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CASE | DECISION | ANALYSIS | JUDGE | FOOTNOTES

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


SUBJECT: Canal Medical Laboratory,

Petitioner,

DATE: August 31, 2006

             - v -

 

Centers for Medicare & Medicaid Services

 

Docket No. A-06-44
Civil Remedies CR1374
Decision No. 2041
DECISION
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FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE D
ECISION

Canal Medical Laboratory (Canal) appealed a December 2, 2005 decision by Administrative Law Judge (ALJ) Anne E. Blair. Canal Medical Laboratory, DAB CR1374 (ALJ Decision). The ALJ upheld the action of the Centers for Medicare & Medicaid Services (CMS) revoking the certificate issued to Canal under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) and cancelling Canal's approval to receive Medicare and Medicaid payments for its services. The ALJ also upheld CMS's imposition of a $2,000 per day civil money penalty (CMP) for the period August 9 through 26, 2003, but reversed the CMP for the period August 27 to September 9, 2003. (CMS did not appeal the ALJ Decision in any respect, however.) CMS had imposed the remedies based on a review by the Louisiana Department of Health and Hospitals finding seven condition-level deficiencies at Canal. The ALJ's determination to uphold the remedies to the extent indicated above was based on her conclusion that Canal failed to meet two CLIA conditions, the condition for successful participation in proficiency testing and the laboratory director condition for moderate complexity testing.

[Page 2] As explained below, we uphold the ALJ's conclusion that the remedies she upheld were authorized based on Canal's failure to meet these conditions.

Applicable law and regulations

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

Generally, a laboratory that is performing tests of high and/or moderate complexity must have a certificate, such as a certificate of compliance, and must meet applicable conditions of certification set out in subparts F, H, J, K, M, P, and Q of Part 493. (1) 42 C.F.R. §§ 493.5, 493.20. (2) Each condition of certification represents a general requirement that must be met for certification. Standards are the specific components of the conditions, and failure to meet one or more standards may be so serious as to constitute a failure to comply with a condition of certification. See Edison Medical Laboratories, DAB No. 1713, at 2 (1999) (citing 42 C.F.R. §§ 493.2, 493.1812-1816; 57 Fed. Reg. 7218, 7219 (Feb. 28, 1992)), aff'd Edison Medical Lab. v. Thompson, 250 F.3d 735 (3rd Cir. 2001); see also, Oakland Medical Group, P.C., DAB No. 1755, at 23 (2000) ("It is indisputable that a laboratory can be so pervasively noncompliant with standards as to have failed to have complied with the overall condition.").

Failure by a laboratory to comply with even a single applicable condition may be grounds for imposing one or more principal or [Page 3] alternative sanctions. 42 C.F.R. § 493.1806(a). Principal sanctions may include suspension, limitation, or revocation of any type of CLIA certificate. 42 C.F.R. § 493.1806(b). Alternative sanctions may include a directed plan of correction, State onsite monitoring, and/or a civil money penalty (CMP). 42 C.F.R. § 493.1806(c). In determining the amount of a CMP, CMS must take into account the "nature, scope, severity, and duration of the noncompliance," among other factors. 42 C.F.R. § 493.1834(d)(1). For a condition-level deficiency that does not pose immediate jeopardy, the range of penalty amount is $50-$3,000 per day of noncompliance or per violation. 42 C.F.R. § 493.1384(d)(2)(ii).

A laboratory is entitled to a hearing before an ALJ to contest the imposition of CLIA remedies, and may request review of the ALJ's decision by the Departmental Appeals Board. 42 C.F.R. § 493.1844(a). The determination as to which alternative sanctions to impose, the amount of any CMP and the determination that a laboratory's deficiencies pose immediate jeopardy are not appealable. 42 C.F.R. § 493.1844(c). The CLIA regulations incorporate by reference the hearing procedures and the request for review provisions in 42 C.F.R. Part 498, subparts D and E. 42 C.F.R. § 493.1844(a).

Standard of Review

The standard of review on factual issues is whether the ALJ decision is supported by substantial evidence in the whole record. The standard of review on issues of law is whether the ALJ decision is erroneous. Board Guidelines - Appellate Review of Decisions of Administrative Law Judges in Cases under CLIA and Related Statutes, http://www.hhs.gov/dab/guidelines/clia.html.

Procedural Background (3)

Canal is a laboratory in New Orleans, Louisiana that provided laboratory services for several primary medical clinics. Surveyors from the Louisiana Department of Health and Hospitals (State agency) and CMS completed a recertification survey of Canal on June 6, 2003. CMS notified Canal by letter dated July [Page 4] 24, 2003 (CMS Exhibit 1A) of its determination that Canal was not in compliance with seven CLIA conditions of participation and that both principal and alternative sanctions would be imposed if Canal failed to come back into compliance. The letter stated that the proposed sanctions included a $2,000 per day CMP for each day of noncompliance beginning August 9, 2003, cancellation of Canal's approval to receive Medicare payments for laboratory services effective August 28, 2003, and revocation of Canal's CLIA certificate effective September 23, 2003. The letter also stated that noncompliance with CLIA conditions had been found in three surveys (including the June 6, 2003 survey), and that CMS took this history of noncompliance into account in imposing the CMP. (4) The letter further stated that the State agency must receive any plan of correction by August 4, 2003. Canal submitted its plan of correction on August 2, and the State agency conducted a revisit survey on August 26. CMS notified Canal by letter dated September 5, 2003 that it remained out of compliance with the seven CLIA conditions, and that Canal's approval to receive Medicare payments would be cancelled effective August 28, the CMP imposed on August 9 would continue to accrue until the revocation of Canal's CLIA certificate, and Canal's CLIA certificate would be revoked on September 23 unless Canal requested a hearing. Canal timely requested a hearing by an ALJ, challenging the CMS determination.

The ALJ concluded that Canal failed to meet two CLIA conditions, the condition for successful participation in proficiency testing and the laboratory director condition, which she stated were Canal's "most serious deficiencies." ALJ Decision at 6. The ALJ stated that she had "not discussed all the noncompliance alleged by CMS" since the deficiency findings that she upheld "fully supported" the revocation of Canal's CLIA certificate. Id. at 6. The ALJ concluded, however, that "CMS failed to make a prima facie case or to prove by a preponderance of the evidence many of the alleged deficiencies." Id. at 18. While the ALJ upheld both the revocation and the cancellation of approval to receive Medicare payments, the ALJ concluded that the CMP was authorized [Page 5] only from August 9 through August 26, 2003, the last day of the survey, because a CMP after that date could serve no remedial purpose. (5)

Canal timely requested Board review of the ALJ Decision. Canal's request for review does not identify the specific findings of fact and conclusions of law (FFCLs) in the ALJ Decision to which it excepts. Based on Canal's arguments, however, we conclude that Canal excepts to all of the FFCLs adverse to it (but not every finding in support of those FFCLs) except FFCLs C.3. and C.4. Below, we address in turn each of the FFCLs to which exception is taken. (6)

ANALYSIS
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We note at the outset that Canal questions the "reliability and objectivity of the survey process." According to Canal, the surveyors had determined to close the laboratory even before they performed the survey, and the imposition of sanctions showed "anti-Appellant animus." P. Br. at 11, 22. The ALJ did not directly address this issue (which Canal raised below), but did find that one CMS surveyor, Daniel Hesselgesser, "made several allegations that proved to be haphazardly determined and groundless" and that his testimony was "generally not credible." ALJ Decision at 18. (7) The ALJ also concluded that CMS failed to prove by a preponderance of the evidence several alleged deficiencies which rested in large part on Surveyor Hesselgesser's testimony. Id. at 18-23. However, CMS did not rely on Surveyor Hesselgesser's testimony to support any of the deficiency findings that we conclude were properly upheld by the ALJ, and Canal does not point to any other evidence as reflecting surveyor bias. The Board has previously stated that where [Page 6] objective evidence establishes the existence of a deficiency, it would make little difference whether or not a surveyor was biased against a particular facility. See, e.g., Vijay Sakhuja, M.D., DAB No. 1958, at 6 (2005), citing Vandalia Park, DAB No. 1940 (2004). Accordingly, we conclude that Canal's allegation of bias is not a basis for reversing any of the deficiency findings at issue here.

Proficiency Testing Condition - FFCL B.

FFCL B. states that "Petitioner failed to meet the CLIA condition-level requirement of successful participation in proficiency testing." ALJ Decision at 7 (italics in original).

Subparts H and I of Part 493 contain the requirements pertaining to proficiency testing. Section 493.801 requires, as a condition of certification, that each laboratory enroll in a proficiency testing program that is approved by HHS "for each of the specialties and subspecialties for which it seeks certification." An approved proficiency testing program may be offered by a private non-profit organization, a federal or state agency, or an entity acting as a designated agent for the state. Section 493.901. The proficiency testing program must distribute test samples to participating laboratories, evaluate and score the results of each testing event, and provide reports on individual laboratory performance in order to assure that laboratories meet minimum performance standards. Id. For most specialties, the proficiency testing program must provide a minimum of five samples per testing event and there must be at least three testing events at approximately equal intervals per year. See sections 493.821 - 493.865.

In addition, section 493.803(a) requires, as a condition of certification, that each laboratory holding a CLIA certificate to do tests of moderate and/or high complexity "must successfully participate" in an approved proficiency testing program "for each specialty, subspecialty, and analyte or test in which it is certified under CLIA." Section 493.2 defines "Unsuccessful participation in proficiency testing" to include "Unsatisfactory performance for the same analyte in two consecutive or two out of three testing events." Section 493.2 defines "Unsatisfactory proficiency testing performance" as "failure to attain the minimum satisfactory score for an analyte, test, subspecialty, or specialty for a testing event."

The standard for "Routine chemistry" at section 493.841(a) provides that "[f]ailure to attain a score of at least 80 percent [Page 7] of acceptable responses for each analyte in each testing event is unsatisfactory analyte performance for the testing event."

The ALJ found that in the second testing event of 2002, Canal received an unsatisfactory score of 60% for uric acid, an analyte in routine chemistry testing. The ALJ further found that for the first testing event in 2003, Canal received a score of 40% for uric acid. The ALJ concluded that Canal "clearly failed to achieve satisfactory performance - 80% - in uric acid analyte testing in two out of three consecutive testing events" and thus "failed to achieve successful performance in uric acid testing . . ." ALJ Decision at 7. The ALJ further concluded that "[u]nsuccessful uric acid testing alone is sufficient to find that Petitioner failed the condition of proficiency testing because uric acid is a critical analyte. Tr. at 288." Id. at 8 (italics in original).

Canal does not dispute that its score for uric acid on two out of three consecutive testing events was unsatisfactory or that uric acid is a critical analyte. However, Canal argues based on the testimony of its expert witness, Dr. Mali Salih, that its test results should not have been graded by the testing program because the number of Hitachi analyzers--the type of equipment Canal used to test uric acid--that participated in the testing events was too small to determine the correct test response to uric acid. P. Br. at 11. In response to the same argument below, the ALJ stated that she found Dr. Salih's testimony credible. ALJ Decision at 8, citing Tr. at 504-505. The ALJ stated, however, that even if the test results had been ungraded, Canal "has not shown that it can accurately test for uric acid, and accuracy in testing is the rationale behind the requirement for proficiency testing." Id.

We agree with the ALJ's conclusion that Canal failed to meet the condition of successful participation in proficiency testing based on its undisputed unsatisfactory performance in uric acid testing in two out of three testing events. However, our analysis differs from the ALJ's. Under the applicable regulations, "the accuracy of a laboratory's response for qualitative and quantitative chemistry tests or analytes" is determined by comparing "the laboratory's response for each analyte with the response that reflects agreement of either 90 percent of ten or more referee laboratories or 90 percent or more of all participating laboratories." 42 C.F.R. § 493.931(c)(1); see also 68 Fed. Reg. 3640, 3700 (Jan. 24, 2003). If this "consensus agreement requirement" is not met, then the laboratory's response is not "graded" and the laboratory receives "an acceptable score, by default." 68 Fed. Reg. 3640, 3700. Dr. [Page 8] Salih based his opinion that the uric acid test results should not have been graded on the fact (confirmed by Canal's general manager, Malcolm Sutter III, at Tr. 420-421) that only two laboratories with Hitachi analyzers, including Canal, participated in the testing events in question. See Tr. at 504, citing P. Ex. 8. However, the testimony assumes that the grading depends on the number of participating laboratories using the same equipment, but the regulation refers to "all participating laboratories" without qualification. Thus, Dr. Salih's testimony is not material. In addition, even if only the two laboratories with Hitachi analyzers were considered "all participating laboratories" and their responses did not agree, nothing in Dr. Salih's or Mr. Sutter's testimony indicates that Canal's uric acid results could not have been graded based on the agreement of 90 percent of ten or more referee laboratories. (8) Moreover, where a test result could not be graded because no comparison group was available, that was specified in the report prepared by the proficiency testing program. See CMS Ex. 32. The fact that the program did not do so for the analyte and testing events in question here indicates that the program determined that an appropriate comparison group was available. On the record here, the ALJ should have deferred to the proficiency testing program's determination of whether to grade the test results.

Canal also argues that its failure to achieve successful performance with respect to one analyte is not a sufficient basis for finding a condition-level deficiency under section 493.803. Canal Br. at 11-12. In support of this argument, Canal cites the testimony of Staci Glueck, the State agency CLIA coordinator, that "[i]t was all the ones together that led to a condition level." Id., citing Tr. at 385. Ms. Glueck subsequently agreed with counsel's restatement of this testimony as "all of the problems with . . . hematology and everything else put together" led to a condition-level deficiency. Tr. at 385. This appears to refer to the laboratory director condition, not the proficiency testing condition, however. In any event, Canal's [Page 9] reliance on this testimony is unwarranted since the condition for successful participation in proficiency testing specifically requires successful participation "for each specialty, subspecialty, and analyte or test in which the laboratory is certified under CLIA." Section 493.803(a) (emphasis added). Moreover, while other conditions in Part 493 include standards, and CMS must assess the laboratory's compliance with those standards in order to determine whether the laboratory complies with the condition, that is not the case with the condition for successful participation in proficiency testing, which includes no standards. Thus, any failure to successfully participate in proficiency testing is per se a condition-level deficiency for which a sanction may be imposed. See section 493.803(b). Thus, it follows that unsuccessful participation with respect to only one analyte can properly be treated as a condition-level deficiency. (9)

We therefore affirm FFCL B.

Laboratory Director Condition - FFCL C.

FFCL C. states that "Petitioner failed to meet the CLIA condition-level requirement of laboratory director." ALJ Decision at 9 (italics in original). The condition for laboratories performing moderate complexity testing at 42 C.F.R. § 493.1403 requires that each laboratory have a qualified director who "provides overall management and direction in accordance with" the standard for laboratory director responsibilities at 42 C.F.R. § 493.1407.

[Page 10] In FFCL C.7., the ALJ concluded that Canal failed to meet the laboratory director condition based on the findings discussed in FFCLs C.1. through C.6. In particular, the ALJ found that standards under this condition were violated because Canal: failed to review ungraded proficiency testing scores (FFCL C.1), failed to follow manufacturers' instructions for control agents (FFCL C.2.), failed to keep accurate records (FFCL C.3.), failed to validate new reagents appropriately (FFCL C.4.), failed to verify that working stock reagents were capped when not in use (FFCL C.5.), and failed to have sufficient blood in its EDTA vacutainers to assure accurate testing (FFCL C.6.). ALJ Decision at 12-18.

We note preliminarily that in FFCLs C.2. - C.6., the ALJ incorrectly cites the standard at section 493.1445(e)(6) instead of the standard at section 493.1407(e)(6). The former is an identically worded provision under the laboratory director condition for high complexity testing at section 493.1441. CMS did not find a deficiency under that condition but rather under the laboratory director condition for moderate complexity testing at section 493.1403. CMS Ex. 1A, at 1. (10) Since the wording of the standards is identical, the ALJ's citation to the wrong standard is merely a technical error and has no significance for our decision.

On appeal, Canal does not dispute FFCLs C.4. or C.5. We therefore modify these FFCLs to correct the citation as explained above and otherwise uphold them without further discussion. In addition, as discussed below, we reverse FFCL C.1. We also modify FFCLs C.2. through C.6. to correct the citation but otherwise uphold them. We also modify FFCL C.7. to delete the [Page 11] reference to FFCL C.1. as part of the basis for finding Canal out of compliance with the laboratory director condition for moderate complexity testing.

Ungraded Proficiency Test Results - FFCL C.1.

FFCL C.1. states, "Petitioner failed to meet the CLIA standard of laboratory director by not reviewing ungraded proficiency testing scores." ALJ Decision at 9 (italics in original). In the analysis supporting this FFCL, the ALJ identified the applicable regulation as section 493.1407(e)(4)(iii), which states that the laboratory director must-

(4) Ensure that the laboratory is enrolled in an HHS approved proficiency testing program for the testing performed and that-

* * * * *

(iii) All proficiency testing reports received are reviewed by the appropriate staff to evaluate the laboratory's performance and to identify any problems that require corrective action[.] (11)

Before the ALJ, Canal did not dispute that it failed to review all proficiency testing reports. However, Canal argued that section 493.1407(e)(4)(iii) does not require a laboratory to review reports of ungraded proficiency test results, i.e., those that receive an acceptable score by default. In Canal's view, such a requirement was not imposed until after the period in question, when CMS amended the regulations to add section 493.1236. That section requires in part that a laboratory "verify the accuracy of . . . [a]ny analyte, specialty or sub-specialty assigned a proficiency testing score that does not reflect laboratory test performance (that is, when the proficiency testing program does not obtain the agreement required for scoring . . .)." See section 493.1236(b)(2). Canal took the position that "it should not have been cited for not [Page 12] doing something - reviewing the 'ungraded' proficiency testing results - when it had no idea it was required to do so." ALJ Decision at 11, citing P. Reply Br. at 9. The ALJ rejected Canal's argument, finding that Canal "had so many 'ungraded' proficiency testing results for each testing event that the laboratory director should have been alerted to problems, perhaps with its instruments and/or methods used for the testing." Id. at 9, citing CMS Ex. 32. The ALJ also found that Canal "had been previously instructed, as a result of prior surveys, to review its ungraded proficiency testing results." Id.

On appeal, Canal argues again that section 493.1407(e)(4)(iii) does not require the laboratory director to "grade" ungraded proficiency test results. See P. Br. at 20-21.

We conclude that the ALJ erred in concluding that section 493.1407(e)(4)(iii) as in effect before April 24, 2003 required a laboratory to review ungraded proficiency test results. Section 493.1236 was added effective on that date as a standard under a new condition for general laboratory systems. It is undisputed that section 493.1236(b)(2), quoted above, requires a laboratory to verify the accuracy of proficiency test results for analytes that receive an "acceptable" score by default. The preamble to the 2003 regulations indicates that CMS was imposing this requirement in order to alert laboratories to "potential sources of error which may not have been otherwise detected . . . ." 68 Fed. Reg. 3640, at 3700. (The preamble also notes that the regulations were being amended to lower the consensus agreement requirement from 90 to 80 percent so that fewer test results would be "ungraded.") CMS's recognition that section 493.1236(b)(2) was needed to assure that laboratories receiving ungraded proficiency test results reviewed them and made appropriate corrections for problems identified in the review indicates that CMS did not view section 493.1407(e)(4)(iii) as imposing a clear requirement to review the ungraded results prior to the addition of section 493.1236(b)(2). Consistent with this view, the preamble specifically describes the language in section 493.1236(b)(2) as a regulatory "change." Id.

Since there was no clear regulatory basis for a requirement to review ungraded proficiency test results during the time in question here, it is immaterial whether, as the ALJ found, CMS instructed Canal to review its ungraded test results or whether Canal should have been aware of problems with its tests based on the sheer number of ungraded test results.

We therefore reverse FFCL C.1.

[Page 13] Manufacturers' Instructions for Control Agents - FFCL C.2.

FFCL C.2. states, "Petitioner failed to meet a CLIA standard of laboratory director by failing to follow manufacturers' instructions for control agents. 42 C.F.R. § 493.1445(e)(6)." ALJ Decision at 12 (italics in original).

As noted above, the ALJ should have cited section 493.1407(e)(6) instead of section 493.1445(e)(6) in this FFCL as well as in FFCLs C.3. - C.6 (discussed below). The former section states that the laboratory director must--

[e]nsure the establishment and maintenance of acceptable levels of analytical performance for each test system[.]

CMS cited Canal for a deficiency under this standard on the ground that the laboratory director failed to ensure the establishment of quality control reference ranges for several control agents as required by the agents' manufacturers. CMS Ex. 1, at 14, 17-19, 24-25. By way of background, the ALJ Decision states:

The manufacturers of a control material will send that material to a laboratory with instructions containing an expected mean value and a range in which the mean value must fall. This is a wider range than should be used by the laboratory for control, however, because different laboratories use different reagents and instruments and have different operating conditions. The laboratory's determined mean and range should fall within the manufacturer's stated expected range.

ALJ Decision at 12, citing Tr. at 60-61, 199-200, 264. The ALJ found that Canal failed to establish its own in-house range for two types of quality control materials identified by CMS--the "Ligand Plus 1,2,3 control" and "Thermo DMA." ALJ Decision at 13-14. (12) The ALJ rejected Canal's argument that, pursuant to section 493.1218(d)(1), it did not need to establish its own in-house range for the Ligand control because it purchased special assayed agents. That section provides that "[t]he stated values of an assayed control material may be used as the target values provided the stated values correspond to the methodology and instrumentation employed by the laboratory and are verified by the laboratory." However, the ALJ stated that [Page 14] Canal provided "no proof . . . with an invoice or other documentation" to establish that it purchased assayed control material for the Ligand control "or that it had verified the control's target values." ALJ Decision at 13. The ALJ also rejected Canal's argument that an in-house range for Thermo DMA was developed by the Hitachi analyzer, the instrument on which Canal ran the test that used this control. The ALJ noted that Kevin Royal, Canal's former technician, testified that he used the ranges that were developed in-house by the Hitachi and that Canal had documents showing its own determination of the mean for Thermo DMA. ALJ Decision at 13, citing Tr. at 464. Although the ALJ found Mr. Royal's testimony "to be generally credible," the ALJ found that Canal failed to calculate its own range for Thermo DMA since Canal "referred to no verifying data or examples of the laboratory's accumulated data nor an explanation of how its method satisfied the requirement in the manufacturer's instructions for Thermo DMA." Id. at 13. Finally, the ALJ noted that Canal "concedes that it had two reagents where it used the manufacturer's ranges but where it should have calculated its own." Id. at 14, citing P. R. Br. at 5.

On appeal, Canal argues that "for many reagents, the ranges shown on the assayed reagent package inserts could be used as proper ranges by the laboratory, thereby refuting CMS' mantra that the laboratory always had to set its own 'mean and range of means.'" P. Br. at 13; see also P. Br. at 27. This argument is unavailing. Section 493.1218(d)(1) permits the use of the assayed values provided by the manufacturer only if they correspond to the laboratory's methodology and instrumentation and this is verified by the laboratory. Canal does not dispute the ALJ's finding that it failed to provide any evidence that it had verified the assayed values for the Ligand control, or even purchased an assayed control. Moreover, Canal's argument admits that there are some controls for which a laboratory must set its own ranges. Furthermore, Canal concedes that it had two reagents "where it used the manufacturer's ranges, but should have calculated its own." Id. at 14.

Canal also reiterates its argument that the Hitachi analyzer developed in-house ranges for Thermo DMA. P. Br. at 13-14, 27, citing Tr. at 454-455, 464. We conclude that the ALJ reasonably discounted Mr. Royal's testimony to that effect since Mr. Royal himself stated that documentation existed to support his assertion yet Canal failed to proffer any supporting documentation.

We therefore uphold the ALJ's conclusion in FFCL C.2. that Canal failed to ensure the establishment and maintenance of acceptable [Page 15] levels of analytical performance for each test system. As noted previously, however, this FFCL incorrectly cites section 493.1445(e)(6) instead of section 493.1407(e)(6). We therefore modify FFCL C.2. to correct this citation.

Records and Use of Reagents and Controls - FFCL C.3.

FFCL C.3. states, "Petitioner failed to meet the CLIA standard for laboratory director as set forth at 42 C.F.R. § 493.1445(e)(6) by failing to keep accurate records and being unable to assure that reagents and controls were used properly." ALJ Decision at 14.

CMS alleged that control vials for CKMB quality control were still in use over 35 days after they had been reconstituted even though the manufacturer's instructions were that the controls are good only for seven days. See ALJ Decision at 14, citing CMS Ex. 1, at 7; Tr. at 148-149. The ALJ noted that Canal's staff "denied that old controls would have been used" and that their position was corroborated by "[t]he fact that the CKMB controls actually came within range." Id. at 14, citing Tr. at 449-450. However, the ALJ found that "the real problem was that the label on the [control] vial was incorrect" and concluded that this undisputed fact was a basis for revoking a laboratory's certificate since "an incorrect label on a control vial prevents Petitioner from being able to assure the accuracy and reliability of patient test results." Id. at 14-15.

On appeal, Canal makes the same arguments it raised before the ALJ. P. Br. at 12-13, 26. We agree with the ALJ that these arguments are not persuasive. Regardless of whether the wrong date was put on the vials or the vials were properly dated and, therefore, actually outdated, the result is the same: Canal could not assure that the reconstituted control had been used within seven days of opening the vials and, therefore, could not assure the accuracy and reliability of patient test results.

The ALJ also found that several inventory lists of the reagents in Canal's refrigerator "did not contain either a date when the reagent was opened or a date when the reagent was discarded" and there were reagents in use that were not on the inventory list. ALJ Decision at 15, citing CMS Ex. 17, Tr. at 139, CMS Ex. 1, at 8, and Tr. at 133. Canal does not dispute this finding on appeal.

We therefore uphold the ALJ's conclusion in FFCL C.3. that Canal failed to keep accurate records and assure that reagents and controls were used properly. As noted previously, however, this [Page 16] FFCL incorrectly cites section 493.1445(e)(6) instead of section 493.1407(e)(6). We therefore modify FFCL C.3. to correct this citation.

EDTA Vacutainers - FFCL C.6.

FFCL C.6. states, "Petitioner failed to meet the CLIA laboratory director standard at 42 C.F.R. § 493.1445(e)(6) by failing to have sufficient blood in its EDTA vacutainers to assure accurate testing." ALJ Decision at 16 (italics in original).

In the analysis supporting this FFCL, the ALJ stated that CMS alleged that Canal was accepting or using tubes called EDTA vacutainers that were filled less than one-quarter full with patient blood samples to do hematology testing and lead testing despite the fact that the manufacturer of the EDTA vacutainers requires them to be at least three-quarters filled for hematology testing and one-quarter filled for lead testing. ALJ Decision at 16-17, citing Tr. at 134-135, CMS Ex. 6, at 4, and CMS Ex. 1, at 8. The ALJ found that Surveyor Pearson "credibly testified that Petitioner failed to follow manufacturer's requirements for specimen acceptability for patient testing in that she watched the laboratory do lead testing on June 4, 2003, and four out of the six patient specimens in EDTA vacutainer tubes were less than one-quarter full as required by the manufacturer's package insert." Id. at 17. (The ALJ did not refer to any testimony regarding hematology testing.) The ALJ noted that "Canal argues that Surveyor Pearson was unable during her cross-examination to point precisely to the one-quarter mark on a tube." Id., citing Tr. at 197-198. The ALJ found, however, that Surveyor Pearson "could tell the tubes had insufficient blood samples even if she could not precisely mark the one-quarter point on the sample tube." Id.

On appeal, Canal reiterates its argument that Surveyor Pearson's finding that the EDTA vacutainers were not one-quarter full was undermined by her inability at the hearing to point to where one-quarter full would be. P. Br. at 19, citing Tr. at 197. Canal also refers to Surveyor Pearson's testimony that her finding was based on the fact that "some of the blood sample was just barely above the level of the anticoagulant" at the bottom of the tube (Tr. at 198), and argues that this testimony is inconsistent with the SOD. Id. Canal further argues that Surveyor Pearson's testimony "was completely contradicted by the Petitioner's staff member who performed the testing . . . ." Id., citing Tr. at 515-517. The testimony of its former laboratory assistant Charlene Miller that Canal cites was that Canal would not use a tube that is not sufficiently full and that there were no tubes [Page 17] being used for testing purposes that had only a couple of drops of blood in them on the day in question.

Canal's arguments have no merit. In light of Surveyor Pearson's uncontradicted testimony that the ETDA vacutainer produced at the hearing was not the same kind used by Canal on the date in question (Tr. at 198), it was reasonable for the ALJ to find that Surveyor Pearson's inability to mark the one-quarter point on the tube at the hearing was not significant. In addition, Surveyor Pearson's testimony about the basis for her finding that the tubes were not sufficiently full is consistent with the finding in the SOD that "[o]ne sample . . . was so insufficient that the blood sample only colored the liquid anticoagulant in the [bottom] of the tube . . . ." See CMS Ex. 1, at 8. Finally, we defer to an ALJ's evaluation of the weight and credibility of the testimony of the witnesses who appeared before her. See, e.g., Koester Pavilion, DAB No. 1750, at 15 (2000). Here, the ALJ could reasonably determine that Surveyor Pearson's testimony regarding her observation of six EDTA vacutainers, which was documented in the SOD, was entitled to more weight than Ms. Miller's sweeping assertion that Canal would not and did not use tubes that were insufficiently full.

We therefore uphold the ALJ's conclusion in FFCL C.6. that Canal failed to have sufficient blood in its vacutainers to assure accurate testing. As noted previously, however, this FFCL incorrectly cites section 493.1445(e)(6) instead of section 493.1407(e)(6). We therefore modify FFCL C.6. to correct this citation. (13)

Conclusion Regarding Laboratory Director Condition - FFCL C.7.

FFCL C.7. states, "The laboratory director's failure to meet the CLIA standards with respect to proficiency testing and ensuring establishment and maintenance of acceptable levels of analytical performance for each test system as discussed above in findings [Page 18] 1 - 6 of Section IV.C of this Decision, constitutes Petitioner's failure to meet the condition of laboratory director." ALJ Decision at 17 (italics in original).

FFCL C.7. is based on the findings made in FFCLs C.1. through C.6. As indicated above, however, we reverse the ALJ's finding in FFCL C.1. that Canal failed to meet the standard in section 493.1407(e)(4)(iii). Noncompliance with one or more particular standards relating to a condition may or may not be serious enough to constitute failure to meet the condition. We conclude, however, that Canal's noncompliance with the remaining FFCLs was sufficiently serious to constitute failure to meet the laboratory director condition for moderate complexity testing. We therefore modify FFCL C.7. to delete the reference to FFCL C.1. but otherwise uphold FFCL C.7.

Failure to Timely Correct Deficiencies - FFCL E.

FFCL E states, "Petitioner failed to make substantial progress in correcting its condition-level deficiencies by the time of the revisit survey." ALJ Decision at 25 (italics in original).

As part of the analysis supporting this FFCL, the ALJ found that Canal did not correct all of its deficiencies by the July 31, 2003 correction date stated in its approved plan of correction. The ALJ noted Canal's argument that the July 31 date was not included in Canal's proposed plan but was set by CMS, but stated that "there is no record evidence" that Canal told CMS at the time the plan was under discussion that "July 31 provided insufficient time" to correct its deficiencies. ALJ Decision at 28. (14) The ALJ also stated that the correction date stated in the approved plan would be meaningless if the statement in the plan that Canal "'will' do a correction . . . referred to any [other] time in the future," as Canal asserted. Id.

On appeal, Canal makes the same argument (see P. Br. at 4), which we find without merit, although for a different reason than stated by the ALJ. Under the applicable regulations, CMS was authorized to revoke Canal's CLIA certificate and cancel its approval to receive Medicare payment for its services without providing any period for correction since Canal had condition-level deficiencies. See section 493.1814(a); Rustom Ali, Jahan Ferdous, and Scottsdale Medical Laboratory, DAB No. 2016, at [Page 19] 21-22 (2006) (regulation at 42 C.F.R. § 493.1814(b) providing that CMS may allow up to 12 months for a laboratory to correct condition-level deficiencies that do not pose immediate jeopardy inapposite where CMS imposes the principal sanction of revocation in addition to alternative sanctions). Since Canal was not entitled to any period for correction, CMS could clearly limit any period for correction it agreed to provide.

Canal also appears to take the position that it was not given notice of the deficiencies in time to correct by July 31, asserting that CMS failed to provide a directed plan of correction after telling Canal at the exit interview that it would do so and that CMS did not send Canal its findings for over six weeks after the exit interview. P. Br. at 3. In response to the same assertions below, the ALJ stated that "CMS's delay in sending the SOD and Petitioner's view that it would be told what it needed to do to come back into compliance certainly disadvantaged Petitioner to some extent in its attempt to return to compliance," but found that the surveyors "explained what deficiencies they had encountered" at an exit conference with the laboratory director. ALJ Decision at 27. Canal does not dispute that it was given information about the deficiencies at the exit interview, nor does it argue that this information was insufficient to enable it to correct its deficiencies. Moreover, the Board has previously held that while the "best practice" would be to mail the survey report to a laboratory within 10 days of completion of the survey, as provided in CMS's State Operations Manual, this provision does "not establish a prerequisite for imposing a sanction." Rustom Ali, Jahan Ferdous, and Scottsdale Medical Laboratory, at 23, citing Sonali Diagnostic Laboratory, DAB No. 2008 (2006). Thus, the delay in sending formal notice does not excuse Canal's failure to correct its deficiencies by the July 31 date in its plan of correction.

Canal also suggests that its failure to correct by the August 25, 2003 revisit survey was excused by the fact that it was not notified until Friday, August 15 that it was authorized to resume patient testing, which gave it "five working days" to prepare for the revisit survey. P. Br. at 3, 23, citing Tr. at 563 (testimony of Canal technical consultant Anthony Jones). (15) Canal's argument presumes that it needed to perform patient testing in order to correct its deficiencies, but it points to no basis for this presumption.

[Page 20] We therefore uphold FFCL E.

Authority for Principal Sanctions - FFCL F.

FFCL F. states, "CMS's principal sanctions of canceling Medicare payments and revoking Petitioner's CLIA certificate are authorized under the regulations and the facts of this case."

On appeal, Canal argues that revocation of its CLIA certificate and cancellation of approval to receive Medicare payments are unwarranted because Canal's "proficiency testing was generally quite satisfactory" and because Canal "made concerted efforts to protect patient safety and to correct problems in the few areas where proficiency testing revealed difficulties." P. Br. at 28. Canal quotes in this connection a 1988 House committee report relating to the Clinical Laboratory Improvement Amendments of 1988 that states in part that "proficiency testing . . . is considered one of [the] best measures of laboratory performance . . . [and] arguably the most important measure, since it reviews actual test results rather than merely gauging the potential for good results." Id., citing H.R. Rep. No. 100-899, at 15 (1988), reprinted in 1988 U.S.C.C.A.N. 3828, 3836. As discussed earlier in this decision, however, the ALJ properly concluded that Canal failed to meet the condition for successful participation in proficiency testing based on the undisputed fact that Canal's score for uric acid, a critical analyte, was unsatisfactory on two out of three consecutive testing events. Thus, the quoted language in the House committee report supports rather than undermines FFCL F.

Canal also argues that the sanctions are unwarranted under the "extremely vague 'totality of the circumstances' criteria articulated by the government's witnesses" since "many of the alleged unfavorable findings were groundless, and . . . CMS' witnesses testified that several of the conditions would not have warranted sanctions in and of themselves[.]" P. Br. at 28-29. Canal points specifically to Ms. Glueck's testimony that she "would not have closed" Canal if the only thing wrong on the survey was the unsatisfactory performance in uric acid in two of three consecutive testing events. P. Br. at 11-2, citing Tr. at 399.

Canal's argument has no merit. In the first place, unsuccessful participation in proficiency testing based on unsatisfactory performance in uric acid in two of three consecutive testing events was not the only noncompliance found in the survey. In addition, as a State employee, Ms. Glueck was not authorized to make the final determination regarding the sanctions to be [Page 21] imposed on a laboratory that was found out of compliance. See 42 C.F.R. § 488.11; 47 Fed. Reg. 7224 (Feb. 28, 1992). Moreover, CMS has discretion to impose one or more of the principal or alternative sanctions based on a laboratory's failure to comply with even a single applicable condition. See sections 493.1804(b)(2) and 493.1806(a). Furthermore, section 493.803(b) provides that CMS must impose alternative or principal sanctions based on a laboratory's failure to successfully participate in a proficiency testing program except in certain circumstances not present here. Accordingly, revocation of Canal's CLIA certificate and cancellation of its approval to receive Medicare payment were authorized based on Canal's failure to meet either the condition for successful participation in proficiency testing or the laboratory director condition. (16)

Canal's appeal also challenges CMS's authority to impose the CMP, which is an alternative sanction. Canal argues that "imposition of daily civil monetary penalties, after patient testing stopped, has only one real purpose-to deter an appeal" and is "contrary to law, not based on substantiated evidence or defined criteria and is thus unwarranted." P. Br. at 29. (17) Although Canal raised this argument below (see, e.g., post-hearing brief dated 9/9/04 at 19-21), the ALJ concluded that the CMP was not authorized after August 26, 2003 without addressing Canal's argument with respect to the CMP for the period through August 26. See FFCL G. The failure to address this argument is harmless error, however, since we conclude that the argument has no merit. Section 493.1834(f) sets out the rules for accrual and duration of a CMP and contains no indication that a CMP does not accrue after patient testing is stopped. Furthermore, the Board has previously upheld the imposition of a CMP for the period after the laboratory ceased testing, stating that the CMP "served a [Page 22] remedial purpose by giving Petitioners an additional incentive to take [corrective] action." Sonali Diagnostic Laboratory at 26.

We therefore modify FFCL F. to add a reference to the CMP imposed through August 26, 2003 and to refer to "actions" instead of "principal sanctions." As modified, FFCL F. reads as follows:

CMS's actions of cancellation of approval to receive Medicare payments, revoking Petitioner's CLIA certificate, and imposing a CMP through August 26, 2003 are authorized under the regulations and the facts of this case.

Conclusion

Based on the foregoing discussion, we uphold FFCLs B. and C., reverse FFCL C.1., modify FFCLs C.2. - C.6 to change the reference to section 493.1445(e)(6) to section 493.1407(e)(6) but otherwise uphold these FFCLs, modify FFCL C.7. to delete the reference to FFCL C.1. but otherwise uphold FFCL C.7., uphold FFCL E., and modify FFCL F. as indicated above.

JUDGE
...TO TOP

Judith A. Ballard

Donald F. Garrett

Sheila Ann Hegy
Presiding Board Member

FOOTNOTES
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1. A laboratory performing only simple laboratory examinations and procedures may operate under a certificate of waiver if it meets the requirements of subpart B of Part 493.

2. The CLIA regulations were amended in January 2003. We cite to the regulations that appear in 42 C.F.R. Part 493 (2000), which were in effect during the relevant time period. Those regulations refer to the Health Care Financing Administration, or HCFA, the former name of CMS. See 66 Fed. Reg. 35,437 (July 5, 2001). We use CMS throughout this decision to refer to the federal agency.

3. The information in this section is drawn from the ALJ Decision and the record before the ALJ and is presented to help the reader understand the context of the issues discussed later. Nothing in this section is intended to replace the findings of fact in the ALJ Decision.

4. In a June 1998 complaint survey, CMS found Canal out of compliance with 12 conditions, including two conditions--the condition for successful participation in proficiency testing and the laboratory director condition for moderate complexity testing-which were cited in the June 2003 survey and are at issue here. In a July 2001 recertification survey, CMS found Canal out of compliance with two of the same conditions cited in the June 1998 survey, although not the two just noted. See CMS Ex. 1A, at 2.

5. CMS did not appeal the ALJ's modification of the period the CMP remained in effect. Accordingly, we do not need to decide here whether the ALJ's legal rationale for that modification was correct.

6. Canal's appeal also makes numerous arguments regarding findings in the SOD that the ALJ chose not to address. We need not address those arguments here.

7. The ALJ stated that she found the other CMS surveyor, Sandra Pearson, "to be a knowledgeable and credible witness" even after taking "into consideration the extent to which she may have been influenced by her co-surveyor, Daniel Hesselgesser, whom I found to be not credible." ALJ Decision at 14, n.11.

8. A "referee laboratory" is defined in the applicable regulations as "a laboratory currently in compliance with applicable CLIA requirements, that has had a record of satisfactory proficiency testing performance for all testing events for at least one year for a specific test, analyte, subspecialty, or specialty, and has been designated by an HHS approved proficiency testing laboratory for analyzing proficiency testing specimens for the purpose of determining the correct response for the specimens in a testing event for that specific test, analyte, subspecialty, or specialty." Section 493.2.

9. In addition, CMS pointed out in its July 24, 2003 letter that Canal had been found out of compliance with the condition for successful participation in proficiency testing in a prior survey. CMS Ex. 1A, at 1-2; see also CMS Ex. 1, at 2 (statement in SOD that "[t]his is a repeat deficiency . . . .") Moreover, as the ALJ noted, although Canal's accepted plan of correction states that Canal will "implement procedures for the review of proficiency testing to include documentation of remedial actions for an unacceptable analyte and test event scores . . .," the surveyors found at the August 2003 revisit survey that Canal had not performed remedial proficiency tests for uric acid. ALJ Decision at 11-12, quoting CMS Ex. 39, at 11. Canal's history of noncompliance with the proficiency testing condition and its failure to do the remedial testing to demonstrate satisfactory performance for that critical analyte provide further support for CMS's determination.

10. The SOD cites the finding in FFCL C.3. relating to labelling of reagents and the findings in C.5. only under the standard at section 493.1202 relating to the routine chemistry condition at section 493.1245 rather than under the laboratory director condition for moderate complexity testing. See CMS Ex. 1, at 7-8. (The findings in FFCL C.6. are cited under both conditions. Id. at 8, 26.) However, in its appeal, Canal does not argue that it did not have notice of these findings or otherwise object to the ALJ's consideration of these findings under the laboratory director condition. Cf. Oak Lawn Pavilion, Inc., DAB No. 1638, at 8-12 (1997) (rejecting nursing home's allegation that ALJ erred in considering findings cited in the SOD under the wrong subsection of a regulation or findings cited in the SOD under a regulation other than the Quality of Care regulation that was the subject of the appeal).

11. Although the ALJ initially noted that CMS cited a deficiency under section 493.1407(e)(4)(iii), the ALJ later stated that Canal's laboratory director did not ensure that an approved corrective action plan was followed as required by section 493.1407(e)(4)(iv). See ALJ Decision at 9, 11. The SOD does not contain any reference to the latter section, however. See CMS Ex. 1, at 12-13. In any event, since we conclude below that there was no deficiency under section 493.1407(e)(4)(iii), there is no basis for a deficiency finding under section 493.1407(e)(4)(iv).

12. The ALJ also found that CMS did not make a prima facie case as to three other controls. ALJ Decision at 13-14.

13. We note Canal's assertion that "proper management of the laboratory" and the laboratory director's "substantial involvement . . . in addressing and correcting problems at the laboratory" were demonstrated by its Quality Control Manual, Personnel Manual, and Policy and Procedure Manual, as well as other materials in the record. P. Br. at 4-5, citing P. Exs. 5, 6 and 7. However, Canal does not explain how these voluminous materials refute any of the deficiency findings under FFCL C. that are discussed above.

14. However, the ALJ did not resolve the parties' dispute regarding whether CMS rather than Canal set the July 31 date.

15. Canal pointed to this testimony in its post-hearing brief, but it is not addressed in the ALJ Decision. See Post-Hearing Br. dated 9/9/04, at 5.

16. The ALJ stated that her finding was that Canal's failure to meet the condition of proficiency testing and the condition of laboratory director "fully supports" revocation of Canal's CLIA certificate. ALJ Decision at 11. She nevertheless noted that "failing only one condition can support revocation." Id., citing section 493.1804(b) and Edison Medical Laboratories (italics in original).

17. Canal also argues that "[t]he appropriate alternative sanction that should have been imposed here was a directed plan of correction." P. Br. at 28. As indicated above, however, section 493.1844(c) provides that CMS's determination as to which alternative sanctions to impose is not reviewable.

CASE | DECISION | ANALYSIS | JUDGE | FOOTNOTES