Being hospitalized is stressful enough without having to worry about whether your insurance company will actually pay the hospital for the medical services you needed to get well. Unfortunately, one of the most frequent ways health insurers try to avoid having to pay for a procedure or treatment is to claim after-the-fact that it was not really medically necessary or that it was experimental. These claims, which are more frequent than you may think, sometimes seem to defy logic. You, the patient, didn’t feel well. You needed medical treatment to get better. The hospital treated you and now you are okay. How can anyone then say this treatment wasn’t medically necessary? What is going on here?

It all has to do with the way contracts between health insurance plans and hospitals are worded. Many of these require the hospital to agree to the health plan’s medical policies, also sometimes known as clinical policies. The medical policies determine when medical procedures are considered by the health plan to be medically necessary, and therefore payable, and when they are not. Some contracts even give the health plan full latitude to make the final call. This means a plan can literally say “It was not medically necessary because we say it wasn’t.” And it ends right there.

These contract provisions come in a number of forms, some less clearly identifiable than others. For instance, “medical necessity” may be defined as services that are (1) necessary for the diagnosis or treatment of a condition, illness or injury; (2) provided in accordance with recognized medical practices and standards; and (3) in accordance with the health plan’s medical policies.Under the last definition, the health plan can argue that any procedure that does not comply with its medical policies is by definition not medically necessary and thus the health plan has no obligation to pay for the treatment.

Health plans also like to include provisions that expressly incorporate their medical policies into the hospital agreement. These policies are completely within the control of the plan. Agreeing to make the policies part of the contract means the hospital agrees to be bound by them even though they had no input in creating them.

The health plans then rely on their own policies to decide on whether any given treatment or procedure is medically necessary. What is important to know, however, is that SAC’s clinical investigations of those claims often show that the denied procedures would be considered medically necessary under traditional medical practices and standards.  But since they don’t meet the health plan’s policies, they are denied. That denial however, is not the end of the story, as SAC has often been successful in recovering on clinical denials even in the face of such language.

To level the playing field, SAC recommends that hospitals and other health care providers remove contractual language binding them to health plan medical policies in future agreements, especially since the hospitals have no role in drafting the medical policies and most agreements give the health plans the right to revise the policies at any time.

In the meantime, it’s important that hospitals be aware of the applicable medical policies so that they can make informed decisions regarding treatment of non-emergency patients.