COURTCWDS IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION LOCKHART, GUMMOW AND LEE JJ HRNG Administrative Law - natural justice - Wednesbury unreasonableness - pathology services - Medical Services Committee of Inquiry - expertise of committee - excessive services - particulars of matters to which hearing relates - severity of penalty.
Medicine - pathology services - excessive services - "personal fault" of practitioner - meaning thereof - whether services "not reasonably necessary for the adequate medical care of the patient". Health Insurance Act 1973 Health Insurance Amendment Act 1977 Health Legislation Amendment Act 1986 Community Services and Health Legislation Amendment (No. 2) Act 1990 Health and Community Services Legislation Amendment Act 1991 Health Insurance Amendment (No. 2) Act 1991 Health, Housing and Community Services Legislation Amendment Act 1992 Tiong v Minister for Community Services and Health (1990) 93 ALR 308 Minister of State for Health v Peverill (1991) 29 FCR 262 Minister for Health v Thomson (1985) 8 FCR 213 Cunliffe v Commonwealth of Australia (1994) 124 ALR 120 ORDER SYDNEY, 26-27 September 1994
#DATE 19:12:1994 Counsel and solicitors Dr G.A. Flick SC and for the appellant: Mr A. Robins instructed by Minter Ellison Morris Fletcher. Counsel and solicitors Mr J.S. Hilton SC and for the fifth respondent: Ms R.M. Henderson instructed by Australian Government Solicitor. The first, second, third and fourth respondents filed a submitting appearance. JUDGE1 The Court orders that:
(1) Orders 2 and 3 made by the primary Judge on 16 June 1994 be set aside. (2) The appeal otherwise be dismissed. (3) The appellant pay the costs of the respondents of the appeal, and of the motion referred to in order 7 made by the primary Judge on 16 June 1994. (4) The costs of the first, second, third and fourth respondents provided for in order 3 be those of a submitting party. Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules. LOCKHART, GUMMOW AND LEE JJ This appeal from a Judge of this Court (Einfeld J) involves important questions of construction of provisions of the Health Insurance Act 1973 ("the Act") relating to over-servicing. In particular, it concerns the position of specialist pathologists who have been requested to perform unnecessary procedures by medical practitioners.
2. The appellant, Dr Peverill, is a specialist pathologist operating a number of practices in Queensland and the Northern Territory. During the relevant time, Dr Peverill operated 7 laboratories and 50 related surgeries. Dr Peverill was personally responsible for supervising 4 of the laboratories (Springwood, Gold Coast, Alice Springs and Darwin) and he employed other pathologists to supervise the laboratories at Ipswich and Cairns. The seventh laboratory (Townsville) was partly owned and fully operated by another practitioner (Dr Lau). 3. On 3 February 1987, a delegate of the fifth respondent ("the Minister") referred certain matters concerning Dr Peverill to the Medical Services Committee of Inquiry for the State of Queensland ("the Committee"). The reference was made under s. 82 (b) of the Act. The first four respondents are the members of the Committee. At the time of the referral by the Minister, s. 82 (b) was as follows: "82 A Committee shall inquire into, and submit to the Minister its report and recommendations on - (a) ... (b) any other matter referred to the Committee by the Minister, being a matter that is relevant to the operation or administrat-ion of this Act ... and arises out of or relates to - (i) an undertaking accepted by the Minister under section 16C; or (ii) the rendering of a professional service on or after 15 April 1977, or the initiation of a pathology service on or after the date of commencement of this section, in the State for which the Committee is established." 4. The instrument of referral states that the delegate refers matters: "which arise out of whether Dr Richard Edwin Peverill complied with an undertaking given by him and accepted by the Minister under section 16C of the said Act, and which further arise out of the rendering of professional services in the State of Queensland after 15 April 1977, namely, whether each professional service rendered to a patient by Dr Richard Edwin Peverill, particulars of which are set out in Annexures 'B1' to 'B251', being a service for which Medicare benefit became payable, was an excessive service within the meaning of section 79 (1B) (a) of the (Act)." 5. We shall deal with the relevance of the s. 16C undertaking later in these reasons. 6. On 9 February 1987, the Committee met to consider the reference and determined to hold a hearing into the matters the subject of the reference. Dr Peverill was informed of this on 16 April 1987. The hearing commenced on 10 June 1987. The hearing was much delayed and the Committee sat for only 14 days between that date and the conclusion of the hearing on 6 April 1992. One interruption involved a proceeding taken by Dr Peverill in this Court, to which we refer hereafter. 7. The Committee delivered its report to the Minister on 29 May 1992. The report identifies 129 instances of over-servicing by Dr Peverill. The Committee recommended, pursuant to sub-s. 105 (2) of the Act, that: "(i) Dr Peverill be reprimanded in relation to his neglect of professional responsibility in the rendering of pathology services. (ii) Dr Peverill be counselled in relation to the rendering of fixed combinations of tests, irrespective of the clinical information. (iii) The Minister revoke his acceptance of the Undertaking by Dr Peverill given under section 16C of the (Act). (iv) The amount of Medicare benefit totalling $11,931.80 as identified in Tables 1 to 129 of the Report and set out in the Schedule of Excessive Services (Appendix No. 130) be payable by Dr Peverill to the Commonwealth of Australia." 8. On 27 August 1992, the Minister made a determination under s. 106 of the Act as follows: "(i) Under paragraph 105 (2) (c) of the Act, (Dr Peverill), as a specialist in pathology and an Approved Pathology Practitioner for the purposes of the (Act), be reprimanded for neglecting his professional responsibility in the rendering of pathology services; (ii) Under paragraph 105 (2) (ca) of the Act, (Dr Peverill) be counselled for his provision of multiple pathology tests irrespective of the needs of the patients and clinical information provided by initiating practitioners; and (iii) Under paragraph 105 (2) (f) of the Act, the amount of Medicare benefits referred to in paragraph (c) above, that is an amount of $11,931.80 in total, herein be payable by (Dr Peverill) to the Commonwealth of Australia." 9. In a letter to Dr Peverill dated 28 August 1992 enclosing the determination, the Minister noted that s. 106AB of the Act required a penalty payment equivalent to the amount of his determination, bringing the total payable to $23,863.60. The Minister also explained why he had not acted upon the third recommendation of the Committee, relating to the s. 16C undertaking. We shall return to this subject. 10. On 15 March 1993, Dr Peverill instituted an application under the Administrative Decisions (Judicial Review) Act 1977 to review both the decision of the Committee and the determination of the Minister. The application was dismissed by the primary Judge on 31 May 1994. Dr Peverill appeals from this decision. 11. It is appropriate at this stage to consider the relevant provisions of the Act. The Act 12. The pathology services under investigation by the Committee were provided to patients between 15 January and 26 September 1986. We shall therefore deal with the Act as it was at these dates. It is necessary to recount various changes to the legislation over the period with which this litigation is concerned. 13. So far as material, s. 16A of the Act was as follows: "16A (1) A Commonwealth medical benefit is not payable in respect of a pathology service unless a practitioner determined that the service was necessary and - (a) in the case of a pathology service ... - the service was rendered by or on behalf of an approved pathology practitioner in pursuance of a request addressed to that approved pathology practitioner - (i) by the practitioner who determined that the service was necessary; or (ii) by another approved pathology practitioner who is not the practitioner who determined that the service was necessary, being a request made in writing as prescribed or, if made otherwise than in writing, subsequently confirmed in writing as prescribed; (b) ... or (c) ... ... (5) For the purposes of this section - (a) where a service is rendered by a person (in this paragraph referred to as 'the employee') in the course of his employment by another person, then, except in a case to which paragraph (b) applies, it shall be deemed to be rendered by that other person, and not by the employee; (b) where a person (in this paragraph referred to as 'the employee') is employed by two or more persons jointly and a service is rendered by the employee in the course of that employment, it shall be deemed to be rendered by the employer principally responsible for the matter being dealt with by the employee, and not by the employee; (c) a service shall be taken to be rendered on behalf of a person if, and only if, it is rendered by another person, not being an approved pathology practitioner, by arrangement with that person; ..." 14. An "approved pathology practitioner" is defined in sub-s. 3 (1) to include a person in respect of whom there is in force an undertaking given by him and accepted by the Minister under s. 16C. Dr Peverill was an "approved pathology practitioner" at the relevant time. 15. Section 16B relevantly was as follows: "16B (1) The Minister may draw up forms of undertaking to be given by persons who wish to become approved pathology practitioners. (2) A form of undertaking shall make provision for and in relation to such matters as the Minister considers appropriate. ..." 16. Section 16C provides, inter alia, that where a medical practitioner gives an undertaking in writing in accordance with the appropriate form, subject to exceptions not here relevant, the Minister shall accept the undertaking. Sub-sections 16C (8) and (9) are as follows: "16C (8) An approved pathology practitioner may, at any time, terminate an undertaking given by him by serving, as prescribed, a notice of termination specifying a date of termination not earlier than 30 days after the day on which the notice is served. (9) For the purposes of this Act, an undertaking given by a person under this section comes into force when accepted by the Minister or on such earlier date (not being a date earlier than the date on which the undertaking was signed) as is fixed by the Minister and ceases to be in force if - (a) the undertaking is terminated by the person under sub-section (8); (b) the Minister's acceptance of the undertaking is revoked under section 106; or (c) ..." 17. Dr Peverill signed an undertaking on 27 July 1977 which was accepted by a delegate of the Minister on 1 August 1977, which was also the date on which the operation of the undertaking commenced. This undertaking was still in force at the time the services in question were rendered. Clause 2 of the undertaking defined the term "applicable pathology services" as pathology services in respect of which medical benefits were payable in accordance with the Act. Clause 3 of the undertaking was headed "Compliance with Act" and was as follows: "3 The practitioner will - (a) comply with the provisions in relation to applicable pathology services of the Act as from time to time amended and of the Regulations as for the time being in force; and (b) take appropriate action from time to time to ensure that persons who in the course of their employment carry out, or by arrangement perform, for or on behalf of the Practitioner duties or services in relation to applicable pathology services, in carrying out those duties or performing those services act in accordance with the said provisions of the Act and Regulations and in conformity with this undertaking." 18. Clause 9 of the undertaking was headed "Excessive Services" and stated: "The Practitioner will not render, or request to be rendered, an applicable pathology service that would constitute excessive services as referred to in Division 3 of Part V of the Act. (Sub-section 79 (1B) (a) of the Act provides that a reference to excessive services is a reference to professional services, being services in respect of which medical benefit has become or may become payable, that are not reasonably necessary for the adequate medical care of the patient concerned." 19. Clause 12 was headed "Termination of Undertaking" and was as follows: "12 This undertaking shall continue to be in force unless and until it ceases to be in force upon termination by the Practitioner under sub-section 16C (8) of the Act or upon such other event as causes an undertaking to cease to be in force by virtue of sub-section 16C (9)." 20. Sections 16A, 16B and 16C were repealed by sub-s. 15 (1) of the Health Legislation Amendment Act 1986 ("the 1986 Act") with effect from 1 August 1987. Sub-section 15 (2) of that Act provided that the amendment made by sub-s. (1) applied only in relation to pathology services rendered after the commencement of the section. Section 16A was re-enacted in similar form. Sections 16B and 16C were replaced by a new Part IIA headed "Special Provisions Relating to Pathology". Section 23DB (the successor to s. 16B) provides that the Minister may approve forms of undertaking to be given by persons who wish to become approved pathology practitioners. Section 23DC (the successor to s. 16C) provides for the giving and acceptance of approved pathology practitioner undertakings. Sub-paragraph 23DC (1) (c) provides that upon accepting the undertaking, the Minister must determine a period, being a period of not more than 12 months after the day on which the undertaking comes into force, for which the undertaking is to have effect. Section 23DD provides that the undertaking ceases to be in force upon the expiration of this period or, if the practitioner proffers a second undertaking, upon the date the practitioner is notified of the refusal of the second undertaking. 21. There is no specific provision in the 1986 Act dealing with the termination of the old s. 16C undertakings. However, the definition in sub-s. 3 (1) of "approved pathology practitioner" was amended to read: "a person in respect of whom there is in force an undertaking given by the person, and accepted by the Minister, under section 23DC;" 22. This means that pursuant to the new s. 16A, no Medicare benefit is payable in respect of services rendered by a practitioner until that practitioner has given the new s. 23DC undertaking. We were not shown any s. 23DC instrument signed by Dr Peverill, but on the appeal it was common ground that such an undertaking had been given by him and was still on foot. 23. We have already noted that the Committee recommended that the Minister revoke Dr Peverill's s. 16C undertaking, but that this was not acted upon by the Minister. In the letter to Dr Peverill dated 28 August 1992, enclosing the determination, the Minister stated that because the system for the giving and accepting of undertakings had changed since Dr Peverill's case was referred to the Committee, it was not possible effectively to revoke Dr Peverill's s. 16C undertaking. This assumed that s. 8 of the Acts Interpretation Act 1901 ("the Interpretation Act") did not operate to save the power of revocation. The amendments effected by the 1986 Act, which we have set out, may cover the field, so that the s. 16C undertaking, while not brought to an end by any provision, was left in limbo. 24. Part V of the Act is headed "Committees". Division 3 is headed "Medical Services Committees of Inquiry". At the relevant time, s. 79 (1B) read as follows: "79 (1B) In this Division - (a) a reference to excessive services is a reference to professional services, being services in respect of which medicare benefit has become or may become payable and which were not reasonably necessary for the adequate medical or dental care of the patient concerned; and (b) a reference to the initiation of a pathology service is a reference to the making of the decision by reason of which the service is rendered;" 25. Sub-section 79 (1B) was repealed and replaced by s. 22 of the 1986 Act, with effect 1 August 1987. The substituted provision excluded pathology services from the definition of "excessive services". The new sub-section was as follows: "79 (1B) A reference in this Division to excessive services is a reference to professional services (other than pathology services), being services in respect of which medicare benefit has become or may become payable and which were not reasonably necessary for the adequate medical or dental care of the patient concerned." (Emphasis supplied) 26. The sub-section was amended again in 1991 by s. 26 of the Health and Community Services Legislation Amendment Act 1991 ("the first 1991 Act") which deleted the words "(other than pathology services)" from the sub-section and so restored the previous situation. This amendment took effect on 24 December 1991 and so was in force when the Committee delivered its report on 29 May 1992. 27. Section 80 provides for the establishment in each State of a Medical Services Committee of Inquiry for that State. 28. We have set out s. 82 as it was at the time of the rendering of the services by Dr Peverill earlier in these reasons. After the reference to the Committee on 3 February 1987, s. 82 was repealed and replaced, with effect 1 August 1987, by s. 24 of the 1986 Act. Following amendment, s. 82 provided: "82 A Committee shall inquire into, and submit to the Minister its report and recommendations on, any matter