NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                                _____________

                                    No. 13-4121
                                   _____________

                                   LISA MIRSKY

                                          v.

         HORIZON BLUE CROSS AND BLUE SHIELD OF NEW JERSEY,
                                          Appellant
                      __________________________

                   On Appeal from the United States District Court
                             for the District of New Jersey
                            (D.C. Civil No. 2-11-cv-02038)
                   District Judge: Honorable Dennis M. Cavanaugh
                            __________________________

                    Submitted Under Third Circuit L.A.R. 34.1(a)
                                  July 11, 2014

            Before: SMITH, VANASKIE, and SLOVITER, Circuit Judges

                             (Filed: September 26, 2014)
                                   _____________

                                     OPINION
                                   _____________

VANASKIE, Circuit Judge.

      Horizon Blue Cross Blue Shield of New Jersey (“Horizon”) appeals the District

Court’s grant of summary judgment in favor of Lisa Mirsky, a member of an employee

benefit plan (“the Plan”) administered by Horizon and governed by the Employee

Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1101, et seq. Horizon
denied Mirsky’s claim for inpatient medical treatment. After considering the record,

including the unanimous consensus of Mirsky’s treating physicians that continuing

inpatient treatment was medically necessary, the District Court concluded that Horizon’s

coverage denial had been arbitrary and capricious. We will affirm the decision in

Mirsky’s favor, effectively awarding her benefits, but remand for the District Court to

determine in the first instance the amount of benefits to which Mirsky is entitled under

the terms of the Plan.

                                             I.

       We write primarily for the parties, who are familiar with the facts and procedural

history of this case. Accordingly, we will provide only a brief synopsis of the relevant

factual background.

       After being diagnosed with bulimia and post-traumatic stress disorder, Mirsky

became unable to function in her workplace, contemplated suicide, and subsequently was

admitted to the Castlewood Treatment Center on June 7, 2010. Horizon authorized

Mirsky’s initial treatment at Castlewood as covered by the terms of the Plan and

designated Magellan Health Services to administer her continued inpatient treatment.

       Although Magellan approved reimbursement for Mirsky’s care at Castlewood

through July 6, 2010, it denied coverage for inpatient treatment following that date,

claiming that such care was no longer medically necessary. Magellan reached this

conclusion despite the consensus of Mirsky’s treating therapists and physicians, who, in



                                             2
the District Court’s words, “unanimously agreed that she was not mentally fit to return to

the community as an outpatient.” App. 12.

       Castlewood, acting on Mirsky’s behalf, filed an internal appeal of the denial of

coverage with Magellan on July 8, 2010. Magellan upheld its denial the following day

and Castlewood requested a Second Level Appeal on July 12. The next day, an Appeal

Subcommittee, consisting of physicians employed by Horizon, affirmed the denial.

Mirsky then pursued an external appeal with Permedion, an Independent Utilization

Review Organization (IURO) assigned by the New Jersey Department of Banking and

Insurance. Mirsky submitted correspondence to Permedion that had not been presented

to Horizon during the internal appeals process. Permedion completed its review on

August 24, 2010 and upheld Magellan’s denial of coverage for Mirsky’s continuing

inpatient treatment.

       Mirsky remained in inpatient treatment at Castlewood through December 2010, at

a cost of approximately $30,000 per month. She brought this action to recover the

benefits due to her under the Plan for her continued inpatient treatment.

                                            II.

       The District Court had jurisdiction under 28 U.S.C. § 1331, and we have

jurisdiction under 28 U.S.C. § 1291. Before turning to the merits of the appeal, we must

determine the proper scope of the record for our review. Horizon contends that the

District Court erred by considering documents that Permedion reviewed during the

external appeal of Mirsky’s benefit denial, but which Horizon had not had the

                                             3
opportunity to consider during its internal review. Horizon argues the scope of the record

should be limited to the information Horizon reviewed during Mirsky’s internal second

level appeal. The District Court reasoned that it must “‘look to the record as a whole,’”

and review all “‘evidence that was before the administrator when he made the decision

being reviewed.’” App. 10 (quoting Mitchell v. Eastman Kodak Co., 

, 440

(3d Cir. 1997) (abrogated on other grounds)). Although Permedion’s review was

conducted by an external body, the District Court concluded that the external review was

“part of Horizon’s clearly articulated review process,” and evidence introduced during

that appeal was therefore part of the record. 

with the District Court that the record encompasses these documents,

which include letters from Mirsky’s treating physicians and therapists at Castlewood that

are highly relevant to assessing whether the final decision to deny coverage for continued

inpatient treatment was supported by substantial evidence. After denying Mirsky

coverage under the Plan, Horizon was required by regulation to “[p]rovide for a review

that takes into account all comments, documents, records, and other information

submitted by the claimant relating to the claim, without regard to whether such

information was submitted or considered in the initial benefit determination.” 29 C.F.R.

§ 2560.503-1(h)(2)(iv). The Plan provided for two internal appeals and one external

review, during which Mirsky was permitted to supplement the record with information

that had not been before Horizon at the time of the initial coverage denial. Because the

external review was the last appeal conducted prior to the filing of this action,

                                              4
information considered during that review was properly before the District Court and can

be considered in this appeal.1

                                             III.

       Turning to the merits of Horizon’s appeal, we exercise de novo review of the

District Court’s grant of summary judgment and “employ the same legal standards

applied by the District Court in the first instance.” Courson v. Bert Bell NFL Player Ret.

Plan, 

, 142 (3d Cir. 2000). “We may affirm the order when the moving

party is entitled to judgment as a matter of law, with the facts viewed in the light most

favorable to the non-moving party.” Kossler v. Crisanti, 

, 186 (3d Cir.

2009). Because the terms of the Plan granted “discretionary authority to the

administrator or fiduciary to determine eligibility for benefits or to interpret the terms of

the plan,” the District Court reviewed the denial of coverage under an arbitrary and

capricious standard. Estate of Schwing v. The Lilly Health Plan, 

, 525 (3d

Cir. 2009). “An administrator’s decision is arbitrary and capricious if it is without

reason, unsupported by substantial evidence or erroneous as a matter of law.” Miller v.

Am. Airlines, Inc., 

, 845 (3d Cir. 2011) (quotations and citations omitted).

This standard is “highly deferential.” 

.




       1
        As we conclude that the District Court properly considered the supplemental
evidence presented to Permedion during the external review, we do not agree with
Horizon’s contention that the District Court instead should have remanded the claim to
Horizon to consider this supplemental information in the first instance.
                                             5
       Mirsky’s entitlement to coverage for the duration of her treatment at Castlewood

was governed by the “Criteria for Continued Stay” set forth in the Plan. In this regard,

the Plan provides:

              Criteria A, B, C, and either D or E must be met to satisfy the
              criteria for continued stay.

              A. Despite reasonable therapeutic efforts, clinical evidence
              indicates at least one of the following:

              • the persistence of problems that caused the admission to a
              degree that continued to meet the admission criteria (both
              severity of need and intensity of service needs), or

              • the emergence of additional problems that meet the
              admission criteria (both severity of need and intensity of
              service needs), or

              • that disposition planning, progressive increases in hospital
              privileges and/or attempts at therapeutic re-entry into the
              community have resulted in, or would result in exacerbation
              of the psychiatric illness to the degree that would necessitate
              continued hospitalization, or

              • a severe reaction to medication or need for further
              monitoring and adjustment of dosage in an inpatient setting,
              documented in daily progress notes by a physician.

              B. the current treatment plan includes documentation of
              diagnosis (DSM-IV axes 1-v), individualized goals of
              treatment, treatment modalities needed and provided on a 24-
              hour basis, discharge planning, and intensive family
              therapeutic involvement occurring several times per week
              (unless there is an identified valid reason why such a plan is
              not clinically appropriate or feasible). This plan receives
              regular review and revision that includes ongoing plans for

              timely access to treatment resources that will meet the
              patient’s post-hospitalization needs.


                                             6
              C. the current or revised treatment plan can be reasonably
              expected to bring about significant improvement in the
              problems meeting criterion IIIA. This evolving clinical status
              is documented by daily progress notes, one of which
              evidences a daily examination by the psychiatrist.

              D. the patient's weight remains <85% of IBW [Ideal Body
              Weight] and he/she fails to achieve a reasonable and expected
              weight gain despite provision of adequate caloric intake.

              E. there is a continued inability to adhere to a meal plan and
              maintain control over urges to binge/purge such that
              continued supervision during and after meals and/or in
              bathrooms is required. In order to satisfy this criterion, there
              must be evidence that the patient is unable to participate in
              ambulatory or residential treatment.

App. 512.

       The District Court thoroughly analyzed the “Criteria for Continued Stay” that

bound Horizon and found that Mirsky should not have been denied coverage, as she had

satisfied Criteria A through C, along with Criterion E, thereby establishing that continued

treatment was medically necessary under the terms of the Plan. After our own

comprehensive review of the record, we agree with the District Court’s conclusion that

the denial of continued inpatient treatment was not supported by “substantial evidence.”

       The District Court found that Mirsky had satisfied Criterion A, which required,

inter alia, the patient to display “the persistence of problems that caused the admission to

a degree that continued to meet the admission criteria . . . ,” or “a . . . need for further

monitoring and adjustment of [medication] dosages in an inpatient setting.” 

with the District Court that Horizon did not present any evidence to rebut the

opinions of Mirsky’s treating physicians that continued inpatient care was necessary.
                                               7
Mirsky’s treating physicians urged that her lifelong struggle with bulimia and her history

of relapses following periods of inpatient treatment indicated that “if she is discharged

now, she is likely to relapse quickly . . . ,” and that “if she is discharged now to standard

outpatient care, she will relapse almost immediately and will require further inpatient

treatment within the next 6 to 12 months, if not sooner.” App. 221, 219. Although

Horizon argued to the District Court that Mirsky had made progress as of July 6, 2010 by

“‘completing her meal plan, not purging, and even self portioning out food,’” App. 12,

the District Court properly reasoned that Criterion A does not demand that coverage for

inpatient care must cease as soon as a patient demonstrates some progress. Rather,

Criterion A allows for continued coverage where patients demonstrate a “need for further

monitoring.” App. 512. There is no dispute that Mirsky’s healthcare providers

reasonably believed that she required additional monitoring and that the severe symptoms

that justified her admission, as well as Horizon’s decision to cover her healthcare costs,

were persisting. Horizon did not present the District Court with “substantial evidence”

undermining the conclusions of her healthcare providers.

       The District Court also found that Criterion B of the Plan, which requires a patient

to be engaged in a treatment plan which contains several specified components and

receives “regular review and revision that includes ongoing plans for timely access to

treatment resources that will meet the patient's post-hospitalization needs,” had been

indisputably satisfied. App. 512. We agree that the correspondence of Mirsky’s treating

physicians demonstrates that a viable treatment plan was in place, which included goals

                                              8
for transitioning Mirsky into outpatient care. Castlewood Staff Psychiatrist Anna Jurec

wrote that Castlewood intended to transition Mirsky out of inpatient care and into partial

hospitalization “as soon as she is capable of autonomously maintain [sic] adequate

nutrition without binging and purging, and anxiety and trauma are stabilized enough for

client to manage without 24 hour structure.” App. 268. Horizon has not directed us to

anything in the record which would support the conclusion that Mirsky’s treatment plan

at the time of the coverage denial failed to satisfy Criterion B.

       Criterion C requires that “[t]he current or revised treatment plan can be reasonably

expected to bring about significant improvement in the problems” identified by Criterion

A, and that the patient’s clinical status is “documented by daily progress notes, one of

which evidences a daily examination by the psychiatrist.” App. 512. Horizon does not

allege that Mirsky’s treatment at Castlewood was unlikely to help improve her eating

disorder, but instead argues that Mirsky had already achieved the maximum benefits of

inpatient treatment—a claim unsupported by any of her treating physicians and belied by

her history of relapses. Horizon likewise does not argue that Castlewood failed to

maintain the appropriate records documenting Mirsky’s “evolving clinical status.” 

of the Plan only required Mirsky to meet either Criterion D or E in

order to demonstrate that continued care was medically necessary. Although the District

Court concluded Mirsky did not meet Criterion D, it found that at the time of the denial,

Criterion E was satisfied. Criterion E requires a showing that “[t]here is a continued

inability to adhere to a meal plan and maintain control over urges to binge/purge such

                                              9
that continued supervision during and after meals and/or in bathrooms is required,” as

well as “evidence that the patient is unable to participate in ambulatory or residential

treatment.” 

that this requirement was not met, as Mirsky had not

binged or purged in the inpatient setting since June 11, 2010. The District Court found

this argument unconvincing, given that Mirsky’s ability to binge and purge was restricted

in the inpatient setting, where she was monitored around the clock and “‘refrigerators,

cabinets, and bathrooms were locked.’” App. 15.

          We agree with the District Court. As 

, the consensus of Mirsky’s

treating physicians was that her lifelong struggle with bulimia and her history of relapses

following inpatient treatment indicated that she was not yet ready to transition into

outpatient treatment at the time of the coverage denial. Evidence that Mirsky was not

binging or purging under the restrictive conditions of inpatient care does not provide

substantial support for the proposition—contradicted by all of her treating physicians—

that Mirsky would not binge or purge once released from inpatient treatment. Therefore,

Criterion E was satisfied, as Horizon has not presented substantial evidence that Mirsky

would have been able to transition out of inpatient treatment at the time of the coverage

denial.

          Because Mirsky satisfied all of the requisite Criteria for demonstrating that

continued inpatient treatment was medically necessary, Horizon’s denial of coverage was




                                               10
arbitrary and capricious. Therefore, we will affirm the District Court’s grant of summary

judgment in favor of Mirsky on her ERISA claim.2

                                            IV.

       Horizon next contends that the District Court erred by awarding Mirsky

compensatory damages for the total cost of her inpatient care at Castlewood through

December 2010. Contrary to Horizon’s argument, the District Court did not award

compensatory damages to Mirsky. Instead, its order simply granted summary judgment

in favor of Mirsky on her claim for benefits for her continued inpatient care after Horizon

discontinued coverage. The District Court, however, made no determination as to the

dollar value of the benefits due Mirsky. Accordingly, we will remand the matter to the

District Court to determine the amount of benefits due to Mirsky under the Plan.3




       2
         Horizon’s argument that Mirsky lacks standing to bring an ERISA claim because
her father paid for her continued inpatient care after Horizon’s denial of coverage is
specious. Mirsky was the Plan member who received treatment for her serious condition
and sought coverage for that treatment. How Mirsky paid for her care at Castlewood
after Horizon’s wrongful denial of coverage is irrelevant. It is to Mirsky that Horizon has
an obligation to pay benefits under the Plan, and Horizon cannot evade its obligation
because Mirsky’s father paid the bills that should have been paid by Horizon.
       3
         On appeal, Horizon argues for the first time that Mirsky has not demonstrated
that inpatient treatment remained medically necessary through December 2010. This
argument was not raised before the District Court and should be treated as waived on
remand.

                                            11
                                           V.

      For the foregoing reasons, we will affirm the District Court’s grant of summary

judgment in favor of Mirsky, but remand for the District Court to determine the amount

of benefits payable to Mirsky under the Plan.




                                           12