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Osf Healthcare System, An v. Concert Health Plan Insurance Co.

October 4, 2011


The opinion of the court was delivered by: Byron G. Cudmore United State Magistrate Judge

E-FILED Tuesday, 04 October, 2011 02:48:59 PM Clerk, U.S. District Court, ILCD



St. Francis Medical Center ("St. Francis") pursues an ERISA claim against Concert Health Plan Insurance Company ("Concert") for denying the bulk of Ronald Miller's benefits claim arising from his hospitalization and surgery at St. Francis in August 2007.*fn1 Concert processed the claim at the out-of-network rate and St. Francis contends that the claim should have been processed at in-network rates.

Before the Court are opposing motions for summary judgment by Concert and St. Francis, as well as various motions to strike, a motion to file an affidavit, and a motion to take additional depositions.

After carefully reviewing the parties' submissions on summary judgment, the Court concludes that Concert's denial of benefits was arbitrary and capricious because Concert did not adequately explain the basis for its decision. The case will be remanded to Concert for further proceedings consistent with this opinion.


Robin Miller enrolled in health insurance coverage for herself and her husband through her employer, Warren Achievement Center, Inc. ("Warren Achievement"). The insurance was provided by Concert through a contract with Warren Achievement. In the form application for benefits completed by Warren Achievement, the purchaser of the policy (in this case, Warren Achievement) is listed as the plan administrator and Concert is listed as the claims administrator and ERISA fiduciary. (d/e 57, Ex. A1, p. 4). The application states that Concert has "full and exclusive discretionary authority" to interpret the policy and make benefit determinations.*fn2 Id.

Like many health benefit plans, the amounts covered in Concert's policy depend in large part on whether the medical provider is "in-network" or "out-of-network." Generally, Concert's policy imposes higher deductibles, copayments, and a cap on out-of-network charges. The cap is called the "Maximum Allowable Amount," which appears to be based on Medicare rates. (d/e 80, p. 19).

On Sunday, August 12, 2007, Mrs. Miller's husband, Ronald Miller, suffered a stroke or brain aneurism while at home. His wife drove him to the emergency room at OSF Holy Family Medical Center in Monmouth, Illinois ("Holy Family"), an in-network provider under Concert's policy. Because Holy Family was not equipped to treat Mr. Miller, he was stabilized and airlifted to Peoria, Illinois, for diagnosis and treatment. According to the Millers, attempts were made to contact Concert before the transfer, but no representatives were available because it was Sunday. Concert has no record of such attempts, but agrees that it had no representative available on the weekends. Concert, however, did maintain a website listing its preferred providers.

Mr. Miller was airlifted from Holy Family to St. Francis in Peoria ("St. Francis"), an out-of-network hospital. Methodist Medical Center in Peoria ("Methodist"), is an in-network hospital and is a few miles from St. Francis.

Mr. Miller had surgery at St. Francis the next afternoon, on Monday, August 13, 2007, apparently performed by Dr. Jeffrey Klopfenstein, a neurosurgeon. At some point during that day, someone from St. Francis contacted Concert to precertify Mr. Miller's stay. It is not clear if this contact was made before or after the surgery. Concert maintains that it was not notified until after the surgery. Concert further maintains that it informed St. Francis sometime on August 13, 2007, that St. Francis was out-of-network and that Methodist was in-network, but St. Francis contends that it was not notified of this fact by Concert until August 14, 2007. It is not clear if anyone communicated to the Millers that St. Francis was out-of-network or that Methodist was in-network. Mr. Miller was released from St. Francis on August 27, 2007.

According to Mr. Johny Antony, Vice President of Operations at Concert, he was notified by Concert employees on August 13, 2007, that Mr. Miller had been admitted to an out-of-network hospital and that the hospital was seeking precertification. Mr. Antony instructed the employees to precertify if the criteria were met. Precertification, however, does not determine whether reimbursement is at in-network or out-of-network rates. That day or the next, he phoned the Chief Financial Officer at St. Francis, leaving a message to see if a rate could be negotiated, but the CFO did not return the call. Antony also testified that he phoned someone at Methodist Hospital on August 14 or 15, 2007, conveyed the precertification information that had been received from St. Francis, and was told that Methodist "would be able to take that patient for the condition." (Antony Dep. p. 100, d/e 57, Ex. D). Antony did not discuss with the Methodist representative the specific treatment Mr. Miller needed and was not sure if he knew at that point that the surgery had already been done. (Antony Dep. p. 108, d/e 57, Ex. D). Thereafter, on August 14 or 15, 2007, a St. Francis representative ("Dawn") called Mr. Antony to negotiate a rate, but those negotiations were unsuccessful. According to Antony, he then asked Dawn to inform the Millers that the charges would be processed at the out-of-network rate and that the Millers could seek in-network care from Methodist. (Antony Aff. pp. 13-17, 83, 104 d/e 57, Ex. D). It is not clear if this information was conveyed to the Millers. Concert granted precertification for Mr. Miller's stay, and in a fax noted that "this inpatient admission/stay is considered as Out-of-Network." (d/e 61-4). It is undisputed that Mr. Miller could not have been transferred immediately after the surgery to Methodist, but Concert maintains that he could have been transferred once stabilized.

St. Francis' bill totaled over $140,000. Concert processed that bill applying the out-of-network rates and caps and sent an explanation of benefits to the Millers and St. Francis. (Complaint, d/e 1-1, p. 36). The explanation concluded that bulk of the bill was not covered because it was "over maximum allowable," (d/e 1-1, p. 26), which is the policy's cap on out-of-network services. Apparently no other written explanation was given for the denial. See 29 U.S.C. § 1133; 29 C.F.R. § 2560.503-1(g)(setting forth details and information required to be included in notification of benefits determination).

According to an attachment to the Complaint, Mrs. Miller appealed the explanation of benefits in December, 2007. (Complaint, d/e 1-1, pp. 17, 31-32). In February, 2008, St. Francis joined in the appeal based on the Millers' assignment of rights to St. Francis. (Complaint, d/e 1-1, pp. 29). There is no indication of what opportunities the Millers or St. Francis had to submit information in their appeal of the explanation of benefits.

In a letter dated March 18, 2008, Concert's "Medical Appeal Committee" affirmed that Mr. Miller's medical bills from St. Francis were subject to the out-of-network rates and caps, stating:

The above listed claims have been received and reviewed by the Medical Appeal Committee. The Medical Appeal Committee has determined that no additional benefits are payable due to the reasons listed below: A medical provider that is not in the member's insurance network provided services. Please be advised that we do understand that circumstances do arise which prevent using and or seeking in-network providers, but we must apply the benefits according to the policy. Per the policy, all out-of-network covered services are payable on a maximum allowable fee basis. In Mr. Miller's case, we applied the maximum allowable fee basis. Benefits are payable only if services are considered to be a covered expense and medically necessary. All covered services are payable on a maximum allowable fee basis for out of network providers and according to contract rates for participating providers, and are subject to specific conditions, durational limitations and all applicable maximums of the policy. Also, the charges for an air ambulance totaling $13,940.00 were denied as not a covered health benefit since there is a policy exclusion within this member's Certificate of Coverage. (d/e 57, Ex. G). St. Francis filed this lawsuit in November 2008, seeking the balance owed. The air ambulance charges are not an issue in this case.

Section 1 of the Certificate of Insurance states in relevant part: If a PREFERRED provider finds it medically necessary to refer You to a Non-Participating provider, benefits will be paid at the level applicable to the referring provider, but ONLY if there is no PREFERRED provider reasonably available to provide that Service. If there is no PREFERRED provider within 50 miles, We may, at Our discretion, require You to travel to a PREFERRED provider of Our choice. If We do, We will pay the reasonable travel expenses of the Covered Person who is receiving treatment from the PREFERRED provider. (d/e 80-1, p. 9). St. Francis contends that in-network rates apply because a preferred provider (Holy Family) referred Mr. Miller to St. Francis and that no in-network provider was "reasonably available." Concert disputes this, arguing that preferred providers were reasonably available.


I. Motions to Strike

Before the Court are motions to strike the affidavits of the followings persons: 1) Dr. Jeffrey Klopfenstein, a neurosurgeon who provided care to Mr. Miller at St. Francis; 2) Johny Antony, the Vice President of Operations at Concert; and 3) Jennifer Ulrich, the Director of Financial Analysis at St. Francis. Also before the Court is Concert's motion to strike the "Steve Todd Analysis" and Concert's motion for leave to submit Deborah Simon's affidavit.

Affidavits "must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated." Fed. R. Civ. P. 56(c)(4). "'Personal knowledge' includes inferences-all knowledge is inferential- and therefore opinions. . . . . But the inferences and opinions must be grounded in observation or other first-hand experience." Visser v. Packer Eng. Assoc., Inc., 924 F.2d 655, 659 (7th Cir. 1991)(citation omitted). Conclusory assertions lacking factual support are insufficient. See Albiero v. City of Kankakee, 246 F.3d 927, 933 (7th Cir.2001). Additionally, an affidavit cannot be used to contradict earlier deposition statements by the same declarant, absent a sufficient explanation for the contradiction. Patton v. MFS/Sun Life Financial Distributors, Inc., 480 F.3d 478, 488-89 (7th Cir. 2007); Bank of Illinois v. Allied Signal Safety Restraint, 75 F.3d 1162, 1168 (7th Cir. 1996).

A. Affidavit of Dr. Jeffrey Klopfenstein and the "Steve Todd Analysis"

Concert argues that the arbitrary and capricious standard of review applies and this information cannot be considered because it was not a part of the administrative record. Concert does not identify exactly what is part of the ...

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