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LANGHORNE GARDENS, INC. v. WEINBERGER

March 6, 1974

LANGHORNE GARDENS, INC.
v.
CASPAR W. WEINBERGER, Secretary of the United States Department of Health, Education and Welfare and BLUE CROSS OF GREATER PHILADELPHIA, INC.


Higginbotham, District Judge.


The opinion of the court was delivered by: HIGGINBOTHAM

The fundamental question here to be resolved is whether a provider of services (Langhorne Gardens, Inc.) under the Health Insurance for the Aged Act *fn1" is entitled by virtue of the Fifth Amendment Due Process Clause to review of an adverse coverage determination made by the provider's fiscal intermediary *fn2" (Blue Cross of Greater Philadelphia, Inc.). Here Blue Cross has suspended payment claimed by plaintiff for supplemental medical services rendered under "Part B" of the Act.

 I.

 The Health Insurance for the Aged Act (Medicare Act), inter alia, establishes:

 
". . . a voluntary insurance program to provide medical insurance benefits . . . for aged and disabled individuals who elect to enroll under such program, to be financed from premium payments by enrollees together with contributions from funds appropriated by the Federal Government." *fn3"

 The program is administered by the United States Department of Health, Education, and Welfare. In order to facilitate the efficient administration of supplementary medical benefits under "Part B" of the Act, the Secretary of HEW is authorized to enter into contracts delegating certain administrative responsibilities to carriers which act as fiscal intermediaries between providers of medical services and the Department. Under this contractual arrangement the carrier, inter alia, determines rates of payment, makes disbursements to providers of services, and audits the records of such providers in order to ascertain if proper payments are being made. *fn4"

 The plaintiff, Langhorne Gardens, Inc., a skilled nursing facility licensed by the Commonwealth of Pennsylvania, filed an agreement with the Secretary pursuant to 42 U.S.C. ยง 1395cc as a provider of services under the Act. The agreement required in part that the Langhorne Gardens, Inc., not charge, except in circumstances not relevant here, any individual ". . . for items or services for which such individual is entitled to have payment made under this subchapter (or for which he would be so entitled if such provider of services had complied with the procedural and other requirements under or pursuant to this subchapter . . .) . . . ." *fn5" In turn Langhorne Gardens, Inc., became eligible to receive payments directly from the Federal Supplementary Medical Insurance Trust Fund *fn6" for services rendered pursuant to the agreement.

 In February, 1971, Langhorne Gardens, Inc., began providing out-patient physical therapy services to patients eligible for benefits under the Act through a contractual arrangement *fn7" with registered physical therapists. As set forth in the stipulated statement of facts in the Joint Final Pretrial Order:

 
"6. In September, 1972, a Blue Cross review of Langhorne's claims for reimbursement indicated substantial increase in the number of claims.
 
"7. In December, 1972 -- January, 1973, Blue Cross reviewed a sample of Langhorne's past claims submitted and found that some of the claims paid during the period May to December, 1972 were subject to question on two grounds:
 
"a. Whether the documentation of the out-patient physical therapy treatments adequately supported a determination that the services rendered were 'medically necessary. '
 
"b. Whether a treatment rendered during this period of physical therapy aides, outside the presence of a registered physical therapist, was a 'covered service ' under the Medicare Act.
 
"8. Blue Cross also found that Langhorne's arrangements with physical therapists were through written contract with American Medical Affiliates, Inc., Langhorne's parent corporation and 100% stockholder.
 
"9. Effective February 13, 1973, the Secretary and Blue Cross suspended payments to Langhorne for the cost of out-patient physical therapy services rendered because they suspected that Langhorne had received ...

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