Our firm recently won the case of Dominic W v. Northern Trust Co. Employee Welfare Benefit Plan, 2019 WL 2576558 (N.D. Ill. June 24, 2019), which took a health benefit plan to task for denying residential treatment behavioral health claim. The case involved coverage for Sofia W, the daughter of a Northern Trust employee, who experienced severe behavioral problems beginning at age 10 that necessitated psychiatric treatment and prescriptions for antipsychotic and antidepressant medications. Despite treatment, Sophia’s condition worsened. The court described the following, which occurred at age 12:

She cried uncontrollably at home and at school, refused to take her medication, entered periods of extreme rage during which she would scream at the top of her lungs, and expressed suicidal thoughts. Her emotional outbursts reached an apex when she swung a hammer at her mother’s head. Soon thereafter, Sofia told her mother that she planned to kill her in her sleep.

The day after Sofia threatened to kill her mother, she was admitted to a residential treatment facility for adolescent girls. Upon admission, Sophia underwent a comprehensive psychiatric evaluation, which verified her diagnoses and confirmed the need for residential treatment. Although the medical necessity for the admission was initially approved, two weeks later, Blue Cross rescinded its approval and maintained that Sofia no longer met the Milliman Care Guidelines for residential treatment. Despite that decision, Sofia’s parents kept her in the facility where she continued to undergo treatment, the necessity for which was supported by multiple episodes of self-harming and oppositional behavior where she required being placed on self-harm watch even though Sofia denied having suicidal thoughts.

Prior to filing suit, Sofia’s father, Dominic, appealed the benefit denial. The appeal recounted Sofia’s history and attached four letters of medical necessity from doctors and therapists who had treated her and recommended residential treatment. Despite the evidence presented, the appeal was denied based on a file review performed by a consulting psychiatrist, Timothy Stock, M.D. Dominic continued to appeal and submitted even more evidence of medical necessity, which included the following from a treating psychiatrist:

Sofia is unusually complex, and unusually resistant to treatment adherence. It is my judgment that in the absence of out of home structure, she would quickly decompensate to acute dangerousness, in light of her refusal to consider medication treatment, as well as her history of a hostility towards her mother which cannot be explained by her mother’s behavior. Although she does not articulate delusional beliefs about her mother, she clearly does not articulate her thoughts and feelings openly to anyone, as she has engaged in what I consider bizaare [sic] irritability, without identifiable stresses, that are associated with her rapid escalation to dangerous assaultive behaviors in the past.

The treating doctor also warned that Sofia would be “an acute danger to herself and others” if discharged. Despite that evidence, though, another in-house psychiatric review by another Blue Cross consultant, Dr. Benji Kurian, echoed the prior review by Dr. Stock and recommended a lower level of care. An independent external review was also sought by that reviewer found that residential treatment was excluded from coverage, an error that Blue Cross acknowledged. In an addendum report, the reviewer deemed the treatment as not medically necessary and claimed she could have been treated at a less intensive level of treatment.

Although the court applied a deferential standard of review, it had no difficulty concluding that the denial of residential treatment was arbitrary and capricious. First, the court determined that an administrator is not permitted “to reverse course on whim without adequate justification or a reasonable evidentiary basis for the decision.” The court explained that the reversal lacked support from any “new, medically relevant information that would reasonably justify reversing the benefits decision Blue Cross made just two weeks prior.” The court observed that the reviewer justified the reversal because Sofia had not expressed homicidal thoughts in a recent family therapy session. However, that rationale was deemed inadequate – “But the fact that Sofia did not threaten to kill her parents in a particular therapy session while she was in residential treatment does not support a reasonable inference that it was no longer dangerous for her to live at home.” Despite Sofia’s denial of suicidal or homicidal thoughts, the court found “the fact that she continued to deny suicidal or homicidal ideation does not constitute new evidence that her condition had improved.” Hence, the court concluded that Blue Cross’ contention Sofia had improved “has no basis in the medical evidence.”

The court also determined that Blue Cross based its decision to rescind the coverage approval after two weeks “on a highly limited subset of the evidence.” He spoke with a clinician who was not even listed as one of the treating and evaluating treaters and reviewed some clinical notes (perhaps – the record suggested that he did not review records), but he did not review a full set of medical records. While Blue Cross tried to excuse that omission by asserting that the records were not provided, the court pointed out that when it “is easy for the administrator to obtain evidence that is obviously relevant to the coverage claim, the failure to do so can be arbitrary and capricious.” (citation omitted). Because the determination was based on “a partial view of the evidence,” the court deemed that selectivity a factor in concluding that the insurer’s reliance on that doctor’s opinion was arbitrary and capricious.

The court was also troubled by the fact that the Blue Cross doctor did not examine Sofia or speak with her treating physicians. Although a file review is not inherently improper,

relying on a file review that is contrary to treating doctors’ opinions that have substantial medical support may be arbitrary and capricious, see Hennen v. Metro. Life Ins. Co., 904 F.3d 532, 540 (7th Cir. 2018). This is particularly true in cases involving psychiatric diagnoses and assessments of risk. Cf. Javery v. Lucent Techs., Inc. Long Term Disability Plan for Mgmt. or LBS Emps., 741 F.3d 686, 702 (6th Cir. 2014) (“[F]ile reviews are questionable as a basis for identifying whether an individual is disabled by mental illness.”); see also Okuno v. Reliance Standard Life Ins. Co., 836 F.3d 600, 610 (6th Cir. 2016) (“Evaluation of mental health necessarily involves subjective symptoms, which are most accurately ascertained through interviewing the patient and spending time with the patient, such that a purely record review will often be inadequate….” (internal quotation marks omitted)).

The consultant’s opinion was also questioned because he never addressed the reasons why the treating doctors found residential treatment was medically necessary. The court pointed out, “Nothing in Dr. Qadir’s opinion suggests that he considered the effects of Sofia returning to live at home in light of her difficult, combative relationship with her mother. It was unreasonable for Dr. Qadir to arbitrarily refuse to consider reliable evidence that showed that living at home posed significant obstacles to Sofia’s treatment, not to mention a danger to her mother.”

The court also determined that Blue Cross’s decisions rejecting his appeal of the coverage termination were arbitrary and capricious. The two Blue Cross reviewing psychiatrists’ opinions were nearly identical; and the court found that reliance on those opinions was arbitrary and capricious

because both doctors unreasonably ignored the weight of the medical evidence showing that Sofia continued to require residential treatment. Neither doctor mentioned any of the four letters from medical professionals who had treated (or at the time were actively treating) Sofia, each of whom stated that residential treatment was medically necessary. Though, as the Court mentioned previously, the evaluators were not required to defer to the opinion of her treating physicians, neither were they entitled to altogether ignore credible evidence of her need for residential treatment.

Although Blue Cross argued that it was not required to articulate every document it considered, the court overruled that objection, finding,

Put another way, the administrator may reasonably disagree with the treating physicians’ opinions, but it cannot “discount the near-unanimous opinions of…treating physicians” without explanation. Love v. Nat’l City Corp. Welfare Benefits Plan, 574 F.3d 392, 397-98 (7th Cir. 2009). That is precisely what Dr. Stock and Dr. Kurian did, except that Sofia’s treating physicians were fully-not just nearly-unanimous in recommending residential treatment.

The court added, “Perhaps most glaringly, Dr. Stock and Dr. Kurian failed to address the fact that an extensive, long-term regimen of outpatient treatment before her admission to Falcon Ridge had proven inadequate.” And the court further noted that the reviewing doctors “apparently did not consider that Sofia’s home environment posed particular challenges for her recovery that made residential treatment appropriate.” The court also made a critical observation in rebuttal to the insurer’s contention that residential treatment was unnecessary since Sofia had been allowed to leave the facility to attend a benefit concert and volunteer at a marathon – “the appropriate level of care for Sofia was residential treatment rather than a more restrictive care environment.” Moreover, the court observed,

The fact that Sofia was not committed to some higher level of care-one where she would be prevented from leaving the premises of her treatment facility at any time-does not by any stretch of the imagination support a reasonable inference that she needed only the level of care associated with outpatient treatment. This is particularly true in Sofia’s case, where the evidence shows that living at home and receiving outpatient care would significantly interfere with her treatment.

Additionally, the court found, “The fact that Dr. Stock and Dr. Kurian appear to have uncritically accepted her self-reported lack of intent to harm herself suggests that they engaged in a selective reading of the evidence, especially given that Sofia was put on self-harm watch on five separate occasions.”

Finally, the court rejected the external reviewer who also did not examine Sofia. The court began by finding the circumstances relating to the external review indicated the review should be “given little weight.” The fact that the initial opinion misread the plan, according to the court, “suggests that his or her review was cursory, unthorough, and potentially outcome-driven.” The court concluded there was “good reason” to “question the reliability” of the review and also found the “substance of the opinion” unreliable. The relevant portion of the addendum report stated:

No the requested health service is not medically necessary. The patient could have been treated at a less intensive level of treatment. The patient was stabilized, she was volunteering, attending equine therapy and had no [suicidal or homicidal ideation] tendencies.

However, those factors were rejected by the court with respect to the Blue Cross doctors. Hence, the court found: “A perfunctory reiteration of the conclusions that other doctors reached-which, as the Court has explained, lack an adequate evidentiary basis-does not constitute reasonable grounds for Blue Cross to terminate coverage.”

After finding that the Blue Cross determinations were arbitrary and capricious, the court weighed the applicable remedy. The court determined that a remand would be inappropriate and that an award of benefits was justified. Since Blue Cross had initially approved residential treatment, the appropriate remedy is to award benefits for the continuation of that treatment. The court also deemed a remand inappropriate because the evidence was so clear cut in plaintiff’s favor.

Discussion: The court’s evaluation of the evidence was so thorough and well-reasoned that no other outcome was possible. There were several key points made here that will benefit other similar litigation. First, Blue Cross obviously took at face value the patient’s denial of suicidal or homicidal ideation even though the evidence showed repeated incidents of self-harm watch. Thus, it is important to look at the full evidentiary picture and the consistency between the treating doctors’ opinions and the clinic notes, as well as all surrounding circumstances. The court was obviously impressed by the well-documented problems with Sofia’s home environment and the need to remove her from that environment.

The insurer also obviously failed to distinguish between hospitalization and residential treatment, with the latter being a lower level of care. While Blue Cross placed great emphasis on Sofia being allowed to leave the facility, the court’s explanation as to why that emphasis was misplaced and was not logically connected to Sofia needing to be away from her home environment is an important observation that will be relevant in future cases.

Finally, the court’s dismissal of the independent external review was critical. It is exceptionally difficult to argue that a claim decision is arbitrary and capricious when it is supported by an independent external reviewer. However, the independent reviewer’s cursory conclusions, which failed to engage with the treating doctors’ opinions, undermined the reviewer’s opinion, in addition to the fact that reviews in behavioral health cases are inherently weak.

It was disappointing that the court chose not to address whether the Milliman Care Guidelines were appropriate or whether they were appropriately utilized. However, even without such an analysis, there is so much useful guidance in this opinion that the remainder of the decision will be cited frequently in future cases.

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