United States Court of Appeals
For the First Circuit
No. 02-1952
MIMIYA HOSPITAL, INC. SNF,
Petitioner,
v.
UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES,
Respondent.
PETITION FOR REVIEW OF FINAL DECISION OF
THE DEPARTMENTAL APPEALS BOARD OF THE UNITED STATES
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Before
Selya, Circuit Judge,
Coffin, Senior Circuit Judge,
and Lipez, Circuit Judge.
Blas R. Ferraiuoli Martinez, with whom Carmen Eva Garcia-
Cardenas was on brief, for Petitioner.
David A. Rawson, Assistant Regional Counsel, U.S. Department
of Health and Human Services, with whom Alex M. Azar II, General
Counsel, and Annette H. Blum, Chief Counsel, Region II, were on
brief, for Respondent.
June 9, 2003
LIPEZ, Circuit Judge. Petitioner Mimiya Hospital, Inc.
SNF (Mimiya), a skilled nursing facility, seeks review of a final
decision of the Departmental Appeals Board (DAB) of the Department
of Health and Human Services. The case concerns Mimiya's request
for a hearing before an administrative law judge (ALJ) on the
imposition of a Civil Monetary Penalty (CMP) by the Centers for
Medicare and Medicaid Services (CMS) as a sanction for Mimiya's
noncompliance with federal Medicare participation requirements.
See 42 U.S.C. § 1395i-3(h)(2)(B)(ii). The ALJ dismissed Mimiya's
request on the ground that it was untimely, and the DAB, in
pertinent part, affirmed the dismissal. We, in turn, affirm the
decision of the DAB.
I.
To participate in Medicare, a skilled nursing facility
must comply with federal Medicare requirements set forth at 42
U.S.C. § 1395i-3 and at 42 C.F.R. Part 483. Generally, the
Department of Health and Human Services enters into agreements with
state agencies to conduct surveys of facilities on behalf of CMS--
the agency within the Department of Health and Human Services
responsible for administering Medicare--to determine whether the
facilities are in substantial compliance with the Medicare
participation requirements. 42 U.S.C. § 1395aa; 42 C.F.R. §§
488.10(a)(1), 488.26(c)(1). Facilities found not to be in
substantial compliance with participation requirements are subject
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to enforcement remedies by CMS. See 42 U.S.C. § 1395i-
3(h)(2)(B)(ii). If, after reviewing the survey results, CMS
decides to take enforcement action against a facility, it issues a
notice of initial determination which entitles the facility to a
hearing, provided that a request is filed within sixty days from
receipt of the notice of initial determination. 42 U.S.C. §
405(b); 42 C.F.R. §§ 498.3(b)(12), 498.5(b), 498.20(a), 498.40.
Regulations governing CMS's notice of initial determination state
that the notice must contain instructions for responding to the
notice, including a statement of the facility's right to a hearing
and the implications of waiving that right. 42 C.F.R. §
488.434(a)(2)(viii). Specifically, 42 C.F.R. § 488.436(b)(1)
provides that if a facility waives the right to a hearing within
sixty days from the receipt of notice of the initial determination,
CMS will automatically reduce the CMP by thirty-five percent.
In this case, the Puerto Rico Department of Health (PRDH)
conducted a survey of Mimiya from April 4 to April 6, 2000. The
survey found thirty-five separate deficiencies, one of which posed
immediate jeopardy to patient health or safety. On April 26, 2000,
the PRDH conducted a revisit survey to determine whether Mimiya had
made the required corrections to the immediate jeopardy deficiency
and found that the corrections had been made, although other non-
immediate jeopardy deficiencies persisted.
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By letter dated May 26, 2000, CMS notified Mimiya of its
determination, based on the PRDH surveys, that Mimiya was not in
substantial compliance with the requirements for Medicare
participation. CMS further notified Mimiya of its decision to
impose the remedies of denial of payment for new admissions
effective May 28, 2000, denial of nurse aide training for two
years, and imposition of a CMP. The CMP consisted of $3,050 per
day for the twenty-two-day period of April 4, 2000 through April
25, 2000 during which Mimiya's noncompliance constituted immediate
jeopardy to resident health or safety, and $100 per day thereafter
until such time as Mimiya achieved substantial compliance or CMS
terminated the provider agreement. The May 26 letter further
stated, pursuant to 42 C.F.R. § 498.40, that Mimiya had sixty days
from receipt of the letter to request a hearing before an ALJ to
challenge CMS's determination. The letter did not inform Mimiya of
its option under 42 C.F.R. § 488.436 to waive the hearing in return
for a thirty-five percent reduction in the amount of the CMP.
Mimiya did not file a request for a hearing within the sixty-day
period.
By letter dated August 30, 2000, CMS notified Mimiya that
it had achieved substantial compliance as of June 22, 2000, and
that the $100 per day portion of the CMP would be imposed for the
period from April 26, 2000 through June 22, 2000 (a sum of $5,800).
Added to the $67,100 CMP imposed for noncompliance constituting
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immediate jeopardy, this brought the total CMP to $72,900. The
August 30 letter notified Mimiya of its right to request a hearing
within sixty days and included language, omitted in the May 26
letter, informing Mimiya that if it waived its right to a hearing,
the amount of the CMP would be reduced by thirty-five percent in
accordance with 42 C.F.R. § 488.436.
On October 22, 2000--149 days after CMS notified Mimiya
of its initial determination of noncompliance, and fifty-three days
after CMS notified Mimiya of its achievement of substantial
compliance--Mimiya requested a hearing before an ALJ to contest the
determination of noncompliance. On November 7, 2001, the ALJ ruled
that Mimiya's request was untimely and dismissed the request.
Mimiya appealed the dismissal to the DAB.
On June 5, 2002, the DAB issued a decision affirming the
ALJ's finding that the May 26, 2000 letter fully apprised Mimiya of
CMS's determination of noncompliance and the imposition of
penalties, and hence that Mimiya's October 22, 2000 request for a
hearing to contest the determination of noncompliance and
imposition of penalties was untimely. The DAB acknowledged that
the May 26 notice was defective in that it failed to inform Mimiya
of the option of a thirty-five percent reduction in exchange for
waiving the hearing, but found that this defect was easily cured by
awarding Mimiya a thirty-five percent reduction of the CMP imposed
for the immediate jeopardy deficiency. However, the DAB found
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that Mimiya was not notified of the substantial compliance
determination until August 30, 2000. The date of substantial
compliance is relevant to both the $100 per day portion of the CMP
and the penalty denying payment for new admissions until Mimiya
achieved substantial compliance. Because Mimiya was not notified
of the determination of the date of substantial compliance until
the August 30 letter, Mimiya's request for a hearing on this issue
was within the sixty-day period, and the DAB accordingly remanded
the case to the ALJ to allow Mimiya to challenge the compliance
determination date.
Although Mimiya appealed the DAB's decision denying the
hearing, the DAB's remand to the ALJ to allow Mimiya to challenge
the compliance determination raised an issue about the finality of
the DAB's decision. However, on March 24, 2003, subsequent to oral
argument, the parties notified us that they had responded to our
finality concerns by reaching a settlement agreement on the issues
remanded to the ALJ. Thus, the only issue outstanding in this case
is the DAB's denial of Mimiya's request for a hearing on CMS's
determination of noncompliance with federal Medicare participation
requirements.
II.
Mimiya contends that the notice provided by the May 26,
2000 letter was invalid for the purpose of triggering the sixty-day
period for requesting a hearing, and that valid notice was not
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provided until the August 30, 2000 letter. Thus, Mimiya reasons
that its request for a hearing on the determination of
noncompliance and imposition of penalties, filed within sixty days
of the August 30 letter, was timely. Mimiya offers two arguments
in support of this contention: (1) the failure of the May 26 letter
to inform Mimiya of the option of a thirty-five percent reduction
in the CMP in exchange for a waiver of hearing rights violated
Mimiya's due process rights and rendered the notice invalid; (2)
CMS is estopped from arguing that Mimiya's request for a hearing on
the determination of noncompliance and imposition of penalties is
untimely.
A. Due Process
The deprivation of a constitutionally protected interest
in life, liberty, or property is a threshold requirement for a
successful procedural due process claim. Aponte v. Calderon, 284
F.3d 184, 191 (1st Cir. 2002). It is, frankly, difficult to
understand the nature of the property interest that underlies
Mimiya's claim. Mimiya attempts to articulate that interest as
follows: "Medicare, through the creation of the above cited rules
for notification of penalties, endowed [Mimiya] with a proprietary
interest in being fully appraised [stet] of all its options when
facing an imposed CMP." This description seems to equate a
property interest with Mimiya's right to be advised of a thirty-
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five percent reduction in the CMP if it waived its right to a
hearing. This equation is erroneous.
It is well established that "individuals whose property
interests are at stake are entitled to notice and an opportunity to
be heard." Dusenbery v. United States, 534 U.S. 161, 167 (2002).
In this case, the property interest at stake (and the issue for
which Mimiya requests the hearing) is the CMP that Mimiya must pay
as a penalty for noncompliance with Medicare regulations. CMS
provided Mimiya with notice of the grounds for the noncompliance
determination, the penalties imposed for noncompliance, and the
opportunity to contest at a hearing the noncompliance determination
and the penalties. Although Mimiya did not exercise its right to
request a hearing, CMS complied with the requirements of due
process by giving Mimiya notice of the deficiencies and the amount
of the penalty, and an opportunity to be heard.
The deficiency in the May 26 notice provided by CMS did
not implicate the notice and opportunity to be heard requirements
of due process. Instead, that notice only failed to inform Mimiya
of the regulatory option of receiving a thirty-five percent
reduction in the CMP if it waived its opportunity to be heard.
This failure did not affect Mimiya's choice to forgo the hearing:
Mimiya was advised of its right to a hearing, and decided to give
up that right without knowledge of the financial benefit of doing
so. Because Mimiya so decided, the regulations governing the
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administration of federal Medicare requirements arguably entitled
Mimiya to the thirty-five percent reduction in the CMP. Mimiya
cannot use its ignorance of the thirty-five percent reduction as a
basis for requesting a hearing when that ignorance had no effect on
its decision to forgo a hearing.
Recognizing Mimiya's equitable claim to the financial
benefit provided by the regulations, the DAB awarded Mimiya the
thirty-five percent reduction in its decision on Mimiya's appeal,
thereby curing any harm from the deficiency in the May 26 notice.
As the DAB aptly observed:
Mimiya offered nothing to show how the failure
to receive the option to settle the CMP for
sixty-five percent would impact its due
process rights; indeed, by failing to request
a hearing based on the May 26 notice, it was
defaulting for the full imposed penalty
amount. If Mimiya did not seek a hearing for
the full proposed penalty amount, then
informing Mimiya of its option to waive its
right to a hearing in exchange for a thirty-
five percent penalty reduction would, if
anything, make Mimiya even less likely to seek
a hearing.
In fact, in its brief, Mimiya confirms that "[i]f CMS had met its
procedural obligations and notified Mimiya of all its rightful
options, [Mimiya] would have chosen the thirty-five percent
reduction at the time of the May 26, 2000 notification."
Therefore, the DAB's decision to award Mimiya the thirty-five
percent reduction on appeal cured any deficiency in the May 26
notice.
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B. Estoppel
Mimiya argues that CMS should be estopped from arguing
that its request for a hearing was untimely because CMS's failure
to notify Mimiya of the waiver option amounted to a
misrepresentation on which Mimiya relied to its detriment. In
Heckler v. Community Health Servs., 467 U.S. 51 (1984), the Supreme
Court explained that a party seeking to assert estoppel must
demonstrate that (1) the party to be estopped made a "definite
misrepresentation of fact to another person having reason to
believe that the other [would] rely upon it"; (2) the party seeking
estoppel relied on the misrepresentations to its detriment; and (3)
the "reliance [was] reasonable in that the party claiming the
estoppel did not know nor should it have known that its adversary's
conduct was misleading." Id. at 59; see also Benitez-Pons v.
Commonwealth of Puerto Rico, 136 F.3d 54, 63 (1st Cir. 1998);
Clauson v. Smith, 823 F.2d 660, 661-62 (1st Cir. 1987).
We bypass the issue of whether CMS's omission of the
waiver option in the May 26 letter was a misrepresentation (without
suggesting that it was), and conclude that Mimiya's argument must
fail because Mimiya cannot show detrimental reliance. In order to
assert estoppel, a party must show that it "relied on its
adversary's conduct in such a manner as to change [its] position
for the worse." Heckler, 467 U.S. at 59 (internal quotation marks
omitted). Given the choice between paying the full amount and
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requesting a hearing, Mimiya in effect chose to pay the full
amount. Notice of the option of receiving a thirty-five percent
reduction for waiving its right to a hearing would not have altered
that choice, as Mimiya itself has conceded. See supra. Because
the DAB awarded Mimiya the thirty-five percent reduction, Mimiya
did not suffer any harm as a result of the omission. Therefore,
Mimiya has not demonstrated the detrimental reliance required by
estoppel.1
III.
For the foregoing reasons, the final decision of the
Departmental Appeals Board of the Department of Health and Human
Services is affirmed.
1
Assuming the availability of estoppel against the
government, we note that the burden for asserting such a claim is
greater than that for asserting estoppel against a private citizen.
Dantran, Inc. v. United States Dept. of Labor, 171 F.3d 58, 66 (1st
Cir. 1999) ("If estoppel against the government possesses any
viability . . . the phenomenon occurs only in the most extreme
circumstances.") But "however heavy the burden might be when an
estoppel is asserted against the Government, the private party
surely cannot prevail without at least demonstrating that the
traditional elements of an estoppel are present." Heckler, 467 U.S.
at 61. Because Mimiya fails to make that demonstration, we need
not discuss the precise parameters of an estoppel claim against the
government.
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