F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
SEP 11 2000
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
SOUTH VALLEY HEALTH CARE
CENTER,
Petitioner,
No. 99-9535
v.
HEALTH CARE FINANCING
ADMINISTRATION,
Respondent.
ON PETITION FOR REVIEW FROM AN ORDER
BY THE SECRETARY OF THE DEPARTMENT
OF HEALTH AND HUMAN SERVICES
(No. A-98-64)
Submitted on the briefs:
David M. Shell of the Law Offices of David M. Shell, Elk Grove, California, for
Petitioner.
Jay A. Swope, Chief Counsel, Region VIII, Patricia L. Bossert, Special Attorney
for the Department of Justice and Assistant Regional Counsel, Department of
Health and Human Services, Denver, Colorado, for Respondent.
Before BRORBY, PORFILIO, and MURPHY , Circuit Judges.
BRORBY , Circuit Judge.
South Valley Health Care Center (South Valley) appeals from a final
decision of the Secretary of the Department of Health and Human Services (the
Secretary) affirming a civil money penalty against South Valley. The penalty was
levied by the Health Care Financing Administration (Administration) pursuant to
42 U.S.C. § 1395i-3(h)(2)(B)(ii) for South Valley’s noncompliance with the
conditions of a skilled nursing facility’s participation in a Medicare program.
Our jurisdiction arises under 42 U.S.C. § 1320a-7a(e), and we affirm. 1
I. Procedural background and standards of review
To participate as a skilled nursing facility in the Medicare program, the
facility must submit to random surveys conducted by state departments of health
on behalf of the Administration to ensure that it is meeting the program
requirements. See 42 C.F.R. § 488.305. After conducting a survey, the state
certifies the compliance or noncompliance of the facility, subject to the approval
of the Administration. See 42 C.F.R. § 488.330. A certification of
noncompliance reports deficiencies and recommends various remedies, including
1
After examining the briefs and appellate record, this panel has
determined unanimously that oral argument would not materially assist the
determination of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G).
The case is therefore ordered submitted without oral argument.
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civil money penalties. Factors to be considered in selecting remedies include the
seriousness of the deficiencies, whether they constitute a pattern of behavior, the
relationship of the deficiencies to one another, and the facility’s history of
noncompliance. See 42 C.F.R. § 488.404. The selection of remedies is further
limited by 42 C.F.R. § 488.408, which mandates application of certain remedies
and leaves others to the discretion of the Administration. Under this section, the
Administration has discretion to impose civil money penalties of $50-$3,000 per
day for any deficiency that is widespread and has potential for causing more than
minimal harm or that results in actual harm if the facility is not in substantial
compliance with the regulations. See § 488.408(d)(2). The Administration’s
discretion in regard to the amount of penalty to be imposed is further guided by
factors set forth in 42 C.F.R. § 488.438(b).
The facility may contest imposition of the civil money penalty in a formal
evidentiary hearing before an administrative law judge (ALJ), see 42 C.F.R.
§ 498.40, who may reduce but not set aside the penalty, and whose consideration
of penalty amount is limited to the same factors considered by the Administration,
see § 488.438(e). The ALJ may not review the exercise of discretion by the
Administration in deciding to impose a civil money penalty. See id. The
“HCFA’s determination as to the level of noncompliance of [a skilled nursing
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facility] . . . must be upheld [by the ALJ] unless it is clearly erroneous.”
42 C.F.R. § 498.60(c)(2).
The decision of the ALJ, in turn, is subject upon request to review by the
Departmental Appeals Board (Board). See 42 C.F.R. § 498.80. The Board may
either adopt, modify, or reject the ALJ’s decision, based upon the evidence in the
record. See 42 C.F.R. § 498.88. This decision becomes the Secretary’s final
decision and may be appealed directly to the United States Courts of Appeal. See
42 C.F.R. § 498.90(a)(1).
On review in this court, the Secretary’s findings of fact, “if supported by
substantial evidence on the record considered as a whole, shall be conclusive.”
42 U.S.C. § 1320a-7a(e). We give substantial deference to an agency’s
interpretation and application of its own regulations. See Colorado Dep’t of
Social Servs. v. United States Dep’t of Health & Human Servs. , 29 F.3d 519, 522
(10th Cir. 1994). Further, a decision within the agency’s discretion is “entitled to
a presumption of regularity.” Franklin Sav. Ass’n v. Director, Office of Thrift
Supervision , 934 F.2d 1127, 1141 (10th Cir. 1991). When reviewing the legal
propriety of a civil money penalty, we have the power to affirm, modify, set aside,
or remand the order. See § 1320a-7a(e).
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II. Factual background
The factual predicate on appeal is undisputed. South Valley was surveyed
on February 29, 1996, by the Utah Department of Health and found to have
fifteen substantial deficiencies, including failure to comply with 42 C.F.R.
§ 483.25(c), which sets forth the standards for prevention and treatment of
pressure sores. Specifically, at the time of the survey, three residents had
pressure sores that were determined to be avoidable. The State warned South
Valley that if the deficiencies were not corrected by May 29, 1996, it would
recommend imposition of a civil money penalty of $2720 per day, a directed plan
of correction, and termination of its Medicare agreement. On June 10, 1996, the
State again surveyed South Valley and found that, although it had corrected other
deficiencies, it was still substantially noncompliant with the pressure sore quality
of care requirements. According to the second survey, an additional patient had
developed a new, avoidable pressure sore, and South Valley still had not
implemented a skin assessment/wound care team that was part of its plan of
compliance intended to prevent such developments. After notification, the
Administration imposed a penalty of $1300/day to be effective February 29, 1996,
along with other remedies. In a subsequent survey, the State determined that
South Valley was in substantial compliance with the pressure sore requirements
on June 24, 1996. The Administration thus limited its penalty to a time period of
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February 29 through June 24, 1996, for a total of $150,800. South Valley
administratively appealed the penalty.
In a detailed and well-documented decision, the ALJ found that (1) South
Valley was not in substantial compliance with 42 C.F.R. § 483.25(c) on
February 29, 1996; (2) it did not fully implement its plan of correction or come
into substantial compliance with the regulation as of May 20, 1996, as evidenced
by (a) its failure to correct a systemic pressure sore care and documentation
problem, (b) its failure to conduct satisfactory inservice training for skin care and
wound prevention, (c) its failure to establish a functioning wound care team,
(d) its failure to conduct or monitor its skin check program until May 20, 1996,
and (e) the fact that a resident developed a new pressure sore between the initial
survey and the revisit; (3) the pressure sore developed after February 29 was
avoidable but occurred because South Valley did not provide the necessary
services to promote healing and prevent infection; (4) South Valley’s failure to
change the resident’s position in bed on an hourly basis did not contribute to the
development of the pressure sore; (5) the ALJ would not disturb the
Administration’s finding that South Valley was in substantial compliance with the
pressure wound regulation by June 24, 1996; (6) the penalty of $1,300/day was
not reasonable; and (7) a penalty in the amount of $400/day was reasonable.
Neither South Valley nor the Administration objected to findings numbered (1),
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(2)(a)-(d), (4), or (5). After appeal to the Board, the Board adopted all the ALJ’s
findings except for number (6), and it modified finding number (7) to reinstate the
penalty of $1,300/day.
III. Analysis
South Valley raises seven issues on appeal to this court. Five are
challenges to the sufficiency of the evidence; two allege legal error. For
substantially the same reasons as stated in the ALJ’s March 27, 1998 decision, we
conclude that challenged findings numbered (2), (2)(e), and (3) are supported by
substantial evidence in the whole record and are therefore conclusive. South
Valley asserts that finding number (2) was improperly based on the fact that a
single resident developed a single pressure sore, but that claim is belied by
unchallenged findings (2)(a)-(d), which establish that South Valley’s substantial
noncompliance was also based on its widespread program, documentation, and
training failures.
South Valley’s remaining issues challenge the reasonableness of the
$1,300/day penalty. It contends that the Board erred in concluding that the
Administration properly based the penalty on the fact that there were numerous
deficiencies at the time of the February survey even though all but one of the
categories of deficiency had been corrected by June 24, 1996. We disagree. As
the Board pointed out, the regulations provide for imposition of penalties from the
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first date a skilled nursing facility is determined not to be in substantial
compliance with one or more requirements. See 42 C.F.R. § 488.430(a); 42
C.F.R. § 488.301 (defining “substantial compliance” as “a level of compliance
with the requirements of participation such that any identified deficiencies pose
no greater risk to resident health or safety than the potential for causing minimal
harm”). The notice letter to South Valley warned that a civil money penalty
would be issued for the deficiencies discovered in February if it did not achieve
substantial compliance by May 26, 1996. Further, the Administration’s reduction
in penalty from $2,720/day to $1,300/day reflected the Administration’s reasoned
consideration that South Valley had corrected most of the deficiencies unrelated
to pressure sore treatment. We conclude that the Administration properly
considered all deficiencies in determining an appropriate penalty.
We next address South Valley’s contention that the penalty must be set
aside or modified because the Administration allegedly did not comply with the
regulations in determining a reasonable penalty. South Valley’s failure to comply
with the requirements of § 483.25(c) resulted in actual harm to its residents.
Under § 488.408(d)(2)(ii), the Administration was mandated to impose a
“Category 2” remedy, which included penalties ranging from $50-$3,000/day. In
determining the penalty to be assessed within this range, the Administration was
required to consider the facility’s history of noncompliance, its financial
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condition, and the facility’s degree of culpability. See 42 C.F.R. § 488.438(b),
(f). “Culpability” includes “neglect, indifference, or disregard for resident care,
comfort or safety,” but absence of culpability is not a mitigating circumstance for
reduction of the penalty. § 488.438(f)(4). The Administration must also consider
the seriousness of the deficiencies and whether they are widespread as well. See
488.438(f)(3); § 488.404.
The notice letter informed South Valley that the Administration was
imposing the penalty of $1,300/day because of (1) the decrease in the level of
substantial noncompliance, (2) the number of residents affected by its
noncompliance, and (3) the fact of actual harm. Thus, the letter provided
evidence that the Administration considered South Valley’s history of
noncompliance, the potential widespread effect of its facility-wide noncompliance
with skin care assessment and wound treatment requirements, and the seriousness
of the actual harm. Contrary to South Valley’s assertion, there is no regulation
requiring the Administration to compare South Valley’s compliance record with
that of other skilled nursing facilities.
At the hearing, a representative from the Administration testified that, for
isolated deficiencies resulting in actual harm, it had developed a chart that
imposed a base fine of $100/day, plus an occupied bed fine of $10/day, plus an
individual affected resident fine of $100/day. The occupied bed fine was
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intended to take into account a facility’s ability to pay, based on the reasonable
implication that the more residents a facility has, the more money it is paid by
Medicare. Use of the chart to aid the Administration in determining a reasonable
civil money penalty did not conflict with the mandates of the regulations. We
conclude that the Administration sufficiently guided its discretion with the
statutorily-required considerations and that it did not abuse its discretion in
imposing a penalty of $1,300/day. The civil money penalty resulted from an
appropriate and reasonable exercise of the Secretary’s discretion.
The determination of the Secretary is AFFIRMED.
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