Chesapeake Bay Holdings, LLC d/b/a Clearwater Healthcare Center, ALJ Ruling 2021-7 (HHS CRD Aug. 12, 2021)

RULING AND ORDER DISMISSING CASE

For the reasons set forth below, I conclude that Chesapeake Bay Holdings, LLC d/b/a Clearwater Healthcare Center (Petitioner or Clearwater), is not entitled to administrative law judge review of the April 28, 2021 letter and statement of deficiencies issued by the California Department of Public Health (state agency) following an April 12, 2021 survey.  Therefore, as authorized by 42 C.F.R. § 498.70(b), I grant the Centers for Medicare & Medicaid Services' (CMS's) motion to dismiss Petitioner's hearing request (CMS Mot.).

Discussion

Petitioner has no right to a hearing because CMS did not impose an enforcement action.1

Petitioner is a skilled nursing facility (SNF) located in Stockton, California, that participates in the Medicare program as a provider of services.  See Docket Entry 1a in

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the Departmental Appeals Board (DAB) Electronic Filing System (E-File).  On April 12, 2021, the state agency completed an abbreviated survey for a facility reported incident and determined that Clearwater was not in substantial compliance with federal program participation requirements.  See CMS Exhibit (Ex.) 1.2   By letter dated April 28, 2021, the state agency informed Petitioner that if Petitioner failed to timely submit a plan of correction, or failed to achieve substantial compliance, the state agency would recommend that CMS or the State Medicaid Agency impose the following remedies:

• a Civil Money Penalty (CMP), if Petitioner failed to achieve substantial compliance by May 12, 2021; and
• termination of Petitioner's provider agreement if Petitioner failed to achieve substantial compliance by October 12, 2021.

Id. at 1-2.  The letter further stated that the CMS Regional Office had authorized the state agency to impose a denial of payment for new admissions, effective July 12, 2021, if Petitioner did not earlier demonstrate substantial compliance.  Id. at 2.

The letter informed Petitioner that it may "appeal the finding of noncompliance that led to an enforcement action . . . ."  Id. at 3.  Finally, the letter stated:  "[s]hould CMS determine that termination or any other remedy is warranted, they will provide you with a separate formal notification of that determination."  Id. at 5 (bold font in original).

On June 3, 2021, the state agency conducted a revisit survey of Petitioner's facility.  CMS Ex. 2 at 1.  Based on the revisit, the state agency determined that Petitioner returned to substantial compliance with Medicare requirements effective May 12, 2021.  Id.

Via DAB E‑File on June 7, 2021, Petitioner requested a hearing before an administrative law judge.  Docket Entry 1 in DAB E-File.  In its hearing request, Petitioner asserted that it "strongly disagrees with the determination of the noncompliance" alleged, and that it wanted a hearing to "challenge the 'D' Deficiency that was issued following" the state agency's investigation.  Id. at 2.

On June 22, 2021, CMS moved to dismiss Petitioner's hearing request.  In the motion, CMS argues that "Petitioner has no right to a hearing under 42 C.F.R. Part 498 because CMS has neither imposed, nor effectuated any remedies pursuant to 42 C.F.R. § 488.406 as a result of the deficiencies identified in the April 12, 2021 survey, which Petitioner

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seeks to appeal."  CMS Mot. at 2.  CMS contends that, in the absence of an appealable initial determination, Petitioner has no right to an administrative hearing.  Id.  On July 9, 2021, Petitioner filed a brief opposing CMS's motion (P. Resp.).

I agree with CMS; Petitioner does not have a right to a hearing.  Therefore, I grant CMS's motion to dismiss.

Medicare providers, such as Petitioner, may seek review of administrative actions related to the survey and certification process in accordance with federal regulations codified at 42 C.F.R. Part 498.3   Under those regulations, a provider dissatisfied with an "initial determination" by CMS or its agent is entitled to further review.  42 C.F.R. § 498.3(a). By contrast, administrative actions that are not initial determinations do not give rise to appeal rights.  Id.  The regulations specify the matters on which CMS makes initial determinations.  42 C.F.R. § 498.3(b).  The regulations also include examples of actions that are not considered initial determinations.  42 C.F.R. § 498.3(d).  As relevant here, a "finding of noncompliance leading to the imposition of enforcement actions specified in [42 C.F.R.] § 488.406 [e.g., civil money penalties, denial of payment for new admissions] or § 488.820" is an appealable initial determination.4   42 C.F.R. § 498.3(b)(13) (emphasis added).  Similarly, 42 C.F.R. § 488.408(g)(1) provides that "[a] facility may appeal a certification of noncompliance leading to an enforcement remedy."

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In applying these regulations, many appellate decisions of the DAB have held that there is no right to a hearing under 42 C.F.R. Part 498 unless CMS determines to impose – and actually imposes – an enforcement action or remedy.  See, e.g., Generations at Regency Center, DAB No. 2950 at 6-7; Columbus Park Nursing & Rehab. Ctr., DAB No. 2316 at 7 (2010), aff'd, Columbus Park Nursing & Rehab. Ctr. v. Sebelius, 940 F. Supp. 2d 805 (N.D. Ill. 2013); see also San Fernando Post Acute Hosp., DAB No. 2492 at 7-8 (2012); Lutheran Home – Caledonia, DAB No. 1753 (2000); Schowalter Villa, DAB No. 1688 (1999); Arcadia Acres, Inc., DAB No. 1607 (1997).  The imposition of an enforcement action described in 42 C.F.R. § 488.406 or 488.820, not the citation of a deficiency, triggers the right to a hearing.  Generations at Regency Center, DAB No. 2950 at 6-7; see also Schowalter Villa, DAB No. 1688; Arcadia Acres, Inc., DAB No. 1607.  Where CMS does not impose a remedy, a party has no right to a hearing.  Florida Health Sciences Ctr., Inc., DAB No. 2263 (2009); Fountain Lake Health & Rehab., Inc., DAB No. 1985 (2005).

Notwithstanding the plain language of the regulations and the cited authorities interpreting the regulations, Petitioner argues that I should not dismiss its hearing request because, in Petitioner's view, CMS has imposed a remedy.  Petitioner alleges that CMS imposed a remedy by placing a "consumer alert icon" by its facility name on CMS's Nursing Home Compare website.5  P. Resp. at 2-6.

In October 2019, CMS added the "abuse icon" (an image of a red circle with a white hand) as a new feature to the Nursing Home Compare website to make "it easier than ever for patients, residents and their families and caregivers to quickly identify nursing homes with past citations for abuse."  See https://www.cms.gov/newsroom/press-releases/trump-administration-empowers-nursing-home-patients-residents-families-and-caregivers-enhancing (last visited Aug. 9, 2021) (cited in P. Resp. at 2-3).  CMS explained that the website would display the abuse icon for facilities if one or both of the following conditions are met:  1) the facility received a citation within the past 12 months for abuse that led to harm of a resident; or 2) the facility was cited in each of the last two years for abuse that could potentially have harmed a resident.  Id.

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Although Petitioner argues that it was harmed by the consumer alert icon, Petitioner does not provide any documentation that CMS actually imposed this "remedy."  For example, Petitioner has not provided an image of the alert icon or where it purportedly appears in relation to Petitioner's name on the Nursing Home Compare website.6   Nonetheless, in evaluating CMS's motion to dismiss, I assume arguendo that a consumer alert icon appears near Petitioner's name on the CMS Nursing Home Compare website.

Even if the consumer alert icon is associated with Petitioner's facility on the website, however, Petitioner fails to cite any authority – statute, regulation, case law, or otherwise – for the proposition that placing a consumer alert icon by its name represents an appealable enforcement action or remedy.  To the contrary, the only authority that I have been able to identify addressing this issue concluded that the consumer alert icon is not a remedy that gives rise to appeal rights.  See Generations at Peoria, DAB CR5819 at 6 (2021) ("[T]he requirement that CMS provide SNF survey information, including statements of deficiencies to the public does not include the right to a hearing to contest the publication of that information.").  Although decisions of DAB administrative law judges are not precedential, see, e.g., Littlefield Hospitality, DAB No. 2756 at 13 (2016), I find the reasoning of the Generations at Peoria decision persuasive and I adopt it here.

In Generations at Peoria, the administrative law judge noted that CMS is required by statute to make information concerning SNF surveys available to the public.  DAB CR5819 at 6; see also Act § 1819(g)(5) (42 U.S.C. § 1395i-3(g)(5)).  The judge further pointed out that the statute affords no appeal rights for disclosures related to this duty.  Id. Further, the analysis in Generations at Peoria is consistent with that in Emery County Care and Rehabilitation Center, DAB No. 3006 (2020).  The Emery County decision held that the regulations do not provide for an administrative law judge hearing based on "reputational harm resulting from the publication of deficiency findings."  Id. at 16-17.  See also San Fernando Post Acute Hosp., DAB No. 2492 at 8 (2012) ("no right to a hearing survives merely to correct [a] compliance record . . . .") (quoting Fountain Lake,

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DAB No. 1985 at 6 (internal quotation marks omitted)).  Petitioner apparently concedes this point, stating that that its hearing request "is not about publishing the Deficiency findings." P. Resp. at 5.

Petitioner attempts to distinguish the consumer alert icon from other communications regarding deficiency findings available on the Nursing Home Compare website, but its arguments are unpersuasive.  For example, Petitioner alleges that the "injury" to Petitioner from having a consumer alert icon associated with its facility is "actual" and "palpable" (P. Resp. at 5) because consumers are "'Warned' [that they should] 'STOP' before proceeding" (Id. at 3).  However, it is difficult to envision how the consumer alert icon causes injury different from that caused by the publication of the survey results on which the icon is based.

The CMS press release, from which Petitioner quotes extensively, states:

Previously, consumers could learn about past instances of abuse citations at a nursing home, but finding this information from [the facility's] health inspection reports available on Nursing Home Compare required multiple steps.  Through [the consumer alert icon], CMS is minimizing the steps, making it easier than ever for patients, residents, and their families and caregivers to quickly identify nursing homes with past citations for abuse.

P. Resp. at 2 (quoting https://www.cms.gov/newsroom/press-releases/trump-administration-empowers-nursing-home-patients-residents-families-and-caregivers-enhancing).  Thus, Petitioner's objection appears to be that the consumer alert icon increases the likelihood that users of the Nursing Home Compare website will access information about deficiencies that they may otherwise have overlooked, but were always entitled to view.  As Petitioner implicitly admits, the consumer alert icon is merely a graphic signal that the facility has been cited for deficiencies involving resident abuse.  I see no reason (and Petitioner provides no compelling argument) to conclude that a hearing right arises simply because the icon alerts website users to the existence of those deficiency findings.

I find similarly unconvincing Petitioner's attempt to distinguish the consumer alert icon from CMS's Five-Star Quality Rating System (Five-Star Rating) for nursing homes.  P. Resp. at 4-5.  CMS created the Five-Star Rating "to help consumers, their families, and caregivers compare nursing homes more easily and to help identify areas about which [they] may want to ask questions.  The Nursing Home Compare Web site [sic] features a quality rating system that gives each nursing home a rating of between 1 and 5 stars."  See https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/CertificationandComplianc/FSQRS (last visited Aug. 9, 2021).  Appellate decisions of the DAB have concluded that a SNF does not have a right to a hearing to challenge the impact of deficiency findings on a facility's Five-Star Rating.  See, e.g.,

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Columbus Park, DAB No. 2316 at 5-9 (the negative impact of noncompliance findings on a facility's Five-Star Rating does not create an appeal right); see also San Fernando Post Acute Hosp., DAB No. 2492 at 13 ("potential harm to a facility's reputation or financial status that may flow from the publication of deficiency findings does not trigger appeal rights under the Act or regulations.").  The decisions reject, as "speculative," claims that SNFs may experience harm from a lower Five-Star Rating.  See, e.g., Columbus Park, DAB No. 2316 at 9.

As I have described above, Petitioner alleges that it has experienced "actual" and "palpable" damages in contrast to the "potential, speculative" consequences of having a low Five-Star Rating.  P. Resp. at 5.  But, Petitioner provides neither examples of the actual harm it has allegedly suffered, nor examples of harm it could possibly suffer in the future.  I infer that Petitioner may be concerned about harm to its reputation, potential lost business, or difficulty in future business dealings.  If these are the injuries of which Petitioner complains, I consider such concerns just as speculative as the harm that may result from having a low Five‑Star Rating.

Most importantly, however, the consumer alert icon which Petitioner seeks to challenge is not "an enforcement action found in 42 C.F.R. § 488.406 or § 488.820 . . . and, therefore, the state agency's findings of noncompliance are not appealable initial determinations under section 498.3(b)(13)."  Generations at Regency Ctr., DAB No. 2950 at 7.  As such, Petitioner's objection that none of the authorities cited by CMS even mentions the consumer alert icon (P. Resp. at 4, 6) rings hollow.  Under the regulations, only specified enforcement actions or remedies give rise to appeal rights.  Because CMS did not impose an enforcement remedy or action specified in the regulations, there is no appealable initial determination.  42 C.F.R. § 498.3(b)(13).

For the reasons explained above, Petitioner has no right to a hearing.  This case is therefore subject to dismissal.  42 C.F.R. § 498.70(b).  Accordingly, I grant CMS's motion and dismiss Petitioner's hearing request.  The parties may request that an order dismissing a case be vacated pursuant to 42 C.F.R. § 498.72.

1. I reach this one conclusion of law.
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2. CMS filed two exhibits with its motion to dismiss.  See Docket Entries 5, 5c, 5d in DAB E-File.  CMS Ex. 1 is a copy of the state agency's April 28, 2021 letter to Petitioner.  Petitioner also filed a copy of the April 28 letter with its hearing request.  See Docket Entry 1b in DAB E-File.
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3. The Part 498 regulations implement the hearing rights provided by statute.  Congress provided the right to a formal Administrative Procedure Act (APA) hearing where CMS imposes a civil money penalty (CMP).  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)); see also 5 U.S.C. §§ 554(a), 556(a)-(b).
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4. Section 498.3(b)(13) was revised effective January 1, 2015, to state that initial determinations include "the finding of noncompliance leading to the imposition of enforcement actions specified in § 488.406 or § 488.820 of this chapter, but not the determination as to which sanction was imposed."  79 Fed. Reg. 66,032, 66,118 (Nov. 6, 2014) (emphasis added).  In revising the language from "imposition of enforcement remedies specified in 42 C.F.R. § 488.406" to "imposition of enforcement actions specified in § 488.406 or 488.820" the drafters expanded section 498.3(b)(13) to include enforcement sanctions applicable to home health agencies under section 488.820.  See 79 Fed. Reg. 66,032, 66,108, 66,118.  However, the change from enforcement remedies to enforcement actions "effected no substantive change in appeal rights" granted to long‑term care facilities under the regulations.  Generations at Regency Center, DAB No. 2950 at 6 (2019).  As such, the revision does not affect the authority of the appellate decisions cited in this order.  Id.
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5. As authorized by Congress, the Nursing Home Compare website allows individuals to find and compare SNFs that participate in the Medicare and Medicaid programs.  Act, § 1819(i) (42 U.S.C. § 1395i-3(i)).  The statute directs the Secretary to include on the website the following information, among other things:  the facility's staffing and the hours of care provided to each resident per day; the results of state agency surveys, including whether CMPs have been imposed; and the number of substantiated complaints received.  Id.  CMS now combines its comparison data for nursing homes with such data for other provider types, "giving [consumers] one place to start finding any type of care [they] need."  See https://www.medicare.gov/care-compare/resources/about-this-tool (last visited Aug. 9, 2021).
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6. In fact, based on Petitioner's own submission, it is unclear whether this consumer alert icon currently appears next to the facility's name, if it ever did.  Petitioner cites the October 7, 2019 press release quoted above, in which CMS stated:  "[t]o ensure CMS is providing the latest information, the icon will be updated monthly, at the same time CMS inspection results are updated.  This means consumers will not be forced to wait for CMS's quarterly updates to see the latest related information – and nursing homes will not be flagged for longer than necessary if their most recent inspections indicate they have remedied the issues that caused the citations for abuse or potential for abuse and no longer meet the criteria for the icon."  P. Resp. at 2 (emphasis added) (quoting https://www.cms.gov/newsroom/press-releases/trump-administration-empowers-nursing-home-patients-residents-families-and-caregivers-enhancing).
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