Michigan Academy of Family Physicians v. Blue Cross & Blue Shield of Michigan

728 F.2d 326
CourtCourt of Appeals for the Sixth Circuit
DecidedFebruary 23, 1984
DocketNo. 81-1202
StatusPublished
Cited by2 cases

This text of 728 F.2d 326 (Michigan Academy of Family Physicians v. Blue Cross & Blue Shield of Michigan) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Michigan Academy of Family Physicians v. Blue Cross & Blue Shield of Michigan, 728 F.2d 326 (6th Cir. 1984).

Opinion

JOHN W. PECK, Senior Circuit Judge.

The principal question raised in this appeal is the validity of the method adopted by the Department of Health and Human Services (HHS) by which certain eligible individuals receive reimbursement for services performed by physicians and other individuals pursuant to the federal Health Insurance for the Aged and Disabled Act (Medicare), 42 U.S.C. § 1395 et seq. The Michigan Academy of Family Physicians (Michigan Academy) filed suit against Blue Cross and Blue Shield of Michigan (BC/BSM) and Richard S. Schweiker, Secretary of HHS (Secretary). The complaint alleges that the classification of certain family physicians separately from other physicians with similar qualifications, and together with non-allopathic doctors (such as chiropractors and podiatrists), contra-verted the statutory mandate of Congress as expressed in the Medicare Act. A .violation of due process and equal protection rights under the fifth amendment of the United States Constitution is also claimed. The district court, after finding jurisdiction, held that the classification violated the Medicare Act, §§ 1395u(b)(3) & 1395a, and ordered the Secretary to include all family physicians with other medical doctors. 502 F.Supp. 751 (E.D.Mich.1980). BC/BSM and the Secretary appeal.

BACKGROUND

The Medicare Act consists of two programs. Part A provides insurance for hospitalization and post-hospital services. 42 U.S.C. § 1395c-1395i-2. Part B, at issue in this case, provides insurance for supplemental medical care. 42 U.S.C. § 1395j-1395w. Under part B eligible individuals may voluntarily enroll in the health insurance program by paying a monthly premium. Members enrolled in the program may request reimbursement of eighty per cent of the reasonable charges, as defined by the insurance carrier, of the services rendered, or assign the right of reimbursement to their physician. 42 U.S.C. § 1395u(b)(3)(B)(ii).

As directed by statute, the Secretary is required to contract with an insurance intermediary to administer the Medicare part B program. 42 U.S.C. § 1395u. According to the statute, the carrier is responsible for determining reasonable fees for covered services in order to calculate the applicable reimbursement amount. Id. The Act further provides that a carrier, in calculating these reimbursements, is to consider “the customary charges for similar services generally made by the physician or other person furnishing such services, as well as the prevailing charges in the locality for similar services.” 42 U.S.C. § 1395u(b)(3). Price ceilings are placed on the calculation of the reasonable fee so that such fee is not reasonable if it exceeds either the prevailing or customary fees as calculated under the Medicare Act.1

In August, 1967, the Secretary validly promulgated 42 C.F.R. § 405.504. 32 Fed. Reg. 12600 (1967). After first restating the definition of prevailing charges, the regulation in part B permits carriers to establish separate prevailing charges for “specialists” and “non-specialists” and specifically provides that carriers can develop more than one set of prevailing charges based on fee patterns in a local area. As a practical [328]*328result of this regulation, carriers developed separate and distinct prevailing charges for different types of physicians. Under the regulation, patients receiving one type of service from a specialist are entitled to incur a higher reasonable charge, and therefore to receive a larger reimbursement than if they received the identical service from a non-specialist.

FACTS

Beginning in 1966 the Secretary contracted with BC/BSM to administer the Medicare part B program in the state of Michigan. BC/BSM, in initially determining charges, lumped physicians into three groups for the purpose of calculating prevailing charges in each geographic locality in Michigan. One group consisted exclusively of hospital internists and other hospital specialists. A second group consisted of certified specialists. The final group consisted of general practitioners and other non-specialists. Thereafter, with the passage of 42 U.S.C. § 1395x(r), including other non-allopathic doctors such as chiropractors, dentists, and podiatrists in the Medicare Program, BC/BSM restructured its prevailing charge screens, devising the present system. Group 1 consisted of hospital personnel and other internists. Group 2 consisted of specialists and board certified specialists or board eligible specialists. Group 3 included general practitioners, board eligible family physicians, and other non-physicians added in the 1972 amendment to the Medicare statute.

Under the Medicare system existing in Michigan, and in several other states, a physician determines what services he will perform for a patient. If covered by the Medicare Act, he assigns the service a procedural code or number from those denoted by the Secretary. BC/BSM, after determining what type of physician performed the service, will thereupon reimburse the patient, or his assignee, based in part on the prevailing charge screen within which the physician is classified. In practice, enroll-ees receiving services from a specialist would receive a larger reimbursement amount than if they received similar services from a general practitioner performing the same service.

The Michigan Academy, a nonprofit Michigan corporation representing family physicians throughout the state, filed suit against BC/BSM and the Secretary, arguing that the Michigan reimbursement procedure violated the Medicare statute and was unconstitutional. It alleged that the use of prevailing charge screens ignored the Medicare Act’s mandate to reimburse equal amounts for similar services performed. Further, Michigan Academy alleged, the use of prevailing charge screens had an impermissible impact on an enrollee’s choice of a physician and unduly infringed the free practice of medicine. Alternatively, Michigan Academy argued that the procedure denied its members equal protection and due process under the fifth amendment of the United States Constitution since 42 C.F.R. § 405.504 irrationally classified them together with non-allopathic doctors rather than with other specialists with whom they shared similar qualifications and talents.

At trial no witness for Michigan Academy or BC/BSM could explain why family physicians were separately categorized from all other medical specialists. BC/BSM, in addition, indicated that its classifications were not based on any particular statistical data but that they had apparently evolved over the years.

At the close of all the evidence, the district judge held that § 405.504 violated the Medicare Act.

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Bluebook (online)
728 F.2d 326, Counsel Stack Legal Research, https://law.counselstack.com/opinion/michigan-academy-of-family-physicians-v-blue-cross-blue-shield-of-ca6-1984.