Heritage v. Adhs

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

HERITAGE AT CAREFREE LLC,
Plaintiff/Appellant,

v.

ARIZONA DEPARTMENT OF HEALTH SERVICES,
Defendant/Appellee.

No. 1 CA-CV 19-0399
FILED 7-16-2020

Appeal from the Superior Court in Maricopa County
No. LC2018-000158-001
The Honorable Patricia A. Starr, Judge

AFFIRMED

COUNSEL

Jennings, Strouss & Salmon, P.L.C., Phoenix
By Jimmie W. Pursell, Jr.
Counsel for Plaintiff/Appellant

Arizona Attorney General’s Office, Phoenix
By Patricia Cracchiolo LaMagna, Aubrey Joy Corcoran
Counsel for Defendant/Appellee

OPINION

Presiding Judge Samuel A. Thumma delivered the opinion of the Court, in
which Judge Randall M. Howe and Chief Judge Peter B. Swann joined.
 HERITAGE v. ADHS
Opinion of the Court

T H U M M A, Judge:

¶1 Through an owner and an employee’s family member,
Heritage at Carefree Senior Living held powers of attorney for two of its
residents. The Arizona Department of Health Services (ADHS) found this
conduct violated an administrative rule and imposed a $2,200 civil penalty.
After unsuccessful challenges administratively and in superior court, this
appeal followed. Because Heritage has shown no error, the administrative
decision finding violations and imposing a civil penalty is affirmed.

FACTS AND PROCEDURAL HISTORY

¶2 As an assisted living facility, Heritage is subject to regulations
enacted to ensure the health and safety of its residents and prevent
exploitation of those residents. See generally Ariz. Rev. Stat. (A.R.S.) §§ 36-
132(A)(1), -405(A), -405(B)(2) (2020); Ariz. Admin. Code (A.A.C.) R9-10-801
to -820 (2020).1 Among other things, Heritage, through its manager, is
required to “ensure that policies and procedures are . . . established,
documented, and implemented to protect the health and safety of”
residents, including for “staffing and recordkeeping,” “resident medical
records,” “health care directives” and training. A.A.C. R9-10-803(C)(1)(h),
(l) & (o). To protect against possible exploitation, an ADHS Rule mandates
that Heritage shall “[n]ot act as a resident’s representative and not allow an
employee or a family member of an employee to act as a resident’s
representative for a resident who is not a family member of the employee.”
A.A.C. R9-10-803(G)(1). The application of this Rule is dispositive here.

¶3 In July 2016, ADHS received a complaint that Heritage owner
Daniela Holbura held a power of attorney (POA) for a resident in violation
of the Rule. ADHS reviewed Heritage’s medical records for the resident and
found two POAs that “designate[d] and appoint[ed]” Holbura as the
resident’s “agent:” (1) a durable business POA, effective when signed, and
(2) a durable medical POA, effective upon the resident’s disability. Both
POAs were signed, witnessed and notarized in August 2014. When
interviewed, the resident apparently did not recall that Holbura was her
designated agent. Holbura, however, told ADHS that the resident signed
the POAs when applying for benefits, and Holbura admitted knowing

1Absent material revisions after the relevant dates, statutes and rules cited

refer to the current version unless otherwise indicated.

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Opinion of the Court

about the POAs. Although Holbura stated she had not exercised either
POA, she admitted they “were still in place and had not been revoked.”

¶4 ADHS notified Heritage of these Rule violations and allowed
Heritage to submit a plan of correction. ADHS required that any plan of
correction would need to specify “[h]ow the deficiency is to be corrected,
on both a temporary and permanent basis” and “the monitoring system
[Heritage] will use to prevent the deficiency from recurring.” Although
Heritage had a right to dispute the deficiencies, instead, Heritage submitted
a plan of correction that ADHS accepted in January 2017.

¶5 The same day it accepted Heritage’s plan of correction, ADHS
received another complaint against Heritage for financial exploitation of a
resident. This second complaint alleged that Roxana Meicke, the daughter
of a Heritage employee, held POAs for another Heritage resident. ADHS
reviewed Heritage’s medical records and service plans for the resident. See
A.A.C. R9-10-801(9), -811(C)(10). These documents in Heritage’s files noted
the resident, who suffered from dementia, had signed POAs designating
Meicke as her agent. Although Heritage was obligated to retain copies of
POAs, see id. R9-10-811(C)(3), the POAs for this resident were not located in
Heritage’s files.

¶6 When contacted by ADHS, Meicke provided a copy of a
health care POA in her favor that the resident signed in December 2016, the
same day the resident was admitted to Heritage. As part of its investigation,
ADHS interviewed the resident, who reported that Meicke told the resident
to sign the POA “to get a better rate at the facility.” The ADHS investigative
report indicates that Meicke, who was not related to the resident, had access
to the resident’s bank accounts “to pay bills.” The resident, however, had
not received bank statements and did not know the status of those accounts.
The report adds that, in December 2016, a Heritage employee knew Meicke
was the resident’s medical POA and knew Meicke “was working to
become” the financial POA. Meicke said she never exercised the POA.

¶7 After investigating this second complaint, ADHS initiated an
enforcement proceeding. In September 2017, based on the “pattern, type
and severity of the . . . violations, . . . [causing] a direct risk to the life, health
and safety of patients at” Heritage, ADHS issued a notice of assessment
imposing an $11,000 civil penalty. Heritage challenged that notice. After an
evidentiary hearing, an administrative law judge (ALJ) found the evidence
showed the POAs violated the Rule and “create[d] the potential for
exploitation of a vulnerable population that the rules are designed to
protect.” The ALJ’s recommended decision found Heritage violated the

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Opinion of the Court

Rule by failing “to review its files and take other steps to ensure it is in
compliance with ADHS regulations.” The ALJ, however, recommended the
penalty be reduced to $2,000 because neither Holbura nor Meicke had
“taken . . . action . . . on behalf of the residents that harmed the residents.”
On review, ADHS accepted the ALJ’s findings and conclusions but
increased the penalty to $2,200.

¶8 Heritage appealed and the superior court affirmed. This court
has jurisdiction over Heritage’s timely appeal from the superior court’s
decision pursuant to Article 6, Section 9, of the Arizona Constitution and
A.R.S. §§ 12-913,2 -120.21(A)(1) and -2101(A)(1).

DISCUSSION

¶9 This court will affirm an agency’s decision unless it is
“contrary to law, is not supported by substantial evidence, is arbitrary and
capricious or is an abuse of discretion.” A.R.S. § 12–910(E). Legal
conclusions are reviewed de novo, Cooke v. Ariz. Dep’t of Econ. Sec., 232 Ariz.
141, 144 ¶ 13 (App. 2013), without deference “to any previous
determination” of law by the agency, A.R.S. § 12–910(E).

I. Heritage Has Not Shown ADHS Erred in Finding It Violated the
Rule.

¶10 The Rule mandates that Heritage shall “[n]ot act as a
resident’s representative and not allow an employee or a family member of
an employee to act as a resident’s representative for a resident who is not a
family member of the employee.” A.A.C. R9-10-803(G)(1) (emphasis
added). Claiming “act” and “allow” each has only one meaning, and the
terms are unambiguous, Heritage argues it did not “act” as a resident’s
representative and did not “allow” Holbura or Meicke do so, meaning it
did not violate the Rule.

¶11 In considering the text of the Rule, “[w]hen the language is
clear and unambiguous, and thus subject to only one reasonable meaning,”
the court applies “the language without using other means of statutory
construction.” State v. Gomez, 212 Ariz. 55, 57 ¶ 11 (2006); see also A.R.S. § 1-
213. When faced with ambiguity, however, this court will construe a word
“in a way that avoids absurdity and fulfills the legislature’s purpose;” to

2
Notwithstanding its reference to “the supreme court,” A.R.S. § 12-913 “has
been construed as also allowing an appeal to the court of appeals, which
was created after § 12-913 was enacted.” Svendsen v. Ariz. Dep’t of Transp.,
Motor Vehicle Div., 234 Ariz. 528, 533 ¶ 13 (App. 2014).

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that end, this court “consider[s] context, subject matter, historical
background, effects, consequences, spirit, and purpose” of the statute or
regulation, Mail Boxes v. Indus. Comm’n of Ariz., 181 Ariz. 119, 122 (1995),
“and the evil which it was designed to remedy,” Calvert v. Farmers Ins. Co.
of Ariz., 144 Ariz. 291, 294 (1985).

A. The Record Shows Heritage Did Act As The Residents’
Representative.

¶12 Heritage argues the term “act” is unambiguous and, then
pressing a narrow reading of the term, argues it did not violate the Rule
because it never used the POAs. In making this argument, Heritage
erroneously assumes that, by securing and retaining the POAs for a resident
or allowing an employee’s family member to do so, Heritage did not “act
as a resident’s representative” or “allow an employee or a family member
of an employee to act as a resident’s representative.” A.A.C. R9-10-
803(G)(1). That assumption, however, is false.

¶13 The POAs granted Holbura and Meicke broad authority as
agents of the resident who signed them. See A.R.S. § 36-3223(B) (“An agent’s
authority to make health care decisions on behalf of the principal is limited
only by the express language of the health care power of attorney.”); A.R.S.
§ 14-5501(D) (under a POA, an agent may “make financial decisions on the
principle’s behalf”). The record does not show that Holbura or Meicke used
the POAs. But that does not end the inquiry.

¶14 Heritage’s records included POAs in favor of Holbura signed
in August 2014. The health care POA expressly “supercede[d] any prior
agreement” the resident had with health care providers regarding
disclosure of medical records, and both POAs “supercede[d] and
revoke[d]” any prior POAs by the resident. The record reflects that Holbura
learned of the POAs naming her as agent at about the time they were signed
but did nothing to prevent their signing or to disclaim them. Heritage then
received and retained copies of those POAs. By accepting POAs that
superceded and revoked all prior POAs for the resident and retaining them
in its records, Heritage did “act as a resident’s representative” and did
“allow” its employee Holbura to do so. A.A.C. R9-10-803(G)(1).

¶15 The violation by Meicke is even more direct: Meicke did “act
as a resident’s representative” when she signed the updated service plan on
behalf of the resident in January 2017. See A.A.C. R9-10-803(G)(1). Heritage
argues Meicke’s doing so was inconsequential because a service plan is only
“for informational purposes.” The regulations, however, require a service
plan for each resident directing the “amount, type, and frequency of

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assisted living services being provided to the resident, including
medication administration or assistance in the self-administration of
medication” and sets forth the “level of service the resident is expected to
receive.” A.A.C. R9-10-808(A)(3)(b), (c). Moreover, Heritage points to no
“informational purposes” exception to the Rule. And Heritage has no
answer for the requirement that a service plan be signed by the resident or
the resident’s representative “when initially developed,” and, as here,
“when updated.” A.A.C. R9-10-808(A)(5).

¶16 Heritage notes Meicke signed the service plan as the
resident’s representative because the resident had gout. Although
apparently true, the possibility that a resident would become infirm is one
of the reasons for the prohibitions in the Rule, not an exception to the Rule’s
application. Similarly, although Heritage is correct that a friend could help
provide information included in the service plan, A.A.C. R9-10-
808(A)(2)(c), -810(C)(10), only the resident or the resident’s authorized
representative could sign the service plan. In these ways, through Holbura
and Meicke, Heritage violated the Rule.

¶17 Arguing “act” as used in the Rule is unambiguous, Heritage
quotes three alternative dictionary definitions for the term: “to take action,”
“to perform a specified function” or “to produce an effect.” Heritage
contends that, because its conduct does not match any of these alternative
definitions, it did not violate the Rule. The Rule, however, does not use any
of these alternative definitions Heritage identifies. Moreover, these
alternative definitions fatally undercut the argument that the Rule can have
only one meaning. The dictionary cited by Heritage, merriam-webster.com,
offers numerous potentially applicable alternative definitions for “act.” Act,
MERRIAM-WEBSTER, https://www.merriam-webster.com/dictionary/act
(last visited July 2, 2020). Given that “act” as used in the Rule reasonably
can be read to have more than one meaning, the court properly can look to
secondary textual interpretation principles, including context, subject
matter and the harm the Rule was designed to prevent. Mail Boxes, 181 Ariz.
at 122 (1995); Calvert, 144 Ariz. at 294.3

3 This approach is consistent with the cases Heritage cites, although it cites

those cases for a different proposition. See Walgreen Ariz. Drug Co. v. Ariz.
Dep’t of Revenue, 209 Ariz. 71, 76 ¶ 21 (App. 2004) (rejecting an argument, in
a tax case, that the “definition of ‘sales’ is a straightforward concept that is
susceptible of a plain-reading construction”); Sun City Grand Cmty. Ass’n v.

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Opinion of the Court

¶18 Heritage is governed by statutes and regulations designed to
ensure the health and safety of its residents and prevent their exploitation.
See generally A.R.S. §§ 36-132(A)(1), -405(A), -405(B)(2); A.A.C. R9-10-801 to
-820. Under those regulations, Heritage must ensure that its residents are
not subject to “Exploitation; Coercion; Manipulation”; . . . [or]
Misappropriation of personal and private property by the assisted living
facility’s manager,” employees or volunteers. A.A.C. R9-10-810(B). These
regulations, including the Rule, are to prevent “a direct risk to the life, health
or safety of patients or residents.” A.R.S. § 36-401(A)(45) (emphasis added);
accord A.A.C. R9-10-111(A). “Risk,” in turn, is “the potential for an adverse
outcome.” A.C.C. R9-10-101(200) (emphasis added). These regulations,
including the Rule, are to be read liberally, construed to effectuate these
legitimate, protective purposes. See A.R.S. § 1-211(B) (“Statutes shall be
liberally construed to effect their objects and to promote justice.”).

¶19 Heritage argues that, because “no harm occurred to the
residents” there could be no violation of the Rule. ADHS, however, was not
required to wait until Heritage harmed a resident to enforce the Rule.
Moreover, Heritage fails to account for the risk of catastrophic harm its
violation of the Rule created. The POAs in favor of Holbura revoked all
other POAs for the same subjects and Heritage concedes Holbura could not
act on those POAs. Accordingly, if that resident had a medical emergency,
no one would have held a valid POA to act as an agent for the resident to
direct emergency treatment. ADHS properly can enact and enforce
regulations like the Rule to prevent such potentially disastrous results.

¶20 Heritage next argues that “[n]ot every action pursuant to a
POA is harmful or exploitive.” Although true, even under Heritage’s view,
the Rule prohibits Holbura and Meicke from using the POAs. So, although
the Rule does not prohibit using all POAs, the Rule does prohibit Heritage
and its employees and their family members from doing so.

¶21 Heritage admits that a prohibited POA allows an employee to
be “in a position” to violate the Rule. Moreover, there is no dispute that
such a person acting on a POA could exploit or harm a resident. Heritage
argues, however, that neither Holbura nor Meicke would do so because
Heritage, as a “regulated facility” aware that acting on the POAs here “will
subject the facility and manager to civil penalties and potential licensing
consequences.” But notwithstanding that awareness, Heritage retained the

Maricopa Cty., 216 Ariz. 173, 178–79 ¶¶ 18, 23 (App. 2007) (construing
ambiguous terms to avoid absurd results).

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prohibited POAs in its records for an extended period and knew that a
prohibited person held a prohibited POA for another resident. Heritage did
nothing to prevent that and took no corrective action until complaints were
raised and ADHS investigated. ADHS can enact and enforce regulations,
like the Rule, to prevent such avoidable harm. See A.A.C R9-10-111
(authorizing ADHS enforcement action if “the violation poses a direct risk
to the life, health, or safety of a patient”). That is precisely what happened
here.

B. Heritage Did Allow Holbura and Meicke to Act.

¶22 Citing an American Heritage Dictionary definition of “allow” as
“to permit, authorize, enable, entitle, consent to,” Heritage argues that “to
violate the Rule, Heritage must have known about the ‘act’ of
representation . . . then have permitted it to happen.” Allow, The American
Heritage Dictionary (4th ed. 2006). Heritage speculates that, otherwise, “a
resident could name a Heritage employee as a POA, without that
employee’s or Heritage’s knowledge, then revoke that designation only
minutes later, and Heritage would still be liable for violating the Rule.”
Heritage’s argument fails for several reasons.

¶23 Heritage’s hypothetical is not presented here. Heritage either
held the prohibited POAs in its records or the records for the resident reflect
their existence. More importantly, by citing a single narrow dictionary
definition, Heritage ignores other definitions for “allow.” Indeed, merriam-
webster.com, the primary dictionary Heritage cites, includes definitions for
“allow” that include “to fail to restrain or prevent.” Allow, MERRIAM-
WEBSTER, https://www.merriam-webster.com/dictionary/allow (last
visited July 2, 2020). Given ADHS’ charge to ensure the health and safety
of residents of assisted living facilities and to prevent exploitation of these
residents, Heritage provides no persuasive reason why its narrow
construction of “allow” should govern. An assisted living facility that
possesses a prohibited POA violates the Rule. Where an assisted living
facility does not possess the prohibited POA, it will not violate the Rule by
“allow[ing] an employee or a family member of an employee” to be an
agent under the prohibited POA, unless it knew or had reason to know of
the prohibited POA.

¶24 Here, the prohibited POAs naming Holbura were in
Heritage’s records. Therefore, Heritage did “allow” Holbura to “act as a
resident’s representative.” A.A.C. R9-10-803(G)(1). For Meicke, although
Heritage did not have copies of the POAs, it knew or should have known
that Meicke was an agent identified in a prohibited POA. Along with

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Meicke’s signing the resident’s service plan for the resident, the resident’s
records held by Heritage list Meicke’s name by the question “POA?” and
note elsewhere the POA was responsible for transportation. ADHS’
investigation revealed that a Heritage employee knew Meicke was the
resident’s agent under a POA at about the same time the resident was
admitted to Heritage. And to the extent Heritage had any doubts, an
investigation going beyond asking the resident with dementia would have
been appropriate. See A.C.C. R9-10-811(C)(3) (requiring policies and
procedures to ensure medical records document resident’s representative).
On this record, Heritage knew or should have known that Meicke was the
resident’s agent under a POA. These facts support the finding that Heritage
did “allow” Meicke to “act as a resident’s representative.” A.A.C. R9-10-
803(G)(1).

II. Heritage Had Sufficient Notice of the Conduct the Rule Prohibits.

¶25 Heritage argues the $2,200 penalty was improper because
ADHS did not give fair warning that the conduct here violated the Rule. See
Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 156 (2012) (“agencies
should provide regulated parties fair warning of the conduct [a regulation]
prohibits or requires”) (quotation omitted). Unlike in Christopher, however,
Heritage has not alleged a long-standing practice of ADHS’ acquiescence to
violations of the Rule. In August 2016, after ADHS discovered the Holbura
POAs, ADHS sent Heritage a statement outlining why Heritage violated
the Rule and ordered Heritage to take steps to comply. In January 2017,
Heritage submitted a plan of correction for those violations and made no
claim it lacked notice of what the Rule prohibited. This first violation, and
Heritage’s responsive plan of correction, put Heritage on notice of what the
Rule required. Accordingly, Heritage had sufficient notice of what conduct
the Rule prohibits.

III. The Civil Penalty Was Not Arbitrary or Capricious.

¶26 Heritage argues the $2,200 civil penalty was excessive and
arbitrary and capricious and the result of an improper investigation. This
court reviews that decision for an abuse of discretion. Maricopa Cty. Sheriff’s
Office v. Maricopa Cty. Employee Merit Sys. Comm’n, 211 Ariz. 219, 223 ¶ 17
(2005); see A.R.S. § 12–910(E).

¶27 ADHS has the discretion to assess a civil penalty, A.A.C. R9-
10-111(A)(2), based on actual or potential harm, see A.A.C. R9-10-101(200).
The civil penalty imposed must not exceed $500 “for each violation,” and
“[e]ach day that a violation occurs constitutes a separate violation.” A.R.S.
§ 36-431.01(A). Here, ADHS had the discretion to impose a civil penalty fare

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larger than the penalty imposed. Accordingly, the $2,200 penalty was well
within what the Rule authorized and well within ADHS’ discretion.4

CONCLUSION

¶28 The administrative decision finding violations and imposing
a civil penalty is affirmed. Because Heritage is not the successful or
prevailing party, its request for attorneys’ fees and costs is denied. ADHS
is awarded its taxable costs on appeal contingent upon its compliance with
Ariz. R. Civ. App. P. 21.

AMY M. WOOD • Clerk of the Court
FILED: AA

4 Heritage summarily asserts that ADHS did not conduct a thorough
investigation. The record does not support this argument, nor does
Heritage specify what else ADHS should have done or not done investigate.
Accordingly, Heritage has shown no error regarding the ADHS
investigation.

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