M.F. ex rel. R.L. v. Magellan Healthcare Inc.

M.F., on behalf of R.L. and P.L.,and S.D. and D.D., Plaintiffs, v. MAGELLAN HEALTHCARE INC.,JANEL FORDE, and TIM MCDEVITT, Defendants.

No. 20 CV 3928

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

March 24, 2021

Judge Manish S. Shah

MEMORANDUM OPINION AND ORDER

As State of Illinois employees, P.L. and S.D. received healthcare coverage under a state-sponsored, self-funded plan. Their respective children, R.L. and D.D., suffered serious mental health conditions and required treatment at residential facilities. Magellan Healthcare Inc., a private company that administered the mental health benefits under the Illinois Plan, denied coverage for most of R.L.'s and D.D.'s respective treatments. The plaintiffs filed this lawsuit against Magellan and two state employees from the Illinois Department of Central Management Services, alleging that by denying coverage, the defendants violated their constitutional rights to due process under Section 1983 and their rights under federal and state mental health parity laws. The defendants filed motions to dismiss the plaintiffs' second amended complaint. The parties fully briefed Magellan's motion, but the plaintiffs responded to the state defendants' motion by seeking leave to file a third amended complaint. Because the plaintiffs fail to state a claim for due process violations under the U.S. Constitution and do not have a private right of action under the mental health parity laws, the defendants' motions to dismiss are granted. Since the proposed complaint does not change this analysis, the plaintiffs' motion for leave to file a third amended complaint is denied as futile.

I. Legal Standard

To survive a motion to dismiss for failure to state a claim, a complaint must contain a short and plain statement that plausibly suggests the violation of a legal right. Fed. R. Civ. P. 8(a)(2), 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556-58 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009). I accept the plaintiffs' factual allegations as true and draw all reasonable inferences in their favor. Iqbal at 678-79. I do not accept allegations that are unsupported, conclusory, or legal conclusions. Id. At this stage of the case, I may only consider allegations in the complaint, documents attached to the complaint, documents that are both referred to in the complaint and central to its claims, and information that is subject to proper judicial notice. Reed v. Palmer, 906 F.3d 540, 548 (7th Cir. 2018).

II. Facts

The State of Illinois sponsors a self-funded healthcare plan called the Illinois Plan that provides healthcare coverage to state employees, retirees, and their dependents. [25] ¶ 9.¹ The state hired Magellan Healthcare Inc., a private corporation, to administer the mental health benefits offered under the plan. [25] ¶ 8.P.L. and S.D. worked for the State of Illinois, so their respective children, R.L., a minor, and D.D., now an adult, received healthcare coverage under the plan. [25] ¶¶ 4-6. P.L. assigned power of attorney to her wife, M.F., who filed this lawsuit on behalf of P.L. and their minor child, R.L. [25] ¶ 4.²

R.L. was diagnosed with disruptive mood dysregulation disorder, autism spectrum disorder, attention deficit hyperactivity disorder, and reading and learning disorders. [25] ¶ 26. These mental and behavioral issues led R.L. to threaten a sibling with bodily harm and destroy personal property at home. [25] ¶ 26. Some of her outbursts required police intervention, and R.L. directed violent behavior towards law enforcement officers and others. [25] ¶ 26. Because of her medical issues, she received inpatient and outpatient treatment. [25] ¶ 26. But this treatment failed to improve R.L.'s mental condition. [25] ¶ 27. She exhibited suicidal ideation, possiblesubstance abuse, and dangerous sexual behavior, "with a complete lack of insight and coping skills." [25] ¶¶ 27, 42, n.1. R.L. was then placed in an intensive out-of-state therapy program. [25] ¶ 27. After the program ended, she went to a therapeutic boarding school but was discharged due to violent outbursts, including attacking staff members and threatening other students. [25] ¶ 27. R.L. was then admitted to a licensed and accredited out-of-state residential behavioral health treatment center with an academic component. [25] ¶¶ 27-28. Magellan deemed the treatment medically necessary and approved coverage. [25] ¶ 29.

After about a month, Magellan terminated R.L.'s benefits. [25] ¶ 29. She had yet to complete treatment and was not capable of functioning at a less intensive level of treatment without posing a significant risk of self-harm and harm to others. [25] ¶ 29. However, Magellan determined that R.L.'s treatment was no longer medically necessary based on the MCG Guidelines, a treatment and care guideline published by a third-party medical consulting company. [25] ¶¶ 29, 63. Her family tried to appeal the decision but Magellan was uncooperative. [25] ¶ 31. M.F., P.L., and R.L. also allege that the Illinois Department of Central Management Services (CMS) initially deferred R.L.'s appeal to Magellan. [25] ¶ 31. More than seven months after the denial, R.L.'s family was able to submit an appeal to Magellan. [25] ¶ 32. About two months later, she received a decision from a third-party, the Medical Review Institute of America, upholding the denial of coverage based on the MCG Guidelines. [25] ¶ 32. D.D.'s angry and defiant behavior started in his preteens. [25] ¶ 33. He started abusing alcohol and using marijuana and attended school drunk or high. [25] ¶ 33. He expressed suicidal threats and tendencies. [25] ¶ 33. His condition worsened, and he began engaging in other risky and violent behavior, including experimenting with hallucinogens. [25] ¶ 33. While D.D. initially saw a therapist, he became unreceptive to therapy. [25] ¶¶ 33-34. D.D. went to the emergency room after a suicidal threat, and received outpatient treatment and prescriptions for anti-depressants. [25] ¶ 34. But his behavior did not change, and he refused to take medication. [25] ¶ 34. D.D. continued to use drugs, make suicidal threats, and occasionally perform violent and destructive acts. [25] ¶ 34. Because D.D. had multiple mental disorder diagnoses, including substance abuse disorders, but refused therapy, medication, and drug rehabilitation services, his pediatrician advised that it was medical necessary for D.D. to go to an outdoor treatment facility, followed by a long-term placement. [25] ¶¶ 35, 42. His psychologist agreed. [25] ¶ 35. D.D. went to an outdoor treatment program for about two and a half months, and was then placed in a residential treatment facility for about nine months, where he underwent treatment successfully. [25] ¶ 36.

Magellan denied coverage for the outdoor treatment program, claiming it never received his treatment records in order to determine whether the services were medically necessary. [25] ¶ 37. D.D. and S.D. allege that this explanation was a lie. [25] ¶ 37. Magellan reopened D.D.'s claim for the outdoor treatment program but never provided a decision on the medical necessity of the treatment, foreclosing hisability to appeal. [25] ¶¶ 38-39. Instead Magellan attempted to settle the claim for pennies on the dollar. [25] ¶ 39. Magellan authorized D.D.'s treatment at the residential facility for approximately two weeks but did not cover the rest of his stay, even though he had not completed treatment after two weeks. [25] ¶¶ 40-41. Magellan's denial was based on the MCG Guidelines. [25] ¶ 42. Magellan also claimed that the residential treatment facility failed to provide the necessary documentation to approve continued coverage, which D.D. and S.D. allege was another lie. [25] ¶ 43. D.D. and S.D. appealed the denial of coverage for the residential treatment facility and allege that Magellan forced them to appeal through Magellan's procedures, even though the Illinois Plan required CMS to adjudicate the appeal. [25] ¶ 44.

In the operative complaint, the plaintiffs allege that the Illinois Plan covered "medically necessary" behavioral healthcare, which was defined as behavioral services that a healthcare provider, who was exercising prudent judgment in accordance with generally accepted standards of medical practice, would provide. [25] ¶¶ 8, 49-50. "Medically necessary" services had to be clinically appropriate, cost-effective, not offered primarily for the convenience of the patient, physician, or other healthcare provider, and consistent with any applicable federal or state laws. [25] ¶¶ 8, 49-50. According to the plaintiffs, the MCG Guidelines, which Magellan used for child or adolescent behavioral care, conflicted with generally accepted standards of care. [25] ¶¶ 55, 62-64. Specifically, the plaintiffs allege that the MCG Guidelines applied standards for acute care when assessing sub-acute behavioral health situations and that the MCG Guidelines were more focused on cost savings thancovering appropriate treatment. [25] ¶ 64. The plaintiffs also allege that under the Illinois Plan, acute-care standards did not apply to individuals requiring sub-acute treatment for other medical or surgical issues. [25] ¶ 64. In other words, a more stringent medical criterion was used for sub-acute patients seeking behavioral healthcare treatment than for sub-acute patients seeking other types of treatment—like medical or surgical healthcare—even when that treatment involved analogous services such as residential rehabilitation treatment, hospice care, or skilled nursing care. [25] ¶ 64. The plaintiffs also allege that under the Illinois Plan, appeals of claim denials had to be submitted to CMS, and that Magellan notified R.L. of this process. [25] ¶¶ 31, 44. Finally, the operative complaint cites one state statute, which states that medical necessity determinations for substance use disorders must "be made in accordance with appropriate patient placement criteria established by...