Nickolas Zervos, Plaintiff-Appellant-Cross-Appellee v. Verizon New York, Inc., F/k/a Verizon Communications Inc., F/k/a Nynex Corporation, F/k/a New York Telephone Company, and Empire Healthchoice, Inc., F/k/a Empire Blue Cross Blue Shield, Defendants-Appellees-Cross-Appellants, United Healthcare Co., Inc., A/K/A United Healthcare
Docket: 01-9213
Court: Court of Appeals for the Second Circuit; January 27, 2002; Federal Appellate Court
Nickolas Zervos, suffering from metastatic breast cancer, sought coverage for high dosage chemotherapy followed by an autologous blood stem cell transplant (HDCT), believing it offered a better chance for remission than conventional chemotherapy. His health insurance provider, Empire HealthChoice, denied pre-certification for HDCT, classifying it as investigational, despite an outside review confirming its effectiveness. Zervos initiated litigation in January 2001, requesting a preliminary injunction, which the district court denied. On appeal, the court affirmed the denial but suggested Zervos could argue that the insurance administrator misapplied the plan's "Experimental/Investigational" exclusion. After a bench trial, the district court deemed Empire's appellate process arbitrary and capricious, remanding the case for a new review. However, the appellate court found this remand unreasonable, stating that the denial of benefits was an abuse of discretion given the urgency of Zervos' condition. As a result, the court reversed the district court's decision and directed it to issue an injunction for coverage. Judge Jacobs dissented.
In February 2000, Zervos was diagnosed with malignant breast cancer after discovering a lump and undergoing a mastectomy, which revealed cancer spread to all examined lymph nodes and possibly the sternum. He was referred to Columbia Presbyterian Medical Center for aggressive chemotherapy. On October 13, 2000, Dr. Charles S. Hesdorffer sought insurance approval for high-dose chemotherapy (HDCT), attaching a treatment protocol. Zervos was already undergoing standard chemotherapy with Adriamycin and Cytoxan, which he tolerated well, and he later responded positively to conventional chemotherapy and radiation, leading to remission.
Zervos' insurance policy covered "medically necessary" treatments, defined as those required for treating an injury, illness, or pregnancy, excluding unnecessary or experimental treatments. "Experimental/Investigational" treatments are defined as those lacking proven benefit or not recognized by the medical community. Dr. Steven Wolinsky, the medical policy director at Empire, determined the experimental status of treatments based on literature and evidence, or by referring to the Technology Assessment Committee (TAC), which includes medical personnel and academics.
The policy allows for internal appeals, managed by Empire, which are sent to the Medical Care Ombudsmen Program (MCOP) for external review. MCOP, independent of Empire, assigns experts to evaluate cases based on patient records and medical literature. Dr. Wolinsky stated that Empire adhered to the external reviewer’s decisions but later clarified that Empire only accepted the reviewer's assessments of medical literature and clinical expertise regarding optimal treatment options.
Empire's HDCT (High-Dose Chemotherapy) policy evolved significantly throughout the late 1990s. Initially, in the 1990s, Empire provided coverage for HDCT for patients with metastatic breast cancer who had responded to standard chemotherapy, supported by various Phase II studies and the Bezwoda Phase III study indicating a survival benefit. However, in May 1999, Dr. Wolinsky noted new abstracts from an ASCO meeting suggesting that recent randomized Phase III studies did not demonstrate improved outcomes for HDCT, prompting a meeting of the TAC (Treatment Advisory Committee) in July 1999, where coverage was maintained after a presentation by Zervos’ physician, Dr. Hesdorffer.
Later in 1999, the Bezwoda study was discredited due to fraud, and the Stadtmauer study gained broader acceptance for showing minimal benefits from HDCT. Dr. Wolinsky reconvened the TAC in March 2000, where Dr. Diana Lake presented results from three Phase III trials, highlighting mixed survival rates, with the Stadtmauer study showing no significant survival differences. Consequently, the TAC decided to initially deny coverage for HDCT for metastatic breast cancer.
At the March 2000 meeting, Dr. Wolinsky acknowledged ASCO's stance on HDCT's lack of persuasive data for superior effectiveness, stating it should only be administered within high-quality clinical trials. He emphasized that financial considerations did not influence the determination of treatment efficacy. Following this meeting, Empire denied three of four HDCT coverage requests, initially denying one request from a less advanced cancer patient but later reversing the decision based on an outside review that deemed HDCT as effective as conventional chemotherapy in a clinical trial context. The final coverage decision was made by Dr. Downs, not Dr. Wolinsky.
Empire denied Dr. Hesdorffer's request for coverage of high dose chemotherapy (HDCT) and autologous peripheral stem cell transplant for Zervos on October 18, 2000, citing its experimental status in Stage IV breast cancer. Following an appeal, Zervos' medical records were reviewed by Dr. Thomas R. Spitzer, who noted that while HDCT may not enhance health outcomes, it could be as effective as prolonged combination chemotherapy. Dr. Spitzer acknowledged that Dr. Hesdorffer's study was well designed. However, Dr. Wolinsky, in his review, dismissed Dr. Spitzer's favorable comparison, asserting that HDCT lacked proven benefits. On October 24, 2000, Dr. Wolinsky upheld the denial, stating insufficient evidence to support HDCT's superiority over conventional chemotherapy.
Subsequently, Zervos underwent radiation treatments and conventional chemotherapy, achieving cancer remission by February 2001, which made him eligible for HDCT in Dr. Hesdorffer's study. On January 29, 2001, Zervos filed a complaint against Empire and Verizon in the Southern District of New York, seeking a preliminary injunction for HDCT coverage, claiming disability and gender discrimination, and arguing that the denial was arbitrary under ERISA. Shortly after the lawsuit commenced, Empire sought a second opinion from Dr. Raymond B. Weiss, who contended that there was no evidence supporting the efficacy of HDCT over other chemotherapy forms and criticized the design of Dr. Hesdorffer's study. The district court denied Zervos' request for a preliminary injunction, concluding that he had not demonstrated irreparable injury or shown that HDCT would improve his survival odds, thereby validating Empire's classification of HDCT as experimental and investigational.
The district court's order was affirmed, finding that Zervos did not demonstrate a likelihood of success on any of his claims, including the ERISA claim based on the administrative record. However, the ruling did not preclude Zervos from potentially establishing a successful federal claim. Zervos could argue that the "arbitrary and capricious" review should focus on the final decision denying coverage, which was communicated to him via a letter dated October 24, 2000. This decision was deemed "arbitrary and capricious" if based on a misunderstanding of what constitutes "Experimental/Investigational" under the plan. The plan defines "Experimental/Investigational" as services lacking proven benefit or general medical community recognition for the condition treated. During the appeal, Zervos experienced a recurrence of his metastatic disease, rendering him ineligible for HDCT, although a later experimental treatment improved his condition despite causing significant complications.
On July 30, 2001, following tests confirming Zervos' eligibility for a treatment protocol, he renewed his request for a preliminary injunction and sought to combine this with a trial on the merits. The district court denied this request for an expedited trial due to a pending summary judgment motion. After oral arguments on September 6, 2001, Judge Daniels granted Empire's motion for summary judgment on Zervos' ADA claim but allowed his ERISA claim to proceed.
During a five-day trial, the district court evaluated testimonies from key individuals involved in the formulation of Empire's HDCT policy, along with doctors who assessed Zervos' initial claim and internal appeal. Expert opinions, including insights from Dr. Weiss and others, were also presented. On October 5, 2001, the court indicated it would deliver a decision the following week. However, on October 11, Zervos' attorney was informed that a decision would be delayed, to which the attorney responded that Zervos could not wait beyond October 16 due to medical advice and the likelihood of an appeal. On October 16, the court's chambers confirmed that no decision had been reached and inquired about Zervos' eligibility for HDCT. The next day, Dr. Hesdorffer submitted a declaration stating that Zervos remained eligible but was facing a risk of disease recurrence if treatment was not administered by the end of October. Dr. Hesdorffer warned that Zervos had limited treatment options and a poor long-term prognosis without HDCT.
On October 22, 2001, the district court issued two memorandum opinions. The first dismissed Zervos' ADA claim, while the second addressed the ERISA claim without considering Zervos' renewed request for a preliminary injunction. Judge Daniels concluded that Empire's decision to terminate HDCT coverage was not arbitrary; however, the appellate process was deemed arbitrary and capricious due to irrelevant and confusing questions, inconsistent evaluations, and unclear coverage practices regarding experimental treatments. The court remanded the case for an expedited review within 48 hours of Zervos' submission of new relevant information. Empire was instructed to engage a new reviewer to provide clear answers regarding the treatment's recognized effectiveness and any medical reasons for its administration despite its experimental status. The court did not explicitly retain jurisdiction or order the entry of judgment.
Zervos filed a notice of appeal and a motion for expedited consideration of his appeal regarding the remand's appropriateness following the district court's order. Chief Judge Walker granted the motion, referring the appeal to the panel. Empire cross-appealed, arguing that the district court's finding regarding its appellate process was arbitrary and capricious. After oral arguments on October 29, 2001, the panel directed the parties to mediation, which did not result in a settlement. On October 30, 2001, with dissent from Judge Jacobs, the panel reversed the district court's order, mandating Empire to cover Zervos's HDCT costs. Judge Daniels complied with this directive. Empire subsequently sought a stay and a recall of the mandate, which was denied unanimously by the panel.
Zervos claims jurisdiction under 28 U.S.C. § 1292(a)(1), asserting the district court effectively denied him immediate injunctive relief. Empire contends that the district court's order does not constitute a final determination on injunctive relief. Zervos argues the district court abused its discretion by remanding instead of issuing an injunction. The discussion references case law establishing that appeals may be taken from orders that practically deny injunctive relief, particularly when such orders result in serious, potentially irreparable consequences.
The district court's refusal to grant immediate injunctive relief effectively denied the plaintiff's request, despite clear violations of ERISA. The urgency of the situation was underscored by the plaintiff's imminent risk of cancer recurrence and the established need for timely treatment. Previous guidance indicated that substantial delays were intolerable, especially given Dr. Hesdorffer's prediction that the plaintiff could lose eligibility for High-Dose Chemotherapy (HDCT) if not administered by the end of October. The record at the time of the district court's order was sufficient to conclude that the appeals process was arbitrary and capricious, and the remand primarily served to allow the defendants to address their flawed appeals process rather than provide immediate relief to the plaintiff, who had already met the conditions necessary for relief. Delays posed serious risks to the plaintiff's treatment eligibility and could result in irreparable harm, as conventional treatment options were diminishing. The court asserts jurisdiction over this appeal, emphasizing that this determination is confined to the unique circumstances of the case and does not address broader implications for remands under 28 U.S.C. § 1291 or the appealability of remand orders generally under Section 1292(a).
Empire had the discretion to interpret the provisions of the plan it administered, and courts can only overturn its interpretations if they are deemed arbitrary and capricious. A decision is classified as "arbitrary and capricious" if it lacks reason, substantial evidence, or is legally erroneous. Courts should not conduct a de novo hearing on an applicant's eligibility for benefits and should refrain from accepting information not included in the original record unless the insured contributed to its inclusion. The district court's review is limited to the administrative record from the time Empire made its decisions regarding Zervos' claim in March and October 2000. The completeness of the record at the time of the October 24, 2000 decision negates the need for additional evidence, which appears primarily aimed at strengthening Empire's legal position.
On the merits, neither party contests the TAC's initial denial of coverage for high-dose chemotherapy (HDCT) for insureds with metastatic breast cancer or the subsequent denial of Zervos' coverage. The existing studies indicate that HDCT does not provide a greater survival benefit than long-term conventional chemotherapy and has more severe side effects. However, the TAC acknowledged that HDCT may be appropriate in well-designed clinical trials, thus allowing for coverage if an external reviewer deems it suitable for individual patients.
Focus is placed on two main issues: the district court's finding that Empire's appellate process was arbitrary and capricious, and the appropriateness of remanding the case instead of granting injunctive relief. The appellate process was deemed arbitrary and capricious because Dr. Wolinsky improperly required treatments to be superior to existing options to avoid exclusion under the policy's experimental/investigational criteria, whereas the policy only required treatments to be effective. This misinterpretation contradicted ERISA principles, as trustees cannot impose additional requirements beyond the policy's clear terms. Additionally, Dr. Wolinsky acted arbitrarily by dismissing Dr. Spitzer's opinion regarding the efficacy of high-dose chemotherapy (HDCT) without valid reasoning.
The district court's decision to remand rather than provide injunctive relief was reviewed for abuse of discretion and found to be inappropriate. Remand is unsuitable when the denial of benefits is deemed unreasonable, not just due to an incomplete record. On the date of denial, the evidence indicated that HDCT and conventional chemotherapy had similar survival benefits, and Dr. Spitzer's letter confirmed the quality and appropriateness of the trial Zervos wished to enter. Dr. Wolinsky’s rejection of Dr. Spitzer’s opinion was based on an unfounded assumption regarding side effects. Therefore, since the administrative record supported coverage for Zervos' treatment, the appellate decision was also ruled arbitrary and capricious.
The remand order was deemed arbitrary and capricious due to insufficient consideration of the time constraints faced by Zervos, which could lead to a denial of justice. Delays from the remand could exacerbate the situation, especially as Zervos had yet to establish an ERISA violation. The evidence indicated that the denial of benefits was unreasonable, and the administrative record supported granting coverage rather than denying it. Thus, the district court's remand, aimed at allowing defendants to rectify a flawed system, constituted an abuse of discretion.
Consequently, the court found that Empire's arguments against the district court's ruling were meritless, and that the denial of benefits was substantively incorrect. Given the urgency of Zervos' medical condition, the deficiencies in the appellate process, and the lack of supporting evidence for Empire’s decision, the remand order was overruled. The district court's decision was reversed, ordering Empire to provide the requested coverage.
Additional notes indicate that Zervos had advanced cancer (Stage IV), and discuss the nature of clinical trials relevant to treatment efficacy. A third-party medical opinion obtained post-remand also recommended against HDCT for Zervos, which remains an unresolved issue in the circuit. A dissenting opinion from Circuit Judge Jacobs was noted.
The district court appropriately applied established legal principles and was thorough in its case evaluation. However, the majority opinion undermined the district court's discretion, questioned the plan administrator's good faith without evidence, ignored relevant facts regarding medical coverage, and made decisions that highlight the necessity of judicial deference to medical professionals. The judgment deemed arbitrary and capricious a refusal to cover high-dose chemotherapy (HDCT) for A. Nickolas Zervos, a patient with Stage IV breast cancer, despite substantial evidence against the treatment's efficacy. Comprehensive studies, including the reputable Stadtmauer study, concluded that HDCT offers no survival benefit over conventional chemotherapy and poses significant risks, particularly to patients over 42. The only study suggesting HDCT's benefit has been discredited as fraudulent. Major health organizations, including the American Society of Clinical Oncology, have cautioned against the treatment outside clinical trials, and Medicare no longer covers HDCT for breast cancer. Notably, several leading cancer institutes have ceased offering this treatment, which has been criticized in media for perpetuating unproven medical practices, having subjected approximately 30,000 women to it during the 1990s without proof of its effectiveness.
Results from four clinical trials conducted two years prior indicated that the treatment in question was ineffective. The legal principles relevant to this case affirm that when an insurance plan grants its administrator broad discretion to interpret the plan's terms and decide on benefit claims, a court may only overturn the administrator's decision if it is deemed arbitrary and capricious. Relevant case law establishes that a decision is arbitrary and capricious if it lacks reason, is unsupported by substantial evidence, or is legally erroneous. Substantial evidence is characterized as evidence sufficient for a reasonable person to accept as adequate, falling between mere speculation and a preponderance.
Courts do not have the authority to reassess the merits of eligibility but must review the administrator's decision under the arbitrary and capricious standard. If a district court finds the administrator's decision to be arbitrary and capricious due to insufficient evidence, it must remand the case to the administrator to consider additional evidence, unless no new evidence could lead to a reasonable conclusion allowing for claim denial. Findings of fact by a district court can only be overturned if clearly erroneous, and the court's decisions regarding relief, including remand, are reviewed for abuse of discretion. An abuse occurs when the decision is based on legal error, a clearly erroneous finding, or falls outside permissible decision-making boundaries.
Under the Zervos plan, Empire excludes coverage for procedures deemed "Experimental/Investigational," defined as services lacking proven benefit for the covered condition or not generally recognized as effective by the medical community, specifically identified as the general community of academic oncologists in this case.
The term "proven benefit," though not defined in the policy, is interpreted by Empire to require evidence of a positive net health effect, weighing treatment efficacy against toxicity and comparing it to other standard treatments. Historically, Empire covered high-dose chemotherapy (HDCT) for breast cancer until a March 2000 meeting of its Technology Assessment Committee (TAC) led to a reclassification of HDCT as Experimental/Investigational. This change was based on studies showing no survival advantage of HDCT over conventional chemotherapy and higher toxicity rates. Empire's reclassification of HDCT is undisputed in this case, with the majority agreeing that the studies reasonably established a lack of survival benefit and increased side effects associated with HDCT.
Following the policy change, Zervos sought coverage for HDCT, which Empire denied, categorizing Autologous Peripheral Stem Cell Harvest/Transplant as Experimental and Investigational for Stage IV breast cancer. Upon Zervos's physician's request, Empire pursued an external review through the Medical Care Ombudsmen Program (MCOP), which selects an independent reviewer based on expertise. Empire provides a set of questions to guide the reviewer, who is not an expert in contract language. The treating physician can submit relevant literature for consideration.
Dr. Thomas R. Spitzer, the assigned reviewer from Massachusetts General Hospital, concluded that the scientific evidence does not support improved health outcomes with HDCT and noted that the oncology community has largely supported discontinuing this therapy as standard care for metastatic breast cancer. When asked about the study's suitability for Zervos, he expressed uncertainty regarding his eligibility for the referenced protocol. Ultimately, Dr. Spitzer determined that the recommended treatment plan was not the best available for Zervos at that time.
No convincing data support that high-dose chemotherapy (HDCT) is superior to conventional chemotherapy for male patients with metastatic breast cancer. Dr. Spitzer, in a limited response, suggested that HDCT might be as effective as prolonged combination chemotherapy and could avoid lengthy treatment. However, this assertion is primarily based on one question and disregards other responses from Dr. Spitzer. Empire, viewing a "proven benefit" as a positive net health effect, denied Zervos's claim for HDCT, referencing Dr. Spitzer's conclusion. Following the denial, Verizon requested a second review, leading to Dr. Raymond Weiss's evaluation. Dr. Weiss indicated that most oncologists consider transplant therapy unproven and stated that Zervos, a male, was ineligible for a clinical study designed for women. He asserted there was no justification for treating Zervos with HDCT, citing a lack of evidence for efficacy in women with metastatic breast cancer and criticizing the protocol as poorly designed and non-innovative. Empire subsequently reaffirmed the denial based on Dr. Weiss’s findings. On October 22, 2001, the district court upheld Empire’s denial, finding it supported by substantial evidence and not arbitrary or capricious.
The court found Empire's appeals process to be arbitrary and capricious, as it failed to pose direct questions that clearly determine the treatment’s proven benefit or its recognition by the medical community. Despite this, the district court ruled it could not conclude the treatment was experimental or that there were sufficient medical reasons to deny it, emphasizing the need for a thorough review by medical experts based on relevant literature and the patient's condition. The court remanded the case for a complete record review, instructing Empire to conduct an expedited MCOP review within 48 hours after Zervos submitted pertinent information, which must include clear questions regarding the treatment's efficacy and necessity, even if deemed experimental.
On October 25, 2001, Dr. Joyce O'Shaughnessy, a qualified oncologist, concluded that the proposed treatment did not provide proven benefits for the patient's condition, asserting it was not recognized as effective or appropriate by the medical community and that its risks outweighed any potential benefits. She highlighted that most oncologists consider high-dose chemotherapy ineffective for patients like Zervos, who are heavily pre-treated and resistant to chemotherapy.
Mr. Zervos is unlikely to benefit from high-dose chemotherapy (HDCT) due to its low probability of achieving durable remission and its significantly greater toxicity compared to conventional chemotherapy for metastatic breast cancer. Dr. O'Shaughnessy concluded that there are no medical or clinical reasons to administer HDCT to Mr. Zervos, emphasizing the potential harm of the treatment. The district court's role is to determine if an administrator's decision was arbitrary and capricious, requiring remand for additional evidence unless no new evidence could reasonably justify denying the claim. In this case, the majority faced challenges in ruling that no new evidence could lead to a reasonable denial, particularly since a third review, ordered by the district court, provided new evidence supporting the denial. The majority opinion incorrectly narrowed the administrative record to a singular response by Dr. Spitzer, neglecting other relevant information and erroneously interpreting the policy to require coverage for any "effective" medical procedure, regardless of toxicity. The district court found that the appeals process was arbitrary and capricious because the questions posed did not align with the Experimental/Investigational exclusion wording, leading to the conclusion that the record was incomplete and necessitating remand. The majority, however, dismissed this finding, asserting the record was complete based solely on Dr. Spitzer's isolated answer.
HDCT is deemed as effective as prolonged combination chemotherapy for metastatic breast cancer. The majority opinion identifies Empire's appellate process as arbitrary and capricious for denying coverage despite this effectiveness, as the policy's experimental/investigational language only requires a treatment to be effective, not superior to existing options. Empire improperly added a requirement for superiority, deviating from basic ERISA principles. It misinterprets the policy by failing to defer to its reasonable interpretation, which necessitates a treatment to have a "proven benefit" recognized by the medical community. "Proven benefit" is subject to interpretation, and Empire's definition encompasses a treatment's positive health effects relative to its toxicity, which the district court found to be a reasonable reading. The court emphasized that a treatment with greater toxicity and equivalent outcomes cannot be deemed beneficial. Expert testimonies supported the view that if a treatment's risks exceed its benefits, it is appropriate to forgo that treatment in favor of standard therapies. The argument draws a distinction from Gallo, where the insurer attempted to add unrelated language to a plan, as opposed to interpreting existing policy terms.
The majority's ruling asserts that the administrative record supports granting coverage for Zervos's claim. However, this conclusion is criticized for excluding significant input from Dr. Weiss and Dr. O'Shaughnessy, misinterpreting Dr. Spitzer's opinions, and neglecting to acknowledge the extensive medical rationale behind Empire's decision to terminate funding for high-dose chemotherapy (HDCT). The majority dismisses two additional reviews from the administrative record, claiming they were solicited solely to strengthen Empire's legal stance rather than to evaluate Zervos's claim comprehensively. There is no evidence that Empire would have ignored a recommendation for HDCT from these reviews. The second review was requested by Zervos's employer, and the third was mandated by the district court, indicating they were integral to the claims process.
Further, the majority overlooks evidence from March 2000, when Empire officially decided to deny HDCT coverage, a decision deemed reasonable. Expert opinions, including those of Zervos's physician, indicate that HDCT is more toxic than conventional chemotherapy, which raises questions about its efficacy. For HDCT to be considered a viable alternative, it must demonstrate greater effectiveness than conventional treatments. Dr. Spitzer's deposition reflects this view, stating that while HDCT may be as effective as conventional chemotherapy, it is not the optimal treatment for Zervos, primarily due to its associated risks. The case contrasts with Zuckerbrod, where coverage was mandated due to clear medical necessity, a situation not present here as no expert claims that HDCT is essential for Zervos's treatment.
Dr. Spitzer characterized the proposed research protocol as a "well designed Phase II study," similar to a prior case where Empire provided coverage for a "well-designed randomized phase III trial." However, Dr. Spitzer noted that the current protocol is specifically for women, while the previous case involved a male patient, raising questions about Zervos's eligibility. The prior case involved a patient with Stage II breast cancer seeking a higher quality randomized trial, whereas Zervos has Stage IV breast cancer and is seeking participation in a Phase II trial of lower quality. The district court found that coverage was granted for the female patient due to the quality of the study, and denied for Zervos based on significant differences in disease state and study quality. The court concluded that Empire's actions were not arbitrary or capricious given these differences.
Regarding time constraints, the majority opinion criticized the district court for remanding the case despite Zervos's urgent condition. However, the district court had promptly ordered an expedited review within 48 hours of Zervos's submission of relevant information, which was completed shortly before oral arguments in the appeal. The majority's ruling emphasized the unique circumstances of Zervos's case but did not change the legal standards of the Circuit. Additionally, the document provides a detailed description of high-dose chemotherapy (HDCT), highlighting its risks and the importance of quickly reintroducing the patient's bone marrow post-treatment to prevent life-threatening complications.
