"Don't Those Pinheads Know I'm Saving Them Money?"

How To Fight Claims Denials

Jeffrey J. Denning


UnCommon Sense 

Battling the Insurance Clerks

Nearly all physicians are competent, honest, well-intentioned solid citizens. So it’s no wonder they go off like roman candles when some clerk at an insurance company says that what they do for a patient won’t be paid because it’s ‘not medically necessary.’

Reacting with anger is understandable in this situation. The implication of one of these denials is that the doctor either doesn’t know what is necessary or does know and is trying to pull a fast one.

Anger can be a fleetingly satisfying emotion. But this is business. What is needed here is logical analysis. Coming passionately unhinged won’t pay the bills.

The cooler head will analyze a medical necessity denial by giving the benefit of the doubt to the insurer: “There is a difference of opinion as to whether this service is covered by the plan in this situation. Since it should be in my opinion, I’ll have to convince them by persuasively explaining my position.”

That may be easier said than done, but it’s worth a try. In our experience, the doctors who do try nearly always win. Here’s how to approach it.

Use The Company’s Definition

Start with the plan’s definition of medical necessity. You’ll find it in your contract. It will also be in the patient’s benefit handbook. This language may help you understand the plan’s decision.

For example, a surgeon performs a minor procedure and charges his Blue Shield plan for the use of his office procedure room, supplies and a tray setup. The entire service comes back denied under the medical necessity criteria because the place of service is not an authorized surgery center.

The surgeon’s reaction: ”Don’t those pinheads know I’m saving them money and giving their insured better service? Besides, if I go to the ASC to do this, I’ll waste an hour of travel and turnover time. How can that inefficiency be good for the system?” It’s an understandable reaction.

But a review of the Blue Shield medical necessity definition [see box] shows that the choice of location is independent of patient or physician convenience. So we won’t bother to include that argument in our appeal.

But just because the computer flagged our procedure/place of service as ‘outside the algorithm’ doesn’t mean it’s wrong. So we will stress the ”consistent with symptoms or diagnosis” and ”most appropriate level” criteria.

That’s not to say our surgeon won’t be hit with the catchall wiggle words: ”consistent with Blue Shield medical policy” language. For example, it may appear to the doctor that using his office is more economical than using the hospital. But if Blue Shield has negotiated a volume discount that is dependent on hitting a quota number of procedures each month, our surgeon may be interfering by using his office. Still, it’s worth making the case that what you have billed is reasonable and necessary under the circumstances.

Steps in the Appeal

When writing your appeal letter, start with the plan’s definition of medically necessary. Restate the part of the definition you followed.

For example, if there is language like ”in accordance with generally accepted professional standards” you have a great place to start. Point out how other payers handle this situation and back it up with actual cases. This will force an admission that the problem plan is denying your payment based on an internal policy and not on any objective industry standard.

Will the appeal work every time? Does anything in life work every time? It can’t work if you don’t try it. And, getting your current case settled in your favor may create a useful precedent for future cases like it. It’s a lot of paperwork, but have you ever noticed how much paperwork you have always had to do in your office and at the hospital? It’s part of the job. Just do it.

Sample of Actual Letter (with identifying information removed)

Dear Claims Supervisor:

This is to appeal the retrospective denial and request for refund of the services rendered from 2/5/10 to 11/22/10.

The patient’s policy defines Medical Necessity as ”Services which include only those which have been established as safe and effective, are furnished in accordance with generally accepted professional standards to treat illness or injury.” The patient’s policy requires that services be provided in the least expensive level of care or medical environment.

Medicare is the largest insurer in America, with more physicians than any other single plan. Medicare includes coverage for these services when provided with Mr. Smith’s diagnosis. This meets or exceeds the “generally accepted professional standards” stipulated in your definition.

Mr. Smith was treated in an outpatient setting with follow-up care provided by his family. Had we provided his services as a hospital inpatient, the costs would have been significantly higher:

Date of Service Outpatient Inpatient
2/5/10 – 2/10/10 $10,376 $18,000
4/8/10 – 4/11/10 6,811 10,000
11/1/10 – 11/22/10 10,835 42,000
Total $28,022 $70,000

Our care provided in an outpatient setting meets the definition of the “least expensive setting” stipulated in your definition.

We pre-authorized each series of treatment, were paid for the service based upon the contract. This would be considered a ”good faith” effort to tell the patient what his financial responsibility was with each treatment. We do not feel your retrospective demand for refund of $14,000 is justified based on our compliance with your policies. It is unfair and unreasonable to expect the patient or the physician to bear the burden of a refund of payment after the care was rendered in good faith.


(Treating Physician, MD)


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