Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Primary Care Medical Group, DATE: October 9, 1996
Petitioner,

Docket No. C-95-161
Decision No. CR439

Vv.

Health Care Financing
Administration.

DECISION

I conclude that Petitioner, Primary Care Medical Group (a
physician's office operating a laboratory), is subject to
revocation of its CLIA' certificate for a one-year minimum
mandatory period, and to concomitant cancellation of
Medicare’ payments for laboratory services.

In reaching this conclusion, I determine that the word
"intentionally" is defined differently in CLIA for civil
violations than for criminal violations.

PROCEDURAL BACKGROUND

Only civil violations are alleged in this case. By letters
dated April 21, 1995 and May 23, 1995, the Health Care
Financing Administration (HCFA) of the United States
Department of Health and Human Services (DHHS) notified
Petitioner that it was revoking Petitioner's CLIA certificate
for one year and cancelling Petitioner's approval to receive
Medicare payments for its laboratory services for one year.
(In addition, Medicaid payments were no longer going to be
available to the laboratory for the same period of time).

' CLIA refers to the Clinical Laboratory
Improvement Amendments, enacted in 1988 (42 U.S.C.
§ 263a).

2 Medicaid payments for laboratory services are
also affected (42 C.F.R. § 493.1809).
2

By letter dated July 19, 1995, Petitioner filed a request for
hearing. On October 25, 1995, I held a hearing in San
Francisco, California. Subsequently, the parties filed
briefs.’ Based on the evidence and the law, in light of the
parties' arguments, I affirm HCFA's determination to revoke
Petitioner's CLIA certificate for a one-year minimum
mandatory period, with concomitant cancellation of
Petitioner's Medicare payments for laboratory services.

ISSUES
There are two issues: 1) whether Petitioner intentionally
referred its proficiency testing samples to another

laboratory for analysis; and 2) whether Petitioner was
otherwise deficient in meeting CLIA requirements.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. Petitioner is a physician's office operating a
laboratory, located in Madera, California.

2. Theodore Johnstone, M.D., is Petitioner's owner and
laboratory director. Tr. 337; P. R. Br. 4.

3. Petitioner's laboratory did testing in the following
areas: general chemistry (i.e., glucose, blood urea,
nitrogen, creatinine, total protein, cholesterol);
isoenzymes; hematology (complete blood counts and platelet
counts); and microbiology (gonorrhea screening only). Tr.
22, 255.

4. The results obtained from Petitioner's laboratory tests
were used in the treatment of Dr. Johnstone's patients.

5. A laboratory receives proficiency testing samples three
times a year. Each testing is known as an "event," with the
first "event" occurring in January. Tr. 52, 118-119.

6. Petitioner's laboratory is enrolled in an approved
proficiency testing Program, pursuant to 42 C.F.R. § 493.801,
conducted by the American Association of Bioanalysts (AAB).

3 Petitioner's opening brief [Petitioner's
“Post-Hearing Brief"] is cited as "P. Br." Petitioner's
"Supplemental Brief" is cited as "P. R. Br."

HCFA's opening brief [HCFA's "Posthearing Memorandum"] is
cited as "HCFA Br." HCFA's "Posthearing Reply
Memorandum" is cited as "HCFA R. Br." I cite to the
transcript as "Tr." (page).
3

7. Among the proficiency testing samples sent to Petitioner
were hematology samples and chemistry enzyme samples.

8. Petitioner's hematology proficiency testing from the
third testing event (i.e., 3rd quarter) of 1994 is at issue
in this case. Tr. 119.

9. Petitioner's chemistry proficiency testing from the
second testing event (i.e., 2nd quarter) of 1994 is also at
issue in this case. Tr. 119.

10. David Dohi is a licensed medical technologist, who in
September 1994 was working part-time at Petitioner [one day a
week for two to three hours a day], full-time at the Madera
Community Hospital (community hospital), and part-time at the
hospital in Chowchilla [on call every other weekend and on
call Wednesday nights]. HCFA Ex. 4; Tr. 262-263.

11. Mr. Dohi's duties for Petitioner's laboratory included
drawing blood, doing laboratory testing and reporting the
results. HCFA Ex. 5; Tr. 262.

12. Mr. Dohi did the testing of Petitioner's laboratory's
3rd quarter 1994 hematology proficiency testing samples. Tr.
232-233.

13. Mr. Dohi did not do the testing of Petitioner's
laboratory's chemistry proficiency testing samples from 2nd
quarter 1994. Tr. 245.

14. With respect to the instruments to be used by
Petitioner's laboratory on the proficiency test samples,
Petitioner had indicated to the AAB that it would be using
the hemacytometer for platelet counts, and the Cell-Dyn 400
for the other hematology tests. Tr. 274-275.

15. At the time relevant to these proceedings, Dorothy
Maurer was employed by HCFA as a CLIA Laboratory Expert. She
has a background as a medical technologist. Tr. 17, 21.

16. On February 28, 1995, Ms. Maurer conducted a survey of
Petitioner's laboratory on behalf of HCFA for the purpose of
determining whether Petitioner was in compliance with
requirements imposed under CLIA (Clinical Laboratory
Improvement Amendments of 1988, 42 U.S.C. § 263a), and the
implementing regulations at 42 C.F.R. Part 493.

17. Pursuant to the survey, Ms. Maurer found three condition
level deficiencies: (1) enrollment and testing of samples --
42 C.F.R. § 493.801; (2) patient test management -- 42 C.F.R.
§ 493.1101; and (3) laboratory director -- 42 C.F.R.

§ 493.1441.
4

18. Ms. Maurer testified that she found computer generated
printouts from a Cell-Dyn 1600 among the 3rd quarter 1994
proficiency testing documentation in Petitioner's files. Tr.
37-40. These printouts, each of which is titled "Cell-Dyn
1600 Specimen Data Report," contained various hematologic
values, including platelet counts. HCFA Ex. 2 at 2-7.

19. The computer generated printouts from the Cell-Dyn 1600
are evidence that Petitioner's hematology proficiency samples
were analyzed on a Cell-Dyn 1600.

20. Petitioner does not have a Cell-Dyn 1600. It has a
Cell-Dyn 400, which does not have the ability to count
platelets nor can it generate computer printouts.

21. Mr. Dohi admitted that he had run tests on Petitioner's
laboratory's 3rd quarter 1994 hematology proficiency testing
samples on both the Cell-Dyn 400 at Petitioner's laboratory

and the Cell-Dyn 1600 at the community hospital laboratory.

Tr. 234, 239, 269-271, 287-288; HCFA Exs. 4, 5.

22. Mr. Dohi knew he was retesting Petitioner's laboratory's
3rd quarter 1994 hematology proficiency testing samples on
the Cell-Dyn 1600 at the community hospital laboratory.

Thus, Mr. Dohi's action was deliberate, not inadvertent.

23. Mr. Dohi stated that the reason he took Petitioner's
laboratory's hematology proficiency testing samples to the
community hospital laboratory and analyzed the samples on its
Cell-Dyn 1600 was that he wished to verify the results he had
obtained using Petitioner's Cell-Dyn 400 [he wanted to check
and make sure his numbers were fairly accurate or within the
.+.-ballpark). HCFA Ex. 5, Tr. 239.

24. Mr. Dohi reported the platelet count results obtained
from the Cell-Dyn 1600 printouts to the AAB for 3rd quarter
1994. Tr. 47, 286-287.

25. At Petitioner, platelet counts for patients are not done
on a Cell-Dyn 1600.

26. Even though Petitioner reported platelet count values
obtained from a Cell-Dyn 1600, Petitioner did not indicate on
the AAB reporting form, as it was required to do, that it had
used different equipment than what it had indicated it would
use. Tr. 275.

27. Mr. Dohi testified that, at Petitioner, he used the
hemacytometer to do the platelet counts. Tr. 238, 241, 244-
245, 287.

28. Use of a hemacytometer is an appropriate and acceptable
way to perform a platelet count. Tr. 115.
5

29. Mr. Dohi stated that he could not find the worksheet
where he had written the platelet values that he had obtained
using the hemacytometer. Tr. 286.

30. With the exception of the platelet count values,
Petitioner submitted to the AAB the values obtained from
using Petitioner's Cell-Dyn 400 for the hematology samples.
Tr. 235.

31. A laboratory that obtains analysis of its proficiency
testing samples from another laboratory, regardless of
whether the laboratory reports to the proficiency testing
agency its own results or the results obtained from the other
laboratory, violates 42 U.S.C. § 263a(i) (4), 42 C.F.R. §
493.801(b) (4) and § 493.1840(b).

32. By retesting its proficiency testing samples in the
community hospital laboratory, irrespective of whether
Petitioner reported the community hospital laboratory
results, Petitioner violated 42 U.S.C. § 263a(i)(4), 42
C.F.R. § 493.801(b) (4) and § 493.1840(b).

33. A laboratory must not send proficiency testing samples
or portions of samples to another laboratory for any analysis
which it is certified to perform in its own laboratory. 42
C.F.R. § 493.801(b) (4).

34. Because neither Congress nor the Secretary has defined
"intentionally" as used in the context of 42 U.S.C. §
263a(i) (4), 42 C.F.R. § 493.801(b) (4) and § 493.1840(b), one
can infer that the term is to be given its common and
ordinary meaning.

35. The definition of "intention" is a determination to act
in a certain way. Long, at 6 (citing Webster's New

Collegiate Dictionary, 1975 ed., at 601). When one acts

"intentionally", he or she acts deliberately. Long, at 6.

36. “Intentionally referred" [as in "intentionally referred"
its proficiency testing samples to another laboratory for
analysis] requires not specific intent, but general intent,
that is, an intent to act. No guilty knowledge, no
culpability, no scienter is required. Motive is irrelevant.
It is necessary merely that a person act deliberately, that
is, not inadvertently.

37. The fact that Mr. Dohi committed the act of referring
Petitioner's proficiency testing samples to another
laboratory for analysis, with the knowledge that the samples
were proficiency testing samples, is sufficient evidence to
show that Petitioner violated 42 U.S.C. § 263a(i)(4), 42
C.F.R. § 493.801(b) (4) and § 493.1840(b). Long, at 6.
6

38. It is irrelevant that Mr. Dohi was unaware that

his retesting of Petitioner's 3rd quarter 1994 hematology
proficiency testing samples in the community hospital
laboratory was prohibited by law.

39. Mr. Dohi's motive in referring Petitioner's proficiency
testing samples to another laboratory for analysis is
irrelevant under 42 U.S.C. § 263a(i)(4), 42 C.F.R. §
493.801(b) (4) and § 493.1840(b).

40. To prove "intention" in the context of 42 U.S.C. §
263a(i) (4), 42 C.F.R. § 493.801(b) (4) and § 493.1840(b), HCFA
is not required to prove what Mr. Dohi was thinking when he
took the proficiency samples to another laboratory and ran
the tests there.

41. Petitioner intentionally referred its 3rd quarter 1994
hematology proficiency testing samples to another laboratory
for analysis, in violation of 42 U.S.C. § 263a(i) (4), 42
C.F.R. § 493.801(b) (4) and § 493.1840(b).

42. As laboratory director, Dr. Johnstone was responsible
for the actions of Mr. Dohi in intentionally referring
proficiency testing samples to another laboratory for
analysis, and the fact that Dr. Johnstone had no knowledge of
Mr. Dohi's intentional referral of proficiency testing
samples to another laboratory for analysis is irrelevant.

43. Petitioner did not test its 3rd quarter 1994 hematology
proficiency testing samples in the same manner as patient
samples were tested.

44, Petitioner did not test its 2nd quarter 1994 chemistry
proficiency testing samples in the same manner as patient
samples were tested.

45. Petitioner did not test its 3rd quarter 1994 hematology
proficiency testing samples using its routine methods.

46. With respect to the chemistry isoenzyme test samples,
Ms. Maurer testified that they were run twice, evidenced by a
worksheet on which was reported two results for each test.
Tr. 43-46. There should have been only one set of answers.

47. Based on the evidence pertaining to the hematology
proficiency testing [finding 21] and the chemistry
proficiency testing [finding 46], Petitioner did not test its
proficiency testing samples the same number of times that it
tested patient samples. Tr. 54; HCFA Ex. 1 at 4-5.

48. Petitioner failed to document the date it ran the tests
on the proficiency testing samples, when it received the
samples, and that the tests were done there (at Petitioner's
laboratory). Tr. 55, 59-60; HCFA Ex. 1 at 6.
7

49. Petitioner failed to maintain specimen logs with respect
to the proficiency testing in chemistry and hematology. Tr.
55, 60.

50. Petitioner failed to identify the technologist
performing the proficiency testing. HCFA Ex. 1 at 6; Tr. 55.

51. Petitioner failed to maintain copies of all proficiency
testing records for 1994. HCFA Ex. 1 at 7.

52. Relevant proficiency testing documentation, including
copies of the attestation statements for the hematology
samples for the third event and the chemistry samples for the
second event, were missing at the time of the survey of
Petitioner. Tr. 40-41, 52-53.

53. Mr. Dohi did not dispute that some proficiency test
documentation was missing at the time of the survey. Tr.
238.

54. Mr. Dohi stated that he could not find the worksheet
where he had written the results obtained from the Cell-Dyn
400. He admitted he had no proof that he had run the samples
on the Cell-Dyn 400. Tr. 271; see also Finding 29.

55. Petitioner's documentation for the second event 1994 for
chemistry proficiency testing was incomplete. Ms. Maurer was
unable to locate the printout with the chemistry results and
could not document that the tests had been performed. Tr.
57, 80, 102.

56. Moreover, Ms. Maurer could locate only one set of
answers on a printout, even though there were two sets of
results on the worksheet. [All printouts are required to be
kept.) Tr. 44, 57. Mr. Dohi was unable to find the
documentation showing the other set of numbers. Tr. 123.

57. Dr. Johnstone and Mr. Dohi signed the attestation form
accompanying the proficiency testing samples, and, by doing
so, were attesting that the proficiency samples were tested
in the same manner as patient samples. Tr. 204; HCFA Ex. 2
at 2.

58. Petitioner failed to meet the Condition for Enrollment
and Testing of Samples, in violation of 42 C.F.R. § 493.801.

59. The procedure manual maintained by Petitioner was
inadequate, old, and outdated. Tr. 61, 84.

60. With respect to patient specimens, Petitioner did not
have in place written policies and procedures to assure
positive identification and adequate tracking of the
specimens. Tr. 65-66; HCFA Ex. 1 at 9.
8

61. For all types of laboratory testing performed in a day,
quality control should be conducted on that day for those
tests. Tr. 67, 72.

62. Quality control in the area of hematology is performed
for every eight hours of operation. Tr. 67.

63. Petitioner failed to perform quality control daily in
hematology. Tr. 68; HCFA Ex. 8. Petitioner failed to
perform and document two levels of hematology quality control
materials each day of testing. HCFA Ex. 1 at 10.

64. Specifically, Petitioner failed to run hematology
quality control on four of 18 days in February 1995, when
patients were tested. HCFA Ex. 8 at 1; HCFA Ex. 1 at 10.
Petitioner performed quality control only 78 percent of the
time in February 1995. Tr. 80.

65. Petitioner conducted gonorrhea screenings. Tr. 61-62,
255.

66. Petitioner did not have in place a tracking system for
sending gonorrhea cultures to other labs. Tr. 64-65; HCFA
Ex. 1 at 9.

67. Petitioner's procedure manual did not contain written
procedures for gonorrhea testing. Tr. 75.

68. The temperature chart on Petitioner's incubator, an
instrument used in gonorrhea screenings, indicated that the
last time the temperature was documented (checked) was in
November 1992. Tr. 63, 76; HCFA Ex. 1 at 11.

69. Mr. Dohi admitted that the incubator was used for
gonorrhea incubations and that results were reported on the
gonorrhea cultures. Tr. 278.

70. Mr. Dohi admitted that he was unaware that the incubator
thermometer was broken until the survey. Tr. 278.

71. Petitioner replaced the broken thermometer in March
1995. Tr. 259, 277; P. Ex. 5 at 48.

72. Mr. Dohi could not recall if he ever saw a positive
culture. Tr. 278-279.

73. At the time of the survey, Petitioner did not have any
culture media records with respect to gonorrhea screening.
Tr. 77; HCFA Ex. 1 at 12.

74. Petitioner failed to meet the Condition for Patient Test
Management set forth at 42 C.F.R. § 493.1101.
9

75. As laboratory director, Dr. Johnstone was responsible
for the overall management and direction of Petitioner in
accordance with 42 C.F.R. § 493.1445. 42 C.F.R. § 493.1441.

76. Dr. Johnstone failed to ensure that Petitioner's
laboratory's testing system in hematology provided quality
testing, as evidenced by the records showing that quality
control was performed only 78 percent of the required time in
February 1995.

77. Dr. Johnstone failed to ensure that Petitioner's
laboratory's proficiency testing samples were tested as
required under subpart H of 42 C.F.R. Part 493. See Finding
58. This failure is evidenced by the following: proficiency
tests on the hematology testing samples were run at two sites
with two different instruments, there were two sets of
answers for the chemistry isoenzymes proficiency testing
samples, and documentation containing chemistry results, as
well as other documentation, was not available. Tr. 80; see
HCFA Ex. 1 at 14.

78. Dr. Johnstone had the ultimate responsibility for
ensuring that Petitioner's laboratory's proficiency testing
was performed in accordance with the requirements set forth
at 42 C.F.R. § 493.801.

79. Dr. Johnstone failed to ensure that quality control and
quality assurance programs were established and maintained in
Petitioner's laboratory, and he failed to identify failures
in quality as they occurred. 42 C.F.R. § 493.1445(e) (5).

80. Petitioner's laboratory's procedure manuals did not have
any documentation for doing quality control. Tr. 81; HCFA
Ex. 1 at 15.

81. Dr. Johnstone failed to have in place a system by which
to monitor the competency of Petitioner's laboratory
employees. Tr. 82-83; HCFA Ex. 1 at 16; see also Finding 85.

82. Dr. Johnstone failed to ensure that Petitioner's
laboratory procedure and policy manuals were current,
complete and approved, especially regarding gonorrhea
cultures and quality control. HCFA Ex. 1 at 17; Tr. 83-84.

83. Dr. Johnstone failed to assign in writing the duties and
responsibilities involved in all phases of the patient
testing process for Petitioner's laboratory's technical
consultant, technical supervisor, and testing personnel.

HCFA Ex. 1 at 17-18; Tr. 87-88.

84. Petitioner's laboratory last reviewed charts for
completeness of laboratory work documentation on April 3,
1992. Tr. 84-86; HCFA Ex. 1 at 18-19.
10

85. Petitioner's laboratory did not have an ongoing
mechanism to evaluate the effectiveness of its policies and
procedures for assuring employee competence. Tr. 89; HCFA
Ex. 1 at 19; see also Finding 81.

86. Petitioner failed to meet the Condition for Laboratory
Director, in violation of 42 C.F.R. § 493.1441.

87. HCFA's Notice, dated May 23, 1995, provided Petitioner
with adequate notice that non-compliance with respect to the
laboratory director condition, in violation of 42 C.F.R. §
493.1441, would independently support revocation of
Petitioner's CLIA certificate.

88. Petitioner's failure to meet the Condition for
Laboratory Director forms an independent basis for HCFA's
revocation of Petitioner's CLIA certificate under 42 C.F.R. §
493.1814(a) (2).

89. The CLIA statute and applicable regulations require HCFA
to revoke a laboratory's CLIA certificate for at least one
year if the laboratory "intentionally refers" its proficiency
testing samples to another laboratory for analysis. 42
U.S.C. § 263a(i) (4); 42 C.F.R. § 493.801(b) (4) and §
493.1840(b).

90. Neither I nor HCFA has the discretion in this case to
revoke Petitioner's CLIA certificate for less than the
mandatory minimum period of one year, or to substitute any
lesser sanction.

91. HCFA is required to cancel a laboratory's approval to
receive Medicare payment for its services where the
laboratory's CLIA certificate is revoked. 42 C.F.R. §
493.1808(a) and § 493.1842(a) (1).

92. I affirm HCFA's one-year revocation of Petitioner's CLIA
certificate, with concomitant cancellation of Petitioner's
Medicare payments for laboratory services.

DISCUSSION

The word "intentionally" requires careful analysis in
determining whether Petitioner "intentionally referred" its
proficiency testing samples to another laboratory for
analysis. This is the key issue in this case, and I will
11

address it first; thereafter I will address the remaining
alleged deficiencies.‘

I. Intentional Referral of Proficiency Testing Samples to
Another Laboratory for Analysis

A. Statute and Regulations

CLIA provides both civil sanctions and criminal sanctions:

Civil sanctions

Any laboratory that the Secretary determines
intentionally refers its proficiency testing samples to
another laboratory for analysis shall have its
certificate revoked for at least one year and shall be
subject to appropriate fines and penalties as provided
for in section (h)*° of this section.

42 U.S.C. § 263a(i) (4).

Regulations which implement CLIA parallel the Act's
requirement that the Secretary revoke® a laboratory's CLIA
certificate where that laboratory improperly refers a
proficiency testing sample to a reference laboratory:

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 HCFA determines
intentionally referred its proficiency testing
samples to another laboratory for analysis will
have its certification revoked for at least one
year. Any laboratory that receives proficiency
testing samples from another laboratory for testing
must notify HCFA of the receipt of those samples.

42 C.F.R. § 493.801(b) (4).

4 The remaining alleged deficiencies relate to
the enrollment and testing of samples condition, 42
C.F.R. § 493.801; patient test management condition, 42
C.F. § 493.1101; and laboratory director condition, 42
C.F.R. § 493.1441.

$ "Intermediate" civil sanctions, such as civil
money penalties, are found in 42 U.S.C. § 263a(h), and
are alternative remedies to the "principal" civil
sanctions of CLIA certificate suspension, revocation, or
limitation, found in 42 U.S.c. § 263a(i).

é Revocation is a civil sanction.
12

Adverse action based on improper referrals in
proficiency testing. If HCFA determines that a
laboratory has intentionally referred its
proficiency testing samples to another laboratory
for analysis, HCFA revokes the laboratory's CLIA
certificate for at least one year, and may also
impose a civil money penalty.

42 C.F.R. § 493.1840(b).

Criminal Sanctions

Any person who intentionally violates any requirement of
this section or any regulation promulgated thereunder
shall be imprisoned for not more than one year or fined
under Title 18, or both, except that if the conviction
is for a second or subsequent violation of such a
requirement such person shall be imprisoned for not more
than 3 years or fined in accordance with Title 18, or
both.

42 U.S.C. § 263a(1).

The implementing regulations regarding such criminal
violations provide:

Definitions. Intentional violation means knowing
and willful noncompliance with any CLIA condition.

42 C.F.R. § 493.2.
Section 353 also [p]Jrovides for imprisonment or
fine for any person convicted of intentional
violation of CLIA requirements.

42 C.F.R. § 493.1800(a) (3) (i).
Criminal sanctions. Under section 353(1) of the
PHS [Public Health Service] Act, an individual who
is convicted of intentionally violating any CLIA
requirement may be imprisoned or fined.

42 C.F.R. § 493.1806(e).

B. Definitions of "Intentionally" under CLIA

I conclude that "intentionally" is defined differently in
CLIA for civil violations than for criminal violations.
13

The word “intentionally" is found in both the civil section
of CLIA and the criminal section of CLIA:

civil:
Any laboratory that the Secretary determines
intentionally refers [emphasis added] its
proficiency testing samples to another laboratory
for analysis...

42 U.S.C. § 263a(i) (4).

criminal:
Any person who intentionally violates [emphasis
added] any requirement of this section or any
regulation promulgated thereunder ....

42 U.S.C. § 263a(1)

Although the term "intentionally" is used in both the civil
and criminal sections of CLIA, the term need not be accorded
the same meaning in each of these sections. Upon careful
analysis, I conclude that the term "intentionally refers" as
it appears at 42 U.S.C. § 263a(i)(4) indeed does not have the
same meaning as the term “intentionally violates" as it
appears at 42 U.S.C. § 263a(1). To begin with, the phrases
are different in that one contains the word "refers" and one
contains the word "violates." This is discussed more fully
below.

1. Factual background

Petitioner is a physician's office operating a laboratory,
located in Madera, California. Theodore Johnstone, M.D., is
Petitioner's owner and laboratory director. P. Br. 2, P. R.
Br. 4. Petitioner's laboratory did testing in the following
areas: general chemistry (i.e., glucose, blood urea,
nitrogen, creatinine, total protein, cholesterol) ;
isoenzymes; hematology (complete blood counts and platelet
counts); and microbiology (gonorrhea screening only). Tr.
22, 255. The results obtained from Petitioner's laboratory
tests were used in the treatment of Dr. Johnstone's patients.

Proficiency testing is designed to determine a laboratory's
accuracy in doing testing for its patients. Each laboratory
enrolls in a proficiency testing program and is sent
specimens [proficiency samples] for testing, approximately
three times a year. The specimens are clearly marked as
proficiency testing samples, so the technician receiving them
knows they are test materials, not patients' specimens. The
laboratory that is being tested is required to test the
14

proficiency samples the same way it tests patients’
specimens.

3rd Quarter 1994 Proficiency Testing Samples

Pursuant to 42 C.F.R. § 493.801, Petitioner is enrolled in an
approved proficiency testing program conducted by the
American Association of Bioanalysts (AAB). P. Br. 3. On
September 22, 1994, Petitioner's laboratory received certain
“hematology samples for testing. HCFA Ex. 2, P. Br. 3.

David Dohi is a licensed medical technologist who, in
September 1994, was working part-time at Petitioner's
laboratory [one day a week for two to three hours a day],
full-time at the Madera Community Hospital (community
hospital), and part-time at the hospital in Chowchilla [on
call every other weekend and on call Wednesday nights]. HCFA
Ex. 4; Tr. 262-263. Mr. Dohi's duties for Petitioner's
laboratory included drawing blood, doing laboratory testing,
and reporting the results. HCFA Ex. 5; Tr. 262.

On September 28, 1994, Mr. Dohi tested Petitioner's 3rd
quarter 1994 hematology proficiency testing samples within
Petitioner's laboratory, using Petitioner's laboratory
equipment. [The evidence is unclear whether Mr. Dohi counted
platelets at Petitioner. Tr. 92.] HCFA Ex. 2; Tr. 232-238;
P. Br. 3.

On September 29, 1994, Mr. Dohi, on his own initiative and
without the knowledge of Dr. Johnstone, took Petitioner's 3rd
quarter 1994 hematology proficiency testing samples to the
laboratory at the community hospital, where Mr. Dohi was also
employed. Mr. Dohi retested Petitioner's hematology
proficiency testing samples in the community hospital's
laboratory, using the community hospital's laboratory
equipment. Tr. 239, 246, 316-317; P. Br. 4.

The computer printouts obtained from the community hospital's
Cell-Dyn 1600, as well as Mr. Dohi's admission that he ran
the proficiency test samples on that instrument, constitute
proof that Petitioner's hematology proficiency samples were
analyzed at a laboratory other than Petitioner's, on an
instrument other than Petitioner's own Cell-Dyn 400.

Mr. Dohi was unaware that his retesting of Petitioner's 3rd
quarter 1994 hematology proficiency testing samples, at the
community hospital's laboratory, was prohibited by law. Mr.
Dohi's motive for retesting Petitioner's hematology
proficiency testing samples at the community hospital's
laboratory was to check the results he had obtained at
Petitioner's laboratory. Tr. 239, 266-267. P. Br. 4.
15

Dr. Johnstone was unaware that Mr. Dohi had retested
Petitioner's 3rd quarter 1994 hematology proficiency testing
samples at the community hospital's laboratory until, during
a survey of Petitioner's laboratory conducted on February 28,
1995, a CLIA Laboratory Expert employed by HCFA, Dorothy
Maurer, told Dr. Johnstone so. Tr. 17, 21; P. Br. 6; P. R.
Br. 4.

The survey of Petitioner's laboratory conducted by Ms. Maurer
on behalf of HCFA on February 28, 1995, was done to determine
whether Petitioner was in compliance with requirements
imposed under CLIA. Ms. Maurer analyzed Petitioner's records
concerning its performance of proficiency testing in the 2nd
and 3rd quarters of 1994.

Ms. Maurer testified that, in examining the testing
documentation relating to the hematology proficiency samples,
she realized that she "had two sets of answers." Tr. 38.
Although Petitioner has a Cell-Dyn 400 on the premises, Ms.
Maurer stated that she found computer generated printouts
from a Cell-Dyn 1600 among the 3rd quarter 1994 proficiency
testing documentation in Petitioner's files. Tr. 37-40.
Petitioner's Cell-Dyn 400 does not have the ability to count
platelets nor can it generate computer printouts.

The computer printouts discovered by Ms. Maurer, each of
which is titled "Cell-Dyn 1600 Specimen Data Report,"
contained various hematologic values, including platelet
counts. HCFA Ex. 2 at 2-7. According to Ms. Maurer, it
would not have been possible for Petitioner to have obtained
these printouts from its own instrument, i.e., the Cell-Dyn
400.

The platelet count was the only Cell-Dyn 1600 result that was
reported as if it had been Petitioner's result. With the
exception of the platelet count values, Mr. Dohi submitted to
the AAB the values obtained from using Petitioner's Cell-Dyn
400. Tr. 235. Mr. Dohi admitted that the platelet count
values he reported to the AAB were those obtained from the
Cell-Dyn 1600 at the community hospital's lab. Tr. 47, 286-
287.

2. Parties' arguments

Petitioner's arguments

Petitioner responds to HCFA's citation of the Long case [see
HCFA's arguments, infra): "Long is simply incorrect insofar
as it states that 'intentionally' is not defined in the

applicable regulations. 42 C.F.R. Part 493, which contains
16

the regulations relied upon by HCFA as the basis for revoking
Petitioner's CLIA certificate, states:

As used in this part, unless the context indicates
otherwise ....

Intentional violation means knowing and willful
noncompliance with any CLIA condition.

42 C.F.R. § 493.2.

Petitioner argues that the definition of "intentional
violation" found in at 42 C.F.R. § 493.2 is to be applied to
the terminology used in 42 C.F.R. §§ 493.801(b) (4) and
[493.]1840(b). P. Br. 7; P. R. Br. 3.

Petitioner argues further that revocation of a Petitioner's
CLIA certificate pursuant to 42 C.F.R. §§ 493.801(b) (4) and
493.1840 is improper unless Petitioner or its employees
knowingly and willfully violated a CLIA condition.

Petitioner adds that 42 C.F.R. § 493.2 makes it clear that no
intentional violation can occur without the putative
offender's knowing and willful noncompliance with a legal
duty imposed by the CLIA regulations. P. Br. 7.

Petitioner maintains that neither Petitioner nor any of its
employees had a specific intent to violate a CLIA condition
at the time Dohi verified the proficiency testing results
obtained at Petitioner's laboratory. P. Br. 11. Moreover,
Petitioner contends that Dr. Johnstone was unaware of Mr.
Dohi's referral of proficiency testing samples until the
survey and thus could not have intended to violate the CLIA
regulation. P. Br. at 6.

HCFA's arguments

HCFA argues: "(T)he issue at hand is whether petitioner
“intentionally referred" its proficiency samples to another
facility, not whether there was an “intentional violation" of
a CLIA condition. Although the elements necessary for
proving whether there was an intentional referral may be
similar to those for proving an intentional violation of a
Condition, the definition itself is not controlling in making
the determination in petitioner's case." HCFA R. Br. 2.

HCFA argues that criminal case standards, including the
"'tknowing and willful' elements," and "'specific intent' to
do something which the law forbids," "should not be
controlling on this administrative proceeding." HCFA R. Br.
2-3.
17

HCFA (HCFA Br. 23) quotes Long Medical Laboratory v. HCFA,
DAB CR334 (1994):

A laboratory contravenes the prohibition against
referrals of proficiency tests by deliberately
referring proficiency testing samples to another
laboratory. Inadvertent referrals of such samples
do not contravene the prohibition. The necessary
elements of a violation consist of: (1) a referral
by a laboratory to another laboratory of a
proficiency testing sample, and (2) knowledge by
the referring laboratory that the sample it is
referring is a proficiency testing sample. If it
is established that a laboratory has deliberately
referred a proficiency testing sample to another
laboratory, then that laboratory's motive for
referring the sample is irrelevant. The Act and
regulations do not distinguish between deliberate
referrals that are motivated by good intentions and
those which are motivated by some other purpose.

Long, supra, at 6.

HCFA continues: "With respect to the element of ‘intent!
that is contained in both the statute and regulation, the
Administrative Law Judge [ALJ] in Long noted that while the
term is not defined, 'it is apparent, from both the language
of CLIA and the regulations, that it was intended that this
term be given its common and ordinary meaning.' Long, supra,
at 6. The ALJ then notes that in Webster's New Collegiate
Dictionary, 1975 ed., at 601, 'Intention' is defined to mean
a determination to act in a certain way. '‘Intentional' or
‘intentionally,' means to act by intention or design. Id.
'Thus, when one acts 'intentionally,' he or she acts
deliberately.'" Long, supra, at 6. HCFA Br. 25-26. "[T)he
knowledge element...is satisfied by showing that the
referring laboratory knew the sample it was referring was a
proficiency testing sample as opposed to a patient sample."
HCFA R. Br. 3.

3. Purpose of CLIA

The Clinical Laboratory Improvement Amendments of 1988
(CLIA), enacted by Congress, require certification of all
laboratories that perform clinical diagnostic tests on human
specimens. CLIA was established to address the issue of
unacceptably high error rates at unregulated laboratories and
the dangers to patients that these high laboratory error
rates posed. H.R. Rep. No. 899, 100th Cong., 2d Sess. 14,
reprinted in 1988 U.S.C.C.A.N. at 3831; S. Rep. No. 561,
100th Cong., 2d sess. 3-4. Congress intended CLIA to
establish a single set of standards to govern all providers
of laboratory services, including those which provide
laboratory services to Medicare beneficiaries. See H.R. Rep.

18

No. 899, ‘Looth Cong., 2d Sess. 8, reprinted in 1988
U.S.C.C.A.N. at 3828.”

The authority to enforce CLIA requirements is granted to the
Secretary of Health and Human Services (Secretary). Under
CLIA, the Secretary is authorized to inspect clinical
laboratories and, in effect, license them to perform tests.
42 U.S.C. § 263a (esp. §§ 263a(b) and 263a(f)); 42 C.F.R. §
493.1800; See Consumer Federation of America and Public
Citizen v. U.S. Dept. of Health and Human Services, 83 F. 3d
1497 (D.C. Cir. 1996).

The importance of proficiency testing as a means of measuring
and ultimately ensuring laboratory competence was noted by
Congress as follows:

The Committee's investigation focused particularly on
proficiency testing because it is considered one of
[the] best measures of laboratory performance. It is
arguably the most important measure, since it reviews
actual test results rather than merely gauging the
potential for good results ...

Proficiency testing is a method of externally validating
the level of a laboratory's performance. Proficiency
testing is not currently conducted by HHS, but is
conducted by private agencies. . .. The standard
testing methodology currently in use involves sample
test specimens being sent by mail to a laboratory by the
proficiency testing agency. The laboratory then
analyzes the samples and returns the results of the test
to the proficiency testing organization. The
proficiency testing organization typically calculates
the mean of the test results, determines an acceptable
range variation based on standard deviations from the
mean, and reports the results to the lab.

7 The Act defines a clinical laboratory to be a
facility for the biological, microbiological,
serological, chemical, immuno-hematological,
hematological, biophysical, cytological, pathological, or
other examination of materials derived from the human
body for the purpose of providing information for the
diagnosis, prevention, or treatment of any disease or
impairment of, or the assessment of the health of, human
beings.

42 U.S.C. § 263a(a).
19

The major problems identified by the Committee were lax
Federal oversight and direction, lack of proficiency
testing for many analytes, inconsistent criteria for
acceptable laboratory performance, and improprieties by
laboratories in handling specimen samples.

A significant deficiency in the current proficiency
testing regime is its inability to assure that
proficiency testing samples are treated like patient
specimens. Samples are mailed to laboratories, and
although proficiency testing organizations recommend
that tests be treated in the same manner as patient
samples, there was evidence that laboratories retest
samples repeatedly to ensure satisfactory results and
send proficiency testing samples out to other
laboratories for analysis. The only way to guarantee
that samples are treated by the same personnel, at the
same speed, using the same equipment as patient
specimens is though [sic] blind or on-site proficiency
testing. The committee learned, however, that such
testing can be quite expensive and may have to be used
with discretion to assure proper processing of
specimens.

H.R. Rep. No. 899, 100th Cong., 2d Sess. 8, reprinted in 1988
U.S.C.C.A.N. at 3828, 3836, 3837.

Thus, Congress, in enacting CLIA, was concerned about, among
other things, laboratories that were sending their
proficiency testing samples to other laboratories for
analysis or retesting to ensure a satisfactory result. It is
within this context that Congress authored the prohibition on
intentional referrals of proficiency testing. The Act
mandates revocation of a CLIA certificate for improper
referral of proficiency testing samples by a laboratory. It
states that:

Any laboratory that the Secretary determines
intentionally refers its proficiency testing
samples to another laboratory for analysis shall
have its certificate revoked for at least one year

42 U.S.C. § 263a(i) (4).

4. Definition of "intentionally," as in
"intentionally refers"

"Intentionally" is not defined in the CLIA statute, but some
assistance is found in the regulations. "Intentional
violation" is defined in the regulations as "knowing and

20

willful noncompliance with any CLIA condition." 42 C.F.R. §
493.2 ("Definitions").

The phrase “intentional violation" does not appear elsewhere
in the pertinent regulations, other than in the definitions
section, as just quoted, and as follows:

Section 353 also [p]rovides for imprisonment or fine for
any person convicted of intentional violation of CLIA
requirements.

42 C.F.R. § 493.1800(a) (3) (i).

The phrase "intentionally violating" appears in the pertinent
regulations, also solely in connection with criminal
sanctions:

Criminal sanctions. Under section 353(1) of the PHS
{Public Health Service] Act, an individual who is
convicted of intentionally violating any CLIA
requirement may be imprisoned or fined.

42 C.F.R. § 493.1806(e).

After careful study of the pertinent portions of the statute
and the regulations, I conclude that "intentional violation"
is defined by the regulations for the sole purpose of
clarifying the phrase "intentionally violates" which is found
in the CLIA statute only in the criminal section (42 U.S.C. §
263a(1)). The "knowing and willful" requirement provided by
the regulation is consistent with the element of criminal
offenses known as "scienter," "culpability," or "guilty
knowledge."

By providing a definition for "intentional violation", the
authors of the regulations have explicitly provided guidance
on how to interpret 42 C.F.R. § 493.1800(a) (3) (i) and §
493.1806(e). There is little doubt that, with respect to the
imposition of criminal sanctions, in determining whether
there was an intentional violation, the legal standard of
"knowing and willful" is to be applied.

Criminal convictions, particularly for persons who work in
health care, trigger extremely serious consequences. It is
reasonable to require proof of specific intent before
subjecting a person to criminal penalties under CLIA. CLIA
has clearly delineated two distinct types of penalties -- the
first, directed at a laboratory and involving civil sanctions
(regarding the laboratory's CLIA certificate, civil money
penalties, costs and the like); -- and the second, directed
at a person and involving criminal penalties (imprisonment or
a fine or both). [See 42 C.F.R. § 493.1806 for available
sanctions. }
21

Under CLIA, a laboratory is subject to inspection and a
variety of civil penalties for failing to comply with CLIA
standards. 42 U.S.C. § 263a(g), (h), (i). ["Principal
sanctions," such as suspension, revocation, and limitation of
the laboratory's CLIA certificate, are provided by 42 U.S.C.
§ 263a(i). "Intermediate" or "alternative sanctions," such
as directed plans of correction, civil money penalties, and
onsite monitoring costs, are provided by 42 U.S.C. §
263a(h).]

In sharp contrast are the CLIA penalties that are criminal in
nature. 42 U.S.C. § 263a(1). The potential penalties
include imprisonment for up to one year and a fine or both.
Even more serious, a repeat offender can be imprisoned for up
to three years and fined or both.

The regulations go to the effort of defining "intentional
violation" to ensure that sufficient scienter is proved
before a person can be convicted of a criminal violation
under CLIA. The fact that "intentional violation" is
specifically defined in the regulations (42 C.F.R.

§ 493.2] suggests that the definition is different from its
common and ordinary meaning, and in fact, it is.

Nowhere do the regulations define the term "intentionally
referred," which is contained in the regulations at 42 C.F.R.
§ 493.801(b)(4) and § 493.1840(b). "Intentionally refers" is
found in the statute at 42 U.S.C. § 263a(i)(4). Neither
Congress nor the Secretary chose to define or modify the word
"intentionally" in the context of "intentionally referred its
proficiency testing samples to another laboratory for
analysis." Where "intentionally" is not specifically defined
in the context of CLIA civil sanctions, one can infer that it
should be given its common and ordinary meaning.

This conclusion is in accordance with that of Administrative
Law Judge Steven Kessel in the case of Long Medical
Laboratory v. HCFA, DAB CR334 (1994). Although in Long
Petitioner admitted that it had intentionally referred
proficiency testing samples for testing, Judge Kessel
nonetheless determined that the word "intentionally" should
be given its common and ordinary meaning. As stated in Long,
"intention" is a determination to act in a certain way.
Long, at 6 (citing Webster's New Collegiate Dictionary, 1975
ed., at 601). When one acts "intentionally," he or she acts
deliberately, regardless of motivation. Long, at 6 - 9.
Accordingly, I find that "intentionally referred" [as in
“intentionally referred" its proficiency testing samples to
another laboratory for analysis] requires not specific
intent, but general intent, that is, an intent to act. No
guilty knowledge, no culpability, no scienter is required.
Motive is irrelevant. It is necessary merely that a person
act deliberately, that is, not inadvertently.

22

In current practice, where proficiency testing samples are
clearly marked, enabling the technician receiving them to
know they are test materials, not patients' specimens, it is
difficult to conceive of an inadvertent referral. If
proficiency testing samples are referred to another
laboratory for analysis, with the knowledge that they were
proficiency testing samples, the referral is intentional,
that is, deliberate, not inadvertent.*

5. Further consideration of Petitioner's arguments
regarding definition of "intentionally," as _ in
"intentionally refers"

Mr. Dohi testified that he was the laboratory technologist
who had run the tests on the hematology samples. Tr. 232-
233. He admitted that he had tested the hematology
proficiency test samples on both the Cell-Dyn 400 at
Petitioner and on the Cell-Dyn 1600 at the lab at community
hospital. Tr. 234-235, 239, 269-271, 287-288; HCFA Exs. 4,
5. Mr. Dohi stated that the reason he took the hematology
test samples to the community hospital's lab and analyzed the
samples on the Cell-Dyn 1600 there, was that he wished to
verify the results he had obtained using Petitioner's Cell-
Dyn 400. HCFA Ex. 5.

Although I agree with HCFA that Mr. Dohi "should have known"

that he was circumventing the purpose of proficiency testing

by analyzing the samples at another laboratory, on different

and more sophisticated instruments [HCFA R. Br. 5 - 6], I am

persuaded that he did not know. His actions appear to me to

be more the result of scientific curiosity than of any intent
to violate the law. I agree with the following statement of

Petitioner [P. Br. 11]:

Neither Petitioner nor any of its employees had a
specific intent to violate a CLIA condition at the
time Dohi verified the proficiency testing results
obtained at Petitioner's laboratory.

I agree with Petitioner that Mr. Dohi did not know that his
action of retesting Petitioner's proficiency testing samples
at another laboratory was prohibited by law, as his
statements to Ms. Maurer, his statements of corrective
action, and his testimony demonstrate. P. Br. 4, 12. Mr.
Dohi still did not know his action was prohibited by law
when, in May 1995, he wrote a Corrective Action Plan that

8 The inclusion by Congress of the word
"intentionally" in the civil context may well be more
significant in the case of "blind" proficiency testing,
in which the laboratory technicians cannot tell the test
samples from patients' specimens. [Patients' specimens
of course may be referred to other laboratories. ]
23

included the potential of future retesting of Petitioner's
proficiency testing samples at another laboratory! [P. Br.
12 - 14}. Also significant to me is that Mr. Dohi placed the
Cell-Dyn 1600 printouts in Petitioner's files and did not
purge them. P. Br. 4, 12.

Nevertheless, whether Mr. Dohi "should have known," and
whether he had specific intent to violate a CLIA condition,
are irrelevant to the issue at hand.

HCFA need only establish a general intent to act, and not, as
Petitioner suggests, specific intent, as would be required in
a criminal case. It is highly improbable that, within the
framework of civil penalties against an entity, where no loss
of personal liberty is involved, Congress would require
specific intent in order to establish a CLIA violation under
the statute's civil penalty provisions. Here, a laboratory
is subject to civil administrative sanctions for failure to
comply with statutory requirements.

To prove "intention" in the context of 42 U.S.C. §

263a(i) (4), 42 C.F.R. § 493.801(b) (4) and § 493.1840(b),

HCFA is not required to prove what Mr. Dohi was thinking when
he took the proficiency samples to another laboratory and ran
the tests there. The issue is whether Mr. Dohi's actions
were intentional, i.e., deliberate (not inadvertent). The
uncontroverted evidence in this case is that Mr. Dohi
referred proficiency test samples to another laboratory
intentionally. Mr. Dohi has admitted doing so.

Regardless of motivation, Mr. Dohi acted with the requisite
general intent to satisfy the civil penalty provision of
CLIA, that is, the intent to act. Mr. Dohi acted
deliberately, that is, not inadvertently, in obtaining test
results elsewhere. It is cheating to look at another's
answer on a test, even if merely to confirm one's own answer.
Anyone looking at answers different from his own would likely
compare and analyze them before forming any intent about what
to do with one's own answers.

Mr. Dohi obtained platelet count values for Petitioner's
proficiency testing samples from the Cell-Dyn 1600 at the
community hospital's laboratory. The platelet count was the
only item reported to AAB from Petitioner's retesting of its
proficiency testing samples on the Cell-Dyn 1600 at the
community hospital's laboratory. All of the remainder of
Petitioner's hematology proficiency testing was reported as
performed at Petitioner, on the Cell-Dyn 400. Whether or not
a laboratory reports the information it has obtained from
another laboratory's analysis of its proficiency testing
samples, it is the obtaining of the analysis itself from the
other laboratory which constitutes the intentional referral.
24

Accordingly, I find that Petitioner intentionally referred
its hematology proficiency testing samples to another
laboratory for analysis, in violation of 42 C.F.R. §
493.1840(b) and § 493.801(b) (4). Petitioner has not disputed
that a referral of proficiency testing samples occurred here.
As stated above, Petitioner admits taking the proficiency
test samples to the community hospital's laboratory and
running the tests there on that hospital's Cell-Dyn 1600.

Congress enacted an especially strong prohibition against
intentionally referring proficiency testing samples to
another laboratory for analysis, by requiring mandatory
revocation for at least one year as the sanction. Clearly,
Congress wanted the practice to stop.

While the actions of Mr. Dohi and Dr. Johnstone may not have
been as egregious as that of the petitioner in the Long case,
they still contravened the purpose of the CLIA statute and
regulations.

Where intentional referral of a laboratory's proficiency
testing samples to another laboratory for analysis has
occurred, there is no possibility of a less severe sanction
than a one-year minimum mandatory revocation. The statute
itself specifies the sanction:

Any laboratory that the Secretary determines
intentionally refers its proficiency testing samples to
another laboratory for analysis shall have its
certificate revoked for at least one year... .

42 U.S.C. § 263a(i) (4).

II. Enrollment and Testing of Samples -- Condition

The laboratory must test its proficiency testing samples in
the same manner as patients' specimens. 42 C.F.R.
§ 493.801.

The enrollment and testing of samples condition includes the
"testing of proficiency testing samples" standard. 42 C.F.R.
§ 493.801(b). Within that standard is found the prohibition
against intentional referral of proficiency testing samples
to another laboratory for analysis. 42 C.F.R. §

493.801(b) (4). The intentional referral issue has been
discussed above. See pp. 11-24 supra.

Hematology proficiency testing

With respect to the 3rd quarter 1994 hematology proficiency
testing results, HCFA alleges that Petitioner did not test
the hematology samples using its routine method nor did it
test the samples in the same manner or the same number of
times as it tested patient samples.
25

I conclude that Petitioner's testing of the hematology
samples on the Cell-Dyn 1600 at the community hospital
violated its obligation to conduct its proficiency tests

using the routine method, in the same manner and for the same

number of times that it routinely performs patient tests.
See 42 C.F.R. § 493.801(b), (b)(1) and (b) (2).

Hel ometer

Although there is no dispute that the reported platelet

count values were obtained from the Cell-Dyn 1600 at the

community hospital (Tr. 286-287), HCFA disputed Mr.
Dohi's claim that he did use an instrument called a
hemacytometer to count the platelets and that he

ordinarily uses this at Petitioner. Ms. Maurer alleged

that Mr. Dohi had informed her that he counted platelets
using a "smear" technique, which would give an estimated

number.® Tr. 141. Ms. Maurer stated that she did not
look to see if Petitioner had a hemacytometer because
Mr. Dohi never told her he used one. Tr. 115. With

respect to the "smear" method, Ms. Maurer expressed her
opinion that no one had ever "put down an actual number

on the smear method". She stated that "the smear method
is simply for an estimate of the platelets. I had never

heard of anybody else ever doing that." Tr. 144.

Mr. Dohi denied using the "smear" method, and stated
that he used a hemacytometer to do the platelet counts.

Tr. 238, 240, 287. He described using the hemacytometer

as doing a "manual" platelet count. Tr. 241-242.

After reviewing the testimony of Ms. Maurer, Mr.
Dohi, and Dr. Johnstone, I conclude that I am not
able to make a satisfactory determination on what
platelet counting method Petitioner routinely used
(except that a Cell-Dyn 1600 was not routinely
used).

Chemistry proficiency testing

With respect to the 2nd quarter 1994 chemistry proficiency
testing results, HCFA alleges that Petitioner did not test
the chemistry isoenzyme samples in the same manner or the
same number of times as it tested patient samples. Ms.
Maurer testified that the chemistry isoenzyme test samples

° According to Ms. Maurer, the use of a
hemacytometer to perform a platelet count is an
appropriate and acceptable method. Tr. 115. Ms. Maurer
testified further that platelet counting is very
difficult and that using a Cell-Dyn 1600 to count
platelets would give a more accurate count than a
hemacytometer. Tr. 142-144.
26

were run twice. As proof of this, she stated that there was
a worksheet on which Petitioner reported two sets of answers
for each test. Tr. 43-46; HCFA Ex. 7 at 2. Ms. Maurer
stated that there should have been only one set of answers.
Moreover, although there were two sets of answers, Ms. Maurer
could locate only one set of answers in the printout from the
chemistry analyzer. Tr. 44, 57.

Mr. Dohi testified that he was not the technician who
performed the testing on the chemistry samples. Tr. 245. He
stated that he did not know why the tests were run twice.
Tr. 245-246. Mr. Dohi was unable to find the documentation
showing the other set of numbers. Tr. 123. Petitioner did
not introduce any evidence to contradict Ms. Maurer, either
at the hearing or in its briefs. I conclude that
Petitioner's retesting of the chemistry isoenzyme samples
violated its obligation to conduct its proficiency tests in
the same manner and for the same number of times that it
routinely performs patient tests.

Proficiency testing documentation

Ms. Maurer found also that relevant proficiency testing
documentation, as required by 42 C.F.R. § 493.801(b) (5), was
either missing or incomplete at the time of the survey. She
testified that copies of the attestation statements for the
hematology samples for the third event and the chemistry
samples for the second event were missing. Tr. 40-41, 52-53.
Petitioner failed to document the date it ran the tests on
the proficiency testing samples, when it received the
samples, and that the tests were done there (at Petitioner's
laboratory). Tr. 55, 59-60. See HCFA Ex. 1 at 6.

Petitioner failed to maintain specimen logs with respect to
the proficiency testing in chemistry and hematology. Tr. 55.
Petitioner failed to maintain copies of all proficiency
testing records for 1994. HCFA Ex. 1 at 7. With respect to
the second event for chemistry proficiency testing, Ms.
Maurer testified that she was unable to locate the printout
with the chemistry results and could not document that the
tests had been performed. Tr. 57, 80, 102.

Mr. Dohi did not dispute that some proficiency test
documentation was missing at the time of the survey. Tr.
238. He acknowledged that he could not find the worksheet
where he had written the results obtained from Petitioner's
Cell-Dyn 400. Tr. 271. Mr. Dohi admitted that he had no
proof that he had run the samples on the Cell-Dyn 400. Tr.
271. Mr. Dohi admitted that he could not find the worksheet
where he had written the platelet values that he had obtained
using the hemacytometer. Tr. 238, 286. I conclude that HCFA
has proven that Petitioner was deficient in its recordkeeping
with respect to proficiency testing.
27

III. Patient Test Management -- Condition

The laboratory must employ and maintain a system that
provides for proper patient preparation; proper specimen
collection, identification, preservation, transportation, and
processing; and accurate result reporting. 42 C.F.R. §
493.1101.

With respect to the Patient Test Management Condition, Ms.
Maurer alleged that Petitioner was deficient regarding
documentation and recordkeeping, quality control, and its
gonorrhea screening. In the area of documentation and
recordkeeping, Ms. Maurer testified that Petitioner did not
have specimen logs and had an inadequate and outdated
procedure manual. Under 42 C.F.R. § 493.1103(a), which is
cited in HCFA Ex. 1, a "laboratory must have available and
follow written policies and procedures for . . . conditions
for specimen transportation." Ms. Maurer testified:

(T]he procedure manual did not include any
directives for handling of specimens at all. They
did not have any directives at all on taking
specimens to another laboratory for confirmation or
further testing. There were no log sheets to
follow a specimen that was transported elsewhere.

I don't know how they kept track of them.

Tr. 61.

Ms. Maurer testified also that Petitioner's "procedure manual
is old and outdated." Ms. Maurer stated that "when you
change a procedure then you should take your old procedure
out." Tr. 84. She discovered that the manual contained
procedures that Petitioner was no longer doing. Id. In
addition, Ms. Maurer discovered that, although Petitioner was
conducting gonorrhea screenings, its procedure manual did not
contain any written procedures for this. Tr. 75. (I discuss
Petitioner's deficient procedure manual further in my
discussion regarding Petitioner's deficient practice in
conducting gonorrhea screenings) .

HCFA's evidence, including Ms. Maurer's testimony,
establishes that Petitioner did not comply with the condition
of participation for Patient Test Management set forth at 42
C.F.R. § 493.1101.

Further support for Ms. Maurer's findings regarding
Petitioner's deficient documentation is found in Petitioner's
Exhibit 5. Petitioner, in this exhibit, attempts to show
that it has implemented adequate recordkeeping and
documentation systems. Tr. 250-259.
28

IV. Quality Control -- Standards

In the area of quality control, Ms. Maurer testified that,
for all types of laboratory testing performed in a day,
quality control should be conducted on that day for those
tests. Tr. 67, 72, 74. The regulation requires that the
laboratory must perform and document its control procedures
using at least two levels of control materials each day of
testing. 42 C.F.R. § 493.1202(c) (4); HCFA Ex. 1 at 10.
Quality control is conducted on a known sample, of which the
testing results would already be known. Tr. 67, 74. By
performing quality control, a laboratory is able to check
that its equipment is operating properly and, also, that its
technologist is using the proper procedures. Tr. 67, 74.

Ms. Maurer stated that quality control in the area of
hematology is to be performed for every eight hours of
operation. Tr. 67. She alleged that Petitioner failed to
perform quality control daily in hematology. Tr. 68; HCFA
Ex. 8. Specifically, I find that Petitioner failed to run
hematology quality control on four of 18 days in February
1995, when patients were tested. HCFA Ex. 8 at 1; HCFA Ex. 1
at 10.

Gonorrhea screenings

Other deficiencies identified by Ms. Maurer related to the
gonorrhea screenings conducted by Petitioner. Under the
regulations, a laboratory must have available a written
procedure manual for all of the tests it performs. 42 C.F.R.
§ 493.1211(a). Ms. Maurer testified that, initially, she was
unaware that Petitioner was even doing gonorrhea screening
because there was no indication in the procedure manual that
these tests were being done. Tr. 61-63.' Ms. Maurer
testified:

You're to have written procedures for all testing
that you do. .. . The technologist should use
the procedures. The procedure should be available
so people know what you are doing in the
laboratory, and how you are doing it, and the
correct way, and the equipment that you're using.

Tr. 75.

10 Ms. Maurer stated further that, because
Petitioner was conducting gonorrhea screenings, it was
required to undergo proficiency testing in this area.
Tr. 62, 64, 79-80. I will not discuss whether or not
Petitioner was required to undergo proficiency testing
with respect to gonorrhea screening since HCFA did not
cite this as a deficiency in the HCFA 2567.
29

The lack of written procedures meant that Petitioner had no
way of ensuring that gonorrhea screenings would be subject to
proper and uniform protocols. By failing to document the
gonorrhea screening procedures in its procedure manual,
Petitioner violated the regulatory requirement stated above.

In addition, the lack of culture media records indicated to
the surveyor that Petitioner had failed to follow proper
control procedures for the culture media used for gonorrhea
screening, resulting in a deficiency under 42 C.F.R. §
493.1218(f)(1). Petitioner also was found deficient in the
area of specimen transportation, as evidenced by the absence
of a tracking system for when Petitioner sent gonorrhea
cultures to other labs.

Ms. Maurer discovered also that the temperature chart on
Petitioner's incubator indicated that the last time the
temperature was checked and recorded was in 1992. Tr. 63,
76. See HCFA Ex. 1 at 11. In addition, the thermometer on
the incubator was broken, a fact that was not discovered by
anyone until the time of the survey. Tr. 278.

The regulations mandate that a laboratory "perform equipment

maintenance and function checks . . . necessary for the
proper test performance and test result reporting of
equipment, instruments and test systems". 42 C.F.R. §

493.1215. Petitioner's failure to notice the broken
thermometer on the incubator, coupled with its failure to
keep the temperature chart up-to-date, could have jeopardized
the accuracy and reliability of the gonorrhea screening
results.'' Petitioner admitted that the incubator was in use
despite having a broken thermometer and that results were
reported on cultures. Such inadequate maintenance and poor
oversight of crucial laboratory instrumentation serves to
underscore Petitioner's laxness in management.”

I find that Petitioner's deficiencies with respect to its
gonorrhea screenings cannot be considered to be minor. It is
apparent from Petitioner's violations that the manner in
which it conducted its gonorrhea screenings was grossly
inadequate and a cause for alarm. A likelihood existed that

" Mr. Dohi testified that he could not recall if
he ever saw a positive culture. However, he conceded
that "it is a possibility" that the reason he may not
have seen a positive culture might be due to the fact
that organisms were being killed due to incorrect
incubator temperature. Tr. 278-279.

v Petitioner pointed out at the hearing that it
replaced the broken incubator thermometer following the
survey.
30

these violations could have adversely impacted the quality
and reliability of the tests performed by Petitioner.

Vv. uali ssurance -- Standard

The laboratory must monitor, evaluate, and revise, if
necessary, based on the results of its evaluations, the
accuracy and reliability of test reporting systems,
appropriate storage of records and retrieval of test results.
42 C.F.R. § 493.1703(f). Petitioner last reviewed charts for
completeness of laboratory work documentation on April 3,
1992. Tr. 84-86; HCFA Ex. 1 at 18-19.

The evidence establishes that Petitioner did not have an
ongoing mechanism to evaluate the effectiveness of its
policies and procedures for assuring employee competence. 42
C.F.R. § 493.1713; Tr. 89; HCFA Ex. 1 at 19.

VI. Laboratory Director -- Condition

Notice

Before I discuss Petitioner's non-compliance with the
condition of participation for Laboratory Director set forth
at 42 C.F.R. § 493.1441, I will address the preliminary issue
of whether HCFA gave Petitioner adequate notice that this
deficiency constitutes an independent basis for revocation of
its CLIA certificate.

Petitioner argues that HCFA's Notice was deficient in that it
did not state that HCFA had imposed the sanction of
revocation in connection with a violation of the Laboratory
Director condition. P. R. Br. 6. Petitioner contends that
"HCFA asserted for the first time at the hearing . . . that
Petitioner failed to meet . . . 42 C.F.R. § 493.1441 and that
this failure was the basis for revocation of Petitioner's
CLIA Certificate." Id. at 7.

I am not persuaded by Petitioner's assertion that it did not
receive adequate notice that its violation of the Laboratory
Director condition was a basis for revocation. HCFA's
Notice, dated May 23, 1995, states:

+ + .{T]he supplemental information you submitted
by letters dated May 16 and May 17, 1995, not only
reconfirm that your laboratory (see 42 C.F.R.
493.2) did in fact intentionally refer its
proficiency testing samples to another laboratory
for analysis, but your admissions therein regarding
your failure to meet your overall management
responsibilities as the director also further
evidence your contravention of the CLIA condition
at 42 C.F.R. 493.1441 - a violation which
independently supports the revocation of your CLIA
31

certificate under the terms of 42 C.F.R.
493.1814 (a) (2).

Based on the language contained in the May 23, 1995 letter
from HCFA to Petitioner, I find that HCFA did allege that
Petitioner's non-compliance with respect to the Laboratory
Director condition would be a basis for revocation. The
contents of the letters establish to my satisfaction that
HCFA provided Petitioner with adequate notice concerning this
issue. I conclude that HCFA's Notice, dated May 23, 1995,
provided Petitioner with adequate notice that violation of 42
C.F.R. § 493.1441 would independently support revocation of
Petitioner's CLIA certificate under 42 C.F.R. §
493.1814(a)(2). HCFA Br. 21-22; HCFA R. Br. 8. While it
appears that HCFA's Notice, dated May 23, 1995, focused on
Petitioner's alleged intentional referral of its proficiency
testing samples as a basis for the imposition of sanctions,
it is apparent that HCFA also was premising the sanction of
revocation on the alleged violation of the laboratory
director condition. (See passage quoted above.)

The Notice sufficiently informed Petitioner that the alleged
intentional referral of proficiency samples and the alleged
violation of the laboratory director condition were each
independent grounds for the sanction of revocation.

Deficiencies

The laboratory must have a director who . . . provides
overall management and direction in accordance with §
493.1445 of this subpart. 42 C.F.R. § 493.1441.

I find that Petitioner's deficiencies in proficiency testing,
quality control, and documentation (including procedure
manual) establish that Petitioner failed to comply with the
condition of participation for Laboratory Director set forth
at 42 C.F.R. § 493.1441. With respect to these alleged
deficiencies, Ms. Maurer testified:

When you find that the conditions have not been met
in such things as proficiency testing, for example,
or quality control, and it has not been done
properly, then you have to cite your laboratory
director for failure to perform, and failure to see
that it is being performed. It's up to him to look
at the laboratory and to check those things.

Tr. 79.

In addition, Ms. Maurer testified that there was no evidence
of any documentation showing that Dr. Johnstone was
monitoring the competency of the laboratory employees. Tr.
82-83. Ms. Maurer stated also that Dr. Johnstone failed to
ensure that the laboratory procedure and policy manuals were
32

up-to-date and complete. Tr. 83-84; HCFA Ex. 1 at 17.
Another deficiency identified by Ms. Maurer was Dr.
Johnstone's failure to assign in writing the duties and
responsibilities involved in all phases of the patient
testing process for the testing personnel. Tr. 87-88; HCFA
Ex. 1 at 18. Ms. Maurer discovered also that Petitioner last
reviewed charts for completeness of laboratory work
documentation on April 3, 1992. Tr. 84-86.

It is evident from the foregoing deficiencies, many of which
were previously described by Ms. Maurer in conjunction with
her testimony concerning Petitioner's non-compliance with the
conditions listed at 42 C.F.R. § 493.801 and § 493.1101, that
Dr. Johnstone failed to supervise adequately Petitioner's
operations and employees. As laboratory director, Dr.
Johnstone was responsible for the overall operation and
administration of Petitioner in accordance with 42 C.F.R. §
493.1445. Part of that responsibility is to 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. 42 C.F.R. § 493.1445(e)(5). See
sections IV. and V. above. Dr. Johnstone had a duty to keep
apprised of the day-to-day operation of his laboratory and to
exercise proper supervision over his employees. He was
obligated also to familiarize himself with the applicable
CLIA regulations. With respect to proficiency testing, Dr.
Johnstone had the ultimate responsibility for ensuring that
proficiency testing was performed in accordance with the
requirements set forth at 42 C.F.R. § 493.801. HCFA Br. 30;
HCFA R. Br. 9-11.

A primary objective of the CLIA requirements is to provide
the public with safe and reliable laboratory services.
Congress, in enacting CLIA, intended to assure that clinical
laboratories perform medical tests accurately and reliably.

I conclude from the deficiencies that Dr. Johnstone failed to
carry out his duties as Laboratory Director, in violation of
the Condition for Laboratory Director set forth at 42 C.F.R.
§ 493.1441. Dr. Johnstone's failure to ensure that the
proficiency testing samples were tested as required, and his
failure to have adequate quality control and patient test
management programs, demonstrate his neglect of his
responsibilities as a laboratory director.

Petitioner's failure to meet the Condition for Laboratory
Director forms an independent basis for HCFA's revocation of
Petitioner's CLIA certificate under 42 C.F.R. §

493.1814(a) (2).
33

vil. HCFA Required to Revoke Petitioner's CLIA Certificate
for a One-Year Period

Enforcement of CLIA 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 CLIA requirements. 42 C.F.R. § 493.1804(a)(1) - (3).

The evidence establishes that Petitioner was out of
compliance with the Conditions of Participation set forth at
42 C.F.R. § 493.801 [Enrollment and Testing of Samples], §
493.1101 [Patient Test Management], and

§ 493.1441 [Laboratory Director].

The CLIA statute and applicable regulations require HCFA to
revoke a laboratory's CLIA certificate for at least one year
if the laboratory "intentionally refers" its proficiency
testing samples to another laboratory for analysis. 42
U.S.C. § 263a(i) (4); 42 C.F.R. § 493.801(b) (4) and 42 C.F.R.
§ 493.1840(b).

Neither I nor HCFA has the discretion to revoke Petitioner's
CLIA certificate for less than the mandatory minimum period
of one year, or to substitute any lesser sanction. HCFA is
required to cancel a laboratory's approval to receive
Medicare payment for its services where the laboratory's CLIA
certificate is revoked. 42 C.F.R. § 493.1808(a) and §
493.1842(a) (1).

CONCLUSION

Petitioner intentionally referred its proficiency testing
samples to another laboratory for analysis during 3rd
quarter 1994. Accordingly, Petitioner's CLIA certificate
must be revoked for a one-year minimum mandatory period, with
concomitant cancellation of Petitioner's Medicare payments
for laboratory services.

Further, Petitioner's failure to meet the Condition for

Laboratory Director forms an independent basis for HCFA's
revocation of Petitioner's CLIA certificate.

/s/

Jill S. Clifton

Administrative Law Judge