New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Howard Mills
Acting Superintendent

The Office of General Counsel issued the following opinion on March 16, 2005, representing the position of the New York State Insurance Department

Re: Prospective Denial of Health Insurance Coverage & Article 49 of the Public Health Law

Question Presented:

Under the facts provided below, did the HMO violate Article 49 of the Public Health Law by denying insurance coverage for the health care services provided to the patient?

Conclusion:

Yes. The HMO violated Article 49 of the Public Health Law by denying insurance coverage for the health care services provided to the patient. Please see analysis below.

Facts:

The following facts were provided:

The insured was admitted to a hospital on November 1, 2004. The hospital faxed clinical information to the insured’s Health Maintenance Organization (HMO) on November 2, 2004. The HMO issued a boilerplate letter on November 3, 2004, stating the following:

Care Management has reviewed the most recent medical information received. Based on the information provided it has been determined that the continued hospitalization in the above-named facility was not medically necessary of (date).

Although HMO has requested medical information for the above referenced period, it has not received the medical information needed to make a medical necessity determination. Review of medical information is the only way to determine whether the treatment proposed or delivered, based on the patient’s condition, is medically necessary.

While the patient was in the hospital, additional clinical information was faxed to the HMO every two days thereafter (the 5th, 7th, 9th, 11th, 13th, 15th, and 17th of November). The insured was discharged on November 19th.

The HMO’s denial of health coverage was also communicated through fax by an "End of Day Report" (Report), which is a document that provides the name of every HMO insured patient at the hospital, the admission date of such insureds and the dates for which the HMO has approved or denied the provision of health insurance coverage for such insureds. The Report denied insurance coverage for the period of November 3, 2004, to November 19, 2004. No letter was sent after the November 3, 2004, denial letter and the HMO did not provide any verbal communication that the case was denied.

It was alleged that the HMO relied on the November 3, 2004, denial letter and did not review the case or the clinical condition of the patient after November 3, 2004. It was also alleged that the HMO’s internal policy does not permit the review of a medical director’s determination that health care services are not medically necessary.

The analysis and conclusion of this opinion assume that the HMO’s health care provider contract does not conflict with the requirements of Article 49 of the Public Health Law if the health care services were provided by a participating provider of the HMO, and that the HMO also sent a copy of the same November 3, 2004, denial letter to the patient or the patient’s health care provider.

Analysis:

Article 49 of the Public Health Law governs utilization reviews performed by or for managed care organizations (e.g., HMOs). N.Y. Pub. Health Law § 4900(8) (McKinney 2002) defines a "utilization review" as "the review to determine whether health care services that have been provided, are being provided or are proposed to be provided to a patient, whether undertaken prior to, concurrent with or subsequent to the delivery of such services are medically necessary." N.Y. Pub. Health Law § 4900(9) (McKinney 2002) defines a "utilization review agent" (UR agent), in pertinent part, as "any company, organization or other entity performing utilization review." And N.Y. Pub. Health Law § 4900(1) (McKinney 2002) defines an "adverse determination" as "a determination by a utilization review agent that an admission, extension of stay, or other health care service, upon review based on the information provided, is not medically necessary." Accordingly, when a UR agent is not provided with all necessary medical information to determine whether health care services are medically necessary, § 4900(1) gives the UR agent the implicit power to issue an adverse determination based on such lack of information, thereby giving rise to the right of the insured to appeal such determination.

However, the UR agent must make such adverse determination in accordance with N.Y. Pub. Health Law § 4903 (McKinney 2002), which provides the following in pertinent part:

2. A utilization review agent shall make a utilization review determination involving health care services which require pre-authorization and provide notice of a determination to the enrollee or enrollee's designee and the enrollee's health care provider by telephone and in writing within three business days of receipt of the necessary information.

3. A utilization review agent shall make a determination involving continued or extended health care services, or additional services for an enrollee undergoing a course of continued treatment prescribed by a health care provider and provide notice of such determination to the enrollee or the enrollee's designee, which may be satisfied by notice to the enrollee's health care provider, by telephone and in writing within one business day of receipt of the necessary information. Notification of continued or extended services shall include the number of extended services approved, the new total of approved services, the date of onset of services and the next review date.

4. A utilization review agent shall make a utilization review determination involving health care services which have been delivered within thirty days of receipt of the necessary information.

5. Notice of an adverse determination made by a utilization review agent shall be in writing and must include:

(a) the reasons for the determination including the clinical rationale, if any;

(b) instructions on how to initiate standard and expedited appeals pursuant to section forty-nine hundred four and an external appeal pursuant to section forty-nine hundred fourteen of this article; and

(c) notice of the availability, upon request of the enrollee, or the enrollee's designee, of the clinical review criteria relied upon to make such determination. Such notice shall also specify what, if any, additional necessary information must be provided to, or obtained by, the utilization review agent in order to render a decision on the appeal.

6. In the event that a utilization review agent renders an adverse determination without attempting to discuss such matter with the enrollee's health care provider who specifically recommended the health care service, procedure or treatment under review, such health care provider shall have the opportunity to request a reconsideration of the adverse determination. Except in cases of retrospective reviews, such reconsideration shall occur within one business day of receipt of the request and shall be conducted by the enrollee's health care provider and the clinical peer reviewer making the initial determination or a designated clinical peer reviewer if the original clinical peer reviewer cannot be available. In the event that the adverse determination is upheld after reconsideration, the utilization review agent shall provide notice as required pursuant to subdivision five of this section. Nothing in this section shall preclude the enrollee from initiating an appeal from an adverse determination.

7. Failure by the utilization review agent to make a determination within the time periods prescribed in this section shall be deemed to be an adverse determination subject to appeal pursuant to section forty nine hundred four of this title.

By letter issued November 3rd, the UR agent delivered an adverse determination that denied insurance coverage for health care services provided to the patient from the date of admission (November 1st), but the UR agent did not specify the denial’s operative end date. Notwithstanding the implication that this open-ended denial of coverage supports the allegation that the "HMO’s internal policy is that once a medical doctor denies coverage that the case is not reviewed further," the HMO did not fall short of any Article 49 requirement by omitting the denial’s operative end date or by, as has been alleged, disregarding any additional medical information provided after the initial denial letter (i.e., the November 3rd letter). However, the HMO did violate Article 49 by not providing: (1) notice of the availability of the clinical review criteria relied upon in making the adverse determination, § 4903(5)(c); (2) instructions on how to appeal the HMO’s adverse determination, § 4903(5)(b); and (3) what additional information must be submitted for the UR agent to render a decision for an appeal, § 4903(5)(c).

Moreover, the "End of Day Report" fax statement that "insurance coverage for the period of November 3, 2004, to November 19, 2004, is denied" does not remedy any of the above-mentioned shortcomings of the UR agent’s November 3rd letter. And standing alone as an adverse determination, the fax does not fulfill any § 4903(5) notice requirements. Nor does it communicate whether the UR agent reviewed any of the medical information that was submitted to it by fax after November 3rd.

Accordingly, under the facts presented, neither the November 3rd letter, nor the "End of Day Report" fax has fulfilled the requirements of Article 49. Therefore, the HMO did not comply with the requirements of Article 49 of the Public Health Law by denying insurance coverage for the health care services provided to the patient.

For further information you may contact Senior Attorney Kristian Earl Lynch at the New York City Office.