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Coverage, technology assessment, and the courts.

Coverage, Technology Assessment, and the Courts

The role of patient as plaintiff in court challenges to adverse coverage decisions appears to be on the increase. Thus, the courts are increasingly finding themselves analyzing the contractual language of insurance policies and the relationship of technology assessment and coverage decisions to the fulfillment of contractual obligations. Generally, the courts have found in favor of the patient and have overturned the initial adverse coverage decision made by the third-party payer. This is illustrated clearly by recent adverse decisions against Blue Cross/Blue Shield plans in cases regarding autologous bone marrow transplantation and a queue of suits facing Blue Cross/Blue Shield plans across the country. This column discusses four recent cases that illustrate the relationship between technology assessment and coverage decisionmaking.

Wickline vs. State of California (November 1986)

Action: Patient brought action against Medi-Cal after having leg amputated due to alleged premature discharge from the hospital.

Judgment: Court of Appeal reversed lower court jury verdict in favor of patient on appeal by the state. The Court of Appeal held that "(1) patient who is harmed when care which should have been provided is not provided should recover from all responsible for deprivation of care, including when appropriate health care payor; (2) third-party payors of health care services can be held legally accountable when medically inappropriate decisions result from defects or designs or implementation of cost containment mechanisms; (3) physician who complies without protest with limitations imposed by third-party payor cannot avoid ultimate responsibility for patient's care; and (4) Medi-Cal was not liable for discharge decision."

Explanation: In response to a physician determination that an extension of eight days of hospitalization was necessary for the patient, Medi-Cal agreed to only four. The treating physicians did not appeal this reduction. The court ruled that Medi-Cal had not been a party to the medical decision and, thus, could not be held to share in the harm (i.e., leg amputation) resulting if such decision was negligently made. Additionally, Medi-Cal did not override the medical judgment of Wickline's treating physicians at the time of the patient's discharge.

Significance: The Court extended its comments on point 3 of its finding by stating: "He [the physician] cannot point to the payor as the liability scapegoat when the consequences of his own determinative medical decisions go sour."

Although the attending physicians in this case were found neither negligent nor liable, the physician is clearly placed between a rock and a hard place when coverage for continued hospitalization is denied yet the patient needs such care. According to this case, the physician has the ultimate responsibility to see that the patient receives the necessary care.

Wilson vs. Blue Cross of Southern California (July 1990)

Action: Patient's mother and the administrator of his estate brought action against health insurers, the contractor that allegedly performed utilization review of the medical necessity of hospitalization, the contractor's employee, and others to recover for suicide of patient after discharge due to discontinuation of insurance benefits.

Judgment: The Court of Appeal reversed the Superior Court summary judgment in favor of the defendants on appeal from the mother and administrator. The Court of Appeal held that (1) the contractor (i.e., the utilization review firm) could be at least partially liable if negligent conduct was a substantial factor in bringing about the suicide, and (2) whether the conduct of the insurer, contractor, and employee was a substantial factor in causing suicide was a question of fact, thus precluding a summary judgment. The case was remanded.

Explanation: On March 1, 1983, Howard Wilson Jr. (the decedent) was admitted to College Hospital in Los Angeles suffering from major depression, drug dependency, and anorexia. On March 11, the insurance company announced that it would not pay for any further hospital care and the patient was discharged. On March 31, 1983, the patient committed suicide. The Court of Appeal remanded the case on the basis that a triable issue existed as to whether the conduct of the decedent's insurance company and certain related entities was a substantial factor in causing the decedent's death.

Significance: The defendants had successfully relied on the Wickline decision in the lower court. The Court of Appeal, in remanding the case, significantly narrowed Wickline and determined that the Wickline case was different than the present one. Additionally, the Court of Appeal stated that "portions of the Wickline case...quite frankly contained overbroad language and constituted dicta. However, it would be inappropriate for this court to allow errors in one of its own prior decisions to remain uncorrected in this case." Thus, the Wilson decision significantly narrowed the scope of applicability of Wickline.

Reilly vs. Blue Cross and Blue Shield of Wisconsin (May 1988)

Action: Employee and his wife, both of whom were covered under a self-insured group health plan subject to ERISA, brought suit against the plan administrator for alleged bad faith failure to pay benefits for wife's in vitro fertilization (IVF).

Judgment: The Court of Appeal reversed the lower court's summary judgment because there was a material question as to whether the plan administrator had acted capriciously or in bad faith to pay employee's claim for cost of in vitro fertilization on the ground that the procedure was experimental.

Explanation: In 1984, Blue Cross-Blue Shield of Wisconsin denied coverage for an IVF procedure on the basis that it was experimental. A Blue Cross Assistant Vice President testified that the negative coverage decision was based on the fact that the IVF success rate was less than 50 percent. The Court questioned the reasonableness of the 50 percent figure and the fact that Blue Cross did not submit testimony from anybody with personal knowledge of IVF. The Court also stated: "The fact that Blue Cross allegedly relied on the advice of its own advisory groups who presumably assist Blue Cross in the administration of its health plans nationwide, those for which it also is an insurer, creates an inherent risk of abuse."

Significance: The sole reliance of Blue Cross-Blue Shield on its own advisory bodies was questioned by the Court of Appeal. Thus, the availability of outside assessments or expert opinion is indeed relevant in the coverage decisionmaking process. Also, the "arbitrary" selection of a 50 percent threshold for success was a dubious action in the Court's eyes.

Pirozzi vs. Blue Cross-Blue Shield of Virginia (July 1990)

Action: Plaintiff sought a declatory judgment that her group health plan, administered by defendant Blue Cross-Blue Shield of Virginia, must cover high-dose chemotherapy with autologous bone marrow transplantation (HDCT-ABMT) for treatment of her stage IV metastatic breast cancer...thus, the Court concludes, on this record, that HDCT-ABMT is not experimental treatment excluded from Blue Cross' plan."

Explanation: The plaintiff, a 35-year-old premenopausal woman, suffered from stage IV metastatic breast cancer. After mastectomy, six cycles of chemotherapy, and radiation treatment, the oncologist prescribed HDCT-ABMT as the plaintiff's "best chance for any type of meaningful survival." BC/BS of Virginia denied the preauthorization request on grounds that HDCT-ABMT was experimental and thus excluded from coverage.

The Court noted that the insurance contract nowhere defined "experimental" or "investigative." Thus, the Court characterized the dispute as one of contract. The medical director of BC/BS testified that he denied coverage on the basis of the national Blue Cross and Blue Shield Association's December 1988 Uniform Medical Policy Memorandum that concluded that HDCT-ABMT is experimental. The medical director then testified that the national association based its conclusion on the application of five technology evaluation criteria. The Court responded that the criteria are not part of the plan and the plan nowhere states that the national Blue Cross/Blue Cross criteria are determinative of a treatment's experimental status. Beyond this, the Court noted that "several criteria are question begging for they do not define |sufficient information, |a net beneficial effect on outcome,' or |safe and efficacious.'" The Court further stated that the medical director of the Virginia Plan merely gave his opinion on a topic outside his area of expertise. In the end, the Court agreed with the expert medical testimony on the plaintiff's side.

Significance: As stated by the Court, the issue in this case was one of contractual language. However, two peripheral items are instructive. First, the Court was not convinced that the application of the five criteria for determining the status of a technology developed by the national office of Blue Cross/Blue Shield was definitive in categorizing a technology such as HDCT-ABMT as experimental or investigative. Second, the medical director of the Virginia Plan also sits on the Medical Advisory Board of the national association that develops national coverage recommendations. It is noteworthy, that, as in the Reilly case, the views of the clinical physicians expert in the technology in question prevailed.


The involvement of the courts in reviewing the legitimacy of coverage decisions is expanding, especially in issues in terminal illness. Other cases, Dosza vs. Crum and Forster Insurance and Prudential Insurance, Cole vs. Blue Cross and Blue Shield of Massachusetts, and Bradley vs. Empire Blue Cross, are additional examples. The findings of these recent cases underscore the need for a company to have a rigorous, objective, reproducible technology assessment process if it relies heavily on internal assessment recommendations. Additionally, a company should be aware of and consider findings of other relevant assessment bodies and expert clinicians. Finally, the technology assessment process and its method for reaching conclusions must be accurately translated to and reflected in the contractual language. It is intriguing that the structured technology evaluation process and criteria of the national Blue Cross and Blue Shield Association are not even represented in the contractual language of the local plans that rely so heavily on the coverage recommendations of the national program.

William T. McGivney, PhD, is Director of the Division of Health Technology, American Meedical Association, Chicago, IL
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Title Annotation:analysis of court decisions on insurance coverage of specific health procedures
Author:McGivney, William T.
Publication:Physician Executive
Date:Jan 1, 1991
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