Charter Canyon Treatment Center v. Pool Co.
| Decision Date | 06 August 1998 |
| Docket Number | Nos. 97-4063,97-4123,s. 97-4063 |
| Citation | 153 F.3d 1132 |
| Parties | 22 Employee Benefits Cas. 1582, 98 CJ C.A.R. 4292 CHARTER CANYON TREATMENT CENTER, Plaintiff-Appellee, v. POOL COMPANY, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Bruce J. Douglas (Tim Dalton Dunn and Kevin D. Swenson, Dunn & Dunn, Salt Lake City, Utah, with him on the brief), Larkin, Hoffman, Daly & Lindgren, Ltd., Bloomington, Minnesota, for Defendant-Appellant.
Brian S. King (N. Brent Jones, Lawler & Jones, and Richard R. Burke, King & Isaacson, P.C., with him on the brief), King & Isaacson, P.C., Salt Lake City, Utah, for Plaintiff-Appellee.
Before SEYMOUR, EBEL, and KELLY, Circuit Judges.
Defendant-Appellant Pool Company appeals from the district court's grant of summary judgment and award of attorney's fees in favor of Plaintiff-Appellee Charter Canyon Treatment Center (Charter). At issue is the administration of Pool Company's Medical Expense Plan (the Plan), an employee welfare plan governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 (ERISA). The Plan provides medical benefits to Pool Company's employees and their dependents. The district court held that Pool Company's decision to conduct a retrospective utilization review was without basis in Pool Company's medical plan documents; thus, Pool Company's subsequent denial of medical benefits could not be sustained under any standard of review. Our jurisdiction arises under 28 U.S.C. § 1291. We reverse, vacate the award of attorney's fees, and remand for further proceedings consistent with this opinion.
From March 29, 1991 to April 25, 1991, Charter, a mental health care facility, provided inpatient medical care to Austin Lyman (Austin), the son of former Pool Company employee Cleo Lyman (Mr. Lyman). After terminating employment with Pool Company, Mr. Lyman had elected to temporarily retain continued coverage under Pool Company's self-funded Plan, 1 and both he and Austin were beneficiaries of the Plan. Austin, who was fourteen years old at the time of his hospitalization, was diagnosed by Dr. Delbert Pearson prior to admission with major depression, single episode resulting from a classmate's accusation of rape. The accusation, according to Dr. Pearson, engendered homicidal and suicidal thoughts which Austin expressed. Upon admission to Charter, Dr. Pearson ordered that Austin be placed on a 15-minute suicide watch and suicide precautions.
The master Plan documents and the Summary Plan Description (Summary) which were provided to all insureds state that inpatient treatment for mental or nervous disorders would be approved "only when the patient is diagnosed as being an imminent threat to himself or others; e.g., suicidal or homicidal," as demonstrated by placement of the patient on suicide precautions. See Aplt. App at 64-65; id. at 273. The Plan also requires pre-certification review, a "screening process by medical professionals designed to help you and your doctor determine if hospitalization is really the best treatment," prior to any hospitalization. Aplt.App. at 276; see id. at 44 (). Should a Plan beneficiary fail to utilize pre-certification review prior to hospitalization, a $500 deductible will not be waived and "no benefits will be paid by the Plan for any treatment or period of hospitalization that is not determined to be medically necessary." Aplt. App. at 276.
Pursuant to the Plan's requirement of pre-admission certification of inpatient care, Charter contacted Pool Company's utilization review contractor Quality Inc. (Quality) prior to Austin's admission to obtain such certification. At least initially, Quality withheld pre-certification of Austin's inpatient treatment until its psychiatric consultant, Dr. Karyn Hall, could discuss Austin's case with Dr. Pearson, his treating physician. Quality's initial pre-certification of Austin's treatment was based on telephone conversations between Dr. Pearson and Dr. Hall. From approximately April 9 until Austin's discharge on April 25, Quality's physicians (Dr. Hall and Dr. Ferrero) pre-certified Austin's extended stays based on medical records provided by Charter, including lab results, nurse and physician progress and treatment notes, and psychological evaluations.
Throughout Austin's treatment at Charter both Mr. Lyman and Charter were provided periodically with notice of Quality's pre-certification of Austin's entire hospitalization, either telephonically or by letters granting an extension of hospital stay. The letters sent to Mr. Lyman stated that Aplt. App. at 141, 147. The letters sent to Charter contained no such disclaimer, but prior to Austin's admission Charter had obtained an assignment of medical insurance benefits and a guarantee of payment for services from Mr. Lyman.
In May 1991, shortly after Austin's discharge from Charter, Louise Winger, Pool Company's medical claims manager, submitted Austin's file to Quality for retrospective review of the claim based on perceived inconsistencies in the medical records. Quality submitted the records to Dr. Hall, who had previously pre-certified Austin's stay, for independent medical review. After reviewing the records in light of the Plan's provisions, however, Dr. Hall concluded:
[t]he patient did not appear to have a plan for harming himself or others. Alcohol abuse and continuing symptoms of ADHD appears [sic] to be the primary concern. In fact the records reflect that the patient stated he had no plans. The outpatient sessions were apparently related to alcohol abuse treatment. There is no evidence that medication was attempted on an outpatient basis.
It is my understanding that the insurance plan does not cover alcohol abuse nor does the plan cover depression for someone who is depressed but not an immediate danger to himself or others.
By letter dated July 3, 1991, Pool Company denied coverage for Austin's treatment at Charter. The letter stated in pertinent part:
The medical records were reviewed by an independent psychiatric consultant who found that the patient did not appear to have a plan for harming himself or others; and the records reflect that the patient stated that he had no plans. The consultant also found that alcohol abuse and the continuing symptoms of ADHD appear to be the primary concerns.
In summary, the claims were denied because your son was not an imminent threat to himself or others and there was no evidence in the records of his treatment that the severity of any disability was of sufficient magnitude to justify acute hospital intervention or that the intensity of the treatment was such that it could only be delivered in an acute inpatient setting.
Having been assigned Mr. Lyman's right to recover benefits, Charter appealed Pool Company's denial of payment to the Plan administrator. Charter provided the Plan administrator with additional information from Dr. Pearson by letter dated August 6, 1991 reaffirming that Austin had expressed homicidal and suicidal thoughts. See Aplt.App. at 292-93. The Plan administrator requested a second independent medical review. That review was performed by Dr. Ferrero. In his report, Dr. Ferrero, who also had earlier pre-certified Austin's stay, changed his mind after reviewing the charts in light of the Plan provisions:
Under conditions of policy included with material reviewed, I believe diagnosis and treatment was primarily directed toward alcohol abuse, personality disorder, and adjustment disorder, and therefore benefits are not available for treatment delivered.
The letter of 8-6-91 from AP [attending physician Dr. Pearson] notes the suicidal and homicidal thoughts and statements but these are not found in the original material. The notes about depression do not seem to justify the conclusions concerning the necessity for the care given.
Aplt. App. at 245. The Plan administrator ultimately affirmed the denial of Charter's claim for the same reasons provided in the initial denial.
Charter then filed this suit in Utah state court and Pool Company removed the action to federal district court. The parties filed cross-motions for summary judgment, and the district court granted summary judgment in favor of Charter, denying Pool Company's motion. The district court held that the phrase "retrospective review" was ambiguous and that a reasonable beneficiary would believe Pool Company's plan documents, particularly the Summary, allow Pool Company to conduct a retrospective review only if prior approval was based on misrepresentations by the physician, patient, or facility. Accordingly, the district court held that Pool Company's denial of Charter's claim was without basis in the Plan documents, and could not be upheld "under any standard of review." Aplt. App. at 323. Pool Company moved to alter or amend the judgment, arguing, among other things, that the district court employed the incorrect standard of review, and the district court denied the motion.
Charter then moved for attorney's fees pursuant to 29 U.S.C. § 1920 and § 1924, and after a hearing and oral argument, the district court awarded Charter $26,419 in attorney's fees, $2,998 in costs, and post-judgment interest. Pool Company appeals the district court's grant of summary judgment and award of attorney's fees and costs.
We review the district court's grant of summary judgment de novo, applying the same legal standard used by the district court. See Siemon v. AT & T Corp., 117 F.3d 1173, 1175 (10th Cir.1997). Summary judgment is properly...
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