Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
Vitas Laboratory, LLC
(CLIA No. 16D2126753),
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-18-32
Decision No. 6135
DECISION
The certificate of Vitas Laboratory, LLC (CLIA No. 16D2126753) (Vitas) to operate as a clinical laboratory under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) is revoked effective the date of this decision. 42 C.F.R. § 493.1840(e)(1). Pursuant to 42 U.S.C. § 263a(i)(3), Vitas’ owner, Billy Taylor, and Vitas’ operators are prohibited from owning, operating, or directing a laboratory subject to CLIA for two years due to the revocation of Vitas’ CLIA certificate. The two-year prohibition runs from the date of the revocation of the laboratory’s certificate, i.e., the date of this decision, pursuant to 42 U.S.C. § 263a(i)(3). Michael Chen, Ph.D. was listed as Vitas’ laboratory director in the two applications for CLIA certificates discussed in this decision. However, Chen was not an operator of Vitas within the meaning of the regulations. Chen did not request a hearing, he had no right to request a hearing, and he is not subject to the application of 42 U.S.C. § 263a(i)(3).
I. Procedural Background
The Centers for Medicare & Medicaid Services (CMS) notified Vitas’ owner Taylor and laboratory director Chen by letters dated August 21, 2017, that CMS proposed to revoke Vitas’ CLIA certificate. CMS alleged that Vitas applied for a CLIA certificate of compliance on February 28, 2017, using a form CMS-116 that listed Vitas’ laboratory
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address as 8 W 4th Street, Spencer, Iowa 51301. CMS alleged that on August 3, 2017, Iowa state surveyors attempted to perform an unannounced survey of Vitas, but the surveyors found that no laboratory existed at the address listed for Vitas in the CMS-116. CMS alleged that Vitas submitted false information that resulted in a CLIA certificate of compliance1 being inappropriately issued. CMS advised Taylor and Chen that CMS proposed to revoke Vitas’ CLIA certificate based on the misrepresentation in the application for a CLIA certificate that Vitas existed as a laboratory. CMS granted Taylor and Chen 10 days to respond. CMS Exhibits (Exs.) 1-2.
CMS notified Taylor and Chen by letters dated September 1, 2017, that Vitas’ CLIA certificate was revoked pursuant to 42 C.F.R. § 493.1840(a)(1), (3), (6) and (e), for two years based on the alleged misrepresentation in Vitas’ application (CMS-116) for a CLIA certificate of compliance. CMS alleges that the specific misrepresentation by Vitas was that Vitas existed as a clinical laboratory. CMS also informed Taylor and Chen that Vitas was no longer approved to receive Medicare and Medicaid payments for services performed on or after November 1, 2017. According to the CMS letters, Vitas responded to CMS’ notices of proposed revocation dated August 21, 2017. CMS indicates that Vitas’ response included eight emails dated August 21, 2017, two emails dated August 22, 2017, an undated written statement signed by Taylor on August 25, 2017, a copy of a three-month lease for Vitas’ physical space, and other materials. CMS found the material insufficient to rebut that Vitas misrepresented that Vitas existed as a laboratory. CMS informed Taylor and Chen of the right to request review by an administrative law judge (ALJ) and that the revocation would not be effective until ALJ review is complete. CMS Exs. 3-4.
On October 2, 2017, a hearing before an ALJ was requested by counsel on behalf of Vitas.2 There is no dispute Vitas’ request for hearing was timely filed as required by 42 U.S.C. § 263a(i) and 42 C.F.R. § 493.1844(f)(1). On October 31, 2017, the case was docketed as C-18-32, assigned to me for hearing and decision, and an Acknowledgment and Prehearing Order (Prehearing Order) was issued at my direction.
On February 28, 2018, CMS filed CMS Exs. 1 through 9. Vitas filed Vitas’ Exhibit (P. Ex.) 1 on March 26, 2018. CMS filed a prehearing brief and motion for summary
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judgment with CMS Ex. 10 on July 16, 2018. On July 18, 2018, Vitas filed a response to the CMS prehearing brief and motion for summary judgment (P. Br.).
On September 20, 2018, I ordered, inter alia, that this case (C-18-32) and two related cases (C-18-521 and C-18-770) be consolidated for hearing and decision. Upon further consideration, the order consolidating C-18-32 with C-18-521 and C-18-770 is vacated. A separate decision is issued in this case and a consolidated decision is issued in C‑18‑521 and C-18-770.
On July 3, 2019, I denied the CMS motion for summary judgment in this case and set the case with the related cases for hearing on June 15 through 19, 2020, but the hearing was subsequently postponed with agreement among the parties in the related cases. On June 16, 2020, the consolidated cases were set for hearing on January 24 through 28, 2022. However, on August 2, 2021, the hearing was postponed, and further proceedings were stayed. On December 16, 2021, a briefing schedule was established for further consideration of the appropriateness of summary judgment in the consolidated cases, and the parties were notified that I would consider the appropriateness of summary judgment for any of the parties in the consolidated case.
On January 27, 2022, Vitas filed a statement of the expected testimony of Taylor (Taylor Expected Testimony).
On January 31, 2022, CMS filed a renewed motion for summary judgment with supporting brief (CMS Br.), and CMS Exs. 11 and 12.3
Vitas did not file another response to the CMS renewed motion for summary judgment. However, Vitas’ July 18, 2018 response to the CMS prehearing brief and motion for summary judgment is considered as Vitas’ response to CMS’ renewed motion for summary judgment.
CMS Exs. 1 through 12 and P. Ex. 1 are admitted and considered as evidence.
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II. Discussion
A. Statutory and Regulatory Program Requirements
CLIA establishes requirements for all laboratories that perform clinical diagnostic tests on human specimens and provides for federal certification of such laboratories.4 The purpose of CLIA is to ensure the accuracy and reliability of laboratory tests, and hence the public health of all Americans. H.R. Rep. No. 100-899 at 8, 18 (1988), reprinted in 1988 U.S.C.C.A.N. 3828-29, 3839.
To conduct laboratory examination of any materials derived from the human body for purposes of assessment, diagnosis, prevention, or treatment, a laboratory must have a certificate issued by the Secretary of Health and Human Services (the Secretary) or CMS, his delegate. 42 U.S.C. § 263a(a)-(b). The Secretary and CMS may only certify a laboratory under CLIA if the laboratory meets the requirements for a certificate established by 42 U.S.C. § 263a(d). 42 U.S.C. § 263a(c). A laboratory, or an approved accrediting body on behalf of a laboratory, must apply for a CLIA certificate on the form authorized by the Secretary. Congress was specific that the laboratory or accrediting body must submit an application
(ii) that describes the characteristics of the laboratory examinations and other procedures performed by the laboratory including—
(I) the number and types of laboratory examinations and other procedures performed,
(II) the methodologies for laboratory examinations and other procedures employed, and
(III) the qualifications (educational background, training, and experience) of the personnel directing and supervising the laboratory and performing the laboratory examinations and other procedures . . . .
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42 U.S.C. § 263a(d)(1)(A)(ii) (emphasis added).
The Secretary has issued regulations implementing CLIA that are published at 42 C.F.R. pt. 493 as required by 42 U.S.C. § 263a(f). The regulations describe five types of CLIA certificates: certificate of compliance, certificate for provider-performed microscopy procedures, certificate of accreditation, certificate of registration (or registration certificate), and a certificate of waiver. 42 C.F.R. § 493.2. A certificate of registration may be issued in accordance with 42 C.F.R. § 493.45 to permit a laboratory to conduct moderate and/or high complexity testing until CMS, CMS’ agent, or an accrediting agency conducts a survey and determines the laboratory is in compliance with CLIA conditions and standards. A certificate of compliance is issued to a laboratory after CMS, or its agent, conducts an inspection of the laboratory and finds it is in compliance with all applicable CLIA condition-level requirements. 42 C.F.R. § 493.2. A certificate of registration is required for all laboratories seeking a certificate of accreditation from a CMS-approved accrediting body, unless the laboratory already holds a valid certificate of compliance issued by the Secretary. 42 C.F.R. § 493.57.
Pursuant to CLIA, the Secretary has broad enforcement authority, including the ability to suspend, limit, or revoke the certificate of a laboratory that is out of compliance with one or more requirements for certification. 42 U.S.C. § 263a(h)-(i).
The regulations implementing CLIA at 42 C.F.R. pt. 493 specify conditions and standards for certification that a laboratory must meet and maintain in order to be certified to test human specimens and to participate in Medicare. The Secretary has through the regulations delegated broad authority to CMS to ensure that laboratories perform as Congress intended, including the authority to inspect and sanction laboratories that fail to comply with the regulatory requirements. CMS has the delegated authority to suspend, limit, or revoke the CLIA certificate of a laboratory that is out of compliance with one or more CLIA conditions, and CMS may also impose alternative sanctions, such as a directed plan of correction, monitoring by the state, and a civil money penalty. 42 C.F.R. §§ 493.1806‑.1842. Cancellation of Medicare payments is also authorized as a principal sanction when condition-level deficiencies are found (42 C.F.R. §§ 493.1807(a), 493.1842(a)(2)(i)) and is required when CMS suspends or revokes a laboratory’s certificate (42 C.F.R. § 493.1842(a)(1)). Under the regulations, a single condition-level deficiency is an adequate basis for principal and alternative sanctions. 42 C.F.R. § 493.1806(a). Conversely, standard-level deficiencies are not an adequate basis for the imposition of a sanction, except when the laboratory fails to correct such deficiencies within 12 months after the last day of inspection. 42 C.F.R. § 493.1816(b).
CLIA provides that a laboratory’s certificate may be suspended, revoked, or limited only after reasonable notice and opportunity for hearing to “the owner or operator of the laboratory . . . .” 42 U.S.C. § 263a(i)(1). The Secretary’s regulations provide that a laboratory or prospective laboratory dissatisfied with an initial determination listed in
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42 C.F.R. § 493.1844(b) is entitled to a hearing before an ALJ. 42 C.F.R. § 493.1844(a), (f). The hearing procedures of 42 C.F.R. pt. 498, subpt. D are applicable pursuant to 42 C.F.R. § 493.1844(a)(2). The “suspension, limitation, or revocation of the laboratory’s CLIA certificate . . . because of noncompliance” is an initial determination that triggers a right to a hearing before an ALJ. 42 C.F.R. § 493.1844(b)(1). The imposition of an alternative sanction is also an initial determination that triggers a right to request a hearing. 42 C.F.R. § 493.1844(b)(3), (f)(1). The CMS choice of alternative sanctions to impose is not subject to ALJ review. 42 C.F.R. § 493.1844(c)(4). Generally, when a hearing is requested, suspension, limitation, or revocation of a CLIA certificate is not effective until after a hearing decision is issued by the ALJ. 42 C.F.R. §§ 493.1840(d)(1), (e), 493.1844(d)(2). My decision is final unless a party requests and receives review by the Departmental Appeals Board (Board). 42 C.F.R. § 493.1844(d)(4).
The allocation of the burden of proof in an appeal of CMS’s sanctions is described in Hillman Rehab. Ctr., DAB No. 1611 (1997), aff’d, Hillman Rehab. Ctr. v. U.S. Dep’t of Health & Human Servs., No. 98-3789 (GEB), 1999 WL 34813783 (D.N.J. May 13, 1999); Edison Med. Labs., Inc., DAB No. 1713 (1999) (Hillman burden of proof applicable in CLIA appeals), aff’d, Edison Med. Lab., Inc. v. Health Care Fin. Admin., 250 F.3d 735 (Table) (3rd Cir. 2001). CMS has the burden of coming forward with sufficient evidence to prove a prima facie case of noncompliance with one or more CLIA conditions. The petitioner then has the ultimate burden of showing by a preponderance of the evidence that it was not out of compliance with the conditions placed at issue by CMS in its prima facie case. Regarding the imposition of sanctions, the issue to be resolved by the ALJ is not whether CMS properly exercised discretion in imposing either principal or alternative sanctions, but rather, whether a basis existed for the imposition of sanctions under governing statutory and regulatory authorities based upon the evidence before the ALJ, i.e., the ALJ resolves these issues de novo. Rustom Ali, Jahan Ferdous, & Scottsdale Med. Lab., DAB No. 2016 at 21 (2006) (citing Emerald Oaks, DAB No. 1800 at 16 (2001)).
B. Issue
Whether there is a basis for the revocation of Vitas’ CLIA certificate.
C. Undisputed Findings of Fact, Conclusions of Law, and Analysis
My conclusions of law are set forth in bold text followed by my findings of undisputed facts and analysis.
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1. Summary judgment is appropriate.
Generally, under CLIA, the Secretary may suspend, revoke, or limit a laboratory’s CLIA certificate after reasonable notice and an opportunity for a hearing for any of the reasons listed in 42 U.S.C. § 263a(i)(1). Suspension, revocation, or limitation of a laboratory’s CLIA certificate may occur prior to a hearing under the circumstances specified in 42 U.S.C. § 263a(i)(2) but those conditions do not exist in this case.
The CLIA regulations provide that a laboratory or prospective laboratory that is dissatisfied with an initial determination of CMS, which includes the suspension, limitation, or revocation of the laboratory’s CLIA certificate, may request a hearing conducted in accordance with 42 C.F.R. pt. 498. 42 C.F.R. § 493.1844(a)(1)-(2).
A hearing on the record, also known as an oral hearing, is required under 42 C.F.R. pt. 498. Crestview Parke Care Ctr. v. Thompson, 373 F.3d 743, 748-51 (6th Cir. 2004). A party may waive appearance at an oral hearing but must do so affirmatively in writing. 42 C.F.R. § 498.66. In this case, Vitas and Taylor have not waived the right to oral hearing. However, if summary judgment is appropriate, no hearing is required.
Summary judgment is not automatic upon request but is limited to certain specific conditions. Summary judgment is appropriate, and no hearing is required, where either: there are no disputed issues of material fact and the only questions that must be decided involve application of law to the undisputed facts; or the moving party must prevail as a matter of law even if all disputed facts are resolved in favor of the party against whom the motion is made. The Board follows the general approach of the federal courts in evaluating whether summary judgment in lieu of a hearing is appropriate. The movant bears the initial burden of demonstrating that there are no genuine issues of material fact for trial and that the movant is entitled to judgment as a matter of law. When confronted with a properly supported motion for summary judgment, the nonmoving party “may not rest upon the mere allegations or denials of his pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (quoting First Nat’l Bank of Az. v. Cities Serv. Co., 391 U.S. 253, 288 (1968)); see also, Fed. R. Civ. P. 56(c); Ill. Knights Templar Home, DAB No. 2274 at 3-4 (2009); Garden City Med. Clinic, DAB No. 1763 (2001); Everett Rehab. & Med. Ctr., DAB No. 1628 at 3 (1997) (in-person hearing required where nonmovant shows there are material facts in dispute that require testimony); Big Bend Hosp. Corp., DAB No. 1814 at 13 (2002) (in some cases, any factual issue is resolved on the face of the written record because the proffered testimony, even if accepted as true, would not make a difference); Wade Pediatrics, DAB No. 2153 at 16-17 (2008), aff’d, Wade Pediatrics v. Dep’t of Health & Human Servs., 567 F.3d 1202 (10th Cir. 2009). The parties were advised that summary judgment is available in this case and that standards
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that have developed related to Fed. R. Civ. P. 56 would be applied. Prehearing Order ¶ II.D.3.
After careful review of the parties’ pleadings related to summary judgment, the documentary evidence, and the averments of fact by the parties, I conclude that summary judgment is appropriate. There is no genuine dispute of material fact. The issues to be resolved are issues of law.
2. Taylor misrepresented the status of Vitas’ operations when he applied for a CLIA certificate.
3. Taylor’s misrepresentation of the status of Vitas’ operations in the CLIA application is a basis for revocation of Vitas’ CLIA certificate.
4. Vitas’ CLIA certificate is revoked effective the date of this decision.
a. Undisputed Facts
Vitas states in its request for hearing that prior to filing its application for a CLIA certificate of compliance, Vitas had executed a lease for space at 8 W 4th Street, Spencer, Iowa 51301. RFH at 1, P. Ex. 1. I accept Vitas’ assertion as true for purposes of summary judgment. CMS placed in evidence as CMS Ex. 6 a copy of a lease dated April 1, 2017, for 8 W 4th Street, Suite 1, Spencer, Iowa 51301. The parties listed on the lease are E‑Building, LLC as the landlord and Vitas as the tenant. The lease reflects that it was a month-to-month lease with the lease term beginning on April 1, 2017, and ending on May 1, 2017, with automatic renewal until a party gave 30 days notice of termination. According to the lease, Vitas was not entitled to possession of the premises until the beginning of the lease term on April 1, 2017. CMS Ex. 6 at 1. Vitas also states in its request for hearing that the lease at 8 W 4th Street, Spencer, Iowa was unilaterally terminated by the landlord on August 1, 2017. Vitas states, however, that as of September 27, 2017, Vitas had secured a lease at 220 Emerson Place, Suite # 101-B, Davenport, Iowa 52801. RFH at 2. I accept Vitas’ assertions as true for purposes of summary judgment.
Taylor stated in an undated, unsworn statement in response to an email received on August 21, 2017, from Cheryl Dobbe, a CMS representative, that “[t]he facility in Iowa was leased and an application was filed for a CLIA certificate . . . .” Taylor further stated that “[n]o specimens were performed nor billed through this facility as it was not ready to take on that due to the circumstances we faced.” CMS Ex. 5. The parties were advised by the Prehearing Order that “a fact alleged and not specifically denied, may be accepted as true for purposes of a motion or cross-motion for summary judgment.” Prehearing Order ¶ II.D.3. Vitas did not object to CMS Ex. 5 or deny that the information contained in the statement is true. Therefore, it is undisputed that while Vitas had a lease at the
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time the application for a CLIA certificate was filed, no testing was done at the site. Although Taylor did not identify whether he was referring to one or both CLIA applications filed, there is no dispute that no testing was done at the site at any time.
Vitas filed a CLIA application for a certificate of compliance (Form CMS-116) signed and dated on February 27, 2017 (February 2017 Application for Certificate of Compliance). The signature is indecipherable.5 CMS Ex. 10 at 4. Block 1 of the CMS‑116 is completed to show it is an initial application effective February 27, 2017. Vitas’ address is listed as 8 W 4th Street, Spencer, Iowa. Block II is completed to state Vitas was requesting a certificate of compliance.6 CMS Ex. 10 at 1. Block IV was completed to state that the laboratory did testing from 8 a.m. to 8 p.m. Monday through Friday. CMS Ex. 10 at 2. Block VI stated that Vitas estimated it performed 1,000 waived tests annually. Block VIII was completed to state that Vitas estimated it performed 2,000 diagnostic immunology tests, 20,000 chemistry tests, and 10,000 hematology tests annually. CMS Ex. 10 at 3. Documents reflecting Chen’s education, experience, training, and board certification by the American Board of Forensic Toxicology were filed with the application. CMS Ex. 10 at 5-15. Vitas does not dispute that this application was filed. Contrary to the representations in the application, there is no dispute that testing was never done by Vitas at a laboratory at 8 W 4th Street in Spencer, Iowa.
Taylor signed a second CMS-116 on June 9, 2017. Block I of the form was marked to indicate that the application was for a change in certificate type, effective June 9, 2017 (June 2017 Application for Certificate of Accreditation). The facility address was listed as 8 W 4th Street, Spencer, Iowa, 51301. Block II of the form was completed to indicate that Vitas was requesting a certificate of accreditation through COLA.7 CMS Ex. 8 at 1. Block IV was completed to show that laboratory testing was performed from “8” to “8” Sunday through Saturday. CMS 8 at 2. Block VI was completed to show that an estimated 1,000 waived tests were performed annually. CMS Ex. 8 at 3. Block VIII was completed to show that Vitas performed an estimated 2,000 diagnostic immunology tests, 10,000 chemistry tests, and 3,000 hematology tests annually. CMS Ex. 8 at 3. With the application was a letter from COLA dated June 9, 2017, which states that Vitas is
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enrolled in the COLA laboratory accreditation program. CMS Ex. 8 at 5. Documents reflecting Chen’s education, experience, and his certification by the American Board of Forensic Toxicology were also filed with the application. CMS Ex. 8 at 6-11. Vitas’ owner Taylor does not dispute that he completed, signed, and filed the CMS-116. Contrary to the representations in the application, there is no dispute that testing was never done by Vitas at a laboratory at 8 W 4th Street. RFH, P. Br.
Vitas presented a statement of the expected testimony of Billy Joe Taylor, Vitas’ owner. The statement indicates that because Taylor is currently under federal criminal indictment he will not cooperate and provide a declaration or affidavit for my consideration in this case and the related cases. However, it is expected that, if he was called to testify, he would testify that:
- Vitas provided accurate information in all CMS-116 forms it filed.
- A laboratory owned by Vitas Laboratory, LLC, existed at 1429 Hazel Street, Carthage, Missouri 645368 when the CMS-116 application for a CLIA certificate was filed.
- On or before the CMS-116 application was filed in this case, Vitas had a lease agreement in place for 8 W 4th Street, Spencer, Iowa, and the agreement was subsequently reduced to writing.
I accept Taylor’s expected testimony as true for purposes of summary judgment. The statement regarding a Vitas laboratory in Carthage, Missouri is not relevant to this case, but will be considered as relevant in the related cases (C-18-521, C-18-770), which involve the revocation of the CLIA certificate for that laboratory. Vitas’ assertion that it provided accurate information on all CMS-116 forms it filed is accepted as true for purposes of summary judgment. However, as explained in the analysis, the allegation is not that Vitas provided false information in its CMS-116 applications, but rather, that Vitas misrepresented that a laboratory existed as suggested by its February 2017 Application for Certificate of Compliance and the June 2017 Application for Certificate of Accreditation. (CMS Exs. 8, 10).
CMS placed in evidence the written direct testimony of Kristine Rotzoll, a surveyor for the Iowa CLIA program (state agency). Surveyor Rotzoll states that on February 28, 2017, her office received an initial application for a certificate of compliance from Vitas – the February 2017 Application for Certificate of Compliance. Vitas’ application listed
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8 W 4th Street, Spencer, Iowa as its address. She testified that on April 11, 2017, she contacted a representative of Vitas and explained the survey process that was expected to occur in the next three months. On May 3, 2017, she states she sent Vitas the presurvey packet letter in anticipation of the survey. On June 21, 2017, she received an email from the Vitas representative with a new CMS-116 application that requested the certificate type be changed to a certificate of accreditation with COLA – the June 2017 Application for Certificate of Accreditation. She testified that she had concerns about Vitas’ application and communicated the concerns to Ms. Dobbe at CMS on June 21, 2017. On August 3, 2017, she conducted an unannounced complaint survey of Vitas at 8 W 4th Street, Spencer, Iowa with another surveyor. The surveyors determined that Vitas had no laboratory or space equipped to be a laboratory at the address. CMS Ex. 11. Vitas does not dispute that on August 3, 2017, it had no laboratory or space suitable to operate a laboratory at 8 W 4th Street in Spencer, Iowa.
CMS also placed in evidence the written direct testimony of Cheryl Dobbe, a Clinical Laboratory Scientist with CMS. She testified that on February 28, 2017, the Iowa state agency received Vitas’ CMS-116 application for a certificate of compliance for a laboratory at 8 W 4th Street in Spencer, Iowa – the February 2017 Application for Certificate of Compliance. She testified that on April 3, 2017, Vitas was issued a certificate of registration with CLIA No. 16D2126753, effective March 3, 2017. She explained that a certificate of registration authorizes a laboratory to conduct moderate and/or high complexity laboratory testing until the laboratory is determined by a survey to be complying with CLIA regulations. CMS Ex. 12 at 2. After the Iowa state agency received the June 2017 Application for Certificate of Accreditation, the Iowa state agency staff expressed concerns to Ms. Dobbe. On June 23, 2017, she authorized a complaint survey of Vitas’ facility. She testified that Iowa state agency surveyors attempted to conduct the complaint survey but found no laboratory, laboratory equipment, or staff at the laboratory address provided by Vitas in its applications. The surveyors also determined that the space was not suitable for operating a laboratory. Thereafter on August 21, 2017, she notified Taylor and Chen that CMS was considering imposing sanctions. She testified that she carefully considered Vitas’ responses to the August 21, 2017 notice and concluded that Vitas misrepresented the existence of a laboratory in applying for a CLIA certificate. CMS Ex. 12 at 2-3. Therefore, on September 1, 2017, CMS notified Taylor and Chen that sanctions would be imposed, including revocation of Vitas’ CLIA certificate of registration and cancellation of Vitas’ approval to receive Medicare and Medicaid payments. CMS Ex. 12 at 3-4. Vitas does not dispute Ms. Dobbe’s testimony.
b. Analysis
CMS determined to revoke Vitas’ CLIA certificate of registration and notified Taylor and Chen it was doing so in its letters dated September 1, 2017. CMS Ex. 3-4. CMS advised Vitas that the revocation was “based on [Vitas] having submitted false information on its
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CMS-116 application for a CLIA Certificate of Compliance. Specifically, [Vitas’] misrepresentation of the alleged existence of a laboratory.” CMS Exs. 3 at 1; 4 at 1. CMS informed Vitas that revocation of Vitas’ CLIA certificate was pursuant to 42 C.F.R. § 493.1840(a)(1) (misrepresentation), (3) (failure to comply with certificate requirements and performance standards), and (6) (violated or aided and abetted violation of CLIA statutory or regulatory requirements). There are eight bases for suspension, limitation, or revocation of a CLIA certificate established by 42 C.F.R. § 493.1840(a). One of the bases for revocation established by 42 C.F.R. § 493.1840(a) is sufficient for revocation as the eight grounds are listed using the disjunctive “or.” Therefore, I conclude that it is only necessary to address whether there is a basis for revocation pursuant to 42 C.F.R. § 493.1840(a)(1).
Pursuant to CLIA, the Secretary has broad enforcement authority, including the ability to suspend, limit, or revoke the certificate of a laboratory that is out of compliance with one or more requirements for certification. 42 U.S.C. § 263a(h)-(i). The Secretary may also suspend, revoke, or limit a CLIA certificate if the Secretary finds, after reasonable notice and an opportunity for hearing, that a laboratory owner, operator, or employee has been guilty of misrepresentation in obtaining the CLIA certificate. 42 U.S.C. § 263a(i)(1)(A). The Secretary has delegated authority to CMS to suspend, limit, or revoke any of the five types of CLIA certificates. 42 C.F.R. § 493.1840. Pursuant to 42 C.F.R. § 493.1840(a)(1), CMS may initiate action to suspend, limit, or revoke any CLIA certificate if CMS finds that a laboratory’s owner, operator, or an employee is guilty of misrepresentation in obtaining a CLIA certificate. The standard of proof is a preponderance of the evidence, i.e., the evidence shows it is more likely than not that the laboratory’s owner or operator is guilty of misrepresentation. Edison, DAB No. 1713.
The statute, 42 U.S.C. § 263a, the regulations at 42 C.F.R. pt. 493, and the regulatory history provide no definition of the term misrepresentation. 57 Fed. Reg. 7218, 7236-37, 7241 (Feb. 28, 1992); 79 Fed. Reg. 25,436, 25,480 (May 2, 2014). Black’s Law Dictionary provides two definitions:
1. The act of making a false or misleading assertion about something, [usually] with the intent to deceive. The word denotes not just written or spoken words but also any other conduct that amounts to a false assertion.
2. The assertion so made; an assertion that does not accord with the facts.
Black’s Law Dictionary 1022 (8th ed. 2004). Merriam-Webster Dictionary provides two definitions, only the first of which is relevant in this context:
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1. [T]o give a false or misleading representation of usually with an intent to deceive or be unfair.
Merriam-Webster Dictionary, merriam-webster.com/dictionary/misrepresentation (last visited July 29, 2022).
An appellate panel of the Board concluded in Clinical Immuno Diagnostic Lab, Inc., that CMS need not show that a misrepresentation was intentional to revoke pursuant to 42 U.S.C. § 263a(i)(1). The Board found that Congress imposed no requirement of intent related to revocation based on misrepresentation under 42 U.S.C. § 263a(i)(1)(A) and 42 C.F.R. § 493.1840(a)(1) and that a careless or negligent misrepresentation is a sufficient basis for revocation of a CLIA certificate. Clinical Immuno Diagnostic Lab, Inc., DAB No. 2036 at 11-14 (2006).
The issue to be resolved under 42 C.F.R. § 493.1840(a)(1) is whether the evidence shows it was more likely than not that there was a misrepresentation in obtaining a CLIA certificate for Vitas.
There is no dispute that the February 2017 Application for Certificate of Compliance was signed and submitted to CMS. There is no dispute that the CMS-116 was received by CMS on February 28, 2017. The February 2017 Application for Certificate of Compliance contained the following representations:
- The physical location of Vitas’ laboratory was 8 W 4th Street, Spencer, Iowa;
- Laboratory testing was performed 8:00 a.m. to 8:00 p.m., Monday through Friday;
- Vitas estimated it performed 1,000 waived tests annually; and
- Vitas had estimated annual test volumes of 2,000 in diagnostic immunology, 10,000 in hematology, and 20,000 in chemistry.
CMS Ex. 10 at 1-3. There is no dispute that Vitas never conducted laboratory testing of human specimens at 8 W 4th Street in Spencer, Iowa. CMS Ex. 5. Therefore, the amount of testing done and when it was done at Vitas misrepresent that Vitas was operating as a laboratory. Even if one accepts the position discussed hereafter that a laboratory need not be testing specimens when an initial application for a CLIA certificate is filed, the laboratory’s failure to begin testing when it received a certificate of registration that allows testing is a misrepresentation regarding the laboratory’s readiness to begin testing.
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I conclude CMS has made a prima facie showing of a basis to revoke Vitas’ CLIA certificate of registration pursuant to 42 C.F.R. § 493.1840(a)(1) because the Vitas applications for CLIA certificates misrepresented that Vitas was operating as a laboratory or was prepared to operate as a laboratory when a CLIA certificate was issued.
Vitas argues that the CMS motion for summary judgment should be denied.9 Vitas asserts that all the information contained on the CMS-116 was accurate and that Vitas had an agreement to lease space at 8 W 4th Street in Spencer, Iowa that was subsequently reduced to writing. P. Br. at 2. I have accepted these assertions of fact as true for purposes of summary judgment. Vitas also asserts that the attestation that must be made when an application is filed is prospective in that it requires attestation that the laboratory will be operated in accordance with CLIA regulations. P. Br. 2. I assume that by this argument Vitas’ position is that Vitas need not be complying with CLIA requirements when an application for a CLIA certificate is filed. Vitas offers no authority (law) in support of this position. In considering summary judgment in this case, however, I have favorably inferred for Vitas that it was not necessary, and probably not permissible, for Vitas to have been engaging in testing human specimens when the February 2017 Application for Certificate of Compliance was filed.
The Secretary and CMS may only issue one of the five types of CLIA certificates to a laboratory under CLIA if the laboratory meets the requirements for a certificate established by 42 U.S.C. § 263a(d). 42 U.S.C. § 263a(c). Congress was specific that the laboratory or accrediting body must submit an application:
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(ii) that describes the characteristics of the laboratory examinations and other procedures performed by the laboratory including—
(I) the number and types of laboratory examinations and other procedures performed,
(II) the methodologies for laboratory examinations and other procedures employed, and
(III) the qualifications (educational background, training, and experience) of the personnel directing and supervising the laboratory and performing the laboratory examinations and other procedures . . . .
42 U.S.C. § 263a(d)(1)(A)(ii) (emphasis added). The plain language of the statute controls its interpretation. Congress did not provide that a laboratory seeking an initial certification under CLIA may simply be planning to set up and operate a laboratory for testing samples derived from humans. The language of the statute that I have identified by bolding, strongly supports an interpretation that a laboratory must be set up and operating at some level when the initial application for a CLIA certificate is filed with CMS. However, such an interpretation is at odds with the plain language of 42 U.S.C. § 263a(b):
No person may solicit or accept materials derived from the human body for laboratory examination or other procedure unless there is in effect for the laboratory a certificate issued by the Secretary under this section applicable to the category of examinations or procedures which includes such examination or procedure.
Subsection 263a(b) is clear that no testing of a human specimen may be done without a CLIA certificate. The possible inconsistency between the two statutory provisions need not be resolved in this case. CMS may not require that a laboratory violate either provision of CLIA, and neither may I.
The February 2017 Application for Certificate of Compliance is clearly marked to show it is an initial application. CMS Ex. 10 at 1. Based on the statutory prohibition on conducting testing of human samples without a CLIA certificate and the fact that the February 2017 Application for Certificate of Compliance was Vitas’ initial application, I infer in Vitas’ favor that it could not have lawfully tested human samples before the February 2017 Application for Certificate of Compliance was filed, and a certificate of registration was issued by CMS. Therefore, I also infer for Vitas on summary judgment
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that the February 2017 Application for Certificate of Compliance did not constitute an intentional or negligent misrepresentation that Vitas was operating and conducting testing of human specimens as indicated in that application. At most, the February 2017 Application for Certificate of Compliance represented that Vitas had laboratory space and intended to proceed with testing as indicated in the application once a CLIA certificate was issued. I accept, for purposes of summary judgment, that Vitas had at least an oral agreement for a lease at 8 W 4th Street. RFH at 1; P. Ex. 1. I also accept the representations of Vitas that all the information provided in the February 2017 Application for Certificate of Compliance was accurate, at least at the time the application was submitted.
If the CLIA statute is interpreted to only permit a laboratory to start testing human samples after a certificate of registration is issued by the Secretary or CMS, there is no dispute that CMS issued a certificate of registration to Vitas on April 3, 2017, with CLIA No. 16D2126753, effective March 3, 2017; but Petitioner did not begin operations. Once the certificate of registration was effective, Vitas was authorized to conduct moderate and/or high complexity laboratory testing pending a survey by CMS to determine whether Vitas was compliant with CLIA conditions and standards and eligible for a certificate of compliance or a certificate of accreditation. CMS Ex. 12 at 2; 42 C.F.R. §§ 493.2, 493.1771-.1773, 493.1777-.1780. It is clear from the regulations that to pass an initial inspection for a certificate of compliance (42 C.F.R. § 493.1777(a)) or (if one is conducted) a validation inspection for a certificate of accreditation (42 C.F.R. § 493.1780(a)), the laboratory must be operating and open for CMS personnel or agents to conduct the inspection and to determine whether the laboratory is operating in accordance with CLIA. 42 C.F.R. §§ 493.1777(d), 493.1780(d). Pursuant to 42 C.F.R. § 493.1777(a)(1), CMS cannot issue a certificate of compliance until the initial survey is conducted and the laboratory is determined to be complying with CLIA requirements. Under 42 C.F.R. § 493.1780, CMS may issue a certificate of accreditation without a validation inspection, but adverse action against the certificate of accreditation is authorized if the laboratory is not operating in compliance with CLIA. 42 C.F.R. §§ 493.563-.569, 493.1780(c). Therefore, the regulations provide notice that a laboratory with a CLIA certificate of registration that is filing an application for a CLIA certificate of compliance or for a certificate of accreditation must be open and operating and prepared for inspection by CMS or the state agency.
The CMS August 21 and September 1, 2017 notices (CMS Exs. 1-4) suggest the basis for revocation was a misrepresentation in the February 2017 Application for Certificate of Compliance that Vitas existed as a laboratory. However, careful reading of the August 21 and September 1, 2017 notices reveals that the misrepresentation that is the basis for revocation was Vitas’ course of conduct, including the February 2017 Application for Certificate of Compliance, the June 2017 Application for Certificate of Accreditation, and Vitas’ undisputed failure to begin and continue testing at 8 W 4th Street, Spencer, Iowa between the time Vitas was issued its CLIA certificate of registration in April 2017
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and the survey on August 3, 2017. Taylor signed a second CMS-116 on June 9, 2017, requesting a change in certificate type to a certificate of accreditation through COLA, to be effective June 9, 2017. The form stated that Vitas had a physical location at 8 W 4th Street, Spencer, Iowa 51301. CMS Ex. 8 at 1. The June 2017 application was completed to state that the laboratory was performing testing from “8” to “8” Sunday through Saturday. CMS Ex. 8 at 2. The form was completed to show that an estimate of 1,000 waived tests were performed annually. CMS Ex. 8 at 3. The form also stated that Vitas performed an estimated 2,000 diagnostic immunology tests, 10,000 chemistry tests, and 3,000 hematology tests annually. CMS Ex. 8 at 3. Taylor does not dispute that he completed, signed, and filed the CMS-116 on about June 9, 2017. Vitas does not deny that after it was issued the certificate of registration on April 3, 2017, Vitas could have been conducting moderate and/or high complexity testing. However, it is not disputed that Vitas was doing no testing as of June 9, 2017. The application submitted by Taylor for a change of certificate clearly misrepresented that Vitas was operating as a laboratory under its CLIA certificate of registration and ready for inspection by CMS or its agent. There is also no dispute that Vitas was still not operating as a clinical laboratory on August 3, 2017, when the survey was attempted.
Vitas also argues that there are due process concerns because CMS argues different grounds for revocation in its motion than those cited by the notices sent to Taylor and Chen. P. Br. at 3. This decision on de novo review is based on revocation pursuant to 42 U.S.C. § 263a(i)(1)(A) and 42 C.F.R. § 493.1840(a)(1), and the misrepresentation cited as grounds for revocation by CMS in the August 21, 2017 notices (CMS Exs. 1-2) and the September 1, 2017 notices (CMS Ex. 3-4). I conclude that CMS provided Taylor and Chen with adequate notice of what to defend in this case and there is no procedural due process issue related to notice.
The undisputed facts establish a basis for revocation of Vitas’ CLIA certificate of registration pursuant to 42 C.F.R. § 493.1840(a)(1). CMS prevails as a matter of law even with the factual inferences drawn in Vitas’ favor.
5. As a matter of law, Vitas’ owners and operators are prohibited from owning, operating, or directing a laboratory subject to CLIA for two years beginning with the date of this decision based on the revocation of Vitas’ CLIA certificate of registration. 42 U.S.C. § 263a(i)(3).
a. Undisputed Facts
There is no dispute that Billy Taylor was Vitas’ owner. CMS Exs. 5; 6 at 4.
There is also no dispute that Michael Chen, Ph.D., was listed as Vitas’ laboratory director on both the February 2017 Application for Certificate of Compliance (CMS Ex. 10 at 1,
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5-15) and the June 2017 Application for Certificate of Accreditation (CMS Ex. 8 at 1, 5‑11).
CMS notified Taylor and Chen by letters dated August 21, 2017, that CMS proposed to revoke Vitas’ CLIA certificate. CMS informed Taylor and Chen that if Vitas’ CLIA certificate is revoked, they are prohibited from owning, operating, or directing a laboratory for at least two years from the date of revocation pursuant to 42 U.S.C. § 263a(i)(3) and 42 C.F.R. § 493.1840(a)(8). CMS Exs. 1 at 2, 2 at 2.
CMS notified Taylor and Chen by letters dated September 1, 2017, that Vitas’ CLIA certificate was revoked pursuant to 42 C.F.R. § 493.1840(a)(1), (3), (6) and (e), for two years based on the alleged misrepresentation in applying for a CLIA certificate. CMS informed Taylor and Chen that they were prohibited from owning, operating, or directing a laboratory for at least two years beginning with the date of revocation of Vitas’ CLIA certificate pursuant to 42 U.S.C. § 263a(i)(3) and 42 C.F.R. § 493.1840(a)(8). CMS Exs. 3 at 1-2; 4 at 1-2.
b. Analysis
In addition to sanctions directed against laboratories, CLIA provides the following with respect to the owners and operators of laboratories that have had their CLIA certificate revoked:
No person who has owned or operated a laboratory which has had its certificate revoked may, within 2 years of the revocation of the certificate, own or operate a laboratory for which a certificate has been issued under this section . . . .
42 U.S.C. § 263a(i)(3). The statute applies to the owners or operators of a laboratory that had its CLIA certificate revoked. The prohibition lasts for two years and runs from the effective date of the revocation of the laboratory’s CLIA certificate. The prohibition applies only to owning or operating or directing another laboratory with a CLIA certificate. The prohibition is triggered by the revocation of a CLIA certificate. The statute does not grant the Secretary or CMS discretion not to apply this provision of the statute to owners and operators, except in a limited circumstance not presented in this case.
The Secretary’s regulations implementing CLIA do not include any express provision implementing or imposing the two-year prohibition against an owner or operator. However, the regulations provide that CMS may suspend, limit, or revoke a laboratory’s CLIA certificate if it finds that the owner or operator has, “[w]ithin the preceding two‑year period, owned or operated a laboratory that had its CLIA certificate revoked.
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(This provision applies only to the owner or operator, not to all of the laboratory’s employees.).” 42 C.F.R. § 493.1840(a)(8).
The two-year prohibition is not a sanction authorized by 42 C.F.R. §§ 493.1806-.1807.
The two-year prohibition is also not an initial determination that triggers a right to request a hearing before an ALJ and subsequent administrative and judicial review. 42 C.F.R. § 493.1844(a)-(b).10
Therefore, CMS generally has no discretion in applying the two-year prohibition of 42 U.S.C. § 263a(i)(3), other than identifying who are owners and operators subject to the prohibition.11 Further, no statutory or regulatory provisions grant an owner or operator of a laboratory that had its CLIA certificate revoked a right to ALJ review of the CMS determination that they are owners and operators for purposes of application of the two‑year prohibition. However, these conclusions do not mean that there is no need in this proceeding for me to determine who are Vitas’ owners and operators who have a right to ALJ review. The determination as to who are Vitas’ owners and operators with a right to ALJ review also necessarily impacts the determination as to who are owners and operators subject to the two-year prohibition of 42 U.S.C. § 263a(i)(3).
The plain language of 42 U.S.C. § 263a(i)(1)(C) provides a hearing to an “owner or operator” to challenge the revocation of their laboratory’s CLIA certificate. The statute provides:
[T]he certificate of a laboratory issued under this section may be suspended, revoked, or limited if the Secretary finds, after reasonable notice and opportunity for hearing to the owner or operator of the laboratory, that such owner or operator or any employee of the laboratory –
* * * *
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(C) has failed to comply with . . . the standards prescribed by the Secretary under subsection (f) . . . .
42 U.S.C. § 263a(i)(1)(C) (emphasis added).
Appeal procedures for CLIA cases are established by 42 C.F.R. § 493.1844. The procedures are available to all “laboratories and prospective laboratories that are dissatisfied with any initial determination under paragraph (b) of this section.” 42 C.F.R. § 493.1844(a)(1). While the regulatory language suggests that the right to request a hearing is with the laboratory, the statute is clear that it is the owners and operators of the laboratory who have the right to request a hearing. To construe 42 C.F.R. § 493.1844(a) consistent with the statute, the term “laboratory” in the regulation should be read to mean that the owners and operators of the laboratory are the individuals who have the right to request an ALJ hearing.
Pursuant to 42 C.F.R. § 493.1844(b)(1), a CMS determination to suspend, limit, or revoke a laboratory’s CLIA certificate is an initial determination that is subject to ALJ review under 42 C.F.R. § 493.1844(a)(2). Therefore, an owner or operator of a CLIA‑certified laboratory has a right to an ALJ hearing if CMS determines to suspend, limit, or revoke the laboratory’s CLIA certificate. If ALJ review is requested by an owner or operator, the ALJ may review the CMS initial determination to suspend, limit, or revoke the laboratory’s CLIA certificate. If the facts of a given case raise issues as to who are the owners and operators who are entitled to exercise the right to hearing, such issues must be resolved in the hearing process to determine the proper parties. It follows that, if an ALJ concludes after an inquiry that an individual is not an “owner or operator” within the meaning of CLIA, the individual is not entitled to request a hearing to challenge a CMS initial determination to limit, suspend, or revoke a CLIA certificate. However, if it is found that the individual is not an owner or operator for purposes of requesting a hearing, CMS and the Secretary should arguably not conclude that the individual is an “owner or operator” for purposes of application of the two-year prohibition.
My conclusions in this regard do not suggest that owners and operators have a right to an ALJ hearing to challenge the imposition of the two-year ban of 42 U.S.C. § 263a(i)(3). Rather, I recognize the owners’ and operators’ statutory right to request a hearing to contest the CMS findings of deficiencies and whether they are responsible for any alleged regulatory violations, and indirectly, the application of the two-year prohibition. I also recognize that it is CMS that will determine whether to apply 42 C.F.R. § 493.1840(a)(8) to limit, suspend, or revoke the CLIA certificate of another laboratory owned or operated by one who is determined by CMS to be subject to the two-year ban of 42 U.S.C. § 263a(i)(3), albeit a determination which is subject to ALJ, Board, and judicial review.
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There is no dispute that Taylor was Vitas’ owner. CMS Exs 5; 6 at 4. Under CLIA and the regulations, Taylor had the right to request review of the CMS determination that there was a basis for revocation of Vitas’ CLIA certificate. CLIA regulations define an owner as:
[A]ny person who owns any interest in a laboratory except for an interest in a laboratory whose stock and/or securities are publicly traded. (That is e.g., the purchase of shares of stock or securities on the New York Stock Exchange in a corporation owning a laboratory would not make a person an owner for the purpose of this regulation.)
42 C.F.R. § 493.2. Based upon his status as owner of Vitas, Taylor had the right to request ALJ review of the CMS initial determination to revoke Vitas’ CLIA certificate. Furthermore, 42 U.S.C. § 263a(i)(3) also applies to Taylor, and he is prohibited from owning, operating, or directing another CLIA laboratory within two years of the date of the revocation of Vitas’ CLIA certificate of registration. This conclusion is consistent with the intent of Congress as discussed hereafter.
There is also no dispute that Chen was Vitas’ laboratory director. Under the Secretary’s regulations, a laboratory director is only an operator if certain conditions are met. The CLIA statute refers to owners and operators as having a right to a hearing and as being subject to the two-year ban. The statute does not refer to laboratory directors. 42 U.S.C. § 263a(i)(3). However, the Secretary has by regulation, specifically 42 C.F.R. § 493.2, expanded the definition of the term operator to include laboratory directors who meet the criteria of or have equivalent duties and responsibilities of an operator. Based on this regulatory definition of operator, CMS has taken the position that the two-year ban of 42 U.S.C. § 263a(i)(3) applies equally to laboratory directors who fit the definition of operator.
Because those laboratory directors who meet the definition are considered operators, an operator’s statutory right to a hearing must logically extend to those laboratory directors who are defined as operators to avoid an obvious inconsistency arising between the regulations and the statute. It would be inconsistent, for example, for CMS to argue on one hand that a laboratory director is an operator and subject to the two-year ban, but, on the other hand, not entitled to request a hearing as an operator. In summary, an individual who is an operator or a laboratory director who has equivalent duties and responsibilities as an operator has a right to a hearing on whether a laboratory’s CLIA certificate should be revoked. In the hearing process, an owner, operator, or laboratory director may arguably raise any issues regarding whether he or she is a proper party to the proceedings and whether he or she is subject to my jurisdiction. An individual who is not an operator or its equivalent does not have a right to a hearing and is not a proper party
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but should also not be treated as being subject to the two-year prohibition of 42 U.S.C. § 263a(i)(3).
CLIA’s legislative history shows that Congress intended to apply the two-year ban to owners and operators whose conduct “precipitated the revocation” of the CLIA certificate or if they bore “ultimate responsibility for the conduct” that led to the revocation. The CLIA statute includes no specific definition of the term operator. According to 42 U.S.C. § 263a(i)(3), “[n]o person who has owned or operated a laboratory which has had its certificate revoked” may own or operate another laboratory for two years. The plain language of the statute could be read to apply to all present and past owners and operators of a laboratory that has its CLIA certificate revoked, without consideration of whether they were owners or operators at the time of the revocation and without consideration of whether their conduct caused the revocation of the laboratory’s CLIA certificate. However, such a literal interpretation does not seem reasonable. Because the plain language of the statute may not reflect the intent of Congress, review of the legislative history of the statute is appropriate in determining how it should be applied. U.S. v. Five Gambling Devices, 346 U.S. 441 (1953); U.S. v. Thirty-Seven (37) Photographs, 402 U.S. 363 (1971) (court will look to legislative history to construe a statute and avoid constitutional questions). The CLIA legislative history includes the following text of the Congressional committee related to the two-year ban of 42 U.S.C. § 263a(i)(3):
The Committee intends that an owner or operator whose conduct has precipitated a revocation not be allowed simply to begin operating a new or existing laboratory during the period of revocation, when such person bore ultimate responsibility for the conduct giving rise to the revocation.
Pub. L. No. 100-578, 102 Stat. 2903 (1988); H.R. Rep. No. 100-899 at 35. The committee clearly intended to prevent owners and operators who failed to properly administer a CLIA laboratory, leading to revocation of that laboratory’s CLIA certificate, from simply opening another laboratory. The language of the above-quoted text further indicates that the committee intended to apply the two-year ban to owners and operators when their conduct “precipitated a revocation” of the CLIA certificate or they bore “ultimate responsibility for the conduct” that led to the revocation.
I conclude it is appropriate and necessary to consider whether Chen was an operator to determine whether he had the right to request a hearing in this case. Chen’s status as an operator also controls whether he should be subject to the application of 42 U.S.C. § 263a(i)(3). Because the Secretary’s regulations at 42 C.F.R. pt. 493 and 42 U.S.C. § 263a(i)(3) do not provide any due process such as notice and an ALJ hearing related to the application of the two-year prohibition, I conclude that it is also in the interest of fairness to address the collateral consequence of my determination that there was a basis to revoke Vitas’ CLIA certificate, i.e., the application of the two-year prohibition of
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42 U.S.C. § 263a(i)(3). Authority is found in the federal district courts for exercising supplemental or ancillary jurisdiction over other claims to do full justice when those claims arise in the same case and controversy as claims over which the district court has jurisdiction.
A federal court’s ancillary jurisdiction, which is based on the practical need to protect legal rights or effectively to resolve an entire logically entwined lawsuit, may extend to claims having a factual and logical dependence on the primary lawsuit, but that primary lawsuit must contain an independent basis for federal jurisdiction; the court must have jurisdiction over a case or controversy before the court may assert jurisdiction over ancillary claims. Ancillary jurisdiction generally is made available to litigants in a defensive posture who would otherwise be prevented or greatly burdened in adequately protecting their interests.
32A Am. Jur. 2d Federal Courts § 582 (2022) (footnotes omitted); see, e.g., 28 U.S.C. § 1367.
In this case, the CMS notices clearly reflect that CMS intends to apply the two-year prohibition of 42 U.S.C. § 263a(i)(3) to both Taylor and Chen. I have authority to review the CMS initial determination to revoke. Based on my analysis, application of the two‑year prohibition to Chen would be contrary to the intent of Congress, the Secretary’s regulations, and would be fundamentally unfair.
Whether Chen had a right to request an ALJ hearing and 42 U.S.C. § 263a(i)(3) applies to Chen is easily determined because the prohibition applies to a laboratory director only if he or she meets the definition of being an operator. The regulations define “operator” as:
[T]he individual or group of individuals who oversee all facets of the operation of a laboratory and who bear primary responsibility for the safety and reliability of the results of all specimen testing performed in that laboratory. The term includes –
(1) A director of the laboratory if he or she meets the stated criteria . . . .
42 C.F.R. § 493.2 (emphasis added). The “stated criteria” for a laboratory director to be considered an operator are those criteria described in the introductory sentence of the above-quoted section, i.e., whether a person oversaw all facets of the operation of the laboratory and bore primary responsibility for the safety and reliability of the results of
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specimen testing performed in the laboratory. Sentinel Med. Labs., Inc., DAB No. 1762 at 13 (2001), aff’d, Teitelbaum v. Health Care Fin. Admin., 32 F. App’x 865 (9th Cir. 2002), reh’g denied, No. 01-70236 (9th Cir. May 22, 2002); Sol Teitelbaum, M.D., DAB No. 1849 at 8 n.7 (2002). It is a condition-level requirement that a CLIA-certified laboratory have a qualified laboratory director who is required to assume oversight and responsibility for the laboratory and the results of its testing. 42 C.F.R. §§ 493.1403, 493.1405, 493.1407, 493.1441, 493.1443, and 493.1445. Thus, the regulations create a rebuttable presumption that a laboratory director is an operator of the laboratory within the meaning of the regulations and CLIA.
Therefore, to determine whether Chen was an “operator” within the meaning of 42 U.S.C. § 263a(i)(3) for purposes of determining whether he has the right to request a hearing and whether the two-year ban applies to him, it is necessary to consider whether his conduct “precipitated the revocation” of Vitas’ CLIA certificate or whether he bore “ultimate responsibility for the conduct” that led to the revocation. The basis for revocation in this case is that it is undisputed that there was no laboratory, and its existence was misrepresented in the application process. Because there was no laboratory and no testing of human specimens, it was impossible for Chen to have any responsibility for overseeing all facets of laboratory operations and the safety and reliability of the testing of specimens. Accordingly, Chen could not be an operator within the meaning of the regulations, he had no right under the statute or regulations to request an ALJ hearing to challenge the CMS initial determination to revoke, and he is not subject to the application of 42 U.S.C. § 263a(i)(3) as a matter of law.
III. Conclusion
For the foregoing reasons, Vitas’ CLIA certificate is revoked, effective the date of this decision. Billy Taylor is subject to the two-year prohibition of 42 U.S.C. § 263a(i)(3).
Endnotes
1 As explained later, CMS issued Petitioner a certificate of registration rather than a certificate of compliance and it was the certificate of registration that was revoked.
2 The request for hearing does not reflect that it was filed on behalf of or at the request of Taylor. However, as explained later in this decision, under CLIA, a laboratory owner and operator have the right to request a hearing rather than the laboratory. I infer that Taylor is the real party in interest.
3 The document filed as CMS Ex. 12, the written direct testimony of Cheryl Dobbe, is mislabeled as CMS Ex. 11.
4 Pub. L. No. 100-578, § 2, 102 Stat. 2903, 2903-15 (1988) (amending sec. 353 of the Public Health Service Act, Pub. L. No. 78-410, 58 Stat. 682 (1944) (as added by the Clinical Laboratory Improvement Act of 1967, Pub. L. No. 90-174, § 5, 81 Stat. 533, 536-39 (1967))) (codified at 42 U.S.C. § 263a).
5 CMS argues that the signature is Chen’s. However, CMS does not explain how that was determined. CMS Br. at 2.
6 There is no option in Block II that permits one to request a certificate of registration.
7 COLA refers to the Commission on Office Laboratory Accreditation, which is a CMS‑recognized accrediting organization. CMS Ex. 12 at 2-3 ¶ 12.
8 The existence of a Vitas Laboratory in Carthage, Missouri, is the subject of two other cases currently before me, C-18-521 and C-18-770.
9 Vitas argues that the CMS motion for summary judgment should be denied because it was not timely filed as required by the Prehearing Order. P. Br. at 1. However, Vitas overlooks the facts that the prehearing schedule was extended. The last extension was granted by amending the date of the Prehearing Order to February 16, 2018. Therefore, CMS had until July 16, 2018, to file its motion for summary judgment and CMS did so on that date. Therefore, the CMS motion was not untimely. Vitas also argues that CMS filed a combined prehearing brief and motion for summary judgment in violation of the Prehearing Order paragraph II.D.3. The title of the CMS pleading describes the filing as both a prehearing brief and a motion for summary judgment. However, the brief addresses only summary judgment. The purpose of the brief is clear based on the introduction and its discussion of the standards for deciding a case on summary judgment. The brief is not confusing and the fact the title is incorrect is not grounds to reject the motion under the provisions of the Prehearing Order. I find no prejudice to Vitas based on the incorrect title of the CMS pleading and Vitas has identified none. CMS effectively waived the filing of a prehearing brief.
10 If a laboratory’s CLIA certificate is revoked because its owner or operator is subject to the two-year prohibition, revocation of the laboratory’s CLIA certificate on that basis would trigger the right to a hearing. 42 C.F.R. § 493.1844(a)(1), (b)(1). But that is not the situation in this case.
11 There is no question that CMS has discretion to revoke a CLIA certificate under 42 C.F.R. § 493.1840(a)(8).
Keith W. Sickendick Administrative Law Judge
