Russi v. Weinberger

• Decision Date: 12 April 1974
• Docket Number: Civ. A. No. 73-396-R.
• Citation: 373 F. Supp. 1349
• Court: U.S. District Court — Eastern District of Virginia
• Parties: Simon RUSSI, M.D., et al. v. Caspar WEINBERGER, Secretary HEW, et al.

373 F. Supp. 1349

Simon RUSSI, M.D., et al. v.Caspar WEINBERGER, SecretaryHEW, et al.

Civ. A. No. 73-396-R.

United States District Court, E. D. Virginia, Richmond Division.

April 12, 1974.

J. Patrick Keith, Midlothian, J. Raymond Munholland, Philadelphia, Pa., for plaintiffs.

Raymond A. Carpenter, (for defts.# 1, 2 & 3), Asst. U. S. Atty., Richmond, Va., Samuel P. Johnson, III(for deft.#4), Petersburg, Va., for defendants.

MEMORANDUM

MERHIGE, District Judge.

Plaintiffs, licensed medical practitioners and their professional corporation, seek declaratory and injunctive relief from alleged illegal refusals to disburse Part B funds properly owing to plaintiffs under the Medicare Act(Title XVIII of the Social Security Act).Jurisdiction is attained pursuant to 28 U. S.C. §§ 2201and1331and5U.S.C. §§ 701-706.The case is presently before the Court on defendants' motion to dismiss which, being supported by material outside the pleadings, will be treated as a motion for summary judgment, and plaintiffs' cross-motion for summary judgment.(F.R.Civ.P. 56)The issues regarding the motions have been briefed and argued before the Court.Upon the material before it, the Court deems the motions ripe for disposition.

Medicare Background

In 1965, Congress enacted the Medicare provisions (Title XVIII) of the Social Security Act.Pursuant to an agreement entered into in 1966 with the Secretary of Health, Education and Welfare under the provisions of section 1866 of the Social Security Act, the Petersburg General Hospital (hereinafter called the provider) was certified as a participating provider under Title XVIII.Subsequently the Blue Cross Association(BCA), a non-profit corporation, having been nominated by a group of providers of services which included Petersburg General Hospital, entered into an agreement with the Social Security Administration pursuant to the provisions of section 1816 of the Social Security Act to perform for the Secretary designated functions in the administration of Part A of the Medicare program.Blue Cross Association delegated its duties as a fiscal intermediary for each provider to Blue Cross of Virginia, one of its local Plan organizations under subcontract with Blue Cross Association.By reason of such subcontract, Blue Cross of Virginia (hereinafter called the intermediary) became the fiscal intermediary for the provider, and through such intermediary the Secretary made payments under Part A of the Medicare program to the provider.

Under the Medicare program, a provider is entitled to be paid by an intermediary for the "reasonable cost" of services its furnishes Medicare beneficiaries under Part A of the program (section 1814(b) of the Social Security Act).Certain services performed for the provider are, however, reimbursable from Part B trust fund monies, which are disbursed by contracting carriers engaged by the program pursuant to section 1842 of the Social Security Act.Travelers Insurance Company contracted with the Social Security Administration to act as a carrier for Part B of the Medicare program in the geographic area in which the provider in this case is located.

The Part B trust fund monies heretofore referred to cover reasonable charges for the services furnished Medicare beneficiaries by staff physicians of designated providers.Except where the physicians lease a hospital department and initially bear the costs of operating such department or where the charges for physicians' services have been identified separately from charges for hospital services,¹ neither of which apply in the instant case, charges against the program for the services of physicians under Part B are determined to be "reasonable" only where they are designed to yield, in the aggregate, an amount no greater than that portion of the physicians' compensation related to direct patient care activities (20 C.F.R. 405.480 and 405.485).The Petersburg General Hospital utilizes hospital based staff physicians, specializing in the field of pathology, in the diagnosis and treatment of hospital patients.The plaintiffs, Dr. Simon Russi, et al, contracted with the hospital to perform this function and to staff and operate the pathology department of the hospital.

Factual Background

From 1966 through 1971, plaintiffs calculated the professional component of their services at 25% of the gross billings of the pathologists' services at the hospital,² and sought reimbursement in that amount under Part B.

A review of the hospital's charge record in 1971 allegedly indicated that this percentage charged by the plaintiffs was excessive, and a further investigation was commenced by the intermediary,³ Blue Cross of Virginia.As a result it was decided that the 25% professional component fee charged by the plaintiff physicians was not in accordance with this contract and Medicare regulations and allegedly yielded in the aggregate an amount greater than the portion of physicians' compensation related to direct patient care activities.To the extent the amount related to direct patient care was determined to exceed such charges, there was allegedly created an overpayment of Medicare Part B trust funds which had to be recouped from the plaintiff physicians.To do so, defendants decided that future payment of Part B claims submitted by the plaintiffs to the carrier would be withheld by the carrier effective December 8, 1971.The government asserts that such withholding of payment is appropriate to conserve government funds by offsetting subsequent reimbursable claims against the indebtedness arising out of the overpayment.

Plaintiffs allege that at no time prior to the suspension of payments were they afforded an opportunity for a hearing or other review with regard to the alleged over-reimbursement.During the subsequent eighteen months, the suspension of payments allegedly continued while Blue Cross conducted further investigation of the cost reports and cost information previously submitted by the Hospital.As a result of its investigation, Blue Cross has revised downward the professional component rate for the years 1966-1971 inclusively and sent such computations to Travelers for appropriate adjustments.

In the meantime, the non-payment of Part B billings has continued, and unpaid payments to the plaintiffs allegedly exceeded $60,000.00 at the time this action was filed.

Initially, there appears little question following the Fourth Circuit decision in Wilson Clinic & Hospital, Inc. v. Blue Cross, 494 F.2d 50(4th Cir.1974) that the offsetting of current obligations against alleged previous overpayments is a mechanism legally available to the Secretary.The Court must, however, additionally address plaintiffs' contention, contained in their motion for summary judgment, that due process required that they be given a hearing prior to implementation of any scheme to withhold Part B payments for services rendered.Plaintiffs base this claim on Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287(1970), which held that state welfare recipients were entitled to an evidentiary hearing before termination of welfare benefits.That decision, however, was, by its terms, of limited application.Its fulcrum was "brutal need:"

Thus the crucial factor in this context — a factor not present in the case of the blacklisted government contractor, the discharged government employee, the taxpayer denied a tax exemption, or virtually anyone else whose government entitlements are ended — is that termination of aid pending resolution of a controversy over eligibility may deprive an eligible recipient of the very means by which to live while he waits.Since he lacks independent resources, his situation becomes immediately desperate.His need to concentrate upon finding the means for daily subsistence, in turn, adversely affects his ability to seek redress from the welfare bureaucracy.

Goldberg, supra, at 264, 90 S.Ct. at 1018.Comparable circumstances are lacking in this case.The Court is dealing here with a dispute between the government and a professional corporation composed of established doctors.While there is no question that the corporation and the doctors individually have suffered serious consequences, economic and otherwise, as a result of the decision to suspend payments, the situation is closer to that of a blacklisted government contractor than to termination of aid to a welfare recipient.SeeGonzalez v. Freeman, 118 U.S.App.D.C. 180, 334 F.2d 570(1964).Ordinarily, in circumstances such as this, suspension of Part B payments can be temporarily borne by the affected doctor or corporation pending resolution of the dispute in a post-action hearing.While it might be argued that precisely this solvency on the plaintiffs' part would enable the government to collect any overpayments at a later time, the method chosen by the government to protect trust fund revenues is not unreasonable.Cf.Phillips v. Commissioner, 283 U.S. 589, 51 S.Ct. 608, 75 L.Ed. 1289(1931).⁴The equities simply do not impel the Court in plaintiffs' direction.

The Court has considered the possible secondary impact which the refusal to reimburse for Part B services might have on Medicare recipients.However, the plaintiffs in this case continue to be credited for services rendered and such credit will remain irrespective of the outcome of this dispute.The only question is whether amounts credited to plaintiffs will ultimately be offset against amounts allegedly owing by them.If not, payments owing to plaintiffs will be made.Thus, there is no reason to believe that discontinuance of Medicare services by these plaintiffs is inevitable.This, coupled with the availability of Medicare services from other sources, renders the possible adverse effect on recipients insufficient and inappropriate for this Court to upset the administratively constructed grievance procedure by requiring a pre-action hearing.

The Court is not...