Welcome to the forum.
Let me say how sympathetic I am to learn of your predicament - particularly the fact that your fiance has Rheumatoid Arthritis ... a chronic condition my [late] first wife also suffered from
... thus severely limiting an affected person's employment prospects.
So where DO you go from here? Well sadly, there is little I can add to what Joe Bloggs has already said ... EXCEPT to say that it might be worthwhile your fiance referring the case to his local Citizens' Advice Bureau. £550 + is, after all, a considerable sum of money for ANYONE to fork out ... let alone someone reliant on Disability Living Allowance and/or Income Support ... especially in the light of such an unsatisfactory outcome!
OK, so in the view of the Entry Clearance Official dealing with the application, you - as a couple - evidently do not satisfy the criteria set by the British Embassy [mainly, it would seem] on account of your *fiance's incapacity ... which, in all fairness, is hardly *HIS fault. There again, though, you might want to reconsider the questions raised by the ECO as regards how your fiance is placed accommodation-wise in the long-term.
All things considered, therefore, I would strongly suggest he contacts Citizens Advice at the earliest opportunity ... and certainly within the time frame allowed for launching an appeal. The last thing you want is having to incur the same fee again in order to re-apply.
All the very best to you both in your efforts.