[ PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
NOVEMBER 3, 2006
No. 05-16935 THOMAS K. KAHN
________________________ CLERK
D. C. Docket No. 04-02610-CV-T-26EAJ
GULFCOAST MEDICAL SUPPLY, INC.,
Plaintiff-Appellant,
versus
SECRETARY, DEPARTMENT OF HEALTH
AND HUMAN SERVICES,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Middle District of Florida
_________________________
(November 3, 2006)
Before BLACK and HULL, Circuit Judges, and RYSKAMP,* District Judge.
PER CURIAM:
*
Honorable Kenneth L. Ryskamp, United States District Judge for the Southern District
of Florida, sitting by designation.
Appellant Gulfcoast Medical Supply (Gulfcoast) is a Florida-based supplier
of durable medical equipment (DME), including motorized wheelchairs. Appellee,
the Secretary of Health and Human Services (Secretary), administers the federal
Medicare program. The Secretary determined that Medicare had overpaid
Gulfcoast for wheelchairs Gulfcoast supplied to Medicare beneficiaries between
September 8, 2001, and February 14, 2002. Gulfcoast sought judicial review of the
Secretary’s decision in the United States District Court for the Middle District of
Florida, and the district court affirmed.
This appeal presents an issue of first impression in this and all circuit courts:
whether, under Part B of the Medicare Act, a DME supplier unequivocally
establishes that such equipment is medically “reasonable and necessary” (and
therefore covered by Part B of the Act) by submitting a “certificate of medical
necessity,” or whether the Secretary may require the supplier to submit additional
evidence of medical necessity.1 We find the Secretary has discretion to require
additional submissions, and we therefore affirm.
I. BACKGROUND
1
We note that two district courts have addressed the issue: MacKenzie Medical Supply,
Inc. v. Leavitt, 419 F. Supp. 2d 766 (D. Md. 2006) and Maximum Comfort, Inc. v. Thompson,
323 F. Supp. 2d 1060 (E.D. Cal. 2004).
2
Part B of the Medicare Act is a federally subsidized, voluntary enrollment
health insurance program. 42 U.S.C. §§ 395j to 1395w-4. Part B pays a
substantial portion of the health costs incurred by those enrolled in the program,
including the costs of DME such as wheelchairs. 42 U.S.C. § 1395x(n); 42 C.F.R.
§ 410.38(a)-(c). The program is administered by the Center for Medicare and
Medicaid Services (CMS), a division supervised by the Secretary. See generally
United States v. R&F Properties of Lake County, Inc., 433 F.3d 1349, 1351 (11th
Cir. 2005).
Part B coverage extends only to those medical services that are medically
“reasonable and necessary” for the beneficiary. 42 U.S.C. § 1395y(a); 42 C.F.R.
§ 411.15(k)(1). In order to administer, validate, and pay claims made under Part B,
CMS contracts with regional, private insurance carriers who act as claims
processors. 42 U.S.C. § 1395u; see R&F Properties, 433 F.3d at 1351. Upon
receipt of a claim for payment, the carrier decides whether the claimed services
“were medically necessary, whether the charges are reasonable, and whether the
claim is otherwise covered by Part B.” Schweiker v. McClure, 456 U.S. 188, 191,
102 S. Ct. 1665, 1667 (1982); see 42 U.S.C. §§ 1395l, 1395y(a); 42 C.F.R.
§ 405.803. Among other requirements, Medicare will not pay a claim unless a
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physician certifies that the medical services were medically required. 42 U.S.C. § 1395n(a)(2)(B)
To facilitate claims processing, the Medicare Act permits DME suppliers to
distribute to physicians a “certificate of medical necessity” (CMN). 42 U.S.C.
§ 1395m(j)(2)(A). The Medicare Act defines the CMN as “a form or other
document containing information required by the carrier to be submitted to show
that an item is [medically] reasonable and necessary. . . . ” 42 U.S.C.
§ 1395m(j)(2)(B). Pursuant to the Medicare Act, suppliers of medical services are
permitted to fill in certain portions of the CMN in advance to make it easier for
physicians to complete the remainder of the CMN. Specifically, suppliers are
permitted to include on the CMN (1) identifying information about the supplier
and the beneficiary, (2) a description and product code for the medical equipment
supplied, and (3) other administrative information not related to the beneficiary’s
medical condition. 42 U.S.C. § 1395m(j)(2)(A). The partially completed form
reduces the administrative burden on physicians, who need only supply the
medical information on the CMN.
For reasons of administrative efficiency, carriers typically authorize payment
on claims immediately upon receipt of the claims, so long as the claims do not
contain glaring irregularities. Later, carriers conduct post-payment audits to verify
that the payments were proper. See 42 U.S.C. § 1395u; 42 C.F.R. § 421.200(a)(2).
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When the carrier discovers that an overpayment has occurred, the carrier may
suspend or recoup payment. 42 C.F.R. § 405.371(a).
A supplier dissatisfied with the carrier’s resolution of a claim may appeal the
decision through a designated administrative appeals process. 42 U.S.C.
§ 1395ff(b)(1)(A) (incorporating by reference the appeals process under the Social
Security Act, 42 U.S.C. § 405(b)); see also 42 C.F.R. § 405.801. After exhausting
this administrative process, the supplier may seek judicial review by a federal
district court. 42 U.S.C. § 1395ff(b)(1)(A) (incorporating by reference the judicial
review available under the Social Security Act, 42 U.S.C. § 405(g)).
II. FACTS
Gulfcoast is a Florida-based supplier of DME, including motorized
wheelchairs. At all relevant times, the Medicare carrier administering Part B
claims in Gulfcoast’s region was Palmetto Government Benefits Administrators
(Palmetto).
After receiving consumer complaints and suspicious results from statistical
analyses of Gulfcoast’s claims, Palmetto decided to audit Gulfcoast. In June 2002,
Palmetto surveyed 30 randomly selected beneficiaries out of the 102 beneficiaries
who received a certain type of power wheelchair from Gulfcoast between
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September 8, 2001, and February 14, 2002. Palmetto requested medical records of
all 30 beneficiaries and interviewed 20 of the beneficiaries (or their caregivers).
Based on its audit, Palmetto determined that a number of the patients for
whom Gulfcoast had submitted claims for Medicare reimbursement of DME did
not meet the necessary criteria. For example, Palmetto found that services for 22
of the beneficiaries were not supported by documents in their medical records and
that at least half of those whose records were examined did not need a power
wheelchair. Palmetto ultimately concluded that Gulfcoast had been overpaid by
$280,573.68. A Medicare fair hearing officer affirmed the overpayment
assessment.
Gulfcoast appealed the carrier’s decision before an administrative law judge
(ALJ). Gulfcoast argued that because it submitted a CMN signed by a physician
for each of the challenged claims, Palmetto lacked discretion to reject those claims
on the basis of additional evidence. The ALJ rejected Gulfcoast’s argument and
found that the 30 audited claims reflected a “pattern of erroneous billing.” The
ALJ determined that overpayments were correctly assessed in 17 cases, but
incorrectly in 6 others,2 and therefore ordered that the total be recalculated by the
2
Of the 30 claims audited by Palmetto, 6 were initially allowed by Palmetto. Therefore,
before the ALJ for consideration were 24 claims. The ALJ dismissed one claim and adjudicated
the remaining 23 claims.
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carrier. Gulfcoast appealed to the United States District Court for the Middle
District of Florida, which affirmed.
III. DISCUSSION
The facts established by the administrative record and outlined above are not
in dispute, and the sole issue before us is a question of law.3 Gulfcoast argues that
as a matter of statutory construction, Part B of the Medicare Act does not give
carriers or the Secretary discretion to require a supplier to submit additional
medical documentation beyond the CMN to prove medical reasonableness and
necessity. Rather, according to Gulfcoast, the CMN signed by a physician is
legally sufficient to validate a claim under Plan B. Thus, because Gulfcoast
submitted a signed CMN for each of the disputed claims, Gulfcoast contends that
the Secretary lacked discretion to reject those claims on the basis of the additional
records procured and interviews conducted by the carrier, Palmetto.
Gulfcoast’s argument relies almost entirely on the Medicare Act’s definition
of a “certificate of medical necessity” as “a form or other document containing
information required by the carrier to be submitted to show that an item is
3
Pursuant to 42 U.S.C. § 405(g), judicial review of the Secretary’s decision regarding a
claim for Medicare benefits is limited to “whether there is substantial evidence to support the
findings of the . . . [Secretary], and whether the correct legal standards were applied.” Wilson v.
Barnhart, 284 F.3d 1219, 1221 (11th Cir. 2002); see 42 U.S.C. § 1395ff(b)(1)(A) (incorporating
into Medicare Act the standard of review set forth in 42 U.S.C. § 405(g)). We review de novo
the district court's determination of whether substantial evidence supports the ALJ's decision.
Wilson, 284 F.3d at 1221.
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reasonable and necessary for the diagnosis or treatment of illness or injury or to
improve the functioning of a malformed body member.” 42 U.S.C.
§ 1395m(j)(2)(B). Gulfcoast argues that this statutory provision unambiguously
mandates that a CMN alone establishes the reasonableness and necessity of
medical equipment, leaving the Secretary no discretion to require a supplier to
submit additional proof of medical necessity. Gulfcoast asks us to follow a
California district court’s ruling that “[t]he Secretary’s contention that Congress
provided him with the authority to decide what documentation may be required to
determine the medical necessity of DME conflicts with the plain meaning of
§ 1395(j)(2)(B).” Maximum Comfort, Inc. v. Thompson, 323 F. Supp. 2d 1060,
1067-68 (E. D. Cal. 2004). According to the Maximum Comfort court,
§ 1395m(j)(2)(B) “plainly specifies that Congress intended that whatever
information may be required by carriers from suppliers to show the medical
necessity and reasonableness of DME must be contained in a CMN.” Id. at 1068.
In considering Gulfcoast’s contention that the Secretary’s actions were
contrary to the Medicare Act, we are mindful that “considerable weight should be
accorded to an executive department’s construction of a statutory scheme it is
entrusted to administer.” Chevron U.S.A., Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837, 844, 104 S. Ct. 2778, 2782 (1984). Under Chevron’s
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two-step approach, we first ask “whether Congress has directly spoken to the
precise question at issue,” removing the interpretation of the statutory provision
from the agency’s discretion. Id. at 842, 104 S. Ct. at 2781. Only if the statute “is
silent or ambiguous with respect to the specific issue” will we proceed to
Chevron’s second step and ask “whether the agency’s [interpretation] is based on a
permissible construction of the statute.” Id. at 842-43, 104 S. Ct. at 2781-82.
Gulfcoast insists that the Secretary’s position fails on the first step of the
Chevron analysis. According to Gulfcoast, § 1395m(j)(2)(B) unambiguously
removes from the Secretary any discretion to request additional medical necessity
documentation beyond a CMN. See Maximum Comfort, 323 F.Supp.2d at 1075
(asserting that § 1395m(j)(2)(B) the plain language of the Medicare Act requires
that “any and all information required from suppliers to make a medical necessity
determination must be contained in a CMN”).
Contrary to Gulfcoast’s assertion and the holding in Maximum Comfort, the
Medicare statute does not unambiguously preclude the Secretary from requiring a
supplier to submit information beyond a CMN to prove medical reasonableness
and necessity. First and foremost, § 1395m(j)(2)(B) does not state unequivocally
that a CMN is the only documentation that may be required of suppliers to show
medical necessity. Section 1395m(j)(2)(B) simply defines a CMN as “a form or
9
other document” containing information showing medical necessity. On its face,
the section simply does not contain any explicit or unambiguous words of
exclusivity – Section 1395m(j)(2)(B) does not define a CMN as “the form” or “the
only form” containing “all information” or “exclusive information” of medical
necessity.
Gulfcoast fails to draw our attention to any other section of the Medicare Act
that states, or even suggests, that the Secretary may not require that a supplier
supplement a CMN with other documentation. Thus, Gulfcoast’s argument asks us
to construe § 1395m(j)(2)(B), a definition subsection of the Act, as performing a
substantive function not delineated elsewhere. As persuasively reasoned by the
district court in MacKenzie Medical Supply, Inc. v. Leavitt, 419 F. Supp. 2d 766,
771 (D. Md. 2006), the subsection that defines “certificate of medical necessity” is
an unlikely place for Congress “to mandate that the CMN serve as the exclusive
and final documentation required for proof of medical necessity.”
In fact, neither § 1395m(j)(2) nor any other provision even requires that a
supplier submit a CMN to the carrier. Section 1395m(j)(2)(A) provides that a
medical equipment supplier “may distribute” a CMN to physicians, and then
restricts the information the supplier may complete on a CMN. In other words, a
CMN is an optional pre-payment tool designed primarily to reduce paperwork and
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to streamline the processing of claims. Section 1395m(j)(2)(A) restricts the
supplier’s ability to fill out a CMN in advance, no doubt in order to ensure that
CMNs are not abused. It would be incoherent to construe §1395m(j)(2), a
subsection restricting the use of CMNs and clearly indicating that they are
voluntary, to also make CMNs the exclusive means for proving medical necessity.
See also 42 U.S.C. § 1395x(n) (stating that Part B coverage extends to power
wheelchairs “where the use of such a vehicle is determined to be necessary on the
basis of the individual’s medical and physical condition” but making no mention of
CMNs as proof of such necessity).
To the contrary, the auditing provisions of Part B convince us that Congress
unambiguously contemplated the Secretary’s authority to require suppliers to
submit medical documentation beyond a CMN to prove medical reasonableness
and necessity. The Act empowers carriers to “make such audits of the records of
providers of services as may be necessary to assure that proper payments are made
under this part.” 42 U.S.C. § 1395u(a)(1)(C); see also 42 C.F.R. § 421.200(e)
(requiring that “[t]he carrier must audit the records of providers to whom it makes
Medicare Part B payments, to assure that payments are made properly”). If, as
Gulfcoast suggests, the carriers and the Secretary have no discretion to request any
evidence of medical necessity apart from the CMNs already submitted by the
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suppliers, such audits would be rendered useless. Moreover, were we to adopt
Gulfcoast’s position, the Secretary would effectively lack the discretion to deny
any claim so long as a supplier could find a physician–even a dishonest or
incompetent one–to sign a CMN. Accordingly, we agree with the district court,
and we conclude that when the Medicare Act is read as a whole, it unambiguously
permits carriers and the Secretary to require suppliers to submit evidence of
medical necessity beyond a CMN.
However, even if the Medicare Act were ambiguous on this issue, the
Secretary’s interpretation of its authority under the Medicare Act is permissible.
Section 1395ff(a) affords the Secretary discretion to make determinations with
respect to benefits under Part B of the Act. 42 U.S.C. § 1395ff(a). Given the
Secretary’s discretion under § 1395ff(a), as well as the language of § 1395(m)(j)(2)
and the carriers’ authority to conduct post-payment audits pursuant to
§ 1395(a)(1)(C), Palmetto and the Secretary acted reasonably in assuming the
authority to require additional documentation from Gulfcoast. Because Medicare
is a “complex and highly technical regulatory program,” judicial deference to the
Secretary’s discretionary decisions in this area is all the more warranted. Sarasota
Mem’l Hosp. v. Shalala, 60 F.3d 1507, 1511 (11th Cir. 1995).
AFFIRMED.
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