                                 STATE OF MINNESOTA
                                 IN COURT OF APPEALS
                                       A16-0986

                                      James Linn, et al.,
                                         Appellants,

                                              vs.

                                        BCBSM, Inc.,
                                         Respondent.

                                  Filed January 30, 2017
                                  Reversed and remanded
                                       Jesson, Judge

                                Ramsey County District Court
                                  File No. 62-CV-15-4022

Brandon M. Schwartz, Michael D. Schwartz, Schwartz Law Firm, Oakdale, Minnesota
(for appellants)

Joel A. Mintzer, Doreen A. Mohs, BCBSM, Inc., Eagan, Minnesota (for respondent)

         Considered and decided by Schellhas, Presiding Judge; Ross, Judge; and Jesson,

Judge.

                                      SYLLABUS

         The determination of medical necessity in an external-review process conducted

under Minnesota Statutes section 62Q.73 (2016) is contractually binding on a health

insurer.

                                        OPINION

JESSON, Judge

         In this action alleging breach of a health-plan contract, appellants James and Gloria

Linn challenge the district court’s summary judgment concluding that no breach occurred
as a matter of law when respondent-insurer BCBSM, Inc., paid a claim following an

external-review determination that proton-beam radiation therapy was medically necessary

to treat James Linn’s bone cancer. They contend that the external-review determination of

medical necessity binds the insurer by statute and contract and that by failing to authorize

coverage earlier, the insurer breached the insured’s contractual right to timely care. We

conclude that because the external-review determination binds the insurer with respect to

medical necessity, the district court erred by interpreting the health-plan contract with

respect to that issue. We reverse and remand for further consideration of whether the

insurer’s failure to approve coverage when first requested constituted a breach of the

timeliness provision of the contract and caused compensable damages to the insured.

                                         FACTS

       In January 2014, James Linn and his wife, Gloria Linn, entered into an individual

health-plan contract with respondent BCBSM, Inc. (Blue Cross). The contract provides

that coverage is subject to its terms, including medical necessity as defined, and that Blue

Cross will not pay for services that are (a) not medically necessary or (b) related to care

that is investigative.1 It also excludes coverage for certain services, even if they may be

medically necessary. And it provides that health-plan members have a right “to receive

quality health care that is friendly and timely.” The contract allows for a formal appeals




1
  A treatment is considered investigative under the contract if (a) it has not yet received
required FDA marketing approval, (b) it is the subject of ongoing clinical trials, or
(c) medically reasonable conclusions have not been established concerning its safety,
effectiveness, or effect on health outcomes.

                                             2
process to Blue Cross. It also refers to a statutory external-review process available to an

insured under Minnesota Statutes section 62Q.73.

         In March 2014, after experiencing back pain, James Linn had a magnetic-resonance-

imaging scan, which revealed a tumor on his thoracic spine. He had back surgery in

St. Cloud, including the insertion of hardware. The pathology report of the tumor indicated

chondrosarcoma, a type of bone cancer that affects cartilage. Linn was then referred to the

Mayo Clinic, where a radiation oncologist recommended additional surgery, with

postoperative radiation treatment with protons or a combination of protons and photons.2

Linn had additional back surgery in May 2014 in St. Cloud to remove as much of the tumor

as possible, but radiation therapy was still recommended.

         Linn’s contract with Blue Cross provides that proton-beam radiation therapy “may

be considered medically necessary” in several listed clinical situations, including

               [p]ostoperative therapy . . . in patients who have undergone
               biopsy or partial resection of chordoma or low-grade (I or II)
               chondrosarcoma of the basisphenoid region (skull-base
               chordoma or chondrosarcoma) or cervical spine and have
               residual localized tumor without evidence of metastasis.

Under the contract, proton-beam radiation therapy is considered investigative in other

situations, including treating chondrosarcoma in the thoracic spine, the location of Linn’s

tumor.

         A radiation oncologist in St. Cloud referred Linn to CDH Proton Center for a

consultation. On September 24, 2014, Dr. William Hartsell, a radiation oncologist from


2
 Proton-beam radiation therapy involves using magnetic fields to direct protons, hydrogen
atoms whose electrons have been removed, to a tumor.

                                             3
Proton Center, provided a letter of medical necessity to Blue Cross, stating that it was

medically necessary for Linn to receive a portion of his postoperative radiation treatment

via proton-beam therapy to control the tumor and minimize the radiation dose to

surrounding normal organs. Dr. Hartsell noted an increased risk of recurrence based on

the extent of the tumor and the implanted hardware. On October 9, Blue Cross denied prior

authorization for the proton-beam radiation therapy on the ground that it was experimental

and/or investigational because the location of the tumor did not meet the contract’s criteria

for medical necessity.

       In early December 2014, on Linn’s behalf, Dr. Hartsell filed an internal appeal of

the denial of authorization for proton-beam radiation therapy. He stated that because the

required radiation dose was high, the use of conventional X-ray therapy for all of the

treatment would deliver a high dose of radiation therapy to normal lung and kidney tissues,

producing a high risk of long-term complications from treatment. The use of proton-beam

therapy, however, would limit the effects of radiation to the kidneys, lungs, and heart.

       On December 15, 2014, Linn was taken to the emergency room with severe back

and abdominal pain. The next day, his neurosurgeon also wrote to Blue Cross in support

of proton-beam therapy, stating that Linn’s tumor had wrapped around his spinal cord,

creating concern that another operation would be required to preserve leg function.

       On December 18 and 19, Linn contacted Blue Cross, requesting reversal of the

denial of benefits, stating that it was an emergency situation. A few days later, Linn

underwent an eight-hour surgery for the tumor, and the pathology report showed

chondrosarcoma. On December 29, in response to Linn’s appeal, Blue Cross issued a


                                             4
denial of benefits on the basis that proton-beam therapy was considered investigative for

the treatment of a chondrosarcoma in a region other than the skull base or cervical spine.

As part of the appeals process, a physician reviewer determined that there were no

extenuating circumstances that would make the use of protons medically necessary in

Linn’s case. On December 30, Dr. Hartsell wrote again to Blue Cross, stating that the

tumor could not be controlled using standard treatment alone and that if there were further

recurrences, which was almost a certainty, the risk increased for “devastating neurological

complications.”

       In February 2015, Linn requested external review of Blue Cross’s decision pursuant

to Minnesota Statutes section 62Q.73. The case was referred to the MAXIMUS Center for

Health Dispute Resolution.3 After review by a practicing physician who is board certified

in radiation oncology and also by a licensed attorney, MAXIMUS determined that the

denial of coverage would be overturned. On April 2, 2015, the external review concluded:

              The MAXIMUS physician consultant explained that [Linn] has
              undergone 3 surgeries and is at very high risk for recurrence.
              The MAXIMUS physician consultant also explained that
              [Linn] needs a high dose of radiation therapy for treatment of
              his chondrosarcoma. The MAXIMUS physician consultant
              indicated that treatment with intensity modulated radiation
              therapy alone would result in a very high dose of radiation to
              [Linn’s] lungs and kidneys, which would result in a high risk
              for serious long term complications. The MAXIMUS
              physician consultant also indicated that the use of proton-beam
              therapy for a portion of [Linn’s] treatment would allow for
              appropriate coverage of target volume and would limit the dose
              to his kidneys, lungs, and heart. Therefore, the MAXIMUS

3
  MAXIMUS is a company that contracts with the Minnesota Department of Commerce to
independently review appeals made by persons challenging adverse determinations on
coverage.

                                            5
               physician consultant concluded that the requested proton
               radiation therapy is not investigational and is medically
               necessary for treatment of [Linn’s] condition.

Blue Cross then agreed to pay for Linn’s proton-beam radiation therapy.

         In June 2015, the Linns sued in district court seeking damages from Blue Cross for

the delay in authorizing coverage. They alleged breach of contract, intentional infliction

of emotional distress, negligence, and deceptive trade practices. Blue Cross filed a rule 12

motion to dismiss, and the district court granted the motion to dismiss all claims except the

contract claim.

         Blue Cross then moved again to dismiss the action or, in the alternative, for

summary judgment. The Linns also moved for summary judgment. After a hearing, the

district court granted Blue Cross’s motion for summary judgment and denied the Linns’

motion for summary judgment. The district court concluded that, as a matter of law, Blue

Cross did not breach its contract with the Linns because the health-plan contract did not

cover proton-beam radiation therapy for chondrosarcomas of the thoracic spine as

medically necessary. It also ruled that Blue Cross did not improperly interfere with or

cause delay in the internal appeal process. And it concluded that, in any event, no breach

occurred because Blue Cross ultimately paid the claim. This appeal follows.

                                           ISSUE

         Did the district court err by interpreting medical necessity under the terms of a

health-plan contract after an external reviewer had made a binding determination on that

issue?




                                             6
                                        ANALYSIS

         Summary judgment is proper if, based on the entire record before the court, there

are no genuine issues of material fact and a party is entitled to judgment as a matter of law.

Minn. R. Civ. P. 56.03. “We review a district court’s grant of summary judgment de novo

to determine whether any genuine issue of material fact exists and whether the district court

erred in applying the law.” Larson v. Nw. Mut. Life Ins. Co., 855 N.W.2d 293, 299 (Minn.

2014).

         The Linns argue that the district court erred by granting summary judgment to Blue

Cross because the external-review determination of medical necessity was binding on

Blue Cross and because Blue Cross breached the timeliness provision of the contract by

failing to pay for proton-beam radiation therapy when it was originally requested. In the

alternative, they argue that, under the terms of the contract, proton-beam radiation therapy

was medically necessary to treat Linn’s tumor. Blue Cross argues that the therapy was

not medically necessary under the contract, that the results of the external-review process

are not binding on the contractual issue of medical necessity, and that it did not breach the

contract because it paid for the therapy when it was determined to be medically necessary

on external review.

         The primary issue before us is whether an external reviewer’s medical-necessity

determination not only requires a health-plan company to pay for the treatment requested,

but also binds the company on the contract term of medical necessity. Stated another way,

we must examine whether the reviewer’s medical-necessity determination is

superimposed on the contract definition of medical necessity, based on the legislature’s


                                              7
provision that it shall be binding on the health-plan company. See Minn. Stat. § 62Q.73,

subd. 8 (2016) (stating that the external-review decision is “binding” on the health-plan

company).

       To address this issue, we first examine the background of the external-review

process and its application in Minnesota statutory law. We then analyze the effect of the

external-review determination on the medical-necessity provision in the health-plan

contract. Finally, we address the implications of our conclusion for further proceedings

in this case to address the issues of timeliness and damages.

       Background of expert-review process and its application in Minnesota

       Since the creation of the Blue Cross system during the Great Depression, insured

individuals have been generally able to choose among any participating hospital and

physician group to meet their healthcare needs.4 See generally, Paul Starr, The Social

Transformation of American Medicine, at 237-43, 306-10 (1982). The backbone of this

insurance system was a “fee-for-service” design. Providers would prescribe a treatment,

deliver the care, and then submit the bill to the insurance company. See Aaron Seth

Kesselheim, What’s the Appeal? Trying to Control Managed Care Medical Necessity

Decisionmaking Through a System of External Appeals, 149 U. Pa. L. Rev. 873, 878-79

(2001). While insurers would examine the medical necessity of the treatment, this typically



4
  During the 1930s, most subscribers were individuals, but following gains in the labor
movement and wage controls imposed during World War II, group insurance became the
prevalent mechanism for private insurance. Starr, at 310-14; Laura D. Hermer, Private
Health Insurance in the United States: A Proposal for a More Functional System, 6 Hous.
J. Health L. & Pol’y 1, 10 (2005).

                                             8
occurred only after treatment completion. And deference to physician judgment resulted

in few payment denials. Id.

       The financial incentives of the fee-for-service system led to overutilization of

medical resources, which was a primary driver of increased medical costs. Id. at 879-80.

By the early 1980s, healthcare costs spiraled. In response to these rising costs, systems of

“managed care” rapidly came to replace pure fee-for-service medicine in the late 1980s.

Id. One of the attributes of managed care is the attempt to control costs through techniques

such as bonuses, incentives, “gatekeepers,” utilization review and preauthorization

requirements. Hermer, supra, at 24-25.

       By the mid-1990s, healthcare-cost increases had slowed dramatically. Id. at 15. But

insurance companies and HMOs that utilized managed-care techniques to control physician

decision-making faced a backlash from patients, providers, and legislators. Much of this

reaction focused on preauthorization requirements by insurance companies, which merged

what was once solely the decision of the treating physician with the decision of the health

insurer about whether to pay for the requested care. Nan D. Hunter, Managed Process,

Due Care: Structures of Accountability in Health Care, 6 Yale J. Health Pol’y, L. & Ethics

93, 93 (2006).

       In response to the growing reality of preauthorization, legislatures in at least 41

states and the District of Columbia enacted laws that establish external-review systems. Id.

Through external review, a patient may challenge a denial of coverage and, if successful,

will be entitled to an order directing the health plan to provide, or, in a retrospective case,

to pay for, the treatment that was initially denied. Id. at 136.


                                              9
       In 1999, Minnesota created its external-review process, which is governed by

Minnesota Statutes section 62Q.73. See 1999 Minn. Laws ch. 239, § 39, at 1897-99. That

statute provides that a patient who has received an adverse determination from a health

plan has the right to submit a written request for an external review. Minn. Stat. § 62Q.73,

subds. 1, 3. In that process, an independent organization considers information submitted

by both the patient and the health insurer. It then issues a decision, which is binding on the

health-plan company, but not binding on the patient. Id., subds. 4-8.

       Submission to this external-review process is required for Blue Cross based on its

licensure as a nonprofit health-service-plan corporation under Minnesota Statutes chapter

62C. Concurrently the statutory scheme governing licensed nonprofit health-service plans,

such as Blue Cross, provides the definition of medical necessity used on external review.

See Minn. Stat. § 62Q.53, subd. 2.5 Specifically, the medical-necessity determination

requires that expert review “must determine whether the adverse determination was

consistent with the definition of medically necessary care in section 62Q.53, subdivision

2.” Minn. Stat. § 62Q.73, subd. 7(c).

       This definition of medically necessary care applies to Blue Cross because of its

licensure as a nonprofit health-service plan corporation apart from the realm of external-

review decisions, and it also sets the standard used on external review. See Minn. Stat.



5
  The statutory definition of medically necessary care in section 62Q.53 applies on external
review following an adverse determination “by a health plan company, other than a health
plan company licensed under chapter 62D.” Minn. Stat. § 62Q.73, subd. 7(c). Blue Cross
is licensed under Minnesota Statutes chapter 62C, not chapter 62D. State by Humphrey v.
Philip Morris, 551 N.W.2d 490, 492 (Minn. 1996).

                                             10
§ 62Q.53.6    The statute defines “medically necessary care” as “health care services

appropriate, in terms of type, frequency, level, setting, and duration, to the enrollee’s

diagnosis or condition, and diagnostic testing and preventive services.” Id., at 2. It further

provides that “[m]edically necessary care must be consistent with generally accepted

practice parameters as determined by healthcare providers in the same or similar general

specialty as typically manages the condition, procedure, or treatment at issue.” Id. Such

care must either help or restore the insured’s health or prevent deterioration of the insured’s

condition. Id. Thus, by statute, when the external-review process was initiated, the

external-review entity was required to evaluate medical necessity under the standards of

section 62Q.53, subdivision 2, which already applied to Blue Cross due to its licensure as

a nonprofit health-service plan corporation. See id.; see also Minn. Stat. § 62C.01, subd. 3.

And that external-review decision on medical necessity is binding on the health plan, but

not binding on the enrollee. Minn. Stat. § 62Q.73, subd. 8.

       The external-review decision on medical necessity supersedes the definition of
       medical necessity in the parties’ health-plan contract.

       Blue Cross argues that the external-review decision is irrelevant to whether Blue

Cross’s initial denial of coverage complied with the definition of medical necessity in the

health-plan contract, which is at issue in this action. It contends that the external-review

decision is binding only as to payment, not as to the contract definition of medical


6
  Although the definition of “medically necessary care” in Minnesota Statutes section
62Q.53, subdivision 2, applies by its terms to health plans that cover mental-health
services, at oral argument Blue Cross did not dispute that, under its licensure, the health
plan sold to the Linns requires coverage of services that satisfy this definition of medical
necessity.

                                              11
necessity. We disagree. The plain language of the external-review statute does not limit

the binding nature of the external-review determination on the health-plan company to the

payment of claims that have been submitted for external review. See Minn. Stat. § 62Q.73.

Further, even if the term “binding” is ambiguous, legislative intent supports the

interpretation that it also encompasses the determination of medical necessity in the parties’

contract. Finally, as discussed below, this interpretation is consistent with the United States

Supreme Court decision in Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 387, 122

S. Ct. 2151, 2170-71 (2001).

       The interpretation of a statute presents a question of law, which appellate courts

review de novo. Wayzata Nissan, LLC v. Nissan N. Am., Inc., 875 N.W.2d 279, 284 (Minn.

2016). The object of statutory interpretation is to ascertain legislative intent. Minn. Stat.

§ 645.16 (2016). When the intent of the legislature is clear from a statute’s plain and

unambiguous language, we interpret the statute according to its plain meaning and do not

resort to other principles of statutory interpretation. Binkley v. Allina Health Sys., 877

N.W.2d 547, 550 (Minn. 2016). Plain meaning assumes the ordinary usage of words that

are not statutorily defined and draws from the full-act context of the provision. Occhino v.

Grover, 640 N.W.2d 357, 359 (Minn. App. 2002), review denied (Minn. May 28, 2002).

If the statute is ambiguous, meaning that it is susceptible to more than one interpretation,

we may look beyond statutory language to discern legislative intent. Staab v. Diocese of

St. Cloud, 813 N.W.2d 68, 73 (Minn. 2012). Legislative intent includes such matters as

the necessity and occasion for the law and the consequences of a particular interpretation.

Minn. Stat. § 645.16 (1), (6).


                                              12
       Minnesota Statutes section 62Q.73, subdivision 8, plainly provides that “[a]

decision rendered [on external review] shall be nonbinding on the enrollee and binding on

the health plan company.”7 In common usage, “binding” means “imposing or commanding

adherence to a commitment, an obligation, or a duty.” The American Heritage Dictionary

of the English Language 187-88 (3d ed. 1992); see also Black’s Law Dictionary 200 (10th

ed. 2014) (stating that “[to] bind” means “[t]o impose one or more legal duties”); see also

Barovic v. Pemberton, 114 P.3d 1230, 1233 (Wash. Ct. App. 2005) (defining binding as

“requiring submission, conformity, or obedience” (quotation omitted)). Therefore, under

the plain language of the statute, Blue Cross was required to abide by and to adhere to the

external-review decision determining that proton-beam radiation therapy was medically

necessary to treat Linn’s condition.

       Blue Cross’ argument that the external-review decision was binding only as to

payment of the claim submitted, not as to the contract definition of medical necessity, asks

this court to add caveats to the term “binding.” But binding means binding. One of the

basic canons of statutory interpretation provides that courts “do not add words or phrases

to an unambiguous statute.” County of Dakota v. Cameron, 839 N.W.2d 700, 709 (Minn.

2013). We will not do so here. The legislature had the ability to limit the term “binding”

only to the obligation to pay claims after the external-review decision, and if it had so



7
 The statute also provides that “[t]he health plan company may seek judicial review of the
decision on the grounds that the decision was arbitrary and capricious or involved an abuse
of discretion.” Minn. Stat. § 62Q.73, subd. 8. But Blue Cross has not challenged the
expert-review determination on that ground. See Melina v. Chaplin, 327 N.W.2d 19, 20
(Minn. 1982) (supporting proposition that issues not briefed are forfeited).

                                            13
decided, it would have included such a limitation. Cf. Annandale Advocate v. City of

Annandale, 435 N.W.2d 24, 30 (Minn. 1989) (stating that the “legislature knew how to

incorporate a specific reference to cities and other local government bodies in the Open

Meeting Law . . . [and] if the legislature had wanted to exempt city governments from the

[law], it would have so indicated”). In fact, here, the legislature did differentiate when

considering the binding nature of the external-review decision: it made that decision

binding only on the health plan, not on the enrollee. Further qualification of the binding

nature of the external-review decision on medical necessity is for the legislature to plainly

state, not for this court to extrapolate.

       The full-act context of the statutory provision reinforces that there are not implied

caveats to the binding nature of the external reviewer’s medical-necessity determination.

By its licensure as a nonprofit health-plan corporation, Blue Cross is already bound to cover

the medically necessary services as defined by section 62Q.53, subdivision 2. This broad

application of the medical-necessity definition to licensed nonprofit health plans like Blue

Cross, outside of the realm of external review, reinforces the plain language of the statute:

that the external reviewer’s medical-necessity decision is not simply a payment decision.8

       Even assuming that the word “binding” is ambiguous, legislative intent supports the

interpretation that the term “binding” also encompasses the determination of medical



8
  We note that Blue Cross is not precluded from providing a health-plan contract that
includes coverage incorporating a more expansive standard for medical necessity than that
indicated by Minnesota Statutes section 62Q.53, subdivision 2. In other words, that statute
designates a floor, not a ceiling, for the coverage of medically necessary care in a health-
plan contract. See id.

                                             14
necessity in the parties’ contract. Blue Cross is licensed as a nonprofit health-service-plan

corporation under Minnesota Statutes chapter 62C. See Minn. Stat. §§ 62C.01-23 (2016).

That chapter states as a purpose “to promote a wider, more economical and timely

availability of hospital, medical-surgical, dental, and other health services for the people

of Minnesota.” Minn. Stat. § 62C.01, subd. 2. It is consistent with this purpose to conclude

that a determination of medical necessity on external review binds a healthcare company,

not just on the issue of payment of a claim, but also on the issue of medical necessity under

the health-plan contract. Conversely, we note that public policy supports the insured’s

ability to seek legal redress following an adverse determination on external review. The

health-plan contract, as an insurance policy, is generally interpreted in favor of the insured.

Am. Family Ins. Co. v. Walser, 628 N.W.2d 605, 609 (Minn. 2001). And “[o]ne major

mitigating factor for all of the due-process deficiencies in external review systems is that,

as a general matter, patients can subsequently bring suit against the health plan for injuries

caused by the denial of treatment.” Hunter, supra, at 137.9


9
  Different states have different governing provisions on the effect of external review on
the insured’s ability to maintain a subsequent lawsuit if an insured does not prevail on
external review. Hunter, supra, at 137. In some states, the plaintiff must first pursue
external review before litigation; in others, the outcome of the external-review process
creates a rebuttable presumption in a later lawsuit. See generally id. Minnesota, along
with some other states, allows for further appeal of the external-review decision. Id. (citing
Minn. Stat. § 62Q.73, subd. 8; Alaska Stat. § 21.07.050(d)(8) (2004); Del. Code Ann.
tit. 18, § 332 (1999); Mich. Comp. Laws Ann. § 550.1915(1) (2002); N.M. Stat. Ann.
§ 59A-4-20 (2002); 40 Pa. Cons. Stat. Ann. § 991.2162(c)(5) (2005); R.I. Gen. Laws
§ 23.17.12-10(b)(6) (2001)). In states where the external-review decision is statutorily
binding on both the health plan and the insured, courts have interpreted the term “binding”
in different ways. See Alexandra H. v. Oxford Health Ins. Inc., 833 F.3d 1299, 1308-1314-
15 (11th Cir. 2016) (concluding that, despite a New York statute stating that external
review was “binding on the plan and the insured,” additional statutory language stating that

                                              15
       Our interpretation is also supported by the United States Supreme Court’s decision

in Moran, 536 U.S. 355, 122 S. Ct. 2151. Moran involved the issue of whether the

Employment Retirement Income Security Act of 1974 (ERISA) preempted an Illinois

health-maintenance organization act, which, like the relevant Minnesota statute, provides

for independent review of an HMO’s denial of service under a health-plan contract. Id. at

359, 122 S. Ct. at 2156. The Supreme Court concluded that, because the Illinois statute

regulates insurance under ERISA’s savings clause, it was not preempted by federal law.

Id. at 378-80, 122 S. Ct. at 2165-67.

       In so doing, the Supreme Court stated that the Illinois law’s independent-review

requirement “affects the ‘policy relationship’ between the HMO and covered persons by

translating the relationship under the HMO agreement into concrete terms of specific

obligation or freedom from duty.” Id. at 373, 122 S. Ct. at 2163. Thus, it read the state

law to “provid[e] a legal right to the insured, enforceable against the HMO, to obtain an

authoritative determination of the HMO’s medical obligations.” Id. at 374, 122 S. Ct. at

2164. The Supreme Court in Moran also noted that although the relief in that case

ultimately available would be controlled by ERISA authorization, “the reviewer’s




the external appeal shall “be admissible in any court proceeding” indicated an intent that
the insured be allowed to challenge the external-review decision in district court); cf.
Gjerde v. UnitedhealthCare Plan, 859 N.W.2d 672, No. 13-1624, at *6-7 (Iowa Ct. App.
2014) (holding, when applicable statute provided that independent-review board’s findings
were “conclusive and binding,” district court did not err in affirming the review decision
denying treatment).

                                           16
determination would presumably replace that of the HMO as to what is ‘medically

necessary’ under this contract.”10 Id. at 380, 122 S. Ct. at 2167.

       The Supreme Court noted that the review process “does not resemble either

contract interpretation or evidentiary litigation before a neutral arbiter, as much as it looks

like a practice (having nothing to do with arbitration) of obtaining another medical

opinion,” so that the state law “is seen as something akin to a mandate for second-opinion

practice in order to ensure sound medical judgments.” Id. at 383-84, 122 S. Ct. at 2169.

Thus, in Moran, the Supreme Court intimated that the right to independent review of a

medical-necessity determination under a state statute essentially equates to the right to a

conclusive determination of the HMO’s medical obligation, and that an expert-review

determination of medical necessity is dispositive of the insurer’s obligation with respect

to the asserted claim on that issue.

       The Supreme Court’s observations in Moran inform our analysis here. In this case,

by statute, the results of the external review as to the medical necessity of the proton-beam

radiation therapy are binding on Blue Cross. See Minn. Stat. § 62Q.73, subd. 8. As a part

of this process, the external-review determination “replace[s] that of the [health-plan

company] as to what is ‘medically necessary’ under [the] contract.” Moran, 536 N.W.2d



10
   The Supreme Court also stated that “[t]he parties do not dispute that [the Illinois statute],
as a matter of state law, purports to make the independent reviewer’s judgment dispositive
as to what is ‘medically necessary.’ We accept this interpretation of the meaning of the
statute for the purposes of our opinion.” Id. at 380 n.9, 122 S. Ct. at 2167 n.9. We note
that the Illinois statute, unlike Minnesota Statutes section 62Q.73, subdivision 8, does not
contain a provision on the effect of the independent-review decision on an insured’s right
to maintain a lawsuit. See 215 Ill. Comp. Stat. 125/4-10 (2016).

                                              17
at 380, 122 S. Ct. at 2167. Without question, this is a complex area of the law. However,

we conclude that the district court erred by addressing on summary judgment whether

proton-beam radiation therapy was “medically necessary” under the health-plan contract.

Once the external-review entity determined that proton-beam therapy was medically

necessary to treat Linn’s condition, Blue Cross was required to adhere to that decision both

as a matter of payment and a matter of contract. No further contractual analysis of that

issue is warranted.11

       The external-review statute sets forth the definition of medically necessary care used

in the external-review process. See Minn. Stat. § 62Q.73, subd. 7(c). Blue Cross’s

licensure and Minnesota Statutes section 62Q.73, subdivision 8, bind Blue Cross to the

results of that process. Thus, the external-review determination of medical necessity is

binding on Blue Cross with respect to Blue Cross’s contract with the Linns as well.

       The Linns’ additional breach-of-contract claim relating to timeliness must be
       addressed by the district court.

       This conclusion, however, does not end our inquiry. The district court ruled that

even if the requested therapy is medically necessary, Blue Cross did not breach the health-

plan contract because it ultimately paid Linn’s claim. The Linns argue, however, that Blue

Cross breached the contract term that requires it to provide timely care because it failed to


11
   This conclusion is also consistent with the provision in the Blue Cross contract itself
referring to the external-review process. That provision notifies enrollees of their right to
an external review of a medical determination, describes the process, and concludes: “The
external review entity’s decision is binding on Blue Cross, but not binding on you.”
Nowhere in this contract provision does Blue Cross make the distinction it argues on
appeal: that the external-review decision was binding on Blue Cross only with respect to
the outcome—that Blue Cross pay for the treatment—but not as to contract interpretation.

                                             18
provide medically necessary services when they were originally requested, in September

2014. That term provides that the insured “ha[s] the right as a health plan member to . . .

receive quality health care that is friendly and timely.” (Emphasis added.)

       The district court concluded that the external-review decision on medical necessity

did not suggest that Blue Cross improperly applied the healthcare contract or was dilatory

in authorizing that therapy.12 In this respect, the district court’s order did not fully address

the Linns’ additional timeliness argument: that Blue Cross’s initial failure to approve

coverage for proton-beam radiation therapy breached the health-insurance contract and

caused damages. Insurance policies are contracts, and absent contrary statutory provisions,

principles of contract law apply to their interpretation. Remodeling Dimensions, Inc. v.

Integrity Mut. Ins. Co., 819 N.W.2d 602, 611 (Minn. 2012). An insurance policy is read

as a whole, with policy provisions “read in context with all other relevant provisions.”

Commerce Bank v. West Bend Mut. Ins. Co., 870 N.W.2d 770, 773 (Minn. 2015). When

contract language is ambiguous, summary judgment is inappropriate, and contract

interpretation becomes a question of fact for a jury. Hickman v. SAFECO Ins. Co. of Am.,

695 N.W.2d 365, 369 (Minn. 2005).

       Here, the contractual provision on the insured’s right to receive timely care appears

relevant and material to the interpretation of the parties’ healthcare contract as a whole.




12
  The district court also rejected the Linns’ argument that Blue Cross’ appeal process was
handled in an untimely manner. On appeal, the Linns have not challenged the district
court’s conclusion that Blue Cross properly adhered to its contractual appeal timeline in
responding to their claim. See Melina, 329 N.W.2d at 20.

                                              19
See Commerce Bank, 870 N.W.2d at 773.13 We acknowledge that the main focus of the

parties’ arguments before the district court concerned the issue of whether proton-beam

radiation therapy for Linn’s condition falls within the definition of medical necessity in the

parties’ contract—an issue that, based on our ruling in this opinion, has now been resolved.

Therefore, a remand to the district court is appropriate for further examination of the issue

of whether Blue Cross may have breached the healthcare contract by failing to approve

coverage for proton-beam radiation therapy to treat Linn’s tumor when that therapy was

originally requested. To the extent that a threshold legal question exists on this issue, the

district court on remand is encouraged to entertain additional briefing. Otherwise, because

the contract is ambiguous on the issue of timeliness, the matter would be appropriately

submitted for trial on the factual issue of breach. See Hickman, 695 N.W.2d at 369.

       The scope of available damages in this action is properly addressed by the district
       court.

       Blue Cross also argues that, even if the issue of breach is decided favorably to the

Linns, no recovery of consequential damages is available for delay in payment of benefits

of a validly disputed amount under a contract. Cf. Olson v. Rugloski, 277 N.W.2d 385,


13
   Blue Cross maintains that this argument on timeliness was not presented to the district
court, and therefore this court should not address it. See Thiele v. Stich, 425 N.W.2d 580,
582 (Minn. 1988) (stating that this court does not generally address an issue not presented
to and considered by the district court). Although the parties’ written submissions to the
district court did not raise this theory, the record reflects that the Linns adequately raised it
at the summary-judgment hearing before the district court. The transcript of those
proceedings forms part of the record before this court. See Minn. R. Civ. App. P. 110.01
(stating that the record on appeal consists of documents filed in the district court, exhibits,
and the transcript of the proceedings). We note, however, that the district court did not
have the opportunity to address this matter with the benefit of full briefing.


                                               20
387-88 (Minn. 1979) (stating that “[w]hen the insurer refuses to pay or unreasonably delays

payment of an undisputed amount, it breaches the contract and is liable for the loss that

naturally and proximately flows from the breach” (emphasis added)). And Blue Cross

maintains that, even if consequential damages may be recoverable, damages asserted for

pain and suffering are unavailable in this breach-of-contract action. See Glorvigen v.

Cirrus Design Corp., 816 N.W.2d 572, 584 (Minn. 2012) (stating that a party is not

responsible for tort damages for breach of a contractual duty). The Linns argue that this

argument is not properly before us because Blue Cross did not raise it before the district

court. See Thiele, 425 N.W.2d at 582.

       We note that the district court did not address the scope-of-damages issue in its

summary-judgment order. In its order denying Blue Cross’s earlier motion to dismiss the

breach-of-contract claim, the district court concluded that its dismissal of the Linns’

additional claims supported Blue Cross’s argument regarding “extra-contractual damages

such as emotional distress or pain and suffering,” but that consequential damages appear

to be an appropriate category of damages with respect to the breach-of-contract claim.

       Under the Minnesota Rules of Civil Appellate Procedure, the scope of review in an

appeal from a final judgment extends to any order “involving the merits or affecting the

judgment.” Minn. R. Civ. App. P. 103.04. But an order denying a motion to dismiss for

failure to state a claim does not involve the merits or affect the judgment in a case: “It does

nothing more than retain the action for trial.” Indep. Sch. Dist. No. 84 v. Rittmiller, 235

Minn. 556, 557, 51 N.W.2d 664, 664 (1952). Therefore, the district court’s statements

relating to available damages in its order denying dismissal of the contract action do not


                                              21
place that issue before this court on appeal. See id. On remand, the district court may

address this issue as appropriate in considering the issue of breach of the healthcare

contract based on timeliness.

                                     DECISION

      Because the determination of medical necessity in the external-review process is

binding on the parties through their health-insurance contract, the district court erred by

granting summary judgment to Blue Cross based on its conclusion that proton-beam

radiation therapy was not medically necessary under the contract. Because the district

court did not fully address the issue of whether the failure to cover proton-beam therapy

when first requested amounted to a breach of the timeliness portion of the contract, the

district court erred by concluding that Blue Cross’s ultimate payment of the claim

warranted summary judgment. We therefore reverse and remand for the district court to

address the issue of breach as it relates to timeliness, as well as the scope of damages

available on any recovery.

      Reversed and remanded.




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