Third-Party Payor Appeals

An Overview

Any third-party payor contract should include detailed procedures the provider must follow to appeal some aspect of a payor’s decision regarding the reimbursement (or non-reimbursement) of any service or services provided under the payor contract. In fact, certain states have enacted laws requiring a third-party payor appeal process which set forth minimum appeal requirements with which third-party payors must comply. Although appeals are heard through these internal processes and not in a courtroom (at least not initially), they are still very much healthcare litigation cases.

The grounds for a healthcare provider appealing a third-party payor’s determination can vary greatly depending on the specific nature of the contract and the facts related to the disputed decision. One of the most common disputes arises when the provider and the payor disagree about whether a service is covered by the governing health plan, and therefore subject to reimbursement, or whether it falls outside the scope of the health plan, and therefore is not subject to reimbursement. Because coverage questions are ultimately governed by the interpretation of the governing contract, i.e. the health plan, they are extremely similar to civil breach of contract lawsuits, and often implicate the same arguments, defenses, and legal theories.

Another common type of dispute that providers will appeal through the contractually-imposed appeals process involves the more nuanced question of whether services which both parties agree are covered by the plan satisfy other, more technical criteria that are prerequisites for reimbursement. Some of the most oft-litigated criteria include whether a service that was provided was “medically necessary” within the plan’s definition, or whether a service that was characterized as “emergency care” was, in fact, urgently needed. These types of disputes are highly-fact specific, and require detail-oriented counsel who has experience with healthcare industry standards and litigating contract compliance issues.

If, after exhausting the payor’s internal appeals process, one of the party’s remains dissatisfied with the outcome, it can usually avail itself an external appeal. As is the case with internal appeals, state laws may give explicit guidance regarding who must decide the outcome of an external appeal. For example, some state regulations require external appeals to be heard and decided by a specific external appeals agency that is designated by the state Department of Health. Regardless of the specific procedures, an external appeal often represents a healthcare provider’s best, and sometimes only, opportunity to have its arguments in favor of reimbursement heard and decided by someone outside of the third-party payor’s corporate structure.

Third-party payor appeals can range from straightforward to very complicated depending on the nature of the adverse decision. Regardless of the complexity, though, appeals are often very contentious and feel like true healthcare litigation even though they take place outside the courtroom. Providers seeking to overturn adverse third-party payor decisions and third-party payors attempting to justify and affirm its determinations can both benefit greatly from counsel who has experience litigating traditional civil breach of contract cases, but who also has sufficient experience in the healthcare industry to fully understand the payor appeals process and the maze of policies and regulations that may govern or affect the appeal.