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CASE | DECISION | ANALYSIS | JUDGE | FOOTNOTES

Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
IN THE CASE OF  


SUBJECT: Lackawanna Medical Group Laboratory

Petitioner,

DATE: March 21, 2003

            
 

Centers for Medicare & Medicaid Services

 

Docket No. A-03-19
Civil Remedies CR957
Decision No. 1870
DECISION
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FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE D
ECISION

Lackawanna Medical Group Laboratory, a clinical laboratory (Petitioner), appealed the September 27, 2002 decision by Administrative Law Judge (ALJ) Keith W. Sickendick granting summary judgment to the Centers for Medicare & Medicaid Services (CMS). Lackawanna Medical Group Laboratory, DAB CR957 (2003) (ALJ Decision). The ALJ determined that CMS properly imposed the remedies of revoking Petitioner's certificate under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) for a period of one year and cancelling Petitioner's approval to receive Medicare payments for its services.

On appeal, Petitioner raised two exceptions to the ALJ Decision. We have reviewed Petitioner's exceptions and conclude that the ALJ Decision should be affirmed.

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, 100th Cong. 2d Sess. 8 (1988), reprinted in 1988 U.S.C.C.A.N. 3828, 3829.

A laboratory's CLIA certification is 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 of the statutory and regulatory program to assure that laboratories holding certain 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 CMS, as outlined in 42 C.F.R. Part 493, Subpart H. Among the requirements of that subpart are the following: a participating laboratory must test PT samples it receives in the same manner as it tests patient samples (42 C.F.R. § 493.801(b)); must examine the samples with its regular patient workload (42 C.F.R. § 493.801(b)(1)); and must not refer PT samples to another laboratory for analysis (42 C.F.R. § 493.801(b)(4)).

A laboratory's failure 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). CMS 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. If a laboratory intentionally refers a PT sample to another laboratory for analysis, CMS is required to revoke the laboratory's license. 42 U.S.C. § 263a(i)(4); 42 C.F.R. § 493.1840(b).

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.

The ALJ Decision

The ALJ Decision contains 11 Findings of Fact and 11 Conclusions of Law (FFCLs)set out below:

A. Findings of Fact (2)

The following findings of fact are based upon the pleadings and exhibits submitted related to the motion for summary judgment, considering the facts and all inferences drawn therefrom in a light most favorable to the nonmovant, the Petitioner [footnote omitted].

1. Petitioner possessed a valid CLIA certificate and was authorized to receive Medicare payments at all relevant times.

2. Petitioner's laboratory was surveyed by the State agency on July 18 and August 7, 2000.

3. CMS proposed to revoke Petitioner's CLIA certificate and authorization to receive Medicare payments based on deficiencies allegedly found during the surveys of July 18 and August 7, 2000.

4. Petitioner had a quality control program.

5. Petitioner's quality control policy states that when it sends its samples for parallel testing at another laboratory, it includes proficiency test samples with its regular patient workload.

6. Petitioner tested proficiency test samples with its regular patient workload, using its regular staff and the regular protocol within its laboratory.

7. Petitioner only reported the results of its own testing of proficiency test samples to the proficiency program and not the results of parallel testing by another laboratory.

8. By sending proficiency test samples with regular patient test samples for parallel testing, Petitioner intended to comply with the requirement of 42 C.F.R. § 493.801(b)(1), which requires that proficiency test samples be treated the same as those of regular patient workload.

9. Petitioner's practice of sending out proficiency test samples with its regular patient workload was reviewed in the past but no deficiency was cited.

10. Petitioner intended to send proficiency test samples to another laboratory.

11. Petitioner sent proficiency test samples to another laboratory.

B. Conclusions of Law

1. A laboratory must not send proficiency test samples or portions of samples to another laboratory, intentionally or unintentionally, for analysis which it is certified to perform in its own laboratory, or for any other reason. 42 C.F.R. § 493.801(b)(4).

2. The motives of the laboratory that sends proficiency test samples to another laboratory for analysis that the sending laboratory is certified to perform, are irrelevant and not a defense to violation of 42 C.F.R. § 493.801(b)(4).

3. The fact that the laboratory that sends proficiency test samples to another laboratory for analysis that the sending laboratory is certified to perform, [and] never reports the analysis of the proficiency samples to the proficiency program is irrelevant and not a defense to a violation of 42 C.F.R. § 493.801(b)(4).

4. There is no conflict between 42 C.F.R. § 493.801(b)(1), which requires that proficiency test samples be tested in the laboratory, with regular patient workload, using regular laboratory personnel and procedures, and 42 C.F.R. § 493.801(b)(4), which establishes an absolute ban on sending out proficiency test samples to another laboratory.

5. CMS is not bound or estopped by prior agency action when that action was based on an erroneous interpretation and application of the statute and regulations.

6. There are no material facts in dispute and issues that require resolution are questions of law, therefore summary judgment is appropriate.

7. Petitioner violated 42 C.F.R. § 493.801(b)(4) by admittedly sending proficiency test samples to another laboratory.

8. CMS is required to revoke Petitioner's CLIA certificate for a period of not less than one year for sending proficiency test samples to another laboratory. 42 U.S.C. § 263a(i)(4); 42 C.F.R. §§ 493.801(b)(4) and 493.1840(b).

9. CMS must cancel Petitioner's approval to receive Medicare payments when its CLIA certificate is revoked. 42 C.F.R. § 493.1842(a).

10. The violation of 42 C.F.R. § 493.801(b)(4) triggers a mandatory one-year revocation of Petitioner's CLIA certificate which requires cessation of entitlement to Medicare payments, therefore it is unnecessary to consider other alleged violations.

11. Revocation of Petitioner's CLIA certificate is effective the date of this decision. 42 C.F.R. § 493.1844(d)(2).

ALJ Decision at 3-5. While the numbered FFCLs do not specifically state that Petitioner "intentionally referred" the PT samples to another laboratory, this finding is implicit in the ALJ's conclusions and is clear from the ALJ Decision as a whole. In his analysis for the finding of intentional referral, the ALJ relied on Petitioner's admission that it had referred PT samples to another laboratory (called Med Science) and on Petitioner's own evidence, which the ALJ accepted for purposes of summary judgment as showing that Petitioner viewed its own quality control policy as requiring it to refer PT samples to Med Science. ALJ Decision at 7-8.

Petitioner's Exceptions

On appeal, Petitioner did not identify the specific findings of fact or conclusions of law to which to which it excepted, but raised two interrelated arguments concerning the ALJ's interpretation of the CLIA regulations.

Petitioner first argued that the ALJ erred by nullifying 42 C.F.R. § 493.801(b)(1). Petitioner noted that its treatment of its regular patient workload included periodic parallel testing at Med Science, a related laboratory located in its building, for quality control purposes. Petitioner contended that even though CMS had recognized the section 493.801(b)(1) requirement for consistent treatment of PT samples and patient specimens, the ALJ nonetheless found that Petitioner violated 42 C.F.R. § 493.801(b)(4) by intentionally referring PT samples to another laboratory. In essence, Petitioner argued, the ALJ allowed section 493.801(b)(4) to nullify section 493.801(b)(1), contrary to the rules of statutory construction. Petitioner interpreted the regulations to mean that it could not have violated section 493.801(b)(4) unless it had referred PT samples to another laboratory in order to submit the results from that laboratory to the PT vendor as its own. Contrary to the ALJ's reasoning, Petitioner concluded that its interpretation gave effect to both section 493.801(b)(1) and section 493.801(b)(4). Petitioner Br. at 4-6; Petitioner Reply Br. at 2-4.

Petitioner then argued that the ALJ erred when he determined that Petitioner intentionally referred its PT samples to another laboratory within the meaning of 42 C.F.R. § 493.801(b)(4). Petitioner insisted that it "never knowingly or intentionally" submitted PT results obtained through the parallel testing to its PT vendor as its own. Rather, Petitioner asserted, the supervisor in charge of the parallel testing "specifically intended not to include" those results in Petitioner's reports. In conclusion, Petitioner argued that summary judgment on a charge of intentional referral was inappropriate where, as here, it merely intended to comply with the requirement that PT samples be tested in the same manner as all patient specimens. Petitioner Br. at 7.

Petitioner argued that the ALJ committed a procedural error by granting summary judgment, and both parties argued that the ALJ erred by not admitting additional evidence into the record.

Standard of Review

Before an ALJ, the standard of proof employed concerning CMS's determination that a laboratory is not in compliance with CLIA conditions is preponderance of the evidence. CMS has the burden of coming forward with sufficient evidence to prove a prima facie case that the laboratory is not complying with one or more CLIA conditions. The laboratory has the ultimate burden of rebutting, by a preponderance of the evidence, any prima facie case of noncompliance established by CMS. Edison Medical Laboratories, Inc., DAB No. 1713 (1999), aff'd, Edison Medical Laboratories, Inc., v. Thompson, 250 F.3d 735 (3rd Cir. 2001).

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 in the record. See Guidelines - Appellate Review of Decisions of Administrative Law Judges in Cases Under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) and Related Statutes (http://www.hhs.gov/dab/divisions/appellate/guidelines/clia.html)); Mark Gary Hertzberg, DAB No. 1805 (2001); US Bio-Chem Medical Laboratories, Inc., DAB No. 1731 (2000).

Whether summary judgment is appropriate is a legal issue that we address de novo, reviewing the proffered evidence in the light most favorable to the non-moving party. See Crestview Park Centre, DAB No. 1838 (2002). The non-moving party, however, must do more than merely allege that there is a genuine dispute of material fact. See Everett Rehabilitation and Medical Center, DAB 1628, at 3 (1997).

ANALYSIS
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We have considered each argument raised by Petitioner as well as the entirety of evidence before the ALJ. We conclude that the ALJ's conclusions of law are not erroneous and that he correctly determined that summary judgment is appropriate.

The relevant statutory and regulatory provisions prohibiting referral are clear and unambiguous. The statute specifically provides that:

Any laboratory that the Secretary determines intentionally refers its proficiency testing samples to another laboratory for analysis shall have its certificate revoked for at least one year.

42 U.S.C. § 263a(i)(4). The implementing regulatory provisions in issue provide:

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. Any laboratory that CMS determines intentionally referred its proficiency testing samples to another laboratory will have its certification revoked for at least one year. Any laboratory that receives proficiency testing samples from another laboratory for testing must notify CMS of the receipt of those samples.

42 C.F.R. § 493.801(b)(4); see also 42 C.F.R. § 493.1840(b).

Petitioner did not deny that it sent its PT samples to Med Science, nor allege that the acts of sending the samples were somehow unknowing or unwilling, rather than intentional. (3) As the ALJ noted, Petitioner's own affidavits, if accepted as true, show that Petitioner deliberately sent the PT samples to Med Science because it thought this was required by its own quality control policy. Petitioner argued, however, that it did not send PT samples to Med Science "for any analysis which it is certified to perform in its own laboratory" but instead sent them for quality control purposes. Petitioner did not, however, specifically assert (nor offer any evidence) that the analysis that Med Science performed on the PT samples was any different from the analysis that Petitioner was certified to perform on those samples. While there is some indication in the record that Med Science may have used equipment different from Petitioner's, the term "analysis" in the context of the CLIA regulations is not tied to the type of equipment, but to the type of testing or examination that is being performed and what is to be determined, for example, whether a particular virus is present or what is the red blood cell count. (4) Nor is it reasonable to interpret the reference to "any analysis which the laboratory is certified to perform" to exclude analysis on the basis that it is performed solely for quality control purposes. Quality control testing in a different laboratory would not make sense if the different laboratory performed a different analysis. Indeed, Petitioner itself referred to the acts done in the Med Science laboratory as "parallel tests." See, e.g., Petitioner Br. at 2.

Contrary to Petitioner's assertions, the ALJ did not interpret section 493.801(b)(4) of the regulations to nullify section 493.801(b)(1). That section provides:

The [PT] samples must be examined or tested with the laboratory's regular patient workload by personnel who routinely perform the testing in the laboratory using the laboratory's routine methods. . . .

42 C.F.R. § 493.801(b)(1) (emphasis added).

Contrary to what Petitioner argued, this section does not conflict with reading section 493.801(b)(4) to prohibit any referral of PT samples for testing that the laboratory is certified to perform. Petitioner's argument ignores the plain wording of section 493.801(b)(1). Under that section, personnel who routinely perform testing "in the laboratory" are required to integrate PT samples into "the laboratory's regular patient workload," "using the laboratory's routine methods." Nothing in that section requires that, merely because some patient specimens are routinely sent to a different laboratory, PT samples must also be sent to the different laboratory. The routine methods referred to are the methods used in the laboratory (here, Petitioner), by the laboratory's personnel for analysis or testing of patient specimens. (5) Thus, the two regulatory sections may easily be reconciled, consistent with the plain language of the regulation and standard principles of construction.

Petitioner pointed to no specific language supporting its reading of section 493.801(b)(1) to require "parallel testing" of PT samples in a different laboratory merely because this is periodically done with patient specimens as part of a quality assurance methodology. Moreover, in promulgating section 493.801(b)(4), CMS explained that--

PT specimen referral is not necessary for purposes of PT, since a laboratory is being evaluated on the basis of its own level of service, not on any combination of service between it and another laboratory. We understand that this violates the condition of treating the PT sample like it would treat a patient specimen in this instance. It was the intent of the paragraph (b)(4) for the regulatory agency to investigate any allegation that a PT sample might be referred to another laboratory, but such allegations may require other laboratories to report suspicious behavior.

57 Fed. Reg. 7002, 7037-38 (Feb. 28, 1992).

Moreover, given the purposes underlying CLIA, Petitioner's position has no merit. The fact that Petitioner may engage in parallel testing of some of its patient specimens at another laboratory as part of a quality control program is not a basis for implying an exception to the statutory and regulatory prohibition against referral of PT samples. As the ALJ recounted, CLIA is designed to ensure the accuracy and reliability of laboratory tests for the public. The proficiency testing required under CLIA is, in effect, the federal program for ensuring the accuracy of laboratory tests.

Petitioner also contended that it was allowed to refer its PT samples because the results from the referred quality control tests on PT samples were not reported to the PT vendor. This assertion is inconsistent with the plain wording of section 493.801(b)(4). While the underlying purpose of the provision is to ensure that the reported PT results are in fact those of the reporting laboratory, the provision clearly prohibits referral "for any analysis" and requires license revocation if referral is intentional. As the ALJ concluded, it is Petitioner's admitted intent to refer PT samples to another laboratory for analysis which requires revocation, regardless of whether Petitioner intended, at the time of referral, to report the results of the other laboratory as its own. The prohibition targets intentional referral for any analysis. This makes sense because it avoids a laboratory being placed in a situation where it might be tempted to report as its own PT results obtained elsewhere, even if it had another justification for the referral. Requiring CMS to prove not only the intent to refer, but also that a petitioner intended to report PT results obtained from the referral laboratory as its own, would undercut the integrity of the PT program. (6)

The unreasonableness of Petitioner's position here is further evident upon examination of the legislative history of CLIA. In discussing the requirement for treating PT samples the same as patient specimens, the House Report states:

The Committee was advised that some laboratories may treat proficiency test samples differently, knowing the laboratory is being judged on its performance. It was alleged, for example, that some laboratories might run repeated tests on the sample, use more highly qualified personnel than are routinely used for testing or send the sample out to another laboratory. Such practices obviously undermine the purpose of proficiency testing and the Committee seeks to prevent them through this agreement.

H.R. 899, 100th Cong. 2d Sess., 24; see also id. at 16.

In sum, the ALJ's reading of the CLIA requirements has not nullified section 493.801(b)(1) of the regulations. The plain language of section 493.801(b)(1) is consistent with section 493.801(b)(4). Rather, it is Petitioner's interpretation which is inconsistent with the plain language and intent of the statute and regulation and therefore unreasonable.

Given Petitioner's admission that it sent PT samples to Med Science for parallel testing and its own evidence showing that it viewed this act as required by its own policy, the ALJ appropriately granted summary judgment in favor of CMS.

The Parties' Requests That We Admit Evidence into the Record

This case was originally assigned to ALJ Carolyn Hughes. On July 20, 2001 ALJ Hughes issued an "Order Directing Exchange of Documents." That Order directed the parties to make their initial exchange of information by September 8, 2001 and their final exchange of information by November 9th. The Order directed that nothing be submitted to the ALJ's office until the final exchange, which was to include "proposed exhibits."

On August 2, 2001, CMS filed a Motion for Summary Judgment. CMS's Motion consisted of a brief and two exhibits. Petitioner responded on September 4, 2001. Petitioner's response consisted of a brief and five exhibits.

The case was reassigned to ALJ Sickendick on October 11, 2001.

Pursuant to ALJ Hughes' July 20, 2001 Order, CMS made its final submission (final exchange of information) on November 7, 2001 and Petitioner made its final submission on November 20th.

By Order dated December 4, 2001, ALJ Sickendick construed Petitioner's November 20th submission as a request to file out-of-time and accepted Petitioner's submission. The ALJ Decision, issued on September 27, 2002, referred to the CMS motion and Petitioner's opposition, stating: "All exhibits submitted with the motion and opposition are admitted for purposes of this decision." ALJ Decision at 2.

On December 16, 2002, the Board's Civil Remedies Division transferred the record before the ALJ to the Board's Appellate Division. The List of Materials in the Record accompanying that transfer, at page 3 contained the following two notations:

15. November 7, 2001 CMS's lists of witnesses and exhibits. The CMS Ex. 1 and CMS Ex. 2 included in this submission are not the same as the CMS Ex. 1 and CMS Ex. 2 previously submitted in the August 2, 2001 submission. CMS Ex. 1 - CMS Ex. 11 of this submission were neither considered nor admitted by ALJ Sickendick and are in Appendix A.

* * *

20. November 20, 2001 Petitioner's transmittal and Petitioner's November 20, 2001 lists of witnesses and exhibits. The P. Ex. 1 - P. Ex. 5 included in this submission are not the same as the P. Ex. 1 - P. Ex. 5 previously submitted in the September 4, 2001 submission. P. Ex. 1 - P. Ex. 13 of this submission were neither considered nor admitted by ALJ Sickendick and are in Appendix B.

(Emphasis in original.)

On December 26, 2002, with Petitioner's consent, CMS asked that the Board "admit into the record as evidence CMS exhibits 1-11, which were previously exchanged with opposing counsel and filed with ALJ Hughes on November 7, 2001 in accordance with Judge Hughes' Order dated July 20, 2001." Similarly, on January 9, 2003 and with CMS's consent, Petitioner requested "that the exhibits submitted and identified as Nos. 1-13 on November 20, 2001 be admitted into the administrative record."

Although the exhibits in question were not formally admitted as evidence by the ALJ prior to his ruling on CMS's Motion for Summary Judgment, those exhibits are nonetheless part of the administrative record in this case (if not part of a formal record for decision). Moreover, for purposes of summary judgment, any proposed exhibits are properly treated as an offer of proof, that may be evaluated if necessary to determine whether a genuine issue of material fact exists. While it is not clear whether the ALJ considered all of the proposed exhibits in granting summary judgment to CMS, the ALJ considered all alleged facts and inferences in the light most favorable to Petitioner as the non-moving party. ALJ Decision at 2. Although CMS and Petitioner asserted generally that the exhibits were relevant and material, neither party specifically pointed to anything in these exhibits that would have made a difference in the ALJ's determination about whether there is a genuine dispute of material fact.

Thus, neither party was prejudiced by the fact that the ALJ did not formally admit the documents into the record for decision, and they are part of the administrative record for purposes of determining whether summary judgment was appropriately granted.

Conclusion

Based on the preceding analysis, we sustain the ALJ Decision. We affirm and adopt each of the Findings of Fact and Conclusions of Law underlying that decision, including the implicit conclusion that Petitioner intentionally referred PT samples to another laboratory for analyses that Petitioner was certified to perform.

JUDGE
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Cecilia Sparks Ford

Marc R. Hillson

Judith A. Ballard
Presiding Board Member

FOOTNOTES
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1. CMS 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. In Findings of Fact 6 through 9, the ALJ accepted as true Petitioner's allegations of fact only for purposes of deciding the motion for summary judgment. ALJ Decision at 2, n.3.

3. While the CLIA regulations do not specifically define "intentional referral," they do define "intentional violation" to mean "knowing and willful noncompliance with any CLIA condition." § 493.2.

4. Thus, for example, the prohibition has been described as prohibiting "referral of PT samples to another laboratory for testing . . . ." 57 Fed. Reg. 7002, 7035 (February 28, 1992).

5. Moreover, while the regulations state that the "laboratory must test samples the same number of times that it routinely tests patient samples," they also state that "PT is required only for the test system, assay, or examination used as the primary method for patient testing during the PT event." §§ 493.801(b)(2); 493.801(b)(6).

6. That no finding of an intent to use the results obtained from testing in another laboratory is required is also supported by the history of the CLIA regulations. The version of section 493.801(b)(4) published in 1992 (57 Fed. Reg. at 7147) stated:

Any laboratory that [CMS] determines intentionally referred its proficiency testing samples to another laboratory for analysis and submits the other laboratory's results as their own will have their certification revoked.

This conflicted with the provision at section 493.1840(b), published the same day (57 Fed. Reg. 7218, 7241), which provided:

If [CMS] determines that a laboratory has intentionally referred its proficiency testing samples to another laboratory for analysis, [CMS] revokes the laboratory's CLIA certificate for at least one year . . . .

Technical amendments issued January 19, 1993 removed this conflict by deleting the reference to the results of the other laboratory and requiring only a determination of intentional referral for analysis that the laboratory is certified to perform. 58 Fed. Reg. 5212, 5228.

CASE | DECISION | ANALYSIS | JUDGE | FOOTNOTES