Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Medicare Appeals Council
|IN THE CASE OF||Claim For|
Key Largo Medical Systems Inc., et al
|Supplementary Medical Insurance Benefits|
Blue Cross/Blue Shield of South Carolina
is the second adjudicative action taken by the Medicare Appeals Council
in the above-captioned case. On December 18, 1997, we vacated a May 13,
1996 decision issued by Administrative Law Judge Marilyn W. Carney (now
retired) and remanded the case for further proceedings. The Social Security
Administration's Office of Hearings and Appeals assigned the case
on remand to Administrative Law Judge Robert S. Habermann. On May 22, 2000,
Judge Habermann issued a decision concerning the claims of six of the seven
original appellants. (1) Judge Habermann's decision
was captioned as fully favorable to the appellants.
In a memorandum dated June 29, 2000, the Health Care Financing Administration (2) referred the case to us for possible own motion review. By notice dated July 21, 2000, we notified the parties that we had decided to review Judge Habermann=s decision under the own motion authority contained in 20 CFR 404.969.
The extensive proceedings
that preceded our December 18, 1997 remand order are summarized in that
order and on pages 1 through 3 of Judge Habermann=s
decision. We hereby incorporate those descriptions by reference and proceed
to the matters that were before Judge Habermann pursuant to our December
18, 1997 remand order.
of the Results of the Council=s
We decided to take
own motion review of this case for several reasons. First, we determined
that review was necessary to consider whether Judge Habermann erred in
reversing Judge Carney=s
decision on carrier jurisdiction, which we had affirmed in our remand
order. Second, it was necessary to determine whether Judge Habermann had
resolved all of the remaining issues we had identified in our order. Third,
in light of the assertions in the referral memorandum, we decided to review
findings concerning the appropriate coding for the supplies at issue,
which was a question that had not been specifically addressed in Judge
decision or our remand order.
considering the voluminous record in this case and the additional material
and arguments that appellants=
have submitted to us, we have reached three general conclusions in this
case. First, we have concluded that although our remand order did not
preclude Judge Habermann from revisiting the carrier jurisdiction issue,
his findings and conclusions with respect to this issue are based on an
error of law and are not supported by substantial evidence. Second, although
we find that the hearing decision adequately resolves the issue of whether
the flushing and irrigation supplies (hereafter: Aflushing/irrigation
provided by the appellants were covered under the Medicare program, it
does not evaluate or make findings on whether the site care supplies also
met Medicare coverage requirements.
Moreover, none of
the oral proceedings conducted on remand, written submissions by the appellants
or others, or the hearing decision itself indicate that the Administrative
Law Judge has resolved other properly appealed claims identified in our
remand order that did not pertain to patients receiving parental or enteral
nutrition (PEN) or who did not have gastrostomies. (3)
Finally, we have concluded that Judge Habermann=s
findings on the coding issue cannot be sustained because his conclusions
are not based on evidence adduced at the hearing, as required by section
205(b)(1) of the Social Security Act (Athe
Moreover, although Judge Habermann made findings concerning how the claims
for flushing/irrigation supplies were to be reimbursed, he did not give
any direction concerning reimbursement for the site care supplies.
For numerous reasons, including the already lengthy proceedings in this case, we have determined that remanding this case a second time would not be appropriate or fruitful. Accordingly, we have decided to resolve the above matters as follows.
For the reasons
explained below, we find: 1) that to the extent that the claims at issue
involved items furnished to beneficiaries who were receiving parenteral
or enteral nutrition (hereafter: "PEN"), those claims were subject
to the South Carolina PEN carrier's jurisdiction (4);
and 2) that the transfer of the claims submitted to the local carriers
did not constitute an impermissible, retroactive change in local policy,
but a correction to comply with national policy, which the local contractors
were required to follow.
As explained in
both Administrative Law Judge decisions and our December 1997 remand order,
the dispute over the claims at issue began with an agency decision to
transfer the appellants' claims from two local carriers, Blue Cross and
Blue Shield of Florida (BCBS-FL) and Pennsylvania Blue Shield (PBS), to
BCBS-SC. One of the primary issues considered during the proceedings in
federal district court and, subsequently, before agency adjudicators has
been whether the local carriers or the PEN carrier, BCBS-SC, had jurisdiction
to adjudicate the claims. In order to resolve this question, considerable
effort has been made to obtain written documents and oral testimony that
would demonstrate the carriers' (both local and PEN) understanding of
their respective jurisdictions. However, less attention has been paid
to determining how carrier jurisdiction is actually established and the
agency's statements or policies about the carriers' respective authorities
concerning the claims at issue. Accordingly, we first discuss how carrier
jurisdiction is established and consider the agency documents that established
and explained the jurisdictions at issue in this case.
Section 1842 of the Social Security Act ("the Act") establishes the authority under which HCFA may delegate to carriers the responsibility for reviewing Part B claims. Section 1842(a) of the Act states that, to provide for the administration of Medicare benefits, "the Secretary is authorized to enter into contracts with carriers" to perform a variety of functions, including making determinations of the amounts of payments required and to "serve as a channel of communication of information relating to the administration of [Part B]."
In addition, sections 1834(a)(12)and 1834(h)(3) of the Act authorize the Secretary to designate one carrier for one or more entire regions to process all claims within the region for covered durable medical equipment (DME), orthotics and prosthetics, as those terms are defined in the statutory subsections. Sections 1834(a)(12) and (a)(13) of the Act were enacted in section 4062 of OBRA of 1987 (P.L. 100-203). (5)
On November 6, 1991, the Secretary and the HCFA Administrator issued a proposed rule designating regional carriers that would process claims for DME, prosthetics, orthotics, and supplies (DMEPOS), relying on sections 1834(a)(12), concerning DME, and 1834(h)(3), concerning prosthetic devices, prosthetics and orthotics. 56 Fed. Reg. 56612, 56613 (November 6, 1991). In addition, the regulations proposed to include PEN claims within the jurisdiction of the new carriers, relying on sections 1102, 1842, and 1874(a) of the Act. (6) Id., at 56615. A final rule establishing the new regional carriers was published on June 18, 1992, with an effective date of August 17, 1992. See 57 Fed. Reg. 27290 (June 18, 1992).
The proposed rule contains a detailed discussion of the latitude given to the Department, and, more particularly HCFA, to delineate a carrier's jurisdiction, as well as the factors the agency considers when it establishes or alters that jurisdiction. First, the proposed rule noted that section 1842 "does not place any restriction on the area which any carrier must serve." Id. Consequently, HCFA historically had contracted with carriers to process claims in areas that were multi-State, State-Wide, and lesser areas. The preamble continued: "HCFA may restrict the types of claims each of these carriers must process, i.e., all carriers need not process the full range of claims." Id.
As noted in the proposed rule, in 1991 and 1992, Part
B claims were allocated among 34 carriers on a number of different bases.
Generally, claims for medical care items, including DME and prosthetics,
were allocated to carriers within whose areas the point of sale of the
item occurred. "The only items allocated under different claims jurisdiction
theories are claims for parenteral and enteral nutrients, supplies and
equipment, which are currently allocated between two specialty carriers
on the basis of the location of the home office of the supplier, and claims
for electronic bone growth stimulators..." Id.
HCFA explained in the 1991 proposed rule that the decision
to reconfigure carrier jurisdiction over DMEPOS claims stemmed from numerous,
unintended consequences of the point of sale rule:
Id. at 56614-15. The proposed rule goes on to list a number of complaints the agency had received during preceding years about "perceived incorrect payments by Medicare for DMEPOS claims." The rule references, inter alia, that carriers with "higher reimbursement amounts or more generous utilization parameters for common supply items, such as catheters, surgical dressings, etc." had complained that some suppliers were "fragmenting charges, billing for excessive amounts of supplies and violating carrier jurisdiction policies...." Id. at 56615.
The above-cited regulations articulate the Secretary's
position that carrier jurisdiction, including the creation of specialty
carriers, is established by HCFA under the authority of sections 1102,
1842 and 1874(a) of the Act. We note, however, that at the time the jurisdictional
dispute in this case arose, the regulations governing intermediaries and
carriers, located at 42 CFR Part 421, did not contain specific provisions
concerning carrier jurisdiction over particular types of claims. Rather,
the special PEN carriers had been established under authority of a September
1984, "Part A/B Intermediary Letter 84-13/84-8." The instruction
stated that two specialty carriers would handle all Medicare Part B parenteral
and enteral (P/E) therapy claims, effective October 1, 1984. Jurisdiction
for processing claims would be based on the suppliers' home office addresses;
claims with a home office east of the Mississippi would be processed by
BCBS-SC. [ALJ Ex. 13-Deposition of Jane Herlocker, deposition exhibit
also addressed the concern that claims might be improperly submitted to
At the end of the
instruction, contractors were advised to direct any questions to their
HCFA regional office.
In addition to this
nationally applicable directive, HCFA published instructions concerning
PEN coverage and PEN carrier jurisdiction in the Medicare Coverage Issues
Manual (MCIM) and the Medicare Carriers Manual (MCM). National Coverage
Determination (NCD) 65-10, which is still in effect, provided, in pertinent
part, as follows:
Further, section 3116 of the MCM (rev. 4/92) read:
In addition, section 3110.4 of the Medicare Intermediary Manual, referenced in the NCD and also reproduced at section 2130 of the MCM, provided:
In addition, the
PEN Supplier's Guide to Medicare, issued in January 1989
Finally, in discussing PEN coverage requirements, MCM section 3329 D.3 provided in pertinent part:
(Emphasis added.) (9)
During the proceedings in the district court and before the Administrative Law Judges, witnesses and appellants' counsel have offered various interpretations of the language highlighted above, particularly to the terms "related supplies" and "necessary to administer therapy.". The agency's position is that the two phrases include not only supplies used while PEN nutrients are being given to the patient, but also the flushing/irrigation and site care supplies provided by the suppliers in this case. Appellants' position is that the supplies referenced in the NCD and manual sections are limited to the supplies used while PEN nutrients are being given to the patient. They also appear to assert that the second paragraph of 3110.4 referenced above is essentially a separate coverage provision for their supplies under the prosthetic device benefit, distinct from the PEN benefit described in 65-10 and the third paragraph of section 3110.4.
We believe that the agency's interpretation of NCD 65-10 and the other manual sections cited above is not only the most reasonable interpretation of the above authorities, but the most consistent with the parameters of the prosthetic device benefit. It is a maxim of the Medicare program that Medicare only pays for items and services in designated benefit categories; in other words, not every medically necessary service is covered by Medicare. Both the agency and appellants agree that in the circumstances in which HCFA contractors have properly paid for the types of supplies that the appellants furnished in this case, they were paid under the prosthetic device benefit. However, the syringes, wipes, adhesive tape, and sterile water provided by the appellants are not, in themselves, prostheses. Rather, they maintain and facilitate the use of the gastrostomy, which, in turn, allows the patient to receive the enteral nutrition. Unless the patient's condition meets the requirements of NCD 65-10, none of the nutrients or other related supplies are covered under the Medicare program. We conclude, therefore, that the agency's interpretation of what encompasses "related supplies" and "necessary to administer therapy" is the most consistent with both the language of the NCD and basic Medicare coverage rules. (10)
Moreover, in our remand order we pointed to another agency document not discussed by Judge Habermann that was issued after the issuance of the NCD. It documents the agency's decision to include the supplies at issue with the PEN carrier's jurisdiction. In September 1991, HCFA's Associate Regional Administrator for Region IV issued a letter to all Region IV. carriers entitled "Surgical Dressing Kits for Patients who use Gastrostomy Tubes for their Enteral Feedings-INFORMATIONAL." [ALJ Ex. 19B, page 7.] The letter stated, in pertinent part:
Notwithstanding that the national issuances directed that PEN related supplies, included irrigation/flushing and site care supplies, should be submitted to the specialty carriers, it is undisputed that the local carriers in this case published inconsistent statements concerning this question. We note, however, that prior to the period in dispute, the local carrier issuances appear wholly consistent with HCFA directives. For example, a December 1987 BCBS-FL update (ALJ Exhibit 19A, p.4) contained a reminder that "all Medicare Part B claims for ... enteral nutritional therapy supplies are processed by [BOBS-SC]." A March 28, 1988 Florida Policy Bulletin (ALJ Exhibit 19A, p.5) stated that "Parenteral and enteral nutrition systems are eligible under the prosthetic device benefit" and described the coverage criteria for enteral nutrition via gastrostomy tube. The bulletin stated that "payment may be made for accessories and/or supplies that are used directly with ... enteral systems to achieve therapeutic benefit or assure proper functioning of the feeding systems." [Emphasis added.] Such accessories, the bulletin explained, included dressings and tape. The bulletin stated that only the two PEN carriers would process "all Part B claims for ... enteral nutritional supplies," effective December 1, 1984.
Additionally, the record contains a special bulletin issued by Pennsylvania Blue Shield, dated February 1991, (11) which reads:
We also recognize, however, as did Judges Carney and Habermann,
that other issuances of the local carriers, including a January 1991 Florida
"specialty update," (13) a January-February 1991
"Medicare Part B Update," (14) a April 1991 update
(15) and a October 19, 1992 PBS letter (16) contained
ambiguities and conflicting representations concerning the local carriers'
authority to process gastrostomy supply claims. (17)
The record also demonstrates that the PEN supplier lacked procedures for
processing the types of claims at issue. Rather, the specialty carrier
maintained that all necessary gastrostomy dressings and maintenance supplies,
including site care and flushing supplies, would be included in the PEN
administration kit. (As noted above, MCM section 3329. D.3 provided that
"enteral care kits contain all the necessary supplies (excluding the tubing)
for the enteral patient using the syringe, gravity or pump method of nutrient
administration." In addition, a December 1990/January 1991 South Carolina
Medicare Advisory [ALJ Ex. 10, Robertson Deposition, deposition exhibit
Accordingly, the PEN carrier had no procedures for processing
claims for separate components of the kit.
During the proceedings before Judge Habermann, Bruce Carter, a witness for the PEN carrier, stated that he had prepared for the hearing by communicating with Robin Robertson Spires, one of the agency's deponents during the district court proceedings. In response to a question by appellant's counsel, Mr. Carter produced an e-mail from Ms. Spires responding to various questions Mr. Carter had asked her in preparation for the hearing. [ALJ Ex. 61]. In her e-mail response, Ms. Spires stated that the HCFA attorney who represented the agency in the district court proceedings did not allow her to testify concerning her true views on the jurisdictional issue, including her belief that "no one with the PEN contract ever believed "A" code suppliers were our jurisdiction." In part because of the introduction of this evidence, Judge Habermann decided to reconsider the jurisdictional finding made by Judge Carney. [See Habermann decision at pp. 26-33]. He subsequently concluded that "the local carriers have the jurisdiction and the responsibility to process the claims at issue in this matter during the time period at question." [Habermann dec. at 41].
In reaching this conclusion, Judge Habermann focused primarily on the carriers' articulation of their respective jurisdictions and, in particular, on the more recent carrier issuances that were the most inarticulate and confusing. He ultimately resolved the jurisdiction question by applying the common law principle of contra proferentum as follows:
The Council finds that the above analysis is insufficient to establish that the local carriers, and not the PEN carrier, had jurisdiction over the majority of the claims at issue. Any analysis of this issue must first determine the source of the carrier's authority to adjudicate these claims, and any pronouncements from that source on the issue. As shown above, HCFA has been given the authority to establish and restrict a carrier's jurisdiction and has exercised that authority in various publications, including, ultimately, a regulation. Second, HCFA, through its regional office, notified carriers that certain suppliers were misdirecting claims for enteral-related supplies and instructed the carriers to correct their processing. That some contractors did not heed or understand these instructions does not give them jurisdiction over claims that should have been directed to another carrier. (19)
Moreover, we find
that the common law principle of contra proferentum,
whether applied to HCFA's communications or the carriers' issuances, provides
no guidance in this case. Contra proferentum is a rule applied to construction
of contracts; the hearing decision cites no authority for applying it
in the context of this case. See Restatement (2d) of Contracts §
206 (1979). Moreover, even if this case involved a contract between the
suppliers and HCFA, it is unlikely that a court would construe any ambiguities
against the agency in interpreting the agency's regulations and instructions.
See, e.g., Commonwealth Edison Co. v. U.S. Depart. of Energy, 877
F.2d 1042 (D.C. Cir. 1989)(doctrine of contra proferentum inapplicable
in regulatory context).
In his evaluation of the jurisdiction question, the Administrative Law Judge also relied on the contents of a draft letter, referred to as "Exhibit 22," which was first introduced in this case during discovery in the proceedings before the federal district court. [See ALJ Ex. 12, Herlocker deposition, deposition exhibit 5, hereafter referred to as "the Cusick letter."] According to the deposition testimony, this draft letter, which was from Elizabeth Cusick, HCFA's Director of the Office of Program Operations, and addressed to Irwin Cohen, one of the appellants' counsel, was never issued. In our December 1997 remand order, we had directed the Administrative Law Judge to rule on appellants' objections to the admission of this letter, because they had never received it. In considering this question on remand, Judge Habermann wrote:
In his decision, Judge Habermann concluded that the Cusick letter contained "admissions" by HCFA that BCBS-FL should have paid for all of the claims at issue in this case, because the claims were submitted to that carrier prior to the date the appellants received actual notice of the "change in carrier jurisdiction." [ALJ dec. at 30.] Regardless of how the letter may be interpreted, we have determined that it cannot be considered as an official statement of agency policy, because there is no evidence that it was ever issued. [ALJ Ex. 13, Herlocker deposition, pages 88-95.]
Accordingly, the Council reverses the ALJ on this issue and finds that the PEN carrier had jurisdiction over the claims for gastrostomy supplies provided to PEN beneficiaries by the six appellants during the period at issue.
Resolving which carrier had jurisdiction over the claims at issue does not, in itself, resolve whether the supplies at issue were covered under the Medicare program. The PEN carrier denied many, if not all, of the flushing/irrigation and site care supplies because it considered the supplies duplicative of items that had been furnished in enteral supply kits furnished by other suppliers. This general finding was not based on a comparison of the items actually provided and billed by both suppliers, but on the general conclusion contained in section 3329D.3 of the MCM that the enteral supply kit contained all items that the PEN patient needed.
In her decision of May 13, 1996, Judge Carney addressed BCBS-SC's determinations that the items furnished were duplicative of supplies previously furnished the beneficiaries in PEN administration kits. She wrote that BCBS-SC could not identify the contents of the kits; accordingly, they could not claim that the Appellants' supplies were duplicative. "Thus," she wrote, "BCBS/SC's denial of payment on this basis is invalid."
In our remand order of December 18, 1997, we indicated that Judge Carney's findings on the above issue were supported by the record. We found the HCFA and PEN carrier issuances concerning the all-inclusiveness of the PEN supply kits unpersuasive because:
No additional evidence contradicting the above conclusion was introduced on remand. Similar to the reasoning given by Judge Carney and the Council, Judge Habermann concluded that the supplies at issue could not legitimately be denied on the basis that they duplicated items provided in the kits furnished with the PEN nutrients. We sustain Judge Habermann's conclusion on the above issue without further discussion.
We note, however, that Judge Habermann's decision did not completely resolve the other issues discussed in our remand order. First, he did not undertake much of the specific development we ordered to determine not only whether the items supplied by the appellants met general, categorical coverage requirements, but also whether the individual claims included in this appeal met those general requirements. Second, he did not consider how to dispose of certain claims, identified in our order, that did not appear to pertain to beneficiaries with gastrostomies. (20) Third, and most importantly, he only evaluated and made findings on one of the two general categories of supplies at issue, the flushing/irrigation supplies. (21)
The Council has considered how to resolve the above defects. In so doing, we not only have been mindful of the age of this case, but also have taken into account whether additional development consistent with our previous order would result in a different outcome on remand. With the exception of the small category of cases described in footnote 20, we are persuaded that additional development would not result in a different outcome, because any item or supply that was found not covered would be paid under the limitation of liability provisions. We reach this conclusion because 1) there is no evidence that either HCFA or the PEN carrier had specific medical policies on the questions identified in our order, such as the medical necessity of using sterile water to flush the gastrostomy tube and 2) the testimony and other evidence presented in the hearings before Judges Carney and Habermann was in sufficient conflict on the medical necessity of some of the supplies at issue that it is unlikely that the suppliers could be held to have had knowledge under 42 CFR 411.406(e)(3) that the supplies would not be covered. (22)
Moreover, although Judge Habermann's resolution of the coverage and documentation issues identified in our order was incomplete, the majority of the testimony provided in his hearing of July 12, 1999 supports a finding of coverage. Specifically, the testimony of Ms. Motta, which is described in detail at pages 11 through 16 of the hearing decision, supports a conclusion that the majority of the supplies provided by the appellants were reasonable and necessary to flush and irrigate the G-tube and to care for the stoma site. Moreover, in weighing the evidence, we, like the Administrative Law Judge, note that the evidence provided by the contractor on remand does not suggest that further proceedings would lead to a different result. Not only did the contractor send to the hearing a witness, Mr. Carter, who had no direct experience in these matters, but, as noted above, Ms. Spires conceded in her e-mail to Mr. Carter that the supplies at issue would been considered covered absent a finding that they were duplicative. In light of the above, we do not believe that further development of the case to resolve the issues raised in our December 1997 remand order would be productive or appropriate.
Accordingly, we adopt the Administrative Law Judge's finding that the flushing/irrigation supplies provided by the appellants to PEN beneficiaries for gastrostomy-related care were covered under the Medicare program and add a similar finding concerning the site care supplies. However, the above conclusion does not apply to any claims referenced in footnote 20 of this decision. We address the disposition of those claims in the Instructions section of this decision.
III. The Coding Issue
Sections I and II of this decision resolve the basic issues that were adjudicated by the PEN carrier in initial, review and carrier hearing determinations and by Judge Carney in her 1996 decision, i.e., which contractor(s) had jurisdiction over the claims at issue and whether some or all of the supplies were covered under the Medicare Act. In essence, these were the only issues squarely before Judge Habermann on remand, since they were the issues that were decided unfavorably to the appellant in the determinations below. However, in section XVI of the decision, entitled "APPROPRIATE BILLING CODE ISSUE." Judge Habermann concluded that the flushing/irrigation supplies should be paid under code A4400. We are not sustaining this finding for the following reasons:
1. Judge Habermann based his conclusions on evidence not
adduced at the hearing.
None of the oral proceedings in this case have concerned the proper coding for the supplies at issue. This is typical in an appeal of claims denied in toto on Medicare coverage grounds; it is the common practice of Administrative Law Judges (or the Council) who reverse a contractor's coverage determination to simply direct the contractor to make the appropriate payment. Any payment determination by the contractor is then a new initial determination on a different issue, i.e, proper coding and payment amount, that may be appealed through the administrative appeals process.
In their August 2001 brief to the Council, the appellants contend that Judge Habermann had the authority to adjudicate the coding issue as a new issue under 20 CFR 404.946. We agree. However, he did not exercise that authority consistent with section 205(b) of the Act and 404.946. Specifically, he did not notice it as an issue to be decided nor did he take any evidence at the hearing concerning the issue. [ALJ Ex. 47, Order Following Pre-Hearing Conference.] The only discussion tangentially related to this question was during the closing remarks of appellant's counsel Mr. Robinson, i.e., that regardless of which carrier had jurisdiction, the suppliers should be paid according to rates that were established for the "A codes." [ALJ Ex. 76, page 71]. Specific codes for specific supplies were not discussed. Moreover, the written administrative record does not contain the February 1993 PBS document referred to throughout section XVI of the decision, nor is this document referenced in the Administrative Law Judge's exhibit list. Accordingly, there is no evidence of record supporting the conclusions reached by Judge Habermann in that portion of the decision.
2. The evidence of record does not support applying a
single code to all of the flushing/irrigation supplies billed for in this
The discussion in section XVI of the hearing decision is premised on the assumption that all of the flushing/irrigation supplies were billed as kits. However, our examination of some of the individual claims submitted in this case does not support such a conclusion. To illustrate, we have appended to this decision two sample claims from two of the six suppliers. The first, for beneficiary A. M., pertains to an "irrigation set" provided on October 28, 1992, by Nursing Home Products Services. It bills under one procedure code (B9998) (23) for 90 units of the set, which is listed as containing a syringe adaptor sterile water, a pair of latex gloves, two 4 x 4 gauze pads, one alcohol prep. pad and one ABD pad. The second claim, submitted by Key Largo Medical Systems, Inc. for beneficiary W.P.. contains three separate billings, all coded B9998, for 30 units each of the following supplies: flush/irrigation supplies, i.e., lubrication jelly, sterile water and syringes. These claims show that while some suppliers billed flushing/irrigation supplies as a kit, others did not.
The record also suggests that both billing methods were appropriate. During her deposition, Debra Fulton stated that supplies could be billed as either kits or as separate supplies. Contractors were advised, however, not to allow suppliers to bill both the set and component parts on the same claim. [ALJ Ex. 11, Fulton deposition, page 77.]
In light of the above, we could not sustain assigning one "A code" to all of the flushing/irrigation supplies billed in this case even if we had determined that the local carriers had jurisdiction over the claims at issue.
3. The hearing decision does not address or resolve how the site care supplies should be reimbursed.
As noted in section II. Of this decision, the Administrative Law Judge did not make any specific findings concerning whether the site care supplies in this case were covered. In addition, he did not provide any direction in the body of his decision or his findings concerning how the site care supplies should be coded or paid. Accordingly, the Council finds that this latter coding issue is best resolved, at least initially, by the specialty carrier.
In light of the length and complexity of the proceedings and the somewhat incomplete resolution of the issues we identified in our remand order, we think it appropriate to provide some direction concerning how this decision should be effectuated.
A. Outlier claims. As we noted in section III., Judge Habermann did not adjudicate any of the individual claims in this case. Moreover, although he requested one of the carriers to draw a statistical sample, he did not use the sample to resolve the issues in this case. Accordingly, the issue of how to dispose of the "outlier" cases described in footnote 20 has not been resolved either by individual adjudication or by sampling.
Since the appellants did not address any of these claims in the remand proceedings, we are uncertain whether they wish to pursue them. Based on our screening of a few boxes of claims, we believe that they constitute a small percentage of the claims denied by the carrier hearing officer. Accordingly, we direct Palmetto to contact appellants' counsel concerning their clients' wishes before disposing of these claims. For any claims appellants do wish to pursue, we make this general finding:
B. Claims for supplies
provided to patients with gastrostomies.
As noted above,
we have affirmed Judge Habermann's conclusion that the flushing/irrigation
supplies and the site care supplies provided to patients with gastrostomies
by the appellants did not duplicate supplies provided in the PEN supply
kits. Therefore, in calculating payment for the supplies at issue, Palmetto
may not reduce or otherwise adjust the payments for the supplies
on the theory that they duplicate supplies already provided to a patient
in a PEN supply kit. Moreover, any payment amounts established for the
supplies at issue shall be comparable to payments made by Palmetto for
similar supplies during the period at issue, but shall not exceed the
After careful consideration
of the entire record, the Medicare Appeals Council makes the following
Payment shall be
made by Palmetto GBA for the flushing/irrigation and site care supplies
provided to beneficiaries with gastrostomies consistent with the instructions
in section IV.B of this decision. Claims for flushing/irrigation and site
care supplies described in footnote 20 of this decision shall be processed
consistent with the instructions in section IV.A of this decision.
M. Susan Wiley
1. The seven original appellants were: Key Largo Medical Systems, Inc.; Citrus Management, Inc.; Genesis Medical Services, Inc.; MK Medical Supply, Inc,; Nursing Home Products and Services, Inc.; Pennsylvania Medical Supply, B.T.; and Ostomy Unlimited, Inc. Ostomy Unlimited subsequently withdrew its appeal and is no longer a party to this decision.
2. In 2001, the Health Care Financing Administration (HCFA) was renamed the Center for Medicare and Medicaid Services (CMS). Because all of the relevant events and policy issuances in this case precede the agency's redesignation, we will refer to the agency as HCFA throughout this decision.
3. In our remand order we found that because Judge Carney erroneously concluded that certain claims denied by the carrier hearing officer had been dismissed, she had not adjudicated all of the claims appealed. We directed the Administrative Law Judge to issue a decision on remand on all of the claims properly appealed, not just the claims pertaining to patients receiving parenteral or enteral nutrition. Judge Habermann's decision does not address any individual claims, nor contain any directions concerning the disposition of the "outlier" cases described in our order.
4. During the period at issue, the PEN benefit was administered by Blue Cross and Blue Shield of South Carolina (BCBS-SC), which is now known as Palmetto Government Benefits Administration. We will refer to the carrier as BCBS-SC throughout this decision.
5. The legislation provided, however, that for purposes of implementing the above provisions, parenteral and enteral nutrition nutrients, supplies and equipment were not included within the definition of prosthetics.
6. Section 1102 establishes the general authority to publish rules and regulations; section 1874(a) establishes the Secretary's general administrative authority to perform any of its functions under title XVIII either directly or by contract.
7. Many of the documents considered by Judges Carney and Habermann are referenced or appear in more than one exhibit. For example, the documents entered in the record by Judge Carney as Exhibits 1 through 3, which pertain to the appeal of this case at the carrier level, no longer appear in the administrative record as Exhibits 1 through 3; rather they are contained in Exhibits 32 through 34, which were entered in the record by Judge Habermann. (The documents that were originally in Exhibit 15 appear to have been similarly dispersed; it no longer appears in the record as a separate exhibit.) Other documents, many of them pertaining to the carrier jurisdiction issue, appear as exhibits appended to various depositions, and may also be entered separately as exhibits by the Administrative Law Judges and/or contained in attachments to briefs submitted by appellants' counsel or the agency. In this decision, we will only reference one location for each document cited. Exhibits entered into the record by Judges Carney and Habermann will be cited as "ALJ Ex.". Citations to documents entered as exhibits within deposition records will give both the ALJ exhibit number for the deposition record and the number given to the particular document during the deposition. Documents entered into the record by the Medicare Appeals Council will be cited "MAC Ex.".
8. ALJ Ex. 10, Robertson deposition, deposition exhibit 9.
9. In March 1997, HCFA moved this provision to section 3324 D.3 of the MCM. Section 3329 now pertains to Medicare Secondary Payer matters.
10. According to the record, approximately 99% of gastrostomy patients are PEN patients. Patients who have gastrostomies, but do not receive PEN include individuals with bowel obstruction and bowel cancer. [ALJ Ex. 11, Fulton deposition, pages 68-69.]
11. ALJ Ex.12, Hummel deposition, deposition exhibit 23.
12. See also, PBS memoranda of February 26, 1991 and February 22, 1991 (ALJ Ex. 12, Hummel deposition, deposition exhibits 24 and 27).
13. Hearing Exhibit 1.
14. Hearing Exhibit 2.
15. Hearing Exhibit 3.
16. Hearing Exhibit 9.
17. Were this a case involving a request for waiver of an overpayment, we might well conclude, as did Judges Stewart and Habermann in other decisions cited in the record, that the confusion caused by such issuances is relevant to determining whether there was good cause for reopening determinations on previously paid claims or whether the suppliers were "without fault" in causing the overpayment. However, as this case involves a request for payment of claims initially denied by a contractor, neither the regulations' reopening provisions nor the waiver provisions in section 1879 of the Act apply.
18. Appellants appended to their August 3, 2001 brief a decision issued on July 2, 1997 by Administrative Law Judge Kenneth Stewart concerning an overpayment that BCBS-FL assessed against a supplier of flushing and site care supplies. [MAC EX. 17, Tab T]. According to the decision, in 1993 BCBS-FL reopened a number of favorable determinations pertaining to these supplies. It then found that the suppliers had been overpaid because the supplies were not reasonable and necessary, as they duplicated supplies the PEN supplier had already paid. In considering whether BCBS-FL had good cause to reopen it prior determinations, Judge Stewart noted that a HCFA memorandum issued in 1990 represented HCFA's expressed policy regarding the jurisdiction of the PEN specialty carriers. Id. at page 19. Judge Stewart also noted, however, that the policy was not effectuated with any clarity so as to ensure any type of uniformity. We agree. However, while the confusion caused by conflicting policy statements may have been relevant to determining whether there was good cause to reopen determinations before Judge Stewart, it is less relevant in determining which carrier actually had jurisdiction over the claims.
19. Understandably, the contents of Ms. Spires e-mail to Mr. Carter have influenced the decisionmaking in this case. For example, as we explain below, we have found persuasive her statement that the PEN carrier would have found the supplies at issue to be covered if they were not duplicative. However, we do not consider her statements concerning jurisdiction to be as significant. For the reasons discussed above, we do not consider a carrier's perception of its jurisdictional boundaries as dispositive of the issue. We also note that Ms. Spires= remarks emphasize the codes the carrier had jurisdiction over, not the services. As indicated in HCFA's 1984 letter establishing the PEN carriers, the B codes were designated for PEN services to enable contractors to sort claims for services not within their jurisdiction, but the carriers' jurisdiction was defined by the services not the codes. Nonetheless, the Council does not condone any attempts that may have been made to improperly influence Ms. Spires' testimony concerning these matters.
20. Our remand
order discussed this problem as follows:
In footnote two of the hearing decision, the Administrative Law Judge wrote that some of the gastrostomy supply claims initially submitted for payment were accompanied by documentation indicating that the beneficiaries had diagnoses of permanent urinary incontinence. The Administrative Law Judge wrote that "[t]hose claims were actually dismissed by BCBS/SC at the review level because they did not relate to the PEN program." Thus, the Administrative Law Judge continued, the claims "are not at issue here, despite the fact that they appear as denial number 4 in the carrier hearing decision."
On review of the record, the Medicare Appeals Council has found that the Administrative Law Judge erred in finding that all of the above-described claims were not before her on appeal. The carrier review determinations in the file and the carrier review worksheets that are now associated with each claim indicate that some of the above-described claims were, in fact, dismissed. The Carrier Hearing Officer decision and attachments show, however, that numerous other claims that were accompanied by urinary care-related documentation (as well as colostomy-related documentation) were considered by the Carrier Hearing Officer, appealed by the suppliers, and were properly before the Administrative Law Judge.
21. Although Judge Habermann's decision describes the testimony offered concerning the medical necessity of both the flushing/irrigation and site care supplies, Section XIV of the hearing decision, entitled MEDICARE COVERAGE ISSUES, only evaluates whether the flushing/irrigation supplies are covered and makes no mention of the site care supplies. Furthermore, Judge Habermann did not make any findings concerning the site care supplies. The only specific evaluation of the medical necessity of the site care supplies is in Section XIII, entitled CARRIER JURISDICTION, in which the Administrative Law Judge states:
...I find that the evidence submitted in the record supports the medical necessity and reasonableness for the gastrostomy supplies at issue in terms of preventing possible complications. These complications could arise from gastric or formula leakage which could lead to skin breakdown, bacterial invasion and inflammation, if proper daily site care is not maintained or if the G-tubes are not properly irrigated or flushed out.
22. For example, we are not convinced that there is sufficient evidence of record to establish that it is always medically reasonable and necessary to include sterile water in gastrostomy flushing and site care supplies. We note that while Ms. Motta indicated that it may be necessary to use sterile water in nursing homes whose regular water source is well water, her general conclusion appears to be that in other instances it is "preferable," rather than necessary. However, the record does not indicate that the suppliers would have had actual or constructive notice of this distinction.
23. As discussed throughout the record, claims for services submitted to the local carriers contained procedure codes beginning with an AA,@ while claims for PEN services submitted to the PEN carriers contained procedure codes beginning with a AB.@ In this case, the appellants were directed to submit claims to the PEN carrier with code B9998, a miscellaneous code, because none of the other available B codes were applicable.