If the standard of review is deferential, logic goes out the window.
Oasis Treatment Center, Inc. vs. The Travelers Insurance Co. (Related Cases) Case Nos: SACV 97-799 AHS and SACV 97-800 AHS (9th Cir. Case Nos: 99-55225 and 99-55226)
Oasis Treatment Center is a residential treatment facility in Anaheim, California, providing rehabilitative treatment for alcoholism and drug dependency. The case involved two ERISA claims for health benefits for two patients treated at Oasis. Both patients were covered under separate employee benefit plans, each established pursuant to ERISA and each insured by The Travelers Insurance Company ("the Travelers"), under virtually identical group insurance policies.
The first patient became addicted to prescription drugs as a result of 14 abdominal surgeries and a 16-year history of chronic pain. When she arrived at Oasis, she had to be immediately transported to a detoxification center for acute-care detox. When she arrived at the detox center, she was unable to walk and had to be physically carried into the building; she couldn’t sign her name; her blood pressure was 64/48; and she appeared to be going into shock, as a result of drugs taken on the plane that day.
After completing 5 days detox., she was transferred back to Oasis, where she began a full-time inpatient rehabilitative treatment program for drug dependency. Two weeks later she was successfully stepped down to a “partial hospitalization” level off care and two weeks after that she was discharged.
The second patient was a chronic alcoholic with a 10-year history of drinking. At the time of his admission he was consuming an average of four six-packs of beer a day. Upon arrival at Oasis, he was intoxicated. In fact, he had planned to come into treatment a week earlier, but couldn't make it, because he was too drunk to get on the plane.
Prior to each admission, Oasis verified benefits, both telephonically and in writing and it obtained written approval for each admission.
One week after the first patient’s admission and three days after the second patient’s admission, a “Patient Advocate” contacted Oasis to advise that The Travelers had changed its mind and that in each case no further treatment would be covered for lack of “medical necessity”. In each case, the stated reason for withdrawing certification was the same: “(T)he services being rendered could be accomplished in a less intensive or more appropriate alternative setting.” However, in neither case was such a “setting” identified. Telephonic appeals were pursued in both cases, but the non-certification decisions were upheld. Nevertheless, Oasis continued to provide treatment for both patients until they had each completed their primary treatment programs and were ready, in the opinion of the attending physician, to be discharged.
Oasis submitted claims for benefits. The Traveler’s claims administrator, MetraHealth, paid approximately 10% of the total charges and denied all remaining charges. Interim appeals were pursued, during which MetraHealth, steadfastly upheld its own denials on grounds of an alleged lack of "medical necessity" for the treatment rendered. In upholding the denials, MetraHealth recited various criteria, standards or "guidelines" for determining "medical necessity" that were of unknown origin. A final administrative appeal was taken, but to no avail. So ultimately, I filed a lawsuit.
The matters were consolidated in the District Court. Both sides made motions for summary judgment. The trial court granted The Travelers’ motions for summary judgment and denied plaintiff's motion, applying a deferential standard of review.
The case was appealed to the Ninth Circuit. A three judge panel reversed the District Court’s judgment, finding the proper standard of review to be de novo.
Result: Both cases were resolved satisfactorily.