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AMERICAN SOC'Y OF DERMATOLOGY v. SHALALA

September 5, 1996

AMERICAN SOCIETY OF DERMATOLOGY, MELISSA K. CLEMENTS, M.D., and JOHN A. KASCH, M.D., Plaintiffs,
v.
DONNA SHALALA, Defendant.



The opinion of the court was delivered by: JOHNSON

 Before the Court are three motions: the motion of plaintiffs, the American Society of Dermatology ("ASD"), Melissa K. Clements, M.D., and John A. Kasch, M.D., for summary judgment and permanent injunction, the motion of defendant Donna Shalala, Secretary of the Department of Health and Human Services, for judgment on the pleadings or, in the alternative, for summary judgment, and the motion of plaintiffs for leave to file an amended complaint. Plaintiffs bring this action pursuant to the Federal Advisory Committee Act ("FACA"), the Administrative Procedure Act ("APA"), and Part B of Medicare under the Social Security Act. *fn1"

 ASD is a national organization designed to advance and protect the interests of private dermatologists. Clements is a private, practicing dermatologist in Oklahoma City, Oklahoma. Kasch is a private, practicing dermatologist in Sacramento, California. Clements and Kasch are members and directors of ASD. Plaintiffs challenge the way in which the Secretary, through the Health Care Financing Administration ("HCFA"), administers the fee schedule for payment of physicians' services rendered under the Medicare program. The statute ordering the Secretary to create this fee schedule, called the Resource-Based Relative Value Scale ("RBRVS"), is codified at 42 U.S.C. § 1395w-4 (1994). Upon consideration of the motions, the supporting and opposing memoranda, the argument of counsel, the entire record herein, and for the reasons set forth below, the Court will grant plaintiffs' motion to amend the complaint, grant the Secretary's motion for summary judgment, and deny plaintiffs' motion for summary judgment.

 Background

 A. The Statutory Scheme

 This action concerns Part B of the Medicare Act, which is a voluntary program providing medical insurance benefits to enrolled aged or disabled persons. Participants in the program pay premiums to Medicare, which are combined with federal government contributions to the program. The Secretary administers the Medicare program.

 Before 1992, payment for medical services under Part B was based on the reasonable cost of the physician's services. Effective January 1, 1992, Congress revised the method for calculating physicians' payments under Part B by switching to the RBRVS system. Congress directed the Secretary to "establish a uniform procedure coding system for the coding of all physicians' services." 42 U.S.C. § 1395w-4(c)(5). Under the RBRVS system, the physician's payment is the lesser of his or her actual charge or an amount determined pursuant to a fee schedule set by the Secretary. 42 U.S.C. § 1395w-4(a). The payment amount under the fee schedule is the product of:

 
(A) the relative value for the service (as determined [by the Secretary] in subsection (c)(2) of this section),
 
(B) the conversion factor (established [by the Secretary] under subsection (d) of this section) for the year, and
 
(C) the geographic adjustment factor (established [by the Secretary] under subsection (e)(2) of this section) for the service for the fee schedule area.

 42 U.S.C. § 1395w-4(b)(1). The Secretary is responsible for "developing a methodology for combining the work, practice expense, and malpractice relative value units ["RVUs"] . . . for each service in a manner to produce a single relative value for that service." 42 U.S.C. § 1395w-4(c)(2). The RVUs are numbers representing, in relative terms, the time and effort required to perform a particular medical procedure. In determining the RVUs for physicians' services for which specific data are not available, the Secretary "may use extrapolation and other techniques . . . and shall take into account recommendations of the Physician Payment Review Commission and the results of consultations with organizations representing physicians who provide such services." 42 U.S.C. § 1395w-4(c)(2).

 The Secretary is also responsible for reviewing the RVUs at least every five years and can adjust them to take into account changes in medical practice, coding changes, new data, or the addition of new procedures. 42 U.S.C. § 1395w-4(c)(2). In making such adjustments, the Secretary "shall consult with the Physician Payment Review Commission and organizations representing physicians." 42 U.S.C. § 1395w-4(c)(2). The statute provides that "there shall be no administrative or judicial review" of the Secretary's determination of relative value units, conversion factors, geographic adjustment factors, or the establishment of the system for coding physicians' services. 42 U.S.C. § 1395w-4(i)(1).

 B. The American Medical Association Committees

 Since 1966, the American Medical Association ("AMA") has published and updated the Physicians' Current Procedural Terminology ("CPT "). CPT, which is copyrighted and published as a book, contains a listing of descriptive terms and identifying code numbers for the standardized reporting of approximately 7,500 medical services and procedures performed by physicians. The purpose of CPT is to provide a uniform language that accurately describes medical, surgical, and diagnostic services to facilitate nationwide communications among health care workers, patients, and others. Barry S. Eisenberg Decl. P 4. CPT is widely used by health insurance companies in the United States for tracking and processing medical claims. See Barton C. McCann, M.D., Dep. at 11. The CPT codes must be updated constantly to reflect changes in medical practice and technology. The CPT Editorial Panel is a panel of fourteen physicians, appointed by the AMA's Board of Trustees, who are responsible for updating the CPT codes. HCFA nominates one physician to be on the panel. The CPT Advisory Committee, consisting of seventy-five physicians nominated by the national medical specialty societies represented in the AMA House of Delegates and appointed by the AMA, supports the CPT Editorial Panel by providing information and advice about medical specialties. The Panel meets quarterly to review proposals to change the codes, submitted by physicians, medical specialty societies, state medical associations, and other interested parties.

 In 1983, the Secretary entered an agreement with the AMA to use the CPT codes for reporting physicians' services under the Medicare program. The agreement gives HCFA permission to incorporate CPT codes into HCFA's Common Procedure Coding System ("HCPCS"). McCann Dep. Ex. 2. The AMA retains the responsibility for revising, updating, and modifying the CPT. Id. Since the time it adopted the CPT codes, HCFA has used the codes listed in CPT to identify a physician's service for payment under Medicare. McCann Dep. at 18. Although the CPT codes have been adopted in their entirety, unchanged, as the HCPCS, the agreement between the AMA and HCFA includes the provision that "HCFA retains sole responsibility for determining which codes represent covered services and the amounts to be paid for those services." McCann Dep. Ex. 2, P 1.

 In 1991, the AMA and its affiliated medical specialty societies established the AMA/Specialty Society Relative Value Scale Update Committee, known as the "RUC." The purpose of the RUC is to make recommendations to HCFA on the relative work values for new and revised CPT codes. The RUC is comprised of twenty-six physicians appointed by the AMA and national medical specialty societies. The RUC is supported by the RUC Advisory Committee, which provides technical assistance and advice. HCFA considers the RUC's recommendations prior to establishing its "interim fee schedules."

 The Secretary issued her first fee schedule under the new RBRVS system in November 1991. Those values were final for the year 1992 while HCFA received and evaluated public comments on them. In November 1992, the Secretary published the 1993 fee schedule and began to receive comments on those values. This pattern has continued every year since 1992 -- in late November or early December of each year, HCFA publishes a notice in the Federal Register announcing the physician fee schedule for the following year. In this notice, HCFA publishes a table listing (1) the new or revised CPT codes, (2) the work RVU recommendations of the RUC and any specialty societies received by HCFA for these codes, (3) HCFA's decision on those recommendations (accepted, increased, or decreased), and (4) the interim work RVU for these CPT codes which will be in effect for the calendar year covered by the final rule. McCann Decl. P 12. After a sixty-day period of receiving public comments on the interim values, HCFA convenes one or more "multispecialty" panels of physicians to assist it in evaluating the comments received. After incorporating the comments, HCFA publishes a final fee schedule.

 C. Plaintiffs' Claims

 As a preliminary matter, the Court will allow plaintiffs to amend their complaint to add two allegations that both parties addressed in their memoranda. See Fed. R. Civ. P. 15. Plaintiffs ask the Court to enjoin HCFA from enforcing the fee schedule published on December 8, 1995, and to remand the matter to the Secretary with an order that the Secretary cease delegating her authority to develop HCPCS codes, publicly disclose all materials submitted to or received by the AMA committees, and receive public comments on those materials before the issuance of a final fee schedule for 1996. Plaintiffs ask for a declaratory judgment (1) that the AMA committees and the HCFA multispecialty panels are "advisory committees" for purposes of FACA and, as such, have been in violation of FACA since 1991; (2) that the Secretary has violated 42 U.S.C. § 1395w-4(c)(5) by failing to establish a uniform procedure for coding physicians' services and, instead, entered into an agreement with the AMA to use the AMA CPT codes, and (3) that 42 U.S.C. § 1395w-4(i)(1) is unconstitutional to the extent that it bars administrative and judicial review. Plaintiffs seek a permanent injunction (1) prohibiting meetings of the AMA committees and the HCFA multispecialty panels until they are in compliance with FACA; (2) ...


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