Abbott Radiology Associates v. Shalala

Decision Date20 November 1997
Docket NumberNo. 94-CV-390H.,94-CV-390H.
Citation992 F.Supp. 212
CourtU.S. District Court — Western District of New York
PartiesABBOTT RADIOLOGY ASSOCIATES; Javaid Asgher, M.D., P.C.; Bailey Radiology, P.C.; Batavia Radiology Group, P.C.; Buffalo General X-Ray Associates; Clarence Sheridan Radiology Group, P.C.; Diagnostic Imaging Associates; Elmwood Radiologists, P.C.; Saleh A. Fetouh, M.D., P.C.; Saleh A. Fetouh, M.D. d/b/a Breast Screening Center of W.N.Y.; A. Paul Greiner, M.D., P.C.; Harlem Radiology, P.C. N/K/A Windsong Radiology, P.C.; Lancaster Radiology, P.C.; Meadowlands Imaging Group, P.C.; Millard Fillmore Hosp. Radiologists, P.C.; Philip C. Moudy, M.D.; Niagara Radiologists, P.C.; North Tonawanda X-Ray Center, P.C.; Nuclear Medicine Associates; Olean Radiology Associates, P.C.; Alvin M. Panahon, M.D.; Radiologic Physicians of W.N.Y., P.C.; C. Riggio, M.D.; Charles J. Riggio, M.D.; Riggio & Tetwesky, M.D.s, P.C.; Sisters Diagnostic Imaging Associates; Southtowns Radiological Group, P.C.; Gowanda Radiologists; Lakeshore Radiologists; Hamburg Radiologists; Tremont Radiological Group; and Ultrasound Associates, Plaintiffs, v. Donna E. SHALALA, as Secretary of the Department of Health and Human Services, and The Department of Health and Human Services, Defendants.

Robert J. Lane, Jr., Hodgson, Russ, Andrews, Woods & Goodyear, Buffalo, NY, for Plaintiffs.

Stephan J. Baczynski, U.S. Attorney's Office, Buffalo, NY, for Defendants.


HECKMAN, United States Magistrate Judge.

The parties have consented to have the undersigned conduct any and all further proceedings in this case, including the entry of final judgment, in accordance with 28 U.S.C. § 636(c). Pending for decision are plaintiffs' motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure (Item 22) and defendants' cross-motion for summary judgement (Item 27).


Plaintiffs are individual physicians and groups of physicians who specialize in radiology, and practice in the Western New York area. They are all "participating physicians" under the Medicare program. As participating physicians, they have agreed to accept payment on an assignment-related basis for services provided to their Medicare patients. 42 U.S.C. § 1395u(h)(1).

Plaintiffs receive reimbursement for their radiologist services under the Medicare Part B program, which pays for nonhospital medical services including physician services. Medicare Part B is administered nationwide by a network of private insurance carriers under contract with the Health Care Financing Administration (HCFA), a division of the Department of Health and Human Services (HHS). 42 U.S.C. § 1395u(a); see Anderson v. Bowen, 881 F.2d 1, 2 (2d Cir.1989). The private carrier acts as the Secretary's agent in the review and payment of Part B claims. 42 U.S.C. § 1395u.

Blue Shield is the carrier designated by the Secretary to administer the Medicare program for all of New York State outside of the greater New York metropolitan area. The program is administered on the basis of four geographic localities, with Western New York designated as Locality 1.1

On May 23, 1994, plaintiffs commenced this action against Donna Shalala, as Secretary of the Department of Health and Human Services (the Secretary), and the Department of Health and Human Services (HHS), alleging that the Secretary improperly applied the "doctrine of comparability" to Medicare reimbursement rates for their radiologist services in Locality 1 and that as a result, the reimbursements they receive are less than that to which they are entitled under the Act.

The doctrine of comparability may be applied in the calculation of Medicare reimbursements only where an insurance carrier administering the Part B program also offers a private insurance program. If it is determined that the carrier's private insurance program is "comparable" to Medicare, then the carrier may not allow a higher payment for a service provided to a Medicare patient than it would allow if a comparable service under comparable circumstances had been provided to a patient covered by its private insurance plan. 42 U.S.C. § 1395u(b)(3)(B); 42 C.F.R. § 405.508.

Of the four localities in which Blue Shield administers the Medicare program, it offers a private insurance program only in Locality 1. Thus, Locality 1 is the only service area in which a comparability limitation can be applied. Plaintiffs contend, however, that their reimbursement should not have been limited to the amounts allowed under Blue Shield's private insurance plan because the private plan is not comparable to Medicare.

Neither party specifically addresses the difference in reimbursement rates resulting from the application of comparability limitations. Nor is any concrete example presented in the voluminous administrative record. There is some indication of the differential, however, at Exhibit 24 (T. at 538-41).2 In a Blue Cross memorandum addressing the establishment of radiology fee schedules for 1989, it was noted that the fee schedules for Western New York radiologist services were approximately 25 percent less than the same fees for the other three localities in Upstate New York (Id. at 540).

Plaintiffs have exhausted their administrative remedies. Beginning in September 1989, plaintiffs submitted numerous requests for carrier review of their Medicare reimbursement rates. After receiving adverse carrier determinations and adverse carrier hearing determinations from Blue Shield, plaintiffs requested a hearing before a Health and Human Services Administrative Law Judge (ALJ) on the issues of whether reimbursements were calculated correctly for the period March 17, 1989 through March 30, 1990, and whether plaintiffs' claims for services rendered from October 1, 1985 through March 16, 1989 could be reopened.

At the administrative hearing, held on March 24 and 25, 1992, plaintiffs argued that the comparability provisions of 42 U.S.C. § 1395u(b)(3)(B) should not have been applied in Locality 1 because the policy that HCFA employs to determine whether a private plan is comparable to Medicare is not consistent with the laws and regulations. Plaintiffs also argued that the HCFA policy is an unpublished regulation and is not merely interpretive but changes the regulation itself. Finally, plaintiffs contended that HCFA and Blue Shield applied comparability arbitrarily and capriciously.

On June 25, 1992, ALJ Margaret Quinn determined that the "comparability limitations are permissible, both under law and regulations, that there [sic] application in this instance, and the policy of HCFA in general is neither contrary to the statute nor is it a substantive change of the statute which would require publication. Therefore, comparability, as a policy in Locality 1, is proper" for the period March 17, 1989 through March 30, 1990 (Item 22, Ex. H, p. 27). The ALJ also denied plaintiffs' request to reopen prior cases dating back to October 1, 1985 (Id.). On March 30, 1994, the Health and Human Services Appeals Council reviewed and upheld ALJ Quinn's determination as the final decision of the Secretary.

On October 3, 1996, plaintiffs moved for summary judgment with respect to each of the six causes of action presented in their second amended complaint. Defendants cross-moved for summary judgment on the same issues on December 16, 1996. Plaintiffs' claims can be summarized as follows:

1. The Secretary's determination to apply comparability limitations to Medicare reimbursements in Locality 1 is inconsistent with and in violation of the comparability statute and regulation.

2. The Secretary's application of comparability is unlawful and invalid in that the policy HCFA employs to determine whether comparability is appropriate is a substantive rule that was never promulgated as a formal regulation in accordance with the Administrative Procedure Act.

3. The Secretary's application of comparability is unlawful and invalid in that the policy HCFA employs to determine whether comparability is appropriate was never published in the Federal Register as an "interpretive" rule in accordance with 42 U.S.C. § 1395hh(c)(1).

4. ALJ Quinn's June 25, 1992 decision was arbitrary, capricious, an abuse of discretion, not in accordance with the law, and not supported by substantial evidence in that it contains certain findings of fact that are not supported by the evidence in the record.

5. The Secretary's application of comparability was arbitrary and capricious in that sometime after 1980, the Secretary and HCFA changed their interpretation of the comparability provisions of the Medicare statute and regulation.

6. The plaintiffs' requests for reopening were supported by good cause and the Secretary's denial of same was arbitrary and capricious, an abuse of discretion, not in accordance with the law, and not supported by substantial evidence.

Plaintiffs are seeking judgment declaring the application of comparability in Locality 1 to be unlawful and invalid, and compelling the Secretary to recalculate Medicare payments for their services.

In addition to the present action, plaintiffs are concurrently prosecuting multiple administrative appeals before the Department of Health and Human Services concerning radiologist services rendered subsequent to March 30, 1990. The parties have agreed that any such administrative proceedings or appeals filed or decided during the pendency of this action shall be governed by the outcome of this action, as if they had been added to this action in a timely manner (Item 22, Ex. C).


The Medicare Act provides that "the findings of the Secretary as to any fact, if supported by substantial evidence, shall be conclusive . . . ." 42 U.S.C. 405(g) (incorporated through 42 U.S.C. § 1395ii). Substantial evidence is that which a "reasonable mind might accept as adequate to support a conclusion. . . . ." Consolidated Edison Co. v. NLRB, ...

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    • United States
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    • September 10, 2015
    ...has retroactive effect, although at least one district court has concluded that it is not retroactive. SeeAbbott Radiology Assocs. v. Shalala, 992 F.Supp. 212, 227–28 (W.D.N.Y.1997) ("Section 1395hh(c)(1) does not apply retroactively. Therefore, the Secretary's alleged failure to publish th......
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    ...(the "Secretary"), and the Department of Health and Human Services (together with the Secretary "Defendants"). Abbott Radiology Assocs. v. Shalala, 992 F.Supp. 212 (W.D.N.Y.1997). On May 23, 1994, Plaintiffs commenced this action against Defendants, alleging that the Secretary had improperl......

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