Opinion
1 CA-CV 12-0243
05-14-2013
C.B., a minor, by and through his mother, L.B., Plaintiff/Appellee, v. ARIZONA PHYSICIANS IPA, INC., an Arizona corporation; ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION, a state agency; and THOMAS J. BETLACH, Director of the Arizona Health Care Cost Containment System, in his official capacity, Defendants/Appellants.
Brownstein Hyatt Farber Schreck, LLP By John C. West Attorneys for Defendant/Appellant Arizona Physicians IPA, Inc. Law Offices of Timothy D. Ducar, PLC By Kenneth M. Rudisill Attorneys for Defendants/Appellants AHCCCS and Thomas Betlach Community Legal Services By Dina R. Lesperance Grant Anderson George H. McKay Pamela M. Bridge Attorneys for Plaintiffs/Appellees
NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED
EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
See Ariz. R. Supreme Court 111(c); ARCAP 28(c);
Ariz. R. Crim. P. 31.24
MEMORANDUM DECISION
(Not for Publication -
Rule 28, Arizona Rules of
Civil Appellate Procedure)
Appeal from the Superior Court in Maricopa County
Cause No. LC2010-000469-001
The Honorable Crane McClennen, Judge
AFFIRMED
Brownstein Hyatt Farber Schreck, LLP
By John C. West
Attorneys for Defendant/Appellant Arizona Physicians IPA, Inc.
Phoenix Law Offices of Timothy D. Ducar, PLC
By Kenneth M. Rudisill
Attorneys for Defendants/Appellants AHCCCS and Thomas Betlach
Phoenix Community Legal Services
By Dina R. Lesperance
Grant Anderson
George H. McKay
Pamela M. Bridge
Attorneys for Plaintiffs/Appellees
Phoenix OROZCO, Judge ¶1 This consolidated appeal is brought by Arizona Physicians IPA, Inc. (APIPA), the Arizona Health Care Cost Containment System Administration (AHCCCS), and Thomas J. Betlach, AHCCCS director, (the Director). The superior court vacated the Director's decision denying continued speech therapy for C.B. by an out-of-network provider. Because we find that the Director abused his discretion, we affirm the judgment vacating his decision.
We refer to the Director even though he acted through his designee.
BACKGROUND
I. The First AHCCCS Appeal
¶2 C.B. was born in 1994. He contracted streptococcal meningitis when he was about three months old, resulting in seizures, hearing loss, and brain damage. C.B. began wearing hearing aids at five months and received a cochlear implant in his right ear in May 1997. He suffers from global developmental delays. ¶3 Arizona participates in Medicaid through AHCCCS, Arizona Revised Statutes (A.R.S.) sections 36-2901 to -2999.57 (2009 & Supp. 2012), and C.B. is eligible for AHCCCS medical benefits. AHCCCS subcontracts with APIPA to provide these benefits. ¶4 In August 2008, Dr. Marylu R. Macabuhay (Macabuhay), C.B.'s primary care physician since 1995, asked APIPA to authorize speech therapy at Wellington-Alexander Center (WAC). Attached to this request was a letter from Stacy L. Fretheim (Fretheim), WAC's director of speech language services. The letter stated that as a result of C.B.'s "marked deficits in the core subsystem of language, the phonological system, resulting in significant oral and written language impairment," Fretheim recommended intensive therapy:
The language therapy is based on neurophysiological modes and is designed to remediate the deficits by developing permanent neuronal connections, which allow [C.B.'s] language to be restored to a more functional manner. Because the goal is to develop solid connections, the treatment must be intensive. The more time per day that the brain is being stimulated, the more efficiently the connections are made. Therapy must occur at least 5days/week [sic] as well, in order to make these neural connections. (In contrast, the more traditional model for language therapy of 1-2 hrs/week offers support, but does not close the gap. Therapy then continues for years as a form of support to avoid decline in abilities and is much more costly with¶5 APIPA refused to authorize the therapy at WAC because APIPA did not contract with WAC and there was another facility that APIPA contracted with that C.B. could attend and get the speech therapy he needed. ¶6 An administrative hearing on this determination was held pursuant to A.R.S. § 41-1092.02.B (2013). The administrative law judge (ALJ) recommended reversal, explaining: "Complainant has established that neither Phoenix Children's Hospital [(PCH)] nor any other contracted provider offers intensive, research-based speech therapy programs comparable to what [WAC] offers." The Director adopted the ALJ's findings and recommendations on June 10, 2009 pursuant to A.R.S. § 41-1092.08.B (2013).
less desirable results.)
It is anticipated that [C.B.] will need language therapy 4 hours/day 5 days/week for at least 10-12 weeks. He will be reassessed at that point to evaluate the development of his language and memory processes. Improvement should be long lasting and significant, based on objective standardized assessments. [C.B.] should improve in his ability to process phonological information, develop normal language skills, and memory skills. The need for continued therapy following an intensive delivery will depend on many factors.
Absent material revisions, we cite to the current version of the statute, rule and regulation.
II. The Second AHCCCS Appeal
¶7 During the summer and fall of 2009, C.B. received intensive speech therapy at WAC. Prior to the therapy's completion, a payment dispute arose between APIPA and WAC, prompting a member grievance to AHCCCS. On December 10, 2009, APIPA denied C.B. additional services through WAC. Four days later, WAC issued a re-evaluation summary recommending that C.B. continue to receive intensive speech-language therapy at WAC. ¶8 After exhausting administrative remedies, C.B. appealed APIPA's decision. At the ensuing administrative hearing on August 8, 2010, Dr. Leslie Paulus (Paulus), a pediatrician with experience in treating children with post-meningitis conditions and APIPA's medical director, testified. Unlike C.B.'s providers, Macabuhay and Fretheim, Paulus had never examined C.B. or his medical records, apart from the WAC post-treatment re-evaluation authored by Fretheim. Paulus based her testimony on conversations with other professionals who had not recently evaluated C.B. ¶9 Following the hearing, the ALJ found that WAC's therapy was medically necessary and recommended that it continue. The Director rejected the ALJ's recommendation and two of the findings. C.B. appealed the Director's decision to the superior court pursuant to A.R.S. § 12-905.A (2003). The superior court vacated the Director's decision and entered a judgment (1) directing APIPA to authorize WAC therapy, and (2) awarding C.B. attorney fees and costs. APIPA and AHCCCS appealed. We have jurisdiction pursuant to A.R.S. §§ 12-2101.A.1 (Supp. 2012) and 12-120.21.A.1 (2003).
AHCCCS timely appealed from the final judgment. APIPA filed its appeal from the signed order awarding attorney fees and costs to C.B. and a prior minute entry ruling. Although APIPA did not file a supplemental notice of appeal as to the final judgment filed on June 19, 2012, the Barassi exception applies because "no decision of the court could change and the only remaining task [was] merely ministerial." See Smith v. Ariz. Citizens Clean Elections Comm'n, 212 Ariz. 407, 415, ¶ 37, 132 P.3d 1187, 1195 (2006) (citing Barassi v. Matison, 130 Ariz. 418, 636 P.2d 1200 (1981)).
DISCUSSION
I. AHCCCS's Denial of Services Lacks Substantial Evidentiary Support.
¶10 This court will affirm the Director's final decision unless, after reviewing the administrative record and supplementing evidence, we conclude that the agency action "is not supported by substantial evidence, is contrary to law, is arbitrary and capricious or is an abuse of discretion." A.R.S. § 12-910.E. (Supp. 2012); see also Havasu Heights Ranch & Dev. Corp. v. Desert Valley Wood Prods., Inc., 167 Ariz. 383, 386, 807 P.2d 1119, 1122 (App. 1990) (in resolving whether substantial evidence supports the decision the court reaches, "the underlying issue [is] whether the administrative action was illegal, arbitrary, capricious or involved an abuse of discretion"). Our review focuses on the Director's decision. A.R.S. § 41-1092.08.F (2013); see also Sharpe v. Ariz. Health Care Cost Containment Sys., 220 Ariz. 488, 492, ¶ 9, 207 P.3d 741, 745 (App. 2009). We view the facts in the light most favorable to upholding that decision. Eaton v. Ariz. Health Care Cost Containment Sys., 206 Ariz. 430, 431, ¶ 2, 79 P.3d 1044, 1045 (App. 2003). ¶11 AHCCCS is required to provide "medically necessary" services, including outpatient health services by licensed health care providers. A.R.S. § 36-2907.A.2 (Supp. 2012); see also Ariz. Admin. Code (A.A.C.) R9-22-215.A.10 (outpatient services for persons under twenty-one include medically-prescribed speech therapy). Arizona statutes do not define "medically necessary." According to A.A.C. R9-22-101.B, a "medically necessary" service is "a covered service [that] is provided by a physician or other licensed practitioner of the healing arts within the scope of practice under state law to prevent disease, disability, or other adverse health conditions or their progression, or to prolong life." A separate regulation defines a "covered service" as "[o]nly medically necessary, cost effective, and federally-reimbursable and state-reimbursable services." A.A.C. R9-22-202.B.1. ¶12 The Director rejected the ALJ's recommendation to authorize further intensive therapy at WAC, explaining in relevant part:
Regardless of whether [PCH] can offer the exact same therapies provided by WAC, the preponderance of the evidence does not show¶13 On appeal, APIPA acknowledges that "[t]he issue presented to, and decided, by the Director was not whether C.B. was entitled to continued and additional speech therapy." APIPA contends that the only question was whether an incremental benefit existed for WAC's therapy over and above that which PCH could provide, that made the therapy medically necessary and "cost effective." According to APIPA, the Director correctly concluded that C.B. failed to satisfy this burden because the WAC evaluation showed "no significant improvement" in C.B.'s skills. ¶14 We examine the record to determine whether substantial evidence supports the Director's decision. Smith v. Ariz. Long Term Care Sys., 207 Ariz. 217, 220, ¶ 15, 84 P.3d 482, 485 (App. 2004). The record includes the first ALJ's recommendation, which incorporates Fretheim's statements supporting WAC's intensive five-day therapy. Fretheim observed that the more traditional therapy of one to two hours per week "offers support, but does not close the gap." She opined that traditional therapy would then continue "for years as a form of support to avoid decline in abilities and [would be] much more costly with less desirable results." ¶15 In her post-therapy WAC evaluation report, Fretheim further stated that "it is recommended that [C.B.] continue to receive intensive speech-language intervention." Contrary to APIPA's assertion, Freitheim found that C.B had "demonstrated significant improvement" after undergoing WAC therapy, although he still "struggles with phonological memory and rapid word retrieval" as well as reading comprehension, and has yet to reach "a therapeutic plateau." ¶16 C.B.'s long-time physician, Macabuhay, came to the same conclusion. Her letter affirms that C.B. "still requires additional sessions at [WAC]." In this case, the Director offered no rationale for discounting the medical necessity opinions of the only professionals who had treated C.B. Meanwhile, APIPA's sole witness, Paulus, could not support its position that PCH, a contracted provider, could provide the medically necessary services. ¶17 During the second administrative hearing, Paulus quoted a statement allegedly made to APIPA's attorney by an unidentified WAC source, that PCH's cochlear implant program has "a good speech program." When told that C.B. instead required cognitive processing and brain injury services, Paulus stated that "PCH can also do that as well." Paulus also testified, however, that "we don't know" whether PCH could offer medically necessary services to C.B. As to whether treatment at WAC was not medically necessary, Paulus stated "I can't tell you until I get everything done." ¶18 Furthermore, APIPA's own records fail to substantially support the Director's decision. In its "Medical Director Review" form, APIPA denied further treatment at WAC because "medical necessity was not established." APIPA's medical director explained in relevant part: "Medical literature does not support requirement for intensive therapy for current cochlear implant and history of meningitis." This generic statement does not reflect personal knowledge of C.B.'s particular needs. ¶19 In sum, the evidence did not contradict the 2009 determination that WAC's intensive speech program was medically necessary and that APIPA had no contracted providers offering these medically necessary services. Without proof that PCH offered the medically necessary services that C.B. required, the Director had no basis to compare its services to WAC's services and to conclude that WAC's services offered only an incremental advantage. Contrary to APIPA's arguments, this is not a decision "at the margin" or a case requiring deference to agency expertise. See Wood v. Betlach, CV 12-08098, 2013 WL 474369, at *10 (D. Ariz. Feb. 7, 2013)(holding that substantial evidence failed to support the determination that Arizona's program was part of an experimental demonstration or pilot program under the Medicaid Act when it was unreasonable to rely on agency expertise in reaching a decision contrary to the plaintiffs' evidence). ¶20 In an effort to justify the Director's decision, APIPA cites J.L.F. v. Ariz. Health Care Cost Containment Sys., for the proposition that "subtle and slight" improvement is not enough to mandate coverage. 208 Ariz. 159, 164, ¶ 19, 91 P.3d 1002, 1007 (App. 2004). However, J.L.F. is readily distinguishable. The claimant had undergone two reconstructive surgeries following a mastectomy. Id. at 160, ¶ 2, 91 P.3d at 1003. This court upheld the decision to deny coverage for further surgery, because examining doctors acknowledged that the asymmetry in the claimant's breasts was only "slight" and the difference was "maybe about half a centimeter." Id. at 163, ¶ 17, 91 P.3d at 1006. In contrast, this case involves a severely impaired child whose treating professionals support his need for further intensive therapy at WAC to help him reach a therapeutic plateau.
that the therapies received from WAC are significant enough to say that it is medically necessary and cost effective for Complainant to receive his speech therapy and cochlear implant therapy from WAC as opposed to the same therapies offered through [PCH].
APIPA has misplaced its reliance upon Diana H. v. Rubin, 217 Ariz. 131, 171 P.3d 200 (App. 2007). Diana H. does not construe AHCCCS regulations, and instead deals with the Department of Economic Security's interest in immunizing a dependent child when a parent objected to the procedure. Id. at 132, ¶ 1, 171 P.3d at 201.
Moreover, there was evidence that APIPA's denial of further services, which pre-dated issuance of WAC's re-evaluation report, was not based upon its interpretation of that document. Rather, as the superior court noted, the denial arose out of a payment dispute.
II. The "Cost Effective" Issue Was Not Litigated At the Hearing.
¶21 Citing the Director's decision, APIPA alternatively argues that C.B. failed to establish that WAC's services are "cost effective" and therefore qualify as covered services under A.A.C. R9-22-202.B. In the "Medical Director Review" form, however, APIPA denies further treatment at WAC because "medical necessity was not established" and makes no mention of cost effectiveness. Nor was any evidence presented on the cost effectiveness of WAC or other potential providers at the second administrative hearing. ¶22 As in the previous administrative hearing, there was no evidence presented that any provider, apart from WAC, could supply the intensive research-based therapy C.B. required. In fact, some record evidence indicates that WAC's intensive therapy would be more cost-effective in the long run. Fretheim observed that traditional therapy "continues for years as a form of support to avoid decline in abilities and is much more costly with less desirable results" than intensive therapy. ¶23 Even assuming that PCH's services were more cost effective, APIPA acknowledges that C.B. would nevertheless be entitled to obtain medically necessary services from outside the network when no in-network provider could supply them. We find this to be the case here. See 42 C.F.R. § 438.206(b)(4) (2012) (requiring the state to ensure that "[i]f the network is unable to provide necessary services, covered under the contract, to a particular enrollee, the [managed care organization] must adequately and timely cover these services out of network for the enrollee, for as long as the [managed care organization] is unable to provide them"); see generally Ariz. Ass'n of Providers for Persons With Disabilities v. State, 223 Ariz. 6, 18, ¶ 43, 219 P.3d 216, 228 (App. 2009).
III. The Superior Court's Articulation of the Burden of Proof Does Not Require Reversal.
¶24 APIPA nevertheless argues that the superior court misconstrued the burden of proof by requiring it to prove medical necessity and the availability of therapies. We agree that the claimant bears the burden to establish entitlement to AHCCCS benefits by a preponderance of the evidence. See A.A.C. R2-19-119.B.1, A. Because our review focuses on the Director's action, the superior court's articulation of the evidentiary burden is not a dispositive issue. But even assuming that the superior court misconstrued the burden, there is no reversible error. ¶25 On June 20, 2009, the Director upheld the first ALJ's finding that "[c]omplainant has established that neither [PCH] nor any other contracted provider offers intensive, research-based speech therapy programs comparable to what [WAC] offers." One year after AHCCCS adopted this finding, APIPA's witness could offer no contrary evidence. Accordingly, even viewing the record in the light most favorable to upholding the Director's decision, and acknowledging that C.B. had the burden of proof, we hold that the Director's decision to deny continued therapy at WAC, the out-of-network provider, lacks substantial evidentiary support.
Because the Notice of Action failed to cite prior authorization as a basis for denial of services, we need not discuss this issue.
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CONCLUSION
¶26 For the above stated reasons, we affirm the superior court's decision in all respects.
____________________
PATRICIA A. OROZCO, Presiding Judge
CONCURRING: _______________
PETER B. SWANN, Judge
____________________
KENT E. CATTANI, Judge