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Lynn R. v. ValueOptions

United States District Court, D. Utah, Central Division

August 22, 2017

LYNN R., as guardian of T.R., a minor, Plaintiff,
v.
VALUEOPTIONS, AT&T, f/k/a SBC Communications, & SBC UMBRELLA BENEFIT PLAN NO. 1 SNET ACTIVE BARGAINING UNIT EMPLOYEE HEALTH PLAN, Defendants.

          Paul M. Warner, Magistrate Judge

          MEMORANDUM DECISION AND ORDER

          ROBERT, SHELBY, United States District Judge

         Before the court are cross motions for summary judgment.[1] Plaintiff Lynn R., as guardian of T.R., brings this action under the Employee Retirement Income Security Act (ERISA).[2] Plaintiff moves for summary judgment, arguing Defendants ValueOptions (VO), AT&T, and SBC Umbrella Benefit Plan No. 1 wrongfully denied her benefits claim for her daughter's stay at Equine Journeys, a residential mental health treatment center. For the reasons discussed below, the court grants Plaintiff's Motion for Summary Judgment, [3] and denies Defendants' Motions for Summary Judgment.[4]

         BACKGROUND

         As an employee of AT&T, T. R.'s father participated in the SBC Umbrella Benefit Plan NO. 1 - SNET Active Bargaining Unit Employee Health Plan (the Plan). T.R. was a beneficiary of the Plan's Point of Service (POS) Option.[5] The Plan covered Mental Health and Chemical Dependency (MH/CD) treatment. T.R. has suffered from mental health related issues, leading to stays in several mental health facilities.[6] In this case, Defendants denied T.R.'s claim for benefits to cover her treatment at Equine Journeys, a residential mental health facility located and licensed in Utah.[7] Plaintiff Lynn R. now challenges this denial. T.R.'s father and mother are divorced and Lynn R. is T.R.'s custodial parent.

         The Plan administrator determines a eligibility for coverage under the Plan.[8] SBC Communications, Inc. was the Plan Administrator for the Plan as a whole, but Southern New England Telephone Company (SNET) was the Plan Administrator of components of the Plan.[9]As part of its role as Plan Administrator, SNET delegated discretionary authority to VO for MH/CD claims.[10]

         The Plan covered care provided at a Residential Treatment Center (RTC). Under the Plan, “RTC refers to a level of care that requires 24-hour onsite supervision as well as an array of therapeutic activities and education (as appropriate). While less restrictive than acute Inpatient care, residential treatment does have structure and rules that residents must follow to maintain their placement.”[11] Two Plan sections are at issue in this case, those relating to precertification and medical necessity. The court details each in turn.

         I. Precertification

         Before obtaining MH/CD treatment, Plan participants were encouraged, and in some cases required, to contact VO and obtain precertification. Specifically, the Plan stated:

When you call the MH/CD Claims Administrator, a wide range of resources will become available to you and your covered dependents, including referrals to: psychiatrists, psychologists, psychiatric Social Workers, masters level nurses, hospitals, clinics and chemical dependency programs. The MH/CD Claims Administrator is not a crisis center, but it can help provide referrals 24 hours a day, 365 days a year.
The POS Option requires review and Precertification of all MH/CD treatment. In order to receive MH/CD benefits under the POS Option, you must contact the MH/CD Claims Administrator and obtain pre-approval for (precertify) Inpatient, outpatient and non-Emergency MH/CD services . . . If you do not contact the MH/CD Claims Administrator and obtain Precertification prior to receiving your services, there will be no MH/CD benefits payable under the POS Option for these services, even if you see a Network provider. Precertification is not a determination of eligibility or guarantee of payment.[12]

         The Plan defined precertification as: “providing required notification or obtaining required pre-approval of certain medical services such as hospitalizations while working directly with the Claims Administrator's care coordinator. Precertification is designed to help you and your dependents receive quality medical care while controlling costs.”[13]

         II. Medical Necessity

         In accordance with its responsibility to precertify Plan participants for MH/CD services, VO had the added responsibility of determining whether treatment was “Medically Necessary.”[14] The Plan did not cover “services or supplies which in the opinion of the appropriate Claims Administrator [were] not Medically Necessary.”[15] The Plan defined “Medically Necessary” as follows, with the language at issue italicized:

Medically Necessary means, with respect to each service or supply, that the service or supply is needed and is appropriately provided, as evidenced by meeting all of the following requirements:
It is ordered by a Physician or clinician or is ordered by a chiropractor for certain chiropractic services
It is rendered for the treatment or diagnosis of an injury, illness or disease
It is appropriate for the symptoms, consistent with the diagnosis, and is otherwise in accordance with generally accepted United States medical standards and professionally recognized standards
The prevailing opinion within the appropriate specialty is that it is accepted medical treatment and is effective for its intended use, and that its omission would adversely affect the participant's condition
It is furnished by a provider with appropriate training, experience, staff, and facilities to furnish that particular service or supply
It is not mainly for the convenience of a participant or of the participant's Physician It is neither educational or developmental nor Experimental or Investigational in nature
It is the most appropriate supply or level of service needed to provide safe and adequate care[16]

         III. Denial Process

         Having set forth the relevant sections of the Plan, the court turns to VO's denial of T.R.'s claim. On March 8, 2012, T.R.'s father contacted VO to inquire about in-patient mental health treatment options for his daughter.[17] VO referred T.R.'s father to three facilities it deemed capable of providing treatment.[18] During the same conversation, VO notified T.R.'s father that “authorization is needed for [inpatient] behavioral healthcare” and “medical necessity info must be sent into VO” if he wished to admit his daughter for inpatient care.[19] It is not clear from the record whether Lynn R. received this information regarding precertification. Lynn R. did not seek precertification and enrolled T.R. in Equine Journeys for inpatient mental healthcare on April 3, 2012.[20] Equine Journeys was not one of the three facilities VO referred to T.R.'s father.

         Seven months after T.R.'s enrollment, a representative from Equine Journeys contacted VO to inquire about benefits.[21] At that time, the representative was quoted benefits at out-of-network rates.[22] Equine Journeys again contacted VO on February 1, 2013, requesting an address for claims and was told “notification is required[, ] if not received claims will deny.”[23]On the same day, Equine Journeys sent medical records to VO and requested a “retrospective review” for claims from April 3, 2012, through January 13, 2013.

         On February 18, 2013, VO issued a Provider Summary Voucher (PSV) stating: “Required authorization is not on file for this claim submission.”[24] However, after the February 18th PSV denial, VO engaged in further review of T.R.'s claim.[25] According to VO's records, on February 26, 2013, VO initially noted “there is no supporting documentation that the facility attempted to verify the member's RTC benefits and authorization requirements” and “per the member's benefit plan retro reviews are not allowed.”[26] VO did not simply deny the claim, but instead forwarded the claim to the appeals manager. On February 28, 2013, the appeals manager made an “administrative decision” to allow “a medical necessity review.”[27] On March 7, 2013, an administrative denial was entered for T.R.'s claim because Equine Journeys did not have “national accreditation.”[28]

         On March 12, 2013, VO issued a formal denial letter.[29] In relevant part, the letter stated: “This letter is to inform you that no certification or no additional certification was given for the above referenced member because: The provider is not eligible to receive reimbursement under the benefit plan; not nationally accredited.”[30] VO further stated its decision was “based on the information in the benefits plan as outlined in the Summary Plan description.”[31]

         On August 30, 2013, Lynn R. appealed VO's March 12th denial.[32] In her appeal, Lynn R. claimed that nowhere in the definition of RTC or “in any other plan provision does it state the facility has to be nationally accredited.”[33] Accordingly, Lynn R. argued that Equine Journeys was a state licensed facility and that VO's determination was arbitrary and capricious and an abuse of discretion.[34] Lynn R. provided VO with a copy of Equine Journeys' Utah business license, which enabled Equine Journeys to “provide residential treatment to youth clients, ages 13-18 years old.”[35] Moreover, Lynn R. provided VO with the Utah Administrative Code regarding Residential Treatment Programs demonstrating that Equine Journeys was “acting within the scope of its license.”[36] She then requested VO make a thorough first level member appeal review of T.R.'s claim from Equine Journeys based on the information she provided.[37]

         VO upheld its denial in a letter dated October 3, 2013, stating:

The reason for the prior denial was that there was not an authorization on file for the above dates of service. The current decision to deny your request was based on the fact that this non-participating facility is not eligible to receive reimbursement under your benefit plan because it does not have accreditation through The Commission on Accreditation of Rehabilitation Facilities (CARF) or The Joint Commission on Accreditation of Healthcare Organizations (JCAHO). Accreditation is required for the residential treatment center to be covered.[38]

         Lynn R. responded with a request for a level two member appeal review.[39] She asserted she “could not find a provision in any of the documents or plan materials which states that a provider must be accredited in order for residential mental health services to be payable.”[40]Further, she claimed VO failed to “fairly consider the licensure status of the facility” before “making their coverage determination.”[41]

         VO issued its final denial on December 23, 2013.[42] VO stated, “[t]he current decision to deny your request was because this non-participating facility is not eligible to receive reimbursement under your benefit plan because it does not have accreditation through [CARF] or [JCAHO]. Accreditation is required for the residential treatment center services to be covered.”[43]VO then asserted, “[i]n addition, our records show that the initial contact received regarding your daughters admission to Equine Journeys was received on November 20, 2012, 7 months after she was admitted.”[44] VO added that “[a]ll level of appeals have been exhausted.”[45] Lynn R. appealed VO's final decision to this court.

         ANALYSIS

         The court now considers cross motions for summary judgment under ERISA. When considering such motions, “the factual determination of eligibility for benefits is decided solely on the administrative record, and the non-moving party is not entitled to the usual inferences in its favor.”[46] Further, the court may consider only the bases for denial the plan administrator articulated in the administrative record.[47]

         The court reviews these asserted bases for denial of benefits “de novo . . . unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.”[48] Where the plan gives an administrator discretionary authority, the court employs a “deferential standard of review, asking only whether the denial of benefits was arbitrary and capricious.”[49] Here, the parties agree the court will review VO's denial of benefits under an arbitrary and capricious standard.[50]

         Plaintiff first argues that VO did not adequately assert lack of precertification as a rationale for denial in the administrative record, and thus the court should not consider this rationale on appeal. Second, Plaintiff argues that the rationale VO did assert-lack of national accreditation-is arbitrary and capricious because this requirement did not appear in the language of the Plan. The court addresses each argument in turn.

         I. Precertification

         In reviewing VO's decision to deny benefits, the court “may only consider the evidence and arguments that appear in the administrative record” and “determine whether the decision, based on the asserted rationale, was arbitrary and capricious.”[51] If VO did not assert precertification as a basis for its denial in the administrative record, the court cannot consider this rationale on appeal.

         “To determine whether a plan administrator considered and asserted a particular rationale, we look only to those rationales that were specifically articulated in the administrative record as the basis for denying a claim.”[52] ERISA requires claim administrators to “provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant . . . .”[53] Accordingly, a claim denial must contain “[t]he specific reason or reasons for the adverse determination” and “[r]eference to the specific plan provisions on which the determination is based.”[54]

         Based on a review of the administrative record, the court concludes VO failed to assert precertification as a specific reason for denial in a manner calculated to be understood by the participant. Significantly, Defendants issued four denials of payment, yet in not one denial is the phrase “lack of precertification” found.

         The initial denial, the February 18th PSV, went to Equine Journeys and not the participant. It is unclear, therefore, how much weight this communication should be given. But even treating this communication as if it had gone directly to the beneficiary, precertification was not articulated in a manner calculated to be understood by the participant. This denial stated in a footnote in fine print “HQ - Required authorization is not on file for this claim submission.”[55] The PSV speaks of “authorization” and never mentions precertification. Presumably there are a number of reasons that a “required authorization” may not be on file for a claim.

         The next communication, the March 12th denial letter addressed to T.R., provides one basis for denial-Equine Journeys' lack of national accreditation. The March 12th letter stated, in relevant part, “[t]his letter is to inform you that no certification or no additional certification was given for the above referenced member because: The provider is not eligible to receive reimbursement under the benefit plan; not nationally accredited.”[56] This communication clearly fails to provide lack of preauthorization as a basis for denial, as it does not mention precertification or authorization in any way.

         The October 3rd denial letter does not fare much better. This letter mentions lack of authorization as a reason for prior denial, without citing to any specific prior denial or linking the lack of authorization to precertification.[57] The letter then explains:

The current decision to deny your request was based on the fact that this non-participating facility is not eligible to receive reimbursement under your benefit plan because it does not have accreditation through The Commission on Accreditation of Rehabilitation Facilities (CARF) or The Joint Commission on Accreditation of Healthcare Organizations (JCAHO). Accreditation is required for the residential treatment center services to be covered.[58]

         Finally, the December 28th denial letter states in relevant part

The current decision to deny your request was because this non-participating facility is not eligible to receive reimbursement under your benefit plan because it does not have accreditation through The Commission on Accreditation of Rehabilitation Facilities (CARF) or The Joint Commission on Accreditation of Healthcare Organizations (JCAHO). Accreditation is required for the residential treatment center services to be covered. You, or an ...

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