Michigan Academy of Family Physicians v. Blue Cross and Blue Shield of Michigan
| Decision Date | 23 February 1984 |
| Docket Number | No. 81-1202,81-1202 |
| Citation | 728 F.2d 326 |
| Parties | , Medicare&Medicaid Gu 33,632 MICHIGAN ACADEMY OF FAMILY PHYSICIANS, et al., Plaintiffs-Appellees, v. BLUE CROSS AND BLUE SHIELD OF MICHIGAN and Richard S. Schweiker, Secretary of Health and Human Services, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Leonard R. Gilman, U.S. Atty., Michele Coleman Mayes, Asst. U.S. Atty., Detroit, Mich., Thomas Stuber, Atty., argued, Dept. of Health & Human Services, Baltimore, Md., for defendants-appellants.
Alan Gilchrist, argued, Frimet, Bellamy & Gilchrist, Detroit, Mich., for plaintiffs-appellees.
Before JONES, Circuit Judge, and PECK and BROWN, Senior Circuit Judges.
The principal question raised in this appeal is the validity of the method adopted by the Department of Health and Human Services (HHS) by which certain eligible individuals receive reimbursement for services performed by physicians and other individuals pursuant to the federal Health Insurance for the Aged and Disabled Act (Medicare), 42 U.S.C. Sec. 1395 et seq. The Michigan Academy of Family Physicians (Michigan Academy) filed suit against Blue Cross and Blue Shield of Michigan (BC/BSM) and Richard S. Schweiker, Secretary of HHS (Secretary). The complaint alleges that the classification of certain family physicians separately from other physicians with similar qualifications, and together with non-allopathic doctors (such as chiropractors and podiatrists), contraverted the statutory mandate of Congress as expressed in the Medicare Act. A violation of due process and equal protection rights under the fifth amendment of the United States Constitution is also claimed. The district court, after finding jurisdiction, held that the classification violated the Medicare Act, Secs. 1395u(b)(3) & 1395a, and ordered the Secretary to include all family physicians with other medical doctors. 502 F.Supp. 751 (E.D.Mich.1980). BC/BSM and the Secretary appeal.
The Medicare Act consists of two programs. Part A provides insurance for hospitalization and post-hospital services. 42 U.S.C. Sec. 1395c-1395i-2. Part B, at issue in this case, provides insurance for supplemental medical care. 42 U.S.C. Sec. 1395j-1395w. Under part B eligible individuals may voluntarily enroll in the health insurance program by paying a monthly premium. Members enrolled in the program may request reimbursement of eighty per cent of the reasonable charges, as defined by the insurance carrier, of the services rendered, or assign the right of reimbursement to their physician. 42 U.S.C. Sec. 1395u(b)(3)(B)(ii).
As directed by statute, the Secretary is required to contract with an insurance intermediary to administer the Medicare part B program. 42 U.S.C. Sec. 1395u. According to the statute, the carrier is responsible for determining reasonable fees for covered services in order to calculate the applicable reimbursement amount. Id. The Act further provides that a carrier, in calculating these reimbursements, is to consider "the customary charges for similar services generally made by the physician or other person furnishing such services, as well as the prevailing charges in the locality for similar services." 42 U.S.C. Sec. 1395u(b)(3). Price ceilings are placed on the calculation of the reasonable fee so that such fee is not reasonable if it exceeds either the prevailing or customary fees as calculated under the Medicare Act. 1
In August, 1967, the Secretary validly promulgated 42 C.F.R. Sec. 405.504. 32 Fed.Reg. 12600 (1967). After first restating the definition of prevailing charges, the regulation in part B permits carriers to establish separate prevailing charges for "specialists" and "non-specialists" and specifically provides that carriers can develop more than one set of prevailing charges based on fee patterns in a local area. As a practical
result of this regulation, carriers developed separate and distinct prevailing charges for different types of physicians. Under the regulation, patients receiving one type of service from a specialist are entitled to incur a higher reasonable charge, and therefore to receive a larger reimbursement than if they received the identical service from a non-specialist.
Beginning in 1966 the Secretary contracted with BC/BSM to administer the Medicare part B program in the state of Michigan. BC/BSM, in initially determining charges, lumped physicians into three groups for the purpose of calculating prevailing charges in each geographic locality in Michigan. One group consisted exclusively of hospital internists and other hospital specialists. A second group consisted of certified specialists. The final group consisted of general practitioners and other non-specialists. Thereafter, with the passage of 42 U.S.C. Sec. 1395x(r), including other non-allopathic doctors such as chiropractors, dentists, and podiatrists in the Medicare Program, BC/BSM restructured its prevailing charge screens, devising the present system. Group 1 consisted of hospital personnel and other internists. Group 2 consisted of specialists and board certified specialists or board eligible specialists. Group 3 included general practitioners, board eligible family physicians, and other non-physicians added in the 1972 amendment to the Medicare statute.
Under the Medicare system existing in Michigan, and in several other states, a physician determines what services he will perform for a patient. If covered by the Medicare Act, he assigns the service a procedural code or number from those denoted by the Secretary. BC/BSM, after determining what type of physician performed the service, will thereupon reimburse the patient, or his assignee, based in part on the prevailing charge screen within which the physician is classified. In practice, enrollees receiving services from a specialist would receive a larger reimbursement amount than if they received similar services from a general practitioner performing the same service.
The Michigan Academy, a nonprofit Michigan corporation representing family physicians throughout the state, filed suit against BC/BSM and the Secretary, arguing that the Michigan reimbursement procedure violated the Medicare statute and was unconstitutional. It alleged that the use of prevailing charge screens ignored the Medicare Act's mandate to reimburse equal amounts for similar services performed. Further, Michigan Academy alleged, the use of prevailing charge screens had an impermissible impact on an enrollee's choice of a physician and unduly infringed the free practice of medicine. Alternatively, Michigan Academy argued that the procedure denied its members equal protection and due process under the fifth amendment of the United States Constitution since 42 C.F.R. Sec. 405.504 irrationally classified them together with non-allopathic doctors rather than with other specialists with whom they shared similar qualifications and talents.
At trial no witness for Michigan Academy or BC/BSM could explain why family physicians were separately categorized from all other medical specialists. BC/BSM, in addition, indicated that its classifications were not based on any particular statistical data but that they had apparently evolved over the years.
At the close of all the evidence, the district judge held that Sec. 405.504 violated the Medicare Act. He found that the Medicare Act mandated equal reimbursements for similar services performed despite the type of physician performing them, and that the prevailing charge screens improperly infringed on a patient's free choice in selecting a physician. At the same time, while indicating on several occasions that he felt the regulation was irrational and without support in the trial record, the district judge specifically refused to rule that the regulation is unconstitutional. Holding only that the regulation violated the Medicare Act, the district judge ordered the Secretary to reclassify all physicians together On appeal, BC/BSM and the Secretary argue initially that the district court lacked jurisdiction to render its decision. In the alternative, they contend that Sec. 405.504 is a permissible interpretation by HHS of the language of the Medicare Act and that the classification of certain family physicians is constitutional. Even if this court disapproves Sec. 405.504 and finds it unconstitutional, BC/BSM and the Secretary argue, the district judge's remedy of restructuring the prevailing price screens was improper. This court, they contend, should remand the case to the Secretary to allow for a proper restructuring of the reimbursement procedure.
including family physicians, in one single prevailing charge screen.
We initially turn to the thorny question of whether the district court had jurisdiction to render a decision in this case. In its brief BC/BSM contends that Sec. 205(h) of the Social Security Act, 42 U.S.C. Sec. 405(h), as interpreted by the courts, precludes jurisdiction in this case. BC/BSM first characterizes this cause as a dispute over the amount of reimbursements owed a recipient under the Medicare part B program, an area in which Congress specifically foreclosed judicial review. Since Sec. 1395ff provides a complex administrative methodology for resolving such appeals, BC/BSM urges, no judicial review of such matters is available. In the alternative, they contend that even though Sec. 1395ff is silent on the question of judicial review of decisions by the Secretary made in the course of implementing the Medicare part B program federal question jurisdiction under 28 U.S.C. Sec. 1331 is specifically precluded by Sec. 405(h).
It is well-settled that there is no judicial review of disputes simply concerning the amount of reimbursement or an individual's eligibility to receive Medicare part B benefits. The Supreme Court in United States v. Erika, Inc., 456 U.S....
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