security Act. What constitutes a substantial limitation
on the capacity to provide adequate care must be
considered in this context. Here, there were seriously
ill children who required one-to-one observation and
other nursing services and were not receiving them from
qualified staff. Petitioner's arguments concerning the
level of education and training the CCCs have are
irrelevant in light of the unrebutted evidence that they
were not qualified to provide nursing services without
formal supervision by nurses.
Thus, we determine that FFCLs 8, 9, and 10 are supported
by substantial evidence in the record, and that the ALJ
did not err in concluding that a condition-level
deficiency existed. Therefore, we affirm and adopt these
FFCLs.
Conclusion
Accordingly, based on the foregoing analysis, we sustain
the ALJ Decision concluding that HCFA's determination
that Petitioner's provider agreement was effective
starting October 25, 1993 was proper. Further, as
discussed in the foregoing analysis, we affirm and adopt
each and every FFCL, with a clarifying modification to
FFCL 2.
Cecilia Sparks Ford
Donald F. Garrett
Judith A. Ballard
Presiding Board Member
* * * Footnotes * * *
1. Unless otherwise indicated, the regulations
cited in this decision are the version in effect in 1993.
2. We note that, although Petitioner did not take
timely exception to the ALJ finding that CCCs were not
supervised by nurses, Petitioner did argue in its reply
brief on appeal (at page 10) that "CCCs were under the
direct supervision of nurses during one-to-one
situations." The affidavit, by one of Petitioner's
nurses, that Petitioner cited in support of this
statement specifically acknowledged, however, that "the
nurse did not have official supervisory authority over
the child care counselors." P. Ex. 17, at 1.
3. In responding to Petitioner's appeal, HCFA
argued that the ALJ erred in placing on HCFA the burden
of proving the facts on which it based its determination
that Petitioner was not complying with a Medicare
condition of participation. Since the ALJ nonetheless
held for HCFA, and we sustain his decision, we do not
need to reach the burden issue here.
4. In 1986, HCFA had revised the staffing
requirements for psychiatric hospitals to "simplify the
current detailed specifications regarding staff in
general to reflect instead the responsibilities and
functions that are appropriate to a psychiatric hospital
staff . . . ." 51 Fed. Reg. 22,010, 22,032 (June 17,
1986). The preamble explained:
These revisions are intended to simplify and clarify
Federal requirements, to provide maximum flexibility
in hospital administration while strengthening
patient health and safety, to emphasize outcomes
rather than processes, to promote cost effectiveness
while maintaining quality care, and to achieve more
effective compliance with Federal requirements.
51 Fed. Reg. 22,010. Petitioner suggested the phrase
"adequate numbers of qualified professional and
supportive staff" was vague and subjective and that HCFA
could have clarified it as it did in later guidance.
Such language is, however, consistent with giving
providers some flexibility in meeting requirements and
recognizes that factors such as the numbers of patients
and their active treatment needs should be considered in
determining what staffing is required. Petitioner had
notice that the survey process would involve surveyors'
professional judgment. 42 C.F.R. § 488.26. In any
event, Petitioner did not argue that it had any
reasonable basis for thinking that CCCs were qualified to
provide nursing services without supervision, or for
thinking that it had adequate numbers of nurses to
provide all of the nursing services required.
5. While Petitioner questioned whether the
regulations gave it notice of the definition of nursing
services used by the ALJ, Petitioner did not take
exception to the ALJ's finding in FFCL 6 that certain
services provided by Petitioner were nursing services,
nor did Petitioner allege that it could not reasonably
have known that these services would be considered
nursing services.
6. In its reply brief on appeal, Petitioner did
attack some of the factual assertions made by HCFA in its
brief, arguing that the evidence did not support those
assertions. While HCFA may have somewhat misdescribed
some of the evidence, the evidence cited by HCFA does
support the finding of a condition-level deficiency. See
e.g., Tr. 96, 116, 129-31, 135, 138; P.Ex. 12-4 to 12-5
8d; HCFA Ex. 4-2 to 4-4 9.b. Petitioner's points in
response are either not supported by the evidence cited
or irrelevant.
7. HCFA also argued, and Petitioner did not deny,
that the services provided by a psychiatric hospital must
be under the supervision of physicians and that it is the
nurses who interpret the physicians' orders and are
critical to ensuring that active treatment is provided
rather than mere residential care. App. Tr. at 19-20;
see Tr. at 86, 91.