5.2 Denial Management, Peer-to-Peer Reviews, and Appeals

5.2 Denial Management, Peer-to-Peer Reviews, and Appeals

High-Yield Exam Focus: Denial management and appeal workflows are heavily emphasized on the ANCC CMGT-BC exam. Mastery requires distinguishing technical denials from clinical medical necessity denials, assembling high-impact Peer-to-Peer (P2P) clinical dossiers, enforcing the 72-hour expedited appeal turnaround for acute health risks, understanding the legally binding authority of Independent Review Organizations (IROs) under the ACA, mastering the 5-level Medicare appeals hierarchy (including the mandatory Level 2 auto-forward rule in Medicare Advantage), and executing BFCC-QIO fast-track discharge appeals using the IMM and NOMNC.

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Taxonomy of Insurance Denials: Technical/Administrative vs. Clinical Medical Necessity

In contemporary healthcare reimbursement, an Adverse Benefit Determination (commonly termed a denial) represents any refusal by a health maintenance organization (HMO), preferred provider organization (PPO), commercial insurer, Medicare Advantage plan, or Medicaid managed care organization to authorize or reimburse healthcare services in full or in part. Effective case management requires categorizing denials into two foundational classes: Technical/Administrative Denials and Clinical Medical Necessity Denials.

┌───────────────────────────────────────────────────────────────────────────────────┐
│                            TAXONOMY OF INSURANCE DENIALS                          │
├─────────────────────────────────────────┬─────────────────────────────────────────┤
│      TECHNICAL / ADMINISTRATIVE         │       CLINICAL MEDICAL NECESSITY        │
├─────────────────────────────────────────┼─────────────────────────────────────────┤
│ • Lapsed or terminated eligibility      │ • Inpatient admission downgraded to obs │
│ • Policy benefit rider exclusion        │ • Continued stay denied (lack of acute  │
│ • Failure to obtain prior authorization │   instability or clinical progress)     │
│ • Out-of-network provider rendered care │ • Inpatient rehab (IRF) denied; SNF     │
│ • Timely filing deadline exceeded       │   recommended as alternative            │
│ • Coordination of Benefits (COB) dispute│ • Specialty drug or DME denied          │
├─────────────────────────────────────────┼─────────────────────────────────────────┤
│  RESOLUTION: Revenue cycle, billing     │  RESOLUTION: Peer-to-Peer review,       │
│  corrections, retro-eligibility, and    │  physician advisor intervention, and    │
│  administrative appeal packets.         │  multi-tiered clinical appeals.         │
└─────────────────────────────────────────┴─────────────────────────────────────────┘

1. Technical / Administrative / Coverage Denials

Technical denials stem from failure to satisfy contractual, administrative, or policy procedural requirements. They are completely unrelated to the patient's physiological condition or the clinical skill of the healthcare team.

• Common Triggers:
  • Eligibility Default: Patient coverage was terminated, lapsed due to non-payment of premiums, or the patient was not an active enrolled member on the date of service.
  • Contractual Exclusions: The requested treatment is explicitly excluded under the member's Summary Plan Description (SPD) or policy rider (e.g., adult bariatric surgery, cosmetic procedures, or experimental gene therapies).
  • Lack of Timely Prior Authorization: Elective surgery, transfer, or specialized diagnostics performed without obtaining pre-service precertification within contractual notification windows (e.g., failure to notify within 24 hours of an emergency admission).
  • Out-of-Network Penalties: Services rendered by an out-of-network facility or specialist without an approved out-of-network gap exception or single-case agreement.
  • Timely Filing Limits: Claims submitted after the payer's contractual filing window has closed (typically 90 to 180 calendar days post-discharge, up to 365 days for traditional Medicare).
  • Coordination of Benefits (COB) Errors: Billing disputes regarding primary versus secondary payer status (e.g., Medicare Secondary Payer rules or auto liability vs. health insurance).
• Remediation Workflow: Technical denials cannot and should not be resolved through physician peer-to-peer reviews. Resolution requires revenue cycle, patient access, and billing intervention: verifying retro-eligibility, requesting administrative retroactive authorization waivers, providing electronic clearinghouse proof of timely filing, updating COB primary questionnaires, or rebilling with corrected coding modifiers.

2. Clinical Medical Necessity Denials

Clinical denials occur when the payer's utilization management clinical team determines that the requested service, level of care, or continued stay fails to satisfy evidence-based medical necessity criteria (such as InterQual or MCG), is not clinically indicated, or could safely be delivered in a less restrictive, lower-cost healthcare setting.

• Common Triggers:
  • Level of Care Downgrade: Inpatient admission denied as not medically necessary, with the payer asserting care should have been provided under outpatient observation status.
  • Continued Stay Cutoff: Inpatient days denied after Day 3 or Day 4 because the patient achieved hemodynamic stability, transitioned to oral medications, and no longer demonstrates active acute instability.
  • Post-Acute Setting Denial: Transfer to an Inpatient Rehabilitation Facility (IRF) denied because the payer asserts the patient cannot tolerate 3 hours of intensive therapy daily, or transfer to a Long-Term Acute Care Hospital (LTACH) denied because the patient does not meet complex weaning criteria.
  • Therapeutic / DME Denial: Negative pressure wound therapy (wound VAC) or home intravenous antibiotics denied for failure to document conservative outpatient wound care trials or culture sensitivities.
• Remediation Workflow: Clinical denials require direct clinical advocacy: immediate scheduling of a Peer-to-Peer (P2P) physician review, preparation of a targeted clinical dossier, escalation to the hospital physician advisor, and submission of formal clinical appeal packets supported by peer-reviewed clinical literature.

Comparative Summary: Technical vs. Clinical Denials

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Statutory Denial Notification Mandates: ERISA, ACA, and Medicare Advantage

Federal statutes establish rigorous consumer protection mandates governing the timing, content, and structure of adverse benefit determinations issued by commercial insurers, self-insured employer plans, and Medicare Advantage organizations.

Governing Federal Statutes

• ERISA (29 U.S.C. § 1133): Applies to all private employer-sponsored group health plans, mandating full and fair claims review procedures.
• Affordable Care Act (ACA Section 2719 & 45 CFR § 147.136): Establishes comprehensive internal claims and appeals processes and external review rights for all non-grandfathered commercial plans.
• Medicare Advantage Regulations (42 CFR § 422.568): Mandates standardized written notification protocols using the Integrated Denial Notice (IDN, Form CMS-10003-NDR).

The Five Mandatory Legal Elements of a Valid Denial Notice

To satisfy federal statutory disclosure rules, any written adverse benefit determination must contain all five of the following elements:

1. Plain-Language Clinical Rationale: A clear, detailed, factual explanation of the specific clinical reason for the adverse determination, tailored to the patient's individual clinical condition (boilerplate, generic form letters violate federal notice standards).
2. Specific Criteria and Policy Citation: Explicit identification and citation of the clinical screening criteria (e.g., InterQual guideline version, MCG guideline section), clinical coverage policy bulletin, or contractual plan provision upon which the denial is based.
3. Mandatory Free Access Disclosure: A prominent, unambiguous statement informing the claimant and their provider that they are legally entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, clinical guidelines, screening protocols, and criteria relevant to the adverse decision.
4. Appeals Guidance and Statutory Deadlines: Comprehensive, step-by-step instructions on how to initiate an appeal, including designated physical addresses, phone numbers, and fax numbers, along with strict statutory filing deadlines (typically 180 calendar days for commercial ERISA plans and 60 calendar days for Medicare Advantage).
5. Expedited Appeal Notification: A clear explanation detailing the right to request an expedited appeal if the standard appeal timeline could seriously jeopardize the patient's life, health, or ability to regain maximum function.

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Peer-to-Peer (P2P) Review Strategy: Preparation, Timing, and Physician Advisor Involvement

The Peer-to-Peer (P2P) review is a direct, structured telephonic clinical discussion between the treating attending physician (or hospital physician advisor) and the health plan's medical director. It represents the fastest, most effective mechanism to overturn a concurrent clinical denial prior to patient discharge.

┌───────────────────────────────────────────────────────────────────────────────────┐
│                        PEER-TO-PEER (P2P) WORKFLOW DYNAMICS                       │
├───────────────────────────────────────────────────────────────────────────────────┤
│  CONCURRENT DENIAL ISSUED  ──▶  RN CASE MANAGER BUILDS  ──▶  P2P CONFERENCE HELD  │
│  (Payer denies inpatient         TARGETED CLINICAL DOSSIER    (Attending/Advisor  │
│   or post-acute transfer)        (Vitals, Labs, IVs, Criteria) vs. Medical Director)│
│                                                │                    │             │
│                                                ▼                    ▼             │
│                             CRITICAL TIMING: 24 TO 72 HOURS  OVERTURN: Authorized │
│                             (Must occur before discharge;     UPHELD: Expedited   │
│                              post-discharge window closes)    Formal Appeal       │
└───────────────────────────────────────────────────────────────────────────────────┘

The Critical Timing Window

Commercial payers and Medicare Advantage plans impose strict operational windows for P2P reviews, typically requiring completion within 24 to 72 hours of verbal or written denial notification. Crucially, the P2P conference almost always must occur while the patient remains hospitalized. Once the patient is discharged, most payers permanently close the P2P window, forfeiting immediate reversal and forcing the hospital into months of administrative retrospective appeals.

The Physician Advisor (PA) Role in P2P Reviews

While attending physicians possess deep knowledge of the patient's bedside status, they frequently struggle during P2P conferences because they are unfamiliar with proprietary utilization criteria (InterQual/MCG) or express frustration rather than presenting objective data. The Hospital Physician Advisor serves as a vital clinical partner:

• Pre-Call Coaching: The physician advisor reviews the chart, identifies criteria gaps, and coaches the attending physician on presenting objective physiologic thresholds.
• Direct Representation: If the attending physician is unavailable (e.g., performing surgery or off-duty), or if the hospital's payer contract permits, the physician advisor conducts the P2P review directly as the facility's designated clinical expert.

The RN Case Manager's P2P Preparation Dossier

The RN case manager is the architect of P2P success. Prior to the conference, the case manager compiles a concise, structured, 1-page P2P Clinical Briefing Dossier containing:

1. Dynamic Physiological Data: Trending vital signs, hemodynamic fluctuations, oxygen titration requirements, and fever curves over the preceding 24 to 48 hours.
2. Trending Objective Diagnostics: Serial laboratory values (troponins, leukocyte count with differential, serum creatinine, arterial blood gases, procalcitonin, lactate) and diagnostic imaging results (e.g., CT scan verifying bowel micro-perforation or pulmonary embolism).
3. Intensity of Nursing and Medical Services: Continuous IV medication titrations (vasopressors, inotropes, IV diuretics, continuous heparin), frequent respiratory therapy treatments, surgical drain outputs, wound VAC management, and telemetry monitoring.
4. Standardized Functional Metrics: Physical and occupational therapy functional scores (such as CMS Section GG mobility scores) documenting that the patient requires maximum physical assistance for bed-to-chair transfers and ambulation, establishing severe fall risk.
5. Criteria Crosswalk: Explicit citations of the payer's own clinical screening guidelines (InterQual or MCG) matching the patient's documented clinical data.

Avoiding Subjective Traps During P2P Discussions

The case manager must ensure the physician avoids subjective, emotional arguments that guarantee denial upholding:

• Ineffective Subjective Statement: "The patient is an 82-year-old frail woman who lives alone, and her daughter cannot care for her; it is unsafe for her to go home."
  • Payer Medical Director Response: Denial upheld; social instability and lack of family support are explicitly excluded as medical necessity indications under commercial and Medicare rules.
• Effective Objective Restatement: "The patient is receiving IV furosemide 40 mg twice daily for acute decompensated heart failure with serial BUN/creatinine monitoring; physical therapy Section GG assessment documents two-person maximum assist for bed transfers; and the patient desaturates to 88% on room air requiring 2 L nasal cannula, satisfying MCG Inpatient Clinical Indications for Heart Failure (M-190)."
  • Payer Medical Director Response: Denial overturned; acute inpatient status authorized.

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Multi-Level Appeals Frameworks Across Payer Models

When a P2P review fails to overturn a denial, or when an adverse determination is issued retrospectively, the case manager must initiate the formal multi-level appeals hierarchy.

Standard vs. Expedited Appeals (The 72-Hour Mandate)

Federal law bifurcates all clinical appeals based on the urgency of the patient's clinical circumstances:

• Standard Appeal: Applicable to retrospective claims post-discharge, or stable pre-service elective requests. Turnaround timeframes are typically 30 calendar days for pre-service requests and 60 calendar days for retrospective post-service claims.
• Expedited Appeal (72-Hour Mandate): Mandated under the ACA (45 CFR § 147.136) and Medicare Advantage rules (42 CFR § 422.584) when applying the standard timeframe could seriously jeopardize the claimant's life, health, or ability to regain maximum function, or would subject the patient to severe pain. The health plan must issue an expedited determination within 72 hours of receiving the appeal request (reduced to 24 hours for urgent pharmaceutical requests).

Commercial / Affordable Care Act (ACA) Appeals Architecture

Under federal ACA regulations, non-grandfathered commercial plans must provide a standardized two-tier appeal framework:

1. Level 1: Internal Appeal: A comprehensive re-evaluation of the denial conducted by the health plan. The review must be performed by independent healthcare professionals who possess appropriate clinical specialty expertise and who were not involved in the initial adverse determination.
2. Level 2: External Review by an Independent Review Organization (IRO): If the internal appeal is upheld, the member or authorized provider may request an External Review conducted by an accredited, independent third-party IRO.
   • The ACA Binding Mandate: Under ACA Section 2719, the decision rendered by an accredited Independent Review Organization is legally binding upon the health plan. If the IRO overturns the insurer's denial, the health plan is legally required to authorize and pay for the services immediately. The insurer has no further administrative appeal rights.

The Medicare 5-Level Appeals Hierarchy

Both traditional Medicare Fee-for-Service (Parts A & B) and Medicare Advantage (Part C) utilize a structured 5-level appeals hierarchy, but with critical operational differences.

┌───────────────────────────────────────────────────────────────────────────────────┐
│                     THE 5-LEVEL MEDICARE APPEALS HIERARCHY                        │
├───────┬─────────────────────────────────────────┬─────────────────────────────────┤
│ LEVEL │ TRADITIONAL MEDICARE (PARTS A & B)      │ MEDICARE ADVANTAGE (PART C)     │
├───────┼─────────────────────────────────────────┼─────────────────────────────────┤
│   1   │ Redetermination by MAC                  │ Plan Redetermination            │
│       │ (File within 120 days of notice)        │ (72 hrs expedited / 30 days std)│
│       │                                         │ ──▶ MANDATORY AUTO-FORWARD ──┐  │
│       │                                         │                              │  │
│   2   │ Reconsideration by QIC                  │ Reconsideration by IRE       │◀─┘
│       │ (File within 180 days; NO auto-forward) │ (MAXIMUS; auto-sent by plan) │
│       │                                         │                                 │
│   3   │ Administrative Law Judge (ALJ) Hearing  │ Administrative Law Judge (ALJ)  │
│       │ (OMHA de novo review; CY2026 AIC threshold: $200)                         │
│       │                                         │                                 │
│   4   │ Medicare Appeals Council Review         │ Medicare Appeals Council Review │
│       │ (Departmental Appeals Board within HHS; file within 60 days)              │
│       │                                         │                                 │
│   5   │ Federal District Court Judicial Review  │ Federal District Court Review   │
│       │ (Federal litigation; CY2026 AIC threshold: $1,960)                        │
└───────┴─────────────────────────────────────────┴─────────────────────────────────┘

The Medicare Advantage Auto-Forward Mandate

A pivotal exam distinction between traditional Medicare and Medicare Advantage is codified at 42 CFR § 422.590:

• In Traditional Medicare, if the Medicare Administrative Contractor (MAC) upholds a denial at Level 1, the provider must manually draft and submit a new appeal request to the Qualified Independent Contractor (QIC) within 180 days.
• In Medicare Advantage, if the health plan upholds any portion of its adverse determination at Level 1 (Plan Redetermination), the health plan is statutorily required to automatically forward the entire case file to the Level 2 Independent Review Entity (IRE - MAXIMUS Federal Services) within 24 hours (expedited) or 30 days (standard). The beneficiary or provider does not need to file a Level 2 appeal; the auto-forward is automatic and legally enforceable.

Level 3: Administrative Law Judge (ALJ) Hearings

Conducted by independent administrative judges within the Office of Medicare Hearings and Appeals (OMHA), ALJ hearings provide a de novo review where the judge examines the clinical evidence without deference to prior plan denials.

• Amount in Controversy (AIC): To qualify for an ALJ hearing, the claim must satisfy the statutory AIC dollar threshold that CMS adjusts every calendar year. For CY 2026 the ALJ threshold is $200, and the threshold for judicial review in federal district court is $1,960 (CMS-4209-N). Related claims may be aggregated to meet the threshold.
• Physician Advisor Testimony: Hospital physician advisors and RN case managers frequently provide expert oral testimony during ALJ hearings, walking the judge through the objective medical necessity criteria.

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Fast-Track Appeals for Discharge: The BFCC-QIO

When a hospitalized Medicare beneficiary disputes an impending discharge, or when a patient in a post-acute setting disputes the termination of covered skilled services, immediate fast-track appeals are managed by the Beneficiary and Family Centered Care Quality Improvement Organization (BFCC-QIO) (e.g., KEPRO or Livanta/Acentra).

Inpatient Hospital Discharge Appeals: The IMM Protocol

Under CMS regulations (42 CFR § 405.1205), hospitals must deliver the Important Message from Medicare (IMM, Form CMS-R-193) to all Medicare beneficiaries (traditional Medicare and Medicare Advantage enrollees alike):

1. Initial Delivery: Delivered within 2 calendar days of inpatient admission.
2. Re-Delivery Prior to Discharge: The hospital must re-deliver and obtain signed acknowledgment on the IMM within 2 calendar days prior to planned discharge (unless initial delivery occurred within that 2-day window).
3. Statutory Safe Harbor Protection: If the patient believes they are being discharged prematurely and contacts the BFCC-QIO by midnight on the day of scheduled discharge (prior to physically leaving the facility):
   • Stay of Discharge: The discharge is legally stayed. The hospital cannot discharge the patient or bill the patient for acute care while the QIO review is pending.
   • Detailed Notice of Discharge (DND): The hospital must deliver Form CMS-10066 (DND) to the patient and the QIO by noon of the day after QIO notification, outlining the clinical justification for discharge.
   • QIO Turnaround: The QIO must examine medical records and issue a formal determination within 24 hours of receiving all records.

Post-Acute Skilled Care Termination: The NOMNC Protocol

Under 42 CFR § 405.1200, when a patient is receiving covered skilled care in a Skilled Nursing Facility (SNF), Home Health Agency (HHA), or Comprehensive Outpatient Rehabilitation Facility (CORF), termination of coverage requires delivering the Notice of Medicare Non-Coverage (NOMNC, Form CMS-10123):

• Mandatory Delivery Window: The NOMNC must be delivered to the beneficiary at least 2 calendar days prior to the proposed termination of covered skilled services.
• Fast-Track QIO Appeal: If the patient appeals to the QIO by noon of the day before services end, coverage continues without out-of-pocket liability until the QIO adjudicates the dispute. If the provider fails to deliver the NOMNC at least 2 days in advance, the provider must absorb financial liability for continued services until valid notice is provided.

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Clinical Application Scenario: Complex Denial and Expedited Appeal Execution

Patient Presentation

A 72-year-old female with severe multivessel coronary artery disease, insulin-dependent type 2 diabetes, and obesity undergoes successful triple coronary artery bypass graft (CABG) surgery. On Postoperative Day 4, the patient develops surgical sternal wound dehiscence with deep tissue purulence requiring emergent surgical wound debridement in the operating room. A negative pressure wound therapy (wound VAC) system is placed.

Following debridement, physical and occupational therapy evaluate the patient. Assessment reveals profound deconditioning: CMS Section GG functional scores document that the patient requires maximum two-person assistance for bed-to-chair transfers and cannot ambulate greater than 10 feet. The attending cardiothoracic surgeon and interdisciplinary team determine that the patient requires transfer to an Inpatient Rehabilitation Facility (IRF) for intensive daily physical and occupational therapy combined with specialized surgical wound VAC management.

The Denial Conflict

The patient's commercial Medicare Advantage plan denies the prospective prior authorization request for IRF admission, issuing an adverse benefit determination stating: "Patient does not meet IRF medical necessity criteria; rehabilitation can be adequately and safely managed in a subacute Skilled Nursing Facility (SNF)."

Step-by-Step Case Management Action Pathway

1. Verifying Notice Validity & Denial Taxonomy

The RN case manager reviews the written Integrated Denial Notice (IDN). The denial is classified as a Clinical Medical Necessity Denial (disputing level of care intensity), not a technical denial. The notice contains the mandatory criteria citations, free access disclosure, and appeal filing instructions.

2. Building the P2P Clinical Briefing Dossier

The case manager immediately coordinates a Peer-to-Peer review scheduled for 3:00 PM that afternoon. The case manager compiles an objective clinical dossier for the hospitalist and cardiothoracic surgeon:

• Wound Complexity: Deep sternal debridement with continuous negative pressure wound therapy at 125 mmHg, requiring daily sterile surgical dressing assessments.
• Functional Deficits: Section GG scores proving the patient requires maximum assist of two clinicians for transfers, exhibiting severe trunk instability.
• Rehabilitation Tolerance: Documenting that the patient participated in 60 minutes of bedside therapy without hemodynamic instability, proving readiness to tolerate the required 3 hours of daily intensive IRF therapy.
• MCG Inpatient Rehabilitation Criteria Alignment: Directly crosswalking the patient's CABG deconditioning, complex surgical wound care, and multi-disciplinary therapy needs to MCG PAC Inpatient Rehabilitation Guidelines (M-550).

3. Execution of the P2P Review

The surgeon conducts the P2P conference with the health plan's medical director. However, the medical director rigidly upholds the denial, asserting that SNF placement is adequate.

4. Initiating the 72-Hour Expedited Internal Appeal

Recognizing that delaying transfer will result in hospital deconditioning and increased nosocomial infection risk, the case manager immediately files an Expedited Level 1 Internal Appeal under 42 CFR § 422.584. The case manager attaches the P2P dossier, operative notes, Section GG physical therapy logs, and an urgent physician certification stating that standard 30-day appeal timeframes would severely jeopardize the patient's functional recovery. This legally compels the Medicare Advantage plan to issue a written appeal determination within 72 hours.

5. Leveraging the Mandatory Level 2 IRE Auto-Forward

At 48 hours, the Medicare Advantage plan issues an internal appeal determination upholding its denial. In strict compliance with 42 CFR § 422.590, the plan automatically forwards the entire case file to the Level 2 Independent Review Entity (IRE - MAXIMUS Federal Services) for an expedited reconsideration. The case manager contacts MAXIMUS, confirms file transmission, and submits supplemental physical therapy progress notes demonstrating ongoing rehabilitation tolerance.

6. Case Resolution

Within 72 hours, MAXIMUS issues a binding determination overturning the Medicare Advantage plan's denial, establishing that the patient's complex sternal wound care combined with intensive therapy needs medically necessitates IRF placement. The health plan is legally required to authorize IRF admission, and the case manager seamlessly executes the post-acute transition.

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Common Exam Traps & High-Yield Pitfalls

• Trap 1: P2P Reviews for Technical Denials. Never schedule a physician peer-to-peer review for an administrative or technical denial (such as an eligibility lapse or timely filing issue). P2P reviews are exclusively for clinical medical necessity controversies.
• Trap 2: The 72-Hour Expedited Threshold. Health plans are legally obligated to resolve expedited clinical appeals within 72 hours when standard delays jeopardize patient life, health, or functional recovery (reduced to 24 hours for urgent medications).
• Trap 3: Re-Filing Medicare Advantage Level 2 Appeals. Do not select an option stating the provider must file a new appeal packet for Level 2 in Medicare Advantage. Medicare Advantage plans are legally mandated to automatically forward unfavorable Level 1 redeterminations to the Level 2 IRE.
• Trap 4: Treating IRO Decisions as Advisory. Under the Affordable Care Act, external review decisions issued by Independent Review Organizations (IROs) are legally binding upon commercial health plans.
• Trap 5: Discharging Patients During Active QIO Appeals. Discharging or billing a hospitalized Medicare beneficiary who has requested an expedited BFCC-QIO discharge review before the QIO issues its determination violates federal safe harbor statutes.