SUBJECT: Stanley Boykansky, M.D.,

Petitioner,

Health Care Financing Administration

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

Stanley Boykansky, M.D., a clinical laboratory (Petitioner), appealed a July 28, 2000 decision by Administrative Law Judge (ALJ) Steven T. Kessel. Stanley Boykansky, M.D., DAB CR690 (2000) (ALJ Decision). The ALJ found that the Health Care Financing Administration (HCFA) properly imposed the remedies of suspension and revocation of Petitioner's certificate under the Clinical Laboratory Improvement Amendments of 1988 (CLIA), as well as the cancellation of Petitioner's approval to receive Medicare payments for its services.

On appeal to the Board, Petitioner excepted to all seven of the ALJ's findings of fact and conclusions of law (FFCLs). We have reviewed Petitioner's exceptions and conclude that the ALJ Decision should be affirmed.

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. Pub. L. No. 100-578, amending � 353 of the Public Health Service Act, codified at 42 U.S.C. � 263a et seq.⁽¹⁾ 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 HCFA, as outlined in 42 C.F.R. Part 493, Subpart H. Among the requirements of that subpart are the following: a participating laboratory must test PT samples it receives in the same manner as it tests patient samples; must not communicate the results of its tests to other laboratories prior to the deadline for reporting results; must not refer PT samples to another laboratory for analysis; and must document and maintain documentation for the handling, preparation, processing, examination, and each step in the testing and reporting of results for all PT samples. 42 C.F.R. � 493.801.

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). HCFA 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.

Petitioner is engaged in high complexity testing for routine chemistry and endocrinology in Farmington Hills, Michigan. Petitioner is owned and operated by Stanley Boykansky, M.D., who served as Petitioner's laboratory director, clinical consultant, technical supervisor and general supervisor. Petitioner employed Deborah Sabo. HCFA Ex. 9. Ms. Sabo performed high complexity routine chemistry and endocrinology testing, PT and tests billable to Medicare.

Some of the laboratories in the Detroit Metro area participating in a PT program operated by the American Association of Bioanalysts (AAB) were Stanley Boykansky, M.D.; Oakland Medical Group (also known as Moretsky/Trager/Flor); John Dunn, M.D.; Mark Hertzberg, M.D.; Rochester Road Clinic; Nazar Sarafa, M.D. (also known as Garden City Medical Clinic); Liptawat Family, P.C.; Lakeland Medical; and Ecorse Med Center. HCFA Ex. 1. The AAB would mail to each laboratory participating in the PT program an identical group of five specimens three times a year. The laboratories were required to test these specimens for analytes for which they did patient testing, and mail their results to the AAB by a date certain. Petitioner was required to test the specimens for cholesterol, HDL cholesterol, triglycerides, iron, thyroid stimulating hormone, total thyroxine, triiodothyronine, and thyroid uptake.

While working for Petitioner, Ms. Sabo also performed PT for the Dunn, Ecorse, Hertzberg and Garden City laboratories and worked for the Rochester Road laboratory as substitute testing personnel. Hearing Transcript (Tr.) at 42-43.

During this period, Rene Wheatley performed PT for the Rochester Road, Liptawat, Lakeland and Oakland laboratories. HCFA Exs. 1 and 2. Ms. Wheatley and Ms. Sabo had a prior professional relationship. Ms. Sabo testified that they knew each other "well" and that Ms. Wheatley had been her supervisor at Oakland General Hospital. Tr. at 41-42.

In early January 1999, Dennis W. Jay, Ph.D., Technical Director of the Proficiency Testing Service of the AAB, sent a letter to the Michigan Department of Consumer and Industry Services (MDCIS), the state survey agency, concerning PT results for a group of Detroit area laboratories that he deemed suspect. Specifically, the cover letter suggested that the same PT results were being submitted by nine laboratories including Petitioner. HCFA Exs. 15 at 2 and 13 at 2-3.

On February 25, 1999, MDCIS surveyors conducted a complaint investigation of Petitioner to determine whether Petitioner was complying with CLIA requirements. The surveyors determined that Petitioner's 1998 PT results were not obtained in compliance with CLIA requirements.⁽²⁾ HCFA Ex. 15 at 3-4. Generally, the surveyors found that Petitioner's PT results for numerous tests were identical to PT results at some or all of eight other Detroit area laboratories, identified above, at which Ms. Sabo and Ms. Wheatley worked. Moreover, the underlying calculations ostensibly used to produce those results did not always support them.

The surveyors referred their findings to HCFA. HCFA Ex. 15 at 3-4. On May 13, 1999, HCFA notified Petitioner that it had been found to be deficient in complying with CLIA requirements. HCFA advised Petitioner that it would impose remedies against Petitioner which included cancellation of Petitioner's approval to receive Medicare payment for its services and revocation of Petitioner's CLIA certificate.

HCFA followed its May 13, 1999 notice with a second notice dated June 23, 1999. There HCFA advised Petitioner that its determination to impose remedies was based on its finding that Petitioner had referred PT samples to another laboratory for testing or had improperly collaborated with another laboratory in the administration of PT samples.

On July 15, 1999, Petitioner requested a hearing before an ALJ. HCFA sent a third notice to Petitioner, dated August 27, 1999. There HCFA reiterated and amplified its findings that Petitioner either had referred PT samples to another laboratory for testing or had collaborated with another laboratory in the PT event. In the August 27, 1999 notice, HCFA identified two specific CLIA conditions with which it asserted Petitioner had not complied. These conditions are stated at 42 C.F.R. �� 493.801 (proficiency testing) and 493.1441 (laboratory director).

On April 12, 2000, the ALJ held an in-person hearing in Detroit, Michigan. There he heard the testimony of Ms. Sabo, who testified on behalf of Petitioner. The ALJ issued his decision on July 28, 2000. Petitioner timely appealed on September 21, 2000.

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 ALJ Decision was premised on seven Findings of Fact and Conclusions of Law (FFCLs). As noted above, Petitioner took exception to each FFCL. Petitioner filed, concurrently, both a Request for Review, listing all the FFCLs to which it excepted, and a Brief grouping some of those FFCLs within broader arguments. In presenting Petitioner's position, we cite both its Request for Review and its Brief.

We have considered each argument raised by Petitioner as well as the entirety of evidence before the ALJ. Below, to the extent practical, we address each relevant argument relative to a disputed FFCL. We have concluded that the challenged FFCLs are not erroneous and are supported by substantial evidence on the record as a whole. Thus, any nuance of Petitioner's contentions that we have not addressed specifically is subsumed in our analysis of its position and rejected.

FFCL 1. HCFA gave Petitioner adequate notice of the basis for its determination to impose remedies.

Petitioner contended that this FFCL was clearly erroneous and not supported by substantial evidence in the record. Petitioner asserted that it did not receive proper notice of the condition-level deficiencies in accordance with 42 U.S.C. � 263a(i) and 42 C.F.R. � 493.1844(g). Petitioner alleged that it had suffered prejudice in that it had its Medicare payments canceled prior to receipt of notice of alleged condition-level deficiencies and, based on the ALJ's erroneous conclusion, could have its CLIA certificate revoked. Petitioner Request for Review at 1-2.

Petitioner asserted that HCFA's first Notice (May 13, 1999) alleged standard level deficiencies and that it was not until HCFA's August 27, 1999 Notice that allegations of condition-level deficiencies arose. Petitioner noted that the August 27^th Notice cited condition-level deficiencies relative to 42 C.F.R. �� 493.801 (testing of samples) and 493.1441 (laboratory director). However, Petitioner contended that HCFA's Form 2567 (Statement of Deficiencies) did not address section 493.1441, let alone violations of that provision. Rather, the Form 2567 pointed to violations of 42 C.F.R. � 493.1445, which, by definition, sets out standard level deficiencies relative to a laboratory director. Petitioner argued that HCFA, without authority, found a condition-level violation of section 493.1441, based on totally unsupported and previously undisclosed standard level deficiencies. Petitioner Br. at 5-6.

Petitioner contended that it received the August 27^th Notice "after the sanctions were either imposed or appealed and provided no opportunity to respond or appeal . . . previously undisclosed deficiencies." Petitioner argued that the ALJ erred in finding that Petitioner had been provided with adequate notice. Specifically, according to Petitioner, the ALJ's reliance on 42 C.F.R. � 493.1842(b) (HCFA authorized to amend notices) was misplaced as that regulation also provided that neither cancellation nor revocation may occur without proper notice and opportunity to respond. Here, Petitioner asserted, HCFA imposed a condition level remedy, cancellation of payment, then raised the specter of condition level deficiencies. Additionally, Petitioner asserted, HCFA erroneously determined that it could cancel payments and revoke Petitioner's CLIA certificate based on an accumulation of standard level deficiencies justifying condition level sanctions. Petitioner Br. at 6-9.

We reject Petitioner's contention that it lacked timely notice of the basis for HCFA's determination because Petitioner admits in its Brief before us that, as early as the Notice and June 23 Letter, it knew that HCFA considered it to be so seriously out of compliance with CLIA requirements that principal sanctions were warranted. Petitioner stated, "HCFA . . . notified Petitioner that his approval to receive Medicare payments would be canceled and his CLIA certificate would be revoked based upon HCFA's determination that standard level deficiencies could provide a basis for a condition-level sanction if HCFA determined that such an unsupported determination was proper. Based upon the reasons and rationale underlying HCFA's decision with respect to the adverse action . . . Petitioner responded to the Notice and June 23 Letter." Petitioner Br. at 8. This admission confirms the ALJ's determinations that Petitioner had timely notice of the charges against it, and that the subsequent, more specific

August 27, 1999 notice was a permissible amendment of HCFA's May 13, 1999 Notice. ALJ Decision at 6. Moreover, one of the specific violations referenced in the May 13 Notice, the intentional referral of PT samples, by its own regulatory terms provides a basis for the principal sanction of certificate revocation. See 42 C.F.R. � 493.801(b)(4). In addition, as we discuss more extensively below, the egregious undermining of the PT system alleged by the May 13 Notice, which the ALJ found to exist in this case, certainly rises to the level of a condition level deficiency with the PT regulations.

We therefore affirm and adopt FFCL 1.

FFCL 2. HCFA is authorized to make independent determinations about the nature and severity of Petitioner's alleged noncompliance with CLIA requirements.

Petitioner asserted that this FFCL was clearly erroneous and not supported by substantial evidence in the record because, contrary to the ALJ's interpretation of its argument, it was not arguing that HCFA had no authority to either impose sanctions or find deficiencies. Rather, Petitioner argued that HCFA could not impose principal level sanctions unless it had properly alleged a condition level deficiency.

In reviewing Petitioner's arguments before the ALJ, we have concluded that the following statement in the ALJ Decision is accurate: "Petitioner seems to be arguing that HCFA lacks the authority to make findings that differ from those which its agents make in conducting CLIA compliance surveys by asserting that HCFA's determination that Petitioner manifested condition level deficiencies in its operations exceeded the findings that were made at the February 25, 1999 survey. From this, Petitioner appears to argue that HCFA's determinations in this case are invalid inasmuch as they differ from the findings of noncompliance that were made by the Michigan State survey agency surveyors." ALJ Decision at 6.

Petitioner did not contend before us that the ALJ's reasoning on this point was flawed. Rather, it contended that this FFCL does not adequately address its arguments about HCFA's authority to impose principal sanctions where the state surveyors had cited only standard level deficiencies. However, the ALJ addressed all aspects of Petitioner's contentions on this topic in FFCL 1, where he found that Petitioner had adequate notice, and FFCL 7, where he concluded that HCFA's imposition of principal sanctions was authorized. We have therefore placed our discussion of these arguments in the sections of this decision dealing with those FFCLs. Moreover, the ALJ's discussion of HCFA's authority to make independent determinations about the nature and severity of Petitioner's noncompliance with CLIA requirements is legally sound, as it is based on the plain language of 42 C.F.R. � 493.1804. We therefore affirm and adopt FFCL 2 without further discussion.

FFCL 3. During 1998, Petitioner colluded with other clinical laboratories in the performance of proficiency testing.

Petitioner asserted that the ALJ's finding of collusion was not supported by "substantial facts presented." Petitioner Request for Review at 3. Petitioner argued that in reaching this FFCL, the ALJ ignored the only credible evidence of record, Ms. Sabo's testimony, and relied instead on the similarity of Petitioner's PT results to the results of other laboratories in the Detroit area. Petitioner contended that the ALJ's findings that Ms. Sabo and Ms. Wheatley were well-acquainted and that Ms. Sabo offered no explanation for similar or identical PT results were not supported by substantial evidence.

With respect to the evidence upon which the ALJ relied in reaching his decision, Petitioner challenged the qualifications of the three HCFA affiants (the Technical Director, Proficiency Testing, AAB; the Chief, Laboratory Improvement Section, MDCIS and the Medical Technologist, HCFA Survey and Certification Division). Petitioner asserted that these affiants' credentials did not include expertise or special knowledge in the area of statistical analysis, and thus, the ALJ's reliance on them was misplaced. Petitioner asserted that the affiants' declarations were suspect because they did not consider the totality of the testing process. Further, Petitioner contended that at least one of the affiants, as well as the ALJ, failed to understand that the reduction of the number of variables in a testing equation reduces the chances for dissimilarity of results. According to Petitioner, since the laboratories participating in the AAB testing had the same samples and many used the same reagents and/or equipment, the chance for similar results was increased. Petitioner Br. at 14-18.

Finally, Petitioner disputed that HCFA had met its burden regarding allegations of intentional referral, because all the cases cited by HCFA before the ALJ involved admissions of referrals by the laboratories. Petitioner contended that HCFA had relied on acts which were no more than simple rounding errors and inconsequential human error in an effort to bolster "unsupported allegations." Petitioner Br. at 13-14.

We have reviewed the ALJ's decision in light of Petitioner's contentions and conclude that this FFCL is supported by substantial evidence in the record. Our review of the transcript of the hearing revealed as baseless Petitioner's contentions that there was no evidence in the record to support the ALJ's findings that Ms. Sabo and Ms. Wheatley were well-acquainted and that Ms. Sabo offered no explanation for the similarity of testing results. In considering the ALJ's conclusions concerning Ms. Sabo's credibility, we defer, as we have previously stated is generally appropriate, to the assessment of witness credibility by the ALJ who has the opportunity to observe the witness' demeanor in testifying. Edison Medical Laboratories, Inc., DAB 1713 at 21 (1999). Here, the ALJ explained his credibility determination and cited to overwhelming evidence that contradicted Ms. Sabo's assertion that these PT results were obtained by her performance of the analyses in the manner prescribed by the regulations: not only did the results match those of eight other laboratories to a degree that was highly improbable without collusion, but the records submitted to support Petitioner's PT results contained calculations that produced numbers different from the PT results reported.⁽³⁾ ALJ Decision at 9-10.

Moreover, while the ALJ did not specifically address Petitioner's argument that Ms. Sabo had no motive to falsify the PT results for Petitioner because it would not save her any work, that argument does not avail Petitioner here. While motive, if proven, would have buttressed the ALJ's findings concerning Ms. Sabo's credibility, lack of motive does not undercut the evidence supporting the ALJ's finding that the PT results reported by Ms. Sabo simply did not match the records she made of the PT testing that she allegedly performed.

In addition to the lack of explanation from Ms. Sabo as to how all nine laboratories could innocently reach identical PT results in all three PT events for 1998, the ALJ relied on his analysis of the testimony of three HCFA affiants and his examination of the records Petitioner had produced to support the PT results reported. He relied on these affiants' opinions concerning the likelihood that identical results could be reached without collusion, as well as his independent determination that the records contained data that was inconsistent with the results reported, in concluding that Petitioner did not arrive at these results through human error or coincidence, but by intentional referral, collaboration, and manipulation of the results.

We also reject Petitioner's arguments about HCFA's affiants' alleged lack of credentials amd the similarity of test methods used by the laboratories who obtained identical testing results. Petitioner mischaracterizes the nature of the ALJ's reliance on the testimony of HCFA's experts. He addressed Petitioner's challenge to these individuals' statistical expertise as follows:

None of these experts performed statistical analyses to obtain their conclusions. Rather, their conclusions were based on their training in their respective fields, their experience in those fields, and on the evidence which pertained to the specific PT results that are at issue in this case. Thus, for example, Dr. Jay [AAB Technical Director] concluded that the nine laboratories, including Petitioner, could not have independently reached identical results for cholesterol and triglyceride PT, because of the poor reproducibility of such tests. HCFA Ex. 13 at 2-3. Dr. Jay plainly based that conclusion on his training and expertise and not on a statistical analysis of test results.

ALJ Decision at 9 (emphasis added).

In addition, the ALJ specifically addressed Petitioner's allegation that the identical PT results for the nine laboratories could be due to the similar testing conditions for the laboratories. He stated:

Although some of the laboratories had the same model spectrometer--a device that was used to perform proficiency testing--others had different models. Tr. at 77. All of the spectrometers were calibrated separately. Id. at 77-78. Each of the nine laboratories had its own supply of controls and reagents. Id. at 76-77. Room temperature varied from laboratory to laboratory. Id. at 78.

ALJ Decision at 9. Indeed, in making his finding that variability would be expected, the ALJ relied in part on Ms. Sabo's own testimony. Id. at 11.

We conclude that the ALJ properly weighed the evidence before him in reaching his finding that the results Petitioner reported for PT in 1998 were not its own. As we discuss below, we also conclude that he did not err in determining that this factual finding meant that Petitioner had participated in unlawful communication of PT results in contravention of 42 C.F.R. � 493.801(b).

We reject Petitioner's contentions that the ALJ erred in affirming HCFA's finding of intentional referral here because HCFA relied on decisions where the laboratory in question had admitted referral and on documents showing what Petitioner characterized as rounding errors or inadvertent human error. The ALJ thoroughly discussed the evidence supporting his application of the referral and inter-laboratory communication regulations to the circumstances here, despite Petitioner's refusal to admit referral and its assertion that its discrepancies between its PT records and the results it reported were honest mistakes. See ALJ Decision at 7-9. As we have already stated, his analysis of these issues is supported by substantial evidence in the record.

We therefore affirm and adopt FFCL 3.

FFCL 4. During 1998, Petitioner did not test proficiency test samples in the same manner as it tested patients' specimens. Also during 1998, Petitioner engaged in inter-laboratory communications pertaining to the results of proficiency tests.

In challenging the evidentiary basis for this FFCL, Petitioner relied heavily on Ms. Sabo's "unequivocal testimony" that PT and patient testing were properly performed in 1998, and it contended that there was no reliable evidence that PT was not performed on site. Petitioner Br. at 25. Petitioner argued that not only was there no evidence before the ALJ that Petitioner had engaged in inter-laboratory communication, but also the relevant CLIA regulation, 42 C.F.R. �� 493.801(b)(3) and (4), dictated that inter-laboratory communications be treated as a standard level deficiency, not sanctionable by revocation. Consequently, Petitioner concluded, since this Department and Congress intended that inter-laboratory communications be treated as a standard level deficiency, neither HCFA nor the ALJ had the authority to impose principal sanctions in this case. Petitioner Br. 24-25.

We have already discussed, in connection with our review of Petitioner's exceptions to FFCL 3, the substantial evidence in the record supporting the ALJ's finding that Petitioner's 1998 PT results were reached through collusion rather than through testing in accordance with the regulations. Based on the same analysis, we reject Petitioner's reliance on Ms. Sabo's testimony that PT testing was done properly on site.

We also reject Petitioner's regulatory analysis leading to its conclusion that HCFA is not authorized to impose a principal sanction for inter-laboratory communication. One of the subsections cited by Petitioner, 42 C.F.R. � 493.801(b)(4), specifically requires imposition of a principal sanction, revocation of a laboratory's CLIA certificate for one year, for any laboratory that HCFA determines intentionally referred its PT samples to another laboratory for analysis. This clearly contradicts Petitioner's assertion that the captioning of 42 C.F.R. � 493.801(b) as a standard evidences an intent to limit HCFA's authority to impose a principal sanction for violations of this provision. As we discuss below in reviewing Petitioner's exceptions to FFCL 7, HCFA is not limited to alternative sanctions where a laboratory's actions constitute an egregious violation of its PT responsibilities.

We therefore affirm and adopt FFCL 4.

FFCL 5. Petitioner failed to comply with the CLIA condition of participation that is stated at 42 C.F.R. � 493.801.

Petitioner asserted that the ALJ's analysis underlying this FFCL, that Petitioner deliberately attempted to frustrate the underlying purpose of PT, was not based on substantial evidence in the record. Petitioner insisted that the ALJ's finding that Petitioner had colluded with other laboratories on 1998 PT and his conclusion that collusion could rise to the level of an intentional referral under 42 C.F.R. � 493.801(b)(4) were clearly erroneous and not supported by substantial evidence in the record.⁽⁴⁾ Petitioner argued that, based on a clear reading of the statute and regulation, there could be no referral without an actual transport of PT samples. Petitioner noted that although the ALJ had found no referral absent physical transport in his decision in Southfield Medical Clinic, DAB CR667 (2000), he ignored his Southfield holding in reaching his decision here. Petitioner argued that the ALJ's conclusion that an intentional referral of PT samples may occur under 42 U.S.C. � 263(a)(i)(4) without physical transport of the samples was clearly erroneous. Additionally, Petitioner argued that the ALJ incorrectly found that the laboratory director's failure to sign the PT attestation form was further evidence of collusion reaching the level of referral. Petitioner maintained that in reaching this finding, the ALJ ignored the evidence that Ms. Sabo was qualified to sign the attestation sheets in place of the laboratory director pursuant to 42 C.F.R. �� 493.1411 and 493.1449. Petitioner Br. at 26-28.

We have already reviewed Petitioner's contentions concerning the ALJ's finding that Petitioner colluded with other laboratories and concluded that it is supported by substantial evidence in the record. In this section, we review Petitioner's contention concerning the legal effect of that finding. In arguing that the ALJ ignored his Southfield holding, Petitioner is mistaken, as the following excerpt from the ALJ Decision demonstrates:

I disagree with HCFA's assertion and I disagree with the Balding (sic) [Blanding Urgent Care Center Laboratory, DAB CR438 (1996)] decision to the extent that it supports the proposition that an unlawful "referral" of a testing sample to another laboratory may occur without an actual physical transport of the sample from one laboratory to another. As I explained in Southfield Medical Clinic, DAB CR667 at 11 (2000), collusion and referral of testing samples are not the same thing.

ALJ Decision at 12. Thus, because there was no evidence of physical transfer in this case, the ALJ did not find intentional referral here. The ALJ went on to conclude, however, that the distinction between intentional referral and collusion was not important in this case because "the effect of Petitioner's collusion on the performance of its proficiency testing was indistinguishable from the effect resulting from other forms of cheating on proficiency testing, including referral of samples to another laboratory for testing. The effect was to invalidate completely Petitioner's proficiency testing." Id., at 12-13.

We agree with the ALJ that Petitioner failed to comply with the CLIA condition at 42 C.F.R. � 493.801 because it reported PT results that were not its own. However, we have recently considered the two ALJ decisions cited by this ALJ, Blanding and Southfield, in another appellate decision, and we respectfully disagree with the ALJ that the regulation at section 493.801(b)(4) prohibiting intentional referral of PT samples is limited to cases where physical transfer is established. In Oakland Medical Group, P.C., DAB No. 1755 (2000), we stated:

The ALJ in Southfield focused on the wording of the provision at 42 C.F.R. � 493.801(b)(4), concluding that the wording indicates a physical transfer of the PT sample. We agree that the use of the word "send" in the first sentence of that section indicates a physical transfer. Contrary to what the ALJ in Southfield stated, however, that sentence is not presented as a definition of "intentional referral" but can be read as a separate prohibition. The second sentence of that section states: "Any laboratory that HCFA determines intentionally referred its . . . [PT] samples to another laboratory for analysis will have its certification revoked for at least one year." HCFA could reasonably read this sentence as applying to constructive referral as well as actual physical transfer, particularly in circumstances where the facts render physical transfer unnecessary for the outside analysis to take place. As noted by the ALJ in Blanding . . ., the dictionary definition of "refer" includes "to direct the attention or thoughts of," and "to direct to a person, place, etc., for information or anything required." Id. at 21 citing Random House College Dictionary, revised ed. 1980, at 1108.

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

Oakland at 17-18.

Consequently, we conclude that Petitioner violated 42 C.F.R. � 493.801(b)(4) specifically, as well as the overall condition at � 493.801. Since that provision codifies a statutory provision requiring HCFA to revoke Petitioner's CLIA certificate for one year, a sanction the ALJ had upheld based on his conclusion that Petitioner's actions violated the overall condition, we see no need to modify FFCL 5 to reflect that Petitioner also violated section 493.801(b)(4).⁽⁵⁾

As noted above, Petitioner also argued that the ALJ erred in relying on Petitioner's failure to rebut the allegation that its laboratory director failed to sign PT statements as further evidence of collusion, because Ms. Sabo was qualified to, and did, sign them as technical consultant or technical supervisor. However, the ALJ properly determined that the functions of technical supervisor and laboratory director are distinct under the regulations, and that at most, one could say that the technical supervisor's duties may be a component of the laboratory director's responsibilities. ALJ Decision at 13. Moreover, among the regulatory duties of the technical consultant and technical supervisor are the evaluation of the competency of all testing personnel to assure that the staff maintain their competency to perform test procedures and report test results promptly, accurately and proficiently. 42 C.F.R. �� 493.1414(b)(8) and 493.1451(b)(8). In addition, both positions bear responsibility for evaluating and documenting the performance of individuals responsible for testing.

42 C.F.R. �� 493.1414(b)(9) and 493.1451(b)(9). These provisions indicate that the person holding these positions should not be the same individual responsible for testing, as was the case in Petitioner's laboratory.

We therefore affirm and adopt FFCL 5.

FFCL 6. Petitioner failed to comply with the CLIA condition of participation that is stated at 42 C.F.R. � 493.1441.

Petitioner asserted that the ALJ's finding that Petitioner's laboratory director had not provided overall management and direction as required by 42 C.F.R. � 493.1441 was not supported by substantial evidence. Petitioner Request for Review at 5.

Petitioner asserted that the ALJ incorrectly relied on an inference that because there are standard level deficiencies, the laboratory director did not perform his responsibilities. Further, Petitioner noted that there was no evidence that Ms. Sabo was not competent to perform PT and no evidence that patient testing was not properly performed on site. Petitioner asserted that, absent evidence to the contrary, it defied logic to think that Ms. Sabo would not perform PT properly given that she had nothing to gain from not performing PT with routine patient testing. Petitioner noted that it had never received complaints concerning the quality of its patient testing, had not had its PT results rejected by AAB and had not had deficiencies cited by the Commission on Office Laboratory Accreditation (COLA). Petitioner characterized the similarity in PT results scores as emanating from small standard deviations from the mean on PT scores coupled with the work of a sloppy or absent-minded technician. Petitioner characterized as "absurd" what it interpreted as the ALJ's requirement that a laboratory director was required to look over the shoulder of a laboratory technician in order to demonstrate satisfactory direction. Petitioner Br. at 31. Petitioner argued that such stringent oversight would not prevent collusion. Rather, Petitioner argued, in order to function effectively, the director must be free to rely on his/her expert, i.e., the technician. Moreover, Petitioner argued that rather than being allowed to impose the draconian sanctions at issue, HCFA and the ALJ should be made to adhere to the letter of the CLIA statute and regulations. Thus, according to Petitioner, the most stringent sanction available should have been compelling Petitioner to adhere to a plan of correction. Petitioner Br. 29-32.

Petitioner's argument is anomalous⁽⁶⁾ and utterly lacking in merit. The ALJ's rationale is explicit and persuasive.

Specifically, he found:

The evidence shows that, in 1998, Dr. Boykansky abdicated the supervisory authority that he had as Petitioner's laboratory director. This abdication of authority was so serious as to comprise a failure to comply with the laboratory director condition of participation under CLIA. The failure to supervise Ms. Sabo enabled her to collaborate with other laboratories in the performance of PT. Had Dr. Boykansky been more vigilant in supervising Ms. Sabo, the collusion that transpired between Petitioner and other laboratories might not have happened.

[T]here is ample evidence to show that he was remiss in supervising Ms. Sabo and that this lax supervision facilitated collusion between Petitioner and other laboratories.

The collusion between Petitioner and other laboratories transpired over a period of approximately one year. . . During this entire period there is no evidence that Dr. Boykansky, acting as laboratory director of Petitioner and Ms. Sabo's supervisor, exercised any supervision of Ms. Sabo that would have exposed her actions. The inference I draw from his failure to intervene was that Dr. Boykansky was not providing required oversight of Ms. Sabo's work. My conclusion that Dr. Boykansky was not supervising Ms. Sabo is buttressed by Dr. Boykansky's failure to sign proficiency testing attestation statements. Rather, he permitted Ms. Sabo to sign these statements.

ALJ Decision at 14-15.

There is precious little room for dispute here. Petitioner has been unable to refute HCFA's case before the ALJ or the ALJ's rationale underlying the other FFCLs upon which his decision is based. This FFCL is the result of cumulative evidence before the ALJ. Faced with persuasive evidence of intentional referral of PT samples, Petitioner offered no credible evidence to show that PT was conducted properly. Consequently, Petitioner's arguments are totally unconvincing. We do not read this FFCL as requiring a laboratory director to stand over a technician's shoulder. As we discussed in our analysis of FFCL 5 above, the CLIA regulations provide for evaluation of testing personnel by the technical supervisor or technical consultant. 42 C.F.R.�� 493.1414(b)(8) and 493.1451(b)(8). By permitting Ms. Sabo to sign in those capacities, Dr. Boykansky abdicated his responsibility for overall management and direction of the laboratory in accordance with the provisions of 42 C.F.R. � 493.1445. This regulation expressly provides that if a laboratory directory delegates responsibilities, he nonetheless remains responsible for ensuring that all duties are properly performed. 42 C.F.R. � 493.1445(b). Consequently, while he does not have to stand over his technician's shoulder, the laboratory director must ensure that PT is performed properly. 42 C.F.R. � 493.1445(e)(4). Here, there is ample evidence to show that the laboratory director failed to fulfill his responsibilities under 42 C.F.R. � 493.1445. Thus, the ALJ properly found a violation of the condition at 42 C.F.R. � 493.1441.

Further, Petitioner's argument that the lack of complaints about its prior performance in both PT and patient testing was evidence of its 1998 compliance with the regulation at issue is unavailing in the face of overwhelming evidence that its participation in these 1998 PT events was flawed. Thus, at most, Petitioner's prior compliance history is a factor HCFA could consider in choosing the appropriate sanction. See 42 C.F.R. � 493.1804(d)(6).

We therefore affirm and adopt FFCL 6.

FFCL 7. HCFA is authorized to impose principal sanctions against Petitioner as remedies for Petitioner's noncompliance with CLIA conditions of participation.

Petitioner asserted that this FFCL was clearly erroneous and not supported by substantial evidence. Petitioner Request for Review at 6. Petitioner asserted that it had submitted a valid plan of correction on May 28, 1999 with respect to the standard level deficiencies of which it had notice. Petitioner further asserted that Ms. Sabo's testimony addressed all those standard level deficiencies and that Petitioner, in its pleadings, had sufficiently explained "certain mistakes made by Ms. Sabo." Petitioner Br. at 32. Petitioner contended that HCFA's failure to properly allege condition level deficiencies meant that HCFA's choice of remedies was limited to those found at 42 C.F.R. � 493.1816. Petitioner asserted that, pursuant to the regulation, HCFA was compelled to provide it the opportunity to submit an acceptable plan of correction within 12 months of the last day of the inspection revealing the deficiencies.

Petitioner also asserted that the ALJ's and HCFA's theory that standard level deficiencies can amount to condition-level sanctions was baseless. In support, Petitioner pointed to 42 C.F.R. � 493.2, which provides that a condition-level deficiency constitutes noncompliance with one or more condition-level requirements. Petitioner asserted that neither CLIA nor the implementing regulations provide HCFA with the authority to find a condition-level violation in the circumstances present here. Moreover, Petitioner noted that both the legislative history and past ALJ decisions plainly distinguish between standard and condition-level deficiencies. Petitioner argued that, given these factors and since HCFA found only standard level deficiencies, the penalty imposed by HCFA was unwarranted. Petitioner Br. at 10-13.

Petitioner's contentions rest on its assertion that it was given timely notice only of standard level deficiencies, which we have already rejected, and on an overly technical reading of the regulations as restricting HCFA's authority to take action to protect patients from relying on laboratory results produced by laboratories which are found to be noncompliant with CLIA requirements. As we stated in Oakland, a case involving another of the group of laboratories found to have identical 1998 PT results, "[i]t is indisputable that a laboratory can be so pervasively noncompliant with standards as to have failed to have complied with the overall condition." Id. at 23. HCFA is not restricted by regulation to the use of a plan of correction, as urged by Petitioner, when "Petitioner's collusion was so egregious as to make its participation in proficiency testing meaningless." ALJ Decision at 14.

We therefore affirm and adopt FFCL 7.

Donald F. Garrett

M. Terry Johnson
Presiding Board Member

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

2. We do not recount here each of Petitioner's questioned PT results. Those results were before the ALJ and their existence is not in question. Rather, the manner in which the PT results were obtained is at issue.

3. Petitioner also challenged the ALJ's credibility determination as not supported by substantial evidence because the ALJ ignored "undisputed evidence . . . that at nine out of thirteen laboratories that Ms. Sabo provided technician services, the 1998 . . . [PT] results are not at issue." Petitioner Request for Review at 3-4. However, the only information in the record concerning Ms. Sabo's performance of PT testing at the other laboratories where she worked was that those laboratories were not included in AAB's survey. Petitioner Br. at 19. Thus, there was no basis for Petitioner's suggested inference that since Ms. Sabo's 1998 performance had been thoroughly reviewed to determine if every laboratory had identical PT results, the ALJ should have believed her when she said that the identical results found by AAB were merely a coincidence.

4. Petitioner also reiterated its position that standard level deficiencies alone could not constitute a condition-level violation and that there was no evidence in the record supporting the ALJ's conclusion to the contrary. Petitioner Request for Review at 5. We address this contention in our discussion of FFCL 7.

5. Moreover, while we agree with the ALJ's statement that there may be instances where collaboration is so minimal as not to warrant the imposition of a principal sanction, we do not agree that providing for a mandatory sanction for referral means that there cannot be more than one subsection applicable to activities that undercut the purpose of PT testing.

6. At one point, in consecutive sentences, Petitioner describes Ms. Sabo as both "highly qualified" and "a sloppy or absent-minded technician." Petitioner Br. at 31.