Opposition Brief — Kwoun v. Southeast Missouri Professional Standards Review Organization

Re Supreme Court, U.S.

“BILLED

No. 86-1944 |S

. BPANIOL, JR.

CLERK

IN THE

Supreme Court of the United States

OcTOBER TERM, 1986

SounG O. Kwoun, ef ai.,

Petitioners,

Vs.

SOUTHEAST MISSOURI! PROFESSIONAL STANDARDS

REVIEW ORGANIZATION, ef ai.,

Respondents.

BRIEF OF THE SOUTHEAST MISSOURI PROFESSIONAL

STANDARDS REVIEW ORGANIZATION RESPONDENTS

IN OPPOSITION TO PETITION FOR WRIT OF

CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE EIGHTH CIRCUIT

JOHN C. Rasp

Counsel of Record

Mark S. PACKER

PEPER, MARTIN, JENSEN,

MAICHEL and HETLAGE

720 Olive Street, 24th Floor

St. Louis, Missouri 63101

(314) 421-3850

Counsel for the Southeast

Missouri Professional Standards

Review Organization Respondents

St. Louis Law Printing Co.,Inc., 411 No. Tenth Street 63101 314-231-4477

TABLE OF CONTENTS

Page

Table of Authorities ....... Steet nett eee eee ees ii

I ioe baie Scan dhs Seeds ees saseaes 2

Reasons for Denying the Writ ..........ccccccccenes 7

A. The Exercise of Prosecutorial Decision-

a, acu d hl wih en Meee ee KERR Os 10

B. The Likelihood of Recriminatory Suits ...... 11

C. Safeguards Provided by the Regulatory

cea ska hivk ns seeueneunknes 14

as in da ao ce vec a dunaes aaa ee eke ee 19

PE OE vine kp rece ke cede ate wha ckeue ve ees A-l

ii

TABLE OF AUTHORITIES

Page

Cases:

Anderson v. Occidental Life Insurance Co., 727 F.2d

I oad aia sc Mba wih bons a Ramee 9

Arnett v. Kennedy, 416 U.S. 134 (1974) .............. 18

Atkins v. Lanning, 556 F.2d 485 (10th Cir. 1977) ...... 1]

Austin Municipal Securities v. National Association of

Securities Dealers, 757 F.2d 676 (Sth Cir. 1985) ... 7, 8,9,

11, 13, 14

Becker v. Philco Corp., 372 F.2d 771 (4th Cir.), cert.

Semin, SEG U.S. Frese es vs ceca cisswsscan 9

Bradley Computer Sciences Corp., 643 F.2d 1029 (4th

Cir.), cert. denied, 454 U.S. 940 (1981) .......... 9

Buel v. Laces, G62 U.S. SEF CISD 5 oc cc ceca vnc den 16

Bushman v. Seiler, 755 F.2d 653 (8th Cir. 1985) ....... 8,9

Butz v. Economou, 438 U.S. 478 (1978)... 1, 7, 8, 9, 10, 11, 13,

15, 16, 19

Ducey v. United States, 713 F.2d 504 (9th Cir. 1983) ... 13

Evans v. Wright, 582 F.2d 20 (Sth Cir. 1978) .......... 9

Forsyth v. Kleindienst, 599 F.2d 1203 (3d Cir. 1979),

729 F.2d 267 (3d Cir. 1983), rev’d on other grounds

sub nom., Mitchell v. Forsyth, 105 S.Ct. 2806

SUNN is wds chek ensue bee cautess eae 11

Franks v. Nimmo, 796 F.2d 1230 (10th Cir. 1986) ...... 16, 18

Geriatrics, Inc. v. Harris, 640 F.2d 262 (10th Cir.), cert.

Geied, 4546 U.S. SES CISRAD «ova ncn ccscsasccacss 17

iil

Gross v. Sederstrom, 429 F.2d 96 (8th Cir. 1970)....... 7

Koerpel v. Heckler, 797 F.2d 858 (10th Cir. 1986)...... i7, 18

Kwoun v. Schweiker, 528 F.Supp. 1004 (E.D. Mo. 1981) 5, 8, 15

Mathews v. Eldridge, 424 U.S. 319 (1976) ............ 17

Matranga v. Travelers Insurance Co., 563 F.2d 677

ee ci keaneeesaes y

Mendez v. Belton, 739 F.2d 15 (Ist Cir. 1984) ......... 13

-Newport v. Fact Concerts, Inc., 453 U.S. 247 (1981) ... 13

Northlake Community Hospital v. United States, 654

sn nk eee ascaccscocece 17, 18

Peterson v. Weinberger, 508 F.2d 45 (Sth Cir.), cert.

denied, 423 U.S. 830 (1975) ...... Mauda k dette 9

Ritter v. Cohen, 797 F.2d 119 (3d Cir. 1986) .......... 17, 18

Simons v. Bellinger, 643 F.2d 774 (D.C. Cir. 1980) ..... 7, 8,9,

10, 11, 12

Slavin v. Curry, 574 F.2d 1256 (Sth Cir. 1978).......... 7, 8,9

Tenney v. Brandhove, 341 U.S. 367 (1951)............ 13

Town Court Nursing Center, Inc. v. Beal, 586 F.2d 266

csc ccc cesascencccen 17

United States v. Tilleraas, 709 F.2d 1088 (6th Cir. 1983) 13

Whitney National Bank in Jefferson Parish v. Bank of

New Orleans & Trust Company, 379 U.S. 411

eg bu bin w ds bs esseceeces 16

Statutes, Regulations and Rules:

awd oe bea sk sessed esecscens 3

I ccc ess cencccsens 2

iv

42 U.S.C. §1320c-1(b)(1)(A) (Supp. IV 1974).......... 2

42.U.S.C. §1520e-3 Gmp.1V 1974) .. 2.0 ccc cceen. 13

42 U.S.C. §1320c-4(a)(1) (Supp. IV 1974)............. 3

42 U.S.C. §1320c-6(b) (Supp. IV 1974) .......... 3, 12, 13, 14

42 U.S.C. §1320c-9(b)(1) (Supp. IV 1974) ............ 3

8 Poe ee Pere rT eT errr cap 3

42 U.S.C. §1395y(d)UIY(C) .. . tate kee ak heed ae 5

42 C.F.R. §420.102(a) & (b) (1980) .................. 3

es ED 5 oh 6 5 basa nesdetTansascascens 3

ee OTOP PRT PTET ELE TT eee Tere 3

Ra es EEG, ac dbicndiderdcctunvt ease 3

II, Sb one pons scabs kevevccsdenuneas 3

PY Fr divas seach ex sseucteeaboee 3

es Sc nases Coes eee ween a 3

No. 86-1944

IN THE

Supreme Court of the United States

OCTOBER TERM, 1986

SouNG O. Kwoun, ef ai.,

Petitioners,

vs.

SOUTHEAST MISSOURI PROFESSIONAL STANDARDS

REVIEW ORGANIZATION, ef al.,

Respondents.

BRIEF OF THE SOUTHEAST MISSOURI PROFESSIONAL

STANDARDS REVIEW ORGANIZATION RESPONDENTS

IN OPPOSITION TO PETITION FOR WRIT OF

CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE EIGHTH CiRCUIT

Respondents, the Southeast Missouri Professional Standards

Review Organization, its physician participants and ad-

ministrator' submit this Brief in opposition to the Petition for

Writ of Certiorari filed by Petitioners, Dr. Soung O. Kwoun

and his related corporations. The opinion of the United States

Court of Appeals for the Eighth Circuit, below, is a straight-

forward application of Butz v. Economou, 438 U.S. 478 (1978)

to the facts presented. The issues truly raised by this case in-

volve no conflict among the Circuits nor novel doctrinal ques-

tions. Therefore, the Writ should be denied.

A listing of the SEMO PSRO respondents is set forth as Adden-

dum ‘‘A’’ to this Brief.

a ee

STATEMENT OF THE CASE

Dr. Soung O. Kwoun is a physician who was suspended from

eligibility to participate in the Medicare program and thereafter

reinstated in the program through the administrative review

process. After being reinstated and receiving full compensation

for all past Medicare services provided, Petitioner Kwoun (with

his corporations) brought this suit against numerous persons

allegedly involved in the suspension decision.

Petitioners named as defendants in this suit some 45 physi-

cians who at one time participated in the operation of the

Southeast Missouri Professional Standards Review Organiza-

tion (SEMO PSRO), the administrator of the SEMO PSRO, of-

ficials of the federal Health Care Financing Administration

(HCFA), and others. Petitioners claim the various SEMO

PSRO officials (including several physicians who are themselves

members of minority groups) and the HCFA officials all con-

spired to suspend Dr. Kwoun’s participation in the Medicare

program on the basis of his race, denied him due process of law,

and committed various common law torts through exercise of

their sanctioning authority.

The Administrative Framework of the Medicare Program

The SEMO PSRO is part of a system of local-area peer review

established by Congress to aid HCFA, a division of the Depart-

ment of Health and Human Services (HHS), in the regulation of

the Medicare program. 42 U.S.C. §§ 1320c et seg. The SEMO

PSRO operates through a committee of physicians practicing in

the southeast Missouri region, who have volunteered to partic-

pate in the PSRO’s public responsibilities. See 42 U.S.C. §

1320c-i(b)(1)(A) (Supp. IV 1974).

PSROs are charged by Congress with performance of a varie-

ty of review and evaluative functions. Among these functions, a

PSRO is required to determine whether physicians are meeting

their obligations to provide high quality and reasonably

—

necessary health care to Medicare recipients. Should a PSRO

determine that a physician is violating his obligations under the

Medicare program, the PSRO is required to initiate an ad-

ministrative action against the physician by issuing a report to

HCFA charging the physician with case-specific violations and

proposing appropriate sanctions. 42 U.S.C. §§ 1320c-4(a)(1),

1320c-6, 1320-9(b)(1) (Supp. IV 1974). The Medicare Act pro-

vides extensive procedural safeguards throughout the sanction-

ing process, including rights to administrative and judicial

review.’

The Administrative Proceeding Involving Dr. Kwoun

The SEMO PSRO’s review began as a result of notification

from HCFA that the hospital readmission rate’ of Medicare pa-

tients in the southeast Missouri region was the highest in the na-

tion. (III CA App. 365)‘ The SEMO PSRO’s evaluation of the

? Under applicable administrative regulations, following a PSRO’s

sanction report, HCFA must give the physician notice of the proposed

sanction. The physician may obtain oral hearing before HCFA or

submit written evidence and argument. 42 C.F.R. §420.102(a) (1980).

If a sanction is imposed, HCFA must send the doctor a notice stating

the reasons. 42 C.F.R. §420.102(b) (1980). The physician may appeal

the decision to an administrative law judge [42 C.F.R. §420.102(b)(3)]

for a formal hearing with right of cross-examination and a decision

based upon the evidence of the record [42 C.F.R. §§ 405.1502(e),

405.1530, 405.1533 et seg., 405.1547, 405.1557]. Further appeal may

be taken to the Secretary’s Appeals Council. 42 C.F.R. §405.1561.

Judicial review may then be obtained in federal district court. 42

U.S.C. §§ 405(g), 1395(d)(3).

> The hospital readmission rate is a standard applied in administer-

ing the Medicare program which measures the frequency enrollees are

being hospitalized.

‘ The Court of Appeals Appendix is cited as “CA App.’’, preceded

by reference to the volume (I-VII) and followed by citation to the ap-

propriate pages.

—

problem focused on Poplar Bluff Hospital’ and ultimately on

Dr. Kwoun.

The PSRO initially reviewed the records of patients of the

Poplar Bluff Hospital having been hospitalized six or more

times. This review was conducted on a blind basis, so that the

patient files did not disclose the identity of the treating physi-

cian. (I CA App. at 117) Having culled those patient records

indicating inadequate care, the PSRO discovered that Dr.

Kwoun was the treating physician on an inordinate number of

the problem-files. (I CA App. at 143-148) The SEMO PSRO

communicated both orally and in writing with Dr. Kwoun and

offered Dr. Kwoun other opportunities to meet with the PSRO.

(Il CA App. at 334-336)

As a result of their evaluation of the patient records, the

PSRO officials determined (a) that in 23 specific cases the treat-

ment accorded Medicare recipients by Dr. Kwoun failed to meet

professionally accepted standards and (b) that these failings

justified their recommendation to HCFA that Dr. Kwoun be

suspended from the Medicare program. (I CA App. at 45)

After the PSRO presented their evidence of the 23 alleged

violations through a report sent to HCFA and prior to the im-

position of sanctions, the Central Office of HCFA sent Dr.

Kwoun a notice formally proposing to exclude him from

Medicare eligibility for 10 years. The notice further advised Dr.

Kwoun of his right to appear in person before HCFA and pre-

sent written evidence in opposition to the proposed sanction.

(1 CA App. at 171-174)

Petitioner Kwoun took advantage of this opportunity for a

hearing and appeared, with counsel, at the administrative

review before the HDFA’s Director of Quality Control. During

* The average readmission rate of the 21 hospitals in the southeast

Missouri region was 34.1 per 100 patients. Poplar Bluff Hospital’s

rate was 70 per 100 patients. (I CA App. 117)

the hearing, Dr. Kwoun addressed on a case-by-case basis the

patient files identified as giving rise to the administrative

charges. (II CA App. at 182-309) The evidence adduced at the

HCFA hearing was then submitted to the SEMO PSRO for its

further review and analysis. (III CA App. at 383-384) In addi-

tion, Dr. Kwoun (through counsel) followed the hearing with

lengthy written comments on the PSRO’s conclusions respec-

ting each patient file. (II CA App. at 311-316) The SEMO

PSRO considered and responded in writing to Dr. Kwoun’s

comments, adhering to its conclusion that the doctor’s

treatments were improper. (II CA App. at 317) Dr. Kwoun

then submitted further written comments. (I1 CA App. at

318-332)

After the hearing and the exchange of comments, the HCFA

determined Dr. Kwoun would be excluded from particpation in

the Medicare Program for a period of ten years pursuant to 42

U.S.C. §1395y(d)(1)(C). The HCFA decision was accompanied

by a statement detailing the basis for the suspension and further

advised the doctor of his right to a hearing before an ad-

ministrative law judge (ALJ). (11 CA App. at 333-337)

Prior to the effective date of the HCFA decision, Dr. Kwoun

filed suit in the United States District Court for the Eastern

District of Missouri to enjoin the suspension. Kwoun v.

Schweiker, 528 F.Supp. 1004, (E.D.Mo. 1981). The court

dismissed the suit for failure of Dr. Kwoun to exhaust his ad-

ministrative remedies. Necessary to ruling that it lacked

jurisdiction, the district court independently reviewed the ad-

ministrative proceedings which had theretofore taken place and

specifically held that the administrative actions disclosed no

‘‘colorable constitutional claim’’ and that ‘‘the agency will be

capable to correct any procedural defects in a later evidentiary

hearing.’’ 528 F.Supp. at 1009.

=

Dr. Kwoun took advantage of the further evidentiary hearing

before the ALJ, who found in the doctor’s favor. Dr. Kwoun

was then restored to full Medicare eligibility and received com-

plete compensation for all Medicare services he had rendered

during the period the suspension was under review. (III CA

App. at 530) The present suit followed.

oe

REASONS FOR DENYING THE WRIT

Federal officials, engaged in discretionary prosecutorial! or

quasi-judicial conduct, are protected by absolute immunity not

only from common-law claims but also from constitutional or

civil rights claims. Butz v. Economou, 438 U.S. 478, 508-16

(1978). The present case involves the routine (and correct) ap-

plication of Butz and its progeny to the facts presented. It

presents no novel doctrinal issues nor any split among the Cir-

cuits.°®

Entitlement to the immunity afforded by Bufz turns on the

public function being performed, not on an individual’s title

nor on whether his employer is a governmental agency. See

Austin Municipal Securities, Inc. v. National Association of

Securities Dealers, 757 F.2d 676 (Sth Cir. 1985) (stockbroker

members of a local disciplinary committee of the securities in-

dustry’s self-regulatory body absolutely immune in determining

whether a brokerage house should be sanctioned). Accord,

Simons v. Bellinger, 643 F.2d 774 (D.C. Cir. 1980); Slavin v.

Curry, 574 F.2d 1256 (Sth Cir. 1978) (attorney-members of bar

disciplinary committees). See also Gross v. Sederstrom, 429

F.2d 96 (8th Cir. 1970) (local farmers serving on a committee

* Petitioners attempt to construct a ‘‘split among the Circuits’’ by

citing a laundry-list of cases wherein courts addressed the type of im-

munity to be accorded a variety of officials in cases involving a

multitude of differing official functions under widely differing factual

situations. These cases are not before the Court. Petitioners point to

no Circuit Court decision involving the immunity of PSRO officials,

officials acting within the Medicare program, or even officials of any

industry or professional self-regulatory body, which conflicts with the

decision of the Eighth Circuit here. Petitioners’ reference to two cases

holding PSROs not subject to the Freedom of Information Act, simp-

ly does not get to the issues at hand — whether and to what degree

physicians, when performing prosecutorial duties through a PSRO

and under a comprehensive federal regulatory program, are entitled to

immunity.

=

determining eligibility to participate in federal farm support

programs).’

The application of absolute immunity from constitutional

tort and common law claims to such persons as stockbrokers

(Austin) and attorneys (Simons; Slavin), exercising their pro-

secutorial discretion in intitiating disciplinary proceedings

within comprehensive regulatory programs, is indistinguishable

from the application of absolute immunity to the SEMO PSRO

doctors under the facts here. Indeed, Petitioners, themselves,

acknowledged in a Brief filed in the Eighth Circuit that the

SEMO PSRO defendants stand in the same legal relationship as

the disciplinary committee members in Austin. In their Brief,

Petitioners stated: ‘‘[T]he disciplinary officials afforded ab-

” Indeed, professional or industry self-regulatory bodies now oc-

cupy an important place in the effectuation of important federal

policies and programs. Congress, often times and in a myriad of con-

texts, has determined that its regulatory objectives are best and most

efficiently served by calling upon members of a profession to perform

regulatory duties — duties which Congress might otherwise have

assigned to agency officials.

The reason is sound: Professionals working in a field or industry and

at the local-level, can bring to bear their expertise in the field and their

knowledge of local practice and circumstances. Indeed, this is precise-

ly what Congress contemplated in establishing a nationwide network

of PSROs. See Kwoun v. Schweiker, 528 F.Supp. at 1005. It would

most certainly produce an anomalous result if the immunity which

would otherwise apply to an agency official would not be applied to

protect individuals (not strictly members of a governmental

‘“‘agency’’) merely because Congress chose to utilize the greater exper-

tise of these individuals. Compare Bushman v. Seiler, 755 F.2d 653

(8th Cir. 1985) with Evans v. Wright, 582 F.2d 20 (Sth Cir. 1978).

All in all, the application of official immunity to persons appointed to

serve as governmental experts and to report on what they find within

an overall regulatory scheme, is ‘‘consistent with protecting ‘officials

who are required to exercise their discretion’ and [with] promoting the

‘public interest in encouraging the vigorous exercise of official

authority.’ ’’ Bushman v. Seiler, 755 F.2d at 656 quoting Butz v.

Economou, 438 U.S. at 506.

‘ate ons

solute immunity in Austin are analogous to the PSRO physi-

cians in this case... .’” (Kwoun Brief in Appeal No. 85-2379 at

p. 37).

Furthermore, application of Burz to the PSRO’s pro-

secutorial conduct is entirely consistent with repeated decisions

holding individuals and entities performing oversight and

regulatory functions under the Medicare program entitle to of-

ficial immunity. See Bushman vy. Seiler, 755 F.2d 653 (8th Cir.

1985) (physician retained by an insurance company serving as a

Medicare carrier absolutely immune in a defamation action aris-

ing from his investigation of Medicare services provided by two

podiatrists); cf. Evans v. Wright, 582 F.2d 20, 21 (Sth Cir. 1978)

(Medicare program integrity specialists investigating plaintiff’s

provision of health care service and equipment). See also Peter-

son v. Weinberger, 508 F.2d 45, 51-52 (Sth Cir.), cert. denied,

423 U.S. 830 (1975); Matranga v. Travelers Insurance Co., 563

F.2d 677 (Sth Cir. 1977); Anderson v. Occidental Life Insurance

Co., 727 F.2d 855, 856 (9th Cir. 1984) (insurance carriers and

intermediaries, required to audit and report to HCFA concern-

ing the provision of Medicare services, held ‘‘governmental

agents’’ for immunity purposes).°

Moreover, the grant of absolute immunity to disciplinary

committee members in Austin, Simons and S/avin and to the

SEMO PSRO physicians here is entirely consistent with the

three factors identified by this Court in Butz v. Economou for

the application of prosecutorial immunity. Under Butz, ab-

solute immunity from constitutional and civil rights claims

* In other contexts, as well, private-sector entities have been held

governmental actors for the purposes of absolute immunity from suit.

See, e.g., Bradley Computer Sciences Corp., 643 F.2d 1029 (4th Cir.),

cert. denied, 454 U.S. 940 (1981); Becker v. Philco Corp., 372 F.2d

771 (4th Cir.) cert. denied, 389 U.S. 979 (1967) (holding government

contractors and their employees entitled to official immunity from

suits arising from reports submitted to the Department of Defense for

governmental purposes).

a ee

applies where:

(1) The official’s functions share the characteristics of

the judicial process;

(2) The official’s activities are likely to result in

recriminatory lawsuits by disappointed parties; and

(3) Sufficient safeguards exist in the regulatory

framework to control unconstitutional conduct.

438 U.S. at 510-13. This case presents a textbook illustration of

the Butz factors.

A. The Exercise of Prosecutorial Decision-Making

Under the first Butz facior, absolute immunity extends to ad-

ministrative officials exercising ‘‘broad discretion in deciding

whether a proceeding should be brought and what sanctions

Should be sought.’’ 438 U.S. at 515 (emphasis added).

Here it was the job of the SEMO PSRO physicians to exercise

their medical expertise in the enforcement of the Medicare Act.

Their review began with an analysis of the general problem of

high hospital readmissions within their region, but quickly

focused on a specific physician, Dr. Kwoun, whose patient

records indicated an inordinate numer of readmissions and,

moreover, inadequate care to Medicare recipients. Faced with

these records, the PSRO physicians had to determine, in the ex-

ercise of their medical judgment, whether and, if so, which

specific patient cases revealed violations of Medicare program

standards. And, upon this evaluation, they had to and did, in

fact, determine ‘‘whether a proceeding should be brought’’

against Dr. Kwoun and ‘‘what sanctions should be sought.”’

Butz, 438 U.S. at 515.

This decision-making process is precisely that held immuniz-

ed by the District of Columbia Circuit in Simons v. Bellinger,

643 F.2d at 784, with respect to the evaluative efforts related

to a bar disciplinary committee’s decision to initiate a case. The

court in Simons held:

— om

‘‘At some point the prosecutor’s inquiry becomes suffi-

ciently focused so that he is preparing a case against a par-

ticular defendant rather than seeking a defendant against

whom he may prepare a case. At his point, his efforts

become advocatory: they are intimately associated with the

sensitive decision of whether or not to initiate a particular

prosecution, a decision which is left to advocates, not in-

vestigators.”’

Accord, Forsyth v. Kleindienst, 599 F.2d 1203, 1215 (3d Cir.

1979); Atkins v. Lanning, 556 F.2d 485, 488 (10th Cir. 1977).

Indeed, protection of a prosecutor’s investigation is necessary

because ‘‘[t]o grant a prosecuting attorney absolute immunity

over his decision to initiate a prosecution while subjecting him

to liability for securing the information necessary to make that

decision would only foster uninformed decision-making and the

potential for needless actions.’’ Forsyth v. Kleindienst, 599

F.2d at 1215.

B. The Likelihood of Recriminatory Suits

The protection of officials intimately involved in a pro-

secutorial decision serves an important public purpose. Ad-

dressing the second Butz factor, this Ceurt expained: ‘‘The

discretion which executive officials exercise with respect to the

initiation of administrative proceedings might be distorted if

their immunity from damages arising from that decision was /ess

than complete.’’ Butz, 438 U.S. at 515 (emphasis added).

The concern expressed in Butz is especially pronounced here.

The administration of the Medicare Program requires enforce-

ment of p ofessionally accepted standards of health care and

Congress chose to use medical experts through the PSROs —

rather than agency officials — to evaluate whether a physician

was meeting these standards and to bring charges if the physican

was not. If the experts are inhibited from exercising their pro-

fessional judgment by fear of retaliatory suits, the intended

benefits of their unique expertise will be lost. Cf. Austin

=.

Municipal, 757 F.2d at 689 (self-regulatory body’s members are

likely targets for suit).

Thus, where, as here the success of a federal program

depends on the effort of private individuals who volunteer to

undertake an important public service, the need for the absolute

_immunity is profound. Commenting on the necessity of ab-

solute immunity for attorneys voluntarily participating on a bar

disciplinary committee, the court in Simons stated: ‘‘Perhaps,

without this [absolute] immunity, membership on the Commit-

tee would be transformed from a distinguished achievement in

public service to an invitation to become a defendant in costly,

time-consuming litigation.’’ 643 F.2d at 782.

This necessary application of absolute immunity to officials

when functioning, as the PSRO here, in a prosecutorial capacity

is entirely consistent with the limitation of liability provision of

42 U.S.C. §1320c-6(b) (relied on by Petitioners for their argu-

ment that the PSRO officials should only be accorded qualified

immunity). The Eighth Circuit’s finding, below, that

$1320c-6(b) is not applicable to the PSRO officials when func-

tioning as prosecutors is supported by reason and authority.

(See Petitioner’s Appendix at 33a-35a, n.13).

The doctrine of official immunity bars (a) common-law

claims against an official arising out of his public duties and (b)

all claims arising out of the performance of prosecutorial duties.

On the other hand, §1320c-6(b), far more broadly, bars all civil

and criminal liability for all persons performing any services for

PSROs if those persons have exercised ‘‘due care.”’

While the initiation of an administrative prosecution is one

function of a PSRO, Congress has also charged the PSROs with

a wide range of other duties in the administration of the

Medicare program. The discharge of many of these day-to-day

statutory duties could give rise to statutory claims against per-

aa

sons aiding the PSRO — claims which in many cases would fall

out side of the scope of any common law immunity.’

Moreover, §1320c-6(b) is not a liability provision. It does not

require liability for failure to exercise ‘‘due care.’’ As such, the

statutory provision cannot be said to foreclose established com-

mon law immunities applicable to particular claims and par-

ticular and narrow functions of the PSRO. Statutes are to be

construed consistent with common law rights and are to be nar-

rowly construed so as not to interfere with common law rights.

See, e.g., United States y. Tilleraas, 709 F.2d 1088, 1092 (6th

Cir. 1983); Ducey v. United States, 713 F.2d 504, 510 (9th Cir.

1983). Indeed, even where a statute express/y imposes liability,

as for example, the Civil Rights Acts, this Court has held that

courts should be circumspect in finding that Congress intended

to impose liability in situations where common law immunities

would otherwise apply. See Tenney v. Brandhove, 341 U.S.

367, 376 (1951); Newport v. Fact Concerts, Inc., 453 U.S. 247,

258 (1981).'°

In short, the exercise of prosecutorial discretion is one official

function that courts have consistently held requires absolute im-

munity. Butz, 438 U.S. at 515; Austin Municipal, 757 F.2d at

* For instance, §1320c-6(b) might apply to a statutory claim against

a physician who assisted the PSRO in determining, pursuant to

§1320c-3, that certain claims should not be paid; though he would be

entitled to the protection of §1320c-6(b), such a physician would not

be protected by official immunity, since the claim was not a common

law claim and did not arise out of performance of prosecutorial

duties. Thus, the limitation of liability of §1320c-6(b) will frequently

apply to different sorts of claims and to different persons than the

common law doctrine of official immunity.

'° Furthermore, the existence of statutory immunities applicable in

certain circumstances, does not foreclose resort to common law im-

munities in other situations where such immunities traditionally app-

ly. See Mendez v. Belton, 739 F.2d 15, 19 (1st Cir. 1984).

—*

687 (‘‘holding some official positions, however, require greater

protection than qualified immunity provides’’). Accordingly,

there is no reason to suppose that the application of absolute

immunity to a PSRO’s occasional exercises of prosecutorial

authority is inconsistent with §1320c-6(b).

C. Safeguards Provided by the Regulatory Framework

Through the Medicare Act, Congress has carefully tailored a

multi-tiered procedural safety net for the administration of

payments to and the sanctioning of health care providers under

the program. See Note 2, supra. Cf. Austin Municipal, 757

F.2d at 689. Dr. Kwoun vigorously took advantage of his pro-

cedura! rights throughout the administrative process. He receiv-

ed:

@ Oral and written communications with the PSRO

during its evaluative process.

@ Notice from HCFA of its intent to suspend his

Medicare eligibility.

@ A pre-suspension hearing before HCFA, at which he

(with counsel) presented evidence on each of the

PSRO’s charges.

@ The opportunity to twice submit written comments

on the charges to HCFA prior to the suspension deci-

sion.

@ Judicial review of the constitutionality of the ad-

ministrative procedures leading up to the suspension.

Kwoun v. Schweiker, supra.

e A post-suspension evidentiary hearing before an

ALJ, which found in his favor.''

'' Furthermore, had Dr. Kwoun not prevailed before the ALJ, he

would have been entitled to an administrative appeal to the Secretary’s

Appeal Council and then to judicial review of the sanction in federal

court.

a. en

@ Reinstatement in the Medicare Program and full com-

pensation for Medicare services he rendered.

These procedures clearly provide a more than an adequate

check on the possibility of unconstitutional conduct, fulfilling the

third requirement of Butz for the application of absolute pro-

secutorial immunity. Indeed, in Kwoun v. Schweiker, the court

expressly found that the administrative record disclosed ‘‘no

colorable constitutional claim’’ and that ‘“‘the agency will be

capable to correct any procedural defects in a later evidentiary

hearing.’” 528 F.Supp. at 1009.'°

Petitioners’ present contentions that (a) due process requires

greater proceedings than he was accorded (specifically, a ‘‘full

pre-suspension hearing’’) and (b) a damages remedy (including

punitive damages and attorneys fees) is necessary, are simply

unjustified by the administrative record and established law.

Absolute immunity to PSRO officials engaged in prosecutorial

decision-making is entirely consistent with the procedural and

remedial protections available through the Medicare

framework. And, the Medicare program’s procedures and

remedies are, likewise, entirely consistent with due process.

Petitioners simply are not entitled, by virtue of asserting some

constitutional claim, to remedies beyond reinstatement in the

Medicare program and compensation for Medicare services

'* Consistent with the findings in Kwoun v. Schweiker, this Court

stated in Butz:

“The defendant in an enforcement proceeding has ample oppor-

tunity to challenge the legality of the proceeding. An ad-

ministrator’s decision to proceed with a case is subject to

scrutiny in the proceeding itself. The respondent may present

his evidence to an impartial trier of fact and obtain an indepen

dent judgment as to whether the prosecution is justified. His

claims that the proceeding may be unconstitutional may also be

heard by the ccurts. Indeed, respondent in this case was able to

quash the administrative order entered against him by means of

judicial review.’’ 438 U.S. at 515-16.

=~

rendered. This Court has long recognized that the review and

remedial procedures available under a comprehensive

regulatory statute may be exclusive and, indeed, preclude the

full scope of remedies (such as punitive damages and attorneys

fees) as may be available through a civil rights or constitutional

tort action. Bush v. Lucas, 462 U.S. 367, 378-390 (1983);

Vi hitney National Bank in Jefferson Parish v. Bank of New

Orleans & Trust Company, 379 U.S. 411, 420 (1965) (holding

‘‘where Congress has provided statutory review procedures

designed to permit agency expertise to be brought to bear on

particular problems, those procedures are to be exclusive’’). See

also Franks v. Nimmo, 796 F.2d 1230, 1240 (10th Cir. 1986)

(dismissing a doctor’s constitutional tort suit arising from his

discharge from a government hospital on the grounds that

remedies available through administrative review, ‘‘reinstate-

ment and back pay,’’ provide ‘‘meaningful relief’’ to the exclu-

sion of further remedies).

The often recognized limitation of remedies to those available

under a comprehensive administrative statute is based on the

same policies which underlie the grant of absolute immunity to

federal officials. This Court observed in Bush:

‘‘The costs associated with the review of disciplinary deci-

sions are already significant — not only in monetary terms,

but also in the time and energy of managerial personnel

who must defend their decis#ens. . . . [I]t is quite probable

that if management personnel face the added risk of per-

sonal liability for decisions that they believe to be a correct

..., they would be deterred from imposing discipline in

future cases.”’

462 U.S. at 388-89. Cf. Butz, 438 U.S. at 515-516 quoted at

Note 12, supra.

Moreover, the administrative procedures provided by the

Medicare Act and accorded Dr. Kwoun fully meet the re-

quirements of due process. Petitioners’ contention that Dr.

ee

Kwoun was constitutionally entitled to and denied a ‘‘full pre-

termination hearing’’ ignores the doctor’s appearance before

the HCFA administrator and his further submission of written

comments and, in any event, misconceives the law.

It is firmly established that due process does not require that a

health care provider receive a full hearing prior to suspension or

termination from the Medicare program. See Koerpel v.

Heckler, 797 F.2d 858 (10th Cir. 1986); Ritter v. Cohen, 797

F.2d 119 (3d Cir. 1986); Geriatrics, Inc. v. Harris, 640 F.2d 262

(10th Cir.), cert. denied, 454 U.S. 832 (1981); Northlake Com-

munity Hospital v. United States, 654 F.2d 1234, 1241-43 (7th

Cir. 1981); Town Court Nursing Center, Inc. v. Beal, 586 F.2d

266, 276-78 (3d Cir. en banc 1978). Under these authorities, the

pre-termination process need not be elaborate but should in-

clude ‘‘oral or written notice’ and an ‘‘opportunity to present

his side of the story.’’ Koerpel, 797 F.2d at 868. Due process is

satisfied when the pre-suspension opportunity to be heard pro-

vides an ‘‘initial check against mistaken decisions’’ and a full

post-termination hearing is given. /d.

Reaching this conclusion under the due process analysis set

forth in Mathews v. Eldridge, 424 U.S. 319, 335 (1976), the Cir-

cuits have focused on the essential purpose of the Medicare pro-

gram — the provision of quality and necessary health care to the

elderly and disabled. Because of the need to insure that the in-

tended beneficiaries of Medicare are receiving quality treatment

without abuse of federal resources, the Circuits have found the

government’s interest in the expeditious suspension of doctors

from the Medicare program is substantial. These courts have

also determined that under the statutory review procedures, the

likelihood of an erroneous termination from Medicare going

uncorrected is not substantial. See, e.g., Koerpel, 797 F.2d at

864; Northlake, 654 F.2d at 1242 & 1244-45.

Moreover, the courts have found the physician’s interest in a

full pre-suspension hearing not of constitutional significance. A

suspended physician ‘‘may seek private patients’? and ‘‘may

—_— po

continue to treat [Medicare] patients and, if he prevails in his

appeal, will be eligible for reimbursement.”’ Ritter, 797 F.2d at

123.'’ Indeed, as Justice Powell observed in Arnett v. Kennedy,

416 U.S. 134, 169 (1974) (concurring op.), an individual’s in-

ierest in receiving a pre-termination hearing is not constitu-

tionally significant where (as here) he ‘‘would be reinstated and

awarded backpay if he prevails’ in the post-termination hear-

ing.

Dr. Kwoun quite clearly received notice of the charges and

the opportunity — which he vigorously exercised — to ‘‘present

his side of the story’’ prior to the HCFA suspension decision.

Koerpel v. Heckler, 797 F.2d at 868. He received a full post-

suspension review and through review obtained reinstatement in

the Medicare program and backpay — in the form of reimburse-

ment for Medicare services rendered. Arnett, 416 U.S. at 169;

Franks, 796 F.2d at 1240. In short, Dr. Kwoun received precise-

ly the review and remedies which the Medicare Act and due pro-

cess contemplate.

'? While termination or suspension from the Medicare program may

have a significant financial impact on a health care provider, a pro-

vider is ‘‘not the intended beneficiary of the Medicare program’’ and

his ‘‘financial need to be subsidized for care of [his] Medicare patients

is only ‘incidental to the purpose and design of the Medicare

program.’ '’ Northlake Community Hospital, 654 F.2d at 1242 (em-

phasis original).

ni aes

CONCLUSION

For the reasons set forth above, the application of ab-

solute immunity to the SEMO PSRO Respondents derives from

a straight-forward application of this Court’s decision in Butz v.

Economou, supra, to the facts of this case. Fully satisfying the

Butz standards — (1) The PSRO functioned here in a pro-

secutorial capacity; (2) This prosecutorial decision-making is

likely (as this suit well illustrates) to result in recriminatory

lawsuits; and (3) The Medicare Act provides elaborate ad-

ministrative safeguards to control any unconstitutional con-

duct. The Writ should be denied.

Respectfully submitted,

John C. Rasp

Counsel of Record

Mark S. Packer

PEPER, MARTIN, JENSEN,

MAICHEL and HETLAGE

720 Olive Street, 24th Floor

St. Louis, Missouri 63101

Telephone: (314) 421-3850

Counsel for the Southeast

Missouri Professional Standards

Review Organization Respondents

Dated: July 2, 1987

ADDENDUM

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,

In addition to the SEMO PSRO, itself, the SEMO PSRO

Respondents are:

James Armantrout, D.O

Larry Baker

Michael K. Blank, M.D.

Joseph Blanton

William V. Booth, M.D

Edwin K. Burford, M.D.

Jean A. Chapman, M.D.

David Clark, M.D.

R.F. Dettmer, M.D.

D.E. Edwards, M.D.

Gordon Eller, M.D.

Bettie Sue Fikki

Jose H. Gonzales, M.D.

Terry Guiley, D.O.,

Tom Henderson, M.D.

W.E. Hendrickson, M.D.

T.O. Honaas, M.D.

Robert C. Hoye, M.D.

Randall Huss, M.D.

W.W. Hutton, D.O.

Christopher Jung, M.D.

Earle Kennedy, D.O.

Robert M. Kepner

G.H. Ladyman, M.D

John K. Legan, M.D

Gene Leroux, M.D.

R.E. Marts, D.O.

A.G. Miranda, D.O

George McAnelly, , M.D

Charles P. McGinty, M.D

Jesse Page, M.D

Pin Pu, M.D

a peo

Vinai Radsakulthai, M.D.

Martha Reed, M.D.

Raymond A. Ritter, M.D.

Robert Robbins, D.Q.

Eugene Ruff, M.D.

A.N. Sandler, D.O.

Allen Spitler, M.D.

Clifford Talbert, M.D.

Ben Till, M.D.

Austin Tinsley, M.D.

A.T. Tuma ** WU.

Kirby Turt.er, M.D.

Barry B. White, M.D.

iano os eect lll