George M. (Blue Cross Blue Shield of Michigan)
George M. was admitted to a residential treatment facility with a primary diagnosis of cocaine dependency and a secondary diagnosis of depression. Upon admission he said that he had smoked 3 grams of cocaine and drank 6 to 12 beers in the 48 hour period preceding his admission. He reported daily use of cocaine, three grams a day for 5 years and daily use of alcohol, 6-12 beers daily for 15 years. He had also used marijuana 3-5 times a week for 15 years and injected heroin 5-10 times over his lifetime. He reported that he spent an excessive amount of time trying to obtain drugs or recover from drugs and he frequently drove an automobile under the influence of drugs.
The treatment facility contacted Blue Cross Blue Shield of Michigan (BCBSM) and verified that inpatient Chemical dependency and psychiatric benefits were payable under the health plan at 100% of “Usual, Reasonable & Customary” (URC) charges subject to a $250 deductible, and a 30 day calendar year maximum.
George M. proceeded with inpatient treatment, which included 12-step meetings, family, group and individual therapy. When he was discharged from treatment, the discharge summary noted his condition at the time as “anxious and guarded”, but his prognosis was stated as “fair”.
The facility submitted a claim for benefits, which was initially denied because of an alleged non-receipt of medical records. An Explanation of Benefits (EOB) form from BCBSM stated that $18,572.30 in charges were rejected because “medical information requested not received”.
The facility forwarded all medical records to BCBSM. After that, there were numerous telephone contacts between the facility and BCBSM. The facility verified that BCBSM had received all medical information it needed and that the claim was in review. But nothing further originated from BCBSM for the next 6 months.
Ultimately, the facility received a letter from the BCBSM’s “Medical Director”, which stated: “BCBSM has completed its review of the medical documentation supplied to us in support of your request for payment . . .Based upon that review, BCBSM has denied the entire admission because: There is no documented evidence of recent bonafide outpatient treatment; The patient was not imminently suicidal; The patient was not psychotic. For all of these reasons, BCBSM has denied the entire admission on the basis of lack of acuity and severity of illness and no documented intensity of service so as to require inpatient treatment.”
ERISA requires that if a claim is denied, the insurer must specifically state the reasons for the denial. The regulations require even more than this. They impose an obligation on the insurer to, among other things, specifically identify the plan provision(s) that the claim denial is based upon.
These requirements exist for a purpose. As explained by the court in Halpin v. W.W. Grainger, Inc. 962 F.2d 685. (7th Cir., 1992): “(T)hese regulations are designed to afford the beneficiary an explanation of the denial of benefits that is adequate to ensure meaningful review of that denial. . . . The persistent core requirements of review intended to be full and fair include knowing what evidence the decision-maker relied upon, having an opportunity to address the accuracy and reliability of that evidence, and having the decision-maker consider the evidence presented by both parties prior to reaching and rendering his decision. These requirements enable the claimant to prepare adequately ‘for any further administrative review, as well as appeal to the federal courts’”. Id at 689. (Emphasis added. Internal citations omitted).
BCBSM’s denial letter adhere violated both the statute and the regulations. No specific reason for the denial was stated in that letter in any way that it could be understood by the plan participant, nor was there any remote reference to any plan provision upon which the denial was based.
I submitted an administrative appeal, which called attention to BCBSM’s statutory and regulatory violations, pointing out that the internal review standards of ERISA had clearly been breached. I also noted that the standards set forth in the denial letter appeared to have been pulled out of thin air. There was no plan provision that referenced any of the criteria relied upon by BCBSM (i.e. “patient was not imminently suicidal; patient was not homicidal; or patient was not psychotic.”). I also stated that, in the absence of such plan provisions, I wanted very much like to see any literature, or other generally accepted medical authority, which equated “medical necessity” with such criteria or held that “medical necessity” could be determined by reference to such criteria.
It appeared to me that BCBSM had either retroactively promulgated its own set of standards and requirements for impatient care, or it was simply reciting its own internal certification guidelines, which I felt was more likely. The basis for my observation was that the denial letter originated from BCBSM’s “Medical Director of Mental Health Management Systems”. The title alone would indicate that person performed “managed care” services for BCBSM. However, “managed care” responsibilities and fiduciary responsibilities under ERISA are fundamentally different. The internal, subjective, cost-containment standards, that a managed-care entity may choose to apply, prospectively (or even concurrently), to certify the “medical necessity” of a proposed treatment are not necessarily the same as the more objective standards, to be applied by a plan fiduciary, or by the courts, when making a retrospective claims determination as to “medical necessity”. Nor is it proper to use certification guidelines, which are not a part of the plan, in making ultimate determinations about the “medical necessity” of inpatient care. This issue was squarely addressed by the Eleventh Circuit Court of Appeals in Florence Nightingale Nursing Serv., Inc. v. Blue Cross/Blue Shield of Alabama, 41 F.3d 1476, 1480, 1483-1484 (11th Cir., 1995) cert. denied, 131 L. Ed. 2d 1003, 115 S. Ct. 2002 (1995).
Result: The case was resolved satisfactorily without litigation.