CASE | DECISION | JUDGE | FOOTNOTES

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


SUBJECT:

Sol Teitelbaum, M.D.,

Petitioner,

DATE: January 28, 2002
             - v -

 

Centers for Medicare & Medicaid Services

 

Docket No.C-01-204
Decision No. CR863
DECISION
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DECISION

Summary judgment is entered affirming the determination of Respondent, the Centers for Medicare & Medicaid Services (CMS)(1) revoking the certificate of Physicians Independent Laboratory, the only appealable issue in this case. By operation of law, and therefore not subject to appeal, Sol Teitelbaum, M.D. (Petitioner) is prohibited from owning, operating or directing a laboratory for two years pursuant to 42 U.S.C. § 263a(i)(3) due to the revocation of the certification of the Physician Independent Laboratory (PIL) of which he was the laboratory director. The two-year prohibition runs from the date of the revocation of the laboratory's certificate pursuant to 42 U.S.C. § 263a(i)(3) and not from the date of this decision as CMS indicated in its notices to Petitioner. Summary judgment is appropriate as there are no genuine issues of material fact in dispute and the controlling issues may be resolved as a matter of law.

PROCEDURAL HISTORY AND UNDISPUTED FACTS

Petitioner was the laboratory director of PIL from July 21, 1999 to July 20, 2000. Petitioner's Reply Brief Re: Jurisdiction, p. 5. The California Laboratory Field Services initiated a survey of PIL on August 17, 1999. Affidavit of Edd E. Epstein, MS, Petitioner's Reply Brief Re: Jurisdiction, Ex. R. PIL appealed the CMS notice of deficiencies arising from the survey, but subsequently withdrew its request for hearing, the case was dismissed, and CMS revoked PIL's CLIA(2) certificate effective January 23, 2001. CMS Brief on Jurisdictional Issues, p. 2, fn. 1 and Attachment A. CMS advised Petitioner of the revocation of PIL's CLIA certificate by letter dated April 6, 2001. CMS Brief on Jurisdictional Issues, Attachment B. CMS further advised Petitioner that as laboratory director for PIL he was subject to a two-year bar from owning, operating or directing any laboratory, but, because his November 15, 2000 request for hearing was pending before the Departmental Appeals Board, the bar would not be effective until an Administrative Law Judge upheld the CMS action. Id.

Petitioner filed his request for hearing on November 15, 2000. Petitioner alleged that CMS's failure to accept the PIL Plan of Correction was an abuse of discretion; that the Statement of Deficiencies was procedurally and substantively defective; that the noted deficiencies did not occur during his tenure as laboratory director; that he was an employee of PIL as laboratory director and not subject to sanction as an owner or operator; that he is entitled to a hearing; and that CMS's actions were in retaliation for his actions in the Sentinel case.(3)

The procedure related to and substance of CMS's Statement of Deficiencies for PIL are no longer disputed by Petitioner. "Petitioner is not seeking a hearing to contest whether or not [CMS] has the authority to impose sanctions upon an owner of a laboratory who has allegedly violated [CMS] regulations or if there is any truth to the condition level deficiencies which it alleges were present at the laboratory." Petitioner's Reply Brief Re: Jurisdiction, p. 10 (emphasis in original). Therefore it is unnecessary to discuss facts related to the Statement of Deficiencies for PIL that gave rise to the sanction of Petitioner.

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. The purpose of CLIA is to ensure the accuracy and reliability of laboratory tests, and hence the public health of all Americans. See H.R. Rep. No. 899, 100th Cong. 2d Sess. 8, 18 (1988), reprinted in 1988 U.S.C.C.A.N. 3828, 3839. CMS certification of a laboratory under CLIA is dependent upon whether the laboratory meets the conditions for certification set out in the statute and regulations. 42 U.S.C. § 263a(f)(1)(E); 42 C.F.R. § 493.1 et seq. Pursuant to CLIA, the Secretary of HHS has 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 certification.

The Secretary has exercised his authority under 42 U.S.C. 263a(f) and issued regulations implementing CLIA. See 42 C.F.R. Part 493. The regulations specify standards and the specific conditions of certification that a laboratory must meet to achieve compliance. The regulations confer broad authority on CMS to ensure that laboratories perform as Congress intended, including authority to inspect and sanction laboratories that fail to comply with the regulatory requirements. CMS has the delegated authority to suspend, limit, or revoke the CLIA certificate of a laboratory that is out of compliance with one or more CLIA conditions, and may also impose alternative sanctions such as a directed plan of correction or monitoring by the state. 42 C.F.R. § 493.1806.

CLIA provides the following with respect to the owners and operators of non-compliant laboratories in addition to sanctions which may be imposed directly against a laboratory:

(3) Ineligibility to own or operate laboratories after revocation.

No person who has owned or operated a laboratory which has had its certificate revoked may, within 2 years of the revocation of the certificate, own or operate a laboratory for which a certificate has been issued under this section.

42 U.S.C. § 263a(i)(3). The Secretary's regulations specify that a "laboratory director" is considered an "operator" of a laboratory:

Operator means the individual or group of individuals who oversee all facets of the operation of a laboratory and who bear primary responsibility for the safety and reliability of the results of all specimen testing performed in that laboratory.

The term includes- (1) A director of the laboratory if he or she meets the stated criteria . . . .

42 C.F.R. § 493.2 (emphasis in original).

This definition of "operator" was part of the final regulations that became effective September 1, 1992. The source of the provision that a "laboratory director" is an operator is reflected at 57 Fed. Reg. 7226 (1992) in the discussion of the public comments related to the proposed regulation:

Comment: Four commenters voiced the opinion that if a laboratory's CLIA certificate has been revoked within the preceding two-year period, [CMS] should initiate adverse action, not only against its owner or operator, but also against those directors involved in the operation of the laboratory.

Response: We have added a definition of "operator" which clarifies that directors of laboratories who are involved in their overall operation, are knowledgeable about the workings of the entire facility, and who bear primary responsibility for the safety and reliability of laboratory testing, are considered operators for the purpose of this regulation. It is our belief, consistent with the direction given by Congress in section 353(i)(3) of the PHS Act, that any laboratory director who meets the criteria as an operator should not be permitted to operate or own any laboratory within 2 years of operating a laboratory which has had its CLIA certificate revoked, as set forth at § 493.1840(a)(8) of these regulations.

The regulations also require that any laboratory conducting moderate or high complexity testing, as was PIL, have a laboratory director who meets specific qualifications and has clear and specific responsibilities. 42 C.F.R. §§ 1403, 1405, 1407. The regulations specify that:

The laboratory director is responsible for the overall operation and administration of the laboratory, including the employment of personnel who are competent to perform test procedures, and record and report testresults promptly, accurate, [sic] and proficiently and for assuring compliance with the applicable regulations.

42 C.F.R. § 493.1407.

The director's responsibilities also include ensuring that appropriate test methodologies are used, that verification procedures are followed, that proficiency testing is complied with, that appropriate corrective actions are taken as necessary, that the laboratory follows quality control and quality assurance programs, and that several other specified requirements are met. Id. Any laboratory that has as its owner or operator (which includes laboratory director) an individual who owned or operated a laboratory that had its CLIA certificate revoked within the previous two years is subject to adverse action including suspension and/or revocation pursuant to 42 C.F.R. § 493.1840(a)(8).

CLIA provides at 42 U.S.C. § 263a(i)(1) that a laboratory's certificate may be suspended, revoked, or limited only after reasonable notice and opportunity for hearing to "the owner or operator of the laboratory . . . ." The Secretary's regulations provide that a laboratory or prospective laboratory dissatisfied with an initial determination listed in 42 C.F.R. § 493.1844(b) is entitled to a hearing before an ALJ. 42 C.F.R. § 493.1844(a). The hearing procedures found in subpart D of Part 498 are incorporated by reference. 42 C.F.R. § 493.1844. The "suspension, limitation or revocation of the laboratory's CLIA certificate . . . because of noncompliance . . . ." is the first listed initial determination subject to hearing before an ALJ. 42 C.F.R. § 493.1844(b)(1).

ISSUES, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ANALYSIS

The threshold issue in this case is:

Whether Petitioner has a right to appeal the action of CMS?

If Petitioner has a right to appeal, the issues are:

Whether Petitioner is subject to the two-year ban on owning, operating, or directing another laboratory.

Whether Petitioner was properly subject to sanction by CMS in this case.(4)

1. Petitioner has the right to appeal the initial determination of CMS to sanction PIL by limiting, suspending, or revoking the laboratory's CLIA certification.

It is unnecessary to explore the legal theories Petitioner advances for why he has the right to request a hearing because the Departmental Appeals Board has made clear in prior cases that the right exists in cases such as this. See Sentinel Medical Laboratories, Inc., DAB CR679, DAB No. 1762 (2001), fn. 6. Section 493.1844(a) of 42 C.F.R. only specifically lists laboratories and prospective laboratories as having the right to appeal adverse initial determinations by CMS. However, the regulation may not be construed without reference to CLIA which specifically requires notice to the owners and operators of a laboratory and the right to a hearing prior to suspension, revocation or limitation of a laboratories certification. 42 U.S.C. § 263a(i)(1). Under the Secretary's definition, "laboratory directors" are "operators." 42 C.F.R. § 493.2. Because they are by the Secretary's definition operators, laboratory directors have the right to file an appeal under CLIA.

Given the plain language of the statute and regulations, CMS cannot argue on one hand that Petitioner has no right to appeal as laboratory director, but he is subject to sanction as an operator. Similarly unpersuasive is Petitioner's argument that he has the right to an appeal as laboratory director, but he is not subject to being sanctioned because he is a mere employee and not an operator.

Petitioner, as the former "laboratory director" for PIL and himself subject to sanction, has the right to request a hearing.(5) The statute and regulations do not specify that only one request for hearing may be filed on behalf of a laboratory or its owners and operators. The fact that the owners or other operators of PIL also filed requests for hearing, but subsequently withdrew them, does not affect Petitioner's right to maintain this appeal. Therefore, I have jurisdiction to resolve this case.

2. Petitioner is properly subject to the two-year ban on owning, operating or directing a laboratory based upon his status as "laboratory director" for PIL, whether or not he was also an employee.

Petitioner has conceded that he was laboratory director of PIL from July 21, 1999 to July 20, 2000. Petitioner has also waived any alleged errors in the CMS findings of deficiencies at PIL either arising or existing during his tenure as laboratory director. Thus, no material facts are in dispute.

Petitioner argues that he was an "employee" of PIL while he held the position of laboratory director and that as an "employee" he was not an "operator" and, thus, not subject to CMS sanctions.(6) The lynch pin for Petitioner's argument(7) appears to be the definition of operator found at 42 C.F.R. § 493.2:

Operator means the individual or group of individuals who oversee all facets of the operation of a laboratory and who bear primary responsibility for the safety and reliability of the results of all specimen testing performed in that laboratory. The term includes- (1) A director of the laboratory if he or she meets the stated criteria....

Petitioner specifically argues that as an employee laboratory director for PIL, he was not responsible for "all facets" of the laboratory operations and, thus, he was not a director who met the "stated criteria" to be an operator. It is not clear from the language of the quoted section whether the reference to "stated criteria" is to the definition of operator established by that section or to 42 C.F.R. §§ 493.1405 and 493.1407 which establish the qualifications and responsibilities for a laboratory director. However, it is important to note that the definition for operator clearly contemplates that the term may apply to an individual or a group of individuals - indicating that the responsibilities for safety and reliability may be shared and not necessarily "all" vested in a single laboratory director.

It is also significant that in order for PIL to maintain its certification for performing moderate complexity testing it had to have a laboratory director who provided "overall management and direction" of the laboratory in accordance with 42 C.F.R. § 493.1407 and who met the qualification requirements of 42 C.F.R. § 493.1405. These regulations draw no distinctions regarding a laboratory director who has status as an employee as opposed to being a contractor, an owner entitled to an equity share, a volunteer, or one who serves in some other status.

The purpose of CLIA is to ensure the accuracy and reliability of laboratory tests, and hence, the public health of all Americans. See H.R. Rep. No. 899, 100th Cong. 2d Sess. 8, 18 (1988), reprinted in 1988 U.S.C.C.A.N. 3828, 3839. The Secretary's purpose in treating a laboratory director of a laboratory which has its CLIA certificate revoked as an operator for purposes of the two-year ban on owning or operating another laboratory is consistent with the legislative purpose of CLIA. 57 Fed. Reg. 7226 (1992).

Petitioner's construction of the regulations in a way that would shield him from his responsibilities as a laboratory director and the sanctions contemplated by the statutes and regulations is unreasonable and inconsistent with the purposes of CLIA. My conclusion is that by accepting the title of "laboratory director" of a laboratory that has or is seeking a CLIA certificate, the director accepts all the specified regulatory responsibilities and is subject to the authority of CMS and any sanctions specified by law, regardless of the actual employment status of the director. (8)

3. Petitioner is properly banned from owning, operating or directing a laboratory for two years in this case.

Petitioner has conceded that he was laboratory director of PIL from July 21, 1999 to July 20, 2000. Petitioner has also waived any alleged errors in the CMS findings of deficiencies at PIL either arising or existing during his tenure as laboratory director. PIL's CLIA certification was revoked subsequent to dismissal of its request for a hearing. No material facts are in dispute.

The revocation of PIL's certification triggers 42 U.S.C. § 263a(i)(3), which is applicable to Petitioner for the reasons already discussed. Section 263a(i)(3) provides that "(n)o person who has owned or operated a laboratory which has had its certificate revoked may, within 2 years of the revocation of the certificate, own or operate a laboratory for which a certificate has been issued under this section." Section 493.1840(a) of 42 C.F.R. is also triggered, which requires CMS to initiate adverse action to suspend, limit or revoke the CLIA certificate of any laboratory if it is found that an owner or operator owned or operated a laboratory that had its CLIA certificate revoked within the last two years. CMS has no discretion and, in fact, takes no action under 42 U.S.C. § 263a(i)(3); the two-year ban on owning and operating is automatic. Similarly, CMS has little discretion under 42 C.F.R. § 493.1840(a)(8) as it must initiate action against the offending laboratory.

4. The two-year ban on owning, operating or directing a laboratory is effective from the date of the revocation of PIL's certificate.

PIL appealed the CMS notice of deficiencies arising from the survey, but subsequently withdrew its request for hearing, the case was dismissed, and CMS revoked PIL's CLIA certificate effective January 23, 2001. CMS Brief on Jurisdictional Issues, p. 2, fn. 1 and Attachment A. CMS advised Petitioner of the revocation of PIL's CLIA certificate by letter dated April 6, 2001. CMS Brief on Jurisdictional Issues, Attachment B. CMS further advised Petitioner that as laboratory director for PIL he was subject to a two-year bar from owning, operating or directing any laboratory, but, because his November 15, 2000 request for hearing was pending before the Departmental Appeals Board, the bar would not be effective until an Administrative Law Judge upheld the CMS action. Id.

The CMS advice regarding the effective date of the two-year ban is in error in this case. Unlike the case in Sentinel, CMS effected the revocation of PIL's certificate based upon the ALJ's dismissal of the PIL request for hearing and did not await my decision. The language of 42 U.S.C. § 263a(i)(3) is clear: "(n)o person who has owned or operated a laboratory which has had its certificate revoked may, within 2 years of the revocation of the certificate, own or operate a laboratory...." (Emphasis added.) Therefore, the 2-year ban against Petitioner runs from January 23, 2001, the date of revocation of PIL's certificate, and expires, January 22, 2003.

CONCLUSION

For the foregoing reasons, summary judgment is entered affirming the determination of CMS revoking the certificate of PIL, the only appealable issue in this case. By operation of law, and therefore not subject to appeal, Petitioner is prohibited from owning, operating or directing a laboratory for two years pursuant to 42 U.S.C. § 263a(i)(3) due to the revocation of the certification of PIL of which he was the laboratory director. The two-year prohibition runs from January 23, 2001 through January 22, 2003.

JUDGE
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Keith W. Sickendick
Administrative Law Judge

FOOTNOTES
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1. Effective July 5, 2001, the Health Care Finance Administration was renamed the Centers for Medicare and Medicaid Services (CMS). 66 Fed. Reg. 35437.

2. Clinical Laboratory Improvement Amendments of 1988.

3. The reference is to the case of Sentinel Medical Laboratories, Inc., DAB CR679, aff'd DAB No. 1762 (2001) in which Dr. Teitelbaum was also a Petitioner as Laboratory Director. In that case, Dr. Teitelbaum pursued similar issues after Sentinel withdrew its request for hearing. Dr. Teitelbaum was unsuccessful before the ALJ and the Departmental Appeals Board. Petitioner was subject to a two-year ban on owning, operating or directing a laboratory under CLIA, effective June 27, 2000, the date of the ALJ decision in Sentinel.

4. Petitioner casts his issues in general terms as challenges to the validity of the regulations. See Petitioner's Reply Brief Re: Jurisdiction, p.10. However, Petitioner never clearly specifies grounds for why the Secretary's regulations are unlawfully promulgated. Petitioner has asserted that similar challenges to the regulations are currently pending before the Ninth Circuit Court of Appeals. Indeed, Petitioner requested that this decision be delayed pending a decision by the Ninth Circuit. Delay is not warranted. If the Ninth Circuit rules completely in favor of Petitioner, the ban I am affirming and the ban affirmed by the ALJ in Sentinel will be declared invalid anyway. If the Ninth Circuit upholds the regulations, then my presumption that they were validly promulgated and are legally binding will be vindicated. The only issues properly before me relate to the specific facts of this case and whether the regulations have been properly applied to Petitioner. A general discussion of the validity of the regulations would constitute nothing more than dicta. I note however that the presumption I make is not without legal foundation to the extent that it is clear that the Secretary was granted authority to promulgate regulations to implement CLIA, those regulations appear to have been promulgated in accordance with the requirements of the Administrative Procedure Act, and Petitioner has offered no evidence to the contrary.

5. However, a distinction needs to be drawn in this case. The appealable issues in the usual case relate to whether the laboratory is appropriately sanctioned and not whether the owner or operator should be or is properly barred from operating another laboratory. This is true because the clear language of 42 U.S.C. § 263a(3) is that the two-year ban on owning or operating is automatic upon revocation of a laboratories CLIA certificate. The Secretary and CMS are granted no discretion under the statute regarding the two-year ban. There is no procedure for imposing the ban; it is automatic as a matter of law. No administrative appeal rights are provided related to the two-year ban as no administrative decision is made to be challenged. The only administrative decision subject to challenge is the limitation, suspension, or revocation of the CLIA certificate. Thus, Petitioner correctly states in the face of his concessions, that the only issue is whether as laboratory director he is subject to the two-year ban.

6. Petitioner appears to have wisely abandoned his "respondeat superior" argument. While application of this common-law tort doctrine might have the effect of extending liability for Petitioner's actions to the other "owners and operators" of PIL, it does nothing to relieve Petitioner of responsibility for his acts or his obligations under the regulations. See Sentinel.

7. See Petitioner's Initial Jurisdiction Brief, p. 8; Petitioner's Reply Brief Re: Jurisdiction, pp. 4-5.

8. Petitioner's argument that CMS has no authority over him because he is not the "licensee" under CLIA, is not persuasive. Petitioner presumably knew the law to which he was subject when he accepted the position of laboratory director at PIL. Indeed, given Petitioner's involvement in Sentinel there can be little doubt he knew of CMS regulation of laboratories under CLIA and voluntarily submitted thereto by accepting the position of laboratory director.

CASE | DECISION | JUDGE | FOOTNOTES