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Appendix C
Stanford Model Contractual Language
for Medical Necessity
In the late 1990s, a research team convened by Stanford University developed model contract language for
medical necessity, as follows:
For contractual purposes, an intervention will be covered if it is an otherwise covered category of service, not
specifically excluded, and medically necessary. An intervention may be medically indicated yet not be a covered
benefit or meet this contractual definition of medical necessity. A health plan may choose to cover interventions
that do not meet this contractual definition of medical necessity.
An intervention is medically necessary if, as recommended by the treating physician1 and determined by the
health plan’s medical director or physician designee,2 it is all of the following:
A health intervention3 for the purpose of treating a medical condition; the most appropriate supply or level
of service, considering potential benefits and harms to the patient; known to be effective 4 in improving health
outcomes.5 For new interventions,6 effectiveness is determined by scientific evidence.7,8 For existing interventions,
1 Treating physician means a physician who has personally evaluated the patient.
2 Physician designee means a physician designated to assist in the decision-making process.
3 A health intervention is an item or service delivered or undertaken primarily to treat (i.e., prevent, diagnose, detect, treat, or palliate) a
medical condition (i.e., disease; illness; injury; genetic or congenital defect; pregnancy; or a biological or psychological condition that lies
outside the range of normal, age-appropriate human variation) or to maintain or restore functional ability. For the contractual definition of
medical necessity, a health intervention is defined not only by the intervention itself, but also by the medical condition and patient indications
for which it is being applied.
4 Effective means that the intervention can reasonably be expected to produce the intended results and to have expected benefits that outweigh
potential harmful effects.
5 Health outcomes are outcomes that affect health status as measured by the length or quality (primarily as perceived by the patient) of a
person’s life.
6 An intervention is considered to be new if it is not yet in widespread use for the medical condition and patient indications being considered.
7 Scientific evidence consists primarily of controlled clinical trials that either directly or indirectly demonstrate the effect of the intervention
on health outcomes. If controlled clinical trials are not available, observational studies that demonstrate a causal relationship between the
intervention and health outcomes can be used. Partially controlled observational studies and uncontrolled clinical series may be suggestive, but
do not by themselves demonstrate a causal relationship unless the magnitude of the effect observed exceeds anything that could be explained
either by the natural history of the medical condition or potential experimental biases.
8 New interventions for which clinical trials have not been conducted because of epidemiological reasons (i.e., rare or new diseases or orphan
populations) shall be evaluated on the basis of professional standards of care or expert opinion (as described in footnote 9).
163
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164 PERSPECTIVES ON ESSENTIAL HEALTH BENEFITS
effectiveness is determined first by scientific evidence, then by professional standards, then by expert opinion; 9 and
cost-effective for this condition compared to alternative interventions, including no intervention.10 “Cost-effective”
does not necessarily mean lowest price.
REFERENCE
Singer, S., L. Bergthold, C. Vorhaus, S. Olson, I. Mutchnick, Y. Y. Goh, S. Zimmerman, and A. Enthoven. 1999. Decreasing variation in medical
necessity decision making. Appendix B. Model language developed at the “Decreasing Variation in Medical Necessity Decision Making”
Decision Maker Workshop in Sacramento, CA, March 11-13, 1999.
9 For existing interventions, the scientific evidence should be considered first and, to the greatest extent possible, should be the basis for
determinations of medical necessity. If no scientific evidence is available, professional standards of care should be considered. If professional
standards of care do not exist, or are outdated or contradictory, decisions about existing interventions should be based on expert opinion. Giving
priority to scientific evidence does not mean that coverage of existing interventions should be denied in the absence of conclusive scientific
evidence. Existing interventions can meet the contractual definition of medical necessity in the absence of scientific evidence if there is a
strong conviction of effectiveness and benefit expressed through up-to-date and consistent professional standards of care or, in the absence
of such standards, convincing expert opinion.
10 An intervention is considered cost effective if the benefits and harms relative to costs represent an economically efficient use of resources
for patients with this condition. In the application of this criterion to an individual case, the characteristics of the individual patient shall be
determinative.
