Blue Cross of Virginia v. Com.

• Decision Date: 28 August 1980
• Docket Number: No. 800056,800056
• Citation: 221 Va. 349,269 S.E.2d 827
• Parties: BLUE CROSS OF VIRGINIA et al. v. COMMONWEALTH of Virginia ex rel., etc. Record
• Court: Virginia Supreme Court

Page 827

269 S.E.2d 827

221 Va. 349

BLUE CROSS OF VIRGINIA et al. v. COMMONWEALTH of Virginia ex rel., etc.

Record No. 800056.

Supreme Court of Virginia.

Aug. 28, 1980.

R. Gordon Smith, Richmond (Richard L. Williams, Gilbert E. Schill, Jr., James H. Walsh, J. Christopher Wiltshire, McGuire, Woods & Battle, Richmond, on briefs), for appellants.

Anthony J. Gambardella, Jr., Asst. Atty. Gen. (Marshall Coleman, Atty. Gen., John F. Kay, Jr., M. Scott Hart, T. J. Markow, Mays, Valentine, Davenport & Moore, Shaia, Stout & Markow, P.C., Richmond, on briefs), for appellees.

Before I'ANSON, C. J., and CARRICO, HARRISON, COCHRAN, POFF, COMPTON and THOMPSON, JJ.

COMPTON, Justice.

In Blue Cross/Blue Shield v. Commonwealth, 218 Va. 589, 239 S.E.2d 94 (1977) we decided the State Corporation Commission had jurisdiction to determine the constitutionality of a statute, amended in 1973, requiring that prepaid medical and surgical plans allow or pay for certain services rendered by optometrists, opticians and psychologists. Subsequently, the Commission declared the statute constitutional. We now review that determination.

As authorized by applicable enabling statutes, a group of physicians as well as a hospital or group of hospitals may conduct within a fixed geographical area, through a nonstock corporation as agent for them, a plan or plans for furnishing prepaid medical, surgical, hospital and related services. Code §§ 38.1-810, -811 and -822.1 (1980 Cum.Supp.). ¹ Under the statutory framework, all hospitals, nonstock corporations and physicians participating in such a plan shall be jointly and severally liable on all contracts made for the purposes of the plan by the nonstock corporate agent. Code § 38.1-814. Any plan providing medical and surgical or related services of a panel of medical practitioners must be so organized to assure that any person covered under the plan shall have free choice of the medical practitioners available and participating in the plan. Code § 38.1-820.

Appellants Blue Cross of Virginia and Blue Shield of Virginia, defendants below, are nonstock, nonprofit Virginia corporations which have been established by certain Virginia hospitals, "participating hospitals," and certain Virginia physicians, "participating physicians," to act as their agents in conducting plans for furnishing prepaid hospital and prepaid medical or surgical and similar or related services to persons subscribing, "subscribers," to the Plans. These hospitals and physicians have entered into individual agreements with Blue Cross, "participating hospital agreements," and Blue Shield, "participating physician agreements," respectively. Only those practicing physicians within Blue Cross/Blue Shield's geographical area who voluntarily execute participating physician agreements, not all physicians, are "participating physicians."

Blue Cross/Blue Shield sell prepaid medical care policies, "subscription contracts," which insure only specified medically necessary services of physicians. Many of the subscription contracts define "physician" as "a duly licensed physician legally entitled to practice medicine and surgery." To be "medically necessary," according to the Blue Cross/Blue Shield Group Major Medical Certificate, the services must be consistent with the diagnosis and treatment of the patient's condition, be in accord with standards of good medical practice, not be for the convenience of the patient or the physician, and be performed in the least costly setting required by the patient's medical condition.

Blue Shield's basic contract does not cover services for outpatient treatment of nervous and mental illness. Upon payment of an increased premium, however, Blue Cross/Blue Shield offer coverage under a Major Medical contract for medically necessary services for the outpatient treatment of nervous and mental disorders. Under these contracts, the companies pay for medically necessary psychotherapy and other services rendered by psychologists as well as psychiatrists. In order to assure that the treatment is medically necessary and to control costs, Blue Cross/Blue Shield require that a physician supervise and bill the psychologist's services.

Similarly, with respect to their subscription contracts covering treatment for eye care problems, the companies will reimburse for medically necessary services rendered by optometrists and opticians only when such services are performed under the supervision of and billed through a physician.

In 1973, the General Assembly amended then Code § 32-195.10:1, now § 38.1-824, by adding language which generated this controversy. See Acts 1973, ch. 428. Insofar as pertinent to this appeal the statute provides as follows, with the portion added in 1973 italicized by us:

§ 38.1-824. Services of certain practitioners other than physicians to be covered.-No plan for furnishing prepaid medical and surgical, and similar or related services, or any of such services, shall fail or refuse, either directly or indirectly, to allow or to pay for such services, or any part thereof, rendered by any doctor of podiatry, doctor of chiropody, (or) optometrist, optician, (and) psychologist, . . . duly licensed to practice in Virginia, to the holder of any contract or subscription contract issued under or pursuant to such plan if the services rendered (i) are services provided for by such contract or subscription contract, . . . and (ii) are services which the doctor of podiatry, doctor of chiropody, (or) optometrist, optician, (and) psychologist . . . is licensed to render in Virginia.

This proceeding commenced in April of 1977 when appellee State Corporation Commission, plaintiff below, entered an order reciting that the requirements of the statute in issue here were, by operation of law, a part of all subscription contracts issued by Blue Cross/Blue Shield. The order stated that the Commission's Bureau of Insurance had approved for issuance by the companies certain subscription contracts which provided for payment of psychological services, only if such services were rendered at the direction and under the supervision of a physician. The Commission's order stated that such provisions seemed to be contrary to the statute in question and ordered the companies to appear before the Commission and show cause why the Commission should not declare void all provisions of the companies' subscription contracts which were contrary to the statute.

Responding to the show cause order, defendants Blue Cross/Blue Shield admitted they had failed to comply with the statute as it related to the services of psychologists, optometrists and opticians, but attacked the validity of the statute on state and federal constitutional grounds. Thereafter, the Commission refused to adjudicate the constitutional question, being of opinion it had no jurisdiction to do so, and declared void all subscription contracts which were contrary to the statute. The companies appealed and, in November of 1977, we reversed the action of the Commission, holding the Commission had authority to, and should, pass upon the constitutionality of the statute. Blue Cross/Blue Shield v. Commonwealth, 218 Va. at 598, 239 S.E.2d at 98.

Upon remand of the proceeding to the Commission, appellee, the Attorney General of Virginia, having intervened as a plaintiff on behalf of the Commonwealth, moved in December of 1977 for summary judgment, taking the position that enactment of the statute in question was a valid and proper exercise of the Commonwealth's police power. Pursuant to an order of the Commission, the defendant companies filed in January of 1979 prepared testimony and exhibits, so-called "pre-filed testimony," of 15 witnesses they anticipated presenting before the Commission on the day of the hearing. Subsequently, appellees Virginia Academy of Clinical Psychologists and Virginia Optometric Association, having also intervened as plaintiffs, filed separate motions for summary judgment likewise asserting the constitutional validity of the statute in controversy.

On February 14, 1979, preliminary to the evidentiary hearing scheduled for that day, the Commission entertained oral argument on the several motions for summary judgment based only on the companies' pre-filed testimony, the intervenors' prepared testimony having been scheduled to be filed after February 14 and before a second hearing date set for April 23, 1979. Upon conclusion of the argument, the Commission, one member dissenting, ruled from the bench that the several motions would be granted. Following the February 1979 oral pronouncement, Blue Cross/Blue Shield moved that the bench decision be reconsidered and that partial summary judgment be granted in their favor.

Subsequently, by order and written opinion dated September 10, 1979, the Commission majority, inter alia, declared the statute to be constitutional with respect to opticians, optometrists and psychologists, declared void the provisions of all subscription contracts which were contrary to Code § 38.1-824, and withdrew the approval by the Bureau of Insurance of such provisions. The dissenting commissioner, in a separate opinion, took the position that the constitutional issue was prematurely decided on motions for summary judgment. In a second order entered on September 10, 1979, the Commission, with the same member dissenting, denied the companies' post-hearing motions. In this appeal of right, Code § 38.1-832, defendants Blue Cross/Blue Shield assign error to both September 1979 orders.

The principal issue raised by the assignments of error is whether the Commission correctly decided that Code § 38.1-824 is constitutionally valid. Linked with that question are several procedural questions. We will digress from the central issue to decide the procedural matters first.

Relying on settled principles applicable to motions for summary judgment in civil actions at law in courts of record, defendants Blue Cross/Blue Shield...