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New Jersey Speech-Language-Hearing Association v. Prudential Insurance Co.

decided: December 29, 1983.

NEW JERSEY SPEECH-LANGUAGE-HEARING ASSOCIATION, A NEW JERSEY CORPORATION, NEW JERSEY ASSOCIATION OF SPEECH PATHOLOGISTS AND AUDIOLOGISTS IN PRIVATE PRACTICE, A NEW JERSEY CORPORATION, JULES KRONENGOLD, M.A., IRWIN BLAKE, PH.D., AND HARRIET SCHWARTZ, M.A., ON BEHALF OF THEMSELVES AS SPEECH-LANGUAGE PATHOLOGISTS AND ALL OTHER ENTITIES AND PERSONS SIMILARLY SITUATED
v.
PRUDENTIAL INSURANCE COMPANY OF AMERICA, A NEW JERSEY CORPORATION, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, RICHARD SCHWEIKER, SECRETARY OF HEALTH AND HUMAN SERVICES, HEALTH CARE FINANCING ADMINISTRATION AND CAROLYN K. DAVIS, ADMINISTRATOR, HEALTH CARE FINANCING ADMINISTRATION. NEW JERSEY SPEECH-LANGUAGE-HEARING ASSOCIATION, NEW JERSEY ASSOCIATION OF SPEECH PATHOLOGISTS AND AUDIOLOGISTS IN PRIVATE PRACTICE, IRWIN BLAKE, PH.D., AND HARRIET SCHWARTZ, M.A., APPELLANTS



Appeal From the United States District Court For the District of New Jersey - Newark.

Aldisert, Hunter and Weis, Circuit Judges. Weis, Circuit Judge, dissenting.

Author: Hunter

Opinion OF THE COURT

HUNTER, Circuit Judge:

Plaintiffs in this civil action are two organizations of speech pathologists and audiologists and three individually named speech therapy professionals. They brought suit against the United States Department of Health and Human Services ("HHS"), the Health Care Financing Administration ("HCFA"), Prudential Insurance Company of America ("Prudential") in its capacity as a fiscal intermediary under the Medicare Program, and several individual officers of HHS and HCFA who were responsible for administering the Medicare program. Plaintiffs challenge the amount received by skilled nursing facilities from Prudential for services rendered by plaintiffs under contract with the nursing facilities and the procedure by which that reimbursement was calculated. Plaintiffs have contracted to accept the amount of Medicare reimbursement as payment in full for the services that they render. The thorough opinion of the United States District Court for the District of New Jersey sets forth in great detail the nature of plaintiffs' claims and the scope of the Medicare statutory provisions and regulations upon which they ground their suit. See New Jersey Speech-Language-Hearing Association v. Prudential Insurance Co. of America, 551 F. Supp. 1024 (D.N.J. 1982) [hereinafter cited as New Jersey Speech ].

Under the relevant provisions of Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395-1395xx (1976 & Supp. V 1981) ("the Medicare Act"), skilled nursing facilities will be reimbursed for the "reasonable cost" of speech therapy services provided to Medicare patients "under arrangement" with independent medical professionals or associations such as plaintiffs. Id. § 1395f. Skilled nursing facilities are among a number of "providers" eligible to participate in the program and receive reimbursements. Id. § 1395x (v)(4). It is clear from the language of the Medicare Act that only "providers" may be reimbursed directly from the government; suppliers of services, the class within which these plaintiffs fall, must independently contract with a provider to determine the amount of their compensation. Id. § 1395x. Plaintiffs concede as much. [Brief for Appellants at 7-8].

The district court dismissed plaintiffs' claims for lack of standing.*fn1 The court held that independent suppliers of speech therapy services could not satisfy either the constitutional or the prudential requirements that must be met before a party may request the adjudication of the claims at issue here. 551 F. Supp. at 1029. We find much force in the reasoning of the district court, but we affirm on more narrow grounds. See New Jersey Chapter Inc. of American Physical Therapy Association, 164 U.S. App. D.C. 40, 502 F.2d 500, 504 (D.C. Cir. 1974), cert. denied, 420 U.S. 1004, 43 L. Ed. 2d 762, 95 S. Ct. 1444 (1975). We hold that the Medicare Act itself evidences a specific congressional intent to preclude suppliers of covered services, as distinguished from providers, from seeking judicial review of Medicare reimbursement procedures or amounts. Accordingly, we will affirm.

I.

The requirements for standing to sue in the federal courts are well established; the application of those criteria to a particular case, however, is not always clear. See Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 151, 25 L. Ed. 2d 184, 90 S. Ct. 827 (1970) ("Generalizations about standing to sue are largely worthless as such."). Parties seeking to challenge administrative actions must satisfy the constitutional prerequisites derived from the "case or controversy" clause of Article III, as well as a set of prudential requirements adopted by the courts to ensure, at a minimum, that parties come forward only to raise distinct personal interests broadly within the scope of the regulatory scheme. Id. at 153; Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 100, 60 L. Ed. 2d 66, 99 S. Ct. 1601 (1979); see Colonial Penn Insurance Co. v. Heckler, 721 F.2d 431 (3d Cir. 1983). "The federal courts have abjured appeals to their authority which would convert the judicial process into 'no more than a vehicle for the vindication of the value interests of concerned bystanders.'" Valley Forge Christian College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 473, 70 L. Ed. 2d 700, 102 S. Ct. 752 (1982) (quoting United States v. SCRAP, 412 U.S. 669, 687, 93 S. Ct. 2405, 37 L. Ed. 2d 254 (1973)).

The district court correctly identified the constitutional and prudential standing requirements as set forth by the United States Supreme Court in a line of decisions culminating in Valley Forge Christian College :

At an irreducible minimum, Art. III requires the party who invokes the court's authority to "show that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant," and that the injury "fairly can be traced to the challenged action" and "is likely to be redressed by a favorable decision."

Beyond the constitutional requirements, the federal judiciary has also adhered to a set of prudential principles that bear on the question of standing. Thus, this Court has held that "the plaintiff generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties." . . . Finally, the Court has required that the plaintiff's complaint fall within "the zone of interests to be protected or regulated by the statute or constitutional guarantee in question."

454 U.S. at 472, 474-75 (citations omitted); see New Jersey Speech, 551 F. Supp. at 1029-30.

Plaintiffs do not quarrel with the criteria for standing articulated here and in the district court. Rather, they contend that they have satisfied each of the constitutional and prudential requirements. Plaintiffs have entered into contracts with Medicare providers which require that plaintiffs accept the amount of Medicare reimbursement received by the nursing facility as payment in full for plaintiffs' speech therapy services. 551 F. Supp. at 1030. In addition, they allege that, as a practical matter, Medicare providers cannot afford to pay more to speech therapists and audiologists than the providers receive from the government as reimbursement for those same services. Thus, plaintiffs contend, the injury that they have suffered and will continue to suffer is real, and the interest that they seek to vindicate is their own. Indeed, in light of the agreement that plaintiffs have negotiated with the providers, the providers retain little present interest in challenging unreasonably low reimbursements.

Plaintiffs further contend, as they must, that the interest they seek to protect is "arguably within the zone of interests to be protected or regulated" by the Medicare Act. See Association of Data Processing Service Organizations, Inc., 397 U.S. at 153; Kirby v. United States, 675 F.2d 60, 64 (3d Cir. 1982).*fn2 They argue that speech therapy professionals, although not permitted to receive reimbursement for their services directly from the government, are nonetheless regulated by the Medicare Act. Regulations promulgated under the Act require that participating skilled nursing facilities provide speech pathology and audiology services as needed by their patients. 42 C.F.R. § 405.1126 (1982). The regulations prescribe the qualifications of speech pathologists and audiologists, id. § 405.1101(t), and set forth the requirement of a written treatment plan for speech therapy services in certain instances in order to secure Medicare reimbursement to the provider, see id. § 405.250. Moreover, plaintiffs caution against an overly narrow reading of the zone of interest requirement. They argue that, although it is clear that the Medicare patient was the ultimate focus of congressional interest, suppliers of medical services, along with providers, are integral components of a broad-based scheme for delivering needed medical care to the aged and infirm. Plaintiffs therefore contend that their interest in receiving reasonable compensation for their services is within the zone of interests that may be asserted in the federal courts.

II.

Thus stated, the standing question in this case would be a difficult one. An additional aspect of the standing issue, however, has not been specifically addressed by plaintiffs and requires that standing to sue be denied in this case. Simply stated, the Medicare Act expressly grants standing to parties other than suppliers of services to challenge the very type of reimbursement procedures and decisions challenged in this case. We believe that the express grant of standing to providers evidences a congressional intent to preclude parties such as these plaintiffs from bringing suit.

This court has recognized that, in deciding whether standing exists to challenge administrative action under a federal statutory scheme, the statute itself must be scrutinized to determine whether Congress has expressed an intent to circumscribe the class of plaintiffs that may initiate an action:

Although the precise limits of Congressional power over federal jurisdiction are not clearly drawn, it is settled law that Congress can in legislating confide certain decisions to the discretion of administrative officials, prohibiting judicial review of the correctness of those decisions. Similarly, subject to due process dictates, Congress can provide for administrative action and limit to a specified class the right to seek judicial review. Thus, where administrative action is challenged as violative of ...


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