SUBJECT:

Oakland Medical Group, P.C.,

Petitioner,

Health Care Financing Administration

Civil Remedies CR688
Docket No. A-2000-107
Decision No. 1755

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

Oakland Medical Group, P.C.(Oakland/Petitioner) a Warren, Michigan, physician office laboratory, appealed a July 18, 2000 decision by Administrative Law Judge (ALJ) Jose A. Anglada granting summary judgment for the Health Care Financing Administration (HCFA). Oakland Medical Group, P.C., DAB CR688 (2000) (ALJ Decision). There, the ALJ found that Oakland failed to meet condition level requirements for proficiency testing (PT) for testing events in 1998, failed to meet the condition level requirement for laboratory director and violated the standard for technical supervisor. Consequently, the ALJ determined that HCFA had properly revoked Oakland's certificate under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) for one year and properly canceled Oakland's approval to receive Medicare payments for its services, effective October 1, 1999. ALJ Decision at 1, 7, and 22-23.

The ALJ Decision was based on 23 findings of fact and conclusions of law (FFCLs). Oakland took exception to 15 of those FFCLs.

Based on the analysis below, we sustain the ALJ Decision, affirming and adopting each of the ALJ's underlying FFCLs.

Applicable law and regulations

CLIA establishes requirements for all laboratories that perform clinical diagnostic tests on human specimens and provides for federal certification of such laboratories. Pub. L. No. 100-578, amending § 353 of the Public Health Service Act, codified at 42 U.S.C. § 263a et seq.⁽¹⁾ CLIA further grants the Secretary of this Department 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 requirements for a certificate. The purpose of the CLIA requirements is to ensure the accuracy and reliability of laboratory tests, and hence the health and safety of those tested. See H.R. Rep. No. 899, 100^th Cong. 2d Sess. 8 (1988), reprinted in 1988 U.S.C.C.A.N., 3828, 3829.

A laboratory's CLIA certification is generally dependent upon whether the laboratory meets the conditions of certification set out in the statute and regulations. 42 U.S.C. § 263a(f)(1)(E); 42 C.F.R. § 493.1 et seq. Each condition represents a major division of laboratory services to be offered by the laboratory or required environmental protections at the laboratory. The regulations also set forth standards, the specific components of the conditions of laboratory certification that a laboratory must meet as part of achieving compliance with applicable conditions.

A key component to the statutory and regulatory program to assure that laboratories holding CLIA certificates are competent to perform tests of moderate and high complexity is the requirement for participation in a proficiency testing (PT) program that is approved by HCFA, as outlined in 42 C.F.R. Part 493, Subpart H. Among the requirements of that subpart are the following: each laboratory must enroll in an approved PT program that meets specific criteria set out at Subpart I of Part 493; a participating laboratory must test PT samples it receives in the same manner as it tests patient samples; must not communicate the results of its tests to other laboratories prior to the deadline for reporting results; must not intentionally refer PT samples to another laboratory for analysis; and must document and maintain documentation for the handling, preparation, processing, examination, and each step in the testing and reporting of results for all PT samples. 42 C.F.R. § 493.801. The condition at 42 C.F.R. § 493.803(a) specifically requires that a laboratory performing high complexity testing "must successfully participate" in an approved PT program for each "specialty, subspecialty, and analyte or test in which it is certified under CLIA."

Failure by a laboratory to comply with even a single condition in an area of testing offered by that laboratory may be grounds for suspension or revocation of a laboratory's CLIA certificate. Ward General Practice Clinic, DAB No. 1624, at 2 (1997). HCFA may suspend, limit, or revoke the CLIA certificate of a laboratory that is out of compliance with one or more CLIA conditions, and may also impose alternative sanctions such as a directed plan of correction or monitoring by the state. 42 C.F.R. § 493.1806.⁽²⁾

A laboratory is entitled to a hearing before an ALJ to contest the imposition of CLIA remedies, including the suspension, limitation, or revocation of the laboratory's CLIA certificate, and may request review of the ALJ's decision by the Departmental Appeals Board. The CLIA regulations at 42 C.F.R. § 493.1844(a)(2) and (3) incorporate by reference the hearing procedures and the request for review provisions in 42 C.F.R. Part 498, Subparts D and E.

Background

This undisputed factual background is drawn from pages 3-6 of the ALJ Decision.

Oakland conducted high complexity testing for routine chemistry and endocrinology. At the time in issue, Robert I. Moretsky, D.O., was Oakland's director, clinical consultant, technical supervisor, and general supervisor. HCFA Exs. 8 at 1; 14 at 1. Rene Wheatley was part of Oakland's testing personnel, as well as part of the personnel working at other laboratories in the general vicinity. HCFA Ex. 14. She performed high complexity routine chemistry and endocrinology testing, as well as PT for Oakland. Id. at 1.

Some of the laboratories in the Detroit metropolitan area participating in a PT program operated by the American Association of Bioanalysts (AAB) were Oakland Medical Group (also known as Moretsky/Trager/Flor); John Dunn, M.D.; Mark Hertzberg, M.D.; Rochester Road Clinic; Nazar Sarafa, M.D. (also known as Garden City Medical Clinic); Liptawat Family, P.C.; Lakeland Medical; Ecorse Med Center; and Stanley Boykansky, M.D. HCFA Ex. 7. The AAB would mail to each laboratory participating in the PT program the same group of five specimens three times a year. The laboratories were required to test these specimens for analytes for which they did patient testing, and mail their results to the AAB by a date certain, approximately 10 days after receiving the samples. Oakland was required to test the specimens for cholesterol, HDL cholesterol, triglycerides, glucose, thyroid stimulating hormone, total thyroxine, triiodothyronine, and free thyroxine.

By letter dated January 4, 1999, Dennis W. Jay, Ph.D., Technical Director of the Proficiency Testing Service of the AAB, sent the Michigan Department of Consumer and Industry Services (MDCIS) some PT results for a group of Detroit area laboratories that he deemed suspect. HCFA Ex. 10. Specifically, the cover letter suggested that the same PT results were being submitted by several laboratories. The following five facilities submitted identical PT results during the third testing event of 1998 for cholesterol, HDL cholesterol, triglycerides, and glucose with respect to five different specimens: Oakland Medical Group, John Dunn, M.D., Mark Hertzberg, M.D., Rochester Road Clinic, and Nazar Sarafa, M.D. Id.

On January 14, 1999, the AAB notified MDCIS that it had discovered another four facilities reporting duplicate results and included their 1998 third quarter summaries and attestation sheets. These four facilities were: Liptawat Family, P.C., Lakeland Medical, Ecorse Med Center, and Stanley Boykansky, M.D. HCFA Ex. 7 at 1.

In response to the above information, on February 25, 1999, Richard J. Benson, Chief, Laboratory Improvement Section, Bureau of Health Systems, MDCIS, attempted an unannounced complaint investigation at Oakland. HCFA Ex. 11 at 3. He sought evidence regarding Oakland's PT for all three events of 1998. The Oakland staff present was unable to produce any testing records, nor was there anyone available who might have known their location. The director was not there that day, and Ms. Wheatley was not scheduled to come in at that time. Mr. Benson went away empty-handed. Id.

On March 2, 1999, Ms. Lucy Estes, Laboratory Evaluation Specialist, MDCIS, attempted to perform a complaint survey of Oakland's facilities. HCFA Ex. 15 at 2. Her first attempt failed. During the second attempt on the same day, the attending physician gave her copies of Oakland's records in response to a request to review quality control records, temperature records, graphs, patient testing records and PT records for 1998. Id. Based on her review of the testing records she received from Oakland, and information from the AAB concerning the similarity of PT results between Oakland and others in the Detroit area, Ms. Estes found that Oakland was not in compliance with the CLIA requirements under 42 C.F.R. § 493.801(b)(1), Testing of Proficiency Samples, and 42 C.F.R. § 493.1451(b)(4), Technical Supervisor Responsibilities. She completed and submitted HCFA Form 2567 to her supervisor, Mr. Benson, along with the aforementioned documents. See HCFA Ex. 15, Att. A.

By letter dated July 15, 1999, HCFA served on Oakland a Notice of Medicare Cancellation, Suspension, and Revocation of CLIA Certificate of Accreditation pursuant to MDCIS's referral of its case for imposition of enforcement action. Specifically, HCFA found that Oakland was not in compliance with the following CLIA statutory and regulatory requirements:

•The laboratory must not send PT samples or portions of samples to another laboratory for any analysis which it is certified to perform in its own laboratory. 42 C.F.R. § 493.801(b)(4).

•Requirement for Certificate: The laboratory agrees to treat PT samples in the same manner as it treats materials derived from the human body referred to it for laboratory examinations or other procedures in the ordinary course of business. 42 U.S.C. § 263a(d)(E); 42 C.F.R. § 493.61(b)(1); 42 C.F.R. § 493.801(b)(1)-(3).

HCFA Ex. 1.

Because of Oakland's improper referral of PT samples to another laboratory for analysis, Oakland's failure to treat PT samples in the same manner as patient samples, and Oakland's refusal to permit MDCIS to survey its facilities, HCFA imposed the principal sanctions of suspension of Oakland's CLIA certificate of accreditation and cancellation of Oakland's approval to receive Medicare payment for its laboratory services, and proposed to revoke Oakland's CLIA certificate of accreditation. HCFA Ex. 1.

HCFA's July 15, 1999 letter provided Oakland with an opportunity to document that improper PT referral had not occurred. HCFA Ex. 1 at 4. On October 1, 1999, HCFA served Oakland with a final and more complete notice of adverse action, stating that HCFA had received nothing from Oakland to convince it that the relevant determinations in its July 15^th letter were incorrect.⁽³⁾

HCFA Ex. 3 at 1. Addressed to Oakland's Director, Dr. Moretsky, the October 1, 1999 letter stated, in pertinent part:

As set forth on the HCFA Form 2567 that was enclosed with our letter to you of July 15, 1999, the surveyors determined that with respect to the first three events of 1998, your laboratory's proficiency testing (PT) was not performed with the laboratory's regular workload using the laboratory's routine methods, in violation of the standard at 42 CFR § 493.801(b)(1). In our July 15, 1999, letter, we also stated that the evidence revealed that your laboratory referred certain PT samples to another laboratory for analysis in violation of the standard at 42 CFR § 493.801(b)(4). The evidence strongly suggests that the results of proficiency testing reported by your laboratory during the first, second, and third events of 1998 were obtained by improper referral and/or collaboration. Inter-laboratory communications pertaining to the results of proficiency testing samples, prior to the testing event reporting due date, are prohibited by the standard at 42 CFR § 493.801(b)(3).

In addition, the standard at 42 CFR § 493.801(b)(5) requires that a laboratory must document the handling, preparation, processing, examination, and each step in the testing and reporting of results for all proficiency testing samples. Further, the laboratory must maintain a copy of all records, including a copy of the proficiency testing program report forms used by the laboratory to record proficiency testing results. . . However, based on a review of the 1998 proficiency tests records and the patient sheets during the survey, it was determined that the PT samples were not examined or tested with the laboratory's regular patient work load. Since the survey findings show that integration did not occur, this violates the standard at 42 CFR § 493.801(b)(5).

The findings from the survey also reveal that you, as laboratory director, have not fulfilled your responsibility to assure that PT samples are tested as required under 42 CFR § [Part] 493, subpart H. You, as technical supervisor, failed to assure that the manufacturer's quality control expected range inserts were available for each procedure performed in your laboratory. Therefore, normal and abnormal control material ranges were not available to determine whether quality control results were within the expected range of the manufacturer. The presence of the deficiencies cited in this letter and on the HCFA-2567 demonstrates that you have failed to take responsibility for the overall operation and administration of your laboratory. Therefore, the laboratory is out of compliance with the condition level requirement for a laboratory director at 42 CFR § 493.1441. Because your laboratory did not treat PT samples in the same manner as patient samples, it is in violation of the CLIA requirements at 42 CFR § 493.61 and 42 U.S.C. § 263a(d)(1)(E) and does not meet the requirements for a certificate of accreditation.

Because of your laboratory's failure to meet the conditions of Proficiency Testing and Laboratory Director, and because of your intentional referral of your laboratory's PT samples for the third testing event of 1998 to another laboratory for analysis, as set forth in our letter of July 15, 1998, we have imposed the following principal sanctions against your laboratory:

•42 CFR § 493.1808(a) and 42 CFR § 493.1842(a)(1) - Principal Sanction: Cancellation of your laboratory's approval to receive Medicare payment for its services. This sanction will become effective on October 1, 1999, and will remain in effect until a hearing decision is rendered, or the end of the revocation period . . . .

•42 U.S.C. § 263(a)(i)(4), 42 CFR §§ 493.1814(a) and 493.1840(b) - Principal Sanction: Revocation of your laboratory's CLIA certificate. . . .

HCFA Ex. 3.

On July 30, 1999, Oakland requested a hearing before an ALJ. In his decision, the ALJ found that Oakland failed to meet condition level requirements for PT events in 1998, failed to meet the condition level requirement for laboratory director, and violated the standard for technical supervisor. ALJ Decision at 22-23.

Standard of Review

Our standard of review of an ALJ decision on a disputed issue of law is whether the ALJ decision is erroneous. Our standard of 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. US Bio-Chem Medical Laboratories, Inc., DAB No. 1731 (2000).

As noted above, Oakland took exception to 15 of the ALJ's 23 FFCLs. Oakland filed, concurrently, both a Request for Review, listing all the FFCLs to which it excepted, along with a Brief grouping some of those FFCLs within broader arguments. In presenting Oakland's position, we cite both its Request for Review and its Brief.

We have considered each argument raised by Oakland as well as the entirety of evidence before the ALJ. Below, to the extent practical, we address each relevant argument relative to a disputed FFCL. We have concluded that the challenged FFCLs are not erroneous and are supported by substantial evidence on the record as a whole. Thus, any nuance of Oakland's contentions that we have not addressed specifically is subsumed in our analysis of its position and rejected.⁽⁴⁾

Exceptions to summary judgment

FFCL 22. Petitioner has submitted no affidavits or other documentary evidence that, if taken as true, would create a genuine issue of material fact that would require a hearing.

Fed. R. Civ. P. 56.

FFCL 23. The facts on which I base this decision are either not in dispute or uncontroverted. Thus, summary judgment is appropriate as a matter of law.

Both Petitioner and HCFA filed motions for summary judgment before the ALJ. Oakland contended that the ALJ erred in granting HCFA's motion for summary judgment because Oakland had submitted documentary evidence that created a genuine issue of material fact with respect to HCFA's allegations against Oakland, and because Oakland was not given an opportunity to request subpoenas. Oakland did not identify the issue of material fact to which it referred, nor did it state what the objects of any subpoena requests would be. In addition, rather than seeking remand of the case to the ALJ for further discovery or a hearing, Petitioner maintained that the Board should grant its motion for summary judgment and overturn the HCFA action. Oakland Request for Review at 5.

Upon review of the record before the ALJ, we conclude that Oakland's arguments are spurious. Of the three documents submitted by Oakland, only one was not a duplicate of a HCFA exhibit. That document -- a Form 1099 for Ms. Wheatley that was submitted to show that she was an independent contractor rather than an employee -- could be said to raise an issue of fact. However, as we find below, the ALJ correctly determined as a matter of law that Ms. Wheatley's alleged employment status was immaterial to Oakland's responsibility for compliance with CLIA requirements. Notably, Oakland did not supply affidavits from its laboratory director, Ms. Wheatley, or an independent expert to support its contentions about how its PT results came to be identical to those of other laboratories absent any referral or unlawful collaboration. Nor did Oakland specifically allege that it needed a subpoena to compel any potential witness to appear. Oakland also did not supply or offer to provide the missing documentation for the PT event of June 1998 or any other documents in its records that would support its defense. Consequently, we conclude that the ALJ's conclusion that summary judgment was appropriate is correct and we affirm and adopt FFCLs 22 and 23.

Exceptions to FFCLs about employees

FFCL 5. Ms. Deborah Sabo performed PT for Stanley

Boykansky, M.D., John Dunn, M.D., Garden City Medical Clinic, and Mark Hertzberg, M.D. Ms. Sabo and Ms. Wheatley had a prior professional acquaintance as co-workers at Oakland General Hospital. HCFA Exs. 14 and 18.

Oakland asserted that this FFCL was irrelevant as there was no evidence that Ms. Sabo had any involvement in Oakland's 1998 PT, nor was there any evidence of contact between Ms. Sabo and Ms. Wheatley in 1998. Oakland Request for Review at 1-2.

There is substantial evidence in the record supporting all aspects of this FFCL. There is no dispute that there was a prior professional relationship between these individuals. In a related case, Ms. Sabo testified that they knew each other "well" and that Ms. Wheatley was her supervisor at Oakland General Hospital. Ms. Sabo testified that Ms. Wheatley did perform PT at another laboratory involved in this situation. She nevertheless expressed her belief that the director of that laboratory incorrectly certified the time of Ms. Wheatley's employment and testified that Ms. Wheatley's employment occurred prior to 1998. HCFA Ex. 18 at 41-42. The ALJ stated, however, that his findings were not necessarily dependent on their common employment. ALJ Decision at 11, n.4.

FFCL 6. Petitioner represented that Ms. Rene Wheatley was an employee of Oakland whose duty it was to conduct high complexity testing for routine chemistry and endocrinology. Whether Ms. Wheatley was an independent contractor or not is irrelevant, inasmuch as Petitioner is responsible for the actions of all individuals it authorizes to perform chemistry testing at its facility on its behalf.

Oakland argued that this FFCL is not supported by substantial evidence and is clearly erroneous as the language of CLIA and its implementing regulations expressly distinguishes "employees" from others. Based on common law factors relied upon by the Internal Revenue Service and on the fact that she was paid by means of an Internal Revenue Service Form 1099, a common payment instrument for independent contractors, Oakland asserted that Ms. Wheatley was not an employee, but an independent contractor. Oakland contended that, contrary to the ALJ's finding, the applicable statutory and regulatory provisions do distinguish between "agents, persons and employees." Oakland insisted that the plain meaning of 42 C.F.R. §§ 493.1940(a) and (b) compelled a conclusion that a laboratory may be sanctioned based only upon the action of its owner, operator or employees. Oakland contended that it could not be sanctioned even if a referral occurred, as Ms. Wheatley was neither an owner, nor an operator or nor an employee. Noting that the CLIA statutory scheme distinguishes between employees and other personnel, Oakland also contended that both the ALJ and HCFA ignored the numerous other definitions of the term "employee" contained in the Social Security Act. As a result, Oakland contended, the ALJ glossed over an important distinction between "employee" and "independent contractor" which would have required a finding of standard level deficiencies at worst. Oakland Request for Review at 2; Oakland Br. at 7-12.

The ALJ's conclusion that Ms. Wheatley's employment status was irrelevant, since Petitioner was responsible for the actions of all individuals it authorizes to perform chemistry testing at its facility on its behalf, was not erroneous.

Regardless of the characterization of her employment status, there is no question that Oakland employed Ms. Wheatley to conduct clinical laboratory testing including PT. See Petitioner Br. at 11. As the ALJ noted, Oakland's CLIA Laboratory Personnel Report merely listed Ms. Wheatley as an employee. ALJ Decision at 11, citing HCFA Ex. 14. Signed by Oakland's Director (Dr. Moretsky), the Laboratory Personnel Report did not distinguish between Ms. Wheatley, as an independent contractor, and her coworkers. They are all listed under the heading "Employee Names." The only distinguishing features for Ms. Wheatley's listing are her shift, part-time status and qualification to perform high complexity testing. HCFA Ex. 14 at 1. As the ALJ determined, the real issue was the responsibility of Oakland's operator (an owner as well as a director) for the safety and reliability of the laboratory's testing. As the ALJ noted, the regulation at 42 C.F.R. § 493.1445 establishes the director's responsibility for the overall operation and administration of the laboratory including the employment of competent testing personnel. The regulation specifically provides that delegation of those duties does not relieve directors of responsibility for their performance. 42 C.F.R. § 493.1445(b). Finally, the ALJ correctly concluded that 42 C.F.R. § 493.1840(b) did not place such a strained reading on the term laboratory so as to exclude from its sphere of import individuals hired by the facility who are not salaried employees. ALJ Decision at 11-12.

CLIA was designed to ensure accurate medical tests by clinical laboratories and to establish a single set of standards applicable to all laboratory services including those available to Medicare beneficiaries. ALJ Decision at 1. The ALJ correctly characterized as "strained" Oakland's reading of the program regulations in such a way as to preclude actions of an independent contractor from giving rise to a condition level deficiency. Although there is no suggestion that it was Oakland's intent to use Ms. Wheatley's independent contractor status as a shield from accountability for deficiencies, it is clear that Oakland's argument regarding her status, if accepted, would defeat the purpose of CLIA.

Oakland's reliance on the provision in 42 C.F.R. § 493.1840(a), which authorizes HCFA to take adverse action based on actions by a laboratory's "owner, operator or employees," is misplaced. The regulations make clear elsewhere that HCFA may impose principal or alternative sanctions on "a laboratory that is out of compliance with one or more of the CLIA conditions." 42 C.F.R. § 493.1806. Section 493.1840(a) provides HCFA additional authority to take adverse action based on a broad range of actions by certain individuals associated with laboratories and cannot reasonably be read in context as limiting HCFA's authority to act against a laboratory that does not meet the certification requirements.

Exceptions to FFCLs concerning Oakland's compliance with PT requirements

Oakland challenged the following FFCLs:

FFCL 9. The affidavits and documentary evidence submitted by HCFA in support of its motion to dismiss show that Petitioner reported PT results to the AAB in 1998 that were identical to the results of eight other Detroit area laboratories for cholesterol, HDL cholesterol, triglycerides, and glucose with respect to five different specimens.

FFCL 10. From the multitude of identical results, I draw the inference that Petitioner intentionally referred proficiency tests to another laboratory and/or engaged in inter-laboratory communications (collaboration) and then reported the results obtained to the AAB as Petitioner's own results. Additionally, although Petitioner reported PT results to the AAB for the second testing event in June 1998, it lacked records to substantiate the basis for the reported results.

FFCL 11. Petitioner's PT samples, particularly for the second testing event in June 1998, were not examined with the laboratory's regular patient workload in violation of the condition level requirement set forth at 42 C.F.R. § 493.801 and 42 C.F.R. § 493.61.

FFCL 12. Petitioner did not arrive at PT results identical to that of eight other laboratories through human error or coincidence, but by intentional referral, collaboration, and manipulation of those results.

FFCL 18. Petitioner's PT results for the three testing events of 1998 were obtained through referral and/or inter-laboratory communications (collaboration) with other laboratories which constitutes a violation of 42 C.F.R. § 493.801.

FFCL 19. By failing to examine or test proficiency samples in the same manner as routine patient specimens, Petitioner violated the terms of 42 C.F.R. §§ 493.801, 493.801(b), and 493.61.

Oakland argued that the premise of FFCL 9, that Oakland's 1998 PT results were identical to those of eight other Detroit area laboratories, was not supported by substantial evidence in the record because the only evidence in the record indicating identical results was for the third quarter of 1998. Oakland Request for Review at 2.

Oakland argued that FFCL 10 was clearly erroneous and not supported by substantial evidence in the record because HCFA had not presented evidence to show that Oakland had physically transferred PT samples for any testing event or failed to perform PT at its clinical laboratory. Oakland contended that HCFA had offered nothing more than a belief that these events occurred as alleged. Id. at 2-3.

Oakland argued that FFCL 11 was clearly erroneous and not supported by substantial evidence in the record as there was no evidence presented to show that the June 1998 PT event was not performed with the regular patient workload. Id. at 3.

Oakland argued that FFCL 12 was clearly erroneous as it was a conclusion unsupported by any factual evidence. Id.

Oakland argued that FFCL 18 was clearly erroneous and not supported by substantial evidence in the record as there was no evidence presented to show that there was a referral of PT to any other laboratory and the clear language of 42 C.F.R. § 493.1840(b) does not include communication, collaboration or any other action short of an actual referral of PT samples to another laboratory as a violation. Oakland asserted that it performed its own PT at all relevant times. Id. at 4.

Oakland argued that FFCL 19 was clearly erroneous and not supported by substantial evidence in the record as there was no evidence presented to show that PT samples were not tested in the same manner as patient samples. Id.

Oakland's attacks on these FFCLs do not withstand close scrutiny. First and foremost, Oakland's assertion that FFCL 9 is incorrect because the evidence showed identical PT results for only the third quarter of 1998 is simply wrong. HCFA showed that Oakland reported identical results for many analytes in each of the three testing events. See HCFA Ex. 7. Thus, the ALJ properly concluded that HCFA made a prima facie case that Oakland failed to fulfill its CLIA responsibilities with respect to PT and focused on whether Oakland could meet its burden to demonstrate compliance for all three events. With respect to the June PT event, the ALJ examined the record before him and determined that:

A review of Petitioner's Master Work Sheets for the second testing event of June 20, 1998 (98-2) revealed that the laboratory did not record any PT testing for this date for any of the analytes with any of the patient testing. HCFA Ex. 11, at 10, 44. Despite the absence of underlying data, Petitioner reported PT results for the second testing event for 1998 to the AAB. HCFA Ex. 11, at 10, 24-27. Petitioner claims to have complied with the proper testing and recording requirements, yet it has failed to make any documentary evidence available for my consideration that shows the existence of any underlying data for the second testing event . . . .

ALJ Decision at 18.

Oakland offered us no plausible explanation for why its records did not show that it did PT on June 20, 1998. On appeal, Oakland noted that it provided June PT results to AAB and that Ms. Wheatley attested that she performed that PT on the date indicated. Oakland Br. at 27-29.

In spite of Ms. Wheatley's attestation, Oakland has not pointed to any evidence of record purporting to be the underlying data for the June 1998 testing event. Absent supporting evidence, Ms. Wheatley's attestation of performance of the June 1998 PT and Oakland's assertions of correct testing procedures are largely self-serving, as to assert otherwise would be an admission of wrongdoing. Oakland was required to maintain for a period of two years from the date of the testing event "all records" necessary to document compliance with the PT process. 42 C.F.R. § 493.801(b)(5). Without them, Oakland cannot establish that it tested the PT samples for that event at all, much less that it performed the tests in accordance with the regulations or that the reason the results it obtained were identical to those of eight other laboratories was human error or coincidence. We therefore reject Oakland's assertions to the contrary as they pertain to this testing event.

With respect to the other 1998 PT events, the ALJ reviewed the testimony of two HCFA affiants and examined the records Oakland had produced to support the PT results reported for the March and October 1998 PT events. He relied on these affiants' opinions concerning the likelihood that identical results could be innocently reached, as well as his independent determination that the records contained data that was inconsistent with the results reported, in concluding that Oakland did not arrive at these results through human error or coincidence, but by intentional referral, collaboration, and manipulation of the results.

Oakland challenged the qualifications of the two HCFA affiants (the Technical Director, Proficiency Testing, AAB and the Chief, Laboratory Improvement Section, MDCIS) relied upon by the ALJ in reaching his decision. Oakland asserted that neither affiant's credentials include expertise or special knowledge in the area of statistical analysis. Thus, Oakland asserted that the ALJ's reliance on them was misplaced. Oakland Brief at 18-19.

We disagree. The ALJ did not rely on these individuals for statistical expertise. The ALJ stated:

Their declarations (HCFA Exs. 11 and 16) are based not only on their expertise, but also on their personal examination and analysis of the data obtained from the AAB as well as Petitioner's records. Although some of their findings are laced with statistical implications, the thrust of their declarations is more associated with the manner in which certain chemical properties will behave given specific testing conditions. For example, based on their knowledge of the poor reproducibility of testing results for triglycerides and cholesterol, with an expected variation in results on the order of 10% to 20%, they are competent to voice an opinion as to the improbable likelihood that Petitioner's PT results for eight analytes, from each of the five specimens would be identical to the results reported by eight other laboratories in the same geographic area.

ALJ Decision at 14 (emphasis added).

Oakland also asserted that the affiants' declarations were suspect because they did not consider the totality of the testing process. Further, Oakland asserted that at least one of the affiants, as well as the ALJ, failed to understand that the reduction of the number of variables in a testing equation reduces the chances for dissimilarity of results. The more common elements the greater the chance for similar results. Here, Oakland noted, the laboratories participating in the AAB testing had the same samples and many used the same reagents and/or equipment. Oakland Br. at 25-27.

Contrary to Oakland's assertion, the ALJ discussed in significant detail the affiants' analytical process in determining that Oakland's reported PT results were not its own. This included a thorough review of Oakland's testing methodology and available worksheets and a comparison of that information to the PT results reported to AAB. ALJ Decision at 16-19. Oakland offered no specific argument or evidence to show that the affiants' statements were incorrect and thus that the relevant FFCLs were either unsupported by substantial evidence or erroneous.

In addition, Oakland did not even attempt to explain the discrepancies between the results reflected in its records and the results it reported to AAB. Consequently, it did not establish that it performed the tests in accordance with the regulations or that the results that it obtained that were identical to other laboratories' results were identical due to human error or coincidence. We therefore reject Oakland's exceptions to FFCLs 10, 12, 18, and 19.

Oakland also maintained that there was no direct or circumstantial evidence in the record which revealed that PT samples were removed from Oakland's clinical laboratory, so as to constitute an intentional referral within the meaning of the regulation. Oakland relied on an ALJ decision in Southfield Medical Clinic, DAB CR667 (2000), for the proposition that there can be no referral without physical transportation of the PT samples from one laboratory to another. Contrary to the reasoning of the ALJ in this case, Oakland contended that it was essential to give the applicable statutory and regulatory provisions their plain meaning that a referral occurs only when there is evidence of actual physical transport of PT samples to another laboratory. Oakland noted that, unlike other laboratories in cases involving referrals, it has not admitted referring the PT samples to another laboratory. The ALJ in this case did not have before him direct evidence that PT samples were in fact removed from Oakland in order to be tested elsewhere, but determined that referral was established through circumstantial evidence. ALJ Decision at 19. Oakland asserted that even if there were inter-laboratory communications regarding the PT samples, those communications would constitute nothing more than a standard level deficiency. Consequently, Oakland argued, the remedy selected by HCFA should have been a plan of correction, not the one-year revocation mandated by 42 U.S.C. § 263a(i)(4) and 42 C.F.R. § 493.801(b)(4). Oakland Br. at 21-24.

We have reviewed the ALJ decisions cited by the ALJ and both parties in this appeal, and we conclude that the ALJ's application of the referral regulation to the evidence before him in this case was not erroneous. The weight of the evidence demonstrated that the PT results that Oakland reported were not the result of its own testing, but were obtained from another laboratory's testing. We therefore affirm the ALJ's factual determination here that referral was established through circumstantial evidence.

In addition, we agree with the ALJ in declining to follow the Southfield ALJ's analysis of the referral regulation as requiring that the actual physical transfer of the sample from one laboratory to another be established through direct evidence. As in the present case, the laboratory in Southfield reported PT results identical to those of another laboratory. In addition, in Southfield the same employee did the PT for both laboratories. In that case, the ALJ relied on the use of the word "send" in section 493.801(b)(4), and the fact that another subsection of the regulation, section 493.801(b)(3), specifically identifies inter-laboratory communication of PT results, for his conclusion that HCFA must show a physical transfer of the PT samples to establish intentional referral. He therefore held that the evidence before him supported only a finding of unlawful collaboration under section 493.801(b)(3).

The ALJ in Southfield focused on the wording of the provision at 42 C.F.R. § 493.801(b)(4), concluding that the wording indicates a physical transfer of the PT sample. We agree that the use of the word "send" in the first sentence of that section indicates a physical transfer. Contrary to what the ALJ in Southfield stated, however, that sentence is not presented as a definition of "intentional referral" but can be read as a separate prohibition. The second sentence of that section states: "Any laboratory that HCFA determines intentionally referred its . . . [PT] samples to another laboratory for analysis will have its certification revoked for at least one year." HCFA could reasonably read this sentence as applying to constructive referral as well as actual physical transfer, particularly in circumstances where the facts render physical transfer unnecessary for the outside analysis to take place. As noted by the ALJ in Blanding Urgent Care Center Laboratory, DAB CR438 (1996), the dictionary definition of "refer" includes "to direct the attention or thoughts of," and "to direct to a person, place, etc., for information or anything required." Id. at 21 citing Random House College Dictionary, revised ed. 1980, at 1108. HCFA established that the results reported by Oakland were not the product of its own PT. The mere fact that section 493.801(b)(3) prohibits inter-laboratory communications does not mean that communications about results could not constitute intentional referral, especially where the communication led to circumstances that are the substantial equivalent of a physical transfer with the transferring laboratory reporting the receiving laboratory's results as its own.

When the regulations are considered as a whole, reading section 493.801(b)(4) to encompass a constructive referral such as what occurred here is a better reading. Limiting the concept of a referral to a physical transfer is inconsistent with the underlying purposes of the condition for certification. Adopting the values achieved in another laboratory (either with or without having done the tests in one's own laboratory) clearly undercuts the general concept that the PT sample be tested in the same way as regular patient specimens in the laboratory are tested so that the results truly measure the proficiency of the laboratory reporting the PT results. The regulation requiring at least a one-year revocation of a certification where a laboratory intentionally referred PT samples to another laboratory can be considered notice of the seriousness with which any intentional circumvention of the requirements for PT would be regarded.

Finally, we reject Oakland's contention that a finding of intentional referral is essential to impose a one-year revocation of its CLIA certificate, and that a finding of inter-laboratory communications would support only a standard level deficiency remedy. Even if only inter-laboratory communications were established, the record supports the ALJ's determination that Oakland was guilty of a wholesale failure to comply with PT requirements for all three 1998 PT events, and thus was out of compliance with the overall condition for participation in PT set forth in section 493.801. As we discuss below in our analysis of Oakland's exceptions concerning the remedies adopted by the ALJ, HCFA is authorized to impose a principal sanction on a laboratory that is out of compliance with one or more CLIA conditions. 42 C.F.R. § 493.1806.

Exceptions to the FFCLs concerning Oakland's laboratory director

FFCL 13. Dr. Robert I. Moretsky, as laboratory director and technical supervisor was responsible for Petitioner's overall operation and administration. His responsibilities included the employment of competent personnel to perform test procedures, the recording and the reporting of test results promptly, accurately and proficiently, and assuring compliance with applicable regulations. 42 C.F.R. §§ 493.1441 and 493.1445.

FFCL 14. Petitioner, through Dr. Robert I. Moretsky, was in violation of the condition for laboratory director in failing to provide proper overall management and direction to the facility and by not establishing and carrying out required quality control measures. 42 C.F.R. §§ 493.1441 and 493.1445.

FFCL 15. Petitioner, through Dr. Robert I. Moretsky, was in violation of the standard for technical supervisor in failing to establish a quality control program with parameters for acceptable levels of analytic performance, and ensuring that such levels are maintained throughout the entire testing process. 42 C.F.R. §§ 493.1449 and 493.1451.

Oakland argued that FFCL 13 was not supported by substantial evidence with regard to the finding that the laboratory director's responsibilities included employment of competent personnel. Oakland maintained that the implementing regulations do not require employees; rather, Oakland argued, laboratories may contract with testing personnel through independent contractor relationships as was the case here. Oakland Request for Review at 3.

Oakland argued that FFCLs 14 and 15 were clearly erroneous and not supported by substantial evidence in the record as there was no evidence presented to show that PT was not performed at Oakland's clinical laboratory. Thus, Oakland asserted, the FFCL regarding quality control measures was based on inferences and unsupported allegations. Id. at 3-4.

Oakland argued that the ALJ's conclusions related to Dr. Moretsky's supervision were clearly erroneous. Oakland asserted that "the only evidence relied on by the . . . [ALJ] is the inference that because there are standard level deficiencies, the laboratory director did not perform his responsibilities." Oakland Br. at 33.

Oakland asserted that FFCLs 13-15 were not based on substantial evidence because there were no allegations that Ms. Wheatley was incompetent, nor was there evidence presented to show that clinical testing was not performed on site. Indeed, Oakland claimed that it was illogical for the ALJ, or HCFA, to contend that Ms. Wheatley did not perform PT because there was no additional time burden placed on her to perform the tests, there was nothing to be gained by nonperformance, and there were no admissions from anyone connected with Oakland that the tests were not properly performed. Oakland reasoned that since there had been no challenge to the routine patient testing at Oakland, and since indeed, Oakland claimed an unsullied history of PT and patient testing, the laboratory director had no reason to suspect deficiencies, at any level. Consequently, Oakland found it inconceivable that the director's performance could be considered deficient. Oakland also asserted that there was no evidence that the laboratory director knew or could have known of alleged improprieties in PT, even if he had stood next to the laboratory technician during testing. Finally, Oakland asserted that its alleged violation of 42 C.F.R. § 493.1451(b)(4) was only a standard level deficiency. Thus, Oakland again contended that HCFA was required to allow it the opportunity to remedy the deficiency pursuant to a plan of correction. Oakland Br. at 34-35.

The ALJ correctly noted that a laboratory must have a director who provides overall direction and proper management pursuant to 42 C.F.R. §§ 493.1441 and 493.1445.

In reaching his decision, the ALJ found:

Petitioner's laboratory records confirm that proficiency samples were not examined with the laboratory's regular workload; testing procedures were not documented; and prohibited collaboration with other laboratories occurred. . . .the MDCIS surveyor, found that the normal and abnormal control ranges were not available for the purpose of determining if quality control results for tests were within the manufacturer's expected ranges. HCFA Ex. 15, at 7. She also found that the laboratory could not verify quality control values for testing because the lot numbers, the expiration dates and the expected ranges were missing. Id.; HCFA Ex. 1, at 9.

ALJ Decision at 22.

The ALJ characterized Oakland's response to this deficiency as non-specific. The ALJ noted that although Oakland alleged it had performed the tests as required, it failed to produce any documentary evidence supporting its position even though it was required by regulation (42 C.F.R. § 493.801(b)(5)) to maintain such records. Finally, the ALJ determined that Oakland's technical supervisor (Dr. Moretsky) failed to establish a quality control program appropriate for the testing performed, and failed to establish the parameters for acceptable levels of analytic performance and to ensure that these levels were maintained throughout the entire testing process, from the initial receipt of the specimen through sample analysis and reporting of test results. Consequently, the ALJ found a violation of the standard at 42 C.F.R. § 494.1451(b)(4). ALJ Decision at 22.

In its appeal, Oakland did not dispute that its technical supervisor/director bore responsibility for ensuring that PT results were secured in accordance with the regulatory guidelines, nor did it provide evidence that Dr. Moretsky fulfilled his duties in this respect. Rather, Oakland challenged the notion that there was anything wrong with the PT results themselves. Since Oakland did not establish that its PT results were accurate and properly derived, however, it follows that Oakland's technical supervisor/director who attested to their accuracy did not fulfill his regulatory duties.

We reject Oakland's implication that the laboratory director could not have discovered the PT deficiencies even if he had been standing next to the laboratory technician during testing, since it assumes that Ms. Wheatley did PT at Oakland for all three 1998 PT events. It bears repeating that Oakland produced no documentation substantiating testing for the June event, and the documentation it provided for the other two events did not support the results it reported. Adopting procedures to assure that required documentation is produced, maintained, and checked for accuracy is certainly within the responsibilities of a laboratory director. See 42 C.F.R. § 493.1445(b)(4). Adherence to these requirements would have alerted Oakland's director to the problems with its PT. Moreover, such a wholesale failure to ensure compliance with PT requirements throughout all three 1998 testing events is certainly noncompliance with the conditions for laboratory director and technical supervisor, not just a standard level deficiency. We therefore conclude that Oakland has not demonstrated that the FFCLs in question here were erroneous or not supported by substantial evidence in the record.

Exceptions concerning the remedies proposed and imposed

FFCL 20. The revocation of Petitioner's CLIA certificate for a period of one year is not unreasonable in light of the failure to satisfy the condition level requirements mentioned above.

FFCL 21. HCFA properly canceled Petitioner's approval to receive Medicare payment for its services, effective October 1, 1999.

Oakland argued generally that revocation of its CLIA certificate was not authorized by the CLIA regulations because HCFA did not provide sufficient notice of the condition level deficiencies until the October 1, 1999 letter. Oakland also contended that the ALJ erred in finding that HCFA was not barred by the absence of reported deficiencies by the Commission on Office Laboratory Accreditation (COLA) from finding Oakland out of compliance with CLIA requirements. In addition, Oakland argued that HCFA was authorized to impose the principal sanction of revocation of its CLIA license only if HCFA established deficiencies in complying with items specifically identified in the regulations as conditions. According to Oakland, noncompliance with items identified as standards could never support imposition of a principal sanction, so that the appropriate sanction in its case was a plan of correction.

With respect to the numbered FFCLs, Oakland argued that FFCL 20 was clearly erroneous and not supported by substantial evidence in the record because revocation of its CLIA certificate for one year was unreasonable based upon HCFA's failure to prove any condition level requirements were unmet by Oakland. Oakland argued that FFCL 21 was clearly erroneous and not supported by substantial evidence in the record as HCFA did not properly cancel Oakland's approval to receive Medicare payments. Oakland Request for Review at 4-5.

The ALJ examined the notification time line in this case and determined that Oakland had ample notice that it had failed to meet requirements that were the basis for revocation of its CLIA certificate. ALJ Decision at 12. The ALJ characterized HCFA's October 1, 1999 letter to Oakland as a final and complete notice of adverse action. Id. at 5. As we noted earlier, the October 1^st letter followed an opportunity for Oakland to demonstrate that the findings outlined in HCFA's July 15, 1999 letter, including the allegation of intentional referral, were incorrect. Moreover, as the ALJ noted throughout his decision, it is clear from the totality of the record that the alleged violations were so widespread as to amount to condition level deficiencies in Oakland's PT program. We therefore affirm the ALJ's determination that Oakland had sufficient notice of the charges against it to satisfy the notice requirements of the CLIA regulations.

The ALJ clearly did not err in rejecting Oakland's contention that HCFA could not find noncompliance with CLIA requirements because Oakland had passed a routine Commission on Office Laboratory Accreditation inspection. As he noted, HCFA may always require an inspection where there has been a complaint. 42 C.F.R. § 493.1773(f). As a result of HCFA's inspection, Oakland was no longer deemed to meet the CLIA conditions by reason of its COLA accreditation. See 42 C.F.R. § 493.61.

We also reject Oakland's general contention that HCFA's citation to Oakland's deficiencies in meeting standards rather than overall conditions limited HCFA to alternative sanctions. It is indisputable that a laboratory can be so pervasively noncompliant with standards as to have failed to have complied with the overall condition. The record here supports the ALJ's determination that there was an absolute failure to comply with the CLIA requirements at 42 C.F.R. §§ 493.801, 493.801(b), and 493.61.

Finally, to the extent that Oakland's challenges to FFCLs 20 and 21 are based on its contention that no condition level deficiencies have been established, we have already affirmed the ALJ's FFCLs concerning the existence of condition level deficiencies, including the intentional referral of PT samples, for which revocation of Oakland's CLIA certificate is mandated.

We therefore reject Oakland's exceptions to these FFCLs and affirm and adopt them.

Conclusion

Based on the preceding analysis, we affirm and adopt each of the FFCLs underlying the ALJ Decision and sustain that decision in its entirety.

Judith A. Ballard

Donald F. Garrett

M. Terry Johnson
Presiding Board Member

1. HCFA may deem a laboratory to meet all applicable CLIA program requirements if the laboratory obtains a certificate of accreditation, as required in 42 C.F.R. Part 493, Subpart D, and meets the other requirements listed in 42 C.F.R. § 493.551(b).

2. These remedies are also available if a laboratory with a certificate of accreditation fails to meet the requirements of 42 C.F.R. § 493.61, including the requirement that it treat the PT samples in the same manner as patient samples. 42 C.F.R. §§ 493.61(b)(1) and (c).

3. HCFA initially determined that Oakland had refused to permit an inspection and contemplated imposing a sanction on that basis. However, based on MDCIS's subsequent recommendation, HCFA withdrew that determination. HCFA Ex. 2.

4. For example, we found impossible to categorize as referring to any FFCL Oakland's contention that "the ALJ and HCFA have never alleged or presented any evidence or made any finding of fact related to patient testing not being properly performed at . . . [its] clinical laboratory." Oakland Br. at 34. Since we conclude below that the ALJ correctly determined that Oakland was out of compliance with CLIA requirements concerning PT participation and laboratory director, and that these deficiencies supported HCFA's imposition of principal sanctions, we need not consider contentions about Oakland's compliance with other CLIA requirements.