MARGARET M. HECKLER, SECRETARY OF HEALTH AND HUMAN SERVICES, ET
AL., PETITIONERS V. MICHIGAN ACADEMY OF FAMILY PHYSICIANS, ET AL.

   No. 84-120

   In the Supreme Court of the United States

   October Term, 1984

   The Solicitor General, on behalf of the Secretary of Health and
Human Services and Blue Cross and Blue Shield of Michigan, an
insurance carrier that administers the payment of claims under the
Part B Medicare Program on behalf of the Secretary, petitions for a
writ of certiorari to review the judgment of the United States Court
of Appeals for the Sixth Circuit in this case.

   Petition for a Writ of Certiorari to the United States Court of
Appeals for the Sixth Circuit

                       PARTIES TO THE PROCEEDING

   The petitioners are Margaret M. Heckler, Secretary of Health and
Human Services, and Blue Cross and Blue Shield of Michigan, an
insurance carrier that has contracted with the Secretary pursuant to
42 U.S.C. (& Supp. V) 1395u to administer the Part B Medicare Program
in Michigan on her behalf.

   The respondents are:  (1) the Michigan Academy of Family
Physicians, a non-profit association of family physicians in Michigan;
 (2) Lester Webb and Charles Farber, family physicians who are
eligible for specialist certification under the standards of the
American Board of Family Practice but who have not been certified by
the Board;  (3) Glenn House, a family physician certified as a
specialist under the standards of the American Board of Family
Practice;  and (4) Carol A. Diedrich, a resident of Michigan and a
Medicare Part B recipient whose treating physician, Philip Lang, is a
family physician who is neither board-certified nor Board-eligible.

            TABLE OF CONTENTS
   Opinions below
   Jurisdiction
   Statutory provisions and regulation involved
   Statement
   Reasons for granting the petition
   Conclusion
   Appendix A
   Appendix B
   Appendix C
   Appendix D

                            OPINIONS BELOW

   The opinion of the court of appeals (App., infra, 1a-13a) is
reported at 728 F.2d 326.  The opinion of the district court (App.,
infra, 15a-23a) is reported at 502 F. Supp. 751.

                             JURISDICTION

   The judgment of the court of appeals was entered on February 23,
1984 (App., infra, 14a).  By order dated May 15, 1984, Justice
O'Connor extended the time within which to file a petition for a writ
of certiorari to and including July 22, 1984.  The jurisdiction of
this Court is invoked under 28 U.S.C. 1254(1).

             STATUTORY PROVISIONS AND REGULATION INVOLVED

   28 U.S.C. 1331 and 1361;  relevant provisions of the Social
Security Act, 42 U.S.C. 1395a, 1395ff(a) and (b), 42 U.S.C. (& Supp.
V) 1395u(b)(3);  and 42 C.F.R. 405.504(b) are reproduced at App.,
infra, 24a-26a.

                          QUESTION PRESENTED

   Whether the district court had jurisdiction under 28 U.S.C. 1331 to
entertain respondents' challenge to a regulation affecting the amount
of benefits payable for medical services under Part B of the Medicare
Program, notwithstanding the preclusion of review in 42 U.S.C. 405(h)
and 1395ff.

                               STATEMENT

   This case concerns the jurisdiction of a federal district court to
entertain a challenge to a regulation affecting the amount of benefits
to be paid for physicians' services under Part B of the Medicare
Program.

   1.a. The Medicare Program is divided into two parts.  Part A (42
U.S.C. (& Supp. V) 1395c et seq.) provides insurance for the
reasonable cost of hospital and related post-hospital services. 42
U.S.C. (& Supp. V) 1395j et seq.), at issue here, establishes a
voluntary program of supplementary medical insurance covering, in
general, 80% of the "reasonable charge" for physicians' and other
medical services.  42 U.S.C. (& Supp. V) 1395k, 1395l, 1395x(s).

   Under 42 U.S.C. (& Supp. V) 1395u, the Secretary of Health and
Human Services is authorized to enter into contracts with private
insurance carriers to administer the payment of Part B claims on
behalf of the Secretary.  Schweiker v. McClure, 456 U.S. 188, 190
(1982).  Under these contracts, the carriers determine whether
particular services are covered by Part B and the amount of the
"reasonable charge" for such services.  These determinations are made
in accordance with regulations issued by the Secretary, through the
Health Care Financing Administration (HCFA) in the Department of
Health and Human Services.  42 C.F.R. 405.502(d).  The Secretary is
expressly authorized to issue such rules and regulations and to
establish procedures to carry out the provisions of the Medicare
Program.  42 U.S.C. 1395hh;  42 U.S.C. 405(a), as made applicable to
the Medicare Program by 42 U.S.C. 1395ii.  See Heckler v. Campbell,
No. 81-1983 (May 16, 1983), slip op. 7-8.

   A request for payment of services may be submitted by a Part B
enrollee or by the physician or other person who rendered the services
if the enrollee has assigned the claim to that person.  42 U.S.C.
1395u(b)(3)(B)(ii);  United States v. Erika, Inc., 456 U.S. 201, 203,
207 n.7 (1982).  If the carrier finds that the services are not
covered by Part B or determines that the payment due is less than the
amount claimed, the beneficiary or his assignee is entitled to have
the claim reconsidered by the carrier.  42 C.F.R. 405.807-405.812.  If
the claim again is denied and the amount remaining in controversy is
$100 or more, the claimant is entitled to an oral evidentiary hearing
conducted by the carrier.  42 U.S.C. 1395u(b)(3)(C);  see Schweiker v.
McClure, 456 U.S. at 191.

   Under 42 U.S.C. 1395ff(b)(1)(C) and (2), an individual is entitled
to judicial review of the "amount of benefits under part A" of the
Medicare Program if the amount in controversy after completion of
administrative review is $1,000 or more.  There is, however, no
comparable provision in 42 U.S.C. 1395ff for judicial review of the
"amount of benefits" determined to be payable on a claim under Part B
of the Medicare Program.  In United States v. Erika, Inc., 456 U.S. at
206-211, this Court held that the text and legislative history of 42
U.S.C. 1395ff established that Congress "deliberately intended to
foreclose further review of such claims" (456 U.S. at 208).  Accord,
Heckler v. Ringer, No. 82-1772 (May 14, 1984), slip op. 5 n.4.

   b. The Social Security Act requires the carriers that administer
the Part B program on the Secretary's behalf to make payment for
covered services on the basis of a "reasonable charge" for the
services.  42 U.S.C. 1395u(b)(3)(B).  In determining the reasonable
charge, the carrier is to "take into consideration the customary
charges for similar services generally made by the physician * * * as
well as the prevailing charges in the locality for similar services."
42 U.S.C. (& Supp. V) 1395u(b)(3).  The Act further provides that the
reasonable charge may not exceed the prevailing charge level that, on
the basis of statistical data and methodology acceptable to the
Secretary, would cover 75% of the customary charges made for similar
services in the same locality during the preceding year (ibid.).
Applying these principles, the reasonable charge for a physician's
services ordinarily is the lowest of (1) the actual charge in the
particular instance, (2) the physician's customary charge, and (3) the
prevailing charge in the locality (App., infra, 2a).  See 42 C.F.R.
405.502.

   The regulation at issue in this case recognizes, however, that "(t)
 he range of prevailing charges in a locality may be different for
physicians * * * who engage in a specialty practice or service than
for others." 42 C.F.R. 405.504(b).  It accordingly permits (but does
not require) a carrier, based on "(e)xisting differentials in the
level of charges between different kinds of practice or service," to
develop more than one range of prevailing charges to be used by the
carrier in determining the reasonable charge.

   In 1968, pursuant to the regulation just discussed, Blue Cross/Blue
Shield of Michigan (BC/BSM), the carrier responsible for administering
the Part B program in Michigan, conducted a statistical analaysis of
physicians' charges in that State.  Based on its analysis, BC/BSM
identified three categories of physicians for purposes of developing
"screens" to review requests for payment.  The three categories were
comprised of:  (1) hospital internists and other hospital specialists,
(2) other specialists, and (3) general practitioners and other
non-specialists.  The prevailing charges for specialists in Michigan
were higher than those for non-specialists.  Therefore, a Part B
enrollee could receive a greater reimbursement under Medicare when he
was treated by a specialist than when he was treated by a
non-specialist.  App., infra, 3a-4a.

   After the Act was amended in 1972 to include chiropractors,
podiatrists, and dentists within the definition of the term
"physician" (42 U.S.C. 1395x(r)), those individuals were included in
the non-specialist category (App., infra, 3a).  Following creation of
the family practice specialty, BC/BSM in 1973 classified Board-
certified family practitioners in the specialist category.  However,
family physicians who were merely eligible for Board certification and
family physicians who were neither Board-eligible nor Board-certified
were grouped with the non-specialists (id. at 4a).  /1/

   2. Respondents filed this action on October 8, 1976 in the United
States District Court for the Eastern District of Michigan to
challenge BC/BSM's classification of family practitioners within the
three-category framework for determining prevailing charges (C.A. App.
1, 11-29).  The initial plaintiffs were the Michigan Academy of Family
Physicians, one Board-certified family practitioner, and two
Board-eligible family practitioners (C.A. App. 19).  Later, a Part B
enrollee who was the patient of a family practitioner who was neither
Board-certified nor Board-eligible was joined as a plaintiff (App.,
infra, 22a).

   The district court held that the establishment of separate charge
screens that distinguish non-Board-certified family physicians from
other physicians violated the Medicare Act and that to the extent 42
C.F.R. 405.504(b) authorized the screens established by BC/BSM, it was
invalid.  The court first relied on 42 U.S.C. 1395u(b)(3), which
requires the carrier to "take() into consideration" the prevailing
charges for "similar services" and to establish a ceiling based on the
prevailing charge level that would cover 75% of the customary charges
for "similar services" in the locality.  In the court's view, these
provisions required that similar services performed by physicians with
different degrees of specialization be reimbursed at an equal rate.
App., infra, 20a-21a.  The court also concluded on the basis of
testimony at trial that BC/BSM did not have an adequate factual or
statistical basis for distinguishing among groups of physicians (id.
at 19a) .

   In addition, the district court held that BC/BSM's procedure and
the Secretary's regulation conflicted with 42 U.S.C. 1395a, which
provides that Medicare beneficiaries "may obtain health services from
any institution, agency, or person qualified to participate under (the
Medicare program) if such institution, agency, or person undertakes to
provide him such services." In the court's view, the maintenance of
three charge screens impermissibly "tends to influence the patient's
choice of a physician" (App., infra, 21a).

   As a remedy, the district court ordered the Secretary and BC/BSM to
establish two categories for determining prevailing charges:  the
first for all physicians, and the second for chiropractors,
podiatrists, and dentists (App., infra, 23a).

   3.a. The court of appeals affirmed the district court's ruling but
modified the remedy. As a threshold matter, the court of appeals
rejected the Secretary's contention that the district court's exercise
of jurisdiction under 28 U.S.C. 1331 was barred by 42 U.S.C. 1395ff
and 42 U.S.C. 405(h) (App., infra, 5a-10a).  The court acknowledged
that under this Court's decision in Erika, judicial review of the
amount of reimbursement for services under Part B of the Medicare
Program is foreclosed (App., infra, 6a-7a).  But the court noted that
in the wake of Erika, several lower courts nevertheless "have
strenuously endeavored to find jurisdiction" over challenges to
certain aspects of the Medicare Program (App., infra, 7a), and it
elected to do the same.  The court relied in particular on the Ninth
Circuit's decision in Ringer v. Schweiker, 697 F.2d 1291 (1982), which
subsequently was reversed by this Court (Heckler v. Ringer, No.
82-1772 (May 14, 1984)), and on the Fourth Circuit's decision in
Starnes v. Schweiker, 715 F.2d 134 (1983), which subsequently was
vacated and remanded by this Court for reconsideration in light of
Heckler v. Starnes, No. 83-1149 (June 4, 1984).  See App., infra, 7a.

   The court of appeals acknowledged that "the eventual result of
(this) suit may cause an increase in amounts of reimbursement" for
services rendered by family physicians, who seek to be grouped with
specialists whose services are reimbursed at a higher rate (App.,
infra 7a).  But the court held that the case fell outside the
preclusion of review in 42 U.S.C. 1395ff with respect to matters
pertaining to the amount of reimbursement because respondents were
challenging the "mechanism" for computing the reasonable charge, and
not the reasonable charge in a particular case (App., infra, 7a).  The
court stated that a "clear and convincing showing" of congressional
intent to preclude review if required, and it declined to find a bar
to judicial review here merely because Congress did not specifically
provide for it in the judicial review section of the Medicare Act, 42
U.S.C. 1395ff (App., infra, 8a;  see also id. at 9a-10a).

   The court of appeals likewise concluded that judicial review under
28 U.S.C. 1331 was not barred by 42 U.S.C. 405(h), as incorporated
into the Medicare Act by 42 U.S.C. 1395ii.  The court acknowledged
that in Weinberger v. Salfi, 422 U.S. 749 (1975), and subsequent
decisions, this Court had held that the third sentence of Section
405(h) bars a court from exercising federal question jurisdiction to
entertain a claim arising under the Social Security Act.  But it noted
that in Salfi and the other decisions, the Court at the same time
permitted suits under 42 U.S.C. 405(g).  Because there is no provision
for review of Part B Medicare claims under 42 U.S.C. 405(g), the court
reasoned, it would not construe 42 U.S.C. 405(h) to preclude judicial
review here in a suit brought under 28 U.S.C. 1331.  App., infra,
8a-10a.

   b. On the merits, the court of appeals held that BC/BSM's
calculation of the amount of reimbursement for family physicians'
services by reference to the separate prevailing charge screens was
invalid (App., infra, 10a-13a).  The court explained that the
"touchstone of (42 U.S.C. 1395u(b)(3)) is that similar services, once
determined, are to be compensated equally, regardless of who performs
them" (App., infra, 10a).  It further found that BC/BSM's decision not
to group family physicians with other specialists but to group them
with chiropractors and podiatrists was not supported by the record of
the trial the district court held in the case (id. at 11a).  The court
of appeals explained that its "decision to invalidate the regulation"
was "bolstered" by its view that the reimbursement approach BC/BSM
followed might create an added incentive for physicians to become
specialized and for patients to seek specialized care (id. at 12a).
The latter incentive, the court believed, was sufficient to support a
finding that "the regulation as applied violates 42 U.S.C. 1395a,
prohibiting infringement of a patient's free choice of a physician"
(ibid.).

   The court of appeals concluded, however, that "the district court's
remedy, adopting sua sponte a single prevailing charge screen for all
physicians, (went) too far" (App., infra, 12a-13a).  It therefore
remanded the case to the Secretary "with instructions to consider
similar services in an equal manner regardless of who performs that
service" (id. at 13a).

                   REASONS FOR GRANTING THE PETITION

   The decision of the court of appeals permitting judicial review of
matters pertainting to the amount of benefits payable under the Part B
Medicare Program is flatly inconsistent with this Court's holdings in
United States v. Erika, Inc., 456 U.S. 201 (1982), and Heckler v.
Ringer, No. 82-1772 (May 14, 1984).  The Court recently granted
certiorari and vacated the judgment of the court of appeals in another
Medicare Part B case raising identical jurisdictional issues and
remanded the case for further consideration in light of Ringer.  See
Heckler v. Starnes, No. 83-1149 (June 4, 1984).  We request the Court
to follow the same course here.  On remand, the court of appeals also
should reconsider its approach to discerning legislative intent with
regard to the availability of judicial review in light of this Court's
decision in Block v. Community Nutrition Institute, No. 83-458 (June
4, 1984).

   1. Respondents in this case challenge the prevailing charge screens
used to calculate the amount of Medicare benefits paid for services
furnished by family physicians.  As the Court's recent decision in
Heckler v. Ringer makes clear, judicial review of such matters is
barred by two separate provisions of the Social Security Act.  The
first is 42 U.S.C. 1395ff, which is the provision that governs the
availability of judicial review for participants in the Medicare
Program.

   In 42 U.S.C. 1395ff(a), Congress provided that "the determination
of the amount of benefits under Part A (of the Medicare Program) shall
be made by The Secretary in accordance with regulations prescribed by
(her)." The Secretary is authorized to enter into contracts with
fiscal intermediaries to make these initial determinations on her
behalf.  See 42 U.S.C. (& Supp. V) 1395h.  An individual who is
dissatisfied with the intermediary's determination is entitled to a
hearing before an administrative law judge in the Department of Health
and Human Services if the amount in controversy is $100 or more and to
judicial review as provided in 42 U.S.C. 405(g) if the amount
remaining in controversy is $1000 or more.  42 U.S.C. 1395ff(b)(1)(C)
and (2).  On judicial review under 42 U.S.C. 405(g), the individual
may seek a greater amount of benefits under Part A than was awarded at
the administrative level by contending that the intermediary or the
Secretary relied upon an invalid regulation.  Heckler v. Ringer, slip
op. 13;  Weinberger v. Salfi, 422 U.S. 749, 762 (1975).  Indeed, the
Court held in Ringer that the individual must raise any challenge to a
regulation under Part A in an action brought pursuant to 42 U.S.C.
1395ff and 405(g), and cannot bring a separate action challenging the
validity of the regulation outside the special statutory review
procedure by invoking the federal question jurisdiction of a district
court under 28 U.S.C. 1331.  Heckler v. Ringer, slip op. 10-13, 16-24.

   Determinations and evidentiary hearings with respect to the amount
of benefits on a particular claim under Part B of the Medicare Program
are conducted by private insurance carriers under contract with the
Secretary.  As this Court noted in Erika (456 U.S. at 208), 42 U.S.C.
1395ff conspicuously fails to authorize judicial review of the "amount
of benefits" under Part B, even though it expressly authorizes such
review under Part A.  In light of the statute's "precisely drawn
provisions," the Court in Erika found this omission persuasive
evidence that Congress had "deliberately * * * foreclosed" judicial
review of benefit amount determinations under Part B.  456 U.S. at
208.  This Court found this indication confirmed by the legislative
history of Section 1395ff. 456 U.S. at 208-210.

   This foreclosure of judicial review under Part B necessarily
applies even where, as here, the plaintiff challenges a regulation
issued by the Secretary that in turn has the effect of limiting the
amount of benefits payable on an individual claim.  In Erika itself,
the plaintiff's claim to increased benefits was based in part on a
challenge to instructions issued by the Secretary that limited the
amount of benefits payable by the carrier.  Erika, Inc. v. United
States, 634 F.2d 580, 589 (Ct. Cl. 1980).  And if there were any doubt
remaining on this score after Erika, it was dispelled by the decision
in Ringer.  That case involved a challenge to a regulation issued by
the Secretary that barred the payment of any amount of benefits under
Medicare for a particular medical service.  The Court nonetheless held
that judicial review of the regulation as it applied in the Part B
Program was barred by 42 U.S.C. 1395ff and this Court's decision in
Erika.  Heckler v. Ringer, slip op. 5 n.4.

   The court of appeals' holding permitting judicial review of the
regulation at issue here therefore cannot be squared with Ringer.  The
court of appeals believed that the preclusion of review did not apply
because respondents were challenging only the "mechanism" for
computing the amount of benefits, not the actual amount paid in a
particular case.  App., infra, 7a.  But in Ringer the plaintiffs
likewise challenged the rule in issue on various substantive and
procedural grounds without seeking an actual award of benefits (slip
op. 7 & n.7), and yet the Court found that review under Part B was
precluded.  /2/

   2. The correctness of the result indicated by 42 U.S.C. 1395ff
standing alone -- that judicial review of the regulation affecting the
calculation of the amount of benefits under Part B is foreclosed -- is
confirmed by 42 U.S.C. 405(h).  /3/ The second sentence of Section
405(h) provides that "(n)o findings of fact or decision by the
Secretary shall be reviewed by any person, tribunal, or governmental
agency except as herein provided" (emphasis added).  This sentence
embodies a general rule under the Social Security Act that judicial
review is unavailable except where and in the manner such review is
expressly authorized by that Act.  /4/ Because Congress has not
affirmatively provided in the Social Security Act itself for judicial
review under the Part B Medicare Program, the second sentence of
Section 405(h) precludes such review.

   The third sentence of 42 U.S.C. 405(h) further provides that "(n)o
action" shall be brought against the Secretary under 28 U.S.C. 1331
"to recover on any claim arising under" the Medicare Act.  The court
of appeals' holding that the district court had jurisdiction over this
suit under 28 U.S.C. 1331 directly contravenes this jurisdictional bar
as well.  The court of appeals believed that this bar was inapplicable
here because respondents purport to challenge the "procedure" for
calculating benefits, not the amount of benefits payable, on a
particular claim (App., infra, 9a).  But this Court has since
explicitly held in Ringer that the preclusion in the third sentence of
Section 405(h) cannot be avoided by labeling a challenge as
"procedural" in nature (Heckler V. Ringer, slip op. 11-13).  The court
of appeals also construed the preclusion of review in the third
sentence of Section 405(h) to be inapplicable because the Social
Security Act does not otherwise provide for judicial review of Part B
claims.  This attempt to avoid the preclusive effect of Section 405(h)
is inconsistent with Ringer too, because the Court in that case
explicitly rejected the notion that the meaning of Section 405(h)
somehow shifts depending on whether judicial review is available under
Section 405(g).  (Heckler v. Ringer, slip op. 19).

   3. The court of appeals narrowly construed the preclusions of
review in 42 U.S.C. 1395ff and 405(h) in part because of what it
believed to be the absence of a "clear and convincing showing" that
Congress intended to bar judicial review in the circumstances
presented here (App., infra, 8a, 9a).  As this Court recently
stressed, however, the proper inquiry is not whether there has been a
clear and convincing showing of congressional intent in the strict
evidentiary sense, as the court of appeals appeared to believe, but
rather whether an "intent to preclude judicial review is 'fairly
discernible in the statutory scheme.'" Block v. Community Nutrition
Institute, No. 83-458 (June 4, 1984), slip op. 10, quoting Association
of Data Processing Service Organizations, Inc., v. Camp, 397 U.S. 150,
157 (1970).  For the reasons stated above, such an intent plainly is
"fairly discernible" -- indeed, it is compelled -- by the combined
force of 42 U.S.C. 1395ff and 405(h).  /5/

                              CONCLUSION

   The petition for a writ of certiorari should be granted, the
judgment of the court of appeals should be vacated, and the case
should be remanded to the court of appeals for further consideration
in light of Heckler v. Ringer, No. 82-1772 (May 14, 1984), and Block
v. Community Nutrition Institute, No. 83-458 (June 4, 1984).

   Respectfully submitted.

   REX E. LEE

      Solicitor General

   RICHARD K. WILLARD

      Acting Assistant Attorney General

   KENNETH S. GELLER

      Deputy Solicitor General

   EDWIN S. KNEEDLER

      Assistant to the Solicitor General

   ANTHONY J. STEINMEYER

   MARILYN S.G. URWITZ

      Attorneys

   JULY 1984

   /1/ The government acknowledged in proceedings in district court in
this case that Board-eligible family physicians should have been
included in the specialist category, and it represented that
Board-eligible family physicians, like other Board-eligible
physicians, thereafter would be included in that grouping (App.,
infra, 19a).

   /2/ In the absence of a concrete claim for benefits filed with the
Secretary by a Part B enrollee (or by a physician who has accepted an
assignment of such a claim), an enrollee or physician would not have
standing to challenge the procedures used to calculate the amount of
benefits payable on such a claim.  Heckler v. Ringer, slip op. 6 n.6,
12, 17.  And where an enrollee or physician does have a claim for
benefits pending, this Court's decisions in Ringer and Erika make
clear that judicial review of matters pertaining to the payment of
that claim, including the mechanism for calculating the amount
payable, is foreclosed.

   /3/ 42 U.S.C. 405(h) is made applicable to the Medicare Program by
42 U.S.C. 1395ii.

   /4/ Because carriers make determinations on claims for benefits
under Part B on behalf of the Secretary (see Schweiker v. McClure, 456
U.S. at 190), this preclusion of review applies equally to findings
and decisions by the carriers under Part B.

   /5/ Because the courts below were clearly without jurisdiction, we
have not asked this Court to review the court of appeals' holding on
the merits that the Secretary's regulation permitting different charge
screens for specialists is invalid.  Nonetheless, it is our view that
this holding also was plainly incorrect.  The regulation, 42 C.F.R.
405.504(b), was promulgated in 1967 (32 Fed. Reg. 12601), just one
year after the Medicare Program went into effect.  See 42 U.S.C.
1395q(a) (1).  It therefore is entitled to particular weight because
"'it involved a contemporaneous construction of a statute by the
(persons) charged with the responsibility of setting its machinery in
motion, of making the parts work efficiently and smoothly while they
are yet untried and new.'" Zenith Radio Corp. v. United States, 437
U.S. 443, 450 (1978), (brackets in original), quoting Norwegian
Nitrogen Products Corp. v. United States, 288 U.S. 294, 315 (1933).
The court of appeals believed that the regulation was inconsistent
with the reference in 42 U.S.C. 1395u(b)(3) to charges made in the
locality for "similar services," which the court read to require
identical levels of reimbursement irrespective of who performs the
services.  App., infra, 10a-12a.  There are two flaws in this
analysis.

   First, the performance of an examination or other service by a
specialist is not necessarily equivalent to the performance by a
non-specialist.  The specialist brings his added expertise to bear.
It presumably is this difference in expertise that has led the medical
profession to recognize specialization by instituting a procedure for
Board certification and that has led to the different charging
patterns in some localities on which a carrier may base different
charge screens.  It certainly is reasonable for the Secretary to
permit a carrier to take those factors into account in calculating the
overall "reasonable charge" -- the ultimate standard for purposes of
Medicare reimbursement.  42 U.S.C. 1395u(b)(3)(B).  Second, 42 U.S.C.
1395u(b)(3) does not state that payment must be identical for "similar
services." It only requires the carrier to "take() into consideration"
the prevailing charge in the locality for "similar services" and sets
a ceiling by reference to that standard.  This framework allows the
Secretary and the carriers flexibility in their approach to the
computation of a "reasonable charge" for services.  As noted above
(see note 1, supra), the Secretary and BC/BSM have agreed to group
family physicians who are Board-certified or Board-eligible with other
specialists.  Those family physicians who are not even Board-eligible
are grouped separately.  That plainly is a rational classification
system.

   APPENDIX