Michael Pellicano v. Office of Personnel Management
714 F. App'x 162
| 3rd Cir. | 2017Background
- Pellicano, a disabled retired federal employee, purchased an RT300 FES cycle ergometer in 2008 for $20,697; Medicare declined coverage and he sought reimbursement under his Federal Employee Health Benefit Plan administered by CareFirst/BCBS.
- After initial denial, a Plan Nurse Reviewer found the device medically necessary and CareFirst paid 65% ($13,453.05), leaving Pellicano responsible for $7,243.95; Pellicano argued the Plan required 100% reimbursement.
- Pellicano submitted two redacted EOBs purporting to show other enrollees received 100% reimbursement; CareFirst and the Plan Appeals Specialist concluded those payments were errors and upheld the 65% payment based on local Individual Consideration pricing.
- OPM, after an administrative remand to supplement the record with the local plan’s written Individual Consideration pricing policy, affirmed CareFirst’s 65% reimbursement decision, explaining nonparticipating-provider durable medical equipment without a UCR or Medicare fee schedule is priced per local policy.
- Pellicano sued OPM in federal district court alleging arbitrary and capricious agency action; the district court (Magistrate recommendation adopted) granted judgment to OPM, admitting the plan policy into the administrative record and finding OPM’s decision rational.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether OPM acted arbitrarily and capriciously in upholding 65% payment | Pellicano: Plan language (referencing 100% of UCR) required 100% reimbursement absent a UCR alternative | OPM: Local plan’s Individual Consideration policy (65% for pre-2011 DME without pre-established allowance) governs nonparticipating-provider claims | Court: OPM's decision was not arbitrary; 65% pricing rationally tied to plan policy |
| Admissibility/authenticity of post‑claim plan policy added on remand | Pellicano: The policy was self-serving and generated after the fact, so should be excluded | OPM: Policy belonged in the administrative record and reflected the local plan’s pricing rules in effect for 2008 | Court: Policy properly part of the record; Pellicano offered no evidence of inauthenticity |
| Whether other enrollees’ 100% payments establish arbitrary disparate treatment | Pellicano: Two EOBs show similarly situated enrollees were paid 100% | OPM: Those payments were made in error and correcting erroneous prior payments does not make the current decision arbitrary | Court: Disparate payments, if errors, do not render the carrier’s corrected application of the written policy arbitrary |
| Whether judicial review exceeded the administrative record or required extra-record discovery | Pellicano: Sought discovery and expansion of the record | OPM: Review limited to administrative record before OPM; supplementation on remand was appropriate | Court: Denied extra-record discovery and denied expansion; review limited to the administrative record as supplemented |
Key Cases Cited
- Burlington Truck Lines v. United States, 371 U.S. 156 (standards for arbitrary and capricious review; must show rational connection between facts and decision)
- Muratore v. U.S. Office of Personnel Management, 222 F.3d 916 (OPM’s broad authority to interpret FEHB plans and ensure consistent national application)
- Long v. Atlantic City Police Dep’t, 670 F.3d 436 (discussion of burdens and standards in judicial review)
- Pellicano v. Blue Cross Blue Shield Ass’n, [citation="540 F. App'x 95"] (prior related appellate decision by the same appellant)