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Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

Volume 46, No. 9 September 1990


On July 23, 1990, AAPS and three of its members, Drs. Nino Camardese, Harold Schultz, and Souheil Al-Jadda prevailed against the Secretary of Health and Human Services (HHS) in the US Court of Appeals for the Sixth Circuit. The Court ruled that the HHS ban on direct (unassigned) billing for clinical laboratory tests performed in physicians' offices was based on an erroneous interpretation of the Consolidated Omnibus Budget Reconciliation Act of 1985.

The three physicians had been threatened with sanctions by Nationwide Mutual Insurance Co., the Medicare carrier, for refusing to take assignment on all laboratory charges. AAPS filed suit in the federal district court in Toledo in 1988 (see AAPS News, Nov 1988, Jan 1989). The district court dismissed the suit, and AAPS appealed (AAPS News July 1989).

In a published opinion titled AAPS, et al. v. Bowen, written by Judge Danny Boggs, the Sixth Circuit Court unanimously reversed and remanded the lower court's decision.

It is the opinion of the court that the statute applies only to tests performed in a laboratory and that, absent a showing that Appellants' offices constitute laboratories, Appellants may continue to bill their Medicare patients directly for clinical diagnostic laboratory tests performed in those offices.

The Medicare statute provides that some persons or entities may bill beneficiaries by means of an itemized bill; formerly, this was taken to include physicians. HHS contended that now only rural health clinics are in that category. However, rural health clinics are by definition clinics that are required to accept assignment on all patients. To the Court's question, ``Who can be billed by a rural health clinic?'' US attorneys were only able to respond, ``Nonpatients.''

The Court reasoned as follows:

Sound statutory construction dictates that subsection (B) should refer to something, and not be a nullity. Therefore, the sensible meaning to attach to subsections (A), (B), and (C) of §1395l(h)(5) is the follow- ing: (1) Someone can bill Medicare patients for clinical diagnostic tests by means of an itemized bill. (2) that someone is a non- laboratory; and (3) the category of non- laboratories (as that term is understood in the statute) is not an empty set, and it includes some physicians' offices.

The Court also noted that the attempt to force all physi- cians to accept assignment for lab services was in conflict with Medicare's statutory provision for nonparticipation.

The case represents the only judicial pronouncement ever handed down on the issue by a US court. Its effect will be felt across the nation as it will undoubtedly cause the Secretary of HHS and his fiscal intermediaries to adjust the way in which they process clinical laboratory claims across the nation. Certainly this case, having been published, can be used by every ``nonparticipating'' physician in the US, so long as the physician is not, in fact, a ``laboratory,'' to protect himself from government demands to submit laboratory bills only on an assigned basis.

AAPS was represented by Kent Masterson Brown. Litigation was partially supported by the American Health Legal Foundation (whose treasury now stands close to $0). Those wishing to help replenish the war chest may send a tax-deductible contribution to AHLF at 1601 N. Tucson Blvd. Suite 9, Tucson, AZ 85716.


AAPS Confronts Public Citizen

On July 2, AAPS Director Sidney Steinberg, MD, a vascular and general surgeon in Shelbyville, KY, appeared on CNN Crossfire with Sidney Wolfe, MD, Director of Public Citizen, a self-styled consumer advocacy group.

Public Citizen recently published a book warning patients about 6,892 ``questionable doctors.'' Private citizens can obtain a copy for $40; for doctors and lawyers, the price is $120.

Dr. Steinberg noted that physicians may be listed in the book for a variety of reasons, which might be completely unrelated to patient care. Doctors who have committed a major felony are on the same list as those whose licenses were suspended during rehabilitation and those who were late in making a loan payment or filing CME credits. The chiropractor who appeared on the program was listed because the Virginia medical board objected to one of his advertisements. Physicians on the list may never have been accorded the rights of self defense that common criminals routinely receive.

Wolfe alleged that medical licensure boards are not doing their job; otherwise more physicians would be delicensed. Steinberg responded that the most important quality control occurs at the medical staff level. Public Citizen has no proof that more doctors deserve to be sanctioned by medical boards.

In reply to Wolfe's skepticism about peer review, Steinberg said, ``We take credentialing very seriously. So seriously, Dr. Wolfe, that if you applied for privileges on our staff, with your qualifications, you might not get them.''

From Capitol Hill

Defendant Wanted. The Inspector General's office is looking for a medical necessity case to test the IG's authority to assess a $2,000 fine per violation (e.g. for wrongly signing a ``medical necessity'' form). The US attorney in Tampa, FL, has formed a task force to investigate ``medically unnecessary'' services. One possible clue is a dramatic change in the number of services billed from one year to the next.

Note that the IG does not need to prove that the doctor intentionally tried to defraud Medicare (Part B News 7/16/90).

The Lock-In Arrangement. The Texas Department of Health Services has identified patient SE, a mentally retarded epileptic, as a ``Lock-in recipient'' for the offense of using Medicaid services ``much more than is usually necessary for a given medical condition'' or otherwise habitually misusing Medicaid services. SE saw her physician 14 times in 12 months, costing Medicaid $148. As ``an educational and control measure for the Medicaid recipient's overutilization,'' Medicaid would henceforth refuse to pay for services rendered to this patient, except by a designated primary provider.

The physician who was requested to serve as ``Lock-in provider'' requested that he be allowed to continue as the patient's physician, treating her without charge, and that the patient be spared the confusion of receiving the Lock-in forms.

Dumping Free Speech. Physicians are advised to mind their tongue if accused of violating federal ``anti-dumping'' legislation. The $20,000 fine levied against Michael L. Burditt, an obstetrician who transferred an emergency patient, might have been more like $3,000, had Dr. Burditt not said that ``the hospital and the federal government were not going to tell him who he has to take as a patient,'' according to attorney Mark Rubin (Medical World News 7/90). An utterance that is explicitly forbidden by the regulations is any query about method of payment before a medical screening examination is performed.

The maximum fine for noncompliance with federal rules on patient transfers, in effect since July 1, is $50,000. The rules are expected to lead to finger-pointing by doctors, as specialists who fail to respond promptly to consultation requests by emergency physicians are also subject to fines and exclusion from Medicare.

``Anti-Hassle'' Legislation. HR 4475, introduced by Rep. J. Roy Rowland, MD (D, GA) and S 2591, introduced by Sen. Max Baucus (D-MT), have collected a large number of cosponsors. These would repeal legislation that prohibits a physician from billing for the services of a covering physician and rules that deny physicians information used as the basis for claims denials or that require physicians to pay for information needed to comply with Medicare mandates. (Carriers may charge physicians from $45 to $750 for information about MAAC charge limits and other regulations.)

HCFA is resistant to the idea of releasing secret carrier screening parameters, fearing that physicians may use the information to ``abuse the system.'' HCFA chief Gail Wilensky is open to the idea of shining a light on the ``invisible barbed wire,'' at least on a trial basis. Meanwhile, HCFA cautions physicians to beware of the ``unauthorized'' parameter lists being marketed by entrepreneurs.

Laboratory Regulations. HCFA-proposed rules im- plementing the Clinical Laboratory Improvement Act (CLIA) have been published and submitted for public comment (see p. 3). Some highlights:

Labs filing for a certificate of waiver must submit a description of the examinations and procedures to be performed, the methodologies used, and the qualifications of personnel. Unannounced inspections may be made. Labs must notify HHS before performing any test not in the waiver category. Notice is also required for a change in location, methodology, name, or ownership. Failure to comply with regulatory requirements could result in revocation of the certificate and suspension or denial of payments under Medicare.

Level I and II labs must provide the Secretary with adequate assurances that they will comply with later provisions of the regulations related to administration, proficiency testing, quality control, personnel, inspection, and computer systems. All personnel must be licensed. In Level II labs, technical personnel would be required to have a bachelor's degree in medical technology or meet one of several other training options, and the director would have to be a physician certified in ``relevant fields'' (such as pathology) or hold a PhD in a chemical, physical, or biological science. Labs must comply with federal, state, and local fire safety laws and laws related to the storage, handling, and disposal of chemical, biological, and radioactive materials. Very detailed requirements must be met for documenting the handling of specimens submitted for proficiency testing, and for documenting quality controls (including temperature and humidity monitoring, procedure manuals, labeling of testing supplies, etc.)

For further details, contact Rhonda Whalen, 301-966-6801.

Medicare Claims Filing. HR 4772, Rep. Joe Kolter's bill repealing the requirement that physicians file all Medicare claims is slowing gathering cosponsorships and has been endorsed in a July 13 report of the Republican Study Committee. HCFA is proceeding with plans to implement the requirement on schedule (September 1). Representatives of the carriers say that beneficiaries are ``thrilled'' to be relieved of the paperwork burden. When asked what will happen to physicians and suppliers who do not comply, the answer is ``education.'' (Fines of $2,000 per violation are no doubt very educational.) The next agency step is likely to be outlawing the popular and time-saving ``superbills'' used by many offices.

Relative Value Scale. On July 13, 1990, the Republican Study Committee issued a report that is a frontal attack on the relative value scale, quoting Robert Moffit, PhD, executive director of the National Alliance of Physicians and Surgeons: ``this very uncertainty [about the effects on patient access to services] calls for a halt to implementation until HCFA can provide the Congress and the public with a clearer idea of the consequences of the new system.'' The report calls for free enterprise solutions, instead of centralized planning.

Data Bank to Open October 1. HHS will soon be distributing information on how to use the national malpractice data bank to 16,000 doctors, hospitals, medical societies, dentists, and state boards of medical examiners. The Public Citizen Health Research Group wants the bank be accessible to the public, a move that would require Congressional approval.

Let's Not Forget the Whitney Case

In our euphoria over receiving the decision of the US Court of Appeals for the Sixth Circuit in the case of AAPS, et al. v. Bowen (see p. 1), we cannot lose sight of a key step we have taken along the way.

One of the primary issues raised in the early proceedings in the lab-fee case was whether AAPS and the three plaintiff physicians had ``standing'' to question the validity of the demands of the Secretary of HHS and whether their case was ``ripe'' for judicial review. The government contended that because there was an administrative appeal mechanism for physicians to defend themselves against sanction recommendations, and the plaintiffs had not been sanctioned and had not taken advantage of same, they could not proceed to a US court for relief.

Indeed, US District Courts are creatures of Congress. They are accorded very limited jurisdiction. True, where one has an administrative remedy, the federal common law mandates that that remedy be exhausted before one may have access to a federal court.

One case resolved the issue of standing in AAPS v. Bowen-a case also brought by AAPS. Although at the time it seemed as though the victory on the issue of standing in the case of Whitney v. Heckler, 780 F.2d 963 (11th Cir., 1986) was little consolation for the Court upholding the constitutionality of the fee freeze for ``nonparticipating'' physicians under the Deficit Reduction Act of 1984 (DEFRA), the decision was of enormous value.

In the Whitney case, the plaintiffs challenged the constitutionality of the Medicare amendments to DEFRA. The nonparticipating physician plaintiffs were threatened with sanctions if they did not freeze their fees according to the maximum allowable actual charge (MAAC) set by Medicare. The government, in a Motion to Dismiss, claimed that the physicians had no standing to litigate the validity of DEFRA because they had not been sanctioned, and, if they were sanctioned, they had an administrative appeal mechanism available to them prior to any judicial review. The case, according to the government, was not ripe for judicial review.

In a two-page footnote, the US Court of Appeals for the Eleventh Circuit (Atlanta, GA) rejected the government's argument:

...deferring resolution of the constitutionality of §2306 will force Appellants (Plaintiff physicians) to choose between complying with the temporary fee freeze and risking sanctions by raising their rates. It is well established that an issue is ripe for judicial review when the challenging party is placed in the dilemma of incurring the disadvantages of complying or risking penalties for noncompliance. Hence, we conclude that the ripeness standard has been met in the instant case.

The Whitney case, in other words, opened the doors of the federal courts to such actions.

The US District Court for the Northern District of Ohio at Toledo, rejecting the government's argument that the AAPS v.

Bowen case should be dismissed for lack of standing and ripeness' cited Whitney v. Heckler in support of this opinion.

When I argued the case before the US Court of Appeals for the Sixth Circuit, I began with a recitation of the standing of the physicians and the ripeness of the issues. The Chief Judge interrupted me, asserting, ``Mr. Brown, this court has no problem with whether there is standing or ripeness here.'' How far the law has come, I thought.

Let us not forget that in a past case, AAPS made law that enabled it to file the lab-fee case. The law is constantly evolving; and AAPS has been a key player in its development. We owe a great debt to Drs. Douglass Whitney, W. Daniel Jordan, Fred Shessel, and all the Atlanta physicians who made the Whitney v. Heckler case possible. That case is truly bearing fruit.


AAPS Physician Wins Civil Rights Victory

Curtis Caine, Jr., MD, won a major victory in the US Court of Appeals for the Fifth Circuit. Dr. Caine's suit was filed under the Civil Rights Act of 1871, the anti-Ku Klux Klan Act, alleging deprivation of property without due process of law. Details to follow in the October issue of AAPS News.


Comments on Lab Regulations Due August 20

The address for public comments on lab regulations is: HCFA, Dept HHS, Attn: HSQ-176-P, PO Box 26676, Baltimore, MD 21207, with copies to your Congressmen and the Office of Information and Regulatory Affairs, OMB, Room 3002, New Executive Office Bldg, Washington, DC 20503, Attn: Allison Herron.

Points that the American Society of Internal Medicine (ASIM) asks you not to make: urging HCFA not to issue regulations at all, requesting an exemption for physicians' office labs, and lengthening the list of waivered tests. After all, ASIM was one of the first medical organizations to agree that greater accountability was needed for all laboratory work. They simply failed to foresee that the end result might be the forced closure of many labs and denial of patient access to convenient, cost- effective testing. So, you should definitely not suggest that the same government that spent more than a gigabuck to put a nearsighted telescope into orbit is possibly incapable of assuring quality microscope work across the land.

One suggested letter from a ``concerned citizen of Canadian, TX'' was sent to us by Dr. Tadeuz Darocha. It states that the closure of their hospital and physicians' office labs would result principally from the unreasonable and unnecessary personnel rules. There are no ``technical supervisors'' or ``general supervisors'' available at any price.

AAPS has recommended the development of a cost-and-quality impact statement, including: (1) the number of physicians who stop doing lab work and the effect on their patients (timeliness of diagnosis, travel time, and amount of the laboratory bill); (2) the cost of the regulatory process itself, both to the government and the medical practitioner, including estimates of resources diverted from direct patient care into meeting regulatory requirements; and (3) outcome analysis- does any measurable increase in quality result? We believe that Congress should require such information about ``what works'' to guide in future legislation.

Patients' Freedoms

The agenda at the annual meeting will include discussion of a declaration of patients' freedoms, many of which are overlooked in the ``Patient Bill of Rights'' recently approved by the AMA House of Delegates. Instead of freedom, the AMA announced a ``basic right to have available adequate health care,'' overriding the objection that this statement ``paves the way to socialized medicine'' and implies a governmental obligation to compel servitude.

President-Elect Claud Boyd proposes for the assembly's consideration a statement that patients have the freedom:

  1. To seek consultation with the physician of their choice;

  2. To contract with their physicians on mutually agreeable terms;

  3. To purchase the care of their choice;

  4. To refuse medical treatment even if it is recommended by their physician;

  5. To be informed about their medical condition, the risks and benefits of treatment, and possible alternatives;

  6. To be treated confidentially, with access to their records limited to those involved in their care or designated by the patient, except as necessary to protect other persons from significant danger;

  7. To refuse government interference in their medical care, and to be confident that their actions in seeking or declining medical care will not result in government-imposed sanctions on patient or physician or any other party; and

  8. To seek redress through the courts, including a jury trial, in the event of injuries resulting from gross negligence.


Medicare in Australia

At the May meeting of IATROS in London, Dr. Sheila W. Hyland of Private Doctors of Australia presented an update on national health insurance down under:

The new Labor government has disallowed private insurance for the gap between Medicare rebate and a more realistic private medical fee, lowered payment to doctors for inpatient hospital consultation from 85% to 75% of an abnormally low government schedule fee, and prevented private payment for prostheses urgently required for operations such as hip replacements.

Although Medicare was introduced in 1984 as a just and equitable system for everyone, it has not been fair or just for the aged or disabled, whom it was supposedly designed to assist. The public hospital waiting lists have swelled to 60-70,000 patients, with everyone, rich, poor, and aged in the queue. Administrative personnel have increased in one rural district referral hospital from six to 60 in 25 years, while the number of beds has declined.

Nor is the scheme fair for physicians. An anesthetist attending a Medicare patient at night is paid less than a television technician. The minimum cost of engaging a technician for a 10-minute job to replace short connecting cables from phone to wall with long ones is $53, worth more than four pensioner consultations under the Medicare system.

General practitioners were nationalized by legislation passed in October, 1989. In collusion with the government, the Royal Australian College of General Practitioners (RACGP) became the ``Lords'' of general practice. There are two classes of GPs (one receiving a higher fee), based on eligibility for Vocational Registration. Ineligible groups include women who marry and bear children.

New legislation to cut dispensing fees endangers the livelihood of small rural pharmacists. Furthermore, the Health Insurance Commission proposes to introduce a ``black box'' into every pharmacy and require the pharmacist to check eligibility before dispensing, endangering confidentiality and causing inevitable delays and confusion. . . .



New Members

AAPS welcomes Drs. Lewis G. Allen of Ash Flat, AR; H.C. Ambacher of Erie, PA; T.D. Blanton of Jackson, MS; Paul T. Elliott of Richardson, TX; Tom Farmer of Rock Hill, SC; W.I. Fox of Abilene, TX; Brian W. Goltry of Boise, ID; Bernhardt Heersink of Newburyport, MA; Donathan M. Ivey of Crossville, TN; Waite S. Kirkconnell of Tampa, FL; Guy E. Knolle, Jr. of Houston, TX; Gregory P. Lewis of Seattle, WA; James W. Montague of Williamsport, PA; Ricardo G. Mora of Norfolk, VA; E. Addis Munyan of Independence, MO; D.G. Nielsen of Seattle, WA; M.V. Rock of Mesa, AZ; F. Fuller Royal of Las Vegas, NV; Manorama Sharma of Fountain Valley, CA; David R. Reich of Auburn, NY; Jean Sauer of Bloomington, MN; Lynn T. Simon of Louisville, KY; Keith Stampher of Colorado Springs, CO; J.V. Wright of Kent, WA; and Daniel V. Young of Washington, DC.


AAPS Calendar

Sept 12, 1990. Board of Directors meeting, Scottsdale, AZ.

Prelude to annual meeting: Bureaucrat of the Year Awards Ceremony, Cattleman's Cookout.

Sept 13-15, 1990. 47th Annual Meeting: The Control of Medicine in the 1990s. Camelview Resort, Scottsdale.

Oct 17-19, 1991. Annual meeting, Lexington, KY.