PIMA Health Sys. v. Ariz. Health Care Cost Containment Sys. Admin.

Full title: PIMA HEALTH SYSTEMS, Plaintiff/Appellee, v. ARIZONA HEALTH CARE COST…

Court: COURT OF APPEALS STATE OF ARIZONA DIVISION ONE DEPARTMENT C

Date published: Jun 11, 2013

1 CA-CV 12-0410 (Ariz. Ct. App. Jun. 11, 2013)

Opinion

1 CA-CV 12-0410

06-11-2013

PIMA HEALTH SYSTEMS, Plaintiff/Appellee, v. ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION, Defendant/Appellant.

Quarles & Brady LLP By Melody A. Emmert Attorneys for Plaintiff/Appellee Ryan Rapp & Underwood, P.L.C. By Paul E. Steen Attorneys for Defendant/Appellant

SAMUEL A. THUMMA

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(Not for Publication -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. LC2010-000946-001

The Honorable Crane McClennen, Judge

AFFIRMED

Quarles & Brady LLP

By Melody A. Emmert
Attorneys for Plaintiff/Appellee
Phoenix Ryan Rapp & Underwood, P.L.C.

By Paul E. Steen
Attorneys for Defendant/Appellant
Scottsdale THUMMA, Judge ¶1 The Arizona Health Care Cost Containment System (AHCCCS) appeals from the superior court's judgment reversing AHCCCS' denial of Pima Health Systems' (Pima) reinsurance request. Because the court properly construed now-repealed administrative rules regarding reinsurance for costs of treating a rare complication arising out of a rare medical condition, the judgment is affirmed.

BACKGROUND

¶2 K.C. was born in 1995 with a rare heart condition that required numerous childhood surgeries. After one such surgery, K.C. developed a rare complication called plastic bronchitis, characterized by large "casts" in the tracheobronchial tree causing shortness of breath. Without proper treatment, plastic bronchitis is fatal. ¶3 After various treatments failed, K.C. was prescribed Alteplase in aerosolized form as a high-dose inhalant to shrink the casts and facilitate their removal during bronchoscopies. Such use of Alteplase was described as the only available treatment left for K.C., and proved extremely effective. Such use of Alteplase, however, has not been approved by the United States Food and Drug Administration.¹ Private insurance paid for K.C.'s Alteplase inhalant treatments until the policy limit was reached, and Pima began paying for the treatments in 2008. ¶4 Pima requested reinsurance reimbursement from AHCCCS. In June 2010, AHCCCS denied the claim, finding that Alteplase as an inhalant to treat plastic bronchitis was an "experimental service" under Arizona Administrative Code (A.A.C.) R9-22-101(B) (2009) (the Rule). See also A.A.C. R9-22-202(B)(10)(a) (2009) (experimental services not reimbursable).² Pima timely appealed that denial and requested an administrative hearing. ¶5 At a hearing before an Administrative Law Judge (ALJ), where the Arizona Rules of Evidence did not apply, all relevant testimony (including hearsay) was admitted. Pima offered two types of evidence: (1) peer-reviewed articles in medical journals published in the United States describing cases where Alteplase was successfully used as an inhalant to treat plastic bronchitis (the Journal Articles) and (2) testimony and other evidence that the Alteplase inhalant treatment was safe and effective in treating K.C.'s plastic bronchitis. ¶6 Pima provided evidence that Dr. Wayne Morgan, a specialist in pediatric pulmonology and "head of the pediatric pulmonary section at the University of Arizona," first prescribed K.C.'s Alteplase inhalant treatments. Dr. Cori Daines, board-certified in pediatrics and pediatric pulmonology, a "pediatric pulmonary physician at the University of Arizona" and "the director of the pediatric pulmonary bronchoscopy program," testified she continued K.C.'s Alteplase inhalant treatments. Dr. Daines had treated K.C. and two other patients with plastic bronchitis. Dr. Daines testified that, while conducting a bronchoscopy on K.C., she administered Alteplase directly to the casts and saw them shrink in size in response. Dr. Daines further testified that K.C.'s Alteplase inhalant treatments were safe and effective and that K.C. had no adverse reactions. Pima's Chief Medical Officer (CMO) Dr. Fred Miller and board-certified pediatrician Dr. Thomas Ball also testified that K.C.'s Alteplase inhalant treatments were safe and effective. ¶7 AHCCCS did not offer any evidence disputing the evidence Pima offered that K.C.'s doctors found the Alteplase inhalant treatment was safe and effective in treating K.C.'s plastic bronchitis. Nor did AHCCCS introduce any journal articles that concluded use of the Alteplase inhalant treatment was unsafe or ineffective. Instead, AHCCCS' CMO Dr. Marc Leib testified that the Journal Articles did not convince him that the Alteplase treatment was safe and effective because they reported individual case studies, not randomized double-blind peer-reviewed studies. Dr. Leib admitted, however, that to his knowledge there were only two patients in Arizona with K.C.'s condition at the time of the hearing. ¶8 Relying on the testimony of the doctors involved in K.C.'s treatment, the ALJ found Alteplase inhalant treatments are rarely used but that K.C.'s Alteplase inhalant treatments were safe and effective and therefore covered by reinsurance. Accordingly, the ALJ recommended sustaining Pima's appeal. ¶9 Notwithstanding the ALJ's recommendation, AHCCCS denied Pima's appeal. AHCCCS first adopted the ALJ's findings of fact in their entirety. Rejecting the ALJ's relevant conclusions of law, and relying on Dr. Leib's testimony, AHCCCS found that the Journal Articles did not support the safety or effectiveness of K.C.'s Alteplase inhalant treatments. The mere presence of those Journal Articles, AHCCCS found, meant that

the only relevant inquiry is whether the weight of the evidence in the [Journal Articles] supports the safety and effectiveness of the [A]lteplase. Whether the [A]lteplase is safe and effective in the opinion of experts is a relevant inquiry only if there is an absence of such peer reviewed articles. Accordingly, the majority of the [ALJ's] Decision, including her rationale for finding that the [A]lteplase is not experimental, is contrary to law and completely irrelevant.

On that basis, AHCCCS denied Pima's appeal. Pima filed a timely complaint for judicial review in superior court pursuant to Arizona Revised Statutes (A.R.S.) § 12-905(A).³ ¶10 After reviewing the record, the superior court found the evidence supported the ALJ's recommended decision (based on the testimony of the treating physicians) and concluded AHCCCS misconstrued the Rule by relying on the Journal Articles to the exclusion of such testimony. Accordingly, the court reversed AHCCCS' decision and remanded the matter for AHCCCS to pay Pima's reinsurance claim. AHCCCS timely appealed from that decision, and this court has jurisdiction pursuant to A.R.S. § 12-913.

1 Alteplase is approved for intravenous use in small doses, and the drug is typically used to treat heart attack or stroke patients.

2 This decision construes the Rule in place when AHCCCS denied Pima's reinsurance claim. Although the Rule was amended effective October 1, 2010 in a way that appears to obviate the dispute in this case, see A.A.C. R9-22-203 (2010), that amendment does not apply here.

3 Absent material revisions after the relevant dates, statutes cited refer to the current version unless otherwise indicated.

DISCUSSION

¶11 When reviewing an administrative decision, this court's role is to determine whether the administrative agency "acted arbitrarily, capriciously, or in abuse of its discretion." Sanders v. Novick, 151 Ariz. 606, 608, 729 P.2d 960, 962 (App. 1986). This court determines whether substantial evidence in the record supports the agency's decision and whether the agency erred as a matter of law. See Sundown Imps., Inc. v. Ariz. Dep't of Transp. , 115 Ariz. 428, 431, 565 P.2d 1289, 1292 (App. 1977); see also Arpaio v. Figueroa, 229 Ariz. 444, 447, ¶ 7, 276 P.3d 513, 516 (App. 2012) (legal error constitutes an abuse of discretion). This court reviews the superior court's decision de novo. See Carondelet Health Servs. v. AHCCCS, 182 Ariz. 502, 504, 897 P.2d 1388, 1390 (App. 1995). ¶12 It is undisputed that AHCCCS is not required to pay for experimental services. Accordingly, the issue is whether AHCCCS' conclusion that K.C.'s Alteplase treatments were experimental services is consistent with applicable law. The analysis starts with the text of the Rule:

"Experimental services" means services that are associated with treatment or diagnostic evaluation and that are not generally and widely accepted as a standard of care in the practice of medicine in the United States unless:

[1] The weight of the evidence in peer-reviewed articles in medical journals published in the United States supports the safety and effectiveness of the service; or
[2] In the absence of peer-reviewed articles, for services that are rarely used, novel, or relatively unknown in the general professional medical community, the weight of opinions from specialists who provide the service attests to the safety and effectiveness of the service.

A.A.C. R9-22-101(B) (emphasis added). The parties agree that K.C.'s Alteplase treatments are "not generally and widely accepted as a standard of care" and, therefore, are experimental unless one of the two exceptions in the Rule applies. ¶13 AHCCCS contends K.C.'s Alteplase treatments were experimental because Pima did not satisfy the first exception in the Rule (the Medical Journals Exception). Dr. Leib determined the Journal Articles merely describe "case studies," which he testified are the least reliable and probative types of articles to determine safety and effectiveness. AHCCCS further argues that Pima's offering of the Journal Articles shows there was no "absence of peer-reviewed articles," meaning the second exception in the Rule (the Specialist Provider Exception) is irrelevant and cannot apply. Accordingly, AHCCCS argues that under the Rule, it could consider only the Medical Journals Exception and that the Journal Articles were insufficient to show the safety and efficacy of K.C.'s Alteplase treatments. Assuming, without deciding, that AHCCCS correctly found the Journal Articles do not support a finding of safety and effectiveness under the Medical Journals Exception, the question then becomes the proper construction of the Specialist Provider Exception to the Rule. ¶14 The Journal Articles do not indicate that K.C.'s Alteplase treatments were unsafe or ineffective. Accordingly, this is not a case where the weight of peer-reviewed journal articles establishes that the medical service is unsafe or ineffective, yet the patient's specialist providers opine that the treatment is safe and effective. ¶15 AHCCCS' argument that the very existence of the Journal Articles means that the Specialist Provider Exception is irrelevant focuses on the "absence of peer-reviewed articles" phrase in the Rule. Contrary to AHCCCS' argument, however, the phrase "the absence of peer-reviewed articles" logically must refer to a situation in which either (1) no peer-review articles address the safety and effectiveness of the treatment or (2) peer-reviewed articles that do address the treatment do not, to AHCCCS' satisfaction, establish the safety and effectiveness of the treatment. In both such cases, the only reasonable reading of the Rule's use of the word "or" between the two exceptions requires AHCCCS to also consider the Specialist Provider Exception when a claimant offers evidence relating to that exception. AHCCCS' argument, which impermissibly attempts to replace the Rule's use of "or" with "and," seeks relief that the court simply cannot provide. See Marlar v. State, 136 Ariz. 404, 411, 666 P.2d 504, 511 (App. 1983) (directing statute or rule "is to be given such an effect that no clause, sentence or word is rendered superfluous, void, contradictory, or insignificant"); see also Potter v. Vanderpool, 225 Ariz. 495, 500, ¶ 13, 240 P.3d 1257, 1262 (App. 2010) (noting "appellate courts are 'not free to rewrite' rules") (citation omitted). A hypothetical proves the point. ¶16 Take, for example, a situation where two relevant, reliable and probative peer-reviewed articles were split on safety and effectiveness of a treatment for an uncommon ailment but that dozens of specialists who have provided the service for years testify to the safety and effectiveness of the treatment. Applying AHCCCS' argument, AHCCCS would find "completely irrelevant" the unanimous opinions of practicing specialists simply because there were two conflicting peer-reviewed articles, making (in AHCCCS' view) the Specialist Provider Exception irrelevant. Along with being inconsistent with the text of the Rule, such an approach would be inconsistent with the obligation to read the Rule "in a manner that yields a fair and sensible meaning." McKesson Corp. v. AHCCCS, 230 Ariz. 440, 442, ¶ 4, 286 P.3d 784, 786 (App. 2012). Thus, AHCCCS erred as a matter of law in interpreting the Rule to preclude Pima's alternative showing under the Specialist Provider Exception and in refusing to consider Pima's argument under that exception.⁴ ¶17 AHCCCS' decision refused to address Pima's evidence supporting the application of the Specialist Provider Exception as summarized above. At the administrative hearing, the ALJ expressly allowed AHCCCS "to offer evidence and testimony which is relevant to the issues." Had AHCCCS presented sufficient evidence to dispute Pima's evidence on this point, remand for further consideration would be appropriate. However, AHCCCS did not present any such evidence, even though AHCCCS knew that Pima was relying on the Specialist Provider Exception. Moreover, the undisputed evidence Pima presented -- including opinions of four doctors -- shows that K.C.'s Alteplase treatments are "safe and effective." On this record, the superior court properly reversed AHCCCS' denial and remanded for AHCCCS to pay Pima all reinsurance monies due.

4 At oral argument, AHCCCS argued that Pima -- apparently as an election of remedies issue -- was required to decide in advance which exception it wished to press, but could not argue in the alternative that both could apply. AHCCCS has provided no authority for this argument, which would appear to impose substantial advance notice requirements on individuals or entities making claims under the Rule. Regardless, by failing to make that argument previously, AHCCCS has waived it. See Paloma Inv. Ltd. P'ship v. Jenkins, 194 Ariz. 133, 137, ¶ 17, 978 P.2d 110, 114 (App. 1998) ("New arguments may not be raised for the first time on appeal.").
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CONCLUSION

¶18 The superior court's judgment reversing AHCCCS' decision and remanding for payment of reinsurance monies due is affirmed. Because it did not prevail on appeal, AHCCCS' request for attorneys' fees on appeal is denied. Pima's request for attorneys' fees incurred on appeal pursuant to A.R.S. § 12-348.01 is granted subject to Pima's compliance with ARCAP 21. Pima's costs on appeal are granted subject to Pima's compliance with ARCAP 21.

______________________

SAMUEL A. THUMMA, Presiding Judge
CONCURRING: ______________________
MICHAEL J. BROWN, Judge
______________________
DIANE M. JOHNSEN, Judge