Abusive Denial Practices Harm Patients by Delaying and Preventing Medically Necessary Care

If payers wrongfully deny authorization for medically necessary services or refuse to pay services at the appropriate level of care, patients are harmed by delayed services or by being forced to pay for services out-of-pocket. Indeed, the April 2023 Final Rule stems in part from CMS’s acknowledgement that the largest MA plans engage in these harmful denial practices. Comments to the Final Rule cite an April 2022 Report from the Office of Inspector General (OIG). This Report found that the largest MA organizations denied prior authorization requests even when the requested services met traditional Medicare coverage guidelines.¹

In the April 2022 report, OIG analyzed a stratified, random sample of prior authorization denials and payment denials from the largest MA organizations, including UnitedHealth Group, Humana, CVS Health, Anthem, WellCare, and Blue Cross Blue Shield of Michigan.² Coding experts and physicians reviewed the samples for Medicare coverage criteria and medical necessity.³ OIG’s investigation found that 13% of prior authorization denials and 18% of payment denials met traditional Medicare coverage rules and thus should have been upheld under those rules.⁴ OIG recommended that CMS issue guidance to abate prior authorization denials in MA plans, which the April 2023 Final Rule purports to address.

If MA plans improperly deny services at the appropriate level of care, such as by refusing to approve services at the inpatient level of care and instead only approving the outpatient level of care (e.g., observation), patients are harmed. MA plans are bundled plans that include Medicare Parts A and B: Medicare Part A is hospital insurance (which covers inpatient services), while Medicare Part B is medical insurance (which covers outpatient care). If, for example, an MA beneficiary presents to the emergency room and is not admitted inpatient (which would fall under Medicare Part A), but instead is only approved for observation (which falls under Medicare Part B), then the patient may be responsible for paying out-of-pocket for the outpatient care that Medicare Part B does not cover. Thus, denials of the appropriate level of care may result in a higher payment to the MA patient.

CMS Final Rule Requirements

On April 12, 2023, the Centers for Medicare & Medicaid Services (CMS) published a Final Rule that, among other changes, streamlines prior authorization requirements under Medicare Advantage (MA) plans (also known as Medicare Part C) and prevents private insurance companies from wrongfully denying medically necessary care to seniors and those with disabilities.⁵ The Final Rule outlines the following coverage and prior authorization requirements under MA plans:

• Approvals granted through prior authorization must be valid for as long as medically necessary to avoid disruptions in care.
• A minimum 90-day transition period is required when an enrollee undergoing an active course of treatment switches to a new MA plan, under which the new MA plan may not require prior authorization for an active course of treatment.
• Prior authorization policies for coordinated care plans may only be used to confirm that an item or service is medically necessary.
• MA plans must utilize national coverage determinations (NCD), local coverage determinations (LCD), and general coverage and benefit conditions included under traditional Medicare laws.
• All MA plans must establish a utilization management committee to review policies annually and ensure consistency with traditional Medicare coverage.⁶

Changes under the Final Rule are designed to hold private insurance companies accountable for delivering quality care to seniors and people with disabilities.

Compliance in Claims Processing Systems

While the Final Rule issues guidance for clinical criteria, some other OIG recommendations remain unaddressed. Notably, the Rule does not direct MA plans to remediate their claim processing problems. In its 2022 study, the OIG discovered that most of the wrongful payment denials resulted from manual review mistakes or system programming errors.

Payers increasingly rely on automation for medical necessity decisions. Cigna, one of the country’s largest insurers, uses a proprietary system to rapidly review—and potentially reject—large volumes of claims.⁷ Driven by an internal standard for acceptable service and diagnosis code pairings, its algorithmic denials may preclude any manual review of records.⁸ United Healthcare similarly relies on technology to make “fast, efficient” coverage decisions in bulk.⁹

Without the benefit of independent clinical review, it is crucial that payer algorithms match Medicare NCD and LCD coding standards. To ensure that medically necessary services are appropriately covered in accordance with Medicare, MA plans should review and retool their processing systems.

Patient and Provider Remedies

When some MA plans deny authorization requests for medically necessary services, patients and providers alike might resort to paying the costs themselves or forgoing treatment altogether. Challenging these improper denials through the administrative appeals process and other forms of dispute resolution remains an option for providers and patients to recover fees for services provided and to ensure that these medically necessary services may actually be performed.

A 2023 study from Kaiser Family Foundation found that of the 35 million prior authorization determinations made by MA plans in 2021, two million requests were denied.¹⁰ Only 11% of prior authorization denials were appealed, but the vast majority (82%) of appeals resulted in full or partial overturns of the initial denial.¹¹ These findings underscore that the overturned authorization requests never should have been denied, and they raise questions about the validity of the remaining unappealed denials.

As providers and patients continue to struggle with improper denials of medically necessary services when seeking authorization, only time will reveal whether the efficiencies from the CMS Final Rule on prior authorization will assist in reducing payer abuses.