Dozier v. Professional Foundation for Health Care, Inc., 90-3328

• Decision Date: 11 October 1991
• Docket Number: No. 90-3328,90-3328
• Citation: 944 F.2d 814
• Parties: , Medicare & Medicaid Guide P 39,665 Laurie DOZIER, Jr., M.D., Plaintiff-Appellee, v. PROFESSIONAL FOUNDATION FOR HEALTH CARE, INC., Frank D. Tagliarini, M.D., Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 814

944 F.2d 814

35 Soc.Sec.Rep.Ser. 40, Medicare & Medicaid Guide P 39,665

Laurie DOZIER, Jr., M.D., Plaintiff-Appellee, v. PROFESSIONAL FOUNDATION FOR HEALTH CARE, INC., Frank D Tagliarini, M.D., Defendants-Appellants.

No. 90-3328.

United States Court of Appeals Eleventh Circuit.

Oct. 11, 1991.

Patricia Guilday, Pensacola, Fla., for defendants-appellants.

John C. Cooper, Douglass, Cooper, Coppins & Powell, Tallahassee, Fla., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Florida.

Before TJOFLAT, Chief Judge, DUBINA, Circuit Judge, and PECK ^*, Senior Circuit Judge.

TJOFLAT, Chief Judge:

Pursuant to a contract with the Health Care Financing Administration (HCFA), the Professional Foundation for Health Care, Inc. (the Foundation), a Medicare peer review organization (PRO), reviews Medicare claims filed in the state of Florida. ¹ If the Foundation determines that the treatment given to a Medicare patient was unreasonable, not medically necessary, or did not meet professional standards of care, Medicare will not pay the claim, 42 U.S.C. § 1320c-3(a)(1) (1988); 42 C.F.R. § 466.71(a) (1990), and the Foundation so notifies the patient, the doctor, and the hospital. ² Dr. Laurie Dozier, Jr., a physician who treats Medicare patients, claims that the Foundation issued a notice of payment denial that contains a defamatory statement about him to one of his patients without first notifying him and giving him an opportunity to explain why denial was not appropriate--as, he asserted, 42 C.F.R. § 466.93 (1986) required. Accordingly, he brought this suit against the Foundation and its medical director, Dr. Frank Tagliarini, for damages, pursuant to Bivens v. Six Unknown Agents of Federal Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). The case proceeded to trial before the magistrate judge, see 28 U.S.C. § 636(c)(1) (1988), and a jury awarded Dr. Dozier compensatory damages in the sum of $100,000 against Dr. Tagliarini and punitive damages in the sum of $10,000 against Dr. Tagliarini and $250,000 against the Foundation. Judgment was entered in accordance with the jury's verdict, and this appeal followed.

We reject Dr. Dozier's contention--on which his claim is based--that 42 C.F.R. § 466.93 (1986) required the Foundation to notify him of a denial of payment before telling his patient. Indeed, the governing statute in force when the Foundation issued this notice, 42 U.S.C. § 1320c-3 (1982) required the Foundation to notify them at the same time. We conclude that Dr. Dozier failed to state a claim for relief and therefore reverse the district court's judgment. ³

I.

On May 23, 1986, Dr. Dozier admitted a Medicare patient, Ina Holloway, to the Tallahassee Regional Medical Center, Inc. (the Hospital) for treatment related to coronary artery disease with angina pectoris and congestive heart failure with mild pulmonary edema. Holloway was discharged on May 27, 1986. Dr. Dozier readmitted her a day later for further treatment. On June 2, 1986, she was discharged for the second time. Either the Hospital, Dr. Dozier, or Holloway submitted a claim for Medicare reimbursement for the care given to Holloway during her second admission to the Hospital. ⁴ In accordance with its contract with the HCFA, the Foundation reviewed Holloway's medical records to determine whether Medicare would pay for her second admission to the hospital.

After review, the Foundation determined that Holloway's second admission to the Hospital was unnecessary. It did not, however, first notify Dr. Dozier that Medicare would not pay for this treatment and give him an opportunity to explain why payment was appropriate. Instead, it sent a notice of payment denial to Holloway; on this notice, it stated that Medicare would not pay for her second admission to the hospital because "it was not medically necessary for [Holloway] to have been admitted to the hospital. Quality of care given on previous admission was inadequate requiring second admission." ⁵ The Foundation sent copies of this "Retrospective Admission Denial" to Holloway, the hospital administrator, the Hospital billing office, the chairman of the Hospital's utilization review committee, and Dr. Dozier. Later, after the Hospital and Dr. Dozier protested the denial, the Foundation reversed its initial denial of payment.

Dr. Dozier alleged, in his complaint, that the notice sent to his patient--which, he asserts, the Foundation would never have sent had it given him an opportunity to contest the proposed payment denial--contained a defamatory statement that harmed his professional and personal reputation, thereby depriving him of a property and liberty interest without the due process of law guaranteed him by the Fifth Amendment. ⁶ The Foundation and Dr. Tagliarini, in their answer, denied liability. Prior to trial, they moved for judgment on the pleadings; they argued that the complaint failed to allege that they had deprived Dr. Dozier of a liberty or property interest protected by the Fifth Amendment. The magistrate judge, with the parties' consent, ⁷ deferred ruling on this motion until after trial. At trial, the jury found for Dr. Dozier on his Bivens claim. ⁸

Thereafter, the magistrate judge issued an order denying the defendants' motion for judgment on the pleadings. He held, first, that Florida law creates a property interest in professional reputation; under the Fifth Amendment, the federal government could not injure this property interest without providing due process. Second, he held that Dr. Dozier had a liberty interest in his professional reputation; the federal government likewise could not injure this interest without due process. For the reasons stated below, we hold that the magistrate judge erred. ⁹

II.

As we have stated, Dr. Dozier's claim is based on his assertion that federal law required the Foundation, before it notified his patient that it was denying payment, first to notify him and to give him an opportunity to contest the recommendation. 42 C.F.R. § 466.93 (1986), the regulation Dr. Dozier claims imposed this duty on the Foundation, states that PROs, before they issue an initial notice that Medicare payment has been denied, must

(a) Promptly notify the provider or supplier and the patient's attending physician (or other attending health care practitioner) of the proposed determination ...; and

(b) Afford an opportunity for the provider or supplier and the patient's attending physician (or other attending health care practitioner) to discuss the matter with the PRO physician advisor and to explain the nature of the patient's need for health care services....

After the PRO tells the hospital and doctor that it is considering denying payment and gives them an opportunity for discussion, the PRO, if it still feels that the treatment was unnecessary or did not meet professional standards, must send written notice that payment for the treatment is denied to the patient, the attending physician, the hospital (or other treatment facility) and to the entity that is responsible for administering and paying the patient's Medicare claim. 42 C.F.R. § 466.94 (1986). ¹⁰

This regulation envisions that the doctor and hospital will receive an initial, informal notice before the formal written notice goes out. It does not, however, forbid the PRO from sending such an initial, informal notice to the patient, or from otherwise soliciting the patient's views on the possibility of payment denial. Indeed, as the purpose of the initial informal notice seems to be to allow the PRO to gather information on the circumstances of the treatment given--and, thus, to filter out erroneous denials--before it issues a formal denial, the patient's input may be crucial. In most circumstances, the hospital or physician, rather than the patient, will be liable for the cost of the denied treatment. Consequently, the patient's impartial input may be more important to the PRO's determination than the doctor's or hospital's. Indeed, it may be necessary for the PRO, in order accurately to filter out erroneous denials, to involve the patient in this initial stage of the process.

Even though this regulation does not forbid notice to the patient, Dr. Dozier could argue that in this case the defendants deprived him of a liberty or property interest by sending the defamatory statement to his patient without whatever process the Fifth Amendment required. We hold, however, that the plain language of 42 U.S.C. § 1320c-3(a)(3) (1982), the statute under which 42 C.F.R. § 466.93 (1986) was promulgated, precludes this argument. The version of section 1320c-3(a)(3) in force when the Foundation sent the denial notice at issue stated:

Whenever the [PRO] makes a determination that any health care services or items furnished or to be furnished to a patient by any practitioner or provider are disapproved, the organization shall promptly notify such practitioner or provider, such patient, and the agency or organization responsible for the payment of claims.... In the case of practitioners and providers of services, the organization shall provide an opportunity for discussion and review of the determination. ¹¹

This statute required that whenever the PRO determined that Medicare payment should be disapproved, it had to notify promptly both the doctor and the patient. Dr. Dozier chose to participate in a federal program that required the Foundation to send denial notices to his patients at the same time they went to him. Under such a system, it is inevitable that patients will receive statements criticizing the quality of care they received. Dr. Dozier may not now complain that, because the Foundation followed federal law and sent such a notice, it somehow deprived him of due process. ¹²

III.

Accordingly, we REVERSE the order denying the defendants' motion for judgment on the pleadings and direct the district court to enter judgment for ...