Lee v Kelly [2005] FCA 26 (7 February 2005)

Last Updated: 7 February 2005

FEDERAL COURT OF AUSTRALIA

Lee v Kelly [2005] FCA 26

ADMINISTRATIVE LAW - Professional Services Review Scheme - whether a medical practitioner has engaged in "inappropriate practice" in connection with the rendering or initiation of services for which Medicare benefits are payable – investigative referral – adjudicative referral – referral period - "prescribed pattern of services" – breach of the 80/20 rule – exceptional circumstances – s 92 Agreement

Health Insurance Act 1973 (Cth) - Part VAA – ss 92, 106KA
Administrative Decisions (Judicial Review) Act 1977 (Cth) – ss 11(1)(c) and 11(3)
Judiciary Act 1903 (Cth) - s 39B(1A)
Health Insurance (Professional Services Review) Regulations 1999 (Cth) – Regs 11(b)

Daniel v Kelly (2003) 200 ALR 379 referred to

Dimian v Health Insurance Commission [2004] FCA 1615 referred to

Hatcher v Cohn [2004] FCA 1548 referred to
Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; (2001) 206 CLR 323 cited

Oreb v Willcock [2004] FCA 1520 referred to

IL SONG LEE v BERNARD KELLY, ELIZABETH MAGASSY and VAN PHUOC VO AND THE DETERMINING AUTHORITY AND HEALTH INSURANCE COMMISSION AND ALAN JOHN HOLMES
N 568 of 2003


JACOBSON J
SYDNEY
7 FEBRUARY 2005

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 568 of 2003

BETWEEN:	IL SONG LEE APPLICANT
AND:	BERNARD KELLY, ELIZABETH MAGASSY and VAN PHUOC VO constituting the Professional Services Review Committee No 348 FIRST RESPONDENTS THE DETERMINING AUTHORITY established by s 106Q of the Health Insurance Act 1973 (Cth) SECOND RESPONDENT HEALTH INSURANCE COMMISSION THIRD RESPONDENT ALAN JOHN HOLMES in his capacity as Director of Professional Services Review FOURTH RESPONDENT
JUDGE:	JACOBSON J
DATE OF ORDER:	7 FEBRUARY 2005
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.	The finding by the first respondents that the applicant engaged in inappropriate practice and the finding that exceptional circumstances did not exist, must be set aside.

2.	The matter should be remitted to the Director to determine whether a referral to another, differently constituted, Professional Services Review Committee should be made.

3. The first respondent is to pay the applicant’s costs of the proceedings.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 568 of 2003

BETWEEN:	IL SONG LEE APPLICANT
AND:	BERNARD KELLY, ELIZABETH MAGASSY and VAN PHUOC VO constituting the Professional Services Review Committee No 348 FIRST RESPONDENTS THE DETERMINING AUTHORITY established by s 106Q of the Health Insurance Act 1973 (Cth) SECOND RESPONDENT HEALTH INSURANCE COMMISSION THIRD RESPONDENT ALAN JOHN HOLMES in his capacity as Director of PROFESSIONAL SERVICES REVIEW FOURTH RESPONDENT

JUDGE:	JACOBSON J
DATE:	7 FEBRUARY 2005
PLACE:	SYDNEY

REASONS FOR JUDGMENT

Introduction

1 This is an application for review of decisions made by the first respondent ("Committee 348") and the fourth respondent ("the Director") under the peer-review based Professional Services Review Scheme ("the Scheme") contained in Part VAA of the Health Insurance Act 1973 (Cth) ("the Act").

2 I described the Scheme in my decision in Oreb v Willcock [2004] FCA 1520 ("Oreb") at [28] – [70]. I also set out the relevant provisions of the Act. I will not repeat what I said in Oreb about the Scheme or the Act. As in Oreb, the relevant provisions are those in the Act as it stood in 1999.

3 The applicant ("Dr Lee") seeks review of the decisions under ss 5 and 6 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the ADJR Act") and s 39B(1A) of the Judiciary Act 1903 (Cth) ("the Judiciary Act").

4 The decisions which Dr Lee challenges are, first, an adjudicative referral made by the Director on 9 July 2002 and, second, a finding made by Committee 348 that Dr Lee engaged in inappropriate practice and that exceptional circumstances did not exist; see s 106KA of the Act. The Final Report of Committee 348 was made on 10 April 2003.

5 The application was filed on 9 May 2003. The application for a review of the decision of Committee 348 was filed within the time limited by ss 11(1)(c) and 11(3) of the ADJR Act. An extension of time under the ADJR Act or a favourable exercise of my discretion under the Judiciary Act is required for any order of review of the adjudicative referral.

6 The Further Amended Application raises, in addition to the grounds of judicial review, three Constitutional questions. On 28 October 2004 I made an order severing the Constitutional questions and providing for the hearing of the claims for judicial review before the hearing of the Constitutional questions.

7 Dr Lee raised two questions for consideration. The first was a "s 92 question" which is similar to the question on which I found against the applicant in Oreb and in Dimian v Health Insurance Commission [2004] FCA 1615 ("Dimian").

8 The second question is whether the Final Report of Committee 348 was affected by jurisdictional error in its approach to the question of whether "exceptional circumstances" existed pursuant to s 106KA(2) of the Act and Regulation 11(b) of the Health Insurance (Professional Services Review) Regulations 1999 (Cth) ("the Regulations").

9 A similar question arose in Oreb. However, here, Dr Lee contends that the nature of the jurisdictional error which affects the finding of inappropriate practice travels beyond the scope of the error which affected the Committee’s report in Oreb.

10 In particular, Dr Lee contends that Committee 348 took into account irrelevant considerations of a racial nature. These may be summarised as considerations of the need for Dr Lee’s Korean patients to integrate into the Australian community.

11 Dr Lee also contends that Committee 348 asked itself the wrong question by considering whether his Korean patients should integrate into the Australian community instead of asking whether exceptional circumstances existed under Regulation 11(b) by reason of the characteristics of Dr Lee’s patients.

The Factual Background

12 On 3 June 2002, the third respondent ("the Commission") referred Dr Lee’s conduct to the Director under investigative referral no 348. The referral period was 8 January 2001 to 12 October 2001. The Commissioner considered that Dr Lee had engaged in inappropriate practice by reason of a prescribed pattern of services under s 106KA of the Act and Regulation 11.

13 The prescribed pattern of services to which the Commission referred was that Dr Lee had rendered 80 or more attendances per day on 37 occasions during the referral period. This was a breach of the 80/20 rule to which Ryan J referred in Daniel v Kelly (2003) 200 ALR 379 at [8].

14 The Further Amended Application in these proceedings seeks review of the investigative referral but this was pursued only in a formal way in the written submissions. It was not addressed at the hearing.

15 On 5 June 2002 the Director wrote to Dr Lee informing him of the investigative referral. The letter was in the same form as the letters to which I referred in Oreb at [92] and [107] and in Dimian at [22]. However, for completeness, I will set it out in full as follows:-

"On 4 June 2002, I received Investigative Referral No 348 from the Health Insurance Commission (the HIC) regarding your conduct in relation to the Medicate program.

I understand that the HIC has delivered to you a copy of the referral documentation and the relevant sections of the Health Insurance Act 1973 (the Act). In accordance with subsection 89(1) of the Act, I must carry out an investigation of this referral. Following the investigation, I have the option to:

• dismiss the referral for the reasons set out in section 91 of the Act,
• enter into an agreement with you as set out in section 92 of the Act, or
• refer the matter to a Professional Services Review Committee as set out in section 93 of the Act.

Subsection 88(3) of the Act provides that you may make written submissions to the Director, within 14 days of the day when you were sent the referral, as to reasons why the Director should dismiss the referral without setting up a Professional Services Review Committee. I would be pleased to receive a submission from you and would give it careful consideration along with any other relevant documents or materials I may decide to obtain.

Should you wish to communicate with this office, the address and telephone numbers are detailed below. If you would prefer any further communications from this office to be directed to you at another address, I would appreciate your written advice.

If you have any questions, please contact the Administrative Officer, Mrs Belinda Steward, during business hours on 02-62819155."

16 Dr Lee did not respond to the letter.

17 On 9 July 2002, the Director made an adjudicative referral and established Committee 348 to consider whether Dr Lee’s conduct constituted inappropriate practice under s 82 of the Act.

18 The adjudicative referral was in almost identical terms to the adjudicative referrals in Oreb at [110] and Dimian at [27] – [30]. The Director stated that he did not dismiss the investigative referral because he was not satisfied that there were insufficient grounds on which a committee could reasonably find inappropriate practice.

19 The Director therefore established Committee 348 under s 93(1) of the Act. The adjudicative referral was in respect of Dr Lee’s attendances at his practice at 87 Rowe Street, Eastwood on the 37 days specified in the referral period.

20 Committee 348 held a hearing on 27 September 2002. Dr Lee tendered written submissions dated 27 September 2002 at the commencement of the hearing.

21 Dr Lee’s written submissions stated that he did not dispute that he had rendered 80 or more consultations a day on 20 or more days during the referral period.

22 The effect of Dr Lee’s written submissions was:-

• 90% of his patients are Korean-speaking or from a Korean background.

• He is one of only two Korean-speaking doctors practicing north of the Parramatta River.

• The Korean population has unique socio-economic and health characteristics.

• There is an absence of other medical services for Korean patients and this is an exceptional circumstance.

• There are five dedicated Korean practices in Campsie.

• There is one "Korean doctor" in Strathfield and two, including Dr Lee in Eastwood.

23 Dr Lee’s evidence at the hearing was to the same effect. He said that the Korean population of New South Wales is about 40,000 - 50,000.

24 He said his practice was unique because he deals mainly with patients from a Korean background and that he has an advantage over other doctors because he speaks Korean and understands the culture.

25 On 4 December 2002, Committee 348 provided a copy of its draft report to Dr Lee’s solicitors. The draft report contained a preliminary finding that Dr Lee had engaged in inappropriate practice on each of the 37 days specified in the referral period. It also contained a preliminary finding that exceptional circumstances did not exist on any of the days.

26 In [58] of the draft report, Committee 348 stated that, although Dr Lee provided an important service to the Korean community, the demographics of his patient base meant that the patients had sufficient English within their "closely knit" community to be able to obtain other medical assistance in an emergency.

27 In [59] of the draft, Committee 348 stated its view that Dr Lee’s management of his patients reinforced their reliance on his surgery.

28 On 14 January 2003, Dr Lee’s solicitors sent written submissions in response to the Draft Report to Committee 348. It is unnecessary to refer to the detail of the submissions save for portions of the response dealing with [58] and [59] of the draft. I will set out Dr Lee’s responses because they are referred to in an attachment to the Final Report and counsel for Dr Lee relies upon the attachment in support of his contentions of jurisdictional error.

29 In answer to [58] of the draft report, Dr Lee’s solicitors submitted, relevantly, as follows:-

"We submit the significant cultural and language barriers to effective communication between Dr Lee’s patient base and other health practitioners are not overcome merely by the availability of ‘sufficient English within their closely-knit support community to be able to obtain other medical assistance in an emergency’. We submit there was a genuine absence of other medical services (including, but not limited to, the absence of Dr Lee(f)) having regard to the location of Dr Lee’s practice and the characteristics of his patients."

30 The reference to Dr Lee (f) in this paragraph was to a female Korean-speaking doctor who worked for Dr Lee.

31 In answer to [59] of the draft report, the solicitors made, inter alia, the following submission:-

"We submit there is no evidence before the Committee to support a finding, conclusion or inference that either:

(a) ‘Dr Lee’s management of his patients reinforced their reliance on his surgery’ or, if that were so;
(b) ‘... this is to the disadvantage of his Korean patients."

32 In its Final Report, dated 10 April 2003, Committee 348 made findings of inappropriate practice and absence of exceptional circumstances.

33 The Final Report of Committee 348 contained an analysis of the meaning of "exceptional circumstances" in exactly the same terms as the report of the Committee in the matter of Oreb. I referred to the relevant paragraphs of the report in Oreb at [119] – [123]. In summary, Committee 348, after referring to extrinsic material to construe s 106KA(2) and Reg 11(b), came to the view that "exceptional circumstances" were most likely to be of an intermittent or episodic nature rather than a predictable on-going situation. It said that:-

".... The exception (s 106KA(2)) may be read as excusing lower standard services on particular days because of exceptional circumstances and it will be difficult to justify this on an on-going basis."

34 The Final Report of Committee 348 accurately summarised Dr Lee’s submissions as referred to at [22] – [24] and [29] – [31] above.

35 The salient paragraphs of the Final Report are as follows:-

"58. The Community accepted that Dr Lee provided an important service for the Korean community, however, the Committee felt the demographics of his patient base meant that the patients have sufficient English within their ‘closely knit’ support community to be able to obtain other medical assistance in an emergency. The Committee also found it difficult to reconcile Dr Lee’s apparently contradictory evidence that many patients have complex conditions, yet his surgery has a high through-put.

59. In the Committee’s view, Dr Lee’s management of his patients reinforced their reliance on his surgery. Arguably, this is to the disadvantage of his Korean patients who, though preferring a Korean doctor for the reasons Dr Lee stated, would have been better served by an increased familiarity and comfort with the general medical services available in the community.

60. Having considered Dr Lee’s evidence, the Committee was not satisfied that the above matters constituted exceptional circumstances which affected the rendering of services on the days in question. It considered that Dr Lee could and should have managed his practice so as to bring patient attendance rates down and not breach section 106KA of the Act and Part 3 of the Regulations.

63. The Committee considered the issues put forward by Dr Lee regarding exceptional circumstances, including the locum taking leave (maternity), as well as the pre and post holiday rush of patients and the unavailability of sufficient Korean doctors. The Committee noted that there were at least 30 active medical practitioners in the Eastwood area during the referral period. The Committee considered that Dr Lee should have managed his practice so as to regulate patient attendance and not breach section 106KA of the Act and Part 3 of the Regulations."

36 In an attachment to the Final Report, Committee 348 set out its responses to Dr Lee’s written submissions to the draft.

37 The response of Committee 348 to the submission I have set out at [29] above was as follows:-

"One could mount that argument about any culturally different group within the community. Other Committees have not had such a difficulty and the Committee is not convinced that the Korean community is sufficiently different from other non English speaking migrant groups that their situation must be treated differently from other groups."

38 The response of Committee 348 to the submission I have set out at [31] was:-

"Dr Lee’s submission is that Korean patients, by virtue of their language and culture need to consult with a Korean practitioner. This is the substance of his argument throughout the proceedings. He claims that his expertise in managing these patients is an expertise not shared by others in ‘his’ area. This is a philosophy which he believes and which he is therefore likely to share with his patients who, by virtue of this philosophy, must necessarily become reliant on his clinic.

The disadvantage is the dependency that such an attitude hinders assimilation of his patients into the wider community."

The s 92 Question

39 The claim that the adjudicative referral was affected by jurisdictional error by reason of the Director’s erroneous construction of s 92 or denial of procedural fairness is identical to the claims made in Oreb and Dimian. I reject it, subject to one qualification, for reasons which are essentially the same as I gave in Oreb at [181] – [182] and [187] and in Dimian at [45] - [51].

40 The Director fairly and squarely put to Dr Lee in the letter of 5 June 2002 set out at [15] the option of approaching the Director to negotiate a s 92 agreement. Dr Lee made no response to the letter. Nor did Dr Lee at any time approach the Director to discuss the possibility of entering into such an agreement.

41 The Director did not give evidence before me. However, any inference which Dr Lee seeks to draw from this cannot assist him. In my opinion, having referred to the possibility of a s 92 agreement in his letter of 5 June 2002, the Director had no further occasion to consider it in view of Dr Lee’s failure to raise the possibility with the Director.

42 No inference arises from the failure to refer to s 92 in the adjudicative referral. This is because s 92(6) of the Act provides that the Director must not disclose to a Panel member the content of any communication between the Director and the person under review in relation to proposals for an agreement under s 92. I overlooked that sub-section in my judgments in Oreb and Dimian. Accordingly, the inference to which I referred in Oreb at [200] and Dimian at [51] was not available and it cannot be drawn in the present case.

Exceptional Circumstances

43 In Oreb, I held that the Committee had wrongly construed the exceptional circumstances exception when it said that exceptional circumstances were limited, ordinarily, to intermittent or episodic circumstances rather than to on-going events. The approach which I took to the proper construction of s 106KA(2) and Reg 11(b) seems to me to be supported by the observations of Kiefel J in Hatcher v Cohn [2004] FCA 1548 ("Hatcher"). In Hatcher at [53] her Honour was of the view that the term "exceptional circumstances" in
s 106KA(2) does not import a temporal element.

44 As Kiefel J said in Hatcher at [52], "exceptional circumstances" in s 106KA(2) are an unusual circumstance or circumstances which caused or influenced the practitioner to exceed the number of services which ought to have been provided or which otherwise provides the explanation for the practitioner’s conduct.

45 The circumstances on which the practitioner relied in Hatcher were the shortage of doctors for the number of patients needing services in a rural area of Queensland and the doctor’s claim that he was the only practitioner who could provide medical services to disadvantaged people because he bulk-billed all his patients. Kiefel J found at [62] that the Committee did not deal with these claims.

46 Her Honour said in Hatcher at [63] that the Committee was of the view that because shortages of medical services were not uncommon in rural areas they could not be exceptional circumstances. But her Honour found that the Committee did not consider whether the shortages, in combination with the doctor’s claim that he was the only available provider of services, provided the explanation of the need for his services and whether they were exceptional.

47 Counsel for Dr Lee submitted that Committee 348 fell into a similar error to that made by the Committee in Hatcher. In particular, it was said, that Committee 348 asked itself the wrong question about the need for the services and took into account irrelevant considerations about the need for the patients to integrate into the wider Australian community.

48 Dr Lee’s claim of exceptional circumstances to Committee 348 was, in substance, that the need for his services was a circumstance outside his control because Korean patients demand a Korean doctor and that there were no other doctors (or perhaps only one other doctor) in the Eastwood area capable of providing the required services.

49 It does not seem to me that Committee 348 dealt with this claim and it did not consider whether those circumstances were exceptional. The approach which Committee 348 took was that the Korean patients had sufficient familiarity with or ability to access English speaking doctors in the area and that Dr Lee could have managed his practice to bring his patient attendance rates below the 80/20 rule. This approach is to be found at [58] – [60] of Committee 348’s Final Report.

50 Committee 348’s responses to Dr Lee’s submissions about the draft report merely explain the first limb of its approach. That is to say, Committee 348’s comments about the Korean community not being different from others and about "assimilation" inform its view stated in [58] – [60] that the Korean patients could access English speaking doctors in the Eastwood area. It was, according to Committee 348, a practice management issue which was within Dr Lee’s own control. Thus, as Committee 348 found at [63], there were 30 other practitioners in the Eastwood area and Dr Lee could have managed his practice accordingly.

51 However, I do not see that the present case is distinguishable from Hatcher. There, the applicant claimed that he was the only doctor who could provide medical services to disadvantaged patients. Here, Dr Lee claimed that he was one of the only doctors who could provide medical services to Korean patients. Regulation 11(b)(ii) directs attention to the ‘characteristics’ of the patients. It seems to me that these must include ethnic characteristics.

52 It is true that Committee 348 found there were 30 other medical practitioners in the Eastwood area and by inference, that Dr Lee’s patients could have seen them. However, in my opinion, this is not to the point, because Committee 348 assumed that Dr Lee’s patients could see non-Korean speaking doctors without considering whether they were able, or in a position, to do so and without asking whether this provided the explanation for their demands on Dr Lee. Nor did Committee 348 consider whether those circumstances were exceptional within s 106KA(2) and regulation 11(b).

53 Accordingly, in my opinion, Committee 348’s findings were affected by errors of law. As in Oreb, it commenced with a misunderstanding of what was meant by "exceptional circumstances". It then failed to ask itself the correct question as to what had given rise to the claimed exceptional circumstances and whether they fell within the terms of Reg 11(b). It distracted itself from addressing the correct question by taking into account an irrelevant consideration, namely the need for the patients to integrate within the wider community. These were jurisdictional errors; see Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; (2001) 206 CLR 323 ("Yusuf") at [84] (McHugh, Gummow and Hayne JJ).

54 As counsel for Dr Lee properly accepted, there were no racial undertones in the approach taken by Committee 348. It misdirected itself by focussing, wrongly, upon "assimilation" and the need for integration. But this does not in any way suggest racial bias.

55 Counsel for the respondents submitted that Committee 348 was entitled to take into account that the high level of servicing reflected an exercise of choice on the part of Dr Lee. It is true, as Kieffel J said in Hatcher at [53], that exceptional circumstances bringing about a large number of consultations must be circumstances which are out of the ordinary and which are beyond the control of the practitioner.

56 Thus, in Hatcher, even if the doctor exercised practice management to control the number of his services, this would not have addressed the shortage of medical services for disadvantaged people which was beyond the doctor’s control.

57 In the present case, it may have been open to Committee 348 to find that Dr Lee made a deliberate choice to see a large number of patients. Its finding that Dr Lee’s management "reinforced" reliance by his patients on his surgery suggests that this is what Committee 348 had in mind. However, reading the report fairly, it seems to me to fall short of a finding that the circumstances upon which Dr Lee relied were based upon an exercise of his own choice in the matter.

58 Counsel for the respondents also submitted that the irrelevant considerations upon which Dr Lee relied were not to be found in the terms of the Final Report. However, it seems to me that the considerations to which Dr Lee pointed are found in [58] and [59], particularly when read in light of the responses to the drafts of those paragraphs. The responses must be read as part of the Final Report. They appear in an attachment and seem to me to provide further explanation for the findings made in [58] – [59] of the Final Report.

Orders

59 It follows that the finding by Committee 348 of inappropriate practice and the finding that exceptional circumstances did not exist, must be set aside. The matter should be remitted to the Director to determine whether a referral to another, differently constituted, Committee should be made.

60 Dr Lee has succeeded on the only issue which was agitated, other than in a formal way, at the hearing. Accordingly, the first respondent should pay the applicant’s costs of the proceedings.

I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson

Associate:

Date: 7 February 2005

Counsel for the Applicant:	Mr M Robinson with Mr C Jackson
Solicitors for the Applicant:	Tress Cox
Counsel for the Respondent:	Ms R Henderson
Solicitors for the Respondent:	Minter Ellison
Date of Hearing:	27 October 2004
Date of Judgment:	7 February 2005