Precision Clinical Laboratory, ALJ Ruling 2024-5 (HHS CRD March 26, 2024)

DISMISSAL

I dismiss the request for hearing that was filed on behalf of Precision Clinical Laboratory (Precision) to dispute the administrative sanctions imposed by the Centers for Medicare & Medicaid Services (CMS).  The hearing request is unsigned and does not provide the name or contact information for the individual who filed it.  Further, despite two orders to submit a notice indicating that counsel or an authorized non-attorney representative is appearing in this proceeding for Precision, Precision has failed to respond or comply with those orders.  Finally, Precision has not responded to an Order to Show Cause.

I.  Legal Framework

The Clinical Laboratory Improvement Amendments of 1988 (CLIA) establishes requirements for all laboratories that perform clinical diagnostic tests on human specimens and provides for federal certification of such laboratories.  42 U.S.C. § 263a.  The purpose of CLIA is “to strengthen federal oversight of clinical laboratories to ensure that [laboratory] tests are accurate and reliable.”  H.R. Rep. No. 100-899 at 8 (1988), reprinted in 1988 U.S.C.C.A.N. 3828-29.  The Secretary for Health and Human Services (Secretary) certifies laboratories under CLIA when those laboratories meet the conditions for certification set out in the statute and regulations that the Secretary promulgates.  42 U.S.C. § 263a(d), (f).

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Under CLIA, the Secretary has broad enforcement authority, including the ability to suspend, limit, or revoke the certificate of a laboratory that is out of compliance with one or more of the conditions for certification and/or the standards for laboratories required by the statute or established by the Secretary.  42 U.S.C. § 263a(i).  Such sanctions may be imposed after providing the laboratory with notice and an opportunity for a hearing.  42 U.S.C. § 263a(i)(1).  The Secretary may also impose intermediate sanctions, such as a civil money penalty (CMP) or a directed plan of correction.  42 U.S.C. §§ 263a(h), 1395w-2.  Intermediate sanctions can be imposed after providing the laboratory with notice and an opportunity to respond.  42 U.S.C. § 263a(h)(3).

The Secretary exercised the authority granted by 42 U.S.C. § 263a(f) and issued regulations implementing CLIA that are codified at 42 C.F.R. pt. 493.  The Secretary explained in regulations that CLIA’s enforcement mechanisms are intended to “protect all individuals served by laboratories against substandard testing of specimens,” “safeguard the general public against health and safety hazards that might result from laboratory activities,” and “motivate laboratories to comply with CLIA requirements so that they can provide accurate and reliable test results.”  42 C.F.R. § 493.1804(a).

The regulations require that each laboratory must be either CLIA-exempt or have a CLIA certificate, including a “certificate of accreditation.”  42 C.F.R. § 493.5(c)(5); 42 C.F.R. § 493.2 (definition of CLIA certificate).  The regulations further specify conditions and standards for certification that a laboratory must meet and maintain to be certified to test human specimens and participate in the Medicare program.  The regulations confer broad authority on CMS to ensure that laboratories perform as Congress intended, including the authority to inspect and sanction laboratories that fail to comply with the regulatory requirements.  The Secretary delegated to CMS the authority to suspend, limit, or revoke the CLIA certificate of a laboratory that is out of compliance with one or more CLIA conditions, and CMS may also impose alternative sanctions, such as a directed plan of correction, monitoring by the state, and a CMP.  42 C.F.R. §§ 493.1806‑493.1844.  Cancellation of Medicare payments is also authorized as a principal sanction when condition-level deficiencies are found (42 C.F.R. §§ 493.1807(a), 493.1842(a)(2)) and required when CMS suspends or revokes a laboratory’s certificate.  42 C.F.R. § 493.1842(a)(1).  Under the regulations, a single condition-level deficiency is an adequate basis for principal and alternative sanctions.  42 C.F.R. § 493.1806(a); White Lake Family Med., P.C., DAB No. 1951 at 2 (2004).  Noncompliance with even one standard, if sufficiently serious, may justify a condition-level deficiency.  Edison Med. Labs., Inc., DAB No. 1713 at 1-2 (1999) (summarizing the interrelationship between conditions and standards, and indicating that “noncompliance with one or more particular standards relating to a condition may or may not be serious enough to cause a deficiency at the level of the condition.”), aff’d, Edison Med. Lab., Inc. v. Health Care Fin. Admin., 250 F.3d 735 (Table) (3rd Cir. 2001).

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The Secretary’s regulations provide that a laboratory or prospective laboratory dissatisfied with an initial determination to impose sanctions (listed in 42 C.F.R. § 493.1844(b)) is entitled to a hearing before an administrative law judge (ALJ).  42 C.F.R. § 493.1844(a), (f).  The hearing procedures of 42 C.F.R. Part 498, Subpart D apply pursuant to 42 C.F.R. § 493.1844(a)(2).  “The suspension, limitation, or revocation of the laboratory’s CLIA certificate . . . because of noncompliance” is an initial determination that triggers a right to a hearing before an ALJ.  42 C.F.R. § 493.1844(b)(1).  Further, the cancellation of a laboratory’s approval to receive Medicare payments is an initial determination.  42 C.F.R. § 493.1844(b)(4).  In addition, the imposition of an alternative sanction, such as a CMP, is also an initial determination that is subject to review.  42 C.F.R. § 493.1844(b)(3), (f)(1).

However, a CMS determination to impose a particular alternative sanction, the amount of a CMP, or that deficiencies pose immediate jeopardy is not subject to ALJ review.  42 C.F.R. § 493.1844(c)(4), (6), (7); Edison, DAB No. 1713 (“The ALJ’s decision not to address the determination that the deficiencies constituted immediate jeopardy, while nevertheless reaching the factual challenges posed to the underpinnings of those deficiency findings is clearly mandated by the regulations on the scope of appeal.  42 C.F.R. § 493.1844(c)(6).”).  Generally, when a hearing is requested, revocation of a CLIA certificate is not effective until after a decision is issued by the ALJ.  42 C.F.R. §§ 493.1840(d)(1), (e), 493.1844(d)(2)(i).  This decision is final unless a party requests and receives Departmental Appeals Board (DAB) review.  42 C.F.R. § 493.1844(d)(4)(i).

II.  Background and Procedural History

Precision is a clinical laboratory located in Aurora, Colorado.  A July 26, 2023 survey found that Precision had eight condition-level deficiencies and that at least some of those deficiencies immediately jeopardized the health and safety of patients.  As a result, CMS authorized the issuance of an August 1, 2023 notice that provided Precision with ten days to submit a credible allegation of compliance and acceptable evidence of correction for the cited deficiencies.  Precision filed three allegations of compliance, but all were found insufficient.  In a September 14, 2023 notice, CMS indicated that it was proposing the imposition of sanctions on Precision and that Precision had ten days to submit evidence or information as to why sanctions should not be imposed.  Precision filed two submissions in response to the notice.  On October 26, 2023, Precision’s laboratory was surveyed again.  The survey confirmed that Precision was still out of compliance with five of the eight conditions originally identified by the July 26, 2023 survey.  Electronic Filing System (E-File) Doc. No. 1a at 1-3.

On December 1, 2023, CMS issued a notice of initial determination imposing the following sanctions on Precision:  revocation of CLIA certificate; suspension of CLIA certificate; cancellation of approval to receive Medicare and Medicaid payments; and a directed portion of a plan of correction.  E-File Doc. No. 1a at 4-5.  The notice also

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informed Precision of its right to request a hearing before an ALJ to dispute the imposition of sanctions.  The notice provided specific requirements on how to file the hearing request.  E-File Doc. No. 1a at 5-6.

On January 31, 2024, a document was electronically filed with the Civil Remedies Division (CRD) that stated in the first line:  “This appeal is in regard to Precision Clinical Laboratory, LLC.”  E-File Doc. No. 1 at 1.  Most of the document restated the procedural history leading to the December 1, 2023 notice of initial determination; however, the document ended with a claim of unfair treatment and a request for reconsideration of the sanctions.  E-File Doc. No. 1.

On February 5, 2024, CRD issued an Acknowledgment and Pre-Hearing Order (Prehearing Order), signed by Administrative Law Judge Steven T. Kessel, and the Civil Remedies Division Procedures (CRDP).  E-File Doc. Nos. 2, 2a.  On February 6, 2024, CRD issued a notice that Judge Kessel was assigned to Precision’s appeal, Judge Kessel’s Prehearing Order had been issued, and that “[i]t is critical that you carefully review the order. . . .”  E-File Doc. No. 3.

On February 12, 2024, CMS’s attorney filed the Agency’s Notice of Entry of Appearance.  E-File Doc. No. 4.

On February 29, 2024, the Director of CRD transferred this case from Judge Kessel to me for adjudication.  E-File Doc. No. 5.

On February 29, 2024, I issued an order adopting Judge Kessel’s February 5, 2024 Prehearing Order.  My order also included the following:

Precision Clinical Laboratory’s Representative

The Prehearing Order required the parties to submit a notice of appearance (for an attorney) or a notice of appointment (for a non-attorney representative) by February 15, 2024.  [Prehearing Order] ¶ 2.  Precision Clinical Laboratory (Petitioner) did not do so.  Therefore, Petitioner must submit, no later than March 5, 2024, an appropriate notice concerning representation in accordance with [Prehearing Order] ¶ 2 and 42 C.F.R. § 498.10.

E-File Doc. No. 6.  Precision did not file anything in response to my February 29, 2024 order.  Therefore, on March 8, 2024, I issued an Order to Show Cause why I should not dismiss Precision’s hearing request.  The show cause order stated:

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This case was transferred to me from Judge Steven T. Kessel.  On February 29, 2024, I issued an order adopting Judge Kessel’s February 5, 2024 Prehearing Order.  In the February 29 order, I directed Petitioner to comply with paragraph 2 of the Prehearing Order by March 5, 2024 (i.e., Petitioner’s representative must submit, as appropriate, a notice of appearance or a notice of appointment).  Nothing has been filed as of this date.

Petitioner, as an entity, must have a properly appointed representative so that there is a person who can act on its behalf and accept receipt of notices and filings.  See 42 C.F.R. § 498.10-.11.  Therefore, Petitioner’s repeated failure to give notice of its representative not only evidences a failure to comply with orders issued by administrative law judges but also impedes the progression of this case.  Failing to comply with orders that interferes with the speedy, orderly, or fair conduct of these proceedings may result in sanctions.  Prehearing Order ¶ 13; Civil Remedies Division Procedures § 23.

In addition, Petitioner’s hearing request is not signed and does not indicate who filed it on Petitioner’s behalf.  The request for hearing must be submitted by “[t]he affected party or its legal representative or other authorized official.”  42 C.F.R. § 498.40(a)(2).  However, no representative has filed a notice of appearance or appointment.  As a result, there is no one to confirm that the hearing request was filed by someone authorized to do so.  Therefore, it is a defective hearing request and Petitioner may not be a proper party to this case.  42 C.F.R. § 498.70(b).

Finally, Petitioner’s failure to respond to my order indicates the possibility that Petitioner has abandoned this case.  42 C.F.R. § 498.69.

Therefore, by March 18, 2024, Petitioner must show cause why I should not dismiss its hearing request as a sanction for failing to comply with orders, because the hearing request was not filed by an authorized individual, and/or Petitioner has abandoned this case.

E-File Doc. No. 7.  Precision did not file a response to the show cause order.

III.  Discussion

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As stated above, a CLIA certified laboratory has the right to an ALJ hearing to dispute CMS imposed sanctions.  42 U.S.C. § 263a(i)(1); 42 C.F.R. § 493.1844(a), (f).  The hearing procedures of 42 C.F.R. Part 498, Subpart D apply to those appeals.  42 C.F.R. § 493.1844(a)(2).

To request a hearing, “[t]he affected party or its legal representative or other authorized official must file the request in writing within 60 days from receipt of the notice of initial . . . determination. . . .”1  42 C.F.R. § 498.40(a)(2).  “All hearing requests must be signed by the party requesting a hearing or its authorized representative.”  CRDP § 2(c).

Affected parties may be represented by either attorneys or individuals who are not attorneys.  42 C.F.R. § 498.10; CRDP § 3(a)-(b).  Representatives have the authority to:

1) Give and accept any notice or request pertinent to the proceedings set forth in this part;

2) Present evidence and allegations as to facts and law in any proceedings affecting that party to the same extent as the party; and

3) Obtain information to the same extent as the party.

42 C.F.R. § 498.11(a).  When an affected party is an entity, and not an individual, the affected party can only act through an authorized representative.

If an affected party wants an attorney to serve as its representative, then that attorney must file a signed statement that the attorney has the authority to represent the affected party.  42 C.F.R. § 498.10(c); CRDP § 3(a); see also 5 U.S.C. § 500(b).  If an affected party wants a non-attorney to serve as its representative, then the affected party must file with the ALJ a written notice of the appointment.  42 C.F.R. § 498.10(b).  The written notice of appointment must be signed by the affected party or the affected party’s authorized official, such as its president or chief executive officer.  CRDP § 3(b)(ii).

In the present case, a document was filed with CRD on behalf of Precision appealing CMS’s initial determination to impose sanctions.  However, that document did not have a letterhead, a signature of the person filing it, or the name and contact information of the person filing it.  In response, CRD issued Judge Kessel’s Prehearing Order on February 5, 2024, which directed the parties to file, by February 15, 2024, either a Notice of Entry of Appearance by an attorney or “written notice of appointment” for a non-attorney

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representative.  Prehearing Order ¶ 2.  CMS’s attorney filed a notice entering an appearance in this case; however, nothing was filed on Precision’s behalf.

As stated earlier, I issued an order on February 29, 2024, providing Precision another opportunity to comply with Prehearing Order ¶ 2; however, nothing was filed by the due date.  Finally, I issued a show cause order because Precision did not comply with either Judge Kessel’s Prehearing Order or my February 29, 2024 order.  In the show cause order, I indicated that the lack of an officially designated representative for Precision may result in dismissal.

The pertinent regulation states that an ALJ may dismiss a hearing request when “[t]he party requesting a hearing is not a proper party or does not otherwise have a right to a hearing.”  42 C.F.R. § 498.70(b).  Applying this regulation, the DAB upheld the dismissal of a hearing request because the individual who filed a hearing request on behalf of an entity failed to submit a notice of appointment as representative of that entity.  Sunview Care & Rehab Ctr., LLC, DAB No. 2713 at 10-11 (2016).  In coming to this conclusion, the DAB recounted how the notice of initial determination provided information as to the requirements for filing a hearing request, the ALJ’s prehearing order required a notice of appointment for the entity’s non-attorney representative, and the ALJ’s Order to File Designation of Representative and to Show Cause questioned the authority of the individual who filed the request for hearing and required the filing of a signed notice of appointment of representative.  Sunview, DAB No. 2713 at 3-6.  The DAB noted that a signed notice of appearance was not filed in response to the ALJ’s orders and the ALJ dismissed the hearing request under 42 C.F.R. § 498.70(b) due to a lack of authority to file the hearing request on behalf of the entity.  Sunview, DAB No. 2713 at 7-8.

In the present case, CMS’s notice of initial determination provided information on how Precision could request a hearing.  The notice expressly stated that CRD requires all hearing requests to be signed.  E-File Doc. No. 1a at 6.  However, the hearing request was not only unsigned, but provided no information on its face as to who filed it.  E-File Doc. No. 1.  Despite the requirement to file a notice of appointment for Precision’s representative in the Prehearing Order, the February 29, 2024 order, and the March 8, 2024 Order to Show Cause, no such notice was filed.  Therefore, I conclude that the scenario in the present case is sufficiently analogous to Sunview that dismissal under 42 C.F.R. § 498.70(b) is appropriate.

Further, I note that CRDP § 2(c) authorizes the dismissal of an unsigned hearing request.  The failure to submit a signed notice of appointment of representative precludes the possibility of obtaining a signed hearing request for Precision or to confirm who submitted the hearing request.

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Finally, Precision failed to comply with three orders concerning the filing of a notice of appointment.  A failure to comply with orders is sanctionable conduct if it interferes with the speedy, orderly, or fair conduct of the proceeding.  Prehearing Order ¶ 13; CRDP § 23.  The DAB has made it clear that it is not acceptable to disregard orders from ALJs.  Chit-Chat Inc., DAB No. 2936 at 9 (2019) (“Compliance with ALJ orders is not optional.”); Sunview, DAB No. 2713 at 11 (noting DAB’s concern that ALJ orders not be disregarded).  In the present case, dismissal is an appropriate sanction given the number of orders that have been disregarded coupled with the need to establish Precision’s authorized representative.

III.  Conclusion

I dismiss Precision’s hearing request.

Precision may request, within 60 days of receiving this order, that I vacate the dismissal of the hearing request if Precision believes good cause exists for me to do so.  42 C.F.R. § 498.72.