Yox v. Providence Health Plans

Filing 32

OPINION & ORDER: Defendant's motion for summary judgment 10 is denied. See 8-page opinion & order attached. Signed on 3/8/2013 by Judge Marco A. Hernandez. (mr)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION

KELLY J. YOX, an individual,
No. 3:12-cv-01348-HZ
Plaintiff,
OPINION & ORDER
v.
PROVIDENCE HEALTH PLAN,
an Oregon non-profit corporation,
Defendant.

John C. Shaw
Megan E. Glor
MEGAN E. GLOR, ATTORNEYS AT LAW, PC
621 SW Morrison, Suite 900
Portland, OR 97205
Attorneys for Plaintiff

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1 - OPINION & ORDER

Arden J. Olson
Aaron T. Bals
HARRANG LONG GARY RUDNICK PC
360 East 10th Ave., Suite 300
Eugene, OR 97401-3273
Attorneys for Defendant
HERNANDEZ, District Judge:
Plaintiff Kelly J. Yox seeks unpaid health benefits from Defendant Providence Health
Plans. Plaintiff is insured by a health plan that is administered by Defendant. In March 2011,
Plaintiff had a seizure, which caused her to fall and suffer facial trauma. Defendant denied
coverage of services, including teeth extractions, bone grafts, and dentures. After the final denial
of coverage by Defendant, Plaintiff elected review by an Independent Review Organization
(“IRO”) under the terms of Defendant’s policy. The IRO reviewer affirmed Defendant’s denial
of coverage. Plaintiff sued in this court to seek judicial review of the denial of coverage.
Defendant moves for summary judgment on Plaintiff’s claim for coverage, arguing that Plaintiff
is precluded from seeking judicial review because the IRO review was an arbitration. I deny the
motion.
BACKGROUND
Plaintiff belonged to a health plan administered and insured by Defendant and sponsored
by Harrison Electrical Workers Trust. Compl. ¶¶ 5-7; Am. Answer ¶ 1. The plan is governed by
the Employee Retirement Income Security Act (ERISA). Compl. ¶ 6; Am. Answer ¶ 1. The plan
“covers dental services that are the result of trauma caused by an accident.” Decl. John C. Shaw
in Supp. P.’s Resp. D’s Mot. Summ. J. (“Shaw Decl.”), Ex. C.
On March 5, 2011, Plaintiff had a seizure, which caused her to fall. Compl. ¶ 9; Am.
Answer ¶ 5. She suffered facial trauma, including a fractured jaw. Compl. ¶ 9; Am. Answer ¶ 5.

2 - OPINION & ORDER

In October 2011, Defendant denied Dr. Mohammed Saleh’s request for coverage of services that
included extraction of teeth, bone grafts, endosseous implants, custom implant abutments, and
fixed partial dentures. Compl. ¶ 14; Am. Answer ¶ 1. Plaintiff appealed the denial of Dr. Saleh’s
request for authorization, but the denial was upheld. Compl. ¶¶ 15-16; Am. Answer ¶¶ 8-9.
Approximately one week later, Plaintiff requested a second level appeal. Compl. ¶ 17; Am.
Answer ¶ 1. Defendant upheld its previous denials of her claim, with the exception of
authorizing coverage for tooth #28. Compl. ¶ 18; Am. Answer ¶ 10.
With the first denial letter, Defendant included a document entitled, “Grievance and
Appeal Rights for Members of Oregon-Based Commercial Groups” (“Grievance Rights
document”). Am. Answer ¶ 14; Am. Answer, Ex. 1. The document stated that Plaintiff could
“request an external review by an Independent Review Organization” if she was not satisfied
with the decision following appeals. Id. at 2. If Plaintiff requested an external review by the IRO,
Defendant agreed to pay all costs associated with the process. Id.
Plaintiff sought review from an IRO. Am. Answer ¶ 14; Am. Answer, Ex. 3. The IRO
reviewer, a doctor of dental surgery, reviewed Plaintiff’s medical record. Am. Answer, Ex. 4 at
1. The IRO reviewer had access to a number of documents including the “Providence Health
Plan Benefit Summary” and a “Schedule of Covered Services and Co-payments.” Id. at 1-2. The
IRO reviewer’s findings and conclusion supported Defendant’s denial of coverage. Id. at 1.
Plaintiff brought this action to recover unpaid health benefits under ERISA, 29 U.S.C.
section 1132(a)(1)(B), plus costs and attorney fees. Compl. ¶ 1.
STANDARDS
Summary judgment is appropriate if there is no genuine dispute as to any material fact
and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The

3 - OPINION & ORDER

moving party bears the initial responsibility of informing the court of the basis of its motion, and
identifying those portions of “‘the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,’ which it believes demonstrate the
absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)
(quoting Fed. R. Civ. P. 56(c)).
Once the moving party meets its initial burden of demonstrating the absence of a genuine
issue of material fact, the burden then shifts to the nonmoving party to present “specific facts”
showing a “genuine issue for trial.” Fed. Trade Comm’n v. Stefanchik, 559 F.3d 924, 927-28 (9th
Cir. 2009) (internal quotation marks omitted). The nonmoving party must go beyond the
pleadings and designate facts showing an issue for trial. Celotex, 477 U.S. at 322-23.
The substantive law governing a claim determines whether a fact is material. Suever v.
Connell, 579 F.3d 1047, 1056 (9th Cir. 2009). The court views inferences drawn from the facts
in the light most favorable to the nonmoving party and draws all reasonable inferences in that
party's favor. Long v. City & County of Honolulu, 511 F.3d 901, 905 (9th Cir. 2007). If the
factual context makes the nonmoving party’s claim as to the existence of a material issue of fact
implausible, that party must come forward with more persuasive evidence to support his claim
than would otherwise be necessary. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986).
DISCUSSION
The parties dispute whether the IRO review was an arbitration. In its motion for summary
judgment, Defendant argues that the IRO review was an arbitration and that under the Federal
Arbitration Act (“FAA”), Plaintiff cannot seek review of Defendant’s denial of coverage in this
court. The FAA governs any written provision in “a contract evidencing a transaction involving

4 - OPINION & ORDER

commerce to settle by arbitration a controversy [] arising out of such contract.” 9 U.S.C. § 2. The
FAA does not define “arbitration.” The Ninth Circuit held that state law controls in determining
what constitutes an arbitration. Portland Gen. Elec. Co. v. U.S. Bank Trust Nat. Ass'n, 218 F.3d
1085, 1089 (9th Cir. 2000) (citing Wasyl, Inc. v. First Bos. Corp., 813 F.2d 1579, 1582 (9th Cir.
1987)). Additionally, the health plan at issue states that Oregon law governs the plan document
to the extent it is not preempted by ERISA. Thus, Oregon law controls in determining whether
the IRO review constituted an arbitration. Oregon defines “arbitration” as “any arbitration
whether or not administered by a permanent arbitral institution.” Or. Rev. Stat. § 36.110(1). The
issue is whether Oregon’s IRO process is an arbitration.
Oregon Revised Statute section 743.862 details the duties that an IRO must perform. The
IRO must determine whether the dispute pertains to an adverse benefit determination and notify
the claimant and insurer of the decision. Or. Rev. Stat. § 743.862(1)(a). If the decision is against
the claimant, the IRO must notify the claimant of the right to file a complaint with or seek
assistance from the Department of Consumer and Business Services. Id. An IRO must also
appoint reviewers and inform the claimant of the information required, as well as inform the
insurer of additional information that may need to be submitted. Id. § (1)(b)-(d). The IRO must
then issue the decision. Id. § (1)(e).
The IRO decision is based on “expert medical judgment after consideration of the
enrollee’s medical record, the recommendations of each of the enrollee’s providers, relevant
medical, scientific and cost-effectiveness evidence and standards of medical practice.” Id. § (2).
While the IRO makes its decision based on the coverage provided by the health benefit plan, the
IRO may override the insurer’s standards if the IRO determines the insurer’s standards are
“unreasonable” or “inconsistent with sound medical practice.” Id.

5 - OPINION & ORDER

The U.S. Supreme Court has held that an IRO mandated by Illinois state law was not an
arbitration. Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 382-83 (2002). The IRO
reviewer in Rush received evidence including medical records and statements from physicians.
Id. at 382-83. Additionally, the IRO reviewer construed related plan terms in coming to a
determination. Id. at 382. However, the IRO reviewer “did not hold the kind of conventional
evidentiary hearing common in arbitration, but simply received medical records submitted by the
parties, and ultimately came to a professional judgment of his own.” Id. at 383. The IRO
reviewer did not have “a free-ranging power to construe contract terms, but instead, confine[d]
review to a single term.” Id.
The Court reasoned that the IRO review was unlike an arbitration because “[a]rbitrators
typically hold hearings at which parties may submit evidence and conduct cross-examinations.”
Id. at 382. Additionally, arbitrators often have “the power to subpoena witnesses and administer
oaths.” Id. The independent review was “significantly different from common arbitration.” Id.
(emphasis added). The Court concludes that the IRO review process in Rush did “not resemble
either contract interpretation or evidentiary litigation before a neutral arbiter, as much as it
look[ed] like a practice (having nothing to do with arbitration) of obtaining another medical
opinion.” Id. at 383 (emphasis added). Similarly, in Larson v. Providence Health Plans, Judge
Jones concluded that an IRO review process, similar to the one here and arising under the same
Oregon Revised Statute section, was a “second medical opinion” and not an arbitration. Civ. 08929-JO, 2009 WL 562815, at *4 (D. Or. Mar. 2, 2009).
The IRO review in Rush and the one here are similar. Like Rush, Defendant’s IRO
reviewer in this case lacked the ability to hold hearings, conduct cross-examination, and
subpoena witnesses. Also, similarly to Rush, the IRO reviewer did not consider legal claims,

6 - OPINION & ORDER

such as whether the terms of the plan were in compliance with Oregon insurance law and
whether Defendant fulfilled ERISA’s statutory and regulatory requirements. Defendant argues
that the IRO reviewer in Plaintiff’s case was different than the one in Rush, because the IRO
reviewer in Rush did not have the power to override plan terms. An Oregon IRO’s ability to
override term plans is limited to whether the insurer’s standards are reasonable and does not rise
to the court’s ability to review.
Plaintiff’s IRO review lacked many of the elements of an arbitration. The IRO process
provided to Plaintiff is indistinguishable from the IRO review in Rush and Larson. Defendant
argues that in Valenti v. Hopkins, the Oregon Supreme Court ruled that an agreement to have a
neutral third party resolve a dispute is an arbitration. 324 Or. 324, 926 P.2d 813, 817-18 (1996).
However, the court’s holding was limited to deciding the standard of review. Id. at 813-14. The
court did not decide what constitutes an arbitration. Plaintiff is not precluded from bringing her
claim in court, because the IRO review was not an arbitration.
Plaintiff raises several other arguments in opposition to Defendant’s motion. These
arguments are based on the assumption that the IRO was an arbitration. Because I have found
otherwise, I need not address these arguments.
I deny Defendant’s motion for summary judgment.

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7 - OPINION & ORDER

CONCLUSION
Based on the foregoing, Defendant’s motion for summary judgment [#10] is denied.
IT IS SO ORDERED.

Dated this _________ day of __________, 2013.

______________________________
MARCO HERNANDEZ
United States District Judge

8 - OPINION & ORDER