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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 46, No. 12 December 1990
AAPS CHALLENGES EX POST FACTO LAW
In a direct response to the Association's victory in the US
Court of Appeals for the Sixth Circuit in AAPS v. Bowen (see
AAPS News Sept 1990), Congress passed a ``clarification''
of the assignment rule for laboratory tests, as part of the enor-
mous Deficit Reduction Act (DEFRA) of 1990. Still worse,
Congress added an ``effective dates'' provision to make its
amendments retroactive to 1985 and 1987, raising the threat of
sanctions against physicians who have billed for clinical
diagnostic laboratory services on a nonassigned basis.
Almost immediately after the Sixth Circuit Court denied the
government's petition for a rehearing en banc, the following
appeared in the Congressional Record (Oct 26, 1990, pp. 12630-3):
Clarification of Assignment Rule for
Laboratory Tests-In general, clinical
laboratory tests are only reimbursed on an
assigned basis. Since 1988, physicians have
been prohibited from billing patients for
such tests on an unassigned basis. A recent
decision in the U.S. 6th Circuit Court of
Appeals indicated that there may be some
ambiguity as to whether the assignment
requirement applies to such tests performed
in all physician offices [emphasis
In DEFRA of 1990, Congress amended Title 42 of the United
States Code §13951(h)(5)(C) to require that ``payment for a
clinical diagnostic test, including a test performed in a
physician's office...may only be made on an assignment-related
basis.'' Congress further amended 13951(h)(5)(D), which enables
the US Department of HHS to impose sanctions against a person who
``knowingly and willfully and on a repeated basis bills for a
clinical diagnostic test on other than an assigned basis.''
The ``effective dates'' provision reads:
This amendment made by paragraph (1)(A) shall take
effect as if included in the enactment of the
Consolidated Omnibus Budget Reconciliation Act of 1985,
and the amendment made by paragraph (1)(B) shall take
effect as if included in the enactment of the Omnibus
Budget Reconciliation Act of 1987.
As with many recent momentous changes in Medicare, the use
of the budget reconciliation process effectively circumvents
debate. No Congressman has even read DEFRA in its entirety. It
is generally impossible to assign responsibility for the
insertion of various amendments into this legislation. In this
instance, Congress has simply rubber-stamped the interpretation
that someone in the HHS bureaucracy wished to assign to the
AAPS and its Legal Service believe that the statute, as now
amended, is still unclear as to its requirements. Even assuming
that the statute is clear, the effective dates make the new
enactment potentially an ex post facto law and a bill of
attainder, which are unequivocally and specifically forbidden by
Article I, section 9 of the US Constitution. (An ex post facto
law is one that has a retroactive effect. A bill of attainder is
a legislative act that declares a person guilty of a crime,
without trial, and subjects him to a loss of civil rights.)
Congress is apparently trying to punish persons for doing
things that were wholly lawful when done. As AAPS argued in its
brief asking the Court to deny the petition for rehearing, courts
are required to assume that the purpose of legislation is
expressed by the ordinary meaning of the words used, not by the
tortuous interpretation of an administrative agency, especially
when that interpretation effectively repeals one part of a
``Congressional silence, no matter how `clanging,' cannot
override the words of the statute,'' argued AAPS Counsel Kent
The Court of Appeals agreed with AAPS in its reading of the
plain language of the law. In the ``effective dates'' provision,
Congress is trying to nullify not only common sense but the
decision of the Court. Although Congress has the power to change
the statute to require billing on the basis of an assignment in
the future, it cannot abrogate the law of a case without
infringing upon the separation of powers established by the US
AAPS, along with Nino Camardese, MD, Souheil Al-Jadda, MD,
and Harold Schultz, DO-the original plaintiffs-are now preparing
another civil action to be filed in the US District Court for the
Northern District of Ohio, Western Division (Toledo), which will
challenge the constitutionality of the new effective dates. The
new case is being brought in an effort to protect those
physicians who, prior to the new DEFRA amendments, billed for
clinical diagnostic laboratory fees on a nonassigned basis in
reliance on the Medicare Act as it was then worded.
Physicians are strongly advised from henceforth to bill for
all clinical diagnostic laboratory tests on an assigned basis
only, in compliance with DEFRA of 1990.
These events, in revealing the nature of the legislative and
executive branches of the US government, should serve as an
object lesson for physicians who advocate a ``partnership'' with
government or seek a ``seat at the negotiating table.''
Retroactive ``clarifications'' of laws that are overturned
by a court, resulting in punishment of citizens who are so bold
as to challenge the decrees of an arrogant bureaucracy, have
implications reaching far beyond the specific issue of billing
for a laboratory test.
Another Farewell to Medicare
The requirement for physicians to file all Medicare claims
was the final straw for Lawrence L. Freeman, MD, of Chamblee, GA,
after 25 years of practice. Last July, he sent a letter to all
his Medicare patients, explaining that he could not afford to
hire the additional person who would be required to cope with the
additional paperwork burden.
``Plus, if we inadvertently failed to file a claim, the
threat of a $2,000 fine is something I will not accept,'' he
As of September 1, all Dr. Freeman's Medicare patients,
except those who do not have Part B coverage, needed to find
I count among Medicare beneficiaries many of my
favorite and long term patients...and I take this
action with tremendous reluctance....I am sending a
copy of this letter to each member of the Georgia
Congressional Delegation and to AARP. The AARP
lobbyists have been the main group putting pressure on
Congress to pass this and the other anti-physician
legislation, and I also believe it ultimately to be
detrimental to my patients (their members).
In an article about Dr. Freeman in the Atlanta Journal and
Constitution, Richard Warren, associate regional administrator
for the HCFA, said that ``the machine is working well.''
Unbundling the Bundle
I took [the] admonition seriously to heart, so no more
``unbundling.'' The insurance form simply stated ``Treatment of
fracture of ulna and radius, $300.'' Back comes the form with a
cover letter from the insurance company: ``Please itemize
charges.'' Translated into my vocabulary that means don't
bundle, unbundle. So itemize I did. [The total came to $447.]
I bundled because it is naughty to unbundle. The insurance
company says-you must not bundle. So in the interest of doing
the right thing per insurance company's instruction and so that
my patient would not be refused coverage, I unbundled. [They
paid 80% of $447.] Now the moral of the story is:-YOU TELL ME, I
Rudi Kirschner, MD, Maricopa County Round-Up
A Medical Student's Perspective
I have spoken to a lot of my classmates and asked them their
opinions about the socialization of medicine. I found that I
could place them into four groups.
The first group really didn't know anything about current
trends in medicine. They were oblivious to the whole situation.
The second group admitted they didn't know very much about
the situation but said they would ``go along with whatever the
system says.'' You might call these the true pacifists.
The third group, a large percentage, told me they wouldn't
mind the socialized system. ``Well, you know, everybody's going
to get equal health care, and I'm only going to have to work 40
hours a week and get paid whether I see my patients or not.''
The last group is mainly made up of students who have a
parent or relative in medicine and know what is going on. They
want to try to stop it.
As Vice President of the student section of the Ohio State
Medical Association, I've had a lot of physicians tell me how
angry they are with young physicians because they don't want to
do anything. But from what I've seen, you really can't be upset
at these young physicians because they are only reflecting the
view that they've been taught in medical school or what they've
seen in the hospitals. In the third and fourth years, we're
indoctrinated into a rationed-care type of system. We're not
being presented with the other side of the story. Physicians
aren't telling us. Maybe they don't have the time. And maybe
they forget how influential they are and how much impact just one
person can have if he stands up.
We ask you to stop and think about the education of future
physicians, the ones that will possibly be treating you. We're
asking you to share the wisdom of your experience with us and to
give us the opportunity to enjoy the medicine that you have
relished for so long.
Richard Villareal, Medical College of Ohio
AAPS seminar, Toledo, April 20, 1990
Letter from the President
It is an honor to serve as your president this year.
Since one of our highest priorities should be membership
growth, a clear understanding of what AAPS stands for is a must.
Therefore, I urge you to use our Code of Medical Ethics, our Code
of Medical Practice, and statement of Patient Freedoms to help
clarify our position to prospective members. (If you don't have
a copy, watch for a new printing in the next issue of AAPS
Telephone, write, or speak face to face with someone today
about membership in AAPS! Even those who are not in private
practice now might like to keep this option open, for some have
actually begun their private practice after retirement from
academia or military service. So speak to someone today about
The attacks on private practice mount daily, primarily from
federal ``agencies,'' but also from state, county, and city
bureaucrats. Their techniques are not new. The enclosed
pamphlet (The Gelded by Otto Scott) chronicles the plight of
American business managers. If you mentally substitute
``physician'' each time ``manager'' is used, you will see the
similarities to past events in medicine and understand probable
future ``agency'' tactics.
Perhaps by the time you read this, the election will have
rectified Congress somewhat. But many of our battles will be in
the courts. The American Health Legal Foundation has supported
litigation by patients and physicians as well as by AAPS to
resist compulsory political medicine. Individuals, corporations,
associations, and foundations may make tax-deductible charitable
gifts to AHLF, so ask someone to contribute today. Anyone can
contribute and everyone will benefit.
Claud A. Boyd, Jr., MD, President AAPS, Augusta, GA
AAPS welcomes Drs. Dona Alvarez of Oakland, MD; Kenneth D.
Hansen of McLean, VA; John Margaris of Great Falls, MT; John
Stiller of Plant City, FL; Pitt Vesom of Atchison, KS; and Ben
Wofford of Catawba, NC.
Dr. Steinberg Wins Jurisdictional Battle
On November 2, 1990, arguments were heard in the case of
Steinberg v. Sullivan, the challenge to the legality of the
methodology by which the Secretary of HHS calculated the fee
screens in Kentucky for Medicare services, effective April 1,
1990 (see AAPS News May and Nov, 1990). The Secretary,
effectively acknowledging that the April fee screens had been
calculated incorrectly, imposed new screens which were to be
effective September 30, 1990. Dr. Steinberg regarded the
Secretary's notice and new screens as an admission of his case as
In the meantime, the Secretary filed a motion to dismiss Dr.
Steinberg's case on the ground that the Court did not have
jurisdiction to hear the complaint.
Judge William O. Bertelsman of the US District Court for the
Eastern District of Kentucky overruled the Secretary's motion on
November 2, 1990, finding that Dr. Steinberg's challenge to the
methodology was a justiciable cause. He has granted Dr.
Steinberg 90 days to take the depositions of officials in the US
Department of HHS and the HCFA to determine whether the April 1,
1990, and subsequent fee screens were developed by the Secretary
(or HCFA), whether the Secretary (or HCFA) instructed the
intermediary to utilize the fee screens, and, if so, whether the
methodology used violated the Omnibus Budget Reconciliation Act
[Dr. Steinberg discussed this case at the banquet at the
47th AAPS annual meeting. An audiotape, which includes the
address by Representative Jon Kyl (R-AZ) is available for $5.]
West Virginians Challenge Omnibus Health Care Cost
L.I.F.E. for West Virginians (Legislation Investigation Fund
Effort), an organization of patients and physicians, has filed a
class action complaint in the Kanawha County Circuit Court,
asking that the Omnibus Budget Health Care Cost Containment Act
of April, 1989, be declared unconstitutional.
At the time the Act was passed, the state of West Virginia
owed over $50 million to health care providers, despite the
enactment of the largest tax increase in the state's history.
The plaintiffs allege that the Act shifts to health care
professionals an ever-increasing portion of the state's self-
chosen financial obligations to provide health care to state
employees and the indigent, a violation of the guarantee of
``equal and uniform'' taxation.
The ``equal and uniform'' taxation clause is a unique
feature of the West Virginia Constitution, enacted at the time
that the state separated from Virginia because of unequal taxes.
To date, there is virtually no judicial interpretation of its
The linchpin of the case, according to Henry Mark Holzer,
Professor of Constitutional Law at the Brooklyn Law School, will
be to establish that the fee caps and ``take-one-take all''
provisions of the Act are the equivalent of taxes.
The Act establishes fee caps and prohibits balance billing
for all state beneficiaries, regardless of the patient's
financial situation. In the ``take-one-take-all'' provision, the
Act mandates that any physician who treats any state beneficiary
(such as a state employee or a workman's compensation patient)
must accept Medicaid beneficiaries until the number of the latter
equals 15% of his active patients.
Although jail sentences were eventually removed from the
Act, the penalties remain quite severe, and due process
protections are minimal. If after an administrative hearing, the
Secretary of the Department of Health and Human Resources
determines that any health care provider is in violation of the
Act or any rule promulgated under the Act, she may assess a civil
penalty of not less than $1,000 or more than $25,000 and remove
the provider from any list. The Secretary shall exercise her
discretion in setting the monetary amount, considering such
factors as the degree of ``willfulness'' displayed by the
The patient plaintiffs allege that the Act deprives them of
the right to freely choose their physicians and to freely make
agreements with their physician about the nature and cost of
treatment. Several were forced to accept inferior care because
their physicians of many years had been forced out of the program
by unreasonable ceilings on their fees.
Plaintiffs also argue that in allowing ``standardless
determinations by departments of the state,'' the Act delegates
legislative power in an unprecedented and unconstitutional
Jerome C. Arnett, Jr, MD, founder of L.I.F.E. for West
Virginians, states that more than 100 physicians are leaving the
state each year. Not a single family practice resident trained
in the state will agree to stay. The exodus will cause an
irreversible deterioration in the quality of care available to
West Virginians, he believes.
Joint Underwriting Plan Under Attack in Massachusetts
With their fees limited by mandatory assignment under both
Medicare and private insurance plans, Massachusetts physicians
are also saddled with retroactive malpractice payments. In 1988,
the Joint Underwriting Association requested the authority to
recoup the $140 million deficit that it had incurred due to
inadequate premium rates charged since its establishment in 1975.
The Supreme Judicial Court of Massachusetts has opined that all
physicians, regardless of whether or not they were insured by the
JUA, are liable for deficit recoupment. Failure to pay means
revocation of insurance and automatic loss of licensure, since
malpractice insurance is mandatory in Massachusetts. About $10
million is believed to be uncollectible from doctors who fled the
state; this cost will be distributed among those who remain.
In May, 1989, Liability Investigation Fund Effort, Inc.
(L.I.F.E.-the organization serving as a model for L.I.F.E. of
West Virginia) filed suit. The Superior Court dismissed the suit
on jurisdictional grounds. An appeal to the Supreme Judicial
Court should be heard in January, 1991, according to Leonard J.
Morse, MD, Chairman.
The lawsuit alleges, among 23 counts, that the act
establishing the JUA violates the Separation of Powers doctrine
delegating the power to tax. Further, the recoupment provision
constitutes retroactive rate making, a violation of Amendments 5,
9, and 14 of the US Constitution.
From Capitol Hill
Medicare Program Integrity. Medicare carriers are
distributing pamphlets describing the ``Program Integrity
function,'' which is designed to detect potential fraud and
abuse. The most common forms of fraud include billing noncovered
services (such as routine examinations unrelated to specific
illnesses or diagnoses) as covered services, and claims involving
``collusion between a provider and a beneficiary.'' Penalties
for fraud include a fine of not more than $25,000, imprisonment
for not more than five years, or both.
Abuse includes billing Medicare at a higher fee than non-
Medicare patients; fragmenting (unbundling) services on separate
claim forms for higher reimbursement; and routine waiver of
deductible and/or coinsurance. Persons convicted will be subject
to a fine of not more than $2,000 per item claimed, imprisonment
for not more than six months, or both.
Although waiver of deductibles and coinsurance would not be
a violation of the law in the event that the payment constitutes
a financial hardship to the beneficiary, routine waivers will
result in retroactive reductions in customary charges; recovery
of overpayments on previous claims; suspension of providers from
participation in Medicare; and treatment of all future routine
waivers as criminal.
The Inspector General has established a toll-free nationwide
hotline for reports of suspected fraud, abuse, or mismanagement.
Allocations to Medicare contractors to catch Medicare cheats
dropped from $358 million in 1989 to $332 million this year. The
Administration has recommended an increase to $335 million for
Methods of investigation and standards of evidence are not
Volume Performance Standards. The first six months of
FY90 have shown a 12.4% increase in spending for physician
services compared with the same period in FY89. Although the
increase doesn't differ much from previous years, it exceeds the
9.1% volume target, jeopardizing the 1992 update for physicians'
Profit Opportunities. A growing service industry is
helping to keep doctors in practice by relieving them of the
claims filing hassles-showing how Congress can help stimulate the
economy. Franchised clinics similar to H&R block may soon dot
the land. One company charges doctors between $750 and $1,200
per month, depending on the number of claims and the number of
added services such as coding. Physicians who want to do their
own can lease a computer system that does forms
for only $700.23 per month. A school that trains
entrepreneurs to do forms (only $1,750 for a three-day session)
projects $500,000 in 1990 revenues. On the down side, clinics
that specialize in filing claims for beneficiaries (for 10% of
the take) may be hurt by increased deductibles and requirements
for physicians to file forms.
Beware of 90060. Physicians who code everything as an
``intermediate visit'' to simplify their billing procedures may
be in for serious complications such as repayment demands and
penalties, even if they often treat older, sicker patients who
require more time. Physicians are supposed to use a variety of
codes. However, carriers are not supposed to advise physicians
to bill a specific percentage of visits at a certain code because
HCFA Administrator Gail Wilensky has instructed them to
adjudicate visit claims on a case-by-case basis. Physicians
should thus try to show empathy for the carriers, who are trying
to comply with these instructions.
Access and Mandatory Assignment. In Massachusetts,
physicians who see any Medicare patients must accept assignment
on all or face loss of licensure. It is estimated that between
20 and 30% of all medical practices have closed out Medicare
patients completely (Physicians Financial News 10/30/90). More
than 10% of doctors in private practice are thought to have left
the state since 1985, although figures are difficult to
Payment Delay Mandated. After several months of
allowing Medicare claims to be paid immediately after processing,
Aetna of Georgia has again established a delay of 14 days before
any payments can be made. Are aged claims better?
Lawrence Shinabery, MD, RIP
Dr. Lawrence Shinabery, President of AAPS in 1950-1951, died
on September 16. He was in general practice for 43 years and was
also founder of A-1 Production in Kendallville, IN. Dr.
Shinabery was also active in the American Family Physicians
Association, American Medical Association, Indiana State Medical
Association, and Fort Wayne-Allen County Medical Society. He is
survived by his wife Isabelle.
Jan. 26, 1991. Board of Directors meeting, Embassy Suites
Hotel, Atlanta, GA.
Oct. 17-19, 1991. Annual meeting, Griffin Gate Marriott,