Report 2007-040 Summary - September 2008

Department of Public Health:

Laboratory Field Services' Lack of Clinical Laboratory Oversight Places the Public at Risk

HIGHLIGHTS

Our review of Laboratory Field Services' (Laboratory Services) clinical laboratory oversight activities revealed the following:

  • It is not inspecting laboratories every two years as state law requires and has no plans to do so unless it receives additional resources.
  • Laboratory Services has inconsistently monitored laboratory proficiency testing, and its policies and procedures in that area are inadequate.
  • It closed many complaints without taking action, and Laboratory Services' recently revised complaint policies and procedures lack sufficient controls.
  • Laboratory Services has sporadically used its authority to impose sanctions against laboratories for violations of law and regulations.
  • The chief of Laboratory Services attributes its inability to meet its mandated responsibilities primarily to a lack of resources; it has only been successful in obtaining approval for two recent funding proposals.
  • Because it had raised its fees improperly one year and failed to impose two subsequent fee increases the budget act called for, Laboratory Services did not collect more than $1 million in fees from clinical laboratories.

RESULTS IN BRIEF

Laboratory Field Services (Laboratory Services) within the Department of Public Health (Public Health) is responsible for licensing, registering, and overseeing clinical laboratories. Clinical laboratories analyze human specimens such as blood, tissue, and urine so that medical professionals can make diagnoses and prescribe treatment. According to Laboratory Services, it was responsible for overseeing more than 7,900 licensed and registered clinical laboratories as of June 2007. Laboratory Services is located primarily in Richmond. Records indicate that of its 76 authorized positions in fiscal year 2007-08, Laboratory Services had assigned 22 positions to clinical laboratories.1 To support its activities related to clinical laboratories, Laboratory Services collects fees from laboratories that obtain a license or registration. In fiscal year 2007-08, those fees provided Laboratory Services with more than $2.1 million in revenue.

The California Business and Professions Code contains the requirement that a clinical laboratory hold a license or registration; both are valid for one year and require annual renewal. The complexity of the tests a clinical laboratory performs dictates whether the laboratory is licensed or registered. For example, clinical laboratories performing complex tests, such as hepatitis testing or certain sexually transmitted disease testing by DNA probe, must obtain licenses. Laboratories performing simpler tests, such as prepackaged manufactured tests with less chance of error or risk, must obtain registrations.

After it licenses or registers a laboratory, Laboratory Services assumes its oversight role. Clinical laboratories provide an essential service—producing test results for medical diagnosis and treatment—so the consequences of mistakes can be significant. State law and regulations mandate that Laboratory Services perform many oversight functions, including inspecting licensed laboratories every two years; monitoring the results of laboratories' proficiency testing, which laboratories must undergo to assess the accuracy of their work; maintaining a complaints function to receive and investigate allegations against clinical laboratories; and sanctioning laboratories that fail to correct deficiencies.

However, Laboratory Services has not overseen clinical laboratories as state law and regulations mandate. Its oversight failings relate not only to laboratories in the State but also to laboratories holding California licenses but located outside the State. For example, Laboratory Services is not inspecting laboratories every two years as state law requires and has no plans to do so unless it receives additional resources. Further, Laboratory Services has inconsistently monitored laboratory proficiency testing, and its policies and procedures in that area are inadequate. Inspections help ensure that laboratories follow appropriate procedures and that laboratory personnel have appropriate qualifications. Proficiency testing demonstrates that a laboratory can perform tests and obtain accurate results. Without regular laboratory inspections and prompt and continuous reviews of proficiency testing results, Laboratory Services could allow errors in laboratory processes to go uncorrected, leading to faulty test information that could result in medical misdiagnoses and treatment errors.

State law requires that Laboratory Services investigate consumer complaints. In late 2007 Laboratory Services had a backlog of complaints it had received, and it closed many cases without taking action. Although its records list 313 complaints received from January 2005 through December 2007, Laboratory Services has no assurance that number is accurate; nor could it confirm how many complaints it had investigated or closed.

Its chief told us that Laboratory Services periodically closed, without any investigation, complaints it considered no longer timely or having minimal public impact. We reviewed 30 complaints Laboratory Services decided to close—some without taking any action and others with some action taken. We disagreed with some of the decisions. For example, we identified five complaints alleging conditions with health and safety implications that Laboratory Services closed without taking any action. Three of the five complaints alleged that laboratories were operating without necessary licensure or were performing unauthorized testing. These types of complaints have health and safety implications because the test results clinical laboratories produce are the foundation of medical decisions regarding, for instance, the treatment of conditions such as diabetes or coronary disease. Additionally, our review of three other complaints prompted concerns that Laboratory Services did not act with the thoroughness or promptness the cases required. Particularly troubling was the case of a laboratory that was believed to have cross contaminated blood samples, leading a medical professional to reportedly misdiagnose tuberculosis in a patient who consequently was hospitalized twice for complications from the prescribed tuberculosis treatments she received.

In an apparent effort to improve its processing of complaints, Laboratory Services created a complaints manager position and staffed it in January 2008. Subsequently, Laboratory Services revised its complaints policies and procedures. However, certain key controls in Laboratory Services' current complaints process are missing or insufficient. For example, the process lacks adequate controls to ensure that Laboratory Services' staff appropriately log, track, and prioritize complaints received. In fact, given the weaknesses in its process, Laboratory Services cannot be certain that it will fulfill its mandate to investigate consumer complaints, identify deficiencies, and ensure that clinical laboratories correct their deficiencies.

Laboratory Services may impose sanctions against laboratories for violations of law and regulations but has used that authority sporadically in recent years. Examples of sanctions that Laboratory Services may impose include civil money penalties, license revocation, and referral to law enforcement for criminal prosecution. Laboratory Services was unable to provide us with summary information on the number of sanctions it imposed from 2002 through 2007. Nonetheless, it acknowledged it had imposed a limited number of sanctions in recent years. Further, it does not plan to increase its sanctioning efforts based on existing resources. Sanctions provide tangible penalties for a laboratory's failure to comply with state law and regulations. Even if Laboratory Services were conducting ongoing oversight and responding vigorously to complaints, it could not enforce its oversight activities without sanctions, and laboratories could provide inadequate, incorrect, or even illegal services without consequences.

The Laboratory Services chief attributes much of its inability to meet its mandated responsibilities to a lack of resources. Laboratory Services has only been successful in obtaining approval for two funding proposals for clinical laboratories in recent years. A lack of complete and accurate management data related to the work it performs also has contributed to Laboratory Services' struggles in meeting its mandated responsibilities. Laboratory Services relies on the Health Applications Licensing system (HAL) to support functions such as licensing, but that system does not provide all the support Laboratory Services requires. For example, HAL does not have sufficient fields to capture the complaints Laboratory Services receives. To make up for HAL's shortcomings, Laboratory Services has, over time, created several internal databases, but those databases lack the controls necessary to ensure that they contain accurate and complete information. All the internal databases we reviewed contain certain illogical, incomplete, or incorrect data and could not be used to track activities accurately or to make sound management decisions.

Laboratory Services has numerous mandated responsibilities and a finite number of staff. Although it may benefit from additional staff, Laboratory Services must demonstrate it has used existing resources strategically and has maximized their utility to the extent possible. During the audit, we identified several ways Laboratory Services could leverage its resources better to provide oversight of clinical laboratories. For instance, it could use its license and registration renewal process, as well as the inspections and proficiency testing reviews its staff perform on behalf of the federal government, as oversight mechanisms. Further, although it has the authority to do so, Laboratory Services has not leveraged its resources by approving accreditation organizations or contracting some of its inspection and investigation responsibilities.2 Exploring these ideas and others could help Laboratory Services better meet its mandated responsibilities for overseeing clinical laboratories.

In the course of our audit work, we determined that Laboratory Services had raised its fees improperly one year and failed to impose two subsequent fee increases called for in the budget act. As a result, Laboratory Services did not collect more than $1 million in fees from clinical laboratories. However, even if it had collected the additional revenue, Laboratory Services could not have spent the funds without approval of the corresponding spending authority to make the revenue available.

RECOMMENDATIONS

Laboratory Services should perform all its mandated oversight responsibilities, including, but not limited to the following:

  • Inspecting licensed laboratories every two years.
  • Monitoring proficiency testing results.
  • Reviewing and investigating complaints and ensuring necessary resolution.
  • Sanctioning laboratories as appropriate.

Laboratory Services should adopt and implement policies and procedures for promptly reviewing laboratories' proficiency testing results and notifying them of failures. Laboratory Services also should strengthen its complaints process by identifying necessary controls, such as those needed for logging, tracking, and prioritizing complaints; incorporating the controls into its complaints policies; and subsequently developing and implementing corresponding procedures.

Public Health, in conjunction with Laboratory Services, should ensure that Laboratory Services has sufficient resources to meet all its oversight responsibilities.

Laboratory Services should work with appropriate parties to ensure that its data systems support its needs. If Laboratory Services continues to use its internally developed databases, it should ensure that it develops and implements appropriate system controls.

To demonstrate that it has used its existing resources strategically and has maximized their utility to the extent possible, Laboratory Services should identify and explore opportunities to leverage existing processes and procedures.

Laboratory Services should work with Public Health's budget section and other appropriate parties to ensure that it adjusts fees in accordance with the budget act.

AGENCY COMMENTS

Public Health responded that it concurred with the recommendations and outlined a number of steps it will take to implement them.


1 Staff in many of the remaining positions perform duties related to Laboratory Services' responsibilities for licensing laboratory personnel and overseeing tissue banks and blood banks. Those oversight areas were not part of our audit.

2 An accreditation organization is a private, nonprofit organization the federal government has approved to provide laboratory oversight.


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