Case No. 12–55210.
Argued and Submitted January 7, 2014. Filed on August 20, 2014 United States Court of Appeals, Ninth Circuit
Pacific Shores Hosp v United Behavioral Health 9th Cir
US Department of Labor Office of the Solicitor-Pacific Shores Hospital Amicus Brief in support of plaintiffs
Ramifications of Court Decision:
- United Behavioral Health violated it’s fiduciary duty under ERISA
- Medical records outside the Administrative Record can be considered if helpful
- DOL argues that an Administrator’s benefits decision is an abuse of discretion if it is not based on a full and fair review of “ALL RELEVANT FACTS AND CIRCUMSTANCES”
The appeals court determined that the initial court decision in this case, Pacific Shores Hospital v. United Behavioral Health, (UBH) was based only on the administrative record provided by UBH, which contained numerous errors and inconsistencies, and not on any additional materials.
In its appeal, Pacific Shores Hospital argued that procedural irregularities in UBH’s benefits denial made it necessary for the appeals court to consider the denial anew. It also argued that the patient’s hospital records should be considered. Pacific Shores Hospital also argued that UBH was operating under a conflict of interest because it was concerned with maintaining its relationship with Wells Fargo, and Wells Fargo had its own self-interest in wanting to hold down the cost of benefits.
The 9th Circuit decided “all of the relevant circumstances” needed to be considered, including the hospital records and the fact that UBH had never seen the patient and instead relied merely on a paper review of her case.
“It is painfully apparent,” wrote appeals court Judge William Fletcher, “that UBH did not follow procedures appropriate to (the) case.” And this “raise[s] questions about the thoroughness and accuracy of the benefits determination.”
“UBH owed a fiduciary duty to (the patient) under ERISA,” said the decision, citing Pegram v. Herdrich. “The statute provides that fiduciaries shall discharge their duties with respect to a plan ‘solely in the interest of the participants and their beneficiaries,’ [29 U.S.C.] § 1104(a)(1), that is, ‘for the exclusive purpose of (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan,’ § 1104(a)(1)(A).”
The court goes on to say, “Fiduciaries must discharge their duties “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.” Id. at 224 n.6 (quoting 29 U.S.C. § 1104(a)(1)(B)).”
“UBH fell far short of fulfilling its fiduciary duty to Jones. Dr. Zucker, UBH’s primary decisionmaker, made a number of critical factual errors. Dr. Center, as an ostensibly independent evaluator, made additional critical factual errors. Dr. Barnard, UBH’s final decisionmaker, stated that he arrived at his decision to deny benefits “after fully investigating the substance of the appeal.” He then rubberstamped Dr. Center’s conclusions. There was a striking lack of care by Drs. Zucker, Center, and Barnard, resulting in the obvious errors we have described. What is worse, the errors are not randomly distributed. All of the errors support denial of payment; none supports payment. The unhappy fact is that UBH acted as a fiduciary in name only, abusing the discretion with which it had been entrusted.“, the 9th circuit said.
“A plan administrator abuses its discretion if the administrator rendered its decision without any explanation, construed provisions of the plan in a way that conflicts with the plain language of the plan, failed to develop necessary facts for its determination, or relied on clearly erroneous findings of fact in making benefit determinations.“, according to the court records.
Click here for a link to the DOL website and Amicus Brief