FEDERAL COURT OF AUSTRALIA

Daniel v Health Insurance Commission [2003] FCA 772

ADMINISTRATIVE LAW – judicial review – medical practitioners – Professional Services Review under Part VAA Health Insurance Act 1973 (Cth) – investigative referral by Health Insurance Commission to Director of Professional Services Review – adjudicative referral by Director to Professional Services Review Committee – where adjudicative referral purportedly under s 86 on the basis of s 106KA(1) – whether s 106KA(1) confers powers or obligations upon the Director – whether the Director can have regard to the “80/20 rule” established by regs 10 and 11, Health Insurance (Professional Services Review) Regulations 1999 – Director not entitled to rely upon the “80/20” rule alone to make adjudicative referral

HEALTH LAW – medical practitioners – Professional Services Review under Part VAA Health Insurance Act 1973 (Cth) – “inappropriate practice” – s 106KA(1) does not absolve the Health Insurance Commission from inquiring whether a practitioner’s “conduct would be unacceptable to the general body of general practitioners” under subs 82(1)(a) – content and form of investigative referral – meaning of “referred services” into which the Director must inquire – subs 86(4)(a) requires that investigative referral contain particulars of all services during the referral period – “referral period” under s 81 and ss 86(2) or (3) means two years period prior to referral date – Director must investigate, as he or she thinks fit, all services rendered in the two year period – investigative referral not necessarily invalid if it does not contain particulars of every service – breach of the “80/20” rule does not relieve Director from need to consider entire two year referral period – such consideration important to exercise of discretion to enter s 92 agreements with practitioner – no requirement under the Act that an agreement can only be considered after a practitioner acknowledges guilt – failure to put to practitioner that silence could be seen as a refusal to acknowledge wrongdoing a breach of procedural fairness

WORDS AND PHRASES – “inappropriate practice” – “referral” – “referral period” – “80/20 rule”

Health Insurance Act 1973 (Cth) Part VAA ss 81, 82, 86, s 87(1), 89, 91, 92, 93A, 106KA.

Administrative Decisions (Judicial Review) Act 1977 (Cth) s 5.

Judiciary Act 1903 (Cth) s 39B

Health Insurance (Professional Services Review) Regulations 1999, regs 10 and 11

Health Insurance Commission v Grey [2002] FCA 130

Pradhan v Holmes [2001] FCA 1560

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355

Adams v Yung (1998) 83 FCR 248

Kioa v West (1985) 159 CLR 550

STEVEN DANIEL  -v-  BERNARD RAYMOND KELLY (in his capacity as Acting Director of Professional Services Review);  ALAN JOHN HOLMES (in his capacity as the Director of Professional Services Review);  LYNETTE EDWARDS (in her capacity as a member of Professional Services Review Committee No 324);  CELIA SKLOVSKY (in her capacity as a member of Professional Services Review Committee No 324);  JOHN TURNBULL (in his capacity as a member of Professional Services Review Committee No 324) and HEALTH INSURANCE COMMISSION

V 785 of 2002

RYAN J

28 JULY 2003

MELBOURNE

THE COURT ORDERS THAT:

1.         The decision of the sixth respondent, Health Insurance Commission, (“the Commission’) made on or about 19 December 2001 to refer to the first respondent (“the Acting Director”) the question whether the applicant had engaged in inappropriate practice in connection with rendering of services between 13 August 2000 and 7 January 2001 be set aside.

2.         The matter to which the decision referred to in paragraph 1 of this Order relates be referred to the Commission for further consideration in accordance with the reasons for judgment of the Court published this day and generally in accordance with law.

3.         The decisions by the Acting Director made on or about 14 February 2002 to set up Professional Services Review Committee No 324 (“the Committee”) and to make an adjudicative referral to the Committee be set aside.

4.                  The respondents are to file and serve written submissions with respect to costs within seven days; and

5.                  The applicant is to file and serve any written submissions in reply within a further seven days.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     This is an application for judicial review of two decisions under the Health Insurance Act 1973 (Cth) (“the Act”).  The first is the decision of the Health Insurance Commission (“the Commission”) to refer certain conduct of the applicant for investigation to the Commission’s Director of Professional Services (“the Director”).  This investigative referral was purportedly made pursuant to s 86 of the Act.  The conduct alleged against the applicant was that he had engaged in inappropriate practice in relation to the provision of services between 13 August 2000 and 7 January 2001 (“the referral period”).  For convenience, I shall refer to this decision as “the investigative referral decision”.

2                     The second decision is that made by the Acting Director to refer the question of the applicant’s conduct during the referral period for adjudication and to establish, ad hoc, Professional Services Review Committee No 324 (“the Committee”) to deal with that adjudicative referral.  For convenience, I shall refer to this decision as “the adjudicative referral decision”.

Factual background

3                     The facts in this case are not relevantly in dispute.  Dr Daniel became a registered medical practitioner in 1995, and from January 2000 to January 2001 he was engaged in general practice at a number of practices and health care centres.  On 8 May 2001, Dr Houston, the Acting Manager Professional Services Branch at the Commission, wrote to Dr Daniel, stating that the Commission had reviewed his “practice profile” and that his “servicing pattern appears to have reached the prescribed level which may result in automatic referral to the Director of Professional Services Review”.  Dr Daniel telephoned the Commission and spoke to Dr Raymond Mak about the process that appeared to have been commenced.  Dr Mak told Dr Daniel that he would be counselling him in the course of a meeting where they would, in Dr Daniel’s words, “go through the issues”.  On 21 September 2001 Dr Mak met with Dr Daniel at his surgery. That meeting and what followed is described by Dr Daniel as follows at [11]-[18] of his affidavit;

‘We talked about a range of matters relating to my practice.  Dr Mak told me that the statistics kept by the HIC showed that my practice had a high volume of services compared with other general practitioners.  He noted that there were 12 days with more than 100 services and many days where there were more than 80 services.  Most of these days were between August 2000 until January 2001.

In addition Dr Mak raised some specific matters concerning the use of Medicare items for various services and he said it was important to use the correct item that related to the particular procedure.

I explained to Dr Mak my work methods and how I saw patients.  During the meeting he told me that I was an honest hard working doctor who was obviously not rorting the system.  He told me that my practice would be reviewed in 3 to 6 months and the statistics reviewed and if the HIC were not content on the review then I might be referred to the Director of Professional Services Review.  It was made clear to me that I would not be referred to the Director of Professional Services Review at that time but if on review my practice profile did not change, I may be referred at that time.

… …

On 22 October 2001 David Willson, Manager Professional Services Review Branch wrote to me about the counselling [provided by Dr Mak] and advised me that HIC had considered my case and had decided to review my practice profile in approximately 6 months.  This letter confirmed my understanding that no action would be taken by HIC in relation to a referral to the Director of Professional Service Review pending a review in 6 months time. …

…… Dr Mak also raised an issue about the use of certain Medicare items.  Mr Willson wrote to me on 21 January 2002 requesting repayment of $1377.50.  The amount requested was subsequent(sic) increased to $2,019.55 which I repaid and in respect of which I received a letter from Paul Hocking dated 8 April 2002. … ….

 By letter dated 6 June 2002, Mr Willson wrote to me advising me that HIC had reviewed my practice profile and that the concerns raised by Dr Mak and held by the HIC “appear to have been allayed to some extent during the period since the visit”.  Mr Willson[’s letter] told me that no further action will be taken at this time by the HIC with regards to Professional Services Review.  … …’

4                     The Commission wrote to Dr Daniel again on 19 December 2001 stating that it had referred his conduct in the period 13 August 2000 to 7 January 2001 to the Director of Professional Services Review.  In turn, Dr Holmes, the Director of Professional Services Review, wrote to Dr Daniel on 20 December 2001 to inform him that he had received an investigative referral from the Commission and that he was required to conduct an investigation.  Dr Daniel responded on 9 January 2002 by fax to an invitation to put forward any reasons why Dr Holmes should dismiss the referral.  On 14 February 2002, Dr Raymond Kelly, as the Acting Director of Professional Services Review, set up Professional Services Review Committee No 324 (“the Committee”) and made an adjudicative referral to the Committee regarding Dr Daniel’s conduct.  On 21 February 2002, Dr Kelly wrote to Dr Daniel, informing him of that adjudicative referral.  The Committee was to meet on 5 June 2002, but rescheduled that meeting as Dr Daniel was out of the country between March and September 2002.  At par 27 of his affidavit Dr Daniel describes the events of October 2002;

‘In early October 2002, I was contacted by Ms Evans to arrange a meeting with the PSRC [the Committee].  I informed her of the letter I had received from Mr Willson in which he said no further steps would be taken in relation to PSR [ie professional services review].  Ms Evans informed me she did not have that letter.  I sent to Ms Evans by facsimile transmission a copy of the letter for Mr Willson dated 6 June 2002 …… .  On 23 October 2002 Ms Evans again telephone me and informed me there were two processes or issues involved and that about which Mr Wilson had wrote to me was different to that which had led to the PSCR (which I did not understand) and that she now had the date 3 December 2002 for me to meet with the PSRC.’

5                     On 19 November 2002 Dr Daniel commenced proceedings in this Court and by his further amended application seeks a review under s 5 of the Administrative Decisions (Judicial Review) Act 1977  (Cth) (“the AD(JR) Act”) or ss 39B(1) and 39B(1A) of the Judiciary Act 1903 (Cth) of the Commission’s decision to make the investigative referral and the Acting Director’s decision to set up the Committee and make the adjudicative referral to it.  The applicant also seeks an injunction restraining the respondents from proceedings with the adjudicative referral.

The scheme created by the Act

6                     The relevant part of the Act is Part VAA, which is entitled “Professional Services Review Scheme”.  At the time of the impugned conduct, the relevant provisions of the Act were:

‘Division 1—Preliminary

80        Outline of this Part

… … …

81        Definitions

82        Definitions of inappropriate practice

Division 2—The Director of Professional Services Review and the Professional Services Review Panel

83        The Director of Professional Services Review

… … …

(3)       The Director has such functions, duties and powers as are conferred on him or her by this Part or the regulations.

84        The Professional Services Review Panel

Division 3—Referrals by the Health Insurance Commission

86        Commission may refer matters to the Director

(1)       The Commission may, in writing, refer to the Director the conduct of a person relating to one or both of the following:

(a)       whether the person has engaged in inappropriate practice in connection with rendering of services;

(b)       whether the person has engaged in inappropriate practice in connection with initiation of services.

(2)       An investigative referral in relation to the rendering of services may only relate to services rendered during the 2 year period immediately preceding the referral, whether or not any or all of the services were initiated before the start of that period.

(3)       An investigative referral in relation to the initiation of services may only relate to services initiated during the 2 year period immediately preceding the referral.

(4)        An investigative referral must:

(a)       contain particulars of all services rendered or initiated during the referral period by:

(i)        the person under review; or

(ii)       a practitioner employed by the person under review; or

(iii)      a practitioner employed by a body corporate of which the person under review is an officer; and

(b)       set out the reasons why the Commission considers the person under review may have engaged in inappropriate practice.

(4A)     After the Commission has made an investigative referral, the Director may request the Commission to give him or her further information relating to any services particulars of which are contained in the referral whether or not the services to which the request relates are dealt with in reasons given by the Commission under paragraph (4)(b).

(4B)     If a request is made as mentioned in subsection (4A), the Commission must comply with the request so far as it is capable of doing so.

(5)       If, after 30 June 1994 but before the commencement of this subsection, a member of the Commission’s staff (within the meaning of the Health Insurance Commission Act 1973) purported to refer conduct of a person to the Director under this section, then for all purposes:

(a)       the referral is taken to be, and always to have been,made by the Commission; and

(b)        all proceedings, matters, acts and things taken, made or done (or purporting to have been taken, made or done) because of the referral are taken to have, and always to have had,the same force and effect as they would have, or would have had, if the referral in fact had been made by the Commission.

87        Content and form of investigative referrals

(1)       An investigative referral must specify whether it relates to one or both of the following:

(a)       specified services;

(b)       services rendered or initiated by a practitioner that are one or more of the following:

(i)        services of a specified class;

(ii)       services provided to a specified class of persons;

(iii)      services provided within a specified location;

(iv)      services provided within a specified period.

(2)       The content and form of the referral must comply with any guidelines made under subsection (3).

(3)       The Minister may, in writing, make guidelines about the content and form of investigative referrals.

(4)        Guidelines so made are disallowable instruments for the purposes of section 46A of the Acts Interpretation Act 1901.

88        Procedure for notifying investigative referrals

(1)       The Commission must send a copy of the investigative referral to the person under review within 48 hours of sending the investigative referral to the Director.

(2)       The copy must be accompanied by a notice inviting the person under review to make written submissions to the Director, within 14 days, stating why the Director should dismiss the referral without setting up a Committee.

(3)       Within the 14 day period commencing on the day on which the person under review is sent the copy and notice, he or she may make such written submissions to the Director.

89        Investigation by Director

91        Dismissing investigative referrals as lacking sufficient foundation

The Director may dismiss the investigative referral if he or she is satisfied that there are insufficient grounds on which a Committee could reasonably find that the person under review has engaged in inappropriate practice in connection with rendering or initiating the referred services.

92        Agreement entered into between Director and person under review

(1)       If the person under review is a practitioner, the Director and the person may enter into a written agreement in respect of the matters referred under subsection 86(1) under which:

(a)       the person acknowledges that conduct during the referral period by the person in connection with rendering or initiating specified services constituted engaging in inappropriate practice; and

(b)       specified action in relation to the person (being action of a kind mentioned in subsection (2)) is to take effect; and

(c)        the Director is to dismiss the referral.

(2)       The action that may be specified under paragraph (1)(b) in the agreement includes any one or more of the following:

(a)       that the Director, or the Director’s nominee, is to reprimand the person;

(b)       if any medicare benefit has been paid (whether or not to the person) for services referred to in paragraph (1)(a)—that the person is to repay to the Commonwealth an amount equal to the whole or a specified part of that medicare benefit;

(c)        that any medicare benefit that would otherwise be payable for services referred to in paragraph (1)(a) is to cease to be payable;

(d)       if the person is a participating optometrist—that the Minister’s acceptance of the undertaking by the participating optometrist under section 23B is to be taken to be revoked, either wholly or in so far as the undertaking covers particular premises;

(e)        if the person is a medical practitioner or a dental practitioner in respect of whom a Part VII authority is in force and a service referred to in that paragraph involves prescribing or dispensing a pharmaceutical benefit—that the Part VII authority is to be taken, for the purposes of the National Health Act 1953, to be revoked or suspended;

(f)        that the person is to be disqualified, for a specified period of not more than 3 years starting when the agreement takes effect, in respect of one or more of the following:

(i)        provision of specified services, or provision of services other than specified services;

(ii)       provision of services to a specified class of persons, or provision of services to persons other than persons included in a specified class of persons;

(iii)      provision of services within a specified location, or provision of services otherwise than in a specified location;

(g)       that the person is to be fully disqualified for a specified period of not more than 3 years starting when the agreement takes effect.

(3)       An agreement entered into between the Director and the person under review under subsection (1) does not take effect unless it is ratified by the Determining Authority.

(4)       If the agreement is ratified by the Determining Authority:

(a)       the agreement takes effect on:

(i)        the date specified in the agreement; or

(ii)       if no date is so specified or the agreement is not ratified on or before the date so specified—the 14th day after the day on which it is ratified; and

(b)       the agreement is binding on the Director and the person under review; and

(c)        the Director must notify the Commission in writing of the making and ratification of the agreement and of the terms and date of effect of the agreement; and

(d)       the Director must ensure that any action specified in the agreement under paragraph (2)(a), (c), (f) or (g) that is necessary to give effect to the agreement is taken; and

(e)        if the agreement provides for the person under review to pay to the Commonwealth an amount equal to the whole or a specified part of any medicare benefit and the amount or a part of the amount is not paid—the unpaid amount is a debt due by the person to the Commonwealth and is recoverable by action in any court of competent jurisdiction; and

(f)        the agreement is taken to be a final determination of the Determining Authority for the purposes of section 106X.

(5)       A refusal of the Determining Authority to ratify the agreement does not prevent the Director and the person under review from entering into a further agreement under subsection (1).

(6)       The Director must not disclose to any Panel member (other than a Panel member consulted by the Director under paragraph 90(1)(a) in relation to the referral):

(a)       the content of any communications between the Director and the person under review in relation to proposals for an agreement under this section; or

(b)        whether any such communications have taken place.

(7)        In this section:

Part VII authority means any of the following authorities or approvals under Part VII of the National Health Act 1953:

(a)       the authority conferred on a medical practitioner by section 88 of that Act;

(b)       the approval of a dental practitioner as a participating dental practitioner under section 84A of that Act;

(c)        the approval of a medical practitioner under section 92 of that Act;

(d)       the authority conferred on a medical practitioner by section 93 of that Act to supply pharmaceutical benefits.

93        Decisions to set up Committees

(1)       The Director may, by writing, set up a Committee in accordance with Division 4, and make an adjudicative referral to the Committee, to consider whether conduct by the person under review in connection with rendering or initiating services specified in the adjudicative referral in accordance with subsection (7) constituted engaging in inappropriate practice.

(2)       If the investigative referral was a referral made by a Committee to the Director under subsection 106H(2), the Director may, instead of setting up a Committee under subsection (1), make the adjudicative referral to the Committee that made the investigative referral.

(3)       Subject to this section, the content and form of an adjudicative referral must comply with any guidelines made under subsection (4).

(4)       The Minister may, in writing, make guidelines about the content and form of adjudicative referrals.

(5)       Guidelines so made are disallowable instruments for the purposes of section 46A of the Acts Interpretation Act 1901.

(6)       If the Director makes an adjudicative referral, the Director must:

(a)       prepare a written report to the Committee, in respect of the services to which the referral relates, giving the reasons why the Director thinks that conduct by the person under review in connection with rendering or initiating the services may have constituted engaging in inappropriate practice; and

(b)       attach the report to the adjudicative referral.

(7)       The services that may be specified in the adjudicative referral in accordance with subsection (1) are any of the services particulars of which were contained in the investigative referral under paragraph 86(4)(a), whether or not the services were dealt with in the reasons given by the Commission under paragraph 86(4)(b).

(8)       If, in the course of the Director’s investigation into the referred services:

(a)       the Director formed an opinion that any conduct by the person under review caused, was causing, or was likely to cause, a significant threat to the life or health of any person and sent a statement of his or her concerns to an appropriate body under section 106XA; or

(b)       the Director formed an opinion that the person under review failed to comply with professional standards and sent a statement of his or her concerns to an appropriate body under section 106XB;

the adjudicative referral must contain a statement that the Director formed that opinion and set out the terms of the statement sent to the appropriate body.

(9)       The Director must disregard any opinion formed as mentioned in subsection (8) when making the adjudicative referral.

93A     Decision to take no action

93C     What happens if no action taken within 9 months after investigative referral

(1)       Subject to subsections (4) and (5), this section applies if, at the end of 9 months after the day on which an investigative referral (other than a further referral in relation to which section 93B applies) is received by the Director:

(a)       the Director has not dismissed the referral under section 91; and

(b)       the Director has not entered into an agreement with the person under review under section 92; and

(c)        the Director has not made an adjudicative referral to a Committee in respect of services referred to in the investigative referral.

(2)       The investigative referral is taken to have lapsed.

(3)       The Director may not enter into an agreement under section 92, or make an adjudicative referral, in respect of any services particulars of which are contained in the investigative referral.

(4)       If the investigation is suspended under paragraph 89A(2)(b), the Director may determine, in writing, that the period of 9 months referred to in subsection (1) is extended by a specified period that is not more than the period of the suspension.

(5)       If a notice is given under subsection 89B(2) to the person under review, or to another person, and the person concerned fails to comply with a requirement of the notice, the Director may determine, in writing, that the period of 9 months referred to in subsection (1) is extended by a specified period that is not more than the period during which the person fails to comply with the requirement.

(6)        A determination made under subsection (4) or (5) extends the period of the investigation accordingly.

94        Notice of decisions on investigative referrals

(1)       Within 7 days after making his or her decision on the investigative referral, the Director must give written notice of the decision to the person under review and the Commission.

(2)       If the Director decides to dismiss the investigative referral, the notice must include a statement of his or her reasons for the decision.

(3)       If the Director decides to make an adjudicative referral to a Committee under section 93, the notice must be accompanied by copies of:

(a)       the instrument making the adjudicative referral to the Committee; and

(b)       the report attached to the adjudicative referral under paragraph 93(6)(b).

(4)        The Director’s decision on the investigative referral is not rendered invalid merely because of a failure to comply with subsection (1) within the 7 day period.

Division 4—Professional Services Review Committees

… … …

Subdivision C—Action to be taken by Committees

106G   Application of Subdivision

106H   Matters to be considered by a Committee

106J    Committee is not required to have regard to all services covered by the adjudicative referral

The Committee is not required to have regard to conduct in connection with rendering or initiating all of the referred services but may do so if the Committee considers it appropriate in the circumstances.

106K   Committee may have regard to samples of services

(1)       The Committee may, in respect of conduct in connection with rendering or initiating the services included in a particular class of the referred services, have regard only to a sample of the services included in the class.

(2)       If the Committee finds that conduct in connection with rendering or initiating all, or a proportion, of the services included in the sample constituted engaging in inappropriate practice, then, the conduct of the person under review, in connection with rendering or initiating all, or that proportion, as the case may be, of the services included in the class from which the sample is chosen, is taken, for the purposes of this Part, to have constituted engaging in inappropriate practice.

(3)       The Minister may make written determinations specifying the content and form of sampling methodologies that may be used by Committees for the purposes of subsection (1).

(4)       The Committee may use a sampling methodology that is not specified in such a determination if, and only if, the Committee has been advised by a statistician accredited by the Statistical Society of Australia Inc that the sampling methodology is statistically valid.

(5)       A determination by the Minister under subsection (3) is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.

106KA Patterns of services

(1)       Subject to subsections (2) and (2A), if, during a particular period (the relevant period), the circumstances in which some or all of the referred services were rendered or initiated constituted a prescribed pattern of services, the conduct of the person under review in connection with rendering or initiating services during that period in those circumstances is taken, for the purposes of this Part, to have constituted engaging in inappropriate practice.

(2)       If the person under review satisfies the Committee that, on a particular day or particular days during the relevant period, exceptional circumstances existed that affected the rendering or initiating of services by the person, the person’s conduct in connection with rendering or initiating services on that day or those days is not taken by subsection (1) to have constituted engaging in inappropriate practice.

(2A)     However, subsection (2) does not affect the operation of subsection (1) in respect of the remaining day or days during the relevant period on which the person rendered or initiated referred services even if the circumstances in which the referred services were rendered or initiated on that day or those days would not, if considered alone, have constituted a prescribed pattern of services.

(3)       The regulations may prescribe, in relation to:

(a)       a particular profession; or

(b)       an identified group or groups of practitioners in a particular profession;

circumstances in which services of a particular kind or description that are rendered or initiated constitute, or do not constitute, a prescribed pattern of services for the purposes of subsection (1).

(4)       The circumstances that may be prescribed under subsection (3) as circumstances in which services that are rendered or initiated constitute a prescribed pattern of services include, but are not limited to, the rendering or initiation of more than a specified number of services, or more than a specified number of services of a particular kind, on each of more than a specified number of days during a period of a specified duration.

(5)       The circumstances that constitute exceptional circumstances for the purposes of subsection (2) include, but are not limited to, circumstances that are declared by the regulations to be exceptional circumstances.

(6)       This section only applies to services rendered or initiated after the commencement of this section.

(7)       This section does not preclude the Committee from making a finding under this Subdivision (other than section 106KB) in relation to conduct during a particular period in connection with rendering or initiating services without considering whether or not the circumstances in which the services were rendered or initiated constituted a prescribed pattern of services.’

7                     The Health Insurance (Professional Services Review) Regulations 1999 (“the Regulations”) contain the following relevant provisions in regs 10 and 11;

‘10.      The circumstance in which services that are professional attendances constitute a prescribed pattern of services is that 80 or more such services are rendered on each of 20 or more days in a 12 month period.

11.       Exceptional circumstances

            For subsection 106KA (5) of the Act, the following circumstances are declared as constituting exceptional circumstances:

(a)       an unusual occurrence causing an unusual level of need for professional attendances;

(b)       an absence of other medical services, for patients of the person under review during the relevant period, having regard to:

(i)   the location of the practice of the person under review; and

(ii)characteristics of the patients of the person under review.

Note   For relevant period, see s 106KA of the Act.’

8                     Regulation 10 thus gives rise to what is referred to as the “80/20” rule, that rendering 80 or more services on each of 20 or more days in any given 12 month period will constitute a prescribed pattern of services within the meaning of s 106KA(1).

9                     The operation of the scheme has been succinctly described as follows by a Full Court of this Court in Health Insurance Commission v Grey [2002] FCAFC 130 at [19]-[21] and [23]-[45];

‘Division 3 of Part VAA, dealing with the referrals by the Commission (s 86 – 94) ……  provides, relevantly as follows.

The Commission may, in writing, refer to the Director of Professional Services Review “the conduct of a person relating to … whether the person has engaged in inappropriate practice in connection with rendering of services …” (s 86(1)(a)) (emphasis added).  The referred services must have been rendered during the two years preceding the referral (s 86(2)).  (Nothing turns on this time limit here.)

The referral must specify whether it relates to one or both of (a) specified services; and (b) services of a specified class, services provided to a specified class of persons, services provided within a specified location, or services provided within a specified period (s 87(1)).  The Minister may make guidelines about the content and form of referrals (s 87(3)) and the content and form of the referral must comply with any such guidelines (s 87(2)).

… … …

The Commission must send a copy of the referral to the person under review within forty-eight hours of sending the referral to the Director (s 88(1)); and invite written submissions to the Director, within fourteen days, stating why the Director should dismiss the referral without setting up a Committee (s 88(2)).  (No question of any failure to comply with these provisions arises.)

The Director must set up a Committee to consider whether the person under review has engaged in “inappropriate practice” unless (a) the Director is satisfied that there are insufficient grounds on which a Committee could reasonably find engagement in “inappropriate practice”; or (b) the Director has, pursuant to s 92, disqualified the person from the provision of services under the Medicare scheme [for a period] (s 93).

Within twenty eight days after receiving the referral, the Director must:  (a) dismiss the referral if satisfied that there are insufficient grounds on which a Professional Services Review Committee could reasonably find that “inappropriate practice” had been engaged in  or (b) unless so satisfied, set up a Committee to consider whether the practitioner has engaged in “inappropriate practice” (s 89(1) and s 93(a)).  The Director must then give written notice of his decision to the person under review and to the Commission (s 94(1)).

Division 4 of Part VAA (s 95 – 106F) deals further with Professional Services Review Committees.

A Committee set up under s 93 consists of a chairperson and (ordinarily) two other panel members, who must be practitioners who belong to the practitioner’s profession (s 95(1) and (2)). 

The Committee may regulate its own proceedings (s 98(1)) and may, for the purposes of its inquiry, inform itself in any manner it thinks fit (s 98(3)). 

The Committee may hold a hearing, and must hold a hearing if it appears that the person under review may have engaged in “inappropriate practice” (s 101).   (A hearing was held here.)

If there is to be a hearing, the Committee must give to the person under review fourteen days written notice of the hearing (s 102(1) and (2)).  The notice must give particulars of the matter to which the hearing relates (s 102(3)). 

The person under review is entitled to attend the hearing with a lawyer (or another adviser) but is not entitled to be represented (s 103(1)).  However, the Committee may allow the person under review or adviser (but not a lawyer) to question any witness and address the Committee (s 103(2) and (3)). 

The conduct of the hearing is at the discretion of the Committee member presiding at the meeting in question (s 106(1)).  The Committee is not bound by the rules of evidence, and may inform itself on any matter in any way it thinks appropriate (s 106(2)).

At the conclusion of the hearing, the Committee must give the Determining Officer a written report setting out its findings on whether, in its opinion, the practitioner engaged in “inappropriate practice” in connection with the referred services (s 106L(1)).  With the practitioner’s consent, the report may include recommendations for disqualification (s 106L(3)).

The report must be given to the Determining Officer within 120 days after the Committee was set up (s 106M(1)); however, there is power to extend time (s 106M(4)). 

Division 5 of Part VAA (s 106Q – 106X) deals with determinations by the Determining Officer.

Upon receipt of the report, the Determining Officer must decide what action should be taken in the event of a finding of “inappropriate practice” (s 106S and 106T). 

If the report contains a finding of “inappropriate practice”, the Determining Officer must make a draft determination in accordance with s 106U, give copies to the practitioner and the Director and invite the practitioner to make written submissions suggesting changes to the draft determination (s 106S(1) and (2)). Thereafter, the Determining Officer must make a final determination in accordance with s 160U (s 106T(1)).

A determination must contain one or more of the following directions:  (i) that the Director reprimand the practitioner;  (ii) that the Director counsel the practitioner;  (iii) that the practitioner repay to the Commonwealth the whole or part of the Medicare benefit paid in respect of services in connection with which the practitioner is stated in a report under s 106L to have engaged in “inappropriate practice”; and (iv) that the practitioner be disqualified fully or partially from the provision of services for which Medicare benefit was payable (s 106U(1);  and see s 81(1) above, for definition of “service”).

Subject to any request for review by a Tribunal, the final determination takes effect twenty eight days after the Determining Officer gives a copy of it to the practitioner (s 106V(1)).

Where a final determination under s 106T that an amount be payable to a person by another person takes effect, the amount specified in the determination is recoverable by the payee from the other person as a debt due to the payee (s 129AD).

Part VA (s 107 – 121) deals with Professional Services Review Tribunals.

The person to whom a determination relates may request the Minister to refer the determination to a Tribunal for review (s 114(1)).  The members of the Tribunal (other than its President) must belong to the same profession as the practitioner (s 115(2)(b)).

Parties may appear before the Tribunal in person, or be represented, and shall be given the opportunity to address the Tribunal (s 117(1)).

The Tribunal’s procedure is within the President’s discretion (s 118(2)).

The Tribunal shall, upon consideration, affirm or set aside the determination, or set it aside and make any other determination that the Determining Officer is empowered to make (s 119(1)(b)(ii)).  The Tribunal’s decision is then taken to be a determination of the Determining Officer (s 119(3)).’  (original emphasis)

While this is a useful overview, I do not consider that Grey contains any statement of principle binding upon me in this specific case.  Essentially Grey concerned questions of whether a particular adjudicative referral contained an adequate statement of the subject-matter for the purposes of the Tribunal’s inquiry under the Act, and what was the scope of the Committee’s jurisdiction under that referral.  Neither of those issues arises in this case.  Nor does the Full Court’s summary of the scheme refer to a Director’s power under s 93A where he or she “is unable to investigate, or complete an investigation into, the referred services … [to] decide to take no action or no further action in respect of the investigative referral”.

The investigative referral decision

10                  The Commission submits that it is entitled, as it did in this case, to make an investigative referral under s 86 on the basis of s 106KA(1).  The Commission does not contest the fact that it made that referral because it detected a prescribed pattern of services, but it contends that its referral was not made in the exercise of any discretion or as a result of a policy.  It is contended on behalf of the respondents that the referral was simply “a result of the operation” of those two statutory provisions.  Indeed, Ms Hampel SC who appeared with Mr S J Moloney of Counsel for the respondent, contended that, as a consequence of the Act, once the Commission has identified a breach of the “80/20” rule, it is obliged to make an investigative referral.

11                  The Commission’s submission entails that the Act creates two distinct processes of professional review for inappropriate practice:  one applying to suspected inappropriate practice under the “general definition” provided in s 82, and a different process attaching to suspected “prescribed pattern” or “80/20” inappropriate practice.  The critical provision is s 106KA(1);

‘Subject to subsections (2) and (2A), if, during a particular period (the relevant period), the circumstances in which some or all of the referred services were rendered or initiated constituted a prescribed pattern of services, the conduct of the person under review in connection with rendering or initiating services during that period in those circumstances is taken, for the purposes of this Part, to have constituted engaging in inappropriate practice.’

12                  Counsel for the respondents focused on the phrases “for the purposes of this Part”, contending that those words make the presumption created by s 106KA(1) applicable to the whole of Pt VAA.  As a result, so the argument went, many considerations, which might otherwise be relevant to a decision whether or not to make an investigative or adjudicative referral, evaporate once a breach of the “80/20” rule has been identified.

13                  I have not been persuaded to accept that construction, at least not without significant qualification.  The structure of the Act suggests that s 106KA(1) is not referable to a power exercisable by the Commission.  The Act proceeds in sequence, identifying, in turn, the initiation of an investigation, the conduct of the investigation and any subsequent adjudication.  That tends to suggest that s 106KA(1) is closely, and intrinsically, related to the facility allowed to the Committee by s 106K(1), which provides;

‘The Committee may, in respect of conduct in connection with rendering or initiating the services included in a particular class of the referred services, have regard only to a sample of the services included in the class.’

While s 106KA(1) does not refer in express terms to “the Committee”, the next provision, s 106KA(2), does.  Subdivision C clearly deals with the powers exercisable by the Committee, although that is no longer specifically identified in s 80(4).  (I note that, until the repeal of s 80(4)(c) on 6 November 1997, s 80(4) read;  “Division 4 is about Professional Services Review Committees.  It deals with the following: … (c) in particular, how Committees may use samples of services to base their findings (Subdivision C)… … .”)

14                  It is, however, certainly true that the legislation confers on the Commission a broad discretion as to the basis on which it may make investigative referrals.  It may, as a matter of policy, decide to monitor an individual practitioner’s statistics by identifying cases where there have been 80 or more services rendered on each of 20 or more days in a 12 month period.  The Commission, it seems to me, is free to refer all such cases to the Director.  It is then a question of discerning the duties which the Act imposes on the Director.

The adjudicative referral

15                  It follows from the interpretation which I consider is to be derived from the structure of the Act that the Director is not entitled to rely upon the “80/20” rule, without more, to make, immediately, an adjudicative referral.  Sub-section 106KA(1) is, I consider, referable only to an exercise of power by the Committee, not by the Director.  The Director’s clear duty is to undertake a review, not to make automatic referrals.  He or she must make a referral only if “it appears … … that there is a possibility that the person was engaged in inappropriate practice … … during the review period”:  s 88A(2).  The Director’s central obligation was, at the relevant time, set out in s 89, which stated briefly;

‘(1)      When an investigative referral is made, the Director must conduct an investigation, in such manner as he or she thinks appropriate, into the referred services, including services not dealt with in reasons given by the Commission under paragraph 86(4)(b).’

16                  The applicant contends that, amongst other errors, the Director mistakenly failed to have regard to the entirety of the applicant’s conduct in the two years preceding this referral.  The applicant’s essential argument is derived from the comments of Finn J in Pradhan v Holmes [2001] FCA 1560 at [15]-[19], where his Honour considered the obligations imposed by the Act on a Director in conducting an investigation;

‘…… for the purposes of the investigative referral, s 81 defines “referred services” to mean “the services particulars of which are contained in the referral in accordance with paragraph 86(4)(a)”.  I emphasise this definition for this reason.  Section 86(4)(a) encompasses all services rendered or initiated by (for present purposes) the person under review during the referral period.  And s 89(1) obliges the Director to “conduct an investigation, in such manner as he or she thinks appropriate, into the referred services”.

The investigative referral itself must set out the reasons why the Commission considers the person under review may have engaged in inappropriate practice:  s 86(4)(b).  But as s 86(4A) and s 89(1) make plain, the Director (a) can request information from the Commission concerning, and (b) is required to inquire into, services particulars of which are contained in the referral (ie all of the s 84(4)(a) services) whether or not they have been dealt with in the reasons given by the Commission under s 86(4)(b).

That right and that duty of the Director stand somewhat oddly beside the provisions of s 87(1) of the … Act.  It provides:

“An investigative referral must specify whether it relates to one or both of the following:

(a)    specified services;

(b)   services rendered or initiated by a practitioner that are one or more of the following:

(i)                  services of a specified class;

(ii)                services provided to a specified class of persons;

(iii)               services provided within a specified location;

(iv)              services provided within a specified period.”

The specification so envisaged could clearly result in services being designated in the referral (eg “specified services”) that were different from the services that are statutorily defined to be the “referred services”:  s 81;  into which the Director “must conduct an investigation”:  s 89(1).

Whatever the purpose served by differentiating between the specified services in s 87(1) and the referred services, the clear legislative intent in the 1999 amendment (which introduced both s 86(4A) and s 89(1) in its present form) was not to confine the Director in his or her investigation to the “specified services”.  This involved a departure from what previously was the case as the Explanatory Memorandum to the 1999 amending bill acknowledged in its commentary on s 86(4A):

“This [sub-section] makes explicit that any subsequent investigations conducted by the Director, although confined to the referral period, are not limited to the scope of the matters set out in the investigative referral.  This is an important change as previously the referral by the HIC set the boundaries within which a Committee could examine a practitioner’s professional conduct.”

I would note in passing that the “referral period” is defined in s 81 to be the applicable two year period specified in s 86(2) and (3).’

17                  I consider, with respect, that his Honour’s conclusion on this point follows logically from the definitions contained in the Act.  Under s 89(1), a Director must “conduct an investigation, in such manner as he or she thinks appropriate, into the referred services”, and “referred services” is defined to mean “the services particulars of which are contained in the referral in accordance with paragraph 86(4)(a)”.  Section 86(4)(a) requires that an investigative referral must contain particulars of all services rendered or initiated during the referral period by the person under review.  “Referral period” is itself defined by s 81, in conjunction with subss 86(2) or (3), to mean the two years before the date of the referral.  This somewhat tortuous reconciliation of definitions has the result that the Director must investigate, as he or she thinks appropriate, the referred services – being all services rendered or initiated during the referral period, meaning the two years up to the date of the referral.  This construction is supported by the express words of the statute without recourse to extrinsic material like the Explanatory Memorandum.  It is also reinforced by the presence, in s 89(1), of the words “including services not dealt with in reasons given by the Commission under paragraph 86(4)(b)”.  As his Honour observed, this does sit oddly with s 87(1), but the alternative construction involves ignoring the plain definitions of the Act.  It was sought to overcome this analysis by contending that his Honour’s decision had been disapproved by a Full Court of this Court in Grey (supra).  However, in that case, the Court made no reference to the paragraphs quoted above and, by contrast with the present case, no issue was taken with either the investigation conducted by the Director or the exercise of the respective discretions of the Director and the Commission to make a referral.

18                  Counsel for the respondents also pointed to the use of the words “only” and “during” in s 86(2) as indicating that the period to be considered by the Director could be less than the whole of two years.  That subsection reads in its entirety:

‘An investigative referral in relation to the rendering of services may only relate to services rendered during the 2 year period immediately preceding the referral, whether or not any or all of the services were initiated before the start of that period.’

However, this does not overcome the difficulty that “referred services” as used in s 89(1) is a defined term, and it is not open to the Court to read it as meaning “the services specified within the Commission’s referral.” The curiosity remains, as noted by Finn J, that there may be a disjunction between the services referred to the Director for consideration and the material to which he or she is, in fact, required to have regard.  However, as Mr Niall of Counsel for the applicant submitted, the intention of the Act, discernible from its drafting, seems to be that the Director is required to look at the referred conduct within a two-year context.

19                  It was also put for the applicant that the failure by the Commission to provide the Director with particulars of all services rendered over the previous two years rendered the investigative referral a nullity.  I am not convinced, for the reasons given below, that such a result necessarily follows in this case.  In any event, it is not every failure to observe a procedural requirement that will render a decision invalid:  see e.g. Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 per McHugh, Gummow, Kirby and Hayne JJ at 389.

20                  In a practical sense, the applicant submits, the Director can respond to a referral in one of only three ways;  by dismissing it, by entering into an agreement under s 92 or by referring the matter to a Committee for adjudication.  A referral can only be dismissed where the Director “is satisfied that there are insufficient grounds on which a Committee could reasonably find that the person under review has engaged in inappropriate practice in connection with rendering or initiating the referred services”:  s 91.  It could not be suggested that the Director should not have regard, in deciding whether he or she is so satisfied, to the requirement under s 106KA(1) to deem inappropriate practice to have occurred where a proscribed pattern of service exists.  Where the “80/20” pattern appears on the face of the Commission’s records, a Director could seldom be satisfied that there are “insufficient grounds” on which a Committee could reasonably make a finding of inappropriate practice, unless there is a strong prima facie case of exceptional circumstances as contemplated by s 106KA(2) which affect sufficient days to render inapplicable the 80/20 rule.

21                  If “prescribed pattern” were the only consideration, there would be little scope for the argument that in every case the Director is obliged to consider every service rendered or initiated in the two-year referral period, rather than confining attention to the nominated referred services.  The exercise which that argument would require the Director to undertake would then be artificial and would ignore the discretion contained in the words “in such manner as he or she thinks appropriate”.  Reviewing all the services rendered in a two year period, it may be argued, would not change the fact that, where the “80/20” pattern existed, the Director could not be other than satisfied that, subject to exceptional circumstances, a Committee would have grounds to make a finding of inappropriate practice, and, indeed, would be obliged, by force of s 106KA(1), to make such a finding.  (Where an exceptional circumstances “defence” might be available, however, failure to review the two-year “context” of which a Director is required to take account might take on greater significance.)

22                  Nevertheless, such a conclusion ignores the possible impact of this broader two-year context on the exercise of a Director’s discretion to enter an agreement under s 92 in “80/20” rule cases or otherwise.  A Director might properly be more inclined to consider a s 92 agreement where the practitioner’s history of providing services suggests that the infractions of the “80/20” rule were atypical, or part of a rising trend that could be stemmed by counselling.  Similarly, a Director might legitimately be less inclined to enter a s 92 agreement where the “background” rate of servicing by a practitioner who had contravened the “80/20” rule was already high (for example in the vicinity of 70 services provided on most days), though not so high as to attract the “80/20” rule on more than the requisite 20 days.

23                  For these reasons, a Director should have regard to the whole of the referred services in the relevant two-year period, although I should not be taken as holding that a failure to do so would, on that ground alone, invalidate an adjudicative referral.  I enter that caveat for two reasons.  The first is the curious result, noted by Finn J in Pradhan (supra), that “the specification so envisaged [from the Commission to the Director under s 87(1)] could clearly result in services being designated in the [investigative] referral (eg “specified services”) that were different from the services that are statutorily defined to be the “referred services” which the Director must consider under s 89(1).  The result seems anomalous, though workable.  However, I am not persuaded that failure to comply with one sub-section, but not the other, necessarily results in invalidity.  The second, and more cogent, reason is that for the Court to impose a prescriptive and laborious duty upon a Director to consider, in every case, two years of material, would detract from the considerable discretion inherent in the words “in such manner as he or she thinks appropriate”, and, potentially, compel unnecessary or excessive expenditure of public funds in implementing legislation which has been framed to protect the public and the general revenue.  Invalidity, however, could still result from a failure to take into account relevant considerations.

Has there been a failure to take into account relevant considerations?

24                  The conclusions reached in the preceding part of these reasons reduce the remaining questions to:

(1)        did the Commission fail to take into account relevant considerations when making the investigative referral?  and

(2)        did the Director fail to take into account relevant considerations when making the adjudicative referral?

(i)        The Commissioner’s investigative referral

25                  The applicant’s principal complaint against the Commission is that it may be inferred from the documents that it had a policy of “automatic referral” which was applied without consideration of the merits of an individual case.  An element of that argument, or an alternative formulation of it was that the Commission had failed to consider the fact that Dr Daniel’s conduct in the period from August 2000 to January 2001 had already been the subject of counselling by Dr Mak and review by Mr Willson in October 2000 and January 2001, resulting in a decision to take no action at that time.  These matters were plainly relevant to any decision to investigate Dr Daniel again for the same conduct.  Counsel for the respondents contend that consideration of them did not arise, as the referral was an automatic consequence of the Act.  I have already rejected that contention.  If that had been the view taken by the Commission when it made the investigative referral, it was founded on an error of law.  The relevant terms of the Commission’s referral are as follows;

‘B. REASONS FOR INVESTIGATIVE REFERRAL

Part VAA of the Act provides a scheme (the Professional Services Review Scheme) under which a practitioner's conduct can be examined to ascertain whether they have engaged in inappropriate practice as defined in section 82 of the Act.

Section 106KA of the Act (which section commenced on 1 August 1999) also provides that, if during a particular period, the circumstances in which some or all of the referred services were rendered or initiated constituted a prescribed pattern of services, the conduct of the person under review in connection with rendering or initiating services during that period in those circumstances is taken to have constituted engaging in inappropriate practice.

Dr Daniel is a medical practitioner (as defined in the Act) and, for present purposes, Part 3 of the Regulations (which part commenced on 1 January 2000) applies.  Part 3 provides that, in relation to medical practitioners, the circumstance in which services that are professional attendances constitute a prescribed pattern of service is that 80 or more such services are rendered on each of 20 or more days in a 12 month period, where 'professional attendance' means a service of a kind mentioned in group A1, A2, A5, A6, A7, A13, A14 or A15 of Part 2 of the general medical services table (as defined in the Act).

C. REFERRED CONDUCT AND PARTICULARS OF SERVICES

In accordance with subsection 86(4)(b) of the Act the HIC considers Dr Daniel may have engaged in inappropriate practice because there is evidence that some of Dr Daniel's professional attendances constitute a prescribed pattern of services as defined in section 106KA of the Act and Part 3 of the Regulations.

Specifically, the HIC's records for professional attendances rendered by Dr Daniel during the referral period show that Dr Daniel:

·        rendered 80 or more professional attendances per day on 24 occasions on and from 13 August 2000 to and including 7 January 2001.

Further material in relation to the referred conduct and particulars of services is attached as part of this Investigative Referral.’ (original emphasis)

26                  Given that the process under consideration is an investigative one which may result in serious consequences for a medical practitioner, including the cancellation or suspension of rights conferred by statute, there is a presumption, not disputed by Counsel for the respondents, that the practitioner will be accorded procedural fairness.  However, the extracts from the referral just quoted indicated that, either as a matter of policy, or stemming from what I have held to be an erroneous construction of the Act, the Commission has not looked beyond the application of the “80/20” rule.   In disregarding the fact that the same conduct had already been examined by at least one Commission officer and had been the subject of counselling by another, the Commission failed to take into account a relevant consideration.  Whatever constraints there are on the matters which the Commission may consider have to be gathered from the terms and scheme of the Act as a whole.  It is inconsistent with those terms and that scheme to say that a prima facie case of a prescribed pattern of services reduces the relevant considerations solely to whether there have been “exceptional circumstances” within s 106KA(2).  The entire review process under the Act is designed to narrow the relevant field of inquiry which may ultimately be required by an adjudicative referral.  I have been unable to discern in the authorities, or the terms or structure of the Act, any suggestion that the deliberations of the Commission or the Director are to be so constrained by s 106KA(1).  While there is clear authority that a Committee’s inquiries should not be into “conduct at large” but “specified conduct”, no authority suggests that same restriction applies to the investigative powers and responsibilities of the Commission and the Director:  Adams v Yung (1998) 83 FCR 248 per Burchett and Hill JJ at 298; as quoted by the Full Court in Grey (supra) at [128].  Section 106KA(1) is a mechanism available to, and binding upon, a Committee.  It does not absolve the Commission and Director of their respective obligations to inquire into whether the practitioner’s “conduct would be unacceptable to the general body of general practitioners” under s 82(1)(a) – a substantially broader and more qualitative inquiry than that required for the application of s 106KA(1) – and to consider the exercise of their respective discretions.  I am persuaded that, on this ground alone, the application should succeed under s 5(1)(f) of the AD(JR) Act as there has been an error of law in giving effect to s 106KA(1) of the Act, or under s 5(1)(e) of the AD(JR) Act by reason of a failure to take into account a relevant consideration, as stipulated in s 5(2)(b) of that Act.

(ii)       The Director’s adjudicative referral

27                  In case I be wrong in the conclusion just reached, I turn to consider the adjudicative referral decision made by the Director.  The Director’s obligation to accord procedural fairness before making such a referral arises not merely because it has not been expressly excluded by the legislation but from positive implications in, e.g. subss 88(2) and (3), which provide for notice to be given of the investigative referral and for the person under investigation to be invited to furnish submissions within 14 days as to why the Director should dismiss the referral without setting up a Committee.  The Director has a discretion to enter a s 92 agreement, and a duty to consider whether to exercise that discretion in an appropriate case.  The uncontested evidence of the Acting Director on this point was given in an affidavit filed by leave after the conclusion of oral argument in this matter.  That affidavit is in the following terms;

‘Before making [the] Adjudicative Referral … … I considered whether this might be an appropriate case to enter into an agreement with Dr Daniel under s 92.

I did not consider this was an appropriate case to enter into an agreement under s 92.

At no stage did I receive any indication Dr Daniel wished to enter into an agreement under s 92.  No submissions were made by Dr Daniel in that respect.  It is a precondition of a s 92 agreement that the person under review acknowledge his or her conduct constitutes inappropriate practice.  I received no indication that Dr Daniel was prepared to make such an admission.’

28                  That affidavit, it must be acknowledged, was filed in reply to a point raised for the first time at the hearing.  Moreover, the deponent was not required to attend to give evidence or to be cross-examined.  However, I think it makes tolerably clear that the Acting Director regarded it as a prerequisite for the exercise of his discretion for the person under investigation to be prepared to concede guilt of inappropriate practice or otherwise invite the Director to resort to s 92.  Although I accept the respondents’ submission that the Act does not stipulate who should initiate consideration of a s 92 agreement the Acting Director seems to have thought that, in this case, it should have been the applicant.  Counsel for the respondents also submitted that the power conferred on the Director by s 92 was, in effect, enlivened only by a real or genuine admission of inappropriate practice, which, it was said, could not be evidenced by a submission that the referral be dismissed, which impliedly denies any wrongdoing.  On that construction, any scope for bargaining a s 92 agreement, would be cut down by the need for the practitioner to make a prior admission against interest.  It finds no support in the statute.  A s 92 agreement, logically, has to be considered before the Director makes a referral to a Committee.  The willingness of a practitioner to enter a s 92 agreement might legitimately inform that decision.  Nothing in Dr Daniel’s submission to the Acting Director indicates a refusal to acknowledge inappropriate practice of a kind that it would have made it pointless to consider a s 92 agreement.  In its context, that document suggested that the author had seen the error of his ways and had accepted the need for counselling and further professional education in relation to the future conduct of his practice.

29                  Had the Acting Director thought that a refusal by Dr Daniel to make an admission would preclude entry into a s 92 agreement, that matter should, as a mater of procedural fairness, have been put to him to allow him to comment upon it.  Similarly, if the Acting Director had proposed to treat as crucially prejudicial the fact that the applicant had not himself proposed a s 92 agreement, he should have afforded the applicant an opportunity to explain his silence on the point:  Kioa v West (1985) 159 CLR 550.  It does not appear to have been put to the applicant that a failure to show contrition, or specifically to invite recourse to s 92, would exclude him from an agreement under that section.  Accordingly, I have concluded that the applicant was denied procedural fairness in relation to the exercise of the Director’s discretion under s 92.  I observe, in passing, that a s 92 agreement is in no sense tantamount to a merely formal reprimand;  it is a serious disciplinary option which may involve repayment of medical benefits and the total or partial disqualification of the practitioner for up to three years from the provision of services.  It is, therefore, a mechanism which the Director should consider in appropriate cases, even if recourse to s 92 is not first raised by the practitioner.

30                  The only document recording the Acting Director’s decision to make the adjudicative referral is the instrument of referral itself, which is in the following terms;

‘Background

l.          Dr Steve Daniel is a medical practitioner who practised at 229 Heaths Road, Werribee Vic 3030, 412 Racecourse Road, Flemington, Vic 3031, Wyndham Vale Health Care, 127 Ballan Road, Wyndham Vale Vic 3024 and Cnr Sage/ Sunshine Ave, Kealba Vic 3021during the referral period.  During the referral period Dr Daniel apparently rendered 80 or more professional attendances per day on each of 24 occasions.

2.         Investigative Referral No.324 was made as the Commission was concerned that Dr Daniel may have engaged in inappropriate practice because there was evidence that the circumstances in which some of Dr Daniel's professional attendances were rendered constituted a prescribed pattern of services as defined in section 106KA of the Act and Part 3 of the Regulations.

3.         Given the nature of this referral, as a referral under section 106KA of the Act, the investigation was limited to consideration of material in the investigative referral and the submission from Dr Daniel (see paragraph 11 below).

Material considered

4.         The material on which the decision to refer this matter to a PSR Committee is based comprises:

·        The Health Insurance Commission's Investigative Referral No.324 dated 19 December 2001.

·        The results of the above-mentioned investigation.

·        The submission from Dr Daniel dated 9 January 2002.

[At paragraphs 5 and 6 the Acting Director set out s 106KA and ss 7-11 of the Regulations]

… …

7.         The specified services were all rendered within the two year period immediately preceding the date of the investigative referral, in accordance with subsection 86(2) of the Act.  Further, the specified services were all rendered on or after 1 January 2000, being the first date on which section 106KA of the Act and Part 3 of the Regulations were both in force.

8.         Regarding regulation 9(a), the investigative referral states at page 3 that Dr Daniel was a medical practitioner at the time the referred services were rendered.

9.         Regarding regulation 10, the material at pages 17-65 of the investigative referral indicates that Dr Daniel rendered 80 or more professional attendances (principally Medical Benefits Schedule item 53 services) a day on each of 24 occasions during the referral period.

10.       On 20 December 2001 the Director wrote to Dr Daniel drawing his attention to subsection 88(3) of the Act which provides that, within 14 days from receipt of the referral, he may make written submissions to the Director as to the reasons why the Director should dismiss the referral without setting up a Committee.  The Director also provided him with a copy of the Regulations.  The Director received a submission dated 9 January 2002 from Dr Daniel.

11.       In this submission Dr Daniel said he had taken a holiday between November 2001 and January 2002 in an effort to keep his figures within acceptable limits.  Since the referral period he had become a member of the Royal Australian College of General Practitioners and felt he understood what inappropriate practice was.  He also said that he had stopped working at Wyndham health care and would in future work at a clinic that wasn't so busy.  On 18 January 2001 I sought additional information from the Commission concerning the practice locations from which Dr Daniel rendered services on each of the days where he rendered 80 or more attendances.  On 30 January 2002 The HIC provided information that on each of the days on which 80 or more attendances were rendered Dr Daniel rendered services from only one location - that at 229 Heaths Road, Werribee.  I did not consider the evidence so strong that a committee would be bound to find that there were exceptional circumstances on each of the 24 days in question.

Reasons for making adjudicative referral

12.       Following the investigation and not having received any submissions from Dr Daniel, I concluded that the circumstances in which Dr Daniel rendered some or all of the specified services during the referral period may have constituted a prescribed pattern of services, as defined in section 106KA of the Act and Part 3 of the Regulations because:

·        The investigative referral presented credible evidence that Dr Daniel rendered 80 or more professional attendances per day on each of 24 days during the referral period; and

·        Dr Daniel made a submission which did not persuade me that a committee could not conclude that Dr Daniel had engaged in inappropriate practice.

13.       Accordingly, I decided to make an adjudicative referral to a Committee in accordance with section 93 for the Committee to consider whether the conduct of Dr Daniel in connection with rendering the specified services constituted engaging in inappropriate practice because the circumstances in which some or all of the specified services were rendered constituted a prescribed pattern of services as defined in section 106KA of the Act and Part 3 of the Regulations.’

31                  That document, particularly in light of the reference in par 3 to the investigative referral as “a referral under section 106KA” only tends to reinforce the conclusion that nothing more than cursory consideration was given to any issue beyond the “80/20” rule, regardless of any claim which Dr Daniel might have had to an offer of a s 92 agreement or some other favourable exercise of the Acting Director’s discretion.

Did the Director have a discretion to confine his investigation solely to the “80/20” issue?

32                  Counsel for the respondents correctly identified “in such manner as he or she thinks appropriate” as the critical words in s 89(1) governing the manner in which a Director is to conduct an investigation.  That discretion, it was said, extended to whether to investigate “services not dealt with in reasons given by the Commission under paragraph 86(4)(b)” which were contended to be words of extension, rather than inclusion.  For the respondents it was submitted that the Director is at liberty to look at nothing more than the services included in the Commission’s referral and its reasons for making the referral.  That submission would have been persuasive if “referred services” could be regarded as the services contained in the referral and had not been a defined term with the meaning discussed at [17] above.  The submission would have had further support if s 106KA had been framed to embody a second, independent definition of “inappropriate practice” within the Part, rather than being a deeming provision designed to facilitate the fact-finding task entrusted to a Committee.  However, for the reasons given above, I have concluded that the Director is obliged to consider, as he or she thinks appropriate and unconstrained by s 106KA, how an investigation should be conducted into the services rendered in the two years before the referral.

33                  It is admitted in the present case that what was before the Acting Director was only material related to services rendered in the period of five months identified by the Commission in its referral.  Accordingly, because he did not have information related to the full period of two years made relevant by the Act, the Acting Director was precluded from properly exercising the discretion entrusted to him.  That defect was not capable of being remedied by a request for further information under s 86(4A).  As explained above, consideration of particulars of all services rendered during the referral period, might have resulted in a  different exercise of the discretion by, for example, offering the applicant a s 92 agreement.

Conclusion

34                  For the reasons which I have endeavoured to explain, the Commission, in making the investigative referral failed to take into account relevant considerations.  That decision must therefore be set aside and as a consequence the decisions of the Acting Director to establish a Committee and make an adjudicative referral to it are also invalid.  It seems to be unnecessary, in view of the orders which I propose to make, to restrain the Committee from proceeding further on the adjudicative referral.  I shall afford the parties an opportunity to make written submissions on the question of costs.

Associate:

Dated:              28 July 2003