FEDERAL COURT OF AUSTRALIA
Carrick v Health Insurance Commission [2007] FCA 984
Administrative Decisions (Judicial Review) Act 1977 (Cth) s 5
Health Insurance Act 1973 (Cth) ss 81, 82, 85, 86, 87, 89B, 91, 93, 95, 103, 106K, 106H
Daniel v Kelly (2003) 200 ALR 379 distinguished
Freeman v Health Insurance Commission [2004] FCA 453 referred to
Kelly v Daniel (2004) 134 FCR 64 cited
Mathews v Health Insurance Commission (2006) 90 ALD 49 approved
Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 cited
Oreb v Willcock (2005) 146 FCR 237 cited
Phan v Kelly [2007] FCA 269 approved
Pradhan v Holmes (2001) 125 FCR 280 cited
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 1944 CLR 355 cited
NSD 322 OF 2005
BRANSON J
3 JULY 2007
SYDNEY
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
NSD 322 OF 2005 |
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BETWEEN: |
JANE CARRICK Applicant
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AND: |
HEALTH INSURANCE COMMISSION First Respondent
ALAN JOHN HOLMES IN HIS CAPACITY AS DIRECTOR, PROFESSIONAL SERVICES REVIEW Second Respondent
RICHARD KING, GRAHAM NEWSTEAD, GLENDA PEEL AND RICHARD GORDON CONSTITUTING THE PROFESSIONAL SERVICES REVIEW COMMITTEE NO 352 Third Respondent
THE DETERMINING AUTHORITY ESTABLISHED BY SECTION 106Q OF THE HEALTH INSURANCE ACT 1973 (CTH) Fourth Respondent
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BRANSON J |
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DATE OF ORDER: |
3 JULY 2007 |
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WHERE MADE: |
SYDNEY |
THE COURT ORDERS THAT:
1. The application be dismissed except as to ‘the constitutional grounds’ as defined in the order made by Sackville J on 7 September 2006.
2. The applicant pay the respondents’ costs of the proceeding except as to ‘the constitutional grounds’ as defined in the order made by Sackville J on 7 September 2006.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
NSD 322 OF 2005 |
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BETWEEN: |
JANE CARRICK Applicant
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AND: |
HEALTH INSURANCE COMMISSION First Respondent
ALAN JOHN HOLMES IN HIS CAPACITY AS DIRECTOR, PROFESSIONAL SERVICES REVIEW Second Respondent
RICHARD KING, GRAHAM NEWSTEAD, GLENDA PEEL AND RICHARD GORDON CONSTITUTING THE PROFESSIONAL SERVICES REVIEW COMMITTEE NO 352 Third Respondent
THE DETERMINING AUTHORITY ESTABLISHED BY SECTION 106Q OF THE HEALTH INSURANCE ACT 1973 (CTH) Fourth Respondent
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JUDGE: |
BRANSON J |
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DATE: |
3 JULY 2007 |
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PLACE: |
SYDNEY |
REASONS FOR JUDGMENT
INTRODUCTION
1 Dr Jane Carrick is a medical practitioner who specialises in undertaking endoscopies on referral from other medical practitioners. On 14 December 2000 Dr Carrick was interviewed by Dr Peter Lorenz, a medical adviser with the Health Insurance Commission. It appears that this interview took place because statistics maintained by the Commission concerning patient services for which Medicare benefits were claimed revealed that Dr Carrick was rendering a high number of certain services when compared with her peers.
2 On 28 June 2002, Dr J H Houston, Acting Medical Director and a delegate of the Commission for the purposes of s 86(1) of the Health Insurance Act 1973 (Cth) (‘the Act’), referred to Dr A J Holmes, the Director of Professional Services Review, (‘the Director’) the conduct of Dr Carrick in connection with the rendering or initiation of all medical services provided by her during the period 1 July 2000 – 30 June 2001 for the purpose of determining whether she had engaged in inappropriate practice within the meaning of s 82 of the Act.
3 On 28 March 2003 the Director, acting under s 93 of the Act, set up a Professional Services Review Committee (‘the Committee’) in accordance with Division 4 of Part VAA of the Act and made an adjudicative referral to the Committee. The Committee was required to consider whether conduct by Dr Carrick in connection with rendering or initiating services specified in the referral constituted engaging in inappropriate practice (s 93(1)). The Committee prepared a final report dated 31 January 2005 (‘the Final Report’) regarding Dr Carrick’s conduct.
4 On 3 March 2005 Dr Carrick applied to this Court for judicial review of:
(a) the decision of the Commission to refer to the Director Dr Carrick’s conduct in respect of the medical services provided by her during the period 1 July 2000 – 30 June 2001 (‘the Investigative Referral’);
(b) The Director’s decision to set up the Committee and to make an adjudicative referral to it in respect of Dr Carrick’s conduct (‘the Adjudicative Referral’); and
(c) the conduct of the Committee in preparing the Final Report.
5 Grounds 1 – 5 of Dr Carrick’s further amended application challenged the constitutional validity of Part VAA of the Act. On 7 September 2006 Sackville J ordered that those grounds (which he called ‘the constitutional grounds’) be decided separately from the other grounds of the application (‘the judicial review grounds’) and after publication of the judgment of the High Court in Dimian & Wong v Commonwealth of Australia. That judgment has not as yet been published. These reasons for judgment concern only the judicial review grounds.
6 For the reasons set out below I have concluded that each of the grounds of application with which these reasons for judgment are concerned is without merit.
THE LEGISLATIVE SCHEME
7 As this case concerns conduct engaged in earlier than 2002, it is the Act as in force prior to the commencement of the Health Insurance Amendment (Professional Services Review and Other Matters) Act 2002 (Cth) that must be considered. All references in these reasons for judgment to the Act are references to the Act as then in force.
8 Part VAA of the Act is entitled ‘The Professional Services Review Scheme’. It is concerned to protect public revenues from abuse of the Medicare benefits system. It establishes a scheme whereby a medical practitioner’s conduct in respect of services for which Medicare benefits are paid can be investigated to ascertain if it involves inappropriate practice. The operation of the scheme has been described in some detail in a number of other judgments of the Court. I do not consider it necessary to repeat that exercise. I refer by way of example to the description set out in Pradhan v Holmes (2001) 125 FCR 280 at [5]-[61].
9 Although Dr Carrick is not a specialist medical practitioner, nothing before this Court suggests that she is a ‘general practitioner’ within the meaning of the Act (see the definition of ‘general practitioner’ in s 3 of the Act and item 1 of Part 1 of Schedule 1 of the Health Insurance (1998-99 General Medical Services Table) Regulations 1998). For that reason the relevant definition of ‘inappropriate practice’ in her case is that contained in s 82(1)(d). That definition is as follows:
‘A practitioner engages in inappropriate practice if the practitioner’s conduct in connection with rendering or initiating services is such that a Committee could reasonably conclude that:
…
(d) if the practitioner rendered or initiated the referred services as neither a general practitioner nor a specialist but as a member of a particular profession – the conduct would be unacceptable to the general body of the members of that profession.’
10 It is sufficient here to note that the above definition, and the other definitions of inappropriate practice in s 82 of the Act, make plain that the scheme is concerned with professional conduct that a practitioner’s professional peers would consider unacceptable. Where a judgment in that regard is required, it is made by a Professional Services Review Committee to which the Director has made an adjudicative referral under s 93. Section 95(2) ensures that the members of a Professional Services Review Committee are practitioners who belong to the profession in which the practitioner was practising when he or she rendered or initiated the referred services.
11 The statutory process of investigation for which Part VAA of the Act provides is initiated by an investigative referral made by the Commission to the Director (s 86). An investigative referral must contain particulars of all services rendered or initiated during the period under review by the person under review and set out the reasons why the Commission considers the person under review may have engaged in inappropriate practice (s 86(4)).
12 The role of the Director in the investigative process established by Part VAA is properly seen as a screening role. The Director on an investigative referral is to form a view as to whether there are sufficient grounds on which a Professional Services Review Committee could reasonably find that the person under review has engaged in inappropriate practice in connection with rendering or initiating the referred services. The Director is authorised to dismiss an investigative referral if satisfied that the Commission’s belief that the person under review may have engaged in inappropriate practice cannot be substantiated (s 91). If the person under review is willing to acknowledge that his or her conduct the subject of the investigative referral constituted engaging in inappropriate practice, the Director and the person may enter into a written agreement pursuant to s 92 of the Act and the Director must then dismiss the referral. Alternatively, the Director may set up a Professional Services Review Committee and make an adjudicative referral to it of specified services (s 93). The specified services must be services particulars of which were contained in the investigative referral but need not include all of those services (s 93(7)). On such a referral the Committee may consider only those services specified in the referral (s 106H).
13 Importantly, the Director is not authorised to make a finding that the conduct of a person under review is conduct that the person’s peers would find unacceptable. Only a Professional Services Review Committee is authorised to do that. As mentioned above, in this regard the Director cannot go beyond forming a view on whether a Professional Services Review Committee could reasonably find that the person had engaged in inappropriate practice.
THE INVESTIGATIVE REFERRAL
Form of the Referral Instrument
14 As mentioned above, on 28 June 2002 the Commission, by its delegate Dr Houston, made the Investigative Referral. No criticism has been made of the instrument of referral although it appears not to have been drafted in accordance with the construction placed on s 86 and s 87 of the Act by Finn J in Pradhan 125 FCR 280 at [14]-[17]. As his Honour observed, s 81 defines ‘referred services’ relevantly to mean ‘the services particulars of which are contained in the referral in accordance with paragraph 86(4)(a)’. That paragraph encompasses all services rendered or initiated during the referral period by, relevantly, the person under review.
15 The Investigative Referral specified particularly Dr Carrick’s conduct in connection with the rendering of certain services identified by reference to MBS item numbers including MBS item 30487. MBS item 30487 represents small bowel intubation with biopsy.
16 The instrument of referral set out the reasons why the Commission considered Dr Carrick may have engaged in inappropriate practice as follows:
‘Within the scope of Dr Carrick’s conduct in connection with the rendering or initiating of the above services, the HIC is concerned that, as indicated by her practice profile, Dr Carrick may have:
· rendered or initiated services that were not necessary;
· not provided an appropriate level of clinical input to the services;
· not provided appropriate ‘professional services’ to her patients, or
· not satisfied the requirements of the relevant items in the Medicare Benefits Schedule Book and the Schedule of Pharmaceutical Benefits.
The concerns of the HIC have been identified and analysed by:
· a review of Dr Carrick’s practice statistics;
· a comparison of those statistics with the data concerning the practice of all active medical practitioners and surgery non-specialists in Australia;
· a counselling meeting between a HIC Medical Adviser and Dr Carrick where the above referred conduct was discussed;
· a report of that meeting between the HIC Medical Adviser and Dr Carrick … ; and
· a review of Dr Carrick’s practice statistics since counselling.
The HIC determined there had been insufficient change to remove the overall concerns about the referred conduct above.
Taking into account the concerns which are outlined above, the HIC is of the view that Dr Carrick may be engaging in inappropriate practice within the meaning of section 82 of the Act and that the conduct should be referred for consideration by the Director of Professional Services Review.’ (footnote omitted)
Grounds of Challenge
17 The decision to make the Investigative Referral is challenged on the ground, in effect, that it involved an improper exercise of the power conferred by s 86(1) of the Act because the Commission failed to take into account relevant considerations (ss 5(1)(e) and 5(2)(b) of the Administrative Decisions (Judicial Review) Act 1977 (Cth)). The matters identified by Dr Carrick as matters that the Commission did not take into account are described in her second further amended application in the following way:
‘[A]ll relevant aspects of the conduct of the applicant over the referral period, including the circumstances:
(i) That the applicant had been counselled by its Medical Advisor on 14 December 2000;
(ii) She had received a letter dated 12 February 2001 from the Commission indicating that, while there were expressed “concerns” about her practice, it would not be reviewed again until after June 2001;
(iv) She had received a letter dated 24 April 2001 from the Commission indicating that there were no immediate concerns about her practice; and
(v) The above all occurred during the actual “referral period” of between 1 July 2000 to 30 June 2001. These events failed to prevent the applicant from rectifying the perceived problems of the Commission and they lulled the applicant into a false sense of security about the manner in which she conducted her practice during the referral period;
(vi) Further, the Commission sent her a letter dated 19 October 2001 indicating that her practice would be reviewed in the future and that there has [sic] been “reductions” in some of her service items.’
18 Dr Carrick submitted in her outline opening statement that the terms of the instrument of referral establish that the Commission failed to take into account:
(1) written communications between her and officers of the Commission between 14 December 2000 and 12 June 2002; and
(2) oral communications between her and officers of the Commission identified in an affidavit sworn by her on 11 May 2005.
19 She submitted in her outline opening statement that if the delegate of the Commission had taken the above communications into account he would have been aware that:
‘a. The applicant had in fact, reduced her workload in some areas and thereby had better practice statistics since and because of her counselling session;
b. In one (of three) areas of concern, the applicant had in fact completely satisfied the Commission’s Case Management’s [sic] Committee that her use of Item 30378 (gastroscopy) and her prescribing of pharmaceuticals was no longer an issue (see, the letter dated 19 October 2001 ‑ in the applicant’s affidavit of 11 May 2005 at page 16);
c. The applicant, at all these times, plainly demonstrated an active willingness, not only to co-operate with the Commission’s investigations, but to reduce her workload to “acceptable” levels ‑ she was simply not told that which she needed in order to satisfy the Commission further;
d. The applicant was positively led to believe that she had passed through to the next stage of Commission review, as it were, in relation to the referral period which she plainly considered was once under review by the Commission (which was 1 July 2000 to 30 June 2001). For example, in the letters from the Commission dated:
(1) 24 April 2001 (page 15 of the applicant’s affidavit);
(2) 19 October 2001 (page 16);
the applicant is informed that her practice profile will be reviewed later. She was entitled to consider that the Commission was not sufficiently concerned about the period 1 July 2000 to 30 June 2001 as to then refer her to the Director under the Act; and,
e. The applicant was positively mislead [sic] by the Commission’s Medical Advisor in the conduct of the counselling session on 14 December 2000 …’. (emphasis omitted)
Consideration
20 Dr Carrick placed particular reliance on the judgments of this Court, at first instance and on appeal, regarding an investigative referral decision made concerning a Dr Daniel (Daniel v Kelly (2003) 200 ALR 379 (Ryan J); Kelly v Daniel (2004) 134 FCR 64 (Full Court)). In Daniel v Kelly Ryan J at [13] rejected the submission that, in the circumstances of that case, the investigative referral was a result of the operation of the Act with the consequence that no occasion arose for the exercise of a discretion by the Commission. His Honour went on at [25] to describe as ‘plainly relevant to any decision to investigate Dr Daniel’ the fact that the relevant conduct of Dr Daniel had already been the subject of counselling and review resulting in a decision to take no action at that time. On appeal the Full Court at [81] agreed that the Commission had a discretion under s 86 to make an investigative referral and that the Commission had proceeded on the erroneous assumption that it was required to make an investigate referral.
21 I reject Dr Carrick’s submission that this case is on ‘all fours’ with Daniel v Kelly. It is not suggested in this case that the Commission proceeded on the assumption that it was required to make an investigative referral. The correspondence considered in [24] and [28] below makes plain that the Commission appreciated that an investigative referral was discretionary.
22 Additionally, as North J, one of the members of the Full Court in Kelly v Daniel, explained in Freeman v Health Insurance Commission [2004] FCA 453 at [54]:
‘The issue fatal to validity in Daniel was the failure of the Commission to take into account a relevant consideration, namely the fact that, apparently unknown to officers of the Commission responsible for making the referral, Dr Daniel’s conduct had already been considered and the issues resolved between other officers of the Commission and Dr Daniel.’
By contrast, the written communications between Dr Carrick and officers of the Commission between 14 December 2000 (the date of Dr Carrick’s interview with Dr Lorenz) and 12 June 2002 indicated that significant issues between Dr Carrick and the Commission remained unresolved at the time of the Investigative Referral.
23 The penultimate paragraph of Dr Lorenz’s report of his interview with Dr Carrick on 14 December 2000 stated that:
‘concerns remain as to whether peers would view Dr Carrick’s practice as appropriate in the following areas:
· the number of services provided on a daily basis, including endoscopies, and the ability to provide standard and long consultations in the time allocated by her
· the frequency of performing small bowel intubation and biopsy, and the subsequent histopathology and chemical pathology generated on her profile
· whether medications are within PBS parameters of prescribing’.
24 On 12 February 2001 the Chairman of the Case Management Committee of the Commission’s Professional Review Branch NSW (‘the Chairman’) wrote to Dr Carrick. After referring to the above concerns identified by Dr Lorenz, the Chairman advised:
‘A review of your practice profile will be performed after June 2001 and I encourage you to seriously consider the issues raised. If the review indicates that the concerns remain, the Case Management Committee may forward the matter to the Medical Director for consideration of referral to Professional Services Review.’
25 I interpolate that I reject the submission of Dr Carrick that the Chairman thereby advised Dr Carrick that any subsequent review of her practice profile would relate only to services provided by her after June 2001. The Chairman’s advice was that a review of her practice profile would be performed after June 2001. A review necessarily concerns a practice profile for a period terminating before the date of that review.
26 On 8 April 2001 Dr Carrick wrote to the Chairman indicating that she was happy to adjust her medical practice to meet his requirements and confirming that she had sought advice from him and from Dr Lorenz as to how best to achieve that outcome. She outlined changes which she had made in her medical service provision and asked to be told whether the changes met the Chairman’s requirements. She received a reply dated 24 April 2001 which relevantly advised:
‘The information provided will certainly help when your practice is reviewed. It is not appropriate for me to comment on the specific clinical issues you raised, as the HIC does not wish to be seen to be setting clinical practice standards.
This role belongs to your peers and it is important that you are confident that your modifications to billing services under Medicare meets that standard.’
27 I reject the submission of Dr Carrick that the Chairman’s letter of 24 April 2001 indicated that there were no immediate concerns about her practice. The letter was calculated to draw to her attention that the Act is ultimately concerned with conduct that a practitioner’s peers would find unacceptable. The letter expressed no view on whether there were immediate concerns about her practice other than by indirectly confirming the earlier advice that her practice would be reviewed.
28 It appears that Dr Carrick’s practice profile was reviewed after June 2001. On 19 October 2001 the Chairman wrote to Dr Carrick referring to his earlier advice that her practice profile would be reviewed and reported:
‘The Case Management Committee on 11 October 2001 discussed the results of the review. While there have been reductions in your use of item 30478 and prescribing of pharmaceuticals, the concerns discussed during counselling have remained.
A review of your practice profile will be performed after December 2001 and I encourage you to seriously consider the issues that have previously been raised. If the review indicates that the concerns remain, the Case Management Committee may forward the matter to the Medical Director for consideration of referral to Professional Services Review.’
29 By letter dated 8 May 2002 the Chairman advised that the subsequent review had been conducted and that:
‘the concerns with volumes of services, small bowel intubation and biopsies with subsequent pathology, routine billing of consultations with procedures and use of Item 30478 have all remained.’
The letter further advised that the Case Management Committee had determined that, as the counselling concerns remained, the matter would be forwarded to the Medical Director for consideration of referral to the Director of Professional Services Review.
30 As I have already observed, the above communications do not suggest that Dr Carrick’s conduct was no longer of immediate concern to the Commission.
31 The oral communications between Dr Carrick and officers of the Commission identified in Dr Carrick’s affidavit sworn on 11 May 2005 similarly do not provide support for the submission that she was entitled to consider that the Commission was not sufficiently concerned about her conduct during the period 1 July 2000 to 30 June 2001 to refer that conduct to the Director. Those oral communications involved Dr Carrick seeking advice from Dr Lorenz, and later the Chairman, as to how she might change her practice to satisfy the requirements of the Commission. On each occasion she was advised, in effect, that the Commission did not provide advice as to appropriate clinical practice.
32 I interpolate that, having regard to the definitions of ‘inappropriate practice’ contained in s 82 of the Act, the above advice from the Commission was apt. The Commission administers a scheme under which professional practice that significantly departs from standard professional practice in the relevant area may be examined and, should concerns remain after that examination, ultimately be subjected to peer review by a Professional Services Review Committee (see s 95 of the Act). Professional practice is not inappropriate practice merely because the practice profile of the practitioner concerned departs significantly from the norm. There may be good reasons for the departure. The reverse is also true. Professional practice is not appropriate practice merely because the practice profile of the practitioner is normal. A normal practice profile may mask inappropriate practice. The concern of a medical practitioner, as Dr Carrick was advised, should be to ensure that his or her practice is in accordance with appropriate clinical standards; not to ensure that his or her practice profile accords with any statistical standard.
33 To substantiate her challenge that the Commission exercised the power under s 86(1) of the Act without taking into account relevant considerations Dr Carrick was required to:
(a) identify a consideration that the Commission was bound to take into account in making its decision (Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 per Mason J at 39); and
(b) demonstrate, on the balance of probabilities, that the Commission did not take into account that consideration.
34 I accept for present purposes that Kelly v Daniel 134 FCR 64 is authority for the proposition that, in making a decision under s 86(1), the Commission is bound to take into account the consideration, where applicable, that the conduct of the person under review has already been considered by the Commission and a decision communicated to the person that the conduct will not be further investigated. As identified above, that consideration was not pertinent in this case.
35 What other factors the Commission is bound to take into account in making a decision under s 86(1) are to be determined as a matter of statutory construction. As the Act does not expressly identify the considerations to be taken in account, they are to be implied from the subject matter, scope and purpose of the Act (Peko-Wallsend 162 CLR 24 at 39-40).
36 It is not necessary for a decision to be reached in this case on whether the Commission was bound to take into account any of the following considerations:
(a) that a counselling meeting had taken place between Dr Carrick and a Commission Medical Advisor at which Dr Carrick’s referred conduct was discussed;
(b) Dr Carrick’s practice statistics had been reviewed later than the date of the counselling meeting; and
(c) there had been some, albeit, in the Commission’s view, insufficient, change in Dr Carrick’s practice statistics since counselling.
I am satisfied that the Commission was alert to, and took into account, each of the above considerations as each of them is referred to in the Investigative Referral under the heading ‘Reasons for Investigative Referral’ (see [16] above). The weight to be given to them was a matter for the Commission.
37 Having regard to the view that I have taken of the true tenor of the written and oral communications discussed above between Dr Carrick and the officers of the Commission, I am not persuaded that Dr Carrick has identified any consideration not identified in the Investigative Referral that the Commission was bound to take into account in making its decision under s 86(1) of the Act.
38 In any event, as Lander J, with whom Black CJ and Wilcox J agreed, observed in Oreb v Willcock (2005) 146 FCR 237 at [101]-[102]:
‘[T]the absence of a mention of those … matters in the reasons does not mean that the Commission did not have regard to those matters. The reasons which must be given by the Commission under s 86(4)(b) are “the reasons why the Commission considers the person under review may have engaged in inappropriate practice”. The Commission does not have to give reasons why it has decided to make an investigative referral but only the reasons why it considers the practitioner may have engaged in inappropriate practice. The purpose of the Commission’s reasons is to identify the matters into which the Director needs to inquire. In my opinion, the reasons which were advanced by the Commission were appropriate having regard to the reasons which the Commission had to give.
In those circumstances, the appellant cannot, in my opinion, rely upon the Commission’s failure to mention the … matters to which the appellant referred for arguing that the Commission failed to have regard to them.’
39 Dr Carrick was not able to point to any evidence apart from the terms of the Investigative Referral itself to support her contention that the Commission did not take into account all relevant aspects of her conduct over the referral period (see [17] above).
40 The extent to which Dr Carrick ultimately pressed the claim that she was positively misled by Dr Lorenz on 14 December 2000 is unclear (see [19(e)] above). This claim was expanded upon in a written submission made by her to the Director which is annexed to an affidavit sworn by her in support of her application. In that written submission she drew attention to the fact that the statistics discussed during the interview related to the year ended 30 September 2000 while the referral period is 1 July 2000 to 31 June 2001; that is, to the fact that the referral period significantly overlapped with the period covered by the statistics discussed during the interview. She contended that in this circumstance it was farcical that the Investigative Referral stated:
‘The HIC determined there had been insufficient change to remove the overall concerns about the referred conduct above.’
41 She further contended in her written submission to the Director that she was not provided with any opportunity to act on the advice given to her by Dr Lorenz and stressed that approximately half of the services referred to the Director were rendered prior to the interview on 14 December 2000. Dr Carrick submitted by way of conclusion that ‘the way in which HIC has abused the counselling process to investigate its own Investigative Referral evidences such a fundamental breach of the requirements of procedural fairness that the referral itself must be invalid and should be dismissed by you [ie the Director].’
42 Counsel for Dr Carrick did not address the Court in support of the above submission and it may be that it was not relied upon.
43 In any event I note that, although Dr Carrick swore an affidavit to which she annexed her written submissions to the Director, she did not give evidence by way of affidavit or otherwise to the effect that she was misled by Dr Lorenz in the conduct of the interview of 14 December 2000. In my view, this is of itself a sufficient answer to the submission assuming it to be relied upon.
44 In any event, I do not accept that Dr Carrick was not given an opportunity to act on the advice given to her by Dr Lorenz. It is immaterial in this regard that some of the services referred to the Director were rendered prior to 14 December 2000. The evidence referred to in [28]-[29] above indicates that Dr Carrick’s practice profile was reviewed twice after 14 December 2000. Following the second of the reviews, which apparently took place after December 2001, the Case Management Committee concluded that concerns remained. It is reasonable to infer, and I do infer, that had that final review dispelled concerns about Dr Carrick’s ‘volumes of services, small bowel intubation and biopsies with subsequent pathology, routine billings of consultations with procedures and use of Item 30478’ the matter (ie Dr Carrick’s conduct in connection with rendering or initiating certain services within the period 1 July 2000 – 30 June 2001) would not have been forwarded to the Medical Director for consideration of referral to the Director (see [29] above).
45 The application, to the extent that it seeks an order declaring void or setting aside the Investigative Referral on the judicial review grounds, fails.
THE ADJUDICATIVE REFERRAL
Grounds of Challenge
46 The further amended application originally sought judicial review of the Adjudicative Referral on four grounds. On the second day of the hearing Dr Carrick was granted leave to file in Court a second further amended application for review. Only two of the four grounds are included in the second further amended application for review. Those two grounds are expressed as follows:
‘(b) The Director delivered to the Committee copies of lists of medical services and the Applicant’s patient files (“materials”) that had, as at that time and in substantial part, already been examined by the Director and/or they had been examined on his behalf by his servants, officers or agents, and they were found to be deficient or sufficiently deficient in relevant respects and adverse to the Applicant such as to cause the Director to set up a Committee and refer the matter to it by way of an Adjudicative Referral purportedly pursuant to section 93 of the Act. This decision and/or conduct must have inevitably and impermissibly skewed the exploratory sample results for or in relation to the Committees’ deliberations and/or its deliberations generally; and/or
(c) To the extent that the Director purported to exercise his discretion to include in the Adjudicative Referral both his reasons (pursuant to section 93(6)) and the materials (purportedly pursuant to clause 5 of the Health Insurance (Professional Services Review – Content and Form of Adjudicative Referrals) Guidelines 1999 – being Ministerial guidelines made in accordance with section 106K(3)) his discretion miscarried or was not reasonably formed or was manifestly irrational in that he knew or should have known that such conduct or action would lead or likely lead the Committee into error by including such material in his Adjudicative Referral such that the said decision constituted a constructive failure of the Director to exercise his jurisdiction and/or vitiated the Adjudicative Referral. His decision to send the said materials involved mistake of law and he took into account irrelevant considerations and the basis for the exercise of his power was absent.’
47 Appendix 2 to the Adjudicative Referral was a list of the first 40 randomly selected MBS item 30487 services (and the full medical records for the patients identified in that list) from the list of randomly selected MBS item 30487 services provided to the Director by the Commission. Dr Carrick’s outline opening statement indicated that her case concerning the Adjudicative Referral was that the discretion of the Director to refer the matter to a Committee hearing miscarried because he included in his referral ‘the already examined patient medical files of [Dr Carrick] for the Committee for it to examine again’ (emphasis in original). This appears to be a re‑run of an argument unsuccessfully advanced before Tamberlin J in Phan v Kelly [2007] FCA 269.
Consideration
48 Section 93 of the Act governs the form and content of an adjudicative referral. Subject to s 93, the content and form of an adjudicative referral must comply with relevant guidelines made by the Minister under s 93(4). The Health Insurance (Professional Services Review – Content and Form of Adjudicative Referrals) Guidelines 1999 (‘the Guidelines’) were made by the Minister under s 93(4).
49 Section 93(6) provides:
‘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.’
50 Item 4 of the Guidelines allows the content of an adjudicative referral to include:
‘(a) information and material received by the Director with the investigative referral relating to the person; and
(b) any other relevant information and material discovered or obtained by the Director.’
51 The short answer to Dr Carrick’s challenge to the Adjudicative Referral is that the Director was obliged by s 93(6) to attach to the Adjudicative Referral a written report giving the reasons why he thought that Dr Carrick may have engaged in inappropriate practice. The Guidelines also entitled the Director to include in the Adjudicative Referral any other relevant information and material received by him with the Investigative Referral or discovered or obtained by him.
52 If, as Dr Carrick argued, the Committee misused material provided to it in the Adjudicative Referral, this may affect the validity of steps taken by the Committee including the preparation of the Final Report. It does not affect the validity of the Adjudicative Referral.
FINAL REPORT
Grounds of Challenge
53 The second further amended application seeks review of the decision, conduct or action of the Committee in preparing the Final Report on the grounds that:
(a) the Committee wrongly received into evidence and considered a written report dated 18 December 2002 of Dr Timothy Heap, a consultant gastroenterologist, over the objection of Dr Carrick and without allowing him to be cross-examined; and
(b) the Committee had regard to only a sample of the services the subject of the referral without complying with the Ministerial determination under s 106K(3) specifying the content and form of allowable sampling methodologies.
The Report of Dr Heap
54 Dr Heap, a Deputy Director of Professional Service Review appointed under s 85 of the Act, was engaged by the Director as a consultant pursuant to s 90(1) of the Act. A copy of his written report to the Director was attached to the Adjudicative Referral as permitted by item 4 of the Guidelines (see [50] above). Dr Carrick therefore received a copy of the report when she received notice of the Adjudicative Referral (s 94 of the Act).
55 Dr Carrick attended the first hearing of the Committee with her lawyer, Mr Wade. Section 103(2) of the Act gives a lawyer accompanying the person under review a limited role which does not include questioning a person giving evidence at the hearing. However, subject to reasonable limitations or restrictions imposed by the Committee, the person under review may question a person giving evidence at the hearing (s 103(1)(e)).
56 The transcript of the hearing discloses that a procedure was adopted whereby the Secretary to the Committee tendered various documents for the purpose of the Committee receiving them into evidence. The first document tendered by the Secretary was the Adjudicative Referral. Mr Wade objected to the report of Dr Heap being received in evidence as part of the Adjudicative Referral on the ground that Dr Heap, as a Deputy Director, was not independent and his report was not capable of appropriate testing because Dr Carrick was not capable of cross-examining him. The Chair of the Committee ruled that Dr Heap’s report was part of the Director’s report and reasons for making the referral and would be received in evidence ‘as the basis for the Director making the referral’. He stated:
‘It is not there as the basis for us making our opinion at the end of this Tribunal hearing.’
The transcript records Mr Wade responding:
‘I understand what you are saying. Yes. I accept your ruling.’
Understandably in the circumstances, no request was made by Dr Carrick, or by Mr Wade on her behalf, for Dr Heap to be made available for cross-examination. The complaint that the Committee did not allow Dr Heap to be cross-examined is without substance.
57 The Committee was constituted by four medical practitioners. The Chair practiced as a gastroenterologist and one of the members practiced as a gastroenterological surgeon. During the three days of Committee hearings the Committee questioned Dr Carrick in a manner that suggests that the Committee members were applying their own expert knowledge and experience to the task at hand. While the Final Report indicated that the Committee’s findings had been made having regard to, inter alia, the material tendered into evidence at the hearing, it does not refer to Dr Heap’s report in support of any findings made by the Committee. In the circumstances there is no reason to conclude that the Committee received Dr Heap’s report for any purpose other than that indicated by the Chair; that is, to establish the basis of the Adjudicative Referral.
58 Dr Carrick sought to support her complaint concerning the Committee’s receipt of Dr Heap’s report by reference to Applicant VEAL of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 225 CLR 88. That case concerned the failure of the Refugee Review Tribunal to tell an applicant for a protection visa that it had received an unsolicited letter that made damaging allegations against him. It is not an authority which is of assistance to Dr Carrick who was at all relevant times fully aware of the content of Dr Heap’s report.
59 The complaint that the Committee wrongly received into evidence and considered Dr Heap’s report is not made out.
Sampling Methodology
60 The Final Report discloses that the Committee had regard to one class of services provided by Dr Carrick, namely MBS item 30487 provided in association with one or more gastrointestinal endoscopic procedural items. It examined this class of services by employing a sample of the services included in the class as authorised by s 106K(1) of the Act. Dr Carrick contends that the sampling methodology used by the Committee for this purpose was not a sampling methodology specified in a determination made by the Minister under s 106K(3).
61 Section 106K relevantly provides:
‘(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).
…’
62 The sampling methodology purportedly used by the Committee was the methodology specified by the Health Insurance (Professional Services Review – Sampling Methodology) Determination 2000 (No 1) (‘the Determination’).
63 Section 6 of the Determination provides:
‘In having regard, under subsection 106K(1) of the Act, only to a sample of the services included in a particular class of referred services, a Committee must ensure that the sample (the preliminary random sample) is a random sample.’
64 Section 7(1) of the Determination is concerned with the appropriate sample size. It provides:
‘The preliminary random sample must be of an appropriate sample size to enable prediction with 95% confidence that the percentage of services constituting inappropriate practice worked out from the sample is within +10% of the actual percentage of inappropriate services rendered or initiated in the class of referred services sampled, at a hypothesised incidence of inappropriate practice of 50% of services rendered or initiated (the incidence requiring the largest sample).’
65 Section 8 of the Determination provides:
‘In making a finding based on statistical sampling, the Committee must:
(a) examine a sample, preferably of 30 or more services … (the exploratory sample), randomly drawn from the preliminary random sample; and
(b) determine whether or not each of those services constitutes inappropriate practice.’
66 As I understand Dr Carrick’s submissions concerning the sampling methodology adopted by the Committee, she does not contend that the Committee breached any express requirement of the Determination. Rather she argues that it is necessarily implicit in the Determination that the Committee was required:
‘to find for itself and inspect a fresh pool of randomly selected medical services to examine, instead of examining a set of 30 from the 40 provided to them by the Director.’
Again, as I understand it, this is a re-run of an argument unsuccessfully advanced before Tamberlin J in Phan [2007] FCA 269.
67 The evidence demonstrates that on 2 July 2002 the Director requested the Commission to select a random sample of 98 patient services from the total population of MBS item 30487 services rendered by Dr Carrick for the period 1 July 2000 ‑ 30 June 2001. It is accepted that the Commission used a computer program to create a report which listed the names of 98 patients who had received a MBS item 30487 service from Dr Carrick randomly selected from the total population as required. The report discloses that it was produced on 29 July 2002 by the Analysis & Evaluation Section of the Program Review Division of the Commission.
68 It is not disputed that the preliminary sample size of 98 patient services met the requirements of s 7 of the Determination. Nor is it disputed that before providing the list of randomly selected patient services to the Director, the Commission used the same computer program to randomly assign a new random number to each of the services in the preliminary random sample. It then re‑sorted the services in the order corresponding to the new random numbers assigned to each service. The list of randomly selected services provided by the Commission to the Director was the list re‑sorted in that order.
69 The exploratory sample which the Committee examined consisted of the first 30 services on the list of randomly selected services provided by the Commission to the Director. I accept the evidence of Professor Desmond Nicholls, which was not challenged, that these first 30 services were a sample selected randomly from the preliminary random sample as required by s 8 of the Determination.
70 The Director, by a written notice given under s 89B(2) of the Act, required Dr Carrick to produce to him original patient records for the first 40 patients listed on the random sample of 98 patient services provided to the Director by the Commission. The Director engaged Dr Heap to review the 40 medical records provided by Dr Carrick. Dr Heap reported that he did not believe that it was justified for Dr Carrick to charge any of the 40 patients for an MBS item 30487 service. The Director also obtained data which showed that Australia wide 7,800 claims were made for MBS item 30487 services during the referral period and that Dr Carrick provided 4,073 of these services. The next highest provider claimed 876 MBS item 30487 services.
71 Having concluded that Dr Carrick may have engaged in inappropriate practice as defined by s 82 of the Act, the Director decided to make the Adjudicative Referral. It appears that the Director provided to the Committee the names of the first 40 patients listed on the random sample of 98 patient services provided to him by the Commission together with the patient records for those patients as provided by Dr Carrick. That is, the Director provided to the Committee the same medical records that he had earlier provided to Dr Heap.
72 The Committee considered Dr Carrick’s conduct in respect of the first 30 services on the list of 40 services that had been considered by Dr Heap. At [19] of the Final Report the Committee stated that it:
‘considered Dr Carrick’s conduct in respect of the 30 services contained in the final random sample (drawn from a preliminary random sample of 98 taken from a total of 4062 MBS item 30487 services provided in association with one or more gastrointestinal endoscopic procedural items by Dr Carrick during the review period) which were examined during the hearing.’ (footnote omitted)
73 The Committee found that Dr Carrick’s conduct would be unacceptable to the general body of medical practitioners in connection with 28 of the 30 MBS item 30487 services examined by it. It concluded that in this circumstance the Determination authorised it to extrapolate its findings to the overall class of services in the manner prescribed by s 11 of the Determination.
74 The first error claimed to affect the methodology adopted by the Committee was that it failed to ‘ensure’ that the preliminary random sample was a random sample as required by s 6 of the Determination. Dr Carrick submitted that s 6 required the Committee itself to undertake a random sampling procedure.
75 A submission to the same effect was ‘rejected out of hand’ by Edmonds J in Mathews v Health Insurance Commission (2006) 90 ALD 49 at [40]. It is appropriate for me to follow the approach adopted by his Honour unless I am satisfied that his Honour was in error. I am not so satisfied. Indeed, in my respectful view, his Honour was plainly correct.
76 The sampling methodology prescribed by the Determination assumes an understanding of, and facility with, statistics. It is unlikely that the Minister intended that Committee members, rather than appropriately qualified statisticians, should undertake important statistical procedures. The obligation on a Committee to ‘ensure’ that the preliminary random sample is a random sample may, in my view, be met by the Committee satisfying itself that the preliminary random sample has been generated as a random sample by an appropriately qualified person. Nothing in the evidence establishes that the Committee did not take that step in this case.
77 I am not persuaded that it was necessary for the Committee to be given the full preliminary sample in the order of its original random selection, as argued by Dr Maxwell Stevenson, an expert statistician whose affidavit evidence was adduced by Dr Carrick. The responsibility of the Committee under s 106K and the Determination was not to engage in ‘sound audit practice’, to use Dr Stevenson’s expression, but rather to ensure that s 6 of the Determination was complied with.
78 In any event, I see no reason to conclude that the Determination, considered in the context of the Act and s 106K in particular, discloses an intention that, where a preliminary random sample is in fact random, the findings of a Committee should be rendered invalid because the Committee itself failed to ‘ensure’ that the preliminary random sample was random (Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355).
79 The second error claimed to affect the methodology adopted by the Committee was that the preliminary random sample was not a random sample in the hands of the Committee because it had already been the subject of consideration by the Director. This argument was rejected by Tamberlin J in Phan [2007] FCA 269 at [52]. His Honour there observed:
‘In my view, the sample used in the present case was in accordance with the requirements of the Act. The evidence is that the Commission drew a preliminary random sample and that the Director required the production of records which he examined. He concluded, for the reasons given by him in his Report, that it would be appropriate for him to refer the matter to a Committee. In examining the material and completing his Report, the Director did not decide that there was inappropriate conduct. That determination was left for the Committee to make following a hearing and having regard to the evidence adduced at that hearing. It is not correct to suggest that the Director had found that the samples had in fact given rise to inappropriate conduct. The fact that the Director examined and considered the records and forwarded them to the Committee does not affect their randomness when they were considered afresh by the Committee. The sample items retained their character as random samples and were not skewed or biased so that the Committee’s decision should be considered invalid.’ (emphasis in original)
80 Again, I should follow the approach adopted by his Honour unless I am satisfied that his Honour was in error. I am not so satisfied. Indeed, in my respectful view, his Honour was correct.
81 The report of Dr Stevenson, parts of which I received by way of submission (O 10 r 1(2)(j) of the Federal Court Rules), assumed a requirement for the conclusions arrived at by the Committee to be ‘truly independent of those of the Director’. Dr Carrick argued that were this not the case, the conclusions would otherwise be ‘unfair’. It is, of course, the case that a Professional Services Review Committee is obliged to make its own finding in respect of the conduct of the person under review; that is, a finding as to whether the conduct constituted engaging in inappropriate practice. However, as I understand the report of Dr Stevenson, he takes the view that, at least where a Committee places reliance on s 106K of the Act, the findings of the Committee must be arrived at by reference to samples of services not previously considered by the Director. Additionally Dr Stevenson places reliance on the notion of ‘data snooping’ in suggesting that the preliminary random sample did not satisfy the requirements of s 7 of the Determination. Data snooping can occur when a given set of data is used more than once for the purpose of inference.
82 The question of whether the findings of the Committee were required to be arrived at by reference to samples of services not previously considered by the Director is to be answered by reference to the Act. References to sound audit practice and notions of fairness are of only limited assistance in this regard. Section 93(6) of the Act provides that where the Director makes an adjudicative referral the Director must prepare and attach to the adjudicative referral:
‘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’ .
This statutory requirement suggests against any legislative intention that the conclusions arrived at by the Committee are to be arrived at by reference to evidence independent of that considered by the Director.
83 It is also significant in this regard that the Director is not authorised to make a finding that a person has engaged in inappropriate practice. Rather the role of the Director under Part VAA of the Act is as outlined in [12] above. A function of the Director under the scheme established by Part VAA is to ensure that only matters where the Committee could reasonably find that the person under review has engaged in inappropriate practice are referred to a Professional Services Review Committee.
84 I conclude that the conclusions arrived at by the Committee are not required to be ‘truly independent of those of the Director’ in the way assumed by Dr Stevenson.
85 I accept the evidence of Professor Nicholls that the notion of data snooping has no application in the context of the sampling methodology prescribed by the Determination. Even if it did, the Committee did not use any data more than once. The Committee was not required by the Determination to examine any sample other than the exploratory sample of 30 services. As the Act does not, in my view, require the conclusions of the Director to be arrived at by reference to evidence independent of that considered by the Committee, the fact that the Director had earlier given consideration to the same 30 services as part of his sample of 40 services is, I conclude, irrelevant.
86 The third and fourth errors claimed to affect the methodology adopted by the Committee are related. The third alleged error was that:
‘The Committee should have not accepted or taken into account the various medical records of the applicant that the Director had delivered to it with or as part of the Adjudicative Referral as it adversely affected the sampling determination process under the Act and the Sampling Determination itself and it affected the independence and partiality of the Committee as a whole, afflicting the Committee with an apprehension of bias in undertaking the sampling determination process’.
87 The fourth alleged error was that the exploratory sample of 30 patient services considered by the Committee were not, in the hands of the Committee, a sample ‘randomly drawn from the preliminary random sample’ as required by s 8(a) of the Determination because they formed part of the pool of 40 patient services examined by Dr Heap as a consultant to the Director.
88 The submissions in support of both the third and fourth claimed errors assumed a requirement for the conclusions of the Committee to be arrived at independently of those of the Director in the sense of not being supported by reference to the same sample of patient services. For the reasons given above, I do not accept that the Act imposes such a requirement.
89 The final error claimed to affect the methodology adopted by the Committee was that the Committee failed to examine a random sample drawn from the preliminary random sample as required by s 8 of the Determination because the preliminary random sample was not before the Committee. The above proposition involves a non sequitur. Nothing in s 8 requires the Committee itself to draw the exploratory sample from the preliminary random sample. Section 8 requires the Committee to ‘examine a sample … (the exploratory sample), randomly drawn from the preliminary random sample’. If the submissions based on the Director’s previous review of the random sample of 40 patient services are put to one side, nothing in the evidence suggests that the exploratory sample examined by the Committee was not randomly drawn from the preliminary random sample. As indicated above, I do not consider that the Director’s previous consideration of the 40 patient services affects this position.
CONCLUSION
90 The application for an order of review will be dismissed with costs except in respect of ‘the constitutional grounds’ as defined in the order made by Sackville J on 7 September 2006.
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I certify that the preceding ninety (90) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson. |
Associate:
Dated: 3 July 2007
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Counsel for the Applicant: |
Mr M A Robinson |
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Solicitor for the Applicant: |
Tress Cox Lawyers |
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Counsel for the Respondent: |
Mr PJ Hanks QC and Ms RM Henderson |
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Solicitor for the Respondent: |
Minter Ellison |
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Date of Hearing: |
29 and 30 May 2007 |
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Date of Judgment: |
3 July 2007 |
