A clinical lab is generally defined as a facility that examines specimens derived from humans for the purpose of disease diagnosis, prevention, and treatment, or health assessment of individuals. Labs conduct a wide range of tests that are categorized as waived tests or as moderate- or high- complexity tests. Approximately 81 percent of all labs (about 157,000) are not subject to routine biennial surveys because they perform (1) “waived” tests, which are generally simple tests that have an insignificant risk of erroneous results, such as those approved for home use or (2) tests performed during the course of a patient visit with a microscope on specimens that are not easily transportable. CLIA establishes more stringent requirements for the 19 percent (about 36,000) of labs performing moderate- or high-complexity testing, including the requirement for a survey and participation in routine proficiency testing. Surveys examine lab compliance with CLIA program requirements in several areas including: personnel qualifications, proficiency testing, quality control, quality assurance, and recordkeeping. In general, labs have a choice of who conducts their surveys—state survey agencies using CLIA inspection requirements or other survey organizations that use requirements CMS has determined to be at least equivalent to CLIA’s. CMS contracts with state survey agencies in most states to inspect labs against CLIA requirements. CLIA established an approval process to allow states and private accrediting organizations to use their own requirements to survey labs. As noted earlier, New York and Washington operate CLIA-exempt programs and CMS has approved six private, nonprofit accrediting organizations to survey labs—the American Association of Blood Banks (AABB), the American Osteopathic Association (AOA), the American Society of Histocompatibility and Immunogenetics (ASHI), CAP, COLA, and JCAHO. The requirements of both state CLIA-exempt programs and accrediting organizations must be reviewed by CMS at least every 6 years to ensure CLIA equivalency, but may be more stringent than those of CLIA. Figure 1 lists the three types of survey organizations and indicates whether they survey labs under CLIA requirements, or use their own CLIA-equivalent requirements. It also shows the percentage of labs performing moderate- to high-complexity testing surveyed by each type of organization. In general, state survey agencies, COLA, and Washington’s CLIA-exempt program survey physician office labs, while New York’s CLIA-exempt program, CAP, and JCAHO survey hospital labs. Survey organizations (1) conduct surveys and complaint investigations and (2) monitor proficiency test results submitted by surveyed labs three times a year. Surveys are typically conducted by former or current lab workers, who assess lab compliance with CLIA or CLIA-equivalent requirements. Generally, surveyors verify that lab personnel are appropriately qualified to conduct testing, evaluate proficiency test records, check equipment and calibration to ensure that appropriate quality control measures are in place, and determine whether the lab has a quality assurance plan and uses it to, among other things, appropriately identify and resolve problems affecting testing quality. Surveys also include an educational component to assist labs in understanding how to comply with CLIA requirements. Lab survey requirements are classified as either “standard-” or “condition-” level. Deficiencies are also characterized as standard- or condition-level based on the requirement in which the deficiency occurs. Standard-level deficiencies denote problems that generally are not serious, while condition-level deficiencies are cited when the problems are serious or systemic in nature. When deficiencies are found during surveys or complaint investigations, labs are required to submit a plan of correction, detailing how and when they will address the deficiencies. Additionally, CMS can impose principal or alternative sanctions, or both. Principal sanctions include revocation of a CLIA certificate, cancellation of the right to receive Medicare payments, or limits on testing. Alternative sanctions, authorized by Congress to give CMS more flexibility to achieve lab compliance, are less severe and include civil money penalties or on-site monitoring. For condition-level deficiencies that do not involve an imminent and serious threat to patient health and a significant hazard to public health, labs have an opportunity to correct the deficiencies, which we refer to as a grace period, before the sanctions are imposed. If a lab is unable to correct a deficiency during this grace period, CMS determines whether to impose sanctions. CMS, including its 10 regional offices, oversees state and accrediting organization survey activities. CMS reviews and approves initial and subsequent applications from exempt-state programs and accrediting organizations to ensure CLIA equivalency. Validation reviews are one of CMS’s primary oversight tools. Federal surveyors in CMS regional offices are responsible for conducting validation reviews of state survey agency and exempt-state program inspections, but state survey agency staff conduct the validation reviews of accrediting organization inspections. An objective of these reviews is to determine if all condition-level deficiencies were identified. These reviews are conducted within 60 days of a state’s, or 90 days of an accrediting organization’s, survey of a lab. The extent of serious quality problems at labs is unclear because CMS has incomplete data on condition-level deficiencies identified by state survey agencies prior to 2004. Survey results for 2004 show substantial variability across states, which suggests that state survey agencies do not conduct surveys in a consistent manner. We also found that the lack of a straightforward linkage between CLIA requirements and the CLIA- equivalent requirements of some survey organizations makes it virtually impossible to assess lab quality in a standardized manner. CMS does not effectively use available data, such as the results of surveys and proficiency testing, to monitor and assess lab quality. Although CMS noted that proficiency testing trend data show a decrease in failures for labs as a whole, the data suggest that quality may not have improved at hospital labs for the period 1999 through 2003. CMS’s OSCAR database contains limited data on the quality of labs inspected by state survey agencies and, as a result, it is not possible to analyze changes in the quality of lab testing over time. In January 2004, CMS implemented revised CLIA survey requirements and modified the existing OSCAR data—state survey agency findings—to reflect the changes. The revisions affected approximately two-thirds of the CLIA condition-level requirements. As a result of the data modifications, the findings for surveys conducted prior to 2004 no longer reflect all key condition-level requirements in effect at the time of those surveys. Based on the available 2004 OSCAR data (which represent about one half of all labs surveyed by state survey agencies), we found that 6.3 percent of labs had condition-level deficiencies. However, variability in the OSCAR data suggests that labs are not surveyed in a consistent manner. In 2004, the percentage of labs that were reported to have condition-level deficiencies varied considerably by state, ranging from none in 6 states to about 25 percent of labs in South Carolina. Based on interviews with CMS and 10 state survey agencies, it appears that at least some of this variability is due to differences in states’ approaches to conducting their surveys as opposed to true differences in lab quality. For example, CMS told us that, because there is not a prescriptive checklist to guide the survey process, the reliance on state surveyor judgment results in variations in the citing of deficiencies. In fact, officials in several states said that there are circumstances under which condition-level deficiencies would not be cited, such as if the lab staff were new or if the lab had a good history of compliance. As a result, available data likely understate the extent of serious quality problems at labs. Differences in the inspection requirements used by survey organizations make it virtually impossible to measure lab quality in a standardized manner. Because exempt-state programs and accrediting organizations do not classify inspection requirements and related deficiencies with the same criteria used by state survey agencies—as either standard- or condition-level—they cannot easily identify the proportion of surveyed labs with condition-level deficiencies. We asked exempt-state programs and accrediting organizations what percentage of their requirements, and any deficiencies cited for failure to meet those requirements, indicated serious problems that were equivalent to CLIA condition-level deficiencies. CAP and COLA crosswalked their recent survey findings to CLIA condition-level requirements. Although their analysis suggested that from about 56 to 68 percent of labs surveyed during 2004 had a deficiency in at least one condition-level requirement, they acknowledged that these proportions overstated the subset of labs with serious problems. JCAHO did not crosswalk its inspection requirements to those of CLIA because staff would have had to manually review each survey report to determine which deficiencies were equivalent to deficiencies in CLIA condition-level requirements. Despite the difficulty of identifying CLIA equivalent condition-level deficiencies, two of the three accrediting organizations we reviewed have systems to identify labs they survey that have serious quality problems. COLA estimated that about 9 percent of labs it surveyed in 2004 were subject to closer scrutiny because of the seriousness of the problems identified. According to JCAHO, about 5 percent of the labs it surveyed in 2004 were not in compliance with a significant number of requirements. The third accrediting organization, CAP, has criteria for identifying labs that warrant greater scrutiny, but CAP officials told us that identifying such labs had to be accomplished on a case by case basis, rather than through a database inquiry. CMS does not effectively use available data, such as the results of surveys and proficiency testing data, to monitor and assess lab quality. Although CMS tracks the most frequently cited deficiencies at labs in an effort to improve quality, it does not routinely track the proportion of labs, by state, in which state survey agencies identify condition-level deficiencies—those that denote serious or systemic problems. As noted earlier, variability in survey findings suggests inconsistencies in how surveys are conducted.