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Regulatory Burdens

American Bar Association v. Federal Trade Commission

636 F.3d 641 (D.C. Cir. 2011)

Outcome:    Favorable

Issue

The issue in this case is whether the Federal Trade Commission (FTC) “Red Flags Rule” (identity theft) regulations should apply to physicians.

AMA interest

The AMA opposes government regulations that burden physicians but do not improve health care.

Case summary

Pursuant to the Consumer Credit Protection Act, the FTC and several other federal agencies promulgated regulations that require “creditors” to make systematic efforts to search for “red flags” that would indicate their customers are being victimized and then take appropriate steps to prevent further identity theft.  The FTC announced that its red flags regulations apply to any person who regularly provides services to consumers without requiring full payment for those services before or at the time they are rendered.  Since many attorneys defer payment until after their services have been rendered, this would mean, according to the FTC, that these attorneys are creditors and must comply with the FTC regulations.

The American Bar Association (ABA) sued the FTC to prevent enforcement of the Red Flags Rule regulation against attorneys, to the extent such enforcement would have been premised on the attorneys’ practice of law.  The lawsuit argued that attorneys should not be deemed creditors under the federal statutes simply because they are not paid in full at the time they render their services.  With rare exceptions, attorneys are not in the business of extending credit to their clients, and nothing would be gained by requiring them to incur the expense and inconvenience of complying with these bureaucratic formalities. The United States District Court for the District of Columbia entered summary judgment for the ABA, and the FTC appealed.

On September 7, 2010, the AMA and the Medical Society of the District of Columbia, acting for themselves and the Litigation Center, along with the American Osteopathic Association, several specialty medical societies, and several osteopathic societies, submitted an amicus brief in the District of Columbia Circuit to support the ABA.

In December, 2010, Congress enacted the Red Flag Program Clarification Act.  This new law clarified that professionals, such as physicians and lawyers, would not be subject to the Red Flags Rule merely because they may not require payment in full at the time they render their services.  On March 4, 2011, the court of appeals held that the new law mooted the lawsuit, and it ordered that the trial court order of summary judgment be vacated and the case be dismissed.

Litigation Center involvement

The Litigation Center filed an amicus brief in support of the ABA.

United States Court of Appeals for the District of Columbia Circuit brief

American Medical Association v. Federal Trade Commission (D. D.C.)

Outcome:    Very favorable

Issue

The issue in this case was whether the Federal Trade Commission (FTC) “Red Flags Rule” (identity theft) regulations should apply to physicians.

AMA interest

The AMA opposes government regulations that burden physicians but do not lead to an improvement in health care.

Case summary

Pursuant to the Consumer Credit Protection Act (“CCPA”), the FTC and several other federal agencies promulgated regulations that required “creditors” to make systematic efforts to search for “red flags” that would indicate their customers are being victimized and then take appropriate steps to prevent further identity theft.  The FTC announced that its Red Flags Rule regulations applied to any person who regularly provided services to consumers without requiring full payment for those services before or at the time they were rendered.  Since most physicians defer payment until after their services have been rendered, this would mean, according to the FTC, that most physicians would be deemed creditors and would comply with the FTC regulations.

On May 21, 2010, the AMA, along with the Medical Society of the District of Columbia and the American Osteopathic Association (AOA), sued the FTC to prevent enforcement of the Red Flags Rule regulation.  The lawsuit argued that, simply because they were not paid in full at the time they rendered their services, physicians should not be deemed creditors under the CCPA.  With rare exceptions, physicians are not in the business of extending credit to patients, and nothing would be gained by requiring them to incur the expense and inconvenience of complying with the FTC’s bureaucratic formalities.

After the suit was filed, Congress enacted the Red Flag Program Clarification Act.  This new law clarified that physicians and other professionals would not be subject to the Red Flags Rule merely because they may not require payment in full at the time they render their services.  Because the new law invalidated the FTC regulations that were at issue in this case, the court, pursuant to the parties' stipulation, dismissed the case.

AMA/Litigation Center involvement

The AMA and the Litigation Center were named plaintiffs.

Palomar Medical Center v. Sebelius, 693 F.3d 1151 (9th Cir. 2012)

Also under Medicare, Payment Issues for Physicians

Outcome:     Very unfavorable

Issue

The issue in this case was whether regulations of the United States Department of Health and Human Services (HHS) that govern reopening decisions under the Medicare Recovery Audit Contractor (RAC) Program were valid.

AMA interest

The AMA opposes RAC Program physician audits.

Case summary

A patient had his hip removed and replaced with a prosthetic device at Palomar Medical Center.  Pursuant to his physician’s direction, the patient was admitted to Palomar’s inpatient rehabilitation unit.  Palomar then submitted a Medicare claim for the rehabilitation services rendered to the patient, which was paid. 

More than a year after the claim had been paid, HHS, pursuant to the Medicare Recovery Audit Contractor (RAC) Program, reopened the claim and determined that Palomar had not been entitled to payment for the patient’s rehabilitation services, as these services could have been rendered at a skilled nursing facility (SNF), instead of the hospital rehabilitation unit.

Palomar appealed the RAC contractor’s actions through several administrative levels.  It contended that, under the Medicare regulations, after one year following payment a claim cannot be reopened except for good cause and good cause did not exist here.  One of the administrative bodies, an administrative law judge (ALJ), agreed with Palomar that the failure to show good cause voided the reopening.  However, a higher administrative review body (the Medicare Appeals Council) found that the ALJ had been unauthorized to question the failure to show good cause.  Therefore, HHS ultimately concluded that the overpayment determination had been correct.  Since Palomar remained a participant in the Medicare program, HHS recouped the money required to restore the alleged overpayment.

Palomar then sued HHS in the United States District Court for the Southern District of California, contending that the reopening had been procedurally defective because good cause had not been shown for reopening the claim.  Palomar also contended that HHS had deprived it of due process by failing to provide a forum in which it could contest the legality of the reopening.  The parties made cross-motions for summary judgment, which were referred to a federal magistrate judge, who recommended an order in favor of HHS.  The trial judge upheld the magistrate’s recommendation in its entirety, and summary judgment was entered in favor of HHS. 

Palomar appealed to the United States Court of Appeals for the Ninth Circuit.  Oral argument was heard on March 7, 2012.

On March 14, 2012, the Ninth Circuit called for additional amicus briefs, which are to address, primarily, the question of whether the federal courts have jurisdiction to enforce the agency’s compliance with the good cause standard for reopening.

On August 22, 2012, the Ninth Circuit found that HHS had interpreted its regulations correctly and affirmed the district court decision in favor of HHS.  Palomar petitioned for rehearing en banc, but that motion was denied on January 29, 2013.

Litigation Center involvement

The Litigation Center, along with the California Medical Association, filed an amicus curiae brief in support of Palomar.

The Litigation Center, along with the nine state medical societies in the Ninth Circuit, also filed a second amicus brief, responding to the court's request.

The Litigation Center, along with the nine state medical societies in the Ninth Circuit, filed a third amicus brief, to support the petition for rehearing.

United States Court of Appeals for the Ninth Circuit first amicus brief.

United States Court of Appeals for the Ninth Circuit second amicus brief

United States Court of Appeals for the Ninth Circuit third amicus brief

South Carolina Medical Association v. Thompson, 327 F.3d 346 (4th Cir. 2003)

Outcome:     Unfavorable

Issue

The issue in this case was whether the privacy regulations promulgated under the Health Insurance Portability and Accountability Act (“HIPAA”) were valid.

AMA interest

The AMA promotes cooperation within the Federation of Medicine.

Case summary

The South Carolina Medical Association, the Louisiana State Medical Society, the Medical Association of the State of Alabama, the Connecticut State Medical Society, six physicians, and an independent practice association of physicians sued the United States Department of Health and Human Services (HHS) for a declaration that the HHS privacy regulations promulgated under HIPAA were invalid. The suit alleged that the statute authorizing the regulations was unconstitutional, in that it unlawfully delegated legislative authority to the executive branch of government, and was so vaguely worded that it failed to provide an intelligible standard for its compliance. The suit also alleged that the statute covered only electronic communications, whereas the regulations covered all forms of communication. Therefore, the suit claimed, even if the enabling statute were valid, the regulations, as written, exceeded the authority that Congress had delegated to HHS.

The United States District Court dismissed the lawsuit. The court acknowledged that the plaintiffs had raised several probing questions, which merited careful analysis. However, the court believed that any ambiguities in the law or the HHS regulations should be resolved in favor of their validity. Although the district court found drafting gaps in the HIPAA language, it ultimately found that the law met constitutional standards. By similar reasoning, it found the HHS regulations valid.

The plaintiffs appealed to the United States Court of Appeals for the Fourth Circuit, but the Fourth Circuit affirmed the District Court's decision. The plaintiffs then petitioned the United States Supreme Court for further review, which request the Court denied.

Litigation Center involvement

The Litigation Center contributed toward the plaintiffs’ litigation expenses.

Washington Chapter of the American College of Emergency Physicians v. Washington HCA

(Thurston Cnty., Wash., Super. Ct.)

Also under Medicaid, Payment issues for physicians

Outcome:    Very favorable

Issue

The issue in this case is whether regulations imposed on emergency physicians who seek payment for treating Medicaid patients are valid.

AMA interest

The AMA believes that Medicaid funding should be sufficient to enable the program to serve its purpose as a safety net for the nation’s most vulnerable populations.

Case summary

As part of its 2011-2013 budget, the Washington legislature directed the Washington State Health Care Authority (HCA) to impose a three-visit-per-year limit on non-emergent emergency department visits by Medicaid patients.  The legislature also directed HCA to “collaborate closely with the Washington state hospital and medical associations in identification of the diagnostic codes … that will be used to determine whether an emergency room visit is a nonemergency condition.”

HCA asserted that, as a result of meetings with hospital and physician groups, it developed a list of services for non-emergency conditions.  The physicians and hospitals, however, denied that the meetings were conducted in good faith and contended that HCA unilaterally and somewhat arbitrarily (and erroneously) decided which codes could be deemed to indicate the absence of an emergency.  HCA then posted approximately 700 ICD-9 codes on its website for procedures which it considered to be of a non-emergency nature.

HCA notified all Washington Medicaid recipients that HCA would only pay for three non-emergency visits to the emergency room per recipient per year.  HCA then adopted an emergency regulation, which, with certain exceptions, limited Medicaid coverage to “a maximum of three emergency room visits that do not meet the definition of emergency services per client, per state fiscal year.”  The revised regulation also provided that HCA “will retroactively recoup payments from all of the billing providers, [including] … professional … fees.”

The Washington Chapter of the American College of Emergency Physicians sued HCA, and the Washington State Medical Association (WSMA) later intervened as an additional plaintiff.  The suit claimed that HCA’s adoption of the non-emergency ICD-9 codes was improper because (1) HCA did not meet the requirements for adopting an emergency regulation, (2) HCA did not collaborate sufficiently with the state hospital and medical associations before publishing the list on non-reimbursable ICD-9 codes, (3) HCA violated various state and federal laws governing Medicaid programs, (4) the HCA policy violated the Supremacy Clause of the United States Constitution, and (5) “the list of ineligible diagnostic … include[d] numerous diagnoses that represent true emergencies.”

On November 11, 2011, the court found that HCA had violated the required rule making procedures in adopting its emergency regulation.  It therefore held the regulation invalid.

Subsequently, the parties negotiated a settlement.

Litigation Center involvement

The Litigation Center contributed to the WSMA legal expenses.