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STEWART v. SULLIVAN

October 26, 1992

Re: James Stewart, et al
v.
Louis W. Sullivan, M.D., et al



The opinion of the court was delivered by: NICHOLAS H. POLITAN

 ORIGINAL ON FILE WITH CLERK OF THE COURT

 Dear Counsel:

 This matter comes before the court on defendant's, Louis M. Sullivan, M.D., Secretary of the United States Department of Health and Human Services, motion to dismiss plaintiffs' complaint pursuant to Rule 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiffs have filed a cross-motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Based upon the reasons set forth below, defendant's motion to dismiss is GRANTED and plaintiffs' motion for summary judgment is DENIED.

 The plaintiffs in this case are Lois J. Copeland, M.D. (the "doctor" or "plaintiff-physician"), and five of her regular patients, James Stewart, Joan Kennedy Taylor, Trudy Drucker, Warren Klose and Connie Streich, ("patients" or "plaintiff-patients"). The five plaintiff-patients are all fully-enrolled beneficiaries under Parts A and B of the Medicare program. Doctor Copeland is a non-participating physician of Medicare Part B. Plaintiffs challenge on several grounds a so-called policy of the Secretary that allegedly prohibits physicians and Medicare patients from entering into private contracts for treatment on a case-by-case basis whereby the requirements of the Medicare Act would be disregarded. First, plaintiffs allege that the policy violates various provisions of the Medicare Act and that the Medicare Act authorizes beneficiaries to contract privately for medical services. Such private contracting would not require a claim to be submitted to Medicare on behalf of the beneficiaries and would be allowed on a case-by-case basis as the beneficiary may choose. Second, plaintiffs allege that the policy is invalid for failure to comply with the notice-and-comment provisions of the Administrative Procedure Act, 5 U.S.C. § 553. Alternatively, plaintiffs claim that the policy violates various provisions of the United States Constitution and is an unconstitutional infringement on the privacy rights of the plaintiff-patients. Additionally, plaintiffs filed a verified amended complaint wherein they challenge so much of 42 U.S.C. § 1395w-4 as authorizes such a policy prohibiting private contracting arrangements as an unconstitutional delegation of legislative power to the Secretary in violation of Article I, § 1 and the Fifth Amendment to the United States Constitution. The plaintiffs have named as defendants both Louis Sullivan, the Secretary of the United States Department of Health and Human Services ("HHS"), and Medical Service Association of Pennsylvania d/b/a Pennsylvania Blue Shield, the medicare intermediary responsible for overseeing the program in New Jersey and under contract with the Secretary. An understanding of the plaintiffs' claims requires a brief overview of the structure of the Medicare program.

 I. STRUCTURE OF MEDICARE

 The Medicare program consists of two parts. Part A is a mandatory program that insures the elderly and disabled against the costs of hospital and certain post-hospital care. 42 U.S.C. § 1395-1395i. Under Part A, payment by Medicare for services rendered by a hospital or other institution may only be made to the institution and the institution may not bill the patient.

 Part B is a voluntary program that provides supplemental coverage for other health-care costs, including physicians' services. 42 U.S.C. §§ 1395j-1395w-4. Medicare beneficiaries purchase Part B coverage through monthly premiums. 42 U.S.C. §§ 1395j,r,s. These premiums, together with a contribution from the federal government, are placed in the Federal Supplementary Medicare Insurance Trust Fund, 42 U.S.C. § 1395t, from which Part B claims are paid. 42 U.S.C. § 1395j. The claims are processed by private insurance carriers under contract with the Secretary. 42 U.S.C. § 1395u. These carriers are commonly referred to as intermediaries. The Health Care Financing Administration ("HCFA"), a division of HHS, is responsible for entering into contracts with carriers to administer Part B of the Medicare program. HCFA also oversees the carriers' administration of the program. The carriers are required to administer the Medicare Part B program in accordance with the Medicare statutes and regulations, as well as the instructions and policies of the Secretary.

 The provisions of Part B apply only to Medicare beneficiaries "who elect to enroll" in the program. 42 U.S.C. § 1395j. The manner of enrollment by eligible beneficiaries is prescribed in regulations promulgated by the Secretary. Within two months before a beneficiary becomes entitled to Part A benefits, he is sent a notice informing him that he will be automatically enrolled in Part B unless he declines in writing. 42 C.F.R. § 407.17(a),(b)(1),(2). Also, during specified periods, other beneficiaries may enroll by filing a written request with the Social Security Administration ("SSA") or HCFA. 42 C.F.R. § 407.22. Disenrollment occurs either by failure to pay premiums, 42 C.F.R. § 407.27(d) or by filing written notice with SSA or HCFA of his desire to disenroll. Neither the statutes nor the regulations expressly address the issue of whether disenrollment on a partial or service-by-service basis is acceptable under the Medicare program.

 Pursuant to the "Omnibus Budget Reconciliation Act of 1989," Pub.L. 101-239 (December 19, 1989), physicians currently are prohibited from charging Part B patients in excess of a limiting charge established by the Secretary under 42 U.S.C. § 1395w-4(g)(2). 42 U.S.C. § 1395w-4(g)(1). "If a nonparticipating physician knowingly and willfully bills on a repeated basis for physicians' services . . . an actual charge in excess of the limiting charge . . . the Secretary may apply sanctions against" the physician. 42 U.S.C. § 1395w-4(g). Such discretionary sanctions include exclusion from Medicare for up to five years, 42 U.S.C. § 1395u(j)(2)(A), and civil monetary penalties and assessments of up to $ 2,000.00 per offense and twice the amount charged or claimed for the Medicare item or service provided. 42 U.S.C. § 1395u (j)(2)(B); 42 U.S.C. § 1320a-7a(a).

 When services are furnished "for which payment is made under this part," a claim form must be submitted regardless of whether the claim is assigned or unassigned. 42 U.S.C. § 1395w-4(g)(4)(A). If the physician fails to submit a claim to the Medicare carrier on behalf of the beneficiary when one is required to be submitted the Secretary may impose sanctions. 42 U.S.C. § 1395w-4(g)(4)(B)(ii). A sanction may be imposed only where the physician acts "knowingly and willfully" and only in an amount "not to exceed $ 2,000." 42 U.S.C. § 1395(p)(3)(A). If the knowing and willful violation also occurs "in repeated cases," however, the physician may be subject to the same exclusionary and monetary penalties that apply to repeated, knowing and willful violations of the limiting charge. 42 U.S.C. § 1395u(p)(3)(B).

 The procedures for imposing an exclusionary sanction are set forth in 42 U.S.C. § 1320a-7, as incorporated in 42 U.S.C. § 1395u(j)(2). Among other things, the physician is "entitled to reasonable notice and opportunity for a hearing," conducted by an administrative law judge, to the same extent as Social Security claimants are entitled to a hearing under 42 U.S.C. § 405(b). 42 U.S.C. § 1320a-7(f)(1),(2). A physician dissatisfied with the Secretary's final decision is entitled to judicial review in the district court pursuant to 42 U.S.C. § 405(g). 42 U.S.C. § 1320a-7(f)(1). The provisions of 42 U.S.C. § 405(h), which preclude 28 U.S.C. § 1331 general federal question jurisdiction over Social Security claims, apply equally to the exclusionary determinations of the Secretary. 42 U.S.C. § 1320a-7(f)(3).

 The administrative procedures governing the imposition of a civil monetary penalty are set forth in 42 U.S.C. § 1320a-7a(C)-(1), as incorporated in 42 U.S.C. §§ 1395u(j)(2), 1395u(p)(3). Generally, the procedures provide that the secretary can initiate a proceeding with the concurrence of the Attorney General. The physician has the right to a full blown hearing on the record. An adverse determination by the Secretary is reviewable in the United States Court of Appeals for the Circuit in which the person resides, or in which the claim was presented. 42 U.S.C. § 1320a-7(f)(3).

 II. FACTS GIVING RISE TO THIS LITIGATION

 
Some physicians have contacted Medicare and requested they be removed from the program. As long as covered services are provided, however, a provider must abide by all Medicare rules and regulations pertaining to those services. The law cannot be bypassed by having patients sign a ...

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