Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-98-05142/USCOURTS-caDC-98-05142-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

---

<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 23, 1998 Decided July 16, 1999

No. 98-5142

United Seniors Association, Inc., et al.,

Appellants

v.

Donna E. Shalala, Secretary,

United States Department of Health and Human Services,

Appellee

Appeal from the United States District Court

for the District of Columbia

(No. 97cv03109)

Kent Masterson Brown argued the cause for appellants.

With him on the briefs was Frank M. Northam. Jerome P.

Friedlander, II, entered an appearance.

Thomas M. Bondy, Attorney, U.S. Department of Justice,

argued the cause for appellee. With him on the brief were

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 1 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Frank W. Hunger, Assistant Attorney General, Wilma A.

Lewis, U.S. Attorney, and Barbara C. Biddle, Attorney, U.S.

Department of Justice.

John S. Hoff, Arthur B. Spitzer and Jeffrey P. Altman

were on the brief for amici Citizens Against Government

Waste, et al.

Before: Williams, Sentelle and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Garland.

Garland, Circuit Judge: Section 4507 of the Balanced

Budget Act of 1997 provides that, for certain medical services,

a doctor may not contract with a Medicare beneficiary outside

of Medicare unless the doctor agrees to abstain from participating in the Medicare program for two years. Plaintiffs, a

senior citizens' organization and four individual Medicare

beneficiaries, contend that section 4507 is unconstitutional on

a number of grounds. The district court found the statute

constitutional and granted summary judgment for the Secretary of Health and Human Services. We affirm the grant of

summary judgment without reaching the constitutional questions because the Secretary's recently-clarified interpretation

of section 4507, to which we must defer, eliminates the injury

that is the basis of plaintiffs' constitutional attack.

I

Medicare is a comprehensive insurance program designed

to provide health insurance benefits for individuals 65 and

over, as well as for certain others who come within its terms.

See 42 U.S.C. ss 1395c, 1395j. The program is administered

by the Health Care Financing Administration (HCFA), a part

of the U.S. Department of Health and Human Services

(HHS). In broad terms, Medicare Part A, which is not at

issue in this case, covers care provided by institutional health

care providers including hospitals. See id. ss 1395c-1395i.

Medicare Part B, which is the focus here, covers medical

services including those provided by physicians. See id.

ss 1395j to 1395w-4. Part B is financed by a combination of

government funding and premiums paid by beneficiaries. See

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 2 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

id. s 1395j. Doctors who provide medical services to Part B

beneficiaries must submit claim forms identifying the services

provided. See id. s 1395w-4(g)(4)(A)(i). They receive compensation in accordance with fee schedules that limit the

amount they may charge and be paid. See id. s 1395w4(g)(2)(C), (D).1

Certain kinds of medical services, such as routine physical

checkups, are categorically excluded from Medicare coverage.

See id. s 1395y(a)(7). Those that are not categorically excluded may only be reimbursed when medically "reasonable

and necessary." Id. s 1395y(a)(1)(A). If a service is deemed

not to have been reasonable and necessary, Medicare will not

make payment and the doctor generally is prohibited from

charging the patient. See id. s 1395u(b)(3)(B)(ii), (l)(1)(A).2

Because at the time a physician provides a service it may

not be certain whether Medicare will regard it as reasonable

and necessary, the Medicare program includes a provision for

an "Advance Beneficiary Notice" ("ABN"). Under this provision, in advance of providing a service the doctor may give

the patient an ABN, which advises that Medicare may not

pay for the service. See id. s 1395u(l)(1)(C)(ii). If the

__________

1 Under Medicare, "participating physicians" generally do not

bill their patients, but instead take an assignment of their patients'

rights and receive payment directly from Medicare. "Nonparticipating physicians" may accept assignments on a case-by-case basis

or bill their patients directly. In the latter circumstance, it is the

patient who obtains reimbursement from Medicare. In all cases,

however, the fee schedules effectively limit the doctor's compensation. See 42 U.S.C. ss 1395u(b), (h), (i); id. ss 1395w-4(a), (b), (g);

42 C.F.R. ss 402.1, 402.105, 405.504.

2 HHS enters into contracts with insurance carriers which

receive and process claims for payment for medical services provided to Part B enrollees. 42 U.S.C. s 1395u(a). Claims are submitted to a carrier, which makes an initial determination as to whether

the service is covered. 42 C.F.R. s 405.803; id. s 421.200. Medicare beneficiaries, or the physicians to whom they have assigned

their rights to payment, may require carriers to review their

determinations and are entitled to post-review hearings. Id.

s 405.801.

patient agrees to pay from his or her own funds if Medicare

does not, and if Medicare subsequently denies payment, the

doctor may bill the patient directly. See id.

In August 1997, Congress enacted section 4507 of the

Balanced Budget Act of 1997, Pub. L. 105-33, s 4507, 111

Stat. 251, 439 (codified at 42 U.S.C. s 1395a). The section

establishes rules for what it describes as "the use of private

contracts by medicare beneficiaries." Id. Section 4507(b)(1)

permits doctors and patients to contract for certain services

outside of Medicare and without its fee limitations:

Subject to the provisions of this subsection, nothing in

this title shall prohibit a physician or practitioner from

entering into a private contract with a medicare beneficiary for any item or service--

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 3 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

(A) for which no claim for payment is to be submitted

under this title, and

(B) for which the physician or practitioner receives

... no reimbursement under this title....

42 U.S.C. s 1395a(b)(1); see id. s 1395a(b)(4). Section

4507(b)(2), entitled "[b]eneficiary protections," lists certain

provisions that private contracts authorized by (b)(1) must

include:

Any contract to provide items and services to which

paragraph (1) applies shall clearly indicate ... that by

signing such contract the Beneficiary--

(i) agrees not to submit a claim (or to request that the

physician or practitioner submit a claim) under this

title for such items or services even if such items or

services are otherwise covered by this subchapter;

(ii) agrees to be responsible, whether through insurance or otherwise, for payment of such items or services and understands that no reimbursement will be

provided under this title for such items or services;

(iii) acknowledges that no limits under this title ...

apply to amounts that may be charged for such items

or services;

... ; and

(v) acknowledges that the medicare beneficiary has

the right to have such items or services provided by

other physicians or practitioners for whom payment

would be made under this title.

Id. s 1395a(b)(2)(B).

Finally, section 4507(b)(3) further provides that such private contracts are authorized only if the physician signs an

affidavit which states that he or she

will not submit any claim under this title for any item or

service provided to any medicare beneficiary (and will

not receive any [Medicare] reimbursement ... for any

such items or service) during the 2-year period beginning on the date the affidavit is signed....

Id. s 1395a(b)(3)(B)(ii). This means that a doctor who enters

into a section 4507 private contract with even a single patient

is barred from submitting a claim to Medicare on behalf of

any patient for a two-year period.

II

Plaintiffs contend that section 4507 effectively makes it

impossible for them to contract for medical services outside of

the Medicare system--particularly for services Medicare will

not cover, either because they are categorically excluded or

because Medicare deems them unreasonable or unnecessary

in a particular case. As plaintiffs read the section, it governs

almost any agreement between a doctor and patient to proUSCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 4 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

vide medical services outside of Medicare, without regard to

whether Medicare would pay for the service if a claim were

submitted. Plaintiffs argue that it will be virtually impossible

to find a doctor willing to enter into such an agreement, given

the importance of Medicare to doctors' practices and the twoyear bar the statute imposes for entering into even a single

private contract.3 The Secretary concedes that very few

__________

3 Plaintiffs note that over 96% of practicing physicians receive

Medicare Part B reimbursement. Pl. Br. at 11-12. They also note

that to date, only 300 doctors nationwide have filed section 4507

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 5 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

doctors will be willing to opt out of Medicare, Oral Arg. Tr. at

22, and generally agrees that the two-year restriction "represents a substantial barrier to the receipt of contracted services." United Seniors Ass'n., Inc. v. Shalala, 2 F. Supp. 2d

39, 41 (D.D.C. 1998).

Plaintiffs also reject the suggestion that the ABN procedure provides a way to relieve the constraints imposed by

section 4507. They recognize that an agreement under an

ABN is not a "private contract" under section 4507, and

hence is not subject to its two-year bar. See 63 Fed. Reg.

58,814, 58,851 (1998). In theory this should mean that patients can obtain services they and their doctors consider

reasonable or necessary, even if Medicare ultimately does not,

by executing ABNs. But plaintiffs regard the ABN option as

unworkable. First, it does not apply to services categorically

excluded from Medicare. Second, plaintiffs contend that

under HCFA rules, doctors who routinely use ABNs to obtain

reimbursement for services Medicare deems unreasonable or

unnecessary are subject to penalties and sanctions. Thus,

plaintiffs do not view ABNs as a practical solution to the

problem created by section 4507.

Nor, plaintiffs contend, is it realistic to suggest that senior

citizens can avoid the restrictions of section 4507 by simply

opting out of Medicare Part B altogether. Notwithstanding

the government's repeated suggestion that "plaintiffs may

disenroll at any time" from Part B, see, e.g., HHS Br. at 3, 27,

28, 29, at oral argument it conceded there is no "meaningful

equivalent to Medicare" in the private market. Oral Arg. Tr.

at 18-19.4 Accordingly, opting out is hardly a viable way for

patients to bypass section 4507.

Plaintiffs' complaint charges that the restrictions imposed

by section 4507 violate the First, Fourth, Fifth, Ninth, Tenth

__________

contracts with the Secretary of Health and Human Services. Pl.

Reply Br. at 4 (citing 9 Medicare Rep. (BNA) 18 (May 1, 1998)).

4 See United Seniors, 2 F. Supp. 2d at 41 n.2 ("Medicare is, in

effect, the only primary health insurance available to people over

65. No private health insurance companies offer 'first dollar'

insurance to this group; they offer only supplemental insurance.").

and Fourteenth Amendments to the Constitution, as well as

the Spending Clause of Article I, section 8. Plaintiffs contend

those restrictions violate their liberty to contract privately for

health care services, violate their ability to maintain the

privacy of their medical information by requiring them to file

claims for all medical services, and violate their equal protection and due process rights by denying them the same liberty

to contract enjoyed by other citizens. They also contend that

section 4507 exceeds Congress' powers under the Spending

Clause, and invades the reserved powers of the States and

the people under the Tenth Amendment, by regulating health

care for which the federal government does not pay.

Critical to our analysis is that the injury plaintiffs assert is

to their ability to purchase services for which Medicare will

not itself pay, thus rendering them unable to obtain those

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 6 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

services on any terms. Oral Arg. Tr. at 4-6. The right they

assert is to contract for services they and their doctors

regard as necessary or even merely salutary, regardless

whether Medicare agrees. Section 4507 abridges this right,

they contend, by making it virtually impossible to find a

doctor willing to enter into a private contract with a Medicare

beneficiary. Plaintiffs made clear at oral argument, however,

that they disavow any claim to a constitutional right to pay

their doctors more than the Medicare fee limits for services

they can obtain through Medicare. Id.

III

The district court examined plaintiffs' constitutional claims,

rejected them on the merits, and granted summary judgment

for the Secretary. See United Seniors, 2 F. Supp. 2d at

42. We review the grant of summary judgment de novo.

Hunter-Boykin v. George Washington Univ., 132 F.3d 77, 79

(D.C. Cir. 1998). When we do so, we find we have no need to

reach the merits of plaintiffs' constitutional claims. After

careful examination and clarification of the Secretary's interpretation of section 4507, we find that interpretation effectively eliminates the injury--whether of constitutional magnitude

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 7 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

or not--that plaintiffs fear, and provides them with all the

relief they seek.

The Secretary contends that plaintiffs have simply misunderstood section 4507. The purpose of the section, she

argues, is to prevent doctors from coercing elderly patients

into paying more for Medicare-covered services than Medicare's fee schedules permit. HHS Br. at 10, 12. Consistent

with that purpose, the section--including its two-year bar--

applies only to services that Medicare would reimburse but

for the private contract. Id.; Oral Arg. Tr. at 51-52. If a

patient and doctor want to enter into a private contract for

such services, the doctor must wholly opt out of the system

for two years. HHS Br. at 14.

The Secretary stresses, however, that section 4507 does not

do what plaintiffs assert--that is, it does not impose restrictions on agreements to provide services for which Medicare

would not pay. Hence, if a doctor and patient agree with

respect to a service that would not be reimbursed by Medicare--either because it is categorically excluded or because it

is deemed unreasonable or unnecessary in the particular

case--then the agreement does not fall within section 4507

and the doctor is not subject to the two-year bar. HHS Br.

at 9-10, 18, 23; Oral Arg. Tr. at 48-49. The Secretary also

contends that plaintiffs have misunderstood the ABN procedure which, she says, provides a workable way to handle

those charges as to which Medicare payment is uncertain.

HHS Br. at 23.

At oral argument, plaintiffs made clear that if section 4507

really says what the Secretary says it says, then their case is

at an end. Oral Arg. Tr. at 4-5, 59. Plaintiffs have no

interest, they aver, in obtaining the right to enter into

agreements to pay more for services they can obtain for less

under Medicare. Id. Rather, their interest--and the constitutional right they assert--is in obtaining services they cannot get under Medicare at any price. Id. at 6. The plaintiffs

are skeptical, however, that section 4507 really means what

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 8 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

the Secretary says it means--and equally skeptical that the

Secretary actually reads and applies it that way.

Plaintiffs' skepticism is not unjustified. The meaning of

section 4507 is hardly plain on its face. Moreover, because

HCFA did not promulgate formal regulations regarding the

section until ten days after the oral argument in this case, its

own interpretation could only be gleaned from memoranda

issued to Medicare carriers and testimony delivered to Congress, of which Medicare beneficiaries may well have been

unaware. Nonetheless, as we discuss below, the Secretary's

interpretation is a reasonable interpretation of the less-thanplain language of section 4507. In addition, the Secretary's

current interpretation, as foreshadowed in the briefs filed in

this case and expressed in the subsequent regulations, is

consistent with the position HCFA has taken since the section

was enacted. Under Chevron U.S.A. Inc. v. National Resources Defense Council, Inc., if a statute is ambiguous we

must defer to an agency's reasonable interpretation of its

terms. 467 U.S. 837, 842-45 (1984); see United States v.

Haggar Apparel Co., 119 S. Ct. 1392, 1395 (1999). This is so

regardless whether there may be other reasonable, or even

more reasonable interpretations. See Serono Labs., Inc. v.

Shalala, 158 F.3d 1313, 1321 (D.C. Cir. 1998). Following the

injunction of the Supreme Court, we are required to accord

such deference here.

A

Section 4507 of the Balanced Budget Act does not clearly

indicate the kinds of services to which it applies. Paragraph

(1) of subsection (b) states that "[s]ubject to the provisions of

this subsection, nothing in this title shall prohibit a physician

or practitioner from entering into a private contract with a

Medicare beneficiary for any item or service ... for which no

claim for payment is to be submitted under this title...." 42

U.S.C. s 1395a(b)(1). This provision is the source of plaintiffs' apprehension, since it appears to apply to any service--

Medicare-reimbursable or not--for which no claim for payment is submitted.

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 9 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

But the introductory clause of paragraph (1) makes it

"[s]ubject to the provisions of this subsection." To understand the scope of paragraph (1), therefore, we must examine

the balance of subsection (b). The key language is in paragraph (2), which states that "[a]ny contract to provide items

and services to which paragraph (1) applies shall clearly

indicate ... that the medicare beneficiary has the right to

have such items or services provided by other physicians or

practitioners for whom payment would be made under this

title." 42 U.S.C. s 1395a(b)(2)(B) (emphasis added). The

Secretary argues that since "any" private contract under

section 4507 must indicate that the beneficiary has "the right"

to have the same services paid for by Medicare, section 4507

should be read as applying only to services that Medicare

would reimburse but for the parties' private contract. Although we find the relationship between paragraphs (1) and

(2) less than plain, the Secretary's interpretation of section

4507 is at least a reasonable one.

B

Our parsing of the language of section 4507 leads us to

conclude that it is reasonable to read section 4507 as applying

only to private contracts for services that are reimbursable

under Medicare. Plaintiffs question, however, whether that

truly is the way HCFA reads section 4507. Although it is

unquestionably the view expressed in the Secretary's briefs in

this case, plaintiffs contend it has not previously been the

position of HCFA.

Even if the legal briefs contained the first expression of the

agency's views, under the appropriate circumstances we

would still accord them deference so long as they represented

the agency's "fair and considered judgment on the matter."

Auer v. Robbins, 117 S. Ct. 905, 912 (1997); see Association

of Bituminous Contractors, Inc. v. Apfel, 156 F.3d 1246,

1251-52 (D.C. Cir. 1998); Tax Analysts v. IRS, 117 F.3d 607,

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 10 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

613 (D.C. Cir. 1997). In this case, however, HCFA has

expressed similar views since Congress first enacted section

4507. Although until recently those views were expressed

only in the form of memoranda and congressional testimony,

"an agency need not promulgate a legislative rule setting

forth its interpretation of a statutory term for that interpretation to be entitled to deference." Association of Bituminous

Contractors, 156 F.3d at 1252. Moreover, although HHS'

past pronouncements have not been perfectly clear, an agency's interpretation of its own rules is "controlling unless

'plainly erroneous or inconsistent' " with them. Auer v. Robbins, 117 S. Ct. at 911; see United States v. Stinson, 508 U.S.

36, 45 (1993). In this case, the agency's past and current

views are not inconsistent.

The Secretary first calls our attention to a program memorandum and fact sheet HCFA issued to all Medicare carriers

in November 1997. See HCFA, Program Memorandum,

Transmittal No. B-97-9 (Nov. 1997) (Joint Appendix ("J.A")

207-08). Consistent with the Secretary's position here, the

fact sheet describes section 4507 as applying to "private

contracts with Medicare beneficiaries to provide covered services." Id. The document then expressly states that "[w]ith

respect to non-covered services, a private contract is unnecessary and section 4507 does not apply." Id. at 208. This

means, the fact sheet says, that "beneficiaries continue to be

able to pay for any services that Medicare does not cover out

of their own pockets ... without having to enter into a

private contract subject to the provisions of section 4507."

The HCFA fact sheet lists cosmetic surgery, hearing aids

and routine physical examinations as examples of "noncovered" services. Although these services are all of the

categorically-excluded variety, the next paragraph of the fact

sheet states that a physician may also "furnish a service that

Medicare covers under some circumstances but which the

physician anticipates would not be deemed 'reasonable and

necessary' by Medicare in the particular case." Id.; see also

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 11 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Oral Arg. Tr. at 53 (HHS counsel's explanation of "noncovered" as including services not necessary in particular

case). If the beneficiary receives an ABN for such a service,

the fact sheet continues, "a private contract [under s 4507] is

not necessary to bill the beneficiary if the claim is denied."

J.A. 208.

The fact sheet concludes that when a physician and beneficiary enter into a private contract to provide services "that

would otherwise be covered by Medicare," the physician must

" 'opt out' of Medicare for a two-year period." Id. The

phrase, "would otherwise be covered by Medicare," is not free

from ambiguity. Plaintiffs suggest, and worry, that it refers

to services that would be covered but for Medicare's conclusion that they are not reasonable and necessary in the

particular case. Under that reading, services the doctor

believes are necessary but Medicare does not could only be

provided under section 4507 (with its two-year bar). But

such a reading would be inconsistent with the language

discussed in the preceding paragraph, which makes clear that

payment for a claim denied on the ground that the service

was not necessary does not require a section 4507 contract.

The Secretary, by contrast, interprets "would otherwise be

covered by Medicare" as meaning "covered but for the fact

that the parties have entered into a private contract." This

reading is consistent both with the rest of the fact sheet, and

with the Secretary's position that physicians must opt out of

Medicare only if they enter into contracts for services that

Medicare would reimburse but for those contracts themselves.5

__________

5 Another HCFA program memorandum, issued to all Medicare

carriers in January 1998 and specifically addressed to "the implementation of ... s 4507," is also consistent with this interpretation.

See HCFA, Program Memorandum, Transmittal No. B-97-17 (Jan.

1998) (J.A. 225-26) (stating that private contracts with their attendant opt-out rules are not required for services: (1) that are "categorically exclude[d]" from Medicare; (2) that are "not covered

because, under Medicare rules, the service is never found to be

medically necessary to treat illness or injury"; or (3) for which

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 12 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

On February 26, 1998, the Administrator of HCFA submitted a statement to the Senate Finance Committee intended to

"clarify" "substantial misunderstanding about what section

4507 of the Balanced Budget Act does." J.A. 254. Consistent with the HCFA fact sheet just discussed, the Administrator stated that a private contract under section 4507 is one

for which the service "would be covered if a claim were

submitted" to Medicare, id. at 252, and that such a contract is

the only kind to which the opt-out rule applies, id. at 254. "A

physician does not have to opt out of Medicare for two years,"

she said, "in order to provide a non-covered service to a

Medicare beneficiary." Id. at 255. Nor does a physician

have to opt out when, employing the ABN procedure, the

doctor provides a service Medicare later determines was not

reasonable and necessary. Id. at 256.6

At oral argument, counsel for the Secretary advised that

HCFA was planning to issue formal regulations incorporating

the above-stated views. Those regulations were published on

November 2, 1998. See 63 Fed. Reg. at 58,901. Consistent

with the position recounted above, the explanatory preamble

__________

"Medicare denies the claim on the basis that the service was not

medically necessary" in the particular beneficiary's case).

6 The Administrator used prostate specific antigen tests (PSAs)

as an example to make her point. J.A. 256. Medicare currently

covers such tests only when used for diagnosis to evaluate a

symptom of a particular patient, and only when such use is reasonable and necessary. Medicare will not pay for the tests when used

for screening patients across the board. "Therefore," the Administrator said, "a private contract is not needed when a beneficiary

wants a PSA test for screening purposes because it is not now a

covered service." Id. Likewise, the Administrator explained, a

physician may believe "that Medicare is likely to deny payment for

a certain diagnostic PSA (for example, when the patient wants to

have the test more frequently than Medicare would likely pay for

[it])." Id. In such circumstances, although an ABN should be

used, section 4507 does not apply. Id. at 256-57. See also Balanced Budget Act of 1997, Pub. L. 105-33, s 4103, 111 Stat. 251, 362

(codified at 42 U.S.C. s 1395l(h)(1)(A)) (providing coverage for

screening PSA tests beginning in the year 2000).

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 13 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

states that "[t]he private contracting rules do not apply to ...

services that Medicare does not cover." Id. at 58,850. It

further states that when a physician "furnishes a service that

does not meet Medicare's criteria for being reasonable and

necessary, and the [physician] has furnished the beneficiary

with an ABN ... , there are no limits on what the [physician]

may charge the beneficiary.... [and] [t]he act of providing

an ABN does not then require that the [physician] opt-out of

Medicare...." Id. at 58,851.

On the basis of our examination of HCFA's announced

views, we conclude that the agency has consistently interpreted section 4507 and its opt-out rules as applying only to

contracts for services that Medicare itself would reimburse.

C

Finally, we briefly address plaintiffs' contention that the

ABN procedure is not a realistic way to ensure patients'

access to services they or their doctors regard as necessary

but Medicare does not. Under the ABN procedure, before

providing a service the physician informs the patient that

Medicare may not pay, and obtains the patient's agreement to

pay on his or her own if Medicare denies the claim. See 42

U.S.C. s 1395u(l)(1)(C)(ii). As noted above, because an ABN

is not considered a private contract under section 4507, if

Medicare does not pay the doctor may receive payment from

the patient without being subject to the opt-out rule. See 63

Fed. Reg. at 58,851.7

Plaintiffs contend that the ABN option is illusory because

HCFA has a policy of sanctioning doctors who repeatedly use

ABNs for services they believe warranted but Medicare

regards as unnecessary and will not reimburse.8 The Secre-

__________

7 An ABN is neither utilized nor necessary for services categorically excluded from Medicare, and section 4507 has no application

to such services. See J.A. 255-57 (statement of HCFA Administrator).

8 Plaintiffs also contend that if their doctor is a "participating

physician" who bills Medicare directly, see supra note 1, or if the

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 14 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

tary vehemently denies having such a policy. HHS Br. at 24.

At least on their face, HCFA's pronouncements support the

Secretary since they expressly advise doctors to employ

ABNs in precisely those circumstances. Standard ABN

forms, for example, require a statement that the patient has

"been informed by my physician that he or she believes that,

in my case, Medicare is likely to deny payment." J.A. 94; see

also 42 C.F.R. s 411.408(f) ("[T]he physician must inform the

beneficiary ... that the physician believes Medicare is likely

to deny payment."). Similarly, a 1998 HCFA program memorandum explains that where a service is not covered by

Medicare because it is "never found to be medically necessary," the physician may charge the patient without opting

out "only if he or she gives the beneficiary" an ABN. J.A.

225.9 These pronouncements would make no sense if HCFA

did not intend doctors to use ABNs for services they believe

Medicare would regard as unnecessary.

The preamble to HCFA's new regulations should also give

plaintiffs some comfort. It notes that ABNs may state that

__________

medical service they seek is one statutorily required to be provided

on an assignment basis, see, e.g., 42 U.S.C. s 1395l(h)(5)(C) (clinical

diagnostic laboratory tests), then the ABN procedure may not be

used. Although the language of the statutory ABN provision

appears to support this contention, see id. s 1395u(l)(1)(A), the

Secretary interprets other statutory provisions and HCFA regulations to permit a doctor to obtain an ABN agreement in such

circumstances and to charge the patient if Medicare denies payment. HHS Br. at 25 n.5 (citing 42 U.S.C. s 1395pp; 42 C.F.R.

ss 411.402(a)(2), 411.404; HCFA, Medicare Carriers Manual

ss 7300.5, 7330.D).

9 Where the service is one Medicare never finds medically

necessary, the memorandum states that "no claim need be submitted." J.A. 225. A claim "must be submitted," however, if the

service "is one which Medicare has determined is medically necessary where certain clinical criteria are met, but is not medically

necessary where these criteria are not met." Id. In both cases, "if

Medicare denies the claim on the basis that the service was not

medically necessary, the physician or practitioner who has given the

advance beneficiary notice may bill the beneficiary." Id.

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 15 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

the physician "believes that the service will not be covered by

Medicare" and that the "act of providing an ABN does not

then require that the physician or practitioner opt-out of

Medicare so that he or she avoids being at risk of having a

penalty assessed...." 63 Fed. Reg. 58,851. And it closes

with an effort to assuage precisely the concern plaintiff

expresses here: "[P]hysicians and practitioners should not

hesitate to furnish services to Medicare beneficiaries when

the physician or practitioner believes that those services are

in accordance with accepted standards of medical care, even

when those services do not meet Medicare's particular and

often unique coverage requirements." Id.

It should not be missed, of course, that HCFA exempts

from this note of encouragement those services not "in accordance with accepted standards of medical care." Id. This

qualifier may well explain some of the confusion. Although a

HCFA regulation does state that ABNs are not acceptable if

the "physician routinely gives this notice to all beneficiaries

for whom he or she furnishes services," 42 C.F.R.

s 411.408(f)(2)(i), the Secretary makes clear that this rule is

aimed at a doctor who "require[s] all his patients to sign

ABNs on a blanket basis in order to bill them for unwarranted procedures." HHS Br. at 24 (citing s 411.408) (emphasis

added). Needless to say, billing patients for unwarranted

procedures may well be subject to sanction, see generally 42

U.S.C. s 1320a-7(b)(6)(B), and plaintiffs do not urge otherwise.

In sum, the evidence before us does not support the

assertion that HCFA interprets the ABN procedures in a

manner that denies plaintiffs access to services they regard

as reasonable or necessary. We have briefly addressed this

question because of plaintiffs' contention that it is linked to

the section 4507 issue. We should note, however, that the

ABN issue is analytically distinct from plaintiffs' facial challenge to the constitutionality of section 4507, since ABNs are

not private contracts under that section and are not governed

by it. To the extent plaintiffs feel HCFA enforces the ABN

statute and regulations in a manner inconsistent with the

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 16 of 17
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

agency's own pronouncements, they are of course free to

challenge such enforcement in a particular case.

IV

Because the Secretary's reading of section 4507 eliminates

the constitutional injury plaintiffs allege, and because we are

bound under Chevron to defer to that interpretation, the

order of the district court is affirmed.

USCA Case #98-5142 Document #449861 Filed: 07/16/1999 Page 17 of 17