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American Society of Cataract and Refractive Surgery v. Thompson

January 28, 2002

AMERICAN SOCIETY OF CATARACT AND REFRACTIVE SURGERY; AMERICAN ACADEMY OF ORTHOPEDIC SURGEONS; AMERICAN ACADEMY OF OPHTHALMOLOGY, ET AL., PLAINTIFFS-APPELLANTS,
v.
TOMMY THOMPSON, SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES AND THOMAS A. SCULLY, ADMINISTRATOR OF THE CENTERS FOR MEDICARE AND MEDICAID SERVICES*FN1, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 98 C 7061--Ann Claire Williams, Judge.

Before Manion, Kanne, and Evans, Circuit Judges.

The opinion of the court was delivered by: Kanne, Circuit Judge.

Argued November 2, 2000

Eleven national medical societies and associations representing physicians of different spe cialties (collectively "petitioners") appeal the district court's dismissal of their statutory and constitutional challenge to a regulation promulgated by the Secretary of the Department of Health and Human Services ("Secretary") implementing a new system for calculating a component of the Medicare physician fee schedule for lack of subject matter jurisdiction. Petitioners contend that their claim is not precluded from judicial review, and that the Secretary's regulation is directly contrary to the transition formula Congress established for calculating the relevant component. Because 42 U.S.C. sec. 1395w-4(i)(1)(B) bars judicial review of petitioners' claim, we affirm the district court.

I. History

Medicare, the federal health insurance program for the aged and disabled has three parts: Part A--Hospital Insurance Benefits; Part B--Supplemental Medical Insurance Benefits; and, Part C--Miscellaneous Provisions. See 42 U.S.C. sec. 1395 et seq. This case deals with Part B, which is a voluntary supplemental insurance program that covers payment for physicians' services and other healthcare services to aged and disabled individuals who enroll in the program. See 42 U.S.C. sec. 1395j-1395w-4. Physicians who participate in the Medicare program are reimbursed at a rate outlined in a physicians' fee schedule. Payment amounts under the fee schedule are calculated by multiplying (1) the relative value of a service; (2) the conversion factor for the particular year; and (3) the geographic adjustment factor applicable to the locality in which the service was provided. See 42 U.S.C. sec. 1395w-4(b)(1). The first component, the relative value of a service, is calculated by combining three subcomponents each of which is measured in terms of relative value units ("RVUs"). The three subcomponents are (1) the work component ("Work RVUs"); (2) the practice expense component ("PE-RVUs"); and (3) the malpractice component ("Malpractice RVUs"). See 42 U.S.C. sec.sec. 1395w-4(c)(2)(A)(i) & (c)(2)(C)(i)-(iii).

This case focuses specifically on the determination of PE-RVUs. In 1994, Congress directed the Secretary to develop a resource-based system for calculating PE-RVUs. See Social Security Act Amendments of 1994, Pub. L. No. 103-432, sec. 121(a)(1), 108 Stat. 4398, 4408 (1994) (codified at 42 U.S.C. sec. 1395w-4(c)(2)). Historically, PE-RVUs were "charged-based," meaning that they were predominately based upon "historical pattern[s] of charges billed by [physicians]." H. R. Rep. No. 101-247, at 338 (1989), reprinted in 1989 U.S.C.C.A.N. 1906, 2064. A "resource-based" system would be based on "the relative practice expense resources involved in furnishing the service." See 42 U.S.C. sec. 1395w-4(c)(2)(C)(ii).

In 1997, the Secretary proposed a new system for determining PE-RVUs. She qualified her proposal, however, by acknowledging that the new system warranted a transition period that should be gradually implemented. See 62 Fed. Reg. 33158, 33194 (June 18, 1997) (to be codified at 42 C.F.R. pts. 400, 405, 410, 414). Shortly thereafter, Congress passed the Balanced Budget Act of 1997, Pub. L. No. 105-33, 111 Stat. 251 (1997) (codified at 42 U.S.C. sec. 1395w-4). In this legislation, Congress provided that the new system for calculating PE-RVUs would be phased in over a four-year period beginning in 1999:

The Secretary shall determine a number of practice expense relative value units for the service for years before 1999 equal to the product of--

(I) the base allowed charges (as defined in subparagraph (D)) for the service, and

(II) the practice expense percentage for the service . . . . For 1999, such number of units shall be determined based 75 percent on such product and based 25 percent on the relative practice expense resources involved in furnishing the service. For 2000, such number of units shall be determined based 50 percent on such product and based 50 percent on such relative practice expense resources. For 2001, such number of units shall be determined based 25 percent on such product and based 75 percent on such relative practice expense resources. For a subsequent year, such number of units shall be determined based entirely on such relative practice expense resources. 42 U.S.C. sec. 1395w-4(c)(2)(C)(ii).

The above-cited language is the formula prescribed by Congress to be used during the four-year transition period to resource-based PE-RVUs.

In June 1998, the Secretary published her proposed rule for implementing the new resource-based system pursuant to Congress's directive in the Balanced Budget Act of 1997. See 63 Fed. Reg. 30818 (June 5, 1998). The Secretary indi cated that she would use the 1998 PE-RVUs, as adjusted, in implementing Congress's four-year transition. See id. at 30839. Thus, "the final rule" published in November 1998 explained:

For services furnished beginning January 1, 1999, the practice expense RVUs are based on 75 percent of the practice expense RVUs applicable to services furnished in 1998 and 25 percent of the relative practice expense resources involved in furnishing the service. For services furnished in 2000, the practice expense RVUs are based on 50 percent of the practice expense RVUs applicable to services furnished in 1998 and 50 percent of the relative practice expense resources involved in furnishing the service. For services furnished in 2001, the practice expense RVUs are based on 25 percent of the practice expense RVUs applicable to services furnished in 1998 and 75 percent of the relative practice expense resources involved in furnishing the service. For services furnished in 2002 and ...


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