Case: Mathews v Health Insurance Commission (2006) 90 ALD 49
Outcome: distinguished
To support his position, Dr Phan has referred to the decision of Edmonds J in Mathews v Health Insurance Commission (2006) 90 ALD 49. In that case, his Honour decided that the Committee had erred in its sampling by failing to examine samples randomly drawn from a preliminary random sample as required by Health Insurance (Professional Services Review - Sampling Methodology) Determination 2000 (No. 1) ("the Determination"). The breach considered by his Honour was clear. The case was decided on the basis that the Committee had examined the first 30 services on lists of the first 40 services taken from lists of random samples furnished by the Commission. They were not therefore 'randomly drawn from the preliminary random sample' as required by s 8(a) of the Determination. 50 In the present case, the Committee - as it was entitled to do under s 106K(4) - used a sampling methodology which was not the subject of a Ministerial determination under s 106K(3). Instead, it used the sampling methodology which had been advised to be statistically valid by Professor Nicholls pursuant to s 106K(4) of the Act. The case of Mathews is clearly distinguishable from the present case, both on its facts and having regard to the controlling principles. 51 It was submitted by the Applicant in Mathews that the Committee's examination of 30 services in each MBS item of service under review from a list of 40 services provided to the Committee by the Director which included services that had already been examined by the Director and found to be deficient and adverse to Dr Mathews had the effect that the sample could no longer be considered to have been 'randomly drawn from the preliminary random sample.' His Honour did not find it necessary to determine this question and specifically left it open. However, he did indicate that there might be some suggestion that this allegation of error in the sampling process should be upheld. 52 It is important to note that, as discussed above, the Mathews case is distinguishable and that Edmonds J specifically refrained from deciding that particular question. The observation of his Honour is not binding on me. In my view, the sample used in the present case was in accordance with the requirements of the Act. The evidence is that the Commission drew a preliminary random sample and that the Director required the production of records which he examined. He concluded, for the reasons given by him in his Report, that it would be appropriate for him to refer the matter to a Committee. In examining the material and completing his Report, the Director did not decide that there was inappropriate conduct. That determination was left for the Committee to make following a hearing and having regard to the evidence adduced at that hearing. It is not correct to suggest that the Director had found that the samples had in fact given rise to inappropriate conduct. The fact that the Director examined and considered the records and forwarded them to the Committee does not affect their randomness when they were considered afresh by the Committee. The sample items retained their character as random samples and were not skewed or biased so that the Committee's decision should be considered invalid. 53 The next ground of invalidity raised relates to Professor Nicholls' memorandum addressed to Ms Goodspeed dated 5 March 2004. It is submitted that Professor Nicholls' memo demonstrates that the decision of the Committee was based on errors of law. 54 On 4 March 2004, Ms Goodspeed, who had been given the task of preparing a draft report for the Committee, sent an email to Professor Nicholls. She sought his advice as to whether it was unsafe to proceed with the proposed sampling methodology. In his reply of 5 March 2004, Professor Nicholls responded: 'Re: Request of 4 March 2004 From the information supplied I note: &#8226; From the 17,970 item 23 services a random sample of 84 services have been examined (with 4 services being disregarded due to no records). The Committee found that of the remaining 80 services, 69 or 86% (rounded down) were considered inappropriate. &#8226; Applying appropriate statistical techniques it can be shown that we can be 95% confident that the true percentage of inappropriate practice lies between 86% + 8%, that is the lower 95% confident limit is 78%. This value (78%) is to be chosen as the level of inappropriate practice (rather than 86%). In conclusion, it is statistically valid to accept the conclusion based on the sample of 80 item 23 services that the level of inappropriate practice will be determined as 78%. I confirm that I am a statistician accredited by the Statistical Society of Australia Inc. as required under subsection 106K(4) of the Act.'