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Minn. court: Treatment delay may cost insurer

Company initially called proton-beam treatment for chondrosarcoma ‘investigative’ but ultimately paid

MINNEAPOLIS – A breach-of-contract action may proceed against Blue Cross Blue Shield Minnesota for its initial refusal to pay for cancer treatment ultimately deemed medically necessary in a statutory external-review process.

Although the company ultimately paid for the proton-beam radiation treatment it had initially deemed “investigative,” the insureds, James and Gloria Linn, argue that the delay of more than a year was a breach of the contract’s timeliness requirements and caused consequential damages.

The Court of Appeals said that the results of the external review process were binding on the insurer and that the District Court judge erred in interpreting the health-care contract medical necessity provision.

‘Huge implications’

The opinion is significant for what it said as well as what it didn’t say, said the Linns’ attorney, Brandon Schwartz of Oakdale. What it said was that the external review opinion is binding on the insurance beyond the question of payment for a procedure and that implies consequences to the company that wrongfully refuses coverage, he said. It also reminds patients that there is a review process after a denial of coverage, of which some may not be aware, he said

Those consequences also are important when it comes to what the court didn’t say, Schwartz said. The court did not say that compensatory damages are unavailable in this contract breach case. Instead, it left the issue open on remand. “This has huge implications for wrongful denial of coverage cases,” he said.

A third surgery and the following proton-beam radiation, which resulted in the external review process, eliminated James Linn’s cancer. If he had received the treatment when the doctor recommended it, there would never have been an adverse review, Schwartz said.

Attorneys from BlueCross Blue Shield Minnesota could not be reached for comment.

Investigative treatment

The contract between the parties provided that BCBSM would not pay for services not medically necessary or related to investigative care. The latter is defined as care that has not received FDA marketing approval, is the subject of ongoing clinical trials, or medically reasonable conclusions have not been established about its safety and/or efficacy.

Linn was diagnosed with chondrosarcoma, a type of bone cancer that affects cartilage, in March 2014.  After two surgeries, proton-beam radiation therapy was recommended, although under the contract it was considered investigative when treating the thoracic spine, where the tumor was located. A radiation oncologist provided a letter of medical necessity to BCBS, which still denied it. That decision was appealed.

By this time, nine months had gone by since the original diagnosis. In mid-December, it was determined that the tumor had wrapped around the spinal cord and the proton-beam therapy was again requested. After about a week, Linn had surgery although BCBS had not responded.  On Dec. 29, it again denied coverage.

In February, the plaintiff requested external review pursuant to Minnesota state law. It was referred to the MAXIMUS Center for Health Dispute Resolution, which in April 2015 overturned the denial of coverage. BCBS then agreed to pay for the proton-radiation therapy.

A Ramsey County District Court judge granted BCBSM’s summary judgment motion, saying that the insurer did not breach its contract as a matter of law because the procedure wasn’t covered, and also that BCBSM did not improperly interfere with or delay the internal appeal.  The court also held that no breach had occurred since the claim had been paid.

‘Binding means binding’

The Court of Appeals framed the issue as whether the external reviewer’s determination of medical necessity binds the company on the contract term as well as the payment obligation.  In other words, is the reviewer’s determination superimposed on the contract definition of medical necessity?

The court determined that it was.

The external-review process was created in Minnesota in 1999. Under the statute, the medical-necessity determination requires that expert review must determine whether the adverse determination was consistent with the statutory definition of medical necessity. The statute defines medically necessary as appropriate to the diagnosis and includes diagnostic testing and preventive services. It also must be within generally accepted healthcare practice parameters. The decision is binding on the health plan but not the enrollee.

The statute applies to BCBSM because of its status as a nonprofit corporation.

The court rejected the insurer’s argument that the external-review decision is binding only as to payment, not to the definition of medical necessity.

“The plain language of the external-review statute does not limit the binding nature of the external-review determination on the health-plan company to the payment of claims that have been submitted for external review,” Jesson wrote.

The court declined to add a caveat to the word binding, saying that “binding means binding.”  The Legislature could have limited the term to liability to pay claims but did not.

The court also noted that a broad application of the medical-necessity definition to licensed nonprofits outside the realm of external review reinforces the statutory meaning as not restricted to a payment decision.

The court further commented that the purpose of nonprofit health-service statute is to promote a wider, more economical and timely availability of services, which is consistent with finding that the medical-necessity decision binds the company under the whole contract. “Conversely, we note that public policy supports the insured’s ability to seek legal redress following an adverse determination on external review,” the court continued.

Timeliness question

The court was also influenced by the U.S. Supreme Court 2001 decision in Rush Prudential HMO Inc. v. Moran, which it said intimated “that the right to an independent review of a medical-necessity determination essentially equates to the right to a conclusive determination of the HMO’s medical obligation. Similarly, in this case the external-review determination replace(s) that of the (health-plan company) as to what is ‘medically necessary’ under (the) contract, the court said, citing Moran.

“Without question, this is a complex area of the law. However, we conclude that the district court erred by addressing on summary judgment whether proton-beam radiation therapy was ‘medically necessary’ under the health-plan contract. Once the external-review entity determined that proton-beam therapy was medically necessary to treat Linn’s condition, Blue Cross was required to adhere to that decision both as a matter of payment and a matter of contract. No further contractual analysis of that issue is warranted,” the court continued.

The court went on to hold that the plaintiff’s breach-of-contract claim relating to timeliness must be addressed by the District Court. The case should be remanded for consideration of the failure to approve the therapy when requested.  The Court of Appeals suggested that the District Court request further briefing or submit the issue of timeliness to a jury. It also left the issue of the appropriate scope of damages to the District Court.

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