Blue Bell Medical, Inc. v. Pennsylvania Blue Shield

775 F. Supp. 829, 1991 U.S. Dist. LEXIS 14725, 1991 WL 208386
CourtDistrict Court, M.D. Pennsylvania
DecidedOctober 15, 1991
DocketCiv. A. No. 1:CV-91-1180
StatusPublished
Cited by1 cases

This text of 775 F. Supp. 829 (Blue Bell Medical, Inc. v. Pennsylvania Blue Shield) is published on Counsel Stack Legal Research, covering District Court, M.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Blue Bell Medical, Inc. v. Pennsylvania Blue Shield, 775 F. Supp. 829, 1991 U.S. Dist. LEXIS 14725, 1991 WL 208386 (M.D. Pa. 1991).

Opinion

MEMORANDUM

CALDWELL, District Judge.

I. Introduction.

We are currently considering the plaintiffs’ petition for a writ of mandamus and the defendants’ motion to dismiss or, in the alternative, for summary judgment.

The fifteen plaintiffs are providers of services within the meaning of Part B of the Medicare program. See 42 U.S.C. § 1395j-1395w. They filed this action to contest a recent unilateral decision by defendant, Pennsylvania Blue Shield (PBS), as a carrier for the program, to reduce its reimbursement for “primary surgical dressing kits” from $30.00 to $8.00. They alleged that this action violated their right to due process because it was contrary to 42 C.F.R. § 405.502(g), requiring a notice and comment period for certain rate changes. The complaint also set forth a second due process claim based upon the retroactive effect of the notice upon the price for kits already supplied.

In material part, the plaintiffs sought the following relief: (1) an injunction against any change in the payments for surgical dressing kits until the defendants had complied with the provisions of 42 C.F.R. § 405.502(g)(3)(ii) and, in particular, an injunction against the change announced by PBS on August 19, 1991; and (2) an order requiring that plaintiffs’ claims be processed at the $30.00 rate and reimbursement for those processed at the new rate.

A motion for a preliminary injunction accompanied the complaint and a hearing was held on September 16, 1991. At the hearing, the plaintiffs withdrew their request for an injunction but argued that they were entitled to a writ of mandamus pursuant to 28 U.S.C. § 1361, ordering PBS to follow the procedure in section 405.-502(g). Thereafter, the defendants, PBS and Louis W. Sullivan, M.D., the Secretary of Health and Human Services, filed their [831]*831motion.1 The parties have briefed the issues and the motions are ready for disposition.

II. Background.

We take the following facts to be undisputed based upon the complaint, the record evidence, and the parties’ briefs.

Part B of the Medicare program deals with medical services and supplies. In the parlance of the statute, PBS is a “carrier” for the Secretary in the administration of Part B of the Medicare program. 42 U.S.C. § 1395u. As a carrier, PBS is responsible for determining the “reasonable charge” for medical services covered by Medicare, including the charge for medical supplies such as surgical dressing kits. Id.; 42 C.F.R. § 405.501(d)(1990). It is also responsible for reimbursing suppliers. By law, Medicare generally pays no more than 80% of the “reasonable charge” for services and supplies. 42 U.S.C. §§ 1395k(a)(l), 13951(a)(1) and 1395x(s).

Prior to August 12, 1991, PBS reimbursed suppliers for surgical dressing kits at the rate of $30.00 per kit. On August 19, 1991, it announced to supplier associations but not to suppliers directly, that the rate would be reduced to $8.00 per kit, retroactive to August 12, 1991, even for reimbursements already awaiting processing. Subsequent to the hearing in this matter, in a notice, dated September 20, 1991, it purportedly notified suppliers of what it deemed to be the appropriate content of each kit. The notice further stated: “If a kit containing items beyond those listed above is furnished, those items should be billed in addition to the standard kit and accompanied by documentation substantiating their medical need.” (defendants’ motion, exhibit 3). This notice was consistent with representations made at the hearing that the $8.00 rate was not a fixed one and that suppliers could be reimbursed for kits actually worth more than that. It was, however, the earlier, unilateral decision to reduce the rate that prompted the plaintiffs to file this lawsuit. As noted, they believed it violated their right to notice and a period of time to comment on the proposed change before the rate was altered.

III. Discussion.

A. Jurisdiction.

The defendants argue that we lack jurisdiction to entertain this lawsuit. In their view, the plaintiffs’ complaint presents claims arising under the Medicare Act2 which must first be presented to the carrier and the agency before judicial review is available. A direct lawsuit like the present one has not been authorized by Congress. Among other cases, defendants cite as their principal support Heckler v. Ringer, 466 U.S. 602, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984) and Weinberger v. Salfi, 422 U.S. 749, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975). Plaintiffs counter with Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 106 S.Ct. 2133, 90 L.Ed.2d 623 (1986) as support for the exercise of our jurisdiction. In turn, defendants assert that Michigan Academy is no longer good law in the context of challenges involving Part B of the Medicare program in light of McNary v. Haitian Refugee Center, Inc., — U.S. -, 111 S.Ct. 888, 112 L.Ed.2d 1005 (1991).

We have carefully examined the cases cited by the parties and we conclude that we have jurisdiction to entertain the complaint. Discussion of each decision is not necessary. The Supreme Court cases cited by the parties provide the necessary guidance. They are all consistent in their legal analysis and differ only because they present different facts. Contrary to defendants’ position, McNary does not diminish the authority of Michigan Academy and, in fact, provides further support for the conclusion that we have jurisdiction here.

[832]*832The jurisdictional issue arises because the Medicare Act incorporates by way of 42 U.S.C. §§ 1395ff and 1395Ü, the method of administrative and judicial review found in 42 U.S.C. §§ 405(h) and 405(g). Section 1395Ü provides that section 405(h) shall apply to Medicare determinations. Section 405(h) provides in full that (emphasis added):

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Cite This Page — Counsel Stack

Bluebook (online)
775 F. Supp. 829, 1991 U.S. Dist. LEXIS 14725, 1991 WL 208386, Counsel Stack Legal Research, https://law.counselstack.com/opinion/blue-bell-medical-inc-v-pennsylvania-blue-shield-pamd-1991.