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AMERICAN AMBULANCE SERV. OF PENNSYLVANIA v. SULLIV

June 30, 1989

AMERICAN AMBULANCE SERVICE OF PENNSYLVANIA, INC.
v.
LOUIS W. SULLIVAN, M.D., et al.



The opinion of the court was delivered by: BRODERICK

 RAYMOND J. BRODERICK, UNITED STATES DISTRICT JUDGE

 Plaintiff American Ambulance Service of Pennsylvania, Inc. ("AASP") seeks judicial review of the administrative determination by Medical Service Association of Pennsylvania ("Blue Shield"), acting as agent for the Secretary of Health and Human Services ("Secretary"), that AASP was not entitled to reimbursement for ambulance transportation provided to certain beneficiaries under Part B of Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. ("Medicare Program"). The matter is before this Court on cross motions for summary judgment based upon a Joint Stipulated Record.

 I. Federal Legislation

 The Medicare Program, which is set forth in Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395-1395ccc, consists of two parts. Part A, which is not at issue in this case, provides hospital insurance benefits to the elderly and disabled. 42 U.S.C. §§ 1395c-1395i-2. Part B is a federally subsidized, voluntary insurance program that pays a portion (typically 80%) of the cost of certain medical and other health services not covered by the Part A program. 42 U.S.C. §§ 1395j-1395w. The term "medical and other health services" is defined as including, inter alia, "ambulance services where use of other methods of transportation is contraindicated by the individual's condition, but only to the extent provided in regulations." 42 U.S.C. § 1395x(s)(7). 42 C.F.R. § 405.232(i)(2) provides that "Medicare Part B pays for transportation by ambulance only if other means of transportation would endanger the beneficiary's health."

 Only persons 65 or older or disabled may enroll in Part B, and eligibility does not depend on financial need. The Part B program is:

 
Financed by the Federal Supplementary Medical Insurance Trust Fund. This Trust Fund in turn is funded by appropriations from the Treasury, together with monthly premiums paid by the individuals who choose voluntarily to enroll in the Part B program. Part B consequently resembles a private medical insurance program that is subsidized in major part by the Federal Government.

 Schweiker v. McClure, 456 U.S. 188, 190, 102 S. Ct. 1665, 1667, 72 L. Ed. 2d 1 (1982). Individuals enrolled under Part B may request direct reimbursement for medical services or may assign the right to reimbursement to the medical provider.

 In order to "provide for the administration of the benefits . . . with maximum efficiency and convenience for individuals entitled to benefits," the Secretary is authorized to delegate to private insurance carriers experienced in such matters, the task of paying Part B claims from the Trust Fund. 42 U.S.C. § 1395u; see H.R. Rep. No. 213, 89th Cong., 1st Sess., 46 (1965). Such insurance carriers are authorized to set rates, review claims and make payments on behalf of the Secretary. 42 U.S.C. § 1395u. After Part B enrolles receive medical care, they (or, after assignment, their medical providers) bill the private insurance carrier. Medicare Part B patients or their assignees are paid on the basis of the amounts charged, subject to the insurance carrier's responsibility to establish "reasonable amounts." 42 U.S.C. § 1395x(v); 42 C.F.R. § 403.501 et seq. By accepting assignment the medical provider agrees to charge a patient no more than the reasonable charge determined by the carrier.

 The Secretary pays the participating carriers' costs of claims administration. 42 U.S.C. § 1395u(c). In return, the carriers act as the Secretary's agents. 42 C.F.R. § 421.5(b) (1980). As is the case with private medical insurance programs, the Part B program and its implementing regulations set forth a number of conditions and limitations on the coverage of medical and other health services, 42 U.S.C. §§ 1395k, 1395l, 1395x(s), and excludes certain items and services from coverage. 42 U.S.C. § 1395y. Accordingly, once the carrier has been billed for a particular service, it determines if the service was medically necessary, whether the charge was reasonable, and whether the claim was otherwise covered by Part B. 42 U.S.C. § 1395y(a). If the carrier determines that the claim meets all these criteria, the carrier pays the claim out of the Government Trust Fund. 42 U.S.C. §§ 1395u(a)(1), 1395u(b)(3), 1395u(c); see also Schweiker v. McClure, 456 U.S. 188, 102 S. Ct. 1665, 72 L. Ed. 2d 1 (1982). The carrier is authorized to conduct periodic post payment surveys and audits of the supplier's records. See generally United States v. Sanet, 666 F.2d 1370, 1372 (11th Cir. 1982).

 If, however, the carrier refuses on behalf of the Secretary to pay all or part of a claim, the claimant is entitled, first, to a "review determination" in which a carrier employee, other than the initial decision maker, reviews the written record de novo, and either affirms or adjusts the original determination. 42 C.F.R. §§ 405.803-405.806. If the amount in controversy is at least $ 100.00, a claimant who is dissatisfied with the review determination may request an oral, evidentiary hearing. 42 U.S.C. § 1395u(b)(3)(C). The hearing officer is appointed by the carrier and may be an employee of the carrier, but he may not hear "any case in which he is prejudiced or partial with respect to any party, or if he has any interest in the matter before him." 42 C.F.R. § 405.824. The hearing officer is required to follow all statutory and regulatory provisions as well as "policy statements, instructions and other guides" issued by the Secretary. 42 C.F.R. § 405.860. Hearing officers receive evidence and hear arguments pertinent to the matters at issue. 42 C.F.R. § 405.830. As soon as practicable thereafter, the hearing officer must render a written decision based on the record. 42 C.F.R. § 405.834. Unless the carrier or the hearing officer decides to reopen the proceeding, the hearing officer's decision is "final and binding upon all parties to the hearing . . ." 42 C.F.R. § 405.835. *fn1"

 II. Factual Background

 During the period between January 1, 1983 and September 30, 1984, plaintiff AASP provided 428 round trip ambulance services for three Medicare Part B enrollees: George Dagilus, Francis New, and Joseph Perla ("enrollees"). The ambulance trips at issue involved taking the enrollees from their places of residence to the Dialysis Center of St. Mary Hospital, where they received outpatient dialysis treatment. Acting as the assignee of the enrollees, AASP submitted claims for payment in the amount of $ 122,656.00 for the ambulance services to Blue Shield, in its capacity as a Medicare Part B carrier.

 AASP attached to these claims, forms captioned Supplemental Documentation for Ambulance Transportation ("SDFAT") which were signed by the enrollees' physicians. Each SDFAT form certified that the enrollees' physical condition contraindicated transportation by means other than an ambulance. In addition, AASP filed with Blue Shield narrative letters signed by each enrollees' treating physician, stating the diagnosis of each enrollee and the medical necessity of ambulance services.

 AASP requested and received a "review determination" which affirmed the earlier determination that Part B did not cover the ambulance services provided. AASP subsequently appealed to a Blue Shield appointed hearing officer in accordance with the "fair hearing" provisions of the Medicare regulations. At the hearing, held on July 15, 1986, AASP, represented by counsel, argued that it had fully complied with all Part B regulations by submitting medical certifications and supporting documentation indicating the necessity of ambulance transportation for the three enrollees. Moreover, AASP challenged Blue Shield's decision denying reimbursement on the ground that a non-physician supplier lacked the authority to overrule a medical determination by a physician. Finally, AASP argued that it was entitled to a waiver of liability, pursuant to 42 U.S.C. § 1395pp, on the ground that neither it nor the enrollees knew or could have known that the ambulance services were not medically reasonable and necessary.

 At the hearing, Blue Shield indicated that in determining that the ambulance services were not reimbursable under Part B, it relied on § 2120 of the Medicare Carrier's Manual as well as Health Care Financing Administration Regional Medicare Letter Number 10-80. Specifically, Blue Shield maintained that § 2120 of the Manual, as interpreted by Medicare Letter Number 10-80, permits coverage of ambulance services only upon the submission of a claim which conclusively contraindicates the feasibility of transport by any other means. The carrier further argued that patients able to ambulate with assistance, with a walker, or wheelchair, as well as patients receiving routine outpatient maintenance dialysis treatments do not normally qualify for ambulance services. On the basis of reviews of medical records of two of the enrolles and an interview with the third enrollee, Blue Shield determined that the enrollees' "medical conditions had not been such as to have contraindicated the use of other means of transportation." Blue Shield also took the position that AASP's request for a waiver of liability should be denied. Specifically, Blue Shield relied on § 7300.2.C.6.b which states that the waiver of liability provision is not applicable where payments for a medically unnecessary item or service is also barred because of a failure to meet a condition of payment required by the regulations.

 Following the hearing, the hearing officer requested that a consultant physician review the enrollees' medical records. Based upon that consultation and her own review of the record, the hearing officer made specific findings regarding each of the three enrollees. For each individual, she found that the documentary evidence had failed to establish that the enrollees' condition had been such as to have contraindicated transportation by means other than an ambulance. Moreover, the hearing officer rejected AASP's claim to entitlement to a waiver of liability. The hearing officer noted that § 1879(a) of the Medicare statute provides that such a waiver of liability is available when the denial of payment is based on § 1862(a)(1) or (9). Inasmuch as the instant denial of payment was based on § 1861(s)(7), the hearing officer held that the plaintiff could not take advantage of the waiver.

 III. Federal Subject Matter Jurisdiction

 Prior to 1986, the Supreme Court had held that the Social Security Act provided for judicial review only of determinations of an individual's entitlement to benefits under both Part A and Part B of Title XVIII, as well as review of determinations of the amount of benefits awarded under Part A. 42 U.S.C. § 1395ff(a). United States v. Erika, 456 U.S. 201, 207, 102 S. Ct. 1650, 1653, 72 L. Ed. 2d 12 (1982). The Court held that by omitting a provision for judicial review of determinations of the amount of Part B awards, Congress intentionally foreclosed review of those determinations:

 
Section 1395ff thus distinguishes between two types of administrative decisions: eligibility determinations (that decide whether an individual is 65 or over or 'disabled' within the meaning of the Medicare program) and amount determinations (that decide the amount of the medicare payment to be made on a particular claim). Conspicuously, the statute fails to authorize further review for determinations of the amount of Part B awards. In the context of the statute's precisely drawn provisions, this omission provides persuasive evidence that Congress deliberately intended to foreclose further review of such claims.

 Id. at 208, 102 S. Ct. at 1654. Indeed, as the Supreme Court held in Heckler v. Ringer, "Congress has not . . . provided for judicial review of the denial of Part B claims." 466 U.S. 602, 608 n.4, 104 S. Ct. 2013, 2018 n.4, 80 L. Ed. 2d 622 (1984). Thus, prior to 1986, the Supreme Court had clearly held that no judicial review was available for Part B claims.

 This holding, however, was modified by Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 106 S. Ct. 2133, 90 L. Ed. 2d 623 (1986) (hereinafter "Michigan Academy"), in which the Supreme Court rejected the proposition that Congress had intended to preclude judicial review of all questions affecting the amount of benefits payable under Part B of the Medicare program. To be sure, the Court affirmed its earlier holding in Erika that Congress intended to foreclose review of amount determinations remitted finally and exclusively to adjudication by private insurance carriers in a fair hearing:

 
Careful analysis of the governing statutory provisions and their legislative history thus reveals that Congress intended to bar judicial review only of determinations of the amount of benefits to be awarded under Part B. Congress delegated this task to carriers who would finally determine such ...

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