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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

United Air Ambulance LLC,

Plaintiff,

v. 

Cerner Corporation, et al.,

Defendants.

No. CV-17-04016-PHX-SMB

ORDER 

Pending before the Court are Cross-Motions for Summary Judgment. Defendants 

Cerner Corporation and the Health Exchange Incorporated filed a joint Motion for 

Summary Judgment and corresponding Statement of Facts on April 10, 2019. (Doc. 67, 

“DMSJ”; Doc. 68 “DSOF”.) Plaintiff United Air Ambulance filed its own Motion for 

Summary Judgement and Statement of Facts later that day. (Doc. 73, “PMSJ”; Doc. 74, 

“PSOF”.) Both Plaintiff and Defendants responded to the opposing motion for summary 

judgment and corresponding statement of facts. (Doc. 83, “Defendants’ Resp.”; Doc. 84, 

“Resp. to PSOF”; Doc. 88, “Plaintiff’s Resp.”; Doc. 89, “Resp. to DSOF”.) Likewise, both

Plaintiff and Defendants filed Replies. (Doc. 90, “Defendants’ Reply”; Doc. 91, 

“Plaintiff’s Reply”.) Oral argument was held on November 18, 2019. The Court considers 

the parties respective pleadings and enters the following Order: 

I. BACKGROUND

K.M., a twenty-three-month-old child with an extremely rare bowel disorder, was 

rushed to the Phoenix Children’s Hospital (“PCH”) emergency room (“ER”) on the 
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morning of March 21, 2017. (PSOF ⁋ 12.) After treatment in the ER, K.M.’s parents faced 

a decision: (1) admit the child to PCH for continued treatment of the emergent condition 

afflicting their son, “a possible line infection,” or (2) depart on a pre-arranged air 

ambulance flight to Boston Children’s Hospital (“BCH”) to address the underlying medical 

condition which PCH could not treat and under which K.M. had long suffered. They chose 

the latter. This case is about who pays for that flight. More precisely, this case concerns 

whether Cerner Corporation (“Cerner”) and its fellow defendants abused their discretion 

in approving the medical necessity of K.M.’s flight at the pre-authorization stage but later 

denying United Air Ambulance’s (“UAA”) claim. 

A. K.M.’s Medical Needs

PCH was familiar with K.M.’s medical conditions—short bowel syndrome, 

secondary to necrotizing enterocolitis in early infancy and parenteral nutrition associated 

liver disease (“PNALD”)—when he arrived at the ER on March 21, 2017. (PSOF ⁋ 1.) 

PCH physicians attempted to address K.M.’s complicated medical problems many times 

in the past, but multiple surgical treatments had largely failed to improve his condition.

(PSOF ⁋ 3.) The physicians believed, but could not confirm, that a lack of intestinal 

musculature complicated K.M’s condition and stymied PCH’s attempted treatment. (PSOF 

⁋ 5.) Lacking the required specialized diagnostic equipment, K.M.’s doctors referred him 

to BCH, one of the few hospitals with the equipment needed to properly diagnose and treat 

him. (PSOF ⁋ 6.) Cerner approved a second opinion from Dr. Tom Jaksic at BCH for a 

duodenal mobility study that required inpatient admission. (Doc. 82-1 at 67.) 

The problem was getting there. Because K.M. was completely reliant on parenteral 

nutrition and suffered severe peristomal erosion around the central line supplying him vital 

nutrients, he needed hourly dressing changes to prevent further erosion and possible 

infection. (PSOF ⁋ 4; Doc. 82-1 at 69, “Dr. Carey Letter”) Dr. Andrew Carey, the 

Associate Medical Director at BCH’s Center for Advanced Intestinal Rehabilitation 

supported transport to BCH by air ambulance, concluding that “the degree of peristomal 

erosion and the frequency of dressing changes required to prevent further skin breakdown 
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and soiling of his sterile central venous line site” made “commercial air flight . . . not 

appropriate for this patient.” (Dr. Carey Letter.) K.M.’s condition was both rare and 

serious.

1 Dr. Carey continued: 

Recent pathology suggests a segmental absence of intestinal musculature . . 

. an incredibly rare diagnosis [that] requires the use of antroduodenal and 

colonic manometry to detect for abnormalities in peristalsis. This testing 

requires inpatient level of care and is only available at a select group of 

centers, of which Boston Children’s Hospital is one. . . . Failure to seek 

further diagnostic testing will result in ongoing limitations in his ability to 

advance enteral nutrition which will accommodate progression of his liver 

disease. Progressive PNALD represents a major source of mortality in 

patients with intestinal failure and requires specialized care to reduce risk of 

death.

(Id.) Dr. David Notrica, a pediatric surgeon at PCH, corroborated Dr. Carey’s medical 

opinion and recommendations. (Doc. 82-1 at 73.) He affirmed K.M. “needs an evaluation 

at [BCH] . . . as soon as possible, and will need medical transport to get there.” (Id.) With 

physicians at both PCH and BCH concluding that ground transportation was inadequate

and instead recommending travel by air ambulance, K.M.’s parents arranged transport with 

UAA.

2

On the day of his scheduled flight, K.M. experienced what both parties consider a 

“medical emergency” and was taken to the PCH ER for treatment. (PSOF ⁋ 12; Doc. 82 

at 47.) PCH treated K.M. for a “possible line infection” and potential sepsis. (PSOF ⁋ 13.) 

As Dr. Carey and Dr. Notrica previously established, PCH could not treat K.M.’s 

underlying condition. (PSOF ⁋⁋ 11-14.) PCH could, however, successfully address K.M.’s 

most pressing medical needs—the line infection and possible sepsis. (See DSOF ⁋⁋ 44-45.) 

Both K.M.’s pediatric gastroenterologist and ER physician thus recommended that K.M. 

be admitted at PCH and not take the UAA flight. (Id.; PSOF ⁋ 13.) But fearing another 

opportunity to fly K.M. by air ambulance for treatment at BCH would not come, K.M.’s 

 

1 Cerner recognized the complexity of K.M.’s condition and assigned a case manager from 

American Health Holding (“AHH”) to coordinate his care. (DSOF ⁋ 34.) 

2 Cerner received Dr. Carey and Dr. Notrica’s Letters of Medical Necessity “on or about 

February 20, 2017.” (DSOF ⁋ 37.) 
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mother signed K.M. out of the PCH ER against medical advice. (PSOF ⁋⁋ 11-14.) Upon 

arrival in Boston, BCH directly admitted K.M. and successfully treated his gastrointestinal 

conditions. (PSOF ⁋ 15.) 

B. The Plan

Defendant Cerner is a health care technology company that offers insurance 

coverage for employees. (DSOF ⁋ 3.) Through its legal subsidiary and third-party benefits 

administrator, Defendant The Health Exchange, Inc. d/b/a Cerner HealthPlan Services 

(“CHPS”), Cerner offers a comprehensive benefits package called the Wraparound 

Benefits Plan.3(DSOF ⁋ 9.) Among other offerings, the Wraparound Benefits Plan 

provides medical insurance coverage to Cerner employees and beneficiaries under a 

component plan, the Healthe Options Component Plan (“the Plan”). (DSOF ⁋ 10.) Both 

plans are governed by the Employee Retirement Security Act of 1974 (“ERISA”). (DSOF 

⁋ 12.) K.M. is a covered beneficiary under the Plan. (DSOF ⁋ 11.) The Plan names Cerner 

as fiduciary and plan administrator as defined by ERISA and grants Cerner “the exclusive 

power and authority, in its sole discretion, to construe and interpret the Plan, to determine 

all questions of Plan coverage and eligibility for benefits, the methods of providing or 

arranging for such benefits and all other related matters.” (DSOF ⁋ 14.) In turn, Cerner 

delegates administration and payment of claims to CHPS. (DSOF ⁋ 15.) Cerner and CHPS 

thus maintain a close working relationship. (See DSOF ⁋⁋ 27-32.) In return for its services, 

Cerner pays CHPS a monthly administration fee on a per employee covered basis and 

provides funds to be paid out by CHPS on a weekly basis. (DSOF ⁋⁋ 29-31.) CHPS 

operates out of a Cerner-owned building in a commercial building campus that Cerner also 

calls home. (DSOF ⁋ 27.) Employees at CHPS maintain email accounts with Cerner and 

CHPS. (PSOF ⁋ 56.) 

The Plan covers ambulatory travel, including by air ambulance, in specific 

circumstances. (DSOF ⁋⁋ 16-17.) Generally, the Plan reimburses transportation by air 

ambulance in medical emergencies when ground transportation is not appropriate either 

 

3 For purposes of clarity, this Order refers to Cerner and CHPS in their individual capacities 

and, collectively, as “Defendants.”
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because a patient needs treatment immediately or because nearby facilities cannot offer 

appropriate treatment. (See DSOF ⁋ 16.) In relevant part, the Plan reads: 

Coverage is provided for air ambulance transport for medical emergencies in 

the following circumstances: 

• The Participant requires transport to a hospital or from one hospital to 

another because the first hospital does not have the required services 

and/or facilities to treat the Participant; and ground transportation is 

not medically appropriate because of the distance involved,

• Or because the Participant has an unstable condition requiring medical 

supervision and rapid transport

(Id.) The provision requires a provider notify Cerner “except in life threatening 

circumstances.” (Id.) The Plan does not define “medical emergencies.” (See Doc 68-4 at 

51-59.) The Plan also explicitly disclaims coverage in a range of other circumstances. 

This provision, titled “Services Not Covered,” reads in part: 

Any treatment, confinement, or service which is not recommended by, or any 

operation which is not performed by, an appropriate professional provider; 

Examination by a Doctor, related laboratory tests, x-rays and vaccines 

performed in the absence of specific symptoms on the part of the Participant 

(except as may be specifically provided herein).

(DSOF ⁋ 17.)

C. The Claims Process

To be compensated, a provider of services must file a claim with Cerner. The claims 

process here entailed navigating seven layers of review. (See DSOF ⁋⁋ 18-26.) Broadly

speaking, this claim passed through two main categories of review: preauthorization and 

claim processing. The Plan allows health care providers to request preauthorization for

providing a service to a Plan beneficiary.4(DSOF ⁋ 17.) When denied, a preauthorization 

request may be appealed twice. (DSOF ⁋ 19.) The first appeal is evaluated by CHPS, the 

second by Cerner itself. Specifically, if CHPS denies a providers’ initial appeal, the dispute 

is elevated to one of two Cerner personnel charged with handling second level appeals—

Bogorad and Dr. David Nill review final claims on appeal among their other 

 

4 CHPS regularly refers to preauthorization requests as “predetermination” requests in 

correspondence, using the terms interchangeably. 
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responsibilities. (DSOF ⁋ 23.) Regardless of whether a preauthorization request is 

approved or denied, a provider must file a formal claim for benefits. (DSOF ⁋ 20.) Like 

preauthorization requests, claims may be appealed twice if denied. (DSOF ⁋ 21.) 

Similarly, claim appeals are first reviewed by CHPS, then by Cerner. (DSOF ⁋⁋ 21-23.) 

To insulate the process from conflicts, Cerner and CHPS have some procedural 

safeguards. The first claim appeal accords no deference to the original decision. (DSOF 

⁋ 24.) Instead, decisions are made “by an individual who did not decide the initial claims, 

and who is not a subordinate of anyone that decided the initial claim.” (Id.) The second 

appeal follows the same procedures. (DSOF ⁋⁋ 24-26.) At both appeal levels, the reviewer 

can consider new information submitted by a claimant and consult a health care 

professional experienced in the relevant area if necessary. (DSOF ⁋⁋ 24-26.) If denied 

after a second appeal, a claimant may request an “External Review.” (DSOF ⁋ 26.) Denial 

of a claim after a second appeal, or, if an external review is requested, confirmation of 

denial by an external reviewer, renders a claim judgment final. Once a final adverse 

benefits decision has been rendered and a provider exhausts all remedies available under 

the Plan, the provider may bring a civil action under ERISA. 

In this case, UAA submitted both a preauthorization request and filed a formal 

claim, following the procedures detailed above. This process began with a series of initial 

inquiries with CHPS by K.M.’s AHH case manager. (DSOF ⁋ 35.) On February 9, 2017, 

K.M.’s AHH case manager asked CHPS if the Plan covered K.M.’s travel expenses for a 

second opinion at BCH. (Id.) Eleven days later, AHH confirmed that BCH’s services were 

medically necessary, but not covered because they were not emergent. The next day, 

February 21, 2017, UAA called CHPS to inquire into covered costs for air ambulance. 

(DSOF ⁋ 39.) Quoting the Plan language, supra, UAA was told the Plan only covered 

travel by air ambulance, like that requested, in “medical emergencies” and any coverage 

was subject to the terms of the Plan. (DSOF ⁋⁋ 39-40.) On February 28, 2017, CHPS

followed-up on the previous phone call and provided AHH written confirmation that 

coverage for air ambulance was not covered for K.M.’s second opinion at BCH. (DSOF ⁋ 
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41.) Despite this, UAA transported K.M. to Boston on March 21, 2017, (PSOF ⁋ 14.), and 

sent CHPS a preauthorization request later that day. (DSOF ⁋ 46.) That request was denied 

on March 24, 2017 for the reasons previously given. UAA appealed on April 24, 2017; 

CHPS upheld the denial on May 15, 2017. (Doc. 82-7 at 82.) This May 15 appeal denial 

again quoted the Plan language, (DSOF ⁋ 53), but also explained that K.M.’s requested air 

ambulance did not meet plan requirements because (1) “he was not requiring rapid 

transport for a medical emergency” and (2) “he was not inpatient requiring transport from 

one facility to another for additional services not available at the initial hospital.” (DSOF 

⁋ 52.)

UAA appealed a second time on July 17, 2017. On the second preauthorization

appeal Cerner reversed its’ initial denial. Cerner sent UAA a “certification of medical 

necessity” affirming the services were “medically necessary but not a guarantee of 

payment.” (Doc. 82-2 at 6.) This certification letter reminded UAA that all payment 

determinations were made after a claim was submitted and remained “subject to the terms 

and limitations of the benefit plan including deductible and/or copayments.” (Id.) The 

certification was thus “pertinent only if the member has an active policy and premiums are 

paid up through the time of service.” (Id.) Although the letter “only certifie[d] the medical 

necessity of the services listed above under the terms of the Plan” it is unclear what 

practical significance, if any, the letter has on any later claim determination.

5

(Id.) At this 

point, Cerner directed Stratos, a third-party retained to negotiate claim reimbursement 

between Cerner and providers, to engage UAA. Stratos negotiated a reimbursement of 

$600,000 with UAA but disclaimed the agreement was a guarantee of payment. (Doc. 82-

1 at 3.) UAA signed and returned this “Provider Agreement” on August 24, 2017. (Doc. 

82-1 at 63.)

 

5 Presumably, the certification affirms that UAA’s transport of K.M. to BCH was 

“medically necessary” as defined in the Plan. (Doc. 68-4 at 55.) The Plan defines 

“Medically Necessary” as: commonly recognized by appropriate medical specialists, 

within standards of good practice; appropriate, effective and consistent with the diagnosis 

or treatment of an illness or injury; the appropriate supply or level of service that can be 

safely administered; provided by a hospital or Covered provider; and a drug or supply 

approved by the U.S. Food and Drug Administration. (Id.)
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UAA filed a formal claim on August 30, 2017. (DSOF ⁋ 60.) On September 1, 

2017, Cerner received PCH medical records from K.M.’s March 21, 2017 ER visit prior to 

the UAA flight. (DSOF ⁋ 61.) The PCH records revealed that K.M. was signed out against 

the medical advice of K.M.’s pediatric gastroenterologist and ER doctor recommending 

admission to PCH. (DSOF ⁋ 62.) The physicians determined K.M. was suffering from an 

emergent condition that could be treated successfully at PCH recommended against 

transport. (See id.) CHPS denied UAA’s claim on September 13, 2017. (DSOF ⁋ 63.) 

UAA appealed the initial claim denial on October 12, 2017, noting CHPS’ prior finding 

that the requested service was medically necessary. CHPS denied this first appeal on 

October 26, 2017 for the same reasons it denied the initial claim. On December 21, 2017 

UAA appealed once more. Cerner again denied. (DSOF ⁋ 73.) In the January 26, 2018 

decision, Ms. Bogorad, Cerner’s claim administrator and final authority for claim 

determinations on secondary appeal, held “[a]t no point in time did the air transport services 

provided by UAA qualify for coverage under the Plan.” (DSOF ⁋ 77.) In denying UAA’s 

claim a final time, Cerner asserted that air ambulance was not covered because K.M.’s 

underlying condition was non-emergent, K.M.’s emergent condition—sepsis—could be 

treated at PCH, and the March 21 UAA flight was taken against the medical advice of PCH 

physicians. (DSOF ⁋ 77.) The denial letter emphasized Cerner’s previous certification of 

that UAA’s services were medical necessary was “not enough to trigger coverage for air 

transport services,” because coverage was conditioned on satisfaction of all the Plan terms. 

(DSOF ⁋ 78.) In short, “medically necessary” did not mean “covered.” 

UAA requested an Independent External Review (“IER”). After deeming an IER 

appropriate, CHPS retained AHH to conduct the IER. (DSOF ⁋⁋ 80-82.) AHH reviewed 

submissions from both parties and affirmed the denial of UAA’s claim. (DSOF ⁋ 85.) In 

fact, the IER went further. The IER rebutted Cerner’s previous certification of medical 

necessity and concluded that not only were air ambulance services not covered by the Plan, 

they were not medically necessary. (DSOF ⁋ 86.) The IER found additional grounds to 

deny UAA’s claim “since it is not documented that the claimant was taken to the closest 
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facility capable of providing the needed services.” (DSOF ⁋ 86.) This is the first mention 

of a proximity requirement in the administrative record.

II. LEGAL STANDARD

The Employment Retirement Income Security Act (“ERISA”) “governs the 

administration of employer-provided benefit pension plans.” Metro. Life. Ins. v. Parker, 

436 F.3d 1109, 1111 (9th Cir. 2006). ERISA requires plan administrators, as fiduciaries, 

to administer their plans “in accordance with the documents and instruments governing the 

plan insofar as the documents and instruments are consistent with the provisions of 

[ERISA].” 29 U.S.C. § 1104(a)(1)(D). 

Courts review the denial of ERISA benefits de novo “unless the benefit plan gives 

the administrator or fiduciary discretionary authority to determine eligibility for benefits 

or to construe the terms of the plan.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 

115 (1989). When a plan “unambiguously provide[s] discretion to the administrator”, the 

standard of review shifts from the default, de novo, to abuse of discretion. Abatie v. Alta 

Health and Life Ins. Co., 458 F.3d 955, 963 (9th Cir. 2006) (en banc) (citing Firestone Tire 

& Rubber Co. v. Bruch, 489 U.S. 101, 115 (9th Cir. 1989); see also, Met. Life Ins. Co. v. 

Glenn, 554 U.S. 105, 110-11 (2008). “Under the abuse of discretion standard of review, 

‘the plan administrator’s interpretation of the plan will not be disturbed if reasonable.” Day 

v. AT&T Disability Income Plan, 698 F.3d 1091,1096 (9th Cir. 2012) (quoting Conkright 

v. Frommert, 559 U.S. 506, 512 (2010)). “ERISA plan administrators abuse their 

discretion if they render decisions without any explanation, . . . construe provisions of the 

plan in a way that conflicts with the plain language of the plan or rely on clearly erroneous 

findings of fact.” Day, 698 F.3d at 1096. Under the abuse of discretion standard, a court 

considers “whether application of a correct legal standard was ‘(1) illogical, (2) 

implausible, or (3) without support in inferences that may be drawn from the facts in the 

record.’” Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 676 (9th Cir. 2011) 

(quoting United States v. Hickson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc)).6

 

6

In an ERISA benefits case, the traditional summary judgment standards are not 

necessarily appropriate. Fed. R. Civ. P. 56. When, as here, a plan adminstrator’s 
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A reviewing court should weigh any conflict of interest or procedural irregularity as 

a factor in its review. Glenn, 554 U.S. at 108. When “the entity that administers the plan 

. . . both determines whether ran employee is eligible for benefits and pays benefits out of 

its own pocket,” a conflict of interest is created. Id. “A conflict of interest is a factor in 

the abuse-of-discretion review, the weight of which depends on the severity of the 

conflict.” Demer v. IBM Corporation LTD Plan, 835 F.3d 893, 900 (9th Cir. 2016). Even 

in the face of a conflict, “a deferential standard of review remains appropriate.” This does 

not mean that plan administrators automatically prevail on the merits, only that a plan 

administrator’s interpretation of the plan “will not disturbed if reasonable.” Conkright v. 

Frommert, 559 U.S. 506, 512 (2010) (citation and quotation omitted). Similarly, “when a 

plan administrator’s actions fall so far outside the strictures of ERISA that it cannot be said 

that the administrator exercised the discretion that ERISA and the ERISA plan grant, no 

deference is warranted.” Abatie, 458 F.3d at 972. Alternatively, “[w]hen an administrator 

can show that it has engaged in an ongoing, good faith exchange of information between 

the administrator and the claimant, the court should give the administrator’s decision broad 

deference notwithstanding a minor irregularity.” Id. (internal quotation marks and citations 

omitted). But “deference” is not a “talismanic word that can avoid the process of 

judgment.” Salomaa, 642 F.3d at 673 (quoting Glenn, 554 U.S. at 118). “The nature and 

scope of the alleged violations will significantly affect the standard of review applied by 

the district court.” Hoffman v. Screen Actors Guild Prod. Pension Plan, 757 Fed. Appx. 

602, 604 (9th Cir. 2019). 

A reviewing court should also consider procedural errors in deciding whether a plan 

administrator abused its discretion. See Salomaa, 642 F.3d at 674. Among other 

procedural irregularities, inconsistent reasons for denial and evidence of malice are rightly

considered. Id. “A small procedural irregularity is a matter to be weighed in deciding 

whether an administrator's decision was an abuse of discretion, just as a court would weigh 

 

determination is reviewed for abuse of discretion, “a motion for summary judgment is 

merely a conduit to bring the legal question before the district court and the usual tests of 

summary judgment, such as whether a genuine dispute of material facts exists, do not 

apply.” Bendixen v. Standard Ins. Co., 185 F.3d 939, 942 (9th Cir. 1999). 
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a conflict of interest.” Horton v. Phoenix Fuels, Co., Inc., 611 F.Supp.2d 977, 986 (D.

Ariz. 2009). “Procedural violations of ERISA do not alter the standard of review unless 

those violations are so flagrant as to alter the substantive relationship between the employer 

and employee, thereby causing the beneficiary substantive harm.” Gatti v. Reliance 

Standard Life Ins. Co., 415 F.3d 978, 985 (9th Cir. 2005).

III. DISCUSSION

A. Conflict of Interest and Standard of Review

The Plan unambiguously confers discretionary authority to Cerner as administrator.

See Abatie, 458 F.3d at 963 (finding abuse of discretion the proper standard of review when 

an “ERISA plan unambiguously grant[s] discretion to the administrator.”). More precisely, 

the Plan names Cerner as fiduciary and plan administrator as defined by ERISA and grants 

Cerner “the exclusive power and authority, in its sole discretion, to construe and interpret 

the Plan, to determine all questions of Plan coverage and eligibility for benefits, the 

methods of providing or arranging for such benefits and all other related matters.” (DSOF 

⁋ 14 (emphasis added)). Both parties agree that the abuse of discretion standard applies to 

this Court’s review of Cerner’s conduct. (DMSJ at 9; PMSJ at 13.) Both likewise concede 

that Cerner, by funding and administering the Plan, has a structural conflict of interest. 

(DMSJ at 10; PMSJ at 11.) They disagree as to what weight, if any, this Court should 

accord that conflict. 

UAA asks the Court to accord greater weight to Cerner’s conflict of interest above

the “higher degree of skepticism” normally applied in such cases. Salomaa, 642 F.3d at 

666. UAA’s argument is highly speculative. First, UAA makes multiple, unsubstantiated 

claims—that Ms. Bogorad wears “multiple hats,” that claim reimbursements affect her 

budget for the other departments in her purview—to infer she has financial incentive to 

deny claims. UAA is correct that Cerner has a structural conflict of interest generally. 

Cerner tasks a wholly-owned subsidiary, CHPS, with determinations and payments of 

claims on the Plan. Bogorad is not immune from that conflict. The record does not 

demonstrate that that the budget for claims determinations is any way intermingled with 
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any other general funds. (See DSOF ⁋⁋ 29-32.) Second, aside from basic money-saving 

incentives operative in the claim decisions of every plan administrator, UAA points to no 

credible evidence that financial incentives infected the claims process here. UAA correctly 

notes that CHPS and Cerner are co-located and maintain open lines of communication 

evidenced by dual email accounts. (Doc. 84 at ⁋ 56.) But this relational closeness only 

bolsters the existence of Cerner’s structural conflict of interest. Given the obvious, 

legitimate explanations for the close working relationship, this does not warrant overly 

exacting scrutiny. Cerner’s conflict of interest demands additional skepticism within the 

abuse of discretion review, but its claim determinations are not presumptively suspect 

because CHPS and Cerner have relational closeness expected of a parent and subsidiary. 

On the other hand, Defendants believe the conflict of interest deserves no weight.

(DMSJ at 10.) They argue UAA’s failure to identify how the alleged conflict of interest 

influenced the process in this case obviates the need for additional scrutiny beyond the 

abuse of discretion standard. (Doc. 83 at 3-6.) That is, the existence of a structural conflict 

of interest only merits a “higher degree of skepticism” when a party points to a specific 

example where the alleged conflict influenced the dispute. Defendants position imposes

an improper burden of proof on plaintiffs unsupported by controlling case law.7 Salomaa

is instructive. The lack direct evidence that a conflict affected the claims process is 

unsurprising in ERISA cases. Salomaa, 642 F.3d at 676 (determining that because the 

record usually does not disclose direct evidence of an insurance company’s conflict—like 

claims-handling history in other cases or internal directives to claims managers in how to 

evaluate claims—"we are ordinarily ignorant of much of what we are supposed to weigh.”).

In ERISA cases, courts do not require direct evidence a conflict of interest manifestly 

affected the outcome of a case. Rather, conflicts of interest justify a court’s “additional 

skepticism” because of the unique incentives of ERISA’s statutory scheme. Id.

 

7 Although a plan administrator should be granted “broad deference notwithstanding a 

minor irregularity” when “an administrator can show it has engaged in an ongoing, good 

faith exchange of information [with] the claimant,” the Court finds no case that willfully 

ignores an actual conflict of interest merely because the administrator appears to have 

operated in good faith. See Abatie, 458 F.3d at 972. 
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Specifically, ERISA gives insurance companies “special protection . . . against claims,” 

increasing the “incentive to be more unfair . . . because [they] cannot be subjected to the 

punitive damages for bad faith that are the bogeymen of insurance companies.” Id.

Regardless of whether UAA proves the conflict of interest affected Cerner’s decisionmaking here, the incentives inherent in ERISA cases remain unchanged and require a court

review with additional skepticism. See Demer, 835 F.3d 893, 903 (“[T]he lack of such 

specific evidence does not mean that there is no conflict of interest.”) (emphasis in 

original). The Court accordingly reviews Cerner’s conduct under the deferential abuse of 

discretion standard, but with the additional skepticism required by Cerner’s structural 

conflict of interest.

B. Procedural Irregularities

With Cerner’s conflict of interest established, the Court analyzes the two main 

stages of the claims process—preauthorization and claim—to weigh the significance of 

any procedural irregularity. Like a conflict of interest, procedural irregularities can 

“reduce[] the deference owed to an administrator’s decision to deny benefits” and heighten 

judicial scrutiny. Abatie, 458 F.3d at 972 (citing Fought v. UNUM Life Ins. Co. of America, 

379 F.3d 997, 1006 (10th Cir. 2004)). “A more serious procedural irregularity may weigh 

more heavily.” Id. As discussed below, the record does not suggest “wholesale and 

flagrant violations of the procedural requirements of ERISA” that necessitate de novo 

review, but the steady drum of procedural irregularities adds weight to Cerner’s conflict of 

interest and undermines the credibility of their claim denial justifications. Id. at 971.

a. Preauthorization

Defendants initial denial of UAA’s preauthorization request was reasonable. 

Admittedly, CHPS provided little explanation for their denial of UAA’s initial 

preauthorization request.

8 More was not needed. The terse denial simply quoted the 

relevant Plan provision, explaining that “air transport for a second opinion is not a covered 

benefit under the plan.” (DSOF ⁋ 41) (emphasis added). CHPS italicizes “medical 

 

8 The email follows multiple recorded phone conversations with UAA. All uniformly 

communicated UAA’s services were not covered under the Plan. (DSOF ⁋⁋ 28-41.) 
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emergencies” in the quoted plan language to seemingly infer that second opinions do not 

fall in that prerequisite category. (DSOF ⁋ 41.) Notably, this denial came on the heels of 

multiple recorded phone conversations consistently explaining Defendants position. While 

not verbose, this initial interpretation was a reasonable lay interpretation of the Plan’s plain 

language. 

Problems surface in Defendants handling of the first appeal from the denial of this

preauthorization request. On first appeal, CHPS affirmed the initial denial and offered a

slightly more detailed, but confused explanation. Interpreting the Plan language, CHPS 

supports the initial preauthorization denial with two apparently independent justifications: 

(1) K.M. “was not requiring rapid transport for a medical emergency”; and (2) “he was not 

inpatient requiring transport from one facility to another for additional services not 

available at the initial hospital.” (Doc. 82-2 at 4) (emphasis added). This misconstrues the 

Plan’s plain language. See Day, 698 F.3d at 1096. The Plan logically reads to provide air 

ambulance coverage in two general circumstances—neither require inpatient status.

9

CHPS’s first justification reasonably interprets the Plan’s plain language.10 The 

second justification blatantly misreads the plain language of the Plan to require “inpatient” 

status.11 The provision clearly states otherwise. The provision covers “transport to a 

hospital or from one hospital to another.” (DSOF ⁋ 16) (emphasis added). There is nothing 

in the language to require inpatient status. A denial of coverage premised upon such 

 

9 Notably, CHPS’s interpretation at this stage directly conflicts with Cerner’s later 

interpretations at the claims stage, (DSOF ⁋ 77), and with their pleadings before this Court. 

(See DMSJ at 12.)

10 CHPS’s explanation of the Plan seemingly replaces an “unstable condition requiring 

medical supervision”—the Plan language detailing one of the two instances where air 

ambulance travel is covered—with “medical emergency”, the language from the 

provision’s prefatory clause. The relevant Plan language provides “coverage . . . for 

medical emergencies [when] the Participant has an unstable condition requiring medical 

supervision and rapid transport.” (DSOF ⁋ 16.) It is unclear whether CHPS merely 

confused the two terms, consciously defined “medical emergencies” as “unstable 

conditions requiring medical supervision”, or unartfully held that coverage under the 

provision was simply not triggered because although K.M. appeared to need medically 

supervised transport, he did not require rapid transport.10 Despite the confused 

explanation, because K.M.’s underlying condition was considered “stable”—and thus, not 

a “medical emergency” or “unstable condition requiring medical supervision”—reasonable 

grounds for denial existed.

11 This gross misreading of the plain language of the plan is found in numerous 

communications at multiple levels of claims processing at both Cerner and CHPS. 
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misreading is precisely the type of “illogical,” “implausible” interpretation that qualifies as 

an abuse of direction. Salomaa, 642 F.3d at 676 ; see also Day, 698 F.3d at 1096. (“ERISA 

plan administrators abuse their discretion if they . . . construe provisions of the plan in a 

way that conflicts with the plain language of the plan”). 

On second appeal, Cerner reversed the denial of UAA’s preauthorization request, 

and instead, certified the medical necessity of UAA’s air ambulance services. Cerner tries 

to pin this reversal on UAA. They argue UAA misrepresented K.M.’s medical status by

selectively disclosing health records excluding PCH’s March 21st ER records where two

doctors’ recommended against the UAA flight. But this does not explain Cerner’s drastic 

interpretive pivot. It is worth establishing what Cerner knew at this decision point. An 

email chain between Bogorad and K.M.’s case manager demonstrates Cerner knew the 

following: (1) Travel by air ambulance was considered medically necessary by Dr. Notrica 

at PCH and Dr. Carey at BCH; (2) K.M.’s underlying condition was “stable” and “nonemergent”; (3) on the day of transport, doctors at PCH wanted to admit K.M. to treat 

possible sepsis; (4) PCH could successfully treat K.M. for sepsis but not his underlying 

condition; (5) K.M. was signed-out of the PCH ER against medical advice. (Doc 82-4 at 

6-8.) The email chain also includes an initial negotiated estimate for UAA’s services of 

$39,865.12 (Doc 82-4 at 8.) Even if UAA’s selective disclosure of medical records caused 

Cerner to believe K.M. “require[d] rapid transport for a medical emergency” at the time of 

the UAA flight, at no point do the medical records indicate that K.M. was “inpatient.”

Cerner denied the first preauthorization appeal because the Plan required K.M. to be 

inpatient status. Both the administrative record and Bogorad’s deposition demonstrate 

Cerner knew K.M. was outpatient at the time of the UAA flight. (See Doc. 82-4 at 6, 8.)

UAA’s selective medical records disclosure cannot create a record of K.M. being inpatient. 

The record contains no meaningful explanation for these changing interpretations. Neither 

do Defendants pleadings. The Court finds Defendants attempt to blame the anomaly on 

UAA unavailing.

 

12 Prior to the initial denial of UAA’s formal claim, this estimate would balloon to 

$600,000. (Doc. 82-1 at 63.)
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b. The Claim

The problems continue at the claims stage. Cerner quickly backtracked from 

approving UAA’s preauthorization request and denied both UAA’s formal claim and, 

eventually, both appeals. Cerner denied UAA’s first level appeal for two reasons: (1) air 

ambulance services were not recommended by an “appropriate provider”13; and (2) the 

record did not support an “emergent need” that required “air ambulance transport . . . from 

one hospital to another.” (Doc. 82 at 48-49.) Each justification is problematic.

First, as to (1), Defendants now argue the Dr. Notrica and Dr. Carey letters 

recommending treatment at BCH and transport by air ambulance do not qualify as 

“recommendations from appropriate providers” because they address K.M.’s underlying 

bowel condition, not the emergent sepsis that would trigger coverage.

14 (Defendants’ Reply 

at 6.) That K.M.’s underlying bowel condition does not qualify as a “medical emergency” 

under the Plan may be a rational reading, but the treatment of Dr. Notrica and Dr. Carey’s 

recommendations raises an eyebrow. Particularly in circumstances like K.M.’s, where a 

chronic non-emergent condition increases the likelihood of emergent events identical to 

the one K.M. suffered on March 21, 2017, consideration of such recommendations seems 

appropriate.15 The denial letter does not attempt to parse the emergent and non-emergent 

 

13 Cerner did not previously rely on this justification when considering UAA’s 

preauthorization request and related appeals. 

14 The nuanced argument Defendants make at the pleading stage is largely absent from the 

administrative record. (See Defendants’ Reply at 6.) The First Appeal denial letter cites 

only the recommendations against transport made by K.M.’s PCH gastroenterologist and 

emergency room physician on the day of the UAA flight. (Doc. 83 at 44-46.) Dr. Carey 

and Dr. Notrica’s earlier recommendations are not considered. (Id.) In examining ERISA 

claims, the Ninth Circuit has applied the “general rule that ‘an agency’s order must be 

upheld, if at all, on the same basis articulated in the order by the agency itself,’ not a 

subsequent rationale articulated by counsel.” Jebian v. Hewlett-Packard Co. Employee 

Benefits Organization Income Protection Plan, 349 F.3d 1098, 1104 (9th Cir. 2003) 

(quoting Fed. Pow. Comm’n v. Texaco, Inc., 417 U.S. 380, 397, 94 S.Ct. 2315, 41 L.Ed.2d 

141 (1974)). The Court will do so here.

15 Defendants do not contest that because of his underlying, chronic condition—PNALD—

K.M. “has had multiple central line associated blood stream infections (CLABSI), which 

also represents a major source of mortality in patients with intestinal failure.” (Dr. Carey 

Letter.) 
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aspects of K.M.’s condition or their corresponding recommendations. Instead, Cerner 

makes no mention of Dr. Carey’s recommendation and includes only a small excerpt—

three fragmented sentences emphasizing the “second opinion” language—from Dr. 

Notrica’s letter. Defendants argue that, being made one month prior to treatment, the 

doctors’ recommendations “cannot be reasonably considered recommendations for 

treatment on March 21, 2017.” (Defendants’ Reply at 6.) Here, however, Cerner’s refusal 

to consider the earlier recommendations undermines the reasonableness of their review.

As recommendations for treatment of a longstanding, chronic condition the medical 

opinions carry more presumptive validity over time than a prescription for passing malady. 

Dr. Notrica and Dr. Carey recommended treatment and travel by air ambulance to address 

a chronic condition that still afflicted K.M. on March 21, 2017. Combined with the 

complexity of K.M.’s condition, the recommendations merited consideration. By

recommending costly medical treatment requiring a cross-country flight, the letters

implicitly contemplate that some passage of time is likely before treatment at BCH given 

the significant logistical hurdles, long travel, and the potential for immediate treatment 

upon arrival.

Second, as to (2), Defendants denial of UAA’s first claim appeal identifies two 

distinct requirements to qualify for coverage—the patient must suffer a “medical 

emergency” and also require “air ambulance transport . . . from one hospital to another.” 

The first requirement, permitting coverage only in “medical emergencies,” is explicitly 

supported by the plain language. (See DSOF ⁋ 16.) However, the Plan leaves “medical 

emergencies” undefined. (See Doc 68-4 at 51-59.) In their pleadings, the parties argue 

over the proper definition of “medical emergency.”16 (Plaintiff’s Resp. at 8; Defendants’ 

 

16 Defendants offer definitions from medical dictionaries to conclude that medical 

emergencies necessarily include a sense of urgent need and that “a chronic condition, no 

matter its severity, is not an emergency.” (Defendants’ Reply at 6.) A lay interpretation 

of emergency supports Defendants position. On the other hand, UAA rejects this 

interpretation and contends that K.M.’s emergent condition—sepsis—is inextricably tied 

to his chronic condition—PNALD. (Plaintiff’s Resp. at 8.) Because the medical 

emergency here directly arose from his chronic PNALD, coverage for air ambulance is 

warranted. (Id.)
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Reply at 6.) Both parties’ arguments have merit.17 But in examining ERISA claims, the 

Ninth Circuit applies the “general rule that ‘an agency’s order must be upheld, if at all, on 

the same basis articulated in the order by the agency itself,’ not a subsequent rationale 

articulated by counsel.” Jebian v. Hewlett-Packard Co. Employee Benefits Organization 

Income Protection Plan, 349 F.3d 1098, 1104 (9th Cir. 2003) (quoting Fed. Pow. Comm’n 

v. Texaco, Inc., 417 U.S. 380, 397, 94 S.Ct. 2315, 41 L.Ed.2d 141 (1974)). Despite the 

reasonableness of Cerner’s present interpretation, a post-hoc rationalization of what 

constitutes a “medical emergency” is of limited probative value in evaluating their 

justification for claim denial at this stage. The Plan does not define “medical emergency.” 

(See Doc 68-4 at 51-59.) Neither does Cerner’s order. (See Doc. 82-1 at 21-24.) Cerner’s 

determination at first level appeal merely quotes the Plan language without explanation,

then denies UAA’s appeal. (Id.) Hardly a model of clarity, this communication certainly 

does not explain Cerner’s reversal and Plan interpretation “in a manner calculated to be 

understood by the claimant.” Saffon, 522 F.3d at 870 (quoting Booton v. Lockheed Medical 

Benefit Plan, 110 F.3d 1461, 1463 (9th Cir. 1997). 

Additionally, Defendants interpretation of the Plan here is inconsistent with their

prior interpretation at the preauthorization stage. At the preauthorization stage, both 

Bogorad and Dr. David Nill, the individuals charged with final claims determinations, 

knew K.M. sought UAA’s services a “non-emergent” condition on March 21, 2017. They 

knew, on “[t]he day of transport, he was ill but the acute care he needed could have been 

provided, like many times in the past, by Phoenix Children’s.” (Doc. 82-4 at 8.) They 

reversed the preauthorization request denial anyway. As mentioned previously, 

 

17 Defendant’s interpretation possibly leads to somewhat perverse results. The arbitrary 

categorization of chronic conditions as “non-emergent” and sudden illness as “emergent” 

rapidly breaks down as the severity of a chronic condition increases. Consider a patient has 

a chronic condition like K.M.’s, but with a nearly 100% mortality rate. This chronic 

condition, when untreated, likely leads to emergent events that increase in both severity 

and regularity over time. Under Defendants Plan interpretation, the patient could only 

qualify for air ambulance coverage in medical emergencies. But, given that the Plan 

arbitrarily separates the emergent events that stem from the chronic condition, the patient 

would never be covered for necessary transport by air ambulance if local hospitals are 

unable to treat the chronic condition. Medical insurance does not offer limitless coverage, 

but such arbitrary interpretation acts like a death sentence. 
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Defendants attempt to blame their reversal on UAA’s provision of selective medical

records is unavailing. Given that Defendants do not define “medical emergency” at any 

point in the review process, the reversal at the preauthorization stage indicates inconsistent 

Plan interpretation at a minimum. Applying the additional skepticism required by Cerner’s 

conflict of interest, this inconsistency casts reasonable doubts on the claim process. See 

Nolan v. Heald College, 745 F.Supp.2d 916, 926 (N.D. Cal. 2010) (“[F]ailure to distinguish 

a contrary . . . determination, failure to explain the evidence necessary to make a successful 

appeal and selective use of evidence are all factors that support ‘giving more weight to the 

conflict.’”) (quoting Glenn, 128 S. Ct. at 2352). 

UAA points to increased cost of its services to explain Defendants about-face from 

preauthorization approval. (PMSJ at 13.) The price of UAA’s services jumped from a 

$40,000 initial estimate to a $600,000 negotiated cost. (Doc. 82-1 at 3.) Cerner was 

undeniably aware of the increased cost. (Doc. 82-1 at 3.) While no evidence indicates that 

Cerner relied upon or considered cost in denying UAA’s claim, the dramatic cost increase 

stands out as of the only factual distinctions between preauthorization request approval and

claim denial. Standing alone, the inference that Cerner may have considered cost does not 

merit finding an abuse of discretion. However, in light of the other procedural irregularities 

and structural conflict, the effect of the cost differential merits consideration.

Comparing the information available to Cerner when overturning the 

preauthorization request denial with the information on hand at claim denial reveals two 

important differences. First, the increased cost of UAA’s services is significant and was 

unknown when preauthorization was granted. Second, at the claim stage Cerner now had 

the complete medical reports from PCH and statements of K.M.’s PCH pediatric 

gastroenterologist and ER physician recommending admission to PCH and against 

transport to BCH. It is unclear what, if any, determinative information Cerner learned from 

these reports that it did not have available at the second preauthorization appeal. At that 

earlier stage, Cerner understood K.M. could be treated at PCH but was signed-out against 

medical advice. Based on Defendants’ stated Plan interpretation, this alone was sufficient 
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to deny coverage. Although the two PCH physicians’ statements provide more detail, the 

fundamental information later used to justify claim denial—that K.M. was signed out 

against medical advice of doctor’s at PCH—was always available. Bogorad infers as 

much. At deposition, Bogorad could not identify what specific facts from the PCH medical 

records informed Cerner’s reversal, instead stating the “additional information . . . gave us 

more transparency” and the “medical records [were] much more nuanced.” (Doc. 81-4 at 

12). 

Cerner’s review of UAA’s second claim appeal largely rolls-up all the previous 

arguments made to support claim denial in one comprehensive summary. Unsurprisingly, 

Cerner minimizes, selectively cites, or entirely omits adverse evidence in similar manner 

to that detailed above. 

IV. CONCLUSION

a. Summary Judgment

In an ERISA benefits denial case, a district court “is making something akin to a 

credibility determination about the insurance company’s or plan administrator’s reason for 

denying coverage under a particular plan and a particular set of medical and other records.” 

Abatie, 458 F.3d at 969. This case asks whether an ERISA plan administrator with a 

conflict of interest dutifully reviewed a provider claim for a child with complex, 

interrelated medical conditions—some chronic, some emergent; some covered, some not. 

Examining the “actual reasons stated by the [plan administrator],” reveals Defendants 

engaged in a concerted effort to find valid reason to deny UAA’s claim. Pannebecker v. 

Liberty Life Ass. Co. of Boston, 542 F.3d 1213 (9th Cir. 2008). In this case, Defendants 

interpretation of an undefined term, “medical emergencies”, is central. In review of UAA’s 

preauthorization request and claim, Defendants largely relied on other grounds to justify 

denial. When invoked, Defendants failed to communicate a consistent interpretation of 

“medical emergencies” to apprise UAA of evidence necessary to make a successful appeal.

Defendants vacillate between interpreting the Plan reasonably and inexplicably. They

construed “provisions of the plan in a way that conflicts with the plain language of the 
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plan,” Boyd v. Bert Bell/Pete Rozelle NFL Players Retirement Plan, 410 F.3d 1173, 1178 

(9th Cir. 2005), interpreted the Plan inconsistently, failed to “distinguish a contrary . . . 

determination,” Nolan, 745 F.Supp.2d at 926, failed “to explain the evidence necessary to 

make a successful appeal,” id., and selectively used evidence to insulate their decisions. In 

total, Defendants offered five distinct justifications to deny UAA’s claim at different stages 

of the review process. Defendants denials grew more forceful after the quoted claim cost 

went from $40,000 to $600,000. The reasonableness of the plan administrator must be 

judged skeptically because here, “the plan acts as judge in its own cause.” Boyd, 410 F.3d 

at 1178. Considering Defendants conduct with the appropriate skepticism, the Court finds 

the litany of procedural irregularities erode Defendants credibility to sufficiently

undermine the stated reasons for denying coverage. Thus, the Court holds Defendants 

abused their discretion in review of UAA’s claim. 

b. Attorneys’ Fees Award

UAA moves for attorneys’ fees under 29 U.S.C § 1132(g)(1). (PMSJ at 17.) 

ERISA permits district courts to award reasonable attorney’s fees and costs to either party. 

See 29 U.S.C § 1132(g)(1). “A plan participant who prevails in an action to enforce rights 

under the plan is ordinarily entitled to a reasonable attorney’s fee if the participant 

‘succeed[s] on any significant issue in litigation which achieves some of the benefit . . . 

sought in bringing the suit’ and if not special circumstances make an award unjust.” Barnes 

v. Independent Auto. Dealers of Cal. Health & Welfare Benefit Plan, 64 F.3d 1389, 1397 

(9th Cir. 1995) (quoting Losada v. Golden Gate Disposal Co., 950 F.2d 1395, 1401 (9th 

Cir. 1991)). To fully assess the award of attorneys’ fees, the Court requires Plaintiff submit

a motion and supporting documentation seeking costs and attorney’s fees in accordance 

with LRCiv. 54.1 and 54.2, Rules and Practice Civil, District of Arizona. 

Accordingly,

IT IS ORDERED Defendant’s Motion for Summary Judgment (Doc. 67) is 

DENIED. 

IT IS FURTHER ORDERED Plaintiff’s Motion for Summary Judgment (Doc. 
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73) is GRANTED. 

IT IS FURTHER ORDERED that Plaintiff may submit the required memorandum 

and supporting documentation of attorney fees within 30 days of the of this Order. 

IT IS FURTHER ORDERED the Clerk of the Court shall terminate this action 

and enter judgment accordingly. 

Dated this 4th day of December, 2019.