SUBJECT:

Rustom Ali, Ph.D., Operator of Scottsdale Medical Laboratory,

Petitioner,

Centers for Medicare & Medicaid Services.

DECISION

Scottsdale Medical Laboratory's (Scottsdale) 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 Scottsdale's CLIA certificate is effective the date of this decision. By operation of law, the owner and operators of Scottsdale 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 Scottsdale's certificate. The two-year prohibition runs from the date of the revocation of Scottsdale's certificate pursuant to 42 U.S.C. � 263a(i)(3) - the date of this decision. The evidence shows that Jahan Ferdous (Petitioner Ferdous), was an owner, Rustom Ali, Ph.D. (Petitioner Ali) was an owner and operator, and Robert Gilsdorf, M.D., Ph.D., was the laboratory director with duties equivalent to those of an operator, and these individuals are subject to the two-year ban pursuant to 42 U.S.C. � 263a(i)(3). The civil money penalty (CMP) of $3,000 per day for the period February 23, 2002 to April 9, 2002, is not approved as it served no remedial purpose.

I. PROCEDURAL HISTORY

Petitioner, Scottsdale Medical Laboratory, is located in Scottsdale, Arizona. The Arizona Department of Health (the state agency) conducted surveys of the laboratory on August 16, 2001, October 3, 2001, and December 17, 2001. Joint Stipulation dated October 1, 2002. The Centers for Medicare & Medicaid Services (CMS) ⁽²⁾ notified Dr. Gilsdorf, laboratory director, Petitioner Ferdous, owner, and Petitioner Ali, operator, by letter dated February 28, 2002, that sanctions were being imposed and of the right to request a hearing. Petitioner Ferdous and Petitioner Ali jointly requested a hearing by an administrative law judge (ALJ) by letter dated April 4, 2002. No request for a hearing was received from Dr. Gilsdorf.

The case was assigned to ALJ Anne Blair for hearing and decision on May 21, 2002. On May 25, 2002, Petitioners filed an unopposed request to have this case consolidated with the case of Sonali Diagnostic Laboratory, C-02-047, which was pending before me. On July 15, 2002, the case was reassigned to me as two cases, Rustom Ali, Ph.D., C-02-503, and Scottsdale Medical Laboratory, C-02-504. In an order dated August 1, 2002, I denied Petitioners' motion for summary judgment, consolidated C-02-503 and C-02-504, and established a schedule to hearing. ⁽³⁾ Pursuant to Petitioners' request of September 2, 2002, cases C-02-047 and C-02-503 were set for hearing the same week in Phoenix, Arizona.

I convened a hearing in this case on December 19, 2002, and adjourned on December 20, 2002. CMS Exhibits (CMS Ex.) 1 through 33 were admitted as evidence. Petitioners' Exhibits (P. Ex.) 1 through 22, 22A, and 23 through 44 were admitted as evidence. CMS presented the testimony of surveyors Diane Eckles and Joan Apt, and the testimony of Gary Yamamoto and Mary Jew from the CMS regional office. Petitioner Ali testified on behalf of Petitioners. A transcript (Tr.) of the hearing was prepared and submitted to the parties for review. The parties each submitted a list of errata which will remain with the transcript. CMS filed a post-hearing brief (CMS Brief) and a post-hearing reply brief (CMS Reply). Petitioners filed a post-hearing brief (P. Brief), a "Request for Early Verdict," and "A Rebut to the Initial Briefs for Scottsdale Medical Laboratory," (P. Reply).

II. FINDINGS OF FACT AND CONCLUSIONS OF LAW

A. Findings of Fact

The following findings of fact are based on the evidence admitted at hearing and the testimony of the witnesses. Specific citations to the evidence may be found in the discussion if not included here.

1. Petitioner, Scottsdale Medical Laboratory, is located in Scottsdale, Arizona.

2. The state agency conducted surveys of the laboratory on August 16, 2001, October 3, 2001, and December 17, 2001.

3. The Scottsdale Medical Laboratory application for CLIA certification was signed by Michael Holland, M.D. on April 21, 2001, and lists Michael Holland, M.D. as laboratory director, Gerlinde White as phlebotomist, Joy Fritz Gregorio as testing personnel, and Petitioner Ferdous as owner. Petitioner Ali is not listed on the application or supporting documents at CMS Ex. 31.

4. Petitioner Ali and Petitioner Ferdous have been husband and wife for over 35 years. Tr. 430.

5. Petitioner Ferdous and Petitioner Ali misrepresented to the state agency the actual ownership of Scottsdale, allowing their agents and employees, Dr. Holland and Mr. Gregorio to sign and file documents to obtain a certificate of registration for Scottsdale, which documents did not reflect the direct or indirect ownership interest of Petitioner Ali.

6. A CLIA laboratory registration certificate was issued to Scottsdale Medical Laboratory on May 24, 2001, with Dr. Holland listed as Laboratory Director. P. Ex. 1.

7. Scottsdale began testing human samples in early August 2001. CMS Ex. 2, at 1 (Plan of Correction, right column).

8. In a letter dated September 16, 2001 and addressed to Petitioner Ali, Dr. Holland, resigned as the laboratory director of Scottsdale. CMS Ex. 33.

9. Robert B. Gilsdorf, M.D., Ph.D., provided the state agency with an attestation dated October 10, 2001, which states that he became the laboratory director of Scottsdale Medical Laboratory on September 1, 2001. CMS Ex. 32.

10. CMS Ex. 19 purports to be a "General Contract" executed by Dr. Gilsdorf, and Petitioner Ali, on September 3, 2001, in which Dr. Gilsdorf agrees to function as Medical Director for Scottsdale.

11. Because Scottsdale was operating under a CLIA certificate of registration, an initial certification survey was required before the laboratory could be issued a CLIA certificate of compliance. The survey was completed by Surveyors Apt and Eckles on December 17, 2001, and they found that Scottsdale was not in compliance with the condition-level requirements of 42 C.F.R. �� 493.1101 (Patient Test Management), 493.1403 (Laboratory Director), and 493.1701 (Quality Assurance). CMS Exs. 22 and 26.

12. CMS, by letter dated February 8, 2002 which was addressed to "Robert Gilsdorf, M.D., Director, Jahan Ferdous, Owner, and Rustom Ali, Operator," provided notice that sanctions were proposed and would be implemented unless Petitioners presented evidence that showed that the deficiencies alleged on the December 2001 survey did not exist. CMS Ex. 27.

13. CMS notified Dr. Gilsdorf, Petitioner Ferdous, and Petitioner Ali by letter dated February 28, 2002, that sanctions were being imposed and of the right to request a hearing. The following sanctions were imposed: a directed plan of correction to "cease testing" effective February 23, 2002; CMP of $3,000 per day for each day of non-compliance effective February 23, 2002, until revocation of Petitioners' CLIA certificate became effective; cancellation of approval to receive Medicare and Medicaid payments effective February 23, 2002; and revocation of the laboratory's CLIA certificate effective April 9, 2002, subject to filing a request for hearing. CMS Ex. 28.

14. Petitioner Ferdous and Petitioner Ali jointly requested a hearing by an ALJ by letter dated April 4, 2002. No request for a hearing was received from Dr. Gilsdorf.

15. Petitioners do not deny the accuracy of the facts alleged by the surveyors in the statement of deficiencies for the December 2001 survey in connection with the alleged violation of 42 C.F.R. � 493.1101 pertaining to Patient Test Management, but argue that the deficiencies were corrected or were minor errors that did not amount to a deficiency after correction.

16. The surveyors alleged a violation of 42 C.F.R. �� 493.1703(d) and 493.1703(f), and Petitioners have never denied the facts alleged by the surveyors, but rather argue that the deficiencies were corrected or were minor errors that did not amount to deficiencies after correction.

B. Conclusions of Law

1. Requests for hearing were timely filed by Petitioners and I have jurisdiction.

2. CLIA grants the Secretary of Health and Human Services (Secretary) broad enforcement authority, including the ability to suspend, limit, or revoke the CLIA 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. The Secretary may suspend, revoke, or limit a laboratory's CLIA certificate if, after "reasonable notice and opportunity for hearing," it is found that the owner, operator, or any employee of a laboratory has been guilty of misrepresentation in obtaining the certificate. 42 U.S.C. � 263a(i)(1).

5. The preponderance of the evidence establishes that Petitioner Ferdous, Petitioner Ali, and/or an employee of Scottsdale was guilty of misrepresentation in obtaining the certificate of registration for Scottsdale because it was not disclosed in the application for the certificate that Petitioner Ali was an owner with his wife Petitioner Ferdous, under the law of Arizona.

6. 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).

7. 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. 1713 (1999).

8. Petitioners were in violation of the condition-level requirement of 42 C.F.R. � 493.1101 pertaining to Patient Test Management during the survey of December 17, 2001.

9. Petitioners were in violation of the condition-level requirement of 42 C.F.R. � 493.1701 pertaining to Quality Assurance during the survey of December 17, 2001.

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

11. 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.

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 a petitioner'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 an initial determination subject to ALJ review. 42 C.F.R. � 493.1844(b)(3). On the facts of this case, this includes review of whether it was lawful for CMS to impose a CMP against Petitioners, i.e., whether Scottsdale "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 of the Social Security Act (Act), 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 of the Act, 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. Gilsdorf, was the laboratory director of Scottsdale with duties and responsibilities equivalent to those of an operator, as that term is used in 42 U.S.C. � 263a(i)(1)© and (i)(3). He was given adequate notice by CMS, but did not request a hearing and has waived the opportunity to challenge revocation of Scottsdale's CLIA certificate.

21. The presumption that Dr. Gilsdorf was an operator of Scottsdale has not been rebutted.

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. Petitioner Ali was an owner of Scottsdale.

24. Petitioner Ali was an operator of Scottsdale.

25. Petitioner, Scottsdale's CLIA certificate of registration is revoked effective the date of this decision.

26. Petitioner Ferdous was an owner of Scottsdale, Petitioner Ali was an owner and operator of the laboratory, and Dr. Gilsdorf was the laboratory director and an operator of Scottsdale within the meaning of the regulations, and all three are subject to the two-year ban on owning or operating another laboratory imposed by 42 U.S.C. � 263a(i)(3).

III. ANALYSIS

A. 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. 100-899, at 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 CLIA 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 delegate to 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. A laboratory that intends to conduct moderate and/or high complexity testing of human specimens must initially apply for a certificate of registration for each laboratory location. A certificate of registration is effective for two years or until an initial program compliance inspection or survey is conducted by CMS or its agent. 42 C.F.R. �� 493.43 and 493.45. If a laboratory is found to be in compliance with CLIA program requirements upon initial compliance inspection, the laboratory is issued a certificate of compliance. 42 C.F.R. � 493.49.

Pursuant to the enforcement provisions of the regulations, which apply equally to laboratories possessing a certificate of registration or a certificate of compliance, 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) and 493.1806. Principal sanctions are suspension, limitation, or revocation of a CLIA certificate. 42 C.F.R. � 493.1806(b). Alternative sanctions are a directed plan of correction, state on-site monitoring, and a CMP. 42 C.F.R. � 493.1806©. Cancellation of Medicare payments is also authorized as a principal sanction when condition-level deficiencies are found (42 C.F.R. �� 493.1807(a) and 493.1842(a)(2)) and required when CMS suspends or revokes a laboratory's certificate (42 C.F.R. � 493.1842(a)). Standard-level deficiencies are not an adequate basis for the imposition of a sanction, except when the laboratory fails to correct such deficiencies within 12 months after the last day of inspection. 42 C.F.R. � 493.1816(b).

If, on inspection, a laboratory is found to have condition-level deficiencies that pose immediate jeopardy, CMS must require the laboratory to take immediate action to remove the jeopardy and may impose alternative sanctions to assist or encourage the laboratory to promptly comply. If, on revisit, the deficiencies remain, CMS may suspend or limit and later revoke the laboratory's CLIA certificate. CMS is also delegated authority to bring a civil suit for an injunction against a laboratory in specified circumstances where there is immediate jeopardy. 42 C.F.R. � 493.1812.

CMS may, in cases involving condition-level deficiencies that do not constitute immediate jeopardy, give the laboratory 12 months to correct such deficiencies before action is taken to suspend, limit, or revoke the laboratory's CLIA certificate. 42 C.F.R. �� 493.1814 and 493.1816. However, CMS may decide that suspension, limitation, or revocation is more appropriate and apply these principal sanctions without giving the laboratory 12 months for correction. 42 C.F.R. � 493.1806. CMS makes the decision as to which sanctions will meet the statutory and regulatory purposes as specified in 42 C.F.R. � 493.1804.

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 (1997). 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. 1713 (1999).

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 ALJ. 42 C.F.R. � 493.1844(a). The hearing procedures found in subpart D of Title 42, 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 as to which alternative sanctions to impose and the amount of the CMP to be imposed are not. 42 C.F.R. �� 493.1844(b)(3) and (c)(4). The general rule is that suspension, limitation, or revocation of a CLIA certificate does not go into effect if appealed, and is not imposed until the ALJ issues a decision, unless CMS declares immediate jeopardy, and then there is no delay in the suspension or limitation of the offending laboratory's CLIA certificate. 42 C.F.R. � 493.1844(d)(2). Similarly, CMS cannot take action to collect a CMP until an ALJ issues a decision on a request for hearing. 42 C.F.R. � 493.1834(g) and (h). Section 498.74 of 42 C.F.R. provides that, absent appeals to the DAB or the U.S. District or Circuit Courts, the ALJ 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:

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. ⁽⁴⁾ However, the regulations provide that CMS may suspend, limit, or 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 above-quoted 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, Inc., DAB No. 1762, at 13 (2001), aff'd, Teitelbaum v. Health Care Financing Admin., No. 01-70236 (9^th Cir. Mar. 15, 2002), reh'g denied, No. 01-70236 (9^th Cir. May 22, 2002); Sol Teitelbaum, 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, 493.1405, 493.1407, 493.1441, 493.1443, and 493.1445. Thus, the regulation creates a rebuttable presumption that a laboratory director is an operator of the laboratory within the meaning of the regulations and CLIA.

The allocation of the burden of proof in an appeal of CMS's sanctions is set forth in Hillman Rehabilitation Center, DAB No. 1611 (1997), aff'd, Hillman Rehabilitation Center v. HHS, No. 98-3789 (GEB) (D.N.J., slip op. May 13, 1999). 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).

B. Issues

1. Whether there is a basis for the revocation of Petitioner Scottsdale's CLIA certificate and the imposition of other remedies.

2. Whether Petitioner Ali was an owner and/or operator within the meaning of the Act for purposes of the two-year ban on owning, operating, or directing another laboratory.

C. Discussion

Petitioner Ali owned, operated, and/or directed other laboratories in Arizona and was well known to the state survey agency. Tr. 431. Dr. Ali was the laboratory director of Sonali Diagnostic Laboratories (Sonali), which was found to have condition-level violations during surveys in January and May 2001. In my decision in Sonali Diagnostic Laboratories, DAB CR1267 (2004), I determined that there was a basis for the revocation of that laboratory's CLIA certificate. The state agency has two CLIA surveyors, Diane Eckles and Joan Apt, both of whom were involved in the December 2001 survey of Scottsdale and testified at the hearing in this case. Diane Eckles testified that she is responsible for the issuance of CLIA certificates for the state agency, and she told Petitioner Ali after the January 2001 survey at Sonali that she would not issue him a CLIA certificate for a new laboratory until he resolved the problems at Sonali. Tr. 359-62. The Scottsdale application for CLIA certification signed by Michael Holland, M.D., on April 21, 2001, was admitted as CMS Ex. 31. The application lists Michael Holland, M.D. as laboratory director, Gerlinde White as phlebotomist, Joy Fritz Gregorio as testing personnel, and Petitioner Ferdous as owner. Petitioner Ali is not listed on the application or supporting documents at CMS Ex. 31. However, Petitioner Ali admitted on examination that Petitioner Ferdous has been his wife for over 35 years. ⁽⁵⁾ Tr. 430. A CLIA laboratory registration certificate was issued to Scottsdale on May 24, 2001, with Dr. Holland listed as Laboratory Director. P. Ex. 1. There is no dispute that the laboratory began testing human samples in early August 2001. CMS Ex. 2, at 1 (Plan of Correction, right column).

The state agency received a complaint which led to a complaint survey of Scottsdale which was completed on August 16, 2001. The surveyors found that Scottsdale was in violation of the condition-level requirements of 42 C.F.R. �� 493.1201 (Quality Control), 493.1403 (Laboratory Director), and 493.1701 (Quality Assurance). CMS Exs. 1 and 2. In a letter dated September 16, 2001 and addressed to Petitioner Ali, Dr. Holland resigned as the laboratory director of Scottsdale. CMS Ex. 33. Dr. Gilsdorf, provided the state agency with an attestation dated October 10, 2001, which states that he became laboratory director on September 1, 2001. CMS Ex. 32. CMS Ex. 19 purports to be a "General Contract" executed by Dr. Gilsdorf and Petitioner Ali on September 3, 2001, in which Dr. Gilsdorf agrees to function as Medical Director for Scottsdale. The state agency completed a follow-up or revisit survey on October 3, 2001, and found that Scottsdale remained out of compliance with two condition-level requirements, 42 C.F.R. �� 493.1403 (Laboratory Director) and 493.1701 (Quality Assurance). CMS Exs. 6, 7, and 20. Ms. Eckles testified that following the October 2001 revisit survey, Petitioner Ali and Dr. Holland (the former laboratory director) visited her office. She provided them with advice on how to submit a credible allegation of compliance, and they subsequently submitted an allegation of compliance. Ms. Eckles conducted a revisit survey at Scottsdale on November 27, 2001, and concluded that Scottsdale was "marginally" in compliance with CLIA requirements. Tr. 124-25.

Because Scottsdale was operating under a CLIA certificate of registration, an initial certification survey was required before the laboratory could be issued a CLIA certificate of compliance. The initial certification survey was completed by Surveyors Apt and Eckles on December 17, 2001, and they found that Scottsdale was not in compliance with the condition-level requirements of 42 C.F.R. �� 493.1101 (Patient Test Management), 493.1403 (Laboratory Director), and 493.1701 (Quality Assurance). CMS Exs. 22 and 26. CMS, by letter dated February 8, 2002 and addressed to "Robert Gilsdorf, M.D., Director, Jahan Ferdous, Owner, and Rustom Ali, Operator," provided notice that sanctions were proposed and would be implemented unless Petitioners presented evidence that showed that the deficiencies alleged at the December 2001 survey did not exist. CMS noted in the letter that while Petitioner Ali was not listed as an owner of Scottsdale, the owner-of-record, Petitioner Ferdous, is his wife. CMS Ex. 27. By letter dated February 28, 2002, CMS notified Dr. Gilsdorf, Petitioner Ferdous, and Petitioner Ali that sanctions were being imposed. CMS noted that no allegation of compliance was requested from Petitioners and that sanctions could only be avoided if Petitioners provided that the deficiencies alleged at the December 2001 survey did not exist. The sanctions imposed were a directed plan of correction to "cease testing" effective February 23, 2002; a CMP of $3,000 per day for each day of non-compliance effective February 23, 2002, until revocation of Petitioners' CLIA certificate became effective; cancellation of approval to receive Medicare and Medicaid payments effective February 23, 2002; and revocation of the laboratory's CLIA certificate effective April 9, 2002, subject to filing a request for hearing. CMS Ex. 28. By letter dated April 4, 2002, Petitioner Ferdous and Petitioner Ali jointly requested a hearing. Petitioners argue in the request for hearing that Jahan Ferdous did not attempt to circumvent CLIA regulations by establishing Scottsdale.

(1) The preponderance of the evidence establishes that Petitioner Ferdous, Petitioner Ali, and/or an employee of Scottsdale was guilty of misrepresentation in obtaining the certificate of registration for Scottsdale.

Pursuant to 42 U.S.C. � 263a(i)(1), the Secretary may suspend, revoke, or limit a laboratory's CLIA certificate, if after "reasonable notice and opportunity for hearing," it is found that the owner, operator, or any employee of a laboratory has been guilty of misrepresentation in obtaining the certificate. In this case, CMS does not specifically allege in either its February 8, 2002 notice or its February 28, 2002 notice that misrepresentation on the application in this case is a basis for revocation, although CMS alludes to Petitioner Ali's undisclosed marital relationship with Petitioner Ferdous in its February 8, 2002 notice. ⁽⁶⁾ It is clear from Petitioners' request for hearing, however, that they were on notice that there was an allegation that Petitioner Ferdous attempted to circumvent the CLIA regulations. This was a matter upon which evidence was taken at hearing and Petitioners addressed the issue of misrepresentation in their post-hearing brief (P. Reply at 23-24). I conclude that Petitioners had adequate notice and opportunity to present evidence on the issue of whether the owner, operator, or an employee of Scottsdale was guilty of a misrepresentation in the application process, which is an independent basis for revocation of the laboratory's CLIA certificate.

The facts show that Petitioner Ferdous, or Petitioner Ali, or laboratory director Dr. Holland, or laboratory employee Mr. Gregorio, individually or collectively, was guilty of a misrepresentation when the application for certificate of registration was filed on or about May 3, 2001. It is undisputed that Sonali, of which Petitioner Ali was owner and director, was surveyed in January 2001, found to have condition-level deficiencies, and was facing the possibility of principal sanctions. See Sonali, DAB CR1267 (2004). It is also undisputed that Ms. Eckles told Petitioner Ali that he would not be issued a certificate to open another laboratory until Sonali was put in order. ⁽⁷⁾ Thus, there is a motive for not disclosing any potential relationship between Petitioner Ali and Scottsdale at the time of the application.

The Scottsdale application for certification is dated April 15, 2001, and the date stamp on the first page of the document indicates that it was received by the state agency on May 3, 2001. The application lists Petitioner Ferdous as owner, Dr. Holland as director, Gerlinde White, as phlebotomist, and Mr. Gregorio as testing personnel. Petitioner Ferdous signed no part of the application, but I infer from the fact her name appears on the application, the fact she has never denied ownership, and the fact she was present but did not take the opportunity to testify at hearing to dispute the application and information thereon, that she at least tacitly approved the application at the time of filing. The application and laboratory personnel report were signed by Dr. Holland as laboratory director, and the disclosure of ownership form was signed by Mr. Gregorio who used the title "laboratory manager." CMS Ex. 31; Tr. 65-67. There is no dispute that Dr. Holland was the laboratory director until September 2001. According to Petitioners, Mr. Gregorio ⁽⁸⁾ was an employee of the laboratory who resigned before the laboratory began human testing. P. Brief at 23.

The list of laboratory personnel signed by Dr. Holland does not show that Petitioner Ali has any position or that he will perform any work at Scottsdale. The "Disclosure of Ownership and Control Interest Statement" (Form HCFA-1513) filed with the application does not reflect that Petitioner Ali is an owner of the laboratory, which is characterized as a sole proprietorship. CMS Ex. 31. Block C.(a) on the disclosure of ownership form requires that all persons or organizations with a "direct or indirect ownership or a controlling interest" be listed. Arizona is a community property state, i.e., all property acquired by either husband or wife during a marriage is the community property of the husband and wife. Ariz. Rev. Stat. Ann. � 25-211. There is a presumption under Arizona law that a business acquired or begun during a marriage is the community property of both the husband and wife. See Delozier v. Evans, 158 Ariz. 490, 763 P.2d 986, 991-92 (Ariz. Ct. App. 1988). Petitioner Ali and Petitioner Ferdous had been married for 35 years at the time of the hearing and 33 or 34 years when the Scottsdale application was filed. Thus, Scottsdale was created during the marriage and there is a presumption that both were owners of the business as it was community property under Arizona law. The presumption that the laboratory business was community property was not rebutted by any evidence presented, but was rather strengthened by Petitioner Ali's testimony that he was never paid but shared any income from the laboratory as husband of Petitioner Ferdous (Tr. 437) and he and Petitioner Ferdous paid laboratory obligations from their joint checking account (Tr. 473-74).

Based on the foregoing discussion, I conclude that Petitioners, Petitioner Ferdous and Ali, misrepresented to the state agency the actual ownership of Scottsdale, allowing their agents and employees, Dr. Holland and Mr. Gregorio, to sign and file documents to obtain a certificate of registration for Scottsdale, which documents did not reflect the direct or indirect ownership interest of Petitioner Ali. This misrepresentation in the application provides a basis for revocation under the statute. ⁽⁹⁾

(2) Petitioners were in violation of the condition-level requirement of 42 C.F.R. � 493.1101 pertaining to Patient Test Management during the survey of December 17, 2001.

Pursuant to 42 C.F.R. � 493.1101, a laboratory performing moderate complexity or high complexity testing "must employ and maintain a system that provides for proper patient preparation; proper specimen collection, identification, preservation, transportation, and processing; and accurate result reporting." The laboratory system "must assure optimum patient specimen integrity and positive identification throughout the preanalytic (pre-testing), analytic (testing), and postanalytic (post-testing) processes and must meet the standards as they apply to the testing performed." 42 C.F.R. � 493.1101.

The surveyors allege in the statement of deficiencies (SOD) for the survey completed December 17, 2001, that Petitioners violated three standard-level requirements which violated the condition-level requirement for patient test management. Specifically, the surveyors allege that Petitioners: (1) failed to accurately document test dates for 3 of 13 test reports examined, in violation of 42 C.F.R. � 493.1107(d) (Tag D3041); (2) failed to assure test reports were accurate and reliable for 2 of 13 test reports examined, in violation of 42 C.F.R. � 493.1109(a) (Tag D3050); and (3) failed to disclose the address of a test site on a final report for 3 of 13 final test reports, in violation of 42 C.F.R. � 493.1109(b) (Tag D3056). CMS Ex. 22, at 1-4.

Under Tag D3041, the surveyors found that the final test report for patient 738 indicated that electrolytes were run on November 9, 2001, but the surveyors learned that no quality control was run that date and upon inquiry, Petitioner Ali advised them that the testing was actually done on November 8, 2001. The surveyors observed that the test date had been cut from the actual instrument printout from the test instrument, but Petitioner Ali concluded the test was done on November 8, 2001, based on the cup number. The second example under Tag D3041 relates to patient 881, whose final test report showed that electrolytes were run on December 20, 2001 (the surveyor viewed this report on December 17, 2001), and routine chemistry was done on December 3, 2001. However, the specimen was logged as received by the laboratory on November 30, 2001. The third example is patient 906 whose final report indicates that the specimen was collected on December 6, 2001 and received by the laboratory on December 7, 2001. However, the laboratory patient log shows that the specimen was actually received at the laboratory on December 5, 2001, with all testing done on December 6, 2001. CMS Ex. 22, at 2-3.

The surveyors allege under Tag D3050 that patient 824 had a final report showing a lymphocytes result of 53.2, but the instrument printout showed 52.3. For patient 906, example 2, the patient's final report showed a sed rate of 11 but the laboratory log book showed a sed rate of 38. The surveyors note that Petitioner Ali issued corrected reports for both patients during the survey. CMS Ex. 22, at 3.

Under Tag D3056, the surveyors allege that a report for patient 768 did not show that a thyroid panel and CBC were done at another laboratory. It is alleged that a report for patient 776 did not show that a digoxin result was obtained at another laboratory. For patient 730, a final report did not show that PSA was performed at another laboratory. CMS Ex. 22, at 4.

Petitioners do not deny the accuracy of the facts alleged by the surveyors. In the plan of correction dated February 16, 2002 and signed by Dr. Gilsdorf (P. Ex. 25, at 1-6 (right column)), Petitioners offer various explanations for the errors observed and assert that those errors were corrected. Similarly, in the post-hearing brief, Petitioners do not deny the errors observed by the surveyors, but offer various excuses, and assert the errors were corrected, and did not amount to a deficiency after correction. P. Brief at 3-4. ⁽¹⁰⁾

A laboratory such as Scottsdale is in the business of receiving specimens from physicians, conducting testing upon those specimens, and then returning final reports of testing to the physicians. Physicians rely upon those reports to make treatment decisions, and the purpose of CLIA is to ensure that both the testing and report results are reliable so that physicians' decisions are the best possible. Petitioners hope to characterize their reporting errors as minor and having little impact once corrected. However, Petitioners' assertions reveal systemic errors which were only corrected when the surveyors caught them. Given the facts of this case, there is clearly a condition-level deficiency that represented a threat to the health and safety of patients who had specimens tested at Scottsdale. This condition-level deficiency is a sufficient basis for revocation of Petitioner Scottsdale's CLIA certificate.

(3) Petitioners were in violation of the condition-level requirement of 42 C.F.R. � 493.1701 pertaining to Quality Assurance during the survey of December 17, 2001.

The surveyors allege in the SOD for the initial certification survey completed on December 17, 2001, that Petitioners violated the condition-level requirement of 42 C.F.R. � 493.1701 pertaining to Quality Assurance. The surveyors allege five separate standard-level violations in support of their conclusion that the condition-level requirement was violated. I find it is only necessary to consider two of those standard-level violations to find the condition violated, the violations of 42 C.F.R. �� 493.1703(d) (Tag D7025) and 493.1703(f) (Tag D7029).

The surveyors allege the violation of 42 C.F.R. � 493.1703(d) based on their findings under Tags D3041 and D3050 that for 5 of 13 final test reports reviewed, there were errors indicating that the laboratory had no adequate system to monitor and ensure accuracy of final test reports. CMS Ex. 22, at 14. The alleged violation of 42 C.F.R. � 493.1703(f) is based on the surveyors' findings under Tag D3050 that there were transcription errors which occurred when instrument test report results were posted to final reports to physicians in 2 of 13 cases reviewed and the laboratory had no adequate system to prevent and/or correct such errors. Id. I have already discussed the pertinent facts in connection with the condition-level violation of 42 C.F.R. � 493.1101.

Petitioners have never denied the facts alleged by the surveyors. In their plan of correction dated February 16, 2002, Petitioners assert that they "instituted the monitoring process and reviewed patients at the rate of 5 patients per week." P. Ex. 25, at 17 (right column). In their post-hearing brief, Petitioners allege that they corrected the alleged deficiency and submitted evidence with the plan of correction which CMS refused to evaluate. P. Brief at 8-9. Thus, I conclude that there was no dispute that Petitioners were deficient in the area of quality assurance. I conclude that the standard-level deficiencies do amount to a condition-level violation of 42 C.F.R. � 493.1701.

Petitioners complain that CMS did not give them another chance by evaluating their February 2002 plan of correction and allegation of compliance. However, as I already noted, Petitioner Ali had a history with the state agency and CLIA including the case related to Sonali. Scottsdale was another laboratory Petitioner Ali was setting up and running, albeit in the name of his wife. Scottsdale, on its initial certification survey after operating for nearly four months, was found to have similar record keeping and reporting problems as found in Sonali. Petitioners point to no statute, regulation, or policy that obliges CMS or the state agency to assist in the creation of a laboratory or to act as consultants to a laboratory owner, operator, or director who was having obvious problems such as those Petitioner Ali seemed to repeatedly demonstrate in the operation of his laboratories. CMS and the state agency are obliged by CLIA to ensure that an incompetent laboratory does not continue to issue inaccurate reports that might lead to faulty diagnosis or treatment. CMS and the state agency were not obliged to serve Petitioners by assisting them to achieve compliance. Clearly, CMS has the discretion to revoke the certificate of registration in this case rather than imposing alternative sanctions intended to bring Petitioners into compliance with participation requirements. 42 C.F.R. �� 493.1804, 493.1806, and 493.1814.

(4) There is a basis for revocation of the laboratory's certificate of registration, but there is no remedial purpose served by a CMP on the facts of this case.

I have concluded that Petitioners Ferdous and Ali were guilty of misrepresentation in obtaining the CLIA certificate of registration for Scottsdale. I have further concluded that the evidence shows that at least two condition-level violations existed at Scottsdale which were discovered during the December 2001 initial certification survey. The violations I have found provide a basis for revocation of the laboratory's certificate of registration and it is not necessary for me to consider the other alleged condition-level violations. 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. 1713 (1999).

In the February 28, 2002 notice letter, CMS imposed a CMP in the amount of $3,000 per day for each day of non-compliance effective February 23, 2002 until the revocation of the laboratory's CLIA certificate becomes effective. CMS Ex. 28. This CMP may not be approved as, given the facts of this case, it serves no remedial purpose.

Section 1846 of the Act 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 of specimens.

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

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

In this case, the sanction of revocation is consistent with CLIA because it serves the remedial purposes of protecting individuals against substandard testing by Petitioners and safeguarding the general public against health and safety hazards that might result from their 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 of the Act and CLIA.

A CMP is an "alternative sanction" that the Secretary has authorized CMS to impose pursuant to 42 C.F.R. � 493.1806©. 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 CMP to request a hearing). Further, 42 C.F.R. � 493.1844(b)(3) defines the imposition of an alternative sanction as an initial determination subject to appeal and review. While 42 C.F.R. � 493.1844(c)(4) provides that the CMS choice of alternative sanctions and the amount of the CMP are not reviewable, this regulation does not deprive a petitioner of the right to hearing on the issue of whether imposition of a CMP as an alternative sanction is consistent with section 1846 of the Act, 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) (applicable to all laboratories subject to CLIA) authorize the Secretary to impose intermediate sanctions ⁽¹¹⁾ 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) of the Act 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) of the Act 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 the intermediate sanction or alternative sanction of a CMP against Petitioners.

CMS ordered that Petitioners cease all testing, effective February 23, 2002. CMS Ex. 28, at 2. Because Petitioners had to cease all testing effective February 23, 2002, and because CMS was unwilling to receive an allegation of compliance and plan of correction from Petitioners (CMS Ex. 28, at 1), a question arises as to how a CMP imposed effective February 23, 2002, served any of the remedial purposes set forth at 42 C.F.R. � 493.1804(a). 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©). Although CMS is authorized to impose a CMP when condition-level deficiencies are found, the CMP must serve a remedial purpose. CMS cannot credibly claim that this CMP was related to the remedial purpose of motivating Petitioners to come into and remain in compliance with CLIA requirements (42 C.F.R. � 493.1804(a)(3)). As to the remedial purposes set forth at 42 C.F.R. � 493.1804(a)(1) and (2), these purposes were accomplished by ordering Petitioners to cease testing. 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.

(5) Petitioners Ferdous and Ali are owners, Petitioner Ali was an operator, Dr. Gilsdorf was the laboratory director of Scottsdale and all are subject to the two-year ban on owning, operating, or directing a laboratory subject to CLIA.

CLIA bans from owning, operating, or directing a laboratory subject to CLIA, any person who has owned and operated a laboratory that has had its CLIA certificate revoked. The ban applies for two years from the effective date of revocation. 42 U.S.C. � 263a(i)(3). In this case, Petitioners Ferdous and Ali are subject to the two-year ban as owners, and Dr. Gilsdorf is subject to the ban as laboratory director.

Petitioners have never contended that Petitioner Ferdous would not be subject to the ban if Scottsdale's certificate of registration was revoked. There is no question that Petitioner Ferdous was the owner of record. CMS Ex. 31.

Dr. Gilsdorf executed a contract with Petitioner Ali on September 3, 2001, in which he agreed to become the Medical Director of Scottsdale to comply with CLIA regulations for the compensation of $250.00 per month. CMS Ex. 19. Dr. Gilsdorf signed the personnel report dated September 6, 2001, listing himself as laboratory director for Scottsdale. CMS Ex. 18. Dr. Gilsdorf also signed an attestation dated October 10, 2001, indicating that he was the laboratory director for Scottsdale. CMS Ex. 32. On February 16, 2002, Dr. Gilsdorf signed the plan of correction for Scottsdale. P. Ex. 25. Both the CMS notices of February 8 and 28, 2002, were addressed to Dr. Gilsdorf as director at the laboratory address with copies provided to him at another address. Both the CMS notices advised that revocation of Scottsdale's CLIA certificate would cause the owner, operator, and laboratory director of Scottsdale to be banned from owning, operating, or directing another CLIA laboratory for two years. I conclude that Dr. Gilsdorf was sufficiently noticed of the potential impact of the loss of Scottsdale's CLIA certificate, but he did not request a hearing and waived any participation in these proceedings. 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, 493.1405, 493.1407, 493.1441, 493.1443, and 493.1445. Thus, the regulation creates a rebuttable presumption that a laboratory director is an operator of the laboratory within the meaning of the regulations and CLIA. There is no evidence to rebut the presumption that Dr. Gilsdorf was Scottsdale's laboratory director with responsibilities equivalent to those of an operator. The evidence also shows that Dr. Gilsdorf was the laboratory director during the period when the condition-level deficiencies occurred, making him presumptively responsible for those deficiencies.

CMS has argued throughout these proceedings that Petitioner Ali was an operator of Scottsdale and subject to the two-year ban on that basis. I have found, however, that Petitioner Ali was an owner of Scottsdale laboratory and he is subject to the two-year ban on that basis. Even if I had not concluded that Petitioner was an owner, I would conclude that he was an operator. While the CLIA statutory provisions do not include a definition of the term operator, 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.

42 C.F.R. � 493.2.

Facts supporting my conclusion that Petitioner Ali was also an operator are: from September 6, 2001 (CMS Ex. 18) through the December 17, 2001 survey (CMS Ex. 25), Petitioner Ali was the only person listed on the laboratory's personnel report other than Director Gilsdorf, and Petitioner Ali was listed as performing all functions in the laboratory except those of Director and Clinical Consult (a position he was not qualified to fill); Petitioner Ali contracted with Dr. Gilsdorf for Dr. Gilsdorf to be the director (CMS Ex. 19); the former director, Dr. Holland, submitted his resignation to Petitioner Ali; Petitioner Ali signed the lease for the laboratory space (Tr. 472); Petitioner Ali owned all the laboratory equipment; Dr. Gilsdorf only visited the laboratory once every two weeks and Petitioner Ali could not recall how much time he actually spent at the laboratory (Tr. 476); and, finally, Petitioner Ali asserted in testimony that his wife was the operator of Scottsdale (Tr. 432), but admitted he was not sure she was qualified to do any testing and that her primary responsibilities involved meeting sales people and buying things (Tr. 435). Surveyor Eckles testified that when she visited the laboratory, it appeared to her that Petitioner Ali was doing everything in the laboratory. Tr. 88-89, 151-52. It is clear from the facts that Petitioner Ali previously owned, operated, and directed other laboratories, but his wife had no such experience. Further, Dr. Gilsdorf's biweekly visits were not sufficient to oversee all testing and reporting going on at Scottsdale and Petitioner Ferdous was not qualified to oversee laboratory operations. Thus, by process of elimination, only Petitioner Ali was operating Scottsdale, most of the time. I note that the regulations do not preclude the possibility that there may be multiple operators of a laboratory and that it is consistent with the facts that both Dr. Gilsdorf and Petitioner Ali both fulfilled duties as operators.

Accordingly, I conclude that Dr. Gilsdorf, Petitioner Ferdous, and Petitioner Ali, Ph.D. are each subject to the two-year ban pursuant to 42 U.S.C. � 263a(i)(3).

IV. CONCLUSION

For the foregoing reasons, the CLIA certificate of registration issued to Scottsdale Medical Laboratory is revoked effective the date of this decision. The CMP proposed by CMS is not approved as it lacks a remedial purpose. Robert Gilsdorf, M.D., Ph.D., Jahan Ferdous, and Rustom Ali, Ph.D. are banned from owning, operating, or directing a laboratory subject to CLIA for a period of two years effective the date of this decision.

Keith W. Sickendick

Administrative Law Judge

1. CLIA is codified as 42 U.S.C. �� 263a, 1302, and 1395x(e). CLIA is often used to refer to both the statutes and implementing regulations found at 42 C.F.R. Part 493, and that is the case with this decision unless otherwise indicated. All references to 42 C.F.R. Part 493 are to the revision in effect at the time of the December 2001 survey, unless otherwise indicated.

2. Effective July 5, 2001, the Health Care Financing Administration (HCFA) was renamed the Centers for Medicare & Medicaid Services. 66 Fed. Reg. 35,437 (2001).

3. After consolidation, the case was designated as C-02-503.

4. 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 (6^th 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 ineligibility ban provided by the statute is not included. See 42 C.F.R. �� 493.1, 493.1806-1807.

5. Petitioner Ali was at first reluctant or evasive on the issue of his relationship with Petitioner Ferdous. Tr. 6, 180-81 .

6. Ms. Jew testified for CMS that had Petitioner Ali's involvement been known to CMS at the time of its notices, misrepresentation would have been cited as an additional basis for revocation. Tr. 323.

7. Ms. Eckles asserted in testimony that she had the authority to determine not to issue a CLIA certificate of registration as she stated. Tr. 360-61. It is not necessary for my decision in this case to determine whether or not Ms. Eckles truly has such authority.

8. Mr. Joy Fritz Gregorio is also referred to as Fritz Gregory in Petitioner's Brief, by Petitioner Ali in the transcript, as well as in CMS's and Petitioner's exhibits.

9. It is not clear to me why the state agency and CMS did not aggressively pursue revocation on this ground as soon as Petitioner Ali's involvement became apparent. It appears from the testimony of the state surveyors and CMS representatives in this case that the state surveyors made excessive efforts to assist Petitioner Ali to achieve compliance in both the case of Sonali and Scottsdale at no small expense to the taxpayers in the form of repeated surveys, meetings with surveyors, and CMS review.

10. I note that Petitioner Ali had similar problems issuing correct final reports in the Sonali case.

11. Section 1846(b)(2)(A) of the Act 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. The regulations indicate that the phrases "intermediate sanctions" and "alternative sanctions" are synonymous. 42 C.F.R. � 493.2.