Home > Business of Medicine > The insurance appeals process – Part 1: How it all works

The insurance appeals process – Part 1: How it all works

Ruling the insurance appeals process – Part 1: How it all works

One thing that many residents do not know is that there are more benefits to becoming a board certified physician than just that plaque on the wall.   One of these benefits is that ability to pick up a few extra hours of work here and there doing consulting for the multitude of companies that would like the opinion or expertise of a physician.

In some cases this consulting can be about products under development.  Sometimes it is reviewing the work that another physician has done, perhaps for a hospital quality care committee.  There is also work for some reviewing legal cases.   But probably the biggest area of this work is insurance work – usually in the area of appeals.

When I became board certified, I did a few google searches and ended up signing up with a number of insurance companies to become a third party peer reviewer.  Through this work, I have learned a huge amount about how insurance companies work, and actually developed a far greater respect for what they do than I had previously.   I have also learned the ins and outs of the insurance appeal system, which a third party reviewer is invariably involved in, and in doing so have gained a skill set that allows my insurance appeals to be invariably accepted.  For that reason, I recommend that every young physician review charts – if not for the money, for the education.

But for those who don’t, let me pass on some of the pearls I have gained from this work, that perhaps when your patients are being denied services you think they should have, you will have a better idea of how to have a successful appeal.

In this post, I am going to talk about how the system works and why things get rejected. In the next post, I will discuss a few things you can do to win appeals.

Any time an insurance company receives a claim, it goes through an automated process that determines if it will be automatically approved.  This is typically based on a comparison between what was requested and the ICD9 codes used to justify that request.  As long as these codes match and the service is not major, approval will likely happen right there.  In some cases, likely with more costly or rare services, the case will be manually compared with the written coverage guidelines for the patient’s plan.  In some cases records will have to be provided, which will be reviewed against plan guidelines.   If the case meets guidelines, based on the review of a (potentially non-physician) employee of the insurance or review company, it will be approved right away.

If something is rejected, there is now an opportunity for an appeal, initiated either by physician or patient.   In this process, the appealing provider provides notes that clearly document what was done (or is proposed to be done), usually with intention to prove that it was needed.  This is different than the initial gathering of documents, where usually one just provides medical records but doesn’t really do anything to otherwise justify the request.  These documents are now again compared to plan coverage provisions, to see if the case meets guidelines.  Usually this comparison will be done by a physician working for the insurance company, or third party reviewer at a contracted review company (like me.)  At this level of appeal, the question is whether or not the case meets the guidelines, not whether an exception to guideline should be made.  If the case does not meet guidelines, it will again get rejected.

If this second rejection occurs, the appealing party now has a opportunity for a second appeal.  In the second appeal, documents are again provided (or are re-reviewed), but now the possibility exists that the case might be considered outside of the standard guidelines.  This level of appeal is almost always done by a third party physician with expertise in the specific field at hand.   It is at this level of review that a therapy that is still experimental might be evaluated as still being medically necessary, and thus being covered despite a policy against coverage of experimental procedures and treatments (ie a novel chemotherapeutic regimen after traditional therapy has failed.) These reviews are usually done based on industry standard definitions of medical necessity or experimental/investigational (see appendix).  In this stage, the appeal documentation of the appealing physician is crucial, particularly if they provide a thoughtful letter justifying the request.

To some, this process seems ungainly and complicated, or even downright evil.  Physicians bristle at the idea that an insurance company would ever deign to tell them how to practice medicine, even with the help of a unbiased third party (like me.)  I have had these feelings myself at times – but these feelings are unjustified.

There is a near-unlimited amount of medical care that could potentially be delivered for patients in this country, but the amount of funds is relatively fixed.  As such, it is absolutely imperative that there is some system of rationing involved that will work towards using those limited funds where they will be most useful.  Weeding out requests for therapies that are medically unnecessary or unproven is part of that.  While it can be frustrating, we have given insurance companies this job.  We can argue that they shouldn’t make so much money doing it, but its hard to argue that it doesn’t need to be done.

Before I started doing this type of reviewing, I generally thought that insurance companies rejected payment for sport (and profit), with little justification or reason.   Now I realize that the system is actually quite just.  Basically, all that is required for something to get approved is that the therapy requested is reasonably within the standard of care and can be supported by current evidence.  In other words, it should be good medicine.   Occasionally appropriate therapy will have to go through the appeals process to get approved, but if what one is doing is appropriate, it will almost always get through.

I have been consistently impressed with the thoroughness and timeliness of insurance company guidelines, which read like well sourced peer reviewed review articles.  They are generally very up to date, and very well thought out, and often were written by experts in the field.

So why do things get rejected?  Here’s an ordered list.

1 – Poor documentation.  Of every 10 charts I review, 6 were rejected because the physician did not document what they were doing and why they were doing it.   When we are residents, we are taught to thoroughly document what we do, and the thought process involved.   Some doctors in private practice have gotten so far from this that their charts have almost no useful information in them.   If that chart is being used to justify an expensive therapy, there is almost certainly going to be a problem.  Physicians have to expect that someone else may read their chart in an effort to justify their actions.  If it doesn’t tell the story or is illegible, rejection is on the way.

2 – Bad medicine.  Of every 10 charts I review, in at least 3 the physician is asking for something that shouldn’t be done, such as a hysterectomy in a  30 year old woman with a normal uterus, without any real attempt to treat her conservatively.  The physician may  get mad about the case getting rejected, but in truth they are practicing bad medicine.  The insurance company is right to reject them.  My experience is that the level of anger that physicians experience in these cases is directly proportional to the bogosity of the treatment they are recommending.  Sometimes a physician requests something that he/she knows is bad, but the patient is requesting, and even writes “we’ll see if insurance will approve this”.  These almost always get rejected (for good reason), and the physician is usually happy to tell the patient that the evil insurance company won’t pay for what they want.  Insurance companies are happy to be the bad cop in these situations.  I have spoken to docs in this situation and heard a sigh of relief when I said that the case doesn’t meet the guidelines.

3 – Industry acceptance of something that cannot be supported in the literature.  Breast MRI is a great example.  Radiologists love to recommend a breast MRI when they have an ‘indeterminate’ mammogram, but this use of breast MRI cannot be supported in the literature, and may actually be harmful.  Doctors freak when the insurance company rejects these, but in truth these doctors are not familiar enough with the literature to realize that what they are asking for is experimental, and possibly harmful.  Another example would be something like compounded bioidentical hormones or salivary hormone testing.  Lots of people believe in them, yet there is no real literature to support their efficacy, safety, and usefulness.   This leads to appropriate insurance rejection, and failed appeals.

4 – Industry introduction of new technology that has yet to be adequately studied.  It is common for industry to try to get their new technology into the standard of care before a study can prove it to lack efficacy.  Short armed retropubic/obturator slings are a great example.  They were on the market for years before any data proved their efficacy, and we are now finding that they aren’t as good as longer ones (what a surprise!).  This is the kind of thing that an insurance company might reject, and rightly so.  MRI guided focused ultrasound for fibroids is another good example of this.  Its a new technology, and data to show comparable efficacy to traditional therapies just isn’t there, nor for cost effectiveness.

5 – Failure to attempt reasonable treatments that are less expensive prior to going to expensive treatments.  Docs hate this, but they really should try less expensive things first.  In most cases, generic drugs are as good as brand, and it does behoove use to spend less money when we can.  Trying some birth control pills for dysfunctional uterine bleeding prior to going to hysterectomy is not only cost effective, it is good medicine.  As docs in general are often not worrying too much about cost, insurance companies worry about it for us.  It is the job we have asked them to do when we decided to create the insurance system about 30 years ago (blame Nixon.)

In my time working with this stuff, I have been genuinely impressed with a consistent desire to cover evidence based and efficacious care from every insurance official I have spoken to.  While the company as a whole may be profit driven, the guidelines they use to ration care seem completely appropriate and up to date.  As physicians, there will be times that we are forced to justify what we do, but this should not be an undue burden.  Throughout residency we are forced to justify what we do, and it makes us better doctors.   Applying the same skills to creating a rational and well sourced argument for our actions continues to be necessary, and helps us to stay thoughtful and current.  Embrace the opportunity to put real words on paper that really describes the course of care.  It will make you a better doctor, and will get your therapies approved along the way.

In part 2 of this article, I will discuss how to successfully appeal an insurance rejection.  If you are practicing good medicine, its not hard to be successful.


** Standard industry language for medical necessity

1. Supported by credible scientific evidence published in peer-reviewed medical literature and recognized by the relevant medical community.
2. Clinically appropriate in terms of type, frequency, extent, site, and duration, and considered effective for the condition in question.
3. Not primarily for the convenience of the patient or health care provider.
4. Not more costly than alternative services at least as likely to produce the desired result.

** Standard industry language for experimental/investigational –

1. Does the requested service have final approval from the appropriate government regulatory bodies for this member’s particular condition (respond only if applicable)?
2. Is the requested service of proven benefit according to published peer-reviewed medical literature for the diagnosis or treatment of the member’s particular condition?\
3. Is the requested service generally recognized by the medical community as reflected in the published peer-reviewed medical literature as effective or appropriate for the member’s particular condition?

4. Is there proof as reflected in the published peer-reviewed medical literature that the requested service is at least as effective in improving health outcomes as the established alternatives for the member’s particular condition?

5.Is there demonstrated evidence as reflected in the published peer-reviewed medical literature that, over time, the requested service leads to improvement in health outcomes, for this member’s particular condition; i.e. the beneficial effects outweigh any harmful effects?

Categories: Business of Medicine
  1. JMT
    September 30, 2010 at 11:57 am

    Fascinating, thank you.


  2. October 1, 2010 at 2:19 am

    Great post although I still think the insurance companies are a little bit evil. I don’t lime some of the small clauses occasionally written into policies that discriminate like not paying for any contraceptive benefits or sterilization. I also don’t like high deductible plans where a patient can’t financially afford a treatment plan because of the out of pocket cost. Intellectually I understand why these exist but it bothers me when money gets mixed into the equation of patient care. I certainly don’t have the answer though. As you said very well there is a limited number of health care dollars to go around.


  3. October 1, 2010 at 2:27 am

    Jeff – If there is something that is evil, its the fact that there is an outside agency profiting off the need to ration healthcare. If we believe that healthcare is the right of the people, then it should be a government service, in my opinion, as the role of the government is to protect or provide our rights.

    I think a lot of times we demonize a particular group or entity, even though each individual in that group has appropriate motivations. Physicians are given the same treatment in lots of way. I have had the opportunity to talk with lots of folks inside insurance companies, and have generally been impressed by their ethical and appropriate behavior and motivations. Perhaps as an entire organism the company has some problems, but it seems that individuals are trying to do the right thing.

    As for high deductible plans, I disagree. The patient is paying (or the employer is paying) a fairly small premium because the deductible is high. If the deductible were lower, the premium would have to be higher, and that’s not what they bought. In the end, the amount of money that comes in can’t be less than the amount that goes out. Insurance is a mechanism for spreading risk around. If someone wants to pay less into the system, they are going to have to bear more of the cost up front before their insurance kicks in. The problem is that high deductible plans are not really designed for people with no money. They are designed for people who have the money to pay the first 3-4k a year. But what happens is that people (or employers) with little money buy them because they are ‘insurance’ and they aren’t so expensive.

    I’m a big supporter of a system where everyone has a high deductible policy and then puts several thousand a year into a health savings account. Patients could then buy their health care in a true economic system, where physicians and service providers are paid up front reasonable fees. Providers would need to compete, either on price or service quality. Presently, there is no way that a superior physician can capitalize on their skill, or for a poor physician to get economically moved out of the market. I think that is a problem.

    God I sound like a Republican. Bleh!


  4. October 3, 2010 at 3:36 am

    I use the term “evil” as tongue-in-cheek. I do understand what you are talking about completely. I think it is hard for doctors to think about this rationally. We just want to do our jobs and the insurance/money side makes things messy with no easy obvious solutions.


  5. Susan Peterson
    October 3, 2010 at 6:17 am

    A health savings account is OK for those who can really afford to put that much into one, which leaves out a lot of people. Also, the money has to be accessible. My employer sponsors a flex plan and I put $3000 into it this year. But they won’t give you your money until you have already PAID for the treatment. So I have three thousand less salary coming in, and yet I have to pay out three thousand dollars before I can get my money back! That’s fine if you have a credit card, but I only have about $500 left on my credit card, which I have to keep for a genuine emergency like having a car break down while on a trip to see my kids. Some of these plans give you a card you can use to pay for the treatment, and that would be wonderful, but mine does not, and I have already had my redone root canal reinfect because I couldn’t afford to go get the proper filling and crown put on it. The lovely man who is the specialist is re-re doing it for me and not charging, even though he has only received my partial payment, as my insurance hasn’t come through with paying yet. These plans are useless for many people if they have to come up with the money to pay before they can get the money out of them.
    And they are really useless to people who need every penny of salary just to feed and house themselves, which position my family was in for quite a few years. I have a complete upper now because during that time I told the dentist to pull the tooth when one abscessed, there is no way I can pay for a root canal or a crown. And I know of someone who couldn’t even afford to pay for extractions of all her rotten teeth, who wound up in the hospital with endocarditis. I was only her disability analyst and as they always tell me, I am not a social worker, but when I had her doctor on the phone and he told me “I told her she couldn’t afford NOT to have these teeth pulled” I acquainted him with her actual financial realities. When he finally grasped that for this woman “I can’t afford it” meant that she would have to not pay her rent or feed her children for several months to accumulate the amount necessary on her husband’s small salary, he said he had a friend who was an oral surgeon and he would get him to pull her teeth while she was in the hospital. The hospital bill would eventually get paid by medicaid because while she was over the medicaid cut off, once she owed a certain amount to the hospital, medicaid would pay the rest. Her part would probably go unpaid because in her whole life she would never have that kind of money.
    I know that overall resources are limited and the government is us and one just can’t say that “the government” should pay for everything. But I feel as if stories like this woman’s story shouldn’t have to happen.


    • October 3, 2010 at 11:01 am

      I agree that the pay first then get reimbursed model for HSAs is unnecessary, and can be obstructive to some. There ought to be a HSA debit card that can be used for health care purchases only. Some credit card company could probably implement such a thing without too much difficulty I would think.

      We could go on a long discussion about these issues, but its kind of off topic from the post. The insurance appeal process causes a lot of pain for docs, and I’m hoping to point out how to negotiate it a little better.


  6. Susan Peterson
    October 3, 2010 at 12:41 pm

    Sorry. I see that my comment was only tangentially related.


  7. Sarah
    January 14, 2012 at 5:36 am

    How long does the appeals process normally take once the physician initiates it? Days? Weeks?


    • January 14, 2012 at 7:22 am

      There are state laws on how long such things are allowed to take, but usually its only a few days. Initial appeals should happen quickly since they are based on policy only. Secondary appeals may take longer.


  8. Lynn
    April 6, 2012 at 1:13 pm

    Can an insurance company “arguing” a diagnosis i.e: CIDP? My issuance company has denied not my treatment (IVIG) as they agree it’s the gold-standard, medically accepted treatment but are now saying they are sending it out to a outside review by a neurologist even after 3 of my independent physician’s (2 neuro and 1 immunologist) have all provided clinical notes, abnormal EMG’s, letter support and concurring with the CIDP diagnosis and treatment. This is unreal! I’ve had mentioned to be my the med. dir. for the insurance co. that they want a more recent EMG but now that I’ve already had one IVIG treatment w/ good sensory response, etc. my doctors are saying EMG after the fact could be inconclusive. My previous EMG’s were done my another neuro a while back who tried to diagnose me with MS w.out MRI etc which has now been ruled out by MRI, LP etc. There are s many dix that are subjective and are dix of probability and exclusion, Why does this outside neuro get to trump the dix or 3 other docs that have spent years working closely and carefully, This reviewer has and will never even examine me in person. The fact that I had + response to the trial ivig should be convincing as well. Please shed some advice or opinion. SO FRUSTRATED!!!

    (p.s…I have a 15+ year history of well documented sensory/muscle weakness, poly-neuropathy)…boarderline low total IgG subclasses and IgM deficiency. Chronic sinusitis/URI, and failed almost all pneumo-serotypes even post prevnar revaccination)


    • April 8, 2012 at 11:18 am

      I suspect that if your physician writes a letter that documents your course including a summary of previous testing, the request will be approved.


  9. October 8, 2013 at 8:24 pm

    Nice article. very interesting, thanks for sharing.


  10. Cassie
    April 5, 2014 at 12:00 pm

    I am a patient filing a second level appeal. I am not getting any help from my physician. I have been denied due to a “pre-existing” condition. Do you have any articles or information on this? It seems as though your specialty is obgyn, which is what my case is related to. A couple months prior to having insurance I got the diagnoses of possible ruptured ovarian cyst and painful ovulation. I then had an pelvis us which showed a cystic mass on my right ovary. The treatment plan was bc pills. I then got insurance a couple months later and a few months after that had a laparoscopic surgery for endometriosis. The first level of appeal said they were denying it because I was diagnosed with “pelvic pain” before my insurance period. And pelvic pain is my pre-existing condition. Pelvic pain can obviously cover a wide array of diagnoses. I never had an endo diagnosis. I am working on my second level of appeal letter. I could use any advice you have. I am willing to share more details with you if you are willing to help.


  11. September 22, 2014 at 9:37 pm

    A fascinating discussion is worth comment. I do believe that you should write more about this topic, it may not be a taboo subject but
    usually people do not discuss such issues. To the next!
    Kind regards!! twitter


  12. XRay
    December 18, 2014 at 10:24 am

    I just came across this post…I am a radiologist interesting in becoming a third party reviewer in my spare time…any suggestions of who to contact? Also, do you need a malpractice insurance policy to do such reviews (eg if you deny a study but it turns out it was necessary)? My hospital policy wouldn’t cover this…


  13. December 26, 2014 at 5:06 am

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    I assume until further notice i’ll settle for book-stamping and adding your RSS channel to my Google account.

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