Petitioner

Decision No. 1713

Health Care Financing Administration

FINAL DECISION ON REVIEW OF ADMINISTRATIVE LAW JUDGE DECISION

Edison Medical Laboratories, Inc., (Edison) appealed the June 9, 1999 decision of Administrative Law Judge (ALJ) Steven Kessel finding that the Health Care Financing Administration (HCFA) was authorized to impose remedies on Edison under the Clinical Laboratory Improvement Amendments of 1988, Public Law No. 100-578, amending ' 353 of the Public Health Service Act, codified at 42 U.S.C. ' 263a et seq. (CLIA), and effectively revoking Edison's CLIA certificate. Edison Medical Laboratories, Inc., DAB CR599 (1999) (ALJ Decision).

Edison excepted to the ALJ Decision on several bases. Edison argued that it had not received a due process hearing because (1) the ALJ wrongly concluded he could not reach the question of whether the deficiencies charged constituted immediate jeopardy, (2) the ALJ employed the wrong burden of proof, and (3) neither HCFA nor the ALJ provided a neutral and objective review of the State inspection results. Edison asserted that the findings of the inspectors were erroneous and unfair because the State agency designated by HCFA to perform surveys in New Jersey was seeking to close down minority-owned laboratories. Edison also alleged that the ALJ misunderstood the CLIA survey and sanction process, which Edison argued had been misapplied to it in this case, because it was not given a chance to show that it had corrected any deficiencies before it was suspended. Further, Edison contended the ALJ erred in weighing the evidence in the record concerning specific deficiency findings.

We find that Edison's exceptions to the ALJ Decision are without merit for the reasons explained below. Therefore, we affirm the ALJ Decision and uphold the revocation of Edison's CLIA certificate.¹

Legal Background

Under CLIA, any laboratory that performs clinical diagnostic tests on human specimens must meet federal certification requirements established by the Secretary of the United States Department of Health and Human Services (Secretary). 42 U.S.C. ' 263a; 42 C.F.R. Part 493. Furthermore, in order to bill for services provided under Medicaid and Medicare, Titles XVIII and XIX of the Social Security Act (Act), the laboratory must be in compliance with CLIA requirements. The requirements consist of conditions that set out general guidelines for a laboratory to qualify for certification in applicable areas of testing and standards that define specific elements under the general conditions. 42 C.F.R. Part 493. The standards are components of the conditions of laboratory certification, so that non-compliance 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. See 42 C.F.R. '' 493.2, 493.1812-16; 57 Fed. Reg. 7218, 7219 (Feb. 28, 1992). Each "condition" represents a major division of laboratory services to be offered by the laboratory or required safety protections, so that a failure by a laboratory to comply with even a single condition in a area of testing offered by that laboratory represents a serious breakdown in one of the major health care delivery or safety systems of the laboratory critical to ensuring the provision of acceptable health care services. Ward General Practice Clinic, DAB No. 1624, at 2 (1997).

CLIA empowered the Secretary to adopt a range of intermediate or alternative sanctions to deal with laboratories that fail to maintain compliance with applicable conditions of participation. See Act, ' 1846(a). HCFA retains broad discretion under CLIA to select a course of action to ensure that laboratories remain in or promptly return to compliance with CLIA requirements. 42 C.F.R. ' 493.1800(a)(2)(iii); see also 57 Fed. Reg. at 7224.. The action which HCFA will take if a survey finds that a laboratory is not in compliance with the requirements depends in part on (1) whether the deficiencies are only at the level of one or more standards or rise to the level of noncompliance with one or more conditions, and (2) whether the deficiencies pose an immediate jeopardy. See 42 C.F.R. '' 493.1812 to 493.1816.²

Where none of the deficiencies are at the level of a condition requirement, the laboratory must submit a plan of correction and show on revisit that it has corrected the deficiencies. 42 C.F.R. ' 493.1816. If the deficiencies are not corrected within 12 months, HCFA will cancel the laboratory's approval to receive Medicare payments and give notice of suspension, limitation or revocation of the laboratory's CLIA certificate. Id. Where the deficiencies are at the condition level but do not pose immediate jeopardy, HCFA has the option of imposing a "principal sanction," i.e., canceling Medicare approval or suspending, limiting or revoking the CLIA certificate, or of imposing one or more "alternative sanctions." 42 C.F.R. ' 493.1814. If alternative sanctions are imposed, and the deficiencies are not corrected within 12 months, a further sanction, including suspension or revocation, may be imposed. Id. Where the deficiencies are found to pose immediate jeopardy, HCFA "requires the laboratory to take immediate action to remove the jeopardy;" HCFA may choose to put alternative sanctions into place to bring the laboratory into compliance, in which case a principal sanction will be imposed if a revisit indicates that the jeopardy has not been removed. 42 C.F.R. ' 493.1812. HCFA may impose a principal sanction in the case of immediate jeopardy with five days' notice to the laboratory. 42 C.F.R. ' 493.1844(g) and (h). In such cases, any suspension or limitation of the laboratory's CLIA certificate will take effect without delay, even if a hearing is requested. 42 C.F.R. ' 493.1844(d)(2).

The suspension of a laboratory's CLIA certificate because of noncompliance with CLIA requirements is an initial determination subject to appeal to an ALJ. 42 C.F.R. ' 493.1844(b)(1). If the laboratory appeals, the suspension generally does not take effect until after an ALJ hearing. 42 C.F.R. ' 493.1844(d)(1). However, as noted, in cases where immediate jeopardy was found, an appeal will not delay the suspension. The laboratory may still appeal the suspension but may not appeal the determination that the deficiencies constituted immediate jeopardy (and therefore justified suspension taking effect while the appeal was pending). 42 C.F.R. ' 493.1844(c)(6) and (d)(2). However, in those circumstances, the laboratory is entitled to an expedited hearing. 42 U.S.C. ' 263a(i)(2).

Factual Background

It was not disputed that Edison is a clinical laboratory in New Jersey that performs tests subject to CLIA. It was surveyed by the New Jersey Department of Health and Senior Services (NJDHSS) to determine if it was in compliance with the applicable conditions of participation. The inspection was triggered by a complaint and resulted in findings that Edison was out of compliance with nine condition-level requirements.³ Multiple survey visits took place between April and July of 1998; in addition, there were later reviews by the inspectors of documents requested from Edison.

The dates of visits were April 28-30, May 1 and 6, June 4, 5, 11, 16, and 24, and July 8-10. The parties disputed the reasons that the survey was conducted over this extended period. The inspector testified that the initial focus was on possible billing problems but that the conditions which were observed raised serious concerns about quality which led to a more in-depth survey. Transcript of Hearing on February 2, 1999 (Tr. 2/2) at 38, 99 (Duffy). (We note that since the hearing continued over three days and transcripts were not numbered consecutively we have included a date in each transcript citation.) HCFA further explained that a time-consuming review of raw data records was required to determine the authenticity of reported results and that the surveyors encountered difficulty in obtaining requested records and in getting cooperation from Edison's staff. HCFA Br. at 3-4, citing Tr. 2/2, at 40-47, 194, 199 and HCFA Ex. 3, at 14-18. Edison, on the other hand, attributed the length of the survey to the inspectors' bias against minority laboratories, and their resultant unreasonable demands and threats, and further complained that the visits disrupted operations. See, e.g., Edison Br. at 52-53, 87, 91-93. We discuss the charges of bias in the section on Edison's legal arguments. Ultimately, however, the issue before us is whether substantial evidence supports the ALJ's findings that Edison violated one or more conditions, not whether the survey which generated the findings appealed to the ALJ was well-conducted or inconvenient. The case must rest on what the evidence in the record demonstrates as to Edison's compliance. We discuss the evidence in the section on Edison's factual arguments.

NJDHSS notified Edison of its findings in a letter dated September 30, 1998 which read, in part, as follows:

HCFA Ex. 1, at 1 (emphasis in original). Attached with this notification was a lengthy statement of the deficiencies found. HCFA Ex. 2. The NJDHSS letter informed Edison that it had ten days in which to provide a "credible allegation of compliance," consisting of either evidence that the deficiencies did not exist or were already corrected or a satisfactory plan for their correction in an acceptable amount of time. Id. at 2. Should a credible allegation be provided within the specified time, NJDHSS indicated that it would promptly conduct a follow-up survey. Id.

Edison responded with a letter dated October 9, 1998 in which it denied that any serious deficiencies existed and asserted that the College of American Pathologists had recertified its accreditation after a re-examination conducted during the same time frame. HCFA Ex. 4, at 1. Edison asserted that the inspectors' findings were false or erroneous because the inspectors failed to ask Edison's staff for information that would have documented compliance, while at the same time making unreasonable and disruptive demands for voluminous records. Id. at 2. Edison denied that it fabricated test data or deliberately reported erroneous results. Id. Further, Edison complained that it was not informed of the allegation of conditions constituting immediate jeopardy until it received the report long after the close of the survey. Id. Edison enclosed a copy of the statement of deficiencies annotated with its responses to each finding which allegedly showed credible documentation of compliance and requested a follow-up visit by different inspectors. HCFA Ex. 4, at 3; HCFA Ex. 3.

NJDHSS rejected Edison's response as inadequate to demonstrate either that the inspection findings were wrong or a credible plan for correcting them was instituted. HCFA Ex. 5, at 1. Consequently, NJDHSS did not perform a follow-up survey and instead recommended that HCFA impose sanctions, including the immediate suspension of Edison's CLIA certificate. HCFA agreed and notified Edison, in a letter dated November 20, 1998, that its CLIA certificate would be suspended and all Medicare payments to it canceled as of November 27, 1998. HCFA Ex. 7. HCFA noted that Edison had been found out of compliance with nine CLIA conditions set out in the following regulations: 42 C.F.R. '' 493.801, 493.1101, 493.1201, 493.1241, 493.1245, 493.1441, 493.1447, 493.1459, and 493.1701. Id. at 1. Based on reviewing those specific deficiencies, HCFA stated that it had determined that they posed an immediate jeopardy and, in particular, expressed concern about three major areas: (1) fabrication of results from a particular apparatus for clinical testing known as a nephelometer; (2) numerous errors in performing a variety of immunofluorescent tests leading to reporting incorrect clinical results; and (3) incorrect calculations with the result that false positive hepatitis results were routinely reported and incorrect interpretations were made in reporting Rheumatoid factor tests. Id. at 2.

Edison requested and received an expedited hearing before the ALJ. See Edison Hearing Request at 1 (Nov. 21, 1998); Edison letter to Civil Remedies Division (Dec. 7, 1998); Order and Notice of Hearing (Dec. 22, 1998). The ALJ found that Edison "failed to provide laboratory services in a manner that complied with accepted standards for quality." ALJ Decision at 6. The ALJ found that Edison's derelictions included reporting to physicians test results on the nephelometer that were "not technically possible" and that therefore were the product of either intentional falsification or gross incompetence. Id. The ALJ also found that Edison's staff conducted other clinical tests incompetently, including alpha fetoprotein tests, low density lipoprotein (LDL) tests, and indirect immunofluorescent antibody (IFA) tests. Id. The ALJ concluded that the deficiencies demonstrated in Edison's clinical testing were "so egregious and pervasive" as to rise to the level of violating conditions of participation, rather than failing to meet individual standards, in regard to all nine conditions listed above. Id. at 15-20. Based on his findings and conclusions, the ALJ upheld HCFA's imposition of principal remedies, including the suspension which automatically converted to a revocation of Edison's CLIA certificate upon issuance of the ALJ Decision. Id. at 20.

Standard of Review

Our standard for review of an ALJ decision on a disputed issue of law is whether the ALJ decision is erroneous. Our standard for review on a disputed issue of fact is whether the ALJ decision as to that fact is supported by substantial evidence on the record as a whole.

In our discussion, we have grouped Edison's arguments in order to address first those that attack the legal foundation of the ALJ Decision and then those that attack the factual findings underlying that decision. In its briefing, Edison intermingled these contentions, but since the standard of review differs, we address them separately here.⁴

Legal Arguments

Duplicative and untimely documents submitted by Edison on appeal are inadmissible.

As a preliminary matter, we note that Edison attached six documents to its reply brief that were styled as DAB Rebuttal Attachments A through G. Attachment D appears to be the same as Edison's Exhibit 36 before the ALJ and is therefore merely duplicative.

As for the remaining attachments, Edison offered no explanation justifying its proffer of this evidence at the end of the appeal process. Nothing on the face of the documents suggests any basis to believe that these documents could not have been made available for submission earlier in the proceedings before the ALJ. The documents consisted of: (A) a 15-page list of HCFA exhibits with unattributed commentaries; (B) a letter dated April 19, 1999 from an apparent supplier of antisera which states that it was sent in response to a request by Dr. Patel of Edison on April 16, 1999 (i.e., Edison did not even ask for this letter until months after the ALJ hearing was completed); (C) a letter to Edison dated May 27, 1998 from the Medicare Fraud Investigations Unit requesting cooperation in a review of fiscal and other records; (D) a letter dated April 8, 1998 to Edison from HCFA reporting adverse findings of a complaint survey of Edison conducted by the American Society for Cytotechnology; (E) a five-page list, from no identifiable source, of clinical laboratories in New Jersey assertedly closed and the purported racial profiles of their owners; (F) a letter dated June 9, 1998 signed by the President of Network Solutions apparently relating to a computer system crash at Edison on June 5, 1998; and (G) four pages of materials purporting to be selected pages from a Benetech Reference Manual on alpha fetoprotein with a attached memorandum dated October 6, 1998.⁵

The appeal regulations provide that the Board "may admit evidence into the record in addition to the evidence introduced at the ALJ hearing . . . if the Board considers that the additional evidence is relevant and material to an issue before it." 42 C.F.R. ' 498.86(a). The Board, thus, has discretion to admit evidence in appropriate cases where the proponent shows that it is relevant and material. We decline to admit the exhibits proffered by Edison because their unexplained untimely submission makes their reliability and authenticity questionable, and hence undercuts their relevance and materiality. Further, to permit evidence to be received under these circumstance would undermine the purposes of holding evidentiary hearing in the first instance.

The purpose of requiring parties to present evidentiary materials in a timely fashion is to allow the opposing party a fair opportunity to test their reliability, authenticity and relevance at the hearing and to present conflicting evidence to bear on the proper weight to be given to the conflicting evidence. Edison had ample notice of the proper times for submission of exhibits and did not assert any difficulty in meeting those deadlines. See, e.g., Order and Notice of Hearing at 2 (December 22, 1998). Admitting these attachments as evidence at this late date would merely serve to permit Edison to evade the adversarial system and to undermine the hearing process. The documents are therefore excluded.

The ALJ properly reviewed the underlying deficiencies and properly declined to review finding of whether the deficiencies constituted immediate jeopardy.

The ALJ held that Edison could appeal the findings of condition-level deficiencies on which the imposition of remedies against it was based, but not the determination that those deficiencies posed an immediate jeopardy to patients. ALJ Decision at 5, 20. The ALJ then considered the issue of whether Edison was in fact out of compliance with one or more conditions of participation, which would authorize HCFA to suspend its CLIA certificate and cancel its approval to receive Medicare payments, or whether, as Edison contended, any problems in its operations were minor and were corrected. Id. at 6. Based on a detailed review of each of the nine conditions with which HCFA alleged that Edison was out of compliance, the ALJ reached the overall conclusion that the "evidence plainly establishes that [Edison] was grossly incompetent in the way it conducted laboratory tests to the extent that patients were at risk from [Edison's] performance of those tests." Id. at 7.

Edison contended that the ALJ erred in failing to address whether the deficiencies posed immediate jeopardy. Edison Br. at 2. Edison further argued that, since the suspension was based on deficiencies which pose immediate jeopardy, the ALJ could not uphold the suspension based on such deficiencies when he declined to reach the question of whether the deficiencies constituted immediate jeopardy. Id. at 2-3. Instead, Edison contended, the ALJ had waived his authority to review the deficiencies and therefore, "technically as a matter of law," Edison's CLIA certificate could not be revoked. Id. at 82-83. In addition, Edison argued that it was prejudiced by HCFA's determination of immediate jeopardy, as distinct from the issue of the validity of the deficiency findings themselves, in that Edison was not given an opportunity to present a revised plan of correction and demonstrate renewed compliance but rather was suspended before a hearing based on the claim of immediate jeopardy could be held. Id. at 72. Edison argued that this action was inconsistent with CLIA's purpose of inducing laboratories to come into compliance during the review process, rather than suspending laboratories. Id.

While one aim of the CLIA enforcement scheme is indeed to motivate laboratories to correct noncompliance and improve quality, the preamble to the enforcement regulations points out that the central purpose of CLIA "is to strengthen the Federal oversight of laboratories in order to ensure that test results are accurate and reliable." 57 Fed. Reg. 7,218 (Feb. 28, 1992). Consequently, the goal of improving laboratory performance is made subject in the regulations to the need to protect "all individuals served by laboratories against substandard testing of specimens" and to safeguard the public "against health and safety hazards that might result from laboratory activities." 42 C.F.R. ' 493.1804(a). Edison's complaint about the regulatory bar on appeal of a finding of immediate jeopardy must thus be considered in light of the overriding and important considerations of patient protection.

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); ALJ Decision at 5. Edison is mistaken in its argument that, by not reaching the question of immediate jeopardy, the ALJ must perforce have declined to evaluate the deficiencies on which the immediate jeopardy finding was based. The issues of whether condition-level deficiencies did in fact exist and whether those deficiencies posed immediate jeopardy are analytically distinct.

Edison also contended that the charge of immediate jeopardy must have been unfounded because it was not lodged until the NJDHSS notification letter quoted in the background section which was sent September 30, 1998, while the survey concluded July 10, 1998.⁶ Edison argued that HCFA's manual for state survey agencies required a warning letter to the laboratory no later than three working days after a survey where immediate jeopardy findings were made. Edison Br. at 5; HCFA State Operations Manual (SOM) at SOP 6282 (erroneously cited as 6340 in Edison's briefing). The time line spelled out in the manual provides for at least five calendar days' notice before any sanction will be imposed and for a ten-day period in which a laboratory may make corrections and demonstrate compliance. The manual states that the enforcement action will be completed within 23 calendar days of the survey and it follows that the short time frame for the state agency to report the immediate jeopardy is necessary to provide the required notice and correction opportunities to the laboratory.

In the present case, NJDHSS did not provide notice within the contemplated time frame that it had found immediate jeopardy, at least in part because its conclusion was based on later in-office review of the extensive documents and data set retrieved from Edison. See HCFA Br. at 2-4, and record citations therein. However, Edison failed to demonstrate any prejudice from the extra time which it had after the close of the survey before NJDHSS determined that its deficiencies posed an immediate jeopardy and initiated enforcement action. Edison eventually received the full notice period to which it was entitled prior to the imposition of sanctions, and an opportunity to submit a credible allegation of compliance as called for by the manual.

Even though Edison repeatedly asserted that it had no idea until it received the statement of deficiencies that the inspectors thought that it had serious quality problems, Edison admitted that the inspectors asked during the inspection itself that the laboratory voluntarily suspend alpha-fetoprotein testing because of the many problems the inspectors said they had seen with those tests. See Edison Reply Br. at 65; Tr. 2/2, at 133-34. Edison refused to do so. Tr. 2/2, at 134. Despite this warning, and despite the additional time resulting from the delay in issuance of the statement of deficiencies in which Edison could have been improving its operations, Edison still submitted an unacceptable response to the statement of deficiencies. HCFA Ex. 3.

The ALJ correctly assigned the burden of proof.

The ALJ stated that HCFA had the burden of coming forward with sufficient evidence to prove a prima facie case of non-compliance with one or more CLIA conditions. ALJ Decision at 5. Edison then had the ultimate burden of showing by a preponderance of the evidence that it was not out of compliance with the conditions placed at issue by HCFA in its prima facie case. Id. The ALJ relied on a Board decision which addressed the allocation of the burden of proof in the analogous area of nursing home participation in the Medicare and Medicaid programs. Hillman Rehabilitation Center, DAB No. 1611, at 8-25 (1997) (Hillman I), aff=d in Hillman Rehabilitation Center v. U.S. Dep't of Health and Human Services, No. 98-3789, at 21-38 (D.N.J. May 13, 1999); see also Cross Creek Health Care Center, DAB No. 1665, at 13, n.10. (1998); Warren N. Barr Pavilion of Illinois Masonic Medical Center, DAB No. 1705 (1999).

The basic reasoning behind the allocation of the burden in nursing homes cases applies as well to the CLIA enforcement scheme. Just as payment to a nursing home is permissible only when it demonstrates that it is in substantial compliance with the requirements for participation (and not merely because it has a provider agreement), payment of Medicaid funds to a laboratory for services is permitted by section 1902(a)(9)(C) of the Act only if the laboratory meets CLIA requirements (and not merely because it holds a CLIA certificate).⁷ See also Act, '' 1861(e)(9) and 1861(s)(16) and (17). Just as the nursing home participation requirements are intended to protect the health and safety of the residents who are the beneficiaries of the program, the CLIA standards and conditions are intended to protect the health and safety of patients who depend on the services of the certified laboratories. Id.; House Rep. No. 899, 100^th Cong., 2d Sess. at 8-19 (Oct. 6, 1988) (House Report). Suspension or revocation of a laboratory's certification for failure to maintain compliance is also analogous to nursing home termination in that it does not necessarily derive from reasons bearing on the integrity or reputation of the provider, unlike exclusions based on wrongdoing or fraud. Instead, laboratory sanctions, like terminations of nursing homes or Head Start grantees, raise the central issue of whether conditions for receipt of federal funds have been met. In such cases, this Board has held that the federal agency must make a prima facie case that there exists sufficient evidence to satisfy the regulatory standards for adverse action, but that the provider or grantee has the ultimate burden of persuasion. Hillman I at 8; Richmond Community Action Program, Inc., DAB No. 1571, at 6-7 (1996); see also Rural Day Care Ass'n of N.E. North Carolina, DAB No. 1489, at 8 (1994), aff'd Civ. No. 2:94-CV-40-BO (E.D.N.C., Dec. 19, 1995) (unpublished).

We thus find that the ALJ's reliance on Hillman I in articulating the distribution of the burden of proof in this case was appropriate. As is clear in our discussion below, the witnesses and documentation presented by HCFA unquestionably established a prima facie case that Edison was not in compliance with CLIA conditions. The allegations against Edison in the statement of deficiencies and in the case presented by HCFA were clear, specific, and detailed. Edison's response consisted largely of personal attacks on the veracity and competence of the inspectors, self-serving denials of wrongdoing by Edison's principals, and proffers of large amounts of disorganized documentation lacking any useful explanation through expert testimony as to how particular documents might support any of Edison's defenses. Even in the few instances where some expert testimony was offered, it often failed to support the arguments made by Edison. Edison thus failed to carry its burden of proof to show by a preponderance of the evidence as a whole that it was in compliance with CLIA conditions.

We also note that, in light of the factual record of egregious and dangerous conditions prevailing at Edison as discussed below, the distribution of the burden of proof was largely irrelevant, since HCFA clearly proved by at least a preponderance of the evidence that Edison was out of compliance with at least one condition requirement. Thus, even under Edison's proposed reversal of the burden of proof, the evidence would have sufficed to sustain the imposition of principal sanctions on Edison.

Edison's remaining due process claims are meritless.

Edison also alleged generally that it had not received due process to which it was entitled, although it was not entirely clear in which respect Edison claimed that the procedural protections accorded it were lacking. See, e.g., Edison Reply Br. at 84-86, 90-94. For the most part, Edison's arguments under this heading related to matters discussed elsewhere, such as its attack on the ALJ's refusal to evaluate the existence of immediate jeopardy, its dispute of the factual basis for the ALJ's findings of condition-level deficiencies, its claims that inspectors and/or the ALJ were hostile or biased against it, and its argument that alternative rather than principal sanctions could or should have been applied. To the extent that Edison was also making a more general complaint about whether it received all due process, however, we find no basis for its contention.

Edison received more than five days' notice before its suspension, as required, and was furnished ample information about the reasons for the action taken against it in the form of the statement of deficiencies and correspondence with NJDHSS and HCFA discussed in the background section. Edison was provided on request with a full formal hearing before the ALJ, and has now received a second impartial review by virtue of its appeal to this Board. It is true that Edison was suspended prior to the ALJ hearing, and for that reason the hearing was provided on an expedited basis. However, CLIA expressly provides authority for the pre-hearing imposition of suspension or limitation of a laboratory's CLIA certificate in cases of immediate jeopardy determinations. 42 U.S.C. ' 263a (i)(2)(A). The rationale for this provision was explained as follows in the legislative history:

House Report at 35. As the Board noted in Hillman I, courts have held in the past that a Medicare or Medicaid provider has no due process right to a pretermination hearing. See Hillman I at 20-22 and cases cited therein. HCFA has simply implemented the provision for suspension of a laboratory's CLIA certificate before a hearing in cases of immediate jeopardy. See 42 C.F.R. '' 493.1840(d)(2)(i), 493.1844(d)(2)(ii); SOM at SOP 6282.

We conclude that Edison received the procedural protections contemplated under CLIA.

Edison provided no support for its allegations of bias against it on the part of the NJDHSS inspectors or the ALJ.

Edison charged that it was unfairly targeted by the NJDHSS inspectors because of an animosity based on the race or ethnicity of its owner. No credible evidence was presented at the hearing to support this allegation of racial bias. Among the exhibits belatedly proffered with Edison's reply brief on appeal was a document purporting to be a list of clinical laboratories closed under the supervision of one of the NJDHSS inspectors (Ms. Duffy). Edison offered no justification or explanation for its failure to produce this material before the ALJ. Given the absence of any showing of good cause for the late submission, as discussed above, we declined to accept this exhibit as evidence.

Further, this document vividly illustrates how problematic submission of evidence for the first time on appeal can be. The provenance of this list is entirely unexplained; and its accuracy, reliability and statistical validity are completely untested. On its face, it raises far more questions than it appears to answer. Those unanswered questions include (1) what time period is covered and how comprehensive is this list; (2) what is the racial or ethnic makeup of the owners, operators, or employees of the laboratories inspected during the same period but not closed or of those not selected for inspection; (3) what is meant by a laboratory having been "closed under the supervision of Ms. Duffy;" (4) what deficiencies or violations were found at these laboratories; (5) how was the owner's "race" ascertained (and what is the meaning of a racial identification of Italian, Polish, Hebrew or Pakistani); and (6) what evidence is there that anyone at NJDHSS had knowledge of the ethnic background of the laboratory owners. Edison thus failed to produce any cognizable evidence whatsoever to substantiate its charge of racial animus against its owner.

Even more importantly, Edison failed to explain how any claimed selective enforcement by the inspectors could constitute a valid defense to suspension of a laboratory where the evidence in the record demonstrated that it was not complying with applicable requirements. See Rural Day Care Ass=n, DAB No. 1489, at 94-115 (1994)

(analogous arguments rejected in a Head Start termination case). Regardless of the motives of the inspectors in their survey, the evidence produced before the ALJ, as discussed below, that Edison was grossly incompetent in the way it conducted laboratory tests to the extent that patients were at risk from" Edison performing the tests more than suffices to establish the existence of condition-level deficiencies and therefore the authority of HCFA to take the actions at issue. ALJ Decision at 7.

Edison offered no other basis on which we could conclude that its treatment by HCFA was arbitrary or capricious. Clearly, HCFA had a strong interest in protecting patients from risks of the kind found at Edison once it was confronted with the evidence. In the face of such compelling evidence, tenuous and unsupported assertions about the motivations of state inspectors in collecting the evidence are neither credible nor relevant.

Edison also asserted that the ALJ was "observed in continuous informal conversation and laughter with the State Agency Inspectors" and "did not communicate informally or laugh" with Edison representatives. Edison Br. at 12. Apart from this bald assertion of improper familiarity, Edison offered no evidence of any ex parte communications or of any basis to find bias on the part of the ALJ. If such observations were made at the time of the hearing, Edison or its counsel should have placed them on the record then. Edison makes no claim that it tried to do so and was denied the opportunity. A thorough review of the transcripts of the hearing in this case demonstrates that the ALJ's on-the-record dealings with both parties and witnesses were even-handed and professional. Tr. 2/2, 2/3, and 2/4 passim. In any case, the weight of the objective evidence presented here is so overwhelmingly opposed to Edison's position that it is difficult to imagine any substantive impact that such alleged familiarity could have had on the outcome of the case.

HCFA had the discretion to apply principal rather than alternative sanctions where condition-level deficiencies were found.

Edison further contended that A[t]he enforcement authority might have used the alternative sanction route@ and that therefore Edison should be reinstated as if it had already met the requirements that might have been imposed under such alternative sanctions. Edison Br. at 37-38; Edison Reply Br. at 86-87. This argument is far-fetched and speculative.

Edison complained that HCFA arbitrarily failed to consider all the evidence submitted by Edison before accepting the State agency's recommendation, so that HCFA must not have given Edison fair consideration in imposing the sanction at issue. Edison Br. at 11, 73. There is no basis for Edison's conclusion that, simply because HCFA accepted the sanction recommended by NJDHSS, HCFA did not take "an objective look" at Edison's responses to the deficiency findings and the documentation Edison submitted. Since even the more extensive arguments and evidence which Edison proffered by the time of the ALJ hearing was unpersuasive, it is more likely that HCFA considered and rejected Edison's positions.

In addition, it does not follow that, because HCFA might have chosen, under its discretionary authority, to use another route to enforce CLIA requirements, HCFA was somehow obliged to select the course preferred by Edison or to eschew legally-available enforcement options, including those imposed on Edison here. The Act expressly states that the alternative sanctions developed under CLIA are "in addition to sanctions otherwise available under State or Federal law." Act, ' 1846(b)(2)(B).⁸ Nor is there any assurance that Edison would have made necessary corrections and achieved compliance under any set of alternative sanctions, given Edison's failure even to submit an acceptable plan of correction.

Finally, Edison pointed to no legal authority that would permit it to be reinstated on the grounds that it should be "deemed" to have met requirements, as it suggested, without any actual showing that it did meet all conditions for participation. The ALJ was empowered to determine whether the remedy imposed by HCFA was authorized because of Edison's noncompliance with one or more CLIA conditions. 42 C.F.R. ' 493.1844(b)(1). However, HCFA, not the ALJ, had the discretion to make the determination of which remedy to impose. 42 C.F.R. '' 493.1806 and 493.1807.

Edison was properly subject to inspection by NJDHSS.

In its briefing on appeal, Edison attacked the legitimacy of the inspection by NJDHSS which found the deficiencies at issue here. Edison asserted that it applied in 1995 for accreditation by the College of American Pathologists (CAP) Clinical Laboratory Accreditation program, which Edison asserted had "deemed status" from HCFA, and that Edison had received a favorable inspection and recommendation from CAP. Edison Br. at 8; see generally 60 Fed. Reg. 7,774 (Feb. 9, 1995) (approval of CAP as accrediting organization for CLIA). Further, Edison asserted that NJDHSS did not have deemed status, apparently implying that somehow the survey by NJDHSS was improper or irrelevant. Edison Br. at 8.

Edison's argument in this regard misunderstands the effect of provisions allowing HCFA to deem a laboratory to meet all CLIA standards when accredited by an organization or State licensure program with requirements that are at least as stringent as those under CLIA and have been approved by HCFA. 42 C.F.R. ' 493, Subpart E. A laboratory with accreditation is not immune from inspection by a State agency acting on behalf of HCFA, where, as here, it has been the subject of a complaint, even though the accrediting organization handles routine inspections. In fact, the notice approving CAP stated that HCFA or any State agency could still conduct validation or complaint investigation surveys. 60 Fed. Reg. 7,774, 7,776. Furthermore, HCFA is not obligated to ignore the results of an inspection finding serious deficiencies at a certified laboratory simply because an organization had earlier accredited the laboratory. In addition, the record evidence in this case shows that CAP also found Edison to be incompetent in its laboratory operation, although it did not find conditions so egregious as to constitute immediate jeopardy during its October 30, 1998 inspection visit. See HCFA Ex. 9, at 1.

CLIA provides authority for inspection of any certified laboratory:

42 U.S.C. ' 263a(g). The Secretary implemented this inspection authority in regulations with which all CLIA-certified laboratories must comply. 42 C.F.R. '' 493.1771, 493.1773, and 493.1780. Among those provisions are requirements to permit HCFA or its agent to conduct inspections to follow up on complaints, to validate the performance of the accrediting body, and to reinspect "at any time to evaluate the ability of the laboratory to provide accurate and reliable test results." 42 C.F.R. ' 493.1773(a) and (e).

The inspection by NJDHSS resulted from a complaint. HCFA Ex. 1, at 1. There is thus no question that NJDHSS was authorized, as agent of HCFA, to follow up with an inspection. Edison complained at length of the disruptiveness and scale of the survey efforts. See, e.g., Edison Br. at 7; Edison Ex. 21, at 62. However, the conduct of the survey was not properly at issue in this case.⁹ The issue before the ALJ was whether HCFA had a basis to impose principal sanctions because of Edison's failure to meet required conditions. It would be inappropriate for alleged procedural flaws in the survey process to be made the issue in a CLIA decertification case, just as we have previously held in the provider termination context. Hillman I at 46; Hillman II at 20. If a laboratory could seek to force HCFA to maintain its certification despite deficiencies on the grounds of alleged procedural improprieties in the survey, the goal of CLIA to assure that only qualified laboratories participate in federal programs would be defeated.

Factual Arguments

The core of the case against Edison was the finding by the ALJ that Edison failed wholesale to provide laboratory services of acceptable quality, thus failing to comply with nine specific CLIA conditions. ALJ Decision at 6. The laboratory tests at issue included nephelometer testing of prealbumin, LDL tests, alpha fetoprotein testing, and IFA testing. Edison contended that the ALJ erred in each area in finding that its testing was deficient and conducted incompetently. See, e.g., Edison Br. at 15, 18, 20, 23, 29. We address the evidence relating to these areas of testing below. Edison argued broadly, however, that HCFA failed to meet its burden of proof because its prima facie case was based on mere allegations and false statements by HCFA witnesses, rebutted by testimony from Edison's witnesses. See, e.g., Edison Br. at 52-53, 57; Edison Reply Br. at 51, 53-54. We therefore address first the broad attack on the HCFA witnesses, particularly the NJDHSS inspectors.

The ALJ's assessment of the credibility of witnesses appearing before him was fully explained by him and adequately supported.

Edison argued that the ALJ erred in crediting the testimony of witnesses that testified against Edison and not relying on the witnesses presented by Edison. In general, we defer to the assessment of witness credibility by an ALJ who has the opportunity to observe their demeanor in testifying. Moreover, here, the ALJ stated his rationale for finding the testimony of HCFA's witnesses more persuasive and plausible.

Edison attacked the overall credibility of the inspectors' testimony. Edison's attack on appeal was based mostly on unsupported after-the-fact allegations. For example, Edison asserted that one inspector was "summarily fired by NJ State Department of Health and HCFA agency effective May 7, 1999 at 2:30 PM," and that this action should be taken to substantiate Edison's claims that the inspector made "false allegations" and was herself "the problem" rather than the problem resulting from the laboratory's own practices. Edison Br. at 71. Edison offered no evidence whatsoever to support this charge. HCFA responded that the inspector in question "retired voluntarily after 28 years of distinguished service and received a letter of appreciation from HCFA." HCFA Br. at 35. In its reply, Edison did not respond to this information except by repeating the charge without substantiation. See Edison Reply Br. at 94. We find no basis to rely on these unsupported claims to undermine the testimony presented by HCFA.

Edison also asserted in its reply brief that two clinical chemists presented as experts by HCFA were a "farce," because they had limited experience with nephelometers and because the witnesses might have been intimidated by the possibility of an intrusive inspection by the same surveyors. Edison Reply Br. at 34-35. The witnesses were both employed as clinical chemists in hospital laboratories in New Jersey for more than 15 years. Tr. 2/3, at 6 and 31. While one expert (Dr. Kampa) stated that his laboratory rarely did prealbumin tests, he also testified that he was familiar with them. Id. at 13-14. He further testified that his conclusion that Edison's nephelometer looked bogus and should have triggered review within the laboratory was based on the conclusion that obtaining multiple repetitions of results identical to two decimal points within a run of less than one hundred samples was "pretty much impossible." Id. at 17; see also id. at 14-19, 26-27. Edison did not prove that it was necessary for an expert chemist to run frequent nephelometer tests in order to know how the device operated and to be able to interpret the statistical significance of such results. Furthermore, the second expert (Dr. Warkentin) testified that he had been responsible for a nephelometer from the same manufacturer for more than ten years, until the preceding six months. Id. at 36. He too testified that his laboratory would perform trouble-shooting rather than release such results if, like Edison's, they did not fit any normal distribution of laboratory results. Id. at 34-35. He stated that the patient results which Edison had reported to physicians looked "specious" or "false" to him on their face because he had "never seen data like this in [his] 25 years of being a clinical biochemist." Id. at 39. Finally, Edison did not lay any foundation to suggest that either witness was intimidated or improperly influenced in any way.

In any case, both witnesses were offered for the limited purpose of corroborating the inspector's testimony concerning the inexplicable nature of Edison's nephelometer results. Ultimately, however, the responsibility for explaining how the results could have been obtained in a manner assuring their authenticity was Edison=s. Edison did not meet that responsibility on this record.

In many areas, Edison's testimony and evidence was simply obfuscatory, and did not rebut the central points made by HCFA. For example, in regard to LDL testing, Edison did not dispute that it repeated nearly all its LDL tests, and generated results on the repeat tests that themselves raised questions of unaccountable bias.¹⁰ See ALJ Decision at 11; Tr. 2/2, at 112-118; HCFA Exs. 39, at 1, 40, at 1, and 88, at 15. The ALJ inferred that such high repeat rates and unexplained bias in repeat results suggested not careful review to eliminate problem results but rather lack of confidence in any of the initial results. ALJ Decision at 11. Dr. Patel, Edison's owner and supervisor, testified as to possible reasons for repeating LDL tests at the discretion of technician, such as cloudy specimens resulting from cetrifuging problems. Tr. 2/4, at 290-97. But, as the ALJ noted, such explanations only reinforce the fact that Edison's LDL testing results were problematic and unreliable, at best. ALJ Decision at 11-12.

In every instance where the testimony presented by Edison did conflict with that of HCFA's witnesses, the ALJ explained fully why he found Edison's witnesses to be uncorroborated and unpersuasive. For example, Dr. Patel offered a possible explanation for the implausible nephelometer readings (discussed below) that was speculative, was not raised prior to the hearing, was not corroborated by the manufacturer's representative who testified for Edison, and was contradicted by other test runs. See ALJ Decision at 9; Tr. 2/4, at 200-09, 284-85. The ALJ thus had ample reason to decline to credit Dr. Patel's explanation.

We find that Edison has failed to provide any evidence to undermine the ALJ's assessments of the witnesses' credibility.

Substantial evidence in the record supported the ALJ's finding that Edison failed to provide laboratory services at an acceptable level of quality.

Edison failed to prove that nephelometer results reported by it were authentic or accurate.

One of the devices used by Edison in performed testing was a nephelometer which used scattered light for automated analysis of blood samples to produce a computerized printout of results. ALJ Decision at 7; Tr. 2/2, at 52-54. This device was employed in performing a variety of tests, such as those for prealbumin in the blood, a nutritional status marker. ALJ Decision at 7; Tr. 2/2, at 55. HCFA presented expert testimony that a pattern of replicating results for different specimens found in Edison's data, results that were identical out to two decimal places, were "bogus" and could not represent actual test results. ALJ Decision at 7; Tr. 2/2, at 65-66; Tr. 2/3, at 8, 39; HCFA Exs. 75-83.

Much of Edison's evidence and argument in relation to the nephelometer results was directed at refuting the charge that the challenged results were falsified, mostly by arguing that human intervention could not have intentionally created these results because the testing system was automated. See, e.g., Edison Br. at 43. The ALJ found that neither HCFA nor Edison was able to demonstrate convincingly how the unusual replicating results might have been obtained. ALJ Decision at 8. Edison offered the possibility that the replication was caused by software in the nephelometer "binning" close results and reporting them as the same precise number.¹¹ The record evidence supported the ALJ's finding that this argument was "fanciful" and based on unsupported speculation. ALJ Decision at 9. The theory conflicted with testimony from representatives of the equipment manufacturer, including one offered by Edison itself, which suggested that the results that Edison obtained would raise suspicions that "there might be something wrong" and that the software used by Edison did not "bin" data in clusters of this kind. Tr. 2/3, at 208-09 (Grey). Further, the idea that such data could occur through some non-aberrant operation of the equipment was contradicted by Edison's own testing which did not show the alleged clustering effect. ALJ Decision at 9; HCFA Ex. 49, at 11. Edison's arguments in this regard were self-contradictory. On the one hand, Edison claimed that the replicating nephelometer readings were the normal functioning of the software; on the other hand, it argued that the replication was "non-recurrent" and that it was monitoring all nephelometer results for replication. Edison Br. at 18. As the ALJ pointed out, Edison's own exhibits showed that its staff had noticed and questioned the pattern of replicating results on at least one occasion. ALJ Decision at 8; Edison Ex. 23, at 279, 282, 286.

Edison offered considerable evidence that the nephelometer automated the readings in such a way that human intervention to directly produce a desired result would not have been possible. See, e.g., Edison Br. at 17; Tr. 2/2, at 186-214. However, Edison failed to prove that the pattern of repeating results was likely to have been an authentic outcome from properly handled samples. Moreover, Edison did not show that it took any steps either to determine the cause of the errors or to prevent their reporting to physicians who would rely on them in the treatment of patients. The deficiency finding here did not depend on proof of intentional wrong-doing. Rather, it sufficed that HCFA presented prima facie evidence that results reported by Edison were questionable on their face and Edison did not present persuasive evidence that it took any appropriate action to investigate the problem or prevent patients from being harmed by erroneous results. The ALJ correctly applied criteria for weighing Edison's conduct that were rooted not in proving fraud or intentional misconduct but rather in evaluating failure to meet requirements of competence and compliance with the conditions set for laboratory testing. Based on those criteria, Edison failed to offer any plausible explanation for the nephelometer results that would justify its having had sufficient confidence in them to report them to physicians as authentic and accurate results.

Edison pointed to nephelometer results from two other laboratories that were submitted by HCFA as comparisons and argued that they showed similar replications. Edison Reply Br. at 15.¹² However, a comparison of the exhibits shows that the occasional repetition of one or two results in the other laboratories' data contrasts dramatically with the large clusters of identical results (as many as six to ten results) for different patients found in the data from Edison. Compare HCFA Exs. 73, at 8, and 74, at 11-12, with, e.g., HCFA Exs. 77, at 11-12, 78, at 13-14, and 83, at 10-11. Edison simply failed to offer any persuasive rebuttal to the evidence that its nephelometer results were inauthentic, whether or not they were deliberately fabricated.

Edison failed to prove that it competently performed the other testing at issue.

The other tests which HCFA alleged were incompetently performed by Edison staff included alpha fetoprotein tests, LDL tests, and IFA tests. The ALJ's findings in regard to each of these were also supported by substantial evidence based on the whole record.

In regard to alpha fetoprotein testing, Edison's main argument was that the inspectors did not use the correct methodology to evaluate the accuracy of the test result calculations. The test is mainly used to identify fetal abnormalities. The calculations used a multiple of median (MoM) to define an abnormal result for a particular patient based on her gestational week. Edison contended that the apparent errors in its calculation actually reflected its use of software that adjusted the MoM for such additional factors as weight, race, menstrual cycle, number of pregnancies, and diabetic status. Edison Br. at 23-26, 46-47. The ALJ did not credit this claim. ALJ Decision at 10-11. Originally, the inspectors found that thirteen of sixteen MoMs reviewed were incorrectly calculated, based on the product insert instructions for those calculations provided to them by Edison. Tr. 2/2, at 143-44; HCFA Ex. 2, at 41. In its plan of correction, Edison indicated that it had used a weight correction factor which it alleged then demonstrated the calculations were accurate. HCFA Ex. 3, at 41. The inspectors found that four of the calculations were inaccurate even using the weight correction factor suggested by Edison. Tr. 2/2, at 144-48. At the hearing, Dr. Patel asserted that the remaining errors could be eliminated by considering the "right, most important critical" factor, which he said was the mother's race. Tr. 2/4, at 303. The ALJ found that Edison failed to demonstrate how the shifting variety of "special" or "critical" factors would establish the accuracy of the remaining four apparent errors. ALJ Decision at 11. We agree. Edison should have been able to explain correctly the basis for its calculations at the time of the survey, yet even long after the hearing, Edison was continuing to search for additional factors to explain these discrepancies.

Furthermore, the ALJ found that Edison offered no credible evidence to rebut HCFA's evidence of late performance or reporting of alpha fetoprotein tests or of misleading information supplied with the results. ALJ Decision at 10-11. Timeliness is particularly important in reporting these results since decisions about a pregnancy may be based on them. Id. at 9; Tr. 2/2, at 131, 163-66. Edison claimed that the evidence of untimeliness credited by the ALJ was erroneous because the dates on the reports were actually reprinting dates rather than reporting dates, and that this was evident on the face of the reports. Edison Br. at 27-28, 47. A review of the reports cited does not support Edison's claims. Some of the laboratory reports do have accompanying interpretative reports that show reprinting dates. See HCFA Ex. 92, at 39-41. However, this evidence does not establish that timely reports were actually made to the affected physicians or patients at some earlier date. Edison produced no evidence of those original reporting dates even though it asserted that the actual reporting dates were always obtainable on their computer screens. Cf. Edison Reply Br. at 71. It was Edison's, not HCFA's, burden to demonstrate timely and accurate reporting of these time-sensitive results. Therefore, it does not suffice to support Edison's defense to show that these reports were reprints without showing when original reports were printed and provided to physicians.

We discussed above in relation to credibility the repetition of nearly all LDL cholesterol tests. We find reasonable and well-supported the inference drawn by the ALJ that these tests had not been shown to be accurate and reliable. ALJ Decision at 11-12. In its brief on appeal, Edison alleged that it repeated a much smaller percentage of tests than found by the ALJ. Compare Edison Br. at 22 with ALJ Decision at 11. Yet in its plan of correction, Edison did not dispute the very high frequency of retesting but only claimed that this observation confirmed its own active monitoring process. HCFA Ex. 3, at 28. Edison argued that the quality of its LDL testing was established by its success in proficiency tests for cholesterol, but the ALJ rejected this argument because the proficiency tests cited were for HDL (high density lipoproteins) not LDL and because such success would not in any case necessarily contradict the NJDHSS observations about Edison's unacceptable techniques. ALJ Decision at 12. On appeal, Edison cited to various documents which it asserted showed excellent calibration, instrument maintenance and function checks, and quality control and validation. Edison Br. at 22, citing Edison Exs. 21, at 65 and 22, at 319-49. Edison asserted that LDL results "were never altered, fabricated, or falsified." Edison Br. at 22. Even if these documents were what they purport to be and even if they covered the relevant time frame, they would not explain the need for constant repetition of LDL tests if Edison were generating adequate and reliable results.

Furthermore, the inspectors found that Edison was using reagents that it produced in the laboratory, rather than standardized commercial reagents, but had neither proper controls nor validation for them. HCFA Ex. 2, at 27-29. Edison did not deny in its plan of correction that it had not had a control methodology in place for this testing for more than a year. HCFA Ex. 3, at 28. Edison also claimed that its failure to produce adequate validation studies for its in-house reagents was not significant because it followed the same chemical formula in producing them as in manufacturer's literature. The ALJ reasonably accepted HCFA's evidence that the absence of controls and of careful validation of reagents contributed to "highly unreliable" results. ALJ Decision at 12.

In the case of IFA testing, the inspectors found widespread errors and problems in performing and reporting test results in the evaluation of such infectious conditions as herpes, measles, and syphilis. See generally ALJ Decision at 12-14; Tr. 2/2, at 235-264; Tr. 2/3, at 47-56, 68-72; HCFA Ex. 2, at 31-41. In the majority of these areas, Edison did not contest the existence of the problems but alleged that it had taken corrective action that would have been verified if its allegation of compliance had been accepted and another survey performed. See Edison Br. at 29-34. However, as the ALJ noted, the plan of correction that Edison submitted as its credible allegation of compliance, while claiming some corrections, introduced additional sources of error into IFA testing if it was implemented as written. ALJ Decision at 13; Tr. 2/3, at 55-56, 72; HCFA Ex. 3, at 32. The claimed corrections amount to concessions that testing was not properly performed in the past. For example, the inspectors found that Edison staff had been attempting to read fluorescent results without having a dark room as required. See ALJ Decision at 13; Tr. 2/2, at 239-40. Edison responded that "[s]ince the inspector [sic], IFA test procedures are performed in a dark room with the fluorescent microscope." Edison Br. at 29. This statement simply corroborates that proper practices were not followed before the inspectors' visits. Similarly, the inspectors found that Edison staff failed to perform proper dilutions and controls for various tests, including anti-DNA screening, and Edison responded that it had "clearly corrected" the deficiency as of November 1998. Compare ALJ Decision at 13; Tr. 2/3, at 47-48 with Edison Br. at 31. But this contradicts Edison's claim that its allegation of compliance submitted in October 1998 should have been accepted as credible.

Edison fired the technician who, it said, had been diluting samples improperly. Edison Br. at 44; see Tr. 2/2, at 254, 258-60. This action amounts to an acknowledgment of poor technique and certainly does not contradict the inspection findings. HCFA Ex. 2, at 35-37. Not only were the dilutions used wrong, but the results reported were found by the inspectors to be impossible with the dilutions used and the controls recorded did not exist. Id. at 35. Edison's plan of correction merely promised to research these allegations. HCFA Ex. 3, at 35. Edison claimed that it now posted charts with the correct dilution methods, but did not explain the apparent inauthenticity of the earlier reports. See Edison Br. at 43-44.

Besides claiming that it had corrected many of the conceded problems, in this area as with many others, Edison simply insisted that the findings and testimony of the inspectors should have been disregarded and the testimony of its owner and employees accepted. For example, Edison argued that the ALJ was wrong to accept testimony that IFA test materials were improperly stored because Edison claimed that its staff had shown the inspector that kits stored at improper temperatures contained only slides and not the sensitive test materials. Edison Br. at 30; Edison Reply Br. at 75; ALJ Decision at 13; see also HCFA Ex. 3, at 32. As discussed above, we defer to the ALJ's clearly-explained and reasonable assessment of the relative credibility of the witnesses.

Conclusion regarding Edison's failure to meet accepted standards of quality in laboratory services.

We conclude that the ALJ's primary finding that Edison "failed to provide laboratory services in a manner that complied with accepted standards for quality" is amply supported by the evidence in the record. We therefore uphold this finding. Given that a single condition-level deficiency would suffice to establish HCFA's authority to impose a principal sanction, this finding alone would be enough to sustain the revocation. As discussed below, however, we find that the additional deficiency findings made by the ALJ were also supported by the record.

Substantial evidence in the record supported the ALJ's findings that Edison failed to comply with eight other conditions.

Much of the evidence discussed above and analyzed in more detail in the ALJ Decision is also sufficient to establish the lack of compliance with other conditions that were necessarily deficient to permit the wholesale failures of laboratory operations to have occurred on the scale found. None of the evidence put forward by Edison successfully rebutted the inferences to this effect drawn by the ALJ. ALJ Decision at 15-20.

Thus, the evidence of egregious performance failures in regard to the nephelometer results and other testing discussed above, in itself, sufficed to establish that Edison could not have been following adequate, written quality control procedures as required by 42 C.F.R. ' 493.1201. ALJ Decision at 15. In addition, that evidence also supported finding noncompliance with the condition-level requirement that a qualified laboratory director provide overall management meeting applicable standards. ALJ Decision at 15-16; 42 C.F.R. '' 493.1441 and 493.1445. Among the standards for which the laboratory director is responsible are the employment of competent staff, ensuring that the test methodologies and performance are as required to provide timely, accurate and reliable results, and maintaining quality control. The ALJ correctly found that the evidence of systemic failures by Edison to meet quality requirements was sufficient for him to infer that the laboratory directors could not have been adequately discharging their responsibilities. Similarly, given what the ALJ properly described as Edison's "wholesale failure" to "monitor, evaluate the quality of, and address deficiencies in its testing program," it follows that no technical supervisor could have been taking the necessary steps to resolve technical problems and ensure that no patient test results are reported absent correction thereof. See ALJ Decision at 16; 42 C.F.R. '' 493.1447, 493.1449 and 493.1451.

Edison's briefing on these conditions was essentially peripheral. For example, Edison argued that it should not have been found out of compliance with the requirement for a qualified laboratory director. Generally, its argument was that it rebutted the evidence that the deficiencies were serious enough to violate conditions rather than standards. Edison Br. at 48. Having concluded above that ample evidence supported the ALJ's findings as to the many testing deficiencies, we do not find that this defense gives any independent reason to believe that the laboratory was adequately directed.

Edison also argued that it should not have been found deficient with this condition on the additional basis that the laboratory director did not adequately oversee proficiency testing. Id. at 49. Edison admitted that a day-shift supervisor was found to have tested proficiency samples for IFA testing (which are supposed to be run in the same way as normal laboratory specimens in order to test laboratory performance) even though a night-shift technician normally did IFA testing. Id. at 49. However, Edison contended that the same staff member ran all the samples that day because of staffing problems. Id. at 49-50. Even if accurate,¹³ the response that both normal and proficiency testing samples were run the same way that day answers only the concern that proficiency tests might have been "singled out for special treatment". Cf. id. at 50. However, the failure to have adequate staffing to handle samples in the routine manner by the staff member whose skills are normally depended on is itself simply more evidence of the widespread dysfunctions in the systems for which the director and supervisors are responsible. Similarly, Edison's attempt to address the charges of inadequate supervision in the reading of cytology slides by testimony that a cytologist reviewed both all abnormal and a sample of normal slides falls far short of addressing the failure of supervision in the laboratory to adequately supervise operations to guarantee quality tests and competent staff. Cf. id. at 51-52; Tr. 2/4, at 244-51. The failures of quality control in the cytology area alone covered eight pages in the statement of deficiencies. HCFA Ex. 2, at 61-69. The cytologist testified that he did not think there was "very much there" in the deficiency findings since the subsequent CAP inspections did not find "anything significant" in this area. Tr. 2/4, at 254. However, many of the findings in this area were either acknowledged as "oversights" or as requiring changes in procedures or practices to correct. HCFA Ex. 3, at 63-64, 67-69.

The ALJ further found that the condition-level requirement for qualified general supervisors in fields where testing is performed to provide day-to-day supervision of tests and personnel could not have been met given the breakdowns in laboratory operations. ALJ Decision at 16-17; 42 C.F.R. '' 493.1459, 493.1461, and 493.1463. The ALJ also found that the inability of Edison's supervisors to answer inspectors' questions about laboratory operations was "strong evidence" of their lack of awareness of testing practices under their "ostensible authority." ALJ Decision at 17. One of the inspectors testified as follows:

Tr. 2/2, at 47. Edison responded that the problem lay with the inspectors requesting too many records and expecting day-shift supervisors to respond to questions about how a specific sample was tested at night. Edison Br. at 52-55. Instead, Edison suggested that the inspectors should have inquired in writing about such tests so that night-shift technicians could respond. Id. at 55. The ALJ reasonably credited the inspector's testimony that the supervisors' inability to answer appropriate questions or to produce records for review was highly unusual and suspect. ALJ Decision at 17; Tr. 2/2, at 47-48.

The ALJ found that Edison also failed to comply with requirements to establish and follow a comprehensive quality assurance program, including monitoring quality, identifying problems, and making corrections. ALJ Decision at 17; 42 C.F.R. ' 493.1701. Edison denied that it had deficiencies in this area serious enough to reach the level of non-compliance with a condition, since the later CAP re-inspection did not find them. Edison Br. at 56-58. We discuss this claim below in light of the more general weight Edison attributed to the CAP inspection findings. However, we note that results on other inspections do not invalidate the substantiated findings of the inspection at issue here. Edison also argued that the deficiencies found by NJDHSS inspectors were corrected immediately or were the fault of the inspectors who "either read the wrong instructions used for a particular test or questioned the wrong people," so that "the HCFA Statement of Deficiencies was not a true measure of the laboratory's capabilities." Id. at 58. This response is not persuasive in light of the "wholesale failure" found by the ALJ in monitoring, evaluating and correcting problems with testing programs, such as the numerous flaws in the various IFA tests.

The ALJ further found Edison out of compliance with conditions governing the performance of general immunology and routine chemistry tests. ALJ Decision at 17-18; 42 C.F.R. '' 493.1241 and 493.1245. The ALJ found that the standards adopted for each of these areas of testing were so pervasively violated as to constitute non-compliance with the overall conditions. Id.; 42 C.F.R. '' 493.1205 - 493.1221. Edison offered little in defense of its performance of the tests in this area beyond "explanation" of its errors and claims of correction after the NJDHSS inspection. Edison Br. at 59-61. For example, in regard to the false positive results in hepatitis testing about which HCFA expressed particular concern, Edison claimed that a re-analysis showed that "only" 2.8% of its hepatitis results were reported incorrectly. Id. at 60; see HCFA Ex. 7, at 2.

The ALJ also found that Edison failed to comply with a condition-level requirement for participation in a proficiency testing program. ALJ Decision at 18-19; 42 C.F.R. ' 801. The ALJ rejected Edison's explanation that the performance of IFA tests by a supervisor who was not an employee "who routinely perform[s] the testing in the laboratory, using the laboratory's routine methods," was excusable as an exceptional event resulting from employee absences. ALJ Decision at 19; 42 C.F.R. ' 801(b)(1). We agree with the ALJ that (1) such a practice defeats the entire purpose of proficiency testing since the supervisor's proficiency says nothing about the competence of the laboratory employees to routinely perform these tests, (2) the attestations of Edison's directors that these samples were tested in the same manner as routine test specimens were not correct, and (3) Edison failed to carry its burden to affirmatively establish that employees doing routine testing performed proficiency testing. ALJ Decision at 19.

Finally, the ALJ found Edison out of compliance with the condition for a patient test management system. ALJ Decision at 19-20; 42 C.F.R. '' 1101 - 493.1111. Among the problems that the ALJ noted in this area were Edison's performance of Lyme testing without required requests from physicians for that test and problems with Edison's record system for identification of patient specimens. Edison disputed the factual bases of these findings, but the ALJ credited the inspector's testimony and documentation. Edison Br. at 66-70. We see no basis to disturb the ALJ's conclusion.

Edison failed to prove that it violated only standard-level, rather than condition-level, requirements.

Edison acknowledged that there were deficiencies in its laboratory's operations during the inspection but argued that its deficiencies were not serious enough to rise to the level of failing to comply with conditions of participation, but rather constituted simple noncompliance with subsidiary standards. Edison Br. at 35-36.

While Edison claimed that 80% of the deficiencies were the result of errors or miscommunication by the inspectors, it did not dispute the accuracy of many of the specific factual findings on which the ALJ relied in finding condition-level violations. In other cases, Edison's evidence was simply not persuasive in rebutting the overwhelming evidence presented by HCFA of careless and incompetent operations.

It is true, as Edison stated, that CAP returned after the NJDHSS's inspection to re-survey and determine why the NJDHSS found such serious deficiencies relatively close in time to a CAP inspection on July 28, 1998 that had not made similar findings of condition-level deficiencies or immediate jeopardy. Edison Br. at 39, 56. Edison argued that its history of accreditation by CAP and the fact that CAP would have been willing to continue Edison's accreditation if it took corrective actions must mean that NJDHSS was wrong in finding condition-level deficiencies. Id. at 57.

A closer look at the history of CAP inspection reports, however, is hardly reassuring. In March 1998, CAP did recommend re-accreditation and described the laboratory operators as well-qualified, but it also commented that the "specific problems that plagued them in the past have been more than adequately solved" and expressed confidence that Edison would "correct the deficiencies cited." Edison Ex. 23, at 7-8. CAP inspected again in July 1998 and in September 1998 extended Edison's accreditation. Tr. 2/3, at 164-67; Edison Ex. 21, at 45-47.

In October 1998, the CAP inspectors returned, looking specifically at the discrepancies between the earlier CAP inspections and the NJDHSS report. They found "a number of . . . deficiencies indicating a partial or complete lack of compliance with either CAP Standards or CLIA >88 requirements." Edison Ex. 21, at 26 (same as HCFA Ex. 8). Overall, the CAP team wrote that the "fundamental problem in this laboratory is a lack of cognitive ability to understand sound principles of laboratory medicine and documentation requirements." Id. at 27 (same as HCFA Ex. 9, at 1). While the CAP inspectors disagreed with some of the specific NJDHSS findings, their report noted that they visited only during the day "when very little analytic activity occurs" and only for one day. Id. at 27. Edison claimed that none of the deficiencies found by CAP would have required more than 30 days to address, but that assertion overlooks the fact that the CAP inspection took place almost 30 days after Edison had received notice of the immediate jeopardy findings and several months after many of the problems had been pointed out to them by state inspectors. See Edison Br. at 57. Clearly, this supports the evaluation by HCFA and NJDHSS that Edison's allegation of compliance as of October 9, 1998 was not credible. See HCFA Ex. 3; HCFA Ex. 7, at 2; Edison Ex. 21, at 39-40.

Furthermore, much of the CAP report substantiates charges by the NJDHSS inspectors and undercuts testimony by Edison staff. Edison Ex. 21, 27-32. For example, the report stated Edison had switched to commercial reagents rather than the in-house preparations criticized by the NJDHSS, but clearly Edison did not understand the importance of the changes. The report noted that the CAP inspectors told the laboratory that

Edison Ex. 21, at 30. This finding undercuts Edison's claim in the plan of correction submitted as an allegation of compliance that the citation for improper use of inadequately validated in-house reagents was "inspector error," because there were --

HCFA Ex. 3, at 47; see also HCFA Ex. 3, at 28; Edison Br. at 44-45; Edison Ex. 21, at 37.

Conclusion regarding other condition-level deficiencies.

We find that substantial evidence supported the ALJ's conclusions about the eight other condition-level deficiencies.

Based on the foregoing analysis, we sustain the ALJ decision in its entirety and uphold the revocation of Edison's CLIA certificate and cancellation of Edison's approval to receive Medicare payments.

¹ Because the ALJ upheld a suspension imposed based on immediate jeopardy, upon issuance of his decision, the suspension automatically converted to a revocation under the regulations. ALJ Decision at 5, 20; 42 C.F. R. 493.1844(d)(4)(ii).

² The "condition-level requirements" are defined as those set out as conditions in 42 C.F.R. Part 493, Subparts G through Q. 42 C.F.R. ' 493.2. "Immediate jeopardy" is defined as --

42 C.F.R. ' 493.2.

³ HCFA alleged that Edison was out of compliance with a tenth condition, but that condition was not cited in HCFA's notice letter and the ALJ declined to consider it. ALJ Decision at 14. HCFA did not appeal that ALJ ruling and therefore we do not discuss that condition in this decision. See HCFA Br. at 2, n.1.

⁴ In reviewing this case, we have considered each and every argument presented by the parties. Although particular issues may not be discussed in detail in this decision, we have nevertheless considered all of the points in the parties' briefs in reaching the conclusions set forth here.

⁵ We note that Edison previously attempted to submit additional exhibits without permission and without a showing of good cause to the ALJ after the close of the evidentiary hearing. ALJ Decision at 2. The ALJ did not admit those exhibits. The attachments to Edison's reply brief on appeal do not appear to fit the description given by the ALJ of the previously-rejected exhibits.

⁶ Edison repeatedly characterized this as a 90-day delay, but the time frame speaks for itself. See, e.g., HCFA Ex. 4, at 2 (Edison letter to NJDHSS).

⁷ HCFA is permitted, but not required, under the Act to continue Medicare payments to a non-compliant laboratory for up to one year while employing alternative sanctions in lieu of canceling its approval for Medicare payment. Act, ' 1846.

⁸ HCFA is permitted, but not required, under the Act to continue Medicare payments to a non-compliant laboratory for up to one year while employing alternative sanctions in lieu of canceling its approval for Medicare payment. Act, ' 1846.

⁹ We note that the regulations provide a limited list of initial determinations which may be appealed under CLIA and specifically provide that any actions not listed as initial determinations are not subject to appeal. 42 C.F.R. ' 493.1844(b) and (c). The scope or conduct of an inspection is not among the appealable initial determinations. Id.

¹⁰ In the statistical sense used here, bias means that the percentage of repeat results that were consistently either higher or lower than the original test results in a run was far greater than should have resulted from normal analytical variation. ALJ Decision at 11.

^11" Binning" was used at the hearing to mean reporting results that were actually spread over a range but clustered in the same vicinity as if they were all at precisely the same number (presumably near the center of the range). ALJ Decision at 9.

¹² Actually, Edison made several somewhat inconsistent assertion with respect to the nephelometer data from the two other laboratories. Edison stated that the ALJ pointed to one replication of results at the hearing but those data were from Quest Laboratories, not Edison. Edison Br. at 19. The transcript shows that the exhibit in question was clearly identified at the hearing as coming from one of the other laboratories and the ALJ merely noted that HCFA's witness overlooked that one value was repeated one time in the results in that exhibit. Tr. 2/2, at 81-82; HCFA Ex. 73. This point did not undercut the witness's testimony that the major clusters of identical results shown in multiple exhibits of Edison's data were inexplicable and unlike anything in the examples from the other laboratories. See Tr. 2/2, at 57-84. Edison also argued that the other laboratories's results were not comparable because they used different software, reagents, or equipment, and that the other laboratories showed evidence of worse quality problems than Edison. Edison Br. at 19-20; Edison Reply Br. at 15-17. If the results are not comparable to Edison's because of the asserted differences in technique, than the occasional repetition of a result in those data is even less relevant to explaining the striking multiple replications in Edison's data. It is not relevant to this proceeding to determine whether other laboratories had quality problems or not. In any case, their data in no way substantiate that replications of the kind seen in Edison's data could occur in properly handled nephelometer tests.

¹³ We discuss the credibility of this response further below in relation to the proficiency testing participation deficiency