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Home | Medical Necessity

Medical Necessity

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 Solution:
  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 closely monitored. 

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 aggressive treatment. 

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 reviewed. 

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 treatment. 

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.

Application for Your Facility

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 environment. 

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 letter. 

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. can assist providers implement an effective denial management program. 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. 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 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. 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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