Petition for Writ of Certiorari — Palm Valley Health Care, Inc., Petitioner v. Alex M. Azar, II, Secretary of Health and Human Services

APPENDIX

APPENDIX A

APPENDIX B

APPENDIX C

APPENDIX D

APPENDIX E

APPENDIX F

APPENDIX G

INDEX TO APPENDICES

Opinion in the United States Court of Appeals

for the Fifth Circuit

(January 15, 2020) oo... ccc cceccccsecccsscccescceeeeseesceeesceeeeessneeseges App. 1

Order in the United States District Court, Southern District of

Texas, McAllen Division

(September 28, 2018).........cccccccccesecccsscceseceeseceeescceeesesseeesees App. 15

Decision of the Medicare Appeals Council

(Sune 5, 2O1D) ....cceecccecccesscceeeeceeeceeesceeeseseneceesceseeessnssseesess App. 40

Decision of the Administrative Law Judge

(Sune 8, 2012) oo. cccccccescccseecesecceseceeseesesseeeceeeseeesenees App. 126

U.S. Const. amend. Vo... ccccccccccccsecceseceeessceeseseneseensseeeness App. 1838

Statutory Provisions Involved ............cccccccccceseceeeeseeeesenees App. 185

Regulatory Provisions Involved ..............cccccceeceeeeseeeeseeeeees App. 221

Case: 18-41067 Document: 00515273342 Page:1 Date Filed: 01/15/2020

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT United States Court of Appeals

FILED

January 15, 2020

Lyle W. Cayce

Clerk

No. 18-41067

PALM VALLEY HEALTH CARE, INCORPORATED,

Plaintiff-Appellant

Vv.

ALEX M. AZAR IT, SECRETARY, U.S. DEPARTMENT OF HEALTH AND

HUMAN SERVICES; PALMETTO GBA, L.L.C.,

Defendants-Appellees

Appeal from the United States District Court

for the Southern District of Texas

Before OWEN, Chief Judge, and HAYNES and COSTA, Circuit Judges.

GREGG COSTA, Circuit Judge:

With annual spending topping half a trillion dollars, Medicare is the

largest recipient of federal funds after Social Security and defense.! With so

many tax dollars at stake, Congress created an administrative process through

which Medicare can recover overpayments. Because of the massive number of

claims, an audit of each one is not feasible. So federal law allows Medicare to

investigate a select number of claims from a provider. If the audit of that

sample reveals “a sustained or high level of payment error,” Medicare can

1 Leigh Angres & Jorge Salazar, The Federal Budget in 2018, Congressional Budget

Office June 2019), https:/Awww.cbo.gov/system/files/2019-06/55342-2018-budvet.pdf.

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No. 18-41067

extrapolate that overpayment rate to a larger number of similar claims. 42

U.S.C. § 1395ddd(f)(3)(A).

An audit of Palm Valley Health Care, a home health care provider,

revealed that a significant percentage of the sampled claims did not meet

Medicare coverage requirements. Extrapolating that overpayment rate to all

claims paid over the relevant time period resulted in a repayment demand of

more than $12 million. Palm Valley brings constitutional, statutory, and

evidentiary challenges to that decision. Finding no error, we AFFIRM.

I.

The Department of Health and Human Services (HHS), acting through

a Medicare contractor, audited claims Palm Valley submitted between July 1,

2006, and January 31, 2009. Palm Valley was selected for review because it

had submitted an unusually large number of claims involving five or more

consecutive home health care episodes. An episode is sixty days long and the

typical claim involves two consecutive episodes. During the audit period, Palm

Valley submitted 10,699 Medicare claims.

Out of those thousands, the contractor sampled 54 and concluded that

29 of them provided services to beneficiaries who were not eligible for home

health care. Medicare will cover home health services if the beneficiary is

homebound, under the care of a physician, in need of skilled services, and

under a plan of care. 42 C.F.R. § 409.42. Based on interviews of beneficiaries

and their friends and families, as well as a review of medical records, the

contractor concluded that the 29 beneficiaries either were not homebound or

did not need skilled care.2 As a general matter, an individual is homebound if

she has a condition restricting her ability to leave home without assistance. 42

U.S.C. § 1395f(a). The overpayment for those 29 claims was $81,681.03.

2 Palm Valley does not appeal the agency’s determinations that various beneficiaries

did not need skilled care.

2

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No. 18-41067

Extrapolation turned that figure into a total repayment demand of

$12,589,185.

Palm Valley sought review of the overpayment finding. It argued that

the beneficiaries qualified as homebound and thus were eligible for home

health services. It also challenged the sample the auditor used and the

extrapolation methodology used to reach the $12 million repayment figure.

Notably, however, Palm Valley did not press a defense Medicare allows for a

provider that “did not know, and could not reasonably have been expected to

know” that it was receiving overpayments.? 42 U.S.C. § 1395pp(a)(2); see also

Caring Hearts Pers. Home Servs. v. Burwell, 824 F.3d 968, 970 (10th Cir. 2016)

(Gorsuch, J.) (calling this “[a] sort of good faith affirmative defense”).

For the arguments Palm Valley was asserting, it had many opportunities

to make them. Administrative review of overpayment decisions has several

stages. The first allows a provider to seek a redetermination from the auditor.

42 U.S.C. § 1395ff(a)(3)(A). The auditor must complete its redetermination

within 60 days. Id. § 1395ff(a)(3)(C)Gi). If the redetermination is unfavorable,

the provider may then seek reconsideration from a qualified independent

contractor, which likewise has a 60-day deadline. Jd. § 1895ff(c)(3)(B)(@),

(c)(3)(C)G). The next step is an appeal to an administrative law judge (ALJ),

who holds a hearing and reviews the overpayment finding de novo. See id. §

1395ff(d)(1)(A). The ALJ must render a decision within 90 days. Jd. An

unfavorable ALJ decision may be appealed to the Medicare Appeals Council,

which also faces a 90-day deadline. Id. § 1395ff(d)(2)(A). If the provider fails

3 In response to questioning at oral argument about the overpayment scheme, the

government noted the availability of this defense and Palm Valley’s failure to raise it before

the Appeals Council. That led Palm Vailey to file a postargument motion for leave to file a

supplemental brief on its interpretation of yet another statute (42 U.S.C. § 1395gg) that it

did not invoke before the Appeals Council. That motion is denied.

3

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No. 18-41067

at this fourth and final stage of administrative review, it may seek review in

federal district court. Id. § 1395ff(b)(1)(A).

Although each stage of administrative review has a statutory deadline,

HHS routinely fails to meet those dates. From start to finish, the average

appeal takes about five years, far in excess of the statute’s approximately one

year. Maxmed Healthcare, Inc. v. Price, 860 F.3d 335, 344—45 (5th Cir. 2017).

The statute recognizes that the agency may not meet the deadlines. If HHS

fails to meet the review deadline at any stage, a provider may escalate its

appeal and immediately jump to the next stage of review. 42 U.S.C.

§§ 1395 ff(c)(3)(C) (a), (d)(3)(A)-B).

Palm Valley appealed through the entire administrative process. At the

redetermination stage, the contractor determined that one partial denial

among the 29 was in error. At the reconsideration stage, the independent

contractor found that Medicare did not cover the claims for 29 beneficiaries.

The ALJ subsequently reviewed the overpayment determinations and

concluded that 27 claims in the sample of 54 should not have been paid. The

Medicare Appeals Council mostly affirmed the ALJ’s decision, but concluded

that the claims for two beneficiaries previously found to be uncovered were

eligible claims. Full administrative review thus reduced the number of

ineligible claims from 29 to 25, shaving a meaningful amount off the $12

million that Palm Valley originally owed.

Consistent with recent practice, the ALJ and Medicare Appeals Council

issued their decisions roughly one-and-a-half years and three years after Palm

Valley sought their review. Although HHS did not come close to meeting either

90-day deadline, Palm Valley did not escalate its appeal.

Palm Valley finally sought review in district court. The court affirmed

the decision of the Medicare Appeals Council.

App. 4

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No. 18-41067

II.

Palm Valley argues that HHS violated due process by failing to meet the

statutory deadlines at each stage of the administrative process. We have

difficulty seeing how Palm Valley was denied due process.

Due process typically requires “some form of hearing . . . before an

individual is finally deprived of a property interest.” Matthews v. Eldridge,

424 U.S. 319, 333 (1976). Palm Valley received a hearing before it had to give

any money back to Medicare. Its argument is essentially that it had too many

hearings—really too many appeals of a hearing—and that they took too long.

It does not cite any Supreme Court or circuit level authority finding a due

process violation for delays occurring during an administrative appeals

process.‘ And violation of a statutory deadline does not automatically mean a

lack of due process; the Constitution, not statutes, determine the minimum

procedures that due process requires. See Cleveland Bd. of Educ. v.

Loudermill, 470 U.S. 532, 538, 538-39, 542 (1985) (recognizing that state

statute created a property interest but applying Matthews’ balancing test to

determine what level of process the Due Process Clause required).

Even assuming the possibility of a due process violation arising from

prolonged appeals of a hearing, Palm Valley failed to take advantage of the

statutory escalation procedure that would have allowed it to expedite the

process. Nor did it seek a federal court injunction to try and prevent

recoupment. See Family Rehab., Inc. v. Azar, 886 F.3d 496 (5th Cir. 2018).

One problem with allowing this after-the-fact complaint about delay is that it

lets the provider have it both ways. Palm Valley took advantage of every

4 It relies on American Hospital Association v. Burwell, 812 F.3d 183 (D.C. Cir. 2016),

but that case does not address due process. If anything, it shows that Medicare providers

may have another option when facing violations of the statutory deadline: mandamus relief.

Id. at 132-34.

5

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opportunity it had to undo the overpayment finding, and it took some bites out

of the apple with partial success on some appeals. Only now, after going

through every appeal, does it challenge the delay. Contrast id. (involving

provider that brought action in district court once recoupment began because

it faced a three-year delay before an ALJ).

The timing of Palm Valley’s due process challenge also means it cannot

show the substantial prejudice that is necessary for a due process claim to

succeed. United States v. Lober, 630 F.2d 335, 337-38 (5th Cir. 1980) (per

curiam). Palm Valley does not brief any theory of substantial prejudice, and

none is apparent from the record. The roughly four-year delay did not affect

HHS’s ability to evaluate Palm Valley’s claims, as the evidence that the agency

drew on at each stage existed when Palm Valley first requested

redetermination. Nor did the delay cause financial harm to Palm Valley.

During the slow appeals process, HHS was not engaging in recoupment, the

process by which Medicare holds back payments on new claims to cover

overpayment findings that are still being appealed and thus may be

overturned. Contrast Family Rehab., 886 F.3d at 503 (holding that a district

court had subject matter jurisdiction to consider a due process claim that a

plaintiff subject to recoupment brought). In other words, HHS did not seek to

recover any overpayment until the end of the appeals process. And as we have

noted, Palm Valley preferred repeated review—with each level providing a new

opportunity to succeed—to expeditious resolution of its claims. That choice to

pursue each level of review shows that Palm Valley saw some benefit from

pursuing multiple appeals despite the known delay each phase caused. Palm

Valley has not established substantial prejudice from the delay.

The district court correctly rejected the due process claim.

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III.

Turning from the process of the agency review to its substance, we

consider Palm Valley’s argument that the ALJ and Medicare Appeals Council

applied the wrong definition of “homebound.” An individual is homebound if

he or she “has a condition. . . that restricts the ability of the individual to

leave his or her home except with the assistance of another individual or the

aid of a supportive device. . . or if the individual has a condition such that

leaving his or her home is medically contraindicated.” 42 U.S.C. § 1395f(a).

The statute further explains that “[w]hile an individual does not have to be

bedridden to be considered ‘confined to his home,’ the condition of the

individual should be such that there exists a normal inability to leave home

and that leaving home requires a considerable and taxing effort by the

individual.” Id. The ALJ and Medicare Appeals Council, citing the statute as

well as Medicare Program Integrity Manuals, stated in their reviews that a

homebound person must have a normal inability to leave home and leaving

home must “require[] a considerable and taxing effort.”

Palm Valley argues this was too demanding a standard. It argues that

for an individual to qualify as homebound, the condition of the person

“should”’—but not must—‘be such that there exists a normal inability to leave

home and that leaving home requires a considerable and taxing effort by the

individual.” 42 U.S.C. § 1395f(a); see also Caring Hearts, 824 F.3d at 973

(recognizing that “should” indicates a normal inability to leave home without

a taxing effort is a useful, but not dispositive, test for homebound status).5

Under Palm Valley’s reading of section 1395f(a), whether an individual

actually left home is largely irrelevant, as the inquiry must turn on whether

5 Palm Valley repeatedly analogizes this case to Caring Hearts, 824 F.3d at 970-71.

It does not mention that Caring Hearts decided whether the section 1395pp good-faith

defense, which Palm Valley did not assert, applied.

7

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the beneficiary has a condition restricting his or her ability to leave home

without assistance.

But Palm Valley raised this argument for the first time in the district

court. A federal court reviewing an agency determination will not ordinarily

consider arguments that a litigant could have raised before the agency but

chose not to. Gulf Restoration Network v. Salazar, 683 F.3d 158, 174—75 (5th

Cir. 2012). HHS limits the Medicare Appeals Council’s review to objections a

represented party asserts challenging the ALJ’s ruling. 42 C.F.R. §

405.1112(c). The regulation tells a party that it must inform the Appeals

Council if it believes the ALdJ’s ruling “is inconsistent with a statute,

regulation, CMS ruling, or other authority.” Id. § 405.1112(b). That covers the

“homebound” argument Palm Valley raises now but did not mention before the

Appeals Council. To allow Palm Valley to litigate an issue in federal court that

it did not present to the Appeals Council would inappropriately “bypass[]” the

agency’s internal requirement.® Sims v. Apfel, 530 U.S. 103, 108 (2000); see

also, e.g., Medwin Family Med. & Rehab., P.L.L.C. v. Burwell, 2017 WL

685696, at *17 (Jan. 31, 2017 S.D. Tex. 2017) (declining to consider issues not

raised before the Medicare Appeals Council). A failure to dispute the governing

legal standard before the agency is especially problematic given that the issue

permeates the review process. Raising the “must” versus “should” issue before

8 When a court decides whether to impose an “issue-exhaustion requirement even in

the absence of a statute or regulation,” it considers how much the administrative proceeding

resembles “normal adversarial litigation.” Sims v. Apfel, 530 U.S. 108, 108-09 (2000).

Because there is a regulation requiring parties to identify specific ALJ errors before the

Appeals Council, id. at 108, we need not decide whether the Medicare overpayment appeals

process is sufficiently adversarial to require exhaustion. See, e.g., id.; Vermont Dept. of Pub.

Serv. uv. United States, 684 F.3d 149, 157-58 (D.C. Cir. 2012) (applying exhaustion

requirement, without assessing whether the administrative process qualified as

“adversarial,” because regulation required exhaustion in agency proceedings); Wolfe v.

Barnhart, 446 F.3d 1096, 1103 n.5 (10th Cir. 2006) (summarizing Sims as recognizing that

“exhaustion is generally required in review of adversarial administrative proceedings or

where exhaustion is mandated by agency regulation”).

8

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the agency would have allowed it to determine whether there is any practical

daylight between those standards on these facts, something that is far from

apparent. While judicial review of agency decisions plays an important role in

correcting agency errors, it does not allow an inefficient redo based on

arguments never presented to the agency the first time around. Because Palm

Valley failed to exhaust its challenge to the “homebound” standard, we cannot

consider the question.

IV.

We next consider Palm Valley’s argument that HHS lacked substantial

evidence for its finding that 25 beneficiaries were not homebound. Substantial

evidence’ supports a finding that a patient is not homebound if “more than a

mere scintilla” of evidence support the determination. Salmond v. Berryhill,

892 F.3d 812, 817 (5th Cir. 2018) (quotation omitted).

That low evidentiary bar was met. The main thrust of Palm Valley’s

evidentiary challenge is that the Medicare Appeals Council and ALJ relied too

heavily on interviews of individuals (including the beneficiaries themselves),

who indicated the beneficiaries were not homebound. That testimony was

unreliable, Palm Valley argues, because a significant amount of time,

sometimes several years, had passed between the claims and the interviews.

As a general matter, Palm Valley is right that memories often fade over

time. Basic principles of our legal system, like statutes of limitations and the

right to a speedy trial, reflect that view. But the fact that passage of time may

be grounds for impeaching testimony does not render that testimony

7 We apply the substantial evidence standard rather than the Administrative

Procedures Act’s arbitrary and capricious standard because the parties agree that the former

applies. We thus do not resolve which applies. Cf. Baylor Cty. Hosp. Dist. v. Price, 850 F.3d

257, 261 (5th Cir. 2017) (‘assum[ing] only for the sake of argument that the APA’s arbitrary

and capricious standard applie[d]” and noting that “it probably ma[de] no difference” which

deferential standard applied on review of Medicare’s refusal to designate a hospital as a

“critical access hospital”).

9

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irrelevant. This is the difference evidence law recognizes between relevancy

and probative value. Compare FED. R. EVID. 401 (evidence is relevant if it

makes a fact any more or less probable), with FED. R. EVID. 408 (excluding

evidence if its tendency to make a fact more or less likely is too small relative

to the costs of presenting it to the jury). Passage of time goes to the latter, not

the former. Because even dated firsthand or eyewitness testimony about a

beneficiary's health makes it more or less likely that the beneficiary was

homebound, the interviews were undoubtedly relevant. In terms of probative

value, as with impeachment evidence generally, the factfinder decides how

much the passage of time undermines the credibility of testimony, if at all.

Many considerations—including the level of detail the witness provides, the

number of times the witness observed the beneficiary, and whether there is

corroboration in the form of other witnesses or documents—will impact the

reliability of the testimony.

The Appeals Council considered these factors when evaluating the

interviews as part of its claim-by-claim review of the homebound question.

Take, for instance, beneficiary R.L. The Council’s determination that R.L. was

not homebound relied in part on an interview with R.L.’s daughter two years

after the dates of service. R.L.’s daughter described how two years earlier R.L.

was able to drive to the barbershop and to visit his daughters. Also consider

beneficiary F.D. Interviews with F.D. and a staff member in the building

where F.D. lived revealed that F.D. was alert and frequently traveled outside

the home, without assistance, for activities like shopping and visiting friends.

For both these claimants, contemporary records corroborated the testimony.

Clinical records demonstrated that R.L.’s medication changes could be

managed without skilled care at home and that his diagnoses were unlikely to

leave him confined to home. And Palm Valley’s records showed multiple days

when it had sent someone to F.D.’s residence, but the patient was not home.

10

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Palm Valley’s critique of the interviews is unavailing given the

deferential standard of review. The Appeals Council carefully evaluated the

evidence on each claim in an 86-page opinion. Substantial evidence supports

HHS’s determination that many beneficiaries were not homebound.

V.

The agency finding we have just upheld—that 25 claims were not eligible

for payment because the patients were not homebound—does not on its own

cause Palm Valley much financial harm. But the extrapolation of that

overpayment rate to Palm Valley’s more than 10,000 claims does. It thus is

not surprising that Palm Valley also challenges that statistical analysis.

As we noted at the outset, HHS may use statistical extrapolation to

determine overpayment amounts when the Secretary determines that “there

is a sustained or high level of payment error.” 42 U.S.C. § 1895ddd(f)(8)(A); see

also Maxmed, 860 F.3d at 344-45. The threshold determination that there are

“sustained or high levels of payment errors” is not reviewable. 42 U.S.C.

§ 1395ddd(f)(3).

Palm Valley thus challenges not whether it was appropriate to use

sampling and extrapolation, but the statistical methods the agency uses when

performing those tasks. It contends that the methodology does not pass muster

under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993),

because it has not been peer reviewed or generally accepted in the relevant

scientific community. Daubert, however, does not apply in agency proceedings.

See Natl Taxpayers Union v. U.S. Soc. Sec. Admin., 302 F. App’x. 115, 121 (3d

Cir. 2008); Bayliss v. Barnhart, 427 F.3d 1211, 1218 n.4 (9th Cir. 2005); Niam

v. Ashcroft, 354 F.3d 652, 660 (7th Cir. 2004). It interprets Federal Rule of

Evidence 702, and the federal rules of evidence do not govern agencies. Niam,

354 F.3d at 660; see also 42 U.S.C. § 405(b)(1) (allowing evidence to be received

in Social Security hearings “even though inadmissible under rules of evidence

11

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to court procedure”). What is more, the procedural “gatekeeping” aspects of

Daubert, aimed as they are at preventing the jury from being tainted by

unreliable evidence, do not translate to agency proceedings for the same reason

they do not fully translate to bench trials: in reaching a decision, a judge will

only rely on evidence the judge deems reliable. See Whitehouse Hotel Lid.

P’ship v. Comm’r, 615 F.3d 321, 330 (5th Cir. 2010) (recognizing that we have

“noted that the importance of the trial court’s gatekeeper role is significantly

diminished in bench trials . . . because, there being no jury, there is no risk of

tainting the trial by exposing a jury to unreliable evidence” (citing Gibbs v.

Gibbs, 210 F.3d 491, 500 (5th Cir. 2000)). Whether a judge’s reliability finding

was correct will be tied up in the substantive review of the decision. That is

why some courts recognize that the substantive aspect of Daubert, with its

focus on reliability, is practically speaking already part of substantive review

of agency decisions. See Donahue v. Barnhart, 279 F.3d 441 (7th Cir. 2002)

(explaining that Daubert’s “idea that experts should use reliable methods . . .

plays a role in the administrative process because every decision must be

supported by substantial evidence”).

In looking at the extrapolation from that substantive standpoint, we see

no reversible error. The methodology that the agency employed resulted in a

random sample of 54 of the 10,699 claims, the audit of which provided an

unbiased estimate of the actual average overpayment for all 10,699 claims. See

MEDICARE PROGRAM INTEGRITY MANUAL § 8.4.1.3. Palm Valley’s own expert

testified that the sample was a valid probability sample and that the agency

applied the correct formulas to extrapolate an aggregate overpayment amount

from that sample.

Palm Valley argues that the sample was too imprecise—or more simply,

that the Medicare contractor did not use a large enough sample. But as the

Medicare Appeals Council recognized, demanding a larger sample to

12

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marginally increase the precision of an estimate “ignore[s] real world

constraints imposed by conflicting demands on limited public funds,

constraints which CMS chose to incorporate into the statistical sampling

guidelines.” The extrapolation methodology may be imperfect, but it is the

product of a complex balance of interests. At a minimum, it constitutes

substantial evidence in support of the agency’s decision. Cf. Maxmed, 860 F.3d

at 343 (“Congress clearly envisioned extrapolation in overpayment

determinations involving home health agencies like [the plaintiff], and the

Secretary’s reliance on extrapolation as a tool was justified.”). If anything, the

extrapolation methodology is provider friendly. The extrapolation does not

assume that the average overpayment in the random sample occurred for the

universe of claims. Rather, the agency assumes that the average overpayment

for all claims is equal to a number that there is a 90% chance is smaller than

the actual overpayment. See MEDICARE PROGRAM INTEGRITY MANUAL § 8.4.5.1

(explaining that the agency uses the lower limit of a 90% confidence interval

as its overpayment estimate). That means that there is a 90% probability that

the amount that Palm Valley was overpaid is greater than the approximately

$12 million that the contractor initially calculated. See id. (“[I]t yields a

demand amount for recovery that is very likely less than the true amount of

overpayment ... .”); see also JAN KMENTA, ELEMENTS OF ECONOMETRICS

188-89 (2d ed. 1997) (demonstrating the properties of confidence intervals).

We see no error in the extrapolation.

* * *

The judgment is AFFIRMED.

13

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Case: 18-41067 Document: 00515336683 Page:1 Date Filed: 03/09/2020

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT United States Court of Appeals

FILED

January 15, 2020

Lyle W. Cayce

Clerk

No. 18-41067

D.C. Docket No. 7:15-CV-331

PALM VALLEY HEALTH CARE, INCORPORATED,

Plaintiff - Appellant

v.

ALEX M. AZAR, II, SECRETARY, U.S. DEPARTMENT OF HEALTH AND

HUMAN SERVICES; PALMETTO GBA, L.L.C.,

Defendants - Appellees

Appeal from the United States District Court for the

Southern District of Texas

Before OWEN, Chief Judge, and HAYNES and COSTA, Circuit Judges.

JUDGMENT

This cause was considered on the record on appeal and was argued by

counsel.

It is ordered and adjudged that the judgment of the District Court is

affirmed.

IT IS FURTHER ORDERED that appellant pay to appellees the costs on

appeal to be taxed by the Clerk of this Court.

Certified as a true copy and issued

as the mandate on Mar 09, 2020

Attest: re

W. Cou

Appcidk, U.S. ue | of Appea’s, Fifth Circuit

Case 7:15-cv-00331 Document 50 Filed in TXSD on 09/28/18 Page 1 of 24

United States District Court

Southern District of Texas

. ENTERED

UNITED STATES DISTRICT COURT September 28, 2018

SOUTHERN DISTRICT OF TEXAS David J. Bradley, Clerk

MCALLEN DIVISION

PALM VALLEY HEALTH CARE, INC., §

§

Plaintiff, §

VS. § CIVIL ACTION NO. 7:15-CV-331

§

SYLVIA MATHEWS BURWELL, etal, §

§

Defendants. §

ORDER

Now before the Court are Plaintiff Palm Valley Health Care, Inc.’s (“Palm Valley”)

Amended Motion for Summary Judgment (Dkt. No. 47) and Defendants Eric. D. Hargan’s,

Acting Secretary of the Department of Health and Human Services (“Defendant HHS”), and

Medicare Administrative Contractor Palmetto GBA, L.L.C.’s (“Defendant Palmetto”)

(collectively, the “Defendants”) Cross-Motion for Summary Judgment and Response to

Plaintiff's Amended Motion for Summary Judgment (Dkt. No. 48).

After considering the Motions, the responsive pleadings, (Dkt. Nos. 47-49), and the

applicable law, the Court hereby ORDERS that Palm Valley’s Motion for Summary Judgment

(Dkt. No. 47) be DENIED and Defendants’ Cross-Motion for Summary Judgment (Dkt. No. 48)

be GRANTED.

I. JURISDICTION

A United States district court has jurisdiction to review a final decision of the Secretary

of the Department of Health and Human Services pursuant to 42 U.S.C. § 405(g). An individual

(or provider) may bring an action for judicial review of such a final decision and the Court may

enter a judgment affirming, modifying, or reversing the decision, and review whether the

1/24

App. 15

Case 7:15-cv-00331 Document 50 Filed in TXSD on 09/28/18 Page 2 of 24

findings of the Secretary are supported by substantial evidence. Jd. Because Palm Valley has

exhausted its administrative remedies regarding the decision of the Secretary, the Court finds that

it has jurisdiction to adjudicate this dispute.

Il. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff Palm Valley — a medical service provider certified to participate in Medicare —

submits claims for coverage of the home health services it provides for qualifying individuals.

(Dkt. No. 47, p.3); see also 42 U.S.C. § 1395f; 42 C.F.R § 409.40, ef seg. Palm Valley

submitted claims for the home health services provided from July 1, 2006 through January 31,

2009, which Defendant Palmetto, a Medicare administrative contractor, initially paid. (Dkt. No.

48, p. 7). Later, however, Health Integrity L.L.C., the Zone Program Integrity Contractor

(“ZPIC”), reopened Palm Valley’s claims. Jd ZPIC allegedly chose Palm Valley for postpayment review based on “an unusually high number of claims involving five plus consecutive

home health periods during a specified period.” Jd.

ZPIC reviewed 54 of Palm Valley’s 10,699 claims from the mentioned time period and

determined that a total of 29 claims should have been denied because the beneficiary was either

not homebound or did not have a qualifying skilled need. (Dkt. No. 47, p. 3). Based on this

sample, the ZPIC calculated an actual overpayment of $81,681.03. Jd. Because Defendant HHS

determined that 29 of the 54 claims should have been denied, Defendant HHS determined that

the rate of error was 54%. (Dkt. No. 48, p. 7). Extrapolating this 54% error rate to the universe,

based on the lower limit of the one-sided 90 percent confidence interval, Defendant HHS

calculated a total overpayment of $12,589,185.00. Jd. Defendant Palmetto formally notified

Palm Valley of the $12,589,185.00 Medicare overpayment on March 19, 2010 and Palm Valley

pursued an administrative appeal of the overpayment determination through the four-stage

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administrative process. (Dkt. No. 47, p. 1). Ultimately, however, the Medicare Appeals Council

(the “Council”) upheld the Secretary’s determination of overpayment and issued a final agency

decision, after which Palm Valley sought judicial review from this Court. (Dkt. No. 48, p. 13).

Palm Valley moves for summary judgment claiming that the Council’s decision “is

arbitrary and capricious, contrary to constitutional right, in excess of statutory authority, without

observance of procedure, and unsupported by substantial evidence.” (Dkt. No. 47, pp. 2, 26).

Defendant HHS, in turn, asks the Court to uphold the Council’s decision and underscores that the

scope of this Court’s review is narrowly limited to (1) whether there is substantial evidence in

the record to support the Council’s decision, and (2) whether the Council applied the proper legal

standards in reaching its decision. (Dkt. No. 48, p. 2). Defendant HHS contends that, because the

Council issued a meticulous and well-reasoned decision supported by ample and substantial

evidence under the applicable law, the Court should affirm the Council’s decision as a matter of

law. (Dkt. No. 1, Exh. 1 — ADMINISTRATIVE RECORD). The Court considers the parties’

arguments below.

Il. OVERVIEW OF THE APPLICABLE LAW

A. Summary Judgment Standard of Review

A district court must grant summary judgment when there is no genuine dispute as to any

material fact and the moving party is entitled to judgment as a matter of law. FED. R. CIv. P.

56(a); see also Rogers v. Bromac Title Servs., L.L.C., 755 F.3d 347, 350 (Sth Cir. 2014)

(Summary judgment is proper “if the movant shows that there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter of law.”). A fact is material if it

might affect the outcome of the lawsuit under the governing law and is genuinely in dispute only

if a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby,

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Inc., 477 U.S. 242, 248 (1986). A party moving for summary judgment has the initial

responsibility of informing the court of the basis for its motion and identifying those portions of

the pleadings and materials in the record, if any, which it believes demonstrate the absence of a

genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); FED. R. CIv.

P. 56(a), (c).

Once the moving party carries its burden, the burden shifts to the nonmovant to go

beyond the pleadings and provide specific facts showing the existence of a genuine issue for

trial. Celotex, 477 U.S. at 324; FED. R. Civ. P. 56(c). In conducting its review of the summary

judgment record, the court “may not make credibility determinations or weigh the evidence” and

must resolve doubts and reasonable inferences regarding the facts in favor of the nonmoving

party. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477 U.S.

at 255; Dean v. City of Shreveport, 438 F.3d 448, 454 (Sth Cir. 2006). The nonmovant, however,

cannot satisfy its burden with “conclusory allegations, speculation, and unsubstantiated

assertions which are either entirely unsupported, or supported by a mere scintilla of evidence.”

Chaney v. Dreyfus Serv. Corp., 595 F.3d 219, 229 (5th Cir. 2010); see also Brown v. City of

Houston, 337 F.3d 539, 541 (5th Cir. 2003) (“Unsubstantiated assertions, improbable inferences,

and unsupported speculation are not sufficient to defeat a motion for summary judgment.”).

B. Judicial Review of an Administrative Decision

Palm Valley contends that the standard of review should be under the Administrative

Procedure Act’s ‘arbitrary and capricious’ standard.’ However, Defendants argue that the

appropriate standard is found at 42 U.S.C. § 405(g): “(1) whether the [Secretary] applied the

proper legal standards; and (2) whether the [Secretary’s] decision is supported by substantial

' The test under the Administrative Procedures Act is whether the Secretary’s decision is “arbitrary, capricious, an

abuse of discretion, or otherwise not in accordance with law.” Maxmed Healthcare Inc. v. Price, 860 F.3d 335, 340

(5th Cir. 2017) (citing 5 U.S.C. § 706(2)(A), (E)).

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evidence on the record as a whole.” Estate of Morris v. Shalala, 207 F.3d 744, 745 (th Cir.

2000). The Court of Appeals for the Fifth Circuit recently addressed the same debate between a

medical services provider and CMS and “assume[d] only for the sake of argument that the

APA’s arbitrary and capricious standard applies.” Baylor Cty. Hosp. Dist. v. Price, 850 F.3d 257,

261 (Sth Cir. 2017). This assumption was adopted by the Fifth Circuit again in Maxmed

Healthcare Inc. v. Price, reasoning that the application of either test “probably makes no

difference.” 860 F.3d 335, 340 (Sth Cir. 2017). This Court will follow the lead of the Fifth

Circuit and apply the standard promulgated by the APA.

The Fifth Circuit defined “substantial evidence” in this context to mean “such relevant

evidence as a reasonable mind might accept as adequate to support a conclusion.” Steere Tank

Lines, Inc. v. Interstate Commerce Comm’n, 687 F.2d 104, 105 (Sth Cir. 1982) (cleaned up).

Substantial evidence is something more than a scintilla but less than a preponderance. New

Thoughts Finishing Co. v. Chilton, 118 F.3d 1028, 1030 (5th Cir. 1997). Defendant HHS is an

“agency” within the meaning of the APA scope of review and thus, Defendant HHS’s factual

findings are governed by the deferential APA standard. Defendant HHS’s legal conclusions,

however, are reviewed de novo. Rain & Hail Ins. Service, Inc. v. Federal Crop Ins. Corp., 229

F.Supp.2d 710, 717 (S.D. Tex. 2002).

The Secretary of the Department of Health and Human Services is charged with the

primary responsibility for interpreting the reimbursement provisions of the Medicare Act.

Girling Health Care v. Shalala, 85 F.3d 211, 215 (5th Cir. 1996). Accordingly, this Court must

give substantial deference to an agency’s interpretation of its own regulations. Jd.

IV. PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

Plaintiff Palm Valley filed the instant Amended Motion for Summary Judgment and

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briefs five separate reasons that it believes should cause the Court to grant summary judgment in

its favor. The Court will address each of these causes in the order in which they are presented.

A. Defendant HHS Did Not Err in Affirming the Denials of Sampled

Medicare Claims.

Plaintiff first contends that Defendant HHS erred in affirming the denials of sampled

Medicare claims because: (1) the denial decisions heavily relied on “interviews conducted by the

Medicare contractor in assessing the functional abilities of beneficiaries”; (2) the wrong

qualification test to determine homebound status was applied, leading to improper denials; and

(3) the wrong qualification test to determine medical necessity was applied, also leading to

improper denials.

i. Denials on the Basis of Interviews

Palm Valley claims that the determination of the Secretary unfairly relied on “biased”

interviews conducted by the contractor to assess homebound and medical necessity statuses.

(Dkt. No. 47, p. 10). Palm Valley states that the interviews were unfair because they were

conducted after a significant amount of time had passed since the services had been rendered. Id.

Palm Valley also states that the medical records prepared by registered nurses would be more

reliable evidence to assess patients’ statuses and should have been given more weight. /d. at 11.

Lastly, Palm Valley states that the “government usurps the physician’s role and medical

judgment in determining that Palm Valley was not entitled to payment” due to their incorrect

determinations of homebound and medical necessity status. Jd.

There are two purposes of the investigation into Palm Valley’s Medicare claims. First,

after detecting unusual claims activity from a provider, a review is necessary to ensure that the

provider is not overcharging the government by submitting false claims; and second, to ascertain

the extent of any overpayment on already-paid claims. With that in mind, the Court sees no

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reason to weigh the medical records of a provider under review any more strongly than an

interview of the beneficiary for which the claim was made. In fact, one may doubt the legitimacy

of the medical records as they may, given the nature of the investigation, reflect untrue

representations of the current conditions of the patient. A natural defense to the possibility of

unrepresentative medical records is to acquire direct evidence. In this case, the court concludes

that reasonable minds would find that interviews and home visits to verify the accuracy of the

claims filed on their behalf are legitimate methods to conduct such a review and, therefore,

relevant evidence.

The Court agrees with Defendant HHS that the Council considered Palm Valley’s

argument that the interviews were unreliable. (Dkt. No. 48, p. 31). For example, the Council

noted that Health Integrity investigators inquired as to the beneficiary’s status during the dates of

the service.” Additionally, the Council stated that family members were often present to

corroborate the beneficiary’s status during the dates of service.* In reaching its decision, the

Council reviewed the administrative record for each beneficiary which “generally included

individual claim folders from the initial certification period (start of care), the certification period

immediately before the home health episode at issue, the home health episode at issue (dates of

service), as well as an additional unmarked folder which contain[ed] various procedural and

clinical documentation, including the Beneficiary Interview” (referred to as the “BI’). (A.R. at

35).

The Council did not rely solely on the Bls, but also on medical records, physician notes,

* See, e.g., (A.R. at 39, observing that the highlighted instructions on interview form state: “NOTE: Questions

should be asked in relation to the period of review.”).

3 See, e.g, (A.R. at 55, interview of R.L.’s daughter; A.R. at 60, noting that son and daughter-in-law of R.M. agreed

with responses to questions).

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and corroborating witness statements.’ For example, with regard to M.A., “the appellant’s

contentions...[were] the most extensive in the request for review” and the Council reviewed this

folder, noting that two of M.A.’s home health certifications for the period April 21, 2006,

through June 19, 2006, were neither signed nor dated by the attending physician. (A.R. at 36-37).

The Council further noted that M.A.’s visit note reports for this period were “almost all computer

generated” and “substantially similar.” Jd. at 37, 39. In addition, the Council detected similar

problems with other certifications of home health services and visit notes for M.A. Jd. at 38. For

instance, one set of M.A.’s records contained “a handwritten signature of the ordering physician

on the first page which [differed] from the physician’s signature” on the other pages and

“[differed] from the handwritten date next to the signature.” Jd. at 39.

With respect to M.B., the Council observed that M.B.’s own physical therapist noted that

during the dates of service M.B. “was independent or required minimal assistance” and there was

“nothing in the gait analysis which [indicated] that the beneficiary was unable to leave the

home.” (A.R. at 42). Although M.B.’s BI “[indicated] that the interviewers found that [M.B.]

was not at home [at the time of the attempted interview] but was ‘playing bingo’ in a day care

center,” the Council only partially relied on this information in determining that M.B. was not

homebound in light of the physical therapist’s notes. Jd.

Likewise, the Council referred to medical records detailing M.C.’s ability to ambulate to

clinics several times without a device and his ability to “[exercise] on a recumbent bicycle, [do]

static pushups, and [perform] wall slide and wall pulley therapeutic exercises with a total

exercise time of approximately one hour each session” during the period he was considered

homebound. (A.R. at 45-46). Further, the Council noted that F.M.2’s Admission OASIS form,

* See, e.g., (A.R. at 82, “the contractor interviewed both the 61-year-old beneficiary and her daughter”) (emph.

added).

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dated four months before the dates of service, “[indicated] that the beneficiary lived alone,

received the assistance of family and paid caregivers multiple times daily, her cardiovascular and

respiratory systems were within normal limits, she transferred with minimal assistance or with

the use of an assistive device, she could go shopping with assistance, and she was alert, oriented

to person and place.” Jd. at 57. As a result, the Council considered that Palm Valley could not

show that “‘it required a considerable and taxing effort for [F.M.2] to leave her home.” /d. at 58.

Similarly, the Council noted that M.P.’s records indicated that M.P. “received [physical

therapy] services, which included 15 minutes on a manual pedlar [sic] exerciser and ambulating

more than 1,000 feet without an assistive device, but with stand-by assistance.” (A.R. at 62).

Documentation demonstrated that M.P. “was discharged from [physical therapy] ambulating 300

feet independently, and also independent with a home exercise program...approximately three

months prior to the dates of service.” Jd. Thus, the Council only partially relied on M.P.’s BI—

which states that M.P. had previously “left for Mexico, and the family did not know when he

would return”—in determining M.P.’s homebound status. Jd.

The BIs also make clear that interviewers focused on the dates of service even if the

interview was conducted years later. For example, F.D.’s BIJ stated that “during the interview and

the dates of service...[F.D.] was able to leave home without help to go to church, shopping, the

grocery store, and to visit friends or relatives.” (A.R. at 41) (emph. added). As a result, the

Council held that “[w]hile the [interview] occurred significantly after the dates of service, the

contemporaneous clinical documentation [indicated] that the beneficiary was ambulatory and

able to participate in multiple exercises calling for balance and strength.” Jd. at 51.

Similarly, J.B.’s BI revealed that J.B “‘visited Mexico’ during the dates of service.” Id. at

43-44 (emph. added). Further, the Council noted that R.L., who was homebound at the time of

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the interview, specifically stated that he was not homebound during the dates of service—

statements corroborated by his daughter.°

P.M.’s “BI [stated] that P.M. was not homebound during the dates of service and at the

interview.” (A.R. at 58) (emph. added). “The BIJ also [indicated] that [P.M.] left her home 3-4

times weekly to go out to eat and shopping and that she took an assisted living facility bus when

doing so.” /d. The interviewer noted that P.M. “lived in an assisted living facility apartment

described as ‘very neat’ and ‘clean,’ [] filled out her own medicine box which the nurse checked

each week, [] wore an adult diaper when taking the facility bus as a precaution, [] required no

assistance toileting or transferring, and [] was able to bathe and dress herself.” Jd.

Similarly, R.M.’s BI “[stated] that [R.M.] was not homebound during the dates of

service” and that the “interviewer specifically questioned [R.M.] about the period September

2008 through November 2008.” (A.R. at 59). Upon questioning, R.M. replied that there was

“nothing medically different than now” and that he currently “left home on average 3 times

weekly, without assistance, to go out to eat, shop, and for medical care, and ‘[could] come and

go as he [pleased].’” Jd. at 60. R.M. also asserted that he “received his first walker two weeks

ago, but ‘[did not] use’” it. Jd. Further, R.M.’s “son and daughter-in-law were present at the

interview and corroborated his responses.” Id.

E.P.’s BI also “specifically [discussed] services provided at the time of the home health

episode and [was] consistent with the ALJ’s findings” because the BI stated that “‘three years

ago,’ [E.P.] did not require help bathing, toileting, transferring or ambulating, but ‘now uses a

walker.’” (A.R. at 59). Palm Valley had complained that E.P.’s “BI was completed almost three

° See (A.R. at 55, describing that in response to the question “Are/Were you able to leave your home?” R.L.

answered, “not now—2 years ago was able to drive [myself] around.”); see also (A.R. at 55, R.L.’s daughter stating

that “2 years ago [R.L.] was driving himself around—driving himself to the barber, he was able and did go by

himself.”).

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years after the dates of service, and [that] clinical records [indicated] that [E.P.] was forgetful.”

Id. The interviewer, however, spoke to E.P.’s daughter who “had lived with [E.P.]...during the

dates of service” and corroborated E.P.’s statements about his homebound status. Jd. at 60.

Likewise, B.S.’s BI “specifically [addressed] the dates of service” and B.S. “stated that

[his] condition was the same then as now, [and] he was not homebound.” (A.R. at 70).

B.S. stated that he “was able to leave home, did not require assistance in doing so, and...left

home to go to church, the grocery store, shopping, and for medical care and...also went ‘to the

ranch on a regular basis.’” /d. Further, B.S.’s “wife also stated that they shopped at Wal-Mart”

and that B.S. “drove himself around.” Jd.

M.S.2’s “BI specifically [indicated] that [M.S.2] was not homebound during the dates of

service, as well as at the time of the interview.” (A.R. at 72). The interviewer noted that M.S.2

“walked into the other room to retrieve medical information” and stated that she was able to

leave home “for the grocery store and medical care, and [that] her daughter drove her to medical

appointments.” Jd. The Council, however, ultimately determined that M.S.2 was not homebound

because “she had no cane, walker, or wheelchair” and thus there was “no taxing effort to leave

home.” Id.

Moreover, the Court does not consider the Council’s attention to the beneficiaries’

condition at the time of the interview an abuse of discretion because the record shows that the

beneficiaries’ current condition was helpful in determining the beneficiaries’ homebound status

during the dates of service. For example, although F.M.1 had been diagnosed with Alzheimer’s

and dementia, “the BI [contained] a handwritten notation indicating no Alzheimer’s and no

dementia, as stated by the beneficiary’s wife.” (A.R. at 55). The “BI [indicated] that [F.M.1] is

83 and “feels great!” /d. “The interviewer’s observations also included that [F.M.1] was alert and

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oriented, with comments ‘very alert & able to answer all questions...wife present & she drives

him everywhere.’” Jd. Further, F.M.1’s “activity level at the time of the interview was stated as

“able to walk OK” but F.M.1’s “wife assisted with bathing” although F.M.1 “needed no

assistance transferring.” Jd. Because conditions such as Alzheimer’s and dementia are

degenerative, the Council considered it telling that F.M.1 was in good condition at the time of

the interview almost two years later. Jd. at 56. The Council used this information to make its

determination and agreed with the ALJ that the BI indicated that F.M.1 was not homebound

during the dates of service. /d. This finding is clearly supported by substantial evidence on the

record.

Furthermore, the Council addressed whether certain beneficiaries would have qualified

for skilled services even if the Council had already determined that the beneficiaries were not

homebound. For example, the Council considered that J.R. was not homebound because J.R.’s

BI focused on “the dates of service” and indicated that “[J.R.] reported knee pain during each

nurse visit of level 2 intensity (on an undefined scale), which was relieved by rest and over the

counter medication Tylenol 500 mg.” (A.R. at 65). In addition, the Council also considered that

J.R. was not homebound because he was absent from the home on at least three occasions prior

to the dates of service. Jd. Based on this information, the Council determined that Palm Valley

had not shown that “it required a considerable and taxing effort to leave home.” (A.R. at 65).

Nonetheless, the Council briefed an analysis as to why J.R. also did not require the “skilled

nursing services” Palm Valley provided. Jd.

The Council underscored that “Medicare covers skilled nursing services for observation

and assessment of a patient’s changing condition when the skills of a nurse ‘are required to

identify and evaluate the patient’s need for modification of treatment or for additional medical

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procedures until his or her condition is stabilized.’” Jd. (citing 42 C.F.R. § 409.33(a)(2)).

The only documented ailments J.R. was suffering from, however, were an upper respiratory

infection, requiring a blister pack to be taken over five days, and another ailment that required a

prescription for a diuretic. (A.R. at 65). Regarding J.R.’s second claim for skilled services, the

Council found that the record contained “no laboratory documents supporting” the “weekly B-12

injections” Palm Valley was administering. Jd. at 68. Thus, the Council decided that J.R. did not

require skilled services.

Similarly, the Council considered that other “homebound” beneficiaries did not require

skilled care. For example, E.C.1 was living with “another family member” and received

“assistance from relatives, friends, or neighbors living outside the home, a person residing in the

home, and paid help.” (A.R. at 47). As a result, the Council considered that one of those people

should have been instructed on how to administer the necessary injections but found that Palm

Valley made no attempt “to instruct the beneficiary, the paid caregiver, a family member, or

anyone else to administer the daily [] injections during the dates of service or for approximately a

year and a half before that.” Jd. Accordingly, the Council considered that Palm Valley did not

meet its burden of proof of showing that the beneficiary required skilled services. Id.

The Council found the same for A.C. and noted that Palm Valley did not even challenge

the ALJ’s findings that “daily insulin injections did not constitute skilled care.” (A.R. at 48).

Moreover, the Council cited to the Medicare Benefits Manual in holding that Palm Valley failed

to show why A.C. continued to require skilled nursing observation, management, and instruction

services approximately two years after the start of care date. Jd. at 49 (citing MEDICARE

MANUAL, Ch. 7 § 40.1.2). Similarly, the Council took issue with the fact that even though

E.C.2’s physical therapist noted that E.C.2 had achieved maximum rehabilitation potential and

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was discharged from physical therapy services, E.C.2 continued to receive skilled services. (A.R.

at 50). As a result, the Council considered that these skilled services were not necessary and thus

not covered under Medicare. Jd.

In M.H.’s case, the Council noted that according to the Medicare Benefits Manual, M.H.

“did not require or receive skilled services during the dates of service” because “the

documentation [did] not support that [M.H. had] a medical condition that had stabilized or had

‘reasonable potential’” for a “complication or further acute episode.” (A.R. at 54)

(citing MEDICARE MANUAL, Ch. 7, § 40.1.2). The Council also noted that the documentation did

not “support skilled [physical therapy] services, as there [was] no expectation of material

improvement with a reasonable and generally predictable period of time.” (A.R. at 54). As a

result, the Council found that that the ALJ properly denied M.H.’s claim.

Likewise, although the Council reversed the ALJ’s “not homebound” determinations for

beneficiaries A.S. and M.S.3, the Council considered that the services provided to A.S. and

M.S.3 were not covered because the services did not meet skilled care requirements. (A.R. at

85). “Medicare covers skilled observation and assessment services, in part, when professional

skills ‘are required to identify and evaluate the patient’s need for modification of treatment or for

additional medical procedures until his or her condition is stabilized.’” (A.R. at 74) (citing 42

C.F.R. § 409.33(a)(2)). Because A.S.’s dates of service were “approximately two years after the

start of care,” the Council considered the condition changing and thus skilled nursing services

were not required to identify and evaluate treatment options. (A.R. at 74). The Council also

considered M.S.3’s condition “changing” because the dates of service were approximately three

and a half years after the start of care. Jd. at 76. In addition, the Council found that skilled

services were not required to instruct the beneficiary. /d. As a result, the Council determined that

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