Laboratory Corporation of America Holdings, Inc., DAB CR5523 (2020)

DECISION

Laboratory Corporation of America Holdings, Inc. (Petitioner),1 appeals the determination of the Centers for Medicare & Medicaid Services (CMS) to impose remedies against Petitioner under the Clinical Laboratory Improvement Amendments of 1988 (CLIA), 42 U.S.C. § 263a et seq. CMS moved for summary judgment. Petitioner opposed CMS’s motion and cross-moved for summary judgment. For the reasons set forth below, I grant CMS’s motion, deny Petitioner’s cross-motion, and sustain the penalties of a directed plan of correction and a civil money penalty (CMP) of $54,297 against Petitioner.

I. Background and Procedural History

Petitioner is a laboratory located in Research Triangle, North Carolina, that holds a CLIA certificate to perform high complexity testing. CMS Brief (Br.) at 1; see also CMS Exhibit (Ex.) 2 at 4. The North Carolina Department of Health and Human Services

Page 2

(state agency) conducted a complaint survey of Petitioner on March 10, 2017. CMS Ex. 2 at 1. By letter dated May 30, 2017, CMS informed Petitioner that, based on the survey, it was proposing sanctions against Petitioner’s CLIA certificate. Id. at 1-3. CMS stated that it had determined that Petitioner was noncompliant with two CLIA conditions of participation: 42 C.F.R. § 493.801, which governs the enrollment and testing of samples; and 42 C.F.R. § 493.1441, which sets forth requirements for the laboratory director for laboratories performing high complexity testing. Id. at 1. CMS agreed with the state agency’s finding that Petitioner had communicated to Castle Medical LLC (Castle), a laboratory located in Smyrna, Georgia, the results Petitioner obtained by analyzing proficiency testing (PT) samples Castle had improperly referred to Petitioner. Id. at 2. CMS explained that such inter-laboratory communication of PT results is prohibited under the CLIA regulations. Id. As a result of these findings of noncompliance, CMS proposed to impose the alternative sanctions of a CMP and a directed plan of correction. Id. CMS gave Petitioner ten days from the date of the notice to submit any evidence or information as to why the proposed sanctions should not be imposed. Id. at 3. Petitioner submitted a response dated June 9, 2017. See CMS Ex. 1 at 1.

By letter dated July 5, 2017, CMS informed Petitioner that, notwithstanding Petitioner’s response, CMS had decided to impose the following alternative sanctions against its CLIA certificate, as proposed in its May 30, 2017 letter:

• the alternative sanction of a CMP in the amount of $6,033 per sample for each instance that it engaged in prohibited inter-laboratory communication of PT. CMS advised that there were nine instances of prohibited inter-laboratory communications, and the total CMP amount was $54,297.
• the alternative sanction of a directed plan of correction effective July 20, 2017.

Id. at 1-2. CMS advised that, pursuant to 42 C.F.R. § 493.1840(a)(7), failure to comply with alternative sanctions was a basis for suspension, limitation, or revocation of a CLIA certificate. Id. at 4.

On September 5, 2017, Petitioner requested a hearing before an administrative law judge. Departmental Appeals Board (DAB) Electronic Filing System (E-File) Docket Entry 1‑1e. The case was assigned to me for hearing and decision. On September 15, 2017, I issued an Acknowledgment and Pre-hearing Order (Pre-hearing Order) establishing a briefing schedule.

On December 14, 2017, CMS filed a brief, which incorporated a motion for summary judgment, and 18 proposed exhibits (CMS Exs. 1-18). On January 19, 2018, Petitioner

Page 3

filed a pre-hearing brief and cross-motion for summary judgment (LC Brief), and 17 proposed exhibits, labeled as LC Exs. 1-17.2 On March 19, 2018, CMS filed a response (CMS Resp.) accompanied by a motion for leave to file its response out of time. I grant CMS’s motion and accept its response.

Neither party objected to the exhibits offered by the opposing party. Therefore, in the absence of objection, I admit into the record CMS Exs. 1-18 and LC Exs. 1-17. Petitioner offered the written direct testimony of one witness. CMS did not request to cross-examine Petitioner’s witness. CMS offered the written direct testimony of two witnesses. Petitioner did not request to cross-examine CMS’s witnesses. As I explain below, the record shows that there is no genuine dispute as to any material facts. I therefore find it appropriate to decide this case on summary judgment in lieu of a hearing.3

II. Issues

The issues in this case are:

Whether summary judgment is appropriate; and

Whether CMS had a basis to impose the sanctions of a directed plan of correction and a CMP.

III. Jurisdiction

I have jurisdiction to hear and decide this case. 42 C.F.R. § 493.1844(a)(2) and (3), (b)(3); see also 42 U.S.C. § 263a(h)(3).

Page 4

IV. Discussion

1. Statutory and Regulatory Background

In order to ensure the accuracy and reliability of laboratory tests, and thus the health and safety of those tested, CLIA creates a federal certification process for laboratories that perform clinical diagnostic tests on human specimens. Public Law No. 100-578, amending section 353 of the Public Health Service Act, codified at 42 U.S.C. § 263a et seq.; see H.R. Rep. No. 100-899, at 8, reprinted in 1988 U.S.C.C.A.N. 3828, 3829. To be certified, a laboratory must meet the conditions of certification set out in the statute and regulations. 42 U.S.C. § 263a(f)(1); 42 C.F.R. Part 493. A condition represents a major division of laboratory services or required environmental protections; each condition is broken down into more detailed standards that laboratories must meet to be compliant with the overall condition. White Lake Family Med., P.C., DAB No. 1951 at 2 (2004); RNA Labs., Inc., & Ter-Zakarian Medical Clinic, DAB No. 1820 at 1 (2002).

The statute gives the Secretary of Health and Human Services (Secretary) broad enforcement authority, which the Secretary has delegated to CMS. Implementing regulations specify the standards and conditions of certification that a laboratory must meet to achieve compliance. 42 C.F.R. Part 493. CMS or its designee conducts periodic inspections to determine a laboratory’s compliance with CLIA requirements. 42 C.F.R. § 493.1777. CMS may impose any of three principal sanctions, which are suspension, limitation, or revocation of any type of CLIA certificate, when it determines that a laboratory has condition-level deficiencies. 42 C.F.R. § 493.1806. CMS may also impose one or more of the following alternative sanctions: a directed plan of correction, state onsite monitoring, and/or civil money penalty. Id. Under the regulations, a laboratory’s failure to comply with an alternative sanction is a basis for limitation, suspension, or revocation of a CLIA certificate. 42 C.F.R. § 493.1840(a)(7). When CMS suspends or revokes a laboratory’s CLIA certificate, it must cancel the laboratory’s approval to receive Medicare payments for its services. 42 C.F.R. §§ 493.1808(a), 493.1842(a).

A laboratory that holds a CLIA certificate to perform high complexity tests must participate in a PT program, as outlined in 42 C.F.R. Part 493, Subpart H. 42 C.F.R. § 493.25(b). Part 493 mandates that each laboratory enroll in an approved PT program or programs that cover all the specialties and sub-specialties for which the laboratory seeks certification. 42 C.F.R. § 493.801. The laboratory is required to test PT samples in the same manner as its regular patients’ specimens. Id. Standards established to satisfy this condition-level requirement are set forth at 42 C.F.R. § 493.801(b)(1) through (6). A laboratory must also have a qualified director (see 42 C.F.R. § 493.1443) who provides overall management and direction in accordance with 42 C.F.R. § 493.1445. 42 C.F.R. § 493.1441. The laboratory director’s responsibilities include assuring compliance with applicable regulations. 42 C.F.R. § 493.1445.

Page 5

A laboratory is entitled to notice and an opportunity for a hearing before an administrative law judge to contest imposition of CLIA intermediate (alternative) sanctions. 42 U.S.C. § 263a(h)(3); 42 C.F.R. § 493.1844(a)(2), (b)(3). A party dissatisfied with a hearing decision may request review of the administrative law judge’s decision by an appellate panel of the DAB. 42 C.F.R. § 493.1844(a)(3). The CLIA regulations incorporate by reference the hearing procedures and the review provisions in 42 C.F.R. Part 498, subparts D and E. 42 C.F.R. § 493.1844(a)(2), (3).

2. Findings of Fact, Conclusions of Law, and Analysis

1. Summary judgment is appropriate in this case.4

1. Legal Standard

The parties cross-moved for summary judgment. The parties agree that summary judgment is appropriate because the material facts are not in dispute and each party contends it is entitled to judgment as a matter of law.

An administrative law judge may resolve a case, in whole or in part, by summary judgment. See, e.g., Lebanon Nursing & Rehab. Ctr., DAB No. 1918 at 3 (2004). Summary judgment is appropriate and no hearing is required where either: there are no genuine disputes of material fact and the only questions that must be decided involve application of law to the undisputed facts; or the moving party prevails as a matter of law even if all factual disputes are resolved in favor of the party against whom the motion is made. Mission Hosp. Reg’l Med. Ctr., DAB No. 2459 at 5 (2012) (and cases cited therein). In determining whether there are genuine issues of material fact for trial, the reviewer must view the evidence in the light most favorable to the non‑moving party, drawing all reasonable inferences in that party’s favor. Id. The party requesting summary judgment bears the burden of showing that there are no genuine issues of material fact for trial and/or that it is entitled to judgment as a matter of law. Id. Generally, the non‑movant may not defeat an adequately supported summary judgment motion by relying upon the denials in its pleadings or briefs but must furnish evidence of a dispute concerning a material fact, i.e., a fact that would affect the outcome of the case if proven. Senior Rehab. & Skilled Nursing Ctr., DAB No. 2300 at 3 (2010) (and cases cited therein); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

In moving for summary judgment, CMS asserts that Petitioner failed to comply with the CLIA condition of participation at 42 C.F.R. § 493.801 because it engaged in prohibited inter-laboratory communications concerning the results of PT samples. CMS contends also that Petitioner failed to comply with the CLIA condition of participation at 42 C.F.R.

Page 6

§ 493.1441 because its laboratory director failed to provide overall management and direction of Petitioner, as evidenced by its deficient practices in the area of proficiency testing.

Viewing the evidence before me in a light most favorable to Petitioner and drawing all inferences in Petitioner’s favor, I conclude that there are no genuine disputes of material fact. The issues in this case related to the CLIA requirements must be resolved against Petitioner as a matter of law, and the case can be resolved by applying the law to the undisputed facts. The undisputed evidence shows that Petitioner was out of compliance with the conditions of participation established by 42 C.F.R. § 493.801 and 42 C.F.R. § 493.1441. Accordingly, I grant summary judgment in favor of CMS and deny Petitioner’s cross-motion for summary judgment.

2. Undisputed Facts5

Petitioner is a laboratory located in Research Triangle, North Carolina. CMS Ex. 2 at 4. It performs high complexity testing under its CLIA certification. CMS Br. at 1. In 2016, Petitioner was enrolled in a CLIA-certified PT program administered by the College of American Pathologists (CAP). See, e.g., CMS Ex. 9. The specialties for which Petitioner was enrolled included MGL3 and BRCA.6 CMS Ex. 9; CMS Ex. 10 at 1, 7-9, 15; CMS Ex. 16 ¶ 12; CMS Ex. 17 ¶ 11; see LC Ex. 1 ¶ 7.

Castle is a laboratory in Smyrna, Georgia. In 2016, Castle was also enrolled in the MGL3 and BRCA PT programs administered by CAP. CMS Ex. 3.

Both Petitioner and Castle received identical PT samples for the MGL3-B and BRCA‑B testing events7 around the same time in October and November 2016. See, e.g., CMS Ex. 3; CMS Ex. 10 at 2. Both laboratories had a November 29, 2016 due date to submit their PT results for the testing events to CAP. CMS Ex. 3; CMS Ex. 16 ¶ 13; CMS Ex. 17 ¶ 12; see also CMS Br. at 6.

Page 7

On November 9, 2016, Castle sent nine PT samples to Petitioner, via Petitioner’s logistics hub in Smyrna, Georgia, for testing. Request for Hearing (RFH) at 3. These specimens were MGL3-04, MGL3-05, MGL3-06, BRCA-01, BRCA-02, BRCA-03, BRCA-04, BRCA-05, and BRCA-06. LC Ex. 1 ¶ 10. Petitioner received the samples the next day, November 10, 2016. CMS Exs. 7, 8; see also CMS Ex. 6 at 1; RFH at 2-3. The documentation Castle sent with the samples identified them as PT samples by stating the “patient names” associated with each specimen as “Proficiency, MGL3-04,” “Proficiency, MGL3-05,” “Proficiency, MGL3-06,” “Proficiency, BRCA-02,” “Proficiency, BRCA-03,” etc. CMS Exs. 7, 8.

On or before November 22, 2016, Petitioner tested the nine PT samples it received from Castle. CMS Ex. 6 at 1; LC Ex. 1 ¶ 9; RFH at 3. On November 22, 2016, Petitioner’s technical director, Dr. Alecia Willis, conducted the final review of the test results for the PT samples in question. LC Ex. 1 ¶ 9. Dr. Willis released test results for six of the nine samples to Castle. LC Ex. 1 ¶¶ 11-14; LC Br. at 3. After releasing the reports, Dr. Willis realized that Petitioner may have tested PT samples which belonged to another laboratory. LC Ex. 1 ¶ 14. Upon investigating, Dr. Willis confirmed that the samples had been improperly referred to Petitioner by Castle. CMS Ex. 6 at 1; LC Ex. 1 ¶ 14. Dr. Willis placed a hold on the release of the remaining results and, although she attempted to recall the reported results, she was unable to recall the reports for four specimens. LC Ex. 1 ¶ 14. Of these four, three were results for active testing events for MGL3 and BRCA. LC Ex. 1 ¶ 14; RFH at 2-3; LC Br. at 2-3. Petitioner communicated with Castle and reported the improper referral of PT specimens to CMS. CMS Ex. 6 at 1‑2; LC Br. at 3.

3. The Parties’ Arguments

CMS contends that, by reporting the results it obtained by testing improperly referred PT samples, Petitioner engaged in prohibited inter-laboratory communications in violation of 42 C.F.R. § 493.801(b)(3). CMS Br. at 7-9. CMS further argues that Petitioner’s multiple missteps in handling the improperly referred PT samples demonstrate that Petitioner’s laboratory director did not discharge his responsibilities under 42 C.F.R. § 493.1441. Id. at 9-10. In response, Petitioner argues that CMS failed to establish a prima facie showing of condition-level violations by either the laboratory or its director. LC Br. at 7, 8. Therefore, in Petitioner’s view, the sanctions should be vacated. Id. at 8. First, Petitioner argues that the prohibition against inter-laboratory communications is inapplicable to it because it was not the laboratory which made the improper referral of PT samples, but rather, was the laboratory which unknowingly received the PT samples as a result of an improper referral. Id. at 5-7. Second, Petitioner contends that the regulations do not support CMS’s position that immediate notification of the improper referral was required; nevertheless Petitioner asserts that it did promptly notify CMS of the improper referral. Id. at 7. Third, Petitioner argues that nothing in the regulations prohibits a laboratory that receives a PT sample as a result of an improper referral from

Page 8

testing the PT samples. Id. at 8. With respect to the CMP, Petitioner contends that, should I uphold it, the amount should be reduced to reflect that at most, there were only three, not nine, violations corresponding to three active testing events. Id. at 8-9. As I explain below, Petitioner’s arguments are without merit, do not raise any genuine disputes of material fact, and fail to rebut CMS’s prima facie case.

2. The undisputed material facts establish that Petitioner was out of compliance with 42 C.F.R. § 493.801 (Condition: Enrollment and testing of samples).

In asserting that it did not engage in prohibited inter-laboratory communications, Petitioner asserts that “any proper construction of § 493.801 requires an inquiry into whether the regulation is directed to Intended Recipients, Secondary Recipients, or both.” LC Br. at 5. According to Petitioner, 42 C.F.R. § 493.801 creates a distinction between “a laboratory that receives a PT sample from a [PT] program,” – i.e., an “intended recipient” – and “a laboratory that receives a PT sample from an intended recipient” through an improper referral – i.e., a “secondary recipient.” Id. at 4. In support of this argument, Petitioner points to language differences in subsections (b)(1) through (b)(4) of 42 C.F.R. § 493.801. Petitioner contends that, under the circumstances of this case, Petitioner was clearly a secondary recipient, not an intended recipient; therefore, the prohibition against inter-laboratory communications does not apply to it. Id. at 5-7.

Petitioner’s argument unnecessarily complicates and distorts the plain meaning of the regulation. The language of 42 C.F.R. § 493.801, as well as its subsections, is unambiguous on its face. It is therefore unnecessary to import any additional terminology into the regulation to understand its requirements regarding proficiency testing. For the reader’s convenience, I restate the relevant provisions here.

42 C.F.R. § 493.801 states in relevant part:

Condition: Enrollment and testing of samples. Each laboratory must enroll in a proficiency testing (PT) program that meets the criteria in subpart I of this part and is approved by HHS. . . . The laboratory must test the samples in the same manner as patients’ specimens . . . .

42 C.F.R. § 493.801(b) states in relevant part:

(b) Standard: Testing of proficiency testing samples. The laboratory must examine or test, as applicable, the proficiency testing samples it receives from the proficiency testing program in the same manner as it tests patient specimens . . . .

Page 9

(1) The samples must be examined or tested with the laboratory’s regular patient workload by personnel who routinely perform the testing in the laboratory, using the laboratory’s routine methods. The individual testing or examining the samples and the laboratory director must attest to the routine integration of the samples into the patient workload using the laboratory’s routine methods.

(2) The laboratory must test samples the same number of times that it routinely tests patient samples.

(3) Laboratories that perform tests on proficiency testing samples must not engage in any inter-laboratory communications pertaining to the results of proficiency testing sample(s) until after the date by which the laboratory must report proficiency testing results to the program for the testing event in which the samples were sent. Laboratories with multiple testing sites or separate locations must not participate in any communications or discussions across sites/locations concerning proficiency testing sample results until after the date by which the laboratory must report proficiency testing results to the program.

(4) The laboratory must not send proficiency testing samples or portions of proficiency testing samples to another laboratory for any analysis for which it is certified to perform in its own laboratory. . . . Any laboratory that receives a proficiency testing sample from another laboratory for testing must notify CMS of the receipt of that sample regardless of whether the referral was made for reflex or confirmatory testing, or any other reason.

The condition for enrollment and testing of samples, codified at 42 C.F.R. § 493.801, requires that “[e]ach laboratory” must enroll in a PT program and “[t]he laboratory must test the samples in the same manner as patients’ specimens.” This language is mirrored in the standard for testing of PT samples, 42 C.F.R. § 493.801(b). Based on the context, it is clear that the references to “[t]he laboratory” in 42 C.F.R. § 493.801(b) and subsections (b)(1), (b)(2), and (b)(4) are synonymous with “[e]ach laboratory” in section 493.801. I therefore conclude that the phrase “[t]he laboratory” throughout the standard applies to any laboratory that receives a PT sample from a PT program in which it is enrolled. I agree with Petitioner’s construction of the regulation to this extent: subsections 493.801(b)(1), (b)(2), and (b)(4) govern how a laboratory enrolled in a PT program must handle the specimens the laboratory receives from the PT program. However, I disagree with Petitioner’s view that this construction means that the prohibition on inter-laboratory communications does not apply to Petitioner.

Page 10

In contrast to the references to “the laboratory” in 42 C.F.R. § 493.801(b)(1), (2), and (4), the subsection that forbids inter-laboratory communications, 42 C.F.R. § 493.801(b)(3), uses the plural, “laboratories.” The plain meaning of the plural “laboratories” in 42 C.F.R. § 493.801(b)(3), is that all laboratories enrolled in a PT program are prohibited from engaging in inter-laboratory communications regarding PT results. Subsection (b)(3) makes no distinction between a laboratory that receives a PT sample directly from a PT program (an “intended recipient” as Petitioner puts it) and a laboratory that receives a PT sample from another laboratory (a “secondary recipient”). To read the regulation to prohibit only one party from engaging in improper communications would defy common sense. The regulation is plainly intended to deter laboratories from comparing PT results to improve the accuracy of the results. To compare results, more than one party must participate. It would make no sense to find noncompliance by the laboratory that asked whether its PT results were accurate, but to find blameless the laboratory that answered the query. Each party to such an exchange has engaged in an improper communication prohibited by 42 C.F.R. § 493.801(b)(3).

My reading of 42 C.F.R. § 493.801(b)(3) is further reinforced by language emphasizing that improper communications may occur between branches of a single corporate entity. In pertinent part, subsection (b)(3) provides: “[l]aboratories with multiple testing sites or separate locations must not participate in any communications or discussions across sites/locations concerning proficiency testing sample results until after the date by which the laboratory must report proficiency testing results to the program.” Thus, the regulation treats each branch of a larger entity as a separate laboratory and prohibits any cross-communication concerning PT results among the branches until after the date the PT results must be reported. This suggests that the regulation applies broadly to intra- and inter-laboratory communications. I find no support for an inquiry into whether a branch (or a free-standing laboratory) was an “intended recipient” or “secondary recipient.”

There can be no dispute that Petitioner qualifies as a “[l]aborator[y] that perform[s] tests on proficiency testing samples” subject to the condition-level requirement of 42 C.F.R. § 493.801, as well as the standard-level requirements under it. Here, CMS has alleged that Petitioner was out of compliance with 42 C.F.R. § 493.801 based on its violation of the standard-level requirement prohibiting inter-laboratory communications set forth at 42 C.F.R. § 493.801(b)(3).

Petitioner was enrolled in the MGL3 and BRCA PT programs in 2016 and, like Castle, participated in those testing events in 2016. It is undisputed that Castle improperly referred to Petitioner nine PT samples relating to the 2016 MGL3 and BRCA testing

Page 11

events. Petitioner tested all nine samples. The record shows that, of these nine samples, six were for active testing events and three were for inactive testing events.8 LC Br. at 8.

There is no dispute that Petitioner released the reports for six improperly referred PT specimens to Castle prior to the date that those results were due to be reported to CAP. Although Petitioner’s technical director, Dr. Willis, discovered the improper referral and then attempted to recall the released reports, she was unable to recall the results for four specimens, three of which related to active testing events. LC Ex. 1 at ¶¶ 14-16; LC Br. at 8; CMS Br. at 6-7; CMS Resp. at 2.

Petitioner asserts that because it “was initially unaware” that the specimens it tested were PT samples, it “cannot be said to have knowingly conspired with anyone else to cheat the system.” RFH at 6.9 According to Dr. Willis, “[t]ypically, testing personnel only see the accession numbers [of the specimens] and are unable to see demographic information or information that would indicate that the specimens are proficiency testing specimens.” LC Ex. 1 ¶ 8; see also CMS Ex. 2 at 7. Dr. Willis stated further that, during her final review and release of the test results, she initially thought the samples were Petitioner’s own PT samples but then realized the specimens did not belong to Petitioner, so she stopped the release of further results and attempted to recall reports that had been released. LC Ex. 1 ¶ 14; see also CMS Ex. 2 at 8.

For purposes of summary judgment, I accept Dr. Willis’ statements as true. However, even if Petitioner’s employees did not realize the specimens they tested were improperly referred and, therefore, did not knowingly conspire to cheat the PT system, this is not the regulatory standard. Nothing in the applicable regulation limits improper inter-laboratory

Page 12

communications to situations where employees subjectively intended to cheat.10 Rather, the regulation prohibits “any inter-laboratory communications pertaining to the results of proficiency testing sample(s). . . .” 42 C.F.R. § 493.801(b)(3) (emphasis added). Accordingly, a violation occurred because Petitioner communicated to Castle the results Petitioner obtained by testing PT samples which were improperly referred to Petitioner by Castle.

I find that Petitioner’s reporting to Castle the results of three PT samples relating to active testing events constituted prohibited inter-laboratory communications, and was prima facie evidence of Petitioner’s noncompliance with 42 C.F.R. § 493.801(b)(3). Petitioner has failed to rebut this conclusion by a preponderance of the evidence. Because the standard-level violation of 42 C.F.R. § 493.801(b)(3) seriously undermined the reliability of the PT program, I conclude that Petitioner violated the condition-level requirement of 42 C.F.R. § 493.801.

CMS additionally found that Petitioner failed to comply with the notification requirement contained in 42 C.F.R. § 493.801(b)(4). I note that Petitioner does recognize that it is subject to this requirement; in this instance, its quarrel is with CMS’s position that a laboratory must notify CMS immediately when it has received an improper referral. LC Br. at 7. As I explain in more detail below in my analysis of Petitioner’s violation of 42 C.F.R. § 493.1441, I find that Petitioner did not timely notify CMS of the improper referral of PT samples from Castle.

Page 13

3. The undisputed material facts establish that Petitioner was out of compliance with 42 C.F.R. § 493.1441 (Condition: Laboratory Director for laboratories performing high complexity testing).

CMS alleges that Petitioner violated the requirements of the Laboratory Director Condition, 42 C.F.R. § 493.1441. The regulation requires that a laboratory have a director who meets the qualifications set forth in section 493.1443, and who provides overall management and direction in accordance with section 493.1445, which outlines the specific responsibilities of the director.11 The laboratory director’s responsibilities include employing personnel competent to perform test procedures, exercising proper supervision over them, and staying apprised of the day-to-day operations of the laboratory. With respect to proficiency testing, the laboratory director bears the ultimate responsibility for ensuring that all proficiency testing is performed in accordance with the regulations, which includes the condition-level requirement of 42 C.F.R. § 493.801 (Enrollment and testing of samples).

CMS alleges that Petitioner’s laboratory director failed to comply with the standard-level requirement of 42 C.F.R. § 493.1445(e)(4)(i), which requires the lab director to ensure that PT samples are tested as required under subpart H of 42 C.F.R. Part 493.12 CMS Ex. 2 at 8-9. In its brief, CMS argues that Petitioner’s lab director failed to ensure that Petitioner complied with PT testing requirements in two ways: 1) he failed to ensure that Petitioner did not engage in prohibited inter-laboratory communications regarding PT results, as required by 42 C.F.R. § 493.801(b)(3); and 2) he failed to ensure that Petitioner immediately reported to CMS that Petitioner had received improperly referred PT samples, as required by 42 C.F.R. § 493.801(b)(4). CMS Br. at 9-10. Because I have explained above why I conclude that Petitioner violated 42 C.F.R. § 493.801(b)(3), I will not reiterate that discussion here. Nevertheless, I agree with CMS that the fact that Petitioner engaged in improper inter-laboratory communications regarding PT samples

Page 14

reflects unfavorably on the lab director’s overall management and direction of the laboratory.

CMS argues additionally that Petitioner’s director failed in his supervisory duties based on Petitioner’s delay in notifying CMS of Castle’s improper referral of PT samples. CMS Br. at 10. CMS contends that, pursuant to 42 C.F.R. § 493.801(b)(4), upon receipt of PT samples from Castle on November 10, 2016, Petitioner’s personnel should have identified them as improperly referred PT samples and immediately reported receipt of them to CMS. Id. Petitioner counters that 42 C.F.R. § 493.801(b)(4) does not contain any requirement that an improper referral must be immediately reported to CMS. LC Br. at 7. In any event, Petitioner claims that it “did promptly notify CMS of the improper referral,” with the notification being delayed two days “by virtue of the Thanksgiving holiday.” Id. (emphasis in original). Petitioner contends that its inability to notify CMS sooner did not cause or threaten any harm. Id.

As relevant to my discussion here, 42 C.F.R. § 493.801(b)(4) states:

. . . Any laboratory that receives a proficiency testing sample from another laboratory for testing must notify CMS of the receipt of that sample regardless of whether the referral was made for reflex or confirmatory testing, or any other reason.

I agree with Petitioner that, read literally, the above-quoted language contains no immediacy requirement. However, even though the regulation does not explicitly require a laboratory to report a PT sample referral to CMS immediately, I find that the duty to report nevertheless arises as soon as a laboratory receives an improperly referred PT sample from another laboratory. For the reporting requirement to be most useful, a laboratory would need to report the improper referral close in time to when it was received. The earlier an improper referral is reported, the more likely CMS can take steps to protect the integrity of a PT event that is underway. It is thus entirely reasonable to read into 42 C.F.R. § 493.801(b)(4) a requirement that a laboratory comply with the notification requirement promptly, within a reasonable timeframe.

Here, the record shows that Petitioner received the PT samples from Castle on November 10, 2016. See, e.g., RFH at 3. The record does not establish with certainty the date on which Petitioner reported the improper referral to CMS. In its hearing request, Petitioner claimed that, after discovering that it had tested PT samples which belonged to another laboratory and reported those results, it “took immediate corrective action” and “on November 23, 2016, [it] notified CMS’ Raleigh Regional Office and CAP.” Id. However, Petitioner seems to have retreated from the assertion that it notified CMS on November 23, 2016. Neither Petitioner’s brief nor the testimony of its witness identifies the specific date on which Petitioner claims to have notified CMS of the improper referral of PT samples. LC Br. at 7; LC Ex. 1 ¶ 15 (Dr. Willis notified her supervisor—not

Page 15

CMS—on November 22, 2016). In addition, Petitioner’s brief represents that the Thanksgiving holiday caused Petitioner to delay notifying CMS by two days. LC Br. at 7.

I take administrative notice that in calendar year 2016, Thanksgiving Day fell on November 24, 2016. Thus, Petitioner’s representation that the holiday delayed its report to CMS by two days is consistent with a notification date of November 28, 2016. A letter from Petitioner’s laboratory director to CMS, dated December 5, 2016, references a telephone conversation regarding the PT samples that reportedly occurred on November 28.13 CMS Ex. 6 at 1; LC Ex. 7 at 1. November 10 through November 28 spans 18 days, and Petitioner was in possession of the PT samples during the entire 18‑day period. Contrary to what Petitioner argues, notifying CMS of the improperly referred PT samples on the 18th day cannot be considered “prompt” by any stretch of the imagination.

Further, even were I to accept, for purposes of summary judgment, that leaving a message at a CMS office on November 23, 2016, constitutes effective notice to CMS of the improperly referred PT samples, this would not change my analysis. I find that the timing of Petitioner’s notification, whether it occurred on November 23, or 28, 2016, fell well outside a reasonable reporting timeframe. I conclude that the delay in reporting that occurred here violated 42 C.F.R. § 493.801(b)(4). In addition, I find that Petitioner’s violation of 42 C.F.R. § 493.801(b)(4) is evidence that Petitioner’s lab director failed in his duty to oversee laboratory operations in violation of 42 C.F.R. § 493.1441 because it is apparent that Petitioner failed to implement procedures that would have enabled its staff to identify improperly referred PT samples upon receipt. Had staff done so, they would have been in a position to notify CMS of the improper referral well before roughly two weeks had elapsed.

Petitioner objects that CMS should not have relied on the fact that Petitioner’s staff tested the improperly referred PT samples as evidence that the lab director violated 42 C.F.R. § 493.1441. LC Br. at 8. According to Petitioner, nothing in the regulations prohibited it from testing the samples. Id. It is true that 42 C.F.R. § 493.801(b) and its subsections do not explicitly prohibit a laboratory that receives improperly referred PT samples from

Page 16

testing those samples.14 However, this argument does not establish that Petitioner’s lab director complied with 42 C.F.R. § 493.1441. As I have just explained, had Petitioner’s lab director implemented procedures to ensure that staff identified any improperly referred PT samples upon receipt and promptly notified CMS as required, Petitioner’s personnel would never have included the Castle PT samples among their testing batches, let alone processed them and released their results.

Lastly, for purposes of summary judgment, I accept as true Petitioner’s claim that its inability to notify CMS sooner did not cause any harm, but I find this is not material under the CLIA regulatory scheme. While I discuss CMS’s sanctions in the next section, I will note here that all that is required for CMS to impose one or more principal or alternative sanctions against a laboratory is a determination that the laboratory is noncompliant with a single CLIA condition of participation; no showing of harm is required. See 42 C.F.R. § 493.2 (defining “[c]ondition level deficiency” without any reference to harm); see Immuno Biogene, Inc., DAB No. 1946 at 23 (2004) (CMS does not have to prove that a given patient was harmed).

The undisputed evidence establishes that, under Petitioner’s laboratory director’s supervision, staff did not competently perform their duties nor did they maintain the integrity of the PT process. Petitioner’s staff failed to identify the improperly referred PT samples from Castle at the outset and failed to notify CMS promptly of the receipt of the samples. Further, not only did Petitioner’s staff test the improperly referred PT samples, but lab personnel also released some of those PT results to Castle, thereby engaging in prohibited inter-laboratory communications. These violations in the area of PT all point to a breakdown in Petitioner’s testing processes and general lab operations. Accordingly, I find that Petitioner’s lab director did not provide necessary management and direction of the lab, violating 42 C.F.R. § 493.1441.15

Page 17

4. CMS is authorized to impose the alternative sanctions of a directed plan of correction and a CMP against Petitioner as remedies for Petitioner’s noncompliance with CLIA conditions.

When a laboratory has condition-level deficiencies, CMS is authorized to impose alternative and/or principal sanctions as specified in 42 C.F.R. §§ 493.1806 and 493.1807. Alternative sanctions include a directed plan of correction, state onsite monitoring, and a CMP. CMS’s choice of alternative sanctions, including the amount of a CMP, is not an initial determination reviewable in this forum. 42 C.F.R. § 493.1844(c)(4).

I find that CMS is authorized to impose alternative sanctions against Petitioner. In this case, the undisputed material facts establish that Petitioner failed to comply with two conditions of participation. CMS imposed the alternative sanctions of a directed plan of correction and a CMP totaling $54,297 ($6,033 per PT sample) against Petitioner. I find that CMS was authorized to impose both of these remedies.

With respect to the CMP, Petitioner argues that CMS improperly “imposed sanctions for nine separate violations, corresponding to all of the Castle PT samples tested by [Petitioner].” LC Br. at 8. Petitioner notes that “only six of the samples were active PT samples” and that it “only released reports as to three of them.” Id. at 2. Based on this reasoning, Petitioner contends that, should the CMP not be vacated in its entirety, then, alternatively, a CMP should only be imposed for three violations and that “sanctions imposed in connection with non-active PT samples and samples that were not reported should be vacated.” Id. at 9.

As noted above, CMS’s determination to impose a CMP, and the amount of the CMP imposed, are not initial determinations and, therefore, are not subject to appeal. However, even if these issues were reviewable, I would find no basis to vacate or reduce the CMP. Contrary to what Petitioner claims, I find that the record supports CMS’s finding that Petitioner committed nine violations. Even were I to disregard the three PT samples relating to inactive PT events, the record would still establish that Petitioner failed to promptly report to CMS the receipt of six improperly referred PT samples relating to active PT events. Additionally, with respect to three PT samples relating to active PT events, Petitioner engaged in prohibited inter-laboratory communications when it reported the test results of those three PT samples to Castle Medical. Thus, there are nine instances in which Petitioner engaged in improper PT activities, and the total CMP amount of $54,297 ($6,033 per sample) must be upheld.

I note that the record contains evidence that Petitioner was previously cited for deficient practices in a 2015 complaint survey, resulting in the same condition-level deficiencies as cited in the case at hand. CMS Ex. 15. In the 2015 survey, CMS alleged, among other things, that Petitioner engaged in improper inter-laboratory communications regarding

Page 18

active PT events. CMS Ex. 15 at 4-6. CMS also cited Petitioner’s laboratory director for inadequate supervision. Id. at 8-9. Given that Petitioner again engaged in improper inter-laboratory communications regarding PT samples in 2016, I find that the CMP is well-justified as a sanction to motivate Petitioner to take appropriate remedial measures. See 42 C.F.R. § 493.1804(d)(3).

Petitioner also disputes CMS’s imposition of a directed plan of correction, despite asserting that it has already complied with it. RFH at 7. As stated above, CMS was authorized to impose this sanction, and I have no authority to review it.

Petitioner notes further that it voluntarily took corrective actions prior to the March 2017 survey and prior to the imposition of the directed plan of correction. Petitioner asserts that it conducted extensive training for its staff on PT regulations, and an audit to ensure PT samples were handled in compliance with CLIA regulations found no deviations. To the extent that Petitioner appears to seek some sort of equitable relief, I have no authority to grant such relief. 1866ICPayday.com, L.L.C., DAB No. 2289, at 14 (2009) (“[a]n ALJ [administrative law judge] is bound by applicable laws and regulations and may not invalidate either a law or regulation on any ground . . . .”).

V. Conclusion

Accepting as true all of Petitioner’s factual assertions, I find that Petitioner violated two CLIA conditions: 42 C.F.R. §§ 493.801 and 493.1441. I therefore grant CMS’s motion for summary judgment and deny Petitioner’s cross-motion for summary judgment. CMS had a legal basis for its determination to impose the alternative sanctions of a directed plan of correction and a CMP against Petitioner.

1. Laboratory Corporation of America Holdings, Inc., operates laboratories throughout the United States. The specific facility whose conduct is at issue in the present case is the Center for Molecular Biology and Pathology. I use the term “Petitioner” in this decision to refer to this entity.
• back to note 1
2. Petitioner did not label its proposed exhibits in accordance with ¶ 6 of my Pre-Hearing Order, which required Petitioner to use the designation “P” for Petitioner. See also Civil Remedies Division Procedures § 14. However, given that Petitioner’s exhibits are otherwise marked properly, I accept its exhibits and will refer to them as “LC Ex.” consistent with their identification in the record.
• back to note 2
3. Even if I did not decide this case on summary judgment, I would reach the same result on the record without an in-person hearing. As I explained in my Pre-hearing Order, “[a] hearing to cross-examine witnesses will be necessary only if a party files admissible, written direct testimony, and the opposing party asks to cross-examine.” Pre-Hearing Order ¶ 10. Because neither party requested to cross-examine the witness(es) proposed by the opposing party, an in-person hearing is not necessary.
• back to note 3
4. My conclusions of law appear as headings in bold italic type.
• back to note 4
5. My recitation of the facts is based on the facts set out on pages 5-7 of CMS’s brief, which are not disputed by Petitioner (LC Br. at 2), as well as additional undisputed facts from Petitioner’s brief and from the record.
• back to note 5
6. The record does not define the acronyms MGL3 and BRCA. Petitioner’s CAP order confirmation form describes MGL3 as “Molecular Genetics,” but provides no further elaboration. See CMS Ex. 9 at 1. The same form describes BRCA as “BRCA 1/2 Sequencing.” Id. I infer that BRCA 1/2 refers to genetic tests for the breast cancer genes referred to as BRCA1 and BRCA2. See, e.g., CMS Ex. 3 at 1.
• back to note 6
7. I infer that the suffix “B” identifies the second PT testing event for 2016.
• back to note 7
8. An inactive testing event is an event for which the reporting deadline has already passed. CMS Resp. at 2.
• back to note 8
9. Petitioner’s argument suggests that it cannot be blamed for engaging in improper inter laboratory communications because its personnel were not initially aware that the samples it tested and for which it reported results were improperly referred PT samples. See, e.g., LC Br. at 6. I do not agree. Petitioner suggests a hypothetical scenario in which a referring laboratory disguises the PT samples to resemble ordinary patient samples. Id. But, in the present case, Castle did not engage in any such subterfuge. Its improperly referred PT samples were clearly labeled as such. On these facts, Petitioner is responsible for its improper communications with Castle because, as I discuss in more detail below, Petitioner should have had in place policies and procedures to ensure that, on intake, staff could identify improperly referred PT samples.
• back to note 9
10. I recognize that, under some circumstances, inquiry into a laboratory’s intent may be appropriate. For example, in analyzing a possible violation of 42 C.F.R. § 493.801(b)(4), the decision maker must consider whether a laboratory “intentionally” referred a PT sample to another laboratory for testing. Under those circumstances, appellate panels of the DAB have recognized that although the CLIA regulations do not specifically define “intentional” referral, they do define “intentional violation” in general to mean “knowing and willful noncompliance with any CLIA condition.” 42 C.F.R. § 493.2; Wade Pediatrics, DAB No. 2153 at 13-14 (2008), aff’d, Wade Pediatrics v. Dep’t of Health & Human Servs., 567 F.3d 1202 (10th Cir. 2009). In applying this definition, appellate panels of the DAB have held that an intentional PT referral requires only a finding that a laboratory acted knowingly and voluntarily in referring PT samples to another laboratory, even if the lab was unaware it was violating CLIA regulations. Victor Valley Cmty. Hosp./Clinical Lab. & Tomasz Pawlowski, M.D., DAB No. 2340 (2010); Wade Pediatrics, DAB No. 2153; Lackawanna Medical Grp. Lab., DAB No. 1870 (2003).
• back to note 10
11. Neither party has identified Petitioner’s laboratory director. However, I note that the record contains documents which indicate that Petitioner’s lab director is (or was) an individual named “Arundhati Chatterjee, M.D.” See CMS’s May 30, 2017 notice of proposed sanctions and CMS’s July 5, 2017 notice of imposition of sanctions (both addressed to “Arundhati Chatterjee, M.D., Director” and “Laboratory Corporation of America Holdings Inc., Owner(s)).” LC Ex. 3 at 1; CMS Ex. 2 at 1; LC Ex. 2 at 1; CMS Ex. 1 at 1; see also letter dated December 5, 2016, from Petitioner to CMS, signed by “Arundhati Chatterjee, M.D. Laboratory Director.” LC Ex. 7 at 2.
• back to note 11
12. Subpart H contains the regulations governing the PT program for laboratories performing nonwaived testing, including the condition-level requirement of 42 C.F.R. § 493.801 (Enrollment and testing of samples).
• back to note 12
13. I take administrative notice that November 28, 2016, was the Monday following the Thanksgiving holiday, i.e., the second business day after Thanksgiving. The December 5 letter also represents that someone on Petitioner’s staff left a message at the CMS office on November 23, 2016. CMS Ex. 6 at 2; LC Ex. 7 at 2.
• back to note 13
14. While there is no explicit prohibition on a laboratory testing PT samples it receives from another laboratory, one might conclude that, if it tested improperly referred samples, the receiving laboratory would violate the requirement to test PT samples in the same manner it tests patient samples. In effect, the laboratory would be testing the PT samples twice (its own PT samples and the improperly referred samples, assuming all samples came from the same PT program and related to the same testing events), which is prohibited.
• back to note 14
15. As I point out in the following section of this decision, CMS previously cited Petitioner for violating the same condition-level deficiencies as cited in the case at hand. CMS Ex. 15. That Petitioner did not maintain compliance with these conditions, despite having been alerted to deficiencies related to PT, is a further indication that Petitioner’s laboratory director did not exercise his supervisory duties adequately.
• back to note 15