Health claims denied based on application of undisclosed medical criteria.

Spencer Recovery Centers, Inc., vs. Blue Cross Blue Shield of Michigan (Related Cases) Case Nos: SACV 00-786 DOC, SACV 00-787 DOC, SACV 00-788 DOC

This case involved three claims for health benefits for three patients treated at a residential treatment facility, providing rehabilitative treatment for alcoholism and drug dependency. Blue Cross Blue Shield of Michigan (BCBSM) denied all three claims.

Patient No. 1 was a 29 year-old male, with a 6 year history of alcohol dependence. He regularly consumed up to 24 beers or 2 fifths of liquor a day. He had been in detox 3 times, the most recent detoxification being 4 months prior to his admission. He had also been in and out of psychiatric hospitals approximately 6 –7 times in the preceding 7 years.

Patient No. 2 was a 48 year-old male, with a 30 year history of alcohol dependence. He had five prior arrests for driving under the influence (DUI).

Patient No. 3 was a 38 year-old male, with a 20 year history of alcohol dependence and a 5 year history of cocaine abuse. He regularly consumed 1/2 to 1 pint of liquor a day and $300.00 to $500.00 worth of crack cocaine every week. Following his admission he continued with group and individual therapy as part of Spencer's inpatient rehabilitation program, until the date of his discharge 17 days later. At no time during the course of his treatment did any physician, acting on behalf of the Plan, ever physically examine or speak to him; and at no time during his treatment did any representative of the Plan, ever identify or propose any alternative course of treatment to help him overcome his problems with cocaine and alcohol dependency.

A claim was submitted following each patient's discharge and each claim was denied by BCBSM on the stated ground that "This service is not a benefit of the subscriber's Health Plan." The denial letter stated that Spencer could appeal and that if the initial denial was upheld, the cost of the appeal would be assessed against Spencer.

ERISA puts the burden of conducting a "full and fair" review of an initially denied claim squarely upon the Plan. Allowing the benefit plan to assess costs of an administrative appeal against a Plan Participant (or his medical provider / assignee) would result in a shirking of fiduciary responsibility imposed by ERISA and the regulations.

The denial letter went on to say that a “second opinion retrospective medical record review” had been conducted by a plan physician; however, neither the identity nor the qualifications of this “physician advisor” were disclosed, nor was any report or other written evidence of this review produced for analysis and comment by Spencer. Therefore, it was impossible to fashion any kind of an intelligent response to the letter.

All of the claims were apparently denied based upon the application of undisclosed medical criteria for determining "medical necessity" after review by an anonymous consulting physician, who stated an opinion that was diametrically opposed to the opinion of the treating physician in each case. The treatment for the first two of the patients was all case-managed and “certified” by BCBSM. For Patient No. 3 Spencer was told that no pre-certification was required.

Three separate lawsuits were filed, which were consolidated for trial. Shortly after they were filed the cases were resolved satisfactorily.

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