Opposition Brief — Bowen v. Michigan Academy of Family Physicians

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NO. JOSEPH F PANTOL, JK

In The

Suprene Court of the United States

October Term, 1985

MARGARET M. HECKLER. SECRETARY Of

HEALTH AND HUMAN SERVICES, ET AL.

Petitioners

V.

MICHIGAN ACADEMY Of!

FAMILY PHYSICIANS, ET AI

Respondents

BRIEF IN OPPOSITION TO

THE PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS

FOR THE SIXTH CIRCUIT

|

ALAN G. GILCHRIST

Counsel of Record

FRIMET, BELLAMY & GILCHRIST, P.C.

333 West Fort Street, Suite 2000

Detroit, Michigan 48226

(313) 964-2710

THE AMERICAN PRINTING COMPANY

1200 WEST) FORT STREET, DETROIT, MICHIGAN 48226 — (313) 963-9310

A EST AVAULABLE COPY

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Wi ob Yay ee es Ce , pu en ee Pe, T

QUESTIONS PRESENTED

Did the Court of Appeals correctly conclude that 42

U.S.C. Sec. 1395ff and 42 U.S.C. Sec. 405(h) do not

deprive Respondents of a judicial forum for redress of then

substantial statutory and constitutional claims?

If it is determined that 42 U.S.C. Sec. I39Sff and 42

U.S.C. Sec. 405(h) do authorize an agency of the federal

government to violate the Medicare statute or the Fifth

Amendment to the United States Constitution with no

forum for those affected to take redress, does such lack of

forum violate the United States Constitution?

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .. | Th

STATUTORY PROVISIONS AND

REGULATIONS INVOLVED ........ , 7 TT

jf) °_) ree errr.

SUMMARY OF ARGUMENT ................. lI

ARGUMENT ............ lL epanwaaes ae - 12

6: «& 2) ) Ee rr ere ere ee

ATTACHMENT A ..... pas awa aed eae A-|

ATTACHMENT B ......... 10:0 60dned eee eee eee

TABLE OF AUTHORITIES

Cases: Page

Amalgamated Meat Cutters v. Connally, 337 F. Supp.

EE ER = 19

Bob Jones University v. Simons, 416 U.S. 725 (1974) 19

Crowell v. Benson, 285 U.S. 22 (1932).............. 19

Hagans v. Levine, 415 U.S. 534 (1974)............. 8

Heckler v. Ringer, ___—-U.S. __,, 104. S. Ct. 2013

ee Il, 12, 14

Herzog v. Secretary, 456 U.S. 188 (1982) ........... 8

Johnson vy. Robison, 415 U.S. 361 (1974). ....... 13, 18, 19

Marbury v. Madison, | Cranch 137, 2 L. Ed. 60 (1803) — 19

Schweiker v. McClure, 456 U.S. 188 (1982) .. 8, Il, 12, 13

United States v. Erika, 456 U.S. 201

TE 7, 8, 1, 12, 13

United States v. Thirty Seven (37) Photographs, 402

GE 19

Weinberger v. Salfi, 422 U.S. 749 (1975)........... I, 12

Yauakus v. United States, 331 U.S. 414 (1944) ........ 19

Statutes and regulations:

Social Security Act, 42 U.S.C. 301 et seq.:

ery Se ae

ec. Se) ............. 1}, 12, 13, 14, 15

Tit. XVII, 42 U.S.C. 395 et seq.:

ccc ccevccevence 1, 6

cece cece Jy OF, 13,

cee cccccees ?

re 2

dd ec ccccecceces 3

I |

42 U.S.C. 1395u(b)(3) 1, 5, 8, 9, 13, 14, 16, 17, 18

42 U.S.C. 1395u(b)3GMC) ......0.0..00002. 204

IV

TABLE OF AUTHORITIES-(Cont’d)

Statutes and regulations: Page

42 C.FR.:

Section 405.504(b) ..........0..2.0055. 8

I os sce ee wonusnnesesse’

I GID ove civcccccecévecsceess

Section 405.823 ............ cc cee cece

Section 405.860 .................0055..

2) lad od Ww

Miscellaneous:

Medicare Carriers Manual Section 12016 .......... 4

STATEMENT

1. Background

This case involves a challenge to a regulation promul-

gated by the Department of Health and Human Services

which permitted differential treatment to certain allopathic

(M.D.) family physicians (and their patients) versus all other

allopathic physicians (and their patients) under the Medi-

care Program. The differential treatment invalidated by both

the trial court and the Court of Appeals is implemented

through the creation and maintenance of separate fee

screens which place family physicians in the same fee

screen as podiatrists, chiropractors, and dentists while phy-

sicians with different specialties were placed in a separate

specialty fee screen. Respondents alleged in their complaint

that the differential treatment of family physicians compared

to all other types of physicians violated both substantive

due process under the Fifth Amendment to the United

States Constitution and the Medicare statute, specifically 42

U.S.C. 1395a (which guarantees a free choice of physicians

by patients) and 42 U.S.C. Sec. 1395u(b)(3) (which requires

that prevailing fee limitations be based upon similar serv-

ices). No monetary relief was requested, Respondents

requesting a finding that the maintenance of separate fee

screens by Petitioner in administering the Medicare Program

violated the Medicare statute and the Fifth Amendment. As

discussed, infra, it is essentially the position of the Peti-

tioners that Respondents have no forum whatsoever to

address their statutory and constitutional claims.

2. The Medicare Act

Petitioners’ description of the Medicare Program is suffi-

cient and will not be repeated here in detail, except for

those provisions that relate directly to the present case or

those provisions not discussed by Petitioners. Under Part B

of the Medicare Program the Secretary is authorized to

enter into contracts with private insurance companies for its

administration. 42 U.S.C. 1395u. Part B of the Medicare

Program concerns services provided by physicians,

> OU aS SOC TD ee Oe i lee ae eS a — 4

tJ

podiatrists, chiropractors, and dentists. In contrast, Part A

of the Medicare Program provides coverage for institutional

care. The distinction between Parts A and B of Medicare are

relevant to the present appeal to the extent that it serves as

a point of contrast for both past precedents and the review

mechanisms provided under each Part.

Under Part A, determinations of both “entitlement to

benefits’ and “amount of benefits” are made by the Secre-

tary, 42 U.S.C. Sec. 1395ff(a). Under Part B the determina-

tion of “entitlement to benefits” is made by the Secretary.

Under Part A, an individual dissatisfied with either an eligi-

bility or amount of benefits determination is entitled to a

hearing by the Secretary and to judicial review of the Secre-

tary’s final decision pursuant to 42 U.S.C. 405(g). In con-

trast, 42 U.S.C. Section 1395ff(b) provides for a hearing by

the Secretary and judicial review of the Secretary's final

decision only where an individual is dissatisfied with entitle-

ment determinations under Part B.

The hearing rights of individuals dissatisfied with an

“amount of benefits” determination under Part B consist of

a hearing before a carrier selected by the agency to admin-

ister the Medicare Program, here Blue Cross and Blue

Shield of Michigan. Specifically, Sec. 1395u(b)(3)(C) provides

that an individual will be granted an opportunity for a “fair

hearing by the carrier” in cases of controversy over $100.00

with regard to services furnished or not acted upon with

reasonable promptness.' Section 405(h) generally indicates

that the findings of the Secretary following a hearing are

binding and no further review (judicial or otherwise) is per-

' This statute states as follows:

(3) Each such contract shall provide that the carrier—

(C) will establish and maintain procedures pursuant to

which an individual enrolled under this part will be granted an

opportunity for a fair hearing by the carrier, in any case, where

the amount in controversy is $100 or more, when requests for

payment under this part with respect to services furnished him

are denied or are not acted upon with reasonable promptness or

when the amount of such payment is in controversy.

missible unless otherwise provided. Under the general provi-

sions of the Social Security Act, a hearing by the Secretary —

(and judicial review thereafter) is accorded by 42 U.S.C.

Sec. 405(g). However, 42 U.S.C. Sec. 1395ii fails to make

Sec. 405(g) applicable to the Medicare Act.

Petitioners have gone to great lengths in their Petition

for Writ of Certiorari to characterize Respondent's cause of

action as a “claim for benefits.” The assertion that Plaintiff's

cause of action is an “amount of benefit case”, however, is

repudiated by Petitioners’ own regulations. The fair hearing

conducted by the carrier is controlled by regulations pro-

mulgated by the Secretary and certain provisions of the

“Carrier's Manual.”? The types of challenges that may be

heard by the carrier are carefully delineated by regulation,

42 CFR 405.801. The regulations provide for a hearing when

a party is dissatisfied with a determination denying a request

for payment, the amount of payment or where the request

for payment is not being acted upon with reasonable

promptness. A party is then given a right to a “fair hearing”

(42 CFR 405.820) conducted by a hearing officer designated

by the carrier. (42 CFR 405.823). The jurisdiction of the

hearing officer is carefully circumscribed by regulations as

follows:

The hearing officer in exercising the authority to conduct

a hearing on this Section 1842(b)(3)(c) of the Act is to

comply with all the provisions of Title XVIII of the Act

and regulations issued thereunder, as well as with policy

statements, instructions and other guides issued by the

Health Care Financing Administration in accordance

with the Secretary's agreement with the carrier. 42 CFR

405.860.

2 The Carrier's Manual was compiled by the Health Care Financing

Administration. Its declared purpose is to serve as “practical operation

instructions needed by the contraciors responsible for the administration

of the supplementary and medica! insurance program — Part B Medi-

care.” (forward to Carrier's Manual).

4

The restrictions imposed upon the hearing officer's juris-

diction are made even more explicit by the Carrier's Manual,

the compilation of guidelines a hearing officer is required by

the above regulation to follow. Section 12016 of the Manual

states:

Authority — The HO occupies a significant position in

the administrative appeals process affording dissatisfied

individuals with hearing rights as provided in Section

1842 (b)\(3)(C) of the Act. Authority of the HO is limited

to the extent that he must comply with all provisions of

Title XVIII of the Act and regulations issued thereunder,

as well as with HCFA rulings, general instructions, and

other guides issued by HCFA with the Medicare Bureau.

The HO does not have the prerogative of overruling the

provisions of the law or of interpreting them in a way

different than that of the Medicare Bureau when he is in

disagreement with their intent; nor may he use hearing

decisions as a vehicle for commenting upon the legality,

constitutional or otherwise, of any provision of the Act

or regulations relevant to the Medicare Program.

(emphasis added)

3. Proceedings

Respondents commenced this action on October 8, 1976

alleging that the differential treatment of family physicians,

compared to all other types of physicians in the State of

Michigan, violated both substantive due process under the

Fifth Amendment to the United States Constitution and the

Medicare Statute. No, monetary relief was requested, Plain-

tiffs seeking seamen om relief in the form of an injunction

prohibiting Petitioners from treating family physi ans dif-

ferently from other physicians and a finding that the ,nainte-

nance of separate fee screens by Petitioners violated the

Medicare statute and the Fifth Amendment. Respondenis

requested that the court enjoin Petitioners from treating fam-

ily physicians differently from other physicians for purposes

of the Medicare Program.

Respondents statutory claim based upon 42 USC Sec.

1395u(b)\(3)3 asserted that, contrary to the Medicare Act's

mandate that “similar service” be the basis for determining

reasonable charges, the Secretary had promulgated a regula-

tion which authorized the carrier to segregate and group

physicians on the basis of specialty practice for the purpose

of developing reimbursement screens used for all types of

procedures, including primary care procedures, thereby

according different payment for similar service. See 42 CFR

405 .504(b)4

Prior to suit, in October, 1974, Respondents requested a

hearing with the Carrier to provide the individual Respon-

dents with an opportunity to demonstrate that Respondent-

physician's training and experience were such as to warrant

+4? USC Sec. 139Su(b)(3) states as follows:

“In determining the reasonable charge for services for purposes

of this paragraph, there shall be taken into consideration the custom-

ary charges for similar services generally made by the physicians or

other person furnishing such service, as well as the prevailing charge

in the locality for similar services. No charge may be determined to

be reasonable in the case of bills submitted or request for payment

made under this Part after December 31, 1980, if it exceeds the higher

of (i) the prevailing charge recognized by the carrier and found

acceptable by the Secretary for similar services in the same locality

in administering this part on December 31, 1970, or (ii) a prevailing

charge level that, on the basis of statistical data and methodol~zy

acceptable to the Secretary, would cover seventy-five (75%) percent

of the customary charges made for similar services in the same

locality during the last preceding calendar year...”

4 This regulation provides:

“The range of pravailing charges in a locality may be different

for physicians or other persons who engage in a specialty practice or

service than for others. Existing differentials and the level of ch ages

between different kinds of practice or service could, in some

localities, lead to development of more than one range of prevailing

charges for application by the carrier in its determination of reason-

able charges. Carrier decisions in this respect shall be responsible to

the existing patterns of charges by physicians and other persons who

render covered services and should establish differentials in the level

of charges between different kinds of practice or service only where

in accord with such patterns.”

6

equal payment for primary care procedures. In December,

1974, the Carrier responded to the request indicating that

Respondents could utilize a peer review procedure. In

March, 1975, the Carrier further clarified the scope of the

hearing by indicating that an adjudication as to the reason-

ableness of the specialty differential could not be involved

and the Carrier would accept no adjudication which elimi-

nated such a differential. Additionally, Respondent-patient,

without counsel, protested the prevailing fee determination

as to services performed by her treating physician and was

notified by the Carrier that she was without recourse and

nothing could be done.

Prior to trial, the Secretary moved to dismiss Respon-

dents’ Complaint for lack of jurisdiction as to the statutury

claim and as to the constitutional claim on the basis that the

constitutional claim was insubstantial. In December, 1977,

the Secretary’s motion was denied by the Honorable James

Churchill in a memorandum opinion which noted:

I am influenced by the improbability that Congress

would intentionally authorize an administrative agency

to delegate to a private contractor the power to violate

the Constitution of the United States in the name of the

United States without recourse.

Following trial on the merits, the district court held that

the Carrier had not developed a procedure to determine

what types of professional services were similar and that the

classification scheme of 42 CFR 405.504(b) was plainly

inconsistent with the Medicare statute which “mandates the

customary charges of physicians for similar services to be

the test for reimbursement.” 502 F. Supp. at 755.

The district court further found that this classification

scheme violated yet another provision of the Medicare stat-

ute, 42 USC Sec. 1395a, because it tended to influence a

beneficiary's choice of physician and reduced that benefici-

ary’s reimbursement solely by virtue of the choice of the

type of physician to perform a particular medical service.°

Since the district court found the Secretary's and Car-

rier’s actions to be a clear violation of the Medicare Act, it

did not consider the constitutional arguments advanced by

Respondent, but did state that “such segregation is not

rationally related to a legitimate purpose of the Medicare

statute.” 502 F. Supp. at 755.

By way of remedy, the district court issued a mandatory

injunction directing the Petitioners to provide a single screen

for all physicians separate from a screen for chiropractors,

podiatrists and dentists.

The court of appeals affirmed the decision of the district

court, both in terms of subject matter jurisdiction and the

substantive merits of the lawsuit. However, the court deter-

mined that the remedy adopted by the district court went

too far. The court of appeals remanded the case to the Sec-

retary for reconsideration of the reimbursement plan with

the proper focus of “similar service.”

As to jurisdiction, the Court of Appeals recognized that

this Court's decision in United States v Erika, 456 U.S. 201

(1982), held that Congress clearly and convincingly intended

no judicial review of amount of benefit cases. However, after

a review of the applicable statutes and case law, the court

concluded that jurisdiction did exist under the particular cir-

cumstances of this case.

5 The district court demonstrated the financial impact of this classi-

fication scheme by focusing on the effect upon respondent-patient.

Respondent-patient was a Medicare recipient whose treating physician

was a family physician who had been in practice for twenty-three (23)

years. While being on staff at three different hospitals and while being an

instructor at Michigan State University, this physician was neither board

eligible nor board certified by the American Board of Family Practice.

The district court noted that solely as a result of selecting this physician

(a choice protected pursuant to 42 USC Sec. 1395a) respondent-patient

was in fact paying more for her physician visits and treatments although

paying the same premiuin as another recipient who may have chosen a

physician defined by the Petitioner as a “specialist.”

8

As to the merits of Respondents’ case, the Court of

Appeals found that the “touchstone” of 42 USC 1395u(b)(3)

is “similar service” and that there was an obvious inconsis-

tency between this statute and the disputed regulation. The

Court of Appeals found the regulation “irrational” and

“invalid.” 728 F.2d at 329. Because the regulation was stat-

utorily unsound, the court did not address the constitutional

issues raised in the case. 728 F. 2d at n. 5. See Hagans v

Levine, 415 U.S. 534 (1974).

Following a remand on a petition for rehearing, the

U. S. Court of Appeals for the Sixth Circuit reaffirmed its

position on jurisdiction on March 19, 1985. Contrary to

statements contained in the Petition for Writ of Certiorari,

however, the U. S. Court of Appeals in neither of its deci-

sions ignored the precedent of this Court. The fact is the

initial opinion cited and analyzed in detail United States v

Erika, supra, and the subsequent opinion, went into great

depth as to the application of Ringer, supra, and noted that

in Ringer, supra, claimants had not exhausted the admin-

istrative remedy afforded by Sec. 405(g). The court further

noted that no 405(g) administrative review was available to

Respondents in this case, and that the Supreme Court has

itself exercised federal jurisdiction to hear constitutional

challenge to the administrative review process provided by

the Social Security Act. Schweiker v McClure, 456 U.S. 188

(1982). In holding for Respondents, the court indicated that

the arguments of the Secretary were not unpersuasive, but

the U. S. Court of Appeals was inclined to follow the time

honored view that a right cannot exist in a vacuum and that

for every right there must be a remedy.

The suggestion of the Petitioners that the decision of the

U. S. Court of Appeals threatens to reintroduce the regime

of uncertainty and widespread litigation on Part B issues

that prevailed prior to Erika ignores the Sixth Circuit's deci-

sion in Herzog v Secretary, 682 F2d 121 (6th Cir, 1982), a

case noted and distinguished by the Sixth Circuit. In

Herzog, the claimants disputed the fact that chelation

therapy was held by the Secretary to be non-reimbursable.

9

The claimants sought and were afforded an administrative

review of this adverse decision. They subsequently filed suit

in federal court. The Court of Appeals, relying extensively

on this Court’s opinion in Erika ruled that federal court

jurisdiction did not exist to hear the claimants’ amount of

benefit case.

Contrary to the assertion of Petitioners, the Sixth Cir-

cuit’s decision in this case is limited to statutory and consti-

tutional claims for which there is no administrative forum

available.

This is the Petitioners’ second Petition for Writ of Cer-

tiorari involving this case. In both cases, Petitioners have

declined to seek review of the Court of Appeals decision on

the merits. Nevertheless, in the body of Petitioners’ argu-

ments they see fit to address the merits of the case on a

limited basis. For example, in footnote 2 of the Petition it is

stated that the government acknowledged in proceedings in

the district court that board eligible family physicians

should have been included in the specialist category. In fact,

while the government did concede at trial that it had no

basis to treat board eligible family physicians as non-

specialists, the government refused an invitation of the court

to place such physicians in the specialty screen. See Appen-

dix A. Furthermore, the government repeatedly charac-

terizes 42 USC 1395u(b)(3) as a requirement that the Carrier

“take into consideration” similar services in determining

payment ceilings. Without so stating, the government

appears to imply that the Carrier has the option of taking

similar services into consideration, but may decline to fol-

low similarity as its test. This inference ignores the balance

of the statutory provision noted in footnote 3 of this Brief,

which states in no uncertain terms that no charge may be

determined to be reasonable which exceeds the 75th percen-

tile of charges for similar services.

In essence, by relying only on the jurisdictional issues

and ignoring the merits of this case, the government is seek-

ing a determination that Respondents have no recourse to

10

address statutory and constitutional violations. Respondents,

prevailed on a statutory claim in both the district court and

the circuit court, and the government conceded that it had

no rationale for its actions, at least as it pertained to a

portion of Respondents’ claim.

In its petition, the government has also glossed over the

fact Respondents have raised a serious constitutional claim

which the Honorable James Churchill found had sufficient

merit to withstand a motion for summary judgment, and

which the Honorable Horace Gilmore declined to rule upon,

having found the statutory violation but characterized the

Petitioners’ position as not related to any legitimate purpose

in the Medicare statute and defying all reason. 502 F Supp

at 755. Furthermore, the U. S. Court of Appeals, in both of

its opinions, recognized Respondents’ constitutional claims,

noting that since it had found the regulations statutorily

unsound, the constitutional issues need not be addressed.

Nowhere in Petitioners’ Petition for Writ of Certiorari are

Respondents’ constitutional claims even acknowledged.

Thus, by ignoring Respondents’ complaint, the Petition

avoids grappling with the issue of denial of any forum what-

soever to address substantial constitutional issues.

Finally, the government's petition ignores the impact of

the U.S. Court of Appeals’ reversal of the lower court's

decision to the extent it mandated a particular relief. Rather,

the U. S. Court of Appeals simply remanded the case to the

Secretary for reconsideration of the Michigan reimburse-

ment plan under Part B of the Medicare Program with

instructions to consider such statutory mandate that fee

ceilings be based upon similar services. 728 F. 2d at 333.

Rather than appeal on the merits, the government has seen

fit to establish one fee ceiling for all physicians. See Attach-

ment B. Furthermore, the suggestion that Petitioners con-

tinue to contest the decision of this case on the merits is in

direct contravention of the testimony established in this

case, that there was no meaningful difference between physi-

cians of different specialties performing the same medical

procedure.

SUMMARY OF ARGUMENT

This case presents the issue of whether the Department

of Health and Human Services can develop a system of

hearings and review that effectively preclude any possibility

for the redress of substantial statutory and constitutional

claims. The import of this Court's decisions in Weinberger v

Salfi, 422 US 749 (1975); United States v Erika, Inc., 456

US 201 (1982); Heckler v Ringer, _ US __; 104 § Ct 2013

(1984); and Schweiker v McClure, 456 US 188 (1982)

strongly indicate that the interpretation placed upon 42 USC

Sec. 405(h) and Sec. 1395ff by the Petitioner is untenable.

The regulatory and administrative authority pertinent to

this matter strip the administrative process of the ability to

address the claims pressed by Respondents. The decisions

of this Court have never concluded that the above statutory

provisions preclude jurisdiction over substantial statutory or

constitutional claims for which no other review is accorded.

Rather, this court has in fact addressed substantial constitu-

tional claims arising out of the Medicare Program in Sch-

weiker Vv McClure, supra. This Court’s decisions in Salfi,

Erika, and Ringer stand for the proposition that claimants

must pursue any available administrative remedy before

asserting federal court jurisdiction and that federal court

jurisdiction is precluded for “amount of benefit” cases.

This case cannot be characterized as an “amount of ben-

efit” case which involves whether a particular claim is pay-

able under the Medicare Program or the specific amount of

payment. To the contrary, Respondents have never sought

an increase in the level of payments or a specific amount of

payment. Rather, Respondents, as in McClure, made a

broad statutory and constitutional claim against the federal

regulations. The claims made did not address the specific

amount to be paid, but rather addressed a classification

scheme inconsistent with a mandate of the Medicare statute.

These claims were certainly not insubstantial.

The construction of Sec. 405(h) and 1395ff advanced by

Petitioners would allow Petitioners to violate the applicable

12

statute and the United States Constitution with impunity.

Indeed, in the district court Petitioners admitted a violation

of the law, refused the district court’s suggestion that a

remedy be fashioned, but yet now insist that no forum exists

for redress of the very violation they concede. It ts

respectfully suggested that this Court must interpret 42 USC

Sec. 405(h) and 1395ff in such a fashion as to avoid a serious

constitutional issue and in a fashion which also gives mean-

ing and effect to the various provisions of the Act.

ARGUMENT

Through the last several years, this Court has had sev-

eral occasions to consider the administrative review mecha-

nisms of the Social Security Act and the related issue of

federal court jurisdiction. See Weinberger v Salfi, 422 U.S.

749 (1975): United States v Erika, Inc., 456 U.S. 201 (1982);

Heckler v Ringer, __ US ___; 104 S. Ct. 2013 (1984). In

addition, this court has previously addressed, without any

significant discussion of jurisdiction, a constitutional chal-

lenge to the administrative review mechanisms of Part B of

the Medicare Program. Schweiker v McClure, 456 U.S. 188

(1982). Contrary to the Petitioners’ suggestion, a review of

these decisions indicates that this Court has never inter-

preted or applied the provisions of the Social Security Act

as foreclosing all forums to redress substantial statutory or

constitutional issues.

In Weinberger v Salfi, supra at 761, this Court faced a

constitutional challenge to provisions of the Social Security

Act and carefully reviewed each of the three sections con-

tained within Sec. 405(h) and concluded that this section

constitutes more than a requirement for exhaustion of

administrative remedies. The court further rejected any nar-

row reading of the ianguage ‘‘any claim arising

under... the Social Security Act” since the statute

provided “both the standing and substantive basis for the

presentation of . . . constitutional contentions.” Significant

13

in the Salfi decision is the distinction of the prior case of

Johnson v Robison, 415 U.S. 361 (1974), the court noting

that acceptance of the government's interpretation of the

statute in Robison would have meant that no judicial consid-

eration of a constitutional challenge could have taken place.

The court stated:

Not only would such a restriction have been extraordi-

nary, such that ‘clear and convincing’ evidence would be

required before we could ascribe such intent to Con-

gress ... but it would have raised a serious constitu-

tional question of the validity of the statute so

construed. 422 U.S. at 763 (citat‘ons omitted)

It is clear from reviewing the decision in Salfi that this

Court was concerned that Sec. 405(h) not be interpreted to

preclude constitutional challenges. This principle was nei-

ther ignored nor forgotten in the subsequent decisions of

this Court.

In United States v Erika, supra, the court faced a

review following administrative hearing by the carrier pursu-

ant to 42 USC Sec. 1395u(b)(3). The substantive challenge

boiled down to the carrier's determination to base the rea-

sonable charge calculation and payment to Erika upon a

price list utilized by the Respondent. There was no constitu-

tional claim pressed. See US v Erika, supra at fn. 5.

This court’s opinion in Erika dealt mainly with the cor-

rect interpretation to be given to Sec. 405(h) in conjunction

with Sec. 1395ff. Because Sec. 1395ff failed to provide for a

hearing by the Secretary (or judicial review thereafter) for

“amount of benefit” cases under Part B, and because the

legislative history revealed an intent to preclude federal

court jurisdiction in such cases, the court determined that

the administrative hearing afforded in Erika was appropriate

and no further judicial review was permissible.

Contemporaneously with issuing the Erika opinion, this

Court also handed down its opinion in Schweiker v

14

McClure, supra. The McClure case once again dealt with

Part B of the Medicare Program but was distinct from Erika

in that the challenge in McClure was directed at the hearing

procedure mandated by 42 USC Sec. 1395u(b)(3) and imple-

mented through regulation. The Court did not consider the

basic jurisdictional issue, but went on to substantively

address the constitutional claims and ruled that the carrier

hearing, as mandated by the statute and implemented

through regulations, passed constitutional muster.

Heckler v Ringer, supra, again focused upon judicial

review of a Medicare case, although the decision was lim-

ited, in the main, to a discussion of judicial review of a Part

A claim. Heckler v Ringer, supra, at n. 4. Respondents

challenged an instruction by the Secretary which denied

Medicare reimbursement for a particular surgical procedure.

The precise issue faced by this Court was whether the

Respondents could pursue their case in federal district court

prior to their claims first channeled into the administrative

process available under Part A and, in the case of claimant

Ringer, before the surgery was actually performed.

In Ringer, this Court declined the invitation not to

enforce the provisions of Sec. 405(h) to a Medicare claimant

since to do otherwise would have opened the door and

allowed a by-pass of the administrative remedy and judicial

review provided by the act. This court noted:

If we allow claimants in Ringer’s position to challenge in

federal court the Secretary's determination .. . that

BCBR surgery is not a covered service, we would be

inviting them to by-pass the exhaustion requirements of

the Medicare Act by simply bringing declaratory judg-

ment actions in federal court before they undergo the

medical procedure in question. Ringer, supra, at 2025.

From these precedents, the Petitioners weave their argu-

ment for requesting relief from this Court. From the Salfi

opinion they take the principle that Sec. 405(h) applies to

any action “arising under” the Medicare Act. From the

15

Erika opinion they take the principle that all “amount of

benefit” cases are barred from judicial review (broadening

this concept to any challenge “affecting the amount of bene-

fits’, see Questions Presented in Petition and Statement of

Case in Petition).

From the .cimger opinion, Petitioners take the principle

that administrative channels and judicial review established

by Sec. 405(g) and Sec. 405(h) cannot be circumvented by a

premature district court action Sy clothing benefit cases in

procedural dress. Petitioners then characterize the present

case as “affecting the amount of benefits’ which “arises

under’ the Medicare statute and hence without federal court

jurisdiction pursuant to Sec. 405(h). Despite the Petitioners’

best efforts these cases cannot establish the principle that

judicial review is foreclosed in a Part B Medicare case in

which a statutory and constitutional challenge is made and

for which there is no administrative process to address

these challenves. Indeed, the decisions of this Court stand

for quite the opposite.

The court’s analysis of Salfi recognizes that the chal-

lenges made by the claimants could be properly addressed

and channeled through the administrative process provided

by Sec. 405(g). In Erika judicial review was foreclosed but

only over certain types of challenges, namely amount of

benefit cases, since there was clear legislative intent to free

the judicial process of these small benefit cases. This Court

recognized that the constitutional claims presented were nei-

ther pressed before this court nor of a substantial nature. In

Erika a judicial forum was not available since such a forum

was not expressly provided by statute and legislative history

revealed an intent to bar judicial review of the very type of

claim being pressed. Petitioners’ attempt to broaden the

holding in Erika to any case “affecting the amount of bene-

fits” is in substantial contrast to the legislative history this

Court relied upon in support of its decision that there was

no federal court jurisdiction in amount of benefit cases. In

that case, the Court quoted the Senate report on the original

16

Medicare Act. which stated that the Act did not provide for

judicial review of “a determination concerning the amount

of benefits under Part B™ and that the provision for review

by carriers under Part B was intended as the “exclusive —

remedy. See Erika, supra at 208, 209. Quoting S. Rep. 404,

89 Cong. Ist Sess. 44-45 (1965). The court also noted the

conference report on the 1972 Amendments, 42 USC 1395ff,

which explained that “there is no authorization . . . for judi-

cial review on matters solely involving amount of benefits

under Part B” (456 US at 210. quoting H. R. Conf. Rep.

92-1605, 92nd Cong. 2d Sess. 51 (1972). (Emphasis added. )

The present case was initiated as a statutory and consti-

tutional challenge to regulation promulgated by the Secre-

tary. Respondents were not seeking any specific payment

level concerning a particular medical service (contrast both

Erika and Ringer) but were claiming that the Secretary and

the Carrier had gone beyond the basic mandate of both the

Medicare Act and the United States Constitution. Like

McClure, Respondents made a broad challenge to the pro-

mulgation of a regulation. That challenge was not based

upon a question of medical necessity or proper pplication

of the Medicare regulations to a particular claim for pay-

ment. Unlike the challenge asserted by Respondents, such

claims could have been pursued through the administrative

hearing mechanism mandated by 42 USC 1395u(b)(3) and

established by regulation.

Respondents’ claims were based on the premise that

whatever payments are to be made should be made accord-

ing to “similar service’ and the regulation in issue violated

this statutory requirement. Respondents objected not to the

application of the classification scheme set forth in the reg-

ulation, but rather the classification scheme itself. In an

attempt to equate Respondents’ claim to that of the Respon-

dents in Erika, the Petitioners makes note of the fact that

the Court of Appeals acknowledged that the eventual result

of this suit may cause an increase in amounts of reimburse-

ment for services to family physicians. See Petition at p. 6.

17

The actual quote from the Court of Appeals provides a

much more thorough and accurate analysis:

In this case BC/BSM contends this suit involves simply

a dispute over the amount of reimbursement due. In a

word, BC/BSM contends, Michigan Academy is simply

seeking to have family physicians and their patients

moved to the more lucrative specialty screen, boiling

down to an argument for an increase in amounts reim-

bursed. Erika, it concludes, should bar this suit outright.

This argument, however, is without merit.

While the eventual result of this suit may cause an

increase in amounts of reimbursement, that does not

necessarily follow. In some cases the result may be an

increased amount of reimbursement, and in others. a

reduction in reimbursement could occur. Michigan

Academy, at bottom line, is challenging the overall

mechanism for determining the amounts of reimburse-

ments, not the actual value of any particular

reimbursement.

728 F. 2d at 330.

Accordingly, it is inaccurate to characterize Respon-

dents’ case as simply seeking to increase the “amount of

benefits” they may receive under the Medicare Program.

The reasonable charge calculation under the Medicare Pro-

gram requires a grouping of all similar services to establish

a ceiling at that figure which would pay seventy-five percent

of all claims submitted. See 42 USC Sec. 1395u(b)(3).

Respondents sought the elimination of specialty screens, not

the transfer of individual claims from the “generalist

screen” to the “specialist screen.” Such a remedy would be

totally contrary to the crux of Respondents’ claim that the

maintenance of different screer.; among physicians for the

same service violated the Medicare statute and the United

States Constitution. Respondents’ claims were delineated to

address the groupings or classification scheme itself and the

illegal and unconstitutional aspects of the disputed regula-

iin iia

18

tion. Since the thrust of Respondents’ Complaint related to

those groupings, a payment dispute on an individual claim

could not afford the relief requested. Rather, the overall

grouping mechanism had to be reviewed in the context of

Petitioners’ statutory authority for iis actions.

Perhaps nothing belies the Petitioners’ attempt to pigeon-

hole Respondents’ challenges as “amount of benefits claims”

more clearly than Petitioners’ own implementation of 42

USC 1395u(b)(3), the statutory authority for carrier hearings

on amount of benefit cases. As noted, Petitioners specifically

removed from the carrier's power the authority to address

the very type of challenge being pursued by Respondents.

Undaunted, Respondents now attempt to pigeon-hole

Respondents’ challenges as “amount of benefit” claims

while denying a forum for review.

A review of the statutory and regulatory scheme here

certainly does not reveal “a fairly discernible intent” to pre-

clude judicial review for a Part B case which raises substan-

tial statutory and constitutional issues. The impact of Sec.

1395ff in conjunction with Sec. 1395u(b)(3) and Sec. 405(h)

evidences a legislative intent to channel small amount of

benefit cases through an administrative hearing process con-

ducted not by the Secretary but by the carrier.

What is discernible in this scheme is only the fore-

closure of judicial review of those issues for which an

administrative hearing is available. The legislative history

discussed in Erika obviously cannot be read as evidencing

an intent to foreclose judicial review for claims of a type

other than the amount of benefit claims discussed in that

history.

In fact, the essence of the Petitioner's legal posture is

that an agency of the federal government may violate the

Medicare statute or the Fifth Amendment of the United

States Constitution with no forum for those affected to take

redress. The complete absence of judicial oversight over the

entire regulatory program would raise a serious constitu-

19

tional issue concerning the improper delegation of legislative

power to the executive. See Amalgamated Meat Cutters v

Connally, 337 F. Supp. 737, 759 (DCDC 197i) and Yakus v

United States, 331 U.S. 414, 423-426 (1944). The denial of a

forum for addressing constitutional rights is a question of

exceptional importance and significance, and is tantamount

to overruling Marbury v Madison, | Cranch 137, 2 L. Ed. 60

(1803). It is a matter of law and precedent with this Court

that the foreclosure of all forums to address substantial con-

Stitutional claims itself raises “serious constitutional ques-

tions.’ See Johnson v Robison, supra, and Bob Jones

University v Simons, 416 U.S. 725 (1974). This Court has

called it a “cardinal principle” that statutory provisions are

to be interpreted so as to avoid this very sort of basic con-

stitutional question. See United States v Thirty Seven (37)

Photographs, 402 U.S. 363 (1971); Johnson v Robison,

supra, and Crowell v Benson, 285 U.S. 22 (1932).

The Petitioners characterize the Sixth Circuit's decision

as a disregard of this Court's clear pronouncement and per-

haps encouraging anarchy. See Petition, pp. 11, 22. One

would at least expect that such strong language be accom-

panied with a clear statement of Petitioners’ position. Unfor-

tunately, the Petitioners have thoroughly ignored the basic

fact that a denial of federal court jurisdiction in this case

would preclude any forum to address the statutory and con-

stitutional challenges of Respondents and would create an

extraordinary constitutional issue in itself. Petitioners simply

have not demonstrated a basis for granting of this Writ of

Certiorari.

CONCLUSION

The Petition for Writ of Certiorari should be denied.

Respectfully submitted,

FRIMET, BELLAMY & GILCHRIST, PC.

By: ALAN G. GILCHRIST

Counsel of Record

eee i iii le

ATTACHMENT A

A-|

Trial Transcript

(63)

TRIAL TRANSCRIPT

ee

Q. Have you ever heard of any rationale with then HHS

as to why the carrier in Michigan has treated board eligible

family physicians different from other types of board eligible

physicians?

A. I have never seen anything that fully explains that. I

have been under the impression at one time or another that

there were differences in the various board rules dealing

with the requirements of becoming board certified that the

carrier was concerned about, but I do not recall what they

are specifically.

MS. MAYES: Your Honor, if I might just raise a ques-

tion. We have indicated at the beginning of this case that we

believe that we were incorrect in defining family practioners,

that is, those who were board eligible, as not being spe-

cialists, and that therefore we conceded that fact before this

trial ever began. That was an incorrect application of that

board eligible definition, so that board eligible family prac-

tioners should be defined as specialists by the carrier in the

State of Michigan.

THE COURT: And should be put in the screen?

MS. MAYES: That question is what is left open, but the

definition of what we called them was (64) incorrect.

THE COURT: All right. Go ahead.

BY MR. GILCHRIST:

Q. Would it be a fair statement that the rationale that

you have heard for treating board eiigible family physicians

differently from other board eligible physicians has never

been related to any charging patterns?

A. I am not sure I understand your question. I am sorry.

Q. Well, you said you talked about—there was some-

thing about qualifications of speciality boards as one of the

rationale.

ATTACHMENT B

B-|

[LETTERHEAD OF BLUE CROSS/BLUE SHIELD|

August 27, 1984

C. Edward Cotton, M.D.

President

Michigan Academy of Family Physicians

109 East Oakland

Lansing, Michigan 48906

Dear Doctor Cotton:

Attached for your information is an announcement on

BCBSM Regular Business/Medicare comparability. As a

result of instructions from the Health Care Financing

Administration (HCFA), BCBSM will apply corresponding

Regular Business screens as comparability limits on Medi-

care prevailing screens. The attached explains the details of

the HCFA directive.

Although this information will appear in a future Record

article, | wanted to share this with you as soon as possible.

Sincerely,

(s) Robert H. Hamburg, M.D.

Senior Liaison Consultant

Medical Affairs

RHH:sve

Attachment

B-2

REGULAR BUSIN®SS PROGRAM SCREEN

COMPARABILITY AND COURT DECISION

APPLY TO MEDICARE SCREEN FREEZE

The Deficit Reduction Act of 1984 (DRA 1984) has put a

freeze on physician payment levels from July |, 1984 through

September 30, 1985, or IS months. At the same time, the

Health Care Financing Administration (HCFA) has

instructed BCBSM that Comparability (Section 1842(b)(3) of

the Medicare law) applics to the frozen screen levels. For

regulations concerning Comparability, see Section 42 CFR

405.508. Therefore, BCBSM will apply the corresponding

regular business screens as Comparability limits on Medi-

care prevailing screens.

The regular business screens were established based on a

relative value scale. A relative value scale ranks procedures

by comparison of the complexity, skill, time and resources

required for each procedure. Procedures that are more com-

plex and/or require more skill, time or resources are ranked

higher than those that require less. In the past, regular busi-

ness screens were determined primarily based on charges

billed to BCBSM. Because charges do not always reflect

complexity, skill, time and resources of one procedure in

relation to another; screens for many procedures were too

low, while screens for other procedures were too high. To

correct the imbalance, the relative value relationship meth-

odology for establishment of maximum screens was

approved by the BCBSM Board of Directors in 1983, and is

currently used for regular business screen determination.

In addition, BCBSM was instructed by HCFA to implement

a decision handed down by the United States Court of

Appeals for the Sixth Circuit. The court decision requires

BCBSM to merge charge data for all physicians, including

chiropractors, dentists, podiatrists, and optometrists in cal-

culating a new prevailing charge screen. BCBSM will apply

this calculation to the frozen fee screens. As a result, physi-

cians may experience changes in payment for selected

Services.