Caring Hearts Personal Home Services, Inc. v. United States Department of Health and Human Services, Secretary of

Filing 27

MEMORANDUM AND ORDER that the Secretary's decision is affirmed. Judgment shall be entered pursuant to the fourth sentence of 42 U.S.C. § 405(g). Signed by District Judge Carlos Murguia on 8/28/14. (hw)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

CARING HEARTS PERSONAL
HOME SERVICES, INC.,
Plaintiff,
v.
KATHLEEN SEBELIUS,
Secretary of the United States Department
of Health and Human Services,
Defendant.

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Case No. 12-2700-CM

MEMORANDUM AND ORDER
Plaintiff filed this action under 42 U.S.C. §§ 405(g) and 1395ff(b)(1) seeking judicial review of
the final decision of Kathleen Sebelius, Secretary of the United States Department of Health and
Human Services (“Secretary”), which denied Medicare coverage for home health services for twentytwo Medicare beneficiaries under Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395 et seq.,
(“Medicare Act”).
I.

Medicare Overview
“Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395 et seq. (2006), establishes the

federally funded health insurance program for the aged and disabled, commonly known as Medicare.”
Via Christi Reg’l Med. Ctr., Inc. v. Leavitt, 509 F.3d 1259, 1261 (10th Cir. 2007). The Secretary
utilizes the Centers for Medicare and Medicaid Services (“CMS”), a division of the United States
Department of Health and Human Services (“HHS”) to administer the program. Under Medicare Part
A, payment is made for covered services administered by hospitals and other institutional providers

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such as home health agencies. 42 U.S.C. §§ 1395c–1385i-5. Medicare Part B pays for covered
“medical and other services” and is a voluntary insurance program. 42 U.S.C. §§ 1395j–1395w-5.
For services to be covered, the beneficiary must (1) be homebound and in need or needed
skilled nursing care, physical or speech therapy, or in some cases occupational therapy; (2) be
receiving services under a plan of care created by a physician who periodically reviews the plan; (3) be
under a physician’s care; and (4) in cases certified after January 1, 2010, meet face-to-face with the
physician or other medical professional prior to certification. Id. §§ 1395f(a)(2)(C), 1395n(a)(2)(A),
1395x(m); 42 C.F.R. §§ 409.42–409.43, 424.22. Additionally, only services that are “reasonable and
necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a
malformed body member” are eligible for coverage. 42 U.S.C. § 1395y(a)(1)(A); 42 C.F.R. §
411.15(k)(1).
A provider may challenge a coverage or reimbursement decision by utilizing the following
levels of review:


The Medicare Administrative Contractor (“MAC”) issues an “initial determination” notice
informing the provider whether services are covered and, if not, the amount owed. 42 U.S.C.
§ 1395ff(a)(1); 42 C.F.R. § 405.920.



The provider may request a “redetermination” from the same MAC. 42 U.S.C. § 1395ff(a)(3);
42 C.F.R. § 405.940.



The provider may seek “reconsideration” from a Qualified Independent Contractor (“QIC”).
42 U.S.C. § 1395ff(b)(1)(A), (c); 42 C.F.R. § 405.960.



The next step is to request a hearing before an Administrative Law Judge (“ALJ”). 42 U.S.C.
§ 13955(b)(1)(A), (E), (d)(1); 42 C.F.R. § 405.1002.

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

The Medicare Appeals Council (“Council”) reviews ALJ decisions. 42 U.S.C. § 1395ff(d)(2);
42 C.F.R. § 405.1100.



The provider may then seek judicial review. 42 U.S.C. § 405(g) (incorporated into the
Medicare statute by 42 U.S.C. § 1395ff(b)(1)(A)); 42 C.F.R. § 405.1136.

II.

Factual and Procedural Background
Plaintiff is a home health services provider. In June 2010, a Medicare Program Safeguard

Contractor (“PSC”)1 notified plaintiff of its intent to reopen and review plaintiff’s claims for services
between January 1, 2008, and January 31, 2009. From a sample of thirty claims, the PSC determined
that the services provided in twenty-four claims failed to meet Medicare coverage requirements. The
PSC determined that plaintiff had been overpaid $63,153.39 for the twenty-four claims. An additional
overpayment amount of $792,490.12 was calculated by extrapolation, resulting in a total overpayment
amount of $855,643.51. Plaintiff then requested a redetermination of the twenty-four claims. In its
redetermination, the MAC issued a fully favorable decision on one of the claims and issued partially
favorable or entirely unfavorable decisions on the other twenty-three claims. The MAC determined a
revised overpayment amount of $814,245.39 based on the redetermination.
Plaintiff then sought reconsideration of the twenty-three denied claims. The QIC affirmed the
denials of the twenty-three claims and also affirmed the statistical sampling and extrapolation
methodology utilized by the PSC in reviewing the claims. Plaintiff further appealed the decision,
requesting an ALJ hearing. The hearing took place on April 21, 2011, before ALJ Wendy A. Weber.
In her June 2, 2011 decision, the ALJ held that some of the home health services provided in eight
claims should be covered. The ALJ denied coverage for all of the home health services provided in the
remaining fifteen claims. The ALJ also affirmed the statistical sampling and extrapolation

1

Under the Medicare Integrity Program, contractors may audit claims to ensure compliance with the Act. 42 U.S.C.
§ 1395ddd; 42 C.F.R. § 421.304. The PSC may reopen claims selected for review. 42 C.F.R. § 403.980.

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methodologies. Further, the ALJ denied plaintiff’s claim that it was not financially liable for the
noncovered services.
At the final level of agency review, plaintiff requested review from the Council. The Council
issued a decision on August 29, 2012, finding that all home health services should be covered for one
claim, allowing partial coverage for four claims, and denying coverage for the remaining eighteen
claims. The Council also affirmed the statistical sampling and extrapolation methodology, as well as
the ALJ’s rejection of plaintiff’s argument that it was not financially liable for noncovered services.
As a result, the Council’s decision—as well as the portions of the ALJ’s decision the Council upheld—
represent the final decision of the Secretary.
III.

Legal Standard
Under 42 U.S.C. § 405(g) (incorporated into the Medicare statute by 42 U.S.C.

§ 1395ff(b)(1)(A)), this court applies a two-pronged review to the Secretary’s decision. This review
determines (1) whether the Secretary’s decision is supported by substantial evidence in the record as a
whole, and (2) whether the Secretary applied the correct legal standards. Lax v. Astrue, 489 F.3d 1080,
1084 (10th Cir. 2007) (citation omitted). ‘“Substantial evidence is more than a mere scintilla and is
such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.”’
Hunter v. Astrue, 321 F. App’x 789, 792 (10th Cir. 2009) (quoting Flaherty v. Astrue, 515 F.3d 1067,
1070 (10th Cir. 2007)). Although the court must give deference to the Secretary’s findings of fact, the
same is not true for legal findings. Exec. Dir. of Office of Vt. Health Access v. Sebelius, 698 F. Supp.
2d 436, 439 (D. Vt. 2010) (citing 42 U.S.C. § 405(g)).
In its analysis, the court may not reweigh the evidence or substitute its judgment for that of the
Secretary. See White v. Massanari, 271 F.3d 1256, 1257 (10th Cir. 2001) (citing Casias v. Sec’y of
Health & Human Servs., 933 F.2d 799, 800 (10th Cir. 1991)). On the other hand, the court must

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examine the entire record—including any evidence that may detract from the Secretary’s decision.
Jaramillo v. Massanari, 21 F. App’x 792, 794 (10th Cir. 2001) (citing Glenn v. Shalala, 21 F.3d 983,
984 (10th Cir. 1994)). Further, the court gives broad deference to the Secretary’s interpretation of its
own regulations. Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994) (noting that broad
deference is warranted when the regulation covers “a complex and highly technical regulatory
program”) (quotation omitted).
Review of the Secretary’s decision is also governed by the Administrative Procedure Act
(“APA”), 5 U.S.C. §§ 701 et seq. The APA allows a court to set aside an agency decision only if it is
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” or
“unsupported by substantial evidence in a case . . . reviewed on the record of an agency hearing
provided by statute.” 5 U.S.C. § 706(2)(A), (E).
IV.

Discussion
Plaintiff argues that the Secretary erred in three different ways: (1) the Secretary failed to apply

the statutory requirements in determining whether beneficiaries were homebound; (2) the Secretary
failed to apply statutory criteria in determining whether home health services were reasonable and
necessary; and (3) the Secretary incorrectly determined that plaintiff is not entitled to payment under
the Doctrine of Waiver of Liability and that plaintiff is not a provider without fault. Each of plaintiff’s
arguments is addressed in turn.2
A. The Secretary’s Decision Finding that Coverage Was Inappropriate for Nine
Beneficiaries Who Were Not Confined to the Home is Supported by Substantial
Evidence3

2

In addition, plaintiff’s complaint challenged the determinations as to patients M.M. and W.H. However, plaintiff’s
brief did not include argument related to these patients, so the court does not address them here.

3

The court does not address Patient #11-L.D. in this section. Plaintiff argued that the Secretary denied coverage to this
beneficiary based on his homebound status. However, the court finds the Secretary’s denial was based on a finding
that the services were not “reasonable and necessary” and thus discusses this patient under that section.

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One requirement for reimbursement of home health services is that the beneficiary is “confined
to his home.” 42 U.S.C. § 1395f(a)(1)(C); 42 C.F.R. § 409.42. A beneficiary qualifies as “confined to
the home” if he or she:
has a condition, due to an illness or injury, 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 (such as crutches, a cane, a wheelchair, or a walker), or if the
individual has a condition such that leaving his or her home is medically
contraindicated. While 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.
42 U.S.C. § 1395f(a) (language following paragraph (8)). In addition, absences that are “infrequent or
of relatively short duration,” including attending a religious service, will not prevent a beneficiary from
being considered “confined to the home.” Id.
In determining whether a beneficiary was homebound, plaintiff argues that the Secretary used a
two-part test. First, plaintiff claims that the Secretary determined whether the beneficiary has a
condition such that trips outside the home (1) require assistance of another individual or the aid of a
supportive device, or (2) are medically contraindicated. Second, upon determining that either one of
the first elements is met, plaintiff contends that the Secretary then analyzed whether outings (1) require
a considerable and taxing effort, and (2) are infrequent, of a short duration, or are taken to receive
medical treatment. If a beneficiary did not meet both elements of the second prong, plaintiff contends
that the Secretary then concluded that the beneficiary is not confined to the home.
Plaintiff argues that the Secretary incorrectly applied the test. According to plaintiff, a
beneficiary must be considered homebound if one of two criteria is met: (1) he or she has a condition
that restricts the ability to leave home without the assistance of another individual or the aid of a
supportive device, or (2) he or she has a condition that would make leaving home medically
contraindicated. Plaintiff argues that if a beneficiary needs aid from another person or a supportive

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device to leave the home, then there is a presumption that there is a normal inability to leave the home
and that doing so requires a considerable and taxing effort. Further, plaintiff argues that the
presumption should apply unless there is some evidence to show that (1) the patient leaves the home
frequently, for long durations, or (2) that leaving does not require a considerable and taxing effort.
Essentially, plaintiff argues that the first sentence of 42 U.S.C. § 1395f(a) should be read separately
from the second sentence. In its initial brief, plaintiff appears to argue that the use of a supportive
device alone should qualify one as homebound, whether or not leaving home requires a considerable
and taxing effort. In its reply brief, plaintiff changes its argument slightly, arguing that it is not
necessarily the “use” of an assistive device, but whether one “needs” an assistive device that is
important.
This court disagrees with plaintiff. Faced with the same issue, the district court in Labossiere
v. Secretary of Health & Human Services found that:
[r]ead in conjunction, the second sentence clarifies the first to require something more
than the need of assistance to be considered homebound. This construction provides
ample flexibility so as not to require a claimant to be “bedridden” to be entitled to home
health benefits. However, it does not expand homebound status to include anyone who
makes regular use of a cane. We believe this reading of the statute is in accordance
with the “whole law, and to its objects and policy.”
No. 90-150, 1991 WL 531922, at*5 (D. Vt. July 24, 1991) (quoting Phillbrook v. Glodgett, 421
U.S. 707, 713 (1975)); Apollo Med., Inc. v. Sebelius, No. 4:09CV1380JCH/MLM, 2010 WL
2132648, at *10 (E.D. Mo. April 23, 2010) (finding that “homebound status is not established
merely because a beneficiary ‘makes regular use of a cane’”) (quoting Labossiere, 1991 WL
531922, at *5).
The court also disagrees with plaintiff’s argument regarding the “use” versus “need” of
an assistive device. As defendant pointed out, the use of an assistive device (even when it is
“needed” by the beneficiary) can sometimes allow a person to leave the home with minimal

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effort. Thus, use or need of an assistive device does not necessarily mean that leaving the
home requires a considerable and taxing effort. Further, as described below, the court finds
that the Secretary properly analyzed whether each beneficiary was able to ambulate, transfer,
complete daily activities, and drive or ride in a vehicle.
The Secretary’s application of the homebound test is consistent with the Labossiere court’s
finding. The Secretary properly read both sentences together and, finding that one of the first elements
was met, then looked to whether leaving the home required a considerable and taxing effort, even if the
beneficiary required some sort of assistance to leave the home. Further, plaintiff’s reliance on Quality
Home Health Services, Inc., a MAC decision, is misplaced. (See R. at 10–13.) Quality Home did not
hold that the use of a supportive device alone was enough to be considered confined to the home.
Instead, the decision expressly stated the requirement that a beneficiary maintain “a ‘normal inability’
to leave home without considerable and taxing effort.” (Id. at 432.) Finding that the Secretary applied
the correct legal standard, the court now reviews whether substantial evidence supports the Secretary’s
decision regarding whether each beneficiary was homebound.
Patient #3-V.M.
As to this patient, the Council found that the ALJ correctly determined that V.M. was not
confined to the home. The Council acknowledged the evidence that V.M. uses an assistive device and
is legally blind. Although plaintiff pointed to two nursing notes to establish that V.M. experienced
tremors, dizziness, diminished respiratory status, and weakness, the Council noted that “these notes
simply contain a checked box for these indications and provide no further support for these conditions
or offer any indication of compounding factors.” (Id. at 15.) The Council then determined that the
documentation as a whole must support the assertion that V.M. was unable to leave the home

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unassisted or that doing so would require a considerable and taxing effort. The Council found that the
record evidence did not support that conclusion.
Plaintiff argues that V.M.’s use of a cane and walker mandates a finding that V.M. is
homebound, and that the Secretary was required to analyze whether V.M.’s absences from the home
were infrequent or of relatively short duration. But as discussed above, the Secretary is not required to
reach this analysis if she determines that leaving the home does not require a considerable and taxing
effort. The Council properly analyzed the evidence and determined that the record did not support a
finding that leaving the home required a considerable and taxing effort. The Secretary’s decision is
supported by substantial evidence, and the court will not disturb the Secretary’s findings. See White,
271 F.3d at 1257 (citation omitted).
Patient #7-C.L.
The Council affirmed the ALJ’s finding that patient C.L. was not homebound, finding no
evidence of a normal inability for C.L. to leave the home. The ALJ pointed to evidence that the
beneficiary “was able to transfer with assistance from a device, she was able to walk alone with the use
of a device, was able to independently go to and from the toilet, and was able to ride in a car.” (R. at
114–15.) Further, the ALJ found that there was no diagnosis to support the beneficiary’s reported
dyspnea, and that even if C.L. had dyspnea on exertion, this would not necessarily mean that leaving
the home requires a considerable and taxing effort. Plaintiff again argues that C.L’s use of a walker
automatically means she is homebound, but this is not the case. The Secretary’s decision is supported
by substantial evidence and is affirmed.
Patient #8-R.S.
The Council also affirmed the ALJ’s decision that patient R.S. was not homebound, citing a
lack of documentation in the record establishing that leaving home required a considerable and taxing

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effort. The ALJ cited evidence that the beneficiary “was able to transfer with assistance from a device,
walk alone with use of a device, independently go to and from toilet, and ride in a car.” (Id. at 115.)
The ALJ explained that the “[u]se of an assistive device and shortness of breath do not, standing alone,
confirm that [R.S.] could not leave home, or that leaving home would require considerable or taxing
effort.” (Id.) Further, the Council noted that although the boxes on nursing notes were checked for
endurance, impaired gait, and impaired balance, the checked boxes were not enough to establish
homebound status. (Id. at 15–16.) The Council also found that a note indicating R.S. experienced
shortness of breath and had fallen in his apartment complex—drafted some two years after the dates of
service—was entitled to little weight because it was not written contemporaneously with the service
dates. (Id. at 16.) Finally, the Council reasonably determined that the fact that R.S. fell after service
did not support a finding that he was homebound. Again, substantial evidence supports the Secretary’s
decision, and it should be upheld.
Patient #9-D.S.
The Council affirmed the ALJ’s decision that insufficient evidence existed to find D.S. was
confined to the home. The ALJ found that the evidence did not show a normal inability for D.S. to
leave her home. Specifically, the ALJ focused on an Outcome and Assessment Information Set
(“OASIS”) report that D.S. “was able to transfer with an assistive device, able to walk alone with a
device, and able to ride in a car.” (Id. at116.) The ALJ also pointed to a physical therapy evaluation,
which stated that D.S. “could transfer independently with no assistive devices” and physical therapy
notes stating that D.S. “was able to ambulate alone with a device for 200 feet.” (Id.) Contrary to
plaintiff’s assertion, D.S.’s use of a walker does not automatically render her homebound, and no
analysis of the frequency or duration of the beneficiary’s trips outside the home is required. The
Secretary’s decision is supported by substantial evidence and is affirmed.

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Patient #10-L.Sm.
Similarly, the Council upheld the ALJ’s determination that there was insufficient evidence to
conclude that patient L.Sm. was homebound, as the evidence failed to show a normal inability for the
beneficiary to leave home. The ALJ acknowledged evidence that the beneficiary experienced
“shortness of breath walking less than 20 feet, ‘lived’ in a wheelchair, and weighed 352 pounds”;
however, the ALJ noted that these findings were contradicted by the OASIS report. (Id. at 117.) The
report contained evidence that L.Sm. “was able to transfer with an assistive device, walk alone with a
device, and ride in a car.” (Id.) Considering these facts, the ALJ found the evidence did not establish
that leaving the home required a considerable and taxing effort. The ALJ gave more weight to the
evidence contained in the OASIS report, and the court will not disturb this opinion. See Cowan v.
Astrue, 552 F.3d 1182, 1185 (10th Cir. 2008) (quotation omitted) (“We may not displace the agency’s
choice between two fairly conflicting views, even though the court would justifiably have made a
different choice had the matter been before it de novo.”). The Secretary’s finding is supported by
substantial evidence and should be upheld.
Patient # 13-J.G.
The ALJ’s determination that J.G. was not homebound was also upheld by the Council. The
ALJ found that the evidence did not show a normal inability for J.G. to leave the home. Despite
evidence that J.G. required the use of a cane and was at high risk for falls, the ALJ focused on the
OASIS report’s findings to support her decision. The OASIS report stated that J.G. “only required
minimal assistance with transfers, was able to walk on her own with no assistance, and was able to
independently drive a car.” (R. at 120.) That J.G. was able to drive herself to a doctor’s
appointment—although the ALJ acknowledged this was not alone enough to prevent J.G. from being
homebound—also factored into the ALJ’s analysis. Based on these findings, the ALJ concluded that

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the evidence “overwhelmingly suggests” that leaving the home did not require a considerable and
taxing effort. (Id.) There is substantial evidence to support the Secretary’s conclusion, and the court
affirms.
Patient #14-O.M.
The ALJ found there was insufficient evidence to determine patient O.M. was homebound, and
the Council affirmed. The ALJ acknowledged plaintiff’s argument that O.M.’s impaired vision,
dementia, shortness of breath when walking twenty feet, and use of an assistive device rendered him
homebound. However, the ALJ found that the evidence did not support this conclusion, citing the fact
that “[t]he Plan of Care did not list shortness of breath or vision impairment as functional limitations”
and that O.M. “was up as tolerated with no assistive device.” (Id. at 121.) Further, the ALJ cited
evidence that O.M. could “ambulate independently, ride in a car, and did not have shortness of breath
to the extent that [O.M.] was unable to leave home without considerable or taxing effort.” (Id.)
Plaintiff argues that the ALJ did not consider OASIS report evidence that O.M. requires an assistive
device to walk alone and is short of breath when walking distances less than twenty feet, but the ALJ
mentioned these facts in her decision. The court will not disturb the ALJ’s reliance on evidence
indicating that O.M. should not be considered to be homebound. See Cowan, 552 F.3d at 1185
(quotation omitted). The Secretary’s decision is supported by substantial evidence and the court
affirms it.
Patient #15-O.R.
The Council also upheld the ALJ’s decision that patient O.R. was not homebound, as the
evidence did not demonstrate a normal inability for O.R. to leave the home or that leaving the home
would require considerable or taxing effort. Plaintiff argues that, after finding that O.R. was “mentally
retarded, had hypertension,” had hearing problems, was obese and a heavy smoker, and had other

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problems, the ALJ should have found that O.R. fell under the catchall category of having a condition
that is medically contraindicated. (R. at 121.)
However, this argument fails for the same reasons as plaintiff’s argument that use of an
assistive device alone automatically qualifies one as homebound. The ALJ must still consider whether
the condition results in a normal inability to leave the home or renders the beneficiary unable to leave
the home without considerable and taxing effort. The ALJ did just this, finding that the evidence that
O.R. could “ambulate independently, ride in a car, and transfer with minimal assistance” supported this
finding. (Id. at 122.) The ALJ acknowledged O.R.’s other conditions, but noted that no behavior
problems were reported or observed, and that no psychiatric nursing services were ordered. The
Secretary’s decision was based on substantial evidence and the court will not disturb it.
Patient #16-C.R.
The ALJ’s decision that C.R. was not homebound was upheld by the Council. The ALJ noted
that, although the evidence indicated C.R. required use of a walker and had shortness of breath on
minimal exertion, the OASIS report stated that C.R. had only “slight mobility limitations.” (Id.) The
ALJ cited additional evidence that C.R. “required only minimal assistance with transfers, was able to
wheel herself in a wheelchair, and able to ride in a car.” (Id.) Plaintiff is correct that the ALJ
unnecessarily focused on the conflict between the reports that C.R. needed a wheelchair versus a
walker. Regardless, the ALJ cited substantial evidence to support the decision that C.R. is not
homebound. Plaintiff is incorrect that C.R.’s use of an assistive device—whether it be a walker or a
wheelchair—mandates a finding that C.R. is homebound. Plaintiff again ignores the second sentence
of the statute, which states that “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

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individual.” 42 U.S.C. § 1395f(a). The Secretary properly applied the test and the decision was
supported by substantial evidence. The court affirms the decision.
After reviewing the record for each of these patients, the court finds that the Secretary’s
decision was supported by substantial evidence and that the Secretary properly determined the
beneficiaries were not homebound. Accordingly, the court affirms this portion of the Secretary’s
decision.
B. The Secretary’s Decision that the Skilled Nursing and Physical Therapy Services
Administered to Eleven Beneficiaries Were Not Reasonable and Necessary is
Supported by Substantial Evidence
As stated above, only services that are “reasonable and necessary for the diagnosis or treatment
of illness or injury or to improve the functioning of a malformed body member” are eligible for
coverage. 42 U.S.C. § 1395y(a)(1)(A); 42 C.F.R. § 411.15(k)(1). The Act does not define “reasonable
and necessary.” Instead, “Congress has vested final authority in the Secretary to determine what items
or services are ‘reasonable and necessary.’” Garcia v. Sebelius, No. CV 10-8820 PA (RZx), 2011 WL
5434426, at *1 (C.D. Cal. Nov. 8, 2011) (citing 42 U.S.C. § 1395ff(a); Heckler v. Ringer, 466 U.S.
602, 617 (1984)).
Plaintiff’s case involves claims for physical therapy service and skilled nursing services,
including observation and assessment of a patient’s changing condition and patient education services.
Under the regulations in effect during the time period at issue, physical therapy services must be
generally regarded under acceptable medical standards to be a “specific, safe, and effective treatment”
for the patient’s condition and must be of a certain level of complexity such that a qualified physical
therapist or other qualified professional must perform the services. 42 C.F.R. § 409.44(c)(2)(i)–(ii)
(1994–2010). In addition, the physical therapy services must comport with one of the following
criteria: (1) “[t]here must be an expectation that the beneficiary’s condition will improve materially in

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a reasonable (and generally predictable) period of time based on the physician’s assessment of the
beneficiary’s restoration potential and unique medical condition”; (2) “the services must be necessary
to establish a safe and effective maintenance program required in connection with a specific disease”;
or (3) “the skills of a therapist must be necessary to perform a safe and effective maintenance
program.” Id. § 409.44(c)(2)(iii)(1994–2010). Finally, “the amount, frequency, and duration of the
services must be reasonable and necessary.” Id.. § 409.44(c)(2)(iv).
Skilled nursing services are those services that must be performed by a registered nurse or a
practical or vocational nurse and meet certain Medicare regulation requirements. Id. § 409.44(b)(1).
“[S]killed nursing services must be reasonable and necessary for the treatment of the illness or injury.”
Id. § 409.44(b)(3). Reasonable and necessary skilled nursing services “must be consistent with the
nature and severity of the beneficiary’s illness or injury, his or her particular medical needs, and
accepted standards of medical and nursing practice.” Id. § 409.44(b)(3)(i). This determination must
consider the context of the beneficiary’s condition and must be “based solely upon the beneficiary’s
unique condition and individual needs, without regard to whether the illness or injury is acute, chronic,
terminal, or expected to last a long time.” Id. § 409.44(b)(3)(ii)–(iii).
Plaintiff argues that the Secretary’s decision was based on hindsight and a presumption of
stability, citing the case of Anderson v. Sebelius, No. 5:09-cv-16, 2010 WL 4273238 (D. Vt. Oct. 25,
2010). Plaintiff is correct that the services must “be viewed from the perspective of the condition of
the patient when the services were ordered.” Medicare Benefit Policy Manual (“MBPM”) CMS Pub.
100-02, Ch. 7, § 40.1.1 (http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/InternetOnly-Manuals-IOMs-Items/CMS012673.html). It is also true that “[s]killed care may, depending on
the unique condition of the patient, continue to be necessary for patients whose condition is stable.”
Id. Observation and assessment of a beneficiary’s changing condition is reasonable and necessary if

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skilled personnel are needed to analyze the need for additional treatment until the beneficiary’s
condition is stabilized. 42 C.F.R. § 409.33(a)(2)(i). The beneficiary’s home health record must
contain documentation showing “there is a reasonable potential for a future complication or acute
episode” and include indications such as “abnormal/fluctuating vital signs, weight changes, edema,
symptoms of drug toxicity, abnormal/fluctuating lab values, and respiratory changes on auscultation.”
MBPM CMS Pub. 100-02 Ch. 7, § 40.1.2.1. But where these signs and symptoms are “part of a
longstanding pattern of the patient’s condition which has not previously required a change in the
prescribed treatment,” the services are not reasonable and necessary. Id.
Further, patient education services can qualify as skilled services if a skilled professional is
necessary to teach the patient how to manage a treatment regimen. 42 C.F.R. § 409.33(a)(3). If the
patient, family, or caregiver is unable to learn the treatment after a reasonable time, however, the
services are no longer reasonable and necessary. Id. § 409.42(c)(1)(ii). Reteaching is appropriate in
circumstances were the procedure changes or the patient’s condition is different, or where the patient
or caregiver is deficient in performing the treatment. See MBMP CMS Pub. 100-02, Ch. 7, § 40.1.2.3.
After reviewing the record and the Secretary’s decision, the court finds that the Secretary
employed a forward-looking perspective and considered the beneficiary’s condition at the time
services were ordered. The Secretary also considered the lack of complications or alteration in the
patients’ conditions during the treatment period. And the Secretary correctly found many of the
services were not reasonable and necessary because of a lack of documentation of the patient’s prior
level of functioning. The Secretary’s decision regarding plaintiff’s argument—that the approval or
denial of certain visits within a sixty-day episode is inconsistent with the home health payment
structure—is also supported by substantial evidence. The court agrees that the contractor can

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determine the appropriate payment amount for approved services. The court examines the Secretary’s
decision as to each patient’s treatment below.
Patient #1-C.P
The Council affirmed the ALJ’s decision that physical therapy services were not covered. The
Council pointed to the absence of evidence in the record showing an expectation that C.P.’s condition
would improve materially in a reasonable amount of time. 42 C.F.R. § 409.44(c)(2)(iii). The Court
agrees with the Council and the ALJ’s determination that the lack of evidence showing quantitative or
objective measurements of C.P.’s prior level of functioning precludes a finding that the services were
necessary to reach progress goals within a reasonable amount of time. The Council’s decision that the
services were not reasonable and necessary is supported by substantial evidence, and the court affirms
it.
Patient #2-L.St.
The Council upheld the ALJ’s decision denying coverage for skilled nursing and physical
therapy services. The ALJ determined that patient education on medication compliance was not
necessary for L.St., as there was no evidence that the medications were newly prescribed or for a new
condition. The ALJ also found that observation and assessment of L.St.’s condition by a nurse was not
reasonable and necessary because the documentation did not support a likelihood of change in L.St.’s
condition. (R. at 109 (citing 42 C.F.R. § 409.33).) There was no documentation of abnormal vital
signs or other changes. Further, the Council affirmed the ALJ’s decision to deny patient education on
wound care because there was no evidence that any such instruction was given. (Id. at 110.)
The Council came to the same conclusion as to physical therapy services, affirming the ALJ’s
decision that they were not reasonable and necessary. As the ALJ noted, there is an absence of
documentation showing that L.St.’s condition would improve within a reasonable period of time. And

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the physical therapy evaluation conflicted with other evidence that there was no change in L.St.’s prior
level of function. The ALJ also pointed out that the physical therapy evaluation did not indicate the
cause of L.St.’s symptoms or whether the symptoms were related to an exacerbation of L.St.’s
condition. The ALJ correctly concluded, and the Council agreed, that “[w]ithout evidence of the
causes of symptoms or prior level of function, an expectation that [L.St.]’s condition would
significantly improve within a reasonable period of time is not established.” (Id.) Finally, the ALJ
concluded that there was no evidence that the services were “necessary to establish a safe and effective
maintenance program.” (Id.) The court finds that substantial evidence supports the Secretary’s
decision, and it is affirmed.
Patient #4-E.I.
In affirming the ALJ’s decision denying coverage for physical therapy services, the Council
agreed the record lacked evidence as to E.I.’s prior level of function. And there was no evidence to
support an expectation that E.I.’s condition would improve materially in a reasonable amount of time
or that the services were necessary. As the Council and the ALJ pointed out, “[t]his lack of
documentation renders the goals set to purportedly improve function essentially meaningfulness[sic];
and calls into question the validity for the purpose of the [physical therapy] from the outset.” (Id. at
22.) Finally, the Council noted that the record did not contain specific quantitative measurements.
The court agrees that general descriptions included in the skilled nursing notes or OASIS report, such
as “very weak,” are insufficient and that the physical therapy notes do not comport with the
documentation requirements of 42 C.F.R. § 409.44(c)(2)(i)(H)(4). The Secretary’s decision was based
on substantial evidence and the court upholds it.

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Patient #6-G.K.
As to this patient, the Council affirmed the ALJ’s decision, noting that for the remaining
beneficiaries, the Council examined the documentation and evidence in the case and found that “the
documentation is insufficient to support Medicare coverage criteria for the services at issue.” (Id. at
29.) Further, “[t]he skilled nursing notes do not show the beneficiaries required or received” the
services at issue. (Id.) Plaintiff argues that there was a new diagnosis of pneumonia here, but the ALJ
noted that the OASIS report and the Plan of Care list gait disturbance as the principal diagnosis.
Regardless, none of the nursing notes indicates that treatment was provided for pneumonia. The
Secretary’s decision is supported by substantial evidence and is affirmed.
Patient #11-L.D
The Council affirmed the ALJ’s decision to deny both physical therapy services and skilled
nursing services rendered to L.D. As to the physical therapy services, the Council noted that plaintiff
pointed to a March 6, 2008 physical therapy evaluation stating that L.D.’s balance was 3/5 and that she
could ambulate 100 feet with a cane. The Council found that, other than an April 15, 2008 visit note
that stated L.D. could ambulate 150 feet, there was no other quantitative measurement in the notes.
The court disagrees, as it found that several of the physical therapy visit notes contained statements
regarding the distances L.D. was able to ambulate. Despite this, the court agrees with the Council that
the notes do not provide sufficient information regarding the physical therapy provided, and the court
cannot properly assess L.D.’s progress at each visit. The court agrees with the Council’s decision to
uphold the ALJ’s finding that “there was no expectation that [L.D.]’s condition would improve
materially in a reasonable (and generally predictable) period of time and that the physical therapy
services were not of a reasonable amount, frequency, and duration, given the beneficiary’s condition.”
(Id. (citing 42 C.F.R. § 409.44(c).)

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Similarly, the Council affirmed the ALJ’s decision denying coverage for the skilled services
rendered to L.D. L.D.’s diagnoses were insulin dependent diabetes mellitus, degenerative joint
disease, increased pain, and chronic obstructive pulmonary disease. But, as the Council pointed out,
although there were some adjustments made to L.D.’s medication and some minor changes in her
condition, the services provided were not at the level anticipated by the regulations. (Id. (quoting 42
C.F.R. § 409.33(a)(1)(ii).) Further, although plaintiff argues that the skilled nursing services were
necessary to monitor L.D.’s diabetes and medication compliance, the ALJ correctly found that the
condition was not new and the record did not support a finding that the services were reasonable and
necessary. The Secretary’s decision denying coverage for both physical therapy services and skilled
nursing services is supported by substantial evidence and is affirmed.
Patient #17-M.S.
The Council upheld the ALJ’s decision denying coverage for skilled nursing services of
observation and assessment and patient education services. The Council again found that the
documentation for M.S. was insufficient to support coverage and that the skilled nursing notes did not
demonstrate that M.S. required or received the services at issue. The ALJ noted that the evidence did
not indicate there was a likelihood of a future complication or acute episode that would warrant skilled
intervention for M.S. Further, the conditions to be monitored (diabetes and hypertension) were not
new diagnoses, and there were no changes in the nursing plan. MBPM CMS Pub. 100-02 Ch. 7, §
40.1.2.1. The Secretary had substantial evidence upon which it based its decision, and the court
affirms.
Patient #18-O.C.
The Council affirmed the ALJ’s decision denying coverage for skilled nursing services as to
O.C. for similar reasons. Again, the Council noted the lack of documentation to support coverage and

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the fact that the skilled nursing notes did not indicate the patient required or received the services in
question. Further, the ALJ noted that the evidence did not indicate there was a likelihood of a future
complication or acute episode that would warrant skilled intervention for O.C. MBPM CMS Pub. 10002 Ch. 7, § 40.1.2.1. The nursing notes indicated the skilled nurse assessed blood pressure, monitored
pain and panic attacks, and instructed on medications, but these were not new diagnoses, and the
medications were not new. The ALJ pointed out that O.C. had a history of these conditions, and there
was no evidence that there was a likelihood of a future complication or acute episode that would
warrant skilled intervention for O.C. The Secretary’s decision is supported by substantial evidence,
and the court will not disturb it.
Patient #19-C.S.
Here, the ALJ allowed two skilled nursing visits, but denied coverage for the other visits. The
Council upheld the ALJ’s decision. The ALJ found that “[t]he primary purpose for the services was to
observe, monitor vital signs, and provide assessment and instructions regarding conditions, particularly
pain management.” (R. at 125.) C.S. had an implanted morphine pump and “failed back syndrome,”
and the ALJ noted that under acceptable standards of medical and nursing practice, long-term pain
management for C.S. should have occurred in a pain management clinic or more structured
environment. (Id.); 42 C.F.R. § 409.44(b)(3)(i). The ALJ then found that C.S. did eventually attend a
pain clinic, and that visits after that point were not covered. Further, the ALJ found that skilled
nursing services were not required to recognize itching or to call for anti-itching medication, and that
these interventions did not constitute a significant change in C.S.’s condition, treatment plan, or
medications. The Council again found, and the court agrees, that the documentation was insufficient to
support coverage of the skilled nursing services. The court affirms, as substantial evidence supports
the Secretary’s decision.

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Patient #21-J.B.
The Council overturned the ALJ’s decision regarding denying J.B.’s skilled nursing services,
but the Council affirmed the ALJ’s decision denying some of J.B.’s physical therapy services. The
ALJ determined that physical therapy “for gait training was reasonable and necessary for the first two
weeks, because it could be expected that the Beneficiary’s ability to walk would improve during that
time.” (Id. at 127.) But without an exacerbation of J.B.’s condition, the ALJ found that continued
physical therapy beyond the two-week period was repetitive and would not require the skills of a
physical therapist. Thus, the ALJ denied coverage for the physical therapy beyond the first two weeks.
Further, the Council found that the physical therapy notes lacked “objective evidence or clinically
supportable statements of expectation that the beneficiary was continuing to progress toward the
treatment goals or was responding to therapy in a reasonable and generally predictable period of time.”
(Id. at 21 (citing 42 C.F.R. § 409.44(c)(2)(i)(H)(4).) The court agrees that language such as “gaining
strength” was not sufficiently descriptive to show that coverage was warranted and does not comport
with documentation requirements. The Secretary’s decision is supported by substantial evidence, and
the court affirms it.
Patient #22-D.B.
The Council affirmed the ALJ’s decision denying coverage of patient education services
regarding exercises, diet, oxygen precautions, and signs and symptoms of infection provided to D.B.
The Council stated that “the evidence does not establish that repeated assessment and instructions
regarding the beneficiary’s condition qualify as skilled nursing services pursuant to the applicable
regulations and policy guidance.” (Id. at 23.) The ALJ explained that “repeated assessment and
instructions regarding the Beneficiary’s chronic condition were not necessary.” (Id. at 126); see 42

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C.F.R. § 409.33(a)(3). The court agrees and finds that substantial evidence supports the Secretary’s
decision.
Patient #23-T.V.
For T.V., the Council affirmed the ALJ’s denial of coverage for four skilled nursing and four
physical therapy visits. The ALJ found that for the first three visits, patient education services given to
T.V.’s daughters were covered, as the daughters required re-education on T.V.’s care and disease
processes. (Id. at 128–29.) However, the ALJ denied coverage for subsequent visits. The ALJ
likewise found that the first three physical therapy visits were covered, as the family required “a short
window of training in order to instruct them on equipment, transfers, stretches, ROM, repositioning,
and strengthening exercises.” (Id. at 129.) The Council further found that the physical therapy notes
lacked objective evidence of the expectation that the patient was continuing to progress toward
treatment goals or would respond to therapy in a reasonable and generally predictable time period. (Id.
at 21); 42 C.F.R. § 409.44(c)(2)(iii)(1994–2010). And the documentation failed to meet the
requirements of 42 C.F.R. § 409.44(c)(2)(i)(H)(4). Because it is supported by substantial evidence, the
Secretary’s decision is affirmed.
The court reviewed the record as to each patient at issue, and finds that substantial evidence
supports the Secretary’s determinations as to each patient. For these reasons, the court affirms the
Secretary’s decisions as to whether the services at issue were reasonable and necessary.
C. The Secretary’s Decision that Plaintiff’s Financial Liability is Not Waived or Limited
for Noncovered Services is Supported by Substantial Evidence
Plaintiff points to several provisions of the Act to argue that plaintiff is not responsible for
noncovered services and that the Secretary erred in finding the opposite. The Council first looked at
Section 1879 of the Act, which is codified at 42 U.S.C. § 1395pp. Under this provision, a provider’s
liability may be waived if the provider “did not know, and could not reasonably have been expected to

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know, that payment would not be made for such items or services . . . .” 42 U.S.C. § 1395pp(a).
Similarly, overpayments may not be recovered from a provider under Section 1870 of the Act if the
provider is “without fault” in incurring the overpayment. Id. § 1395gg(b)(1).
Upon review, the court finds that substantial evidence supports the Secretary’s determination
that plaintiff cannot avoid financial liability because plaintiff has not shown that it “did not know, and
could not reasonably have been expected to know, that payment would not be made for such items or
services . . . .” Id. § 1395pp(a). As the Council explained, plaintiff knew or had reason to know that
the services at issue were not covered based on ‘“[i]t’s receipt of CMS notices, including manual
issuances, bulletins, or other written guides or directives from [Medicare contractors]”’ and ‘“[i]ts
knowledge of what are considered acceptable standards of practice by the local medical community.”’
(R. at 29 (quoting 42 C.F.R. § 411.406(e)(1), (3).) And, as defendant pointed out, plaintiff apparently
had some knowledge that the services may be noncovered, because plaintiff issued advance beneficiary
notices (“ABNs”) to some beneficiaries stating that services may not be covered.
Therefore, plaintiff is liable unless it informed the beneficiary by providing an ABN that
services would not be covered. 42 C.F.R. § 411.406(d)(1). After reviewing the ABNs, the court
agrees with the Council’s decision that the ABNs do not allow the beneficiary to make an informed
decision regarding services because the ABNs fail to inform the beneficiary why services would not be
covered. See Medicare Claims Processing Manual, CMS Pub. 100-04, Ch. 30, § 40.3.8 (discussing the
need to provide enough information so the beneficiary can make an “informed consumer decision”)
(http://cms.gov/Regulations-and-Guidance/Guidance/Manuals/Internet-Only-Manuals-IOMsItems/CMS018912.html?DLPage=1&DLSort=0&DLSortDir=ascending). And the court also agrees
that the notices found in the files of three beneficiaries do not qualify as ABNs and thus do not limit

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plaintiff’s liability. The Council’s decision finding that no waiver of liability is available to plaintiff
under 42 U.S.C. § 1395pp(a) is supported by substantial evidence, and the court affirms.
Likewise, substantial evidence supports the Council’s decision that plaintiff is not “without
fault” in incurring the overpayment. The Council was correct that no rebuttable presumption holding
plaintiff without fault applies, as the overpayment was not identified more than three calendar years
after the initial determination was made. See 42 U.S.C. § 1395gg(b) (language after paragraph (4)); 42
C.F.R. § 405.350(c) (2010); Medicare Financial Management Manual (“MFMM”), CMS Pub. 100-06,
Ch. 3, § 80 (http://cms.gov/Regulations-and-Guidance/Guidance/Manuals/Internet-Only-ManualsIOMs-Items/CMS019018.html?DLPage=1&DLSort=0&DLSortDir=ascending). 4
The MFMM provides that a provider is without fault “if it exercised reasonable care in billing
for, and accepting” Medicare payments. MFMM, CMS Pub. 100-06, Ch. 3, § 90. The MFMM further
provides an example of a situation where a provider is not without fault as when “[t]he provider billed,
or Medicare paid the provider for services that the provider should have known were noncovered.” Id.
at § 90.1(H). Again, plaintiff is charged with knowledge of Medicare policies and regulations,
including those listed in the manual. Id.; 42 C.F.R. 411.406(e). As discussed above, plaintiff failed to
support its claims with the proper documentation to show that the services provided should be covered.
For these reasons, the Secretary’s decision that plaintiff is not without fault is supported by substantial
evidence and is affirmed.
V.

Plaintiff’s Remaining Arguments
Plaintiff raises additional arguments in its reply. First, plaintiff argues that the ALJ and the

Council ignored significant evidence. But plaintiff fails to cite to the record to support its assertions.
The ALJ’s decision notes that “[a]ll exhibits contained in the Master File and each Beneficiary claim
4

In 2010, the rebuttable presumption applied if the overpayment was identified more than three years after the initial
determination. The current version of the law applies if the overpayment was identified more than five years after the
initial determination.

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folder . . . were admitted into evidence without objection” at the hearing before the ALJ. (R. at 73.)
And the Council stated that it had “carefully considered the entire record . . . .” (Id. at 6.) Further, the
opinions of both the ALJ and the Council were thorough and detailed. The court finds no indication
that the ALJ and the Council ignored significant evidence.
Plaintiff also asks the court to apply the “treating physician rule” from social security disability
cases to this case. Plaintiff appears to argue that a physician’s certification alone is the determining
factor as to whether coverage is appropriate. The court disagrees. Although physician certification is
required for payment purposes, it is the role of the Secretary to determine whether services are
covered. Plaintiff admits that the treating physician rule has not been applied in Medicare cases, and
the court will not apply it here.
Finally, plaintiff’s complaint objected to the Secretary’s use of statistical sampling and
extrapolation in this case. Plaintiff’s claims on this issue were denied at each level of administrative
review. But plaintiff’s brief did not address this issue. Although it appears that plaintiff has waived
the arguments here, the court finds that the Secretary’s decision regarding the statistical sampling and
extrapolation used in this case is legally sound and is supported by substantial evidence.
VI.

Conclusion
The Secretary’s decision is supported by substantial evidence in the record. Based on the

above analysis, the court affirms the decision of the Secretary.
IT IS THEREFORE ORDERED that the Secretary’s decision is affirmed. Judgment shall be
entered pursuant to the fourth sentence of 42 U.S.C. § 405(g).
Dated this 28th day of August, 2014, at Kansas City, Kansas.

s/ Carlos Murguia
CARLOS MURGUIA
United States District Judge

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