In re: Admin. Subpoena Blue Cross Blue Shield of Mass. (Full Text)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

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IN RE: ADMINISTRATIVE SUBPOENA )
BLUE CROSS BLUE SHIELD OF )
MASSACHUSETTS, INC. ) M.B.D. 05-10041-PBS
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Saris, U.S.D.J.

MEMORANDUM AND ORDER

November 18, 2005

I. INTRODUCTION

This action arises out of a federal criminal investigation

of a Massachusetts physician (“Doctor”), a provider with Blue

Cross Blue Shield of Massachusetts, for health care fraud. The

government suspects that the Doctor bills Medicare for an

expensive specialized treatment for patients with a rare disease

when the patients have not been properly diagnosed with the

disease. The government served Blue Cross with an administrative

subpoena under the Health Insurance Portability and

Accountability Act of 1996, 18 U.S.C. § 3486(a)(1)(A), asking for

documents reviewed as part of its internal medical peer review

committee’s ongoing (but incomplete) inquiry into the Doctor’s

activities in this area. Blue Cross refused to produce those

documents, asserting a federal medical peer review privilege.

The government filed a motion to compel production,1 which was

referred to a magistrate judge. On July 28, 2005, the magistrate

judge denied the motion, and the government objected.

After hearing on September 26, 2005, the government modified

its document request to exclude any interim or final reports or

opinions of the peer review committee. Instead, the government

now seeks (1) documents related to statements and representations

by the Doctor, his counsel or representatives, as part of the

peer review process; (2) documents relied on by the Doctor to

support any positions he took as part of the peer review process;

(3) documents provided by anyone other than the Doctor for

consideration by the peer review committee; (4) any settlement

agreements between Blue Cross and the Doctor arising out of the

peer review process; and (5) any reporting by Blue Cross to any

national registries or databases regarding any action taken with

respect to the Doctor.

After review of the magistrate judge’s Order, the Court

ALLOWS the government’s motion to compel, subject to a protective

order.

A. Standard of Review

III. DISCUSSION

An interesting threshold question is the proper standard of

1 Blue Cross did produce documentation generated in an
investigation by its fraud prevention and investigative unit,
including two expert reports.

review under the Federal Magistrate’s Act, 28 U.S.C. § 636. The

answer turns on whether the motion to compel is dispositive under

§ 636(b)(1)(B) or nondispositive under § 636(b)(1)(A). If the

motion is dispositive, as the government now contends, then the

Court must engage in de novo review of the magistrate judge’s

order. Fed. R. Civ. P. 72(b). If the motion is nondispositive,

then the Court may only modify the order to the extent that it is

“clearly erroneous or contrary to law.” Fed. R. Civ. P. 72(a).

The Court referred the matter to the magistrate judge for ruling

in a pro forma order, and the magistrate judge denied the motion.

Rule 72, which was adopted in 1983, refers to all matters

which can be heard and determined by a magistrate judge as

“nondispositive,” and all motions as to which a magistrate judge

may only make a recommendation as “dispositive.” Phinney v.

Wentworth Douglas Hosp., 199 F.3d 1, 5 (1st Cir. 1999) (in a

medical malpractice case, holding that discovery sanctions are

ordinarily nondispositive unless they dispose of a claim or

defense). However, one cannot merely refer to the list of

dispositive motions which are exempted from the normal operation

of § 636(b)(1)(A) to decide whether a particular motion is

dispositive under Rule 72. Instead, “that enumeration informs

the classification of other motions as dispositive or

nondispositive.” Id. at 5-6; Strong v. United States, 57 F.

Supp. 2d 908, 913 (N.D. Cal. 1999) (holding that “a magistrate

judge may not determine motions that are analogous to the

enumerated motions, i.e., dispositive motions”). Since an

administrative subpoena is not among the enumerated motions

listed in § 636(b)(1)(A), the Court must decide whether the

motion is “dispositive” under Rule 72 in order to determine the

correct standard of review.

Many courts have treated similar motions to enforce or quash

administrative subpoenas, or the like, as dispositive motions for

purposes of review where the matter involving the subpoena

constitutes the entire case before the Court. See, e.g., Nat’l

Labor Relations Bd. v. Frazier, 966 F.2d 812, 817 (3d Cir. 1992)

(stating that an NLRB subpoena is “like a motion to dismiss”

because “once the court grants a motion to dismiss or compels

compliance with a subpoena, the court disposes of the entire case

before it”); United States v. Mueller, 930 F.2d 10, 12 (8th Cir.

1991) (treating an IRS summons as a dispositive matter and

finding that de novo district court review palliated any problem

with the magistrate judge’s reference to his findings as an

order); Aluminum Co. of Am., Badin Works v. U.S. Envtl. Prot.

Agency, 663 F.2d 499, 501 (4th Cir. 1981) (treating a motion to

quash an EPA warrant as dispositive because the motion

constituted the entire proceeding); Strong, 57 F. Supp. 2d at

913-14 (treating a motion to quash an IRS summons as a

dispositive motion because “[u]nlike a discovery motion,

petitions to quash summonses are not ancillary to a larger

proceeding”); In re Oral Testimony of a Witness Subpoenaed

Pursuant to Civil Investigative Demand No. 98-19, 182 F.R.D. 196,

201 (E.D. Va. 1998).

In this case, the government’s motion to compel production

of documents pursuant to a subpoena is the entire proceeding

before this Court. The only matter for this Court to decide is

whether to enforce the subpoena. As such, the decision both

“determines with finality the duties of the parties” and “seals

with finality the district court proceeding and is subject to

appellate review.” See Frazier, 966 F.2d at 817-18. As such, it

is of the “same genre” as the enumerated motions in

§ 636(b)(1)(A), and the Court will treat the motion as

dispositive and will review the magistrate judge’s findings de

novo under 28 U.S.C. §636(b)(1)(C). See Phinney, 199 F.3d at 6.

B. Federal Medical Peer Review Privilege

The Court must decide whether to recognize a federal medical

peer review privilege. No court in the First Circuit or District

of Massachusetts has yet done so under federal law, but

Massachusetts state law does recognize the privilege.2 Mass.

Gen. Laws ch. 111, § 204(a) (stating that “the proceedings,

reports, and records of a medical peer review committee shall be

2 One Court in the District of Massachusetts has applied
§ 204(a), but that was in a wrongful death case removed on the
basis of diversity. Hughes v. Am. Regent Labs., 144 F.R.D. 177,
179 (D. Mass. 1992). Under Rule 501, when state law provides the
rule of decision, a federal court must apply state privilege law.
Fed. R. Evid. 501.

confidential and . . . not be subject to subpoena or discovery,

or introduced into evidence in any judicial or administrative

proceeding”). As Magistrate Judge Collings stated in his

decision, “there is no extant federal peer review privilege and .

. . most federal courts, including the Supreme Court, have

declined to recognize a state peer review privilege in a federal

case.” (Mem. & Order 4 (citations omitted).) See also Nilavar

v. Mercy Health Sys., 210 F.R.D. 597, 601 (S.D. Ohio 2002)

(noting that “federal common law has not evolved to the point

that it recognizes a de jure physician peer review evidentiary

privilege”); Pagano v. Oroville Hosp., 145 F.R.D. 683, 692 (E.D.

Cal. 1993) (“There is no federal statutory basis for a medical

peer review privilege.”).

In federal question cases, federal common law controls the

existence and application of evidentiary privileges. See Fed. R.

Evid. 501 (stating that privilege “shall be governed by the

principles of the common law as they may be interpreted by the

courts of the United States in the light of reason and

experience”). The Supreme Court has directed that although

courts have the power to be flexible and adaptive with regard to

the law of privilege, they should not use the power to recognize

new privileges expansively. See Univ. of Pa. v. EEOC, 493 U.S.

182, 189 (1990) (“We do not create and apply an evidentiary

privilege unless it ‘promotes sufficiently important interests to

outweigh the need for probative evidence’” (citing Trammel v.

United States, 445 U.S. 40, 51 (1980))). Moreover, the Supreme

Court has indicated that recognition of any privilege contravenes

the “fundamental principle” that the public has a right to every

person’s evidence. Trammel, 445 U.S. at 50 (quoting United

States v. Bryan, 339 U.S. 323, 331 (1950)).

When the forum state has recognized a particular privilege,

a court may take that into account when deciding whether to

recognize that privilege as part of federal law. See Jaffee v.

Redmond, 518 U.S. 1, 12-13 (1996) (observing that “the policy

decisions of the States bear on the question whether federal

courts should recognize a new privilege or amend the coverage of

an existing one”). As a matter of comity, federal courts

recognize state privileges “where this can be accomplished at no

substantial cost to federal substantive and procedural policy.”

See United States v. King, 73 F.R.D. 103, 105 (E.D.N.Y. 1976);

see also 3 Joseph M. McLaughlin, Jack B. Weinstein & Margaret A.

Berger, Weinstein’s Federal Evidence § 501.03[5][b], at 501-25

(2d ed. 1995).

Although this Court must take the Massachusetts statute into

account, it must also heed the Supreme Court’s directive in

University of Pennsylvania that courts should be “especially

reluctant to recognize a privilege in an area where it appears

that Congress has considered the relevant competing concerns but

has not provided the privilege itself.” 493 U.S. at 189. In

that case, a Title VII suit brought by a female professor denied

tenure, the Supreme Court rejected the university’s assertion of

a peer review privilege with respect to documents produced by the

tenure committee. Id. at 189-92. The Court noted that Congress

could have created such a privilege for educational institutions

when it passed Title VII. That Congress did not do so evinced a

federal policy weighing against recognition of the privilege.

Id. at 189-90.3

Just as Congress chose not to include a privilege for

educational institutions in the Civil Rights Act, Congress

similarly chose not to include a medical peer review privilege in

the Health Care Quality Improvement Act of 1986, 42 U.S.C. §§

11101-11152 (“HCQIA”). The Act was designed to provide

“incentive and protection for physicians engaging in effective

professional peer review.” 42 U.S.C. § 11101(5) (2005). As

such, Congress extended qualified immunity from suit to those

conducting such peer reviews. 42 U.S.C. § 11111(a)(2) (2005).

Significantly, Congress did not also create a federal evidentiary

privilege for most documents produced during such a review,

indicating that it “not only considered the importance of

maintaining the confidentiality of the peer review process, but

took the action it believed would best balance protecting such

confidentiality with other important federal interests.”

3 Unlike this case, the university sought to assert a
privilege which was unrecognized in Pennsylvania state law.

Teasdale v. Marin Gen. Hosp., 138 F.R.D. 691, 694 (N.D. Cal.

1991). This Court must, especially in light of the Supreme

Court’s language in University of Pennsylvania, consider it

important that “Congress spoke loudly with its silence in not

including a privilege against discovery of peer review materials

in the HCQIA.” Id.; Nilavar, 210 F.R.D. at 602 (“Congress, in

enacting the HCQIA, carefully crafted a very specific privilege,

applicable to peer review material submitted to the Secretary

pursuant to the dictates of the mandatory reporting provisions of

that statute. That is as far as Congress went, and that is as

far as this Court should apply the privilege contained

therein.”); Johnson v. Nyack Hosp., 169 F.R.D. 550, 560

(S.D.N.Y. 1996).

It is against this background that the Court must decide

whether to recognize a federal medical peer review privilege.

The First Circuit case In re Hampers guides district courts in

determining whether to recognize a state privilege under Federal

Rule 501. 651 F.2d 19 (1981). Under the Hampers test, the Court

must first determine whether Massachusetts state law would

recognize the privilege, which it surely would in this case.

Hampers, 651 F.2d at 22. Then, the Court must decide whether the

privilege is “intrinsically meritorious.” Id. In order to make

this determination, the First Circuit has directed courts to

evaluate four factors: (1) whether the communications originate

in a confidence that they will not be disclosed, (2) whether this

element of confidentiality is essential to the full and

satisfactory maintenance of the relations between the parties,

(3) whether this relationship is one which ought to be sedulously

fostered, and (4) whether the injury that would inure to the

relation by the disclosure of the communications would be greater

than the benefit thereby gained for the correct disposal of

litigation. Id. at 23-24.

While the Massachusetts medical peer review privilege

satisfies the first three elements, under the fourth prong of

Hampers, this Court must weigh the benefits of enforcing the

privilege against the costs. Marshall v. Spectrum Med. Group,

198 F.R.D. 1, 4 (D. Me. 2000). Applying the Hampers test, two

courts have refused to enforce a state medical peer review

privilege in the employment discrimination and civil rights

areas. See Krolikowski v. Univ. of Mass., 150 F. Supp. 2d 246,

248 (D. Mass. 2001) (refusing to recognize Massachusetts medical

peer review statute under federal law in a sex discrimination

action); Marshall 198 F.R.D. at 5 ( finding that the defendant

medical group was entitled to access to peer review documents in

a case challenging termination of employment of a psychiatrist).

Blue Cross alleges that they will not be able to retain

outside consultants to aid or convince other institutions to

share information in the peer review process if the process is

subject to public disclosure. Consistent with this position,

Massachusetts courts have recognized that the Massachusetts

privilege is justified by the need to foster “rigorous and candid

evaluation of professional performance by a provider’s peers.”

Swatch v. Treat, 41 Mass. App. Ct. 559, 563, 671 N.E.2d 1004,

1007 (1996). Blue Cross points out that all fifty states have

adopted some form of the medical peer review privilege with

forty-six states enacting legislation that recognizes the

privilege. Further, the policies have been recognized

nationally.

Given that the HCQIA already provides for qualified immunity

from suit for those participating in peer reviews and that the

production of documents would be subject to a protective order to

preserve confidentiality, any concerns about discouraging

rigorous and honest evaluation of physician conduct by public

disclosure have been minimized. See Syposs v. United States, 63

F. Supp. 2d 301, 308-09 (W.D.N.Y. 1999) (finding that “the record

does not support the conclusion that such benefits [of peer

review] would be withheld by physicians unless their discussions

are treated as privileged.”).

In Hampers, the First Circuit counseled that courts should

“seek a more particularistic answer than the macrocosmic one that

effective federal criminal law enforcement is more important

than” the state interest sought to be protected by the state

privilege. See Hampers, 651 F.2d at 23. However, in University

of Pennsylvania, the Supreme Court cautioned that “a requirement

. . . beyond a showing of relevance, would place a substantial

litigation-producing obstacle in the way of the [EEOC’s] efforts

to investigate and remedy alleged discrimination.” 493 U.S. at

194. Thus the government should not be Hampered in its

investigation so long as it shows the documents sought could

likely be relevant. The government persuasively asserts that

given the similarity of the two investigations, it is likely that

the documents requested by the government will provide

substantial assistance in its endeavor. There is nothing in the

record that indicates that the government could easily get the

information elsewhere. While Blue Cross has apparently produced

reams of documents, including two of its own expert reports,

there is no indication that these include the doctor’s

explanation for his billing practice and the documentation he

produced to support his bills.

The Supreme Court has several times refused to recognize a

privilege when doing so would inhibit a federal investigation.

See United States v. Gillock, 445 U.S. 360, 373 (1980) (refusing

to recognize privilege for state legislators when doing so would

“impair the legitimate interest of the Federal Government in

enforcing its criminal statutes”); Trammel, 445 U.S. at 50

(refusing to extend spousal privilege when benefits would not

“outweigh the need for probative evidence in the administration

of criminal justice”).

Furthermore, the federal interest in this investigation is

to enforce laws against health care fraud, an interest other

federal courts have found sufficiently strong to refuse to

recognize a federal medical peer review privilege. See In re

Baptist Mem. Hosp., 2004 U.S. Dist. LEXIS 26153, at *7 (W.D.

Tenn. June 22, 2004) (refusing to recognize privilege when

government subpoenaed hospital peer review documents following an

indictment of a doctor for health care fraud); Accreditation

Ass’n for Ambulatory Health Care, Inc. v. United States, 2004

U.S. Dist. LEXIS 6493, at *7-9 (N.D. Ill. Jan. 8, 2004) (refusing

to apply medical review privilege when government sought “highly

relevant” documents in heath care fraud investigation against a

doctor); United States v. QHG of Ind., Inc., 1998 U.S. Dist.

LEXIS 23512, at *24 (N.D. Ind. Oct. 8, 1998) (compelling

production of documents in qui tam action seeking to recover from

a doctor for health care fraud).

Additionally, this decision comports with the findings of

the vast majority of federal courts that have faced this issue in

other contexts. See, e.g., Virmani v. Novant Health, Inc., 259

F.3d 284, 292 (4th Cir. 2001) (refusing to allow privilege in

case alleging discrimination during the peer review); Mem’l Hosp.

v. Shadur, 664 F.2d 1058, 1063 (7th Cir. 1981) (expressly

rejecting the privilege in the civil antitrust context); Nilavar,

210 F.R.D. at 604 (noting that the “vast majority” of federal

courts have refused to recognize the privilege); Syposs, 63 F.

Supp. 2d at 308 (refusing to apply the privilege in a Federal

Tort Claims Act case); but see Weekoty v. United States, 30 F.

Supp. 2d 1343, 1348 (D.N.M. 1998) (enforcing peer review

privilege when doing so will have a “minimal impact” on the

plaintiff’s claims); Cohn v. Wilkes Gen. Hosp., 127 F.R.D. 117,

121 (W.D.N.C. 1989) (enforcing peer review privilege in civil

antitrust action as an extension of the HCQIA prior to Supreme

Court’s ruling in University of Pennsylvania).

As such, the government has shown sufficiently that the

costs of withholding the documents would outweigh the benefits of

recognizing a medical peer review privilege in the context of a

federal criminal investigation. Therefore, the Court will not

recognize a federal medical peer review privilege under Rule

501.4

IV. CONCLUSION

The motion to compel production (Docket No. 2.), as

modified, is ALLOWED.5

4 In light of the weight of authority declining to recognize
a federal peer review privilege, the standard of review is not
dispositive here. Thus, even if an administrative subpoena were
a nondispositive matter, I conclude that the recognition of a
federal privilege is contrary to law under 28 U.S.C. § 636.

5One issue that neither side has addressed is whether the
HCQIA allows the government access to any reporting by Blue Cross
to national registries or databases. Some caselaw suggests that
this information is privileged under 42 U.S.C. § 11137(b)(1).
See Med. Soc’y v. Mottola, 320 F. Supp. 2d 254, 259 (D.N.J. 2004)
(noting that “unless otherwise provided by state law, all
information collected by the Data Bank and ‘reported under the
subchapter’ is presumed confidential and is released only as

S/PATTI B. SARIS
United States District Judge

specifically provided by the HCQIA”). Because the parties have
not addressed this issue, the Court will not decide it sua
sponte.

Publisher Information
Note* This page is not part of the opinion as entered by the court.
The docket information provided on this page is for the benefit
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Jeremy M. Sternberg
United States Attorney’s Of f ice
John Joseph Moakley Federal Courthouse
1 Courthouse W ay
Suite 9200
Boston, MA 02210
617-748-3142
617-748-3971 (fax)
jeremy.sternberg@usdoj.gov
Assigned: 02/14/2005
LEAD ATTORNEY
ATTORNEY TO BE NOTICED representing United States of America
(Petitioner) Sara A. W alker
Blue Cross and Blue Shield
Landmark Center
401 Park Drive
Boston, MA 02115-3326
617-246-3513
617-246-3550 (fax)
sally.walker@bcbsma.com
Assigned: 08/23/2005
LEAD ATTORNEY
ATTORNEY TO BE NOTICED