I know you simply asked a couple of questions, and seem to know the answers, but your focus should be on recovery and not so much on a "settlement". Your surgery was probably denied because the initiating medical staff screwed up the documentation and didn't make it clear for LM to approve.
If you're receiving WC, there is no "back pay" because you would have had to agree to the start date for the injury.
From what I know (very little BTW), a nerve transposition's recovery is primarily a surgical wound recovery, unlike a knee replacement or losing a foot.
As long as your WC is coming in, you really have no case.
If you're released prior to your full recovery, your issue is with the Dr (who typically fear patient suits).
Get well soon and focus on the rehab protocol. You'll need that hand/arm later in life.