PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

VIRGINIA BURGIN; JOSEPH K. BURGIN,
Plaintiffs-Appellants,

v.

OFFICE OF PERSONNEL MANAGEMENT,
                                                                        No. 96-1289
Defendant-Appellee,

and

HEALTHPLUS, INCORPORATED,
Defendant.

Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
Alexander Williams, Jr., District Judge.
(CA-95-1793-AW)

Argued: May 6, 1997

Decided: August 7, 1997

Before MURNAGHAN and NIEMEYER, Circuit Judges, and
STAMP, Chief United States District Judge for the
Northern District of West Virginia, sitting by designation.

_________________________________________________________________

Reversed and remanded by published opinion. Judge Niemeyer wrote
the opinion, in which Judge Murnaghan and Chief Judge Stamp
joined.

_________________________________________________________________

COUNSEL

ARGUED: Joseph Martin Gorvoy, FERRIS, HANSEN & GORVOY,
Greenbelt, Maryland, for Appellants. George Levi Russell, III, Assis-
tant United States Attorney, Baltimore, Maryland, for Appellee. ON
BRIEF: Lynne A. Battaglia, United States Attorney, Baltimore,
Maryland, for Appellee.

_________________________________________________________________

OPINION

NIEMEYER, Circuit Judge:

We must determine in this case whether the United States Office
of Personnel Management ("OPM") acted arbitrarily, in abuse of its
discretion, or otherwise not in accordance with law in affirming the
denial of health insurance coverage to a federal employee. The
employee claimed coverage for his wife under a health plan that
HealthPlus, Inc. issued pursuant to a contract with OPM to provide
insurance in accordance with the Federal Employees Health Benefits
Program. After HealthPlus denied coverage and the OPM affirmed
the decision, the employee filed this action. On OPM's motion for
summary judgment, the district court affirmed OPM's decision. We
reverse and remand.

I

Joseph K. Burgin, a retired federal employee, and his wife, Vir-
ginia, were covered by health insurance provided pursuant to the Fed-
eral Employees Health Benefits Program. The health insurance in
force during the period at issue in this case was provided by Health-
Plus, Inc. pursuant to a contract it had with OPM for the benefit of
federal employees.

In September 1993, Virginia Burgin suffered a cardiac arrest, and
as a result of a lack of oxygen to her brain, she lapsed into a coma
from which she never recovered. In December 1993, Mrs. Burgin was
transferred from the hospital to the Regency Nursing and Rehabilita-
tive Treatment Center ("Nursing Center") in Forestville, Maryland,
where she remained until her death in September 1995.

In January 1994, Joseph Burgin made a claim to HealthPlus to pay
for his wife's stay at the Nursing Center. He relied on the language

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of HealthPlus' policy that "[t]he Plan provides a comprehensive range
of benefits with no limit as to dollars or days when full-time skilled
nursing care is necessary and confinement in a skilled nursing facility
is medically appropriate as determined by a Plan doctor. You pay
nothing. All necessary services are covered." (Emphasis in original).
HealthPlus, however, denied coverage, relying on a Plan exclusion for
"custodial care, rest cures, domiciliary or convalescent care." It
invited Burgin to submit additional medical reports in support of
reconsideration.

Burgin then obtained a letter from Dr. George C. Hajjar, Mrs. Bur-
gin's treating physician and a "Plan doctor." Dr. Hajjar stated:

          [Mrs. Burgin] is fed via a gastrostomy tube, is given insulin
          injections twice a day, and breathes through a tracheostomy
          tube that requires suctioning several times a day. All of the
          above treatments are considered "skilled care." These treat-
          ments require the 24 hour supervision of a licensed nurse.
          Therefore, Mrs. Burgin does require "skilled care" rather
          than merely custodial care.

Burgin obtained a second letter from the Nursing Center, which
reported Mrs. Burgin as suffering from anoxic encephalopathy sec-
ondary to cardiac arrest, seizure disorder, insulin dependent diabetes
mellitus, coronary artery disease, and tracheostomy and gastrostomy
tube placement and described eight separate procedures regularly
required by Mrs. Burgin that under federal and state law must be per-
formed by Licensed Practical Nurses under the supervision of the
attending physician and Registered Nurses. The Nursing Center's let-
ter also stated that Mrs. Burgin was considered to require skilled nurs-
ing care under the existing Medicaid and Medicare regulations.

When HealthPlus did not respond to Mr. Burgin's submissions and
repeated claims for coverage, Burgin complained to the Maryland
Insurance Administration. The Administration submitted Mrs. Bur-
gin's records to an independent nursing evaluator associated with
Sinai Hospital of Baltimore and obtained an appraisal of Mrs. Bur-
gin's care needs. The evaluator wrote a letter concluding:

          This patient, by virtue of receiving Insulin twice daily, in
          addition to management of a tracheostomy, foley catheter

                    3
          and a gastrostomy tube for nutrition and medications clearly
          falls within the criteria for skilled care.

           What was not identified in her medical history, but no
          doubt is a very critical part of her plan of care is the neuro-
          logical and cardiopulmonary monitoring and evaluation that
          must occur given that she is bedbound and unresponsive.
          She is also at risk for complications arising from compro-
          mised skin integrity resulting in decubitus ulcers. All of
          these activities are considered skilled.

           There is no question that the care necessary to maintain
          an appropriate level of medical management must continue
          to be of a skilled nature.

The Maryland Insurance Administration sent a copy of this letter to
HealthPlus, requesting reconsideration of their denial of coverage to
the Burgins. HealthPlus responded that the Maryland Insurance
Administration had no jurisdiction over this matter of federal
employee health benefits coverage, and the Maryland Insurance
Administration took no further action.

Finally, Mr. Burgin sought help from Congressman Albert Wynn,
who intervened on behalf of the Burgins and appealed to OPM, for-
warding to OPM the three letters obtained by Burgin about his wife's
condition and her need for skilled nursing care. OPM then contacted
HealthPlus, which responded by reaffirming its denial of coverage
under the exclusion for custodial care. In a letter to OPM, HealthPlus
stated its position:

          [Care provided to Mrs. Burgin] is clearly custodial in nature
          as it primarily supports activities of daily living (feeding,
          bathing, turning, elimination of bodily waste etc.). This care
          is necessary because Mrs. Burgin is not capable of indepen-
          dently sustaining her bodily functions. The fact that the cus-
          todial services being provided, such as turning, feeding,
          passive range of motion exercises, skin care and the taking
          of vital signs, are performed by nursing or ancillary health
          care personnel does not change the essential nature of the

                    4
          services themselves; they remain custodial since they serve
          to support activities of daily living.

HealthPlus added that the Burgins would receive coverage for acute
and emergency problems, such as pneumonia or a hip fracture,
explaining, "This acute care would be covered because it would be
definitive medical treatment provided for a specific condition which
could be treated and resolved."

After considering HealthPlus' letter, Kenneth A. Lease, Chief of
Health Benefits Division of OPM, wrote Congressman Wynn that
OPM was affirming HealthPlus' denial of coverage for the Burgins.
Lease stated that "[t]he issue in this case is whether Mrs. Burgin is
receiving medically necessary skilled nursing care to aid her in her
treatment, or custodial care designed primarily to assist her with
activities of daily living, such as hygiene and nutrition." Lease then
went on to repeat HealthPlus' position which concluded that the ser-
vices being rendered to Mrs. Burgin were "primarily in support of
activities of daily living."

On seeing Lease's letter, Burgin requested that OPM conduct a for-
mal review and reconsideration. With his request, Burgin attached the
three letters relating to Mrs. Burgin's condition and needs, two defini-
tions of "skilled nursing care," and his wife's medical records. With-
out any formal hearing, for which the regulations make no provision,
OPM reaffirmed HealthPlus' denial of coverage. Repeating its view
that the proper inquiry was "whether Mrs. Burgin is receiving skilled
nursing care designed to treat her condition so that she will get better,
or whether the nature of her care is custodial; that is, care designed
mainly to support her living functions," OPM stated that there was
"no indication that the care is designed or likely to treat and solve her
medical condition" and that it thus had "no contractual basis to com-
pel the Plan to provide benefits." OPM also informed Burgin that he
had exhausted his administrative review rights and was free to file
suit in federal court.

Burgin filed this action against OPM directly, complying with
OPM's regulation that suit not be brought against the private insur-
ance carrier. See 5 C.F.R. § 890.107(c). On OPM's motion, the dis-
trict court entered summary judgment for OPM, ruling that OPM's

                     5
action in affirming HealthPlus' denial of coverage was not "arbitrary
and capricious" and that there was no evidence that OPM's interpreta-
tion of the Plan was "plainly erroneous or inconsistent with the plain
language of the Plan." The court concluded that it would not substi-
tute its judgment for that of the agency, even if it would have reached
a different conclusion. This appeal followed.

II

On the motion for summary judgment, the district court had before
it only a sparse agency record composed of the health plan, three
medical opinions supplied by Burgin, and the decisions of HealthPlus
and the OPM employee authorized to review private carriers' cover-
age determinations. See 5 C.F.R. § 890.105(e). But the district court's
review based only on the administrative record complied with the dic-
tates of the Administrative Procedure Act, which states that a court's
review of any final agency action must be made on the "whole
record" that was before the agency, even in a case -- such as that
before us -- in which the agency action was the result of informal
procedures. See 5 U.S.C. § 706; Florida Power & Light Co. v. Lorion,
470 U.S. 729, 743-44 (1985).* Our review of the district court's sum-
mary judgment is de novo and duplicates the district court's review
of the OPM determination. See id. at 744.

The Administrative Procedure Act defines the scope of review as
to both legal and factual questions. It reads:

           To the extent necessary to decision and when presented, the
           reviewing court shall decide all relevant questions of law . . .
           and determine the meaning or applicability of the terms of
           an agency action. The reviewing court shall --
_________________________________________________________________
*While the OPM purports to limit by regulation the scope of judicial
review, even imposing a limitations period, see 5 C.F.R. § 890.107(d)(2),
without citing supporting statutory authority, its regulatory limitation of
judicial review to the record before the OPM, see 5 C.F.R.
§ 890.107(d)(3), has support in the Administrative Procedure Act, 5
U.S.C. § 706. Because no party has challenged these regulations, we
need not explore further OPM's authority.

                    6
          * * *

          (2) hold unlawful and set aside agency action, findings, and
          conclusions found to be --

          (A) arbitrary, capricious, an abuse of discretion, or other-
          wise not in accordance with law;

5 U.S.C. § 706. We show substantial deference to an agency's inter-
pretations of its own regulations, see, e.g., Martin v. Occupational
Safety and Health Review Commission, 499 U.S. 144, 150-51 (1991),
relying on the "agency's unique expertise and policymaking preroga-
tives." Id. at 151. "When the administrative interpretation is not based
on expertise in the particular field, however, but is based on general
common law principles, great deference is not required." Jicarilla
Apache Tribe v. Federal Energy Regulatory Commission , 578 F.2d
289, 292-93 (10th Cir. 1978) (overturning an agency determination
that payment-in-kind of gas royalties under a standard government
form contract constituted a "purchase" under FERC regulations); see
also Texas Gas Transmission Corp. v. Shell Oil Co. , 363 U.S. 263,
270 (1960) (noting that court of appeals correctly made independent
determination of application of contract principles). Thus, although
we would defer to the agency's determination of whether a health
benefits contract meets regulatory requirements, here, the dispute is
not to be resolved by reference to the regulatory provisions governing
the features of an acceptable contract. Rather, the essential question
is one of the interpretation of the contract's language, a question of
law clearly within the competence of courts, see Scarborough v.
Ridgeway, 726 F.2d 132, 135 (4th Cir. 1984), and which we review
de novo, see 5 U.S.C. § 706 (the"reviewing court shall decide all rel-
evant questions of law"). With respect to factual matters to which the
contract interpretation may be applied, we review only to determine
if the agency's determination was arbitrary or capricious, although
even this inquiry into the facts is to be "searching and careful." See
Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416
(1971).

Turning to the Plan language in this case, the Plan provides bene-
fits for full-time nursing care when it is "necessary and confinement
in a skilled nursing facility is medically appropriate as determined by

                    7
a Plan doctor." That language is straightforward. Moreover, the Plan
explicitly promises for that coverage that "you pay nothing. All neces-
sary services are covered, including: bed, board, and general nursing
care." The OPM interpretation of the Plan relies on the exclusion for
"custodial care, rest cures, domiciliary or convalescent care."

Of course, we must interpret the Plan as a whole and seek to har-
monize all of its provisions rather than construing isolated portions of
the Plan out of context. And in harmonizing the Plan's provisions, it
is generally accepted that we give greater weight to specific and exact
language than to more general language. See, e.g., Restatement (Sec-
ond) of Contracts § 203(c).

In the case before us, we need to harmonize the provision that pro-
vides benefits for "skilled nursing care" with the clause that denies
benefits for "custodial . . . or convalescent care." OPM would define
"skilled nursing care" not as care requiring the skills of a trained nurse
(as distinct from care provided by nonskilled personnel), but as care
which is likely to result in recovery. And it would define "custodial
care" as that care which is designed to assist with activities of daily
living. Reading these terms together, OPM concludes that the Plan
covers only care which is medically necessary to cure a patient, if a
Plan doctor determines that it is medically appropriate to have such
care performed by skilled nursing personnel in a skilled nursing facil-
ity. Thus, OPM reads into the coverage that skilled nursing care is
afforded only when "necessary for recovery ." It maintains that the
expectation of "recovery" must be read into the coverage in order to
distinguish skilled nursing care from custodial care where the patient
is maintained without the expectation of recovery. Concluding that
Mrs. Burgin's care in the Nursing Center was designed "primarily to
assist her with activities of daily living, such as hygiene and nutrition"
and not with the expectation of recovery, OPM agreed that benefits
should be denied.

By concluding that skilled nursing care is not covered by the Plan
when it provides assistance in the activities of daily living and is cov-
ered only when recovery is anticipated, OPM seeks to redraft the con-
tract and to eviscerate the coverage its clear language provides. Under
OPM's interpretation, any care directed to the maintenance of daily
living functions, regardless of the level of skill required to administer

                     8
it, is classified as custodial and is excluded from coverage. But the
fact that skilled nursing care, or indeed acute hospital care, includes
assistance in the daily activities of patients, such as feeding, bathing,
and turning, does not render such skilled nursing care or even acute
hospital care "custodial care"; care for activities of daily living is an
inevitable adjunct to any more intensive form of care. Thus, the inter-
pretation that any care which includes assistance in a patient's daily
activities is not covered would require denial of coverage for virtually
all hospital and nursing care. Such an interpretation is clearly irratio-
nal, and furthermore, it is contrary to the explicit promise of the Plan
that it will provide full-time skilled nursing care when necessary and
determined to be appropriate by a Plan doctor "including bed, board,
and general nursing care."

OPM's broad construction of the custodial care exception and its
interposition of the expectation of recovery into the skilled care cov-
erage are further belied by the language of the Plan itself. The very
clause that excludes custodial care from coverage also excludes "con-
valescent care." To convalesce is "to recover health and strength grad-
ually after sickness or weakness." Webster's Collegiate Dictionary
253 (10th ed. 1993) (emphasis added). Thus, under OPM's interpreta-
tion, the exclusion of both custodial and convalescent care would
appear to swallow all other coverages provided by the Plan. Nor can
the limitation as to convalescent care be said to depend on the gradual
nature of recovery without conflicting again with the explicit lan-
guage of the skilled care coverage, which promises payment "without
limit as to dollars or days" when other prerequisites for coverage are
met.

We conclude that the only interpretation of the Plan language that
coordinates coverage for skilled nursing care with the absence of cov-
erage for custodial or convalescent care rests on a distinction based
on the level of skill required to provide the appropriate care. Thus, if
both (1) full-time care by trained nurses is "necessary" and (2) a Plan
doctor determines that confinement in a "skilled nursing facility" is
"medically appropriate," then coverage is provided for "all necessary
services, including bed, board, and general nursing care." On the
other hand, if care can be provided by personnel with training below
the level of skilled nursing or if the Plan doctor does not find it medi-
cally appropriate to provide the care in a skilled nursing facility, then

                     9
the care may be found to be custodial or convalescent and not cov-
ered. Under this interpretation, specific coverage for skilled nursing
care is not eliminated by the more general exclusion for custodial or
convalescent care. See Doe v. Group Hospitalization and Medical
Services, 3 F.3d 80, 88 (4th Cir. 1993) ("the exclusion should not, in
the absence of clear language, be construed to withdraw coverage
explicitly granted elsewhere in the contract"). Hence, we reject
OPM's interpretation of the contract as violative of norms of contract
construction and as otherwise arbitrary.

III

When we apply the Plan's language to Mrs. Burgin's circum-
stances, we can only conclude that she was entitled to benefits. All
of the medical opinions in the record state that Mrs. Burgin required
"skilled care" rather than "merely custodial care," and a Plan doctor,
Dr. Hajjar, determined that it was medically appropriate that Mrs.
Burgin be provided skilled nursing care, as was provided at the Nurs-
ing Center, thus meeting the only requirements for coverage apparent
on the face of the Plan.

Moreover, even if we were to accept the OPM's interpretation of
the contract, we could not sustain the OPM's decision applying that
interpretation to the facts of this case. OPM would not, with its inter-
pretation, provide coverage for skilled nursing care unless it was nec-
essary to recovery. But there is nothing in the record to support its
conclusion that the care provided to Mrs. Burgin at a skilled nursing
facility was not necessary to recovery. Indeed, there is no evidence in
the record regarding Mrs. Burgin's recovery prognosis, as that ques-
tion was never posed to the medical professionals in soliciting their
opinions about the nature of Mrs. Burgin's care requirements. Yet on
this record, OPM concluded that Mrs. Burgin's treatments were not
cure-oriented. Such a conclusion is unsupported and thus arbitrary.

Accordingly, we conclude that the OPM interpretation is not a rea-
sonable one and that the facts of record do not justify a denial of cov-
erage. Because we hold that the OPM decision denying coverage is
arbitrary, constitutes an abuse of discretion, and is not in accordance
with law, see 5 U.S.C. § 706(2)(a), we reverse and remand this case
to the district court with instructions to direct the payment of benefits

                     10
for Mrs. Burgin's stay at the Nursing Center during the period of cov-
erage by HealthPlus. See 5 C.F.R. § 890.107(c); Myers v. United
States, 767 F.2d 1072 (4th Cir. 1985).

REVERSED AND REMANDED

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