Rudolph v. Pennsylvania Blue Shield

• Decision Date: 21 August 1998
• Citation: 717 A.2d 508,553 Pa. 9
• Parties: Joseph P. RUDOLPH, M.D., Family Professional Center, P.C., a Professional Corporation and Family Professional Center Laboratory, Appellants, v. PENNSYLVANIA BLUE SHIELD, a Professional Health Service Corporation, Appellee.
• Court: Pennsylvania Supreme Court

Page 508

717 A.2d 508

553 Pa. 9

Joseph P. RUDOLPH, M.D., Family Professional Center, P.C., a

Professional Corporation and Family Professional

Center Laboratory, Appellants, v. PENNSYLVANIA BLUE SHIELD, a Professional Health Service

Corporation, Appellee.

Supreme Court of Pennsylvania.

Argued Sept. 17, 1997.

Decided Aug. 21, 1998.

Albert G. Feczko, Jr., Bethel Park, Craig E. Frischman, Pittsburgh, for Joseph P. Rudolph, M.D., Family Professional Center, P.C. and Family Professional Center.

Kevin J. McKeon, Harrisburg, for Pennsylvania Medical Soc. (Amicus Curiae).

Charles P. Falk, for Pennsylvania Blue Shield.

Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO and NEWMAN, JJ.

OPINION ANNOUNCING JUDGMENT OF THE COURT

FLAHERTY, Chief Justice.

When a doctor affiliated with Pennsylvania Blue Shield has been denied payment for services by a medical review committee appointed by Blue Shield, what review of the decision is permitted under the contract between the doctor and Blue Shield within the limitations set by the Pennsylvania Health Services Plan Corporations Act?

Between June 1986 and November 1987, Rudolph, a participating Blue Shield physician, and Family Professional Center, P.C., his professional corporation (hereinafter "the doctor") provided certain medical services to Blue Shield patients for which he was denied payment by Blue Shield on the grounds that the services were neither medically necessary nor cost effective. Pursuant to the Pennsylvania Health Services Plan Corporations Act, 40 Pa.C.S. § 6301 et seq. and the contract entered into between the doctor and Blue Shield, the doctor submitted his claim to a medical review committee appointed by Blue Shield. On November 3, 1987 the committee denied the claims and ordered the doctor to repay $26,005, which it found had been improperly paid. On December 30, 1987 the doctor filed a contract action in the Court of Common Pleas of Allegheny County, and on March 20, 1992 the court ordered that the case be heard by a panel of physician arbitrators. On February 15, 1994 the panel entered an award that Blue Shield must return the $26,005 which the Blue Shield medical review committee had ordered the doctor to repay, and also awarded the doctor $75,000 for other medical services. The trial court confirmed the award and after adding interest, it entered judgment against Blue Shield for $110,580.30.

Blue Shield appealed to the Superior Court, claiming that the trial court lacked subject matter jurisdiction to review the decision of the medical review committee. The Superior Court vacated the judgment of the trial court, holding that an award of a professional health corporation's dispute review committee, promulgated pursuant to 40 Pa.C.S. § 6342(c), is not subject to de novo review, although it may be reviewed on the due process issues of lack of notice, opportunity to be heard, fraud or misconduct. One dissenting judge would allow de novo review of the medical review committee's award on the due process ground that the committee, a majority of which were directors or members of the corporation, was not impartial. We granted allocatur in order to provide guidance on the question of what judicial review is available, if any, of the award of a medical review committee which conducted its adjudication pursuant to the contract between the parties and the Professional Health Services Plan Corporation Act, 40 Pa.C.S. § 6301 et seq. (hereinafter "the regulatory act").

Section 6324(c) of the regulatory act, titled "Rights of health service doctors," provides

All ... disputes ... relating to the professional health services rendered by health service doctors ... shall be considered and determined only by health service doctors as selected in a manner prescribed in the bylaws of the professional health service corporation.

Blue Shield's bylaws provide:

Section 1. Review Committees. All matters, disputes or controversies arising out of the relationship between the Corporation and doctors of medicine ... shall be considered, acted upon, disposed of and determined by the appropriate one of the two Review Committees hereinafter referred to.

Section 2. Medical Review Committee. There shall be a Medical Review Committee consisting of at least five (5) members, each of whom shall be appointed by the Chairman of the Board of Directors of the Corporation and each of whom shall serve until his successor is appointed. A majority of the members of the Medical Review Committee shall be doctors who are either members of the Board of Directors of the Corporation or members of the Corporation.

Bylaws, Article X, Sections 1, 2. (Emphasis added.)

The contract between the doctor and Blue Shield provides:

Participating Doctors Agreement with Pennsylvania Blue Shield

I, the undersigned doctor of medicine duly licensed to engage in practice under the applicable laws of the Commonwealth of Pennsylvania, in consideration of being registered by Pennsylvania Blue Shield ... as a Participating Doctor, do hereby agree as follows:

I will perform services for Blue Shield subscribers, make reports to Blue Shield concerning such services and accept compensation therefore, as provided for in the Blue Shield Regulatory Act, as heretofore or hereafter reenacted or amended, and the Bylaws [and] the applicable rules and regulations....

In sum, the doctor agrees to abide by the regulatory act and the bylaws of Blue Shield in making claims for services. The regulatory act, in turn, provides that the medical review committee, which decides claims made by the doctor, will be selected in a manner prescribed by Blue Shield's bylaws. The agreement, the bylaws, and the regulatory act are silent on whether the doctor's claims are reviewable beyond the medical review committee.

The majority in the Superior Court held that the phrases "determined only by," "acted upon," and "disposed of" mean that the committee award is not subject to review, for such phrases contemplate finality in the committee's decision. However, as a matter of due process, the majority implicitly would allow judicial review on the due process issues of "notice and the opportunity to be heard in an orderly proceeding adopted to the nature of the case," and explicitly would allow judicial review in a case involving an allegation of fraud or other misconduct inherent to the proceeding. The dissenter in the Superior Court, as indicated above, would allow de novo review in this case because, in the dissenter's view, due process also requires an impartial tribunal, which was not present in this case because the committee selection process was inherently unfair.

This court has held that "the requirement of due process of law extends to administrative as well as judicial proceedings...." Commonwealth v. Cronin, 336 Pa. 469, 473, 9 A.2d 408, 410 (1939). Since the medical review committee is formed and functions pursuant to the terms of the regulatory act, it is a creature of the state, and like an administrative agency, is subject to due process review. The question then becomes the nature of the due process that is required in this setting.

On the one hand, it is plain that the purpose of the regulatory act is to put medical claim review decisions in the hands of experts, i.e., physicians. It is less clear whether this forum of experts is intended to be the only forum. Neither the regulatory act nor the contract states that the medical review committee is the sole and exclusive forum. Regardless of the exclusivity of the forum, however, it would be absurd to conclude that the legislature would have contemplated an inherently unfair forum.

The majority of the Superior Court is correct that due process requires that a person aggrieved by the award of a medical review committee is entitled to judicial review for notice and the opportunity to be heard in an appropriate forum and for fraud or other misconduct. But it is axiomatic that due process also requires that the forum be fair and impartial. Without that, the guarantee of notice, a hearing, and the right to be heard would be no more than an illusion.

In this case, pursuant to the bylaws of Blue Shield, a majority of the medical review committee was composed of members of the board of directors or what the corporate bylaws terms "members of the corporation." By definition, such a panel is not impartial. Those who decided the case were either directors or members of the corporation against which the claim was made.

Since this panel was not, by definition, impartial, the doctor was entitled to some sort of review which could provide appropriate relief. If the bylaws of Blue Shield were written to include the possibility of an unbiased panel, a remand for a new hearing before a reconstituted and impartial panel would have been appropriate. In this case, however, the bylaws provide only for the creation of a per se biased panel. A remand for another medical review hearing before another panel, therefore, would necessarily have repeated the original error. For this reason, the trial court was correct in determining that the doctor was entitled to a de novo hearing in the court of common pleas on the merits of his claim.

Accordingly, the order of the Superior Court is reversed and the judgment of the Court of Common Pleas is reinstated. ¹

NIGRO, J., files a concurring opinion.

ZAPPALA, J., files a dissenting opinion in which CASTILLE, J., joins.

NIGRO, Justice, concurring.

I concur in the result of the Majority Opinion. I write separately because I find that judicial review of the findings of the Medical Review Committee is not grounded in due process, but, rather, the unconscionability of the contract provisions providing for no review other than the Medical Review Committee.

The dissenting opinion properly observes that the due process protections afforded by the Fourteenth Amendment to the U.S. Constitution can only be invoked when the action complained of...