Ass'n of American Medical Colleges v. USA

• Decision Date: 08 December 1999
• Docket Number: OTOLARYNGOLOGY-HEAD,No. 98-56190,98-56190
• Parties: (9th Cir. 2000) ASSOCIATION OF AMERICAN MEDICAL COLLEGES; AMERICAN MEDICAL ASSOCIATION; THE AMERICAN HOSPITAL ASSOCIATION; ASSOCIATION OF ACADEMIC HEALTH CENTERS; CALIFORNIA MEDICAL ASSOCIATION; CALIFORNIA HEALTHCARE ASSOCIATION; HEALTHCARE ASSOCIATION OF NEW YORK STATE; MEDICAL GROUP MANAGEMENT ASSOCIATION; THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, on behalf of the University of California, San Diego School of Medicine, UCLA School of Medicine, University of California-Davis School of Medicine, University of California-Irvine College of Medicine and University of California-San Francisco School of Medicine; LOMA LINDA UNIVERSITY HEALTHCARE, INC.; ALLEGHENY UNIVERSITY OF THE HEALTH SCIENCES; UNIVERSITY OF COLORADO; TRUSTEES OF INDIANA UNIVERSITY; THE JOHN HOPKINS UNIVERSITY; REGENTS UNIVERSITY OF MICHIGAN; MONTEFIORE MEDICAL CENTER; BOARD OF REGENTS OF THE UNIVERSITY OF NEBRASKA; BOARD OF REGENTS UNIVERSITY MEDICAL ASSOCIATES; STATE UNIVERSITY OF NEW YORK; MEDICAL COLLEGE OF WISCONSIN; UNIVERSITY PHYSICIANS INC., and UNIVERSITY OF MARYLAND NEUROSURGERY ASSOCIATES PA; UNIVERSITY OF MARYLAND PHYSICAL THERAPY ASSOCIATES PA; UNIVERSITY OF MARYLAND DIAGNOSTIC IMAGING SPECIALISTS; UNIVERSITY OF MARYLAND PATHOLOGY ASSOCIATES PA; UNIVERSITYOF MARYLAND ANESTHESIA ASSOCIATES PA; UNIVERSITY OF MARYLAND DERMATOLOGIES PA; UNIVERSITY OF MARYLAND ONCOLOGY ASSOCIATES PA; UNIVERSITY OF MARYLAND FAMILY MEDICINE ASSOCIATES PA; UNIVERSITY OF MARYLAND PSYCHIATRY ASSOCIATES PA; UNIVERSITY OF MARYLAND EMERGENCY MEDICINE ASSOCIATES; SHOCK TRAUMA ASSOCIATES PA; UNIVERSITY OF MARYLAND RADIATION ONCOLOGY ASSOCIATES PA; UNIVERSITY OF MARYLAND MEDICINE PA; UNIVERSITY OF MARYLAND NEUROLOGY ASSOCIATES PA; UNIVERSITY OF MARYLAND OB/GYN ASSOCIATES PA; UNIVERSITY OF MARYLAND PEDIATRIC ASSOCIATES PA; UNIVERSITY OF MARYLAND EYE ASSOCIATES PA; UNIVERSITY OF KANSAS; KANSAS UNIVERSITY ANESTHESIOLOGY FOUNDATION; KANSAS FAMILY MEDICAL FOUNDATION; KANSAS UNIVERSITY INTERNAL MEDICINE FOUNDATION; KANSAS UN
• Court: U.S. Court of Appeals — Ninth Circuit

Page 770

217 F.3d 770 (9th Cir. 2000)

ASSOCIATION OF AMERICAN MEDICAL COLLEGES; AMERICAN MEDICAL ASSOCIATION; THE AMERICAN HOSPITAL ASSOCIATION; ASSOCIATION OF ACADEMIC HEALTH CENTERS; CALIFORNIA MEDICAL ASSOCIATION; CALIFORNIA HEALTHCARE ASSOCIATION; HEALTHCARE ASSOCIATION OF NEW YORK STATE; MEDICAL GROUP MANAGEMENT ASSOCIATION; THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, on behalf of the University of California, San Diego School of Medicine, UCLA School of Medicine, University of California-Davis School of Medicine, University of California-Irvine College of Medicine and University of California-San Francisco School of Medicine; LOMA LINDA UNIVERSITY HEALTHCARE, INC.; ALLEGHENY UNIVERSITY OF THE HEALTH SCIENCES; UNIVERSITY OF COLORADO; TRUSTEES OF INDIANA UNIVERSITY; THE JOHN HOPKINS UNIVERSITY; REGENTS UNIVERSITY OF MICHIGAN; MONTEFIORE MEDICAL CENTER; BOARD OF REGENTS OF THE UNIVERSITY OF NEBRASKA; BOARD OF REGENTS UNIVERSITY MEDICAL ASSOCIATES; STATE UNIVERSITY OF NEW YORK; MEDICAL COLLEGE OF WISCONSIN; UNIVERSITY PHYSICIANS INC., and UNIVERSITY OF MARYLAND NEUROSURGERY ASSOCIATES PA; UNIVERSITY OF MARYLAND PHYSICAL THERAPY ASSOCIATES PA; UNIVERSITY OF MARYLAND DIAGNOSTIC IMAGING SPECIALISTS; UNIVERSITY OF MARYLAND PATHOLOGY ASSOCIATES PA; UNIVERSITYOF MARYLAND ANESTHESIA ASSOCIATES PA; UNIVERSITY OF MARYLAND DERMATOLOGIES PA; UNIVERSITY OF MARYLAND ONCOLOGY ASSOCIATES PA; UNIVERSITY OF MARYLAND FAMILY MEDICINE ASSOCIATES PA; UNIVERSITY OF MARYLAND PSYCHIATRY ASSOCIATES PA; UNIVERSITY OF MARYLAND EMERGENCY

MEDICINE ASSOCIATES; SHOCK TRAUMA ASSOCIATES PA; UNIVERSITY OF MARYLAND RADIATION ONCOLOGY ASSOCIATES PA; UNIVERSITY OF MARYLAND MEDICINE PA; UNIVERSITY OF MARYLAND NEUROLOGY ASSOCIATES PA; UNIVERSITY OF MARYLAND OB/GYN ASSOCIATES PA; UNIVERSITY OF MARYLAND PEDIATRIC ASSOCIATES PA; UNIVERSITY OF MARYLAND EYE ASSOCIATES PA; UNIVERSITY OF KANSAS; KANSAS UNIVERSITY ANESTHESIOLOGY FOUNDATION; KANSAS FAMILY MEDICAL FOUNDATION; KANSAS UNIVERSITY INTERNAL MEDICINE FOUNDATION; KANSAS UNIVERSITY NEUROLOGICAL FOUNDATION; KANSAS UNIVERSITY GYNECOLOGICAL & OBSTETRICAL FOUNDATION; KANSAS UNIVERSITY OTOLARYNGOLOGY-HEAD & NECK SURGERY FOUNDATION; UNIVERSITY PATHOLOGY ASSOCIATES; KANSAS UNIVERSITY CHILDRENS CENTER FOUNDATION; KANSAS UNIVERSITY PSYCHIATRY FOUNDATION; KANSAS UNIVERSITY CLINICAL RADIOLOGY FOUNDATION; KANSAS UNIVERSITY RADIATION THERAPY FOUNDATION; KANSAS UNIVERSITY REHABILITATION MEDICINE ASSOCIATION; KANSAS UNIVERSITY SURGERY ASSOCIATION; KANSAS UNIVERSITY OPHTHALMIC FOUNDATION; MASSACHUSETTS HOSPITAL ASSOCIATIONS, INC.; AMERICAN MEDICAL GROUP ASSOCIATION; AMERICAN COLLEGE OF CARDIOLOGY; AMERICAN ACADEMY OF OTOLARYNGOLOGY-HEAD & NECK SURGERY; ASSOCIATION OF ACADEMIC PHYSIATRISTS; AMERICAN COLLEGE OF RHEUMATOLOGY; AMERICAN SOCIETY OF CLINICAL PATHOLOGISTS; AMERICAN COLLEGE OF SURGEONS; AMERICAN ACADEMY OF ORTHOPEDIC SURGEONS; AMERICAN ACADEMY OPHTALMOLOGY; AMERICAN ASSOCIATION OF NEUROLOGICAL SURGEONS; CONGRESS OF NEUROLOGICAL SURGEONS; AMERICAN LUNG ASSOCIATIONAND ITS MEDICAL SECTION THE AMERICAN THORACIC SOCIETY; AMERICAN UROLOGICAL ASSOCIATION; AMERICAN ACADEMY OF DERMATOLOGY; AMERICAN SOCIETY OF ANESTHESIOLOGISTS; SOCIETY OF THORACIC SURGEONS; AMERICAN ACADEMY OF FAMILY PHYSICIANS; AMERICAN PSYCHIATRIC ASSOCIATION; AMERICAN SOCIETY OF PLASTIC AND RECONSTRUCTIVE SURGEONS; AMERICAN ACADEMY OF PEDIATRICS; AMERICAN COLLEGE OF OSTEOPATHIC SURGEONS; ASSOCIATION OF ACADEMIC DEPARTMENTSOF OTOLARYNGOLOGY-HEAD & NECK SURGERY, Plaintiffs-Appellants, v. UNITED STATES OF AMERICA, Defendant-Appellee.

No. 98-56190

U.S. Court of Appeals for the Ninth Circuit

Argued and Submitted December 8, 1999--Pasadena, California

Filed July 11, 2000

[Copyrighted Material Omitted]

Leonard C. Homer, Baltimore, Maryland, and Harry R. Silver, Washington, D.C., for the plaintiffs-appellants.

Peter Robbins, United States Attorney, Civil Division, for the defendant-appellee.

Appeal from the United States District Court for the Central District of California; Carlos R. Moreno, District Judge, Presiding. D.C. No. CV 98-01734 CM

Before: Betty B. Fletcher, Alex Kozinski, & David R. Thompson, Circuit Judges.

B. FLETCHER, Circuit Judge:

This is an action for declaratory and injunctive relief brought by the American Association of Medical Colleges, the American Medical Association, a host of other medical associations, and numerous teaching hospitals against the Office of the Inspector General for the Department of Health and Human Services and the Department of Justice. Plaintiffs allege that the government has initiated a nationwide program of audits for reimbursements made to teaching hospitals under Part B of the Medicare Act, that the audits are based on unlawful or retroactively applied standards for Medicare billing, and that, on threat of suit under the False Claims Act, the audits are being used to coerce settlements. The district court dismissed the action for lack of subject matter jurisdiction on defendant's motion to dismiss under Rule 12(b)(1) of the Federal Rules of Civil Procedure, ruling that the action is premature because there has been no final agency action, plaintiffs have adequate alternative remedies, and the issues are not ripe for adjudication. Although we affirm on grounds that there is no case or controversy under Article III of the Constitution, we order the case dismissed without prejudice.

FACTS AND PROCEDURAL HISTORY

This case arises out of efforts by the Secretary of Health and Human Services (the "Secretary") to review Medicare Part B billings by teaching hospitals and to recover potential overpayments for services rendered by such hospitals to Medicare beneficiaries. The review is called the Physicians at Teaching Hospitals ("PATH") program, and is conducted in the form of audits by the HHS's Office of the Inspector General ("OIG").¹ After a PATH audit of the billings submitted by the University of Pennsylvania Health System produced a settlement of over $30 million for the government for Medicare claims submitted between 1989 and 1994, the review was extended to teaching hospitals nationwide. The key findings in the University of Pennsylvania PATH audit were (1) a lack of documentation showing the physical presence of the teaching physician during a service performed by a resident and subsequently billed for payment under Medicare Part B, and (2) "upcoding" -i.e., billing for a more complex level of care than that which was provided. According to the government, services performed by a resident may be billed to Medicare Part B by a teaching physician only if that physician was present during the performance of the service.

Plaintiffs, comprising nearly all the major medical associations in the country along with several major teaching hospitals currently subject to PATH audits, filed a complaint in October 1997, alleging (1) that the PATH audits apply billing requirements beyond those set forth in the Medicare Act and HHS regulations, and (2) that the audits are being used along with the threat of ruinous penalties under the False Claims Act to coerce settlements. Fourteen plaintiff hospitals and affiliated practice groups were subject to PATH audits as of February 1998. At least one audit has concluded with a finding of no Medicare fraud or abuse and at least one plaintiff (the University of California) has been named in a qui tam suit by an individual who alleges Medicare fraud in the hospitals' Part B billings.² A brief review of the billing requirements historically imposed on teaching hospitals will illustrate why plaintiffs are so deeply concerned by the PATH audits.

Title XVIII of the Social Security Act of 1935 establishes a federally subsidized health insurance program for elderly and disabled persons. 42 U.S.C. S 1395 (the "Medicare Act"). While Part A of the Medicare Act covers institutional health costs, such as hospital expenses (e.g., room, board, nursing, residents' salaries, and other inpatient care costs), see 42 U.S.C. SS 1395c-1395i-2, Part B covers medical services provided directly to individuals on a fee-for-service basis such as physician services, medical supplies, and diagnostic/ laboratory tests. See 42 U.S.C. SS 1395j-1395w. Coverage and payment for services rendered to beneficiaries is administered by the Secretary through the Health Care Financing Administration ("HCFA"). For Medicare Part B claims, the HCFA contracts with approximately 34 private insurance companies nationwide ("Carriers") to process claims and to perform payment safeguard functions. See 42 U.S.C. S 1395u.

In order to obtain payment for Part B services rendered at teaching hospitals, the regulations traditionally required (1) that the teaching physician establish an "attending physician" relationship with the patient, and (2) that the services rendered be "of the same character, in terms of the responsibilities to the patient that are assumed and fulfilled," as the services provided to paying patients. 20 C.F.R. S 405.521 (1968). Although payment of residents' salaries is covered under Medicare Part A, services performed by residents under the direction of teaching physicians qualified for Part B reimbursement where (1) the teaching physician furnished "personal and identifiable direction to interns or residents who are participating in the care of his patient," or (2) in the case of "major surgical procedures and other complex and dangerous procedures or situations," the attending physician provided direction "in person." 20 C.F.R. S 405.521(b) (1968).

With respect to documentation of the teaching physician's role in services provided, HCFA simply required that "[p]erformance of the activities . . . must be demonstrated, in part, by notes and orders in the patient's records that are either written by or countersigned by the supervising physician." Bureau of Health Insurance Intermediary Letter No. 372, at 3 (April 1969). In other words, countersignature by the teaching physician would...