Chapman v . Anthem, et a l . CV-03-480-PB 05/12/05
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Paul Chapman
v. Case No. 03-CV-480-PB Opinion N o . 2005 DNH 080 Anthem Health Plans of New Hampshire, Inc. and Matthew Thornton Health Plan
MEMORANDUM AND ORDER
Paul Chapman claims that Anthem Health Plans of New
Hampshire, Inc. and Matthew Thornton Health Plan, Inc.
(collectively “Anthem”) have breached their contractual
obligation to cover the cost of a surgical procedure known as
Intradiscal Electrothermal Therapy (“IDET”). Anthem has moved
for summary judgment, claiming that IDET is an uncovered
“Experimental/Investigational” procedure (Doc. N o . 1 9 ) . For the
reasons set forth in this order, Anthem’s motion is denied.
I. BACKGROUND
A. The Policy Certificate
Chapman is insured under an Anthem health insurance policy
through his wife’s employer, the City of Rochester, New Hampshire. Anthem’s policy Certificate outlines the scope of
Chapman’s coverage, as well as number of pertinent policy
exclusions. The exclusion at issue states, in relevant part,
that
Anthem BCBS will not pay for services or supplies which Anthem BCBS determines in its sole discretion, are Experimental/Investigational in nature or for the covered services related to such Experimental/ Investigational services. The Medical Director of Anthem BCBS will have authority to determine all questions in connection with whether the use of any treatment, procedure, facility, equipment, device or supply (each of which is hereafter called a “service”) is Experimental/Investigational as follows:
In making the determination, the Medical Director . . . may require that demonstrated evidence exists (as reflected in the published Peer Review Medical Literature), as follows to determine that a service is not experimental:
1. that the service has a proven positive net health outcome; such evidence must include well designed investigations that have been reproduced by non- affiliated authoritative sources with measurable results supported by the positive endorsements of national medical bodies or panels regarding scientific efficacy and rationale;
2. that, over time, the service leads to improvement in health outcomes, i.e., the beneficial effects outweigh any harmful net effects;
3. that the service is more effective in improving net health outcomes than established technology;
-2- 4. that the improvement in health outcomes is achievable in standard conditions of medical practice outside clinical investigatory settings . . .
The policy also states that
Peer Review Medical Literature means two or more United States scientific publications, for which require [sic] manuscripts submitted to acknowledged experts inside or outside the editorial office for their considered opinions or recommendations regarding publication of the manuscript. Additionally, in order to qualify as a Peer Review Medical Literature, the manuscript must actually have been reviewed by acknowledged experts before publication.
B. Chapman Opts to Undergo IDET
Chapman suffered from debilitating back pain for several
years before he asked Anthem to approve the IDET procedure. He
initially sought treatment from D r . Edwin Charle, M.D., his
primary care physician, who approached Chapman’s case
conservatively, and ultimately without success. Believing more
aggressive care was in order, D r . Charle referred Chapman to D r .
Carlos Palacio, M.D., who, in turn, referred Chapman to D r .
Nathan Jorgensen, M.D., of the Seacoast Pain Institute in
Rochester, New Hampshire. In October 2002, after reviewing
Chapman’s history, D r . Jorgensen recommended that Chapman undergo
IDET.
-3- IDET is designed to address back pain originating from a
damaged disc. A needle is inserted into the affected disc and a
wire is threaded down the needle and into the disc where it is
heated to upward of 190º Fahrenheit for 14 to 17 minutes. This
heating process is thought both to repair cracks and fissures in
the disc and to destroy small nerve fibers that may be the source
of the patient’s pain. IDET was approved by the Food and Drug
Administration (“FDA”) in 2000.
Chapman asked D r . Jorgensen to seek approval from Anthem for
the IDET procedure in December 2002. D r . Jorgensen submitted two
studies with his request for coverage. The first study, authored
by Jeffrey A . Saal, M.D. and Joel S . Saal, M.D., was published in
the May 2002 edition of Spine. The second study, authored by
Nikolai Bogduk, M.D., and Michael Karasek, M.D., was published in
the September 2002 edition of The Spine Journal.
C. Anthem’s Initial Review of Chapman’s Policy
Anthem rejected Chapman’s request for coverage in a letter
dated December 2 3 , 2002. Rather than commenting directly on the
studies submitted by D r . Jorgensen, Anthem cited only its own
policy on IDET. This policy concludes that IDET is
-4- “investigational” for all uses and conditions. The policy cites
two surveys of peer reviewed medical literature on IDET, one
developed by the Blue Cross and Blue Shield Association
Technology Evaluation Center (“TEC”) and published in August
2002, the other by Winifred S . Hayes, Inc. (“Hayes”) and
published in April 2001. The TEC survey criticizes early
research on IDET for failing to properly test the net health
benefits of IDET against an ideal control group. It also
criticizes the research for failing to consider whether the net
benefits of the procedure were caused by the placebo effect. The
Hayes survey offers similar criticisms and additionally expresses
concern that the net health benefits of IDET had not been
confirmed by follow-up data.
D. The First-Level Appeal of Anthem’s Decision
Chapman postponed his surgery and appealed the denial of his
claim. The appeal was overseen by D r . Richard LaFleur, M.D., an
Anthem Associate Medical Director, who relied again on Anthem’s
policy to uphold Anthem’s initial decision to deny benefits.
Chapman was notified of this decision by letter. In i t , Anthem
stated only that IDET was considered “Experimental/
Investigational.” Chapman was instructed to “refer to the
-5- enclosed rule, protocol or guideline on which this determination
was based” for further explanation. No such information was
enclosed. When Chapman sought the referenced material, Anthem
failed to respond.
E. The Second-Level Appeal of Anthem’s Decision
Not satisfied with Anthem’s decision, Chapman requested a
second-level internal appeal. The policy Certificate states that
second-level appeals shall be considered by an Appeal Committee
comprised of Anthem employees. Typically, the Committee conducts
a hearing during which Anthem’s reasons for denying coverage are
explained to the claimant. Chapman participated in the hearing
by telephone. At no point during the hearing, however, were the
publications submitted by D r . Jorgensen raised or otherwise
addressed.
A month later, in March 2003, Chapman learned that Anthem
had rejected his second-level appeal. The letter conveying the
result again explained only that IDET was “Experimental/
Investigational,” and therefore that the policy did not provide
coverage for i t . Seeking a more detailed explanation, Chapman
requested copies of the guidelines Anthem relied on in denying
his appeal. Anthem never responded to this request.
-6- Ultimately, Chapman and his wife decided to pay for the
procedure on their own and, on November 1 0 , 2003, Chapman
successfully underwent IDET. He has since experienced
significant pain relief and has been able to return to work.
Chapman again requested coverage for the IDET procedure on
January 8 , 2004. To date, neither Chapman nor any of his
representatives have received a decision on his most recent
claim.
II. STANDARD OF REVIEW
Summary judgment is appropriate only “if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(c). A trial is necessary only if there is a genuine factual
issue “that properly can be resolved only by a finder of fact
because [it] may reasonably be resolved in favor of either
party.” Anderson v . Liberty Lobby, Inc., 477 U.S. 2 4 2 , 250
(1986). A material fact is one that affects the outcome of the
suit. See id. at 248.
-7- In ruling on a motion for summary judgment, I must construe
the evidence in the light most favorable to the non-movant. See
Navarro v . Pfizer Corp., 261 F.3d 9 0 , 94 (1st Cir. 2001). The
party moving for summary judgment “bears the initial
responsibility of informing the district court of the basis for
its motion, and identifying those portions of [the record] which
it believes demonstrate the absence of a genuine issue of
material fact.” Celotex Corp. v . Catrett, 477 U.S. 3 1 7 , 323
(1986). Once the moving party has properly supported its motion,
the burden shifts to the non-moving party to “produce evidence on
which a reasonable finder of fact, under the appropriate proof
burden, could base a verdict for i t ; if that party cannot produce
such evidence, the motion must be granted.” Ayala-Gerena v .
Bristol Myers-Squibb Co., 95 F.3d 8 6 , 94 (1st Cir. 1996)
(citation omitted). Neither conclusory allegations, improbable
inferences, nor unsupported speculation, however, are sufficient
to defeat summary judgment. See Carroll v . Xerox Corp., 294 F.3d
231, 236-37 (1st Cir. 2002).
-8- III. DISCUSSION
A. The Effect of the “Sole Discretion” Provision
As a threshold matter, this case requires the court to
interpret language set forth in Anthem’s insurance policy. That
language vests Anthem with “sole discretion” to determine whether
a policy is experimental or investigational. As in all contract
cases, the interpretation of language in an insurance policy is a
question of law. See Peerless Ins. v . V t . Mut. Ins. C o , 151 N.H.
7 1 , 72 (2004); Wilson v . Progressive Northern Ins. Co., 868 A.2d
268, 273 (N.H. 2005). The court must “construe the language of
an insurance policy as would a reasonable person in the position
of the insured based on a more than casual reading of the policy
as a whole.” Wilson, 868 A.2d at 273.
Anthem has clearly and unambiguously reserved to itself
“sole discretion” to determine whether a treatment is
experimental or investigational. A literal reading of this
provision would thus render Anthem’s decision on this point
unreviewable. The New Hampshire Supreme Court has recognized,
however, that provisions of this sort do not vest the drafter
with absolute power. Instead, it has held that an implied
-9- contractual obligation of good faith and fair dealing arises
“where a contract ‘by word or silence . . . invests one party
with a degree of discretion in performance sufficient to deprive
another party of a substantial proportion of the agreement’s
value.’” Ahrendt v . Granite Bank, 144 N.H. 3 0 8 , 312-13 (1999)
(quoting Centronics Corp. v . Genicom Corp., 132 N.H. 133, 143
(1989)).
In the present case, Anthem’s implied duty to act in good
faith obligates it to act reasonably in determining whether IDET
is an experimental procedure. See Ahrendt, 144 N.H. at 313.
Whether Anthem has done so is a question that should be answered
on the basis of the administrative record.
B. The Reasonableness of Anthem’s Exercise of Discretion
Chapman claims that Anthem’s failure to consider the 2002
Bogduk and Karasek study, and its failure to independently review
the 2002 Saal and Saal study, constitutes a breach of its duty to
exercise its discretion reasonably. I agree.
The policy Certificate provides that “in making the
determination” as to whether a treatment is “Experimental/
Investigational,” Anthem may require a claimant to demonstrate,
-10- through “Peer Review Medical Literature,” that the following set
of circumstances exist: (1) that the service has a proven
positive net health outcome; (2) that, over time, the service
leads to improvement in health outcomes; (3) that the service is
more effective than established technology; and (4) that
improvements are attainable outside clinical investigatory
settings. According to the policy, Peer Review Medical
Literature means “two or more United States scientific
publications submitted to experts.” Only “well designed
investigations” “reproduced by non-affiliated authoritative
sources,” however, need be considered.
Anthem’s failure to consider studies that may meet the
criteria set forth above would constitute a breach of its good
faith obligation to abide by the terms of its own policy. Cf.
Ahrendt v . Granite Bank, 144 N.H. at 312-313 (acknowledging that
a bank’s failure to “follow its own rules” could provide basis
for the claim that the bank “breached an implied covenant of good
faith”). The studies that D r . Jorgensen submitted with his
request for coverage plainly meet these criteria. Thus, Anthem
had a duty to consider them in the course of its review.
-11- That Anthem failed to do so is beyond question. The record
contains no evidence that Anthem ever considered the 2002 Bogduk
and Karasek study, and the only evidence that Anthem considered
the 2002 Saal and Saal study is a brief, partially complementary
reference to the study in the TEC survey.1 Anthem’s duty to act
reasonably required it to more carefully consider the studies
submitted on Chapman’s behalf.
Anthem’s primary response is to claim that the breach of its
contractual obligation was not material. I find this position to
be untenable. Both the 2002 Bogduk and Karasek study as well as
the 2002 Saal and Saal study address a number of criticisms
leveled by the TEC and Hayes surveys at the early research on
IDET. More importantly, the new studies present two-year
follow-up results from prior studies published in 2000. This
information is particularly pertinent given the fact that the
status of an experimental or investigational procedure could
change over time as more data on the procedure becomes available.
1 The reference in the TEC survey provided a brief analysis of the 2002 Saal and Saal study, lumping it together with three other studies that TEC praised for “consistently show[ing] improvements” in patients due to the use of IDET.
-12- That these studies add cumulative weight to a growing body of
scholarship that illustrates that IDET is both a safe and
effective treatment for pain associated with disc disruption only
further suggests that they merited independent review.2 Anthem’s
failure to consider the studies thus constitutes a material
breach of its duty to exercise its decision-making discretion
reasonably.
Anthem seeks to cure its error by providing a number of post
hoc justifications as to why these studies need not have been
considered. One such criticism points to a statement in the 2002
Bogduk and Karasek study that suggests that its conclusions are
not “definitive.” Another is Anthem’s claim that the 2002 Saal
and Saal paper cannot be characterized as a “non-affiliated
source.”
Post hoc justifications offered at the summary judgment
stage by parties who are presumed to be concerned more with
2 Though it has no direct bearing on the decision in this case, I find it noteworthy that, in an insurance contract dispute, the Court of Appeals in Arkansas refused to classify IDET as “experimental,” rooting its decision in evidence that IDET has been performed since 1997 and had a national success rate of 70 percent. See Dallas County Hosp. v . Daniels, 74 Ark. App. 1 7 7 , 184 (2001)
-13- advocacy than with properly evaluating a claim, however, will
rarely cure failures that occurred in the course of a claim
review. C f . Glista v . Unum Ins. Co., 378 F.3d 113, 131 (1st Cir.
2004) (barring an insurer from relying on post hoc justifications
for denying a claim in the ERISA context). I therefore reject
these arguments as a basis for granting summary judgment in this
case.
C. The Remedy for Abuse of Discretion: De Novo Review
The question that remains is the proper remedy for Anthem’s
breach. One possible remedy, which is common in ERISA cases,
would be to remand for further consideration by Anthem with an
instruction to address the overlooked evidence. See e.g., Cook
v . Liberty Life Assur. C o . of Boston, 320 F.3d 1 1 , 24 (1st Cir.
2003) (discussing remand option). I reject this approach because
I can find no support for it in New Hampshire law and because it
would impose no sanction on an insurer when it arbitrarily denies
a claim without considering relevant evidence that is included in
the administrative record. An alternative remedy would be to
simply order Anthem to provide coverage based on the fact that it
exercised its discretion unreasonably. Id. Although it is
-14- common practice in insurance coverage cases to order an insurer
to provide coverage when it materially breaches a contractual
obligation to its insured, to do so in this case would leave open
the possibility that Chapman might obtain coverage for an
uncovered experimental procedure simply because Anthem failed to
consider relevant but ultimately unpersuasive evidence in the
record when it made its coverage decision. Rather than adopt
either of these two extremes, I employ a middle ground approach
that avoids the difficulties created by either alternative.
Anthem will have an opportunity to demonstrate at trial that IDET
was an experimental or investigational procedure when it denied
Chapman’s claim for coverage. However, its decision to deny
Chapman’s claim will be accorded no deference because it was made
without considering relevant evidence that was included in the
administrative record.
Viewing the dispute through this lens, I conclude that
material issues of fact remain in dispute as to whether IDET
should have been considered experimental or investigational when
Anthem initially considered Chapman’s claim. Aligned on each
side of the case are medical experts who make competing claims
-15- about the status of IDET in light of the various studies on IDET
that were available at the time. Anthem’s Medical Director, D r .
John Robinson, M.D., claims, for instance, that the 2002 Bogduk
and Karasek study would not have been credited by Anthem because
its selection of patients was not purely randomized. Decl. of
Dr. Hurlin, M.D. at 7 . D r . Nicholas Bogduk, by contrast, argues
that this deficiency did not disqualify research done on other
treatments for which coverage was granted, and therefore that D r .
Robinson has purposely raised the “goal posts” in the IDET
context to avoid liability. Decl. of D r . Bogduk, M.D., PH.D.,
DSc at 1 3 . This difference of opinion is but one type of
material factual dispute that makes it impossible to grant
summary judgment at this stage of litigation. To answer i t , I
would first have to determine which expert was more credible and
then conclude which factual assertion to credit in light of this
determination. Decisions of this sort are not appropriately
rendered at the summary judgment stage of litigation. See
DeNovellis v . Shalala, 124 F.3d 2 9 8 , 308 (1997) (stating that a
“judge’s function is not himself. . . to weigh the evidence and
determine the truth of the matter but to determine whether there
-16- is a genuine issue for trial”); Santiago-Ramos v . Centennial P.R.
Wireless Corp., 217 F.3d 4 6 , 55 (1st Cir. 2000) (stating that
“for the purposes of summary judgment, we cannot weigh the
credibility of witnesses”). I therefore refuse to render one
here.
III. CONCLUSION
Anthem’s motion for summary judgment claim (Doc. N o . 19) is
denied (Doc. N o . 1 9 ) .
SO ORDERED.
Paul Barbadoro United States District Judge
May 1 2 , 2005
cc: Scott Harris, Esq. Peter Thompson, Esq. Donald Whittum, Esq.
-17-