Three health claims denied despite obvious need for treatment.
Spencer Recovery Centers, Inc., vs. Blue Cross Blue Shield of Michigan (Related Cases) Case Nos: CV 01-6687 ABC, CV 01-6689 ABC, CV-016692 ABC
This case involved three separate claims for health benefits for three patients treated at Spencer, all within the same time frame. All three claims were denied by Blue Cross Blue Shield of Michigan (BCBSM).
Patient No. 1 was a 48 year-old female, with a 15-year history of Multiple Sclerosis. She was also legally blind and wheelchair bound. She was admitted to Spencer’s treatment facility with mixed addictions to opiates. Before admission, Spencer contacted BCBSM to verify the availability of benefits under the patient’s health benefit plan. A BCBSM representative advised that inpatient benefits for chemical dependency treatment were payable under the Plan.
Spencer provided treatment and then submitted a claim to BCBSM. The claim was denied by BCBSM’s mental health Administrator, Magellan Health Inc.. No reason was given. However, curiously, the letter stated that an "external review" could be requested, but that the cost for conducting that review would be the full responsibility of Magellan, only if the denial was fully overturned. The letter said the cost of the "external review" would be the responsibility of the requesting party if Magellan's denial was upheld. And if the denial was only partially overturned, the letter said the cost would be "billed to both parties in accordance with the determination". The Plan itself provided for no such "external review" procedure.
Not only did the claim denial fail to meet ERISA’s requirement of specificity, but the "external review" procedure would have imposed upon the plan participant the cost of pursuing any administrative appeal of a denied claim. For a Plan to assess such costs against a plan participant, violates ERISA and the regulations. Federal law 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 would result in a shirking of fiduciary responsibility imposed by ERISA and the regulations. Obviously, the intended purpose such a procedure was to deter any further appeals by participants and beneficiaries. It would have a profoundly "chilling effect" upon plan participants, who wished to exercise their rights, and who wished to seek remedies provided by ERISA, particularly since a Plan's administrative remedies must generally be exhausted before a claimant may seek redress in Federal Court.
Patient No. 2 was a 52 year-old male, with a 30-year history of alcohol dependence. He regularly consumed up to 16 ounces of gin a day. He had undergone inpatient treatment, twice before coming to Spencer. His longest period of abstinence from alcohol, during the previous year, was one week. He also reported binge use of cocaine, twice a month, coinciding with receiving his retirement check. He reported that he would smoke rock cocaine until he had exhausted all of his money.
Before admission, Spencer contacted BCBSM to verify the availability of benefits under the patient’s health benefit plan. A BCBSM representative advised that inpatient benefits for chemical dependency treatment were payable under the Plan at 100% "usual, reasonable & customary" (URC) charges, subject to no deductible; but subject to a 45-day calendar year maximum. Spencer was also told that no pre-certification was required for admission.
At the time of admission, Spencer called BCBSM a second time and re-verified eligibility. Spencer was again told that BCBSM would not case manage or issue certification for any inpatient residential rehabilitation, but instead, would do a "retrospective review" for "medical necessity" of rehabilitative treatment, after such treatment was rendered.
Spencer subsequently received a form, from Magellan which stated: "Magellan Behavioral of Michigan, Inc. has been authorized by Blue Cross Blue Shield of Michigan to administer their mental health program. We are requesting your assistance in conducting a retrospective review . . . The purpose of this review is to determine the medical necessity of inpatient services. Please send a copy of the patient's complete medical record . . . to . . . Magellan. . ."
Spencer submitted a claim to BCBSM. It received no response. I directed a letter to BCBSM, requesting administrative review of the claim. It ignored the request. I sent three follow-up letters. Each one was ignored.
Patient No. 3 was a 24 year-old female, with a 6-year history of heroin addiction. She regularly consumed a gram of heroin, administered intravenously each day. She also had a history of cocaine use, four times a week for the preceding three years, as well as abuse of tranquilizers. She had been in and out of treatment programs numerous times, but had received minimal inpatient care, following emergency room interventions. She lived with her husband, who was reported to also be a heroin addict and who was also reportedly in treatment at the time of her admission.
Before her initial admission to Spencer’s treatment facility, she had just completed a 10-day medical detoxification program, after which she was transferred to another facility for rehabilitation. But while there, she became intoxicated and threatened another patient. At that point, she was transferred to Spencer to complete her rehabilitation. Four days after her first admission to Spencer, she was caught drinking in a peer's room, at 3:00 A.M., in violation of the house rules. As a result, she was administratively discharged.
But after leaving Spencer, she slipped even further down, immediately resuming her IV heroin use. A week prior to her second admission to Spencer, she entered a hospital program, once again, for medical detoxification. After completing detoxification, she presented for re-admission to Spencer a second time, with the same diagnosis as before. On her Bio-Psycho-Social Evaluation form, in response to the question "For what reason did you come here?, she stated: "I was so far into my addiction that I was headed for death."
Before her first admission, Spencer contacted BCBSM to verify the availability of benefits under the patient’s health benefit plan. A BCBSM representative advised that inpatient benefits for chemical dependency treatment were payable under the Plan at 100% "usual, reasonable & customary" (URC) charges, subject to no deductible; but subject to a 45-day calendar year maximum. Spencer attempted to obtain pre-certification for the proposed treatment, but was told that no pre-certification was done for residential rehabilitation.
Following the rendition of treatment, Spencer submitted claims to BCBSM. Payment was denied, on the stated ground, "This service is not a benefit of the subscriber's Health Plan." No further explanation was given on the form for denial of the claim.
Spencer later received a letter from BCBSM’s mental health administrator, Magellan Health Services, which stated that "A second opinion retrospective medical record review has been conducted by Magellan." That letter likewise denied payment stating that "the proposed plan of care is not a covered benefit under your contract." The letter also made a vague reference to BCBSM "medical criteria" for determining "medical necessity". But nothing in the letter explained what those "medical criteria" were.
ERISA requires that a claim denial must specifically state the reasons why a claim is denied and it must identify the provisions of the plan upon which the denial is based. As far as coverage was concerned, Spencer had verified that the patient was covered before her admission. As far as the "medical necessity" for treatment was concerned, nothing could be more obvious. This patient was in desperate need of help.
I directed a letter to BCBSM, requesting administrative review of the claim. It ignored the request. I sent follow-up letters. Each was ignored.
Result: I filed three separate lawsuits, which were ultimately transferred to the same judge and consolidated for trial. Shortly after the lawsuits were filed the cases were resolved satisfactorily.