Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Jerry Lee Stayton,
Petitioner,
v.
The Inspector General.
Docket No. C-13-701
Decision No. CR2998

Date: November 19, 2013

DECISION

The Inspector General (1.G.) of the United States Department of Health and Human
Services (HHS) notified Petitioner, Jerry Lee Stayton, that he was being excluded from
participation in Medicare, Medicaid, and all other federal health care programs pursuant
to 42 U.S.C. § 1320a-7(b)(4), effective April 18, 2013. For the reasons stated below, I
conclude that the I.G. has a basis for excluding Petitioner from participation in federal
health care programs because his license to provide health care as a Certified Addiction
Counselor (CAC) was surrendered while a formal disciplinary proceeding was pending
before the Colorado State Board of Addiction Counselor Examiners and the proceeding
concerned Petitioner’s professional performance. The exclusion must last while his state
license is surrendered. 42 U.S.C. § 1320a-7(c)(3)(E).

I. Background

By letter dated March 29, 2013, the LG. notified Petitioner that he was being excluded
from Medicare, Medicaid, and all federal health care programs pursuant to 42 U.S.C.
§ 1320a-7(b) until he regains his license as a CAC in Colorado and is reinstated in the
program by the I.G. The I.G. advised Petitioner that the exclusion was because his
license to provide health care as a CAC was revoked, suspended, otherwise lost or
surrendered while a formal disciplinary proceeding was pending before the Colorado
Addiction Counselor Program for reasons bearing on his professional competence,
professional performance, or financial integrity. 42 U.S.C. § 1320a-7(b); 42 C.F.R.
§ 1001.501. I.G. Exhibit (Ex.) 1.

Petitioner timely filed his request for a hearing (RFH) and this case was assigned to me
for hearing and decision. On May 22, 2013, I convened a prehearing conference by
telephone, the substance of which is summarized in my Order and Schedule for Filing
Briefs and Documentary Evidence (Order) of that same date. See 42 C.F.R. § 1005.6.
Pursuant to the Order, the I.G. submitted the L.G.’s brief (I.G. Br.) together with six
exhibits (I.G. Exs. 1-6). Petitioner submitted a response brief (P. Br.) together with 14
exhibits (P. Exs. 1-14). Petitioner sent his response brief and exhibits to counsel for the
1G., rather than filing with my office. Counsel for the I.G. forwarded Petitioner’s
submission to my office and my staff uploaded all the documents on to the Departmental
Appeals Board’s electronic filing system. The I.G. then submitted its reply brief (I.G.
Reply Br.). Because neither the IG. nor Petitioner objected to any of the proposed
exhibits, I admit into evidence I.G. Exs. 1-6 and P. Exs. 1-14. Neither party proposed
any witnesses to testify. I.G. Br. at 13; P. Br. at 5. Therefore, an in-person hearing is
unnecessary and I issue this decision on the basis of the written record.

II. Issue

The sole issue before me is whether the I.G. has a basis for excluding Petitioner from
participating in Medicare, Medicaid, and all other federal health care programs pursuant
to 42 U.S.C. § 1320a-7(b)(4)(B).

I. Jurisdiction
I have jurisdiction to decide this issue. 42 C.F.R. §§ 1001.2007(a)(1), 1005.2(a).
IV. Findings of Fact, Conclusions of Law, and Analysis!

A, On May 15, 2012, Petitioner admitted, while a disciplinary proceeding was
pending before the Colorado Board of Addiction Counselor Examiners, that
he violated section 12-43-222(1)(g)(I) and (i) of the Colorado Revised
Statutes and stipulated to the surrender of his CAC certificate.

On May 15, 2012, Petitioner signed a Stipulation for Voluntary Relinquishment and Final

Agency Order (Stipulation and Final Order) in a proceeding before the State Board of
Addiction Counselor Examiners in the State of Colorado. The Stipulation and Final

' My findings of fact and conclusions of law are set forth in italics and bold font.
Order indicates that it is “In the Matter of Disciplinary Proceedings Regarding the
Certificate to Practice Addiction Counseling in the State of Colorado of Jerry Stayton,
Certificate No. CAC III 4951.” The stated purpose of the Stipulation and Final Order is
to provide for a settlement of all matters arising out of the case without the necessity of
holding a formal hearing. Finally, the Stipulation and Final Order constitutes a full and
final resolution of the matter. I.G. Ex. 3.

In the Stipulation and Final Order, Petitioner admitted to several facts including that he
“spent the night in a client’s room while the client was out on pass but another client was
present”, “acted in a manner that did not meet generally accepted standards of care while
employed by Arapahoe House”, and “maintained a relationship with clients that increased
the risk of client exploitation.” I.G. Ex. 3, at 1-2. By virtue of these facts, Petitioner
admitted that he violated section 12-43-222(1)(g) and (i) of the Colorado Revised
Statutes (C.R.S.). LG. Ex. 3, at 2. The Colorado Board of Addiction Counselors found
that a disciplinary sanction was necessary to protect public health, safety, and welfare.
1.G. Ex. 3, at 2. Thus, Petitioner agreed to relinquish his CAC certificate to practice
addiction counseling in Colorado and agreed to surrender his certification as of the date
of the execution of the Stipulation and Final Order. LG. Ex. 3, at 2. By the terms of the
Stipulation and Final Order, Petitioner understood and agreed that he was ineligible to
apply for certification as an addiction counselor in Colorado for at least three years from
the date of surrender of the certification and any reapplication would be treated as a new
application. I.G. Ex. 3, at 2. Petitioner indicated that he was “fully aware of and
understands the right to receive a formal notice of hearing and charges and to have a
formal disciplinary hearing, pursuant to § 12-43-224, C.R.S., and hereby waives those
rights” and acknowledged “that this waiver constitutes a waiver of all rights to appeal in
this matter.” I.G. Ex. 3, at 2.

B. There is a basis for Petitioner’s exclusion pursuant to 42 U.S.C. § 1320a-
7(b)(4)(B)as each of the elements has been proven in this case.

The LG. cites 42 U.S.C. § 1320a-7(b)(4) as the basis for Petitioner’s permissive
exclusion. I.G. Ex. 1. The statute provides:

(b) PERMISSIVE EXCLUSION. — The Secretary may
exclude the following individuals and entities from
participation in any Federal health care program

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(4) LICENSE REVOCATION OR SUSPENSION. — ANY
INDIVIDUAL OR ENTITY —
(A) whose license to provide health care has been revoked or
suspended by any State licensing authority, or who otherwise
lost such a license or the right to apply for or renew such a
license, for reasons bearing on the individual’s or entity’s
professional competence, professional performance, or
financial integrity, or

(B) who surrendered such a license while a formal
disciplinary proceeding was pending before such an authority
and the proceeding concerned the individual’s or entity’s
professional competence, professional performance, or
financial integrity.

Thus, the elements that must be proven for exclusion pursuant to section 1320a-7(b)(4)
in this case are: (1) Petitioner’s license to provide health care has been surrendered while
a formal disciplinary proceeding was pending before a State licensing authority, and (2)
the proceeding concerned Petitioner’s professional competence, professional
performance, or financial integrity.

1. Petitioner surrendered his license to provide health care and
the surrender of Petitioner’s license occurred while a
formal disciplinary proceeding was pending before a State
licensing authority.

The Stipulation and Final Order in Petitioner’s disciplinary case before the Colorado
Board of Addiction Counselor Examiners clearly indicates that Petitioner surrendered his
CAC certificate to practice addiction counseling in Colorado. I.G. Ex. 3, at 2, 4.
Petitioner characterizes his action of signing the Stipulation and Final Order as signing
“an agreement which placed my Certification on an Inactive Status.” P. Br. at 1.
However, Petitioner did not simply opt to make his license to practice addiction
counseling or CAC certificate inactive. Petitioner agreed to “relinquish” his certificate to
practice addiction counseling and “surrender” his CAC certification in the State of
Colorado. I.G. Ex. 3, at 2. Petitioner also agreed that he could not apply for another
certification as an addiction counselor for three years. LLG. Ex. 3, at 2. The Stipulation
and Final Order states that Petitioner was subject to a “disciplinary sanction” and that the
Stipulation and Final Order has the same effect as an order issued following a
disciplinary hearing. I.G. Ex. 3, at 2. Petitioner also agreed that the Stipulation and Final
Order was entered into “voluntarily and without coercion, after an opportunity to consult
with counsel and with full understanding of the legal consequences of [the Stipulation
and Final] Order and the right to a formal hearing on all matters herein.” LG. Ex. 3, at 2.
Therefore, I find that Petitioner surrendered his license to provide health care as a CAC in
Colorado on June 4, 2012, the date of the execution of the Stipulation and Final Order.
Further, Petitioner surrendered his license while formal proceedings were pending before
a state licensing authority. According to the record of this case, a June 10, 2010 letter
from the Colorado Department of Regulatory Agencies indicates that Petitioner was
offered the opportunity to voluntarily relinquish his CAC certificate and avoid a formal
proceeding, and it appears that Petitioner did not accept this offer. I.G. Ex. 6. However,
it is clear that a formal proceeding was initiated at some time after the June 10, 2010
letter. Both an Assistant Attorney General and Petitioner signed a document in July and
August 2012, respectively, seeking mediation of Petitioner’s case by the Colorado Office
of Administrative Courts. P. Ex. 5C. The record also contains a July 1, 2011 letter from
a Senior Assistant Attorney General indicating that Petitioner had a hearing on the
revocation of his CAC certificate scheduled for July 14, 2011. P. Ex. 5A. Further, the
Stipulation and Final Order that resulted in the surrender of Petitioner’s CAC certificate
makes it clear that the surrender occurred during a disciplinary proceeding before the
State Board of Addiction Counselor Examiners in Colorado. The Stipulation and Final
Order is formally captioned and the title indicates it is a Final Agency Order. I.G. Ex. 3.
Thus, I find that the first element under 42 U.S.C. § 1320a-7(b)(4) is satisfied.

2. The proceeding concerned Petitioner’s professional
performance.

The I.G. argues that the surrender of Petitioner’s CAC certificate was for reasons bearing
on his professional competence and professional performance. As discussed above,
Petitioner admitted to acting in a manner that did not meet generally accepted standards
of care while working at his former employer and maintaining a relationship with clients
that increased the risk of client exploitation. 1.G. Ex. 3, at 1-2. Furthermore, Petitioner
admitted that he violated § 12-43-222(1)(g)(I) and (i), a Colorado statute applicable to
mental health care professionals which states that:

(1) A person licensed, registered, or certified under this article
violates this article if the person:

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(g)(I) Has acted or failed to act in a manner that does not meet the
generally accepted standards of the professional discipline under
which the person practices. Generally accepted standards may
include, at the board’s discretion, the standards of practice generally
recognized by state and national associations of practitioners in the
field of the person’s professional discipline.

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(i) Has maintained relationships with clients that are likely to
impair such person’s professional judgment or increase the risk
of client exploitation, such as treating employees, supervisees,
close colleagues, or relatives;

C.R.S.A. § 12-43-222(1)(g)(D), (i).

Petitioner disputes the I.G.’s conclusion and argues that the I.G. should not exercise a
permissive exclusion in this case. Petitioner appears to explain the facts surrounding the
incident that led to the disciplinary proceeding which resulted in the Stipulation and Final
Order and argues that “[l]aws and ethics code provide guidelines, yet neither offers clear
cut answers to situational problems.” P. Br. at 1. Although Petitioner may contend that
he did not surrender his CAC certificate for reasons bearing on his professional
competence and professional performance, | find the relevant fact is that Petitioner signed
the Stipulation and Final Order, which is undisputed. Therefore, I conclude as a matter of
law, based on the facts, that the surrender of Petitioner’s CAC certification in Colorado
pursuant to the Stipulation and Final Order was for reasons related to Petitioner’s
professional competence and professional performance. I.G. Ex. 3. Accordingly, I
conclude that the second element required for exclusion pursuant to 42 U.S.C. § 1320a-
7(b)(4) is satisfied. Therefore, the I.G. has a legal basis to exclude Petitioner.

C. The length of Petitioner’s exclusion is reasonable as a matter of law.

In his RFH, Petitioner disputes the length of his exclusion as being unreasonable. The
1.G. exclusion letter indicates that Petitioner cannot be reinstated until his Colorado CAC
certificate has been restored to him. LG. Ex. 1. Petitioner suggests difficulty in obtaining
a new Colorado certificate because he no longer lives in Colorado. RFH at 1. The LG.
argues that Petitioner is excluded from participation in all federal health care programs
until he regains his CAC certificate in Colorado and that term of exclusion is reasonable
as a matter of law. I.G. Br. at 12.

It is clear that Petitioner agreed to relinquish his certificate to practice addiction
counseling and surrender his CAC certification in Colorado. LG. Ex. 3, at 2. Pursuant to
42 U.S.C. § 1320a-7(c)(3)(E), the period of exclusion “shall not be less than the period
during which the individual’s or entity’s license to provide health care is revoked,
suspended, or surrendered ....” Petitioner has not presented any evidence to support
that he has been reinstated as an addiction counselor in Colorado or any other state.
Accordingly, I conclude that there are currently no facts that raise an issue before me
requiring interpretation or application of 42 U.S.C. § 1320a-7(c)(3)(E). Further, I cannot
waive the requirement that Petitioner obtain a new CAC certificate in order for the
exclusion to end. See 42 C.F.R. § 1005.4(c)(1). Therefore, I conclude that the period of
exclusion is reasonable as a matter of law under 42 U.S.C. § 1320a-7(c)(3)(E), based on
the facts in the record.
D. Iam unable to consider collateral attacks on the Stipulation and
Final Order.

Petitioner raises many issues related to the surrender of his CAC certificate and his
signing of the Stipulation and Final Order. Petitioner indicates that a manager at
Arapahoe House filed an untimely complaint with the state of Colorado. P. Br. at 1.
Petitioner also asserts that two other employees at Arapahoe House lied about the
incident that became the subject of the disciplinary action against Petitioner and that
those employees received probation related to a lack of maintaining confidentiality. P.
Br. 1. Further, Petitioner states: “I would hope that you will find that just because a
person signed [the Stipulation and Final Order] it does not mean I committed the
allegation....” P. Brat 1-2. These arguments are all impermissible collateral attacks on
the Stipulation and Final Order. I cannot review the Stipulation and Final Order and
Petitioner cannot collaterally attack it on either substantive or procedural grounds in this
appeal because “facts were adjudicated and a final decision was made” in the disciplinary
proceedings before the State Board of Addiction Counselor Examiners in Colorado. LG.
Ex. 3, at 1-2; 42 C.F.R. § 1001.2007(d); George Iturralde, M.D., DAB No. 1374 (1992);
Leonard R. Friedman, M.D., DAB No. 1281 (199 )2

E. Petitioner’s exclusion cannot be reversed on equitable grounds.

Petitioner also appears to urge me to review the I.G.’s decision to exercise his discretion
to exclude Petitioner from all healthcare fields and argues that “the definition of
exclusion is very narrow....” P. Br. at 1. Petitioner filed copies of a positive
performance review, reference letters from individuals who have worked with him, and
certificates and awards from employers. See P. Exs. 11-14. However, Petitioner’s
arguments and evidence are not relevant because I have very limited authority to reverse
an exclusion under 42 U.S.C. § 1320a-7(b)(4). See 42 C.F.R. § 1005.4(c)(5). Although I
have the authority to reverse an exclusion, see 42 C.F.R. §§ 1001.3005(a)(3), 1005.20(b),
I can only do so if the LG. has failed to prove that there is a basis for the exclusion. See
42 C.F.R. § 1001.2007(a); Keith Michael Everman, D.C., DAB No. 1880 (2003).
Furthermore, I cannot reverse the I.G.’s decision to impose an exclusion based upon
equitable considerations such as past positive performance reviews, awards, and good
character reference letters. Donna Rogers, DAB No. 2381, at 6 (2011).

> Administrative decisions and rulings cited in this decision are accessible on the internet
at: http://www.hhs.gov/dab/decisions/index.html.
V. Conclusion

For the foregoing reasons, I sustain the I.G.’s determination to exclude Petitioner from
participating in Medicare, Medicaid, and all federal health care programs pursuant to
42 U.S.C. § 1320a-7(b)(4)(B).

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Luisa Deli and Grocery Inc.
d/b/a Luisa Grocery,

Respondent.
Docket No. C-13-1208
FDA Docket No. FDA-2013-H-1003
Decision No. CR2996

Date: November 15, 2013

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint
(Complaint) against Respondent, Luisa Deli and Grocery Inc. d/b/a Luisa Grocery,
that alleges facts and legal authority sufficient to justify the imposition of a civil
money penalty of $2,000. Respondent did not answer the Complaint, nor did
Respondent request an extension of time within which to file an answer.
Therefore, I enter a default judgment against Respondent and assess a civil money
penalty of $2,000.

CTP began this case by serving the Complaint on Respondent and filing a copy of
the Complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. The Complaint alleges that Respondent impermissibly sold
cigarettes to a minor, failed to verify that a cigarette purchaser was 18 years of age
or older, and sold individual cigarettes, thereby violating the Federal Food, Drug,
and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations,

Cigarettes and Smokeless Tobacco, 21 C.F.R. Part 1140 (2012). CTP seeks a civil
money penalty of $2,000.

On September 24, 2013, CTP served the Complaint on Respondent by United
Parcel Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and
accompanying cover letter, CTP explained that within 30 days, Respondent should
pay the proposed penalty, file an answer, or request an extension of time within
which to file an answer. CTP warned Respondent that if it failed to take one of
these actions within 30 days, an Administrative Law Judge could, pursuant to

21 C.F.R. § 17.11, issue an initial decision ordering Respondent to pay the full
amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor
has it requested an extension. Pursuant to 21 C.F.R. § 17.11(a), 1am required to
“assume the facts alleged in the [C]omplaint to be true” and, if those facts
establish liability under the Act, issue a default judgment and impose a civil
money penalty. Accordingly, I must determine whether the allegations in the
Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Luisa Grocery, an establishment that sells tobacco
products and is located at 123 Elizabeth Avenue, Newark, New Jersey
07108. Complaint § 3.

e On February 11, 2013, an FDA-commissioned inspector observed a
violation of 21 C.F.R. Part 1140 at Respondent’s establishment. The
inspector observed a violation of 21 C.F.R. § 1140.14(d) “for selling
individual cigarettes ... .”' Complaint § 10.

e On February 28, 2013, CTP issued a Warning Letter to Respondent
regarding the inspector’s observations from February 11, 2013. The letter
explained that the observations constituted a violation of a regulation found
at 21 C.F.R. § 1140.14(d), and that the named violation was not necessarily

' The regulation prohibits retailers from “break/ing/ or otherwise open[ing] any
cigarette or smokeless tobacco package to sell or distribute individual cigarettes . .
- LJ]? 21 C.F.R. § 1140.14(d) (emphasis added). CTP, however, alleges only that
Respondent sold individual cigarettes “in violation of 21 C.F.R. § 1140.14(d),”
and fails to allege that Respondent either broke open a package of cigarettes or
that the individual cigarettes visibly came from an opened package. Because
Respondent did not answer CTP’s Complaint, I will infer that both elements of a
violation of 21 C.F.R. § 1140.14(d) are present.

intended to be an exhaustive list of all violations at the establishment. The
Warning Letter went on to state that if Respondent failed to correct the
violation, regulatory action by the FDA or a civil money penalty action
could occur and that Respondent is responsible for complying with the law.
Complaint § 10.

Juan Rivas, Respondent’s owner, responded to the Warning Letter with a
June 6, 2013 letter of his own. “Mr. Rivas stated that the establishment: 1)
is retraining employees; 2) will check the photo identification of everyone
appearing to be under the age of 27 who attempts to purchase tobacco
products; 3) will sell tobacco products only to purchasers 18 years and
older; and 4) will only sell tobacco products in direct, face-to-face
exchanges.” Complaint § 11.

On June 12, 2013, at approximately 2:51 PM, FDA-commissioned
inspectors documented three additional violations of 21 C.F.R. Part 1140 at
Respondent’s establishment. The inspectors documented violations of 21
C.F.R. § 1140.14(a) and (d) when “a person younger than 18 years of age

was able to purchase individual cigarettes . . . [.]” The inspectors also
documented a violation of 21 C.F.R. § 1140.14(b)(1) when “the minor's
identification was not verified before the sale... .” Complaint § 1.

CTP issued a Notice of Compliance Check Inspection to Luisa Grocery on

June 17, 2013, due to the June 12, 2013 inspection. The Notice of

Compliance

Check Inspection specifically informed Res

pondent that “a

minor was able to . . . purchase a regulated tobacco product at
approximately 2:51 PM” on June 12, 2013. Complaint J

These facts establis!

that Respondent is liable under the Act. T!

2.

ie Act prohibits

misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is

misbranded if distri

issued under section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(
§ 1140.1(b). The Secretary issued the regulations at 21 C.F.R. Part 1140 under

section 906(d) of th
Reg. 13,229 (Mar.

e Act. 21 U.S.C. § 387(a); 21 U.S.C. § 387

person younger than 18 years of age. 21 C.F.R. § 1140.14(a). 17

also require retailer:
purchaser’s date of
age. 21C.F.R.§ 1

s to verify, by means of photo identification
birth, that no cigarette purchaser is younger
40.14(b)(1). Finally, the regulations prohib:

breaking or otherwise opening cigarette packages in order to se
cigarettes. 21 C.F.R. § 1140.14(d).

buted or offered for sale in any state in violation of regulations

B); 21 C.F.R

(d)(1); 75 Fed.

0, 2010). The regulations prohibit the sale of cigarettes to any

The regulations
containing a
than 18 years of
it retailers from
1 individual

Taking the above alleged facts as true, Respondent had four violations of
regulations contained in 21 C.F.R. Part 1140 within a four-month period.
Specifically, Respondent had a violation on February 11, 2013, and three
violations on June 12, 2013. Respondent’s actions on June 12, 2013, violated the
prohibition against selling cigarettes to persons younger than 18 years of age.

21 C.F.R. § 1140.14(a). Respondent’s actions on June 12, 2013, also violated the
requirement that retailers verify, by means of photo identification containing a
purchaser’s date of birth, that no cigarette purchaser is younger than 18 years of
age. 21 C.F.R. § 1140.14(b)(1). Finally, Respondent’s actions on both February
11, 2013, and June 12, 2013, violated the prohibition against breaking open a
package of cigarettes in order to sell individual cigarettes. 21 C.F.R.

§ 1140.14(d). Therefore, Respondent’s actions constitute violations of law for
which a civil money penalty is merited.

The regulations require me to impose a civil money penalty in an amount that is
either the maximum provided for by law or the amount sought in the Complaint,
whichever is smaller. 21 C.F.R. § 17.11(a)(1)-(2). The regulations currently
allow a maximum penalty of $2,000 for a fourth violation within a four-month
period, 21 C.F.R. § 17.2, and CTP has requested a fine in that amount. Therefore,
I find that a civil money penalty of $2,000 is warranted and so order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division

Liberty Laboratory, Inc.,
(CLIA No.: 15D1019268),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-13-237
Decision No. CR2995
Date: November 14, 2013
DECISION

The certificate to operate as a clinical laboratory under the Clinical Laboratory
Improvement Amendments of 1988 (CLIA) of Petitioner, Liberty Laboratory, Inc., is
revoked effective the date of this decision. 42 C.F.R. § 493.1844(d)(4)(ii). The owners
and operators of Petitioner are prohibited from owning, operating, or directing a
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, i.e., the date of this decision, pursuant to

42 U.S.C. § 263a(i)(3).

I. Background

Petitioner is a clinical laboratory located in Tell City, Indiana. Petitioner had a CLIA
certificate to perform nonwaived, moderate complexity testing. The Indiana State
Department of Health (state agency) conducted a complaint survey of Petitioner’s facility
on August 22 and 23, 2012. The state agency found that Petitioner was not in compliance
with the following three regulatory conditions for Medicare coverage of its services:
42 C.F.R. §§ 493.803;" 493.1250; and 493.1403. The Centers for Medicare & Medicaid
Services (CMS) notified Petitioner by letter dated October 16, 2012, that CMS was
imposing the following enforcement remedies: suspension of Petitioner’s CLIA
certificate effective October 16, 2012, which was to continue until Petitioner corrected
the condition-level deficiencies or its CLIA certificate was revoked; revocation of
Petitioner’s CLIA certificate effective November 5, 2012, unless a hearing was requested,
in which case the revocation would not be effective until upheld after hearing;
cancellation of approval to receive payments from Medicare for services performed after
October 16, 2012; a directed plan of correction effective October 16, 2012; and a CMP of
$1,000 per day for each day of noncompliance. Joint Stipulation of Undisputed Facts (Jt.
Stip.); CMS Exhibit (CMS Ex.) 17.

Petitioner requested a hearing before an administrative law judge (ALJ) by an undated
letter received at the Civil Remedies Division on December 18, 2012. The parties
stipulated that Petitioner’s request for hearing was timely filed. Jt. Stip. § 11. The case
was assigned to me for hearing and decision on December 26, 2012, and an
Acknowledgment and Prehearing Order (Prehearing Order) was issued at my direction.

CMS filed a motion for summary judgment (CMS Br.), with CMS Exs. | through 20, on
June 20, 2013. Petitioner filed a document on July 19, 2013, entitled “Liberty
Laboratory, Inc. Pre-Hearing Brief.” The document filed by Petitioner is treated as both
Petitioner’s response to the CMS motion for summary judgment and as Petitioner’s
prehearing brief (P. Br.). Petitioner filed no exhibits with its brief. Petitioner does not
object to my consideration of CMS Exs. | through 20 and they are admitted and
considered as evidence. On July 10, 2013, I ordered that further proceedings be stayed
pending my resolution of the CMS motion for summary judgment. Summary judgment is
granted.

II. Discussion
A. Statutory and Regulatory Program Requirements

CLIA establishes requirements for all laboratories that perform clinical diagnostic tests
on human specimens and provides for federal certification of such laboratories. Pub. L.
No. 100-578, amending sec. 353 of the Public Health Service Act, codified at 42 U.S.C.
§ 263a et. seq. 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. 899,

* References are to the 2011 revision of the Code of Federal Regulations (C.F.R.), unless
otherwise indicated.
100th Cong. 2d Sess. 8, 18 (1988), reprinted in 1988 U.S.C.C.A.N. 3828, 3839. CMS

certification of a laboratory under CLIA i
the conditions for certification set out in t

s dependent upon whether the laboratory meets
e statute and regulations. 42 U.S.C.

§ 263a(f)(1)(E); 42 C.F.R. pt. 493. Pursuant to CLIA the Secretary of Health and
Human Services (the Secretary) has broad enforcement authority, including the ability to

suspend, limit, or revoke the certificate o
or more requirements for certification.

The Secretary has exercised the authority
regulations implementing CLIA that are c'
specify conditions and standards for certi:

TI
Cc
comply with the regulatory requirements.
limit, or revoke the CLIA certificate of a
more CLIA conditions, and may also imp
of correction, monitoring by the state, an

e regulations confer broad authority on

a laboratory that is out of compliance with one

granted by 42 U.S.C. § 263a(f) and issued
odified at 42 C.F.R. pt. 493. The regulations
fication that a laboratory must meet and

maintain in order to be certified to test human specimens and to participate in Medicare.

CMS to ensure that laboratories perform as

‘ongress intended, including the authority to inspect and sanction laboratories that fail to

CMS has the delegated authority to suspend,
aboratory that is out of compliance with one or
ose alternative sanctions, such as a directed plan
aCMP. 42 CFR. § 493.1806-.1844. Under

the regulations, a single condition-level violation is an adequate basis for principal and
alternative sanctions.

The regulations provide as a condition for participation that a laboratory conducting
moderate or high complexity testing, as was Petitioner, must enroll in an approved
proficiency testing (PT) program or programs that cover all the specialties and
subspecialties for which the laboratory seeks certification. The laboratory is required to
test PT samples in the same manner as its regular patients’ specimens. 42 C.F.R.

§ 493.801. It is a condition-level requirement that a laboratory must successfully
participate in a PT program approved by CMS for each specialty, subspecialty, and
analyte or test for which the laboratory is certified under CLIA. CMS may impose
authorized sanctions if a laboratory fails to participate successfully. 42 C.F.R. § 493.803.
Unsuccessful PT performance is defined as the “failure to attain the minimum
satisfactory score for an analyte, test, subspecialty, or specialty for two consecutive or
two of three consecutive testing events. 42 C.F.R. § 493.2. Generally, a PT score of less
than 80 percent is an unsatisfactory score. Failure to participate in a testing event results
ina score of 0 for that event. 42 C.F.R. §§ 493.823, .825, .827, .829, .831, .835, .837,
-841, .843, .845, .851, .861, and .865. A PT score of less than 100 percent is
unsatisfactory for compatibility testing and ABO group and D (Rho) typing. 42 C.F.R.
§§ 493.859 and .863.

CMS must cancel a laboratory’s approval to receive Medicare payments when CMS
suspends or revokes the laboratory’s CLIA certificate. 42 C.P.R. § 493.1842(a). 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 Secretary’s 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 of 42 C.F.R. subpt. D are applicable pursuant to 42 C.F.R.

§ 493.1844(a)(2). The “suspension, limitation or revocation of the laboratory’s CLIA
certificate . . . because of noncompliance . . . .” is an initial determination subject to
hearing before an ALJ. 42 C.F.R. § 493.1844(b)(1). The imposition of an alternative
sanction, such as a CMP, is also an initial determination that triggers a right to request a
hearing. 42 C.F.R. § 493.1844(b)(3). The CMS choice of alternative sanctions to
impose, including the amount of a CMP to impose per day or per violation, and the
determination that a laboratory’s deficiencies pose immediate jeopardy, are not subject to
ALJ review. 42 C.F.R. § 493.1844(c)(4), (6) and (7).

Generally when a hearing is requested, revocation of a CLIA certificate is not effective
until after a hearing decision is issued by the ALJ. 42 C.F.R. § 493.1844(d)(2).

B. Issues

Whether summary judgment is appropriate; and

Whether there is a basis for the revocation of Petitioner’s CLIA certificate.
C. Findings of Fact, Conclusions of Law, and Analysis

My conclusions of law are set forth in bold text followed by my findings of fact, and
analysis.

1. Summary judgment is appropriate.

A clinical laboratory subject to a principal or alternative sanction has a right to a hearing
and judicial review pursuant to 42 U.S.C. §§ 263a(i) and (k); 42 C.F.R. § 493.1844. A
hearing conducted pursuant to 42 C.F.R. pt. 498 is generally a hearing on the record, also
known as an oral hearing. Crestview Parke Care Ctr. v. Thompson, 373 F.3d 743, 748-
51 (6th Cir. 2004). A party may waive appearance at an oral hearing, but must do so
affirmatively in writing. 42 C.F.R. § 498.66. In this case, Petitioner has not waived the
right to oral hearing or otherwise consented to a decision based only upon the
documentary evidence or pleadings. Accordingly, disposition on the written record alone
is not permissible, unless the CMS motion for summary judgment has merit.

Summary judgment is not automatic upon request but is limited to certain specific

conditions. The procedures established by 42 C.F.R. pt. 498 do not include a summary
judgment procedure. However, appellate panels of the Board have long recognized the
availability of summary judgment in cases subject to 42 C.F.R. pt. 498, and the Board’s
interpretative rule has been recognized by the federal courts. See, e.g., Crestview, 373
F.3d at 749-50. Furthermore, a summary judgment procedure was adopted as a matter of
judicial economy within my authority to regulate the course of proceedings and made
available to the parties in the litigation of this case by my Prehearing Order § II.D.3.

Summary judgment is appropriate, and no hearing is required, where either: there are no
disputed issues of material fact and the only questions that must be decided involve
application of law to the undisputed facts; or, the moving party must prevail as a matter
of law even if all disputed facts are resolved in favor of the party against whom the
motion is made. The Board follows the general approach of the federal courts in
evaluating whether or not summary judgment in lieu of a hearing is appropriate. The
movant bears the initial burden of demonstrating that there are no genuine issues of
material fact for trial and that the movant is entitled to judgment as a matter of law.
When confronted with a properly supported motion for summary judgment, the
nonmoving party “may not rest upon the mere allegations or denials of his pleading,
but... must set forth specific facts showing that there is a genuine issue for trial.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (quoting First Nat’l Bank of
Az. v. Cities Serv. Co., 391 U.S. 253, 249 (1968)); see also Fed. R. Civ. P. 56(c);
Venetian Gardens, DAB No. 2286, at 10-11 (2009); Ill. Knights Templar Home, DAB
No. 2274, at 3-4 (2009); Garden City Med. Clinic, DAB No. 1763 (2001); Everett Rehab.
& Med. Ctr., DAB No. 1628, at 3 (1997) (in-person hearing required where nonmovant
shows there are material facts in dispute that require testimony); Big Bend Hosp. Corp.,
d/b/a Big Bend Hosp. Ctr., DAB No. 1814, at 13 (2002) (in some cases, any factual issue
is resolved on the face of the written record because the proffered testimony, even if
accepted as true, would not make a difference).

In opposing a motion for summary judgment, the nonmovant bears the burden of showing
that there are material facts that are disputed either affecting the movant’s prima facie
case or that might establish a defense. It is insufficient for the nonmovant to rely upon
mere allegations or denials to defeat the motion and proceed to hearing. The nonmovant
must, by affidavits or other evidence that sets forth specific facts, show that there is a
genuine issue for trial. If the nonmovant cannot show by some credible evidence that
there exists some genuine issue for trial, then summary judgment is appropriate and the
movant prevails as a matter of law. Anderson, 477 U.S. at 247. A test for whether an
issue is regarded as genuine is if “the evidence [as to that issue] is such that a reasonable
jury could return a verdict for the nonmoving party.” Jd. at 248. In evaluating whether
there is a genuine issue as to a material fact, an ALJ must view the facts and the
inferences to be drawn from the facts in the light most favorable to the nonmoving party.
Pollock v. Am. Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3rd Cir. 1986).

The standard for deciding a case on summary judgment, and an ALJ’s decision-making in
deciding a summary judgment motion, differs from resolving a case after a hearing. On
summary judgment, the ALJ does not make credibility determinations, weigh the
evidence, or decide which inferences to draw from the evidence, as would be done when
finding facts after a hearing on the record. Rather, on summary judgment the ALJ
construes the evidence in a light most favorable to the non-movant and avoids deciding
which version of the facts is more likely true. Holy Cross Vill. at Notre Dame, Inc, DAB
No. 2291, at 5 (2009). The Board also has recognized that on summary judgment it is
appropriate for the ALJ to consider whether a rational trier of fact could find that a
party’s evidence, i.e., the movant’s evidence, would be sufficient to meet that party’s
evidentiary burden. Dumas Nursing & Rehab., L.P., DAB No. 2347, at 5 (2010); Zi.
Knights Templar Home, DAB No. 2274, at 8.

In deciding that summary judgment is appropriate in this case, I note that Petitioner
offered no affidavit or declaration in support of its response to CMS’s motion for
summary judgment. Further, as discussed hereafter, it is not disputed that Petitioner
failed to successfully participate in a PT program approved by CMS. The undisputed fact
that Petitioner failed to successfully participate in a PT program is, as a matter of law, a
condition-level violation and a basis for revocation of Petitioner’s CLIA certificate and
the imposition of a CMP. There is no genuine dispute as to the material fact that
Petitioner did not satisfactorily participate in a CMS approved PT program. Petitioner’s
arguments and allegations of fact do not rebut the CMS prima facie case; raise a genuine
dispute of material fact as to a defense; and must be resolved against Petitioner on the
law. Accordingly, there is no need for a hearing to receive evidence and summary
judgment is appropriate.

2. Petitioner violated the condition-level requirement of 42 C.F.R.
§ 493.803, which requires successful participation in proficiency
testing.

3. There is a basis for revocation of Petitioner’s CLIA certificate.

The CMS letter dated September 6, 2012, which notified Petitioner of the CMS proposal
to implement sanctions, and the CMS letter dated October 16, 2012, which notified
Petitioner that sanctions were imposed, cite violations of 42 C.F.R. §§ 493.803,
493.1250, and 493.1403 as the basis for imposition of sanctions. CMS Exs. | and 17.
CMS alleges that summary judgment is appropriate as to the alleged violation of

42 C.F.R. § 493.803, and that the condition-level deficiency at 42 C.F.R. § 493.803 is an
adequate basis for revocation of Petitioner’s CLIA certificate. The CMP referenced in
the CMS notices is not at issue, as no CMP accrued in this case because suspension of
Petitioner’s CLIA certificate occurred on October 16, 2012, the date on which the CMP
was to begin accruing. CMS Br. at 3 n. 2. A single, condition-level violation is a
sufficient basis for revocation of Petitioner’s CLIA certificate. Further, CMS is correct
that summary judgment is appropriate as to the violation of 42 C.F.R. § 493.803.
Accordingly, it is not necessary to consider the additional alleged deficiencies, and only
the violation of 42 C.F.R. § 493.803 is analyzed in this decision.

The surveyors allege in the statement of deficiencies (SOD) for the survey completed on
August 23, 2012, that Petitioner failed to successfully participate in an approved PT
program in violation of the condition-level requirement established by 42 C.F.R.

§ 493.803. The surveyors allege specifically that Petitioner did not successfully
participate in: (1) chemistry — one of Petitioner’s two CLIA certified specialties; and (2)
four of twenty-five analytes in the subspecialty of routine chemistry. The surveyors
examined PT scores from the American Proficiency Institute (API). The surveyors found
that in the subspecialty of routine chemistry, Petitioner had scores of 0 percent for the
analyte chloride for the third test event of 2011 and the second test event of 2012; 0
percent for HDL cholesterol for the third test event of 2011 and the first and second test
events of 2012; 20 percent for sodium for the third test event of 2011 and the first and
second test events of 2012; and 20 percent for digoxin for the first and second test events
of 2012. CMS Ex. 2 at 1-3. The surveyors’ findings are consistent with the API
“Failures Summary,” except that report also shows that Petitioner scored 60 percent on
the first test event for 2012 for the analyte chloride. CMS Ex. 20. Petitioner did not
object to CMS Ex. 20 and has not disputed the accuracy of the findings reported in CMS
Ex. 20. Petitioner does not dispute, in either the request for hearing or in its prehearing
brief and opposition to the motion for summary judgment, that the proficiency test
failures alleged by CMS and reported in CMS Ex. 20 occurred and are accurately
reported. In paragraph 3 of its prehearing brief, Petitioner acknowledges that proficiency
test failures occurred. Petitioner offers explanations for why the failures occurred, which
are analyzed hereafter.

Because Petitioner does not dispute the evidence of its unsatisfactory PT scores, or that
its participation in proficiency testing was unsatisfactory as alleged by the surveyors in
the SOD and as reflected in CMS Ex. 20, there is no genuine dispute as to the material

facts. CMS has made a prima facie showing of condition-level noncompliance with 42
C.F.R. § 493.803. The regulation provides:

Condition: Successful participation.

(a) Each laboratory performing nonwaived testing must
successfully participate in a proficiency testing program
approved by CMS, if applicable, as described in subpart I of
this part for each specialty, subspecialty, and analyte or test in
which the laboratory is certified under CLIA.

(b) Except as specified in paragraph (c) of this section, if a
laboratory fails to participate successfully in proficiency
testing for a given specialty, subspecialty, analyte or test, as
defined in this section, or fails to take remedial action when
an individual fails gynecologic cytology, CMS imposes
sanctions, as specified in subpart R of this part.
(c) Ifa laboratory fails to perform successfully in a CMS-
approved proficiency testing program, for the initial
unsuccessful performance, CMS may direct the laboratory to
undertake training of its personnel or to obtain technical
assistance, or both, rather than imposing alternative or
principle sanctions except when one or more of the following
conditions exists:

(1) There is immediate jeopardy to patient health and
safety.

(2) The laboratory fails to provide CMS or a CMS
agent with satisfactory evidence that it has taken steps
to correct the problem identified by the unsuccessful
proficiency testing performance.

(3) The laboratory has a poor compliance history.
42 CFR. § 493.803.

There is no dispute that Petitioner applied for and received a CLIA certificate to perform
nonwaived testing, specifically routine chemistry, among others. CMS Exs. 7, 9. There
is no dispute that CMS approved proficiency testing by API. There is no dispute that
Petitioner failed to successfully participate in proficiency testing for routine chemistry by
failing to achieve a score of 80 percent or better for each analyte as detailed above.
Accordingly, there is a prima facie showing of noncompliance with the condition-level
requirement of 42 C.F.R. § 493.803, and CMS has authority pursuant to 42 C.F.R.

§ 493.803(b) to impose sanctions. The regulation grants CMS discretion to take
alternative actions for initial unsuccessful performance in limited cases. 42 C.F.R.

§ 493.803(c). However, CMS Ex. 14, which is also not disputed, shows prior
unsuccessful participation in the second test event for 2011, albeit in the specialty of
hematology. Further, the surveyors declared immediate jeopardy. Thus, the alternatives
to sanctions set forth in 42 C.F.R. § 493.803(c), i.e. training and technical assistance, are
not authorized in this case. I further note that CMS’s determination as to which principal
and alternative sanctions to impose and the determination that Petitioner’s deficiencies
pose immediate jeopardy are not initial determinations subject to being reviewed. 42
C.F.R. § 493.1844(c)(4), (6).

Having determined that there are no genuine disputes as to the material facts that
establish a prima facie showing of noncompliance with 42 C.F.R. § 493.803, it is
necessary to analyze Petitioner’s alleged defenses. Petitioner has not presented affidavits
or declarations in support of its arguments and did not file other evidence in support of its
opposition to the CMS motion for summary judgment. It is required on summary
judgment that I view all evidence in a light most favorable for the Petitioner and draw all
inferences in Petitioner’s favor. I am not to judge credibility or weigh the evidence on
summary judgment. Therefore, for purposes of ruling on summary judgment, I accept as
true Petitioner’s allegations of fact in its request for hearing and prehearing brief. I
conclude that, even if I accept Petitioner’s allegations of fact as true, as a matter of law
Petitioner can establish no defense to excuse its noncompliance with the condition-level
requirement established by 42 C.F.R. § 493.803.

Betty Hanks, Petitioner’s Laboratory Director, asserts in the request for hearing that when
two employees left employment at the laboratory they took items that would be needed
for inspection. She states that city police were notified on July 30, 2012. Request for
Hearing (RFH) at 1; P. Br. at 2. Ms. Hanks does not assert that there is any connection
between the materials allegedly stolen and the PT failures and noncompliance with

42 C.F.R. § 493.803. There is no favorable inference to be drawn for Petitioner.

Ms. Hanks asserts in the request for hearing (RFH at 1) and the prehearing brief (P. Br. at
1) that the survey team was led by a man against who she had previously filed sexual
arassment charges and that she had been promised by the state agency that he would not
be permitted to survey Petitioner. Ms. Hanks does not assert that the survey team
composition had any impact upon the unsatisfactory PT scores, which occurred months
prior to the survey.

Ms. Hanks asserts that remedial action was implemented for the failed proficiency testing
subsequent to the survey and that Petitioner’s PT scores were acceptable for two events in
arow. RFH at 2. The fact that Petitioner had subsequent satisfactory PT scores is
accepted as true, but Petitioner points to no authority that supports an argument that the
subsequent scores deprive CMS of the authority to suspend, limit, or revoke Petitioner’s
CLIA certificate. Ms. Hanks also asserts that Petitioner was complying with the
requirements of CLIA, at least as of the date of the request for hearing, and she requested
reinstatement of Petitioner’s CLIA certificate on that basis. As already noted, if I
conclude that CMS had a basis to impose principal and alternative sanctions, I have no
authority to review the CMS choice of sanctions. 42 C.F.R. § 493.1844(c)(4). The CMS
“determination not to reinstate a suspended CLIA certificate because the reason for the
suspension had not been removed or there is insufficient assurance that the reason will
not recur” is also not subject to my review. 42 C.F.R. § 493.1844(c)(3). Associated
Internists, P.C., DAB No. 2298, at 6 (2010); HRT Lab., Inc., DAB No. 2118, at 10-11
(2007).

Ms. Hanks asserts that CMS requested corrective action related to the unsatisfactory PT
performance, even though Ms. Hanks states that she was previously advised that no
corrective action would suffice. She asserts that normal procedure would have been for
Petitioner to have been advised of the unsatisfactory PT scores and permitted a period to
return to compliance, but that did not happen in this case. P. Br. at 2. Ms. Hanks
10

describes the procedure at 42 C.F.R. § 493.803(c). As already noted, 42 C.F.R. §
493.803(c) does not apply in this case due to the declaration of immediate jeopardy and
Petitioner’s history of noncompliance with the PT participation requirement. Even if 42
C.F.R. § 493.803(c) could have been applied as a matter of discretion by CMS, the
decision not to apply 42 C.F.R. § 493.803(c) is not a reviewable initial decision listed in
42 C.F.R. § 493.1844(b). 42 C.F.R. § 493.1844(c). Furthermore, even if remedial action
was permitted or directed by CMS, remedial action does not excuse unsuccessful PT
participation. Sonali Diagnostic Lab., DAB No. 2008, at 7 (2006). Therefore, this issue
must be resolved against Petitioner as a matter of law, as the law precludes review of this
exercise of discretion by CMS.

Ms. Hanks also asserts that extreme circumstances occurred during the period of the
unsatisfactory PT performance. For purposes of summary judgment, I accept her
assertions that certain incidents or events occurred are true. The gist of Ms. Hanks’
argument is that attempted murder, death, disability, and suicide distracted her from
running Petitioner, and she trusted one who was not reliable to oversee the laboratory.
While Ms. Hanks offers an enlightening explanation for Petitioner’s unsuccessful PT
participation, she cites no legal authority for the proposition that Petitioner’s condition-
level noncompliance with 42 C.F.R. § 493.803 may be or should be excused simply
because she was not fully executing her duties to oversee laboratory operations as
Petitioner’s laboratory director.

I conclude, after review of Petitioner’s assertions of facts and arguments, that Petitioner
has failed, as a matter of law, to establish any defense to the prima facie showing of a
condition-level violation of 42 C.F.R. § 493.802. Accordingly, I conclude that CMS had
a basis to suspend and revoke Petitioner’s CLIA certificate.

III. Conclusion

For the foregoing reasons, Petitioner’s CLIA certificate is revoked, effective the date of
this decision.

/s/
Keith W. Sickendick
Administrative Law Judge