Faith Home Healthcare, ALJ Ruling 2022-2 (HHS CRD Mar. 18, 2022)

ORDER DENYING CMS’S MOTION TO DISMISS

Petitioner, Faith Home Healthcare, is a home health agency (HHA) that participates in the Medicare program.  On November 29, 2021, Petitioner filed a request for hearing challenging the imposition of remedies by Respondent, the Centers for Medicare & Medicaid Services (CMS).  CMS moved to dismiss Petitioner’s hearing request as untimely.  As discussed below, I find good cause to extend the filing deadline and do so here.  A pre-hearing order setting forth the parties’ filing deadlines and other obligations will issue separately.

DISCUSSION

I.    Background

On July 9, 2021, CMS notified Petitioner by e-mail to its Administrator that based on a July 6, 2021 recertification survey of the HHA conducted by the Missouri Department of Health and Senior Services (state agency), it found Petitioner out of compliance with program participation requirements at both the immediate jeopardy and non-immediate jeopardy levels.  As a result of the immediate jeopardy-level noncompliance findings, CMS informed Petitioner that it would impose the following enforcement remedies:

-- termination of its Medicare provider agreement effective July 29, 2021; and

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-- imposition of a civil money penalty (CMP) of $19,268.00 per day beginning July 6, 2021 and continuing until either Petitioner had returned to substantial compliance or its provider agreement was terminated.

P. Ex. D at 1-2; CMS Ex. 6 at 2-3.  CMS’s notice contained a section advising Petitioner of its appeal rights:

If you believe that this determination is not correct, you may request a final Administrative Law Judge (ALJ) review.  To do this, you must file your appeal within 60 calendar days after the date of receipt of this decision.

P. Ex. D at 4; CMS Ex. 6 at 5.  Elsewhere in the notice, CMS informed Petitioner that

If you waive your right to a hearing, in writing, within 60 calendar days from the date of receipt of this notice, the amount of your CMP will be reduced by thirty-five percent (35%) . . . . The failure to request a hearing within 60 calendar days of your receipt of this notice does not constitute a waiver of your right to hearing for purposes of the 35% reduction.

P. Ex. D at 2; CMS Ex. 6 at 3.  The notice also provided that “CMS will notify you of the total amount due and where payment is to be sent.”  Id.

CMS sent additional notice letters to Petitioner on August 2, 2021 and October 1, 2021.  The agency’s August 2, 2021 letter stated that the condition of immediate jeopardy had been found removed based on a July 28, 2021 revisit survey but that condition-level deficiencies persisted at the non-immediate jeopardy level.  P. Ex. H at 1; CMS Ex. 4 at 1.  CMS advised in the August 2021 notice that it would “issue a final CMP due and payable notice . . . after the State conducts a revisit survey.”  P. Ex. H at 2; CMS Ex. 4 at 2.1

CMS’s October 1, 2021 notice letter stated that it found Petitioner had returned to compliance based on a second revisit survey conducted on September 28, 2021.  CMS advised Petitioner it had rescinded the termination action and that the per-day CMP of $19,268.00 was in effect for 23 days, beginning July 6, 2021 and continuing through July 28, 2021, for a total of $443,164.00.  P. Ex. I at 1.

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On October 25, 2021, CMS issued notice to Petitioner that the full amount of the CMP was due and payable.  CMS Ex. 5.  CMS also advised that “the timeframe for Faith Home Healthcare to request a hearing or waive [its] right to a hearing to receive a thirty-five percent (35%) reduction in the total amount of the CMP has expired.”  Id. at 1.

Petitioner filed its request for hearing on November 29, 2021.  I issued an order on December 3, 2021 noting Petitioner appeared to argue its hearing request should be considered timely because it had not received a final penalty amount from CMS until October 1, 2021.  I gave CMS the opportunity to file a motion to dismiss if it believed Petitioner had filed an untimely hearing request without good cause, with an opportunity for Petitioner to respond.  Dec. 3, 2021 Order.

On December 23, 2021, CMS filed a motion to dismiss (CMS MTD) Petitioner’s hearing request as untimely, asserting Petitioner filed its hearing request 77 days2 after receipt of CMS’s July 9, 2021 notice of the imposition of remedies without a showing of good cause to extend the 60-day filing deadline.  CMS submitted seven exhibits in support of its motion (CMS Exs. 1-7).  Petitioner filed a response (P. Resp.) in opposition to the motion and nine exhibits labeled A-I (P. Exs. A-I).  CMS filed a reply (CMS Reply).

II.    Applicable Law

The applicable regulation provides a party that receives an adverse determination from CMS may file a hearing request “in writing within 60 days from receipt of the notice . . . unless that period is extended . . . .”  42 C.F.R. § 498.40(a)(2).  I may extend the 60-day period to file a hearing request for good cause.  42 C.F.R. § 498.40(c).  Alternately, I may dismiss an appeal if the affected party did not timely file and I do not find a basis to extend the time for filing.  42 C.F.R. § 498.70(c).

The regulations do not provide a definition for good cause, and while the Departmental Appeals Board (Board) has not provided a definition either, it has specifically declined to undermine the view of other ALJs that circumstances within a party’s control do not establish good cause.  See MedStar Health, Inc., DAB No. 2684 at 8 (2016).

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III.    Analysis

CMS first observes Petitioner was required to file “a written request for extension of time stating the reasons why the request was not filed timely.”  42 C.F.R. § 498.40(c)(1).  CMS argues that Petitioner has not complied with this requirement, “making consideration of good cause unnecessary.”  CMS MTD at 6.  It is true that Petitioner did not initially seek an extension of time to file its hearing request, but that is because Petitioner believed it had timely filed one.  In any event, Petitioner’s response to CMS’s motion to dismiss is sufficient to meet the regulatory threshold cited by CMS.  I therefore proceed to consider whether good cause exists to extend Petitioner’s time to file its hearing request.

Petitioner argues good cause exists because CMS did not provide notice of the total CMP amount until October 1, 2021; until receipt of that final notice, Petitioner believed CMS could still exercise its discretion to reduce the CMP amount in response to its claims of survey improprieties and arbitrary rejection of its plans of correction.  P. Resp. at 5, 7-8.  Petitioner also claims CMS’s July and August notices were misleading because they “referenced a ‘final’ determination to be provided at a later date” which Petitioner assumed “would be appealable.”  Id. at 6.

CMS contends that Petitioner’s ignorance of the total CMP amount during the 60-day appeal window does not provide good cause to extend the deadline for filing a hearing request.  CMS MTD at 6-7, citing Hillcrest Healthcare, L.L.C., DAB No. 1879 (2003).  CMS asserts the regulations do not require it to provide a final penalty amount before the 60 days to either file an appeal or settle in return for a reduction expire.  Id. at 8-9, citing 42 C.F.R. § 488.845.  CMS also points out that Petitioner could have itself calculated the final penalty during the 60-day window after receiving notice from CMS on August 2, 2021 that the conditions resulting in immediate jeopardy and condition-level noncompliance had ended as of July 28, 2021, the date of the revisit survey.  Id. at 7-8, citing CMS Ex. 2; CMS Ex. 4 at 1.  Finally, CMS claims that even if information necessary to file an appeal was not made available to Petitioner until October 1, 2021, Petitioner was not entitled to the 59 days it took from that point to file a hearing request.  CMS MTD at 9-10.

I find CMS’s arguments unpersuasive.  CMS claims that the Board’s decision in Hillcrest supports its assertion that lack of knowledge of the final penalty amount cannot provide good cause to extend the 60-day filing deadline.  But closer review reveals that case is materially distinguishable.  CMS issued a notice of deficiency to Hillcrest on May 7, 2002 that advised it of a $3,450 per-day CMP resulting from deficiencies found during a May 1, 2002 survey; that notice provided the right to appeal within 60 days or settle for a 35% reduction in the CMP.  Hillcrest, 2003 WL 21043169 at 1 (2003).  A revisit survey conducted on May 30, 2002 resulted in a second notice from CMS issued June 7, 2002 that advised Hillcrest that it had cured the condition causing immediate jeopardy on May

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1, 2002, but that the revisit survey had discovered other deficiencies that kept the skilled nursing facility out of compliance.  The June 7, 2002 notice advised Petitioner that the CMP was reduced from $3,450 per day to $100 per day as of May 24, 2002.  Id. at 2.  This notice afforded Hillcrest the opportunity to either appeal the $100 per-day CMP arising from the newly cited deficiencies from the May 30, 2002 survey within 60 days or settle them for a 35% reduction.

On July 15, 2002, Hillcrest’s parent entity sent a letter to the Civil Remedies Division (CRD) indicating it formally waived Hillcrest’s appeal rights arising under both May 2002 surveys, pending a revision of the state agency’s finding concerning the end of the period of immediate jeopardy (Hillcrest argued it should have ended May 10, not May 24, 2002).  Id.  The next day, CMS issued notice to Hillcrest that it had modified the duration of the per-day CMP by moving the effective date of the $100 per-day CMP from May 24 to May 16, 2002.  Id.

Critically, the July 16, 2002 notice from CMS specified that the 60-day appeal deadlines set forth in the May 7 and June 7 notices were unchanged.  Id.  On August 7, 2002, Hillcrest notified the CRD that it intended to waive its appeal rights arising under the June 7, 2002 notice; CMS acknowledged receipt of that waiver on August 22, 2002.  Id.  On August 26, 2002 Hillcrest notified the CRD that it intended to proceed with an appeal concerning the findings of the May 1, 2002 survey.  Id.

When CMS moved to dismiss Hillcrest’s hearing request, Hillcrest argued it did not timely file a hearing request because it had sought to address the cited deficiencies and otherwise resolve the matter through the revisit survey process and Independent Dispute Resolution (IDR).  Id. at 2.  The presiding ALJ granted the motion to dismiss, finding Hillcrest had waived its right to hearing with respect to the May 30, 2002 survey findings and had otherwise failed to show good cause for failing to file an appeal of the May 1, 2002 survey findings within 60 days of receiving notice.  Id. at 3.  The ALJ specifically found that Hillcrest knew as of June 7, 2002 that CMS had established an endpoint for the penalties imposed from the May 1, 2002 survey and had not otherwise been misled by CMS into believing it could delay its hearing request.  Id. at 4.

The salient feature distinguishing this case from Hillcrest (and warranting a different outcome) is that CMS made a determination of duration before Hillcrest’s 60-day period to appeal had expired.  CMS issued a notice of deficiency to Hillcrest on May 7, 2002 that included a substantial per-day CMP beginning May 1, 2002.  Id. at 1.  On June 7, 2002, CMS notified the facility that the conditions giving rise to immediate jeopardy (and the higher per-day CMP) ended on May 24, 2002.  Id. at 2.  CMS subsequently reduced the duration of immediate jeopardy, finding it ended May 16, 2002, but the critical point is that Hillcrest was first made aware of a decision by CMS as to the duration of the per-day CMP arising from the May 1, 2002 survey on June 7, 2002, only halfway into its appeal period.  Moreover, in its July 16, 2002 notice, CMS made sure to advise Hillcrest

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that the 60-day appeal window identified in the May 7, 2002 notice had not changed.  Hillcrest was given ample notice – approximately 30 days – of the total CMP amount and the amount of time left to file its appeal or pursue other options.  The facility could knowingly choose between filing an appeal or settling for a 35% reduction in the CMP in that time.  On these facts, Hillcrest failed to convince the ALJ or the Board that circumstances out of its control prevented it from timely exercising its options.

Here, by contrast, CMS notified Petitioner on July 9, 2021, of a substantial per-day CMP beginning on July 6, 2021, the date of the survey.  The 60-day window of appeal afforded to Petitioner in that first notice ended on September 7, 2021.  But CMS did not issue a notice establishing duration (and therefore the total CMP) until October 1, 2021, nearly a month after Petitioner’s appeal period had expired.3   P. Ex. I at 1.  And it did not provide the final amount in a formal notice until October 25, 2021.  CMS Ex. 5.

It is absurd to claim, as CMS does, that the total amount of a CMP is irrelevant to deciding whether to contest it or agree to pay 65% of that amount to settle the matter.  CMS MTD at 8-9, citing 42 C.F.R. § 488.845.  No regulated entity could competently determine whether waiver of appeal rights or litigation was appropriate without knowing the costs of both options.  In any event, the plain language of the regulation cited by CMS does not support this claim.  Id.  That regulation specifies that “CMS provides the [home health agency] with written notice of the intent to impose a [CMP].  The notice includes the amount of the CMP being imposed, the basis for such imposition and the proposed effective date of the sanction.”  42 C.F.R. § 488.845(c)(1) (emphasis added).  Contrary to CMS’s view, the regulations require a valid initial notice of intent to impose a penalty to include, at minimum, “the amount of the CMP being imposed.”  Id.  Without notifying the HHA of the duration of a per-day CMP, it is impossible to determine this amount.

CMS also argues Petitioner had no right to a “final” CMP amount in the notice of the intent to impose penalties.  CMS MTD at 8-9.  The regulations distinguish between the initial notice of the imposition of remedies and the final notice of the amount due and payable.  Compare 42 C.F.R. § 488.845(c)(1), (2), with 42 C.F.R. § 488.845(e)(1).  Appeal rights appear to be associated with the issuance of an initial notice of the intent to impose penalties, as they are housed in the same regulatory subsection.  42 C.F.R. § 488.845(c)(1), (2).  Computation of a total penalty amount and issuance of a “final notice,” by contrast, do not occur until, applicable here, an HHA returns to substantial

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compliance.  42 C.F.R. § 488.845(e)(1).  Thus, it would indeed be improper to conclude an HHA like Petitioner could wait to file its appeal until the final notice is issued, as Petitioner claims.4   P. Resp. at 6. 

The regulations do not permit an HHA to argue its period to file an appeal tolls until CMS calculates a “final” total penalty.  But as I have explained, they do require CMS to include a CMP amount in the initial notice of intent to impose penalties.  42 C.F.R. § 488.845(c)(1).  Where CMS intends to impose a per-day CMP, it must also establish duration so as to provide the total CMP amount required to be in the initial notice.  Providing only the per-day penalty amount in the initial notice of intent to impose penalties without duration fails to meet the regulatory obligation that CMS provide the “amount of the CMP being imposed.”  Such an omission deprives the HHA of adequate notice to competently exercise its choice to either appeal or seek a reduction in the penalty amount in exchange for waiver of its appeal rights.  

Petitioner has established that CMS did not comply with the regulations requiring it to include a CMP amount in its initial notice of intent to impose a penalty, which for a per-day CMP amount necessarily includes duration.  Petitioner could not have reasonably and knowingly exercised its right to either seek appeal or resolve this matter by waiver and settlement without that knowledge.  CMS did not provide this necessary information until October 1, 2021.  Petitioner filed its hearing request within 60 days of that date.  The delay in receiving a CMP amount in the initial notice, required by the regulations, was altogether out of Petitioner’s control.  I therefore find good cause to extend the time for filing and accept Petitioner’s November 29, 2021 hearing request.

IV.    Conclusion

For the foregoing reasons, I DENY CMS’s motion to dismiss Petitioner’s hearing request and extend the time for its filing pursuant to 42 C.F.R. § 498.40(c).

SO ORDERED.

1.  The August 2, 2021 notice letter references a notice letter from CMS dated July 20, 2021 informing Petitioner it would be subject to termination on October 4, 2021 and requesting a plan of correction.  P. Ex. H; CMS Ex. 4.  Neither party offered this letter into evidence.
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2.  Petitioner received the initial notice by e-mail on July 9, 2021 and by commercial mail on July 12, 2021.  CMS Exs. 6, 7.  In asserting Petitioner filed its hearing request 77 days late, CMS applied the five-day presumptive receipt rule found in the regulations to calculate a presumptive date of receipt of July 14, 2021.  42 C.F.R. § 498.22(b)(3); CMS Br. at 5 n.9.  But applying the five-day presumptive rule where notice has been delivered by e-mail makes no sense, as delivery is instantaneous.  As I explain herein, Petitioner concedes actual receipt of the initial notice providing appeal rights on July 9, 2021.
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3.  CMS did issue notice on August 2, 2021 advising Petitioner of the end of the immediate jeopardy period.  CMS Ex. 4 at 1.  CMS argues Petitioner could have calculated the final CMP from this notice, CMS MTD at 7-8, but this is not correct.  CMS did not inform Petitioner on that date that it was no longer subject to additional CMPs.  Id.  The HHA could have been subject to additional per-day penalties until it was found to have returned to substantial compliance.  See 42 C.F.R. § 488.845(a)(1).  CMS eventually chose not to impose penalties for deficiencies that persisted after the immediate jeopardy period ended on July 28, 2021 until the return to compliance on September 28, 2021, but Petitioner had no way of knowing that until CMS revealed its decision on October 1, 2021.  P. Ex. I.
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4.  I reject Petitioner’s assertion that CMS’s subsequent notices in July and August of 2021 notices were misleading because they “referenced a ‘final’ determination to be provided at a later date.”  P. Resp. at 6.  The fact that Petitioner is not familiar with the regulations does not make CMS’s notices misleading.
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