Michael Reese Physicians and Surgeons, S.C. v. Quern, 78-2040

• Decision Date: 16 June 1980
• Docket Number: No. 78-2040,78-2040
• Citation: 625 F.2d 764
• Parties: MICHAEL REESE PHYSICIANS AND SURGEONS, S.C., and Lawrence Ferguson, M.D., Plaintiffs-Appellees, v. Arthur F. QUERN, Director, Illinois Department of Public Aid, Defendant-Appellant. . Reheard In Banc
• Court: U.S. Court of Appeals — Seventh Circuit

Page 764

625 F.2d 764

MICHAEL REESE PHYSICIANS AND SURGEONS, S.C., and Lawrence Ferguson, M.D., Plaintiffs-Appellees, v. Arthur F. QUERN, Director, Illinois Department of Public Aid, Defendant-Appellant.

No. 78-2040.

United States Court of Appeals, Seventh Circuit.

Reheard In Banc June 16, 1980.

Decided July 18, 1980.

Appeal from Northern District of Illinois, Eastern Division; J. Sam Perry, Judge.

James C. O'Connell, Asst. Atty. Gen., Chicago, Ill., for defendant-appellant.

James C. Murray, Jr., Chicago, Ill., for plaintiffs-appellees.

Before FAIRCHILD, Chief Judge, and SWYGERT, CUMMINGS, PELL, SPRECHER, BAUER, WOOD and CUDAHY, Circuit Judges.

PER CURIAM.

A panel of this court initially issued an opinion, reported at 606 F.2d 732 (7th Cir.), which ordered that the preliminary injunction granted plaintiffs-appellees, Michael Reese Physicians and Surgeons, S.C., and Lawrence Ferguson, M.D., be dissolved. Based upon the plaintiffs-appellees' petition for rehearing with a suggestion that the case be reheard in banc, a majority of the judges in regular active service on this court voted to rehear the case in banc. Following reargument a majority of the judges in regular active service on the court decided to adopt the original panel decision dissolving the preliminary injunction.

PELL, Circuit Judge, for the reasons stated in his dissent from the panel opinion, 606 F.2d at 736, dissents from this decision.

CUMMINGS, Circuit Judge, joins in Circuit Judge PELL's dissent and adds additional reasons for dissenting.

CUMMINGS, Circuit Judge, with whom PELL, Circuit Judge, joins, dissenting.

I join in Judge Pell's original dissent, but I write separately to highlight some additional reasons, first advanced at the en banc oral argument, that support affirmance.

When Congress enacted the 1977 Medicare-Medicaid Antifraud and Abuse Amendments to the Social Security Act, the amended Section 1902a(a)(32) of the Act read in pertinent part as follows:

'(a) A state plan for medical assistance must----

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'(32) provide that no payment under the plan for any care or service provided to an individual shall be made to anyone other than such individual or the person or institution providing such care or service, under an assignment or power of attorney or otherwise; except that----

'(A) in the case of any care or service provided by a physician, dentist, or other individual practitioner, such payment may be made (i) to the employer of such physician, dentist, or other practitioner if such physician, dentist, or practitioner is required as a condition of his employment to turn over his fee for such care or service to his employer, or (ii) (where the care or service was provided in a hospital, clinic, or other facility) to the facility in which care or service was provided if there is a contractual arrangement between such physician, dentist, or practitioner and such facility under which such facility submits the bill for such care or service * * *.' (Italics supplied; 42 U.S.C. Sec. 1396a(a)(32).)

Prior to the amendment, said paragraph (a)(32) stated in pertinent part:

'(a) A State plan for medical assistance must----

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'(32) provide that no payment under the plan for any care or service provided to an individual by a physician, dentist, or other individual practitioner shall be made to anyone other than such individual or such physician, dentist, or practitioner * * *.'

The central purpose of the amendment was to stop the common practice of factoring Medicare and Medicaid bills. That practice depended on the physician's use of a power of attorney that 'allows the factoring company to receive the Medicare or Medicaid payment in the name of the physician, thus allowing the continuation of a program abuse which factoring activities were shown to produce in the past.' House Report No. 95-393, Part II (95th Cong., 1st Sess. 1977) at 49, reproduced in 3 U.S.Code Congressional and Administrative News (95th Cong., 1st Sess. 1977) at 3039, 3051. No such practice is involved here, and Congress expressly recognized this fact. Thus, although the 1977 Amendments prohibit the states from making payments to 'anyone other than' certain named entities under an assignment or power of attorney, it specifically included among the entities entitled to receive payments 'the person * * * providing such care or service.' Under 1 U.S.C. Sec. 1, a 'person' includes a corporation. It follows then that Congress explicitly permitted a corporation such as Michael Reese Physicians & Surgeons, S.C. (MRPS) to receive the payments at issue here.

It would make no sense for Congress to place a corporation such as MRPS within the class of allowable recipients only to have it removed by a state. Although the Illinois Department of Public Aid may argue that the statute prohibits only an expansion of the class of payees and that the Department has merely reduced the size of the class in the interest of furthering the Congressional intent, I do not believe a state should be able to substitute for the judgment of Congress its own notions on how to eliminate factoring. Since Congress clearly believed it was unnecessary to prohibit corporations such as MRPS from receiving payments, Illinois' attempt to do so is contrary to the intent of the statute.

Although under other circumstances I might hesitate to draw from language permitting a state to make payments to MRPS the conclusion that Illinois must allow MRPS to receive payments, such an approach to the statutory intent is...