Index . .i
Table of Authorities ..1
Questions Presented . 2
Statement of the Case 3
Facts ..6
Arguments .. 9, 13
I. The Court of Appeals did not err in this matter in ruling that a physician owes no duty to file a Medicare claim for his/her Medicare patient unless an implicit right of action exists under the Medicare Act, as such an action as alleged by the Appellant is preempted by Federal law.
II. Even if this court were to find that there are state law claims for negligence or breach of fiduciary duty, it is asserted, as a alternative sustaining ground, that the Appellant has failed to exhaust her administrative remedies.
Conclusion 15
CASES
Bodimetric Health Servs., Inc. v. Aetna Life & Cas., 903 F.2d 480 (7th Cir.1990) .12
Brogdon ex rel. Cline v. Natl Healthcare Corp., 103 F.Supp.2d 1322 (N.D. GA 2000) 10
Christus Health Gulf Coast v. Aetna, Inc. 167 S.W.3d 879, 883 -884 (Tex.App.-Houston [14 Dist.],2005) 10
Foley v. Southwest Texas HMO, Inc., 226 F.Supp.2d 886 (E.D.Tex.2002). 11, 12
Lifecare Hospitals, Inc. v. Oshsner Health Plan, Inc., 139 F.Supp.2d 768 (W.D.La.2001) 12
New York v. Lutheran Ctr. for the Aging, Inc., 957 F.Supp. 393, 397 (E.D.N.Y.1997) ..11
Stanton v. Town of Pawley's Island, 309 S.C. 126, 420 S.E.2d 502 (1992) 14
S.C. Code Ann. § 39‑5‑10, et seq .. 8
42 U.S.C. § 1395(a), et seq 9
42 C.F.R. § 422.402(b)(3) (2003) .11
42 C.F.R. § 405, et seq 13
42 C.F.R. § 424.5 subsection five .13
42 U.S.C.A § 1395w-4(g)(4)(A)(I) 13
42 U.S.C.A § 1395w-4(g)(4)(B)(i and ii ) ..14
42 C.F.R. § 422.564 .. .14
65 Fed.Reg. at 40261 11
63 Fed.Reg. 34968, 35013 (June 26, 1998) . 11
QUESTIONS PRESENTED
I. Did the Court of Appeals err in ruling in this matter that the physician owed no duty to file a Medicare claim for his patient unless an implicit right of action exists under the Medicare Act, because the cause of action as alleged by the Appellant is preempted by Federal Law?
II. Is this action barred as the Appellants failed to exhaust her administrative remedies?
III.
On October 1, 2002, the Appellant, Phyllis J. Wogan, individually and as personal representative of the Estate of James John Wogan, brought this action for negligence, loss of consortium, breach of third party beneficiary contract, breach of fiduciary duty, and violation of the South Carolina Unfair Trade Practices Act against Defendants, Kenneth C. Kunze, M.D. and his medical practice, Hilton Head Gastroenterology, P.A. ("Dr. Kunze"). On February 18, 2004, the Appellant amended the Complaint to add Gary W. Thomas, M.D. and his practice, Gary W. Thomas, M.D., P.A. (Dr. Thomas), alleging the same five causes of action against Dr. Thomas. According to the Amended Complaint, this lawsuit arises out of substandard medical care provided by the Defendants to the Decedent, Mr. Wogan, and the failure of the Defendants to file a claim for reimbursement with Medicare for medical services provided. The Amended Complaint seeks unspecified actual and punitive damages on behalf of the Estate of Mr. Wogan and actual and punitive damages for Mrs. Wogan on her loss of consortium claim. Dr. Kunze answered the Amended Complaint and denied all of the material allegations thereof Dr. Kunze and Dr. Thomas respectively filed motions for summary judgment as to Appellants claims for unfair trade practices, breach of fiduciary duty, and a portion of the negligence claim. On June 18, 2004, Dr. Thomas filed a motion for summary judgment as to the cause of action for breach of a third party beneficiary contract. A similar motion for summary judgment was also filed by Dr. Kunze. On June 28, 2004, the summary judgment motions were heard by The Honorable Curtis L. Coltrane, Master‑In‑Equity and Special Circuit Court Judge for Beaufort County. All of the parties had an opportunity to file memoranda in support of their positions. Evidentiary support consisted of depositions and affidavits. Generally, allegations of medical malpractice were not placed in issue by the motions, and that claim is still pending.
By Order dated July 6, 2004, Judge Coltrane granted the motions. The Petitioner filed a motion to reconsider on July 16, 2004. That motion was denied by Order dated August 6, 2004. The Notice of Appeal was served on August 18, 2004.
The South Carolina Court of Appeals issued its Opinion Number 4026 in this matter on September 26, 2005. Petitioner filed a Petition for Rehearing which was denied. Appellant abandoned her appeal as to Dr. Thomas and sought only a Petition for Certiorari as to her claims of an implied right of action under the Medicare Act, common law negligence and common law breach of fiduciary duty against Dr. Kunze. The Appellant did not address her claims against Dr. Kunze for Unfair Trade Practices and for Breach of Third-Party Beneficiary Contract in the petition for certiorari, thus, the Courts rulings on those issues are the law of the case. The Supreme Court granted Appellants Petition for a Writ of Certiorari on January 5, 2007. In Appellant/Petitioners Initial Brief dated March 5, 2007, the Appellant appears to have also abandoned her first issue on Petition for a Writ of Certiorari relating to the existence of an implied right of action under the Medicare Act, and proceeds only with the remaining issues relating to a breach of the standard of care in common law negligence and breach of fiduciary duty claims.
FACTS
Around 1997, Dr. Gary Thomas, a medical oncologist, began treating the Decedent, Mr. Wogan, for rectal cancer. (R. p.211 and 212). Dr. Thomas administered chemotherapy to Mr. Wogan. (R. p.212). In 2001, Dr. Thomas referred Mr. Wogan to Dr. Kenneth Kunze, a gastroenterologist, for gastrointestinal problems. (R. p.216; R. p.217; and R. p.218). Mr. Wogan developed a severe case of diarrhea, which was treated with a medication called Sandostatin. (R. p.7, R. p.9, R. p.12). This appeal primarily concerns Appellants complaint that she could not get the Dr. Kunze to submit a claim to Medicare for the cost of the medication.
In opposition to the Respondents summary judgment motions, Appellant submitted an affidavit in which she described her late husband's relationship with his doctors in regard to the prescription and administration of Sandostatin. It is important to note that the facts in issue on this appeal must be taken in the light most favorable to the Appellant. However, these facts as set forth by the Appellant are, in many instances, strongly disputed by Dr. Kunze and the testimony of his staff.
Dr. Kunze's office initially prescribed Sandostatin on or about March 31, 2001. (R. p.168 and R. p.169). After determining that it was effective, Dr. Kunze informed the Wogans that he was going to change the medication to Sandostatin LAR, a long acting form of the medication; that the Sandostatin LAR would be administered once a month in his office; that it was covered by Medicare; and that a claim would be submitted to Medicare. (R. p.169). Petitioner alleges that Dr. Kunze's office later stated that it would not submit a Medicare claim because of the cost of the medication and that the Wogans would need to purchase it at a pharmacy and administer it at home. (R. p. 170 and R. p. 171). After Mrs. Wogan complained to Dr. Kunze's office about this, his nurse suggested that she call Dr. Thomas and ask him to prescribe the medication and submit a claim to Medicare. (R. p. 171). According to research performed by the Appellant, the medication would be covered by Medicare if her husband's condition had been caused by chemotherapy. (R. p.183). Dr. Thomas indicated that he would neither prescribe it nor submit the claim, and they would need to work it out with Dr. Kunze. (R. p.171). In Dr. Thomass opinion as an oncologist, Mr. Wogan's condition was not caused by chemotherapy. (R. p.213 and R. p.214). Eventually, Dr. Kunze's office indicated that they would administer the medication in the office, but that the Appellant would have to purchase it and bring it into the office, and that is how it was purchased and administered. (R. p.174).
Mr. Wogan passed away on October 1, 2001. (R. p.31). Mrs. Wogan commenced this action on October 1, 2002 with the filing of the Summons and Complaint against Dr. Kunze and his medical practice, Hilton Head Gastroenterolgy, P.A., and Thomas P. Rzeczycki, M.D. and Hilton Head General and Laparoscopic Surgery, P.A. (Final Brief of Appellant, p. 6).
Although the Amended Complaint contains five causes of action, it is basically comprised of three claims: a claim for medical malpractice; claims for negligence and breach of fiduciary duty failing to file a claim with Medicare; and a claim for loss of consortium. The claims for medical malpractice were not at issue in the summary judgment motions, and are still pending. The motions with regard to Dr. Kunze dealt with the legal claims against Dr. Kunze for failing to submit a claim for Sandostatin to Medicare. Specifically, subparagraphs "n," "o," "xx," and "yy" of paragraph 89 of the First Cause of Action of the Amended Complaint allege that the Kunze negligently failed to submit a Medicare claim and negligently failed to help the Wogans submit a Medicare claim. The Second Cause of Action alleges the doctor breached his contract with Medicare by not filing a claim, for which Appellant seeks damages as a third party beneficiary of the contract. (R. p.40 and R. p.41). The Third Cause of Action alleges that they violated the South Carolina Unfair Trade Practices Act, S.C. Code Ann. § 39‑5‑10, et seq., by the "aforementioned conduct." (R. p.42). The Fourth Cause of Action alleges that they breached a fiduciary duty by failing to file the Medicare claim and failing to assist the Wogans with alternative means of financing the medication. (R. p.43 and R. p. 44). The claim for loss of consortium was not at issue.
A hearing on the motions was held in circuit court on June 28, 2004. The parties submitted memoranda outlining their positions. The court heard oral arguments. (R. p.220 R. p.273). After considering the argument of all parties in the hearing on the submission of supporting and opposing memoranda, the court issued a written order granting summary judgment to Dr. Kunze and his practice as to those allegations of the negligence claim relating to the failure to file the Medicare claim and on the breach of third party beneficiary contract claim on the ground that the Appellant cannot maintain a private right of action based on Kunzes alleged violations of the Medicare Act, 42 U.S.C. § 1395(a), et seq. (R. p.5 and R. p.6).
The court granted Summary Judgment as to Kunze on the Appellants claims for negligence and breach of third party beneficiary contract on the ground that there is neither an express or implied cause of action for either negligence or breach of contract under the Medicare Act. Summary Judgment was also granted on the Unfair Trade Practices claim on the ground that the Appellant does not have standing to bring a claim under the Act in a representative capacity. (R. p. 6 and R. p.7). Additionally, Summary Judgment was granted on the breach of fiduciary duty claim on the ground that it is a restatement of the negligence claim, and an act of medical negligence does not give rise to a cause of action for breach of fiduciary duty. (R. p.7).
ARGUMENTS
I. The Court of Appeals did not err in this matter ruling that a physician owes no duty to file a Medicare claim for his/her Medicare patient unless an implicit right of action exists under the Medicare Act, as such the causes of action as alleged by the Appellant would be preempted by Federal law.
The Appellant contends that the Court of Appeals erred in ruling that a physician owes no duty to file a Medicare claim for his/her Medicare patient unless a right of action exists under the Medicare Act. This issue as framed by the Appellant does not adequately explain the context of the courts ruling.
The court was addressing the Petitioners allegations of a common law cause of action for negligence premised solely upon a violation of the Medicare Act. However, as the court noted, this assertion of negligence derives wholly from alleged obligations and duties arising from the Medicare Act and are, in fact, assertions of an individual right of recovery arising out of the Medicare Act.
The Petitioners argument is an attempt to invoke a cause of action under the Medicare Act where it would not otherwise exist. The Petitioner attempts to show a breach of duty by providing evidence of a failure to follow Medicare billing guidelines. With respect to the cause of action for negligence, the Petitioner would not otherwise have a cause of action except for allegations of breach of duties that exist only under the Medicare Act. Thus, the Court of Appeals is correct in holding that in this instance there is no duty to support a cause of action for the alleged negligence complained of unless the court were to find a private right of action under the Medicare Act.
The Appellant correctly notes that Brogdon ex rel. Cline v. Natl Healthcare Corp., 103 F.Supp.2d 1322 (N.D. GA 2000) Congress did not intend to preclude residents form pursing common law remedies. This is true. However, such remedies may not rely solely on a duty created under the Medicare Act, to which there is no express or implied private right of action, as the Court of Appeals appropriately found.
Additionally, in Christus Health Gulf Coast v. Aetna, Inc. 167 S.W.3d 879, 883 -884 (Tex.App.-Houston [14 Dist.],2005), the district court held that
uniformity is crucial on decisions regarding Medicare coverage so that a Medicare patient's right to health care services does not vary from state to state. Thus, all coverage decisions must go through the administrative procedures of the Medicare program. See 42 C.F.R. § 422.402(b)(3) (2003) (stating that the Medicare Act preempts all state law coverage determinations); Medicare+Choice Program, 65 Fed.Reg. at 40261 (explaining that state courts are preempted from deciding any claim "in which the legal issue before the court is ... whether services are covered under the terms of an M+C contract"); Medicare Program; Establishment of the Medicare+Choice Program, Interim Final Rule with Comment Period, 63 Fed.Reg. 34968, 35013 (June 26, 1998) (noting that the Medicare appeals process is the exclusive remedy for any dispute over whether a service is covered under a Medicare contract). For these important policy reasons, we resolve any doubts in favor of requiring claims to first proceed through the administrative process. See New York v. Lutheran Ctr. for the Aging, Inc., 957 F.Supp. 393, 397 (E.D.N.Y.1997) (holding that "regardless of whether the services at issue are ultimately determined to be covered by Medicare, they still must be litigated through the administrative process").
The court in that case determined that even though the Plaintiffs claims are characterized under state law, such as for breach of contract, they are "inextricably intertwined" with a claim for benefits because, "at bottom," they are seeking a determination of coverage for services provided to Medicare patients. Id. The court reasoned that while some claims arising out of Medicare rights may be asserted under the common law in state court, claims dealing with coverage issues are appropriate only through the administrative process set forth in the Medicare Act. Id.
Similarly, in Foley v. Southwest Texas HMO, Inc., 226 F.Supp.2d 886 (E.D.Tex.2002), the plaintiffs were physicians who had contracted with a third party administrator to provide medical services to patients of various HMOs. The HMOs later refused to pay the physicians and the physicians filed suit claiming unjust enrichment and alleging violations of the Texas Insurance Code. The district judge concluded that the physicians' claims were "at bottom" claims for Medicare benefits and that such claims arise under the Medicare Act. Foley, 226 F.Supp.2d at 905-906. The court reasoned that the physicians were attempting to force Medicare-governed entities to pay for services given to Medicare beneficiaries and that such payments were nothing more than claims for benefits. Id. at 906. Thus, those claims arose under the Act and were subject to administrative exhaustion See also Lifecare Hospitals, Inc. v. Oshsner Health Plan, Inc., 139 F.Supp.2d 768 (W.D.La.2001) (concluding that a hospital's claim to recover payment for services rendered to Medicare patients through an M + C HMO was a claim arising under the Medicare Act); Bodimetric Health Servs., Inc. v. Aetna Life & Cas., 903 F.2d 480 (7th Cir.1990) (concluding that claims by Medicare providers against a fiscal intermediary arises under the Act).
As the case before this court, these cases which were framed as state law claims all relate to whether certain treatment should have been covered claims under Medicare. In order to determine the validity of a claim for negligence or breach of fiduciary duty, of which the alleged breach of duty is whether the doctor acted inappropriately in failing to file a Medicare claim because he believed the claim to not be covered by Medicare, the state court to resolve the common law cause of action must determine the Medicare coverage issue. As set forth above, such a ruling is expressly prohibited as that determination is preempted by Federal law.
In the matter sub judice, the determination of a breach of duty as sought by the Appellant would ultimately require a determination benefits under the Medicare Act as the key issue in Kunzes refusal to submit the claim, is because he did not believe the treatment was covered by the Medicare Act. As set forth above, such a determination is specifically prohibited by Federal Regulation and is more appropriately rendered through the mandated Medicare process. Thus, such a claim cannot be brought in state court under the guise of a state common law action.
II. Even if this court were to find that there are state law claims for negligence or breach of fiduciary duty, it is asserted, as a alternative sustaining ground, that the Appellant has failed to exhaust her administrative remedies.
Should this court find that there are state law claims for negligence or breach of fiduciary duty, it is asserted, as a alternative sustaining ground, that the Petitioner failed to exhaust her administrative remedies, and the Appellants claim for common law negligence and breach of fiduciary duty are now barred.
The entire section of the Code of Federal Regulations dealing with the filing of Medicare claims references the ability of the beneficiary to file his own claim. 42 C.F.R. § 405, et seq. Specifically, 42 C.F.R. § 424.5 subsection five sets forth who may make a claim for payment. It provides that the provider, supplier, or beneficiary, as appropriate, must file a claim that includes or makes reference to a request for payment.(emphasis added). Moreover, 42 U.S.C.A § 1395w-4(g)(4)(A)(I) provides that for Medicare Part B covered services, the physician, supplier, or other person furnishing services must complete and submit a claim to the carrier on the beneficiary's behalf.[1] Additionally, 42 U.S.C.A § 1395w-4(g)(4)(B)(i and ii ) provide a penalty provision for physicians who fail to submit a claim which is required to be submitted. Dissatisfaction with the service given by a Medicare provider may be grieved pursuant to 42 C.F.R. § 422.564. Clearly, if the Appellant perceived that Dr. Kunze was refusing to submit a claim that should have been submitted, there was an administrative remedy in place under the Medicare Act.
Thus, the Appellant had a grievance process available pursuant to the Medicare regulations. Similarly, the Decedent or his representative could have filed the Medicare claim for himself, avoiding the damage the Appellant claims to have suffered. While admittedly this is not the normal or the preferable mode of operation under the Medicare Act, it is not prohibited and the Medicare Act contains numerous provisions which imply or explicitly state that a beneficiary can make a claim. Therefore, even if the court were to find that the Appellant does have a state law tort claim, the trial courts order should be affirmed by the alternative sustaining ground that the Appellants claim should be dismissed as she has failed to exhaust her administrative remedies pursuant to the Medicare Act. See Stanton v. Town of Pawley's Island, 309 S.C. 126, 420 S.E.2d 502 (1992) (plaintiff is generally required to exhaust administrative remedies before seeking relief from the courts, and dismissal for failure to do so is in the sound discretion of the court).
Additionally, it is respectfully submitted that the Appellants argument that the ruling of the Court of Appeals has left her with a wrong without a remedy is without merit. While the Appellant has no available recourse through the state court system, she had the ability to file her own claim for the Decedent or could have grieved Dr. Kunzes determination that the drug was not covered under Medicare. While this may not be the Appellants preferred course of action, because of the nature of the claim specifically dealing with the availability of a benefit and the corresponding duty of a healthcare provider to file the Medicare claim, the Appellants proper channel of recourse was through the rubric of the Medicare Act. As discussed previously, there is no private right of action for such a claim, and state courts have been specifically preempted from addressing this type of issue.
CONCLUSION
Based on the foregoing, it is respectfully submitted that the Court of Appeals did not err in finding that no express or implied right of action exists under the Medicare Act and that the Circuit Court properly granted summary judgment on the Appellants claims of negligence and breach of fiduciary duty. Additionally, should this Court find that the Court of Appeals erred in finding no state law causes of action existed for Dr. Kunzes alleged failure to file a Medicare claim on behalf of the decedent, the Court of Appeals ruling that summary judgment was appropriate should still be affirmed on the alternative sustaining ground that the Appellants claims should be barred as she failed to exhaust the administrative remedies available to her under the Medicare Act, but rather, elected to proceed against Dr. Kunze in State court in an effort to obtain a monetary award, rather than to seek the remedies expressly available to her under the Medicare Act.
HOWELL, GIBSON & HUGHES, P.A.
By:___________________________
Mary Bass Lohr
Bar No: 16927
HOWELL, GIBSON & HUGHES, P.A.
Post Office Box 40
Beaufort, South Carolina 29901
(843) 522-2400
Attorneys for Respondents
Kenneth C. Kunze, M.D., Hilton Head
Gastroenterology, P.A., Thomas P.
Rzeczycki, M.D., Hilton Head General
and Laparoscopic Surgery, P.A.
[1] The reason Dr. Kunze refused to file the claim with Medicare is because he believed the treatment was not covered given the circumstances of the Appellants condition.