Nursing v. U.S. Dep't of Health & Human Servs.

• Decision Date: 17 May 2013
• Docket Number: No. 12–60086.,12–60086.
• Parties: ELGIN NURSING AND REHABILITATION CENTER, Petitioner, v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent.
• Court: U.S. Court of Appeals — Fifth Circuit

718 F.3d 488

ELGIN NURSING AND REHABILITATION CENTER, Petitioner,

v.UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent.

No. 12–60086.

United States Court of Appeals, Fifth Circuit.

May 17, 2013.

Juliann Hale Panagos (argued), Crain, Caton & James, P.C., Houston, TX, Michael Dwayne Seale (argued), Crain, Caton & James, P.C., Victoria, TX, for Petitioner.

Edmond Dante Anderson, III (argued), Esq., Assistant Regional Counsel, U.S. Department of Health & Human Services, Office of the General Counsel, Region VI, Dallas, TX, Mike Polston, U.S. Department of Health & Human Services, Office of the General Counsel, Baltimore, MD, for Respondent.

Petition for Review of a Decision of the Department of Health and Human Services.

Before STEWART, Chief Judge, SMITH and WIENER, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Elgin Nursing and Rehabilitation Center (“Elgin”) seeks review of a final decision of the Department of Health and Human Services (“DHHS”) upholding a ruling of an administrative law judge (“ALJ”) affirming a determination by the Center for Medicare and Medicaid Services (“CMS”) that Elgin had violated certain safety requirements by serving “undercooked” eggs to its elderly residents. We grant the petition for review and set aside the decision.

I.

Between February 9 and 12, 2010, Elgin was investigated by the Texas Department of Aging and Disability (“TDAD”), which observed two breakfast plates with egg yolk “smeared around the plate.” The surveyors interviewed residents and the kitchen manager, who confirmed that five of Elgin's residents had requested that the unpasteurized eggs that Elgin had purchased be served “soft cooked.” TDAD, having concluded that “nonpasteurized shell eggs when served ‘soft-cooked’ ... could lead to” serious illness and even death, found Elgin to be in noncompliance with 42 C.F.R. § 483.35(i), which requires facilities such as Elgin to serve food in a “sanitary” manner. TDAD found that Elgin's soft-cooked eggs placed its residents in “immediate jeopardy.”

On March 2, 2010, CMS adopted TDAD's findings and imposed a number of penalties: a civil monetary fine of $5,000, termination of Elgin's provider-of-care agreement, a denial of payment for new admissions, and withdrawal of Elgin's approval to conduct nurse training. CMS later rescinded most of the penalties, but Elgin was still required to pay $5,000.

Elgin requested an ALJ hearing to contest the finding of a safety deficiency and the fine. It presented significant evidence in support of the safety of its culinary operations, including the affidavit of Mary Abshire, Elgin's dietary consultant, noting that she had conducted temperature checks on eggs cooked during TDAD's survey and found them to be above the required 145°F. in all instances. Elgin also presented the affidavit of Gary Jefferson, the cook who had prepared the offending meals. He described his method of cooking eggs in a half-inch of boiling oil for several minutes so that the white was congealed but the yolk was “a little soft in the middle.” He added that no TDAD surveyor observed him cooking eggs, spoke with him, or took temperatures during the survey.

Pamela Sue Brummit, a registered dietician and food-safety instructor, provided an affidavit wherein she explained replicating Johnson's method. She noted that the eggs she cooked had temperatures ranging from 153 to 156°F. and that despite that, the yolks were still soft or slightly runny. Elgin attached a video of Brummit performing her experiment. CMS presented TDAD's statement of deficiencies and copies of a CMS letter and a Department of Agriculture report discussing the safe preparation of eggs. The parties agreed to all of the facts and presented no live testimony.

The ALJ found that the yolks were too soft, the whites uncongealed, and the final product not safely edible. CMS had made a prima facie case of noncompliance with safety regulations, and Elgin had not produced sufficient rebuttal evidence. The ALJ upheld CMS's finding of deficiency and concluded that the amount of the monetary penalty was reasonable.

On appeal to the DHHS Departmental Appeals Board, Elgin maintained again that the evidence of smeared yolk alone was not enough to make a prima facie case of noncompliance. The Appeals Board rejected that contention and concluded that CMS had met its burden, that substantial evidence supported the ALJ's decision, and that the fine of $5,000 was not unreasonable.

II.

We have jurisdiction to review the decision of the Appeals Board under 42 U.S.C. § 1320a–7a(e), which provides that, upon appeal of a decision, this court may enter an order “affirming, modifying, remanding for further consideration, or setting aside, in whole or in part, the determination of the Secretary and enforcing the same.” “[F]indings of the Secretary with respect to questions of fact, if supported by substantial evidence on the record considered as a whole, shall be conclusive.” Id. Appellate review of an agency's finding is “limited to determining whether the decision is supported by substantial evidence in the record and whether the proper legal standards were used in evaluating the evidence.” Villa v. Sullivan, 895 F.2d 1019, 1021 (5th Cir.1990). We grant deference “to the Secretary's interpretation [of the agency's regulation] unless an alternative reading is compelled by the regulation's plain language or by other indications of the Secretary's intent at the time of the regulation's promulgation.” Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994) (internal quotations omitted).

III.

We must first determine what level of deference to give DHHS's legal interpretations. There are three levels of interpretation nested within one another. The first level is 42 C.F.R. § 483.35(i)(2), which requires that long-term care facilities “[s]tore, prepare, distribute, and serve food under sanitary conditions.” That is DHHS's interpretation and implementation of 42 U.S.C. § 1320a–7j, which requires the agency to regulate nursing facilities.

That requirement in the Code of Federal Regulations (“CFR”), however, is somewhat vague—“sanitary conditions” requires further specification. Thus DHHS, through CMS, fashioned guidelines interpreting and clarifying the regulation. The second level of interpretation is CMS's interpretive manual, specifically Appendix PP of CMS's State Operations Manual (“SOM”),¹ which provides:

Final Cooking Temperatures

Cooking is a critical control point in preventing foodborne illness. Cooking to heat all parts of food to the temperature and for the time specified below will either kill dangerous organisms or inactivate them sufficiently so that there is little risk to the resident if the food is eaten promptly after cooking. Monitoring the food's internal temperature for 15 seconds determines when microorganisms can no longer survive and food is safe for consumption. Foods should reach the following internal temperatures:

...

Unpasteurized eggs when cooked to order in response to resident request and to be eaten promptly after cooking;—145 degrees F for 15 seconds; until the white is completely set and the yolk is congealed.²

The third level of interpretation is CMS's interpretation, in this case, of the SOM Appendix's requirement. The SOM has its own ambiguity—there are potentially dueling requirements regarding temperature and consistency of the egg. Based on its presentations to the ALJ, the Appeals Board, and here, CMS appears to interpret the SOM as imposing a conjunctive requirement; that is, the egg must be cooked at 145°F., and the white must be completely congealed and the yolk firm.

CMS posits, unsurprisingly, that its interpretations at all three levels should be accorded “great deference.” It contends that Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414, 65 S.Ct. 1215, 89 L.Ed. 1700 (1945), which mandates deference to an agency's interpretation of its own regulations, controls. Courts must, CMS asserts, defer to an agency's interpretation unless an “alternative” interpretation is “compelled” by the regulation's plain language. Thomas Jefferson Univ., 512 U.S. at 512, 114 S.Ct. 2381. CMS improperly mixes the last two levels of interpretation—the SOM and the SOM's later interpretation as applied to this case—into a single “interpretation” and requests Seminole Rock deference for the final product.

Elgin, on the other hand, urges that we may interpret the CFR regulation, the SOM's interpretation of the CFR, and CMS's interpretation of the SOM without reference to CMS's interpretations. Elgin points to the statement in Kansas City Southern Industries, Inc. v. Interstate Commerce Commission, 902 F.2d 423, 430 (5th Cir.1990), that, “[i]n reviewing agency actions, [the court] shall decide all relevant questions of law, and interpret statutory provisions.” (internal quotation omitted). That is, however, only half the standard and inapplicable here; Kansas City Southern reviewed agency interpretation of an originating statute, citing Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), which is not at issue in this case.

Neither CMS nor Elgin states the proper type of deference. Nor does either analyze the correct “level” of interpretation. The first level—DHHS's interpretation and implementation of the statute promulgated in the CFR—is given Chevron deference.³ The second—CMS's interpretation of the CFR as embodied in the SOM—receives Seminole Rock deference.⁴ The question, however, is what amount of deference, if any, is accorded to CMS's interpretation of the SOM.⁵

An agency's interpretation of its own regulation “becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation.” Seminole Rock, 325 U.S. at 414, 65 S.Ct. 1215. The Court reaffirmed that position in Auer v. Robbins, 519 U.S. 452, 461, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997)...