[Federal Register Volume 62, Number 24 (Wednesday, February 5, 1997)]
[Notices]
[Pages 5433-5442]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2761]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES
[HSQ-244-N]


CLIA Program; Clinical Laboratory Improvement Amendments of 
1988--Denial of Exemption of Laboratories in the Commonwealth of Puerto 
Rico

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Notice.

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SUMMARY: The Public Health Service Act provides for the exemption of 
laboratories from the requirements of the Clinical Laboratory 
Improvement Amendments of 1988 (CLIA) if the State in which they are 
located has been determined to have requirements equal to or more 
stringent than those of CLIA. Under our regulations, HCFA's decision to 
approve or deny a requested exemption from CLIA requirements is 
published in the Federal Register. This notice announces that a request 
from the Commonwealth of Puerto Rico for exemption from CLIA 
requirements has been denied.

EFFECTIVE DATE: The denial of exemption from CLIA was effective on 
October 28, 1996.

FOR FURTHER INFORMATION CALL:
    Lee Feehely, (410) 786-3401.

SUPPLEMENTARY INFORMATION:

I. Background and Legislative Authority

    Section 353 of the Public Health Service Act, as amended by the 
Clinical Laboratory Improvement Amendments of 1988 (CLIA), requires any 
laboratory that performs tests on human specimens to meet the 
requirements established by the Department of Health and Human 
Services. Regulations implementing section 353 of the Public Health 
Service Act are contained in 42 CFR part 493, Laboratory Requirements. 
Subject to specified exceptions included in subpart D, laboratories 
must have a current and valid CLIA certificate to test human specimens. 
Section 353(p) of the Public Health Service Act provides for the 
exemption of laboratories from CLIA requirements in a State that is

[[Page 5434]]

determined to have requirements that are equal to or more stringent 
than those of CLIA. The statute does not specifically require the 
promulgation of criteria for the exemption of laboratories in a State. 
The authority to determine whether a State qualifies for an exemption 
has been delegated by the Secretary to the Administrator of HCFA.
    Part 493, subpart E, Accreditation by a Private, Nonprofit 
Accreditation Organization or Exemption Under an Approved State 
Laboratory Program, implements section 353(p) of the Public Health 
Service Act. Section 493.513 provides that we may exempt from CLIA 
requirements, for a period not to exceed 6 years, State licensed or 
approved laboratories in a State if the State meets specified 
conditions.
    When a request for exemption from CLIA is not granted, the State 
may request a reconsideration. Our policy on reconsiderations is set 
forth in our regulations in Part 488, subpart D--Reconsideration of 
Adverse Determinations-Deeming Authority for Accreditation 
Organizations and CLIA Exemption of Laboratories Under State Programs. 
Sections 488.205 and 488.207 provide for the opportunity for an 
informal hearing and set out the informal hearing procedures. The 
hearing officer presents his findings within 30 days of the close of 
the hearing (Sec. 488.209). Section 488.211 provides that the hearing 
officer's decision is final unless the Administrator, within 30 days of 
the hearing officer's decision, chooses to review that decision. The 
Administrator may accept, reject, or modify the hearing officer's 
decision. If the Administrator chooses to review the hearing officer's 
decision, the Administrator's decision becomes the final decision. 
Section 488.211 provides that we will publish, in the Federal Register, 
the final reconsideration determination.
    On December 5, 1992, the Commonwealth of Puerto Rico, which is 
considered a State for CLIA purposes, requested exemption from the CLIA 
requirements. The Health Quality and Standards Bureau, HCFA, notified 
Puerto Rico on May 10, 1995 that its request was denied. On July 10, 
1995, the Commonwealth requested a reconsideration. A reconsideration 
hearing was held on August 30, 1996. The hearing officer rendered his 
decision on September 27, 1996, affirming the denial of the request for 
exemption. The Administrator declined his right to review the hearing 
officer's decision. Thus, in accordance with Sec. 488.211(a), the 
hearing officer's decision became the final reconsideration 
determination on October 28, 1996.

II. Notice of Denial of CLIA Exemption to Laboratories in the 
Commonwealth of Puerto Rico

    Attached as an addendum to this notice is the hearing officer's 
decision on the Commonwealth of Puerto Rico's request for exemption 
from CLIA.

    Authority: Section 353 of the Public Health Service Act (42 
U.S.C. 263a).

    Dated: January 27, 1997.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

Addendum--Reconsideration of the Commonwealth of Puerto Rico's 
Application for Exemption From CLIA

Hearing Officer's Recommended Decision

I. Background

    The Clinical Laboratories Improvement Amendments of 1988 (the 
``CLIA'') requires that all laboratories must be certified in order to 
perform testing on human specimens. (Section 353 Public Health Service 
Act, 42 U.S.C. 263a). The Health Care Financing Administration (the 
``HCFA'') using scientific and technical support, as needed, from the 
Centers for Disease Control (the ``CDC''), Public Health Service (the 
``PHS''), administers the CLIA program for the Department of Health and 
Human Services. HCFA has promulgated regulations containing the 
requirements concerning the Medicare, Medicaid and CLIA programs in 42 
CFR part 493.
    The CLIA statute provides that ``[i]f a State enacts laws relating 
to matters covered by [CLIA] which provide for requirements equal to or 
more stringent than the requirements of [CLIA], the Secretary may 
exempt clinical laboratories in that State from compliance with 
[CLIA].'' 42 U.S.C. 263a(p)(2). This statutory authority is reflected 
in HCFA's regulations which provide that HCFA may exempt from CLIA 
program requirements all State-licensed or approved laboratories in a 
State <SUP>1 if the State meets the requirements of 42 C.F.R. 
493.513(a). Section 493.513(a)(1) of the regulations, which mirrors 42 
U.S.C. 263a(p)(2), explains that in order to be granted an exemption 
from CLIA, the State must have in effect laws that provide for 
requirements equal to or more stringent than condition-level 
requirements.<SUP>2 Section 493.513(a)(1).
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    \1\ For purposes of CLIA, the term ``state'' includes each of 
the 50 states, the District of Columbia, the Commonwealth of Puerto 
Rico, the Virgin Islands and a political subdivision of a State 
where the State, acting pursuant to State law, has expressly 
delegated powers to the political subdivision sufficient to 
authorize the political subdivision to act for the State in 
enforcing requirements equal to or more stringent than CLIA 
requirements. 42 CFR Section 493.2.
    \2\ Condition-level requirements are defined as any of the 
requirements identified as ``conditions'' in subparts G through Q of 
Part 493. 42 CFR Section 493.3.
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    On December 5, 1992, the Secretary of Health for the Commonwealth 
of Puerto Rico submitted an application for exemption from CLIA. On May 
10, 1995, the Commonwealth was notified that its application for CLIA 
exemption was denied.<SUP>3 The basis for the denial was a 
determination by HCFA that several of Puerto Rico's personnel standards 
did not meet the respective CLIA condition level requirements and that 
the Commonwealth's laboratory licensure requirements, especially as 
applied to tests performed by physicians, were less stringent than CLIA 
requirements.
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    \3\ See May 10, 1995, letter to Dr. Carmen Feliciano de Melecio, 
Secretary of Health from Anthony J. Tirone, Director of the Office 
of Survey and Certification, Health Standards Quality Bureau.
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    By letter dated July 10, 1995, and in accordance with Sec. 488.201 
of the regulations, the Commonwealth requested a reconsideration of the 
denial of its application for CLIA exemption. At the same time, Puerto 
Rico also requested permission to submit a proposal addressing HCFA's 
concerns and establishing equivalencies with applicable CLIA 
requirements. The revised proposal was sent by the Commonwealth on July 
26, 1995. This proposal addressed Puerto Rico's laboratory environment 
and outlined proposed changes to regulations establishing educational 
standards for certain laboratory personnel. On October 24, 1995, the 
Hearing Officer then appointed by HCFA requested that the Commonwealth 
submit materials pertinent to its request for exemption and recommended 
that the Commonwealth submit a complete and current application for 
exemption.
    On December 5, 1995, Puerto Rico submitted revised application 
materials, including an updated cross-walk of the Puerto Rico 
equivalents to the CLIA regulations together with complete addenda, to 
HCFA for review. On May 22, 1996, after having reviewed the revised 
application materials, HCFA again decided to deny the Commonwealth's 
application for exemption.<SUP>4 The Commonwealth was advised that the 
application failed to demonstrate the existence of CLIA-level laws and 
regulations in several key

[[Page 5435]]

areas including, but not limited to, those identified in the May 10, 
1995 letter and in the areas of enforcement authority, proficiency 
testing and quality assurance.<SUP>5
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    \4\ See May 22, 1996 letter to Dr. Feliciano from Anthony 
Tirone, hereinafter referred to as the ``denial'' or ``initial 
determination.''
    \5\ The Commonwealth has asked, for purposes of rendering a 
decision on reconsideration, that the Hearing Officer disregard the 
May 22, 1996 letter. According to counsel for the Commonwealth, 
``Puerto Rico finds this May 22 letter highly irregular'' since it 
was issued approximately a year after the May 1995, notice of denial 
and it identifies additional reasons underlying HCFA's decision to 
deny the application for exemption. (Position Paper, pg. 10). 
However, I note that by letter dated July 26, 1995, the Commonwealth 
submitted a ``new proposal'' to ``override the objections stated in 
* * * (the) May 10, 1995 (denial) letter.'' See July 26, 1995 letter 
to Anthony Tirone from Dr. Carmen A. Feliciano de Melecio. In that 
same letter, the Commonwealth offered to meet with HCFA to discuss 
the proposed new standards and included ``a copy of the final 
official documentation of the application for exemption.'' Id. at 
pg. 15. Thus, while I agree that it was unusual for HCFA to send two 
separate letters representing initial determinations, the record 
suggests that the second letter illustrates HCFA's attempts to 
accommodate the interests of the Commonwealth. HCFA could have 
elected to limit the Commonwealth's recourse to a reconsideration 
hearing after it sent the May 1995 letter. However, the agency 
allowed the Commonwealth a chance to buttress its application 
outside of the reconsideration process. Therefore, for purposes of 
this reconsideration determination, I will consider in its entirety 
the May 22, 1996 letter sent by HCFA to the Commonwealth.
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    In accordance with 42 CFR Sec. 488.201, et seq., the Commonwealth 
requested a reconsideration of HCFA's denial of the application for 
CLIA-exemption. A hearing was scheduled for August 30, 1996 to review 
each of the grounds for denial identified by HCFA in making its initial 
determination. In an effort to facilitate a full understanding of the 
Commonwealth's position on each of those issues, the Commonwealth was 
asked to submit a Position Paper prior to the scheduled hearing date. 
The Position Paper was submitted and the hearing took place, as 
scheduled, on August 30, 1996 at HCFA's Headquarters in Baltimore, 
Maryland.

II. Issue

    Whether the Commonwealth of Puerto Rico has submitted evidence in 
connection with its application for exemption from CLIA that, in 
accordance with 42 U.S.C. 263a(p)(2) and 42 CFR 493.513(a)(1), 
demonstrates that it has in effect laws that provide for requirements 
equal to or more stringent than condition-level CLIA requirements.

III. Discussion

    In reaching its initial determination to deny the Commonwealth's 
application for exemption, HCFA identified several different grounds 
for denial in a summary referred to in and attached to the May 22, 1996 
denial letter. In the following discussion, for each of the grounds for 
denial, I review the CLIA requirements, the cited deficiency, and the 
evidence of equivalency offered by Puerto Rico in its submissions, 
Position Paper and at the hearing. My finding of fact is provided at 
the end of each section.
A. Basis and Scope
    Upon review of the initial application, HCFA determined that the 
Commonwealth failed to clarify whether testing performed in certain 
locations was subject to the Commonwealth's laboratory licensing 
regulations. Of particular concern was testing in physician's office 
laboratories, clinics, group practices, seropheresis centers, non-
hospital transfusion services, blood and blood products processing 
centers, temporary testing sites, such as health fairs, and testing 
performed during patient examinations in a physician's office.
    The CLIA regulations set forth the conditions that all laboratories 
must meet to be certified to perform testing on human specimens. 42 CFR 
493.1. A laboratory is defined, in pertinent part, as ``a facility for 
the biological, microbiological, serological, chemical, 
immunohematological, hematological, biophysical, cytological, 
pathological, or other examination of materials derived from the human 
body for the purpose of providing information for the diagnosis, 
prevention, or treatment of any disease or impairment of, or the 
assessment of the health of, human beings.'' 42 CFR 493.2.
    HCFA's assessment was that when compared with the CLIA regulations, 
the Commonwealth's laboratory regulations did not clearly show that all 
testing sites were regulated. The agency also viewed as problematic the 
issue of whether physician-operated laboratories were required to be 
licensed.
    In its Position Paper, the Commonwealth explained that the 
statutory provisions regulating clinical laboratories are contained in 
Public Law 97 and Regulation 83. (Position Paper, pg. 21). Section 91 
of Public Law 97 mandates the issuance of a license by the Secretary of 
Health prior to establishing and operating clinical analysis 
laboratories, plasmaphereses centers, seropheresis centers or blood 
banks. Similarly, Regulation 83, Chapter 2 states that ``(n)o entity, 
be it a natural or juridical person, may establish or operate a 
clinical analysis laboratory,<SUP>6 an anatomical pathology laboratory, 
or a Blood Bank, a licensed (sic) <SUP>7 issued by the Department of 
Health is previously obtained.'' Thus, the Commonwealth's position is 
that any place where clinical analysis is performed must be licensed 
and is subject to the laboratory regulations. (Position Paper, pg. 23). 
It is their contention that this includes cases where clinical analysis 
is performed in temporary testing sites, such as physician's offices 
and at health fairs. Id.
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    \6\ ``Clinical Analysis'' is defined broadly as ``any facility, 
place or location, where any sample obtained from a human being is 
handled and/or processed for the purpose of it being tested or 
analyzed by any biological, biophysical, microbiological, 
serological, immunological, chemical, hematological, 
immunohematological, cytogenetical or any other test of materials 
derived from the human body (sic) are performed with the purpose of 
providing information for the prevention, diagnostic (sic) and 
treatment of any disease, or deterioration, or for the health 
evaluation of human beings.'' Reg. 83, Chpt. 1, Art. III, sec. 1.
    \7\ Should likely read ``unless a license.''
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    During the proceedings, testimony was offered by witnesses called 
by the Commonwealth that all testing sites in Puerto Rico were 
regulated. (Position Paper, pp. 65, 69, 74, and 83). The key inquiry 
appears not to be who is performing the test but whether a clinical 
analysis test covered by Regulation 83 is being performed. Id. at 69. 
In cases where a physician elects to perform clinical analysis testing 
in his or her office, Regulation 83 requires that the physician comply 
with applicable licensing requirements. Id. at 70. In such instances, 
the physician must secure a special license in accordance with 
Regulation 83, Chapter 2, Article I, sec. 3(a). Id. at 80.
    Based upon the foregoing, I believe that the Commonwealth has 
sustained its burden of demonstrating that all laboratories of the type 
covered by CLIA, including physician operated laboratories, must be 
licensed. Regulation 83 encompasses all locations where clinical 
analysis is performed and explicitly mandates that, as a prerequisite 
of performing such tests, a license must be obtained. While arguably 
the Commonwealth's regulations could be amended to explicitly include 
physician operated laboratories in the list of covered laboratories, 
the regulations currently are broad enough to include physician 
operated laboratories. Thus, I disagree with HCFA's initial 
determination that the Commonwealth's regulations defining the scope of 
coverage are not as broad as the CLIA regulations and find that the 
scope is in fact, equivalent.
B. Categories of Test by Complexity
    HCFA determined in its initial review of the application that the 
Commonwealth needed to provide clarification and evidence on how

[[Page 5436]]

provider-performed microscopy (PPM) procedures and waived tests were 
regulated. In its application, the Commonwealth indicated that all 
tests were treated as high complexity tests. However, the application 
was silent with regards to waived tests and PPM procedures.
    HCFA categorizes laboratory tests as waived tests, tests of 
moderate complexity, including PPM procedures, or tests of high 
complexity. 42 CFR 493.5. The type of CLIA certificate issued is a 
function of what type of testing the laboratory performs. 42 CFR 
493.5(c); Sec. 493.3. The CLIA regulations at Secs. 493.15 and 493.19 
explain that waived tests include simple laboratory examinations that 
impose no reasonable risk to the patient if done properly while PPM 
procedures are moderately complex tests performed by certain health 
care practitioners.
    In its Position Paper, the Commonwealth explained that regardless 
of complexity, all clinical analysis testing is regulated in the same 
way. (Position Paper, p. 24). Both waived tests and PPM procedures are 
included in the definition of clinical analysis testing and are subject 
to the requirements of Regulation 83. Id. In other words, rather than 
issuing different certificates for high-complexity, waived tests or PPM 
procedures, the Commonwealth regulates all clinical analysis tests in 
the same way. Similarly, during the hearing, witnesses for the 
Commonwealth reiterated that all tests in Puerto Rico were treated as 
high complexity and, thus, were subject to the standards applicable to 
high complexity tests. (Position Paper, p. 62, 81).
    Based upon my review of the Commonwealth's regulations and an 
evaluation of the testimony given at the hearing, I reverse HCFA's 
finding with regard to waived tests and PPM procedures. I find that the 
Commonwealth's use of a single criterion for all tests, which is 
comparable to the CLIA requirement for high complexity tests, should be 
recognized as more stringent than the CLIA regulations.
C. General Requirements for Exemption
    1. Retrospective Review of Cytology Smears. Section 493.513(a)(4) 
of the CLIA regulations states that a State seeking exemption from CLIA 
must ``(demonstrate) that it has enforcement authority and 
administrative structures and resources adequate to enforce its 
laboratory requirements.'' One of the grounds for HCFA's initial denial 
of the application for exemption was that the Commonwealth failed to 
demonstrate an administrative structure and adequate resources to 
arrange for a retrospective review of cytology smears by appropriately 
trained individuals if necessary to investigate or enforce cytology 
requirements. The application and materials submitted together with the 
application were silent with regard to this issue.
    In its Position Paper, the Commonwealth indicated that it would 
develop a cytology enforcement program to support the Laboratory 
Inspection Division. (Position Paper, p. 25) However, there was no 
indication in either the Position Paper or through testimony that there 
are current procedures for performing retrospective reviews of cytology 
smears or for the investigation and enforcement of cytology 
requirements.
    Thus, I concur with HCFA's initial determination and find that the 
Commonwealth has not satisfied the requirements of Sec. 493.513(a)(4) 
insofar as they concern retrospective reviews of cytology smears.
    2. Enforcement Authority, Administrative Structure, and Resources. 
Section 493.513(c)(3) of the CLIA regulations states that an 
application for exemption must include ``(a) description of the State's 
enforcement authority, administrative structure and resources to 
enforce the State standards.'' When reviewing the application submitted 
by the Commonwealth, HCFA determined that Puerto Rico failed to submit 
adequate information necessary to evaluate its enforcement authority, 
administrative structure or resources for enforcement.
    In its Position Paper, the Commonwealth asserted that the 
organizational charts found in addenda 18 and 19 of the application for 
exemption clearly set forth the information required by 
Sec. 493.513(c)(3). (Position Paper, p. 25). Addendum 18 simply is an 
organizational chart for the Office of the Assistant Secretariat for 
Regulation and Accreditation of Health Facilities for the Department of 
Health. Addendum 19 merely represents the Fiscal Year 1994-1995 budget 
for the Laboratory Division for the Department of Health.
    During the hearing, testimony was offered with regard to the 
enforcement authority that could be exercised by the Department of 
Health. Counsel for the Commonwealth explained that the ``Uniform 
Administrative Procedures Act'' (the ``UAPA'') empowered the Secretary 
to take immediate remedial action, ex parte, against laboratories where 
there is a (sic) indication of immediate and serious threats to public 
health and safety. (Position Paper, p. 91) According to the 
Commonwealth, section 2167 of the UAPA allows an agency to use 
emergency adjudicatory procedures in any situation in which there is 
imminent danger to the public health, safety and welfare. Section 2201 
of the UAPA provides that any violations of laws administered by 
agencies shall be penalized by administrative fines not to exceed $5000 
for each violation. With the exception of discussing the UAPA, which is 
a statute of general application, little additional information on the 
Commonwealth's enforcement authorities was provided at the hearing.
    By contrast, subpart R of part 493 sets forth detailed requirements 
relating to the use of intermediate sanctions, and on the suspension, 
limitation or revocation of laboratory certifications. These 
requirements direct the correction of deficiencies within a certain 
time period, provide for alternative sanctions and set forth the 
penalties that may be assessed in the event a laboratory operates 
without a license.
    Neither the application nor Position Paper submitted by the 
Commonwealth provided sufficient information to assess the scope and 
breadth of the Commonwealth's enforcement authority as compared to 
subpart R of part 493. Accordingly, I must concur with HCFA's initial 
determination and find that the Commonwealth failed to produce adequate 
evidence concerning the enforcement authority, administrative structure 
and resources available in its laboratory program to demonstrate that 
its requirements are equal to or more stringent than the CLIA 
requirements.
    3. Cases Involving Immediate and Serious Jeopardy. Section 
493.513(c)(5) of the regulations directs a State applying for exemption 
from the CLIA program to provide information concerning its procedures 
for responding to and investigating complaints against licensed or 
approved laboratories. In its initial determination, HCFA found that 
the Commonwealth did not explain how it would investigate complaints 
indicating possible immediate and serious jeopardy to public health.
    In its Position Paper, the Commonwealth referenced Regulation 83, 
Chapter 10, Art. VI, Sec. 10 as the section identifying procedures for 
responding to and investigating such complaints. Also referenced was a 
Letter of Intent dated February 24, 1995 which represents that if an 
onsite investigation or inspection is required, appropriate personnel 
will visit the facility within 30 days of receiving the complaint. 
(Position Paper, p. 25).

[[Page 5437]]

    I have considered the information submitted by the Commonwealth and 
reject the agency's determination in this regard. I note that 
Sec. 493.513(c)(5) only requires a State to submit information on the 
State's procedures for responding to and investigating complaints 
against laboratories. This section of the regulation does not direct, 
in any way, the manner in which the State must respond to or 
investigate any such complaints.<SUP>8 In order to satisfy 
Sec. 493.513(c)(5), the State need only include with its application 
for exemption this required information. Since the Commonwealth 
included a copy of Regulation 83 in its application, which at Chapter 
10, Art. VI, Sec. 10 outlines its investigation and complaint 
procedures, I find that the plain requirements of 42 CFR 493.513(c)(5) 
were satisfied.
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     <SUP>8  While Sec. 493.513(c)(5) does not dictate the manner of 
investigation and response to complaints that each State must show 
in an application for exemption, Sec. 493.513(a)(1) requires a 
demonstration of the existence of laws at least comparable with CLIA 
condition-level requirements. Thus, a review of the State's process 
for investigating and responding to complaints must be done when 
considering how the State's enforcement laws compare with those set 
forth in subpart R of Part 493. See discussion at I. Subpart R--
Enforcement, section 1, (pp. 32-34) of this Decision.
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    4. Documentation Requirement. Section 493.513(d) of the regulations 
directs that States applying for exemption submit supporting 
documentation on the ability to furnish HCFA with electronic data in 
ACSII compatible code and a statement acknowledging that it will notify 
HCFA through electronic data transmission of certain licensure and 
specialty change events. In the initial determination, HCFA found that 
Puerto Rico failed to submit documentation demonstrating the intent and 
ability to provide HCFA with this data.
    In a Letter of Intent dated February 24, 1995, the Commonwealth 
assured HCFA that it would notify HCFA ``by electronic transmission of 
any laboratory having its license revoked, limited, withdrawn or 
suspended and/or of all enforcement actions of sanctions imposed and/or 
any changes in licensing or inspection requirement and/or any changes 
in specialties and/or subspecialities of laboratories'' within 30 days 
after such event. The Letter indicated that the Commonwealth would 
modify the ASPEN system, currently utilized by the Medicaid program, to 
satisfy this requirement. In its Position Paper, the Commonwealth 
assured HCFA that it is currently mechanizing operations and, once the 
process is completed, would be able to provide the necessary 
information via electronic transmission. (Position Paper, pg. 25-26).
    The regulations at Sec. 493.513(d) specifically require that at the 
time of application the State must demonstrate its ability to provide 
HCFA with electronic data in ASCII compatible code. However, the 
Commonwealth has not been able to document its current ability to 
satisfy this requirement. Hence, I concur with the initial 
determination of HCFA on this issue and find that the Commonwealth has 
failed to demonstrate an ability to furnish HCFA with electronic data 
in the appropriate code format.
D. Enrollment and Testing of Samples
    Section 493.801 of the regulations requires that each laboratory 
must enroll in a proficiency testing program that meets the criteria of 
subpart I of part 493 and is approved by HHS. In its initial 
determination, HCFA found that the Commonwealth's proficiency program 
was not HHS-approved for direct antigen testing in bacteriology and 
that the regulations did not require all licensed laboratories to seek 
enrollment with another HHS-approved program if the Commonwealth lost 
its Federal approval.
    The Commonwealth points out that Regulation 83, Chapter 6, Art. I, 
sec. 1(a) provides that each institution which processes clinical 
analysis tests must participate satisfactorily in a proficiency program 
established by the Department of Health. (Position Paper, p. 26). The 
regulation further provides that those programs must be accredited by 
HHS. Id. As explained by the Commonwealth in its Position Paper, in 
cases involving direct antigen testing, the laboratory must participate 
in an HHS-approved proficiency program. (Position Paper, p. 26)
    Based upon the language of the regulations and the assurances 
provided in the Position Paper, I reverse the initial determination of 
HCFA on this matter and find that the Commonwealth has in effect laws 
equal to or more stringent than 42 CFR 493.801.
E. Referral of Specimens
    Section 493.1111 of the CLIA regulations at subsection (b) states 
that referring laboratories may permit each testing laboratory to send 
the test result directly to the authorized person who initially 
requested the test. In its application, the Commonwealth cited as an 
equivalent regulation its Regulation 83, Chpt. 7, Art. IV, sec. 2(1), 
which states that the referring laboratory ``will deliver the original 
report sent by the testing laboratory directly to the physician or to 
the patient.''
    In its initial determination, HCFA found that the Commonwealth's 
regulation raised concerns because it appeared to allow the testing 
report to be given to either the patient or to the physician, without 
assuring that a copy of the test results would be sent to the 
individual who initially requested the test.
    The Position Paper submitted by the Commonwealth provided 
additional information regarding reporting test results. (Position 
Paper, pp. 26-27) First, other subsections of section 2 of Regulation 
83, Art. IV, more fully explain how referred laboratory tests are 
handled and, at subsection (3), states that ``(t)he referring 
institution may permit each testing laboratory to sent (sic) the test 
result directly to the physician who initially requested the test.'' 
Id. Secondly, the Commonwealth cites section 1(a) of the same Article, 
which provides that ``(a)ll laboratory report (sic) must be sent 
promptly to the authorized physician who requested said test.'' 
(Position Paper, p. 27) Testimony also was given to clarify that all 
laboratory reports are sent to the physician ordering the test. 
(Position Paper, p. 109)
    Thus, based upon the Commonwealth's current regulations, I reject 
the initial determination of HCFA and find that the Commonwealth has in 
effect laws which are equal to those set forth at 42 CFR 493.1111.
F. Quality Control Issues
    1. Control Procedures. Section 493.1218(f)(1) of the regulations 
directs each laboratory, as part of its routine control procedures, to 
check each batch or shipment of reagents, discs, stains, antisera and 
identification systems when prepared or opened for positive and 
negative reactivity, as well as graded reactivity.
    In both its application and its Position Paper, the Commonwealth 
cites to its comparable regulation, Regulation 83, Chapter 8, Article 
IV, sec. 1(a)(6). (Position Paper, p. 28). That section provides that 
each laboratory will ``(v)erify each lot and delivery of reagents, 
media (if applicable), disks, stains, antiserums, and identification 
systems when they are prepared or opened for positive or negative 
reactions.'' However, in its initial determination, HCFA noted that the 
Commonwealth's requirements fell short of the requirements of 
Sec. 493.1218(f)(1) since they do not require laboratories to check for 
graded reactivity, if applicable.
    Similarly, Sec. 493.1218(f)(3) requires that laboratories check 
fluorescent stains for positive and negative

[[Page 5438]]

reactivity each time of use, unless otherwise specified in subpart K of 
part 493. The Commonwealth's regulations on this aspect of reagent and 
supply checks requires laboratories to check fluorescent stains for 
reactivity each time of use, unless otherwise indicated. Reg. 83, Chpt. 
VIII, Art. IV, sec. 1(a)(8).
    In its Position Paper, the Commonwealth acknowledged that the 
current regulations do not require laboratories to check for graded 
reactivity or to check fluorescent stains for positive and negative 
reactivity each time of use. (Position Paper, p. 28) In order to 
resolve the lack of regulations equivalent to paragraphs (1) and (3) of 
Sec. 493.1218(f), the Commonwealth has offered to amend its 
regulations. Id.
    Notwithstanding the offer to amend the deficient regulations, since 
they currently do not include such requirements, I must concur with the 
initial determination made by HCFA. I find that the Commonwealth's 
regulations on control procedures are not equivalent to the 
corresponding CLIA requirements set forth at Secs. 493.1218(f)(1) and 
493.1218(f)(3).
    2. Syphilis Serology. In order to meet the quality control 
requirements for syphilis serology, the current CLIA regulations at 
section 493.1239 state that a laboratory must comply with applicable 
requirements including, as relevant here, employing positive and 
negative controls that evaluate all phases of the test system to ensure 
reactivity and uniform dosages. In the initial determination, the 
Commonwealth was advised that it needed to show evidence to assure HCFA 
that its regulations met this specific requirement. However, neither in 
its Position Paper, which set out in great detail SARAFS Quality 
Control Specific Requirements, nor in testimony offered at the hearing, 
was the Commonwealth able to identify a specific regulatory provision 
that indicated that it required laboratories to use positive and 
negative controls in all phases of the syphilis serology. (Position 
Paper, pp. 28-30; Testimony, pp. 106-107).
    Hence, based upon the application, Position Paper and the testimony 
offered at the hearing, I must concur with the initial determination 
made by HCFA. I find that the Commonwealth has failed to demonstrate 
that it has regulations in place, comparable to 42 CFR 493.1239, which 
require laboratories to employ positive and negative controls that 
evaluate all phases of syphilis testing.
    3. Urinalysis Testing. In order to meet the quality control 
requirements for urinalysis, Sec. 493.1251 of the regulations states 
that the laboratory must comply with the applicable requirements in 
Secs. 493.1201 through 493.1221. In its application, the Commonwealth 
indicated that it requires facilities to comply with all applicable 
general quality control and routine chemistry requirements as well as 
additional requirements for urinalysis. However, HCFA's initial review 
suggested that these requirements appeared to conflict.
    The Position Paper submitted by the Commonwealth clarified the 
apparent inconsistency and explained that institutions must comply with 
general quality controls and routine chemistry requirements. (Position 
Paper, p. 30). In addition, certain positive controls and confirmatory 
tests must be run for urinalysis. Id. I believe that this explanation 
clears up the inconsistency noted by HCFA and, thus, I find that the 
Commonwealth has demonstrated the existence of regulatory requirements 
equal to those set forth at 42 CFR 493.1251.
G. Personnel Qualifications
    At the outset, I must note that the issues relating to the 
personnel qualifications have been the most contentious. The 
Commonwealth, HCFA and CDC have spent a significant amount of time 
discussing the educational and training levels for key laboratory 
personnel. The Commonwealth has suggested in its Position Paper that 
Puerto Rico has distinct sociological and economic limitations that 
should militate in favor of establishing different educational 
qualifications for laboratory personnel. (Position Paper, pp. 1-9) 
However, as I counseled the Commonwealth in the hearing, the discretion 
granted to the Hearing Officer in CLIA reconsideration hearings is 
limited. See 42 CFR 488.201, et seq. Accordingly, my decision must be 
based on whether the Commonwealth can cite existing regulations or laws 
that represent criteria or standards equal to or more stringent than 
those required by CLIA. Sociopolitical, economic nor cultural 
differences may not be considered. It is also inappropriate for me to 
consider proposed laws that would amend the Commonwealth's laws.
    The Commonwealth also argues that applying the CLIA standards 
strictly, especially as regards personnel qualifications, does not 
allow a consideration of whether the Commonwealth's laws demonstrate 
``equivalency'' with CLIA. (Position Paper, p. 9) As used in the CLIA 
regulations, ``equivalency'' means that:

    An accreditation organization's or a State laboratory program's 
requirements, taken as a whole, are equal to or more stringent than 
the CLIA requirements established by HCFA, taken as a whole. It is 
acceptable for (a) * * * State laboratory program's requirements to 
be organized differently or otherwise to vary from the CLIA 
requirements, as long as (1) all of the requirements taken as a 
whole would provide at least the same protection as the CLIA 
requirements taken as a whole; and (2) a finding of noncompliance 
with respect to CLIA requirements taken as a whole would be matched 
by a finding of noncompliance with the * * * State requirements as a 
whole.

    Thus, the term ``equivalency'' as defined in Sec. 493.2 of the 
regulations requires a consideration of the entirety of the State's 
program and a consideration of whether the same protections provided by 
CLIA would be provided under that State's program. Accordingly, it 
would be inappropriate to use ``equivalency'' as a tool to measure 
whether or not a particular standard or requirement is present in a 
State's program when compared with CLIA. Instead, it is necessary to 
evaluate the totality of the State's program consonant with the scope 
and intent of CLIA.
    That said, I will now address the specific personnel requirements 
at issue in the Commonwealth's application.
    1. Laboratory Director. The regulations at Sec. 493.1443 set forth 
the qualifications for laboratory directors. The laboratory director 
must be qualified to manage and direct the laboratory personnel, to 
perform certain tests and be eligible to be an operator of a laboratory 
within the requirements of subpart R. Subsection (b) of Sec. 493.1443 
specifies the educational criteria necessary for laboratory directors 
and states, in pertinent part, that the laboratory director must (1) be 
a licensed doctor of medicine or osteopathy and certified in anatomic 
or clinical pathology, or both; (2) be a licensed doctor of medicine, 
osteopathy, or podiatric medicine and have either at least one year of 
laboratory training during medical residency or two years experience 
directing or supervising high complexity testing; or, (3) hold an 
earned doctoral degree in chemical, physical, biological or clinical 
laboratory science and be certified by specified licensing 
organizations. Section 493.1443. Provision is made in the regulations 
for ``grandfathering'' in laboratory directors who qualified and served 
as such on or before February 28, 1992.
    The Commonwealth's current regulations do not establish educational 
criteria for laboratory directors that are at all comparable to those 
set forth in Sec. 493.1443. HCFA was advised in

[[Page 5439]]

correspondence, and testimony was offered in the hearing, that the 
Commonwealth would be willing to amend its existing regulations to 
establish new qualifications equivalent to CLIA. However, as of the 
date of the hearing, such action has not been taken by the 
Commonwealth.
    Consequently, I must concur with the initial determination reached 
by HCFA. I find that the personnel requirements for laboratory 
directors in the Commonwealth of Puerto Rico are not equal to or more 
stringent than those set forth in section Sec. 493.1443.
    2. Technical Supervisor. Section 493.1447 mandates that 
laboratories performing high complexity testing must have a technical 
supervisor who meets the qualification requirements of Sec. 493.1449 
and who provides technical supervision in accordance with 
Sec. 493.1451. Section 493.1449 requires that laboratories employ one 
or more persons qualified by education and either training or 
experience to provide technical supervision for each of specialties and 
subspecialties of service in which the laboratory performs high 
complexity tests or procedures. In Sec. 493.1449 the education and 
experience qualifications differ based upon the types of procedures and 
tests that the laboratory performs.
    The Commonwealth was notified by HCFA in May 1995, that the 
standards set forth in its existing regulations for laboratory 
supervisors, when compared with those required by CLIA for the various 
types of laboratory testing, were insufficient. More specifically, HCFA 
explained that

    For most specialties, CLIA requires individuals with a 
bachelor's degree to have 4 years training/experience in the 
specialty with, if applicable, a minimum of 6 months experience in a 
subspecialty. Although Puerto Rico requires an individual with a 
bachelor's degree to have 5 years experience, two of which should be 
supervisory, there is no requirement for the experience to be in the 
specialty/subspecialty. In addition, CLIA requires a technical 
supervisor of histocompatibility or clinical cytogenetics to have at 
minimum a doctoral degree and 4 years of specific training or 
experience, or both. PR [sic] allows an individual with a bachelor's 
degree in medical technology and specialized training * * * to serve 
as a technical supervisor in these specialties.

    The Commonwealth never disputed HCFA's characterization of the 
apparent differences in qualifications for technical supervisors. 
Instead, the Commonwealth asserted that ``the nature of the practice of 
laboratory testing in Puerto Rico is very different from that on the 
mainland'' <SUP>9 and offered to change its regulations on technical 
supervisor qualifications ``in order to upgrade this particular 
personnel standard to the C.L.I.A. standard'' contingent of the 
approval of Puerto Rico's request for exemption. (Position Paper, p. 16 
and Feliciano letter).
---------------------------------------------------------------------------

     <SUP>9  July 26, 1995 Letter from Dr. Carmen A. Feliciano de 
Melecio to Anthony J. Tirone.
---------------------------------------------------------------------------

    However, as discussed at the outset, the requirements for exemption 
from CLIA are clear. In order to be granted an exemption, the State 
must demonstrate the current existence of laws that represent standards 
equal to or more stringent than CLIA condition level requirements. An 
offer to change existing regulations at sometime in the future to meet 
the ``CLIA standard'' is insufficient.
    Accordingly, I must concur with the initial determination reached 
by HCFA with regard to the technical supervisors qualifications. I find 
that the qualifications for technical supervisor represent a condition-
level requirement and that the Commonwealth has not produced existing 
regulations demonstrating the existence of standards equal to or more 
stringent than those required by 493.1447.
    3. Clinical Consultants. Section 493.1453 requires that all 
laboratories performing high complexity testing must have a clinical 
consultant meeting the requirements of Sec. 493.1455 and who provides 
clinical consultation in accordance with Sec. 493.1457.
    In its application, the Commonwealth stated that, with the 
exception of hospital laboratories, it did not require laboratories to 
have a clinical consultant. On this basis, HCFA made an initial 
determination that the Commonwealth did not demonstrate that it had 
laws equal to or more stringent than the CLIA regulations regarding 
clinical consultants.
    In the Feliciano letter and in the Position Paper, the Commonwealth 
argues that clinical consultants have no role in Puerto Rico since the 
clinical laboratories use the physician who orders the test as the 
clinical consultant. (Position Paper, p. 19; Feliciano letter, p. 7). 
The Commonwealth believes that requiring independent clinical 
consultants interferes with the physician-patient relationship and 
could cause ethical conflicts. Id. However, notwithstanding these 
concerns, the Commonwealth has offered to amend its regulations to 
include a requirement relating to clinical consultants if the request 
for exemption is granted.
    As discussed above, a future offer to amend the regulations to meet 
or exceed CLIA requirements may not be considered in a request for CLIA 
exemption. Thus, on the issue of clinical consultants, I concur with 
the determination reached by HCFA. I find that the Commonwealth has 
failed to demonstrate that it has in effect regulations regarding 
clinical consultants that are equal to or more stringent than those 
required by Sec. 493.1453.
    4. General Supervisor--Cytology. Section 493.1467 sets as a 
condition-level standard for the subspecialty of cytology, that the 
laboratory must have a general supervisor who meets the qualification 
requirements of section 493.1469 and who provides supervision in 
accordance with section 493.1471. In reviewing the Commonwealth's 
submission, HCFA noted that the application failed to address certain 
requirements for cytology general supervisors, including the 
requirement that the individual have at least three years of full-time 
experience as a cytotechnologist within the preceding ten years.
    In its Position Paper, the Commonwealth concedes that its 
regulations at Regulation 83, Chpt. 5, Art. IV, Sec. 1(a)(5) do not 
mandate that cytology general supervisors have the same number of years 
of experience as a cytotechnologists. (Position Paper, pg. 31). To 
resolve this deficiency, the Commonwealth offers to amend their 
regulations to correct this ``oversight.'' Id.
    As stated, a future offer to amend regulations to meet or exceed 
CLIA standards can not be considered when evaluating a request for 
exemption. The Commonwealth acknowledges that its current regulations 
establishing the qualifications for cytology general supervisors are 
not equal to the CLIA regulations. Thus, I concur with the initial 
determination reached by HCFA and find that the Commonwealth has failed 
to document the existence of regulations equal to or more stringent 
than those set forth at Sec. 493.1467.
    5. Cytotechnologists. Section 493.1483(b)(4) of the CLIA 
regulations requires that cytotechnologists seeking the benefit of the 
``grandfathering'' provisions must have completed two years of full-
time supervised experience in cytotechnology before January 1, 1969. 
Section 493.1483(b)(5), in turn, allows an individual to be 
``grandfathered'' in if, on or before September 1, 1994, they had two 
years of full-time experience within the preceding five years under the 
supervision of a physician and on or

[[Page 5440]]

before September 1, 1995, either have graduated from an accredited 
cytotechnology school or become certified in cytotechnology.
    HCFA informed the Commonwealth as one of the grounds for denial 
that their personnel qualifications for cytotechnologists wanting to be 
``grandfathered'' into the program were less stringent than these CLIA 
requirements. Specifically, HCFA noted that the regulations cited by 
the Commonwealth did not require an additional two years of full-time 
supervised experience in cytology before January 1, 1969. The 
Commonwealth's regulations also did not require an individual to have 
graduated from cytotechnology school or have certification in addition 
to possessing the requisite number of years of full-time experience.
    In responding to these issues in its Position Paper, the 
Commonwealth did not dispute the existence of a difference in 
qualifications. The Commonwealth avers that the applicable provisions 
in Regulation 83, Chpt. 5, Art. IV, sec. 1(a)(5) contains an error, 
causing one to read these qualifications in the alternative rather than 
as cumulative, that will be corrected at some time in the future. 
(Position Paper, p. 31).
    However, to the extent that the language of the current regulatory 
provision is lacking when compared to Secs. 493.1483(b)(4) and (b)(5), 
I concur with the determination reached by HCFA. I find that the 
Commonwealth has failed to demonstrate the existence of regulations 
setting forth cytotechnologist qualifications equal to or more 
stringent than those required by Secs. 493.1483(b)(4) and (b)(5).
    6. Testing Personnel. Sec. 493.1487 requires that laboratories 
performing high complexity testing have a sufficient number of 
individuals meeting the qualification requirements of Sec. 493.1489 to 
handle the volume and complexity of testing performed. The 
qualification standards set forth at section 493.1489 apply to all 
individuals performing such high complexity testing. In its initial 
determination, HCFA stated that the Commonwealth did not provide 
assurances that individuals given special licenses, such as 
hemodialysis technicians, nursing personnel and emergency medical 
technicians, would have to meet these CLIA level standards. The 
Commonwealth has stated that all testing performed in the Commonwealth 
is treated as high complexity testing. Thus, even individuals granted 
special licenses by the Commonwealth would need to possess 
qualifications equal to or more stringent than those set forth at 
Sec. 493.1489.
    The Commonwealth cites Regulation 83, Chapter 2, Section 2 as the 
currently applicable regulation governing the qualifications of 
individuals accorded special licenses. That regulation allows a 
laboratory to undertake responsibilities for training personnel working 
under a special license and allows the laboratory to certify 
proficiency through a written and practical tests. (Position Paper, p. 
32). However, there is no indication that these individuals are 
required to complete any accredited laboratory training program or that 
they must attain any particular educational level.
    By contrast, Sec. 493.1489 of the CLIA regulations sets forth in 
detail the licensing, accreditation and educational requirements for 
personnel who perform high complexity testing. Nothing in the 
documentation provided by the Commonwealth represents similar 
regulatory requirements.
    The Commonwealth states in its Position Paper that ``the personnel 
authorized under special license to perform certain testing shall 
either comply with Puerto Rico's stricter testing personnel 
requirements or at a minimum, comply with the less stringent C.L.I.A. 
requirements.'' (Position Paper, pp. 31-31.) However, as with other 
personnel qualification requirements, the Commonwealth's proposed 
manner of assuring the application of such standards is by taking 
regulatory action in the future.
    Thus, I agree with the determination made by HCFA regarding the 
qualifications for testing personnel. I find that the Commonwealth has 
not produced evidence of existing regulations that are equal to or more 
stringent than the CLIA regulations on testing personnel qualifications 
set forth at Sec. 493.1489.
H. Comparison of Test Results
    Section 493.1709 of the regulations provides that if a laboratory 
performs tests that are not included in a proficiency testing program, 
the laboratory must have a system for verifying the accuracy of its 
test results at least twice a year. Upon reviewing the Commonwealth's 
application, HCFA determined that it failed to demonstrate the 
existence of an equivalent regulation.
    In its Position Paper, the Commonwealth draws our attention to the 
text of Regulation 83, Art. XI, Chpt. 9, sec. 5(b). (Position Paper, p. 
34.) That section, which is entitled ``Evaluation of the Comparison of 
the Test Results,'' states in pertinent part that ``(t)he Institution 
must develop mechanisms to verify the accuracy and reliability of the 
processed tests through different methods at least twice a year.''
    However, the Commonwealth acknowledges, and we must note, that this 
regulation does not specifically require that laboratories maintain the 
accuracy of a testing procedure at least two times a year for tests for 
which proficiency testing is not available. In order to ensure that its 
regulations correspond more closely with Sec. 493.1709, the 
Commonwealth has offered to amend its regulations accordingly.
    This change, necessary to ensure that the Commonwealth has in 
effect a law equal to or more stringent than Sec. 493.1709, has not yet 
been made. Hence, I concur with the initial determination of HCFA and 
find that the Commonwealth has not satisfied the requirements of 
Sec. 493.513(a) with regard to the comparison of test results.
I. Subpart R--Enforcement
    1. Relationship of Proprietor to Owner/Operator. When apprising the 
Commonwealth of its initial determination, HCFA generally noted that 
``(t)he relationship of the proprietor to the owner/operator is 
unclear. This is important because, under CLIA, certain consequences to 
the owner-operator of a laboratory occur when the laboratory loses its 
certificate.'' No particular section of the CLIA regulations was cited 
and no additional information on the ``consequences'' at issue was 
provided in the notice of denial. Indeed, other than the above-cited 
two sentences, there is no indication that the Commonwealth was advised 
of the specific basis for HCFA's problems with the manner in which the 
Commonwealth defined the duties of the proprietor/owner.
    Section 493.1840(a)(8) allows HCFA to initiate adverse actions to 
suspend, limit or revoke any CLIA certificate if the laboratory's owner 
or operator, within the preceding two year period, owned or operated a 
laboratory that had its CLIA certificate revoked. An ``owner'' is 
defined at Sec. 493.2 as ``any person who owns any interest in a 
laboratory except for an interest in a laboratory whose stock and/or 
securities are publicly traded.'' Section 493.2 defines 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 laboratory.''
    By comparison, the Commonwealth uses the term ``proprietor'' or 
``owner'' to mean the person to whom a license is issued for the 
operation of a

[[Page 5441]]

laboratory. Reg. 83, Art. III, (51). The ``supervisor'' of the 
laboratory is identified as the ``[p]erson in charge of ensuring that 
the operation and/or administrative procedures are performed in 
compliance with the established standards of the institution.'' Id. at 
(58). The laboratory ``director'', in turn, is the ``[p]erson in charge 
of a facility in which any type of clinical analysis, pathological 
study and/or Blood Bank's service is provided.'' Id. at (15).
    While there apparently is incongruence between the terms used in 
the CLIA regulations and the Commonwealth's regulations, the initial 
determination did not explain the basis for HCFA's concerns in anything 
but the vaguest form. Perhaps because of this failure to specify the 
nature of the problem insofar as concerns ``proprietors,'' ``owners,'' 
and ``operators,'' the Commonwealth did not address this issue in its 
Position Paper.
    It is also noteworthy that HCFA did not actively solicit additional 
guidance on how the Commonwealth allocated duties between proprietors, 
owners and operators during the hearing.
    Hence, because the Commonwealth was not fully apprised of the 
nature of HCFA's concerns with regard to the issue of the duties of 
proprietors, owners and operators, I have elected to disregard this 
issue in reaching a decision in this reconsideration.
    2. Ensuring Timely Correction of Deficiencies. The Commonwealth was 
informed by HCFA that one of the grounds for the initial determination 
to deny the request for exemption from CLIA was that the application 
failed to explain fully how the Commonwealth enforced the timely 
correction of deficiencies. More specifically, the Commonwealth was 
advised:

    (T)he ability to take enforcement action in cases of immediate 
and serious jeopardy before the laboratory receives a hearing must 
be demonstrated. The Commonwealth must provide information 
concerning the type of sanction imposed, time frames for correction, 
and the actions taken when deficiencies are not corrected for * * * 
immediate and serious threat to public health and safety; condition 
level deficiencies, and deficiencies below the condition 
level.<SUP>10

    \10\ See May 22, 1996 Denial Letter.
---------------------------------------------------------------------------

    Thus, HCFA's evaluation of the application for exemption indicated 
a dearth of basic information necessary to establish the existence of 
adequate enforcement measures.
    In its Position Paper, the Commonwealth overlooks an opportunity to 
educate us regarding this important aspect of the basis for denial and 
instead merely references sundry regulations and laws, without 
meaningful explanation on how the laws and regulations respond to the 
concerns identified in the initial denial. (Position Paper, p. 34) 
However, testimony was given during the Hearing that may help explain 
how the Commonwealth knits together these various laws to fashion 
enforcement proceedings. We will use this testimony to attempt to 
respond to the particular concerns identified by HCFA in its initial 
determination.
    As stated, HCFA generally noted that the Commonwealth needed to 
demonstrate the ability to take prehearing enforcement action in cases 
of immediate and serious jeopardy. To respond to this deficiency, the 
Commonwealth refers us to Regulation 83, Chapter 10, Art. VI, sec. 10, 
which explains the procedures the Department may use in cases where 
there is an existing situation which is imminently dangerous to the 
health, safety and well being of the public. While this regulation is 
imprecise, it does demonstrate an ability to take enforcement action in 
such cases, and when read together with other parts of Regulation 83, 
such as Chapter 2 and Chapter 4, would seem sufficient to respond to 
the first concern expressed by HCFA.
    Testimony offered at the hearing also pointed to the UAPA as an 
important element of the Commonwealth's enforcement authority. Section 
2167 of the UAPA allows an agency to take immediate action in cases 
involving threats to the public health. Witnesses for the Commonwealth 
explained that these proceedings are ex parte and an order addressing 
the threat may be issued by the Secretary of the Department of Health 
after receipt of a complaint. (Testimony, pp. 90-91). If a laboratory 
ignores the Secretary's order, the Department of Law may petition the 
court for an injunction directing the laboratory to close. (Testimony, 
p. 91).
    We note that the UAPA and the relevant provisions of Regulation 83 
were cited in the Crosswalk submitted by the Commonwealth together with 
its application. However, it is also apparent that the testimony 
offered at the Hearing helped explain how these various laws should be 
read together. Based upon the information I have reviewed, I must 
partially reverse the determination of HCFA insofar as concerns this 
aspect of the initial determination. I find that the Commonwealth has 
produced documentation demonstrating the ability to take prehearing 
enforcement actions in cases of immediate and serious jeopardy.
    HCFA also found lacking the Commonwealth's submission of 
documentation concerning sanctions, time frames for corrections and 
actions taken when deficiencies are not corrected for all levels of 
deficiencies. Again, because the Commonwealth relies upon several 
regulations to address enforcement and did not prepare a Crosswalk that 
corresponded exactly to the CLIA regulations, appraising the 
sufficiency of the Commonwealth's laws has been difficult. However, we 
believe that a very close reading of the documentation submitted with 
the initial application, including sections not explicitly identified 
by the Commonwealth, provides some of the information needed by HCFA.
    Regulation 83, Chpt. 2, Art. VII sets forth the principal 
sanctions: suspension, revocation or limitation of tests. Puerto Rico 
also has alternative sanctions such as plans of correction, explained 
at Regulation 83, Chpt. 4, Art. III, sec. 1(f), and civil monetary 
penalties, set forth at section 2201 of the UAPA and Regulation 83, 
Chpt. 2, Art. VIII. A civil suit, seeking immediate closing of a 
laboratory, may be commenced in cases of immediate jeopardy and 
criminal prosecution may be sought in cases involving intentional 
violations. Reg. 83, Chpt. 2, Arts. IX and X. Thus, with the exception 
of State onsite monitoring, the Commonwealth has in effect laws that 
correspond generally to the CLIA regulations at section 493.1806.
    However, although these laws exist, they nevertheless fail to 
address certain key elements and are, in some instances, less stringent 
than the CLIA regulations. For example, the regulations do not address 
the amount of time a laboratory is given to make corrections. Although 
Regulation 83, Chpt. 4, Art. III, Section 1(f) explains that deficiency 
reports are issued ten days after an inspection discloses deficiencies 
and indicates that correction plans must be submitted by the 
laboratories, the regulations do not specify when the laboratory must 
complete any noted corrections. Neither do the regulations make clear 
that the Commonwealth may send someone to visit the laboratory at any 
time to evaluate progress in correcting noted deficiencies. See 
Sec. 493.1820(a).
    Similarly, while the Commonwealth has in effect laws that allow for 
the assessment of civil monetary penalties for certain violations, the 
amounts are markedly less than those authorized under the CLIA 
regulations. As stated, section 2201 of the UAPA allows the imposition 
of an administrative fine of up to $5,000 for each violation of the

[[Page 5442]]

agency's regulations and has been cited by the Commonwealth as the key 
penalty provision for cases involving immediate jeopardy. However, this 
must be compared with 42 CFR 493.1834(d)(2) which allows HCFA to impose 
a penalty amount from $3,050 to $10,000 per day of noncompliance or per 
violation for condition level deficiencies that represent immediate 
jeopardy.
    Lastly, with the exception of information provided concerning cases 
of immediate jeopardy, the Commonwealth cannot be said to have 
submitted comprehensible documentation of what actions are taken when 
less severe deficiencies are not corrected.
    In summary, while I disagree with HCFA's initial determination that 
the Commonwealth did not demonstrate an ability to take enforcement 
action in cases of immediate and serious jeopardy, I concur with their 
assessment that the Commonwealth did not adequately explain certain key 
aspects of their enforcement proceedings. I find that the Commonwealth 
has not demonstrated the existence of regulations to ensure the timely 
investigation of and correction of deficiencies. I also find that the 
amount of civil monetary penalties that the Commonwealth may assess in 
cases of immediate and serious jeopardy is insufficient when compared 
to the CLIA regulations. For these reasons, I find that the 
Commonwealth has failed to document the existence of regulations equal 
to or more stringent than Sec. 493.1820 of the CLIA regulations.
    3. Laboratory Registry. Section 493.1850 of the regulations 
requires HCFA to make available once a year specific information that 
is useful in evaluating the performance of laboratories. The regulation 
explicitly mandates that this information include a list of 
laboratories convicted under laws relating to fraud and abuse, false 
billing, or kickbacks. In its initial determination, HCFA found that 
the Commonwealth did not evidence the existence of a regulation or law 
that would require it to make available to physicians and the public, 
via HCFA, a list of laboratories convicted of fraud and abuse, false 
billing, or kickbacks, under Puerto Rican law.<SUP>11
---------------------------------------------------------------------------

    \11\ See also Sec. 493.513(d), which requires exempted States to 
provide HCFA with certain information, including license approvals, 
revocations, sanctions and withdrawals.
---------------------------------------------------------------------------

    The Commonwealth in its Position Paper indicates that it does not 
have any information about any laboratory convicted under Puerto Rican 
laws sanctioning fraud and abuse, false billing or kickbacks. (Position 
Paper, p. 34). As concerns its future duty to report pursuant to 
Sec. 493.1850, the Commonwealth ``guarantees'' submission of such 
information and the future amendment of its regulations, if necessary. 
(Position Paper, p. 34).
    We are unsure of how one should interpret the Commonwealth's lack 
of information in this regard. One interpretation is that there have 
been no laboratories in the Commonwealth of Puerto Rico have been 
convicted of fraud and abuse, false billing or kickbacks. Another 
interpretation is that the Secretary does not obtain information or 
maintain a record of the disposition of fraud and abuse, false billing 
or kickback cases involving laboratories.
    In any event, to the extent that the CLIA regulations specifically 
require disclosure of this information to the public, any State seeking 
exemption from CLIA must show the existence of a corresponding 
reporting mechanism. As conceded by the Commonwealth, it does not 
currently have regulations that require it to collect and submit this 
data to HCFA. Without such current regulations, I have no alternative 
but to concur with the initial determination reached by HCFA. For the 
above-noted reasons, I find that the Commonwealth has failed to 
demonstrate the existence of a regulation equal to or more stringent 
than the CLIA regulation requiring laboratory registry.

IV. Findings

    After undertaking an exhaustive and complete review of the 
documentation submitted by the Commonwealth in connection with its 
application for exemption, HCFA determined that Puerto Rico did not 
satisfy the requirements of Sec. 493.513(a)(1) and could not be granted 
exemption from CLIA. I have considered the record, supplementary 
information provided by the Commonwealth, the Position Paper and 
testimony in preparing this decision. I hereby make the following 
findings:
    1. Section 493.513 of the regulations sets forth the general 
requirements for States seeking exemption from CLIA program 
requirements.
    2. Subsection 493.513(a)(1) provides that HCFA may grant a State 
exemption from CLIA if the State has in effect laws that provide for 
requirements equal to or more stringent than CLIA condition-level 
requirements.
    3. The application for exemption and supporting documentation 
submitted by the Commonwealth of Puerto Rico was evaluated by HCFA 
using this standard.
    4. In fourteen instances involving condition-level requirements, 
HCFA properly determined that the Commonwealth was unable to 
demonstrate the existence of laws providing for requirements equal to 
or more stringent than the CLIA regulations. These deficiencies have 
been thoroughly discussed in this decision.

Legal Conclusion

    For the reasons discussed herein, and based upon the above-
referenced findings of fact, I conclude that the initial determination 
reached by HCFA to deny the Commonwealth of Puerto Rico's application 
for exemption from CLIA was consistent with the applicable laws and 
regulations. It is recommended that the initial determination denying 
the Commonwealth's application for CLIA exemption be affirmed.

    Dated: September 27, 1996.
Richard W. Besdine,
Hearing Officer, Health Care Financing Administration.
[FR Doc. 97-2761 Filed 2-4-97; 8:45 am]
BILLING CODE 4120-03-P