Guzzo v. Thompson ( 2004 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 04a0397p.06
UNITED STATES COURTS OF APPEALS
FOR THE SIXTH CIRCUIT
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Plaintiff-Appellant, -
ANTHONY GUZZO,
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No. 03-1346
v.
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THOMAS G. THOMPSON, Secretary of State of the United -
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Defendant-Appellee. -
States Department of Health and Human Services,
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Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 02-70711—Patrick J. Duggan, District Judge.
Argued: April 28, 2004
Decided and Filed: June 25, 2004*
Before: COLE and COOK, Circuit Judges; SPIEGEL, Senior District Judge.**
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COUNSEL
ARGUED: Ryan D. Heilman, Joseph K. Grekin, SCHAFER AND WEINER, Bloomfield Hills, Michigan,
for Appellant. Elizabeth Larin, ASSISTANT UNITED STATES ATTORNEY, Detroit, Michigan, for
Appellee. Sally Hart, CENTER FOR MEDICARE ADVOCACY, Tucson, Arizona, for Amici Curiae.
ON BRIEF: Joseph K. Grekin, SCHAFER AND WEINER, Bloomfield Hills, Michigan, for Appellant.
Elizabeth Larin, ASSISTANT UNITED STATES ATTORNEY, Detroit, Michigan, for Appellee. Sally
Hart, CENTER FOR MEDICARE ADVOCACY, Tucson, Arizona, Sarah L. Lock, AMERICAN
ASSOCIATION OF RETIRED PERSONS, Washington, D.C., for Amici Curiae.
SPIEGEL, D. J., delivered the opinion of the court, in which COLE, J., joined. COOK, J. (p. 5),
delivered a separate dissenting opinion.
*
This decision was originally issued as an “unpublished decision” filed on June 25, 2004. On September 20, 2004, the court
designated the opinion as one recommended for full-text publication.
**
The Honorable S. Arthur Spiegel, Senior United States District Judge for the Southern District of Ohio, sitting by
designation.
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No. 03-1346 Guzzo v. Thompson Page 2
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OPINION
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SPIEGEL, Senior District Judge. Plaintiff-Appellant, Anthony Guzzo, appeals from the district
court’s grant of summary judgment in favor of Defendant-Appellee, the Secretary of Health and Human
Services (the “Secretary”), upholding the Secretary’s decision to deny Guzzo Medicare reimbursement for
cryosurgery, a medical treatment he underwent for prostate cancer. For the following reasons, we
REVERSE the judgment of the district court and GRANT summary judgment in favor of Guzzo.
Guzzo is a Medicare beneficiary who was diagnosed with prostate cancer in 1999. His physicians
prescribed cryosurgical ablation (“cryosurgery”), which was performed successfully on March 30, 1999.
The question before us is whether Guzzo was legally entitled to Medicare reimbursement for his
cryosurgery.
The Medicare statute authorizes coverage for numerous medical treatments and health services. See,
e.g., 42 U.S.C. §§ 1395d, 1395k-m. However, an exclusion from coverage is carved out “for items and
services . . . not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve
the functioning of a malformed body member.” 42 U.S.C. § 1395y(a)(1).
In 1997, the Secretary issued National Coverage Decision 35-96 (“NCD”), which prohibited
reimbursement for cryosurgery, stating:
Cryosurgery of the prostate gland . . . destroys prostate tissue by applying extremely cold
temperatures in order to reduce the size of the prostate gland. The evidence is not yet
sufficient to demonstrate the effectiveness of this procedure. Therefore, cryosurgery of the
prostate cannot be considered reasonable and necessary under [the Medicare statute].
In subsequent years, evidence of cryosurgery’s safety and effectiveness accumulated, and the Medicare
administration recognized the error of the 1997 NCD. Accordingly, on February 1, 1999 – approximately
two months before Guzzo underwent his surgery – the Department of Health and Human Services issued
a “Decision Memorandum” approving cryosurgery for clinically localized prostate cancer. The Decision
Memorandum stated that: “Cryosurgery is safe, effective, as well as medically necessary and appropriate
in certain patent populations. . . . It has demonstrated effectiveness through an absolute analysis as well as
through a comparative analysis.” The memorandum makes clear that its purpose is to “[approve coverage
of cryosurgery] as a primary treatment for clinically localized prostate cancer.” The memorandum also
states that NCD 35-96 “will be modified to reflect this change in policy,” meaning that the NCD’s
prohibition of coverage for cryosurgery is lifted by force of the Decision Memorandum, and the NCD itself
would be amended to reflect that.
Guzzo contends that he is entitled to reimbursement for the cryosurgery because the Decision
Memorandum, issued two months before his surgery, deemed the procedure “necessary and appropriate”
for the treatment of prostate cancer. The Secretary counters that the Decisional Memorandum did not make
coverage effective as of February 1, 1999, because the Memorandum stated that various administrative steps
– most of them relating to billing and claims processing – would have to be complete before coverage for
cryosurgery would be effective. (A short time later, the Secretary announced that cryosurgery coverage
would be effective beginning July 1, 1999). As such, the Secretary argues, the 1997 NCD prohibiting
cryosurgery coverage was still in effect at the time of Guzzo’s surgery in March 1999.
In short, Guzzo underwent cryosurgery approximately two months after the Secretary deemed the
procedure “reasonable and necessary” in a Decision Memorandum, but approximately three months before
the date specified by the Secretary when an administrative infrastructure would be ready to issue
reimbursements.
No. 03-1346 Guzzo v. Thompson Page 3
The statute at issue in this case, 42 U.S.C. § 1395y(a)(1)(A) makes clear that the legal question
before us is one of entitlement, and that entitlement to reimbursement is triggered when the Government
announces that a medical procedure is “reasonable and necessary.” Here, that event occurred on February 1,
1999, when the secretary issued a decisional memorandum deeming cryosurgery “reasonable and necessary”
for the treatment of prostate cancer. The language and very title of the memorandum leave no doubt that
the memorandum itself is the Government’s pronouncement that cryosurgery is “reasonable and necessary.”
Although the memorandum indicates that an administrative infrastructure designed to handle cryosurgery
claims and billing still had to be established, the “reasonable and necessary” determination was effective
as of February 1. Accordingly, we hold that because the Secretary had declared cryosurgery “reasonable
and necessary” for the treatment of prostate cancer two months before Guzzo’s surgery, Guzzo is entitled
to reimbursement. The Secretary might have been entitled to delay reimbursement until the administrative
claims-processing system was in place, but the Secretary’s denial of Guzzo’s claim altogether was contrary
to the Medicare statute.
We are not unmindful of the Department’s interest in ensuring the efficient processing of claims
once a new procedure is approved. But the Department appears to have changed its practices in response
to the instant case. At oral argument, the Government stated that it no longer titles these memoranda
“decisional,” but rather, refers to them as “analytical” documents. Moreover, whereas the February 1
Decisional Memorandum has the language and force of an enacting document, the Department’s new
memoranda make clear that any such pronouncements about changes in the status of a procedure are merely
statements of intent, thereby allowing the Department to choose a date on which a formal pronouncement
is made about the procedure’s reasonableness or necessity, and to synchronize that with the inauguration
of an administrative scheme to process claims that would then flow from the procedure’s new, covered
status.
Mr. Guzzo also requests his attorney’s fees for having to litigate the Secretary’s wrongful refusal
to deny him his reasonable and necessary medical expenses. As the Secretary points out, under 28 U.S.C.
§ 2412(d)(1)(A), Plaintiff is only entitled to fees and costs if the Court would find the government’s position
was not substantially justified. The Secretary’s position is substantially justified if it is “justified to a
degree that could satisfy a reasonable person.” Jankovich v. Bowen, 868 F.2d 867, 869 (6th Cir.
1989)(quoting Pierce v. Underwood, 487 U.S. 552, 565 (1988)). “[A] position can be justified even though
it is not correct. . .it can be substantially (i.e., for the most part) justified if a reasonable person could think
it correct, that is, if it has a reasonable basis in law and fact.” Cummings v. Sullivan, 950 F.2d 492, 497 (7th
Cir. 1991)(quoting Pierce, 487 U.S. at 566 n.2).
The Secretary argues that his position in denying Mr. Guzzo benefits was substantially justified in
his reliance on NCD 35-96, and such decision was affirmed by the district court. The Secretary quotes
Heckler v. Ringer, 466 U.S. 602, 617 (1984), “[t]he Secretary’s decision as to whether a particular medical
service is ‘reasonable and necessary’ and the means by which she implements her decision, whether by
promulgating a generally applicable rule or by allowing individual adjudication, are clearly discretionary
decisions.” In contrast, Plaintiff argues that the Secretary’s position was not substantially justified, as the
Secretary denied payment for coverage which the Secretary himself admits was reasonable and necessary.
Plaintiff argues that the Secretary knows full well that he is not entitled to create his own exceptions to
mandated coverage, based on administrative convenience.
The Court finds in this instance that the Secretary’s position was not substantially justified, and that
Mr. Guzzo is therefore entitled to his attorney’s fees and costs. The Secretary relied on a NCD that he had
already announced was no longer correct. The Secretary’s announcement, that predated Mr. Guzzo’s
surgery, clearly indicates that such surgery was reasonable and necessary. To deny coverage for a service
that is designated reasonable on the basis of an outdated rule is unreasonable. The Secretary’s reliance on
Heckler is misplaced, as in this case the issue is not whether cryosurgery is reasonable and necessary or
whether Plaintiff should not have had the procedure, but rather whether the Secretary can deny a beneficiary
No. 03-1346 Guzzo v. Thompson Page 4
a treatment that has already been determined to be reasonable and necessary. For these reasons, Mr. Guzzo
is awarded his reasonable attorney’s fees and costs.
Having reviewed this matter, the Court FINDS for the Appellant Mr. Guzzo, DETERMINES that
the Secretary’s denial of Mr. Guzzo’s reimbursement for cryosurgery was contrary to Congressional intent
and the Medicare Act, DETERMINES that at the date of Mr. Guzzo’s surgery NCD 35-96 was not
supported by adequate information, VACATES the judgment and opinion of the district court, and
AWARDS Mr. Guzzo attorney’s fees for having to litigate the Secretary’s refusal to reimburse him for his
reasonable and necessary medical expenses.
No. 03-1346 Guzzo v. Thompson Page 5
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DISSENT
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COOK, Circuit Judge, dissenting. I would affirm the district court’s grant of summary judgment
in favor of the Secretary for the reasons stated in that court’s opinion. The majority reaches its well-
intentioned conclusion in this case without reconciling its departure from the national coverage decision
(NCD) that mandated denial of Guzzo’s claim, with the governing statutory and regulatory framework of
the Medicare Act. The majority’s opinion instead accords force of law to a “Decision Memorandum” that
forecasted a likely change in the controlling NCD, though Guzzo’s ineligibility was fixed by the NCD in
effect at the time of his surgery.