CustomAir Ambulance, LLC v. Lund Foods Holdings, Inc. Health Care Plan
- Donovan Frank
- 0:17-cv-05191
- U.S. District Court · District of Minnesota
- 12
In CustomAir Ambulance v. Lund Food, Judge Frank dismissed the complaint without prejudice because CustomAir had not completed the Plan’s appeal process.
CustomAir Ambulance, LLC’s claim for payment under the Lund Food Holdings Health Care Plan was dismissed without prejudice; the Plan and Medica Self-Insured obtained dismissal of the amended complaint.
What happened
CustomAir Ambulance, LLC v. Lund Food Holdings, Inc. Health Care Plan concerned a $399,464 claim for air ambulance services provided to Laura Olsen. The Plan initially denied the claim because the services were not medically necessary, but later approved that issue and paid $165,091 after deciding the transport was non-emergency and involved a non-network provider.
CustomAir argued that it had already completed the required appeals. The defendants argued that CustomAir needed to separately appeal the later partial denial concerning whether the transport was an emergency and how much a non-network provider should receive.
Judge Frank ruled that CustomAir had not completed the Plan’s internal appeal process for those newer issues. He granted the defendants’ motions to dismiss and dismissed CustomAir’s amended complaint without prejudice.
The detailed version
- CustomAir Ambulance, LLC v. Lund Foods Holdings, Inc. Health Care Plan · No. 0:17-cv-05191
- Donovan Frank
- Sept. 14, 2018
Background
Lund Food Holdings, Inc. established and sponsored a health care plan for eligible employees and dependents. Medica Self-Insured sponsored the Plan. Darlene Olsen was a Plan participant, and her daughter, Laura Olsen, was a beneficiary. CustomAir Ambulance, LLC was the contractual assignee of claims and damages arising from the defendants’ alleged actions.
CustomAir provided Laura with air ambulance transportation from Rochester, Minnesota, to Rockville, Connecticut, on September 21, 2016. It submitted a $399,464 claim to Medica. Medica initially denied the entire claim on the ground that the services were not medically necessary. Darlene’s letter was treated as an appeal, and Medica upheld the denial on December 14, 2016.
CustomAir then requested reconsideration and external review. Medica reconsidered the matter and, on March 14, 2017, reversed its determination that the services were not medically necessary. Medica nevertheless determined that the transport was not an emergency and that CustomAir, as a non-network provider, should receive $165,091. Medica denied the remaining $234,373 and notified CustomAir that it could request a first-level review within 180 days.
CustomAir did not request that first-level review. It later sent correspondence referring to the March 14 decision and sought more time, but Medica did not treat the correspondence as a proper appeal. CustomAir filed this lawsuit after asserting that it had exhausted the Plan’s appeal process.
Parties’ Positions
The defendants moved to dismiss under Rule 12(b)(6), arguing that CustomAir had failed to exhaust the administrative remedies required by the Plan. “Administrative remedies” here means the Plan’s internal process for reviewing denied claims before a lawsuit may be filed.
CustomAir argued that it was required to pursue only one appeal and that its appeal of the original denial satisfied the exhaustion requirement. It also contended that it had submitted several appeals, including communications concerning the initial denial and later reconsideration.
The defendants argued that the March 14 decision created a separate partial denial based on different issues—whether the transport was an emergency and the reimbursement rate for a non-network provider. They maintained that CustomAir had not specifically appealed those issues.
Court’s Analysis
The court explained that the Employee Retirement Income Security Act (ERISA) does not expressly require exhaustion in every case, but exhaustion is required when the governing plan requires it. The Plan provided a three-step process: first-level review, optional external review, and then legal action. The court also stated that exhaustion may not be required if pursuing the process would be futile or if no administrative remedy were available.
The court rejected the futility argument. Medica had reversed its initial decision about medical necessity, showing that the appeal process could result in a different outcome.
The court concluded that CustomAir’s initial appeal succeeded because Medica ultimately found that the services were medically necessary. But the March 14 decision addressed two different matters: the classification of the transport as non-emergency and the calculation of reimbursement under the Plan’s non-network-provider provision. Because CustomAir did not request a first-level review of that partial denial, the administrative record was incomplete.
The court also found that Medica clearly notified CustomAir of its right to appeal the March 14 decision. Although CustomAir referred several times to appealing that decision, it never actually requested the required first-level review of the new issues. The court therefore stated that the case was not yet ripe for judicial review.
Disposition
Judge Donovan W. Frank granted the defendants’ motions to dismiss. The court dismissed CustomAir’s amended complaint without prejudice because CustomAir had failed to exhaust the Plan’s administrative remedies by not appealing the March 14, 2017 partial denial. The court ordered judgment to be entered accordingly.
Read the full 12-page opinion on CourtListener, the free public archive maintained by the Free Law Project.