AMERICAN AMBULANCE SERVICE OF PA. v. Sullivan, Civ. A. No. 87-7746.

• Decision Date: 29 March 1991
• Docket Number: Civ. A. No. 87-7746.
• Citation: 761 F. Supp. 1211
• Court: U.S. District Court — Eastern District of Pennsylvania
• Parties: AMERICAN AMBULANCE SERVICE OF PENNSYLVANIA, INC. v. Louis W. SULLIVAN, M.D., et al.

761 F. Supp. 1211

AMERICAN AMBULANCE SERVICE OF PENNSYLVANIA, INC. v. Louis W. SULLIVAN, M.D., et al.

Civ. A. No. 87-7746.

United States District Court, E.D. Pennsylvania.

March 29, 1991.

Stirling Lathrop, Philadelphia, Pa., for plaintiff.

James G. Sheehan, Barbara Koppa Gerolamo, Asst. U.S. Attys., Philadelphia, Pa., for defendants.

MEMORANDUM

RAYMOND J. BRODERICK, District Judge.

In this litigation, the plaintiff, American Ambulance Service of Pennsylvania, Inc. (AASI), challenges the methods by which Medicare Part B reimbursement decisions for ambulance service providers are made. AASI and the defendants, the Secretary of Health and Human Services (the Secretary), the Administrator of the Health Care Financing Administration, and the Medical Service Association of Pennsylvania, have filed cross-motions for summary judgment. For the reasons that follow, the defendants' motion will be granted.

I. Background

A. The Medicare Part B Program

The Medicare Program, which is set forth in Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395-1395ccc, consists of two parts. Part A, which is not at issue in this suit, covers basic institutional health costs and is provided automatically to all Social Security Trust Fund recipients. 42 U.S.C. §§ 1395c-1395i-2. In contrast, Part B is a voluntary, federally subsidized health insurance program that pays a portion of certain medical and other health service expenses not covered under Part A. 42 U.S.C. §§ 1395j-1395w. Importantly for present purposes, medical costs covered under Part B include ambulance services when use of other methods of transportation "is contraindicated by the individual's condition, but only to the extent provided in regulations." 42 U.S.C. § 1395x(s)(7). The regulations, which interpret the statute, provide that Medicare Part B "pays for ambulance service only if — (1) Other means of transportation would endanger the beneficiary's health." 42 C.F.R. § 410.40(b). Enrollment in the Part B program is restricted to persons who are disabled or 65 or older, 42 U.S.C. § 1395o, and eligibility does not depend on financial need. The program is financed by the Federal Supplementary Medical Insurance Trust Fund, which is maintained by "appropriations from the Treasury, together with monthly premiums paid by the individuals who choose voluntarily to enroll in the Part B program. Part B consequently resembles a private medical insurance program that is subsidized in major part by the Federal Government." Schweiker v. McClure, 456 U.S. 188, 190, 102 S.Ct. 1665, 1667, 72 L.Ed.2d 1 (1982).

In order to take advantage of insurance carriers' "`great experience in reimbursing physicians,'" id., (quoting H.R.Rep. No. 213, 89th Cong., 1st Sess. 46 (1965)), Congress has authorized the Secretary to delegate to private insurance carriers the tasks of setting rates, reviewing claims, and paying charges covered by Part B from the Trust Fund on the Secretary's behalf. 42 U.S.C. § 1395u. Part B enrollees may seek direct reimbursement for medical services or may assign the right to reimbursement to the health care provider. Typically, after a Part B enrollee receives medical care, he or she submits a Medicare voucher to the provider, which, in turn, submits the voucher to a participating insurance carrier. 42 U.S.C. § 1395u(b)(3). The carrier pays the provider approximately 80% of the provider's submitted costs, subject to the carrier's responsibility to establish "reasonable amounts," 42 U.S.C. § 1395x(v); 42 C.F.R. § 403.501 et seq., with the enrollee bearing the remaining 20 percent. The Secretary finances the participating carriers' costs of claims administration. 42 U.S.C. § 1395u(c).

As with private medical insurance, the Part B program and its implementing regulations delineate conditions and limitations on reimbursement, 42 U.S.C. § 1395k, 1395l, 1395x(s), and exclude certain items and services from coverage. 42 U.S.C. § 1395y. Once the carrier has been billed for a given service, it determines if the service was medically necessary, whether the charge was reasonable, and whether the claim was otherwise covered by Part B. 42 U.S.C. § 1395y(a). If the carrier ascertains that the claim meets all these criteria, it pays the claim out of the Trust Fund. 42 U.S.C. §§ 1395u(a)(1), 1395u(b)(3), 1395u(c); Schweiker v. McClure, 456 U.S. at 191, 102 S.Ct. at 1667-68. As a corollary of this authority, the insurance carrier may conduct periodic post-payment surveys and audits of the supplier's records. See United States v. Sanet, 666 F.2d 1370, 1372 (11th Cir.1982).

On the other hand, if the carrier declines on behalf of the Secretary to pay all or part of a submitted claim, the claimant is entitled to a "review determination." Under that procedure, a carrier employee (other than the initial decision-maker) undertakes a de novo review of the written record and either affirms or adjusts the original determination. 42 C.F.R. §§ 405.803-405.806. If still disgruntled, and if the amount in controversy is $100.00 or more, the claimant then may request an oral evidentiary hearing before a hearing officer appointed by the carrier. 42 U.S.C. § 1395u(b)(3)(C). The hearing officer may be an employee of the carrier, but may not preside over the case if "he is prejudiced or partial with respect to any party, or if he has any interest in the matter." 42 C.F.R. § 405.824. The hearing officer is obliged to follow all statutory and regulatory provisions, in addition to any "policy statements, instructions and other guides" promulgated by the Secretary. 42 C.F.R. § 405.860. Indeed, the hearing officer may not disregard or pass on the validity of the Medicare Act, regulations promulgated thereunder, policy statements, instructions, or any guidelines issued by the Health Care Financing Administration (HCFA). 42 C.F.R. § 405.860; Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 680, 106 S.Ct. 2133, 2140-41, 90 L.Ed.2d 623 (1986); American Ambulance Serv. v. Sullivan, 911 F.2d 901, 905 (3d Cir.1990); Medical Fund-Philadelphia Geriatric Center v. Heckler, 804 F.2d 33, 39 (3d Cir.1986). After receiving evidence and entertaining argument, the hearing officer must render a written decision based on the record. 42 C.F.R. §§ 405.830, 405.834. Unless the carrier or the hearing officer reopens the proceedings, the ruling is "final and binding upon all parties to the hearing." 42 C.F.R. § 405.835.

Thus, in normal circumstances, agency actions under Part B are not reviewable by federal courts. United States v. Erika, Inc., 456 U.S. 201, 208, 102 S.Ct. 1650, 1654, 72 L.Ed.2d 12 (1982). Unlike aggrieved Part A beneficiaries, who are entitled to judicial review of administrative determinations, 42 U.S.C. § 1395u(b)(3)(C), Part B recipients are afforded only "an opportunity for a fair hearing by the carrier." This limitation on federal jurisdiction does not apply, however, to "challenges mounted against the method" employed by the Secretary or his agent in reaching Part B determinations. Michigan Academy, 476 U.S. at 675, 106 S.Ct. at 2138 (emphasis deleted). Those controversies, as opposed to "the determinations themselves," id. (emphasis deleted), touch upon matters that "Congress did not delegate to private carriers" and accordingly are "cognizable in courts of law." Id. at 680, 106 S.Ct. at 2140-41. As the Third Circuit has explained, "Erika and Michigan Academy define the ends of a continuum. At one end are disputes over amount computations at issue in a particular case. At the other are disputes arising from the Secretary's rules, regulations and instructions which are applied by the Hearing Officer." American Ambulance, 911 F.2d at 905. The latter may be adjudicated in federal court, while the former may not.¹

B. Facts and Procedural History

As disclosed by the joint stipulated record, between January 1, 1983 and September 30, 1984, AASI provided 428 ambulance trips to three Medicare Part B enrollees, George Dagilus, Francis New, and Joseph Perla. The services involved transporting the individuals from their residences to St. Mary's Hospital, where each received outpatient dialysis treatment. The plaintiff's charges totalled $122,656. As assignee of the enrollees, it submitted claims for that amount to the Medical Service Association of Pennsylvania, which is more commonly known as Blue Shield, in its capacity as a Medicare Part B carrier. Attached to AASI's claims were Supplemental Documentation for Ambulance Transportation (SDFAT) forms, signed by the enrollees' physicians. Each SDFAT form certified that the enrollee's physical condition required movement by a stretcher, that transportation by means other than an ambulance was contraindicated, and that the enrollee was confined to bed both before and after the ambulance transportation. Additionally, AASI filed letters from each enrollee's treating physician stating that ambulance services were medically necessary.

After evaluating the claims, Blue Shield decided to pay AASI, but it ascertained that reimbursement should be limited to $114,347, the amount Blue Shield found to be a reasonable charge for the services. The carrier therefore paid AASI $91,420.60, or 80% of the determined reasonable charge. Several months later, Blue Shield conducted a post-payment survey on the claims. The survey, based on a review of the patients' hospital and nursing home records, indicated that, at the time AASI's services were supplied, the enrollees could ambulate with the assistance of a walker or wheelchair and were not confined to bed. Blue Shield concluded that the ambulance services were not called for and asked for its $91,420.60 back.

At the plaintiff's request, Blue Shield reviewed the decision to demand repayment, but ultimately adhered to its position. AASI then appealed to a carrier-appointed hearing officer pursuant to 42 C.F.R. § 405.820-872. At the hearing, convened on July 15, 1986, AASI argued that it had complied fully...