author: CYR, Chief Judge.

text:
    Rudolph J. HOUK, Plaintiff, v. Robert S. FURMAN, et al., Defendants.
    Civ. No. 82-0202-B.
    United States District Court, D. Maine.
    July 18, 1985.

      Anthony M. Ambriano, Robert V. Johnson II, Concord, N.H., Robert C. Treworgy, Bangor, Me., for plaintiff.
    Michael D. Seitzinger, Pierce, Atwood, Scribner, Allen, Smith & Lancaster, Augusta, Me., for defendants.
   MEMORANDUM DECISION AND ORDER

CYR, Chief Judge.

This diversity malpractice action was filed on October 8, 1982, alleging negligence by the defendant-physician in treating plaintiff “on or about October 11,1980.” Defendants have moved to dismiss the complaint on the basis of plaintiffs failure to timely serve a 90-day pre-filing notice on defendants as required by 24 M.R.S.A. § 2903. Since the parties have presented materials outside of the pleadings which have not been excluded by the court, the motion to dismiss is treated as a motion for summary judgment under Rule 56. Fed.R.Civ.P. 12(b).

Plaintiff alleges that he was treated by defendant Robert S. Furman, M.D., of Fur-man, Wickenden and Wickenden, P.A., at the Penobscot Bay Medical Center in Rock-land, Maine “on or about October 11, 1980,” for a dislocated thumb. On October 8,1982 plaintiff brought the present action. On October 13, 1982 Dr. Furman and the professional association were served with copies of the complaint. On November 3, 1982, defendants moved to dismiss the complaint. On December 6, 1982, defendants received additional copies of the complaint to which had been added plaintiffs signature subscribed and sworn before a notary public. Defendants have received no other notice of the claim which is the subject of this action.

Title 24 M.R.S.A., section 2903 (Supp. 1984), enacted in 1977, provides:

No action for death or injuries to the person arising from any medical, surgical or dental treatment, omission or operation shall be commenced until at least 90 days after written notice of claim setting forth under oath the nature and circumstances of the injuries and damages alleged is served personally or by registered or certified mail upon the person or persons accused of wrongdoing. Any applicable statute of limitations shall be tolled for a period of 90 days from service of notice.

In Givertz v. Maine Medical Center, 459 A.2d 548 (Me.1983), the Maine Supreme Judicial Court [Law Court] held that section 2903 requires that the 90-day pre-filing notice be served within the two-year statute of limitations, 14 M.R.S.A. § 753, which is applicable to medical malpractice actions, and that the failure to serve such a notice within the required time subjects the malpractice suit to dismissal. Id. at 554.

Plaintiff responds to defendants’ argument that Givertz mandates dismissal of the present action by asserting (1) that Givertz is distinguishable; (2) that Givertz, decided on April 26, 1983 following the commencement of suit and service of the pre-filing notice in this case, should not be applied retroactively; (3) that the notice requirement of section 2903 does not apply in this federal diversity action; (4) that the section 2903 notice provision violates the Equal Protection and Due Process clauses of the United States Constitution and the Maine Constitution; (5) that section 2903 is contrary to Me. Const, art. I, § 19; and (6) that 14 M.R.S.A. § 753 denies equal protection insofar as it provides a two-year limitations period for medical malpractice actions.

I. GIVERTZ v. MAINE MEDICAL CENTER

Compliance with Pre-Litigation Notice Requirement

Plaintiff’s argument that, unlike the present case, no notice of claim was ever served in Givertz, misconceives the holding in Givertz. In upholding the trial court’s dismissal of the claim against the defendant physician in Givertz, the Maine court explained:

We immediately point out that in requiring service of a ninety-day mandatory notice of claim prior to the actual bringing of a malpractice suit, the Legislature at the same time integrated this specific legislation into any applicable statute of limitations respecting such actions. Having in mind that such actions must be commenced within two years after the cause of action accrues, whether it be 14 M.R.S.A. § 753 or 24 M.R.S.A. § 2902, the Legislature affirmatively kept the full two-year period intact by providing a tolling of the limitations statute for the required ninety-day run of the notice of claim. Such integration of the two statutes manifests an intent on the part of the lawmakers to make the ninety-day preaction notice of malpractice claims a mandatory requirement within the two-year limitations statute applicable to the commencement of malpractice suits, which statute has been construed by this Court as mandatory. Millett v. Dumais, 365 A.2d 1038 (Me. 1976). See also Beegan v. Schmidt, 436 A.2d 893 (Me.1981).

459 A.2d at 551. Thd court then explicitly held that “the notice-of-claim-before-suit provisions of section 2903 of title 24 must be served within the two-year period of limitations of the applicable statute. Failure to do so, as in the instant case, properly subjected the malpractice suit to dismissal.” Id. at 554.

As in Givertz, plaintiff filed the present malpractice action within the two-year limitations period but failed to provide the prelitigation notice of claim within that period. Thus, Givertz is essentially indistinguishable.

Relying on Michaud v. Northern Maine Medical Center, 436 A.2d 398 (Me.1981), plaintiff contends that dismissal is not mandated where the complaint is filed before the expiration of the limitations period, even though the pre-litigation notice is given after the limitations period has run. However, unlike the present case, Michaud did not involve service of a notice of claim after the running of the limitations period. The Givertz court explained that the claimed non-compliance with section 2903 in Michaud was that the notice of claim was not under oath. The notice in Michaud was served “well in advance of both the filing of the complaint and the expiration of the limitations period for bringing suit.” Givertz, supra, 459 A.2d at 551.

Retroactivity of Givertz

Plaintiff next contends that Givertz, which was decided April 26, 1983, represents a substantial departure from prior holdings and that it should not be applied retroactively. The “contrary” holdings referred to by plaintiff are those in Michaud v. Northern Maine Medical Center, supra, and Dougherty v. Oliviero, 427 A.2d 487 (Me.1981).

As has been demonstrated, Givertz in no way contradicts Michaud. Nor is Givertz at all inconsistent with Dougherty, which held that where an action is commenced before the expiration of the statute of limitations and a sufficient notice of claim is served within that limitations period, though after the commencement of the action, non-compliance with section 2903 does not necessarily require dismissal, and a stay of proceedings may be appropriate.

The issue in Givertz: whether the failure to serve a notice of claim within the two-year limitations period mandated dismissal, was one of first impression for the Maine court. Indeed, the Givertz court carefully distinguished its prior holdings in Michaud and Dougherty. Moreover, Givertz did not involve a question of Maine common law, but an interpretation of a 1977 statute, as manifested by the court’s finding of “a clear legislative intent that some notice of claim, be it sufficient or deficient, be served, as mandated by section 2903, within the period of limitations set by the statute as extended by reason of the ninety-day tolling provision of said section.” Givertz, supra, 459 A.2d at 553.

Although the Maine court has on occasion declined to give retrospective effect to a new rule of law, see Myrick v. James, 444 A.2d 987, 1001-02 & n. 14 (Me.1982) (and cases cited), unlike Myrick and the cases cited therein, Givertz did not overrule prior decisional law, nor did it expressly preclude the retrospective application of its holding. Thus, plaintiffs claim that Givertz does not apply retroactively must fail.

Applicability of Pre-Litigation Notice Requirement in Diversity Action

Plaintiff contends that section 2903’s pre-litigation notice requirement should not be applied in this diversity action because the requirement is “procedural” rather than “substantive.” Plaintiff concedes that other state medical malpractice statutes requiring that malpractice claims be initially referred to an arbitration or review board are binding on federal courts sitting in diversity actions. See, e.g., Feinstein v. Massachusetts General Hospital, 643 F.2d 880 (1st Cir.1981) (applying Massachusetts law). However, plaintiff argues that the pre-litigation notice requirement of the Maine Health Security Act, which does not mandate arbitration or panel review, is purely procedural and does not apply in a federal diversity action under the Rules of Decision Act, 28 U.S.C. § 1652, and Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

Erie overruled Swift v. Tyson, 41 U.S. (16 Pet.) 1, 10 L.Ed. 865 (1842), and held that “[ejxcept in matters governed by the Federal Constitution or by Acts of Congress, the law to be applied in any [diversity] case is the law of the State.” 304 U.S. at 78, 58 S.Ct. at 822. The Court later held in Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945), that a state statute of limitations was applicable in a diversity action, explaining:

[T]he question is not whether a statute of limitations is deemed a matter of ‘procedure’ in some sense. The question is whether such a statute concerns merely the manner and the means by which a right to recover, as recognized by the State, is enforced, or whether such statutory limitation is a matter of substance in the aspect that alone is relevant to our problem, namely, does it significantly affect the result of a litigation for a federal court to disregard a law of a State that would be controlling in any action upon the same claim by the same parties in a State court? ... In essence, the intent of [the Erie ] decision was to insure that, in all cases where a federal court is exercising jurisdiction solely because of the diversity of citizenship of the parties, the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a State court.

Id. at 109, 65 S.Ct. at 1470.

In a case somewhat analogous to the present one, the Supreme Court, in Ragan v. Merchants Transfer & Warehouse Co., 337 U.S. 530, 69 S.Ct. 1233, 93 L.Ed. 1520 (1949), considered a Kansas statute which provided that an action was deemed commenced, for purposes of the applicable statute of limitations, at the date of service of the summons and that a 60-day grace period was available beyond the ordinary limitations period if plaintiff had made a good faith effort to effect service. The federal complaint in Ragan had been filed within the two-year limitations period, thus “commencing” the action under Fed.R.Civ.P. 3, but plaintiff did not serve the summons until after the limitations period had expired. The Court, viewing the Kansas service-of-summons requirement as an integral part of the statute of limitations, held that the state statute, and not the federal rule, controlled the question of whether the action was timely brought, reasoning as follows:

Since that cause of action is created by local law, the measure of it is to be found only in local law. It carries the same burden and is subject to the same defenses in the federal court as in the state court____ It accrues and comes to an end when local law so declares---Where local law qualifies or abridges it, the federal court must follow suit. Otherwise there is a different measure of the cause of action in one court than in the other, and the principle of Erie R. Co. v. Tompkins is transgressed.

Id. at 533, 69 S.Ct. at 1235.

Plaintiff apparently contends that Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965), precludes application of the Givertz rule in this diversity action. In Hanna the Court rejected the defendant’s argument that a federal court exercising diversity jurisdiction should comply with a state statute requiring in-hand service on an executor or administrator of an estate, rather than Fed.R.Civ.P. 4(d)(1), which allows for other than in-hand service. However, Hanna reaffirmed that the “outcome-determination” test had to be read with reference to the “twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the laws.” Id. at 468, 85 S.Ct. at 1142.

In Walker v. Armco Steel Corp., 446 U.S. 740, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980), a case “indistinguishable from Ragan,” id. at 748, 100 S.Ct. at 1984, the Court explained that Hanna involved a “ ‘direct collision’ between the Federal Rule and the state law,” id. at 749, 100 S.Ct. at 1985, whereas Ragan did not involve a federal rule which conflicted with the essentially “substantive decision by [the state] that actual service on ... the defendant is an integral part of the policies served by the statute of limitations,” id. at 751, 100 S.Ct. at 1985. Walker also pointed out that, unlike Ragan, the plaintiff in Hanna “ ‘was not presented with a situation where application of the state rule would wholly bar recovery; rather adherence to the state rule would have resulted only in altering the way in which process was served.’ ” 446 U.S. at 747, 100 S.Ct. at 1983, quoting Hanna v. Plumer, 380 U.S. at 469, 85 S.Ct. at 1143.

The section 2903 requirement that a notice of claim be served upon a malpractice defendant within the applicable Maine period of limitations, as a prerequisite to the right to recover in a court action, renders the notiee-of-claim requirement, like the service-of-summons requirements in Ragan and Walker, an integral part of the Maine statute of limitations for malpractice actions. No federal rule directly conflicts with the Maine notice-of-claim requirement. Moreover, to refuse to apply section 2903 in this diversity case would produce an inequitable administration of Maine law as between resident and nonresident plaintiffs in malpractice actions, thus contravening the principles of Erie, supra, 304 U.S. at 74-75, 58 S.Ct. at 820-21.

In short, the pre-litigation notice requirement, as an integral part of the statute of limitations, is “intimately bound up” with the rights and obligations of the parties to Maine medical malpractice claims, and, therefore, must be applied in this diversity action. See Feinstein v. Massachusetts General Hospital, 643 F.2d 880 (1st Cir.1980) [Erie mandates application of Massachusetts statute requiring that court refer medical malpractice claim to tribunal]; Seoane v. Ortho Pharmaceuticals, Inc., 660 F.2d 146, 149 n. 4 (5th Cir.1981) [Louisiana statute requiring pre-litigation referral of malpractice claim to review panel]; DiAntonio v. Northampton-Accomack Memorial Hospital, 628 F.2d 287, 290 (4th Cir.1980) [Virginia statute requiring pre-litigation notice and panel review of claim (at request of party)]; Edelson v. Soricelli, 610 F.2d 131,133-35 (3d Cir.1979) [Pennsylvania statute requiring arbitration of malpractice claims as precondition to court action]; Davison v. Sinai Hospital of Baltimore, 617 F.2d 361 (4th Cir.1980), aff'g, 462 F.Supp. 778 (D.Md.1978) [Maryland statute requiring arbitration of malpractice claims as precondition to court action]; Woods v. Holy Cross Hospital, 591 F.2d 1164, 1168-1170 (5th Cir.1979) [Florida statute requiring mediation of malpractice claim prior to court action],

II. CONSTITUTIONAL CHALLENGES

Plaintiff argues that the pre-litigation notice requirement of section 2903 violates the Equal Protection and Due Process Clauses of the United States Constitution, U.S. Const, amend. XIV, and the Maine Constitution, Me. Const, art. I, § 6-A, as well as article I, section 19 of the Maine Constitution. Plaintiff also contends that the two-year statute of limitations for medical malpractice actions, 14 M.R.S.A. § 753, violates the constitutional requirement of equal protection.

Pre-Litigation Notice

A. Equal Protection

Plaintiff argues that the notiee-of-claim requirement denies equal protection of the laws because it impermissibly distinguishes between medical malpractice plaintiffs and plaintiffs in other tort actions. Plaintiff concedes that the requirement that a notice of claim be served prior to commencing a malpractice action, and within two years of the accrual of the cause of action, does not implicate a fundamental right or a suspect classification and therefore does not invoke the “strict scrutiny” standard of review. However, plaintiff maintains that this court must apply an “intermediate” level of scrutiny, rather than the “rational relationship” test applied in most equal protection challenges.

Generally, social or economic legislation which does not impinge on fundamental rights or employ suspect classifications does not deny equal protection if the discriminatory classification occasioned by the statute is rationally related to a legitimate governmental objective. City of Cleburne v. Cleburne Living Center, — U.S. —, ---, 105 S.Ct. 3249, 3254, 87 L.Ed.2d 313 (1985): “When social or economic legislation is at issue, the Equal Protection Clause allows the states wide latitude ... and the Constitution presumes that even improvident decisions will eventually be rectified by the democratic processes.”

In certain narrowly defined circumstances, the Supreme Court has applied an intermediate level of scrutiny — requiring the state to demonstrate a “substantial interest” in its discriminatory classification. See Pickett v. Brown, 462 U.S. 1, 8, 103 S.Ct. 2199, 2204, 76 L.Ed.2d 372 (1983) [classifications based on illegitimacy of child]; Plyer v. Doe, 457 U.S. 202, 216-24, 102 S.Ct. 2382, 2394-98, 72 L.Ed.2d 786 (1982) [statute withholding state funds for the education of illegal-alien children]. The plaintiff points to no special circumstances, such as the discrete nature of the class, the consequent lifetime hardship imposed upon the class, or the nonaccountability of the class for their disadvantageous status, see Plyer v. Doe, 457 U.S. at 223-24, 102 S.Ct. at 2398, which would warrant a departure from the general rule requiring application of the rational relationship test.

The vast majority of federal and state courts which have considered equal protection challenges to statutory schemes aimed at reducing the costs of malpractice litigation by providing for pre-litigation notice and review of claims has applied the rational relationship test. Seoane v. Ortho Pharmaceuticals, Inc., 660 F.2d 146, 150 (5th Cir.1981) (La.); DiAntonio v. Northampton-Accomack Memorial Hospital, 628 F.2d 287, 291 (4th Cir.1980) (Va.); Woods v. Holy Cross Hospital, 591 F.2d 1164, 1172-73 (5th Cir.1979) (Fla.); DiFilippo v. Beck, 520 F.Supp. 1009, 1016 (D.Del.1981); Eastin v. Broomfield, 116 Ariz. 576, 570 P.2d 744, 750 (1977); Lacy v. Green, 428 A.2d 1171, 1177 (Del.Super.1981); Everett v. Goldman, 359 So.2d 1256, 1266 (La.1978); Attorney General v. Johnson, 282 Md. 274, 385 A.2d 57, 78-79 (1978); Paro v. Longwood Hospital, 373 Mass. 645, 369 N.E.2d 985, 988-89 (1977); State ex rel. Strykowski v. Wilkie, 81 Wis.2d 491, 261 N.W.2d 434, 441-42 (1978); Prendergast v. Nelson, 199 Neb. 97, 256 N.W.2d 657, 668 (1977); State ex rel Schneider v. Liggett, 223 Kan. 610, 576 P.2d 221, 225-28 (1978); see Sibley v. Board of Supervisors of Louisiana State University, 462 So.2d 149, 155-56 (La.1985) [involving statute limiting recovery in medical malpractice actions].

Plaintiff cites, as contrary authority, Carson v. Maurer, 120 N.H. 925, 424 A.2d 825 (1980), which, in evaluating a similar New Hampshire pre-litigation notice provision, concluded that the proper test to be applied was whether the classification bears “a fair and substantial relation to the object of the legislation.” Id. 424 A.2d at 831. However, the Carson court explicitly stated that it did not consider itself confined to the federal constitutional standards of equal protection review, and relied on state case law applying the indicated level of review to social and economic legislation. Id. at 831. Whereas the Maine Supreme Judicial Court holds that the requirements of the equal protection and due process clauses of the Maine Constitution are no more stringent than those imposed by the Fourteenth Amendment. Beaulieu v. City of Lewiston, 440 A.2d 334, 338 n. 1 (Me.1982); State v. Richardson, 285 A.2d 842, 844 (Me.1972); see Bernier v. State, 265 A.2d 604, 606 (Me.1970).

Additionally, it is not at all clear that the Carson test differs significantly from the rational relationship test. The Carson language appears to have been taken from Reed v. Reed, 404 U.S. 71, 75-76, 92 S.Ct. 251, 253-54, 30 L.Ed.2d 225 (1971), which explained that “[a] classification ‘must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly circumstanced shall be treated alike.’ ” Id. at 76, 92 S.Ct. at 254, quoting Royster Guano Co. v. Virginia, 253 U.S. 412, 415, 40 S.Ct. 560, 561, 64 L.Ed. 989 (1920). In the very next sentence of the Reed opinion the Court restated the test to be whether the discrimination “bears a rational relationship to the state objective____” Id.

But assuming that the level of scrutiny applied in Carson is somewhat more stringent than the rational relationship test ordinarily applied in cases involving economic and social legislation, the court declines to follow Carson, in view of the overwhelming authority to the contrary and Maine’s explicit refusal to extend equal protection and due process rights beyond the federal constitutional norm.

In determining whether the challenged statutory discrimination is constitutional, the following questions must be addressed under the rational relationship test: “(1) Does the challenged legislation have a legitimate purpose? and (2) Was it reasonable for the lawmakers to believe that use of the challenged classification would promote that purpose?” Western & Southern Life Insurance Co. v. State Board of Equalization, 451 U.S. 648, 668, 101 S.Ct. 2070, 2083, 68 L.Ed.2d 514 (1981). In approaching these issues the court must refrain from acting as a “superlegislature to judge the'wisdom or desirability of legislative policy determinations made in ... the local economic sphere.” New Orleans v. Dukes, 427 U.S. 297, 303, 96 S.Ct. 2513, 2517, 49 L.Ed.2d 511 (1976). The plaintiff bears the “heavy” burden of showing that “ ‘the varying treatment of different groups or persons is so unrelated to the achievement of any combination of legitimate purposes that [a court] can only conclude that the legislature’s actions were irrational.’ ” Hodel v. Indiana, 452 U.S. 314, 332, 101 S.Ct. 2376, 2387, 69 L.Ed.2d 40 (1981), quoting Vance v. Bradley, 440 U.S. 93, 97, 99 S.Ct. 939, 943, 59 L.Ed.2d 171 (1979).

Considering the first step of the analysis, whether the pre-litigation notice provision is directed at a legitimate purpose, the Maine Law Court has explained that the Maine Health Security Act of 1977, 24 M.R.S.A. § 2501, et seq., was enacted “to promote the settlement of disputes and ameliorate the current proliferation of litigation [in medical malpractice]---- For one thing, liability insurance coverage of exposure ... in the area of malpractice actions was becoming increasingly difficult to obtain, and, if obtainable, was unduly costly.” Givertz v. Maine Medical Center, supra, 459 A.2d at 553.

The Pomeroy Commission on Medical and Hospital Malpractice Insurance [Commission] reported a “substantial problem” in Maine involving increasing insurance rates for medical practitioners, with a probable effect on the availability of health care. As summarized in the “Statement of Fact” accompanying the bill, L.D. 727, 108th Me. Legis., 1st Reg.Sess. 21 (1977), which produced the Maine Health Security Act:

The commission to revise the laws relating to medical and hospital malpractice insurance has found that there is a substantial problem in the State concerning the availability and cost of malpractice insurance for physicians and hospitals. The commission has found further that the situation has affected the availability of health care in some areas and the cost of health care in all areas of the State. Further deterioration is inevitable unless action is taken now.

Plaintiff challenges the legislative findings by pointing to portions of the Commission report indicating that the Commission considered Maine doctors and hospitals to be in a comparatively “favorable” position when viewed in light of the medical practice problem at the national level. However, while recognizing that the situation in Maine is not “cataclysmic,” the Commission found that there was a “substantial problem” affecting Maine health care.

Plaintiff relies on Boucher v. Sayeed, 459 A.2d 87 (R.I.1983), in which the Rhode Island Supreme Court held that a Rhode Island statute, requiring malpractice plaintiffs to present, at a preliminary hearing before the judge, “evidence sufficient to raise a legitimate question of liability,” id. at 90, violated Rhode Island malpractice plaintiffs’ federal constitutional right to equal protection of the laws. Applying the rational relationship test, the court upheld the trial court’s finding that there was no malpractice “crisis” at the time of the legislative enactment, and concluded: “Absent a crisis to justify the enactment of such legislation, we can ascertain no satisfactory reason for the separate and unequal treatment that it imposes on medical malpractice litigants.” Id. at 93.

However, Boucher’s premise, that only a “crisis” can give rise to a legitimate state interest in attempting legislative solutions to malpractice insurance coverage problems, is open to question. Moreover, unlike Boucher, plaintiff here has not presented facts to indicate that the problem perceived by the Maine legislature in 1977 was illusory. Indeed, Maine was certainly not alone among the states in perceiving a need for legislative action to avert the problems of health care cost and availability resulting from rising malpractice insurance rates. See generally Note, Medical Malpractice Statute of Repose: An Unconstitutional Denial of Access to the Courts, 63 Neb.L.Rev. 150, 160-62 (1983).

Next, it is necessary to consider whether it was reasonable for the Maine Legislature to believe that the differentiation between medical malpractice plaintiffs and other personal injury plaintiffs, i.e., the requirement that the former group alone provide a pre-litigation notice, would promote the stated purpose of maintaining the availability of quality health care at an affordable cost throughout the state.

In its report to the legislature the Commission stated:

Notice of claim. The Commission believes that any reasonable measure that helps weed out doubtful claims and encourages the settlement of meritorious ones is beneficial to the parties and public. In malpractice claims this may be the result if there is a mandatory waiting period prior to suit in which negotiations may take place.

Commission Report xxiii. The bill submitted to and enacted by the legislature included a mandatory 90-day pre-litigation notice “[i]n order to encourage settlement of disputes,” L.D. 727 (Statement of Facts) 108th Me.Legis., 1st Reg.Sess. 21 (1977).

The Maine Law Court stated in Dougherty v. Oliviero, 427 A.2d 487 (Me.1981), that “[t]he purpose of the notice-of-claim requirement is to provide a mandatory 90-day waiting period during which medical malpractice claims can be settled without litigation through the use of the dispute resolution procedures established by the Maine Health Security Act. id. at 489, that is, “a period of time during which the parties can attempt to settle the claim through nonjudicial procedures before they encounter the expense, time limits, and other pressures associated with discovery and preparation for trial,” id. at 490. See also Michaud v. Northern Maine Medical Center, 436 A.2d 398, 401 (Me.1981).

In Givertz v. Maine Medical Center, 459 A.2d 548 (Me.1983), the Maine court once again articulated the purpose of the pre-litigation notice provision:

The Legislature, in 24 M.R.S.A. § 2903, intended to implement the recommendation of the Pomeroy Commission which viewed the mandatory ninety-day notice of medical malpractice claims prior to the commencement of any action for damages on account thereof as a reprieve period before the parties locked horns in a very sensitive judicial proceeding, the Commission believing that such waiting period prior to suit would be beneficial to the parties and the public by helping weed out doubtful claims and encouraging the settlement of meritorious ones.

Id. at 550. See also Taylor v. Hill, 464 A.2d 938, 945 (Me.1983).

Plaintiff contends that the pre-litigation notice requirement does not in fact help weed out doubtful claims or encourage the settlement of meritorious ones and thus cannot be said to be reasonably related to its purported objective. Plaintiff points to (1) other disincentives discouraging the litigation of unfounded claims, including exposure to liability for malicious prosecution and contingent fee arrangements; (2) the option of the malpractice claimant to settle his or her claim prior to suit; (3) the availability of pretrial procedures for settling claims or disposing of meritless claims; and (4) “substantial evidence suggesting” that, as a tactical device, insurers wait until immediately prior to trial to settle claims.

In evaluating these contentions the court is mindful that the requirement of equal protection is satisfied if the Maine Legislature “could rationally have decided” that the notice provision either itself or in combination with other provisions “might” help to accomplish a legitimate objective, Minnesota v. Cloverleaf Creamery Co., 449 U.S. 456, 466, 101 S.Ct. 715, 725, 66 L.Ed.2d 659 (1981).

The presence of other disincentives to pursuing unfounded claims does not negate the potential benefits of the additional disincentive that may obtain from affording an opportunity for a pre-litigation response to the malpractice claim, i.e. the potential for (1) exposing and resolving unfounded claims prior to the commencement of costly litigation and (2) arriving at prelitigation settlements of nonfrivolous claims not yet inflated by litigation costs. Similarly, the availability of court procedures for disposing of or settling claims does not avoid the “expense, time limits, and other pressures associated with [litigation],” Dougherty, supra, 427 A.2d at 489; nor does it negate the usefulness of the notice provision in providing further inducement and occasion for the early resolution of claims.

Although, as plaintiff suggests, a malpractice claimant has always been able to pursue settlement prior to commencing suit, the prelitigation notice requirement insures that malpractice defendants have such an opportunity as well, thus contributing to the prospect for nonjudicial resolution of claims.

Finally, plaintiffs assertions (1) that “insurers” consciously employ the litigation tactic of refusing settlement until immediately prior to or during trial, and (2) that the notice requirement will increase the cost of malpractice litigation, are not supported by any evidence in the record nor do they negate the benefit which will accrue if a substantial number of physicians and insurers are able to settle or otherwise resolve claims without incurring the expense of litigation.

Plaintiff correctly points out that, in Carson v. Maurer, 120 N.H. 925, 424 A.2d 825, 834-35 (1980), the New Hampshire Supreme Court found that a similar pre-litigation notice provision did not “fairly and substantially relate to any legitimate legislative object,” i.e., it bore “no reasonable relationship to the stated purpose of [the statute],” id. 424 A.2d at 834. The court reasoned that “[t]he malpractice defendant gets all the notice he needs when he is served with process ..., because he still has ample time to review the claim and initiate settlement negotiations before the trial begins. Any expenses incurred in doing so would likewise be incurred if the investigatory and settlement process was commenced prior to suit.” Id. However, the fact that there is “ample” time for settlement after litigation has commenced does not mean that there is no conceivable benefit to be gained from providing “a period of time during which the parties can attempt to settle the claim through nonjudicial procedures before they encounter the expense, time limits, and other pressures associated with discovery and preparation for trial,” Dougherty v. Oliviero, 427 A.2d at 490. Moreover, the notice also provides an opportunity for a pre-litigation response to claims and a voluntary panel review of claims, both having the potential of discouraging the filing of groundless suits. Finally, Carson does not explain the factual basis for its conclusion that pre-litigation settlement expenses do not differ from those incurred during litigation; nor does plaintiff here offer any evidentiary support for this proposition.

To be sure, those states which have responded to the medical malpractice problem by mandating arbitration or panel review of claims may have taken a more effective approach toward weeding out frivolous claims and encouraging the settlement of meritorious ones. Accordingly, courts confronted with such statutes have had little trouble concluding that such mandatory review can reasonably be expected to promote the goal of reducing malpractice insurance costs. See Seoane v. Ortho Pharmaceuticals, Inc., 660 F.2d 146, 150 (5th Cir.1981); DiAntonio v. Northampton-Accomack Memorial Hospital, 628 F.2d 287, 291 (4th Cir.1980); Woods v. Holy Cross Hospital, 591 F.2d 1164, 1170-75 (5th Cir.1979) (and cases cited at 1170 n. 11). However, it does not follow that Maine’s pre-litigation notice provision is “wholly irrelevant to the achievement of the State’s objective,” McGowan v. Maryland, 366 U.S. 420, 425-26, 81 S.Ct. 1101, 1104-05, 6 L.Ed.2d 393 (1961), merely because the state provides only for voluntary panel review. Indeed, the Maine Legislature, and the Commission upon whose recommendation the legislature relied, saw some value in simply providing a “waiting period prior to suit in which negotiations may take place,” Commission Report, xxiii, for the purpose of encouraging settlement of disputes; and it has not been demonstrated that the legislature’s assessment was unreasonable.

B. Due Process

Plaintiff does not explain, through argumént or reference to authority, how section 2903 violates “due process.” Assuming that it is plaintiff's contention that the statutory imposition of a pre-litigation notice requirement denies substantive due process, it is well-established that legislative acts adjusting economic burdens and benefits carry a presumption of constitutionality and that the person challenging the enactment must establish that the legislature has acted in an “arbitrary and irrational” manner. Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15, 96 S.Ct. 2882, 2892, 49 L.Ed.2d 752 (1976); Williamson v. Lee Optical Co., 348 U.S. 483, 487-88, 75 S.Ct. 461, 464, 99 L.Ed. 563 (1955).

The court has already concluded, in the context of plaintiffs equal protection challenge to section 2903, that legislative enactment of the pre-litigation notice requirement and waiting period is rationally related to the legitimate objective of assuring the continued availability of affordable health care in the face of increasing insurance costs attributable, in part, to litigation costs.

In view of the minimal burden imposed by service of the pre-litigation notice and the ensuing 90-day delay in filing suit, the legislature cannot be said to have acted arbitrarily or irrationally in concluding that the pre-litigation notice requirement was a reasonable approach to reducing litigation costs. See Seoane v. Ortho Pharmaceuticals, Inc., 660 F.2d 146, 151 (5th Cir.1981); Woods v. Holy Cross Hospital, 591 F.2d 1164, 1175-77 (5th Cir.1979). Of course, it is true that plaintiff’s noncompliance with the notice requirement bars recovery. But it is not the sometimes harsh effects of noncompliance with the notice requirement, but the burden of compliance, that is to be considered in weighing the burdens imposed by the statute.

C. Me. Const, art. I, § 19

Finally, plaintiff argues that section 2903 violates article I, section 19 of the Maine Constitution, which provides: “Every person for an injury done him in his person, reputation, property or immunities, shall have remedy by due course of law; and right and justice shall be administered freely and without sale, completely and without denial, promptly and without delay.” Plaintiff essentially contends that the 90-day delay inherent in the pre-litigation notice requirement does not allow for the administration of justice “promptly and without delay,” relying on State ex rel Cardinal Glennon Hospital v. Gaertner, 583 S.W.2d 107 (Mo.1979), involving a similar Missouri constitutional provision. However, the Missouri statute in Gaertner, unlike the Maine Health Security Act, mandated a review of the claim by a review panel and a consequent delay of up to six months prior to suit. Moreover, other state courts have rejected, as meritless, the contention that mandatory pre-litigation panel review, involving substantial delay, violates similar state constitutional provisions. Linder v. Smith, 629 P.2d 1187, 1190-91 (Mont.1981); Johnson v. St. Vincent Hospital, Inc., 273 Ind. 374, 404 N.E.2d 585, 594-96 (1980); Everett v. Goldman, 359 So.2d 1256, 1268-69 (La.1978); Attorney General v. Johnson, 282 Md. 274, 385 A.2d 57, 71 (1978); Prendergast v. Nelson, 199 Neb. 97, 256 N.W.2d 657, 663-65 (1977).

Limitations Period for Malpractice Claims

In addition to his equal protection challenge to 24 M.R.S.A. § 2903, plaintiff belatedly brings a similar challenge to the two-year limitations period applicable to medical malpractice actions under 14 M.R. S.A. § 753, contending that it impermissibly distinguishes between victims of medical malpractice and victims of other types of negligence.

In 1931 the Maine Legislature included actions for “malpractice of physicians and all others engaged in the healing art” with certain other tort actions governed by the two-year limitations period, see 14 M.R.S.A. § 753, rather than the residual six-year limitations period, see 14 M.R.S.A. § 752. P.L.1931 Ch. 62.

Once again the court looks “only to whether there is a rational relationship between the classification and some legitimate governmental purpose in determining whether the statute violates the equal protection clause,” Brubaker v. Cavanaugh, 741 F.2d 318, 321 (10th Cir.1984). See Cournoyer v. Massachusetts Bay Transportation Authority, 744 F.2d 208, 212-13 (1st Cir.1984); Cadieux v. International & Telegraph Corp., 593 F.2d 142, 145 (1st Cir.1979).

Statutes of limitations serve the policy of discouraging stale and fraudulent claims where the loss of evidence makes the proof more difficult or costly. See Clark v. Gulesian, 429 F.2d 405, 406 (1st Cir.1970), cert. denied, 400 U.S. 993, 91 S.Ct. 461, 27 L.Ed.2d 441 (1971); Fitz v. Dolyak, 712 F.2d 330, 333 (8th Cir.1983). The legislative decision that physicians and other health care providers should be accorded the benefit of a limitations period shorter than the six-year residual limitations period applicable to most negligence actions under Maine law may have been arrived at on the basis of the legislature’s perception of (1) the significantly greater liability exposure to which such health care professionals are subjected in their performance of an essential human service or (2) a greater need, in the interests of accurate factfinding, for prompt medical investigation of the source of ailments or injuries attributed to a physician’s negligent treatment.

There being a rational basis upon which to distinguish between medical malpractice cases and other negligence cases, 14 M.R. S.A. § 753 does not deny equal protection. See Brubaker v. Cavanough, 741 F.2d 318, 321 (10th Cir.1984) [Kansas four-year limitations period for actions against health care providers (compared with ten-year period for claims against other tortfeasors) rationally related to legislative attempt to reduce cost and unavailability of malpractice insurance largely attributable to length of period of exposure to liability]; Hargett v. Limberg, 598 F.Supp. 152, 156-58 (D.Utah 1984) [rejecting, under rationale similar to Brubaker, equal protection challenge to a statute distinguishing minors who have malpractice claims from minors who have other types of claims, by excluding the former from the normal tolling provision applicable to minors]; cf. Cournoyer v. Massachusetts Bay Transportation Authority, 744 F.2d 208, 212 (1st Cir.1984) [Massachusetts statute of repose, barring actions for injury due to real estate improvement six years after the act of performing the improvement, rationally related to legitimate state objective]; Cadieux v. International Telephone & Telegraph Corp., 593 F.2d 142, 145 (1st Cir.1979) [R.I. two-year limitations period for wrongful death actions (as compared to longer limitations period for personal injury actions) ]; but cf. Heath v. Sears, Roebuck & Co., 123 N.H. 512, 464 A.2d 288 (1983) [holding that N.H. three-year limitations period for products liability actions (as compared to six-year limitations period for other personal injury actions) denies equal protection, because providing special protection to manufacturers is not a legitimate legislative objective].

III. CONCLUSION

Failure to serve the pre-litigation notice of claim required by 24 M.R.S.A. § 2903 within the two-year limitations period of 14 M.R.S.A. § 753 mandates dismissal of plaintiff's action. Givertz v. Maine Medical Center, 459 A.2d 548, 554 (Me.1983).

The section 2903 notice requirement is applicable in this diversity action and Givertz controls even though the two-year limitations period expired prior to the date of that decision. Section 2903 does not deny equal protection or due process, nor does it violate Me. Const, art. I, § 19; and the two-year limitations period for medical malpractice actions does not violate the equal protection clauses of the federal and state constitutions.

Accordingly, defendants’ motion to dismiss, treated as a motion for summary judgment, is hereby GRANTED, and the Clerk is directed to enter judgment for the defendants dismissing all claims.

SO ORDERED.

      . Under Maine law, except in foreign-object surgical malpractice cases, the two-year period of limitations in medical malpractice actions begins running at the time of the negligent act. See Box v. Walker, 453 A.2d 1181, 1183 (Me.1983); Myrick v. James, 444 A.2d 987 (Me.1982). Here it is alleged that the negligent treatment occurred on October 11, 1980, and there is no allegation that the alleged malpractice involved the failure to remove a foreign object from plaintiff's body after surgery. Accordingly, the December 6, 1982 "notice of claim," even if sufficient, was untimely.

      . Every person, for an injury done him in his person, reputation, property or immunities, shall have remedy by due course of law; and right and justice shall be administered freely and without sale, completely and without denial, promptly and without delay.

      . Although Reed, involving a differentiation on the basis of gender, see also Mississippi University for Women v. Hogan, 458 U.S. 718, 102 S.Ct. 3331, 73 L.Ed.2d 1090 (1982); Craig v. Boren, 429 U.S. 190, 97 S.Ct. 451, 50 L.Ed.2d 397 (1976), adheres to the general rubric of the rational relationship test, one commentator discerned, in Reed, a shift toward a so-called "means-oriented scrutiny test.” Gunther, The Supreme Court, 1971 Term-Forward: In Search of Evolving Doctrine on a Changing Court: A Model for Newer Equal Protection, 86 Harv.L. Rev. 1, 20-24 (1972). In Professor Gunther’s view the requirement of a “substantial relationship” between the legislation and its purported object requires the state to provide greater justification for its classification than is required, in practice at least, under the rational relationship test, the difference being that under the former, unlike the latter, the reviewing court will not hypothesize purposes for the classification that were not previously asserted. Id. at 20-21.
      The "substantial relation" language of Reed has also been viewed as requiring a “close fit” between the legislative means and ends, thus involving a greater degree of scrutiny of the factual assumptions underlying the legislation. See L. Tribe, American Constitutional Law § 16.30, at 1082-83 (1978).
      Assuming the applicability of a more stringent, intermediate level of scrutiny in some cases, commentators have noted that its application appears to have been limited by the Supreme Court to cases involving "a quasi-fundamental right or an 'almost’ suspect classification.” E.g. Redish, Legislative Response to the Medical Malpractice Insurance Crisis: Constitutional Implications, 55 Tex.L.Rev. 759, 773 (1977). Moreover, even the approach advocated by Mr. Justice Marshall, that of evaluating the interest infringed and applying an appropriate sliding scale level of scrutiny, see, e.g., City of Cleburne v. Cleburne Living Center, — U.S. —, —, 105 S.Ct. 3249, 3263, 87 L.Ed.2d 313 (1985) (Marshal, J. dissenting), is unavailing to plaintiff here inasmuch as the interest infringed by the pre-litigation notice requirement, the possible ninety-day delay in recovery, is rather insignificant, see Note, California's Medical Injury Compensation Reform Act: An Equal Protection Challenge, 52 So.Cal.L.Rev. 829, 962-66 (1979), thus requiring only a minimal degree of scrutiny.

      . Examining the other cases cited by the plaintiff, in Johnson v. St. Vincent Hospital, Inc., 273 Ind. 374, 404 N.E.2d 585 (1980), the court stated that in order to withstand an equal protection challenge a statute requiring pre-litigation panel review of malpractice claims must meet the standard stated in Reed v. Reed, supra. However, the court then restated the test to be whether there was any "conceivable basis which might have supported the classification,” id. 404 N.E.2d at 597, and upheld the statute.

        Arneson v. Olsen, 270 N.W.2d 125 (N.D.1978), and Jones v. State Board of Medicine, 97 Idaho 859, 555 P.2d 399 (1976), both considered state statutes which limited the amount recoverable in malpractice actions. Arneson required a "close correspondence between statutory classification and legislative goals," 270 N.W.2d at 133. Jones required that the legislation "substantially further some specifically identifiable legislative end,” 555 P.2d at 407, but did not decide the equal protection question, choosing to remand the case to the trial court for further factual findings. Contra Sibley v. Board of Supervisors of University of Louisiana, 462 So.2d 149, 156 (La.1985) [applying rational relationship test]. Moreover, the legislative encroachment on individual rights at issue in Arneson and Jones, limiting the amount of recovery in malpractice actions notwithstanding the actual damages suffered, is clearly more onerous than is the minor delay (90 days) imposed by Maine’s pre-litigation notice requirement, the former directly impinging, without recourse, the individual’s interest in damages recovery.

      . The Act established a voluntary procedure for the review of malpractice claims by an "advisory panel,” 24 M.R.S.A. §§ 2801-2809, and a procedure for the voluntary submission of malpractice claims to binding arbitration, 24 M.R.S.A. §§ 2701-2715 (repealed effective Jan. 1, 1983).
      The panel review procedure provides for the submission of cases as follows:
      § 2803. Submission of cases 1. Written requests; signatures; content. Any attorney may submit a case of asserted medical malpractice for the consideration of the panel by a request in writing signed by both the party and his attorney and delivering the original and 6 copies thereof to the chairman of the panel. This written request shall contain the following:

      A. A brief statement of the facts of the case, showing the persons involved, the dates and the circumstances, so far as they are known, of the alleged act or acts of malpractice;
      B. A statement authorizing the panel, by its chairman, to obtain all medical and hospital records and information pertaining to the incident complained of, which statement shall be accompanied by true copies of any and all medical and hospital records then in the possession of said party or his attorney, and which, for only the purpose of the panel’s consideration of the matter, waives privilege as to the contents of such records. The statement shall not be construed as waiving the privilege for any other purpose or any other contest, in or out of court;
      C. A statement that the deliberations and the discussions of the panel and of any member of the panel in the deliberation of the case shall be confidential and privileged, and that no panel member will be asked in any action to testify concerning the deliberations, discussions and internal proceedings of the panel;
      D. A statement that the party or attorney understands and subscribes to the purpose of screening medical malpractice cases and has advised his client thereof and that the client agrees to the submission of the facts pursuant to the plan;
      E. A request that the panel consider the merits of the claim and render its report. 2. Notice to physician; agreement; waiver. Upon receipt of the request, the chairman shall immediately forward a copy to the physician involved who, if he agrees to the submission, shall forthwith forward to the chairman a statement as provided in subsection 1, paragraphs B, C, D and E. Neither the party making the original request pursuant to subsection 1 nor his attorney shall be bound by any waiver or agreement made thereunder until the chairman shall have received from the physician a like written waiver or agreement.
      24 M.R.S.A. § 2803 (emphasis added). As presently worded, the statute appears to contemplate the submission of requests for review by claimants alone, rather than by either claimants or physicians.

      . In response to defendants’ suggestion at oral argument on June 24, 1983 that Givertz mandated dismissal of the complaint, both parties, pursuant to court order, filed supplemental memoranda dated July 15, 1983 and reply memoranda dated July 29, 1983. No mention was made of plaintiff’s constitutional challenge to 14 M.R. S.A. § 753 until the issue was raised in his reply brief.

      . In Clark v. Gulesian, supra, the First Circuit held that the application of Maine’s medical malpractice statute of limitations to bar a "foreign-object” malpractice action not commenced within two years of the date of the surgery in question, as required under the then-existing rule defining the point when a cause of action "accrues,” Tantish v. Szendey, 158 Me. 228, 182 A.2d 660 (1962), overruled Myrick v. James, 444 A.2d 987 (Me.1982), did not deprive plaintiff of equal protection or due process. The court noted that
      the state may reasonably recognize that a defendant has an interest in repose, and in the avoidance of stale claims, however free from fault the claimant’s delay may be. Such a conclusion does not deprive the plaintiff of any constitutional right to fair or equal treatment.

        Id. at 406.

        Fitz v. Dolyak, supra, rejected an equal protection challenge to an Iowa statute which limits, to six years from the date of the negligent act, the period for bringing medical malpractice claims involving diagnosis and treatment while applying no such limitation to "foreign-object” malpractice cases, the latter being maintainable within two years of the time the injury should have been discovered without regard to the six-year statute of repose. The court found that the provision of a potentially longer period for bringing "foreign-object” cases is rational because such claims are more easily verified even with the passage of time, while other malpractice claims are more apt to become stale.


source: Caselaw Access Project

author: ARONOVITZ, District Judge.

license: Public Domain

text:
    DOCTORS GENERAL HOSPITAL, INC., Plantation, Florida, Plaintiff, v. Margaret M. HECKLER, Secretary of the Department of Health and Human Services, Defendant.
    No. 84-6684-Civ-ARONOVITZ.
    United States District Court, S.D. Florida.
    July 18, 1985.

      Richard C. Klugh, Jr., Miami, Fla., for plaintiff.
    Gerard Keating, Daytona Beach, Fla., Marc Fagelson, Asst. U.S. Atty., Miami, Fla., for defendant.
   ARONOVITZ, District Judge.

THIS CAUSE was considered upon the Plaintiff’s Motion for Judgment on the Pleadings, and the Defendant’s Motion to Dismiss and in the alternative for Summary Judgment. The Court, having examined the Motions, the memoranda of law submitted in support thereof and in opposition thereto, the applicable law, and having heard and carefully considered the oral argument of counsel at a hearing on June 3, 1985, and being otherwise fully advised in the premises, it is thereupon

ORDERED AND ADJUDGED that for the reasons which are set forth herein, the Defendant’s Motion to Dismiss and in the alternative for Summary Judgment be, and the same is hereby, DENIED, and the Plaintiff’s Motion for Judgment on the Pleadings be, and the same is hereby, GRANTED IN PART and DENIED IN PART.

To the extent that the Plaintiff seeks review and a hearing before the Provider Reimbursement Review Board for the purpose of making a final administrative determination of the “Hospital-Specific Portion” of Plaintiff’s transition period prospective payment rate, the Motion is GRANTED. At this juncture, however, there is not yet a justiciable controversy regarding 42 CFR § 405.474(b)(3)(i)(C)(2), and to the extent that Plaintiff seeks a ruling from the Court that this regulation is arbitrary and capricious, the Motion for Judgment on the Pleadings is DENIED. If the Provider Reimbursement Review Board adjusts Plaintiff’s base-year cost figures and thereby redetermines the “Hospital-Specific Portion” of Plaintiff’s transition period prospective payment rate, and at that time the Secretary’s regulations still preclude such adjustment from having any retroactive effect during the three year transition period, Plaintiff may refile this action and seek appropriate judicial review.

Background

This case finds its origin in the new “Prospective Payment System” (hereinafter “PPS”) for reimbursing health care providers under Part A of the Medicare Act, 42 U.S.C. § 1395 et seq. Prior to October 1,1983, qualified hospitals and other Medicare providers were reimbursed, pursuant to legislation enacted by Congress, in accordance with the lesser of their “reasonable cost of services” and “customary charges with regard to services.” 42 U.S.C. § 1395f(b). At the close of each fiscal year, an intermediary such as Blue Cross and Blue Shield would analyze the hospital’s cost reports, conduct an audit, and make a determination as to what should be the reimbursement to the provider for the particular year.

Congress established an administrative appellate tribunal, the Provider Reimbursement Review Board (hereinafter “PRRB”), to review the fiscal intermediary’s reimbursement determination, called a “Notice of Program Reimbursement” (hereinafter “NPR”). The NPR played a critical role under the old “reasonable cost” system of reimbursement, and was the fiscal intermediary’s final determination of the amount of reimbursement due to a particular provider. The PRRB did not have jurisdiction under § 1395oo(a) to review a reimbursement determination until the fiscal intermediary had issued an NPR.

Congress has mandated a new formula for Medicare hospital reimbursement which was effective on October 1, 1983. Pub.L. No. 98-21. Beginning in 1986, there will no longer be “reasonable cost” reimbursement to health care providers. Instead, providers will be reimbursed on a “prospective payment” basis. Each Medicare patient, upon entering a hospital, will be diagnosed with one of 467 Diagnostic Related Groupings (hereinafter “DRG”). See 42 U.S.C. § 1395ww(d). Each DRG is assigned a number which is either greater or less than the number one, depending on the severity of the illness. The DRG number or factor is then multiplied by one specific dollar figure which represents the national average per patient cost of medical treatment. For example, assuming that the illness pneumonia is assigned the DRG factor 1.1029, and the uniform national multiplier is $3000.00, all health care providers nationwide will receive the sum total of $3000.00 X 1.1029, which is $3,308.70, for all Medicare pneumonia patients. The hospital will receive $3,308.70 if the patient stays one day or fifty days, and no matter how much it actually costs the particular hospital.

In order to ease the transition from the “reasonable cost” method of reimbursement to the PPS, Congress mandated a three year transition period. The administrative regulation implementing the transition period is codified at 42 CFR § 405.474. For each fiscal year between 1983 and 1986, the dollar multiplier figure is not a single nationwide figure, but is determined in accordance with a mix of two figures; a national figure, called the “federal portion,” and a figure unique to each particular provider called the “hospital specific portion.” In other words, recognizing the burden which would be imposed on hospitals if the PPS, employing standardized DRG’s and a national per-patient rate were implemented immediately, a portion of the respective hospitals’ reasonable costs were allowed to be figured into the dollar multiplier for the first three years of PPS.

During the transition period, the hospital specific portion becomes a lesser portion of the mix, and the federal portion becomes more significant. Thus, for 1983, the hospital specific portion comprised 75% of the dollar multiplier figure, and the federal portion 25%. For 1984, the two figures were mixed 50%-50%, and for 1985, the hospital specific portion comprised 25%, and the federal portion 75%. Finally, beginning in 1986 the PPS will be in full effect,' and the federal portion will be 100% of the dollar multiplier figure.

“Hospital Specific Portion”

The instant case centers around the manner in which the “hospital specific portion” is determined under 42 CFR 405.474(b)(l)(i). The fiscal intermediary is required under the regulation to make an “estimate” of the hospital’s costs during a base year, in most instances 1982. It is not, however, the 1982 NPR (i.e., the fiscal intermediary’s “final determination” for 1982 reimbursement purposes) which provides the basis for determining the “hospital specific portion.” Rather, it is the fiscal intermediary’s pre-NPR “estimation” of 1982 base-year costs, made in accordance with the aforementioned regulation and HCFAR Form 1007, which forms the basis for determining the hospital specific portion of the PPS multiplier during the three year transition period. The parties refer to this pre-NPR 1982 or base year estimate which governs the determination of the hospital specific portion as the 1982 Target Amount.

Issues Presented

Fiscal year 1982 thus has special significance. The “reasonable cost” determination for that year not only provides a basis for reimbursement in 1982, but also provides the basis for determining the “hospital specific portion” of PPS reimbursement during the 1983-1986 transition period. Plaintiff in the instant case alleges that while an NPR has not been issued for 1982, the Secretary’s determination of its 1982 Target Amount is incorrect and fails to take into account certain laboratory costs. Plaintiff received notice of its 1982 Target Amount on January 3, 1984. {See Plaintiff’s Motion at 1119).

As stated above, under the old system, Plaintiff would have to wait until an NPR was issued to obtain PRRB review of the fiscal intermediary’s reimbursement determination. Plaintiff contends, however, that because of the 1982 Target Amount’s role during the transition period, PRRB review of the fiscal intermediary’s base-year cost “estimation” should not have to await the issuance of an NPR.

In the instant case, Plaintiff seeks two rulings by the Court. First, Plaintiff seeks a ruling that the 1982 Target Amount is a “final determination” by the Secretary which is reviewable by the PRRB under § 1395oo (a). Second, as is discussed infra, Plaintiff seeks a ruling by the Court declaring arbitrary and capricious one of the regulations which implements the PPS transition period.

Under 42 U.S.C. § 1395oo, an appeal to the PRRB from a “final determination of the Secretary as to the amount of the payment [under PPS]” is available so long as a provider files its request for a hearing before the PRRB within “180 days after notice of the Secretary’s final determination.” (emphasis supplied). With respect to the first remedy which Plaintiff seeks, then, the central question presented is when is a “determination” of a provider’s “hospital-specific portion” final for purposes of seeking PRRB review?

Plaintiff argues that the 1982 Target Amount is a “final determination” for purposes of PRRB review under § 1395oo because under the Secretary’s own regulations the 1982 Target Amount governs the hospital specific rate during the transition period. The Defendant’s view was unclear until the Secretary issued Health Care Financing Administration Ruling (HCFAR) 84-1, 49 Fed.Reg. 22, 413-15 (1984). Indeed, in the instant case Plaintiff contends that the PRRB invited Plaintiff to submit the necessary documents preparatory to review of the 1982 Target Amount, implying that it would grant a hearing pursuant to § 1395oo. HCFAR 84-1, however, states that the Target Amount is not a “final determination by the Secretary” for purposes of § 1395oo, and review by the PRRB of the intermediary’s base year cost estimation is not' available until an NPR is issued. Plaintiff, therefore, will not be able to obtain PRRB review of its “prospective” hospital specific rate until after there is a final determination of its reimbursement for 1982. After HCFAR 84-1 was issued, the PRRB- denied Plaintiff’s request for a hearing, and Plaintiff filed the instant action.

Jurisdiction

The threshold question which must be addressed is the extent of this Court’s subject matter jurisdiction in this case. Plaintiff argues that with the denial of a hearing by the PRRB, Plaintiff has exhausted its administrative remedies. According to Plaintiff, there has been a final decision by the Board, and its claims are subject to judicial review under § 1395oo (f)(1). To the extent that Plaintiff seeks review of the PRRB’s decision not to exercise jurisdiction, Plaintiff is correct. In Athens Community Hospital, Inc. v. Schweiker, 686 F.2d 989 (1982), the District of Columbia Circuit Court of Appeals was very clear that “if the threshold requirements of 42 U.S.C. § 1395oo(f)(l) are met, a court has jurisdiction to review a decision by the PRRB that it lacks jurisdiction to review a determination of the fiscal intermediary.” Id. at 994.

Plaintiff, however, seeks further relief upon which the court does not have jurisdiction to rule at this juncture. Plaintiff makes a strong argument that one of the regulations governing the transition period should be declared arbitrary and capricious. Upon examining 42 CFR § 405.-474(b)(3)(i)(C)(2), the Court agrees that this regulation, when considered with the Secretary’s interpretive ruling HCFAR 84-1, presents a troubling set of consequences.

Assuming that Plaintiff ultimately prevails before the PRRB and obtains a redetermination of its 1982 reimbursement, any adjustment of the “hospital specific portion” of Plaintiffs PPS transition period rates will not have any retroactive effect. Under 42 CFR § 405.474(b)(3)(i)(C)(2), while adjustments of the hospital specific portion are allowed, such adjustments would only affect the remaining years of the transition period. If such revisions or adjustments to the base-year cost figure were obtained in 1983, this regulation would present little problem. But given the Secretary’s interpretive ruling HCFAR 84-1 that an NPR must be issued before the PRRB has jurisdiction to review base-year PPS determinations, there may be revisions and adjustments to the “hospital specific portion” after 1986, the last year of the transition period. Outside of their effect on reimbursement for 1982, such revisions and adjustments would have no effect at all on reimbursement during the transition period under 42 CFR § 405.474(b)(3)(i)(C)(2).

Counsel for the Government attempted to defend this seemingly unfair regulation on the merits, but the Court finds more persuasive the jurisdictional arguments which were made. As is explained infra, the Court disagrees with HCFAR 84-1 and herein remands the case to the PRRB for the hearing on Plaintiff's PPS transition period rates which Plaintiff requested. The PRRB may or may not agree with Plaintiff that its 1982 Target Amount improperly disallowed certain laboratory costs, and make the appropriate adjustments. Until the PRRB’s review, then, the impact of 42 CFR 405.474(b)(3)(i)(C)(2) on the Plaintiff is not “direct and immediate” but is hypothetical and uncertain. There is not yet a “case or controversy” under this regulation which is ripe for adjudication. Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1966). The Court, therefore, has denied that portion of Plaintiff’s Motion for Judgment on the Pleadings which seeks a ruling declaring invalid 42 CFR 405.474(b)(3)(i)(C)(2).

PRRB Review

Having held, supra, that this Court has jurisdiction to review the PRRB’s denial of a hearing, the question whether the PRRB’s decision was correct can now be addressed. Defendant cites a number of cases which hold that an NPR must be issued before the PRRB may review a reimbursement determination. These cases, however, do not address PRRB review in the context of the Prospective Payment System. The Court, therefore, views the issue as follows. On one hand is the Secretary’s interpretive ruling HCFAR 84-1 which states that a PPS determination is not final for purposes of PRRB review under § 1395oo until the intermediary has issued an NPR. The Courts which have interpreted the same provision, however, have come to a different conclusion and in two cases have specifically rejected and declared invalid HCFAR 84-1. In Redbud Hospital District v. Heckler, CCH Medicare and Medicaid Guide 34,084 (N.D.Cal. July 30, 1984) and in Tucson Medical Center v. Heckler, 611 F.Supp. 823 (D.D.C.1985) two district courts directed that the PRRB grant á review of a PPS Target Amount determination without awaiting the issuance of an NPR and specifically rejected the Secretary’s interpretive ruling.

In Tucson Medical Center, the Court stated that “the reasoned unappealed decision of the Redbud court is entitled to greater deference than the ipse dixit ruling of the Secretary,” Id. at 827, and in the instant case, this Court agrees. First, in light of the Secretary’s regulation discussed above, requiring a provider to await the issuance of an NPR for 1982 before PRRB review may be obtained is patently unfair. The fact that the Secretary does not give base-year adjustments retroactive effect should, if anything, necessitate the quickest and earliest review by the PRRB as is possible. In the instant case, for example, Plaintiff may not receive an NPR for 1982 until after the 1983-1986 transition period has expired. If the PRRB agrees that the fiscal intermediary improperly disallowed certain costs, Plaintiff will have been improperly reimbursed for three years and, because of 42 CFR § 405.-474(b)(3)(i)(C)(2), will have no remedy. The Court believes that the Secretary cannot have it both ways. If transition period adjustments will not have any retroactive effect, then PRRB review of a base-year Target Amount determination should be as close to the commencement of the transition period as is possible.

Second, as Plaintiff and the Courts in the two above-cited cases point out, the Secretary’s position regarding the “finality” of an intermediary’s base year costs estimate clearly has been inconsistent. Before HCFAR 84-1, the Secretary promulgated several regulations and interpretations which treated the intermediary’s determination as “final” for several other purposes. After HCFAR 84-1, as the Court in Tucson Medical Center pointed out, the Secretary’s more recently promulgated regulations also treat the intermediary’s determination as final: “The intermediary’s estimate of base year costs and modifications thereto is final and may not be changed after the first day of the first cost reporting period beginning on or after October 1, 1983 ...” 50 Fed.Reg. 12,753 (1985)(to be codified at 42 CFR § 412.71(d)). With the exception of PRRB review, jurisdiction under § 1395oo, then, the intermediary’s target amount determination has been interpreted by the Secretary as “final” for most administrative purposes.

Conclusion

In accordance with the two above-cited decisions, this Court does not believe that the PPS determination at issue here should be controlled by NPR review provisions fashioned under the old reasonable cost method of reimbursement. In 1983 Congress made certain additions to § 1395oo(a) which clearly contemplate two different kinds of appeal to the PRRB. One begins when the intermediary issues an NPR; the other, when the intermediary issues a notice of what will be paid under the PPS. As the Court in Tucson Medical Center stated, “the Secretary’s proffered interpretation [i.e., HCFAR 84-1] would reduce the 1983 additions to section § 1395oo(a) to mere surplusage ... Congress patently did not impose the appeal mechanism for the cost reimbursement system on the new prepayment system.” Id. at 8. Plaintiff in the instant case has received a target amount determination for 1982, and therein is the Secretary’s “final determination” for purposes of PRRB review under § 1395oo.

It is in accordance with the aforegoing

ORDERED AND ADJUDGED that Defendant’s Motion to Dismiss and for Summary Judgment be, and the same is hereby, DENIED, and Plaintiff’s Motion for Judgment on the Pleadings be and the same is hereby GRANTED IN PART and DENIED IN PART as indicated hereinabove. This case is hereby REMANDED to the Secretary of the Department of Health and Human Services for review forthwith by the PRRB of Plaintiff’s 1982 Target Amount for the purpose of making a final administrative determination of the “hospital specific portion” of Plaintiff’s transition period prospective payment rate. If any adjustments are made by the PRRB and regulations are still in effect which deny such adjustments retroactive effect, Plaintiff may seek appropriate judicial review, including a ruling that such regulations are arbitrary and capricious.

        See 49 Fed.Reg. 253 (1984); 42 CFR § 405.-474(b)(l)(iv); Medicare Provider Reimbursement Manual, Part 1, HCFA Pub. 15-1 (May 1983) at 1, 28-7 & 28-14, cited in Tucson Medical Center at p. 8.


author: CAFFREY, Chief Judge.

text:
    UNITED STATES of America, Plaintiff, v. Lawrence F. BRETTA, Defendant.
    Crim. No. 84-262-C.
    United States District Court, D. Massachusetts.
    July 18, 1985.
   MEMORANDUM AND ORDER

CAFFREY, Chief Judge.

This matter came before the Court on motions to vacate or reduce the sentence of Lawrence F. Bretta, former Regional Administrator of the United States General Services Administration. One motion was filed by defendant’s attorney, William S. Brown, Esq., and a second motion was filed pro se by Mr. Bretta himself.

On November 20, 1984, after pleading guilty to one count charging extortion, 18 U.S.C. § 1951, defendant was sentenced to four years in the custody of the Attorney General. In his pro se motion, defendant provides no information not already known to the Court at the time sentence was imposed other than his statement that, during incarceration, he has maintained an excellent work record and has voluntarily attended numerous rehabilitative and educational programs.

Mr. Bretta also makes a representation that he believed that the Court sentenced him “with the intent that he be incarcerated for a period of time reflected by the ‘Guidelines’ prevailing in his case, as established by the United States Parole Commission; those being 14-20 months.” Defendant also states that he “plead Guilty with the assumption that his sentence would mandate his service of no more than 14-20 months.”

The government, in its opposition to defendant’s motions, correctly points out that “there is no basis in the record for the defendant’s ‘belief’ set forth in paragraph 8 of his pro se motion, and that the defendant’s ‘assumption’ mentioned in paragraph 9 thereof does not afford a ground for relief.” I note for the record that, in the course of accepting a guilty plea from Mr. Bretta on October 29, 1984, approximately 3 weeks before sentence was imposed, this Court specifically told Mr. Bretta that, as of that date, the Court, not having had the benefit of a presentence report, had made no decision and had no knowledge of what sentence would actually be imposed if the guilty plea were accepted at the conclusion of that hearing. In light of this Court's explicit statement, Mr. Bretta could not reasonably have believed that this Court intended that he be incarcerated for a period of time reflected by the Guidelines, i.e., 14-20 months. I also rule there is no basis for defendant’s assumption, set forth above, that the sentence would mandate no more than 14-20 months.

The motion filed by counsel for Mr. Bret-ta fails to state any grounds for the allowance thereof despite the provisions in Fed. R.Civ.P. 7(b)(1) that a motion should state the grounds upon which the movant seeks relief.

Since the date on which Mr. Bretta entered his guilty plea, there has been no significant change in his situation other than the fact, which I judicially notice, that the Honorable John J. McNaught adjudicated Mr. Bretta guilty of civil contempt of this Court on July 11, 1985. This contempt order resulted from defendant’s refusal to testify before a federal grand jury after receiving a grant of immunity and after being ordered to testify before that grand jury by the Honorable Rya W. Zobel of this Court. For all of the reasons set forth above, I therefore rule that both motions to reduce sentence should be, and hereby are, denied.


author: MOTLEY, Chief Judge.

text:
    Maurice O'CONNOR, Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    No. 81 Civ. 2430 (CBM).
    United States District Court, S.D. New York.
    July 18, 1985.

      Morris Rubin, Brooklyn, N.Y., for plaintiff.
    Rudolph W. Giuliani, U.S. Atty. for the S.D. of N.Y. by Rosemarie E. Matera, Asst. U.S. Atty., New York City, for defendant.
   OPINION

MOTLEY, Chief Judge.

Plaintiff brings this action pursuant to Section 205(g) of the Social Security Act (the “Act”), as amended, 42 U.S.C. Section 405(g) to review a final determination by the Secretary of Health and Human Services (the “Secretary”). Upon reversal of an award determination by the Administrative Law Judge (“AU”), plaintiff’s application for federal disability insurance benefits was denied. Plaintiff' appeals, alleging that the Secretary’s denial of benefits is unsupported by substantial evidence and is arbitrary and capricious.

Subsequently, both parties have filed motions for judgment on the pleadings under Fed.R.Civ.P. 12(c). On review, the court finds that the Appeals Council erred in relying, in part, on the summary and evaluations of a previously vacated opinion in order to reach a final determination. Reliance on such procedurally tainted evidence may have violated plaintiff’s substantive right to a fair assessment of his claim. Therefore, this case is remanded to the Appeals Council for a new decision based only on relevant evidence.

FACTS

The history of the present action spans more than a decade. In September, 1973, plaintiff Maurice O’Connor, while on duty as a marine engineer for the New York City Fire Department, slipped and fell on a fireboat. As a result, O’Connor suffered back and neck injuries and was reassigned to light duty. In May, 1974, the Fire Department Medical Board determined that the plaintiff was “permanently partially disabled.” O’Connor was thus retired from his twenty year career with the Fire Department and granted an accident disability pension.

In 1975, O’Connor applied for disability benefits and was denied at the initial filing of his application as well as upon reconsideration. The following year, O’Connor requested a hearing before an AU to determine his entitlement to disability benefits under the Act. Plaintiff appeared pro se before AU Aaron Waldman in July, 1976. While numerous doctors reported that O’Connor suffered from physical impairment, no evidence was submitted that the plaintiff’s injuries were totally disabling. AU Waldman thus determined that O’Con-nor was not entitled to benefits and the Appeals Council of the Social Security Administration upheld that decision.

O’Connor renewed his application for benefits in August of 1978. Again, his application was denied. At yet another administrative hearing, held in April, 1980, plaintiff appeared pro se. AU Emmanuel Poverstein considered the case de novo, received medical evidence supportive of plaintiff’s claim, but determined that O’Connor was not disabled within the meaning of the Act. O’Connor’s petition to the Appeals Council for review of this decision was denied.

Plaintiff then filed the instant action seeking judicial review of the Secretary’s decision. The court found that AU Poverstein had conducted an insufficient inquiry into plaintiff’s pro se claim, the result being an inadequate record upon which to base judicial review. In noting that “an administrative law judge has an affirmative duty to assist a pro se litigant in developing his case,” No. 81-2430, slip op. at 9 (S.D.N.Y. September 15, 1982), the court remanded the case for further development. Specifically, the Secretary was ordered to inquire further into 1) the nature, extent and frequency of O’Connor’s pain and 2) whether the plaintiff was capable of performing specific jobs which exist in the national economy.

Following the District Court’s order, the Appeals Council entered its own “Order of the Appeals Council Remanding Court Case to an Administrative Law Judge” on November 29, 1982. The substance of that order was that the Council “vacates its denial of the claimant’s request for review and the decision of the administrative law judge and remands this case to an administrative law judge for further proceedings consistent with the Order of the Court.” (Tr. 200) (emphasis added). By this action, the Secretary did more than simply refer O’Connor’s case for a new hearing. She vacated and rendered a nullity the opinion of AU Poverstein.

A third administrative hearing on the O’Connor case was conducted by AU Neil Ross in July, 1983. This hearing differed from previous hearings in that plaintiff was now represented by counsel. Additionally, medical evidence was put forward which, for the first time, provided clinical support for O’Connor’s claim that he suffered from both physical and mental impairment.

AU Ross found that O’Connor did not have a listed disability within the meaning of the Act. As such, he “retains the maximum functional capacity to perform some sedentary jobs.” (Tr. 193). However, AU Ross also found O’Connor to have a severe physical impairment which significantly limited his ability to sit, stand, walk, lift or carry objects for prolonged periods of time. In weighing other factors such as O’Con-nor’s age, lack of transferrable skills, work history, education, complaints of persistent pain, and presence of “strong psychogenic overlay”, AU Ross returned a recommended decision to the Appeals Council that O’Connor was entitled -to disability benefits.

The Appeals Council reversed. - In its decision of May, 1984, there is considerable reference to the vacated opinion of AU Poverstein. In its own language, th'e Appeals Council states that its evaluation of the evidence has incorporated “the summary and evaluation of the medical evidence and the hearing testimony detailed in the prior administrative law judge’s decision of May 6, 1980.” (Tr. 185) (emphasis added).

The Appeals Council fails to mention that the district court had already considered the record developed at the 1980 hearing as “inadequate.” It also fails to explain why it gave any weight to an opinion that it had previously vacated. Plaintiff again appealed, alleging that the Secretary’s new decision was unsupported by substantial evidence and that the agency’s actions were arbitrary and capricious.

DISCUSSION:

When a court reviews a final determination of an administrative agency, it is not at liberty to roam the corridors of judicial speculation. Rather, in considering the whole record of the case, the court must determine whether there was substantial evidence to support the conclusion reached. Universal Camera Corp. v. NLRB, 340 U.S. 474, 488, 71 S.Ct. 456, 465, 95 L.Ed. 456 (1951).

Substantial evidence is “more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 216, 83 L.Ed. 126 (1938)); Donato v. Secretary of Health and Human Services, 721 F.2d 414, 418 (2d Cir.1983); Parker v. Harris, 626 F.2d 225, 231-32 (2d Cir.1980)

The substantial evidence test is generally applied when the agency action being reviewed is a final determination and is based on an evidentiary, trial-type hearing. 5 U.S.C. Section 556. The district court, however, must also be satisfied that the agency did not abuse its discretion in reaching the final determination. Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 95 S.Ct. 438, 42 L.Ed.2d 447 (1974); Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971); Valente v. Secretary of Health and Human Services, 733 F.2d 1037, 1041 (2d Cir.1984).

The Administrative Procedure Act provides in pertinent part: “[T]he reviewing court shall ... (2) hold unlawful and set aside agency action, findings, and conclusions found to be — (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law____” 5 U.S.C.A. Section 706(2)(A). The two standards are not coextensive. Even if the court concludes that an agency’s findings are supported by substantial evidence, it may nonetheless find the procedures used to reach a final determination “reflect arbitrary and capricious action.” Bowman Transportation, 419 U.S. at 284, 95 S.Ct. at 441. The scope of review under the arbitrary and capricious standard is narrow: “A reviewing court must ‘consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.’ ” Id. at 285, 95 S.Ct. at 441 (quoting Overton Park, 401 U.S. at 416, 91 S.Ct. at 823).

In applying this standard to the present record, the court concludes that the action of the Appeals Council was arbitrary and capricious and an abuse of discretion. Having vacated AU Poverstein’s opinion and ordered a new hearing, when the Appeals Council reviewed the results of the new hearing it should have assessed the conclusions of AU Ross and not those of AU Poverstein. By expressly relying on the summary and evaluations of AU Poverstein’s vacated opinion, the Appeals Council gave weight to irrelevant factors such that it constituted a “clear error of judgment.” Overton Park, 401 U.S. at 416, 91 S.Ct. at 823.

The court finds that the analysis contained in AU Poverstein’s opinion was irrelevant for two independent reasons. First, the court had already held that the record adduced at the 1980 hearing reflected insufficient development of plaintiff’s case and did not provide an adequate basis for the court’s review. Therefore, any analysis or conclusions produced by the AU were of necessity similarly infirm, because the AU’s opinions may have been skewed by the incomplete record. Second, in addition to this court’s ruling that AU Poverstein’s conclusions could not be relied upon, the Appeals Council itself had previously vacated the 1980 opinion. The Council’s reliance on an opinion which it had rendered a nullity was, to say the least, procedurally improper.

Because of the Appeals Council’s reliance on this irrelevant evidence, this court has no way of knowing if the Council’s latest ruling was based on substantial evidence of O’Connor’s alleged non-disability. The Appeals Council decision incorporates so much of AU Poverstein’s irrelevant analysis that it is impossible to tell whether the agency would still have found plaintiff “not disabled” if its review had been limited to relevant evidence. Therefore, we do not reach the question of substantial evidence but will address it, if necessary, in reviewing a subsequent ruling of the Secretary based only on legitimate evidence.

The court finds that the agency’s failure to observe procedural norms consistent with the district court's previous order, as well as with its own vacate order, was arbitrary and capricious, an abuse of discretion, and otherwise not in accordance with law. Accordingly, remand is required so that the Appeals Council can evaluate the opinion of AU Ross and the underlying evidence and provide a final determination free of procedural taint.

On remand, however, we make clear that our concern is not with the Appeals Council’s incorporation of the underlying evidence adduced at the 1980 hearing. Such evidence as is relevant may be analyzed by the Appeals Council, as it was by AU Ross. Moreover, absent a challenge to the adequacy of the record before AU Ross, the Council may choose to rely on or reject his analysis of the evidence. What is not acceptable is for the Appeals Council to put any reliance on the conclusions reached by AU Poverstein based on the inadequate record before him.

The Appeals Council non-award determination is therefore vacated and the ease is remanded to the Secretary of Health and Human Services for further administrative action consistent with this opinion. The motions of both parties for judgment on the pleadings are denied.

      . The remand order as to the second issue was effectively overruled by Heckler v. Campbell, 461 U.S. 458, 103 S.Ct. 1952, 76 L.Ed.2d 66 (1983). The Supreme Court therein held that the Second Circuit had erred in requiring that the determination of "non-disability” be, in part, dependent on agency identification of specific jobs existing in the national economy that a "non-disabled” claimant could perform. Decker v. Harris, 647 F.2d 291, 298 (2d Cir.1981). Under Campbell, the agency may rely on a finding that a claimant is not disabled if his capacity for work meets general job requirements laid out in the agency’s medical and vocational guidelines. See Medical-Vocational Guidelines, 20 C.F.R. pt. 404, subpt. P, app. 2 (1984).

      . For example, the agency apparently relied on ALJ Poverstein’s finding that the plaintiff "had the residual functional capacity for light work” (Tr. 185) and “claimant's pain had not been shown to give rise to a level of severity preclusive of the ability to perform light work.” (Tr. 186). Both issues, however, were considered by the court to be in need of further development on the initial remand, so reliance on this analysis was improper.

      . In failing to provide an explanation for its reliance on an opinion that it had previously vacated, the agency’s course of action, at best, lacks a rational basis. The court is reluctant, however, to further find that the Appeals Council intentionally ignored our previous order by attempting to resubmit, sub silentio, a set of conclusions already held to be inadequate by this court. In the absence of “a strong showing of bad faith or improper behavior" the court will not second-guess the "mental processes of administrative decisionmakers." Overton Park, 401 U.S. at 420, 91 S.Ct. at 825.