David L. Smalley, Ph.D., ALJ Ruling 2023-3 (HHS CRD November 14, 2022)

RULING DISMISSING CASE

For the reasons set forth below, I conclude that Petitioner, David L. Smalley, Ph.D., failed to show good cause for filing his hearing request out of time.  Therefore, I dismiss the hearing request pursuant to 42 C.F.R. § 498.70(c).

Background

Petitioner was the laboratory director and operator of Gamma Healthcare, Inc. (Gamma), a former clinical laboratory located in Poplar Bluff, Missouri.  In June and July 2020, the Missouri Department of Health and Senior Services (state agency) conducted multiple surveys and found the lab out of compliance with Clinical Laboratory Improvement Amendments (CLIA) requirements.

In a letter dated September 25, 2020, and addressed to Gamma’s owners and to Petitioner, the Centers for Medicare & Medicaid Services (CMS) provided notice that it was imposing sanctions based on the noncompliance found during the surveys.  Docket Entry # 1a in the DAB E-File for C-22-724.  The sanctions included the suspension and revocation of Gamma’s CLIA certificate.  The notice warned that, once revoked, both the owner(s) and operator(s) (including a director) would be prohibited from owning or operating (or directing) a laboratory for at least two years from the date of the revocation.  Id. at 13 (citing 42 U.S.C. § 263a(i)(3); 42 C.F.R. § 493.1840(a)(8)).  The notice also

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warned that an appeal “must be requested no later than November 25, 2020.”  Id. at 12.

On October 4, 2020, Gamma’s owners timely requested a hearing.  The case was docketed as C-21-11 and assigned to me.  Petitioner did not request a hearing individually, nor did he request to intervene or otherwise appear in Docket No. C-21-11.  Thereafter, Gamma’s owners and CMS entered into a settlement agreement.  Gamma’s owners withdrew its hearing request, and I dismissed the case by order issued May 25, 2021.  Docket Entry # 23 in the DAB E-File for C-21-11.

Almost two years after the deadline to request a hearing and over a year after the case had been dismissed, Petitioner filed correspondence, dated August 15, 2022, which my office treated as a hearing request (Hearing Req.) and docketed as C-22-724.  In it, Petitioner asserts that he is entitled to a hearing before an administrative law judge to contest CMS’s sanctions.

Because Petitioner’s filing appeared to be untimely either as a request to vacate the May 2021 dismissal or as a hearing request to challenge the September 2020 notice imposing sanctions, I directed Petitioner to show cause why his case should not be dismissed.  Acknowledgment and Order to Show Cause (Aug. 17, 2022).  In accordance with the Order to Show Cause, Petitioner filed a response (P. Resp.) along with an attachment (Attach. A)¹, and CMS filed a reply along with two exhibits (CMS Exs. 1-2).

Discussion

Petitioner has not established good cause for filing his hearing request untimely.² 

Any laboratory dissatisfied with the suspension, limitation, or revocation of its CLIA certificate, with the imposition of an alternative sanction under the regulations, or with cancellation of the approval to receive Medicare payment for its services, is entitled to a hearing before an administrative law judge and has 60 days from the notice of sanction to request a hearing.  42 C.F.R. § 493.1844(f).  Pursuant to 42 C.F.R. § 493.1844(a)(2), the hearing procedures of 42 C.F.R. pt. 498, subpt. D apply, including the provision that I may dismiss a hearing request where “[t]he affected party did not file a hearing request

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timely and the time for filing has not been extended.”  42 C.F.R. § 498.70(c).  The same regulation authorizes me to extend the time for filing a hearing request “[f]or good cause shown.”  Id. § 498.40(c)(2).

Neither the regulations themselves nor appellate decisions of the Departmental Appeals Board (DAB) provide an authoritative or complete definition of “good cause” for a party’s failure to meet a deadline or other regulatory requirement, and instead leave that determination to the discretion of the administrative law judge.  See, e.g., Brookside Rehab. & Care Ctr., DAB No. 2094 at 7 n.7 (2007); Glen Rose Med. Ctr. Nursing Home, DAB No. 1852 (2002) (2002 WL 31654627 at *4 n.5).  In that regard, many decisions of DAB administrative law judges have concluded that good cause is not established where the untimely filing was the result of avoidable human error.  See, e.g., Heritage Park Rehab. & Nursing Ctr., DAB CR2028 at 4 (2009); Jackson Manor Health Care, Inc., DAB CR545 (1998) (1998 WL 479304 at *5).

In his response to the Order to Show Cause, Petitioner confirms he is not seeking to vacate the dismissal in Docket No. C-21-11 because, he asserts, he was not a party to that case or its final disposition.  P. Resp. at 1.  Petitioner also acknowledges that his August 15 hearing request was not filed timely or within 60 days of receiving the CMS determination imposing sanctions.  Id.

Petitioner contends instead that there is good cause for his untimely hearing request given the “[c]onfusion” or “lack of legal clarity” over whether he, as a lab operator, has a right to a hearing independent from that of the lab owners.  Id. at 2, 5.  In Petitioner’s view, the regulation governing hearings addresses the “[a]ppeal rights of laboratories” only, and does not distinguish between owners and operators even though other governing authorities do.  Id. (comparing42 C.F.R. § 493.1844(f) (providing appeal rights to “[a]ny laboratory” dissatisfied with listed sanctions) with 42 U.S.C. § 263a(i)(3) and 42 C.F.R. § 493.2 (distinguishing between lab owners and lab operators)).  Petitioner asserts that, due to circumstances beyond his control, he was unaware that Gamma’s owners had filed a hearing request in October 2020, and that, as soon as he was advised of the settlement of Gamma’s appeal, he engaged in good faith efforts to clarify whether he had an independent right to appeal.  Id. at 2, 4.  Petitioner explains that he and his counsel inquired of CMS, only to be told that he “lacks ALJ appeal rights and the ability to challenge the dismissal of the hearing.”  Id. at 3 (emphasis in original).  Petitioner then filed a complaint for declaratory relief in the U.S. District Court for the Eastern District of Missouri (federal district court), which was dismissed on June 6, 2022.  Id. at 3-4; see also Attach. A at 2 (Opinion, Memorandum and Order in Smalley v. Becerra, No. 4:22CV399 HEA, 2022 WL 2452593 (E.D. Mo. July 6, 2022)).

I find that none of the circumstances Petitioner describes establishes good cause for filing his hearing request out of time.  As an initial matter, the September 2020 notice imposing sanctions was addressed to Petitioner along with Gamma’s owners, and Petitioner does not deny receiving that notice.  Nor could Petitioner do so credibly, given that he signed

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documents that were submitted to CMS addressing the noncompliance findings.  CMS Ex. 1 (Oct. 2, 2020 Credible Allegation of Compliance submitted to CMS, which was signed by Petitioner); 42 C.F.R. § 493.2 (definition of “credible allegation of compliance”); see also Attach. A at 15, 24 (federal district court noting Petitioner’s “participation in the process preceding [Gamma’s] appeal.”).  Petitioner asserts that Gamma’s owners excluded him from communications concerning the filing of Gamma’s appeal.  P. Resp. at 3.  But even if I accept that Petitioner was unaware that Gamma’s owners had filed a hearing request, ignorance of that fact did not prevent Petitioner from himself requesting a hearing by the November 25, 2020 deadline specified in the CMS notice.³

Moreover, even if Petitioner somehow remained unaware of Gamma’s appeal, Petitioner acknowledges that, as of June 11, 2021, he knew that Gamma’s owners and CMS had settled the pending appeal, because the attorney for Gamma’s owners asked Petitioner to sign the settlement agreement and acknowledge the sanction that would be imposed against him.  Hearing Req. at 1.  The record before me also includes a notice of final sanctions, dated June 10, 2021, addressed to Gamma’s owners and to Petitioner, which mentions the dismissal of Gamma’s appeal.  CMS Ex. 2 at 1-2 (confirming that “Gamma Healthcare Inc.” waived all appeal rights to contest the sanctions imposed, including revocation of the laboratory’s CLIA certificate; that “the laboratory withdrew the hearing request on May 25, 2021”; and that “the Administrative Law Judge issued a dismissal order on May 25, 2021.”).  And yet, even possessing that knowledge, Petitioner did not immediately request that I set aside the dismissal based on the contention that he had been excluded from the proceedings.⁴

I accept Petitioner’s representation that, once he learned in June 2021 of the dismissal, he asked first CMS, and then the federal district court, whether he, as a lab operator, could request a hearing.  But his efforts to seek CMS’s position on the matter, and later to challenge CMS’s position in federal district court, did not prevent him from asserting his individual right to an administrative appeal at the same time, by requesting a hearing

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before an administrative law judge, just as he has belatedly done here.  Certainly, none of Petitioner’s arguments constitutes good cause for filing the hearing request over a year after he learned of the settlement and dismissal of Gamma’s appeal (let alone almost two years after the deadline to challenge the September 2020 notice of sanctions).

The prudent course for Petitioner would have been to request a hearing by the deadline specified in CMS’s September 2020 notice letter.  If he was in doubt about his individual right to a hearing, he could have raised those arguments in a timely hearing request just as he has done now.⁵  At a minimum, he could have filed his hearing request (or motion to vacate the dismissal of Docket No. C-21-11) as soon as he was contacted by Gamma’s attorneys regarding the settlement.  For reasons he has not adequately explained, Petitioner did not avail himself of either option.  This was avoidable human error that delayed Petitioner’s filing a hearing request for at least one year and up to almost two years.  As an appellate decision of the DAB observed, “Petitioner must bear the consequences of focusing [his] time and energy on advocacy tactics other than preparing and filing a timely hearing request.”  Borger I Enters., LLC, DAB No. 2618 at 4 (2015).

Finally, Petitioner’s contention that CMS is to blame for impeding his ability to file a timely hearing request may be an attempt to assert the doctrine of equitable estoppel, i.e, that Petitioner relied to his detriment on false or misleading information provided by CMS.  See P. Resp. at 3-4 (arguing that CMS’s actions constitute “prejudicial errors of procedure”).  However, as appellate decisions of the DAB have recognized, equitable estoppel will not lie against a government entity absent some type of affirmative misconduct.  See, e.g., Richard Weinberger, M.D. & Barbara Vizy, M.D., DAB No. 2823 at 19 (2017) (citing Office of Pers. Mgmt. v. Richmond, 496 U.S. 414, 419-21 (1990)).  As the decision in Weinberger & Vizy emphasized, “affirmative misconduct appears to require something more than failing to provide accurate information or negligently giving wrong advice.”  DAB No. 2823 at 19(internal quotation marks and citations omitted).

Therefore, even if, as Petitioner represents, a CMS representative told him that he could not appeal the dismissal of Docket No. C-21-11 (P. Resp. at 3), nothing in the record suggests this statement rises to the level of affirmative misconduct, or even that it was false or misleading.⁶  Moreover, if Petitioner is seeking equitable relief more generally because, in his view, he was unfairly deprived of his right to a hearing, I cannot grant such relief.  Arriva Medical LLC, DAB No. 2934 at 16 (2019) (citing Cent. Kan. Cancer Inst., DAB No. 2749 at 10 (2016)).  In any event, to the extent Petitioner no longer has

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hearing rights in this case, it is not because of any action by CMS or Gamma’s owners.  Petitioner himself failed to file a timely hearing request despite having notice of the deadline to do so.

In sum, I conclude that Petitioner has not established good cause to file a hearing request out of time.  I therefore dismiss this case.  42 C.F.R. §§ 498.40(c)(2), 498.70(c).  I deny Petitioner’s Request for Status Update and Motion to Establish Briefing Schedule, filed November 4, 2022, as moot.

Endnotes

¹ Petitioner filed his Response, as well as Attachment A, as a single PDF document in the electronic file.  See Docket Entry # 5 in the DAB E-File for C-22-724.  The cover sheet for the Attachment appears at PDF page number 6; the substance of the Attachment begins on page 7.  When citing to the Attachment, I cite the internal pagination of the document.

² I reach this single conclusion of law.

³ In fact, the federal district court rejected Petitioner’s claim that he was denied the opportunity to participate in the administrative proceedings.  Attach. A at 13 (“The record before the Court, however, belies [Petitioner’s] position.”).  Rather, the court opined that Petitioner’s “extensive history of operating laboratories gives rise to the inference that [Petitioner] is familiar with the procedures through which an operator would challenge the two-year suspension.  The notices informing [Petitioner] of the potential suspension [are] clearly indicative of the need to pursue the appeal remedies available to [Petitioner].”  Id. at 15.  The federal district court concluded that, despite having been notified of the sanctions and the suspension that would result, Petitioner “did nothing to protect his interest at the appeal level.”  Id. at 24.

⁴ Indeed, on June 11, 2021, Petitioner still would have been within the 60-day window to request to vacate the May 25, 2021 dismissal.  42 C.F.R. § 498.72.

⁵ This ruling takes no position on the merits of Petitioner’s contention that a lab operator has a right to a hearing independent from that of a lab owner.

⁶ The record before me does not establish when CMS allegedly gave Petitioner this advice.  If the interaction occurred more than 60 days after May 25, 2021 (the date I dismissed Docket No. C-21-11), the dismissal would no longer be subject to review, regardless of the party requesting the appeal.  See 42 C.F.R. §§ 498.72, 498.82(a)(2).