Metrolina Family Practice Group, PA v. Sullivan

• Decision Date: 29 December 1989
• Docket Number: No. C-C-88-0436-M.,C-C-88-0436-M.
• Citation: 767 F. Supp. 1314
• Court: U.S. District Court — Western District of North Carolina
• Parties: METROLINA FAMILY PRACTICE GROUP, P.A., et al., Plaintiffs, v. Louis M. SULLIVAN, M.D., Secretary, of Health and Human Services, and United States Department of Health and Human Services, Defendants.

767 F. Supp. 1314

METROLINA FAMILY PRACTICE GROUP, P.A., et al., Plaintiffs, v. Louis M. SULLIVAN, M.D., Secretary, of Health and Human Services, and United States Department of Health and Human Services, Defendants.

No. C-C-88-0436-M.

United States District Court, W.D. North Carolina, Charlotte Division.

December 29, 1989.

William L. Auten and Stanley Gertzman, Charlotte, N.C., for plaintiffs.

Sheila Lieber and Peter Kimm, Civ. Div., Washington, D.C., for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

McMILLAN, District Judge.

This suit (1) challenges the constitutionality of certain recent amendments to Title XVIII of the Social Security Act, Health Insurance for the Aged and Disabled, 42 U.S.C. § 1395 et seq., and (2) requests declaratory and injunctive relief. Plaintiffs specifically attack §§ 1395l (h)(5)(C)-(D), 1395u(j), and 1395u(n) (which place ceilings on the amount physicians can charge Medicare patients), and §§ 1395u(b)(3)(B)(ii)(III), 1395u(l)(1)(A)(iv), and 1395u(m) (which place limitations on services for which physicians can charge Medicare patients).

The court heard plaintiffs' and defendants' motions for summary judgment on June 15, 1989.

On June 27, 1989, the court entered a memorandum of decision determining that defendants' motion for summary judgment should be granted and that plaintiffs' motion for summary judgment should be denied. Defendants were requested to draft and submit proposed findings of fact and conclusions of law. The court has reviewed the records and defendants' proposed findings and conclusions, and makes the following findings of fact and conclusions of law:

FINDINGS OF FACT

1. No material facts are in dispute. Most of the relevant facts are set forth in a stipulation, filed May 30, 1989, signed by counsel for both parties. Other relevant facts are in the record and are uncontested.

2. Plaintiffs Metrolina Family Practice Group, P.A., Charlotte Medical Clinic, P.A., Mecklenburg Medical Group, P.A., Travis Medical Clinic, P.A., and Kouri Medical Clinic, P.A., are professional associations, organized and existing under the laws of the State of North Carolina; each has an office and principal place of business in Charlotte, North Carolina.

3. Plaintiff North Mecklenburg Family Practice Group, P.A. is a professional association, organized and existing under the laws of the State of North Carolina, with offices and its principal place of business in Huntersville, North Carolina.

4. Plaintiff The Durwood Medical Clinic, Inc. is a corporation, organized and existing under the laws of the State of North Carolina, with offices and its principal place of business in Charlotte, North Carolina.

5. Plaintiff Charlotte Internal Medicine Associates is a partnership, organized and existing under the laws of the State of North Carolina, with offices and its principal place of business in Charlotte, North Carolina.

6. Plaintiffs Thomas Dulin, Ralph V. Kidd and Harold P. Hope, Jr. are residents of Charlotte, North Carolina.

7. The individual plaintiffs, the corporate plaintiff's members or shareholders, and the partnership plaintiff's partners are "physicians" rendering "Physicians' services" under Part B of the Medicare program, 42 U.S.C. § 1395x(q) and (r).

8. Defendant Louis M. Sullivan, M.D. ("the Secretary"), is the Secretary of Health and Human Services and is responsible for the administration of programs within the Department of Health and Human Services ("HHS"), including the Medicare program.

9. Defendant United States Department of Health and Human Services is the agency empowered to implement and regulate the Medicare program and to enforce the provisions of the Social Security Act.

10. The Medicare program is divided into two parts. Part A provides insurance for hospital and related post-hospital services. 42 U.S.C. §§ 1395c et seq. Part B, at issue here, establishes a voluntary program of supplementary medical insurance covering physicians' and other medical services. 42 U.S.C. §§ 1395j et seq.

11. Under Part B, Medicare enrollees obtain health insurance benefits in return for the payment of monthly premiums, the amount of which is determined by the Secretary of HHS. 42 U.S.C. § 1395r(b)-(c); 42 U.S.C. § 1395t. These premiums, together with contributions from the federal government, make up the Federal Supplementary Medicare Insurance Trust Fund ("Medicare Trust Fund"). For fiscal year 1988, premium payments accounted for approximately one-fourth of Medicare Trust Fund revenues. About three-fourths of these revenues were contributed by the federal government.

12. A physician who treats an enrollee under Part B may either bill the patient (who then requests reimbursement from Medicare) or submit the claim directly to Medicare. 42 U.S.C. § 1395u(b)(3)(B)(i) and (ii). In the latter group of cases (referred to as "assigned claims"), the physician collects from Medicare as assignee of the beneficiary, and bills the beneficiary for any applicable coinsurance and/or deductible amount. To help administer the program, the Secretary is authorized to enter into contracts with "carriers," usually large insurance companies, that process claims for reimbursement for physicians' services and maintain records of physician charges for specific localities. 42 U.S.C. § 1395u.

13. Physicians treating Medicare patients must decide each year whether to be a Medicare "participating" or "nonparticipating" physician. 42 U.S.C. § 1395u(h). A "participating" physician agrees to accept assignment of all of his or her Medicare patients' claims as full payment for all items or services furnished to Medicare beneficiaries during a twelve-month period. "Nonparticipating" physicians may continue to choose whether to accept assignment of claims on a case-by-case basis.

14. For both assigned and unassigned claims, Medicare will generally pay only the "reasonable charge" for the service involved, less any applicable co-payment. 42 U.S.C. § 1395l(a)(1)(B). The "reasonable charge" for a physician's services is based on billing information supplied by physicians, and is computed according to a formula set out by statute. 42 U.S.C. § 1395u(b)(3). Ordinarily, the "reasonable charge" for a service is defined as the lowest of (1) a physician's actual charge for the service; (2) the physician's "customary charge" for similar services as determined according to a fee profile developed by the local Medicare carrier; and (3) the "prevailing charge recognized by the carrier" based on data for similar services in the locality. Id.

15. Under § 1395y of the Social Security Act, Medicare will not pay for services that are judged "not reasonable and necessary for the diagnosis or treatment of illness or injury." The statute establishes peer review organizations, composed of licensed physicians engaged in the practice of medicine within a geographic area, whose primary function is to determine whether services are reasonable and necessary. 42 U.S.C. § 1320c-3.

16. More than 32 million Americans are presently enrolled in Medicare, which has become one of the fastest growing federal programs. Federal outlays for Medicare amounted to nearly $88 billion in fiscal year 1988. Part B expenditures, which comprise about one-third of total Medicare spending, increased by approximately 17% per year between 1980 and 1988. Payments for physician services have accounted for approximately 72% of Part B expenditures. During the 1980's, as Medicare costs to the federal government soared, Congress became increasingly concerned about escalating charges to the Medicare program of physician services and the potential effect of these increases on the continuing integrity of the Medicare Trust Fund. In response, Congress has enacted numerous provisions affecting physician reimbursement under the Medicare program.

17. Plaintiffs challenge the statutory provisions described in the following paragraphs:

18. Limitations on Non-Participating Physicians' Fees (42 U.S.C. 1395u(j)). Prior to 1984, if a physician chose not to accept a particular assignment, Medicare placed no limitation on the amount that he or she could charge a Medicare beneficiary. In such cases Medicare would reimburse the patient for a physician's service based upon the "reasonable charge"; the beneficiary was then responsible for any difference between the "reasonable charge" and the physician's actual charge to the patient.

19. However, under amendments passed in the Deficit Reduction Act of 1984, Public L. No. 98-369 ("DEFRA-84") and the Omnibus Budget Reconciliation Act of 1986, Pub.L. No. 99-509 ("OBRA-86"), if a "non-participating" physician decides not to accept a particular assignment, a limitation is nonetheless placed on the amount he or she can bill a Medicare patient. Section 1395u(j) states that for services performed from July 1, 1984 until December 31, 1987, physicians can be sanctioned if they knowingly and willfully bill their patients for more than their actual charges for the calendar quarter beginning on April 1, 1984. For services performed on or after January 1, 1987, physicians can be sanctioned for billing more than the "maximum allowable actual charge" ("MAAC") for any service. An individual physician's MAAC for a particular service is calculated by applying a mathematical formula to the physician's actual charges for that service between April 1 and June 30, 1984.

20. Charges for Specified Surgical Procedures (42 U.S.C. § 1395u(b)(10)). This provision mandates the application of a statutory formula to reduce the "prevailing charge" for both participating and nonparticipating physicians used in determining the Medicare "reasonable charge" for a number of specified surgical procedures listed in 42 U.S.C. § 1395u(b)(10)(B). The procedures include, for example, bronchoscopy, carpal tunnel repair, cataract surgery and coronary artery bypass surgery.

21. Mandatory Assignment of All Clinical Diagnostic Laboratory Tests (42...