SUBJECT: RNA Laboratories, Inc., and Ter-Zakarian Medical Clinic,

Petitioners,

Centers for Medicare & Medicaid Services

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

Petitioners, RNA Laboratories, Inc. and Ter-Zakarian Medical Clinic (RNA and Ter-Zakarian), appealed an October 23, 2001 decision by Administrative Law Judge (ALJ) Steven T. Kessel. RNA Laboratories, Inc. and Ter-Zakarian Medical Clinic, DAB CR829 (2001) (ALJ Decision).⁽¹⁾ The ALJ found that the Centers for Medicare & Medicaid Services (CMS)⁽²⁾ properly imposed the remedies of 1) suspension and revocation of Petitioners' certificates under the Clinical Laboratory Improvement Amendments of 1988 (CLIA); 2) cancellation of Petitioners' approval to receive Medicare payments for their services; and 3) alternative sanctions against Petitioners consisting of civil monetary penalties.

The ALJ Decision was based on six findings of fact and conclusions of law (FFCLs). Petitioner took exception to the four FFCLs (2, 3, 5 and 6) which were adverse to them.⁽³⁾ We have reviewed Petitioners' exceptions. The ALJ's FFCLs were supported by substantial evidence in the record and were not erroneous.

Thus, we conclude that the ALJ Decision should be affirmed. However, as explained more fully in our analysis below, we modify subsection "d" to FFCL 2 deleting reference to 42 C.F.R.
� 493.801(a) and substituting in its place 42 C.F.R. � 493.801.

Applicable law and regulations

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

A laboratory's CLIA certification is dependent upon whether the laboratory meets the conditions of certification set out in the statute and regulations. 42 U.S.C. � 263a(f)(1)(E); 42 C.F.R. � 493.1 et seq. Each condition represents a major division of laboratory services to be offered by the laboratory or required environmental protections at the laboratory. The regulations also set forth standards, the specific components of the conditions of laboratory certification that a laboratory must meet as part of achieving compliance with applicable conditions.

A key component of the statutory and regulatory program to assure that laboratories holding CLIA certificates are competent to perform tests of moderate and high complexity is the requirement for participation in a proficiency testing (PT) program that is approved by CMS, as outlined in 42 C.F.R. Part 493, Subpart H. Among the requirements of that subpart are that each laboratory must enroll in an approved PT program that meets specific criteria set out at Subpart I of Part 493. 42 C.F.R. � 493.801. The condition at 42 C.F.R. � 493.803(a) specifically requires that a laboratory performing high complexity testing "must successfully participate" in an approved PT program for each "specialty, subspecialty, and analyte or test in which it is certified under CLIA."

Failure by a laboratory to comply with even a single condition in an area of testing offered by that laboratory may be grounds for suspension or revocation of a laboratory's CLIA certificate. Ward General Practice Clinic, DAB No. 1624, at 2 (1997). CMS may suspend, limit, or revoke the CLIA certificate of a laboratory that is out of compliance with one or more CLIA conditions, and may also impose alternative sanctions such as a directed plan of correction or monitoring by the state. 42 C.F.R. � 493.1806.

A laboratory is entitled to a hearing before an ALJ to contest the imposition of CLIA remedies, including the suspension, limitation, or revocation of the laboratory's CLIA certificate, and may request review of the ALJ's decision by the Departmental Appeals Board. The CLIA regulations at 42 C.F.R.� 493.1844(a)(2) and (3) incorporate by reference the hearing procedures and the request for review provisions in 42 C.F.R. Part 498, Subparts D and E.

Background

This undisputed factual background is drawn from the ALJ Decision and the record below.

Petitioners are clinical laboratories located in suburban Los Angeles, California. Petitioner RNA's mailing address was North Hollywood and Petitioner Ter-Zakarian's, Santa Monica.

Dr. Hovanes Ter-Zakarian was the medical director and owner of Petitioner Ter-Zakarian. Petitioner RNA was owned by a corporation which, in turn, was owned by Dr. Ter-Zakarian's brother, Vahe. Dr. Ter-Zakarian was also RNA's medical director.⁽⁴⁾

Both Petitioners enrolled in an approved PT program operated by the American Association of Bioanalysts Proficiency Testing Service (AAB). The AAB mails to each laboratory participating in its PT program an identical group of five specimens three times a year. The laboratories are required to test these specimens for analytes for which they do patient testing, and mail their results to the AAB by a date certain. See Oakland Medical Group, P.C., DAB No. 1755, at 4 (2000); Stanley Boykansky, M.D., DAB No. 1756, at 3-4 (2000).

Testing PT samples in the same manner as patients' specimens means that the PT samples must be integrated fully into the laboratory's testing regime. The requirement for full integration is found in the standard at 42 C.F.R. � 493.801(b). The laboratory must use the same techniques to test patient specimens and PT samples. 42 C.F.R. � 493.801(b)(1). The laboratory must not test PT samples a greater or fewer number of times than it tests patient specimens. 42 C.F.R. � 493.801(b)(2). The laboratory must not collaborate with any other individual or entity in the performance of proficiency testing. 42 C.F.R. � 493.801(b)(3). The laboratory must maintain complete and accurate documentation of all proficiency testing for a minimum of two years from the date of the PT event. 42 C.F.R. � 493.801(b)(5).

Petitioners received the same PT samples from the AAB at the same time. Petitioners did not dispute that for the third 1999 testing event, they reported identical results for nine analytes in the five samples provided by AAB. CMS alleged that Petitioners failed to comply with the CLIA condition at 42 C.F.R. � 493.801 in that they failed to test PT samples in the same manner as patients' specimens. Specifically, CMS asserted that Petitioners failed to comply with several of the standards that are part of this condition and that their failure to comply was so egregious as to constitute a failure by each Petitioner to comply with the condition itself. ALJ Decision at 6.

The ALJ concluded that CMS made a prima facie case supporting its allegations and that Petitioners did not rebut CMS' case. Id. at 2.

Standard of Review

Our standard of review of an ALJ decision on a disputed issue of law is whether the ALJ decision is erroneous. Our standard of review on a disputed issue of fact is whether the ALJ decision as to that fact is supported by substantial evidence on the record as a whole. US Bio-Chem Medical Laboratories, Inc., DAB No. 1731 (2000).

The record before us consists of the briefs, exhibits and hearing testimony provided to the ALJ, the briefs on appeal to the Board and a tape of oral argument on the appeal that was held at Petitioners' request.

Below we set out the challenged FFCLs followed by our analysis of Petitioners' arguments.

FFCL 2. Petitioners RNA and Ter-Zakarian failed to comply with the CLIA condition of participation that is stated at 42 C.F.R. � 493.801.

Petitioners alleged that each of the underlying "four sub-FFCLs" and thus FFCL 2 is not supported by substantial evidence. Petitioners Br. at 3. We have reviewed Petitioners' contentions and conclude below that this FFCL is supported by substantial evidence in the record and is not erroneous.

a. Petitioners RNA and Ter-Zakarian engaged in prohibited inter-laboratory communications about proficiency testing.

The ALJ found that the evidence of identical PT results on so many tests was powerful circumstantial proof that Petitioners engaged in prohibited communications. In so finding, the ALJ cited expert testimony of Dr. Dennis Jay, AAB's Technical Director, Proficiency Testing, that the presence of multiple variables in the two laboratories' testing processes made it extraordinarily unlikely that identical results in so many instances could occur by happenstance. ALJ Decision at 7-8.

Petitioners questioned the statistical validity of the opinions offered by Dr. Jay and the ALJ's conclusions based on the testimony of that witness. Petitioners asserted that Dr. Jay was inexperienced and not qualified to offer a valid statistical analysis regarding the probability of two laboratories producing identical PT results. Further, Petitioners noted that the ALJ ignored Dr. Jay's testimony, on cross-examination, that he had no opinion about whether Petitioners shared PT information or samples. Petitioners argued that the ALJ simply ignored the flaws in Dr. Jay's testimony and substituted, without support, his opinion that Petitioners had engaged in prohibited inter-laboratory communications. Petitioner Br. at 3-8.

Petitioners also asserted that the ALJ's reliance on his decision in Stanley Boykansky, M.D., DAB CR690 (2000), aff'd, Stanley Boykansky, M.D., DAB No. 1756 (2000), where he found improper PT referrals, was misplaced because the circumstances of Boykansky were vastly different from theirs. Petitioners noted that Boykansky involved nine facilities which shared some testing personnel and produced a degree of identical results over the course of three PT events. Here, Petitioners maintained, there were no shared testing personnel and the laboratories produced the same values on 9 of 32 analytes during one PT event. Moreover, Petitioners contended that the ALJ focused on only one event in spite of the fact that CMS had offered evidence alleging improper referral over the course of three PT events. Petitioners also alleged that the ALJ ignored a printout offered by Petitioner Ter-Zakarian and related testimony which showed that each Petitioner performed its PT testing independently. Finally, Petitioners asserted that the ALJ erred by "entirely discounting the fact that Petitioner RNA scored successfully for 115 values on chemical analytes that were not reported or tested by Petitioner Ter-Zakarian." Petitioner Br. at 5-8.

There is no merit in Petitioners' challenge to the testimony of CMS witness Dr. Jay. As we have noted in other CLIA cases involving his testimony, the ALJ did not rely on Dr. Jay's testimony, or that of similarly qualified witnesses, for statistical expertise. Rather, the credibility of Dr. Jay's conclusions is based on his training and expertise in the areas of clinical laboratory testing and PT. Specifically, the ALJ relied on Dr. Jay's testimony concerning the manner in which certain chemicals will behave in specific testing conditions, not on any statistical analysis of test results. See Oakland at 14-15; Boykansky at 10. Consequently, the ALJ did not (and was not required to) discuss Petitioners' expert testimony and arguments attacking the statistical validity of Dr. Jay's observations.

Dr. Jay testified that, in his experience, it would be unlikely for two independently operated laboratories to produce identical results for any sample. Here, there is no dispute that Petitioners reported identical testing results for nine categories of analytes in five specimens during the third 1999 PT event, for a total of 45 identical testing results. The ALJ correctly concluded that the logical inference to be drawn from the evidence before him was that Petitioners had collaborated in obtaining or reporting the results in issue. ALJ Decision at 7-8.⁽⁵⁾

Petitioners' attempt to distinguish their circumstances from those in Boykansky and related decisions is not convincing. Although there are only two laboratories involved in this case, they share both geographic proximity and their laboratory director. In addition to being the laboratory director for both facilities, Dr. Ter-Zakarian owns Petitioner Ter-Zakarian. Further, Dr. Ter-Zakarian's brother is the owner of the corporation which controls Petitioner RNA. Therefore, the relationship between these Petitioners is at least equally, if not far more, intertwined than that present in Boykansky and related decisions.

Moreover, there is no merit in Petitioners' contention that the ALJ erred by focusing only on the results of the third 1999 PT event, even though CMS had offered evidence regarding two other testing events that year. We do not agree with Petitioners' contention that by relying only on the alleged referral for the third testing event, the ALJ was rejecting CMS' allegations of referral in the other two 1999 testing events or was otherwise finding that the Statement of Deficiencies (the HCFA 2567) was unreliable. There is no indication that the ALJ was making any such findings; in fact the ALJ cited the HCFA 2567 in discussing PT deficiencies other than referral that took place during other testing events. As we discuss more fully in our analysis of Petitioners' exception to FFCL 3, the third event in 1999 was not the sole basis for the sanctions imposed by CMS or the ALJ Decision. Our review of the ALJ Decision indicates that the ALJ's reliance on a single testing event was simply a matter of judicial economy. Regardless of whether there was evidence in the record to demonstrate that Petitioners had been fully compliant in other PT events that year, the violations present in the third 1999 event provide a sufficient basis to sustain the sanctions imposed by CMS. The condition established at 42 C.F.R. � 493.801 requires strict compliance. CLIA does not permit a laboratory to simply offset one bad PT event with one or two good ones. The CLIA statute and regulations are intended to ensure safe, reliable and accurate laboratory testing for all tests, for all patients, at all times.

Similarly unpersuasive is Petitioners' argument that it would be illogical to find referral between the laboratories considering that Petitioner RNA scored successfully for 115 values on other analytes in the third PT event that were not reported or tested by Ter-Zakarian. All referral between laboratories is prohibited. Even assuming Petitioner RNA scored successfully on other analytes independent of Petitioner Ter-Zakarian, and that Petitioner Ter-Zakarian's analyzer print-outs confirmed that Petitioner Ter-Zakarian achieved the testing results reported, neither fact overcomes the ALJ's determination that there was no credible evidence that RNA independently achieved PT scores identical to those reported by Petitioner Ter-Zakarian for 45 separate tests. By stating that there was no "credible" or "persuasive" evidence that Petitioners independently came up with identical test results, the ALJ was clearly making a credibility determination with respect to Petitioners' witnesses. When the Board reviews an ALJ decision under the substantial evidence standard, it generally accords considerable deference to the ALJ's assessment of witness credibility because the ALJ has the best opportunity to observe the witnesses and weigh the evidence. St. Anthony Hospital, DAB No. 1728, at 8 (2000). None of the witnesses offered a plausible explanation for how two laboratories, performing testing using different mechanics, methods and employees, could independently arrive at identical results for 45 tests. The ALJ's rejection of Petitioners' witnesses' testimony as a credible counterweight to the substantial evidence of collusion is reasonable and we will not disturb it. Thus, this aspect of his FFCL was not erroneous.

b. Petitioner RNA failed to comply with documentation and record keeping requirements in its conduct of proficiency testing.

Petitioner RNA conceded that it had not produced the analyzer reports which would show actual PT results either at the time of the survey or at the ALJ hearing. The ALJ relied on this specific lack of documentation in reaching his FFCL. Petitioners, in contrast, asserted that the ALJ erroneously found that there was no way to verify the accuracy of RNA's testing report forms. Petitioner argued that this finding was overcome by the testimony of a witness who averred that she performed PT for RNA. Petitioners Br. at 9.

Petitioner RNA's contention that the testimony of its witness was sufficient to overcome the absence of analyzer reports is unavailing. The regulation is clear in requiring a clinical laboratory to -

document the handling, preparation, processing, examination, and each step in the testing and reporting of results for all proficiency testing samples. The laboratory must maintain a copy of all records, including a copy of the proficiency testing program report forms used by the laboratory to record proficiency testing results . . . for a minimum of two years from the proficiency testing event.

45 C.F.R. � 493.801(b)(5).

As the ALJ noted, the regulation does not permit a partial production of records. Rather, it requires a laboratory to produce all records. The analyzer reports contain raw data and test results that a laboratory produces when it conducts a proficiency test; a witness' memory of conducting such tests is not a substitute for this data. Absent this information, there is no way to verify the accuracy of testing report forms. See ALJ Decision at 10.

c. Petitioner Ter-Zakarian did not test proficiency testing samples the same number of times that it routinely tested patient samples.

Petitioners asserted that this subsection of the ALJ's FFCL was based on the ALJ's adoption of a witness' inference, the ALJ's refusal to consider testimony by that same witness more favorable to Petitioners' position, and the ALJ's failure to consider other favorable facts established by Petitioners. Petitioners Br. at 9-10.

The program regulations require that a clinical laboratory must test PT samples the same number of times that the laboratory routinely tests patient samples. 45 C.F.R. � 493.801(b)(2). The ALJ determined that CMS had established a prima facie case through documents showing that Petitioner Ter-Zakarian often tested PT samples multiple times while routinely testing patient samples only once. Before the ALJ, Petitioner Ter-Zakarian argued that it had tested PT and patient samples in the same manner because it used the same equipment and testing techniques for both types of tests. The ALJ found that Petitioner Ter-Zakarian did not address the issue. ALJ Decision at 11-12.

Petitioners' assertions that the ALJ's determination was erroneously based on the ALJ's reliance on certain testimony coupled with his unwillingness to consider other testimony are without foundation. CMS provided documentary evidence sufficient to establish a prima facie case that Petitioner Ter-Zakarian did not test PT samples in the same manner as it tested patient samples. Petitioners did not supply to the ALJ evidence sufficient to overcome CMS' prima facie case since their arguments addressed the method rather than the frequency of testing, and since they offered no documentary evidence to support the suggestion that repeat testing, although only evidently performed on PT samples, was part of its quality control program.

d. The failures by Petitioner RNA and Petitioner Ter-Zakarian to conduct proficiency testing in the same manner as the testing of patients' specimens were so egregious as to be failures by these Petitioners to comply with the condition of participation that is stated at 42 C.F.R. � 493.801(a).

Petitioners asserted that the ALJ's conclusion that Petitioners had failed to comply with the condition of participation at 42 C.F.R. � 493.801(a) was invalid because there was "no condition level violation . . . [in the regulation] which provides the standard of enrollment." Petitioners Br. at 11 (emphasis in original).

The regulation at 42 C.F.R. � 493.801 is titled "Condition: Enrollment and testing of samples." As Petitioners noted, 42 C.F.R. � 493.801(a) is a standard, titled "Enrollment." Section 493.801(b) is titled "Standard; Testing of proficiency testing samples." Subsections (b)(1) and (b)(2) require that PT samples be integrated into the laboratory's regular patient workload, by personnel who routinely perform the testing in the laboratory, using the laboratory's routine testing method. Samples must be tested the same number of times the laboratory routinely tests patient samples. Subsection (b)(5) addresses documentation in the PT process.

Clearly, contrary to the heading for this subpart of FFCL 2, the ALJ's analysis was based on the totality of Petitioners' actions measured against the CLIA condition found at 42 C.F.R. � 493.801, not just the standard at 42 C.F.R. � 493.801(a). The evidence supported the ALJ's determinations that 1) both Petitioners violated the standards at 42 C.F.R. � 493.801(b)(1); 2) Petitioner RNA individually violated the standard at 42 C.F.R. � 493.801(b)(5); and 3) Petitioner Ter-Zakarian individually violated the standard at 42 C.F.R. � 493.801(b)(2).

Given the evidence, the ALJ found that Petitioners did not conduct PT testing honestly during the third event of 1999. Their collaboration rendered meaningless the PT results they did submit. Further, based on the absence of any supporting evidence from Petitioner RNA, the ALJ could not reasonably determine that RNA actually performed PT for the tests involving 45 results which were part of that event. Consequently, FFCL 2 is fully supported by the evidence of record and is not erroneous.

We therefore affirm FFCL 2, but modify subsection "d" to delete reference to 42 C.F.R. � 493.801(a) and substitute in its place 42 C.F.R. � 493.801.

FFCL 3. Petitioners RNA and Ter-Zakarian failed to comply with the CLIA condition of participation that is stated at 42 C.F.R. � 493.1403.

The condition at 42 C.F.R. � 493.1403 is titled "Laboratories performing moderate complexity testing; laboratory director." The ALJ found that CMS introduced evidence which established a prima facie case that both Petitioners failed to comply with the condition governing the performance of the laboratory director.

Again, Petitioners asserted that the "sub-FFCLs" upon which this FFCL is based are not supported by substantial evidence. Thus, according to Petitioners, the FFCL is erroneous. Petitioners Br. at 11-12. We find that this FFCL is supported by substantial evidence in the record and is not erroneous.

a. Petitioner RNA did not comply with the laboratory director condition.

The ALJ determined that Petitioner RNA's deficiencies in PT, including the prohibited communications and the failure to maintain documentation established in FFCL 2, meant that Petitioner RNA was also out of compliance with the laboratory director condition. Petitioners contended that, in reaching this conclusion, the ALJ relied on no "evidence" other than his FFCL 2. Petitioners asserted that this Board's holding in St. Anthony Hospital required that an ALJ's "assessments" must be supported by reliable evidence and an ALJ's inferences must be reasonably drawn from the evidence. Here, Petitioners argued, the ALJ's "wholesale incorporation of . . . unsupported, unreasonable determinations fail to show that . . . 3(a) is supported by substantial evidence." Petitioners Br. at 12.

Further, Petitioners noted that Petitioner RNA was "owned by a non-party to these proceedings" and "was not operating at the time records were requested." Thus, Petitioners questioned how the ALJ could reasonably find that the creation and preservation of PT records were within the scope of the RNA laboratory director's duties. Petitioners Br. at 12-13.

As the ALJ noted, the CLIA condition of participation found at 42 C.F.R. � 493.1403 requires a clinical laboratory to have a director who is responsible for the overall management and direction of the laboratory. Specifically, a laboratory director must provide management and direction that comports with the standard set out at 42 C.F.R. � 493.1407. Thus, in part, a laboratory director must assure that PT is conducted in compliance with the requirements of all applicable regulations. See ALJ Decision at 13. As noted above, the evidence supports the ALJ's finding at FFCL 2 that Petitioner RNA did not comply with PT conditions. Consequently, Petitioner RNA was also out of compliance with the laboratory director condition since it follows that the laboratory director failed in his duty to assure compliance.

Moreover, in spite of clear regulatory documentation requirements, Petitioner RNA could produce no evidence to show that it performed PT for the 45 testing results questioned by CMS for the third 1999 testing event. Here, RNA's laboratory director bore the responsibility to ensure that RNA produced and maintained proper CLIA documentation for two years after the testing event. Petitioner RNA's laboratory director's failure to ensure that RNA maintained proper PT documentation for the requisite period of time was not excused by the closing of RNA's facility in 2000. Consequently, Petitioner RNA failed to meet the laboratory director condition at 42 C.F.R. � 493.1403.

The fact that, in reaching an earlier FFCL, the ALJ found that RNA did not have any documentation to support certain PT results, does not preclude the ALJ from relying on that same evidence in finding that Petitioner RNA did not comply with the laboratory director condition. Thus, contrary to Petitioners' assertion, the ALJ's determination was supported by substantial evidence in the record and was not erroneous.

b. Petitioner Ter-Zakarian did not comply with the laboratory director condition.

Generally, the ALJ found that CMS' evidence established "a wholesale failure by Petitioner's [Ter-Zakarian] laboratory director to manage or direct the laboratory in compliance with applicable requirements." Specifically, Petitioner Ter-Zakarian was conducting specimen tests for TSH and its laboratory director had not enrolled in the PT program for that substance. Petitioner Ter-Zakarian received PT results for the third PT event in 1999 showing an unsuccessful test for creatinine, but did not present evidence to show that the laboratory director reviewed and evaluated those reports or had taken corrective action based on those results. Petitioner Ter-Zakarian's staff ran PT tests multiple times, but the laboratory director established no quality controls instructing his staff on how to distinguish correct from erroneous PT results. Further, for the first 1999 PT event, Petitioner Ter-Zakarian reported PT results which differed from the scores contained in its supporting paperwork. ALJ Decision at 15.

Petitioners noted that the ALJ's determination that Petitioner Ter-Zakarian was conducting patient specimen testing for a substance, but was not enrolled in PT for that substance, was based on the HCFA 2567. Petitioners asserted that there was no evidence that the HCFA 2567 was accurate. Additionally, Petitioners questioned the ALJ's reliance on the HCFA 2567 for this finding since he had otherwise "utterly disregarded the primary basis of the 2567, namely, that Petitioners engaged in PT referral over three testing events."⁽⁶⁾ Petitioners also contended that the ALJ ignored the testimony of Dr. Ter-Zakarian when the ALJ determined that Petitioner Ter-Zakarian's laboratory director (Dr. Ter-Zakarian) failed to take corrective action when faced with sub-standard PT results. Finally, although Petitioners did not dispute the ALJ's finding that Petitioner Ter-Zakarian ran the same PT specimen multiple times, Petitioners argued that such multiple testing was valid so long as patient samples were tested in the same manner. Petitioners Br. at 13-14.

Petitioners' arguments are unavailing. In the main, the ALJ used information contained in the HCFA 2567 relevant to the third PT event in 1999 to reach his findings on the validity of PT in that event. Petitioners have not demonstrated that those determinations by the ALJ were not supported by substantial evidence. See ALJ Decision at 14-15. As the ALJ found, CMS' evidence established that Petitioner Ter-Zakarian conducted patient specimen tests for TSH, but had not enrolled in the PT program with AAB for that substance in violation of 42 C.F.R. �� 493.1407(e)(4) and 493.801(a). If Petitioner Ter-Zakarian had indeed enrolled, it should have provided evidence of its enrollment to rebut this evidence. Further, Dr. Ter-Zakarian's testimony cited by Petitioners (Tr. at 405) stated only that it was Dr. Ter-Zakarian's general practice to take corrective action when presented with evidence of unsuccessful testing. Petitioners offered no evidence whatsoever to rebut CMS' specific allegation that Petitioner Ter-Zakarian had not taken any corrective action when presented with evidence of unsuccessful testing for creatinine in the third 1999 PT event. See ALJ Decision at 15, citing HCFA Ex. 25, at 27. Petitioner Ter-Zakarian's failure constituted a violation of the standards at 42 C.F.R. � 493.1407(e)(4)(iii). Additionally, contrary to Petitioners' arguments, the third 1999 PT event was not the sole basis for the ALJ's finding Petitioner Ter-Zakarian in violation of the CLIA conditions of participation. The ALJ found that Petitioner Ter-Zakarian did not offer evidence or explanation justifying the fact that it allowed its staff to run PT multiple times and reported PT scores at variance with its recorded PT results for the first PT event in 1999. ALJ Decision at 14-15.

We have previously rejected Petitioners' assertion that multiple proficiency testing was valid so long as patient samples were tested in the same manner. Thus, we affirmed the ALJ's determination that Petitioner Ter-Zakarian failed to comply with that specific condition for PT. FFCL 2, the ALJ's finding that Petitioners did not comply with other conditions governing PT, called into question Petitioners' compliance with the standards concerning the laboratory director. FFCL 3 was based, in part, on the fact that "Petitioners offered no meaningful response to CMS' allegations and evidence except to aver that they complied with the condition governing proficiency testing." ALJ Decision at 13. Petitioners have presented no evidence to show that the ALJ's determinations were erroneous or otherwise not supported by substantial evidence.

We therefore affirm and adopt FFCL 3.

FFCL 5. A basis exists to impose remedies against Petitioners RNA and Ter-Zakarian.

Petitioners noted that FFCLs 2 and 3 were the basis for this FFCL. Consequently, Petitioners argued that since they had demonstrated that those FFCLs were unsupported and unreasonable, it followed that FFCL 5 was also unsupported and unreasonable. Petitioners Br. at 15.

We have found above that FFCLs 2 and 3 are supported by substantial evidence and are not erroneous. Consequently, contrary to Petitioners' argument, a basis exists to impose remedies against Petitioners RNA and Ter-Zakarian.

We therefore affirm and adopt FFCL 5.

FFCL 6. I deny Petitioners' Motions.

Petitioners noted that based on FFCL 2, the ALJ had denied three of its motions.⁽⁷⁾ Petitioners argued that since they had demonstrated that FFCL 2 was unsupported and unreasonable, it followed that FFCL 6 was also unsupported and unreasonable. Id. We have affirmed and adopted FFCL 2. Consequently, to the extent that Petitioners' exception to FFCL 6 is based on an allegation of the invalidity of FFCL 2, we find that Petitioners' exception has no merit.

We therefore affirm and adopt FFCL 6.

Cecilia Sparks Ford

Donald F. Garrett

M. Terry Johnson
Presiding Board Member

1. Each Petitioner requested a hearing before an ALJ and their appeals before him were separately docketed. The ALJ conducted a consolidated hearing in these cases since they involved similar issues and common evidence. The ALJ did not formally consolidate the cases since the parties requesting hearing were not the same entity. ALJ Decision at 3.

2. CMS was previously named the Health Care Financing Administration (HCFA). See 66 Fed. Reg. 35,437 (July 5, 2001).

3. Petitioners also alleged that the ALJ erred by not making individual FFCLs for each Petitioner for each alleged regulatory violation. Other than a vague allegation that this violated their due process rights, Petitioners did not state any basis for their objection. Below, we review each of the FFCLs to which Petitioners excepted and conclude that all of them, both joint and individual, are sound, except for one instance where a citation has to be modified.

4. After the parties filed their respective hearing requests, Dr. Ter-Zakarian asserted through counsel that he was the real party in interest in Petitioner Ter-Zakarian's hearing request. Dr. Ter-Zakarian's position was based on a statement in CMS' Notice of Remedies to Petitioner Ter-Zakarian which addressed the impact those remedies would have on Dr. Ter-Zakarian's future in the CLIA program. The ALJ permitted Dr. Ter-Zakarian to participate in Petitioners' hearing and ultimately ruled that Dr. Ter-Zakarian did have a right to a hearing. ALJ Decision at 3-5.

5. Petitioners also maintained that the ALJ erred in relying on Dr. Jay's testimony as evidence of improper referral because Dr. Jay testified that it was not his job to determine whether laboratories were sharing PT results but rather, his job was to report to CMS. However, it is clear from the record that Dr. Jay meant that he was only providing expert testimony about the likelihood of coincidence as the reason two laboratories independently obtained 45 identical test results. Tr. at 76-77 and 98-107. The ALJ stated at the hearing that he would, and clearly did, make his own decision about whether the circumstances warranted a finding of improper referral under the applicable regulations. Tr. at 4 and 46-47; ALJ Decision at 7-9.

6. Specifically, Petitioners referenced their earlier argument that although the HCFA 2567 questioned results for three PT events, the ALJ Decision focused on only one PT event.

7. Petitioners' motions involved exclusion of evidence, preclusion of testimony, and an examination of due process issues. See ALJ Decision at 17.