Medical Necessity or Payment Policy? The Line Is Blurring
Medical necessity denials and prior authorization denials are becoming one of the most consequential “silent overrides” of clinical decision-making. Not because providers aren’t documenting. Not because care wasn’t appropriate. But because payer rules, algorithms, and post-service review standards are increasingly shaping what gets paid after the fact.
And the burden is not small.
In the AMA’s 2024 physician survey, 93% of physicians said prior authorization delays access to necessary care, and 82% said it can at least sometimes lead to patients abandoning recommended treatment. Physicians and staff spend an average of 13 hours per week completing prior authorizations, and 40% report prior authorization requests are often or always denied. From the patient side, KFF found that among insured adults who encountered prior authorization in the past two years, about half reported delays (48%) and 43% reported denials for a service, treatment, or medication their doctor requested.
This is why medical necessity denials and prior authorization denials can’t be treated like “routine billing noise.” They are governance problems. And if they’re left unchallenged, they don’t stay isolated. They become precedent.
Here’s the practical risk: medical necessity is increasingly defined at the point of payment, not at the point of care.
A disciplined escalation framework for medical necessity and prior authorization denials
Step 1: classify the denial correctly Not all “medical necessity” denials are truly clinical. Many are operational in disguise:
authorization not obtained or not matched to the claim
benefit/coverage policy misapplied
frequency limitation edits
documentation mismatch
payer configuration error (especially common with diagnostics, modifiers, and panel/bundling logic)
Step 2: anchor the appeal in the payer’s own framework
cite the payer medical policy and coverage criteria
tie the ordering rationale to the documented presentation (signs/symptoms, risk factors, differential, prior results)
include ordering provider attestation when appropriate
make the request explicit: overturn denial, reprocess claim, or issue authorization retroactively if the payer caused the delay
Step 3: second-level appeal and reconsideration are not optional when the clinical intent is sound Many denials do not resolve at first review. Second-level appeal is where you bring:
trend evidence (same denial pattern, same CPT/ICD pairing, same product line)
peer-to-peer when clinical judgment is questioned
contract terms when prior auth requirements conflict with payer obligations or are applied inconsistently
Step 4: contractual escalation when it’s repetitive If it’s happening across patients, providers, or locations, it’s no longer “one claim.” Escalate to:
provider relations / network management
medical management leadership
configuration teams for systematic claim edit failures
Step 5: external escalation when the issue becomes systemic and internal channels fail When you have documented patterns of inappropriate denials, excessive administrative barriers, or persistent payment delays, escalation can move beyond the payer. Depending on the plan type and jurisdiction, this can include:
state insurance departments (state-regulated plans)
CMS complaint pathways (Medicare Advantage and other CMS-regulated products)
ERISA pathways for self-funded plans (federal oversight structure varies by issue)
constituent services offices when a repeated access issue is demonstrably harming patients and routine channels are exhausted
The point is not to “go nuclear.” It’s to build a record and use the right escalation lane when the facts warrant it.
What’s changing on the legislative and regulatory horizon
There are a few developments worth watching that could provide real relief, if implemented and enforced:
CMS Interoperability and Prior Authorization Final Rule (CMS-0057-F) CMS finalized a broad prior authorization modernization rule impacting Medicare Advantage, Medicaid/CHIP FFS, Medicaid managed care, and Qualified Health Plans on the federally facilitated exchange. It’s aimed at reducing burden through standardization, API-based exchange, and public reporting requirements. The rule is effective April 8, 2024, with phased operational requirements and reporting timelines beginning in 2026 and broader API requirements extending into 2027.
Improving Seniors’ Timely Access to Care Act of 2025 (H.R.3514 / S.1816) This bipartisan Medicare Advantage-focused bill would require an electronic prior authorization program, require transparency reporting, and creates pathways toward faster decisions for routinely approved services. The introduced Senate text includes transparency requirements beginning in 2027 and electronic prior authorization/enrollee protections beginning in 2028.
A diagnostics-specific reminder: the Omni Healthcare decision matters
For labs and diagnostics, medical necessity disputes often get tangled with an unfair expectation that laboratories should “adjudicate” physician intent. A recent First Circuit opinion reinforced an important compliance boundary: a laboratory is permitted to rely on the ordering physician’s determination that the tests billed are medically necessary, and the court explicitly agreed with that principle while discussing OIG guidance recognizing labs “do not and cannot treat patients or make medical necessity determinations.”
That doesn’t eliminate documentation obligations. But it does matter for how we frame medical necessity denials in diagnostics: labs are not the treating clinician, and payer denials should not quietly shift clinical decision accountability onto technical operators who did not make the medical decision.
Bottom line
Medical necessity denials and prior authorization denials are not just administrative friction. They are a lever. If providers don’t build a consistent escalation pathway, payer interpretations become the de facto standard over time.
The solution isn’t appealing everything. It’s appealing what’s payable, documenting what’s defendable, and escalating what’s systemic.
References for more reading:
AMA prior authorization (PA) physician survey | AMA
KFF Health Tracking Poll: Public Finds Prior Authorization Process Difficult to Manage | KFF
Text - S.1816 - 119th Congress (2025-2026): Improving Seniors’ Timely Access to Care Act of 2025 | Congress.gov | Library of Congress
