Most Disputes with HMOs Involve Out-of-Network Care or Scope of Coverage, Not Medical Necessity Issues; Patients Win Nearly Half of All Appeals

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Most disputes between patients and their health maintenance organizations do not deal with the medical necessity of services, and many of those that do are resolved in favor of patients, according to a study by researchers from RAND and the Harvard School of Public Health.

Patients won about half of the appeals claiming that denied care was medically necessary, and prevailed in about one-third of the other types of appeals, according to researchers.

The study, published in the Feb. 19 edition of the Journal of the American Medical Association, is the first detailed examination of pre-service insurance appeals—those filed by patients who are seeking coverage for care they want, as opposed to payment for care they have already received.

After studying records from two of the nation's largest HMOs, researchers found that about one-third of the pre-service appeals involved issues of medical necessity. The rest contested the scope of insurance coverage or patientsí ability to obtain care from providers outside their network.

A significant portion of the appeals over medical necessity disputed coverage for elective procedures, such as varicose vein removal and scar treatments, rather than life-saving medical care. About 10 percent of the appeals for medical necessity involved treatments for obesity, including gastric bypass surgery.

"There has been a tendency to characterize managed care disputes as basically fights over life-and-death care," said David Studdert, an assistant professor at the Harvard School of Public Health and RAND consultant who was lead author of the report. "This impression misses the main body of these disputes. Understanding the different shapes and sizes that managed care appeals come in should help to craft better policies for protecting patients."

"People in managed care plans who feel like they have been denied coverage unfairly should know that systems of review like this are available to them, usually both inside their plan and outside of it." Studdert said. "The typical appeals system is fairly easy to use and free, and patients should not be too pessimisticóthey may well be told, ëWeíre wrong and youíre rightí."

Roughly 87 million Americans with private health insurance are enrolled in HMOs and other managed health care organizations—about half of those with private insurance, according to 1999 statistics. Enrollees file an estimated 250,000 appeals each year with their HMOs.

Studdert and RAND economist Carole Roan Gresenz reviewed records from about 3,500 pre-service appeals filed from 1998 to 2000 by patients enrolled in two California-based HMOs, which covered several million people. About 60 percent of those appeals were related to care or equipment not yet obtained, with the rest seeking payment for care already received, such as visits to emergency rooms.

Appeals were classified as relating to scope of coverage if the primary tool for settling a dispute was the terms of an enrollee's insurance policy. Medical necessity appeals were those where the primary reference point was the customary practice of medical care.

Researchers say they were struck by how the pre-service disputes centered on a relatively narrow band of medical services and conditions.

"The disputes are concentrated in specific areas," Gresenz said. "This suggests that many of these appeals might be eliminated if there was clearer communication ahead of time with patients about what conditions are covered and what conditions are not covered."

Among appeals challenging contractual limits, requests for coverage for foot orthotics, speech therapy, physical therapy, dental care, alternative medicine treatments, investigational therapies and infertility treatments accounted for most cases.

Enrollees said their primary reason for seeking care from a specialist outside their medical network was because they believed that the outside provider was of higher quality or because they wanted to continue a prior relationship with the provider.

The study is the second in a series of reports that come from a project investigating the appeals systems health plans operate. The project is supported by a grant from the U.S. Department of Labor.

Read the journal article »

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