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United Air Ambulance LLC v. Cerner Corp.

United States District Court, D. Arizona

December 4, 2019

United Air Ambulance LLC, Plaintiff,
Cerner Corporation, et al., Defendants.


          Honorable Susan M. Brnovich United States District Judge

         Pending before the Court are Cross-Motions for Summary Judgment. Defendants Cerner Corporation and the Health Exchange Incorporated filed a joint Motion for Summary Judgment and corresponding Statement of Facts on April 10, 2019. (Doc. 67, “DMSJ”; Doc. 68 “DSOF”.) Plaintiff United Air Ambulance filed its own Motion for Summary Judgement and Statement of Facts later that day. (Doc. 73, “PMSJ”; Doc. 74, “PSOF”.) Both Plaintiff and Defendants responded to the opposing motion for summary judgment and corresponding statement of facts. (Doc. 83, “Defendants' Resp.”; Doc. 84, “Resp. to PSOF”; Doc. 88, “Plaintiff's Resp.”; Doc. 89, “Resp. to DSOF”.) Likewise, both Plaintiff and Defendants filed Replies. (Doc. 90, “Defendants' Reply”; Doc. 91, “Plaintiff's Reply”.) Oral argument was held on November 18, 2019. The Court considers the parties respective pleadings and enters the following Order:

         I. BACKGROUND

         K.M., a twenty-three-month-old child with an extremely rare bowel disorder, was rushed to the Phoenix Children's Hospital (“PCH”) emergency room (“ER”) on the morning of March 21, 2017. (PSOF ¶ 12.) After treatment in the ER, K.M.'s parents faced a decision: (1) admit the child to PCH for continued treatment of the emergent condition afflicting their son, “a possible line infection, ” or (2) depart on a pre-arranged air ambulance flight to Boston Children's Hospital (“BCH”) to address the underlying medical condition which PCH could not treat and under which K.M. had long suffered. They chose the latter. This case is about who pays for that flight. More precisely, this case concerns whether Cerner Corporation (“Cerner”) and its fellow defendants abused their discretion in approving the medical necessity of K.M.'s flight at the pre-authorization stage but later denying United Air Ambulance's (“UAA”) claim.

         A. K.M.'s Medical Needs

         PCH was familiar with K.M.'s medical conditions-short bowel syndrome, secondary to necrotizing enterocolitis in early infancy and parenteral nutrition associated liver disease (“PNALD”)-when he arrived at the ER on March 21, 2017. (PSOF ¶ 1.) PCH physicians attempted to address K.M.'s complicated medical problems many times in the past, but multiple surgical treatments had largely failed to improve his condition. (PSOF ¶ 3.) The physicians believed, but could not confirm, that a lack of intestinal musculature complicated K.M's condition and stymied PCH's attempted treatment. (PSOF ¶ 5.) Lacking the required specialized diagnostic equipment, K.M.'s doctors referred him to BCH, one of the few hospitals with the equipment needed to properly diagnose and treat him. (PSOF ¶ 6.) Cerner approved a second opinion from Dr. Tom Jaksic at BCH for a duodenal mobility study that required inpatient admission. (Doc. 82-1 at 67.)

         The problem was getting there. Because K.M. was completely reliant on parenteral nutrition and suffered severe peristomal erosion around the central line supplying him vital nutrients, he needed hourly dressing changes to prevent further erosion and possible infection. (PSOF ¶ 4; Doc. 82-1 at 69, “Dr. Carey Letter”) Dr. Andrew Carey, the Associate Medical Director at BCH's Center for Advanced Intestinal Rehabilitation supported transport to BCH by air ambulance, concluding that “the degree of peristomal erosion and the frequency of dressing changes required to prevent further skin breakdown and soiling of his sterile central venous line site” made “commercial air flight . . . not appropriate for this patient.” (Dr. Carey Letter.) K.M.'s condition was both rare and serious.[1] Dr. Carey continued:

Recent pathology suggests a segmental absence of intestinal musculature . . . an incredibly rare diagnosis [that] requires the use of antroduodenal and colonic manometry to detect for abnormalities in peristalsis. This testing requires inpatient level of care and is only available at a select group of centers, of which Boston Children's Hospital is one. . . . Failure to seek further diagnostic testing will result in ongoing limitations in his ability to advance enteral nutrition which will accommodate progression of his liver disease. Progressive PNALD represents a major source of mortality in patients with intestinal failure and requires specialized care to reduce risk of death.

(Id.) Dr. David Notrica, a pediatric surgeon at PCH, corroborated Dr. Carey's medical opinion and recommendations. (Doc. 82-1 at 73.) He affirmed K.M. “needs an evaluation at [BCH] . . . as soon as possible, and will need medical transport to get there.” (Id.) With physicians at both PCH and BCH concluding that ground transportation was inadequate and instead recommending travel by air ambulance, K.M.'s parents arranged transport with UAA.[2]

         On the day of his scheduled flight, K.M. experienced what both parties consider a “medical emergency” and was taken to the PCH ER for treatment. (PSOF ¶ 12; Doc. 82 at 47.) PCH treated K.M. for a “possible line infection” and potential sepsis. (PSOF ¶ 13.) As Dr. Carey and Dr. Notrica previously established, PCH could not treat K.M.'s underlying condition. (PSOF ¶¶ 11-14.) PCH could, however, successfully address K.M.'s most pressing medical needs-the line infection and possible sepsis. (See DSOF ¶¶ 44-45.) Both K.M.'s pediatric gastroenterologist and ER physician thus recommended that K.M. be admitted at PCH and not take the UAA flight. (Id.; PSOF ¶ 13.) But fearing another opportunity to fly K.M. by air ambulance for treatment at BCH would not come, K.M.'s mother signed K.M. out of the PCH ER against medical advice. (PSOF ¶¶ 11-14.) Upon arrival in Boston, BCH directly admitted K.M. and successfully treated his gastrointestinal conditions. (PSOF ¶ 15.)

         B. The Plan

         Defendant Cerner is a health care technology company that offers insurance coverage for employees. (DSOF ¶ 3.) Through its legal subsidiary and third-party benefits administrator, Defendant The Health Exchange, Inc. d/b/a Cerner HealthPlan Services (“CHPS”), Cerner offers a comprehensive benefits package called the Wraparound Benefits Plan.[3] (DSOF ¶ 9.) Among other offerings, the Wraparound Benefits Plan provides medical insurance coverage to Cerner employees and beneficiaries under a component plan, the Healthe Options Component Plan (“the Plan”). (DSOF ¶ 10.) Both plans are governed by the Employee Retirement Security Act of 1974 (“ERISA”). (DSOF ¶ 12.) K.M. is a covered beneficiary under the Plan. (DSOF ¶ 11.) The Plan names Cerner as fiduciary and plan administrator as defined by ERISA and grants Cerner “the exclusive power and authority, in its sole discretion, to construe and interpret the Plan, to determine all questions of Plan coverage and eligibility for benefits, the methods of providing or arranging for such benefits and all other related matters.” (DSOF ¶ 14.) In turn, Cerner delegates administration and payment of claims to CHPS. (DSOF ¶ 15.) Cerner and CHPS thus maintain a close working relationship. (See DSOF ¶¶ 27-32.) In return for its services, Cerner pays CHPS a monthly administration fee on a per employee covered basis and provides funds to be paid out by CHPS on a weekly basis. (DSOF ¶¶ 29-31.) CHPS operates out of a Cerner-owned building in a commercial building campus that Cerner also calls home. (DSOF ¶ 27.) Employees at CHPS maintain email accounts with Cerner and CHPS. (PSOF ¶ 56.)

         The Plan covers ambulatory travel, including by air ambulance, in specific circumstances. (DSOF ¶¶ 16-17.) Generally, the Plan reimburses transportation by air ambulance in medical emergencies when ground transportation is not appropriate either because a patient needs treatment immediately or because nearby facilities cannot offer appropriate treatment. (See DSOF ¶ 16.) In relevant part, the Plan reads:

         Coverage is provided for air ambulance transport for medical emergencies in the following circumstances:

• The Participant requires transport to a hospital or from one hospital to another because the first hospital does not have the required services and/or facilities to treat the Participant; and ground transportation is not medically appropriate because of the distance involved,
• Or because the Participant has an unstable condition requiring medical supervision and rapid transport

(Id.) The provision requires a provider notify Cerner “except in life threatening circumstances.” (Id.) The Plan does not define “medical emergencies.” (See Doc 68-4 at 51-59.) The Plan also explicitly disclaims coverage in a range of other circumstances. This provision, titled “Services Not Covered, ” reads in part:

Any treatment, confinement, or service which is not recommended by, or any operation which is not performed by, an appropriate professional provider; Examination by a Doctor, related laboratory tests, x-rays and vaccines performed in the absence of specific symptoms on the part of the Participant (except as may be specifically provided herein).

(DSOF ¶ 17.)

         C. The Claims Process

         To be compensated, a provider of services must file a claim with Cerner. The claims process here entailed navigating seven layers of review. (See DSOF ¶¶ 18-26.) Broadly speaking, this claim passed through two main categories of review: preauthorization and claim processing. The Plan allows health care providers to request preauthorization for providing a service to a Plan beneficiary.[4] (DSOF ¶ 17.) When denied, a preauthorization request may be appealed twice. (DSOF ¶ 19.) The first appeal is evaluated by CHPS, the second by Cerner itself. Specifically, if CHPS denies a providers' initial appeal, the dispute is elevated to one of two Cerner personnel charged with handling second level appeals- Bogorad and Dr. David Nill review final claims on appeal among their other responsibilities. (DSOF ¶ 23.) Regardless of whether a preauthorization request is approved or denied, a provider must file a formal claim for benefits. (DSOF ¶ 20.) Like preauthorization requests, claims may be appealed twice if denied. (DSOF ¶ 21.) Similarly, claim appeals are first reviewed by CHPS, then by Cerner. (DSOF ¶¶ 21-23.)

         To insulate the process from conflicts, Cerner and CHPS have some procedural safeguards. The first claim appeal accords no deference to the original decision. (DSOF ¶ 24.) Instead, decisions are made “by an individual who did not decide the initial claims, and who is not a subordinate of anyone that decided the initial claim.” (Id.) The second appeal follows the same procedures. (DSOF ¶¶ 24-26.) At both appeal levels, the reviewer can consider new information submitted by a claimant and consult a health care professional experienced in the relevant area if necessary. (DSOF ¶¶ 24-26.) If denied after a second appeal, a claimant may request an “External Review.” (DSOF ¶ 26.) Denial of a claim after a second appeal, or, if an external review is requested, confirmation of denial by an external reviewer, renders a claim judgment final. Once a final adverse benefits decision has been rendered and a provider exhausts all remedies available under the Plan, the provider may bring a civil action under ERISA.

         In this case, UAA submitted both a preauthorization request and filed a formal claim, following the procedures detailed above. This process began with a series of initial inquiries with CHPS by K.M.'s AHH case manager. (DSOF ¶ 35.) On February 9, 2017, K.M.'s AHH case manager asked CHPS if the Plan covered K.M.'s travel expenses for a second opinion at BCH. (Id.) Eleven days later, AHH confirmed that BCH's services were medically necessary, but not covered because they were not emergent. The next day, February 21, 2017, UAA called CHPS to inquire into covered costs for air ambulance. (DSOF ¶ 39.) Quoting the Plan language, supra, UAA was told the Plan only covered travel by air ambulance, like that requested, in “medical emergencies” and any coverage was subject to the terms of the Plan. (DSOF ¶¶ 39-40.) On February 28, 2017, CHPS followed-up on the previous phone call and provided AHH written confirmation that coverage for air ambulance was not covered for K.M.'s second opinion at BCH. (DSOF ¶ 41.) Despite this, UAA transported K.M. to Boston on March 21, 2017, (PSOF ¶ 14.), and sent CHPS a preauthorization request later that day. (DSOF ¶ 46.) That request was denied on March 24, 2017 for the reasons previously given. UAA appealed on April 24, 2017; CHPS upheld the denial on May 15, 2017. (Doc. 82-7 at 82.) This May 15 appeal denial again quoted the Plan ...

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