Are Independent Medical Reviewers Subject to ERISA?
On June 3, 2019, there was a case before the U.S. District Court for the Northern District of California, “Josef K. v. California Physicians’ Service.”
In this case, the plaintiff’s son received #mentalhealth treatment at two separate mental health treatment programs. They submitted a claim for services to Blue Shield, but the #claims were denied, as was the appeal of the denial. At this point, the plaintiff requested an independent medical review (IMR); Maximus Federal Services, Inc. was chosen as the reviewer.
Maximus then completed a review, and upheld the denial. The plaintiffs took the case to court, citing numerous failures by #Maximus, like failing to consider evidence, mischaracterizing the patient’s condition and history, and not completing a sufficient review.
It appears like the largest burden was showing that the #IMR agency was a responsible fiduciary under ERISA. In the end, the court did find that Maximus was a “fiduciary” as defined by ERISA. This meant that they were liable under ERISA, and could be held accountable for any breach of responsibility. To be more precise, the judge named Maximus as a functional #fiduciary, not a named one.
Judge Rogers quoted the Ninth Circuit Court of Appeals saying a functional fiduciary “has the authority to grant, deny, or review denied claims.” He went on to say, “[t]he central inquiry when determining whether a party is a functional fiduciary is whether it was acting as an #ERISA fiduciary ‘when taking the action subject to complaint.”
As restitution, the plaintiffs attempted to have the court require that Maximus modify it’s IMR process to prevent similar situations from arising. The court, however, stated that their ruling was based on the specific claim denial of the plaintiff, and could not be applied in general. As such, the court refused this request.
However, the court did allow “the plaintiffs to pursue an equitable surcharge claim under section 1132(a)(3). (Deakins, 2019)” The court found that the plaintiffs could recover “costs incurred in connection with the investigation of E.K.’s benefits claim.” The court also found that the plaintiffs could pursue a clam for “individualized disgorgement of profits, relating to revenue earned by Maximus in the course of reviewing E.K.’s claim denial only.”
How this impacts mental health billing is yet to be determined. It does however set strong precedence that third party IMR’s, have liability under ERISA, and are therefore subject to allegations of a breach of fiduciary duties. This may lead to some revision of IMR guidelines, and perhaps to a more fair review process.
References Deakins, O. (2019, June 14). District Court in California Denies Motion to Dismiss, Finds an Independent Review Organization to Be a Functional Fiduciary Under ERISA. Retrieved from Lexology: https://www.lexology.com/library/detail.aspx?g=a7b4bd47-856d-4b73-8d2f-0587fbec6104