SUBJECT:

Millennium Clinical Laboratories,

Petitioner,

Centers for Medicare & Medicaid Services.

DECISION

Petitioner's certificate to engage in the testing of human specimens, issued pursuant to the Clinical Laboratory Improvement Amendments of 1988 (CLIA), ⁽¹⁾ is revoked. Pursuant to 42 C.F.R. � 493.1844(d)(4)(ii), the revocation of Petitioner's CLIA certificate is effective the date of this decision. ⁽²⁾ By operation of law, the owner and operator of Petitioner are prohibited from owning or operating a CLIA laboratory for two years pursuant to 42 U.S.C. � 263a(i)(3) due to the revocation of Petitioner's CLIA certificate. The two-year prohibition runs from the date of the revocation of the laboratory's certificate pursuant to 42 U.S.C. � 263a(i)(3) - the date of this decision. The civil money penalty (CMP) $10,000 per day proposed by CMS for the period September 14, 2003 until September 17, 2003, the date of suspension of Petitioner's CLIA certificate, is approved. ⁽³⁾

I. PROCEDURAL HISTORY

On November 6, 2003, Dom T. Salamanca, in his capacity as laboratory director and Melis (Gary) Paronyan, in his capacity as owner, requested a hearing on behalf of Petitioner, Millennium Clinical Laboratories, Inc. The request, which was submitted by counsel to the San Francisco Regional Office of the Centers for Medicare & Medicaid Services (CMS), was forwarded to the Departmental Appeals Board (DAB or the Board), Civil Remedies Division (CRD) on November 12, 2003, where it was received on November 18, 2003. The case was assigned to me for hearing and decision on December 15, 2003.

Petitioner's request for hearing is in response to CMS's September 9, 2003 notice of proposed sanctions based on the findings of a survey of Petitioner completed by surveyors from the California Department of Health Services, Laboratory Field Services (the state agency) on August 4, 2003, pursuant to CLIA. CMS alleged in the notice that the state agency surveyors found that Petitioner was out of compliance with four CLIA conditions and that the serious nature of the deficiencies caused a determination of immediate jeopardy to patient health and safety. CMS further alleged that the state agency recommended that Petitioner not be recertified under CLIA and CMS concurred with that recommendation. The notice further advised that CMS was imposing the following sanctions: revocation of Petitioner's CLIA certificate effective November 8, 2003, subject to the filing of a timely request for hearing; suspension of Petitioner's CLIA certificate effective September 17, 2003, based upon a finding of immediate jeopardy and until revocation; a CMP in the amount of $10,000 per day from September 14, 2003, until Petitioner achieved compliance with all condition-level requirements or its CLIA certificate was suspended (i.e., September 17, 2003); a directed portion of a plan of correction requiring Petitioner to provide lists of physicians and clients for purposes of notification; and cancellation of the approval to receive Medicare payments for any laboratory services performed on and after September 14, 2003. ⁽⁴⁾ CMS indicated in its notice that Petitioner's CLIA certificate expired on February 15, 2003, but that it was administratively extended to allow CMS to finalize the sanction action. CMS pointed out that Petitioner's CLIA certificate could not be renewed for Medicare and Medicaid purposes and that all Medicare and Medicaid payments after February 15, 2003, were subject to recoupment as overpayments to Petitioner. In its letter dated October 14, 2003, CMS advised Petitioner that the proposed sanctions had been imposed. Request for Hearing, Exhibit A.

On December 18, 2003, I held a prehearing telephone conference in this case, the substance of which is memorialized in my Order and Notice of Hearing of December 19, 2003. During the prehearing conference, both parties requested an expedited hearing. I discussed briefly with the parties their positions on the right to expedited hearing provided by 42 U.S.C. � 263a(i)(2)(B). The parties were not in agreement as to the meaning of that statutory provision. Petitioner's counsel argued that the 60-day period for hearing was triggered by the suspension of Petitioner's CLIA certificate on September 17, 2003, and that the time for hearing had already passed. CMS argued the 60-day period was triggered by Petitioner's exercise of the opportunity to request a hearing on November 6, 2003. Petitioner's counsel indicated that a proceeding was pending in the federal court regarding the right to expedited hearing and neither party requested any particular relief from me except that I set this case for the first available hearing date. After further discussion with the parties, the case was scheduled for hearing from January 12 through 15, 2004.

On January 9, 2004, another prehearing conference was conducted by telephone, the substance of which is memorialized in my Ruling and Order of January 15, 2004. As a result of that prehearing conference, the hearing was postponed to March 1 through 5, 2004.

I conducted a hearing in this case from March 1 through 5, 2004, in Los Angeles, California. A 1791-page transcript of proceedings has been produced. Petitioner filed a list of errata on April 16, 2004, which will remain with the transcript. CMS offered and I admitted CMS exhibits (CMS Ex.) 1 through 81. Tr. 62. Petitioner offered and I admitted Petitioner's exhibits (P. Ex.) 1 through 56 and 58 through 66. P. Ex. 57 was not admitted. ⁽⁵⁾ Tr. 63-93. CMS called as witnesses Elsa Eleco, one of the state agency surveyors involved, and Mary Jew and Gary Yamamoto of the CMS Regional Office in San Francisco. Petitioner called Steve Huang, a retained expert; William Gardner, a retained expert; Melis (Gary) Paronyan, owner; and Dom T. Salamanca, laboratory director. The parties filed opening post-hearing briefs on May 6, 2004, and reply briefs on May 21, 2004. Petitioner attached to its opening post-hearing brief as exhibit D, a copy of a U.S. Department of Justice press release dated April 21, 2004. Another copy was attached as exhibit D to Petitioner's reply brief. Petitioner requests that I take administrative notice of the press release. The request is granted.

II. FINDINGS OF FACT AND CONCLUSIONS OF LAW

A. FINDINGS OF FACT

The following findings of fact are based upon the admitted exhibits and the transcript of the proceedings. Citations to transcript pages and exhibit numbers related to each finding of fact may be found in the analysis section of this decision.

1. Petitioner's initial CLIA certification was done February 4, 1993, with recertification on April 12, 1995, April 18, 1997, August 24, 1998, and January 5, 2001. At the time of this survey, Petitioner possessed a valid CLIA Laboratory Certificate of Compliance with an effective date of February 16, 2001, and an expiration date of February 15, 2003.

2. Two state agency surveyors conducted an on-site survey of Petitioner on February 14 and 18, 2003, and issued a Statement of Deficiencies (SOD) dated August 4, 2003.

3. CMS notified Petitioner by letter dated September 9, 2003, of its intent to impose sanctions based on the findings of a survey of Petitioner completed on August 4, 2003. The sanctions to be imposed were the following: revocation of Petitioner's CLIA certificate effective November 8, 2003, subject to the filing of a timely request for hearing; suspension of Petitioner's CLIA certificate effective September 17, 2003, based upon a finding of immediate jeopardy; a CMP in the amount of $10,000 per day from September 14, 2003, until Petitioner achieved compliance with all condition-level requirements or its CLIA certificate was suspended (i.e., September 17, 2003); a directed portion of a plan of correction requiring Petitioner to provide lists of physicians and clients for purposes of notification; and cancellation of the approval to receive Medicare payments for any laboratory services performed on and after September 14, 2003.

4. On November 6, 2003, Dom T. Salamanca, in his capacity as laboratory director and Melis (Gary) Paronyan, in his capacity as owner, requested a hearing on behalf of Petitioner.

5. Immediate jeopardy was declared on August 4, 2003, nearly six months after the state surveyors concluded their on-site inspection of the laboratory.

6. The immediate jeopardy determination was made by the surveyors' superior and adopted by the CMS Regional Office.

7. State agency surveyor Eleco's roommate of more than ten years was an employee of Petitioner until October 2002.

8. Mr. Yamamoto of the CMS Regional Office did not concur in the state agency findings based solely upon the opinions of the state agency surveyors, but independently reviewed the statement of deficiencies and the submissions of Petitioner.

9. The state agency surveyors did not take a sample from a cross-section of Petitioner's records but took the sample used for the survey from Petitioner's panic value log.

10. During the period October 1, 2002 through February 12, 2003, Petitioner tested specimens that were suboptimal because they were hemolyzed or involved prolonged contact between red blood cells and serum or they did not satisfy test kit or reagent manufacturers' specifications for the optimal specimen for testing. No comments were on the test reports regarding the fact that the specimens were suboptimal; that testing suboptimal specimens might affect test results; nor did the report indicate which analyte test results might be affected.

11. A test report that does not warn the report user that the tested specimen was suboptimal and that does not alert the user as to which analyte test results might be affected by such testing is misleading with a potential for patient harm.

12. There is no evidence of any actual harm to a patient in this case.

B. CONCLUSIONS OF LAW

1. The request for hearing was timely filed and I have jurisdiction.

2. Violation of one condition-level deficiency can be grounds for a principal sanction, including revocation of a laboratory's CLIA certificate. 42 C.F.R. � 493.1804(b); Edison Medical Laboratories, Inc., DAB No. 1713 (1999).

3. It is well-settled that an immediate jeopardy determination by CMS is not subject to appeal by a provider.

4. The existence of immediate jeopardy has relevance to an administrative law judge's (ALJ) review from an evidentiary perspective in two respects: (1) evidence that surveyors or CMS declared immediate jeopardy reflects their view that an alleged deficiency or deficiencies was severe and warrants revocation; and (2) evidence of an incorrect or unsupported declaration of immediate jeopardy may be considered to reflect negatively upon the credibility of the surveyors and the CMS Regional staff involved.

5. It is appropriate to consider, when placed in issue, whether a declaration of immediate jeopardy is credible from an evidentiary perspective, i.e., whether that declaration is of any probative value or affects the credibility of CMS or state agency witnesses.

6. I will not consider the declaration of immediate jeopardy adverse to Petitioner in this case, or as evidence of the severity of the deficiencies, as I find it not credible.

7. Surveyors use their judgment to determine whether facts constitute a violation; whether a violation has the potential to cause or caused actual patient harm; whether or not the violation is serious enough to be condition-level; and whether or not there is immediate jeopardy and the surveyor's credibility is subject to challenge as to each of these judgments.

8. There is no rule or principle of law that requires blind acceptance of a surveyor's observations and opinions. Surveyors' opinions and testimony may be challenged on grounds that they are not based upon sufficient facts or data; or are not the product of reliable principles and methods; or the surveyor did not apply principles and methods reliably to the facts of the case. State agency and CMS surveyors may also be challenged as fact witnesses based on inability or poor ability to perceive, faulty observation or perception, bias, and any of numerous other grounds that might establish that their rendition of facts at hearing is erroneous.

9. The evidence does not establish that Surveyor Eleco had an actual conflict of interest or acted out of impermissible bias against Petitioner, but there is an appearance of a conflict of interest based upon Ms. Eleco's roommate's recent employment with Petitioner.

10. The appearance of a conflict of interest does not require a conclusion that the survey of Petitioner was invalid for two reasons: (1) my review of whether or not deficiencies existed at Petitioner is de novo; and (2) this is not a case where survey findings are solely dependent upon Ms. Eleco's observations and conclusions; rather, there is a large volume of documentary evidence from Petitioner, the testimony of Mr. Yamamoto, and the testimony of Petitioner's witnesses to consider.

11. To attenuate any possible taint based on the appearance of a conflict in this case, I will not give probative value to the opinions Ms. Eleco expressed in testimony or the conclusions and opinions expressed by her in documentary evidence.

12. There is nothing in CLIA or the implementing regulations that requires CMS or its agent to follow a particular survey protocol or procedure based upon the type of inspection or survey being performed.

13. The State Operations Manual (SOM) does not require that a surveyor select an entire survey sample representing a cross-section of laboratory operations before beginning assessment and, if a surveyor determines, based on a partial sample, that there is a condition-level deficiency, the SOM does not require that the surveyor continue sampling. The SOM provides surveyors specific and detailed guidance on organizing and conducting a survey, but it is not an inflexible tool and allows the surveyor discretion in executing the survey protocol.

14. Petitioner has no due process rights associated with the protocol or procedures surveyors use for selecting the sample to be reviewed.

15. CMS or the state agency does not violate CLIA by the use of any particular survey protocol and Petitioner has no enforceable rights in that regard.

16. CLIA requires compliance, not "substantial compliance," and there is no statistical standard of compliance except where specified in CLIA or the regulations.

17. Whether CMS has made a prima facie showing as to any alleged condition-level violation generally depends upon: (1) whether CMS has identified a statute, regulation, or other legal criteria to which it may hold the provider; (2) whether CMS has come forward with evidence to support its factual conclusions that shows, absent consideration of other evidence, that a violation exists; and (3) whether CMS has shown with its evidence that the deficiencies or violations of law amount to noncompliance which warrants an enforcement remedy.

18. A deficiency exists when a laboratory's failure to meet a statutory or regulatory requirement creates the potential for patient harm.

19. CMS must, as part of its prima facie case, show, by evidence or presumption, that there is actual or potential patient harm due to a laboratory's deficient practice.

20. Condition-level and standard-level deficiencies are both premised on the notion that there is potential or actual patient harm; thus, the distinction between condition-level and standard-level under the SOM is that the condition-level violation represents a "significant or a serious problem."

21. CMS failed to make a prima facie showing of a violation of 42 C.F.R. � 493.1103(a).

22. CMS failed to make a prima facie showing of a violation of 42 C.F.R. � 493.1107(a).

23. CMS failed to make a prima facie showing of a violation of 42 C.F.R. � 493.1109(c).

24. Petitioner violated the standard established by 42 C.F.R. � 493.1109(a).

25. The violation of 42 C.F.R. � 493.1109(a) amounts to a violation of the condition established by 42 C.F.R. � 493.1101 because Petitioner's failure to include a warning on many test reports that a suboptimal specimen was tested with potential effects upon specific analyte test results is a significant or serious problem with the potential for patient harm.

26. Petitioner has not demonstrated systematic changes to ensure that the condition-level deficiency will not recur or that there is adequate monitoring to ensure that future test reports are accurate and reliable, and I conclude that Petitioner has not adequately shown correction of the condition-level violation of 42 C.F.R. � 493.1101.

27. Petitioner violated the condition-level requirement established by 42 C.F.R. � 493.1403.

28. Petitioner's reports were deficient and Petitioner did not identify and remedy the deficiency as part of its quality assurance program in violation of 42 C.F.R. � 493.1703(d) which amounts to a condition-level violation of 42 C.F.R. � 493.1701.

29. Sanctions against CMS are not warranted.

30. Revocation of Petitioner's CLIA certificate is appropriate.

III. ANALYSIS

A. APPLICABLE LAW

CLIA establishes requirements for all laboratories that perform clinical diagnostic tests on human specimens and provides for federal certification of such laboratories. Pub. L. No. 100-578, amending � 353 of the Public Health Service Act, codified at 42 U.S.C. �� 263a, 1302, 1395x(e). The purpose of CLIA is to ensure the accuracy and reliability of laboratory tests and, hence, the public health of all Americans. See H.R. Rep. No. 100-899, at 8, 18 (1988), reprinted in 1988 U.S.C.C.A.N. 3828, 3839. CLIA grants the Secretary of Health and Human Services (the Secretary) broad enforcement authority, including the ability to suspend, limit, or revoke the CLIA certificate of a laboratory that is out of compliance with one or more requirements for certification. The Secretary has exercised his authority under 42 U.S.C. � 263a(f) and issued regulations implementing CLIA. See 42 C.F.R. Part 493.

The Secretary's regulations delegate to CMS broad authority to ensure that laboratories perform as Congress intended, including authority to inspect and sanction laboratories that fail to comply with the regulatory requirements. CMS certification of a laboratory under CLIA is dependent upon whether the laboratory meets the conditions for certification set out in the statute and regulations. 42 U.S.C. � 263a(f)(1); 42 C.F.R. � 493.1 et seq. Pursuant to the enforcement provisions of the regulations, CMS may impose principal or alternative sanctions when it finds that a laboratory has a "condition-level" deficiency. 42 C.F.R. � 493.1804(b)(2). Principal sanctions are suspension, limitation, or revocation of a CLIA certificate. 42 C.F.R. � 493.1806(b). Alternative sanctions are a directed plan of correction, state on-site monitoring, and a CMP. 42 C.F.R. � 493.1806(c). 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)) and required when CMS suspends or revokes a laboratory's certificate (42 C.F.R. � 493.1842(a)). 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). This provision has no application to the case before me.

Each condition-level requirement of the regulations represents a major division of laboratory services to be offered by the laboratory or establishes an important environmental protection for the laboratory. Since each "condition" represents a major division of laboratory services to be offered by the laboratory or an important safety requirement, it has been held that a failure by a laboratory to comply with even a single applicable condition can represent a critical breakdown in one of the major health care delivery or safety systems of the laboratory. Ward General Practice Clinic, DAB No. 1624, at 2 (1997). Therefore, violation of just one condition-level deficiency can be grounds for a principal sanction, including revocation of a laboratory's CLIA certificate. 42 C.F.R. � 493.1804(b); Edison, DAB No. 1713.

If, on inspection, a laboratory is found to have condition-level deficiencies that pose immediate jeopardy, CMS requires the lab to take immediate action to remove the jeopardy and may impose alternative sanctions to assist. If, on revisit, the deficiencies remain, CMS may suspend or limit and later revoke the laboratory's CLIA certificate. CMS is also delegated authority to bring a civil suit for an injunction against a laboratory in specified circumstances where there is immediate jeopardy. 42 C.F.R. � 493.1812. Condition-level deficiencies that do not constitute immediate jeopardy and standard-level deficiencies that do not rise to condition-level, are treated differently and a laboratory is generally accorded 12 months to correct such deficiencies before action is taken to suspend, limit, or revoke the laboratory's CLIA certificate. 42 C.F.R. �� 493.1814, 1816.

CLIA provides at 42 U.S.C. � 263a(i)(1) 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." The implementing regulations provide that a laboratory or prospective laboratory dissatisfied with an initial determination listed in 42 C.F.R. � 493.1844(b) is entitled to a hearing before an ALJ. 42 C.F.R. � 493.1844(a). The hearing procedures found in subpart D of Part 498 are incorporated by reference. 42 C.F.R. � 493.1844(a)(2). The "suspension, limitation, or revocation of the laboratory's CLIA certificate . . . because of noncompliance . . ." is the first listed initial determination subject to hearing before an ALJ. 42 C.F.R. � 493.1844(b)(1). The imposition of alternative sanctions is also an initial determination subject to appeal (42 C.F.R. � 493.1844(b)(3)), but the determination as to which alternative sanctions to impose and the amount of the CMP to be imposed are not. 42 C.F.R. �� 493.1844(b)(3) & (c)(4). The general rule is that suspension, limitation, or revocation of a CLIA certificate is not effective if appealed, and not imposed until the ALJ issues a decision, unless CMS declares immediate jeopardy, and then there is no delay in the suspension or limitation of the offending laboratory's CLIA certificate. 42 C.F.R. � 493.1844(d)(2). Section 498.74 of 42 C.F.R. provides that, absent appeals to the DAB or the U.S. District or Circuit Courts, my decision is final.

In addition to sanctions directed against laboratories, CLIA provides the following with respect to the owners and operators of non-compliant laboratories:

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 implementing regulations do not include any express provision implementing or imposing this two-year prohibition against an offending owner or operator. ⁽⁶⁾ 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. (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).

CLIA does not include a definition of the term operator. However, the regulations define an "operator" as:

the 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 aboratory. The term includes -

(1) A director of the laboratory if he or she meets the stated criteria . . . .

42 C.F.R. � 493.2.

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 specimen testing performed in the laboratory. Sentinel Medical Laboratories, Inc., DAB No. 1762, at 13 (2001), aff'd, Teitelbaum v. Health Care Financing Admin., No. 01-70236 (9^th Cir. Mar. 15, 2002), reh'g denied, No. 01-70236 (9^th 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. See 42 C.F.R. �� 493.1403, 1405, 1407, 1441, 1443, & 1445. Thus, the regulation creates a rebuttable presumption that a laboratory director is an operator of the laboratory within the meaning of the regulations and CLIA.

The allocation of the burden of proof in an appeal of CMS's sanctions is set forth in Hillman Rehabilitation Center, DAB No. 1611 (1997), aff'd, Hillman Rehabilitation Center v. HHS, No. 98-3789 (GEB) (D.N.J., slip op. May 13, 1999). Edison, DAB No. 1713 (Hillman burden of proof applicable in CLIA appeals). At a hearing, 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. Cf. Emerald Oaks, DAB No. 1800 (2001).

B. ISSUES

Whether one or more condition-level deficiencies existed at Petitioner.

Whether there is a basis for the revocation of Petitioner's CLIA certificate and the imposition of other remedies.

C. DISCUSSION

Petitioner argues in this case that the facts do not establish condition-level violations; that CMS has not made a prima facie showing of a condition-level violation; and that, to the extent CMS might have made a prima facie showing, that showing has been rebutted. Before analyzing the alleged deficiencies, it is necessary to address several issues skillfully litigated by both parties, including my jurisdiction particularly with respect to regulatory limits; the burden of going forward with the evidence (burden of production) and the burden of persuasion (referred to collectively as the burden of proof); the credibility and probative value of the testimony of experts for both CMS and Petitioner; the validity of the survey protocol or procedure; and the meaning of the phrase "substantial compliance" in the CLIA context. After discussion of these overarching issues, I consider the individual deficiency findings, and I consider Petitioner's motion to sanction CMS for failure to fully disclose evidence last.

1. My authority to review the determination of immediate jeopardy

Congress granted laboratory owners and operators a right to a hearing before the Secretary may suspend, revoke, or limit the laboratory's CLIA certificate. 42 U.S.C. � 263a(i)(1). There is an exception however. In a case where a laboratory's failure to comply with CLIA standards presents "an imminent and serious risk to human health," the Secretary may suspend or limit the laboratory's CLIA certificate prior to hearing but the laboratory has a right to an expedited hearing "no later than 60 days from the effective date of the suspension or limitation." The suspension or limitation remains in effect until a decision is made following the hearing. 42 U.S.C. � 263a(i)(2).

The Secretary, acting pursuant to his delegated authority under CLIA, has directed that CMS not suspend, limit, or revoke a laboratory's CLIA certificate until after an ALJ hearing decision except CMS may suspend or limit a laboratory's certificate before hearing where the laboratory's deficiencies pose immediate jeopardy. ⁽⁷⁾ 42 C.F.R. �� 493.1840(d) & (e) & 493.1844(d)(2). The Secretary has provided by regulation that a laboratory has a right to an ALJ hearing (42 C.F.R. � 493.1844(f)); and the Secretary has delegated the authority to conduct hearings in CLIA cases to ALJs (42 C.F.R. � 493.1844(a)(2)). The Secretary, however, set limits upon which actions of CMS are subject to appeal and ALJ review. Actions which are "initial determinations" may be reviewed; those that are not, are not subject to review. Initial determinations identified by the Secretary are the following: (1) suspension, limitation, or revocation of a CLIA certificate; (2) denial of a CLIA certificate; (3) the imposition of alternative sanctions; and (4) the denial or cancellation of approval to receive payments from Medicare. 42 C.F.R. � 493.1844(b). Examples of CMS actions that are not subject to review as initial determinations include: findings that a laboratory only has standard-level violations; the determination as to which alternative sanctions to impose and the amount of a CMP; and the determination that deficiencies pose immediate jeopardy. 42 C.F.R. � 493.1844(c).

CMS does not dispute that Petitioner may appeal and I may review the decision to suspend and revoke Petitioner's CLIA certificate. CMS urges me, however, not to consider Petitioner's contentions that CMS erred by declaring that the condition-level deficiencies identified at Petitioner's laboratory posed immediate jeopardy. CMS argues that it is well-settled that the CMS immediate jeopardy determination is not subject to appeal. CMS Brief at 2-3. Petitioner agrees that the CMS immediate jeopardy determination is not subject to appeal and Petitioner does not ask that I review the facts and determine whether CMS correctly declared that immediate jeopardy existed. Rather, Petitioner encourages me to determine whether immediate jeopardy could exist in this case as a matter of law. Petitioner argues that, given the uncontroverted facts that an on-site visit by the surveyors occurred more than six months before immediate jeopardy was declared, CMS's determination is contrary to the Secretary's definition of immediate jeopardy found at 42 C.F.R. � 493.2. ⁽⁸⁾ The immediate jeopardy determination is significant in the context of this case, because that determination is what allowed CMS to immediately suspend Petitioner's operation in September 2003, without first according Petitioner a hearing.

Whether or not the evidence of noncompliance collected by the state surveyors at Petitioner supports a conclusion, whether by those surveyors or the CMS Regional Office staff, that "immediate corrective action" was necessary because the noncompliance had caused, was causing, or was likely to cause "serious injury or harm or death" to Petitioner's clients or the public is not an issue I may decide. It is an interesting notion that I might however be able to consider whether the legal definition of immediate jeopardy is consistent or inconsistent with the facts before me. The question is to what end would I make such a determination. If I were to conclude that no immediate jeopardy existed as a matter of law as Petitioner advocates, Petitioner has pointed to no remedy that I can accord and I am aware of none. If there is no remedy I can fashion, review of the issue seems to be needless.

My task in this case is to determine whether or not one or more condition-level deficiencies existed at Petitioner. My review and determination is de novo. Edison, DAB 1713 (applying Hillman burden of proof to CLIA cases) (1999); cf. Emerald Oaks, DAB No. 1800 (2001) (Petitioner entitled to de novo review by ALJ under 42 C.F.R. Part 498). If I find no condition-level deficiencies existed, then there is no basis for the revocation of Petitioner's CLIA certificate and, of course, there was no immediate jeopardy. If I find at least one condition-level deficiency, the question I must resolve is whether or not that deficiency is a sufficient basis for revocation of Petitioner's CLIA certificate. I need not find that a condition-level deficiency posed immediate jeopardy as a condition precedent to deciding revocation is appropriate.

Nevertheless, the existence of immediate jeopardy does have relevance to my determination in two respects: (1) evidence that surveyors or CMS declared immediate jeopardy reflects their view that an alleged deficiency or deficiencies was severe and such evidence may affect my decision as to whether or not revocation is appropriate; and (2) evidence of an incorrect or unsupported declaration of immediate jeopardy may be considered to reflect negatively upon the credibility of the surveyors and the CMS Regional staff involved. Thus, I conclude it is appropriate for me to hear and consider arguments from CMS that the determination of immediate jeopardy is appropriate and supported and warrants approval of the most severe sanctions. More specifically, if there is evidence that a condition-level deficiency has caused, is causing, or is likely to cause "serious injury or harm or death" to Petitioner's clients or the public (i.e., immediate jeopardy exists), that evidence would certainly lend support to my determination to revoke a CLIA certificate to protect Petitioner's clients or the public. See, e.g., Center Clinical Laboratory, DAB No. 1526, n.2 (1995) (preamble of final regulations indicates where immediate jeopardy exists, sanctions more severe; if no immediate jeopardy, alternative sanctions may be more appropriate). ⁽⁹⁾

Conversely, if there is evidence that the immediate jeopardy declaration was not well-founded or well-supported, consideration of that evidence and its impact upon the substantive deficiencies and the credibility of those involved in the declaration is appropriate. The state surveyors and CMS Regional Office staff who made the decision that immediate jeopardy existed and that immediate suspension was necessary, were clearly influenced in their view of the case by those conclusions. I recognize that their testimony and credibility are significantly impacted by their conclusions that immediate jeopardy actually existed in this case. Thus, if I conclude that the finding of immediate jeopardy by the surveyors or CMS Regional Office staff is inconsistent with the legal definition of immediate jeopardy, there is a negative impact upon their credibility. ⁽¹⁰⁾

The undisputed evidence in this case is that roughly six months passed between the on-site inspection of Petitioner and the declaration that immediate jeopardy existed. There is evidence that during the intervening period, Petitioner submitted additional evidence to the state agency, but the evidence before me does not show that Petitioner's additional evidence submitted after the survey provoked the determination that immediate jeopardy existed. Rather, it appears that the immediate jeopardy determination was based on the evidence collected by the two surveyors who conducted the on-site survey in February 2003. There is no evidence Surveyor Lash ever recommended a declaration of immediate jeopardy and he did not testify at hearing. The evidence shows that Surveyor Eleco did not conclude during the on-site survey that immediate jeopardy existed, but determined such at some time thereafter. Tr. 475; 709-10, 714-15. CMS Regional Office staff did not determine that immediate jeopardy existed until nearly six months after the on-site survey when they received and reviewed the survey packet and then sent notice to Petitioner.

Petitioner pushes the point that the declaration of immediate jeopardy months after the on-site survey is inconsistent with the existence of immediate jeopardy. Petitioner's point is well-taken. The Secretary's definition of immediate jeopardy at 42 C.F.R. � 493.2 requires:

(1) a situation in which immediate corrective action is necessary;

(2) because noncompliance is at a condition level;

(3) has caused, is causing, or is likely to cause;

(4) serious injury, harm, or death;

(5) to individuals served by the laboratory or the general public.

If each of these five elements from the regulation are not present, then the legal definition of immediate jeopardy is not satisfied and immediate jeopardy cannot exist as a matter of law. The evidence presented in this case is inconsistent with there being any sense of immediacy of potential harm to patients or the public. Ms. Eleco performed the survey of Petitioner with Mr. Lash, but Ms. Eleco was the only surveyor who testified. The on-site survey of Petitioner was done on February 14 and 18, 2003. There is no dispute that Ms. Eleco did not advise anyone upon completion of the on-site survey in February 2003 that she considered that there was immediate jeopardy. Further, it is clear that even when she sent her report to her supervisor, Examiner ⁽¹¹⁾II Sparhawk, Ms. Eleco only equivocally indicated a potential that immediate jeopardy existed. Ms. Eleco testified: "[s]o we just gave them the report, and told them, well, it has condition level deficiencies, and it could be IJ [immediate jeopardy]. So I sent it up to her, and so she would read it independently." Tr. 475. ⁽¹²⁾ Ms. Eleco's further testimony suggests that, from her perspective this was not clearly an immediate jeopardy situation or that she did not feel competent to make that determination on her own:

Q (By Petitioner's counsel): At what point from February 18th until August 4th [2003] when you have an exit conference, at what point in that period of time did you determine immediate jeopardy existed?

A: It is after I have completed the report and after -- when I say completed, I have completed it and it's been reviewed and after the review when I generate the letter and the 2567, then I would look at it and say -- well, before I give it up for review, I would have an idea of whether based on the report that I've just written that whether it's IJ or not.

Now, the reason why I hesitate to call it IJ right there and then is I was working on two other reports wherein I have determined immediate jeopardy, not this laboratory, there are two other laboratories that have that I was writing reports on in addition to this and I have determined immediate jeopardy for those laboratories.

Now, there may be some similarities as to the deficiency, but then I would like to reserve, so I want somebody else to look at the report to make sure that when I call it jeopardy that it is jeopardy, not just because I'm working on two other reports.

Q: So you didn't really answer my question, because I asked you when you made the determination and you told me all the things you do and all the things and the process of making the final report and letter come out. That wasn't my question. My question was when did you make the determination that immediate jeopardy existed?

A: It was after the final review.

Q: What is the final review?

A: It's after I have reviewed it and I have sent it to an examiner, too [sic - two], to review and after they have their feedback regarding the report that they have just read.

Tr. 709-10.

Subsequently on cross-examination, Ms. Eleco testified that she did not think that it was up to her and not her decision as to whether immediate jeopardy existed:

Q: You sent it [SOD] up without an immediate jeopardy recommendation, correct?

A: That's correct.

Q: And it came back with one?

A: She asked me before I handed it whether it's condition or condition with IJ.

JUDGE SICKENDICK: And she is who?

THE WITNESS: I'm sorry, Joanne Sparhau [sic - Sparhawk], the examiner 2 who reviewed the 2567.

BY MS. BREWER:

Q: So you're saying you did make a recommendation verbally but not in writing?

A: It's not actually a recommendation. When I handed the 2567 for review, I handed it to her, here is something for you to review. I was asked was this condition, condition with IJ, and then I responded I'm not exactly sure, it's probably an IJ, but I just don't want to call it at this time.

Q: So who made the call?

A: It would be for her to determine whether that it would be IJ.

Tr. 714-15.

If immediate jeopardy truly existed in this case, then the evidence does not reflect well upon Ms. Eleco's ability as a surveyor or upon the state agency process for review and supervision of CLIA laboratories. It is disturbing to think that Ms. Eleco and Mr. Lash could complete an on-site survey and fail to recognize that there was an immediate need to protect Petitioner's patients and/or the general public from harm, if, in fact, such a need existed. It is equally disturbing that they may have recognized that there was potential immediate jeopardy upon completion of the on-site survey but then waited several months to bring their concern to the attention of their superiors. There is evidence that Ms. Eleco and Mr. Lash were experienced surveyors and I am loath to determine that they were incompetent or simply failed to fulfill an important duty to protect those that Congress sought to protect through CLIA. Rather, I conclude that the evidence supporting the immediate jeopardy declaration is just not so clear as CMS would have me believe.

Ms. Sparhawk was identified by Ms. Eleco as the Examiner II who made the immediate jeopardy determination for the state agency, but Ms. Sparhawk was not called to testify by CMS and so did not provide clarification for why it took so long to recognize the alleged immediate jeopardy situation in this case. The testimony from the CMS Regional Office staff, Ms. Jew and Mr. Yamamoto, does nothing to enhance the credibility of the immediate jeopardy determination. The evidence is that Ms. Jew did not review the evidence as a technical expert in CLIA compliance; rather, she testified that she was involved with the administrative aspects of due process accorded Petitioner, i.e. writing letters to Petitioner. Tr. 841-42; 898-99. Thus, Ms. Jew could offer no informed opinion about whether or not immediate jeopardy truly existed in this case. Mr. Yamamoto reviewed only the SOD submitted by Ms. Eleco in determining whether there were condition-level deficiencies shown and whether or not immediate jeopardy existed. Tr. 925. Mr. Yamamoto also testified that he gives the state surveyors the benefit of the doubt on the SOD and he could remember no situation where he did not follow a state determination that immediate jeopardy existed. Id. Mr. Yamamoto was the CMS official who decided immediate jeopardy existed and that immediate suspension was thus required to protect the laboratory's clients and/or the general public, but he admitted that he deferred to the state agency determination with regard to whether or not immediate jeopardy existed. Tr. 925. Mr. Yamamoto did not visit the laboratory or collect any evidence himself. Ms. Eleco testified that she spoke with Mr. Yamamoto before she forwarded the SOD (CMS Ex. 5) to him to advise him that she was sending a report that identified condition-level deficiencies with immediate jeopardy. Tr. 806. But Ms. Eleco's testimony clearly shows she did not make an immediate jeopardy determination but rather deferred to an Examiner II, Ms. Sparhawk, to make that determination. Ms. Sparhawk did not visit the facility and she did not testify and so could not clarify what was the basis for her determination that immediate jeopardy existed. Based on the foregoing, I cannot find that the immediate jeopardy determination by the state agency or CMS was credible in this case - there was no immediacy; the determination was apparently made by someone who did not visit the facility or have any first-hand knowledge; the determination was based in part upon an equivocal suggestion by Ms. Eleco; and there is no evidence as to whether the other surveyor, Mr. Lash, concurred in that recommendation.

I also note that the description of the manner in which the state agency and the CMS Regional Office processed this case is inconsistent with the strict procedure that CMS has established for handling such cases as published in the SOM, section 6282. The CMS procedure for handling cases where there is immediate jeopardy prescribes the following steps: the state agency must advise CMS within two working days of the survey date that deficiencies have been cited and that immediate jeopardy exists; not later than the end of the third working day, the state agency must give the laboratory written notice; by the eighteenth calendar day and at least five days before the effective date of a principle sanction, the CMS Regional Office gives notice to the laboratory of its due process rights; suspension of the CLIA certificate takes effect on the twenty-third calendar day following the survey if no credible allegation of compliance is made and verified within that period. SOM, section 6282, at 6-75 to 6-76. While this procedure vests no rights in Petitioner in this case, the fact that the procedure was not followed is another indication that the allegations of immediate jeopardy are simply not credible. ⁽¹³⁾

I will not consider the declaration of immediate jeopardy adverse to Petitioner in this case, as I find it not credible. I do consider that the lack of credibility of the immediate jeopardy determination reflects adversely upon the testimony of both Ms. Eleco ⁽¹⁴⁾ and Mr. Yamamoto and upon the process followed by the state agency and CMS in this case.

2. The burden of production and persuasion, elements of the prima facie case, witness credibility, and expert opinion evidence

(a) Burden of production and persuasion

There appears to be no disagreement between the parties that the allocation of the burdens of production and persuasion are governed in this case by the Board's decision in Hillman, which the Board found applicable to CLIA cases in Edison. Pursuant to the Hillman and Edison decisions, CMS bears the initial burden of producing evidence sufficient to establish a prima facie case for each alleged violation of the regulations. CMS must set forth the basis for its determination with sufficient specificity for a petitioner to respond and come forward with evidence related to the disputed findings. The evidence set forth by CMS must be sufficient to establish a prima facie case that CMS had a legally sufficient basis to impose a remedy, i.e., that there was a condition-level regulatory violation in this case for which a remedy is authorized. 42 C.F.R. � 493.1804(b)(2). In order for a petitioner to prevail, the petitioner must then prove by a preponderance of the evidence on the record as a whole that it was in compliance with the relevant statutory and regulatory provisions.

(b) Elements of the CMS prima facie case

A prima facie case is defined in Black's Law Dictionary 1209 (7^th ed. 1999) as follows:

1. The establishment of a legally required rebuttable presumption. 2. A party's production of enough evidence to allow the fact-trier to infer the fact at issue and rule in the party's favor.

An appellate panel of the Board defined the requirements for a prima facie case in its decision in Hillman, at 11:

HCFA [CMS] did not dispute that it has the burden of coming forward with evidence establishing a prima facie case that Hillman substantially failed to comply with program requirements. This is appropriate because HCFA's determination to terminate a provider agreement must be legally sufficient under the statute and regulations. We agree with the ALJ that HCFA must identify the legal criteria to which it seeks to hold a provider. Moreover, to the extent that a provider challenges HCFA's findings, HCFA must come forward with evidence of the basis for its determination, including the factual findings on which HCFA is relying and, if HCFA has determined that a condition of participation was not met, HCFA's evaluation that the deficiencies found meet the regulatory standard for a condition-level deficiency.

If a provider appeals a termination decision, CMS has the initial burden of showing that its decision to terminate is legally sufficient under the statute and regulations. Cf. Beverly Health and Rehabilitation Center - Williamsburg, DAB No. 1748 (2000). As a panel of the Board stated in Meadow Wood Nursing Home, DAB No. 1841, at 7 (2002),

It is true that, in order to put a provider to its proof, CMS must produce evidence sufficient to establish a prima facie case that, in the absence of any conflicting evidence, would constitute a legal basis for the proposed remedies. This requirement can be characterized as a production burden to establish that the factual allegations raised are legally sufficient and are not simply asserted without some evidentiary basis. This prima facie showing in no way represents a shifting of the ultimate burden of proof to CMS.

Another panel of the Board explained in the earlier Emerald Oaks decision that:

It follows . . . that, in determining whether a prima facie case has been presented, the ALJ looks only at the evidence put forward by CMS. VITAS Healthcare Corp. of America, DAB No. 1782, at 11-19 (2001). Absent a showing sufficient standing alone to support the basis for CMS's action, no further evaluation of conflicting evidence is necessary. Assuming a prima facie case exists, the ALJ must review all the evidence in the record and apply the preponderance of the evidence standard to determine whether the facility has proven that it was in substantial compliance with the applicable standards. The preponderance of the evidence standard means that the party with the burden, . . . , had to show that it was more likely than not that it was in substantial compliance as to each disputed deficiency finding. Under this standard, if the evidence in the record as a whole is in equipoise as to a disputed fact, that fact is resolved against the party with the burden to prove it. Hillman, at n.7.

Id. at 16.

Thus, the initial analysis required is whether or not CMS has made its prima facie case as to disputed condition-level deficiencies. As the foregoing DAB decisions make clear, there are several issues inherent in the general issue of whether or not CMS has made a prima facie showing as to any alleged condition-level violation, including: (1) whether CMS has identified a statute, regulation, or other legal criteria to which it may hold the provider; (2) whether CMS has come forward with evidence to support its factual conclusions that shows, absent consideration of other evidence, that a violation exists; and (3) whether CMS has shown with its evidence that the deficiencies or violations of law amount to noncompliance which warrants an enforcement remedy. In the instant case, Petitioner attacks the CMS prima facie case as to each alleged deficiency on one or more of these issues. Before analyzing individual deficiencies, it is necessary to consider what is a prima facie showing.

It is generally not difficult for CMS to cite the law it alleges was violated in order to satisfy the first element of its prima facie case. CLIA requires that the Secretary promulgate regulations to implement its provisions. CLIA specifically requires that the Secretary "issue standards to assure consistent performance by laboratories issued a certificate under this section of valid and reliable laboratory examinations and other procedures." 42 U.S.C. � 263a(f)(1). The statute is specific that the standards adopted by the Secretary must require each laboratory:

(A) to maintain a quality assurance and quality control program adequate and appropriate for the validity and reliability of the laboratory examinations and other procedures of the laboratory and to meet requirements relating to the proper collection, transportation, and storage of specimens and the reporting of results,

(B) to maintain records, equipment, and facilities necessary for the proper and effective operation of the laboratory,

(C) in performing and carrying out its laboratory examinations and other procedures, to use only personnel meeting such qualifications as the Secretary may establish for the direction, supervision, and performance of examinations and procedures within the laboratory . . . ,

(D) to qualify under a proficiency testing program meeting the standards established by the Secretary . . . , and

(E) to meet such other requirements as the Secretary determines necessary to assure consistent performance by such laboratories of accurate and reliable laboratory examinations and procedures.

Id. CLIA also requires that the Secretary develop and implement a program of laboratory inspections to ensure that a laboratory meets and continues to meet the requirements for certification and complies with the standards established by the Secretary. 42 U.S.C. � 263a(g).

The Secretary has promulgated regulations at 42 C.F.R. Part 493 to fulfill the statutory requirements for standards and inspections and he has delegated authority to CMS to manage the program. The Secretary's regulations establish condition-level requirements and standard-level requirements that CLIA laboratories must comply with. The inspection requirement for nonexempt laboratories is satisfied by CMS or an agent of CMS through "accreditation and survey" by private accreditation organizations pursuant to 42 U.S.C. � 263a(e) or through "survey and certification" by the state agency pursuant to 42 U.S.C. � 263a(o). ⁽¹⁵⁾ The accreditation procedure is not applicable in this case and Petitioner was subject to survey by the state agency. A citation of deficiency by a surveyor during a survey is an allegation that a regulatory provision was violated by the laboratory. Generally, CMS cites the regulation violated as the law applicable and the issue is then whether the facts alleged by the surveyors actually constitute a violation of the law CMS cites.

In this case, the evidence that CMS relies upon for its factual conclusions - the second element of a prima facie case - was gathered through the survey process. Generally, the state agency surveyors who conduct inspections of laboratories make observations, conduct interviews, collect documents, and then develop opinions and conclusions that are communicated to the CMS Regional Office. The surveyors use a form known as the SOD, Form CMS-2567, to record their conclusions or findings and the basis for those findings. See e.g. CMS Ex. 5; SOM, section 6130. CMS Regional Office personnel, based upon the SOD created by the surveyors and supporting evidence submitted by the surveyors and the laboratory, determine whether or not to impose any remedies or sanctions for the deficiencies cited in the SOD by the surveyors. Typically, the laboratory that was subject to the inspection has an opportunity to respond to the findings in the SOD; in fact, the right column of the SOD form is reserved for a provider's plan of correction. The state agency or CMS may conduct a revisit survey if they conclude that a laboratory has made a credible allegation of compliance with CLIA requirements. If CMS ultimately decides that one or more principle or alternate remedies are appropriate, CMS notifies the laboratory, and the laboratory may elect to request a hearing by an ALJ. The steps in the process do not necessarily occur in the order set forth above, and may not be required or followed in certain cases, e.g., where there is immediate jeopardy to patient or public health. See 42 C.F.R. Part 493, Subpart Q (�� 493.1771 - 1780).

In the SOD, the state surveyors cite the deficiencies they allege exist at a surveyed laboratory. The regulations establish condition-level requirements and standard-level requirements. Deficiency citations in the SOD allege violation of one or more such requirements. Some condition-level and standard-level requirements are very specific and it is not difficult to determine whether or not a laboratory has violated or is not in compliance with those requirements. For example, there is a condition-level requirement that a laboratory be enrolled in an approved proficiency testing (PT) program and test samples in the same manner as patient samples. 42 C.F.R. � 493.801. Standard-level requirements under the condition requirement for PT include enrollment in an approved program and testing PT samples with the laboratory's patient specimens. If a laboratory is not enrolled or does not test its PT samples with patient samples, there is clearly a violation of the standards and, possibly, the condition. ⁽¹⁶⁾

However, it is not so simple to determine compliance or noncompliance with other conditions and standards such as those involved in this case, which include alleged violation of the conditions at 42 C.F.R. �� 493.1101 (Patient Test Management); 493.1201 (General Quality Control); 493.1403 (Laboratory Director); and 493.1701 (Quality Assurance). CMS Exs. 4, 5, 7. Each of the alleged condition level violations will be discussed separately later, but for purposes of this discussion, it is sufficient to consider one as an example. The condition established by 42 C.F.R. Part 493, subpart J, subsection 1101 (42 C.F.R. � 493.1101) provides:

Each laboratory performing moderate complexity (including the subcategory) or high complexity testing, or any combination of these tests, must employ and maintain a system that provides for proper patient preparation; proper specimen collection, identification, preservation, transportation, and processing; and accurate result reporting. This system must assure optimum patient specimen integrity and positive identification throughout the preanalytic (pre-testing), analytic (testing), and postanalytic (post-testing) processes and must meet the standards as they apply to the testing performed.

The condition specified by 42 C.F.R. � 493.1101 includes the standards set forth in 42 C.F.R. �� 493.1103 (procedures for specimen submission and handling); 493.1105 (test requisition); 493.1107 (test records); 493.1109 (test report); and 493.1111 (referral of specimens). The standards are appropriately viewed as setting forth the specific requirements necessary to satisfy the condition, and violation of specific standards may amount to a violation of a condition. ⁽¹⁷⁾

The SOM is the CMS publication that provides guidance to the surveyors for the survey process. Chapter 6 of the SOM provides guidance on the CLIA survey process, generally. Appendix C of the SOM provides specific survey procedures and the interpretive guidelines for the surveyors. In the case of the condition-level requirement of section 493.1101 and its five standard-level requirements, the SOM identifies and lists 49 separate regulatory requirements the surveyor may examine which are referred to as tags and are assigned tag numbers ranging from D3000 through D3077. See SOM, App. C, at C-96 to C-103. The standard level requirement of 42 C.F.R. � 493.1105 related to test requisition, is set forth in the interpretive guidelines as 10 separate tags, each of which relates to a specific provision of the regulation. The guidance to surveyors is set out by regulatory provision and includes guidelines and probes that the surveyor uses to determine whether or not a laboratory is in compliance with the regulatory provision associated with the tags for the regulation. A "guideline," as that term is used in the SOM, is generally an interpretative rule which directs the surveyor to conclude the regulation and related tags are violated if the guideline is not satisfied by the laboratory. For example, under 42 C.F.R. � 493.1105 (standard for test requisition), there is the guideline:

The patient's chart or medical record, if used as a requisition must be available to the laboratory at the time of testing, and to HHS upon request, and must be maintained in lieu of a separate form for at least two years.

SOM, App. C, at C-97. If, during a survey, it is concluded that charts or medical records used as requisitions are not available to the laboratory at the time of testing or they are not available to surveyors at the time of the survey, the surveyor should conclude that the regulatory standard is violated. Other guidelines are specified for subsections of 42 C.F.R. � 493.1105(a) - (f).

The guidance to surveyors also includes "probes" which are questions that the surveyor answers to determine whether or not the laboratory is in compliance with a regulatory requirement. For example, under the guidance to surveyors there is the following probe for 42 C.F.R. � 493.1105:

How does the laboratory maintain records documenting oral requests for testing?

SOM, App. C, at C-97.

This question is pertinent because 42 C.F.R. � 493.1105 allows oral requests for laboratory tests if the laboratory subsequently requests written authorization for the testing within 30 days and the laboratory maintains the written authorization or documentation of its efforts to receive the subsequent written authorization. It is logical that if oral requests for testing are accepted by the laboratory but it has no record of such requests, the laboratory cannot do the follow-up required by the regulations. CLIA and the regulations do not specify a required form for laboratory records, so a laboratory has discretion to determine what the form should be. Further, the guidance to surveyors does not specify what is a sufficient or acceptable record documenting oral requests for testing but rather the probe allows the surveyor some discretion in determining what is or is not sufficient and acceptable. The fact that the laboratory has discretion to determine the form of the record and that the surveyor has the discretion to determine what is adequate, creates the potential for conflict. Similar conflicts are presented by this case.

In the case of many of the regulatory requirements, condition-level and standard-level, the determination of whether a laboratory meets the requirements is not simply a matter of yes or no. Rather, the surveyor must apply judgment to make the determination as to whether or not the facts presented constitute a deficiency. It is often important to the CMS prima facie case to establish what the surveyor's judgment was and its basis, not because the surveyor's judgment is binding upon me, but because surveyors are generally accepted as having special expertise and their conclusions and opinions based on the facts they observed generally merit some weight. To the extent that a surveyor is required or permitted to exercise some independent judgment as to whether particular facts do or do not constitute a violation of a regulatory requirement, the surveyor's ability and credibility are placed in issue anytime CMS offers up the surveyor's opinion as evidence of the existence of the violation.

The third element of the CMS prima facie case is that CMS must show that the alleged deficiencies rise to the level that the proposed enforcement remedy is required and appropriate. The surveyor's judgment comes into play when, during a survey, the surveyor identifies a laboratory's action or inaction as a potential violation of CLIA or one of the specific regulatory provisions and it is then necessary for the surveyor to determine whether the potential violation has an effect or "outcome." The "outcome" determination, as explained by the SOM, is guided by the underlying purpose for CLIA. There can be no question that the purpose of Congress in enacting CLIA was to ensure the accuracy and reliability of laboratory tests and, hence, the public health of all Americans. See H.R. Rep. No. 100-899, at 8, 18 (1988), reprinted in 1988 U.S.C.C.A.N. 3828, 3839. Consistent with the Congressional purpose, the Secretary has specified three purposes for the imposition of sanctions against CLIA laboratories:

(1) To protect all individuals served by laboratories against substandard testing of specimens.

(2) To safeguard the general public against health and safety hazards that might result from laboratory activities.

(3) To motivate laboratories to comply with CLIA requirements so that they can provide accurate and reliable test results.

42 C.F.R. � 493.1804(a). In summary, the purpose of CLIA and the implementing regulations is to ensure public health and safety by ensuring that laboratories provide accurate and reliable test results. CMS has provided in the SOM that:

Survey protocols and Interpretive Guidelines provide guidance to personnel conducting surveys of laboratories. These documents are established pursuant to pertinent sections of the Social Security and Public Health Service Acts and regulations at 42 CFR Part 493. The documents serve to clarify or explain the intent of the regulations and are to be used by all surveyors assessing compliance with Federal requirements.

The outcome-oriented survey process places emphasis upon performance or outcome measurements to ensure accurate and reliable test results and other related activities. The purpose of the protocols and guidelines is to provide suggestions, interpretations, and other tools to use in preparing for and conducting the survey and for analyzing and evaluating survey findings.

SOM, section 6100 (emphasis in original).

Appendix C of the SOM contains the following statement of policy for conducting surveys of laboratories:

The protocols and guidelines clarify and/or explain the intent of the regulations and are required for use by all surveyors assessing laboratory performance based on Federal requirements. The same survey protocols are used by the regional office (RO) and/or State Agency (SA) surveyors and therefore are written to address the surveyor.

The following protocols represent an outcome-oriented method to be used to conduct the survey. The focus of the survey is to assess how the laboratory monitors its operations and ensures the quality of its testing. The intended use of these protocols is to promote consistency in the approach to the survey process and to ensure that a laboratory's operations are reviewed in a practical, efficient, and effective manner so that at the completion of the survey there is sufficient information to make compliance decisions. While the purpose of the protocols and guidelines is to provide direction in preparing for the survey; in conducting the onsite survey; and for analyzing, evaluating, and documenting survey findings; the surveyor's professional judgement [sic] is the most critical element in the survey process.

HCFA's objective is not only to determine the laboratory's regulatory compliance but also to assist regulated laboratories in improving patient care by emphasizing those aspects that have a direct impact on the laboratory's overall test performance. HCFA promotes the use of an educational survey process. It is the surveyor's objective, using professional judgement [sic], to determine, based on observation of the laboratory's (past and current) practices, interviews with the laboratory's personnel, and review of the laboratory's relevant documented records, whether it is producing accurate, reliable, and timely (quality) test results. Regardless of the manner in which the surveyor approaches assessing the laboratory's operation and test performance, the primary objective is to determine whether or not the laboratory meets the CLIA requirements. The surveyor meets this objective by employing an outcome-oriented/quality improvement type of survey process or approach, the intent of which is to focus the surveyor on the overall performance of the laboratory and the way it monitors itself, rather than on a methodical evaluation of each standard level regulatory requirement.

SOM, App. C, at C-3. ⁽¹⁸⁾

The outcome-oriented survey process is defined as follows:

The principal focus of the survey is the effect (outcome) of the laboratory's practices on patient test results and/or patient care. The Outcome-Oriented Survey Process is intended to direct the surveyor to those requirements that will most effectively and efficiently assess the laboratory's ability to provide accurate, reliable, and timely test results.

SOM, App. C, at C-4.

The SOM provides surveyors the following guidance for assessing outcome or potential outcome:

If your findings reveal potential problem areas with any test procedures, ensure the review is sufficient in breadth and depth to substantiate whether a negative or potentially negative outcome exists. If a problem or potential problem related to patient test results is found, determine the nature and seriousness of the problem.

The survey process allows the freedom to increase or decrease the number and types of records reviewed, the personnel interviewed, and the observations made as individual needs are identified.

Analyze your findings for the degree of severity, survey history, frequency of occurrence, impact on delivery of services, i.e., accuracy, reliability, and timeliness of test results. One occurrence of a deficiency directly related to a potential adverse impact on patient testing may be cited. On the other hand, some preliminary findings may have so slight an impact on outcome that they do not warrant ea [sic] citation.

SOM, App. C, at C-11.

Under the SOM procedures, state surveyors survey and evaluate whether or not a laboratory is in compliance with CLIA requirements and certify either compliance or noncompliance to the CMS regional office. SOM section 6134 establishes three types of compliance:

A. Compliance with all CLIA Conditions with No Deficiencies Identified.--This indicates that there are no deficiencies identified. The laboratory is issued the appropriate CLIA certificate and is eligible to participate in the Medicare and Medicaid programs.

B. Compliance Based on an Acceptable PoC [plan of correction].--Compliance based on an acceptable PoC reflects the findings that all applicable Conditions are met, but there are deficiencies below the Condition level for which the laboratory has submitted an acceptable PoC. The surveyor is certifying that the laboratory is able to furnish test results without hazard to the health and safety of patients. Laboratories having deficiencies must correct them within a acceptable time frame (no later than 12 months). Compliance based on an acceptable PoC varies with the level, nature and seriousness of the deficiencies.

In reviewing the PoC, the SA evaluates whether or not the corrective action will result in compliance within the time frame indicated and that time frame is an acceptable amount of time. If the laboratory does not submit an acceptable POC or if it fails to correct its deficiencies, the SA/RO [state agency/regional office] withdraws the laboratory's approval to receive Medicare and Medicaid payment and revoke its certificate, as appropriate. (See �6284.)

C. Noncompliance.--In situations where it is determined that a laboratory has failed to comply with one or more CLIA conditions, the SA certifies noncompliance to the RO by submitting a Form HCFA-1539 (Code Item 4 as 9-Other), and recommends a sanction action. (See �6262.) When certifying noncompliance, the SA enters the survey findings into the CLIA database and sends a hardcopy of the Form HCFA-2567 to the RO. After reviewing the HCFA-2567, the RO makes a final determination of noncompliance and enters the final determination into the CLIA data system.

SOM, section 6134, at 6-34 to 6-35 (emphasis added).

Based on the foregoing provisions of the regulations and the CMS interpretation in the SOM, a deficiency exists when a laboratory fails to meet a statutory or regulatory requirement and that failure presents the potential for patient harm. The existence of a standard-level deficiency does not lead to a certification of noncompliance so long as there is an acceptable plan of correction that will lead to correction of the deficiency within 12 months and there is no hazard to the health and safety of patients. However, the conclusion that a deficiency is at the condition level implies that there is a greater potential for patient harm and dictates that there will be a certification of noncompliance. Ms. Jew confirmed for me in her testimony that the outcome-oriented survey focuses upon whether or not there is patient outcome, which I construe to be actual or potential patient harm. Tr. 849-54. Ms. Jew's interpretation and my reading of the CMS interpretation in the SOM is consistent with the Congressional purpose for CLIA and the purpose stated in the Secretary's regulations. See also 63 Fed. Reg. 26,722 at 26,724-26,725 (May 14, 1998) (outcome-oriented survey process adopted). I conclude that the showing of actual or potential patient harm is an element of the prima facie showing that CMS must make when CMS alleges that there is a condition-level deficiency and, absent such showing, no enforcement remedy is justified. Whether CMS makes the required showing by offering evidence of actual or potential harm or reliance upon a regulatory presumption must be analyzed in the context of the cited deficiency and the applicable regulatory language.

The SOM emphasizes that whether or not there is actual or potential adverse impact is a matter for the surveyor to determine applying his or her professional judgment. Thus, the surveyor's judgment is critical to the CMS prima facie case. Because the surveyor's judgment on whether or not there is actual or potential patient impact is important to the CMS prima facie case, it is subject to challenge by Petitioner as discussed hereafter.

The surveyor must also use judgment to determine whether a deficiency, i.e. a regulatory violation with actual or potential adverse patient outcome, constitutes only a standard- level violation or whether it amounts, singularly or collectively with other violations, to a condition-level violation that will support an enforcement remedy. CLIA requires that the Secretary establish standards for laboratories but does not characterize those standards as condition-level or standard-level. The regulations provide the following definitions:

Condition level deficiency means noncompliance with one or more condition level requirements.

Condition level requirements means any of the requirements identified as "conditions" in subparts G through Q of this part.

42 C.F.R. � 493.2. These definitions are not particularly helpful to the task of trying to determine what facts might be viewed as amounting to a condition-level deficiency. I find no regulation or decision of the DAB that more clearly defines what is a condition-level deficiency or that clarifies whether it takes more than one standard-level violation to amount to a condition-level deficiency. In the final rule making for 42 C.F.R. � 493.2, the drafters of the regulations included the following:

2. Comment: Several commenters want condition level deficiency and lower level deficiency to be more clearly delineated. They were also unclear about the relationship between "elements", "standards" and "conditions". Response: A condition level deficiency is a deficiency with respect to any of the conditions that a laboratory must meet in order to obtain a CLIA certificate. A deficiency not at the condition level is a deficiency with respect to one or more of the standard level requirements that are below the condition level, and, therefore, are not identified as conditions. These requirements may appear in this part under the heading "standard" or under no heading, and are what is meant by "lower level" requirements. There is no official requirement category designated "element" in this part. We have expanded the definition of "condition-level deficiency" in the final rule.

57 Fed. Reg. 7218, 7221 (Feb. 28, 1992).

The SOM instructs surveyors as follows:

V. REGULATORY COMPLIANCE DECISION

After all necessary information has been collected and the outcome or potential outcome has been evaluated to determine if a preliminary finding constitutes a deficiency, determine if it is a condition level deficiency. Review the findings and decide if additional information and/or documentation is necessary to substantiate a deficient practice.

The number of deficiencies does not necessarily relate to whether or not a condition is found out of compliance, but rather its impact or potential impact on the quality of laboratory services and the results reported. Consider a condition out of compliance for one or more deficiencies if, in your judgment, the deficiency(ies) constitutes a significant or a serious problem that adversely affects patient test results/patient care, or has the potential for adversely affecting patient test results/patient care.

SOM, App. C, section V, at C-12 (emphasis added).

The determination as to whether a deficiency rises to condition-level is left to the judgment of the surveyor, subject to review and approval by the CMS Regional Office staff and any appeal. The determination that a deficiency is at the condition level is an important part of the CMS prima facie case as only a condition-level deficiency warrants the remedy CMS imposed in this case. According to the SOM, the surveyors identify all the deficiencies, i.e. all the standard-level violations, and then determine whether one or more of those standard-level violations presents a "significant or a serious problem" that actually or potentially affects patient test results or care and, if so, whether it is appropriate to declare a condition-level deficiency. Condition-level and standard-level deficiencies are both premised on the notion that there is potential or actual patient harm; thus, the distinction between condition-level and standard-level under the SOM is that the condition-level violation represents a "significant or a serious problem." The regulations and SOM do not specify what factors should be considered to make the determination that a violation represents a "significant or a serious problem" but leaves that to the judgment of the surveyor, a judgment which is subject to challenge.

(c) Witness credibility

The discussion regarding the elements of the CMS prima facie case demonstrates the importance of the surveyors and their judgments in the process. Not only do the surveyors conduct the survey and create the SOD in which they state their conclusions, but they are also the fact witnesses CMS normally relies upon at hearing to relate their direct observations from the on-site inspection at the laboratory. CMS also calls the surveyors to testify at the hearing regarding their judgment or opinions based upon their observations at the laboratory and the documents they reviewed, much like expert witnesses. Even though surveyors are routinely permitted to express opinions at hearing, there is no regulatory or statutory presumption that surveyors are "expert witnesses" as described, for example, in Fed. R. Evid. 702 or Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). ⁽¹⁹⁾ During the rule-making that lead to the regulations that established the laboratory survey process, several comments were received by HHS questioning HCFA's "sole reliance" on the judgment of the surveyors the Secretary used. The agency response was:

The surveyors whom we employ to inspect laboratories are laboratory professionals. They are trained extensively by both HCFA [the predecessor to CMS] and their respective States in proper inspection techniques under CLIA. They use their professional judgment and expertise in making recommendations. We expect that each surveyor will demonstrate sound judgment and make good decisions. However, there are "checks and balance" inherent in this system. The surveyors' recommendations are reviewed by the supervisory staff of the State agency or other HCFA agents, and are further reviewed by the HCFA regional office (RO). The RO makes the final determination of compliance or noncompliance and imposes the sanction(s) that would, in the opinion of the RO, most likely precipitate correction. We reiterate, however, that State surveyors or other agents designated by HCFA to inspect laboratories are highly trained professionals. We do not believe that the differences in each surveyor's professional judgment would negatively affect a laboratory to the degree predicted by commenters, because one of the major objectives in the training of State health department personnel, State surveyors, and other HCFA agents is consistency in the application of all sanctions.

57 Fed. Reg. 7218, 7224 (Feb. 28, 1992). Given this representation by the agency, I will generally accept without question that a state agency or CMS surveyor has scientific, technical, or other special knowledge that will help me make a decision on a fact in issue, and I give their opinions weight in my deliberation. However, the observations and opinions of surveyors are not unassailable. There is no rule or principle of law that requires blind acceptance of a surveyor's observations and opinions. Fed. R. Evid. 702 provides some examples of avenues of attack upon the opinions of surveyors, e.g., the surveyor's opinions and testimony are not based upon sufficient facts or data; or the surveyor's opinions and testimony are not the product of reliable principles and methods; or the surveyor did not apply principles and methods reliably to the facts of the case. State agency and CMS surveyors may also be challenged as fact witnesses based on inability or poor ability to perceive, faulty observation or perception, bias, and any of numerous other grounds that may establish that their rendition of the facts at hearing is erroneous. When the credibility of a surveyor is challenged, it is necessary to determine whether there is merit to the challenge and what weight, if any, to give the surveyor's testimony. If a surveyor's testimony is found not credible and to lack probative value, it is then necessary to determine whether CMS has made a prima facie showing even without that testimony.

In this case, Petitioner presents a serious challenge to the credibility of two of CMS's witnesses, Ms. Eleco and Mr. Yamamoto. Regarding Ms. Eleco, Petitioner identifies credibility issues regarding an actual or perceived conflict of interest and her level of expertise. Regarding Mr. Yamamoto, Petitioner mounts an indirect challenge to his level of current expertise. There is also an issue presented regarding Mr. Yamamoto to the extent he relied upon information from Ms. Eleco, whose credibility is placed in issue. I address these credibility issues in turn.

(i) The credibility of the state agency surveyor, Ms. Eleco

I conclude, based upon the testimony of Ms. Eleco, that she volunteered to do the survey of Petitioner. Ms. Eleco testified that she put her initials next to Petitioner's name on a list of laboratories that was circulated at a monthly staff meeting to indicate she was willing to do the survey. Tr. 497-98. She also testified that the laboratory was close and she would not have to travel very far. Tr. 505-06. Also, on cross-examination and over objection of counsel for CMS, Ms. Eleco testified that Dinia Gamilla has been her friend since about 1990 and they have been roommates since about 1992. ⁽²⁰⁾ Ms. Eleco admitted that she was aware that Ms. Gamilla was a part-time employee of Petitioner until 2002. Ms. Eleco denied, however, that she ever had discussions with Ms. Gamilla about her employment with Petitioner. Tr. 561-67. She also denied knowing why Ms. Gamilla left her job with Petitioner. Tr. 569. Ms. Eleco testified that during the on-site survey, one of Petitioner's testing personnel asked Ms. Eleco how Ms. Gamilla was doing. Tr. 582. Melis Paronyan, Petitioner's sole owner, testified that Ms. Gamilla worked at Petitioner doing testing from August 2000 through October 4, 2002. Mr. Paronyan testified that on October 4, 2002, he called Ms. Gamilla to his office to discuss her poor productivity and she became upset. Later that evening, Mr. Paronyan was called at home by a staff member who reported that Ms. Gamilla was slamming doors and instruments. He received a subsequent call that Ms. Gamilla had left work before her shift was over. Mr. Paronyan testified that Ms. Gamilla never returned to work. Tr. 1691-98. Mr. Paronyan testified that at the time of the survey he did not know that Ms. Eleco and Ms. Gamilla ere roommates and had he known, he would have protested to the state agency. He only found out from another of Petitioner's employees the day they received the notice of sanctions, August 4, 2003. Tr. 1699-01.

Petitioner argues that Ms. Eleco was influenced or biased in her survey of Petitioner based upon her relationship with Ms. Gamilla and Ms. Gamilla's experience as an employee of Petitioner. Petitioner suggests that the survey in this case was so tainted by Ms. Eleco's bias that the findings of the survey should be thrown out in their entirety, or at a minimum, Ms. Eleco should be found not credible. Petitioner's Post-hearing Brief (P. Brief) at 13-19; Petitioner's Post-hearing Reply (P. Reply) at 11-12. Petitioner points to no state or federal law that establishes Ms. Eleco's relationship with Ms. Gamilla as a per se conflict of interest that required her disqualification from conducting the survey in this case. The provisions of the SOM (revised May 21, 2004) that discuss conflicts of interest for state agency employees are found at Sections 4008 (general conflict of interest rules applicable to State agency surveyors) and 7202 (conflict of interest rules applicable to surveyors of long-term care facilities). ⁽²¹⁾ Ms. Eleco's relationship with Ms. Gamilla is also not a "prima facie conflict of interest" based on the guidance in the SOM. However, Section 4008 defines a conflict as possibly arising when "public employees utilize their position for private gain or to secure unfair advantages for outside associates." The SOM indicates that the gain involved may or may not be monetary and may include abuses of privileged information, influence, or trust. SOM, Section 4008. The SOM places a burden upon state agency administrators to monitor for potential conflicts of interest.

CMS characterizes Petitioner's argument that Ms. Eleco had a conflict of interest or bias based on her relationship as being based on "innuendo" and a "red herring and cannot invalidate findings of noncompliance credibly established by the laboratory's own records." CMS Reply at 13-14. CMS also points to the testimony of Mr. Yamamoto as supporting its allegations that deficiencies existed at Petitioner.

I do not agree with CMS that Petitioner's argument is based on innuendo. It is not disputed that Ms. Eleco and Ms. Gamilla have been roommates for more than ten years. It is also not disputed that Ms. Gamilla worked part-time at Petitioner for two years and left employment in October 2002. It is not known why Ms. Gamilla left employment with Petitioner. Ms. Eleco volunteered to survey Petitioner less than five months after Ms. Gamilla left employment at Petitioner. Ms. Eleco denies any improper motives. I have no direct evidence, such as an admission, that she was influenced in her survey work by improper motives. Nevertheless, it is not unreasonable for Petitioner to take the position that Ms. Eleco's judgment may have been influenced in this case, intentionally or unintentionally, by her relationship with Ms. Gamilla.

While the evidence does not establish an actual conflict of interest or showing of impermissible bias against Petitioner, I find that there is an appearance of a conflict of interest here. However, there are at least two reasons why the appearance of a conflict does not require a conclusion that the survey of Petitioner was invalid. First, my review of whether or not deficiencies existed at Petitioner is de novo. Emerald Oaks, DAB No. 1800 (2001). I determine, based upon the credible evidence before me, whether CMS has made a prima facie showing that Petitioner violated CLIA requirements. My review is not limited to and does not focus upon whether or not surveyors or CMS management were correct in determining whether there were deficiencies. Second, as CMS points out (CMS Reply at 10), this is not a case where survey findings are solely dependent upon Ms. Eleco's observations and conclusions - I have documentary evidence from Petitioner, the testimony of Mr. Yamamoto, and the testimony of Petitioner's witnesses to consider.

Nevertheless, some remedy is required because it is simply not possible to determine with any degree of certainty whether or how Ms. Eleco's professional judgment may have been impacted by her personal interests. The remedy I choose is to simply not give probative value to Ms. Eleco's opinions expressed in testimony and statements found in the documentary evidence. Although Petitioner would prefer the remedy of dismissal on grounds that the survey was tainted by Ms. Eleco, Petitioner suggests, and most strongly supports by its argument, that I simply find Ms. Eleco not credible and not consider the evidence she provided. P. Brief at 16-18. Declining to give Ms. Eleco's opinions probative value is substantially consistent with the relief requested by Petitioner. Further, the remedy I grant is consistent with maintaining public confidence in the integrity of the process while ensuring observance of the Congressional purpose of CLIA of protecting the public.

Accordingly, I will not give probative value to the opinions Ms. Eleco expressed in testimony or the conclusions and opinions expressed by her in documentary evidence. I will, rather, consider the other evidence of record in determining, de novo, whether deficiencies existed at Petitioner as alleged by CMS.

(ii) The credibility of Mr. Yamamoto

Petitioner suggests in its briefing that Mr. Yamamoto relied upon Ms. Eleco; thus, his conclusions and opinions are tainted and should not be given weight in my decision- making. See e.g. P. Brief at 13-14; P. Reply at 8. ⁽²²⁾ I do not find Mr. Yamamoto tainted by the appearance of conflict that causes me to reject, as a remedial measure, Ms. Eleco's opinions. I do not find Mr. Yamamoto's opinions unworthy of consideration simply because they were based in part upon information provided by Ms. Eleco. The evidence shows that Mr. Yamamoto reviewed the SOD independently and he did not consider himself bound by the opinions and conclusions of Ms. Eleco. Tr. 919, 928-29. Mr. Yamamoto testified that when the survey materials were received from the state agency by Ms. Jew, she only gave him the SOD to review; he did not review any documentary evidence collected by Ms. Eleco or her worksheets. Tr. 1019-20. He did testify that he was "in constant conversation" with Ms. Eleco to determine what documents she had and what the documents looked liked. Tr. 1020. I consider in weighing Mr. Yamamoto's opinions that he was not the surveyor who performed the on-site survey of Petitioner. I will also consider that Mr. Yamamoto expressed opinions in testimony at hearing and in documents submitted as evidence that are based upon information given him by Ms. Eleco and Petitioner, and not based on any first-hand knowledge. However, he did review documents submitted by Petitioner as part of an allegation of compliance.

Because Mr. Yamamoto did not perform the on-site survey, he is presented by CMS as an expert witness to the extent that he reviewed documents related to the survey and was asked to opine based on that review. ⁽²³⁾ I have already discussed in detail that I will generally accept a surveyor's testimony regarding his or her opinion as an expert opinion due to the specialized knowledge and experience that surveyors bring to their jobs and the hearing room. However, I have also noted that surveyors are subject to challenge of their knowledge, skill, experience, training, and education. Their opinions are also subject to challenge based on insufficiency of facts or data, application of unreliable principles and methods, or unreliable application of principles and methods to facts of the case. See Fed. R. Evid. 702.

Mr. Yamamoto is a CMS surveyor and I treat him as an expert witness in this case as he has special knowledge and expertise as a surveyor and in laboratory science and his opinions are helpful to me in resolving the issues in this case. In weighing Mr. Yamamoto's opinions, both in testimony and those that appear in documents submitted as evidence in this case, I consider his training, education, experience, knowledge and skill. Mr. Yamamoto testified that he has been a laboratory consultant with CMS since 1997. Tr. 916. Annually, he reviews 15 to 20 surveys performed by state agencies, and has reviewed at least 100 since his employment by CMS. Id. He was taught the CLIA enforcement process by Ms. Mary Jew. He could recall no specific training on "more technical CLIA matters" since joining CMS. Tr. 917. Mr. Yamamoto had prior work experience as a CLIA surveyor with the State of California for five years averaging 80 to 120 CLIA surveys per year. Id. Prior to working as a state surveyor, Mr. Yamamoto worked in both reference and hospital laboratories after receiving his license to do such work from the State of California in 1985. His laboratory work experience included chemistry and hematology testing and immuno-hematology. Tr. 915-18; P. Ex. 47, at 29-31.

Mr. Yamamoto testified generally that he concurred with the deficiencies alleged in the SOD. Tr. 919.

(d) Petitioner's expert witnesses

Petitioner also offered expert testimony from two individuals, Steve Huang and William Gardner. I accept Mr. Huang as an expert witness in the area of laboratory operations with special experience as a surveyor for the College of American Pathologists (CAP) ⁽²⁴⁾ and laboratory consultant as reflected by his testimony regarding his qualifications and his resume which was admitted as P. Ex. 6. Tr. 1167. I also found Mr. Gardner qualified as an expert witness in the area of laboratory operations in California and under federal law based on his responses to questions at hearing and his resume which was admitted as P. Ex. 5. Tr. 1352-53. I found both Mr. Huang and Mr. Gardner qualified as experts over the objection of CMS. I construed the CMS objection to be, in part, that only a CMS trained individual could be qualified to render opinions on what is required to comply with CLIA. I reject the notion that only a CMS trained individual can understand what is required for CLIA compliance. The Social Security Act (42 U.S.C. �� 301 - 2110), CLIA (42 U.S.C. � 263a), and the Secretary's implementing regulations at 42 C.F.R. Part 493 are the law. They specify the requirements for CLIA compliance, and are public documents. The SOM, specifically chapter 6 and Appendix C, are the CMS interpretive rules or guidelines that, while not binding on the public as law, ⁽²⁵⁾ guide CMS and state agency surveyors in administering the clinical laboratory program and conducting surveys. Surveys are conducted by comparing laboratory performance with the standards and conditions specified at 42 C.F.R. Part 493, using the procedures and interpretative guidelines of the SOM. The statutes, regulations, and SOM are all publicly available, and as Mr. Huang and Mr. Gardner both indicated, those materials are important to their work of assisting laboratories to obtain CLIA certificates and to correct or defend against alleged deficiencies. Mr. Huang and Mr. Gardner also demonstrated a special knowledge of the operations of laboratories in the geographic area where they work and, thus, they are knowledgeable of the standards followed by laboratories generally. The argument that only a CMS trained individual is knowledgeable of CLIA requirements is, thus, contrary to facts. Furthermore, the suggestion that only CMS trained individuals can know what is required for CLIA compliance is contrary to our system of laws, for, if this were the case, no laboratory owner or operator could ever know for sure whether there is a requirement or standard to be followed, or whether surveyors arbitrarily make up requirements. Under our system of laws, an individual must generally be on notice of the requirements of the law. See 5 U.S.C. � 552(a); Hillman and Edison decisions (CMS must show as part of its prima facie case the legal requirement or standard to which it seeks to hold Petitioner).

Petitioner also offered the curriculum vitae of Thomas P. Barrow, M.S. (P. Ex. 7) and his declaration (P. Ex. 23), and they were received without objection at hearing by CMS. Tr. 63-65, 86. Based on my review of Mr. Barrow's vitae and declaration, I find him qualified to provide opinions for my consideration in the area of laboratory operations due to his special knowledge and experience in that area.

Of course, the relevance of the expert witness testimony must be determined in the context of an alleged deficiency. The probative value of the expert's testimony is assessed in the context of the subject for which the expert claims special knowledge or expertise.

3. Survey Protocol or Procedure

There is another issue raised by Petitioner that may be considered overarching to the extent that it is an attempt to invalidate the entire survey without looking at individual deficiencies. Petitioner alleges that the survey protocol used by Ms. Eleco was improper for a recertification survey and invalidates the results of the survey. Petitioner argues:

CLIA authorizes CMS to conduct initial, recertification, complaint and validation surveys under 42 C.F.R. Part 493. All are created for different purposes and involve different criteria. While CMS has authority to survey with a focused probe based upon complaint, CMS has no authority to employ the techniques of complaint survey and deceptively describe the work as a recertification survey representative of the overall performance of Millennium.

P. Brief at 8. Petitioner complains specifically that the February 2003 survey was supposed to be a recertification survey but two surveyors came to the laboratory rather than one as in the past. The surveyors did not take a sample from a cross-section of Petitioner's records so as to obtain a reflection as to Petitioner's overall performance related to all testing done. Rather, Ms. Eleco took her sample from Petitioner's panic value log and for only one analyte, potassium. Id. at 9. Petitioner asserts that the procedure Ms. Eleco followed is similar to that used in Medi-Cal fraud investigations or complaint surveys. P. Brief at 12; P. Prehearing Brief at 5-7. Petitioner submitted evidence at hearing and in support of its February 14, 2004 motion for sanctions against CMS that shows that the state agency previously alleged fraud against Petitioner and then withheld Medi-Cal payments until the state agency lost on Petitioner's appeal to a California hearing officer. Petitioner's Request for Sanctions, dated February 14, 2004, Tab A; P. Ex. 65. Petitioner argues in the motion for sanctions that it is concerned that the survey by Ms. Eleco may have been motivated by a desire to accomplish what the state agency previously failed to accomplish. Petitioner's Request for Sanctions, dated February 14, 2004, at 7-10.

Petitioner urges me to conclude that there is a survey protocol to be followed for each of the types of survey that CMS or its agents might perform and that CMS and its agent violated Petitioner's rights by deviating from the correct survey protocol for a recertification survey. I do not read the law or CMS policy to be as strict as Petitioner suggests.

CLIA gave the Secretary authority to inspect laboratories and required that the Secretary establish inspection procedures to ensure compliance with CLIA. 42 U.S.C. � 263a(g). The Secretary promulgated regulations for inspections found at 42 C.F.R. Part 493, subpart Q. The regulations establish a laboratory's responsibilities in the inspection process and give CMS or its agent broad discretion to conduct surveys, except that surveys must generally be done during the laboratory's general hours of operation. 42 C.F.R. �� 493.1775(b); 493.1777(a); 493.1780(b). The regulations recognize the following types of surveys: initial surveys; subsequent surveys on a biennial or such frequency as CMS determines appropriate (recertification surveys); validation surveys; and complaint surveys. 42 C.F.R. �� 493.1773(f), 493.1775, 493.1777, 493.1780. Section 493.1773(b) of 42 C.F.R. provides that CMS or its agent may require the laboratory to test samples or perform procedures, permit interviews of all personnel, permit laboratory personnel to be observed, permit CMS or its agent access to all areas covered by the laboratory's CLIA certificate, and provide CMS or its agent with copies of all records and data CMS or its agent requires. Section 493.1773(e) of 42 C.F.R. provides that CMS or its agent may reinspect at any time. I find nothing in either CLIA or the implementing regulations that supports Petitioner's position that CMS or its agent is required to follow a particular procedure based upon the type of inspection or survey being performed.

The SOM contains CMS's interpretive rules and guidance for the state agency to follow in conducting surveys as a CMS agent. Chapter 6 and Appendix C apply specifically to laboratories subject to survey under CLIA. Survey procedures are set forth in sections 6100 through 6138 of the SOM. Section 6100 specifies that the SOM survey protocols and interpretive guidelines are to be used by all surveyors in determining compliance with federal requirements. The SOM does not specify a number of surveyors to participate in a survey but specifies that, if there is more than one, they must survey together during the same time period. SOM, section 6110. Section 6134 of the SOM, titled "Evaluation of Compliance" specifies that the state agency is to compile all information to determine compliance and complete all reports of survey findings by the surveyors.

Appendix C of the SOM provides more specific guidance for surveyors. The policy for conducting surveys provides that the protocols and guidelines of the SOM are "required for use by all surveyors assessing laboratory performance based on Federal requirements." SOM, App. C, at C-3. The protocols establish an outcome-oriented method with two goals: (1) to promote consistency, efficiency and effectiveness in the survey process to ensure sufficient information is gathered to determine whether or not a laboratory is in compliance; and (2) to assist regulated laboratories in improving patient care through an "educational survey process." Id. The objective for the surveyor is to determine whether the laboratory "is producing accurate, reliable, and timely (quality) test results." Id. The protocols and guidelines do apparently allow surveyors some flexibility as indicated by the following statement:

Regardless of the manner in which the surveyor approaches assessing the laboratory's operation and test performance, the primary objective is to determine whether or not the laboratory meets the CLIA requirements. The surveyor meets this objective by employing an outcome-oriented/quality improvement type of survey process or approach, the intent of which is to focus the surveyor on the overall performance of the laboratory and the way it monitors itself, rather than on a methodical evaluation of each standard level regulatory requirement.

SOM, App. C, at C-3.

In discussing the outcome-oriented/quality improvement survey process, the SOM indicates that the surveyor needs to review and assess the overall function of the laboratory and that quality assurance is an acceptable starting point or guide for organizing the survey. The surveyor is instructed to select "a cross-section of information" covering all aspects of a laboratory's operations to assess the laboratory's ability to produce quality results, including reliability, and the laboratory's ability identify and correct problems, including the development of mechanisms for monitoring and evaluating its practices and solving its problems. Id. at C-4; see also, para. D at C-9. Petitioner suggests that these provisions create a fairly rigid protocol the surveyor must follow. The SOM suggests but does not require that a surveyor use quality assurance as a guide to organizing a survey. There is no dispute in the case before me that Petitioner's panic value log is, in fact, part of its quality assurance program. The SOM does not require that a surveyor select a sample representing a cross-section of laboratory operations before beginning assessment. As Mr. Huang testified, a surveyor can "start anywhere they want" (Tr. 1186). Mr. Huang also pointed out that by reviewing only a panic value log which represents such a small portion of overall laboratory operations, the surveyor may miss a view of the laboratory's overall performance. Tr. 1186-87. If a surveyor selects a partial sample from quality assurance rather than a complete cross-section and determines based on that sample that there is likely a condition-level deficiency, the SOM does not require that the surveyor continue sampling. The discretion granted surveyors is also apparent in other statements in SOM, Appendix C, such as:

Evaluate the laboratory's operations without being excessive. As each laboratory is unique in the services offered, the order of gathering information may be different for each survey.

Id. at C-7.

The survey process allows the freedom to increase or decrease the number and types of records reviewed, the personnel interviewed, and the observations made as individual needs are identified.

Analyze your findings for the degree of severity, survey history, frequency of occurrence, impact on delivery of services, i.e., accuracy, reliability, and timeliness of test results. One occurrence of a deficiency directly related to a potential adverse impact on patient testing may be cited. On the other hand, some preliminary findings may have so slight an impact on outcome that they do not warrant ea (sic) citation.

Id. at C-11.

The surveyor is also instructed to consider the laboratory's compliance history when gathering information. Id. at C-7. In assessing outcome or potential outcome, the surveyor is instructed upon finding a potential problem to ensure the review is sufficient to substantiate whether a negative or potentially negative outcome exists. Id. at C-10. The surveyor is not advised what is required to substantiate a finding of negative or potentially negative outcome.

Based on the foregoing review of the SOM, I conclude that the SOM provides surveyors specific and detailed guidance on organizing and conducting a survey, but it is not an inflexible procedure and allows the surveyor discretion in executing the survey protocol. Petitioner's assertions that it was deprived of due process because it did not have notice of the type of survey being performed or that CMS and its agent violated CLIA by converting a recertification survey to a complaint survey are unfounded. See P.'s Prehearing Brief at 5-7; P. Brief at 8-9; P. Reply at 8-9. Petitioner cites no law for the proposition that it has any due process rights associated with the protocol or procedures surveyors use for selecting the sample to be reviewed. Petitioner cites no law to support its position that CMS or the state agency violates CLIA by use of any particular survey protocol or that Petitioner has any enforceable rights in that regard.

Petitioner also submitted as exhibit D to its Post Hearing Brief and Post Hearing Reply Brief, a copy of an April 21, 2004, Press Release from the U.S. Department of Justice that indicates that the brother of Petitioner's owner agreed to a $10 million settlement to resolve a fraud claim against a different laboratory. Petitioner argues that its survey was tainted by CMS's and the state agency's knowledge of the prior failed action against Petitioner and the fraud action against the other laboratory owned by Petitioner's owner's brother. Obviously, someone in both the CMS and the state agency chains-of-command had knowledge that there was a prior investigation of Petitioner and that there was a pending action against the laboratory owned by the brother of Petitioner's owner. Even if Ms. Jew, Mr. Yamamoto, Ms. Sparhawk, Ms. Eleco, and Mr. Lash had received information of those investigations, rumor or otherwise, I see no impact upon Petitioner's rights in these proceedings. My review is de novo. Whether or not a deficiency exists is determined based upon the evidence of record. Whether or not a deficiency is a condition-level violation is subject to my new determination. Whether or not the remedy proposed is supported is also subject to my new determination. Accordingly, to the extent that there may have been any prejudice in the survey process, it is fully attenuated by the appeal process. The information in the press release that Petitioner has brought to my attention has no impact on my decision-making. Further, the alleged motives of unknown individuals at the state agency or CMS, of Ms. Eleco, or of Ms. Jew, have no impact upon my de novo review except to the extent that motives impact their credibility as witnesses. I have already rejected Ms. Eleco's testimony and opinions on other grounds. I have also noted that Ms. Jew really did not act as a decision-maker in this case, but rather simply processed a decision made by Mr. Yamamoto. I make no assumption regarding the credibility of the survey process followed in this case, but rather engage in a thorough de novo review of the alleged deficiencies.

4. Substantial compliance

Petitioner notes in its post-hearing brief that there is no regulatory definition under CLIA for the phrase "substantial compliance" and no decisions of the DAB have addressed the meaning of the phrase in the context of a CLIA case. P. Br. at 19. Nevertheless, Petitioner, citing to long-term care facility regulations and cases, argues that either CMS has failed to make a prima facie case because it has failed to show Petitioner was not in substantial compliance as to some deficiencies or Petitioner has shown that it was in substantial compliance. P. Brief at 19. Petitioner's expert, Mr. Barrow, opined that Millennium's August 15, 2003 submission in response to the SOD, "met or exceeded CLIA standards for substantial compliance. . . ." P. Ex. 23, at 4. Petitioner's expert, Mr. Gardner, also referred to substantial compliance in the CLIA context. See e.g. Tr. 1358, 1363. Petitioner's citations to long-term care law are inapposite.

CLIA does not require perfection in laboratory operations and, as Ms. Jew testified, that would be unrealistic (Tr. 850). However, it is the Congressional purpose to ensure the accuracy and reliability of laboratory tests and, hence, the public health of all Americans. See H.R. Rep. No. 100-899, at 8, 18 (1988), reprinted in 1988 U.S.C.C.A.N. 3828, 3839. Consistent with this purpose, CLIA, the regulations, and the SOM speak only in terms of compliance and noncompliance, not "substantial compliance." See, e.g., 42 U.S.C. � 263a(i)(1) (CLIA certificate may be suspended, revoked, or limited where Secretary finds a laboratory "failed to comply" with CLIA requirements); 42 U.S.C. � 263a(g) (requires inspection of CLIA laboratories to ensure compliance with the requirements of a CLIA certificate and the standards issued by the Secretary pursuant to CLIA).

It is clear from the provisions of the regulations and the SOM already cited in this decision that, under CLIA, there are condition-level deficiencies that involve actual or potential patient harm and there are standard-level deficiencies that present a lesser risk of patient harm. Neither the SOM nor the regulations characterizes a laboratory as being "substantially compliant" so long as there are few deficiencies that present little or no risk of patient harm. In fact, the regulatory scheme requires that even where there are only standard-level deficiencies, an acceptable plan of correction must still be submitted and correction must be made within 12 months or the laboratory will lose its CLIA certificate, if appropriate, and Medicare/Medicaid reimbursement. See 42 C.F.R. � 493.1816; SOM, section 6134.

I note that 42 U.S.C. � 263a(h), which authorizes the Secretary to impose intermediate sanctions (referred to as alternative sanctions in the regulations, 42 C.F.R. � 493.2) states:

If the Secretary determines that a laboratory which has been issued a certificate under this section no longer substantially meets the requirements for the issuance of a certificate, the Secretary may impose intermediate sanctions in lieu of the actions authorized by subsection (i) of this section.

42 U.S.C. � 263a(h)(1) (emphasis added). The legislative history of this provision shows that Congress authorized the use of intermediate sanctions to give the Secretary more options when dealing with noncompliant laboratories than the two available to him up to that point - either no action or shutting down the laboratory. The examples provided in the legislative history for when the use of intermediate sanctions is appropriate are those cases where the laboratory is out of compliance but allowing the laboratory to continue operation subject to intermediate sanctions until compliance is achieved, "would not place the health of patients in jeopardy" and the laboratory has made a good faith effort to comply. H.R. Rep. No. 100-899, at 32-33 (1988), reprinted in 1988 U.S.C.C.A.N. 3828, 3853-3854. This provision and its history highlights that deficiencies under CLIA are not acceptable, but there are greater and lesser deficiencies and for the lesser deficiency, the laboratory may be given an opportunity to correct rather than be immediately shut down.

I conclude that the concept of "substantial compliance," as applied in the long-term care context, has no application in the CLIA survey and certification context, either as an element of the CMS prima facie case or as a defense to be shown by Petitioner. ⁽²⁶⁾ When "substantial compliance" is used in the CLIA context, I construe it to refer to the situation where there is no actual or potential patient harm; for example, where only standard-level deficiencies are cited but the state has accepted a plan of correction and certified compliance pending correction of deficiencies. Petitioner cites no authority and I find none to support the suggestion at page 12 of Petitioner's prehearing brief that there is some standard of statistical substantial compliance, e.g., if results are reported correctly 99.9% of the time, a laboratory is compliant, except where specified by regulation, e.g., in the area of proficiency testing. Mr. Huang testified that he was aware of no statistical compliance standard in the CLIA survey and certification process. Tr. 1191. Furthermore, a statistical substantial compliance standard, as suggested by Petitioner, would be inconsistent with the Congressional purpose of CLIA because it would imply that some threat to patient health may be acceptable.

5. Alleged deficiencies

According to CMS records, Petitioner's initial CLIA certification was done February 4, 1993, with recertification on April 12, 1995, April 18, 1997, August 24, 1998, and January 5, 2001. P. Ex. 47, at 6. Petitioner provided evidence dating to 1997 that shows Petitioner was found to have only standard-level deficiencies during its survey in 1997. No deficiencies were found during the 12-month follow-up survey in 1998 nor in the survey of 2001. P. Ex. 10. At the time of the survey at issue in this case, Petitioner possessed a CLIA Laboratory Certificate of Compliance with an effective date of February 16, 2001, and an expiration date of February 15, 2003. ⁽²⁷⁾ P. Ex. 1.

CMS alleges, based on the SOD, that Petitioner failed to meet the following conditions: 42 C.F.R. � 493.1101 (D3000) Patient Test Management (moderate or high complexity testing or both); 42 C.F.R. � 493.1201 (D4000) General Quality Control (moderate or high complexity testing, or both); 42 C.F.R. � 493.1403 (D6000) Laboratory Director (moderate complexity testing); and 42 C.F.R. � 493.1701 (D7000) Quality Assurance (moderate or high complexity testing, or both). See CMS Ex. 5, at 4. CMS also alleges that Petitioner violated the standard-level requirements of 42 C.F.R. � 493.841(a) (D2087) Routine Chemistry; and 42 C.F.R. � 493.843(a) (D2098) Endocrinology. ⁽²⁸⁾ See CMS Ex. 5, at 12-13. Although the cited standard-level deficiencies do not provide a basis for an enforcement remedy, CMS argues that the standard-level deficiencies did contribute to the surveyors' finding that the laboratory was not in compliance with the condition-level requirement for quality assurance. CMS Brief at 4.

The deficiencies alleged under tag D3000, Patient Test Management, are also the basis for some of the alleged deficiencies under tag D6000, Laboratory Director, and tag D7000, Quality Assurance. I conclude that a condition-level violation of D3000 has been shown and not rebutted or corrected, which also leads to the conclusion that there are condition-level violations of both D6000 and D7000. A finding of one condition-level violation is a sufficient basis for revocation of a CLIA certificate.

(a) 42 C.F.R. � 493.1101 (D3000) Patient Test Management; moderate or high complexity testing, or both

The SOD alleges that a condition-level violation of this regulation existed based on the "number and severity of the deficiencies cited herein . . . ." CMS Ex. 5, at 13. The allegation of a condition-level violation cites four alleged standard-level violations: (i) Petitioner "failed to follow instructions for specimen preservation" as alleged under D3010; (ii) Petitioner's record system "failed to include the condition and disposition of specimens that did not meet the laboratory's criteria for acceptability" as alleged under D3040; (iii) Petitioner "failed to have adequate systems in place to report results in a timely, accurate and reliable manner" as alleged under D3050; and (iv) Petitioner "failed to indicate on the test report any information regarding the condition and disposition of specimens which did not meet the laboratory's criteria for acceptability" as alleged under D3061. Id. at 13-14. It is necessary to assess each of these alleged standard-level deficiencies to determine whether or not CMS has made a prima facie showing and whether or not Petitioner has established a defense by the preponderance of the evidence. It is necessary to determine whether any proven standard-level violations, individually or collectively, are of such severity to constitute a condition-level violation that provides a basis for the enforcement remedy proposed by CMS, i.e., revocation of Petitioner's CLIA certificate.

(i) Whether Petitioner "failed to follow instructions for specimen preservation," as alleged under standard D3010

The regulatory requirement for D3010 is at 42 C.F.R. � 493.1103(a):

The laboratory must have available and follow written policies and procedures for each of the following, if applicable: Methods used for the preparation of patients; specimen collection; specimen labeling; specimen preservation; conditions for specimen transportation; and specimen processing. Such policies and procedures must assure positive identification and optimum integrity of the patient specimens from the time the specimen(s) are collected until testing has been completed and the results reported.

CMS alleges that the standard was violated because, based on 28 of the 56 records Ms. Eleco ⁽²⁹⁾ examined, Petitioner did not follow the instructions on the package inserts for ThermoTrace, ThermoDMA, and Diagnostic Products Corporation. CMS alleges that the failure to follow manufacturer insert instruction results in "failure to ensure the reporting of accurate and reliable test results." CMS Ex. 5, at 14. The SOD refers to D6007 (Id. at 38-43) for the specific factual allegations that support the conclusion that the standard was violated. ⁽³⁰⁾ It is alleged under D6007 that Petitioner tested suboptimal specimens, i.e. specimens that were hemolyzed to some degree or had prolonged contact between red blood cells and serum, contrary to the manufacturer's instructions resulting in the failure to report accurate and reliable test results. Id.

The regulatory requirement for the standard identified by D3010 is clear - a laboratory must have and follow "written policies and procedures for, among other things, specimen preservation. 42 C.F.R. � 493.1103(a). The regulation further states that the laboratory's "policies and procedures must assure positive identification and optimum integrity of the patient specimens from the time the specimen(s) are collected until testing has been completed and the results reported." Id. The probes set forth in Appendix C relate to 42 C.F.R. �� 493.1103(a) through (c), and encompass several tags (D3001, D3004, D3007, D3010, D3013, D3014, and D3016) in addition to D3010. The probes serve to focus surveyors' attention on the following issues: how the laboratory ensures that special handling requirements are met throughout the testing process; what instructions the laboratory gives for optimal specimen collection; what instructions the laboratory gives for preservation and transportation; what provisions are made for clients to receive special instructions for unique cases; whether, when tests are not performed daily, specimens are stored in accordance with laboratory policy to ensure specimen integrity; whether the laboratory's specimen identification system ensures each patient's specimen and any aliquots are uniquely identified for that patient; and whether the laboratory maintains and follows a current client service manual that includes any reference laboratory requirements. See SOM, App. C, at C-96 to C-97.

In this case, comparing the CMS allegations under D3010 with 42 C.F.R. � 493.1103(a) and the probes provided for surveyors in the SOM, there is an obvious disconnect and it is clear that CMS has failed the first element of its prima facie case for this alleged violation. The standard of D3010 is that a laboratory must have and follow written policies and procedures. CMS does not allege under D3010 that the laboratory did not have the required policies and procedures or that they did not satisfy the requirements of the regulation. Rather, CMS alleges under D3010 that Petitioner tested samples where hemolysis had occurred or the red blood cells had been in prolonged contact with the serum and manufacturer's instructions indicated that such samples should not be used or their use was not recommended. Under D3010, it is also alleged that Petitioner "failed to follow instructions for specimen preservation" with the cross-reference to D6007, which contains the allegations summarized hereafter in the discussion of D3050. However, the deficiency citation does not allege that Petitioner violated a particular laboratory preservation policy. In fact, CMS presented no evidence and did not even allege that Petitioner caused, by some improper preservation, the hemolysis or prolonged contact between red blood cells and serum that allegedly affected the cited test results. Mr. Yamamoto testified that there are different reasons that a specimen might be hemolyzed, some of which do not stem from conduct of Petitioner. Tr. 959-62. Petitioner's expert, Mr. Huang, also testified as to the many potential causes for hemolysis, some of which can occur before a sample even reaches the laboratory. Tr. 1272-74; see also P. Ex. 45. Both Mr. Yamamoto and Mr. Huang also testified that a specimen can be naturally hemolyzed due to certain clinical conditions. Tr. 960, 1272. The allegations of D6007 that Petitioner tested compromised specimens, not in accordance with the manufacturer's recommendation in package inserts, is not an allegation that Petitioner improperly preserved those specimens.

Ms. Eleco's testimony about why she cited this deficiency tracks with the allegations in the SOD, i.e. Petitioner has a policy to follow manufacturers' inserts and in this case it did not by testing samples that were hemolyzed or involved prolonged contact between serum and red blood cells. Tr. 179-80. Ms. Eleco never testified that Petitioner failed to have a policy, or that Petitioner had a policy but did not follow it, causing a negative impact on specimen preservation that led to inaccurate results, or that Petitioner improperly preserved specimens. Ms. Eleco did not testify that any conduct of Petitioner resulted in hemolysis or prolonged contact between red blood cells and serum. Rather, Ms. Eleco's testimony is consistent with the fact that her complaint is really based upon Petitioner's testing of suboptimal specimens and Petitioner's failure to note this in the laboratory reports issued by Petitioner.

Accordingly, I conclude that CMS has failed to make a prima facie showing of a violation of the standard established by 42 C.F.R. � 493.1103(a). CMS has not shown facts that constitute a violation of the law it cites.

(ii) Whether Petitioner's record system failed to include the condition and disposition of specimens that did not meet the laboratory's criteria for acceptability, as alleged under D3040

The standard for D3040 is set forth at 42 C.F.R. � 493.1107(c):

The laboratory must maintain a record system to ensure reliable identification of patient specimens as they are processed and tested to assure that accurate test results are reported. These records must identify the personnel performing the testing procedure. Records of patient testing, including, if applicable, instrument printouts, must be retained for at least two years. Immunohematology records and transfusion records must be retained for no less than five years in accordance with 21 CFR part 606, subpart I. In addition, records of blood and blood product testing must be maintained for a period not less than five years after processing records have been completed, or six months after the latest expiration date, whichever is the later date, in accordance with 21 CFR 606.160(d). The record system must provide documentation of information specified in � 493.1105 (a) through (f) and include -

* * * *

(c) The condition and disposition of specimens that do not meet the laboratory's criteria for specimen acceptability;

The guidelines and probes for D3040 are set forth in Appendix C of the SOM under 42 C.F.R. � 493.1107. The guideline clarifies that the regulation gives laboratories flexibility to establish a system that ensures "positive patient identification through specimen accessioning and storage, testing and reporting of test results." SOM, App. C, at C-99. The focus is upon using a patient's name or other unique identifier to ensure positive identification of the specimen through the entire process including disposition of unacceptable specimens. The probes question how the laboratory's system tracks specimens throughout the process and whether records show that all testing information for a specimen is documented (including work records) so that there is a clear history of what happened to the specimen.

It is alleged in the SOD that the standard of 42 C.F.R. � 493.1107(c) was violated with respect to 42 of 56 records reviewed because "the laboratory's record system failed to include the condition and disposition of specimens that did not meet the laboratory's criteria for acceptability." CMS Ex. 5, at 14, 16. The citation in the SOD for D3040 refers to D7023-1(a)(b)(f) for the factual allegations in support of the cited deficiency. ⁽³¹⁾

D7023 is a standard for patient test management assessment under the condition of quality assurance. The regulatory standard for that tag is 42 C.F.R. � 493.1703(c), which requires generally that a laboratory must monitor, evaluate, and revise its specimen rejection policy. D7023-1, or example 1 under D7023, is a deficiency cited by Ms. Eleco. CMS Ex. 5, at 55-58.

There are several factual allegations under D7023, example 1. D7023-1.a alleges that Petitioner had a document entitled "Criteria for Unacceptable Specimens" that provided that hemolyzed specimens should not be used for electrolytes, enzymes or blood bank, and if not possible to obtain a specimen that was not hemolyzed, the hemolysis should be noted on the report slip. Id. at 55. The alleged facts under D7023-1 do not show a violation of the standard of 42 C.F.R. � 493.1107(c) as interpreted by CMS in the SOM. The allegations under D7023-1 simply have nothing to do with specimen identification using a patient's name or a unique identifier or having a record of what happened to a specimen that did not meet the laboratory's criteria for acceptability, which are the requirements established by 42 C.F.R. � 493.1107(c). No violation of 42 C.F.R. � 493.1107(c) or 42 C.F.R. � 493.1703(c) is alleged.

D7023, example 1.b, alleges that on the first day of the survey the surveyor asked for the specimen rejection log which the laboratory could not produce. The lab did not begin using such a log until after the surveyor made the request. CMS Ex. 5, at 55. The difficulty for CMS is 42 C.F.R. � 493.1703 does not establish a requirement for a specimen rejection log. Appendix C of the SOM makes clear that the laboratory has discretion to adopt the system for tracking specimens using patient name or other unique identifier. No violation of 42 C.F.R. � 493.1107(c) or 42 C.F.R. � 493.1703(c) is alleged.

D7023, example 1.c, alleges that Petitioner had a document titled "Laboratory Quality Assurance/Assessment Program," which set a 95% threshold for problem specimens. Petitioner's document titled "Quality Assurance Monitoring/Assessment for October 2002 showed that Petitioner rated itself 99.6% compliant with problem specimens. CMS Ex. 5, at 55-56. Again, this allegation does not relate to specimen identification and recording specimen history or relate to recording the condition and disposition of unacceptable specimens and, therefore, does not reflect any violation of 42 C.F.R. � 493.1107(c) or 42 C.F.R. � 493.1703(c).

D7023, example 1.d, alleges a failure by Petitioner to discover problems through its quality assurance process (CMS Ex. 5, at 56) and does not relate to specimen identification and history or relate to recording the condition and disposition of unacceptable specimens. Thus, no violation of 42 C.F.R. � 493.1107(c) or 42 C.F.R. � 493.1703(c) is alleged.

D7023, example 1.e, alleges that Petitioner tested sub-optimal specimens that were hemolyzed or that involved prolonged contact between serum and red blood cells and that manufacturers had indicated in their literature that certain test results may be affected by the use of such samples. CMS Ex. 5, at 56. No violation of 42 C.F.R. � 493.1107(c) or 42 C.F.R. � 493.1703(c) related to specimen identification and history or to recording the condition and disposition of unacceptable specimens is alleged.

D7023, example 1.f, alleges that Petitioner tested and reported on sub-optimal specimens. CMS Ex. 5, at 56. The allegations do not indicate a failure of Petitioner related to specimen identification using the patient's name or a unique identifier. The allegations also fail to include any alleged problem with recording specimen condition and the disposition of unacceptable specimens. Thus, no violation of 42 C.F.R. � 493.1107(c) or 42 C.F.R. � 493.1703(c) is alleged.

Based on the foregoing, I conclude that CMS has failed to establish a prima facie showing of a violation of 42 C.F.R. � 493.1107(c).

(iii) Whether Petitioner failed to have "adequate systems in place to report results in a timely, accurate and reliable manner," as alleged under D3050

The regulatory requirement for D3050 is at 42 C.F.R. � 493.1109(a):

The laboratory report must be sent promptly to the authorized person, the individual responsible for using the test results or laboratory that initially requested the test. The original report or an exact duplicate of each test report, including final and preliminary report, must be retained by the testing laboratory for a period of at least two years after the date of reporting. Immunohematology reports and transfusion records must be retained by the laboratory for a period of no less than five years in accordance with 21 CFR part 606, subpart I. In addition, records of blood and blood product testing must be maintained for a period not less than five years after processing records have been completed, or six months after the latest expiration date, whichever is the later date, in accordance with 21 CFR 606.160(d). For pathology, test reports must be retained for a period of at least ten years after the date of reporting. This information may be maintained as part of the patient's chart or medical record which must be readily available to the laboratory and to HHS upon request.

(a) The laboratory must have adequate systems in place to report results in a timely, accurate, reliable and confidential manner, and, ensure patient confidentiality throughout those parts of the total testing process that are under the laboratory's control.

The SOD cites four examples of this alleged violation, all of which focus upon the accuracy and reliability of reported test results. The first example alleges that, based on examination of 24 of 56 records from the period October 1, 2002 through February 12, 2003, Petitioner failed to have adequate systems to ensure reporting of accurate and reliable alkaline phosphatase (ALP) test results. CMS Ex. 5, at 16-18. The second example alleges that two records from October 22, 2002, show that Petitioner failed to have adequate systems to ensure reporting of accurate and reliable folic acid test results.

Id. at 18-20. The third example alleges that examination of two records from October 22, 2002, revealed the laboratory failed to have adequate systems to ensure accurate and reliable reporting of vitamin B12 test results. Id. at 20-21. The fourth example alleges that a review of 28 of 56 records from the period October 1, 2002 through February 12, 2003, shows that Petitioner failed to have adequate systems in place to ensure accurate reporting of test results for LDH, AST, ALT, phosphorus, uric acid, and folic acid. Id. at 21.

Appendix C of the SOM sets forth several probes relating to 42 C.F.R. � 493.1109(a), which encompasses D3054 in addition to D3050. The probes are also applicable to several other tags (D3056, D3061, D3062, D3063, and D3064). The probes cover legibility of reports, whether reports "clearly represent the information intended," and how the laboratory maintains confidentiality of reports. SOM, App. C, at C-101. Four of the probes are directly applicable to the allegations in the SOD under D3050:

How does the reference laboratory notify the referring laboratory or client of unacceptable specimens in a timely manner?

How does the laboratory provide the authorized person ordering tests or using test results with information that is necessary for proper interpretation of the results?

What information does the laboratory provide to the individual ordering or using test results when specimens are unsatisfactory for testing?

How does the laboratory inform the individual ordering or using a test of the test method employed when it is critical to the interpretation of the test results . . . .

Id. at C-100, C-101. These probes show that the focus of D3050 is not only upon the legibility and confidentiality of a report, but also upon the accuracy of its contents and whether the information in the report can be accurately interpreted with information in the report regarding such variables as condition of specimen at the time of testing, test method, deviation from known and/or accepted standards in testing, and any other factors that might impact test results and the interpretation of those results.

The gist of the allegation under the first example is that Petitioner stored specimens before testing longer than the manufacturer of the test reagent package recommended and Petitioner had not verified and established performance specifications for the reagent using samples that were stored longer than recommended. CMS Ex. 5, at 16-18. It is not disputed that Petitioner used a test reagent for ALP manufactured by ThermoTrace. The package insert admitted as CMS Ex. 70, p. 16 includes the notation under the heading "Specimen Collection and Handling" that "ALP activity in stored serum increases with time . . . . The rate of this increase is both temperature and time dependent." It is also undisputed that Petitioner had an established reference range for ALP of 30 - 140 U/L.

CMS Ex. 5, at 17. The SOD lists 24 patient identifiers with dates samples were collected and tested and the ALP test result. Id. Comparing the dates collected with the dates tested, more than 24 hours separated collection and testing for all 24 samples. Id. Most of the ALP test results fall within the reference range, but four are greater than the upper parameter. The real problem is that the test reports for the examples listed do not contain any information that indicates to the user of the report that the samples were suboptimal when tested because they were more than 24 hours old and the user cannot make a determination as to the validity of the reported result and what action to take based on the reported result.

In briefing, CMS uses as an example for this deficiency CMS Ex. 53, the test report for Patient 669518. CMS Evidence Matrix, at 5; Tr. 273-74. The report reflects that the blood sample was collected on January 29, 2003, received by Petitioner on January 30, 2003, and results were reported on February 3, 2003. CMS Ex. 53, at 1. The ALP result was reported as 157, which is above the reported reference range. Id. at 3. CMS Ex. 65, at 82 is an instrument printout that contains the actual test result and shows that the test was run on January 31, 2003 at 10:49. It is not evident from the printout whether the test was run at 10:49 a.m. or 10:49 p.m. and we also do not know at what time the patient's blood was drawn. However, it is clear that more than 24 hours elapsed between collection on January 29, 2003, sometime before 11:59 pm on that date, and actual testing of the specimen on January 31, 2003. As I stated above, my review of the other examples cited under D3050, example 1, shows that all the samples were collected more than 24 hours before they were tested.

None of the foregoing test reports includes a statement that would alert the user to the fact that the specimens were tested more than 24 hours after they were drawn or that that is inconsistent with the reagent or test kit manufacturer's instructions.

Petitioner argues that Petitioner gave the ordering physician notice if there was a problem with the specimen and there was no adverse patient impact from this alleged deficiency because the reports noted that the specimen was suboptimal. P. Brief, Ex. C, at 3; P. Reply, Ex. C, at 3.

Petitioner's expert, Mr. Gardner, acknowledged that Petitioner did report some ALP results on specimens "that were stored more than the manufacturer said and that they caught those and they had a notation on the report." Tr. 1440. Mr. Gardner is correct that all the reports related to D3050 example 1 contained a note that indicated the sample was suboptimal, but that note related to the potassium test result (or lack thereof for CMS Exs. 50, 52, 53, 58) and in the case of CMS Ex. 39, separate notes related to the potassium and phosphorus test results, not the ALP result. My review shows there is nothing on the reports that alerts the report user that there is a potential problem because the specimen was tested more than 24 hours after it was drawn, which is contrary to the manufacturer's instructions.

Mr. Gardner testified that he reviewed the reports in question and did not see any results "that were more than four, five, or six days" old and that he would not be concerned about timeliness unless he saw tests results that were being issued seven to ten days after receipt of the specimen. Tr. 1439. Mr. Gardner accurately testified that it is up to the laboratory to establish its turn-around time policy. Id. I understand Mr. Gardner's opinion regarding turn-around time. But, the issue raised by this deficiency is not whether the laboratory violated a turn-around time policy; the deficiency relates to testing a sample that exceeds the manufacturer's specification for an optimal specimen with no notice in the test report that reported results might be affected. Mr. Gardner also opined, referring to his testimony regarding alleged high potassium results (Tr. 1427-33), that the notation regarding high potassium on the reports was sufficient to place the doctor using the report on notice that the sample was suboptimal for testing and that potassium and other test results might be affected. Mr. Gardner also opined that it is up to the doctor to know what to do and there is no patient outcome. Tr. 1431-32; 1438. Mr. Gardner testified that he does not believe the deficiency alleged under D3050, Example 1, amounts to a condition-level deficiency. Tr. 1440-42.

The second example under D3050 alleges that, for two specimens tested on October 24, 2002, the laboratory failed to have an adequate system for the accurate and reliable reporting of folic acid test results. CMS Ex. 5, at 18. There is no dispute that Petitioner used a folic acid test from Diagnostic Products Corporation. The manufacturer's package insert specifies that hemolyzed serum is inappropriate for analysis, and storage for serum or heparinized plasma should be no more than 8 hours at 2-8C, or 6-8 weeks at -20C. CMS Ex. 70, at 27. It is alleged that for Patients 636076 (CMS Ex. 34) and 636079 (CMS Ex. 36) folic acid results were reported on testing done more than 24 hours after the specimens were collected with results outside Petitioner's reference range. CMS Ex. 5, at 18. According to Petitioner's reports, samples for both 636076 and 636079 were collected on October 22, 2002, and received by Petitioner on October 23, 2002. CMS Exs. 34 and 36. Test results at CMS Ex. 67, at 5 and 7, show that 636076 was tested on October 24, 2002 (error reported) and again on October 25, 2002, both tests more than 24 hours after collection. I cannot locate instrument printout test results for 636079 for folic acid and do not consider this sample further. ⁽³²⁾ Petitioner has not alleged that storage was at -20C. On reviewing the test report for Patient 636076, I note that there is a notation to the report user that the reported potassium result may be inaccurate but I find no such similar notation regarding the folic acid result. CMS Ex. 34, at 2.

Petitioner's argument is the same for example 2 as example 1. Mr. Gardner testified that his opinions regarding this example are the same as those expressed regarding the reporting of high potassium results. He indicated this is also just a problem with a suboptimal specimen and the doctor using the report was already on notice by the notation in the report. Tr. 1507-09.

The third example under D3050 relates to vitamin B12 testing and reporting. CMS alleges that for Patients 636076 and 636079, vitamin B12 results were reported on specimens that were not tested within 24 hours. CMS Ex. 5, at 20. It is not disputed that Petitioner used the Diagnostic Products Corporation vitamin B12 test kit. The manufacturer specifies in the package insert that if a sample is not assayed within 8 hours, it should be stored at -20C for up 6 to 8 weeks. CMS Ex. 70, at 35. Samples for Patients 636076 and 636079 were collected on October 22, 2002, and received by Petitioner on October 23, 2002. CMS Exs. 34 and 36. Again, I have no instrument printout for Patient 636079 for vitamin B12 and do not consider it further. The instrument printout for B12 testing for 636076 is at CMS Ex. 67, at 5, and it shows testing on October 24, 2002, more than 24 hours after the blood was drawn. ⁽³³⁾ Mr. Gardner testified that his opinion regarding the third example is the same as for D3050, example two. Tr. 1509-10. Petitioner's argument is the same for all examples under D3050.

Example four of D3050 alleges that Petitioner did not accurately report test results for LDH, AST, ALT, phosphorus, uric acid, and folic acid for 28 of 56 patient reports examined from the period October 1, 2002 through February 12, 2003. The SOD refers to the factual allegations of D6007. CMS Ex. 5, at 21.

The SOD alleges under D6007, example a.(1), that Petitioner routinely received and tested blood specimens that had undergone hemolysis (the breakdown of the red blood cells) or that involved prolonged contact between serum and red blood cells. CMS Ex. 5, at 39. CMS alleges that ThermoTrace, the manufacturer of the test used by Petitioner for LDH, specified in its package insert that non-hemolyzed serum should be used and hemolyzed specimens should not be used, which is consistent with my review of the document at CMS Ex. 70, at 10-11. However, Petitioner tested samples that were hemolyzed or involved prolonged contact with red blood cells and issued reports for patients 633882 (CMS Ex. 17), 635970 (CMS Ex. 26), and 637403 (CMS Ex. 43) with LDH results outside Petitioner's established reference range. CMS Ex. 5, at 39.

CMS alleges under D6007, example a.(2), that ThermoDMA, the company that manufactured the AST test used by Petitioner, states in its package insert that non-hemolyzed serum is the recommended sample, that gross hemolysis should be avoided, and that serum should be separated from cells as soon as possible after collection. CMS Ex. 5, at 39-40; CMS Ex. 70, at 12. CMS alleges that Petitioner tested for AST and reported results outside the laboratory's established reference range on specimens that were either hemolyzed or involved prolonged contact with red blood cells for patients 628006 (CMS Ex. 9), 633882 (CMS Ex. 17), 636065 (CMS Ex. 30), 637403 (CMS Ex. 43), and 672431 (CMS Ex. 58). CMS Ex. 5, at 40.

ThermoDMA manufactured the ALT test that Petitioner used. CMS alleges, under D6007, example a.(3), that the package insert for the ALT test stated that clear, non-hemolyzed serum is the recommended sample and gross hemolysis should be avoided. CMS Ex. 5, at 40; CMS Ex. 70, at 14. CMS alleges that Petitioner tested for ALT and reported results outside the laboratory's established reference range on specimens that were either hemolyzed or involved prolonged contact with red blood cells for patients 628006 (CMS Ex. 9), 632266 (CMS Ex. 15), 633882 (CMS Ex. 17), 636065 (CMS Ex. 30), 636069 (CMS Ex. 31), 636074 (CMS Ex. 33), 636078 (CMS Ex. 35), 637403 (CMS Ex. 43), and 672431 (CMS Ex. 58). CMS Ex. 5, at 40-41.

It is alleged in the SOD under D6007, example a.(4) (CMS Ex. 5, at 41), that ThermoTrace manufactured the phosphorus test used by Petitioner and specified in its insert that non-hemolyzed serum should be used, which is consistent with my review of CMS Ex. 70, at 23. CMS alleges that Petitioner tested hemolyzed samples or samples with prolonged contact with red blood cells for phosphorus and reported results outside its established reference range for patients 631373 (CMS Ex. 13) and 637318 (CMS Ex. 41). CMS Ex. 5, at 41.

Example a.(5) of D6007 alleges that ThermoDMA manufactured the uric acid test used by Petitioner and specified in its insert that non-hemolyzed serum is recommended. CMS Ex. 5, at 42; CMS Ex. 70, at 20. CMS alleges that Petitioner tested and reported uric acid results outside the laboratory's established reference ranges for uric acid on specimens that were either hemolyzed or involved prolonged contact between serum and red blood cells for patients 628006 (CMS Ex. 9), 628008 (CMS Ex. 10), 634692 (CMS Ex. 20), 636069 (CMS Ex. 31), and 636078 (CMS Ex. 35). CMS Ex. 5, at 42.

It is alleged in the SOD under D6007, example a.(6), that Diagnostic Products Corporation manufactured the folic acid test used by Petitioner and specified in its package insert that hemolyzed serum samples are inappropriate for analysis and hemolyzed samples are unsuitable for serum folate determinations. CMS Ex. 5, at 42; CMS Ex. 70, at 27, 30. CMS alleges that Petitioner tested for folic acid and reported results outside the laboratory's reference range on samples that were either hemolyzed or involved prolonged contact with red blood cells for patients 636076 (CMS Ex. 34) and 636079 (CMS Ex. 36). CMS Ex. 5, at 42-43.

It is alleged under D6007, example b, regarding patient 672431, that a laboratory report shows that the laboratory director, Mr. Salamanca, cancelled a potassium test on a sample because the serum separator tube was not centrifuged immediately to separate serum from red blood cells. CMS Ex. 5, at 43; CMS Ex. 58. Nevertheless, it is alleged that Petitioner reported abnormal tests results for LDH, AST, and ALT, results which are also potentially affected by hemolysis or prolonged contact between red blood cells and serum. CMS Ex. 5, at 43.

There is no dispute related to D6007, as incorporated by reference by D3050, example 4, that CMS's allegations are correct regarding the manufacturers of the various tests cited, that the manufacturers' package insert instructions are as alleged, and that each report cited involved testing of a suboptimal specimen. Regarding D6007, Mr. Gardner testified that it is no deficiency for a laboratory to receive and test hemolyzed specimens. Tr. 1391. Mr. Yamamoto agrees that the receipt and testing of a hemolyzed specimen is not prohibited under CLIA. Tr. 958-62. Mr. Gardner also points out that, in his opinion, the CMS allegation that hemolyzed specimens were "routinely" received and tested is not supported by the evidence because Ms. Eleco only looked at a small sample taken from Petitioner's panic value log. Tr. 1391. Merriam-Webster Online Dictionary defines "routinely" as meaning that something is commonplace or repetitious in character or that it is in accordance with established procedure. Whether or not it is a fair characterization that the number of samples selected by CMS shows that suboptimal specimens were routinely received and processed is not important for my decision. It is apparent that Petitioner did receive and test more than one suboptimal specimen over the period October 2002 to February 2003. The expert witnesses seem to agree that it is not uncommon for laboratories to receive and process hemolyzed specimens. In fact, Mr. Huang noted that every laboratory in which he worked had handled hemolyzed or suboptimal samples. Tr. 1049. The evidence also indicates that Petitioner had policies for handling suboptimal specimens. CMS Ex. 68, at 18. However, I understand Mr. Gardner's point to be that the number of samples selected by Ms. Eleco for her survey, in proportion to the total number of test reports generated during a year, or even during the period she limited her selection to, is relatively small. I construe Mr. Gardner's opinion to be that there was no deficiency under D6007. His testimony indicates that, in his opinion, all the test reports were accurate and reliable and the laboratory notified the report user that the specimen was suboptimal by the notation about the high potassium value. See Tr. 1389-02; 1510-11.

I find that the laboratory violated the standard established by 42 C.F.R. � 493.1109(a) as interpreted by the SOM under D3050. The standard is simple - a laboratory must issue timely, accurate and reliable reports. The examples cited in the SOD under D3050 involved suboptimal specimens. The problem here is that Petitioner did not include in the test report some notation that the specimen was suboptimal for testing on a specific analyte which might have some effect on the result. Because there was no note, the report user might make incorrect assumptions or judgments based upon reported test results for the affected analytes. Mr. Gardner tells me that the note about potassium which appears on most all these reports, is sufficient to place a doctor on notice that the specimen was suboptimal. Mr. Gardner assumes that a doctor will understand the effect a suboptimal specimen may have upon the various analytes. I am not persuaded by Mr. Gardner's opinions regarding the adequacy of the notice on Petitioner's test reports examined here. I will not make assumptions about what doctors do and do not understand, know, or take time to analyze. The requirements of this regulation are clear and they may be simply fulfilled by including a notation in the report that a specimen is suboptimal and by including a listing of potential impact upon the affected analytes. Another option for the laboratory is to simply not test suboptimal specimens, although the experts for both sides seem to agree that that is not very practicable. Petitioner appears, in its plan of correction (CMS Ex. 5, at 16-20, right column), to have taken a third approach suggested by Ms. Eleco in the SOD and that was to try to validate testing on suboptimal specimens. I agree with Mr. Gardner that this does not seem to be a very reasonable approach to the problem. Tr. 1441. However, as I understand CLIA, it is not for CMS to tell Petitioner how to ensure its reports are accurate and reliable in their content, but rather for the laboratory to determine.

(iv) Whether Petitioner failed to "indicate on the test report any information regarding the condition and disposition of the specimens that do not meet the laboratory's criteria for acceptability," as alleged under D3061

The regulatory standard for D3061 is at 42 C.F.R. � 493.1109(c):

The laboratory report must be sent promptly to the authorized person, the individual responsible for using the test results or laboratory that initially requested the test. The original report or an exact duplicate of each test report, including final and preliminary report, must be retained by the testing laboratory for a period of at least two years after the date of reporting. Immunohematology reports and transfusion records must be retained by the laboratory for a period of no less than five years in accordance with 21 CFR part 606, subpart I. In addition, records of blood and blood product testing must be maintained for a period not less than five years after processing records have been completed, or six months after the latest expiration date, whichever is the later date, in accordance with 21 CFR 606.160(d). For pathology, test reports must be retained for a period of at least ten years after the date of reporting. This information may be maintained as part of the patient's chart or medical record which must be readily available to the laboratory and to HHS upon request.

* * * *

(c) The laboratory must indicate on the test report any information regarding the condition and disposition of specimens that do not meet the laboratory's criteria for acceptability.

The SOM, App. C, provides the surveyor with one probe related to D3061:

What information does the laboratory provide to the individual ordering or using test results when specimens are unsatisfactory for testing? Is this information relayed in a timely manner?

SOM, App. C, at C-101.

The wording of the standard and the probe are different. The regulation does not rule out the possibility that a specimen is tested and then found not to meet the laboratory's criteria for acceptability. The probe, however, specifies that the specimen is unsatisfactory for testing, which implies it could not be tested. The CMS interpretation of the regulatory standard through the probe is a reasonable construction of that provision. Accordingly, I will construe the standard to relate to a specimen that is received in such condition that it cannot be tested or is rejected for testing based upon the laboratory's criteria for acceptability.

CMS alleges under D3061 that 28 of 56 test reports from the period October 1, 2002 through February 12, 2003, did not include information regarding the condition and disposition of specimens. CMS Ex. 5, at 21. Ms. Eleco, who cited this deficiency, alleged that the 28 specimens were hemolyzed or involved prolonged contact between red blood cells and serum; that they were tested for LDH, AST, ALT, phosphorus, uric acid, and folic acid, contrary to manufacturer's instructions on package inserts; no comments were on the reports regarding condition of the specimens on receipt; and there was no comment on the final reports regarding specimen condition. CMS Ex. 5, at 21-22. Ms. Eleco incorporated the factual allegations of D6007, ⁽³⁴⁾ which I have already discussed in detail under the preceding tag.

The gist of the allegations under D3061 are no different than the allegations under D3050, i.e., Petitioner tested suboptimal specimens and did not note that on the report for each analyte that was affected by the testing of the suboptimal specimen. I have already found Petitioner deficient under D3050 and I see no need to repeat that discussion here. Further, because the specimens referred to in D3061 and D6007 were actually tested and not rejected, D3061, as interpreted by CMS through the probe in the SOM, is not applicable. Accordingly, I find that CMS has failed to meet the first element of its prima facie case of a violation of the standard established by 42 C.F.R. � 493.1109(c).

(v) Condition-level violation of 42 C.F.R. � 493.1101 (D3000)

CMS alleged four standard-level violations under the condition for patient test management established by 42 C.F.R. � 493.1101. I have concluded that CMS failed to show facts that constituted violation of the standards established by 42 C.F.R. �� 493.1103(a), 493.1107(c), and 493.1109(c), i.e., CMS cannot satisfy the first element of a prima facie case as to any of those alleged violations. I have found that CMS has shown facts that constitute a violation of 42 C.F.R. � 493.1109(a), which satisfies the first two elements of its prima facie case. I have rejected Petitioner's defense that the cited laboratory reports included a sufficient notice that suboptimal specimens were tested and that some results might be affected. The issue remaining is whether or not the reports, as issued in violation of the standard, presented the potential for patient harm and the magnitude of that potential harm. There is no evidence of any actual harm to a patient in this case.

Mr. Yamamoto testified that he concurred with the citations of deficiency at the condition level. Tr. 919. However, Mr. Yamomoto's opinion that there was a condition-level violation of 42 C.F.R. � 493.1101 might have been based upon the mistaken impression that there were four separate standard-level violations under the condition. Mr. Gardner opined that it did not rise to the condition level. After reviewing Mr. Gardner's testimony carefully, I note that he did not testify that there is no potential for patient harm when a suboptimal specimen is tested and the laboratory fails to note on the report that the specimen was suboptimal with possible effects on test results. Rather, Mr. Gardner testified that, in this case, there was little or no potential for patient harm because Petitioner had noted on the test reports with regard to potassium results that the specimen was suboptimal. I reject, however, Mr. Gardner's assumption that there is no harm because doctors read and interpret these reports and know how test results are affected by suboptimal specimens. Mr. Gardner is not a practicing physician and has no first-hand knowledge regarding the situation of the recipients of the reports at issue in this case. While Mr. Gardner may be correct in his assumption that doctors have the knowledge and skill to interpret the reports correctly, there is no basis for his assumption that doctors actually do the necessary analysis rather than rely upon what is represented on the face of the report by the laboratory that produced the report.

The question then is whether there is the potential for patient harm. It can be argued that a presumption exists under CLIA and the regulations that inaccurate or unreliable laboratory reports create a potential for patient harm. CMS can rely upon such presumptions to satisfy the elements of its prima facie case. However, there is really no dispute between the parties in this case that an inaccurate or unreliable report creates the potential for harm. Neither of Petitioner's experts testified to the contrary at hearing. Further, Ms. Eleco pulled the samples cited from Petitioner's panic log. According to Petitioner's policy in effect at the time the reports were released:

The laboratory has selected various laboratory test of great clinical significance for which it has established result-limits beyond which is mandatory for the results to be called to the doctor's offices, so called "Panic Value List". These are also called critical values that are so far from the normal indicating a potentially dangerous condition requiring immediate attention by the clinician.

CMS Ex. 68, at 20, 23 (Millennium Policies & Procedures, Subject: Panic Value List and Life Threatening Values, eff. 5-10-97). Several of the analytes included in the cited deficiencies appear in Petitioner's panic value list. I infer from the fact that Petitioner listed the reports on the panic value log indicates that Petitioner appreciated the potential for patient harm. On CMS Ex. 23, at 1, the test report related to Patient 635440, Petitioner included the notation:

POTASSIUM RESULT MAYBE INACCURATE. PLEASE RESUBMIT RED TOP TUBE WITH SEPARATOR GEL, CENTRIFUGED IMMEDIATELY AFTER BLOOD HAS CLOTTED. THANK YOU.

On CMS Ex. 25, at 1, the test report for Patient 635645, Petitioner included two notations:

POTASSIUM RESULT MAYBE INACCURATE DUE TO HEMOLYSIS. PLEASE RESUBMIT SPECIMEN. THANK YOU.

T. BILI RESULT MAYBE INACCURATE DUE TO HEMOLYSIS. PLEASE RESUBMIT SPECIMEN. THANK YOU.

CMS Ex. 39, at 1-2, the report for Patient 636549, includes a notation for both potassium and phosphorus. Petitioner's use of these notations indicates a recognition that inaccurate test results may result in patient harm.

The manufacturers' inserts for the test kits and reagents Petitioner used have been admitted as CMS Exs. 70 and 71. Those documents give instructions for the various tests in issue, describe how specimens should be collected and handled, and reflect upon the potential for adverse impact if testing and reporting is not performed properly.

I conclude that inaccurate and unreliable test results have the potential for patient harm, a fact recognized by Petitioner. I also conclude that the violation amounts to a condition-level violation. As previously noted, the SOM instructs surveyors to "[c]onsider a condition out of compliance for one or more deficiencies if, . . . , the deficiency(ies) constitutes a significant or a serious problem that adversely affects patient test results/patient care, or has the potential for adversely affecting patient test results/patient care. SOM, App. C, at C-12. I have found no other workable definition for "condition-level" and believe it appropriately applies in this case. I conclude that Petitioner's failure to note on test reports that a suboptimal specimen was tested and also to specifically note on the report how an analyte result was actually or potentially impacted, is a significant or serious problem with the potential for patient harm. My conclusion is supported by the fact that several of the analytes are listed in Petitioner's panic value policy indicating the critical nature of test results related to those analytes. Further, it is not disputed that hemolysis, prolonged contact between red blood cells and serum, and testing specimens that exceed test kit manufacturer's parameters for optimal specimens have a potentially adverse impact upon many analytes. I also note that, to the extent a clinician relies upon laboratory reports to be accurate, the specific warning about potassium on many of the reports might give the clinician the false impression that the laboratory was representing that only that analyte was affected. Mr. Huang indicated in testimony that, "to certain extent," CLIA requires that a laboratory append a note to each analyte that can be potentially affected by hemolysis or prolonged exposure to red blood cells. Mr. Huang stated that CLIA does not contain explicit language requiring that a notation be appended to a hemolyzed specimen, but noted that it is the intent of CLIA that a laboratory append proper specimen information to a particular analyte so that the specimen's condition is made known. Tr. 1194-95. Finally, although Mr. Gardner opined that relatively few samples were selected by Ms. Eleco compared to the total volume of testing done by Petitioner, I am not persuaded that 56 potentially adversely affected patients in the period October 2002 to February 2003, is a small number.

Accordingly, I conclude that a condition-level violation of 42 C.F.R. � 493.1101 has been established.

(vi) Petitioner's plan of correction and credible allegation of compliance

Petitioner's plan of correction for the deficiency cited under D3050, examples 1 to 3, is set forth in the right column of CMS Ex. 5, at 16-20. The plan of correction shows that, for all three examples, Petitioner undertook to demonstrate that samples that were not within the manufacturer's parameters for optimal specimens could be tested and reported without adverse patient impact. Under D3010, Petitioner's plan of correction advises that corrected reports were issued for the reports selected by Ms. Eleco as her sample and also for reports beyond the time frame of Ms. Eleco's sample. Petitioner also adopted a new procedure for checking specimen integrity by the technical supervisor and a new specimen rejection procedure and specimen integrity checklist. CMS Ex. 5, at 14-15. Examples of corrected reports are contained in P. Exs. 25-31. Petitioner's plan of correction and allegation of compliance was rejected by the state agency. Petitioner's subsequent submissions were also found lacking by CMS. The last review was performed by Mr. Yamamoto after CMS received Petitioner's allegation of compliance on October 29, 2003. Mr. Yamamoto's review and the reasons for his rejection of Petitioner's allegation of compliance are found at P. Ex. 47, at 48-58, with his review of the allegations for D3000 at pages 51-55.

The state agency advised Petitioner in its letter of August 4, 2003 (P. Ex. 11, at 2-3), of what is required for a credible allegation of compliance and acceptable evidence of correction. The letter stated that a credible allegation of compliance is a statement or documentation by a representative of a laboratory that has a history of maintaining compliance and taking corrective action when required; the allegation is realistic in that the corrective action alleged could have been accomplished in the interval between the survey date and the date of the allegation; and the allegation indicates resolution of the problems. P. Ex. 11, at 2. Acceptable evidence includes documentation showing the following: corrective action was taken for affected patients; other patients were identified that had the potential to be affected and corrective action was taken; changes have been made to ensure that the deficient practice does not recur; and there is ongoing monitoring to ensure that the deficient practice does not recur. P. Ex. 11, at 3.

Petitioner's defense, as elaborated in its briefing, focused primarily upon rebutting the existence of a condition-level deficiency rather than showing such a deficiency was corrected. However, Petitioner submitted as evidence the large volume of documents reflecting its efforts to attempt to satisfy CMS that it had come into condition-level compliance. ⁽³⁵⁾ The totality of Petitioner's post-survey submission relating to the basic deficiency that Petitioner tested suboptimal specimens without reporting that fact in the test reports, shows Petitioner taking multiple approaches including promising henceforth to comply with manufacturer inserts, validating testing on suboptimal specimens, and rejecting specimens that are suboptimal due to moderate or gross hemolysis or prolonged contact between red blood cells and serum. See e.g. P. Exs. 44 and 66; CMS Ex. 5, at 16-20. Mr. Huang testified at hearing that, even if the deficiencies cited at Petitioner were true deficiencies, Petitioner's plan of correction should have been accepted. Tr. 1171. The most persuasive evidence I have regarding Petitioner's post-survey allegations and evidence of correction is Mr. Yamamoto's analysis at P. Ex. 47, at 51-55. I conclude, based upon all the evidence, that Petitioner has not demonstrated systematic changes to ensure that the deficiency will not recur or that there is adequate monitoring to ensure that future reports are accurate and reliable. Accordingly, I conclude that Petitioner has not adequately shown correction of the condition-level violation of 42 C.F.R. � 493.1101.

Petitioner submitted as evidence documents obtained from Bio Med Laboratory (Bio Med) (P. Ex. 46) and documents related to a Bio Med survey produced by CMS pursuant to my order (P. Ex. 48). I admitted the documents over CMS's objection. Tr. 78-85. Petitioner's argument, as I construe it, is that very similar deficiency citations were made by Ms. Eleco in the Bio Med case in a survey completed August 1, 2002; that Bio Med submitted an allegation of compliance and plan of correction similar to that of Petitioner; and that CMS ultimately accepted the Bio Med plan of correction and did recertify Bio Med under CLIA. Petitioner suggests that, given the similarity of the two cases, CMS was arbitrary and capricious in dealing with Petitioner. I also construe Petitioner's position to be that I can use the Bio Med case as a standard of sorts against which to measure Petitioner's plan of correction. I note, based on my review of the Bio Med record, that the procedures or process followed by the state agency and CMS in that case is identical to the procedures followed in this case and are consistent with the SOM and regulations. I see nothing in the Bio Med case that would cause me to characterize CMS's actions in this case arbitrary or capricious; to the extent that the allegations of deficiency and the plan of correction are similar in the two cases, they were handled nearly identically; in fact, many of the same grounds cited for rejecting Petitioner's plan of correction are similar to CMS's October 18, 2002 rejection of the Bio Med plan. Compare CMS Ex. 5, at 13-22 and P. Ex. 47, at 37-40 with P. Ex. 46, at 150-69; 289-93 and P. Ex. 48, at 7-12. However, there are also dissimilarities between the case before me and the Bio Med case, including differences with respect to the two plans of correction, who performed validation and other studies, laboratory personnel and qualifications, variance in the cited deficiencies under D3000, and submissions by Bio Med after October 18, 2002, which were found credible and resulted in a revisit survey, to name a few. Based upon my comparison of the two cases, I do not find the CMS action with respect to Bio Med to be persuasive that similar action should be taken in this case.

Petitioner also conducted a study of five laboratories in California to show what the standard of practice is. Petitioner's expert, Mr. Huang, supervised the study and compiled its results. A doctor collected blood specimens from an employee of Petitioner's counsel. Mr. Huang hemolyzed the specimens and they were then sent to five different laboratories in California. The laboratories generated reports and Petitioner then subpoenaed related test documents from the five laboratories that did the testing. Mr. Huang then analyzed the reports and related laboratory documents and prepared the summary table admitted as P. Ex. 63 which is a comparison of some of the deficiencies cited at Petitioner to the reports and materials from the five laboratories included in the study. Tr. 1049-57, 1195-09; P. Ex. 36-43, 50-54, 56, 58-63. Mr. Huang noted that all five of the laboratories "demonstrate some degrees of deviations errors in the reporting of the high potassium result or chose not to report a potassium result -- report or to have failure in noting other analyzed [sic] that can be potentially affected by hemolysis or by prolonged exposure to RBC's." Tr. 1170-71. I reviewed Mr. Huang's table at P. Ex. 63 and the documents admitted from the five laboratories. Mr. Huang determined that four of the five laboratories tested samples older than their policies specified. His table indicates that the laboratories did not note on the final reports that the specimens were suboptimal for this reason. However, all five laboratories noted that the submitted specimens were hemolyzed or stated that the serum and cells were in contact. One laboratory only noted hemolysis with its potassium result. One laboratory refused testing for multiple analytes, noting hemolysis as the reason on four. One laboratory refused to test for one analyte due to gross hemolysis and for all other analytes except for the lipid panel tests noted that the results should be interpreted with caution due to gross hemolysis. Two laboratories had notations with two test results indicating that multiple other analytes might be affected by prolonged exposure of serum to red blood cells or hemolysis. See P. Exs. 37-41. In summary, three of the five studied laboratories included in their reports notations specific to multiple analytes regarding the potential adverse impact of testing having been performed on a hemolyzed sample and one declined to perform most of the tests requested. I agree with Mr. Huang that his study reflects that there is not perfect compliance with CLIA requirements among laboratories. However, I also observe that the majority of the laboratories he studied does follow the practice of including a notation in the test results for each analyte that may be impacted by testing a suboptimal sample, which is consistent with Mr. Huang's testimony as to what he thinks CLIA requires. Tr. 1194-95. I conclude, based upon Mr. Huang's study, that the industry standard is to comply with CLIA. What CLIA requires may be subject to some interpretation and variation in implementation from laboratory to laboratory, but reports have to be accurate and reliable. The majority of laboratories Mr. Huang studied does include a notation for analytes potentially affected by testing a suboptimal sample.

(b) 42 C.F.R. � 493.1403 (D6000) Laboratory Director; moderate complexity testing

The condition established by 42 C.F.R. � 493.1403 requires that a laboratory have a director who meets the qualifications specified in 42 C.F.R. � 493.1405 and provides overall management and direction of the laboratory in accordance with 42 C.F.R. � 493.1407. CMS alleges that this condition was violated by the number and severity of the standard-level deficiencies cited in the SOD. CMS Ex. 5, at 37. The surveyors cited ten separate standard-level deficiencies in the laboratory director area. Id. at 38-51. I discuss one due to its direct relationship to the condition-level deficiency I have found under D3000.

CMS alleges under D6026, example 2, that Petitioner violated the standard-level requirement established by 42 C.F.R. � 493.1407(e)(8). CMS Ex. 5 at 46-48. The standard imposes upon the laboratory director the responsibility to report test results accurately. Subsection 493.1407(e)(8) of 42 C.F.R. provides that the laboratory director must "[e]nsure that reports of test results include pertinent information required for interpretation; . . . ."

I have already discussed under D3000 the multiple examples of reports, issued between October 2002 and February 12, 2003, that did not warn the recipient or user of the report that a suboptimal specimen was tested and that the test results for particular analytes might have been affected. I also concluded under D3000 that the deficient reports posed the potential for patient harm of such severity that the violation was at the condition level. My analysis under D3000 applies equally to the alleged deficiency cited under D6000. The regulation fixes responsibility for that deficiency upon the laboratory director. Accordingly, I conclude that Petitioner violated the condition-level requirement established by 42 C.F.R. � 493.1403.

(c) 42 C.F.R. � 493.1701 (D7000) Quality Assurance; moderate or high complexity testing, or both

Title 42 C.F.R. � 493.1701 requires that a laboratory "establish and follow written policies and procedures for a comprehensive quality assurance program . . . . " The quality assurance program must, among other things, "identify and correct problems" and "assure the accurate, reliable and prompt reporting of test results; . . . ." 42 C.F.R. � 493.1701. CMS alleges a violation of this condition-level requirement based on the number and severity of the deficiencies cited by the surveyors. The surveyors cited seven standard-level violations. I discuss one due to its direct relationship to the condition-level violation I found under D3000. CMS Ex. 5, at 52-65.

CMS alleges under D7025, example 1, that Petitioner violated the standard-level requirement of 42 C.F.R. � 493.1703(d). Section 493.1703 of 42 C.F.R. requires the laboratory to have a mechanism for monitoring patient test management systems. Subsection 493.1703(d) of 42 C.F.R. specifically requires monitoring, evaluating, and revising, if necessary, the "completeness, usefulness, and accuracy of the test report information necessary for the interpretation or utilization of test results."

I have discussed under D3000 the multiple examples of reports, issued between October 2002 and February 12, 2003, that did not warn the recipient of the report that a suboptimal specimen was tested and that the test results for particular analytes might have been affected. I also concluded under D3000 that the deficient reports posed the potential for patient harm of such severity that the violation was at the condition level. Looking back at the test reports considered under D3000, it is readily apparent that those reports do not convey to the user of the report that suboptimal specimens were tested and that more analytes than potassium, phosphorus, and bilirubin might be affected by such testing. Petitioner has consistently complained that it was unfair and improper for the surveyor to identify these sample reports from Petitioner's panic value call log, but the fact that these reports were from the log indicates that they should have received higher scrutiny than normal reports. In fact, Mr. Salamanca testified regarding the careful attention he gave to the abnormal reports. Tr. 1735-45. Mr. Salamanca testified that he intentionally designed the reports that I have found deficient to give only the notice for one analyte, usually potassium, leaving it to the doctor to determine whether other analyte results might have been affected because the specimen was suboptimal. Tr. 1744-45. It apparently did not occur to Mr. Salamanca or Petitioner's other staff that the reports being issued could result in the clinician who relied upon the reports being uninformed or misled about the accuracy of the test results. The reports were deficient and Petitioner did not identify and remedy the deficiency as part of its quality assurance program. Accordingly, I conclude 42 C.F.R. � 493.1703(d) was violated. Further, I conclude the violation of 42 C.F.R. � 493.1703(d) amounts to a condition-level violation of 42 C.F.R. � 493.1701 for the reasons already discussed under D3000.

6. Petitioner's Motions for Sanctions

On February 10, 2004, Petitioner moved that I sanction CMS for failure to comply with my order that CMS produce surveyor worksheets. CMS responded on February 12, 2004, making an additional production of "notes" of Surveyor Lash and arguing that the term "worksheet" is a term of special meaning for CMS and, as used in the order, did not include Mr. Lash's notes. On February 14, 2004, Petitioner filed a second motion for sanctions against CMS on grounds that CMS had not disclosed all documents of communication between CMS and the state agency reflecting meetings concerning whether Petitioner was in compliance, and what sanctions should be imposed. CMS responded on February 19, 2004, denying that it had any documents of the type described by Petitioner that had not been disclosed. A lengthy discussion was had on the record regarding these motions. Tr. 19-61. Counsel for Petitioner indicated that the late production of Surveyor Lash's notes was still an appropriate ground for sanctioning CMS. Counsel for Petitioner also expanded the first motion to include documents created by Surveyor Eleco that Petitioner believed might not have been produced. Petitioner argued with regard to the second motion that it seemed inconsistent with the amount of time it took the state and CMS to process this case and other failed state actions against Petitioner, that there did not exist more written communication between CMS and the state agency. I determined based upon the representations of counsel that Surveyor Eleco's presence as a witness would give Petitioner an opportunity to fully inquire of her to determine whether additional documents might exist. I also determined that Ms. Jew, whom CMS presented as a witness, was most likely the focal point of CMS activity in terms of letters regarding this case, that Ms. Fuller most likely only acted in a ministerial capacity, and that Ms. Jew was subject to examination by Petitioner regarding the nature of any communications with the state agency regarding the survey of Petitioner and post-survey decision making.

Having reviewed Petitioner's first motion and supporting evidence attached to that motion, CMS's response and supplemental brief, the discussion on the record, and the testimony of Ms. Eleco, I decline to sanction CMS. As a general matter, the burden should be upon the requesting party to properly define the universe of documents it seeks to have produced. The government has many forms with many different numbers and titles and it may be better to define things broadly enough in a production request or motion for order to compel production to ensure all documents are produced, rather than using a single term or phrase. However, I also encourage government counsel not to stand upon technicalities but to disclose fully, consistent with their unique positions as officers of the court and counsel for the United States. In this case, Petitioner requested production of surveyor worksheets and did not describe the documents sought as Mr. Lash's notes. However, Petitioner described Mr. Lash's notes or work papers in great detail in the motion for sanctions before they were produced. Petitioner did receive those notes several weeks prior to hearing and has not shown any prejudice by the late production. Accordingly, the February 10, 2004 motion for sanctions is denied.

The February 14, 2004, motion for sanctions is also denied. No evidence has been presented that there are documents responsive that have not been produced. Thus, I cannot find that the order for production was violated or that Petitioner suffered any prejudice.

IV. CONCLUSION

For the foregoing reasons, Petitioner's CLIA certificate is revoked as of the date of this decision. The civil money penalty is approved as proposed.

Keith W. Sickendick

Administrative Law Judge

1. Codified as 42 U.S.C. �� 263a, 1302, 1395x(e).

2. All citations are to the 2002 version of the Code of Federal Regulations, which was in effect at the time of the February 2003 on-site survey.

3. No issue has been raised before me regarding the reasonableness of the CMP if a condition-level deficiency was established.

4. Petitioner became ineligible for Medicaid payments for any laboratory services on or after September 14, 2003, by operation of law. Social Security Act (the Act), � 1902(a)(9)(C) (42 U.S.C. � 1396(a)(9)(C)); 42 C.F.R. � 493.1809 (2002).

5. The index to Volume 1 of the transcript incorrectly reflects that P. Ex. 57 was received into evidence and refers to page 86 of the transcript where the court reporter's note indicates that P. Ex. 57 was received. However, the discussion after the reporter's note clearly reflects that P. Ex. 57 was not, in fact, received as evidence. Tr. 86-93.

6. This prohibition is a statutory disability rather than a sanction as that term is used in CLIA and its implementing regulations. Black's Law Dictionary (6^th ed.1990) defines disability as the "want of legal capability to perform an act" while a sanction is "a penalty or punishment provided as a means of enforcing obedience to a law." Disability seems the more apt characterization of the "ineligibility" to own or operate imposed by the statute. Furthermore, the regulations are very specific in listing the sanctions that CMS may impose and the two-year ineligibility ban provided by the statute is not included. See 42 C.F.R. �� 493.1, 493.1806-1807.

7. Other exceptions specified in the regulation have no application in this case.

8. The regulations define "immediate jeopardy" as follows:

Immediate jeopardy means a situation in which immediate corrective action is necessary because the laboratory's noncompliance with one or more condition level requirements has already caused, is causing, or is likely to cause, at any time, serious injury or harm, or death, to individuals served by the laboratory or to the health or safety of the general public. This term is synonymous with imminent and serious risk to human health and significant hazard to the public health.

42 C.F.R. � 493.2.

9. This review of whether or not the immediate jeopardy determination is or is not credible, is really an evidentiary matter to the extent that it is a determination of what, if any, probative value will be given to the fact that the state agency and/or CMS declared immediate jeopardy.

10. The discussion in this case is different from that in Medimex Clinical Laboratory, DAB CR1025 (2003). In Medimex, Judge Anglada rejected Petitioner's equitable defense of laches and indicated that delay in completing the survey in that case did not detract from the merits of the alleged deficiencies. Judge Anglada did not address the issue raised in this case, i.e. whether a potentially invalid immediate jeopardy declaration detracts from the credibility of the surveyors and the process employed.

11. State agency surveyors are referred to as Examiners in California.

12. Ms. Eleco subsequently admitted on cross-examination that she had never identified an immediate jeopardy situation during an on-site survey. Tr. 708-11.

13. The on-site visit was done in this case on February 14 and 18, 2003 - there is no evidence Ms. Eleco or Mr. Lash sensed immediate jeopardy at that time. In a letter dated July 18, 2003, Ms. Eleco asked for additional information from the laboratory (CMS Ex. 2); the letter appears to have been sent by regular mail with no request to Petitioner to expedite a response - so no sense of immediacy attached to this letter. Ms. Eleco requested further documents by letter dated July 22, 2003 (CMS Ex. 3) - again there is no indication that immediate jeopardy might be present. In a letter dated August 4, 2003, which accompanied the SOD and was sent by certified mail rather than some more expeditious means, the state agency notified Petitioner that immediate jeopardy existed at the laboratory. CMS Ex. 4. It is troubling to think that in the face of alleged actual or likely serious injury or harm or death to patients or the public, the state agency did not sense a need to expedite any of their actions leading to the declaration of immediate jeopardy. It is even more troubling to think, whether or not this was the case, that the surveyor and her supervisors did not recognize that immediate jeopardy existed throughout the time until jeopardy was declared.

14. As discussed hereafter, I reject all of Ms. Eleco's testimony on other grounds.

15. CMS surveyors may also conduct surveys, and there are provisions for laboratory self-assessment (SOM, section 6112) in limited cases.

16. What constitutes a "condition-level" deficiency will be discussed hereafter.

17. How many standard-level violations or deficiencies are required for a surveyor to find a condition-level violation requires separate discussion.

18. Effective July 5, 2001, the Health Care Financing Administration (HCFA) was renamed the Centers for Medicare & Medicaid Services (CMS). 66 Fed. Reg. 35,437.

19. A panel of the Board in the decision in Center Clinical Laboratory, DAB No. 1526 (1995) cites to 42 C.F.R. � 488.26(b)(3) [the correct reference is � 488.26(c)(3)] for the proposition that surveyors are professionals. I have no problem with that assertion, but note that the regulation cited in that case applies to long-term care facilities and not clinical laboratories which have a different enforcement scheme set forth at 42 C.F.R. Part 493.

20. See also P. Ex. 57 for identification.

21. Contrary to the testimony of Ms. Jew (Tr. 864), CMS exercises significant control over the State agency contracted to do surveys through the SOM.

22. I have already discussed that I do not find the determination of immediate jeopardy and any testimony related thereto credible in this case. Mr. Yamamoto freely admitted that he formed no independent opinion regarding immediate jeopardy but simply deferred to the state agency determination that immediate jeopardy existed. Tr. 925.

23. Mr. Yamamoto is also a fact witness to the extent that he formulated the CMS decision or action in this case and can provide testimony about that action. I recognize that CMS may take exception to this characterization of Mr. Yamamoto to the extent that Ms. Karen Fuller, the Manager of the State Oversight and CLIA Branch within CMS's Division of Survey and Certification, is probably the person with delegated authority to act for the Secretary in this case. Ms. Fuller signed the notices dated September 9, 2003 (CMS Ex. 7) and October 14, 2003 (CMS Ex. 8) which constitute the CMS action in this case. However, there is no indication that Ms. Fuller deviated from the recommended action formulated by Mr. Yamamoto as set forth in the two letters sent to Petitioner. Ms. Jew indicated in her testimony that she is the leader of the team of which Mr. Yamamoto is a part, but her input was non-technical and consisted of receiving correspondence, preparing the notice letters to Petitioners (CMS Exs. 7 & 8), reviewing for readability Mr. Yamamoto's rejection of Petitioner's allegation of compliance, and providing a declaration for the federal court lawsuit by Petitioner (CMS Ex. 77). Tr. 838-47. My conclusions in this regard are also consistent with the fact that CMS offered Mr. Yamamoto as the witness to testify about the substantive deficiencies.

24. CAP is a private accreditation organization. CLIA provides for certification of compliance with CLIA requirements by private accreditation organizations for purposes of obtaining and retaining a CLIA certificate as an alternative to survey and certification by CMS and/or its agent, the state agency. The selection of accrediting bodies and oversight of their performance is the responsibility of the Secretary and his delegee, CMS. 42 U.S.C. � 263a(e); 42 C.F.R. Part 493, subpart E.

25. Interpretive rules do not have the force and effect of law. Erringer v. Thompson, 371 F.3d 625 (9 ^th Cir. 2004).

26. In Edison, DAB 1713 (1999) at 12-13, the Board, in deciding that the Hillman analysis related to burden of proof is applicable to CLIA cases, notes that for long-term care facilities "substantial compliance" with participation requirements is required for payment, but under CLIA a laboratory must meet CLIA requirements to be entitled to payment. Act, section 1902(a)(9)(C) (42 U.S.C. � 1396a(a)(9)(C)).

27. CMS administratively extended the certificate after it expired to permit completion of the sanction process. CMS Ex. 7, at 3.

28. The surveyors cited the following deficiencies in the SOD by tag number: D2003; D2087; D2098; D3000 (Condition); D3010; D3040; D3050; D3061; D4000 (Condition); D4001; D4002; D4074; D4098; D4154; D6000 (Condition); D6007; D6011; D6013; D6014; D6020; D6021; D6026; D6032; D6070; D6107; D7000 (Condition); D7010; D7014; D7023; D7025; D7043; D7047; and D7055. CMS Ex. 5, at 11-65. CMS accepted Petitioner's allegation of compliance, received on September 19, 2003, with respect to tags D2003; D4002; D4098; D4154; D6011; D6032; D6070; D6107; and D7047, and I do not give those deficiency citations further consideration. CMS Ex. 8, at 4-13; Tr. 1009-10 (per Mr. Yamamoto, if a tag is not listed in his review at CMS Ex. 8, at 4-13, then Petitioner's allegation of compliance was accepted).

29. Ms. Eleco's surveyor number is 16626. Id. at 5; Tr 181.

30. D6007 sets forth the CMS allegation that the laboratory director failed to ensure that "testing systems developed and used for each of the tests performed in the laboratory provide quality laboratory services for all aspects of test performance . . . ." Id. at 38.

31. I discuss all examples cited under the separately alleged violation of D7023-1 at this point in the decision for the sake of efficiency.

32. CMS Ex. 65, at 51 contains an instrument printout of test results for 636079, but a folic acid result is not listed among the results.

33. "VB" represents "vitamin B12."

34. The SOD under D3061a actually refers to D6022. CMS Ex. 5, at 21. However, there is no citation in the SOD to D6022 and CMS clarified in its prehearing brief (page 17, n.7) and at hearing (Tr. 282) that the reference to D6022 is a clerical error and the reference should be to D6007.

35. I do not construe Petitioner's post-survey submissions to constitute an admission that a condition-level deficiency existed.