Report 2015-507 Summary - September 2015
Follow-Up—California Department of Public Health:
Laboratory Field Services Is Unable to Oversee Clinical Laboratories Effectively, but a Feasible Alternative Exists
Our follow-up audit of Laboratory Field Services' (Laboratory Services) progress in addressing issues we raised in our September 2008 report revealed the following:
- Laboratory Services has not implemented many of the recommendations from our prior audit report.
- Laboratory Services is still not performing oversight activities of clinical laboratories (labs) required by law and its management of its responsibilities is inadequate.
- It only inspects about half of California labs, and has not established a process to ensure that it becomes promptly aware when California licensed out-of-state labs fail required proficiency testing.
- It does not always investigate complaints timely and has issued only a small number of lab sanctions in the past seven years despite the number of labs it oversees.
- It made an unauthorized fee increase in January 2014, resulting in labs overpaying it more than $1 million and contributing to a $12 million fund balance it has not spent.
- Management has missed opportunities to partner with nonprofit accreditation organizations to conduct oversight functions, inspections, and monitor proficiency testing.
- To reduce the regulatory and financial burden on lab facilities, state law requiring that lab facilities be licensed by the State should be repealed.
Results in Brief
Laboratory Field Services (Laboratory Services) within the California Department of Public Health (Public Health) is responsible for overseeing clinical laboratories (labs) that analyze human specimens such as blood, tissue, and urine. Medical professionals use these analyses to make diagnoses and prescribe treatment. Laboratory Services' oversight responsibilities cover both labs located within California and labs located outside of the State that test specimens originating from within California. The State currently has licensed approximately 2,800 labs and registered approximately 19,300 labs; the complexity of the tests the labs perform dictates whether they require licensing or registration. Laboratory Services' oversight responsibilities include inspecting licensed labs once every two years and periodically verifying the accuracy and reliability of their tests through a process called proficiency testing. It must also investigate complaints against both licensed and registered labs and may issue sanctions when it finds that a lab is out of compliance with state laws or regulations. All licensed labs must pay Laboratory Services an annual fee based on the volume of tests they perform, while registered labs must pay an annual flat fee.
In this follow-up audit, we found that Laboratory Services is still not performing the oversight activities with which it has been entrusted and that its management of its responsibilities is inadequate. Specifically, it has not implemented many of the recommendations from our September 2008 audit report titled Department of Public Health: Laboratory Field Services' Lack of Clinical Laboratory Oversight Places the Public at Risk, Report 2007-040 (2008 audit). For example, it still only inspects about half of California labs, and it has not established a process to ensure that it becomes aware, in a timely manner, when out-of-state labs that are licensed in California fail required proficiency testing. Further, it does not yet investigate all complaints against labs and has issued only a small number of lab sanctions in the past seven years despite the number of labs it oversees. Additionally, we found that Laboratory Services made an unauthorized fee increase in January 2014 that resulted in labs overpaying it more than $1 million, and since 2008 it has collected more than $12 million in lab fees that it has not spent. Finally, its management has missed opportunities to more effectively use its limited personnel by partnering with other organizations that could help it meet its workload obligations under state law. Under state law, Laboratory Services can approve private nonprofit accreditation organizations to conduct oversight functions—including performing inspections and monitoring proficiency testing—in lieu of its direct oversight. However, Laboratory Services has not taken full advantage of this opportunity.
Because the problems that have plagued Laboratory Services have persisted since our last audit, we believe the State's consumers have, in effect, been relying on the federal oversight that the federal Centers for Medicare and Medicaid Services (CMS) provides through its administration of the Clinical Laboratory Improvement Amendments of 1988 (CLIA). In fact, we believe Laboratory Services' workload largely duplicates federal oversight with no meaningful benefit to consumers. State law and CLIA are nearly equivalent in their mandates, and the oversight each requires is redundant: Both Laboratory Services and CMS collect fees from labs to perform inspections, monitor proficiency testing, investigate complaints, and issue sanctions. Eliminating the portion of Laboratory Services that we have found to be exceedingly deficient for many years would end the duplicate oversight and the duplicate fees. CMS has processes in place to ensure that it effectively administers CLIA; therefore, relying on CLIA would keep the public health benefits of lab monitoring intact, as they are today, while reducing the regulatory burden on California's clinical labs.
To eliminate the State's redundant and ineffective oversight of labs and to ensure labs do not pay unnecessary or duplicative fees, the Legislature should do the following:
- Repeal existing state law requiring that labs be licensed or registered by Laboratory Services and that Laboratory Services perform oversight of these labs. Instead, the State should rely on the oversight CMS provides.
- Repeal existing state law requiring labs to pay fees for state-issued licenses or registrations.
While the Legislature considers eliminating the requirements that labs receive state-issued licenses or registrations and that Laboratory Services oversee these labs, Laboratory Services should develop a corrective action plan by December 31, 2015. This plan should identify the individuals responsible for ensuring Laboratory Services takes corrective actions, the resources needed to carry out those corrective actions, and the expected time frame for their successful implementation. The corrective action plan should address Laboratory Services' plans for implementing the recommendations from our 2008 audit, including the following:
- Inspecting licensed labs every two years and ensuring it identifies in a timely manner all labs that fail proficiency testing. In addition, it should improve its complaints policy and procedures and dedicate an appropriate number of staff to its sanctioning efforts.
- Developing a process to assess the budget act annually and to adjust its fees accordingly. It should also maximize the opportunity to partner with accreditation organizations by developing an accreditation organization program.
Public Health responded that it concurred with the recommendations and outlined a number of steps it will take to implement them.