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CASE | DECISION |JUDGE | FOOTNOTES

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


SUBJECT:

American Diagnostic Labs (by Ayazur Rahman, Owner & Charles Panchari, M.D.,

Petitioner,

DATE: June 09, 2004
                                          
             - v -

 

Centers for Medicare & Medicaid Services.

 

Docket No.C-01-433
Decision No. CR1189
DECISION
...TO TOP

DECISION

American Diagnostic Labs' (ADL) certificate to engage in the testing of human specimens issued pursuant to the Clinical Laboratory Improvement Amendments of 1988 (CLIA) (1) is revoked. Pursuant to 42 C.F.R. 493.1844(d)(4)(ii), the revocation of ADL's CLIA certificate is effective the date of this decision. (2) By operation of law, the owner and operators of ADL are prohibited from owning or operating a CLIA laboratory for two years pursuant to 42 U.S.C. � 263a(i)(3) due to the revocation of ADL's certificate. 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) - the date of this decision. The evidence shows that Ayazur Rahman was the owner of ADL and Charles Panchari, M.D., was a laboratory director with responsibilities equivalent to those of an operator and he was responsible for the findings of deficiency that caused this revocation. (3) No civil money penalty (CMP) may be imposed in this case as such penalty serves no remedial purpose and, thus, is contrary to law.

I. PROCEDURAL HISTORY

This case involves two requests for hearing filed on behalf of ADL, one by its owner, Ayazur Rahman (Mr. Rahman), and the other by one of ADL's laboratory directors, Charles Panchari, M.D. (Dr. Panchari). Unless otherwise indicated, "Petitioners" is used to refer collectively to the laboratory and the two individual petitioners.

On September 21, 2000, the California Department of Health Services, Laboratory Field Services (the State agency) completed a survey of ADL. The examiners found that ADL was not in compliance with requirements of CLIA and they declared that the noncompliance presented immediate jeopardy to the public. The State agency examiners alleged specifically in their report, the Statement of Deficiencies (SOD), that ADL was not in compliance with the condition level requirements set forth at 42 C.F.R. � 493.801 (enrollment and testing of samples); � 493.1101 (patient test management); � 493.1201 (quality control); � 493.1403 (laboratory director); � 493.1409 (technical consultant); � 493.1421 (testing personnel); and � 493.1701 (quality assurance). CMS Ex. 1. (4)

On September 26, 2000, a temporary restraining order and order to show cause re: preliminary injunction was issued by the Superior Court of Los Angeles County. ADL and Mr. Rahman were ordered not to engage in operating a clinical laboratory or any other laboratory in California. CMS Ex. 7. On January 10, 2001, the court issued a preliminary injunction against ADL and Mr. Rahman. CMS Ex. 46. The injunction is effective until "after all appeals have been exhausted from the administrative action to revoke the defendant's clinical laboratory license." Id. at 2. In March 2001, Mr. Rahman was charged criminally with seven counts of violating, on or about June 1, 2000, various provisions of California law regarding the operation of clinical laboratories. CMS Ex. 35, at 1. In November 2001, Mr. Rahman pled no contest to and was found guilty of two criminal counts for violation of CAL. BUS. & PROF. CODE �� 1220(d)(2)(A) (for failing to document critical patient test values when reported to the health care provider) and 1282 (for engaging in clinical laboratory practice without a license). Five remaining counts, which also concerned violations of California law governing clinical laboratories, were dismissed. Id. at 5-6.

On December 5, 2000, CMS informed Mr. Rahman that ADL's CLIA certificate would be revoked unless, within 10 days, he provided CMS with a credible allegation of compliance and acceptable evidence documenting that the immediate jeopardy caused by ADL's noncompliance had been removed. CMS Ex. 2. CMS also informed Mr. Rahman and ADL's most recent director, Dr. Luis Hernandez, that failure to come into compliance with the CLIA requirements would result in the following sanctions: (1) a CMP in the amount of $10,000 per day, effective December 15, 2000 and to run until the laboratory's CLIA certificate was suspended, effective December 21, 2000; (2) a directed plan of correction directing the laboratory to cease all testing effective December 15, 2000, until such time as ADL could demonstrate that it was in compliance with all CLIA requirements, and to submit to CMS within ten days a list of the names and addresses of all physicians, providers, suppliers and other clients who had used the services of the laboratory since December 1998, so that CMS could advise these individuals of the nature of the laboratory's non-compliance; (3) suspension of the laboratory's CLIA certificate, effective on December 21, 2000; (4) revocation of the laboratory's CLIA certificate, effective on February 3, 2001, unless the laboratory requested a hearing prior to that date; and (5) cancellation of the laboratory's approval to receive Medicare payments for services performed on or after December 21, 2000. Id. In that same letter, CMS informed Mr. Rahman and Dr. Hernandez that, as ADL's owner and operator respectively, they would be prohibited from owning, operating or directing a laboratory for two years pursuant to 42 U.S.C. � 263a(i)(3) if ADL's CLIA certificate was revoked. On December 26, 2000, the State agency informed Mr. Rahman and Dr. Hernandez that it was imposing the sanctions proposed in its December 5, 2000 letter. CMS Ex. 4. On December 6, 2000 and January 19, 2001, CMS informed Dr. Panchari of its actions against ADL and that, as a former operator of ADL, he would be prohibited from owning, operating or directing a laboratory for two years pursuant to 42 U.S.C. � 263a(i)(3) if ADL's CLIA certificate was revoked. CMS Exs. 3, 6.

Both Mr. Rahman, as owner of ADL, and Dr. Panchari appealed CMS's determinations and these appeals were docketed as Docket No. C-01-433 and Docket No. C-01-438 respectively. (5) The cases were assigned to Chief Judge Marion Silva on March 6, 2001.

In the ADL case, C-01-433, CMS timely filed its report of readiness as required by Judge Silva's docketing order. In its report, CMS requested that cases C-01-433 (ADL) and C-01-438 (Panchari) be consolidated. ADL did not file its readiness report or respond to the motion. On June 25, 2001, Judge Silva ordered ADL to show cause why its hearing request should not be dismissed for abandonment or for failure to comply with her docketing order. ADL responded by filing a readiness report.

In the Panchari case, C-01-438, CMS timely filed its report of readiness and motion for consolidation with C-01-433. Dr. Panchari timely filed his report of readiness. Dr. Panchari then filed a motion for summary judgment with a supporting brief and exhibits on August 17, 2001. On August 20, 2001, CMS filed its cross-motion for summary judgment with a supporting brief and exhibits. On September 28, 2001, Dr. Panchari filed his brief in opposition to the CMS motion for summary judgment and CMS filed its brief in opposition to Dr. Panchari's motion for summary judgment. On October 15, 2001, CMS filed a reply to Dr. Panchari's brief in opposition to the CMS motion for summary judgment and Dr. Panchari filed a reply to CMS's response to Dr. Panchari's motion for summary judgment.

On March 31, 2003, both cases were reassigned to me for hearing and decision. On June 6, 2003, I issued an order denying the cross-motions for summary judgment, consolidating the cases under Docket No. C-01-433, establishing an exchange and briefing schedule, and setting the case for hearing to begin September 2, 2003. (6) Neither Dr. Panchari nor Mr. Rahman filed briefs or exhibits as required by my order of June 6, 2003. Counsel for Dr. Panchari did submit a letter dated July 24, 2003 stating that settlement discussions with CMS had not resulted in a settlement; that Dr. Panchari was without the financial means to continue to pursue his rights under the administrative process; that Dr. Panchari "will not be taking any further actions to defend himself against the action brought by CMS[,] . . . will not be filing any of the pleadings required by the June 6 Order [, and will not] participate in the hearing on this matter scheduled to begin on September 2, 2003." Counsel also asked me:

to consider the arguments made by Dr. Panchari in his papers supporting his Motion for Summary Judgment and opposing the government's Motion for Summary Judgment when hearing the evidence offered by the government in the hearing scheduled for September 2, 2003. Dr. Panchari, therefore, would ask the Court to take judicial notice of those pleadings when evaluating the government's evidence as it is the government's burden to prove its case, whether Dr. Panchari is present or not.

Court Ex. 2. Although Dr. Panchari did not participate in the hearing of this case, my September 30, 2003 and October 6, 2003 orders were served upon counsel for Dr. Panchari. Dr. Panchari made no request for a copy of the transcript and submitted no post hearing briefs.

On July 29, 2003, CMS moved, as to all Petitioners, to dismiss the case for abandonment and for sanctions against Mr. Rahman. On August 1, 2003, I ordered Petitioners to show cause why the case should not be dismissed for abandonment or as a sanction, and I set a prehearing telephonic conference for August 15, 2003. My order of August 19, 2003, memorializes the prehearing conference of August 15, 2003 and reflects my rulings on the order to show cause. I declined to dismiss as to Dr. Panchari, finding that, while he affirmatively waived his right to participate in the oral hearing, he desired a decision based on his summary judgment submissions and the evidence developed at the oral hearing. I also declined to dismiss as to Mr. Rahman as a sanction but, rather, concluded that the remedy of excluding evidence he offered would be more appropriate on a showing of prejudice by CMS. Mr. Rahman also advised me during the prehearing conference that he was no longer represented by an attorney. I denied Mr. Rahman's request for postponement of the hearing of the case to permit him to obtain counsel, and he proceeded without counsel.

A hearing was held in this case from September 2 through 5, 2003, in Los Angeles, California. At the hearing, I admitted CMS Exs. 1 through 46, P. Exs. 1 through 5, and Court Exhibits (Court Exs.) 1 and 2. The documents identified as Petitioner Exhibits are documents submitted by Mr. Rahman at the hearing. By order dated October 6, 2003, I admitted the following additional exhibits into the record, which will hereafter be cited as indicated: CMS's exhibits in support of its motion for summary judgment as CMS SJ Exs. 1-11, (7) Dr. Panchari's exhibits in support of his motion for summary judgment as Panchari SJ Exs. 1-9, and declarations submitted by Dr. Panchari as Dec. of Panchari and Dec. of Abrams. In the October 6 order, I noted that the summary judgment pleadings in Docket No. C-01-438 are part of the record in this case by virtue of the consolidation order issued June 6, 2003. CMS presented the testimony of three witnesses at hearing: Donald Newbold, and Janice Otey (State agency examiners for the September survey) and Mary Katherine Jew (a CMS employee). Mr. Rahman testified on his own behalf.

After the hearing, I issued an Order Establishing Bifurcated Post Hearing Briefing Schedule, dated September 30, 2003 and reissued on October 6, 2003, directing the parties to simultaneously file post hearing briefs addressing five specific issues set out in the Order: (1) whether, on the current record, it can be determined that the laboratory was in violation of the CLIA condition at 42 C.F.R. � 493.1403 (Tag 6000 - Laboratory Director); (2) whether, on the current record, it can be determined that the laboratory was in violation of the CLIA condition at 42 C.F.R. � 493.1421 (Tag 6063 - Testing Personnel); (3) whether, if it is concluded the laboratory violated the condition level requirements at 42 C.F.R. �� 493.1403 and 493.1421, that either condition level requirement would be a sufficient basis for revocation of ADL's CLIA certificate; (4) whether, in light of the purposes for imposing a CMP, it is appropriate to impose or continue the accrual of the CMP after a state has terminated operation of the laboratory by court order; and (5) whether, in light of the fact that California had terminated operation of ADL by court order in September 2000, it is appropriate to impose a CMP in the immediate jeopardy range in December 2000. Both CMS and Mr. Rahman filed post-hearing briefs and responses. (8)

II. FINDINGS OF FACT AND CONCLUSIONS OF LAW

A. FINDINGS OF FACT

The following findings of fact are based upon the admitted exhibits and the transcript of the proceedings. Citations to transcript pages and exhibit numbers related to each finding of fact may be found in the analysis section of this decision.

1. On September 21, 2000, State agency examiners completed a survey of ADL, finding that ADL was not in compliance with requirements of CLIA, and they declared that the noncompliance presented immediate jeopardy to the public.

2. The State agency examiners alleged specifically in the SOD, that ADL was not in compliance with the condition level requirements set forth at 42 C.F.R. � 493.801 (enrollment and testing of samples); � 493.1101 (patient test management); � 493.1201 (quality control); � 493.1403 (laboratory director); � 493.1409 (technical consultant); � 493.1421 (testing personnel); and � 493.1701 (quality assurance). CMS Ex. 1.

3. On September 26, 2000, a temporary restraining order and order to show cause re: preliminary injunction was issued by the Superior Court of Los Angeles County ordering ADL and Mr. Rahman not to engage in operating a clinical laboratory or any other laboratory in California. CMS Ex. 7. A preliminary injunction against ADL and Mr. Rahman was issued on January 10, 2001. CMS Ex. 46. The injunction is effective until "after all appeals have been exhausted from the administrative action to revoke the defendant's clinical laboratory license." Id. at 2.

4. On November 5, 2001, Mr. Rahman pled no contest to and was found guilty of two criminal counts for violating CAL. BUS. & PROF. CODE �� 1220(d)(2)(A) (for failing to document critical patient test values when reported to the health care provider) and 1282 (for engaging in clinical laboratory practice without a license). Five remaining counts, which also concerned violations of California law governing clinical laboratories, were dismissed. CMS Ex. 35, at 1, 5.

5. On December 5, 2000, CMS informed Mr. Rahman that ADL's CLIA certificate would be revoked unless, within 10 days, he provided CMS with a credible allegation of compliance and acceptable evidence documenting the immediate jeopardy caused by the ADL's noncompliance had been removed. CMS Ex. 2. CMS also proposed the following: (1) a CMP in the amount of $10,000 per day, effective December 15, 2000 and to run until the laboratory's CLIA certificate was suspended effective December 21, 2000; (2) a directed plan of correction directing the laboratory to cease all testing effective December 15, 2000, until such time as ADL could demonstrate that it was in compliance with all CLIA requirements, and to submit to CMS within ten days a list of the names and addresses of all physicians, providers, suppliers and other clients who had used the services of the laboratory since December 1998, so that CMS could advise these individuals of the nature of the laboratory's non-compliance; (3) suspension of the laboratory's CLIA certificate, effective on December 21, 2000; (4) revocation of the laboratory's CLIA certificate, effective on February 3, 2001 unless the laboratory requested a hearing prior to that date; and, (5) cancellation of the laboratory's approval to receive Medicare payments for services performed on or after December 21, 2000. Id. In that same letter, CMS informed Mr. Rahman and Dr. Luis Hernandez that, as ADL's owner and operator respectively, they would be prohibited from owning, operating or directing a laboratory for two years pursuant to 42 U.S.C. � 263a(i)(3) if ADL's CLIA certificate was revoked.

6. On December 6, 2000 and January 19, 2001, CMS informed Dr. Panchari that, as a former operator of ADL, he would be prohibited from owning, operating or directing a laboratory for two years pursuant to 42 U.S.C. � 263a(i)(3) if ADL's CLIA certificate was revoked. CMS Exs. 3, 6.

7. Mr. Rahman, as owner of ADL, and Dr. Panchari appealed CMS's determinations and these appeals were docketed as Docket No. C-01-433 and Docket No. C-01-438 respectively.

8. Counsel for Dr. Panchari, by letter dated July 24, 2003, waived Dr. Panchari's participation in the oral hearing of this case. Court Ex. 2.

9. In setting-up ADL, Mr. Rahman rented space, collected necessary equipment, obtained a Medicare provider number and a CLIA certificate, and applied for a Medi-Cal provider number.

10. In January 2000, Mr. Rahman hired Dr. Panchari as the laboratory director of ADL.

11. Dr. Panchari was registered pursuant to CLIA as the laboratory director of ADL from January 18, 2000 until his resignation effective July 20, 2000. CMS Exs. 8, 9; Panchari SJ Exs. 5 & 7.

12. In May 2000, Mr. Rahman hired one employee to work in the laboratory and secured his first and only customer, Dr. Hernandez, who later became registered as laboratory director.

13. ADL began conducting tests on human specimens in May 2000.

14. ADL billed Medicare for testing ordered by Dr. Hernandez and occurring in May 2000.

15. ADL sent some specimens received from Dr. Hernandez to reference laboratories for testing.

16. ADL did not note on its reports to Dr. Hernandez that specimens had been sent to a reference laboratory for testing or list the identity of the reference laboratories.

17. Dr. Luis Hernandez became laboratory director of ADL effective August 16, 2000, and remained director until he resigned effective September 22, 2000.

18. As he admitted in his declaration, Dr. Panchari did not provide overall management and direction of ADL in accordance with 42 C.F.R. � 493.1407 between May 9, 2000, when testing began, through the date of his resignation, July 20, 2000.

19. Between July 20, 2000, when Dr. Panchari resigned as director of ADL, and August 16, 2000, when Dr. Hernandez accepted the title of laboratory director, there was no laboratory director of ADL.

20. Dr. Hernandez was ADL's registered CLIA laboratory director from August 16 through September 22, 2000, when he resigned, but Dr. Hernandez did not perform any duties as laboratory director.

21. ADL had no qualified individual performing the duties of a laboratory director, as specified at 42 C.F.R. � 493.1407, during the period May 9, 2000 to September 17, 2000, while human testing was being done and reported.

22. California requires that clinical laboratory testing personnel be licensed, but Mr. Rahman conducted testing at ADL with no California license. CMS Exs. 35, 36.

23. Mr. Rahman engaged in testing and other activities which required a California license, even though he had no license and no supervision by a qualified and licensed person.

24. Mr. Rahman admitted during his testimony that he knew he was not in compliance with CLIA, but he was counting on the State examiners to give him time to correct any deficiencies they identified. Tr. at 1138-1139.

25. ADL was never in compliance with CLIA.

26. ADL never had a director that fulfilled the responsibilities of a director in accordance with 42 C.F.R. � 493.1407.

27. Mr. Rahman actively and intentionally violated CLIA by operating ADL without ensuring that his laboratory directors were actively engaged in overseeing the laboratory.

28. Mr. Rahman violated California law and the requirements of CLIA by conducting testing himself without the license required by California law.

29. The State agency examiners recommended that the State obtain an injunction against ADL and that CMS revoke ADL's CLIA certificate. CMS Ex. 12, at 7.

B. CONCLUSIONS OF LAW

1. Requests for hearing were timely filed by Petitioners.

2. CLIA grants the Secretary of Health and Human Services (Secretary) 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 CLIA certification.

3. The Secretary's regulations give CMS broad authority to ensure that laboratories perform as Congress intended, including authority to inspect and sanction laboratories that fail to comply with the regulatory requirements. 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); 42 C.F.R. � 493.1 et seq.

4. Pursuant to the enforcement provisions of the regulations, CMS may impose principal or alternative sanctions when it finds that a laboratory has a "condition-level" deficiency. 42 C.F.R. � 493.1804(b)(2).

5. Congress intended that principal and alternative sanctions imposed on CLIA laboratories by the Secretary serve a remedial purpose. At 42 C.F.R. � 493.1804(a), the Secretary has specified three remedial purposes for the imposition of sanctions against CLIA laboratories.

6. Since each "condition" represents a major division of laboratory services to be offered by the laboratory or an important safety requirement, failure by a laboratory to comply with even a single applicable condition can represent a critical breakdown in one of the major health care delivery or safety systems of the laboratory justifying revocation of the laboratory's CLIA certificate. 42 C.F.R. 493.1804(b); Ward General Practice Clinic, DAB No. 1624, at 2 (1997); Edison Medical Laboratories, Inc., DAB No. 1712 (1999).

7. CLIA requires that a laboratory have a qualified laboratory director who is required to assume oversight and responsibility for the laboratory and the results of its testing. See 42 C.F.R. �� 493.1403, 1405, 1407, 1441, 1443, & 1445.

8. ADL violated the condition for laboratory director set forth at 42 C.F.R. � 493.1403 because it did not have a laboratory director who provided overall management and direction in accordance with 42 C.F.R. � 493.1407.

9. No qualified individual fulfilled the laboratory director duties set forth at 42 C.F.R. � 493.1407 from May 9, 2000 to September 17, 2000, the period of human specimen testing at ADL.

10. Testing at ADL by Mr. Rahman, who was not licenced by the State of California to engage in clinical laboratory practice, amounted to a condition level violation of 42 C.F.R. � 493.1421.

11. Condition level deficiencies existed at ADL and there is a basis for revoking the laboratory's CLIA certificate.

12. Imposition of the principal remedy of revocation serves the remedial purposes of protecting individuals against substandard testing and safeguarding the general public against health and safety hazards that might result from ADL's activities.

13. A CMP is an "alternative sanction" that the Secretary has authorized CMS to impose on a laboratory that is out of compliance with one or more CLIA conditions. 42 C.F.R. � 493.1806(c).

14. The imposition of an alternative sanction is subject to ALJ review as an initial determination. 42 C.F.R. � 493.1844(b)(3). This includes review of whether, on the facts of this case, it was lawful for CMS to impose a CMP against ADL, i.e., whether ADL "no longer substantially [met] the requirements for the issuance of a certificate" (42 U.S.C. � 263a(h)(1)) and whether CMS's imposition of the CMP was contrary to section 1846, CLIA, and the implementing regulations.

15. The imposition of a CMP in this case does not serve a remedial purpose as set forth in 42 C.F.R. � 493.1804(a) and imposition of the CMP is, therefore, inconsistent with section 1846, CLIA and implementing regulations.

16. CLIA gives owners and operators the right to request a hearing to challenge the suspension, limitation or proposed revocation of their laboratory's CLIA certificate for failure to comply with CLIA conditions and standards. 42 U.S.C. � 263a(i)(1)(C).

17. CLIA does not give owners and operators the right to challenge the imposition of the two-year ban of 42 U.S.C. � 263a(i)(3).

18. Pursuant to 42 C.F.R. � 493.2, an "operator" of a CLIA laboratory is the individual or group of individuals, including the laboratory director, who oversees all facets of the operation of a laboratory and who bears primary responsibility for the safety and reliability of the results of all specimen testing performed in that laboratory.

19. The regulatory definition of director and the comprehensive description of a director's responsibilities establish a rebuttable presumption that a director is also an operator. 42 C.F.R. �� 493.2; 493.1403; 493.1405; 493.1407; 493.1441; 493.1443; 493.1445.

20. Dr. Panchari is a proper party to this proceeding, as he was laboratory director with duties and responsibilities equivalent to those of an operator as that term is used in 42 U.S.C. � 263a(i)(1)(C) and (i)(3) and, as an operator, he had the right to request a hearing.

21. Dr. Panchari did not rebut the presumption that he was an operator of ADL.

22. Pursuant to 42 U.S.C. � 263a(i)(3), the owners and operators of a non-compliant laboratory that has its CLIA certificate revoked are not eligible to own or operate another CLIA laboratory for two years.

23. Dr. Panchari was a laboratory director of ADL and an operator of ADL within the meaning of the regulations and is subject to the two-year ban on owning or operating another laboratory imposed by 42 U.S.C. � 263a(i)(3).

III. DISCUSSION

A. ISSUES

      1. Whether condition level deficiencies existed at ADL;

      2. Whether the remedies imposed by CMS on ADL are consistent with the Act, CLIA and the implementing regulations, and

      3. Whether Dr. Panchari is subject to the two year ban on owning or operating another laboratory pursuant to 42 U.S.C. � 263a(i)(3).

B. APPLICABLE 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, 1302, 1395x(e). 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. CLIA grants the Secretary 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 Secretary's regulations give CMS broad authority to ensure that laboratories perform as Congress intended, including authority to inspect and sanction laboratories that fail to comply with the regulatory requirements. 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); 42 C.F.R. � 493.1 et seq. Pursuant to the enforcement provisions of the regulations, CMS may impose principal or alternative sanctions when it finds that a laboratory has a "condition level" deficiency. 42 C.F.R. � 493.1804(b)(2). Principal sanctions include suspension, limitation, or revocation of a CLIA certificate. 42 C.F.R. � 493.1806(b). Alternative sanctions include a directed plan of correction, state on-site monitoring, and CMP. 42 C.F.R. � 493.1806(c). Cancellation of Medicare payments is also authorized as a principal sanction when condition level deficiencies are found (42 C.F.R. �� 493.1807(a); 493.1842(b)) and required when CMS suspends or revokes a laboratory's certificate (42 C.F.R. � 493.1842(a)).

Each condition level requirement of the regulations represents a major division of laboratory services to be offered by the laboratory or establishes an important environmental protection for the laboratory. Since each "condition" represents a major division of laboratory services to be offered by the laboratory or an important safety requirement, it has been held that a failure by a laboratory to comply with even a single applicable condition can represent a critical breakdown in one of the major health care delivery or safety systems of the laboratory. Ward General Practice Clinic, DAB No. 1624, at 2. Therefore, violation of just one condition level deficiency can be grounds for a principal sanction, including revocation of a laboratory's CLIA certificate. 42 C.F.R. 493.1804(b); Edison, DAB No. 1712.

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 implementing 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 administrative law judge (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(a)(2). 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). The imposition of alternative sanctions is also an initial determination subject to appeal (42 C.F.R. � 493.1844(b)(3)), but the determination of which alternative sanctions to impose and the amount of the CMP to be imposed are not. 42 C.F.R. �� 493.1844(b)(3) & (c)(4). Section 498.74 of 42 C.F.R. provides that, absent appeals to the Departmental Appeals Board or the U.S. District or Circuit Courts, my decision is final.

In addition to sanctions directed against laboratories, CLIA provides the following with respect to the owners and operators of non-compliant laboratories:

(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 implementing regulations do not include any express provision implementing or imposing this two-year prohibition against an offending owner or operator. (9) However, the regulations provide that CMS may revoke a laboratory's CLIA certificate if it finds that the owner or operator has -

[w]ithin the preceding two-year period, owned or operated a laboratory that had its CLIA certificate revoked. (This provision applies only to the owner or operator, not to all of the laboratory's employees.)

42 C.F.R. � 493.1840(a)(8).

CLIA does not include a definition of the term operator. However, the regulations define an "operator" as:

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.

The "stated criteria" for a laboratory director to be considered an operator are those criteria described in the introductory sentence of the section, i.e., whether a person oversaw all facets of the operation of the laboratory and bore primary responsibility for the safety and reliability of the results of specimen testing performed in the laboratory. Sentinel Medical Laboratories, Ind., DAB No. 1762, at 13 (2001); Sol Teitlebaum, M.D., DAB No. 1849, at 8 n.7 (2002).

It is a condition level requirement that a CLIA certified laboratory have a qualified laboratory director who is required to assume oversight and responsibility for the laboratory and the results of its testing. See 42 C.F.R. �� 493.1403, 1405, 1407, 1441, 1443, & 1445.

The burden of proof in an appeal of CMS's sanctions is set forth in Hillman Rehabilitation Center, DAB No. 1611 (1997). Edison, DAB No. 1713 (Hillman burden of proof applicable in CLIA appeals). At a hearing, CMS has the burden of coming forward with sufficient evidence to prove a prima facie case of noncompliance with one or more CLIA conditions. The petitioner then has the ultimate burden of showing by a preponderance of the evidence that it was not out of compliance with the conditions placed at issue by CMS in its prima facie case. Regarding the imposition of sanctions, the issue to be resolved by the ALJ is not whether CMS properly exercised discretion in imposing either principal or alternative sanctions, but, rather, whether a basis existed for the imposition of sanctions under governing statutory and regulatory authorities based upon the evidence before the ALJ, i.e. the ALJ resolves these issues de novo. Cf. Emerald Oaks, DAB No. 1800 (2001).

C. ANALYSIS

The decision in this case includes three primary conclusions:

1. Condition level deficiencies existed at ADL;

2. The imposition of a revocation is a consistent with the Act, CLIA and the implementing regulations, but the imposition of a CMP is not consistent with the Act, CLIA and implementing regulations;

3. Dr. Panchari was laboratory director of ADL and an operator of ADL within the meaning of the regulations and subject to the two-year ban on owning or operating another laboratory imposed by 42 U.S.C. � 263a(i)(3).

Before discussing the foregoing primary conclusions, I address two other matters raised by Mr. Rahman: his allegations regarding examiner abuse or bias and his assertions regarding the amount of testing done at ADL. Mr. Rahman argues that the examiners who conducted the September 2000 survey were prejudiced against him, came to ADL with the intention of shutting the laboratory down, and conducted the survey unfairly. (10) He introduced evidence showing that he had been making these contentions for years. P. Ex. 5. However, as I explained to him several times at the hearing, the issue before me is whether ADL had condition level deficiencies, and the purpose of the hearing was to give Mr. Rahman an opportunity to prove that ADL was in compliance with CLIA requirements. My review of this question is de novo and I am not bound by the findings and conclusions of the examiners. Further, while I find the examiners' testimony credible, none of their testimony is really critical to this decision. Rather, Mr. Rahman's admissions and evidence from Dr. Panchari, Dr. Hernandez, and an ADL employee's statements to the Los Angeles District Attorney are more than sufficient to establish that ADL was not in compliance with the CLIA condition for laboratory director or the condition for laboratory personnel.

I also need not resolve exactly how many or which tests were actually being conducted at ADL because the evidence clearly establishes two condition level deficiencies without looking further. However, in order to place the issues I do resolve in context, it is necessary to understand some undisputed facts regarding the setup and operation of the laboratory. Mr. Rahman rented space, collected necessary equipment, obtained a Medicare provider number and a CLIA certificate, and applied for a Medi-Cal provider number. In January 2000, Mr. Rahman hired Dr. Panchari as a laboratory director to start a clinical laboratory business. In May 2000, Mr. Rahman hired one employee to work in the laboratory and secured his first and only customer, Dr. Hernandez, who later became ADL's registered laboratory director. There is no dispute as between Mr. Rahman and CMS that some testing of human specimens was being performed at ADL beginning in May 2000. ADL also billed for the testing ordered by Dr. Hernandez beginning in May 2000. There is also no dispute that ADL sent some specimens received from Dr. Hernandez to reference laboratories for testing. How many specimens were sent to reference laboratories is subject to dispute because ADL did not indicate on its reports to Dr. Hernandez that specimens had been sent to a reference laboratory for testing or list the identities of the reference laboratories. (11) At the hearing, Mr. Rahman said that "99%" of the testing was done by reference laboratories (Tr. at 1114, 1230) and, at hearing, he produced many records of reference laboratory testing. Mr. Rahman's assertion that 99% of the tests were performed by reference laboratories is not credible because it is inconsistent with the other evidence on this point. (12) Further, it is clear from all the evidence that Mr. Rahman did not make much effort during the September survey to provide reference laboratory documentation to the examiners. He also did not explain in his Plan of Correction the degree to which tests were being conducted by reference laboratories. See Tr. at 917, 920, 932, 936-937, 938-939, 1108-1109; CMS Ex. 1, at 21. While it is now clear that much of the testing reported by ADL was performed at other laboratories, how much testing was referred is not an issue I need resolve. It is clear from Mr. Rahman's evidence that ADL was conducting testing for which it billed Medicare. Furthermore, even if ADL tested only one human specimen, it had to comply with CLIA.

1. Condition level deficiencies existed at ADL and there is a basis for revoking the laboratory's CLIA certificate.

(a) ADL violated the condition for laboratory director set forth at 42 C.F.R. � 493.1403 because it did not have a laboratory director who provided overall management and direction in accordance with 42 C.F.R. � 493.1407.

CMS alleges that ADL did not comply with the condition level requirement set forth at 42 C.F.R. � 493.1403 (cited at Tag D6000 of the SOD). Section 493.1403 provides:

The laboratory must have a director who meets the qualification requirements of � 493.1405 of this subpart and provides overall management and direction in accordance with � 493.1407 of this subpart.

Section 493.1405, a standard level requirement, sets forth qualification requirements calculated to ensure that individuals are competent to direct laboratories. Section 493.1407, a standard level requirement, provides that the 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 test results promptly, accurately and proficiently, and for assuring compliance with the applicable regulations. Specific responsibilities assigned to the director are set out in the remainder of section 493.1407.

There is no dispute that Dr. Panchari was registered as ADL's CLIA laboratory director from January 18, 2000 until his resignation effective July 20, 2000. CMS Exs. 8, 9; Panchari SJ Exs. 5, 7. Upon Dr. Panchari's resignation, the State agency notified Mr. Rahman that section 1265(e) of the California Business and Professions Code required the laboratory to obtain a new director within thirty days in order to avoid automatic revocation of its clinical laboratory license. CMS Ex. 9, at 2; Panchari SJ Ex. 7. Dr. Luis Hernandez became director effective August 16, 2000, and remained director until he resigned effective September 22, 2000. CMS Exs. 8, 10. CMS alleges that neither Dr. Panchari nor Dr. Hernandez fulfilled the responsibilities set forth in 42 C.F.R. � 493.1407.

The evidence clearly establishes that, while Dr. Panchari and Dr. Hernandez were registered as ADL's CLIA laboratory directors, neither performed more than minimal duties in that capacity. Dr. Panchari was retained by Mr. Rahman as ADL's laboratory director in January 2000. Dr. Panchari was a medical doctor specializing in pathology and an employee of Glenview Pathology Medical Group, Inc., a practice that staffed laboratories with pathologists and provided medical directorships for laboratories. Dec. of Panchari at 1. Therefore, Dr. Panchari was clearly qualified to be and should have understood the responsibilities of a director. In his affidavit, Dr. Panchari stated that Mr. Rahman told him that ADL was not operational and that he would inform Dr. Panchari when ADL did begin conducting patient tests. Dr. Panchari represented further that Mr. Rahman never informed him that testing at ADL had started. (13) Id. at 2. In fact, there is no dispute that ADL began specimen testing in May 2000 but none of the testing was managed or directed by Dr. Panchari. Neither Dr. Panchari nor Mr. Rahman assert that Dr. Panchari managed or directed operation of the laboratory from the time human testing began about May 9, 2000 through the effective date of Dr. Panchari's resignation as laboratory director on July 20, 2000. Thus, it is clear that no qualified individual was fulfilling the duties specified for a laboratory director from May 9, 2000 to July 20, 2000.

When the State agency learned of Dr. Panchari's resignation it directed Mr. Rahman to engage a new laboratory director within 30 days. Between July 20, 2000 and August 16, 2000, when Dr. Hernandez accepted the title of laboratory director, there is no evidence of any other director.

It is also clear that, during his entire tenure as laboratory director, Dr. Hernandez did not understand that he was responsible "for provid[ing] overall management and direction [of the laboratory] in accordance with � 493.1407" as required by 42 C.F.R. � 493.1403. Rather, he told the examiners that "he was unaware that his official status as director had started" and that "he was waiting for Mr. Rahman to explain his duties and responsibilities." Tr. at 231-232. He further stated he never visited the laboratory and did nothing to carry out his responsibilities as a director. Id.

The testimony of the examiners regarding Dr. Hernandez's statements is corroborated by Dr. Hernandez's September 22, 2000 resignation letter to Mr. Rahman that stated:

Effective immediately, I will no longer be considered for your laboratories Medical Director.

Your dishonesty with numerous questions asked is criminal. You were asked if I needed any special training or qualifications, you said no "just an MD." You were asked if you had considered you other clients and replied, "I thought of you first," then you were asked if you had any other clients and you said "Of course, several." When I told you I was too busy to take on any more responsibilities, no matter how easy it sounded, you pleaded, "If I don't get a doctor, I'll have to closed today!" I questioned about your previous director, you mention they were a pathologists who have never been available and did not "show up" to a State of California accreditation meeting, which is why you were in this dilemma. Then, after I signed your forms in the middle of a very busy day, I asked you not to send them until I went to the lab, which you agreed.

CMS Ex. 10. Thus, while Dr. Hernandez was registered as ADL's CLIA laboratory director from August 16 through September 22, 2000, Dr. Hernandez did not perform any of the duties of a laboratory director.

Mr. Rahman did not dispute CMS's assertion that Dr. Hernandez never supervised the operation of ADL. As to Dr. Panchari, Mr. Rahman represents, and CMS does not dispute, that Dr. Panchari reviewed and signed some procedures for ADL to follow. Tr. at 1150. Mr. Rahman further represents that ADL did no specimen testing until May 9, 2000 and that much of the testing for which it billed was referred out to other laboratories. Rahman Response at 14-16. However, Mr. Rahman does not assert that Dr. Panchari supervised, reviewed, managed, or directed the testing ADL conducted in May, June and July. Id. at 15-17.

Based on the foregoing, I conclude that ADL had no one performing the duties of a laboratory director specified at 42 C.F.R. � 493.1407 during the period May 9, 2000 to September 17, 2000, while human testing was being done. There was no laboratory director ensuring the quality of laboratory services; that the laboratory environment was appropriate and safe; that results reported were accurate and reliable; that proficiency testing was being done; that quality control and assessment programs were being maintained; that appropriate remedial actions were undertaken; that reports included required information; that qualified consultation was available for clients; that sufficient numbers of trained and qualified people were employed; or ensuring that any of the other duties specified by section 493.1407 were being fulfilled. (14) The evidence here is clear that no laboratory director provided overall management and direction of the laboratory during the period of human testing, a clear violation of the condition level requirement of 42 C.F.R. � 493.1403. In ADL's Plan of Correction dated December 20, 2000, Mr. Rahman represented that ADL had employed a new director who was "experienced" and "qualified" and who "is going to take an assertive and active role the direction of the laboratory." CMS Ex. 1, at 39. However, Mr. Rahman did not identify this director and there is no credible evidence to support this allegation. Therefore, I conclude that ADL was not in compliance with the condition level requirement of 42 C.F.R. � 493.1403. (15)

(b) Testing at ADL by Mr. Rahman, who was not licensed by the State of California to engage in clinical laboratory practice, amounted to a condition level violation of 42 C.F.R. � 493.1421.

Section 493.1421 establishes the condition level requirement that a laboratory performing moderate complexity tests have a sufficient number of individuals who meet the qualification requirements sets forth in 42 C.F.R. � 493.1425 for the volume and complexity of tests performed. One of the qualification requirements is that each individual performing moderate complexity testing "posses a current license issued by the State in which the laboratory is located, if such licensing is required." 42 C.F.R. � 493.1423(a). In California, it is unlawful for a person to engage in clinical laboratory practice unless licensed to do so under California law. CAL. BUS. & PROF. CODE � 1282.

It is undisputed that Mr. Rahman conducted tests at ADL. Mr. Rahman was convicted in a California court of unlawfully engaging in clinical laboratory practice without a license in violation of CAL. BUS. & PROF. CODE � 1282. CMS Ex. 35, at 5 & 36. The judgment of the California court is entitled to full faith and credit. See U.S. Const., Art. IV, sec. 1. The evidence also shows that Mr. Rahman did testing and calibration of equipment without the supervision of someone with a license. Tr. at 1182-1186; CMS Ex. 1, at 60 (plan of correction, right column); see also CMS Ex. 26, at 2.

I find that Mr. Rahman's testing of human specimens without a California license, with or without a qualified testing person present, violated the standard level requirements of 42 C.F.R. � 493.1423(a). Mr. Rahman's only defense to this violation is his assertion that he was subject to the supervision or review of the one licensed testing person he employed. However, the law recognizes no such defense as the regulations are specific that each person conducting testing must have a current license if such is required by the state. I also find incredible Mr. Rahman's allegation that he was supervised and reviewed by someone he testified he had to train until as late as August or September of 2000. Tr. 1182-1186. I further find that Mr. Rahman's testing of human specimens amounted to a condition level violation of section 493.1421. Section 493.1421 requires that a laboratory have a sufficient number of qualified testing personnel relative to the volume and complexity of testing performed. While it may be argued that ADL's one qualified tester(16) was sufficient for the "volume and complexity of the testing performed" at ADL, I do not think that the regulation should be so strictly construed. In fact, any testing by an unqualified person, particularly unsupervised, marks a departure from the high standards intended by CLIA for the protection of the public and should not be condoned.(17)

2. The imposition of revocation is consistent with CLIA and the implementing regulations, but the imposition of a CMP is not consistent with section 1846 of the Act, CLIA, and implementing regulations.

Section 1846 and CLIA authorize the Secretary to impose a range of sanctions on noncompliant laboratories. These sanctions are civil sanctions rather than retributive or punitive sanctions. See Batavia Nursing and Convalescent Center, DAB No. 1904, at 18 (2004). Civil sanctions must serve a remedial purpose. Hanlester Network, DAB No. 1275, at 51-52 (1991), citing United States v. Halper, 490 U.S. 435, at 488 (1989).

At 42 C.F.R. � 493.1804(a), the Secretary has specified, three remedial purposes for the imposition of sanctions against CLIA laboratories:

(1) To protect all individuals served by laboratories against substandard testing.

(2) To safeguard the general public against health and safety hazards that might result from laboratory activities.

(3) To motivate labs to comply with CLIA requirements so that they can provide accurate and reliable test results.

As explained below, I conclude that the sanction of revocation is consistent with CLIA because it served the remedial purpose of protecting individuals against substandard testing by ADL and safeguarding the general public against health and safety hazards that might result from ADL's activities. 42 C.F.R. � 493.1804(a). In contrast, I conclude that the CMP in this case did not serve a remedial purpose and therefore is contrary to section 1846 and CLIA.

(a) Revocation of ADL's CLIA certificate served a remedial purpose.

CMS may impose a principal sanction of suspension, limitation, or revocation of a laboratory's CLIA certificate when, on examination, the laboratory is found to be out of compliance with one or more CLIA conditions. 42 C.F.R. � 493.1806; Edison, DAB No. 1712.

CMS's revocation of ADL's CLIA certificate served the remedial purposes of protecting individuals against possible substandard testing by ADL and safeguarding the general public against health and safety hazards that might result from ADL's activities. 42 C.F.R. � 493.1804(a). As discussed above, ADL was not in compliance with at least two condition level requirements the entire time ADL was doing human testing and thereafter. Mr. Rahman suggests that he attempted to comply with CLIA by hiring Dr. Panchari, an experienced professional director. (18) However, Mr. Rahman did not follow through and actually involve Dr. Panchari in the operation of ADL in a manner required by the regulations. Whether Mr. Rahman was concerned that Dr. Panchari would impose too strict standards for ADL's operation, (19) or he was trying to save money, or he had some other motivation are issues that need not be resolved. The fact is Dr. Panchari never became involved with managing and directing the operation of the laboratory as required by the regulations. In recruiting Dr. Hernandez to be director, Mr. Rahman displayed flagrant disregard for the CLIA requirement that the laboratory have a qualified laboratory director managing and directing every aspect of laboratory operations. It is clear that, while Dr. Hernandez was licensed as a medical doctor, he did not have the training, time, or desire to act as a CLIA laboratory director and he communicated that to Mr. Rahman. Mr. Rahman no doubt felt he was qualified to and could competently operate ADL without the active participation of a laboratory director. Mr. Rahman no doubt felt he was as fully qualified to conduct testing as the licensed testing person he hired. Whether or not Mr. Rahman was correct in his assessment of his abilities I need not judge. CLIA and the implementing regulations set standards that were created for the protection of the public and their violation authorizes remedies that encourage compliance or result in termination of the operation of the laboratory. Mr. Rahman, an intelligent person, clearly knew the requirements of the law but chose to ignore those requirements. Mr. Rahman admitted during his testimony that he knew he was not in compliance with CLIA, but he was counting on the State examiners to give him time to correct any deficiencies they identified. Tr. at 1138-1139. Mr. Rahman's brazen willingness to operate ADL without a CLIA director and his willingness to conduct testing even though not qualified as required by law fully justify my determination that revocation of the ADL's CLIA certificate is necessary for the protection of the public.

(b) The imposition of a CMP is contrary to CLIA, section 1846 of the Act, and the implementing regulations because the CMP served no remedial purpose.

In my September 30, 2003 order to the parties to file errata and establishing a bifurcated post hearing briefing schedule, I asked the parties to address two issues related to the CMP:

Whether, in light of the purposes for imposing a civil money penalty (CMP) . . . under section 1846 of the Social Security Act and the provisions of 42 C.F.R. � 493.1834(f), and of the provisions of 42 C.F.R. � 493.1834(f), it is appropriate to impose or continue the accrual of a CMP after a state has terminated operation of the laboratory by court order. Whether, in light of the fact that the State had terminated operation of ADL by court order in September 2000, it is appropriate to impose a CMP in the immediate jeopardy range in December 2000. 42 C.F.R. � 493.1834(d)(2).

CMS responded in its post hearing brief that the regulations authorize it to impose a CMP and neither the CMS determination to impose a CMP nor the amount are subject to appeal. CMS relies upon 42 C.F.R. � 493.1844(c)(4), which provides that the CMS determination of which alternative sanction to impose and the amount of the CMP imposed are not initial determinations and are not subject to appeal. CMS Brief at 28-29.

In its response brief, while still maintaining that I did not have jurisdiction to review its imposition of the CMP (CMS Response at 14 n.4), CMS asserted that its purpose in imposing the CMP was to motivate ADL to examine its testing for all patients and take corrective action to ensure those patients were not harmed by ADL's deficient practices. CMS argues that ADL did not need to be operating as a laboratory under CLIA to accomplish the remedial action CMS sought, i.e, ADL's examination of its testing for all patients and taking corrective action to avoid harm. CMS argues that despite the State court action putting ADL out of business in September 2000, CMS "had an obligation to require that ADL take action to correct whatever harm might have been done to its patients affected by the deficient practices." CMS Response at 12-13.

CMS raises two issues: (1) whether my jurisdiction to review the CMP includes the authority to review both whether ADL "no longer substantially [met] the requirements for the issuance of a certificate" (42 U.S.C. � 263a(h)(1)) and whether CMS's imposition of the CMP was contrary to law, and, if so, (2) whether the imposition of the CMP in this case was contrary to section 1846, CLIA, and the implementing regulations because it served no remedial purpose.

(i) I have jurisdiction to review the imposition of an alternative or intermediate sanction.

I reject the CMS argument that I have no jurisdiction to review whether its imposition of the CMP was contrary to law. A CMP is an "alternative sanction" that the Secretary has authorized CMS to impose pursuant to 42 C.F.R. � 493.1806(c). The Secretary has specifically granted a laboratory a right to appeal the imposition of a CMP pursuant to 42 C.F.R. � 493.1834(e)(2) (laboratory has 60 days from the date of receipt of the notice of intent to impose a civil money penalty to request a hearing). Further, 42 C.F.R. � 493.1844(b)(3) defines the imposition of an alternative sanction as an initial action subject to appeal and review. While CMS is correct that 42 C.F.R. � 493.1844(c)(4) provides that its choice of alternative sanctions and the amount of the CMP are not reviewable, section 493.1844(c)(4) does not deprive a petitioner of the right to hearing on the issue of whether imposition of an alternative sanction is consistent with section 1846, CLIA, and implementing regulations.

My interpretation of the regulations is consistent with the related statutes. Section 1846(a) of the Act (42 U.S.C. � 1395w-2) (applicable to those laboratories that are Medicare providers) and 42 U.S.C. � 263a(h) (CLIA) (applicable to all laboratories subject to CLIA) authorize the Secretary to impose intermediate sanctions (20) against a laboratory in violation of CLIA. Section 1846(b)(1) of the Act mandates that the Secretary "develop and implement" a range of intermediate sanctions and "appropriate procedures for appealing determinations related to the imposition of such sanctions." Section 1846(b)(2)(A) also provides that "[t]he provisions of section 1128A (other than subsections (a) and (b)) shall apply to a civil money penalty . . . ." Section 1128A(c)(2) requires that a party have notice and a right to hearing before a CMP may be imposed. Title 42 U.S.C. � 263a(h)(3) requires that the Secretary develop procedures that provide for notice and appeal of "determinations relating to the imposition of intermediate sanctions." The applicable statutes clearly require that in the procedures for imposing intermediate sanctions, the Secretary accord a laboratory the right to appeal the imposition of an intermediate sanction.

The right to appeal was certainly recognized by the drafters of 42 C.F.R. � 493.1844(d)(4) in a response to a comment about appealing a CMP amount:

the amount of a civil money penalty to impose per day or per violation is not an initial determination and therefore is not subject to appeal; rather, the imposition of an alternative sanction, (in this case a civil money penalty) is the action that is subject to appeal.

57 Fed. Reg. 7218, 7229 (Feb. 28, 1992).

Thus, I conclude that I have jurisdiction to determine whether, on the facts of this case, it was lawful for CMS to impose an intermediate sanction or alternative sanction against ADL, in this case the CMP. This jurisdiction includes both the authority to review whether ADL "no longer substantially [met] the requirements for the issuance of a certificate" (42 U.S.C. � 263a(h)(1)) and whether CMS's imposition of the CMP was contrary to section 1846, CLIA, and the implementing regulations.

(ii) Imposition of the CMP served no remedial purpose in this case and is contrary to law.

Since ADL was enjoined from operating as of September 26, a question arises as to how a CMP imposed in December served one of the remedial purposes set forth at 42 C.F.R. � 493.1804(a). CMS asserts the CMP was imposed to cause ADL to examine its testing for prior patients and take corrective action to ensure those patients were not being harmed by ADL's deficient practices. CMS Response at 12-13. As explained below, I reject CMS's explanation because, as a review of the facts before me shows, the CMP was not related to accomplishing a remedial purpose set forth in section 493.1804(a).

The key facts are not disputed. On September 26, 2000, a temporary restraining order and order to show cause re: preliminary injunction was issued by the Superior Court of Los Angeles County. ADL, Mr. Rahman, their employees and "all other persons, corporations, or other entities acting under, by, through, or on behalf" of ADL or Mr. Rahman were enjoined from operating a clinical laboratory or any other laboratory in California effective September 26, 2000. CMS Ex. 7. A preliminary injunction against ADL and Mr. Rahman and all others was issued on January 10, 2001. CMS Ex. 4. The injunction is effective until "after all appeals have been exhausted from the administrative action to revoke the defendant's clinical laboratory license." Id. at 2. Thus, ADL could not lawfully engage in any testing on and after September 26, 2000, for the indefinite future.

In its letter dated December 5, 2000, CMS advised Mr. Rahman that the State agency completed its survey of ADL on September 21, 2000, and the laboratory was out of compliance with multiple condition level requirements presenting immediate jeopardy to patient health and safety and the public. CMS stated that the findings were even more egregious given that Mr. Rahman had been cited for immediate jeopardy at another laboratory in 1997. CMS required Petitioners to provide a credible allegation of compliance and acceptable evidence showing that immediate jeopardy had been removed and that condition level compliance with all CLIA requirements had been achieved within 10 days of the date of the notice. CMS informed ADL that acceptable evidence of correction must include documentation of corrective action for prior patients. CMS further advised that it proposed imposing the principal sanctions of suspension of ADL's CLIA certificate and revocation after a hearing, if requested; cancellation of approval to receive Medicare payments; a CMP of $10,000 per day from December 15, 2000 through December 21, 2000 (the date ADL's CLIA certificate was suspended); and a directed plan of correction. CMS Ex. 2. By letter dated December 26, 2000, CMS advised Mr. Rahman that its was imposing the proposed sanctions as no credible allegation of compliance or evidence had been received. CMS Ex. 4.

The cancellation of Medicare payments and a directed plan of correction were required by the regulations in this case. See 42 C.F.R. �� 493.1808(a) (CMS concurrently cancels Medicare approval with suspension or revocation) and 493.1832 (at least a directed portion of a plan of correction must be imposed with suspension of Medicare payments or a CMP). The CMP proposed by CMS was not required by the regulation, but was a matter within CMS discretion based on the existence of condition level deficiencies (42 C.F.R. � 493.1834(c)). Although CMS is authorized to impose a CMP when condition level deficiencies are found, the CMP must serve a remedial purpose. CMS argues in its response brief that it imposed the CMP to compel Petitioners to document: (1) corrective action taken for patients found to have been adversely affected; (2) how the Petitioners had identified other patients potentially affected by the deficient practices; and (3) how Petitioners intended to prevent such deficiencies in the future. CMS Response at 12. The problem for CMS is that the imposition of a CMP would not serve any of the remedial purposes identified by the Secretary at 42 C.F.R. � 493.1804(a).

CMS cannot credibly claim that this CMP was related to the remedial purpose of motivating ADL to come into and remain in compliance with CLIA requirements (section 493.1804(a)(3)). ADL was never in compliance with CLIA. ADL never had a director that performed in accordance with the law. ADL's owner actively and intentionally violated CLIA by operating without ensuring that his laboratory directors were actively engaged in overseeing the laboratory. ADL's owner violated California law and the requirements of CLIA by doing testing himself without the license required by California law. ADL was not a laboratory that was operated at one time in compliance with CLIA that fell out of compliance and needed to be brought back into compliance. CMS was well aware of Mr. Rahman's managing at another laboratory which had its CLIA certificate revoked. This was not a laboratory where it was reasonable to believe it could be brought into compliance, this was a laboratory that needed to be shut down as the California court did within a few days of the end of the survey. The State agency examiners did not suggest a CMP - they recommended an injunction against ADL by the State and that CMS revoke ADL's CLIA certificate. (21) CMS Ex. 12, at 7.

As to the remedial purposes set forth at � 493.1804(a)(1) and (2), these purposes had been accomplished before the imposition of the CMP. The California court's injunction prevented ADL from engaging in future substandard testing for its patients and protected the general public from health and safety hazards caused by operation of ADL. ADL's patients were protected from any past substandard practices because Dr. Hernandez was ADL's only client and he had been informed on September 21, 2000 by the examiners that ADL was an unsafe laboratory. Additionally, with the December 5 letter, Dr. Hernandez received a copy of the SOD describing the deficiencies. Tr. at 657. There is nothing in the record to suggest that Dr. Hernandez, having been given this information, was not capable of protecting his patients or that CMS intended to take some additional action to protect patients based on Mr. Rahman's reply to the letter of December 5. In fact, the only corrective action suggested by CMS as appropriate in its brief was "notifying the physicians who referred the samples for testing." CMS Response at 12. This had already been done.

Further, CMS's assertions in its response brief that the purpose of the CMP was to protect prior patients strikes me as a post hoc rationalizations for a number of reasons. First, the CMP was not structured to achieve the ostensible remedial purpose. In order to avoid the CMP, ADL had to address its prior testing and bring itself into complete compliance. CMS and the State agency knew that compliance was impossible given ADL's and Mr. Rahman's history, ADL's operational status, and the fact that the California court had enjoined all people from doing business for or with ADL. If CMS's purpose in imposing the CMP had been the welfare of ADL's prior patients, it would have structured the CMP to address that concern by restricting it to ADL's production of documentation on prior patients. Second, it is not credible that CMS would rely on Mr. Rahman to take appropriate action since CMS knew that Mr. Rahman's perspective was that no patients were adversely affected and it is abundantly clear from the record before me that neither CMS nor the State agency had any intention of trusting any representation from Mr. Rahman absent verification from some other source. Third, CMS apparently felt there was no urgency to protect these prior patients, i.e., the survey occurred in September 2000 but CMS did not seek protection for prior patients until over two months later. This delay is inconsistent with the idea the CMS's purpose in imposing the CMP was to protect prior patients.

Accordingly, I conclude that the imposition of a CMP did not have a remedial purpose and therefore may not lawfully be imposed or approved in this case.

3. Dr. Panchari was laboratory director of ADL and an operator of ADL within the meaning of the regulations and he is, therefore, subject to the two-year ban on owning or operating another laboratory imposed by 42 U.S.C. � 263a(i)(3).

CLIA provides that "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). CMS alleges and Mr. Rahman did not dispute that, as the owner of ADL, Mr. Rahman is subject to this prohibition if ADL's certificate is revoked. CMS also alleges that the two-year ban applies to Dr. Hernandez and Dr. Panchari on the grounds that, as directors, they were "operators" of ADL. Dr. Hernandez did not participate in this appeal. Dr. Panchari disputes that he is subject to the ban for reasons discussed hereafter. Before discussing Dr. Panchari's status as an operator, I first review the law as to Dr. Panchari's right to participate in this appeal.

CLIA gives owners and operators the right to request a hearing to challenge the suspension, limitation or proposed revocation of their laboratory's CLIA certificate for failure to comply with CLIA conditions and standards. 42 U.S.C. � 263a(i)(1)(C). CLIA does not give owners and operators the right to challenge the imposition of the two-year ban of section 263a(i)(3). However, in order to determine whether Dr. Panchari is a proper party to this proceeding, I first must determine whether he was an operator. As explained below, I conclude he was an operator as that term is used in section 263a(i)(1)(C) and (i)(3) and therefore he was a proper party to these proceedings. See William Komaiko, M.D., DAB CR1111 (2003).

CLIA, as codified at 42 U.S.C. � 263a, includes no definition of the term operator. However, 42 C.F.R. � 493.2 defines "operator" as "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." That definition also provides that the term operator includes "a director of the laboratory if he or she meets the stated criteria ." The "stated criteria" is the criteria set forth in the definition. Sentinel, DAB No. 1762, at 13; Teitlebaum, DAB No. 1849, at 8 n.7.

Dr. Panchari argues that he should not be considered an operator subject to the two-year ban of 42 U.S.C. � 263a(i)(3) for the following reasons. First, Dr. Panchari argues that he was not an operator of ADL because he reasonably believed that it was nonoperational during the time he was director and he was therefore not overseeing the operation of ADL. Panchari Motion for Summary Judgment at 10 - 11. Second, Dr. Panchari asserts that he was not a operator subject to the ban because a CLIA laboratory can have only one director and he was not the director at the time of the revocation. Id. at 11. Third, Dr. Panchari argues that he was not an operator because he had no ability to bring ADL into compliance after July 20, 2000 and cannot be held responsible for its failure to correct deficiencies. Id. at 13. Fourth, he argues that imposing the sanction against him would not meet the remedial purpose of the Act. Id. at 14.

As explained below, I reject these arguments. I conclude that Dr. Panchari was an operator of ADL and that he is subject to the two-year ban.

The regulatory definition of director and the comprehensive description of a director's responsibilities establish a rebuttable presumption that a director is also an operator. 42 C.F.R. �� 493.2, 493.1403, 493.1405, 493.1407, 493.1441, 493.1443, 493.1445. Therefore, CMS can establish a prima facie case that an individual was an operator by proving that he/she was registered as the director or other competent evidence that he or she assumed the position. Komaiko, DAB CR1111. Dr. Panchari concedes that he was registered with the State agency as the CLIA director for ADL from January 18, 2000 to July 20, 2000. Therefore, CMS has established a prima facie case that Dr. Panchari was an operator during this time. However, since the regulatory definitions of laboratory director and operator are not identical, this presumption is rebuttable.

Dr. Panchari seeks to rebut this presumption by arguing that he was not "oversee[ing] all facets of the operation" of ADL because he reasonably believed the laboratory was non-operational. He argues:

Certainly, it cannot be argued that the nominal director of a non-operational laboratory is an "operator" under the regulations. The Petitioner acted with due diligence in ascertaining the operational status of American Diagnostic Lab. Mr. Rahman agreed to notify him once testing was commenced. This notification never took place.

Panchari Motion for Summary Judgment at 11.

Dr. Panchari's evidence in rebuttal of this presumption consists of his declaration in support of his motion for summary judgment in which he represents that he was misled by Mr. Rahman as to the operational status of ADL. Declaration of Panchari at 1-3. Dr. Panchari asserts that Mr. Rahman told him that ADL was not performing tests because it had not obtained a Medicare provider number and that, when ADL did obtain a Medicare provider number, Mr. Rahman would inform Dr. Panchari; that he visited ADL three times and did not observe patient testing; that he was only able to visit by arranging to meet Mr. Rahman at ADL because he did not have a key; that on his last visit to ADL in mid-May he met an individual who was introduced as a technical consultant and supervisor hired to calibrate the laboratory instruments, perform linearity checks, perform quality control testing, and perform proficiency testing; that at that time, he reviewed reports of proficiency testing and verified their accuracy and examined ADL's procedure manuals and signed off on their appropriateness; and that at no time did Mr. Rahman inform him that ADL was operational.

Even if I accept as fully credible Dr. Panchari's declaration, I do not find it excuses his failure to actively pursue his duties as laboratory director. Congress delegated to the Secretary broad authority to administer CLIA with the goal of protecting the public. In his exercise of that authority, the Secretary chose to place primary responsibility for the integrity of laboratory testing on the position of director. The regulation clearly imposes upon the laboratory director the duty of "overall management and direction" of his or her laboratory. 42 C.F.R. �� 493.1403 & 493.1441. The regulations require specific qualifications and detail extensive duties. So serious are these responsibilities that the Secretary deems the director to be an operator, i.e., a person who should be subject to the statutory two-year ban if the laboratory's CLIA certificate is revoked.

California law also recognizes the threat to public safety posed by a doctor's holding the position of director while not actually supervising the operation of the laboratory. In California, it is crime for a doctor authorized to serve as a director "to serve only as a nominal director." CAL. BUS. & PROF. CODE � 1284. Dr. Panchari's practice involved "providing medical directorships for laboratories." Panchari Dec. at 1. He should have been aware of the critical role of a director and the high degree of responsibility placed on directors by both federal and state law.

Given the law and the dangers posed by improperly supervised laboratories, Dr. Panchari, as director, had a duty to make sure that ADL was being properly supervised. There is no question that Dr. Panchari was the registered laboratory director from January 18, 2000 to July 20, 2000. CMS Exs. 8, 9. There is no question Dr. Panchari was an experienced laboratory director who should have know his duties under the law. Thus, even if I accept Dr. Panchari's assertions that Mr. Rahman misled him as to the operational status of ADL, Dr. Panchari had a responsibility, under the law, to exercise care to prevent himself from being misled. If Dr. Panchari had participated in the hearing, he could have addressed how he fulfilled this responsibility. For example, did he inquire about Mr. Rahman's past experience with laboratories; did he ask for references from Mr. Rahman and did he check those references; why did he not insist on having a key to the laboratory so he could visit at will; why did he find it credible that it was taking ADL months to obtain a Medicare billing number; when he met a consultant working at ADL in mid-May, what inquiries did he make about ADL's testing status and why a consultant was conducting proficiency testing when the regulations require proficiency samples to be tested in the same manner as patient specimens (42 C.F.R. � 493.801(b)); what inquiries did he make as to why Mr. Rahman had hired a consultant when, as director, he was responsible for ensuring ADL's personnel had appropriate education and experience (42 C.F.R. � 493.1407(d)(10))? Certainly, it is not consistent with the purposes of CLIA to allow a registered laboratory director, particularly an experienced director such as Dr. Panchari, to proffer ignorance as an absolute defense to fulfilling his regulatory duties. It is also not consistent with CLIA to allow a laboratory director to register or permit himself to be registered a laboratory director with CMS in order for a laboratory to begin or continue operations, but allow the director to insulate himself or herself from responsibility by not taking the keys or not making the most basic inquiries to determine the actual status of the laboratory. It is reasonable to impose upon the purported director, consistent with specified regulatory duties, the obligation to learn about the laboratory he or she directs.

Additionally, I do not find credible Dr. Panchari's suggestion that he was misled by Mr. Rahman. Mr. Rahman testified that he told Dr. Panchari in May that ADL was beginning to test and that Dr. Panchari reviewed the resume of the laboratory technologist hired by ADL. Tr. at 1144-1146. Mr. Rahman testified that he paid Dr. Panchari $400 a month from January 2000 through June 2000 to serve as director. Tr. at 1142, 1154. Mr. Rahman's statements have the ring of credibility on these points as Dr. Panchari admitted visiting the laboratory, verifying some proficiency testing and reviewing some policies of ADL. Dec. Panchari at 3; Petitioner's Reply Brief to CMS' Response to Petitioner's Motion for Summary Judgment at 8 n.3. Further, the contractual relationship with Glenview Pathology Medical Group, Inc., which provided Dr. Panchari as primary director for CLIA, required Mr. Rahman to make a monthly payment of $400 to Glenview for Panchari and the other directors services. Panchari SJ Ex. 5.

Dr. Panchari's declaration confirms that he was not, in fact, fulfilling the responsibilities of a director for ADL. His declaration does not rebut the presumption that, as the registered director, Dr. Panchari was an operator of ADL and to find otherwise would give credence to the notion that a laboratory director might avoid responsibility by simply choosing to ignore it.

Dr. Panchari's second and third arguments as to his status as operator are related to the fact that he was not the director at the time of the September survey and of CMS's decision to revoke the CLIA certificate. He argues that a laboratory can only have one CLIA director and Dr. Hernandez was the director at the time of the September survey. Panchari Motion for Summary Judgment at 11. Additionally, he argues that he should not be subject to the sanction because he had no ability to bring ADL into compliance after July 20, 2000, as he was no longer director. Id. at 13.

I reject the arguments related to the timing of the survey or revocation for the following reasons. Section 263a(i)(3) of 42 U.S.C. states that "[n]o person who has owned or operated a laboratory which has had its certificate revoked" may own or operate another laboratory for two years. The plain language of the statute seems to apply to all present and past owners and operators of a laboratory extending its two-year ban to all without consideration of whether they caused the revocation of the laboratory's CLIA certificate. However, such a literal interpretation does not seem reasonable. Because the plain language of the statute may not reflect the intent of Congress, review of the legislative history of the statute is appropriate in determining how it should be applied. United States v. Five Gambling Devices, 346 U.S. 441 (1953); United States v. Thirty-Seven (37) Photographs, 402 U.S. 363 (1971) (court will look to legislative history to construe a statute and avoid constitutional questions). The CLIA legislative history includes the following note of the Congressional Committee related to the two-year ban of 42 U.S.C. � 263a(i)(3) :

The Committee intends that an owner or operator whose conduct has precipitated the revocation not be allowed simply to begin operating a new or existing laboratory during the period of revocation, when such person bore ultimate responsibility for the conduct giving rise to the revocation.

Pub. L. No. 100-578; 102 Stat. 2903; H.R. Rep. No. 100-899, at 35. The Committee clearly intended to prevent owners and operators who failed to properly administer a CLIA laboratory, leading to revocation of that laboratory's CLIA certificate, from simply opening another laboratory even if they were not the operator at the point in time that the CLIA certificate was revoked. The language of the note indicates that the Committee intended to apply the two-year ban to owners and operators when their conduct "precipitated the revocation" of the CLIA certificate or they bore "ultimate responsibility for the conduct" that led to the revocation. See Komaiko, DAB CR1111, at 12-13.

Thus, to determine whether Dr. Panchari was an "operator" within the meaning of 42 U.S.C. � 263a(i)(3) for purposes of application of the two-year ban, it is necessary to determine whether his conduct "precipitated the revocation" of the ADL CLIA certificate or whether he bore "ultimate responsibility for the conduct" that led to the revocation.

I conclude that Dr. Panchari's conduct partially precipitated the revocation and he bore some of the ultimate responsibility for the revocation. Between May 2000, when ADL began testing, until September 2000, when ADL was enjoined from operating, ADL did not have a director who satisfied the requirements set forth at � 493.1403. Dr. Panchari's failure to fulfill his responsibilities as a director allowed ADL to operate without a director. The absence of a director is a condition level deficiency that existed throughout the time ADL conducted specimen testing. Therefore, Dr. Panchari's failure to fulfill his responsibilities as a director between at least May 2000 (when ADL began testing) and July 20, 2000 (when he resigned) was conduct that "precipitated the revocation" and he is "ultimately responsible" for that conduct.

Finally, Dr. Panchari argues that subjecting him to the ban would not serve the remedial purpose of CLIA. Panchari's Motion for Summary Judgment at 14. Dr. Panchari correctly points out that the two-year ban is a remedial action intended to protect the public health. Sentinel Medical Laboratories, DAB No. 1762 (2001). He argues that ADL, under his directorship as documented in a State agency survey conducted in July 2000, had only standard level deficiencies and "no remedial purpose would be served by imposing" a two-year ban. Panchari's Motion for Summary Judgment at 14. I reject this argument. As discussed above, ADL had condition level deficiencies during Dr. Panchari's tenure as director resulting from the fact that he was not fulfilling the responsibilities of a director. It was Dr. Panchari's status as the registered laboratory director that allowed Mr. Rahman to operate an unsupervised laboratory in violation of section 493.1403. This created an obvious danger to the public since there was no one at ADL who was qualified to fulfill the director's duties. It is plainly remedial to apply this ban to a doctor whose failure to diligently fulfill his duties as a director has, even unintentionally, abetted the operation of an unsupervised laboratory.

IV. CONCLUSION

For the foregoing reasons, ADL's CLIA certificate is revoked effective the date of this decision. The CMP proposed by CMS is not approved.

JUDGE
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KEITH W. SICKENDICK

Administrative Law Judge

FOOTNOTES
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1. Codified as 42 U.S.C. �� 263a, 1302, 1395x(e).

2. All citations are to the 2000 version of the Code of Regulations, which was in effect at the time of September 2000 survey.

3. Dr. Luis Hernandez, M.D. was also a laboratory director during the period in issue but he did not participate in these proceedings.

4. Exhibits of the Centers for Medicare & Medicaid Services offered and admitted at the hearing are cited as "CMS Ex." and the exhibit number. Exhibits of ADL and Mr. Rahman offered and admitted at the hearing are cited as "P. Ex." and the exhibit number.

5. Related hearing requests were also filed by Margaret E. Rose, M.D., and Marian Pennington, M.D., and these requests were docketed as C-01-439 and C-01-440 respectively. Drs. Rose and Pennington worked with Dr. Panchari at the Glenview Pathology Medical Group, Inc., a practice that supplied medical directors to laboratories. They were registered with the State agency as laboratory co-directors for ADL from January 2000 to July 2000 and were notified by CMS that they would also be subject to the two-year prohibition if ADL's CLIA certificate was revoked. CMS Ex. 6.

Drs. Rose's and Pennington's hearing requests were subsequently withdrawn and their appeals dismissed by Chief Judge Silva. In its Report of Case Readiness in those cases, CMS explained that -

based on declarations from Drs. Rose and Pennington that they were never involved as directors of ADL, [CMS] has rescinded its action subjecting them to the two-year prohibition against owning, operating or directing any laboratory.

6. None of the exhibits offered by CMS and Dr. Panchari were received as evidence in connection with the ruling on the cross-motions for summary judgment but the parties were granted leave to offer any of the exhibits in connection with the hearing on the merits. Order Denying Parties' Cross Motions for Summary Judgment, Consolidating Cases for Hearing, Establishing Schedule to Hearing, and Notice of Hearing, June 6, 2003, at 3 n.3.

7. The CMS summary judgment exhibits appear to duplicate, in part, documents admitted as CMS Exs. 1 through 11 at hearing.

8. The briefs filed are referred to as CMS Brief, CMS Response, Rahman Brief, and Rahman Response. Mr. Rahman's brief included attachments A through L, which will be referred to specifically where necessary. The parties submitted lists of errata that will be retained with the transcript.

9. This prohibition is a statutory disability rather than a sanction as that term is used in CLIA and its implementing regulations. Black's Law Dictionary (6th ed.1990) defines disability as the "want of legal capability to perform an act" while a sanction is "a penalty or punishment provided as a means of enforcing obedience to a law." Disability seems the more apt characterization of the "ineligibility" to own or operate imposed by the statute. Furthermore, the regulations are very specific in listing the sanctions that CMS may impose and the two-year ban or ineligibility provided by the statute is not included. See 42 C.F.R. �� 493.1, 493.1806-1807.

10. Mr. Rahman's opinion of the survey team is based, in part, on a 1996 event. At that time, Mr. Rahman managed a CLIA laboratory named BCL that was apparently owned by one of Mr. Rahman's relatives. Tr. 83-84; CMS Ex. 43, at 1, 2. BCL had large contracts with the California prison system. Id. at 3. In 1996, two members of survey team in this case, Mr. Donald Newbold and Mr. Tommy Barr, conducted a survey of BCL that resulted in the revocation of BCL's CLIA certificate. Tr. at 83, 867, 869.

11. Section 493.1109(b) of 42 C.F.R. required test reports to indicate the name and address of the laboratory at which the test was performed. Mr. Rahman testified that the reason the reference laboratories were not identified on ADL's reports was that he was having problems with his computer software and could not include this information in the ADL report. Tr. at 1113-1114, 1232. I find this explanation not credible because some ADL's reports do contain information on the reference lab. For example, CMS Ex. 14, at 23, 24 (which correspond to the reference laboratory reports at P. Ex. 3, at 43-44, 48-49) say "SEE UNILAB REPORT." This indicates to me that Mr. Rahman was able to customize ADL reports at will. For these patients, he sent part of the test report as an ADL report, but for, the more complex component that ADL could not do, he sent the Unilab report and acknowledged it on the ADL report. This is particularly evident in CMS Ex. 14, at 23, which specifically says "SEND OUTS SYNOVIAL FLUID" even though this patient's urine was also sent to and tested by Unilab.

12. For example, on July 24, 2000, an examiner from the State agency conducted a pre-Medi-Cal enrollment survey of ADL. CMS Ex. 11. That examiner reported that ADL received 10 to 15 specimens a week and that "30% of the tests are sent to a reference laboratory because American Diagnostic Laboratories does not have the supplies to perform the requested tests." Id. at 1. Also, ADL's laboratory technologist worked there 2 to 3 hours a day, Monday through Friday. CMS Ex. 26, at 2. If ADL was receiving 15 specimens a week and referring out 99%, this would leave ADL's technician less than one specimen a week to test herself. Such a workload does not reasonably correlate to the number of hours she was being paid. Finally, in his post-hearing brief, Mr. Rahman represented that, during Dr. Panchari's tenure as director, ADL referred 41 tests out and did 32 in house. Rahman Response at 15-16. Thus, by his own admission, ADL was performing over 40% of the tests ordered by Dr. Hernandez.

13. Mr. Rahman testified that he told Dr. Panchari in May that ADL was conducting tests. Tr. at 1144-1146. It is not necessary for me to resolve this conflict in the evidence as Mr. Rahman does not dispute the critical fact that Dr. Panchari never managed or directed the human testing that began in May 2000.

14. CMS cited nine separate standard-level violations of 42 C.F.R. � 493.1407. CMS Ex. 1, at 40-57. Because there was no functioning laboratory director of ADL, those deficiencies exist as a matter of law and further analysis is not necessary.

15. Although not specifically cited in the SOD, the facts and analysis supporting the condition level violation of 42 C.F.R. � 493.1403 also show a violation of 42 C.F.R. � 493.1441. Section 493.1441 sets forth comparable requirements for directors of laboratories performing high, as opposed to moderate, complexity testing. There is no dispute that ADL attempted both moderate and high complexity testing of human samples during the period May 9, 2000 to September 17, 2000. Because there was no laboratory director fulfilling the duties specified by 42 C.F.R. � 493.1445 and no director providing "overall management and direction," ADL also violated the condition level requirement of 42 C.F.R. � 493.1441.

16. CMS asserts that this person was actually not qualified to do the full menu of tests that ADL represented it could do, but it is not necessary to resolve the issue given the disposition on other issues.

17. Although not specifically cited as a deficiency in the SOD, the facts and analysis supporting the condition level violation of 42 C.F.R. � 493.1421 also establish a violation of 42 C.F.R. � 493.1487. Section 493.1487 sets forth comparable requirements for testing personnel of high complexity laboratories. There is no dispute that ADL attempted both moderate and high complexity testing of human samples during the period May 9, 2000 to September 17, 2000. Therefore, ADL also violated the condition level requirement of 42 C.F.R. � 493.1487.

18. Ms. Otey stated that she had determined that Dr. Panchari had directed multiple laboratories - an estimate of around 26 - over the past several years. Tr. at 361

19. Mr. Rahman testified that Dr. Panchari was "a very good detail director, because he'd been in so many labs. And he's not that easy to go by. I mean he is very hard in his work." Tr. at 1143.

20. Section 1846(b)(2)(A) lists the authorized intermediate sanctions: directed plans of correction; CMPs not to exceed $10,000 per day; payment for costs of onsite monitoring; and suspension of payments due the provider under the Act. These are referred to as "alternative sanctions" in the regulations that indicate that the phrases "intermediate sanctions" and "alternative sanctions" are synonymous. 42 C.F.R. � 493.2.

21. CMS offered and I admitted, as CMS Ex. 43, a copy of a September 25, 2000 article from the San Francisco Chronicle in which Paul Kimsey, Assistant Deputy Director for Laboratory Science, California Department of Health Services, is quoted as saying that the State perspective was that ADL should never have been granted a license. CMS Ex. 43 at 1-2.

CASE | DECISION | JUDGE | FOOTNOTES