Case: 14-20576 Document: 00513133695 Page: 1 Date Filed: 07/29/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 14-20576 July 29, 2015
Lyle W. Cayce
REBECCA HAMSHER, Clerk
Plaintiff - Appellant
v.
NORTH CYPRESS MEDICAL CENTER OPERATING COMPANY,
LIMITED,
Defendant - Appellee
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:13-CV-1401
Before JOLLY, HIGGINBOTHAM, and DAVIS, Circuit Judges.
PER CURIAM:*
In this ERISA case, we must decide whether the plaintiff’s medical
expenses were incurred at a “hospital.” Concluding that the administrative
record does not support the insurer’s determination that they were, we reverse.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
Case: 14-20576 Document: 00513133695 Page: 2 Date Filed: 07/29/2015
No. 14-20576
I.
A.
North Cypress Medical Center provides health insurance to its
employees through its self-funded Employee Benefit Plan (the “Plan”). As with
many insurers, North Cypress must pre-approve certain medical treatments.
If pre-approval is required, but not received, North Cypress may reduce its
payment to its beneficiaries, or deny reimbursement altogether.
The Plan has two types of pre-approval. The first is called
“precertification,” and it applies to all “hospitalizations” and “inpatient mental
disorder/substance use disorder treatments.” 1 To precertify, the covered
person or a family member must contact North Cypress’s medical management
subcontractor, Meritain Health Medical Management, at least 48 hours before
treatment is to begin. 2 Meritain will then determine how many days of
treatment are medically necessary. That said, a failure to precertify is not an
absolute bar to reimbursement. “If a Covered Person does not obtain
precertification, as required for certain benefits under the Plan, eligible
expenses will be reduced by $500.”
The second type of pre-approval is more stringent, and is called “prior-
authorization” (although it is sometimes referred to in the briefing as “pre-
authorization”). Prior-authorization is an absolute precondition to
reimbursement; North Cypress will not pay for certain services unless the
“service or specialty is not available at [North Cypress] and prior authorization
1 A “Mental Disorder” is defined by the Plan as “any disease or condition, regardless
of whether the cause is organic, that is classified as a Mental Disorder in the current edition
of the International Classification of Diseases, published by U.S. Health and Human
Services.” Outpatient and emergency mental disorder and substance use disorder treatments
do not require precertification.
2 If there is a medical emergency, the covered person or a family member must contact
Meritain “within 48 hours of the first business day after admission.”
2
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No. 14-20576
has been obtained from [North Cypress] Human Resources Department.” As
is relevant here, both inpatient and outpatient hospital services must be prior-
authorized. And the Plan defines “[h]ospital” to include “[a] facility operating
legally as a psychiatric [h]ospital or residential treatment facility for mental
health and licensed as such by the state in which the facility operates.” 3
B.
Rebecca Hamsher was employed by North Cypress as a nurse and was
insured through its Plan. In May 2011, she was admitted to Timberline Knolls
Residential Treatment Center (“Timberline”) in Illinois, where she was
diagnosed with various mental disorders. She was treated at Timberline
through December 2011, although the administrative record is not clear as to
the nature of her treatment. What is clear, however, is that North Cypress did
not precertify or prior-authorize her medical treatment.
3The Plan’s full definition is:
Hospital is an institution which is engaged primarily in providing medical care and
treatment of sick and injured persons on an inpatient basis at the patient’s expense and
which fully meets these requirements: it is accredited as a Hospital by the Joint Commission
on Accreditation of Healthcare Organizations or the American Osteopathic Association
Healthcare Facilities Accreditation Program; it is approved by Medicare as a Hospital; it
maintains diagnostic and therapeutic facilities on the premises for surgical and medical
diagnosis and treatment of sick and injured persons by or under the supervision of a staff of
Physicians; it continuously provides on the premises 24-hour-a-day nursing services by or
under the supervision of registered nurses (R.N.s); and it is operated continuously with
organized facilities for operative surgery on the premises.
“Hospital” also includes:
(1) A facility operating legally as a psychiatric Hospital or residential treatment facility
for mental health and licenses as such by the state in which the facility operates.
(2) A facility operating primarily for the treatment of Substance Use Disorder if it meets
these requirements: maintains permanent and full-time facilities for bed care and
full-time confinement of at least 15 resident patients; has a Physician in regular
attendance; continuously provides 24-hour a day nursing service by a registered
nurse (R.N.); has a full-time psychiatrist or psychologist on staff; and is primarily
engaged in providing diagnostic and therapeutic services and facilities for treatment
of Substance Use Disorder.
3
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North Cypress refused to pay. 4 Hamsher internally appealed in January
2012, and North Cypress again denied her claim. It concluded that “based on
evidence in the administrative record showing that [she] failed to obtain the
necessary prior authorization,” she “was not eligible to receive benefits.” 5
Unsatisfied, Hamsher filed suit against North Cypress in federal district
court, seeking “to recover benefits due to [her] under the terms of [her] plan,”
as provided by the Employee Retirement Income Security Act (“ERISA”). 6
North Cypress moved for summary judgment. Shortly after, Hamsher moved
to supplement the administrative record, which the district court denied. The
court also granted North Cypress’s summary judgment motion. In a brief
order, it concluded that Hamsher was required to get prior-authorization for
her treatment at Timberline, and since she conceded she had failed to do so,
North Cypress was entitled to deny her claim.
This timely appeal of the district court’s orders granting summary
judgment and denying Hamsher’s motion to supplement the administrative
record follows.
II.
A.
“Standard summary judgment rules control in ERISA cases.” 7 We
review the district court’s grant of summary judgment de novo, applying the
4 While the administrative appeal was pending, Hamsher paid Timberline all amounts
due.
5 “[T]he administrative record reviewed consisted only of the following information:
(a) the Plan documents; (b) UB-04 and UB-97 claim forms provided by Timberline Knolls
Residential Treatment Center (‘Timberline Knolls’); and, (c) written confirmation of a request
for prior authorization, if any, via e-mail from . . . the Director of Human Resources at North
Cypress.”
6 29 U.S.C. § 1132(a)(1)(B).
7 Green v. Life Ins. Co. of N. Am., 754 F.3d 324, 329 (5th Cir. 2014) (quoting Cooper v.
Hewlett-Packard Co., 592 F.3d 645, 651 (5th Cir. 2009)).
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same standards as the district court. 8 “The court shall grant summary
judgment if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” 9
We review “an administrator’s factual determinations in the course of a
benefits review,” as at issue here, for abuse of discretion. 10 This standard is
far from demanding.
Abuse of discretion review is synonymous with arbitrary and
capricious review in the ERISA context. 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. Substantial evidence is more than a scintilla,
less than a preponderance, and is such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.
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. 11
“A plan administrator abuses its discretion where the decision is not ‘based on
evidence, even if disputable, that clearly supports the basis for its denial.’” 12
B.
North Cypress denied Hamsher’s claim because it concluded that she
had neither asked for nor received prior-authorization for “hospital expenses
incurred at hospitals other than North Cypress.” Under the terms of the Plan,
North Cypress’s denial was proper if Hamsher’s expenses were incurred at a
8 Wilson v. Tregre, 787 F.3d 322, 324-25 (5th Cir. 2015).
9 Fed. R. Civ. P. 56(a).
10 Dutka ex rel. Estate of T.M. v. AIG Life Ins. Co., 573 F.3d 210, 212 (5th Cir. 2009).
11 Cooper v. Hewlett-Packard Co., 592 F.3d 645, 652 (5th Cir. 2009) (internal citations
and quotation marks omitted); see also Holland v. Int’l Paper Co. Retirement Plan, 576 F.3d
240, 246 (5th Cir. 2009) (“Our ‘review of the administrator’s decision need not be particularly
complex or technical; it need only assure that the administrator’s decision fall somewhere on
a continuum of reasonableness – even if on the low end.’”(quoting Corry v. Liberty Life
Assurance Co. of Boston, 499 F.3d 389, 398 (5th Cir. 2007)).
12 Holland, 576 F.3d at 246 (quoting Lain v. UNUM Life Ins. Co., 279 F.3d 337, 342
(5th Cir. 2002)).
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hospital, a category which explicitly includes a “residential treatment facility
for mental health and licensed as such by the state in which the facility
operates.” If, however, Hamsher received “mental health . . . treatment” at a
non-hospital facility, prior-authorization was not required, and she is entitled
to at least partial reimbursement. 13
The problem is that the administrative record is essentially silent as to
the nature of Hamsher’s treatment. We know that she was treated for various
mental disorders at a facility called “Timberline Knolls Residential Treatment
Center,” but the record says nothing about whether this facility is a
“residential treatment facility for mental health and licensed as such by the
state [of Illinois].” Rather, the administrative file contains only claim forms,
none of which provide an indication as to whether Timberline is a “hospital”
as defined under the Plan. The name is suggestive, of course, but title alone
does not constitute the type of “substantial evidence” that North Cypress must
put forward.
This conclusion accords with our precedent. In Barnham v. Ry-Ron Inc.,
for example, an insurer denied coverage for an experimental cancer
treatment, citing a plan exclusion for experimental or investigational
procedures. 14 The patient filed suit, and the insurer moved for summary
judgment. It did so without developing the record; “[t]he only evidence put
forth by the Plan in support of its position that the . . . treatment is
experimental is an affidavit of the claims manager.” 15 We held that this
evidence was not enough to “sufficiently demonstrate the plan administrator’s
13 Under any circumstances, the Plan specifies that Hamsher can only be reimbursed
for “medically necessary” services, however, North Cypress does not contest the medical
necessity of her treatment.
14 121 F.3d 198, 200 (5th Cir. 1997).
15 Id. at 202.
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entitlement to summary judgment.” 16 Here, by contrast, we lack even an
affidavit indicating that Timberline was an Illinois-licensed residential
treatment facility. 17
The administrative record cannot support North Cypress’s conclusion
that Hamsher was treated at a “hospital.” Its denial of her claim – and
summary judgment in its favor – was improper. 18
C.
The only remaining question is of remedy. “Remand to the plan
administrator for full and fair review is usually the appropriate remedy when
the administrator fails to substantially comply with the procedural
requirements of ERISA.” 19 Our practice is different where, as here, the
administrator’s denial is “not supported by concrete evidence in the record.” 20
There, we have held that “granting summary judgment for the plaintiff is
appropriate,” 21 even if the plaintiff had not moved for summary judgment. 22
In Vega v. National Life Insurance Services, our en banc court explained
the basis for this rule:
16 Id.
17 Nor is there any evidence in the record that Timberline satisfied any of the Plan’s
other definitions of “hospital.” See R. 371.
18 Given our holding, we need not reach the question of whether the district court erred
in denying Hamsher’s motion to supplement the administrative record.
19 Rossi v. Precision Drilling Oilfield Servs. Corp. Empl. Benefits Plan, 704 F.3d 362,
368 (5th Cir. 2013) (quoting Lafleur v. La. Health Serv. & Indem. Co., 563 F.3d 148, 157 (5th
Cir. 2009)).
20 Id.
21 Id.; see also Robinson v. Aetna Life Ins. Co., 443 F.3d 389, 396-97 (5th Cir. 2006)
(granting summary judgment to the plaintiff because “no evidence in the administrative
record” supported denying the plaintiff’s claim); Vega v. Nat’l Life Ins. Servs., 188 F.3d 287,
302 (5th Cir. 1999) (en banc) (“If an administrator has made a decision denying benefits when
the record does not support such a denial, the court may, upon finding an abuse of discretion
on the part of the administrator, award the amount due on the claim and attorneys' fees.”),
overruled on other grounds by Metro Life Ins. Co. v. Glenn, 554 U.S. 105 (2008).
22 See Robinson, 443 F.3d at 396-97.
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We want to encourage each of the parties to make its record before
the case comes to federal court, and to allow the administrator
another opportunity to make a record discourages this effort.
Second, allowing the case to oscillate between the courts and the
administrative process prolongs a relatively small matter that, in
the interest of both parties, should be quickly decided. Finally, we
have made plain in this opinion that the claimant only has an
opportunity to make his record before he files suit in federal court,
it would be unfair to allow the administrator greater opportunity
at making a record than the claimant enjoys. 23
North Cypress had its chance to create a record showing that Hamsher
received services at a “[h]ospital.” It simply failed to do so.
III.
We REVERSE the judgment of the district court and REMAND for the
entry of judgment in favor of Hamsher.
23 Vega, 188 F.3d at 302 n.13.
8