Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
J.B. and Greeta B. Arthur Comprehensive Cancer Center Laboratory
(CLIA No. 26D1047130),
Petitioner
v.
Centers for Medicare and Medicaid Services.
Docket No. C-10-543
Decision No. CR2436

Date: September 21, 2011

DECISION

Petitioner, J.B. and Greeta B. Arthur Comprehensive Cancer Center Laboratory (Cancer
Center), did not intentionally refer its proficiency testing (PT) samples to another
laboratory for analysis. Consequently, Centers for Medicare & Medicaid Services (CMS)
does not have a basis to impose remedies against Petitioner pursuant to the Clinical
Laboratory Improvement Amendments of 1988 (CLIA)! 42 U.S.C. § 263a et seq., and its
implementing regulations at 42 C.F.R. Part 493.

I. Background

This case is before me based on Cancer Center’s appeal of CMS’s proposed sanctions
against it. Cancer Center is a CLIA-certified laboratory located in Mexico, Missouri, that
provides comprehensive care to cancer patients, including radiation therapy and
chemotherapy. Cancer Center is certified to perform testing in the subspecialties of

' “CLIA” when used in this decision refers to both statutory and regulatory provisions
governing the program, unless otherwise indicated. Pub. L. 100-578, codified at 42
U.S.C. §§ 263a, 1302, 1395x(e).
chemistry and hematology. Tr. at 192, 239-40; P. Ex. 1, at 24. To maintain this
certification, Cancer Center enrolled in a CLIA-certified proficiency testing program
administered by the American Association of Bioanalysts (AAB). Petitioner’s Exhibits
(P. Exs.) 2.1, at 3; 2.2, at 2; 2.3, at 2; 2.4, at 2.

In September 2009, Cancer Center underwent a routine survey by The Joint Commission
(TJC). Following that survey Cancer Center received a letter dated September 30, 2009
from TJC. CMS Exhibit (CMS Ex.) 1; P. Ex. 7. The letter stated that after Cancer
Center performed its PT sample tests for three testing events in 2008 and one testing
event in 2009, the PT samples were also tested at Audrain Medical Center (AMC). AMC
and Cancer Center are both operated by Audrain Health Care, Inc. (Audrain). The letter
further advised that the testing at AMC occurred before Cancer Center’s results were
submitted to its PT provider AAB. TJC interpreted the circumstances as not being an
intentional PT referral and granted Cancer Center its accreditation. However, the letter
advised Cancer Center that based on its finding of a potential PT referral, TJC was
required to report the information to CMS. A copy of the letter was provided to Regie
Haug, CMS CLIA Region VII Office in Kansas City, because Mr. Haug served as a
laboratory consultant for the CLIA program. CMS Ex. 1, at 1-2; P. Ex. 7, at 2.

Upon receiving the letter from TJC, Mr. Haug asked surveyors from the Missouri
Department of Health & Senior Services to conduct a complaint investigation survey of
Cancer Center. Tr. at 32. The survey was completed on October 20, 2009. Based on the
survey’s findings, CMS determined that Cancer Center improperly referred PT samples
to another laboratory for analysis. In a letter to Petitioner dated January 14, 2010, CMS
proposed to revoke Cancer Center’s CLIA certificate for one year and to cancel Cancer
Center’s approval to receive Medicare payment for any services effective January 29,
2010. The letter also advised Cancer Center that upon revocation of its CLIA certificate,
the owners and operators of the laboratory would be prohibited from owning or operating
any laboratory for at least two years from the date of revocation. CMS Ex. 2. On
January 21, 2010, Cancer Center asked CMS to reconsider its decision. CMS responded
affirming its prior determination.” CMS Ex. 3.

By letter dated March 11, 2010, Petitioner requested an Administrative Law Judge (ALJ)
hearing. The case was docketed as C-10-543, and assigned to me for hearing and
decision.

> T note that although the February 9, 2010 response letter from CMS references the
prohibition of inter-laboratory communication, it is a separate standard identified at 42
C.F.R. § 493.801(b)(3), under the Condition of Enrollment and testing of samples.
Cancer Center was not cited for failure to comply with the inter-laboratory standard.
Rather, it was cited only for referring PT samples to another laboratory for analysis,
which is a violation under 42 C.F.R. § 493.801(b)(4).
An in-person hearing was conducted in Kansas City, Missouri, from January 19-20, 2011.
A 272-page transcript (Tr.) of the proceedings was prepared and the parties were afforded
an opportunity to review the transcript for errata.>_ CMS offered CMS Exs. 1-4, and
Cancer Center offered P. Exs. 1-17, 20-22.* All of the exhibits were admitted into
evidence at the hearing. Tr. at 14-16, 20-21. Cancer Center’s objections to CMS Exs. 2
and 4 were overruled. Tr. at 15-16. CMS called as a witness Regie Haug, a CMS
medical technologist and a laboratory consultant to the CLIA program. Petitioner called
as witnesses Louis J. Leonatti, a private attorney who represented Audrain and three
Audrain employees: David A. Neuendorf, President and CEO of AMC; Carmen Oberlag,
an AMC medical technologist; and Judith K. Hammettt, a clinical laboratory technician at
Cancer Center’s laboratory. Following the hearing, the parties filed post-hearing briefs
(CMS Br. and P. Br.) and Cancer Center filed an answer brief (P. Reply).

IL. Issue

The issue in this case is whether Cancer Center violated CLIA and its implementing
regulations by “intentionally referring” PT samples to another laboratory for analysis.

III. Controlling Statutes and Regulations

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

§§ 263a, 1302, and 1395x(e). The purpose of the CLIA requirements is to ensure the
accuracy and reliability of laboratory tests, and hence the health and safety of those
tested. See H.R. Rep. No. 899, 100th Cong. 2d Sess. 8 (1988), reprinted in 1988
U.S.C.C.A.N. 3828, 3829. CLIA was designed to establish a single set of standards
applicable to all laboratory services. The Secretary of the Department of Health and
Human Services (Secretary) administers CLIA, through CMS. To be certified, a
laboratory must meet the conditions of certification set out in the statute and regulations.
42 US.C. § 263(a)(f)(1)(E); 42 C.F.R. Part 493.

A laboratory that holds a CLIA certificate must enroll in an approved PT program that
meets the specific criteria set out at subpart I of Part 493. 42 C.F.R. §§ 493.801, 493.803.
Proficiency testing is designed to determine a laboratory’s accuracy in performing testing
for its patients. Regulations governing performance of proficiency tests provide that a

* Cancer Center filed its suggested errors and proposed corrections on March 7, 2011,
and the transcript was amended as outlined in my Order Settling Transcript issued May
11, 2011.

* Cancer Center’s exhibits 18 and 19 were withdrawn. Tr. at 19-21.
participating laboratory must test PT samples it receives in the same manner as it tests
patient samples; must not engage in inter-laboratory communications pertaining to PT
results prior to the deadline for reporting results; must not refer PT samples to another
laboratory for analysis; and must document and maintain documentation for the handling,
preparation, processing, examination, and each step in the testing and reporting of results
for all PT samples. 42 U.S.C. § 263(a)(1)(4); 42 C.F.R. § 493.801(b), (b)(1), and (b)(4).
If a laboratory intentionally refers a PT sample to another laboratory for analysis, CMS
must revoke its license for at least one year. 42 U.S.C. § 263a(i)(4); 42 C.F.R. §
493.1840(b); accord Wade Pediatrics v. Department of Health and Human Services, 567
F.3d 1202, 1204 (10th Cir. 2009); Lackawanna Medical Group Lab., DAB No. 1870
(2003).

A laboratory that is dissatisfied with a determination by CMS to impose sanctions against
it may request a hearing before an ALJ to contest CMS’s determination. 42 C.F.R.

§ 493.1844. The standard of proof that is employed is a preponderance of the evidence.
CMS has the burden of coming forward with sufficient evidence to prove a prima facie
case that the laboratory is not complying with one or more CLIA conditions. The
laboratory has the ultimate burden of rebutting, by a preponderance of the evidence, any
prima facie case of noncompliance that is established by CMS. Edison Medical
Laboratories, Inc., DAB No. 1713 (1999); Hillman Rehabilitation Center, DAB No.
1611 (1997).

IV. Findings of Fact and Conclusions of Law

1. Cancer Center received five PT samples per testing event from its PT provider
AAB for three events in 2008 and one event in 2009.

2. It is undisputed that Cancer Center tested each of the PT samples in its own
laboratory on February 29, 2008 for the first testing event in 2008; on June 4, 2008
for the second testing event in 2008; on October 28, 2008 for the third testing
event in 2008; and on March 6, 2009 for the first testing event in 2009.

3. It is undisputed that AMC also tested the unused portions of the PT samples that
were directed to Cancer Center as part of Cancer Center’s participation in a PT
program on February 29, 2008 for the first testing event in 2008; on June 4, 2008
for the second testing event in 2008; on October 28, 2008 for the third testing
event in 2008; and on March 6, 2009 for the first testing event in 2009.

4. It is undisputed that the electronic report submitted to the PT provider AAB shows
that the results were submitted online by the AMC laboratory technician on
February 29, 2008, at 12:45 p.m., for the first testing event in 2008; on June 6,
2008, at 9:51 a.m., for the second testing event in 2008; on October 30, 2008, at
7:58 a.m., for the third testing event; and on March 7, 2009, at 12:56 p.m., for the
first testing even of 2009.

5. The AMC laboratory technician reported to the PT provider AAB only the results
Cancer Center’s laboratory technician performed on each of Cancer Center’s PT
samples for the three testing events in 2008 and the first testing events in 2009.
There were no test results from AMC’s testing of Cancer Center’s PT samples
reported to AAB.

6. A laboratory must not send PT samples, or portions of PT samples, to another
laboratory for analysis that it is certified to perform in its own laboratory. 42
CFR. § 493.801(b)(4).

7. Under CLIA and applicable regulations, a laboratory intentionally submits a
proficiency testing specimen to a reference laboratory when it does so deliberately,
and not inadvertently.

8. CMS made a prima facie case of noncompliance based on the facts it pleaded in
the Statement of Deficiencies.

9. Cancer Center met its burden of rebutting, by a preponderance of the evidence,
CMS’s prima facie case of noncompliance.

0. Cancer Center did not send the PT samples or portions of its samples to AMC for
analysis.

1. Cancer Center’s actions in bringing its unused portions of its PT samples to
AMC for storage did not constitute an intentional referral for analysis.

2. The revocation of Petitioner's CLIA certificate for a period of one year is
unreasonable in light of its compliance with CLIA requirements.

3. CMS improperly canceled Cancer Center’s approval to receive Medicare
payment for its services, effective January 29, 2010.

4. There is no basis to impose against Cancer Center’s owners or operators the two-
year prohibition against owning or operating any laboratory.

V. Discussion

This is a case in which CMS cites Cancer Center for the violation of intentionally
referring PT samples to another laboratory for analysis. At issue here are four PT
samples related to testing events that had occurred in 2008 and during the first testing
event in 2009. The other laboratory is part of a hospital called Audrain Medical Center
which is also referenced in this decision as AMC. A preliminary discussion of the
relationship between Cancer Center and AMC is relevant.

Cancer Center is operated by Audrain. Audrain also operates AMC. Tr. at 23-24. AMC
is an acute care hospital and Cancer Center is part of AMC. AMC and Cancer Center
each have clinical laboratories with different CLIA certificates. Although they use some
of the same protocols, they basically operate independently of each other, including
having separate directors for each laboratory. Request for Hearing at 3; P. Br. at 1, 10; P.
Ex. 1; Tr. at 127, 131, 145.

Cancer Center’s building and equipment are owned by Audrain County and are provided
to AMC under a lease agreement. Cancer Center originally did not have its own mailing
address. When PT samples arrived for Cancer Center they would be delivered to AMC.
An AMC staff member would bring the PT samples to Cancer Center for testing by
Cancer Center’s staff in its own laboratory. Cancer Center initially also did not have a
refrigerator to store PT samples, nor did it have a computer with internet access to
provide electronic reporting of the test results. Tr. at 193. After a PT sample was tested
by Cancer Center’s laboratory technician at its laboratory, the unused portion of the PT
sample would be brought back to the AMC laboratory for storage. Cancer Center’s PT
sample test results would be transcribed by Cancer Center’s technician onto a form,
which would be brought to AMC, and then the sample test results would be reported by
AMC’s laboratory technician to the PT provider AAB from a computer located in AMC’s
laboratory. The PT result form would then be brought back to Cancer Center. When
AMC received the PT provider results of Cancer Center’s PT testing, someone at AMC
would bring them to Cancer Center. Tr. at 191-96. The unused portion of the PT
samples remained stored in AMC’s refrigerator until the test results were received from
the PT provider, after which they would be discarded. P. Br. at 10-11; Tr. at 227.

A. CMS made a prima facie case of noncompliance based on the facts it pleaded
in the Statement of Deficiencies (Form 2567), but Cancer Center successfully
rebutted it in its case-in-chief.

According to CMS, the October 20, 2009 complaint survey and the follow-up
investigation on January 6, 2010, confirmed that in 2008 and the beginning of 2009,
Cancer Center sent PT samples for four testing events to AMC for analysis prior to its
reporting those results to the PT provider AAB. CMS maintains that all of the PT
samples at issue were clearly marked as test samples, and that Cancer’s Center’s actions
were an intentional referral. CMS Br. at 1-3, 9-11; CMS Ex. 4, at 2; Tr. at 33.

There is no dispute between the parties that Cancer Center’s laboratory technician
brought the PT samples to AMC on each of the three testing events in 2008 and the first
testing even in 2009. The parties’ arguments, however, center on whether there was an
“intentional referral” of these PT samples to the AMC laboratory “for analysis.”

The relevant regulation requires, in pertinent part, that —

(4) The laboratory must not send PT samples or portions of samples to
another laboratory for any analysis which it is certified to perform in its
own laboratory. Any laboratory that CMS determines intentionally
referred its proficiency testing samples to another laboratory for analysis
will have its certification revoked for at least a year. . . .

42 C.F.R. § 493.801(b) (emphasis added).

The facts, as pleaded by CMS in the CMS 2567 and on which I base this decision, are
uncontroverted. As noted already, they involve PT samples for three testing events in
2008 and one testing event in 2009. They are based on a review of Cancer Center’s
hematology PT reports, PT reports from AMC, electronic reports submitted electronically
online to the PT provider, and surveyor interviews with laboratory staff. CMS Ex. 4, at
1-2. Specifically:

+ First PT Sample Event in 2008 - PT report forms show that for each of the
five PT samples from the first testing event of 2008, the samples were tested
by Cancer Center on February 29, 2008 between 11:42 a.m. and 11:57 a.m.,
and also tested by AMC on that same day between 11:17 a.m. and 12:18 p.m.
The electronic report submitted to the PT provider AAB shows that the results
were submitted online by the AMC technician at 12:45 p.m. on February 29,
2008. CMS Ex. 4, at 2; CMS Br. at 2-3.

¢ Second PT Sample Event in 2008 - PT report forms show that for each of
the five PT samples from the second testing event of 2008, the samples were

tested by Cancer Center on June 4, 2008 between 10:37 a.m. and 10:49 a.m.,

and also tested by AMC on that same day between 11:41 a.m. and 11:44 a.m.
The electronic report form submitted to the PT provider AAB shows that the

results were submitted online by the AMC technician at 9:51 a.m. on June 6,

2008. CMS Ex. 4, at 3; CMS Br. at 2.

¢ Third PT Sample Event in 2008 - PT report forms show that for each of the
five PT samples from the third testing event of 2008, the samples were tested
by Cancer Center on October 28, 2008 between 11:30 a.m. and 11:49 a.m., and
also tested by AMC that same day between 12:08 p.m. and 12:11 p.m. The
electronic report form submitted to the PT provider AAB shows the results
were submitted electronically on October 30, 2008, at 7:58 a.m., by the AMC
technician. CMS Ex. 4, at 3; CMS Br. at 2.

¢ First PT Sample Event in 2009 - PT report forms show that for each of the
five PT samples from the first testing event of 2009, the samples were tested
by Cancer Center on March 6, 2009 between 10:46 a.m. and 10:58 a.m., and
also tested by AMC that same day between 11:34 a.m. and 12:15 p.m. The
electronic report form submitted to the PT provider AAB shows the results
were submitted online on March 7, 2009, at 12:56 p.m., by the AMC
technician. CMS Ex. 4, at 3-4; CMS Br. at 3.

CMS has established a prima facie case that PT samples directed to Cancer Center as part
of its participation in the PT program were also tested by another laboratory, here AMC.
However, for the reasons outlined below, Cancer Center has provided evidence to rebut
CMS’s prima facie showing.

B. Cancer Center's actions in bringing its PT samples to AMC after completion
of its PT testing were not an intentional referral.

Cancer Center disagrees that it improperly referred its PT samples to AMC for analysis.
Cancer Center claims that AMC’s testing of the samples was totally unrelated to the
proficiency testing event. Cancer Center’s fundamental position is that simply because a
PT sample is tested by another laboratory is not in and of itself a basis to find that a
sample had been “referred . . . to another laboratory for analysis” according to 42 C.F.R.
§ 493.801(b)(4). P. Br. at 10-22; P. Ex. 1, at 1-2.

CMS’s position is that by allowing AMC staff to test its PT samples and submit its test
results to the PT provider, Cancer Center violated the prohibition against a laboratory
intentionally referring its PT samples to another laboratory for analysis. CMS Br. at 12.

At the hearing Cancer Center called Judith Hammett to testify. Ms. Hammett held the
position of clinical laboratory technician at Cancer Center, and participated in PT by
testing samples for Cancer Center during the first three proficiency testing events in 2008
and the first testing event in 2009. Tr. at 238, 240-41, 243.

She testified that she never requested that AMC test Cancer Center’s unused PT samples,
nor did she ask AMC about the results of AMC’s testing of the PT samples. She further
testified that there never was an occasion where AMC tested the PT samples for Cancer
Center’s 2008 and 2009 PT events before the samples had been tested by Cancer Center,
or before she had provided AMC with Cancer Center’s test results. She testified that it
would not have been possible for anyone at AMC to test the specimens prior to Cancer
Center’s testing because, when she received the PT samples, they were in sealed vials.
Tr. at 244-45. Under cross-examination Ms. Hammett testified that it was Carmen
Oberlag, an AMC technician, and not she, who entered the results of the PT sample
events into AMC’s computer for electronic transmission to the PT provider AAB. Tr. at
247, 249. She also testified under cross-examination that she was aware that AMC had a
policy and practice of testing PT samples, but that there was not a policy which required
AMC to retest Cancer Center’s PT samples. Ms. Hammett stated that she took the
unused portions of Cancer Center’s PT samples to AMC for the sole purpose of storing
them in AMC’s refrigerator. She also testified that she took the results of Cancer
Center’s testing to AMC at the same time she took the unused PT samples. Tr. at 241,
243-45, 247, 250.

Carmen Oberlag was the AMC laboratory technician who both performed the AMC tests
of Cancer Center’s PT samples and who entered Cancer Center’s PT test results into the
computer. Tr. at 182. At hearing she testified that the unused portions of the PT samples
from Cancer Center for the events at issue were tested at AMC for quality assurance. She
stated that Cancer Center had not requested that AMC test the unused portions of the PT
samples, nor did Cancer Center ever request the results from AMC’s testing of these
unused portions of the PT samples. Tr. at 196-97. She explained that PT samples from
Cancer Center were retained in case the reported results were incorrect. This would
allow opportunity for the samples to be retested to determine what went wrong. Tr. at
225. She asserted that AMC never tested the unused PT samples from the 2008 and 2009
PT sample events before Cancer Center had tested the samples. She explained that this
was not possible since AMC would receive the unused PT samples from Cancer Center
“Tajt the same time they brought their results over.” Tr. at 197. She stated that she did
not compare the test results before she reported Cancer Center’s PT results to the PT
provider. Tr. at 197.

CMS claims that the instrument printouts for the first testing event for 2008 show that
some of the PT samples were tested by AMC before they were tested by Cancer Center’s
laboratory. CMS notes that for the first testing event in 2008, Cancer Center tested the
samples on February 29, 2008, between 11:42 a.m. and 11:57 a.m. Cancer Center’s test
results were reported to the PT provider AAB that day at 12:45 p.m. However, a PT
report form shows that AMC tested the samples earlier that day between 11:17 a.m. and
12:18 p.m. On its face, and in the absence of contradiction or explanation, this data is
powerfully suggestive of a violation.

But Cancer Center was able to offer both explanation and contradiction. In response to
CMS’s allegation, Ms. Oberlag testified that the instrument printouts were not accurate as
there was “a time problem on the instrument.” She explained:

The time was not correct. There was two samples that were — that were
sent through the instrument in the - - on the sample loader. And they said
11:17, I realized at that point in time that it was actually 12:17 or 12:18. So
I stopped the sample loader and pushed the samples back through, you
know. And then I changed the time on the instrument. And I - - then I re-
put the other three samples along with patient samples back through the
instrument.

Tr. at 198. Ms. Oberlag attributed the AMC’s hematology analyzer clock’s incorrect
time to a possible power surge. She stated that:

[it’s happened before where I’ve had to go in and change the time. It loses
- - it might lose time, it might have a problem with the internal thing with
the daylight savings time type stuff. I’m not sure. But I do know for a fact
that that is what happened, because it was exactly one hour.

Tr. at 199.

A review of the record before me shows that Ms. Oberlag’s testimony is supported by P.
Exs. 2.1, at 3-10, 2.2, 2.3, and 2.4, as well as by CMS Ex. 4. At hearing, Ms. Oberlag
provided a credible and very detailed explanation of the time discrepancy — that none of
the documents reflect any testing of the same PT specimen more than once, and that what
was reported to the PT provider AAB corresponds to the laboratory instrument printouts
from Cancer Center. P. Exs. 2.1, 2.2, 2.3, and 2.4; CMS Ex. 4; Tr. at 200-07, 212-14.
The records show that the PT test results reported to AAB for all three testing events in
2008, and for the first testing event of 2009, were identical to the results Ms. Hammett
transcribed onto Cancer Center’s laboratory log. I find credible Ms. Oberlag’s
explanation that a power surge more than likely occurred on February 29, 2008 which
affected the clock on the laboratory’s hematology analyzer causing it to be incorrect.
This would account for the approximate one hour time differential.

Although the term “intentionally referred” is contained in the regulations at 42 C.F.R.

§§ 493.801(b)(4) and 493.1840(b), and the term “intentionally refers” is found in the
statute at 42 U.S.C. § 263a(i)(4), neither Congress nor the Secretary has defined
“intentionally” as used in the context of 42 U.S.C. § 263a(i)(4), and 42 C.F.R. §§
493.801(b)(4) and 493.1840(b). As guidance, an appellate panel of the Departmental
Appeals Board (Board) in Wade Pediatrics discussed both the legislative intent of CLIA,
as well as what does and does not constitute an intentional referral. In Wade Pediatrics,
CMS argued that the very act of sending PT samples to another laboratory for analysis
was an indication of the laboratory’s intent to intentionally refer PT samples. The Board
found that CMS’s position was inconsistent with both the CLIA regulations and the
legislative history of the statute. The Board determined that a referral is intentional if it is
knowing and willful, that is, not done by accident or mistake. In discussing the phrase
“knowing and willful” the Board states:

It is more consistent with the purpose of CLIA to read the phrase “knowing
and willful” fairly broadly. At the very least, however, defining the term
11

“intentional” to mean knowing and willful excludes a situation where the
referral was a mistake or accident.

Wade Pediatrics, DAB No. 2153, at 13-14 (2008), aff’d, Wade Pediatrics v. Department
of Health & Human Services, 567 F.3d 1202; see also Victor Valley Community
Hospital/Clinical Laboratory and Tomasz Pawlowski, M.D., DAB No. 2340 (2010).

Cancer Center maintains that the mere fact that its PT samples were tested by AMC is not
a sufficient basis for determining, as CMS has done here, that the samples had been
improperly referred to another laboratory for analysis. P. Br. at 9-10. Petitioner provided
a copy of the surveyor notes from the October 20, 2009 survey of its laboratory. P. Ex.
17, at 18. Ina note to file, under a category identified as “Conclusion,” the surveyors
note:

On the surface it appears to be proficiency testing referral. But the
investigation shows no intent on either party to change proficiency testing
results. . . .This investigation shows unintentional proficiency testing
referral.

P. Ex. 17, at 18.

The PT results that were submitted to the PT provider AAB on behalf of Cancer Center
were consistent with Cancer Center’s own records of its proficiency tests. The logical
inference is that the values reported were from the analysis of samples in Cancer Center’s
own laboratory. Both Ms. Hammett and Ms. Oberlag provided credible explanations as
to what happened and the nature of the operational protocol between Cancer Center and
AMC with reference to the testing of PT samples. The evidence which supports my
conclusion includes the testimony of both of these individuals. Their testimony was
based on their direct personal knowledge of the events at issue and the documentary
evidence, including the PT sample reporting forms which pertained to the specific
proficiency tests at issue in this case.

Although CMS’s witness, Mr. Haug, asserted that there was an intentional referral
between Cancer Center and AMC, I am unable to accord substantial weight to his
testimony. Mr. Haug did not have direct personal knowledge of the underlying events,
but instead relied almost completely on the statements in the SOD. When asked at the
hearing whether he believed the statements in the SOD to be true because they were
written or because he verified them himself, he testified that he believed them to be true
“because they were written.” Tr. at 56-57. Mr. Haug admitted at hearing that there was
no determination in TJC’s letter that Cancer Center’s PT samples for the events at issue
in this appeal were found to be intentional. Tr. at 52. He also testified that there were
very few surveyor notes, so he basically based his determination on the SOD. Tr. at 57.
12

At hearing Mr. Haug was asked whether, if a laboratory requested another laboratory to
store PT samples, would that situation constitute an improper referral of a PT sample.
Mr. Haug responded that he was not sure if the regulation said “‘referred to another
laboratory for analysis’ or just referred to another laboratory.” Tr. at 61. As far as
evidence regarding whether anything would have been different had AMC waited until
receiving the PT results back from the PT provider before testing them, Mr. Haug
responded that it could be a month or six weeks before Cancer Center would have
received its test results back from the PT provider, and, by then, the PT “whole blood
sample wouldn’t be any good for comparing at that point in time.” Tr. at 88.

When Mr. Haug was presented with P. Ex. 17 — an internal narrative report generated by
the state surveyors after the October 20th survey, which notes that the surveyors opined
that there was not an intentional PT referral — Mr. Haug stated that the surveyors’ role
was to collect the facts and documents to determine what had happened, and that it was
not their job to determine whether there was an intentional referral or not. Tr. at 69. He
admitted that he “did not use this document as a basis for [his] final confirmation that
there had indeed been proficiency testing referral.” Tr. at 72. Mr. Haug stated that
“other than the fact that they were sent and that there was two sets of results,” there was
no evidence that the two laboratories compared test results before Cancer Center’s test
results were reported to the PT provider. Tr. at 89.

My credibility determination is based upon the overwhelming body of direct, first-hand
evidence refuting Mr. Haug’s assertion that Cancer Center intentionally referred PT
samples to AMC for analysis. Both Ms. Oberlag and Ms. Hammett provided credible
explanations as to what occurred. Ms. Oberlag outlined the AMC testing policy, and Ms.
Hammett discussed the occurrences surrounding the three testing events in 2008 and the
first testing event in 2009. CMS offered no specific evidence to show that Ms. Oberlag
or Ms. Hammett’s statements at hearing were incorrect.

In reaching my conclusion, I rely on my analysis of the testimony of each witness, having
had the opportunity to observe the witness’ demeanor in testifying, and on my
examination of the records Cancer Center produced to support the PT results reported. I
determine that the records contained data that was consistent with the results reported in
concluding that Cancer Center did not arrive at these results through intentional referral,
collaboration, or manipulation of the results.

Based on the documentary evidence and the testimony at hearing, I find that Cancer
Center bringing its PT samples to AMC after completion of the PT testing was not an
intentional referral.
13

C. Even if what happened could be characterized as an intentional referral, it
was not an intentional referral for the purposes of analysis.

Cancer Center states that as a quality assurance procedure used by its laboratory and
AMC’s laboratory, on a periodic basis, Cancer Center and AMC tested the same test
specimen or specimens on their own individual, separate laboratory instruments and then
compared results. Ifa significant difference in these results appeared, they then would
suspect a problem with their lab instruments or with the related procedures used by one
or both of the laboratories. Cancer Center claims that AMC’s testing of the PT sample
was an extension of this practice and that, even if there was a violation, it was
inadvertent. P. Br. at 22; P. Ex. 1, at 2.

It is clear that in enacting CLIA, Congress was concerned about laboratories that were
sending their proficiency testing samples to other laboratories for analysis or retesting the
samples to ensure a satisfactory result. It is within this context that Congress authored
the prohibition on intentional referrals of proficiency testing. H.R. Rep. No. 899, 100th
Cong Sess. 8, 18, reprinted in 1988 U.S.C.C.A.N. at 3828, 3836, 3837. Although it is
true that there is an interlocking relationship between the laboratories at Cancer
Center and AMC, what happened during the time period at issue was not an
intentional referral and not a referral for purposes of analysis. Cancer Center sent the
unused PT samples to AMC for storage, and AMC performed tests to check its own
equipment, not to verify Cancer Center’s results. Cancer Center never asked AMC to
do testing of any sort. Therefore, although Cancer Center did send the PT samples to
AMC, it certainly did not intentionally refer them for analysis.

An appellate panel in Oakland Medical Group, P.C., examined the definition of “refer”
and concluded:

As noted by the ALJ in Blanding Urgent Care Center, DAB CR438 (1996),
the dictionary definition of ‘refer’ includes ‘to direct the attention or
thoughts of,’ and ‘to direct to a person, place, etc., for information or
anything required.’ /d. at 21 citing Random House College Dictionary,
revised ed. 1980, at 1108.

Oakland Medical Group, P.C., DAB No. 1755, at 21- 22 (2000).

For the reasons already discussed above, I find and conclude that Cancer Center did not
direct AMC to test its PT samples, nor did Cancer Center require or suggest that AMC
report back to it the results of AMC’s testing of the samples. The facts of this case are
clear and unequivocal. Simply put, Cancer Center did not intentionally refer its PT
samples to AMC for the purposes of analysis. Rather, it is clear from the evidence
14

that the samples were brought to AMC for the purpose of storage and eventual
disposal.

It is clear from the Board’s analysis and holding in Wade Pediatrics that the prohibition
is against the sending of the proficiency samples to another laboratory for analysis. The
intent requirement is not met by the simple act of sending PT samples to another
laboratory. The Board further notes that sending samples to another laboratory for
disposal after the end of the testing event would not constitute an improper referral.
Additionally, sending the samples to another laboratory by mistake, never intending that
they be analyzed, would also not constitute an improper referral. Wade Pediatrics, DAB
No. 2153, at 13-15, 20. The United States Court of Appeals for the Tenth Circuit, in
upholding the Board’s decision in Wade Pediatrics, agreed that the laboratory’s referral
was a “knowing and willful” action, and stated:

it is undisputed that Wade’s technician took the lab’s proficiency testing
samples to [the other laboratory] with the express purpose of testing them
there — that is, with the express purpose of referring them for analysis.
There was no mistake, accident, negligence or recklessness about it.

567 F.3d at 1205.

CMS has offered no evidence to counter Cancer Center’s documentary and testimonial
evidence, credible evidence that rebuts any suggestion of an intentional referral of PT
samples for the purposes of analysis. Accordingly, I conclude that Cancer Center did not
violate CLIA and its implementing regulations with its actions involving PT samples for
the three testing events in 2008 and the one testing event in 2009.

D. No violations having been found, it is not necessary to address Cancer
Center’s other arguments.

Cancer Center raises two general issues in its pleadings. The first is whether its actions
involved noncompliance at all. The second is whether its Board of Directors can be
prohibited from owning or operating any laboratory for a two-year period. P. Br. at 23-
29. Because I have determined that Cancer Center was not out of compliance with
CLIA regulations and therefore not subject to sanctions, I do not address Petitioner’s
additional arguments in this decision.

VI. Conclusion

For the reasons stated above, I find that Petitioner did not violate 42 U.S.C. § 263a(1)(4)
and 42 C.F.R. § 493.801(b)(4), because it did not intentionally refer its PT samples to
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another lab for analysis. Consequently, CMS is not authorized to impose any
enforcement actions against Petitioner.

/s/

Richard J. Smith
Administrative Law Judge