I decide that the Health Care Financing Administration (HCFA) is authorized to impose remedies against Petitioner, Edison Medical Laboratories, Inc., including suspension of Petitioner's certificate under the Clinical Laboratory Improvement Amendments of 1988 (CLIA). As a matter of law, my decision means that Petitioner's CLIA certificate is revoked.

I. BACKGROUND

A. Background facts

Petitioner is a clinical laboratory that is located in Edison, New Jersey. On November 20, 1998, HCFA notified Petitioner that Petitioner had been found to be deficient in meeting nine conditions of participation under CLIA at a survey that had been conducted of Petitioner by the New Jersey Department of Health and Senior Services (New Jersey Department of Health). Petitioner was told that the extent and nature of these deficiencies was such as to pose immediate jeopardy to Petitioner's clients. HCFA advised Petitioner that, as a consequence of these findings, and as a consequence of Petitioner's failure to submit to HCFA a credible allegation of compliance with CLIA conditions, Petitioner would be subject to suspension of its CLIA certificate and cancellation of its approval to receive Medicare payments. Petitioner was advised that it had a right to a hearing before an administrative law judge to contest HCFA's determinations.

Petitioner filed a timely request for a hearing. In its request, Petitioner asked that the hearing be expedited. The case was assigned to me for a hearing and a decision. I agreed to hold an expedited hearing. I conducted an in-person hearing in this case in North Brunswick Township, New Jersey, on February 2 - 4, 1999. In this decision, I refer to the transcript of the hearing held on February 2, 1999, as "Tr. 2/2 at page number"; the transcript of the hearing held on February 3, 1999, as "Tr. 2/3 at page number"; and the transcript of the hearing held on February 4, 1999, as "Tr. 2/4 at page number."

At the in-person hearing, I received into evidence from HCFA exhibits consisting of HCFA Exhibits (HCFA Ex.) 1 - 119. Tr. 2/2 at 20. I received into evidence from Petitioner exhibits consisting of Petitioner Exhibits (P. Ex.) 1 - 84. Following the hearing, Petitioner submitted the certification of Amy C. Grossman, Esq., accompanied by what Petitioner identified as Exhibits "A" through "E." These exhibits consist of: Exhibit A - a Departmental Appeals Board (DAB) appellate panel decision in the case of Center Clinical Laboratory, DAB No. 1526 (1995); Exhibit B - a DAB administrative law judge's (ALJ) decision in the case of Center Clinical Laboratory, DAB CR411 (1996); Exhibit C - a DAB appellate panel decision in the case of Ward General Practice Clinic, DAB No. 1624 (1997); Exhibit D - an article regarding alpha fetoprotein concentrations in maternal serum, with reference to race and body weight; and Exhibit E - an article regarding clinical chemistry, theory, analysis, and correlation. I am not receiving these exhibits into evidence, as they were submitted after the conclusion of the evidentiary hearing in this case. However, to the extent that Petitioner has utilized the DAB decisions delineated as exhibits as authority for its arguments, I have considered them.

The following witnesses testified on behalf of HCFA at the in-person hearing:

• Gerda Duffy (Tr. 2/2 at 30 - 231). Ms. Duffy is employed by the New Jersey Department of Health. Currently, she manages the CLIA inspection program for the New Jersey Department of Health. Id. at 31. Ms. Duffy is a chemist and a medical technologist. Id. at 35. Ms. Duffy participated in the survey of Petitioner. Id. at 37.

• Joan Mikita (Tr. 2/2 at 231 - 264); Tr. 2/3 at 46 - 108. Ms. Mikita is employed by the New Jersey Department of Health as a microbiologist and as a quality assurance officer and a clinical laboratory evaluator. Tr. 2/2 at 232. Ms. Mikita participated in the survey of Petitioner. Id. at 234.

• Ingo Kampa, Ph.D. (Tr. 2/3 at 5 - 29). Dr. Kampa is a clinical biochemist. Id. at 5.

• Donald L. Warkentin, Ph.D. (Tr. 2/3 at 30 - 46). Dr. Warkentin is a clinical chemist and a clinical biochemist. Id. at 31.

The following witnesses testified on behalf of Petitioner at the in-person hearing:

• Sam J. Lichtenfeld (Tr. 2/3 at 113 - 140). Mr. Lichtenfeld has been employed by Petitioner since July, 1997, as an associate laboratory director. Id. at 114. He is a licensed bioanalytical laboratory director. Id.

• Nilda Bawalan (Tr. 2/3 at 140 - 160). Ms. Bawalan has been employed by Petitioner since the last week of July, 1998, as a general supervisor. Id. at 142. Her experience includes 25 years' experience as a medical technologist. Id. at 142 - 143.

• Thirumalai Madhavan, M.D. (Tr. 2/3 at 160 - 186). Dr. Madhavan is board certified in anatomic and clinical pathology. Id. at 161. Currently, he is Petitioner's laboratory director. Id. at 163.

• Albert Grey (Tr. 2/3 at 186 - 214). Mr. Grey is employed as a clinical applications specialist by Dade Behring, a manufacturer of laboratory equipment. Id. at 186 - 187.

• Ratilal Kapadia, Ph.D. (Tr. 2/3 at 215 - 231). Dr. Kapadia is a chemist. Id. at 217. He has been employed by Petitioner since July, 1996. Id. at 218.

• Ranjit Jani (Tr. 2/3 at 232 - 239). Mr. Jani is employed by Petitioner as a technical supervisor and as a bench technician for microbiology. Id. at 233.

• Zwannah Dukuly, M.D. (Tr. 2/4 at 244 - 257). Dr. Dukuly is an associate director of Petitioner. Id. at 246. His duties include being in charge of Petitioner's cytology operations. Id.

• Harshad Patel, Ph.D. (Tr. 2/4 at 257 - 323). Dr. Patel is a biochemist. He is Petitioner's general supervisor, president, and 100% stockholder. Id. at 258, 318.

• Gopinatha Mallya (Tr. 2/4 at 324 - 334). Mr. Mallya is employed by Petitioner as a laboratory manager. Id. at 325.

B. Governing law

CLIA requires, among other things, that the Secretary of the United States Department of Health and Human Services (Secretary) establish certification requirements for any laboratory that performs tests on human specimens and certify, through the issuance of a certificate, that a laboratory meets certification requirements. 42 U.S.C. § 263a. The Secretary published regulations designed to implement the requirements of CLIA. These regulations are contained in 42 C.F.R. Part 493. The CLIA regulations set forth the conditions that all laboratories must meet in order to perform clinical testing. The regulations also set forth enforcement procedures and hearings and appeals procedures for those laboratories that are found to be noncompliant with CLIA requirements.

The regulations establish both conditions and standards for participation under CLIA. Conditions of participation are set forth as general requirements which must be met in order that a laboratory qualify under CLIA. For example, under 42 C.F.R. § 493.1201 (general quality control for tests of moderate or high complexity), the condition of participation is stated to include the requirement that a laboratory must establish and follow written quality control procedures for monitoring and evaluating the quality of the analytical testing process of each testing method to assure the accuracy and reliability of patient test results and reports.

Standards of participation are set forth as specific quality requirements which must be met by a laboratory in order to meet the more general requirements of conditions of participation. For example, under 42 C.F.R. § 493.1202 (standards for moderate or high complexity testing or both), specific requirements are set forth which govern the way such moderate or high complexity tests must be performed by a laboratory.

The CLIA regulations authorize HCFA or its designee (such as the New Jersey Department of Health) to conduct validation inspections of any accredited or CLIA-exempt laboratory in order to determine whether the laboratory is in compliance with CLIA requirements. 42 C.F.R. § 493.1780(a). The regulations confer enforcement authority on HCFA in order to assure that laboratories comply with CLIA. 42 C.F.R. § 493.1800. Where HCFA determines that a laboratory is not complying with one or more CLIA conditions, HCFA may impose principal sanctions against the laboratory which include suspension and/or revocation of the laboratory's CLIA certificate. 42 C.F.R. § 493.1806(a), (b). HCFA may also impose alternative sanctions against a noncompliant laboratory in lieu of or in addition to principal sanctions. 42 C.F.R. § 493.1806(c). Additionally, HCFA may cancel a laboratory's approval to receive Medicare payments for its services, where the laboratory is found not to be complying with one or more CLIA conditions. 42 C.F.R. § 493.1807(a).

The regulations provide a noncompliant laboratory with the opportunity to correct its deficiencies so that HCFA may remove alternative sanctions that have been imposed against the laboratory. 42 C.F.R. § 493.1810(e). A laboratory may make an allegation of compliance once it believes it has corrected the deficiencies. HCFA will verify whether the deficiencies have been corrected if it finds the allegation of compliance to be credible and will lift alternative sanctions effective as of the correction date. Id. However, the regulations do not afford a laboratory the same opportunity to have principal, as opposed to alternative, sanctions lifted based on self-correction of deficiencies and an allegation of compliance by the laboratory. Nor is HCFA obligated to accept as credible a laboratory's allegation of compliance. The determination to accept or not to accept a noncompliant laboratory's allegation of compliance is a matter of discretion for HCFA to exercise.

A laboratory that is dissatisfied with a determination by HCFA to impose sanctions against it may request a hearing before an administrative law judge to contest HCFA's determination. 42 C.F.R. § 493.1844. In most circumstances, a determination to suspend, limit, or revoke a CLIA certificate will not become effective until after a decision by an administrative law judge that upholds HCFA's determination to impose such a remedy. 42 C.F.R. § 493.1844(d)(2)(I). However, if HCFA determines that a laboratory's failure to comply with CLIA requirements poses immediate jeopardy to patients, then HCFA's determination to suspend or limit a laboratory's CLIA certificate will become effective after HCFA gives notice of its determination and in advance of a hearing and decision by an administrative law judge. 42 C.F.R. § 493.1844(d)(2)(ii). A suspension automatically becomes a revocation of the laboratory's CLIA certificate in a case where an administrative law judge upholds a determination by HCFA to suspend a laboratory's CLIA certificate based on a finding that the failure by the laboratory to comply with CLIA requirements poses immediate jeopardy to the health and safety of patients. 42 C.F.R. § 493.1844(d)(4)(ii).

A laboratory that has been found to pose immediate jeopardy to patients may appeal the finding or findings of condition level deficiencies which are the basis for the imposition of remedies against that laboratory. But, the laboratory may not appeal HCFA's determination that the deficiencies pose immediate jeopardy to patients. 42 C.F.R. § 493.1844(c)(6). Nor may a laboratory appeal a determination by HCFA not to rescind a suspension of that laboratory based on the laboratory's allegations of compliance where HCFA has concluded that the reason for the suspension has not been removed or that there is insufficient assurance that the reason for the suspension will not recur. 42 C.F.R. § 493.1844(c)(3).

The standard of proof that is employed at a hearing concerning HCFA's determination that a laboratory is not in compliance with CLIA conditions is preponderance of the evidence. HCFA has the burden of coming forward with sufficient evidence to prove a prima facie case that the laboratory is not complying with one or more CLIA conditions. The laboratory has the ultimate burden of rebutting, by a preponderance of the evidence, any prima facie case of noncompliance that is established by HCFA. Hillman Rehabilitation Center, DAB No. 1611 (1997).

The issue in this case is whether Petitioner failed to comply with one or more conditions of participation in CLIA, thereby giving HCFA the authority to suspend Petitioner's CLIA certificate and cancel its approval to receive Medicare payments.

I make findings of fact and conclusions of law (Findings) to support my decision to sustain HCFA's determination to suspend Petitioner's CLIA certificate. I set forth each Finding below as a separate heading. I discuss each of my Findings in detail.

1. Petitioner failed to provide laboratory services in a manner that complied with accepted standards for quality.

The assertion which lies at the heart of HCFA's determination that Petitioner failed to comply with nine specific CLIA conditions is that Petitioner failed, in numerous ways, and egregiously, to provide laboratory services in a manner that complied with accepted standards for quality. HCFA asserts that Petitioner's performance was so deficient as to endanger the health and safety of the individuals whose laboratory specimens Petitioner tested. According to HCFA, Petitioner's derelictions in providing quality services included the following:

• Many of the test results that Petitioner obtained and reported to physicians or patients by testing specimens on a device known as a nephelometer were not technically possible. That Petitioner would report such test results means either that Petitioner's management and staff were grossly incompetent or that the results were falsified. HCFA's Posthearing Brief at 18.

• Petitioner's staff incompetently performed tests in other areas, including low density lipoprotein testing, alpha fetoprotein testing, and indirect immunofluorescent antibody testing. HCFA's Posthearing Brief at 27.

Petitioner concedes that there may have been minor problems in its operations. But, it asserts that these problems all were easily correctable and were, in fact, corrected by Petitioner. It denies that it manifested quality problems which posed any dangers to the health or safety of patients.

As I discuss above, at Part I.B. of this decision, it is the Petitioner's burden to prove, by a preponderance of the evidence, that it is not deficient, assuming that HCFA establishes a prima facie case of deficiency in Petitioner's operations. It is apparent from the evidence in this case that Petitioner failed to meet its burden with respect to HCFA's allegations of deficient performance. Indeed, the overwhelming evidence in this case is that Petitioner's operations were deficient. The evidence plainly establishes that Petitioner was grossly incompetent in the way that it conducted laboratory tests to the extent that patients were at risk from Petitioner's performance of these tests.

a. Petitioner was deficient in its conduct of nephelometer tests.

A nephelometer is a device used by a clinical laboratory to perform specific tests on patient specimens. Tr. 2/2 at 51. Among the tests which are performed by a nephelometer is a test designed to determine a patient's levels of prealbumin. Id. at 54 - 55. Prealbumin results may be an important indicator of a patient's nutritional status. Id. Another test performed by a nephelometer is the transferrin test. Transferrin tests are used to differentiate between different types of anemia in a patient. Id. at 56 - 57.

When the New Jersey Department of Health surveyors analyzed nephelometer test results that were maintained by Petitioner, they discovered that the recorded results of many tests were identical. Tr. 2/2 at 65. Results on a large number of tests were replicated out to two decimal places. Id. at 66; HCFA Ex. 75 - 83.

The only reasonable conclusion that may be drawn about the veracity of the replicating nephelometer test results that Petitioner generated is that they do not reflect actual test values. In the credible opinion of HCFA's expert, Dr. Kampa, these results are "bogus." Tr. 2/3 at 8. Dr.Warkentin opined credibly that he had never seen nephelometer results such as those produced by Petitioner in his 25 years of work as a clinical biochemist. Id. at 39.

Replicated nephelometer test results such as those manifested by Petitioner are not technically possible. Normally, samples that are tested by a nephelometer would produce different results - depending on the contents of each sample - which, if graphed, would distribute themselves in the form of a bell curve. Tr. 2/2 at 75 - 77; Tr. 2/3 at 9 - 10, 35. It is not within the realm of reasonable statistical probability that test results within a set of results taken from different samples would duplicate each other. There is no reasonable statistical possibility that large groups of results of nephelometer test results taken from different specimens produced by different individuals would be identical out to two decimal places.

Petitioner has offered no persuasive evidence to show that the nephelometer test results that it generated were valid results. Petitioner's own witness, Mr. Grey, a technical advisor (clinical applications specialist) for the manufacturer of Petitioner's nephelometer device, could not explain how a nephelometer could produce the results that were generated by Petitioner. Tr. 2/3 at 203, 206 - 207.

HCFA suggests that Petitioner may have deliberately falsified nephelometer test results. I do not find that the evidence in this case establishes that Petitioner intentionally falsified nephelometer test results. The evidence is inconclusive as to how Petitioner obtained the obviously false replicated results. But, I do find that Petitioner was at least negligent in allowing the replicated results to be generated and communicated. Assuming that Petitioner did not generate the aberrant nephelometer results intentionally, the fact that the nephelometer tests produced obviously false replicated data put Petitioner on notice that something was amiss. Petitioner should have recognized that the nephelometer test results were aberrant and should have made reasonable efforts to determine the cause of the problem. Tr. 2/2 at 83; Tr. 2/3 at 8 - 9, 34 - 35. And, under no circumstances, should Petitioner have communicated the false nephelometer results to patients or their physicians.

Petitioner's deficient conduct in its management of nephelometer tests is both that it permitted such obviously false test reports to be generated and that it did nothing to investigate the source of the false reports. Many of the nephelometer test results that Petitioner provided to physicians and their patients were worse than worthless. Not only were these results false, but they could have misled physicians into misdiagnosing their patients' medical conditions. Petitioner had a duty, which it failed to exercise, to assure that such misleading results were not communicated.

Petitioner asserts that, on at least one occasion, its employee identified and investigated replicating nephelometer results and ordered that tests be repeated to assure that results were correct. Petitioner's Reply Brief at 5. As support for this contention, Petitioner relies on some handwritten notations that someone made on test report documents. See P. Ex. 23 at 279, 282, 286. The documents in question do suggest that someone observed a pattern of replicating test results. See Id. But, they do not suggest that Petitioner made any meaningful systematic efforts either to ascertain the reason for the replicating results or to assure that they did not recur.

Petitioner argues that the false test results constituted only a small portion of a much larger universe of test results. Petitioner's Reply Brief at 6 - 7. Petitioner would have me conclude that it should be absolved of its responsibility to assure that false nephelometer test results were not disseminated because it arguably would have been difficult to distinguish the false results from those which were not false. I do not accept this argument. Petitioner's duty is to assure that accurate test results are generated and reported. Indeed, the principal purpose of CLIA is to assure that clinical laboratories discharge this duty. Petitioner was obligated to assure that only accurate nephelometer test results were generated or reported irrespective of the volume of results it was generating or the possibility that false replicating results could have been detected only with close scrutiny.

Petitioner argues that no harm was occasioned by its communication of false nephelometer test results. It asserts that these results probably were accurate even if they clustered around certain numbers. Petitioner argues that the replicated test results might have been the consequence of a "glitch" in a version of the software that is utilized by Petitioner's nephelometer to perform tests. Petitioner's Posthearing Brief at 16 - 17. Petitioner's theory is that the software might have "binned" test results (clustered results around specific numbers). According to Petitioner, the software may have assigned repeating values to test results which were very close to, but which varied to an insignificant degree from, the repeating values. Therefore, according to Petitioner, the nephelometer test results were valid even if they were "binned," because they were very close to actual test results.

I find this argument not to be persuasive. Indeed, it is fanciful. It is based on the testimony of Petitioner's general supervisor, Dr. Patel. Tr. 2/4 at 284 - 285. Dr. Patel's testimony was, essentially, speculative. He offered no foundation for his opinion. Dr. Patel offered no evidence which would show how the software at issue would produce "binned" test results. Moreover, Dr. Patel's testimony was contradicted by the testimony offered on Petitioner's behalf by Mr. Grey. And, it was contradicted by the results of nephelometer tests performed by Petitioner using the allegedly suspect software that were not "binned." HCFA Ex. 49 at 11.

b. Petitioner was deficient in conducting other tests.

Petitioner's deficient performance of nephelometer tests was not an isolated instance of failure by Petitioner to conduct tests in compliance with accepted standards. The weight of the evidence in this case is that Petitioner was not competent in its performance of other tests in addition to nephelometer tests.

i. Alpha fetoprotein testing

Alpha fetoprotein testing is performed in the 15^th to 19^th weeks of a woman's pregnancy in order to determine whether abnormalities, such as spina bifida or Down's Syndrome, are present in the fetus. Tr. 2/2 at 130 - 131, 135. Obviously, the results of an alpha fetoprotein test are of great importance to a prospective mother and to her physician. An adverse result may lead to termination of a pregnancy. Moreover, it is often critically important that the test be performed promptly and that the results of the test be communicated expeditiously. Id. at 131.

The critical calculation which must be performed in an alpha fetoprotein test is a calculation known as the "multiple of the median" or "MoM." A MoM is, essentially, a value which is used to describe what a "normal" alpha fetoprotein test result would be. Tr. 2/2 at 134. Test results are compared against the MoM in order to determine the extent to which they comport with or deviate from the MoM value. Id. at 135. A wide discrepancy between a test result and the MoM value signals an abnormal test result.

There is no single MoM value that may be used to measure the results of all alpha fetoprotein tests. Each test method used produces a different MoM. Tr. 2/2 at 135, 138; HCFA Ex. 93 at 4, 7, 13. And, the MoM changes for each test depending on the week of gestation of the woman whose specimen is being tested. Tr. 2/2 at 135, 138.

Petitioner was manifestly incompetent in its performance of alpha fetoprotein testing. Petitioner was careless in calculating test results. It reported results incorrectly or in ways that were misleading. And, it did not report results timely. These lapses potentially put expectant mothers and their unborn fetuses at great risk for harm.

Petitioner's lapses in its alpha fetoprotein testing included the following:

• In at least four instances, Petitioner inaccurately calculated the MoM. Tr. 2/2 at 144 - 146. These miscalculations produced inaccurate test results which Petitioner communicated to physicians.

• In reporting test results, Petitioner often left out pertinent data or gave misleading information. Petitioner, on occasion, reported incorrect MoMs with test results. Tr. 2/2 at 153 - 155; HCFA Ex. 3 at 44.

• In nine instances, Petitioner did not report test results timely. Tr. 2/2 at 163 - 166; HCFA Ex. 92 at 39, 41, 61, 64; HCFA Ex. 3 at 42. In one instance involving a specimen from a woman in her 19^th week of gestation, Petitioner did not perform an alpha fetoprotein test on the specimen until three days after Petitioner received the specimen. Tr. 2/2 at 163, 165 - 166; HCFA Ex. 92 at 48.

Petitioner asserts that it did not inaccurately calculate MoMs. It contends that the New Jersey Department of Health surveyors failed to consider that Petitioner was using software to calculate MoMs which incorporated special factors which take into consideration the weight, race and diabetic status of the woman whose specimen is tested. Petitioner's Posthearing Brief at 22. Petitioner argues that its MoM calculations are accurate when these special factors are taken into account.

This argument is not persuasive. The New Jersey Department of Health surveyors found originally that Petitioner had incorrectly calculated the MoM in 13 instances. The surveyors reviewed their findings after Petitioner advised them that it was using software which took into account the weight of the women whose specimens were tested. Taking weight into consideration, the surveyors found that Petitioner's calculations were inaccurate in four instances. Tr. 2/2 at 144 - 146. Petitioner has not established these four calculations to be accurate. It has not shown how the "special" factors of race and diabetic status would establish these four calculations to be accurate.

Furthermore, Petitioner has not offered credible evidence to rebut the evidence adduced by HCFA which shows that Petitioner's performance of alpha fetoprotein tests was deficient in other respects. Petitioner has not rebutted evidence that Petitioner reported alpha fetoprotein test results late, or performed tests untimely, or supplied inaccurate or misleading information with test results.

ii. Low density lipoprotein testing

Low density lipoprotein (LDL) testing is done by a clinical laboratory to measure the quantity of a form of cholesterol in a patient's blood. LDL test results are important to physicians and their patients because they are an important indicia of the possible presence of coronary artery disease. For that reason, it is important that LDL tests be performed accurately.

At issue are direct LDL tests performed by Petitioner, where LDL is measured by testing patient blood specimens. See Tr. 2/2 at 107 - 108. Petitioner's LDL test results were unreliable for the following reasons:

• Petitioner repeated nearly all of its LDL tests. Tr. 2/2 at 109; HCFA Ex. 88 at 15. Repetition of a test by a laboratory does not in and of itself show that the laboratory is not testing specimens accurately. In fact, repetition of a test may show that the laboratory is cautious or that it is being diligent in ferreting out suspect test results. However, Petitioner repeated virtually all of its LDL testing. I infer from the high rate with which Petitioner repeated its LDL tests that Petitioner was almost never confident that the results it was obtaining on LDL tests were accurate.

• Rather than provide assurance that tests were being performed accurately, Petitioner's repeat testing raised additional questions about the likely inaccuracy of its LDL tests. There was a very high bias in repeat test results - a large percentage of the repeat tests were either all lower than or higher than original test results - a degree of variation that would not reflect normal analytical variation between original results and repeat results. Tr. 2/2 at 112 - 113, 115 - 116; HCFA Ex. 39 at 1; HCFA Ex. 40 at 1; HCFA Ex. 88 at 15.

Petitioner argues that it performed repeat LDL testing because at times there were problems with centrifuging specimens which resulted in cloudy specimens. Tr. 4/4 at 292 - 295; Petitioner's Posthearing Brief at 28 - 29. This explanation makes sense only if nearly all of Petitioner's initial LDL testing was done incorrectly, given the very high rate at which Petitioner retested specimens for LDL. That hardly constitutes reassurance that Petitioner did its LDL tests consistent with prevailing quality standards.

Petitioner argues also that it passed proficiency tests for high density lipoproteins (HDL). Petitioner's Reply Brief at 8 - 9. HDL is another form of cholesterol. Petitioner reasons that, if it performed satisfactorily on proficiency tests for HDL, then its overall cholesterol testing must be satisfactory. I do not accept this argument. The fact that Petitioner may have passed a proficiency test does not derogate from the evidence gathered by the New Jersey Department of Health which shows Petitioner's overall failure to use acceptable testing techniques in its LDL testing.

iii. Indirect immunofluorescent antibody testing

Indirect immunofluorescent antibody (IFA) testing (also called immunofluorescent antibody testing) is a technique that is designed to detect the presence in a patient's blood of viral or other types of infections such as herpes, measles, or syphilis. Tr. 2/2 at 235 - 237. IFA tests are important diagnostic tools. Erroneous IFA test results pose a potential for significant harm to patients. Tr. 2/3 at 72 -73.

IFA testing seeks to find the presence of an infection by determining whether a patient's blood contains antibodies to a known disease agent. Tr. 2/2 at 235 - 236. The test is performed by adding an antigen (a specific disease agent) to a specimen of blood and then testing the blood to see if antibodies have combined with the antigen. Id. at 237 -238. The antibody-antigen combination, assuming it is present, is made to fluoresce. Id. at 238. Test results are established by observing under a microscope the patterns and intensity of the fluorescence. Id.

The results of IFA tests may be affected by a number of variable factors. For that reason, the tests must be done with great precision and controlled carefully. For example, the volume of blood that is being tested must be measured carefully, because the amount of antibodies present, and, hence, the quantity of the disease agents, is affected by the volume of blood that is tested. Test results are affected by the temperatures at which testing materials are stored. Tr. 2/2 at 246 - 247. Test results are also affected by the amount of time that a reaction is given to take place. Tr. 2/3 at 68.

The persuasive evidence in this case is that Petitioner's IFA testing was highly unreliable because Petitioner failed to properly control its IFA test methodology. Tr. 2/3 at 71. The credible testimony of Ms. Mikita is that:

All the indicators - all the principal steps in the procedures were not adhered to . . . [T]he incubation, the wash procedures, the initial specimen screening dilution was not correct for most of the procedures. The interpretation of these results . . . the interpretation of the slides could not be made correctly . . . [T]here were errors on the test reports.

Id. at 71 - 72. Ms. Mikita also observed that Petitioner's plan of correction for its IFA testing contained errors, which, if implemented, would continue to make Petitioner's IFA testing unreliable. Id. at 72.

Among the errors that were present in Petitioner's IFA testing procedures were the following:

• Petitioner failed to screen IFA test results for fluorescence in a darkened room. Tr. 2/2 at 239 - 240.

• Petitioner's testing records failed to grade test results for fluorescence even though the degree of fluorescence in a specimen is an important factor in reading the results of an IFA test. Tr. 2/2 at 243 - 244. Rather, Petitioner merely noted results as being positive or negative.

• Petitioner failed to store IFA testing materials in a manner that was consistent with the instructions issued by the manufacturers of these materials. Tr. 2/2 at 244 - 245. For example, Petitioner stored working IFA test kits at minus fifteen degrees despite the manufacturer's instructions that the kits be stored at two to eight degrees. Id. at 245 - 248.

• Petitioner failed to incubate slides properly. Tr. 2/2 at 250 - 252; HCFA Ex. 3 at 33; HCFA Ex. 33 at 2, 5 - 8.

• Petitioner failed to wash test slides properly. Tr. 2/2 at 254 - 255.

• Petitioner failed to maintain accurate records of its testing procedures. Tr. 2/2 at 255 - 256, 263 - 264.

• Petitioner failed to perform or to interpret properly various of its IFA tests. For example, Petitioner incorrectly diluted the specimens that it tested for thyroglobulin/microsomal antibodies. Tr. 2/2 at 258 - 260. As another example, Petitioner failed to correctly dilute specimens for the DNA IFA test. Tr. 2/3 at 47 - 48. In another instance, Petitioner failed to correctly dilute specimens for the herpes simplex types 1 and 2 IFA tests. Id. at 51 - 52. In yet another instance, Petitioner failed to properly perform the Measles IFA test. Id. at 53 - 54. And, in its plan of correction, Petitioner offered a "correction" that in fact was an additional error in the way that this test would be conducted. Id. at 55- 56.

Petitioner asserts that, to the extent that it was deficient in performing IFA testing, it corrected these deficiencies. Petitioner avers that it has established a dark room for reviewing IFA slides for fluorescence. It asserts, additionally, that it had its staff retrained in IFA testing by representatives of the companies that manufacture and distribute IFA test materials. Petitioner's Reply Brief at 13.

The fact that Petitioner has taken corrective action concerning the way it conducts its IFA testing does not vitiate my conclusion that Petitioner committed errors in its IFA testing procedures. Indeed, to some extent, Petitioner's corrective actions support my conclusion. For the most part, the evidence that HCFA offered concerning Petitioner's IFA testing procedures stands unrebutted by Petitioner.

2. Petitioner failed to comply with condition level requirements of participation in CLIA.

HCFA told Petitioner in its determination notice to Petitioner that it had found Petitioner not to be complying with nine enumerated condition level requirements of participation in CLIA. In its posthearing brief, HCFA asserts that Petitioner was in fact not complying with 10 condition level requirements. It notes that the statement of deficiencies, which had been sent to Petitioner by the New Jersey Department of Health, listed 10, and not nine, condition level deficiencies.

I have opted to consider the evidence only as it pertains to the nine conditions that were cited in HCFA's notice letter. The question of whether Petitioner was in fact deficient in complying with a tenth condition raises due process and notice considerations that are not necessary for me to decide here. The preponderance of the evidence strongly supports my conclusion that Petitioner was not complying with the nine conditions that were cited in the notice letter. That evidence justifies the imposition of the remedies that HCFA determined to impose. Indeed, the presence of just one condition level deficiency in Petitioner's operations justifies the imposition of the remedies that HCFA determined to impose. 42 C.F.R. § 493.1806.

I have reviewed HCFA's allegations of noncompliance in light of my Finding that Petitioner was not providing laboratory services in a manner which complied with accepted standards of quality. Finding 1. I have also reviewed HCFA's allegations in light of additional evidence that addresses some of the specific conditions that are at issue.

Petitioner makes a general argument in opposition to HCFA's assertions of noncompliance with condition level CLIA requirements that it has been certified as a clinical laboratory by the College of American Pathologists (CAP). Petitioner asserts that the evidence adduced by HCFA should be weighed against CAP's determination that Petitioner has satisfied its requirements. Petitioner reasons that it cannot be found to be seriously deficient inasmuch as CAP did not find serious deficiencies in Petitioner's operations.

I am not persuaded that CAP's certification of Petitioner overcomes the very specific and strong evidence of noncompliance with conditions of participation that HCFA presented. I find nothing in CAP's certification that rebuts directly this evidence. Moreover, the CLIA certification process is not subordinate to, nor does it defer to, whatever accreditation or certifications may be made by private organizations.

Petitioner acknowledges that it may have failed to comply with some standards of participation. It asserts that in no instance did these admitted standard level deficiencies rise to the level of a condition level deficiency. I have considered whether Petitioner failed to comply with conditions of participation or merely failed to comply with standards of participation. I conclude that, in those instances where standard level deficiencies were identified by the New Jersey Department of Health surveyors, such deficiencies were so egregious and pervasive as to create overall condition level deficiencies in Petitioner's operations.

a. Petitioner failed to comply with the condition level requirement that is stated at 42 C.F.R. § 493.1201.

The condition level requirement that is stated at 42 C.F.R. § 493.1201 provides, among other things, that a clinical laboratory must establish and follow written quality control procedures for monitoring and evaluating the quality of the analytical testing process of each method utilized by the laboratory to assure the accuracy and reliability of patient test results and reports. I find that Petitioner failed to comply with this requirement in the following respects.

• Petitioner failed to follow meaningful quality control protocols for nephelometer testing. That is evidenced by Petitioner's failure to detect replicating results and to assure that such results did not recur.

• Petitioner failed to follow meaningful quality control protocols for other types of tests. That is made manifest by the way in which Petitioner conducted alpha fetoprotein tests and other types of tests, as I have discussed above, at Finding 1.

b. Petitioner failed to comply with the condition level requirement that is stated at 42 C.F.R. § 493.1441.

The condition level requirement that is stated at 42 C.F.R. § 493.1441 provides, among other things, that a laboratory must have a director who provides overall management in accordance with the requirements that are stated at 42 C.F.R. § 493.1445. That regulation provides that a laboratory director is responsible for the overall operation and administration of the laboratory. These responsibilities include the employment of personnel who are competent to perform test procedures, record and report test results promptly, accurately, and proficiently, and assure that applicable regulations are complied with.

It is evident from the regulation that the laboratory director assumes responsibilities for assuring that a laboratory meets CLIA requirements. A systemic failure by a laboratory to meet these requirements is evidence from which I may infer that the laboratory director is failing to discharge his or her responsibilities.

Petitioner's laboratory directors failed to discharge their obligations under 42 C.F.R. §§ 493.1441 and 493.1445. There plainly were systemic failures by Petitioner, as I discuss above, at Finding 1, to meet accepted standards of quality.

c. Petitioner failed to comply with the condition level requirement that is stated at 42 C.F.R. § 493.1447.

The condition level requirement that is stated at 42 C.F.R. § 493.1447 states that a laboratory must have a technical supervisor who meets prescribed qualification requirements and who provides technical supervision in accordance with the requirements of 42 C.F.R. § 493.1451. This regulation, 42 C.F.R. § 493.1451, states that a technical supervisor is responsible for resolving technical problems and insuring that remedial actions are taken whenever test systems deviate from a laboratory's established performance specification. Additionally, the regulation requires that a technical supervisor assure that test results are not reported until all corrective actions have been taken and that test systems are functioning correctly.

Petitioner failed manifestly to comply with this requirement. That is made evident by Petitioner's failures, discussed at Finding 1, to: identify and address problems with nephelometer and other tests; to take remedial actions to deal with these problems; and to assure that inaccurate test results were not reported.

d. Petitioner failed to comply with the condition level requirement that is stated at 42 C.F.R. § 493.1459.

The condition level requirement that is stated at 42 C.F.R. § 493.1459 states that a laboratory must have one or more general supervisors who meet specified qualification requirements and who provide general supervision in accordance with the requirements of 42 C.F.R. § 493.1463. This regulation, 42 C.F.R. § 493.1463, provides that a laboratory must have one or more general supervisors who provide day-to-day supervision of testing personnel and the reporting of test results. Moreover, 42 C.F.R. § 493.1461 provides that a general supervisor works under the direction of the laboratory director and the supervision of the technical supervisor.

Petitioner's wholesale failure to comply with generally accepted standards of quality is evidence from which I infer that Petitioner was failing to provide acceptable general supervision of laboratory activities. That conclusion is reinforced by the New Jersey Department of Health surveyors' findings that Petitioner's supervisors were not able to answer their questions about laboratory operations. Tr. 2/2 at 46 - 48. The answers that the supervisors gave the surveyors in response to their questions is strong evidence that the supervisors were not aware of what was going on under their ostensible authority. For the most part, the supervisors responded to the surveyors' questions by averring that the actual testing was performed at times when the supervisors were not on duty.

e. Petitioner failed to comply with the condition level requirement that is stated at 42 C.F.R. § 493.1701.

The condition level requirement for participation that is stated at 42 C.F.R. § 493.1701 directs a laboratory that performs moderate or high complexity testing to establish and follow written policies and procedures for a comprehensive quality assurance program that is designed to monitor and evaluate the ongoing and overall quality of the laboratory's testing program. The requirement provides that a laboratory's quality assurance program must evaluate the effectiveness of its policies and procedures; identify and correct problems; assure the accurate, reliable and prompt reporting of test results; and assure the adequacy and competency of the laboratory's staff. The requirement directs a laboratory to, as may be necessary, revise policies and procedures based upon the results of its evaluations.

There was a wholesale failure by Petitioner to monitor, evaluate the quality of, and address deficiencies in its testing program. That is made evident by the numerous quality failures, discussed above at Finding 1, that the New Jersey Department of Health surveyors identified in Petitioner's operation. One example, Petitioner's failure to monitor and evaluate the quality of its testing program, is apparent in the numerous quality deficiencies that were present in Petitioner's IFA testing program. Finding 1.b.iii.

f. Petitioner failed to comply with the condition level requirement that is stated at 42 C.F.R. § 493.1241.

The condition level requirement that is stated at 42 C.F.R. § 493.1241 requires that, in order to meet the condition level requirements for general immunology, a laboratory must comply with the requirements that are stated at 42 C.F.R. §§ 493.1201 - 493.1221. The referred-to regulations establish requirements for performance of immunology testing.

Petitioner failed to comply with these requirements. That is apparent from my discussion at Finding 1. For example, 42 C.F.R. § 493.1215 requires that a laboratory perform equipment maintenance and function checks that include any electronic, mechanical and operational checks necessary for the proper test performance and test result reporting of equipment, instruments and test systems, to assure accurate and reliable test results and reports. I infer from the evidence relating to Petitioner's nephelometer test results that Petitioner failed to perform equipment function checks of its nephelometer equipment. Petitioner as much as admits that when it avers that the replicating test results that were produced by its nephelometer equipment were as a consequence of a software "glitch."

As another example, 42 C.F.R. § 493.1205 requires a laboratory to utilize test methods, equipment, instrumentation, reagents, materials, and supplies that provide accurate and reliable test results and test reports. Petitioner failed systematically to comply with this requirement. That is plain from the many quality failures in its conduct of IFA testing and nephelometer testing.

The requirements that are stated at 42 C.F.R. §§ 493.1201 - 493.1221 are standards of participation and not conditions. However, my conclusion that Petitioner failed to comply with these standards is not a conclusion that Petitioner failed to comply with standards only. The degree of noncompliance manifested by Petitioner was so pervasive as to comprise a failure to comply with the overall condition stated in 42 C.F.R. § 493.1241.

g. Petitioner failed to comply with the condition level requirement that is stated at 42 C.F.R. § 493.1245.

The condition of participation governing the performance of routine chemistry testing that is stated at 42 C.F.R. § 493.1245 requires a laboratory to comply with the requirements of 42 C.F.R. §§ 493.1201 - 493.1221. The routine chemistry requirements largely duplicate the immunology requirements which I discuss above, at Finding 2.f.

Petitioner manifested the same poor quality in the area of routine chemistry testing that it manifested in the area of general immunology. That is evident, for example, from the many examples of poor quality that Petitioner demonstrated in its LDL testing.

h. Petitioner failed to comply with the condition level requirement that is stated at 42 C.F.R. § 493.801.

The condition of participation that is stated at 42 C.F.R. § 493.801 requires a clinical laboratory to enroll in an approved proficiency testing program. The condition establishes as standards the criteria which must be adhered to by a clinical laboratory in its performance of proficiency testing. 42 C.F.R. § 493.801(a), (b).

Petitioner failed in several respects to comply with the standards established for proficiency testing. I find these failures to be so extensive and serious as to constitute a failure by Petitioner to comply with the overall condition established by 42 C.F.R. § 493.801. Petitioner's compliance failures included the following:

• Petitioner failed to assure that the person who did proficiency testing was an employee who routinely performed testing at Petitioner as is required by 42 C.F.R. § 493.801(b)(1). The analyst-employee of Petitioner who acknowledged doing proficiency testing for IFA specimens worked during daytime hours, whereas routine IFA testing was done by Petitioner at night. Tr. 2/3 at 100 - 102; HCFA Ex. 3 at 2. This lapse by Petitioner made meaningless its IFA proficiency testing. The whole point of such testing was to have the employees who did routine IFA testing demonstrate their proficiency. It is irrelevant that someone other than those employees might be able to test IFA specimens proficiently.

• Petitioner's directors signed statements attesting that proficiency testing specimens had been tested in the same manner as routine test specimens. However, that was not the case, as is demonstrated by the way in which Petitioner's employees performed proficiency testing for IFA specimens. HCFA Ex. 3 at 2.

In the plan of correction that Petitioner submitted in response to the findings that were made by the New Jersey Department of Health surveyors, Petitioner asserted that the surveyors' findings that proficiency tests were not being conducted by the laboratory employees who performed routine tests on patients' specimens comprised "the exception and not the rule." HCFA Ex. 3 at 2. According to Petitioner, employee absences accounted for the occasional performance of a proficiency test by an employee other than the employees who performed routine tests on patient specimens. Id.; Petitioner's Posthearing Brief at 10 - 11.

I am not persuaded from this explanation that Petitioner complied with the requirements of 42 C.F.R. § 493.801 by assuring that the employees who did tests also performed proficiency tests. Petitioner has not provided affirmative proof in this case to satisfy me that proficiency tests were always performed by the employees who performed routine tests on patients' specimens.

i. Petitioner failed to comply with the condition level requirement that is stated at 42 C.F.R. § 493.1101.

The condition of participation that is stated at 42 C.F.R. § 493.1101 requires a clinical laboratory that performs moderate or high complexity tests to employ and maintain a system that provides for proper patient specimen preparation, proper specimen collection, identification, preservation, transportation, and processing; and accurate result reporting. The standards which recite the particular requirements of the condition are stated at 42 C.F.R. §§ 493.1103 - 493.1111. Petitioner failed pervasively to comply with these standards to the extent that it failed to comply with the overall condition of participation.

Petitioner's compliance failures include the following deficiencies:

•Petitioner failed to comply with the requirement that a laboratory perform tests only at the written or electronic request of an authorized person. 42 C.F.R. § 493.1105; Tr. 2/2 at 168 - 171; HCFA Ex. 3 at 7 - 8; HCFA Ex. 117 at 1 - 5, 11 - 12. On numerous occasions, Petitioner performed a test for the presence of Lyme disease where such test had not been requested by the patient's physician. Id.

•Petitioner failed to comply with the requirement that a laboratory maintain a record system that insures that patient specimens are reliably identified as they are processed and tested to assure that accurate test results are reported. 42 C.F.R. § 493.1107. For example, some of Petitioner's work records had control results recorded on them and were signed and dated by a supervisor - to signify that work had been done properly - before tests actually were performed. Tr. 2/3 at 84 - 85; HCFA Ex. 3 at 8 - 9; HCFA Ex. 100. As another example, the work record that Petitioner generated for ANA testing on July 10, 1998, showed that tests had been performed on seven patients' specimens. In fact, on that date Petitioner had performed 11 ANA tests. HCFA Ex. 3 at 9; HCFA Ex. 101 at 1- 2.

3. HCFA is authorized to impose principal remedies against Petitioner.

The presence of one or more condition level deficiencies in Petitioner's operations authorizes HCFA to impose principal remedies against Petitioner. 42 C.F.R. § 493.1806. These remedies may include suspension of Petitioner's CLIA certificate and cancellation of Petitioner's approval to receive Medicare payments. Furthermore, as I discuss above, that suspension becomes a revocation effective with my decision that Petitioner manifested condition level deficiencies.

I do not address the question of whether the condition level deficiencies manifested by Petitioner posed immediate jeopardy to patients. As I discuss above, at Part I.B. of this decision, I have no authority to consider whether a condition level deficiency poses immediate jeopardy.