Emerald Shores Health Care Associates, LLC v. United States Department of Health & Human Services , 545 F.3d 1292 ( 2008 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
October 22, 2008
No. 07-12404 THOMAS K. KAHN
________________________ CLERK
Agency No. A-60-50-
EMERALD SHORES HEALTH CARE ASSOCIATES, LLC,
d.b.a. EMERALD SHORES HEALTH & REHABILITATION
CENTER,
Petitioner,
versus
UNITED STATES DEPARTMENT OF
HEALTH AND HUMAN SERVICES,
CENTERS FOR MEDICARE & MEDICAID SERVICES,
Respondent.
________________________
Petition for Review of a Decision of the
Department of Health & Human Services
_________________________
(October 22, 2008)
Before BIRCH, DUBINA and HILL, Circuit Judges.
BIRCH, Circuit Judge:
Emerald Shores Health Care Associates, LLC, petitions for review of a
decision by the Departmental Appeals Board (“DAB”) for the United States
Department of Health and Human Services (“DHHS”) imposing a civil monetary
penalty (“CMP”) for violating 42 C.F.R. § 483.70(h)(4). Emerald Shores argues
that the DAB did not have substantial evidence to support its decision that Emerald
Shores was not in substantial compliance with the regulation. After review, we
grant the petition, VACATE the DAB’s decision, and REMAND for further
proceedings consistent with this decision.
I. BACKGROUND
A. Regulatory Framework
Petitioner Emerald Shores is a skilled nursing facility in Calloway, Florida
that participates in both Medicare and Medicaid. Such facilities must meet a
number of statutory and regulatory guidelines. See generally 42 U.S.C. § 1395i-3
(2003); 42 C.F.R. Part 483 (2008). In order to ensure that these requirements are
fulfilled, the Centers for Medicare and Medicaid Services (“CMS”), a division of
DHHS, enters into agreements with state agencies to help monitor and enforce
compliance. See 42 U.S.C. § 1395aa; 42 C.F.R. § 488.10(a)(1). In Florida, the
applicable state department is the Agency for Health Care Administration
(“AHCA”).
2
As part of its responsibilities to CMS, AHCA must conduct regular surveys
of each licensed facility at least every fifteen months. See 42 C.F.R. § 488.308(a).
It also must perform special surveys whenever complaints are brought, including
follow-up visits to monitor facilities that are attempting to correct previously-noted
deficiencies. See id. §§ 488.308(e)(2), 488.332(b)(1). Surveyors record their
findings on CMS Form 2567, identifying all deficiencies by an agency-assigned
“tag” number. In addition, Form 2567 provides space for them to note the scope
and severity of the problem, the regulation being violated, and any specific
findings to support the citation.
CMS uses these surveys as a basis for potential disciplinary action, selecting
remedies appropriate to the scope and severity of the particular deficiency. See 42
C.F.R. § 488.408(a). A facility would be in “substantial compliance” if “individual
deficiencies pose no greater risk to resident health or safety than the potential for
causing minimum harm.” Id. § 488.301. Either CMS or the state can impose a
civil monetary penalty (“CMP”) for each day a facility is not in substantial
compliance. See 42 U.S.C. § 1395i-3(h)(2)(B)(ii); 42 C.F.R. § 488.430(a). The
maximum penalty is $10,000 per day of noncompliance, with the permissible range
depending on the severity of the deficiencies. See 42 C.F.R. § 488.438(a). The
regulations permit a penalty between $3050 and $10,000 per day if the deficiencies
constitute “immediate jeopardy” and between $50 and $3000 if they cause actual
3
harm or have the potential to cause more than minimal harm. See id. “Immediate
jeopardy” exists if a deficiency “has caused or is likely to cause, serious injury,
harm, impairment, or death to a resident.” Id. § 488.301. In determining the
appropriate penalty amount, CMS can consider such factors as the scope and
severity of the deficiency, the degree of culpability and the facility’s past history of
noncompliance. See id. §§ 488.404, 488.438(f). In addition, noncompliant
facilities are required to develop a “plan of correction” to remedy these
deficiencies. See id. § 488.401.
A Medicare provider can appeal a decision to impose a CMP to an
administrative law judge (“ALJ”) pursuant to 42 C.F.R. § 498.40. At the hearing
before the ALJ, CMS must put forward a prima facie case of noncompliance. See
Cross Creek Health Care Ctr., D.A.B. No. 1665 (1998). Once this showing is
made, the provider bears the burden of persuasion, which can be met by proving,
by a preponderance of the evidence, substantial compliance with the regulation.
See id. Both parties have the right to have the DAB review the ALJ’s decision
pursuant to 42 C.F.R. § 498.80. The DAB determines whether the ALJ’s
conclusions of law were erroneous and his findings of fact were supported by
substantial evidence in the record. See id. In CMP cases, a facility can seek
judicial review of the DAB’s decision with the appropriate circuit of the United
States Court of Appeals. See 42 U.S.C. § 1320a-7a(e).
4
B. CMS Investigation and Response
On 7 July 2004, a bedridden resident of Emerald Shores (“Resident #1") was
stung by fire ants approximately forty times.1 AHCA received a complaint about
this incident, resulting in a survey of the facility on 16 July. The survey team
identified two deficiencies in its survey: failure to “maintain an effective pest
control program,” in violation of 42 C.F.R. § 483.70(h)(4), and failure to “develop
and implement written policies and procedures that prohibit mistreatment, neglect,
and abuse of residents and misappropriation of resident property,” in violation of
42 C.F.R. § 483.13(c). Based on these findings, CMS determined that Emerald
Shores’s situation constituted “immediate jeopardy.” Both before and after this
finding, Emerald Shores began implementing a plan of correction.2 On 28 July,
AHCA performed a follow-up survey and deemed Emerald Shores to be in
substantial compliance. After AHCA made this finding, CMS imposed a CMP of
$120,000 for the total violations, amounting to $10,000 for each day between 16
July and 27 July, the period in which Emerald Shores was in immediate jeopardy.
1
The AHCA survey report refers to the residents by number rather than name, as does
the ALJ. We will use the same scheme for the sake of consistency.
2
The record is rather unclear about what Emerald Shores’s pest control program entailed
both before and after 16 July as well as when any changes were proposed and implemented.
Emerald Shores’s plan of correction discusses various actions already taken or soon to be taken
during this time frame, including an enhanced integrated pest management (IPM) program,
additional barrier treatment, implementation of a monthly maintenance plan, regular inspections
of rooms and building exteriors, and staff training programs.
5
C. Administrative Review Process
Emerald Shores sought administrative review of the CMP, filing claims at
both the federal and state level. It successfully challenged the survey results in the
state administrative review process, with the AHCA determining that it had been in
compliance during the period in question. CMS did not rescind its penalties,
however, so Emerald Shores then filed a request for hearing with the DHHS.
On review, the ALJ determined that Emerald Shores had no punishable
violations on or after 16 July and thus rejected the CMP based on the survey
findings from that date. His review focused on whether Emerald Shores had done
“all that it reasonably could be expected to do to prevent ant infestation and to
protect its residents against ant stings.” He noted that CMS had not prescribed any
particular pest control program for nursing homes and had given little guidance as
to how it would assess such a program. To fill this gap, the ALJ attempted to
identify key elements that could constitute an effective program. He looked to the
testimony of Dr. Michael Merchant, an entomology professor called by CMS as an
expert witness, for guidance in determining what the relevant elements would be.
In his written declaration, Dr. Merchant described an integrated pest management
program (IPM) as “one of the best plans of attack to eradicate fire ants” and
identified a number of ways in which Emerald Shores’s pest control program was
deficient. R6 at 714–15. The ALJ synthesized Dr. Merchant’s recommendations
6
into three elements: extensive surveillance of the grounds and buildings; effective
documentation of problems to aid in coordinating ant control; and an effective
eradication program.3 Based on the record, he found Emerald Shores to have met
all three requirements by 16 July, which thus put it in substantial compliance with
the regulations.4
CMS requested that the DAB review the ALJ’s decision. After examining
the record, the DAB reversed the ALJ’s findings with respect to the effective pest
control program requirement.5 The DAB determined that there was not substantial
evidence in the record to support the ALJ’s decision. It based this conclusion on
Emerald Shores’s failure to show that CMS’s immediate jeopardy finding was
clearly erroneous. In assessing the effectiveness of the pest control program, the
DAB did not require Emerald Shores to have adopted any particular method but
emphasized that “[e]vidence of significant numbers of ants and other pests” would
indicate “lack of any effective program,” whether or not it involved IPM. R2 at 21
3
Importantly, though, the ALJ did not require that a facility meet these criteria to be
compliant. See R2 at 6 (refusing to “find[] that a facility which fails to implement the system
described by Dr. Merchant to control fire ant infestation is necessarily out of compliance with 42
C.F.R. § 483.70(h)(4)).
4
In addition to finding substantial compliance with the “effective pest control”
requirement, the ALJ also found substantial compliance with two other regulations, 42 C.F.R.
§§ 483.13(c) & 483.10(b)(7)(iii)-(iv), which deal with policies and procedures regarding resident
abuse and neglect.
5
The DAB upheld the ALJ’s findings of substantial compliance with 42 C.F.R.
§§ 483.13(c) & 483.10(b)(7)(iii)-(iv). These decisions were not part of the petition for review.
7
n.5 (emphasis in original). Examining the record, the DAB found evidence of
“numerous ant sightings” during the period in question, in sharp contrast to the
ALJ’s identification of “two areas of ant activity.” Id. at 8, 23. Under the DAB’s
standard, this constituted sufficient evidence to overturn the ALJ’s findings on that
point. In addition, the DAB noted that the ALJ had not considered evidence that
Emerald Shores had failed to implement essential parts of its IPM program until 28
July, most notably a “full barrier treatment.” Id. at 25–28. Since the DAB had not
accepted all of the bases for CMS’s proposed CMP, it reduced the amount to
$8500 per day ($102,000 overall). The DAB found this amount, which was in the
upper range for “immediate jeopardy” penalties, appropriate due to the “ongoing
inadequacy” of the pest control program, the increased risk of harm to the
residents, and the actual harm that resulted. Id. at 42–43. Emerald Shores
subsequently petitioned us for review of the DAB’s decision.
II. DISCUSSION
In its petition for review, Emerald Shores contests the DAB’s determinations
that there was not substantial evidence to support the ALJ’s findings and that its
deficiency constituted “immediate jeopardy.” In reviewing the imposition of a
CMP, we are statutorily required to treat as conclusive all findings of fact made by
the DAB, so long as they are supported by substantial evidence. See 42 U.S.C.
§ 1320-7a(e). Substantial evidence “means such relevant evidence as a reasonable
8
mind might accept as adequate to support a conclusion.” Richardson v. Perales,
402 U.S. 389, 401, 91 S. Ct. 1420, 1427 (1971). We have no statutory guidance
regarding the appropriate standard for reviewing legal conclusions, however. In
similar reviews of administrative actions we have reviewed such conclusions de
novo, focusing on whether the correct legal standards were applied and refusing to
presume the validity of any legal conclusions. See Black Diamond Coal Mining
Co. v. Director, Office of Workers’ Comp. Programs, United States Dep’t of
Labor, 95 F.3d 1079, 1082 (11th Cir. 1996) (involving claim for disability benefits
due to black lung); Davis v. Shalala, 985 F.2d 528, 531 (11th Cir. 1993) (reviewing
determination of Social Security benefits). We find this standard appropriate,
particularly since the DAB and ALJ were not acting as policymakers, which means
we do not accord their legal interpretations the same degree of deference we would
an administrative agency’s. See Black Diamond, 95 F.3d at 1082.
Long-term care facilities participating in Medicare and Medicaid must
“[m]aintain an effective pest control program so that the facility is free of pests and
rodents.” 42 C.F.R. § 483.70(h)(4). Our review of the DAB’s decision thus
involves two separate inquiries: what would constitute an “effective” program and
whether there is substantial evidence supporting a determination that Emerald
Shores failed to meet this standard. CMS and DHHS do not require facilities to
adopt any particular program and have offered very little guidance about the
9
standards for assessing effectiveness. In the absence of any detailed elaboration of
the regulatory requirements, we think it appropriate to assess the DAB’s evidence
of noncompliance in light of what Emerald Shores would have reasonably
expected it was required to do. In making this evaluation, we find it relevant to
consider DAB decisions and official CMS/DHHS publications as well as those
agencies’ past interactions with and directions to Emerald Shores.
The record includes only one government document discussing the
“effective pest control” requirement in any detail — CMS’s guidebook for
surveyors of long term care facilities. The guide describes an “effective pest
control program” as “measures to eradicate and contain common household pests,”
including ants. R6 at 682. Additionally, it advises surveyors that “[e]vidence of
pest infestation in a particular space is an indicator of noncompliance.” Id.However, the guidebook provides no standards for determining how many such
observations would be sufficient for a finding of noncompliance or even what
would constitute an “infestation.”
Apart from this handbook, the remaining agency-related discussions of the
provision all appear in administrative decisions. Prior to 16 July 2004, the date of
Emerald Shores’s alleged violation, only two decisions, one by the ALJ and one by
10
the DAB, discuss pest control programs in depth.6 In the former instance, Western
Care Management Corp., D.A.B. No. CR1020 (2003), the ALJ determined that the
existing pest control program was ineffective, though he did not articulate any
clear standard of effectiveness. Instead, he based his decision on evidence showing
a pattern of repeated incidents over multiple months in which ants were found in
residents’ beds and even in one resident’s mouth.7 See Western Care Mgmt. Corp.,
D.A.B. No. CR1020 (2003). In addition, he emphasized that the facility had not
been diligent in responding to previous complaints lodged by residents.8 See id. In
the latter matter, Price Hill Nursing Home, D.A.B. No. 1781 (2001), the DAB
found the nursing home’s pest control system deficient but did not explicitly
articulate the standard it used to make this determination, noting only that the
facility had not put forth any evidence to show substantial compliance. In addition,
it commented that an effective pest control system should account for seasonal
6
Though DHHS cites other DAB decisions in its brief, they all occurred after the
relevant events here. See, e,g,, Lake Mary Health Care, D.A.B. No. 2081 (2007). Emerald
Shores cannot reasonably be held liable based on subsequent interpretations of the provision.
Additionally, federal and state courts appear not to have ever addressed the regulation, though a
Texas court briefly discussed a similarly-worded state law provision in a 2008 case. See Omaha
Healthcare Ctr., LLC v. Johnson, 246 S.W.3d 278, 286 (Tex. App. 2008). That court determined
that the statute-in-question did not set forth any “specialized standard” but rather required “only
that there be a [pest control] program.” Id.7
The ALJ did not specify whether they were fire ants.
8
The DAB affirmed the ALJ’s decision but did not elaborate on the “pest control” issue.
See Western Care Mgmt. Corp., D.A.B. No. 1921 (2004).
11
variations in pest level. See Price Hill Nursing Home, D.A.B. No. 1781 (2001).
The DAB did make clear, however, that it did not expect nursing homes to have to
eliminate every single pest in order to comply. See id.Based on these decisions and official guidance, Emerald Shores could have
reasonably expected that the effectiveness of its pest control system would be
evaluated on something less than a strict liability standard, though exactly how
much less would have been unclear. Price Hill and Western Care indicate that
noncompliance would not be assumed based on the presence of a single pest but
that it might occur if a facility failed to respond to repeated past infestations which
had occasioned patient complaints. Further, the guidebook shows that a finding of
noncompliance could be based, at least in part, on the presence of some undefined
number of pest infestations at the facility.
Perhaps even more importantly, CMS had not previously cited Emerald
Shores for any pest control-related penalties — even though there had been past
incidents involving ants on the premises — nor had it ever suggested any changes
to Emerald Shores’s pest control program. The most illustrative example of this
was the response to an August 2003 incident in which a resident was stung by fire
ants.9 This incident was reported to the AHCA, which investigated the complaint
9
The ALJ’s mention of a July 2003 biting incident appears to reference the same event
and likely reflects a misstatement in a hearing transcript. Both parties described the event as
occurring in August 2003.
12
and found Emerald Shores not to be in violation of the regulations. Additionally,
CMS and DHHS never informed Emerald Shores that its pest control program was
ineffective prior to the 16 July survey nor did they recommend that it adopt any
specific programs to make it effective. It was also only after 7 July that Emerald
Shores’s pest control providers first suggested areas for improvement, including
enhanced barrier treatment and monthly maintenance of the treatment. Emerald
Shores adopted these recommendations soon afterward, putting in barrier
treatments on 9, 16 and 21 July and purchasing a monthly maintenance plan on 23
July. Based on this history, it seems reasonable to conclude that Emerald Shores
was not on notice prior to 7 July (and perhaps even thereafter) that it was not in
substantial compliance with the effective pest control requirement.
Similarly, Emerald Shores was reasonable in assuming compliance based on
its history of pest infestations. The July 2004 survey team based its finding of
noncompliance on incidents reported by four individuals. One was the 7 July 2004
biting of Resident #1 which initiated the inquiry. A different resident (“Resident
#2") claimed to have been bitten by ants about two months prior to the 7 July 2004
incident, though the nursing assistant could not see any bites and the resident did
not report the incident to anyone else, including his son. The surveyors also noted
that family members of Resident #2 and Resident #5, who were roommates, had
13
seen ants in their relatives’ room in late June.10 Of these four events, only Resident
#1's biting was reported to Emerald Shores supervisors, though Resident #5's
spouse informed a maintenance worker, who subsequently sprayed the room. In
addition to these pre-survey problems, the DAB noted that there were a number of
observed sightings of ants or ant mounds in the period between 16 July and 27
July.
Overall, this amount of infestation does not appear to be of the same
pervasive, extended nature as that which occurred in Western Care, nor was
Emerald Shores’s response as inadequate as that of Price Hill. Western Care had
repeated, documented infestations over a period of months to which the facility
failed to respond. See Western Care Mgmt. Corp., D.A.B. No. CR1020. Emerald
Shores, on the other hand, appeared to have only a few sporadic problems prior to
July 2004. Based on the evidence presented, the facility was first put on notice of a
possible deficiency by the 7 July occurrence, since none of the earlier problems
were reported to it, apart from the August 2003 incident for which it had been
cleared. Further, once Emerald Shores learned of the problem, it began to
implement changes even before the 16 July survey occurred. This stands in sharp
10
These appear to represent a single infestation, since both family members mention that
they observed the ants around the same time, three weeks earlier. Apparently Resident #2 left a
peanut butter sandwich on a bedside table overnight, which attracted ants. Assuming that the
dates given by Resident #2 are correct, this event was likely distinct from the earlier biting
incident, which Resident #2 said occurred two months prior to the interview.
14
contrast to Price Hill, which only took action once the surveyors noticed a
problem. See Price Hill, D.A.B. 1781 (noting that “Price Hill removed bugs from
the food storage area only after the surveyors pointed them out”). Though there
were still ants present at Emerald Shores after 16 July, these were likely
attributable more to the difficulties in attempting to determine how to combat a
theretofore unknown problem rather than to any punishable failure to respond on
Emerald Shores’s part.
Based on all of these factors, we conclude that the DAB’s decision was not
supported by substantial evidence in the record. The DAB relies on two factors in
its decision: the presence of substantial numbers of ants after 16 July and the
failure to implement critical parts of its IPM program by 16 July. Though we do
not disagree with these factual determinations, we find them legally insufficient to
merit a finding of noncompliance with 42 C.F.R. § 483.70(h)(4), particularly
considering the lack of guidance given to Emerald Shores prior to 16 July. In the
absence of any mandatory, or even suggested, standards for establishing a pest
control program, it is unreasonable to expect Emerald Shores to know that CMS
would view its plan as not in substantial compliance with the statute. We find it
particularly noteworthy that AHCA had previously found Emerald Shores’s pest
control program compliant, even after the August 2003 incident, and that, despite
15
this finding, Emerald Shores purchased a barrier treatment soon after, thus
enhancing its already-compliant program.
As we previously noted, both the continued presence of ants and the
implementation of further protective measures should be viewed in light of the fact
that Emerald Shores had only recently become aware of the problem and was
trying to implement solutions with little to no assistance from CMS. Though the
DAB disavowed the use of a strict liability standard, it seemed to evaluate Emerald
Shores’s response in just such a light. For instance, it considered the fact that
Emerald Shores had not fully completed every part of its revised pest control plan
by 16 July as de facto evidence of a deficiency, even though the facility had
already taken steps to rectify the problem and would be clearly compliant soon
after. In making this determination, the DAB focused on whether Emerald Shores
had implemented by 16 July the elements of a successful IPM program, as
described by Dr. Merchant and synthesized by the ALJ. However, this emphasis
would seem to run counter to the DAB’s assertion that Emerald Shores did not
have to follow this conception of IPM to have an effective program. Though the
ALJ found, and Emerald Shores asserts, that the implemented pest control program
met Dr. Merchant’s standards by 16 July, we do not consider this finding
necessary to prove compliance, especially given the context in which Emerald
Shores was operating prior to that date and its actions thereafter.
16
We agree with the DAB that Emerald Shores did not have the ideal pest
control program at the time of the 16 July survey. However, we find that the
program it had in place substantially complied with the requirements of the
regulation, at least insofar as Emerald Shores would have reasonably understood
them at the time. Assessing whether a pest control program is “effective” will
almost always involve some degree of subjectivity due to the inherent vagueness of
quantifying and qualifying “effectiveness.” This difficulty is further compounded
by the average nursing home administrator’s lack of expertise in pest control
methods, which makes such an individual reliant on the advice and assistance of
professional exterminators. If CMS had provided a more objective and
particularized concept, then we would be more inclined to affirm a finding of
noncompliance. In the absence of such advice and the failure to produce any
evidence that Emerald Shores did not implement a recommended pest control
measure within a reasonable time frame, we find that the DAB’s conclusions not to
have sufficient evidentiary support.11
III. CONCLUSION
Emerald Shores petitions for review of a DAB decision to impose a CMP for
failing to maintain an effective pest control program. Though there was evidence
11
Since we make this conclusion, we need not address whether the situation constituted
“immediate jeopardy.”
17
of fire ant problems at Emerald Shores, we find the facility’s response reasonable
and sufficient based on the then-current understanding of effectiveness; thus the
DAB’s decision was not supported by substantial evidence. Accordingly, we grant
Emerald Shores’s petition for review and VACATE the DAB’s decision and
REMAND for proceedings consistent with this opinion.
18