SUBJECT: Immuno Biogene, Inc.,

Petitioner,

Centers for Medicare & Medicaid Services

FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION

Immuno Biogene, Inc. (IBI) appealed a September 17, 2003 decision by Administrative Law Judge (ALJ) Anne E. Blair upholding the determination by the Centers for Medicare & Medicaid Services (CMS) ⁽¹⁾ to impose a $30,000 civil money penalty (CMP) on IBI, to revoke IBI's certificate under the Clinical Laboratory Improvement Amendments of 1988 (CLIA), 42 U.S.C. § 263a et seq., and to cancel its approval to receive Medicare payments for its services. Immuno Biogene, Inc., Charles T. Black, M.D., DAB CR1083 (2003) (ALJ Decision).

As explained below, we uphold the ALJ's conclusions that IBI failed to comply with six CLIA conditions of participation and that CMS was authorized to impose the remedies at issue.

I. Background

IBI was a clinical laboratory located in California. Vali Kermani, Ph.D., IBI's owner, president, and technical supervisor, established IBI in 1986. Hearing Transcript (Tr.) at 604-605. Dr. Charles Black became IBI's laboratory director in January 1996. Tr. at 781.

In February 2001, the California Department of Health Services, Laboratory Field Services (LFS), began a survey of IBI to determine whether it met the conditions required for continuation of its CLIA certificate. The survey ended on August 31, 2001. On October 24, 2001, CMS issued a statement of deficiencies (SOD) found in the survey. CMS Ex. 1. CMS informed IBI that because of the laboratory's alleged failure to comply with six of the CLIA conditions resulting in immediate jeopardy to patients' health and safety, and because of IBI's improper proficiency testing (PT) referrals, CMS proposed to impose: (1) a CMP in the amount of $10,000 per day to run from October 29, 2001, until the suspension of the laboratory's CLIA certificate became effective on November 1, 2001; (2) a directed plan of correction requiring IBI to cease all testing effective October 29, 2001; (3) suspension of the laboratory's CLIA certificate effective November 1, 2001; (4) revocation of the laboratory's CLIA certificate; and (5) cancellation of the laboratory's approval to receive Medicare payments for services performed on or after October 29, 2001. CMS Ex. 2. After reviewing IBI's response to the SOD, CMS, on November 26, 2001, notified IBI that CMS was proceeding with the remedies as proposed in its October 24, 2001 letter. CMS Ex. 5.

IBI and Dr. Black timely filed requests for hearing before an ALJ. Dr. Black did not appeal the resulting ALJ Decision.

II. Applicable law

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 (PHS Act), codified at 42 U.S.C. § 263a et seq. ⁽²⁾ CLIA further grants the Secretary of the Department of Health and Human Services (Secretary) 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. CLIA requirements are designed 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 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. ⁽³⁾ 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 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. 42 C.F.R. § 493.1800(a)(2)(iii)(B); 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 remedies such as a directed plan of correction or monitoring by the state. 42 C.F.R. § 493.1806.

When CMS revokes a laboratory's CLIA certificate, it will also cancel that laboratory's approval to receive Medicare and Medicaid reimbursement for services rendered. Social Security Act § 1902(a)(9)(C); 42 C.F.R. §§ 440.2(b), 440.30(c), 493.1809 and 493.1842(a).

III. Standard of Proof and Review

The standard of proof employed at a hearing concerning a CMS 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 establish a prima facie case that the laboratory is not complying with one or more CLIA conditions. The laboratory then has the burden of showing, by a preponderance of the evidence as a whole, that it was in compliance with CLIA conditions. Edison Medical Laboratories, Inc. DAB No. 1713 (1999), aff'd, Edison Medical Laboratories, Inc., v. Thompson, 250 F.3d 735 (3^rd Cir. 2001); cf. Hillman Rehabilitation Center, DAB No. 1611 (1997), aff'd, Hillman Rehabilitation Center v. United States, No. 98-3789 (GEB) (D.N.J. May 13, 1999).

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 CLIA Guidelines at www.hhs.gov/dab/guidelines/clia.html; US Bio-Chem Medical Laboratories, Inc., DAB No. 1731 (2000).

The ALJ set forth her findings of fact and conclusions of law (FFCLs) in separately bolded headings. IBI challenged all of the FFCLS except FFCL A.4, which we affirm and adopt. As explained below, we affirm and adopt the remaining FFCLS except FFCLs A.2, A.3, and F, which we modify. Additionally, we adopt FFCL A.5 and G. The FFCLs in this decision are set forth in bolded headings and the modified or newly adopted FFCLs also are set forth at the end of the decision.

A. IBI failed to comply with the condition for proficiency testing set forth in 42 C.F.R. § 493.801. (D2000)

Section 493.801 of 42 C.F.R. sets forth the condition for participating in proficiency testing (PT). It requires that, for each of the specialties and subspecialties for which a laboratory seeks certification, a laboratory enroll in an approved PT program that meets the established criteria and that a laboratory test PT samples in the same manner as patients' specimens.

The ALJ concluded that IBI was not in compliance with the condition-level requirement for PT because, as discussed below, IBI had violated four standard-level requirements related to PT.

1. IBI was not enrolled in PT for all tests it was performing as required by 42 C.F.R. § 493.801(a)(3). (D2001) ⁽⁴⁾

This deficiency involved IBI's testing for unexpected antibody detection (also called antibody screens or non-transfusion antibody detection). IBI began patient testing for unexpected antibody detection in August 2000. CMS Ex. 7, at 262; Tr. at 622. Three times a year, PT programs mail enrolled laboratories identical groups of five samples for testing of specific analytes. The ALJ concluded that IBI should have been, but was not, enrolled in a PT program for this test as of the third PT testing event for 2000.

IBI does not contest the ALJ's conclusion that it was required to be enrolled in the 3^rd PT testing event for 2000 for unexpected antibody. As the ALJ noted, at the hearing, Dr. Kermani testified he contacted one of IBI's PT programs, the American Association of Bioanalysts (AAB), in August 2000 to enroll IBI in PT for unexpected antibody detection. ALJ Decision at 6, citing Tr. at 622; IBI Ex. 1, at 17. After IBI received its customary immunohematology samples from AAB for the 3^rd PT testing event on September 21, 2000, Dr. Kermani testified he tested the samples for unexpected antibody detection in addition to other immunohematology tests. ⁽⁵⁾ He returned his testing results to AAB. Id., citing CMS Ex. 7, at 15; Tr. at 622. Subsequently, AAB notified IBI that it was not enrolled in PT testing for unexpected antibody detection for the 3^rd testing event of 2000. Id., citing Tr. at 623, 625. Dr. Kermani testified he then contacted IBI and was told by a woman named Anna to self-grade the results. Id.

This evidence, which is uncontested by IBI, supports the ALJ's finding that IBI was not enrolled in PT testing for unexpected antibody detection in the 3^rd testing event in 2000. In August, Dr. Kermani may have believed IBI was enrolled; however, as Dr. Kermani admitted, he was subsequently informed by AAB that IBI was not enrolled. Tr. at 623, 625. By October 24, 2000, Dr. Kermani knew that IBI was not properly enrolled. IBI Ex. 1, at 13. ⁽⁶⁾ However, IBI continued to do unexpected antibody detection in November and December even after Dr. Kermani had notice that IBI was not enrolled for the 3^rd testing event of 2000. CMS Ex. 7, at 262; Tr. at 44-45, 100.

Citing the hearing transcript at page 110, IBI asserted on appeal that one of the examiners, Mr. Barr, testified that IBI was enrolled for unexpected antibody detection in the 3^rd testing event of 2000. The ALJ properly found that IBI misinterpreted Mr. Barr's testimony. ALJ Decision at 7 n.5. We agree that the testimony at page 110 is confusing and, to the extent that it can be read to say that Mr. Barr believed IBI was enrolled for unexpected antibody PT in the 3^rd testing event of 2000, he obviously misspoke. The remainder of his testimony supports CMS's position that IBI was not enrolled. See Tr. at 108. Further, the AAB documents and Dr. Kermani's own testimony, cited above, show that IBI was not enrolled.

On appeal, IBI cited no evidence that would support a finding that it was enrolled in PT for unexpected antibody detection between August and December 2000. IBI identified no authority for the position that an attempt to enroll or a belief that one is enrolled satisfies the clear mandate of the regulation. Further, IBI offered no justification for the fact that it continued to conduct this test in November and December even after it had actual knowledge that it was not enrolled. Finally, as the ALJ pointed out, IBI identified no authority for the proposition that self-grading satisfies the requirement of the regulation. See ALJ Decision at 6.

2. IBI's laboratory director did not attest to the routine integration of the samples into the patient workload, as required by 42 C.F.R. § 493.801(b)(1). (D2009)

The ALJ concluded that IBI failed to comply with 42 C.F.R. § 493.801(b) and (b)(1). FFCL A.2 states:

IBI failed to comply with the standard requirement to test PT samples in the same manner as it tested patient specimens as required by 42 C.F.R. § 493.801(b). IBI's laboratory director did not attest to the routine integration of the samples into the patient workload, as required by 42 C.F.R. § 493.801(b)(1).

ALJ Decision at 7.

Section 493.801(b) requires a laboratory to examine or test PT samples in the same manner as it tests patient specimens. Section 493.801(b)(1) requires the samples to be examined or tested using the laboratory's routine methods and the individual examining or testing the samples and the laboratory director to attest to the routine integration of the samples into the patient workload using the laboratory's routine methods.

As explained below, we sustain the ALJ's conclusion that IBI was not in compliance with the attestation requirement of 42 C.F.R. § 493.801(b)(1). We reverse the ALJ's conclusion that IBI was not in compliance with 42 C.F.R. § 493.801(b).

CMS cited a deficiency under section 493.801(b)(1) not (b). Nevertheless, as to 42 C.F.R. § 493.801(b), the ALJ found that Dr. Kermani's failure to list the AAB samples on his testing worksheet by patient accession numbers rather than as AAB #1, AAB #2, etc., meant that IBI had failed to fully integrate the PT samples into regular patient testing. ALJ Decision at 7. While an examiner did suggest PT samples should be listed by laboratory accession numbers (Tr. at 67), the SOD did not identify IBI's failure to list PT samples by accession number as a violation of section 493.801(b)(1). CMS Ex. 1, at 7. Further, CMS did not argue in its brief before the ALJ that IBI's failure to list PT samples by accession number was a deficiency under section 493.801(b) or 493.801(b)(1). CMS Br. at 19-20. Since CMS did not cite IBI in the SOD for failure to routinely integrate its PT samples nor subsequently argue that IBI had failed to routinely integrate its PT samples because of the lack of accession numbers, we conclude that the ALJ erred by relying on a purported deficiency that CMS itself had not relied on or even given notice of. The ALJ necessarily is limited to those deficiencies that CMS has relied upon in support of the remedies it is seeking to impose.

The error is harmless, however, since the ALJ also determined that IBI violated section 493.801(b)(1) because its director, Dr. Black, did not attest to the routine integration of the PT samples into the patient workload using the laboratory's routine methods. ALJ Decision at 7-8. IBI acknowledged that Dr. Kermani, rather than Dr. Black, signed the PT attestation forms (e.g., CMS Ex. 7, at 16, 18, 20, 51) but asserted, as it had before the ALJ, that Dr. Black delegated this responsibility to Dr. Kermani. IBI Reply at 14. Both Dr. Black and Dr. Kermani testified that Dr. Black had delegated the responsibility. ALJ Decision at 8, citing Tr. at 725, 781, 785, 810. ⁽⁷⁾

The ALJ declined to find that there was a valid delegation of this responsibility because IBI and Dr. Black provided no written delegation. ALJ Decision at 8. The ALJ relied on 42 C.F.R. §§ 493.1407(3)(14) (moderate complexity) and 493.1445(e)(15) (high complexity), which require that a laboratory director must "specify, in writing, the responsibilities and duties of each . . . person engaged in . . . testing, that identifies which examination and procedures each individual is authorized to perform . . . ."

On appeal, IBI argued that "there is no law or regulation requiring written delegation." IBI Reply at 15. We conclude that section 493.1407(e)(14) (which applies here because IBI was certified to perform test of moderate complexity) does require a delegation of the attestation responsibility to be memorialized in writing. Certainly, attesting to the routine integration of PT samples is a "responsibilit[y]" or "dut[y]" of a "person engaged in . . . testing". Memorialization of such a delegation is particularly vital in the circumstances presented by this case for a number of reasons. First, routine integration of PT samples is critical to the integrity of the PT process since the purpose is to evaluate whether a laboratory's routine practices are producing reliable test results. Second, section 493.1407(e)(4)(i) requires a laboratory director to "ensure" that "proficiency testing samples are tested as required under subpart H," which requires routine integration. The attestation requirement is one component of a director's duty to ensure proper handling of PT specimens. Third, the regulations contemplate two different people attesting to the routine integration, i.e., the person conducting the tests and the director. Here, the alleged delegation collapsed the safeguard of the attestation by two people into one person, Dr. Kermani. Under these circumstances, the requirement of a written delegation is particularly crucial because it would document that some additional measure of consideration had been given by the director to the fact that he was delegating this important responsibility to the person who was also performing the PT testing.

On the basis of the preceding discussion, we modify FFCL A.2. as follows:

IBI's laboratory director did not attest to the routine integration of the samples into the patient workload, as required by 42 C.F.R. § 493.801(b)(1).

3. IBI failed to comply with the regulatory prohibition on sending PT samples or portions of samples to another laboratory for an analysis IBI was certified to perform, as set forth in 42 C.F.R.§ 493.801(b)(4). IBI failed to notify CMS of the receipt of PT samples from another laboratory in violation of 42 C.F.R. § 493.801(b)(4). (D2013)

This deficiency and the remaining PT-related violations involve IBI's relationship with Cell Marx. Therefore, we review the undisputed facts about that relationship (primarily drawn from the ALJ Decision) prior to considering this deficiency.

In 2000, Dr. Kermani agreed to help a Mr. Mortezapour start a new laboratory to be named Cell Marx. Dr. Kermani agreed to be the technical supervisor for Cell Marx until Cell Marx started processing its own patient specimens. ALJ Decision at 8, citing Tr. at 684. Mr. Mortezapour rented space for Cell Marx across the hall from IBI for the convenience of Dr. Kermani. Id., citing Tr. at 762. From the time Cell Marx applied for its CLIA certification until at least February 2001, Dr. Kermani was its technical supervisor and did PT testing for both laboratories. Id., citing Tr. at 684-685. In January 2001, Cell Marx began patient testing. Tr. at 159.

Cell Marx and IBI owned different equipment. During an initial certification visit by a LFS examiner to Cell Marx, the examiner stated that it would be permissible, under certain circumstances, for the laboratories to use one another's equipment. Tr. at 540-541. ⁽⁸⁾ Thereafter, from August 2000 to January 2001, IBI used Cell Marx's Hitachi 747 for its patient chemistry testing, except for total bilirubin and creatine kinase, which it performed on its own Cobas Mira. ALJ Decision at 9, citing Tr. at 689; CMS Ex. 1, at 10.

In late September, when IBI received its PT chemistry samples, Dr. Kermani tested all of them, except for total bilirubin and creatine kinase, on Cell Marx's Hitachi 747. ALJ Decision at 9, citing Tr. at 140-142; see Tr. at 610; CMS Ex. 10, at 345. IBI reported to the AAB that the PT was done on a Hitachi 747. Id. IBI tested its bilirubin and creatine kinase on its Cobas Mira and reported that the testing was done on a Cobas Mira. ALJ Decision at 9, citing Tr. at 143-144; CMS Ex. 10, at 345; see also CMS Ex. 1, at 10.

Similarly, Dr. Kermani performed and Cell Marx reported its chemistry PT for the same testing event as being done on the Hitachi 747, with the exception of total bilirubin and creatine kinase, which were reported as done on a Cobas Mira. ALJ Decision at 9, citing Tr. at 143-144; CMS Ex. 10, at 45.

For hematology testing, IBI owned a Coulter Junior analyzer, while Cell Marx had a Coulter STKS hematology analyzer. ALJ Decision at 9, citing Tr. at 151. For the 3^rd testing event of 2000 and the 1^st testing event of 2001, Cell Marx and IBI both reported to AAB that their respective PTs for hematology were performed on a Coulter Junior. Id., citing Tr. at 151; Tr. at 689; CMS Ex. 10, at 22 and 40.

For the 3^rd testing event of 2000 endocrinology testing, Dr. Kermani stated in IBI's Plan of Correction (POC) that, for TSH, T3 Uptake, and Total T4, the "Cell Marx AAB samples and controls were processed, tested and prepared for reading in Cell Marx by Vali Kermani. Then, the Cell Marx test was read by the IBI gamma counter . . . ." CMS Ex. 1, at 12.

Finally, the ALJ also found that Dr. Kermani used IBI's equipment to perform rubella PT for the 1^st testing event of 2001. Cell Marx reported to AAB that it had used a Diamedix Microassay system (DMS Ex. 10, at 369) but Cell Marx did not have a Diamedix Microassay system while IBI did (Tr. at 162). ALJ Decision at 9. Further, the ALJ found that the instrument printouts for the rubella testing provided by both laboratories were the same. ALJ Decision at 9, citing CMS Ex. 11, at 1; CMS Ex. 10, at 36; Tr. at 160-163, 532-534. ⁽⁹⁾

CMS argued that the events described above establish IBI's noncompliance with the CLIA requirements that it (1) not engage in inter-laboratory communications with another laboratory about PT prior to the date PT is sent to the PT organization (D2011); (2) not intentionally refer PT to another laboratory for testing (D2013); and (3) notify CMS of receipt of PT samples from another laboratory for testing (D2013). ALJ Decision 10. CMS did not allege that IBI or Cell Marx actually reported the other's results as its own PT results. See Tr. at 359.

Section 493.801(b)(4) prohibits a laboratory from sending its PT samples to another laboratory for any analysis that it is certified to perform and requires any laboratory that receives PT samples from another laboratory for testing to notify CMS of the receipt of the samples. In FFCL A.3, the ALJ concluded that IBI violated 42 C.F.R. § 493.801(b)(4). ALJ Decision at 8. We uphold this FFCL but modify it to reflect the ALJ's full discussion of section 493.801(b)(4).

Section 493.801(b)(4) prohibits "send[ing] PT samples . . . to another laboratory for any analysis." Dr. Kermani did not deny that he took IBI's chemistry PT samples out of its rented space into the rented space of Cell Marx and tested the samples on equipment owned by Cell Marx. On its face, this conduct constitutes "sending" samples to another laboratory. IBI asserted this was not "sending" because IBI was "renting" the use of the Hitachi 747 and related space from Cell Marx, had used it for its routine patient testing, and, therefore, Dr. Kermani was simply doing IBI's proficiency testing as required, i.e., in the same manner as he performed IBI's patient testing. IBI Reply at 30, 35-36. see CMS Ex. 1, at 10, 14; IBI Ex. 7, at 1.

This defense raises questions as to (1) whether it is permissible under CLIA for a laboratory to enter into an agreement with another laboratory for the use of that laboratory's space and equipment for patient testing, and (2) if it is permissible, how the laboratory then conducts PT testing in such a manner as to avoid the prohibition on sending samples to another laboratory for analysis.

CMS did not assert before the ALJ or the Board that such agreements violate CLIA standards. ⁽¹⁰⁾ Since CMS did not argue or cite any authority as to the impermissibility of such agreements, we will assume, for purposes of this case only, that such agreements do not violate CLIA. ⁽¹¹⁾

However, for the following reasons, we conclude that IBI failed to show by a preponderance of the evidence that its agreement with Cell Marx and its practices in conducting PT created a sufficient differentiation between these two entities and their PT practices so as to comply with the strict standards of section 493.801(b)(4).

• First, IBI's agreement with Cell Marx for the use of its equipment was vague and undocumented. IBI produced no contemporaneous written memorialization and Dr. Kermani's testimony did not describe the sorts of contractual terms one would expect in a commercial relationship (such as the amount of the rent or responsibility for maintenance, for example). See Tr. at 692-693. Therefore, the agreement did not clearly define the rights and duties of each laboratory.



• Second, IBI's laboratory director did not know about IBI's agreement with Cell Marx. ALJ Decision at 32, citing Tr. at 789, 811-812. A laboratory director is responsible for the overall operation of the laboratory. The fact that Dr. Black was not informed raises questions as to both nature of the agreement and Dr. Kermani's conduct in securing and implementing that agreement.



• Third, the evidence indicates that functional separation was not maintained between the two laboratories. For example, Dr. Keramani retrieved immunohematology reagents from the Cell Marx refrigerator; Examiner Hunter found an IBI employee with IBI immunohematology records working in Cell Marx who told him that was where they did immunohematology testing; IBI could not document that it had appropriate reagents to conduct some of the immunohematology testing it reported, raising questions as to whether it was sharing reagents with Cell Marx. See ALJ Decision at 25.



• Fourth, as to the PT testing on the same equipment, Dr. Kermani offered only the most summary testimony that he conducted PT testing for the two laboratories at different times. Tr. at 616-617. He described no measures he took to assure that the PT testing was not compromised by the fact it was conducted by the same person on the same equipment, and he did not explain how any of the documentary evidence supported a finding as to such measures. Further, as discussed below, documentary evidence indicates that some PT tests were run on the same equipment for the two laboratories within minutes of one another.



• Fifth, as explained below, Dr. Kermani's use of IBI's equipment for Cell Marx PT testing clearly undermined the primary purpose of PT, which is to ascertain whether a laboratory's primary method of testing is reliable. This indicates a fundamental disregard for the integrity of the PT process.



• Sixth, a laboratory must conduct PT for the "test system . . . used as the primary method for patient testing during the PT event." 42 C.F.R. § 493.801(b)(6). IBI identified no evidence in the record that would show that Cell Marx's Hitachi was its primary method of chemistry testing during the 3^rd testing event of 2000.
  

Where laboratories are sharing equipment and testing personnel (Dr. Kermani), CMS can reasonably require such laboratories to demonstrate how their practices protect the purposes of the PT process and the regulatory provisions designed to ensure that each laboratory does its own PT testing and does it as it does its patient testing. Here, the lack of a clearly defined relationship between the laboratories, the apparent failure to maintain separate operations of the laboratories, the apparent failure to take measures to prevent PT interlab communication, the obvious disregard for the integrity of Cell Marx's PT process, and the failure to show that the Hitachi was IBI's primary method for chemistry testing all support a finding that IBI's and Cell Marx's PT processes were so commingled that IBI's use of Cell Marx's Hitachi constituted "sending" PT samples to another laboratory in violation of section 493.801(b)4). ⁽¹²⁾

Section 493.801(b)(4) also provides that "[a]ny laboratory that receives proficiency testing samples from another laboratory for testing must notify [CMS] of the receipt of those samples." There is no dispute that IBI did not notify CMS of its receipt of PT samples for testing from Cell Marx. These samples include bilirubin and creatine kinase for the 3^rd testing event of 2000 and immunohematology samples for the 3^rd testing event of 2000 and the 1^st testing event of 2001. ALJ Decision at 9. While the ALJ's FFCL did not identify IBI's failure to notify CMS, in her discussion of section 493.801(b)(4) she plainly found that IBI had received Cell Marx samples and concluded that its failure to notify CMS was a violation of section 493.801(b)(4). ALJ Decision at 13. Therefore, we regard this omission from the text of the FFCL as unintentional. IBI disputed this finding on appeal. IBI RR. at 37.

We agree with the ALJ that IBI's failure to notify CMS of its receipt of PT samples from Cell Marx is a violation of section 493.801(b)(4). While IBI argued that it was required to test its PT samples on Cell Marx's Hitachi 747 in the 3^rd testing event of 2000 because it had used it for patient testing, IBI advanced no justification for failing to notify CMS of the receipt of PT samples from Cell Marx for PT testing for the 3^rd testing event of 2000 and the 1^st testing event of 2001. In fact, Dr. Kermani testified that he never intended to share IBI's equipment with Cell Marx for patient testing and did not share it. He testified: "I allowed him to use our [IBI's] equipments in our lab for the things he's deficient, temporarily, until he started seeing his patient. Then he has to have everything of his own, and that's what happened." Tr. at 692-693. ⁽¹³⁾ Cell Marx did not use IBI's machines for patient testing, had no arrangement to use IBI's machines for patient testing in the future, and should not have used them for PT. Thus, IBI was obligated under section 493.801(b)(4) to notify CMS of its receipt of Cell Marx PT samples.

Failure to notify CMS of receipt of PT samples from Cell Marx and the resulting testing of those samples on IBI equipment undermined the purpose of PT, i.e., to measure whether the laboratory doing a given test can perform the test proficiently using the method it routinely uses. Further, the evidence shows that Dr. Kermani's use of IBI's equipment for Cell Marx PT samples did mask problems Cell Marx had with its own equipment. For example, as to Cell Marx's use of IBI's hematology equipment, IBI wrote in its POC:

Vali Kermani processed Cell Marx AAB Hematology samples at Cell Marx including their controls; then, Vali Kermani, read Cell Marx AAB samples with IBI Coulter Jr, located at IBI at a different time than IBI AAB was performed. . . . Cell Marx was having mechanical problems with their hematology cell counter.

CMS Ex. 1, at 14. Because IBI failed to notify CMS of the receipt of Cell Marx hematology specimens, Cell Marx's PT results falsely represented its hematology testing proficiency for the 3^rd testing event of 2000 and the 1^st testing event of 2001.

As to the bilirubin and creatine kinase tests, IBI stated in the POC that they were done on IBI's Cobas Mira in the 3^rd testing event for 2000 because Cell Marx's Hitachi 747 "was not set for these two tests." CMS Ex. 1, at 10. Therefore, in the 3^rd testing event for 2000, Cell Marx was apparently unable to do these tests, yet its PT scores obtained on IBI's equipment indicated that it could do them successfully. Further, when the bilirubin was performed on IBI's equipment in the 3^rd testing event, Cell Marx received a score of 100 percent, but when bilirubin was performed on Cell Marx's equipment in the 1^st and 2^nd testing events of 2001, Cell Marx scored 60 percent and 20 percent respectively. CMS Ex. 10, at 3. Again, use of IBI's equipment masked proficiency problems at Cell Marx.

Dr. Kermani's failure to alert CMS of receipt of PT samples from Cell Marx concealed the fact that Cell Marx could not actually perform this testing during the PT events at issue. IBI should have told CMS that it received PT samples from another laboratory and should not have let its equipment be used for Cell Marx's PT. As the ALJ concluded in the text of the decision, the fact that IBI did not report this receipt to CMS is a violation of 42 C.F.R. § 493.801(b)(4) and the type of subversion of the PT process that this provision was designed to prevent. ALJ Decision at 13. Therefore, we add the following sentence to FFCL A.3:

IBI failed to notify CMS of the receipt of PT samples from another laboratory in violation of 42 C.F.R. § 493.801(b)(4).

5. IBI failed to comply with 42 C.F.R. § 493.801(3), which prohibits engaging in inter-laboratory communication pertaining to the results of PT samples until after the date for PT reporting. (D2011) ⁽¹⁴⁾

The ALJ found that "[Dr. Kermani] and IBI . . . had essential communications about the PT samples with [a laboratory named] Cell Marx, which were prohibited and in violation of 42 C.F.R. § 493.801(b)(3)." ALJ Decision at 10. While the ALJ did not make a bolded FFCL as to this deficiency, she clearly found IBI in violation of 42 C.F.R. § 493.801(b)(3), and IBI challenged this finding on appeal. IBI Request for Review (RR.) at 28-29.

With respect to CMS's citation under section 493.801(b)(3) involving prohibited inter-laboratory communications, the ALJ concluded that Dr. Kermani's failure to process the AAB samples under patient accession numbers for both IBI and Cell Marx enabled Dr. Kermani to knowingly test the PT samples twice and resulted in communication about the PT samples between IBI and Cell Marx. ALJ Decision at 10.

IBI's failure to use patient accession numbers is not, by itself, sufficient to support this deficiency finding. However, we agree with the ALJ that the intertwined nature of the PT done by Dr. Kermani for IBI and Cell Marx constitutes a prima facie case of the type of communication prohibited by section 493.801(b)(3). At a minimum, Dr. Kermani was performing the same tests for two different laboratories on the same equipment while knowing the identity of each of the AAB specimens. Given this opportunity to acquire knowledge about two sets of results, a reasonable inference is that such common knowledge or 'communication' in fact occurred. IBI did not point to any evidence that rebuts this inference.

On appeal, IBI asserted that there was no inter-laboratory communication because the PT testing for the two laboratories was done separately. IBI Reply at 28. IBI's arguments on appeal are not persuasive for the following reasons.

• While Dr. Kermani testified before the ALJ that he performed the PT at separate times (Tr. at 616, 617; see also CMS Ex. 1, at 10-11), this testimony was conclusory and summary. He did not direct the ALJ or the Board to any documentary evidence that would support his testimony. ⁽¹⁵⁾ He did not explain how he guarded against one set of results influencing another set.
  
  
• On appeal to the Board, IBI made a number of factual assertions, such as "Dr. Kermani was doing blind folding results," which were not supported by citations to the record. IBI Reply at 29, 30, 32, 34.
  
  
• The ALJ's finding that IBI's and Cell Marx's rubella testing for the 1^st testing event of 2001 was supported by identical instrument printouts indicates that Dr. Kermani was not always conducting PT tests separately.



• IBI's own exhibits show that its representations of completely separate testing are not believable. For example, on October 31, 2000, for cholesterol and triglycerides, Dr. Kermani tested IBI's AAB samples 2, 3, and 4 at 12:44 p.m. and Cell Marx's AAB samples 2, 3, and 4 at 12:45 p.m., and he tested IBI AAB sample 5 at 12:45 p.m. and Cell Marx's AAB sample 5 at 12:46 p.m. Compare IBI Ex. 7, at 13 and 39. The values obtained in these tests were entered on the respective AAB reporting sheets. IBI Ex. 7, at 36 (IBI); CMS Ex. 10, at 46 (Cell Marx).
  

Therefore, we agree with the ALJ that IBI failed to show by a preponderance of the evidence that there was no inter-laboratory communication pertaining to PT. We add FFCL A.5 to reflect this conclusion:

IBI failed to comply with the regulatory prohibition on engaging in inter-laboratory communications pertaining to the results of PT until after the date by which the laboratory must report PT results, as set forth in 42 C.F.R. § 493.801(b)(3).

In summary, we conclude that the ALJ properly determined that IBI had violated the condition-level requirement for PT set forth at 42 C.F.R. § 483.801 because IBI was not enrolled in PT for unexpected antibody detection in the 3^rd testing event of 2000, engaged in prohibited inter-laboratory communication, failed to properly attest to the routine integration of PT samples into the patient workload using the laboratory's routine methods, sent PT samples to another laboratory, and failed to notify CMS of the receipt of PT samples from another laboratory for testing. We affirm FFCL A.

B. IBI failed to comply with the condition of Patient Test Management set forth in 42 C.F.R. § 493.1101. (D3000)

The condition for test management requires each laboratory performing moderate or high complexity testing to employ and maintain a system that provides for proper patient preparation; proper specimen collection, identification, preservation, transportation and processing; and accurate result reporting. 42 C.F.R. § 493.1101.

The ALJ concluded that IBI was not in compliance with the condition-level requirement for test management because, as discussed below, IBI had violated three standard-level requirements related to test management.

1. IBI failed to comply with the standard for procedures for specimen submission and handling. (D3013)

Section 493.1103(a) of 42 C.F.R. requires a laboratory to have available and follow written policies and procedures with respect to specimen preparation, collection, labeling, preservation, transportation, and processing which must assure optimum integrity of patient specimens from the time the specimens are collected until testing has been completed and the results reported. Section 493.1003(b) provides that, if a laboratory accepts referral specimens, written instructions must be available to clients and must include, as appropriate, information specified in section 493.1003(a).

As the basis for the violation in the SOD, CMS cited to IBI's handling of 42 patients whose potassium and glucose values were, it alleged, incompatible with human life and resulted from compromised specimens. ⁽¹⁶⁾ CMS Ex. 1, at 25; Tr. at 175-176. On appeal, IBI denied that all of these values were necessarily incompatible with human life (IBI Reply at 42), but admitted that the extreme values probably resulted from old or compromised specimens. IBI Reply at 41, 43. IBI maintained that the majority of these samples were received from a laboratory named Physicians Independent Laboratory (PIL). ⁽¹⁷⁾ IBI Reply at 41. The ALJ found that most, but not all, of these samples did come from PIL. ALJ Decision at 16.

As the ALJ found and IBI did not deny, the presence of so many abnormal glucose and potassium results establishes that these specimens were compromised when tested. The issue, as framed by the SOD, was whether IBI "ensure[d] that instructions were made available to clients to include information on specimen collection, specimen labeling, specimen preservation, and conditions for specimen transport to ensure optimum integrity of patient specimens." CMS Ex. 1, at 25. In the POC, IBI asserted that it had "implement[ed] new specimen rejection and patient test management policy which has been enclosed." CMS Ex. 1, at 25. IBI did not assert that it had such written instructions at the time of the survey.

On appeal, IBI failed to identify any evidence that would tend to show that it had complied with section 493.1103(b) by having written instructions for clients to prevent specimen compromise. ⁽¹⁸⁾

The ALJ concluded that IBI was deficient under this tag because IBI inappropriately tested old or stale specimens (ALJ Decision at 15) and failed to reject the specimens at issue (Id. at 17). ⁽¹⁹⁾ As to these findings, IBI argued on appeal that, since the specimens were in serum form, IBI could not tell prior to testing that the specimens were compromised. IBI Reply at 40. This response does not address the basic problem identified by the ALJ for the following reasons. First, while the samples may not have been visually compromised, IBI was aware that many of them were possibly compromised since they arrived at IBI days after collection by PIL. ⁽²⁰⁾ Second, upon testing, IBI realized the specimens were compromised because of the potassium and glucose results. At this point, IBI could have rejected the specimen. Instead, it reported the results for the potassium and/or glucose and many other analytes, even though it could not tell whether the accuracy of its reporting for the other analytes was also compromised by the condition of the specimen. Tr. at 175-176; 203-204. Third, as the ALJ pointed out, IBI did not test the specimens in accord with its own timeliness standards, thereby contributing to the staleness of the specimens. ALJ Decision at 17 (citing exhibits in which the time between specimen collection and reporting exceeded seven days).

Additionally, the ALJ found that IBI failed to properly notify clients of specimens that it identified or should have identified as compromised, failed to consistently include in reports notification of the condition of the specimen, and failed to document any such notice. ALJ Decision at 17.

As to these findings, IBI asserted:

[When] the result did not correspond to reasonable human values or value deviated far from any expected human condition, clients were immediately informed and asked to provide fresh specimen. If client did not send fresh specimen, report was submitted to client with an alert note. Any sample with abnormal result was called in or faxed immediately. There were not any complaints from any of the clients related to this. No patient was ever put in jeopardy because of this and all remedial action was taken in accordance with CLIA guidelines.

IBI Reply at 48, 49, 50.

These arguments are not persuasive for the following reasons.

While Dr. Keramani testified at the hearing that he called clients about these results (Tr. at 651), on appeal IBI did not cite to documentary evidence to support its assertion that, upon obtaining a "value [that] deviated far from any expected human condition" and prior to sending any report, Dr. Kermani immediately informed the client and requested a fresh sample. IBI Reply at 48. Nor, on appeal, did IBI identify entries on a call or fax log or other documentation that would substantiate its assertion that "[a]ny sample with abnormal result was called in or faxed immediately." ⁽²¹⁾

Dr. Kermani testified that he attached a letter (presumably what is referred to above as an "alert note") to reports with anomalous potassium and glucose results. Tr. at 651, citing IBI Ex. 16, at 44. The ALJ did not find the letter to be reliable evidence that IBI notified referring physicians about bad specimens because "the letter . . . is not addressed to anyone in particular, is undated and does not indicate where it was mailed." ALJ Decision at 17. Further, the letter does not contain written instructions for clients to assure proper specimen handling but merely tells clients to instruct their staffs "to follow proper guidelines concerning specimen collection, preparation, handling storage and delivery." Therefore it does not constitute evidence that IBI had provided appropriate written instructions as required by the regulation.

Finally, the fact that CMS did not prove that "there were not any complaints from any of the clients related to this" is not determinative. ⁽²²⁾ CMS did not have to prove that a given patient was harmed or clients complained. Here, the examiners testified that patients were put at risk because, while doctors might recognize the high potassium or glucose result as unreliable, IBI was reporting other results based on stale samples without determining whether they had also been compromised by the condition of the sample. Tr. at 175-176. As to IBI's assertion that "all remedial action was taken in accordance with CLIA guidelines," this assertion is vague and unsupported. Moreover, it may simply be referring to IBI's action after the issuance of the SOD, which is not relevant to whether its practices were deficient prior to the issuance of the SOD.

2. IBI failed to meet the standard for test records as set forth in 42 C.F.R. § 493.1107. (D3034)

A laboratory must maintain a record system to ensure reliable identification of patient specimens as they are processed and tested to assure that accurate test results are reported. The record system must include: the patient identification number or accession number; the date and time of receipt of the specimen; the condition and disposition of specimens that do not meet the laboratory's criteria for specimen acceptability; and the records and dates of all specimen testing, including the identity of the personnel who performed the tests. 42 C.F.R. §§ 493.1107(a) - (d).

The deficiencies found by the ALJ under section 493.1107 involved immunohematology records, HIV test records, potassium and glucose test records, and reagent records.

a. Immunohematology testing records

There were significant conflicts in the testimony as to the documents used at IBI for immunohematology testing. ⁽²³⁾

Dr. Kermani testified as follows. As he conducted immunohematology tests, he recorded the results on daily worksheets. Tr. at 638-640; 726-728; CMS Ex. 7, at 106. The data on the daily worksheets was then entered into the computer for the test reports and the reports released. Tr. at 640. Subsequently, the data on the daily worksheets was transcribed by a clerk to the monthly logsheets (CMS Ex. 7, at 134). Tr. at 640.

Examiner Hunter testified as follows. When he first visited IBI on February 19, he asked about immunohematology testing and reagents. In the course of finding the reagents, Dr. Kermani took him across to the hall to the Cell Marx laboratory. There Examiner Hunter noticed an IBI worker with immunohematology logsheets. Tr. at 383, 387, and 431 identifying a logsheet at CMS 67, at 38. When he inquired about the data on the logsheets, Dr. Kermani told Examiner Hunter that, as he conducted tests, he verbally gave the results to a lab assistant who recorded the results on the logsheets. Tr. at 429, 452, 463. Examiner Hunter made copies of the logsheets (id. at 390-391) that had some cross-outs and data changes on them (id. at 387). When Examiner Hunter returned to IBI on March 1, he noticed that changes had been made to the data he had seen on a logsheet in February so he copied some logsheets again. Id. at 390-392. Dr. Kermani did not show Examiner Hunter any daily worksheets during the February or March surveys. Id. at 455, 462, 430-432 identifying worksheet at IBI Ex. 18, at 10. Examiner Hunter based his determination of deficiencies under this tag on the logsheets. Id. at 462-463.

At the hearing, CMS adduced testimony concerning the problems posed by the logsheets. These included (1) changes to the data on the logsheets (Tr. at 54, 392-393); (2) failure of the logsheets to contain all of the data (such as graded reactions to anti-sera and graded reactions to the screen test cells) necessary to derive the results recorded on the logsheets (Id. at 69-70; 87-88); (3) chronological discrepancies in the entry of data (Id. at 107, 113-114, 137); and (4) failure of the tester to initial the logsheet (Id. at 348-349).

In response, Dr. Kermani testified as follows. He had shown Examiner Hunter the daily worksheets during the survey. Tr. at 648. The changes in data on the logsheets resulted from the fact that he had a clerk, whom he ultimately fired and who made mistakes in transcribing the results of the daily worksheets onto the monthly logsheets thus requiring the changes observed by the examiners. Tr. at 649, 656-657. The daily worksheets had the necessary entries in the columns for graded reactions antibody screening. Tr. at 640-644, citing CMS Ex. 7, at 106. He did not initial the logsheets until he had checked them against the worksheets for accuracy. Tr. at 656.

While the ALJ acknowledged Dr. Kermani's argument that the examiners had mistakenly relied on logsheets rather than worksheets, she did not state whether she believed his explanation as to the relationship between the logsheets and worksheets or his testimony as to what he had told Examiner Hunter about how data was entered on the logsheets and worksheets. ⁽²⁴⁾ However, the ALJ reasonably found that the carelessness with which the logsheets were maintained and results were recorded was a violation of section 493.1107 in that changes were made to original entries without contemporaneous explanations or audit trails with respect to the transcription errors. ALJ Decision at 19. Further, we note that Examiner Hunter testified at the hearing that the worksheets themselves did not comply with section 493.1107 because they were confusing (Tr. at 434); they lacked space to record certain components of tests (Tr. at 460); and they did not record the reagents and lot numbers (Tr. at 461).

On appeal, IBI repeated its argument distinguishing between the worksheets and the logsheets, which we accept for purposes of this decision. However, it offered no arguments and cited no evidence that would show that the ALJ erred in concluding that IBI's immunohematology records were deficient under section 493.1107 for the reasons discussed above.

b. HIV testing records

The ALJ concluded that IBI was not in compliance with section 493.1107 because it reported to the public health department that it had tested and found positive HIV results for four individuals but had testing records for only two individuals. ALJ Decision at 19, citing CMS Ex. 67, at 3-8. She acknowledged that IBI claimed that it sent two tests to a reference laboratory but correctly ruled that IBI should have had copies of all the test reports.

On appeal, IBI submitted additional evidence concerning these test reports and asserted:

There were 4 tests reported to the Health Department. Unilab confirmed the results as positive for all 4 tests. The results for the four patients from Unilab were never requested by CMS or anyone else. A copy of the four Unilab laboratory results confirming the results is attached as Exhibit "A".

IBI RR at 52.

Our Guidelines provide:

While the panel may admit evidence into the record . . . the panel will only do so if it considers the additional evidence to be relevant and material to an issue before it and if the proponent demonstrates good cause for not having produced the evidence during proceedings before the ALJ.

http://www.hhs.gov/dab/guidelines/clia.html.

IBI failed to show good cause for not producing these reports before the ALJ. IBI should have understood that it needed to document its assertions in its POC as to the referral of these tests and submitted documentation at that time. However, even if the SOD was not clear about the need to submit these documents, CMS specifically noted in its posthearing brief that these reports had not been provided. By that point, IBI had sufficient notice that it needed to supply the reports. Therefore, we uphold the ALJ's conclusion that IBI's handling of these HIV records violated section 493.1107.

c. Other issues

The ALJ cited IBI's records' failure to track "the condition and disposition of specimens that do not meet the laboratory's criteria for specimen acceptability" (section 493.1107(c)) as discussed in FFCL B.3.d. ALJ Decision at 19. She also cited IBI's failure to properly maintain reagent records for immunohematology testing as discussed at FFCL C.2. Id. IBI failed to raise any arguments that were not addressed in our prior discussion.

Based on the evidence discussed above, we conclude that substantial evidence in the record as a whole supports a finding that the test records at IBI did not comply with the standards of section 493.1107.

3. IBI failed to meet the standards for test reports as set forth in 42 C.F.R. § 493.1109.

a. Timeliness (D3050)

A laboratory must have "adequate systems in place to report results in a timely, accurate, reliable and confidential manner." 42 C.F.R. § 493.1109(a).

The ALJ found that IBI failed to follow its own policies regarding turn-around-time frames for many of the specimens yielding abnormal potassium and glucose results in violation of section 493.1109(a). ALJ Decision at 20; CMS Ex. 1 at 34 (SOD citation of this violation). ⁽²⁵⁾ IBI's procedures manual (IBI Ex. 16) set forth a turn-around-time for potassium and glucose of 1 to 2 days. In the exhibits CMS submitted regarding the high potassium values, turn-around times from receipt by IBI to testing were far longer than stated in IBI's manual. On most of IBI's testing reports to physicians in the record, the time between specimen collection and reporting exceeded seven days. ALJ Decision at 17, citing CMS Exs. 24, 25, 31, 33, 34, 35, 38, 39, 44, 45, 46, 47, 48, 49, 51, 52, 55.

On appeal, IBI did not deny that it failed to process these specimens in accordance with its standards for timeliness or explain why the ALJ's construction of the evidence was wrong. IBI Reply at 48-50.

b. Name and location of laboratory related to blood gas testing (D3056)

The laboratory must indicate on the test report the name and address of the laboratory location at which the test was performed. 42 C.F.R. § 493.1109(b).

This deficiency concerned testing by Isaac Moran, an independent contractor engaged by IBI to do blood gas testing with portable gas testing equipment at other sites such as nursing homes. ⁽²⁶⁾ Moran, who did not have a separate CLIA certificate (Tr. at 321-322), performed the tests and IBI reported and billed the tests. ALJ Decision at 20, citing Tr. at 268-269, 274, 276, 322, CMS Ex. 68, at 7 - 8. IBI's contract with Mr. Moran provided that he was not an employee of IBI and that -

[w]hile working out in the field in order to perform the work for which the client [IBI] has sought the services of the contractor [Morin], all liabilities including but not limited to safety at work practices, technical competence as well as professional and procedural codes are all the responsibility of the contractor.

ALJ Decision at 21, citing CMS Ex. 68, at 1.

The ALJ found a violation of this standard because the reports for these blood gas tests reported the laboratory's address as IBI's but the tests were performed at field locations by an independent contractor. ⁽²⁷⁾ ALJ Decision at 20-21. The ALJ also noted that Dr. Kermani "disavowed expertise" on some of the blood gas testing. ALJ Decision at 21, citing Tr. at 760.

IBI offered no meritorious arguments on appeal. IBI asserted that the practice of using independent contractors to perform off-site testing is a practice that "is common in California." IBI Reply at 63, 65. There is no support for this assertion in the record. ⁽²⁸⁾ As to the fact that Mr. Moran operated as an independent contractor, IBI stated "if a problem [arose], IBI would have surely been implicated." Id. at 63. While this may or may not be accurate, it does not negate the fact that IBI was referring testing to a separate legal entity, an independent contractor, while reporting the testing as its own. Therefore, the reports did not accurately reflect the name and address of the laboratory location at which the test was performed as required by section 493.1109(b).

c. Reporting critical values (D3066)

Section 493.1109(f) of 42 C.F.R. requires laboratories to develop and follow written procedures for reporting imminent life-threatening laboratory results or panic values. The laboratory must immediately alert the individual or entity requesting the test or the individual responsible for using the test results when any test result indicates an imminent life-threatening condition.

IBI's written policy was that:

When a critical value is obtained on a patient specimen, the ordering physician will be notified in person or by telephone. If the notification is in person, the physician will initial, date, and time the abnormal value. If the notification is by telephone, the technician will note as such, initial, date, and time the abnormal report.

CMS Ex. 69, at 1.

In its POC, IBI stated, "Please note we take panic value reporting very seriously. We always fax and call panic values and document by recording in our panic value folder." CMS Ex. 1, at 38. At the hearing, Dr. Kermani testified he called doctors about critical values and then faxed the related report. Tr. at 652. On appeal he made the same assertion. IBI Reply at 67-69.

While such calls and documentation of such calls were required by IBI policy and IBI asserted that it followed the policy, the evidence in the record does not support this assertion. The ALJ found that IBI primarily faxed the reports to the doctors' offices rather than calling as required by IBI's policy and that no confirmations of the facsimiles were contained in IBI's patient records. ALJ Decision at 22, citing CMS Ex. 69, at 45 - 96, 99, 111-120; Tr. at 193-194. Further, the ALJ found that IBI's documentation of reporting of critical values to doctors by facsimile "was spotty at best." ALJ Decision at 22, citing CMS Ex. 69, at 97, et seq. Finally, Examiner Barr testified that, when he was at IBI in June 2001, IBI was unable to find any critical values call log when he requested to see it. Several weeks later IBI produced a critical values log for Examiner Otey. See ALJ Decision at 22, citing Tr. at 193-194.

On appeal, IBI asserted that panic values were always called or faxed but it did not address the ALJ's cites to documentary evidence indicating that they were not or that such calls and faxes were not properly documented. IBI again complained that CMS failed to contact doctors and that IBI has never had a complaint about failure to report critical values. IBI Reply at 67-69. As explained before, CMS is not required to contact a laboratory's clients to prove that a given patient was harmed or clients complained. Thus, IBI's assertions do not overcome the problem that IBI could not document that it was following its written policy. In fact, the evidence indicates that IBI was using fax notification rather than telephone call notification and that it could not document consistent use of fax notification.

We uphold the ALJ's determination that IBI violated the condition for patient test management set forth at 42 C.F.R. § 493.1101, because of (1) a lack of instructions to assure optimum integrity of the patient specimens; (2) a lack of records that consistently identified the condition and disposition of specimens not meeting the laboratory's criteria for specimen acceptability; (3) a lack of a reporting system that consistently and accurately reflected the condition of the specimen or identified the condition and disposition of specimens not meeting the laboratory's criteria for specimen acceptability; (4) a failure to include on the test report the name and address of the laboratory location where the test was performed or information about the condition and disposition of specimens that did not meet the laboratory's criteria for acceptability; (5) the lack of adequate, updated procedures for reporting panic values; and (6) failure to comply with turn-around-times.

C. IBI failed to comply with the condition for General Quality Control as set forth in 42 C.F.R. § 493.1201. (D4000)

The ALJ concluded that IBI was not in compliance with the condition-level requirement for quality control because, as discussed below, IBI had violated four standard-level requirements related to quality control.

1. IBI failed to meet the standard for facilities as set forth in 42 C.F.R. § 493.1204. (Tag D4017)

A laboratory must provide the space and environmental conditions necessary for conducting the services offered. It must be constructed, arranged, and maintained to ensure the space, ventilation, and utilities necessary for conducting all phases of testing. Additionally, the laboratory must establish, post and observe safety precautions to ensure protection from physical, chemical, biochemical and electrical hazards and biohazardous materials. 42 C.F.R. §§ 493.1204.

The ALJ determined that IBI violated this standard based on the testimony of two examiners who described IBI as small, crowded and dangerous with electrical cords across the floor and things stacked on counters. ALJ Decision at 24, citing Tr. at 29, 412, 415.

On appeal IBI argued that "the Interpretive Guidelines for Surveyors" states that potential safety violations not applicable under CLIA should be reported to the appropriate state or local authority. IBI Reply at 78. IBI did not cite where in the record these interpretive guidelines can be found. Additionally, the fact that a condition could be reported as violating a local safety code does not mean that the condition does not also violate CLIA's requirement that a laboratory provide the space and environmental conditions necessary for conducting the services offered. Based on the testimony of the examiners, the ALJ reasonably concluded that IBI had outgrown its office space and violated this standard.

2. IBI failed to comply with the standard for test methods, equipment, instrumentation, reagents, materials, and supplies. (Tag D4038)

A laboratory must have appropriate and sufficient equipment, instruments, reagents, materials, and supplies for the type and volume of testing performed and for the maintenance of quality during the testing. 42 C.F.R. § 493.1205(b). Section 493.1205(e)(1) requires that reagents, solutions, culture media, controls, calibration materials and other supplies must be stored and handled in a manner to ensure that they are not used when they have exceeded their expiration date, have deteriorated, or are of substandard quality.

The ALJ Decision discussed two issues under this tag. First, the ALJ found CMS made a prima facie case that IBI was using expired reagents when examiners visited in February. Second, the ALJ found CMS made a prima facie case that IBI did not have the reagents necessary to conduct the blood testing that it performed in 2000. ALJ Decision at 27.

As to the use of expired reagents noted in the February 2001 survey, the ALJ described the following testimony of Examiner Hunter, which she found credible and which supports her finding. ALJ Decision at 34, citing Tr. at 382-385. On February 20, 2001, Examiner Hunter looked in the IBI refrigerator for blood banking reagents but could find none. Upon asking for the reagents, he was taken by Dr. Kermani to the Cell Marx laboratory across the hall and told this was where immunohematology was done. There he saw immunohematology documents that were identified as IBI documents. He noticed that one of these documents listed expired reagents. He asked Dr. Kermani for reagents. Dr. Kermani pulled some blood banking reagents from the refrigerator at Cell Marx to show Examiner Hunter. Examiner Hunter observed that these reagents had the same lot numbers and expiration dates that he observed on the immunohematology document he had previously reviewed. When he pointed to Dr. Kermani the reagents were expired, Dr. Kermani went to the refrigerator and opened some new boxes to show Examiner Hunter that IBI did have reagents, and he threw out the expired reagents.

In his own testimony, Dr. Kermani blamed the expired reagents listed on the immunohematology document on the careless laboratory clerk who had mistakenly carried over the lot numbers of expired reagents onto the documents for the most recent testing. Tr. at 656-657. However, as the ALJ noted, Dr. Kermani's testimony did not address Examiner Hunter's testimony that, when asked for reagents, Dr. Kermani had retrieved expired reagents from the refrigerator. The fact that Dr. Kermani retrieved expired reagents supports CMS's position that the expired reagents were in use at the time on February 20, the date of the survey.

On appeal, IBI stated that Examiner Hunter testified about a reagent that expired on February 19 and he was there on February 20 (IBI Reply at 82); that Examiner Hunter's assertion about Dr. Kermani's opening a box is untrue -- that Dr. Kermani opened a "plastic bag not boxes" (id. at 83); that expired reagents were marked "not in use" and IBI did not use expired reagents (id. at 85); and that "there is no mention in the SOD of actually ever seeing staff using expired reagents" (id. at 84). In support of these arguments, IBI cited only IBI Exhibit 23, which is a 26-page exhibit of reagent logs and invoices.

These arguments are not persuasive and are unsupported by citations to specific evidence in the record. First, Examiner Hunter did not testify that the reagents he was shown on the 20^th expired on the 19^th. Rather, CMS's evidence was related to reagents that expired on January 17 (see CMS Exs. 1, at 50; and 66, at 7). Second, IBI did not address Examiner Hunter's testimony that when he pointed out to Dr. Kermani that the reagents first retrieved by Dr. Kemani were expired, Dr. Kermani opened a box (or bag) and retrieved new reagents and threw the old ones away. ⁽²⁹⁾ Third, there is no citation to any testimony or other evidence to show that the expired reagents Dr. Kermani first retrieved were marked "not in use." Fourth, examiners do not have to "see" expired reagents in use to cite a deficiency. The ALJ identified ample evidence based on IBI's records and Dr. Kermani's actions as described by an examiner to make a prima facie case of the use of expired reagents.

The ALJ further determined that CMS also made a prima facie case that IBI did not have the reagents to perform blood antibody screening and ABO testing during all of the time periods these tests were being conducted, in violation of section 493.1205(b). ⁽³⁰⁾ ALJ Decision at 25-26. For the antibody screening, which IBI began performing in August 2000, the earliest proof of purchase for the necessary reagents was dated November 13, 2000. ALJ Decision at 25-26, citing Tr. at 132; CMS Ex. 72, at 1; IBI Ex. 23, at 5. For the ABO testing reported by IBI between June and January, the earliest documentation of purchase of "anti A antisera, the anti B, the anti AB antisera and A-1 cells, the B cells required for this testing was January 29, 2001." ALJ Decision at 25, citing Tr. at 133-135; 42 C.F.R. § 493.1269(b); CMS Ex. 67, at 1-2; CMS Ex. 72, at 5; IBI Ex. 23, at 9.

Dr. Kermani testified that he sometimes received sample reagent kits from distributors. Tr. at 655-656. Dr. Kermani testified that he did not have records to show purchase of these reagents and that he had been unable to obtain records from the company. Tr. at 654-654. However, the ALJ found it inconceivable that a business could not reconstruct its purchases because, at minimum, such information must be retained for tax purposes. ALJ Decision at 26. Additionally, the ALJ found Dr. Kermani's testimony less credible because, while he testified he maintained a reagent log sheet (Tr. at 731), the log sheet showed no incoming anti-A, anti-B, or anti-D regents between March and November 2000. ALJ Decision at 27, citing IBI Ex. 23, at 3.

On appeal IBI asserted that CMS's allegation as to its conducting ABO/Rh testing was not specific in that the patient tests were not identified. IBI Reply at 90. IBI repeated that Dr. Kermani was unable to obtain copies of invoices and that he received reagent demonstration kits from distributors to use as samples. IBI noted that the regulations do not require laboratories to retain invoices of reagent purchases for a specific period of time. IBI Reply at 87-95.

None of these arguments is persuasive. First, IBI did not dispute that it conducted ABO/Rh testing (see CMS Ex. 1, at 61), and CMS also submitted computer reports listing such testing (see Tr. at 43-44, citing CMS Ex. 7, at 262). Second, if IBI were using sample reagent kits, these reagents should have been documented in IBI's reagent log. Third, if IBI were using Cell Marx's supplies (even though the two labs should not have been sharing reagents), that also should have been documented. Fourth, we too find it implausible that a business cannot reconstruct its expenses as to such matters as reagent purchases. Fifth, while the regulations do not require laboratories to retain invoices, they do require a laboratory to "have appropriate and sufficient equipment, instruments, reagents, materials, and supplies for the type and volume of testing performed and for the maintenance of quality during the testing." 42 C.F.R. § 493.1205(b). Thus, IBI should have known that it needed to document that the laboratory indeed "had" the appropriate reagents at the time it conducted the testing in order to show compliance.

3. IBI failed to comply with the standard of remedial actions as set forth in 42 C.F.R. § 493.1219. (D4179)

Section 493.1219 of 42 C.F.R. requires the laboratory to establish remedial action policies and procedures to maintain the laboratory's operations in a manner that assures accurate and reliable patient test results and reports. The regulation also requires the laboratory to document all remedial actions taken when, inter alia, patient test values are outside of the laboratory's reportable range of patient test results; results of control and calibration materials fail to meet the laboratory's established criteria; or the laboratory cannot report patient test results within its established time frames.

The ALJ relied on the testimony of Examiner Hunter in which he stated that, when he returned to IBI in March 2001, he asked Dr. Kermani to show him the IBI policies and procedures for its quality control program for hematology and for documenting corrective or remedial action. Examiner Hunter testified that IBI never provided that information. Tr. at 397-399, 422-423.

On appeal, IBI cited the testimony of another examiner, who reviewed documents from IBI but did not visit it, and who, on cross examination, testified that he did not testify about hematology documents (Tr. at 570). This testimony does not rebut Examiner Hunter's testimony. IBI also stated that "all documents presented previously indicate that the quality control done by IBI was sufficient." IBI Reply at 96. However, IBI cited to no specific documents in the record to support this assertion.

The ALJ also relied on IBI's handling of the potassium and glucose results that were significantly outside accepted values because the specimens were old, noting that (1) IBI's patient test reports did not indicate what IBI did to remediate the problems; (2) IBI failed to identify any "set procedure for corrective action;" (3) IBI did not include information on all of the patient result worksheets or logsheets to document whether corrective action was taken; and (4) for those instances documented in the record when IBI did not report results within its established time frames, IBI provided no documentation of corrective action taken or its policies and procedures for taking corrective action. ALJ Decision at 27-28.

On appeal IBI argued that CMS had never asked it to produce its policies related to abnormal results. IBI Reply at 97. IBI is correct that the SOD at D4179 speaks in terms of failing to document corrective remedial actions rather than failure to have a policy as to abnormal results. However, the ALJ relied on several factors in addition to the failure to produce a policy. IBI did not address these factors on appeal except to repeat its previous assertions, which had been reasonably rejected by the ALJ, as to contact with physicians about these abnormal results.

4. IBI failed to comply with the standard of quality control for specialties and subspecialties for tests of moderate and/or high complexity as set forth in 42 C.F.R. § 493.1227(c)(1). (Tag D4212)

The laboratory must establish and follow written quality control procedures for monitoring and evaluating the quality of the analytical testing process of each method to assure the accuracy and reliability of patient test results and reports. 42 C.F.R. § 493.1223. For the subset condition of bacteriology, the laboratory, in conducting antimicrobial susceptibility tests, must check each new batch of media and each lot of antimicrobial discs before, or concurrent with, initial use, using approved reference organisms. In addition, the laboratory's zone sizes or minimum inhibitory concentration for reference organisms must be within established limits before reporting patient results. 42 C.F.R. § 493.1227(c).

CMS alleged that IBI failed to properly establish antimicrobial susceptibility zone size limits for its reference organisms prior to reporting patient test results. CMS Ex. 1, at 58. Specifically, IBI identified the zone sizes for Escherichia coli (E. Coli) (25922) as 22 to 30 for Erythromycin (CMS Ex. 72, at 1) but no zone sizes for this combination were given in the guidelines of the National Committee For Clinical Laboratory Standards (CMS Ex. 72, at 28, Tr. at 401), and Dr. Kermani could not document any in-house validation procedures by which the 22-30 zone sizes had been established (Tr. at 402). IBI reported patient results as to the susceptibility of E. Coli to Erythromycin. ⁽³¹⁾ CMS Ex. 71, at 6, 14, 15, and 19. Based on the testimony of Examiner Hunter and the CMS Exhibits, the ALJ upheld this deficiency finding. ALJ Decision at 28-29, citing Tr. at 399-405, CMS Ex. 72, at 1, 28.

On appeal, Dr. Kermani argued as follows:

Dr. Kermani, who has a significant background as a research scientist, noted that a special control lot was showing that E. Coli was sensitive to Erythromycin, which is not typical. However, believing it might possibly be a new strain of E. Coli, Dr. Kermani established that zone for E Coli based on that particular control. (Tr. at 658). In the patients tested, the E. Coli was resistant to Erythromycin and this was stated on the report to the physicians. In this instance, Dr. Kermani was looking out for the best interest of the patients. Running E. Coli for sensitivity to Erythromycin would not negatively affect a physician's treatment for his patient, since he or she would only select an antibiotic that was sensitive to the patient's particular organism. (Tr. at 659). It would be extremely beneficial to a physician to know that his/her patient's strain of organism was sensitive to Erythromycin in case he/she wanted to use that drug to also treat another. In fact, Mr. Hunter [the examiner] admits that the surveyors did not ask the technicians if they did want the laboratory to test for resistance to erythromycin. (Tr. at 482).

IBI Reply at 102-108.

The crux of this deficiency is that IBI could not show the examiners how Dr. Kermani validated the zone sizes for Escherichia coli (E. Coli) (25922) with Erythromycin. As for these zone sizes, the SOD alleged "[n]o zone sizes exist in 2001 NCCLS guidelines and no in-house validation was performed." CMS Ex. 1, at 58. On appeal, IBI pointed to nothing in the record that would support Dr. Keramani's testimony or assertions on appeal that he "established a zone for E. Coli based on that particular control." IBI Reply at 102; see also Tr. at 658, 744. IBI did state that it "conducts three level controls for each 8 hour of patient's testing" and "[a]ll documents presented previously indicate that the quality control done by IBI was sufficient and guaranteed the best outcome." IBI Reply at 102. However, it identified nothing in the record to support these representations as they relate to this testing.

None of IBI's other assertions on appeal have merit. As the ALJ acknowledged, CMS did not show that any patient was directly harmed or that any physicians were misled by IBI's reports. ALJ Decision at 29. However, CMS is not required to establish actual harm. Further, while it could be beneficial to a physician if IBI established that E. coli was sensitive to Erythromycin, this assertion does not address the basis for the deficiency, which was that IBI could not show how it established the zone sizes it was using to determine if E. coli was sensitive to Erythromycin as required by CLIA standards.

Therefore, we conclude that the ALJ's determination that IBI failed to use properly established limits for zone sizes before reporting patient results is supported by substantial evidence in the record as a whole and that this conduct constitutes a violation of 42 C.F.R. § 493.1227(c).

D. IBI failed to comply with the conditions for Laboratory Director, Moderate Complexity Testing and Laboratory Director, High Complexity Testing, as set forth in 42 C.F.R. § 493.1403 and § 493.1441, respectively. (D6000; D6076))

For moderate complexity testing, the condition requirement at 42 C.F.R. § 493.1403 requires a laboratory to have a director who meets the qualifications of section 493.1405 and who provides overall management and direction of the laboratory in accordance with section 493.1407. Pursuant to section 493.1407, the laboratory director:

is responsible for the overall operation and administration of the laboratory, including the employment of personnel who are competent to perform test procedures, and record and report test results promptly, accurate (sic), and proficiently and for assuring compliance with the applicable regulations.

42 C.F.R. § 493.1407.

The laboratory director may perform the duties of the technical consultant, clinical consultant, and testing personnel, or may delegate these responsibilities to personnel who meet the qualifications set forth in the regulations. If the laboratory director delegates performance of his or her responsibilities, the director remains responsible for ensuring that all duties are properly performed. 42 C.F.R. §§ 493.1407(a) and (b). There are similar regulatory requirements for the director of a laboratory performing high complexity testing. 42 C.F.R. §§ 493.1441, 493.1443, and 493.1445.

The ALJ determined IBI was deficient under 42 C.F.R. § 493.1407 because Dr. Black, as the laboratory's director, failed to ensure that IBI met the following CLIA standards.

• Dr. Black failed to ensure that testing systems developed and used for each of the tests performed in the laboratory provided quality laboratory services for all aspects of test performance as required by 42 C.F.R. § 493.1407(e)(1). The ALJ based this conclusion on IBI's failure to have adequate procedures for optimum integrity of patient specimens and its handling of stale specimens as discussed under FFCLs B and C. ALJ Decision at 31.



• Dr. Black failed to ensure that IBI's physical plant and environmental conditions were appropriate for the testing performed and that the laboratory was a safe environment for the employees as required by 42 C.F.R. § 493.1407(e)(2). The ALJ based this conclusion on her findings in FFCL C.1. Additionally, she pointed out that Dr. Black denied knowledge that IBI was actually using additional space at Cell Marx. ALJ Decision at 32.



• Dr. Black failed to ensure that IBI was enrolled in an approved PT program for the testing performed (42 C.F.R. § 493.1407(e)(4)), and that the PT samples were tested as required under Subpart H of 42 C.F.R. Section 493. 42 C.F.R. § 493.1407(e)(4)(i). The ALJ relied on findings concerning proficiency testing in FFCL A. Additionally, the ALJ pointed out that Dr. Black was unaware that IBI was using Cell Marx equipment and Cell Marx was using IBI equipment for proficiency testing. ALJ Decision at 32-33.



• Dr. Black failed to ensure that IBI had defined criteria for quality control, and maintained those criteria prior to IBI reporting test results as required by 42 C.F.R. § 493.1407(5). The ALJ relied on her finding concerning quality control in her findings in FFCL C. ALJ Decision at 31.



• Dr. Black failed to ensure that IBI's reports of test results included pertinent information required for interpretation as required by 42 C.F.R. § 493.1407(e)(8). The ALJ relied on her findings related to the completeness and accuracy of IBI's test reports as discussed in FFCL B. ALJ Decision at 32.

For the most part, the arguments offered by IBI in response to this deficiency were properly rejected by the ALJ in her consideration of the related FFCLs. IBI's other arguments on appeal have no merit, for the following reasons:

• IBI asserted that CMS failed to make a prima facie case as to these violations (IBI Reply at 110), even though, as discussed earlier in the decision, the ALJ properly found IBI had violated numerous CLIA conditions and standards. These findings support her conclusion that IBI was also not in compliance with the condition for laboratory director since the laboratory director must ensure that the laboratory complies with conditions and standards.
  
  
• IBI reviewed the qualifications of Dr. Kermani and Dr. Black. Id. However, these qualifications are not relevant to the question of whether Dr. Black, either personally or through Dr. Kermani, ensured that IBI complied with CLIA standards and conditions.



• IBI asserted that Dr. Black was not involved in the day-to-day operation of IBI because he had delegated this responsibility to Dr. Kermani who was qualified to serve as technical supervisor. Id. at 112. It also asserted that Dr. Black was available for consultation with Dr. Kermani and present at IBI every three to four weeks. Id. at 113-117. The regulations expressly provide that if a "laboratory director reapportions performance of his or her responsibilities, he or she remains responsible for ensuring that all duties are properly performed." 42 C.F.R. § 493.1407(b). Therefore, neither Dr. Black's delegation nor his availability excuse Dr. Black from ensuring that IBI met CLIA conditions and standards. Further, as the ALJ pointed out, the fact that Dr. Black knew nothing about IBI's association with Cell Marx and contractual arrangement with an independent contractor for off-site testing indicates that he was not properly involved in the operation of IBI. ALJ Decision at 32-33.

  E. IBI failed to comply with the condition for quality assurance, as set forth in 42 C.F.R. § 493.1701. (D7000).

The quality assurance (QA) condition requires laboratories to establish and follow written procedures for a "comprehensive quality assurance program that is designed to monitor and evaluate the ongoing and overall quality of the total testing process . . . ." 42 C.F.R. § 493.1701. The QA program must evaluate the effectiveness of the laboratory's policies and procedures, identify and correct problems, assure accurate, reliable and prompt reporting of test results, and assure the adequacy and competency of staff. All QA activities must be documented. CMS cited the following standard level deficiencies related to this condition: patient test management assessment (section 493.1703); quality control assessment (section 493.1705); proficiency testing assessment (section 493.1707), and comparison of test results (section 493.1709).

The presence of condition-level deficiencies at IBI, which had not been identified or addressed prior to the surveys, indicated that IBI did not have a functioning QA program. ALJ Decision at 34; Tr. at 323-326. In concluding that IBI was deficient under section 493.1701, the ALJ relied on the absence of a QA program and actions to address (1) stale specimen rejection; (2) high turnaround times; (3) haphazard documentation of critical values reporting; (4) retrieving and retaining test records; (5) storing, recording and purchasing reagents necessary for testing; and (6) involvement of the director in important aspects of the laboratory's activities for which he had ultimate responsibility. ALJ Decision at 34. These deficiencies have been discussed in the previous sections of this decision. On appeal, IBI offered no arguments and identified no evidence that would tend to show that it had a QC program related to these deficiencies.

F. CMS's conclusion that immediate jeopardy existed is fully supportable by the record.

IBI asserted that none of IBI's patients were ever put in jeopardy. IBI RR. at 109. We assume IBI is seeking to challenge FFCL F, in which the ALJ wrote:

CMS's finding that IBI's condition-level deficiencies constituted immediate jeopardy to patient health and safety is not subject to review. 42 C.F.R. § 498.1844(c)(6).

ALJ Decision at 35.

We narrow the holding in this FFCL because it is unnecessary, in this case, to reach the question of an ALJ's scope of review as to immediate jeopardy in CLIA cases. ⁽³²⁾ Rather, we conclude that CMS's conclusion that immediate jeopardy existed is fully supported by the record based on evidence discussed above, such as the evidence showing use of expired reagents, failure to update and follow a critical value reporting policy, disregard of proficiency testing requirements, and reporting results of compromised samples.

G. IBI's additional arguments are without merit.

IBI made arguments that were not related to specific FFCLs. Below we discuss these arguments.

IBI argued that the ALJ erred in determining that CMS had "made a prima facie case instead of considering all of the evidence in the record to determine whether IBI was in substantial compliance." IBI RR. at 108. Specifically, IBI complained that, at the hearing, CMS did not present evidence as to numerous deficiency allegations.

CMS must make a prima facie case sufficient to support the imposition of the proposed remedies, not as to all deficiency allegations in the SOD. As discussed in this decision, CMS made a prima facie case that IBI had violated six condition-level requirements, and IBI failed to show, by a preponderance of the evidence, that it had complied with these condition-level requirements. CMS is authorized to revoke a laboratory's CLIA certificate on the basis of one condition-level deficiency. 42 C.F.R. § 493.1806.

On appeal before the Board, IBI made a number of arguments directed at eliminating or reducing the amount of the CMP. The ALJ did not address these arguments because IBI did not make them in its briefing before the ALJ. IBI did, however, identify as issues for hearing whether the CMP "was proper" and whether the "amount of the CMP was reasonable." IBI Report of Readiness, at 3, citing 42 C.F.R. §§ 493.1804(b) and (d), 493.1806(c), 493.1810(d), 493.1812(a), 493.1840(b), 493.1834). In response to IBI's arguments on appeal, CMS asserted that the ALJ and the Board had no authority to review the reasonableness of the amount of the CMP. However, we do not need to reach the question of the ALJ's scope of review as to the amount of a CLIA CMP because we reject IBI's arguments and find the record supports the imposition of the CMP.

First, IBI argued that the ALJ erred in affirming CMS's imposition of a CMP of $30,000 ($10,000 per day for October 29, 30, and 31, 2001) because IBI, pursuant to CMS's directive, stopped testing on October 29, 2001. IBI RR. at 110. IBI cited no evidence in the record to support this representation. Further, 42 C.F.R. § 493.1834(f)(2) provides that a CMP continues until the laboratory achieves compliance or its certificate is suspended, limited, or revoked, whichever occurs first. IBI did not argue that any of these events occurred before November 1, 2001.

IBI also argued that the amount of the CMP imposed by CMS was unreasonable in light of the factors set forth at 42 C.F.R. § 493.1834(d)(1), which are to be considered by CMS in determining the amount of a CMP. IBI RR at 112. In its letter of October 24, 2001, CMS listed the factors it considered when selecting the amount. CMS Ex. 2, at 3. These factors principally involved "the nature, scope, severity . . . of the noncompliance" (42 C.F.R. § 493.1834(d)(1)(i)): improper proficiency testing, failure to comply with six condition-level requirements, and the presence of immediate jeopardy. The ALJ Decision properly upheld CMS's determinations as to the presence of these factors and therefore the record supports the imposition a CMP in the amount of $30,000.

On appeal before the Board, IBI asserted that under 42 U.S.C. § 263a(i)(2), it was entitled to a hearing within 60 days of the suspension. IBI RR at 116. IBI is correct that CLIA provides for an expedited hearing when a laboratory's certificate is suspended. In October 2001, CMS informed IBI of the opportunity for a hearing within 60 days of the suspension but instructed IBI that it should "specify in any request for hearing to challenge the suspension of your laboratory's CLIA certificate whether you wish the hearing to commence within 60 days." CMS Ex. 2, at 5. In its request for hearing filed December 6, 2001, IBI did not request that a hearing be held within 60 days of the suspension. Nor did IBI cite on appeal any request to the ALJ for an expedited hearing. Therefore, IBI may not complain now that it did not receive a hearing within 60 days.

IBI argued that the statements of the examiner concerning the permissibility of the use of another laboratory's equipment constituted "entrapment by estoppel." IBI RR at 117. The case cited by IBI involved a criminal prosecution in which the court considered "due process concerns under the Fifth and Fourteenth Amendments." United States v. Meraz-Valete, 26 F.3d 992 (10^th Cir. 1994). We reject this argument. First, IBI did not make the argument before the ALJ. Second, IBI did not explain how this criminal case is relevant to a civil proceeding. Third, we have not concluded that IBI's use of Cell Marx equipment was, per se, a violation of CLIA standards. Therefore, even if the examiner misinformed Dr. Kermani, IBI is not being sanctioned for Dr. Kermani's reasonable reliance on that advice.

On appeal, IBI asserted that CMS failed to provide required notice in the SOD "regarding particular deficiencies that formed the basis for the sanction." IBI RR at 117. We find CMS's SOD to be very detailed. While we do see places in the record where IBI complained about CMS's failure to be more specific, on appeal IBI has not explained how this failure prejudiced its defense as to any facts on which the ALJ based the FFCLs sustained on appeal.

IBI argued that there were less drastic measures that CMS could have taken against IBI and the remedies imposed were "harsh, unjust and unsupported by the evidence." IBI RR at 116. This argument is unavailing, since, as we explained above, the condition-level deficiency findings were supported by substantial evidence and fully support the remedies imposed.

IBI asserted Dr. Black and Dr. Kermani should not be subject to the two-year ban on operating a laboratory (42 U.S.C. § 263s(i)(3)) because their conduct did not precipitate the revocation. IBI RR. at 116. We reject this argument. As explained above, Dr. Kermani's actions led to the circumstances that were the basis for the revocation. Dr. Black, as laboratory director, was responsible for "overall management and direction in accordance with § 493.1407" and, therefore, is also responsible for these circumstances. 42 C.F.R. § 493.1403.

VI. Conclusion

ased on the foregoing discussion, we conclude that IBI's failure to comply with the condition-level requirements discussed above authorizes CMS's revocation of IBI's CLIA certificate, cancellation of IBI's approval to receive Medicare payments for laboratory services, and imposition a $30,000 CMP. By operation of 42 U.S.C. § 263a(i)(3), Dr. Black and Dr. Kermani are subject to the two-year prohibition on owning or operating a CLIA certified laboratory.

We affirm and adopt the ALJ's FFCLS, except for FFCLs A.2, A.3. and F, which we modify. Additionally, we adopt FFCLs A.5 and G. The modified and additional FFLCs are:

A.2. IBI's laboratory director did not attest to the routine integration of the samples into the patient workload, as required by 42 C.F.R. § 493.801(b)(1). (D2009)

A.3. IBI failed to comply with the regulatory prohibition on sending PT samples or portions of samples to another laboratory for an analysis IBI was certified to perform, as set forth in 42 C.F.R. § 493.801(b)(4). IBI failed to notify CMS of the receipt of PT samples from another laboratory in violation of 42 C.F.R. § 493.801(b)(4). (D2013)

A.5. IBI failed to comply with 42 C.F.R. § 493.801(3), which prohibits engaging in inter-laboratory communication pertaining to the results of PT samples until after the date for PT reporting. (D2011)

F. CMS's conclusion that immediate jeopardy existed is fully supportable by the record.

G. IBI's additional arguments are without merit.

Judith A. Ballard

Cecilia Sparks Ford

Donald F. Garrett
Presiding Board Member

1. CMS was previously named the Health Care Financing Administration (HCFA). 66 Fed. Reg. 35,437 (July 5, 2001).

2. 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).

3. All citations are to the regulations in effect in 2000 and 2001 at the time of the survey and issuance of the SOD, i.e., 42 C.F.R. Part 493 (October 1, 2000).

4. CMS cited the facts described below as a violation of 42 C.F.R. § 493.801(a)(1). CMS Ex. 1, at 3. The ALJ cited the facts as a violation of section 493.801(a)(3) without noting the change in citation. FFCL A.1, ALJ Decision at 6. IBI did not except to the ALJ's citation of section 493.801(a)(3) as the basis for this deficiency.

5. IBI would have received these immunohematology samples from AAB whether or not IBI was enrolled in unexpected antibody detection because IBI was enrolled in other immunohematology testing for which AAB sent these samples. ALJ Decision at 6.

6. IBI Exhibit 1, at 13 is a copy of the AAB immunohematology reporting form for the 3^rd testing event of 2000 on which Dr. Kermani has written "spoke with Anna from AAB 10-24-[illegible]." Pages 12-17 are documents that, according to Dr. Kermani, show that he did self-grade his AAB results for the 3^rd testing event of 2000 unexpected antibody detection. IBI Reply at 10. On a document titled "Unacceptable Proficiency Testing Result Form" dated October 28, 2000, IBI recorded its "repeat value obtained on stored proficiency testing specimen" for unexpected antibody on specimen 2 for the 3^rd testing event of 2000. IBI Ex. 1, at 15.

7. The ALJ questioned whether a director can delegate the responsibility for this attestation. ALJ Decision at 8. IBI pointed out that the SOM authorizes such delegation to a laboratory's technical consultant meeting the qualifications of 42 C.F.R. § 493.1409 (moderate complexity testing) or 493.1447 (high complexity testing). SOM, App. C at D2009. IBI Reply at 14. Before the ALJ and in the proceedings on appeal, CMS did not dispute that Dr. Black could have delegated this responsibility to Dr. Kermani but relied on the lack of a written delegation. CMS Br. at 21. Thus while we agree with the ALJ that there is a question whether the regulations can reasonably be read to permit delegation of the director's attestation responsibility to the individual doing the testing, we do not need to reach that issue here.

8. As discussed later in our decision, exactly what the examiner said as to the use of one another's equipment is disputed.

9. On appeal, IBI asserted that Dr. Kermani did not use IBI equipment to perform Cell Marx's rubella PT in the 1^st testing event of 2001 and disputed the examiners' assertions that they had found identical printouts from both laboratories for rubella testing. IBI RR 27-28. We conclude that the ALJ's finding is supported by substantial evidence. Examiner Hunter, whom the ALJ found to be a credible witness (ALJ Decision at 24), testified that, when he asked the Cell Marx owner for testing documentation for rubella for the 1^st testing event of 2001, he was given an instrument printout that was identical to the printout given the examiners at IBI for this test. Tr. at 532; CMS Ex. 11, at 1 (printout given to Examiner Hunter by Cell Marx); CMS Ex. 10, 36 (printout given to examiners by IBI); see also Tr. at 160-163. While the printed title contained the words "Immuno Biogene," the document came to Examiner Hunter from Cell Marx with the handwritten notation "AAB Cell Marx." Id. At the hearing, Dr. Kemani testified that he did not recognize this handwriting but offered no other information specifically relevant to this dispute. In its POC and on appeal, IBI asserted that Dr. Kermani performed Cell Marx's rubella testing for the 1^st testing event of 2001 with a seradyn latex kit but had accidentally identified the testing method on the Cell Marx AAB 1^st event report as Diamedix Microassay. CMS Ex. 1, at 15; RR at 27. However, the only documentary support for this assertion that IBI identified was an "Unacceptable Proficiency Testing Report Form" (IBI Ex. 7, at 7) in which Dr. Kermani stated that he had identified the wrong test method on the report. This form is not particularly persuasive since it is dated nine days after the examiners obtained the PT testing papers indicating that Dr. Kermani ran the same PT test at the same time on the same equipment.

10. In fact, the SOD implies that such agreements are permissible. At D6082, CMS cited IBI for the failure of the director to ensure quality laboratory services because IBI was sharing equipment and reagents with Cell Marx "without an agreement." CMS Ex. No. 1, at 81; see also CMS Ex. 1, at 68 (stating IBI "was sharing the following equipment/reagents without an agreement with Cell Marx Laboratories Inc.'s different site in Rm 407").

11. The ALJ did not determine whether IBI had a valid agreement with Cell Marx. ALJ Decision at 12. CMS asserted that any agreement was not valid because it was not in writing and did not contain terms as to such matters as expenses, operating hours, maintenance, separation of patient testing, quality control, records and procedure manuals. Tr. at 540-541.

12. The ALJ concluded that, no matter what the agreement was between the two laboratories, IBI could not test its PT samples on Cell Marx's equipment. ALJ Decision at 13. While we agree with the ALJ that the prohibition against referral is central to the integrity of the PT process, we do not reach the question of whether a laboratory with a valid agreement for the use of another laboratory's equipment in the other laboratory's space could never test its PT samples on that equipment.

13. In the POC, IBI also stated that "no patient samples were run in [IBI's] instruments for Cell Marx." CMS Ex. 1, at 11.

14. IBI did not except to FFCL A.4 in which the ALJ determined that CMS had failed to prove that IBI did not comply with 42 C.F.R. § 493.803. In order to conform the numbering in this decision to the ALJ Decision, we number our new FFCL A.5.

15. In the POC portion of the SOD for D2001, IBI refers to "verification in folder D2011" but we do not know where or if these documents are in the exhibits in this appeal.

16. The SOD cited section 493.1103(a) but described conduct that violated section  493.1103(b). However, since IBI was given specific notice of the conduct CMS alleged was deficient and did not, on appeal, assert that it was somehow prejudiced by CMS's citation of subsection (a) rather than (b), we conclude that this discrepancy was not prejudicial. See Cedar View Good Samaritan, DAB No. 1897 (2003).

17. Dr. Kermani testified that for a period of time he agreed to accept referrals from PIL. Tr. at 762-763. After processing the specimens, he realized the specimens were "problematic" and would not provide valid tests. Tr. 650-651. He said he notified the original ordering physicians and PIL. He said he took a few more specimens from PIL, but when he started receiving more problematic specimens, he stopped accepting specimens from PIL. Tr. at 650-651, 763.

18. In its POC, IBI asserted that "all clients are instructed concerning . . . specimen handling and preservation and condition of delivery. Please refer to our enclosures." On appeal, IBI did not identify such "enclosures" in the record. In its list of exhibits before the ALJ, IBI stated that IBI Exhibit 16 contained documents related to tag D3013. However, IBI Exhibit 16 does not contain instructions as to "specimen handling and preservation and condition of delivery."

19. The ALJ also found that IBI failed to have "written procedures for rejecting specimens." Id. at 16. We do not address this finding because CMS did not cite IBI for these failures under this tag or address these failures in its posthearing briefing. CMS Ex. 1, at 25; CMS Br. before ALJ at 37-38.

20. For example, CMS Ex. 26 concerns a specimen with an abnormal potassium result that was collected at PIL on October 5, 2000 (CMS Ex. 26, at 2); received by IBI on October 16, 2000 (id. at 1), and tested on October 17 (id. at 5). Therefore, the specimen was 12 days old when tested by IBI. There is a handwritten note on the instrument printout (id. at 6) stating "old" but no indication on the test report that the specimen was compromised. See id. at 5; Tr. at 213.

21. In its POC, IBI stated that "abnormal results were treated as panic results and were faxed and called immediately. Please refer to our panic value records." CMS Ex. 1, at 26. However, on appeal IBI did not identify where in the record these panic value records were. D3066 concerns the panic value deficiency. Before the ALJ, IBI listed IBI Exhibit 21 as relevant to D3066. However, IBI Exhibit 21 consists of 329 pages and IBI did not identify on appeal which of these pages support its assertions on appeal.

Additionally, the ALJ found that, as to the information in its laboratory reports, "IBI was inconsistent in notifying physicians something was wrong with the specimens." ALJ Decision at 17. IBI offered no arguments that were responsive to the ALJ's assertion or the evidence she cited in support of her assertion. IBI Reply at 47.

22. IBI complained that CMS failed to contact doctors to determine whether they had been notified by Dr. Kermani. IBI Reply at 41. This is an unavailing point for IBI. While CMS is free to contact third parties, the burden was on IBI to show that it complied with this requirement.

23. This conflict included disputes as to document nomenclature. In this decision, we refer to documents listing results from the tests on a specific day as "worksheets" and documents listing results for tests conducted over the period of a month as "logsheets."

24. Even assuming that the logsheets were based on the worksheets, we are disinclined to believe that Dr. Kermani showed Examiner Hunter the worksheets and explained their relationship to the logsheets. Had he done so, CMS would not reasonably have invested the amount of time it did in the SOD or the hearing detailing the shortcomings of the logsheets. Additionally, with its POC, IBI apparently submitted the worksheets and stated that "worksheet was and is available. . . . Please refer to attachment." and "The examiner was asking a clerk that was unfamiliar with the immuno-hematology record system. The worksheets were in possession of licensed personnel [Dr. Keramani] only. Please refer to attachment." CMS Ex. 1, at 31. These statements do not indicate that Dr. Kermani had previously given the worksheets to the examiners or explained the role of the worksheets to the examiners.

25. The ALJ questioned whether the staleness of the specimens associated with IBI's delay in testing "contributed to the less than optimum specimen integrity." ALJ Decision at 17, citing Tr. at 174, 204-207, 212-214, and 216-217.

26. Initially, the examiners believed IBI was deficient because these blood gas test results were reported as being performed by "IBI Pulmonary & Respiratory Services" and there was no such CLIA entity. See ALJ Decision at 20, citing CMS Ex. 68, at 90. Upon further investigation, the examiners discovered the relation with Mr. Moran and asserted that referral to Mr. Moran, as an independent contractor who did not have a CLIA certificate, constituted a deficiency. See Tr. at 321.

27. Mr. Moran conducted a significant amount of testing that was billed by IBI. Examiner Barr testified that IBI billed Medicare/Medicaid for over 1,000 blood gas tests between September 1999 and September 2000. ALJ Decision at 21 n.12, citing Tr. at 269-273; CMS Ex. 7, at 274.

28. Section 493.1111 expressly provides that specimens may be referred only to a CLIA-certified laboratory. Therefore, referral to a non-CLIA certified independent contractor for whom the CLIA laboratory attempted to contract away all responsibility for the reliability of the contractor's work is inconsistent with this requirement.

29. IBI's assertion on appeal that Dr. Kermani retrieved the fresh reagent for Examiner Hunter by opening a plastic bag rather than a box (IBI Reply at 83) is unsupported by a citation to the record and contrary to Dr. Kermani's testimony. Dr. Kermani testified he could not recall Examiner's Hunter's pointing out the expired reagents or getting new reagents from a box. Tr. at 688. Further, the mere assertion that he opened a bag rather than a box is not sufficient to undercut the inference that the expired reagents had been used and, but for the examiner's intervention, would have continued to be used for testing.

30. CMS did not identify failure to have the proper reagents as a violation of section 493.1205. CMS Ex. 1 at 50. However, CMS did cite the failure to have reagents as a violation of the immunohematology standards at section 493.1269(a). Id. at 59. Therefore, IBI was on notice that its maintenance of its reagents was at issue; there was testimony at the hearing concerning reagent records (Tr. at 32, 41-47, 65, 72, 135, 382-383; 653-656, 731); and IBI did not object on appeal to the reagent issue being discussed as a failure under section 493.1205 rather than 493.1269.

31. As the ALJ noted, Dr. Kermani testified that he was using erythromycin with E. coli as a form of research because a special control lot of E. coli was showing sensitivity to erythromycin. Dr. Kermani was concerned that there may be a new strain of E. coli, and he stated that he himself established a zone for E. coli based on his control. As soon as he realized that the E. coli was resistant to erythromycin on the patient specimens he tested, he stopped conducting such tests. ALJ Decision at 29, citing Tr. at 658-659.

32. CMS, citing 42 C.F.R. § 493.1844(c), took the position that the ALJ had no authority to review whether the facts found by the ALJ at hearing constituted immediate jeopardy or to address the reasonableness of the amount of the CMP. CMS Response at 38. Section 493.1844(c) goes to the ALJ's jurisdiction to hear a case in the first instance - that is, what CMS determinations are appealable. Section 493.1844(c) is not dispositive with respect to an ALJ's scope of review where there is an appealable determination and the ALJ's factual findings or legal conclusions are materially different from those on which CMS based its determination. See 42 U.S.C. § 263(h)(3); HR Rep. 100-899, at 33 (1988), reprinted in 1988 U.S.C.C.A.N. 3828, 3854; and 57 Fed. Reg. 7218, at 7232 (Feb. 28, 1992).