Case Study: Responding to Insurance Denials Due to Lack of Medical Necessity
A medical provider has
received an insurance denial due to lack of medical necessity. To review
the correctness of this action, the providerís office obtains the
carrierís policy definition of medical necessity. According to the
carrier, the medical necessity criteria includes any treatment which (1)
is generally accepted by other medical practitioners for the treatment of
that condition; and (2) is provided at the lowest level of care which
ensures the insured partyís safety; and (3) must not be experimental. In
reviewing the patientís medical records, the provider believes all three
criteria were met and decided to appeal the denial.
The medical provider first
discussed the denial at length with the initial claims examiner. As a
result, the medical provider learned that the insurance carrier believes
only the second criteria was unmet by the denied treatment. Therefore, the
provider based the appeal on information in the medical records which
substantiated the providerís position that treatment could not have
occurred at a lower level of care. They provided information from the
Physicianís Desk Reference regarding the effect certain medications were
expected to have on the patient and the need for such medication to be
To further support the need for a higher level of care, the provider spoke
with the referring doctor about the need for aggressive treatment. The
referring doctor agreed to write a letter of medical necessity for the
treatment in which he carefully outlined the failure of previous, less
Finally, the medical provider specified in the appeal letter that both the
treating physician and the patient requested that the appeal only be
reviewed by a clinician licensed to provide the type of treatment being
As a result, the carrier overturned the previous decision and approved
full payment for the more aggressive treatment.
In any medical necessity appeal, first determine what records were
reviewed in reaching the initial decision. Submit any additional
documentation the carrier indicates would allow approval of the
If all records have been reviewed, you want to submit additional medical
arguments for the treatment and respond to the carrierís recommended
course of treatment. Ask the carrier to provide you with the policy
definition of medical necessity as well as the name and clinical
background of the person who performed the initial review so that you may
address the adequacy of this information in your appeal.
Try to obtain letters
of medical necessity from both the treating physician and referring
physician. Ask the doctors to not only outline the clinical support for
the chosen treatment but to also discuss why the carrierís recommended
course of treatment would not have been in the patientís best interest.
You can also ask the patient to submit an appeal letter. The patient may
be able to submit information of a more personal nature, ie. lack of any
family support structure to assist with home care or an unhealthy home
Check your state insurance code for specific legislation which governs
the insurance companyís ability to deny treatment based on medical
necessity. You may want to quote such information in your appeal
Other cases helpful in overturning lack of medical necessity denials:
Hughes v Blue Cross of Northern California, 263 Cal. Rptr. 850.
Patient was admitted for inpatient treatment of a mental disorder after
several attempts at outpatient treatment had failed to produce desired
results. The insurer denied the coverage for the treatment and indicated
care should have continued at a lower level. However, the court found in
the patientís favor because the carrier did not review the full medical
records and did not outline specific medical reasons to support the
decision in numerous denial letters to the provider.
Breeden v Weinberger, 377 F. Supp. 734 - Federal court ruled that
a Medicare denial of an extended hospital stay (111 days) was
unsubstantiated. Court found that the Social Security Act clearly
indicates that the treating physicianís opinion is not binding in
regards to level of care. However, when there is no direct conflicting
evidence, the attending physicianís decision is to be given great weight
on matters of medical necessity.
Wickline v State of California, 183 Cal. App. 3d 1064 -
California court found public insurer liable for a medically
inappropriate decision resulting from defects in the cost containment
measures. The court found that the insurer had arbitrarily ignored and
unreasonably disregarded an appeal for an extended hospital stay. As a
result, the patient suffered amputation of a leg as a result of alleged
premature discharge from hospital.
AppealLettersOnline.com can assist providers implement an effective denial management program.
AppealLettersOnline.com is an interactive resource provided to level the playing field between Insurance Companies and Medical Providers. You
will find appeal letters, case studies, articles, other resources and the latest intelligence necessary to help healthcare providers make
vital decisions and take strategic actions to address payer denial issues.
AppealLettersOnline.com will help health care
providers actively develop the processes, analytical tracking information, educational programs and procedures needed for
implementing an effective denial management program.
Some of the topics covered at AppealLettersOnline.com include addressing payment reductions such as usual and
customary and out-of-network care reductions, lack of timely filing denials, pre-existing conditions and medical necessity
appeals and improving verification of benefits procedures. Treatment exclusions, maximum benefits denials and
subrogation/coordination denials are also discussed. Tips are also provided on appealing for interest and penalty payment on
late payments and appealing a request for a refund of previously paid claims.
AppealLettersOnline.com discusses all types
of claims including Managed Care, Indemnity, Government, Self-Funded, ERISA
claim issues and managed care contractual payment discrepancies.
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