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LaVecchia v. State Health Benefits Commission

August 10, 2010


On appeal from the State Health Benefits Commission.

Per curiam.


Argued: May 12, 2010

Before Judges Cuff, C.L. Miniman, and Fasciale.

Petitioner Jaynee LaVecchia and her husband are participants in the State Health Benefits Program. At issue in this appeal is whether respondent properly denied reimbursement for a procedure performed on petitioner's husband to relieve long-standing back pain. Respondent determined the procedure was an experimental or investigational procedure and not a covered expense under the State Health Benefits Plan. We affirm.

In November 2006, petitioner participated in the Traditional Plan (the Plan) of the New Jersey State Health Benefits Program (SHBP). Her husband, Michael Cole, was covered as a dependent under the Plan. The Plan was administered by Horizon Blue Cross Blue Shield of New Jersey (Horizon).

In November or December 2006, Cole requested a predetermination of benefits from Horizon for a procedure on his back, known as Percutaneous Laser Disc Decompression (PLDD). PLDD is a minimally invasive alternative procedure for repair of a herniated disc causing nerve root compression that uses a laser to ablate a portion of the disc nucleus to relieve nerve root compression. The traditional surgical treatment is an open lumbar discectomy or microdiscectomy, both of which entail the physical removal of disc material.

Dr. Daniel Choy, the physician who performed Cole's surgery, wrote a letter of medical necessity on November 22, 2006, to Horizon. Dr. Choy is the pioneer of the PLDD procedure. The letter advised that Cole had suffered lower back pain for six to eight years and previous physical therapy was only moderately helpful. Dr. Choy stated that he believed Cole was a "good candidate" for PLDD and that PLDD was noninvestigational as various articles and studies reported on the procedure. He also informed Horizon that "[a]pproximately 75,000 PLDD's have been performed worldwide[, it] is routinely performed in all of Europe, South and Central America, Japan, India, and the U.S.[,]" and that he had performed over 4000 PLDDs over the prior twenty-one years, "with an average success rate of 89%, and a complication rate of 0.4%."

Horizon's Medical Director concluded that PLDD was not covered under the Plan because it was experimental and/or investigational and so advised petitioner on December 27, 2006. On January 2, 2007, Cole underwent the PLDD procedure at Dr. Choy's facility in New York City.

On February 7, 2007, Cole submitted a "Traditional Plan Claim Form" for $22,080, the cost of the procedure. Horizon denied the claim on April 26, 2007. In its decision, Horizon relied upon its internal policies, Uniform Medical Policy #077, and pages 17 and 18 of the SHBP Traditional Plan Member Handbook (the Handbook). The letter stated that the earlier coverage determination was affirmed because the Medical Director determined "PLDD is considered investigational because there have been insufficient large scale long term studies in comparison to the standard of care for micro diskectomy."

Petitioner requested reconsideration of the denial of benefits. The State Health Benefits Commission (SHBC) responded that, pursuant to the provisions of the Plan, the Division of Pensions and Benefits had requested that Horizon conduct the final review of its administrative denial of the claim. On August 29, 2007, SHBC advised petitioner that Horizon had denied the claim and attached a letter from Horizon to SHBC explaining that it continued to view PLDD as an investigational/experimental procedure.

On October 10, 2007, petitioner appealed the denial of her husband's coverage to the SHBC. Following consideration of the appeal at its November 14, 2007 meeting, the SHBC denied the appeal.

On January 27, 2008, petitioner filed a timely appeal and requested that the matter be transmitted to the Office of Administrative Law (OAL). On February 13, 2008, the SHBC reaffirmed its previous determination to deny coverage and voted to transmit petitioner's appeal to the OAL, and advised petitioner's counsel of its decision in a February 27, 2008 letter.

Administrative Law Judge (ALJ) Joseph A. Paone conducted a hearing on January 28, 2009. After hearing the testimony of Doctor Stanley Harris, the Senior Medical Director at Horizon, and reviewing all of the medical literature admitted in evidence, ALJ Paone held that there "is substantial and sound medical literature that supports Horizon's policy, which is grounded on the notion that RCTs [randomized controlled trials] are needed before PLDD can be validated." In making this determination, he made the following findings of fact: (1) "the prevailing opinion within the spinal-surgery field recognizes PLDD as an effective treatment for relief of a herniated lumbar disc"; (2) the prevailing medical opinion is also that "PLDD needs further evaluation . . . before it is used outside clinical trials or research settings"; and (3) "PLDD is an investigational treatment."

The ALJ noted that four of the ten articles relied upon by petitioner were written by Dr. Choy, who is admittedly a pioneer in the field, but also "has a large financial interest in the acceptance of the validity of PLDD." The ALJ also noted that Dr. Choy was the executive editor of Photomedicine and Laser Surgery and its predecessor, Journal of Clinical Laser Medicine and Surgery, in which six of the ten articles were published. The ALJ accorded more weight to the articles submitted by SHBC because of the timeliness of SHBC's articles and the limitations of the studies petitioner cited. He stated:

Except for the Tassi article and Choy's article in Techniques in Regional Anesthesia & Pain Management, the other eight articles relied upon by petitioner were published before the articles written by Boswell, Goupille, and "Windows on Medical Technology," which reviewed the state of the various PLDD studies, and criticized the lack of an RCT.

The Tassi study represents a very strong endorsement of PLDD. But even Tassi suggests caution in the interpretation of his results because the study is too short-term. And the Tassi study remains subject to the same criticism as the others -- it is not an RCT.

ALJ Paone concluded that SHBC correctly determined that petitioner's claim did not fall under the Plan because PLDD was still considered experimental/investigational. The SHBC adopted the Initial Decision on April 17, 2009.

Petitioner argues that SHBC plainly erred in classifying PLDD as "experimental." She contends that a finding that the procedure is effective is inconsistent with a finding that it is experimental or investigative. She further maintains that SHBC erroneously imported an extraneous definition of "experimental and investigational" by requiring RCTs of PLDD before removing the procedure from the "experimental" classification. Additionally, petitioner argues that the ALJ erred in failing to place the burden on SHBC to prove that PLDD should be an excluded procedure.

SHBC counters that the exclusion of PLDD is "a straightforward application of the Plan's terms." It argues that the ALJ applied the plain terms of the Plan and relied "on . . . published reports in authoritative medical literature," which is required in any determination of whether a procedure is experimental. SHBC also maintains that the ALJ properly assigned the burden of proof to petitioner but also emphasizes that the ALJ stated he reached his conclusions on the applicable facts regardless of which party bore the burden of proof.

The role of this court in reviewing an administrative agency's final determination is exceedingly limited. In re Taylor, 158 N.J. 644, 656 (1999).

The scope of review of an administrative decision is the same as that for an appeal in any non-jury case, i.e., whether the findings made could reasonably have been reached on sufficient credible evidence present in the record considering the proofs as a whole, with due regard to the opportunity of the one who heard the witnesses to judge of their credibility. [Ibid. (internal quotations and citations omitted).]

Therefore, this court may only reverse an agency's final decision if "(1) it was arbitrary, capricious, or unreasonable;

(2) it violated express or implied legislative policies; (3) it offended the State or Federal Constitution; or (4) the findings on which it was based were not supported by substantial, credible evidence in the record." Univ. Cottage Club of Princeton, N.J. Corp. v. N.J. Dep't of Envtl. Prot., 191 N.J. 38, 48 (2007) (citing In re Taylor, supra, 158 N.J. at 656).

An appellate court is not permitted to "engage in an independent assessment of the evidence as if it were the court of first instance." In re Taylor, supra, 158 N.J. at 656 (quoting State v. Locurto, 157 N.J. 463, 471 (1999)). If, in reviewing the agency's decision, this court finds sufficient credible evidence in the record and the inferences to be drawn therefrom, it must uphold the agency's decision even if the court feels it would have reached a different result. Campbell v. N.J. Racing Comm'n, 169 N.J. 579, 587 (2001); In re Taylor, supra, 158 N.J. at 657. If, on the other hand, the court finds the agency's decision "'is clearly a mistaken one and so plainly unwarranted that the interests of justice demand intervention and correction, then, and only then, [it may] appraise the record as if it were deciding the matter at inception and make its own findings and conclusions.'" Campbell, supra, 169 N.J. at 587 (quoting Clowes v. Terminix Int'l, Inc., 109 N.J. 575, 588 (1988)).

Finally, an appellate court "may not second-guess those judgments of an administrative agency which fall squarely within the agency's expertise." In re Stream Encroachment Permit, Permit No. 0200-04-0002, 402 N.J. Super. 587, 597 (App. Div. 2008). An appellate court must grant deference to an agency's expertise when such expertise is relevant to the case. Campbell, supra, 169 N.J. at 588. When resolution of a legal question rests upon factual issues within an agency's province, those questions should be resolved in accordance with the agency's fact finding. Ibid.

The SHBC was created to institute a health benefit plan for State employees. N.J.S.A. 52:14-17.27. Any insurance contracts purchased by SHBC are required to have certain basic benefits, but the SHBC has the authority to purchase contracts that are subject to limitations and exclusions. N.J.S.A. 52:14-17.29(A), (D). The SHBC is not permitted to provide benefits beyond those enumerated in the contracts they provide. N.J.S.A. 52:14-17.29 (D). Additionally, the SHBC is statutorily prohibited from providing coverage for experimental or investigative procedures. N.J.S.A. 52:14-17.29(B).

The goal of the State Health Benefits Act is to "provide comprehensive health benefits for eligible public employees and their families at tolerable cost." Heaton v. State Health Benefits Comm'n, 264 N.J. Super. 141, 150 (App. Div. 1993). Although contracts procured by the SHBC are not precisely identical to commercial insurance contracts, the consumers who are subject to each are in positions of equal footing, because both must accept the contracts as presented to them and adjust their medical services in accordance with the same. Micheletti v. State Health Benefits Comm'n, 389 N.J. Super. 510, 525 (App. Div. 2007). As such,

"The reasonable expectations of both the State and the insured public employees are reached in large part after a consideration of the scope of the protections offered by the commercial insurance market. If Program provisions compatible with the statute appear to furnish protection consistent with the offerings of the commercial insurance market, those provisions should be interpreted in a consistent manner. Thus, judicial interpretations of coverage provisions of commercial insurance contracts should guide, if not control, interpretation of Program provisions." [Id. at 524-25 (quoting Heaton, supra, 264 N.J. Super. at 152).]

However, the SHBP is not a commercial insurance company and, therefore, contracts by each should not be construed exactly the same. Heaton, supra, 264 N.J. Super. at 150-51. "Program language following the statute should not automatically be construed against the profferer as a contract of adhesion. Instead, the limitation should be interpreted and applied in accordance with legislative intent and in furtherance of statutory goals." Id. at 151.

The Plan was one of several health benefit programs offered by the SHBP in 2006-07. The Plan was administered by Horizon at all relevant times and was a self-funded "indemnity plan that provide[d] reimbursement of expenses for treatment of illness and injury." The terms of the Plan are set forth in the SHBP Handbook.

The Plan provides that it will only pay for eligible services or supplies, which

[(i)] Are medically needed at the appropriate level of care. . . for the medical condition (When there is a question as to medical need, the decision on whether the treatment is eligible for coverage will be made by [Horizon]);

[(ii)] Are listed in the Eligible Services and Supplies sections of this handbook;

[(iii)] Are ordered by a doctor (as defined by the plan) for treatment or illness or injury;

[(iv)] Were provided while you or your eligible family members were covered by the plan; [and]

[(v)] Are not specifically excluded (listed in the Charges Not Covered by the Plan section beginning on page 48).

The Charges Not Covered by the Plan section specifically excludes from coverage "[e]xperimental or investigational services or supplies and charges in ...

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