Eighth Circuit Hands Grace Healthcare a Victory Significant to the LTC Industry

Folks, I have abstracted an opinion filed today.  It will be a published decision. This is a very exciting decision regarding the administrative law judge’s (“ALJ”) and the DAB’s use of judicial economy in reviewing citations on appeal.  The facility’s attorneys argued six immediate jeopardy (“IJ”) citations where only one was reviewed by the ALJ and DAB to uphold the Civil Money Penalties.  The  ALJ and DAB refused to review the other five IJ citations based on their theory of "judicial economy".   I apologize for its length.  Elizabeth 
Eighth Circuit Hands Grace Healthcare a Victory Significant to the LTC Industry
On judicial review, the Eighth Circuit Court of Appeals vacated a decision of the CMS Department Appeals Board (“DAB”) finding that Grace Healthcare of Benton violated requirements of participation at the immediate jeopardy level.  Accordingly, the Court directed the Secretary of the Department of Health and Human Services to expunge all references to findings or determinations of immediate-jeopardy-level noncompliance from the Department’s and CMS’s agency records “that are accessible or available by any method or means to the public (and [to] ensure that its contract surveyor does the same)”.  (Emphasis added).
The appeal to the Eighth Circuit focused on Resident No. 1, who was an 86 year old woman.  She had multiple diagnoses, and was in declining health.  Two days after her April 4, 2006 admission, the facility transferred her to the hospital following a stroke.  She returned to the facility on April 11 in a more deteriorated condition.  She was placed on Plavix, a potent blood thinner.  The facility’s nursing assessments, both on April 4th and April 11th, documented bruises on the residents arm at the sites of IV infusions and blood draws. 
On May 7, 2006, the facility’s Daily Skilled Nurses Notes documented that the resident developed a low grade fever and had a golf ball sized lymph node on the right side of her neck.  She was promptly transferred back to the hospital, where among other diagnoses, the emergency room physician noted dehydration and multiple ecchymoses.  Dr. Quade, the hospital treating physician, documented the multiple ecchymoses without referencing possible abuse or neglect.  While at the hospital, the facility’s nurse liaison overheard Dr. Quade complaining about the resident’s dehydrated and bruised condition.  The nurse spoke to Dr. Quade about this, who responded that she wanted to talk to someone at Grace Healthcare about the resident’s bruises, “which were not present when Resident #1 left the hospital on April 11”.  The nurse reported Dr. Quade’s comments to both the facility’s director of nursing (“DON”) and the administrator.  The DON left a message with Dr. Quade, but Dr. Quade did not return her call.  The administrator interviewed several nurses and consulted the resident’s medical records.  The resident’s attending physician at the facility and the facility’s medical expert both opined that the resident’s ecchymoses were caused by the administration of Plavix and aspirin, not by injury or accident.
The Office of Long Term Care cited six deficiencies at the IJ level, and imposed civil money penalties of $3,500 per day for May 17th and May 18th, and $350 per day for May 19 through June23rd.  On administrative appeal, the ALJ upheld the penalties on the sole ground that Grace Healthcare failed to investigate the source of the ecchymoses observed by its staff.  The ALJ did not address the other five IJs because the failure to investigate possible staff abuse “is, in and of itself, sufficient to justify the low-end penalties of $3,500 per day”. 
The Court noted that the DAB affirmed by finding “a significantly different immediate-jeopardy-level violation” of the regulation, which was not identified or relied upon by the ALJ.  The DAB’s basis, noted the Court, was that Dr. Quade’s statements overheard by the nurse liaison were an allegation of abuse, and that the facility failed to investigate the bruises following notification of this allegation.  Regardless of the basis for the IJs, the Court held that neither the ALJ’s nor the DAB’s decisions were supported by the record, and that the DAB ignored “uncontroverted facts”. 
The critical issue in the case, according to the Court, was whether the facility’s failure to more vigorously investigate Dr. Quade’s comment to the nurse liaison “caused, or [was] likely to cause, serious injury, harm impairment, or death to a resident.”[1]  Quoting the DAB that “[t]here was a sufficient causal connection between the noncompliance . . . and the likelihood of serious harm because  . . . any abuse of a frail nursing home resident can be lethal”, the Court observed that, if so, every violation of the regulation at issue would be an immediate-jeopardy-level violation, “an arbitrary ruling because it is contrary to the DAB’s decision in Spring Meadows, 2005 HHSDAB LEXIS 35, at *73-74”. 
The Court found error in the ALJ’s and DAB’s failure to review all six IJ citations.  It said that the Office of Long Term Care “declared that Grace Healthcare’s interrelated noncompliance with six regulations in caring for three residents resulted in an immediate jeopardy condition”.  (Emphasis added).  This basis of the IJs was repeated in CMS’s affidavit of record, where it declared that the facility’s “interacting noncompliance with [the regulations] were the resident-centered core of [the facility’s] noncompliance.”  By reviewing only one of the six deficiencies to uphold the IJs, the Court stated that, “[i]n effect, the ALJ and the DAB convicted Grace Healthcare of an immediate-jeopardy-level violation that was  not charged”.  Still, the Court noted, the DAB made no fact-specific analysis of the IJ issue, nor did it cite facts in the record raising an inference that the Facility’s failure to investigate Dr. Quade’s comment more promptly or thoroughly increased the risk of abuse or neglect of Resident #1 or its other residents.  It said the DAB’s finding of the likely harm was “pure speculation” and not supported by substantial evidence.  The Court held that the DAB failed to “articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made”.[2]
Grace Healthcare argued further that the DAB’s decision was arbitrary and capricious because it ignored the other five IJs that the facility appealed.  The DAB responded, saying, “the ALJ’s hearing ‘is a de novo proceeding . . . not a quasi-appellate review of the correctness of [CMS’s] determination,’ and therefore the ALJ need not address CMS noncompliance findings that are not material to the ALJ’s decision”.[3]  The Court opined that it need not review the soundness of that principle, other than to conclude it was misapplied in this case.  Grace Healthcare also asserted that unreviewed CMS findings of IJ remain accessible to the public and can be used to support damage claims against the provider in private litigation.  The Court noted, if true, this has a “material adverse impact, in which case all finding of immediate jeopardy that are appealed should either be upheld or reversed by the ALJ or the DAB or be expunged from the agency’s public records.”
Grace Healthcare of Benton v. U.S. DHHS, CMS, No. 08-3218 (8th Cir., Dec. 21, 2009).  http://www.ca8.uscourts.gov/opndir/09/12/083218P.pdf.  Argued by Rex Terry and Brief by Shala Klutts, of Hardin, Jesson & Terry, PLC.
Elizabeth Andreoli
Hardin, Jesson & Terry, PLC
1401 W. Capitol Ave., Suite 180
Little Rock, AR   72201
(O) (501)372-3634
(F) (501) 372-3631
(C) (501) 690-5069

[1]  42 C.F.R. § 488.301.
[2]  Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983).
[3]  W. Care Mgmt., 2004 HHSDAB LEXIS 73, at *32, 40. 

 ****** Begin Notice from Husch Blackwell Sanders LLP ****** Pursuant to U. S. Treasury regulations, we inform you thatany federal tax advice contained in this message (including all constituent email correspondence, attachments, enclosuresand/or exhibits) is not intended or written to be used, andcannot be used, for the purpose of (i) avoiding penaltiesunder the Internal Revenue Code or (ii) promoting, marketingor recommending to another party any transaction or matteraddressed herein. ****** End Notice from Husch Blackwell Sanders LLP *******

Author: Web Master
Westlaw Number: