$05:Civil Money Penalty
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of: Long Medical Laboratory, Petitioner,
- v. -
Health Care Financing Administration.
DATE: September 23, 1994
Docket No. C-94-294
Decision No. CR334
DECISION
This case arises under the Clinical Laboratory Improvement
Amendments of 1988, 42 U.S.C. 263a (referred to in this Decision
as "CLIA" or "the Act") and implementing regulations in
42 C.F.R.
Part 493. By letter (notice) dated June 3, 1993 1/, the Health
Care Financing Administration (HCFA) notified Petitioner that it
had determined to revoke Petitioner's CLIA certificate and that it
was cancelling Petitioner's approval to receive Medicare
reimbursement for its services. Petitioner requested a hearing and
the case was assigned to me for a hearing and a decision. 2/ On
May 25, 1994, I held a hearing in Ocala, Florida. Subsequently,
the parties submitted briefs. 3/
I. Issues, findings, and conclusions
The June 3, 1993 and June 28, 1993 letters from HCFA to Petitioner
assert more than one basis for the imposition of sanctions.
However, HCFA is now relying on a single contention as
justification for revoking Petitioner's CLIA certificate and
cancelling its approval to receive reimbursement from Medicare.
This contention is that Petitioner intentionally submitted
proficiency testing samples to a reference laboratory, in violation
of 42 U.S.C. 263a(i)(4) and 42 C.F.R. 493.1840(b). Based on
this contention, there are two issues in this case. These are:
1. Whether Petitioner intentionally submitted proficiency
testing samples to a reference laboratory in violation of
applicable law and regulations; and
2. Whether such action by Petitioner justifies revocation of
Petitioner's CLIA certificate and cancellation of its approval to
receive reimbursement from Medicare.
I conclude that Petitioner intentionally submitted proficiency
testing samples to a reference laboratory in violation of
applicable law and regulations. I conclude further that HCFA's
determination to revoke Petitioner's CLIA certificate and to cancel
its approval to receive Medicare reimbursement for its services is
mandated under CLIA and applicable regulations. I premise these
ultimate conclusions on the following findings of fact and
conclusions of law. After each finding or conclusion I set forth
the pages in this Decision in which I discuss the applicable law
and evidence which supports it.
1. It is a violation of CLIA and applicable regulations for
a laboratory intentionally to submit a proficiency testing specimen
to a reference laboratory. Pages 3 - 6.
2. Under CLIA and applicable regulations, a laboratory
intentionally submits a proficiency testing specimen to a reference
laboratory when it does so deliberately, and not inadvertently.
Pages 5 - 6.
3. HCFA is required to revoke a laboratory's CLIA certificate
and cancel its approval to receive Medicare reimbursement for its
services where it is established that the laboratory intentionally
referred a proficiency testing specimen to a reference laboratory.
Pages 3 - 6.
4. If a laboratory has intentionally referred a proficiency
testing sample to another laboratory, that laboratory's motive for
referring the sample is irrelevant as a defense against HCFA's
revocation of its CLIA certificate or its approval to receive
Medicare reimbursement. Pages 5 - 6.
5. Petitioner referred proficiency testing specimens to a
reference laboratory. Pages 6 - 9.
6. Petitioner's referral of proficiency testing specimens to
a reference laboratory was intentional and not inadvertent. Pages
6 - 9.
7. HCFA was required to revoke Petitioner's CLIA certificate
and cancel its approval to receive Medicare reimbursement. Pages
3 - 13.
II. Governing law
A. CLIA
Congress enacted CLIA in order to assure that clinical laboratories
perform medical tests accurately. CLIA was intended by Congress to
establish a single set of standards to govern all providers of
laboratory services, including those which provide laboratory
services to Medicare beneficiaries. See H.R. Rep. No. 899, 100th
Cong., 2d Sess. 8 (1988), reprinted in 1988 U.S.C.C.A.N. 3828. 4/
Under CLIA, the Secretary of the United States Department of Health
and Human Services (Secretary) is authorized to inspect clinical
laboratories and, in effect, license them to perform tests. The
Act prohibits a clinical laboratory from soliciting or accepting
specimens for testing unless it has first received from the
Secretary a certificate authorizing it to perform the specific
category of tests which the laboratory intends to perform. 42
U.S.C. 263a(b). The Act directs the Secretary to establish
standards to assure that clinical laboratories certified by the
Secretary perform tests that are valid and reliable. 42 U.S.C.
263a(f).
It is apparent, both from the Act itself and its legislative
history, that Congress considers proficiency testing conducted
pursuant to standards developed by the Secretary to be an important
factor in assuring that clinical laboratories conduct tests
accurately and reliably. The Act directs the Secretary to develop
standards for proficiency testing. 42 U.S.C. 263a(f)(3). The
House of Representatives committee report (cited above) which
supported the Act provides that:
To maintain its certification under the bill, a laboratory
would have to participate successfully in a proficiency testing
program that met standards established by the Secretary. The
Committee believes that proficiency testing should be the central
element in determining a laboratory's competence, since it purports
to measure actual test outcomes rather than merely gauging the
potential for accurate outcomes.
1988 U.S.C.C.A.N. 3849 (emphasis added).
Implicit in CLIA is Congress' finding that, in order to be
meaningful, a laboratory must perform proficiency tests at its own
premises. The Act mandates revocation of a CLIA certificate for
improper referral of proficiency testing samples by a laboratory.
It states that:
Any laboratory that the Secretary determines intentionally
refers its proficiency testing samples to another laboratory for
analysis shall have its certificate revoked for at least one year
. . . .
42 U.S.C. 263a(i)(4).
B. Regulations
Regulations governing performance of proficiency tests by clinical
laboratories are contained in 42 C.F.R. 493.801. A clinical
laboratory must enroll in an approved proficiency testing program.
42 C.F.R. 493.801. The laboratory must notify the Department of
Health and Human Services of each program or programs in which it
chooses to participate to meet proficiency testing standards. 42
C.F.R. 493.801(a)(1). It is obligated to examine or test each
proficiency testing sample that it receives in the same manner as
it tests patient specimens. 42 C.F.R. 493.801(b). The
laboratory must not send proficiency testing samples to another
laboratory for any analysis which the laboratory is certified to
perform itself. 42 C.F.R. 493.801(b)(4). The laboratory must
document the handling, preparation, processing, examination, and
each step in the testing and reporting of results for all
proficiency testing samples. 42 C.F.R. 493.801(b)(5).
Regulations which implement CLIA parallel the Act's requirement
that the Secretary revoke a laboratory's CLIA certificate where
that laboratory improperly refers a proficiency testing sample to
a reference laboratory. 42 C.F.R. 493.1840(b). The regulations
provide also that, in the case where HCFA revokes a laboratory's
CLIA certificate, HCFA will cancel that laboratory's approval to
receive Medicare reimbursement for its services. 42 C.F.R.
493.1842(a).
C. The meaning of the word "intentionally"
The mandatory revocation provision of both the Act and the
regulations applies to a laboratory which "intentionally" refers
proficiency testing samples to another laboratory for analysis.
This term is not defined. However, it is apparent, from both the
language of CLIA and the regulations, that it was intended that
this term be given its common and ordinary meaning. "Intention" is
defined to mean a determination to act in a certain way. Webster's
New Collegiate Dictionary, 1975 ed., at 601. "Intentional" or
"intentionally" means to act by intention or design. Id. Thus,
when one acts "intentionally," he or she acts deliberately.
A laboratory contravenes the prohibition against referrals of
proficiency tests by deliberately referring proficiency testing
samples to another laboratory. Inadvertent referrals of such
samples do not contravene the prohibition. The necessary elements
of a violation consist of: (1) a referral by a laboratory to
another laboratory of a proficiency testing sample, and (2)
knowledge by the referring laboratory that the sample it is
referring is a proficiency testing sample. If it is established
that a laboratory has deliberately referred a proficiency testing
sample to another laboratory, then that laboratory's motive for
referring the sample is irrelevant. The Act and regulations do not
distinguish between deliberate referrals that are motivated by good
intentions and those which are motivated by some other purpose.
III. Relevant facts
This is my analysis of the evidence which led me to make the
findings above. In subpart A, I analyze the evidence concerning
Petitioner and its activities. These facts are, essentially,
background facts, and they are not in dispute. In subpart B, I
analyze the evidence concerning HCFA's allegation that Petitioner
referred proficiency testing samples to another laboratory. In
subpart C, I analyze the evidence about Petitioner's intent. In
subpart D, I discuss Petitioner's arguments concerning its motive
for referring tests.
A. Petitioner
Petitioner is a clinical laboratory in Ocala, Florida. Petitioner
began operating in 1968. Tr. at 102. 5/ It is owned jointly by
Edwin Albert Long and his wife, Mary F. Long. Id.; P. Ex. 2 at 2.
Mr. Long and his wife perform all of the clinical testing done by
Petitioner. Tr. at 103. Clinical tests performed by Petitioner
include tests in the areas of bacteriology, parasitology, general
immunology, routine chemistry, urinalysis, endocrinology, and
hematology. HCFA Ex. 1 at 3; Tr. at 103 - 104.
B. Petitioner's submission of proficiency testing samples to
a reference laboratory
The preponderance of the evidence in this case establishes that,
beginning in March 1992, and for at least one year thereafter,
Petitioner routinely referred proficiency test samples to a
reference laboratory for testing. Petitioner admits referring
proficiency test samples to a reference laboratory. That admission
is substantiated by exhibits in evidence. Tr. at 57, 181; HCFA Ex.
3, 5, 6, 10 - 14, 16.
In March 1993, Petitioner was surveyed by representatives of the
Florida Agency for Health Care Administration. Tr. at 30, 37.
This is the State agency in the State of Florida which performs
inspections for HCFA pursuant to CLIA. Tr. at 30. Among other
things, the inspectors examined the way in which Petitioner was
performing proficiency testing. Tr. at 37.
In connection with the survey, the inspectors obtained documents
from Petitioner and from a laboratory to which Petitioner had
referred specimens for tests. The inspectors obtained documents
also from the American Association of Bioanalysts (AAB), the
organization which ships specimens to clinical laboratories for
proficiency tests and which compiles records as to the proficiency
test performance of laboratories.
The inspectors discussed with Mr. Long allegations that Petitioner
had referred proficiency test samples to a reference laboratory.
Mr. Long admitted to the inspectors that Petitioner had done so,
using fictitious patient names to conceal from the reference
laboratory the fact that the referred specimens were constituted
from proficiency test samples. Tr. at 57. Mr. Long made the same
admission during his testimony at the hearing in this case. Tr. at
181. Petitioner denies that it reported to AAB the results of the
tests it obtained from the reference laboratory as being the
results it obtained on proficiency tests. For reasons which I
explain in subpart C, I find this denial to be not credible.
The documents which the inspectors obtained from AAB include copies
of reports of proficiency tests submitted by Petitioner and
attested to by Albert Long, for four groups of tests in 1992, and
one group of tests in 1993. HCFA Ex. 10 - 14; Tr. at 49 - 52. The
documents which the inspectors obtained from a reference laboratory
document bacteriology tests which were requested from that
laboratory by Petitioner between March 1992 and March 1993, and
which were performed for Petitioner by the reference laboratory.
HCFA Ex. 16; Tr. at 52.
Comparison of these documents establishes a pattern of referrals of
tests by Petitioner to the reference laboratory, which produced
results similar to those which Petitioner reported subsequently as
the results of its proficiency tests. HCFA Ex. 3; Tr. at 54 - 61.
For example, on November 18, 1992, Mr. Long attested to AAB that
results of proficiency tests performed by Petitioner established
the presence of the following organisms: E. Cloacae (test #1),
B-Strep (A) (test #2), and E. Coli (test #5). HCFA Ex. 3 at 2. On
November 16, 1992, the reference laboratory had reported to
Petitioner identical results for tests that had been referred to it
by Petitioner. Id.
The inference which I draw from these similarities is that
Petitioner referred proficiency tests to another laboratory and
then reported the results of these tests to AAB as the results of
its own tests. That inference is supported strongly by additional
evidence obtained by the inspectors in connection with the March
1993 survey.
Documents which the inspectors obtained from the reference
laboratory prove that Petitioner labeled with fictitious patient
names the specimens which it referred to the reference laboratory.
HCFA Ex. 16. That, coupled with Mr. Long's admission that he
labeled the samples with fictitious patient names, suggests that
Petitioner sought to conceal from the reference laboratory the fact
that these samples were, in actuality, proficiency test samples
that AAB sent to Petitioner.
Petitioner's inability to document the proficiency tests which it
allegedly performed between March 1992 and March 1993 provides
additional support for my conclusion that Petitioner referred these
tests to another laboratory. The only documentation of proficiency
tests which Petitioner was able to produce to the inspectors who
visited Petitioner in March 1993 consisted of documents pertaining
to proficiency tests which Petitioner alleged to have performed in
that month. HCFA Ex. 6; Tr. at 39 - 40. This inability to produce
documentation of proficiency tests performed prior to March 1993,
stands in contrast to the fact that Petitioner produced detailed
documentation of actual patient tests which it had performed at its
facility during the March 1992 through March 1993 period. HCFA Ex.
5; Tr. at 39.
Furthermore, the documents which Petitioner produced pertaining to
the proficiency tests which it allegedly performed in March 1993
are scanty and incomplete. HCFA Ex. 6. This stands in contrast
with the more detailed documents which Petitioner provided to
inspectors relating to tests of patients' specimens which had been
performed on its premises. HCFA Ex. 5. The inference which I draw
from comparing documentation of in-house patient tests with alleged
documentation of proficiency tests is that the alleged
documentation of proficiency tests does not, in fact, document
tests that were actually performed by Petitioner.
C. Petitioner's intent
As I find in subpart II C of this decision, a laboratory refers
proficiency tests "intentionally" if it does so deliberately, and
not inadvertently. The uncontroverted evidence in this case is
that Petitioner referred proficiency test samples to another
laboratory intentionally. Petitioner has admitted doing so. Tr.
at 57, 181. The exhibits confirm a pattern of deliberate referrals
of proficiency tests. There is nothing in the record of this case
to suggest that the referrals were inadvertent.
D. Petitioner's asserted motive for referring proficiency
tests
As I discuss at subpart II C of this decision, a party's motive for
referring proficiency tests is irrelevant under CLIA and
implementing regulations, so long as it is shown that the party
referred the tests intentionally. A party cannot defend its
deliberate referral of a proficiency test by attempting to show
that it referred the test for honorable reasons.
Petitioner alleges that it referred proficiency tests to another
laboratory in order to check on the quality of that laboratory's
services. Petitioner alleges also that it did not report to AAB as
its own proficiency test results the results of proficiency tests
that it received from the reference laboratory. These allegations
do not controvert my finding that Petitioner referred these tests
intentionally. Indeed, Petitioner's defenses are an admission of
its intent. Therefore, I would find that Petitioner referred
proficiency tests intentionally even if I accepted as true
Petitioner's asserted motive for referring these tests, or its
allegation that it did not report to AAB the results it received
from the reference laboratory. However, I find not credible either
Petitioner's explanation for its referrals of proficiency tests or
its allegation that it did not report to AAB as its own test
results the results it received from the reference laboratory.
I am not persuaded by Petitioner's assertion that it was referring
proficiency tests in order to check on the quality of services
provided by the reference laboratory. There was no need for
Petitioner to refer tests in order to determine whether the
reference laboratory was proficient in its testing. Had Petitioner
been interested in checking the quality of tests performed by the
laboratory to which it referred specimens, it merely had to request
that the laboratory's proficiency test results be provided to it.
Both CLIA and the regulations require the Secretary to make all
proficiency test results available to the public. 42 U.S.C.
263a(f)(3)(F); 42 C.F.R. 493.801(a)(4)(ii). 6/
Petitioner alleges that it did not report to AAB as its own test
results the results of the proficiency tests it referred to another
laboratory. This assertion is not credible. In order to accept
this assertion, I would have to find that Petitioner performed its
own proficiency tests on portions of the samples it received from
AAB, and that, simultaneously, it referred portions of these same
samples to another laboratory. There is simply no credible
evidence in the record which might support such findings. As I
find above, Petitioner has not provided credible proof that it
actually performed these proficiency tests. It produced only
documentation relating to tests it allegedly performed in March
1993. HCFA Ex. 6. The records which allegedly document these
tests are scanty and incomplete.
Furthermore, Petitioner's allegation that it was performing its own
proficiency tests is belied by evidence showing that Petitioner
reported to AAB as its own proficiency test results the test
results it received from the reference laboratory. The evidence
establishes that, for each of the proficiency tests which
Petitioner referred to another laboratory, the results of those
tests were sent to Petitioner shortly before it reported test
results to AAB. HCFA Ex. 3. This pattern, coupled with the
absence of documentation showing that Petitioner performed the
proficiency tests, suggests strongly that Petitioner relied on the
reference laboratory's reports as a basis for its reports to AAB.
Petitioner avers also that it reported to AAB only proficiency
tests in areas in which it conducted testing. It asserts that it
would report to AAB that it referred tests in those areas where it
did not perform testing at its premises. That assertion may
literally be true. But it begs the question of whether Petitioner
used the reports it received from the reference laboratory as the
basis for the proficiency test results it did furnish to AAB.
The credible evidence of record shows that, from early 1992 through
March 1993, Petitioner was referring all of its proficiency tests
to a reference laboratory. HCFA Ex. 16. I infer from the record
of this case that Petitioner would review the results of the
proficiency tests it received from the reference laboratory. It
would report as its own test results those tests which involved
areas of testing that Petitioner performed on its own premises. It
would tell AAB that it referred those tests which did not involve
areas of testing that it performed on its premises. See HCFA Ex.
3. Nevertheless, it relied on the reference laboratory to the
extent that it reported at least some of that laboratory's test
results as its own test results.
IV. Petitioner's additional affirmative defenses
Petitioner asserts that HCFA failed to provide it with notice of
CLIA requirements. It contends that, as a consequence, it is being
held accountable unfairly to standards of which it had no
knowledge. I am not satisfied that Petitioner proved that it was
unaware of HCFA standards relating to proficiency testing. Mr.
Long admitted that he knew that a "cardinal principal" of
proficiency testing is that a laboratory not report as its own
results test reports that it obtains from another source. Tr. at
177.
However, it is not necessary for me to find either that Petitioner
knew or did not know about CLIA standards in order for me to decide
this case. Petitioner had a duty to familiarize itself with
applicable standards before applying to be certified pursuant to
those standards. Inasmuch as it was Petitioner's duty to be aware
of the standards, HCFA cannot be held responsible, either for
Petitioner's failure to be aware of the standards, or for HCFA's
asserted failure to provide Petitioner with a copy of the
standards.
The application for certification under CLIA which Petitioner
submitted over Mr. Long's signature provides that:
The applicant hereby agrees that such laboratory identified
herein will be operated in accordance with applicable standards
found necessary by the Secretary of Health and Human Services to
carry out the purposes of . . . [CLIA].
HCFA Ex. 1 at 4. Petitioner could not have agreed to operate in
accord with applicable standards under CLIA without agreeing also
to do whatever was reasonably necessary to familiarize itself with
the standards. Thus, in applying for CLIA certification,
Petitioner assumed the duties of learning applicable standards and
obeying them.
Petitioner argues also that, inasmuch as it is licensed by the
State of Florida, it should enjoy "automatic certification" under
CLIA. This is, in effect, an argument that CLIA requirements are
subordinate to State licensing laws. I disagree with this
contention. It is plain from the language of CLIA and its
legislative history that Congress intended CLIA to supersede State
licensing laws, to the extent that any conflict might exist between
CLIA and State laws. Furthermore, there is no evidence that a
conflict exists in this case between Florida licensing laws and
CLIA. Petitioner has not shown, for example, that Florida law
would permit it to refer proficiency tests to a reference
laboratory.
Much of Petitioner's arguments are devoted to what it contends
constitutes unreasonable interference by HCFA in the operations of
independent clinical laboratories. In effect, Petitioner asserts
that these laboratories operated successfully for many years
pursuant to State licensing requirements. Therefore, according to
Petitioner, federal interference in the operations of such
laboratories is unreasonable.
This argument ignores a fundamental premise of CLIA, which is that
State regulation of clinical laboratories was not functioning
effectively to assure that these laboratories produced accurate
test results. CLIA was enacted by Congress to provide some
national, uniform standards for the operation of clinical
laboratories.
This concludes my analysis of the law and evidence in this case.
Steven T. Kessel
Administrative Law Judge
1. Following Petitioner's receipt of HCFA's June 3, 1993
notice, Petitioner submitted material to HCFA in an attempt to
correct the deficiencies cited in the notice. By letter of June
28, 1993, HCFA notified Petitioner that its submission of June 10,
1993 did not provide a sufficient basis to rescind HCFA's
cancellation of its approval to receive Medicare reimbursement for
its services. HCFA stated, however, that it would treat
Petitioner's June 10, 1993 submission as a request for a hearing
and would delay the revocation of Petitioner's CLIA certificate
pending a hearing before an administrative law judge.
2. Although Petitioner was timely in filing its hearing request
with HCFA, the request and HCFA's notice were not received by the
Civil Remedies Division of the Departmental Appeals Board until
February 1994. The case was docketed immediately upon receipt of
these documents.
3. Following this hearing, Petitioner offered two additional
exhibits. These exhibits were attached by Petitioner to memoranda
which he submitted on June 27, 1994 and July 15, 1994. I have
marked the attachment to Petitioner's June 27, 1994 submission as
P. Ex. 20. I have marked the attachment to Petitioner's July 15,
1994 submission as P. Ex. 21. I am not admitting these exhibits
into evidence. They were presented untimely by Petitioner and
Petitioner has offered no legitimate reason for their untimely
presentation.
4. The Act defines a clinical laboratory to be a facility for
the biological, microbiological, serological, chemical,
immuno-hematological, hematological, biophysical, cytological,
pathological, or other examination of materials derived from the
human body for the purpose of providing information for the
diagnosis, prevention, or treatment of any disease or impairment
of, or the assessment of the health of, human beings.
42 U.S.C. 263a(a).
5. Inexplicably, the transcript refers at page 102 to "Judge
Leahy" as presiding over the hearing. Administrative Law Judge
Mimi Hwang Leahy of the Board did not participate in the hearing
and has had no responsibility for hearing and deciding this case.
6. A better explanation for Petitioner's referral of
proficiency tests is that it lacked confidence in its own
performance of these tests. Petitioner received a score of 37.5
from AAB for proficiency tests which it reported to AAB in the
third quarter of 1991. HCFA Ex. 8; Tr. at 44 - 49. At that time,
the minimum passing score for proficiency testing results was 70.
Tr. at 48.