Michael Pellicano v. Office of Personnel Management

• Court: Court of Appeals for the Third Circuit
• Decided: March 3, 2022
• Docket: 21-1472
• Status: Unpublished

Opinion

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT ___________

No. 21-1472 ___________

MICHAEL V. PELLICANO, Appellant

v.

OFFICE OF PERSONNEL MANAGEMENT, Insurance Operations, Health Insurance II ____________________________________

On Appeal from the United States District Court for the Middle District of Pennsylvania (D.C. No. 3-17-cv-00698) District Judge: Honorable Malachy E. Mannion ____________________________________

Submitted Pursuant to Third Circuit L.A.R. 34.1(a) on February 24, 2022

Before: KRAUSE, BIBAS, and SCIRICA, Circuit Judges

(Opinion filed: March 3, 2022) ____________________________________ ___________

OPINION* ___________

PER CURIAM

Pro se appellant Michael Pellicano appeals from the District Court’s order granting

summary judgment in favor of the Office of Personnel Management (OPM) and denying

his cross-motion for summary judgment. For the reasons that follow, we will affirm in part

and vacate and remand in part. The motion to file a reply brief out of time is granted.

Pellicano is a retired federal employee who was disabled after suffering a spinal cord

injury and is a quadriplegic. In this 2017 lawsuit, he challenged five different OPM deci-

sions upholding coverage determinations by his insurer, the National Association of Letter

Carriers (NALC) Health Benefit Plan, which is covered by the Federal Employee Health

Benefit Act (FEHBA), 5 U.S.C. § 8901, et seq.1 The District Court dismissed claims chal-

lenging two of the decisions with prejudice and remanded three others for further proceed-

ings. At the conclusion of those administrative proceedings, OPM upheld the denials of

coverage for the remaining three claims, and the District Court agreed with the decisions.

On appeal, Pellicano raises arguments in his briefs about just one of them: OPM’s claim

numbered Y16063002, a pre-authorization request for a replacement Shower Commode

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent. 1 He previously brought a similar suit against OPM (concerning a decision by a different insurer). We affirmed the District Court’s grant of summary judgment in that case after he filed this suit. Pellicano v. Off. Pers. Mgmt., 714 F. App’x 162 (3d Cir. 2017).

2 Chair.2 Accordingly, we will focus our review on that determination alone. See Barna v.

Bd. of Sch. Dir. of Panther Valley Sch. Dist., 877 F.3d 136, 145 (3d Cir. 2017) (citing Fed.

R. App. P. 28(a) and 3d Cir. L.A.R. 28.1, and noting that, to preserve an issue, the litigant

must raise it in the opening brief).

According to Pellicano, his Shower Commode Chair is an utterly necessary piece of

specialized medical equipment that permits him to complete a complex and lengthy daily

bowel ritual with the assistance of a caregiver. He notes that a previous insurer approved

reimbursement for his original purchase of such a device in 2003. In 2014, Pellicano ap-

plied to NALC for reimbursement of replacement parts for his chair. NALC approved par-

tial reimbursement. In 2015, he sought pre-authorization for the purchase of a new chair.

NALC denied the request, determining that the chair was “not a covered item per our Du-

rable Medical Equipment benefits in our Health Benefit Plan brochure.” 3d Cir. ECF No.

21-14 at 79.3 When Pellicano appealed the decision to OPM, NACL argued that the chair

was not medically necessary, was a personal convenience item, and was not a covered

2 The other two claims remanded were: Y15035005, for repair of an FES Cycle Ergometer, and Y15099009, for replacement parts for a Shower Commode Chair. Because the Plan’s treatment of the latter claim was relevant to the denial of a new chair, it will be discussed only as it relates to the denial of Y16063002. 3 The NALC plan brochure provides that Durable Medical Equipment (DME) is equipment and supplies that are prescribed by your attending physician; are medically necessary; are primarily and customarily used only for a medical purpose; are generally useful only to a person with an illness or injury; are designed for prolonged use; and serve a specific ther- apeutic purpose in the treatment of an illness or injury. See 3d Cir. ECF No. 21-14 at 55. The brochure also indicates that, among other things, safety and convenience items do not meet these requirements and are not covered. See id. at 56.

3 DME under the Plan’s criteria in the brochure. Id. at 87-88. OPM issued a letter upholding

the decision. D. Ct. ECF No. 1-1 at 15.

When Pellicano sought judicial review in the District Court, however, OPM acknowl-

edged that its letter decision did not satisfactorily explain why application of the Plan’s

provisions led to its decision to uphold NALC’s denial, and further noted that NALC may

have previously approved replacement parts for the same type of DME.4 OPM asked for a

remand to develop the record by potentially obtaining an independent medical review on

the issue of medical necessity and requesting any plan policies “informing the plan bro-

chure terms relative to coverage of the type of DME.” D. Ct. ECF No. 7 at 3. The District

Court thus remanded the matter.

After the District Court granted the remand, OPM specifically inquired into why NALC

approved partial reimbursement for replacement parts but not for a new chair. NALC re-

sponded that it exercised its discretion to approve partial reimbursement for the parts know-

ing that the Plan would not preauthorize a new chair. NALC also argued that chairs were

not DME because they are useful to people even without a specific illness or injury. It also

produced, for the first time, an Electronic Claims Manual (ECM), an internal document

used to inform claims analysts about Plan coverage for particular items; the ECM indicated

that the chairs are ineligible for coverage. OPM accepted NALC’s explanations and upheld

its decision. See 3d Cir. ECF No. 21-3 at 120–24. After the parties filed cross motions for

4 The repair of Pellicano’s old chair was the subject of the claim at Y15099009, mentioned in note 2. Pellicano alleged that the Plan should have paid the full amount for the repairs, $415, instead of the $332 amount which NALC explained was in accordance with the Plan’s non-PPO benefits. 4 summary judgment, the Magistrate Judge determined that OPM’s reasoning should be up-

held under the APA’s deferential standard of review and recommended summary judgment

in OPM’s favor. The District Judge adopted that recommendation, and denied Pellicano’s

subsequent motion for reconsideration. Pellicano filed this timely appeal.

We have jurisdiction to review the District Court’s decision under 28 U.S.C. § 1291.

We review de novo the District Court’s grant of summary judgment to OPM and denial to

Pellicano, and, as the case was brought under the Administrative Procedure Act (APA),

see 5 U.S.C. § 701 et seq., we will apply the appropriate standard of review to the underly-

ing agency decision. See Pa. Dep’t of Human Servs. v. United States, 897 F.3d 497, 504

(3d Cir. 2018). We will set aside OPM’s actions if they are “ ‘arbitrary, capricious, an abuse

of discretion, or otherwise not in accordance with law’ or [are] conducted ‘without ob-

servance of procedure required by law.’ ” Id. (quoting 5 U.S.C. § 706(2)(A) & (D)). Alt-

hough the scope of our review is narrow and deferential, we must confirm that the “agency

[considered] the relevant data and articulate[d] a satisfactory explanation for its action in-

cluding a rational connection between the facts found and the choice made.” Motor Vehicle

Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 43 (1983) (internal

quotation marks omitted).

As noted above, when the District Court remanded this matter to the agency in 2018,

OPM asked NALC whether the two shower-commode-chair claims referred to the same

type of durable medical equipment, and if so, whether the disparate coverage decisions

were correct. NALC confirmed that they referred to the same items, and that, despite the

difference in result, they were correctly decided. NALC explained that “[w]hen Mr.

5 Pellicano requested a new shower commode chair, rather than simply deny his request, we

decided, within our discretion under Section 2.2(b)(2) of our OPM contract, and, as an act

of good will for the patient, to provide some level of coverage for the replacement part

needed for his existing chair, knowing we were not going to cover a new shower commode

chair under the terms of the brochure.” 3d Cir. ECF No. 21-3 at 44 (emphasis added).

Whatever may be made of this explanation, it simply cannot be true that NALC authorized

the replacement parts “when Mr. Pellicano requested a new shower commode chair.” As

the Administrative Record before us indicates, NALC paid its portion for chair replacement

parts in February 2015, see 3d Cir. ECF No. 21-4 at 4, well before Pellicano had filed the

request for a new chair in December 2015; thus, the second decision could not have in-

formed the first. See Christ the King Manor, Inc. v. Sec’y U.S. Dep't of Health & Human

Servs., 730 F.3d 291, 305 (3d Cir. 2013) (noting that “post-hoc rationalizations” will not

support agency actions).

In one of Pellicano’s previous cases before us, we decided that the agency did not act

in an arbitrary fashion when it provided coverage for a particular claim but subsequently

reconsidered and applied a “corrected” understanding of Plan terms when a like claim was

made later. See Pellicano, 714 F. App’x at 166. But that is not what the agency has said

here. Instead, NALC (and OPM, on summary judgment and on appeal), has held fast to

what is, at best, a confusing explanation which also appears to contradict what it said in its

April 15, 2015 memorandum explaining why NALC was only paying $332 of the amount

for replacement parts. 3d Cir. ECF No. 21-4 at 15–16 (applying the Plan brochure’s benefit

limitations on page 47 for non-PPO Plan allowance “for durable medical equipment,” and

6 noting that the Plan processed “Pellicano’s April 11, 2014 $415.00 durable medical equip-

ment charges not covered by Medicare but covered under the Plan’s non-PPO durable med-

ical equipment benefit.”).5 Because the agency has offered insufficient reasons for treating

similar circumstances differently, this part of the agency decision cannot stand. See Naza-

reth Hosp. v. Sec’y U.S. Dept. of Health and Human Servs., 747 F.3d 172, 179–80 (3d Cir.

2014) (noting that “[i]f an agency makes an exception in one case, then it must either make

an exception in a similar case or point to a relevant distinction between the two cases”

(internal quotation marks and alteration omitted)).

Pellicano argues that the agency also erred in its explanation for asserting that the chair

was not a covered DME as that term is defined in the Plan. See 3d Cir. ECF No. 21-3 at

121–22. As noted above, the Plan restricts coverage for DME to equipment and supplies

that, among other things, “[a]re primarily and customarily used only for a medical purpose”

and “[a]re generally useful only to a person with an illness or injury.” 3d Cir. ECF No. 21-

14 at 55. OPM explained that the chair did not meet these criteria, and that the chair instead

qualified as a “safety” or “convenience” item that the Plan specifically excluded from DME

coverage. See id., 21-3 at 121–22.6

5 OPM has relied on NALC’s explanation for its decision to cover replacement parts in its motion for summary judgment and in its brief in this Court. See D. Ct. ECF No. 35-1 at 41, 43; 3d Cir. ECF No. 16 at 31 n.12. 6 Before remand, OPM apparently upheld the denial in part because the chair was not med- ically necessary. D. Ct. ECF No. 1-1 at 15. On remand, OPM apparently abandoned its position that the chair was not medically necessary. See generally 3d Cir. ECF No. 21-3 at 120–22.

7 To support these points, OPM cited two website advertisements.7 For the principle that

the chairs are used by the elderly, it cited a marketing website, “Amazingmachines.info,”

which covers all manner of devices (including deep fryers, sewing machines, and air puri-

fiers). OPM quoted the title of the advertisement, “Shower Commode Chairs Make Show-

ering [E]asier for Elderly [sic],” as supporting its point that the chairs are used for nonmed-

ical purposes by persons lacking illness or injury. Id. OPM likewise attempted to support

classifying the chairs as excludable “safety” and “household” equipment using a statement

about bathroom dangers from a site that sells occupational and physical therapy-related

medical devices, “Rehabmart.”

Our review is confined to the administrative record that was before the agency. See

Christ the King Manor, Inc., 730 F.3d at 305. In this case, OPM naturally cited to the Plan

brochure provisions, but problematically, it then relied on excerpts from “Amazingma-

chines” and “Rehabmart” advertisements to explain the provisions of the Plan. Because

OPM cited them for their substance in its October 25, 2018, letter of explanation to Pelli-

cano, we must conclude that they played a role in informing OPM’s decision. See generally

7 In its October 25 letter, OPM stated that “shower commode chairs are commonly used by elderly individuals who do not necessarily have an illness or injury. See, e.g., https://amaz- ingmachines.info/shower-commode-chair-make-showering-easier-elderly (website that sells shower commode chairs states ‘Shower Commode Chairs Make Showering easier for Elderly [sic]’).” 3d Cir. ECF No. 21-3 at 121 (italics added). OPM continued that the Plan brochure excluded safety and convenience equipment, and that “[s]hower commode chairs are properly classified as safety or household equipment. See, e.g., https://www.rehab- mart.com/category/shower_commode_chairs.htm (website states that ‘the bathroom is one of the most dangerous rooms in the house, especially for those with limited mobility. A shower commode chair is a convenient and safe piece of equipment to help prevent falls in the bathroom.’).” Id. at 121–22 (italics added). 8 Allegheny Def. Project, Inc. v. U.S. Forest Serv., 423 F.3d 215, 231 (3d Cir. 2005) (ex-

plaining that “the reasonableness of the agency’s action is judged in accordance with its

stated reasons” (internal quotation marks omitted)).

We must ensure that, “in reaching its decision, the agency examined the relevant data

and articulated a satisfactory explanation for its action.” Prometheus Radio Project v. FCC,

373 F.3d 372, 389–90 (3d Cir. 2004). Although the Federal Rules of Evidence generally

do not apply in a strict sense to administrative proceedings, see Richardson v. Perales, 402

U.S. 389, 400–02 (1971), at a minimum, we would expect the agency to support its benefits

determination with evidence that is relevant and reliable. Cf. Mars Home for Youth v.

NLRB, 666 F.3d 850, 853 (3d Cir. 2011) (explaining that substantial evidence under the

APA is relevant evidence that a reasonable mind might accept as adequate to support a

conclusion). OPM relied on website advertising statements for their truth, which qualifies

as hearsay. Even if the formal rule against hearsay does not apply, OPM did not afford

Pellicano the opportunity to examine or rebut this evidence before incorporating it into its

decision. Cf. Karroumeh v. Lynch, 820 F.3d 890, 898 (7th Cir. 2016) (noting that admission

of hearsay evidence must include the opportunity to test reliability of statement); Lacson

v. U.S. Dept. of Homeland Sec., 726 F.3d 170, 178 (D.C. Cir. 2013) (explaining that ad-

ministrative agencies may consider hearsay evidence only if it has “satisfactory indicia of

reliability” and is “trustworthy”) (internal quotation marks omitted). From our review of

the Administrative Record, it was OPM that first used the website advertisements to ex-

plain the terms of the health Plan—not NALC. Pellicano thus had no opportunity in the

9 administrative process to challenge these advertising excerpts as unreliable sources. Ac-

cordingly, we cannot concur in OPM’s explanation that used them.

We note that the agency provided a third ground for denial of preauthorization in its

October 25 letter: that the 2015 ECM listed Shower Commode Chairs as ineligible for

coverage as DME. 3d Cir. ECF No. 21-3 at 122. However, while the harmless-error doc-

trine provides that we need not vacate an agency decision if the errors “have no bearing on

the substantive decision of an agency,” Del. Riverkeeper Network v. Sec’y Pa. Dep’t of

Env’t Prot., 833 F.3d 360, 377 (3d Cir. 2016), we cannot conclude that the errors here were

harmless. OPM’s decision mentioned the ECM in a single sentence, while it discussed the

other rationales at much greater length. It thus appears that the errors did bear on OPM’s

decision, and we decline to deem them harmless. See generally Shinseki v. Sanders, 556

U.S. 396, 411 (2009) (directing Courts to make “an estimation of the likelihood that the

result would have been different”); Li Hua Yuan v. Att’y Gen., 642 F.3d 420, 427 (3d Cir.

2011) (explaining that remand is not necessary when “it is highly probable that the error

did not affect the outcome of the case”).

Accordingly, we will vacate the District Court’s grant of summary judgment to OPM

on claim number Y16063002 and remand for further proceedings, which may include an-

other remand to OPM. The District Court’s order awarding summary judgment to OPM on

all other claims will be affirmed.