D. Woods (Self-Funded Plan administered by Professional Benefit Services, Inc.)
D. Woods was admitted to a residential treatment facility for heroin dependence, cocaine and alcohol abuse, where she spent 76 days as an inpatient. She was 39 years old at the time and had been told that a condition of her returning to work was that she complete a full course of treatment for substance abuse.
D. Woods executed a standard Assignment of Benefits form, by which she expressly assigned all of her Plan benefits to the treatment facility. Therefore, under the law, the facility had standing to assert whatever rights she had, relating to the Plan, including the right to pursue administrative remedies, the right to request plan documents and other information, as well as the right to pursue legal action against the Plan to recover benefits, if necessary.
Upon admission, an employee of the treatment facility spoke with a representative of the Plan, who verified that inpatient benefits were payable at 80% “Usual, Reasonable & Customary” (URC) for the first $31,000 in charges and then payable at 100% URC, thereafter, subject to a $100 deductible and a lifetime maximum for substance abuse treatment of “two complete courses”. The facility employee also spoke with a representative from Western Medical Review (WMR) and obtained pre-certification for the admission. The facility employee then spoke to a person from Community Care Network (CCN), and was told that because the facility was not an acute facility; no further reviews (e.g. “utilization reviews”) need be done, provided benefits were available.
A claim for benefits was submitted by the facility. A response letter from Professional Benefit Services, Inc. (PBS) stated that: (1) since the facility was “not part of the preferred hospital network”; therefore, not entitled to “contract rates” under the plan; (2) Since no utilization review had been done by WMR, PBS was “unable to accept billing”; and (3) “our records show (a lack of premium payment.” None of those statements proved to be correct, as no such “reviews” were required and all premium payments had been timely made. Despite these statements, the claims auditor from PBR asked that all medical records be sent to it for review. That was done.
Three months later, the facility sent a letter inquiring as to the status of the claim. PBS then sent the file Materiel Resource Associates, Inc. (MRA) for an outside “Physician Advisor peer review"”, which concluded that a “three week in house substance abuse program”, was feasible for Ms. Woods. It was MRA’s recommendation that PBS pay nothing on the claim. The basis for this recommendation, which appeared in its report, was that the entire amount charged by the treatment facility was an "overcharge". PBS then sent the facility a letter stating, “Based upon the report submitted by the medical reviewer, it appears that Ms. Woods' stay . . . is not eligible for reimbursement under the terms of her policy and was not supported by medical necessity.”
The facility sent a detailed letter to PBS, taking issue with the denial, explaining the incorrectness of PBS’s conclusions and requesting a further review, but PBS did not respond. ERISA requires that each plan establish internal procedures for a "full and fair review" of claims disputes. Since PBS ignored the facility, the internal review standards of ERISA were breached.
In essence, this case involved a claims administrator, either making up the rules or changing the rules as it went along. The facility was told upon Ms. Woods’ admission that no further reviews were necessary, following the initial pre-authorization for admission. So it justifiably relied upon the representations that were made by responsible individuals, authorized to speak on behalf of the plan. Based upon those representations, the necessary treatment was provided. Moreover, the medical necessity for Ms. Woods’ treatment could not have been clearer. Only after she had incurred substantial medical expense, did the plan reverse itself and deny on grounds of "medical necessity". The plan did this, utilizing a post-admission review procedure, which CCN had said was not necessary.
Nevertheless, PBS would not reverse its decision, so I was retained. I directed a further administrative appeal letter to the Plan Administrator (employer). The initial response of the employer was skeptical, suggesting that the facility did not meet the plan’s definition of a “Primary Treatment Facility”, because it did not provide 24-hour nursing services. This was yet another new ground to try to justify the denial.
I wrote back a response that stated as follows: “(S)ince the submission of this claim, more than two years ago, the plan has offered various ill-grounded excuses for not paying it. These . . . include the following: (1) (The facility) was “not part of the preferred provider hospital network”; (2) The plan’s “records show (a lack of premium payment
. . .”; (3) The plan was “unable to accept billing, without the utilization and review certification . . .”; (4) The entire amount, charged . . . were "provider overcharges"; (5) “The patient did not receive substantive treatment for (a substance abuse) problem; (6) “There is an indication that the patient was treated for depression (in fact this was the primary treatment rendered) . . .” (7) “The medical necessity for hospitalization for . . . substance abuse . . . was not present; and (8) “The provisions of Ms. Woods' plan cover only impatient acute-care treatment and (the facility) does not meet this requirement." It seemed clear at that point that PBS simply could not make up its mind as to why it didn't want to pay the claim. It just didn't want to pay it.
Result: The claim denial was administratively reversed and the claim paid in full.