Pacific Shores Hospital v. United Behavioral Health
764 F.3d 1030
| 9th Cir. | 2014Background
- Jane Jones, a Wells Fargo Plan participant, was admitted to Pacific Shores Hospital (PSH) for severe anorexia nervosa with active suicidal ideation and medical complications; United Behavioral Health (UBH/Optum) was the Plan's third-party reviewer.
- PSH sought inpatient authorization; UBH initially approved a short stay but repeatedly limited extensions, authorizing through February 14, 2010, then denying coverage thereafter.
- UBH’s reviewers (Dr. Zucker and Dr. Center) relied on telephone peer-to-peer conversations and an administrative record that contained inconsistent and inaccurate factual entries (e.g., admission weight, laxative use, suicidal history, lab results).
- UBH’s reviewers concluded Jones was medically stable and could step down to partial hospital care; UBH denied the urgent appeal and PSH continued treatment and then sued after Jones assigned her benefits to PSH.
- The district court upheld UBH’s denial under an abuse-of-discretion standard; the Ninth Circuit reversed, finding UBH abused its discretion and breached its ERISA fiduciary duties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard of review | UBH committed procedural irregularities that warrant de novo review | Plan grants discretionary authority, so abuse of discretion review applies | Court applied abuse-of-discretion but considered procedural flaws as relevant factors |
| Adequacy of administrative process | UBH failed to develop necessary facts; relied on phone reports and erroneous summaries | UBH relied on peer-to-peer and independent review, which provided a reasonable basis | UBH’s process was deficient; factual errors and lack of records undermined decision |
| Factual basis for denial of inpatient care | Jones remained suicidal and medically at-risk; errors in reviewers’ factual findings were material | Reviewers concluded stabilization and appropriateness of lower level care (PHP) | Court concluded reviewers’ factual findings were clearly erroneous and supported denial improperly |
| ERISA fiduciary duty | UBH, as fiduciary, must act prudently and exclusively for beneficiaries; it failed to do so | UBH acted within its guidelines and authority to determine medical necessity | Court held UBH breached fiduciary duty by acting carelessly and rubber-stamping errors; reversal of denial |
Key Cases Cited
- Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (9th Cir. 2006) (standard for reviewing administrator discretion and procedural irregularities)
- Glenn v. Metropolitan Life Ins. Co., 554 U.S. 105 (2008) (conflict-of-interest is a factor in abuse-of-discretion review)
- Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623 (9th Cir. 2009) (paper-only review raises concerns about thoroughness and accuracy)
- Pegram v. Herdrich, 530 U.S. 211 (2000) (ERISA fiduciary duties require acting solely in beneficiaries’ interest with prudence)
- Horan v. Kaiser Steel Retirement Plan, 947 F.2d 1412 (9th Cir. 1991) (upholding administrator decision if grounded in any reasonable basis)