Public Citizen Health Research Group v. Department of Health, Ed. and Welfare, s. 79-2199

• Decision Date: 30 September 1981
• Docket Number: Nos. 79-2199,79-2364 and 79-2388,s. 79-2199
• Citation: 668 F.2d 537,215 U.S.App. D.C. 191
• Parties: PUBLIC CITIZEN HEALTH RESEARCH GROUP, v. DEPARTMENT OF HEALTH, EDUCATION AND WELFARE, et al. National Capital Medical Foundation, Inc., Appellant. PUBLIC CITIZEN HEALTH RESEARCH GROUP v. DEPARTMENT OF HEALTH, EDUCATION AND WELFARE, Appellant National Capital Medical Foundation, Inc., et al. PUBLIC CITIZEN HEALTH RESEARCH GROUP v. DEPARTMENT OF HEALTH, EDUCATION AND WELFARE, et al. American Association of Professional Standards Review Organizations,(Intervenor-Deft.), Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 537

668 F.2d 537

215 U.S.App.D.C. 191

PUBLIC CITIZEN HEALTH RESEARCH GROUP, v. DEPARTMENT OF HEALTH, EDUCATION AND WELFARE, et al.

National Capital Medical Foundation, Inc., Appellant.

PUBLIC CITIZEN HEALTH RESEARCH GROUP v. DEPARTMENT OF HEALTH, EDUCATION AND WELFARE, Appellant

National Capital Medical Foundation, Inc., et al.

PUBLIC CITIZEN HEALTH RESEARCH GROUP v. DEPARTMENT OF HEALTH, EDUCATION AND WELFARE, et al.

American Association of Professional Standards Review

Organizations,(Intervenor-Deft.), Appellant.

Nos. 79-2199, 79-2364 and 79-2388.

United States Court of Appeals, District of Columbia Circuit.

Argued May 13, 1980.

Decided Sept. 30, 1981.

As Amended Sept. 30, 1981.

Appeals from the United States District Court for the District of Columbia (D.C.Civil Action No. 77-2093).

Joseph B. Scott, Atty., Dept. of Justice, Washington, D. C., with whom Alice Daniel, Asst. Atty. Gen., Charles F. C. Ruff, U. S. Atty. and Leonard Schaitman, Atty., Dept. of Justice, Washington, D. C., were on the brief, for federal appellants in No. 79-2364 and cross-appellees in Nos. 79-2199 and 79-2388.

Lee T. Ellis, Jr., Washington, D. C., with whom John Lewis Smith, III, Douglas K. Spaulding, and Kay M. Small, Washington, D. C., were on the brief, for National Capital Medical Foundation, Inc., appellant in No. 79-2199 and cross-appellee in Nos. 79-2364 and 79-2388.

Robert D. Reif, Washington, D. C., with whom William G. Kopit, Washington, D. C., was on the brief, for American Association of Professional Standards, appellant in No. 79-2388 and cross-appellee in Nos. 79-2199 and 79-2364.

David C. Vladeck, Washington, D. C., with whom Alan B. Morrison, Washington, D. C., was on the brief, for Public Citizen Health Research Group, appellee in Nos. 79-2199, 79-2364, and 79-2388.

William J. Guste, III, New Orleans, La., was on the brief for amicus curiae urging affirmance. Stuart F. Pierson, Washington, D. C., also entered an appearance for amicus curiae.

Before TAMM, ROBB and MIKVA, Circuit Judges.

Opinion for the court filed by Circuit Judge ROBB.

Concurring opinion filed by Circuit Judge TAMM.

Dissenting opinion filed by Circuit Judge MIKVA.

ROBB, Circuit Judge:

This is an action under the Freedom of Information Act, 5 U.S.C. § 552 (1976) (FOIA) initiated by the plaintiff, Public Citizen Health Research Group (Public Citizen), against the Department of Health, Education and Welfare (HEW or Department) ¹ and the National Capital Medical Foundation, Inc. (the Foundation) to compel disclosure of documents. The Foundation has been designated by the Department as the "Professional Standards Review Organization" (PSRO) for Washington, D.C., and it performs its functions under contract with the Department, pursuant to Medicare and Medicaid programs.

The Foundation moved to dismiss the action on the ground that it is not an "agency" within the meaning of the Freedom of Information Act, 5 U.S.C. § 552(e) (1976), and that its records therefore are not subject to disclosure under that Act. HEW supported the Foundation on this issue and separately moved for dismissal as to it on the ground that it had neither possession nor control over the documents sought. Holding that the Foundation is an independent agency for purposes of the Freedom of Information Act, the District Court denied the motion to dismiss. However, the court found that the Department had neither possession nor control of the disputed materials. The matter was remanded for administrative processing of the plaintiff's request for disclosure. Public Citizen Health Research Group v. HEW, 449 F.Supp. 937 (D.D.C.1978). Thereafter, the parties having submitted affidavits, the plaintiff moved for summary judgment. The Foundation opposed the motion, contending that the materials sought were exempt from disclosure under Exemptions three, four, five, six and seven of the Freedom of Information Act. In light of this court's decision in Forsham v. Califano, 190 U.S.App.D.C. 231, 587 F.2d 1128 (1978), aff'd, 445 U.S. 169, 100 S.Ct. 978, 63 L.Ed.2d 293 (1980), HEW moved for reconsideration of the court's earlier ruling that the Foundation is an "agency" under FOIA. Alternatively, the Department moved for summary judgment. The intervenor, American Association of Professional Standards Review Organizations, supported the Foundation and the Department. Concluding that none of the FOIA exemptions applied, the court granted the plaintiff's motion for summary judgment and denied the motion for reconsideration. The court granted a stay of thirty days pending appeal and we extended the stay until further order of this court.

We reverse because we conclude that the Foundation is not an "agency" for purposes of the Freedom of Information Act, 5 U.S.C. § 552(e) (1976).

In 1972 Congress amended the Social Security Act (Act) to establish the PSRO program. Section 249F(b) of P.L. 92-603; 42 U.S.C. § 1320c, et seq. (Supp. III 1979). The legislation was enacted "to promote the effective, efficient, and economical delivery of health care services of proper quality for which payment may be made (in whole or in part) under (the Social Security Act)..." 42 U.S.C. § 1320c. The impetus for adoption of the PSRO system was congressional concern over rapidly rising costs of the Medicare and Medicaid programs ² and the congressional finding that this increase in costs was caused, in part, by unnecessary use of medical services under these programs. S.Rep.No. 92-1230, 92d Cong., 2d Sess. 254-55 (1972). To assist in stemming this rise in costs, PSROs were established to review the appropriateness, medical necessity, and quality of health care services paid for under the Act, principally Medicare and Medicaid reimbursement. 42 U.S.C. § 1320c et seq.

The PSRO program operates through a system of peer review. ³ Under the legislation, the Secretary of HEW is required to enter into an agreement with a "qualified organization", which is designated as the PSRO for a particular locale. 42 U.S.C. § 1320c-1(a) (1976). The Act gives a funding preference to PSROs that are nonprofit, local, physician membership organizations. 42 U.S.C. § 1320c-1(b)(1)(A). Whatever the character of the organization, however, the HEW PSRO designations are reflected in agreements that are for terms of twelve months and are terminable by either the Secretary or the association. 42 U.S.C. § 1320c-1(d) (1976).

In general terms, PSROs review health care services, furnished to individuals; collect and analyze patient, practitioner, and provider data; develop local norms of care; conduct various educational activities; and report practitioners and providers who violate certain statutory obligations. 42 U.S.C. §§ 1320c-4, 1320c-6, 1320c-9 (1976). In reviewing health care services rendered by or in institutions for which payment may be made under the Medicare and Medicaid programs, PSROs determine: (1) whether the services are or were medically necessary; (2) whether the quality of services meets professionally recognized standards of health care; and (3) whether the services could have been more appropriately rendered in another less expensive manner. 42 U.S.C. § 1320c-4(a)(1) (1976). The standards governing PSRO review are the professionally developed norms of care, diagnosis or treatment typical of practice in the particular region. 42 U.S.C. § 1320c-5(a) (1976). In order to perform their function, PSROs are given access to patient records (42 U.S.C. § 1320c-4(b)(3)), and are required to maintain "profiles" on physicians and hospitals providing Medicare and Medicaid services. Profiles consist of data about hospital admissions, types of diagnoses, disapproved services, etc. 42 U.S.C. § 1320c-4(a)(4). In addition, in order to perform its quality assurance activities, PSROs have been required by HEW to perform Medical Care Evaluation (MCE) studies. These are in-depth assessments of the quality of the delivery and organization of health care services and are aimed at effecting specific improvements in health care delivery. ⁴ (J.A. 265)

In practice, members of a PSRO such as the Foundation review Medicaid and Medicare patients in hospitals within the PSRO's jurisdiction. The PSROs undertake four steps of review: (1) admission certification; (2) continued stay review; (3) medical care evaluation studies; and (4) profile analyses.

Admission certification review concerns the medical necessity of hospital admissions. PSRO members review an admission during the first day of hospital stay to determine whether a patient needs to be hospitalized at all. Based on that review, members predict or "assign" the appropriate length of the patient's stay. 42 U.S.C. § 1320c-4(a)(2).

Continued stay reviews are conducted for patients who remain in the hospital beyond the expiration of their predicted stay. These reviews are made to determine whether continued hospitalization is in fact needed. Additional days may be assigned at this time, or, if the PSRO concludes the additional stay is not "medically necessary" the PSRO can disapprove the continued hospitalization. 42 U.S.C. § 1320c-5(d). In that event, once the patient has been notified that the PSRO deems an additional stay to be medically unnecessary, the patient must thereafter either leave the hospital or make private payment.

The statute provides that the PSRO determinations with regard to the medical necessity, conformance to provisional standards, and appropriateness of hospitalization "shall constitute the conclusive determination on those issues ... for purposes of payment under this chapter." 42 U.S.C. § 1320c-7(c) (Supp. III 1979). In other words, favorable determinations by a PSRO are binding on HEW and not appealable. Under certain circumstances an adverse decision may be appealed, but in the case before us the District Court found that only about one percent of the decisions made by the Foundation as to medical necessity were adverse.

The National Capital Medical Foundation,...