American Society of Dermatology
2721 Capital Ave.
Sacramento, CA 95816-6004
Phone: (916) 446-5054
Message: (561) 873-8335
Fax: (916) 446-0500
American Society of Dermatology, Inc.
A Voice for Private Dermatologists Since 1992

ASD vs. Shalala Update

July 14, 1997
by Chester C. Danehower, MD
Peoria, IL

On April 14,1997 oral arguments were heard by the Washington D.C. Appellate Court concerning ASD v. SHALALA. Kent Masterson Brown presented our case in a masterful manner. In fact, the attorney for Health and Human Services was “roasted” by the appellate judges. The three judges gave every indication that they understood the issues in the case, and from the discussion it appeared that there was no way for us to lose. Needless to say when a negative decision was rendered by the appellate court confirming United States District Justice Norma Holloway Johnson’s original findings, we were appalled. This decision was rendered within two weeks of the oral arguments, and lacked an appropriate explanation.

Still feeling certain that the CPT Editorial Committee, the CPT Editorial Advisory Committee, the Relative Value Update Committee, the Relative Value Update Advisory Committee, and the Physician’s Multispecialty Advisory Committee were all FACA Committees, we asked our attorney to petition the appellate court to hear our case “en banc” i.e. for all of the Washington D.C. appellate court judges to hear the case. Unfortunately this request was also denied, and again an appropriate explanation was lacking.

It was our hope to open the RBRVS process. In this quest we were unsuccessful. If we had been successful every physician in this country would have benefited. We will now have to put our lack of success in this lawsuit behind us, and move on to the battles that are sure to follow. We learned much in this quest about the judicial process, and we have obtained reams of information. In fact we have only started to evaluate the volumes of material we obtained during the investigative phase of the lawsuit; information that will surely be valuable to the ASD in the future.

Now we must move forward. We have stood up to the oppression of our out of control federal bureaucracy, and we have sent them a message. We will be watching, and will not hesitate to take appropriate steps, when in the future, governmental agencies violate the law in their dealings with our patients and/or physicians. We can be satisfied that we were in the battle. Where was the rest of organized medicine?
March 3, 1997
by Chester C. Danehower, MD
Peoria, Illinois

Members Invited to Attend Hearing. . .

Oral argument in this case will be heard in the United States Court of Appeals for the District of Columbia on April 14, 1997 at 9:30 am. Any ASD Member who is interested in being present at the hearing is invited to attend. Please call the ASD Office at (309/676-4074) for details.

Recently I discovered a particularly disturbing article in the November, 1996 issue of the PHYSICIAN’S MEDICARE GUIDE NEWSLETTER. The headlines proclaim boldly “AMA’S Involvement in Fee Schedule Updates Permissible”. This article states that ASD v. Shalala was rejected by the U.S. District Court for the District of Columbia which is true. The final paragraph reads as follows: “The court ruled that the fee schedule law prohibits judicial review of fee schedule codes and values. The court also said that the Health Care Financing Administration (HCFA) was not improperly using the AMA committees because it relied on them merely for advice and did not control their activities.”

It strikes me as very strange how the truth can be told and yet how it is still not the truth. For example, it appears from this article that the case has been completed, and that no further legal action is to occur. Well, for those of you who do not already know, oral argument in this case will be heard in the United States Court of Appeals for the District of Columbia on April 14, 1997 at 9:30 a.m. The suit is alive and well, and quite frankly the ASD has an excellent chance of winning!

Furthermore, the first sentence of the above mentioned paragraph which states that judicial review of fee schedule codes and values is not permitted raises a serious constitutional issue; that is the separation of powers within our government. The article tells the truth, but does not mention that Congress has no right under current law to make a law that prohibits judicial review. An action of this nature sets a very dangerous precedent, and is not acceptable in a free society!

Finally, the last sentence in the quoted paragraph states that the committees were used merely for advice. I must be missing something, because I thought that is what the word advisory means in the Federal Advisory Committee Act (FACA). For the purpose of the FACA, the Current Procedural Terminology (CPT) editorial committee, the CPT editorial advisory committee, the Relative Value Update Committee (RUC), the RUC Advisory Committee, and the physician’s multi-specialty committee all give every indication of being FACA advisory committees, and therefore must be open to the public. From ASD's standpoint these AMA advisory committees to Health and Human Services (HHS) are acting in violation of the law.

For those of you who think that this lawsuit is not important, I would like for you to consider the recent action in Florida by its Medicare carrier. As I am sure you are aware, this carrier has attempted to interfere in the doctor-patient relationship by directing how actinic keratoses will be treated. To the credit of both the Florida dermatologists and the American Academy of Dermatology (AAD), a lawsuit has been filed for relief in this matter. As important as this latter lawsuit is, its importance pales in comparison to the ASD lawsuit, because it only deals with a single issue. The ASD lawsuit goes to the heart and soul of the problem; the Resource Based Relative Value System (RBRVS) and CPT coding. Perhaps if we had received support from the AAD in ASD v. Shalala, the actinic keratosis debacle may have never occurred. We need to find ways to work together instead of pulling against one another.

If you would like to make a contribution to the FACA fund, please curse to the bottom of this page for mailing details.

ASD challenges HHS failure
to follow procedures in
developing Medicare
Fee Schedule

The American Society of Dermatology headquartered in Peoria, Illinois, and two physician members, Melissa Kline Clements, MD, of Oklahoma City, Oklahoma, and John A. Kasch, MD, of Sacramento, California, filed a complaint in the United States District Court in Washington, D.C., against Secretary of Health and Human Services Donna Shalala, challenging the development and administration of the Medicare physician fee schedule and its annual updates and revisions annually through the use of five unchartered, unregulated, and secret advisory committees and panels.

The lawsuit alleges that the Secretary has failed to comply with the Federal Advisory Committee Act ("FACA"), the Government in the Sunshine Act, the Freedom of information Act ("FOIA"), and the Administrative Procedure Act ("APA"), while promulgating the physician fee schedule.

The Plaintiff dermatologists charge that the Secretary has utilized the American Medical Association and certain "AMA-recognized" medical specialty societies, all representatives chosen from the AMA House of Delegates, none of whom are employees of the Federal government, as a "preferred source of advice and recommendations" as described in FACA. Any meetings held with the purpose of providing such advice and recommendations to the Secretary are subject to the FACA and other sunshine laws, including the requirement to provide public notice of meetings, conduct meetings open to the public, provide minutes of the meetings, and to file charters with the Library of Congress annually, noting, among other facts, the identities of those advising the federal of ficials and agencies, and the amount of taxpayer funds used by the advisors in holding the meetings.

Congress charged the Secretary with developing a physician fee schedule under Part B of Medicare in 1989, in amendments to the Medicare Act that were a radical overhaul of the former charge-based method under which physician reimbursement for providing services to Medicare beneficiaries had previously been determined. Congress required, instead, that physician fees be calculated in accordance with a relative value scale to be established by the Secretary.

In establishing the relative value of all physician services covered by Medicare, the Secretary was authorized by Congress to "take into account the recommendations of the Physician Payment Review Commission," a federal advisory commission established under the Federal Advisory Committee Act, and the recommendations of "organizations representing physicians."

The Plaintiffs have learned that AMA representatives on at least three (3) committees and panels - known as the "AMA/Specialty Society Relative Value Update Committee," the "AMA/ Specialty Society Relative Value Update Advisory Committee," and the "HCFA Multispecialty Physicians Panels" - have met several times each year since 1989 with HHS officials and representatives of the insurers under contract with HCFA to reimburse physician Medicare services, after the notice and comment period had expired under the Administrative Procedure Act ("APA"), and that, among themselves, these individuals have determined the rates of Medicare reimbursement in a completely closed process that excludes all public scrutiny.

These "preferred sources" and HHS officials have failed to follow procedures under FACA, and have violated the sunshine laws. Immediate Past President of the American Society of Dermatology, Dr. Chester Danehower, has expressed concern that "the secret process between AMA officials and government, including the Medicare carriers, should be open to the public so that we can determine on what basis these rates are determined." The secret process has resulted in a windfall to the AMA - the outcome these Federal Laws aim to prevent.

In addition, Congress, in the 1989 amendment, required the Secretary to establish a uniform procedure for coding all physician services. The Secretary, under an agreement with the - AMA, instead, - adopted wholesale the AMA's preexisting "Current Procedure Terminology" ("CPT") codes, material on which the AMA holds a copyright.

AMA officials have met several times each year since 1989 with the Secretary and other federal Health and Human Services officials, members of medical specialty societies, and American Hospital Association officials, among others, to update, revise, and add CPT codes to the list of covered physician services. None of the members of what are known as the "CPT Editorial Panel" and the "CPT Advisory Committee" are federal officials, and only one federal official attends the "CPT Editorial Committee." And yet, these committees are charged with developing the CPT codes used by the Secretary as a comprehensive description of physician services. Members of the American Society of Dermatology and others have been excluded from providing input on the CPT codes relating to dermatology services. The Plaintiffs charge that the CPT committees of the AMA are unequivocally "preferred sources of advice and recommendations" in establishing the federally-required coding system.

The AMA publishes an estimated 800,000 copies of the annually revised edition of the CPT, containing information required by law to be used by all physicians, hospitals, and others who and which make claims for reimbursement for Medicare physician services. As such, all must purchase each year the revised edition of CPT codes from the AMA, creating a windfall for the AMA.

Plaintiffs have requested the federal court to permanently enjoin any futther meetings of any of the committees and panels which meet for the purpose of providing advice and recommendations under the Medicare physician fee schedule; to enjoin the use of any recommendations heretofore made by those committees and panels; and to issue a declaratory judgment that all such committees and panels be declared FACA committees, and that the Secretary comply with the tenrts of all applicable laws, providing thereby to the Plaintiffs any required documents in existence since 1991.

Support is Needed

A fund has been established at Charter National Bank, Oklahoma City, Oklahoma for the exclusive purpose of supporting the American Society of Dermatology, et al vs. Shalala, etc. This fund is audited independently from the American Society of Dermatology.

Through the lawsuit, the American Society of Dermatology seeks to open and make public the proceedings of all committees and panels established by FACA for the purpose of establishing CPT codes and the Medicare reimbursement schedule.

Anyone wishing to contribute to the fund may do so by sending a check to:

FACA Legal Fund
c/o Melissa Kline Clements, MD
608 NW 9th Street, #6200
Oklahoma City, OK 73102

Your support is greatly appreciated!

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