Varandani v. Bowen, 86-2603

• Decision Date: 30 September 1987
• Docket Number: No. 86-2603,86-2603
• Parties: , Medicare&Medicaid Gu 36,605 Jai K. VARANDANI, Appellee, v. Otis R. BOWEN, Secretary, Department of Health and Human Services, Appellant, and The Medical Society of Virginia Review Organization, Inc., Defendant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 307

824 F.2d 307

18 Soc.Sec.Rep.Ser. 486, Medicare&Medicaid Gu 36,605

Jai K. VARANDANI, Appellee, v. Otis R. BOWEN, Secretary, Department of Health and Human

Services, Appellant,

and

The Medical Society of Virginia Review Organization, Inc., Defendant.

No. 86-2603.

United States Court of Appeals, Fourth Circuit.

Argued April 8, 1987.

Decided July 28, 1987.

Rehearing Denied Sept. 30, 1987.

Robert V. Zener, Civil Div., Dept. of Justice (Richard K. Willard, Asst. Atty. Gen., Washington, D.C., John Perry Alderman U.S. Atty., Roanoke, Va., John F. Cordes, Civil Div., Dept. of Justice, Washington, D.C., on brief), for appellant.

Martin Andrew Donlan, Jr. (Peter M. Mellette, Crews & Hancock, Richmond, Va., on brief), for appellee.

Before WINTER, Chief Judge, SPROUSE, Circuit Judge and BUTZNER, Senior Circuit Judge.

HARRISON L. WINTER, Chief Judge:

Plaintiff, Dr. Jai K. Varandani, brought suit to enjoin the Secretary of Health and Human Services ("the Secretary") from suspending him for one year from receiving reimbursement for services rendered to Medicare patients. Dr. Varandani alleged, inter alia, that the threatened suspension would violate procedural due process and that the statutory standard for suspension is unconstitutionally vague. The district court preliminarily enjoined the suspension on the grounds that Dr. Varandani had raised "serious questions" as to the constitutionality of the suspension. The Secretary appeals and we reverse.

I.

Dr. Varandani is a physician licensed to practice medicine in Virginia. He has a provider agreement with Medicare under which he treats Medicare beneficiaries and receives reimbursement for his services. He is one of two specialists in internal medicine in general practice in Lee County, Virginia, an area targeted by the federal government as medically underserved, and he is a member in good standing of the medical staff at Lee County Community Hospital.

Doctors receiving Medicare reimbursement have a statutory obligation to provide services "of a quality which meets professionally recognized standards of health care." 42 U.S.C. Sec. 1320c-5(a)(2). Sanctions and penalties for breach of this duty and the procedure for determining them are set forth in Sec. 1320c-5. As a first step in the statutory procedure, an agent of the Medical Society of Virginia Review Organization (the "MSVRO") wrote Dr. Varandani on April 19, 1985 and advised him that the MSVRO was reviewing his treatment of a patient in October and November 1984. On September 4, 1985, the chairman of a regional advisory committee of the MSVRO wrote Dr. Varandani asking that he attend a committee meeting at a public restaurant on October 9 to discuss the "specifics" of the medical treatment in question. Dr. Varandani was unable to attend the meeting; his complaint alleges that he repeatedly attempted to notify the regional committee chairman of a schedule conflict and that the chairman did not return his calls until the day of the meeting. The meeting went forward without Dr. Varandani, and the regional committee decided to refer the case to the state-level MSVRO.

Four weeks later, on December 9, 1985, the Quality Assurance Committee of the state-level MSVRO convened a meeting to consider the case. Dr. Varandani was not present. The Committee determined that Dr. Varandani had "grossly and fragrantly violated" his statutory obligation to provide competent medical care to the Medicare patient he treated in October and November 1984. See 42 U.S.C. Sec. 1320c-5(a)(2). The Committee sent Dr. Varandani a letter advising him of this determination and of its intention to recommend sanctions to the Secretary. The letter also invited Dr. Varandani to submit "additional information" within 30 days and to request a meeting with the Committee to "review and discuss case specifics." An attachment to the letter entitled "issues of Concern to MSVRO" listed a number of medical decisions taken by Dr. Varandani while treating the patient in question.

Finally, in February, 1986, Dr. Varandani appeared before the Committee in a meeting at the MSVRO Conference Room. He submitted a booklet describing his version of the case, gave a lengthy oral explanation of the treatment he administered, and engaged in a detailed technical discussion with members of the Committee on the "issues of concern" listed in the attachment to the Committee's earlier letter. He alleges that he was interrupted before he could finish his oral presentation and that the Committee cross-examined him instead of debating the issues with him. Although Dr. Varandani was accompanied by his attorney and by the administrator of Lee County Community Hospital, neither of these people was allowed to speak. The Committee did not make a verbatim transcript of the meeting but it did keep written minutes of the proceedings. After the meeting, the Committee concluded that Dr. Varandani's explanations were inadequate, and it referred the case to the Office of the Inspector General of the Department of Health and Human Services (OIG) with a recommendation that Dr. Varandani be suspended from receiving Medicare reimbursement for six months.

OIG adopted the MSVRO's recommendation of suspension, but it lengthened the suspension from six months to one year on the grounds that Dr. Varandani's medical errors were particularly egregious and on the grounds that there are enough physicians in the Pennington Gap area to care for the patient population. On May 22, 1986, OIG wrote Dr. Varandani and advised him of his right to a full adversary de novo hearing on the case. See 42 U.S.C. Sec. 1320c-5(b)(4); 42 C.F.R. Secs. 405.1501(f), 405.1530 et seq. OIG also informed Dr. Varandani that the suspension would take effect within 15 days of receipt of OIG's letter, well before the de novo hearing could take place, and that notice of the suspension would be published in a local newspaper in accordance with 42 C.F.R. Sec. 474.52(d) (1985), now codified at 42 C.F.R. Sec. 1004.100(d) (1986). Dr. Varandani filed this suit just before the suspension became effective, and the district court preliminarily enjoined the suspension. The Secretary now appeals.

II.

We turn first to the procedural due process claim. The Secretary argues that the district court lacked jurisdiction to hear this claim, since under 42 U.S.C. Sec. 405(g) a suspended physician is entitled to judicial review only after a "final decision" by the Secretary--that is, only after the de novo hearing and administrative appeal are complete. The Supreme Court, however, has held that the requirement of a "final decision" may be waived if the plaintiff asserts a "colorable" constitutional claim that is "collateral" to the merits. Mathews v. Eldridge, 424 U.S. 319, 330-31, 96 S.Ct. 893, 900-01, 47 L.Ed.2d 18 (1976). The rationale for this rule, at least as to procedural due process claims, is that a "preliminary" administrative decision to deprive an individual of property may cause irreparable harm that cannot be rectified by a postdeprivation hearing, and thus that the "preliminary" decision is in fact "final." Id. at 331-32, 96 S.Ct. at 900-01; Ram v. Heckler, 792 F.2d 444, 446 (4 Cir.1986).

We are not convinced that Dr. Varandani has raised a "colorable" procedural due process claim sufficient to establish jurisdiction. Even if we assume that he has a liberty interest in protecting his good name from the tarnishment that would result from official publication of the suspension, see Koerpel v. Heckler, 797 F.2d 858, 866 (10 Cir.1986), we are doubtful that he has a "colorable" claim that he has been denied procedural due process. He received notice of the impending suspension, an opportunity to respond in writing, and an opportunity to respond in person at an informal hearing. At least two circuits have held that a doctor may be suspended from Medicare reimbursement after receiving notice and an informal hearing, see Koerpel, 797 F.2d at 869; Ritter v. Cohen, 797 F.2d 119 (3 Cir.1986), and no case of which we are aware holds that a doctor is entitled to a formal, pre-suspension evidentiary hearing.

But even if Dr. Varandani's due process claim is sufficiently "colorable" to establish jurisdiction, we think it should be rejected on the merits. The standard for determining what process is due is set forth in Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18 (1976), which held that a court should examine the private party's interest in greater procedural protection, the government's interest in avoiding delay, and the risk that lesser procedures will produce an erroneous deprivation. Applying this standard, the courts have refused to require anything more than an informal hearing before a doctor is suspended from Medicare reimbursement in large part because of the interest of Medicare patients in not being treated by a doctor found by his peers to have engaged in grossly substandard practice. See Koerpel, 797 F.2d at 869; Ritter, 797 F.2d at 123-24. See also Ram v. Heckler, supra (formal pre-suspension hearing not required where doctor was convicted of Medicare fraud). Dr. Varandani distinguishes Koerpel on the ground that the physician in that case had an opportunity to meet with a representative of OIG before the suspension took effect. We think it sufficient that the peer-review organization, which recommends a sanction to OIG, met with Dr. Varandani before it recommended that he be suspended. A meeting with OIG would reduce the risk of erroneous deprivation only marginally; in our view, this insignificant improvement in the accuracy of pre-suspension proceedings would not outweigh the government's very strong interest in quick action to protect Medicare patients from incompetent physicians.

Nor do we think it fatal to the Secretary's case that the MSVRO forbade Dr. Varandani's attorney to speak at the informal hearing. While it might be preferable to allow an attorney to speak on behalf of the...