College of American Pathologists
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  Of clouds and silver linings: reflections
  on Martis v. Pekin






May 2007
Feature Story

Jack R. Bierig

On March 6, 2007, the Circuit Court of Tazewell County, Illinois in Martis v. Pekin Memorial Hospital (No. 05 L 23) dismissed all claims against the defendant pathology group based on the group’s practice of billing for the professional component of clinical pathology procedures for patients. The ruling of the court was set forth in two lines: “...the professional component billing practice...has been upheld in Central States Health & Welfare Fund v. Pathology Labs of Arkansas, 71 F.3d 1251 (7th Cir. 1995). The Court finds said practice not to be actionable.”

What the court seems to be saying in these two lines is that professional component billing does not violate the law—under any theory. For pathologists who bill for professional component services, these lines are very good news. In their succinctness, they are, in a sense, lines of silver. But, to play off of a well-worn phrase, surrounding all silver lines (or linings) there are clouds. In this article, I will examine four clouds that hover over the Martis decision.

Cloud No. 1: It took a lot of time and money to get the court to deliver the silver lines. The Martis case was filed in the spring of 2005—nearly two years before the decision. The complaint asserted violations of the state Consumer Fraud Act, the state Medical Practice Act, and other laws. Moreover, the case was brought as a class action purportedly on behalf of all patients who had been billed for professional component services. The issues, both procedural and substantive, required extensive briefing.

The briefing was complex for several reasons. First, judges are generally unfamiliar with the responsibilities of a pathologist in directing a laboratory for the benefit of patients. They must, therefore, be educated regarding those responsibilities. Second, the existence of a governmental payment system that does not provide direct compensation to pathologists for professional component services to patients—that is, the Medicare approach—gives plaintiffs’ lawyers an opening to argue that billing patients for such services is unfair. Third, apart from the factual background, there are always complex legal issues with which to contend.

In addition, the Martis case, as frequently happens in litigation, engendered its own issues unrelated to the merits of the dispute. In this instance, significant expense was incurred in resisting plaintiff’s efforts to disqualify the judge who was originally assigned to the proceeding. Additional expense arose when, after denying two separate motions for disqualification, the original judge voluntarily took himself off the case. Yet more expense had to be borne when the second judge, after hearing extensive oral argument, decided that he had a conflict that required his recusal. The expense grew still greater when a third judge required additional citation of authority, additional court appearances, and additional argument.

In sum, although the ruling was quite favorable to the defendant pathologists, it didn’t just happen. It took a lot of work, provoked a lot of aggravation, and cost a lot of money.

Cloud No. 2: The dismissal of the claims based on professional component billing was “without prejudice.” In other words, the court permitted the plaintiff to file an amended complaint making new allegations against the defendant pathology group. While it is difficult to see what new claims the plaintiff could make, the filing of an amended complaint will trigger a new round of briefing—with additional expense and uncertainty for the pathology group. The anxiety provoked by, and the costs incurred as a result of, the filing of any complaint should not be underestimated.

In this connection, it should be noted that the plaintiff claims that, in order to draft a new complaint, he needs to see the pathology group’s contracts with the hospital and with its billing agent. The plaintiff has asked the court to require the group to produce those documents, and the court has granted the request. This development means not only additional expense, but also the release to the plaintiff of documents intended to be confidential.

Cloud No. 3: Even if the court ultimately dismisses the amended complaint that the plaintiff will file, that dismissal will not end the litigation. The plaintiff has already announced his intention to take an appeal if final judgment is entered against him in the Circuit Court. An appeal will require a new round of briefing and argument—before new judges who come to the case with no knowledge of either the practice of pathology or the various systems for payment for clinical pathology services.

Moreover, given the standard of review of judgments at the motion to dismiss stage, the appellate court may reverse if it concludes there is any set of facts on which the plaintiffs could prevail. Consequently, an appeal will entail more time, more expense, and more uncertainty, even if the judgment of the lower court is affirmed.

Cloud No. 4: Each of the previous clouds hung over the defendant pathology group. The fourth and final cloud casts a shadow over other pathology groups. Specifically, the decision in the Martis litigation, as favorable as it might be, is only a ruling of a trial court applying Illinois law. While it will certainly be citable to courts in other jurisdictions, it does not constitute binding precedent beyond that state.

If challenges are brought to professional component billing in courts outside of Illinois, plaintiffs will argue that the Martis case reflects Illinois law only. In support, they will point out that the court relied entirely on the Pathology Laboratories of Arkansas case, which was decided by the United States Court of Appeals in Chicago. Further, they will contend that Illinois law on this issue should not be followed in their case. It will be up to defense counsel in future cases to demonstrate that Martis was correctly decided and should be adopted in other jurisdictions

Conclusion: The Martis litigation is the most recent battle in the war over professional component billing. The silver lines of the court on March 6 represent a significant victory for pathologists in that war. But those lines are not without clouds. And the battle rages on.

Jack Bierig is a partner with the law firm Sidley Austin, LLP, Chicago.