Introduction

This case is before the Medicare Appeals Council on the Appellant's request for review of the Administrative Law Judge's decision, dated July 27, 2001. The Medicare Appeals Council grants the request for review pursuant to 20 CFR 404.967 and 404.970, incorporated by reference in 42 CFR 405.856, because there is an error of law. The Council hereby vacates the Administrative Law Judge's decision and remands this case for further proceedings, including a new decision. 20 CFR 404.977.

Background

On February 24, 2000, surgeon J.G.H., M.D. (Dr. H.) evaluated the beneficiary for treatment options concerning a basal cell carcinoma of the lower left eyelid. Ex. 32. Dr. H. recommended "Moh's excision," a surgical technique using "microscopically controlled excision of the [cancerous] tissue." The Merck Manual, Sec. 10, Ch. 126, "Basal Cell Carcinoma" (Mark H. Beers, M.D. & Robert Berkow, M.D., eds., 17^th ed. 1999). Dermatologist and surgeon R.M.S., M.D. (Dr. S) performed the Moh's procedure on March 27^th. Id. Dr. H was to perform reconstructive surgery on the following day. Id.

The beneficiary testified that the first surgery was more complex than anticipated. Tape Audit. ⁽¹⁾ As a result, according to the beneficiary, Drs. S and H referred him to G.W.J., M.D. (Dr. J) to perform the reconstructive surgery. Tape Audit. ⁽²⁾ Dr. S states that the referral occurred "emergently" in order "to provide the patient with the best functional outcome." Ex. 33. Dr. H states that the referral was made for "urgent treatment . . . to preserve eye function." Ex. 32. Dr. J states that the beneficiary's diagnosis made it "imperative that immediate attention be drawn to the area." Ex. 17.

A Medicare carrier "Reasonable Charge Record" indicates that Dr. J opted out of the Medicare program for a two-year period on June 18, 1998 and renewed his opt-out status on June 18, 2000. Ex. 27/1. The record contains a Medicare Opt-Out Affidavit for Dr. J dated June 23, 2000. Ex. 20/1. That affidavit states, in part: "I understand that a beneficiary who has not entered into a private contract and who requires emergency or urgent care services may not be asked to enter into a private contract with respect to receiving such services and that the rules of 42 C.F.R. 405.440 [emergency and urgent care services] apply if I furnish such services." Id. There is no earlier opt-out affidavit in the record covering the period the services at issue were rendered.

On March 28, 2000, Dr. J and the beneficiary entered into a "Private Contract for Medicare Beneficiaries." Ex. 21. The contract states, in relevant part, that "Medicare may not be billed for the services that [Dr. J] provides. You . . . are personally liable for all charges incurred to Dr. G. W. J, M.D., P.C." Id. An office memo indicates that the beneficiary paid a $5,000 surgery fee on the same day and an $800 surgery fee on May 2, 2000. Ex. 19. The beneficiary maintained at both the Medicare carrier hearing level and before the Administrative Law Judge that he did not understand, or was not advised, of the ramifications of privately contracting with an opt-out physician, i.e., that Medicare would neither be billed nor pay for Dr. J services. Tape Audit; Ex. 11/2.

Medicare was nonetheless billed for the services that Dr. J provided. The record contains a "Health Insurance Claim Form" (HCFA-1500) for the two surgeries. Ex. 1/1. The beneficiary signed and dated the field authorizing release of medical information "to process the claim." Id. (Block 12). An illegible signature and date appear in the block for "signature of physician or supplier." Id. (Block 31). The block for assignment of payment to the physician is unsigned. Id. (Block 13). The record also contains "Patient's Request for Medical Payment" (HCFA-1490S) signed by the beneficiary and dated May 16, 2000. Ex. 1 / 2. ⁽³⁾ Medicare initially denied payment because Dr. J had opted-out of the Medicare program. Ex. 3/1 (Notes Section, Item C). The carrier affirmed the denial on reconsideration, Ex. 5/2, and Appellant requested a Medicare carrier hearing. Ex. 6.

The Medicare carrier Hearing Officer wrote Dr. J on November 28, 2000, and asked whether the surgery performed on March 29, 2000, constituted an "emergency" or "urgent" situation. Ex. 9/1. In doing so, she referred to Section 4507 of the Balanced Budget Act of 1997, which permits Medicare payment for services provided by an opt-out physician in an urgent or emergent situation. Id. The Hearing Officer also provided authority defining these terms. Id. When Dr. J did not respond within 15 days, the Medicare carrier Hearing Officer issued a decision, dated December 18, 2000, denying coverage based on lack of information. Ex. 11/2. Dr. J responded by letter a month later, stating that the beneficiary's pre-operative diagnosis required that "immediate attention" be given to the surgical site. Ex. 17/1. He did not address whether an urgent or emergent situation existed under definitions provided by the Medicare carrier Hearing Officer.

The Administrative Law Judge denied coverage for the two surgeries based on the existence of the private contract between Dr. J and the beneficiary. Decision at 3. In doing so, he stated that "the urgent nature of the services is not here in issue." Decision at 2. In his findings, he stated that "[t]he emergency services in question are not covered . . . as the provider physician, a Medicare opt out provider, entered into a private contract with the appellant." Decision at 3, Finding #4. The Administrative Law Judge did not make Dr. J a party to the hearing.

Appellant requests review, asserting that the Administrative Law Judge "failed to interpret B-98-29, MNB-97-13" and "improperly presented charges due." Request for Review. In an accompanying memorandum dated August 18, 2001, the Appellant contends generally that the severity of the basal cell carcinoma and the complexity of the initial surgery by Dr. S constituted an emergency or urgent situation warranting coverage of the reconstructive surgery. In support, the Appellant encloses excerpts of Program Memorandum - Transmittal (PM) No. B-98-29, dated July 1998, issued by the Health Care Financing Administration (now known as CMS) and a "Medicare News Brief," MNB-97-13, dated December 1997, and issued by Empire Medicare Services, the Medicare carrier in this case (Empire). ⁽⁴⁾ In summary, the Appellant contends that Dr. J provided emergency or urgent care services that are covered by Medicare under exceptions to Medicare opt-out authorities.

The Appellant also contends that the Administrative Law Judge "improperly presented charges due." Request for Review. This seems to refer to Appellant's testimony before the Administrative Law Judge that charges for the May 16, 2000 follow-up surgery were improperly denied coverage as a result of the incorrect use of generic procedure codes. Tape Audit; see Ex. 27. The Administrative Law Judge also failed to mention the May 16, 2000 surgery as a service at issue. Decision at 1.

Legal Standards

Generally, the Medicare program specifies that physicians who provide items or services to Medicare beneficiaries are subject to Medicare claims submission procedures and charge limitations. Medicare Carriers Manual (MCM) Section 3044. However, physicians may "opt out" of these obligations, and the Medicare program altogether, by satisfying certain conditions and contracting privately with Medicare beneficiaries for otherwise covered services. Id.

The Social Security Act (SSA) 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 . . . ." SSA, 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)(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." SSA, 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 CFR 405.405(a)(1999). However, the physician must "opt out" of Medicare for a two year period in order to privately contract with Medicare beneficiaries. 42 CFR 405.405(b)(1999).

The physician must first submit a qualifying "opt-out" affidavit to the Medicare carrier. 42 CFR 405.410(b)(1999); 42 CFR 405.420(1999). The private contract must also satisfy specific conditions. 42 CFR 405.415 (1999). A physician who properly opts-out of the Medicare program, among other things, is no longer subject to Medicare claims submission requirements or limiting charges. 42 CFR 405.425(c),(e)(1999).

A physician may fail to opt-out properly if either the private contract or opt-out affidavit fail to meet regulatory criteria. 42 CFR 405.430(a)(1999). A physician may fail to maintain opt-out status, in part, by failing to comply with billing requirements for emergency or urgent care services. 42 CFR 405.435(a)(3)(1999). 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 CFR 405.405(c),(d)(1999). ⁽⁵⁾

Services provided under a private contract are "not covered by Medicare." 42 CFR 405.405(e)(1999). 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 CFR 405.425(b) (1999) (emphasis supplied). A private contract, in relevant part, "must . . . [n]ot be entered into . . . during a time when the beneficiary requires emergency care services or urgent care services." 42 CFR 405.415(k)(1999). An opt-out physician who does provide emergency or urgent care services to a Medicare beneficiary must bill Medicare for those services and accept the limiting charge. 42 CFR 405.425(d),(e)(1999); 42 CFR 405.440(b) (1999).

"Emergency care services" are services provided to treat "an emergency medical condition." 42 CFR 405.400(1999), citing 42 CFR 422.2. An "emergency medical condition," in turn, is a condition with symptoms of such severity that a "prudent layperson . . . could reasonably expect the absence of immediate medical attention" to result in serious adverse consequences. 42 CFR 422.2 (1999)(emphasis supplied). "Urgent care services," by contrast, are services furnished to a beneficiary "who requires services to be furnished within 12 hours in order to avoid the likely onset of an emergency medical condition." 42 CFR 405.400 (1999)(emphasis supplied). Medicare does not cover follow-up visits to the physician after emergency or urgent care services. MCM 3044.28.

If the opt-out physician "has previously entered into a private contract" with the Medicare beneficiary, the emergent or urgent care services are provided under the terms of that contract, but only when the contract was "entered into before the onset of" the emergent or urgent condition. 42 CFR 405.440(c)(1999)(emphasis supplied). As previously noted, a physician forfeits his opt-out status for failing to comply with the all regulatory requirements for opting out of the Medicare program. Specifically, the physician can lose his opt-out status, and once again be subject to billing and charge requirements of the Medicare program, if he or she "fails to comply with [regulations] regarding billing for emergency care services or urgent care services." 42 CFR 405.435(a)(3)(1999). ⁽⁶⁾

An Administrative Law Judge may make any person a party to a hearing "if his or her rights may be adversely affected by the decision, and the administrative law judge notifies the person to appear at the hearing or to present evidence supporting his or her interest." 20 CFR 404.932(b).

Analysis

The Administrative Law Judge denied Medicare coverage for Dr. J's May 29, 2000 services based upon the existence of the private contract between Dr. J and the beneficiary. Decision at 2, 3. In his analysis, the Administrative Law Judge stated that "Dr. H noted, as have all of the physicians involved in the appellant's care, [that] urgent treatment was required . . . . [T]he undersigned noted that the urgent nature of the services is not here in issue." Decision at 2. His findings also assume the presence of an emergency medical condition: "The emergency services in question are not covered under Part B . . . as the provider physician, a Medicare opt out provider, entered into a private contract with the appellant." Decision at 3.

The Administrative Law Judge erred in his interpretation of the governing law and regulations. With limited exceptions, private contracts do not govern the relationship between an opt-out physician and Medicare beneficiaries during an emergency or urgent medical situation. SSA, Section 1802(b)(2)(A)(iii). While regulations state that an opt-out physician may not provide any covered services to a Medicare beneficiary without a private contract, they also carve out an exception when an emergency or urgent situation exists. 42 CFR 405.425(b)(1999); see also 42 CFR 405.440(a)(1999)("A physician . . . who has opted-out of Medicare under this subpart need not enter into a private contract to furnish emergency care services or urgent care services to a Medicare beneficiary."). Medicare pays opt-out physicians for "Medicare covered items or services furnished in emergency or urgent situations when the beneficiary has not signed a private contract with that physician . . . ." MCM 3044.5. The relevant statute, regulations, and agency manual guidelines thus allow an opt-out physician to provide emergency or urgent care services to a Medicare beneficiary without a private contract. The findings and conclusions of the Administrative Law Judge to the contrary are errors of law.

It is true that emergency or urgent care services provided under a pre-existing private contract are not covered by Medicare. 42 CFR 405.440(c)(1999). However, this exception does not apply unless the private contract was executed before the onset of the emergency or urgent condition. Id. The record demonstrates that Dr. J entered into the private contract with the beneficiary after the surgery that resulted in the need for Dr. J's services. We therefore hold that the existence of the private contract between Dr. J and the beneficiary is insufficient, standing alone, to support denial of Medicare coverage. If the beneficiary suffered a medical condition requiring emergency or urgent care services, then Dr. J, as an opt-out physician, could provide those services without a private contract.

As noted, the regulations define an "emergency medical condition," in relevant part, as one that requires "immediate medical attention." 42 CFR 422.2(1999)(emphasis supplied). "Emergency care services" are those services provided to treat an emergency medical condition. 42 CFR 405.400(1999). "Urgent care services," by contrast, are services that need to be furnished "within 12 hours" to prevent an emergency condition from occurring. 42 CFR 405.400(1999)(emphasis supplied).

The beneficiary consulted with Dr. H on February 24, 2000, for evaluation and treatment options concerning the diagnosis of basal cell carcinoma of the left lower eyelid. Dr. H scheduled a Moh's procedure to be performed on March 27, 2000, more than a month later. Dr. S was also scheduled to perform reconstructive surgery a day after that. After the Moh's procedure, the reconstructive surgery scheduled for the next day was postponed so that Dr. J could evaluate the beneficiary. Dr. J operated on the beneficiary the day after the evaluation.

As discussed, the Administrative Law Judge appears to have found that the beneficiary's condition, when evaluated by Dr. J on May 28, 2000, constituted either an emergent or urgent condition. Drs. S, H, and J all assert a situation that, respectively, was emergent, was urgent, or required "immediate attention." Exs. 33, 32, 17. Dr. J submitted the following written statement to the Administrative Law Judge:

Mr. R.G. was first seen in my office on March 28, 2000. He had a diagnosis of left lower eyelid defect involving lower canaliculus status post resection basal cell carcinoma. With a diagnosis of this nature, it is imperative that immediate attention be drawn to the area. Therefore, Mr. G was placed on the surgical schedule the following day.

Ex. 17 (emphasis supplied).

Need for Further Proceedings

The Council finds that the Administrative Law Judge erred in failing to make Dr. J a party to the hearing, as his interests could be adversely affected by the decision. The statement of Dr. J could constitute a statement against his interests if the beneficiary was in an emergency or urgent care situation, as defined by statute, regulation, and agency manual.

The Council further finds that the record does not contain sufficient evidence to determine whether Dr. J had properly opted-out of the Medicare program when he performed the March 29, 2000 surgery. A Medicare carrier document indicates that Dr. J opted-out of the Medicare program from June 18, 1998 through June 18, 2000. Ex. 27/1. However, the record contains an opt-out affidavit dated June 23, 2000, after Dr. J provided services to the beneficiary.

The Council further finds that the record does not contain sufficient evidence to determine whether the private contract between the beneficiary and Dr. J was executed in accordance with 42 CFR 405.415(k), which prohibits such a contract "when the beneficiary requires emergency care services or urgent care services."

The Council further finds that the record does not contain sufficient evidence to determine whether the surgery performed by Dr. J on March 29, 2000, constituted emergency care or urgent care services as defined by regulation.

Remand Instructions

On remand, the Administrative Law Judge shall:

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

2. Make Dr. J a party to the hearing, as his interests may be adversely affected by the Administrative Law Judge's decision.

3. Determine pursuant to 42 CFR 405.430(a), whether Dr. J failed to properly opt-out of the Medicare program by failing to submit to the carrier a qualifying opt-out affidavit covering the period at issue.

4. Determine pursuant to 42 CFR 405.415(k), whether the private contract between the beneficiary and Dr. J was executed at a time when the beneficiary required emergency care services or urgent care services.

5. Determine pursuant to 42 CFR 405.400, whether the March 29, 2000 surgery constituted emergency care services or urgent care services.

6. Determine pursuant to 42 CFR 405.440(b), whether Dr. J was required to submit a claim to Medicare for the March 29, 2000 surgery and to collect from the beneficiary no more than the Medicare limiting charge for his services.

7. Determine pursuant to 42 CFR 405.435(a)(3), whether Dr. J failed to maintain his opt-out status.

8. Determine whether the May 16, 2000 surgery is covered by Medicare under applicable authority.

9. Render findings of fact, citing to the record, and conclusions of law, citing to applicable legal authority.

The Administrative Law Judge may take any further action not inconsistent with this remand order.

Date: April 2, 2003

Bruce P. Gipe
Administrative Appeals Judge

Thomas E. Herrmann
Administrative Appeals Judge

1. Dr. S indicates that the tumor excision resulted in a 1.4 x 4.0 centimeter "defect" on the operative site. Ex. 33. A 1.4 x 4.0 centimeter defect represents a .5 x 1.6 inch defect in the beneficiary's lower left eyelid.

2. The beneficiary also testified that a tear duct had been damaged during the first surgery; that portions of his right eyelid had to be grafted to his lower left lid to repair the excision site; and that his left eye was sewn shut for approximately seven weeks while the graft healed. Tape Audit; see also Ex. 18/1. Dr. J diagnosed the beneficiary with "80% left lower eyelid defect involving lower canaliculus status post resection basal cell carcinoma." Ex. 18/1.

3. The fact that a beneficiary submits a claim for Medicare-covered services provided by an opt-out physician does not, alone, constitute a violation of opt-out requirements by the physician or nullify the private contract. Medicare Carriers Manual Section 3044.12.

4. PM No. B-98-29 is contained in the record at Ex. 25. MNB-97-13 provisions concerning emergency or urgent care services are similar in all material respects to the "Medicare News Brief" MNB-2000-8 contained in the record at Ex. 23. These authorities reflect policy statements or interpretations by CMS or the Medicare carrier.

5. See discussion at note 6 concerning physician good-faith efforts to comply with opt-out requirements, including refunds of improperly collected charges.

6. After notice from the carrier, the physician would have 45 days to demonstrate good faith efforts to comply with all opt-out requirements, including refunding any amounts in excess of charge limits paid by Medicare beneficiaries without a private contract. 42 CFR 405.435(b)(1999). Failure to demonstrate such compliance results in the following for the remainder of the opt-out period: all private contracts between the opt-out physician and Medicare beneficiaries are void; the physician's opt-out status is null; the physician must bill Medicare for all Medicare-covered items and services provided to Medicare beneficiaries; the physician is subject to the limiting charges established by Medicare; the physician may not seek opt-out status until the current two-year period expires; and "[t]he physician . . . will not receive Medicare payment on Medicare claims for the remainder of the opt-out period" (with limited exceptions). 42 CFR 405.435(b)(1999).