In the last issue of Healthcare Authority, we addressed the survey and certification guidelines in Centers for Medicare & Medicaid Services’ (CMS) proposed rule for home health agencies (HHAs). See 77 Fed. Reg. 41,548 (July 13, 2012). In this issue, we focus on the proposed enforcement actions found in subpart J of the proposed rule.  

In a March 2, 2012 letter to the CMS Acting Administrator, the HHS Office of Inspector General (OIG) noted that CMS had not implemented “intermediate sanctions” for HHAs found out of compliance, as mandated by the Omnibus Budget Reconciliation Act of 1987 (OBRA ‘87) and as OIG had previously recommended in its 2008 OIG Report, Deficiency History and Recertification of Medicare Home Health Agencies. In its March 2, 2012 letter, OIG stated that CMS should make intermediate sanctions a “high priority and complete their implementation as soon as possible.” In response, CMS published the proposed rule and the proposed intermediate sanctions described below.  

Section 1891(f )(1) of the Social Security Act (Act), as amended, required the Secretary of HHS to develop and implement intermediate sanctions for HHAs by April 1, 1989. CMS published a Notice of Proposed Rulemaking (NPRM) on August 2, 1991 that proposed “alternative sanctions.” However, CMS subsequently withdrew its NPRM, without publishing a final rule regarding alternative sanctions for those HHAs not in substantial compliance with Medicare conditions of participation (CoP) found at 42 C.F.R. Part 484. Thus, the proposed rule seeks to comply with the statutory requirements mandated by OBRA ’87.  

Currently, when an HHA is not in substantial compliance with Medicare requirements, the only enforcement action CMS may impose is termination of the provider agreement. The proposed rule at subpart J sets forth six separate although not mutually exclusive “alternative sanctions” as well as factors that CMS considers when selecting a particular sanction. Those alternative sanctions are described below.  

Temporary Management

CMS may appoint a temporary manager for an HHA that has one or more condition-level deficiencies when it determines that either the existing Arnall Golden Gregory LLP Page 2 Client Alert management or the deficiencies are likely to preclude the HHA from regaining full compliance with the CoPs in the required timeframe. (CMS will terminate the provider agreement of HHAs not in compliance for six months.) A temporary manager will have broad authority to hire, fire, and establish policies.  

If the HHA fails to relinquish control to the temporary manager, CMS will terminate that HHA. Where CMS has appointed a temporary manager and the HHA resumes management control without CMS approval, such resumption of control will also result in a termination and possibly other sanctions, according to the proposed rule.  

The temporary management continues until the HHA either achieves substantial compliance and demonstrates a likelihood of continued compliance or, until CMS terminates the provider agreement. However, the temporary management will not exceed six months from the date the noncompliance was determined. Under the proposed rule, the HHA must pay the temporary manager’s salary, which may not be less than the prevailing rate in that geographic location. Additionally, any costs that the HHA would ordinarily incur must be borne by the HHA. Such costs will not be considered an allowable item on a cost report. In the event that an HHA fails to pay the salary of a temporary manager, CMS would treat that as a failure to relinquish control, which, as noted above, would trigger a termination.  

Suspension of Payment

CMS may suspend payment for all new admissions and new payment episodes if it determines that an HHA has condition-level deficiencies, whether or not those deficiencies constitute immediate jeopardy. The HHA may only charge a newly admitted Medicare beneficiary for services rendered during the payment suspension if it can demonstrate that it provided oral and written notice of the suspension to the beneficiary or his/her representative in understandable language prior to initiating care.  

Once imposed, the suspension of payments will continue until CMS determines the HHA has regained substantial compliance or is terminated. The proposed rule requires that suspended Medicare payments may only resume prospectively.  

Civil Money Penalties

As with skilled nursing facilities, CMS may impose either a per day or a per instance civil money penalty (CMP), although it may not impose both types simultaneously. In no event may CMS impose a CMP that exceeds $10,000 per day. Among the factors affecting the CMP is the size of the HHA and its resources as well as the availability of other HHAs within the same geographic region.  

Per Instance CMPs

A per instance CMP may be imposed where a survey determines one or more discrete events of conditionArnall level noncompliance that were corrected during the survey. The range of per instance CMPs is $1,000 to $10,000. The deficiency does not have to be cited at the immediate jeopardy level for CMS to impose a per instance CMP. Providers should be aware that CMS may impose a per instance CMP for each condition-level deficiency determined, but the total CMP may not exceed the daily limit of $10,000.  

Per Day CMPs

The proposed rule contemplates a three-tiered system for CMPs in the per day category. The “upper range” is from $8,500 to $10,000 per day of noncompliance and is limited to condition-level deficiencies constituting immediate jeopardy. The CMP continues in the upper range until a revisit confirms either a return to substantial compliance or the removal of immediate jeopardy but with remaining condition-level deficiencies.  

CMPs in the “middle range” are imposed for repeat deficiencies and/or condition-level deficiencies that are not immediate jeopardy and are directly related to poor quality patient care outcomes. The middle range is from $2,500 to $8,500 per day and is further divided. An $8,500 per day CMP is triggered by a repeat deficiency while “other deficiencies” have a range from $2,500 to $5,000 per day.  

The “lower range” of CMPs is geared towards repeat and/or condition-level deficiencies not constituting immediate jeopardy and is reserved for what CMS terms as “structure or process-oriented conditions (such as OASIS submission requirements)” rather than deficiencies directly related to patient care outcomes. CMS proposes to impose a $4,000 per day CMP for a repeat deficiency and a CMP in the range of $500 to $3,000 for all other deficiencies. CMPs are due and payable 15 days after a final administrative action or after the 60-day period has elapsed and no appeal has been filed.  

Directed Plan of Correction

CMS may impose a directed plan of correction when it feels an HHA needs to undertake specific actions to correct a deficiency or when an HHA fails to submit an acceptable plan of correction for cited deficiencies. The directed plan of correction would be developed either by CMS or a temporary manager, with CMS approval. If the HHA failed to achieve compliance within a specified timeframe, CMS would impose one or more alternative sanctions until the HHA either achieved compliance or was terminated.  

Directed In-Service Training

CMS may also impose directed in-service training on an HHA’s staff where it feels that education is likely to correct cited deficiencies. CMS may require HHA staff to participate in a program developed by medical and nursing schools, centers for aging and health education centers. The HHA will be responsible for the cost of any directed in-service training. If compliance was not achieved after the training, CMS notes that it might impose “one or more additional sanctions.


CMS may terminate an HHA that fails to comply with the CoP; fails to furnish an acceptable plan of correction within the time allotted by CMS; or fails to relinquish control to a temporary manager, if CMS imposed that sanction. CMS will terminate an HHA that is not in compliance for six months from the last day of a survey that determined noncompliance. Likewise, in situations where immediate jeopardy has been cited, CMS will terminate the HHA’s provider agreement no later than 23 days from the last day of the survey, if the immediate jeopardy has not been removed by the HHA.  


Providers subject to any of the alternative sanctions mentioned above, including CMPs, have several options. They may challenge CMS’ basis for imposing a sanction by: 1) filing an appeal with the HHS Departmental Appeals Board; and/or 2) seek an Informal Dispute Resolution (IDR) within 10 calendar days of receipt of the Statement of Deficiencies; or, 3) in the case of a CMP, waive their right to a hearing and pay 65% of the total CMP imposed. There are strict requirements governing an HHA’s choices. For example, a request for a hearing must be filed within 60 calendar days following receipt of CMS notice of imposition of CMP. Receipt is presumed to occur five days after the date on the notice, unless CMS can demonstrate an earlier receipt. HHAs that elect to waive their right to a hearing must notify CMS within 60 calendar days “from the date of the notice” imposing the CMP.  

HHAs need to be aware that in order to meet the requirements concerning appeals, they must identify the specific issues as well as findings of fact and conclusions of law with which they disagree. HHAs must also state the basis for their disagreement with those findings of fact and conclusions of law. Providers who do not meet the regulatory requirements concerning the content of a hearing request run the risk of having CMS seek a dismissal of their appeal by an administrative law judge before they even present their case. As noted above, the only sanction CMS can impose at this time is termination. Once CMS adds the alternative sanctions mandated by OBRA ’87 to its quiver of arrows, providers will be subject to those sanctions. As such, providers should anticipate increased enforcement activity and submit any appropriate comments concerning the proposed rule to CMS before the September 4, 2012 deadline.