SUBJECT:

Mark Gary Hertzberg, M.D., P.C.,

Petitioner,

Centers for Medicare & Medicaid Services

DECISION

I sustain the determination of the Centers for Medicare & Medicaid Services (CMS)⁽¹⁾ to impose remedies against Petitioner, a physician-owned laboratory known as Mark Gary Hertzberg, M.D., P.C., pursuant to the Clinical Laboratory Improvement Amendments of 1988, 42 U.S.C. § 263a et seq. (CLIA). The remedies which I sustain include: (1) cancellation of Petitioner's approval to receive Medicare payment for its services beginning 60 days from Petitioner's receipt of CMS's June 23, 1999 remedy determination notice and continuing until the date of this decision; and (2) revocation of Petitioner's CLIA certificate effective the date of this decision.

I. BACKGROUND

A. Background facts

As I discuss more fully below, CMS submitted 27 exhibits (CMS Exs. 1 - 27) and Petitioner submitted five exhibits (P. Exs. 1 - 5) during the course of these proceedings. I receive into evidence CMS Exs. 1 - 27 and P. Exs. 1 - 5. In receiving these exhibits into evidence, I overrule any objection the parties made to making them part of the record.

Petitioner is a clinical laboratory that is located in Southfield, Michigan. Petitioner is owned and operated by Mark Gary Hertzberg, M.D. Dr. Hertzberg serves as Petitioner's laboratory director. On February 25, 1999, surveyors employed by the Michigan Department of Consumer and Industry Services (Michigan State survey agency) conducted a complaint investigation of Petitioner to determine whether Petitioner was complying with CLIA requirements. The surveyors made findings which were referred to CMS. On June 23, 1999, CMS notified Petitioner that CMS had determined that Petitioner had intentionally referred its proficiency testing samples to another laboratory for analysis and it had been found to be deficient in complying with CLIA requirements. CMS Ex. 4. CMS advised Petitioner that it had determined to impose remedies against Petitioner which included cancellation of Petitioner's approval to receive Medicare payment for its services and revocation of Petitioner's CLIA certificate for at least one year.

Petitioner responded to CMS's notice with letters dated June 28, 1999, and August 9, 1999. CMS Exs. 20 and 21. Petitioner denied CMS's allegations and contended that CMS had misunderstood the manner in which the laboratory dated its worksheets.

CMS responded to Petitioner's letters on August 17, 1999. CMS Ex. 22. CMS clarified and set forth in more detail its basis for imposing CLIA sanctions on Petitioner. In this second notice, CMS advised Petitioner that it had based its determination to impose remedies on its finding that Petitioner had referred proficiency testing samples to another laboratory for testing or had improperly collaborated with another laboratory in the testing of proficiency testing samples. CMS asserted that this conduct constituted noncompliance with 42 C.F.R.§ 493.801, the CLIA condition concerning proficiency testing. CMS provided a point by point response to Petitioner's arguments concerning the laboratory records. CMS also withdrew one of the deficiencies not related to the proficiency testing.

Petitioner requested a hearing on August 19, 1999, and the case was assigned to me on September 30, 1999 for a hearing and a decision.

On September 3, 1999, CMS forwarded to Petitioner certain additional evidence upon which it had based it determinations. This evidence was a spread sheet that compared the proficiency testing results reported by Petitioner in 1998 with the identical (and nearly identical) results reported by eight other area laboratories. CMS Ex. 23. The nine laboratories at issue in this case employed either Deborah Sabo or Rene Wheatley as testing personnel. CMS Ex. 25 at 3.

CMS moved for summary disposition. CMS's motion was accompanied by 25 exhibits which I identify as CMS Exs. 1 - 25. Petitioner filed a response brief in opposition to CMS's motion. Attached to Petitioner's brief were three documents labeled P. Exs. 1 - 3. CMS filed a reply in support of its motion for summary disposition. Petitioner then moved to file a surreply. I granted Petitioner's request and accepted Petitioner's accompanying surreply into the record.

On May 16, 2000, CMS submitted additional documents, including the transcript of the in-person hearing in the case of Stanley Boykansky, M.D., DAB CR690 (2000) and CMS's posthearing brief in Boykansky.⁽²⁾ I identify the transcript as CMS Ex. 26, and the copy of the brief as CMS Ex. 27. Petitioner objected to the admission of these submissions, but offered Boykansky's posthearing brief in Boykansky should CMS's posthearing brief be admitted. (Petitioner and Boykansky were represented by the same counsel.) I identify Boykansky's posthearing brief in Boykansky as P. Ex. 4.

On May 31, 2000, Petitioner filed a motion for summary disposition with a supporting brief. CMS then filed a response in opposition to Petitioner's motion accompanied by one attachment. Petitioner filed a reply.

On September 25, 2000, I convened a prehearing conference in which I informed the parties that I was denying Petitioner's motion for summary disposition, and that I would address Petitioner's arguments in my written decision in this case. Pursuant to Petitioner's request, I scheduled an in-person hearing for November 8, 2000. On November 2, 2000, this hearing was canceled at the request of the parties, and the parties were given additional time to submit written documents which they said would obviate the need to take in-person testimony.

On November 2, 2000, the parties filed a stipulation that if Ms. Sabo, the testing personnel for Petitioner and the Boykansky laboratory, were to testify in this matter, her testimony would be the same as her April 12, 2000 testimony given in the hearing before the ALJ in Boykansky and contained in the transcript from that proceeding (CMS Ex. 26). Petitioner subsequently submitted a supplemental affidavit by Ms. Sabo. I mark this document as P. Ex. 5. CMS and Petitioner simultaneously filed concluding briefs and waived the filing of response briefs.

B. Governing law

CLIA establishes requirements for all laboratories that perform clinical diagnostic tests on human specimens and provides for federal certification of such laboratories. Pub. L. No. 100-578, amending § 353 of the Public Health Service Act, codified at 42 U.S.C. § 263a et seq.⁽³⁾ The purpose of the CLIA requirements is to ensure the accuracy and reliability of laboratory tests, and hence the health and safety of those tested. See H.R. Rep. No. 899, 100^th Cong. 2d Sess. 8 (1988), reprinted in 1988 U.S.C.C.A.N. 3828, 3829. CLIA grants the Secretary of the United States Department of Health and Human Services broad enforcement authority, including the ability to suspend, limit, or revoke the certificate of a laboratory that is out of compliance with one or more requirements for a certificate.

A laboratory's CLIA certification is dependent upon whether the laboratory meets the conditions of certification set out in the statute and regulations. 42 U.S.C. § 263a(f)(1)(E); 42 C.F.R. § 493.1 et seq. The CLIA 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 for a laboratory to 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. Stanley Boykansky, M.D., DAB No. 1756, at 18 - 19 (2000).

A key component of the statutory and regulatory program to assure that laboratories holding CLIA certificates are competent to perform tests of moderate and high complexity is the requirement for participation in a proficiency testing program that is approved by CMS, as outlined in 42 C.F.R. Part 493, Subpart H. Among the requirements of that subpart are the following: a participating laboratory must test proficiency testing samples it receives in the same manner as it tests patient samples; must not communicate the results of its tests to other laboratories prior to the deadline for reporting results; must not refer proficiency testing samples to another laboratory for analysis; and must document and maintain documentation for the handling, preparation, processing, examination, and each step in the testing and reporting of results for all proficiency testing samples. 42 C.F.R. § 493.801.

The CLIA regulations authorize CMS or its designee (in this case the Michigan State survey agency) 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 CMS in order to assure that laboratories comply with CLIA. 42 C.F.R. § 493.1800. Where CMS determines that a laboratory is not complying with one or more CLIA conditions, CMS 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). CMS 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, CMS 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).

A laboratory that is dissatisfied with a determination by CMS to impose sanctions against it may request a hearing before an administrative law judge to contest CMS's determination. 42 C.F.R. § 493.1844. The CLIA regulations at 42 C.F.R. § 493.1844(a)(2) and (3) incorporate by reference the hearing procedures and the request for review provisions in 42 C.F.R. Part 498, Subparts D and E.

The standard of proof that is employed at a hearing concerning CMS's determination that a laboratory is not in compliance with CLIA conditions is preponderance of the evidence. CMS has the burden of coming forward with sufficient evidence to 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 CMS. Edison Medical Laboratories, Inc., DAB No. 1713 (1999); Hillman Rehabilitation Center, DAB No. 1611 (1997).

II. ISSUE, FINDINGS OF FACTS AND CONCLUSIONS OF LAW

A. Issue

The issue in this case is whether Petitioner failed to comply with one or more CLIA conditions of participation, thereby giving CMS 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 and address Petitioner's arguments.

 

1. CMS properly notified Petitioner of condition-level deficiencies.

Petitioner asserts that CMS did not give it proper notice of condition-level deficiencies in accordance with 42 U.S.C. § 263a(i), 42 C.F.R. § 493.1842(b), and 42 C.F.R. § 493.1844(g). Petitioner argues that, as a result of this alleged failure, CMS is without authority to impose principal sanctions against Petitioner.

First, Petitioner argues that the initial (June 23, 1999) notice was improper because it imposed principal sanctions, but did not cite any condition-level deficiencies and was based on the attached Statement of Deficiencies (HCFA Form 2567). The Statement of Deficiencies also listed only standard-level deficiencies cited by the surveyors. Petitioner asserts that CMS cannot impose principal sanctions pursuant to a finding of only standard-level deficiencies. Petitioner argues that the "surveyors found no condition level deficiencies, and they cannot simply be created by HCFA as a result of the standard level violations alleged." Brief in support of Petitioner's motion for summary disposition at 9.

Petitioner's assertions that CMS cannot impose principal sanctions for standard-level deficiencies and that CMS is limited to the surveyors' findings is premised on a misreading of the CLIA sanction process. Appellate panels of the Departmental Appeals Board have repeatedly ruled that "a laboratory can be so pervasively noncompliant with standards as to have failed to have complied with the overall condition." Boykansky,

DAB No. 1756, at 18 - 19. Therefore, the violation of a standard may constitute violation of a condition. Further, CMS is not limited to the surveyors' findings. Rather, CMS is authorized to make independent determinations about the nature and severity of a laboratory's noncompliance with CLIA requirements.⁽⁴⁾ Boykansky, DAB No. 1756, at 7.

Second, while Petitioner acknowledges that the second notice (August 17, 1999) cited a condition-level deficiency for noncompliance with 42 C.F.R. § 493.801 (enrollment and testing of samples), and two new standard-level deficiencies, 42 C.F.R.§ 493.801(b)(3) and 42 C.F.R. § 493.801(b)(5), Petitioner argues that the second notice is deficient because it was received after the sanctions were imposed and provided no opportunity to respond or appeal previously undisclosed deficiencies.

I disagree. An appellate panel has determined that CMS may subsequently amend its initial notice to impose CLIA sanctions.⁽⁵⁾

Boykansky, DAB No. 1756, at 6. CMS issued its second notice prior to Petitioner's request for a hearing which was dated August 19, 1999 (although Petitioner did not receive the second notice prior to submitting its request). CMS inadvertently failed to enclose the chart of the nine laboratories' results on which it based its determination of referral or collusion. This omission was corrected by a September 3, 1999 mailing. Petitioner was fully informed of CMS's position and had a copy of the evidence upon which CMS based its decision prior to any substantive development of the record in this case. Petitioner has had a full opportunity to develop its rebuttal to CMS's allegations. Thus, the second notice constitutes an acceptable amendment of the first notice.

Petitioner argues that it was prejudiced by this sequence of events because: (1) the date of the termination of its Medicare payments was based on the allegedly invalid first notice and was therefore miscalculated; and (2) Petitioner was not given an opportunity to respond to the second notice prior to the termination of Medicare payments.

Neither of these factors constitutes prejudice in this case. Since I conclude that the first notice was valid, the date of the termination of Medicare payments was properly calculated. Furthermore, pursuant to the information in the first notice, Petitioner was given an opportunity to respond to the determinative allegation that it had referred proficiency testing samples to another laboratory for testing. While I agree that Petitioner may have theoretically been in a better position to respond had it been given all of CMS's information as of June 23, 1999, including the chart of coincidental results from the nine laboratories, CMS's failure to provide the information at that time made no practical difference in this case. Though Petitioner has denied collusion or referral, it has offered no persuasive evidence to rebut CMS's findings or to show in any way that the amended notice hampered its ability to rebut CMS's findings. Therefore, Petitioner has failed to show any prejudice resulting from CMS's amended notice.

2. During 1998, Petitioner colluded with other clinical laboratories in the performance of proficiency testing.

Petitioner colluded with other laboratories during 1998 in the performance of proficiency testing. The evidence in this case provides overwhelming support for this conclusion. Petitioner did not rebut the evidence of collusion.

The condition of participation that is stated at 42 C.F.R. § 493.801 requires that a clinical 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 also requires laboratories to test the proficiency testing samples in the same manner as patients' specimens.

Petitioner enrolled in an approved proficiency testing program that is operated by the American Association of Bioanalysts (AAB). See CMS Ex. 24. Petitioner received a group of proficiency testing samples from the AAB at regular intervals each year. Other clinical laboratories who were enrolled in the AAB proficiency testing program received the same samples at the same time. I take notice of the fact that the AAB refers to each mailing of samples to laboratories for proficiency testing as an "event."

The object of the proficiency testing exercise is for each participating laboratory to test its samples independently as if they are patient specimens and to report the results of its tests to the AAB. The laboratories were required to test five samples for each analyte. The AAB scores the results for the tests that are performed for each event and rates each laboratory's testing competency for that event based on the scores that the laboratory obtains. Petitioner was required to test for cholesterol, HDL cholesterol, glucose, triglycerides, iron, thyroid stimulating hormone (TSH), total thyroxine, triiodothyronine, and thyroid uptake. CMS Ex. 8, CMS Ex. 25 at 3.

For many of the proficiency tests that Petitioner and other laboratories were asked to perform in 1998, there was no such thing as a single "correct" score. CMS Ex. 24 at 3 - 4. For these tests, the AAB accepts scores that fall within a range of possible scores as "correct" because of the wide range of variables that are involved in the testing process. Id. For example, the third testing event of 1998 included testing triglyceride samples. CMS Ex. 25 at 39. For the first sample of that event, a laboratory would receive a passing score if it identified a triglyceride level which fell anywhere in a range of values of between 140 to 233. Id. For the fourth sample, acceptable values ranged between 96 to 160. Id.

During 1998, Petitioner and eight other laboratories located in the Detroit, Michigan area submitted proficiency test results that were virtually identical. CMS Ex. 24 at 3. Indeed, on numerous tests, Petitioner and the other eight laboratories submitted scores that were precisely identical. Id. The inference that arises from Petitioner and eight other laboratories submitting virtually identical proficiency testing results for numerous samples in three testing events during a single year - especially given the variable factors that were at play - is that Petitioner and the other laboratories colluded with each other to produce those results. There is no reasonable likelihood that nine laboratories independently would produce nearly identical results on numerous proficiency tests for three events in a single year. CMS Ex. 24 at 4; CMS Ex. 25 at 4 - 5.

The evidence which supports my conclusion that Petitioner and eight other laboratories colluded with each other to produce nearly identical proficiency testing results in 1998 includes the declarations of two experts: Dennis W. Jay, Ph.D., DABCC, Technical Director of the AAB Proficiency Testing Service (CMS Ex. 24) and Richard J. Benson, CLS, MT, Chief, Laboratory Improvement Section, Bureau of Health Systems, of the Michigan State survey agency (CMS Ex. 25). I find these experts to be well-qualified and their opinions to be persuasive.

As to the testing for triglycerides and total cholesterol, Dr. Jay stated in his declaration:

The lack of variability in results submitted for triglycerides and total cholesterol was particularly unusual since these assays typically show poorer reproducibility from laboratory to laboratory when compared to other routinely performed tests. This is particularly so in the case of Hertzberg and the eight neighboring laboratories, given that the methods used by these laboratories are preformed manually. Manually performed methods show poorer reproducibility when compared to automated methods. Based upon my education and experience, given the imprecision of the testing methodology and the range of acceptable results, I would expect to see variation in results on the order of 10-20% for these assays. Instead, for cholesterol and triglycerides the exact same values were reported by all nine laboratories.

CMS Ex. 24 at 3 - 4.

Dr. Jay concluded:

In my professional opinion, the chances of nine laboratories independently arriving at the same values by happenstance for all five specimens for even two different tests are close to nil. The identity of the Hertzberg's reported results for nine analytes, five specimens each, with nearly every result reported by as many as eight other laboratories in the same geographic area leads to the inescapable conclusion that the results that were reported to AAB were arrived at through referral, or collaboration, or both.

Id. at 4.

Mr. Benson came to the same conclusion. CMS 25 at 4 - 5. In his letter recommending the revocation of Petitioner's CLIA certificate, Mr. Benson wrote:

[T]he possibility of nine testing locations arriving at one identical result that is obtained in the course of manual diluting, incubating, measuring and calculating of standards followed by further calculation of patient values is a strain on the premise of coincidence. In many instances, the results reported are triple digit whole numbers. The slightest variation in technique or calculation would result in numerical diversity. For nine testing locations to arrive at identical results for a set of five values defies belief. For testing locations to arrive at identical results for a no less than 20 results (each facility exactly matched cholesterol, high density lipoprotein, triglyceride and thyroid stimulation hormone) is absurd.

CMS Ex. 2 at 2.

Petitioner challenges these experts' opinions on the ground that they have not demonstrated any background or training in statistics sufficient to enable them to opine as to the probability of different laboratories attaining identical proficiency testing results. I do not find Petitioner's argument to be persuasive. These experts did not perform statistical analyses to obtain their conclusions. Rather, their conclusions were based on their training in their respective fields, their experience in those fields, and on the evidence which pertained to the specific proficiency tests that are at issue in this case. Thus, for example, when Dr. Jay concluded that the nine laboratories, including Petitioner, could not have independently reached identical results for cholesterol and triglyceride proficiency testing, because of the poor reproducibility of such tests, he plainly based that conclusion on his training and expertise and not on a statistical analysis of test results.

I find reinforcement for my conclusion that there existed no reasonable probability that the nine laboratories would independently arrive at identical proficiency testing results on multiple occasions by the existence of differences in testing conditions among the laboratories which would have affected the test results produced by each laboratory. Although some of the laboratories had the same model spectrometer - a device that was used to perform proficiency testing - others had different models. CMS Ex. 26 at 77. All of the spectrometers were calibrated separately. Id. at 77 - 78. Each of the nine laboratories had its own supply of controls and reagents. Id. at 76 - 77. Room temperature varied from laboratory to laboratory. Id. at 78.

The evidence which I have discussed so far indicates that Petitioner and the other eight laboratories colluded in 1998 to produce nearly identical proficiency testing results. Additionally, the following evidence supports my finding that these laboratories engaged in collusion.

First, the evidence establishes that the opportunity for collusion existed. All nine of the laboratories submitting identical proficiency testing results employed as testing personnel one of two individuals, Ms. Sabo and Ms. Wheatley. CMS Ex. 25 at 3. During 1998, Petitioner employed Ms. Sabo. CMS Ex. 26 at 42. Ms. Sabo and Ms. Wheatley are well-acquainted. Id. at 42.

In the Boykansky hearing, Ms. Sabo denied colluding with other laboratories or individuals. CMS Ex. 26 at 21. She asserted that she performed each proficiency test for the Boykansky laboratory in the same manner that she performed tests on patients' specimens and that she integrated her proficiency testing into her routine specimen testing. Id. at 18 - 19, 20. Ms Sabo averred that discrepancies between proficiency testing data and the results that she reported for proficiency testing could be explained as simple errors on her part. Id. at 30 - 39.

The ALJ in Boykansky, found that Ms. Sabo's denials of complicity in collusion were not credible. He wrote:

If anything, Ms. Sabo's testimony confirms my conclusion that collusion is the only reasonable explanation for the nearly identical proficiency test results that were produced by the nine laboratories. Ms. Sabo's testimony consisted, essentially, of unsupported denials of wrongdoing. Moreover, it failed to explain the overwhelming evidence that collusion occurred. Ms. Sabo was unable to provide any credible explanation how nine laboratories could produce identical proficiency testing results on many tests over a lengthy period of time.

Ms. Sabo acknowledged that the testing she performed was subject to a large number of variables that would be likely to produce different results at different laboratories assuming that samples were tested individually at these laboratories. Tr. at 74 - 80. She admitted that, given these variable factors, it would be surprising if identical test results were produced at different laboratories. Id. She offered no explanation for the virtually identical proficiency testing scores produced by the nine laboratories given the acknowledged variables in the testing process. See Id. at 76 - 80.

Boykansky, DAB CR690, at 11.

My review of the transcript of Ms. Sabo's testimony supports the ALJ's conclusions in Boykansky. Further, Petitioner has introduced no evidence or arguments in this case that would cause me to reject the ALJ's conclusions as to the significance of Ms. Sabo's testimony in this case.

Second, the evidence shows that the proficiency testing results that Petitioner submitted were not consistent with Petitioner's own records of its proficiency tests. Such evidence strongly supports a conclusion that Petitioner manipulated its proficiency testing results in order to submit results that conformed to those which were submitted by the other eight laboratories. The evidence shows that Petitioner rounded proficiency testing values in a manner that is inconsistent with accepted practice in order to produce results that conformed with the results obtained by the other eight laboratories. CMS Ex. 25 at 8 - 11. Thus, in March 1998, Petitioner recorded 162.5 and reported 163; but it also recorded its fourth triglyceride sample as 182.5 and reported it as 182. Id. at 8 - 9. In June, Petitioner recorded 187.5 and reported 188; but it also recorded its first glucose sample as 178.5 and reported it as 178. Id. at 9-10. In October, Petitioner recorded 22.7 and reported 23, but it also recorded 25.7 for its first HDL sample and reported it 25. Id. at 11.

These rounding practices are logically inconsistent, but each one results in a figure which matches values reported by other Sabo/Wheatley laboratories. In March 1998, Petitioner reported 182 as its result for the fourth AAB triglyceride sample and so did six of the eight Sabo/Wheatley laboratories. CMS Ex. 23 at 2. In June 1998, Petitioner reported 178 as its result for the first glucose sample and so did four of the eight Sabo/Wheatley laboratories that test for that analyte. CMS Ex. 23 at 3. In October 1998, Petitioner reported 25 as its result for the first HDL sample and so did all eight of the other Sabo/Wheatley laboratories. CMS Ex. 23 at 4.

The logical inference is that the values Petitioner reported were obtained in whole or in part from analysis of samples in the other eight laboratories. This inference is supported by other anomalies in its worksheets. For example, in June 1998, like the six other laboratories testing for triiodothyronine, Petitioner reported a result of 700 for the third proficiency test sample. However, according to its own laboratory worksheet, its test result was 701, not 700. CMS Ex. 23 at 3, CMS Ex. 25 at 11 - 12.

Third, the evidence shows that Petitioner did not document its testing of proficiency testing samples in the same manner as it documented the testing process for patient samples. Patient results for cholesterol, HDL, triglycerides, and glucose are almost always expressed as integers in the worksheets. However, proficiency testing results are carried out to one decimal place. CMS Ex. 25 at 8 - 10 . This raises additional questions as to whether the proficiency testing was done as part of Petitioner's regular workload.

In rebuttal, Petitioner asserts that "results received by AAB represent small standard deviations and thus a high probability that multiple laboratories produced the same figures." Petitioner brief in response to CMS memorandum of law in support of summary affirmance at 13. In support of this representation, Petitioner relies on the summary of proficiency testing results for TSH and triglycerides submitted to AAB for the third quadrimester of 1998. P. Ex. 3.

This exhibit does not support Petitioner's arguments for the following reasons:

• Petitioner has not accompanied its argument with any evidence as to the mathematical significance of the amount of a standard deviation.



• Petitioner cites to the standard deviations for TSH and triglycerides as supporting "a high probability that multiple laboratories produced the same figures." However, even if Petitioner's representations were supported, they address only 2 of the 9 analytes for one of the three quadrimesters in which these laboratories had coincidental results.

Petitioner also argues that Ms. Sabo had no motive to falsify the proficiency testing results for Petitioner because it would not save her any work. However, that argument is not persuasive in this context. As the appellate panel concluded in Boykansky:

[L]ack of motive does not undercut the evidence supporting the ALJ's finding that the [proficiency testing] results reported by Ms. Sabo simply did not match the records she made of the [proficiency testing] that she allegedly performed.

Boykansky, DAB No. 1257, at 9.

Finally, Petitioner argues that although Ms. Sabo testified that she performed laboratory technician services in 13 laboratories in 1998, only four of these were cited for collusion. Petitioner asserted that CMS has ignored the fact that Ms. Sabo worked at twice as many laboratories that did not have the same results as Petitioner and this fact "clearly shows that neither Ms. Sabo nor Petitioner intentionally referred any proficiency testing samples to another laboratory as contemplated by CLIA." Petitioner reply to CMS response to Petitioner motion for summary disposition at 3 - 4.

I do not find this argument persuasive for the following reasons. First, the record is silent as to the test results of these laboratories. Second, even if it is assumed that these laboratories filed different results, there is no way to know whether there were factors as to these laboratories which would have interfered with collusion. For example, perhaps these laboratories were not enrolled in the AAB program; perhaps they used significantly different equipment or methods; or perhaps the laboratory directors supervised the proficiency testing process more diligently. If the circumstances and testing results of these laboratories were relevant, Petitioner had the burden to produce such evidence and it has failed to do so.

Identical proficiency testing results submitted by up to nine laboratories, coupled with discrepancies between laboratory worksheets and reported proficiency testing results and the opportunity for collusion is persuasive evidence of collaboration among laboratories. Boykansky, DAB No. 1756, at 8 - 11. Therefore, I conclude that CMS has adduced persuasive evidence that Petitioner engaged in collusion with other laboratories in testing proficiency testing samples and Petitioner has offered no persuasive arguments or evidence which rebut CMS's showing of collusion.

3. Petitioner's conduct in colluding with other laboratories as to the testing of proficiency testing samples during 1998 constitutes a violation of the following standards concerning proficiency testing set forth at 42 C.F.R. § 493.801(b): section 493.801(b)(1) (failing to test proficiency testing samples in the same manner as it tests patients' specimens); section 493.801(b)(3) (engaging in inter-laboratory communications pertaining to the results of proficiency testing samples); and section 493.801(b)(4) (intentionally referring proficiency testing samples to another laboratory for analysis).

The standards for the CLIA condition of participation regarding testing of proficiency testing samples set forth at 42 C.F.R. § 493.801 require that a clinical laboratory must test proficiency test samples in the same manner as it tests patients' specimens; must not engage in inter-laboratory communications pertaining to the results of proficiency testing; and must not refer proficiency testing samples to other laboratories for analysis. 42 C.F.R. § 493.801(b)(1), (3), and (4). Petitioner did not comply with these standards during 1998.

The manner in which Petitioner performed proficiency testing - by colluding with other laboratories to obtain a collectively determined result - clearly was a departure from standard procedures for testing patients' specimens and involved communicating with other laboratories about the results of proficiency testing. This behavior was a violation of 42 C.F.R. § 493.801(b)(1) and (3).

I also find that Petitioner's conduct constitutes a violation of 42 C.F.R. § 493.801(b)(4) which prohibits intentional referral of testing samples to another laboratory. In doing so, I reject Petitioner's argument that section 493.801(b)(4) is limited to cases where physical transfer of the testing sample is established.

The question of physical transport was addressed by an appellate panel in Oakland, DAB No. 1755 (2000). It concluded that, while use of the word "send" in the first sentence of 42 C.F.R. § 493.801(b)(4) indicates a physical transfer, that sentence was not presented as a definition of "intentional referral" but could be read as a separate prohibition.

The appellate panel noted that the second sentence of that section states: "Any laboratory that HCFA determines intentionally referred its proficiency testing samples to another laboratory for analysis will have its certification revoked for at least one year."

Therefore, the appellate panel concluded as follows:

HCFA could reasonably read this sentence as applying to constructive referral as well as actual physical transfer, particularly in circumstances where the facts render physical transfer unnecessary for the outside analysis to take place. As noted by the ALJ in Blanding Urgent Care Center Laboratory, DAB CR438 (1996), the dictionary definition of 'refer' includes 'to direct the attention or thoughts of,' and 'to direct to a person, place, etc., for information or anything required.' Id. at 21 citing Random House College Dictionary, revised ed. 1980, at 1108.

When the regulations are considered as a whole, reading section 493.801(b)(4) to encompass a constructive referral such as what occurred here is a better reading. Limiting the concept of a referral to a physical transfer is inconsistent with the underlying purposes of the condition for certification. Adopting the values achieved in another laboratory (either with or without having done the tests in one's own laboratory) clearly undercuts the general concept that the [proficiency testing] sample be tested in the same way as regular patient specimens in the laboratory are tested so that the results truly measure the proficiency of the laboratory reporting the [proficiency testing] results.

Oakland , DAB No. 1755, at 21 - 22.

Consequently, I conclude that Petitioner violated 42 C.F.R. § 493.801(b)(4). That provision codifies a statutory provision, found at 42 U.S.C. § 263(a)(i)(4), requiring CMS to revoke Petitioner's CLIA certificate for at least one year.

4. Petitioner failed to comply with the standard set forth at 42 C.F.R. § 493.801(b)(5) which requires the clinical laboratory's director to sign proficiency testing attestations.

Petitioner's owner and laboratory director, Dr. Hertzberg, did not sign the attestation statements that were submitted as part of the three proficiency testing events in 1998 in violation of the standard that is stated at 42 C.F.R. § 493.801(b)(5). CMS Exs. 8, 10, 12. That standard requires that a clinical laboratory's director must sign proficiency testing attestations. CMS asserts that Ms. Sabo, who was employed by Petitioner as its testing personnel and not as Petitioner's laboratory director, signed the statements.⁽⁶⁾

Petitioner did not dispute this assertion.

5. Petitioner's failure to comply with the standards set forth in 42 C.F.R. § 493.801(b) constitutes a failure to comply with the CLIA condition of participation that is stated at 42 C.F.R. § 493.801.

If standard level deficiencies are sufficiently egregious, they will constitute a failure by a laboratory to comply with the overall condition of which the standards are subparts. Boykansky, DAB No. 1756, at 18 - 19. That is certainly the case here.

I conclude that Petitioner's violation of the standards for testing of samples in a proficiency testing program set forth in 42 C.F.R. § 493.801(b) constitutes failure to comply with the condition of participation stated at 42 C.F.R. § 493.801. Petitioner's collusion in the performance of proficiency testing was a deliberate effort to frustrate the purpose of proficiency testing, which is to assure that a clinical laboratory establishes its competence through an impartial proficiency testing process. Petitioner's collusion was so egregious as to make its participation in a proficiency testing program meaningless. Petitioner's collusion undermined the integrity of the proficiency testing process for other laboratories.⁽⁷⁾ Furthermore, such collusion by Petitioner meant that Petitioner was not performing its proficiency tests in the manner that it normally tested patients' specimens, was engaging in inter-laboratory communication about proficiency testing samples, and was referring proficiency testing samples to other laboratories. Finally, Petitioner's owner and laboratory director failed to sign required attestation statements that it submitted as part of the first three proficiency testing events in 1998.

6. CMS is authorized to impose principal sanctions against Petitioner as remedies for Petitioner's noncompliance with CLIA conditions of participation.

CMS is authorized to impose principal sanctions, including revocation of a laboratory's CLIA certificate, as remedies for a laboratory's failure to comply with one or more CLIA conditions. 42 C.F.R. § 493.1806(a), (b). CMS 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.

As discussed above, the evidence in this case establishes that Petitioner failed to comply with a CLIA condition of participation. Therefore, CMS is authorized to cancel Petitioner's approval to receive Medicare payment for its services and to revoke Petitioner's CLIA certificate.

Alfonso J. Montano

Administrative Law Judge

1. The Health Care Financing Administration (HCFA) has been renamed Centers for Medicare & Medicaid Services (CMS). For purposes of this decision, reference to either name will constitute reference to the same entity. In this regard, I point out, for example, that the CMS exhibits are marked with the acronym "HCFA". I have renamed these exhibits by substituting CMS for HCFA, and I refer to them as CMS exhibits.

2. With this submission as well as at other times during the proceedings, CMS submitted copies of Civil Remedies Division decisions. Since these decisions were submitted for my convenience, I do not consider them to be proposed exhibits. Both parties were given ample opportunity to address the legal significance of these decisions throughout the extensive briefing process in this case.

3. CMS may deem a laboratory to meet all applicable CLIA program requirements if the laboratory obtains a certificate of accreditation, as required in 42 C.F.R. Part 493, Subpart D, and meets the other requirements listed in 42 C.F.R. § 493.551(b).

4. As the ALJ in Boykansky reasoned:

The plain meaning of [42 C.F.R. § 493.1804(b)(1)] is that HCFA has the final say on determining whether or not to impose sanctions against a laboratory. It is HCFA's decision and not that of the State survey agency which controls. Moreover, the language of the regulation is equally plain in stating that HCFA may determine independently whether a laboratory is not complying with CLIA requirements and the extent of that noncompliance. Under the regulation, HCFA finds the presence of deficiencies based on the results of inspections. Boykansky, DAB CR690, at 7.

5. As explained by the ALJ in Stanley Boykansky, M.D., DAB CR690, at 6, the regulations which govern CLIA enforcement by CMS and hearings involving an alleged failure by a clinical laboratory to comply with CLIA requirements do not prohibit CMS from amending or superseding a notice of an initial determination. See 42 C.F.R. Part 493, Subpart R.; 42 C.F.R. Part 498, Subpart D; 42 C.F.R. § 493.1844(a)(2).

6. At the in-person hearing in Boykansky, Boykansky and Petitioner's counsel asked Ms. Sabo if she had served as Boykansky's "technical supervisor." CMS Ex. 26 at 26. The ALJ in Boykansky surmised that counsel was trying to elicit testimony from Ms. Sabo to the effect that she served as the functional equivalent of a laboratory director. The ALJ rejected this approach, writing:

[C]ounsel's question did not address the issue of who was Petitioner's laboratory director. Petitioner laid no foundation to show that a 'technical supervisor' at Petitioner's laboratory performed the functions of a laboratory director. I note that regulations which define the role of laboratory director state that a laboratory director may function as a laboratory's technical supervisor as part of his or her broader responsibilities. 42 C.F.R. § 493.1445(a). But, this regulation does not suggest that a laboratory director and a technical supervisor have interchangeable roles. To the contrary, the regulation suggests that a technical supervisor's duties are, at most, a component of a laboratory director's responsibilities. Furthermore, Ms. Sabo answered the question equivocally, by asserting first that she was the "testing personnel" for the laboratory and then, by saying that she might have at times been referred to as "technical supervisor" because of her degree. Tr. at 26.

Boykansky, DAB CR690 at 13 - 14.

7. As Dr. Jay states:

When, as occurred here, a group of laboratories reports [proficiency testing] results that were not obtained as required, i.e., through independent testing of samples in the same manner as patient samples are tested, the integrity of the entire proficiency testing program is undermined. This is because proficiency testing is graded on a "curve."

To determine what constitutes a "passing grade" for a particular analyte, results from laboratories using the same methodology and equipment are grouped together. The average value reported determines the range of "correct" responses. Because any collaboration among laboratories necessarily skews the calculation of the average, collaboration or referral corrupts the grading range against which all laboratories in the given group are evaluated.

Consequently, referral and/or collaboration not only helps insure those who engage in this improper activity obtain a passing grade, regardless of the quality of their proficiency testing; but it also may so disrupt the average values against which all other similarly situated laboratories are rated as to make other laboratories appear to have performed poorly when, in fact, they may be reporting results well within what should be tolerable limits of accuracy. In addition, false information concerning the reproducibility of the method is displayed to the public, which could cause errors in judgment when evaluating laboratory tests.

CMS Ex. 24 at 4 - 5.