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When Doctors Get Second Guessed
“MEDICALLY NECESSARY” are procedures, treatments, supplies, devices, equipment, facilities or drugs (all services) that a medical practitioner, exercising prudent clinical judgment, would provide to a patient for the purpose of preventing, evaluating, diagnosing or treating an illness, injury or disease or its symptoms, and that are:
- in accordance with generally accepted standards of medical practice; and
- clinically appropriate in terms of type, frequency, extent, site and duration and considered effective for the patient’s illness, injury or disease; and
- not primarily for the convenience of the patient, physician or other health care provider; and
- not more costly than an alternative service or sequence of services at least as likely to produce equivalent therapeutic or diagnostic results as to the diagnosis or treatment of that patient’s illness, injury or disease.
For these purposes, “generally accepted standards of medical practice” means standards that are based on credible scientific evidence published in peer-reviewed medical literature generally recognized by the relevant medical community, national physician specialty society recommendations and the views of medical practitioners practicing in relevant clinical areas and any other relevant factors.
Source: Anthem Policy #ADMIN.00004
The City Attorney's Medical Necessity Definition
Based on discussions with stakeholders including organized medicine, the Los Angeles City Attorney’s Office has written a definition of medical necessity that it may decide to introduce in legislation as a statewide standard. It reads:
“A service is medically necessary when, in the considered, prudent and good-faith judgment of the treating physician, it is reasonably required to protect life, prevent a significant illness or disability, or alleviate or avoid severe pain. In determining whether to authorize a service, the plan or insurer shall defer to the treating physician’s judgment, unless it can produce credible medical or scientific evidence that a less-expensive service is more or equally as safe and efficacious as that ordered, prescribed or recommended by the treating physician, or that the treating physician’s order, prescription or recommendation was not the product of considered, prudent or good-faith judgment.”
The phrase questions a treating doctor’s judgment and undermines their medical authority, sure. But it also gives payers wiggle room to avoid shelling out based on their own medical criteria. In essence, it can be seen as an attempt to practice medicine without once examining a patient. But that’s not the end of it—money paid by Medicare to doctors for services rendered has been revoked by the agency’s hired fraud investigators, who usually cite questioned treatments as lacking “medical necessity.”
None of this has escaped the notice of the California Medical Association, however. Over the years, several members have introdu ced resolutions to its House of Delegates aiming to correct the problem for California physicians. It’s not a simple matter, though. None of the public and private payers use the same definition of medical necessity, and imposing a standard definition will be tricky, since it will have to gain the approval of most of the state’s legislators. Even if it is possible to create a standard definition, U.S. case law might simply not support that kind of approach. As a result, the CMA could pursue a third course of action—requiring insurers’ medical directors to attain specific training and expertise before they can make decisions about medical necessity. That tack would still take the fight to payers, argue proponents, while reducing ambiguity about what patients actually need.
An Ill-Definted Term
NO TWO PAYERS, public or private, mean the same thing when they say they’ll pay for medically necessary care. A study by the 2003 U.S. Center for Mental Health Services reported that there is no federal definition of “medical necessity,” and only about one-third of the states have any sort of regulatory definition. That situation is ongoing. In most cases, then, the term’s meaning “is most commonly found in individual insurance contracts that are defined by the insurer and hold primacy in most determinations,” says the study.
Where a trained physician might expect “necessary medical care” to mean treatment that meets the profession’s standards, the way payers actually define the term is quite broad (see “Blue Cross of California’s Medical Necessity Definition”). After an extensive investigation, the CMHS reviewers boiled most payer contracts down to five categories of standards: contractual scope; standards of practice; patient safety and setting; medical service; and cost. As for state laws that allow external reviews, the CMHS researchers found that many state regulatory definitions of medical necessity mirror this multi-categorical approach, taking a cue from the industry itself.
Of course, to even be considered for reimbursement, each treatment must not be specifically disallowed by a patient’s contract. Even then, a treatment might meet a health plan’s standards for four of the above categories, but still be rejected based on its cost relative to another efficacious treatment. Health plans and treating doctors can also simply disagree about what constitutes an accepted standard of practice.
Things should have been different after most of the large health plans settled federal Racketeer-Influenced and Corrupt Organizations lawsuit filed by the California Medical Association, the Medical Association of Georgia, and 18 other state and county medical societies. Among other things, the RICO settlements imposed a more stringent medical necessity definition on the companies, requiring medical directors to refer to clinical information available from medical society guidelines, peer-reviewed journals and other mainstream medical sources. Under this definition, the plans may only push for cheaper treatment alternatives when they are “at least as likely to produce equivalent therapeutic or diagnostic results,” according to settlement documents. The settlements also set up an independent external medical-necessity review process for handling disputes between physicians and health plans.
Unfortunately, many health plans do not always abide by the RICO settlements or the new definition. “They didn’t implement it,” says Mountainview neurologist Susan Hansen, MD. She “fought very hard” for language in the RICO settlements that would prevent health plans from asking non-contracted physicians for information during a medical-necessity review process, to avoid HIPAA-related problems. But the companies still do it. “The other problem is that the definition of medical necessity in the RICO settlements doesn’t give authority to the treating physician,” Dr. Hansen continues. That puts the burden of proof in the wrong place—on the treating physician rather than the health plan.
In another example reported in 2006 by CMA’s California Physician, Santa Rosa cardiologist Patrick Coleman won a RICO-settlement compliance dispute with Aetna based on a contract analysis that CMA legal counsel helped him file with the appointed compliance dispute facilitator. Part of that successful complaint charged that the company had used a medical-necessity definition inconsistent with its settlement agreement.
Currently, Blue Cross of California requires its medical directors to refer to medical policies or clinical utilization management guidelines to find whether a particular treatment is covered. If the answer cannot be found there, “reviewers will use their discretion and professional judgment to select resources from the list below which may be appropriate to be referenced for the requested services based on the clinical circumstances of the member.” That list includes specialty societies, Medicare, the Association for Healthcare Research and Quality, the Blue Cross Blue Shield Association’s Technology Evaluation Center, and others. “Reviewers should exercise their professional judgment in selecting appropriate resources and in rendering their determination,” the company notes.
Questioning Treatment
HEALTH PLANS INVOKE a lack of medical necessity “any time we need authorization for anything beyond the most inexpensive, mildest medical intervention,” says addiction medicine specialist Don Kurth, MD, who worked as medical director of Loma Linda University’s Behavioral Medicine Center for about a decade.
Nearly every day, the center would receive denials for important interventions, such as inpatient medical treatment for drug addiction and alcoholism. “Generally, if somebody could stop drinking on their own or using drugs, they would’ve stopped long ago.” Patients get sent to a tertiary referral center like the Behavioral Medicine Center because they’ve already failed to quit addictive behavior after meetings with physicians, group therapy, Alcoholics Anonymous and other low-level interventions. “Yet the insurance companies repeatedly cite that inpatient detox is not medically necessary,” says Dr. Kurth.
Medical-necessity denials are so serious that the issue came up at the first advisory committee meeting for Loma Linda’s upcoming Health Care Leadership Center. “It may save money in the short run, but it costs society much more in the long run,” Dr. Kurth says. “Why wouldn’t you pay the few dollars it takes to get someone to quit smoking, rather than pay for lung-cancer treatments later?”
Asked whether some of these denials were based on accepted standards of practice, Dr. Kurth laughs. “In our specialty, we have a book called ‘Patient Placement Criteria,’ and that’s nationally recognized as ‘The Bible’ on addiction care—but insurance companies will come up with their own, arbitrary criteria.”
Lack of medical necessity is often cited in denials of payment for diagnostics, says Mountainview neurologist Susan Hansen, MD. For example, it comes up a lot when she needs MR angiograms for patients who are at risk for aneurisms. Some health plans have procedures that require her to share patient information before they will agree to pay. Because she’s not contracted to some of these insurers, sharing information would break HIPAA privacy requirements. And since these health plans also ask whether a patient’s family members have had an aneurism, she runs the risk of affecting the insurability of these people. “For an insurance company, economically speaking, the best thing to have happen to a patient with an aneurism is for it rupture and for them to die,” she says.
Not Even Prescriptions Are Immune
WHEN IT COMES TO physician-recommended drugs, insurers still invoke a lack of medical necessity even when delays threaten patient health, says Reneé Williams, a registered nurse at the Arthritis Medical Clinic in Riverside, where RCMA member Babak Zamiri, MD, is medical director. When patients with diseases such as rheumatoid arthritis, lupus, and ankylosing spondylitis need medication, they need it quickly—before permanent physical damage occurs. Williams, who does much of the approval process back-and-forth, says that by the time rheumatoid arthritis patients reach her clinic, they have often had symptoms for as many as five months, and nearly a third of them suffer permanent joint damage due to drug-treatment delays.
Most insurers require a lot of work on the part of healthcare providers before they will cover many medications, particularly biologics and new medications. Most often, “they will deny it, but then you write a medical necessity letter giving them all the medical justification, including previously failed drugs, that meet the insurer’s protocol,” says Williams “They will provide you with another medication—if there is no other medication that they offer, then we can get an appeal that will cover it.” In the worst cases, she says, the delays caused by all this negotiation and trying of alternate drugs can result in patients becoming bedridden or wheelchair-bound.
Patients fail a second-choice drug about a quarter of the time, and sometimes eight weeks go by before a patient can get HMOs and other insurers to cover a useful drug. As a result, the Arthritis Medial Clinic works extra hard to get the right drug quickly, often educating the patient to file appeals in concert with appeals from the clinic. “I always go to patients and say, ‘This is what I would do if you were my mom,’” says Williams. Still, the whole process can consume a lot of time, money and effort—the clinic even employs a staff to work full-time on authorizations.
At Riverside’s nearby Nephrology Associates, they see a lot of medical necessity denials from HMOs for preventative medications, which can lead to very expensive problems down the road, says RCMA board member Joseph Lee, MD. Take diabetic complications that can lead to end-stage kidney failure. “We have a lot of trouble getting through to insurers that a drug would go a long way in preventing patients from having kidney failure,” Dr. Lee explains, adding that he’s following guidelines issued by the American Diabetic Association and the National Kidney Foundation. “I think the people who authorize these are not necessarily medical personnel with all the knowledge, equipment and newly updated information.”
Once a patient’s kidney health deteriorates, drug coverage gets easier. “Kidney disease is a serious problem, so they pretty much let us do what we want to do,” says Dr. Lee. Overall, he estimates that HMOs deny about 10 percent of his drug authorizations for lack of medical necessity, with PPOs giving less trouble. He’s able to overturn about 75 percent of those denials with phone calls and explanations to health plan doctors. “But you don’t always get a doctor to call you back,” says Dr. Lee. “It’s just not a trusting system anymore, and the unintended consequence is a lot of delay in appropriate care. Patients probably wind up with more complications.”
CMA Resolutions
FOR YEARS, CMA members and staff have struggled with how to bring this situation to heel. Two resolutions introduced in the 2008 House of Delegates—401-08 and 414.08—call for the association to push for laws and policies that take medical necessity decisions out of the health plans’ hands entirely, and give the responsibility solely to treating doctors. Dr. Hansen is one of the authors, and Los Angeles County Medical Association President Robert Bitonte, MD, is the other.
To achieve this goal, all three resolutions aim to use one standard definition of medical necessity to replace the disparate health plan definitions. And in the face of almost certain, well-funded health plan lobbying opposition, they all draw from a definition California law already uses to govern Medi-Cal:
A service is “medically necessary” or a “medical necessity” when it is reasonable and necessary to protect life, to prevent significant illness or significant disability, or to alleviate severepain.
—California Welfare and Institutions
Code, Section 14059.5
That line implies that these decisions are made by a treating physician, but for good measure, one of the resolutions goes a step further by specifying that only “a licensed physician who personally examines the patient” can determine medical necessity. That resolution also calls for shifting the burden of proof onto health plans, calling for a presumption that treating doctors are acting in good faith when they decide that a treatment is necessary; it goes on to require a good-faith patient examination by anyone determining medical necessity.
“It used to be that a vast number of physicians who had their licenses suspended or revoked had disciplinary action on the basis of their failure to complete a good-faith examination,” says resolution author Dr. Hansen. “There’s no expectation that a medical director will perform a good-faith exam, and when that patient dies, they’ll be miles away and their name won’t be on the chart.”
Hoping to find out whether that approach would genuinely give doctors the final official say in what patients need, the CMA Committee on Medical Services examined the issue, including a review of relevant case law, which it finished in April. But according to its analysis, when it comes down to gritty legality, officials within Medi-Cal now make decisions on medical necessity, despite the program’s governance by he Welfare and Institutions Code. Relevant cases tried under federal law point to the same conclusion, says Armand Feliciano, CMA associate director for medical and regulatory policy.
Still, the Committee on Medical Services has a few more ideas about how to get the right treatments for patients, according to Steve Una, MD, a Castro Valley internist who serves as its chair. The new course that Dr. Una’s committee recommends is for the CMA to call for new requirements among health plan medical directors. Instead of allowing non-practicing doctors or specialists from another field—or even non-physicians—to make the final call as to what is medically necessary, the CMA may begin advocating for medical directors to closely mirror treating doctors. “It’s a strong step for physicians to push back on insurance plans,” says Dr. Una.
According to Feliciano, the association could begin calling for health plan medical directors to hold a California license, certification by the Medical Board of California, similar training to the treating doctor, and current work in a medical practice.
Dr. Hansen herself was hoping for a different outcome, but she’s encouraged that the issue is moving forward. “I believe it’s likely that this issue will be coming back to the House of Delegates for another look, because I don’t think we’ve completed the job—I think this was a good first step,” she says. “But what we really need to do is make it so that somebody sitting in a different room can’t just open up a recipe book and check off the boxes; we need to make it so that the doctor has the authority to do what’s right.”
Legislation from L.A. County
THE LOS ANGELES CITY Attorney’s Office might be getting into the act of redefining medical necessity also, says Jeff Isaacs, chief of its criminal and special litigation branch. “If it’s something that’s worthwhile, we would propose it as legislation to amend the Insurance Code and the Knox-Keene Act,” he says. “Then at least you have a standard by which you can hold the insurance companies liable, or at least they’ll know what they have to do.”
Working with various stakeholders—including the California Medical Association and L.A. County Medical Association President Dr. Robert Bitonte—the city attorney’s definition gives treating doctors the right to decide what is medically necessary (see sidebar, “The City Attorney’s Medical Necessity”). At the same time, it specifically places the burden of proof upon insurers, should they want to argue a lack of necessity, and it protects health plans from the possibility of an unscrupulous doctor.
From Isaacs’ viewpoint, a universal standard of medical necessity provides the foundation for changing insurer and health plan behavior. Most lawsuits involving medical necessity can only be prosecuted in civil court as individual cases, because there is no clear standard that applies across the board. “But if you can prove that something was a practice that involved thousands of people, then all of a sudden, the calculus changes in terms of the legal exposure of the insurer,” Isaacs says. “No class action means no significant punitive damages, means not much threat to the insurance companies.”
In the absence of a statute or resolution defining a standard, the law falls back upon contracts. “That’s what basically allows policies to write in whatever they want, which means, for one thing, that they don’t have to pay any deference to the views of the treating physician, when it comes to determining medical necessity,” says Isaacs. That situation has allowed expert treating doctors to be second-guessed by non-expert doctors or even non-doctors whose salaries are paid by health plans.
However, the City Attorney’s Office has no specific plans to file medical-necessity class action lawsuits just yet. Its interest in the topic came about as a part of its wider investigation into health plans that had improperly rescinded member coverage, as well as those that may have underpaid doctors under the guise of reimbursing at “usual, reasonable and customary rates.” The rescission campaign culminated in city attorney lawsuits against HealthNet in February 2008, Anthem Blue Cross in April 2008, and Blue Shield in July.
Asked about the medical necessity definition available in the California Welfare and Institutions Code—and recently introduced at the CMA House of Delegates—Isaacs has one small quibble. It includes the term “reasonable and necessary,” which leaves the definition somewhat open to interpretation. “It works better than what’s in [overall state law], which is nothing,” he adds.
As for whether the Welfare and Institutions verbiage favored by the CMA Committee on Medical Services would in practice still give insurers the final say, he says, “It’s not a question of whether the law is being followed in the breach—we’ve documented that these companies will adhere to any standard they want to, unless and until a court tells them otherwise, or a jury tells them otherwise with a substantial verdict, or they realize that their legal position is untenable because there’s a clear definition [of medical necessity], and they’re looking at an enormous financial exposure.”
Medical Necessity and Medicare
‘RECOVERY AUDITS’ PRACTICES expend a lot of resources to get authorization and eventual payment, but there’s another way that the medical necessity problem has been hitting physicians in the wallet. Medicare Recovery Audit Contractors, which the agency hired for a fraud-hunting pilot program, list “lack of medical necessity” more than any other reason when they recover money “overpaid” to doctors and hospitals.
“Almost all the cases we handled were inpatient short stays and inpatient rehab facilities, and most of our cases were ‘medical necessity’ for the type of setting,” says Drew Wachler, a partner in Royal Oak, Mich.-based Wachler and Associates, which specializes in Medicare appeals for physicians. He estimates that as the firm was able to successfully argue about 90 percent of these cases in providers’ favor, with each case dealing with an average of $10,000 to $35,000.
On a case-by-case basis, it’s difficult to tell whether RACs, such as PRG Schultz in California, are being overzealous. But Wachler is clear about the overall picture: “In our medical necessity cases, we have a very high rate of denied claims being approved eventually, at the administrative-law judge level. That, to me, would be tangible evidence that their medical necessity disallowances are not consistently and appropriately being applied. They’re essentially looking for reasons for disallowance.”
Wachler also notes that RAC auditors retroactively deny payments based on InterQual criteria, which is a McKesson-developed evidence-based decision support system. The system, however, is meant to function as guidelines, rather than Medicare-approved standards, and is not intended for use in determining reimbursement. Also, a validation contractor hired by Medicare to double-check the RACs overturned 27 percent of denials on medical necessity from inpatient rehabilitation disallowances.
Along with New York State and Florida, California was an early part of the RAC pilot program, which began in 2005, with Massachusetts and South Carolina joining later. The program is scheduled to roll out nationwide by 2010, with validation contractors as a vital component.
The End Result
Together, doctors and patients face a long list of challenges. But a few steps in the right direction can help to shorten that list at least a little bit. When a patient and physician decide, after long and careful consideration, on the best course of action, it’s not uncommon for a total stranger to deny them the promised financial support that could mean a better life for the patient, and even a less costly medical future. With a little luck and a lot of work, it’s possible that the people who practice medicine will again be the ones who make the informed decisions.
