Residential Treatment Center Denied Claims

What Counts as ‘Medically Necessary’ Residential Treatment in San Francisco?

Residential Treatment Centers (RTCs) provide 24-hour-a-day, 7-day-a-week care to individuals struggling with serious mental health or substance use disorders. In San Francisco, insurance companies are often careful to scrutinize RTC claims, explicitly using the “medical necessity” standard, to assess whether a claim is deserving of coverage. Understanding what is "medically necessary" for residential treatment is essential for policyholders who want to get coverage for residential treatment and for those who have been denied coverage. At DL Law Group, we have over 80 years of combined experience in insurance litigation. We assist residents of San Francisco in obtaining RTC benefits for their hard-earned time away from home and help policyholders confront wrongful denials, holding insurance companies to a higher standard of accountability. Below, we explain what constitutes “medically necessary” residential treatment, how insurers evaluate it, and how DL Law Group can assist. 

Defining ‘Medically Necessary’ for Residential Treatment 

In San Francisco, as in the rest of California, “medically necessary” residential treatment is determined by a combination of state and federal regulations, insurance policy terms, and clinical guidelines. Under California’s Mental Health Parity Act and the federal Mental Health Parity and Addiction Equity Act (MHPAEA), insurers must cover mental health and substance use disorder treatments, including RTC care, when they are deemed medically necessary, on par with medical or surgical treatments. 

Generally, a treatment is considered medically necessary if it meets the following criteria: 

• Clinical Justification: The treatment is supported by evidence-based medical standards and is appropriate for the patient’s diagnosis, symptoms, and severity of condition. 
• Essential for Health: The treatment is necessary to improve, stabilize, or prevent deterioration of the patient’s mental health or substance use disorder. 
• No Less Intensive Alternative: Less intensive treatments (e.g., outpatient therapy or partial hospitalization) have been tried and found to be either unsuccessful or insufficient in addressing the patient’s needs. 
• Consistent with Standards of Care: Treatment is consistent with the generally accepted standards of medical practice, as outlined by organizations such as the American Psychiatric Association or the American Society of Addiction Medicine (ASAM). 

For RTCs, medical necessity often involves demonstrating that the patient requires 24/7 structured care due to severe symptoms, safety risks, or inability to function in a less restrictive environment. 

Common Conditions Requiring Medically Necessary RTC Care 

Residential treatment may be deemed medically necessary for a range of mental health and substance use disorders, including but not limited to: 

Severe Mental Health Disorders: 

• Major depressive disorder with suicidal ideation or failed outpatient treatment. 
• Bipolar disorder with acute manic or depressive episodes requiring stabilization. 
• Schizophrenia or other psychotic disorders with significant functional impairment. 
• Severe anxiety disorders or obsessive-compulsive disorder (OCD) are unresponsive to outpatient care. 

Substance Use Disorders: 

• Chronic alcohol or drug addiction with repeated relapses despite outpatient treatment. 
• Co-occurring disorders (e.g., addiction combined with depression or PTSD) require integrated care. 
• Withdrawal management requires 24/7 medical supervision. 

Eating Disorders: 

• Anorexia nervosa, bulimia nervosa, or binge-eating disorder with life-threatening symptoms or medical complications. 
• There is a need for structured nutritional and psychological support, which is unavailable in outpatient settings. 

Other Conditions: 

• Post-traumatic stress disorder (PTSD) with severe symptoms impacting daily functioning. 
• Chronic fatigue syndrome (CFS) or other conditions with significant mental health components require intensive therapy. 

While access to mental health care is critical, in San Francisco, insurers may still deny RTC claims based on medical necessity, often through insufficient documentation and/or by suggesting a less intensive level of care is appropriate. 

How Insurers Evaluate Medical Necessity for RTC Claims 

Insurance companies in San Francisco use several standards to help them determine whether RTC care was medically necessary. Some of those standards may include: 

Medical Records and Diagnosis: 

• Insurers require detailed medical records, including a formal diagnosis from a licensed provider (e.g., psychiatrist, psychologist) and documentation of symptoms, treatment history, and failed interventions. 
• Example: Documentation of repeat hospitalizations or unsuccessful outpatient treatment for severe depression. 

Functional Impairment: 

• Insurance companies assess how the illness is affecting the client’s ability to function in typical adult life, such as working, maintaining relationships, and maintaining personal safety. 
• Example: Documentation of a client’s inability to get dressed, eat, or sleep due to substance use issues or crises. 

Risk Assessment: 

• Evidence of safety risks, such as suicidal ideation, self-harm, or harm to others, often supports the need for RTC care. 
• Example: A letter from the psychiatrist outlining a client’s recent suicide attempt, requiring the client to have 24/7 supervision. 

ASAM Criteria for Substance Use Disorders: 

• When evaluating substance use disorder claims, insurers typically use the ASAM Criteria, which analyzes risk across six dimensions (e.g., acute intoxication, biomedical conditions, emotional/behavioral complications). 
• Example: A patient with severe opioid use disorder and co-occurring depression may meet ASAM Level 3 or Level 4 with justification for RTC care. 

Mental Health Parity Compliance: 

• Insurers must evaluate RTC claims using criteria comparable to those for medical/surgical inpatient care. Stricter standards for mental health claims may violate parity laws. 
• Example: Denying RTC care for anorexia while approving inpatient care for a physical illness with similar severity could indicate a parity violation. 

Challenges in Proving Medical Necessity 

The insurer in San Francisco will often deny RTC claims, typically due to disputes over medical necessity, which places a significant burden on the policyholder. More frequent challenges are: 

 

• Insufficient Documentation: Insurers may argue that the medical records or provider letters lack sufficient detail to justify the care. 
• Disputes Over Alternatives: Insurers may argue that outpatient care or partial hospitalization is adequate, even when providers recommend RTC. 
• Pre-Authorization Requirements: Failure to obtain prior approval can lead to denials, even if RTC care is urgently needed. 
• Bad Faith Practices: Some insurers delay or deny claims to avoid paying for costly RTC treatment, relying on policyholders to drop their claims. 
• ERISA Complexities: Plans governed by ERISA are employer-sponsored plans, so now you add somewhat cumbersome and complex layers of regulations that you must follow when submitting an appeal related to provider care for RTC. You would need to follow designated timelines and processes. 

How to Establish Medical Necessity and Appeal Denials 

Below are steps policyholders can take to obtain RTC coverage and to appeal denials: 

Gather Comprehensive Documentation: 

• Collect detailed medical records, including diagnoses, treatment history, and provider statements outlining why RTC care is necessary. 
• Include functional assessments or letters from providers detailing the patient’s symptoms, risks, and failed treatments. 

Work with Providers: 

• Collaborate with your psychiatrist, therapist, or addiction specialist to document the severity of your condition and the need for RTC care. 
• Request a letter explicitly addressing medical necessity, referencing clinical guidelines (e.g., ASAM Criteria). 

Review Your Policy: 

• Review your insurance policy for RTC coverage information and compare it to the medical/surgical inpatient benefit to assess possible parity violations. 
• Be sure to notice any pre-authorization or exclusion criteria. 

File an Appeal: 

• If your RTC claim is denied, submit a written appeal within the specified timeframe (typically 180 days for ERISA plans or as outlined in the denial letter). 
• Include all supporting documentation and highlight any violations of mental health parity laws or bad faith practices. 

Seek Legal Assistance: 

• An experienced attorney can help build a strong case, navigate ERISA or California regulations, and challenge wrongful denials through appeals or litigation. 



Why Choose DL Law Group? 

Establishing medical necessity for RTC care in the City of San Francisco can be challenging and frustrating when insurers rely on questionable methods to deny coverage. At DL Law Group, we bring decades of experience, a proven track record of getting results, and a client-centric philosophy. We have helped countless policyholders obtain RTC care, and we can bring all of that firepower to your fight. 

Contact Us Today 

Suppose your RTC claim has been denied in the City of San Francisco, or you are having difficulty showing the medical necessity of that RTC care. Call DL Law Group for your free consultation. We have attorneys with years of experience to review your case, assist you with the appeal process, and vigorously advocate for the benefits you are entitled to. Call us today, or stop by our San Francisco office and meet with us at a time that is convenient for you.