Universal Healthcare/King v. Kathleen Sebelius

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 11-1817

UNIVERSAL HEALTHCARE/KING,

Petitioner,

v.

KATHLEEN SEBELIUS, Secretary of the United States Department
of Health and Human Services; UNITED STATES DEPARTMENT OF
HEALTH AND HUMAN SERVICES,

Respondents.

On Petition for Review of an Order of the United States
Department of Health and Human Services. (A-11-38)

Argued: September 19, 2012 Decided: December 14, 2012

Before NIEMEYER and DIAZ, Circuit Judges, and Max O. COGBURN,
Jr., United States District Judge for the Western District of
North Carolina, sitting by designation.

Petition for review denied by unpublished opinion. Judge
Cogburn wrote the opinion, in which Judge Niemeyer and Judge
Diaz joined.

ARGUED: Joseph L. Bianculli, HEALTH CARE LAWYERS, PLC,
Arlington, Virginia, for Petitioner. Adam C. Jed, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Respondents. ON
BRIEF: William B. Schultz, Acting General Counsel, Dana J.
Petti, Chief Counsel, Region IV, Elizabeth C. Benton, Assistant
Regional Counsel, DEPARTMENT OF HEALTH AND HUMAN SERVICES,
Atlanta, Georgia; Tony West, Assistant Attorney General, Michael
S. Raab, Helen L. Gilbert, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Respondents.

Unpublished opinions are not binding precedent in this circuit.

2
COGBURN, District Judge:

Universal Healthcare/King (“Universal”) challenges a civil

monetary penalty (“CMP”) imposed by the Centers for Medicare &

Medicaid Services (“CMS”) for violations of the Medicare and

Medicaid statutes and regulations. The challenged CMP was

sustained by an administrative law judge (“ALJ”) and affirmed by

the Departmental Appeals Board (“DAB”) of the U.S. Department of

Health and Human Services. Because we find no error in the

DAB’s decision, we deny Universal’s petition for review.

I.

Universal is a Medicare nursing facility located in King,

North Carolina. Nursing facilities participating in the

Medicare Program must comply with federal “Long Term Care

Requirements of Participation” as set forth in 42 C.F.R. Part

483, which implements provisions of 42 U.S.C. §§ 1395i-3(b)-(e).

Those regulations establish numerous clinical, operational, and

other responsibilities for participating nursing facilities as

well as provide a number of rights for facility residents. Id.

Compliance with these regulations is evaluated via periodic

inspections or “surveys,” which are usually conducted, as in

this matter, by a State Survey Agency (“SSA”) acting under

contract as the agent of Respondent Secretary of the U.S.

Department of Health and Human Services. In September 2009, an

3
SSA conducted a survey at Universal’s facility in King, which

revealed that Universal had violated several of the regulations.

Based on those findings, CMS imposed per diem CMPs on Universal

for the period of March 21 through September 27, 2009, in the

amount of $3050 per day, totaling $587,950.

The regulations are enforced by the Secretary as provided

by 42 U.S.C. § 1395i-3(h). That statute authorizes the

imposition of various sanctions tied to the “severity” and

“scope” of noncompliance, which are in turn measured by the

actual or potential impact of the noncompliance on nursing

facility residents. Id. Among the sanctions available to the

Secretary are two types of CMPs: a “per diem” CMP, which may be

imposed “for the number of days a facility is not in substantial

compliance” with the regulations; and a “per instance” CMP,

which may be imposed for “past noncompliance” corrected prior to

a survey. Significantly, per diem CMPs can accrue in an amount

of up to $10,000 per day, and may “continue until [t]he facility

has achieved substantial compliance[.]” 42 C.F.R.

§ 488.454(a)(1). On the other hand, per instance CMPs are

limited to a cap of $10,000 per survey. 42 C.F.R. §§ 488.430,

488.438.

Supporting its imposition of a per diem CMP, CMS found that

Universal committed violations of 42 C.F.R. § 483.25(l), which

requires proper monitoring of prescription drugs given to

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residents, § 483.75(j)(1), which regulates provision of

laboratory services for residents, and § 483.20(d), which sets

patient recordkeeping requirements. These violations stemmed

largely from a series of serious errors committed by

petitioner’s staff in caring for “Resident #1,” a 78-year-old

woman who ultimately died in March 2009. It is undisputed that

it was the death of Resident #1 which spurred the survey.

Universal contends that the ALJ, the Board, and ultimately the

Secretary erred in upholding the duration of CMS’s per diem CMPs

by failing to consider its evidence that its self-implemented

corrective measures had returned the facility to “substantial

compliance” in April 2009, long before the September survey.

II.

A.

On February 10, 2009, Universal’s nurses noted swelling in

Resident #1’s right lower leg, and reported such condition to

the patient’s physician, who ordered a Doppler test, which

disclosed a blood clot. Based on the presence of the blood

clot, the physician ordered 10 mg of Coumadin daily and Lovenox

(both anti-coagulant drugs), as well as daily Prothrombin Time

and International Normalized Ratio tests (“PT/INR”). The tests

are used to monitor the effectiveness of anticoagulant therapy,

5
a highly risky treatment process that requires close monitoring

and a detailed care plan.

As the record establishes and petitioner concedes, the

facility badly mishandled Resident #1’s anticoagulant therapy

care plan. Initially, petitioner’s staff failed to perform the

daily PT/INR tests as ordered and, when such test was eventually

performed, the results indicated an elevated level of Coumadin.

The patient’s doctor was notified and over the next month he

made a series of adjustments to the patient’s medications.

After the patient’s March 10 PT/INR test showed a

“critical[ly] high” Coumadin level, her physician altered her

regimen of medication and then ordered another PT/INR test two

days later. That test, on March 12, again showed somewhat high

results, but the physician ordered the Coumadin to be resumed at

6 mg/day and that another PT/INR test be conducted on March 21.

Unfortunately, the nurse who took the March 21 order entered it

on the resident’s Medication Administration Record (“MAR”) in a

confusing manner, resulting in neither the lab’s technician nor

petitioner’s nurse conducting a PT/INR test on that day. On

March 23, such error was caught by a nurse and blood was drawn

for the lab work. 1

1
It is undisputed that a MAR is prepared each month for
each resident, listing on the left side of the form all
medications the resident is to receive, with a series of boxes
(Continued)
6
 On March 24, the lab reported that the late sample was too

small to test, so a nurse attempted to draw blood again;

however, the patient refused to allow the draw. While a patient

has a right to refuse treatment, 42 C.F.R. § 483.10(d)(3), the

nurse did not immediately inform a supervisor or the resident’s

physician, as required. During the last attempt to obtain

consent, a nurse noted unusual bruising around the resident’s

breast and shoulder area, injuries which could be signs of

Coumadin overdose. This nurse did, however, report the bruising

and refusal to allow a blood draw to the patient’s physician,

who then ordered the resident to be sent to a hospital for

evaluation. In the late afternoon of March 24, a PT/INR test

indicated a very high Coumadin level. Later that evening, the

hospital administered a small dose of Vitamin K (the antidote

for Coumadin overdose), but the resident’s family thereafter

declined further treatment or medical intervention, and the

resident died on March 25, 2009.

B.

After Resident #1’s death, Universal’s staff reviewed her

record and its lab policies to determine what, if anything, its

corresponding to dates and times that a nurse initials when he
or she administers the medication. Nurses use the patient’s MAR
each day, and an order for a lab test on a particular day is
ordinarily noted in the box for that day.

7
nurses had done wrong. That review unearthed Resident #1’s

missed and delayed lab tests and the fact that she had refused

blood draws several times on March 24 before the nurses informed

the physician. In response, on March 26 and 27, Universal’s

Director of Nursing provided in-service training to all licensed

nurses regarding the necessity of immediately notifying a

supervisor or the Director of Nursing of any instance in which

any ordered lab tests--especially PT/INRs--could not be obtained

for any reason, including resident refusal. The Director of

Nursing also revised Universal’s protocol for posting physician

orders for future lab tests to assure that a certain date was

marked on each resident’s Medication Administration Record.

Based on the Director of Nursing’s findings, Universal’s

Administrator also contacted a nurse consultant to expand the

investigation. That nurse audited the facility’s lab

procedures, as well as the medical records of every resident

receiving anticoagulant therapy, and found no other errors.

Nevertheless, Universal’s managers decided to revise its

Laboratory Procedure Policy to clarify all lines of

communication, and to create a simplified reporting and tracking

form for anticoagulant lab tests. All of these reports and

findings, including the results of the investigations and the

revised protocols, were addressed at a Quality Assessment and

Assurance Committee Meeting on April 1, 2009, by Universal’s

8
managers, Director of Nursing, and Resident #1’s physician.

Petitioner’s clinical staff presented, and the QAA Committee

approved, the new protocols at that time.

On April 3, 2009, petitioner’s Director of Nursing began

training nurses on the new lab, documentation, and reporting

protocols, which was completed on April 7, 2009. No errors

involving any lab tests occurred thereafter and the SSA found

and cited none during the six-month interim until the September

2009 survey.

C.

The SSA’s September 2009 survey cited Universal for the

deficiencies relating to the care of Resident #1. Following the

survey and at the SSA’s direction, Universal developed a

comprehensive “Plan of Correction,” which it formally

implemented on September 28, 2009. Universal contends that at

no point during the survey did the team critique its internal

investigation into Resident #1’s death or its April 2009

corrective action. Further, Universal contends that the survey

team did not find any new errors since the implementation of the

April measures.

The survey team recommended to CMS that it only impose a

$10,000 per instance CMP for past noncompliance. CMS rejected

that recommendation, however, determining that petitioner was

noncompliant for the entire period from March 21 (the date of

9
the missed PT/INR) through September 27, 2009 (the day before

Universal implemented its comprehensive Plan of Correction).

Accordingly, it imposed a CMP in the amount of $3050 per day for

each day of noncompliance, totaling $587,950.

Universal requested review of this sanction by an ALJ, and

offered statements of several witnesses that Universal’s April

2009 lab protocol and its implementation was fully consistent

with all pertinent professional and regulatory standards, and

that Universal had resumed compliance with the cited regulations

by no later than April 7, 2009. Defending its penalties, CMS

argued before the ALJ that Universal’s April corrective actions

had failed to adequately address its deficiencies.

Agreeing with CMS, the ALJ determined that Universal’s

April 2009 corrective measures were too narrowly focused on

“only one element of petitioner’s noncompliance,” and failed to

“address the totality of the noncompliance.” J.A. 16, 14. The

ALJ explained that while the April measures did address the

problem of petitioner’s failure to perform physician-ordered

testing, they failed to address other problems, “such as the

failure of the staff to plan for the care of residents receiving

anticoagulants or the failure [to report abnormal test results

to physicians].” J.A. 16. “For that reason,” the ALJ

explained, “they are inadequate proof that Petitioner self-

corrected its deficiencies by April 7, 2009.” Id. at 14.

10
Ultimately finding that petitioner had not implemented

comprehensive corrective actions addressing the entire range of

deficiencies until it formalized the Plan of Correction on

September 28, 2009, the ALJ affirmed CMS’s determinations as to

the duration of petitioner’s noncompliance, and held that CMS’s

penalties were reasonable. J.A. 15, 17. The Board sustained

this determination, which became the final action of the

Secretary.

III.

Universal raises two challenges to the Secretary’s

imposition of the per diem CMP. First, Universal contends that

the Secretary failed to consider its proffered evidence of

resumed compliance with the Secretary’s regulations as of April

7, 2009. Second, Universal contends that the final decision of

the Secretary should be reversed and remanded because she failed

to apply the correct legal standard in allocating the burden of

proof, arguing that the ALJ’s determination as to the duration

of Universal’s noncompliance was based only on a “presumption,”

which is inconsistent with applicable law. We address each

contention.

A.

Under 42 U.S.C. § 1320a-7a(e), “[t]he findings of the

Secretary with respect to questions of fact, if supported by

11
substantial evidence on the record considered as a whole, shall

be conclusive.” Id. Substantial evidence means “such relevant

evidence as a reasonable mind might accept as adequate to

support a conclusion.” Richardson v. Perales, 402 U.S. 389, 401

(1971). “When the question before the court is whether an

agency has properly interpreted and applied its own regulation,

the reviewing court must give the agency’s interpretation

‘substantial deference.’” Md. Gen. Hosp. v. Thompson, 308 F.3d

340, 343 (4th Cir. 2002).

1.

Despite Universal’s argument that the Secretary failed to

consider its evidence of resumed compliance, we cannot say that

the Secretary’s decision to uphold the imposition of a per diem

CMP is unsupported by substantial evidence.

As a condition of participation in the Medicare program,

certified nursing facilities must meet a variety of requirements

to ensure the safety of the residents under their care. Under

42 C.F.R. § 483.25(l)(1), a facility must ensure that “[e]ach

resident’s drug regimen” is free from drugs given “[i]n

excessive dose,” “[f]or excessive duration,” “[w]ithout adequate

monitoring,” “[i]n the presence of adverse consequences which

indicate the dose should be reduced or discontinued,” or “[a]ny

combinations” thereof. Under 42 C.F.R. § 483.75(j)(1), each

facility must provide or obtain laboratory services that are

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timely and that meet quality requirements. Under the DAB’s

interpretation of the regulations, once a facility is determined

to be out of compliance, it need not be “affirmatively” shown

“that noncompliance exists on each day that a remedy is in

effect after the first day of noncompliance.” In re Texan

Nursing & Rehab. of Amarillo, LLC, DAB No. 2323, at 20 (July 2,

2010) (internal quotation marks omitted); 42 C.F.R. §§

488.440(a)(1), 488.454(a)(1).

While Universal presented some evidence to the contrary,

the Secretary had before her substantial evidence that

petitioner failed to satisfy these requirements until on or

about September 28, 2009. The regulations require that a

skilled nursing facility “have systems in place” to ensure

careful monitoring for, inter alia, “any unusual bleeding or

symptoms of bleeding”; to “anticipate and plan for [the] risk”

of bleeding; and to ensure “gentle handling,” for example “in

transfers to avoid bumps.” J.A. 31-32, 35. Review of the

administrative record reveals that the Secretary had before her

statements from an experienced pharmacist and surveyor, as well

as petitioner’s own pharmacist consultant, that, at the time of

the survey, Universal still lacked adequate systems to ensure

that residents taking Coumadin were monitored closely for

possible subtle signs of Coumadin toxicity. Further, the record

contains evidence that in September 2009 Universal had yet to

13
implement systems to protect patients from possible trauma, such

as bruising, which is dangerous to a person with impaired

clotting.

In addition, the regulations require that a nursing

facility have a system in place to ensure that labs are drawn

when ordered, drawn correctly, processed correctly, and that the

results are reported to doctors. Although Universal submitted

evidence to the Secretary in support of its argument that it

satisfied this requirement by April 7 by implementing a new lab

protocol, such argument assumes that PT/INR tests alone are

sufficient under the regulations to detect “adverse

consequences” or an “excessive dose” of Coumadin. See 42 C.F.R.

§ 483.25(l)(1). Universal did not, however, make such argument

in the course of the administrative proceeding and has not shown

any exceptional circumstance warranting its consideration for

the first time on appeal. 42 U.S.C. § 1320a-7a(c). Moreover,

substantial evidence supports the Secretary’s conclusion that

adequate systems for monitoring residents on anticoagulant

therapy require not only lab tests, but also protocols for

monitoring and observation of residents by direct caregivers.

The Secretary had ample evidence that petitioner did not return

to substantial compliance with these standards until September

28, 2009, when it implemented the Plan of Correction. By way of

example, the Secretary had evidence before her that before the

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survey Universal did not have any system in place for ensuring

that special instructions for Coumadin were placed in care plans

or that subtle signs of injury were recorded.

Moreover, the Secretary had before her substantial evidence

that, despite the April measures, Universal continued to lack an

effective system for ensuring that labs were properly drawn and

results reported. Even during the September survey, Universal’s

own consulting pharmacist expressed concern that she was unable

to obtain or review information about labs and that she

periodically discovered labs had been missed. Likewise, the

Secretary’s conclusion that there was a systematic failure based

on petitioner’s failure to “anticipate and plan for [the] risk”

of bleeding, to “monitor[] for adverse drug reactions or

overdoses,” “to instruct staff” on touching and handling

residents on Coumadin, and “to detect the errors that rank and

file care givers were committing,” J.A. 31-32, 37 (internal

quotation marks omitted), is supported by substantial evidence.

All in all, the final decision of the Secretary is supported by

substantial evidence.

2.

Finally, Universal contends that the Secretary’s decision

should be reversed and remanded because she failed to apply the

correct legal standard in allocating the burden of proof.

Universal contends that the Secretary’s conclusion that

15
petitioner did not achieve compliance until September 2009 was

based only on a presumption, which is inconsistent with

applicable law.

We will not reach the merits of this contention inasmuch as

Universal failed to raise such argument before the Secretary

below. 2 As “[n]o objection that has not been urged before the

Secretary shall be considered by the court, unless the failure

or neglect to urge such objection shall be excused because of

extraordinary circumstances,” 42 U.S.C. § 1320a-7a(e), and no

exceptional circumstance has been suggested, we will not

consider the merits of this contention. Woelke & Romero

Framing, Inc. v. NLRB, 456 U.S. 645, 665 (1982); United States

v. L. A. Tucker Truck Lines, Inc., 344 U.S. 33, 36-37 (1952).

IV.

In sum, we conclude that the Secretary’s imposition of a

per diem CMP of $587,950 was supported by substantial evidence.

Universal’s petition for review is therefore

DENIED.

2
While Universal’s procedural default on this contention
prevents consideration of the merits of such argument on appeal,
we note that Universal explicitly acknowledged that once it had
been determined to be deficient in its care of Resident #1,
there was a “presumption of continuing noncompliance.” J.A. 85.
Indeed, Universal argued before the Secretary that the
applicable presumption was rebuttable. Id.; accord J.A. 46.

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