Caring Hands Medical Lab Services LLC, DAB CR5225 (2018)

Department of Health and Human Services
Civil Remedies Division

Docket No. C-18-1088
Decision No. CR5225


The Centers for Medicare & Medicaid Services (CMS), through its Medicare administrative contractor, CGS Administrators, LLC (CGS), denied the Medicare enrollment application of Petitioner, Caring Hands Medical Lab Services, LLC (Petitioner), citing non-compliance with 42 C.F.R. § 424.530(a)(1) because Petitioner did not qualify as a laboratory.

Petitioner requested a hearing before an administrative law judge to dispute the denial of its Medicare enrollment application. As explained below, CGS correctly determined that Petitioner was not in compliance with the enrollment requirements because it did not meet the definition of a laboratory. I therefore affirm the denial of Petitioner's Medicare enrollment application.

I. Background and Procedural History

Petitioner operates a clinical facility with a practice location in North Carolina. CMS Exhibit (Ex.) 1 at 3; CMS Ex. 5 at 54. It sought to expand to provide mobile laboratory services in the state of Kentucky by means of a new application to CMS. CMS Ex. 5 at 19. On May 4, 2018, CGS denied Petitioner's enrollment application seeking to establish a mobile practice in Kentucky. CMS Ex. 3. CGS denied the application pursuant to 42 C.F.R. § 424.530(a)(1), stating "[t]here is no statutory or regulatory basis which

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permits a Mobile Laboratory/Phlebotomist to enroll or receive payment in the Medicare program." Id. at 1.1

Petitioner requested reconsideration, explaining that "[t]he process ... [i]s I will be drving [sic] to draw blood work and pick up specimens from Home and Facility patients and I will be transporting the specimens to a laboratory in Kentucky to be processed." Id. at 3. On May 30, 2018, CGS issued a reconsidered determination upholding the denial of enrollment. CMS Ex. 4. CGS relied on the definition of a laboratory at 42 C.F.R. § 493.22 to conclude that "because [Petitioner is] only collecting/preparing and/or delivering specimens [it does] not meet the requirements to enroll as a mobile laboratory." Id. at 2.

Soon thereafter, Petitioner submitted another 855B enrollment application. CMS Ex. 5. In the new application, Petitioner amended the description of its process to include that its "technician will be drawing blood work from the patients and will process basic lab tests using an Istat Hand held machine for resulting" and will use the outsourced lab in Kentucky for "specialty tests." Id. at 53. CGS closed the application because the time period in which Petitioner could file an appeal of the prior denial had not yet passed. CMS Ex. 6.

Petitioner filed a request for hearing (RFH) on June 26, 2018. In its request, Petitioner reiterated that its lab technician would draw blood work and process basic lab tests using hand‑held machines, while still transporting some specimens to the outsourced lab in Kentucky for more specialized tests. P. RFH.

I was designated to hear and decide this case for the Civil Remedies Division. On July 13, 2018, I issued an Acknowledgment and Pre‑Hearing Order (Pre‑Hearing Order) to the parties. In accordance with my Order, CMS submitted its Motion for Summary Judgment (CMS Br.) along with six proposed exhibits (CMS Exs. 1‑6) on August 17, 2018. On September 12, 2018, Petitioner submitted a letter (P. Br.) and one exhibit (P. Ex. 1).

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Neither party objected to the exhibits offered by the opposing party. I therefore admit CMS Exs. 1‑6 and P. Ex. 1 into the record.

II. A Decision on the Record is Appropriate

My Pre‑hearing Order required the parties to submit written direct testimony for each proposed witness and advised that an in-person hearing would only be necessary if a party requested the opportunity to cross-examine an opposing party witness. Pre‑hearing Order ¶¶ 8-10; Civil Remedies Division Procedures (CRDP) §§ 16(b), 19(b); Pac. Regency Arvin, DAB No. 1823 at 8 (2002) (holding that the use of written direct testimony for witnesses is permissible so long as the opposing party has the opportunity to cross‑examine those witnesses).

Neither party proposed witnesses or submitted written direct testimony. Consequently, I need not hold an in-person hearing in this matter, and issue this decision based on the written record. Pre‑hearing Order ¶¶ 8-11; CRDP § 19(d). CMS's motion for summary judgment is denied as moot.

III. Issue

Whether CMS had a legitimate basis to deny Petitioner's enrollment application
seeking Medicare billing privileges under 42 C.F.R. § 424.530(a)(1) based on Petitioner's failure to comply with enrollment requirements.

IV. Jurisdiction

I have jurisdiction to decide this case. 42 C.F.R. §§ 498.3(b)(17), 498.5(l)(2).

V. Findings of Fact, Conclusions of Law, and Analysis3

A. Applicable Law

Clinical laboratories are "suppliers" for purposes of Medicare regulations. 42 C.F.R. § 1395x(d); 42 C.F.R. §§ 400.202 (definition of supplier), 498.2. The regulations define enrollment in relevant part, as "the process that Medicare uses to establish eligibility to submit claims for Medicare‑covered items and services." 42 C.F.R. § 424.502. In order to participate in the Medicare program as a supplier, an individual must meet certain criteria to enroll and receive billing privileges. 42 C.F.R §§ 424.505, 424.510. CMS may deny enrollment for any reason stated in 42 C.F.R. § 424.530.

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CMS may deny a supplier's enrollment in the Medicare program if the "supplier is determined to not be in compliance with the enrollment requirements in this subpart P or in the enrollment application applicable for its provider or supplier type, and has not submitted a plan of corrective action as outlined in part 488 of this chapter." 42 C.F.R. § 424.530(a)(1). Suppliers must be in compliance with Title XVIII of the Social Security Act and applicable Medicare regulations as well as Federal and State licensure, certification, and regulatory requirements. 42 C.F.R. § 424.516(a); see also 42 C.F.R. § 410.32(d)(1)(v) (incorporating laboratory requirements at 42 C.F.R. Part 493). In addition, certain states, like Kentucky, have their own licensure requirements for laboratories. Ken. Rev. Stat. § 333.010 et seq.

The Clinical Laboratory Improvement Amendments (CLIA) impose participation requirements for clinical laboratories that perform tests on human specimens for the purpose of diagnosis and treatment. 42 U.S.C. § 263a(a). The Medicare program pays for covered diagnostic laboratory tests if the laboratory meets the applicable requirements found in the implementing regulations. 42 C.F.R. § 410.32(d)(1)(v).

CMS defines laboratories in its governing regulations as

... a facility for the biological, microbiological, serological, chemical, immunohematological, hematological, biophysical, cytological, pathological, or other examination of materials derived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of, human beings. These examinations also include procedures to determine, measure, or otherwise describe the presence or absence of various substances or organisms in the body. Facilities only collecting or preparing specimens (or both) or only serving as a mailing service and not performing testing are not considered laboratories.

42 C.F.R. § 493.2.

Laboratories can hold different types of certificates, depending on the complexity and scope of the tests that they perform. 42 U.S.C. § 263a(b)‑(d). Such certificates are generally issued through a designated state agency, often an arm of the state department of public health. Mobile laboratories may receive an exception to provide laboratory testing if covered under the certificate of a primary location, or home base. 42 C.F.R. § 493.35(b)(1).

In its sub-regulatory guidance, CMS further specifies that a mobile laboratory is a "movable, self‑contained operational laboratory with its own personnel, equipment, and records." Ctrs. for Medicare and Medicaid Servs., Medicare State Operations Manual (SOM), CMS Pub. 100‑07, Ch. 6, § 6034 (Rev. 45, May 8, 2009, available at

Page 5 (last visited Dec. 17, 2018).

B. Discussion

1. Petitioner's operation did not qualify as a laboratory.

CMS contends that Petitioner's enrollment application for its Kentucky operation was properly denied because as described, Petitioner would not actually test the specimens it collected, and therefore would not be a laboratory. CMS Br. at 4, citing CMS Ex. 3 at 3. Petitioner now contends before me that it would in fact perform some tests, explaining that a lab technician would "process basic lab tests using an Istat Hand held machine for resulting." P. RFH; P. Br.

CMS prevails because Petitioner failed, both in its initial application and at reconsideration, to demonstrate it met the criteria for qualification as a laboratory. Specifically, Petitioner did not qualify as a laboratory because, by its own description, it would not actually test the specimens that it collected. At reconsideration, Petitioner explained that it would "draw blood work and pick up specimens" to be transported to Labcorp., a laboratory in Kentucky, to be processed. CMS Ex. 3 at 3.

But in order to qualify as a laboratory, the entity in question must perform tests on human specimens for the purpose of diagnosis and treatment. 42 U.S.C. § 263a(a). The regulatory definition of a laboratory excludes facilities that merely collect, prepare, or mail specimens or only serve as a mailing service and do not perform any testing. 42 C.F.R. § 493.2; see also SOM, Ch. 6, § 6034 (a mobile laboratory is "not a vehicle that only transports laboratory equipment, supplies or personnel from one location to another, such as a vehicle used for transporting instruments, specimens, and supplies to or from a health screening fair.") (emphasis in original).

In both its initial application and in its assertions at reconsideration, Petitioner described itself simply as a courier picking up and transporting specimens to another entity for testing. CMS Ex. 3 at 3. Such an operation is not a laboratory under the applicable law and regulations. I therefore find CMS, through its contractor, properly concluded Petitioner did not qualify as a laboratory based on information provided in its initial application for Medicare enrollment and in its request for reconsideration.

2. CMS had a legitimate basis under 42 C.F.R. § 424.530(a)(1) to deny Petitioner's Medicare enrollment application because Petitioner was not in compliance with Medicare enrollment requirements.

Petitioner now contends before me that it will perform the testing necessary to meet the regulatory definition of a laboratory, explaining that a lab technician will "process basic

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lab tests using an Istat Hand held machine for resulting." P. RFH; P. Br. Petitioner further clarifies that it will only use Labcorp., the laboratory it originally identified as its sole testing location in Kentucky, for certain specialized lab tests. Id.

Petitioner's efforts to come into compliance are laudable, but I must confine my review to the facts and circumstances that existed on or before May 30, 2018, the date of the reconsidered determination that Petitioner is appealing. See Briarwood Cmty. Mental Health Ctr., DAB No. 2414 at 10 (2011) (citing Pepper Hill Nursing & Rehab. Ctr., LLC, DAB No. 2395 at 6-7 (2011) for the proposition that, in accord with the preamble to the Part 424 enrollment regulations, the proper inquiry in a provider or supplier enrollment appeal is to ascertain the applicant's eligibility for enrollment at the time CMS or its contractor makes the relevant adverse determination). Acknowledging this constraint, I find that at the time of the reconsidered determination, the evidence shows that Petitioner was holding itself out merely as a courier of specimens to be tested at another facility. Thus, CMS had a legitimate basis to deny Petitioner's Medicare enrollment application.

CMS also argues that Petitioner's enrollment application should be denied because it has not provided any documentation to show that it satisfies Kentucky's licensure requirements. CMS Br. at 6. In response, Petitioner submitted a Kentucky Certificate of Waiver with its pre‑hearing exchange. P. Ex. 1.

To the extent this waiver may demonstrate Petitioner could satisfy Kentucky's requirements, it is still not a basis to reverse CMS's reconsidered denial of enrollment because it had not been effectuated at the time the reconsidered decision was made. As I explained above, I am constrained to consider the facts as they existed at the time of the request for reconsidered determination. The Kentucky Certificate of Waiver was issued August 28, 2018, and therefore post-dates the reconsidered determination. CMS Ex. 4, P. Ex. 1. CMS could not have considered it, and thus had a legitimate basis to deny Petitioner's enrollment application.

In closing, I note that Petitioner had already attempted to re-apply while the period to appeal the denial at issue before me was pending, and was denied on that basis. CMS Exs. 5, 6. Petitioner will in due course become free to reapply to enroll in Medicare as a mobile laboratory that is properly licensed in Kentucky and actually tests the specimens it collects.

Should its application again be denied, I urge CMS and its contractor to better identify and explain any deficiencies to Petitioner at the initial level, so Petitioner can properly address them at the reconsideration level. The opacity of the initial determination in this instance caused unnecessary delay to Petitioner and required the government to expend resources defending this case; it did no favors to either party.

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VI. Conclusion

For the foregoing reasons, I affirm CMS's determination to deny Petitioner's Medicare enrollment application.

  • 1. CMS clarifies that mobile laboratories are in fact allowed to enroll in Medicare under 42 C.F.R. § 493.35(b)(1), but contends that these provisions are not relevant here because Petitioner failed to meet enrollment requirements as a laboratory, for reasons having nothing to do with its mobile status. CMS Brief (Br.) at 2 n.1. This notice could have more clearly identified to Petitioner the nature of the deficiency in its application, but I note that CMS's reconsidered determination better explained to Petitioner that its failure to meet the definition of a laboratory formed the basis of the denial. CMS Ex. 4 at 1-2.
  • 2. The aspect of the regulatory definition of a laboratory at issue here states that "Facilities only collecting or preparing specimens (or both) or only serving as a mailing service and not performing testing are not considered laboratories."
  • 3. My findings of fact and conclusions of law are set forth numbered in italics and bold font.