Health Law Daily Wrap Up, ADMINISTRATION OF MEDICARE/MEDICAID PROGRAMS—DAB DECISIONS: Avoidable human error, not good cause, resulted in untimely hearing request, (Mar 23, 2023)

By Susan L. Smith, JD, MA

Former clinical laboratory director failed to show good cause for failing to submit a timely hearing request.

The Departmental Appeals Board (DAB) administrative law judge (ALJ) dismissed the hearing request of a former director and operator of a clinical laboratory (lab) because the director failed to show good cause for not timely filing the request. In September of 2020, CMS notified the owners and director that the owners’ Clinical Laboratory Improvement Amendments (CLIA) certificate was being revoked because the laboratory was out of compliance with CLIA requirements and warning the owners and director that an appeal had to be filed by November 25, 2020. Although the owners requested a hearing on October 4, 2020, the director did not file a hearing request until August 15, 2022. The director contended that there was a lack of clarity as to whether he had a right to a hearing independent of the owners hearing. The ALJ determined that neither CMS nor the owners’ actions caused the director to fail to submit a timely hearing. Rather, the court concluded that the delay was caused by avoidable human error (Smalley v. CMS, Docket No. C-22-724, Ruling No. 2023-3, November 14, 2023).

Background. After conducting multiple surveys, the Missouri Department of Health and Senior Surgery (state agency) found that the clinical laboratory was out of compliance with CLIA requirements. On September 25, 2020, CMS notified the owners of the clinical lab as well as the director that it was imposing sanctions based on the noncompliance found in the surveys, including the suspension and revocation of the lab’s CLIA certificate. The revocation prohibited the owners and director from owning, operating, or directing a lab for at least two years from the date of the revocation. After the owners filed its request for a hearing, the owners and CMS entered into a settlement agreement and withdrew its hearing request. The ALJ dismissed the owners’ case on May 25, 2021.

Director’s contentions. The director asserted that he was not a party to that case or its final disposition but acknowledged that his August 15 hearing request was not filed timely or within 60 days of receiving CMS’ determination imposing sanctions. He contended, however, that he had good cause for his untimely hearing request based on the lack of legal clarity in the regulations governing appeal rights as to whether he had a right to a hearing independent from the lab owners. The director further argued that, due to circumstances beyond his control, he was unaware that the owners had filed a hearing request in October 2020. Further, as soon as he was advised of the owners’ settlement, he engaged in good faith efforts to clarify whether he had an independent right to appeal. The director also claimed that CMS told him and his counsel that he lacked ALJ appeal rights and the ability to challenge the dismissal of the hearing.

ALJ’s analysis. The ALJ concluded that none of the circumstances presented by the director established good cause for filing his untimely hearing request for the following reasons.

1. the September 2020 notice imposing sanctions was addressed to the director and the owners, the director did not deny receiving the notice, and the director signed the documents that were submitted to CMS addressing the noncompliance findings;

2. even if the owners excluded him from communications regarding the filing of the owners’ appeal, ignorance of not knowing of the hearing request did not prevent the director from filing a timely request on his own;

3. the director acknowledged that as of June 11, 2021, he knew the owners and CMS had settled the pending appeal because the attorney for the owners asked the director to sign the settlement agreement and acknowledge that the sanction would be imposed against him; further, the notice of the final sanction, which mentions the dismissal of the owners’ appeal, was addressed to the owner and the director;

4. the director’s efforts to determine whether he, as the lab operator, could request a hearing from CMS and a federal district court, did not prevent him from asserting his right to an administrative appeal by requesting an appeal before an ALJ; and

5. although the director contended that CMS was to blame for him not filing a timely hearing request because he relied on the false or misleading information it provided, nothing in the record suggests that CMS’ statement rose to the level of affirmative misconduct.

The ALJ stated that the prudent course for the director would have been to request a hearing by the deadline in CMS’ September 2020 notification and raise the arguments in a timely hearing request as he did in his untimely filing. The ALJ contended that the director could have filed a hearing request when he was contacted by the lab’s attorneys regarding the settlement. The ALJ determined that avoidable human error delayed the director’s filing a timely hearing request rather than any action by CMS or the owners. Thus, the ALJ concluded the director had not established a good cause to file an untimely hearing request and dismissed the case.

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