October 1999 Bulletin

Court says 'clarifications' free private contracting

Physicians don't have to leave Medicare to give care

The U.S. Court of Appeals for the District of Columbia ruled in July that "clarifications" made by the Secretary of the Department of Health and Human Services meant there is no prohibition against physicians contracting privately with patients for services which would not be paid for by Medicare.

This would apply irrespective of whether it is categorically noncovered (e.g., plastic surgery); not "reasonable and necessary" in a particular case; or the Secretary never considers it to be "reasonable and necessary" (e.g., screening laboratory tests), said Kent Masterson Brown, an attorney who represented the United Seniors Association which filed the law suit.

The ruling means a physician need not opt out of Medicare for two years if he or she did accept payment for such services, Brown said.

The seniors organization filed suit in 1997 in U.S. District Court for the District of Columbia, seeking a declaratory judgment that section 4507 of the Balanced Budget Act of 1997 unconstitutionally limited Medicare beneficiaries' ability to spend their own money to obtain health care under private contract with their doctors.

Brown said United Seniors asserted that under the system, a doctor could not freely give his or her Medicare patients health care services if her or she believed the Secretary would, or even might, determine they were not "reasonable or necessary" even though the doctor felt, under his or her professional standards of care, that those services were reasonable and necessary to the patent's health and well-being.

If the Secretary found that a doctor had provided a "pattern" of services that she determined were not "reasonable or necessary," the doctor could have been forced to pay a monetary penalties or be cited for fraud, Brown said.

Robert P. Nirschl, MD, orthopaedic surgeon, was one of five physicians who testified for the plaintiffs that the HHS policy was denying care because physicians were afraid to provide care, Brown said.

The District Court declined to rule on the constitutionality of section 4507 and United Seniors filed an appeal. Brown said the Court of Appeals declined to rule on the constitutionality of the section because it found that the policies of the Secretary with regard to Section 4507 had changed to such an extent during the course of the case, that they no longer prohibited Medicare beneficiaries from contracting privately to obtain services for which Medicare would not pay.

Brown said, "the court reached its result by relying on the Secretary's restatements and 'clarifications' that doctors may use the Advance Beneficiary Notice (ABN) procedure in the Medicare Act to provide any service for which Medicare might not pay. Under that process, if a doctor believes that Medicare might not pay for a service, he or she can give the patient an ABN, which notifies the patient in writing that Medicare may not or would not pay and in which the patient agrees to pay if and when Medicare doesn't. The Court sided with the Secretary that doctors can provide these services only "in accordance with accepted standards of medical care" and cannot use ABN's process to bill patients for "unwarranted" procedures.

If the doctor believes Medicare would not pay for the service, Brown said the physician does not need to follow the ABN process, but can contract directly with the patient because the court has determined Section 4507 does not apply where Medicare would not pay for the service.


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