1. Case Name: Dailey v. Blue Cross and Blue Shield of Kansas City, et al.

 2. Type of Treatment Services Denied: Residential Treatment/Wilderness Therapy

  3. Lawyers:

  1. Plaintiff: Candace Weatherfield and Matthew Davis, Gallagher Davis, LLP
  2. Defendant: Douglas Weems and Olawale Akinmoladum, Spencer Fane, LLP

 4. Format: Order and Opinions (1) Granting Defendants’ Motion for Summary Judgment, and (2) Denying Plaintiff’s Motion for Summary Judgment

 5. Outline:

  1. ERISA Claim? Yes
  2. Class Action/or Individual Action: Individual
  3. Defendant: Insurance Company and Claims Administrator
  4. Type of Insurance Plan: Employer Group Health Plan
  5. Type of Coverage Denial: Medical Necessity

 6. Legal Issues and Causes of Action: Plaintiff alleges that BCBSKC improperly denied reimbursement for inpatient mental health treatment that R.H. received at the Elements Wilderness Programs and Boulder Creek Academy from January 20, 2016 to March 17, 2017.

Ruling: Defendant’s Motion for Summary Judgment was granted, and Plaintiff’s Motion for Summary Judgment was denied.

 7. Narrative Case Description: H. had a long history of mental health issues, including Obsessive Compulsive Disorder, an eating disorder and behavioral problems, including anger outbursts and aggression towards family members and property. On January 20, 2016, R.H. was admitted to Elements, an intermediate outdoor use mental health treatment service facility. At Elements, R.H. received outdoor behavioral healthcare designed to help him build skills related to self-confidence, assertive communication, interpersonal relationships, and coping skill management. The documentation from the facility noted that R.H. was not suicidal, homicidal, psychotic, or gravely disabled; he had a history of superficial self-harm behaviors; and was taking his medications. His eating disorder was described as being in full remission. R.H.’s discharge diagnoses included Autism Spectrum Disorder, Major Depressive Disorder, and Attention-deficit/hyperactivity disorder (ADHD). One day later, R.H. was enrolled at Boulder Creek where he received focused academic and therapeutic resources to help him gain skills necessary to integrate back into his family and society at large. After a year of treatment, R.H. left Boulder Creek.

BCBSKC’s EOBs informed Plaintiff that billed charges from Elements and Boulder Creek were denied because Plaintiff did not first obtain prior authorization and/or a referral was not obtained. Plaintiff requested retrospective reviews of BCBSKC’s denial of benefits regarding Elements and Boulder Creek. A board-certified psychiatrist completed a review and determined that the residential treatment provided at Elements and Boulder Creek were not medically necessary, and R.H.’s care could have been provided in a less intensive level of care. Plaintiff submitted a Level One Member Appeals regarding the denials. Prest & Associates, Inc. (Prest), an independent review organization, was retained to perform independent physician reviews of the benefits decisions. Dr. Khalid L. Afzal determined that with regard to services R.H. received at Boulder Creek, he did not meet medical necessity criteria and Dr. Barbara Center determined that, with regard to services R.H. received at Elements, he did not meet medical necessity criteria for admission to the mental health residential treatment level of care as requested. Plaintiff requested an independent external review of R.H.’s residential treatment benefit denial claims at Elements and Boulder Creek with the Department of Insurance (Department). The Department’s independent reviewer, MAXIMUS Federal Services, Inc., informed the Department that BCBSKC’s denial of coverage for these services should be upheld.

Plaintiff filed suit and cross-Motions for Summary Judgment were filed. Defendants argued that Plaintiff failed to obtain the required prior authorization for the treatment at issue. Plaintiff argued that Defendants’ “no prior authorization” defense was a post hoc rationale. The Court concluded that before R.H. was admitted for any inpatient or residential mental illness and substance abuse service, Plaintiff should have first obtained and received prior authorization. The administrative record established that Plaintiff knew that reimbursement for treatment at Elements was denied in its entirety due to lack of pre-authorization and the BCBSKC EOBs sent to Plaintiff regarding Elements stated that the benefits were reduced because prior authorization was not obtained and that services were not covered because authorization and/or a referral was not obtained. Similarly, Plaintiff knew that reimbursement for treatment at Boulder Creek was denied in its entirety due to lack of pre-authorization. The BCBSKC EOBs sent to Plaintiff regarding Boulder Creek stated that services were not covered because authorization and/or a referral was not obtained. As such, the Court rejected Plaintiff’s “lack of prior authorization” notice argument.

Plaintiff further argued that R.H.’s treatment was medically necessary; however, the Court disagreed. The Court stated that the plans clearly covered only treatments that were medically necessary. Multiple reviews by licensed physicians were conducted on behalf of BCBSKC, and all physicians determined the services R.H. received at Elements and Boulder Creek were not medically necessary. This determination was then confirmed by (1) an independent external review commissioned by Maximus Federal Services, Inc., and (2) a second external review commissioned by the MES Peer Review Services appeal grievance panel. Plaintiff was provided with each reviewer’s opinion, including access to the documents and information relied upon by each reviewer. Plaintiff argued that the medical necessity criteria upon which the reviewing physicians relied when making their determinations should have been included in the Plans. The Court opined that BCBSKC was obligated to provide Plaintiff with a plan document intended to be a summary in lay terms of specified plan provisions. However, disclosures required to be made in summary plan documents were limited to specified items, none of which have anything to do with particularized criteria used to determine the medical necessity of requested services. ERISA’s disclosure provisions did not require a plan summary contain particularized criteria for determining the medical necessity of treatment for individual illnesses.  Plaintiff also argued that the reviewing physicians applied the wrong criteria to determine medical necessity under the New Directions criteria. New Directions had criteria for five levels of treatment for mental illness, which are distinct from substance abuse and eating disorder treatment: Psychiatric Acute Inpatient Criteria, Psychiatric Residential Criteria, Psychiatric Partial Hospitalization Criteria, Psychiatric Intensive Outpatient Criteria, and Psychiatric Outpatient Criteria. The Court opined that when reviewing Plaintiff’s claims, New Directions applied the criteria for Psychiatric Residential Criteria as Elements and Boulder Creek were both residential treatment facilities as defined under New Directions intensity of service. The Court concluded that nothing in the record suggested that the reviewing physicians did not follow the Psychiatric Residential Criteria when making their determinations and therefore, Plaintiff’s argument failed. Lastly, Plaintiff argue New Directions’ denial letters did not provide a sufficient basis for her to challenge its decisions. The Court disagreed, stating that the letters not only explained the basis of the denials, but also offered Plaintiff the option to submit additional information to support her claim. Plaintiff was also provided with each reviewer’s opinions, as well access to the documents and information relied upon by each reviewer. Ultimately, the Court concluded that Defendants’ decisions were reasonable and appropriate.

 8. Additional Comments: Defendants also argued that Plaintiff’s Count II was duplicative of Count I, entitling Defendants to summary judgment on Count II. Plaintiff relied on 29 U.S.C. § 1132(a)(1)(B) for Count I, and 29 U.S.C. §1132(a)(3) for Count II. Section 1132(a)(1)(B) provides “[a] civil action may be brought by a participant or beneficiary to recover benefits due to [her] under the terms of [her] plan, to enforce [her] rights under the terms of the plan, or to clarify [her] rights to future benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). Section 1132(a)(3) states: [a] civil action may be brought by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan. 29 U.S.C. § 1132(a)(3). Defendants argued Plaintiff sought the same remedies in both Count I and Count II. More specifically, Plaintiff’s section 1132(a)(1)(B) claim was premised on Defendants’ allegedly incorrect application of medical necessity criteria, and her belief that benefits were payable because the treatment received at Elements and Boulder Creek was medically necessary. Plaintiff’s section 1132(a)(3) claim was premised on Defendants’ alleged breach their fiduciary duty by not paying for R.H.’s treatment. According to Plaintiff, under the Plans, most mental health treatment services by out of network providers, whether inpatient or outpatient, were paid at the same rate. Defendants agreed that Plaintiff had options for appropriate lower levels of care to address R.H.’s medical condition and meet coverage criteria. Plaintiff argued that if Defendants were to pay for a lower level of care, then they would have paid the same amount for the treatment they agreed was medically necessary as they would have paid for the denied benefits which they believe were not medically necessary. Plaintiff claims BCBSKC should pay her because the administrative record established that R.H. should not have gone to Elements and Boulder Creek, but some lower level of care. However, the Court was not persuaded, opining that there was nothing in the Plans or administrative record supporting Plaintiff’s argument. Furthermore, the Court concluded that Plaintiff was not entitled to payment for benefits not received and granted Defendants’ motion for summary judgment on Count II.

 9. Website: None.

 10. All Legal Theories Presented in Case: Breach of Fiduciary Duty

 11. Successful Legal Theories in Case: None.


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