ORDER OF MEDICARE APPEALS COUNCIL
REMANDING CASE TO ADMINISTRATIVE LAW JUDGE

(HIC Number) The Administrative Law Judge (ALJ) issued a decision dated May 18, 2005. The appellant has asked the Medicare Appeals Council to review this action.

The Council grants the request for review because the action, findings or conclusions of the ALJ are not supported by substantial evidence. 20 C.F.R. �� 404.967 and 404.970, incorporated by reference in 42 C.F.R. � 422.608. The Council hereby vacates the hearing decision and remands this case to an ALJ for further proceedings, including a new decision. See 20 C.F.R. � 404.977.

The appellant is an 82 year old Medicare beneficiary who was enrolled as a member of GHI Medicare Choice, a Medicare Advantage Organization, ⁽¹⁾ (GHI) at the time of the services in this case.

Dec. at 1. At all stages on appeal, he has been unrepresented by counsel.

The appellant underwent a laparoscopic bilateral inguinal hernia repair performed by Dr. M.R. in Mt. Sinai Medical Center on February 13, 2004. ⁽²⁾ The record contains a CMS 1500 bill to Medicare reflecting (i) a $7,000 charge for Dr. R's services; (ii) that Dr. R did not accept assignment; and (iii) that "Y.K., MD," referred the appellant to Dr. R. Exh. 1/22; see also Exh. 1/2 (R. relation to GHI described as "Non Plan Provider but under referral from Plan."). The appellant paid $6969.15 in satisfaction of Dr. R's $7,000 fee. Exh. 1/21.

An explanation of benefit printout reflects that GHI paid $30.85 for Dr. R's services, after subtracting deductible and coinsurance from an allowed amount of $226.06. Exh. 1/11. In response to the appellant's complaint, GHI explained that Dr. R was a "non-participating provider" and that a representative of Dr. R's office had stated that the beneficiary "was advised of the charges and signed a waiver prior to the procedure" accepting financial responsibility for charges "not covered by insurance." Exhs. 1/13, 1/10. GHI also advised that Dr. R was not prohibited from charging more than 115% of the Medicare approved amount of reimbursement because of the purported waiver. Exhs. 1/13, 2/9. The record does not contain the referenced waiver document.

The appellant appealed GHI's decision to the Center for Health Dispute Resolution (CHDR). ⁽³⁾ CHDR requested that GHI submit a complete copy of its Evidence of Coverage (EOC). Exh. 2/6. The record contains a November 20, 2004, letter from GHI which purports to enclose "a copy of the complete Evidence of Coverage for Medicare Choice PPO II for New York, Kings, Queens, Bronx, and Richmond Counties." Exh. 2/9. There is no such document in the record, although the record does contain page 14 of the EOC, which does not appear to address GHI's coverage obligations for physician services. Exh. 1/29.

CHDR upheld GHI's denial, explaining that Dr. R was "not a plan provider" and the appellant had "reason to know of the costs that would be involved prior to the plan's authorization for the [out-of-plan] services." Exh. 3/2. CHDR also determined that the $30.85 reimbursement was made "in accordance with the plan rules" as provided in "the plan contract." Exh. 3/3.

The ALJ affirmed CHDR's determination, finding that Dr. R was a "non-plan provider" and that the beneficiary "acknowledged that he would not receive full reimbursement of the charges incurred." Dec. at 3-4. At the ALJ hearing, GHI representative J.T. testified that the beneficiary entered into a "private contract" with Dr. R, which stated that Medicare "would not be billed" for services provided. Hearing audit.

Services to Plan Enrollees

A MA plan must provide its members with basic benefits as provided in Medicare Parts A and B, as well as optional supplemental benefits offered by the plan. 42 C.F.R. � 422.100(c); see also Medicare Managed Care Manual (MMCM), Ch. 4, � 10.1. ⁽⁴⁾ A plan must also provide information to its members regarding those benefits, as well as conditions and limitations of coverage. 42 C.F.R. � 422.111(b)(2). This information is usually contained in the plan EOC, provided at the time of enrollment and annually thereafter. 42 C.F.R. � 422.111(a)(3). A plan must also "[e]nsure that services are provided in a culturally competent manner to all enrollees, including those with limited English proficiency or reading skills, and diverse cultural and ethnic backgrounds." 42 C.F.R. � 422.112(a)(9). ⁽⁵⁾

A plan provides basic and supplemental benefits by furnishing them directly, through arrangements, or by paying for services furnished by out-of-network providers. 42 C.F.R. � 422.100(a). Typically, the plan provides such services by maintaining a network of physicians and other providers under contract with the plan to provide covered services to members for a fixed amount. 42 C.F.R. � 422.112(a)(1). A non-contracting physician who provides covered services to a plan member "must accept, as payment in full, the amounts that the provider could collect if the beneficiary were enrolled in original Medicare." 42 C.F.R. � 422.214(c); see also 42 C.F.R. � 422.200. ⁽⁶⁾

Participating and Nonparticipating Physicians

The Medicare program covers physician services as a Part B benefit. Sections 1832 and 1861(s)(1) of the Social Security Act (Act). A "participating" physician is one "that has an agreement with CMS to participate in Part B of Medicare in effect on the date of the service." 42 C.F.R. � 400.202 (definitions of participating supplier and supplier as a physician). A nonparticipating physician is one who has not entered into such a participation agreement. Id. "Payment on an assignment-related basis" includes payment to a physician who accepts assignment of benefits payable to the beneficiary. Id., citing 42 C.F.R. �� 424.55, 424.56. A physician who accepts assignment agrees to accept the amount that Medicare allows as payment in full. 42 C.F.R. � 424.55(b)(1). A participating physician who accepts payment on an assignment-related basis also agrees to collect only deductibles and co-payments from the beneficiary. 42 C.F.R. � 424.55(b)(2)(ii).

A nonparticipating physician who does not accept assignment of Medicare benefits may not collect from the beneficiary more than Medicare's "limiting charge," defined as 115% of the amount allowed for that service on Medicare's physician fee schedule. 42 C.F.R. � 414.48; see also Exh. 1/23 (GHI letter to Dr. R regarding limiting charge and associated penalties). CMS may assess a civil money penalty (CMP) of up to $10,000 against a nonparticipating physician who does not accept assignment and, on a repeated basis, "knowingly and willfully" (i) collects more than the Medicare's limiting charge; (ii) fails to make written disclosure to the beneficiary of charges and coinsurance payments for elective surgery, as required by section 1842(m)(1) of the Act; ⁽⁷⁾ or (iii) fails to make required refunds. 42 C.F.R. �� 402.105(d)(2)(xiii), 402.105(d)(2)(xi).

Medicare "Opt-Out" Provisions

The above authority reflects Medicare's general requirement that physicians who provide items or services covered by the Medicare program to a Medicare beneficiary are subject to certain claim filing requirements and charge limitations. See Medicare Benefit Policy Manual (MBPM), Ch. 15, � 40. These requirements and limitations "cannot be negotiated between a [physician] and the beneficiary except where a [physician] is eligible to opt out of Medicare under [MBPM] �40.4 and the remaining requirements of [MBPM] �� 40.1-40.38 are met." Id. (emphasis supplied). "Agreements with Medicare beneficiaries . . . that purport to waive the claims filing or charge limitations requirements, or other Medicare requirements, have no legal force and effect." Id. (emphasis supplied).

Physicians may "opt out" of these requirements and limitations, and the Medicare program altogether, by satisfying certain conditions and then contracting privately with Medicare beneficiaries for services otherwise covered by the Medicare program. MBPM, �40.1. The Act provides, in relevant part, that a physician may "enter[] into a private contract with a medicare beneficiary for any item or service for which no claim for payment is to be submitted under this title . . . ." Section 1802(b)(1)(A). The contract must "clearly indicate to the medicare beneficiary that by signing such contract the beneficiary agrees not to submit a claim . . . under this title for such items or services even if such items or services are otherwise covered by this title . . . ." Section 1802(b)(2)(B)(1)(i). Section 1802(b)(1) does not apply if the private contract is "entered into at a time when the medicare beneficiary is facing an emergency or urgent health care situation." Section 1802(b)(2)(A)(iii).

Title 42, Part 405, Subpart D of the Code of Federal Regulations implements the above statutory authority. Generally, a physician may enter into a private contract with a Medicare beneficiary for items or services for which Medicare would otherwise pay. 42 C.F.R. � 405.405(a). However, the physician must "opt out" of Medicare for a two year period in order to privately contract with Medicare beneficiaries. 42 C.F.R. � 405.405(b).

The physician must first submit a qualifying "opt-out" affidavit to the Medicare carrier. 42 C.F.R. � 405.410(b); 42 C.F.R. � 405.420. The private contract must satisfy specific conditions. 42 C.F.R. � 405.415. A physician who properly opts-out of the Medicare program is, in relevant part, no longer subject to Medicare claims submission requirements or limiting charges. 42 C.F.R. � 405.425(c),(e).

A physician may fail to opt-out properly if either the private contract or opt-out affidavit fails to meet regulatory criteria. 42 C.F.R. � 405.430(a). The physician's failure to opt-out properly, or to maintain opt-out status, results in the nullification of private contracts between the physician and beneficiaries, as well as the physician's opt-out status. 42 C.F.R. � 405.405(c),(d).

Services provided under a private contract are "not covered by Medicare." 42 C.F.R. � 405.405(e). Similarly, an opt-out physician cannot provide items or services otherwise covered by Medicare to a Medicare beneficiary without a private contract, except for emergency or urgent care services. 42 C.F.R. � 405.425(b).

A MA plan "may not pay, directly or indirectly, on any basis for services (other than emergency or urgently needed services as defined in �422.2) furnished to a Medicare enrollee by a physician . . . who has filed with the Medicare carrier an affidavit promising to furnish Medicare-covered services to Medicare beneficiaries only through private contracts under section 1802(b) of the Act with the beneficiaries." 42 C.F.R. � 422.220 (emphasis supplied).

Parties to ALJ Hearing

The parties to an ALJ hearing include those who were parties to a reconsideration, the MA organization, "and any other person or entity whose rights with respect to the reconsideration may be affected by the hearing, as determined by the ALJ." 42 C.F.R. � 422.602(c). A reconsideration is a review of an adverse organization determination and the evidence upon which it rests (42 C.F.R. � 422.580), and the parties to a reconsideration include the parties to an organization determination. 42 C.F.R. � 422.578. The parties to an organization determination include the plan enrollee and "[a]ny other provider . . . determined to have an appealable interest in the proceeding." 42 C.F.R. � 422.574(a),(d). An organization determination is defined, in relevant part, to include payment for services provided by non-plan providers that the beneficiary believes are covered under Medicare. 42 C.F.R. � 422.566(b)(2).

Dr. R as Nonparticipating or Opt-Out Physician

The ALJ referred to Dr. R as "not a contracted member of the GHI Medicare Choice provider network." Dec. at 3. He then noted that GHI paid for Dr. R's services "as set forth in its contract for payment of nonparticipating providers." Id. He referred to a document, purportedly signed by the beneficiary agreeing to "pay all costs not not [sic] covered by insurance (Exhibit 3)," as an unspecified "waiver." Id. As noted, GHI representative J. T. referred to this same document at the hearing as a "private contract" under which the beneficiary agreed that Medicare would not be billed. Hearing audit. This document is not found at Exhibit 3 nor anywhere else in the record.

The ALJ states, and the record supports, that Dr. R is a physician who has not contracted with GHI to provide services to GHI enrollees, including the appellant. The record also supports that GHI physician Y. K. referred the beneficiary to Dr. R. Exhs. 2/9, 1/22 (field 17). There are no medical records in evidence to determine whether this referral occurred at the appellant's request or because GHI was unable to furnish the required services through its own provider network. Whatever the reason for the referral, as a noncontracting physician, Dr. R "must accept, as payment in full, the amounts that [he] could collect if the beneficiary were enrolled in original Medicare." 42 C.F.R. �� 422.214(a).

If the beneficiary were enrolled in the original Medicare Part B program, the amount that Dr. R could collect would depend, as relevant here, upon his status in relation to the Medicare program: a nonparticipating provider or a physician who has opted out of the Medicare program. ⁽⁸⁾ This leads to two possible scenarios:

1. If Dr. R is a nonparticipating physician, who has not accepted assignment in this case, he could collect only the limiting charge established by the Medicare program for the services provided on February 13, 2004.

2. If Dr. R is a physician who has properly "opted out" of the Medicare program, he could enter into a private contract with the beneficiary and collect whatever fee he wished to charge that the beneficiary agreed (in writing) to pay.

The record is unclear as to which of these categories apply. The fact that Dr. R has not contracted with GHI to provide services to plan enrollees leaves unanswered whether he is a nonparticipating physician (which is supported by GHI's payment of $30.83 for his services) or whether he has opted out of Medicare (which is supported by Ms. T's testimony).

If Dr. R is a nonparticipating physician, he must accept Medicare's limiting charge for his services to the appellant. He may not negotiate privately with the appellant to "waive" any component of what Medicare would pay for his services. If the document referenced repeatedly in the record as a "waiver" is, in fact, an attempt to have the appellant waive Medicare's limiting charge, that agreement is void and of no legal effect as a matter of law. Dr. R would then be required to refund to the beneficiary the amount of his fee that exceeds the applicable limiting charge or face possible civil money penalties.

Ms. T's testimony, however, indicates that the document purportedly executed by the beneficiary could be a private contract between a physician who has opted out of the Medicare program and the appellant as a Medicare beneficiary. If that is the case, and Dr. R has properly opted-out of the Medicare program, he would be entitled to collect his entire fee from the beneficiary, to the extent agreed in the private contract. The beneficiary would not be entitled to any refund of Dr. R's fee and GHI would not be obligated to pay more than its EOC requires.

As this document is not contained in the record, the ALJ's decision is not supported by substantial evidence. Further proceedings are therefore warranted.

GHI Evidence of Coverage

The ALJ states that GHI paid for Dr. R's services "at a reduced rate, as set forth in its contract for payment of nonparticipating providers . . . ." Dec. at 3. Although CHDR requested the EOC from GHI, and GHI wrote that it was supplying its entire EOC, no such document is in the record.

As this document is not contained in the record, the ALJ's decision is not supported by substantial evidence. Further proceedings are therefore warranted.

On remand, the ALJ is instructed to:

1. Schedule and hold a new administrative hearing, providing appropriate notice to affected parties.

2. Make Dr. R a party to the hearing, as he is a provider with an appealable interest in the organization determination and whose rights may be affected by the ALJ decision.

3. Obtain a copy of the document from Dr. R that purports to require the beneficiary to pay for Dr. R's $7,000 charge.

4. Determine whether Dr. R is a physician who has properly opted out of the Medicare program in accordance with the statutory, regulatory, and administrative authority cited herein.

5. If the ALJ determines that Dr. R is not a physician who has opted out of the Medicare program, the ALJ shall make a finding as to whether Dr. R is a nonparticipating physician under applicable authority.

6. If the ALJ determines that Dr. R is a nonparticipating physician, the ALJ shall determine the limiting charge that Dr. R can collect from the appellant and any refund obligations that Dr. R may have under the authority cited herein.

7. Obtain a copy of GHI's entire EOC and determine whether GHI paid the beneficiary for Dr. R's services consistent with its obligations under its EOC.

The ALJ may take any further action not inconsistent with this order.

DATE: September 17, 2005

Clausen J. Krzywicki
Administrative Appeals Judge

Thomas E. Herrmann
Administrative Appeals Judge

1. Title II of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) established the Medicare Advantage (MA) program on December 8, 2003. 70 Fed. Reg. 4587, 4588 (Jan. 28, 2005). The MA program replaced the Medicare+Choice (M+C) program previously implemented under part 422 of Title 42 of the Code of Federal Regulations, while retaining its material components. Id. The Centers for Medicare and Medicaid Services (CMS) implemented the MA program through regulations effective on March 22, 2005. Id. Although not in effect at the time of the services here, the MA regulations would not materially alter part 422 regulations relevant to this appeal. Id. at 4590.

2. Dr. R submitted a prior authorization form to GHI dated January 29, 2004, and marked "urgent." Exh. 1/24. This form reflects that the surgery was originally scheduled for the next day, on January 30. Id. The record does not support that the surgery performed two weeks later was in response to urgent or emergent circumstances.

3. CHDR is an "independent entity" under contract with CMS to review an adverse "organization determination." 42 C.F.R.
� 422.952.

4. Effective October 1, 2003, manuals issued by CMS can be found at http://www.cms.hhs.gov/manuals/

5. The Council's audit of the CD recording of the ALJ hearing indicates that this 82 year old unrepresented beneficiary speaks with a heavy ethnic accent and does not clearly understand questions asked by the ALJ or, in some instances, provide answers that are directly responsive. Both GHI and the ALJ are obligated to insure that the beneficiary receives, respectively, full access to medical services under the plan and a fair and non- adversarial administrative hearing on any appeals, despite any limited proficiency with English or cultural or ethnic barriers.

6. Medicare regulations refer to physicians both as suppliers and providers. 42 C.F.R. � 422.200 includes physicians under the definition of "provider" for purposes of 42 C.F.R. � 422.214.

7. Section 1842(m)(1) requires that a nonparticipating physician who does not accept assignment on elective surgery "for which the physician's actual charge is at least $500 . . . must disclose to the individual, in writing and in a form approved by the Secretary, the physician's estimated actual charge for the procedure, the estimated [Medicare] approved charge . . . , the excess of the physician's actual charge over the approved charge, and the coinsurance amount applicable to the procedure."

8. The CMS 1500 in the record indicates that Dr. R did not accept assignment. He could thus not be a participating physician, as participating physicians are required to accept assignment of benefits and Medicare's allowed amount as payment in full.