DHHS May Suspend Noncompliant Labs Prior to Hearing Without Violating Const. Due Process, Judge Finds

On October 28, in the Western District of Missouri, Judge Douglas Harpool ruled against Gamma Healthcare Inc., operator of medical laboratories in Missouri, who sued the Department of Health and Human Services (DHHS) and the Center for Medicare and Medicaid Services (CMS), alleging that the defendants suspended the plaintiff’s labs, prior to a hearing, in violation of the Due Process Clause of the 14th Amendment. 

The opinion laid out the pertinent facts as follows: Laboratories receiving federal funding via Medicare or Medicaid reimbursements for diagnostic tests conducted on blood, human tissue, or bodily fluids must comply with the Clinical Laboratory Improvement Amendments of 1988 (CLIA) and its associated regulations. If a lab is CLIA compliant, that lab receives a “CLIA certificate,” with the lab being regularly inspected for continued compliance. If an inspection reveals a lab is CLIA noncompliant, the DHHS may impose sanctions, ranging from a civil fine to a revocation of the lab’s federal certification. The certification revocation proves the rarest of punishment, allowed only by the Act, before an administrative hearing when the DHHS inspection unearths a noncompliance issue that “presents an imminent and serious risk to human health.” If such an imminent or serious risk exists, the lab receives a five-day notice, notwithstanding the administrative hearing being at a later date, with immediate de-certification occurring on day six. On October 26, the defendants decertified Gamma in aforementioned fashion, removing the plaintiff’s “federal authority to operate as clinical labs.” 

Gamma argued that the Due Process Clause mandates that that plaintiff receive an administrative hearing prior to the suspension of the CLIA certificates, as the Clause mandates notice and an opportunity to be heard before deprivation of a constitutionally protected property interest. The court ruled otherwise, holding that precedent dictated that “CLIA certificate holders lack a constitutionally protected property interest in a CLIA certificate.” The court then dismissed the plaintiff’s case on grounds of subject-matter jurisdiction. The district judge explained that until the plaintiff completed the CLIA hearing, the court maintained no federal-question jurisdiction over the claim, absent additional recognizable constitutional considerations, as such jurisdiction required the plaintiff to exhaust administrative remedies prior to judicial review. 

Gamma is represented by Polsinelli.