Opinion ID: 417775
Heading Depth: 2
Heading Rank: 1

Heading: Schwartz's Due Process Claim

Text: 20 Part A of the Medicare Program, entitled Hospital Insurance Benefits for the Aged and Disabled, 42 U.S.C. Secs. 1395c to 1395i-2, is a government-financed program designed to provide insurance, principally for persons over the age of 65, against the cost of institutional health services, such as hospital and nursing home fees. Part B, entitled Supplementary Medical Insurance Benefits for the Aged and Disabled, 42 U.S.C. Secs. 1395j to 1395w (1976 & Supp. IV 1980), is a voluntary program funded partly by contributions of the individuals enrolled and partly by the government, and is designed to reimburse persons who are disabled or over the age of 65 for a portion of the cost of certain medical expenses not covered by Part A, such as physician services, outpatient physical therapy, x-rays, and laboratory tests. 21 Schwartz's principal claim on appeal is that he was denied due process because he was afforded no review by the Secretary with respect to Travelers' rejection of Woodcrest's ORI claims and because the panel that rendered that ultimate decision was appointed by the same entity, i.e., Travelers, that made the initial decision to deny those claims. While we recognize that Woodcrest was a provider of services under Part A of the Medicare Program, we conclude that Schwartz's contention must be rejected on the basis of the reasoning of the Supreme Court in Schweiker v. McClure, 456 U.S. 188, 102 S.Ct. 1665, 72 L.Ed.2d 1 (1982), rejecting similar claims on behalf of beneficiaries of Part B. Only Schwartz's claim that there should have been review by the Secretary merits extended discussion. 5
22 McClure arose out of decisions by hearing officers denying the claims of three individuals seeking reimbursement for their expenditures for certain services under Part B. The claimants contended that the fact that the Secretary provided no review of the decision of the hearing officers denied them due process of law. After a detailed review of the existing procedures, the Supreme Court rejected this contention. 456 U.S. at 200, 102 S.Ct. at 1672. The Court noted that in order to make the administration of Part B more efficient, Congress had authorized the Secretary to contract with private insurance carriers to administer the payment of qualifying claims. Id. at 190, 102 S.Ct. at 1667. Part B claimants submit claims to the carrier for reimbursement for services they have received; the carrier decides initially whether the services were medically necessary, whether the charges are reasonable, and whether the claim is otherwise covered by Part B. Id. at 191, 102 S.Ct. at 1667; see 42 U.S.C. Sec. 1395y(a); 42 C.F.R. Sec. 405.803(b) (1981). 23 A claimant who is dissatisfied with the initial determination has one or more opportunities to appeal. First he is entitled to a review determination, in which he may submit written evidence and arguments of fact and law to a carrier employee other than the initial decision-maker; this employee then reviews the record and the written submissions and either affirms or adjusts the initial determination. See 42 C.F.R. Secs. 405.807-405.812 (1981). If the claimant is still dissatisfied and if the amount in dispute is $100 or more, the claimant has a right to an oral hearing before a hearing officer, appointed by the carrier, who has not previously participated in the case. See 42 U.S.C. Sec. 1395u(b)(3)(C); 42 C.F.R. Secs. 405.820-405.835 (1981); Schweiker v. McClure, supra, 456 U.S. at 191, 102 S.Ct. at 1667. Unless the carrier or the hearing officer decides to reopen the proceeding, the hearing officer's decision is final and binding upon all parties to the hearing .... 42 C.F.R. Sec. 405.835. Neither the statute nor any regulation makes provision for further review of the hearing officer's decision. See United States v. Erika, Inc., 456 U.S. 201, 102 S.Ct. 1650, 72 L.Ed.2d 12 (1982). 24 The Court pointed out that there is a strong presumption in favor of the validity of congressional action, Schweiker v. McClure, supra, 456 U.S. at 200, 102 S.Ct. at 1672, and that the Court had recognized Congress's  'solicitude for fair procedure,'  id. (quoting Califano v. Yamasaki, 442 U.S. 682, 693, 99 S.Ct. 2545, 2553, 61 L.Ed.2d 176 (1973)), and it concluded that the McClure claimants had not shown that the Part B procedures were unfair. 6 25 The Court noted that the district court, in holding that due process required additional review by a government hearing officer, had analyzed the three factors made relevant by Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976), to such a due process inquiry, to wit: 26 First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail. 27 Id. at 335, 96 S.Ct. at 903. The Supreme Court found that its own analysis of the second Mathews factor led it to the opposite conclusion. Referring to the first and third Mathews factors, the Court assumed the correctness of the district court's view that the private interest in Part B payments was  'considerable,' though 'not quite as precious as the right to receive welfare or social security benefits,'  and the district court's estimate that the additional cost and inconvenience of providing administrative law judges would not be unduly burdensome. Schweiker v. McClure, supra, 456 U.S. at 198, 102 S.Ct. at 1671. As to the second Mathews factor, however, the Supreme Court rejected the district court's views (1) that the existing procedures were constitutionally inadequate because the carriers' hearing officers were not required to have law degrees or other formal training and (2) that more stringent requirements would reduce the risk of erroneous determinations. The Court stated that 28 the record does not support these conclusions. The Secretary has directed carriers to select as a hearing officer 29 an attorney or other qualified individual with the ability to conduct formal hearings and with a general understanding of medical matters and terminology. The [hearing officer] must have a thorough knowledge of the Medicare program and the statutory authority and regulations upon which it is based, as well as rulings, policy statements, and general instructions pertinent to the Medicare Bureau. App., 22, quoting Department of Health and Welfare Services, Medicare Part B Carriers Manual, p. 12-21 (emphasis added). 30 The District Court did not identify any specific deficiencies in the Secretary's selection criteria. By definition, a qualified individual already possessing ability and thorough knowledge would not require further training. The court's further general concern that hearing officers are not required to satisfy any threshold criteria overlooks the Secretary's quoted regulation. 31 Id. at 199, 102 S.Ct. at 1672 (footnote omitted). In sum, the Court concluded that the availability of appellate review by new hearing officers, together with the Secretary's criteria for the selection of these officers, provided sufficient procedural protection.
32 We see no significant difference in the Part A procedures under which Woodcrest's reimbursement claims were determined here. 7 The structure--the Secretary relying on carriers or other intermediaries to review reimbursement claims--was the same; the initial decisionmaking processes of the carriers were parallel; and the appellate procedures were not materially different. 33 Part A of the Medicare Program provides that if any group or association of providers wishes to have its Part A payments made through a public or private agency or organization such as Travelers and nominates such an agency or organization for this purpose, the Secretary is authorized to enter into an agreement providing for the determination by the agency or organization of payments to be made to the providers. 42 U.S.C. Sec. 1395h(a). Thus, just as Part B claimants request reimbursement from the carrier on the basis of their expenditures for services, Part A providers such as Woodcrest seek reimbursement from the fiscal intermediary on the basis of the cost of their services. See 42 C.F.R. Sec. 405.453(f) (1981). 34 Within a reasonable time after receipt of a Part A provider's cost report, the intermediary analyzes the report, undertakes any necessary audit of the report, and furnishes the provider and any related organization of the provider a notice that reflects the intermediary's determination of the amount of reimbursement; if the intermediary's determination differs from the claim submitted, the notice states the reasons for the difference. See id. Sec. 405.1803. Thus, just as Part B carriers determine whether claims are for reasonable amounts for medically necessary services and are otherwise covered by Part B, the Part A intermediaries determine whether and to what extent the providers' claims are for reasonable costs that are reimbursable under Part A. 35 Finally, the appeal procedure for claims of Part A providers differs from the appeal procedure for Part B beneficiaries in that the preliminary step of a written appeal to an employee of the carrier is omitted. If a Part A provider is dissatisfied with the intermediary's claim determination, and the amount in dispute is at least $1,000, the provider is entitled immediately to request a hearing before a hearing officer, or a panel of such officers. See id. Sec. 405.1811(a). These appellate officers are appointed by the intermediary; they must have had no prior role in the decision, and they must be persons knowledgeable in the field of health care reimbursement. Id. Sec. 405.1817. The appellate procedures permit the parties to conduct prehearing discovery, id. Sec. 405.1821, to call and cross-examine witnesses, id. Sec. 405.1825, and to present documentary evidence and arguments, id. Sec. 405.1823. The hearing officers are required to make a de novo determination of the claims after inquir[ing] fully into all of the matters at issue and ... receiv[ing] into evidence the testimony and any documents which are relevant and material to such matters. Id. Sec. 405.1819. The officers are empowered to call for such additional evidence as they deem relevant and material. Id. The hearing officers render a written decision, id. Sec. 405.1831, and unless they decide to reopen their determination, see id. Sec. 405.1885(a), the decision is final and binding upon all parties to the hearing .... Id. Sec. 405.1833. Neither the statute nor any regulation makes provision for further review of the hearing officer's decision as to such claims. 36 These procedures seem adequately designed to provide a fair opportunity for providers to obtain full and meaningful review of the carriers' determinations, and Schwartz has pointed out to us no respect in which they are unfair. 8 The availability of procedures for the prehearing discovery of evidence, the opportunity to present all relevant and material evidence, to cross-examine witnesses, and to present all pertinent arguments to hearing officers knowledgeable in the health care reimbursement field, together with the obligation imposed on those officers to make a full-scale inquiry and de novo determination, provide adequate safeguards against the risk that the carrier has made an erroneous initial determination. 9 We do not regard the difference between these appellate procedures and those for Part B beneficiaries as material. It is true that the availability under Part B of an initial appeal to an employee of the carrier, prior to the final appeal to a hearing officer, automatically increases the chance of a favorable decision on the claim. But this initial appeal is limited to the presentation of written materials, and its omission under Part A seems insignificant beside the expansive opportunities before the final hearing panel. We note, finally, that there was no suggestion in McClure that the Court's conclusion as to the adequacy of the Part B procedures turned upon the opportunity to make a written presentation to a carrier employee or even upon the fact that two appellate steps, rather than one, were available. In short, we conclude that the procedures followed by Travelers in determining Woodcrest's claims and the fact that there was no further review of the appellate panel's decision did not deprive Schwartz of due process.