Is the prudent layperson standard really a “standard”?

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It should come as no surprise to most emergency physicians that a large portion of postservice health maintenance organization (HMO) denials of coverage relate to emergency department (ED) visits. These denials are often appealed to the insurance plan after the visit. The reasons for this are many, starting with the harshly expressed obvious: “It was not an emergency if the patient was not admitted, was not taken immediately to surgery, or did not die.” Other less draconian reasons include patient fear or uncertainty, inability to access other providers of care, and confusion about coverage. Decisions to come to the ED are often made afterhours—during nights and weekends—on short notice, without time or consideration of authorized coverage or notifying the HMO for pre-authorization. These factors are contrary to the principles of managed care, which attempt to control and direct patient care to appropriate, lower-cost providers within the contracted network. As such, ED visits represent an unpredictable and unmanageable expense from the HMO’s perspective. No wonder HMOs intensely scrutinize ED visits and, given the variation in ED care and the HMO review process, produce a high rate of coverage denials that confuse and frustrate patients and physicians. Clearly, a common understanding between the 3 parties involved—the HMO, the covered patient, and the physician provider—could do much to improve this situation. The “prudent layperson standard” is an attempt to have a common understanding. The prudent layperson standard was first adopted by the state of Maryland in 1993 and was mandated by Congress in 1997 for application to Medicare and Medicaid beneficiaries. Currently, nearly all states have adopted the prudent layperson standard. With a universal definition, disagreements should be solved, either on initial review or during the appeals process. As the saying goes, God (or the devil, depending on your point of view) is in the details. How well does the prudent layperson standard function in practice? In this issue of Annals, Gresenz and Studdert1 studied application of the prudent layperson standard by analyzing 405 post-ED service appeals from 2 large HMOs based in California. The HMOs were large and well-established, with a defined appeals process. In both plans, the initial denial of coverage was from a contracted medical group, whereas the HMO plan had responsibility for the appeals process. Nine trained abstractors recruited from the 2 HMOs obtained the medical information concerning the disputed ED visit. The demographic characteristics of the patient and ED visit, the cost of the disputed visit, and the outcome of the appeals process were also collected for analysis. Some of the results meet expectations. Nearly half of the disputed ED visits occurred at night, over the weekend, or on holidays, when physician offices and clinics are usually closed. About one fifth involved children, where parental fear and uncertainty plays a role. The majority of disputed ED visits were for symptoms, followed by injuries and disease management; this is nearly identical to the National Hospital Ambulatory Medical Care Survey.2 Specific reasons for these disputed ED visits also paralleled those found in the National Hospital Ambulatory Medical Care Survey. What is probably surprising to cynical emergency physicians is that more than 90% of the appeals for post-ED service coverage denials were successful and resolved in favor of the patient. Slightly more than half of appeals were overturned on the basis of merits, and the remainder were overturned for goodwill payment, although the percentages of each differed greatly between the 2 HMOs. Both HMO plans had similar motivations for goodwill coverage decisions: to mainH E A L T H P O L I C Y A N D C L I N I C A L P R A C T I C E / E D I T O R I A L