SUBJECT:

Southfield Medical Clinic,

Petitioner,

Health Care Financing Administration

I enter summary disposition in favor of the Health Care Financing Administration (HCFA) sustaining HCFA's determination to impose remedies against Petitioner, Southfield Medical Clinic. The remedies which I sustain include: (1) cancellation of Petitioner's approval to receive Medicare payment for its services from September 20, 1999 until the date of this decision; and (2) revocation of Petitioner's certificate to provide laboratory services pursuant to the Clinical Laboratory Improvement Amendments of 1988 (CLIA); and (3) modification of the determination to revoke Petitioner's CLIA certificate from two years to a period without a minimum term.

I. Background

A. Background facts

Petitioner is a clinical laboratory that is located in Southfield, Michigan. On August 31, 1999, HCFA notified Petitioner that it had been found to be deficient in complying with CLIA conditions of participation and other federal requirements governing clinical laboratories. HCFA advised Petitioner that it had determined to impose remedies against Petitioner. These included cancellation of Petitioner's approval to receive Medicare payment for its services and revocation of Petitioner's CLIA certificate. HCFA informed Petitioner that it had based its determination on the results of a complaint investigation survey that was conducted at Petitioner's premises on July 1, 1999 by the Michigan Department of Consumer and Industry Services (MDCIS) and HCFA. HCFA advised Petitioner that it had a right to a hearing before an administrative law judge at which it could contest HCFA's determinations.

Petitioner requested a hearing and the case was assigned to me for a hearing and a decision. HCFA then moved for summary disposition. Petitioner opposed HCFA's motion. HCFA offered 22 exhibits in support of its motion (HCFA Ex. 1 - HCFA Ex. 22). Petitioner offered three exhibits in opposition to HCFA's motion (P. Ex. 1 - P. Ex. 3). I am receiving into evidence HCFA Ex. 1 - HCFA Ex. 22 and P. Ex. 1 - P. Ex. 3.

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 broadly stated general requirements which must be met in order that a laboratory qualify under CLIA. 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. Standards are subparts of the more broadly stated conditions. A failure by a laboratory to comply with one or more standards may be so serious as to constitute failure to comply with the condition of which the standards are subparts.

The CLIA regulations authorize HCFA or its designee (such as MDCIS) 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 as remedies principal sanctions against the laboratory which may 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 that laboratory. 42 C.F.R. §493.1810(e). However, the regulations do not afford a laboratory the same opportunity to have principal, as opposed to alternative, sanctions lifted.

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 a 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. Edison Medical Laboratories, Inc., DAB No. 1713 (1999); Hillman Rehabilitation Center, DAB No. 1611 (1997).

II. Issue, findings of fact and conclusions of law

A. Issue

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 impose remedies against Petitioner including canceling Petitioner's approval to receive Medicare payments and revoking 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 in this case. I set forth each Finding below as a separate heading. I discuss each Finding in detail.

1. Summary disposition is appropriate in this case.

A threshold question in this case is whether summary disposition is appropriate. I conclude that in this case it is.

Generally, summary disposition is appropriate in a case where there are no disputed issues of material fact and where the only issues involve either questions of law or of application of the law to the undisputed material facts. Summary disposition is appropriate in the circumstance where the parties agree as to the material facts. It may also be appropriate where there is disagreement as to the facts but where the moving party prevails as a matter of law when all disputed facts are resolved in favor of the party against whom the motion for summary disposition is made. However, summary disposition should not be issued where there is a genuine dispute as to material facts and where the outcome of the case may depend on how that dispute is resolved. In that circumstance further proceedings will be necessary in order to resolve factual disputes.

I have carefully considered the parties' respective fact assertions and arguments in this case and I conclude that there are no genuinely disputed issues of material fact here. I am relying on Petitioner's rendition of the facts in any instance where there may be a disparity in the parties' respective recitations of the facts.

2. Petitioner did not contest HCFA's determination that Petitioner failed to comply with CLIA conditions of participation that are stated at 42 C.F.R. §§ 498.801 and 498.839.

In Family Home Health Services, DAB CR615 (1999), aff'd, DAB No. 1716 (2000), I held that summary disposition is appropriate in a case where a potentially outcome determinative allegation is made by a party that is not denied by the opposing party. DAB CR615 at 4. That principle is applicable here concerning the allegations that Petitioner failed to comply with the CLIA conditions that are stated at 42 C.F.R. §§ 493.801 and 493.839. I enter summary disposition in HCFA's favor on the question of whether Petitioner failed to comply with these two conditions.

Petitioner has effectively conceded the findings in the July 1, 1999 survey report and in the August 31, 1999 notice letter that Petitioner did not comply with CLIA conditions stated at 42 C.F.R. §§ 493.801 and 493.839. There is nothing in Petitioner's reply to HCFA's motion which I can construe as a response to the specific allegations that Petitioner did not comply with the requirements of 42 C.F.R. §§ 493.801 and 493.839.

The report of the July 1, 1999 survey of Petitioner alleged two condition-level deficiencies in Petitioner's operations. These are the conditions that are stated at 42 C.F.R. §§ 493.801 and 493.839. In its August 31, 1999 notice letter to Petitioner, HCFA concurred with these findings. HCFA also advised Petitioner on August 31, 1999 that it had found that Petitioner failed to comply with a third condition of participation. This is the condition that is stated at 42 C.F.R. § 493.803.

The condition of participation that is stated in 42 C.F.R. § 493.801 requires that a laboratory must enroll in a proficiency testing program that meets defined criteria and which is approved by the United States Department of Health and Human Services. It provides that the laboratory must test proficiency testing samples in the same manner as it tests patients' laboratory specimens. Petitioner was found not to have complied with this condition because it tested proficiency testing samples differently than it tested patients' laboratory specimens. (HCFA Ex. 7 at 1 - 2). Specifically, Petitioner was found to run patient samples only once and to report them out whereas Petitioner ran proficiency testing samples for glucose, cholesterol, and triglycerides in duplicate. Additionally, it was found that the results of proficiency tests run at Petitioner's laboratory were added to the results of proficiency tests that were run at another laboratory and an average of the test scores was obtained in order to produce a single averaged result that was reported out as a proficiency test result for both Petitioner's laboratory and for the other laboratory. HCFA Ex. 7 at 2.

The condition of participation that is stated at 42 C.F.R. § 493.839 establishes criteria for the purposes of proficiency testing in the subspecialties of routine chemistry, endocrinology, and toxicology. The criteria are provided as separate standards. The allegation in the survey report is that Petitioner's failure to comply with several of these standards was so serious as to comprise a failure to comply with the overall condition. (HCFA Ex. 7 at 6 - 8). The report alleges that Petitioner failed to: 1) attain satisfactory proficiency test scores as is required by 42 C.F.R. § 493.841(b); and 2) properly train its staff as is required by 42 C.F.R. § 493.841(e)(1) to address failures to attain satisfactory proficiency test scores; and 3) take and document remedial action to address unsatisfactory proficiency test scores as is required by 42 C.F.R. § 493.841(e)(2).

The CLIA condition of participation that is stated at 42 C.F.R. § 493.803(a), requires that a laboratory performing tests of moderate and/or high complexity must successfully participate in a proficiency testing program. HCFA based its determination that Petitioner had failed to comply with the condition stated in 42 C.F.R. § 493.803 on the surveyors' findings that Petitioner had contravened several standards governing proficiency testing. HCFA essentially alleges that, when Petitioner's failure to comply with these standards is considered in its totality, it establishes that Petitioner's deficiencies are so severe as to establish an overall failure by HCFA to comply with the condition.

HCFA determined that Petitioner had not routinely integrated proficiency testing samples into its regular workload as is required by 42 C.F.R. § 493.801(b)(1). Additionally, HCFA concluded that Petitioner had violated 42 C.F.R. § 493.801(b)(4) in that it allegedly referred proficiency testing samples to another laboratory. Further, HCFA concluded also that Petitioner had collaborated with another laboratory in the administration of proficiency testing samples for the first and second testing events of 1998 and for the first testing event of 1999 in violation of the requirements of 42 C.F.R. § 493.801(b)(3). Finally, HCFA determined that Petitioner's laboratory director and one of its employees had signed attestation statements affirming that proficiency tests had been done in the same manner as patient tests when, in fact, proficiency tests had not been performed in the same manner as patient tests. According to HCFA, this was a violation of 42 C.F.R. § 493.801(b)(5).

Petitioner has, to some extent, contested HCFA's determination that Petitioner failed to comply with the condition stated in 42 C.F.R. § 493.803. However, it has not addressed any of the findings that were made concerning the conditions stated in 42 C.F.R. §§ 493.801 and 493.839. This is evident, both from Petitioner's hearing request and from Petitioner's reply to HCFA's motion for summary disposition.

Petitioner's hearing request focuses on the allegations that it referred proficiency test samples to another laboratory and collaborated in the performance of proficiency tests. Petitioner avers that:

1. There was no "intentional referral of . . . [proficiency test] samples to another laboratory for analysis;

2. There was no improper referral within the meaning of the Statute;

3. There was no improper collaboration within the meaning of the Statute;

4. There were no other deficient test practices regarding . . . [proficiency test]

samples; . . . .

Petitioner's hearing request at 1. Additionally, Petitioner asserts that the "statute, regulations and case law do not support a finding that a laboratory technician acting alone can create the intent element of the statute." Id. at 2.

Petitioner's reply to HCFA's motion also focuses on the allegations of referral and collaboration. Petitioner argues that the impetus for HCFA's determination to impose remedies against Petitioner was an allegation that Petitioner had engaged in improper referral of proficiency tests or improper collaboration concerning test results. Petitioner's reply at 2. But, Petitioner makes no argument addressing the allegations that it failed to comply with the conditions stated at 42 C.F.R. §§ 493.801 and 493.839. Indeed, Petitioner essentially concedes that it was not in compliance with these conditions. It characterizes the findings of deficiency that are not related to allegations of referral or collaboration as being "other minor PT [proficiency test]-related deficiencies" which Petitioner allegedly largely addressed in a corrective action plan dated September 13, 1999. Id. Petitioner asserts that HCFA is criticizing it inappropriately for:

making the informed and strategic decision to have the other cited minor deficiencies, which Petitioner immediately corrected in good faith, appropriately resolved with the Secretary through a more flexible intermediate sanction, such as a directed plan of corrected action and monitoring.

Id.

Petitioner has offered no affirmative evidence to respond to the allegations that Petitioner did not comply with the conditions stated at 42 C.F.R. §§ 493.801 and 493.839. None of the exhibits that Petitioner offered with its reply to HCFA's motion address these allegations. See P. Ex. 1 - P. Ex. 3. Petitioner's only assertion of fact in its reply is to deny that it improperly referred proficiency tests or engaged in improper collaboration about the results of proficiency tests.

I have considered whether Petitioner's denial of referrals of proficiency test samples and of collaboration, assuming them to be true, might constitute a defense to HCFA's determination that Petitioner failed to comply with the conditions that are stated in 42 C.F.R. §§ 493.801 and 493.839. Although Petitioner's denials are relevant to HCFA's determination that Petitioner did not comply with the condition that is stated in 42 C.F.R. § 493.803, they do not provide a defense to the determination that Petitioner failed to comply with the conditions that are stated in 42 C.F.R. §§ 493.801 and 493.839. The allegations of noncompliance in the survey report concerning these two conditions do not rest on improper referral of proficiency test samples nor do they rest on improper collaboration.

The allegations concerning Petitioner's failure to comply with the requirements of 42 C.F.R. § 483.801 are that Petitioner used incorrect or improper techniques in processing proficiency tests. At bottom, the allegations rest on the assertion that Petitioner did not process proficiency tests in the same manner that it processed patient specimens. For example, Petitioner is alleged to have run proficiency tests twice whereas it ran patient specimen tests only once. And, Petitioner is alleged to have averaged proficiency test results. Petitioner has offered nothing to challenge these specific allegations of noncompliance.

Indirectly, the allegations that were made with respect to Petitioner's noncompliance with the requirements of 42 C.F.R. § 493.801 touch on allegations of collaboration with another laboratory in the performance of proficiency testing. Petitioner is alleged to have averaged the results of proficiency tests performed at its laboratory with results of tests performed at another laboratory. Implicit in this allegation is a charge that Petitioner collaborated with another laboratory in the performance of proficiency testing. Petitioner has denied collaborating with another laboratory. However, as I discuss below at Finding 3, Petitioner's denial is, in fact, a denial that its management authorized or approved collaboration with another laboratory. Petitioner does not deny that an employee combined and averaged proficiency testing results from Petitioner with proficiency testing results from another laboratory. Indeed, Petitioner concedes that this occurred. Thus, Petitioner admits to the allegation made with respect to 42 C.F.R. § 493.801 that it averaged test results obtained from its laboratory with those that were obtained from another laboratory. And, Petitioner does not deny that this represented a departure from its standard testing procedure.

Nor has Petitioner offered affirmative evidence which refutes the allegation that it failed to comply with the condition that is stated in 42 C.F.R. § 493.839. The allegation of noncompliance under this condition is that Petitioner failed to establish proficiency test scores that demonstrated its competence and failed to take remedial action to improve its performance. Petitioner has offered nothing which responds to this allegation.

Petitioner characterizes its deficiencies in complying with the requirements of 42 C.F.R. §§ 493.801 and 493.839 as being only "minor." Petitioner's argument appears to be that the seriousness of Petitioner's noncompliance with the requirements of 42 C.F.R. §§ 493.801 and 493.839 is not so great as to constitute condition-level deficiencies. However, Petitioner has offered no affirmative facts which would show that its noncompliance was merely minor. It has elected to rest on its characterization of the deficiencies without offering any supporting evidence. Thus, it has not rebutted the prima facie evidence of noncompliance, including evidence that Petitioner's noncompliance was of a condition level, which HCFA presented to support its motion.

On their face, the allegations of noncompliance that are stated in the report of the July 1, 1999 survey make out a prima facie case of noncompliance by Petitioner with the conditions that are stated at 42 C.F.R. §§ 493.801 and 493.839. Petitioner has an obligation to show why the deficiencies that are asserted in the survey report are only "minor" deficiencies. However, Petitioner has offered no affirmative proof which would establish a genuine dispute as to the facts. Its naked characterization of the deficiencies as "minor" is, in the absence of some evidence to support that characterization, merely a conclusion without substance.

3. The undisputed material facts establish that Petitioner failed to comply with the requirements of the condition that is stated in 42 C.F.R. § 493.803.

The undisputed material facts of this case establish the elements of a failure to comply with the condition that is stated in 42 C.F.R. § 493.803. I am satisfied from these undisputed material facts that Petitioner failed to engage successfully in a proficiency testing program. Petitioner does not deny that it failed to integrate proficiency testing samples into its regular laboratory operations. It collaborated with another laboratory in the performance of proficiency testing. And, its director signed attestation statements which were incorrect.

As I describe above at Finding 2, HCFA premised its determination that Petitioner had not complied with the requirements of 42 C.F.R. § 493.803 on findings that Petitioner had contravened several standards governing the performance of proficiency testing. HCFA's findings included determinations that Petitioner had referred proficiency testing samples to another laboratory and that Petitioner had collaborated with another laboratory in performing proficiency testing. Those were not the sole allegations that form the basis that Petitioner did not comply with 42 C.F.R. § 493.803. HCFA alleged additionally that Petitioner failed to integrate proficiency testing into its normal sample testing procedures. And, it found that Petitioner's director and staff had not complied with the requirements of 42 C.F.R. § 493.801(b)(5) in signing attestations of testing performance.

Petitioner has challenged only the findings of referrals and collaboration. I have examined closely the evidence offered by HCFA and by Petitioner as to these issues. I conclude that the evidence does not establish that Petitioner referred proficiency testing samples to another laboratory for testing. However, the undisputed material facts plainly establish collaboration between Petitioner and another laboratory in the performance of proficiency testing.

I conclude that the undisputed material facts establish that Petitioner failed to comply with the condition that is stated at 42 C.F.R. § 493.803. I enter summary disposition in favor of HCFA as to the question of whether Petitioner complied with that condition. The failures by Petitioner to comply with standards governing proficiency testing are so severe as to establish that Petitioner did not comply with the overall condition governing proficiency testing. I find that to be the case even though the undisputed material facts do not show that Petitioner referred proficiency testing samples to another laboratory for testing.

HCFA premises its assertions of referral and collaboration on facts which relate to certain proficiency testing events. A proficiency testing "event" is an instance in which a laboratory is sent proficiency testing samples from the American Association of Bioanalysts (AAB) for testing. The laboratory tests the samples and returns the results to the AAB for scoring. The laboratory's score for a proficiency testing event is one basis for determining whether that laboratory has met minimum testing requirements.

In the four proficiency testing events, which occurred during the period beginning March 1998 through March 1999, Petitioner and another laboratory, Family Care Medical Center (Family Care), obtained identical scores on seven different analytes. HCFA Ex. 4; HCFA Ex. 16 at 1. These identical scores were submitted even where the test results were incorrect. HCFA Ex. 16 at 1. The two laboratories submitted identical scores on 32 of 35 individual tests in March 1998. HCFA Ex. 8 at 1; HCFA Ex. 21 at 1. They submitted identical scores on 36 of 40 individual tests in March, 1999. HCFA Ex. 13 at 6; HCFA Ex. 21 at 6. During this period, the same individual, Dorothy Lott, was employed by both Petitioner and Family Care and did proficiency testing for both laboratories. HCFA Ex. 8 at 2, 4; HCFA Ex. 21 at 4.

HCFA argues that the reasonable inference that may be drawn from the aforesaid facts is that Petitioner referred proficiency testing samples to another laboratory for testing. HCFA further argues that these facts also show collaboration between Petitioner and Family Care in conducting proficiency testing.

Petitioner responds by arguing that it cannot be reasonably inferred that Petitioner referred proficiency testing samples to Family Care. Petitioner asserts that other reasonable explanations exist to account for the test scores. Petitioner also denies the allegations of collaboration. Petitioner does not deny that Ms. Lott engaged in improprieties in the way she performed and reported proficiency testing results. But, Petitioner asserts that it did not authorize these improprieties and was not aware of them when they occurred. Petitioner argues that, as a matter of law, it cannot be held responsible for the acts or omissions of an employee when it neither authorized them nor was aware of them.

I agree with Petitioner that the evidence adduced by HCFA in support of its motion does not establish referral of testing samples. It is unclear from this evidence how Ms. Lott obtained identical test results for the two laboratories. And, there are several equally possible explanations for the results. Ms. Lott could have tested all of the samples at either Petitioner or at Family Care. She could have tested samples at the respective laboratories but altered the testing results in order to obtain identical scores at both laboratories. She could have tested only one set of samples at one of the laboratories and simply duplicated the test results for the other laboratory.

HCFA argues that it is not necessary to establish actual referral of testing samples to prove that samples are referred from a laboratory to another laboratory. HCFA asserts that an unlawful "referral" occurs where two laboratories collaborate to produce a shared result. As support for this argument, HCFA cites to the administrative law judge's decision in Blanding Urgent Care Center Laboratory, DAB CR438 (1996). I disagree with that decision to the extent that it supports the proposition that an unlawful "referral" of a testing sample to another laboratory may occur without an actual physical transport of the sample from one laboratory to another laboratory. The regulation which prohibits referrals of proficiency testing samples and collaboration between laboratories concerning proficiency testing plainly defines an unlawful referral to be the act of sending proficiency testing samples to another laboratory for analysis. 42 C.F.R. § 493.803(b)(4). And, that regulation clearly distinguishes between unlawful referrals (42 C.F.R. § 493.803(b)(4)) and unlawful collaboration (42 C.F.R. § 493.803(b)(3)).

However, although the undisputed material facts of this case do not establish an unlawful referral of proficiency testing samples from Petitioner to another laboratory, those same facts establish that there was collaboration between Petitioner and Family Care in the performance of proficiency testing. The only reasonable inference that I can draw from the near identical testing scores produced by the two laboratories over a 12-month period and from the fact that the employee who did proficiency testing, Ms. Lott, was employed by both laboratories during this time frame, is that Ms. Lott manipulated proficiency testing results at the two laboratories to produce identical scores for both of them. That plainly is collaboration within the meaning of 42 C.F.R. § 493.803(b)(3).

Petitioner does not deny any of the facts adduced by HCFA which establish that Ms. Lott manipulated proficiency testing scores at Petitioner and Family Care. Petitioner asserts that Ms. Lott was only an employee of Petitioner and was not in a position to make decisions on Petitioner's behalf. It argues that any collaboration engaged in by Ms. Lott was unauthorized and was, furthermore, unknown to Petitioner's management. Petitioner asserts that it should not be held legally responsible for the unauthorized acts of its employee.

Petitioner argues equitable considerations as support for its argument that it should not be responsible for the actions of its employee. The thrust of Petitioner's argument is that a laboratory should not be held liable for CLIA deficiencies where the laboratory's management has acted in good faith and where the actions of its employee run counter to the expressed wishes of management.

For purposes of deciding this question, I am assuming to be true Petitioner's representations that its management neither knew about nor authorized Ms. Lott's actions. However, I conclude that, even assuming the truth of Petitioner's representations, it remains responsible for the actions of Ms. Lott. The requirements of CLIA, of the regulations which implement CLIA, and of 42 C.F.R. § 493.803 in particular, are not limited to laboratory behavior which is the product of knowing acts by the laboratory's management. Both CLIA and its implementing regulations impose compliance requirements on a "laboratory" and not just on its management. Under CLIA, a laboratory is liable for the acts of its employees whether or not those acts are authorized or even known about by the laboratory's management. Melvin C. Murphy, M.D., P.C., DAB CR590 (1999).

A purpose of CLIA is to assure that laboratory testing of patients' specimens is done in a manner which assures that testing be of acceptable quality. For that reason, CLIA and the regulations which implement CLIA establish strict compliance standards. The statutory purpose of attaining satisfactory laboratory performance would be frustrated if a laboratory were liable only for deficiencies that were the consequence of willful decisions by its management.

4. HCFA is authorized to impose principal sanctions against Petitioner as remedies for Petitioner's noncompliance with CLIA conditions.

As I discuss above at Part I.B. of this decision, HCFA is authorized to impose principal sanctions including revocation of a laboratory's CLIA certificate as remedies for that laboratory's failure to comply with one or more CLIA conditions. 42 C.F.R. § 493.1806(a), (b). HCFA may impose the additional remedy of cancellation of a laboratory's approval to receive Medicare payment for its services where the laboratory has not complied with one or more CLIA conditions. 42 C.F.R. § 493.1807.

HCFA is authorized to impose principal sanctions against Petitioner. In this case, the undisputed material facts establish that Petitioner failed to comply with three CLIA conditions of participation. HCFA would be authorized to impose principal sanctions against Petitioner even if the evidence were to show that Petitioner failed to comply with only one CLIA condition of participation.

Petitioner argues that any failures by it to comply with CLIA requirements was not so severe as to necessitate the imposition of the remedies of revocation of Petitioner's CLIA certificate and cancellation of Petitioner's authority to receive payment from Medicare for its services. Petitioner repeatedly characterizes its deficiencies as being "minor" and asserts that HCFA should have accepted a plan of correction from Petitioner wherein Petitioner pledged to correct deficiencies.

However, HCFA's determination to impose principal sanctions against Petitioner is an act of discretion that is authorized by Petitioner's failure to comply with CLIA conditions of participation. Petitioner has no right to offer a plan of correction to address condition-level deficiencies. As I discuss above, at Part I.B. of this decision, a laboratory is afforded the opportunity to offer a plan of correction only where HCFA imposes alternative sanctions for deficiencies that are at less than a condition level of severity. 42 C.F.R. § 493.1810(e). I have no authority to direct HCFA to accept a plan of correction from Petitioner in lieu of imposing principal sanctions against Petitioner given that there exist condition-level deficiencies.

HCFA has elected to impose the principal sanction of revocation of Petitioner's CLIA certificate. Additionally, HCFA has determined to impose against Petitioner cancellation of Petitioner's authority to receive Medicare payments for its services. HCFA is authorized to impose both of these remedies.

In its August 31, 1999 notice to Petitioner, HCFA stated that it was imposing a two-year term of revocation against Petitioner. I conclude that this determination is based on an incorrect reading by HCFA of CLIA and its implementing regulations. HCFA cited as authority for its determination to impose a two-year revocation 42 U.S.C. § 263a(i)(3) and 42 C.F.R. § 493.1840(a)(8). However, these authorities do not state or suggest that a term of revocation of a CLIA certificate be for two years in any instance. Rather, they permit revocation of a laboratory's CLIA certificate where that laboratory has been acquired by the owner or operator of a laboratory whose CLIA certificate has been revoked within the past two years. These provisions of CLIA are aimed at preventing an owner or operator of a laboratory whose CLIA certificate has been revoked from resuming business under another name within two years.

I am modifying the determination to revoke Petitioner's CLIA certificate in view of HCFA's misreading of the law. I modify the revocation so that it becomes a revocation without a minimum term. The effect of my modification is to allow HCFA to exercise its discretion to reinstate Petitioner's CLIA certificate, if it chooses to do so, in less than two years. I make no finding here as to when Petitioner's CLIA certificate should be reinstated.

In making this modification I note that the only situation in which CLIA mandates a minimum period of revocation of a CLIA certificate is where a laboratory has been found to refer proficiency testing samples to another laboratory. In that circumstance both CLIA and its regulations mandate a minimum revocation period of one year. 42 U.S.C. § 263a(i)(4); 42 C.F.R. § 493.1840(b). In this case, I have concluded that there is no persuasive evidence that unlawful referrals of proficiency testing were made. My decision to modify the term of revocation so that there is no minimum term is, therefore, consistent not only with my reading of 42 U.S.C. § 263a(i)(3) and 42 C.F.R. § 493.1840(a)(8), but also with my conclusion that no intentional referrals of proficiency tests were established here.

Steven T. Kessel
Administrative Law Judge