Thursday, August 20, 2015

No. 113: Consulting Physicians—Their Role in Denying Disability Insurance Claims

In the June 2010 issue of The Insurance Forum, in an article entitled "How a Medical Reviewer Helped Reliance Standard Deny Disability Claims," I described the work of a physician who served as a consultant to an insurance company and helped the company deny many disability insurance claims. A recent Sixth Circuit decision in a disability case prompts me to revisit the subject of consulting physicians who are retained by parties seeking to deny claims, have a conflict of interest because of the compensation they receive from those parties, do not see the claimants, and render their opinions based solely on reviews of medical records.

The Shaw Case
Raymond Shaw, a 39-year-old customer service representative for Michigan Bell, stopped working in August 2009 because of chronic neck pain. He was covered under a disability program (Plan) administered by Sedgwick Claims Management Services, Inc. He received short-term disability benefits for one year, but his application for long-term disability (LTD) benefits was denied. His appeal to the Plan was also denied.

In March 2013 Shaw filed a lawsuit against the Plan alleging that he was wrongly denied LTD benefits. In July 2013 Shaw filed an amended complaint. In September 2013 the Plan answered the amended complaint. In February 2014 both parties filed motions for judgment on the record. In September 2014, the district court granted the Plan's motion and denied Shaw's motion. Two weeks later Shaw filed a notice of appeal. (See Shaw v. AT&T Umbrella Benefit Plan No. 1, U.S. District Court, Eastern District of Michigan, Case No. 5:13-cv-11461.)

On July 29, 2015, a three-judge appellate panel reversed the district court's ruling. The reversal was in an 18-page opinion by Chief Judge Ransey Guy Cole, Jr. and joined by Senior Judge Ronald Lee Gilman. They ruled that "the Plan acted arbitrarily and capriciously in denying Shaw LTD benefits." They not only remanded the case but also ordered the district court to enter an order awarding LTD benefits to Shaw.

A perfunctory two-paragraph dissent was filed by Judge Raymond M. Kethledge. He said the Plan's denial was not arbitrary and capricious because Shaw failed to provide "objective medical documentation," and because the Plan relied on the opinions of specialists who reviewed Shaw's medical records. (See Shaw v. AT&T Umbrella Benefit Plan No. 1, U.S. Court of Appeals, Sixth Circuit, Case No. 14-2224).

The Consulting Physicians
In dealing with Shaw's initial appeal of the Plan's denial of LTD benefits, Sedgwick sent Shaw's medical records to Dr. Imad M. Shahhal, a neurosurgeon, and to Dr. Jamie Lee Lewis, a specialist in physical medicine and rehabilitation and pain medicine. Each called Shaw's treating physicians and asked them to call back within 24 hours or the reports would be "based on available medical information." The treating physicians did not meet the deadline and the consulting physicians promptly concluded that Shaw was "not disabled from any occupation."

The two appellate judges who reversed the district court ruling apparently were outraged by the imposition of a 24-hour deadline on busy physicians. Also, the two judges said that "Dr. Lewis's conclusions have been questioned in numerous federal cases, in all of which he was hired by Sedgwick." They cited details from four such cases. In one of them, Dr. Lewis was described as having submitted a review that "ignored or misstated evidence by treating physicians."

My June 2010 Article
As indicated at the outset, an article about insurance company use of consulting physicians was in the June 2010 issue of The Insurance Forum. It focused on Dr. William S. Hauptman, a specialist in gastroenterology and internal medicine, who had a contract with Reliance Standard Life Insurance Company. Over three years he conducted 446 reviews for the company and received compensation of about $400,000.

Dr. Hauptman's work has been mentioned in numerous lawsuits. My June 2010 article described two cases in some detail. In one of them, the court illustrated the bias in his reports by citing his use of boldface type and underlining to emphasize his points supporting denial of the claim.

In the article I said the use of a consulting physician creates a serious conflict of interest for the physician because he or she knows that the insurance company wants support for an adverse claim decision, that he or she will be paid generously for providing that support, and that failing to provide that support will discourage the company from using the physician. I suggested that it might be helpful to disclose publicly the number and percentage of cases handled by a consulting physician where he or she recommended denial of a claim.

Available Material
I am offering a complimentary 22-page PDF consisting of the appellate ruling, the brief dissent, and my June 2010 article. E-mail and ask for the package relating to the Shaw case.