SUBJECT:

Caroline D. Zohoury, D.O.,

Petitioner,

Centers for Medicare & Medicaid Services

DECISION

I sustain the determination of the Centers for Medicare & Medicaid Services (CMS) to deny Petitioner, Caroline D. Zahoury's, application for a Clinical Laboratory Improvement Amendments of 1988 (CLIA) certificate of waiver. I do so because I find that Petitioner was an "owner" and/or "operator" of Rochester Road Clinic, P.C. (RRC), whose CLIA certificate was revoked within the last two years prior to Petitioner's application. CMS is, therefore, authorized to prohibit Petitioner's ownership or directorship of any CLIA laboratory for a period of two years from October 14, 1999, the date of RRC's revocation.

I. Procedural Background

This case is before me pursuant to a request for hearing filed by Petitioner on August 23, 2000, in accordance with 42 C.F.R. § 498.40.

On March 31, 2000, CMS (formerly, the Health Care Financing Administration or HCFA) sent Petitioner a notice (Notice) that her application for a CLIA certificate of waiver (Waiver) was denied pursuant to 42 U.S.C. § 263a(i)(3). The Notice informed Petitioner that, based on a review of her request for a Waiver, she met the definition of either an owner or operator, or both, in accordance with the definition of those terms in 42 C.F.R. § 493.2, of RRC. Petitioner's Waiver was denied because RRC's CLIA certificate was revoked on October 14, 1999. Petitioner's Waiver was for a physician's office laboratory at the same address and with the same phone numbers as RRC, the laboratory whose CLIA certificate was revoked.

II. Background

Petitioner is an osteopathic physician having a medical practice located at 115 North Rochester Road, Clawson, Michigan. This appeal arises out of her request for a Waiver for a physician office laboratory which is located at the same address as Petitioner's medical office and at the same address as RRC, whose CLIA certificate was revoked on October 14, 1999.

On February 24, 1999, during the normal hours of business operation, surveyors of the Michigan Department of Consumer and Industry Services (MDCIS) made an unannounced on-site survey at RRC concerning an allegation of an intentional referral of proficiency test (PT) samples to another laboratory for analysis (a prohibited act). See 42 C.F.R. § 493.1840(b). Upon reasonable request by MDCIS survey officials to complete their survey of RRC, Petitioner did not permit the survey to be conducted on that occasion as was required to do under 42 C.F.R. § 493.1840(a)(5).

On May 27, 1999, CMS suspended the CLIA certificate of compliance for RRC because of an allegation of an improper proficiency test referral. CMS Ex. 3, at 7. CMS then revoked RRC's CLIA certification of accreditation. Id., at 11. The revocation was to become effective on July 11, 1999. Because RRC appealed CMS's revocation, the revocation of RRC's certificate of accreditation did not become effective until October 14, 1999, when RRC withdrew its appeal. CMS Exs. 9, 10. CMS notified RRC, specifically Petitioner and her father, Badi Zohoury, that the revocation of its CLIA certificate of accreditation was for two years. CMS Ex. 11. Thus, the revocation remained in effect until October 13, 2001.

In addition, 42 U.S.C. § 263a(i)(3) and 42 C.F.R. § 493.1840(a)(8) prohibit Petitioner, as an owner(s) and/or operator(s) (including the laboratory director) of a lab whose CLIA certificate is revoked, from owning or operating a laboratory for two years following the revocation of RRC's CLIA certificate.

On or about March 10, 2000, Petitioner filed an "Initial Application" for a CLIA Waiver pursuant to 42 C.F.R. § 493.15 of the regulations. In that application, Petitioner listed the name of the new laboratory as "Caroline Zohoury" in which she was the sole "Owner/Director." CMS Ex. 12. The listed address and phone number of the new laboratory is the same address and phone numbers as RRC's. Therefore, on March 31, 2000, CMS denied Petitioner's application for a CLIA certificate of waiver on the grounds that Petitioner met the definition of an owner or operator, or both, of a laboratory, RRC, whose CLIA certificate had been revoked. CMS Ex. 14.

III. Applicable Law and Regulations

Congress enacted CLIA (42 U.S.C. § 263a) to ensure that the results of tests performed in clinical laboratories, including those tests performed in physicians' office laboratories, are reliable and accurate. See H.R. Rep. No. 899, 100th Cong., 2d Sess. 8 (1988), reprinted in 1988 U.S.C.C.A.N. 3828, 3829. The statute provides as follows:

No person may solicit or accept materials derived from the human body for laboratory⁽¹⁾ examination or other procedure unless there is in effect for the laboratory a certificate issued by the Secretary⁽²⁾ under this section applicable to the category of examinations or procedures which includes such examination or procedure.

42 U.S.C. § 263a(b).

CLIA was intended by Congress to establish one set of standards which would govern all suppliers of laboratory services, including those which supply laboratory services to Medicare beneficiaries. See 1988 U.S.C.C.A.N. 3828, 3829, 3843.

The statute directed the Secretary to issue regulations to implement various provisions set out in CLIA, including standards to assure consistent performance of valid and reliable laboratory examinations by laboratories which are issued a certificate under the Act. 42 U.S.C. § 263a(f)(1). The Secretary's regulations implementing CLIA are found in 42 C.F.R. Part 493. A laboratory which is accredited by a private, non-profit accreditation program is deemed to meet all CLIA program requirements. 42 C.F.R. § 493.551. The Committee of Laboratory Accreditation (COLA) is one of those organizations which may qualify a laboratory for CLIA certification.

In order for a laboratory to perform testing under CLIA, and bill for services provided to Medicare beneficiaries and Medicare recipients under Titles XVIII (Medicare) and XIX (Medicaid) of the Social Security Act (Act), it must comply with all CLIA requirements in 42 C.F.R. Part 493 and have a CLIA certificate.

The regulations confer broad enforcement authority to 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 of participation (Conditions) --

(a) CMS may impose sanctions against that laboratory which include suspension and/or revocation of the laboratory's CLIA certificate. 42 C.F.R. § 493.1806(a);

(b) 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; and

(c) CMS may prohibit any person who has owned or operated a laboratory which has had its CLIA certificate revoked from owning or operating a laboratory within two years of the revocation. 42 U.S.C. § 263a(i)(3); 42 C.F.R. § 493.1840(a)(8). A laboratory director is included within the definition of an operator. See 42 C.F.R. § 493.2.

A laboratory that is not satisfied with the imposition of remedies by CMS may request a hearing before an administrative law judge (ALJ). 42 C.F.R. § 493.1844.

IV. Issue

The issue in this case is whether Petitioner is precluded from owning or operating a laboratory for a period of two years from October 1999 because Petitioner was an "owner" or "operator" of RRC, a laboratory whose CLIA certificate was revoked.

V. CMS's Contentions

CMS contends that Petitioner satisfied the criteria for being an owner or operator, or both, of RRC, a CLIA laboratory, within a two-year period preceding the revocation of RRC's CLIA certificate on October 14, 1999, and, consequently, she is prohibited from owning or operating a CLIA laboratory for a period of two years following the date of revocation.

VI. Petitioner's Contentions

Petitioner contends that her father, Badi Zohoury, was the sole owner/operator and Director of RRC at all times, and that CMS has failed to produce evidence to show that Petitioner meets the definition of an "owner of any interest" or "director" of RRC within the prohibited period. She argues that she did not have the responsibilities that pertained to an operator, nor does she meet the qualifications under 42 C.F.R. § 493.1405 to be a laboratory director.⁽³⁾ Petitioner further argues that the State of Michigan corporate filing and corporate personal property tax returns for RRC are strong evidence that she is not an "owner of any interest."

VII. Findings and Discussion

I make the findings of fact and conclusions of law (Findings) to support my decision. Each Finding is noted below, in bold face and italics, followed by a discussion of the finding.

1. Summary Judgment is appropriate in this case.

Federal Rule of Civil Procedure 56 empowers a court to enter summary judgment if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1996). Once the moving party has satisfied this initial burden, the opposing party must establish that a genuine factual issue exists. See Jersey Central Power & Light Co. v. Township of Lacey, 772 F.2d 1103, 1109 (3d Cir. 1985), cert. denied, 475 U.S. 1013 (1986). Not every issue of fact will be sufficient to defeat a motion for summary judgment. Issues of fact are genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Further, the opposing party cannot rest upon mere allegations; it must present actual evidence that creates a genuine issue of material fact. See id., at 249 (citing First Nat'l Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290 (1968)). The court must draw all reasonable inferences in the opposing party's favor, and must accept the party's evidence when considering the merits of the summary judgment motion. See Pollock v. American Tel. & Tel. Long Lines,794 F.2d 860, 864 (3d Cir. 1986).

In its briefs, CMS presented credible documentary evidence strongly suggesting that Petitioner was either an owner or operator/director, or both. Petitioner submitted only self-serving affidavits by herself and her father, Badi Zohoury, that she was not an owner or operator/director of RRC. P. Exs. 2, 3.

2. Petitioner meets the definition of an "owner" of a CLIA laboratory.

CMS made a determination to exclude Petitioner from owning or operating a laboratory. The basis for CMS's determination was that Petitioner was, in fact, an owner or operator, or both, of RRC, a CLIA laboratory, within a two-year period preceding the date that RRC's CLIA Certificate was revoked. The period of revocation for Petitioner is for a period of two-years following the date of revocation of RRC's CLIA certificate on October 14, 1999.

CMS based its determination on 42 U.S.C. § 263a which provides, in pertinent part, 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.

42 U.S.C. § 263(a)(i)(3). Regulations authorize CMS to enforce this section by initiating adverse action to, among other things, revoke a laboratory's CLIA certificate where that laboratory's owner or operator has owned or operated another laboratory whose CLIA certificate was revoked during the preceding two-year period. 42 C.F.R. § 493.1840(a)(8).

Thus, if Petitioner is found to be an owner or operator, or both, of RRC, as those terms are defined in 42 C.F.R § 493.2, then Petitioner is excluded from owning or operating and/or directing any other CLIA laboratory for a two-year period following the date RRC's CLIA Certificate was revoked.

The regulations provide in pertinent part --

Owner means any person who owns any interest in a laboratory[.]

42 C.F.R. § 493.2.

CMS has provided prima facie evidence that Petitioner was an owner because, (a) Petitioner said she was an owner, and (b) she held herself out as an owner (or partial owner) by taking affirmative steps consistent with a person having ownership rights.

CMS's evidence that Petitioner was an owner is based, in part, on the following:

[Petitioner is] listed on the Disclosure of Ownership and Control Interest Statement, Form HCFA-1513, as one of two individuals having direct or indirect ownership or a controlling interest in the entity. The other individual is Dr. Badi Zohoury. This document was completed [by Petitioner] during the February 24, 1999 complaint investigation survey conducted by MDCIS.

HCFA Ex. 16, at 1 - 2.

Petitioner argued that her actions, at the time of the unannounced complaint survey by MDCIS on February 24, 1999, were that of a mere employee of RRC. On the day of the unannounced survey, Petitioner unlocked the non-public door to the laboratory at the request of the MDCIS surveyors. Subsequently, she prevented MDCIS from completing their survey. These are more than the actions of a mere employee. Petitioner was ostensibly exercising the rights of a person with authority and/or ownership.

3. Petitioner meets the definition of "operator" which term includes a director of a laboratory.

The regulations provide in pertinent part --

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.

CMS provided prima facie evidence that Petitioner was a director because Petitioner said she was a director.

CMS's evidence that Petitioner was a director is based on the following:

• On page one of a CLIA Laboratory Personnel Report, Form HCFA-209, dated February 24, 1999, Petitioner signed as the director of the laboratory. CMS Ex. 1, at 1. On page 3 of Form HCFA-116, Dr B. Zohoury and Dr. C. Zohoury are listed under "Signature of Owner/Authorized Representative of Laboratory." CMS Ex. 1, at 6.

• RRC would not have been allowed to participate in the CLIA program but for its accreditation by COLA. On COLA Form VI-Signature, which confirms that [the RRC] laboratory will comply with "the requirements for accreditation established by COLA. . . ." Petitioner's signature and printed name are noted on the document as "Laboratory Director." This form is date stamped as verified by COLA on May 28, 1996. CMS Ex. 2, at 2.

• By letter to Petitioner from COLA dated July 3, 1995, COLA confirms that RRC directed by Petitioner participates in COLA. CMS Ex. 2, at 4.

• According to COLA officials, Petitioner is the only laboratory director they have conducted laboratory business with since the laboratory became accredited. CMS Ex. 16, at 1 - 2; CMS Ex. 17.

• Again, on December 19, 1998, COLA notified Petitioner that her laboratory, RRC, had successfully completed the on-site survey and "now meets the Commission's requirements for accreditation." CMS Ex. 8.



• Petitioner filled out a "Disclosure of Ownership and Control Interest Statement," Form HCFA-1513, on which she indicated she had a direct or indirect ownership or controlling interest in RRC together with her father, Dr. Badi Zohoury. She signed the form as the authorized representative and indicated in her own handwriting,"We passed COLA with flying colors!!" CMS Ex. 4, at 2.

In order for Petitioner to be excluded from owning or operating any CLIA laboratory under 42 C.F.R. § 493.1840(a)(8), CMS must show that she satisfies the definition of an owner or operator of another CLIA laboratory for the preceding two-year period before RRC's CLIA Certificate was revoked.

I do not find Petitioner's self-serving affidavit and Michigan Professional Service Corporation records sufficiently persuasive as to the issue of CLIA laboratory directorship or ownership, nor do they satisfy the criteria for rebuttal evidence in a summary judgment action. P. Ex. 1, at 1 - 11. I take note that at the same time that RRC was filing Michigan corporate records showing ownership and directorship by Badi Zohoury, Petitioner was dealing with COLA officials and MDCIS officials as a person with more than a mere employee's interest. CMS Ex. 4.

The evidence contained in CMS Exs. 2 at 2, 4 at 1, and 17 at 4 - 6, 8 - 9, which was created by Petitioner's own hand, is ample evidence for me to decide that Petitioner had some controlling authority as a director. The beginning of Petitioner's presumptive directorship began as early as July 3, 1995. CMS Ex. 17, at 7. Petitioner's status as director of RRC appears confirmed by both her own actions and passive acceptance to periodic written contact with MDCIS or COLA officials, or both, between July 3, 1995 through December 19, 1998. On the latter date, COLA sent a letter to Petitioner congratulating RRC on its successful on-site survey. CMS Ex. 8. Petitioner offered no evidence that she sought to clarify or correct her "mistaken" status of laboratory director upon having received the December 19, 1998 correspondence from COLA, or during the on-site visits by COLA during the bi-annual renewals. P. Br., at 5.

Petitioner's signature on Form HCFA-1513 on or about February 24, 1999 was directly below clear written warnings of its importance.

WHOEVER KNOWINGLY AND WILFULLY MAKES OR CAUSES TO BE MADE A FALSE STATEMENT OR REPRESENTATION OF THIS STATEMENT, MAY BE PROSECUTED UNDER APPLICABLE FEDERAL OR STATE LAWS IN ADDITION, KNOWINGLY AND WILLFULLY FAILING TO FULLY AND ACCURATELY DISCLOSE THE INFORMATION REQUESTED MAY RESULT IN A DENIAL OF A REQUEST TO PARTICIPATE OR WHERE THE ENTITY ALREADY PARTICIPATES, A TERMINATION OF ITS AGREEMENT OR CONTRACT WITH STATE AGENCY OR THE SECRETARY, AS APPROPRIATE.

CMS Ex. 4, at 2.

If Petitioner's signature on the official Form HCFA-1513 was the "mistake" she now alleges, it is not without its consequences.

On line I(a) of the same HCFA Form 1513, Petitioner reaffirms in her own handwriting that she is a person having direct or indirect ownership in the entity. There is nothing in the "Remarks" section on page 2, below her signature, where she clearly disavows her directorship or ownership roles. Id.

On line IV(a), she again misses an opportunity to tell CMS that there has been a change in her relationship with RRC, even if there had been a past relationship with RRC as an owner or director. Id.

The burden of proof in this case is governed by the decision of an appellate panel of the Departmental Appeals Board in Hillman Rehabilitation Center, DAB No. 1611 (1997). Under Hillman, CMS bears the burden of coming forward with evidence sufficient to establish a prima facie case that: (1) RRC's CLIA Certificate was revoked on October 14, 1999; and (2) the collateral sanction against Petitioner is warranted and lawful under the statute and regulations. Petitioner has the burden of proving, by a preponderance of the evidence, that: (1) Petitioner complied substantially with participation requirements; and (2) the collateral sanction against her is unwarranted and unlawful under the statute and regulations.

In determining whether CMS has met its burden of establishing a prima facie case, I may consider rebuttal evidence, if offered by Petitioner, that CMS's evidence is neither credible or relevant to the issue of Petitioner's owner/operator/director relationship with RRC. Hillman Rehabilitation Center, DAB CR500, at 3-8 (1997). I have received no such rebuttal evidence from Petitioner.

VIII. Conclusion

I find that the CLIA Certificate for RRC was revoked on October 14, 1999. Based on the applicable law and undisputed facts, I conclude that Petitioner's relationship with RRC meets the definition of owner or operator, or both, under 42 C.F.R. § 493.2.

Accordingly, I find that CMS's decision to deny Petitioner's request for a Waiver is justified.

José A. Anglada

Administrative Law Judge

1. CLIA defines a "laboratory" or a "clinical laboratory" as a facility for the biological, microbiological, serological, chemical, immuno-hematological, hematological, biophysical, cytological, pathological, or other examination of materials derived from the human body for purposes of providing information for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of, human beings. See 42 U.S.C. § 263a(a).

2. The Secretary means the Secretary of the United States Department of Health and Human Services.

3. Petitioner made only an allegation without any substantiation that she could not be a director of a moderate complexity laboratory because she did not have the necessary qualifications. 42 C.F.R. § 493.1405. The regulations require that a "laboratory director must . . . be a doctor of medicine [or] doctor of osteopathy. . . licensed to practice medicine in the State in which the laboratory is located . . . and have at least one year directing or supervising non-waived testing." 42 C.F.R. § 493.1405(b)(2). Petitioner presents no evidence of her qualifications or her lack thereof under this regulation. Yet she applied to COLA as the laboratory director and never denied that she was qualified to do so. I find this nothing more than a baseless and unsubstantiated assertion on Petitioner's part. Frankly only Petitioner, and not CMS, can demonstrate her qualifications or lack thereof to be a director. It is unreasonable to presume CMS somehow has a duty to show her qualifications, given that Petitioner held herself out as the laboratory director.