Judicial Review Upheld
ACR Bulletin
November 1997
Legal
Appellate Court Reaffirms Judicial Review Doctrine for Medicare Part B Claims
In an opinion issued Aug. 7, 1997, the federal 11th Circuit Court of Appeals reaffirmed a traditional legal doctrine governing judicial review of Medicare claims. In American Academy of Dermatology, et al. v. Shalala (11th Cir. 1997), the appellate court held that physicians and patients must present their claims for Medicare Part B benefits to the Secretary of Health and Human Services (HHS) and "exhaust" administrative remedies before a court may use jurisdiction to review a carrier's Local Medical Review Policy (LMRP).
The American Academy of Dermatology filed a lawsuit in a Florida federal court and argued that the carrier's LMRP limiting coverage for treatment of premalignant skin lesions had been unlawfully promulgated. Specifically, the Academy alleged that the LMRP conflicted with the Medicare Act and the Medicare Carriers Manual by denying coverage for the medically necessary removal or destruction of such lesions. The district court dismissed its suit for lack of subject matter jurisdiction, ruling that the Academy had to present its claims to HHS and exhaust its administrative remedies before a court could exercise such jurisdiction.
Under the Medicare Act, courts may review Medicare benefit determinations only after HHS renders a final decision on a claim. The final decision occurs when two elements are met: presentment, whereby a benefits claim must be presented to HHS, and exhaustion, whereby a claimant must completely pursue all available administrative remedies before seeking judicial review. The circuit court noted that according to the Supreme Court's Heckler v. Ringer decision, these two requirements were a jurisdictional prerequisite to judicial review of Medicare Act claims that were "essentially" claims for benefits. The appellate court found that the Academy's claims fell within those requirements and ruled that the Academy prematurely sought relief in the courts that would preclude HHS from refusing to reimburse claims for lesion removals not covered under the carrier's policy. The Academy asserted that another Supreme Court opinion, Bowen v. Michigan Academy of Family Physicians, governed this case. In Michigan Academy, the Court held that a challenge to Medicare benefit determinations need not be presented to and exhausted at the administrative level, as did challenges to the benefit amounts. However, Congress changed the Medicare Act following that decision to establish the same requirements for review of Part B claims as for review of Part A claims. This has eliminated the amount/methodology distinction. The circuit court also emphasized that even if different rules still existed for reviewing Part B claims, determinations about whether particular lesion removals were reimbursable did not involve a challenge to the validity of HHS regulations that would allow the Academy to circumvent administrative review.
The appellate court also rejected the argument that the Academy's claims would be unreviewable if exhaustion were required because HHS refused to provide the Academy with guidance. The court deemed it "quite possible" that when presented with claims, HHS would not deny them. If HHS did deny the claims, the court stated that the Academy could obtain judicial review of the carrier's LMRP. Although Part B claims must undergo administrative review, the court indicated that methodology disputes are not relegated to carriers but only "are fed through the administrative-judicial system as parts of disputes over actual amounts." Counsel for one of the dermatology societies indicated that every carrier advisory committee member opposed the challenged LMRP.
Ultimately this case symbolizes a conflict between necessary treatments and current HCFA reimbursement policy that affects coverage of those treatments. The circuit court reaffirmed that physicians and patients who contest Medicare benefit decisions must work their way up the chain of HCFA's administrative remedies before they can get to the courthouse steps. Radiologists must press Part B benefit claims or challenges of controversial carrier medical policies through the very system that adjudicates such claims to have the right to judicial review.