## Facts

- Fred A. Smith, a Medicare beneficiary, was diagnosed with prostate cancer.
- Smith’s physician advised him that cryosurgical ablation of the prostate (cryosurgery) was his only treatment option.
- Before the March 1995 procedure, both the physician and the hospital informed Smith that prostate cryosurgery was considered “experimental and investigational” and therefore unlikely to be covered by Medicare.
- Smith signed forms acknowledging that Medicare might deny coverage and agreeing that he would be personally responsible for payment if the claims were denied.
- The physician billed $3,500 and the hospital billed $14,718.46, totaling $18,218.46.
- Health Care Service Corporation (HCSC), Illinois’s Medicare Part A and Part B carrier, denied the claims initially and on reconsideration on the ground that the procedure was experimental/investigational and not “reasonable and necessary.”
- Smith pursued further review within HCSC; a hearing officer issued an on-the-record decision denying the Part B claim (Feb. 26, 1996).
- Smith then sought administrative review before an Administrative Law Judge (ALJ). HCSC presented evidence that, at the time of treatment in 1995, (1) HCSC had a published policy treating prostate cryosurgery as experimental/investigational and noncovered, and (2) the American Urological Association described the procedure as experimental/investigational.
- The ALJ upheld the denial. The Medicare Appeals Council denied review, making the ALJ’s decision the final decision of the Secretary of Health and Human Services, Tommy G. Thompson.
- Smith filed suit in the Northern District of Illinois seeking judicial review of the final agency decision, arguing the denial was unlawful because the procedure was safe and effective, generally accepted, his only option, and successful in his case.
- The district judge referred the case to a magistrate judge for a report and recommendation; on cross-motions for summary judgment, the magistrate judge recommended judgment for the Secretary.
- Neither party filed timely objections. The district judge reviewed for clear error, adopted the report and recommendation in full, denied Smith’s motion, granted the Secretary’s motion, and entered final judgment for the Secretary.

## Issues

1. Whether the Secretary’s final decision that prostate cryosurgery in March 1995 was not “reasonable and necessary” because it was experimental and investigational was supported by substantial evidence on the administrative record.
2. Whether the denial of Medicare payment was arbitrary, capricious, an abuse of discretion, or otherwise contrary to law given Smith’s claim that the treatment succeeded and was medically appropriate for him.

## Decision

- The court denied Smith’s motion for summary judgment and granted the Secretary’s cross-motion.
- Because no party objected to the magistrate judge’s report and recommendation, the district judge reviewed it for clear error and found none.
- The court upheld the Secretary’s final decision that, at the time of service, prostate cryosurgery was properly treated as experimental/investigational and therefore not covered under Medicare as not “reasonable and necessary.”

## Legal Principles

- Medicare excludes payment for items and services that are not “reasonable and necessary” for the diagnosis or treatment of illness or injury. (42 U.S.C. § 1395y(a)(1)(A))
- On judicial review of a final Medicare coverage determination, the court applies a highly deferential standard and will affirm if the decision is supported by substantial evidence and is not arbitrary, capricious, or contrary to law.
- “Substantial evidence” is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion; the court does not reweigh the record or substitute its own judgment for the agency’s.
- In assessing whether a service was “reasonable and necessary,” the agency may rely on coverage policies in effect at the time of treatment, medical society characterizations, and national coverage determinations assessing the state of proof regarding effectiveness.
- A favorable outcome for an individual patient, even where the patient asserts the treatment was his only viable option, does not by itself require Medicare payment when the agency reasonably finds the procedure lacked sufficient evidentiary support and was regarded as investigational during the relevant period.
- When a magistrate judge issues a report and recommendation and the parties do not file timely objections, the district court may adopt the recommendation after reviewing for clear error.

## Conclusion

The Northern District of Illinois affirmed the Secretary’s denial of Medicare reimbursement for Smith’s March 1995 prostate cryosurgery, holding that the final agency decision was supported by substantial evidence—including the carrier’s contemporaneous noncoverage policy and medical-community descriptions of the procedure as investigational—and was not arbitrary or contrary to law, even though Smith’s treatment was successful and described as his only option.


Smith v. Thompson, 210 F. Supp. 2d 994 (2002)