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BIO MED. APPLICATIONS OF PROVIDENCE, INC. v. HECKL

September 25, 1984

BIO-MEDICAL APPLICATIONS OF PROVIDENCE, INC. d/b/a ARTIFICIAL KIDNEY CENTER OF RHODE ISLAND, et al., Plaintiffs,
v.
MARGARET M. HECKLER, SECRETARY OF HEALTH AND HUMAN RESOURCES, Defendant



The opinion of the court was delivered by: RICHEY

 The Court has before it defendant's motion to dismiss, plaintiffs' motion for summary judgement, and defendant's cross-motion for summary judgement, as well as memoranda in support thereof and in opposition thereto. Plaintiffs in this case challenge a rule issued in December 1982 by the defendant Secretary, released initially in a Health Care Financing Administration (HCFA) intermediary letter, and then later published as a revision to the Medicare Renal Dialysis Facility Manual (Manual). This new rule provided that clotting time tests, tests sometimes used to monitor patients undergoing kidney dialysis, were not to be billed separately from the basic dialysis charge, thus affecting the amount of reimbursement a Medicare provider is entitled to receive.

 Plaintiffs, operators of medical facilities which provide kidney maintenance dialysis to patients suffering from chronic kidney failure, do not seek to make a claim for additional reimbursement with this action. Rather, plaintiffs allege that the Secretary's promulgation of this rule violates the notice and comment requirements of the Administrative Procedure Act. 5 U.S.C. § 551, et seq. Plaintiffs ask that this Court declare the rule void and remand the issue back to the Secretary with an order compelling her to follow the procedures outlined in the APA. The defendant argues that this action is at bottom a claim for reimbursements, and therefore this Court's jurisdiction is precluded by 42 U.S.C. § 405(h). Alternately, she claims that the rule was interpretive in nature and therefore not subject to notice and comment.

 THE STATUTORY BACKGROUND

 The Medicare program established by Title XVIII of the Social Security Act, 42 U.S.C. § 1395, et seq., provides funds for medical care for the aged and disabled. Medicare is divided into two separate sections, Part A and Part B. Part A of Medicare contains the hospital insurance benefits program, 42 U.S.C. §§ 1395c - 1395i-2, and pays the costs of inpatient hospital services and related post-hospital services. Id. §§ 1395c, 1395d. Individuals generally are eligible for Part A coverage by establishing eligibility for monthly social security benefits. 42 U.S.C. § 426.

 Providers of services under Part A are usually reimbursed for their costs by a fiscal intermediary designated by the provider and the Secretary. 42 U.S.C. § 1395h; 42 C.F.R. § 421.103. The Secretary has delegated responsibility for the administration of Medicare to HCFA. Such reimbursements are made on the basis of "reasonable cost." 42 U.S.C. §§ 1395f(b), § 1395x(v)(1). Part A contains provisions for both administrative and judicial review of disputes over reimbursement amount determinations made by the intermediary. Id. §§ 1395 oo (a), 1395 oo (f)(1).

 Part B of Medicare, 42 U.S.C. §§ 1395j - 1395w, is a voluntary insurance program in which beneficiaries must first enroll to establish eligibility for benefits. Part B generally pays for the "reasonable charges" of physician and various health services. Id. §§ 1395k, 1395l, 1395x(s). Under Part B, Medicare pays 80 percent of the charges for those services covered under its regulations, to the extent that those charges are considered reasonable. The beneficiary is responsible for paying the remaining 20 percent of such costs. Unlike Part A, which is administered by fiscal intermediaries, Part B benefits are payed through insurance carriers, under contract with the Secretary. Id. § 1395u. The carriers set reasonable charges for Part B services pursuant to guidelines set forth in the Medicare statute and regulations. 42 C.F.R. § 405.501, et seq.

 Institutional dialysis services, such as those provided by the plaintiffs in this action, are covered under Part B of the Medicare program. 42 C.F.R. §§ 1395x(s)(2)(F), 1395rr(b)(1). Institutional dialysis services furnished by freestanding renal dialysis facilities, such as the plaintiffs in this case, are required to be affiliated with a provider hospital's renal dialysis center. Id. §§ 405.2102(e)(2), 405.2160(a). The dialysis facility is reimbursed for its services through the provider hospital's intermediary, which functions as the facility's carrier under Part B. Id.

 Again, unlike Part A, Part B does not provide for judicial review of claims arising under reimbursement amount determinations. The statute does provide for "a fair hearing by the carrier" if a dispute arises over payment on the basis of reasonable charges and the amount in controversy exceeds $100. 42 U.S.C. § 1395u(b)(3)(C). The decision of the hearing officer is "final and binding upon all parties to the hearing." 42 C.F.R. § 405.835. Judicial review of this decision is foreclosed by statute. 42 U.S.C. § 405(h).

 THE FACTUAL BACKGROUND

 Plaintiffs are suppliers of Part B services, including diagnostic laboratory tests furnished as part of plaintiffs' institutional dialysis services. Pursuant to 42 C.F.R. § 405.541(b), the intermediary servicing each of the plaintiffs' facilities has established the "reasonable charge" for all institutional dialysis services furnished by each facility. These intermediaries are guided in their determinations by the Renal Dialysis Facility Manual ("the Manual"). The portion of the Manual relevant to this case sets forth billing and reimbursement procedures for laboratory tests, including what is known as Activated Coagulation Time of Whole Blood Test ("ACT"). ACT is a bedside test sometimes used to monitor kidney dialysis patients. ACT is not necessary in every treatment, but provides a reliable and accurate method of monitoring blood clotting time during kidney maintenance dialysis treatment.

 Prior to December, 1982, Plaintiff's allege that the Manual provisions allowed the dialysis facilities to bill ACTs separately from the basic dialysis treatment. They state that they were regularly reimbursed for ACT treatment in addition to the basic dialysis reimbursement. In December of 1982, HCFA published an intermediary letter, which stated that "routine laboratory services do not include hematocrits and clotting time tests . . . as they are included in the basic dialysis charge regardless of frequency." This letter was then included as part of a revised Manual, without prior notice or public comment. The result of this new rule has been the termination of additional reimbursement for ACT tests.

 JURISDICTION OF THIS COURT IS NOT PRECLUDED BY 42 U.S.C. § 405(h) SINCE THIS IS AN ACTION TO "VINDICATE PROCEDURAL RIGHTS", AND NOT ULTIMATELY AN ACTION FOR ADDITIONAL REIMBURSEMENT.


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