Decision No. CR632
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division

SUBJECT:

US Bio-Chem Medical Laboratories, Inc.

Docket No. C-99-601

I sustain the determination of the Health Care Financing Administration to impose principal administrative remedies against Petitioner, US BIO-Chem Medical Laboratories, Inc., based on Petitioner's failure to comply with the Clinical Laboratory Improvement Amendments of 1988, section 353 of the Public Health Services Act, 42 U.S.C. § 263(a) (CLIA), and with implementing regulations published at 42 C.F.R. Part 493. The remedies which I sustain are as follows:

• Pursuant to 42 C.F.R. §§ 493.1773(d), (g) and 493.1842, cancellation of Petitioner's approval to receive Medicare payments for laboratory services effective June 14, 1999. Also, pursuant to section 1902(a)(9)(C) of the Social Security Act (Act) and 42 C.F.R. § 440.30(c), denial of payment to Petitioner under the State Medicaid programs for laboratory services performed on or after June 14, 1999.
• Pursuant to 42 C.F.R. §§ 493.1773(d), (g) and 493.1840(d)(2)(ii), suspension of Petitioner's CLIA certificate effective June 14, 1999.
• Pursuant to 42 C.F.R. §§ 493.1773(g) and 493.1840(e)(1), revocation of Petitioner's CLIA certificate.

I. Background

A. Procedural history

Petitioner is a clinical laboratory that is located in Metairie, Louisiana. On May 28, 1999, HCFA sent a notice to Petitioner. In that notice, HCFA advised Petitioner that it had determined that Petitioner no longer complied with CLIA participation requirements. HCFA advised Petitioner that it had determined to impose administrative remedies against Petitioner.

Petitioner requested a hearing. The case was assigned to me for a hearing and a decision. I held an in-person hearing in New Orleans, Louisiana on September 15, 1999. At that hearing the following witnesses testified:

• Sandy Pearson Hearing Transcript (Tr.) at 25 - 63. Ms. Person is presently employed by HCFA as a laboratory consultant. Her duties include performing CLIA surveys on behalf of HCFA. Tr. at 26 - 27. Ms. Person was present at a CLIA survey of Petitioner that was conducted on May 25, 1999. Id. at 31.
• Diane Weiss (Tr. at 64 - 75). Ms. Weiss is employed as a Medicare Part B field representative by Arkansas Blue Cross-Blue Shield. Tr. at 64. Arkansas Blue Cross-Blue Shield has a contract with HCFA to administer Medicare Part B in the State of Louisiana. Id. Ms. Weiss accompanied Ms. Pearson to Petitioner on May 25, 1999. Id. at 65.
• Barbara M. Borel (Tr. at 75 -81; 87 - 88). Ms. Borel is Petitioner's office manager. Tr. at 76. She has been employed by Petitioner for the past seven years. She is a registered medical assistant and phlebotomist. Id. Ms. Borel was present during the visit of Ms. Pearson and Ms. Weiss on May 25, 1999 and was a witness to the events which transpired on that date.
• A. S. Lee Fernandez (Tr. at 81 - 86). Mr. Fernandez is president of Petitioner. Tr. at 82. He was present during the visit of Ms. Pearson and Ms. Weiss on May 25, 1999.

At the close of the hearing I directed the parties to file posthearing briefs. Each party filed a posthearing brief. Petitioner attached three additional exhibits - described by Petitioner as invoices - to its posthearing brief. Petitioner did not designate these additional exhibits as exhibits. For purposes of identification, I am identifying the exhibits as P. Ex. 2 , P. Ex. 3, and P. Ex. 4. I am not receiving P. Exs. 2-4 into evidence. Petitioner has offered them untimely and has made no showing of good cause for offering them untimely. I note also that some of the invoices in P. Exs. 2-4 resemble, and may in fact duplicate, invoices that Petitioner offered as part of P. Ex. 1.

B. Governing law

CLIA requires, among other things, that the Secretary of this Department 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. § 263(a). The Secretary published regulations designed to implement the requirements of CLIA. These regulations are contained at 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. Standards of participation are set forth as specific quality requirements that a laboratory must meet in order to meet the more general requirements of conditions of participation.

The CLIA regulations authorize HCFA or its designees to conduct complaint 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(b). 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" as an administrative remedy against the laboratory which include suspension and/or revocation of the laboratory's CLIA certificate. 42 C.F.R. § 493.1806(b). 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. Id.

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. 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), aff'd, Hillman Rehabilitation Center v. U.S. Dept. of Health & Human Services, No. 98-3789, slip op. at 25 (D.N.J. May 13, 1999).

A. Issue

The issue in this case is whether Petitioner failed to comply with a CLIA condition of participation, thereby authorizing HCFA to impose a principal sanction as an administrative remedies against Petitioner, which includes revocation of Petitioner's CLIA certificate.

B. Findings of fact and conclusions of law

I make findings of fact and conclusions of law (Findings) to support my decision that HCFA is authorized to impose principal sanctions against Petitioner based on Petitioner's failure to comply with a condition of participation in CLIA. I set forth each Finding below as a separate heading. I discuss each Finding in detail.

1. Cooperation with HCFA in a CLIA inspection is a mandatory condition of participation in CLIA.

It is a condition of participation that a laboratory that participates in CLIA cooperate with HCFA in any CLIA inspection that is conducted of that laboratory. Failure by the laboratory to comply with this condition leads to the imposition of principal sanctions against that laboratory which include cancellation of the authority to receive payment from Medicare or State Medicaid programs for laboratory services and suspension limitation or revocation of the laboratory's CLIA certificate.

The regulations which establish condition mandating cooperation are unequivocal. The general condition of participation governing inspection requirements that is stated in 42 C.F.R. § 493.1771(a) provides that each laboratory issued a CLIA certificate must comply with the requirements contained in, among other regulations, 42 C.F.R. § 493.1773. Pursuant to 42 C.F.R. § 493.1773(a):

A laboratory issued a [CLIA] certificate must permit HCFA or a HCFA agent to conduct an inspection to assess the laboratory's compliance with the requirements of this part.

42 C.F.R. § 493.1773(g) provides that:

Failure to permit HCFA or a HCFA agent to conduct an inspection or reinspection results in the suspension or cancellation of the laboratory's participation in Medicare and Medicaid for payment, and suspension or limitation of, or action to revoke the laboratory's CLIA certificate . . . .

2. On May 25, 1999, Petitioner refused to produce documents requested by inspectors who were sent to Petitioner on behalf of HCFA to conduct a CLIA complaint inspection.

On May 25, 1999, Ms. Pearson and Ms.Weiss went to Petitioner's facility. Tr. at 31, 65. Their purpose in going there was to conduct a complaint investigation. Id. at 31. The purpose of the visit was to investigate whether Petitioner was performing unauthorized tests. Id. at 32-33. The inspectors did not inform Petitioner in advance of their visit to the facility. Id. at 32. On their arrival the inspectors told Mr. Fernandez, Petitioner's president, the reason for their visit to the facility. Id. However, at the time of the visit the inspectors did not inform Mr. Fernandez of the source of the complaint that led to their visit. Id.

Initially, Mr. Fernandez permitted Ms. Pearson and Ms. Weiss to enter Petitioner's facility in order to conduct their inspection of the premises. During the course of the visit, Ms. Weiss noticed the presence of reagents that are used for blood typing. Tr. at 39, 42. Petitioner was not authorized by its certificate of waiver to perform blood typing. Id. at 38-39. Ms. Weiss asked Ms. Borel, Petitioner's office manager, whether Petitioner was performing blood typing. Id. at 39. Ms. Borel averred that Petitioner had in the past performed some blood typing pursuant to a contract with another company but that Petitioner had ceased doing such tests recently. Id.

Ms. Pearson then requested that Petitioner produce its patient log book. Tr. at 43, 66, 77. Her purpose in requesting the patient log book was to ascertain when Petitioner had done blood typing tests and what tests Petitioner had performed. Id. at 43-44. Mr. Fernandez denied Ms. Pearson's request to see the log book. Id. at 44, 66, 77. Ms. Pearson restated her request several times to no avail. Id. at 44 She then explained to Mr. Fernandez the possible ramifications of his refusal to produce the log book and Mr. Fernandez continued to refuse to produce the log book. Id. at 44, 66. At that point, Ms. Pearson and Ms. Weiss terminated their inspection of Petitioner's facility and left the premises. Id.

3. Petitioner's refusal to cooperate with the inspectors constituted a failure by Petitioner to comply with the condition of participation which requires a laboratory to cooperate with inspectors.

Petitioner's refusal to produce its log book for review by the inspectors constitutes a clear failure by Petitioner to comply with the condition of participation which requires it to cooperate with inspectors. 42 C.F.R. §§ 493.1771 and 493.1773. The inspectors determined that the log book might contain evidence which would establish whether Petitioner was operating outside of the parameters of its CLIA certification. In refusing to produce the log book Petitioner denied the inspectors access to potentially necessary evidence and frustrated the inspectors' investigative efforts.

Petitioner's sole defense to the overwhelming evidence of its failure to cooperate was that it was justified in refusing to produce evidence by the surveyors' refusal to inform Petitioner of the source of the complaint which triggered the complaint investigation. However, that is not a valid defense to Petitioner's refusal to cooperate. The regulations which govern a laboratory's duty to cooperate do not permit a laboratory to withhold information from inspectors under any circumstance. The duty to cooperate is unconditional. 42 C.F.R. §§ 493.1771 and 493.1773.

Furthermore, Petitioner cannot assert reasonably that it was unaware of its unconditional duty to cooperate. Ms. Pearson explained to Mr. Fernandez the ramifications of his refusal to produce the log book, but Mr. Fernandez was adamant in refusing to produce the document. Petitioner knew in advance of the inspection that it was obligated to cooperate with inspectors. Petitioner knew that failure to cooperate would result in the imposition of remedies against Petitioner, including cancellation of approval to receive payment, suspension, limitation or revocation of Petitioner's CLIA certificate. On February 15, 1995, Mr. Fernandez signed an application for CLIA certification. HCFA Ex. 13. Just above the line on the application to which Mr. Fernandez signed his name is the following statement in large type:

CONSENT: THE APPLICANT HEREBY AGREES . . . TO PERMIT THE SECRETARY OR ANY FEDERAL OFFICER OR EMPLOYEE DULY DESIGNATED BY THE SECRETARY, TO INSPECT THE LABORATORY AND ITS OPERATIONS AND PERTINENT RECORDS AT ANY REASONABLE TIME.

(capitalization in original). Id. at 4. The CLIA certificates that were issued to Petitioner all contained the following statement:

This certificate is subject to revocation, suspension, limitation, or other sanctions for violation of the Act or the regulations promulgated thereunder.

HCFA Ex. 11 at 1-3.

4. Petitioner's failure to comply with a condition of participation in CLIA is a basis for the imposition of principal administrative remedies against Petitioner.

The overwhelming evidence in this case is that Petitioner failed to comply with the condition of participation that required it to cooperate with CLIA inspectors. The presence of this condition level failure by Petitioner to comply with CLIA requirements is sufficient basis for HCFA to impose principal sanctions against Petitioner that HCFA. 42 C.F.R. § 493.1806. Such sanctions may include any of the remedies that HCFA imposed in this case against Petitioner. Furthermore, those remedies are authorized specifically and additionally by Petitioner's failure to comply with the requirements of 42 C.F.R. §§ 493.1771 and 493.1773(d). See 42 C.F.R. § 493.1773(g).

5. Petitioner's possible failure to comply with additional standard-level requirements of participation has no effect on my decision in this case.

The inspectors found that, as of May 25, 1999, in addition to not complying with the condition of participation governing cooperation, Petitioner was not meeting several standards of participation in CLIA. These standards related to performance of tests pursuant to certificates of waiver. HCFA Ex. 6.

I do not make findings in this decision whether Petitioner was failing to comply with standards of participation in addition to its failing to comply with the condition governing cooperation. My reason for not making findings as to Petitioner's compliance with standards is that Petitioner's compliance or non-compliance with these standards has no effect on my decision to sustain the imposition of principal remedies against Petitioner. That is because the authority to impose such remedies results from Petitioner's failure to comply with a condition of participation and not from any findings that Petitioner may have failed to comply with some additional standards of participation. Failure by Petitioner to comply with some standards of participation in addition to the condition that is at issue here would not enhance or strengthen HCFA's authority to impose principal remedies. And, compliance by Petitioner with those standards would not detract from HCFA's authority to impose principal remedies.

/S/ Steven T. Kessel
Administrative Law Judge