Downtown Medical Center/Comprehensive Health Care Clinic v. Bowen, s. 88-2120

• Decision Date: 10 September 1991
• Docket Number: 88-2636,Nos. 88-2120,s. 88-2120
• Citation: 944 F.2d 756
• Parties: , Medicare & Medicaid Guide P 39,575 DOWNTOWN MEDICAL CENTER/COMPREHENSIVE HEALTH CARE CLINIC, Plaintiff-Appellee, v. Otis R. BOWEN, Secretary of Health & Human Services, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 756

944 F.2d 756

35 Soc.Sec.Rep.Ser. 22, Medicare & Medicaid Guide P 39,575

DOWNTOWN MEDICAL CENTER/COMPREHENSIVE HEALTH CARE CLINIC Plaintiff-Appellee, v. Otis R. BOWEN, Secretary of Health & Human Services Defendant-Appellant.

Nos. 88-2120, 88-2636.

United States Court of Appeals Tenth Circuit.

Sept. 10, 1991.

Deborah Ruth Kent, Atty., U.S. Dept. of Justice, Washington, D.C. (John R. Bolton, Asst. Atty. Gen., Michael J. Norton, U.S. Atty., Michael Jay Singer and Rick Richmond, Attys., U.S. Dept. of Justice, Washington, D.C., on the brief), for defendant-appellant.

Danielle Lombardo Trostorff, Brook, Morial, Cassibry, Fraiche & Pizza, New Orleans, La. (Lionel Dunievitz, Keller, Dunievitz, Johnson & Wahlberg, Denver, Colo., with her, on the brief), for plaintiff-appellee.

Before HOLLOWAY, Chief Judge, BRORBY, Circuit Judge, and BOHANON, District Judge. ^*

HOLLOWAY, Chief Judge.

The Secretary of the Department of Health and Human Services (the Secretary) appeals from the district court's grant of summary judgment and award of attorney fees to Downtown Medical Center/Comprehensive Health Care Clinic (CHC). The district court ruled that a hearing officer, acting on behalf of the Secretary, erred as a matter of law in denying CHC reimbursement under the Medicare program for certain psychological and physical therapy services. In awarding attorney fees, the court ruled that the Secretary's defense on the merits was not substantially justified within the meaning of the Equal Access to Justice Act. We reverse.

I.

Title XVIII of the Social Security Act establishes a federally-subsidized health insurance program for persons who are at least 65-years-old or disabled, which is commonly known as the Medicare program. 42 U.S.C. § 1395, et seq. (1982 & Supp. III 1985). The Medicare program has two parts: Part A and Part B. At issue here is only Part B. ¹ Part B is a voluntary insurance program that covers a portion (ordinarily 80%) of the cost of certain physician services, non-physician services when furnished incident to physicians' services, outpatient physical therapy, and other medical and health care. Id. §§ 1395k, 1395l(a), 1395x(s). Part B is financed by the Federal Supplementary Medical Insurance Trust Fund. Id. § 1395t. The Trust Fund receives moneys from Treasury appropriations and, to a lesser extent, from premiums paid by Part B enrollees. See Schweiker v. McClure, 456 U.S. 188, 190, 102 S.Ct. 1665, 1667, 72 L.Ed.2d 1 (1982); 42 U.S.C. §§ 1395j, 1395r, 1395w.

The Secretary is charged with the administration of the Part B program. See 42 U.S.C. § 1395kk(a), 1395hh. The claims-processing functions under Part B are handled by private insurance carriers under contract with the Secretary. Id. § 1395u(a). These carriers are billed for particular services by program beneficiaries or their assignees (e.g., treating physicians). Upon receiving a bill, a carrier must decide whether the services were medically necessary, whether the charges are reasonable, and whether the claim is otherwise covered. Id. § 1395y(a). If the carrier determines that the claim satisfies these criteria, it determines the amount due and makes payment out of the Trust Fund.

Where the claim is denied, one or more opportunities are available under Part B for an appeal. All claimants are initially entitled to a de novo written review before another carrier employee. See 42 C.F.R. § 405.807. After this review, if they are still unsatisfied and the amount in controversy is $100 or more, claimants are entitled to an oral hearing before a hearing officer designated by the carrier. See 42 U.S.C. § 1395u(b)(3)(C); 42 C.F.R. § 405.820. In making their determinations, hearing officers are obligated to comply with the Medicare statute and regulations, "as well as with policy statements, instructions and other guides" issued by the Secretary. Id. § 405.860. Among the "guides" issued by the Secretary are the Medicare Carrier's Manual (MCM) and the Outpatient Physical Therapy Manual (OPTM). The hearing officer's decision may be reopened under certain circumstances. Id. § 405.841. However, under the language in effect at the time of the instant claims, ² no provision of the Medicare statute expressly authorizes further review of the hearing officer's decision, including judicial review.

II.

A.

CHC is a physician-directed clinic incorporated under the laws of Colorado and authorized by the Secretary to furnish services to patients under Part B of the Medicare Program. With the stated aim of developing a comprehensive health care facility, CHC (through physicians E. Sam and Paul Fishman) ³ subleased portions of its office space in 1982 to a psychologist and physical therapist. I R., Doc. 7, Ex. 8a-8b. In the sublease agreements, which were virtually identical, CHC sought to regulate the manner in which these professionals furnished services to its patients under referrals. It obligated them to provide only "first-class service," subject to CHC's review, and to communicate with "referring physician(s) and/or other associates" regarding patients with the goal of enhancing the quality of care. See, e.g., id. Ex. 8a at 1 n. *. Further, CHC required them to abide by various administrative procedures and policies designed to "enhance the function and professional image and reputation" of CHC. Id. at 5. Included among these procedures and policies was a provision stating that assignment of claims under Medicare would be taken and this meant that "only CHC shall bill for such care." Id. attachment 1 at 1. CHC did not employ the psychologist or the physical therapist. Id. Doc. 8 p 3.

In June 1986, Blue Cross & Blue Shield of Colorado (Blue Cross), a carrier under contract with the Secretary to process Medicare claims in Colorado, informed CHC that it was not entitled to reimbursement under the Medicare program for services furnished by the psychologist and physical therapist to CHC patients in 1984 and 1985, and the payments made to CHC for these services would be subject to recoupment. Id. Doc. 7, Ex. 1a at 1-2. Blue Cross said that physicians could not properly bill under the Medicare program for the services of "auxiliary personnel" such as psychologists and physical therapists as an "incident to" their own service unless the physicians employed them. Id. at 1. It informed CHC that there was generally a right to review of its decisions before a hearing officer where the amount in controversy was $100 or more. Id. at 2. By Blue Cross' calculation, the amount in controversy here was $9,748.22. Id. at 2; id. Ex. 1b at 2.

CHC sought review of Blue Cross' denial of reimbursement before a hearing officer. ⁴ The parties waived an oral hearing and the officer rendered her decision on their briefs. The officer ruled against CHC, sustaining the carrier's denial of reimbursement.

The hearing officer addressed two points. First, by reference to the Medicare Carrier's Manual (MCM) §§ 2050, 2050.1 to 2050.2 and 2050.4, she ruled that CHC was not entitled to reimbursement for services furnished by the psychologist and physical therapist because they were not employees of CHC. Id. Ex. 3 at 3. More specifically, she stated that physicians could not bill for services of non-physicians who are not in their employ as an "incident to" their services, even if the non-physicians furnished their services under orders from the physicians. Id. This was so, she said, because the MCM "requires that physicians only bill Medicare for services that represent an expense incurred by them in their professional practice." Id.

Second, the hearing officer ruled that, even if allied health professionals, like psychologists and physical therapists, were not subject to an employment requirement, CHC did not otherwise satisfy the federal standards for reimbursement. Id. at 3-5. The hearing officer observed that CHC relied on 42 C.F.R. § 405.1721 for the proposition that physician-directed clinics can receive Medicare benefits for services furnished by non-employees. However, she said this provision only applied after a clinic had satisfied the criteria of 42 C.F.R. § 405.1701, which related to conditions for participation of clinics in the provision of outpatient physical therapy. Id. at 4.

Section 405.1701 incorporated the standards of 42 U.S.C. § 1395x(p)(4)(A)(iv), which established a state licensure requirement. The hearing officer observed that Blue Cross had alleged that CHC was not licensed in Colorado as a physical therapy provider, and CHC had not presented documentation to dispute this point. The hearing officer found that CHC was not a participating provider of outpatient physical therapy services. Id. at 5. The hearing officer notified CHC that it could seek to reopen the case to correct alleged mistakes. But, as to the possibility of further review, she commented that: "This decision is final. There are no other appeals you can make." Id.

CHC moved for reopening on two separate occasions, and the hearing officer granted each request, responding in writing to CHC's contentions. The hearing officer did not deviate, however, from her ruling against CHC. Significantly, she observed that, even if CHC satisfied the requirements for providing outpatient physical therapy services found in 42 C.F.R. § 405.1701, et seq. (subpart Q), reimbursement would not be appropriate because Medicare law imposed additional requirements for providing such services, and there was no showing by CHC that it satisfied them. Id. Ex. 5 at 2 (First Reopening). In particular, she referred to the requirements that CHC obtain certification from a state agency that it was in compliance with the conditions for participation in the Medicare program, and execute a provider agreement with the Secretary. Id. (citing § 112 and § 130 of the Outpatient Physical Therapy Manual). See also id. Ex. 6 at 2 (Second Reopening).

In addition, the hearing officer rejected an estoppel argument by CHC (found in its...