Svidlerv.United States Dept. of Health Human Serv

United States District Court, N.D. CaliforniaJun 10, 2004
No. C-03-3593 MJJ EDL (N.D. Cal. Jun. 10, 2004)

No. C-03-3593 MJJ EDL.

June 10, 2004


REPORT AND RECOMMENDATION TO DENY PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND TO GRANT DEFENDANTS' MOTION FOR SUMMARY JUDGMENT


ELIZABETH LAPORTE, Magistrate Judge

I. INTRODUCTION AND FACTUAL BACKGROUND

Plaintiff Inessa Svidler ("Plaintiff") is a doctor who used a device, the Matrix ProElectDT ("ProElectDT"), to treat the chronic pain of several medicare beneficiaries. The Medicare program, as established by Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395 et seq., pays for covered medical care that is provided to eligible aged and disabled persons. The program is administered by the Health Care Financing Administration ("HCFA") on behalf of the Secretary of Health and Human Services (the "Secretary"). The HCFA contracts with entities known as "fiscal intermediaries" to act as the Secretary's agents in administering the program. See 42 U.S.C. § 1395h. Generally, the fiscal intermediaries are private insurance companies. Cedars-Sinai Medical Center v. Shalala, 939 F. Supp. 1457, 1460 (C.D. Cal. 1996). The fiscal intermediaries, following instructions of the Secretary, review claims to determine whether the claims are for covered services and the appropriate amount of reimbursement.

Medicare "Part A," 42 U.S.C. §§ 1395c- 1395i, provides insurance for covered inpatient hospital and related services. This case involves Medicare "Part B," 42 U.S.C. §§ 1395j- 1395w, a supplemental program insuring the costs of other items and services, including outpatient hospital and physician services, supplies, and laboratory tests. Section 1862(a)(1)(A) of Title XVIII of the Social Security Act (commonly referred to as the "Medicare Act") provides a controlling standard against which all coverage decisions must be measured:

Notwithstanding any other provision of this subchapter, no payment may be made . . . for any expenses incurred for items or services (1) which . . . are 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)(A). Medicare also specifically excludes:

Experimental or investigational devices, except for certain devices —
(1) Categorized by the FDA as a non-experimental/investigational (Category B) device defined in § 405.201(b) of this chapter; and
(2) Furnished in accordance with the FDA-approved protocols governing clinical trials.
42 C.F.R. § 411.15(o). Finally, Medicare provides that reimbursement may be made for services that are determined not to be covered under 42 U.S.C. §§ 1395y(a)(1) if both the beneficiary and the provider "did not know, and could not reasonably have been expected to know" that such services were not covered under the Medicare program. 42 U.S.C. § 1395pp(a).

In 1999, the Medicare Carrier's Utilization Review Unit initiated an audit of Medicare claims for reimbursement submitted to Medicare by Plaintiff. As a result of the audit, Plaintiff was notified on December 10, 1999 that she had been overpaid a total of $144,791.11, based on an extrapolation from incorrect reimbursement made for sample claims to the entire universe of claims. (Administrative Record ("AR"), p. 00267.) That determination was upheld on July 8, 2000, after reconsideration by a Medicare Hearing Officer, and a timely request for hearing was filed on September 6, 2000. (AR 00227-00230). After due notice to Plaintiff, a hearing was held before an ALJ on March 13, 2001 and March 14, 2001 in San Francisco, California. (AR 00009.) After considering the entire record, the ALJ affirmed the Medicare Hearing Officer's decision. The ALJ determined that services provided by Plaintiff to a number of Medicare beneficiaries using the ProElectDT device were not covered by Part B Medicare because the manner in which the ProElectDT was used was experimental or investigational under Medicare law and regulations. The ALJ also found that the limitation of liability provision contained in 42 U.S.C. § 1395pp, which allows reimbursement for uncovered services in limited situations, did not apply to Plaintiff and that Plaintiff is therefore liable for the repayment of the entire amount of the overpayment. (AR 00008-00019). Plaintiff requested review of the ALJ's decision from the Medicare Appeals Council. The Medicare Appeals Council ruled that the ALJ's decision was in accordance with applicable law and regulations, and that it was supported by substantial evidence. (AR 00001-4.)

On August 1, 2003, Plaintiff filed the Complaint in this matter, requesting judicial review of final agency action, the Medicare Appeals Council's decision. (AR 00001.) On March 5, 2004, Plaintiff filed a motion for Summary Judgment. On April 6, 2004, Defendant filed an Opposition to Plaintiff's motion and a Motion for Summary Judgment. Judge Jenkins referred the motions to this Court for Report and Recommendation. On May 18, 2004, this Court held a hearing on the motions for summary judgment and both parties appeared through their respective counsel of record. At the hearing, the Court granted the parties the right to submit five additional pages of briefing. Having considered all the papers submitted, and the arguments of counsel at the hearing, the Court hereby Recommends that Plaintiff's Motion for Summary Judgment be Denied and Defendant's Motion for Summary Judgment be Granted.

II. DISCUSSION

In 1976, the Medical Devices Amendments Act, 21 U.S.C. §§ 360(k), 360c, 360e, 360j, required that certain devices, Class III devices, receive pre-market approval from the FDA before they may be commercially distributed. The ProElectDT is a class III device, but did not receive pre-market approval. Under section 510(k) of the Federal Food, Drug and Cosmetic Act, a device may be marketed without prior FDA approval if it is substantially equivalent to a predicate device that is already being legally marketed. A new product is substantially similar to an existing product if the product has the same intended use, even if it has different technological characteristics, as long as it 1) is as safe and effective as a legally marketed device, and 2) does not raise different questions of safety and efficacy than the predicate device. 21 U.S.C. § 360c(i).

The ProElectDT was approved by the FDA as "substantially equivalent" to a transcutaneous electrical nerve stimulator (TENS) unit. The dispute in this case is whether Plaintiff used the ProElectDT in a manner substantially similar to the TENS unit, or in a dissimilar, experimental manner. Plaintiff claims that she properly billed Medicare for her use of the ProElectDT to provide "nerve blocks" and that she properly used the only CPT codes for nerve blocks. Defendant contends that Plaintiff did not use the ProElectDT in a substantially equivalent manner to the TENS unit because the TENS unit does not create a nerve block.

The procedural system utilized by Medicare for billing is the Health Care Financing Administration Common Procedure Coding System (HCPCS). It is based upon the American Medical Association's Physicians' Current Procedural Terminology manual, Fourth Edition (CPT-4) (A.R. pgs. 00248-00249.).

A. Standard of Review

A court's review of the final decision of the Secretary in this case is governed by 42 U.S.C. § 1395ff(b), which incorporates 42 U.S.C. § 405(g). Under § 405(g), the Secretary's final decision will be disturbed only if the factual findings underlying the decision are not supported by substantial evidence, Richardson v. Perales, 402 U.S. 389, 401 (1971), or if the decision failed to apply the correct legal standards. Moncada v. Chater, 60 F.3d 521, 523 (9th Cir. 1995). The ALJ's determinations of law are reviewed de novo, although deference is owed to a reasonable construction of the applicable statutes. Edlund v. Massanari, 253 F.3d 1152 (9th Cir. 2001) (reversing ALJ's decision for failure to apply clear and convincing standard to reject treating physician's testimony); McNatt v. Apfel, 201 F.3d 1084, 1087 (9th Cir. 2000) (reversing ALJ's dismissal of request for hearing as not allowed by regulation). Additionally, 42 U.S.C. § 405(h), applicable to Medicare through 42 U.S.C. § 1395ii, provides that the judicial review method set forth in § 405(g) is the exclusive method of review in requiring that "[n]o findings of fact or decision of the [Secretary of Health and Human Services] shall be reviewed by any person, tribunal, or governmental agency except as herein provided."

Plaintiff argues that, under the Administrative Procedures Act ("APA"), 5 U.S.C. § 701 et. seq., this court can set aside any decision found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Rothman v. Hospital Service of Southern California, 510 F.2d 956, 958-59 (9th Cir. 1975). The Rothman case, however, found that the APA provided for review of medicare decisions in the absence of any other judicial review of a provider's right to reimbursement. In 1986, Medicare was amended to provide for judicial review pursuant to 42 U.S.C. § 405(g). Accordingly, review under the APA is no longer available. Moreover, even if such review were available, the court recommends finding that the decision of the ALJ was not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.

Substantial evidence is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion,"Richardson v. Perales, 402 U.S. 389, 401 (1971) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)), and is "more than a mere scintilla," but is "less than a preponderance." Gonzalez v. Sullivan, 914 F.2d 1197, 1200 (9th Cir. 1990). A reviewing court "must affirm a finding" supported by "such evidence as a reasonable mind might accept as adequate . . ., even if it is possible to draw two inconsistent conclusions from the evidence." Vallejo Gen. Hosp. v. Bowen, 851 F.2d 229, 233 (9th Cir. 1988). A court may not displace the agency's "choice between two fairly conflicting views, even though the court would justifiably have made a different choice had the matter been before it de novo." Lockert v. United States Dept. of Labor, 867 F.2d 513, 520 (9th Cir. 1989) (citation omitted).

B. The ALJ's Finding that the Treatments Were Experimental Is Supported by Substantial Evidence

The central issue in this case is whether Plaintiff used the ProElectDT in a manner that was substantially similar to use of the TENS. The ALJ found:

The appellant acknowledged that she used the ProElectDT in the instant case not as a service "substantially" similar to that of a TENS unit. For example, the appellant acknowledged that the purpose of a TENS unit is to provide a temporary relief from pain by using a low electrical current to affect the superficial nerves, while the ProElectDT uses a much higher (and variable) current to reach and alter the nerve itself, with the expectation of more permanently reducing the transmission of pain, thereby achieving a true nerve block. . . . By using the ProElectDT to produce permanent electroceutical nerve blocks, the appellant used the device for services different than those ascribed for a TENS unit. . . .

. . . .

. . . In this case, the evidence of record is convincing in establishing that the ProElectDT was approved by the FDA for use only as a TENS unit, and that the actual use of the device for achieving a nerve block was beyond the scope of its authorized use, and must therefore be considered experimental or investigational.

(AR ¶ 00014, 00016). The ALJ also noted that, in a letter dated September 17, 1997, the FDA specifically ordered the manufacturer to stop making claims in its promotional materials about the ProElectDT's potential as a nerve-blocker. (AR 00015) In the letter, the FDA states that certain Matrix marketing materials were promoting the ElectDT and MMR 190i devices for uses that go beyond the clearance granted. One example listed by the FDA of a claim not cleared for the ElectDT was that the device provides "potent analgesic effects via neuron blockade". The FDA concluded that the "expanded claims represent a major modification in the intended use of the devices." (AR 000245-246.)

The hearing officer stated in her decision that the case file contains a letter from the FDA to Matrix Electromedical Inc. (the manufacturer of the ProElectDT) dated September 17, 1997. The ALJ refers to the letter as Exhibit 8 to the Hearing Officer's Decision. The exhibits to the Hearing Officer's decision were not included in the Administrative Record delivered to the Court. Defendant represented in Court that Exhibit 8 had been considered by the Hearing Officer and Plaintiff did not dispute the assertion.

The ALJ's finding is supported by substantial evidence. The FDA approved the marketing of the ProElectDT as substantially similar to the TENS unit, but only for the use of the ProElectDT program that used the machine as a TENS. (AR 00048, AR 01533.) The ALJ supported his conclusion by noting that the warnings the FDA issued along with the approval to market the ProElectDT contained several references to transcutaneous electrical stimulation, which would be associated with the TENS unit. (AR 00049.) Additionally, the testimony showed that the TENS unit creates a superficial stimulation, as opposed to a nerve block. (AR 01500, 01506-07.) Plaintiff's medical expert, Dr. Verbuch, acknowledged the difference between the TENS unit and the ProElectDT, describing the difference as "huge." (AR 01506.) Dr. Verbuch also stated: "There's no comparison. You certainly use them for different purposes, just like you would use chemical blocks versus tans [sic] unit for different purposes." (AR 01533.) Moreover, Plaintiff also presented testimony from Dr. Schwartz, who stated that the TENS unit is felt on the surface on the skin, does not penetrate deeply, and does not affect the nerve physiology, whereas the ProElectDT penetrates deeply into the nerve, creates a blockade, and stops the nerve from firing. (AR 01574-75.) Dr. Schwartz further testified that "every single characteristic about the current is completely different" for the TENS unit versus the ProElectDT. (AR 01576.) Finally, Plaintiff's attorney conceded at the hearing in front of the Hearing Officer that there was no FDA approval for using the ProElectDT as a nerve block. (AR 01536-37.) Despite this admission, Plaintiff argues that her use of the ProElectDT was not experimental.

Plaintiff presented testimony from Dr. Schwartz recorded in a different proceeding involving similar issues. (AR 00009.)

1. FDA Approval of ProElectDT Does Not Guarantee Medicare Payment

Plaintiff argues that because the ProElectDT was approved by the FDA for treating chronic pain, any treatment using the ProElectDT for chronic pain must be compensated by Medicare. When a device is approved for one purpose and used outside of its approval (either for a different purpose or in a different dosage), that use is deemed "off label." Plaintiff correctly notes that the FDA can restrict a company from marketing for off label uses, but can not prevent a doctor from prescribing a device for an off label use for any purpose she deems medically necessary. Washington Legal Foundation v. Friedman, 13 F. Supp.2d 51 (D.D.C. 1998). Plaintiff then argues that because she is allowed to prescribe off label uses, Medicare must pay for off label uses. This leap of logic is unwarranted. Medicare excludes payments for all treatment not necessary, but does not require payment for all necessary treatments. Goodman v. Sullivan, 891 F.2d 449, 451 (2nd Cir. 1989). In fact, Plaintiff concedes in her Reply that she is not arguing that all necessary treatments are reimbursable. (Reply at 7.)

2. The ALJ's Finding that Use of a ProElectDT to Create a Nerve Block Was Not Substantially Similar to Use of TENS Unit Is Supported by Substantial Evidence

Plaintiff next argues that the use of the ProElectDT as a nerve block was approved by the FDA as substantially similar to previous use. As noted above, a new product is substantially similar to an existing product if the product has the same intended use, even if it has different technological characteristics, as long as it 1) is as safe and effective as a legally marketed device, and 2) does not raise different questions of safety and efficacy than the predicate device. 21 U.S.C. § 360c(i). Plaintiff argues that there is no evidence in the record refuting the contention that the ProElectDT is safe and effective. The ALJ, however, based his decision instead on his finding that the use of the ProElectDT as a nerve block raised different questions of safety and efficiency than the use of the TENS unit. This finding is supported by substantial evidence. The ProElectDT uses a much higher current to reach and alter the nerve to create the nerve block. (AR 01576, 01585-86). Moreover, Plaintiff's attorney admitted at the hearing in front of the Hearing Officer that there was no FDA approval to use the ProElectDT as a nerve block. (AR 01536-37.) Finally, the FDA issued a letter prohibiting the marketing of the ProElectDT as a device that could be used for performing nerve blocks. Thus, the ALJ's determination that the use of the ProElectDT to create a nerve block was not substantially similar to the TENS unit because it raised different safety questions is supported by substantial evidence.

3. The ALJ Made No Error in Determining The Device Was Not Approved to Create a Nerve Block

Plaintiff argues that the ALJ was mistaken to find that the FDA had not approved the use of the ProElectDT for achieving nerve blocks under the 644XXX CPT codes, as the FDA does not provide approval for CPT codes. Plaintiff misstates the finding of the ALJ. The ALJ found that the FDA did not approve the use of the ProElectDT as a nerve block. (AR 00016.) This finding is supported by sufficient evidence, as discussed above.

4. Mere Approval of CPT Codes Does Not Constitute a Binding Coverage Determination

Plaintiff argues that the use of the ProElectDT was not experimental because she used the right CPT codes for nerve blocks. Plaintiff asserts that Mr. Hauf, her employee responsible for billing medicare, got confirmation from a Medicare consultant that the codes were appropriate. Plaintiff also presented expert testimony from Dr. Schwartz that he believed the codes to be appropriate. (AR 00228,1555-56, 1577-78.) Plaintiff argues that Medicare's authorization of the use of the nerve block CPT code should act to estop Defendant from arguing that the codes were wrong. Defendant counters that whether or not the CPT code for nerve blocks is appropriate is a red herring. Defendant is correct. The issue is whether the use of the ProElectDT to create a nerve block was experimental, not whether the CPT code was some kind of "best fit." Plaintiff was unable to present any authority that approval of a billing code acts as an estoppel.

C. 42 U.S.C. § 1395pp(a) Does Not Apply to Services Denied as Experimental

The limitation of liability provision provides that payment may be made for services otherwise not reimbursable if:

(1) a determination is made that, by reason of section 1395y(a)(1) or (9) of this title or by reason of a coverage denial described in subsection (g) of this section, payment may not be made under part A or part B of this subchapter for any expenses incurred for items or services furnished an individual by a provider of services or by another person pursuant to an assignment under section 1395u(b)(3)(B)(ii) of this title, and
(2) both such individual and such provider of services or such other person, as the case may be, did not know, and could not reasonably have been expected to know, that payment would not be made for such items or services under such part A or part B of this subchapter
42 U.S.C. § 1395pp(a). Only § 1395y(a)(1), which states that items that are not reasonable and necessary for treatment shall not be reimbursed, potentially applies in this case.

Section 1395y(a)(9) involves custodial care and section 1395pp(g) relates to home health services or hospice care.

The ALJ found that section 1395pp(a) does not apply because the services were experimental under 42 C.F.R. § 411.15(o), as opposed to not medically reasonable or necessary under 42 U.S.C. § 1395y(a)(1). Plaintiff disputes this determination. The ALJ's determinations of law are reviewed de novo, although deference is owed to a reasonable construction of the applicable statutes.Edlund v. Massanari, 253 F.3d 1152 (9th Cir. 2001); McNatt v. Apfel, 201 F.3d 1084, 1087 (9th Cir. 2000).

1. The ALJ's Construction of the Statute Is Reasonable.

On its face, the statue states that it applies to denials of coverage based upon three specific reasons. A denial based on the service being experimental is not listed. If Congress had intended to allow the limitation of liability provision to apply to denials for experimental services, it would have written section 1395pp(a) to include such denials. Cf. Doerr by Merkel v. Chater, 937 F. Supp. 775 (C.D. Ill. 1995) (Accepting agency interpretation that limitation of liability only applies when denial is solely based on enumerated reason and excluding denial based also upon uncovered reason.); see also Medicare Carrier's Manual § 7300.2A ("Where items or services can be denied for a reason other than, or in addition to, § 1862(a)(1), the basis for denial cannot be § 1862(a)(1), and the limitation of liability cannot apply.") Although the Doerr court noted that the spirit of the provision arguably supported payment, it held that the statute only provided for application in limited situations and that it was "not unreasonable" to assume that if Congress had intended other sections of the Act to trigger the limitation of liability provision, it would have clearly enumerated those sections.

Moreover, the Secretary's interpretation is sensible as the limitation of liability provision was designed to apply only in limited circumstances. One of those circumstances is a denial based solely on not being reasonable and necessary under section 1395pp(a). It is logical to allow payment for denials based on the general category of not being reasonable and necessary, which cannot be entirely anticipated by a provider, and to deny payment for denials based on the more limited, and clearly defined, standard of being experimental.

2. The ALJ's Interpretation Is Not Contrary to the Intent of Congress

Plaintiff argues that the Secretary's interpretation is contrary to the intent of Congress. Plaintiff claims that the legislative history of 42 C.F.R. § 411.15(o) specifically provides that the limitation of liability provision applies to denials of coverage for experimental procedures. A review of the legislative history is necessary to evaluate Plaintiff's argument.

Historically, all experimental devices were excluded from coverage as not medically reasonable and necessary. Additionally, devices that require, but have not yet received, FDA approval for marketing ("investigational devices"), have been excluded as experimental. HCFA recognized that some investigational devices were safe and should be considered for coverage. In order to allow for coverage of those devices, on September 19, 1995, HCFA promulgated a final rule establishing the process by which the FDA will assist HCFA in identifying non-experimental investigational devices that are potentially covered under Medicare. Medicare Program, Criteria and Procedures for Extending Coverage to Certain Devices and Related Services, 60 Fed. Reg. 48417, 48418 (Sept.19, 1995) (to be codified at 42 C.F.R. pt. 411); 1995 WL 550116. Accordingly, HCFA entered into an agreement with the FDA to identify those investigational devices for which the underlying questions of safety and effectiveness had been resolved. Id. at 48419. The FDA now classifies each device with an FDA-approved IDE as either experimental/investigational (Category A), for which the risk is unknown, or non-experimental/investigational (Category B), for which the underlying questions of safety have been resolved. Medicare continues to exclude all Category A devices. However, Medicare now covers those Category B devices which are furnished in accordance with FDA-approved trials.

In 1976, the Medical Devices Amendments Act, 21 U.S.C. §§ 360(k), 360c, 360e, 360j, required that Class III devices receive pre-market approval from the FDA before they may be commercially distributed. In 1980, the Secretary promulgated regulations providing an exemption to the pre-market approval requirement for Class III investigational devices used in clinical trials. Under this "Investigational Device Exemption" ("IDE"), devices could be sold to hospitals for use in clinical trials prior to obtaining pre-market approval.

Plaintiff supports her argument that all denials of coverage for experimental devices fall within the limitation of liability provision by quoting the legislative history, but she omits the language quoted below in bold:

Existing regulations concerning limitations on liability in Secs. 411.400 through 411.406 will apply to this broader coverage of certain investigational devices and services related to those devices. Medicare payment may be made for certain assigned claims for a service related to a noncovered device if the service was excluded from coverage in accordance with § 411.15(k) as not medically necessary under section 1862(a)(1)(A) of the Act. A beneficiary who did not know and could not reasonably have been expected to know that payment would be denied under section 1862(a)(1)(A) of the Act receives protection from financial liability in accordance with Secs. 411.400 through 411.406 under the limitation of liability provision of section 1879 of the Act. Similarly, when the beneficiary is protected and the provider or supplier also did not know and could not reasonably have been expected to know that payment would be denied, the provider or supplier also receives protection from financial liability in accordance with the limitation on liability provision. Consequently, Medicare payment may be made to the provider or supplier.
Id. at 48420. However, when the strategically omitted portion is considered, this interpretation is not tenable. Instead, the unambiguous words state that the limitation of liability provision applies "to this broader coverage." The "broader coverage" refers to the new coverage for Category B devices furnished in accordance with FDA-approved trials. Additionally, the limitation of liability only applies when services are "excluded from coverage in accordance with § 411.15(k) as not medically necessary under section 1862(a)(1)(A) of the Act." Thus, the limitation of liability applies only to situations in which coverage is available for experimental Category B devices used during approved clinical trials, but denied under 42 C.F.R. 411.15(k), as not medically necessary.

Section 411.15(k) provides: "The following services are excluded from coverage. . . . (k) Any services that are not reasonable and necessary for one of the following purposes: (1) for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member." 42 C.F.R. § 411.15(k).

3. Prior Case Law Does Not Render the ALJ's Construction Unreasonable

Plaintiff argues that Yale-New Haven Hospital v. Thompson, 162 F. Supp.2d 54 (D. Conn. 2001), stands for the proposition that the limitation of liability provision is applicable to her situation. The Yale court denied a motion to dismiss the provider's claims for payment, finding genuine questions of fact as to whether the limitation of liability provision in section 1395pp(a) applied. The Plaintiff in that case had been denied payment because the procedure in question was experimental. Accordingly, the court in Yale implicitly concluded that 1395pp applied to claims denied as experimental.

The Yale decision is not binding on this court. Additionally, the Yale decision is not persuasive to the extent that it did not examine whether the denial in that case was properly categorized as under 42 U.S.C. § 1395y(a)(1) (the "not reasonable and necessary" basis for limiting liability). Moreover, Yale is distinguishable because, unlike here, there is no evidence in the decision that the Secretary presented a reasonable construction of the statute that would exclude the denial of payment from the limitation of liability provision of section 1395pp. Also, this case is not directly on point, as it examined claims denied prior to the effective date of 42 C.F.R. § 411.15(o). Prior to the enactment of 42 C.F.R. § 411.15(o), the issue was governed by a Medicare Manual Instruction, instructing fiscal intermediaries to deny coverage for all medical devices not approved for marketing by the FDA. Thus, although the denial is still based on the experimental nature of the process, the court did not directly face the question of whether a denial under 42 C.F.R. 411.15(o) would qualify as a denial under 42 U.S.C. § 1395y(a)(1), for purposes of the limitation of liability provision.

The instruction stated "Medical devices which have not been approved for marketing by the FDA are considered investigational by Medicare and are not reasonable and necessary for the diagnosis or treatment of illness or injury . . . Program payment, therefore may not be made for medical procedures or services performed using devices which have not been approved for marketing by the FDA."
(quoted in Cedars-Sinai Medical Center v. Shalala, 939 F.Supp. 1457, 1462 (C.D. Cal. 1996) (holding 1986 Manual Instruction invalid for failure to comply with notice and comment requirements of Administrative Procedures Act.))

4. The ALJ's Interpretation Does Not Violate Due Process and Is Not Unfair

Plaintiff argues that an interpretation of the limitation of liability provision that does not include denials under 42 C.F.R. 411.15(o) would violate her rights under the Due Process Clause of the Fifth Amendment. The Fifth Amendment provides: "No person shall be . . . deprived . . . property, without due process of law . . ." U.S. Const. amend. V. Plaintiff's argument is without merit. First, Plaintiff has received two full evidentiary hearings as well as this judicial review. Plaintiff has received all process due. Second, Plaintiff's claim that she had no notice that her claims would not be paid is not accurate. Plaintiff knew, or should have known, that she was prescribing an "off label" use which would be considered experimental and not reimbursable.

Plaintiff also argues that it would be "incredibly unfair" to allow for payment for services determined not to be reasonable and necessary, but to deny payment for reasonable and necessary services deemed experimental. Plaintiff's argument is not persuasive. Medicare does not guarantee payment for all necessary services. Goodman v. Sullivan, 891 F.2d 449, 451 (2nd Cir. 1989). The limitation of liability provision allows for payment for certain unnecessary services, so long as neither provider nor beneficiary knew or should have known that the service was not reimbursable. There is no unfairness inherent in providing the limitation of liability.

Plaintiff also argues that it would be "patently unfair" to find that investigational devices are covered by the limitation of liability provision, but experimental devices are not. Plaintiff's premise that the ALJ distinguished between experimental and investigational devices is in error. Under current regulations, both investigational and experimental procedures are generally barred from payment under 42 U.S.C. 411.15(o). The exception for safe investigational devices used in clinical trials is a rational one that does not apply to Plaintiff's use.

Although a different construction could also be reasonable, the agency is entitled to "some deference" in its interpretations. Because the Agency's interpretation is reasonable, this court recommends upholding the ALJ's determination that the limitation of liability provision does not apply to denials of coverage for experimental devices.

D. Plaintiff Knew or Should Have Known that Her Use of the ProElectDT was Experimental

Even if the Limitation of liability provision applied to a denial based upon experimental services, the ALJ also found that Plaintiff should have known that the procedure would not be covered. This finding is also supported by substantial evidence.

"[A] provider is deemed to have actual or constructive knowledge of an exclusion from coverage if any one of four sets of conditions are met, including the circulation of an exclusionary policy in HCFA notices, manual issuances, bulletins, or other written guidelines or directives. 42 C.F.R. § 411.406(e)(1)" Yale, 162 F. Supp.2d at 67. The ALJ found: "It is untenable that a Board Certified doctor with extensive experience did not know or would [not] have known she would not be reimbursed." (AR 00018.) This finding is supported by substantial evidence. As Plaintiff's counsel conceded during the hearing in front of the Hearing Officer, the FDA has never approved of the use of the ProElectDT to create a nerve block. (AR 01536-37.) Plaintiff knew that the FDA had not approved the use of the ProElectDT except for use that was substantially equivalent to the TENS device. Plaintiff also knew that she was using the ProElectDT in a manner that was not substantially equivalent to the TENS device. The Medicare Coverage Issuance Manual, section 35-46, describes the conditions under which the TENS unit is covered and states that the TENS device "is used by the patient on a trial basis and its effectiveness in modulating pain is monitored by the physician . . ." (AR 252.) In contrast, Plaintiff knew that she was not prescribing use of the ProElectDT either by the patient or to modulate pain. Instead, she, as the doctor, operated the ProElectDT to create a nerve block. Accordingly, Plaintiff knew or should have known that the procedures were experimental and not covered by medicare.

Plaintiff claims that she had no reason to know the procedures were not covered because other Carriers had authorized reimbursements for the use of the ProElectDT to create nerve blocks. However, the Hearing Officer found that the evidence submitted by Plaintiff only showed payments for nerve blocks and did not show that they were achieved through electricity. Additionally, the Hearing Officer, found that the "evidence also showed that the other Carriers were not knowingly paying for nerve blocks with the 644xx codes when electricity was used as the anaesthetic agent." (AR 00248.)

III. CONCLUSION

For the foregoing reasons, It Is Hereby Recommended that:

1. Plaintiff's Motion for Summary Judgment be Denied; and
2. Defendant's Motion for Summary Judgment be Granted.

IT IS SO RECOMMENDED.

Any party may serve and file specific written objections to this recommendation within ten (10) working days after being served with a copy. See 28 U.S.C. § 636(b)(1)(C); Fed.R.Civ.P. 72(b); Civil Local Rule 72-3. Failure to file objections within the specified time may waive the right to appeal the District Court's order.