Level-of-Care Criteria Ruled Inconsistent with Accepted Medical Standards

Executive Summary

In perhaps the first decision of its kind, Magistrate Judge Joseph Spero of the Northern District of California issued on February 28, 2019, his 106-page Findings of Fact and Conclusions of Law (Order) in the ERISA class action Wit v. United Behavioral Health. The Wit plaintiffs brought a facial challenge to United Behavioral Health’s (UBH’s) coverage determination guidelines for the treatment of mental health and substance abuse disorders, alleging the guidelines did not comport with “generally accepted standards of care” as required by the terms of their ERISA plans.

Magistrate Judge Spero concluded that all of UBH’s guidelines during the class period were more restrictive than those standards. As a result, the court found that UBH had breached its fiduciary duties and wrongfully denied the class members’ claims.

The Wit decision hinged on the court’s finding that the guidelines wrongly emphasized addressing acute symptoms and stabilizing crises to the exclusion of “generally accepted standards of care” that focus on the treatment of underlying conditions. In the court’s view, the guidelines’ focus on acuity permeated all levels of coverage for treatment of mental health and substance abuse disorders, resulting in overly restrictive coverage criteria. In arriving at this conclusion, Magistrate Judge Spero determined eight specific “generally accepted standards of care”—on topics ranging from treatment of co-occurring conditions to treatment of adolescents—and found UBH’s guidelines deficient for each standard.

The court also addressed the process by which UBH formulated and updated the guidelines, concluding that the overly restrictive standards were influenced by the UBH finance department’s involvement during the development process and its focus on profitability.

This ruling is significant in a number of ways. Not only does it purport to show that courts can determine “generally accepted medical standards” for a range of conditions over a multi-year period, but it also purports to set forth those standards and give them the authority of case law. This may be problematic since the court’s findings were based on the opinions of a handful of paid experts. In any event, future plaintiffs may use these findings to challenge health plans’ coverage determinations and standards for developing coverage criteria.

A more detailed summary is provided below.

Detailed Summary

Background

Wit and a related case, Alexander v. UBH, were filed in 2014. The plaintiffs in Wit challenged the level of care guidelines and certain coverage determination guidelines (collectively, the guidelines) employed by UBH for treatment of mental health and substance use conditions. The plaintiffs alleged that the guidelines were more restrictive than “generally accepted medical standards,” thus violating ERISA to the extent the plans provided coverage for treatment of mental health and substance use based on that standard. The Wit plaintiffs brought claims for breach of fiduciary duty and denial of benefits under ERISA Sections 502(a)(3) and 502(a)(1)(b), seeking monetary and equitable relief.

Magistrate Judge Spero certified classes of members of ERISA-governed health benefit plans whose requests for coverage of residential, intensive outpatient, or outpatient services for mental illnesses and/or substance use disorder were denied, in whole or in part, by UBH based on the guidelines, between May 22, 2011 and June 1, 2017. (Order pp. 8-9.) The court also certified a “State Mandate Class” of members of fully insured health benefit plans governed by both ERISA and the laws of Connecticut, Illinois, Rhode Island, or Texas, whose requests for coverage of residential treatment for substance use disorder were denied, in whole or in part, by UBH allegedly in violation of applicable state law. (Order pp. 8-9.)

Wit’s ten-day bench trial was essentially a battle of the parties’ experts, who opined about the meaning and application of “generally accepted medical standards” within the guidelines.

The Court’s Threshold Findings

Magistrate Judge Spero made several initial factual findings of the parties and the guidelines. The court found the plaintiffs’ experts to be credible, while discounting UBH’s experts who, in the opinion of the court, “had serious credibility problems.” (Order pp. 11-13.) The court then turned to the guidelines themselves, making several key factual findings:

• “UBH employees apply the Guidelines as written, that is, their exercise of clinical judgment is constrained by the criteria for the coverage set forth in the Guidelines, which are mandatory.” (Order p. 19.)
• “The [Level of Care Guidelines] are used to make coverage determinations for plans that contain a medical necessity requirement while the [Coverage Determination Guidelines] are used to make coverage determinations in cases involving plans that do not contain a medical necessity requirement.” (Order p. 19.)
• “UBH’s Level of Care Guidelines are used to make coverage determinations under the health benefit plans it administers, and in particular to establish criteria consistent with generally accepted standards for determining the appropriate level of care” and “are intended to standardize coverage determinations with respect to the appropriate level of care.” (Order pp. 19-20.)
• “For all versions of the [Level of Care Guidelines] that are at issue in this case, every provision of the Common Criteria had to be satisfied in order to obtain coverage at any level.” (Order p. 21.)
• “Like the [Level of Care Guidelines], the [Coverage Determination Guidelines] are supposed to reflect generally accepted standards of care.” (Order p. 22.)

The Court Found That the Guidelines Do Not Reflect Generally Accepted Standards of Care

After its initial factual determinations, the court turned to the substance of the guidelines and whether they comported with “generally accepted standards of care.”

The court began by identifying a variety of sources the expert witnesses agreed reflected generally accepted standards of care. These were: (1) the American Society of Addiction Medicine Criteria (ASAM Criteria); (2) the American Association of Community Psychiatrist’s (AACP) Level of Care Utilization System (LOCUS); (3) the Child and Adolescent Level of Care Utilization System (CALOCUS) developed by AACP and the American Academy of Child and Adolescent Psychiatry (AACAP), and the Child and Adolescent Service Intensity Instrument (CASII); and (4) the Medicare benefit policy manual issued by the Centers for Medicare & Medicaid Services (CMS Manual). (Order p. 27.)

The court then purported to determine the generally accepted standards of care applicable to the UBH guidelines at issue. The court found the following standards of care are generally accepted:

• “[I]t is generally accepted in the behavioural health community that effective treatment of individuals with mental health or substance use disorders is not limited to the alleviation of current symptoms. Rather, effective treatment requires treatment of the chronic underlying condition as well.” (Order p. 33.)
• “It is a generally accepted standard of care that effective treatment requires treatment of co-occurring behavioural health disorders and/or medical conditions in a coordinated manner that considers the interactions of the disorders and conditions and their implications for determining the appropriate level of care.” (Order p. 34.)
• “It is a generally accepted standard of care that patients should receive treatment for mental health and substance use disorders at the least intensive and restrictive level of care that is safe and effective.” (Order p. 35.) “Placement in a less restrictive environment is appropriate only if it is likely to be safe and just as effective as treatment at a higher level of care in addressing a patient’s overall condition.” (Order p. 36.)
• “It is a generally accepted standard of care that when there is ambiguity as to the appropriate level of care, the practitioner should err on the side of caution by placing the patient in a higher level of care.” (Order p. 36.)
• “It is a generally accepted standard of care that effective treatment of mental health and substance use disorders includes services needed to maintain functioning or prevent deterioration.” (Order p. 38.)
• “It is a generally accepted standard of care that the appropriate duration of treatment for behavioural health disorders is based on the individual needs of the patient; there is no specific limit on the duration of such treatment.” (Order p. 39.)
• “It is a generally accepted standard of care that the unique needs of children and adolescents must be taken into account when making a level of care decisions involving their treatment for mental health or substance use disorders.” (Order p. 39.)
• “It is a generally accepted standard of care that the determination of the appropriate level of care for patients with mental health and/or substance use disorders should be made on the basis of a multidimensional assessment that takes into account a wide variety of information about the patient.” (Order p. 40.)

The court then analyzed whether UBH’s guidelines comport with generally accepted standards of care and found the following specific deficiencies:

•  “[I]n every version of the Guidelines at issue in the class period, and at every level of care that is at issue in this case, there is an excessive emphasis on addressing acute symptoms and stabilizing crises while ignoring the effective treatment of members’ underlying conditions.” (Order p. 42.) Defining “acute” as “the immediate crisis, that is, symptoms associated with a rapid onset that is typical of short duration and that cause the patient to seek treatment at that time,” Magistrate Judge Spero surmised that the guidelines’ “focus on acuity … results in a significantly narrower scope of coverage that is consistent with generally accepted standards of care.” (Order pp. 42-43.) The court then addressed specific instances where the problematic focus on acuity in the guidelines materialized:
   
  • In all challenged guidelines was the requirement “that in order to obtain coverage upon admission, there must be a reasonable expectation that services will improve the member’s ‘presenting problems’ within a reasonable period of time.” (Order pp. 44-45) The court found the “presenting problems” requirement “focuses on the immediate, acute symptoms that brought the member to treatment, rather than the broader question that should be considered under generally accepted standards of care, namely, whether the services being considered will be effective in treating not only the current symptoms but also the individual’s underlying condition.” (Order p. 45.)
  • Certain guidelines adopted the impermissible focus on acute symptoms by “limiting covered services to those aimed at treatment of acute symptoms by adopting the concept of ‘why now,’” which was defined as “the ‘acute changes in the member’s signs and symptoms and/or psychosocial and environmental factors leading to admission.” (Order p. 47.)
  • Acuity also played a role in the continued service and discharge criteria because “members were required to show that they continued to meet the admission criteria for the applicable level of care in order to qualify for coverage of continued services at that level of care.” (Order p. 50.) In effect, “[t]his means that just as a showing of acute symptoms is necessary for admission to a level of care, the patient must continue to suffer from those acute symptoms for coverage to continue at that level.” (Order p. 50.)
  • Importantly, although UBH had certain provisions in the guidelines to “take[] into account factors related to members’ chronic conditions” and “focus on the members’ overall well-being rather than simply managing crises,” which were “consistent with generally accepted standards of care,” the court found that these provisions did not make the guidelines-compliant because the guidelines either “did not allow this information to be taken into account in the actual determination of coverage” or were “not incorporated into the specific Guidelines that establish rules for making coverage determinations.” (Order pp. 52-53.)
• With respect to co-occurring conditions, the court found that, while generally accepted standards of care “may require that a patient be placed at a higher level of care so that all of the patient’s conditions can be effectively treated,” the guidelines instead “instruct that determination of the appropriate level of care … should be based only on whether treatment of the current condition is likely to be effective at that level of care whereas treatment of co-occurring conditions need only be sufficient to ‘safely manage’ them or to ensure that their treatment does not undermine treatment of the current condition.” (Order p. 54.) “In other words, UBH distinguished between the treatment of the current condition (which must be both safe and effective) and treatment of co-occurring conditions (which need only be safe).” (Order pp. 55-56.)
• The court found that UBH’s guidelines “actively seek to move patients to the least restrictive level of care at which they can be safely treated, even if a lower level of care may be less effective for that patient.” (Order p. 57.) For example, limiting language in the guidelines allows continued coverage only when acute symptoms prevent efficient and effective treatment at the lower level or “require discontinuation of coverage once it is safe to move to a lower level of care without regard to whether treatment at the lower level of care will be effective.” (Order pp. 57-59.) Thus, the court stated, “The Guidelines drove members to lower levels of care even when treatment of the member’s overall and/or co-occurring condition would have been more effective at the higher level of care.” (Order p. 58.)
• The court found that the guidelines deviated from the generally accepted standard of care for “treatment aimed at preventing relapse or deterioration of the patient’s condition and maintaining the patient’s level of functioning” “by requiring a finding that services are expected to cause a patient to ‘improve’ within a ‘reasonable time,’ and further restricting the concept of ‘improvement’ to ‘reduction or control of the acute symptoms that necessitated treatment in a level of care.’” (Order pp. 61-62.)
• The court found that certain guidelines in effect deviated from the generally accepted standards of care “with respect to consideration of the patient’s motivation in determining the appropriate level of care” by permitting discharge and discontinuation of coverage when “the member is unwilling or unable to participate in treatment and involuntary treatment or guardianship is not being pursued,” without considering “whether attempts to motivate the patient may eventually be effective or whether it is likely that treatment at this level of care is likely to be effective despite the patient’s low motivation.” (Order pp. 66-67.)
• The court found that “[o]ne of the most troubling aspects of UBH’s Guidelines is their failure to address in any meaningful way the different standards that apply to children and adolescents with respect to the treatment of mental health and substance use disorders.” (Order p. 68.) Specifically, the court found that “UBH failed to adopt separate level-of-care criteria tailored to the unique needs of children and adolescents” or “instruct decision-makers to apply the criteria contained in the Guidelines differently when the member is a child or adolescent.” (Order p. 68.) Rather, “the actual rules that govern coverage determinations [] make no distinctions based on the unique needs of children and adolescents.” (Order p. 68.)
• The court found that UBH deviated from generally accepted standards of care because it “broadened the concept of custodial care beyond the generally accepted definition of that term” to include clinical services under some circumstances, thus excluding that care from coverage. (Order pp. 68-70.)
• The court found that the guidelines deviated from “generally accepted standards of care by imposing mandatory prerequisites rather than a multidimensional approach … to the extent that [the guidelines] instruct clinicians to collect a wide array of information under their Best Practices provisions but do not allow for adequate consideration of this information in the rules and requirements that govern coverage determinations.” (Order p. 78.)
• As relevant to those plans governed by state law that adopt or rely upon ASAM for generally accepted standards of care, the court found the guidelines deviated from those standards for similar reasons to those set forth above. (Order pp. 78-79, 82-88.)

The Court Found That Financial Incentives Played a Role

The court then addressed the process employed by UBH to develop the guidelines. (Order p. 88.) Magistrate Judge Spero recognized that the two leading organizations that accredit utilization management processes for major health plans—the National Committee for Quality Assurance and the Utilization Accreditation Commission—accredited the guidelines during the entire class period. (Order p. 90.) Accreditation notwithstanding, the court concluded that the process was “fundamentally flawed because it is tainted by UBH’s financial interests.” (Order pp. 90-91.) “For fully insured plans, UBH bears the risk that the benefit expense for the services it approves will be more than it projected when it fixed its premium, which reduces UBH’s profits. Likewise, although UBH does not bear the same risk with respect to self-funded plans, it has an incentive to keep benefit costs down for customers who purchase such plans.” (Order p. 91.) For example, the court found that UBH closely monitored utilization data of the average length of stay for which UBH approves coverage. (Order p. 92.)

Magistrate Judge Spero also concluded that “the record is replete with evidence that UBH’s Guidelines were viewed as an important tool for meeting utilization management targets, ‘mitigating’ the impact of the 2008 Parity Act, and keeping ‘benex’ down.” (Order p. 93.) The court cited several examples:

• “First, the very fact that the Guidelines were riddled with requirements that provided for narrower coverage that is consistent with generally accepted standards of care gives rise to a strong inference that UBH’s financial interests interfered with the Guideline development process.” (Order p. 93.)
• “[T]he financial incentives … infected the Guideline development process. In particular, instead of insulating its Guideline developers from these financial pressures, UBH has placed representatives of its Finance and Affordability Departments in key roles in the Guidelines development process throughout the class period.” (Order p. 92.)
• The court identified the “decision not to adopt the ASAM Criteria for making substance use disorder coverage determinations” as “the most telling example of the emphasis UBH placed on financial considerations with respect to the Guidelines” because, “despite clear consensus among UBH’s addiction specialists that the ASAM Criteria were preferable to UBH’s own Guidelines from a clinical standpoint, UBH consistently refused to replace its standard Guidelines with ASAM Criteria without first obtaining approval from the Finance Department.” (Order pp. 95-96.)

Finally, in its conclusions of law, the court ruled that UBH breached its fiduciary duties and wrongfully denied benefits based on the substantive and procedural deficiencies in the guidelines. (Order pp. 99-106.) The court found, by a preponderance of the evidence, that UBH breached its duties of loyalty and due care and failed to comply with plan terms “by adopting Guidelines that are unreasonable and do not reflect generally accepted standards of care.” (Order p. 104.) For the denial of benefits claim, the court found, that “[o]ne condition of coverage under each class member’s Plan was that the services for which coverage was requested are consistent with generally accepted standards of care and/or the standards mandated by state law.” (Order p. 105.) Based on the findings of fact, the court concluded, by a preponderance of the evidence, “that UBH’s Guidelines were unreasonable and an abuse of discretion because they were more restrictive than generally accepted standards of care.” (Order p. 106.) The court did not address the remedies to which the plaintiffs were entitled.

The Significance of Wit

Wit may be viewed as a precedent that a court can determine what constitutes generally accepted standards of care within a specific clinical field. Likewise, the court’s specific determinations of the generally accepted standards of care for treatment of mental health and substance use disorders may serve as a baseline from which plaintiffs can challenge coverage determinations in future litigation.

Beyond the court’s rulings on the substance of the guidelines, the court provides guidance regarding the processes by which coverage criteria are developed. Significantly, the involvement of finance departments in the development and implementation of coverage guidelines may be problematic. This is especially true when bolstered by the court’s determination that coverage at levels more restrictive than the generally accepted standards of care gives rise to a strong inference that financial interests interfered with the development process.

According to recent court filings, the plaintiffs intend to file a motion for remedies, and UBH intends to file a motion to decertify. Both parties’ motions are due by May 3, 2019.