Care Was Custodial and SNF Claims Denied Because Patient Had No Chance of Improving
Employer’s Guide to Self-Insuring Health Benefits December 2011 | Vol. 19, No.3
A federal district court upheld a claim administrator’s denial of payment for stays at a hospital and a skilled nursing facility (SNF) for a plan participant on life support deemed not medically necessary under plan terms because his condition was past the point of improving. Most of the care he got at the facilities could have been provided in a less intensive setting. The plan had a well-crafted exclusion for services that would not aid with a patient’s recovery: the plan defined such services as excluded custodial care.
After initially denying hospital and skilled nursing stays entirely, the plan doubled back and paid out more than $100,000 to cover part of the stays in which doctors were attempting remove the patient from his ventilator in order to spur a recovery. The plan, however, refused to pay for periods in which physicians were not trying to wean the patient from the ventilator.
The patient’s wife sued to compel the plan to pay a remaining $200,000 to cover the entire stay. The court in Bonanno v. Blue Cross and Blue Shield of Massachusetts, 2011 WL 4899902 (D. Mass., Oct. 14, 2011) dismissed her case, after finding that the claim administrator gave a fair reading to the plan’s medical necessity and custodial care provisions.
Plan Rules on Necessity
The Raytheon summary plan description (SPD) gave claims administrator Blue Cross and Blue Shield of Massachusetts (Blue Cross) the authority to make final decisions regarding claims payments. In making such decisions, Blue Cross and the plan administrator had “full discretionary power” to interpret plan terms and resolve plan-related questions such as benefits eligibility.
Raytheon’s plan document contained a similar grant of discretionary authority. Its “benefit description” section further stated that Blue Cross would decide which health care services were medically necessary.
The benefits description excluded services that were not medically necessary. For a service to be medically necessary, it had to be:
1) required to diagnose or treat [a participant’s] illness, injury, symptom, complaint or condition;
2) consistent with the diagnosis and treatment of the condition and in accord with Blue Cross’ medical policy;
3) essential to improve the patient’s net health outcome and as beneficial as any established alternatives covered by this health plan;
4) as cost-effective as any established alternatives;
5) furnished in the least intensive type of medical care setting required by the patient’s medical condition; and
6) not furnished solely for patient, physician or family convenience or comfort.
Plan Exclusion of Custodial Care
In 2008, the plan added an explicit exclusion for custodial care to the benefits description:
No benefits are provided for custodial care. This type of care may be furnished with or without routine nursing or other medical care and the supervision or care of a physician.
[Custodial care is defined as] care that is given primarily by medically-trained personnel for a member who shows no significant improvement response despite extended or repeated treatment; or care that is given for a condition that is not likely to improve, even if the member receives attention of medically-trained personnel.
The Facts
Ken Bonanno was enrolled in Raytheon’s self-funded health plan. In May 2007, while having surgery to remove a kidney and treat renal cancer, he had a heart attack and sustained brain damage due to oxygen deprivation. Until his death, he would remain in a vegetative state, unable to breathe or eat on his own and showing no cognitive response.
After a stay in intensive care, Bonanno was admitted to a chronic care unit at Kindred Hospital, where he remained from July 2007 into August 2008. The plan would pay for the period July 2007 until April 2008, but it would reject payment for May 2008 onward.
This happened after an April 2008 review by Blue Cross Physician Reviewer Dr. Troia (referring to standardized guidelines known as McKesson’s InterQual criteria) found that Bonanno’s care was medically unnecessary, because: (1) it could have been given in a less medically intensive setting; (2) it was not likely to improve [his] functional abilities; and therefore it (3) was “custodial” in nature.
Dr. Troia said that Bonanno was being given “custodial care,” because there was “no expectation of progress or improvement,” and Bonanno’s care was “chronic.” Bonanno’s treating physicians concurred that no improvement in his condition was likely. Dr. Troia sent a letter to Bonanno’s wife and treating physician (Dr. Kenney) saying that the plan would not pay for hospital-stay dates after April 30.
On Aug. 7, 2008, his caregiver requested authorization to place Bonanno in Exeter Healthcare, a SNF. Blue Cross Physician Reviewer Dr. Eng–Hwi Kwa recommended denying such a claim, based on a lack of medical necessity, because it would constitute custodial care, and because the patient showed no promise of improvement. He consulted Dr. Kenney, who reportedly agreed. Dr. Kwa informed Bonanno’s wife and Dr. Kenney of his decision in a letter dated Aug. 8. Bonanno was moved to a SNF.
On April 22, 2009, Bonanno’s wife appealed the denials for Kindred and Exeter. By that time she had paid more than $300,000 out of pocket. A nurse retained by Bonanno’s attorney asserted that attempting to wean Bonanno from the ventilator justified coverage because it was intended to improve his condition.
A Blue Cross reviewer, Dr. Christos Hasiotis, partially reversed and allowed for plan payments for: (1) May 27 through July 21, 2008; and (2) Oct. 21, 2008 through Jan. 9, 2009. Payments at all other times were denied.
The difference between the periods approved and periods denied, was that Bonanno “was undergoing a prolonged weaning process” from the ventilator during the approved periods. The medical record indicated no such process was occurring during the denied times.
Without efforts to remove the patient from the ventilator, the only needed care was prevention/management of bedsores and management of Bonanno’s feeding tube. Those services did not require a SNF, the medical reviewer said.
Blue Cross informed Bonanno in a May 8, 2009 letter that it would pay $108,000 for the approved periods, but that it would not paid for the denied periods. Bonanno passed away on July 25, 2009.
Court Chooses Abuse of Discretion Standard
On Aug. 5, 2010, Bonanno’s wife sued to reverse Blue Cross’ benefit denial, seeking reimbursement for Bonanno’s expenses at Kindred Hospital and Exeter Healthcare and for attorneys’ fees and costs. Both sides moved for summary judgment.
The court said it would review the claims decision using an abuse-of-discretion standard, because the plan had given Blue Cross clear authority to interpret the plan and deny claims when necessary.
Further, no conflict of interest existed for Blue Cross, because the plan document had properly separated the role of Raytheon — as the plan administrator and source of funding — from Blue Cross’s claims administration duties.
Bonanno’s wife said Raytheon’s Administrative Services Agreement (ASA) stipulated that Blue Cross was not an “administrator” or a “named fiduciary” to the plan. But the court said this in no way eliminated the plan’s delegation of claim administration responsibilities. All the ASA stated was Blue Cross did not fund the plan, and it had no fiduciary duty to the account (when negotiating with providers, for example).
She tried to say the recent Supreme Court decision in CIGNA v. Amara, 2011 WL 1832824 (U.S. Sup., May 16, 2011) enabled a retroactive revision of the plan document. But the court rejected this, because policies on medical necessity and custodial care had remained stable the entire time and the SPD and plan document were always in lock-step on them.
Denial Was Not Arbitrary and Capricious
The court would review the coverage decision against the plan definition for medical necessity to see whether the denial was arbitrary and capricious. For a service to be necessary, it would have to be: (1) furnished in the least intensive type of medical care; and (2) essential to a patient’s recovery.
The court noted that Bonanno was in a persistent vegetative state, his condition had not improved despite long treatment and (even his treating physicians agreed) his condition showed no likelihood of improvement, even with attention from medical personnel. That matched the plan’s definition for custodial care, which the plan excluded.
Blue Cross denied payment for service periods during which Bonanno remained on a ventilator.
Blue Cross covered periods when medical staff was trying to wean Bonanno from the ventilator because that was targeted at improving his underlying condition and therefore constituted a medically necessary service.
Bonanno’s wife argued that if the plan covered earlier periods (July 2007 through April 2008) when he was vegetative, then the plan should cover all periods. But the court rejected that, saying that being in a vegetative state was not the sole criteria. The plan based its denial on the later consensus that Bonanno was not likely to improve and further treatment would have no effect.
The court added that the arbitrary-and-capricious standard does not require evidence to the contrary to overturn a plan’s decision. If a plan had a reasoned basis for its denial, courts should not overturn them; and courts need not rule whether plans properly considered all conflicting evidence.
Bonanno’s wife alleged the plan did not adequately communicate the reasons for the denials. The court, however, reviewed the letters sent to the family to explain the denial and found that they properly referenced plan provisions saying care not likely to improve a patient’s condition was subject to the plan’s medical necessity exclusion.
Further, the court said other courts in the same judicial district found similar letters by Blue Cross to have sufficiently explained the reasons for its decision.
Care Was Custodial Because Patient Had No Chance of Improving
The court similarly upheld the plan’s denial of the SNF stay, because the care he would be getting (management of bedsores and feeding tubes) did not require a SNF; that is, could have been delivered in a less intensive setting. The plan’s denial of payment for SNF services therefore was reasonable.
Even though skilled nurses were working on his bedsores and feeding tube, those services were not expected to improve his condition; they were custodial care to maintain current function and not covered.
The plan did not discount reliable evidence supporting coverage, as Bonanno contended. On the contrary, the court observed that Bonanno’s treating physicians concurred with Blue Cross reviewers about the irreversibility of his condition.
Even if there were a conflicting opinion from a treating physician, the court would not have to reverse the denial on that basis, it held.
And finally, Blue Cross’ failure to identify a “less intensive” care setting was not an abuse or a basis to overturn the denial. In fact, the plan in its Aug. 8 denial letter told the Bonannos that it would pay for “home-based services at a private pay nursing home,” and discussed care setting with the hospital and Bonanno’s doctors.
Based on all this, the court concluded that the plan’s denial was not arbitrary and capricious and issued a summary judgment in the plan’s favor.
Implications
As illustrated in this case, uniformly and consistently interpreting plan terms and provisions is imperative.
Stages of Treatment
It is important to note that a plan administrator may, in its discretion, deem some “stages” of treatment as covered (meant to improve the patient’s condition) without being forced to deem the entire course of treatment as medically necessary.
As an example, the plan may dissect the overall course of treatment and examine each element individually. It isn’t an all-or-nothing proposition.
Administrative Services Agreements
Another interesting item: Bonanno’s wife said Raytheon’s Administrative Services Agreement (ASA) stipulated that Blue Cross was not an “administrator” or a “named fiduciary” to the plan.
However, the court said this in no way eliminated the plan’s delegation of claim administration responsibilities. All the ASA stated was Blue Cross did not fund the plan, and it had no fiduciary duty to the account (when negotiating with providers, for example).
Unlike the case of Hartfield Titus and Donnely v. Loomis, 2010 WL 596466 (D. N.J., Feb. 17, 2010) where the court essentially held that Loomis’ actions in claims processing were fiduciary in nature (therefore Loomis was deemed to be a fiduciary), in the immediate case, the court is willing to allow Blue Cross to exercise authorities fiduciary in nature, without deeming Blue Cross to be a fiduciary in fact (or, alternatively, prohibiting Blue Cross from making fiduciary-natured decisions by virtue of its lack of fiduciary status).
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