Furlong v. Shalala

• Decision Date: 01 August 2000
• Citation: 238 F.3d 227
• Parties: (2nd Cir. 2001) MONICA FURLONG, LAWRENCE SCHWARTZ, ROBERT SLOAN and KENNETH Y. SUNEW, individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. DONNA E. SHALALA, in her capacity as Secretary of the Department of Health & Human Services; BRUCE C. VLADECK, in his capacity as Administrator of the Health Care Financing Administration, Defendants-Appellees. Docket No 00-6091
• Court: U.S. Court of Appeals — Second Circuit

Page 227

238 F.3d 227 (2nd Cir. 2001)

MONICA FURLONG, LAWRENCE SCHWARTZ, ROBERT SLOAN and KENNETH Y. SUNEW, individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. DONNA E. SHALALA, in her capacity as Secretary of the Department of Health & Human Services; BRUCE C. VLADECK, in his capacity as Administrator of the Health Care Financing Administration, Defendants-Appellees.

Docket No 00-6091

August Term, 2000

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: November 29, 2000

Decided: January 24, 2001

Appellants appeal from a judgment of the United States District Court for the Southern District of New York (Loretta A. Preska, Judge)denying appellants' motion for "summary expedited final judgment" in the form of a recalculation of benefits under the Medicare Part B plan and granting appellees' motion for summary judgment on the issue of what process is due appellants with respect to their property interest in charging higher fees.

Affirmed in part and reversed in part, and remanded.

PETER JAMES CLINES, Landy & Seymour, New York, NY (Whitney North Seymour, Jr., of counsel), for Appellants.

MICHAEL M. KRAUSS, Assistant United States Attorney, for Mary Jo White, United States Attorney for the Southern District of New York; (Gideon A. Schor, Assistant United States Attorney, on the brief), for Appellees.

Before: VAN GRAAFEILAND, McLAUGHLIN, KATZMANN, Circuit Judges.

KATZMANN, Circuit Judge:

Robert Sloan and Kenneth Y. Sunew (collectively "plaintiffs")¹ appeal from a judgment entered on February 25, 2000, in accordance with a Memorandum and Order entered on February 23, 2000 (Loretta A. Preska, Judge), denying plaintiffs' motion for "summary expedited final judgment" and granting defendants motion for summary judgment on the question of what process was due to plaintiffs with respect to the calculation of the Medicare-approved charges for the provision of certain services. We affirm the district court's denial of plaintiffs' requested relief, but reverse its due process determination and grant of defendants' motion for summary judgment.

I. Background

This case is before us for the second time. See Furlong v. Shalala, 156 F.3d 384 (2d Cir. 1998). Because a thorough account of the facts, and of the relevant regulatory scheme, is provided in our earlier opinion, see id. at 386-90, we presume familiarity with the background of this case. However, it will be useful for the discussion that follows to reiterate a few key points.

This case concerns various statutory and regulatory provisions that govern the Medicare "Part B" program -- a voluntary program offering supplemental insurance coverage for those persons already enrolled in the Medicare "Part A" program, which offers basic health insurance to people who are 65 or older, or who are disabled. See 42 U.S.C. § 1395c-1395d; 1395j-1395k (1992). Under the Part B program, physicians must choose whether to accept assignment of their patients' rights to reimbursement. See id. § 1395u(b)(3)(B)(ii) & (h)(1). If a physician accepts assignment, he must agree to accept the Medicare-approved charge (set by the Department of Health and Human Services) as payment in full. See id. § 1395u(b)(3)(B)(ii). These "assignee-physicians" generally receive 80% of the Medicare-approved charge from the Federal Supplementary Medical Insurance Trust Fund ("Trust Fund") and the remaining 20% from the patient. See id. § 1395l(a)(1). Physicians electing not to accept assignment are also limited in the amount they can charge for their services, but the limit is higher than the Medicare-approved charge; they are permitted to charge an amount in excess of the Medicare-approved amount so long as it is not more than a specified "limiting charge." See id. § 1395w-4(g). Since 1992, the limiting charge has been 115% of the Medicare-approved charge for non-participating physicians. See id. § 1395w-4(g)(2)(C). These "non-assigned physicians" bill their patients directly for the Medicare-approved charge plus any additional amount allowed by the limiting charge. See id. §§ 1395l(a)(1) & 1395u(b)(3)(B)(i). The patient is then reimbursed by the Trust Fund for 80% of the Medicare-approved charge. See id.

The Part B program is administered by the Secretary of the Department of Health and Human Services (the "Department") acting through the Health Care Financing Administration ("HCFA"), but the day-to-day management of the program is handled by private insurance carriers under contract with the Department. See id. § 1395u. HCFA's policies and rulings are binding on the carriers, see, e.g., 42 C.F.R. 405.502(d), 405.860(a)(1) (2000), and directives are communicated at least in part through the Medicare Carriers' Manual ("MCM"), as well as through the Federal Register. In 1991, HCFA adopted a policy which provides that "[i]f a surgeon performs more than one procedure on the same patient on the same day, we will pay 100 percent of the global fee for the highest value procedure only, 50 percent of the global fee for the second most expensive procedure, and 25 percent of the global fee for the third, fourth, and fifth procedures." 56 Fed. Reg. 59,502, 59,515 (Nov. 25, 1991); see 56 Fed. Reg. 59,601-02 (providing the Department's response to comments on this rule).² This so-called "one-and-one-half rule" applies by its terms only to surgical procedures.

A physician's decision whether to accept assignment of patients' claims affects not only the amounts that can be charged and the associated billing procedures, but also his or her ability to appeal an insurance carrier's determination of the Medicare-approved charge for a given service. In our previous opinion, we summarized the appeal provisions available to assignee physicians as follows:

Following the carrier's initial de novo determination, § 1395u(b)(3)(C) of the Act entitles the patient to a "fair hearing," if the amount in controversy is at least $100, to be conducted by a carrier designated hearing officer. See generally 42 C.F.R. § 405.807 405.815. If that hearing results in a decision adverse to the patient, and the amount in controversy equals or exceeds $500, the patient may request an evidentiary hearing and de novo review of the carrier's decision by an Administrative Law Judge (ALJ). See §42 U.S.C. 1395ff(b)(1)(C) (incorporating procedures for administrative review set forth at 42 U.S.C. § 405(b) & (b)(2)(B) (1994)). If that too is unsuccessful, the patient may appeal the ALJ's decision to an appeals council. See id. Upon issuance of the appeals council's ruling, which is the final administrative decision, a dissatisfied patient may within 60 days seek judicial review of the Secretary's determination in the district court, but only if the amount in controversy equals or exceeds $1,000. See id. (incorporating procedures for judicial review set forth at 42 U.S.C. § 405(g)).

Furlong, 156 F.3d at 388; see 42 C.F.R. § 405.801. The difference in the rights accorded to assignee and non-assigned physicians arises because while Congress, in 42 U.S.C. § 1395ff, stated that "[a]ny individual dissatisfied with any determination" as to the amount of benefits awarded is entitled to the types of review summarized above, see 42 U.S.C. § 1395ff (b)(1)(C) (emphasis added), the Department, through 42 C.F.R. § 405.801, has determined that "the rights of a beneficiary . . . to appeal the carrier's initial determination are granted also to . . . [a] physician or supplier that furnishes services to a beneficiary and that accepts an assignment from the beneficiary," 42 C.F.R. § 405.801 (b) (1), but does not extend the rights provided by § 1395ff to non-assigned physicians, see Furlong, 156 F.3d at 388. As we observed in our previous opinion, this policy "encourag[es] physicians to accept assignments and allow[s] patients to avoid additional charges and administrative responsibilities." Id. at 391.

Plaintiffs here are non-assigned anesthesiologists who performed what the parties have called "concurrent invasive monitoring" during major surgeries. Such monitoring is "invasive" in that it involves the placement of equipment into the patient's arteries and veins in order to monitor vital signs such as blood pressure, blood gases, and heart performance. See Furlong, 2000 WL 194843, at *2 (S.D.N.Y. Feb. 18, 2000). It is "concurrent" because more than one type of equipment is used at the same time. See id. Prior to January 1, 1994, carriers classified concurrent invasive monitoring as surgical, and therefore applied the one-and-one-half rule to the procedures involved. See id. at *3. On that date, the HCFA apparently indicated through changes in the Medicare Physician Fee Schedule database that such monitoring was medical, rather than surgical, in nature, and was therefore exempt from application of the one-and-one-half rule.³ Given that the limiting charge for a service provided under Part B by a non-assigned physician is linked to the Medicare-approved charge for those services, the application of the one-and-one-half rule to concurrent invasive monitoring lowered the amount that plaintiffs could charge for their services. Throughout this case plaintiffs have argued that concurrent invasive monitoring is a "medical" and not a "surgical" procedure, and that the carriers therefore erroneously applied the one-and-one-half rule to such monitoring. And, as defendants conceded at oral argument and in their brief, assignee physicians who performed concurrent invasive monitoring during this period and who exercised their rights to appeal the application of the rule to these procedures before Administrative Law Judges ("ALJs"), appear to have been consistently successful in getting the application of the rule overturned on grounds that the procedures at issue were "medical" in nature. Plaintiffs claim that the total difference in benefits among the class of anesthesiologists affected by the application of the rule is...