Kensington Diagnostics LLC, DAB No. 2992 (2020)

FINAL DECISION ON REVIEW OF ADMINISTRATIVE LAW JUDGE DECISION

Kensington Diagnostics LLC (Kensington) is a laboratory that held a certificate issued by the Centers for Medicare & Medicaid Services (CMS) under the Clinical Laboratory Improvement Amendments of 1988 (CLIA), 42 U.S.C. § 263a.  Alleging violations of the regulations that implement CLIA, CMS notified Kensington in November 2016 that its CLIA certificate was being revoked and that it was being assessed a $5,936 per day civil money penalty (CMP).  Kensington appealed those enforcement actions to an Administrative Law Judge (ALJ).  On August 5, 2019, after the parties submitted documentary evidence, declarations, and written argument – and after Kensington waived its right to an in-person hearing – the ALJ issued a decision sustaining the revocation and CMP.  Kensington Diagnostics LLC, DAB CR5385 (2019) (ALJ Decision).  Kensington now appeals the ALJ’s decision, seeking another opportunity for oral testimony, objecting to the amount and duration of the CMP (which the ALJ held was properly in effect from December 7, 2016 through March 2, 2017), and raising other issues.  However, Kensington has failed to identify any unsupported finding of material fact, prejudicial legal error, or abuse of discretion by the ALJ.  Moreover, Kensington has not justified its request that the Board hold a hearing to receive in-person testimony from its owner and two employees. 

Accordingly, we affirm the ALJ’s decision in its entirety. 

Legal Background

The CLIA statute provides that a “laboratory” must be certified by the United States Department of Health and Human Services (HHS) in order to test human specimens (such as blood and tissue).1   42 U.S.C. § 263a(b)-(c), (f).  The statute defines the term “laboratory” and “clinical laboratory” to mean a facility that performs biological and other “examination of materials derived from the human body for the purpose of

Page 2

providing information for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of, human beings.”  Id. § 263a(a).  Congress enacted CLIA to ensure that the results of diagnostic laboratory tests are reliable and accurate.  Malaria & Rheumatic Disease Research Inst., Inc., DAB No. 2872, at 1 (2018) (citing legislative history); 42 U.S.C. § 263a(f)(1)(E) (giving the Secretary of HHS discretion to require laboratories to “meet such other requirements as the Secretary determines necessary to assure consistent performance . . . of accurate and reliable laboratory examinations and procedures”). 

The federal regulations that implement CLIA are found in 42 C.F.R. Part 493.  Those regulations spell out “conditions” and “standards” that a laboratory must meet in order to obtain and maintain federal certification.  42 C.F.R.  §§ 493.1, 493.3, 493.5(c).  The “conditions” for CLIA certification are general requirements, while the “standards” are “specific components of the conditions.”  Associated Internists, P.C., DAB No. 2298, at 2 (2010).   

The Secretary of HHS has delegated his statutory authority to enforce CLIA to CMS, which may inspect a certified laboratory to verify its compliance with applicable federal requirements (or designate an agent, such as a state health agency, to carry out that function).  42 U.S.C. § 263a(g); 42 C.F.R. §§ 493.1800(b), 493.1771-.1773.  If an inspection reveals one or more “condition level deficiencies” – that is, noncompliance with any certification “condition” specified in subparts G through Q of the CLIA regulations – CMS may impose “sanctions” on the laboratory.  42 C.F.R. §§ 493.1804(b)(2), 493.1806(a)-(b), and 498.2 (definitions of “condition level deficiency” and “condition level requirements”).  The “principal” sanctions for a condition-level deficiency include the revocation of the laboratory’s CLIA certificate.  Id. § 493.1806(b).  In lieu of, or in addition to, a principal sanction, CMS may impose one or more “alternative” sanctions, such as a CMP and a “directed plan of correction.”  Id. § 493.1806(c).  A single condition-level deficiency is a sufficient basis for sanctioning a laboratory.  Id. § 493.1806(a) (authorizing sanctions when the laboratory is “out of compliance with one or more CLIA conditions); Wade Pediatrics, DAB No. 2153, at 2-3 (2008), aff’d, Wade Pediatrics v. U.S. Dep’t of Health & Human Servs., Ctrs. for Medicare & Medicaid Servs., 567 F.3d 1202 (10th Cir. 2009). With one (irrelevant) exception, the revocation of a laboratory’s CLIA certificate disqualifies both the laboratory’s owner and “operator” from owning or operating any laboratory for two years.  42 U.S.C. § 263a(i)(3).

A laboratory may challenge CMS’s determination to revoke its CLIA certificate and impose alternative sanctions by requesting a hearing before an ALJ and, then, by requesting Board review of any adverse decision by the ALJ.  42 C.F.R. § 493.1844(a)-(b), (f).  Proceedings before the ALJ and the Board are governed by the procedural regulations in 42 C.F.R. Part 498.  Id. § 493.1844(a)(2)-(3).  Unless CMS has found that conditions at the laboratory pose an imminent and serious risk to human health, the filing

Page 3

of an administrative appeal postpones the effective date of a challenged revocation “until after a hearing decision by an Administrative Law Judge is issued.”  Id. §§ 493.45(g), 493.1812(b), 493.1844(d)(2); see also id. § 493.1840(e)(1) (“CMS does not revoke any type of CLIA certificate until after an ALJ hearing that upholds revocation.”).

Case Background

The following background information is drawn from the record, the ALJ’s findings of fact, and the parties’ June 29, 2017 “Joint Stipulation of Undisputed Facts” (Jt. Stip.).   The Board does not make any new factual findings in this decision.     

1. Kensington’s laboratory and CLIA certification

On November 25, 2014, CMS issued Kensington a CLIA Certificate of Registration, enabling it to conduct moderate or high complexity laboratory testing.  Jt. Stip. ¶ 3.  From November 2014 through at least June 2017, Kensington operated a laboratory (whose only piece of equipment was a Biolis 24i desktop analyzer) at the offices of its sole owner, Sanjoy Banerjee, M.D.  Id. ¶¶ 1-2, 4.  “[T]he only testing done [at Kensington during that period] consisted of urine drug test screenings for patients of Dr. Banerjee,” who, according to one of his declarations, practices “in the field of Pain Management and Addiction Medication.”  Id. ¶ 6; P. Ex. 20, ¶ 2.  Kensington’s urine screens are “considered high complexity testing within the meaning of [CLIA] and CLIA’s implementing regulations.”  Jt. Stip.¶ 7.  The “primary purpose” of the urine screens was to determine whether Dr. Banerjee’s patients were “complying with prescribed medication and/or taking illicit substances.”  Id. ¶ 6.

2. The compliance survey and CMS’s enforcement action

On November 9, 2015, the California Department of Public Health (CDPH), acting on CMS’s behalf, conducted an onsite survey of Kensington; CDPH “finalized” the survey on January 7, 2016.  CMS Ex. 1, at 1; Jt. Stip. ¶ 9.  Gabriele Sabino was the CDPH surveyor who performed the onsite survey; he later became a CMS employee.  Oct. 20, 2017 Sabino Decl. ¶¶ 1-2, 4.

Based on its survey findings, CDPH cited Kensington for three condition-level deficiencies.  Jt. Stip. ¶ 10.  Those deficiencies were alleged violations of 42 C.F.R. §§ 493.1230, 493.1250, and 493.1441.2   CMS Ex. 1, at 1.  CDPH also found Kensington noncompliant with 19 CLIA standards, including the standard in section 493.1236(c)(1).  Id. at 4-42.  In addition, CDPH found that three standard-level deficiencies, including the

Page 4

alleged violation of section 493.1236(c)(1), were serious enough to render Kensington noncompliant with the condition-level requirement in section 493.1230.  Id. at 4.

In April 2016, CDPH notified Kensington of the survey’s findings.  Jt. Stip. ¶ 10.  Kensington then sent CMS a plan of correction “and a number of documents responsive to” the deficiency findings.  Id. ¶ 12. 

On October 11, 2016, CMS issued a notice of proposed sanctions, which stated that Kensington’s post-survey submissions “did not constitute a credible allegation of compliance and acceptable evidence of correction of the deficiencies cited during the January 7, 2016 survey.”  Id. ¶ 13; CMS Ex. 8.  The notice of proposed sanctions allowed Kensington ten days to submit any evidence or information showing why the proposed sanctions should not be imposed.  Jt. Stip. ¶ 13.  In response to the notice of proposed sanctions, Kensington submitted another plan of correction and supporting documents.  Id. ¶ 14. 

On November 22, 2016, CMS sent Kensington a notice stating that its most recent submission failed to show that the cited condition-level and standard-level deficiencies had been corrected and notifying Kensington that the following sanctions were being imposed: 

• Revocation of Kensington’s CLIA certificate effective January 21, 2017;
• A daily civil money penalty of $5,936 effective December 7, 2016 and continuing “until it can be verified that all the cited deficiencies have been corrected and [Kensington] is in compliance with all Condition-level requirements or [Kensington]’s CLIA certificate is revoked”;
• A “directed portion of a plan of correction” (effective December 7, 2016); and
• Cancellation of Kensington’s approval to receive Medicare payments for any laboratory services performed on or after January 21, 2017.

CMS Ex. 10, at 3-4, 6; Jt. Stip. ¶ 15.  The November 22, 2016 notice also advised Kensington that, if it appealed the deficiency findings by requesting an ALJ hearing, CMS would not collect the accrued CMP or revoke its CLIA certificate until after an ALJ decision upholding those sanctions.  CMS Ex. 10, at 6.

Page 5

3. Kensington’s administrative appeal

On January 17, 2017, Kensington requested a hearing before an ALJ to appeal the imposition of sanctions.  Jt. Stip. ¶ 16.

On January 30, 2017, the ALJ issued a prehearing order that included a schedule for submitting pre-hearing briefs and documentary evidence.  Ack. & Prehearing Order ¶ II.G.  The prehearing order stated that “[t]he hearing would be “set on the first available date, generally not less than 30 days or more than 180 days after prehearing briefs are due.”  Id. ¶ II.L.  The prehearing order further advised Kensington that it could “at any time waive a hearing and request a decision on the written record” and could, in that event, submit written declarations or affidavits in lieu of in-person testimony.  Id. ¶¶ II.D.4, II.L.8.  

On July 20, 2017, the ALJ notified the parties that the hearing in the case would be held on August 14, 2018.

On August 6, 2017, complaining that CMS was “withholding the renewal” of its CLIA certificate and citing “a large amount of uncertainty” about whether “sanctions are imposed and accruing,” Kensington requested an expedited hearing or, alternatively, a decision on the written record.  Motion for Expedited Hearing at 1-2.  Kensington also asked the ALJ to direct CMS to “reinstate” its expired CLIA certificate while its case was pending.3   Id. at 2. 

On August 17, 2017, the ALJ denied Kensington’s request for an expedited hearing and offered the following advice:

If Petitioner wishes to waive an oral hearing that is Petitioner’s right but Petitioner must file a written waiver of the right to appear and present evidence at a hearing on the record in accordance with 42 C.F.R. § 498.66(a).  If the waiver of oral hearing is not opposed by CMS and the waiver is accepted, a schedule for the filing of briefs and documentary evidence will be adopted.  Petitioner is advised, however, that a waiver . . .  will not result in Petitioner’s case be[ing] moved ahead of other pending cases for purposes of decision.

Page 6

Ruling Denying Motion for Expedited Hearing.  The ALJ also held that he had no authority to direct CMS to “take any action” regarding Kensington’s expired CLIA certificate.  Id.

On August 24, 2017, Kensington notified the ALJ that it wanted to “waive its right to an oral hearing and ability to present evidence at a hearing on the record.”  Motion for Waiver of Right to Oral Hearing and Request for Decision on the Written Record. 

On September 5, 2017, the ALJ accepted the waiver, stating that, in accordance with 42 C.F.R. § 498.66(a)(2), Kensington could, upon a showing of “good cause,” withdraw the waiver at any time prior to his decision in the case.  Order and Schedule for Final Briefing at 1.  The ALJ also established a schedule for the submission of legal argument, documentary evidence (in addition to that already filed), and written testimonial evidence.  Id.  The parties filed those materials during October, November, and early December 2017.  The evidence submitted by Kensington (both before and after the waiver) included declarations by its owner (Dr. Banerjee), laboratory director (William Nguyen, M.D.), and technical consultant (Firas Tamary).  ALJ Decision at 3. 

On August 24, 2018, the ALJ ordered the parties to submit supplemental briefing that was completed on September 17, 2018.  Id. at 2.

4. Efforts by Kensington after the imposition of sanctions to demonstrate compliance.

Beginning in December 2016 (after CMS imposed sanctions) and continuing until at least February 6, 2017, Firas Tamaly, Kensington’s recently hired technical consultant, sent documents to Gabriele Sabino, CMS’s surveyor, purporting to show that Kensington had corrected the cited deficiencies and was fully compliant with CLIA requirements.  See CMS Exs. 13-27; P. Exs. 18-19, 24.  Those documents included an “allegation of compliance” signed by Kensington’s laboratory director (Dr. Nguyen).  CMS Ex. 23, at 1.  Tamaly sent the allegation of compliance to Surveyor Sabino on January 19, 2017, two days after Kensington filed its request for hearing.  Id.

In a declaration, Surveyor Sabino asserted that he spent 40 to 50 hours reviewing the January 19, 2017 allegation of compliance and other documents submitted by Tamaly but concluded that those materials were inadequate to show that Kensington had corrected all of the cited deficiencies.  Oct. 20, 2017 Sabino Decl. ¶¶ 18-26.

On February 7, 2017, according to a telephone log, Surveyor Sabino called Tamaly to inform him that he (Sabino) could no longer communicate with Kensington during the appeal process.  CMS Ex. 28.  

Page 7

On March 2, 2017, “counsel for CMS notified counsel for Kensington that . . . CMS had not received documentation that CMS accepted as a satisfactory evidence of the Laboratory’s compliance with all CLIA requirements.”  Jt. Stip. ¶ 17. 

In its opening brief to the ALJ, CMS stated that between December 7, 2016 and March 2, 2017:

[it] [had been] engaged in a good faith effort to allow Kensington to return to compliance with all CLIA requirements and thus to potentially avoid some of the imposed sanctions. . . .  CMS staff communicated extensively with Kensington’s newly-retained laboratory consultant [Firas Tamaly], and spent more than 40 hours reviewing hundreds of pages of documents, but ultimately concluded that the laboratory had failed to establish full compliance.

CMS Opening Br. to ALJ at 17.   

5. The ALJ Decision

In his August 5, 2019 decision, the ALJ first determined that Kensington had violated the standard-level CLIA requirements specified in 42 C.F.R. §§ 493.1235 (personnel competency), 493.1236(c)(1) (verifying test accuracy), and 493.1239(a) (self-monitoring and quality assessment).  ALJ Decision at 10-26.  Based on his findings of standard-level deficiencies, and on Surveyor Sabino’s assessment of the deficiencies’ “seriousness” and “potential to adversely impact patient test results and patient care,” the ALJ concluded that Kensington was noncompliant with the condition-level requirement in 42 C.F.R.
§ 493.1230 (general laboratory system requirements) and that CMS had therefore lawfully revoked Kensington’s CLIA certificate and imposed a CMP.  Id. at 9, 26-33.  The ALJ did not address any other condition-level or standard-level deficiency citation, holding that a single condition-level deficiency sufficed to warrant the imposition of sanctions.  Id. at 9, 26. 

The ALJ further determined:

• The effective date of the revocation of Kensington’s CLIA certificate was August 5, 2019, the date of his decision.  Id. at 33-34;
• The CMP was properly in effect from December 7, 2016 through March 2, 2017, the period during which CMS assertedly “‘continued to work with [Kensington] in its attempts to return to compliance.’”  Id. at 33-37 (quoting CMS Opening Br. to ALJ at 17);
• The amount of the CMP imposed by CMS was “unreviewable.”  Id. at 37;

Page 8

• The revocation of Kensington’s CLIA certificate subjected its owner and laboratory director to a two-year ban on owning, operating, and directing a CLIA laboratory.  Id. at 37-39. 

Standard of Review

In general, Board review of an ALJ’s decision is limited to determining whether or not: (1) the ALJ’s findings of material fact are supported by substantial evidence in the record as a whole; (2) the decision’s necessary legal conclusions are correct (that is, are consistent with applicable statutes and regulations); and (3) a “prejudicial error of procedure . . . was committed.”  See Fairway Med. Clinic, et al., DAB No. 2811, at 7 (2017), aff’d, Murtaza Mussaji, D.O., P.A. v. U.S. Dep’t  of Health & Human Servs., 741 Fed. App’x 222 (5th Cir. 2018); Guidelines – Appellate Review of Decisions of Administrative Law Judges in Cases Under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) and Related Statutes (“Board Guidelines”), “Completion of the Review Process,” ¶ (c), accessible at https://www.hhs.gov/about/agencies/dab/different-appeals-at-dab/appeals-to-board/guidelines/clia/index.html.  The Board “will review only those parts of the record before the ALJ which are cited by the parties or which the Board considers necessary to decide the appeal.”  Board Guidelines, “Completion of the Review Process,” ¶ (a).  In addition, the Board generally “will not consider issues not raised in the request for review,” nor will it consider “issues which could have been presented to the ALJ but were not.”  Id.

Analysis

As our background narrative indicates, the ALJ sustained the sanctions imposed on Kensington based on his determination that it had violated the condition-level requirement in 42 C.F.R. § 493.1230 and three subsidiary standard-level requirements, including the standard in 42 C.F.R. § 493.1236(c)(1).  Kensington raises various issues in this appeal, but it objects to only one of the ALJ’s deficiency findings – namely, the finding that Kensington had violated the standard in section 493.1236(c)(1).  We address Kensington’s objection to that finding first.4   We then address Kensington’s objections to the amount and duration of the CMP and consider its equitable estoppel claim and its request that the Board convene a hearing so that it may present in-person testimony.

Page 9

1. The ALJ committed no error in concluding that Kensington had violated the standard in 42 C.F.R. § 493.1236(c)(1).

Title 42 C.F.R. § 493.1236(c)(1) requires that, “[a]t least twice annually, the laboratory must verify the accuracy of . . . [a]ny test or procedure that it performs that is not included in” 42 C.F.R. Part 493, subpart I.  At issue in this case is whether Kensington complied with this requirement in testing for carisoprodol, a muscle relaxant with a potential for abuse.5   The ALJ found, and Kensington does not dispute, that it had tested human specimens for this substance during 2015 and 2016.  ALJ Decision at 18; Pet.’s Request for Review (RR) at 3-4.

The ALJ held that, because “[c]arisoprodol is not an analyte listed in” subpart I of the CLIA regulations, section 493.1236(c)(1) required Kensington to verify the accuracy of its test for carisoprodol at least twice a year.  ALJ Decision at 18, 22.  The ALJ further held that, in order to comply with 493.1236(c)(1), Kensington “should have verified its test for carisoprodol at least once during the seven months between starting testing for carisoprodol [on June 3, 2015] and the end of the survey [on January 7, 2016].”  Id. at 18.  The ALJ found that Kensington failed to verify the carisoprodol test’s accuracy during that seven-month period (or any point until October 2016).  Id. at 22.  On that basis the ALJ concluded that Kensington had violated section 493.1236(c)(1).  Id.  

Kensington does not dispute that section 493.1236(c)(1) requires a laboratory subject to CLIA to verify the accuracy of a carisoprodol test.  Nor does Kensington contest the ALJ’s finding that it failed to meet the regulatory standard between June 3, 2015 and January 7, 2016.6   Instead, Kensington contends that it had no obligation to comply with section 493.1236(c)(1) because it did not report carisoprodol test results to “patients or providers” and because “no clinical actions were being taken on the results.”  RR at 3 (citing CMS Ex. 2, at 43).  Kensington explains that when CMS performed its survey (in late 2015), “the policies and procedures for the Carisoprodol test were still under development in our lab” and that it was performing the test “only for developing internal

Page 10

protocols, monitoring performance, stability and range limits for Kensington’s own use and data gathering.”  RR at 3-4.  Kensington asserts that it does not report the results of any test unless the test is “fully verified and compliant with CLIA standards”; that it followed that protocol for the carisoprodol test; and that there is “no possibility of clinical harm” to patients if results are not reported and no action is taken based on them.  Id. at 4.  “Being a high complexity CLIA certified lab,” says Kensington, “we are well within our rights and abilities to add additional tests to our menu after we evaluate the performance of said reagent on our machine.”  Id.

The ALJ rejected this argument, stating that “[t]esting of human samples triggers the application of CLIA and the CLIA regulations and not the reporting of the results of the testing.”  ALJ Decision at 23.  We see no error in that holding.  In general, a laboratory is subject to CLIA if it tests human specimens “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); 42 C.F.R. § 493.1, 493.2 (definition of “laboratory”).  It is undisputed that, during the relevant period (June 2015 through January 2016 and beyond), Kensington was engaged in the business of testing human specimens for the purpose specified in the CLIA statute.  Consequently, its testing of human specimens – including its screens for carisoprodol – had to meet applicable CLIA requirements.  Kensington’s position is that these requirements are inapplicable to “research” or validation testing by a laboratory otherwise subject to CLIA so long as the results of the testing are not “reported.”  However, the CLIA statute and regulations contain no such research or test-specific exemption.

The law does exempt certain types of laboratories from CLIA requirements.  Section 493.3(b)(2) states that those requirements “do not apply to components or functions of 
. . . [r]esearch laboratories that test human specimens but do not report patient specific results for the diagnosis, prevention or treatment of any disease or impairment of, or the assessment of the health of individual patients.”  Kensington does not cite section 493.3(b)(2) or claim that its carisoprodol testing is somehow covered by this regulation, much less provide any documentation that its physician-office testing services constitute a research laboratory. 

Even if we agreed that section 493.1236(c)(1) were inapplicable to so-called “research” testing by a non-exempt laboratory (which we do not), we would find Kensington’s challenge to the deficiency finding meritless because the record does not confirm its owner’s self-serving allegation that it was testing carisoprodol “only for developing internal protocols, monitoring performance, stability and range limits for Kensington’s own use and data gathering” (italics added).  RR at 3.   None of the laboratory documents of record from the noncompliance period identified by the ALJ (June 2015 through January 2016) describe or allude to a research plan for establishing the accuracy and precision of that test.  See CMS Ex. 2, at 34-86. 

Page 11

Kensington points to certain test result forms from January, May, July, August, and September 2015 that, as prepared by the laboratory, did not include test results for carisoprodol.  Reply Br. at 2 (citing CMS Ex. 2, at 34, 43, 51, 59, 62); see also Oct. 20, 2017 Sabino Decl. ¶ 38 (stating that Kensington’s “test results pages did not include carisoprodol . . . results as of the time of the survey”).  However, the absence of carisoprodol test results on test forms is not proof that Dr. Banerjee – the laboratory’s “only user” and the treating physician of the patients whose specimens Kensington tested (P. Ex. 20, ¶¶ 2-3, 5) – did not consider those results in diagnosing and treating patients.  Although Kensington alleges that carisoprodol test results were not “reported” to Dr. Banerjee “per good lab practice,” Reply Br. at 2, no laboratory employee testified to that effect, and Dr. Banerjee did not assert in his declarations that he was unaware of, or disregarded, those results in caring for patients.  Furthermore, Surveyor Sabino testified that, even though the carisoprodol results were not on the test pages, Kensington staff told him orally during the survey that it began “reporting” carisoprodol test results “two months earlier” – that is, sometime in September 2015.  Oct. 20, 2017 Sabino Decl. ¶¶ 38-39.  Kensington failed to rebut that testimony.

Based on the foregoing analysis, we hold that the ALJ’s conclusion that Kensington did not comply with 42 C.F.R. § 493.1236(c) is supported by substantial evidence and not legally erroneous. 

2.  Summary affirmance of the ALJ’s conclusion that Kensington violated a condition-level requirement is warranted.

The ALJ sustained CMS’s decision to revoke Kensington’s CLIA certificate and impose a CMP based on his conclusion that Kensington had violated the condition-level requirement in 42 C.F.R. § 493.1230.  That conclusion was based in turn on the ALJ’s findings that Kensington had violated standard-level requirements in sections 493.1235, 493.1236(c)(1), and 493.1239(a), and that the standard-level violations were serious and had the potential to affect patient care and test results.  As we have explained, Kensington contested before us the finding as to only one of those three requirements, and we have found its arguments as to the contested requirement to be without merit.

In this appeal, Kensington does not present any basis for us to overturn the ALJ’s conclusion that the standard-level violations rise to the level of violating the condition in section 493.1230.  Kensington raises no dispute about the ALJ’s assessment of the standard-level violations’ seriousness or claim that his conclusions are not supported by substantial evidence.  

Because Kensington does not dispute that it violated the condition-level requirement in section 493.1230, we summarily affirm the ALJ’s conclusion to that effect as well as his ultimate holding that CMS lawfully revoked Kensington’s CLIA certificate and imposed

Page 12

a CMP.  See Board Guidelines, “Completion of the Review Process,” § (a) (“The Board will not consider issues not raised in the request for review . . .”).

3. The Board may not review the CMP amount chosen by CMS.

Kensington contends that the $5,936 per day CMP (which, the ALJ held, was properly in effect from December 7, 2016 through March 2, 2017) is excessive given the size of its laboratory.  RR at 5.  Kensington asserts that it is a “small lab in a doctor’s office” that operated only four days per month and did not generate “significant profit,” whereas the CMP was “the maximum daily amount allowed by law” and more than $500,000 in the aggregate.  Id.  Alleging that the penalty will bankrupt it, Kensington requests that the Board grant it “equitable relief” by “adjust[ing] the penalty “to reflect the size of our operation both in volume, days open and actively testing.”  Id.

The Board cannot consider or grant this request.  The Board is “bound by applicable statutes and regulations, and may not ignore or refuse to apply those laws.”  Madison Cnty. Nursing Home, DAB No. 2895, at 17 (2018).  As Kensington acknowledges, the applicable CLIA regulations permitted CMS to impose a CMP as high as $5,936 per day.  42 C.F.R. § 493.1834(d)(2)(ii); 45 C.F.R. § 102.3 (table) (Oct. 1, 2016).  Those regulations also prohibit a laboratory from appealing a determination by CMS as to “the amount of a civil money penalty” that falls within the authorized penalty range.  42 C.F.R. § 493.1844(c)(4), (7).  We therefore cannot entertain Kensington’s argument that the penalty amount imposed by CMS in this case (which was within the authorized range) is excessive or unduly burdensome.  In addition, the Board has no authority to overturn or modify a legally valid agency action (such as the imposition of the CMP), or to make exceptions to applicable legal requirements, on “fairness or other equitable grounds.”  James Shepard, M.D., DAB No. 2793, at 9 (2017); Foot Specialists of Northridge, DAB No. 2773, at 18 (2017).  

4. Kensington has identified no legal error by the ALJ concerning the duration of the CMP.

In accordance with 42 C.F.R. § 493.1834(f)(1)(ii), the ALJ held that the CMP began accruing on December 7, 2016, 15 days after November 22, 2016, the date upon which CMS notified Kensington that it was imposing sanctions.  ALJ Decision at 34-35.  As for when the CMP stopped accruing, the ALJ first considered 42 C.F.R. § 493.1834(f)(2), which provides that a CMP “continues to accrue until the earliest of the following occurs”:

(i)     The laboratory’s compliance with condition level requirements is verified on the basis of the evidence presented by the laboratory in its credible allegation of compliance or at the time or [sic] revisit.

Page 13

(ii)     Based on credible evidence presented by the laboratory at the time of revisit, CMS determines that compliance was achieved before the revisit.  (In this situation, the money penalty stops accruing as of the date of compliance.)

(iii)     CMS suspends, limits, or revokes the laboratory’s certificate of compliance, registration certificate, certificate of accreditation, or certificate for [provider-performed microscopy] procedures.

Finding that the conditions in subparagraphs (i), (ii), and (iii) of section 493.1834(f)(2) had not yet occurred,7 the ALJ stated that the CMP “arguably” continued to accrue throughout the “pendency of [Kensington’s] appeal.”  ALJ Decision at 36.  The ALJ did not reach that conclusion, however.  He noted that CMS in its briefs had “recognize[d] prior ALJ decisions that have disallowed CMPs after determining those CMPs did not serve the purpose of incentivizing a laboratory to return to compliance.”  Id. at 36-37.  In addition, the ALJ accepted CMS’s proposition that the CMP in this case “served a remedial purpose” (that is, incentivized Kensington to take corrective action) from December 7, 2016 through March 2, 2017 because CMS “continued to work with [Kensington during that period] in its attempts to return to compliance.”  Id. at 36-37 (quoting CMS Opening Br. to ALJ at 17).  Based on that proposition, the “logic” of prior ALJ decisions, and CMS’s “concession” (which the ALJ said he would not “look behind”) that the CMP no longer served a remedial purpose after March 2, 2017, the ALJ concluded that the CMP properly ceased accruing after March 2, 2017, the date that CMS advised Kensington that its most recent attempt to demonstrate CLIA compliance had failed.”8   Id.

Kensington now contends that the CMP should have stopped accruing on February 1, 2017.  RR at 5-6.  Kensington alleges that February 1, 2017 is the date of the “last communication” – a telephone call – between CMS’s surveyor (Gabriele Sabino) and Kensington’s technical consultant (Firas Tamary), and that after this call, “there w[ere] no communications from CMS to Kensington that might be construed as remedial action” by CMS.  RR at 6.  Because there was no apparent “remedial action in progress” after

Page 14

February 1, 2017, says Kensington, the CMP may not properly accrue after that date.9  Id. (asserting that “[n]o communication = no remedial action in progress”).

This argument identifies no factual or legal error by the ALJ.  The ALJ held that the CMP incentivized corrective action (“served a remedial purpose”) – and thus properly accrued – from December 7, 2016 through March 2, 2017 because Kensington had an opportunity during that period to demonstrate its compliance with CLIA requirements and thus avoid, or at least obtain a modification of, the previously imposed sanctions.  Kensington does not disagree with the ALJ’s holding that a CMP may properly accrue to the extent that it continues to incentivize corrective action by the sanctioned laboratory.10  In addition, Kensington does not dispute that CMS gave it an opportunity – until March 2, 2017 – to demonstrate its compliance with CLIA requirements and possibly avoid (in whole or part) the previously imposed sanctions.  Nor does Kensington deny that the CMP’s accrual actually encouraged it to take corrective action.  The record shows that Kensington responded to that incentive by submitting an “allegation of compliance” on January 19, 2017 (CMS Ex. 23) and a large volume of supporting documentation (CMS Exs. 13-27).  The fact that Kensington’s technical consultant submitted such documentation to CMS on February 6, 2017 (see CMS Ex. 27) is substantial evidence that the CMP continued to serve a remedial purpose even after Kensington’s so-called “last communication” with CMS on February 1, 2017. 

Notably, Kensington’s argument appears to confuse the remedial purpose of an accruing CMP to motivate the noncompliant provider with the idea that CMS must itself be taking remedial action or continuously communicating with the provider.  The duty to remediate is with the laboratory.  What the ALJ accepted in ending the accrual of the CMP prior to the date that he found the revocation actually went into effect was CMS’s concession that it did not expect continuing the CMP past March 2, 2017 would have any effect in getting Kensington to remediate given its failure to do so at that point despite multiple efforts by CMS to work with it.

Page 15

Surveyor Sabino’s telephone log indicates that he notified Kensington’s technical consultant on February 7, 2017 that he could no longer communicate with Kensington while its case was pending before the ALJ.  CMS Ex. 28.  However, Kensington does not allege that this communication led it to think that its window of opportunity to demonstrate compliance had closed, or that CMS had decided at that point not to accept the recently submitted allegation of compliance.  As already discussed, CMS did proceed to review that allegation of compliance and found it substantively unacceptable.  Oct. 20, 2017 Sabino Decl. ¶¶ 19-24, 27.

Because Kensington has identified no legal or factual error by the ALJ in determining the duration of the CMP, we affirm his conclusion that the CMP properly accrued from December 7, 2016 through March 2, 2017.      

5. The Board cannot grant relief based on equitable defenses, such as equitable estoppel.

Asserting that it is making a claim of “equitable estoppel” based on “affirmative misconduct,” Kensington contends in its opening appeal brief that the sanctions imposed by CMS should be rescinded or overturned because CMS’s surveyor, Gabriele Sabino, told Kensington’s consultant, Firas Tamary, during a February 1, 2017 telephone call that “all standards and conditions had been met by Kensington” as of that date.  RR at 6-7.  According to Kensington:

This misinformation from the CMS agent . . . caused [Kensington] to act in a certain way which resulted in [its] harm.  If [Kensington] had not received this misinformation, [it] would have stopped clinical testing sooner thus minimizing potential harm to patients and minimizing the amount, extent and duration of CMP’s.  We would not have pursued the appeal and relinquished our CLIA certificate . . . willingly and without regret.  

RR at 7.  Kensington further alleges, in its reply brief, that Surveyor Sabino made handwritten alterations to some its test reports and caused “delays in communications or inaccurate communications in our time sensitive matter,” and that these circumstances also constitute “affirmative misconduct” by CMS.11   Reply Br. at 2.    

Page 16

In appeals brought under 42 C.F.R. Part 498 (as this one is), the Board has consistently held that it lacks authority to grant the non-federal party relief from a remedial sanction or penalty based on equitable defenses or doctrines – such as equitable estoppel – and must decide cases in accordance with applicable statutes and regulations.  Cornelius M. Donohue, DPM, DAB No. 2888, at 9 (2018).  First, “estoppel against the government cannot be asserted on the basis of oral advice,” such as the alleged oral statements of CMS’s surveyor.  Linda Silva, P.A., DAB No. 2966, at 8 n.6 (2019) (italics in original).  Second, as Kensington recognizes, a claim of estoppel against the federal government requires a showing of “affirmative misconduct” by a government actor, but affirmative misconduct is more than the mere negligent provision of erroneous advice; it is akin to deliberate or reckless misrepresentation.  Hartford HealthCare at Home, Inc., DAB No. 2787, at 10 (2017); Baccei v. United States, 632 F.3d 1140, 1147 (9th Cir. 2011) (stating that “[a]ffirmative misconduct on the part of the government requires an affirmative misrepresentation or affirmative concealment of a material fact, . . . such as a deliberate lie or a pattern of false promises”).  Kensington’s claims of misconduct by the surveyor are far from any such characterization.  Third, Kensington fails to cite evidence that it satisfied other necessary conditions for estoppel, including reasonable reliance upon, and harm flowing from, a government actor’s misrepresentation.  See Southlake Emergency Care Ctr., DAB No. 2402, at 8 (2011) (noting that the “traditional requirements” for estoppel include a factual misrepresentation by the government, reasonable reliance on the misrepresentation by the party seeking estoppel, and harm or detriment to that party as a result of the reliance). 

We therefore decline to rule on the merits of Kensington’s estoppel claim or grant any relief based upon it.   

6. Kensington is not entitled to another chance to present in-person testimony.

Although it waived its opportunity for an evidentiary hearing before the ALJ, Kensington asks the Board to convene a hearing so that it can present testimony by its owner (Dr. Banerjee), laboratory director (Dr. Nguyen), and technical consultant (Firas Tamary).  RR at 3-4.   

The appeal regulations provide that the Board “may” admit evidence “in addition to” the evidence presented to the ALJ if the additional evidence is “relevant and material to an issue before it.”  42 C.F.R. § 498.86(a).  This provision “is permissive and does not require the Board to admit additional evidence even if it is material and relevant.”  Cmty. Nursing Home, DAB No. 1807, at 28 (2002).  In deciding whether to admit additional evidence, the Board, in accordance with its longstanding appellate review guidelines, considers whether that evidence’s proponent has shown “good cause” for not producing it during the ALJ proceeding.  Id.; Board Guidelines, “Development of the Record on Appeal, ¶ (g); see also Sunview Care & Rehab Ctr. LLC, DAB No. 2713, at 15 (2016) (rejecting request to introduce new evidence on appeal where the party did not

Page 17

demonstrate good cause, without reaching the issue of whether the new evidence was material or relevant).

We deny Kensington’s request to present in-person testimony as unjustified – for several reasons.  First, Kensington does not contend that its proposed witnesses would offer relevant and material in-person testimony that clarifies or supplements the statements contained in their declarations of record.  Kensington suggests just the opposite, stating, in its reply brief, that it “do[es] not want to introduce new evidence,” and that the “evidence on the record is extensive and exhaustive enough.”  Reply Br. at 2.  In short, it appears that the proposed in-person testimony would merely duplicate written testimony already in the record.  However, an administrative tribunal is under no obligation to allow the needless introduction of such repetitious evidence.  See Guardian Health Care Ctr., DAB No. 1943, at 16 (2004) (indicating the general standard of admissibility in a Part 498 proceeding is found in the Administrative Procedure Act, which permits a fact-finder to consider any oral or documentary evidence except “irrelevant, immaterial, or unduly repetitious evidence” (5 U.S.C. § 556(d)). 

Second, Kensington has not satisfied the good-cause standard articulated in the Board Guidelines.  More specifically, Kensington has not alleged that the substance of the proposed in-person testimony, to the extent it would supplement its witness declarations, could not have been included in those declarations while the case was pending before the ALJ. 

Third, Kensington had an opportunity to present in-person testimony to the ALJ but expressly waived that opportunity in August 2017.  Kensington implies that it entered the waiver because the ALJ or his staff created the false impression that doing so would result in its case being decided quickly.  RR at 2 (stating that, based on communication with the ALJ’s staff, it was “under the impression that [waiver] would expedite the decision process”).  The record contradicts that implication.  While Kensington may have believed that a waiver would expedite the ALJ’s decision-making, there is nothing in the record indicating that the ALJ fostered that belief.  The ALJ did not commit to any timeline for deciding the case or suggest to Kensington that waiving its right to an in-person hearing would shorten that timeline.  If anything, the ALJ tried to lower expectations by advising Kensington “that a waiver . . . will not result in Kensington’s case be[ing] moved ahead of other pending cases for purposes of decision.”  Aug. 17, 2017 Ruling Denying Pet.’s Motion for Expedited Hearing. 

Kensington states that it wants to “confront” CMS and its witness (Surveyor Sabino) before an “independent tribunal.”  Reply Br. at 2.  It is apparent from this statement (and others) that Kensington wants to re-litigate its case before the Board, not merely provide additional relevant and material evidence.  However, in administrative appeals governed by 42 C.F.R. Part 498, as this one is, the Board’s role is to review the ALJ’s findings of fact and conclusions of law based on the record developed by the ALJ, not to rehear the

Page 18

case in its entirety in order to decide the case anew.  See Board Guidelines, “Completion of the Review Process.”  The record shows that Kensington had a full and fair opportunity to present its case to the ALJ and to cross-examine CMS’s witnesses.12   Neither the regulations nor due-process principles entitle Kensington to a second such opportunity before the Board.

Conclusion

Based on the foregoing analysis, we affirm the ALJ’s August 5, 2019 decision in this case.

1. A laboratory’s CLIA certification is also a condition of eligibility to receive Medicare payments for diagnostic testing.  See 42 C.F.R. §§  493.1826, 493.1842(a)(1).
• back to note 1
2. The condition-level deficiencies were identified by survey identification tag numbers D5200 (the section 493.1230 violation), D5400 (the section 493.1250 violation), and D6076 (the section 493.1441 violation).  CMS Ex. 1, at 1, 4, 11, 37.
• back to note 2
3. In its August 16, 2017 response to Kensington’s request for an expedited hearing, CMS informed the ALJ that, “[i]ndependent of th[e] litigation,” Kensington’s CLIA certificate had expired on November 25, 2016.  Resp. to Motion for Expedited Hearing at 1 n.2.  In a letter dated November 9, 2018, while the case was still pending before the ALJ, CMS notified Kensington that its CLIA certificate had been extended “solely for the purpose of finalizing the current sanction actions.”  Ex. A to CMS’s Nov. 9, 2018 Supplemental Notice of CMS Regarding Administrative Extension.  Kensington raises no issue in this appeal concerning the expiration or extension of its CLIA certificate. 
• back to note 3
4. As noted in section 2 of the Analysis, Kensington raises no issues regarding the ALJ’s other standard-level noncompliance findings.  In addition, Kensington does not challenge the ALJ’s determination that its owner and laboratory director are subject to a two-year ban on owning or operating a clinical laboratory.  Kensington’s laboratory director has separately attempted to appeal that determination to the Board (under Appellate Division docket number A-19-137).
• back to note 4
5. CMS points to the following publicly available website for general information about this medication, to which Kensington has not objected:  U.S. Dept. of Justice, Drug Enforcement Admin., Diversion Control Div., Factsheet on Carisoprodol, https://www.deadiversion.usdoj.gov/drug_chem_info/carisoprodol/carisoprodol.pdf.  CMS Br. at 11, n.3.
• back to note 5
6. Kensington asserts that when CMS’s surveyor expressed concern about carisoprodol testing, it “performed corrective actions per [the surveyor’s] wishes well within the one-year time frame generally afforded by CMS to labs with alleged standard deficiencies.”  RR at 4.  Kensington does not point to evidence of the “corrective actions,” indicate precisely when they occurred, or claim that they demonstrate the absence of a section 493.1236(c)(1) violation.  Nor does Kensington argue that it was compliant with its regulatory obligation at any point between the end of the survey (in January 2016) and the date that CMS imposed sanctions (on November 22, 2016).   Furthermore, while the regulations provide a corrective-action period before sanctions are imposed for standard-level deficiencies, see 42 C.F.R. § 493.1816(b), a laboratory is not entitled to delay sanctions in order to take corrective action when its deficiencies rise to the condition level, as Kensington’s do. 
• back to note 6
7. Before the ALJ, Kensington contended that the CMP should have terminated on January 21, 2017 because CMS had revoked its CLIA certificate effective on that date.  The ALJ rejected that argument:  he concluded that “[a]though January 21, 2017 was the effective date CMS originally proposed to terminate [Kensington]’s CLIA certificate,” the certificate was actually “revoked effective the date of this decision, not earlier,” in accordance with 42 C.F.R. §§ 493.1840(d) and 1844(d)(2).  ALJ Decision at 36 n.24.  Kensington does not challenge that conclusion in this appeal, and thus we do not review it.
• back to note 7
8. The ALJ stated that, although “the regulations do not authorize CMS to end a CMP prematurely,” he would “not look behind CMS’s concession that no remedial purpose would be served by extending the CMP beyond March 2, 2017.”  ALJ Decision at 37.
• back to note 8
9. In support of its claim for equitable estoppel – which we address in the next section – Kensington alleges that Surveyor Sabino told Firas Tamary (Kensington’s technical consultant) during the February 1, 2017 telephone call that Kensington’s most recent allegation of compliance (filed on January 19, 2017) was adequate to show compliance with all CLIA requirements.  RR at 6.  Kensington did not argue before the ALJ that the substance of that telephone call was itself a basis for stopping the accrual of the CMP, and the ALJ made no finding of fact about what Surveyor Sabino actually told Tamary on that occasion.  (Sabino and Tamary gave conflicting accounts of the February 1, 2017 call in their declarations.  See Aug. 6, 2017 Tamary Decl. ¶ 4; Oct. 20, 2017 Sabino Decl. ¶ 25.)  Because Kensington did not argue before the ALJ that the parties’ dispute concerning the substance of the February 1, 2017 telephone call was a matter that he needed to address in deciding how long the CMP should accrue, we decline to resolve that dispute in reviewing the ALJ’s conclusion that the CMP accrued through March 2, 2017.  See Board Guidelines, “Completion of the Review Process,” § (a) (stating that the Board “will not consider issues which could have been presented to the ALJ but were not”). 
• back to note 9
10. The Board has held that a CMP serves a remedial purpose during a period in which a laboratory has an “opportunity for corrective action.”  Sonali Diagnostic Lab., DAB No. 2008, at 26 (2006), aff’d, Rustom Ali v. U.S. Dep’t of Health & Human Servs., 240 Fed. App’x 211 (9^th Cir. 2007).
• back to note 10
11. Surveyor Sabino stated in a declaration that, during his November 2015 inspection of Kensington, he “annotated several documents [including the laboratory’s test report sheets] . . . as a reminder” to himself that he was “reviewing laboratory systems and documentation for all analytes,” including carisoprodol and tramadol, even though those two analytes “did not yet appear on the laboratory’s report sheets.”  Nov. 20, 2017 Sabino Decl. ¶ 2.
• back to note 11
12. The ALJ held that Kensington had “waived cross-examination of Surveyor Sabino by its waiver of oral hearing.”  ALJ Decision at 3.  Kensington does not contest that holding or claim that it was unware that the waiver effectively foreclosed its opportunity to conduct cross-examination.  The DAB Civil Remedies Division Procedures, a copy of which the ALJ provided to the parties at the outset of the case, states that both direct and cross-examinations of a witness “will generally occur during an oral hearing.” 
• back to note 12