Lafleur v. Louisiana Health Service and Indem. Co.

Decision Date23 March 2009
Docket NumberNo. 08-30091.,08-30091.
PartiesRichard LAFLEUR, Plaintiff-Appellant, v. LOUISIANA HEALTH SERVICE AND INDEMNITY COMPANY, doing business as Blue Cross Blue Shield of Louisiana, Defendant-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Appeal from the United States District Court for the Western District of Louisiana.

Before WIENER, GARZA, and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

Plaintiff-Appellant Dr. Richard Lafleur sued Defendant-Appellee Louisiana Health Service and Indemnity Company (Blue Cross) under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B), for recovery of wrongfully denied health insurance benefits. The district court granted summary judgment in favor of Blue Cross. Because Blue Cross failed to substantially comply with ERISA's procedural requirements, the judgment of the district court is vacated, and the case is remanded for entry of an order remanding the case to the plan administrator for a full and fair review regarding the denial of benefits. We express no opinion on whether Blue Cross abused its discretion in denying benefits because its substantial compliance with ERISA procedural regulations is a threshold issue in this case.

I. Factual and Procedural Background
A. Facts

Lafleur received health insurance benefits through his employer, The Family Clinic, Inc. Lafleur's group health insurance policy (the Plan), which was issued by Blue Cross, is an "employee welfare benefit plan" within the meaning of ERISA. See 29 U.S.C. § 1002(1).

On May 7, 2001, Lafleur underwent a cardiovascular bypass operation. During surgery, he suffered an anoxic event and never regained consciousness. On August 9, 2001, Blue Cross agreed to pay the cost of Lafleur's care at Eunice Manor Nursing Home (Eunice Manor) pursuant to the Plan's "Alternative Benefits" provision. Alternative Benefits are "[b]enefits for services not routinely covered under the Benefit Plan but which may be provided by agreement through Case Management." In turn, "Case Management" permits for payment of Alternative Benefits at Blue Cross's discretion, and such benefits "are provided in lieu of the Benefits to which [members] are entitled under the Benefit Plan." According to the Plan, the provision of Alternative Benefits should not be construed as a waiver of Blue Cross's right to enforce the Plan in accordance with its express terms, and Alternative Benefits can be terminated if the patient is no longer covered under the terms of the Plan. The August 9 letter stated that "[r]eimbursement for skilled nursing care ordered by Dr. Tate[, Lafleur's treating physician,] has been approved per a special agreement under the Individual Case Management Program." On August 20, 2001, Lafleur was transferred from an acute care hospital to Eunice Manor.

The issue on appeal revolves around whether Lafleur's care at Eunice Manor qualifies as Skilled Nursing Care, which is covered, or Custodial Care, which is not. In its motion for summary judgment, Blue Cross stated that "[t]he alternative benefits arrangement that had been entered with Eunice Manor allowed it to be paid by Blue Cross as though it was a SNF (Skilled Nursing Facility) rather than a nursing home during the time that skilled nursing services were required." A SNF is defined by the Plan as a facility other than a nursing home that provides (1) inpatient medical care, treatment and skilled nursing care as defined by Medicare, (2) full-time supervision by at least one Physician or Registered Nurse, (3) twenty-four hour nursing services by Registered Nurses or Licensed Practical Nurses, and (4) utilization review plans for all patients. Article IV(A)(3) of the Plan states that "Inpatient Bed, Board and General Nursing Service" are covered "[i]n a Skilled Nursing Facility or Unit or while receiving skilled nursing services in a Hospital for the maximum number of days per Benefit Period shown in the Schedule of Benefits."1

Blue Cross initially agreed to cover costs of $516 per day for bed rental, 24-hour sitter service, supplies, nursing care, room, and board. On December 8, 2002, Blue Cross decreased this amount to $392 per day. On March 4, 2003, Blue Cross's Case Management department wrote to Eunice Manor indicating that it would reduce payments to $202 per day as "alternative care" for "all inclusive" room and board expenses. Both the December 8 letter and the March 4 letter described the per diem payments as "[r]eimbursement for skilled nursing."

On May 16, 2003, Blue Cross's Dr. William Weldon, after consulting with Blue Cross's Dr. Dwight Brower and an unidentified board certified urologist, determined that the nursing home's services provided to Lafleur constituted "Custodial Care," and that, pursuant to the Plan, Blue Cross would no longer approve reimbursement. Dr. Weldon and Dr. Brower did not consult with either of Lafleur's treating physicians, Dr. Tate or Dr. Heinen. In his deposition, Dr. Brower testified that he contacted the urologist via telephone to inquire whether continuous bladder irrigation (CBI) was a skilled nursing service and whether there were non-skilled alternatives to that procedure. Because CBI is not a common procedure, Dr. Brower and Dr. Weldon "opted to get some specialty input over that service and get more information regarding it." Dr. Brower described his consultation with the urologist as "entirely an informal telephonic conversation done anonymously relative to this patient" to determine whether CBI was "standard procedure done by urologists for recurrent infections in someone with a chronic and dwelling foley catheter." The May 16 denial letter did not elaborate on the specific reason for the denial beyond the following: "Contractual Exclusion for Custodial Care per Medical Director." Dr. Weldon made the following entry in the administrative record the day before the denial:

Deny further days. Reimbursement has continued to this point due to the continued CBI. Review with a board certified urologist indicates that this is neither necessary nor appropriate and that the same purpose could be accomplished with a condom catheter or, if an indwelling catheter is necessary, low dose of fluoroquinolones (i.e. Cipro 500 mg/day). Denial is based on contractual exclusion for custodial care.2

Under the Plan, excluded "Custodial Care" refers to treatment or services "that could be rendered safely and reasonably by a person not medically skilled, or that are designed mainly to help the patient with daily living activities." On May 29, 2003, in preparation for administrative appeal, Lafleur requested from Blue Cross the complete administrative record and the names of all persons Blue Cross consulted "whether the consultant's opinion was relied upon or not."3

B. Procedural Background

Lafleur administratively appealed Blue Cross's determination twice (the "Level I Appeal" and the "Level II Appeal"). Dr. Brower conducted the Level I Appeal, and an appeals committee conducted the Level II Appeal. As part of the Level I Appeal, Dr. Brower made the following entry in the administrative record on June 9, 2003: "Will uphold the denial of continued skilled nursing unit coverage as the patient's care is now primarily custodial and therefore excluded by this policy. Care can be provided in a regular nursing home bed."4 Lafleur received the Level I denial letter on July 24, 2003. The July 24 letter, which was drafted by an attorney in Blue Cross's Legal Affairs Department, provided a more detailed explanation of the reason for denial than the May 16 letter:

Our records indicate that in December 2002, pursuant to a special agreement under the Individual Case Management Program, we approved reimbursement of skilled nursing care at Eunice Manor Nursing Home for Richard Lafleur for services ordered by Dr. Tate.

As is customary, our Case Management Department continuously monitored the services being rendered to Dr. Lafleur to ensure that the care being received was eligible for reimbursement under the contract and in accordance with the Case Management Agreement. Eventually, the medical information we received indicated that the care being rendered to Dr. Lafleur was custodial in nature, and that skilled nursing care was not needed. For this reason, we advised the hospital and patient on May 16, 2003 that subsequent days would not be covered if hospitalization continued beyond that date as Dr. Lafleur's contract does not provide benefits for custodial care.

At his deposition, Dr. Brower testified that he did not consult with any other health care professional in conducting the Level I Appeal.

On September 15, 2003, as part of the Level II Appeal, Lafleur submitted a letter from his treating physician, Dr. Tate, which stated that Lafleur's "condition is very fragile and his long term survival is dependent on good skilled nursing rather than custodial care." Dr. Tate stated that Lafleur needed skilled nursing to monitor his vital signs, fluid intake, diabetes, nourishment status, skin care, trache care, foley care, peg tube care, and to observe for pulmonary infiltrates and mucus plugs that could result in severe hypoxia.5 In affirming the denial based on the Custodial Care exclusion, the Level II appeals committee consulted with Dr. Brower and found that "the clinical issues are the tracheotomy and ... tube feeding. Patient is stable so the extent of the care doesn't have to be skilled nursing."6 (emphasis in original). Apparently, the Level II appeals committee only consulted with Dr. Brower before making its final determination, and Dr. Brower did not produce any written report that was responsive to the concerns raised by Dr. Tate. By letter dated October 1, 2003, the Level II Appeals Committee cited the Custodial...

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