IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
No. 98-40204
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MEDITRUST FINANCIAL SERVICES CORPORATION,
NEW MEDICO ASSOCIATES, INCORPORATED,
and
OTIS ALCORN,
as Next Friend of Juanita Revels,
Plaintiffs-Appellants,
VERSUS
THE STERLING CHEMICALS, INCORPORATED, MEDICAL BENEFITS PLAN
FOR HOURLY-PAID EMPLOYEES,
Defendant-Appellee.
_________________________
Appeal from the United States District Court
for the Southern District of Texas
_________________________
March 4, 1999
Before JONES, SMITH, and EMILIO M. GARZA, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
Meditrust Financial Services Corporation, New Medico
Associates, Incorporated, and Otis Alcorn (collectively
“Meditrust”) appeal a summary judgment in their action to recover
medical coverage benefits under 29 U.S.C. § 1132(a)(1)(B), a
provision of the Employee Retirement Income Security Act of 1974
(“ERISA”). Concluding that the district court applied the proper
standard of review to the plan administrator's actions and that the
administrator did not abuse its discretion in denying the claim, we
affirm.
I.
Juanita Revels suffered severe closed head injuries in an
automobile accident. Initially, she fell into a coma. When she
regained consciousness, she was rehabilitated at New Medico
Associates, Incorporated (“New Medico”). Because she was a
dependent of her step-father, Otis Alcorn, Revels’s treatment was
covered by The Sterling Chemicals, Incorporated, Medical Benefits
Plan for Hourly-Paid Employees (“the Plan”). After several years
of treatment, however, her parents terminated the treatment against
her doctor’s advice.
After regressing for nearly a year, Revels returned to New
Medico for in-patient treatment, which New Medico billed at an out-
patient rate. When New Medico submitted Revels’s new round of
treatment to the Plan, the expenses were denied as “not medically
necessary in terms of generally accepted medical standards.”
Although the Plan initially refused payment, the plan
administrator, Metropolitan Life Insurance Company (“MetLife”),
agreed to review the claim. After the claim was reviewed by a
MetLife physician, the Plan denied the claim as not medically
necessary because the treatment was not rehabilatory but merely
2
custodial in nature.
Revels’s family appealed the claim several times. Although
Meditrust’s expert and treating physicians claim the treatment was
medically necessary, five MetLife physicians reviewed the claim six
times and concluded that it was not. Meditrust filed a § 1132(a)-
(1)(B) action under ERISA to recover benefits improperly denied.
Following cross-motions for summary judgment, the district court
granted summary judgment to the Plan, holding that (1) the language
of the Plan vested the administrator with discretion to determine
eligibility for benefits and to interpret the terms of the Plan;
(2) the determination of medical necessity was a factual inquiry
subject to abuse of discretion review; and (3) the administrator
neither abused its discretion nor acted in bad faith.
II.
We review summary judgment de novo, employing the same
standards as did the district court. See Urbano v. Continental
Airlines, Inc., 138 F.3d 204, 205 (5th Cir.), cert. denied,
119 S. Ct. 509 (1998). Summary judgment is appropriate when,
viewing the evidence in the light most favorable to the nonmoving
party, no genuine issue of material fact exists, and the moving
party is entitled to judgment as a matter of law. See Celotex
Corp. v. Catrett, 477 U.S. 317, 322-24 (1986); see also FED. R. CIV.
3
P. 56(c).1
III.
A.
We review de novo the district court’s decision regarding the
appropriate standard of review to be applied to an ERISA
administrator’s eligibility determination. See Branson v.
Greyhound Lines, Inc., Amalgamated Council Retirement & Disability
Plan, 126 F.3d 747, 756 (5th Cir. 1997), cert. denied, 118 S. Ct.
1362 (1998). Unless the terms of the plan give the administrator
“discretionary authority to determine eligibility for benefits or
to construe the terms of the plan,” an administrator’s decision to
deny benefits is also reviewed de novo. Firestone Tire & Rubber
Co. v. Bruch, 489 U.S. 101, 115 (1989). If the language of the
plan grants such discretion, a court will reverse an
administrator’s decision only for abuse of discretion. See id.
Regardless of the administrator’s ultimate authority to determine
benefit eligibility, however, factual determinations made by the
administrator during the course of a benefits review will be
rejected only upon the showing of an abuse of discretion. See
1
Because the parties agreed to submit the case to the district court by
motion, the Plan argues that the clearly erroneous standard of review should
apply to that court's factual determinations. Application of the clearly
erroneous standard would not be appropriate, however, because the district court
employed a summary judgment standard of review in dismissing the claim. See
Pasant v. Jackson Nat’l Life Ins. Co., 52 F.3d 94, 96 (5th Cir. 1995) (employing
de novo standard of review in appeal from dismissal on cross-motions for summary
judgment).
4
Pierre v. Connecticut Gen. Life Ins. Co., 932 F.2d 1552, 1562 (5th
Cir. 1991).2 We agree with the district court that the Plan’s
decision was a factual determination triggering abuse-of-discretion
review.
Meditrust contends that the determination of medical necessity
requires the interpretation of the terms “medical necessity” and
“generally accepted medical standards.” Meditrust calls these
“terms of art” within the medical and insurance fields. Moreover,
Meditrust argues that determining whether the rehabilitative or
custodial treatment fits within the medical necessity language is
a purely interpretive question. We disagree.
The Plan persuasively argues that the decision to deny
benefits based on lack of medical necessity involves a review of
the facts in Revels’s hospital records and a determination of
whether there is factual support for her claim. The Plan’s experts
reviewed Revels’s records for specific signs of medical
improvement. To determine whether further medical treatment was
necessary, these doctors used their medical expertise to make a
judgment about the likelihood of improvement in Revels’s medical
condition.
Therefore, these medical assessments do not constitute an
2
Meditrust questions Pierre's application of abuse of discretion review
to factual determinations, noting that other circuits have criticized it. See
Rowan v. UNUM Life Ins. Co. of Am., 119 F.3d 433, 435-36 (6th Cir. 1997); Ramsey
v. Hercules Inc., 77 F.3d 199, 202-05 (7th Cir. 1996); Luby v. Teamsters Health,
Welfare & Pension Trust Funds, 944 F.2d 1176, 1183-84 (3d Cir. 1991); Reinking
v. Philadelphia Am. Life Ins. Co., 910 F.2d 1210, 1213-14 (4th Cir. 1990).
5
issue of contract interpretation. Deciding the medical progress of
a patient through analysis of medical reports and records is
similar to the factual determinations we have reviewed for abuse of
discretion in other ERISA cases.3 Therefore, we affirm the
district court’s conclusion that it should review the Plan’s
decision for abuse of discretion because the Plan made a factual
determination.
B.
Because we review “a district court’s determination of whether
a plan administrator abused its discretionSSa mixed question of law
and factSSde novo,” Sweatman, 39 F.3d at 600, 601, we review the
Plan’s decision from the same perspective as did the district
court, and we directly review the Plan’s decision for an abuse of
discretion. “'In applying the abuse of discretion standard, we
analyze whether the plan administrator acted arbitrarily or
capriciously.'” Id. at 601 (quoting Salley v. E.I. DuPont de
Nemours & Co., 966 F.2d 1011, 1014 (5th Cir. 1992)).
We recognize that this court in Pierre refused to equate the
“abuse of discretion” and “arbitrary and capricious” standards.
“Our thorough consideration leads us to the conclusion that the
arbitrary and capricious standard for factual determinations is
3
See Bellaire Gen. Hosp. v. Blue Cross Blue Shield, 97 F.3d 822, 828 (5th
Cir. 1996) (“Blue Cross concedes that its decisions regarding medical necessity
of the [treatment] were factual determinations subject to abuse of discretion
review by the district court under Pierre.”); Sweatman, 39 F.3d at 598 (“Sweatman
concedes that MetLife’s determination that she was not disabled was more factual
in nature than interpretive . . . .”) (internal quotations omitted).
6
inapplicable . . . .” Pierre, 932 F.2d at 1562. We are bound,
however, by an earlier decision of this circuit4 that expressly
preserves the arbitrary and capricious standard for the review of
a plan administrator’s decision, even in light of Bruch. “As long
as the interpretations or fact-findings are not arbitrary or
capricious, we do not upset them.” Penn v. Howe-Baker Eng'rs,
Inc., 898 F.2d 1096, 1100 (5th Cir. 1990). The Penn court went on
to point out that “the way to review a decision for abuse of
discretion is to determine whether the plan committee acted
arbitrarily or capriciously.” Id. at 1100 n.2A. We agree with the
Wildbur court that there is only a “semantic, not a substantive,
difference” between the arbitrary and capricious and the abuse of
discretion standards in the ERISA benefits review context. See
Wildbur, 974 F.2d at 635.
We also note that cases after Pierre have used the “arbitrary
and capricious” standard as part of abuse-of-discretion review.5
Similarly, we decline to follow Pierre to the extent that it
4
When panel decisions are in conflict, the earlier one controls. See
Narvaiz v. Johnson, 134 F.3d 688, 694 (5th Cir.) (“It is more than
well-established that, in this circuit, one panel may not overrule the decision,
right or wrong, of a prior panel in the absence of en banc reconsideration or
superseding decision of the Supreme Court.”), cert. denied, 118 S. Ct. 2364
(1998).
5
See, e.g., Switzer v. Wal-Mart Stores, Inc., 52 F.3d 1294, 1298 (5th Cir.
1994) (“[T]he decisions of the plan administrator can only be reversed if found to
be arbitrary and capricious.”); Izzarelli v. Rexene Prods. Co., 24 F.3d 1506, 1513
n.13 (5th Cir. 1994) (referring to “our abuse of discretion/arbitrary and capricious
standard . . . .”); Duhon v. Texaco, 15 F.3d 1302, 1306 (5th Cir. 1994) (“The
standard of review we apply in our review of the plan administrator’s decision is
the arbitrary and capricious or abuse of discretion standard . . . .”).
7
rejects the use of the “arbitrary and capricious” analysis as part
of abuse-of-discretion review.6
C.
When reviewing for arbitrary and capricious actions resulting
in an abuse of discretion, we affirm an administrator’s decision if
it is supported by substantial evidence. A decision is arbitrary
only if “made without a rational connection between the known facts
and the decision or between the found facts and the evidence.”
Bellaire, 97 F.3d at 828-29. Assuming that both parties were given
an opportunity to present facts to the administrator, our review of
factual determinations is confined to the record available to the
administrator. See Wildbur, 974 F.2d at 639.
Although Meditrust cites several alleged instances of bad
faith and challenges the procedures employed during the review
6
With one exception, our sister circuits also have folded the “arbitrary
and capricious” standard into the “abuse of discretion” standard in the wake of
Bruch. See, e.g., Vizcaino v. Microsoft Corp, 120 F.3d 1006, 1009 (9th Cir.
1997) (“[T]he exercise of [the Plan’s] discretion is reviewed under the arbitrary
or capricious standard, or for abuse of discretion, which comes to the same
thing.” (internal quotations omitted)); Sheppard & Enoch Pratt Hosp., Inc.,
32 F.3d 120 (4th Cir. 1994) (reviewing denial of benefits under “arbitrary and
capricious or abuse of discretion” standard); Abynathya v. Hoffmann-La Roche,
Inc., 2 F.3d 40 (3d Cir. 1993) (holding that arbitrary and capricious standard
is essentially the same as abuse of discretion standard); Callahan v. Rouge Steel
Co., 941 F.2d 456, 458 (6th Cir. 1991) (reviewing denial of benefits under
arbitrary and capricious standard but also weighing conflicts of interest as a
factor); Brown v. Blue Cross & Blue Shield, 89 F.3d 1556, 1562 (11th Cir. 1990)
(“We therefore hold that the abuse of discretion, or arbitrary and capricious,
standard applies to cases such as this one [reviewing denial of benefits].”).
But see Morton v. Smith, 91 F.3d 867 (7th Cir. 1996) (applying abuse-of-
discretion standard in general but applying arbitrary-and-capricious standard
when fiduciaries are bound to interpret plan under broad standard of good
faith).
8
process, there is not sufficient support in the record to hold the
administrator’s denial of benefits arbitrary or capricious.
Meditrust’s argument that the Plan violated 29 U.S.C. § 1133 by
failing to provide a “full and fair review” of Revels’s claim is
not persuasive. The Plan reviewed Revels’s medical records six
times, concluding on each occasion that the treatment was not
medically necessary.
Meditrust further avers that these reviews were inadequate
because the Plan’s physicians were insufficiently trained and
relied on incomplete records. Meditrust does not, however, point
to any authority requiring the Plan to provide medical specialists
when reviewing a claim.
Our review of the record supports the district court’s finding
that the Plan fully and adequately reviewed Revels’s claim. The
denial letters expressly contain the basis for the denial: “[T]he
above mentioned therapy is educational and maintenance in nature,
rather than medically necessary for the treatment of an illness
and/or injury.” (Emphasis added.) Moreover, the Plan’s review was
based on a full record. In fact, a collection agency retained by
New Medico forwarded to the Plan “all of the medical records and
supporting documentation . . . necessary . . . to review” Revels’s
claim prior to the fifth and sixth reviews.7 The Plan’s review of
7
We have upheld an administrator’s denial of benefits based on an
independent review of the claimants’ medical records. “[The Plan Administrator]
did not rely on Sweatman’s physician’s diagnoses only to ignore their advised
(continued...)
9
Revels’s claim, using a number of qualified physicians and based on
all the hospital records, constitutes enough of a “rational
connection between the known facts and the decision” to survive
arbitrary and capricious review.
IV.
In summary, the district court applied the appropriate
standard of review and addressed each of Meditrust’s arguments.
Our review of the record reveals that the Plan did not abuse its
discretion in denying coverage. The judgment is AFFIRMED.
7
(...continued)
treatment. Rather, [the Plan Administrator] denied Sweatman’s claim based on the
opinions of [independent doctors] disagreeing with those of Sweatman’s
physicians.” Sweatman, 39 F.3d at 603.
10