to be paid for their services at a particular rate. Rather, defendants argue that plaintiffs were entitled to ". . . the rate set forth by the Secretary under his statutory authority, and set forth in regulations." (Defendants' reply, at p. 11).
Even if I accept plaintiffs' argument that the statute mandated that the Secretary promulgate a regulation authorizing development of radiologist fee schedules based on a regional, statewide or carrier service area only,7 it is a different thing to say that plaintiffs had a vested right to such payment. In Germantown Hosp. and Medical Center v. Heckler, 590 F.Supp. 24, 31 (E.D.Pa. 1983), aff'd, 738 F.2d 631 (3d Cir. 1984), cert. denied, 469 U.S. 1158, 105 S. Ct. 906, 83 L. Ed. 2d 921 (1985), the court said:
Retroactive adjustments in the Medicare reimbursement system have been declared constitutional because included in the concept of statutory entitlement to reimbursement is the possibility that the statute or implementing regulations may be changed. Springdale Convalescent Center v. Mathews, 545 F.2d 943, 955-57 (5th Cir. 1977). In addition, courts have recognized that "the expectations of those who enter a regulated field are diluted by the knowledge that occasional changes will be made to better carry out regulatory purposes." Adams Nursing Home of Williamstown, Inc. v. Mathews, 548 F.2d 1077, 1081 (1st Cir. 1977) (citing Federal Housing Administration v. Darlington, Inc., 358 U.S. 84, 79 S. Ct. 141, 3 L. Ed. 2d 132 (1958)).
The nature of plaintiffs' statutory expectations is illustrated by the language of the "Participating Physician or Supplier Agreement" into which the participating plaintiffs entered. (Affidavit of Robert J. Lane, Jr., sworn to on January 11, 1991, Exhibit A). Under the Agreement, the participating plaintiffs agreed to accept direct Part B payment from the Medicare program, and that ". . . the approved charge, determined by the Medicare carrier, shall be the full charge for the service covered by Part B." The participating plaintiffs therefore had no reasonable expectation to be paid on any more precise a basis.
b. The Nature and Strength of the Public Interest
"Not every law that upsets expectations is invalid; courts have generally compared the public interest in the retroactive rule with the private interests that are overturned by it." Adams Nursing Home, 548 F.2d at 1080. In Adams Nursing Home, the Secretary had issued regulations allowing Medicare providers to treat the depreciation of capital assets used to serve Medicare patients as a cost of providing care. Providers were left to their own devices as to the method they used for calculating depreciation, and from 1967 through 1970, plaintiff/appellee ("Adams") used an "accelerated" rather than a "straight line" method. In 1970, the Secretary issued a regulation restricting the future use of accelerated depreciation, and also issued a regulation designed to recapture the difference between accelerated and straight line depreciation from providers who were leaving the program.
Id., 548 F.2d at 1087.
The court, weighing Adams's expectations against the public interest involved, found that the recapture provisions were constitutional. Id., 548 F.2d at 1082. It found that the public's interest in recovering Medicare funds paid to providers who accelerated their depreciation costs and then left the program outweighed Adams's expectation that the depreciation rules would remain constant. Noting that "the government here is entitled to the benefit of any constitutional doubts we have," the court upheld the regulation. Id., 548 at 1082.
In this case, plaintiffs knew that they would be paid for rendering radiologist services at a rate to be determined by the Secretary's regulations. Further, they expected that the regulations would direct the development of fee schedules on a regional, statewide or carrier service area basis. They became aware in March 1989 that the Secretary issued regulations contrary to their expectations, effective for all radiologist services rendered after April 1, 1989. (Am. Complaint, P 18). At that point, plaintiffs knew that the government was offering them less for their services than they had anticipated.
By the retroactive application of OBRA '90's amendment to 42 U.S.C. § 1395m(b), the government attempted to ratify the action of the Secretary. (Defendants' reply memo, at 7).
I must weigh the public's interest against plaintiffs' expectation that they would receive more for their services. Defendants assert that ". . . there is a strong public interest in having Congress resolve potential disputes concerning the meaning of congressional acts and insure the proper interpretation of those acts through retroactive clarifications." (Defendants' reply memo, at 8). Although I do not think Congress's amendment to 42 U.S.C. § 1395m(b) was a mere clarification, the amendment's legislative history does reflect a Congressional desire to ratify the Secretary's actions with regard to the fee schedules. The House Conference Report to the legislation states: "when the radiology fee schedule was established, the fee schedule was to be established on the basis of carrier service areas. This has been used by the Secretary to mean carrier localities." H. Conf. Rep. No. 964, 101st Cong., 2d Sess. 720 (1990). Given the deference courts must pay to "legislative Acts adjusting the burdens and benefits of economic life," I cannot say that a Congressional desire to avoid the confusion that may result from differing interpretations of its actions is irrational. Accordingly, even if I find the interests of the plaintiffs and the public in this case are equally balanced, the presumption in favor of constitutionality must carry the day.
c. The Extent to which the Amendment Impairs the Asserted Interest
As I have discussed above, even if plaintiffs' interest is characterized as a right to be paid for radiologist services on a regional, statewide or carrier service basis, the amendment does not completely destroy that right. Plaintiffs will still be compensated for their services, only the rate will be calculated on a locality basis, which plaintiffs claim will compensate them at a lower rate. This leaves plaintiffs in a position similar to that of plaintiff/appellee Adams in Adams Nursing Home, supra. Adams was not denied depreciation allowances altogether, but simply retroactively denied a method by which the allowances were greater. Similarly, plaintiffs are not to be denied payment for their services, although they may receive less than they expected.
Therefore, based on the discussion above, I find that the retroactive application of OBRA '90's amendment to 42 U.S.C. § 1395m(b) is constitutional. Accordingly, defendants' motion to dismiss for failure to state a claim is granted.
III. Plaintiffs' Motion for a Stay
Plaintiffs also have argued that, in the event that I find there to be insufficient evidence as to the definitions of "locality" and "carrier service area," I should deny defendants' motion to dismiss, or in the alternative, stay determination of defendants' motion pending the completion of discovery as to the issue. Plaintiffs correctly argue that I must resolve all issues of fact against defendants. (Affidavit of Robert J. Lane, Jr., sworn to on January 11, 1991, P 8). However, as my discussion above makes clear, I have done so and still find in defendants' favor. Accordingly, plaintiffs' motion for a stay is denied.
For the reasons articulated above, defendants' motion to dismiss plaintiffs' First, Third and Fifth Causes of Action for lack of subject matter jurisdiction is denied because those causes of action are cognizable under 28 U.S.C. § 1331. Defendants' motion to dismiss plaintiffs' Fourth Cause of Action on the same grounds is denied because a factual question exists as to the futility of administrative remedies. Defendants' motion to dismiss plaintiffs' Second Cause of Action is denied because mandamus jurisdiction is inappropriate in this case.
Further, because I find that Congress did not act arbitrarily or irrationally in making the amendment to 42 U.S.C.§ 1395m(b) retroactive, such retroactive application is constitutional, and defendants' motion to dismiss this action for failure to state a claim is granted.
Finally, plaintiffs' motion for a stay of proceedings is denied.
IT HEREBY IS ORDERED, that defendants' motion to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(1) is denied in part and granted in part.
FURTHER, that defendants' motion to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6) is granted.
FURTHER, that plaintiffs motion for a stay of proceedings is denied.
FURTHER, that the Clerk of the Court is directed to enter judgment dismissing this action in accordance with this Decision and Order.
Dated: July 23, 1992
Buffalo, New York
WILLIAM M. SKRETNY
United States District Judge