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In re Yucht

Superior Court of New Jersey, Appellate Division

September 3, 2013

IN THE MATTER OF PHILIP YUCHT

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 20, 2012

On appeal from the School Employees' Health Benefits Commission, Division of Pensions and Beneits.

Steven P. Weissman argued the cause for appellant Philip Yucht (Weissman & Mintz, LLC, attorneys; Mr. Weissman and Meredith Richardson, on the briefs).

Diane J. Weeden, Deputy Attorney General, argued the cause for respondent Division of Pension and Benefits (Jeffrey S. Chiesa, Attorney General, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel; Ms. Weeden, on the brief).

Before Judges Simonelli and Koblitz.

PER CURIAM

Appellant Philip Yucht (Yucht) was a participant in the School Employees' Health Benefits Program (SEHBP) under the N.J. Direct 10 plan. He appeals from the July 20, 2011 final administrative determination of respondent Division of Pensions and Benefits (Division), which denied his appeal of the decision of the School Employees' Health Benefits Commission (Commission) to reduce his reimbursement for out-of-network mental health services provided by a licensed clinical social worker (LCSW). We reverse.

Health care providers bill patients for services under codes established by the Current Procedural Terminology (CPT codes).[1] Each service has its own CPT code[2] and each CPT code has a usual, customary and reasonable (UCR) rate. CPT code 90806, at issue here, is the CPT code for an individual 45-50 minute psychotherapy service.

N.J.S.A. 52:14-17.46.7 provides that the N.J. Direct 10 plan will reimburse a participant "80% of reasonable and customary charges" for out-of-network services. The statute defines "reasonable and customary charges" as "charges based upon the 90th percentile of the [UCR] fee schedule determined by the Health Insurance Association of America or a similar nationally recognized database of prevailing health care charges." N.J.S.A. 52:14-17.46.7. The Health Insurance Association of America is now known as the Prevailing Healthcare Charges System (PHCS). Thus, the statute requires that the 80% reimbursement for out-of-network services be based upon the PHCS UCR fee schedule.

The PHCS UCR fee schedule established UCR rates for CPT codes without regard to the provider's professional level or licensure. Prior to January 1, 2009, the N.J. Direct 10 plan reimbursed a participant 80% of the PHCS UCR rate for a CPT code 90806 out-of-network service without regard to the provider's professional level or licensure.

On April 23 and June 18, 2010, a LCSW provided out-of-network individual psychotherapy services to Yucht under CPT code 90806. At the time, the PHCS UCR rate for CPT code 90806 was $200 per session in the geographical area where the LCSW's office was located.

Horizon Blue Cross Blue Shield of New Jersey (Horizon) is the third-party administrator for the SEHBP N.J. Direct plans. Magellan Health Services (Magellan) is the company Horizon contracts to manage N.J. Direct 10 claims for behavioral health services. Neither company is a "nationally recognized database of prevailing health care charges."

Sometime prior to May 2009, Magellan evaluated the PHCS UCR fee schedule for behavioral health services and determined it did not accurately or adequately support behavioral health UCR rates because it did not consider the rendering provider's professional level. Magellan saw that the fee schedule had the same UCR rate regardless of whether the provider was a psychiatrist (M.D.), psychologist (Ph.D.), LCSW, licensed marriage family therapist (LMFT), licensed professional counselor (LPC) or clinical nurse specialist (CNS), even though the typical charges of these various professional levels varied. Magellan decided there should be an adjustment of the PHCS fee schedule for out-of-network behavioral health services based on the provider's licensure.

To determine the adjustment, Magellan analyzed its claims data for a two-year period[3] and determined that an M.D. charged an average of $139 per outpatient service while a Ph.D. charged $121, an LCSW, LMFT and LPC charged $99 and a CNS charged $98. Magellan concluded that a Ph.D. charged 87% of what an M.D. charged and an LCSW, LMFT, LPC and CNS charged 71%.

As a secondary approach, Magellan analyzed twelve of its standard fee schedules for in-network providers for the same two-year period. Magellan determined that a Ph.D. charged 78% of the median amount an M.D. charged and an LCSW, LMFT, LPC and CNS charged 65%. As a result, Magellan concluded that the UCR rate for out-of-network behavioral health services should be based on the provider's licensure. Magellan reasoned that this would "result in a more equitable distribution of benefit dollars based on the level of the rendering provider" and encourage out-of-network providers "to join the network." Magellan recommended that the percentages to be applied to the applicable PHCS UCR rate for all out-of-network behavioral services would continue at 100% of the UCR rate for an M.D., but would be reduced to 85% for a Ph.D. (a 15% reduction), 70% for a CNS (a 30% reduction) and 65% for an LCSW, LMFT and LPC (a 35% reduction).

Horizon forwarded Magellan's analysis to the Commission. The Commission accepted Magellan's recommendations and, effective May 4, 2009, changed the reimbursement percentages for out-of-network behavioral health services as of January 1, 2009, based on the provider's licensure. As a result of the change, the percentage for a CPT code 90806 service provided by an out-of-network LCSW was reduced to 65% of the PHCS UCR rate and the N.J. Direct 10 participant was reimbursed 80% of that amount. For Yucht, this meant that the percentage for the LCSW's services was reduced to 65% of the $200 PHCS UCR rate, or $130, and Yucht was reimbursed 80% of $130, or $104.

Yucht followed the appropriate appeal procedures to contest the reduced reimbursement. In a July 20, 2011 final administrative determination, the Division's Acting Director acknowledged that N.J.S.A. 52:14-17.46.7 governed the dispute. However, relying on N.J.S.A. 52:14-17.46.5d, [4] the Acting Director advised that the Commission denied Yucht's appeal for the following reasons:

The Commission determined, based on the analysis provided by Horizon, that application of the PHCS fee schedule for certain CPT codes (including CPT code 90806) without adjustment for the licensure level of the provider would be inequitable in that certain providers that have met extensive education and licensing requirements would be reimbursed at levels below the average amount billed by such providers, while other providers who have not met such requirements would be reimbursed at a level greater than the average amount billed by such providers. A provider's licensure level evidences the provider's level of education and skill as established by the respective licensing authorities, which are reflected in the services provided to the patient. The PHCS fee schedule combined the charges of physicians [who] have charges higher than other professionals based on their medical skill, training and expertise. Thus, by using this data, the rate for LMTFs, LCSWs and LPCs is artificially inflated to an amount that is higher than is reasonable and customary for these professionals. Therefore, the Commission approved a prorated reimbursement rate for psychotherapy services provided by [LCSWs].
[(Emphasis added.)]

This appeal followed.

On appeal, Yucht contends that the Commission's decision is arbitrary, capricious and unreasonable as it violates the clear mandates of N.J.S.A. 52:14-17.46.7 that a SEHBP N.J. Direct 10 participant be reimbursed 80% of the reasonable and customary charges for out-of-network services based upon the 90th percentile of the PHCS fee schedule "or a similar nationally recognized database of prevailing health care charges." He also contends that the Commission cannot apply N.J.S.A. 52:14-17.46.5d to make N.J. Direct 10 plan changes that violate N.J.S.A. 52:14-17.46.7.

The Division counters that N.J.S.A. 52:14-17.46.7 does not require that the reasonable and customary charge for out-of-network behavioral health services "be" the 90th percentile of the PHCS UCR fee; rather, the statute only requires that the reasonable and customary charge be "based upon" the PHCS UCR fee. The Division also argues the N.J.S.A. 52:14-17.46.5d permitted the change in reimbursement rates to avoid an inequity.

Yucht responds that the Division's interpretation of N.J.S.A. 52:14-17.46.7 lacks legal support, the Division's interpretation of N.J.S.A. 52:14-17.46.5d renders N.J.S.A. 52:14-17.46.7 meaningless and invalid, and even if N.J.S.A. 52:14-17.46.5d applied, the Division failed to identify any inequity.

Our role in reviewing an agency's decision is limited. In re Stallworth, 208 N.J. 182, 194 (2011). "'In order to reverse an agency's judgment, [we] must find the agency's decision to be arbitrary, capricious, or unreasonable, or [ ] not supported by substantial credible evidence in the record as a whole.'" Ibid. (second alteration in original) (quoting Henry v. Rahway State Prison, 81 N.J. 571, 579-80 (1980)).

In determining whether agency action is arbitrary, capricious, or unreasonable, [we] must examine:
(1) whether the agency's action violates express or implied legislative policies, that is, did the agency follow the law; (2) whether the record contains substantial evidence to support the findings on which the agency based its action; and (3) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.
[Ibid. (quoting In re Carter, 191 N.J. 474, 482-83 (2007)).]

We ordinarily defer to an administrative agency's interpretation of statutes and regulations within its implementing and enforcing responsibility. E.S. v. Div. of Med. Assist. & Health Servs., 412 N.J.Super. 340, 355 (App. Div. 2010). "Nevertheless, 'we are not bound by the agency's legal opinions.' Statutory and regulatory construction is a purely legal issue subject to de novo review." A.B. v. Div. of Med. Assist. & Health Servs., 407 N.J.Super. 330, 340 (App. Div.) (quoting Levine v. State Dep't of Transp., 338 N.J.Super. 28, 32 (App. Div. 2001)), certif. denied, 200 N.J. 210 (2009). We will set aside an agency's interpretation that violates legislative policies expressed or implied in the applicable statute, Campbell v. Dep't of Civil Serv., 39 N.J. 556, 562 (1963), or extends a statute to give it greater effect than its language permits. Oberhand v. Dir., Div. Of Taxation, 193 N.J. 558, 568 (2008).

Our Supreme Court has established the standard for statutory interpretation:

The paramount goal of all statutory interpretation is to carry out the Legislature's intent. We begin by giving the words of the statute their ordinary meaning and significance. Words, phrases, and clauses cannot be viewed in isolation; all the parts of a statute must be read to give meaning to the whole of the statute. In this way, we must construe the statute sensibly and consistent with the objectives that the Legislature sought to achieve. If the statute's plain language reveals the Legislature's intent, our interpretative mission should come to an end. We resort to extrinsic evidence, such as legislative history, only if there is ambiguity in the statutory language that leads to more than one plausible interpretation, or if a plain reading of the statute leads to an absurd result or if the overall statutory scheme is at odds with the plain language.
[Nicholas v. Mynster, 213 N.J. 463, 480 (2013) (internal quotation marks and citations omitted).]

We conclude that the Commission's interpretation of N.J.S.A. 52:14-17.46.7 violated legislative policies expressed in the statute and improperly extended the statute to give it greater effect than its language permits. The statute's clear and unambiguous language reveals the Legislature's intent that a N.J. Direct 10 participant be reimbursed 80% of the "reasonable and customary charges" for out-of-network services and that the "reasonable and customary charges" be based on the 90th percentile of the PHCS UCR fee schedule "or a similar nationally recognized database of prevailing health care charges." The statute does not authorize the Commission to deviate in any way, including rejecting the PHCS UCR fee schedule, relying on non- nationally recognized database of prevailing health care charges to change that fee schedule, and imposing a percentage rate or condition the statute does not permit. Thus, the Commission's decision was arbitrary, capricious and unreasonable and must be reversed.

N.J.S.A. 52:14-17.46.5d does not compel a contrary result. The statute only authorizes the Commission to make certain plan modifications over which it has discretion to "avoid inequity, unnecessary utilization, duplication of services or benefits otherwise available[.]" The statute does not authorize the Commission to change or extend N.J.S.A. 52:14-17.46.7 or disregard its clear mandates. To permit otherwise would render N.J.S.A. 52:14-17.46.7 meaningless.

Even assuming that N.J.S.A. 52:14-17.46.5d authorized the Commission to reduce a statutory benefit to avoid inequity, the Commission did not identify any inequity resulting from the PHCS UCR rates or the reimbursement rate required by N.J.S.A. 52:14-17.46.7. In addition, neither the Commission nor the Division explained how the Commission's decision avoided an inequity.

Reversed.


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