DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board

Civil Remedies Division

In the Case of:

Maurice Labbe, Date: August 5, 1997

Petitioner,

-Vve or Docket No. C-97-212
Decision No. CR488

The Inspector General.

DECISION

I sustain the determination of the Inspector General
(I.G.) to exclude Petitioner, Maurice Labbe, from
participating in the Medicare, Medicaid, Maternal and
Child Health Services Block Grant and Block Grants to
States for Social Services programs (Medicare and
Medicaid), until Petitioner obtains a valid license to
practice medicine or provide health care in the State of
Maine. I base my decision on evidence which proves that
Petitioner surrendered his Nursing Home Administrator's
license during the pendency in that State of a formal
disciplinary proceeding related to his professional
competence, professional performance, or financial
integrity. I further base my decision on evidence which
proves that Petitioner lost such license, and the right
to apply for or renew it, for reasons bearing on his
professional competence, professional performance, or
financial integrity. Additionally, I find that when an
exclusion imposed by the I.G., as here, is concurrent
with the remedy imposed by a State licensing authority,
then no issue of reasonableness exists and such an
exclusion is mandated by law.

BACKGROUND

By letter dated January 13, 1997, the I.G. notified
Petitioner that he was being excluded from participating
in the Medicare and Medicaid programs. The I.G.
explained that Petitioner's exclusion was authorized
under section 1128(b)(4) of the Social Security Act (Act)
because Petitioner's "license to practice medicine or
provide health care in the State of Maine was revoked,
suspended, or otherwise lost or was surrendered while a
2

formal disciplinary proceeding was pending before the
licensing authority for reasons bearing on [his]
professional competence, professional performance, or
financial integrity." Additionally, the I.G. advised
Petitioner that his exclusion would remain in effect
until he obtained a valid license to practice medicine or
provide health care in the State of Maine.

Petitioner requested a hearing and the case was assigned
to me for decision. The parties agreed that the case
could be decided based on their written submissions, and
that an in-person hearing was not necessary. The parties
have each submitted written arguments and proposed
exhibits.

The I.G. submitted six proposed exhibits (I.G. Ex. 1-6).
Petitioner did not object to these exhibits. Petitioner
submitted two exhibits labelled Ex. A and B with his
February 24, 1997 request for a hearing. I have re-
marked these exhibits as P. Ex. 1 and 2. Petitioner also
submitted six exhibits with his response (P. Br.) to the
I.G.'s brief in support of exclusion (I.G. Br.). I have
re-marked these exhibits (originally designated P. Ex. 1-
6) as P. Ex. 3-8. Petitioner submitted also the
affidavit of Peter D. Lowe. I have designated Mr. Lowe's
affidavit as P. Ex. 9. The I.G. did not object to
Petitioner's exhibits or to Mr. Lowe's affidavit. Thus,
in the absence of objection, I am admitting I.G. Ex. 1-6
and P. Ex. 1-9 into evidence in this case. I base my
decision in this case on these exhibits, the applicable
law, and the arguments of the parties.

APPLICABLE LAW

Pursuant to section 1128(b) (4) of the Act, the I.G. may
exclude "[{aJny 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."

Pursuant to section 1128(c)(3)(E) of the Act, as amended
by section 212 of the Health Insurance Portability and
Accountability Act of 1996 (Pub. L. 104-191), the length
of an exclusion under section 1128(b)(4) "shall not be
3

less than the period during which the individual's or
entity's license to provide health care is revoked,
suspended, or surrendered, or the individual or the
entity is excluded or suspended from a Federal or State
health care program." Prior to 1996, the Act provided no
criteria for establishing the length of exclusions for
individuals or entities excluded pursuant to section
1128(b) (4). The 1996 amendments require, at section
1128(c) (3) (E), that an individual or entity who is
excluded under section 1128(b) (4) be excluded for not
less than the period during which the individual's or
entity's license to provide health care is revoked,
suspended, or surrendered. Under the 1996 amendments, no
issue of reasonableness exists where the exclusion
imposed by the I.G. is concurrent with the loss,
suspension, or revocation of a State license. A
concurrent exclusion, as in Petitioner's case, is the
mandated minimum required by law.

FINDINGS OF FACT AND CONCLUSIONS OF LAW (FFCL)

1. At all times relevant to this case, Petitioner was
the owner of Medical Care Management Corporation, which
owned and operated Russell Park Manor, a nursing home
licensed in the State of Maine. I.G. Br. 2, para. 1; P.
Br. 2, fn. 1.

2. Petitioner held the Nursing Home Administrator's
license for Russell Park Manor. I.G. Br. 2, para. 2; P.
Br. 2, fn. 1.

3. As Administrator, Petitioner was responsible for the
Management and operation of Russell Park Manor. I.G. Br.
2, para. 3; P. Br. 2, fn. 1.

4. Following a survey of Russell Park Manor completed on
August 4, 1995, the Maine Department of Human Services
("DHS") issued a statement of deficiencies report (DHS
survey report) citing a number of violations at Russell
Park Manor involving patient care. I.G. Ex. 1; I.G. Br.
2, para. 4; P. Br. 2, fn. 1.

' An issue of reasonableness will arise only if
the I.G. imposes an exclusion for a longer term than the
sanction which has been imposed by a State licensing
authority. In that event, the administrative law judge
will hear and decide the issue of whether the period of
exclusion which extends beyond the concurrent exclusion
term is reasonable.
4

5. On August 4, 1995, in a case brought by DHS against
the owners and operators of Russell Park Manor, the
Superior Court of Androscoggin County, Maine (Superior
Court), placed Russell Park Manor into receivership.
I.G. Ex. 2.

6. In settlement of the DHS action, Petitioner, as
reflected in a Superior Court Consent Order dated
September 6, 1995, agreed to surrender his Maine Nursing
Home Administrator's license and not to re-apply for an
Administrator's license in the State of Maine. I.G. Ex.
2.

7. The Maine Nursing Home Administrators Board (Board)
received a copy of the August 4, 1995 DHS survey report.
I.G. Ex. 1; I.G. Ex. 3 at 1; I.G. Ex. 4 at 1.

8. The Board notified Petitioner that at its September
20, 1995 meeting, it had "found that reasonable grounds
exist to believe that (Petitioner) may have violated
Board statutes or rules which govern (his) license as a
Nursing Home Administrator." I.G. Ex. 3.

9. By letter dated September 20, 1995, the Board agreed
to allow Petitioner to resolve the complaint by entering
into a consent agreement whereby he would agree to
surrender his Nursing Home Administrator's license and
not apply for any presently offered or future offered
category of license in the State of Maine. I.G. Ex. 3;
see I.G. Ex. 6.

10. In its September 20, 1995 letter, the Board further
stated that it would place the issue of Petitioner's
alleged violations on the agenda of its next meeting for
“appropriate action by the Board." I.G. Ex. 3; see I.G.
Ex. 6.

11. On November 14, 1995, Petitioner entered into a

Consent Agreement with the Board whereby he agreed to
indefinitely surrender his license and not apply for

future licensure. I.G. Ex. 4.

12. On January 13, 1997, the I.G. notified Petitioner of
his indefinite exclusion from participation in the
Medicare and Medicaid programs. I.G. Ex. 5.

13. Section 1128(b) (4) (A) of the Act authorizes the I.G.
to exclude an individual 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
5

bearing on the individual's professional competence,
professional performance, or financial integrity.

14. Section 1128(b) (4) (B) of the Act authorizes the I.G.
to exclude an individual who surrenders his or her
license to provide health care during the pendency of
formal disciplinary proceedings by a State's licensing
authority which concern the individual's professional
competence, professional performance, or financial
integrity.

15. The consent agreement Petitioner entered into with

the Board resulted in the loss of his right to apply for

or renew his Nursing Home Administrator's license, within

the scope of section 1128(b)(4)(A) of the Act. I.G. Ex.
; See I.G. Br. 4, para. 13; P. Br. 2, fn. 1.

16. Petitioner surrendered his Nursing Home
Administrator's license during the pendency of a formal
disciplinary proceeding, within the scope of section
1128(b) (4) (B) of the Act. I.G. Ex. 3, 4, 6.

17. Petitioner's loss or surrender of his Nursing Home
Administrator's license was for reasons bearing on or
concerning his professional competence, professional
performance, or financial integrity, within the scope of
section 1128(b) (4) of the Act. FFCL 1-16.

18. The I.G. was authorized to exclude Petitioner
pursuant to sections 1128(b) (4) (A) and 1128(b) (4)(B) of
the Act. FFCL 1 - 17.

19. Where an exclusion is imposed pursuant to section
1128(b) (4) of the Act, the period of the exclusion shall
not be less than the period during which the individual's
license to provide health care is revoked, suspended, or
surrendered. Act, section 1128(c) (3) (E).

20. When an exclusion is imposed pursuant to section
1128(b) (4) of the Act and the period of exclusion is
concurrent with the loss, suspension, revocation, or
surrender of a State license, then no issue of
reasonableness concerning the length of the exclusion
exists.

21. The exclusion imposed by the I.G. against
Petitioner, which will remain in effect until Petitioner
obtains a valid license to practice medicine or provide
health care in the State of Maine, was authorized under
sections 1128(b)(4) and 1128(c)(3)(E) of the Act.
6
PETITIONER'S ARGUMENTS

Petitioner's primary argument is that he did not
surrender his license as specified in section 1128(b) (4)
of the Act. Rather, he argues that he relinquished his
license prior to the institution of formal disciplinary
proceedings against him. He asserts that he did this on
August 28, 1995, before he received notification of the
September 20, 1995 Board proceedings against hin.

Petitioner also contends that he relinquished his license
to negotiate a settlement of litigation with the State of
Maine, and that he did not admit any of the allegations
made against him in the DHS survey report. Thus,
Petitioner argues that his license was not surrendered or
lost for reasons bearing on his professional competence,
professional performance, or financial integrity.

Petitioner also contends that for the I.G. to now take
action against him is against the intent of the
settlement agreement entered into between his company and
DHS.

DISCUSSION

The record in this case establishes that Petitioner
surrendered his Nursing Home Administrator's license
while a formal disciplinary proceeding was pending before
the Board which related to his professional performance,
professional competence, or financial integrity. I
specifically reject Petitioner's contention that he
voluntarily relinquished his license prior to such
disciplinary proceeding. Such contention does not
comport with the facts in his case. Petitioner was the
licensed Nursing Home Administrator of the Russell Park
Manor Nursing Home. In 1995, DHS conducted a survey of
the facility and found its operation deficient ina
number of areas, including the quality of patient care.
DHS then generated the August 4, 1995 survey report.
I.G. Ex. 1.

The DHS survey report was forwarded to the Board. I.G.
Ex. 1, 3, 4. The allegations raised in the DHS survey
report relate to Petitioner's professional performance
and competence as they pertain to his ability to properly
manage Russell Park Manor. The same DHS survey report
was relied upon in the Superior Court action filed by DHS
against Petitioner's medical management company. This
action was resolved through a Consent Order, in which
Petitioner agreed to permanently relinquish his State of
Maine administrator's license and his company agreed to
cease managing Russell Park Manor. I.G. Ex. 2.
7

During its September 20, 1995 meeting, based on the DHS
survey report and the Superior Court Consent Order, the
Board found reasonable grounds to believe Petitioner may
have violated its rules or statutes governing his license
as a Nursing Home Administrator. I.G. Ex. 3, 6. The
Board sent a letter dated September 20, 1995, to
Petitioner informing him of its findings and proposed
action. I.G. Ex. 3. This letter indicated that the
Board had begun a formal investigation of the allegations
against Petitioner and offered him the opportunity to
enter into a consent agreement with it whereby he would
permanently surrender his license and not apply for
future licensure. On November 14, 1995, Petitioner
signed such agreement, which was accepted by the Board on
November 29, 1995. I.G. Ex. 4.

The decisions of Departmental Appeals Board (DAB)
administrative law judges (ALJ) establish that a
chronology such as occurred in Petitioner's case
constitutes a license surrender within the scope of
section 1128(b)(4)(B) of the Act. An ALJ found the
I.G.'s indefinite exclusion of a provider who violated
section 1128(b)(4) to be reasonable in Dillard P.
Enright, DAB CR138 (1991). In that case, the petitioner
alleged that his license was not surrendered while a
formal disciplinary proceeding was pending. Enright
involved a petitioner who surrendered his nursing license
to a Nursing Board before formal findings were made as to
the allegations in a complaint filed against him. In
this decision, the ALJ found that the petitioner's
license surrender at an informal meeting was a surrender
while a formal disciplinary proceeding was pending. The
ALJ found that "(i]f Petitioner had not surrendered his
license, the Nursing Board would have had a
responsibility to resolve the issues raised by the claims
+ . . The Nursing Board, in the absence of Petitioner's
surrender of his license, was fully prepared to go
forward." Enright, at 9. Likewise, in this case, the
Board was prepared to go forward, as Petitioner's failure
to enter into a consent agreement would result in the
matter being "placed on the agenda of the next meeting of
the Board . . . for appropriate action." I.G. Ex. 3.

In John W. Foderick, M.D., DAB CR43 (1989), an ALJ found
that legislative history defines a formal disciplinary

proceeding as "a license proceeding which places a
party's license in jeopardy and which provides that party
with an opportunity to defend against charges which might
result in license suspension or revocation." Foderick at
6. This decision further states that "[t]he law presumes
that an individual or entity who surrenders a health care
license in the face of charges, and in the circumstance
8

where he has the opportunity to defend himself, is as
likely to be untrustworthy as the individual or entity
who loses a license after litigating the issue . . ." Id.
at 7.

In the present case, Petitioner surrendered his license
in the wake of the Board's investigation of a complaint
filed against him. I.G. Ex. 3, 4. A letter from the
Board dated September 20, 1995, notified Petitioner of
the complaint and provided him with the opportunity to
respond. I.G. Ex. 3. If Petitioner had not surrendered
his license, the Board would have continued its
investigation of the allegations which could have led to
sanctions including license suspension or revocation.
Petitioner was subject to the jurisdiction of the Board,
was notified of the complaint pending against him, and
was afforded the opportunity to respond to the complaint.
I.G. Ex. 3. Prior to the completion of formal
proceedings, Petitioner entered into a consent agreement
with the Board. I.G. Ex. 4. Petitioner agreed to
surrender physical possession of his wallet and wall
licenses to the Board. Petitioner also agreed that the
surrender of his licenses would be indefinite, and that
he would not be granted licensure in any existing or
future classification governed by the Board. In
exchange, the Board agreed to make no formal findings as
to the DHS survey report and to refrain from issuing any
media statements regarding Petitioner or his management
company. I.G. Ex. 4.

Contrary to Petitioner's assertions, the chronology in
his case does not support his claim that he voluntarily
relinquished his license prior to commencement of formal
disciplinary proceedings. Petitioner relies on his
letter to the Board, dated August 28, 1995, to support
his claim that he voluntarily relinquished his license.
However, in such correspondence, he merely states that he
wished to "relinquish my State of Maine Administrator's
license effective immediately." P. Ex. 2. He did not,
in fact, surrender such license until he entered into the
consent agreement with the Board on November 14, 1995, at
which time he physically surrendered his license as
required by the Board. This action, however, was in
direct response to the Board complaint dated September
20, 1995. I.G. Ex. 3. Correspondence from Board
personnel also shows that the Board did not view
Petitioner's August 28, 1995 correspondence as
constituting a surrender of his license. Ina letter
dated September 18, 1995, acknowledging receipt of
Petitioner's August 28, 1995 letter, Gregory Girardin,
Case Compliance Coordinator of the Maine Division of
Licensing and Enforcement, states that he would present
9

Petitioner's request to the Board at its next meeting, an
action which, in fact, resulted in the issuance of the
September 20, 1995 complaint. P. Ex. 7. From such
response, it can be concluded that the Board did not view
Petitioner's action as sufficient, without more, to
constitute a relinquishment. Indeed, the Board issued a
formal complaint on September 20, 1995. I.G. Ex. 3, 6.

As an alternative ground for sustaining the I.G., I note
that the agreement entered into by Petitioner with the
Board resulted in the loss of his license and precludes
him from ever applying for a license in the State of
Maine. I.G. Ex. 4. I therefore find that this agreement
also equates to a loss of a license or right to apply for
or renew a license under section 1128(b) (4) (A) of the
Act.

Petitioner also contends that his license was not lost or
surrendered for reasons bearing on or concerning his
professional competence, professional performance or
financial integrity. I note that the DHS survey report
of Russell Park Manor, which was completed on August 4,
1995, was conducted while that facility was under
Petitioner's ownership and operation, and cited
deficiencies which, if sustained, would constitute
mismanagement or poor quality of care at the facility
(examples of which, among many other cited deficiencies,
include deficiencies regarding the protection of resident
funds, where the Administrator's written, signed
statement of self-assurance did not meet the requirements
of either a purchase of a security bond or an acceptable
alternative to a security bond; as well as the 19
separate allegations based on surveyor observations that
residents at the facility did not receive care ina
manner and in an environment that maintained or enhanced
each resident's dignity). I.G. Ex. 1. The deficiencies
cited in the survey report are directly related to
Petitioner's responsibilities as a Nursing Home
Administrator, as they relate to the management and care
of the residents of Russell Park Manor. It was this
survey report upon which the Superior Court and Board
actions were based. It is not necessary under the Act
that the I.G. prove that the allegations in the survey
report are true. It is necessary only that Petitioner's
license was lost or surrendered for reasons bearing on or
concerning his professional competence, performance, or
financial integrity. I agree with the I.G. (I.G.
Response to Petitioner's Brief at 8) that it can hardly
be disputed that charges against a Nursing Home
Administrator regarding management of a nursing home
facility (such as those made in the DHS survey report)
directly relate to that administrator's or that
10

facility's professional competence or performance (and
here, with regard to the protection of resident funds,
perhaps Petitioner's financial integrity as well). Thus,
I conclude that the loss or surrender of Petitioner's
license was for reasons bearing on or concerning his
professional competence, professional performance, or
financial integrity.

Finally, Petitioner contends that for the I.G. to take
action against him is against the intent of the
settlement entered into between DHS and Medical Care
Management. I.G. Ex. 2. An examination of the Superior
Court Consent Order, however, shows no merit to this
claim. This agreement specifically provides that
Petitioner relinquish and not be allowed to reapply for
his Nursing Home Administrator's license. The I.G.'s
action in excluding Petitioner until he regains his Maine
license is entirely consistent with this intent.

CONCLUSION

I conclude that the I.G. was authorized to exclude
Petitioner pursuant to sections 1128(b) (4) (A) and (B) of
the Act. I conclude also that the term of exclusion
imposed by the I.G. is mandated by section 1128(c) (3) (E)
of the Act.

/s/

Joseph K. Riotto
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:

Williams Bio Medical
Laboratory,

Date: August 5, 1997

Petitioner,

Docket No. C-96-101
Decision No. CR487

-v.-

Health Care Financing
Administration.

DECISION

This case arises under the Clinical Laboratory
Improvement Amendments of 1988 (referred to as "CLIA" or
"the Act"), 42 U.S.C. § 263a and on implementing
regulations in 42 C.F.R. Part 493. On November 28, 1995,
the Health Care Financing Administration (HCFA) notified
Williams Bio Medical Laboratory (WBML or Petitioner)
that, based on a survey completed on October 26, 1995,
deficiencies had been found in Petitioner's facility
which remained uncorrected 12 months after having been
identified originally in surveys dated August 4, 1994 and
November 2, 1995. HCFA notified Petitioner also that it
had failed to comply with an August 24, 1995 Directed
Plan of Correction, which had required correction of all
deficiencies by September 29, 1995. As a result, HCFA
informed Petitioner that it had decided to revoke
Petitioner's CLIA certificate and cancel all Medicare
payments for services furnished by Petitioner. By letter
dated December 2, 1995, Petitioner timely requested a
hearing.!

' Petitioner's CLIA certificate was subsequently
revoked on separate and independent grounds, effective
March 21, 1996, as a result of Petitioner's failure to
pay required CLIA fees. Petitioner acknowledges that it
did not pay the required fees and that it did not appeal

(continued...)
2

This case was assigned initially to Administrative Law
Judge Mimi Hwang Leahy. In a Ruling dated August 20,
1996, Judge Leahy granted partial summary judgment, based
on HCFA's motion for summary judgment. Judge Leahy ruled
that only two issues remained for hearing: (1) whether
Petitioner had deficiencies that remained uncorrected
over 12 months following the survey of August 4, 1994;
and (2) whether Petitioner had failed to comply with the
terms of the Directed Plan of Correction requiring that
all deficiencies (whether condition-level or standard-
level) be corrected by September 29, 1995. Specifically,
Judge Leahy ruled that, under the first issue, HCFA will
prevail (and Petitioner will lose) if evidence from the
October 26, 1995 survey proves that Petitioner failed to
correct all standard-level and condition-level
deficiencies from the August 4, 1994 survey. 42 C.F.R.
§§ 493.1816(b), 493.1820, 498.1828(b)(2). Judge Leahy
further ruled that, under the second issue, HCFA will
prevail (and Petitioner will lose) if evidence from the
October 26, 1995 survey proves that by September 29,
1995, Petitioner had even one standard-level deficiency
that remained uncorrected from either of the two prior
surveys. If HCFA prevails on either one of these two
issues, then HCFA is entitled to prevail as a matter of
law on its imposition of the sanctions revoking
Petitioner's CLIA certificate and canceling all Medicare
payments to Petitioner. 42 C.F.R. §§ 493.1808(a),
493.1816(b), 493.1832(c), 493.1840(a) (7), and
493.1842(a). Finally, Judge Leahy ruled that Petitioner
must prevail on both issues for the sanctions imposed by
HCFA, in the notice of November 28, 1995, to be set
aside. Id.

On September 26, 1996, this case was reassigned to me. I
scheduled a hearing to commence on February 11, 1997,
solely on the issues remaining after Judge Leahy's ruling
of August 20, 1996. However, on February 7, 1997, ina
telephone prehearing conference, Petitioner withdrew its
request for an in-person hearing, and requested instead
that the case be heard based on an exchange of
documentary evidence and briefs. After consideration,

'(...continued)
its revocation based on this failure to pay required CLIA
fees. Unappealed determinations are binding and cannot
be set aside in this proceeding. Administrative Law
Judge Mimi Hwang Leahy's August 20, 1996 Ruling in this
case (ALJ Ruling), Findings of Fact and Conclusions of
Law (FFCL) 17-20.
3

HCFA agreed to submit its case on briefs and documentary
evidence, including declarations.’

I have considered the relevant evidence, the applicable
law and the parties' arguments. Any argument or issue
raised by the parties that is not specifically addressed

2 Petitioner's exhibits 1-6, 8-25, 25A, 26-28, and
18 attachments (P. Att. 1-18) were accepted into the
record by Judge Leahy. Subsequently, Petitioner
submitted a copy of its brief in opposition to HCFA's
motion for summary judgment, which was labeled exhibit 1
(and which was previously submitted to Judge Leahy); a
declaration ("Reference to Franklin R. Barnes
Declaration"), which was labeled exhibit 2 and which I
have remarked as P. Ex. 29; and a revised response to the
October 26, 1995 revisit survey, which was labeled
exhibit 3 and which I have remarked as P. Ex. 30. At the
same time, Petitioner submitted 23 attachments. I am
discarding part of the second set of attachments,
attachments 1-18, because these attachments are
duplicates of P. Att. 1-18 which were accepted into the
record by Judge Leahy. Petitioner submitted five new
attachments (P. Att. 19-23). I am re-marking P. Att. 1-
23 as P. Ex. 31-53, to conform with Civil Remedies
Division practice. I am discarding the brief Petitioner
submitted as exhibit 1, as it is of record already.

HCFA had previously submitted HCFA exhibits 1-15 in
support of its motion for summary judgment. Judge Leahy
accepted those exhibits into the record. Following Judge
Leahy's ruling, HCFA submitted a brief in support of the
revocation of Petitioner's CLIA certificate, and 17
exhibits (HCFA Ex. 1-8 and 10-18). I am discarding part
of the second set of exhibits, HCFA Ex. 1-8 and 10-15,
because these exhibits are duplicates of exhibits already
in the record. HCFA submitted three new exhibits (HCFA
Ex. 16-18). In order to decide the case before me, I am
receiving into the record those exhibits that were not
previously admitted as exhibits: P. Ex. 29-53 and HCFA
Ex. 16-18.

The parties have submitted several briefs, some referred
to above. Those submitted to Judge Leahy include the
brief accompanying HCFA's motion for summary judgment
(HCFA Br.), Petitioner's brief in response to this motion
(P. Br.), and HCFA's response brief (HCFA Resp. Br.).
Before me, HCFA submitted a brief in support of the
revocation of Petitioner's CLIA certificate (HCFA Br. 2)
and Petitioner submitted a summary letter in response (P.
Let.).
4

in this decision I have rejected as either lacking in
merit or irrelevant. I conclude that Petitioner has
failed to prevail on either issue identified above.’ I
conclude further that HCFA's determination to revoke
Petitioner's CLIA certificate and to cancel its approval
to receive Medicare reimbursement for its services is
authorized by CLIA and implementing regulations.

GOVERNING LAW

Congress enacted CLIA in order to guarantee that clinical
laboratories perform medical tests accurately. CLIA was
intended by Congress to establish a single set of
standards which govern all providers of laboratory
services, including those which provide laboratory
services to Medicare beneficiaries. See H.R. Rep. No.

3 Petitioner sought to raise other issues in its

brief. Specifically, Petitioner claimed that the
deficiencies cited in the November 2, 1994 survey were
incorrect. Petitioner alleges that it did not receive
the letter dated March 30, 1995, from the California
Department of Health Services (State agency) which
notified WBML that, as a result of the November 2, 1994
survey, four condition-level deficiencies were still out
of compliance. This letter further stated that the State
agency would recommend to HCFA that alternative sanctions
be imposed. However, even if all Petitioner's claims are
true, as Judge Leahy found, Petitioner still received
HCFA's notice imposing alternative sanctions, and was
aware that all deficiencies had to be corrected by
September 29, 1995. ALJ Ruling, FFCL 6. Petitioner did
not request a hearing to contest the results of the
August and November 1994 surveys, or to contest the
imposition of alternative sanctions pursuant to those
surveys. ALJ Ruling, FFCL 7. Judge Leahy ruled that
Petitioner may not dispute HCFA's findings of
deficiencies from the survey of November 2, 1994, because
unappealed determinations are binding on Petitioner and
cannot be set aside in this proceeding. ALJ Ruling, FFCL
7, 20.

Petitioner also submitted a declaration with reference to
the declaration of Franklin R. Barnes, the State agency
surveyor (P. Ex. 29). This declaration relates to
procedural points that are not relevant to the issues
before me. In her August 20, 1996 Ruling, Judge Leahy
ruled that the issues raised by WBML, other than the
issues referred to above, were beyond the scope of
Petitioner's remaining hearing rights, since WBML had
failed to appeal any of HCFA's prior sanctions.
5

899, 100th Cong., 2d Sess. 8 (1988), reprinted in 1988
U.S.C.C.A.N. 3828-3836 (House Report).

CLIA authorizes the Secretary of the United States
Department of Health and Human Services (Secretary) to
inspect clinical laboratories. The Act directs the
Secretary to establish standards to assure that clinical
laboratories certified by the Secretary perform tests
that are valid and accurate. 42 U.S.C. § 263a(f)(1).
Before a clinical laboratory can accept or solicit
specimens, a clinical laboratory must first receive a
certificate from the Secretary authorizing it to perform
the specific category of tests which the laboratory
intends to perform. 42 U.S.C. § 263a(b).

The Act provides for revocation of a CLIA certificate
under specified circumstances. These include, among
others things, failure of the laboratory's owner or
operator to comply with standards issued by the
Secretary, or failure by an owner or operator to abide by
an intermediate sanction issued by the Secretary. 42
U.S.C. § 263a.

In addition to standards established by the Act,
regulations are issued by the Secretary pursuant to CLIA
that establish standards for certification, provide a
framework for inspections, and provide for the imposition
of sanctions in the event that laboratories fail to
comply with the applicable standards.

Regulations provide for an enforcement process to assure
that clinical laboratories comply with the requirements
of CLIA and applicable regulations. Enforcement is
intended to protect individuals served by laboratories
against substandard testing, to safeguard the public
against health and safety hazards which might result from
noncompliance, and to motivate laboratories to comply
with the CLIA requirements. 42 C.F.R. § 493.1804(a) (1)-
(3).

Principal sanctions consist of remedies which HFCA may
impose for any of the reasons set forth in section
263a(i)(1) of the Act. 42 C.F.R. § 493.1840(a). HCFA
may impose principal sanctions where a laboratory has not
complied with applicable standards or where the
laboratory has not complied with an alternative sanction.
42 C.F.R. § 493.1840(a) (3), (7). Principal sanctions may
include revocation of a laboratory's CLIA certificate and
cancellation of its approval to receive Medicare payments
for its services. 42 C.F.R. §§ 493.1806, 493.1807,
493.1840(a), 493.1842.
6
BURDEN OF PROOF
By notice letter of March 26, 1997, I afforded the

parties the opportunity to file a supplemental brief
addressing what effect, if any, the decision in the case

of Center, DAB 1611 (1997) might
hav ‘ availed itself of the
opp Hillman, ‘llate panel of the

Departmental Appeals Board held that HCFA has an initial
obligation to set forth the basis for its determinations
with sufficient specificity to allow the petitioner to
respond (the obligation to make a prima facie case). To
prevail, a petitioner must prove by a preponderance of
the evidence on the record as a whole that it is in
substantial compliance with relevant statutory and
regulatory provisions. Thus, under Hillman, the
petitioner, not HCFA, bears the ultimate burden of
persuasion. This case is governed by the burden of proof
set forth in Hillman.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Judge Leahy's Ruling of August 20, 1996 sets forth 33
Findings of Fact and Conclusions of Law (FFCL). These
are set out below. The rest of the FFCL pertain to the
October 26, 1995 revisit survey and to the resultant
November 28, 1995 notice letter issued by HCFA.

1. Pursuant to a CLIA survey conducted on August 3 and
4, 1994 by the California Department of Health Services
(State agency), Petitioner was found to have various
standard-level deficiencies as well as the following
seven condition-level deficiencies:

a. Enrollment and testing (proficiency
testing) samples (42 C.F.R. § 493.801);

b. Bacteriology (42 C.F.R. § 493.1227);

c. Laboratories performing high complexity
testing; laboratory director (42 C.F.R. §
493.1441);

d. Laboratories performing moderate complexity
testing; laboratory director (42 C.F.R. §
493.1403);

e. Quality assurance; moderate or high
complexity testing, or both (42 C.F.R. §
493.1701);
7

f. Patient test management; moderate or high
complexity testing, or both (42 C.F.R. §
493.1101);

g- General quality control; moderate or high
complexity testing, or both (42 C.F.R. §
493.1201).

HCFA Br. at 2-3; HCFA Ex. 1.

2. In response to the deficiencies found during the
survey which was completed on August 4, 1994, Petitioner
submitted a plan of correction which was found acceptable
by HCFA's agent (the State agency), and a revisit survey
was conducted. HCFA Ex. 3 at 1; HCFA Ex. 4 at 1.

3. The results of the revisit survey conducted on
November 2, 1994, showed that Petitioner had five of the
same condition-level deficiencies (FFCLs 1a to e) as
noted during the August 1994 survey. HCFA Ex. 2, 4.

4. After having provided Petitioner with the opportunity
to submit additional information or comments concerning
the possible imposition of sanctions (HCFA Ex. 3, 4),
HCFA notified Petitioner by letter dated August 24, 1995,
that the following alternative sanctions were being
imposed and that Petitioner had a right to appeal HCFA's
determinations:

a. state on-site monitoring (42 C.F.R. §
493.1836);

b. a directed plan of correction (42 C.F.R. §
493.1832) to correct all designated
deficiencies by September 29, 1995; and

c. the suspension of all Medicare and Medicaid
(Social Security Act, § 1902(a)(9)(C); 42
C.F.R. § 440.30(c), 440.2(b)) payments for
laboratory services (42 C.F.R. § 493.1828)
effective September 8, 1995.

HCFA Ex. 5.

5. The directed plan of correction stated: "EXPECTED
DATE OF CORRECTION FOR ALL DEFICIENCIES: On, or before
September 29, 1995." HCFA Ex. 2 at 3.

6. Petitioner received HCFA's notice imposing the
alternative sanctions and was aware that all deficiencies
should be corrected by September 29, 1995. P. Br. at 2.
8

7. Petitioner did not request a hearing to contest the
results of the above-mentioned August and November 1994
surveys, or to contest HCFA's imposition of alternative
sanctions pursuant to those survey results. P. Br. at 2.

8. Petitioner verified that Medicare and Medicaid
payments had stopped on September 8, 1995. P. Br. at 3.

9. Subsequent to the imposition of the alternative
sanctions and prior to October of 1995, Petitioner
changed its location and telephone number without
providing HCFA with advance notice. Declaration of
Franklin Barnes (HCFA Ex. 14); Petitioner's declaration
"Reference to Franklin R. Barnes Declaration."

10. After ascertaining Petitioner's new address, HCFA
conducted a scheduled revisit survey on October 26, 1995,
and found that 21 standard-level deficiencies still
remained uncorrected from the prior two surveys. HCFA
Ex. 7.

11. Petitioner was closed in November and has remained
closed since then. P. Br. at 3.

12. Based on the October 26, 1995 survey, HCFA notified
Petitioner by letter dated November 28, 1995 that, as a
result of the deficiencies which remained uncorrected
over the 12 months since the August 4, 1994 survey, as
well as Petitioner's failure to comply with the terms of
the Directed Plan of Correction requiring the correction
of all deficiencies by September 29, 1995, HCFA was
imposing the following principal sanctions:

a. revocation of Petitioner's CLIA
certificate, effective 60 days after receipt of
the notice letter unless a hearing is
requested; and

b. cancellation of all Medicare payments for
services furnished by the laboratory 15 days
from Petitioner's receipt of the notice letter,
in accordance with 42 C.F.R. §§ 493.1808(a),
493.1816(b), 493.1832(c), 493.1840(a) (7), and
493.1842(a).

HCFA Ex. 8.

13. Cancellation of Medicare payments under 42 C.F.R. §
493.1842 may be imposed before a hearing, and it

terminates any Medicare payment sanctions, regardless of
the original time frames. 42 C.F.R. § 493.1842(b), (c).
9

14. If a hearing is requested, the revocation of a CLIA
certificate does not take effect unless and until there
is a decision by an administrative law judge which
upholds HCFA's revocation determination. 42 C.F.R. §
493.1840(e).

15. By letter dated December 2, 1995, Petitioner timely
requested a hearing to contest the results of the October
26, 1995 survey.

16. By letters dated January 16, 1996 (HCFA Ex. 10) and
March 15, 1996 (HCFA Ex. 11), HCFA notified Petitioner
that it owed outstanding CLIA fees in the amount of $2549
and that Petitioner had a right to appeal the
determination of outstanding fees and the imposition of
the following sanctions for the nonpayment of CLIA fees:

a. revocation of Petitioner's CLIA certificate
effective March 21, 1996, if a request for hearing
was not received; and

b. cancellation of Medicare payments to
Petitioner within 15 days of receiving the
notice dated January 16, 1996.

HCFA Ex. 10, 11.

17. By letter dated March 28, 1996, HCFA informed
Petitioner that, since HCFA had not received the
outstanding fee payment or any request for hearing,
Petitioner's CLIA certificate was revoked as of March 21,
1996 for the nonpayment of CLIA fees, which is an
independent and separate basis from the reasons stated
for revoking Petitioner's CLIA certificate in HCFA's
notice of November 28, 1995. HCFA Ex. 13, 8.

18. The reasons provided by HCFA in its January 16, 1996
letter for imposing the sanctions of revocation of
Petitioner's CLIA certificate and cancellation of all
Medicare payments to Petitioner are separate and distinct
from those HCFA set forth in its November 28, 1995 notice
imposing the same sanctions against Petitioner. HCFA Ex.
13, 8.

19. Petitioner acknowledges that it had not paid the
CLIA fees and that it has no basis for appealing the
revocation of its CLIA certificate for that reason. P.
Br. at 2-4.

20. Unappealed determinations are binding upon
Petitioner and cannot be set aside in this proceeding.
See, _g-, 42 C.F.R. § 498.20(b).
10

21. Petitioner may not dispute HCFA's findings of
deficiencies from the survey which was completed on
August 4, 1994. FFCL 7, 20.

22. Petitioner may not dispute HCFA's findings of
deficiencies from the survey of November 2, 1994. FFCL
7, 20.

23. Petitioner may not dispute any of the sanctions HCFA
imposed by notice dated August 24, 1995, which resulted
from the surveys of August 3 and 4, 1994 and November 2,
1994, FFCL 7, 20.

24. The alternative sanction of a directed plan of
correction, imposed by notice of August 24, 1995, and
containing HCFA's directive for Petitioner to correct all
deficiencies by September 29, 1995, did not give specific
instructions on how Petitioner must make the corrections.
HCFA Ex. 2.

25. Petitioner may not dispute HCFA's determination that
it failed to pay its CLIA fees. FFCL 19, 20.

26. Petitioner may not dispute the sanctions HCFA
imposed based on Petitioner's nonpayment of CLIA fees.
FFCL 19, 20.

27. The only issues for hearing are whether, as
determined by HCFA on the basis of the October 26, 1995
revisit survey;

a. Petitioner had deficiencies which remained
uncorrected over the 12 months following the
survey which was completed on August 4, 1994,
and

b. Petitioner failed to comply with the terms
of the Directed Plan of Correction requiring
the correction of all deficiencies (whether
condition-level or standard-level) by September
29, 1995.

FFCL 4, 7, 12, 17.

28. Under the issue identified in FFCL 27a, HCFA will
prevail (and Petitioner will lose) if evidence from the
October 26, 1995 survey proves that Petitioner had failed
to correct all standard-level and condition-level
deficiencies from the August 4, 1994 survey. 42 C.F.R.
§§ 493.1816(b), 493.1820, 498.1828(b) (2).
11

29. Under the issue identified in FFCL 27b, HCFA will
prevail (and Petitioner will lose) if evidence from the
October 26, 1995 survey proves that, by September 29,
1995, Petitioner had even one standard-level deficiency
which remained uncorrected from either of the two prior
surveys. FFCL 5, 6, 20.

30. If relevant to either party's position on the issue
identified in FFCL 27b, either party may submit evidence
to prove whether Petitioner was closed for any period of
time up to and including September 29, 1995.

31. The effective dates specified by HCFA in its
November 28, 1995 notice for the imposition of sanctions
are in accord with the requirements of the regulations.
42 C.F.R. §§ 493.1842(b), 493.1844(h) (2), 493.1844(d) (2).

32. If HCFA prevails on either one of the two issues
identified above in FFCL 27, HCFA is entitled to prevail
also as a matter of law on its imposition of the
sanctions revoking Petitioner's CLIA certificate and
canceling all Medicare payments to Petitioner. 42 C.F.R.
§§ 493.1808(a), 493.1816(b), 493.1832(c), 493.1840(a) (7),
and 493.1842(a).

33. Petitioner must prevail on both issues identified
above in FFCL 27 in order to have me set aside the
sanctions imposed by HCFA in the notice letter dated
November 28, 1995 (revocation of Petitioner's CLIA
certificate and cancellation of Medicare payments to
Petitioner). Id.

34. By confirming letter dated October 10, 1995, HCFA
notified Petitioner that an onsite CLIA revisit survey
would be performed on October 26, 1995. HFCA Ex. 6.

35. On October 26, 1995, a second revisit survey was
conducted by the State agency. HCFA Ex. 14, at 5, para.
17.

36. The purpose of this second revisit survey was to
verify whether Petitioner had corrected all deficiencies
identified in the surveys of August 4, 1994 and November
2, 1994, as required by the August 24, 1995 Directed Plan
of Correction. HCFA Ex. 6.

The August 24, 1995 Directed Plan of Correction required
that all deficiencies be corrected by September 29, 1995.
HCFA Ex. 5.
12

37. The State agency found that numerous standard-level

deficiencies identified during the prior surveys remained
uncorrected, contrary to the terms of the August 24, 1995
Directed Plan of Correction. HFCA Ex. 14, at 5-6, para.

17.

38. As a result of the second revisit survey of October
26, 1995, HCFA now alleges that eight standard-level
deficiencies remained uncorrected over 12 months
following the August 4, 1994 survey. HCFA Ex. 7, 14, 15,
16, 17.

39. The 13 remaining deficiencies identified during the
October 26, 1995 revisit survey, were later determined to
be corrected, because HCFA subsequently verified that the
laboratory was enrolled in a proficiency testing program
at the time of the survey. HCFA Ex. 15, at 5-6, para.
10; HCFA Br. 2, at 13.

40. Petitioner failed to comply with 42 C.F.R. §
493.1103(a), which governs specimen submission and
handling, by the second revisit survey on October 26,
1995.

41. Petitioner failed to comply with 42 C.F.R. §
493.1407(e) (5), which governs the responsibilities of the
laboratory director to ensure that quality control and
assurance programs are established and maintained to
assure the quality of laboratory services provided, and
to identify failures in quality as they occur, by the
second revisit survey on October 26, 1995.

42. Petitioner failed to comply with 42 C.F.R. §
493.1711, which governs quality assurance for moderate or
high complexity testing for quality assurance and
requires the laboratory to have a mechanism to identify
and evaluate patient test results that appear
inconsistent with relevant criteria, such as the
relationship with other test parameters, when available
within the laboratory, by the second revisit survey on
October 26, 1995.

43. At the time of the revisit survey of October 26,
1995, eight standard-level deficiencies remained
uncorrected over 12 months following the survey of August
4, 1994, as cited under D tags 3013, 6022, 6094, 7009,
7010, 7054, 7057, 7066. HCFA Ex. 7, 14, 15, 16, 17.
13

44. At the time of the revisit survey of October 26,
1995, the following eight standard-level deficiencies
remained uncorrected in violation of the Directed Plan of
Correction requiring the correction of all deficiencies
(whether condition-level or standard-level) by September
29, 1995:

a. D tag 3013 concerning specimen submission,
transportation and handling (42 C.F.R. §§
493.1103(a) and 493.1445(e) (5));

b. D tag 6022 concerning the responsibilities of
the laboratory director (42 C.F.R. §
493.1407(e) (5) );

c. D tag 6094 also concerning the responsibilities
of the laboratory director (42 C.F.R. §
493.1445(e) (5));

d. D tag 7009 concerning patient test management
assessment (42 C.F.R. §§ 493.1103(a),
493.1445(e) (5), and 493.1703);

e. D tag 7010 also concerning patient test
management assessment (42 C.F.R. §§ 493.1103(a) and
493.1703);

f. D tag 7054 concerning patient information and
test results (42 C.F.R. §§ 493.1445(e) (5) and
493.1711 (e));

g. D tag 7057 concerning communications (42 C.F.R.
§§ 493.1445(e) (5) and 493.1715);

h. D tag 7066 concerning quality assurance records
(42 C.F.R. §§ 493.1407(e) (5), 493.1445 (e) (5), and
493.1721);

HCFA Ex. 7, 14-17.

45. HCFA prevails, since it met its obligation to
provide notice of its determinations regarding the
October 26, 1995 survey, and since Petitioner failed to
prove by a preponderance of the evidence that it had
corrected all the deficiencies identified during the
August 4, 1994 survey. The period of time between these
two surveys is over 12 months. HCFA Ex. 7, 17; 42 C.F.R.
§§ 493.1816(b), 493.1820, 493.1828(c) (2).
14

46. HCFA prevails, since it met its obligation to
provide notice of its determinations, and since
Petitioner failed to prove by a preponderance of the
evidence that, by September 29, 1995, no condition or
standard-level deficiencies remained uncorrected, a
violation of the terms of the Directed Plan of
Correction.

47. As a matter of law, HCFA prevails on its imposition
of the sanctions revoking Petitioner's CLIA certificate
and canceling all Medicare payments to Petitioner. FFCL
1-46; 42 C.F.R. §§ 493.1808(a), 493.1816(b), 493.1832(c),
493.1840(a) (7), 493.1842(a).

DISCUSSION

The evidence and argument presented by Petitioner do not
persuade me that, based on the results of the October 26,
1995 survey, Petitioner has proved that all the
deficiencies identified by HCFA had been corrected.
Petitioner, not HFCA, bears the ultimate burden of
persuasion. Petitioner has not met this burden.

Specifically, Petitioner failed to comply with the
standard governing Specimen Submission and Handling (42
C.F.R. § 493.1103(a)). This resulted in a deficiency
cited as D tag 3013. This standard requires that a
laboratory must have available and follow written
policies and procedures for conditions for specimen
transportation. Such policies and procedures must assure
positive identification and optimum integrity of the
patient specimens from the time the specimen(s) are
collected until testing has been completed and the
results reported. HCFA determined that Petitioner failed
to comply with this standard, based upon interviews
conducted by the State agency with Petitioner's staff and
upon the review of available procedure manuals. This
failure was corroborated by Petitioner's general
supervisor. HCFA Ex. 7, at 6; HCFA Ex. 17, at 1, para.
3. Petitioner attempts to refute this evidence by
referring to P. Ex. 36, a document entitled "Quality
Assurance Program-Phlebotomy-Specimen Collecting
Procedure for Williams Bio Medical Laboratory." However,
Petitioner cannot rely on this exhibit to show its
compliance with the regulation, since P. Ex. 36 pertains
only to specimen collection, and not to specimen
transportation. In addition, P. Ex. 36 has no date or
signature on it to show that it was in place at WBML at
the time of the October 26, 1995 revisit survey.
Obviously, the best evidence to demonstrate that the
procedures were in place would be documentation showing
they were in use. Petitioner, who would be in the best
15

position to have such documentation, assuming such
documentation was in use, did not offer such proof.
Consequently, I must conclude that no such documents
exist and that the procedures were never in place.
Petitioner claims also that this standard does not apply
to it, since it does not transport specimens and all
testing is done in house. However, 42 C.F.R. §
493.1103(a) is intended to "assure positive
identification and optimum integrity of the patient
specimens from the time the specimen(s) are collected
until the testing has been completed and the results
reported." Clearly, section 493.1103(a) is referring to
"in house" specimen transportation. Therefore, this
regulation does apply to WBML, and WBML has failed to
comply with it.

Petitioner failed also to comply with 42 C.F.R. §
493.1407(e) (5), which requires that a laboratory director
of moderate complexity testing must ensure that quality
control and quality assurance programs are established
and maintained to assure the quality of laboratory
services provided and to identify failures in quality as
they occur. HCFA found deficiencies (D tags 6022 and
7066) under this standard based, in part, on the State
agency's interviews with staff and review of quality
control/quality assurance records, and based, in part, on
a lack of documentation showing that quality assurance
activities, including the identification of problems and
corrective actions taken, had, in fact, occurred. HFCA
Ex. 7 at 12-13 (D tag 6022) and 28-29 (D tag 7066); HCFA
Ex. 15, 17. Petitioner relies on its P. Ex. 39-43 to
show that it had quality control and assurance programs
in place at the time of the October 26, 1995 survey.
However, these exhibits consist of forms and checklists
which are blank. There are no dates, signatures, or any
other information to show that the required quality
control/quality assurance programs were in place at the
time of the survey. HFCA Ex. 16. The evidence offered
by Petitioner thus does not prove that such a program was
in place at the time of the October 26, 1995 survey.

The regulation at 42 C.F.R. § 493.1711(e) requires that
for internal quality assurance, a laboratory must have a
mechanism to identify and evaluate patient test results
that appear inconsistent with relevant criteria, such as
its relationship with other test parameters when
available. HCFA determined that, at the time of the
surveys, WBML did not have such a mechanism. HCFA Ex. 7,
at 24-25; HCFA Ex. 17. This resulted in a deficiency
cited as D tag 7054.
16

Petitioner attempts to refute this by relying on P. Ex.
45, 46, 49, and 51. P. Ex. 45 is a form on which tests
are ordered. There is no place on this form to record
results. P. Ex. 46 appears to be a form on which results
are reported. This form does provide a normal range for
each test, but it does not provide a mechanism to
identify and evaluate patient test results that are
inconsistent with relevant criteria such as patient age,
sex, diagnosis, distribution of test results, or
relationship with other test parameters, when available.
Therefore, these two exhibits do not demonstrate
compliance with this regulation.

P. Ex. 49 is a communication log between the laboratory
director or clinical consultant and clients or
facilities. This form shows blanks to be filled in with
the date, time, who was spoken to, patient name, subject
of communication, and resolution. There are also blanks
to be filled in to identify the individual initiating the
communication and the individual who reviews the
completed form. A note at the bottom of the form says
that the form should be turned in to the Quality
Assurance Committee. However, this form does not
indicate how or when it should be used. There is no
indication what the triggering circumstance would be to
initiate communication. Further, the form does not
provide a mechanism to identify and evaluate patient test
results that are inconsistent with relevant criteria.

P. Ex. 51 is part of a document entitled "Quality
Assurance" (P. Ex. 50), and it states:

(f) Standard. The laboratory must have a mechanism
to identify and evaluate patient test results that appear
inconsistent with clinically relevant criteria such as--

1) Patient's age;

2) Sex;

3) Diagnosis of pertinent clinical data;

4) Relationship with other test parameters.

This document simply repeats the wording of the
regulation. It states that the laboratory "must have" a
mechanism to identify and evaluate patient test results
that appear to be inconsistent with relevant criteria.

It does not state that the laboratory has identified such
a mechanism, nor does it show that such a mechanism was
being used by WBML.
17

P. Ex. 49 and 51 contain no dates, signatures, or other
identifying information indicting that any of the
procedures reflected there had been adopted by the
laboratory, or were in place, at the time of the October
26, 1995 survey. Nor had these exhibits been provided to
HCFA previously, either in response to the deficiencies
identified during any of the three surveys or at the time
Petitioner requested a hearing. HFCA Ex. 16. Further,
even assuming that these documents were present in the
laboratory at the time of the October 26, 1995 survey,
they fail to identify any mechanism in place at that time
to assure that the regulation was being carried out.

The remaining uncorrected deficiencies, for which
Petitioner has submitted no acceptable documentation to
refute the evidence introduced by HCFA, include:
deficiencies based on the failure of the laboratory
director to establish and maintain quality control and
quality assurance programs in order to assure the quality
of laboratory services provided and to identify failures
as they occur (42 C.F.R. § 493.1445(e) (5), D tags 6094,
7009, 3013, 7054, 7057, 7066); deficiencies based on the
failure to have an ongoing mechanism for monitoring and
evaluating the systems required under subpart J of 42
C.F.R. Part 493, Patient Test Management (42 C.F.R. §§
493.1103 and 1703, D tags 7009, 7010); a deficiency based
on a failure to have in place a system to document
problems that occur as a result of breakdowns in
communication between the laboratory and the authorized
individual who orders or receives the results of test
procedures or examinations (42 C.F.R. § 493.1715, D tag
7057); and a deficiency based on the failure to maintain
documentation of all quality assurance activities,
including problems identified and corrective actions
taken (42 C.F.R. § 493.1721, D tag 7066). HCFA
determined that these deficiencies existed based on
interviews conducted by the State agency with WBML's
staff, including WBML's general supervisor, a review of
the quality assurance records, and the finding of a lack
of documentation where required. HCFA Ex. 7, 15, 17. In
addition, HCFA provided declarations from the surveyor,
Franklin R. Barnes, and from a laboratory consultant
employed by HCFA, Esther-Marie Carmichael. HCFA Ex. 14-
17. These declarations support the existence of the
deficiencies at WBML.

Petitioner relies on its exhibits to show that it had
overcome these remaining deficiencies prior to the
revisit survey of October 26, 1995 (P. Ex. 39-43 and 49).
These exhibits consist of forms and checklists that are
blank. None of these exhibits show that Petitioner had
the required quality assurance or other systems in place
18

at the time of the October 26, 1995 survey. This showing
does not meet the burden of persuasion required by
Hillman.

CONCLUSION

Petitioner had deficiencies which remained uncorrected
over 12 months following the August 4, 1994 survey.
Further, Petitioner failed to comply with the terms of
the August 24, 1995 Directed Plan of Correction requiring
that all deficiencies, whether condition-level or
standard-level, be corrected by September 29, 1995.

HCFA may impose principal sanctions where a laboratory
fails to correct deficiencies within 12 months of the day
of the inspection or where it fails to comply with an
alternative sanction, such as a Directed Plan of
Correction. 42 C.F.R. §§ 493.1816(b), 493.1840(a) (7).
Thus, as a matter of law, HCFA prevails on its imposition
of sanctions revoking Petitioner's CLIA certificate and
canceling all Medicare payments to Petitioner. 42 C.F.R.
§§ 493.1808(a), 493.1816(b), 493.1832(c), 493.1840(a) (7),
493.1842(a).

/s/

Edward D. Steinman
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)

Ronald B. Phillips, ) Date: August 1, 1997
)
Petitioner, )
)

“Vv. ) Docket No. C-96-385

) Decision No. CR485
The Inspector General. )
)
DECISION

I sustain the determination of the Inspector General (I.G.) to exclude Petitioner, Ronald
B. Phillips, D.O., from participating in the Medicare program and State health care
programs, including State Medicaid programs, for five years. I conclude that the I.G.
was authorized to exclude Petitioner pursuant to the pre-July 1996 version of section
1128(b)(3) of the Social Security Act (Act). Additionally, I conclude that the length of
the exclusion that the I.G. imposed against Petitioner, five years, is reasonable.

As I discuss in more detail below, Petitioner is a physician. On November 27, 1995,
Petitioner was convicted of unlawfully obtaining controlled substances for his own
personal use. Finding 6. The conviction was based on a pattern of unlawful conduct
by Petitioner. Over a period of slightly more than three years, Petitioner unlawfully
issued hundreds of prescriptions for thousands of units of controlled substances which
Petitioner converted to his own use. Findings 6, 7. This unlawful conduct is part of a
pattern of substance abuse by Petitioner extending over a period of many years.
Finding 7. The I.G. determined to exclude Petitioner. On June 15, 1996, the I.G.
excluded Petitioner for five years, which exceeds by two years the three-year
benchmark exclusion prescribed by regulations for a case involving a conviction
telating to a controlled substance. The I.G. premised the length of the exclusion on her
determination that Petitioner’s prolonged pattern of substance abuse is an aggravating
factor.
2

Petitioner requested a hearing and the case was assigned to me for a hearing and a
decision. I held a prehearing conference, at which the I.G. advised me that she
intended to present her case against Petitioner based on written submissions, and
without in-person testimony. Petitioner, through his counsel, advised me that he
believed that an in-person hearing would be necessary. I directed the parties to submit
their proposed exhibits and briefs addressing the merits of the case. I advised
Petitioner that he could make a motion for an in-person hearing.

The I.G. submitted a brief and six proposed exhibits (I.G. Ex. 1 - 6). Petitioner
submitted a brief and eleven proposed exhibits (P. Ex. 1 - 11). Each party submitted a
reply brief.

Petitioner’s proposed exhibits include the affidavits of six individuals. These affidavits
consist of the sworn statements of: Nicholas Monti (P. Ex. 6); Philip J. Stevens, D.O.
(P. Ex. 7); John T. Troup, Ph.D. (P. Ex. 8); Jon A. Shapiro, M.D. (P. Ex. 9); Dean
A. Steinberg, M.D. (P. Ex. 10); and Petitioner (P. Ex. 11). Petitioner listed himself
and each of the five other affiants as proposed witnesses, in the event that I scheduled
an in-person hearing. Petitioner’s Brief at 8 - 9.

Petitioner submitted a motion for an in-person hearing, along with his brief and
proposed exhibits. Petitioner moved that I schedule an in-person hearing in the event
that there were any disputes of fact concerning the credibility of Petitioner’s affidavit or
of the other five affidavits submitted by Petitioner.

In her reply brief, the I.G. did not argue that the affidavit testimony submitted by
Petitioner lacked credibility. She asserted that the affidavit testimony offered by
Petitioner in P. Ex. 6 - 10 is irrelevant. The I.G. argued additionally that the evidence
in Petitioner’s affidavit, P. Ex. 11, is largely irrelevant, except to the extent that it
corroborates other evidence which documents a pattern of substance abuse by
Petitioner.

An in-person hearing is not necessary in this case. The I.G. has not contested the
credibility of the affidavit testimony offered by Petitioner. Furthermore, I agree with
the I.G. that the testimony contained in P. Ex. 6 - 10 is irrelevant, and that the
testimony contained in P. Ex. 11 largely is irrelevant. The evidence which I may
consider in this case which is relevant to the length of an exclusion is limited to
evidence addressing any of the aggravating factors or mitigating factors identified in 42
C.F.R. §§ 1001.401(c)(2) and (c)(3). Finding 4. The evidence in P. Ex. 6 - 11 does
not address any of the aggravating factors or mitigating factors that are identified in the
regulations, except that Petitioner’s admission, in P. Ex. 11, that he abused controlled
substances for a period of years, supports my conclusion that the 1.G. proved the
presence of an aggravating factor. I discuss in greater detail at Finding 8 my
conclusion that the evidence offered by Petitioner in P. Ex. 6 - 11 largely is irrelevant.
3

The evidence which Petitioner offered in P. Ex. 6 - 11 is not the only irrelevant
evidence which I have been asked to consider in this case. The evidence which
Petitioner offered in P. Ex. 1 - 5 is largely irrelevant, because it does not relate to any
aggravating or mitigating factor. Finding 8. And, some of the evidence which the I.G.
offered is irrelevant because it does not relate to an aggravating factor or to a
mitigating factor. Finding 7; See I.G. Ex. 2.

However, I receive into evidence I.G. Ex. 1 - 6 and P. Ex. 1 - 11. I have not based
my decision on evidence which I find to be irrelevant. Therefore, the parties are not
prejudiced by my receiving into evidence all of their exhibits.

The issues in this case are whether: (1) the I.G. is authorized to exclude Petitioner
pursuant to section 1128(b)(3) of the Act; and (2) the five-year exclusion that the I.G.
imposed against Petitioner is reasonable. I make findings of fact and conclusions of
law (Findings) to support my decision to sustain the I.G.’s exclusion determination.
Below, I set forth each Finding as a separately numbered heading, and I discuss each
Finding in detail.

1. Prior to July 1996, section 1128(b)(3) of the Act authorized the I.G.
to exclude an individual or entity who was convicted of a criminal
offense relating to a controlled substance.

Prior to July 1996, section 1128(b)(3) of the Act authorized the I.G. to exclude any
individual or entity who was convicted under Federal or State law, of a criminal offense
telating to the unlawful manufacture, distribution, prescription, or dispensing of a
controlled substance. Congress revised and amended section 1128 in July 1996. The
revised and amended Act, which became effective in January 1997, now mandates the
exclusion for at least five years of any individual or entity who is convicted of a felony
relating to a controlled substance. Act, sections 1128(a)(4); 1128(c)(3)(B). It
authorizes exclusion, without a minimum mandated exclusion period, of any individual
or entity who is convicted of a misdemeanor relating to a controlled substance. Act,
section 1128(b)(3).

2. This case is governed by the provisions of section 1128(b)(3) of the
Act which predate the July 1996 revisions and amendments to section
1128.

Neither the I.G. nor Petitioner argues that this case is governed by the July 1996
Trevisions and amendments to section 1128. I conclude that this case is governed by the
version of section 1128(b)(3) which predates the July 1996 revisions and amendments,
inasmuch as the conduct at issue, including Petitioner’s November 1995 conviction,
predates the effective date of those revisions and amendments.
4

3. The purpose of an exclusion imposed under section 1128 of the Act
is to protect the integrity of federally-funded health care programs, and
the welfare of beneficiaries and recipients of those programs, from an
individual or entity who is not trustworthy to provide care.

Section 1128 of the Act is a remedial statute. The purpose of any exclusion that is
imposed pursuant to section 1128, including an exclusion imposed pursuant to the
version of section 1128(b)(3) that predated the July 1996 revisions and amendments, is
to protect the integrity of federally-funded health care programs, and the welfare of
program beneficiaries and recipients from an individual or entity who is not trustworthy
to provide care. An exclusion will be sustained if it relates reasonably to the Act’s
temedial purpose.

4. The Secretary has established the exclusive criteria to be used to
determine trustworthiness in the case of an exclusion imposed under the
pre-July 1996 version of section 1128(b)(3) of the Act.

The pre-July 1996 version of section 1128(b)(3) of the Act authorized, but did not
mandate, the exclusion of an individual who was convicted of a criminal offense
relating to a controlled substance. The Act did not establish specific criteria for
determining whether an individual was untrustworthy. However, the Secretary
published regulations which establish specific criteria for evaluating trustworthiness.
The criteria to be used in cases involving the pre-July 1996 version of section
1128(b)(3) of the Act are set forth at 42 C.F.R. § 1001.401(c).

An exclusion imposed pursuant to the pre-July 1996 version of section 1128(b)(3) will
be for a period of three years, in the absence of evidence which establishes the presence
of either aggravating factor or factors or a mitigating factor or factors. 42 C.F.R. §
1001.401(c)(1). An exclusion may be for a period of more than three years if there
exists evidence establishing an aggravating factor or factors which is not offset by
evidence establishing a mitigating factor or factors. 42 C.F.R. §§ 1001.401(c)(1), (2),
(3). An exclusion may be for a period of less than three years if there exists evidence
establishing a mitigating factor or factors which is not offset by evidence establishing an
aggravating factor or factors. Id,

The regulation identifies the sole factors which may be established as aggravating or
mitigating ina case. 42 C.F.R. §§ 1001.401(c)(2), (3). In effect, the regulation
establishes the rules of evidence that must be used to evaluate trustworthiness. The
only evidence which I may consider on the issue of an excluded individual or entity’s
trustworthiness, in a case involving an exclusion imposed under the pre-July 1996
version of section 1128(b)(3), is evidence which relates to an aggravating factor or to a
mitigating factor. I may not consider evidence which is offered as proof of an excluded
individual or entity’s trustworthiness or lack of trustworthiness if that evidence does not
5

relate to one of the specific aggravating or mitigating factors identified in 42 C.F.R. §§
1001.401(c)(2) or (3).

5. I must evaluate any evidence that relates to an aggravating factor or
a mitigating factor in light of the Act’s remedial purpose in order to
decide whether an exclusion is reasonable.

The aggravating and mitigating factors identified in 42 C.F.R. §§ 1001.401(c)(2) and
(3) define what evidence is relevant to deciding an excluded individual or entity’s
trustworthiness to provide care but they do not establish the weight that must be
assigned to such evidence. Although the presence of one or more of these factors in a
case may be a basis to impose an exclusion of more than or less than three years, the
presence of an aggravating or mitigating factor or factors in a case does not direct that
an exclusion of any particular length be imposed. In any case where aggravating or
mitigating factors are proved, I must weigh the evidence which relates to each factor or
factors that is proved in order to decide whether an exclusion that is greater than or less
than three years is reasonable.

In order to be meaningful, evidence which relates to an aggravating or a mitigating
factor must be evaluated in light of the Act’s remedial purpose. At bottom, the
question that I must answer in any case where there exists proof of one of the factors
is: what does that evidence establish about the excluded party’s trustworthiness to
provide care?

For example, an aggravating factor identified in 42 C.F.R. § 1001.401(c)(2)(i), which
is at issue in this case, is that:

The acts that resulted in the [excluded individual or entity’s] conviction
or similar acts were committed over a period of one year or more... .

Proof of unlawful conduct which occurred over a period of more than one year relating
to a controlled substance would establish the presence of this aggravating factor.
However, such evidence would have to be examined closely in order to decide what it
shows about the trustworthiness to provide care of the excluded individual or entity.
For example, proof of a few isolated acts of misconduct which occurred over a period
of one year or slightly more than one year, may not establish that the excluded
individual or entity is significantly more untrustworthy than would be the case if those
same acts had occurred in a period of less than one year. In that circumstance,
although an aggravating factor would be present, an exclusion of more than three years
might be unreasonable.
6

On the other hand, the evidence might establish that there is a pattern of misconduct by
the excluded individual or entity covering a period of substantially more than one year.
In that event, the evidence relating to the aggravating factor might be a basis for
concluding that the excluded individual or entity manifests a high degree of
untrustworthiness. An exclusion of more than three years might be reasonable in such
a case.

6. Petitioner was convicted of a criminal offense, relating to a
controlled substance, within the meaning of the pre-July 1996 version
of section 1128(b)(3) of the Act.

Petitioner is a physician. I.G. Ex. 1 at 1. On May 10, 1995, Petitioner was indicted
in the United States District Court for the Eastern District of Pennsylvania. Id. The
indictment charged that, between on or about April 15, 1990, and on or about May 13,
1993, Petitioner nowingly and intentionally acquired, by misrepresentation, fraud,
forgery, deception and subterfuge, for no legitimate medical purpose, Schedule II
through Schedule IV controlled substances. Id, at 3.

The indictment charged that Petitioner wrote prescriptions under various names, and
used these prescriptions to obtain for his personal use, controlled substances, including
Percocet and Vicodin. I.G. Ex. 1 at 3. Specifically, the indictment charged that,
between April 1990 and May 1993, Petitioner wrote 466 prescriptions for 14,624 total
dosage units of controlled substances, including Percocet and Vicodin, in the names of
various members of his family. Id, at 2. The indictment charged further that, during
the same period of time, Petitioner wrote approximately 110 prescriptions for controlled
substances, including Percocet and Vicodin, in the name of another individual. Id.

Petitioner pled guilty to the indictment. I.G. Ex. 6. A judgment of conviction was
imposed against Petitioner on November 27, 1995. Id.

The evidence of Petitioner’s indictment and conviction establishes that he was convicted
of a criminal offense as is described by the pre-July 1996 version of section 1128(b)(3)
of the Act. Petitioner was convicted of an offense relating to the unlawful prescription
or dispensing of a controlled substance. Act, section 1128(b)(3) (pre-July 1996
version).

7. The 1.G. established the presence of an aggravating factor.

The aggravating factor which the I.G. alleged and proved is that Petitioner engaged in a
pattern of unlawful prescription, dispensing, and abuse of controlled substances over a
period of more than one year. 42 C.F.R. § 1001.401(c)(2)(i). The criminal conduct of
which Petitioner was convicted involved a pattern of unlawful prescriptions extending
over a period of more than three years. I.G. Ex. 1 at 2. Moreover, this conduct was
7

part of a history of unlawful substance abuse by Petitioner extending back over a period
of many years. I.G. Ex. 1 at 2; I.G. Ex. 2 at 5; P. Ex. 11 at 1.

There is some dispute in the evidence concerning the duration of Petitioner’s addiction
to controlled substances. Evidence offered by the I.G. supports a conclusion that
Petitioner’s addiction goes back at least to 1980. I.G. Ex. 2 at 5. Petitioner, in his
affidavit, suggests that his addiction began in 1988. P. Ex. 11 at 1. However, it is not
necessary for me to find precisely when Petitioner’s addiction began to conclude that he
manifests a long-standing addiction and a pattern of substance abuse extending over
many years.

In her brief, the I.G. directed my attention to a determination by the Pennsylvania State
Board of Osteopathic Medicine (Board), made in November 1996, not to reinstate
Petitioner’s license to practice osteopathic medicine in Pennsylvania. I.G. Ex. 2. The
I.G. seems to argue that the Board’s determination that Petitioner is not trustworthy
supports her own determination that Petitioner is not trustworthy. I.G.’s Brief at 4 - 6.

I find I.G. Ex. 2 to be relevant only insofar as it describes a pattern of substance abuse
by Petitioner which predates the conduct for which Petitioner was indicted and
convicted. The remainder of the exhibit, including the findings by the Board
concerning Petitioner’s credibility and his trustworthiness to function as a licensed
physician is not relevant, because it does not relate to any aggravating or mitigating
factor identified in 42 C.F.R. §§ 1001.401(c)(2) or (3).

8. Petitioner did not establish the presence of any mitigating factor.

The sole mitigating factors which may be considered in a case involving an exclusion
imposed pursuant to the pre-July 1996 version of section 1128(b)(3) of the Act are
stated at 42 C.F.R. § 1001.401(c)(3). These are that: the excluded individual or
entity’s cooperation with federal or State officials resulted in the conviction or exclusion
of others or in the imposition of a civil money penalty against others; or, alternative
sources of the type of health care items or services that are provided by the excluded
individual or entity are not available. 42 C.F.R. §§ 1001.401(c)(3)(i)(A), (B);
(c)(3)(ii).. Petitioner neither alleged nor proved the presence of any of these mitigating
factors.

Petitioner has offered evidence which relates to his general trustworthiness to provide
care. P. Ex. 1 - 11. I have reviewed this evidence. I conclude that it does not relate
to any of the aggravating or mitigating factors which are enumerated in 42 C.F.R. §§
1001.401(c)(2), (3). Therefore, I find it not to be relevant.
8

Petitioner submitted three letters from professional colleagues and a patient, attesting to
Petitioner’s professional behavior. P. Ex. 1. The letters in P. Ex. 1 address
Petitioner’s personal and professional qualities. They do not address any of the
aggravating or mitigating factors which are stated at 42 C.F.R. §§ 1001.401(c)(2), (3).

Petitioner also submitted exhibits which relate to disciplinary proceedings against
Petitioner’s license to practice osteopathic medicine that were conducted by the Board
and the remedial measures taken by Petitioner pursuant to, or in conjunction with, the
disciplinary measures that were imposed against him by the Board. P. Ex. 2 - 5.
Petitioner’s point in offering these exhibits is that Petitioner has complied with the
Board’s remedies and has remained free of substance abuse since he began treatment
for his addiction. These exhibits, and the arguments that Petitioner seeks to make from
them, are not relevant because they do not address any of the aggravating or mitigating
factors identified by regulation. Remedial measures that an excluded party may have
undertaken to free himself or herself from a substance addiction are not within the
aggravating or mitigating factors that the regulation identifies. See 42 C.F.R. §§
1001.401(c)(2), (3).

The affidavits offered by Petitioner, including much of his own affidavit, are not
relevant to any of the aggravating or mitigating factors identified in the regulation. The
affidavits of Nicholas Monti, Philip J. Stevens, D.O., and John T. Troup, Ph.D.,

attest to Petitioner’s professional skills. P. Ex. 6 - 8. Even assuming these affidavits
to be credible, they say nothing about any of the aggravating or mitigating factors
identified in 42 C.F.R. §§ 1001.401(c)(2), (3). Thus, they suggest neither a basis for
finding an exclusion to be reasonable nor unreasonable.

The affidavits of Jon A. Shapiro, M.D. and Dean A. Steinberg, M.D. address the
efforts that Petitioner made at rehabilitation beginning in May 1993. P. Ex. 9, 10. As
with the other affidavits offered by Petitioner, these affidavits do not relate to any of
the aggravating or mitigating factors identified in 42 C.F.R. §§ 1001.401(c)(2), (3).
These affidavits establish that Petitioner’s patterns of unlawful conduct and substance
abuse ended in May 1993. However, the I.G. has not alleged that Petitioner’s unlawful
conduct and substance abuse continued after May 1993.

Even if I were to accept Petitioner’s affidavit as completely credible, it does not detract
from the evidence of aggravation offered by the I.G., nor does it offer any relevant
evidence of mitigation. See P. Ex. 11. Indeed, in one respect, P. Ex. 11 supports the
1.G.’s evidence concerning the presence of an aggravating factor. In his affidavit,
Petitioner admits that he prescribed controlled substances for his own use and that he
was addicted to controlled substances. Id, at 1. He describes his efforts at
rehabilitation. Id. at 2 - 5. Petitioner’s affidavit, in part, constitutes an admission of
the aggravating circumstance proved by the I.G. His assertion that he is attempting to
rehabilitate himself from his substance abuse is not relevant to any of the aggravating or
mitigating factors described in 42 C.F.R. §§ 1001.401(c)(2), (3).
9

9. A five-year exclusion is reasonable in light of the evidence
establishing the presence of an aggravating factor.

I conclude that a five-year exclusion is reasonable in this case because the pattern of
substance abuse and unlawful conduct engaged in by Petitioner establishes him to be a
highly untrustworthy individual. During a period of more than three years, Petitioner
unlawfully wrote hundreds of prescriptions for thousands of units of controlled
substances, which he converted to his own use. By his own admission, Petitioner was
addicted to, and abused, controlled substances for a period that began at least in 1988.
The evidence establishes a persistent pattern of unlawful, reckless, and self-destructive
conduct by Petitioner. I infer from the evidence which establishes a long-standing
pattern of unlawful abuse of controlled substances by Petitioner that Petitioner was
capable of subverting the welfare of his patients to his own self-gratification.
Petitioner’s conduct was especially egregious, in light of the fact that Petitioner
practiced medicine for years while impaired, thereby potentially placing his patients’
welfare at risk.

I have taken into consideration the absence of evidence showing that Petitioner engaged
in this pattern of unlawful behavior and substance abuse after May 1993. Petitioner
will not be eligible for reinstatement before June 2001, or approximately eight years
after he ceased his unlawful conduct and substance abuse. I do not find a five-year
exclusion to be unreasonable, even considering the length of time that will have elapsed
between the date when Petitioner ceased abusing controlled substances and the earliest
date when Petitioner will be eligible for reinstatement. The evidence of persistent
misconduct by Petitioner is ample ground to impose a lengthy exclusion. Such an
exclusion is reasonably necessary in order to protect the welfare of program
beneficiaries and recipients.

/s/

Steven T. Kessel
Administrative Law Judge