Community Hospital of The Monterey Peninsula v. Aetna Life Insurance Company

Background

Community Hospital of The Monterey Peninsula (CHOMP) provided care to P.R., an Aetna health-plan member, from January 1 through January 23, 2016. CHOMP had an assignment of P.R.’s plan benefits. The parties’ settlement agreement required claims for services during the relevant period to be processed under their Hospital Services Agreement and the applicable plan.

Aetna initially approved P.R.’s care through January 14, 2016, but later denied coverage for January 15 through January 23. P.R. had end-stage chronic obstructive pulmonary disease and could not care for herself without assistance. Her doctors considered her medically stable and ready for discharge, but home-healthcare services would not accept her because her living environment was unsafe. CHOMP therefore searched for a skilled-nursing or residential-care placement, and P.R. remained hospitalized until January 23.

CHOMP billed Aetna $254,745 for P.R.’s care. Aetna made partial payments and continued to deny the remaining charges for January 15 through January 23. After an appeal, Aetna upheld the denial because P.R. no longer met acute inpatient criteria and her care could have been provided at a lower level of care or in another setting.

Review standard and procedural issues

The plan was governed by the Employee Retirement Income Security Act, a federal law regulating many private employee health and benefit plans. The plan gave Aetna discretionary authority to decide benefit claims, so the court reviewed Aetna’s decision for abuse of discretion. Under that standard, the court generally defers to a plan administrator’s reasonable decision.

CHOMP identified five alleged procedural irregularities: delayed notice that coverage would end, delay in resolving the appeal, delayed payment for an earlier period, failure to produce requested documents, and failure to consider whether lower-level care was available. The court rejected the first four arguments. It found that P.R.’s condition was not “urgent” during the disputed period, that Aetna’s communications showed an ongoing exchange of information, that the earlier delayed payment was not a procedural irregularity, and that the cited document-production rule applied to the plan administrator rather than Aetna as the claim administrator.

The court agreed with CHOMP on the fifth issue. Aetna’s medical director testified that the availability of lower-level care was not part of the review, and Aetna did not present evidence contradicting that testimony. The court therefore found a violation of ERISA appeal procedures, admitted the deposition testimony into the record, and applied the abuse-of-discretion review with a mild level of skepticism. The court concluded, however, that the violation was minor because the plan did not require Aetna to evaluate medical necessity based on P.R.’s housing conditions or the availability of another facility.

The court sustained Aetna’s objection to CHOMP’s other evidence outside the administrative record, except for the medical director’s deposition testimony about whether Aetna considered the availability of lower-level care. The court also denied Aetna’s request for judicial notice of information from CHOMP’s website.

Merits ruling

The plan covered medically necessary services that were clinically appropriate, effective, and no more costly than an alternative service likely to produce equivalent results. It excluded services primarily for comfort or convenience and care provided to create an environment protecting a person from exposure that could worsen an illness or injury.

The court held that Aetna did not abuse its discretion in denying coverage for the disputed hospital stay. The medical records repeatedly described P.R. as stable, at her baseline, and able to be discharged to a lower level of care. The court found no evidence that her medical condition deteriorated between January 7 and January 23. It ruled that the lack of an available skilled-nursing or residential-care placement did not make acute hospitalization medically necessary under the plan.

The court also rejected CHOMP’s argument that P.R.’s circumstances constituted an emergency condition under the plan or federal law. The court interpreted the plan’s emergency-condition definition as addressing the patient’s existing medical status, not what might happen after discharge. It found that P.R. was not experiencing an emergency medical condition during the disputed period because her doctors repeatedly found her stable and able to receive care at a lower level.

The court further ruled that CHOMP’s diligence in searching for a suitable placement was irrelevant to whether Aetna reasonably denied coverage. Finally, it rejected CHOMP’s argument that the plan’s medical-necessity language was ambiguous and therefore should be interpreted in favor of coverage.

Disposition

The court DENIED CHOMP’s Motion for Partial Summary Judgment at ECF 51 and GRANTED Aetna’s Motion for Partial Summary Judgment at ECF 55.