For
long-term care (“LTC”) facilities in California, a recent bill known as “AB
641” is about to make the calculus of appealing citations more complicated. LTC facilities — including nursing
facilities, skilled nursing facilities, and assisted living facilities — face
the risk of citations when regulators determine that facilities have violated
state and federal statutes and regulations.
While
citations can be issued at different levels of seriousness, California Health &
Safety Code Section 1424 provides for the imposition of civil monetary
penalties for any citation, ranging from $100 for minor violations to up to $25,000
for a serious violation that proximately caused a resident death.
In
recent years, the California Department of Public Health (DPH) has been
criticized for failing to collect revenues from the citation process into the
State and Federal Health Facilities Citation Penalties Accounts. The Bureau of State Audits (“BSA”) has
identified two reasons why the accounts are not maximizing revenue capabilities. First, California law permits a 35% reduction
to the monetary penalty if paid within a specified time frame. Second, a significant amount of monetary
penalties assessed are stalled in the appeals process. According to one study, between 2003 and 2010,
facilities appealed citations totaling $15.7 million in monetary penalties, of
which $9 million were still under appeal.[1] From the regulators’ perspective, LTC facilities
have adapted to take advantage of a “glitch” in the system via the delays of
the process and the reductions of the ultimate determinations. According to the above study, on average,
over 70% of citations appealed resulted in reductions to the original amount
imposed.
To
address the problem of stalled appeals and ensure that DPH captures revenues
more effectively through the citation process, Assemblyman Mike Feuer introduced
AB 641, a bill that passed September 8, 2011, and takes effect January 1, 2012. The bill brings some significant changes to
the citation review process.
First,
AB 641 eliminates the citation review conference (“CRC”), which had previously
been an option the facility could elect in the first fifteen days. The CRC had been criticized as a source of
significant delay due to limited staffing, which led to a significant backlog. Beginning in 2012, the appeals process will be
significantly streamlined. Without the
CRC stage, when a LTC licensee is issued a citation, it has 15 days to notify DPH
of its intent to adjudicate the validity of the citation either before an
administrative law judge (ALJ) or before the Superior Court of the county in
which the LTC facility is located.
Second,
AB 641 increases penalties for Class B violations, which had been criticized as
insufficient for some violations. Currently,
a class AA violation — a determination that the violation was a direct
proximate cause of death of a patient — carries a penalty of not less than
$5,000 and not more than $25,000.[2] A Class A violation — a determination that
the violation constitutes an imminent danger or a substantial probability that
death or serious harm to patients would result — carries a penalty of not less
than $1,000 and more than $10,000. A
Class B violation — a direct or immediate relationship to the health, safety,
or security of patients, other than
class AA or A violations — carries a penalty of not less than $100 and not more
than $1,000. AB 641 increases the maximum of a class B citation from $1,000 to
$2,000.
Third,
AB 641 allows DPH not only to issue a citation pursuant to California law, but
also to refer and recommend citations for separate, additional federal civil
monetary penalties when
an incident violates both state and federal laws. This threat may be significant because it
opens up a risk of federal review and penalties that have not previously been
present.
Additionally, until AB 641 takes
effect, there exists the possibility of obtaining a miscellaneous
administrative line item reimbursement from Medi-Cal for a CRC
expenditure. However, according to a
reliable source in the Department, under the new appeals regime, such
reimbursement is unlikely to continue.
LTC
licensees should consider the impact of these changes. The repeal of the CRC is arguably the most
significant change. Many facilities had
elected to handle CRC’s without attorneys, and even those that had relied upon
legal counsel had benefited from both the backlog and the informality of the
CRC process. In the pre-AB 641 world, facilities
could give notice of their desire for a CRC, sit back and wait. After the benefit of a long delay, facilities
could then proceed to informal conferences, where, often, penalties would be dramatically
reduced in negotiated settlements, with rare dismissals of the entire citation. Assemblyman Feuer recognized not only that
the heavy backlog of citation appeals was incentivizing DPH to settle for
heavily discounted amounts, but also that the failure to apply the proper legal
standards resulted in the net effect of a low statistical dismissal rate.
Stripped
of the CRC’s, both regulators and LTC licensees will be forced to meet the
required burdens of proof based on the requirements in the Health and Safety
Code. In this more formal setting, a
citation will be more likely to receive a disposition on the merits of each
case. For example, a licensee seeking to establish the “reasonable licensee
defense” to a citation will need to meet the burden of demonstrating that the
facility did what might reasonably be expected of any LTC facility, acting
under similar circumstances, to comply with the regulation.[3]
According to reviews of appeals since
2004, this defense successfully resulted in dismissals in as few as 1.6% of all
cases brought before the Department.
Indeed,
in California Association of Health
Facilities v. Dept. of Health Services, the California Supreme Court
highlighted the limited utility of the “reasonable licensee defense” (codified
in Section 1424)[4]. The Court noted that the defense had been extended
to all three classes of citations via the 1987 amendment of the statute on a
trial basis, with a three year sunset provision. The Department determined that the defense
had a low impact: of 3,781 citations issued
by the Department in the two years after the 1987 amendment, only 85 reasonable
licensee defense claims were raised, and the Department found the defense
applicable in only seven cases — less than .25% of the total number of
citations. The defense was retained and
made into permanent law on the basis of its limited viability and resulting low
impact as demonstrated in the CRC setting.
In
the post-AB 641 environment, the “reasonable licensee defense” is likely to be
adjudicated significantly more frequently.
Facilities that contest citations with valid defenses are likely to see
a much higher success rate. Prevailing
facilities will not only avoid financial penalties, but are also likely to fare
better by improving their reputations with government regulators and through
data comparison/ratings websites. At the
same time, facilities are likely to elect simply to pay citations based on
indefensibility. In either case, AB 641
will require licensees to weigh new tactical and strategic considerations when
they receive citations.
Elliot
Zemel is a 2011 graduate of Loyola Law School and a fellow of Fenton Nelson’s
Health Law Program. Fenton Nelson represents healthcare facilities in the
citation appeal process. He can be
reached at ezemel@fentonnelson.com.
