Appeal from the Order of the Secretary of Health in the case of In Re: The Complaint of KGD OB-GYN Associates, P.C., against Pennsylvania Blue Shield, Formal Complaint No. 82-3.
Thomas E. Wood, with him, William H. Wood and William E. Miller, Jr., Keefer, Wood, Allen & Rahal, for petitioner.
Christine S. Dutton, Assistant Counsel, with her, Ruth M. Siegel, Chief Counsel, for respondent.
Fred Speaker, Pepper, Hamilton & Scheetz, for Amicus Curiae, Pennsylvania Medical Society.
Thomas A. Beckley, with him, Jeffrey W. Davis and John G. Milakovic, Beckley & Madden, for Amicus Curiae, Pennsylvania Dental Association.
President Judge Crumlish, Jr. and Judges Rogers, Craig, MacPhail, Doyle, Colins and Palladino. Opinion by Judge Craig.
In view of provisions of the participating-physician contract of Pennsylvania Blue Shield (PBS), approved by the Department of Health, which stated
when requested, a doctor must substantiate to PBS's satisfaction by any mutually accepted method that his usual charge of record is the most frequent made to all parties*fn*
may the department order Blue Shield to refund to a group of physicians a sum representing the excess of the medical fees which those physicians charged for a medical procedure to their insured patients at a clinic ($155 each) over the fees which those physicians charged for identical service to their uninsured patients at the same clinic ($30 each)?
Pennsylvania Blue Shield, a professional health service corporation, appeals from a final order which the Pennsylvania Department of Health issued on February 16, 1984,*fn1 pursuant to a complaint which a group of Blue Shield participating physicians known as KGD OB-GYN Associates, P.C. (KGD) had filed with the
department against Blue Shield under the General Rules of Administrative Practice and Procedure, 1 Pa. Code § 35.9.*fn2 We affirm in part and reverse in part.
The applicable Blue Shield contract provisions, in effect at the time of this dispute and previously approved by the department, read:
20. All matters, disputes or controversies related to the services performed by Participating Doctors or any questions involving professional ethics shall be considered, acted upon, disposed of and determined only by doctors in the manner provided by the By-Laws of PBS.
D. PREV AILING FEE PROGRAM
2. Payment will be made by PBS under this program according to the following criteria :
Usual: The fee which an individual doctor most frequently charges to his patients for the procedure performed.
Customary : The customary range of usual fees charged by doctors of similar training and experience in a given geographic area for the procedure performed.
Reasonable : The fee which differs from the usual or customary charges because of unusual circumstances involving medical complications which require additional time, skill and experience.
4. A doctor's usual charge of record for any procedure will be determined from charges actually submitted by that doctor for all PBS Doctor's Service Reports and on all Medicare Requests for Payment and CHAMPUS (Civilian Health and Medical Program of the Uniform Services) claim forms. However, when Page 6} requested, a doctor must substantiate to PBS' satisfaction, by any mutually accepted method, that his usual charge of record is the most frequent made to all patients. If a review of a doctor's records indicates any usual charge is not valid, PBS may use this additional information in its determination of a usual charge. (Emphasis added.)
Thus to qualify for reimbursement, the doctor's charge for any single class of service (e.g. all KGD patients at the Center) cannot depart from the usual fee.
KGD, a professional corporation owned by three physicians, maintains a private practice in obstetrics and gynecology. During the period involved in this payment dispute, from 1978 through June 1981, the KGD physicians were charging their patients $300 for an abortion performed in their private offices. KGD also had a contract with a clinic known as the Northeast Women's Center (Center). The contract between KGD and the Center provided that any patient treated at the clinic having insurance coverage would be considered a "private" patient of KGD. KGD billed the abortion patient's health insurance carrier its "private" fee of $300, from which KGD paid $145 to the Center for overhead costs and retained the remaining $155 as its doctor's fee. On the other hand, the arrangement labeled cash-paying patients at the clinic as "Center" patients, even though KGD's doctor-patient relationship with those patients was exactly the ...