American Medical Ass'n v. Bowen, 87-1755
| Decision Date | 14 October 1988 |
| Docket Number | No. 87-1755,87-1755 |
| Citation | 857 F.2d 267 |
| Parties | , Medicare&Medicaid Gu 37,489 AMERICAN MEDICAL ASSOCIATION, et al., Plaintiffs-Appellants, v. Otis R. BOWEN, M.D., Secretary of the Department of Health and Human Services, Defendant-Appellee, and American Association of Retired Persons, et al., Intervenors-Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
David F. Graham, Sidley & Austin, Chicago, Ill., for plaintiffs-appellants.
Scott McIntosh, Dept. of Justice, Appellate Staff, Civil Div., Washington, D.C., for Bowen.
Douglas N. Letter, Atty., Sp. Lit., D of J, Washington, D.C., for Otis Bowen.
David Overlock Stewart, Washington, D.C., Sharon N. Freytag, Dallas, Tex., Alfred J. Chiplin, Burton D. Fretz, Washington, D.C., for intervenors.
Appeal from the United States District Court for the Northern District of Texas.
Before WISDOM, GEE and JONES, Circuit Judges.
Appellants, seven individual doctors and three medical societies representing physicians nationally, in Texas, and in Lubbock-Crosby-Garza counties, challenge provisions of the Medicare program enacted as Sec. 9331 of the Omnibus Budget Reconciliation Act (OBRA) of 1986. Pub. L. 99-509, 100 Stat. 2018 (42 U.S.C. Sec. 1395u). Appellants allege that the Secretary's method of implementing OBRA in late 1986 forced physicians to choose whether or not to "participate" in the program in 1987 without knowing exactly how much they would be allowed to charge Medicare patients as non-participants and exposed non-participants to sanctions for overcharging Medicare patients, all in violation of the due process clause of the Fifth Amendment. Appellants also contend that certain regulations were promulgated pursuant to the statute without following the notice and comment requirements of the Administrative Procedure Act (APA). 5 U.S.C. Sec. 553. We conclude that the Fifth Amendment claim (1) is moot and lacks a reasonable expectation of recurrence to the extent that it complains of the participation choice and (2) is not ripe to the extent that it complains of the exposure to sanctions. We further find that Appellants lack standing to bring the APA claim because they were not injured by the agency action. Accordingly, we affirm on different grounds the district court's judgment dismissing these claims.
The facts in this case, although more complex than our legal analysis, provide a necessary backdrop to what follows. The Medicare Program furnishes two distinct alternative means of reimbursement for physicians' services. A physician can charge his patients "on the basis of an itemized bill," 42 U.S.C. Sec. 1395u(b)(3)(B)(i), following which Medicare reimburses the patient 80% of the doctor's "reasonable charge." 1 42 C.F.R. Sec. 410.152. The patient ends up paying the difference between the actual charge and 80% of the "reasonable charge."
Otherwise, the physician can "accept assignment," pursuant to 42 U.S.C. Sec. 1395u(b)(3)(B)(ii), and thereby bill the Medicare carrier directly for 80% of the "reasonable charge," leaving the patient initially responsible for the remaining 20% of the "reasonable charge." The doctor, however, agrees to accept no more than the "reasonable charge" for his services.
Originally, the Medicare Act permitted doctors to choose whether to accept assignment on a case-by-case basis. Legislation enacted in 1984, however, required every doctor periodically to decide whether to sign a "participation agreement" and thereby to accept assignment for all services furnished to Medicare Part B recipients during the following year. 2 A physician who did not sign a participation agreement remained free to accept assignment on a case-by-case basis. The same statute temporarily froze the fees that non-participating physicians could charge to Medicare beneficiaries and so controlled those fees from July 1, 1984 through December 31, 1986. Additionally, non-monetary incentives, such as Medicare directories listing only participating physicians, were included to encourage physicians to sign participation agreements. See, e.g., 42 U.S.C. Sec. 1395u(h) (2)-(6).
This litigation was spawned, paradoxically, by the law that terminated the price freeze but substituted a new form of price Congress enacted OBRA on October 21, 1986. The act required physicians to make their 1987 participation decision by January 1, 1987. However, the Health Care Financing Administration, the sub-agency of the Department of Health and Human Services ("HHS") which administers Medicare, did not require that MAACs be supplied to non-participating physicians until March 1, 1987. HHS instructed the health insurance carriers that administer the Medicare plan to respond to physicians' requests for information within three working days. 4 Unfortunately, many of the physicians who actually requested the information necessary to compute their MAACs did not receive it prior to the participation deadline.
control for non-participating doctors. Section 9331 of the Omnibus Budget Reconciliation Act ("OBRA") of 1986, Pub.L. No. 99-509, 100 Stat. 1874, 2018-22 (1986), caps non-participating physicians' charges to Medicare beneficiaries according to the newly-invented "maximum allowable actual charge" ("MAAC"). 42 U.S.C. Sec. 1395u(j)(1)(B)(i). While the "reasonable charge" formula for reimbursement of participating physicians remained constant after OBRA, the MAAC significantly altered the reimbursement formula for non-participating physicians in a way that only legislators and accountants can appreciate. To say that the calculation of individual MAAC's by every physician for every medical service that may be performed (some 10,000 in all) is complex is to understate the matter ridiculously. 3
Although the district court found that "no doctor [was] without at least some means for estimating his 1987 MAAC," most physicians could not precisely calculate their MAACs prior to the participation decision deadline. 659 F.Supp. 1143, 1147. Even if a physician's records contained his charges to Medicare beneficiaries for the 1984 base quarter, he would lack two key parts of the calculation. First, he would not have known the "prevailing charges" for each service. Second, he would not know in which of the approximately 10,000 categories the carrier has classified his services. Moreover, physicians were probably unable to determine the "reasonable charge" that participating physicians would be allowed to charge. Thus, physicians This is not the end of the story. Congress made further changes to the Medicare program in the OBRA of 1987. Pub.L. No. 100-203, 101 Stat. 1330. Congress avoided the transitional problems caused by the 1986 Act by extending the effectiveness of the 1987 participation agreements and fee ceilings through the first quarter of 1988. Pub.L. No. 100-203, Sec. 4041, 101 Stat. 1330-83. With this extra time, HHS was able to provide physicians with updated customary and prevailing charges and MAACs more than a month before the April 1, 1988 participation decision deadline. HHS "Dear Doctor Letter" 4 Medicare and Medicaid Guide (CCH) Sec. 37,006 (1988).
were left with only a rough estimate of the fee limit differences between participating and non-participating status at the participation decision deadline.
The crux of appellants' complaint is the way in which the MAAC fee limits were folded into the existing Medicare payment system. Appellants contend that they were forced by HHS to make 1987 participation decisions in the dark, without knowing or having the ability to ascertain what their MAACs would be, and consequently without knowing whether Medicare reimbursement would be higher for participants or non-participants. This necessity for blind decisionmaking, together with warnings by HHS that non-participating doctors whose 1987 charges exceeded their MAACs would be subject to enforcement proceedings, underlie the appellants' due process claim. They thus contend that their statutory right to make "voluntary" participation decisions, 42 U.S.C. Sec. 1395u(h), was denied by the implementation of MAACs, and that they were effectively coerced into signing participation agreements.
The calculation of a MAAC depends in part on a doctor's "actual charge" for a procedure during the 1984 base period. Section 9331 provides that the actual charge for this purpose shall be "the weighted average (or, at the option of the Secretary ..., the median)" of his charges for the service during the base period. OBRA Sec. 9331(b) (codified at 42 U.S.C. Sec. 1395u(j)(1)(C)(vi)). HHS chose the median method of calculating actual charges because it was the easier method for carriers to compute. No APA notice and comment procedures were used to make this choice. However, HHS noted that the median was chosen for "operational" rather than "policy" reasons and that "it would be inappropriate to disadvantage any physician who is adversely affected by the selection and who wishes to charge in accordance with a self-calculated MAAC based on a weighted average of the base quarter charges." 52 Fed.Reg. 1383, 1384. The notice provides further "that no sanction action will be initiated against a physician if it is determined that the physician would have been in compliance had the weighted average been used." Id.
We decline to reach the merits of appellants' due process challenge to the implementation of Sec. 9331. If a dispute has been resolved or if it has evanesced because of changed circumstances, including the passage of time, it is considered moot. Matter of S.L.E. Inc., 674 F.2d 359, 364 (5th Cir.1982). With the...
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