HHS Cannot Issue Civil Penalties Without Prior Notice of How to Comply with Regulations, Sixth Circuit Finds

An appellate panel of judges from the Sixth Circuit Court of Appeals has ruled in a case between Golden Living Ctr.- Mountain View and the Secretary of Health & Human Services regarding an alleged arbitrary and capricious imposition of penalty by both the initial Administrative Law Judge (ALJ) and the Departmental Appeals Board of the Department of Health and Human Services (DAB). 

The penalty was imposed originally in response to an annual recertification and extended survey of operations at Mountain View by personnel from the Centers for Medicare and Medicaid Services (CMS). During the survey, the surveyors discovered that there had been multiple slip and fall incidents in the Alzheimer’s Care Unit. These slip and falls were determined to be the result of the facility being out of compliance with 42 C.F.R. Secs. 483.20(d)(3) and 483.10(k)(2) [F280] (care plans); 483.25(h) [F323] (accident hazards); 483.30(a) [F353] (adequate staffing); 483.75 [F490] (administration); 483.75(i) [F501] (medical director); and 483.75(o)(1) [F520] (Quality Assurance Committee). Each of these falls resulted in medical treatment and complications that would not have been necessary if the falls had been prevented.

As a result of this survey, CMS imposed monetary penalties on the facility, eventually totaling $621,250. However, in the imposition of the fine, CMS, and later the ALJ and the DAB all relied upon the facility not having utilized one specific remedy, namely hiring a larger staff, instead of determining “that CMS had sufficient evidence from which to infer noncompliance with the relevant regulations.” The appellate court acknowledged that typically the court’s standard of review was highly deferential to HHS’s decision, but that the court afforded no such deference in situations involving an agency’s “ad hoc enforcement,” with an unexpected result, of an ambiguous regulation. This, the court explained, is because a review by these appellate bodies must not unfairly surprise the body receiving the penalty, by hinging all review on one requirement that fails to “represent a common-sense understanding of the regulations.” Therefore, the court concluded, the defendants determining the only remedy allowed involved the hiring of additional staff (to the exclusion of other possible remedies) was an “arbitary and capricious decision” as such mandate lacked fair notice. 

Golden Living Center – Mountain View was represented by Health Care Lawyers, PLC at all levels of appeal.