O'LEARY V HEALTH FUNDING AUTHORITY CA CA167/04

O'LEARY V HEALTH FUNDING AUTHORITY CA CA167/04 26 October 2005IN THE COURT OF APPEAL OF NEW ZEALAND CA167/04BETWEEN LIAM JOSEPH O'LEARY Appellant AND HEALTH FUNDING AUTHORITY Respondent Hearing: 10 October 2005 Court: Hammond, William Young and Panckhurst JJ Counsel: C J Hodson QC and A J L Beatson for Appellant C T Gudsell for Respondent Judgment: 26 October 2005JUDGMENT OF THE COURT A The appeal against the finding that maintenance of daily records is an aspect of the consultation requirement in relation to the provision of general medical services, is dismissed. B The direction that the case be referred back to the Authority for further consideration is quashed. C The appellant is ordered to pay costs of $6,000 together with usual disbursements and travel expenses as fixed by the Registrar.____________________________________________________________________REASONSHammond and Panckhurst JJ [1] William Young J [37]HAMMOND AND PANCKHURST JJ(Given by Panckhurst J)Table of ContentsPara NoIntroduction [1]The background [3]High Court judgment [14]What is the obligation in relation to daily records? [20]Discussion [29]Was there procedural error? [31]Result [35]Introduction[1] The essential issue in this case concerns whether payments of the General Medical Services subsidy may be recovered back from a medical practitioner on account of failure to keep daily records pertaining to the particular consultations. The case centres upon the Advice Notice issued to general practitioners pursuant to s 51 of the Health and Disability Services Act 1993, by which the terms and conditions which govern payment of patient benefits, fees and other subsidies are prescribed. [2] The appeal is against a decision of Ellen France J given in a judicial review context. The Judge decided that even where general medical services had been provided, the Health Funding Authority could recover back that part of the payments in relation to which the practitioner had not made a daily record of the consultations as required by the Advice Notice (the Notice).The background[3] Dr O'Leary is a registered medical practitioner who conducts a general practice at Ashurst and Palmerston North. Throughout the relevant period he provided General Medical Services (GMS) to patients. Periodic claims weresubmitted by him to the Health Funding Authority (the Authority) for the payment of GMS subsidies. Each of the claims submitted was paid. [4] Health Benefits Limited (HBL) manages the health benefits system in New Zealand. The compliance unit of the company audits GMS claims. Commencing in late 1998 officers of HBL conducted an audit of Dr O'Leary's GMS claims for the year from 24 November 1997 to 23 November 1998. Records relevant to individual GMS claims were examined at Dr O'Leary's surgery, in that the patient records were analysed and also discussed with the practitioner. [5] On 9 April 1999 HBL gave Dr O'Leary preliminary notification of a complaint. This was that GMS claims for which payment had been made were "unsupported by a clinical record" and, therefore, did not comply with the terms of the Notice. [6] On 4 June 1999 HBL advised Dr O'Leary that following discussion with him the audit had been completed and that a complaint would be notified to the Medical Practitioners Advisory Committee (the Advisory Committee). The letter further advised that a schedule would be provided which set out those individual claims for which a subsidy had been paid and in relation to which there was no supporting clinical record. Such schedule was forwarded on 21 June 1999. [7] On 4 August 1999 and following its receipt of the HBL report the Authority wrote to Dr O'Leary advising that a complaint had been made. The letter further advised that the Advisory Committee would meet and consider the complaint in due course and that Dr O'Leary would be entitled to be heard, whether through written submissions or in person. Full details of the complaint were contained in the HBL report. The report recommended that Dr O'Leary be censored by the Advisory Committee for claiming otherwise than in accordance with the Notice and that the Committee consider recovery of the amount of the invalid claims. [8] In an undated letter Dr O'Leary provided detailed comments and responses to the matters set out in the HBL report. HBL considered this material and amended its report to a limited extent. Based on 199 individual claims which were audited atrandom, records were not found for 35 patients. In percentage terms this was 18%, which, when applied against the total payments received by Dr O'Leary throughout the 12 months to 23 November 1998, produced a recommended recovery figure of $15,691. In addition, HBL quantified the costs of the audit as $6,000. [9] On 9 March 2000 the Advisory Committee conducted a hearing in relation to the complaint. The Committee comprised five medical practitioners and a lawyer as the Chair. Dr O'Leary was represented by senior counsel. Subsequent to the hearing the Advisory Committee issued a decision, which contained recommendations to the Board of the Authority. [10] It is important to note that the Committee did not doubt Dr O'Leary's honesty, in particular it accepted that the consultations for which there were no records had nonetheless occurred. It said:The committee, having heard the details in respect of around half of the random alleged "misclaims" advised they were satisfied that clearly a service had occurred and that the issue before them was one of the adequacy of records.At another point:It was very clear that there was evidence of attendance and the committee notes that issues of non attendance or of fraud were not an issue before it.However, in relation to all of the 35 individual claims where HBL alleged there were no records, the Committee found that this was so, save in one case. [11] The Advisory Committee recommended to the Board:a) That the committee's finding of non compliance in 34 claims be noted. b) That recovery of $14,700 (plus GST if applicable) be made. c) That costs of $3,000 (plus GST if applicable) be recovered. d) That the total sum be set off in 10 equal instalments from amounts payable to the practitioner in the period from the posting of the HFA advice (if confirmed).Reflective of the finding that there were records in relation to one individual claim, the extrapolated recovery figure was reduced from $15,691 to $14,700. We also note that the Committee recommended recovery of only half of the audit cost. [12] Before the Authority made its decision in light of the recommendations Dr O'Leary was afforded a further opportunity to respond. His counsel made submissions upon the Committee's recommendations. These were considered, and on 13 June 2000 the Board of the Authority advised that the recommendations would stand, so that deductions to recoup the overpayment and costs would follow. [13] On 13 July 2000 Dr O'Leary initiated the judicial review proceeding. The statement of claim raised a number of grounds, but the central plank of the plaintiff's case was that the decisions of the Advisory Committee and the Authority were afflicted by legal error, in that in terms of the contractual arrangements between the Authority and medical practitioners a failure to keep clinical records could not found recovery of the subsidies paid in relation to such consultations, much less recovery of a larger amount extrapolated by reference to the percentage figure established through the random audit sample. The relief sought was a declaration that the Health Authority was not entitled to recover payments made to the plaintiff "in respect of proper and necessary medical services provided by him".High Court judgment[14] Ellen France J identified two issues for determination. The first was whether the Authority could recover the GMS subsidy paid to Dr O'Leary because he had not completed a daily record of the relevant consultation. The second was whether the procedure followed by the Authority in this case, being a complaint to the Advisory Committee, was open to it. [15] With reference to the first question the Judge noted the competing arguments, the substance of which was repeated in this Court. Mr Hodson QC contended that so long as a general practitioner provided GMS as part of a consultation he or she was entitled to claim the relevant payment. The further and separate requirement to keep a "daily record" of consultations, was not part of the provision of GMS. It followed,that recovery of payments could not be effected on the basis that clinical records evidencing the consultations did not exist. At most a medical practitioner may be liable for audit costs, where an audit was rendered more difficult or expensive because of the state of the practitioner's clinical records. In short, the decision to recover $14,700 by instalments was tainted by legal error, being misconstruction of the terms and conditions and the Notice. [16] Mr Gudsell's argument entailed a close analysis of the definitions of "general medical services", "consultation" and "daily record". General medical services are defined with reference to proper and necessary consultations, which in turn are defined to include an obligation to record details of the consultation in a daily record, the content of which is likewise defined. It followed, Mr Gudsell argued, that it was fundamental in terms of the contractual requirements that the prescribed daily record was maintained, if the practitioner was to claim payment for the GMS. The absence of a daily record of a consultation was a breach of the contractual requirements, and recovery of the relevant payments could follow. [17] The Judge accepted the argument advanced on behalf of the Authority. She expressed herself satisfied that a consultation was defined to include the maintenance of the daily record, so that "inadequate record keeping (was) a basis on which recovery (could) be sought". [18] However, the Judge found that the process followed in bringing the case before the Advisory Committee was in error. A complaint was referred to the Advisory Committee in terms of the relevant clause in the Notice. Complaints were "for the purpose of preventing abuse against the provisions of the Notice", including obtaining payment otherwise than in accordance with the Notice. Here, because HBL in formulating the complaint acknowledged that the central focus was upon record keeping and that "patient non-attendance" was not alleged, there was no allegation of an abuse sufficient to warrant resort to the complaint process. [19] As the Judge put it at [84]:Poor record keeping may well comprise an abuse and so form the basis for immediate referral by way of complaint. For example, as Mr Hodsonacknowledged, this may be so where audits result in repeated instances of inadequate record keeping. However, on its facts, this case was not treated as such a case.In light of this conclusion the Judge considered that the appropriate course was for the case to be referred back to the Authority so that it may consider recovery of the payments other than via the complaint process. We shall return to this aspect later and set out the relevant provisions from the Notice, since these are necessary to an understanding of this issue.What is the obligation in relation to daily records?[20] Section 51 of the Health and Disability Services Amendment Act 1998 updated the provision whereby Notices may be given, as follows:Arrangements relating to payments for health and disability services – (1) Where the Health Funding Authority gives notice of the terms and conditions on which the Authority will make a payment to any person or persons, and, after notice is given, such a payment is accepted by any such person from the Authority, then - (a) Acceptance by the person of the payment shall constitute acceptance by the person of the terms and conditions; and (b) Compliance by the person with the terms and conditions may be enforced by the Authority as if the person had signed a deed under which the person agreed to the terms and conditions.We note that under the New Zealand Public Health and Disability Act 2000 s 88 is to very similar effect. [21] The relevant Notice in 1997-8 was divided into parts A and B. Part A described the purpose of the Notice, including in cl 2.3 confirmation that both parts comprised the terms and conditions under which general practitioners would receive subsidies. Part B contained the detailed terms and conditions for payment of subsidies. For present purposes certain of the definitions in Schedule 1, the GMS terms in Schedule 2 and the administrative provisions in Schedule 6, are of most moment. [22] The entitlement to payment for the provision of general medical services was contained in cl 1.1 of Schedule 2:Subject to the provisions of this schedule, every General Practitioner, other than a specialist, who provides general medical services as part of a Consultation as defined in Schedule 1 of this Notice shall be entitled to claim from the [RHA] the relevant payment as prescribed and defined in Appendix 1 to this schedule, together with such travelling allowances (if any) [23] In Schedule 1 GMS were defined:"General Medical Services" means all proper and necessary Consultations (and associated administrative activities) provided to the individual patients of a General Practitioner either personally or by a locum tenens or under any other arrangements approved by the [RHA]. Services to an individual will only be initiated at the request of the patient or the patient's caregiver or agent (where the patient is unable to make the decision for themselves).Then followed a list of 13 types of medical service which were covered and a further list of services which were not. Nothing turns on the nature of the services provided by Dr O'Leary in this case. [24] "Consultation" was defined in Schedule 1 as:an actual face to face medical consultation between General Practitioner and an individual Patient, or a telephone consultation , in which the General Practitioner provides proper and necessary medical services pursuant to this Notice. Details of the consultation will be recorded in the Daily Record in clause 6 of Schedule 6. (emphasis added)And, with reference to records:The "Daily Record" means that every General Practitioner who provides general medical services for which payment is claimed under this Notice shall keep a comprehensive, readily accessible and legible daily record in respect of every Consultation which shall include the following:• the name and usual place of residence of the patient:• the place where the services were provided (if different from the usual place of work of the gp):• the date on which the services were provided:• a record of the clinical history of the patient and of the treatment given or services rendered:• the pharmaceuticals prescribed:• the laboratory services authorised.[25] The administrative provisions in Schedule 6 repeated the above definition of "Daily Record" in cl 6.1, while cl 6.2 imposed a duty upon medical practitioners to make such records available for inspection and "to answer all enquiries" properly made in relation to them. Then, cl 6.3 provided:The Board of the Regional Health Authority may, on the recommendation of the Advisory Committee, disallow any claim for payment of any benefit, fee or subsidy in accordance with this Notice if any of the records required to be kept pursuant to this clause have not been kept, or if, in the opinion of the Advisory Committee, any records so kept are inadequate.This provision, we note, was not relied upon by the Authority in the present case. Since payment had already been made to Dr O'Leary in relation to the claims submitted for the audit period, cl 6.3 was considered not to apply. [26] Instead, the recovery claim was pursued through the complaints process provided for in cl 7 of Schedule 6:Complaints 7.1 In respect of every General Practitioner who provides any general medical services, the Board of the Regional Health Authority may, for the purpose of preventing abuse against the provisions of this Notice as it applies to claims made under this Notice, refer to the Advisory Committee any of the following matters for enquiry: 7.1.5 Any complaint that a General Practitioner has obtained or attempted to obtain any fee from the Regional Health Authority in connection with a claim in respect of any medical services that have not been provided or that have been provided otherwise than in accordance with this Notice; (emphasis added)[27] Clause 7.2 provided:In respect of any complaint under this clause, instead of, or in addition to, exercising any other powers conferred on the Board of the Regional Health Authority by this Notice, the Board of the Regional Health Authority may, if the Board of the Regional Health Authority thinks fit, and if the Advisory Committee or the Disciplinary Committee if appropriate so recommends, exercise any of the powers conferred by subclauses 5.2.1 and 5.2.2 of this schedule.The subclause powers were to disallow a claim either wholly or in part; or to recover from a general practitioner the whole or part of a claim as a debt due to the Authority, or to set off such sum against amounts thereafter payable to the practitioner, respectively. [28] The Advisory Committee was provided for in cl 11 of Schedule 6. The functions of the Committee included advising and making recommendations in connection with the terms and conditions provided for by the Notice, as well as "hearing any complaints and disputes that may arise in relation to any such benefits, fees or subsidies". A further clause empowered the Advisory Committee to refer matters involving professional misconduct or conduct unbecoming a medical practitioner, to the Disciplinary Committee for investigation and report.Discussion[29] Mr Hodson contended with reference to cl 1.1 in Schedule 2 ([22]) that, in essence, practitioners who provided GMS as part of a consultation were entitled to payment. Clause 1.1 was unqualified, in that the entitlement to claim was not made conditional on keeping a daily record. The requirement to maintain a daily record in relation to consultations where GMS were provided was said to be to facilitate the audit of claims made, or paid, by the Authority. But such records were, Mr Hodson submitted, of only evidential significance. The actual provision of GMS constituted substantial compliance with the terms of the Notice and, therefore, entitled the practitioner to payment. [30] We disagree. In our view Ellen France J was correct in holding that recording details of each consultation in the daily record was, as a matter of contract, an essential aspect of the provision of a consultation, which in turn gave rise to the entitlement to payment. The definition of a consultation ([24]) confirms as much. Where a consultation occurred, but was not recorded in a daily record as defined, medical services were not provided in accordance with the Notice in terms of cl 7.1.5 ([26]), and we are in no doubt that the powers to disallow, or recover payment, were triggered. For these reasons we do not accept the appellant's basiccontention that the decisions of the Advisory Committee and the Authority were legally flawed through misconstruction of the terms and conditions of the Notice.Was there procedural error?[31] We have already referred ([26]-[27]) to the relevant parts of cl 7 in Schedule 6, by which the complaint in this case was referred to the Advisory Committee which subsequently recommended the recovery of the sum paid for consultations which were unsupported by daily records. [32] The Judge, however, was influenced by cl 5 of Schedule 6:Statement in Explanation of Claim 5.1 In relation to any claim for payment of any benefits, fees or subsidies in accordance with this Notice, the Medical Officer of the Regional Health Authority may require the General Practitioner concerned to supply in writing or otherwise, a statement in explanation or substantiation of the claim, or of the reasonableness of the amount of the claim. 5.2 If the General Practitioner refuses to supply any information required by subclause 5.1 of this clause or fails to supply any such information within 21 days after being so required, or supplies an insufficient or unsatisfactory statement, the Board of the Regional Health Authority, after reference to the Advisory Committee, may: 5.2.1 disallow the claim either wholly or in part; or 5.2.2 if the claim or any such claim has been paid, take the necessary steps to recover from the General Practitioner the whole or a specified part of the claim and any associated costs or losses, as a debt due to Regional Health Authority, or set off the whole or any specified part of such claim against any amounts that may thereafter be payable to the General Practitioner in respect of any other claim or claims.The Judge considered that "the better view is that in this case the (Authority) should have asked (Dr O'Leary) for further explanation in terms of cl 5.1. If the response was unsatisfactory, steps could then be taken to recover the money or a complaint could be laid with the Committee". By contrast, she found that it was premature to refer the HBL report directly to the Advisory Committee as a complaint alleging the receipt of payments otherwise than in accordance with the Notice. Because the abuse alleged was a failure to keep records, not an allegation of fraud, resort to the complaint process was inappropriate.[33] We do not accept this analysis of the Schedule 6 processes. The focus of cl 5 is the supply of information in relation to claims for payments under the Notice. Where a practitioner refuses to supply information, or supplies insufficient or unsatisfactory answers, reference to the Advisory Committee may follow and in due course disallowance, or recovery, of payments as well. Here, however, there was no suggestion that Dr O'Leary failed to provide information relevant to the claims which were the subject-matter of the audit. It follows, in our view, that the Judge's decision to refer the case back to the Authority "for further consideration in terms of cls 5.1 and 5.2" was in error. [34] Moreover, we do not share the view that resort to the complaints process, as occurred, was inappropriate. Clause 7.1 envisaged that the Board of the Authority may for "the purpose of preventing abuse" refer matters to the Advisory Committee for inquiry. The concept of abuse is broad enough to cover the present circumstances, where GMS payments had been obtained in relation to a percentage of consultations for which daily records were not maintained. This conclusion necessarily follows from the express terms of subcl 7.1.5, by which the obtaining of payment for medical services "that had not been provided" or "that had been provided otherwise than in accordance with (the) Notice", may be the subject-matter of a complaint.Result[35] In light of our conclusion that Ellen France J was correct in concluding that maintenance of daily records was an aspect of the consultation requirement in terms of the Notice, the appeal against that finding is dismissed. However, the Judge's direction that the case be referred back to the Authority for further consideration in terms of the information provision process contemplated in cl 5 of Schedule 6, is quashed. [36] The Authority is entitled to costs which are fixed in the sum of $6,000 together with usual disbursements and travel expenses as fixed by the Registrar.WILLIAM YOUNG J[37] I agree with the conclusions reached by Panckhurst and Hammond JJ but wish to add a few comments of my own as to how I see the s 51 notice operating in the present context. [38] Remarks that I made in Ministry of Health v Dalley HC CHCH M569/96 12 August 1998 at 22 - 23 were cited by the High Court and the Advisory Committee as supporting the view that recording is not a prerequisite to payment.Dalley, however, involved statutory and contractual entitlements to payment which were expressed in terms which differed appreciably from the language of the s 51 notice in this case. [39] In the current s 51 notice, the requirement to record a consultation is placed within the definition of "consultation". This makes it clear that an attendance by a doctor on a patient is not a "consultation" unless it is recorded. It follows that a doctor is entitled to payment in relation to a general medical service only if the relevant consultation was recorded. So, in the absence of a proper record having been kept, there is no entitlement to claim. [40] Claims for the general medical services subsidy are made and paid on the basis that the claimant is entitled to payment. Where a claim for which there was no entitlement has been paid, it is open to the Authority to recover the payment by way of a claim for money had and received, see my judgment in Dalley at 29 - 31. [41] It may that the right of the Authority to recover payments made under mistake of fact has been qualified so as to permit such recovery only when that is sanctioned by the Advisory Committee. I say this because: (a) Clause 5.2.2 appears to restrict the entitlement of the Authority to seek recovery to circumstances where there has been a reference to the Advisory Committee; and(b) Clause 7.1, which deals with references to the Advisory Committee, makes the powers exercisable under cl 5.2.2 only available where the Advisory Committee "so recommends". Presumably the Advisory Committee will only so recommend if it thinks that action for recovery is just. [42] It is perfectly clear that Dr O'Leary did not act fraudulently. It is also clear that the claims made by Dr O'Leary were for services which, but for his poor record keeping, would have qualified for payment under the s 51 notice. In that context, I think it a pity that counsel for the Authority sought to reserve his position on these aspects of the case. [43] The Advisory Committee's decision to recommend recovery action proceeded expressly on the basis that Dr O'Leary had provided the relevant services. On the basis of this conclusion it would have been open to the Advisory Committee to recommend against recovery action and such a decision would perhaps not have been surprising. On the other hand, sympathetic though I am to Dr O'Leary's position, I recognise that provision of the relevant services is not necessarily the controlling consideration. There are very good reasons why recording requirements are imposed. A failure by a doctor to record consultations is likely to result in expensive and time consuming investigations and other downstream processes. In that context, I think it was open to the Advisory Committee to recommend recovery action even though the underlying services were actually provided. [44] I see no point in, or requirement for, a reference back to the Authority: (a) Clause 7 provides generally for references to the Advisory Committee with the words "for the purpose of preventing abuse" necessarily applying to all the areas of complaint specifically provided for under that clause, including the making of claims in relation to unrecorded consultations (cl 7.1.5).(b) Accordingly it was open to the Authority to go to the Advisory Committee under cl 7.1.5. (c) As I read cl 5, it was still necessary for the Authority to go through the procedure provided for under that clause before commencing recovery actions under cl 5.2.2, albeit that cls 5 and 7 are not prescriptive as to the timing of the reference under cl 7 and compliance with cl 5.1.2. (d) By the time that the Advisory Committee made its recommendation, the Authority had, in substance, complied with cl 5.1.2 and Dr O'Leary had given his statement of explanation in support of the claims, a statement which was carefully considered by the Advisory Committee. (e) Accordingly, the procedure provided for by the notice has been complied with. [45] For those reasons I agree with the orders proposed by Panckhurst J.Solicitors: Bartlett Partners, Wellington for Appellant Fiona Wakefield, Christchurch for Respondent